Kenyatta & Borghi (No 2)
[2024] FedCFamC1F 501
•26 July 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kenyatta & Borghi (No 2) [2024] FedCFamC1F 501
File number(s): SYC 7834 of 2021 Judgment of: ALTOBELLI J Date of judgment: 26 July 2024 Catchwords: FAMILY LAW – COSTS – Where an application for costs is made following substantive property proceedings – Where the applicant seeks indemnity costs – Where it is claimed that the applicant’s conduct bars her from relief – Where the existence of a sham offer is asserted – Where the offer was found to be reasonable – Where the refusal of the offer was unreasonable – Where the respondent’s conduct justifies indemnity costs for the substantive proceedings – Where a fixed costs order is made regarding the costs of the costs application. Legislation: Family Law Act 1975 (Cth) ss 78, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 6.06, 12.08, 12.17
Cases cited: Bhatt & Acharya (Costs) [2017] FamCAFC 71
Browne & Green (2002) FLC 93-115; [2002] FamCA 791
Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432
Calderbank v Calderbank [1975] 3 All ER 333
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
Cotter v Eggers-Cotter (No 2) [2015] FamCA 1008
Cross & Beaumont (2008) 39 Fam LR 389; [2008] FamCAFC 68
Davida & Davida (Costs) [2011] FamCAFC 61
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 256 CLR 137; [2015] HCA 45
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish & Another (2005) 33 Fam LR 123; [2005] FamCA 158
Hawkins & Roe (2012) 47 Fam LR 526; [2012] FamCAFC 77
Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23
In the Marriage of I & I (No. 2) (1995) FLC 92-625; [1995] FamCA 80
Kenyatta & Borghi [2024] FedCFamC1F 300
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Lenova & Lenova (Costs) (2011) FLC 93-467; [2011] FamCAFC 141
Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664; [2015] FamCAFC 157
Messiter v Hutchinson (1987) NSWLR 525
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248,
Peake v Benedict (Costs) (2014) 53 Fam LR 476; [2014] FCCA 2723
Penfold v Penfold (1980) 144 CLR 311; [2016] FamCAFC 248
Penner & Conroy [2022] FedCFamC1F 283
Phillips & Hansford (2020) FLC 93-941; [2020] FamCAFC 28
Robinson and Higginbottom (1991) FLC 92-209; [1991]
FamCA 5
Stoian & Fiening (Costs) [2014] FamCA 944
Division: Division 1 First Instance Number of paragraphs: 64 Date of last submission/s: 12 July 2024 Date of hearing: In Chambers Place: Sydney Counsel for the Applicant: Michelle McMahon Solicitor for the Applicant: O’Sullivan Legal Counsel for the Respondent: Lorne Havenstein Solicitor for the Respondent: Unified Lawyers ORDERS
SYC 7834 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS KENYATTA
Applicant
AND: MR BORGHI
Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
26 JULY 2024
THE COURT ORDERS THAT:
1.The Respondent pay the Applicant’s costs fixed in the sum of $50,000.
2.Such payment shall be made within 28 days of the publication of these orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kenyatta & Borghi has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
The applicant wife (“the wife”) seeks an order for costs against the respondent husband (“the husband”) relating to substantive property proceedings finalised on 10 May 2024 (Kenyatta & Borghi [2024] FedCFamC1F 300 (“Kenyatta & Borghi”)). The wife seeks costs for her Initiating Application filed 28 October 2021 (“the substantive proceedings”), and for her Application in a Proceeding filed 7 June 2024 (“the costs application”). The costs for the substantive proceedings are sought in three alternatives. Firstly, on an indemnity basis. Secondly, at a rate calculated in accordance with Sch 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). Thirdly, in an amount fixed by the Court. The legal fees for, and incidental to, the preparation of the costs application are sought on an indemnity basis. The precise orders sought are as follows:
Costs
5. That within 28 days from the date of these Orders, the Husband shall pay the Wife's costs on an indemnity basis in the sum of $238,494.20.
6. In the alternative to Order 5 above, costs be paid by the Husband to the Wife in accordance with the scale in a sum to be particularised in the Wide's Schedule of Costs to be submitted with written submissions, with such costs to be paid within 28 days of the date of these Orders.
7.In the alternative to Order 6 above, costs paid by the Husband to the Wife in an amount fixed by this Honourable Court, with such costs to be paid within 28 days from the date of these Orders.
8. That within 28 days from the date of these Orders, the Husband pay the Wife's indemnity costs of and incidental to this Application in or alternatively accordance with the scale in a sum to be particularised in the Wife's schedule of costs to be submitted with written submissions, with such costs to be paid within 28 days from the date of these Orders.
