Krach & Krach (No 2) - [2009] FamCA 886

FAMILY COURT OF AUSTRALIA

KRACH & KRACH (NO. 2)

[2009] FamCA 886

FAMILY LAW – COSTS – costs order against unsuccessful litigant in child-related proceeding

Family Law Act 1975 (Cth) ss 117AB, 117(2A)
Family Law Rules 2004 (Cth) r 19.18(1)

Brown & Brown (1998) FLC 92-822
D & D [2005] FamCA 356
In the Marriage of Kohn (1977) 30 FLR 175
Krach & Krach [2009] FamCA 507
LAC and TRF and LKL [2005] Fam CA 158
Re Dellow's Will Trusts, Lloyd's Bank Ltd v Institute of Cancer Research (1964) 1 All ER 771

APPLICANT:

Mr Krach

RESPONDENT:

Ms Krach

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER:

MLC

2897

2007

DATE DELIVERED:

16 September 2009

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

BENNETT J

HEARING DATE:

Chambers

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr B KIERNAN

SOLICITOR FOR THE APPLICANT:

HALL & WILCOX

COUNSEL FOR THE RESPONDENT:

SOLICITOR FOR THE RESPONDENT:

IN PERSON

COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER:

Mr J WILLIAMS

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER:

ROBERT HALLIDAY & ASSOCIATES

Orders

IT IS ORDERED:

That on or before 16 November 2009, the mother pay $45,000 (forty-five thousand dollars), being part of the father’s costs of and incidental to the parenting proceedings such payment to be made as follows;-
a)the first $41,500 (forty one thousand, five hundred dollars) to the father’s solicitors on the record for the benefit of the father;
b)the sum of $3,500 (three thousand , five hundred dollars) to the independent children’s lawyer on behalf of the father.
That the mother and the father each pay to the independent children’s lawyer the sum of $5,000 (five thousand dollars), being part of the costs of the independent children’s lawyer for the completed parenting proceedings, as follows:-
a)as to the mother, on or before 16 November 2009;
b)as to the father, the sum of $3,500 (three thousand, five hundred dollars) , such payment to be made by the mother pursuant to paragraph 1(b) of this order, AND THE COURT NOTES that the father has already paid the sum of $1,500 (one thousand, five hundred dollars).
Having regard to the operation of paragraphs 1(b) and 2(a) of this Order, the amount owing by the mother to the independent children’s lawyer, by way of costs, is $8,500 (eight thousand, five hundred dollars) and that is the amount for which the independent children’s lawyer is hereby entitled to enforce.
That the mother be responsible for the witness costs of Ms P which are already fixed in the sum of $650.
That the costs applications are otherwise dismissed.

IT IS DIRECTED:

That Registrar Mestrovic send a sealed copy of this Order to Ms P at her professional address.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 2897 of 2007

