Orozco & Bonilla (No 2)
[2024] FedCFamC1F 317
•20 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Orozco & Bonilla (No 2) [2024] FedCFamC1F 317
File number(s): WOC 201 of 2021 Judgment of: CURRAN J Date of judgment: 20 May 2024 Catchwords: FAMILY LAW – COSTS – Where there is an application by first and second applicants for costs – Whether costs should be ordered on an indemnity basis – Where the respondent brought proceedings and was wholly unsuccessful – Where costs awarded on a party and party basis – Where application for indemnity costs refused – Where the respondent’s application for costs as against the first and second applicants dismissed Legislation: Family Law Act (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 Sch 3
Cases cited: Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
I & I (No 2) (1995) FLC 92-625
Madin & Palis (Costs) (2016) 55 Fam LR 59
Meldon & Meldon (No. 6)(Indemnity Costs) [2015] FamCAFC 157
Munday v Bowman (1997) FLC 92-784
Nada & Nettle (Costs) (2014) FLC 93-612
Orozco & Bonilla [2023] FedCFamC1F 1018
Pavlic & Pavlic (No 2) [2023] FedCFamC1A 97
Quickley & Pelissier [2016] FamCAFC 124
Ragatta Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175
Robinson & Higginbotham (1991) FLC 92-209
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187
Division: Division 1 First Instance Number of paragraphs: 63 Date of last submission/s: 11 March 2024 Date of hearing: Determined on the papers Place: Sydney Solicitor for the Applicants: Maguire & McInerney Lawyers Counsel for the Respondent: Mr Scarlett Solicitor for the Respondent: Johnson Vardanega Lawyers ORDERS
WOC 201 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS C BONILLA
First Applicant
MR B BONILLA
Second Applicant
AND: MR OROZCO
Respondent
ORDER MADE BY:
CURRAN J
DATE OF ORDER:
20 MAY 2024
THE COURT ORDERS THAT:
1.The Respondent pay the costs of the First and Second Applicants on a party and party basis as agreed or assessed.
2.The application of the Respondent for the First and Second Applicants to pay the Respondent’s costs is 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).
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 the pseudonym Orozco & Bonilla has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CURRAN J:
BACKGROUND
On 9-13 October 2023, an application for property settlement orders was heard by me. Final judgment was delivered on 11 December 2023. Those reasons are contained in Orozco & Bonilla [2023] FedCFamC1F 108 (“the Judgment”). The parties were Mr Orozco (“the respondent” in the costs application), his former partner Ms Bonilla, and the parents of Ms Bonilla, being Ms C Bonilla (“the first applicant” in the costs application) and Mr B Bonilla (“the second applicant” in the costs application).
Final orders were made to affect a superannuation split as between the respondent and Ms Bonilla, and for him to pay her a lump sum of $79,832 by way of property settlement. As against the first and second applicant’s interests, the respondent’s application was defeated. Declarations were made that the property held at D Street, Suburb E (“the Suburb E property”) was held on trust for the first and second applicants by Ms Bonilla, and that the first and second applicants hold all legal and beneficial interest in the property to the exclusion of the other parties.
The respondent had also pursued orders relating to the property situated at H Street, Town J (“the Town J property”). However, this claim was abandoned on the second day of the hearing, following which orders were made by consent declaring that the Town J property was held on trust for the first and second applicants by Ms Bonilla, and that the first and second applicants hold all legal and beneficial interest in the Town J property to the exclusion of the other parties.
THE APPLICATION
The first and second applicants filed an Application in a Proceeding on 5 January 2024 seeking that the respondent pay their costs on an indemnity basis. In the alternative, they sought that the respondent pay their costs on a party and party basis in accordance with Sch 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) within 28 days.
In his Response to Application in a Proceeding, the respondent sought that the first and second applicant’s application be dismissed and that the first and second applicants pay his costs.
All parties sought that the application be determined on the papers in chambers.
MATERIAL RELIED UPON
The first and second applicants relied upon:
(a)Judgment delivered 11 December 2023, Orozco & Bonilla [2023] FedCFamC1F 1018;
(b)Application in a Proceeding filed 5 January 2024;
(c)Affidavit of the second applicant sworn 28 December 2023;
(d)Financial statement of the respondent filed 11 September 2023; and
(e)Written submissions filed 11 March 2024.
The respondent relied upon:
(a)Response to Application in a Proceeding filed 22 February 2024;
(b)Affidavit of the respondent filed 21 February 2024; and
(c)Written submissions filed 11 March 2024.
THE LAW
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) sets out the statutory framework for the exercise of the discretion in respect of costs. The starting point is that each party will bear their own costs, unless the circumstances justify otherwise, having regard to the considerations set out at s 117(2A) of the Act referred to below.