The husband opposes the wife’s application for costs and seeks for each party to bear their own costs for the substantive proceedings. The husband’s Response to an Application in a Proceeding filed 5 July 2024 is silent regarding the costs application. The precise orders sought are as follows:
1. That the Application in a Proceeding filed 7 June 2024 be dismissed.
2. That each party bear their own costs in relation to the Wife’s Initiating Application filed 28 October 2021.
BREIF BACKGROUND
The wife is 33 years old and is employed as a finance professional. The husband is 38 years old and is self-employed. The parties commenced cohabitation in 2013, married in 2016 and separated on 20 April 2021. The parties were divorced in 2022. There are no children to the marriage.
The Court heard the substantive proceedings for three days in April 2024. My reasons for judgment were delivered on 10 May 2024 (Kenyatta & Borghi). I made orders for the wife to retain beneficial ownership of the property situated at D Street, Suburb C NSW, her motor vehicle, any chattels, furnishing or other property in her possession, and any monies, shared, debentures, employee emoluments and superannuation entitlements in her sole name at the date the orders were published. Under the same orders, the husband received beneficial ownership of the properties located at G Street, Suburb F NSW, and H Street, Suburb B NSW (“the Suburb B property”), as well as all motor vehicles in his name, the company O Pty Ltd, any chattels, furnishing or other property in his possession, and any monies, shared, debentures, employee emoluments and superannuation entitlements in his sole name at the date of the orders.
This equated to the wife receiving 62.5 per cent, and the husband receiving 37.5 per cent of the property pool.
THE PRESENT APPLICATION
On 7 June 2024, I directed the costs application to proceed by way of written submissions, and for the costs application to be determined on the papers.
In support of her case, the wife relies on the following material:
(a)Application in a Proceeding filed 7 June 2024;
(b)Her affidavit filed 7 June 2024;
(c)Written submissions filed 21 June 2024; and
(d)Written submissions in reply filed 12 July 2024.
In support of his case, the husband relies on the following material:
(a)Response to an Application in a Proceeding filed 5 July 2024;
(b)His affidavit filed 5 July 2024; and
(c)Written submissions filed 5 July 2024.
LEGAL PRINCIPLES
The law relating to costs in family law proceedings is well settled and is set out in detail in the Full Court decision of Parke & The Estate of the Late A Parke (2016) FLC 93-748.
An application for costs is governed by s 117 of the Family Law Act 1975 (Cth) (“the Act”). Section 117(1) of the Act sets out the general presumption that each party to the proceedings shall bear their own costs. This is subject to s 117(2), which provides that:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as the court may make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) sets out the matters that the Court is to have regard to:
(2A)In considering what order (if any) should be made under subsection (2), 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 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.
Although the Court is required to consider each of the abovementioned factors, it is plain that their relevance to a particular matter will depend upon the circumstances of that case and they should be considered in that light. That is, no one factor prevails over another and it is a question of the weight that is to be afforded to each of the relevant factors depending on the circumstances of the matter (Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664 at [24]). There is also “nothing to prevent any factor being the sole foundation for an order for costs” (Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish & Another (2005) 33 Fam LR 123 at [41]).
Whilst the applicant in a costs application must establish the circumstances justifying the making of a costs order, the Court is not limited to making such an order only in what has been described as a “clear case” (Penfold v Penfold (1980) 144 CLR 311).
DISCUSSION
Costs orders are made at the Court’s discretion based on the factors listed in s 117(2A) of the Act. The Court must consider all the factors in s 117(2A), and no one factor takes precedence over another (In the Marriage of I & I (No. 2) (1995) FLC 92-625). A discussion of these considerations follows.
Section 117(2A)(a): Financial circumstances of the parties
Mere impecuniosity is not a reason per se for declining to make a costs order (see, e.g., Lenova & Lenova (Costs) [2011] (2011) FLC 93-467; Bhatt & Acharya (Costs) [2017] FamCAFC 71). Especially if a party’s conduct is found to warrant such an order (Cross & Beaumont (2008) 39 Fam LR 389).
The parties were financially comfortable and remain so. In the substantive proceedings it was found that the net matrimonial asset pool, including superannuation, held a value of $2,540,682 (Kenyatta & Borghi at [29]). The parties continue to hold down full-time employment in professional industries.
Throughout the relationship, the parties received significant financial support from each other’s parents. The wife’s parents contributed approximately $438,000 during the marriage (Kenyatta & Borghi at [50]). The husband’s parents provided little direct financial support, however, they aided the husband’s business and with the finalisation, fitting out and landscaping of the Suburb B property (Kenyatta & Borghi at [56]).
