Moyland & Shearer (No 3)
[2024] FedCFamC2F 864
•27 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Moyland & Shearer (No 3) [2024] FedCFamC2F 864
File number(s): CAC 1659 of 2021 Judgment of: JUDGE W J NEVILLE Date of judgment: 27 June 2024 Catchwords: FAMILY LAW – COSTS – multiple offers made by the Father during the course of the protracted litigation – Mother made two counter-offers – consideration of principles regarding costs especially where there are offers of settlement – the Father’s penultimate offer of settlement regarding costs was one-sixth his ultimate costs – Full Court authority that refers to rejection of offers where doing so is more than just unwise but actually “imprudent” – Father sought as his primary position indemnity costs against the Mother – indemnity costs Application refused but a limited costs Order in keeping with the “generous” costs offer made by the Father in November 2023 made – payment of costs by the Mother to be made in six months. Legislation: Family Law Act 1975 (Cth) ss.117, 117(2), 117(2A)(e) and (f) Cases cited: AON Risk Services Ltd v Australian National University (2009) 239 CLR 175
Browne v Green (2002) 29 Fam LR 428
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303
Harris & Harris (1991) 15 Fam LR 26
JEL v DDF (2001) 28 Fam LR 119
Lad & Gittings (2014) 52 Fam LR 71
Penfold v Penfold (1980) 144 CLR 311
Ressel & Morath [2023] FedCFamC1A 145Stephens v Stephens (2011) 44 Fam LR 117
Division: Division 2 Family Law Number of paragraphs: 32 Date of last submission/s: 10 June 2024 Date of hearing: 12 June 2024 Place: Canberra Counsel for the Applicant Ms R. Dart Solicitor for the Applicant Robinson + McGuinness Family Law Counsel for the Respondent Ms M Davis Solicitor for the Respondent Foster Johnson Lawyers ORDERS
CAC 1659 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR MOYLAND
Applicant
AND: MS SHEARER
Respondent
ORDER MADE BY:
JUDGE W J NEVILLE
DATE OF ORDER:
27 JUNE 2024
THE COURT ORDERS THAT:
1.The Mother is to pay the Father’s costs of and incidental to the substantive proceedings, fixed in the sum of $40,000, within 6 months of the date of these Orders, being by 27 December 2024.
2.The Mother is to pay the Father’s costs of and incidental to the Costs Application, filed by the Father on 18 April 2024, fixed in the sum of $2000, within 6 months of the date of these Orders, being by 27 December 2024.
3.Order 2 of Orders made 12 June 2024 reserving the costs of the parties in relation to the Mother’s Adjournment Application be discharged.
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
JUDGE W J NEVILLE
Introduction
On 27th June 2024, I delivered detailed oral reasons regarding the Father’s costs Application, details of which are set out below. The Court has been asked by the Mother to provide her with written reasons. Those reasons, revised from the transcript, follow.
On 21st March this year I delivered reasons and made Orders that I considered to be in the best interests of the two children of the relationship, X and Y. To say that there were some unusual features of the trial, many if not most of them outside the control of the parties and the Court, would be an understatement. Such matters are set out in two earlier judgments of the Court and need not be rehearsed, or even summarised, here.[1]
[1] See Moyland & Shearer [2023] FedCFamC2F 1202, regarding the discharge of an expert; and Moyland & Shearer [2024] FedCFamC2F 350, the primary parenting judgment.
Nor do I need to rehearse or repeat my recent oral reasons dismissing the Mother’s Application that I recuse myself to deal with the Father’s Application for costs. These abbreviated reasons only concern the Father’s Application regarding costs.
Orders sought by the Applicant
The Applicant’s Orders sought were contained in his Application in a Proceeding. filed 18th April 2024. They were as follows:
1.That the Respondent Mother pay the Applicant Father's costs of and incidental to his Initiating Application filed 30 July 2021 and amended on 18 March 2022, and limited to the period 18 March 2022 to 21 March 2024 ("the Father's costs").
