Mosef and Mosef (No 3)

[2015] FamCA 1035

FAMILY COURT OF AUSTRALIA

MOSEF & MOSEF (NO 3) [2015] FamCA 1035

FAMILY LAW – COSTS – where the wife was successful in her application for interim property distribution but orders were not made in similar terms proffered by her in an offer of settlement – where the wife seeks costs on an indemnity basis – where relevant factors under s 117 of the Family Law Act 1975 (Cth) considered – where principles underlying an award for indemnity costs considered – where order made for costs on a party/party basis.

Family Law Act 1975 (Cth) s 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
Lenova & Lenova (Costs) [2011] FamCAFC 141
Penfold v Penfold (1980) 144 CLR 311
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT: Mr Mosef

RESPONDENT: Ms Mosef

FILE NUMBER: PAC 4109 of 2014

DATE DELIVERED: 25 November 2015

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 8 September 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Conte-Mills

SOLICITOR FOR THE APPLICANT: Thurlows Family Lawyers

SOLICITOR FOR THE RESPONDENT: Browns The Family Lawyers

Orders

1. That the husband pay the wife’s costs of and incidental to the application in a case for interim property provision filed on 10 July 2015 except for the wife’s costs of appearance on 24 July 2015 together with costs of and incidental to the present costs application with such costs to be as agreed within two months from the date of these orders or failing agreement as assessed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Mosef & Mosef (No 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 4109  of 2014

Mr Mosef

Applicant

And

Ms Mosef

Respondent

REASONS FOR JUDGMENT

1. The present application for determination is an application by the wife that the husband pay her costs of and incidental to an interim hearing on 8 September 2015 in respect of which are reasons for judgement were delivered on 17 September 2015 (Mosef & Mosef (No 2) [2015] FamCA 769).

2. The wife’s interim application in the primary property proceedings was for the payment to her and the husband of the sum of $100,000 from the sale of a property owned by the parties at M Street, Suburb N New South Wales.

3. The background circumstances to the application are more fully set out in the reasons for judgment referred to above.

4. The wife who was wholly successful in interim application seeks an order against the husband that he pay her costs on an indemnity basis. Her application for indemnity costs is, it appears, substantially founded on the fact that she was wholly successful and that she had put to the husband prior to the hearing an offer of compromise which she asserts he imprudently failed to consider.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. As to the relevant factors in section 117(2A):

    a)Financial circumstances of the parties: the interim application related to property and the parties at the time of the interim application were in substantial agreement as to the value of the net asset pool which at that time had an approximate net value of $714,000. Both parties will receive significant capital sums from the interim property orders. Thus neither party will be short of funds in circumstances where previously one of their substantial assets was unrealisable in the form of real estate. They will now both have significantly available cash funds.

    b)Legal aid: this is not a relevant consideration.

    c)The conduct of the parties to the proceedings: such conduct is often described as a particular conduct of a party that has in some way lead to an additional burden or costs being incurred by the other party by reason of for example non-cooperation, obstructive in this or otherwise. Such is not the circumstances in relation to this interim application and this is not a relevant consideration.

    d)Failure to comply with court orders: this is not a relevant consideration in the context of this matter.

    e)Wholly successful: the wife has been wholly successful in her interim application seeking sale of the subject property and a distribution of funds in the quantum sought by her. Such a circumstance is a significant factor in assessing whether a costs order should be made. Ultimately the wife was unsuccessful in her application to be appointed sole trustee for sale of the property with the Court ordering that each of the parties do all things necessary to procure a sale. Notwithstanding that circumstance in substance the wife was successful in her application.

    f)Offer of settlement: by letter dated 3 July 2015 the wife’s solicitors wrote to the husband’s solicitors in circumstances where the present application for interim property was pending. The wife’s solicitors wrote in the following terms:

    We note that if your client is willing to pay for the chapter 15.5 single expert report by [Dr Q] our client would be willing to discontinue with the part property application.