MR KRACH

Applicant

And

MS KRACH

Respondent

REASONS FOR JUDGMENT

Introduction

Over 22 days in February to May 2009 I heard parenting proceedings. The mother was self represented. Mr Kiernan of counsel appeared on behalf of the applicant father and Mr Williams of counsel appeared for the independent children’s lawyer. On 5 June 2009 I made orders and delivered reasons for judgment[1]. My orders included:-
25. That any party wishing to make an application as to costs, including the reserved costs of Ms [P], file and serve a written submission to that effect by not later than 27 June 2009 and then await directions to issue from my Chambers as to the time in which further documentation and responses are required to be filed and served.
[1] [2009] Fam CA 507
Ms P is a psychologist upon whose evidence the mother relied and who the other parties required to attend court for cross examination on 6 and 7 May 2009. Pursuant to an Order made in the course of the trial, on 7 May 2009 the witness expenses of Ms P were fixed at $650 and liability for payment of those costs was reserved.
On 26 June 2009 the independent children’s lawyer, at the behest of Victoria Legal Aid, filed a submission in writing seeking an unspecified amount of costs against each parent.
On 29 June 2009 the father filed a submission in writing seeking that all of his costs of the proceedings be paid for by the mother on a party/party basis. I accept that the father’s submission was filed on the first working day after the due date and I deem it to have been filed within time. Neither of the other parties have objected to late service.
On 9 July 2009 a hearing was conducted by telephone link. The father was represented by his solicitor. The mother appeared on her own behalf and Mr Halliday appeared as independent children’s lawyer. I made the following orders:-
1.   That within fourteen (14) days the mother and father each file and serve a financial statement.
2.   That by not later than 4.00 p.m. on 3 August 2009:-
a)the mother file and serve any submissions in response to the applications of the independent children’s lawyer and the father that she pay costs; and
b)the father file and serve any submissions in response to the application of the independent children’s lawyer that the father pay costs.
3.   That by not later than 13 August 2009 the applicants for costs file and serve any further submissions in reply.
4.   That the costs applications be determined on the written submissions of the parties.
The mother’s financial statement sworn 22 July 2009 was filed on 23 July 2009.
The father’s financial statement sworn 21 July 2009 and his written submissions in response to the costs application of the independent children’s lawyer were filed on 27 July 2009.
The mother’s submissions in relation to costs, in which she resists the costs sought by the father and the independent children’s lawyer, were filed on 13 August 2003. A letter dated 3 August 2009 was sent by the mother to the court. This letter contained an apology that the mother’s submissions in response, which were already overdue, would, she hoped, be received by the Court within a week.
The father’s undated submission in reply to the mother’s submissions in response were filed on 26 August 2009.
With the exception of the independent children’s lawyer, each party has been late in filing documents in the costs application. On 28 August 2009 I ordered that any party who sought to object to the admissions of documents filed late do so by application filed prior to 12 noon on 3 September 2009. No party has taken the objection.
I have read and have regard to all of the documents described above. In assessing the evidence, I apply the balance of probabilities as the standard of proof.
As was observed by Carmody J in D & D [2005] FamCA 356, the more serious the allegation, the more cogent the evidence required to overcome the unlikelihood of what is alleged and thus to prove it. [2] The balance of probability standard takes account of the instinctive judicial feeling that even in civil proceedings a court should be surer before finding serious allegations proved than when deciding less serious or trivial matters. There are degrees of probability but, when the law talks about "the balance of probabilities", it envisages a degree of probability to the point that a court can be satisfied that the alleged fact in issue is more likely than not. There has to be something more than mere conjecture or suspicion. I agree with those observations.
[2] Re Dellow's Will Trusts, Lloyd's Bank Ltd v Institute of Cancer Research (1964) 1 All ER 771 at 773 per Ungoed-Thomas J.
In these reasons, statements of fact constitute findings of fact.

Liability for costs

Section 117 of the Family Law Act1975 contains the general rule that each party to proceedings under the Act shall bear his or her own costs. The object of the rule is to ensure that spouses are not deterred from bringing or maintaining legitimate applications for fear of incurring an intolerable financial burden if they lose.[3] However, the Court retains discretion to make an order for costs if it is of the opinion there are circumstances that justify that course and it would be just to do so.
[3] In the Marriage of Kohn (1977) 30 FLR 175 at 177.
In considering whether to make an order the Court must have regard to the matters set out in s 117(2A). The weight to be attached to any of the considerations in s 117(2A) is wholly discretionary. Whilst no single factor out-ranks any other, there is nothing to prevent one or other of them from being the sole foundation for a costs order.[4] As Kay J observed in Brown & Brown[5] :
In many cases there will be an outstanding feature . . . that makes an order for costs appropriate, a feature which so dominates the scene that it can outweigh any of the other s 117(2A) considerations.
[4] LAC and TRF and LKL [2005] Fam CA 158 at [41].
[5] (1998) FLC 92-822 at 85,347.

