PABST & PABST (No.3) - [2021] FCCA 191

FEDERAL CIRCUIT COURT OF AUSTRALIA

PABST & PABST (No.3)

[2021] FCCA 191

Catchwords:
FAMILY LAW – Ruling on costs application.

Legislation:

Family Law Act 1975 (Cth), ss.45A, 117

Family Law Rules 2004 (Cth), rr.1.10, 19.18, 21.02, 21.03, 21.10

Cases cited:

Colgate Palmolive Co v Cussons Pty Ltd [1993] 46 FLR 225

Fewin Pty Ltd v Burke (No.3) [2017] FCA 693

Graft & McCormick (Costs) [2018] FamCAFC 82

Applicant:

MR PABST

Respondent:

MS PABST

File Number:

DGC 4210 of 2018

Judgment of:

Judge Burchardt

Hearing date:

On the papers

Date of Last Submission:

29 January 2021

Delivered at:

Dandenong

Delivered on:

11 February 2021

REPRESENTATION

Counsel for the Applicant:

Not denoted

Solicitors for the Applicant:

Wl Lawyers

Counsel for the Respondent:

Mr Trim

Solicitors for the Respondent:

Robert Wood and Associates

ORDERS

The applicant husband pay the wife’s costs fixed at $60,000.

IT IS NOTED that publication of this judgment under the pseudonym Pabst & Pabst (No.3) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 4210 of 2018

MR PABST

Applicant

And

MS PABST

Respondent

REASONS FOR JUDGMENT

Introduction

In this matter, the respondent wife seeks an order that the applicant to the original proceedings pay her costs in the sum of $137,500, together with costs of the costs application itself in the sum of $2500. The husband resists any costs order and, in the alternative, submits that costs should not be awarded on what in effect is an indemnity basis.
For the reasons that follow, while I am not unsympathetic in principle to the wife’s application, I think the sum claimed is simply excessive. Pursuant to the Court’s relevant powers, I am going to order the husband to pay the wife’s costs fixed in a sum of $60,000.

