Mitchell and Mitchell (No.2)
[2015] FCCA 2907
•30 October 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MITCHELL & MITCHELL (No.2) | [2015] FCCA 2907 |
| Catchwords: FAMILY LAW – Application for costs – application for costs by mother against the father following dismissal of application to vary final parenting orders – whether justifying circumstances for costs – what order for costs should be made. |
| Legislation: Family Law Act 1975, s.117(1)(2)(2A) Federal Circuit Court Rules 2001, r.21, Schedule 1 |
| Mitchell & Mitchell [2015] FCCA 2793 Cassidy & Murray (1995) FLC 92-633 Specsavers Pty Limited v Luxottica Retail Australia Pty Limited (No.2) [2013] FCA 807 |
| Applicant: | MR MITCHELL |
| Respondent: | MS MITCHELL |
| File Number: | DGC 1344 of 2011 |
| Judgment of: | Judge O'Sullivan |
| Hearing date: | On the papers |
| Date of Last Submission: | 19 October 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 30 October 2015 |
REPRESENTATION
| Solicitors for the Applicant: | David Wilkinson & Co |
| Solicitors for the Respondent: | Mackinnon Jacobs Lawyers |
| Solicitors for the Independent Children's Lawyer: | Peter Lynch |
ORDERS
The applicant pay the respondent’s costs fixed in the amount of $16,481.50 within 30 days.
IT IS NOTED that publication of this judgment under the pseudonym Mitchell & Mitchell (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
DGC 1344 of 2011
| MR MITCHELL |
Applicant
And
| MS MITCHELL |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for decision concern an application for costs by
Ms Mitchell (“the mother”) against Mr Mitchell (“the father”).
The relevant background is set out in Mitchell & Mitchell [2015] FCCA 2793. For the reasons set out therein the father’s application was dismissed and the following orders were made:
“THE COURT ORDERS THAT:
1. The orders made on 13 February 2012 remain in full force and effect.
2. The respondent file and serve any submissions in support of her application for costs within seven (7) days.
3. The applicant file and serve any submissions in reply seven (7) days thereafter.
4. The Independent Children’s Lawyer have seven (7) days after that to file and serve any submissions it wishes to make.
5. The respondent file and serve anything in reply three (3) days after that.
6. The decision on the respondent’s application for costs be otherwise reserved.
7. Thereafter the appointment of the Independent Children’s Lawyer be discharged.
8. Pursuant to s.65DA(2) of the Family Law Act 1975 the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders and these particulars are included in these orders.”
The mother filed submissions on 7 October 2015. The Independent Children’s Lawyer filed submissions on 8 October 2015. The father’s submissions were filed on 19 October 2015. The mother did not file submissions in reply. The application was dealt with on the papers in chambers.
For the reasons that follow, the father should pay the costs of the mother but only in relation to the trial and those costs are fixed at $16,481.50.
Submissions
The mother’s submissions in relation to her application for costs filed on 7 October 2015 were as follows:
“1. The Mother seeks an order for the costs of and incidental to:
1.1the final hearing before the Court on 21st-23rd September 2015; and
1.2the filing of summary of argument and reply filed 4th March, 2015 and 16th March 2015 on behalf of the Mother;
1.3the filing of these written submissions as to costs on behalf of the Mother;
from the date of the filing of the Father’s Application, being 17th September 2014.
2.The Mother seeks that such costs be paid on an indemnity basis, or in the alternative on a party/party basis.”
The mother’s submissions then referred to the orders made on 30 September 2015 for the reasons set out in Mitchell & Mitchell [2015] FCCA 2793 and the relevant sections of the Family Law Act 1975 (Cth) on costs before going on to submit:
“…
5. An order for costs is compensatory in the sense that it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the legal proceedings (see Latoudis v Casey (1990) 170 CLR534; Cassidy v Murray (1995) FLC 92-633).
