Prantage & Prantage

[2013] FamCAFC 105

FAMILY COURT OF AUSTRALIA

PRANTAGE & PRANTAGE [2013] FamCAFC 105

FAMILY LAW – APPEAL – Appeal against a costs order made on an indemnity basis – Where the trial Judge understood but questioned the settled law relating to indemnity costs – The trial Judge’s discretion miscarried in apparently not applying the settled law – Appeal allowed.

FAMILY LAW – RE-EXERCISE – The appellant knowingly made a false allegation or statement – The appellant was wholly unsuccessful – Parties not in a strong financial position after incurring substantial legal costs – Indemnity costs not appropriate – Costs in favour of the respondent awarded on a party and party basis.

Administrative Decisions (Judicial Review) Act 1977 (Cth)
Family Law Act 1975 (Cth) ss 117, 117AB
Family Law Legislation Amendment (Family Violence and Other Measures) Act 2011 (Cth) Schedule 1
Family Law Rules 2004 rr 1.04, 1.05, 1.08, 19.04, 19.08, 19.18, 19.19, 19.33, 19.34, 19.53; Part 19.4; Schedules 1 and 3
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules 1979
Federal Proceedings (Costs) Act 1981 (Cth)

Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] 179 ALR 406
Boyapati v Rockefeller Management Corporation (No 2) [2008] FCA 1375
Browne v Green (2002) FLC 93-115
Charles and Charles [2007] FamCA 276
Child Support Registrar & Kanavos (2010) 44 Fam LR 422
Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248
Derry v Peek (1899) 14 App Cas 337
Farnell & Farnell (1996) FLC 92-681
Given v Pryor (1979) 39 FLR 437
Hackshaw & Hackshaw (Costs) [2011] FamCA 570
Hand & Bodilly [2013] FamCAFC 98
Harris & Harris (1991) FLC 92-254
Hayward v Forest Practices Tribunal (No 3) [2004] TASSC 14
I & I (No. 2) (1995) FLC 92-625
Kenneally v Pouras & Ors [2007] SASC 303
Kohan and Kohan (1993) FLC 92-340
Magill v Magill (2006) 231 ALR 277
Marks v GIO Australia Holdings Ltd (1996) 137 ALR 579
Michos v Council of the City of Botany Bay (No 3) [2012] NSWSC 1465
Nguyen v Nguyen (1990) 169 CLR 245
NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77
Oshlack v Richmond River Council (1998) 193 CLR 72
Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc (t/as East Coast Apprenticeships) v Group Training Assoc Qld and Northern Territory Inc [2013] QSC 87
Prantage & Prantage [2011] FamCA 481
Re Malley SM; Ex parte Gardner [2001] WASCA 83
Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Robinson & Higginbotham (1991) FLC 92-209
Sharma & Sharma (No. 2) [2007] FamCA 425
State of Victoria v Grawin Pty Ltd [2012] VSC 157
Strahan & Strahan (Appeal Costs) [2009] FamCAFC 225
Transurban City Link Ltd v Allan (1999) 95 FCR 553

APPELLANT: Mr Prantage

RESPONDENT: Mrs Prantage

FILE NUMBER: MLC 11263 of 2008

APPEAL NUMBER: SOA 67 of 2012

DATE DELIVERED: 4 July 2013

PLACE DELIVERED: Perth

PLACE HEARD: Melbourne

JUDGMENT OF: Thackray, Ryan and Murphy JJ

HEARING DATE: 17 June 2013

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 10 August 2012

LOWER COURT MNC: [2012] FamCA 661

REPRESENTATION

COUNSEL FOR THE APPELLANT: In person

COUNSEL FOR THE RESPONDENT: Ms Smallwood

SOLICITOR FOR THE RESPONDENT: Lampe Family Lawyers

Orders

1. The appeal be allowed.

2. Orders 1 to 3 of the Honourable Justice Cronin made on 10 August 2012 be set aside.

3. The appellant husband pay the respondent wife’s costs of the parenting proceedings from 28 January 2010 on a party and party basis.

4. For the purpose of paragraph 3, the costs be determined by agreement and failing agreement as assessed by a registrar pursuant to Chapter 19 of the Family Law Rules 2004.

