Nagel & Clay
[2021] FedCFamC1F 134
•15 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)Nagel & Clay [2021] FedCFamC1F 134
File number(s): SYC 7861 of 2015 Judgment of: HARPER J Date of judgment: 15 October 2021 Catchwords: FAMILY LAW – COSTS – Between parties – Where the father seeks an application for costs following dispute regarding interpretation of final parenting orders – Where costs are sought on an indemnity or party/party basis – Where the mother is self-represented only for costs dispute – Where the mother argues she is in financial hardship – Where the mother’s interpretation of the final parenting orders was wrong but not unreasonable – Conduct of the parties considered – Where the mother was wholly unsuccessful – Indemnity costs not justified in the circumstances – Order made for fixed costs. Legislation: Family Law Act 1975 (Cth) s 117 Cases cited: Atkins & Hunt [2017] FamCAFC 131
B v J (2006) FLC 93-259; (2006) 35 Fam LR 222; [2006] FamCA 256
Bell Lawyers Pty Ltd v Pentelow (2019) 372 ALR 555; [2019] HCA 29
Brown & Brown (1998) 145 FLR 431; (1998) 23 Fam LR 349; (1998) FLC 92-822; [1998] FamCA 115
Cachia v Hanes (1994) 179 CLR 403; (1994) 120 ALR 385; [1994] HCA 14
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 191 FLR 294; (2005) 33 Fam LR 123; [2005] FamCA 158
Harris & Dewell (No 2) [2018] FamCAFC 180
Latoudis v Casey (1990) 170 CLR 534; (1990) 97 ALR 45; [1990] HCA 59
Medlon & Medlon (No 6) (Indemnity Costs) (2015) 54 Fam LR 1; (2015) FLC 93-664; [2015] FamCAFC 157
Nagel & Clay [2021] FamCA 358
Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
Parke & Estate of the Late A Parke (2016) 314 FLR 322; (2016) FLC 93-748; [2016] FamCAFC 248
Penfold v Penfold (1980) 144 CLR 311; (1980) 5 Fam LR 579; (1980) FLC 90-800; [1980] HCA 4
Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184; (1998) FLC 92-812; [1998] HCA 44
Stoian & Fiening (Costs) [2014] FamCA 944
Division: Division 1 First Instance Number of paragraphs: 41 Date of last submission/s: 21 September 2021 Date of hearing: On the papers Place: Sydney Counsel for the Applicant: Ms Vohra SC Solicitor for the Applicant: Pearson Emerson Family Law Solicitor for the Respondent: Ms Clay in person ORDERS
SYC 7861 of 2015 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR NAGEL
Applicant
AND: MS CLAY
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
15 OCTOBER 2021
THE COURT ORDERS THAT:
1.Within 28 days of the date of this order, the Respondent Mother pay the Applicant Father’s costs of the Application in a Case filed on 4 May 2021, fixed in the amount of $15,000.
2.The Application in a Case filed on 4 May 2021 be otherwise dismissed.
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 Nagel & Clay has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J
INTRODUCTION
The substantive proceedings in this matter concern parenting and property disputes between the Applicant Father, Mr Nagel (“the father”), and the Respondent Mother, Ms Clay (“the mother”). Property issues have been resolved. Final parenting orders with respect to the parties’ children were made by consent on 28 December 2020 and amended by agreement on 15 December 2020 (“final parenting orders”).
Thereafter, a dispute erupted between the parties concerning the interpretation of the final parenting orders. It came to a head at the beginning of Term 2, 2021, which commenced on 20 April 2021. The final orders provided for the children to spend time with each parent during term time in a fortnightly cycle. The father argued that this commenced on specific dates in October 2020 and continued, notionally, through school holiday periods. The result would be that the children would spend most of Week 1 of Term 2 with the father. On the other hand, the mother contended that time with each parent effectively reset at the start of Term 2, 2021, with the result that the children were to be with her. The mother withheld the children on this basis and they missed several days of school.
