Olsen & Rich (No 3)
[2022] FedCFamC1F 751
•30 September 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Olsen & Rich (No 3) [2022] FedCFamC1F 751
File number(s): SYC 5822 of 2018 Judgment of: SCHONELL J Date of judgment: 30 September 2022 Catchwords: FAMILY LAW – COSTS – Where the husband sought a costs order following termination of an order for arbitration – Where the wife previously consented to arbitration but later changed her mind – Where the husband sought costs on an indemnity basis but failed to provide a costs agreement – Consideration of factors in s 117(2A) of the Family Law Act 1975 (Cth) – Husband’s application dismissed – Each party to bear their own costs. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 190
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.13
Cases cited: Bant & Clayton (Costs) (2016) 56 Fam LR 31; [2016] FamCAFC 35
Colgate Palmolive Company & Anor v Cusson Pty Ltd (1993) 118 ALR 248; [1993] FCA 801
Harris and Harris (1991) FLC 92-254; [1991] FamCA 124
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
Olsen & Rich (No 2) [2022] FedCFamC1F 647
Olsen & Rich [2022] FedCFamC1F 324
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123; [2005] FamCA 158
Penfold and Penfold (1980) 144 CLR 311; [1980] HCA 4
Pennisi v Pennisi (1997) FLC 92-774; [1997] FamCA 39
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Division: Division 1 First Instance Number of paragraphs: 39 Date of last submissions: 24 June 2022 Place: Sydney Solicitor for the Applicant: Newnhams Solicitors Solicitor for the Respondent: Dorter Family Lawyers and Mediators ORDERS
SYC 5822 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR RICH
Applicant
AND: MS OLSEN
Respondent
order made by:
SCHONELL J
DATE OF ORDER:
30 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.The applicant husband’s application for costs be dismissed.
2.Each party pay their own costs of the application.
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 Olsen & Rich has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
Pursuant to orders and directions made by Wilson J on 13 May 2022, the applicant husband (“the husband”) sought costs arising out of a hearing before his Honour that resulted in a judgment on 13 May 2022, where his Honour terminated an order for arbitration. As a consequence of his Honour’s orders, the substantive proceedings were transferred first to Division 2 of the Court and thereafter to Division 1.
The husband seeks costs in the sum of $9,168.50 on an indemnity basis and the sum of $1,200 on a party/party basis, being costs of the application. Those costs are said to be approximately 70% of the husband’s indemnity costs.
The background to the costs application arises in circumstances where on 10 March 2022, a judge of Division 2 of the Court made orders by consent referring the matter to arbitration. At the time of referral to the arbitration, the husband and respondent wife (“the wife”) were both represented by a solicitor and counsel.
On 29 March 2022, the Court was advised “that the [wife] ‘may’ not continue to consent to the matter being dealt with by arbitration” (husband’s Written Submissions filed 24 June 2022, paragraph 4). This was confirmed on 22 April 2022.
On 2 and 10 May 2022, as his Honour expressed in his judgment of Olsen & Rich [2022] FedCFamC1F 324, the Court heard an application by the husband seeking “orders holding the wife to her agreement to arbitrate. The wife says she proffered her agreement at an earlier stage of the litigation, when she was legally represented and she no longer wishes to arbitrate” (at [2]).
Justice Wilson delivered his judgment on 13 May 2022, terminating the order for arbitration but making directions as to costs. Relevantly, in relation to the costs application, his Honour observed:
46.In addition to the prolongation of this litigation by the wife’s approbation and reprobation on the question of arbitration, the husband has been required to expend legal fees subsequent to 10 March 2022 right up to this decision. If he wishes to apply for an order for costs under s 117 of the Family Law Act –
(a)any affidavit by the husband in support of an application for costs must be filed and served by noon on 27 May 2022;
(b)any affidavit in response to the husband’s application for costs must be filed and served by the wife by noon on 10 June 2022;
(c)both parties must file and serve written submissions by noon on 24 June 2022;
(d)the costs matter will be determined on the papers thereafter.
In relation to those directions, the husband complied with the filing of an affidavit whilst the wife did not. Each party filed their submissions but in the case of the wife, she was late.
It is unclear why the husband’s application for costs was not dealt with earlier but the matter has now been transferred to me.
Indemnity costs
The husband seeks an order for indemnity costs that resulted in his Honour’s judgment.
The authorities make it plain that an order for indemnity costs is not one that is made lightly and there should be circumstances of an exceptional kind that warrant orders for costs on an indemnity basis. In Kohan & Kohan (1993) FLC 92-340, their Honours in the Full Court observed at 79,614:
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O. 38 r. 2, the provisions of O. 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O. 38 r. 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v. Wright (No.2) “(supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR at 368 to 370.
Indemnity costs orders are still an exception in this and other jurisdictions. …
Justice Sheppard in Colgate Palmolive Company & Anor v Cusson Pty Ltd (1993) 118 ALR 248 observed as follows at 256–257:
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, ie 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 O 62, rr 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 88as 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:88the 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 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) 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.
The category of cases in which a court may make an indemnity costs order are not closed and are not limited to those identified by Shepard J. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 at 87,471, the Full Court said:
… It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied that some '”particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.
The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules) and jurisprudence require production of the costs agreement by which the husband is bound. In that respect, r 12.13 provides as follows:
12.13 Order for costs
(1) The court may make an order for costs on its own initiative.
(2) A party may apply for an order that another person pay costs.
(3) An application for costs may be made:
(a) at any stage during a proceeding; or
(b) by filing an Application in a Proceeding within 28 days after the final order is made.
(4) A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement or costs agreements in relation to those costs and, if so, the terms of the costs agreement or costs agreements.