5. Each party shall meet their own costs of the appeal.

6. The Court grants to the appellant husband a costs certificate pursuant to the provisions s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by him in relation to the appeal.

7. The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by her in relation to the appeal.

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).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SOA 67 of 2012
File Number: MLC 11263 of 2008

Mr Prantage

Appellant

And

Mrs Prantage

Respondent

REASONS FOR JUDGMENT

THACKRAY AND RYAN JJ

Introduction

1. The appellant husband, Mr Prantage, and the respondent wife, Mrs Prantage, have been involved in protracted and ruinously expensive litigation concerning their two children and settlement of their property.

2. By Notice of Appeal filed on 20 August 2012, the husband has challenged an indemnity costs order made by Cronin J on 10 August 2012 that will require him to pay the wife nearly $300,000. 

Background

1. The husband and wife were married in February 1997 and separated in November 2008.

2. They have two children, a daughter born in 1998 and a son born in 2002.

3. Proceedings were commenced in 2008.  The husband and wife each made a number of serious allegations, which were aired during an 11 day trial in 2010.  Judgment was delivered in December 2010.

4. The trial Judge made interim orders aimed at restoring the relationship between the children and the wife, which was then almost non-existent.  The orders involved the children living with the husband and receiving family therapy.

5. The judgment also dealt with property and child support.  The property orders were overturned on appeal and that dispute is awaiting a rehearing. 

6. On 23 May 2011, the wife filed an application seeking a change in the children’s living arrangements.  On 22 June 2011, the trial Judge made orders for the children to live with the wife and to have no communication with the husband save in limited circumstances. 

7. On 16 August 2011, the wife filed a contravention application, alleging the husband was contacting the children in defiance of the earlier order. 

8. On 5 September 2011 the husband admitted the breaches, acknowledging they were serious.  He was sentenced to prison for nine months, suspended upon him entering into a bond to comply with the orders and paying the costs of the wife and the Independent Children’s Lawyer relating to the contravention.

9. There was a further hearing on 6 December 2011, when the case was fixed for hearing.

10. On 2 March 2012, final orders were made by consent, providing for the children to remain with the wife and for the husband to have restricted involvement in their lives.  

11. Following the making of those orders, the wife sought an order for the husband to pay her costs of the entire proceedings on an indemnity basis.  Excluding the costs of the contravention application (in relation to which a costs order had already been made), the wife’s claim for costs was quantified at $416,000. 

12. The husband sought that each party bear their own costs.

13. On 10 August 2012, the trial Judge ordered the husband to pay the wife’s costs of the parenting proceedings from 28 January 2010 on an indemnity basis.

Meaning of “indemnity basis”

1. Before discussing the merit of the appeal, we should state our understanding of the meaning of the expression “indemnity basis”. 

2. Although the Explanatory Guide to the Family Law Rules 2004 (“the Rules”) is not formally part of the Rules, we accept as accurate its definition of “indemnity basis” when applied to a costs order as being:

   an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.

The reasons of the trial Judge

1. Having set out background facts, the trial Judge, at [14], referred to the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”), which his Honour noted “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)”.

2. His Honour found there were justifying circumstances to make a costs order by reference to the “foregoing” – by which expression his Honour was referring to the background facts set out above.  His Honour did not, at this point in his reasons, specify which of those facts had led him to conclude that a costs order should be made. 

3. At [15], the trial Judge mentioned s 117AB of the Act, which his Honour noted applies if the court is satisfied that a party to proceedings has knowingly made a false allegation or statement, in which case the court must order them to pay some or all of the costs of the other party. His Honour observed, at [16], that if 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”.

4. The trial Judge then referred to his own decision in Charles and Charles [2007] FamCA 276 where he found that the presence of the word “knowingly” in s 117AB “required a finding that the person lied”. His Honour observed that the relevance of this “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”.

5. At [19], the trial Judge recorded that the wife relied upon his finding in his principal judgment that the husband had embellished his evidence and his acceptance of the evidence of other witnesses.  His Honour agreed that he had rejected the husband’s version of three incidents, but said those findings “must be read as findings on the balance of probabilities rather than a specific finding as to the husband having lied”.

