Maurice & Barry (No 2)
[2019] FamCA 639
•10 September 2019
FAMILY COURT OF AUSTRALIA
| MAURICE & BARRY (NO. 2) | [2019] FamCA 639 |
| FAMILY LAW – COSTS – Offer of settlement – Where the applicant made an offer for a payment to the respondent of a greater sum than awarded – Where the respondent rejected the offer ‘at her peril’ – Where the respondent is casually employed and has no assets – Where the respondent is ordered to make a contribution towards the applicant’s legal costs in a specific amount of $35,000. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 In the Marriage of Murray (1990) FLC 92-173 In the marriage of Nikitaris (unreported, Family Court of Australia, Purvis J, 13 April 1989 In the Marriage of Pennisi (1997) FLC 92-774 Lenova & Lenova (Costs) [2011] FamCAFC 141 Penfold v Penfold (1980) 144 CLR 311 Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 Robinson & Higginbotham (1991) FLC 92-209 Sfakianakis & Sfakianakis [2019] FamCAFC 54 |
| APPLICANT: | Ms Maurice |
| RESPONDENT: | Ms Barry |
| FILE NUMBER: | CAC | 996 | of | 2010 |
| DATE DELIVERED: | 10 September 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Carew J |
| HEARING DATE: | In chambers by way of written submissions |
REPRESENTATION (BY WRITTEN SUBMISSIONS)
| COUNSEL FOR THE APPLICANT: | Mr Kirk QC |
| SOLICITOR FOR THE APPLICANT: | Mills Oakley Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Marino Law |
Order
The respondent is to pay the costs of the applicant fixed in the sum of $35,000 within 12 months.
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 Maurice & Barry 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 BRISBANE |
FILE NUMBER: CAC996 of 2010
| Ms Maurice |
Applicant
And
| Ms Barry |
Respondent
REASONS FOR JUDGMENT
On 1 May 2019 I concluded a three day parenting and property trial between Ms Maurice (“the applicant”) and Ms Barry (“the respondent”) and delivered judgment on 29 May 2019. By application filed 27 June 2019, the applicant seeks an order for costs on a solicitor/client basis[1] fixed in the sum of $86,227.17, in relation to the property part of the trial as from 25 October 2018 to the end of the trial.
[1] The application for indemnity costs was not pressed.
The application for costs is opposed by the respondent.
With the consent of the parties, this application has proceeded upon the basis of written submissions in chambers and, for the reasons set out below, I propose to make an order that the respondent contribute towards the costs incurred by the applicant from 2 November 2018 fixed in the sum of $35,000 payable within 12 months.
Applicable legal principles
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) confers on the Court a broad discretion to make such order as to costs as the Court considers just, where there are circumstances that justify it in doing so (s 117(2)), although each party generally bears their own costs in this jurisdiction (s 117(1)).
In the exercise of the discretion to award costs, regard must be had to the factors set out in s 117(2A) of the Act, so far as they are relevant.
Those factors are 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.
No one factor has more weight than any other, nor is it necessary for more than one factor to be present.[2]
[2] Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at 130.
A party may apply for an order that another person pay costs at any stage during a case and, if applying for costs on an indemnity basis, the terms of any costs agreement are to be disclosed (r 19.08 of the Family Law Rules 2004 (Cth) (“the Rules”)).
The method of calculation of costs is set out in r 19.18 of the Rules and empowers the Court to 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.
In considering what specific order should be made, the same rule provides that the Court may consider any of the following factors:
e)the importance, complexity or difficulty of the issues;
f)the reasonableness of each party’s behaviour in the case;
g)the rates ordinarily payable to lawyers in comparable cases;
h)whether a lawyer’s conduct has been improper or unreasonable;
i)the time properly spent on the case, or in complying with pre-action procedures; and
j)expenses properly paid or payable
In Penfold v Penfold[3] the High Court held:
Sub-section (2) [of s 117 of the Act] 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 [s 117(1) and s 117(2)] which imposes any additional or special onus on an applicant for an order for costs.
[3] (1980) 144 CLR 311 at 315.
The tension between an order for costs on a party/party basis and some other basis is discussed in Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2)[4] where the Full Court of the Federal Court (per Black CJ) said:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225.
[4] (1996) 72 FCR 151 at 156-157.
The Full Court (per Cooper and Merkel JJ) went on to restate the principles from Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 as follows:
1. Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2. In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a)the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c)whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
The basis upon which costs may be awarded can be ‘fashioned’ to suit the particular circumstances of the case. In Sfakianakis & Sfakianakis[5] the Full Court of the Family Court held:
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 falls 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. For convenience, in these reasons we shall refer to such orders as a “special costs order”.
[5] [2019] FamCAFC 54 at [10].
discussion
In support of the application for costs it is submitted by the applicant that the circumstance of a written offer of settlement made on 25 October 2018 providing for a payment to the respondent of a greater sum than awarded justifies an order for costs on a lawyer/client basis from that date.
The applicant deposes to having incurred costs of $258,940.45 for the period 25 October 2018 to 29 May 2019, including Queen’s Counsel and experts’ fees. It is estimated by the applicant that about two thirds of the costs incurred related to the financial aspects of the proceedings and that is the basis upon which she claims $86,227.17. The applicant does not disclose any basis for her estimate.
