Moby and Schulter (No 2)

[2010] FamCA 1192

FAMILY COURT OF AUSTRALIA

MOBY & SCHULTER (NO. 2) [2010] FamCA 1192

FAMILY LAW – COSTS – Assessed as between parties – Application for indemnity costs considered and refused – Respondent wholly unsuccessful – Significantly superior financial position of respondent

Family Law Act 1975 (Cth)

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) FCA 202
Yunghanns and Yunghanns (2000) FLC 93-029
Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225

APPLICANT: Ms Moby

RESPONDENT: Mr Schulter

FILE NUMBER: MLC 10432 of 2009

DATE DELIVERED: 24 December 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Mushin J

HEARING DATE: 10 December 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Wilson

SOLICITOR FOR THE APPLICANT: Adrian Abrahams Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Hoult

SOLICITOR FOR THE RESPONDENT: JH Legal Pty Ltd

Orders

IT IS ORDERED THAT

1. Failing agreement as to costs within 28 days or such further time as may be agreed between the parties in writing, the applicant's costs of and incidental to her application filed on 23 November 2009 together with her costs of and incidental to this application for costs be assessed as between parties pursuant to the provisions of Chapter 19 of the Family Law Rules 2004 and when so assessed be paid by the respondent.

2. The applicant's application for costs filed on 27 September 2010 be otherwise dismissed.

IT IS CERTIFIED THAT

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 10432 of 2009

MS MOBY

Applicant

And

MR SCHULTER

Respondent

REASONS FOR JUDGMENT

introduction

1. On 25 August 2010 I delivered reasons for judgement (“the reasons”) and made orders (“the orders”) determining proceedings between the parties as to whether they had been in a de facto relationship in accordance with the meaning of that term in the Family Law Act1975 ("the Act").  I found in favour of the applicant that the parties had been in a de facto relationship and referred the consequent applications for preparation for trial.

2. As a result of that determination, the applicant has applied for costs of those proceedings (“the proceedings”). These reasons for judgement, which determine the applicant's cost application, are to be read together with the reasons and the orders.

The hearing

1. Both parties were represented by Counsel at the oral hearing of this application. In addition, both Counsel provided me with written submissions which I have considered in my determination of the application.

Relevant facts

1. The proceedings were heard over a period of four days.  Both parties were represented by Counsel.  Three of the four days of the proceedings were occupied by evidence, the bulk of which was cross examination.  As is clear from the reasons, the parties were diametrically opposed on their respective versions of the relevant facts on which I was required to make extensive and detailed findings.

2. The fourth day of the proceedings were occupied by addresses by Counsel.  I received oral and written submissions with regard to both the relevant facts and the law.  The application raised points of law which were novel to this jurisdiction.  This was the first major consideration of the meaning of “de facto relationship” and the application of the matters to be taken into account in this Court.  The reasons considered those issues in detail.

The parties' proposals

1. The applicant seeks costs of and incidental to the entirety of the proceedings on an indemnity basis. In the alternative, she seeks costs as between parties in accordance with the Scale of Costs in Chapter 19 of the Family Law Rules 2004.

2. The respondent opposes any order for costs in favour of the applicant.  He seeks the dismissal of the applicant's application.

Discussion

1. In considering an application for costs, I am bound by the provisions of section 117 of the Act to which I now turn. Subsection (1) provides that in proceedings under the Act “… each party … shall bear his or her own costs.” However, subsection (2) empowers me to make an order for costs if I consider it "just" to do so. In considering whether it is just to make an order, I am bound by the provisions of subsection (2A) to which I turn.

Subsection 117(2A)

1. Subsection 117(2A) of the Act specifies the following matters to which I am required to “have regard”:

   (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.

   I now turn to a consideration of those factors.

The parties' financial circumstances

1. During the trial of the proceedings, there was considerable evidence that the applicant's financial situation was very substantially inferior to that of the respondent.  One of the points which was emphasised on behalf of the respondent was that the applicant made very little financial contribution to the parties' lives.  The respondent asserted that any financial advance to the applicant by him had simply arisen out of a desire to help her rather than to further any relationship.  Also, it was asserted that the applicant had been unable to make any greater contribution that she had done.

2. The applicant filed a Financial Statement in support of her application in the proceedings.  She deposed to “nominal” weekly income together with weekly expenses of approximately $1386.  Those expenses included “anticipated rent” of $450 together with costs of replacement furniture and counselling for herself. She disclosed minimal assets and liabilities of approximately $33,500. Subsequent material filed on behalf of the applicant disclosed that she is now on a Newstart allowance of $291 per week. It also disclosed a very significant increase in liabilities.  While her business was still trading, I am satisfied on all the evidence that she receives little more than minimal income from it.

3. The respondent filed a Financial Statement in these proceedings after delivery of the reasons and the making of the orders.  He disclosed assets valued at $2,411,928 together with liabilities in the sum of a little more than $691,000.  Those liabilities included mortgages totalling $352,437, credit card liabilities of $124,542 and a personal loan of a little more than $102,000.

