Laurent and Laurent

[2013] FMCAfam 100

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LAURENT & LAURENT [2013] FMCAfam 100

FAMILY LAW – Costs – application for indemnity costs – general principles discussed – application refused – order for costs on party/party basis.

Family Law Act 1975 – s.117
Federal Magistrates Court Rules 2001 – r.21.02
Family Law Rules 2004 – r.19.18

Penfold (1980) 144 CLR 311
PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL (2005) 33 Fam LR 123
Robinson and Higginbotham (1991) 14 Fam LR 559 at 561; FLC 92-209
Pennisi v Pennisi (1997) FLC 92-774
Browne and Green (2002) FLC 93–115
Lenova v Lenova (Costs) (2011) FLC 93-467
Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FamCA 681
Limousin & Limousin(Costs) (2007) FamCA 1178
Fennessy & Gregorian (2009) FamCAFC 44
D & D(Costs 2) (2010) FLC 93-45
Colgate Palmolive Co. & Cussons Proprietary Limited (1993) FCA 536

Applicant: MS LAURENT

Respondent: MR LAURENT

File Number: WOC 233 of 2009

Judgment of: Foster FM

Hearing date: 11 December 2012

Date of Last Submission: 21 December 2012

Delivered at: Sydney

Delivered on: 8 February 2013

REPRESENTATION

Counsel for the Applicant: N/A

Solicitors for the Applicant: John Dawson & Associates

Counsel for the Respondent: N/A

Solicitors for the Respondent: Verekers Lawyers

ORDERS

1. That the respondent husband pay the wife’s costs in the sum of $12,197 within one month from the date of these orders.

2. That in the event that the payment of capital or any part thereof and any interest accrued thereon to the husband pursuant to orders of 10 August 2012 is outstanding then the wife is at liberty to offset this costs order as against her liability to pay the husband.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

WOC 233 of 2009

MS LAURENT

Applicant

And

MR LAURENT

Respondent

REASONS FOR JUDGMENT

Proceedings

1. The application for determination is the wife’s application for costs as sought in her amended application in a case filed on 1 November 2012.

2. The wife seeks orders as follows:

   a)That the respondent husband pay within 14 days to the wife on an indemnity basis the sum of $24,193.45 by way of costs of and incidental to the property settlement proceedings;

   b)That the respondent husband pay within 14 days to the wife the sum of $2,495 by way of costs of and incidental to this application;

   c)That the costs ordered pursuant to a) and b) above be paid by the husband by way of deduction from the sum of $53,423 ordered to be paid by the wife pursuant to Order 1 of 10 August 2012;

   d)That any interest payable on the sum of $53,423 (or the balance thereof) ordered to be paid pursuant to Order 1 of 10 August 2012 be waived provided that payment is made within 14 days of the date of these orders.

3. The husband’s response filed on 6 December 2012 seeks a dismissal of the wife’s application for costs.

4. Reasons for judgement and orders in the property settlement proceedings between the parties were delivered and made on 10 August 2012.  Relevantly in those proceedings the court made the following orders:

   a)That within two months from this date the wife pay to the husband the sum of $53,423;

   b)That currently with the payment provided for in order a) the husband do all things necessary and sign all necessary documents to transfer to the wife his interest in the former matrimonial home situated at [address omitted] New South Wales.

5. Proceedings between the parties were commenced on 19 March 2009 when the wife filed an application relating to parenting issues. Subsequently the respondent filed on 25 March 2009 a response as to parenting and thereafter on 12 August 2010 an amended response seeking orders as to property settlement.

6. The wife on 1 November 2010 filed an amended application seeking orders as to property.  The parties attended a conciliation conference as to property on 15 February 2011.

7. On 4 November 2011 the court made orders by consent as to the issue of parenting. Property proceedings ultimately were listed for hearing on 7 June 2012. Following subsequent written submissions completed by 13 July 2012 the court delivered judgement on 10 August 2012.

8. The husband gives evidence of receiving an offer to settle from the wife on or about 4 April 2010 in which the wife proposed that based upon a property value of $420,000 that the husband receive a payment of $60,000. In that letter the wife asserts the value of the husband’s superannuation to be in the sum of $112,000.