2.That for the purpose of order 1, the Father's costs be paid as follows:
2.1 On a fixed basis in the sum of$222,779.90.
2.2 In the first alternative, in an amount fixed as determined by the Court.
2.3 In the second alternative, on an indemnity basis as agreed or as taxed.
2.4 In the third alternative, on a solicitor/client basis as agreed or taxed.
2.5 In the fourth alternative, on a party/party basis as agreed or taxed.
3.That that Mother pay the Father's costs of and incidental to this Application in a Proceeding.
4.1 In the first alternative, in an amount fixed as determined by the Court.
4.2 In the second alternative, on an indemnity basis as agreed or as taxed.
4.3 In the third alternative, on a solicitor/client basis as agreed or taxed.
4.4 In the fourth alternative, on a party/party basis as agreed or taxed.
4.That for the purpose of order 3, the Father's costs be paid as follows:
5.That the Mother meet any payment to the Father pursuant to an order as to costs within 30 days of the date of order.
Orders sought by the Respondent
The Respondent’s Orders sought were contained in her Response to an Application in a Proceeding, filed 16th May 2024. They were as follows:
1.The Applicant Father's Application in a Proceeding filed on 18 April 2024 be dismissed.
2.The Applicant Father pay the Respondent Mother's costs of and incidental to these costs proceedings, fixed in the sum of $5,500.00.
Written Submissions on behalf of the Applicant
An Outline of Written Submissions was filed on behalf of the Applicant on 7th June 2024; it was as follows (emphasis in original):
Proceedings
1.By his Application in a Proceedings filed 18 April 2024, the Father seeks an order that the Mother pay his costs of and incidental to his Initiating Application filed 30 July 2021 (and amended on 18 March 2022) for the period 18 March 2022 to 21 March 2024, together with his costs of bringing the current application.
2.The father’s primary position is that the order be made on a fixed basis. With respect to the costs of the primary proceedings, the father seeks those fees to be fixed in the sum of $222,779.90 and in relation to the costs application, in the sum of $8,000.
Documents relied upon
3.Application in a Proceedings, filed 18 April 2024;
4.Affidavit of [Mr Moyland], filed 18 April 2024;
5.Financial Statement, filed 18 April 2024;
6.Affidavit of [Mr Moyland] (in reply), filed 23 May 2024.
History
7.Parenting proceedings were commenced by the Father by way of an Initiating Application filed 30 July 2021, seeking orders to formalise the long-standing equal time arrangement in relation to the children [X], born [in] 2010 and [Y], born [in] 2013.
8.In early 2022, the mother relocated to Queensland. The children thereafter remained living with the father in [City D].
9.The matter proceeded to final hearing before his Honour Judge Neville on 23 and 24 August 2023 and was adjourned part-heard.
10.On 24 August 2023, an unsuccessful application was brought by the mother seeking to discharge [Dr B] as the single expert. Orders were made on 26 September 2024 providing for the mother to pay the father’s costs of that application in the fixed sum of $10,450 plus GST. That order has been complied with and is excluded from the current application.
11.As it transpired, further hearing time was not required and on 19 October 2023 orders were made for the preparation of written submissions. Through her written submissions filed on or about 14 December 20231, the mother conceded a number of orders sought by the father, such that the Court was only called upon to determine the issue of parental responsibility.
12.Judgment was delivered on 21 March 2024 and orders were made for the father to have sole parental responsibility for the children. By consent, it was ordered, inter alia, that the children live with the father and spend 2 weekends per school term and 10 nights in each of the terms 1, 2 and 3 school holiday period and half of the term 4 school holiday period with the mother.
