Khoury & Khoury
[2023] FedCFamC2F 1087
•25 August 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Khoury & Khoury [2023] FedCFamC2F 1087
File number: ADC 5819 of 2022 Judgment of: JUDGE BROWN Date of judgment: 25 August 2023 Catchwords: FAMILY LAW – COSTS – where the husband instituted parenting and divorce proceedings – where the wife had instructed solicitors and counsel to complete documents as ordered – where the husband discontinued said proceedings without notice to the wife on even date – wife is seeking costs on an indemnity basis – consideration as to an order for indemnity costs – exceptional circumstances – considerations relevant to party/party costs Legislation: Family Law Act 1975 (Cth) s 4(1), 39, 44(3), 48, 49(2), 55A, 59, 60B, 60I, 61B, 64B, 65C, 67Z, 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 5, 7, 25, 132, 149, 190, 191, 192
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) Sch 3, Ch 12, Pts 4.01, 10.01, 12.8, rr 1.04, 4.01, 10.03, 12.01, 12.08, 12.13, 12.17, 12.47
Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth) rr 2.01, 3.01(3), 4.01
Cases cited: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
Browne v Green (2002) 170 FLR 411
Bulow & Bulow (No 5) [2021] FedCFamC2F 166
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Gin & Hing [2010] FamCA 617
In the Marriage of I & I (No 2) (1995) 22 Fam LR 557
In the Marriage of Kohan (1992) 16 Fam LR 245
Marks v GIO Australia Holdings Ltd (No2) (1996) 66 FCR 128
Parke & The Estate of the Late A Parke (2016) FLC 93-748
Prantage & Prantage (2013) FLC 93-544
Re Wilox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Stasiuk & Guild [2021] FamCAFC 62
Steinbrenner & Steinbrenner [2008] FamCAFC 193
Division: Division 2 Family Law Number of paragraphs: 251 Date of hearing: 31 July 2023 Place: Adelaide Counsel for the Applicant: Ms Vohra SC Solicitor for the Applicant: Norman Waterhouse Lawyers Counsel for the Respondent: Mr Bartfeld KC Solicitor for the Respondent: BBS Family Lawyers & Mediators ORDERS
ADC 5819 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS KHOURY
Applicant
AND: MR KHOURY
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
25 AUGUST 2023
THE COURT ORDERS THAT:
1.Within thirty (30) days of the date of these orders, the Respondent Husband, pay the Applicant Wife:
(a)The fixed sum of FORTY FIVE THOUSAND DOLLARS ($45,000.00) by way of party/party costs arising from the discontinued proceedings and relating to the costs application made ancillary to it; and
(b)The sum of the Applicant Wife’s disbursements for her counsel’s fees arising from the appearances at the initial directions hearing on 2 February 2023 and subsequent hearings on 4 May 2023, 12 May 2023 and 31 July 2023 in relation to the costs application.
2.The Application in a Proceeding filed 29 March 2023 is dismissed.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These reasons for judgment relate to an application for indemnity costs following the discontinuance of an application for parenting orders. The parties to the proceedings are Mr Khoury “the husband” and Ms Khoury “the wife”.
It is the wife’s application for costs. In brief terms, it is her case that she was put to significant cost because she reasonably anticipated that the husband was in the process of bringing complex proceedings in respect of finalising both parenting and financial matters between the parties, which necessitated her to instruct solicitors and counsel to prepare a raft of complex documents.
She asserts that these documents have essentially been wasted because the husband discontinued the relevant application and he should bear the costs thrown away in respect of the preparation of these documents on a full indemnity basis or alternatively the court should award a specific sum of party/party costs, in her favour, to avoid the further costs of a taxation.
The costs formally sought are $110,587.40 on a full indemnity basis for legal work done on her behalf between 19 January 2023 and 24 March 2023, which includes counsel’s fees and disbursements. On a party/party basis the total is said to be $54,485.03.[1]
[1] See Exhibit B.
In addition, the additional costs relating to the current application, instituted on 29 March 2023 by the wife for costs, for work done between 9 March 2023 and 31 July 2023 seeks an amount of $66,575.85 for indemnity costs which has been calculated to be $35,757.75 on a party/party basis.[2]
[2] See Exhibit A.
On the other hand, the husband asserts he brought a simple application in respect of a discrete parenting issue which, when he ascertained it was strongly opposed by the wife, he elected to discontinue in deference to her feelings.
In these circumstances, if the wife instructed solicitors to prepare documents, which related to other issues, this was a matter for her and she should bear the costs of their preparation not him. It being open to her to utilise them to institute her own proceedings, if she wishes to do so.
Accordingly, he strongly opposes the costs application and asserts that there is no just or proper reason for the court to depart from the ordinary rule that parties in family law proceedings should bear their own costs.
In addition, he would characterise the claim for costs as inflated and out of proportion to the degree of complexity arising in the case. In this context, he points to the fact that a cost agreement between the wife and her solicitors indicates that the range of costs attributable to cases going to trial is between approximately $53,000.00 and $110,550.00 – somewhat less than the amount sought for the current matter, which was before the court for a matter of weeks.[3]
[3] See Annexure ‘MK 1’ to the wife’s affidavit filed 29 March 2023.
From the wife’s perspective, the relevant factual matrix surrounding the husband’s application invoke significant issues relating to how the court should approach issues of case management as encapsulated in its statutory rules and legislative objectives.
In particular, she points to the court’s statutory obligation to act consistently with its overarching purpose to ensure, in all civil litigation coming before it, that justice is delivered effectively and efficiently. Essentially, the wife asserts that the husband has not approached the relevant litigation with such an ethos and this justifies the cost orders sought by her.
Finally, it is the wife’s case that, in practical terms, she is impecunious, and so incapable of meeting her costs obligation to her solicitors and counsel. Whilst, on the other hand, the husband has access to vast amounts of wealth and this, in itself, renders it just to make the costs order sought by her.
These reasons for judgment are directed towards resolving this dispute between the parties concerned. Ostensibly, at least, the status quo in respect of how the parties have managed their affairs post separation has been reinstated and each, at the present time, has withdrawn from legal proceedings concerning both their family and financial affairs.
This is their prerogative as both parents and citizens. I am neither entitled to know nor, I think, to conjecture, whether this status quo will last or to be informed about other private arrangements the parties may be contemplating regarding the care of their children or the allocation of fiscal resources between them in future. That is their affair alone.
However, necessarily, the court’s jurisdiction having been invoked, it is obligated to resolve the costs issue raised according to relevant legal principals. The court is conferred with a discretion, in this regard, which it must exercise judicially and according to the dictates of what is just. The discretion is also governed by complex legislative and regulatory provisions. However, I am well aware that the exercise of this discretion has the possibility, quite possibly, to influence the parties’ on-going relationship as parents.
I also consider that the issue is likely to have assumed emblematic significance so far as each of the parties are concerned. As I will detail in due course, the wife, from her personal resources, has no apparent capacity to pay what many in the community would consider her jaw dropping legal expenses.
The evidence indicates that she is currently, in practical terms, entirely dependent upon Mr Khoury – certainly for anything amounting to something other than an ordinary incident of day to day expenditure. Accordingly, if Ms Khoury’s solicitors seek to pursue their client for their fees, she will have no recourse to pay them other than to approach Mr Khoury for assistance or face suit or seek personal insolvency. Neither of which outcomes appear to me to be probable at this juncture. I suspect all involved in the case are well aware of the realpolitik of this highly idiosyncratic situation.
BACKGROUND
The parties were married, in 2003, in Adelaide. They are the parents of four children: W born in 2009; X born in 2011; Y born in 2012; and Z born in 2014.
The parties separated in March of 2021 but have continued to live under the same roof of their former family home, in the period since and continue to do so.
Mr Khoury commenced two distinct but related proceedings, pursuant to the provisions of the Family Law Act 1975 (Cth)[4] on 21 December 2022[5] and 27 January 2023 respectively.[6] The parenting application sought final orders, which can be summarised as follows:
·The wife execute the necessary documents to allow for the issue of Australian passports for the three younger children;
·In the event the wife failed to execute such documents, the husband alone be authorised to apply to the relevant authorities for such passports or alternatively, in lieu of the wife, a court official be authorised to execute the necessary passport applications;
·Upon the issue of such passports, the husband hold them unless the parties agreed in writing otherwise; and
·The husband be authorised to take all four of the children, outside of Australia, for the purposes of holidaying overseas.
[4] Hereinafter referred to as ‘the Act’.
[5] Hereinafter referred to as ‘the parenting application’.
[6] Hereinafter referred to as ‘the divorce application’.
By way of an interlocutory order, the husband sought that the court deal with his application as a matter of urgency. These various applications were supported by an affidavit affirmed by Mr Khoury on 20 December 2022. As previously indicated, it is the husband’s position that his application raised a relatively simple and discrete issue, relating to overseas travel and the formalities thereof and nothing else.
In this affidavit, Mr Khoury deposed that he and the wife had separated on 21 March 2021 but continued to live separately and apart under the same roof of their former family home located in suburban Adelaide. Other aspects of his evidence can be summarised as follows:
·All four of the children had previously been issued with Australian passports;
·None of the children concerned held a passport issued by the authorities of another country;
·In August of 2022, he was informed by Ms Khoury that she had lost each of the passports;
·A search had been made of the parties’ home but the passports had not been located;
·As a consequence, the wife obtained passport photographs of each child and prepared applications for replacement passports to issue for each child;
·Mr Khoury duly executed the relevant documents and assumed that the wife had done likewise and had lodged the documents with the Australian Passport Office;
·Subsequently, a passport was issued for W (the oldest child) and he and Mr Khoury travelled to Country B, in 2022, to attend a sporting event; and
·On his return to Australia with W, Mr Khoury enquired of Ms Khoury as to the whereabouts of the remaining passports for the three younger children. To which Ms Khoury replied that she had decided not to lodge the relevant applications.
This basic chronology details the background to the parenting application. However, also of relevance is the fact that Mr Khoury deposed that he had strong familial and business connections centred in Adelaide, including being the Director of a business, employing many people.
By necessary implication, the effect of Mr Khoury’s evidence was that he was, and is, a person of significant means. He also deposed that he personally travelled overseas frequently. In these circumstances, he sought to be able to travel, with the children, to various overseas locations, including the United States of America, Country C, Europe and Country D, during future school holiday periods.
Given the potential complexities of the necessary travel arrangements, he sought the orders in question to allow him the necessary time and flexibility to be able to make the appropriate arrangements well in advance of travel. Therefore, by necessary implication, for logistical reasons, he should hold the passports. He denied that there was any risk that that he would fail to return the children to Australia, where each of them had been born, given his personal and business connections to Australia.