6. However, at [20], his Honour accepted he had made one finding in his principal judgment that provided “a clear indication that the husband’s evidence was knowingly false”.  He therefore found that “s 117AB is satisfied”.

7. The finding mentioned in the preceding paragraph related to the husband’s assertion that photographs taken of the children at a local swimming pool were a forgery.  In dealing with that assertion, the trial Judge said, “I reject not only that the photographs were not taken at the pool on the day asserted by the wife but also that the husband did not believe them to be so taken”.  His Honour’s reasons reveal that photographs adduced in evidence were important because they portrayed the children enjoying their time with the wife, which was contrary to the case presented by the husband.

8. His Honour went on, at [21], to accept the wife’s submission that once s 117AB was enlivened, the quantum of costs payable became discretionary. 

9. Then, at [22], his Honour rejected the wife’s proposition that “there was no requirement to establish a nexus or direct effect of the falsity on any particular segment of the proceedings”. He therefore did not accept he could order costs in relation to the property proceedings when the false evidence related to the parenting proceedings.

10. His Honour, at [23], noted the wife’s submissions about the volume of evidentiary material and the number of witnesses, and accepted this had impacted on the duration of trial and the wife’s costs. 

11. At [24], his Honour recorded the wife’s submission that, given the “unusual events subsequent to the orders of December 2010, a more appropriate assessment could be made by looking at the matter retrospectively”.  Importantly, his Honour observed that:

    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.

12. His Honour, at [25], found it was irrelevant that s 117AB had been repealed, and said he had 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”.

13. In a further important paragraph, his Honour said:

    26.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.

14. The trial Judge, at [27], rejected the wife’s submission that s 117AB has a “punitive characteristic”.  His Honour said that the intention of the section was to compensate rather than to penalise, noting that the wife had no choice but to litigate because of the husband’s conduct.

15. His Honour, at [28], referred to the wife’s submission about her responsibility to care for children and the fact that she was unable to earn an income because of her role with the children, but observed that “there are property proceedings which would indicate no significant financial problems for the wife”.

16. His Honour found, at [29], that although the discretion in s 117AB is wide, applications for costs under s 117AB “should focus on the extent to which the litigation was necessary as a result of a particular litigant’s conduct of that litigation”.  Continuing, his Honour said:

    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.

17. His Honour, at [30], found that subsequent events had shown that the husband had been wholly unsuccessful in the litigation. 

18. His Honour, at [33], noted that “both parties are of modest means and have modest wealth” and that the husband also had “his own significant legal costs”.  He also noted that the pool of assets has been dissipated by both parties predominantly because of the children’s issues.  However, his Honour did not accept that the husband was impecunious, observing he had employment and a financially supportive family.  His Honour also observed that the husband had been represented at every hearing.  He accepted that while the husband earned $100,000 per year, he had to pay child support, as well as support himself.

19. At [34] and [35], his Honour noted that although the property proceedings had only taken up a modest portion of the time of the trial, it would be inappropriate to make any order for costs in relation to those proceedings, given that his decision about property had been overturned on appeal.

20. His Honour turned, at [36] and following, to discuss indemnity costs.  He first expressed the view that even when costs are awarded on that basis, “the Court should only order those where they were reasonably incurred”.  His Honour explained this by saying that “this Court is, by legislative decree, except for s 117AB (which in itself has been repealed), a no-costs jurisdiction”. 

21. His Honour then went on to note that rule 19.34(1) requires that when costs are ordered, the assessment of costs is to exclude those not reasonably necessary for the attainment of justice or those not proportionate to the issues.  He noted that rules 1.08(1)(g), (h), (i) and (j) reinforce that concept. 

22. His Honour then recorded, but rejected, the husband’s submission that it would be contrary to the spirit of the consent orders made in March 2012 to make an order for indemnity costs, the husband having accepted the recommendation of an expert in consenting to the order for the children to live with the wife.  His Honour accepted that whilst the husband may have been following expert advice, he was now dealing with what had “led to the orders and, in particular, [the husband’s] conduct at trial and his subsequent admissions”. 

