Klumper & Klumper (Costs a** parenting)

[2008] FamCA 360

FAMILY COURT OF AUSTRALIA

KENDLING & KENDLING (COSTS – PARENTING) [2008] FamCA 360

FAMILY LAW – COSTS - Indemnity costs - s 117, s 117AB - orders for contribution towards the costs of the Independent Children’s Lawyer.

Family Law Act 1975 (Cth)

Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; (1993) 28 IPR 561
Fitzgerald v Fish (2005) 833 Fam LR 123
I & I (No. 2) (1995) FLC 92-625
Kohan & Kohan (1993) FLC 92-340
Latoudis v Casey (1990) 170 CLR 534
Ohn v Walton (1995) 36 NSWLR 77
Penfold & Penfold (1980) 144 CLR 311
Robinson v Higginbotham (1991) FLC 92-209
Telfer and Telfer (1996) FLC 92-688
Yunghans & Ors v Yunghans & Ors and Yunghans (2000) FLC 93-029

APPLICANT: Mrs Kendling

RESPONDENT: Mr Kendling

FILE NUMBER: SYF 2903 of 2003

DATE DELIVERED: 7 MAY 2008

PLACE DELIVERED: MELBOURNE

PLACE HEARD: In Chambers

JUDGMENT OF: CRONIN J

HEARING DATE: By way of written submissions

SUBMISSIONS RECEIVED FROM:

COUNSEL FOR THE APPLICANT: Mr Richardson SC

COUNSEL FOR THE RESPONDENT: Mr Baran and Mr Gardiner

Orders made in chambers

That upon reading the submissions on behalf of each party

IT IS ORDERED:

1. That by 1 July 2008 the husband pay to the wife, towards the costs of all parenting proceedings to date, the sum of $170,000.

2. That by 1 June 2008 or such other time as may be agreed with the Independent Children’s Lawyer, the unpaid or outstanding costs of the Independent Children’s Lawyer in respect of the parenting proceedings be borne by the wife as to $7,200 and the husband, the balance.

IT IS NOTED that publication of this judgment under the pseudonym Kendling (Costs - parenting) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2903  of 2003

MRS KENDLING

Applicant

And

MR KENDLING

Respondent

REASONS FOR COST JUDGMENT

1. On 21 December 2007 I delivered judgment in relation to the parenting orders sought under the Family Law Act 1975 (Cth) (‘the Act’) in respect of DAVID KENDLING born … September 1996 and MARC KENDLING born … January 1999.

2. The respondent wife now seeks costs in relation to those proceedings and various interlocutory hearings on an indemnity basis or alternatively on a party/party basis. The husband says each party should bear their own costs.

The submissions

1. On 7 February 2008 I received submissions from Mr Richardson SC in respect of the wife’s application for costs.

2. The submissions of the husband drawn by Mr Baran and Mr Gardiner were filed and dated 26 February 2008. At the request of the husband’s practitioners, I had extended time for the submissions to be filed.

Certification for the attendance of senior counsel

1. The wife seeks certification pursuant to rule 19.50 of the Family Law Rules 2004 that this was a case in which it was reasonable to engage senior counsel to appear on her behalf. She submits that the necessity of senior counsel was indeed recognised by the applicant for the first week of the hearing before changing his solicitors. The husband was represented by senior counsel in the first part of the hearing and two counsel in the second part of the hearing.

2. The wife justifies the certification and contends that the proceedings were ‘factually huge’ and assumed a ‘potentially huge significance in the outcome’.

3. The husband does not dispute nor put forward any argument as to why certification for senior counsel should not be given.

4. Because of the complexities of the case, I propose to certify that it was reasonable to engage senior counsel.

The positions of the parties

1. The wife argued that this is a case where indemnity costs were appropriate for at least some of the proceedings. If that was not acceptable, party/party costs should apply.

2. The wife relied on an affidavit of her solicitor Mr Michael Conley. He said that if indemnity costs were not awarded, the wife’s costs on a party/party basis would be approximately 35 per cent of the total costs incurred.

Section 117AB

1. Before turning to the general issue of costs, I propose to deal with the wife’s specific application for costs based on the provisions of section 117AB of the Family Law Act 1975.

2. S 117AB reads:

   (1)  This section applies if:

   (a)proceedings under this Act are brought before a court; and

   (b)the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.