He further deposed that he had no objection to Ms Khoury being able to travel overseas with the children. In addition to his own strong ties with Australia, he deposed that each of the children currently attend school in Adelaide and it was his intention, shared with Ms Khoury, that the children should complete their education at their current Adelaide school.
The parenting application was listed, with some degree of urgency, being made returnable on 2 February 2023 before a Judicial Registrar. On 24 January 2023, solicitors acting on Ms Khoury’s behalf filed a Notice of Address for Service but no other documents in response to Mr Khoury’s parenting application.
In this context, Ms Khoury has deposed as follows:
On 19 January 2023, my solicitors were served with the husband’s Initating Application by the husband’s solicitors. The first return hearing was listed for 2 February 2023.[7]
[7] See the wife’s affidavit filed 29 March 2023 at [6].
This suggests that there had been some earlier communications between those advising the husband and those advising the wife in the period before service. However, I have not been advised, in any detail, as to the specific nature of these communications. On balance, it seems more probable than not that there had been at least some level of communications, of a formal nature, between the legal advisors of each of the parties during at least the latter half of 2022.
In the context of the present proceedings, it is the gravamen of the wife’s submission that the husband delayed in serving the application upon her, which belied his assertion that his application needed to be urgently dealt with by the court. She asserts that his approach is not in keeping with the overarching purpose.
On 27 January 2023, Mr Khoury filed the Application for Divorce. Pursuant to section 39 of the Act, this court has jurisdiction in respect of matrimonial causes, which are defined to include an application for a divorce order and proceedings between the parties to a marriage in respect of property.
No time limits are prescribed by the Act in respect of when an Application for Divorce can or is required to be made. Indeed, it is open to separated spouses to remain formally married, although either one of them or both of them jointly, hold the view that their marital relationship is terminated. In addition, an Application for Divorce may be instituted by one party or jointly by both parties.
Pursuant to section 48(1) of the Act the only ground on which a divorce can be granted is that the relevant marriage has broken down irretrievably. The ground being established by satisfactory proof that the two spouses concerned have lived separately and apart for a continuous period of twelve months.
However, the relevant legislation (section 49(2)) also recognises that the parties to a marriage may be separated and their marriage irretrievably ruptured, notwithstanding the fact that they have continued to reside in the same residence or indeed may have resumed cohabitation for discrete periods of three months.
As I understand the position of each of the parties concerned in the present matter, there is no controversy between them that the marriage between them has irretrievably broken down, notwithstanding that they live in the same premises, which have been described as a large mansion.
However, the granting of a divorce has specific legal ramifications in respect of time limits applicable to the institution of proceedings ancillary to it. In particular, pursuant to section 44(3), an application for property settlement and other specified matrimonial causes, must be brought within 12 months of the date on which a divorce order becomes final or if not so instituted, the leave of the court to do so must be granted.
The rationale for the provision being that it is the public interest for separated spouses to know when the proprietary implications of any separation between them have, at least potentially, been extinguished. In general terms, it provides a means for such individuals to move on with their lives, in a financial sense, separate from any claims from their former spouse.
Before a court conferred with jurisdiction under section 48 can make a divorce order, pursuant to provisions contained in section 55A, it must be satisfied that proper arrangements have been made for the care, welfare and development of any child under the age of eighteen, who spring from the relevant marriage being dissolved.
Accordingly, the applicable pro forma application has a section which deals with such matters. In his application, Mr Khoury indicated that the parties shared in the care of each of their children and, so far as future care arrangements for them were concerned, it was anticipated that the parties would cease to reside under the one roof.
In addition, Mr Khoury filed two affidavits, one of himself and one of his commercial solicitor, Mr E, directed toward the issue of the parties having been separated under the one roof since March of 2021.
In his affidavit, Mr Khoury deposed that he continued to support both Ms Khoury and the children financially and he had been endeavouring to negotiate a property settlement with her, which he envisaged would result in Ms Khoury moving out of the house, when settlement had been reached or beforehand. What issues these negotiations covered and to what were their parameters is not known to me.
In an affidavit, Mr E deposes that he met with Mr Khoury several times each week and has done so for many years. Since May of 2021, Mr E further indicates that Mr Khoury has sought his advice about divorce and related legal matters. What is the relationship of this advice to Mr Khoury’s endeavours to negotiate a settlement with Ms Khoury and the degree to which this has involved her legal advisers is not clear to me or indeed what was the extent of the negotiations indicated.
The husband’s affidavit was affirmed on 12 August 2022 and Mr E’s on 30 September 2022, but each was actually filed on 27 January 2023, with the divorce application. The divorce application was served by post on the wife’s solicitors on the date it had been filed.
In her affidavit material, the wife has provided a copy of a costs agreement, which she entered into with her current solicitors, on 11 August 2022, in respect of what is described as family law matters. The scope of the work envisaged is legal representation in relation to matrimonial property and children’s matters.[8]
[8] See Annexure ‘MK 1’ to the wife’s affidavit filed on 29 March 2023.
This confirms, by necessary implication, that she too was engaged in some form of discussion, with Mr Khoury (or those advising him) about issues arising from their separation. Certainly, I do not think it is a possible conclusion that the finalisation, through whatever means, including legal avenues, of issues arising as a consequence of the parties’ separation under the one roof, were in the contemplation of the mind of only one of the parties, at this stage.
The agreement goes on to specify the hourly rates of each of the individuals who were anticipated to provide services to the wife in respect of her matter and estimates of costs at various stages of proceedings, which was subject to the proviso that it was not possible, at this time, to provide an accurate estimate of the cost in question.
As previously indicated, in this document, it was suggested the additional range of costs potentially to be incurred if the case in question could not be resolved without a trial was between $53,000.00 and $110,000.00. Accordingly, it would seem to me to be more probable than not that each of the parties, from at least August of 2022 onwards, was contemplating some level of legal intervention though what this would be is far from clear to me.
In addition, I have been provided with some evidence regarding what private arrangements had been made between the parties regarding financial provisions for the wife and the children in the period following separation. In this context, Mr Khoury has deposed that he would continue to provide for Ms Khoury and the children financially. In his recent affidavit he has deposed that he provides Ms Khoury with the sum of $7,744.00 per month for personal expenses and some home related and children’s expenses.[9]
[9] See the husband’s affidavit filed 27 July 2023 at [19].
Whilst Ms Khoury herself, as will be delineated in greater detail shortly, concedes that she has received some financial sums from Mr Khoury and has some capacity, albeit one vastly inferior to that of Mr Khoury, to support herself. It is the gravamen of her position that she cannot defray her current costs liability to her solicitors.
In addition, although she concedes that her costs must be regarded as significant, they cannot be regarded as being disproportionate to issues likely to be raised in the potential litigation, given the financial resources of Mr Khoury and the manner in which they are held.
How responsibility for the parenting of a child is formally conferred upon a person, in proceedings conducted under the Act, is through the making of a parenting order. A parenting order is an order which deals with such issues as the persons with whom a child should live; spend time and communicate with; and the persons who should have responsibility for making decisions, both significant and otherwise, about a child and the degree of consultation necessary to implement such decisions.[10]
[10] Family Law Act 1975 (Cth) s 64B(2).
Significantly, it includes any aspect relevant to the care, welfare and development of a child and any other aspect relating to parental responsibility. Parental responsibility, in relation to a child, means all the duties, powers, responsibilities and authority which, by law, parents have in relation to children.[11]
[11] Family Law Act 1975 (Cth) s 61B.
Unlike property proceedings, there are no time limits applicable to the making of an application for a parenting order. Pursuant to section 65C of the Act, a child’s parents; the child; a child’s grandparents; or any other person concerned with the child’s care, welfare or development; may apply for a parenting order. There can be no controversy that the parenting application instituted by Mr Khoury sought various parenting orders in respect of each of the parties’ four children.
It is the tenor of Ms Khoury’s case that the fact Mr Khoury had also instituted a divorce application, which necessarily triggered the statutory time limit in respect of the bringing of property proceedings and which had, at the least, also foreshadowed the possibility of him seeking to change the then pre-existing arrangements for the care of the children, certainly vis-à-vis their residential situation, was such that it could only create in her mind and those advising her that it was the intention of the husband to commence proceedings, which would canvas more issues than those relating to overseas travel for the children and matters ancillary to such travel.
On the other hand, it is the contention of the husband that his parenting application cannot be construed as being anything other than what it represented on its face, namely a prudent application directed to ensuring that he and the children could travel easily overseas, as they had done in the past. Essentially, the application was incapable of being interpreted as an application directed towards making substantial changes to the children’s living arrangements.
I was not present at the hearing of 2 February 2023 and have not been provided with of transcript of what was said. I have only the procedural orders which were made by a Judicial Registrar. These orders can be summarised as follows:
·The wife file a Response setting out both the detailed final and interim orders, which she sought supported by an affidavit of up to twenty pages in length;
·A Financial Statement;
·A Notice of Child Abuse, Family Violence or Risk; and
·A Genuine Steps Certificate.
These documents were to be filed on or before 20 February 2023.
Thereafter, the husband was directed to file any documents in response on or before 6 March 2023. As with the wife, his affidavit could be up to twenty pages in length. The wife was then authorised to file an affidavit in reply no later than 14 March 2023. The Judicial Registrar then adjourned the proceedings back before herself at 2.00 pm on 16 March 2023 for directions.
At this first return date, each of the parties was represented by senior counsel from the Victorian Bar, each of whom has represented their respective clients in this contested costs application. The orders of the Judicial Registrar were made with the consent of each of the parties concerned. What, if anything was discussed between the parties’ counsel, prior to and/or during this mention, particularly what issues it was anticipated would be joined between the parties in the lead up to the hearing of 16 March 2023, is not known to me.
In these circumstances, it is the submission of Ms Vohra SC for the wife, that the orders of Judicial Registrar, on their face, necessarily anticipated that both parenting and property proceedings would be joined by the parties. This being implicit from the direction that a Financial Statement be filed by the wife. In addition, the fact that longer affidavits than are normally mandated in at least Division 2 of the court, indicate that it was anticipated the case would entail some level of complexity.
Given these circumstances, it is the wife’s position that she approached the task of preparing the documents directed of her on the basis that property issues had been engaged, along with significant issues germane to the parenting of the parties’ children. Necessarily, it is a corollary of her position that the husband and those advising him did nothing to dissuade her that this was anything but the case.
In her affidavit filed in support of her costs application[12] Ms Khoury deposes as follows:
After the hearing on 2 February 2023 my solicitors commenced taking detailed instructions for the purpose of preparing and filing my responding documents in line with the terms of the consent order negotiated between senior counsel.
