K & v
[2006] FamCA 252
•12 April 2006
FAMILY LAW ACT 1975
FAMILY COURT OF AUSTRALIA
AT CANBERRA SYF 5441 OF 2003
Ms K
AND:
Mr V
JUDGMENT DELIVERED BY
THE HONOURABLE JUSTICE FAULKS
(COSTS)
DATE OF JUDGMENT: 12 April 2006
DATE OF SUBMISSIONS: 19 January 2006 (on behalf of applicant wife)
3 February 2006 (on behalf of respondent husband)
REASONS FOR JUDGMENT
SYF 5441 OF 2003
K & V
Foreword
The present applications relate to costs for the matter which was heard by Boland J on 18, 19, and 22 August 2005, 14 October 2005, and 7 and 8 November 2005, with judgment delivered on 16 December 2005, an aborted hearing before Judicial Registrar Johnston, and the husband’s cross “application” for costs more generally.
The matter involved a property settlement between Ms K (“the wife”) and Mr V (“the husband”). Her Honour determined that the parties’ total property pool was $1,209,204 and that the wife should receive 52.5 per cent of the property pool and the husband should receive the remaining 47.5 per cent. The husband’s greater superannuation was split allowing the wife to retain $126,754 in total of benefits and the husband to retain $154,922.
Orders were also made providing mechanisms for the sale of the former matrimonial home where the husband and the child of the parties, S (aged 17) had been residing since separation. The sale of the home had been foreshadowed in her Honour’s judgment of 14 October 2005 and in orders made on 8 November 2005 when the wife had been appointed as the trustee for sale of the property.
On 16 December 2005 her Honour made further orders providing that costs in the proceedings would be considered upon the filing by the parties of written submissions. Those submissions were filed by the wife on 19 January 2006 and by the husband on 3 February 2006.[1]
[1] The response was sent by the husband via email and received at the Court on that day
The Parties’ Applications
The wife made written submissions seeking costs in relation to two discrete matters:
i.Costs asserted to have been thrown away when the matter was vacated before Judicial Registrar Johnston as a result of the husband’s withdrawing his consent to appear before the Judicial Registrar on the day of the hearing; and
ii.Costs in relation to the hearing of an application for the appointment of the wife as trustee for sale as the result of the husband’s conduct.
The wife seeks these costs on an indemnity basis and impliedly, if I should decline to order costs on that basis, on a party-party basis.
In response, the husband filed written submissions seeking costs for the entirety of proceedings in this matter on eight grounds:
1.The unreasonable and dishonest behaviour of the applicant to date regarding these proceedings;
2.The wife’s refusal to accept the reasonable and fair offers made by the respondant [sic] to the wife prior to and following the proceedings scheduled for hearing in front of Judicial Registrar Johnstone [sic] on the 23rd May 2005;
3.The misconduct of the wife and her father in relation to the affadavits [sic] they submitted to The Family Court for these proceedings and their attempts to misconsrue [sic] the truth whilst under oath as acknowledged by Justice Boland in her final orders dated 16th December 2005 as follows:
i. “Item 92. I am satisfied that the wife and [Mr K] were aware that an arrangement had been entered into to benefit the wife and that there was no disclosure by the wife of the wife’s interest in the Greek land in these proceedings.
ii. Item 119. A significant portion of the proceedings were devoted to evidence relating to contributions asserted to be made by [Mr K] in his role in undertaking renovations carried out principally at the … property. I found that [Mr K] somewhat embellished or exaggerated his evidence of contributions made by him… ”
4.The inconvenience and grief suffered by the respondant [sic] and the son as a result of Justice Boland’s reluctant decision to approve the wife’s request for the applicant to be made sole trustee for the sale of the home and for the respondant [sic] and their only child to vacate the home, despite the fact the wife had made negligible contributions to the mortgage and maintenance of the home since separation and refused to contribute to improvements to the home as recommended in writing by the real estate agent for the sale.
5.Justice Boland’s decision not to provide consent to the respondant’s [sic] request in court in September 2005 for a court order to be issued to the Greek Government to enable the respondent to further investigate the foreign assets of the wife and her father and family, despite the fact she was aware the applicant and her father currently possessed a Greek Tax File number and had attempted to hide the wife’s foreign assets in court.
6.The additional and unnecessary mortgage and maintenance costs of approx $45,000 incurred by the respondant [sic] as a result of the applicant’s refusal to provide her consent for the home to be rented until the finalisation of these proceedings.
7.The costs incurred to date by the respondant [sic] to engage a solicitor in Greece to obtain evidence to prove the applicant and her father were hiding assets currently owned by the wife in Greece.
8.The grief and inconvenience suffered by the respondant [sic], his son, and his family due to the misconduct of the applicant and her father in relation to these proceedings.
Costs
The prima facie position in proceedings under the Family Law Act 1975 is that each party will bear his or her own costs, as provided in subsection 117(1). However subsection 117(2) provides that if the Court is of the opinion that there are circumstances that justify it, the Court may make such orders as to costs as it considers just.
The High Court in Penfold v. Penfold[2] stated:
“As subsec (1) is expressed to be subject to subsec (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.”
[2] (1980) FLC ¶90-800 at pp 75,053 – 75,054
Their Honours went on to say:
“Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs”.
Subsection 117(2) is supported by the circumstances mentioned in subsection 117(2A) which provides that the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In I and I (No. 2)[3] the Full Court held that the relevant matters in subsection 117(2A)
“must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”.
[3] (1995) FLC ¶92-625
I will now consider all grounds provided for in subsection 117(2A) as they relate to the proceedings.
