Lynton and Lynton (Costs)

[2010] FamCA 1130

FAMILY COURT OF AUSTRALIA

LYNTON & LYNTON (COSTS) [2010] FamCA 1130

FAMILY LAW – COSTS – application by the wife seeking costs in relation to previous property settlement proceedings – consideration of s 117(2A) factors – where the circumstances justify an order for costs in favour of the wife – where the wife withdrew a claim at the commencement of the trial – where the wife has been unsuccessful in establishing a further claim at trial – orders that the husband pay the wife a reduced sum of costs in the sum of $15,000

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

Kennon & Kennon (1997) FLC 92-757
Penfold v Penfold (1980) 144 CLR 311
W and T (2006) FLC 93-266

APPLICANT: Ms Lynton

RESPONDENT: Mr Lynton

FILE NUMBER: ADC 206 of 2008

DATE DELIVERED: 13 December 2010

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Dawe J

HEARING DATE: 5 November 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Scragg

SOLICITOR FOR THE APPLICANT: Peter Scragg & Associates

COUNSEL FOR THE RESPONDENT: Mr Jordan

SOLICITOR FOR THE RESPONDENT: C E Legal Pty Ltd

Orders

1. Within 42 days from today the husband pay the wife’s costs fixed in the sum of FIFTEEN THOUSAND DOLLARS [$15,000.00].

2. The husband pay all costs of valuations and joint experts paid or payable by him without reimbursement from the wife and indemnify the wife of or in relation to any payments now due.

3. Remove all matters from the pending list.

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

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 206  of 2008

MS LYNTON

Applicant

And

MR LYNTON

Respondent

REASONS FOR JUDGMENT

Introduction

1. The wife applies for an order for costs of the property settlement proceedings seeking that the husband pay the sum of $32,621.78.

Hearing

1. On 5 November 2010 I heard the submissions in relation to the application for costs.  The wife was represented by Mr Scragg.  The husband was represented by Mr Jordan.

2. I also received written submissions from each party;  the wife’s submissions being filed on 27 October 2010 and the husband’s being filed on 1 November 2010.

Background

1. The husband is aged 65, nearly 66.  The wife is aged 62.  They were married in 1971 and separated in 2003/2004.

2. The wife’s application for property settlement was filed on 18 January 2008 in the Federal Magistrates Court.  Subsequently there were interim orders made in the Federal Magistrates Court, including an order made on 23 October 2008 by Federal Magistrate Lindsay relating to the joinder of the parties’ son, J Lynton, as a party to the proceedings.

3. Trial affidavits were filed in the Federal Magistrates Court.  The trial in the Federal Magistrates Court did not proceed in March 2009.  Subsequently, when the matter came on in the Federal Magistrates Court again for hearing, it was transferred to the Family Court of Australia.

4. The husband takes issue with the notice  he was given that the wife proposed to make a claim pursuant to Kennon & Kennon (1997) FLC 92-757 seeking a larger sum due to the husband’s violent behaviour.

5. Subsequently, further affidavits were filed in the Family Court of Australia and the matter listed for trial.  The trial commenced before me on 7 April 2010, proceeding on 8 and 9 April 2010, resuming on 19 April 2010, continuing on 20, 21, 22 April 2010.  The trial concluded on 22 April 2010.  Judgment was delivered on 9 August 2010 when I made final orders by way of property settlement.

6. Subsequently, the husband filed an Application in a Case in which he sought orders pursuant to section 79A.  The wife then pursued her application for costs.

7. At the hearing on 5 November 2010 I reserved my judgment in relation to the wife’s application for costs generally.

8. The husband’s application seeking a section 79A order was dismissed. On 5 November 2010 an order was made varying paragraph 5 of my final orders of 9 August 2010 and inserting a further paragraph 5A. 

9. The question of the wife’s costs in respect of the husband’s section 79A application was reserved for further consideration at a later date, if necessary.

10. Other relevant background material is dealt with in the latter portion of this judgment, particularly in relation to the section 117(2A) factors.

11. The wife sought to rely on the factual matters contained in her further affidavit filed on 1 November 2010 and the affidavit of one of her witnesses, Ms F, filed on 1 November 2010, which sets out the costs incurred by the witness in attending Court.

12. Without detailing the full submissions which are set out primarily in the written submissions filed on 27 October 2010, the wife maintains that the husband’s financial circumstances permit an order for costs to be made. 

13. The individual submissions by the wife and the husband will be dealt with under the relevant section 117(2A) heading.

14. The husband opposed the wife’s application for costs.  He sought an order for costs fixed in the sum of $5,000 being his costs of defending her costs application.

The Law

1. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides:

   Costs

   (1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

   (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.

2. In many decisions of the Full Court emphasis is placed upon the remarks of the High Court in Penfold v Penfold (1980) 144 CLR 311 at 315 to 316:

   “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”. (emphasis added)

   and …

   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 [(1970) 92 W.N. (NSW) 503, at p. 505]). 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.”

