Piroozi & Piroozi (No 3)
[2023] FedCFamC1F 829
•28 September 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Piroozi & Piroozi (No 3) [2023] FedCFamC1F 829
File number(s): SYC 4175 of 2019 Judgment of: SCHONELL J Date of judgment: 28 September 2023 Catchwords: FAMILY LAW – COSTS – Where the wife sought costs following a final hearing in the matter – Where the husband opposed the costs order – Where both parties made genuine attempts to settle the matter – Where the circumstances are not exceptional to warrant an indemnity costs order – Consideration of factors in s 117(2A) of the Family Law Act 1975 (Cth) – Where the husband failed to make full and frank disclosure – Costs ordered in a fixed sum. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
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
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
Pascoe & Larsen (No 2) [2022] FedCFamC1A 126
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
Piroozi & Piroozi [2023] FedCFamC1F 359
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Division: Division 1 First Instance Number of paragraphs: 40 Date of hearing: 21 September 2023 Place: Sydney Counsel for the Applicant: Ms Petrie Solicitor for the Applicant: Mills Oakley Counsel for the Respondent: Mr Butters Solicitor for the Respondent: Godden Lawyers ORDERS
SYC 4175 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PIROOZI
Applicant
AND: MR PIROOZI
Respondent
ORDER MADE BY:
SCHONELL J
DATE OF ORDER:
28 SEPTEMBER 2023
THE COURT ORDERS THAT:
1.The respondent husband pay the applicant wife’s costs assessed in the sum of $27,500, with such payment to be made from the husband’s share of the sale proceeds of the Suburb AG property.
2.The Amended Application in a Proceeding filed 5 September 2023 and the Response to an Application in a Proceeding filed 11 July 2023 are dismissed.
THE COURT ORDERS BY CONSENT THAT:
3.The husband shall pay the wife’s costs incurred incidental to the husband’s Application in a Proceeding filed 19 June 2023 at scale quantified at $7,806.43.
4.The amount payable to the wife in Order 3 shall be paid by the husband from his share of the sale proceeds of the Suburb AG property.
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 Piroozi & Piroozi has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
By Amended Application in a Proceeding filed 15 September 2023, the applicant wife (“the wife”) seeks an order for costs on an indemnity basis or alternatively, costs in accordance with the scale of costs prescribed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) for a defined period up to the date of judgment as well as costs of a stay application.
The wife’s application for costs needs to be seen within the context of the judgment delivered by me on 11 May 2023 in relation to contested financial proceedings between the parties. That judgment has been published as Piroozi & Piroozi [2023] FedCFamC1F 359.
The wife’s application is opposed by the respondent husband (“the husband”).
The husband had sought that the wife pay his costs of the proceedings but abandoned that application at the hearing.
The parties reached agreement about costs arising from the stay application and invited the Court to make orders by consent.
The wife relied upon the following documents:
(1)Amended Application in a Proceeding filed 15 September 2023;
(2)Affidavit of wife filed 7 June 2023;
(3)Affidavit of wife filed 15 September 2023; and
(4)Case Outline document filed 20 September 2023.
The husband relied upon the following documents:
(1)Response to Application in a Proceeding filed 11 July 2023;
(2)Affidavit of husband filed 14 September 2023; and
(3)Case Outline filed 20 September 2023.
INDEMNITY COSTS
The authorities make it plain that an order for indemnity costs is not one that is made lightly and that 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 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 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 wife contended that the husband imprudently disregarded an offer of settlement and that the wife incurred substantial costs because of the husband’s conduct in the proceedings, including failing to provide full and frank disclosure and, according to her written submissions, not being a credible and reliable witness. In that regard, the wife placed great store on aspects of the judgment including [49], [54]–[55], [64], [71]–[73], [109] and [133].
The obligation to provide full and frank disclosure in proceedings before the Court is mandatory and goes to the fundamental enquiry of determining a just and equitable outcome. Parties who fail to comply with their obligations of disclosure can lead to the incurring of unnecessary costs by the other side, the prolonging of the proceedings and, render in some instances, it more difficult for the parties to bring about a prompt and just resolution of the proceedings.
It is clear from my judgment that I made findings that the husband had failed to comply with his obligation of disclosure in two material respects: firstly, in relation to a company that he contended was controlled by his brother; and secondly, in relation to his failure to disclose transparently and fulsomely what happened to the parties’ interest in the partnership assets.
In relation to the offer of settlement, the wife agreed that the effect of the offer, if accepted, would have seen a payment to the wife of $1,259,160. The effect of the judgment was that the wife received some $1,238,399 less any allowance for costs in relation to the sale of the property at Suburb T. Whilst the result of the judgment to the wife was less than that contained in the offer, that in and of itself does not disentitle the wife to an order for costs.