Costs may be ordered, including on an indemnity basis, if the justice of the matter so requires.
The matters set out in s 117(2A) must be taken into account and balanced to determine whether the overall circumstances justify the making of an order for costs (I & I (No 2) (1995) FLC 92-625, at page 3 (Nicholson CJ, Ellis and Buckley JJ)).
Indemnity costs
Orders for indemnity costs should only be made in the most extreme cases per Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 at page 256 (“Colgate Palmolive”), as confirmed by the Full Court in Quickley & Pelissier [2016] FamCAFC 124 at [121], and Madin & Palis (Costs) (2016) 55 Fam LR 59 at [23].
In Colgate Palmolive, Sheppard J observed 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:-
…
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 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 Sheppard J.
A number of circumstances can be taken into account which may justify the award of costs on an indemnity basis, per Holden CJ in Munday v Bowman (1997) FLC 92-784 at 84,660 these are:
(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: see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty. Ltd. (supra)
(c)Evidence of particular misconduct causing loss of time to the court and to other parties: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (French J, Fed C of A, 3 May 1991, unreported).
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ragatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
DISCUSSION AS TO COSTS
It is well settled that no one factor in s 117(2A) is determinative, and that the Court may give such weight as it considers relevant to any of the identified considerations. The submissions filed on behalf of each of the parties identified what they each considered to be relevant in the determination of the competing applications for costs.
The consideration of each factor set out in s 117(2A) of the Act follows.
Section 117(2A)(a): Financial circumstances of the parties
The first and second applicants are self-funded retirees. They are 87 and 88 years of age respectively. No evidence as to their financial circumstances or assets was filed in support of this application. They retained private legal representation throughout the proceedings for which they expended a total of $145,438.06.
The respondent is casually employed in industry. He is 59 years of age. His earnings for the current financial year to 21 February 2024 were $123,058.99. He has a surplus, after his personal expenditure, of approximately $1,400.00 per week.
The respondent is a beneficiary of the estate of his late mother, however, failed to provide any evidence of the likely inheritance he is to receive. He says he attempted to obtain a “ballpark figure of funds that I might expect to receive but they simply have told me they will send further correspondence to me in due course.” He annexed a letter from the Estate’s solicitors dated 17 November 2023 which advises they will “be able to answer any general questions.” No particulars have been given of any enquiries made of the Estate, or specifically, of any request for a copy of the inventory of assets.
The respondent retained private legal representation throughout the first instance proceedings, expending $136,903.85, for which he took out a loan and is paying this at a rate of $149.07 per week. The loan balance as at 15 February 2024 was $28,333.89.
The respondent has an ongoing earning capacity while he continues to be in employment. He has no assets other than a motor vehicle worth $12,000 and his superannuation interest.
Despite what I infer as a superior asset position of the applicants, the respondent has an ongoing income stream. In any event, impecuniosity is not a bar to the making of a costs order (see Nada & Nettle (Costs) (2014) FLC 93-612; Meldon & Meldon (No. 6) (Indemnity Costs) [2015] FamCAFC 157).
Section 117(2A)(b): Whether the parties are in receipt of legal aid
All parties had private legal representation throughout the proceedings.
Section 117(2A)(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
In written submissions, the first and second applicants refer to criticism of the respondent contained in the Judgment, specifically as to his failure to provide sufficient evidence to support his contentions and to provide full and frank disclosure. It is true, and the Judgment reflects, that the respondent failed to make full and frank disclosure, especially as to his pending inheritance, and his current income and earning capacity. Similarly, I was unable to accept much of the respondent’s evidence at final hearing on account of his demonstrated inaccuracies and inability to produce any corroborative evidence.
I have no more clarity now than I had at the hearing as to the likely inheritance to be received. That information could have been sought by the respondent or an explanation provided as to what enquires were made. He chose not to provide evidence and the inheritance question remains opaque. However, I am not satisfied that this forensic decision made by the respondent is relevant to the making of the costs order, other than I infer he will receive some inheritance which supports a conclusion that he has some capacity to pay.
In addition to the identified disclosure issue, the respondents contended that the conduct of the respondent being the timing of his abandonment of the claim to the Town J property was a relevant factor to consider in determining the costs application.
It was submitted by the respondent that he “conducted his case in a logical and economical manner”, including the abandonment of his claim as to the Town J property which, it was submitted, shortened the length of the hearing. I do not accept that submission in respect of the impact of the abandonment of the claim. The respondent abandoned his claim as to the Town J property at the conclusion of his evidence, after already being cross-examined in relation to the Town J property.
The Town J claim was one part of the claim being made. I do not consider that the late abandonment of the Town J claim, when it was apparent the claim was unable to succeed, is conduct of the parties in relation to the proceedings that is relevant to a costs application.
