Oliver and Oliver
[2010] FMCAfam 220
•26 February 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OLIVER & OLIVER | [2010] FMCAfam 220 |
| FAMILY LAW – Costs. |
| Family Law Act 1975, ss.79, 117 Federal Magistrates Act 1999, s.75 |
| Penfold v Penfold (1980) 144 CLR 311 Pennisi (1997) FLC 72-774 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 |
| Applicant: | MR OLIVER |
| Respondent: | MS OLIVER |
| File Number: | BRC 7484 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | By written submissions |
| Date of Last Submission: | 19 October 2009 |
| Delivered at: | Brisbane by Slack FM |
| Orders Delivered on: | 26 February 2010 |
| Reasons Delivered on: | 10 March 2010 |
REPRESENTATION
| Counsel for the Applicant: | N/A |
| Solicitors for the Applicant: | Romans & Romans Lawyers |
| Counsel for the Respondent: | N/A |
| Solicitors for the Respondent: | Rosen Lawyers |
ORDERS
That the respondent wife shall pay the applicant husband’s costs of and incidental to the proceedings, including the application for costs filed 23 September 2009 to be taxed on the party and party or standard basis.
IT IS NOTED that publication of this judgment under the pseudonym Oliver & Oliver is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 7484 of 2007
| MR OLIVER |
Applicant
And
| MS OLIVER |
Respondent
REASONS FOR JUDGMENT
These are the reasons of Federal Magistrate Wilson, who was unable to deliver prior to his departure from the Court, therefore pursuant to s.75 of the Federal Magistrates Act 1999 they are being delivered by Federal Magistrate Slack.
On 28 August 2009 this Court made orders, and delivered reasons, adjusting the property of the parties pursuant to s.79 Family Law Act 1975. On 23 September 2009 the husband applied, inter alia, for an order that the respondent wife pay his costs of and incidental to the proceedings. The husband seeks an order for those costs to be paid on the indemnity, or alternatively the party and party basis. The wife resists the application for costs, and seeks her costs of the husband’s application for costs.
It is common ground that ss.117(1), (2) and (2A) Family Law Act governs the making of costs orders in these proceedings.
Those subsections provide:
(1) Subject 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.
(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) and (5) 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.
The interrelationship of ss.117(1) and (2) of the Act was considered by the High Court of Australia in Penfold v Penfold (1980) 144 CLR 311. There the majority justices in a joint judgment construed s.117(1) as being subject to s.117(2) and that the former must yield to the latter whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs. Their Honours continued, at 315:
“Subsection (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”.
The husband is undoubtedly in stronger financial circumstances than the wife. The assets the each party retains as a result of the orders made are set out in my earlier reasons for judgment. The orders of 28 August 2009 required the husband to pay to the wife $164,398.46. In determining whether the property settlement orders were just and equitable, at paragraph [73] of my reasons I observed that that sum of money would enable the wife to rehouse, bearing in mind her current level of income. I noted, at paragraph [64] that the husband was employed [in the healthcare industry] earning some $6,185.00 per week. That included rental he received from properties owned by him. He earned some $280,000.00 per annum from his [healthcare] work. The wife earns approximately $900.00 per week in her work [in the healthcare industry]. The financial circumstances of the parties, as a consideration, does not warrant an order for costs being made in the husband’s favour.
There is no evidence that either party to the proceedings was in receipt of legal aid.
As to the consideration in s.117(2A)(c) of the Act the husband asserts that during the proceedings the wife failed to make full and frank disclosure. Reference was made to applications heard on 5 September and 15 October 2007. The husband asserts at paragraphs [16] and [17] of the written submissions made on his behalf that the wife did not disclose details of her financial contributions to the relationship until either very shortly prior to the commencement of the trial or during the trial itself. Counsel for the wife submits, at paragraph [69] of his written submissions, that there were no findings of fact as to non disclosure by the wife, nor of any prejudice to the husband. That is correct. Save for one matter, that I will address when considering s.117(2A)(f) of the Act, there is nothing in the parties’ conduct of the proceedings that warrants an adverse order for costs.
Subsection 117(2A)(d) is not a relevant consideration in this case because there were no previous orders of the court (that is, prior to the commencement of the property proceedings) with which either party failed to comply. Nor could it be said that either party has been wholly unsuccessful in the proceedings. Each party received an adjustment of property in his and her favour.
Considerable reliance is made by each party on the terms of offers made to settle the proceedings, a consideration made relevant by s.117(2A)(f) of the Act. In the context of considering such offers it is, in my view, relevant to view such offers against not only what each party was seeking at the final hearing but also what each party received.