   (2)The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.

3. The wife submits that there a several points in the judgment which tend towards findings under section 117AB that the husband knowingly made false allegations or statements. In particular, the wife points to paragraphs 30, 35, 43, 44, 47 – 50, 53-56, 58-60, 66, 68-70, 72, 77, 78, 87, 99, 101, 104, 114, 117, 119-121, 124, 127, 128, 129, 130, 132 and 141 as examples of where the husband’s veracity was to be questioned or as examples of his disingenuous use of proceedings.

4. The husband denies that he was found to have been deliberately dishonest in regard to any issue other than in representations in relation to his address on the electoral roll. He said that the finding on that issue did not undermine the integrity of the proceedings.

5. “Knowingly” as referred to in the section, imports a serious subjective element into the question. To be satisfied that a person knowingly made a false allegation or statement in the proceedings must mean that a court is comfortable in finding that the person lied. To be satisfied that a lie has been told and to so find, requires a careful analysis of two things. The first is that the proffered version of fact is untrue but the second is that it is put knowing it to be untrue. A court must then be cautious about such a finding because of the mandatory consequence. The finding must be elevated above the “probable” level set out in s 140(1) of the Evidence Act 1995 to consider the matters contemplated in s 140(2) of that Act.

6. “Knowingly” is unequivocal.  There can be no room for misunderstanding or doubt; objectively, the person making the statement cannot believe the statement to be true.

7. I made a large number of findings in this case. Whilst the wife’s submission is as I have set it out in paragraph 13 above, I am satisfied beyond any doubt to say that my findings in paragraphs 78, 87, 124 and 130 of the December judgment fell into the category of the husband knowingly making false statements. That being so, an order for costs must follow. The question is whether the order should be for some or all of the wife’s costs. That is a matter that I shall return to below.

8. Even were there no such finding about costs under s 117AB, the wife’s application seeks a discretionary order for costs.

The general application for costs

1. The wife submitted that the husband’s conduct in the running of his case and the disparity of the financial circumstances between the parties justified a departure from the general rule that parties should bear their own costs.

2. The general rule as to costs is contained in s 117(1) of the Act which provides that each party should bear their own costs. However this rule is subject to the exception in s 117(2) which provides that the court may depart from that general position if it is just in the circumstances. In determining what order, if any, for costs should be made, I need to turn to the factors set out in section 117(2A). It is therefore a two step process.

3. In respect of the question of a justification for an order for costs, the wife submitted:

   a)the husband conceded that the net property of the parties was ‘a value in excess of $40,000,000’[1]. That amount is overwhelmingly with the husband. The wife has provided a further Financial Statement with her written submissions which places her net asset worth at just under $2,000,000; and

   b)the husband’s conduct in the running of this case was tantamount to an abuse of process in that many of the allegations put forward were false and any that were true, were not related to concerns he genuinely held.

   [1] Kendling & Kendling and Ors [2008] FAMCA 31 Paragrap 5 O’Ryan J

4. In support of those contentions, the wife submitted that the husband produced voluminous affidavits which focused on the capacity of her care for the children and which made allegations of drug and alcohol abuse putting the wife to the unnecessary burden of embarking upon lengthy cross-examination of the husband and adducing evidence of her own to rebut the allegations. She submitted that the allegations about consumption of alcohol and use of illicit substances were for ‘no legitimate forensic purpose’ and were part of the husband ‘pursuing a case that was a sham’.

5. The husband said that some of his assertions were conceded by the wife, in particular those in respect of the use of illicit substances and her consumption of alcohol [paragraphs 35, 39 and 40]. Thus, he said, there was no ‘sham’.

6. It was also submitted by the husband that there was no finding in my judgment that he prosecuted his case with no forensic purpose.

7. In respect of the final hearing, there were many factual issues mostly raised by the husband which in a parenting case would be seen as important. Historical events often foretell the way in which parents will case for their children in the future.

8. However, it is important here to contemplate the way in which the interlocutory cases were put to the court by the husband. Because the hearings were interlocutory and the evidence was by affidavit, the husband’s case could not realistically be tested by the wife. Having regard to the husband’s ultimate concession during the trial, his presentation in the interlocutory hearings could hardly have been child-focussed or genuine.

