Morishita & Vartanian (No 2)
[2024] FedCFamC1F 618
•17 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Morishita & Vartanian (No 2) [2024] FedCFamC1F 618
File number(s): CAC 1369 of 2021 Judgment of: GILL J Date of judgment: 17 September 2024 Catchwords: FAMILY LAW – COSTS – Where the mother sought costs as agreed or as assessed until an offer of settlement was made and then on an indemnity basis at a fixed sum until delivery of the substantive judgment – Where the father pursued an unmeritorious case and correctly concedes he was wholly unsuccessful in relation to parenting matters – Where the father’s testing of the mother’s parenting position was still warranted – Where the father’s non-disclosure meant the mother was not fully aware of his financial circumstances when negotiating settlement – Where the mother made multiple offers better than the final outcome which the father did not respond to – Father to pay the mother’s costs on a party-party basis from the commencement of proceedings until the delivery of the substantive judgment Legislation: Family Law Act 1975 (Cth) – s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021
Cases cited: Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248
Hawkins & Roe [2012] FamCAFC 77
Higginbotham & Robinson (1991) FLC 92-209
In the Marriage of W P J Munday and H J Bowman (1997) 22 Fam LR 321
Kohan & Kohan (1993) FLC 92-340
Lenova v Lenova (Costs) [2011] FamCAFC 141
Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664
Orioli v Oriolo [1985] FamCA 54
Penfold v Penfold (1980) 144 CLR 311
Quickley & Pelissier [2016] FamCAFC 124
Roydon & Roydon [2023] FedCFamC2F 1265
SVG v KLD [2015] FamCA 687
Division: Division 1 First Instance Number of paragraphs: 90 Date of hearing: 6 August 2024 Place: Heard in Canberra, delivered in Sydney Counsel for the Applicant: Ms Tonkin Solicitor for the Applicant: Neilan Stramandinoli Family Law Solicitor for the Respondent: Mr Lee, Gabbedy Milson Lee ORDERS
CAC 1369 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS VARTANIAN
Applicant
AND: MR MORISHITA
Respondent
ORDER MADE BY:
GILL J
DATE OF ORDER:
17 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.The respondent father pay the applicant mother’s costs of, and incidental to, the substantive proceedings from the commencement of the proceedings initiated by the father on 28 June 2021 up to and including the delivery of the substantive judgment in these proceedings on a party and party basis as agreed or as assessed.
2.The costs be paid to the mother by the father within 14 days of the total sum being determined, into a bank account nominated in writing by the mother.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J
This judgment concerns a costs application by Ms Vartanian (the applicant) against Mr Morishita (the respondent) following the delivery of judgment in their substantive proceedings involving parenting and property matters.
In summary the mother emphasises issues of whether the father was wholly unsuccessful in respect of parenting, the father’s conduct of the litigation, particularly in relation to non-disclosure, the father’s failure to accept offers made by the mother or engage with such, and ongoing financial disparity.
The orders sought
The mother seeks orders that the father pay her costs as agreed or as assessed from 28 June 2021 to 2 September 2023 and in a fixed amount of $74,872.91, that amount being on an indemnity basis, from her offer of settlement on 4 September 2023 until the substantive judgment was delivered on 23 February 2024.
The father opposes any costs order being made and, if an order is made, opposes it being made on an indemnity basis.
Documents relied upon
The applicant mother relied upon:
(a)Affidavit of Ms Vartanian filed 21 March 2024;
(b)Application in a Proceeding filed 22 March 2024;
(c)Amended Financial Statement filed 13 June 2024;
(d)Tender Bundle; and
(e)Outline of Case filed 30 June 2024.
The respondent father relied upon:
(a)Affidavit of Mr Morishita filed 24 May 2024;
(b)Response to Application in a Proceeding filed 24 May 2024;
(c)Financial Statement filed 24 May 2024;
(d)Outline of Case filed 30 July 2024; and
(e)Family Report filed 28 April 2023.
General Principles
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) sets out the default position being a general rule that each party bears their own costs, subject to circumstances justifying otherwise. In Kohan & Kohan (1993) FLC 92-340 (“Kohan”), the Full Court observed 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.
In Penfold v Penfold (1980) 144 CLR 311 the High Court considered that whilst justifying circumstances, as identified in s 117, must be determined to enable a costs order to be made, no “additional or special onus” is placed upon applicants in their pursuit of costs.