6. The normal rule in proceedings under the Family Law Act 1975 (“the Act”) is that each party pay their own costs (s.117(1)). However, the Court may make an order for costs if it is satisfied that in the particular circumstances of the case it should do so.
7. Section 117(2) of the Act provides that in an appropriate case the Court may make an order for costs against one or other parties notwithstanding the general rule in s.117(1). Section 117(2) of the Act requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs.
8. The High Court in Penfold v Penfold (1980) 144 CLR 311 has said that the wording of that section does not create an onus on either of the parties and that it is a matter for the court in each case to consider, having regard to the matters in section 117(2) of the Act, whether in a particular case to exercise discretion to order costs or not to order costs.
9. Section 117(2A) of the Act sets out the factors to which the Court shall have regard when considering an order for costs.
10.There is nothing within Sections 117(2), (2A) that places priority of one factor over another nor indeed places any requirement for one factor to be in combination with another. Any factor standing alone can be sufficient to persuade the court to exercise its discretion to award costs.
11.In LAC v TRF & LKL [2005] FamCA 158 at paragraph [41], Their Honours KAY, WARNICK, BOLAND JJ stated:
“Nowhere in subsection (2A) or elsewhere in section 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 subsection (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs”
12.The authorities make clear that the weight to be attached to any of the considerations is s.117(2A) is wholly discretionary. As Kay J said in Brown v Brown (1998) FLC 92 - 822 at 85,347:
“In many cases there will be an outstanding feature …that makes an order for costs appropriate, a feature which so dominates the scene that it can outweigh any of the other s.117(2A) considerations.”
The mother’s submissions (to which it will be necessary to return to later in these reasons) then went on at paragraphs [13] to [27] to address each of the factors in s.117(2A) and the issue of her application for indemnity costs before concluding:
“Costs Claimed
27.Annexed hereto and marked with the letter “A” is an itemized Bill of Cost wherein $68,258.96 claimed on an indemnity basis for the Mother’s legal fees as from 17th September 2015.
28.Annexed hereto and marked with the letter “B” is an itemized Bill of Cost wherein $26,824.48 is claimed on a party/party basis on scale.
29.Notwithstanding the various alternative positions, in respect to costs, as set out herein it is submitted that an order for costs in the Mother’s favour in the sum of $68,258.96 on an indemnity basis as from 17th September 2014 is justified in all the circumstances of this case.”
The Independent Children’s Lawyer’s position was as follows:
“1. Pursuant to Order 4 of the Orders made on 30 September 2015 (Annexed hereto and marked with the letter “A”, the Independent Children’s Lawyer is required to file and serve by 21 October 2015 any submissions he wishes to make in respect of any costs application against the father.
2.After consultation with Victoria Legal Aid, the Independent Children’s Lawyer does not seek to make any costs application against the father.
3.The brief reasons for this are that both prior to the trial hearing and at the final submissions hearing, the Independent Children’s Lawyer proposed that an increase of the father’s time (subject to conditions) was a possible option for the learned Judge O’Sullivan to implement.”
Notwithstanding the timetable set out in the orders referred to in paragraph [2] above the father requested further time to file submissions (which the mother didn’t oppose). The father filed submissions on 19 October 2015 in relation to costs which were:
“Pursuant to section 117(1) of the Family Law Act 1975 each party to proceedings under the Act ordinarily bears their own costs. The court is invited not to depart from section 117(1) in this case because:
(a)the proceeding concerns parenting matters. As such, the outcome of the proceeding depends upon a discretionary judgment about what will ultimately be in the best interests of the children.
(b)in this case, both the Family Report writer and Independent Children’s Lawyer supported a variation of the existing orders so as to increase the children’s time with the Father, albeit with review provisions in place.
(c)The Court is the arbiter of what is in the best interests of the children. However, the Court is also invited to bear in mind that the Father brought this application because he loves his children. His desire to spend more time with them is simple, natural, and understandable.
(d)In light of the written report of Mr P and the proposals of the Independent Children’s Lawyer, the Father could be forgiven for believing he had a meritorious case that would find favour with the Court at final hearing.
