Kendall & Karas & Ors (No. 2)

[2014] FamCA 790

FAMILY COURT OF AUSTRALIA

KENDALL & KARAS AND ORS (NO. 2) [2014] FamCA 790

FAMILY LAW – COSTS –  where a contravention application is dismissed – where an offer is made in open court –  where that offer is refused –  where the court is empowered to make such orders to costs as is in the circumstances just and appropriate –  s 117(2A) – where the third respondent seeks an order that costs be paid on an indemnity basis – where the applicant is to pay the third respondent’s costs of the contravention application as agreed or, in default, as assessed, such costs to be assessed on an indemnity basis.

Family Law Act 1975 (Cth) ss 112AB(1), 112AD(1), 112AD(4), 112AG(3), 117(1), 117(2)

Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225

APPLICANT: Ms Kendall

1st RESPONDENT: Mr Karas

2nd RESPONDENT: Ms Karwood

3rd RESPONDENT: Ms Eberson

4th RESPONDENT: Mr Staunton

FILE NUMBER: SYC 7163 of 2010

DATE DELIVERED: 19 September 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Aldridge J

HEARING DATE: 12 May 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Pender

SOLICITOR FOR THE APPLICANT:

COUNSEL FOR THE 1ST RESPONDENT: Mr Bell

SOLICITOR FOR THE 1ST RESPONDENT: B Bilinsky & Co

COUNSEL FOR THE 2ND RESPONDENT:

SOLICITOR FOR THE 2ND RESPONDENT: 2^nd Respondent in Person

COUNSEL FOR THE 3RD RESPONDENT: Mr Lloyd, SC

SOLICITOR FOR THE 3RD RESPONDENT: Horowitz & Bilinsky

COUNSEL FOR THE 4TH RESPONDENT: No Appearance

SOLICITOR FOR THE 4TH RESPONDENT:

Orders

(1)That the applicant is to pay the third respondent’s costs of the contravention application filed on 11 December 2013 as agreed or, in default, as assessed, such costs to be assessed on an indemnity basis. 

(2)That such payment is not to be enforced until the conclusion of the property proceedings between the applicant and the first respondent.

(3)That the applicant has liberty to apply within twenty-one (21) days and, upon notice to the other parties and to her legal representatives, in the event she seeks an order that her legal representatives and not her pay the costs the subject of these orders.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kendall & Karas and Ors (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 7163 of 2010

Ms Kendall

Applicant

And

Mr Karas

1^st Respondent

And

Ms Karwood

2^nd Respondent

And

Ms Eberson

3^rd Respondent

And

Mr Staunton

4^th Respondent

REASONS FOR JUDGMENT

1. On 12 May 2014 I heard and dismissed Ms Kendall’s (“the applicant”) contravention application against Ms Eberson (“the third respondent”).  The third respondent then sought an order for costs and made her submissions in support.  Counsel appearing for the applicant sought the opportunity to file an affidavit from her client and to provide some written submissions.

2. Subsequently an affidavit from the applicant and written submissions were received. 

3. The contravention application arose out of orders that I made on 18 September 2013.  The third respondent has acted as the solicitor for Mr Karas (“the first respondent”) in these proceedings.  On that day I ordered her to provide, within seven days, details of the payments received by her in respect of the proceedings that had not been the subject of previous disclosure in a letter of 13 May 2013. 

4. The contravention application, as eventually framed, alleged that the third respondent had received the sum of $66,807 from the first respondent but had only disclosed receipts of $47,150. 

5. It was alleged by the applicant that the list of 16 payments disclosed by the third respondent up to May 2012 totalled $47,150 yet a costs disclosure provided by the third respondent shows costs received of $67,807. 

6. As the evidence did not establish which, if either, of these documents was correct, the applicant did not establish on a prima facie basis that there had been a failure to disclose payments. 