(a)The Financial Circumstances of Each of the Parties to the Proceedings
The financial circumstances of the parties to the proceedings are relevant in any making of a costs order if there is a disparity in financial resources,[4] and can apply to the parties’ circumstances after any property order that the Court may make.[5]
[4] See for example Kelly v Kelly (No. 2) (1981) FLC ¶91-108; Mallet v Mallet (1984) FLC ¶91-507
[5] See White v White (1982) FLC ¶91-246
Although the trial Judge found that there was a significant difference in the parties’ earning capacities,[6] both parties will receive a considerable payment upon the sale of the matrimonial home and hold significant other property. Both parties are in a position to meet a costs order.
[6] See [53]
(b) Whether a Party to the Proceedings is in Receipt of Legal Aid
Neither party was legally aided in these proceedings.
(c) Conduct of the Parties to the Proceedings
Subsection 117(2A)(c) allows the Court to consider the parties’ conduct throughout the proceedings, including in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, and the production of documents. In particular the Court may be concerned with the provision of false or misleading evidence; failures to disclose or obstructions of another party’s inquiries; the wasting of time by the pursuit of ultimately unsuccessful issues; the provision of irrelevant or lengthy affidavit material; and the making of amendments which cause delay.
The husband asserts that the wife has provided the Court with false or misleading evidence, has failed to disclose, and has obstructed his inquiries in relation to the property held by her and her father, Mr K, in Greece, as suggested in his submissions as to costs.[7] The husband also asserts that Mr K provided false or misleading evidence during the course of the hearing.[8]
Provision of False or Misleading Evidence and a Failure to Disclose and/or Obstruction of Another Party’s Enquiries
[7] See for example Grounds 1, 3, 5 and 7
[8] See for example Ground 3
Traditionally, costs have been used as a means to sanction parties who provide false or misleading evidence, particularly in circumstances where the provision of such evidence extends the time that is required to determine the matter or involves the other party’s accruing costs to provide the Court with an accurate state of affairs.[9]
[9] See Penfold v Penfold (1980) FLC ¶90-800
This situation is reinforced by the positive obligations in the Family Law Rules 2004 requiring a full and frank disclosure and the provision of a written undertaking as to compliance with the duty of disclosure.[10]
[10] See for example R13.01 and R12.08
If a hearing has been lengthened by, or if one of the parties has been occasioned additional costs by the other party’s failing to, make proper information available or by that party’s being obstructive in the collection of relevant material, then an order for costs may be appropriate.[11]
[11] See Greedy v Greedy (1982) FLC ¶91-250, Weir v Weir (1993) FLC ¶92-338 and Oriolo v Oriolo (1985) FLC ¶91-653
It is clear from her Honour’s judgment that the wife did not disclose in either her evidence-in-chief or her financial statements relied upon in the proceedings, any interest in land in Greece, despite the fact that the husband had long asserted in these proceedings that she had an interest in land in Greece.[12]
[12] At [83]
At the date of hearing it was not disputed that the wife had a one quarter interest in the land held by her father in Greece.[13] The only valuation in evidence was that of a valuer, who despite being initially agreed upon as a valuer by the parties, was retained solely by the wife.[14] That valuation was of $1,997.[15]
[13] At [83]
[14] At [83]
[15] At [83]
In cross-examination the wife asserted that when on holiday in Greece in 2003 she signed some documents and handed over her passport.[16] She maintained that she did not know what the documents were and denied giving a power of attorney to anyone to deal with the property or providing a tax file number.[17] In cross-examination Mr K conceded that the wife had signed a power of attorney and that a tax file number was obtained to enable the transfer.[18] A power of attorney was produced in the proceedings and labelled Exhibit C.[19]
[16] At [87]
[17] At [87]
[18] At [88]
[19] At [90]
Despite Mr K’s concessions, her Honour found that,
“I am not able, on the evidence before me, to affirmatively find that the power of attorney referred to in Exhibit C was a power of attorney executed by the wife, nor am I satisfied that the tax file number referred to in Exhibit C is the wife’s Australian tax file number.”[20]
[20] At [91]
Her Honour then again noted that
“there was no disclosure by the wife of the wife’s interest in the Greek land in these proceedings.”[21]
[21] At [92]
At the hearing, the husband asserted that the wife failed to make a full, frank and complete disclosure of her financial affairs.[22]
[22] At [84]
In her judgment, her Honour stated that,
“It is clear that the interest in the Greek land is of minimal value. It is also of significance that the husband was aware of the wife’s interest in May 2005, had obtained a translation of the relevant documents but did not disclose these documents until the cross-examination of the wife. I find the wife’s failure to disclose the transaction in Greece was improper. However, I find no other evidence before me to suggest that the wife has not otherwise made other than a full, frank and complete financial disclosure to the Court.”[23]
[23] At [93]
The Family Law Rules 2004 place upon both parties a duty to disclose, not only the parties’ financial circumstances, but also any documents which are relevant to an issue in the case and are, or have been, in the possession or under the control of the party disclosing the document.[24] Any failure to disclose a document as required by the Rules can result in the exclusion of the document at hearing, contempt proceedings, a dismissal of the party’s case, or the imposition of costs.[25]
[24] Rule 13.07
[25] Rule 13.14
It is clear from her Honour’s judgment that both parties failed to make full and frank disclosures to the Court.[26] The deliberate failure of a party to disclose may result in the Court drawing adverse inferences against the non-disclosing party if there is material upon which an adverse inference could be based.[27] In this case, her Honour did not make adverse findings against either of the parties, despite their respective failures.
[26] At [1]-[2] and [101]
[27] Stein v Stein (1986) FLC ¶91-779 and Guinti v Guinti (1986) FLC ¶91-759
Further, her Honour did not find the wife’s behaviour “unreasonable” or “dishonest” as asserted by the husband.[28] She referred instead to its being “improper”. Her Honour also considered the failure to disclose any interest in the land in Greece as being the wife’s only failure to provide the Court with a full, frank and complete financial disclosure.