These submissions respond to the Mother’s Costs Submissions adopting her paragraph numbering as follows:
5. In Latoudis & Casey, the High Court was required to rule upon what, if any, were the criteria to be applied by a court of summary jurisdiction in exercising a statutory discretion to award costs in criminal proceedings which have terminated in favour of a defendant. The Full Court of the Family Court mentioned Latoudis when giving judgment in Cassidy & Murray. In the latter case, a solicitor had written letters to the trial judge, and to the Chief Justice, when the trial judgment was published, which resulted in the trial judge having to disqualify himself from the further conduct of the case. The matter was assigned to another judge who proceeded to order the solicitor personally to pay the costs incurred by the other party consequent upon the disqualification. On appeal, the Full Court stated that the solicitor’s conduct amounted to serious dereliction of duty and confirmed the costs order against him. The Full Court stated that the costs power was compensatory as distinct from punitive. The Court is invited to the conclusion that neither Latoudis nor Cassidy are particularly relevant to the present case.
6. Section 117(1) states:
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.
7. Section 117(2) provides:
If in proceedings under this Act the court is of the opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2), (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.
8. What the High Court said in Penfold was that ‘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.’ The Mother does bear the onus of showing why the court should depart from the usual rule that each party bears his or her own costs.”
The father’s submissions (to which it will be necessary to return later in these reasons) then went onto address each of the factors in s.117(2A), the issue of the mother’s application for indemnity costs and the mother’s calculations for costs by reference to Schedule 1 of the Federal Circuit Court Rules 2001 was set out in her submissions.
As noted earlier the mother did not file submissions in reply. No further submissions were filed nor was any application made to do so.
Application for costs
The normal rule in proceedings under the Family Law Act 1975 (“the Act”) is that each party pay their own costs (s.117(1)). However, the Court may make an order for costs if it is satisfied that in the particular circumstances of the case it should do so.
Section 117(2) of the Act provides that in an appropriate case the Court may make an order for costs against one or other parties notwithstanding the general rule in s.117(1). Section 117(2A) of the Act sets out the factors to which the Court shall have regard when considering an order for costs.
“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.”
The High Court in Penfold v Penfold (1980) 144 CLR 311 has said that the wording of that section does not create an onus on either of the parties and that it is a matter for the Court in each case to consider, having regard to the matters in section 117(2A) of the Act, whether in a particular case to exercise discretion to order costs or not to order costs.
The authorities also make it clear that an order for costs is compensatory in the sense that it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the legal proceedings (see Latoudis v Casey (1990) 170 CLR 534; Cassidy v Murray (1995) FLC 92-633).
In PBF (as child representative for AF (Legal Aid Commission of Tasmania)) & TRF & LKL [2005] FamCA 158 the Full Court (per Kay, Warnick and Boland JJ) referring to s.117(2A) said at 130:
“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 s117, 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.”
Finally s.117(2) of the Act requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs.
Consideration of the application
I now turn to deal with the factors set out above having regard to submissions made by each of the parties in respect of those matters and against the background of the reasons in Mitchell & Mitchell [2015] FCCA 2793.
The financial circumstances of each of the parties
The mother in submissions, noted that:
“The financial circumstances of each of the parties
13. It is not normally appropriate to engage in a detailed analysis. "An inquiry under s 117(2A)(a) where the financial circumstances of the parties may be relevant is an inquiry to enable the court to have some concept of the relative financial positions of the parties. It is not a search for minutiae nor is it to be seen as an appropriate exercise to conduct inconsequential arguments over the value of each party's assets." Browne v Green (2002) 29 Fam LR 428; FLC 93–115; [2002] FamCA 791.
14.In this case both parties are not in receipt of Legal Aid, are paying their respective legal fees privately and are employed. The mother gave evidence that she had drawn upon her house deposit savings to fund the litigation. The Father gave evidence that he had not submitted tax returns for the last 2 years and that his child support assessment income was different (less) than his actual income. This factor contained in S117(2A)(a) should provide the court no impediment to its discretion in ordering costs against the Father.”
