LASIC & TRUSTEE FOR THE BANKRUPT ESTATE OF N LASIC
[2010] FamCAFC 240
•3 December 2010
FAMILY COURT OF AUSTRALIA
| LASIC & TRUSTEE FOR THE BANKRUPT ESTATE OF N LASIC | [2010] FamCAFC 240 |
| FAMILY LAW - APPEAL – CROSS-APPEAL – Cross-appeal on costs order arising from proceedings under s 79A of the Family Law Act 1975 (Cth) – Where threshold findings for the purpose of s 79A(1) of the Family Law Act 1975 (Cth) conceded by wife – Concession basis for costs order made by trial Judge under s 117 of the Family Law Act 1975 (Cth) – No appealable error established. FAMILY LAW - APPEAL – COSTS – Wife wholly unsuccessful – Wife to pay trustee’s costs of and incidental to the preparation of written submissions. |
| Bankruptcy Act1966 (Cth) Family Law Act 1975 (Cth), s79A, s117 Family Law Rules 2004 (Cth). |
| Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 Penfold v Penfold (1980) 144 CLR 311 |
| CROSS-APPELLANT: | Ms Lasic |
| CROSS-RESPONDENT: | Trustee for the Bankrupt Estate of N Lasic |
| INTERVENOR: | Mr M |
| FILE NUMBER: | PAF | 7534 | of | 1997 |
| APPEAL NUMBER: | EA | 114 | of | 2007 |
| DATE DELIVERED: | 3 December 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Boland, Thackray & Ryan JJ |
| HEARING DATE: | 4 September 2008 and by way of written submissions filed 22 May 2009, 23 June 2009 and 7 August 2009 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 14 February 2008 |
| LOWER COURT MNC: | [2008] FamCA 80 |
REPRESENTATION
| COUNSEL FOR THE CROSS-APPELLANT: | Mr Sweet |
| SOLICITOR FOR THE CROSS-APPELLANT: | Turner Freeman |
| COUNSEL FOR THE CROSS-RESPONDENT: | Mr McClintock SC with Mr Durston |
| SOLICITOR FOR THE CROSS-RESPONDENT: | HWL Ebsworth Lawyers |
| COUNSEL FOR THE INTERVENOR: | Mr Levy |
| SOLICITOR FOR THE INTERVENOR: | Watts McCray |
Orders
The wife’s cross-appeal against the orders of the Honourable Justice Coleman made 14 February 2008 is dismissed.
The wife pay on a party/party basis the trustee’s costs of and incidental to the preparation of the written submissions ordered by the Full Court on 28 April 2009.
IT IS NOTED that publication of this judgment under the pseudonym Lasic & Trustee for the bankrupt estate of N Lasic is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 114 of 2007
File Number: PAF 7534 of 1997
| Ms Lasic |
Cross-Appellant
And
| Trustee for the Bankrupt Estate of N Lasic |
Cross-Respondent
And
| Mr M |
Intervenor
REASONS FOR JUDGMENT
Introduction
On 28 April 2009 we delivered our reasons in respect of an appeal by the trustee for the bankrupt estate of Mr N Lasic (“the trustee”) against orders made by Coleman J on 5 October 2007. The orders were made in respect of proceedings under s 79A of the Family Law Act 1975 (“the Act”) instituted by the trustee against Ms Lasic (“the wife”). The wife resisted the appeal and, by leave at the hearing before us, filed a cross-appeal. The cross-appeal included an appeal against orders made by Coleman J on 14 February 2008 which provided for the wife to pay the trustee’s costs of the proceedings before him on a solicitor/client basis.