[28] See Husband’s Submissions as to Costs document, Ground 1
Given these findings, there is no evidence to support the husband’s assertions that he should on this ground receive costs in the proceedings, specifically those incurred in relation to engaging a solicitor to obtain evidence to
“prove that the applicant and her father were hiding assets… in Greece”[29]
or in relation to her Honour’s decision not to issue an order to the Greek Government, as requested by the husband, to enable him to further investigate the foreign assets of the wife and her family.[30] Her Honour did not find that the wife possessed a Greek tax file number or that she had attempted to hide her assets from the Court as asserted by the husband.[31]
[29] See Husband’s Submissions as to Costs document, Ground 7
[30] See Husband’s Submissions as to Costs document, Ground 5
[31] See Husband’s Submissions as to Costs document, Ground 5
As such, both parties’ failures to disclose are not relevant conduct to be considered in any determination in relation to a costs order.
‘Unreasonable and Dishonest Behaviour’ of the Wife
The husband asserts that he should receive costs in the proceedings as a result of the ‘unreasonable and dishonest behaviour’ of the wife.[32] The husband has not produced or identified any evidence to support this assertion. This ground is not made out.
[32] See Husband’s Submissions as to Costs document, Ground 1
‘Misconduct’ of the Wife and Mr K
The husband also seeks costs as a result of the alleged misconduct of the applicant and her father in the proceedings, and in relation to the affidavits they produced in the proceedings.[33] However no evidence has been provided or identified by the husband as to the specific nature of the alleged misconduct, other than a statement about “attempts to misconscrue [sic] the truth”[34] and by reference to paragraphs of her Honour’s judgment where adverse findings were made against the wife and her father.
[33] See Husband’s Submissions as to Costs document, Ground 3
[34] See Husband’s Submissions as to Costs document, Ground 3
In relation to the evidence of the wife, these allegations have been addressed above.
In relation to the evidence of Mr K, her Honour made a determination that he had
“somewhat embellished or exaggerated his evidence of contributions made by him.”[35]
Her Honour also stated that she accepted that the contribution by the wife’s father was a “substantial one” but that
“I am unable on the evidence before me to precisely value that contribution.”[36]
[35] At [119]
[36] At [120]
Her Honour accordingly gave the evidence of Mr K little weight.
In a similar vein, her Honour also found that the husband had
“…sought to downplay or minimise the contributions by Mr [K] in his capacity as a builder…”[37]
[37] At [119]
The trial judge observes the parties throughout the hearing and may then make determinations about the demeanour and evidence of witnesses.[38] Her Honour at times preferred the evidence of the husband,[39] and at times preferred that of the wife.[40] The preference for one party’s evidence over that of another may, or may not, reflect that party’s attempt to misconstrue the truth. However, in this case her Honour did not make a finding that either party was not a witness of the truth.
[38] Powell v Streatham Manor Nursing Home [1935] AC 243 and Chehab (1993) FLC ¶92-371
[39] For example, at [125-128]
[40] See [124-125]
As his Honour Lord MacMillan in the House of Lords noted, a judge will not simply distrust a witness because
“he [sic] finds him inaccurate in some details”
and, that
“…such inaccuracies may appear in a very different light when pointed to as isolated passages… and abstracted from the human atmosphere of the trial and from the totality of the evidence.”[41]
[41] Per Lord MacMillan in Powell v Streatham Manor Nursing Home [1935] AC 243 at 267
The findings of her Honour about the wife’s and her father’s evidence do not support the husband’s assertion of ‘misconduct’. In relation to the husband, the wife and her father, her Honour weighed their evidence as she saw fit after considering it against the totality of the evidence. As she was entitled to, her Honour made findings as to the exaggeration and embellishment of Mr K’s evidence and found that she could not precisely value the wife’s father’s contribution to the parties. Her Honour’s findings in relation to Mr K do not support the allegation of misconduct.
Appointment of Wife as Trustee for Sale and Amendment Causing Delay
The Court has discretion to award costs in circumstances where late amendment causes delay. As was noted by the Full Court in Bradley v Weber,[42]
“proper relief to a late amendment lies in an application for an adjournment coupled with an application for costs…”
[42] (1997) FLC ¶92-770 at p84,480
On 14 October 2005 her Honour made a partial property distribution, ordering the immediate sale of the former matrimonial home. The application was sought orally by the wife on that date and opposed by the husband.[43] Both parties in their applications for property settlement had sought the sale of the property. However this was a fall-back position for the husband who preferred that the property be transferred to him, but that it be sold in default of that occurring.[44] The method of sale was also in dispute between the parties; the wife seeking sale by private treaty and the husband seeking public auction with a reserve price to be agreed or as determined by the Australian Institute of Valuers.[45]
[43] Judgment of 14 October 2005, at [1]
[44] Judgment of 14 October 2005, at [4], Husband’s Amended Response filed 1 April 2005 and Further Amended Response filed 28 April 2005
[45] Judgment of 14 October 2005, at [5]
Her Honour’s decision to require the sale of the property was based upon a number of factors including: the poor state of repair of the home; the inability of either party to make mortgage payments (both parties were unemployed at the time of the hearing); the mortgagee’s having given a notice of intention to foreclose; and the fact that the property appeared to be uninsured at the date of hearing.[46]
[46] Judgment of 14 October 2005, at [20]
The problem facing her Honour was that on that date she did not have evidence of the value of the property.[47] In evidence presented by the wife it appeared that she would accept a sale price of $1,600,000, but that the husband would not accept an amount less than $1,700,000.[48] Her Honour stated that if the wife failed to file satisfactory evidence of the valuation within seven days, then the home would be sold within four weeks thereafter at an agreed price or, failing agreement, within fourteen days and that the Australian Institute of Valuers nominate a valuer at the cost of both parties to fix a reserve price.[49]