The father in submissions noted:
“Financial circumstances of each of the parties
13-14 It is common ground that the Father works as a [omitted] and the Mother works as a [omitted] and that each party has paid for their own legal representation without assistance from Victoria Legal Aid.”
I note in light of the authorities that an order for costs is compensatory in the sense it is awarded to indemnify the successful party against the expense they have been put by reason of the proceedings. On the material before the Court this factor does not tell against an order for costs.
Whether either party is in receipt of legal aid
Neither the mother nor the father is in receipt of any legal aid assistance and no one suggested this was a relevant factor.
Conduct of parties to proceedings
The mother in submissions noted:
“The conduct of the parties to the proceedings in relation to the proceedings
15.Conduct is a matter of great importance in costs, and has been the subject of considerable case law. It is submitted that the most common situation where an order for costs is made is because of some particular aspect of the conduct of a party to the proceedings, which conduct has in some way led to an additional burden or cost being incurred by the other party. In In the Marriage of Jensen (1982) 8 Fam LR 594 at 595, Nygh J said that if as a result of non co-operation, obstructiveness or otherwise, one of the parties causes the conduct of the proceedings to be unduly prolonged or made unduly expensive to the other side then an order for costs would be warranted.
16.Where a party has made allegations of fault which were not relevant to the proceedings costs will properly be awarded against that party. An order for costs will also be made where a party has conducted proceedings in an unjustifiable manner: In the Marriage of Fisher (1990) 13 Fam LR 806; FLC 92–127.
17.Conduct in an Application for costs can be a very significant factor. In this case, the Father’s conduct as summarized below elevate this case from beyond a simple order for party/party costs on scale to one requiring the Mother’s costs being awarded on an indemnity basis:
17.1 Repeatedly breaching intervention orders
17.2Lying on oath about the extent of the death threats he made to the maternal grandmother about the Mother
17.3Suggesting through his counsel that the Mother’s intervention orders were a sham to deny his relationship with the children
17.4Claiming with unbridled ignorance that the Mother and her family had “white anted” his relationship with the children
17.5Suggesting in the witness box that he understood that the Mother had every reason to go to a refuge due to his violent threats and her fears yet swearing in an Affidavit that there had been no threats and that she went there because she felt guilty over an affair
17.6Lying about the extent of his road rage incidents since the making of the 2012 final orders
17.7Misrepresenting his alcohol consumption both past and present
17.8Seeing Ms S in secret to avoid disclosure of the sessions to the court via subpoena then mentioning it to the court for the first time in the witness box
17.9Misleading Mr P about the [omitted] festival and his unresolved road rage incidents
17.10 Showing no insight into the effect of his behaviour on the children yet claiming to have gained insight following “losing his children” and participating in courses.
17.11 Despite his protestations of being a changed man he could not point to even 3 months of trouble free times.
In summary, the Father’s evidence at the 2015 Final hearing belied the veracity of his claims. He has embarked upon conduct that has necessitated continuous, expensive litigation from the date of separation in 2011, to present time. This case is not a fact scenario where “it takes two to tango” but is a self-centred, reckless disregard for the Mother as primary carer of the children in a background of continual family violence and total lack of insight on the effect of such conduct.”
The father in submissions noted that:
“Conduct of the parties to the proceedings in relation to the proceedings
15. Section 117(2A)(c) clearly refers to the conduct of the parties in relation to the proceedings.
In the Marriage of Jensen (1982) 8 Fam LR 594, cited by the Mother, Nygh J held that this factor concerned
the conduct of the parties at the hearing or determination of the proceedings, and has nothing to do with what used to be described as matrimonial misconduct. It refers to the manner in which each of the parties conducted the proceedings and if as a result of non co-operation, obstructiveness or otherwise, one of the parties causes the conduct of the proceedings to be unduly prolonged or made unduly expensive to the other side, clearly an order for costs would be warranted.’ (last paragraph of page 595).