9. The husband submits that when the matter was heard before Lawrie J on 7 April 2006 both parties were seeking various final orders which differed from those sought at the final hearing and the parties had varying degrees of success, suggesting that neither should be able to recoup costs. The husband further points to the finding of the court at that time that the protective measures sought by him ought to have been made. However, that submission has to be seen in the context of his ultimate concession compared with the way he conducted the interlocutory hearings. I reject the husband’s submission on that issue.

10. The wife points to the comments of Murphy J in Penfold & Penfold (1980) 144 CLR 311 to support the contention that the husband’s conduct in this regard had the effect of undermining the integrity of the legal proceedings. I accept the wife’s position in respect of the way in which the husband conducted the proceedings.

11. In this case, there is ample justification for a departure from the general rule that each party bear their own costs.

The interlocutory hearings and costs

1. Before turning to the matters in s 117(2A), the wife also seeks costs relating to interlocutory hearings.

2. The wife submitted that the husband’s conduct in relation to interlocutory proceedings was tantamount to an undermining of the integrity of the court process and demonstrative of ‘an absolute lack of respect for the court and the proceedings’. She pointed to the husband’s conduct in the court in the proceedings about which I made findings in my judgment at paragraph 87. The husband’s approach in the interim parenting matters can be seen more clearly when the final hearing was finished

3. As another example of the husband’s approach, in the period when this matter remained adjourned part heard, he brought an application for overseas travel. In that application, he was wholly unsuccessful.

4. Given that the husband had known about his trip some time before bringing the application and had been less than forthcoming about providing particulars of his travel arrangements to the wife or the court, I held that he could not travel overseas with the children of the marriage.

5. Having regard to the matters to which I have just referred and the ultimate outcome of the proceedings, I have adopted the view that it is just to depart from the rule that each party should bear their own costs in respect of the interlocutory applications relating to parenting issues.

Section 117(2A)

1. The next step is to look at the factors outlined in s 117(2A) to determine what order for costs is just in the circumstances.

2. The Full Court in I & I (No. 2) (1995) FLC 92-625 said that the matters referred to in section 117(2A) ‘must all be taken into account and all balanced in order to determine whether the overall circumstance justify the making of an order for costs’. However in this case, as in others, some factors will be more persuasive than others and some will simply not be relevant to the facts.

3. Counsel for the wife pointed to the Full Court’s decision in Fitzgerald v Fish (2005) 833 Fam LR 123 at 130 and the judgment of Nygh J in Robinson v Higginbotham (1991) FLC 92-209 to say that there is no intention to be inferred from the legislation that more than one factor must be present before an order for costs can be made. I agree but I intend to refer to each of the relevant provisions in s 117(2A).

   (a) the financial circumstances of each of the parties to the proceedings;

4. The exact financial circumstances of these parties have yet to be determined. However at the time of the hearing and at the conclusion of this case, the parties had a conceded net worth of around $40,000,000[2] and the wife has, with her submissions for this costs application, submitted an updated Financial Statement which suggests she has just under $2,000,000 in assets. There is a considerable financial disparity between the parties.

   [2] Kendling & Kendling and Ors [2008] FAMCA 31 Paragrap 5 O’Ryan J

5. Ultimately an order for costs is discretionary and no one factor will be conclusively determinative in all cases. The significant financial disparity in this case will not be the sole determinant of the costs issue but it certainly carries significant weight.

   (b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

6. Neither party is in receipt of legal aid in this case apart from the Independent Children’s Lawyer who it is agreed should have his costs met by the husband and wife.

   (c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

7. Much of the ten days in hearing the matter was spent directly and indirectly around challenging the wife’s capacity to parent and her alleged abuse of alcohol and illicit substances. Counsel for the wife submitted that these allegations were put to the wife at ‘the expense of meeting voluminous affidavits’ and necessitated a more lengthy cross examination of the husband than was otherwise necessary in the circumstances of the case.

8. The wife submitted that the husband’s approach was unnecessary considering the husband’s own concession on the third day of cross examination that he was no longer concerned about the wife’s ability to parent. That was not a concession made at any time prior to the commencement of the proceedings including during the interview between the husband and the expert witness.

9. The husband’s position was that the wife conceded her use of alcohol and marijuana (see paragraph 55 of my judgment). However the wife’s conceded use of that drug was of a different calibre to that alleged by the husband. If I combine that position with his concession through counsel in opening submissions to seek a week-about arrangement in the alternative, I am entitled to infer he could not have held concerns as to the wife’s capacity to parent.