[47] Judgment of 14 October 2005, at [25]
[48] Judgment of 14 October 2005, at [10]-[12]
[49] Judgment of 14 October 2005, at [25]
When the matter was re-listed on 7 November 2005 the wife made an oral amendment to her application that she be appointed trustee of the sale.[50] The husband also made an oral amendment to his further amended response seeking that the property not be sold but that the wife transfer her interest in the matrimonial home to the husband and that he pay an unspecified cash sum to the wife and split his superannuation.[51] This late amendment by the husband was opposed by the wife.[52]
[50] Judgment of 8 November 2005, at [8]-[9]
[51] Judgment of 8 November 2005, at [3]
[52] Judgment of 8 November 2005, at [3]
In support of his application the husband presented a copy of a loan application where he sought to borrow finance of some $1,200,000 but did not present any other evidence.[53] The husband sought in this application to borrow the above amount and pay interest for only one year, with the loan secured over the matrimonial home and to refinance the existing borrowings on the house of some $600,000. The basis of the husband’s application was that the home would be used after settlement as an investment property rented at $1,000 per week.[54]
[53] Judgment of 8 November 2005, at [2]
[54] Judgment of 8 November 2005, at [9]
Her Honour had already made findings on 14 October 2005 that the husband was unemployed and unable to meet the current mortgage payments and that between 14 October 2005 and 8 November 2005 (about three weeks) the mortgage indebtedness of the parties had increased by some $13,000.[55] There was no evidence presented by the husband of prospective employment or of the rental value of the matrimonial home.[56] The husband also sought that the wife should use her savings to make payments under the mortgage to prevent a mortgagee’s sale,[57] as it appears that the husband had done in late August 2005.[58] Her Honour rejected this proposition.[59]
[55] Judgment of 8 November 2005, at [16]
[56] Judgment of 8 November 2005, at [16]
[57] Judgment of 8 November 2005, at [16]
[58] Judgment of 14 October 2005, at [15]
[59] Judgment of 8 November 2005, at [16]
The husband also submitted that the Court’s making orders as sought by the wife would not be in the best interests of S, the parties’ son, impliedly because of subsections such as 65E, 68E or 68F of the Family Law Act 1975. This argument was misconceived and rejected by her Honour.
Throughout the proceedings, the husband had conducted his case on the basis that the home should be sold - albeit as an alternative position. The evidence before her Honour indicated that the husband had not co-operated so far in the sale of the home and despite his submission that he would agree to the sale of the home for a sum in excess of $1,500,000, he refused to accept an offer of $1,600,000.[60] As such the husband’s unrealistic expectations about refinancing and his conduct in refusing to co-operate with the sale required the appointment of a trustee of sale - the most obvious person to be so appointed was the wife.[61]
[60] Judgment of 8 November 2005, at [18]
[61] Judgment of 8 November 2005, at [21]-[22]
If the husband had co-operated with the wife to achieve the position in her Honour’s orders of 14 October 2005, which were in accordance with his position taken on that date, the wife would not have had to make her application. Further, if the husband had not amended his application on 7 November 2005 to no longer seek the sale of the property, the cost of extended proceedings on that day related to the husband’s change of application would not have been incurred by the wife. On that date, given the findings of her Honour on 14 October 2005, the husband’s oral application was without merit.
Because of the husband’s unwillingness to co-operate in the sale of the house, it was necessary for the wife to be appointed trustee for the sale. The husband’s oral amendment to his response was an amendment which caused delay and resulted in the wife’s incurring unnecessary costs, particularly because the application was without merit. In the proceedings before her Honour on both 14 October 2005 and 8 November 2005, costs were reserved to the substantive proceedings. In my opinion the conduct of the husband in relation to both these appearances is relevant to the making of a costs order.
Husband’s Withdrawal of Consent
On the day of the hearing which had been approached by both parties apparently on the basis that it would proceed (including the fact that the husband had filed a Summary of Argument for the pending hearing), the matter was stood down before the Judicial Registrar to enable certain preliminary matters to be undertaken and for him to deal with another matter in his list. Prior to its being stood down the Judicial Registrar raised the issue of consent because he determined that on the papers at least the gross value of the property was over $2,000,000.[62] No indication was given at that point that there would not be consent to the Judicial Registrar’s dealing with the proceedings.
[62] This was because of the inclusion of the superannuation - see transcript of 23 May 2005 at p 1
When the matter resumed at 11:04 am Mr Richards, who appeared on behalf of the respondent husband, announced that his client did not consent to the Judicial Registrar’s hearing it.[63]
[63] Transcript of 23 May 2005 at p 3
The Judicial Registrar pointed out that Mr Richards’s “learned instructor” was present when the matter was listed before a Judicial Registrar.[64]
[64] Transcript of 23 May 2005 at p 3
Mr Richards responded
“Yes and as I understand my instructions, it was indicated to her that there was no choice because the net pool was below two million and it was listed on that basis. … but what happened, as I understand, at the pre trial conference was that the parties were told the net pool is X therefore, we don’t even need your consent, it would be listed before a Judicial Registrar.”[65]
[65] Transcript of 23 May 2005 at p 3, ln 26
The Judicial Registrar enquired of Mr Richards
“did your instructor object to that?”[66]
and was informed by counsel for the husband
“there was no objection put to that, no.”[67]
[66] Transcript of 23 May 2005 at p 3, ln 35
[67] Transcript of 23 May 2005 at p 3, ln 36
The Judicial Registrar pursued the matter in the following way
“It just seems extraordinary. I mean, why should a solicitor specialising in family law who knows the jurisdiction of a Judicial Registrar is limited agree to a matter being listed for hearing if they objected to it?”[68]
[68] Transcript of 23 May 2005 at p 3, lns 39-41
Mr Richards responded
“there was no objection and no as I understand it consent given. It was a decision made by the Deputy Registrar at that time”.