Offers made
13.The father relies upon the following offers made in support of his application for costs:
13.1.27 October 2022: providing for the parties to have equal shared parental responsibility (“ESPR”), for the children to live with him and to spend time with the mother for 2 weekends in the school term, for 10 nights in the term 1 and 3 school holidays, the entirety of the term 2 holidays and half of the term 4 holidays. This offer was open for 28 days and was not responded to;
13.2.7 February 2023: this offer substantially in the same terms as the offer of 27 October 2022, with the significant change being that the children spend time with the mother for the first 10 days of each of the Terms 1, 2 and 3 school holidays (being the arrangement ultimately implemented). This offer was initially open for acceptance until 5 pm on 28 February 2023 and then extended to 5 pm on 31 March 2023. On 14 March 2023, the mother responded to the offer seeking a number of amendments including the orders for time and live with arrangements be in place only until the children were 14 and thereafter their parenting arrangements be in accordance with their wishes;
13.3.27 June 2023 (open offer): this offer was substantially in the same terms as the 7 February 2023 offer but omitted provisions with respect to electronic devices and for each party to pay their own costs of the proceedings. By way of a response dated 5 July 2023, the mother rejected the offer.
14.At trial, the father sought orders consistent with his offer of 27 June 2023, although his position with respect to parental responsibility changed following the close of evidence.
15.On 26 October 2023, the mother made a without prejudice offer to resolve the parenting proceedings on the basis of the Minute attached to the father’s trial affidavit (being the offer of 27 June 2023) conditional upon each party bearing their own costs of the proceedings.
16.On 2 November 2023, the father replied to that offer by proposing that he have sole PR with respect to medical, dental and allied health subject to appropriate consultation with the mother and that the mother meet his costs in the sum of $40,000. The mother rejected that offer on 23 November 2023.
The law
17.Costs are governed by s 117 of the Act, with the ordinary rule being that each party to a proceedings shall bear his or her own costs (s 117(1)) unless the Court finds under s 117(2A) that the circumstances justify an order being made: Penfold v Penfold (1980) FLC 90-800.
18.Section 117(1) must yield to s 117(2) whenever it is found that there are particular circumstances the making of a costs order: In the marriage of Mallett (1984) 156 CLR 605.
19.The making of a costs order against a particular party is said to be compensatory in nature and to protect a party who has been successful in either defending or prosecuting a particular application and being put to the expense of doing so where it was not justified or warranted: Cassidy v Murray (1995) FLC 92-633
20.The Court has the power to make an indemnity costs order (r. 12.17), although it is an established principle that the court should not lightly depart from the ordinary rules relating to party/party costs and the circumstances justifying the departure should be of an exceptional kind: Kohan and Kohan (1993) FLC 92-340; Yunghanns v Yunghanns (2000) FLC 93-029.
21.The seminal case in relation to the awarding of indemnity costs is contained in Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 which sets out the circumstances which may warrant an order for indemnity costs. Relevantly to the current circumstances, this includes where there has been an imprudent refusal to an offer of settlement.
22.Rule 12.13(4) provides that a party applying for an order for costs on an indemnity basis must inform the court of the party is bound by a costs agreement(s) and if so, the terms of the agreement(s). That requirement is met at pages 229 – 257 of the affidavit of [Mr Moyland] filed 18 April 2024.
Consideration of s 117(2A)
23.The financial circumstances of each of the parties to the proceeding:
23.1.The financial circumstances of each of the parties is set out in their respective Financial Statements filed with respect to this application.
23.2.Whilst the mother relies upon her financial circumstances to resist an order for costs, it is well established that impecuniosity is not a bar to a cost order being made. In Lenova & Lenova (Costs) (2011) FLC 93-467 the Full Court held at [10]-[12]:
10.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.
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.
12.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 can not 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.
23.3.The mother has been represented for much of these proceedings including relevantly when each of the offers of settlement referred to at paragraph [9] were made and rejected. She was represented by both a solicitor and counsel at trial and she has engaged a solicitor and counsel to act for her with respect to the present costs application.
