Mosef and Mosef and Anor

[2017] FamCA 587

FAMILY COURT OF AUSTRALIA

MOSEF & MOSEF AND ANOR [2017] FamCA 587

FAMILY LAW – COSTS – Where application for indemnity costs – Where consideration of general principles as to costs – Where appropriate that order be made on party/party basis – Where only lump sum figure asserted – Appropriate for agreement or assessment of costs.

Family Law Act 1975 (Cth) ss 117
Family Law Rules 2004 (Cth) r 19.18

Bele & Vaughan (Costs) [2012] FamCAFC 198
Hawkins & Roe [2012] FamCAFC 77
Kohan & Kohan (1993) FLC 92-340
Penfold v Penfold (1980) 144 CLR 311
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT: Ms Mosef

RESPONDENT: Mr Mosef

INTERVENOR: Cambridge Law Pty Ltd

INDEPENDENT CHILDREN’S LAWYER: Ms Dodson

FILE NUMBER: PAC 4109 of 2014

DATE DELIVERED: 11 August 2017

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: By way of written submissions last received on 19 June 2017

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Browns The Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Moutasallem

SOLICITOR FOR THE RESPONDENT: Hajjar Legal

SOLICITOR FOR THE INTERVENOR: Cambridge Law Pty Ltd

COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: Mr Sperling

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: Legal Aid NSW Campbelltown Family Law

Orders

1. That the wife pay the costs of the Intervenor of and incidental to the application to intervene and of this costs application on a party/party basis as agreed within one month from the date of this order in default of agreement as assessed.

Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Mosef & Mosef and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 4109  of 2014

Ms Mosef

Applicant

And

Mr Mosef

Respondent

And

Cambridge Law Pty Ltd

Intervenor

REASONS FOR JUDGMENT

1. The application for determination is an Application filed 20 April 2017 by the Intervenor solicitors that inter alia seeks an order for costs against their former client, the wife in the primary proceedings.

2. Final orders as to the property entitlements of the husband and wife were made on 17 July 2017.

3. The application by the Intervenor was first listed before a Registrar on 1 May 2017 and on that date adjourned to the first day of the property and parenting hearing between the husband and wife on 18 May 2017.

4. The application relevantly sought orders that in summary provided:

   a)That the applicant solicitors be granted leave to intervene in the proceedings;

   b)That the applicant be entitled to be paid from the wife’s property entitlement under s 79 of the Family Law Act 1975 (Cth) their costs of $34,309.00 plus interest accruing;

   c)That such costs be a charge against the property of the wife. 

5. On 18 May 2017 the Intervenor’s application was resolved by consent and relevantly orders were made as follows:

   a)Upon final judgment a sum of $34,309.00 currently held in a controlled monies (sic) by [R Solicitors] be paid into Court within 7 days of the date of these Orders.

   b)Should the Applicant wife intend to seek leave to have any part of the costs assessed out of time such leave must be sought within 14 days of the date of these Orders.

   c)Upon the Applicant Wife obtaining such leave the decision is to be communicated  to the Applicant Intervenor within 48 hours and the costs as assessed be paid forthwith from the funds held as per paragraph a).

   d)That in the event that the Wife does not apply for the costs to be assessed payment of the outstanding costs is to be made upon final judgment.

6. Otherwise, the application for costs by the Intervenor was reserved pending filing of written submissions. Those submissions have now been filed.

Costs 

1. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.

2. That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.

3. Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: see Penfold v Penfold (1980) 144 CLR 311.

4. The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:

   17. With respect to the application of the section, in Penfold and Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:

   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. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case".

   Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.

   (footnotes omitted)

   18. 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. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:

   … 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 s 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 subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.

5. The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They relevantly, in these proceedings, relate to the following:

   a)The financial circumstances of each of the parties to the proceedings;

   b)Whether any party has legal aid and the terms of any grant of aid;

   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 answers, 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.

6. The Intervenor in submissions seeks indemnity costs against the wife. The wife opposes any order for costs particularly on an indemnity basis.

7. The method of calculation of costs is reserved to the Court under Rule 19.18. It is usual for the Court to make an order for costs on a party/party basis.

8. Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly r 19.18, provides for the method of calculations of costs. That rule provides as follows:

   (1)The court may order that a party is entitled to costs:

   (a) of a specific amount;

   (b) as assessed on a particular basis (eg lawyer and client, party/party or indemnity);

   (c) to be calculated in accordance with the method stated in the order; or

   (d) for part of the case, or part of an amount, assessed in accordance with Schedule 3.