[12] See the wife’s affidavit filed 6 July 2023 at [20].
The implication of this paragraph being that the matters discussed between senior counsel set the parameters of what the nature of the issues to which Ms Khoury’s documents would be directed. In these circumstances, it is suggested that it is disingenuous to imply that Ms Khoury and those advising her were off on a tangent of their own making, when they began to prepare the various documents in question.
Mr Khoury has not specifically responded to this paragraph. Again whether this is an oversight or arose at his election is unclear to me. As indicated above, the directions regarding the filing of both documents relating to financial and parenting proceedings were made by consent. Such a state of affairs implied some degree of discussion between the parties’ respective counsel. It seems improbable that these discussions occurred in a vacuum as to the issues to which those documents were to be directed and what was to be the likely trajectory of the proceedings, from the perspective of both parties, as at, the very least, 2 February 2023.
In these circumstances, it would appear to be Ms Khoury’s case that, as at 2 February 2023, neither Mr Khoury nor those advising him, did anything to dissuade her and her lawyers that the post separation status quo had come to an end and Mr Khoury intended to dissolve the marriage between the parties with inevitable consequences for the parenting arrangements for their children, whilst at the same time crystallising a necessity to finalise their financial relationship with one another. Implicit in such a state of affairs was that litigation had been engaged, which had the obvious potential to be both complex and expensive.
Essentially, if ever there was an opportune time, at which Mr Khoury could have indicated that he was having reservations about proceeding with the divorce application or wished only to pursue discrete and defined issues about overseas travel, particularly in respect of travel in proximate school holidays, the directions hearing of 2 February 2023 or the days after it were the appropriate time to do so. Otherwise, Ms Khoury and those advising her would assume that it was necessary for them to prepare for the type of litigation envisaged in the negotiated (Ms Khoury’s descriptor) consent orders of 2 February.
On 14 February 2023, Mr Khoury’s family law solicitor wrote to Ms Khoury’s family law solicitor in the following terms:
We are writing to formally propose that there be a meeting between the parties on 24 February 2023, in order to discuss resolution of the various matters that have arisen.
We are instructed that respective senior counsel have discussed this suggestion. The meeting would proceed upon the basis that our respective senior counsel will be present in Melbourne for the purpose of the meeting, and that all other parties will be present here in Adelaide.
Would you please confirm your client’s instructions to attend such meeting.[13]
[13] See Annexure ‘MK 2’ to the wife’s affidavit filed 6 July 2023.
Again, the phraseology adopted, in the letter, is somewhat opaque in nature. I have no way of knowing what is the nature of the various matters that have arisen or indeed what was discussed between respective senior counsel. Thereafter, it is the effect of the wife’s evidence that she indicated to her counsel that, if there was to be such a meeting, it was her preference that it take place in the presence of an agreed mediator.
In these circumstances, on 15 February 2023, the husband’s solicitor wrote to the wife’s solicitor, indicating that he had been requested to organise a mediation with Mr F for 27 February 2023. This arrangement having been apparently discussed by senior counsel. The wife’s solicitor responded in the following terms:
We are seeking instructions today for a mediation on 6 March on all issues but with priority to resolving parenting first and with your client meeting our client’s costs and the [sic] [Mr F’s] fee.[14]
[14] See Annexure ‘MK 3’ to the wife’s affidavit filed 6 July 2023.
Again, in my view, the phraseology is somewhat elliptical in tone. The delineation of an initial emphasis on the resolution of parenting being obviously suggestive of the fact that, in the minds of both the parties concerned and their lawyers, it remained their mutual understanding that controversies remained outstanding in respect of a wide range of issues within the context of the proceedings remaining extant before the court and, in my view, those which were also in prospect in the minds of all concerned.
Ultimately, on 20 February 2023, it was agreed that there would be a mediation, with Mr F, on 27 February 2023. It was anticipated that both parties’ senior counsel would be present at the mediation, albeit that Ms Vohra would attend electronically, with junior counsel being present. Ms Khoury’s solicitor requested that Mr Khoury provide her with the sum of $30,000.00 to fund her client’s anticipated costs of the mediation so that the parties would be on a level playing field. It is my understanding that this request and others, in the same terms, which had preceded it, went unanswered.
On the same day (20 February 2023) but in separate correspondence, the wife’s solicitor requested of the husband’s family law solicitor, that she be granted an extension of time in which to file the documents directed of her by a Judicial Registrar to 28 February 2023 (the day after the scheduled mediation) with the husband to have until 14 March 2023 to file the documents directed of him.
The rationale for this change of filing regime being expressed as being this avoids a situation where the Mediator has our client’s responding Court documents but not your client’s reply.[15] There appears to be no controversy that the husband’s solicitor, in a telephone conversation, agreed to this change of filing regime but not to provide any funding to the wife to take part in the mediation.
[15] See Annexure ‘MK 7’ to the wife’s affidavit filed 6 July 2023.
It is the effect of the wife’s evidence that, by this stage, she had completed the documents required of her. However, given the agreement to attend the mediation, she did not file them. In this context, she does not concede that anything of substance had occurred, from her perspective, to persuade her to think anything other than the husband’s application, as she had been given to understand it, remained live.
Both parties, with their respective teams of legal advisers, attended the mediation. In the husband’s case, this included his commercial solicitor, Mr E. I am not entitled to know what was discussed at the mediation, but to some extent each of the parties has waived the privilege attaching to it. The wife asserts that each party prepared a detailed position paper for the mediation. She further asserts that the mediation dealt with parenting issues in the main, including the issue of passports and international travel for the children.[16]
[16] See the wife’s affidavit filed 6 July 2023 at [27].
The husband disagrees with this statement asserting that the mediation dealt with a broad range of issues relating to living arrangements, spousal maintenance, parenting, and property settlement and also canvassed property and financial matters. He agrees that issues of passports and international travel were also discussed.[17]
[17] See the husband’s affidavit filed 27 July 2023 at [16].
In my view, this is a significant concession being indicative that, in the lead up to the mediation, following the directions hearing before a Judicial Registrar, the husband was of the view that the proceedings, which he had instituted, from the perspective of each of the parties concerned, incorporated a wide range of controversies potentially amenable to being resolved pursuant to the provisions of the Act.
In these circumstances, it would appear to me to be naïve to conclude that there was not, at the very least, a causal connection between the institution of proceedings and the fact that the parties subsequently agreed to attend the mediation with Mr F, at which all manner of issues were canvassed between them.
In this sense, to utilise the terminology of Ms Vohra of senior counsel, the husband’s applications triggered a state of affairs, in the minds of each of the parties, that the proceedings initiated by Mr Khoury had the potential, at the very least, to require judicial determination in respect of both property and parenting issues, in the broad sense, described above and this had occurred at the husband’s instigation.
There appears to be general agreement between the parties that the mediation did not result in the resolution of any issue of significance between them. In her most recent affidavit, the wife deposes as to the next matter of moment which occurred, from her perspective, in the following terms:
On 1 March 2023, the husband discontinued his Initiating Application and his Divorce Application without notice to me.[18]
She further deposes that she was put to considerable cost as a result of having to prepare the various documents required of her by the orders of 2 February 2023.
[18] See the wife’s Affidavit filed 6 July 2023 at [29].
In my view, Mr Khoury has elected to respond selectively to these aspects of Ms Khoury’s affidavit. He asserts that he filed his notice of discontinuance in respect of the passport application because he realised that the Wife was not prepared to agree to that application in any form whatsoever.[19]As is his prerogative, Mr Khoury has not provided any reason as to why he elected to withdraw the divorce application.
[19] See the husband’s affidavit filed 27 July 2023 at [8].
In addition, the husband deposed that the failed mediation also resulted in him incurring costs. Undoubtedly this must be the case. As required by the court’s rules, he has supplied a notice of his costs incurred and anticipated until the conclusion of the current costs proceedings. The costs total around $82,000.00 but do not include any costs due to Mr E.
In contrast, the wife’s costs notice, up to 30 June 2023 are calculated to be $182,447.00 of which $52,927.50 has been paid, with a further $129,519.50 having been billed but not as yet defrayed. The anticipated fees for the current matter are estimated to be up to $18,000.00.
Neither Mr Khoury nor those advising him have been provided with the documents prepared on Ms Khoury’s behalf in accordance with the direction of a Judicial Registrar. Nor have I. Accordingly, I do not know what issues Ms Khoury wished to invoke for potential judicial determination.
In this context, it is the submission of Mr Bartfeld KC that Ms Khoury does not need his client’s approval to commence proceedings and, if she so wishes, it is open to her, in effect, to simply amend her document to nominate it as an initiating application and thereafter utilise the other documents prepared on her behalf to contain the evidence to support any claims, which she wishes to pursue. Thus it is a misnomer to assert that she has wasted her costs. Rather, if she so elects, she can use them to institute her own proceedings against Mr Khoury. I accept this is so but, at the same time, it remains the position that Ms Khoury does not have to institute proceedings, if she does not wish to do so.
Essentially, again to return to the somewhat aggressive metaphor, if it is asserted that Mr Khoury had earlier cocked the trigger, in respect of comprehensive children’s and property proceedings, with his divorce and overseas travel applications, his action in withdrawing them, has had the effect of putting the figurative revolver back in its holster. In these circumstances, if she so wishes, Ms Khoury can pull her own trigger and commence her own proceedings in whatever manner she deems appropriate.
I apologise for using these violent metaphors. I am well aware that family law is a very special form of private litigation invariably arising between individuals who are intimately connected and, as in this case, remain linked together, as parents, regardless of the end of the marital relationship between them.
Accordingly, I am well aware of the emotional consequences of such litigation and the fact that, for understandable and human reasons, many individuals may have no desire to be involved in family law litigation, not only because of the expense involved for them personally but also as a consequence of its potential psychological cost for them and their children.
The state, through the applicable legislation, has no authority to compel separated individuals to engage in litigation, regarding their property and children, if those individual do not wish to do so but prefer to make their own private arrangements about such matters.
As a consequence, apart from the administrative necessity to establish the end of a marriage to avoid bigamy prosecution upon a subsequent marriage, separated spouses need not invoke the court’s jurisdiction to resolve any issues arising between them post the end of their marriage.[20] They are free to make whatever arrangements they please in respect of the parenting of their children and the disposition of their property. Indeed, some aspects of the relevant legislative provisions encourage them to do so.[21]
[20] See Family Law Act 1975 (Cth) s 59.
[21] See Family Law Act 1975 (Cth) s 60B(2)(d).
