Mulvany v Lane - [2009] FamCA 76

FAMILY COURT OF AUSTRALIA

SIMMONS & SIMMONS

[2009] FamCA 76

FAMILY LAW – COSTS – Costs against unsuccessful third party on an application for summary dismissal

Family Law Act 1975 (Cth)

Colgate-Palmolive Company and Anor v. Cussons Pty. Limited (1993) 46 FCR 225
J-Corp Pty Limited v. Australian Builders Labourers Federation Union of Workers - Western Australian Branch, (Federal Court of Australia, 19 February 1993, unreported)
Kohan and Kohan (1993) FLC 92-340
Lindon v The Commonwealth (No 2) (1996) 136 ALR 251
LGM and CAM (Contempt) [2008] FamCAFC 1
Penfold v Penfold (1980) FLC 90-800

APPLICANT:

Ms Simmons

RESPONDENT:

Mr Simmons

SECOND NAMED RESPONDENT:

R Pty Ltd

THIRD NAMED RESPONDENT:

L Pty Ltd

FILE NUMBER:

MLF

1269

2005

DATE DELIVERED:

12 February 2009

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

BY WAY OF WRITTEN SUBMISSIONS

WRITTEN SUBMISSIONS RECEIVED FROM:

COUNSEL FOR THE APPLICANT:

MR NORTH SC WITH MR SWEENEY

SOLICITOR FOR THE APPLICANT:

LANDER & ROGERS

SOLICITOR FOR THE RESPONDENT:

KENNA TEASDALE LAWYERS

COUNSEL FOR THE SECOND & THIRD

NAMED RESPONDENTS:

MR GLICK SC WITH MS MACMILLAN

SOLICITOR FOR THE SECOND &

THIRD NAMED RESPONDENTS:

KENNEDY WISEWOULDS

Orders

That the third named respondent L PTY LTD pay the wife’s costs of the summary dismissal proceedings in a sum to be agreed and in default of agreement, as assessed.
That all other applications by the parties for costs otherwise remain reserved to be determined by the trial judge.
I certify that it was appropriate to brief counsel including senior counsel for all parties.

IT IS NOTED that publication of this judgment under the pseudonym Simmons & Simmons is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1269 of 2005