24.Whether any party to the proceedings is in receipt of a grant of aid
24.1. Neither the mother nor father are in receipt of a grant of legal aid.
25.The conduct of the parties in relation to the proceedings:
25.1. It is not contended that this is a relevant consideration.
26.Whether the proceedings were necessitated by the failure of the party to the proceedings to comply with previous orders of the Court:
26.1. It is not contended that this is a relevant consideration
27.Whether the party to the proceedings has been wholly unsuccessful in the proceedings:
27.1.It is contended that the mother has been wholly unsuccessful. Whilst the mother ultimately agreed to the orders proposed by the father (save with respect to parental responsibility), this consent could not be seen as a significant concession on her part given the way in which the trial progressed and the inevitability that the proposal of the father would be seen to be in the children’s best interest. Notably, her consent was only forthcoming once the father had been put to the expense of comprehensive written submissions addressing the full ambit of the dispute. The refusal of the mother to settle the issue of parental responsibility caused the father to be put to the expense of preparing submissions in reply.
27.2.Such belated consent of the mother in relation to some of the issues in dispute did not thus serve to minimise or reduce the father’s costs of these proceedings and hence is not a factor to which the Court would have regard in determining the costs application.
28.Written offers:
28.1.The relevant offers relied upon by the father in support of this application are detailed above. It is submitted that the mother would have been in a substantially better position had she accepted those offers and her refusal to do so was of such imprudence that it justifies not only an order for costs, but for such costs to be made on an indemnity basis.
28.2.Offers of settlement carry significant weight in the determination of costs applications, as confirmed by the Full Court in Browne & Green (2002) FLC 93-115 in which it was held:
56.We would agree with the observations of Nygh J in Robinson and Higginbotham (1991) FLC 92-209; 14 Fam LR 559 at FLC 78,417; Fam LR 561:
“…I accept counsel for the husband’s submission that paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case.
…
Similarly, 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...”
57.We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.
29.Such other matters that the Court considers relevant
29.1.In her affidavit material at [49], [50] and [52], the mother threatens that if a costs order is made, she would return to [City D] and foreshadowed further Court proceedings in the event that was to occur. During the trial, the mother was resolute in her refusal to return to [City D], citing health, study and safety concerns. In light of such evidence, it is submitted the Court would find the suggestion that the mother would return if a costs order were made to be disingenuous and not a matter to which regard should be had when determining the present application.
Written Submissions on behalf of the Respondent
An Outline of Written Submissions was filed on 10th June 2024 on behalf of the Respondent; it was as follows:
1.These submissions are limited to two pages in accordance with the directions made on 30 April 2024 following the Father’s Application for Indemnity or any other Costs made on 18 April 2024. The Costs Application arises from judgment delivered on 21 March 2024, finalising a parenting dispute that included the Mother’s relocation application.
2.The Mother says that the Court should make no order for costs in this matter, and it certainly should not take the exceptional step of ordering indemnity costs.
Basic Principles
3.The starting point under s117 of the Family Law Act 1975 (“the Act”) is that each party bears their own costs. Where there are justifying circumstances, the Court has wide discretion to order costs in accordance with s117(2). The Father relies upon s117(2A)(e) and (f).
4.While it is acknowledged that s117 of the Act does not differentiate between parenting and property matters, public policy reasons often require a different approach so as not to limit parents from pursuing a case they believe is in the children’s best interest. This must be especially so in relocation matters. The Full Court has observed:
In proceedings involving children's or parenting matters, the general rule is not often displaced. The rationale for this practise is that in such matters it is proper that parents are able to put their case in seeking orders which they believe to be in the best interests of their children. It hardly needs to be said that the nature of family court litigation in relation to children is quite different to a commercial dispute in the state or federal court.
5.Indemnity costs is a very great departure from the usual course and should only be ordered in the most extreme cases. The kinds of situations enumerated in Colgate-Palmolive v Cussons Pty Ltd are not present in this case and are not asserted by the Father.
6.In this matter: the parties each made multiple attempts to resolve the issues in dispute, including by mediation and through lawyers; the Mother’s financial circumstances are and have been much more parlous than the Father’s; the matter’s delays and required costs were not always a result of either parties’ applications or actions but a function of the Court’s own processes.