The Relevant History

The husband filed his initiating application on 14 December 2018. Thereafter, both parties filed very extensive affidavit material and the matter ultimately came on for trial on 17 and 18 September 2020.
Before that, however, the wife took out an application in a case seeking the summary dismissal of the husband’s application pursuant to section 45A of the Family Law Act1975 (Cth) (“the Act”). That application was heard on 17 July 2020 and on 23 July 2020 I dismissed the application, but reserved the costs. It should be noted that the husband’s originating application sought to set aside consent orders made in the Family Court of Australia on 6 March 2017 and that there be an adjustment to the parties’ interest in property.
In the July 2020 judgment, I noted, at paragraphs 4 and 5, the copious affidavit material the parties had filed, and the delays caused by problems with tax returns. I noted that the matter arose out of consent orders initially rejected by Registrar Mestrovic by letter dated 17 January 2017, which the husband said he did not receive. At paragraph 12, I observed:
His counsel did not shrink as I understand the matter from asserting fraud on the part of the wife and/or her agents. These are serious matters, all the more so when, in an earlier affidavit, the husband had proposed that he had, in fact, signed the relevant orders. On any view of the matter, this would be a forensic difficulty for him at trial.
I noted the husband had various other complaints and that the wife strongly resisted the application. At paragraph 15, I observed:
She asserts that his application in December 2018 was motivated not by any proper distain (sic) for the March 2017 orders but rather by the fact that he learnt she was then in a new relationship. It would appear from the materials that the wife did, indeed, enter into a new relationship which became known to the husband at about that time.
I went on to note that although the husband’s application would face significant forensic difficulties because of his earlier affidavit, the fact was that he had sworn he did not execute the March 2017 orders.
I observed at paragraph 19:
This is a very serious and significant matter. In my view, it is not one that can be dismissed on a summary basis. Only one of two explanations are tenable. Either he did sign the documents or he did not. He complains that he did not have legal advice and of course that is another relevant consideration. It needs to be tested by the evidence.
I then went on to note at paragraph 20 that the pool was not entirely clear and, in paragraph 21, I decided:
In those circumstances, and not without some considerable hesitation, I think that the application for summary dismissal cannot be upheld.
At paragraph 22, I observed:
I do not propose to make any costs orders in respect of the section 45A application. In a sense its ultimate success or failure will be determined in the trial in the sense that I will make a final conclusion as to whether or not orders were forged or in some other fashion inappropriate or improper.
Following the hearing to which I have earlier referred, on 17 and 18 September, I gave judgment on 20 November 2020. I refer by reference to the whole of that judgment, but the following extracts are pertinent. At paragraph 3, I observed:
For the reasons that follow, I am completely unpersuaded that the husband’s attacks on the 2017 orders were established and it follows that the application will be dismissed.
I noted, at paragraph 4:
It should be noted that the parties have not been shy in the filing of affidavit materials, much of which is repetitive.
I again described the parties’ affidavits as voluminous at paragraph 13. At paragraph 91, I roundly dismissed suggestions advanced by the husband that the parties’ former accountant, Mr F, had forged documents that had been submitted to the Court. At paragraph 97, I said:
It is immediately, and in my view conclusively, apparent that Mr Pabst did indeed sign the 1 March 2017 orders in his personal capacity. He failed, however, to sign each page in his capacity as a director of A Pty Ltd
At paragraph 100, relevantly, I found:
Put shortly, there was no forgery and no fraud, not only by Mr F, but by anyone else.
At paragraph 102, I accepted that the wife’s family contributed $200,000 towards the purchase and renovation of the Town C property and:
The assertion that there was any misleading component in the draft orders and the explanation for them is one I reject.
At paragraph 103, I found:
Notwithstanding some occasional vacillation by the wife in her evidence, I am satisfied that there were no material misrepresentations in any of the figures provided by the parties in the lead-up and the execution of the final orders.
At paragraph 106, I found:
Notwithstanding that the ultimate outcome has about something of a utilitarian air, I should make it clear again that I accept Mr F’s evidence. The methodology on which he assessed the values of the businesses may ultimately have been flawed, but this was only because he was acting on such information as was given to him by the parties. To the extent that the husband’s case rests on the supposition that the wife’s business was grossly undervalued, I reject it. The wife has denied this and I accept her denial. To the extent that there was any greater gain to the wife, I accept that this reflected the considerable benefit of the funds injected by her parents.
At paragraphs 108 to 111, I completely rejected the husband’s submissions as to the alleged impropriety of the parties and Mr F in relation to tax matters. At paragraph 112, I rejected a submission that there was impropriety in the lawyers for the wife acting for both parties in the lead-up to the final orders. I noted that there was nothing to prevent the husband getting independent legal advice but failed to do so. I also, at paragraph 113, rejected any assertion that Mr F acted for both parties improperly.
At paragraph 117 to 18, I observed:
Registrar Mastrovich (sic) did not accept the original deal, and raised questions which were answered, honestly, by Mr F. This led to the final set of orders which were freely executed by both the husband and the wife.
What ultimately changed, of course, was the fact that the wife re-partnered. One only has to look at the text messages that the husband sent the wife when he found out that she had repartnered to see where he was coming from. The emails in exhibit R1 show him desperately seeking in November 2019 to resuscitate his relationship with the wife and her ultimately telling him that it was all over, and he should move on. His application to this Court was filed very shortly thereafter and I find that this was motivated by a sense of grievance in which the husband’s controlling personality played a considerable part.
At paragraph 120, I observed:
In my view, despite the tenacity and skill with which the husband’s case has been pursued, in an overarching sense it is devoid of merits on all fronts. The application will be dismissed.
On 20 November 2020, I therefore dismissed the application. On 2 December 2020, the wife filed an application in the case, seeking costs of the proceeding fixed in the sum of $135,000, together with costs of the application, fixed at $5,900. An affidavit of support by Ms FF, affirmed 1 December 2020, deposed to a costs agreement between the wife and her solicitors that the work involved in the case be performed on the Supreme Court scale of costs.
The affidavit in part consists of submissions and refers to the rejection of the respondent’s case and raises a number of other matters said to have put the wife to additional and unnecessary expense. Complaint was made of the prolixity of the applicant’s affidavits (rather omitting the equal length of those of the respondent). More particularly, the affidavit annexed a summary of costs incurred which, following clarification recently consists in effect, of solicitor’s care and attention to the amount of $102,800, together with expenses which include barrister’s fees of $33,595, in a total of $136,397.53. Estimated costs of the application were $5,994.
By consent, I made orders on 3 December 2012 for a response to the application in the case to be filed together with written submissions by both parties.