7. Further, counsel for the applicant tendered an updated list of payments received by the third respondent from the first respondent. That list indicated that a cheque, said to have been received on 10 May 2013 in the first list provided pursuant to the orders of 18 September 2013, was, in fact, received in June 2012 and not in 2013.  If that was the position there was then no discrepancy between the costs disclosure and list of payments received. 

8. I thus found that the applicant had not established a prima facie case for contravention of the orders. 

9. In support of his client’s application for costs senior counsel for the third respondent referred to what had occurred in the proceedings on 12 March 2014.  On that day there were two applications for contravention in these proceedings, each brought by the applicant.  The first was against the first respondent and the other was the application the subject of this costs application.  The application against the first respondent proceeded on 12 March 2014.  I was not satisfied that the evidence established that the alleged contravention occurred.  The application was dismissed. I ordered the applicant to pay the first respondent’s costs of the contravention as agreed or as assessed and that assessment and payment not be enforced until the conclusion of the property proceedings between the parties. 

10. There was then no time available to deal with the contravention application against the third respondent.  However, senior counsel for the third respondent made an open offer that, if the applicant agreed to have the contravention application against the third respondent dismissed, the third respondent would not seek an order for costs.

11. As can be seen that offer was not accepted. 

12. Pursuant to s 117(1) of the Family Law Act 1975 (Cth) (“the Act”) each party to the proceedings under the Act shall bear his or her own costs. Nevertheless the court is empowered to make such orders to costs as is in the circumstances just and appropriate. In considering whether a costs order should be made the court is to have regard to the matters raised by s 117(2)(A) of the Act.

13. There is no evidence as to the financial circumstances of the third respondent and she did not seek to rely upon her financial position. 

14. The evidence of the applicant is that she is in a parlous financial position.  She earns approximately $800 per week and is paying $600 per week rent.  She has, in the past, been paying her daughter’s school fees but it is not entirely clear whether she is still doing so.  The applicant’s only significant asset is her car.  She has a debt to the Child Support Agency of $12,000, and a debt for legal fees of approximately $48,000. 

15. Thus her present capacity to pay any costs orders is limited.  It is to be recalled however that impecuniosity is, of itself, not necessarily a bar to the making of a costs order.

16. I am required to take the conduct of the parties to the proceedings into account.  My reasons for Judgment given on 12 May 2014 I said at [13]:

    I should add Ms Pender said many times that she was not seeking any punitive measures but the application was designed to obtain further and better disclosure.   Had an application been framed in those terms it may well have been considered differently. 

17. In the applicant’s written submissions her counsel submitted at [10]:

    It was the wife’s submissions that she did not seek orders punishing the solicitor but rather an order that she be provided with relevant documents in order to proceed.  Senior Counsel for the Third Respondent submitted that this was a “collateral purpose” and therefore more reason for the wife to pay costs.  It is submitted that the Court would hold that the proper administration of justice and assisting the wife’s application not to be defeated by the husband, is not a collateral purpose for the Family Court nor any other Court.  [as per original]

18. A contravention application is a particular kind of application. Pursuant to s 112AB(1) of the Act a person bound by an order shall be taken to have contravened that order if and only if he or she has intentionally failed to comply with the order or has made no reasonable attempt to comply with the order.

19. If the court is satisfied that a person has, without reasonable excuse, contravened an order the court may impose one or more of the sanctions available to be imposed under s 112AD(1) of the Act. Those sanctions are the requiring of the person to enter into a bond, to impose a sentence involving a community service order or similar orders as provided by s 112AG(3), a fine of up to sixty penalty units or a sentence of imprisonment.

20. Section 112AD(4) provides:

    Where a court makes an order under subsection (1), the court may make such other orders as the court considers necessary to ensure compliance with the order that was contravened. 

21. By its very terms, the further orders under s 112AD(4) can only be made where the court otherwise makes an order under s 112AD(1) imposing a sanction. Such an order is limited to orders as the court thinks it is necessary to ensure compliance with the order that has been contravened. Contravention applications are accordingly of a serious kind with potentially serious consequences if the alleged contravention is established. They cannot be used as a means to obtain further and different orders such as the provision of further documents. The application had a “collateral purpose” and was clearly misconceived.