During the post-separation period the husband failed to meet the mortgage payments on the properties for which he was made responsible. The mortgages were approximately $70,000 in arrears by the time the matter came before me (Kenyatta & Borghi at [60]). The husband argued during the substantive proceedings that he could not afford to pay the mortgages. The Court ultimately rejected the husband’s argument of impecuniosity (Kenyatta & Borghi at [60]).
The financial circumstances of the parties in this matter do not preclude the making of a discretionary costs order if the circumstances otherwise justify the same.
Section 117(2A)(b): Whether the parties are in receipt of legal aid
Neither party is in receipt of legal aid.
Section 117(2A)(c): The conduct of the parties
The Court expressed concern about the manner with which both parties conducted the litigation (Kenyatta & Borghi at [38]–[39] ). Ultimately, the husband made unrealistic proposals, and the wife made unrealistic submissions. This costs application seemingly involved “pots calling kettles black”.
The wife submits that the conduct of the husband is the predominant factor necessitating a costs order in her favour. The husband refutes this and suggests that the wife’s conduct during the proceedings acts as a bar to her relief. There is truth to both submissions.
The wife relies on the husband’s non-compliance with Court orders, chronic issues of non‑disclosure and his inability to admit crucial facts, as a basis for her claim.
As will be expanded upon later, the husband continually ignored the orders of this Court and has failed to provide full and frank disclosure. The husband does not dispute these facts. Compliance and disclosure issues weighed against the husband in the substantive proceedings (Kenyatta & Borghi at [21]), and they continue to weigh against him in these proceedings.
The husband failed to admit the fact that he had no claim over, or made any contribution to, the “[Country Q] Property 1” (as it was described in Kenyatta & Borghi at [31]). Additionally, the father only chose to divulge that he had re-partnered on the first day of the substantive proceedings. Both facts are material facts. Should they have been appropriately admitted, it would have substantially changed the way the wife ran her case.
In particular, the husband’s false insistence that he had made contributions towards the Country Q Property 1 generated significant work for the wife. It is also likely that his position prevented meaningful settlement negotiations from occurring. The husband notably decided to resile from this position at the last possible moment. This demonstrates an awareness that such contention was incorrect. Given that the husband had the benefit of legal advice throughout the entire substantive proceedings, it can only be deduced that the husband was either reckless in his pleadings or held an incorrect position purely as a litigation tactic to cause the wife further expense.
The husband asserts that the wife’s case was run in a manner that induced unnecessary costs, that equal concern should be attributed to her failure to disclose, and that she had improperly sought to minimise the contribution of the husband’s parents.
The Court is critical of the wife for her position and preparation regarding the Suburb B property. The wife maintained that she should receive the realty, where it was clear that “it is the husband’s family home and he should be given the opportunity to acquire ownership of it, subject to financial capacity to refinance existing secured loans” (Kenyatta & Borghi at [66]). The wife’s counsel made no submissions on this point. The wife’s trial affidavit was equally silent on this issue. The rationale behind her position was not clear and this, without doubt, caused extra cost to the husband in his trial preparation.
The Court is also concerned with the lack of disclosure from the wife, particularly pertaining to the wife’s alleged business (Kenyatta & Borghi at [53]). In circumstances where joint matrimonial funds were used to support the business, more information should have been divulged. However, the Court is quick to remind the husband that, in the context of the matter, the severity and frequency of his non-disclosure is more egregious. Similarly, it must be acknowledged that both parties sought to minimise the financial contribution of each other’s parents.
The diametrically opposed positions of the parties meant that both parties were put to the cost of substantiating their respective positions. In my judgment I noted that “the polarisation of the parties’ proposals merely reflect[ed]…the manner in which the case was conducted [and that] they could not possibly both be right” (Kenyatta & Borghi at [36]).
On balance, the conduct of both parties was such that neither’s conduct was more, or less, reprehensible than the other. This consideration is equivocal in relation to costs.
Section 117(2A)(d): Failure to comply with orders of the Court
The wife asserts that the husband did not comply with numerous orders of the Court. She suggests that the repeated non-filing and failure to particularise the husband’s claim made negotiations and preparation more arduous. The husband does not contest these assertions.
Parties have an obligation to disclose all relevant material. On 26 March 2024, Campton J made orders for the parties to file an undertaking as to disclosure in accordance with r 6.06 of the Rules. It is uncontentious that the husband did not comply with his duty to disclose, and that this compromises his most recent undertaking filed 4 April 2024. The wife’s affidavit illustrates the extent of the husband’s non-compliance. The wife was put to the additional burden of filing additional subpoenas and the unnecessary cost of causing her solicitor to analyse the documents.