In our reasons of 28 April 2009 we set out a short history of the proceedings before the trial Judge and the issues raised by the appeal and cross-appeal (at paragraphs 3 to 16) and, at paragraph 17, described our intended approach to the issues raised as follows:
17.After we have set out additional background material, reviewed the trial Judge’s reasons, and recorded the grounds of appeal and the cross-appeal, we propose to:
• First, examine the question of the status of the trustee to bring the s 79A proceedings (the jurisdictional question raised by the cross-appeal);
• Second, consider whether the trial Judge could order a payment by the wife to Mr [M] under the Act, and also examine whether s 58 of the Bankruptcy Act precluded the trial Judge making a payment direct to Mr [M];
• Third, consider whether his Honour erred in assessing the spouses’ entitlements, both at the time of the consent orders and at the time of the trial;
• Fourth, consider whether his Honour erred in varying the consent orders, rather than setting them aside;
• Fifth, if we find merit in the appeal, or cross-appeal, consider whether we should re-exercise the discretion;
• Sixth, provide reasons for the decision made at the hearing to grant leave to the wife to rely upon her Notice of Cross-appeal;
• Seventh, consider how we will deal with the wife’s challenge to the costs orders made by his Honour, no appeal books having been prepared for the cross-appeal;
• Eighth, determine the competing applications for costs relating to the appeal and the cross-appeal.
In respect of the wife’s challenge to the costs orders made by Coleman J we noted at paragraph 107:
No appeal book for the cross-appeal was prepared. It was agreed between the parties that the relevant documents could be provided to us. However, as an issue was raised by us about reference to offers of settlement, we did not receive the documents. Accordingly, we propose to defer consideration of ground 4 in the cross-appeal and deal with it by way of written submissions following delivery of these reasons.
At paragraphs 244 and 245 we further stated:
244.It is impossible for us, absent provision of relevant material (by reason of lack of an appeal book), to deal with the cross-appeal insofar as that cross-appeal challenges the trial Judge’s costs orders made on 12 February 2008 [semble 14 February 2008]. We did not have the benefit of the submissions made to the trial Judge or access to any relevant documents, including offers which may have been influential to his Honour’s decision.
245.We propose therefore to give the parties the opportunity to provide any relevant documents, together with written submissions in relation to the challenge to his Honour’s costs orders.
In respect of the appeal and cross-appeal we thus made the following orders:
(1)That the appeal against Orders 1 and 2 of the orders made by the Honourable Justice Coleman on 5 October 2007 is allowed.
(2)That the cross-appeal against Orders 1 and 2 of the orders made by the Honourable Justice Coleman on 5 October 2007 is allowed.
(3)That the appellant’s application be listed for rehearing as soon as practicable before a Judge in the Parramatta Registry other than Coleman J.
(4)That the respondent wife pay the costs of the appellant and the intervener in respect of the appeal as agreed and failing agreement as assessed pursuant to Chapter 19 of the Family Law Rules 2004.
(5)That the cross-appellant file and serve any written submissions on which she seeks to rely in respect of the cross-appeal against Orders 1 and 2 of the orders made by the Honourable Justice Coleman on 14 February 2008 within 21 days of the date of these orders by filing such written submissions with the Appeal Registrar, Eastern Appeal Registry and serving copies of the submissions on the first and second respondent to the cross-appeal.
(6)That the first and second respondent to the cross-appeal file and serve written submissions, if any, on which they seek to rely within a further 21 days of receipt of the cross-appellant’s submissions in respect of the cross-appeal against Orders 1 and 2 of the orders made by the Honourable Justice Coleman on 14 February 2008.
(7)That the cross-appellant file and serve any written submissions in reply on which she seeks to rely within a further 7 days of receipt of the first and second respondent’s submissions.
(8)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
We received submissions from the wife and the trustee filed pursuant to (if not strictly in accordance with the timetable set out in) our orders. The wife filed submissions in respect of the cross-appeal against Coleman J’s orders of 14 February 2008 on 22 May 2009 and the trustee filed submissions in response on 23 June 2009. The wife’s reply was filed on 7 August 2009. In that reply the wife’s counsel indicated that no matter was raised on the wife’s behalf in reply. The intervenor, Mr M, did not file any submissions in respect of the cross-appeal against the costs order.