22. It was submitted by counsel for the applicant, as the amended list of payments showing the receipt of $42,000 in May 2012 as opposed to May 2013 was only handed to her on the day of the hearing, the applicant and her counsel had otherwise appropriately prepared for the contravention hearing.  She submitted at [7]:

    Nevertheless the court accepted evidence from the bar table from Senior Counsel and the handwritten note he had given to Counsel for the Wife as evidence that the Third Respondent had complied with the order to provide a list of payments and the wife did not have a prima facie case for a contravention application. 

23. Firstly, the court did not accept evidence from the bar table from senior counsel.  The court considered that the evidence relied upon by the applicant was incapable of establishing a prima facie case. 

24. Secondly the handwritten note that had been handed to counsel for the applicant on the day of hearing was tendered by the applicant in her case.  She was the party who relied on it. 

25. Thirdly, whilst the handwritten note tendered by the applicant made the position tolerably clear, in its absence the contravention application would have failed because there was no evidence which would indicate whether the letter relied upon by the applicant or the costs disclosure relied upon by the applicant correctly stated the payments received. 

26. As I have found the proceedings were not necessitated by the failure of a party to the proceedings to comply with a previous order of the court. 

27. The applicant was wholly unsuccessful in the proceedings.

28. Neither party made an offer in writing to the other party to settle the proceedings. 

29. The third respondent, however, as I have said made an open offer in court on 12 March 2014 to resolve the proceedings.  The applicant had ample time to consider that offer and did not accept it. 

30. Taking all of these matters into account, the misguided purpose of the contravention application and the failure to accept the third respondent’s offer are most persuasive.  Thus, notwithstanding the applicant’s impecuniosity, it is appropriate to order her to pay the third respondent’s costs of the contravention application but having regard to that impecuniosity those costs not to be paid until the completion of the property proceedings.

31. The third respondent seeks an order that those costs be paid on an indemnity basis.  Indemnity costs are rarely ordered and are exceptional.  In Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225 Sheppard J said at [24], after noting that the categories of indemnity costs are not closed:

    … it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion.  I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud …; evidence of particular misconduct that causes loss of time to the court and other parties …; the fact that proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law …; the making of allegations which never ought to have been made or the undue prolongation of a case by groundless contentions…; and imprudent refusal of an offer to compromise…; and an award of costs on an indemnity basis against a contemnor … The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. [References to authority omitted]

32. Here the misguided nature of the proceedings, that is using a contravention application supposedly to seek further discovery, is a significant consideration.  In the course of giving reasons in the contravention application heard and dismissed on 12 March 2014 I said at [15]:

    Contravention applications are applications of a kind where the charge needs to be carefully framed and the evidence in support of it tightly focused so as to establish a breach of the contravention alleged.  I am not satisfied on the evidence that has been produced on this contravention application that the contravention as alleged has been made out. 

33. The contravention application was made for an impermissible purpose and ought never to have been made. 

34. The refusal of the open offer to resolve the proceedings was clearly an imprudent refusal of an appropriate offer.  I am satisfied, taking those two matters into account that the costs should be on an indemnity basis. 

35. I am concerned that responsibility for this contravention application might lie at the feet of the applicant’s lawyers and not at the feet of the applicant herself.  If that is the position then consideration would need to be given to whether or not a costs order should be against the applicant and her lawyers or solely against the lawyers. 

36. Such a consideration would, of course, require the lawyers being given the opportunity to put on such evidence and submissions as they thought appropriate to deal with that application. 

37. The appropriate course in my opinion is to give the applicant liberty to apply on twenty-one days’ notice to the other parties and to her legal representatives if she wishes to seek an order that they and, not her, pay the costs.  Otherwise the order will be as I have indicated.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Aldridge delivered on 19 September 2014.

Associate: 

Date:  19 September 2014