Lepanto and Lepanto - [2019] FamCA 62

FAMILY COURT OF AUSTRALIA

LEPANTO & LEPANTO

[2019] FamCA 62

FAMILY LAW – COSTS – Where husband fails to engage in proceedings – Where necessary for wife to proceed to undefended hearing – Where wife seeks order as to indemnity costs – Where consideration of applicable principles – Where appropriate for an order to be made that the husband pay the wife’s costs in the sum of $30,000.00.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) r 19.08, 19.18

Beach Petroleum NL v Johnson(No 2) (1995) 135 ALR 160
Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536
Collins & Collins (1985) FLC 91-603
D & D (Costs) (No 2) [2010] FamCAFC 64
Fennessy & Gregorian [2009] FamCAFC 44
Greedy & Greedy (1982) FLC 91-250
Harris & Dewell & Harris (Costs) [2018] FamCAFC 180
Hawkins & Roe [2012] FamCAFC 77
Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23
Joyce & Fante [2013] FamCAFC 141
Lepanto & Lepanto [2018] FamCA 791
Limousin & Limousin [2007] FamCA 1178
Luadaka & Luadaka (1998) FLC 92-830
Parke & the Estate of the Late A Parke (2016) FLC 93-748
Penfold v Penfold (1980) 144 CLR 311
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT:

Ms Lepanto

RESPONDENT:

Mr Lepanto

FILE NUMBER:

PAC

398

2016

DATE DELIVERED:

14 February 2019

PLACE DELIVERED:

Parramatta

PLACE HEARD:

Parramatta

JUDGMENT OF:

Foster J

HEARING DATE:

By way of written submissions last received on 2 November 2018

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Ms Orr of Cheryl Orr Family Law

RESPONDENT – SELF-REPRESENTED LITIGANT:

No Appearance

Orders

That the husband within one month from this date pay to the wife or as she may otherwise direct the husband in writing, her costs of and incidental to these proceedings in the sum of $30,000.00.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lepanto & Lepanto has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 398 of 2016

Ms Lepanto

Applicant

And

Mr Lepanto

Respondent

REASONS FOR JUDGMENT

The application for determination is the wife’s application for costs arising from final property proceedings that proceeded to an undefended hearing by reason of the husband’s failure to engage in the proceedings.
Final orders were made as to property on an undefended basis on 4 October 2018: Lepanto & Lepanto [2018] FamCA 791. Those orders provided:
(1)That the husband pay by way of spousal maintenance for the wife the sum of $500.00 per week for a period of 104 weeks from the date of these orders first payment within seven days payable to the wife or as she may otherwise direct the husband in writing.
(2)That the wife, Ms Lepanto, is by reason of this order appointed Trustee for Sale of the real estate property situate at B Street, Suburb C being the whole of the land comprised in Folio identifier … and for such purpose the said property shall vest in the wife as trustee for sale for the purpose of the wife obtaining vacant possession thereof and selling the said property at the best price reasonably obtainable and by such method of sale as she may reasonably determine with the net proceeds of sale to be disbursed as follows:
(a)in payment of agents commission, advertising expenses and legal expenses of sale;
(b)in payment of all amounts necessary to discharge outstanding council and water rates and utilities in respect of the said property and any other adjustments as required pursuant to the usual contract for sale;
(c)in discharge of the mortgage encumbrances presently secured over the said property in favour of the National Australia Bank;
(d)in payment of the balance then remaining to the wife.
(3)That the husband pay as they fall due and payable all council and water rates and utilities in respect of the Suburb C property and all mortgage payments including both capital and interest payments as they fall due and payable in respect of the said property and indemnify the wife in respect of any arrears of such payments as at the date of settlement of the sale of the property.
(4)That any application for costs of and incidental to these proceedings for property adjustment be made by way of written submission with such submission to be filed and served within one month from the date of these orders and any submissions in response to be filed and served within a further 14 days thereafter and upon receipt of submissions judgment as to costs is reserved to chambers.
On the making of orders and delivery of reasons for judgment on 4 October 2018 the husband appeared before the Court in person. An order was made as to any costs submissions. In accordance with order, the wife provided her written submissions as to costs. No submissions have been received from the husband.
It is appropriate to determine the wife’s application for costs.