I am not satisfied that there is any matter of conduct that is relevant to the making of a costs order.
Section 117(2A)(d): Failure to comply with orders of the Court
There was no evidence of any failure to comply with orders of the Court.
Section 117(2A)(e): Whether a party has been wholly unsuccessful in the proceedings
It was submitted by the first and second applicants that the respondent was wholly unsuccessful in the proceedings as against the first and second applicants.
The respondent submitted that he was not wholly unsuccessful in the proceedings because he abandoned his claim to the Town J property, and therefore, “the Court was not called upon to decide upon this aspect of his original claim.” I do not follow this submission.
In Robinson & Higginbotham (1991) FLC 92-209 at 78,417, Nygh J stated that the concept of being wholly unsuccessful is “a situation in which the proceedings as a whole have been unsuccessful. In other words, in which an application which was without merit has been dismissed.”
None of the orders sought by the respondent as against the first and second applicants were made. By the conclusion of the final hearing, the respondent had consented to declarations being made as sought by the first and second applicants as to the Town J property and the property situated at F Street Suburb G (“the Suburb G property”). The only orders sought against him by the first and second applicants, other than those for costs, were the declarations which were ultimately made in relation to the Suburb E property. He was wholly unsuccessful in the proceedings.
The respondent was wholly unsuccessful in the proceedings and only abandoned his claim in respect of the other declarations sought at the end of his evidence and accordingly this is a relevant factor supporting an order for costs.
Section 117(2A)(f): Offers of settlement
The respondent conceded that on 9 October 2023, the first and second applicants made an offer in writing to the respondent. He and did not respond to the earlier correspondence sent on 16 April 2020 and 16 July 2021.
The respondent was warned by the first and second applicants that they would pursue costs against him almost twelve months prior to filing the Initiating Application on 24 February 2021. An Amended Initiating Application filed on 7 June 2021.
An open letter was sent to the respondent on 16 April 2020 which set out, with particularity, the facts and contentions of the applicants which would be relied upon to rebut any presumption of advancement. The respondent was on notice that an application for costs in reliance on that correspondence would be made if he pursued any claim to an interest in the property, and as a result, the applicants were obliged to incur legal costs in opposing such a claim.
An open offer of settlement pursuant to the Rules was made on 16 July 2021. That letter offered to settle the proceedings against the applicants on the basis of the pleadings being dismissed and that there be no order as to costs. The letter gave an estimate of the costs likely to be incurred and referred the respondent to the relevant sections of the Act in respect of costs considerations as well as the well-known and relevant authorities.
A without prejudice offer of settlement was made in writing on the first day the trial which commenced on 9 October 2023. The offer was that there be agreement to the declarations sought, and again that each party bear their own costs, at that time noting the costs were in excess of $125,000.
The substance of each of the offers made were that the respondent should withdraw his application as against the first and second applicants in its entirety, or to consent to declarations being made as sought by the first and second applicants, and for each party to pay their own costs.
The obligation to establish his case as against the third parties rested with the respondent. The first and second applicants did much more than merely deny the claim. They also set out, in some detail, the facts and contentions relied upon to support and explain the position articulated in the respective offers. They first wrote to the respondent well before the proceedings were commenced, setting out their position and the basis for such position. They made an offer after proceedings were commenced, and a further offer on the first day of the trial.
It was submitted by the respondent that the offers of the first and second applicants were “not an offer of settlement at all. It was nothing less than a demand for a total capitulation by the Respondent.” This submission relied upon the Full Court decision of Pavlic & Pavlic (No 2) [2023] FedCFamC1A 97 (“Pavlic”).
I do not accept that there was no compromise contained in the offer made by the first and second applicants. The circumstances and the parties involved are vastly different to the circumstances of Pavlic, which involved an application between parties to a marriage, in the context of an appeal, where the offer “was merely a demand for her to surrender. She was threatened with indemnity costs if the appeal succeeded, but was not offered any relief from costs liability in return for an early concession of the appeal. There was no genuine aspect of “compromise”” according to the Full Court at [14].
The offers were made in circumstances where the respondent had included Ms Bonilla’s parents as third-party respondents to the matrimonial cause. The application was not simply between parties to a marriage. The legal costs incurred by the first and second applicants were attributable solely to the actions of the respondent in including them in the Initiating Application, in proceedings which were wholly unsuccessful. The offers were made in writing, and each offered relief from the potential costs liability identified. This was a genuine aspect of compromise which differentiates the matter from the facts of Pavlic. I give weight to the letter of 16 April 2020 and the subsequent two written offers of settlement after proceedings were commenced. This is a significant factor that supports the making of a costs order.