7.The Father seeks in the alternative costs at scale, although his evidence does not disclose how the Court or the Mother could assess those costs. The Mother’s evidence as her incapacity to meet a costs order is compelling. Her jointly-held property cannot reasonably be sold or mortgaged due to storm damage. Her income is fully committed, including to the cost of spending time.
Context of the Proceedings
8.Any offers relied upon must be seen in context. At the time of the Final Hearing, the Father sought equal shared parental responsibility, for the children to live with him and spend time with the Mother during each [City D] school holiday period. The Mother sought for the children to live with her, for her to hold sole parental responsibility and for the children to spend time with the Father regularly during school terms and holidays. Her alternate application almost mirrored the Father’s.
9.The Family Report supported equal shared parental responsibility and for the children to live with the Father and spend regular term time and holiday time with the Mother. The Report Writer was de-registered during the proceedings and her report was ordered not to be given weight other than for observations, although there remain many mentions of her conclusions and opinions in the Judgement.
10.At the time of the proceedings, it was common ground that the children (then aged 13 and 10) wanted to live with the Mother. The children’s poor mental health, particularly [X]’s, was also a significant matter, and was one of the reasons for the Mother’s application to have the children live with her in Queensland.
11.The Mother’s position mirrored the views of the children. In addition, [in late] 2021 when she was moving to Queensland, the Mother proposed orders to the Father in line with his final position almost two years later.
12.It is not conceded that the Father’s offer made in October 2022 was the same or better than the Mother achieved at trial. The offer was made prior to the Expert responding to the parties’ questions and did not include term-time visits.
13.Ultimately, the Mother attempted to put an end to proceedings by accepting the Father’s position (contained in both an open offer of settlement and also his Outline of Case filed for the trial) on 26 October 2023. Questionably as to his capacity to do so, the Father refused to settle for his own Orders sought, necessitating a much-reduced contest as to parental responsibility and schooling.
14.At Judgement paragraphs 8 & 9, the Court makes reference to the parties’ reduced conflict, noting no criticism of them. In all the circumstances, a costs order against the Mother could not be seen as other than punitive. No order should be made against her.
Outline of Principle
The statutory and jurisprudential considerations in relation to the making (or not making) orders for costs are well known. Although (or because) they are well known, among many authorities, it is sufficient to note the following from the Full Court decision in Stephens v Stephens.[2] Beginning at [62], the Full Court said (emphasis added):
[2] Stephens v Stephens (2011) 44 Fam LR 117.
[62] Section 117(1) of the Act provides: “[s]ubject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.”
[63] Section 117(2) of the Act provides that if, in proceedings under the Act, the court is of opinion that there are circumstances that justify it in doing so, it may, subject to sub-ss (2A), (4) and (5), and the applicable rules, make such order as to costs, whether by way of interlocutory order or otherwise, as it considers just.
[64] Section 117(2A) of the Act provides that in considering what order (if any) should be made under s 117(2), the court shall have regard to the matters set out in paragraphs (a) to (g). In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 the Full Court (Kay, Warnick and Boland JJ), referring to s 117(2A), said at 130 [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.
[65] As to the relationship between s 117(1) and s 117(2) of the Act in Penfold v Penfold (1980) 144 CLR 311, in joint reasons, Stephen, Mason, Aickin and Wilson JJ said at 315:
It is an accurate description of s. 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
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”. (emphasis added)
[66] As to the nature of the hearing of an application pursuant to s 117 of the Act in Penfold their Honours said at 315-16:
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 [(1970) 92 W.N. (NSW) 503, at p. 505]). 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.
[67] We also observe that in Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) of the Act referred to costs in the conventional sense and thus to the payment by one party to litigation of money by way of a partial indemnity for professional legal fees and expenses actually incurred by another party in the course of the litigation: see Hayne J at 219. An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages: Latoudis v Casey (1990) 170 CLR 534 per Mason CJ at 543 and McHugh J at 567; Ruddock and Ors v Vadarlis and Ors (2001) 188 ALR 143 per Full Court of the Federal Court at [12] and Brott and Joachim (2006) FLC 93-259 per Full Court (Holden, Warnick and Boland JJ) at 80,403-404.