The precondition to making an order for costs is the finding that there are circumstances justifying the making of an order for costs. Once these are found, the default position yields to the Court’s discretion to award costs as it considers just.
The relevant considerations to assess the circumstances are set out at s 117(2A) of the Act as follows:
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.
In Hawkins & Roe [2012] FamCAFC 77 May and Ainslie-Wallace JJ observed that:
The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”. That is not to say that one single matter may not ultimately be determinative.
As indicated in Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 (Strickland J), no single factor takes precedence over any other factor. The trial judge is to exercise their discretion with regard to the weight that is afforded each factor under s 117(2A).
Those considerations emphasised by the parties were the financial circumstances, the conduct of the litigation, whether the father can be considered to have been wholly unsuccessful in respect of the parenting aspect (a matter he concedes), and whether an offer in writing has been made to settle the proceedings that bears upon the costs issue.
Principles in respect of indemnity costs
The principles to be applied in relation to indemnity costs are neatly set out by the Full Court in Quickley & Pelissier [2016] FamCAFC 124 at [120]:
We then turn to consider whether costs should be awarded on a party/party or indemnity basis.
In Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 at 256, Sheppard J referred to the "settled practice" that where a court orders one party to pay another party's costs, the order is for costs to be paid on a party/party basis. His Honour also said "there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice" at 257.
In an appropriate case the court has a discretion to order costs on an indemnity basis. An order made in the exercise of that discretion is a very great departure from the normal approach and the circumstances justifying the departure should be of an exceptional kind (Kohan and Kohan (1993) FLC 92-340).
In the recent case of Madin & Palis (Costs) [2016] FamCAFC 25 this Court made reference to the increasing number of applications for indemnity costs and said at [23]:
Finally, we take the opportunity to observe that in so far as the appellant sought an order for indemnity costs, applications for such costs should only be made, and such costs will only be ordered, in the most extreme cases. This is particularly so having regard to the fact that the primary rule in this jurisdiction is that each party should pay their own costs.
In Kohan, the Full Court, in observing that indemnity costs are the exception, said 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.
The principles in Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 are also usefully discussed in In the Marriage of W P J Munday and H J Bowman (1997) 22 Fam LR 321. In that judgment, Holden CJ extracted a series of circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis, 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 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.
(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 (French J, Fed C of A, 3 May 1991, unreported).
(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 (Davies J, Fed C of A, 5 March 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
It ought, however, to be noted that in citing such examples, Holden CJ was dealing with extremes. For example, in relation to the “no chance of success” example Holden CJ indicated that the conduct was to be such as to allow a finding of “ulterior motive” or “wilful disregard of known facts”. That is, it is not sufficient to reflect that the application had a low chance of success, but rather that the prospective lack of success was so stark as to require the inference that the application was occasioned by an ulterior motive or was pursued in wilful disregard of known facts.
Further, in relation to the final example of ‘imprudent refusal[s]’, Holden CJ noted, as did the Full Court in Kohan, that the authorities giving rise to such a category are predominately New South Wales (“NSW”) authorities, and are in part “attributable to the amendment of the Supreme Court Rules of that state which provide for indemnity costs where a plaintiff obtains judgment in terms no less favourable than those of an offer to compromise made by him and not accepted by the defendant.” In Kohan, the distinction was then drawn between the practice in NSW in accordance with the Rules of the Supreme Court, and in this jurisdiction:
In so far as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction so far has been to order no more than costs on a party and party basis. Even in cases where there has been dishonest concealment of assets or income as in Penfold v Penfold (1980) 5 Fam LR 579; [1980] FLC 90-800 and Oriolo v Oriolo (1985) 10 Fam LR 665; [1985] FLC 91-653, no more than party and party costs have been awarded.
As was observed by Reithmuller J in Roydon & Roydon [2023] FedCFamC2F 1265:
The matters identified by Sheppard J in Colgate Palmolive as justifying indemnity costs orders all involve significant misconduct in litigation, not simply a party litigating a marginal or speculative case.