9. The Rule further provides, in subparagraph (3), that:

   (3)In making an order under subrule (1), the court may consider:

   (a)the importance, complexity or difficulty of the issues;

   (b)the reasonableness of each party’s behaviour in the case;

   (c)the rates ordinarily payable to lawyers in comparable cases;

   (d)whether a lawyer’s conduct has been improper or unreasonable;

   (e)the time properly spent on the case, or in complying with pre-action procedures; and

   (f)expenses properly paid or payable.

Indemnity Costs

1. “Indemnity basis” when applied to a costs order means an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably: Prantage & Prantage [2013] FamCAFC 105.

2. It is usual for the Court to make an order for costs on a party/party basis.

3. Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly Rule 19.18(1), provide for the method of calculations of costs.

4. That Rule provides as follows:

   The court may order that a party is entitled to costs:

   (a)of a specific amount;

   (b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);

   (c)to be calculated in accordance with the method stated in the order; or

   (d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

5. The Rule further provides, in subparagraph (3), that:

   In making an order under subrule (1), the court may consider:

   (a)       the importance, complexity or difficulty of the issues;

   (b)      the reasonableness of each party’s behaviour in the case;

   (c)      the rates ordinarily payable to lawyers in comparable cases;

   (d)      whether a lawyer’s conduct has been improper or unreasonable;

   (e)      the time properly spent on the case, or in complying with pre-action procedures; and

   (f)       expenses properly paid or payable.

6. Rule 19.08(3) of the Family Law Rules provides that a party applying for an order for costs on an indemnity basis must inform the Court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement. This Rule implicitly recognises that an order for  costs  on an  indemnity  basis is a very great departure from the norm and that the Court  should know to what extent  costs  on an  indemnity  basis exceeds the parameters set by the generally applicable scale of  costs.

7. The Court has jurisdiction in its discretion to make an order for costs on an indemnity basis and the purpose of such an award is to more fully or even wholly repay to a party all, or at least the majority, of their legal costs and disbursements and charges incurred in the proceedings.

8. In Kohan & Kohan (1993) FLC 92-340 at 79,611: the Full Court recognised 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,

   … 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.

9. Then at 79,614 the Full Court said:

   The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O.38 r. 2, the provisions of O.38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client.
   O.38 r.7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2) [1983] 2 NSWLR 354; Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR 358 at 368 to 370.

   …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.

10. The obligation to provide to the Court details of any solicitor/client costs agreement in the context of an application for indemnity costs reflects the significant departure from the normal rule as to costs that such an order represents. In the absence of such details the Court is simply unable to determine the quantum of prospective costs sought on an indemnity basis and thus how far an order for indemnity costs is likely to depart from the usual party/party basis order.

11. The applicant for costs has not complied with the requirement of Rule 19.08(3) and thus it is unnecessary to consider costs on an indemnity basis.

12. The Intervenor complains of the wife avoiding service and being generally obstructive by her conduct. Yet the application for costs must relate to the present application before the Court. Proceedings have been on foot for some time and it was always open to the Intervenor to make application for a solicitors lien to secure payment of the costs subject to determination of quantum.

13. The wife prudently resolved the intervenor’s application at an early date and orders were made by consent.

14. The Intervenor and the wife signed a costs agreement in September 2014. Subsequently, the intervenor undertook work on behalf of the wife in respect to the primary proceedings before this Court. The Intervenor lodged a caveat against the title to a property owned by the husband and wife to secure payment of the wife’s costs.

15. The wife subsequently in early 2015 withdrew instructions from the Intervenor and instructed R Solicitors.

16. To facilitate the later sale of the property the Intervenor withdrew the caveat in consideration of the undertaking by R Solicitors to secure payment of the Intervenor’s costs. The wife later withdrew instructions from J Solicitors.

17. The Intervenor commenced in February 2017 proceedings in the Local Court at Bankstown to recover costs owed.

18. Otherwise, the Intervenor has incurred costs in the present application that sought to secure payment. Quite properly orders were consented to by the wife on 18 May 2017.

19. The wife has funds to meet an order for costs by reason of the property orders made on 17 July 2017.

20. The Intervenor has been wholly successful in securing its outstanding costs.

21. In such circumstances it is just that the Intervenor have its costs of the application paid by the wife on a party/party basis. 

22. The Intervenor provides a lump sum assessment of its costs and no detailed breakup. The sum includes a sum for “enforcement”. It is not possible on the information provided to assess a figure on a party/party basis. Such costs will need to be agreed or as assessed.

23. Orders will be made accordingly.   

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 11 August 2017

Associate:

Date:  9 August 2017