The Father complied with each and every Court order for the filing of documents and the conduct of proceedings. He volunteered and paid the whole of the cost of Mr P’s Family Report, including his attendance at court on 18 March 2015.
The Father attempted Family Dispute Resolution prior to issuing proceedings and was granted a certificate pursuant to Section 60I of the Family Law Act 1975 as a result of the Mother refusing to attend. A copy of the certificate and covering letter are annexed to these submissions.
When the Independent Children’s Lawyer proposed Family Dispute Resolution, the Father immediately wrote back to the ICL agreeing to attend. The Mother in writing refused to attend, which led to Victoria Legal Aid closing their file. Copies of the four letters are annexed to these submissions.
In the Marriage of Greedy (1982) 8 Fam LR 669, the Full Court held that there may be situations where refusal to negotiate or to make an offer may be a factor which justifies an order for costs. The Court stated,
‘The policy of the Act is to encourage conciliation, and the failure of a party to take part in negotiations in a genuine manner may contribute to delay and cost and obstruct the proper resolution of a matter.’
Had the Mother been willing to attend FDR, the parties may have been able to reach a mutually acceptable compromise that would have obviated the need for a final hearing. The Independent Children’s Lawyer could have played the role of honest broker in assisting the parties and the children to agree upon the way forward, itself in keeping with s60B(2)(d) of the Act.
16. Paragraph 16 of the Mother’s submissions is a slab quotation from the Butterworths looseleaf commentary (see [s.117.13]). Both parties made allegations about the conduct of the other party as parents and as co-parents in the course of the proceedings. The submission for the Mother does not satisfy the test in Jensen quoted above.
17. Many of the claims made in paragraph 17 of the submissions for the Mother are irrelevant to s.117(2A)(c), because they are not examples of conduct ‘in relation to the proceedings’. Others do not satisfy the Jensen requirement that it be ‘conduct which has in some way led to an additional burden or cost being incurred by the other party.’
17.1 This is not conduct in relation to the proceedings.
17.2 Even if the court had made a finding of fact to support this claim, it would not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.3 This assertion misquotes what was put to the Mother in cross-examination, if accepted would undermine a litigant’s right to strenuously test the evidence of the other party at trial, and in any event does not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.4 The Court made no finding of fact that would support this claim. Even if there were such a finding of fact, it would not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.5 The Court made no finding of fact that would support this claim. Even if there were such a finding of fact, it would not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.6 There was no such finding of fact by the Court. Even if there were such a finding of fact, it would not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.7 There was no such finding of fact by the Court. Even if there were such a finding of fact, it would not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.8 This submission fails the criteria of that it be ‘conduct which has in some way led to an additional burden or cost being incurred by the other party.’
17.9 There were no such findings of fact by the Court. This is no more than comment from counsel for the Mother. Even if there were such findings of fact, it would not constitute conduct which had in some way led to an additional cost or burden being incurred by the other party.
17.10 As for the previous points, this is not litigation conduct that falls within the scope of s117(2A)(c), or satisfies a causal nexus between conduct and cost.
17.11 Once again the Mother’s criticism of the Father is not focussed upon conduct in relation to the proceedings.
The concluding comments to paragraph 17 of the Mother’s submissions share the same lack of focus on litigation conduct. The Court is invited to follow Nygh J’s extremely clear judgment to the contrary In the Marriage of Jensen, cited by the Mother. Section 117(2A)(c) ‘has nothing to do with what used to be described as matrimonial misconduct. It refers to the manner in which each of the parties conducted the proceedings and if as a result of non-co-operation, obstructiveness or otherwise, one of the parties causes the conduct of the proceedings to be unduly prolonged or made unduly expensive to the other side, clearly an order for costs would be warranted.’”
Having considered the above and notwithstanding the father’s submissions (many of which are inconsistent with the findings in the reasons published as Mitchell & Mitchell [2015] FCCA 2793) this factor does not tell against an order for costs.