The remarks of Sheppard J with respect to offers must be seen in context. The proceedings before Sheppard J concerned commercial litigation where, unlike family law proceedings, costs ordinarily follow the event. In family law cases, ordinarily there are no orders for costs. This practical difference between costs rules for commercial litigation compared to family litigation is particularly important when considering whether a failure to accept an offer is “imprudent”, and thereby justifying an indemnity costs order, rather than a situation where it was not reasonable to have rejected an offer (leading to a party and party costs order): Badawi & Badawi (Costs) [2017] FamCAFC 196 at [27]–[29]. As was said by Murphy J in Prantage & Prantage (2013) FLC 93-544 at [152]:
Indemnity costs are confined to “an exceedingly rare situation” … in jurisdictions where “the usual rule” is that a successful party receives an order for costs (i.e. “costs follow the event”). They might, then, be seen to be more so in this jurisdiction where the “usual rule” is that “each party ... shall bear his or her own costs (s 117(1)).
Financial circumstances
The mother relied upon an Amended Financial Statement filed 13 June 2024, and further corrected it to note a reduction in indebtedness to her parents of $47,000 rather than $56,000, and an increase in her income from $33,000 to $50,000 per annum.
By virtue of the property adjustment, the mother has significantly greater immediate assets as the distribution was, in her case, weighted to immediately available assets whilst in the father’s case it was weighted toward superannuation interests.
The income of the father is, at present, approximately double that of the mother. His income significantly exceeds his expenses. As a part of these expenses the father is liable to pay Child Support.
The children of the relationship live with the mother. The mother’s income and expenses are such that she is struggling to meet the cost of basic groceries for herself and the children from her income, although she holds other assets.
Given that the mother, in her affidavit, tied limitations in her income to the need to resign from work to prepare her court case as well as deal with other obligations, there is little reason to consider that this level of disparity will be ongoing.
While the father has limited current assets from which a costs award could be satisfied, he has an income surplus that could be applied toward meeting a costs award.
Manner of conduct of the litigation
Section 117(2A)(c) requires consideration of the conduct of the parties in relation to the proceedings. As observed by Cronin J in SVG v KLD [2015] FamCA 687:
It must also be remembered that costs are not awarded by way of punishment of the unsuccessful party but rather are compensatory in the sense that they are awarded to ameliorate the expense of the successful party as a result of having been required to endure the legal proceedings. (Minister for Immigration and Multicultural Affairs v Vadarlis (No 2) (2001) 188 ALR 143 citing with approval Cretazzo v Lombardi [1975] 13 SASR 4 and Chilli v Abbott (1981) 53 FLR 108).
In that same case Cronin J explained the scope of this particular consideration:
One needs to be very careful here to distinguish Mr SCVG’s “conduct” as a parent from that as a litigant. I agree with counsel for Mr SCVG that the question must be addressed about conduct in relation to the proceedings but it must be noted that s 117(2A)(c) is extremely wide. The applicant for costs must satisfy the Court that there is a nexus between what is complained about and the costs in issue in the proceedings.
The key issue relied upon in respect of this aspect was the asserted non-compliance by the father with his disclosure obligations.
It may be accepted that obligations as to disclosure form a central aspect of proceedings before this court. The importance of the obligations is reflected in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, which describe a general duty of the parties “to give full and frank disclosure of all information relevant to the proceedings in a timely manner.”
The mother relied in particular upon Orioli v Oriolo [1985] FamCA 54 where the Full Court adopted what had been said by Smithers J in Briese describing the “need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance,” and further that there “is an obligation on each party to act so as to provide a basis upon which the two of them are in a position to resolve the case by agreement, or proceed to a hearing, as expeditiously as may reasonably be done.”
The mother asserted that defaults in the father’s disclosure, in particular in the property proceedings as to his receipt of Total and Permanent Disability payout, had two adverse effects upon the mother. The first was that she was put to the added trouble and expense of discovering this information through other means. The second was that she was deprived of a proper basis upon which she could make offers in order to resolve the proceedings.
These issues then need to be considered in the light of the offers made by the parties to resolve the proceedings as they impact upon the weight to be assigned to those offers and to the responses made to them.
In Lenova v Lenova (Costs) [2011] FAMCAFC 141 Murphy J observed:
[10] In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subs (2) ... each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.
[11] A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation. Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs.
Justice Nygh in Higginbotham & Robinson (1991) FLC 92-209 encapsulated s 117(2A)(f) as follows:
…when one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost 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.