3. The Full Court has also held that there is clear power to make any type of order for costs that is appropriate.  It is not necessary to require the costs to be taxed if they cannot be agreed.  It is usual to order costs to be paid on a party/party basis unless there is established the circumstances which justify costs on an indemnity basis.

4. In paragraph 53 of the Full Court’s decision in WNT (2006) FLC 93-266 said:

   “Whilst there is clearly power to make any order for costs the Court thinks appropriate, where the Court intends to depart from calculating a figure that approximates a scale amount there is an obligation on the Court to explain why it is appropriate that there be a departure from the obligation.  Absent any such explanation, an order for costs that accords with party/party costs on the scale basis is the appropriate order that should be made.”

5. Rule 19.18 provides:

   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 (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.

   Example

   For paragraph (1) (c), the stated method may be in accordance with Schedule 3 but with an additional percentage for complexity.

   (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.

Discussion

(a)      The financial circumstances of each of the parties to the proceedings

1. The wife is now 62 years of age.  Her serious health issues make it unlikely that she will obtain future employment.  (See findings in judgment of 9 August 2010).

2. The husband is aged 65.  For many years he has been engaged in the gem trade, mining gems and later dealing in gems.  The husband lives in a de facto relationship with his current partner, Ms Z.

3. Following the judgment, the wife retains the N property subject to a mortgage ($420,000 less $200,000 – net $220,000), some personal property, a motor vehicle and the P1 property ($75,000).  The wife also has significant debts payable to Ms F and Ms O.

4. The husband retains the remaining interest in the P properties, being:

   (a)     P2  $65,000

   (b)     P3  $120,000

   (c)     P4 (– annual licence)  $10,000

   (d)     Camp site M1 properties:

   One at   $20,000

   One at  $1,000

   (e)    Household contents and other personal property

   (together with a tunnelling machine)  $32,000

   Total:  $313,000

1. The judgment also referred to the husband retaining the mining equipment, gem stock, pictures, jewellery and personal effects of unknown value.

2. The husband asserts that he retained liabilities, including the Westpac mortgage in relation to the P properties of $75,000.  In his submissions he referred to unpaid legal fees which he owed to his previous solicitors and current solicitors of $6,000 and $55,000 respectively.  He also referred to the debt to his daughter E Lynton “as found by the Court” $242,000.

3. It is correct to say that the Court found that the husband did owe his daughter $242,000, the husband having denied this debt.  However in paragraph 86 of the judgment it was said:

   “This is on the basis that the Court is satisfied that the husband owes [E] $242,000 but that offset against that debt and any other possible debts due by the husband are undisclosed assets or benefits received by the husband.”

4. It is therefore not appropriate to bring this debt to E into account in the manner claimed by the husband when considering his financial circumstances.

5. The husband also gave evidence about his credit card debt and referred in his submissions concerning costs to an amount of $25,000 owing on his Westpac credit card.

6. The financial circumstances of each of the parties to the proceedings is therefore one where neither party has significant equity, but their assets and liabilities were divided on the basis that the wife receive approximately 62 per cent of the net assets and the husband the remainder.

(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;

1. Neither party is in receipt of legal 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 answer questions, admissions of facts, production of documents and similar matters;

1. The wife alleges that she was put to the unnecessary expense of calling Ms F as witness in the proceedings and as a result has incurred substantial costs.

2. The wife also maintains that the husband failed to make full and frank disclosure putting her to the expense of issuing subpoenas.  Similarly, the wife alleges that the costs were incurred by her in relation to the issue of the amount owing to E, her medical condition and other issues concerning the alleged debts owing by the husband and to the husband.

3. The husband maintains that he should not incur any further penalty by way of costs for the Court’s determination that he has failed to “convince the Court that he has disclosed all assets”.  (Paragraph 142(4) of the judgment of 9 August 2010).  It is correct to say that his failure to account for all of his assets was a factor that has been taken into account, but it is not inappropriate in all the circumstances to consider this failure in the context of the costs incurred by the wife in pursuing the matter to final hearing.

4. The husband seeks to bring into account under the heading of “Conduct of the parties” the wife’s delay in pleading her Kennon & Kennon (Supra) claim and her lack of success in that matter.

5. It is correct that the wife’s claim in relation to Kennon v Kennon (Supra) factors was not appropriately pursued at the commencement of the proceedings, nor at the Federal Magistrates Court level and was only made clear shortly before the trial.  It is also correct to say that unnecessary costs were incurred in relation to the claim by the wife against the third party (the parties’ son), the wife withdrawing her third party claim on the first day of the trial.

6. The conduct of the wife in relation to the third party claim against the parties’ son which the wife abandoned on the first day of the trial is a factor which needs to be taken into account.  Similarly, the ultimately unsuccessful Kennon & Kennon (Supra) claim is a factor which should be considered.  This should however be considered in the context that the wife’s claims of violent behaviour by the husband were substantiated.  In particular, the judgment indicates that the Court was satisfied that the wife had established the violent conduct by the husband, which had been denied by the husband.  The wife was not able however, to establish that this violent, abusive conduct by the husband had had a significant adverse impact upon the wife’s contribution to the marriage.  (See paragraph 130 of the judgment of 9 August 2010).