4. In his written submissions Counsel for the respondent conceded that “[t]he parties at this point have a disparity in their financial relationships” but went on to submit that “this does not justify an order for costs”, noting that should the matter not resolve it will move to a trial, the result of which will be an alteration of the parties’ “financial relationships” where costs incurred may be considered.

5. I am satisfied on all the evidence, including evidence during the trial of the proceedings, that the respondent's financial situation is very significantly superior to that of the applicant. In reference to the submission referred to in the previous paragraph, while the finding of one of the factors in subsection 117(2A) does not necessarily of itself justify an order for costs, it is one matter to be taken into account in my consideration of the applicant's application for costs.

Wholly unsuccessful

1. Counsel for the applicant submitted that the respondent had been wholly unsuccessful in the proceedings. The applicant's application sought a declaration that she and the respondent had been in a de facto relationship in accordance with the meaning of that term in the Act. The respondent asserted in the alternative first, that they had never been in such a relationship and secondly, even if they had been it had come to an end in February 2008 and had not been revived. The significance of that second alternative, as found in the reasons, was that the subject legislation only came into operation on 1 March 2009 and accordingly, the Court could not have had jurisdiction to determine the applicant's application. The respondent failed on both those alternatives.

2. Counsel for the respondent conceded that his client had been unsuccessful in establishing that the parties had not been in a de facto relationship at the relevant time in accordance with the meaning of that term in the Act. However, he submitted that that proposition did not result in his client having been wholly unsuccessful in the particular circumstances of these proceedings. Counsel submitted that the applicant's application was the first such application under the de facto legislation to be determined by this Court and accordingly, both parties were effectively breaking new ground in this litigation.

3. In response to that submission, Counsel for the applicant submitted that the essence of the trial of the proceedings was a determination of the divergences between the parties and their witnesses as to the relevant facts.  He submitted that the respondent had been wholly unsuccessful in all the significant findings of fact necessary to determine the application.  To the extent that Counsels' final addresses required consideration of propositions of law which were novel to this jurisdiction, that is a natural consequence of litigation and the novelty of the propositions does not detract from the submission that the respondent had been wholly unsuccessful.  Further, the factual issues involving the taking of evidence had occupied three of the four days of the trial.

Legal aid, conduct, compliance, offers and other matters

1. I have included five factors which are required to be considered by the subsection in this heading for the purpose of finding that they are all not relevant to that consideration.

Determination of costs

1. I have determined that it is just, in accordance with the meaning of that term in subsection 117(2) of the Act, that I make an order that the respondent pay the applicant's costs of and incidental to the proceedings. In doing so, I rely on two factors prescribed by subsection (2A). They are first, the comparative financial circumstances of the parties and secondly, the fact that the respondent was wholly unsuccessful in the proceedings. I now make findings in respect of each of those factors.

2. As I have found, the respondent is in a significantly superior financial position to that of the applicant.  That is established in part by the Financial Statements referred to above but in particular, by the whole circumstances of the manner in which the respondent's case was put in the substantive application.  One of the limbs of his argument was that the applicant was in no financial position to make any contribution and accordingly, she could not have done so.  I refer to my findings in that regard contained in the reasons.

3. I accept the submission of Counsel for the applicant that the respondent has been wholly unsuccessful in these proceedings.  He is correct in submitting that the bulk of the trial was occupied by evidence.  The fact that submissions had to be made on propositions of law which were novel to this jurisdiction does not detract from the fact that the respondent has been wholly unsuccessful.

Party/party or indemnity costs

1. Counsel for the applicant submitted that an order for costs in favour of his client should be on an indemnity basis rather than as between parties.  The question of when to grant indemnity costs has been the subject of considerable judicial consideration. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) FCA 202, Woodward J held (at para. 20):

   I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, 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 or the clearly established law. Such cases are, fortunately, rare. But when they occur, the Court will need to consider how it should exercise its unfettered discretion.

2. In Yunghanns and Yunghanns (2000) FLC 93-029 the Full Court held with regard to awarding indemnity costs (at p 87,471):

   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. All that is required is that the court asked to exercise the discretion be satisfied that some “particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.

3. In my view, it cannot be said that the respondent -

   … should have known that he had no chance of success.

   Equally, it cannot be said that there is any fact or circumstance which might -

   … warrant the making of an order for the payment of costs that on a party and party basis.

   The fact that I preferred the applicant's evidence to that of the respondent does not, of itself, constitute such fact or circumstance.  Accordingly, I find that the applicant has not satisfied me that she should be awarded indemnity costs and I therefore order costs as between parties.

Conclusion

1. I will order that failing agreement as to costs, the applicant's costs of and incidental to these proceedings including this application be assessed as between parties and be paid by the respondent.  The applicant's application for costs will be otherwise dismissed.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Mushin  

Associate: 

Date:  24 December 2010