The situation then is that, on the apparently unchallenged facts, the Deputy Registrar erroneously determined that because the net value of the property was under $2,000,000 that the matter could and (as the Deputy Registrar determined) should proceed before a Judicial Registrar. The Judicial Registrar was wrong as a matter of law on the material before the Deputy Registrar.
The question is whether when a person in the position of a Deputy Registrar informs the parties erroneously about a question of jurisdiction, is there an obligation on the part of a practitioner (whether experienced or not) to object and to seek to persuade the Deputy Registrar to a “correct” position. Relevantly to these proceedings, if such an objection is not made should the party represented by that legal practitioner subsequently be obliged to pay costs as is sought in this case.
It is not clear to me from the evidence available whether there was time available from the determination of the Deputy Registrar to review the Deputy Registrar’s decision before the matter came on for hearing before Judicial Registrar Johnston. It is however apparent that no such review was sought.
Moreover at no point prior to the date of the projected hearing before Judicial Registrar Johnston was notice given by the respondent that there would be an objection to jurisdiction. In fact as commented previously, pre-trial documents were filed which gave every indication that the respondent expected the hearing to proceed.
Because no notice was given before the hearing, the applicant was entitled to proceed to prepare for a hearing and to retain counsel. The fact that counsel’s retainer involved a commitment to cancellation fees as described in the fee agreement is a matter which I will address in due course.
Accordingly the withdrawal of consent, or perhaps more accurately the failing to give consent by the husband on the day of the hearing before the Judicial Registrar, smacks a little of opportunism. It is to be noted that this was not a preliminary application by counsel for the husband on that day but was only pursued once the Judicial Registrar raised the matter.
Nevertheless it is quite clear that in circumstances where the Judicial Registrar’s monetary jurisdictional limited is exceeded the matter can only proceed by consent and once that fact was established it is not incumbent upon either party to give consent.
The respondent could not be required to give consent where the Judicial Registrar’s jurisdiction was exceeded. The question is whether the conduct of the respondent in relation to this matter was such as ought properly to provide a basis for an order for costs against the respondent pursuant to subsection 117 (2A)(c) or perhaps (d).
If a party were to be self-represented, it would be hard to argue that that person should challenge either immediately or, subsequently formally with a review, a determination of the person in authority. Equally it might be argued that it would be unreasonable to expect the self-represented person to raise a challenge at the beginning of the proceedings before the Judicial Registrar.
However in this matter the respondent had retained as a solicitor a person apparently experienced in family law.[69] Equally, counsel retained in the matter, ordinarily would have been expected to perceive any difficulty in jurisdiction and to raise the matter at the earliest point.
[69] This was the assertion of the Judicial Registrar not contradicted by any of those appearing before him - see transcript of 23 May 2005 at p 3, ln 39 ff.
In my opinion in circumstances such as this there are a number of elements which need to be balanced to determine whether the conduct of the respondent deserves to incur an order for costs or should give rise to an order for costs.
1.There can be no doubt that the applicant has behaved reasonably in preparing for the hearing. (I leave aside for a moment the question of whether a retainer involving cancellation fees is reasonable.)
2.When a person of authority (in this case a Deputy Registrar) makes a determination, ordinarily the parties would be entitled to rely upon that determination.
3.An experienced solicitor, and perhaps even more so an experienced barrister, would be expected to either object to the determination of the Deputy Registrar or seek a review of that determination or raise the matter before the hearing or at least at the beginning of the hearing.
A combination of these factors leads me to conclude that on this ground alone at least it is reasonable that the applicant should have the costs thrown away by attendance on the first day of the hearing. It seems to me that the combination of circumstances referred to above could not reasonably give rise to an order for indemnity costs (which I will consider generally in more detail subsequently) or, for reasons which I will again consider more substantively subsequently, to the payment of counsel’s fees for days cancelled as a consequence of the actions of the respondent at least beyond the first day.
(d) Whether Proceedings were Necessitated by a Party’s Failure to Comply with Previous Orders of the Court
A further consideration will be whether a party has failed to comply with previous orders of the Court, and whether that failure was a result of a deliberate action or inaction by a party, or as a result of extenuating circumstances. There are very few cases which consider subsection 117(2A)(d) specifically. In Madden v Madden,[70] a case involving enforcement, their Honours Chief Justice Evatt and Justices Wood and Simpson in the Full Court held that
“[t]he order for costs [made by the trial Judge] was well within his Honour’s discretion having regard to the appellant’s bad history in this matter…”[71]
[70] Madden v Madden (1979) FLC ¶90-710
[71] At page 78-794
Federal Magistrate Scarlett in In the Marriage of Gaudry (No 2)[72] considered relevant factors in making a costs order. He noted
“I am satisfied that the proceedings were necessitated by the failure of the respondent to comply with a previous order of the court. [footnote omitted] In fact, the respondent has flagrantly disregarded the earlier orders.”[73]
[72] [2004] 33 FamLR 346
[73] At 349
In the latter case it was contemplated by Scarlett FM that a single failure to comply with “a previous order of the court” could be a relevant factor in the making of a costs order. However, both cases refer to a party’s course of conduct in failing to comply with more than a single order of the Court.
It is asserted on behalf of the wife that the husband’s withdrawal of consent on the morning of the hearing to appear before a Judicial Registrar as directed by a Registrar of the Court was a failure on behalf of the husband to comply with an order of the Court.
For the reasons that I have set out above, while I consider that the failure on the part of the lawyers for the respondent to raise issues about jurisdiction before the day of the hearing may reasonably give rise in itself to an order for costs in relation to that day, it cannot be said that the circumstance could properly be construed as a party’s failure to comply with previous orders of the court. It seems clear that the previous order of the court was wrong. The respondent’s failure to proceed with the hearing was a legal entitlement because the Judicial Registrar had no jurisdiction except by consent.