    If your client is unwilling to do so will, we propose the following terms:

    Thereafter the wife set out in her proposal that the property at Suburb N be sold and that after payment of sale costs the chapter 15.5 expert report be paid for and there be a distribution of $50,000 to the wife with the remaining balance to be placed in a controlled monies account with her solicitors.

    No response was received from the husband’s solicitors save for some communication that the husband may be able to procure an extension of the mortgage on the home to provide funds and ultimately the matter proceeded to judicial determination.

    In Lenova & Lenova (Costs) [2011] FamCAFC 141 the Full Court, Bryant CJ, Coleman and Murphy JJ said:

    In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (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.

    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.

    That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order cannot be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.

    Whilst the wife was successful in her application for interim property orders, the orders were not made in terms similar to that proffered by her. Indeed interim distribution is to be made to both the husband and wife of $100,000 each.

    However, the fact of the offer and the limited response by the husband in the context of the wife’s ultimate success in an application is relevant to the exercise of the Court’s discretion to make an order for costs.

    g)Any other fact or circumstances: there are no other relevant circumstances.

11. For the reasons outlined in considering the relevant factors above it is appropriate that there be an order for costs that displaces the general rule as provided for in section 117.

12. The general position is that such an order is usually made on a party/party basis as assessed or agreed.

Indemnity Costs

1. The application in submissions seeks indemnity costs against the husband. The husband opposes any order for costs particularly on an indemnity basis.

2. The method of calculation of costs is reserved to the Court under Rule 19.18.

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

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. The category of cases in which an award of an indemnity costs order may be appropriate are not closed: see Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681.

10. Strickland J in Bele & Vaughan (Costs) [2012] FamCAFC 198 at [26] to [28] on this issue neatly encapsulated the relevant legal principles.

    26.      A useful recent discussion of the question of indemnity costs is to be found in the decision of the Full Court in D & D (Costs) (No 2) (2010) FLC 93-435. There the Full Court reviewed extensively earlier authorities including Limousin v Limousin (Costs) (2008) 38 Fam LR 478 and Kohan and Kohan (1993) FLC 92-340, and also Sheppard J’s decision in Colgate-Palmolive Co & Another v  Cussons Pty Ltd (1993) 118 ALR 248.

    27.      The ordinary rule is that an order for costs is calculated on a party/party basis, and it emerges from the authorities referred to above that to depart from that rule exceptional circumstances need to be demonstrated.

    28.      As to what might constitute an exceptional circumstance, reference can be made to the oft-cited decision of Sheppard J in Colgate-Palmolive Co & Another v Cussons Pty Ltd where his Honour detailed circumstances that might qualify.  Usefully, Holden J in Munday v Bowman (1997) FLC 92-784 at 84,660 drew from the decision of Sheppard J the following examples:

    (a)      Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success.  In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397).

    (b)      Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra)).

    (c)      Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd (unreported, Federal Court,
    3 May 1991)).

    (d)      The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).

    (e)      An imprudent refusal of an offer to compromise.

1. As can be seen there needs to be significant and relevant circumstances that would justify the normal rule as to party/party costs being departed from. The wife may well point to her offer of settlement but that offer did not include an offer of any distribution of funds to the husband as was ultimately ordered.

2. The wife contends that the husband was unreasonable in opposing any order for interim property distribution. The making of such an order ultimately is a matter for judicial discretion which in this case was exercised in favour of the wife. That result does not render it a circumstance justifying an order for indemnity costs but is a circumstance clearly relevant to the displacement of the general rule that each of the parties should pay their own costs

3. Accordingly the wife’s application for indemnity costs is rejected.

4. The application for interim property distribution was neither complex nor difficult.

5. But as discussed above it is appropriate that there be an order that the husband pay the wife’s costs on a party/party basis as agreed or assessed.

6. The husband’s costs of 24 July 2015 were reserved by reason of the matter going over part-heard as the wife’s case was not properly prepared. It is appropriate that the wife not have her costs of that day.

7. Orders will be made accordingly.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 25 November 2015.

Associate:

Date:  25 November 2015