In these circumstances, for reasons about which I can only conjecture, Ms Khoury may have no desire to commence litigation against the husband but was compelled to engage in such litigation only because Mr Khoury had initiated it in the first place. Indeed she may have legitimate reasons, for all I know, for wanting to avoid such litigation and perhaps not to be perceived as its initiator.
As indicated above, I do not know why specifically Mr Khoury withdrew the divorce application. He too may have personally valid reasons for not wanting to persist with it. For all I know, having come to the brink of litigation and peered into the abyss, he decided to drawback and return to the pre-existing status quo represented by the parties’ separation under the one roof because he considered it the best outcome.
For all I know, he may have other personal reasons for having issued the application in the first place and then decided to withdraw it. What is clear is that the parties have not reconciled their marriage. Neither has asserted that the separation between them has come to end.
However, it may be the case that both of them have decided that the best outcome for their family is to persist with the separation under the one roof or avoid litigation of the kind involved in this matter. Having had a brief experience of it, each may have decided it is not to their taste. Again, these are matters of conjecture for me.
I can have no remit to investigate the idiosyncratic and highly personal circumstances of the parties and how they wish to parent their children in the absence of a defined application seeking the adjudication of a dispute between them. How they approach these issues is their business alone.
Even if issues of disputation remain between them, in respect of parenting and property matters, the parties are free to resolve those disputes through avenues other than a process of judicial determination. Essentially, litigation in family law matters is not compulsory.
However, in this particular case, one controversy remains between the parties – the husband, having invoked the court’s jurisdiction, under the Family Law Act 1975, as he was entitled to do and then withdrawing such invocation, again as he was entitled to do so – is it just that he should also bear some degree of the financial implications of his actions so far as others are concerned, namely the wife.
This difficult issue is to be determined by reference to the highly idiosyncratic circumstances of the parties themselves, viewed within the legal matrix provided by the applicable legislation and statutory regulations.
CASE MANAGEMENT CONSIDERATIONS
The proceedings instituted by Mr Khoury were filed in the Federal Circuit and Family Court of Australia, which was created by the Federal Circuit and Family Court of Australia Act 2021 (Cth)[22]. The court consists of two divisions. Each division has its own rules. However the Rules for Division 1[23] are more comprehensive and pursuant to rule 2.01 of the Division 2 rules,[24] the Division 1 rules can have application to its processes.
[22] Hereinafter referred to as the FCFCOA Act.
[23] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
[24] Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth).
For the purposes of these proceedings, the jurisdiction conferred on each division, in respect of the Act is the same [see FCFCOA Act at section 25 & 132]. However in practical terms, all matters begin in Division 2, which is where the current matters affecting the parties remain.
Pursuant to section 149 of the FCFCOA Act, a judge of Division 2 may transfer a matter to Division 1 according to any factors listed in rule 3.01(3) of its rules. These factors include the following:
·The financial value of the claim;
·The complexity of issues;
·The wishes of the parties;
·Resource issues.
In general terms of legislative intent and ethos, Division 2 of the court is directed towards resolving less complicated family law matters, which are likely to occupy less hearing time; whilst Division 1 is directed towards more complicated and lengthier ones.
As already indicated, this particular matter had only one mention in Division 2 of the court prior to the discontinuance and the costs application being engaged. Accordingly no consideration was apparently given to the transfer of the court to Division 1 given its potential for complexity, particularly given any financial issues which may have been engaged.
Given the different nature of the cases each division of the court is likely to attract, informed within the history of each of the division’s curial predecessors – the Family Court and the Federal Circuit Court - each division has a different regime of costs but with a significant degree of overlap and the ability, particularly so far as Division 2 is concerned, to adopt the procedures of the other.
As was pointed out by French CJ in Aon Risk Services Australia Limited v Australian National University[25] courts have an obligation to ensure that the litigation coming before them is transacted effectively and efficiently, not only in the interests of the individual parties concerned but also in the interests of other litigants and users of the court, whose cases are inevitably affected by how other cases in the system are managed. His Honour said as follows:
…the adversarial system has been qualified by changing practices in the courts directed to the reduction of costs and delay and the realisation that the courts are concerned not only with justice between the parties, which remains their priority, but also with the public interest in the proper and efficient use of public resources.[26]
[25] See Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175.
[26] See Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 189, [23].
In the case, French CJ also noted that courts have the inherent authority to control their processes and prevent their application in a way which would be unfair to a party or would otherwise bring the administration of justice into disrepute among right-thinking people.[27]Such concepts are often encapsulated within the rubric of case management.
[27] See Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 193, [33].
As a consequence of its enabling legislation, the Federal Circuit and Family Court of Australia is subject to a broadly based system of case management both in terms of actual proceedings before it and what should occur prior to the instigation of such proceedings.
Section 190 of the FCFCOA Act[28] provides a directive to the court to, in the application of its practice and procedure, to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. This reflects the objects of the FCFCOA Act as contained in section 5 and is referred to as the court’s overarching purpose.
[28] This has application to Division 2 but there are analogous provisions relating to Division 1.
Section 190(2) of the FCFCOA Act provides that the court’s overarching purpose includes the following objectives:
·The just determination of proceedings;
·The efficient use of judicial and administrative resources;
·The efficient and timely disposal of cases; and
·The resolution of disputes at a cost proportionate to the importance and complexity of the issues raised by them.
Pursuant to section 191(1) & (2) of the FCFCOA Act both the parties and their lawyers are obliged to conduct litigation before the court, including negotiations for settlement in ways that are consistent with the overarching purpose. Such principles inform section 191(4) which reads as follows:
In exercising the discretion to award costs in a civil proceeding, the Federal Circuit and Family Court of Australia (Division 2) or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).
In the context of these principles, pursuant to section 192 of the FCFCOA Act, the court is empowered to give directions to ensure the compliance of parties with the principles contained in the overarching purpose. Pursuant to section 192(3) if a party fails to comply with such a direction, the court may make any order which it thinks appropriate, including pursuant to section 192(4) an order for costs, including indemnity costs.
Ms Vohra SC relies on this provision to support her client’s claim for indemnity costs.[29] I am troubled by this submission. Ms Vohra SC describes the provision as providing a source of power for making such an order. However, in my view, the specific provision is conditional on the court being satisfied of a failure to comply with a direction which has specific application to a party.
[29] See the wife’s outline of case filed 27 July 2023 at [9].
It is not asserted that Mr Khoury has disregarded a specific direction made to him directly. Rather, I take it that it is asserted that his conduct of the litigation has been not been in keeping with the ethos of the FCFCOA and its rules as encapsulated in the overarching purpose, so far as the following issues are concerned:
·the application of mandated pre-filing procedures;
·the invocation of claims of urgency, so far as his parenting application was concerned and then the failure to serve the application promptly;
·the suggestion, in the divorce application, that the arrangement regarding the sharing of former family home would be brought to an end;
·the necessary implication arising from the divorce application that time limits for the bringing of a property application had been engaged; and
·the implicit negotiations between the parties’ respective senior counsel, at the directions hearing before a Judicial Registrar, which led to apparent agreement between them that it was necessary for Ms Khoury to file a statement of her financial circumstances, in response to Mr Khoury’s application. Such a document ordinarily being a necessary component of any application for a financial order but not a parenting one.
There appears to be no controversy that the relevant rules of the court are the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).[30]Rule 1.04 delineates the obligation of parties to assist the court to achieve its objectives delineated in the overarching purpose. Parties are required to avoid undue delay, expense and technicality. They are also directed to conduct proceedings in a manner consistent with the overarching purpose.
[30] Hereinafter referred to as “the rules”. As previously indicated they have general application to both divisions of the court.
Part 4.01 of the rules stipulates that a party to proceedings must comply with a number of prescribed pre-action procedures. Different procedures are mandated for financial proceedings and parenting proceedings. However, they are broadly analogous requiring an effort being made to resolve matters without recourse to litigation, through engagement with some form of alternate dispute resolution prior to filing; and to encourage disclosure of necessary information, again as a necessary precursor to instituting proceedings.
Such procedures are not to be directed towards harassing a party. The emphasis is on the speedy resolution of disputes, at the minimum cost, both in financial and emotional terms to the parties themselves and indeed their children and without recourse to litigation, if at all possible.
In these circumstances, the relevant rule [rule 4.01(4)] mandates the filing of what is characterised as a Genuine Steps Certificate. In addition, other legislative requirements require the filing of notices relevant to allegations of child abuse [section 67Z of the Act] and that a family dispute resolution practitioner has certified that a genuine attempt has been made by the parents of any child concerned to resolve the issues in dispute [section 60I of the Act].
In the current matter, Mr Khoury did file a Genuine Steps Certificate, as required by the rules. In this certificate he attested to the truth of the following statements that:
·He had read and understood the pre-action procedures;
·He had not undertaken any such procedures; and
·He sought to be exempted from their application because of the urgency of his application.
Given the legislative intent of section 190 of the FCFCOA Act, I do not consider that these requirements are to be taken as empty shibboleths, with which compliance can be easily dispensed. In this case, as previously indicated, Ms Vohra SC places significant emphasis on the delay between the filing of the children’s application and its actual provision on Ms Khoury, which occurred through her lawyers, the identity of whom were clearly known to Mr Khoury’s lawyers and whom had been engaged by her since at least August of 2022.
It is her submission that this hiatus belies any assertion that compliance with the pre-action procedures could be dispensed with because of urgency. I am inclined to agree. However, I also concede that it is not beyond the bounds of possibility (and in this context no explanation has been proffered for the delay) that Mr Khoury may have wanted some time to consider whether he actually wished to proceed with the divorce and wished to sleep on it, given its obvious moment for both him and Ms Khoury (and indeed their children).
I appreciate that there is no explicit obligation to provide a Genuine Steps Certificate in respect of a divorce application. However, given the contents of the supporting affidavit, it would be naïve to consider that the application did not have the potential to have very significant consequences for Ms Khoury personally. I also consider it improbable that neither Mr Khoury nor those advising him were unaware of such implications.
In these circumstances, it seems to me to be apparent that there was some form of obligation, on Mr Khoury and those advising him, to observe, at the very least, the spirit of the FCFCOA Act and disclose to Ms Khoury what were his intentions in regards to the shared family home and what would follow, from his perspective, in practical legal terms, from the dissolution of the marriage between the parties.
In my view, given the highly idiosyncratic circumstances of the parties, this obligation became more pronounced after each of the applications had been filed and served on Ms Khoury and culminated at the first return date. On this occasion, a Judicial Registrar was charged with managing the case. In these circumstances, the parties, ostensibly at least, agreed that it was necessary for a statement of financial circumstances to be filed by Ms Khoury.
