PRANTAGE & PRANTAGE - [2012] FamCA 661

FAMILY COURT OF AUSTRALIA

PRANTAGE & PRANTAGE

[2012] FamCA 661

FAMILY LAW - COSTS – Indemnity Basis

Family Law Act 1975 (Cth)

Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] 179 ALR 406
Charles & Charles [2007] FamCA 276
Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Limited (1993) 118 ALR 248
Kohan & Kohan (1993) FLC 92-340
Rittman & Rittman (No 3) [2011] FamCA 228

APPLICANT:

Ms Prantage

RESPONDENT:

Mr Prantage

FILE NUMBER:

MLC

11263

2008

DATE DELIVERED:

10 August 2012

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

By Way of Written Submissions

SUBMISSIONS RECEIVED FROM

SOLICITOR FOR THE APPLICANT:

Lampe Family Lawyers

SOLICITOR FOR THE RESPONDENT:

Gadens Lawyers

Orders

That the husband pay the wife’s costs relating to the parenting proceedings on an indemnity basis from 28 January 2010 .
For the purposes of paragraph 1, the costs be determined by agreement and failing agreement as assessed by a Registrar pursuant to Chapter 19 of the Family Law Rules 2004.
Any assessment by a Registrar under these orders shall be on the following basis:
(a)the quantum shall be determined by reference to the costs agreement executed between the wife and her legal practitioner;
(b)the costs shall only relate to the parenting part of the proceedings;
(c)the principles to be otherwise applied shall be those set out in rule 19.34(1) of the said rules.
(d)The wife’s costs associated with the retention of counsel and an instructing solicitor at all hearings were reasonably and properly incurred.
To the extent that the Registrar requires guidance in the exercise of any discretion under these orders, then, pursuant to rule 19.33(1)(i), the Registrar may refer questions involved in the assessment to the Honourable Justice Cronin after consultation with the parties.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Prantage & Prantage has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 11263 of 2008

Ms Prantage

Applicant

And

Mr Prantage

Respondent

And

Independent Children’s Lawyer

REASONS FOR JUDGMENT

By paragraph 6 of the orders I made on 2 March 2012, provision was made for applications by any party for costs. Any such application had to be filed and served by 4.00pm on 30 April 2012 and any reply thereto be filed and served by 4.00pm on 7 May 2012.
The wife’s submission encompassing an application was filed on 29 March 2012 to which the husband replied by submission filed on 30 April 2012. In addition, the wife responded to the husband’s material by filing a reply on 3 May 2012. All of those submissions have been considered.

