Moy & Pao
[2022] FedCFamC1A 17
•15 February 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Moy & Pao [2022] FedCFamC1A 17
Appeal from: Moy & Pao (No. 4) [2021] FamCA 506 Appeal number(s): SOA 47 of 2021 File number(s): MLC 6493 of 2011 Judgment of: MCCLELLAND DCJ, TREE & MCEVOY JJ Date of judgment: 15 February 2022 Catchwords: FAMILY LAW – APPEAL – LEAVE TO APPEAL – COSTS – Where the appellants appeal against an order dismissing their applications for costs following the adjournment of a trial – Where the primary judge’s conclusion that costs were unlikely to be thrown away comprises a material error of fact – Adequacy of reasons –Conduct of respondent’s legal representatives warranted an order for indemnity costs – Leave to appeal granted – Appeal allowed – Re-exercise of discretion – Indemnity costs ordered – Costs of appeal ordered in favour of appellants. Legislation: Family Law Act 1975 (Cth) s 117(2A)
Family Law Rules 2004 (Cth) rr 16.05, 16.06
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
Fashion Warehouse Pty Ltd v Pola [1984] 1 Qd R 251
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Moy & Pao (No. 3) [2021] FamCA 310
Robinson and Higginbotham (1991) FLC 92-209; [1991] FamCA 5
Rozenblit v Vainer (2018) 262 CLR 478; [2018] HCA 23
Stasiuk & Guild [2021] FamCAFC 62
Number of paragraphs: 37 Date of hearing: 1 February 2022 Place: Melbourne (via video link) Counsel for the First Appellant: Dr Smith Solicitor for the First Appellant: Kennedy Partners Counsel for the Second Appellant: Mr Atkinson Solicitor for the Second Appellant: PCL Lawyers Counsel for the Respondent: Mr Felkel Solicitor for the Respondent: McDonald Lawyers ORDERS
SOA 47 of 2021
MLC 6493 of 2011FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS MOY
First Appellant
MR PAO
Second Appellant
AND: B PTY LTD
Respondent
ORDER MADE BY:
MCCLELLAND, TREE & MCEVOY JJ
DATE OF ORDER:
15 FEBRUARY 2022
THE COURT ORDERS THAT:
1.Leave to appeal be granted.
2.The appeal be allowed.
3.The orders made on 13 July 2021 by the primary judge be set aside.
4.Within 28 days, the respondent pay the first appellant’s costs thrown away as a result of the adjournment of the trial of the primary proceedings on 13 May 2021 in the sum of $32,353.75, together with costs of the Application in a Case filed 11 June 2021 in the sum of $1,178.34.
5.Within 28 days, the respondent pay the second appellant’s costs thrown away as a result of the adjournment of the trial of the primary proceedings on 13 May 2021 in the sum of $29,012.50, together with costs of the Application in a Case filed 11 June 2021 in the sum of $1,178.34.
6.Within 28 days, the respondent pay the first appellant’s costs of this appeal in the sum of $9,021.21.
7.Within 28 days, the respondent pay the second appellant’s costs of this appeal in the sum of $6,775.44.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 the pseudonym Moy & Pao has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MCCLELLAND DCJ, TREE & MCEVOY JJ:
INTRODUCTION
Ms Moy (“the wife”) and Mr Pao (“the husband”) (collectively, “the appellants”) seek leave to appeal, and if granted, appeal an order made on 13 July 2021 dismissing their application for costs against B Pty Ltd (“the respondent”) following the adjournment of a final hearing of property settlement proceedings. The respondent opposes both the application for leave to appeal and the appeal.
For the reasons that follow, the application for leave to appeal and the appeal are allowed and the orders made on 13 July 2021 discharged. Further, the respondent is ordered to pay the appellants’ costs on an indemnity basis, being costs thrown away by virtue of the adjournment, costs incurred in prosecuting their applications for costs, and their costs of this appeal.
BACKGROUND
The appellants are former spouses involved in property settlement proceedings. The respondent, who is a creditor of the appellants, intervened in those proceedings and sought orders in relation to its judgment debt. The respondent has been a party to the property settlement proceedings since their inception in May 2017.
After various attempts to set the matter down for trial, on 27 July 2020, the property proceeding was listed for a four day final hearing on 11 May 2021 before the primary judge. The trial directions then made, which were by consent, required the respondent to file and serve its evidence-in-chief of all witnesses, including expert witnesses, by 15 December 2020. The respondent failed to comply with that timetable.