The Written Submissions of the Parties

I have already paraphrased, in rather broad terms, the matters raised in the affidavit of Ms FF. The husband’s written submissions were accompanied by an affidavit of the husband, affirmed 20 January 2021. These, essentially, deposed to difficulties in his future as a labourer, owing to problems with his knees, his reduction in work and receipt of insurance and, more particularly, to a diagnosis of prostate cancer just before Christmas 2020 and a consequential surgery due in early 2021. At paragraph 11, he deposed:
This proceeding and the current Application by the wife for costs has placed a great deal of stress on me and any order for costs will place further stress and financial hardship on me. Accordingly, I request that the wife’s application for costs be dismissed.
The husband’s written submissions commence by reference to section 117 of the Family Law Act. They note that the wife was seeking, in effect, indemnity costs charged pursuant to the Supreme Court scale, that there was no alternative application for costs and that the wife had not sought taxation of costs.
The submissions went on to describe what was said to be the relevant law. It was submitted that the ordinary rule was that costs be paid on a party to party basis and that indemnity costs usually require exceptional, special or unusual circumstances. Even where special circumstances exist it was submitted that the Court continues to have a discretion. It was noted that circumstances that can justify indemnity costs include that the party’s case never had any prospect of success, allegations of fraud made knowingly to be false and a tortuous history of applications and appeals.
The submissions went on to address the considerations in section 117(2A) that were said to be most relevant. The first point made in the written submissions is to the effect:
Having regard to all this, it seems the Wife received about half a million dollars more than the husband – putting aside the significant taxation and business valuation issues.
This assertion follows a number of assertions as to the property pool which run directly contrary to the findings I made. Furthermore, I was well aware of the uncompleted taxation affairs of the parties to which the written submissions refer. The written submissions seek, in my view, to reagitate matters that were unsuccessfully prosecuted in the conduct of the case. It should be noted that there has been no appeal lodged against the orders made on 20 November 2020 and it is simply not open to the written submissions to seek to reagitate these matters.
The written submissions then go on to detail the inability of the husband to work due to health problems with his knees and, more particularly, his upcoming and urgent prostatectomy. I accept that that is a relevant consideration.
The written submissions go on to refer to the conduct of the parties and assert that both parties can be criticised. They go on to make complaint about the conduct of Mr F but, once again, the complaints made seem to me to run directly contrary to the findings I have made.
The written submissions go on to respond to the affidavit of Ms FF. It is asserted that it is common ground that costs should not be taxed. It is submitted it would be unjust for the Supreme Court scale to apply. The submission take issues with whether or not costs were thrown away by reason of trial dates being adjourned, being the responsibility of the husband, and respond to Ms FF’s assertion that a lot of time was wasted in responding to the expert report filed at the death knock by the husband. They submit that the wife’s summary dismissal application was wholly unsuccessful and make complaint of late provision of an email by the wife’s side.
The wife’s reply submissions filed 29 January 2021 decrease the sum sought for the costs of the costs application to $2,500. It is said that the wife does not seek an indemnity order because she is claiming only $137,500 out of a total of $141,207.59. It is submitted, in my view somewhat disingenuously (paragraph 3):
It is the Wife’s position that she is entitled to indemnity costs, however she is seeking the lesser amount in a fixed sum specifically to bring these proceedings to an end in a timely manner and avoid the costs associated with indemnity costs and taxation.
It is then submitted that the wife does not require an alternative application for costs because the Court may make any alternative order for costs on its own initiative by reference to r 1.10 Family Law Rules 2004 (Cth). The submissions go on to assert that the husband has led no submissions as to the wife’s quantum of costs and they are likely to be similar to those of the husband. The submissions go on to refer to the affidavit of Ms FF in which it was asserted that the matters in this case were more complex than one might usually expect from a family law matter because it involved complex company tax issues and later fraud and detailed handwriting analysis.
The submissions go on to assert that the husband’s case never had any prospect of success, that the husband had made allegations of fraud knowing them to be false and that the husband’s evidence had been roundly rejected. The submissions go on to assert that the husband’s ill health was not an appropriate reason not to provide the wife her costs and laid emphasis upon the husband’s complete lack of success.