Father’s application for costs against the mother

The father contends that the factors described in section 117(2A)(a), (c), (d), (e), (f) and (g) are relevant to his application for costs. I will deal with each of them in turn.
(a) the financial circumstances of each of the parties to the proceedings;
The mother does not work outside the home and is a part time student. The mother is reliant on a social security pension. She owns the house in which she lives, subject to a mortgage to the Commonwealth Bank. The mother deposes to the value of the property at $252,000[6] and the mortgage securing an indebtedness of $41,683[7] resulting in a net equity of approximately $210,000. The mother submits that she is paying less by way of repayments than are due under the mortgage agreement and that this is because she has no other assets of significance.
[6] Paragraph 35 of the mother’s financial statement sworn 22 July 2009.
[7] Paragraph 46 of the mother’s financial statement sworn 22 July 2009.
The father is employed as a truck driver by a business operated and owned by his wife. He deposes to a personal income of $570 per week[8] and that his wife, with whom he can share expenses, receives $799 per week.[9] The father does not have any property of significance. His superannuation interests amount to $44,000 but there is no evidence to suggest that he has met a condition of release. He and his wife rent a house at a cost of $325 per week.
[8] Paragraph 9 of the father’s financial statement sworn 21 July 2009.
[9] Paragraphs 17 and 18 of the father’s financial statement sworn 21 July 2009
The father deposes to debts to credit card providers and his parents-in-law in excess of $21,000 for the costs of these legal proceedings. At the trial the father’s wife, Mrs K Krach, gave evidence that she had taken a $20,000 unsecured business loan with which to pay part of the costs of these proceedings.
The father now has the full time care and financial support of the children, L and S. The mother pays child support of approximately $7 per week.
The father is in a superior income position to that of the mother but his position is modest. The mother’s capital position is stronger than the father’s capital position but is nonetheless modest. She submits that her capital was acquired, at least as to part, by using an inheritance from her late father’s estate to acquire her residence. The mother submits that she will have to sell her residence as a consequence of any order for costs being made against her and consequently rent accommodation. I take those matters into account.
(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;
The father ran his case as expeditiously as possible. The father raised considerations as to costs on the first and second day of the hearing, 19 and 20 February 2009. On 3 March 2009, the eighth day of the trial, the father filed an application seeking an order restraining the mother from dealing with her interest in her residence. It was submitted that this was a security for costs measure. I did not accede to the application. However, I accept that the issue of costs and, in particular, the mother’s potential liability for the costs of the father, was a live issue throughout the trial. On 27 April 2009, day 11 of the trial, the father filed an amended application initiating proceedings in which he sought, inter alia, that the mother pay the father’s costs.
The mother attempted to be organised but did not always succeed. She slowed proceedings down to a very considerable degree by asking questions which were not relevant and, when disallowed, essentially asking the same questions again. She concentrated on irrelevancies, such as whether she or the father had “gotten over” their relationship and did not follow directions or rulings to the effect that certain questions were irrelevant or not proper and ought not be pursued.
In terms of relevant disclosure, it is submitted by the father that the mother failed to disclose relevant and pertinent facts to Dr K. That is not correct. Dr K did not assess the mother.
I found that the mother had purposefully concealed relevant facts from Dr D, who was a single expert psychiatrist retained in the proceedings to assess the mother’s mental health. I found that the mother did so in the hope that Dr D would prepare a more favourable report of the mother than would have been the case if he had known all of the mother’s history. The independent children’s lawyer provided Dr D with material of which he had been unaware prior to Dr D being called to give evidence. Dr D was cross examined at far more length than would have been the case if many facts did not need to be put to him.
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;
I accept that the father’s initial motivation to institute proceedings was the refusal of the mother to comply with final parenting orders which were made, by consent, in October 2004. I have found that the mother’s refusal to abide orders of the court and her attempts to erode the father’s involvement in the lives of their daughters was not justified.
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
I find that the mother was wholly unsuccessful in the proceedings.
I find that the father was wholly successful in the proceedings.
This factor is particularly significant and provides strong justification for a costs order to be made in favour of the father.
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer;
I accept the submissions of the father to the effect that, from the commencement of the final hearing, the basis upon which the father was prepared to resolve the proceedings was articulated and known to the mother. A written record of the basis upon which the father and independent children’s lawyer proposed to resolve the proceedings was published between the parties on the second day of the hearing. It was an outcome much more favourable to the mother than the final determination because it would have enabled the children to remain primarily in her care.
(g) such other matters as the court considers relevant.
Additionally, the father relies on section 117AB which provides that, if the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings, the court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.
At trial, I did not accept the mother’s evidence is very many respects. However, to say that the mother knowingly gave false evidence is another matter. There is a punitive element to section 117AB. For section 117AB to be invoked, there needs to be a degree of culpability on the part of the party from whom costs are sought which I am not satisfied the mother possesses. There are several explanations why the mother gave evidence including evidence which is far fetched and fanciful and one such explanation may be that the mother’s behaviours are driven by false delusional beliefs. In any event, I will be ordering the mother to pay some of the father’s costs.
All factors taken cumulatively provide strong justification for a order for costs against the mother for the benefit of the father.
As to quantum of costs, Rule 19.18(1) provides:-
(1) The court may order that a party is entitled to costs:
(a) of a specific amount;
(b) as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c) to be calculated in accordance with the method stated in the order; or
(d) for part of the case, or part of an amount, assessed in accordance with Schedule 3.
The father seeks that the whole of his costs be paid.
Appendix 6 to the father’s submissions discloses counsel’s fees of $56,930 including trial preparation and preparation of the costs submissions. This is a matter which required preparation and it is appropriate to include the cost of making the application for costs.
I have perused the copy back sheet endorsed by counsel for the father. Counsel’s fees appear to be calculated at $1,980 per day. The itemised scale of costs in the Rules of Court puts the hourly rate of preparation between $221.55 to $315.90 per hour and the daily hearing fee at between $1,565.60 and $2,301.25. Mr Kiernan’s fees are well within the scale.
Appendix 6 also shows significant fees for the father’s lawyer. Apart from the preparation of documents and running of the matter, an instructing solicitor was frequently in attendance during the trial. This was desirable having regard to the fact that there was no funding for the independent children’s lawyer to attend otherwise than through counsel.
I am satisfied that the circumstances of the case justify the mother making a contribution to the father’s costs. That is, that she pay part, but not all, of his costs. Having regard to the relevant factors, I consider that the mother ought to pay the sum of $45,000 towards the father’s costs of these proceedings.
I am not prepared to accede to the father’s application that the costs be assessed. I do not consider it is appropriate to further embroil the parents in additional appearances and assessments in relation to fixing and disputing costs in accordance with the Rules. I take into account the main purpose of the Rules being to ensure that each case is resolved in a just and timely manner at a cost to the parties and to the court that is reasonable in the circumstances of the case.[10] I take into account that the Rules provide a scheme for assessment of costs and that, if that assessment process was to be followed, the parties and the Court would have certainty in relation to the total amount of the father’s costs. However, I would still order that only a proportion of those costs be paid. I am satisfied that any further sum that the father may recover if his costs were assessed and then awarded on a proportional basis, would be insufficient to warrant the extra time, trouble and expense of the process.
[10] Rule 1.04
In essence, I favour finality over precision and am satisfied that $45,000 is the appropriate amount of costs recoverable by the father against the mother.