The trustee’s submissions of 23 June 2009 attached a copy of the wife’s written submissions to the trial Judge on costs dated 22 November 2007. Following correspondence at our direction to the parties’ solicitors from the
Appeal Registrar on 17 September 2009, we received, on 21 September 2009, a copy of the trustee’s written submissions before the trial Judge in relation to costs. Despite the Appeal Registrar requesting we be provided with offers of settlement and any other documents which were before the trial Judge, none have been forthcoming from the wife. Accordingly, we have determined to deliver these reasons on the material which has been supplied to us.
The challenge to the costs orders
The orders of the trial Judge in respect of costs which the wife challenged in her cross-appeal are as follows:
(1)That the respondent wife pay the costs of and incidental to the proceedings of the trustee of the bankrupt estate of the deceased former husband as and from the date of filing of the trustee’s originating application to this Court on a solicitor/client basis as agreed or assessed under the Family Law Rules 2004 (Cth).
(2)That for the purpose of the assessment of costs pursuant to Order 1, Rule 19.18 Family Law Rules 2004 (Cth) does not apply.
Ground of appeal
The relevant challenge to Coleman J’s costs orders of 14 February 2008 is found in ground 4 of the Notice of Cross-Appeal filed by the wife, with our leave, at the hearing of the appeal. Ground 4 provides as follows:
His Honour erred in ascribing the deceitful conduct of the Cross Appellant Wife for the basis of the costs order.
In determining the wife’s challenge to the costs order we will first consider the trial Judge’s reasons, before turning to the submissions of the wife and the trustee.
The trial Judge’s reasons
The trial Judge’s orders as to costs were in respect of an application by the wife that the trustee pay her costs of and incidental to the substantive proceedings before his Honour. The trustee opposed the wife’s application and sought in response that the wife pay his costs. Both parties sought costs on an indemnity basis, or in the alternative, on a party/party basis.
The trial Judge, at paragraph 2 of his reasons, identified the two questions arising for determination as:
(i)Should there be an order for costs in favour of either party; and
(ii)If so, should such costs be awarded on other than a party/party basis?
The trial Judge noted, at paragraph 4, that the wife, in support of her application for costs, placed “substantial reliance” upon the conduct of the substantive proceedings before him by the trustee, asserting that the trustee had “unreasonably delayed” making the application to the Court and “failed to marshal and present adequate evidence in support of the application which he eventually did make”. The trial Judge found that this contention did not advance the wife’s case, and, to the extent that the evidence relied upon by the trustee was deficient, this was reflected in his substantive reasons. The trial Judge noted, at paragraph 6, that “[i]t cannot be successfully suggested … that the trustee was ‘unsuccessful’ in the proceedings.”
The trial Judge also considered the wife’s reliance on offers for settlement made in the proceedings. In relation to this, at paragraph 8, his Honour noted as relevant the wife’s concession in respect of the “preliminary or threshold issue raised in the case pursuant to s 79A of the Act”. In his substantive judgment, the trial Judge recorded at paragraph 6:
At the commencement of the trial counsel for the wife tendered a document entitled “Concession by the Respondent Wife” (Exhibit R1), the terms of which provided:
1. that the inference arising from the circumstances of the making of the Consent Orders on the 2nd April 1998 is that the intent of the Husband and Wife was to avoid possible recovery of any liability that the husband may have had after the said Consent Orders to [Mr M] arising from then current proceedings in the District Court of New South Wales in which the husband and wife were the Second and Third Defendants respectively and;
2. that as a consequence of the failure of the husband and wife to notify [Mr M] of the proposed Consent Orders and their failure to refer to the then pending District Court of New South Wales proceedings in the Application for Consent Orders there was a failure to disclose relevant information and
3. that such circumstances are sufficient to enliven the exercise of the courts [sic] discretion pursuant to s79A of the Act. [Concession by the Respondent Wife, Exhibit R1, paras 1 – 3].
His Honour later explained that the subsequent focus of the substantive proceedings was on the question of whether an order should be made under s 79A and if so, what order should be made. His Honour found that:
9.The proceedings having been necessitated by the wife’s conduct, albeit in concert with the now deceased husband, prima facie, from the commencement of the proceedings on 20 January 2005 to 27 March 2006, there seems little doubt that the wife should be liable for the trustee’s costs, the only question being whether that be on a party/party or other basis.
