Liang & Zedong
[2022] FedCFamC1F 920
•25 November 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Liang & Zedong [2022] FedCFamC1F 920
File number(s): MLC 3691 of 2020 Judgment of: HARTNETT J Date of judgment: 25 November 2022 Catchwords: FAMILY LAW – COSTS – Application for indemnity costs – Where the original proceeding has settled – Where the second respondent in the substantive proceedings seeks indemnity costs against the applicant wife in the substantive proceedings – Where the second respondent alleges psychological and medical distress – Where the second respondent claims an offer made by her – Where the second respondent alleges she was incorrectly joined to the proceedings – Where the applicant wife claims the second respondent was a necessary party – Where the applicant wife claims indemnity or other costs in respect of the second respondent’s application for costs – Order for costs in favour of the applicant wife in the substantive proceedings on an indemnity basis Legislation: Family Law Act 1975 (Cth) ss 79, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 2.17, 5.04, 11.01 12.13
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Collins and Collins (1985) FLC 91-603
Kohan & Kohan (1993) FLC 92-340
Loomis v ML Lawyers (2016) FLC 93-731
Munday v Bowman (1997) FLC 92-784
Penfold v Penfold (1980) 144 CLR 311
Sfankianakis & Sfankianakis [2019] FamCAFC 54
Yunghanns & Yunghanns (2000) FLC 93-029
Division: Division 1 First Instance Number of paragraphs: 42 Date of last submissions: 19 October 2022 Date of hearing: 16 November 2022 Place: Melbourne The Applicant: Litigant in person Counsel for the Respondent: Mr Schmidt Solicitor for the Respondent: Prudentia Legal ORDERS
MLC 3691 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS LIANG
Applicant
AND: MS ZEDONG
Respondent
order made by:
HARTNETT J
DATE OF ORDER:
25 November 2022
THE COURT ORDERS THAT:
1.The second respondent, the applicant in Application in a Proceeding filed 22 August 2022, pay the costs of the applicant wife, the respondent to the Application in a Proceeding, on an indemnity basis fixed in the sum of $10,680.
2.There be a stay on such payment of 28 days.
3.Otherwise, all extant applications are dismissed and the matter removed from the list.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Liang & Zedong has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARTNETT J
introduction
The applicant in this Application in a Proceeding filed 4 August 2022 was the second respondent in the substantive proceedings. For the purposes of these reasons, the applicant will hereafter be referred to as the “second respondent” in accordance with the final orders made on 7 July 2022.
The respondent to this Application in a Proceeding was the applicant in the substantive proceedings. For the purposes of these reasons, the respondent will hereafter be referred to as the applicant wife (“the wife”). The wife initiated the substantive proceedings in the Federal Circuit and Family Court of Australia (Division 2), (formerly the Federal Circuit Court of Australia), on 14 April 2020. She issued those proceedings against her former husband as the first respondent, and against the second respondent. The first and second respondents were married to each other following the divorce of the wife and the first respondent. They subsequently separated prior to the institution of the substantive proceedings in April 2020.
The wife, first and second respondents finalised the substantive property order proceedings by way of final consent orders made on 7 July 2022. There was no challenging of the evidence. Included in the final orders was, relevantly, the following:
…
2. At 4.00 pm on 4 August 2022, unless the Second Respondent has filed, and served upon the Applicant Wife, an Application in a Proceeding seeking costs against the Applicant Wife pursuant to, and in full compliance with, rule 12.13(3)(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, Order 5 of the orders made on 14 December 2020 be discharged.
The Court also made notations to the orders of 7 July 2022, relevantly, as follows:
…
D. The Second Respondent has indicated that she may make such an application for costs against the Applicant Wife.
E. The Applicant Wife foreshadows, and puts the Second Respondent on notice, that any such application will be resisted, and that she will seek indemnity costs for defending such application.
Order 5 of the orders made by consent on 14 December 2020, was as follows:
With a denial of the necessity of this order, within 90 days of these orders, the wife deposit the sum of $30,000 to the wife’s solicitors Prudentia Legal to hold on trust as security of costs for the husband and the Second Respondent and such funds are not to be released pending further order of the Court.
The wife was not served with an Application in a Proceeding as filed by the second respondent (seeking costs against her) by 4.00pm on 4 August 2022.
On 16 August 2022, at about 3.09pm, an email was sent by the second respondent’s former lawyers to the wife’s lawyer, purportedly serving a “sealed Application in a Proceeding filed by the Applicant”. The attachment contained an unsealed copy of an Application in a Proceeding, seeking indemnity costs against the wife. No affidavit in support and in accordance with r 5.04 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) was attached.