Also in Stephens, the Full Court commented summarily on the award of indemnity costs, relevantly at [73]:
An order for costs may be made on an indemnity basis, subject to a judicial determination capable of being made that there ought to be a departure from the usual basis that costs be payable on the party and party basis. For a discussion of the jurisdiction to order indemnity costs and its exercise see Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 per Sheppard J at 256-257 and NMFM Property Pty Ltd and Others v Citibank Ltd (No 2) (Court’s “NMFM” Judgment No 11) (2001) 109 FCR 77 per Lindgren J at [53] to [90].
The decision of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (noted by the Full Court) is a regularly cited authority for relevant principle regarding the awarding of indemnity costs.[3] In that judgment, his Honour outlined the following principles (at 232 – 234), which I set out in full (emphasis added):
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:-
1. The problem arises in adversary litigation, i.e. litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg. a government agency or statutory authority.
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of Order 62, rules 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v. British Transport Commission and Handley JA in Cachia v. Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson (1987) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal)and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
[3] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
I note the following additional matters. First, in addition to the statutory framework under s.117 of the Act regarding costs set out by the Full Court in Stephens above, s.117(2A)(c) refers in particular to one broad area of consideration by a Court regarding a possible award of costs which is of some relevance here. That sub-section provides that a Court “shall have regard to” … (emphasis added)
(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…
Secondly, while not precisely the situation here, in the general starting point of considerations of costs by the High Court in Penfold v Penfold (noted by the Full Court in Stephens), Murphy J said (at 318; emphasis added):
Presentation of a false statement of financial circumstances, which puts the other party to the trouble and expense of disproving it, is a circumstance which justifies an order for costs. Courts should regard such circumstances which tend to undermine the integrity of proceedings with great concern, and should do everything in their power to determine who is responsible in order to maintain that integrity.
Thirdly, more recently still, the Full Court in Ressel & Morath provided a further summary of principle, at [71] – [72] and [75] – [82], in the following terms:[4]
[4] Ressel & Morath [2023] FedCFamC1A 145.
[71] Section 117 of the Act is well understood. It provides that the making of any costs order in family law proceedings is discretionary in nature. The starting premise is that each party shall bear their own costs, but that general rule is subject to the provisions of s.117(2), which provides that a court may make such order for costs as it considers just if “the court is of opinion that there are circumstances that justify it in doing so”.
[72] The factors that are to be considered when contemplating the making of a costs order are those set out in s.117(2A) of the Act; albeit the court may give such weight as it considers appropriate to any relevant factor (Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 at [24]).
…
[75] Even if the appellant is impecunious or in poor financial circumstances, that is no bar to an award of costs being made (D & D (Costs) No 2 (2010) FLC 93-435.
[76] Neither party is in receipt of legal aid. The appellant acts for himself and the respondent is privately funded s.117(2a)(b).
[77] As for s.117(2A)(c), the respondent submitted that each time the appellant filed something out of time, (the late affidavits by way of a Summary, the Applications on 31 July 2023) that put her to the expense of recalibrating her case.
[78] It is plain that the appellant has been wholly unsuccessful (s.117(2A)(e)). It is an appeal that was doomed from the start.
[79] In the circumstances, especially that the appellant has been wholly unsuccessful on a wrongheaded appeal, and, put the respondent to the expense of considering his non-compliant material, a costs order in favour of the respondent is justified. The question then is on what basis – scale or indemnity.
[80] An order for indemnity costs is a significant departure from the normal standard and requires something exceptional (Harris & Dewell (No 2) (2018) FLC 93-863), where the Full Court said at [23]–[25]:
[23] In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
[24] That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
[25] The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”
[81] In the well-settled authority of Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, Shepherd J provided some examples of circumstances that might justify the awarding of indemnity costs, and usefully, Holden CJ in Munday v Bowman (1997) FLC 92-784, at 84,660, drew from his Honour’s decision those 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...