10.Whilst it may appear simplistic to say so, the proceedings were only commenced because of the deceit which the wife and her now deceased husband visited upon the Court and, more importantly, upon Mr [M] through the consent orders of April 1998.
The trial Judge considered the offer of settlement in the amount of $350,000.00 made by the wife to the trustee, and the counter offer of $820,000.00 made on behalf of the trustee and the submissions of the parties in respect of those offers, and at paragraph 14 concluded:
It is clear that a substantial component of the sum of $350 000 offered on behalf of the wife must have been referrable to the, not inconsiderable costs which the trustee would have reasonably incurred in litigation by March 2006. Whilst this Court is in no position to suggest figures, it is confident that it can infer that the $350 000 inclusive of costs would, in real terms, represent significantly less by way of award than the substantive order which the Court made in 2007. In the Court’s view, the offers of settlement thus do not advance the cause of either party.
At paragraphs 18 and 19 his Honour explained:
As is not in doubt, and the course of the trial of the substantive proceedings would confirm, the concession of 27 March 2006 was little more than a recognition of the almost inevitable outcome of the threshold question and, as a consequence, the making of a substantive award in favour of the trustee.
Given that the concession neither alleviated the need for an exploration of the circumstances surrounding the making of the order nor limited the evidence relevant to the determination of the second limb of the s 79A application, in reality, all that the wife’s concession achieved in a practical sense was to save her potentially damaging cross-examination on credit in relation to the threshold issue. Even without that opportunity, as the Court’s Reasons for Judgment in the substantive proceedings confirm, Counsel for the trustee was able to significantly damage the wife’s credibility. In the Court’s view, the wife’s concession on 27 March 2006 could not properly operate to enhance her claim for costs.
At paragraph 23 the trial Judge found that:
It is appropriate to consider the course the proceedings took in this Court. As suggested earlier, from the date the trustee commenced the proceedings until 27 March 2006 there is no rational basis for concluding other than that the wife should pay the trustee’s costs, on whatever basis the Court considers appropriate.
The trial Judge considered (at paragraphs 24 to 28) whether the wife’s concession or offers of settlement would have the effect of reducing the wife’s potential liability to pay the trustee’s costs. His Honour found that the wife’s concession “constituted little more than an accurate anticipation of the almost inevitable outcome of the threshold question” and thus did not consider that the concession should reduce the wife’s potential liability as to costs. In respect of the offer of settlement the trial Judge found that “both the form of the offer and the reality that, by whatever amount, the offer can be seen as representing less in real terms than the Court’s final order represented” and thus the wife “ought not be able to thereby improve her position with respect to the trustee’s claim for costs”.
The trial Judge concluded at paragraph 28 of his reasons:
The Court is of the opinion that the wife should pay the trustee’s costs of and incidental to the proceedings from the date of commencement of proceedings on 20 January 2005 up to and including the final orders made by the Court in 2007. No matter how extensively the issue is discussed, the reality of how this case came to happen remains the dominant and decisive consideration in relation to the competing claims for costs.
His Honour then went on to consider the basis on which the costs order should be made, noting the trustee’s submission that costs were justified on an indemnity basis as the case “came about” as a result of the consent orders entered into by the wife for the purpose of defeating the claims of a creditor.
After considering the relevant case law, the trial Judge found, at paragraph 34:
In the circumstances of this case, despite the deceitful conduct of the wife bringing about the proceedings, the Court does not consider indemnity costs to be appropriate. The Court has not seen any costs agreement which would form the basis of the calculation of indemnity costs were they to be awarded. Such evidence as the Court heard at trial in relation to the circumstances in which a costs agreement was apparently entered into and some of its terms would strongly disincline the Court to make any order which could result in costs being determined in accordance with such agreement, with or without the intervention of a taxing officer. However it is generally accepted that a party to litigation reasonably incurs costs over and above those covered by awarded party/party costs. In the circumstances of this case, the trustee and his legal advisors, who have acted in good faith in difficult circumstances, are likely to go unrewarded for their efforts if only party and party costs are awarded. In these circumstances, consideration of r 19.19 Family Law Rules 2004 (Cth) (“the Rules”) is appropriate.