The father filed an Application in a Case on 4 May 2021 seeking enforcement of the final parenting orders according to his interpretation. The mother filed a Response to his Application in a Case filed on 10 May 2021 seeking enforcement of the final parenting orders according to her interpretation.
On 2 June 2021, I delivered reasons for judgment which determined the correct interpretation of the orders: Nagel & Clay [2021] FamCA 358. The contentions of the parties are set out in detail in those reasons for judgment. I preferred the construction propounded by the father.
The parties were directed to bring about an agreed form of orders reflecting the reasons for judgment. They submitted to the Court a form of consent orders, which were made on 23 June 2021 (“the consent orders”). Orders 7 and 8 of the consent orders made provision for the father to apply for a costs order in his favour in respect of his Application in a Case filed on 4 May 2021:
7. That within 21 days of the date of these Orders, the Applicant Father file and serve on the Respondent Mother written submissions as to costs.
8. That within 21 days of the Applicant Father’s compliance with order 7, the Respondent Mother file and serve on the Applicant Father written submissions as to costs.
The mother made no application for costs. She resists the father’s application.
The father seeks a costs order in his favour in the alternative, as follows:
The Mother pay to the Father the costs of and incidental to his Application in a Case filed 6 April 2021 [sic] on an indemnity basis, fixed at $39,897
Or
The Mother pay to the Father the costs of and incidental to his Application in a Case filed 6 April 2021 [sic] on a party/party basis, fixed at $25,683.96
The references to “6 April 2021” should be read as “4 May 2021”. There was no application filed on 6 April 2021 in these proceedings.
Both parties filed written submissions. The father also relied upon an affidavit of his solicitor, Phillip Ridgway, filed on 14 July 2021 which quantified the costs incurred by him. The mother relied upon an affidavit filed 4 August 2021. The father objected to much of the mother’s evidence as prolix and irrelevant.
Although there is force in this objection, I have considered the mother’s material. Some of it was confusing and generally irrelevant. For the purposes of this application for costs, the mother was self-represented. I have also taken account of the father’s extensive list of objections provided in his submissions in reply. However, in the circumstances of these proceedings, where the parties have resolved all substantive issues, I am not persuaded any useful purpose is served for a costs judgment by trawling through the 114 paragraphs and 425 pages of exhibits supplied by the mother, as a litigant in person, in order to make specific rulings on admissibility. I will refer to the mother’s evidence only as necessary in the course of these reasons.
THE LAW
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that, subject to subsection (2), “each party to proceedings under this Act shall bear his or her own costs”. Subsections (2) and (2A) are in the following terms:
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(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;
(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.
It follows, that while s 117(1) provides, as a starting point, that in family law proceedings each party bears his or her own costs, the Court may make a costs order in favour of a party where there are circumstances justifying such an order.
It is not necessary to establish extraordinary or exceptional circumstances, however there must be circumstances which, at the absolute discretion of the Court, justify a costs order: Stoian & Fiening (Costs) [2014] FamCA 944 at [19]. As the High Court made clear in Penfold v Penfold (1980) 144 CLR 311, s 117(2) requires a finding of justifying circumstances before any costs order can be made.
The considerations set out in s 117(2A) of the Act must be taken into account in deciding whether or not to order a party to pay the costs of another. But no one factor under s 117(2A) prevails over any other factor. It is a matter of weight that is accorded to each relevant factor in the trial judge’s discretion: Medlon & Medlon (No 6) (Indemnity Costs) (2015) 54 Fam LR 1, per Strickland J. It is well settled that there is “nothing to prevent any factor being the sole foundation for an order for costs” being made: Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 191 FLR 294 at [130]. There may be a dominant or outstanding feature that makes an order for costs appropriate; thus although any one factor may be sufficient, no one factor is essential: Brown & Brown (1998) 145 FLR 431.
These principles have been affirmed in detail in the Full Court decisions of Parke & Estate of the Late A Parke (2016) 314 FLR 322 and Atkins & Hunt [2017] FamCAFC 131.
In summary, the father relies on the conduct of the mother (s 117(2A)(c)) and the fact that she has been wholly unsuccessful (s 117(2A)(e)) as grounds for a costs order in his favour. The mother gave evidence about her financial circumstances. She also gave evidence about the father’s conduct. I discuss this further below.