This consideration warrants a costs order in favour of the wife.
Section 117(2A)(e): Whether a party has been wholly unsuccessful in the proceedings
The wife relies on the holistic view of proceedings to establish that she has been wholly successful. The wife refers the Court to the authority of Davida & Davida (Costs) [2011] FamCAFC 61 at [14] where it was said “that the practice has been to look at what one might term the relative merits of success or lack of success between the parties”. The husband relies on the retention of the Suburb B property as an indication that he was, at least, partially successful in the proceedings.
On the words of the Act alone, this Court is to consider whether a party has been wholly unsuccessful in the proceedings; not whether a party has been relatively successful after final property distribution. As stated by the Full Court in Peake v Benedict (Costs) (2014) 53 Fam LR 476 at [138]:
…wholly unsuccessful means there was no justified basis for the position adopted having regard to the outcome of the proceedings. Being “wholly unsuccessful” must look not just at the outcome but the position adopted by the party as well.
The husband retained the Suburb B property during the substantive proceedings. This was a position that he maintained throughout the duration of the proceedings. It cannot be said that he had no justified basis for adopting this position having regard to the final outcome.
If we accept the wife’s position that she was successful overall in this matter, it does not flow that the husband was inherently wholly unsuccessful. On the narrow issue of the Suburb B property the wife failed. In Hawkins & Roe (2012) 47 Fam LR 526, Thackray J stated at [161] “[E]ven a meritorious case can be “unsuccessful” when the other case is found to have greater merit”.
It follows that no costs order will be made under this consideration.
Section 117(2A)(f): Offers of settlement
The wife contends that she made an offer to settle proceedings on 16 June 2023 (“the letter”). The husband contends that the letter sent by the wife was not an offer, and if it was, that the husband’s rejection was not unreasonable. The wife attaches the letter to her affidavit as Annexure “B”.
On the face of the letter, the document proports to “settle these proceedings on a full and final basis”. The document is headed “without prejudice save as to costs” in accordance with the principles found in Calderbank v Calderbank [1975] 3 All ER 333 (“Calderbank v Calderbank”).
Despite deriving from English authority, offers made pursuant to Calderbank v Calderbank are “undoubtedly a relevant authority in claims in this jurisdiction for indemnity costs” (Cotter & Eggers-Cotter (No 2) [2015] FamCA 1008 at [25] (“Cotter & Eggers-Cotter (No 2)”)).
The letter has a specific subheading labelled “the offer”. Under such heading, the wife suggests a distribution of the parties’ assets on a final basis via the Court’s declaratory power in s 78 of the Act. The letter includes a populated balance sheet demonstrating the effect of the suggested declaration on the parties’ finances. The letter complies with s 117C of the Act, Div 4.2.2 of the Rules, and the principles in Calderbank v Calderbank and Messiter v Hutchinson (1987) NSWLR 525. The husband could have accepted the offer if he so chose to.
The husband’s contention that the wife created a sham offer, akin to an argument as to the conduct of the proceedings, is not substantiated. Simply, this is not a case where the wife formed “something which has every feature of a rooster, but called it a duck and insist that everybody else recognise it as a duck” (Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 256 CLR 137 at [21]). Otherwise put, the letter was a formal offer, not a litigation tactic disguised as an offer.
Where an applicant relies on s 117(2A)(f) of the Act as a justification for costs, “she bears the onus of demonstrating the offer was reasonable, or that it was not reasonably accepted by the husband” (Penner & Conroy [2022] FedCFamC1F 283 at [37]).
The wife’s offer was reasonable. The wife made concessions related to the proposed value of the parties’ motor vehicle and the proposed addbacks sought by the wife. This can only be seen as a good faith attempt at coming to a resolution. Contrary to that asserted by the husband, the mere fact that the wife sought to retain the Suburb B property within her offer does not invalidate the offer. Simply because an offer does not reflect the current orders in place or runs counter to the established position of the other party, it does not mean that it is prima facie unreasonable. Offers are made considering the respective position of each party and need not be palatable to the other to perform their function.
Offers made in accordance with Calderbank v Calderbank are “useful in establishing that the rejection of an offer was unreasonable rather than that the offer was reasonable” (Cotter & Eggers-Cotter (No 2) at [26]). In Cotter & Eggers-Cotter (No 2) at [27] Cronin J further added that:
To be unreasonable, the response to an offer must take into account the recipient’s perception of the sense of the outcome. It would be unreasonable to continue on with litigation after an offer was made if the intention of the recipient was to just make life unpleasant or to run up legal costs for the other party. A court can take into account that the recipient has legal advice and even though the exercise of the s 79 power is highly discretionary, making the outcome uncertain, lawyers are trained to make predictions within parameters.