The trial Judge found that in the “uncommon” circumstances of the case, the trustee was entitled to costs on a solicitor and client basis (with the further order that Rule 19.18 of the Family Law Rules 2004 (“the rules”) not apply). At paragraph 37 of his reasons, his Honour concluded:
As noted at the commencement of these reasons, the trustee did not seek costs on a solicitor/client basis. Nor did the wife. The order proposed could be said to represent an outcome neither party sought. Nor was such outcome raised as a possibility which those representing the wife could address. In theory that may appear to be the case, but with respect to her advisers, no more could have been advanced on the wife’s behalf in opposition to a costs order being made against her, on whatever basis it might be. Significantly, the liability of the wife pursuant to the proposed order will be less than would have been the case had the Court confined itself to the competing positions emerging from the submission of their Counsel.
The wife’s submissions on the cross-appeal in respect of costs
The written submissions of counsel for the wife in respect of the cross-appeal against the orders of 14 February 2008 were filed on 22 May 2009. In those submissions, at paragraph 15, counsel for the wife noted that no challenge is made to his Honour’s conclusion that the offers of settlement did “not advance the cause of either party on the question of costs”.
Counsel for the wife referred to a number of passages from the trial Judge’s costs judgment and submitted that his Honour found:
(a)That the Wife’s deceased former husband was guilty of tortious misconduct in the early 1990s.
(b)That the deceased husband was involved in deceitful conduct visited upon the Court and upon Mr [M] through the Consent Orders of 1998.
(c)The Wife had participated in “deceit” which she visited upon the Court and upon Mr [M] through the Consent Orders of 1998. (wife’s submissions, p 7, paragraph 23, original emphasis)
Counsel for the wife further submitted that, in concluding it was appropriate to make an order for costs, the trial Judge failed to take into account that the husband, when he was alive, participated in conduct identical to that of the wife, and that that it was the husband’s “tortious conduct that precipitated the deceit” by the husband and wife in entering into the consent orders. (wife’s submissions, p 7, paragraph 25)
It was also submitted, in paragraph 26 of the written submissions on behalf of the wife, that the trial Judge failed to “go on to consider the provisions of s. 117(2A)”. It is asserted that had the trial Judge considered s 117(2A)(g) of the Act, it would have been open to his Honour to consider that the conduct of the husband was “relevant” and thus to consider in the circumstances whether it was appropriate for the wife “to bear the entire costs of the other parties to the proceedings”. (wife’s submissions, pp 7-8, paragraph 27, original emphasis)
It was submitted that the trustee “cannot escape from the ramifications of the behaviour that the husband clearly participated in and the effect of his tortious conduct”. Counsel for the wife submitted that having regard to the conduct of the husband “it cannot be said that the ‘fault’ rested solely with the Wife”. Thus it was asserted that the trial Judge erred in ordering the wife “to carry the entire burden of the costs” and as such there was a failure in the exercise of his Honour’s discretion. (wife’s submissions, p 8, paragraphs 28-32, original emphasis)
In the alternative, counsel for the wife submitted “the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred” being that the wife was ordered to bear the costs of all parties “yet her culpability in the deceit was equivalent to, if not less, than that exercise by the husband, whose bankrupt estate … bore none of the burden” of the costs order. (wife’s submissions , p 9, paragraphs 33-34)
The trustee’s submissions
Counsel for the trustee submitted that the cross-appeal is meritless and that it should be dismissed with costs on an indemnity basis. In support of this submission counsel for the trustee relied on:
·an assertion that the reasoning of the submission on behalf of the wife was flawed;
·the submissions relied upon the wife before the trial Judge; and
·a submission that there are strong policy reasons why the order against the wife was appropriate. (trustee’s submissions, p 1)
In respect of the submissions of the wife, counsel for the trustee acknowledged that it was “common ground that the husband and the wife engaged in tortious conduct”. In respect of the submissions on behalf of the wife that the trustee is “fixed” with the husband’s fraud, the trustee submitted that while it is a general principle of bankruptcy that a trustee “may ‘stand in the shoes of the bankrupt’” that this “is not a paramount principle”. Counsel for the trustee further submitted that a perhaps more important principle is the “duty of the trustee to act in the interests of creditors” which in this case, it is asserted, required the trustee to bring the s 79A application. (trustee’s submissions, p 1)
The written submissions on behalf of the trustee further asserted that the submission of counsel for the wife that “the Wife is less guilty than the [husband] seem[s] difficult to reconcile with the fact that the fruits of the fraud were to give her all the assets” and that generally the party to a fraud that obtains all the benefits is the “most guilty”. (trustee’s submissions, p 2)
In relation to the wife’s submissions before the trial Judge, counsel for the trustee asserted that such submissions were inconsistent with the wife’s submissions in the cross-appeal. Counsel for the trustee asserted on page 2 of his written submissions that:
The submissions below also make a number of concessions with regard to s117 (2) and as such there can be no complaint that His Honour only addressed those factors that were raised for decision.