On 17 August 2022, a Notice of Address for Service was filed on behalf of the second respondent by her new lawyers, B Lawyers. It was not served upon the wife.
The Application in a Proceeding of the second respondent was sealed on 22 August 2022, and thereafter a sealed copy of the application was served upon the wife.
Given paragraphs [3] - [9] above, it is clear that the second respondent did not comply with Order 2 of the final orders made 7 July 2022. Accordingly, Order 5 of the orders made 14 December 2020 was discharged and the monies held on trust as security for costs were released to the wife.
Whilst the wife sought summary dismissal of the second respondent’s Application in a Proceeding, on the basis of the second respondent being out of time in the filing of her application, that submission was not forcefully pressed. In my view, this is not a matter appropriate for summary dismissal. Any time limit provided by Order 2 of the orders made 7 July 2022 was imposed only in respect of the discharge of an earlier order (see paragraph [3] above). Otherwise, a perhaps technical breach of the Rules (there was some registry delay and confusion) in this instance, does not warrant summary dismissal.
The second respondent proceeded to seek an order for costs on an indemnity basis against the wife and in respect of the entire substantive proceedings.
The wife sought that the second respondent’s Application in a Proceeding be dismissed and the second respondent pay the wife’s costs of and in respect to the Application in a Proceeding, on an indemnity basis, or otherwise party/party basis, as set out in the Response to an Application in a Proceeding filed by the wife on 12 September 2022.
background
During the marriage between the wife and the first respondent (“the husband”), they acquired, in the husband’s sole name and subject to a mortgage, a real property situated at C Street, Suburb D. Following the separation of the husband and wife in or about June 2014, the husband acquired an interest in two further real properties (each subject to a mortgage), at E Street Suburb F, purchased by he and the second respondent in early 2016, and G Street, Suburb H, Queensland purchased by he and the second respondent in early 2018. The funds used by the husband to acquire the Suburb F property and the Suburb H property were, as argued by the wife, funds belonging at least in part, to each of the husband and the wife, as acquired by them, during their marriage. Around the time of purchase of the Suburb F property, the second respondent and the husband had married. The second respondent was on title to both properties. The husband and the second respondent were on title to Suburb F as joint proprietors, and on title to the Suburb H property as tenants in common. When the husband and the second respondent first acquired the Suburb H property, they were registered as joint proprietors. The husband deposed in his first affidavit filed in the proceedings, to altering the holding as a result of the wife’s application pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) being foreshadowed.[1]
[1] Affidavit of Mr K filed 28 May 2020, paragraph 22.
The husband’s legal and/or equitable interests in the three real properties comprised the entire quantifiable pool of property available for adjustment between the wife and the husband in the substantive proceedings.
The fact that the second respondent and the husband were separated at the time of the institution of the substantive proceedings, was not known to the wife until one year into the proceedings, when it became apparent during discovery, that a financial agreement between the second respondent and the husband existed. At all relevant times however, the second respondent and the husband were on title to the Suburb F property and Suburb H property. Despite being separated, a matter the second respondent considered should have excluded her from the proceedings, the fact the second respondent was on title to property the subject of the proceedings, meant the wife had an obligation to name her as a respondent to the substantive proceedings.[2] The second respondent was a necessary party.
[2] Federal Circuit Court Rules 2001 (Cth) r 11.01.
In support of her application, the second respondent contends essentially, three things. The first, that she made an offer to settle the substantive proceedings; the second, that as a stranger to the marriage between the parties, she ought not to have been joined to the proceedings; and the third, that the wife’s conduct caused delay in the proceedings. The fact the second respondent was a stranger to the marriage between the husband and wife was of no consequence for the reasons given in the preceding paragraph, namely, the second respondent was a registered proprietor of property in which the wife claimed an interest.
Material relied upon
The second respondent relied on the following material:
(1)a Application in a Proceeding filed 4 August 2022, sealed 22 August 2022; and
(2)affidavit of Mr J filed 19 October 2022.
The wife relied on the following material:
(1)a Response to an Application in a Proceeding filed 12 September 2022;
(2)affidavit of Mr K filed 12 September 2022; and
(3)a summary of argument and annexures to the summary of argument.
legal principles
Section 117(1) of the Act sets out the general rule that each party shall bear their own costs. However, the Court being satisfied that there are circumstances justifying it doing so, may make such order for costs as it considers just in accordance with the Court’s discretion.[3] In considering what (if any) order for costs it should make the Court shall have regard to the matters in s 117(2A) of the Act as follows:
(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.