10. I noted this concession by the husband in several places in the judgment and queried why he continued to adduce evidence of the wife’s incapacity in this regard. No better example of that can be seen in the  husband’s forensic conduct in adducing evidence from his adult daughter Penelope Kendling whose evidence I found to be of little probative value and whom I found to be neither honest nor objective  [paragraph 145].

11. The husband submitted that my findings in respect of Penelope Kendling should not form the basis of a punitive costs order against the husband as he was not able to control the way in which she presented herself as a witness. I do not intend to punish the husband but rather ameliorate the wife’s cost position having regard to the expenses that she has incurred and endured as a result of the way he conducted his case. He could have declined to rely on the evidence after the invitation from counsel for the wife and my own concerns about the relevance of that evidence. That opportunity occurred on two separate occasions.

12. At paragraph 140 of my judgment, I noted that the husband’s focus on Mr M in this case was ‘unnecessarily obsessive’ and consumed far more of the hearing time than it ought reasonably to have done. The husband’s own expressed concerns about Mr M were written on his hands to ensure that he did not forget. Ultimately, the challenge to Mr M was not significant.

13. The wife submitted that there was ‘little doubt’ that the husband’s conduct ‘falls aptly within the description of that which has the effect of and is intended to undermine the integrity of the proceedings’. Perhaps put another way, there were many unnecessary things put by the husband in his own case let alone the challenge to the wife’s case.

14. The husband’s conduct in the proceedings therefore is a matter that I will take into account in determining what order for costs should be made.

    (d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

15. No issues arise under this sub paragraph from the circumstances of the case.

    (e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;

16. In the context of parenting proceedings it is difficult to say that any party has been wholly unsuccessful. However as the High Court said in Penfold & Penfold (1980) 144 CLR 311; (1980) FLC 90-800, obtaining ‘substantial parts’ of the relief sought may be a circumstance justifying a costs order.

17. Both parties in this case sought an arrangement that they have sole care of the children and to that extent there were orders which both the wife and the husband sought in which they were ultimately unsuccessful. However, it is clear that the husband was far less successful that the wife.

    (g) Such other matters as the court considers relevant

18. Lindenmayer J in Telfer and Telfer (1996) FLC 92-688 at p 83,139 referred to s 117 (2A)(g) as the “all-encompassing paragraph” and noted that the other sub paragraphs of s 117(2A) should not limit the discretion which may otherwise be applicable under this sub heading.

19. On 13 January 2006, the husband sought orders that the children’s time with the wife be limited. An order to that effect was made by a Judicial Registrar on 1 February 2006. The wife submitted that the husband’s pursuit of those orders was incompatible with his evidence given on 17 July 2007 that he had reached the view some 18 months before. In evidence, he said that the children “have no problems with their mother and they are not in danger of their mother, not at all”[3]. The wife’s position therefore is that the husband should pay all of, if not contribute on a party/ party basis to, the costs associated with her application for a review of the judicial registrar’s orders.

    [3] Page 68 transcript on 17 July 2007

20. The wife also seeks costs in respect of the husband’s application filed 22 February 2006 in which he sought that the contact between the wife and the children cease.

1. I have already dealt with the general concept above about the way in which the husband conducted the interlocutory hearing and his focus at the time just referred to, compared with his ultimate position at trial. As I have said, that conduct justified a departure from the principle rule that each party bear their own costs but I find that it also entitles the wife to her costs for those interlocutory hearings.

Indemnity Costs

1. It is submitted by the wife that the court should make an order for indemnity costs against the husband in relation to the preparation and conduct of the final hearing before me including for the interim application by the husband that I heard.

2. An indemnity costs order is not confined to any predetermined category of cases however there should be some reason to believe that the usual party/party costs would not be appropriate in the particular case. This, in the past, has involved something unusual in the circumstances of the case.

3. The Full Court in Yunghans & Ors v Yunghans & Ors and Yunghans (2000) FLC 93-029 said that the categories of cases where an indemnity costs order might be appropriate are not closed. However a court should not depart lightly from ordering costs on a party/party basis and the circumstances should be of an exceptional kind. See for example Kohan v Kohan (1993) FLC 92-340.