On 28 January 2021, the respondent’s solicitor sent an email to the chambers of the primary judge advising that if his client’s witnesses were unable to travel from China to Australia to appear at the trial in person, then the respondent would seek leave for them to give their evidence by electronic means. On 29 January 2021, the then solicitor for the husband sent an email to all parties and the Court, alerting them to the requirements of rr 16.05 and 16.06 of the then Family Law Rules 2004 (Cth) (“the Rules”), which were the rules governing applications for foreign witnesses to give evidence by electronic means. The respondent was therefore on notice of the requirements of rr 16.05 and 16.06 since 29 January 2021, but at no stage prior to the trial did the respondent attempt to invoke the mandatory procedures set out in the Rules.
At the outset of the hearing on the first day of trial, counsel for the respondent first sought leave to rely upon several affidavits that had not been filed in accordance with the trial directions, nor previously foreshadowed as being relied upon, and secondly sought leave for those witnesses to give evidence electronically. Counsel for both the wife and husband opposed that course.
As the ex tempore reasons of the primary judge in the subsequent decision of Moy & Pao (No.3) [2021] FamCA 310 make plain, much of the first three days of the trial were spent on housekeeping issues and argument concerning the respondent’s application to call its witnesses electronically. The matter was stood down several times over those three days for the respondent’s counsel to gather her thoughts or to amend certain documents in an attempt to comply with rr 16.05 and 16.06. Ultimately as found by the primary judge, the respondent failed to establish compliance with rr 16.05 and 16.06 of the Rules (at [33] and [34]).
On the afternoon on the second day of the trial, counsel for the respondent made an application for an adjournment of the trial in order to allow her client to comply with the relevant rules and for her client’s witnesses to attend either in person or electronically. The parties’ submissions on the adjournment application continued until mid-morning on the third day of trial, after which the primary judge delivered his ex-tempore reasons for judgment granting the adjournment. The trial was adjourned to a further three days in October 2021, however for reasons that are unclear, the trial did not proceed at that time and is still awaiting final hearing. As part of the orders adjourning the trial, his Honour ordered that the parties file a joint timetable for the filing of material on the issue of costs consequent upon his Honour’s ruling.
On 11 June 2021, the husband and the wife each filed an application seeking their costs against the respondent; in the first instance, on an indemnity basis, and thereafter (in the case of the wife) on a lawyer/client basis, or alternatively (for both the husband and the wife) on a party/party basis.
Both applications were dismissed in their entirety with, significantly, the primary judge further ordering that each party bear their own costs “of and incidental to the adjournment of the trial on 13 May 2021”. The appellants appeal against those orders.
LEAVE TO APPEAL
It was uncontentious before us that the appellants require leave in order to bring the proposed appeal. The test adopted in this Court for leave to appeal is a conjunctive one, namely, whether the decision of the primary judge is attended by sufficient doubt so as to warrant its reconsideration by the Full Court and, if so, whether a substantial injustice would occur if leave were not granted (Medlow & Medlow (2016) FLC 93-692 at [57] (“Medlow”)).
The test in Medlow requires an examination of the grounds of appeal to determine whether the decision of the primary judge was attended by sufficient doubt to warrant its reconsideration. The question of substantial injustice will be considered thereafter.
Before we discuss the grounds of appeal, it must be noted that whilst the Full Court has generally been reluctant to interfere with a primary judge’s discretion as to costs (Robinson and Higginbotham (1991) FLC 92-209 (“Robinson”)), that does not mean that this Court should never interfere with the exercise of a costs discretion (Stasiuk & Guild [2021] FamCAFC 62 at [6] (“Stasiuk & Guild”)). This Court must interfere “if the result is plainly unjust or if the discretion was exercised on wrong principles” (Robinson at 78,417).
REASONS FOR JUDGMENT
The primary judge’s reasons for dismissing the costs applications run to nine paragraphs in length, however relevant to this appeal are as follows:
4First, it is necessary to address the claims for costs to be assessed on an indemnity basis. Stasiuk & Guild is a recent illustration of a repeat theme that the decision in In the Marriage of Kohan remains good law and that indemnity costs are ordered in exceptional circumstances. There was nothing exceptional about the trial of this proceeding being adjourned. It will resume on 13 October 2021. Whether the intervenor is ultimately successful in pressing for recovery of many millions of dollars in a judgment debt obtained in Australia remains to be seen. This case scarcely commenced before three days of “housekeeping” issues emerged. No evidence was called. Only when I have a better understanding of the merits of this case will I be placed to make a costs order, if one under s 117(2) is appropriately made at all.