The husband thought that he was going to retain a significantly larger portion of the matrimonial property pool than what he ultimately did. Such predictions were based on the inclusion of the Country Q Property 1 within the asset pool. Given that the husband had legal advice, he ought to have known that such inclusion was unlikely to succeed. Even after retreating from that position at trial, the husband still sought a 56 per cent share of the assets. Ultimately, he was awarded 37.5 per cent instead. The wife’s offer within the letter proposed an even 50/50 split. Consequently, the husband’s refusal to accept the wife’s offer was unreasonable.
Longstanding authority in Robinson and Higginbottom (1991) FLC 92-209 at 78,417 underscores the argument that:
…para (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case…
...when one looks at para (f), it is quite clear that the purpose of the provision is to ensure that Offers to Settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the work load of the court is lightened, and one other consideration is certainty that a party with greater wealth is not placed in a position whenever he or she can wear out the other party by simple attrition…
Similarly, the decision of Browne & Green (2002) FLC 93-115 at [163] provides:
We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given.
Considering the circumstances laid out above, I am satisfied that there has been an imprudent refusal to accept a reasonable offer of settlement.
Section 117(2A)(g): Any other relevant matters
In her written submission, the wife contended, pursuant to r 12.08 of the Rules, that her conduct did not form a bar to receiving relief. This matter was dealt with more fulsomely above.
This comment does not hold sufficient weight for a costs order under this section.
INDEMNITY COSTS
It is well settled that when costs are ordered by this Court, such costs are payable on a party‑party basis. It has been held that the Court should not lightly depart from the ordinary rule (Kohan and Kohan (1993) FLC 92-340).
The provision relating to the calculation of costs is governed by r 12.17(1) of the Rules which is as follows:
12.17 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount; or
(b)as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c) to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
The rule further provides that:
(3) In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre‑action procedures; and
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
In relation to an award of indemnity costs, the Full Court decision of Phillips & Hansford (2020) FLC 93-941 at [35]–[37], helpfully summarises the position as follows:
Indemnity cost orders are made only in exceptional cases (Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435).
Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise” (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).
In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401) and where “a party persists in what should on proper consideration be seen to be a hopeless case” (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch & Anor [1993] FCA 70 per French J at 5).
In the substantive proceedings it is established that the husband wilfully disregarded known facts, withdrew certain contentions that were doomed to fail and imprudently refused an offer to compromise. However, the wife’s litigation behaviour was hardly virtuous. Whilst a costs order is warranted in her favour, there is no conduct amounting to a “special or unusual feature…to justify the Court in departing from the ordinary practice” to which she did not contribute (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).
FIXED COSTS
The wife sought orders requesting that costs be awarded in a fixed sum if her indemnity argument was not substantiated. Rule 12.17(1)(a) enables the Court to comply with this request if it is minded to do so.
In Stoian & Fiening (Costs) [2014] FamCA 944 at [91], Kent J endorsed the principles for applying an equivalent to r 12.17 of the Rules, as adumbrated by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]. Those principles are:
i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as “the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation“ (All ER page 265)];
ii.the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleumat [16];
iii.the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788 ];
iv.a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schippat [22];
v.the gross sum “can only be fixed broadly having regard to the information before the Court“: Beach Petroleum at 124;
[in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enables fixing a gross sum “only if I apply a much broader brush than would be applied on taxation, but that…is what the rule contemplates“.]
Consistent with those principles, it has been determined that, “where a Court orders a party to pay costs, it may be appropriate for the Court to fix a lump sum, by doing so, the Court can avoid further delay and inconvenience” (Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51]).
I consider it reasonable for the husband to pay the wife’s costs, including the present application for costs, fixed in the sum of $50,000, payable within 28 days. The figure would have been higher but for the wife’s own poor litigation behaviour.
CONCLUSION
As foreshadowed in Kenyatta & Borghi at [36], “in the clearest possible terms…there was a high prospect of a costs order” following the substantive proceedings. The wife has made out numerous circumstances that justify an award of costs. These include, the husband’s conduct, breach of Court orders, lack of full and frank disclosure, failure to admit facts and unreasonable refusal of settlement offers.
In the circumstances, it is just that the husband pays the wife’s costs for both applications fixed in the sum of $50,000.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 26 July 2024
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