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud...
(c) Evidence of particular misconduct causing loss of time to the court and to other parties...
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions...
(e) An imprudent refusal of an offer to compromise
[82] That said, the categories of circumstances which enliven the discretion to award indemnity costs are not closed (Yunghanns v Yunghanns (2000) FLC 93-029 at [31]).
In Browne v Green, at [57], the Court said:[5]
… whilst s.117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. … The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it proper consideration, is something to which very significant weight indeed ought to normally be given.”
[5] Browne v Green (2002) 29 Fam LR 428.
Austin J did precisely this in Lad & Gittings.[6]
[6] Lad & Gittings (2014) 52 Fam LR 71.
A failure to accept an offer which in retrospect should have been accepted may not, without more, justify the making of a costs order, certainly on an indemnity basis. In JEL v DDF, at [70], the Full Court also said that for such an award, “the rejection of the offer must be at the very least imprudent.” This was (or is) in contrast to a rejection of an offer that was (or is) simply “unwise.”[7]
[7] JEL v DDF (2001) 28 Fam LR 119.
In my view, the Court must also have some basic regard to the important High Court decisions in AON Risk Services Ltd v Australian National University and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd regarding considerations such as the impact upon other parties of the conduct of the current litigation, plus the consumption of scarce public resources.[8] Matters of efficiency regarding the conduct of litigation, as well as of justice, are also firmly set out in the Rules of Court, which I need not detail here, in part because they are well known.
[8] AON Risk Services Ltd v Australian National University (2009) 239 CLR 175 and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303.
Consideration & Disposition
In short, the Father seeks an Order for costs against the Mother regarding the parenting matter, primarily as a result of multiple offers of settlement to resolve the litigation, which are summarised at par.13 of his submissions. Those offers were on 27th October 2022, 7th February 2023, 27th June 2023 and 2nd November 2023, and 21st March 2024.
The Father’s offer in early November 2023 was to the effect that he have sole parental responsibility for the children regarding medical, dental and allied health matters subject to consultation with the Mother, and that the Mother pay his costs in the sum of $40,000. This offer was rejected by the Mother on 23rd November 2023. In the light of authorities discussed briefly later, an immediate question is whether the rejection of this offer was simply unwise or was it relevantly “imprudent.”
The Father’s offer in March 2024 involved payment by the Mother of costs of $120,000. She said that she could only raise $20,000.
The Father also submitted that the Orders ultimately made by the Court were as good as or in fact better than what he had offered the Mother in his various offers of settlement. Put in rather more stark terms, the Father submitted that the Mother was “wholly unsuccessful” in the result, which obviously picks up the terms of s.117(2A)(e).
The Mother resists any costs Order, essentially on the fair and neatly put basis that, when (in my words) all of the sound, fury and general discombobulation of the litigation is allowed to settle, and the trial and its surroundings fairly and reasonably considered in the cold light of day, this was pretty much like most or many parenting matters. This is to say that it was, in general terms, a relatively standard parenting matter in which strong contest and views, which was the case here, are really quite standard fare. There is some force if not attraction to this argument.
Without being comprehensive, the Mother made what might reasonably be said to be forms of counter-offers or refinements of the Father’s offers, on 14th March 2023 and 26th October 2023. There is some case law that deals with such circumstances, such as Harris, which does not assist the Mother much at all here.[9] At 38 in Harris the Full Court referred to the exercise of “common sense and goodwill” which should [also] have guided the party in that case to accept the offer of the other party.
[9] Harris & Harris (1991) 15 Fam LR 26.