9. The husband asserts that he did not accept the wife’s offer of 4 April 2010 as he was waiting on legal advice.

10. By letter dated 29 April 2010 the wife’s then solicitors made an offer of settlement to the husband’s solicitors. That offer provided for a sale of the subject matrimonial home and an apportionment of the net proceeds of sale as to 78% to the wife and the balance to the husband. In that letter the wife set out the rationale for the offer with the underlying premise being that the wife would receive overall 60% of the asserted pool of assets. The subject letter asserted that as a consequence of the wife’s position on sale the husband would receive the sum of $84,700 and retain his superannuation entitlement then in the sum of $112,000 and [I] issues in the sum of $1,000 making his total entitlement $197,700.

11. The wife asserts that there was no response from the husband in relation to the wife’s offer of settlement under cover of her letter of 29 April 2010.  However the husband’s solicitors by letter dated 30 April 2010 rejected the wife’s offer and sought payment to the husband of $115,000 from the proceeds of sale, that the husband retain his superannuation and that there be a further agreement as to child support as a condition of the property settlement.  One of the underlying premises of the husband’s counter offer was his assertion that the matrimonial home was valued in the sum of $450,000 and that the then value of his superannuation was $97,000.

12. The wife responded by letter dated 7 May 2010 offering the husband the sum of $95,000 from the proceeds of sale of the home. The husband asserts that he did not accept this offer because he found it unreasonable for various reasons.  

13. On 12 May 2010 the husband responded to the wife’s further offer on the basis that he received from the proceeds of sale of the home the sum of $110,000.

14. Subsequent to the conciliation conference on 15 February 2011 the husband by letter dated 24 February 2011 proposed that he received the sum of $100,000 from the proceeds of sale of the home and retain his superannuation.

15. On 23 March 2011 the wife made a further offer as to settlement that provided for the matrimonial home to be sold after December 2012 and that the husband received from the proceeds of sale the sum of $100,000, that the husband retain the superannuation and that the wife receive certain items of personalty set out in that correspondence. Otherwise the wife proposed a payment to the husband of only $48,000 in cash and that the parties enter into a child-support agreement crediting the husband with $52,000 as a lump sum child-support payment for the period from 1 February 2011 to 1 November 2014.

16. By subsequent letter dated 16 May 2011 the wife proposed that the former matrimonial home was sold and from the net proceeds of sale the wife receive 74.4% of the net proceeds, that there be a lump sum payment of child support in the sum of $52,009 and that the balance be paid to the husband. That balance on values as they were at trial would have paid to the husband the sum of about $50,000.

17. Subsequently by letter dated 5 March 2012 the wife made a further offer to the husband to settle the matter.  The underlying premise being that the wife would receive 60% of the overall assets with the husband to receive either 20% of the proceeds of sale of the home or a payment of $80,000 from the wife in consideration of which the husband would transferred his interest in the home to the wife. The husband otherwise would retain his superannuation entitlements intact and about $1,000 in [I] issues. By the time of this offer the husband’s superannuation had increased to just under $133,000.

18. There was no response from the husband in relation to this further offer of settlement from the wife.

19. It is noted that the underlying value of the matrimonial home for the purposes of the wife’s offer of settlement was asserted at $400,000.

20. At trial the matrimonial asset pool was in the sum of $537,466 that comprised the following:

    The matrimonial home   $400,000

    Joint [I] shares                                   $1,776

    Wife’s furniture   $1,500

    Husband’s car   $500

    Husband’s furniture   $1,000

    Husband’s superannuation                 $132,690

The Law

1. Pursuant to section 117 of the Act, each party to the proceedings shall bear his or her own costs. That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2) that provides as follows:

   “If the court is of the opinion that there are circumstances that justify it in so doing, that it may, subject to the further subsections hereof and the applicable rules of court, make such order as to costs as the court considers just.”

2. Although s.117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an Applicant who seeks an order for costs: see Penfold (1980) 144 CLR 311.

3. The matters relevant to determining what order, if any, should be made for costs are set out in subparagraph (2A) of section 117. They relevantly, in these proceedings, relate to the following:

   - The financial circumstances of each of the parties to the proceedings.