[3] Family Law Act 1975 (Cth) s 117(2).
Although the Court must have regard to all of these matters, and their relevance will depend upon the particular circumstances of each case, it is not required to consider these matters in any particular order, and no matter takes precedence over another. It is also not necessary for there to be more than one relevant consideration for the purposes of deciding that an order is justified.
In Collins and Collins (1985) FLC 91-603 at page 79,877, the Full Court of the Family Court of Australia (Evatt CJ, Pawley & Barblett JJ) said:
In deciding whether the circumstances justify an order for costs, there is a broad discretion to be exercised, having regard to the factors set out in subs. (2A) so far as relevant. Those factors…. are not to be read in a restrictive way, however, the discretion remaining is a broad one: Penfold v Penfold (1980) FLC 90-800 at pp 75,053-75,054 (High Court); quoted in Mallet v Mallet (1984) FLC 91-507 at pp 79,123-79, 124 (by Wilson J).
In Penfold v Penfold (1980) 144 CLR 311, the High Court (Stephen, Mason, Aickin and Wilson JJ) held that:
12.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 subsection is not paramount to s.117(2). As subsec (1) is expressed to be subject to subsec (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.
13.Subsection (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 …... we do not agree with the suggestion….... that an order can only be made under s.117(2) in a 'clear case'.
In Loomis & ML Lawyer (2016) FLC 93-731 at [57], Murphy J noted that the Full Court of the Family Court of Australia had said “on a number of occasions that financial impecuniosity is not determinative of an application for costs”. His Honour said:
58.It is plain that s 117(2A) does not prescribe that more than one factor must be present or that any one factor has any more or less weight than any other factor referred to within that section. The statutory factors are each and all matters which inform an overall discretion inherent within the section.
59.Modest or even poor financial circumstances cannot be determinative in the exercise of the discretion in relation to costs. If it were otherwise the discretion inherent in the section would be curtailed and one of the enumerated factors would preclude appropriate consideration being given to all factors relevant to the discretion. Moreover, an impecunious litigant could litigate with impunity — and, indeed, immunity — irrespective of their conduct in the litigation or any other factor pertinent to the discretion in respect of costs.
Are there circumstances justifying a costs order
Financial circumstances of each of the parties
There is no up to date evidence of the parties’ respective financial circumstances. Neither is in receipt of legal aid. I accept the submissions of counsel for the wife that the affidavit relied upon by the second respondent, being an affidavit sworn by her then solicitor, Mr J does not provide evidence on which the Court could rely, containing hearsay and unqualified opinion regarding the second respondent’s employment status and health.
The conduct of the parties
Counsel for the wife submitted that the second respondent’s assertion the wife caused delay in the proceedings is without basis. I find that is clearly an accurate submission. Delay was caused by the husband, and the second respondent at times engaged in inappropriate, costly (to the wife) conduct.
A private mediation was scheduled to occur between the wife and the husband, in which the second respondent was not required to take part.[4] The second respondent did not take part.[5] That mediation was later adjourned due to a failure by the husband to comply with discovery orders. The second respondent indeed consented to such adjournment.[6] No delay was caused by the wife.
[4] Order of 14 December 2020, Notation A.
[5] Order of 14 December 2020, Notation A.
[6] Order of 21 April 2021.
It was the evidence of the wife that contrary to the second respondent’s submissions, it was the second respondent’s conduct in the substantive proceedings that was unsatisfactory. On occasion, that was correct. That evidence included evidence as appearing on the face of orders of the Court as referred to in the submissions of counsel for the wife, being:
(a)On 29 July 2020 (the first return date in the substantive proceedings):[7]
(i)the second respondent’s responding document was struck out (Order 5);
(ii)the second respondent declared to the Court that she would not comply with its orders and was warned that she may be found in contempt (Notation D); and
(b)On 24 August 2021, without being excused and without an explanation, the second respondent failed to appear at a hearing before the DCJ. That hearing was the return date of an Application in a Case filed by the second respondent, which the Honourable Deputy Chief Justice dismissed for default.
[7] Respondent’s written submissions emailed 15 November 2022 to chambers, p.4.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The substantive proceedings were settled by consent orders being entered into between all three parties. The matter was compromised by each of them and no party was wholly unsuccessful.
Offers made between the parties
Mr J’s affidavit purports to provide an evidentiary basis to the second respondent’s assertion that she made an offer to settle the substantive proceedings. No evidence supports an offer being made of the type that would result in a costs order in favour of the second respondent.