Section 117 of the Family Law Act, Indemnity Costs and the Federal Circuit Court Scale of Costs

It was agreed that what might be described as the ordinary position for costs is that set out in section 117(1) of the Act. This prescribes that:
Subject to subsection (2) … each party to the proceedings under this Act shall bear his or her own costs.
Subsection (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.
Subsection 117(2A) sets out a number of matters that the Court is required to consider in contemplating making an order pursuant to subsection (2), to which I shall return. Relevantly for these purposes they include the financial circumstances of each of the parties, the conduct of the parties in relation to the proceeding and whether any party had been wholly unsuccessful.
It is of course clear that the ordinary rule is that each party bears their own costs but the Court may make an order for costs if it is of the opinion that there are circumstances that justify it doing so.
The question of indemnity costs has been considered on numerous occasions in almost every Court in Australia. The matter is, in my respectful view, succinctly and helpfully set out in the judgment of Murphy J in Graft & McCormick (Costs) [2018] FamCAFC 82 at [9] where his Honour said:
Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd outlines relevant principles and has been frequently cited in this Court as being applicable to its proceedings. The emphasis is on the necessity for the circumstances justifying an order for indemnity costs being extraordinary: all the more so given the provisions of section 117(1) of the Act.
The reference to the celebrated judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd [1993] 46 FLR 225 does not require any further detailed exposition. The class of circumstances which can give rise to an order for indemnity costs is not closed but, in a broad general sense, something special is required to justify an order of this sort.
The next matter worthy of note is the provisions of this Court’s rules as to costs. The Court has overarching powers pursuant to rule 21.02 which provide that, more particularly, under rule 21.02(2) that:
In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Court Rules.
Sub-rule (a) above in my view entitles the Court to make what is known as a lump sum order.
The Court may additionally, pursuant to rule 21.03:
(1) The Court may specify the maximum costs that may be recovered on a party and party basis.
Pursuant to rule 21.10 costs and disbursement:
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Parts 1 and 2 of schedule 1; and
(b) disbursements properly incurred.
Additionally, the Court has power pursuant to rule 1.06 to dispense with operation of the Rules and, pursuant to rule 1.05(2) “if in a particular case the Rules are insufficient or inappropriate, the Court may apply the Family Law Rules … in whole or in part or modified or dispensed with, as necessary”.
Amongst other provisions in the Family Law Rules rule 19.18 gives the Court power to order “a specific amount” this being what is known as a lump sum payment (in the event that my observations in paragraph 42 are incorrect).
In Fewin Pty Ltd v Burke (No. 3) [2017] FCA 693 Markovic J of the Federal Court was considering the Federal Court Rule relevantly identical to that in Family Law Rule 19.18, and said in what, in my respectful submission, is a helpful summary at [49]:
As was observed in Clipsal Australia at [9] the circumstances in which an order for lump sum costs may be made are not closed. The power to make such an order can be exercised whenever the circumstances warrant it. The making of such an order is not limited to large or complex cases, nor to simple cases. Relevantly, the circumstances in which such an order can be made include the avoidance of delay, expense, inconvenience and aggravation arising out of a taxation. The purpose of making such an order is not punitive. Rather, it is made in order to bring finality to the litigation in a way that is efficient for the parties both in terms of the time and cost they might otherwise expend in the taxation process.

Consideration of the Matters in Section 117

The financial circumstances of the parties were, of course, to an extent in issue in the proceedings before me. The written submissions of the husband continue to seek to reagitate matters which I have already addressed. There seems no doubt that the wife’s ultimate outcome in the property proceedings was superior to that of the husband but, as I found, not unreasonably so because of the contribution of her parents.
Nonetheless, both these parties are, by the standards of the community generally, reasonably well off and possess properties, albeit that they have to various debts (some to an extent inter-related). The taxation circumstances of the parties are not known solely because the husband has not moved himself to file his tax returns, it would appear, out of concern that he is likely to have money to pay when he does. The position can hardly be said to be wholly clear.
What is clear, however, is that the husband’s business has suffered as a result of his health problems. Equally, however, quite how things will come out in the long term may depend upon his resilience as a businessman and, if necessary, his capacity to redirect the kind of work he does. Self-evidently, the husband’s serious possible difficulties with prostate cancer may operate in the most marked way upon his financial circumstances. But, of course, more particularly and directly upon his own personal health. It is to be hoped the outcome of the surgery is beneficent.
Neither party is in receipt of legal aid, subsection (b).
The conduct of both of these parties to the proceeding has been unsatisfactory in various ways. I think both of them have been prolix with their affidavit material. Nonetheless, there is no doubt that in some respects the husband’s conduct has been unhelpful. This is particularly the case in relation to the late engagement of the handwriting expert, and, given that it was always clear in my view that the husband signed the documents personally, this was an irrelevant furphy, subsection (c).
While both parties had somewhat to say about disclosure, I do not think that failure to comply with orders of the court operates in any significant way, subsection (d).
The husband has been utterly unsuccessful in the proceeding, and this is plainly a relevant consideration, subsection (e). Nonetheless, it should be noted that I do not think that it can be said that the husband’s case was always doomed to fail. There were undoubtedly issues that turned upon questions of credit which could only be determined at trial. I do not accept that the husband knew his case was always doomed to fail.

