Lotta and Lotta (No 4)

[2015] FamCA 871

FAMILY COURT OF AUSTRALIA

LOTTA & LOTTA (NO 4) [2015] FamCA 871

FAMILY LAW – COSTS – INDEMNITY COSTS - where the husband was unsuccessful in his application for a declaration that a financial agreement be declared a binding financial agreement for the purposes of the Family Law Act 1975 - where the husband wholly unsuccessful – where the wife seeks costs on an indemnity basis – where relevant factors under s 117 of the Family Law Act 1975 (Cth) considered – where principles underlying an award for indemnity costs considered – where order made for costs on an indemnity basis.

Family Law Act 1975 (Cth) ss 117, 117AA, 117AC, 118
Family Law Rules 2004 (Cth) rr 1.21, 19.08, 19.18

Bele & Vaughan (Costs) [2012] FamCAFC 198
Lotta & Lotta (No 2) [2015] FamCA 360.
Kohan & Kohan (1993) FLC 92-340
PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL (2005) 33 Fam LR 123
Penfold v Penfold (1980) 144 CLR 311.
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT: Ms Lotta

RESPONDENT: Mr Lotta

FILE NUMBER: PAC 3435 of 2013

DATE DELIVERED: 20 October 2015

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 17 September 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Beck

SOLICITOR FOR THE APPLICANT: Thurlows Family Lawyers

SOLICITOR FOR THE RESPONDENT: Samuel Jones Legal Services

Orders

1. That the husband pay on an indemnity basis the wife’s costs of and incidental to his Application in a Case filed 12 February 2015 seeking a declaration that the financial agreement signed by the parties be declared a binding financial agreement under the Family Law Act 1975 and the present costs application, except for the wife’s costs of appearance on 15 September 2015, such costs to be as agreed within one month from this date or otherwise in default of agreement as assessed with such costs to be paid within three months of agreement or assessment.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lotta & Lotta (No 4) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 3435  of 2013

Ms Lotta

Applicant

And

Mr Lotta

Respondent

REASONS FOR JUDGMENT

1. The application for determination is the wife’s application for costs filed on 18 June 2015 arising from proceedings relating to a purported binding financial agreement entered into between the parties on 14 April 2009.

2. Reasons for judgment in respect of that issue were delivered on 18 May 2015 and a declaration was made that the purported financial agreement was not a binding financial agreement for the purposes of the Family Law Act 1975 (Cth) (“the Act”): (Lotta & Lotta (No 2) [2015] FamCA 360)

3. The present application for costs arises out of the Court’s determination as to the financial agreement.

4. The husband in submissions for the first time contended that the wife’s application was filed out of time and thus should be dismissed. The relevant Rule provides for any application for costs to be filed within 28 days of the relevant order. However, orders as to the subject financial agreement were made on the 18 May 2015 and any application for costs was ordered to be made by way of an Application in a Case filed within one month.

5. The wife filed her application for costs on the 18 June 2015 as evidenced on the application itself.

6. Rule 1.21 provides:

   Calculating time

   (1)  Time in a case runs during a period when the filing registry is closed.

   (2)  If:

   (a) the period allowed by these Rules or an order for an action to be validly taken is 5 days or less; and

   (b)  the period includes a day when the filing registry is closed;

   that day is not counted.

   (3)  For the calculation of time of one day or more from a particular day, or from the occurrence of a particular event, the particular day, or the day when the event occurs, is not counted. (emphasis added)

   (4)  If the last day for taking an action requiring attendance at a filing registry is on a day when the filing registry is closed, the action may be taken on the next day when the filing registry is open.

7. Having regard to r 1.21(3) there is no substance to the husband’s submission, the Application having been filed on the last available day.

Costs

1. Section 117 of the Act provides that each party to the proceedings shall bear his or her own costs.

2. That principle is, however, subject to the provisions of ss 117(2), 117AA, 117AC and 118 of the Act.

3. Relevantly for the present application, the discretion afforded to the trial judge in s 117(2) 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.

4. 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 v Penfold (1980) 144 CLR 311.

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

   (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.

6. 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.

Context

1. Financial circumstances: Property issues between the parties are unresolved. The financial circumstances of and issues between the parties were canvassed in Lotta & Lotta (No 2) [2015] FamCA 360. The husband is in poor income circumstances he says due to his health but otherwise has assets available to meet any order for costs if made. There is nothing in the financial circumstances of the parties that would contraindicate any order for costs.

2. Legal aid: This is not a relevant consideration.

3. The conduct of the parties to the proceedings in relation to the proceedings: This relates more to the interlocutory conduct of the parties and is not a relevant consideration.

4. The failure of a party to the proceedings to comply with previous orders of the Court: This is not a relevant consideration.