It may be observed that the question is one of engagement with a genuine offer. An offer does not lose relevance merely because a party does what may be considered to be marginally better than the terms of the offer. Where the offer is adjacent to, but not better than the outcome, there may still be good reason to give consideration to a party’s failure to engage with or to accept it.
The father had his TPD claim of approximately $631,000 approved in about mid-2020, receiving payment in about late 2020.
The mother, prior to the commencement of the proceedings, made an offer on 9 December 2020. That offer provided, in summary, that the mother would retain the real property, with no adjustment of superannuation. The father failed to respond to the offer at all.
The offer was withdrawn on 23 December 2020 and a request was made for disclosure.
At this stage the mother was unaware of the TPD payment. She asserted that she was not advised of such until immediately prior to scheduled mediation between the parties in September 2021 (referred to below) and was then informed without being provided with any supporting or corroborative documents. It was accepted by the father that, at best the mother was provided with a screenshot to evidence the TPD. Reasonably, she contended that this undermined the mediation process.
On 18 February 2021 the father provided disclosure, but omitted disclosure as to his application in February 2020 for a TPD payout, received through his superannuation in late 2020. He also omitted disclosure regarding compensation received in mid and late 2020 of about $70,0000. He did however disclose final monies paid by his employer of $36,000.
The father explains that he had provided his superannuation documents to his then lawyer, but that his lawyer had omitted to disclose them to the mother.
On 13 April 2021 the mother made a further offer that in summary provided that the mother retain the real property and proceeds of real property and that there be a $40,000 superannuation split to the father. The father described that he had no recollection of such an offer.
The father failed to respond to the offer at all. The offer was withdrawn on 4 May 2021.
On 25 June 2021 the mother proposed private mediation and sought specific disclosure as to any payouts received by the father.
On 28 June 2021 the father commenced proceedings.
The father, accepting that there had not been prompt disclosure, explained that he did not provide the information about the TPD as it was not requested. He asserted that disclosure had been given when he sent the offer to the mother on 22 July 2021. It was common ground that although the offer had been sent to the mother in July 2021, it was not received by her until November 2021. That offer included a purported balance sheet that included the TPD figure incorporated into the father’s superannuation balance. It did not include any direct corroboration of the payments received by the father. That offer provided that the proceeds of the Suburb D parcel of real property would be divided equally whilst the mother would receive the other real property, and that there would be an equal division of superannuation. The father offered to pay a further $21,000 to the mother. The offer was said by the father to equate to an equal division of the pool including superannuation. The offer had expired by the time it was actually received by the mother and was not renewed.
It was also common ground that previous disclosure, before the sending of the offer by the father, had excluded the award and any information about it.
In September 2021 the mother sought specific disclosure regarding the father’s Superannuation Fund 1.
Mediation took place between the parties in September 2021. The father described that the mother then sought an 80 per cent division of property in her favour which he asserts he accepted. He further described that the mother then withdrew the offer on the basis that the father had not offered sufficient disclosure. The mother described that negotiation as to the financial matter could not be undertaken due to lack of disclosure by the father, the father providing at best a screenshot in relation to payments for his workplace injury, and at worst mere oral advice of such.
The circumstances were not sufficient to enable the mother to be satisfied as to the actual financial position of the father. Even if the mediation took the course as described by the father it is not a matter that can be weighed against the mother due to the lack of proper disclosure.
It was not until 15 December 2021 that the father provided a letter from Superannuation Fund 1 setting out the amount received from the TPD claim.
The second category of non-disclosure related to the psychological/psychiatric condition of the father, a matter relevant to the both the parenting and property aspects of the proceedings. The mother contended that the father failed to disclose such material, contrary to court orders, and obstructed the production of such to the mother.
On 30 September 2021 orders were made for the father to provide all reports from his treating psychiatrists from 31 March 2021 to that present date. Such reports were not provided at that stage, with the father’s compensation lawyers explaining that in providing material “we have not included medical reports as we have not been asked to provide them.” Accordingly, the mother caused a number of subpoenas to be issued to deal with the shortfall in production. The father asserted that he lacked control over a number of the reports. The correspondence from his compensation lawyers undermines that notion.
The mother contends that the father did not provide a list of his medical treaters despite multiple requests, and did not provide material from them, resulting in the issuing of subpoenas. The father however describes that he provided documents from Dr W, Dr EE and Dr FF on receipt.