Such a document would not be relevant to a divorce application. It may conceivably, in some circumstances, have had application to a parenting application involving travel, if an issue arose as to the capacity of the parents to pay for such travel. But such considerations can have no application in the current matter, given the husband’s level of wealth.
In these circumstances, I do not accept that it can be concluded necessarily that, in agreeing to file a statement of her financial circumstances, the wife was acting unilaterally in adding to the causes of action between the parties. As such, I do not accept that the prospect of the wife being able to simply re-entitle her response as an application and then file it, with her affidavit and statement of financial circumstances, absolves the husband of responsibility in respect of costs, given what is implicit in his Application for Divorce.
Essentially, in instructing her lawyers to prepare the relevant documents, I do not think it can be said that Ms Khoury’s actions were anything other than a direct response to the husband’s instigation of the divorce proceedings. She was being reactive rather than proactive. There is a difference between the two states so far as litigation is concerned.
In the former, a person has no choice other than to respond, if he or she does not wish to be the subject of a determination in which he or she has had no input. In the latter, the person has a choice whether to initiate litigation at all. As I have already indicated, Ms Khoury may have very valid reasons for not wanting to initiate litigation. However, once Mr Khoury began proceedings, she had little choice, particularly if there was a lack of clarity about what ends Mr Khoury sought to achieve by bringing the parties to court.
It is also relevant that the parties agreed to attend the mediation with Mr F and the issues canvassed at the mediation were wide-ranging. In my view, this belies any suggestion that following the instigation of the husband’s two applications to the court, there was anything other than a raft of controversial family law issues between the parties, not just overseas travel and a desire to formalise, by divorce, the end of the parties’ marriage.
Part 10.1 of the rules deals with the discontinuance of proceedings. It authorises the discontinuance of proceedings with and without the leave of the court, which are not specifically relevant to this matter. Mr Khoury was not required to seek leave to discontinue given the proceedings had not been listed for final hearing nor did either of his applications deal specifically with property.
However, as a consequence of rule 10.03, the filing of a notice of discontinuance does not prevent another party to the proceedings being able to bring an application for costs. Any such application must be brought within 28 days after service of the relevant notice.
THE LEGAL PRINCIPLES APPLICABLE TO COSTS
Section 117(1) of the Act abolishes for the purpose of family law proceedings, the general rule that, in civil proceedings, costs follow the event. It provides that each party should bear his or her own costs in proceedings under this Act.
The expression proceedings is defined in both section 4(1) of the Act and section 7 of the FCFCOA Act in the following terms:
A proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceedings.
However, pursuant to section 117(2), if the court is of the opinion that there are circumstances that justify it in doing so, it may, subject to a number of stipulated considerations, make such order as to costs as it considers just. The power is subject to the provisions of subsection (2A) and any applicable rules of court.
The relevant considerations are set out in section 117(2A) of the Act and are as follows:
·The financial circumstances of each of the parties to the proceedings;
·Whether any party to the proceedings is in receipt of legal aid;
·The conduct of the parties to the proceedings, including in respect of issues of discovery and production of documents;
·Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court;
·Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
·Whether any party has made an offer in writing to settle the proceedings and the terms of any such offer;
·Such other matters as the court considers relevant.[31]
[31] See Family Law Act 1975 (Cth) s 117(2A).
In the case of In the Marriage of I & I (No.2)[32] the Full Court said as follows:
Section 117 confers upon the Court a broad discretion in relation to costs. That discretion is one which the court should not seek to fetter. As was pointed out by the High Court in Penfold v Penfold:
It is an accurate description of s 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s 117(2). As subs (1) is expressed to be subject to subs (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.
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 in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs (citations removed).[33]
[32] See In the Marriage of I & I (No 2) (1995) 22 Fam LR 557.
[33] See In the Marriage of I & I (No 2) (1995) 22 Fam LR 557, 558 (Nicholson CJ, Ellis and Buckley JJ).
Accordingly, the principle that each party should bear their own costs is to be regarded as being general in nature and in its application. It is subject to potential modification if one of the circumstances provided by section 117(2A) is engaged. There is no particular onus arising from any of these factors. Rather, their application depends on the existence of sufficient circumstances to justify their application. In this context, given section 117(2A)(g) – other matters, which the court considers relevant – the court’s discretion to make an order for costs is a wide one. However, the discretion remains one which must be exercised carefully and judicially.
Given the inter-relation between subsections (1) and (2) and the nature of family law proceedings generally, orders for indemnity costs are extraordinary or exceptional in nature. The Full Court of the Family Court noted Inthe Marriage of Kohan that an order for indemnity costs as being a very great departure from the normal standard.[34] In this context, the Full Court said as follows:
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.[35]
[34] See In the Marriage of Kohan (1992) 16 Fam LR 245, 254 (Strauss, Lindenmayer and Bulley JJ).
[35] See In the Marriage of Kohan (1992) 16 Fam LR 245, 258.
As I observed in an earlier case concerning the award of costs in family law proceedings I made some general comments regarding litigants in family law proceedings in the following terms:
It is frequently the case that litigants in family law proceedings have no personal experience of the court system or in dealing with legal professionals. A case involving division of marital property or arrangements for children may be the first time they have ever even entered a courtroom. Necessarily such cases are replete with emotion and, as such, do not enable the individuals concerned to exercise dispassionate judgment about the issues raised, and the cost, both in emotional and financial terms, of pursing their preferred outcome.[36]
[36] See Bulow & Bulow (No 5) [2021] FedCFamC2F 166 at [38].
I stand by those comments. Family law proceedings have these idiosyncratic features given the private nature and emotional content of the litigation involved. In this context, it is necessary to differentiate between party and party costs, on the one hand and indemnity costs, on the other and the rationale which attaches to each such type of costs order. This is potentially significant because of what has been described as the increasingly widening gap between the amounts able to be calculated by reference to the two heads.
In general terms, party/party costs are calculated by reference to a prescribed list of costs allowable for discrete events occurring in the litigation in question. Necessarily, their effect is not to reimburse a litigant for all of the costs payable as a consequence of such litigation. On the other hand, the effect of indemnity costs is to provide full (or close to full) reimbursement of costs incurred to a successful party.
In a number of cases, both in the Full Court of the Family Court and the Federal Court, it has been characterised as the usual rule, in jurisdictions in which costs are routinely awarded following the event, that such costs are to be calculated on a party/party basis. As described above, there is no such usual rule in family law proceedings. Rather the usual rule is that there should be no costs order.
Given the effect of section 117(1) of the Act, the fact that, in family court proceedings, party/party costs are not to be awarded in accordance with any such general rule, this underlines the exceptional quality of an award of indemnity costs, in family law proceedings. In these circumstances, it is to be recognised that an order for indemnity costs has a particular context in family law cases.[37] Essentially, indemnity costs in family law proceedings are even more exceptional than in jurisdictions in which the award of party/party costs, to the successful party, is the usual practice.
[37] See Prantage & Prantage (2013) FLC 93-544 at 87,216 [152] per Murphy J.
There is no closed category of cases in which indemnity costs may appropriately be awarded. In Colgate Palmolive Co v Cussons Pty Ltd (‘Colgate Palmolive’),[38] Sheppard J of the Federal Court indicated that there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice of awarding a party deserving of an award of costs only party/party costs. The kinds of situation in which indemnity costs might be considered included those in which a litigant had:
·Commenced or continued an action knowing it to have no chance of success;
·Made false or irrelevant allegations of fraud;
·Made groundless allegations, which prolonged the case concerned; and
·Imprudently refused an offer to compromise.[39]
[38] See Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
[39] See Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 231-233 (Sheppard J).
The essential attributes of the various situations outlined above is that each represents an exemplar of one which has resulted in a party having to defend aspects of litigation which should not have been brought at all. As such, the respondent to them has been put to a level of expense which cannot be justified on any base. Thus the extraordinary circumstances necessary to justify the award of indemnity costs is established.
However, his Honour went on to indicate that the categories of matters in which the discretion to award indemnity costs could never be considered to be closed. Essentially, as I understand the relevant authorities, there can be no exhaustive lists of circumstances justifying the award of indemnity costs. Their award must depend on the idiosyncratic circumstances of the case concerned and the application of a closely considered judicial discretion to such circumstances.
A number of authorities, including Prantage & Prantage (‘Prantage’),[40] have analysed the apparent tension between awards of indemnity costs vis-à-vis party/party costs in the context of a recognition of legal costs generally increasing and the growing practice of legal practitioners entering into cost agreements with their client. Such issues were examined within the rubric of access to justice generally and the influence of costs awards in this respect and whether this justified a reconsideration of the principle contained in Colgate Palmolive.
[40] See Prantage & Prantage (2013) FLC 93-544.
In Re Wilox; Ex parte Venture Industries Pty Ltd (‘Wilcox’)[41] Cooper and Merkel JJ said as follows:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis.
[41] See Re Wilox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 at 156.
In Marks v GIO Australia Holdings Ltd (No 2)[42] Einfield J conjectured that it might be appropriate to depart with the usual rule and the only issue to be considered, in respect of the award of costs and their method of calculation, should be the merits of the case. Both these cases were considered by the Full Court, in the family law context, in Prantage and indeed one of the aspects of the appeal was the issue of whether it was appropriate to revisit the principles of Colgate Palmolive.
[42] See Marks v GIO Australia Holdings Ltd (No2) (1996) 66 FCR 128.
In this context, the Full Court, in Prantage, determined, as had the Full Court of the Federal Court in Wilcox, that the ordinary rule in respect of the award of party and party costs was well‑settled in Australia and any inequities in respect of the calculation of costs in this regard was better resolved by increasing the scale rather than enabling more awards of indemnity costs. As a consequence, it was considered that a general discretion, as envisaged by Einfeld J was likely to lead to more disputation about costs, which would not be conducive with the interests of justice overall.
As a consequence, the Full Court in Prantage said as follows:
In particular, we respectfully agree with Cooper and Merkel JJ that there are “two seemingly irreconcilable objectives” at stake. Placing great emphasis on the importance of one objective, namely “relieving a successful litigant from the burden of costs which that litigant should not have been required to incur” will inevitably lead to insufficient emphasis being placed on the importance of the other objective of “protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis”.
In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.[43]
[43] See Prantage & Prantage (2013) FLC 93-544 at 87,209 [96] – [98].
As was emphatically pointed by the Full Court in Stasiuk & Guild[44] I am bound to apply both Kohan and Prantage. Accordingly, I take it, that if I determine that there are circumstances which justify the making of a costs order in the wife’s favour, those costs should ordinarily be calculated on a party to party basis and an order for costs should be made only if exceptional circumstances can be demonstrated. However the quantum of cost alone is not a sufficient justification for the making of an indemnity costs order.