The wife received her motor vehicle, her bank accounts, and her superannuation. She remained liable for a credit card debt in her name. The husband was always prepared to concede that the wife receive these items. The primary contest was as to the amount of money that the husband had to pay the wife. As I have said the orders made by me required the husband to pay $164,398.46.
By his Application for Final Orders filed 21 June 2007 the husband sought orders that the wife keep those items to which reference has been made and that he pay $120,000.00. The husband submits that the additional amount ordered to be paid to the wife following the final hearing ($44,398.00) is, in the context of the pool, relatively insignificant. I agree. By contrast, in her Response filed 22 August 2007 the wife sought a payment to her of $700,000.00. I accept the submission by the husband that that claim was unrealistic.
The husband made three written offers of settlement to the wife. In the first offer made on 19 April 2007 the husband offered to pay $120,000.00 split as to $50,000.00 directly and $70,000.00 from his superannuation fund.
In his second offer of 9 May 2007, prior to the commencement of proceedings, the husband offered to pay $120,000.00 in cash to the wife and that she retain all of the assets to which reference has been made.
On 30 November 2007 the husband offered to pay $130,000.00, and provide the wife with half of the furniture and the Accor Vacation Club interest.
I accept the submission made on behalf of the husband that in considering offers the court’s attention is not restricted to those offers which exceed the amount that a party receives at final hearing: Pennisi (1997) FLC 72-774 at 84,547.
Counsel for the wife submits that because each of the three offers was less than the wife received, no adverse order for costs should be made. I reject that submission. The offers made by the husband, although for a sum that was ultimately less than that ordered by the Court, must be considered in the context of when each was made, and whether a party is better or worse off as a result of rejecting the offers.
Each party also sought to adduce evidence of what offers were made at a mediation conducted between them. It is not strictly necessary for me to decide the competing contentions of the parties as to whether evidence of what was said during the mediation is admissible when the court is considering the question of costs. I incline to the view that such evidence is not admissible unless any offer made during the mediation process is on terms that it would be disclosed to the court on the issue of costs.
However, in my view the question of costs can be decided without reference to what occurred at the mediation. The husband made three offers the effect of which was to gradually increase the amount offered to the wife. Each offer fell short of what the wife ultimately achieved, but it must be borne in mind that if the wife had accepted any of the husband’s three offers she would undoubtedly have been better off financially than contesting the proceedings to final hearing. The difference between the amount proposed by the husband in his Initiation Application and what the wife received following the final hearing has undoubtedly been consumed by legal fees. If any of the offers made by the husband, and to which reference has been made, had been accepted by the wife she would have been better off financially. In my view, by not accepting the offers, the wife’s conduct in relation to the proceedings, being the consideration under s.117(2A)(c) of the Act is such as to warrant an adverse order for costs against her. The fact that the wife was unwilling to accept any of the husband’s three offers is also a factor that warrants an adverse order for costs against her under s.117(2A)(f) of the Act.
The husband seeks an order for indemnity costs. In my view, an order for costs should be made in favour of the applicant. Should such costs be taxed and paid on the indemnity basis?
The authority most often cited on an application for indemnity costs is that of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. Of course in that case the court was dealing with a forum in which the ordinary rule as to costs applied, namely that the successful party recovered their costs on a party and party basis. That is to be distinguished from family law proceedings, in which s.117(1) is applicable. That is, the court must be persuaded that circumstances exist which justify any order for costs at all. Neither counsel submitted that the principles discussed in Colgate-Palmolive were inapplicable in this jurisdiction, nor that the Full Court of the Family Court has decided that some different test should apply.
At paragraph [24] in Colgate-Palmolive Sheppard J said:
“24.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 (1978) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at 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 be 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.”
In my view, none of the circumstances adverted to by his Honour as justifying an award of indemnity costs arises in this case. Here, the court must be satisfied that the general rule in s.117(1) of the Act is displaced. That threshold has been crossed in this case. Something additional or more significant is then required to justify an indemnity costs order. In my view, it has not been demonstrated that the respondent’s conduct has been such as to warrant such an order.
In that regard I am mindful also of the fact that the amount of costs estimated to have been incurred by the husband would entirely obliterate the property settlement order made in favour of the wife if an order for indemnity costs was made. Indeed I was mindful that any order for costs against the wife would substantially diminish the amount that she receives. However, the husband has been put to considerable expense in litigating proceedings which ought not to have proceeded to final hearing had the wife, and her advisors, adopted a more realistic attitude. The husband ought not be required to suffer financial loss in circumstances where he has made a number of realistic offers that have not been accepted, and where the wife has made unrealistic claims against him. In my view an order for costs is appropriate in this case. However the costs should be paid on the standard or party and party basis.
There will be orders accordingly.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 10 March 2010
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