Medlon & Medlon (No. 6) (Indemnity Costs)
[2015] FamCAFC 157
•13 August 2015
FAMILY COURT OF AUSTRALIA
| MEDLON & MEDLON (NO. 6) (INDEMNITY COSTS) | [2015] FamCAFC 157 |
| FAMILY LAW – APPEAL – INDEMNITY COSTS – Where the husband seeks that the wife pay his costs on an indemnity basis as a result of her unsuccessful applications seeking to restrain his senior counsel and solicitor from further acting on his behalf – Where the wife relies on her financial situation and opposes the application – Where the wife should never have brought the applications – Where the wife is a legal practitioner and should have been aware of that – Where the wife made scandalous allegations against the husband’s solicitor for which she produced no evidence – Where the wife was estopped from pursuing her application against the husband’s solicitor but did not concede that was the case until the hearing on 12 February 2015 – Where impecuniosity is not a bar to a costs order being made when the circumstances justify such an order – Where there are circumstances here that justify such an order being made – Costs ordered on an indemnity basis in favour of the husband. |
| Family Law Act 1975 (Cth) – S 117(1), (2) and (2A) Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 |
| APPLICANT: | Ms Medlon |
| RESPONDENT: | Mr Medlon |
| FILE NUMBER: | ADC | 491 | of | 2010 |
| APPEAL NUMBER: | SOA | 88 | of | 2012 |
| DATE DELIVERED: | 13 August 2015 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Strickland J |
| HEARING DATE: | 27 March 2015 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 30 October 2012 |
| LOWER COURT MNC: | [2012] FMCAfam 1479 |
REPRESENTATION
| THE APPLICANT: | In person by telephone link |
| COUNSEL FOR THE RESPONDENT: | Ms Nelson QC |
| SOLICITOR FOR THE RESPONDENT: | Adelaide Family Law |
Orders
The wife pay the costs of the husband of and incidental to the applications to restrain the husband’s senior counsel and the husband’s solicitor from continuing to act for the husband, such costs to be assessed on an indemnity basis in default of agreement.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Medlon & Medlon (No. 6) (Indemnity Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: SOA 88 of 2012
File Number: ADC 491 of 2010
| Ms Medlon |
Applicant
And
| Mr Medlon |
Respondent
REASONS FOR JUDGMENT
Introduction
On 12 February 2015 I heard and determined that part of the application in an appeal filed by Ms Medlon (“the wife”) on 5 July 2013, seeking orders effectively restraining Ms Nelson QC, the senior counsel for Mr Medlon (“the husband”), and Ms Joanne Collie, the husband’s solicitor, from acting further in these proceedings.
I dismissed those applications on 12 February 2015 and then delivered my reasons for judgment in relation thereto on 13 March 2015.
At the hearing on 12 February 2015 Ms Nelson made an application for costs consequent upon the dismissal of the applications. That application was opposed by the wife, and after hearing submissions I reserved my decision. One reason for that was, given the plethora of applications in this matter, I was unsure if there were any previous costs applications still to be finalised. I have now satisfied myself that there were no outstanding costs applications as at 12 February 2015, and thus, I will now address the application for costs made on that day.
The application for costs
The husband seeks an order that the wife pay the costs of and incidental to the application seeking, in effect, to restrain Ms Nelson and Ms Collie from continuing to act for him. It is sought that those costs be as assessed on an indemnity basis, in default of agreement.
The first question is whether a costs order should be made at all given the wife’s opposition to the application.
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) governs any application for costs whether it is in the context of an appeal or a first instance hearing, and relevantly provides as follows:
(1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 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), (4A), 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.
As can be seen, the primary position is that each party is to bear their own costs, but a costs order can be made where there are circumstances that justify it, and in determining that, regard has to be had to the factors set out in s 117(2A).
There is no question that there are circumstances here that would justify an order for costs, given that the wife has been “wholly unsuccessful in the proceedings” (s 117(2A)(e)).
There is also the wife’s conduct in relation to the proceedings, in that they were delayed whilst the wife made unsuccessful attempts to gather the evidence that she said she needed to demonstrate a basis for the application to restrain Ms Nelson from continuing to act for the husband. In the end result the wife was unable to present any such evidence. The detail of those attempts to gather evidence, and the delays, are set out in my reasons for judgment published on 13 March 2015 (see Medlon & Medlon (No. 3) [2015] FamCAFC 37), and I do not propose to repeat them here, but instead I incorporate them in these reasons for judgment.
There was also a delay whilst the wife pursued an unsuccessful appeal against my refusal to disqualify myself, and that is also addressed in Medlon & Medlon (No. 3).
I hasten to add though, that this conduct of the wife cannot be the basis for an order for costs against her, given that there have been orders for costs made along the way in respect of those matters, where appropriate.
However, what is relevant is that the applications should never have been brought in the first place. As explained in Medlon & Medlon (No. 3), these applications never had any chance of success, and, given that the wife is an admitted legal practitioner, she should have been aware of that.