As submitted by counsel for the wife and accepted by me:
(a)the document annexed to Mr J’s affidavit as “[MJ1]” does not comply with r 2.17 of the Rules. Accordingly, the second respondent cannot rely upon it; and
(b)the letter annexed to Mr J’s affidavit as “[MJ2]” was dated 24 November 2021, some 17 months into the proceedings. Accordingly, it cannot support an application for costs of the entire proceedings. In any event, the “offer” it contained was neither quantified nor quantifiable, and therefore incapable of acceptance.
The wife submitted there are no circumstances which satisfy s 117(2A) of the Act to justify a departure from the general rule in s 117(1) of the Act. Accordingly, the second respondent should bear her own costs of the substantive proceedings. On the evidence, I accept that submission. Indeed, there was no need for a departure from the usual order in respect of any of the parties.
Are there circumstances justifying an order for costs in favour of the wife
The wife submitted that the second respondent, if wholly unsuccessful in her Application in a Proceeding, should bear the wife’s costs of defending the application. Such circumstance, it was submitted, justified a departure from the general rule in s 117(1) of the Act.
It was submitted by the wife that she has incurred (or will incur) costs of, and incidental to the Application in a Proceeding of $13,680. This comprises of $7,940 in solicitors fees, $4,950 of which has been paid, and $5,470 in counsel fees, $450 of which has been paid.[8]
[8] Respondent’s written submissions emailed 15 November 2022 to chambers, p.6.
The wife seeks her indemnity costs be fixed at $13,680. If the Court declines to award indemnity costs in favour of the wife, the wife seeks an order for costs in favour of her on a party/party basis. On this basis, the wife seeks $7,698.07, comprising of $2,907.67 in solicitors fees and $4,790.40 in counsel fees.
The Court “should not depart lightly from the ordinary rules relating to costs between party and party, and the circumstances justifying the departure should be an exceptional one”.[9]
[9] Kohan & Kohan (1993) FLC 92-340.
In my view, on the facts and circumstances described above, a costs order against the second respondent is warranted. The question is what costs order?
The circumstances justifying an order for indemnity costs are not closed.[10] The Court in exercising its discretion must be satisfied that the circumstance of the case “warrant the making of an order for the payment of costs other then on a party-party basis”.[11] Circumstances which may warrant such an order were summarised by Holden CJ in Munday v Bowman (1997) FLC 92-784, as identified in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, as follows:
•Where an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts;
•The making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
•Evidence of particular misconduct causing loss of time to the court and to other parties;
•The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;
•An imprudent refusal of an offer to compromise.
[10] Yunghanns & Yunghanns (2000) FLC 93-029.
[11] Yunghanns & Yunghanns (2000) FLC 93-029.
The Court has a discretion and is not bound by simply orders as to indemnity or party/party costs. In the decision of Sfankianakis & Sfankianakis [2019] FamCAFC 54, the Full Court of the Family Court of Australia observed at [10] that:
…It is however, a mistake to think that if a costs order is made, that order can only be on a party and party basis or on an indemnity basis. The words ‘such order as to costs as the Court considers just” permit the Court to fashion an order that is apt to the circumstances. One such well known example is assessment on a trustee basis, which is more generous than party and party costs, but fall short of an indemnity. Orders for a partial indemnity or for a particular period are obvious possibilities. The Court may also fix costs in a particular sum, taking account of all relevant circumstances; that type of order too is neither one for party and party costs nor an indemnity costs order.
Pursuant to r 12.13 of the Rules a party applying for costs on an indemnity basis must inform the Court if that party is bound by a costs agreement in relation to those costs and the terms of that agreement. The wife entered into a costs agreement with Prudentia Legal on 14 February 2019. Mr Andrew Zhu (“Mr Zhu”) as partner of Prudentia Legal has an hourly rate from $600 per hour plus GST. Mr Zhu has worked with a junior solicitor who has an hourly rate of $300 per hour plus GST.
conclusion
Prior to the filing of the Application in a Proceeding the second respondent was advised by the wife that the wife would seek indemnity costs if the second respondent proceeded with such an application. The second respondent was very clearly on notice. The Application in a Proceeding was not only filed but proceeded with. The second respondent was represented throughout that process and up until the hearing date of the Application in a Proceeding by solicitors.
Given the above matters as set out in these reasons, I consider an award of party/party costs is not sufficient and that it would be inequitable to have the wife pay for the second respondent’s imprudent and wilful behaviour. However, I also consider, that for an application of this type, the quantum of solicitors’ costs is excessive and I propose to reduce such costs claimed by an amount of $3,000. In my view, and in the exercise of my discretion, a costs order of $10,680 is justified.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hartnett. Associate:
Dated: 25 November 2022
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