On 6 October 2021 the mother became aware that the father had made an offer on 22 July 2021.
On 11 October 2021 disclosure orders were made, including for the provision of the father’s superannuation entitlements.
On 21 October 2021 the mother made an offer to compromise the parenting proceedings. This entailed the mother holding sole parental responsibility, the children living with her but spending alternate Sundays with the father, and that family therapy take place. The father promptly rejected the offer.
On 20 November 2021 the father provided the mother with about 1000 pages of disclosure in relation to his work related claims. The documents were jumbled and repetitive. The father described that he provided them in the form that he had received them.
On 15 December 2021 the father provided a letter from Superannuation Fund 1 setting out the amount received from the TPD claim.
A conciliation conference in respect of the property matters was conducted in August 2022.
On 2 September 2022 the mother offered to compromise the property proceedings with the mother to retain the real property, pay the father $47,000 and with the mother to receive a $100,000 split of the father’s superannuation. No response was received from the father, who says that he saw the offer on 12 October 2022.
On 6 June 2023 the mother filed an Amended Response seeking parenting orders largely in accordance with those ultimately made, and seeking that she receive 70 per cent of the overall pool including superannuation.
On 4 September 2023 the mother offered to compromise the property proceedings with the real property to be sold, 70 per cent of the non-superannuation property to go to the mother, and no split of the superannuation of the father sought. The mother also offered to resolve the parenting proceedings such that she would hold sole parental responsibility, the children would live with her and see the father once per year, and would see his parents four times per year.
The final disposition
The father accepts that he was wholly unsuccessful in respect of the parenting proceedings, orders being made almost entirely as sought by the mother, and providing that the father would have neither parental responsibility nor would the children spend any time with him.
The property proceedings resolved on a 55-45 division of the property in favour of the mother, part of which was made up of a $200,000 split of the father’s superannuation in her favour. That $200,000 split resulted in a superannuation balance to the mother of just over $373,000, and to the father of approximately $425,000. The overall split was otherwise achieved by a division of the proceeds of the sale of the real property.
The father conceded by his outline of case document that the sale of the real property pursuant to the final orders realised a gross total of about $938,000, and provided a net amount of about $541,000 to the mother, with he having received $33,000 and another approximately $139,000 attributable to him being held in trust by the mother's lawyers in respect of this costs claim.
The conduct of the parenting proceedings
Aside from the disclosure issues set out above the key contention raised by the mother in relation to the parenting case was that the father pursued an unmeritorious case. Having previously said in August 2020, prior to the proceedings, that he would sign over full custody rights to the mother, and in September 2020 specifically agreeing with the mother that a fifty-fifty arrangement was inappropriate given his circumstances, his applications commenced with a claim for equally shared parental responsibility and equal time in June 2021. This occurred after a point in late 2020 when the father threatened to destroy the mother.
The father ceased to spend overnight time with the children from November 2020 and by the end of May 2023 the Family Report recommended that the children spend no time with him. Despite this, shortly prior to trial the father indicated that he sought sole parental responsibility and that the children live with him. This remained his primary position at trial as he contended that the mother had not supported his relationship with the children.
Where the evidence was indicative of mental health issues suffered by the father connected to his PTSD and TPD claim, the failure of the father to call any evidence from a treating practitioner (other than in the form of letters and prior reports) meant that his case was inadequately supported.
The mother submits that the pursuit of the parenting case was completely unreasonable, or “pursued for an ulterior motive to inflict harm and distress upon the mother and cause a significant financial burden upon her.”
However, while it can be concluded that the case pursued by the father was unreasonable, the testing of the mother’s case was reasonable under circumstances where what was at issue was whether the children would have any ongoing relationship with the father.
Discussion
As identified above, the key matters relied upon pursuant to s 117(2A) were the financial circumstances, conduct of the litigation, whether the father can be considered to have been wholly unsuccessful in respect of the parenting aspect (a matter he concedes), and whether an offer in writing has been made to settle the proceedings that bears upon the costs issue.
As noted above, the father concedes that he has been wholly unsuccessful in respect of the parenting aspect of the case.
That lack of success was in the context of his pursuit of an unmeritorious case as set out above. However, it was also in the context of it being reasonable to test the case put by the mother that would effectively see no ongoing relationship between he and the children.