The first question is whether the father has established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in his favour. The second question is whether, if there are circumstances justifying a costs order, the wife should pay the father’s costs on an indemnity basis.
SECTION 117(2A) CONSIDERATIONS
Section 117(2A)(a) – financial circumstances of the parties
The father placed no reliance on the financial circumstances of the parties, except to submit that both parties were well resourced, having briefed senior counsel to put forward their contentions about enforcement of the final parenting orders.
The mother claimed to be struggling financially and could not afford representation to resist the father’s application for costs. The mother gave some detailed evidence about her financial position, saying it is dire. She stated her weekly income was $2,409, while her weekly expenses totalled $7,734. This includes $12,074.56 for a loan for equipment and fit out for work. She has outstanding tax liabilities of $115,979, unpaid legal fees of $86,212.91, a liability for overpaid child support, an unpaid loan owing to her father of $681,248, and little by way of cash at bank.
She also claimed her income is presently unstable. She was asked to vacate one of her professional practices in March 2021, and has had to reduce her hours at another practice because she has been unable to find child care. She has established a new practice in the Greater Western Sydney region, which has taken her time away from other practices. The Covid-19 pandemic has also caused cancellation of her work in NSW.
The father disputed much of the mother’s evidence about her financial position. He pointed out that under the agreed property settlement, the mother received a valuable property in Suburb N, Sydney. The mother also makes no clear distinction between personal and business expenses, the latter of which would reduce her tax liabilities.
I accept the mother is burdened by ongoing expenses in her professional life, and, like so many in Sydney communities, is likely to have been adversely affected in her ability to generate income because of NSW Government lockdowns. However, I am unable, on the basis of her untested, and, at times confusing evidence, to find that her financial position is as dire as she asserts.
The mother gave some detailed evidence about her understanding of the father’s financial position as being “significantly greater” than hers. She relied upon a financial statement filed by him in October 2020 and some evidence by a single expert valuing the parties’ business interests, entities, and companies, which had been prepared for a final hearing which never took place because the parties settled their property dispute. I am unable to form a view about this evidence. It may well be out of date. I have not taken it into account. I do not accept the mother’s assertions about the detail of the father’s financial position.
However, I infer from the submissions of the father that he accepts that he is well resourced financially. I accept his financial position is likely to be, at present, stronger than that of the mother.
Section 117(2A)(c) – conduct of the parties
It is a basic principle that an order for costs is compensatory and not to be used to punish a litigant: Latoudis v Casey (1990) 170 CLR 534, Cachia v Hanes (1994) 179 CLR 403, Oshlack v Richmond River Council (1998) 193 CLR 72 at [1]. In Bell Lawyers Pty Ltd v Pentelow (2019) 372 ALR 555 at [33], the majority of the High Court said “costs are awarded by way of indemnity; they are not awarded as compensation for lost earnings, much less as a reward for a litigant's success”.
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) referred to costs in the conventional sense, that is, as indemnity for another’s liability for professional fees and out of pocket expenses reasonably incurred in the litigation (see Hayne J at [97], also see B v J (2006) FLC 93-259). Thus, putting aside, for the moment, the question of indemnity costs, which is evaluated according to some different considerations, concepts of punishment or reward should be avoided in considering the factors in s 117(2A).
Nonetheless, s 117(2A)(c) makes party conduct a necessary consideration, being conduct
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.
The father argues that the Court accepted his construction of the final consent orders, which was to “the only construction of the Final Orders that allowed for logical consistency and which had been followed by the parties” until the commencement of Term 2, 2021. He argues the mother was, on his enforcement application, wholly unsuccessful. He also contends that by letter dated 21 April 2021, his lawyers made clear to the mother’s lawyers the correct construction of the final orders. Finally, the father submits that he made several attempts to resolve the impasse about the final orders by negotiation, but the mother was intransigent. Consequently, he was compelled to make his application which should have been unnecessary.