Whilst the obligation to disclose fully and frankly is paramount and the Court should in the sternest of terms make clear its displeasure, when established that in and of itself does not mean that indemnity costs are warranted. To order indemnity costs, there must be something that carries the hallmark of exceptionality to warrant departure both from the rule that each party pays their own costs and an order on a party/party basis. I am not satisfied that the circumstances of this case carry the character of exceptionality such as to justify the making of an indemnity costs order.
I will now proceed to consider whether to make an order under s 117 of the Family Law Act 1975 (Cth) (“the Act”) other than on an indemnity basis for the wife’s costs for the defined period.
COSTS IN ACCORDANCE WITH SCALE
An application for costs is governed by the provisions of s 117 of 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 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
I will deal with such of the matters under s 117(2A) that are relevant.
(a) The financial circumstances of each party to the proceedings
There is no evidence before me to suggest that the parties’ financial circumstances have changed from that set out in the judgment. I am satisfied that the husband has the capacity to meet a costs order.
(b) Whether the parties are in receipt of legal aid
Neither party was in receipt of legal aid.
(c) The conduct of the parties to the proceedings
The wife contends that the husband’s conduct is relevant to the making 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 of litigation, the bringing of unreasonable or unmeritorious applications. It may include non-disclosure or a failure to comply with the Rules of Court in relation to disclosure.
I am satisfied that the husband’s failure to disclose is a factor warranting consideration in deciding whether to make a costs order.
(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court
Not relevant.
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The term “wholly unsuccessful” relates to a situation in which proceedings as a whole have been unsuccessful (see Bant & Clayton (Costs) (2016) 56 Fam LR 31. The husband was not wholly unsuccessful in the proceedings.
(f) Whether any party has made an offer in writing
I have referred earlier to the wife’s offer of settlement to resolve the proceedings. I am satisfied that she made a genuine attempt to try and resolve the proceedings. I have as well, however, had regard to the earlier offers of settlement made by the husband referred to in his affidavit and what I regard as his genuine bona fide attempts to try and resolve the proceedings.
(g) Any other matter the Court considers relevant
There is no other relevant matter.
I am satisfied that the findings in relation to the husband’s failure to make a full and frank disclosure are such as to attract the imposition of an order for costs. The obligation of disclosure goes to the very heart of proceedings before the Court and a party who fails to make a full and frank disclosure frustrates that very process to the disadvantage of the other party.
I am satisfied that it is appropriate that an order for costs be made.
The wife sought costs in a set sum, relying upon a document (Exhibit 1) which listed her costs on what was said to be a scale basis. Having examined Exhibit 1, I am not satisfied that the asserted costs truly represent the party/party costs of the wife; some of the entries seem to be solicitor/client costs.
The husband sought orders that the costs, if ordered, be as agreed, or assessed. This would lead to further costs to both parties.
I am satisfied that it is appropriate to fix costs in a set amount. To fix the costs avoids further costs and delay, which is consistent with the overarching purpose of family law practice and procedure as set out in s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth).
The Rules and authorities make plain that I can fix an amount for costs. As McClelland DCJ observed in Pascoe & Larsen (No 2) [2022] FedCFamC1A 126:
27.Rule 12.17 of the Rules sets out the methods of calculating costs. These include the Court fixing a specific amount for costs (r 12.17(1)(a)) or an order for the costs to be assessed on a particular basis (r 12.17(1)(b)).
28.In Stoian v Fiening (Costs) [2014] FamCA 944 at [91], Kent J endorsed the principles for applying a rule equivalent to r 12.17 when referring to r 19.18 of the now repealed Family Law Rules 2004 (Cth) as adumbrated by Einstein J in Idoport Pty Limited v National Australia Bank Limited & Ors [2007] NSWSC 23 at [9]. Those principles include:
i.the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation;…
ii.the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable;…
iii.the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available;…
iv.a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place;…
iv.the gross sum “can only be fixed broadly having regard to the information before the Court”;…
(Citations omitted)
29.Consistent with those principles, it has been determined that where a Court orders a party to pay costs, it may be appropriate for the Court to fix a lump sum. By doing so, the Court can avoid further delay and inconvenience being occasioned by the requirement to tax a bill: Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51].
I am satisfied that it is just that an order for costs should be made but not in the quantum as sought by the wife. I am of the view that it would be just that there be an order made that the husband pay the wife’s costs in the sum of $27,500.
I will order the husband to pay that sum from his share of the proceeds of sale, consistent with their agreement in relation to the wife’s costs of the stay.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 28 September 2023
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