[44] See Stasiuk & Guild [2021] FamCAFC 62 at [8].
In my view, the final issue to be considered, under this heading of the judgment, is whether the current regulatory regime, within the parameters of the overarching purpose, are more conducive to the making of an order for indemnity costs than was the case prior to its promulgation.
As previously indicated, the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), which came into force on 1 September 2021, are the rules applicable to this matter. Chapter 12 thereof deals with costs.
In general terms, the current regulatory regime is to be characterised as being more proscriptive in terms of the obligations of legal practitioners in respect of costs and envisages the court having a role in the management of the costs incurred by the parties in proceedings before it [see rule 12.01(1)(c)].
These proceedings are being determined in Division 2 of the court, which has its own discrete regime of costs. In particular, it has a schedule of costs to be calculated by reference to fixed court events.[45]
[45] See Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), particularly rule 4.01
The procedure in respect of the such methodology being designed to allow the ready calculation of costs, by either the parties themselves or the court, which have been incurred following the various procedural stages of litigation from filing to finalisation with judgment. In my view, it is a scheme directed towards less complicated litigation.
I do not consider that this schedule is appropriate to the current matter. Accordingly, pursuant to the rules, I am authorised to apply the general family law rules. Neither party contends otherwise, notwithstanding the fact that the substantive matters have not been referred to Division 1 and no consideration has been given to this occurring.
If the court determines to make an order for costs, it has a wide discretion as to the calculation of such costs. Pursuant to rule 12.17 of the rules, it may order costs in a specific amount or to be assessed on a designated basis, such as by reference to party/party; solicitor/client; or on an indemnity basis. It may also direct that costs be calculated pursuant to a methodology prescribed in a schedule – Schedule 3 – to the rules.
In brief, the schedule enables the calculation of fees by the length of documents prepared and the hourly rates of those engaged in working on the proceedings. This sets hourly rates for work done by a lawyer at $276.33. In this context, the cost agreement entered into by the wife envisages hourly rates of between $540.00 and $285.00 per hour. This latter sum being for non-qualified staff.
It is implicit that the court may make an order that costs be as determined or taxed by a Judicial Registrar pursuant to the provisions of Part 12.8. Only such costs as are fair and reasonable and which are proportionate to the issues arising are allowable.
If the court has ordered that indemnity costs are to be paid pursuant to rule 12.47, the Judicial Registrar must have regard to the costs specified in Schedule 3 and any cost agreement. In addition the rule directs that in assessing indemnity costs regard be had to what is reasonable.
In this matter, the wife opposes any such taxation as being burdensome on her as adding to her costs. She seeks that the court specify a specific sum in terms of the schedule of costs characterised as having been thrown away.
Pursuant to rule 12.13(4) of the rules a person seeking indemnity costs must provide to the court a copy of any relevant costs agreement with his/her solicitor. The wife has provided her cost agreement with her solicitor and senior counsel.
Rule 12.17(2), in my view, enshrines the principle that if an order for costs is made, in a family law proceeding, ordinarily it should be on a party/party basis. More significantly, if any order for costs is made, pursuant to rule 12.17(3), the court must have regard to the following considerations:
·the importance, complexity or difficulty of the issues;
·the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in sub-rule 12.08(2);
·the rates ordinarily payable to lawyers in comparable proceedings;
·whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
·the time properly spent on the proceeding, or in complying with pre‑action procedures; and
·whether expenses (paid or payable) are fair, reasonable and proportionate.
Accordingly, in my view, the rules envisage that costs should be proportionate to the issues and complexity of the case. Rule 12.08(2) provides a list of criteria, for the court to apply, as to whether costs have been incurred fairly, reasonably and proportionately. They include whether one or other of the parties concerned has:
·complied with all relevant rules and orders of the court, including requirements that documents be filed or provided to other parties by a given date;
·acted reasonably in raising, pursuing or contesting a particular allegation or issue;
·made reasonable efforts, subject to the client’s instructions, to resolve the dispute through negotiation, mediation or arbitration;
·made reasonable efforts to narrow the issues in dispute;
·filed no more interlocutory applications than are reasonably necessary in the circumstances of the proceeding; and
·filed no more affidavits or other documents than are reasonably necessary in the circumstances of the proceeding.
Rule 12.08(3) provides criteria to determine whether a party’s costs are fair and proportionate. These include the complexity of the case involved; the quality of the work done; and the seniority of the lawyer concerned. In the current matter, it is not controversial that it was a matter which required a significant level of expertise on both sides, given the idiosyncratic circumstances of the parties.
Accordingly, the current regulatory regime does specifically envisage the making of indemnity costs orders. In addition, the current regime also makes reference to case management principles as being something potentially germane to whether costs should or should not be awarded and their overall quantification. As previously indicated it is Ms Vohra SC’s submission that, amongst other things, the failure of the husband to comply with pre-filing procedures is a matter relevant to her client’s application for costs.
In Prantage the Full Court did not accept that the previous regulatory regime had negated the application of the earlier enunciated principles applicable to the award of indemnity costs. The majority said as follows:
We recognise that the Rules now expressly refer to orders for costs on an indemnity basis. We recognise also that the rules in this Court are not precisely the same as those in other courts; however, there is nothing in the Rules which indicates that the fundamental principle applied in other jurisdictions should not also be applied in this jurisdiction. Indeed rule 19.18[46] makes clear that the “default” position is that costs are awarded on a party/party basis.[47]
[46] The analogous rule is rule 12.17(2).
[47] See Prantage & Prantage (2013) FLC 93-544 at 87,209 [94].
In my view, although it is clear, I think, that the court is to assume a greater degree of oversight in respect of costs, particularly in terms of disclosure of costs and the reasonableness of all concerned in proceedings, in terms of how they are to approach litigation in family law proceedings and more particularly lapses from what is regarded as objectively reasonable conduct have the potential to be sanctioned, I do not consider that I have authority to disregard what was said in Kohan regarding what is necessary to justify an award of indemnity costs. I also note the gloss provided by Prantage that in a jurisdiction which does not have a rule regarding costs following the events, the award of indemnity costs is even more exceptional.
EVIDENCE REGARDING THE FINANCIAL CIRCUMSTANCES OF THE PARTIES
In my view, the evidence regarding the respective financial circumstances of the parties is unusual in the sense that they are out of the ordinary or remarkable, particularly in respect of the ostensible disparity in their level of wealth.
Ms Khoury is employed as an allied health worker, on a part time basis, by G Company. She earns approximately $43,000.00 gross per annum. It is her evidence that she personally owns no assets of any significant value. She has deposed that her salary is paid into her bank account, into which Mr Khoury also deposits a regular monthly amount (funds being for the management of her aspects of the shared household and the needs of the children).
In her affidavit of March 2023, Ms Khoury deposes as follows:
In July 2022, the husband provided me with a $100,000.00 lump sum payment. From this sum, I have paid living expenses, counsel fees, mediation fees and accounting fees. I have a balance of approximately $20,000.00 remaining in my savings accounts to meet those expenses.
I have outstanding fees owing to Norman Waterhouse Lawyers of $82,544.20 (including GST), plus work in progress of $26,641.93 plus GST at 29 March 2023.[48]
[48] See the wife’s affidavit filed 29 March 2023 at [24] – [25].
She also asks the husband for other sums of money occasionally, including to be able to take the children on holiday from time to time. She has approximately $100,000.00 in her bank account at present and, as indicated above, is indebted to her solicitor in a sum greater than this. The import of her evidence is that she is dependent upon the husband for her current accommodation and the provision to her of a motor vehicle.
In addition, it would appear to be her case that she is, in practical terms, beholden to Mr Khoury to supply the vast majority of her financial needs. In real terms, she is not able to pay her own legal fees, whereas from the husband’s perspective, they are likely to be financially inconsequential.
She asserts that the husband is the Director of a group of companies with an annual turnover of hundreds of millions of dollars. She has read in the press that aspects of this business have been sold for a sum in the vicinity of hundreds of millions of dollars. She further asserts that the husband has access to liquid assets in the millions of dollars.
Essentially, it is her case that there is a gross disparity between her financial resources and those of the husband. In addition, it is the tenor of her evidence that she does not know a great deal about his situation and therefore axiomatically she faces a significant level of disadvantage in respect of any proceedings involving the husband.
Given the nature of the proceedings instituted by the husband, I have no significant evidence regarding the husband’s financial circumstances other than he does not dispute that he is anything other than an extraordinarily wealthy person. However, in this context, he points to the fact that other members of his family and other complex corporate entities and trusts are involved in his financial affairs.
Mr Khoury acknowledges that he is one of three directors of a group of companies, which has sold its business for millions of dollars. However, in this context, he asserts the sale has not yet been completed and is subject to regulatory approval. In addition, the board will determine how the sum is to be disbursed and it will be subject to deduction for tax and the payment of financiers and other liabilities.
In these circumstances, I concede that I do not have a clear picture of the extent of Mr Khoury’s personal level of asset backing and nor indeed does Ms Khoury herself. In my view, this adds some weight to her contention that when, as a consequence of the directions hearing of 2 February 2023, which required to file financial documents, she was facing a case of significant financial complexity.
In respect of parenting matters, Mr Khoury does not dispute the wife’s assertion that he has an entitlement to live in the Country H and has done so in the past with her and the children. I accept that this fact along with the husband’s very significant wealth add a particular level of complexity to the matter. Necessarily, Mr Khoury disputes that he would ever have any intention not to return the children to Australia following any period of overseas travel with them, given his connections with this country. In these circumstances, he would categorise his parenting application as routine in nature.
THE CONTENTIONS OF THE PARTIES
The wife’s contends that she has demonstrated circumstances of such an exceptional nature to justify an award of costs in her favour on an indemnity basis. The circumstances, she relies on can be summarised as follows:
·The gross disparity in the financial circumstances of the parties;
·The fact that the husband discontinued the proceedings on the day her responding material was due without prior notice to her;
·The potential complexity of the matter, which necessitated her to engage a specialised firm of family solicitors, including one of seniority, as well as to brief senior counsel;
·The wife’s costs in their entirety were thus incurred for no reason; and
·The failure of the husband to engage pre-action procedure prior to instituting his parenting application is contrary to the overarching purpose.
