Makaral and Makaral

[2017] FamCA 126

FAMILY COURT OF AUSTRALIA

MAKARAL & MAKARAL [2017] FamCA 126

FAMILY LAW – COSTS – Application for indemnity costs against wife in respect of the wife’s dismissed application to set aside consent orders as to property under s 79A – Where wife’s application was by consent dismissed – Where discussion of general principles – Whether there are justifying circumstances for a costs order to be made – Whether there are grounds for awarding indemnity costs – Where husband fails to comply with Rule 19.08(3) – Where costs order made on party/party basis

Family Law Act 1975 (Cth) ss 79A, 117, 117(1), 117(2) and 117(2A)
Family Law Rules 2004 (Cth) rr 19.08(3), 19.18

Bele & Vaughan (Costs) [2012] FamCAFC 198
Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536
D & D (Costs) (No. 2) [2010] FamCAFC 64
Degmam v Wright (No 2) [1983] 2 NSWLR 354;
Fitzgerald (as child representative forA (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] 81 ALR 397
Hawkins & Roe [2012] FamCAFC 77
Hobartville Stud v Union Insurance Co. (1991) 25 NSWLR 358
I and I (No 2) (1995) FLC 92-625
Kohan & Kohan (1993) FLC 92-340
Limousin & Limousin [2007] FamCAFC 1178
Munday v Bowman (1997) FLC 92-784
Penfold v Penfold (1980) 144 CLR 311
Ragatta Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court,
3 May 1991)
Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT: Mr Makaral

RESPONDENT: Ms Makaral

FILE NUMBER: PAC 5367 of 2010

DATE DELIVERED: 8 March 2017

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 12 December 2017

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Chand of Rajesh Chand & Associates

SOLICITOR FOR THE RESPONDENT: Ms Stouppos of Slater & Gordon Lawyers

Orders

1. That the wife pay the husband’s costs of and incidental to these proceedings including costs of this costs application on a party/party basis as agreed within one month from the date of these orders or failing agreement as assessed.

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 Makaral & Makaral 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 5367  of 2010

Ms Makaral

Applicant

And

Mr Makaral

Respondent

REASONS FOR JUDGMENT

1. The application for determination is an application for costs by the husband as against his former wife arising from the wife seeking leave to withdraw her application initiating proceedings filed on 4 August 2015 seeking relief under s 79A of the Family Law Act 1975 (“the Act”) as to property orders made by consent in the then Federal Magistrates Court of Australia on 17 May 2012 by Federal Magistrate Halligan as he then was.

2. In summary, the wife’s application sought that the property orders be set aside and that she be paid the sum of $400,000.00 by way of a property adjustment.

3. The proceedings have had a somewhat chequered history.

4. The wife’s application was first listed before a registrar on 21 October 2015 at which time she was granted leave to issue a subpoena to the AMP Society as to an asserted payout received by the husband subsequent to the consent orders as to property.

5. When the proceedings were before a registrar on 31 March 2016 it was noted that subpoenaed documents did not show any payments had been made and that the husband denied receiving any such payment. Proceedings were thereupon adjourned for a procedural hearing to 3 May 2016. On that date the wife asserted that the production of documents by the AMP Society was deficient. The husband was ordered to sign an appropriate authority to the AMP Society and to provide an answer to a request for specific questions within 21 days.

6. Proceedings were again before a registrar on 10 June 2016 and were adjourned to 1 August 2016 and on that date adjourned to 15 September 2016. Proceedings were then adjourned for judicial case management to 12 December 2016.

7. On listing for judicial case management on 12 December 2016 orders were made by consent that the wife’s application filed 4 August 2015 be dismissed. The question of costs was reserved until completion of written submissions.

Costs: General Principles

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 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.

3. 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.

4. 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.

5. The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:

   17. With respect to the application of the section, in Penfold and Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:

   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".

   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 forA (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.

6. It is contended on behalf of the husband that the wife’s application to set aside early property orders was based merely on speculation and suspicion. The fact that subsequently her application was dismissed by consent is certainly indicative of that suggestion.

7. As to the relevant considerations:

   a)The financial circumstances of the parties: the wife filed a financial statement in the context of the s 79A proceedings on 4 August 2015. At that time she was in full-time employment earning over $50,000.00 per annum. Otherwise she was possessed of three real estate properties having a combined value she asserted of $1.8 million and had some $100,000.00 in cash funds in the National Australia Bank and a business that she valued at $275,000.00 with superannuation of $153,000.00. Her properties were subject to, it appears, mortgages totalling $565,000.00. It is clear that she is a woman of considerable resources. The husband filed a financial statement in these proceedings on 7 October 2015. He was in receipt of an income of about $600.00 per week and owned one real estate property valued at $850,000.00 unencumbered with cash at bank of about $120,000.00 and a business having a value of $150,000.00, he had superannuation of $204,000.00. Clearly the wife has the capacity to meet an order for costs although she contends that as both parties are not in parlous financial circumstances there should be no order for costs.

   b)Legal aid: not applicable.

   c)The conduct of the parties in relation to the proceedings: the husband contends that the proceedings were protracted and unnecessarily delayed by the wife’s procrastination requiring numerous attendances before the registrar. In response, the wife contends that she at all times sought to pursue her proceedings and sought to obtain evidence by way of subpoena, the administration of a request for further and better particulars and with the authority of the husband permitting her to make enquiries of the AMP Society. It seems incongruous that the wife would commence proceedings in circumstances where her case was based on suspicion and innuendo and where the husband had no obligation to provide financial disclosure. She asserts that it was a commercial decision by her to discontinue her application.

   d)Failure to comply with previous orders: there is no cogent submission in this regard.

   e)Whether a party has been wholly unsuccessful: it is contended on behalf of the husband that in her application being dismissed the wife has been wholly unsuccessful in circumstances where her application had no prospect of success.

   f)Offer in writing: not applicable.

   g)Any other fact or circumstance: the husband contends that the wife sought to set aside orders made by consent in 2012 when such orders were made in circumstances where she was legally represented. The only basis for her application was she asserts the husband’s failure to disclose prospective benefits from the AMP Society of $750,000.00. Ultimately her assertion concretely failed.

Indemnity Costs

1. The application before the Court is an application for the wife to pay the husband’s costs on an indemnity basis. It is asserted that such costs are in the sum of $14,345.00.

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

3. Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly rule 19.18, provide 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.

4. The Rule further provides, in subparagraph (3), 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.

5. 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.

6. 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 s 117(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.

7. 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.

8. 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.

9. 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.

1. However Rule 19.08 of the Family Law Rules 2004 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.

1. The husband has failed to disclose or provide a copy of his Costs Agreement as between himself and his solicitors in compliance with rule 19.08(3). Failure to do so is fatal to his application for indemnity costs.

2. Otherwise it is clear that there should be an order that the wife pay the husband’s costs of the proceedings and this costs application on a party/party basis.

3. An order will be made accordingly.

I certify that the preceding twenty seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 8 March 2017.

Associate: 

Date:  7 March 2017