These proceedings

These were parenting and property proceedings culminating in orders made on 24 December 2010 after a trial that ran for 11 days.
A number of serious allegations were made each against the other but the end result was that I made interim parenting orders to try and resume the parental relationship between two children and their mother which was then almost non-existent. I made orders that the two children live with the husband and participate in therapy.
Although the substantive applications relating to the parenting matters were effectively adjourned for one year, further proceedings soon followed upon the interim orders that I had made.
On 23 May 2011, the wife filed an application seeking a change of residence and that was opposed by the husband.
On 22 June 2011, I made orders for the change of residence and for the children to live with their mother. I excluded the husband’s communication with the children save for some limited circumstances. I published reasons for those orders. That did not end the proceedings between the parties.
On 16 August 2011, the wife filed a contravention application which accused the husband of surreptitiously contacting the children in defiance of the earlier order. On 5 September 2011, the husband admitted the breaches including acknowledging that they were serious. I ordered that he be imprisoned for nine months which was suspended upon him entering into a bond to comply with orders and pay the wife’s costs and those of the Independent Children’s Lawyer.
Those orders also did not end the proceedings.
On 6 December 2011, the parties required a further hearing to address what parenting orders should then be made having regard to what was happening with the children. The case was fixed for hearing.
On 2 March 2012, final orders were made by consent of the parties which restricted the husband’s involvement in the lives of the children.
The wife now seeks an order for costs “of the proceedings” on an indemnity basis. I point out that such costs cannot include those relating to the orders made on 5 September 2011. Those costs are acknowledged by the wife as being excluded. The wife therefore seeks an order for costs of $416,000.
The husband’s response was that each party should bear their own costs.
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party shall bear their own costs unless there are circumstances which justify a departure from that principle in which case, consideration has to be given to s 117(2A). In this case, because of the foregoing, I find there are justifying circumstances to make a costs order.
In addition to those considerations, there is also s 117AB which applies if there are proceedings before the Court and the Court is satisfied that a party to proceedings had knowingly made a false allegation or statement in the proceedings. If such a finding is made, the Court must order that that party pay some or all of the costs of another party or other parties to the proceedings.
If I accept that s 117AB applies, the discretionary determination referred to in s 117(1) and (2) otherwise does not apply and an order for costs must be made.
The basis upon which the application under s 117AB is made by the wife arises from the findings in the reasons for judgment.
In Charles & Charles [2007] FamCA 276 I noted that the word “knowingly” required a finding that the person lied. The relevance of that is in the distinction between a finding that a person has lied and one in which a determination is made about a particular incident on the balance of probabilities.
Arising out of the judgment of December 2010, the wife referred to my findings that the husband had embellished his evidence and that I had preferred the version of others before that of the husband. At paragraphs 107, 108 and 115 of my reasons, I rejected the husband’s version of three particular incidents but those must be read as findings on the balance of probabilities rather than a specific finding as to the husband having lied.
It was submitted by the wife that in respect of paragraph 118 of my reasons, my finding was a clear indication that the husband’s evidence was knowingly false. I agree that that is the only interpretation open. Subsequent findings were made on the balance of probability but not that the husband had knowingly lied. As such, s 117AB is satisfied.
Importantly, it was submitted by the wife that once s 117AB was enlivened, the quantum of costs became discretionary. With that I agree.
At paragraph 11 of the wife’s submission, it was submitted that there was no requirement to establish a nexus or direct effect of the falsity on any particular segment of the proceedings. Once dishonesty within the meaning of the section was established, the section was enlivened. Thus it was submitted, the Court had the discretion to make an order for costs relating to the entirety of the proceedings including property matters and they need not necessarily be limited to the parenting aspects of the case. I reject that proposition for the reasons that follow.
The wife’s submission continued that the proceedings were protracted and that the affidavit evidence was informative of why that was so. The size of the evidentiary material required digestion, consideration and response by the recipient and it affected the number of witnesses involved. All of that impacted on the duration of the trial and obviously the costs incurred by the wife.