Both parties have helpfully filed written submissions, which are set out above. Those submissions relevantly set out or refer to the financial circumstances of the parties. The material filed in support of each party’s financial position assists of course, albeit with limited information regarding the Mother’s Husband’s situation. I need not detail it here save to note that, for current purposes, and accepting the limited material before the Court, the Mother’s financial position is somewhat delicate, presumably, in part, after paying her former lawyers a substantial sum (by what means is unhelpfully not indicated). The Independent Children’s Lawyer has not sought an Order for costs and has not engaged with the current Application (including the recusal Application by the Mother).
The authorities mentioned earlier of course include, and usually use as a basal starting point, the High Court decision in Penfold v Penfold.[10]
[10] Penfold v Penfold (1980) 144 CLR 311.
S.117(2A)(f) is critical to the current matter. That section refers to the Court considering, or having regard to, “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.”
The case law on costs confirms that a detailed consideration of factual findings is unnecessary; nor is it essential that there be a particular finding that justifies any order for costs. It is sufficient (according to Penfold) for the exercise of the Court’s discretion to find that there are justifying circumstances. One factor alone can be sufficient for this purpose. The Court’s discretion is recognised as being broad.
The basic arguments of the parties here, hugely compressed and intensely summarised, are that, on the Father’s side, he made five offers in writing to resolve the matter. The Mother contends that she made a number of offers (or counter-offers) to the Father to which he did not respond.
I will deal with the issue of the Father’s claim for indemnity costs first. Having regard to relevant authority (notably, the regularly cited decision in Cussons v Colgate-Palmolive noted above), in my view, there is no basis for an indemnity costs Order. Having regard to relevant authority and accepting (in my words) an understandable level of frustration on the Father’s part in regularly making offers to resolve the matter but without success, nonetheless I do not see that there is any basis for an indemnity costs Order. As the authorities mentioned record, such an Order is very much an exception to the usual Order regarding costs under s.117 and otherwise. In the somewhat troubled circumstances of the current matter, such an Order would be exceptional if not bordering on extraordinary. Unwise and imprudent some of the conduct in the course of the litigation certainly was. But that alone, even over a period of time here, does not, in my view, come within the terms and principles set out by Shepherd J in Cussons v Colgate-Palmolive, which in turn were cited by the Full Court in Stephens.
I accept readily that the making of a costs Order, especially in a parenting matter, would also generally be considered to be somewhat out of the ordinary. In my view, the resolution of the issues raised in the Father’s Application and the Mother’s Response, hinges on two things. First, the offers made by the Father was substantial in both the number of them and in the relative generosity of them. Secondly, the penultimate offer, made in November 2023, in my view, was particularly generous, where he sought very specific and limited parental responsibility Orders, and confirmed what was, in my view, a very generous offer for payment of his costs. That offer was approximately one sixth of his actual costs. As well, the ultimate decision of the Court was even more favourable to the Father than what he had proposed to the Mother in his November 2023 offer.
In my view, both (a) the number of the offers made to resolve the matter, which obviously would have meant (among other things) a likely significant reduction in the legal fees incurred by both parties, and (b) the generosity of the Father’s final offers (notably in November 2023) are crucial. In all of the circumstances, the Mother’s rejection of the November 2023 offer, which included the payment of the Father’s costs in the sum of $40,000 was, in my view, significantly imprudent as referred to by the Full Court in JEL v DDF. Put another way, that offer should have been accepted. It was imprudent not to have done so. In the words of the Full Court in Harris, common-sense would also have, or should have, meant that the November 2023 offer was accepted and the litigation, with all of its constant financial and psychological toll on the parties, as well as the impact upon the girls, brought to a conclusion.
For these brief reasons, there should be an Order for the Mother to pay the Father’s costs fixed in the sum of the Father’s November 2023 offer of $40,000. They are to be paid within 6 months of the date of these Orders. There should also be a nominal costs Order in the Father’s favour in relation to the Application for costs. This will be fixed in the sum of $2000. It too is to be paid within 6 months of the date of these Orders. The previous Order of the Court reserving the costs of the parties in relation to the Mother’s unsuccessful recusal Application should be discharged.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of Judge W J Neville. Associate:
Dated:27 June 2024
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