Subsection 117(2A)(d) does not provide a further or indeed any ground for making an order for costs against the respondent.
I add for the sake of completeness that in my opinion while there may be circumstances (for example in cases of contempt or contravention of an order or proceedings for contravention of an order) where a single act or a failure to comply with an order of the court may in itself constitute a ground for costs, generally speaking, and particularly in relation to procedural matters, it would require more than a single act of failing to comply with an order to invoke the provisions of subsection 117 (2A)(d).
(e) Whether a Party has been Wholly Unsuccessful in the Proceedings
Neither party was wholly unsuccessful in the primary proceedings.
(f) Whether Either Party Has Made an Offer in Writing to Attempt to Settle Proceedings and the Terms of Any Such Offer
The terms of subsection 117(2A)(f) seeks to ensure that
“…offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.”[74]
The fact that an offer has been made in writing to the other side must not be disclosed to the Court except for consideration in the matter of costs,[75] in which circumstances the offer should be provided to the Judge.
[74] Nygh J in Robinson v Higginbotham (1991) FLC ¶92-209 at p78-417
[75] Richards v Richards (1988) FLC ¶91-951
It is asserted by the husband that the wife refused to accept reasonable and fair offers made prior to and following the proceedings to be heard before Judicial Registrar Johnston on 23 and 24 May 2005. However no offer of settlement has been provided with the costs submissions, and as such, the husband cannot seek to rely upon this ground to support his application for costs. It is noted that the wife does not make submissions on this ground.
(g) Such Other Matters as the Court Considers Relevant
Fees Agreements
It is asserted[76] that the fact that the parties engaged both a solicitor and counsel under fees agreements which, certainly in the wife’s case, were higher than those provided for in the Court scale is a factor which could be relevant consideration to a costs order. The wife has provided a copy of her fees agreement; the husband has not.
[76] Wife’s Submissions as to Costs at 3(g) and 5(g)
However the fact that the parties are, under their respective fees agreements, liable for higher than scale costs is not a proper factor to be taken into account under subsection 117(2A). Although costs are among other things intended to deter unnecessary or unreasonable litigation, this does not extend in every case to putting the successful party back to the position he or she was in before retaining a lawyer. The ability of a Court to award costs is an important factor in regulating litigation but that principle does not require or even make desirable that costs should be a complete indemnity to the successful litigant.
Inconvenience and Grief
The husband also seeks costs as a result of what he terms “inconvenience and grief”, purportedly suffered by himself and S, as a result of Justice Boland’s decision to require the parties to sell the former family home at …, and the alleged misconduct of the wife and her father in relation to these proceedings, which has been discussed above.[77]
[77] See Husband’s Submission as to Costs at paragraph 4 and 8
It is recognised that the break-up of relationships and subsequent proceedings in the Family Court are often difficult, particularly emotionally, for the parties, but the Court will not and should not compensate litigants with costs orders for decisions which they do not like or do not agree with.
Further, in relation to the wife’s alleged negligible contributions to the family home both prior to and after separation her Honour made determinations about the wife’s contributions following the production of evidence and a hearing in which the husband ably participated. If the husband is unhappy with her Honour’s determination in relation to contribution then the appropriate course of conduct is to apply for leave to appeal her Honour’s decision. This is not an appropriate ground for the making of a costs order.
Mortgage and Maintenance Costs
The husband further seeks costs on the basis of additional and unnecessary mortgage and maintenance costs of some $45,000 incurred by the husband as a result of the applicant’s refusal to permit the home to be rented until the finalisation of the proceedings.
The order by her Honour for the sale of the property on 14 October 2005 and 8 November 2005, as sought by the wife, was made on the basis of the parties’ inability to pay the mortgage, their lack of employment, the poor condition of the home, and the mortgagee having given notice on an intention to foreclose. When the husband sought orally to change his position on 7 November 2005, the husband did not provide the Court with any evidence as to the rental value of the house, or whether the loan application which he was seeking to make for $1,200,000 had any prospects of success, particularly given that the home was at that point mortgaged for some $600,000, and valued at approximately $1,600,000. Her Honour also considered the fact that between 14 October 2005 and 8 November 2005, the mortgage had increased by some $13,000.
It is not clear where the figure of $45,000 asserted by the husband to have been paid into the mortgage comes from. It appears that the husband paid certain amounts on the mortgage during August 2005.[78] This may have been a reference to the post-separation benefit received by the husband of some $81,000 from a company. The husband paid $35,000 of this for S’s school fees and some $28,000 to reduce a line of credit which had been used to pay utilities, mortgage repayments, and bills, while the husband had in sole occupation of the home.[79] If so, this issue has already been taken into account by her Honour in her decision.[80]
[78] Judgment of 14 October 2005, at [15]
[79] At [63]
[80] At [135]
Again, if the husband is unhappy with her Honour’s determination about this contribution then the appropriate course is to apply for leave to appeal her Honour’s decision. This however is not an appropriate ground for the making of a costs order.
The Issue of Indemnity Costs
When one party to the litigation is ordered to pay the other party’s costs, those costs are traditionally assessed on a party-party basis that being the proper costs, charges and expenses reasonably and necessarily incurred by one party to the litigation to defend or prosecute their rights. In Kohan v Kohan[81] the Full Court considered whether it should award indemnity costs and stated that
“…the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.”[82]
[81] (1993) FLC ¶92-340
[82] At p 79-614
In recent times the difference between solicitor-client costs and indemnity costs seems to have become somewhat blurred. Traditionally solicitor-client costs differed from party-party costs mainly because of the omission[83] of the requirement that such costs must “necessarily” be incurred. This might be illustrated by the fact that a client may require his solicitor to brief counsel of a higher level of seniority than the matter might “necessarily” require. This would then constitute a proper basis for the solicitor to claim such costs from his or her client. It may also constitute a basis for resistance to such additional payment being included in a party-party order made against the other party in the litigation.