Whether proceedings necessitated by failure to comply with court orders
The submissions filed by the parties did not suggest this was a relevant factor and I am satisfied that is the case.
Whether any party has been wholly unsuccessful
The mother in submissions, notes:
“Whether any party has been wholly unsuccessful
18.Where a party is wholly unsuccessful in the proceedings, and no difficult question of law arose from the subject matter, then the court is justified in making an order for costs against the unsuccessful party: see In the Marriage of Vaughan (1990) 13 Fam LR 842; FLC 92–135.
19.In this case the Father was unsuccessful in every aspect of the orders he sought. This lack of success was as a consequence of his demeanour, lack of candour and the misleading nature of his evidence. His participation in the trial process underscored the very guarded reservations of the expert witnesses. The “wholly unsuccessful” factor alone could persuade the court that an order for costs should be made in favour of the respondent Mother.”
The father’s submissions noted:
“Whether either party has been wholly unsuccessful in the proceedings
18. The mere fact that a party has been wholly successful does not justify the court in making an order for costs, since such a result would mean that the general rule had given way to para (e). It would also appear to be inconsistent with at least the spirit of the requirement in subs (1) that the court must find that there are circumstances justifying an order for costs.
19. Whilst it is true that the Father was wholly unsuccessful in the proceedings, he clearly had an arguable case, as was evidenced by the support for his case provided by the Family Report writer and the Independent Children’s Lawyer.
The question whether to make interim orders with safeguards, and see whether new arrangements worked, was clearly an option that was open to the court and which did have the qualified support of both the Family Report writer and the Independent Children’s Lawyer.
It is submitted that the case management aspect of this case was ultimately pivotal to the court’s disposition of the matter. This was an issue upon which, to use the oft-repeated words of the Full Court, reasonable minds might differ, having regard to the large number of factors to which the court has regard when making a discretionary judgment pursuant to Part VII of the Act.”
Given the above, the reasons in Mitchell & Mitchell [2015] FCCA 2793 and the compensatory nature of an order for costs, I am satisfied this factor tells in favour of an order as to costs.
Were there any parties to the proceedings who made an offer in writing to settle the proceedings
The mother noted in submissions:
“Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings
20.Annexed hereto and marked with the letter “C” is the letter sent by the Mother’s solicitors to the Father’s solicitors after receiving the Father’s Application dated 17th September, 2014 but before filing a Response. The contents of the letter are self- explanatory but clearly refer to the Rice & Asplund argument, inviting withdrawal of the Application and placing the Father on notice that costs would be sought against him. In essence the offer by the Mother was to leave the 13th February 2012 Orders in effect. The Father achieved no better outcome than the Mother’s offer by pursuing the September 2015 trial.”
The father’s submissions noted:
“Whether either party has made an offer in writing to the other party to the proceedings to settle the proceedings
20. Reference is made to the fact that the Father was willing to attend Family Dispute Resolution in an endeavour to resolve matters with the Mother both prior to the issue of his application, and later when the Independent Children’s Lawyer suggested it (see letters attached). Reference by the Mother to her letter prior to the proceedings strains at the definition of s117(2A)(e) given that her offer was no form of compromise at all, merely an invitation that the Father withdraw his application. Her letter contained no content to explain why she thought the Father’s case was without merit, and merely adverted to the fact that answering material would be prepared. This was not a genuine attempt to resolve the proceedings. Even in financial cases there is a need for an offer of settlement to set out the reasoning behind the offer, in order for such an offer to comply with the Calderbank principles and carry real weight in any later submissions on costs. This the Mother’s letter did not do.”
The letter referred to in submissions (omitting the formalities for present purposes) provided:
“We note that your client has issued an Application in the Federal Circuit Court and we have to hand copies of your client Application and Affidavit material. We note your client’s Application seeks to set aside and/or vary the Final Orders made on 13 February 2014.