It was also asserted that the wife made a “forensic decision” to apply for costs and not to address the Court in the issue of “why she should not bear costs”.
As noted above, counsel for the trustee also submitted that there are strong policy reasons why the wife’s appeal against the costs order should be dismissed. In relation to this issue we set out the relevant submission on behalf of the trustee in full:
As submitted above, the Wife used the Family Court as a tool in her fraud. No court should countenance such behaviour. No court should fail to discourage such behaviour in the strongest possible terms and no court should leave an innocent party out of pocket in rectifying such a fraud.
Section 109 of the Bankruptcy Act provides the statutory order of payments. It is not discretionary. The only discretion is found in subsection 10 where a court [not the trustee] can order, when the relevant factors are enlivened, that one creditor receives a greater dividend than other creditors. There is no discretion to change the order of payments.
Paragraph 13 of His Honour’s judgment on costs sets out part of the Trustee’s submissions below. It was always open and remains open for the Wife to rectify the situation brought about by her fraud. Instead even with the Cross-Appeal, the Wife seeks to continue to evade the full costs consequences of her fraud. (trustee’s submissions, p 2)
relevant law
Section 117(1) of the Act provides that subject to subsection (2) (and other provisions of the Act which are not relevant to the cross-appeal) each party to proceedings under the Act shall bear his or her own costs.
Sections 117(2) and (2A) provide as follows:
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
The reasoning of the majority of the High Court in Penfold v Penfold (1980) 144 CLR 311 is relevant to this appeal. At 315 – 316 Stephen, Mason, Aicken and Wilson JJ stated:
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 sub-section is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (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.
Sub-section (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. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in “a clear case”.
Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs. (footnote omitted)
How the matters in s 117(2A) may be considered, and the weight afforded to them, is discussed by the Full Court in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:
… The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subsection (2A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
Discussion
Before commencing our discussion of the submissions it is important that we refer to the somewhat unusual circumstances of us dealing with this part of the cross-appeal after we have delivered our reasons in respect of the substantive appeal by the trustee.
We allowed the trustee’s appeal against the trial Judge’s orders essentially on two bases. First, because his Honour ordered, contrary to the provisions of the Bankruptcy Act1966 (Cth), a payment direct to a creditor rather than to the trustee, and secondly, because we found the trial Judge’s discretion miscarried in respect of the quantum of the sum ordered to be paid by the wife.
Significantly, we rejected the wife’s cross-appeal insofar as it challenged the standing of the trustee to bring the s 79A application on the basis that the trial Judge should have found the trustee was not a “person affected” by the consent orders. Although we found it was not strictly necessary for us to decide whether there was a factual basis for concluding that the trustee was indeed a “person affected”, we nevertheless went on to say at paragraph 166:
For the sake of completeness, however, we would observe that the evidence before the trial Judge provided an ample basis for such a finding. The evidence established that at the time the consent orders were made:
·the District Court proceedings had been instituted against the spouses and their elder son asserting negligence;
·the spouses had received legal advice about the likely prospects of success of the proceedings against the husband;
·facts asserted in the application in support of the consent orders were false;
·no disclosure was made to the Court of the pending litigation;
·no notification was given to Mr [M] of the proposed orders;
·the effect of the making of the orders was to eliminate the husband’s capacity to satisfy any judgment debt obtained by Mr [M], and unjustly enrich the wife.