The application of the independent children’s lawyer against the mother and the father

The independent children’s lawyer, Mr Robert Halliday, makes an application against both parents for a proportion of his costs.

The professional fees and disbursements of the independent children’s lawyer are met by Victoria Legal Aid (“VLA”). Any amount recoverable by him against either of the parties will reduce the amount which VLA pays to Mr Halliday for his representation of the interests of the children in the proceedings.
The costs of the independent children’s lawyer are not quantified but must include counsel’s fees for 22 days of the trial. Mr Halliday did attend Court to instruct for some portion of the trial but I understand that he was not funded to do so.
With the exception of s 117(2A)(a), the financial situation of the parties to the costs dispute, all of the factors discussed above which justified an order being made against the mother in favour of the father also justify an order being made against the mother in favour of the independent children’s lawyer. Furthermore, I commend Mr Halliday for the manner in which he and, through him, Mr Williams of counsel, conducted the proceedings. They did all that an independent children’s lawyer is expected to do and in a manner which did not prolong the trial unnecessarily or incur unnecessary expense.
In relation to 117(2A)(a) and the fact that the independent children’s lawyer is in receipt of assistance from VLA[11], I accept that VLA has finite resources. I accept that monies payable to and on behalf of Mr Halliday for his services and disbursements including counsel’s fees will reduce the funds otherwise available for the representation of other children who are the subject of family law proceedings in Victoria. The cap which applies to most family law cases does not apply to this case because of the protocols attaching to Magellan cases so the exposure of VLA to costs in this case is greater than for other cases which are capped.
[11] 117(2A)(b).
The fact that the independent children’s lawyer is funded by VLA is a factor which justifies an order for costs being made in his favour. I have regard to the mother’s submissions that she should not be required to pay costs because of financial hardship but, as with the father’s application, I do not accept that submission.
Having regard to all of the relevant factors, I am satisfied that the mother should pay part of the costs of the independent children’s lawyer albeit a very modest part. For the reasons expressed above, and my preference for finality, I will fix the contribution by the mother to the costs of the independent children’s lawyer at $5,000.
In relation to the father, who was wholly successful in the proceedings, there is no suggestion that his conduct made the proceedings any more onerous for the independent children’s lawyer. However, I am persuaded by the fact that the fees and disbursements payable to Mr Halliday will diminish funds available to other litigants who are eligible for legal assistance. Therefore the father should also make a modest contribution to the costs of the independent children’s lawyer, which I fix at $5,000.
Of the $5,000 payable by the father, $1,500 has already been paid on 30 July 2008.
I do not wish to impose a further cost penalty on the father and will therefore provide that the balance of $3,500 is to be paid from the costs recoverable by the father from the mother. In this way, the mother is liable to pay $8,500 in costs to VLA and she may reimburse herself for the father’s portion from costs payable by her to the father.

Witness Expenses

Ms P was the mother’s witness. She was required for cross-examination and found to be an unreliable witness. The mother will be responsible for and pay her expenses.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett

Associate:

Date: 16 September 2009