5Second, there are unlikely to be costs thrown away. The material on which all parties have proceeded to date will be used when the trial resumes.
6Third, even if a party successfully enlivens one of the grounds of the subsections of s 117(2A) of the Family Law Act, it does not follow that a costs order is axiomatically made. The making of a costs order must be just.
7It must not be forgotten that the applicant and the respondent have been battling in this court for a long time. The intervenor has been owed a very large amount for a long time. The case has not been tried. A costs order may well be made after trial. Equally, one may not. I am not prepared to materially alter the status quo by the making of the costs order sought.
8In my view the proceeding must resume on the dates allocated. If the case runs to judgment then costs may become an issue. It is too early to tell.
9In those circumstances I dismiss the applications for an order that the intervenor pay the applicant’s and the respondent’s costs on an indemnity basis. I also dismiss their applications for a costs order under s 117(2) on a party party basis. Costs should be borne by all parties under s 117(1) of the Family Law Act.
(Footnotes omitted)
Ground 1
This ground of appeal contends:
1.The [primary judge] erred in concluding that there were unlikely to be costs ‘thrown away’ of the husband and the wife, notwithstanding that the matter had been adjourned after three days of final hearing, without the trial commencing.
(As per the original)
The primary judge’s reasoning at [5] that costs are “unlikely” to be thrown away because the material filed to date will be used when the trial resumes, ignores the fact that the appellants expended three days’ worth of costs for their legal representatives’ appearances in Court. The trial remains to be heard over another three days, thus further costs for preparation and a further three days’ appearances will be incurred and would have been avoidable but for the conduct of the respondent, and particularly if the trial had proceeded in May 2021 rather than been adjourned.
Each of the appellants’ costs applications sought recovery of costs in relation to the preparation and attendance of their respective legal representatives over the three days of final hearing, which were ultimately wasted by the conduct of the respondent and the subsequent adjournment. Clearly these were “costs thrown away” (Fashion Warehouse Pty Ltd v Pola [1984] 1 Qd R 251 at 254). Indeed, the respondent all but conceded this in oral argument before us. The appellants conceded that the costs with respect to the preparation of their trial material were not thrown away, and consequently neither appellant sought recovery of those costs in their applications.
We agree with the appellants’ submissions that the conclusion reached by the primary judge at [5] appears to misapprehend the nature of the work in respect of which costs were sought by each of the appellants, and therefore comprises a material error of fact. The decision based on that error is necessarily unjust as it is based upon a fundamental misconception.
This ground has merit.
Grounds 2, 3 and 4
These grounds provide:
2.The [primary judge] failed to consider, or failed to adequately consider, s 117(2A) of the Family Law Act 1975 (Cth), and in particular s 117(2A)(c).
3.The [primary judge] erred in concluding that there were no ‘exceptional circumstances’ warranting an order for indemnity costs, notwithstanding that there was clear evidence of particular misconduct causing loss of time to the Court and to other parties.
4. The [primary judge] gave inadequate reasons.
(As per the original)
Given that the error of fact complained of in Ground 1 has been established, it is not necessary to traverse the remaining grounds, however we should briefly explain why they nonetheless also have merit.
As to Grounds 2 and 4, it is not possible to discern what, if any, matters under s 117(2A) of the Family Law Act 1975 (Cth) were considered by the primary judge, and at the least, therefore the reasons were inadequate.
As to Ground 3, as we shall shortly explain, the failures of the respondent to comply with the trial directions and rr 16.05 and 16.06, are clear examples of misconduct derailing a trial, which is an exceptional circumstance sufficient to found an order for indemnity costs.
Substantial injustice
The appellants submit that the substantial injustice they will suffer, if leave to appeal were refused, is the irrecoverability of the significant legal expenses they have each wasted because of the lack of preparation and compliance by the respondent. Further, the refusal by the primary judge to order costs means that the appellants will now each need to source additional funds to pay their legal representatives for a further three days of hearing when the trial resumes, which would not have been necessary but for the respondent’s misconduct.