Section 117(2A)(g): Any other relevant matters
It was submitted that the Court should have regard to the fact that the respondent’s evidence of his expenditure on the Suburb E Property was called for during the final hearing, but never provided. While he did not produce records of expenditure, oral evidence was given, and it was agreed that the respondent did undertake various improvements on to the property. I do not accept that this failure is relevant to the costs application.
It was also submitted that the significant costs of the first and second applicants should be taken into account under this consideration. The evidence of the second applicant is that the applicants have spent $145,438.06 in legal costs.
DISCUSSION AS TO INDEMNITY COSTS
Indemnity costs were sought against the respondent on the basis of the same evidence and submissions relied upon by the first and second applicants in relation to s 117 of the Act.
The authorities make plain that an order for indemnity costs is not one that is lightly made, and there should be circumstances of an exceptional kind that warrant orders for costs on an indemnity basis (see Colgate Palmolive).
It was submitted that the respondent commenced the action in circumstances where he should have known that he had no chance of success. I do not accept the submission that the respondent’s case had no merit.
The Suburb E property and the Town J property were also registered in the name of Ms Bonilla until the day after the commencement of these proceedings. The respondent filed his Initiating Application on 24 February 2021, joining the first and second applicants as third-party respondents to the substantive application. The following day, Ms Bonilla transferred the Suburb E and Town J properties from her name to the names of the first and second applicants.
The respondent’s evidence was he believed the property had been gifted to him on the basis of conversations that occurred between the parties. The applicants both gave evidence of conversations pertaining to the use of the Suburb E property, including the first applicant saying “Go in there and live and be happy”. The respondent may have held a genuine belief that he was gifted the property based on these conversations, and therefore, had a basis to run his case as sought, although he was ultimately unsuccessful.
Similarly, the first and second applicant contend that the respondent made “allegations which ought never to have been made” or engaged in “the undue prolongation of a case by groundless contentions.” The respondent was criticised for making contentions which were not supported by any evidence produced by him and contradicted by evidence produced by the first and second applicants and Ms Bonilla. There is some weight to this submission however there was also evidence of contributions made by the respondent to the properties such as plastering, assisting with improvements and gardening that were not in contest. Based on these factors I am not satisfied that the respondent’s contentions were entirely groundless. In fact, some contentions as to the contributions made to the renovation of the Suburb E property were in cross-examination accepted by each of the witnesses. The respondent was inconsistent and inaccurate with aspects of his evidence, however, this does not mean the claim was groundless as contended.
Although it is finely balanced, based on the factors referred to above, the inaccuracy of the respondent’s evidence and his pursual of his claim against the Suburb E property when considering the merits of the whole case does not satisfy the “extreme” variety that would justify awarding costs on an indemnity basis.
It was submitted that the respondent engaged in misconduct which caused a loss of time to the Court and to other parties. I was critical of the way that the respondent ran his case, including his lack of full and frank disclosure, however, I do not accept the submission that he engaged in misconduct causing a loss of time and was taken to no specific evidence to support this contention.
As set out above at [14], Sheppard J in Colgate Palmolive identified that “an imprudent refusal of an offer of compromise” might, in an appropriate case, warrant the exercise of discretion to award indemnity costs. It was submitted that the respondent gave an “imprudent refusal” of an offer to compromise. The refusal is taken into account in the making of the costs order but does not satisfy me that it warrants the making of an indemnity costs order.
In light of the authorities, I am not satisfied that there are exceptional circumstances that warrant an order for costs on an indemnity basis as there is no particular facts and circumstances of the case in question warranting the making of an order for the payment of costs other than on a party and party basis.
CONCLUSION
Having regard to all of the factors set out under s 117 of the Act, for the reasons set out herein it is appropriate that costs are ordered against the respondent on a party to party basis as agreed or assessed. Litigation in this Court is extraordinarily expensive, evidenced by the respective costs of each of the parties to this litigation. The circumstances in this case where a party embarks upon litigation and is ultimately wholly unsuccessful, and the consequence is that the other party is put to costs, is a justifying circumstance that warrants departure from the general rule that each party pay their own costs.
I am not satisfied that the respondent’s conduct, or pursual of his claim against the first and second applicants, was so egregious or exceptional to warrant an order for costs on an indemnity basis.
I am, however, satisfied that an order should be made for the respondent to pay the applicants costs on a party and party basis, given he was wholly unsuccessful in the proceedings, given the offers of settlement that were made, given the financial circumstances of the parties and given the nature of the applicants as third parties joined to proceedings against their will.
COSTS APPLICATION MADE BY THE RESPONDENT
In consideration of the relevant s 117 factors above, there is no basis to make an application for costs on behalf of the respondent. It is an extraordinary application that is entirely without merit. For the reasons set out above the application must fail.
The respondent’s application for costs is dismissed.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Curran. Associate:
Dated: 20 May 2024
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