It is apparent from our substantive reasons that we accepted the trial Judge was correct in finding that the wife, who was a party to the consent orders, participated in providing false information to the Court at the time those orders were made, and the result of the orders was to unjustly enrich the wife. In these circumstances, although an appeal against the trial Judge’s orders has been successful and those orders were set aside and a new trial ordered, the basis on which the appeal succeeded, and the cross-appeal was dismissed, do not impugn the findings of the trial Judge which supported the costs order.
We discern the gravamen of counsel for the wife’s submission to be that it was unjust to visit all of the costs of the proceedings before the trial Judge on the wife when the circumstances which led to the s 79A application involved both the conduct of the wife and her late husband in whose shoes the trustee stood.
We reject that contention as disclosing appealable error by the trial Judge in the broad exercise of discretion available to him in dealing with costs.
It must be remembered that, at the commencement of the hearing before the trial Judge, a proper concession was made by the wife’s then counsel about the circumstances in which the consent orders were made as justifying a finding of miscarriage of justice under s 79A of the Act. There was also no dispute that the wife had, by her deceit, received and retained the whole of the assets of the husband and wife for her sole benefit.
We observe that, in determining if there should be a departure from s 117(1) of the Act, it is not necessary to find more than one factor in s 117(2A) established. We discern no appealable error by the trial Judge in finding there should be a departure from s 117(1) and that the wife should pay the trustee’s costs.
Before concluding these reasons, we note that in his written submissions, at paragraph 6, counsel for the wife submitted:
Rule 19.18 of the Family Law Rules 2004 (Cth) only applies to work done after 1 July 2008 because, prior to that date, costs were assessed pursuant to Schedule 6 of the Family Law Rules 2004 (Cth) which is headed “Costs – rules before 1 July 2008”.
We further note that since the making of the orders by his Honour, r 19.18 has been amended and now 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.
(2) If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.
(3) In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer’s conduct has been improper or unreasonable;
(e) the time properly spent on the case, or in complying with pre-action procedures; and
(f) expenses properly paid or payable.
We accept that these proceedings were based on an amended application filed in 2005, and that if costs were to be assessed on a party/party basis, that Schedule 6 governed the quantum of costs prior to 2008. That schedule, as clearly explained in the notes accompanying it, is subject to the Court’s general powers in Chapter 1 of the rules to over-ride all other provisions of the rules. But in this case it was not necessary for his Honour to make an order based on Chapter 1, as he prescribed costs should be paid, not on a party/party basis, but on a solicitor/client basis (now referred to in rule 19.18 as a “lawyer and client basis”. The explanatory guide to the rules defines “lawyer and client costs” as “the costs payable by a client to the client’s lawyer”. In this case, the costs payable by the trustee to its lawyers is based on work, unless otherwise agreed between the parties, deemed by a Registrar, acting as an assessing officer, as properly chargeable to the client for the conduct of the proceedings (see Quick R and Garnsworthy D, Quick on Costs (Thomson Reuters) at [2.3390]).
As we are satisfied no appealable error has been established, this aspect of the cross-appeal too must be dismissed.
At the time of the hearing of the substantive appeal we dealt with costs incurred in the appeal and those aspects of the cross-appeal which we determined. We think in accordance with our earlier orders, that the wife should additionally be ordered to pay on a party/party basis the costs of and incidental to the trustee’s preparation of the written submissions in respect of this aspect of the costs appeal. In reaching this conclusion we have considered the trustee’s submission that costs should be on an indemnity basis. We are not satisfied the circumstances relevant to this aspect of the cross-appeal warrant costs being awarded on a different basis to that which we found to be appropriate in respect of the substantive appeal.
I certify that the preceding fifty two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 3 December 2010.
Associate:
Date: 3 December 2010
0
1
3