It was further submitted by the wife that having regard to the unusual events subsequent to the orders of December 2010, a more appropriate assessment could be made by looking at the matter retrospectively. Throughout the substantive parenting proceedings, the husband blamed the wife for the children’s behaviour and denied any responsibility for their hysteria or behaviour. The events afterwards showed a deep, if not passionate, endeavour by the husband to alienate the children from the wife under the guise of protecting them from a harm that did not exist. Quite the contrary, it was his behaviour which was psychologically damaging for the children and the orders now reflect the attempt to contain that damage.
Reference was made to the repeal of s 117AB. In my view that is irrelevant having regard to the fact that I am obliged to apply the relevant and applicable law rather than factor in that parliament has now decreed that the law will be different to future cases.
The longstanding principle that the discretionary exercise of justice must be transparent applies here. The entitlement of the wife to costs which must be ordered because of s 117AB cannot be untrammelled. Considerations such as her involvement in the substantive dilemma, the necessity to bring along witnesses and the depth of the relevance of her own evidence are all factors to be taken into account. Section 117AB does not provide that once a finding of lying is made, all costs flow to the innocent party. In addition to the wife’s role, the provisions of s 117(2A) provide parameters or guides as to how the discretion should be exercised. All of these should also be guided by what was reasonable for the wife to incur knowing before the case began what the husband’s position about the future would be.
It was submitted that costs awarded under s 117AB have a punitive characteristic but with that I disagree. Costs are not to be awarded as a form of punishment but rather, to compensate the person required to litigate. Here, the wife had no choice but to litigate because of the husband’s conduct.
In respect of the matters set out in s 117(2A), the wife’s submission was that she now has the responsibility of the care of the two children and is unable to earn an income because of her full-time role with the children. Be that as it may, there are property proceedings which would indicate no significant financial problems for the wife.
Albeit the discretion is wide, s 117AB applications should focus on the extent to which the litigation was necessary as a result of a particular litigant’s conduct of that litigation. Where a deliberate lie is part of the conduct of the litigation generally, it has, as here, had a huge impact upon the way in which the litigation laboriously proceeded. In this case, had the husband adopted a pragmatic approach and taken a view that there was a prospect of the relationship between the children and the wife being resolved with his cooperation, the litigation would not have taken the time that it did. It is therefore not appropriate to assess the costs just on the evidence relevant to the lie itself.
It was submitted that, for the purposes of s 117(2A), the husband had been unsuccessful in the proceedings because the children were now residing with the wife. That is hard to argue with. The husband was not initially wholly unsuccessful but subsequent events changed that to support the position that the wife had always maintained.
By his submission, the husband said that there were no findings that he had knowingly made a false allegation or statement. It was submitted that although the wife’s evidence may have been preferred over that of the husband, and the husband had been found to have embellished his evidence, that was not a finding of knowingly lying to the court. It was submitted therefore that the standard required by s 117AB was not found in this case. For the reasons set out in the paragraphs above, I reject that submission.
It was further submitted by the husband that I could not go outside the findings. I note that there is a disagreement about that view (See Barry J in Rittman & Rittman (No 3) [2011] FamCA 228) but in respect of s 117AB, I consider a court cannot move away from the precise findings.
In respect of s 117(2A) the husband submitted there was no evidence before the Court that the wife was unable to work and in any event, she had the interest in a family trust. The husband further submitted that the wife had a capacity to work because she had her parents living next door. The particular provision in s 117(2A) however concerns the financial circumstances of the parties generally and not particularly those relating to income. There can be little doubt in this case that both parties are of modest means and have modest wealth. The husband too has his own significant legal costs and the pool of assets has been dissipated by both parties predominantly because of the children’s issues. I do not accept that the husband is impecunious. He has employment and a financially supportive extended family. He has been represented by lawyers at every hearing. He earned $100,000 gross per year but now has to pay child support as well as support himself.
The husband’s submission was that the claim by the wife for costs included the property proceedings and because they were not quantified, the husband was unable to articulate a position as to what costs belonged where. I agree with the husband’s position albeit it does not solve the problem. Without a clearly laid out indication of how the costs were structured, it is impossible to distinguish parenting from property.
The property proceedings took up a modest amount of the overall time of the hearing and were not the parties’ main focus. My determination on the property was ultimately overturned on appeal and therefore, that matter will be relitigated. It would be inappropriate to make any order for costs relating to the property proceedings because those issues have been considered by the Full Court and the parties are starting again.