(5) In making an order for costs in a proceeding, the court may set a time for payment of the costs, which may be before the proceeding is concluded.
The husband has not complied with the rule. He has not attached to his affidavit or his submissions the costs agreement by which he is bound or the basis upon which the costs are incurred.
There was nothing exceptional about the circumstances of this matter that warrants an order for indemnity costs. True it is that the wife sought what could properly be described as an indulgence in circumstances where she had previously otherwise consented to orders. I am not satisfied that this unexceptional case warrants an order for indemnity costs.
The husband expressed his application as seeking only indemnity costs. He did not otherwise seek costs of the hearing before his Honour on the usual basis. He did, however, seek costs of this application.
An application for costs is governed by the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”), which provides a general rule that each party to the proceedings should bear their own costs.
Section 117(2) reposes in the Court a discretion to make a costs order in circumstances where the Court determines that there are circumstances that justify it making an order and, if there are such circumstances, the Court may make such order as it considers just, having regard to the matters set out in s 117(2A).
In Penfold and Penfold (1980) 144 CLR 311, the plurality in the High Court determined that to make an order under s 117(2), the Court needs to make a finding of justifying circumstances as a preliminary prerequisite to the making of an order. Their Honours also observed that terms such as an exceptional case, special circumstances or a clear case are not necessary determiners of whether or not an order for costs should be made. All that is required or necessary is that there are justifying circumstances.
It is well-settled law that no one factor under s 117(2A) is determinative and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123, the Full Court observed:
41. … 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
Dealing now with the relative subsections in s 117(2A).
(a) The financial circumstances of each party to the proceedings
The parties’ financial position is clearly articulated in my judgment of Olsen & Rich (No 2) [2022] FedCFamC1F 647. Each party is in a financial position whereby they can meet a costs order should it be ordered. The consequences of the litigation have impacted considerably on each of the parties. That said, impecuniosity is not a basis for making a costs order.
(b) Whether the parties are in receipt of legal aid
Not relevant.
(c) The conduct of the parties to the proceedings
Each party contends that the other party’s conduct is relevant to the granting of a costs order.
What is relevant is conduct of a party, which in some way or other leads to an increase in costs by the other party. Such factors may include uncooperative behaviour, obstruction, prolonging litigation or the bringing of unreasonable or unmeritorious applications. It may include non-disclosure or a failure to comply with the Rules in relation to disclosure.
The husband contends that he incurred costs as a consequence of the wife’s conduct in the proceedings. I have referred to earlier the observations made by Wilson J in his judgment and am of the view that the wife’s conduct in initially consenting to the orders of the Court and then seeking an indulgence is a matter that is relevant to the question of costs.
(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court
The proceedings before his Honour arose as a consequence of the wife seeking to be relieved of the obligations imposed by the orders to which she had consented to previously. It was that fact which necessitated a hearing.
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The term “wholly unsuccessful” refers to a situation in which proceedings as a whole have been unsuccessful, rather than necessarily an application (see Bant & Clayton (Costs) (2016) 56 Fam LR 31).
(f) Whether any party has made an offer in writing
In that respect, the Full Court in Pennisi v Pennisi (1997) FLC 92-774 at 84,547 held:
We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer.
In Harris and Harris (1991) FLC 92-254, the then Family Court of Australia awarded the wife exactly the amount which she had been offered to settle for. The Full Court agreed that the trial judge was within the limits of the proper exercise of his jurisdiction to order costs.
The husband contends that there were no offers in writing made by the wife. I do not accept such submission. Attached to the wife’s submissions and marked as Annexure “A” is an offer made on 24 June 2022 in the following terms:
I am instructed to put forward the following open offer, that:
a. The wife pay to the husband 70% of the costs sought by him, and being the amount set out in the husband’s submissions filed/served today;
b. That such sum be paid within seven (7) days of final orders being made in this matter.
The offer, it would appear from the wife’s submissions, was rejected by the husband.
(g) Any other matter the Court considers relevant
There is no other relevant matter.
Having regard to the above matter, I am not of the view that the circumstances of this case warrants an order for indemnity costs. The husband has not complied with the Rules in placing before the Court his costs agreement.
The husband does not seek an order for costs on a party/party basis. Even if he had, I am of the view that the rejection of the offer of settlement made by the wife was imprudent. It was in all the circumstances a sensible and reasonable offer.
I note s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA”) is as follows:
67 Overarching purpose of family law practice and procedure provisions
(1) The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Note 1: See also paragraphs 5(a) and (b).
Note 2: The Federal Circuit and Family Court of Australia (Division 1) must give effect to principles in the Family Law Act 1975 when exercising jurisdiction in relation to proceedings under that Act.
(2) Without limiting subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 1);
(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court’s overall caseload;
(d) the disposal of all proceedings in a timely manner;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3) The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4) The family law practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a) the Rules of Court;
(b) any other provision made by or under this Act, or any other Act, with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
The overarching purpose is reinforced by the Rules and the Central Practice Direction – Family Law Case Management (CPD), especially the core principles including that parties must conduct the proceedings (including negotiations for settlement of the dispute) in a way that is consistent with the overarching purpose. Further, legal practitioners are expected in the conduct of proceedings to take account of the duty imposed by s 67(1) and s 190(1) of the FCFCOA.
I am of the view that the rejection by the husband of the wife’s offer of settlement was not consistent with the overarching purpose of the family law practice and procedure and was, as I observed earlier, imprudent. In all the circumstances, I am not satisfied that I should depart from the usual order.
Accordingly, I will dismiss the husband’s application other than to record that each party shall pay their own costs of the application.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 30 September 2022
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