As previously indicated, it is the wife’s preference that she avoid a taxation of any cost to be awarded to her. She seeks that pursuant to the provisions of rule 12.17(1)(a) the court fix a specific amount for costs. In this context, Ms Vohra SC relied on the endorsement by Murphy J or comments of Einstein J as follows:
…the requirement that the power to award a gross sum should be exercised judicially does not mean that it must be exercised in any scientific or formulaic manner; At the heart of the judicial function is the responsibility to weigh up competing factors and considerations, many of which might conflict, to reach a determination. Acting judicially carries with it an obligation to apply the rules of natural justice, to act impartially and to apply the law to the facts. …[49]
[49] See Parke & The Estate of the Late A Parke (2016) FLC 93-748 at 81,944 [131].
The husband opposes the making of any order for costs, both on a party/party basis and on an indemnity basis on the following grounds:
·The wife is not impecunious;
·The wife was unreasonable in not agreeing to the issue of passports for the children;
·He attended the mediation proposed by the wife. It was the lack of agreement there, which caused him to withdraw his applications;
·Given he withdrew the proceedings, neither party can claim to have been successful or otherwise. The pre-existing status quo was reinstated;
·The wife’s claim for costs arises outside the ambit of the proceedings instituted by him. As such, she should bear the costs of the production of the documents prepared on her behalf, which she can in any event utilise in any proceedings she cares to commence;
·Accordingly, it cannot be said that she has been put to expense for no reason or on any basis which she should not have been called upon to incur to respond;
·Essentially, she elected to act as she did and there was nothing improper in the proceedings instituted and subsequently discontinued by him;
·There are no exceptional circumstances to justify indemnity costs;
·The costs claimed, on both a party/party basis and more so in respect of indemnity costs, are excessive and not proportionate or reasonable; and
·Any costs should be referable only to the withdrawn parenting application and subject to a taxation.
In the context of these matters, Mr Bartfeld KC submits as follows:
[T]he order sought constitutes an overreach. No order should be made. If the Court exercises the discretion under s 117(2) of the FLA any order should be calculated on a party/party basis and it should relate only to the proceedings which were discontinued. It is submitted that the quantum of any such order would be nominal. That fact mitigates against any order being made.[50]
[50] See the husband’s outline of case filed 28 July 2023 at [29].
DISCUSSION
It is now necessary to consider whether there are any circumstances which justify a departure from the general rule provided by section 117(1) by virtue of any of the considerations specified in section 117(2A). As a corollary of this exercise, it is also necessary to consider whether there any circumstances of such an exceptional nature to justify an order for indemnity costs.
The financial circumstances of the parties
The purpose of an inquiry under section 117(2A)(a) is to enable the court to have some concept of the relative financial positions of the parties.[51]I am satisfied that the evidence available to me enables me to conceptualise, at least in general terms, the relative financial standing of the parties.
[51] See Browne v Green (2002) 170 FLR 411 at 414, [20].
In a collective sense, the parties have access to great wealth. In practical terms, this wealth is wholly controlled by the husband and other individuals, both in a corporate and personal sense, related to him. Accordingly, I accept that is a misnomer to say that the wife is bereft of financial resources. As a consequence of her marriage, she must be regarded as being well off, at least in prospective terms.
However, the supply of her needs currently depends on the ascent of the husband. He decides what monies are allocated to her and to some extent how they are to be utilised. Otherwise she is a modest salary earner with a limited financial capacity to pursue any litigation on her own behalf, particularly when compared to the husband. She does not have direct access to assets of any significant value.
Clearly, in my view, there is a very great discrepancy in the relative financial positions of the parties and it cannot be said there is a level playing field between them in respect of financial matters. Whether this extends to some form of power imbalance between them, in respect of other issues related to their marital relationship, is beyond the scope of the current matter.
I accept that the fact that a family law matter concerns large sums of money is not of itself a factor which can be regarded as making a case exceptional in terms of the award of costs. However, in my estimation, it will certainly add to the degree of complexity. As such, Ms Khoury was entitled to consult specialised and experienced solicitors and to retain senior counsel, as indeed did Mr Khoury.
These circumstances, must add to the quantum of the fees incurred by each of the parties, which some in the community are likely to regard as eye watering given the length of time the proceedings had been before the court and the number of court appearances involved.
Receipt of legal aid
Neither party was in receipt of legal aid during these proceedings. Accordingly, this is not a relevant consideration.
Conduct of the parties
This is the most relevant criterion. It deals with the conduct of the parties in a general sense, not merely in respect of procedural issues and directions. This is clear from the specific wording of the provision, which is as follows:
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;[52]
[52] See Family Law Act 1975 (Cth) s 177(2A)(c).
Conduct, which may have implications for an award of costs, must arise in relation to the proceedings. As previously indicated, the definition of proceedings includes incidental proceeding in the course of or in connexion with a proceedings. One meaning of relation is the existence of some form of connection between a person or persons and some thing. Incidental means something having a quality which is less important than the thing something is connected with or part of.
In my view, given the circumstances of the parties, it is open to the court to reach the view that the institution of the divorce proceedings and the parenting application were incidental to each other and connected, at least in the perception of Ms Khoury and those advising her.
As I have already indicated, the situation of the parties must be regarded as highly idiosyncratic. This is not merely because of financial issues, which are axiomatically not run of the mill, but also as a consequence of the manner in which they have elected to parent their children post separation.
In my view, this state of affairs, to some extent must inform the court’s objective assessment of each parties conduct in the proceedings in the broad sense. It is common ground between them that their date of final separation occurred in March of 2021 but have continued to live under the same roof. Ostensibly, at least, there was a marked imbalance between them regarding financial resources. The husband had access to significant funds; the wife, as a modest income earner, was dependent upon the husband to fund anything more than inconsequential purchases.
In these circumstances, it appears to be the case that each elected to secure some legal advice about the possible implications of their separation. The husband acknowledges this in his affidavit material. In addition, the wife was served with the husband’s proceedings, in this matter, via her solicitors. Accordingly, the current matter did not arise in a complete vacuum. However, what, if anything, was discussed between the parties’ respective lawyers, is not known to me.
It appears to be entirely reasonable that each party should have consulted lawyers, given their situation. This did not mean that either contemplated proceedings in this court or that such proceedings were either necessary or inevitable. As I have already pointed out, the parties were free to parent their children and make financial arrangements for each other on whatever bases they considered appropriate. However, it appears to me that it would have been imprudent, for each of them, not to have had some legal advice.
Given her circumstances, in my view, the wife was entitled to engage the solicitor of her choice, on the basis of whatever retainer she thought appropriate. The conundrum arising being that she herself did not have access to the funds likely to be able to discharge personally such a retainer, which given the complexity of her situation had at least the potential to be expensive. Necessarily, Mr Khoury would have to be the source of the necessary funds. Indeed it is conceded that he provided her with a sum of around $100,000.00 for incidental expenses.
It seems axiomatic that those advising the wife would have been aware of this situation – ultimately Mr Khoury would be the source of funds required to pay them. Mr Khoury himself must also be regarded as being aware of the wife’s financial situation. How could he not be? Although the parties are separated, they remain inextricably linked not least because of their co-parenting of the children.
Accordingly, notwithstanding the complexity of the legal provisions applicable, which I have attempted, I fear at some length, to summarise, if the wife’s legal advisers elect to demand payment from her, if unpaid, as they are entitled to do so, it seems probable that the most likely individual to whom she will turn to pay her liability, is Mr Khoury. It would be a matter for him, of course, how he would respond to such a scenario, particularly in the context of how it played out.
The husband was entitled to bring the passport application when he did. In the absence of agreement between the parties, his only recourse to resolve the dispute was to issue proceedings and to seek a judicial determination. He and those advising him were subject to the overarching purpose and ordinarily should have engaged in pre-action procedures.
Given the circumstances of the parties, the overseas travel issue, in my view, cannot be regarded as being self-apparently routine. I am not required to determine this issue. However, in theoretical terms, Mr Khoury is a person of unlimited means, who can, in principle, live anywhere in the world. As Cronin J said in Gin & Hing:[53]
Decisions about international travel are difficult to make because no-one can foretell the future and the decision I have to make here amounts to a leap of faith. The Court determines discretionary matters within the framework of the evidence that it is presented.
The factual situation arising in this matter necessarily rendered any issue in respect of overseas travel complex and multi-faceted.
[53] See Gin & Hing [2010] FamCA 617 at [64].
Mr Khoury was also entitled to seek release from pre-action procedures on the basis of urgency, which he did. However, he delayed in serving his application on the wife. As to why this was so is a matter of conjecture for the court. Certainly, the delay was not consistent with the overarching purpose, particularly in terms of the parties themselves being able to work consensually to resolve the issue.
In this context, it is relevant that their oldest child was able to travel to Country B and it is agreed that prior to the proceedings, overseas travel for the children was a normal incident of their lives. It cannot be said that there were not then in existence formal modes of communication between the parties, given each had solicitors.
Given all these factors, the husband’s decision to institute divorce proceedings must be regarded as highly significant, particularly given the contents of his affidavit in support of the contention that the parties were separated under the one roof. He indicated his understanding that the wife would be leaving the former family home on the making of the divorce.
Necessarily, such an outcome must have had implications for most obviously financial arrangements between the parties and almost certainly for parenting arrangements. In my view, it would have been naïve for the husband (and professionally inconceivable for his lawyers) to consider anything other than that the wife (and those advising her) would regard the divorce application as anything other than a harbinger of other ancillary family law proceedings being anticipated by the husband. In my view, it was at this stage, that the overarching purpose and its application to the parties’ idiosyncratic circumstances, comes into sharper focus.
The orders made by a Judicial Registrar are expressed as having been consensually reached. It seems highly unlikely that there was not some discussion between the parties’ legal advisers as to why more lengthy affidavits were required than usual, along with a Financial Statement.
It also seems to me to be improbable that from the perspective of each party, it was understood that the preparation of these documents, given the idiosyncratic circumstances of the parties, would be a professionally time consuming and expensive exercise, given what was implicit in the divorce application.
If this assumption was incorrect, on the part of one of the parties, in my view, it was incumbent on the other to advise to this effect. In this context, it appears to me to entirely reasonable for the wife to have proposed a mediation. Both parties agree that the mediation was wide-ranging and covered issues other than overseas travel.
This suggests that both the husband and wife had a common understanding that by 16 March 2023 there was a reasonable probability that they would be engaged in comprehensive family law litigation with one another and needed to prepare for it, if the mediation was unsuccessful.
In these circumstances, the wife requested financial assistance for the mediation and to extend the filing regime. The fact of her request for such an extension did not, in my view, result in any lessening of the need for her to continue to prepare for the hearing nor did the prospect of settlement being reach consensually have this effect.