In addition to costs generally, the wife sought indemnity costs. Even in cases involving indemnity costs, the Court should only order those where they were reasonably incurred. That is because this Court is, by legislative decree, except for s 117AB (which in itself has been repealed), a no-costs jurisdiction. Where costs are awarded, Rule 19.34(1) requires the assessment to exclude costs not reasonably necessary for the attainment of justice or those not proportionate to the issues in the case. Rule 1.08(1)(g), (h), (i) and (j) reinforces that concept. Thus, whilst costs are discretionary, the Court must look at what was reasonable including where the costs sought are calculated on an indemnity basis.
On the issue of indemnity costs, the husband submitted that he consented to the orders on 2 March 2012 based upon the recommendations of an expert witness and that it would be contrary to the spirit of those orders to make an order for the payment of indemnity costs. Whilst the husband may have followed expert advice, I am dealing with what led to the orders and in particular, his conduct at trial and his subsequent admissions.
The wife attached to her submission a copy of the costs agreement with her solicitor as she was required to do under the rules. In that agreement, she acknowledged having received, read and understood the costs notice prepared by the Court. She had therefore known that her costs had to be calculated in accordance with the scale determined under the Rules unless she signed a costs agreement. The brochure she was given directed her attention to the website where the scale was set out. The differences between the scale and that for which she contracted with her solicitors varied. The lawyer rate in the scale was $205.27 per hour whereas she contracted for $350. Clerical work could be charged out on the scale at $133.10 whereas she contracted at $140. The scale provided for letters at $20.10 whereas she agreed to $30. However, photocopying under the agreement was cheaper than the scale.
The scale provides for counsel’s fees at trial of up to $1,840 for each day but I am unaware of what the wife’s costs in that area were. I can take some judicial notice of the fact that the husband was represented during the trial by senior counsel leading an experienced member of junior counsel so he would have been aware that $1,840 per day for the wife would have been very modest.
The husband relied upon the statement of Callinan J in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] 179 ALR 406. There his Honour declined an order for indemnity costs saying that should only occur in an exceedingly rare situation because indemnity costs had a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers. With great respect to his Honour, that may be a principle in general litigation but in this Court, the production of the costs agreement is required enabling the Court to see the departure from the Court’s scale but there is also the opportunity for an assessment by the Registrar. In my view, the problem does not arise here or for that matter, as a principle in this Court.
In what circumstances then should there be a departure from the scale? If the scale is deemed inappropriate, should all of the costs for which the litigant has contracted with a lawyer be covered? If not, how is the costs discretion to be exercised?
In Kohan & Kohan (1993) FLC 92-340, the Full Court considered an appeal from an indemnity costs order. Whilst acknowledging the discretionary nature of the costs power, the Court said that it was fundamental to the exercise of the discretion that a Judge should understand that an indemnity costs order was a “very great departure” from the “normal standard” but also to see what impact such an order would have on the financial position of each party because of the extent to which the costs being charged to the litigant seeking the order exceeded the scale.
Their Honours reinforced the concept of the “normal standard” by referring to the fact that indemnity costs orders were the exception rather than the rule in not only this Court but others as well.
In this jurisdiction, Judges have the benefit of watching the progress of how the profession is dealing with costs issues in what is obviously a commercial environment. This Court sees costs disputes between litigants and their own lawyers but it also has rule 19.04(3) which gives an understanding of what litigants are being charged. It is not an unreasonable assumption to say that most cases which require judge involvement have an intractable conflict where precedent does not assist the parties to confidently know an outcome or where views about facts are so disparate as to make compromise and resolution difficult. The complexity of litigation in this Court continues to rise with the recent additional jurisdictions relating to third parties and de facto relationships. With new jurisdictions come costs disputes.
It is my experience that it is unusual to see a litigated case in this Court where the lawyers are committed to and charging the scale costs. That can be seen in both property and parenting cases. The relevance of the scale as a benchmark must therefore be questioned when it is not often used. A court should be less concerned about using it as the benchmark for the appropriateness of a costs order. The remarks of the Full Court in Kohan (supra) which were intended as both a guide and also the setting of the parameters for the exercise of discretion, probably need to be reconsidered after 20 years.