MR SIMMONS

Applicant

And

MS SIMMONS

Respondent

And

R PTY LTD & L PTY LTD

Second and Third Named Respondents

REASONS FOR JUDGMENT

On 17 December 2008, I made the following order:
That any party seeking an order for costs file and serve any submissions relevant to the application for costs of the application to summarily dismiss the wife’s application no later than 16 January 2009” (emphasis mine).
In a submission on behalf of the husband, it is said that my order did not accurately reflect the order of Watt J made on 12 December 2008 just as his Honour was about to retire. Be that as it may, that was the order I made.
Watt J referred the substantive proceedings to me. His Honour had just delivered judgment on the application by a third party seeking summary dismissal. His Honour dismissed that application and the substantive proceedings are now awaiting final determination.
The substantive proceedings are between the husband and the wife but there are also joined R PTY LTD as the second respondent and L PTY LTD as the third respondent.
In relation to the summary dismissal application before Watt J, as best I can ascertain, the second respondent did not seek orders and therefore has nothing to do with the costs application in relation to that application.
The relevant submissions before me by all parties therefore relate to the application of the wife for costs against the third party on the unsuccessful summary dismissal application. For completeness, I had read the submissions of the second and third-named respondents for costs on an indemnity basis against the wife arising out of her amended application filed on 27 February 2008 and an application filed on 20 March 2008 seeking interlocutory orders.
In relation to the very comprehensive submission by the second and third named respondents on the substantive costs, I agree with the position of the wife that I should not deal with them as there are many issues still alive arising out of those interlocutory applications, hearings and orders.
It would appear from the various submissions that there are a variety of orders for reserved costs. That being the case, those matters outside of the summary dismissal application should be generally left until the conclusion of the substantive proceedings. Accepting as I do that I should only deal with only the limited application for costs arising out of the summary dismissal application, I will order that the unresolved costs claims arising out of the substantive proceedings should wait until the conclusion of the final hearing.
The summary dismissal application is different. It relates to an endeavour by the third respondent to halt the substantive proceedings on the basis of there being no reasonable prospect of success. To a large extent, the third party has “chanced his arm” and lost. It is a costs issue that can be discretely dealt with.
In his reasons for judgment delivered on 12 December 2008, Watt J said:
In conclusion, I am not satisfied that the wife’s claim is doomed to failure because it shows no reasonable cause of action, or that the court lacks jurisdiction to exercise the powers conferred on it by Part VIIIAA in this case.
The applications of [L Pty Ltd] and the husband will therefore be dismissed.
In his determination, Watt J said that on an application for summary dismissal, the test in Lindon v The Commonwealth (No 2) (1996) 136 ALR 251 was still the test applied by the Full Court of this Court. In response to the third respondent’s submission that the introduction of rule 10.12 had “lowered the bar” with respect to the applicable test for summary orders and that s 31A(3) of the Federal Court of Australia Act 1976 provided a specific legislative direction to the Federal Court in relation to the content of “no reasonable prospect of success” as a consequence of which there was no substantial difference between the tests for summary judgment or dismissal in the Family Court and in the Federal Court, his Honour said:
The Rules were drafted against the background of the decision in Lindon and the judgments of the Full Court of this court that had applied it. Subsequent decisions of the Full Court of this court have continued to apply the same test in circumstances where r 10.12 was the relevant statutory guide. One such case that I have cited and quoted above is Korsky & Bright and Anor (No. 2), where the Full Court’s intention to apply the Lindon test could not be more apparent. There is no basis, in my view, for the proposition advanced on behalf of [L Pty Ltd] that the approach of this court to this issue has changed, or should now change, to the less demanding standard that applies to an applicant for summary dismissal under the Federal Court Act 1976 …, or that the introduction of r 10.12 has produced such a change.
Thus, it is with respect only to the submissions relating to the summary dismissal application that I turn. Before doing so, the husband filed a submission arguing that he should not be visited with any proportion of the wife’s costs. As was pointed out by the supplementary submission of the wife, no application for costs was sought against him.
The wife’s submission said:
(a)the question of costs is governed by s. 117 of the Family Law Act 1975;
(b)the financial disparity between the wife and the third named respondent was “indisputably vast”;
(c)the third named respondent had been entirely unsuccessful in an application it chose to bring;
(d)the third named respondent’s application was made knowing that relief was rarely and sparingly granted in circumstances where it required expenditure of substantial legal expenses;
(e)Watt J had little compunction about adjourning the costs application to me on the basis that the third named respondent had been wholly unsuccessful.
In respect of the discrete issue of the summary dismissal application, the third named respondent submitted:
(a)the costs issue should be reserved to the trial judge;
(b)whilst there was a financial disparity between the wife and the third named respondent, there is currently a very difficult financial circumstance facing the third respondent’s industry with its responsibility for many employees and that costs orders would impose a significant burden on a third party with no interest in the proceedings;
(c)the third named respondent was an unwilling participant in the proceedings from which it had no prospect of obtaining any benefit;
(d)at the ultimate trial, the third named respondent might be successful in showing that it had unnecessarily been joined as a party in which case, arguably there was no purpose in them being joined to the litigation;
(e)the right to bring the application for summary dismissal required Watt J to consider the questions of law raised by the High Court in Kennon v Spry; Spry v Kennon [2008] HCA 56 and in that context, the third named respondent had arguable issues.
Having regard to my decision not to determine costs issues outside of the summary dismissal application, it is not necessary for me to traverse the other issues raised by the third named respondent.