[83] And by this I do not mean to paragraph or summarise the law definitively
Although there are many bases and reasons for the ordering of costs, and compensation is only one of them, in more recent times courts have considered that it may be necessary to place a successful party to litigation back into the position that he or she may have occupied if he or she had not been required to bring the matter before a court. This means in essence that the party would be indemnified in respect of all of the costs that he or she had incurred in the proceedings. One would think that this would ordinarily mean an order for what used to be known as solicitor/client costs. Ordinarily, the distinction would not be one of consequence.
However one difficulty automatically facing a court seeking to make an indemnity or solicitor/client costs order is the inability on the part of the court to police or supervise adequately the criteria by which such costs should be determined. An order for indemnity costs or solicitor/client costs does not remove the requirement that such costs should be reasonably incurred.
In accordance with Rule 19.08(3) copies of the costs agreements for the wife’s counsel and lawyer have been provided to the Court. However it seems that it is reasonable in the circumstances before any such order might be made to require that the amount of costs claimed should be indicated. Counsel for example may have some clause in the agreement which would permit his or her charging fees which he or she subsequently does not charge because he or she has obtained other work or alternatively chooses not to do so in the circumstances. Indemnity must mean indemnity and not penalty.
In Munday v. Bowman[84] his Honour, the Chief Judge of the Family Court of Western Australia, had before him an application for indemnity costs. He reviewed the law. He referred to Kohan v. Kohan[85] and quoted their Honours in the Full Court in that case as follows:
“Indemnity costs orders are still an exception in this and other jurisdictions.”[86]
[84] (1997) FLC ¶92-784
[85] (1993) FLC ¶92-340
[86] (1997) FLC ¶92-784 at p 84-660
His Honour Holden CJ’s judgment was favourably commented upon by their Honours in the Full Court of the Family Court in Gourley v. Gourley.[87] Their Honours in the Full Court made the following comment:
“Given the view of the Full Court in Kohan that it is fundamental to the exercise of a discretion to award costs on an indemnity basis that the court should know what the terms of any costs agreement are as between the party sought to be indemnified and her own legal practitioners, and given that we have no such information, we are loathe in the circumstances to order costs on an indemnity basis…”[88]
[87] [2000] FamCA 889
[88] [9]
Their Honours however went on to indicate that if they had been inclined to make such an order they would have done so in the form suggested by his Honour Justice Gummow in McKewins Hairdressing and Beauty Supplies Pty Ltd v Deputy Commissioner of Taxation[89] which would have been an order in this case in the following form:
“The respondent is to bear the costs of the applicant, such costs to be taxed on the basis that the costs include all costs of the applicant except in so far as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the applicant is completely indemnified by the respondent for the applicant’s costs.”
[89] [2000] HCA 27
The phrase emphasised by their Honours which is obviously applicable in these matters and which provides the basis for taxation is
“except in so far as they are of an unreasonable amount or were unreasonably incurred”.
His Honour Holden CJ did however refer to, with approval, the summary of potential or suggested circumstances by his Honour Justice Sheppard in Colgate v Palmolive Company and Another v Cussons Pty Limited.[90] His Honour Sheppard J suggested that indemnity costs might be awarded in circumstances where:
i.an action has been commenced or continued in circumstances where a party properly advised should have known that it had no chance of success; or
ii.the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; or
iii.evidence of particular misconduct causing loss of time to the court and to other parties; or
iv.the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and,
v.an imprudent refusal of an offer to compromise.
[90] (1993) 46 FCR 225
His Honour[91] commented that the last mentioned category may in fact be to some extent affected by the Supreme Court Rules in New South Wales which provide for indemnity costs where a plaintiff obtains judgment on terms no less favourable than those of an offer to compromise made by him and not accepted.
[91] (1997) FLC ¶92-784 at p 84,660
His Honour Holden CJ referred to dicta of Sheppard J to the effect that there must be some “special or unusual feature in the case to justify the court in departing from the ordinary practice [of awarding only party and party costs]”.[92] However his Honour appeared to agree with French J in Tetijo Holdings Pty Limited v Keeprite Australia Pty Limited[93] that the “categories in which the discretion may be exercised are not closed”.[94]
[92] (1997) FLC ¶92-784 at p 84-660
[93] [1991] FCA 225 , 3 May 1991
[94] (1997) FLC ¶92-784 at p 84-660
The wife submits that the behaviour of the husband in withdrawing his consent to appearing before the Judicial Registrar and in withdrawing his consent for the sale of the former matrimonial home which forced the wife to make an application to be appointed trustee of the sale was conduct that resulted in a loss of time to the Court and to the wife and this was relevant to be taken into account in the exercise of the Court’s discretion to order indemnity costs.
In relation to the appearance before the Judicial Registrar, the wife seeks $12,300 in costs. This was a day’s preparation for counsel and two days’ appearance cancellation fees, together with solicitor’s costs on an hourly basis in accordance with a costs agreement with the wife.
The wife’s costs assessed by her for the application seeking her appointment as trustee for sale for the former matrimonial home are $4,850.
In total, the wife seeks $17,500 by way of indemnity costs.
Cancellation Fees
In the submissions from the wife I was supplied with the fees agreement for Mr J of Counsel. Such documents do not often find their way into evidence. Clause 4 refers to “cancellation fees” that is, fees payable to the barrister for not attending Court. I understand that this is now a common practice at the Sydney Bar.
The practice of charging cancellation fees is no doubt at least in part dictated by supply and demand. However, the market place is not the only determinant of professional practice. It is easy to feel some sympathy for counsel who in good faith reserve time in their diaries for a hearing only to find that the hearing is not reached or resolved by settlement on the first or second day of the time reserved for the trial. However, it has come to my attention that it has been known for counsel to be paid more than one cancellation fee in respect of the same period of hearing time.