Our office is in the process of preparing Ms Mitchell’s responding material which will be filed and provided to your office in due course. In the meantime however we wish to advise that our client’s position will be that the matter be struck out on the basis that there has been no significant change in circumstances since the making of the Final Orders.
In this regard we direct you to well established principals as enunciated in the case of Rice and Asplund (1979) FLC 90-725.
In the circumstances, we invite your client to withdraw his Application and we further put you on notice that if this matter proceeds on 19 November 2014, our client will be seeking a costs order against your client in the event she is successful in having the matter dismissed.”
I accept the nub of the mother’s submissions that thereafter the father was on notice the mother would seek an order for costs. However as the authorities make clear the “mere rejection of a Calderbank offer followed by a result which is more favourable to the offeror and less favourable to the offeree than that represented by the offer does not automatically lead to the making of an order for payment of costs on an indemnity basis”[1]
[1] See Specsavers Pty Limited v Luxottica Retail Australia Pty Limited (No 2) [2013] FCA 807 at [10].
Should an order for costs be made
Having weighed all of the relevant matters in s.117(2A) set out above, I am satisfied the mother has demonstrated justifying circumstances for the Court to make an order for costs.
Should an order for indemnity costs be made?
Given the conclusion reached above and the orders sought by the mother, it is also necessary to consider the mother’s application for indemnity costs. The principles to be applied in determining whether an indemnity costs order is to be made are set out by Sheppard J in Colgate Palmolive Co and another v Cussons Pty Ltd (1993) 118 ALR 248 at 256-257:
“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… namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice.”
In Kohan & Kohan [1993] FLC 92-340 the Full Court qualified that:
“…the circumstances justifying the departure should be of an exceptional kind.”
In Munday & Bowman (1997) 22 FamLR 321, Holden CJ provided some examples of such exceptions. Whilst by no means an exhaustive list, it demonstrates the seriousness of the situation that the Court must accept as existing before the court can consider whether a matter falls within an exception to justify the making of an indemnity costs order.
In Prantage & Prantage [2013] FamCAFC 105 the Full Court dealt with an appeal against a costs order made on an indemnity basis. In their Honour’s views, the trial judge understood but questioned the settled law relating to indemnity costs. They held the discretion miscarried in apparently not applying the settled law. The Full Court said:
“76.The law relating to indemnity costs has been well established in this jurisdiction for many years, a fact the trial Judge himself properly recognised.
77.This Court recognised in Kohan (supra) 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, at 79,605:
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.
78.The Full Court, when re-exercising the trial Judge’s discretion in Kohan, also said, at 79,615:
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.
79.At the time Kohan was decided, there was no mention of indemnity costs in the Rules. This is no longer the case, as will be seen from our recital of the Rules earlier. It will also be noted that the requirement for the Court to be informed of the terms of the relevant costs agreement has now been enshrined in the Rules. Notwithstanding this formal recognition of indemnity costs, this Court and trial Judges in this jurisdiction have routinely followed Kohan in holding that indemnity costs orders are to be seen as “a very great departure from the normal standard”. We consider citation of authority to this effect would be otiose, so well accepted is the proposition.” (emphasis added)
Submissions on indemnity costs
The mother submitted that:
“Indemnity costs
21.The Court has the power to award costs on an indemnity basis (see Kohan v Kohan (1993) FLC 92-340). The consideration of the matters in section 117(2A) has already been set out above.
22.In Colgate Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225, Sheppard J considered the cases on costs and confirmed the ordinary rule or practice that such orders are to be on a party and party basis. His Honour held that the Court must not make an order on another basis unless the circumstances of the case warrant it departing from the usual practice. In exercising its discretion the Court would look to the particular facts and circumstances of the case and consider whether they warrant the making of an order other than on a party and party basis.
23.In Colgate-Palmolive v Cussons Pty Ltd, Sheppard J held that there should be some “special or unusual feature in the case to justify the court in departing from the ordinary practice.”