The mother gave evidence that she genuinely believed in her interpretation of the final parenting orders and arranged her work schedule on the basis of her understanding. She argued that she had received the advice of senior counsel about the meaning of the final parenting orders, and believed she had reasonable prospects of success.
The mother also gave evidence that the parties attempted, in April/May 2021, to resolve the impasse over the correct interpretation of the final parentings orders. She alleges the father failed to engage in a mediated process properly by limiting his availability for mediation, and that when mediation did occur, he departed after only 15 minutes.
The mother’s evidence and submissions also went to considerable lengths to accuse the father of reprehensible conduct during the relationship and throughout the proceedings. She claimed he has breached parenting orders concerning the child passports and appointments with a psychologist, and that he has failed to comply with final property orders. Some of her evidence concerns a range of conduct by the father as a parent. She alleges non-disclosure by the father “in the course of the litigation.” The mother also alleged she had been subject to abuse by the father and his application for costs was the latest manifestation of financial abuse.
One problem with this evidence is that it is untested, and I cannot make findings on the basis of it. Another problem is that this evidence is irrelevant to a narrow costs application relating to one application for enforcement of final orders. The question of conduct for the purposes of this costs judgment is limited to the father’s conduct, as a litigant, in relation to his application filed on 4 May 2021.
I am not persuaded that only one construction of the final parenting orders was reasonably open. While it may be true that, in the end, only one construction could be correct, I do not agree that the mother’s conduct, in adhering to her construction, was unreasonable. I do not accept, as the father argued, that it was simply a cynical posture because the mother “did not want the child Kate to be out of her care for 13 days” (paragraph 28 of his written submissions).
Section 117(2A)(e) – whether any party has been wholly unsuccessful
There can be no debate that the mother was wholly unsuccessful. As already pointed out, only one construction of the orders was correct. I rejected her construction of the final parenting orders, her arguments for rectification in finding no relevant ambiguity, and no occasion to apply the slip rule.
CONCLUSION ON JUSTIFYING CIRCUMSTANCES
I am satisfied that, in the circumstances, the complete lack of success by the mother justifies a costs order in the father’s favour.
INDEMNITY COSTS
The award of indemnity costs in this Court has regularly been called a significant departure from the normal standard. In Harris & Dewell (No 2) [2018] FamCAFC 180 the Full Court said at [23]-[25]:
[23] In Kohan and Kohan [(1993) FLC 92-340 (“Kohan”)], the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive [Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225], 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 [2013] FamCAFC 105; (2013) 49 Fam LR 197 (“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 ([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 [[2001] HCA 26; [2001] HCA 32; (2001) 179 ALR 406 at [40]]. 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.
The father argued that were she properly advised, the mother should have known she had no chance of success. I reject this argument. I have already held that the mother’s construction of the final parenting orders, although wrong, was not unreasonable.
I do not accept the father has established a factor or factors which would justify the “extremely rare” order for indemnity costs.
CONCLUSION
I find that there should be a costs order in favour of the father. I note here that he also claimed costs of this application for costs, and a mention on 13 July 2021. He quantified these costs at $4,400. In my view, the costs order should include a component for dealing with the volume of irrelevant evidence relied upon by the wife.
The Court has discretion to fix an amount for costs. The father seeks a fixed amount, whilst the mother made no submissions on this question. In my view, this should be done to bring any further argument about costs to an end by this judgment. As already noted, the father estimated and claimed an amount of $25,683.96 for costs, assessed on a party/party basis. I am unable to form a view as to whether the father would succeed for this amount fully if an assessment was undertaken. I consider a discounted and fixed amount for costs is appropriate. The Court has a broad and absolute discretion to award costs. In my view, it would not be an appropriate use of Court resources or in the interests of the parties to make an order for costs which would require more Court resources and costs to be incurred in an assessment.
Taking account of the factors and principles discussed in these reasons, but, particularly, the father’s likely stronger financial position on the one hand, and the mother’s complete lack of success and the costs of the application for costs on the other, I will order the mother to pay the father’s costs in the amount of $15,000.
I certify that the preceding forty (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 15 October 2021
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