I accept that the wife did incur significant expense in the period between being served with the husband’s two applications and this expense related to the preparation of a complex financial and parenting matter, not merely an issue of overseas travel, although, as pointed out above, this application too must be regarded as complex in its nature.
The mediation was proposed by the wife and readily accepted by the husband. In my view, it was a sensible intervention and each party reasonably elected to apply a significant level of resource to it, including retaining senior counsel. In these circumstances, I do not propose to make any award of costs which are directly attributable to the mediation. Rather each should bear their own costs in respect of it.
It is both beyond the remit of these proceedings and subject to privilege as to why the parties were not able to resolve any issue at the mediation. In this context, I acknowledge that it is the husband’s position that, once he had been directly exposed to the wife’s opposition to his overseas travel proposal he decided to withdraw it, which he would characterise as a reasonable response. This may be so but, in my view, it must still remain the case that the wife had expended significant costs in respect of the other proceedings initiated by him.
The husband does not seek to challenge the wife’s assertion that his decision to discontinue both the parenting and divorce application was not forewarned to her. I accept that it came as a surprise to her and those advising her and after she and they were well advanced in preparing for what was anticipated to be complex litigation involving finances and children.
Given the divorce application, the issues that were anticipated to touch on where she would live and how her alternative accommodation would be funded. Other issues arising are likely to have included how the litigation, which from her perspective the husband had signalled was in chain, would be funded from her perspective.
I accept that the financial value of her potential claim, of itself, added to the complexity and justified the hours allocated to her matter. Indeed, if there had been any application to transfer the matter to Division 1, given the contents of rule 3.01(3)(b) of the Division 2 rules, such an application would have been a fait accompli.
I do not accept the submission that, as it is open to the wife to institute her own proceedings, seeking whatever orders she consider appropriate, utilising the documents prepared on her behalf, it cannot be said that she has incurred costs for no reason and should not be indemnified for them.
As previously indicated, she may not wish to institute proceedings on her own behalf and has assumed that the withdrawal of the husband’s applications is a tacit indication, on his part, that he wishes to return to the status quo, which has existed since the parties separated under the one roof. She may also wish to return to this state of affairs.
In effect, what she understood from what was contained in the divorce application and the subsequent discussions between counsel, in and around the directions hearing, compelled her to react to the husband’s application. However, with the withdrawal of both applications she no longer is subject to any such imperative to respond or be involved in any legal process.
In addition, for reasons unknown to me the parties may now both hold the view that litigation, in this court, is not conducive to how they wish to parent their children or allocate financial resources in future. This, as I have pointed out already, is their prerogative.
In my view, in all these circumstances, particularly the late notice of withdrawal provided to the wife, after the failed mediation, in respect of which no assistance had been provided to her to attend, justify a making of costs in her favour, which is referrable to the provision of legal services to her in respect of preparing the documents ordered on 2 February 2023.
The question remaining being whether that should be on an indemnity basis or a party/party one. Following the resolution of this issue the question of how the quantum of such a cost order arises and whether it is just to award a specific sum or appoint a process for its calculation.
Failure to comply with previous orders
I do not think that this is a relevant consideration in this matter.
Party wholly unsuccessful
I do not think it is appropriate to apply concepts of success or otherwise, in the litigation, to the assessment of costs. At this juncture, it would appear to be the case that each party is not interested in pursuing any form of adjudication under the Act. As such, in my view, neither party can be considered as either successful or unsuccessful. No appraisal has been made of any substantive applications advanced by either of them.
Offers to settle in writing
I do not think that this is a relevant consideration in this matter.
Other relevant matters
I do not propose to engage this particular consideration given that I have already alluded to the idiosyncratic circumstances of the parties, which necessarily require a sensitive approach on the court’s part.
CONCLUSIONS
It is only in exceptional circumstances that the court should make an order for indemnity costs. In my view, a case involving an extraordinary level of wealth, is not, of itself, an exceptional circumstance, although it does necessarily add to the complexity of the case concerned. Given the usual rule, in family law proceedings, is that the parties concerned should bear their own costs, it is even more exceptional, in family law proceedings, for such orders to be made.
In my view, it cannot be said that the husband’s conduct of the proceedings brought by him should be censured by an award for indemnity costs. Nor should such an order be made on the basis that he has ample means to satisfy such an order and may ultimately, given the parties’ current circumstances, be the source of payment of the wife’s costs, given her personal financial circumstances.
Clearly, there was a dispute between the parties regarding the appropriateness of overseas travel for the parties’ four children. Given the parties’ circumstances, I can readily understand, from both their perspectives, the level of difficulty and controversy, which the issue threw up. Accordingly, in my view, it cannot be said that this was an application, which should not have been brought at all from the time of its institution.
However, thereafter, in my view, the base of the case and its import was subtly transmuted by the divorce application. The wife was compelled to respond and there was no indication by those representing the husband that she should do anything other. She was put to considerable expense.
In these circumstances, in my view, this is an appropriate case in which it is just to make an order for the payment of party/party costs in the wife’s favour in respect of the costs which have not been utilised in reacting to the husband’s intimation that there would be a change in the manner in which the parties had arranged their affairs post separation. Whether this represented a testing of the water, on the husband’s part, is not known to me.
I have endeavoured to have regard to the matters contained in rule 12.17 regarding the reasonableness of the costs sought by the wife. Any case potentially involving many tens of millions of dollars and complicated commercial entities must be regarded as important to the individuals concerned and inherently complex and difficult for the legal practitioners involved. This was a case which befitted the retention of senior counsel. Indeed both parties seems to have taken it as a given that they would have senior counsel.
I have not seen the wife’s documents, as they have not been filed. I have, however, been provided with some details of her personal financial situation. Were she not married to a man of exceptional wealth, her financial circumstances must be regarded as quotidian. The complexity, from her perspective, arises as a consequence of the circumstances of the person to whom she is married. She is not required to outline his circumstances – that must fall to him.
I acknowledge that the personal circumstances of the parties may very well have an extraordinary level of emotional complexity, which may be reflected in the affidavit prepared on the wife’s behalf, but that, of course, is a matter of conjecture on my part.
Although I have referred to the costs incurred over a space of weeks as being likely to be jaw dropping and eye wateringly expensive for many in the community to contemplate, the hourly rates charged are not likely to be out of proportion to fees which would be charged in comparable proceedings. Many millions of dollars of cases, for obvious reasons, attract high fees. At the end of the day, it would be naïve, on my part, to consider that a case involving potentially many hundreds of millions, would not attract some form of premium so far as legal fees are concerned.
In addition, it is apparent that each of the parties came into the proceedings being aware of the sort of hourly rates and the extent of counsel’s fees to which they would be exposed and each elected to engage them. As I have indicated, the rules require the court to consider the proportionality of the fees in question to what has actually occurred.
In this context, I must consider that the wife prepared four documents, the longest of which was twenty pages and a statement of apparently relatively simple financial circumstances. There was a short mention. The fees claimed are, indeed, steep.
However, I consider that there is likely to be some overlap in the fees charged for the preparation of the litigation and those related to the mediation, which I do not regard as being compensable in these proceedings.
At present, although I cannot be sure for certain, it seems to be the position of each party that they do not wish to engage in litigation with one another pursuant to the Family Law Act 1975. How long this state of affairs will persist is also uncertain. As I have already observed, prior to the institution of the current proceedings, for understandable and prudent reasons, both parties elected to obtain some degree of legal advice and each must bear the costs of this.
I have closely considered whether I should have sent the issue of the calculation of party/party costs for taxation. The husband has indicated his preference for this course given his view that the costs proposed by the wife are excessive. For her part, the wife’s preference is for the court to utilise the discretion provided by rule 12.17(1)(a) and provide a specific amount to avoid the proceedings becoming more protracted and, from her perspective, more expensive.
On balance, I consider it more just to adopt the course proposed by the wife and end the costs proceedings at the earliest possible juncture. I appreciate that in fixing such a sum, I must act judicially in the light of all the facts applicable. In all cases involving the exercise of a discretion in respect of the calculation of a sum of money, there comes a point where a judge must make the “leap” from words to figures.[54]As such, the leap cannot be expressed by reference to some scientific formula. Necessarily minds will differ.
[54] See Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] per Coleman.
Given the degree of complexity implicit in the case, arising from the financial disparity of the parties and the extent of wealth involved, I consider that a global sum of $45,000.00 in respect of party/party costs is an appropriate one given the time the matter was before the court, involving as it did two discrete hearings. In addition, I will order that the husband pay the wife’s disbursements, in the form of her counsel fees for both the initial directions hearing and the costs application.
This sum is directed towards providing party/party costs arising from the discontinued children’s application and the preparation and presentation of the application for costs which resulted from it. It is not directed towards the costs relating to the mediation or other aspects of advice.
I acknowledge that it is an extraordinary sum of money, when I compare it to the documents which currently comprise the court’s file. However, it will not come close to providing full recompense to the wife for the amounts she is due to her lawyers. She incurred the fees in anticipation that she was about to embark on complex and perhaps protracted litigation, at essentially the husband’s instigation, involving hundreds of millions of dollars, which necessarily had significant implication both for her and the children concerned, particularly where she was going to live.
The proceedings were directed towards determining her just and equitable entitlements, in the context of possibly an extremely complicated financial environment, controlled by her husband and others, of which she had little personal understanding. Not the least of which, the proceedings concerned where she would live in future (given what was asserted in the divorce application) and maintain a standard of living commensurate with her situation.
This was not a simple paradigm and must necessarily attract a premium so far as legal expenses are concerned, a circumstance of which both parties are likely to have been well aware throughout. In all these circumstances, although the sum on which I have determined is a significant one, I have reached the conclusion that it is a just one and falls within a proper level of discretion. In addition, in my assessment, it is preferable to end the costs application in this manner rather than to send the matter to taxation, which will result in the imposition of still more fees on the parties concerned.
At the same time, I bear in mind that the proceedings were at all times in Division 2 of the court. They had not, as yet, been transferred to Division 1 because of their inherent complexity. The sums which are allowed in respect of costs referrable to the specified events in the cost schedule generally applicable in this Division[55] would result in costs vastly less than the party/party costs calculated by the wife’s solicitors being allowed.
[55] See Federal Circuit & Family Court of Australia (Division 2) (Family Law) Rules 2021 Schedule 1 – Scale of costs in family law and child support matters.
This factor, is also one which must have implications in respect of the overall proportionality of the costs to be calculated and lead me to be fortified in respect of the still, in my view, very significant figure for costs of preparing a limited number of documents and preparing a costs application, which I have specified.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding two hundred and fifty-one (251) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 25 August 2023
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