Both of the appellants have very limited income and resources to fund the litigation. Moreover, given that the primary judge specifically ordered that all parties bear their own costs of the adjournment of the trial, that necessarily means that those costs cannot be revisited other than on appeal, notwithstanding intimations by the primary judge at [7] and [8] which, on one view, suggested otherwise.
To deny the appellants leave to appeal would occasion them substantial injustice comprising the inability to recover the legal expenses which they have incurred which, given their financial circumstances, are relatively significant. As Keane J observed in Rozenblit v Vainer (2018) 262 CLR 478 at [42]:
Litigation is sufficiently stressful and expensive for all concerned without the unnecessary aggravations of additional cost, stress, distraction and delay occasioned by inefficiency, incompetence or sheer disregard of the rules. To the extent that the contention advanced on behalf of [the appellant] reflects an assumption that inefficiently or incompetently conducted litigation, and the waste in terms of time and money inflicted upon the other party or parties, is nevertheless consistent with the promotion of access to justice because the end may ultimately justify the means, that assumption must be rejected. Inefficient or incompetent conduct of litigation may cause injustice even if it is not intended to do so. Litigation that is conducted inefficiently, incompetently or in disregard of the rules by one party is no less oppressive to the other party because it is not intended to be oppressive…
(Footnote omitted)
In this case, we are satisfied that the appellants have suffered substantial injustice as a result of the incompetence of the respondent in the manner in which we have described.
CONCLUSION
The grounds of appeal have merit and the appellants would suffer substantial injustice if leave to appeal were refused. Leave to appeal will therefore be granted. Further, following the success of Ground 1, the appeal will be allowed.
Before turning to the re-exercise of the costs discretion, it is desirable to make one final point. As has been noted, in addressing the claims for costs to be assessed on an indemnity basis, the primary judge referred to Stasiuk & Guild at [4] as “a recent illustration of a repeat theme that the decision in In the Marriage of Kohan remains good law and that indemnity costs are ordered in exceptional circumstances” (footnote omitted). His Honour was, of course, correct in this respect. The Full Court has consistently made it clear that, unremarkably, indemnity costs should only be ordered in exceptional circumstances. As we will explain, the circumstances which confronted the primary judge on the application for an adjournment were plainly exceptional.
RE-EXERCISE
In the event the appeal succeeded, all parties sought that the Full Court re-exercise the discretion as to costs.
The conduct of the respondent over the three days of trial in itself alone justifies an order for costs thrown away by the adjournment. Indeed, on one view, the adjournment application should have only been entertained on an undertaking that those costs would be paid by the respondent. The appellants’ limited financial resources, and the respondent’s failure to disclose its financial position, only serves to bolster the justice of a costs order.
Further the respondent’s blatant disregard of the trial directions, and rr 16.05 and 16.06, is clear misconduct causing loss of time to the Court and other parties (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225), and hence sufficient to justify indemnity costs.
There are two further significant competing factors relevant to the exercise of the discretion. The first is that the facts at least raise the possibility that the adjournment was necessitated by the misconduct of the respondent’s lawyers, rather than the respondent itself. However the respondent put forth no material as to that, and further, any expense to the respondent occasioned by an indemnity costs order against it because of the misconduct of its lawyers is able to be remedied elsewhere.
The second is that, unlike the appellants, the respondent voluntarily chose to intervene in this litigation. In those circumstances, where that intervention is thereafter misconducted, it is difficult to see why any financial consequence of that misconduct should be borne by either appellant or, to put it another way, why the respondent should be able to avoid the inevitable consequences of its misconduct.
We are persuaded that in this unusual case, an order for indemnity costs is warranted. Those costs will be as claimed by the wife and husband, in the sums of $32,353.75 and $29,012.50 respectively.
There also ought be orders that the respondent pay the appellants’ costs of their respective applications for costs. Sensibly this was not disputed by the respondent, nor was the quantum of those costs disputed.
COSTS
The respondent further sensibly conceded that, if the appeal succeeded, and a costs order was made upon the re-exercise of the discretion, then costs of the appeal should also be ordered against it. No objection was taken to the claimed quantum, and therefore the amounts of $9,021.21 and $6,775.44 will be ordered to be paid by the respondent to the wife and husband respectively.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Deputy Chief Justice McClelland and Justices Tree & McEvoy. Associate:
Dated: 15 February 2022
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