4. Sheppard J in Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; (1993) 28 IPR 561 in succinctly summarising the applicable principles noted that there should be some ‘special or unusual feature in the case’ to justify the court departing from ordinary practice.

5. In my view there are two unusual, exceptional and special features of this case that do warrant an order for indemnity costs. The first is that the provisions of s 117AB apply. This is not simply a case in which I have generally believed one party over the other on the basis of the balance of probabilities. I have found that the husband lied. The second issue which is of serious concern is that the husband chose to conduct his case through the interlocutory process indicating to the court his concerns about the children only to then alter that position at trial. That raises the question of what his real intentions were throughout and in particular the comment I earlier made about being child-focussed. Had his mind been child-focussed rather than on his own dissatisfaction with the wife, the trial may have been substantially shorter, less costly and without the anguish that it generated. The husband must be seen to be entirely responsible for that.

6. Accordingly, the features of this case are exceptional and are of a kind that warrants departure from ordinary practice.

7. The evidence of the amount of costs opined by the wife’s legal practitioner Mr Conley for the final hearing and the interim hearing relating to overseas travel was that the fees of counsel were $136,950 and solicitor costs and disbursements amounted to $145,950. That amounts almost to $283,000 which is not at all surprising in the circumstances. Having regard to the number of days of the hearing, the size of the relevant affidavit material and the inference that I can draw from the amount of work that had to be done by the solicitor, I find that Mr Conley’s estimate is reasonably likely to be accurate. In addition, counsel’s fees seem to be reasonable particularly having accepted that it was reasonable and appropriate for the wife to have senior counsel appear for her.

8. However, account must also be taken of the fact that the wife had a case to pursue as well as to answer. It was important that the court have her material to determine her own application. That in itself, required the professional attendances and work of the solicitor and counsel. Even allowing for the difficulties created by the husband’s conduct of the proceedings, I still consider that it would have been reasonable for the wife to have the benefit of senior counsel. That is particularly so where there was a parallel financial proceeding which I understand to have considerable complexity. Whilst distinctly different proceedings, there are many overlapping issues.

9. The same considerations apply to the interim matters about which I have expressed concern.

10. I have already referred to the fact that it is not my intention to punish the husband by an order for costs but rather compensate the wife for the fact that she had to proceed on the way the husband was conducting his case. In his submissions, Senior Counsel for the wife referred to Latoudis v Casey (1990) 170 CLR 534 and Ohn v Walton (1995) 36 NSWLR 77. I have taken those cases into consideration.

11. Not only is the general question of costs a discretionary one but so is the quantum. In my view, the husband’s conduct of these proceedings extended the hearing and the legal preparation work extensively. Whilst the determination of that extent is arbitrary, I am confident in saying that over half of the wife’s costs were incurred as a result of the husband’s conduct of the case. Accordingly, of the $283,000, I propose to order that the husband make a contribution of approximately 60% of the wife’s estimated costs and I round that out to $170,000. In my view that is a just amount given the circumstances of the case and the particular instances identified under the s 117(2A) factors.

Costs of the Independent Children’s Lawyer

1. The wife seeks that the outstanding proportion of the Independent Children’s Lawyers costs payable by her should be paid in full by the husband. As I understand the position of the Independent Children’s Lawyer, the total costs were $31,864.53. It has always been the agreement of the parties that they would pay the costs of the Independent Children’s Lawyer. The question has always been in what proportion those costs should be shared. Each party has apparently paid some payments and the total amount now sought from them is $24,059.05.

2. Section 117(3) gives the court the power to order the costs of the Independent Children’s Lawyer be paid by the parties in such proportion as it considers just.

3. In this case, given the conduct of the husband already referred to above, in raising issues which were ultimately unsuccessful and pursuing the lines of argument concerning the wife’s capacity to parent, all of which required the Independent Children’s Lawyer to spent extensive and unnecessary time and effort on the case, it is just that the husband pay a much greater amount of the costs than the wife.

4. In the exercise of my discretion, I propose to order that the husband pay approximately 70% of the unpaid costs of the Independent Children’s Lawyer. Because a percentage order may give rise to uncertainty and argument, I propose to fix the amount payable by the wife at $7,200 and for the husband to pay what is otherwise the balance.

I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  7 May 2008