   -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.

4. There is nothing to prevent any one factor being the sole determinant for an order for costs: see PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL (2005) 33 Fam LR 123.

Offers of Settlement

1. The public policy reason behind the encouragement of the making of offers of settlement during proceedings is that it is beneficial to both the parties, the Court and the public at large if people are able to resolve their disputes themselves without the need for litigation.

2. As was observed by Nygh J. in Robinson and Higginbotham (1991) 14 Fam LR 559 at 561; FLC 92-209 at 78,417 in relation to offers:

   "… it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition …”

3. In Pennisi v Pennisi (1997) FLC 92-774 84,547, referring to s.117(2A)(f), the Full Court said:

   “The plain words of the paragraph do not limit a Court's attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the Act carry the same consequences as payments into Court in common law matters.

   We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree's knowledge of the parties' financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties' financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.”

4. In Browne and Green (2002) FLC 93–115 the Full Court commented:

   “57. We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given…”

5. In Lenova v Lenova (Costs) (2011) FLC 93-467 the Full Court said [10-12]:

   “10. In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (2) ... each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.

   11. A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation. Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs.

   12. That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.”

Indemnity Costs

1. The application before the Court is, in effect, an application for the husband to pay the wife’s costs on an indemnity basis. 

2. It is usual for the Court to make an order for costs on a party/party basis. 

3. The provisions of the Federal Magistrates Court Rules 2001, Rule 21.02, subparagraph (2), provide that:

   In making an order for costs in a proceeding, the Court may:

   (a)  Set the amount of the costs or;

   (b)  Set the method by which the costs are to be calculated or;

   (c) Refer the costs for taxation under chapter 19 of the Family Law Rules or;

   (d)  Set a time for payment of the costs which may be before the proceeding is concluded.

4. Provisions of the Family Law Rules 2004, particularly Rule 19.18, provides for the method of calculations of costs. In that rule, it provides as follows:

   (1)  The Court may order that a party is entitled to costs:

   (a)  Of a specific amount;

   (b)  As assessed on a particular basis (for example, lawyer and client, party/party or indemnity)

   (c)  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.

5. The rule further provides, in subparagraph (3), that:

   In making an order under sub rule (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.

6. It is clear that the Court has jurisdiction in its discretion to make an order for costs on an indemnity basis and the purpose of such an award is to more fully or even wholly repay to a party all, or at least the majority, of their legal costs and disbursements and charges incurred in the proceedings. 

7. The category of cases in which an award of an indemnity costs order may be appropriate are not closed as the Full Court of the Family Court observed in Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FamCA 681 at [31]:

   “it will suffice it to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the other party, against whom such order is sought.”

8. The Full Court has further considered the question of indemnity costs in Limousin & Limousin (Costs) (2007) FamCA 1178, Fennessy & Gregorian (2009) FamCAFC 44 and D & D(Costs 2) (2010) FLC 93-45.

9. Otherwise, the principles underlying an award for indemnity costs have been classically summarised by Shepherd J in Colgate Palmolive Co. & Cussons Proprietary Limited (1993) FCA 536 where the Court said:

   (a) The ordinary rules that where the Court orders the costs of one party’s litigation to be paid by another party, the order is for payment of those costs on a party/party basis.

   (b) This has been the settled practice for centuries in England.  It is a practice, which is entrenched in Australia.  Either legislation, perhaps in the form of an amendment to rules of Court or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it.

   (c) In consequence of the settled practice which exists, the Court ought not usually make an order for payment of costs on some basis other than party/party costs.  The circumstances of the case must be such as to warrant the Court in departing from the usual practice.”

10. His Honour at p.257 made observations as to some of the circumstances which may warrant the exercise of the discretion to award indemnity costs and they included false and irrelevant allegations of fraud, misconduct that causes a loss of time to the Court and other parties or where the proceedings were commenced or continued for an ulterior motive, the undue prolongation of a case or wilful disregard of known facts and clearly established law.

11. Indemnity costs are appropriate where there has been wilful misconduct in the litigious process or conduct that can be regarded as so reckless as to be misconduct. Otherwise the usual practice of costs on a party/party basis is to be observed.