24.Holden CJ in Munday v Bowman (1997) FLC 92-784 at 84,660 drew from the decision of Sheppard J in Colgate-Palmolive (supra) examples of circumstances warranting the exercise of the discretion to award costs on an indemnity basis, the relevant examples to this application being:
(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 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)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. Fed C of A, French J, 3 May 1991, unreported).
(c)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; Fed C of A, Davies J, 5 March 1993, unreported)
25.The substantive proceedings concerned an application by the Father to set aside Final Orders on the basis of significant changed circumstances. That application was dismissed.
26.It is submitted that the Father’s Application was made in wilful disregard of known facts. The Father’s conduct and his flagrant misleading of the court and professional witnesses in these particular facts and circumstances warrant making an order for indemnity costs.”
The father submitted:
“Indemnity Costs
21. In the Marriage of Kohan (1993) 16 Fam LR 245 stands as authority for the proposition (at p.258) that:
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.
22-23. In Colgate Palmolive Company & Anor v Cussons Pty Ltd, Sheppard J described the ‘ordinary rule’ that a costs order meant costs on a party-party basis; that this ‘has been a settled practice for centuries in England’, ‘a practice which has become entrenched in Australia’, which would require either legislation or a decision of an intermediate Court of Appeal or of the High Court to alter it; and that 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.’ (See judgment paragraphs 2-4).
Colgate Palmolive was followed by Holden CJ in the Family Court of Western Australia In the Marriage of Munday & Bowman. Another striking example of the Full Court’s reluctance to order indemnity costs is found in Stephens v Stephens (2010) 44 Fam LR 117.
24-26. None of the examples mentioned in paragraph 24 of the submissions for the Mother apply fairly to the facts of the present case.”
The nub of the submissions made on behalf of the mother in support of an order for indemnity costs appeared to be based on conduct of the father and that he was wholly unsuccessful. However, I am not satisfied the father’s position in pursuing the application in the substantive proceeding was “plainly or obviously unmeritorious”.
I am not satisfied the justice of the case requires or that there are special or unusual features of the case that would justify a “very great departure from the normal standard” for costs.
What order as to costs should be made?
I am satisfied justifying circumstances exist for making an order for costs and the Rules provide a fixed event based scale for proceedings suitable for this Court.
I am sympathetic to the mother in relation to the very large amount of costs she has incurred. However as set out above I cannot identify particular facts or circumstances in this case (even allowing for the parties submissions) on which to make the order for indemnity costs (see Prantage & Prantage [2013] FamCAFC 105).
The authorities make it clear an order for costs is compensatory in the sense it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the proceedings. The mother’s submissions included as an attachment on “ASSESSMENT OF COSTS ON PARTY – PARTY SCALE SCHEDULE 1 – FEDERAL CIRCUIT COURT RULES”. The father’s submissions took issue with the cost calculations set out in the mother’s submissions.[2]
[2] See paragraph 27-28 of father’s submissions.
Rule 21.02 provides that the Court retains the discretion in relation to costs and how those costs should be calculated including in accordance with Schedule 1 of the Rules. Whilst costs in accordance with Schedule 1 of the Rules for the trial would not fully compensate the mother for all the costs she incurred given both the particular circumstances of this matter and the issues referred to at paragraphs [23] to [28] in Mitchell & Mitchell [2015] FCCA 2793 along with the matters raised at paragraph 28 of the father’s submissions, it is appropriate the mother only have her costs of the trial.
Given the discussion of the relevant factors in s.117(2A) of the Act and the reasons in Mitchell & Mitchell [2015] FCCA 2793 there are no justifying circumstances in relation to Court events other than the trial.
Accordingly the appropriate order is that the father pay the mother’s costs of the trial fixed in the amount of $16,481.50 and as no submissions were made on the issue of any timeframe for payment I will order they be payable within 30 days.
I certify that the preceding forty eight (48) paragraphs are a true copy of the reasons for judgment of Judge O'Sullivan
Associate:
Date: 30 October 2015
Key Legal Topics
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