The letter of offer dated 25 October 2018 provided an acceptance period of seven days. Any award for costs should be from the latter date.
If accepted, the respondent would have received a payment of $1,050,000 rather than the $974,666 awarded. The sum awarded to the respondent represented 40 percent of the net assets.
In the applicant’s written submissions reference is made to three decisions. First, in In the Marriage of Murray[6] where Nygh J said:
On the basis of what the Parliament’s objective and purpose was in enacting legislation, it is clear that the Parliament wished to encourage settlements thereby reducing the cost of litigation to the parties and the community. That must mean that a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs.
[6] (1990) FLC 92-173 at 78,178.
Second, in In the marriage of Nikitaris[7] where Purvis J said:
It seems to me that where a party in circumstances the like of those existing in this matter does make an offer pursuant to S. 117C that it is incumbent upon the party to do all things as may then be necessary to become appraised of the strength and weaknesses of the case and to then and there give consideration as to whether the offer should not be accepted.
A non-acceptance of an offer, all other matters in S. 117 being taken into account, should put the non-accepting party on notice that if the order in due course made by the Court, either by consent or as a consequence of a contested hearing, is in accord with the offer or all on all fours with it, that he runs the risk, or she runs the risk, of having to pay the costs incurred subsequent to the offer being made and as a consequence of the matter having had to be litigated.
[7] (unreported, Family Court of Australia, Purvis J, 13 April 1989) and referred to by Nygh J in In the Marriage of Murray.
Third, in Robinson & Higginbotham[8] where Nygh J said, relevantly:
…The purpose of the provision [s 117(2A)] is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the costs of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.
[8] (1991) FLC 92-209 at 78,417.
There is no suggestion that the latter part of that quote applies in this case. It is conceded by the applicant that she is in a stronger financial position than the respondent, although the four children of the relationship live primarily with the applicant and spend five nights per fortnight with the respondent.
The respondent seeks to resist a costs order on the basis that her “capacity to assess the appropriateness of the… offer… was limited as a result of her lack of financial knowledge and the… lack of disclosure”. Reliance is placed upon In the Marriage of Pennisi[9] where the Full Court said:
Offers must be seen in the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live…There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, not matter how close to the ultimate result the offer may be.
[9] (1997) FLC 92-774 at 84,547.
Further, it is submitted that the entire sum received by the respondent has now been expended in meeting her legal costs of $380,158.86 and the balance used towards the purchase of a home for $616,915.00 (including stamp duty). The respondent is currently in casual employment at an early learning centre and has no other assets, other than a motor vehicle.
Lastly, it is submitted that costs thrown away by the Federal Circuit Court being unable to hear the trial when it was listed for trial in December 2018 should not be a cost borne by the respondent.
Conclusion
It was never in contention in this case that the applicant’s financial contributions substantially exceeded those of the respondent, although the applicant may have had limited knowledge of the precise quantum of those contributions.
On 3 October 2018, the applicant particularised her initial contributions and gifts and inheritances as follows:
Shares to the value of $1,500,000 and property to the value of $600,000
Gifts and inheritances to the value of $3,000,000
It is conceded by the respondent that at the mediation on 17 October 2018, the applicant produced some documents which went some way towards corroborating the quantum, at least in relation to real estate. While the respondent did not know the details of the other contributions, it was not in contention that the parties and their children lived a very comfortable lifestyle throughout the 17 year relationship, and that the applicant received substantial sums from her family throughout that time.
The respondent rejected the offer ‘at her peril’ and, in so doing, should bear the consequences, at least to some degree. Impecuniosity of itself cannot defeat a claim for costs.[10]
[10]Lenova & Lenova (Costs) [2011] FamCAFC 141.
While no challenge is made to the quantum of costs claimed (other than to the costs thrown away in December 2018), I note that the costs sought by the applicant appear to represent one third of her entire costs i.e. indemnity costs. As conceded by the applicant, this is not a case that would warrant an award for costs on an indemnity basis. In relation to the costs thrown away by the case not being reached in December 2018, I note the applicant’s Queen’s Counsel’s costs agreement entitles him to cancellation fees if a case does not proceed for any reason and I accept the submission that the costs thrown away should not be visited upon the respondent.
It is regrettable that the applicant has not included a schedule of fees including a schedule calculated on scale (both on party/party and lawyer/client) but I have had regard to the relevant schedule in the Rules in considering whether it would be more appropriate to cause the costs to be assessed rather than fixing a sum. If I order the costs to be assessed, further legal costs will, of necessity, be incurred. That should be avoided wherever possible.
Accordingly, I propose to order the respondent to make a contribution towards the applicant’s legal costs in a specific amount of $35,000. While no submissions were made by the respondent about time to pay I do not propose to order that payment occur within 14 days as sought by the applicant. The respondent has recently commenced casual employment. She has no funds from which a payment could readily be made. I consider that time to pay should be granted and that 12 months is a reasonable time.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 10 September 2019.
Associate:
Date: 10.09.2019
6
2