Is an Indemnity Costs Order in General Appropriate in the Circumstances of the Case?

In my view, as a matter of principle, this would ordinarily be a case in which an order for indemnity costs would be appropriate. The reasons that lead me to that conclusion are as follows:
(1)The husband’s case was utterly unsuccessful. His case always faced the very significant forensic difficulty that he had sworn an affidavit attesting to execution of documents which he then sought to retract. As I indicated in the summary dismissal application, this was always going to be a problem for him at trial, and I was persistent in that remark.
(2)The husband prosecuted allegations of fraud to judgment. This is well known to be one of the matters most likely to grant an order for indemnity costs even of itself. The case run by the husband made what in effect were scandalous allegations against both Mr F and the wife. These did not shrink from asserting forgery, conspiracy to evade the proper operation of taxation law and the like. It is open to a party to prosecute a case on this footing, but on its total failure they must face the consequences. In my view, this matter alone would ordinarily justify an order for indemnity costs in the circumstances of this case. It did not just involve forgery, but it in part involved forgery alleged against a person in the exercise of his profession.
(3)The husband’s case was, in large part, as I have already found, commenced as a response to the fact that the wife had re-partnered and indicated a refusal to contemplate a further relationship with the husband. It self-evidently was an improper basis upon which to commence litigation. He has put the wife to a great deal of costs, stress and inconvenience. It is a relevant consideration.
(4)It needs to be borne in mind, however, at all points that an order for costs is not punitive. Rather, it is designed to reimburse reasonably the party who has been successful, and I bear this well in mind.

How Much Should Be Awarded?

The wife seeks what, in effect, is an order for indemnity costs. To give a discount from $142,000 to $135,000 is wholly negligible. In summary, she seeks all her costs, it would appear, based upon the Supreme Court scale. Contrary to the wife’s position, this was not a case of such complexity that I would regard this court’s scale of costs, or indeed the Family Law orders scale of costs as being inappropriate. While it did involve matters of some complexity, in the end it was essentially a factual dispute. What did the parties do when they entered into the agreement in 2017 was the central factual issue, and it was attended, essentially, by documentary and oral evidence that was, as I found in the ultimate, relatively straightforward.
There is a further matter to be considered. The wife’s claim for costs is, in the scheme of things, enormous for a relatively straightforward two day trial, even accepting that it involved unnecessary interim proceedings. I noted in the summary judgment application that, in a sense, the outcome would be determined by the outcome of the trial. On further reflection, I no longer think that that is so. While it is certainly the case that the facts, as finally established, would have justified the summary dismissal of the case, in the end, the summary dismissal application was always going to face the very significant difficulty that there were disputed facts. In considering the overall total, I note that there would of course have been, no doubt, not insignificant amounts included for the summary dismissal application.
It is also worth noting what this case would have engendered on the court’s own scale of costs. If one adds up items 2, 3 7, 9 and 13 (which seem those engaged) – applying advocacy loading to items 2 and 13 – the resulting figure rounded off is in the range of $17,000 to $18,000 together with disbursements, bearing in mind that counsel’s fees for two days are already included in that figure. It is immediately apparent, therefore, that a figure something over 10 times that much is simply too much. Equally, however, it is readily apparent that the scale figure is far too low.
In the end, in my view, the proper way for the court to proceed in these circumstances is to make a lump sum order that will bring this dispute to a timely end. I propose to order the figure of $60,000 as an all inclusive amount for the husband to pay the wife’s costs. This figure factors in the unusual circumstances of this case which would move the court not only to make an order for costs, pursuant to section 117(2), but to give an order for costs substantially greater than those that the rules would ordinarily provide. I have not fixed this amount arbitrarily. It takes into consideration all the relevant considerations to which I have referred, including the counter-competing considerations relating to the husband’s uncertain earning capacity and possible health difficulties.
I have drawn on my considerable experience over the years in litigation, including extensive experience as a mediator which gave me, prior to my appointment, a detailed understanding of likely costs and taxed costs in the County and Supreme Court. I appreciate that that experience is now some 15 years out of date, and I have factored in an inflationary measure into it in what, inevitably, is ultimately an impressionistic exercise of judgment.
In my opinion, the appropriate exercise of my discretion, bearing in mind all these relevant factors, is the figure of $60,000. There will be an order accordingly.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate:

Date: 11 February 2021