The significance of the financial circumstances should be viewed through the lens of the final judgment. The mother has significantly greater immediate assets through a distribution that, in her case, was weighted to immediately available assets whilst the father’s adjustment was weighted toward superannuation interests. On the other hand, whilst the mother’s income and expenditure are matched in circumstances where she describes difficulty in meeting basic expenses, the father’s income significantly outweighs his expenses. Accordingly, while the father has limited current assets from which a costs award could be satisfied, he has an income surplus that could be applied toward meeting a costs award.
As to the manner of conduct of the litigation, the failure of the father to give timely disclosure in relation to the payments, including to his superannuation, flowing from his work related injury increased the costs of the mother, at least in requiring the pursuit of such information. The father was also uncooperative in relation to providing disclosure form his medical treaters, as seen in the letter from his compensation lawyers. One aspect of default appears in the failure of the father to promptly disclose the medical practitioners that he had engaged with. The complaint by the mother as to the requirement to issue subpoenas to obtain medical information is made good. The complaint about the volume of the material produced on subpoena does not point to default on the part of the father. The complaint about the provision of disorganised material is answered by the father’s description of how he received them.
The mother complains that her ability to negotiate a compromise was hampered by the disclosure default, in particular regarding the work-related injuries. This can be seen in the contentions raised in respect of the failed attempt at mediation.
Although offers were made by the father, one was not received by the mother and was not extended when she identified that she had no knowledge of it. That offer, even if it had been received, came in the context of inadequate disclosure re the work-related injury. Even if the amount received was incorporated into the balance sheet associated with the offer, it was necessary for the mother to have been provided with some objective confirmation of the circumstances of the payments (which she did not receive until much later).
The offer, and the purported acceptance of the mother’s offer at mediation, made by the father are nullified by the late disclosure in relation to the work-related injury.
Otherwise, given the nature of the offers made by the mother, it is unclear how the mother was hampered in her negotiations by the disclosure defaults.
Each offer as to the property made by the mother, as identified above, was an offer proximate to, or better than the ultimate outcome received by the father. There was, apparently, no engagement by the father with the offers. Similarly, an offer made by the mother in relation to parenting in September 2023 was better than the outcome ultimately achieved by the father.
The combination of these matters is sufficient to justify that an order be made for the father to pay the mother’s costs of the proceedings.
However, the mother also sought that a portion of the costs be paid on an indemnity basis, specifically those following an offer made by her on 3 September 2023, until 28 February 2024, fixed in the sum of $74,872.91.
As set out above, on 4 September 2023 the mother offered to compromise the property proceedings with the real property to be sold, 70 per cent of the non-superannuation property to go to the mother, with no split of the superannuation of the father sought. That was significantly superior to the outcome achieved by the father.
The mother also offered to resolve the parenting proceedings such that she would hold sole parental responsibility, the children would live with her and see the father once per year and his parents four times per year. Again this was an outcome superior to that obtained by the father.
At the same time the father was, in relation to property, seeking that he receive 65 per cent of the sale proceeds of Suburb D property, with no order as to superannuation. In relation to the children he sought orders for sole parental responsibility, for the children to live with him, and a moratorium on their time with the mother.
The father pursued an unmeritorious case, in respect of the children, in circumstances where the orders he pursued were inconsistent with his statements to the mother as to what was best for the children, as set out above, and in a context where he had previously threatened to destroy the mother. While these matters point to an ulterior motive, it was, at the same time, no foregone conclusion that the orders as sought by the mother that the children would have no ongoing contact with him would be the final outcome. The testing of that parenting case was reasonable even if the orders pursued by the father were not.
As identified above, an indemnity costs order is a very great departure from the more usual order for party and party costs. In a jurisdiction where the starting point is that each party bear his or her own costs, such an order should be seen to be exceedingly rare, and to require extreme circumstances to justify it.
The failure to accept the offers made, even if imprudent, is not of such an extreme character to warrant more than party and party costs, noting the observation in Kohan that, in this jurisdiction the effect of an imprudent rejection of an offer is generally no more than party and party costs. Even taking into account the father’s defaults in relation to disclosure, and his pursuit of an unmeritorious parenting case, and considering the parties’ financial circumstances, such matters together do not arise to the level of extremity required for an indemnity order.
Conclusion
Orders will be made for the father to pay the mother’s costs on a party and party basis from the commencement of the proceedings.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 17 September 2024
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