5. Wholly unsuccessful: The husband contended the financial agreement was a binding financial agreement for the purposes of the Act. The background and circumstances relating to the signing of the financial agreement by the husband and wife are more particularly referred to in the relevant reasons for judgement referred to above. It is relevant to note in relation to the circumstances of the agreement that:

   a)the husband contended that the agreement was prepared jointly by he and the wife,

   b)that the husband notwithstanding he being a solicitor in private practice contended that he was unaware that independent legal advice was necessary notwithstanding the very terms of the financial agreement in Clause 7,

   c)the signatures of the husband and wife to the agreement are not witnessed,

   d)the wife was not provided with any independent legal advice as to the agreement or its consequences as required by the Act,

   e)the agreement itself was fundamentally defective in that the initial primary requirement that it be expressed to be an agreement under the Act and, in the particular circumstances of the agreement an agreement under s 90C of the Act, was not complied with,

   f)that even if the agreement had complied with the provisions of s 90C of the Act, the financial agreement was incapable of complying with the provisions of s 90G of the Act that would have rendered the agreement a binding financial agreement.

   The deficiencies in the agreement are all the more relevant to the present application as the husband at the time of the agreement was practising as a solicitor in private practice and it is to be inferred should have known of the requirements of the legislation. Not unexpectedly the husband’s application for a declaration that the financial agreement was a binding financial agreement for the purposes of the Act was wholly unsuccessful. This factor of itself is sufficient to warrant a departure from the general rule as to costs.

6. An offer in writing: This is not a relevant consideration.

7. Any other relevant matter: It is not contended that there are any other relevant matters.

8. By reason of the considerations referred to above the wife is entitled to her costs of and incidental to the proceedings.

9. It is usual practice for an order for costs to be made on a party/party basis.

Indemnity Costs

1. The application for costs by the wife seeks an order for the husband to pay costs on an indemnity basis or otherwise costs on a party/party basis.

2. Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly r 19.18(1) provides for the method of calculations of costs. That Rule 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 (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.

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

   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.

4. 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 the a party all, or at least the majority, of their legal costs and disbursements and charges incurred in the proceedings.

5. In Kohan & Kohan (1993) FLC 92-340 at 79,611: the Full Court recognised that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said,

   … it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.

6. Then at 79,614 the Full Court said:

   The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O.38 r. 2, the provisions of O.38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O.38 r.7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, 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 of an exceptional kind. See Degmam v Wright (No 2) [1983] 2 NSWLR 354; Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR 358 at 368 to 370.

   …When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.

7. 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]:

   … 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.

8. Strickland J in Bele & Vaughan (Costs) [2012] FamCAFC 198 at [26] to [28] on this issue encapsulated the relevant legal principles.

   26.      A useful recent discussion of the question of indemnity costs is to be found in the decision of the Full Court in D & D (Costs) (No 2) (2010) FLC 93-435. There the Full Court reviewed extensively earlier authorities including Limousin v Limousin (Costs) (2008) 38 Fam LR 478 and Kohan and Kohan (1993) FLC 92-340, and also Sheppard J’s decision in Colgate-Palmolive Co & Another v Cussons Pty Ltd (1993) 118 ALR 248.

   27.      The ordinary rule is that an order for costs is calculated on a party/party basis, and it emerges from the authorities referred to above that to depart from that rule exceptional circumstances need to be demonstrated.

   28.      As to what might constitute an exceptional circumstance, reference can be made to the oft-cited decision of Sheppard J in Colgate-Palmolive Co & Another v Cussons Pty Ltd where his Honour detailed circumstances that might qualify.  Usefully, Holden J in Munday v Bowman (1997) FLC 92-784 at 84,660 drew from the decision of Sheppard J the following examples:

   (a)      Where it appears that 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 (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397).

   (b)      Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra)).

   (c)      Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd (unreported, Federal Court,
   3 May 1991)).

   (d)      The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).

   (e)      An imprudent refusal of an offer to compromise.

9. Rule 19.08 relevantly provides:

   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.

10. The applicant wife has provided a copy of her costs agreement with her solicitors together with costs agreements with relevant counsel.

11. The poor prospects of the husband’s application being successful were in fact indicated to him by counsel for the wife in open court on 17 March 2015. On that date the husband was represented. Later his prospects were brought to his attention by the court in circumstances where the husband appeared unrepresented on 2 April 2015.

12. The husband contends that the circumstances are not exceptional in that they do not justify an order for costs on an indemnity basis. Yet he persisted with an application that was ultimately shown as doomed to fail at the first hurdle.  His contention is rejected.

13. In circumstances where the husband has been wholly unsuccessful in his contention that the financial agreement signed by he and his wife was a binding financial agreement for the purposes of the Act and in the circumstances referred to above where there was no chance of his application being successful, it is appropriate that there be an order that he pay the wife’s costs of and incidental to the proceedings relating to the financial agreement and costs of the present costs application on an indemnity basis.

14. This application first came before the Court on 15 September 2015 for hearing. It was apparent that such hearing date was allocated by the Registrar on an earlier date where there was only an appearance on behalf of the wife. It should have been clear to the wife’s legal representatives that they were required to notify the husband of the date allocated for hearing in fairness to him. They did not do so. The result was the matter was stood over for several days on the application of the husband who had only been alerted to the hearing date when checking the Commonwealth Courts Portal the day before. 

15. The wife thus should not have her costs of 15 September 2015.

16. Orders will be made accordingly.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 20 October 2015.

Associate: 

Date:  20 October 2015