The wife submitted that I ought make an order for solicitor and client costs or in other words, indemnity costs. Whilst that was also the position of the third named respondents in their initial application for costs against the wife, the third named respondent argued that I ought not contemplate orders for indemnity costs in respect of this matter.
The provisions relating to orders for costs are clear. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party shall bear their own costs unless the Court finds that there are circumstances which justify it departing from that principle. In considering what order (if any) should be made, the Court is required (inter alia) to have regard to the matters referred to in s 117(2A). I shall refer to those below.
Section 117(1) applies to “proceedings under this Act”. In s 4 of the Act “proceedings” are defined to mean “a proceeding in a court, whether between parties or not, and includes cross proceedings or an incidental proceeding in the course of or in connection with a proceeding”.
Thus, there is no question that there is a power to make orders against persons who are not parties to the marriage but who are parties to the proceedings.
In Penfold v Penfold (1980) FLC 90-800 the High Court of Australia said that the general rule expressed by s 117(1) was not paramount to s 117(2). Thus, when a court finds circumstances justifying an order for costs, the principle that each party should bear their own costs should give way.
Section 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.
In this case, the third named respondent took the opportunity to test the water in an endeavour to remove itself from the proceedings in which it understandably felt it should not be involved. I agree with the wife’s submission that in so doing, it put the wife in a position where she had to follow.
It is not the purpose of a costs order to act as a punishment but rather to compensate a party who has to participate in the litigation.
I find therefore that there are circumstances here that justify a departure from the principle that each party bear their own costs. That in turn requires a consideration of the matters in s 117(2A).
Notwithstanding the apparent downturn in the third respondent’s industry, there would seem to be a considerable disparity between the financial positions of the parties. Whilst the third named respondents are not in the same position as the wife, I see no reason why she should not be compensated for her costs as she too was an unwilling participant in the proceedings albeit in the summary dismissal application. I take that into account.
There is no legal aid consideration in this case.
I have taken into account that there is nothing in the conduct of the parties to the proceedings in the sense of any wrong doing or recalcitrance. Here, there was a simple desire by the third named respondent not to have to continue in the case and the whole matter was argued on that basis.
There also is no suggestion before me of a failure to comply with any court orders.
Importantly for the purposes of my orders, the third named respondent has been wholly unsuccessful. In a case such as this, that is a significant consideration. I accept the submissions of the wife which I have set out in paragraph 13(d) above notwithstanding that the third named respondent argued something quite different. Even on the test that it proposed, the third named respondent must have known that it was taking a chance.
In the circumstances, and in the exercise of my discretion, it is appropriate to make an order that the third named respondent pay the wife’s costs.
The wife seeks an order for indemnity costs.
This Court has often adopted the principles set out in Colgate-Palmolive Company and Anor v Cussons Pty. Limited (1993) 46 FCR 225. In that case, Sheppard J made a pertinent observation about the court-endorsed costs structure of litigation in the Federal Court of Australia which, to a very large degree, is the same philosophy in this Court. It will be seen from this Court’s rules that if a party wants to depart from the court-approved costs structure, there is a requirement for a strict adherence to rules relating to contracting-out.
Sheppard J. went on to quote French J (as he then was) in J-Corp Pty Limited v. Australian Builders Labourers Federation Union of Workers - Western Australian Branch, (Federal Court of Australia, 19 February 1993, unreported) where his Honour in a case which he described as “paper thin” said:
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
I could not find that to be the case here. Upon reading the judgment of Watt J, it will be apparent that his Honour looked carefully at the merit of the argument raised by the third named respondent event though he rejected it.
Sheppard J in Colgate-Palmolive went on to set out some examples of where indemnity costs should be contemplated but none of the examples he gave applies here. His Honour said that:
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. 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.
In the recent Full Court decision of LGM and CAM [2008] FamCAFC 1, the Court referred to what was said in Kohan and Kohan (1993) FLC 92-340 at 79,611 where their Honours said:
…We are of the opinion that in an appropriate case, the Court has a discretion to order costs on an indemnity basis and that such costs may be ordered, where they have been incurred under a costs agreement which departs from the usual scale of costs. However, 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……….
There is nothing in the conduct of the third named respondent that would warrant me making an indemnity costs order as a result of what I have read in the judgment of Watt J or the submissions of the parties.
As such, I cannot find that there are any special or indeed unusual matters or facts in this case that would give rise to a finding that there were exceptional features of the case that would in turn justify a departure from the ordinary practice in relation to the payment of costs.
In my view, it would not be appropriate to make an order for indemnity costs.
I propose therefore to order that the third named respondent pay the wife’s costs of and incidental to the proceedings relating to the summary dismissal based on the schedule to the Family Law Rules by agreement and in default of agreement, as assessed.
I have also been asked to certify for the attendance of senior or two counsel.
I do not understand the third named respondent to cavil with that as each party was represented by both senior and junior counsel.
Rule 19.50 of the Family Law Rules 2004 provides for a court to certify that it was reasonable to so engage counsel including Senior Counsel. This was a case in which the legal argument and the facts were complicated to such an extent that it justified the engaging of Senior Counsel. I find that it was reasonable in the circumstances for both parties to engage Senior and Junior Counsel and I propose to so certify.

I certify that the preceding Forty Three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 12 February 2009