Further, in relation to the application to restrain Ms Collie, the wife has made scandalous allegations for which she produced no evidence, and they were allegations that should never have been made (see [42] – [47] of Medlon & Medlon (No. 3)). For example, in oral submissions the wife alleged that Ms Collie was “attempting to pervert the course of justice” (transcript 12.2.2015, page 37, lines 12-13), yet no evidence was presented to establish that claim.
Then there is the circumstance that the wife was estopped from pursuing her application against Ms Collie as from 31 October 2014, yet she still maintained the application thereafter (see [48] of Medlon & Medlon (No. 3)). It was only during the hearing on 12 February 2015 when the court was alerted to the email that the wife sent to the Appeal Registrar and to Ms Collie on 31 October 2014, that the wife accepted that she could not pursue the application and that it should be dismissed.
Thus, to repeat, there are clearly circumstances here that justify this court making an order for costs against the wife.
The wife though opposes any order for costs. She disputes that her applications had no chance of success, but I am clearly against the wife in that regard. The other basis for opposing any application for costs is the financial circumstances of the parties (s 117(2A)(a)), but in reality, the wife’s allegedly parlous financial position.
At the hearing, the wife suggested that the proceedings have cost her “an enormous amount of money”, namely “hundreds of thousands of dollars”, that she has “no equity”, “no capacity to pay”, and she spends more than she earns (transcript 12.2.15, page 39, lines 16 and 17, line 21 and line 23 respectively).
As to the detail, the wife informed the court that her income as a full-time legal practitioner is about $3,200 gross per fortnight, that she also receives rent from one of her two properties of $600 per fortnight, that her total income net of income tax is about $2,900 per fortnight, and her personal living expenses are over $3,000 per fortnight.
The two properties that the wife owns, she says, are valued at $635,000 in total, and her only other assets are a motor vehicle and furniture valued, again she says, at a total of $30,000, and $300 in the bank.
As for liabilities, the wife says that she has two mortgages and two personal loans totalling $640,000, a credit card liability of $5,000, and outstanding legal fees of $94,000.
There is little or no current evidence before the court as to the husband’s financial circumstances, but plainly this is about the wife’s financial position.
There are two significant points to be made about the wife’s financial circumstances. First, although she says her expenses currently exceed her income, and her liabilities exceed her assets, she is still working full-time as a legal practitioner and receiving a substantial income, and she has valuable assets. Thus, the wife cannot maintain that she has no capacity to meet an order for costs.
Secondly, even if this court found that the wife is not able to meet an order for costs, there is clear Full Court authority that impecuniosity is not a bar to a costs order being made, and particularly where there are circumstances which otherwise justify an order for costs (e.g., see D & D (Costs) (No. 2) (2010) FLC 93-435), and that is the case here.
There is no doubt that any one of the factors in s 117(2A) of the Act cannot prevail over any of the other factors, and it is a matter of the weight that is accorded to each of the relevant factors. In this case, lack of success and the wife’s conduct plainly outweigh any other factors, including the financial circumstances of the wife. The wife brought the application and the husband was obliged to respond and incur significant legal expenses in doing so.
Thus, I propose to make an order that the wife pay the costs of the husband of and incidental to the applications to restrain Ms Nelson and Ms Collie from continuing to act for him.
The husband of course seeks that those costs be assessed on an indemnity basis, rather than the usual party/party basis.
In relation to this claim, it is useful to record what the Full Court said in D & D (Costs) (No. 2):
26.In Limousin & Limousin (Costs) [2007] 38 FamLR 478, the Court reviewed the authorities in relation to indemnity costs. Reference was there made to the judgment of the Full Court in Kohan and Kohan (1993) FLC 92-340. It was recorded at 79,614 (citations omitted) in which it was said that:
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 368–70.
Indemnity costs orders are still an exception in this and other jurisdictions.
27.The Court in Limousin (supra) also referred to the judgment of Shephard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 upon which learned Counsel for the Wife relies in support of the present application. Shephard J said in Colgate-Palmolive (supra) (at 256):
“2.The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis …
3.This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it …
4.In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course …”
28.Reference was made to the later decision of the Full Court of Yunghanns v Yunghanns (2000) FLC 93-029 in which is [sic] was said (at 87,471, par 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 an order is sought.”
In Colgate-Palmolive Company v Cussons Pty Limited, Sheppard J provided some examples of circumstances that might warrant the exercise of discretion to award indemnity costs, and usefully, Holden CJ in Munday v Bowman (1997) FLC 92-784 at 84,660, drew from his Honour’s decision the following:
(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.
Plainly, the applications here come within the first and fourth examples, and there is a clear basis for providing that the costs be assessed on an indemnity basis, and the court will so order.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland delivered on 13 August 2015.
Associate:
Date: 13 August 2015
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