Costs

Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that 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), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.
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: Penfold v Penfold (1980) 144 CLR 311.
The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They are as follows:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party has legal aid and the terms of any grant of aid;
(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 answers, 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.
In Collins & Collins (1985) FLC 91-603 (at 79,877), the Full Court described the discretion conferred by s 117 as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way.
The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:
17.With respect to the application of the section, in Penfold v Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:
1.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".
2.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.
(footnotes omitted)
18.The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”. That is not to say that one single matter may not ultimately be determinative. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:
… A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 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.
In Greedy & Greedy (1982) FLC 91-250 and Luadaka & Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.
The provision relating to the calculation of costs is set out in r 19.18(1) of the Family Law Rules 2004 (Cth) (“the Rules”) which states:
Method of calculation of costs
(1)The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (e.g. 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.
It was said in Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 at 162 that the purpose of the rule enabling an order for costs in a specific amount, without formal assessment or taxation is, commonly with other courts, to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”.
In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 the Court said at [10] that the Court must act judicially, but that does not mean that it must exercise the power to award a lump sum in any “scientific or formulaic manner”.
Murphy J observed in Parke & the Estate of the Late A Parke (2016) FLC 93-748 at [130]:
8.If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”…

Indemnity Costs

The application before the Court is an application for the husband to pay the wife’s costs on an indemnity basis in the sum of $41,533.00 or such other order as the Court thinks fit.
It is usual for the Court to make an order for costs on a party/party basis if an order for costs is made at all.
Rule 19.18(3) further provides that:
(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.
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.
The category of cases in which an award of an indemnity costs order may be appropriate are not closed and the Full Court of the Family Court observed in Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 at [31]:
14.… It will suffice 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 party against whom such order is sought. …
More recently, the Full Court has considered indemnity costs in Joyce & Fante [2013] FamCAFC 141, Limousin & Limousin [2007] FamCA 1178, Fennessy & Gregorian [2009] FamCAFC 44 and D & D (Costs) (No. 2) [2010] FamCAFC 64.
Otherwise, the principles underlying an award for indemnity costs have been classically summarised by Sheppard J in Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536 where his Honour, in summary, said at [24]:
1. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on a party and party basis. …
2. 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. …
3 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 the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. …
Sheppard J set out some of the circumstances which may warrant the exercise of the discretion to award indemnity costs and they included:
a)false and irrelevant allegations of fraud;
b)misconduct that causes a loss of time to the Court and other parties;
c)where the proceedings were commenced or continued for an ulterior motive;
d)the undue prolongation of a case on groundless contentions; and
e)wilful disregard of known facts and clearly established law.
In Harris & Dewell & Harris (Costs) [2018] FamCAFC 180 (20 September 2018) the Full Court said (footnotes omitted):
23.In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
24.That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
25.The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”
26.Of course, in proceedings under the Act, an overriding “usual rule” is prescribed by s 117(1), namely that each party bears their own costs. The degree of departure between that “usual rule” and a result where one party bears the totality of the other party’s costs can be seen to be all the greater.
Notwithstanding that the wife has provided to the Court an assessment of her costs on an indemnity basis in the sum referred to above the provisions of Rule 19.08(3) are:
Order for costs
(1)A party may apply for an order that another person pay costs.
(2)An application for costs may be made:
(a)at any stage during a case; or
(b)by filing an Application in a Case within 28 days after the final order is made.
(3)A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
The obligation imposed by the Rule is to “inform” the Court if a party is bound by a costs agreement and, if so, to “inform” the Court of “the terms of the costs agreement”. There is no obligation cast by the Rule to put into evidence a copy of the relevant costs agreement, although in practice that is very frequently the means by which the Court is informed of its relevant terms. Regrettably, no details of any costs agreement have been forthcoming and so the question of indemnity costs is not enlivened.
The circumstances of the husband’s disengagement are detailed in Reasons for Judgment: Lepanto & Lepanto [2018] FamCA 791 at [4] to [11].
As to the relevant considerations, the financial circumstances of the wife are known by reason of the orders made on 4 October 2018. The husband’s circumstances are not known save that he has a considerable expectancy in respect of the estate of his late mother who died in August 2017 and he has otherwise been receiving rental payments in relation to the former matrimonial home at Suburb C in the sum of $1,500.00 per week from March 2017.
Otherwise, the parties are not assisted by a grant of legal aid.
The husband’s conduct after February 2018 when it appears he elected to disengage from the proceedings has been perplexing and without explanation. It has caused the wife to prepare for a final hearing in circumstances where the Court had previously been informed by both parties that the matter had been close to resolution by agreement. In the period from February 2018 to undefended hearing the wife incurred legal fees in the sum of $41,533.00.
The undefended hearing was necessitated by the failure of the husband to comply with previous orders as to filing of documents, his obligation as to full and frank disclosure and his failure to attend at various procedural directions.

The circumstances of this matter justify a departure from the general rule that each party pay their own costs.
Doing the best that can be done in the circumstances, it is appropriate that there be an order that the husband pay to the wife the sum of $30,000.00 in respect of her costs.
An order will be made accordingly.

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 14 February 2019.

Associate:

Date: 14 February 2019