12. The court is not satisfied that indemnity costs are appropriate or even should be considered in this matter. 

13. As the Court has observed the relevant considerations that arise under section 117 (2A) are the financial circumstances of the parties and issues that flow from the various offers of settlement made during the course of the proceedings.

14. The wife is in receipt of a Centrelink carer’s pension and has the care of the parties’ teenage daughter who has developmental difficulties.

15. The husband is currently studying to be a [omitted] and makes a contribution to the support of the parties to eldest children who are over the age of 18 years. The husband has a modest stipend during the continuation of his studies and other benefits including accommodation available to him from his employer. Historically the husband has had a demonstrated capacity to earn a much more significant income.

1. Save for the distribution of assets as a consequence of the property orders the parties have no other financial resources.

2. Clearly the husband’s capacity to meet an order for costs would come from the capital payment to be paid to him by the wife pursuant to the court orders.

3. The factual circumstances in relation to the various offers and counter offers are set out above. The court is comfortably satisfied that by reason of the various offers made by the wife to settle proceedings in respect of which each and every offer as to a capital payment to the husband without condition exceeded the court’s final orders that this an appropriate circumstance to depart from the usual rule that each party pay their own costs.

4. Property proceedings commenced in August 2010 with the husband filing a response incorporating that cause of action. The wife seeks orders for costs as set out above with those costs being itemised in the wife’s affidavit from October 2010.

5. The wife in written submissions assesses costs in accordance with Schedule 1 of the Federal Magistrates Court Rules to be in the sum of $19,136.

6. The court is not satisfied that such an assessment is justified. 

7. Stage 1 costs claimed at $2,206 included both parenting and property issues.  On that basis Stage 1 costs will be allowed at 50% of the amount claimed in the sum of $1,103.

8. Stage 3 costs being costs up to and including the conciliation conference will be allowed in the amount claimed of $1,617.

9. Subsequent court attendances for 30 November 2011 and 1 March 2012 will be allowed on a mention basis and in the sum of $264 each, in total $528.

10. The applicant seeks costs in relation to the hearing on 4 November 2011.  That date involved preparation for both parenting and property proceedings and as to property there were no outstanding valuation issues to be attended to.  The property proceedings were subsequently adjourned for discreet hearing on 7 June 2012.  The applicant seeks the full-scale costs in relation to preparation for this and the previous hearing date.

11. It is thus appropriate to allow the applicant in relation to both 4 November 2011 and the hearing on 7 June 2012 one sum as provided for in the scale for preparation in the sum of $4,138 and an advocacy loading in relation to that sum of $2,069.

12. Otherwise the applicant seeks an order for costs of attendance on judgment on 10 August 2012 in the sum of $264. That sum is allowed.

13. The applicant seeks the payment of various disbursements and the court is satisfied that the following disbursements should reasonably be allowed:

    Search link land title searches                    $190

    Photocopying    $250

    Superannuation information fee                $103

    GST      $54

    Total:       $597

14. The applicant seeks orders in relation to the present application. The scale fee for a discrete application is the sum of $1,617 in addition to which the court will allow a court attendance fee of $264.

15. Costs as assessed by the court are in the total sum of $12,197.

16. In all the circumstances the court is satisfied that the respondent husband should pay the applicant wife’s costs in that sum.

17. The wife seeks a further order that the costs to be paid by the husband be deducted from the capital sum payable the husband pursuant to orders of 10 August 2012.

18. That capital sum was payable to the husband by no later than 10 October 2012. In the event that that sum has not been paid interest will have accrued by reason of the operation of the rules and the court is not satisfied in all circumstances that interest that the husband would otherwise be entitled to should be waived in the manner sought by the applicant wife.

19. Accordingly the court makes the following orders:

    a)That the respondent husband pay the wife’s costs in the sum of $12,197 within one month from the date of these orders.

    b)That in the event that the payment of capital or any part thereof and any interest accrued thereon to the husband pursuant to orders of 10 August 2012 is outstanding then the wife is at liberty to offset this costs order as against her liability to pay the husband.

I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Foster FM

Associate: 

Date:  8 February 2013