In financial cases, this Court has used the single expert witness concept in financial matters for a number of years but it is evident from the expenses that the parties are bearing, that experts such as specialist accountants, medical practitioners and handwriting experts are charging significant sums of money to give evidentiary advice to the Court. That is not a criticism but rather an acknowledgement that litigation is now extremely expensive and the Court is ordering these reports at the parties’ expense. Little control seems to be exercised by the Court over those expenses yet a legal practitioner costs scale bearing no resemblance to the reality of the litigation, continues to be the benchmark. It defies commonsense.
Costs submissions seeking indemnity orders often refer to the decision of Sheppard J in Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Limited (1993) 118 ALR 248. That decision is from the same period as Kohan (supra) and this Court needs to contemplate whether there is a change occurring in the community about costs. In Colgate-Palmolive, Sheppard J examined the Federal Court Rules which have a distinct philosophical similarity to the rules of this Court. The Federal Court rules provided that on a taxation, the taxing officer was to allow costs as appeared to that officer to have been necessary or proper for the “attainment of justice” or for maintaining or defending the rights of a party but were not to be allowed where those costs were incurred through “over-caution, negligence or misconduct”.
His Honour noted that particularly in long complex cases, it was:
a matter of notoriety that the indemnity for costs which one party recovers from another pursuant to the common order that one pay the costs of the other does not very often provide the party entitled to the benefit of the order with anything approaching a full indemnity for the costs which have in fact been incurred.
His Honour observed that the disparity between costs incurred and costs recovered was widening. Sheppard J set out a number of circumstances from cases previously determined in which costs should be ordered on an indemnity basis. His Honour used as examples, the making of allegations of fraud knowing them to be false, the making of irrelevant allegations of fraud, misconduct that causes loss of time to the Court and to other parties, proceedings commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise.
In parenting cases, the objects of the Act are set out in s 60B. In respect of parenting cases, indemnity costs might be contemplated where there are “groundless contentions” having regard to the clear philosophical direction of the legislature that orders should only be made if they are in a child’s best interests. The “imprudent refusal of an offer to compromise” in parenting cases might include refusing to foster another parent’s relationship with a child or refusing to work with a social scientist outside of litigation to try and repair a fractured or non-existent parent-child relationship. The emphasis to which Sheppard J was referring was on parties who must have or should have known their approach was simply imprudent and I agree.
Notwithstanding the legislature’s recent removal of s 117AB, if allegations of dishonesty are made and a finding follows (other than on the balance of probabilities) that deliberate lies were told, an indemnity costs order might be contemplated. That is not because of punishment concepts but because of the trouble to which the untruthful litigant has put the other where the answer is clear. It has also resulted in a waste of the Court’s time which in turn incurs costs for the other litigant.
The categories of indemnity costs are therefore clearly not closed. Embellishment and distortion of the truth in this case has exacerbated the search not so much for the truth but for what proposal would best work in the future interests of the children. In this case, the husband simply folded his arms and said it had nothing to do with him. Having been told to encourage participation in a therapy program, he thwarted the very concept the Court was trying to achieve so that the objects of the Act would be fulfilled. This is a case where indemnity costs should be awarded. In my view therefore, two findings are necessary.
First, an order for costs should be made because of s 117AB and it should relate only to the parenting matter. Secondly, costs should be assessed on an indemnity basis because to do otherwise would defeat the purpose of compensating the wife for the reasonable costs she incurred. In litigation of this nature, the complexity warrants experienced specialist family lawyers and if they contract out their fees beyond the scale as they have, the party facing a costs order can hardly complain particularly where those same sorts of costs will no doubt be incurred also by him.
Unfortunately, I do not have sufficient information to enable me to decipher what costs should be indemnified. I am unable to exercise a discretion and fix a sum. It is not appropriate to simply agree with the wife’s pursued quantum.
An assessment by an experienced registrar will be necessary if the parties cannot agree but it should relate only to the parenting issues. Having regard to the principles set out above, the costs should be calculated on the basis of what was reasonably done by the wife’s practitioner not using the family law scale but rather that which she has contracted with her lawyers for under the costs agreement.
Having regard to what I have said about commercial realities and benchmarks, I consider the costs agreement of the wife sets out fees that are not unreasonable in respect of the assessment for the costs to be paid by the husband. Because of the way he conducted the litigation and the resources he put into it, it would be hypocritical to suggest the scale should apply.
To make a costs order covering all of the parenting proceedings would also been unreasonable. Until not long before 28 January 2010, the parties had been involved in negotiation and therapy where they indicated that they were endeavouring to resolve matters. They had the benefit and assistance of an independent children’s lawyer. Whether their attempts were genuine or not, I am unable to say. However, on 28 January 2010, it was clear that battle lines had been drawn. The Court was told that therapy had broken down and expert evidence involving a number of social scientists would be called.
In my view, 28 January 2010 was the “watershed” day. On that day, the Independent Children’s Lawyer described the behaviour of the children as “mind blowing” and the lawyers for each party agreed. Because of my findings about the husband’s role, the parenting relationship should have been repaired by that time yet the husband exacerbated the problem and the litigation worsened it. Both husband and wife acknowledged that it was time for the Court to step in and that the case had to be litigated but it was really the wife who took the view, rightly as it turned out, that litigation was the last and only resort. The case inexorably began its journey to judgment that day.
Accordingly, the costs agreement and/or assessment should start from and include 28 January 2010.
The lawyers on both sides are experienced and if they cannot work out what work was reasonably done, an experienced registrar can do so. To the extent that the parties were not satisfied with that assessment, the registrar’s decision can be reviewed and I will determine the issues. I also indicate that to the extent that the registrar requires further direction as to the extent of any assessment, he or she may rely upon rule 19.33(1)(i).
I propose to order accordingly.

I certify that the preceding Sixty One (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 10 August 2012.

Associate:

Date: 10 August 2012