Counsel, at least busy or well-regarded counsel rarely in my experience are left with no work to do even if a hearing resolves or is adjourned at short notice. Chamber work is an important part of counsel’s professional work.
The tradition that the brief fee included preparation and the first day’s hearing seems to have faded into a distant professional haze. Counsel seem now to charge and charge highly for preparation for trial on an hourly basis. In my opinion this practice makes it very difficult for litigants to have some firm idea of what legal services will cost them. (The same applies equally to solicitors or attorneys who charge for their services according to the time it takes them to do their work.) I accept that time-costing is now a wide-spread practice of both barristers and solicitors. I fear that the legal profession does itself no favour in persisting with this practice. It opens up lawyers to allegations that the charging system rewards the slow and incompetent over the fast and efficient. This is in most cases an unjustified criticism but persistence with this practice leaves the profession open to unfounded or even occasionally well-founded criticism.
The practice of charging cancellation fees falls into a similar category and if anything is even less justified. The fees agreement in this case which may or may not be typical makes no provision for a payment or penalty from counsel if for any reason counsel is unavailable. Counsel become jammed through no fault of their own. Counsel can become ill or have family emergencies. These events are beyond counsel’s control but have the effect of the litigant losing at short notice the support and skills of counsel in whom the litigants have reposed trust and confidence. The agreement lacks reciprocity of obligation. Litigants may have no choice in the market place except to agree to such terms but that does not make them reasonable.
I accept that commercial litigants may have sufficient bargaining power and financial strength to fairly enter into arrangements which might not appear to be fair or reasonable for those less powerful or well off. But I find it hard to believe that this could be so in many (if any) cases of family law litigation. In my opinion the practice of charging cancellation fees in family law matters at least is not to be encouraged and I urge individual barristers and the various Bar Associations to review their practices.
The practice of cancellation fees received unfavourable comment from his Honour Justice Wilcox in the Commissioner of Australia Federal Police v Razzi (No.2)[95] where he stated
“Very often they [barristers] would have refused other work because of the case and its estimated duration. But as I understood the situation, barristers generally accepted that any financial loss caused by such circumstances was to be borne by them. Any disadvantage had to be balanced against the advantage conferred by the rule which permits barristers to charge a full fee on a matter settled after delivery of the brief but before any hearing. This approach was fair. The unexpected time out of court was rarely the personal fault of the barrister’s client, or even the opposing party. Moreover, it was right in principle. The practice of demanding “cancellation fees” can rest only on the premise that, if a case does not proceed or finishes early, the barrister will be left without remunerative work. But, except perhaps for beginners at the Bar who are unlikely in any event to be able to command a “cancellation fee”, the premise is rarely well-founded in point of fact. Most established barristers find that their problem is over-employment, not under-employment. For most, some unexpected time out of court is a welcome opportunity to catch up with Chamber work.”[96]
[95] (1991) 30 FCR 64
[96] At [10]
This decision was commented upon favourably by his Honour Justice Hannon in Plowman v. Robertson[97] and his Honour further quoted with approval from his Honour Justice Wilcox as follows[98]
“I do not think that a solicitor-client order would in fact enable recovery of cancellation fees. A solicitor-client costs order enables the recipient of the order to recover the actual costs, reasonably incurred, of all work reasonably required and actually performed in connection with a matter. But it does not extend to fees for work not done.”
[97] [2004] FamCA 643, 16 July 2004
[98] [25] of Justice Hannon’s judgment
His Honour Justice Hannon had added the emphasis referred to in the last quotation and added the following in paragraph 27 of his judgment
“… In my opinion and with respect, Wilcox J has correctly stated the law that for costs to be recoverable they must be actual costs reasonably incurred for work reasonably required and actually performed. I further agree with the passage from the reasons of his Honour, again at page 67 where he says:
“At a time when legal fees are so onerous as to exclude from significant litigation all but the wealthy and the legally-aided, any new practice which further increases costs requires meticulous justification.”
With respect to both his Honour Justice Wilcox and his Honour Justice Hannon I agree.
It follows that in this case even if I were to accept that indemnity costs or solicitor-client costs were appropriate I would not be prepared to endorse or approve the application of any agreement about cancellation fees.
Nothing I have said should be taken to suggest that Mr J has behaved otherwise in accordance with all existing standards of the Bar or the Bar Association. However in my opinion those standards or practices in so far as they allow cancellation fees to be included in counsel’s agreements are inappropriate.
Costs Decision
Balancing the factors under subsection 117(2A) for the reasons set out I find that the wife is entitled to costs as a result of the behaviour of the husband which resulted in her seeking appointment as a trustee for sale for the former matrimonial home and for the costs thrown away on the first day in relation to the aborted hearing before the Judicial Registrar.
The wife’s costs will be payable on a party-party basis only.
The husband’s application for costs of the entirety of the proceedings is unproved and without merit again for the reasons set out above and is accordingly to be dismissed.
Orders
The orders that I make in K & V are as follows:
1.That the husband will pay the costs of the wife on a party-party basis in the proceedings before her Honour Justice Boland on 14 November 2005, the hearing of 7 and 8 November 2005, and of costs thrown away on the first day as a result of the husband’s withdrawing his consent for the matter to be heard by the Judicial Registrar as agreed or in default of agreement as assessed under the Family Law Rules 2004.
2.That the wife serve upon the husband within 30 days an itemised costs account.
3.That the itemised costs account served by the wife upon the husband be paid within 90 days from the date of this order.
4.That the husband’s application for costs in the proceedings be and is hereby dismissed.
Key Legal Topics
Areas of Law
-
Family Law
-
Civil Procedure
Legal Concepts
-
Costs
-
Appeal
-
Consent
-
Remedies
2
6
0