7. The Court also found that the abusive behaviour of the husband significantly contributed to the wife’s current psychiatric and psychological difficulties which was a factor taken into account.

8. The Court also accepts the submissions of the wife that the findings in the judgment indicate that the conduct of the husband included his failure to disclose significant assets, his failure to call relevant witnesses and the findings that his evidence was unreliable and inconsistent.

(d)Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

1. This factor is not particularly relevant and to the extent that it is, is covered by findings in relation to other factors.

(e)Whether any party to the proceedings has been wholly unsuccessful in the proceedings;

1. The husband argues that the wife has been wholly unsuccessful in relation to the third party claim which she abandoned, the Kennon & Kennon (Supra) claim and her claim for assessment of contributions.

2. The Court has already taken into account the abandonment of the third party claim and the lack of success in the overall Kennon & Kennon (Supra) claim.  The Court made an adjustment in relation to contributions, both financial and otherwise, on the basis of 60 per cent to the wife and 40 per cent to the husband.  This assessment however needs to be seen in light of the other factors considered in the judgment.  The findings made in the judgment, when considered in overall basis, do not establish any basis for a finding that the wife has been “wholly unsuccessful in the proceedings”.

3. The husband in his opposition to the wife’s proceedings has been successful in some matters, but was wholly unsuccessful in convincing the Court that his assets had been fully disclosed and that he owed substantial debts to other persons (other than E). 

4. The husband was also unsuccessful in maintaining that there should be no further adjustment, after taking into account a contribution by the wife of 60 per cent.  He was also unsuccessful in convincing the Court  to make the orders he sought.  (Paragraph 44 of the judgment of 9 August 2010).

(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;

1. The wife made two offers of settlement.  They were however offers in which she sought considerably more than the amount she received by way of judgment.

2. The husband does not rely on any offers he made.

(g)Such other matters as the court considers relevant.

1. The findings made in the judgment of 9 August 2010 indicated that the Court preferred the evidence of the wife and that the husband had failed to establish on a sufficient evidentiary basis many of his claims.  The Court also accepted that the wife had established, through the evidence of Ms F and Ms O, the loans provided by them to the wife which were brought into account when considering the parties current financial circumstances.  (Paragraph 90 of the judgment of 9 August 2010).

Conclusion

1. Having had regard to all of the factors referred to in section 117(2A) the Court is satisfied that there are circumstances justifying an order for costs in the wife’s favour. However, the costs order should take into account that the wife withdrew the third party claim on the first day of the trial and was not wholly successful in establishing the Kennon & Kennon (Supra) claim.  The factors discussed above clearly favour the wife receiving an order for a significant amount of costs.

Quantum of costs

1. The husband has in the past been ordered to pay the costs of valuations with the possibility of adjustments being made in due course.  Taking into account the matters discussed above, it is not appropriate to make any order that the wife contribute to those valuation costs.  The husband should indemnify the wife in relation to all valuation costs paid or payable by him.

2. The submissions of the wife also included the costs of the witness Ms F being her lost wages and travelling expenses.  There is little detail about the costs of $32,621.78 which counsel for the wife submitted were on a solicitor/client basis for the trial and “around the trial”. 

3. The trial occupied approximately 7 days.  At the time of trial there were already 74 documents on the Court file.  The proceedings commenced in January 2008.

4. The husband himself claims to have unpaid legal fees in excess of $60,000.

5. Using the costs permitted under Part II of Schedule 3 as a guide in this matter, junior counsel are entitled to charge in a range of $1,615 to $2,374 per day for the trial.  Without considering any of the fees that might be recoverable by the wife for the preparation of documents and conferences, nor the cost of witnesses, a simple calculation of counsel fees for the trial and reserved judgment could be in excess of $14,000.

6. Solicitors fees charged at approximately $200 per hour and drafting documents at approximately $25 per 100 words would result in another substantial sum.

7. It is not unreasonable therefore to assess the wife’s costs for preparing the documents used during the trial in the Family Court and counsel fees to be in excess of $18,000.  Extra amounts have been incurred by the wife for interim proceedings and witness fees.

8. Taking into account that only a percentage of the wife’s costs should be paid on a party/party basis (and the benefit to the parties of avoiding further costs of determining the actual figure for party/party costs) I am satisfied that pursuant to the provisions of section 117 of the Act and the Family Law Rules it is just and proper that the husband pay a sum of $15,000 on account of the wife’s costs. This is on the basis, as previously indicated, that the husband pay the costs and disbursement of the valuations and indemnify the wife in relation to the same.

9. The husband should be allowed time to make arrangements to pay the wife’s costs before interest starts to accrue.

I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe delivered on  13 December 2010.

Associate: 

Date:  13 December 2010