23. His Honour noted that the wife had entered into a costs agreement, knowing her costs would be calculated in accordance with the agreement rather than the scale prescribed by the Rules. His Honour then noted differences between the scale and the agreement. The rate for a lawyer on the scale was $205.27 per hour, whereas the wife had contracted for $350. Clerical work could be charged on the scale at $133.10 per hour, whereas the wife had contracted at $140 per hour. Letters would cost $20.10 at scale, but $30 pursuant to the agreement. Photocopying under the agreement was cheaper than the scale.

24. His Honour recorded that the scale fee for counsel was $1,840 per day, but said he was unaware of the wife’s counsel costs; however, he took “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”.

25. The trial Judge, at [40], referred to Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] 179 ALR 406 in which, as his Honour noted, Callinan J declined to make an order for indemnity costs on the basis that such orders “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”.

26. In commenting on Callinan J’s remarks, the trial Judge said, at [40]:

    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.

27. His Honour then referred, at [42] and [43], to the decision of this Court in Kohan and Kohan (1993) FLC 92-340, in which it was said that an indemnity costs order was a “very great departure” from the “normal standard” in both the family law jurisdiction and in other jurisdictions.

28. However, his Honour went on:

    44.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.

    45.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.

    46.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.

1. His Honour next noted, at [47], that the decision of Sheppard J in Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 (“Colgate-Palmolive”) was often cited in submissions seeking indemnity costs.  His Honour observed that Colgate-Palmolive “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”. 

2. The trial Judge went on to observe that Sheppard J had examined the rules of the Federal Court which “have a distinct philosophical similarity to the rules of this Court”, in that the Federal Court Rules provide that a taxing officer should “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’”.

3. His Honour, at [48], recorded that Sheppard J had said 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.

4. The trial Judge continued:

   49.[Sheppard J] 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.

   50.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.

   51.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.

   52.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.

   53.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. 

5. Having recorded that he did not have sufficient information to determine the quantum of costs that should be awarded, his Honour went on to say:

   56.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. 

6. At [57] and [58], his Honour gave reasons why the costs awarded should only be those incurred after 28 January 2010.  Although there was no cross-appeal by the wife, nor any submission by the husband that, if it was proper for costs to be awarded, they should not commence from that date, we will recite those paragraphs as they assist in understanding his Honour’s decision:

   57.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.

   58.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.

7. His Honour then made the orders which are the subject of this appeal, namely:

   1.That the husband pay the wife’s costs relating to the parenting proceedings on an indemnity basis from 28 January 2010.

   2.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.

   3.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.

   4.The wife’s costs associated with the retention of counsel and an instructing solicitor at all hearings were reasonably and properly incurred.

   5.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.

8. At the hearing of the appeal, we received as further evidence in the appeal, a certificate issued by a registrar quantifying the wife’s costs at $295,732.98.

Relevant legislation and rules

1. Before setting out the grounds of appeal, it will be convenient to describe the relevant statutory framework, and in particular ss 117 and 117AB of the Act.

2. Section 117AB has been repealed by the Family Law Legislation Amendment (Family Violence and Other Measures) Act 2011 (Cth) (‘the amending Act”), and s 117 has been amended to delete reference to s 117AB. However, these proceedings were instituted prior to the commencement of the amending Act and, for reasons we will later explain, the amendments have no application.

3. Section 117 is the primary provision of the Act dealing with costs. Prior to its amendment, it relevantly provided as follows:

   117  Costs

   (1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

   (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) and (5) 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.

   (2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (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;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)      such other matters as the court considers relevant …

4. It will be seen that s 117(1) is expressed to be subject to a number of provisions. The only one of importance here is s 117AB which, prior to its repeal, provided as follows:

   117AB Costs where false allegation or statement made

   (1)      This section applies if:

   (a)      proceedings under this Act are brought before a court; and

   (b)the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.

   (2)The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.

5. In his reasons, the trial Judge referred to various provisions of the Rules. These are set out below, but we will first mention rule 1.04, which provides that:

   The main purpose of these Rules is to ensure that each case is resolved in a just and timely matter at a cost to the parties and the court that is reasonable in the circumstances of the case.

6. Rule 1.08 relevantly provides:

   (1)Each party has a responsibility to promote and achieve the main purpose, including:

   …

   (g)       assisting the just, timely and cost-effective disposal of cases;

   (h)       identifying the issues genuinely in dispute in a case;

   (i) being satisfied that there is a reasonable basis for alleging, denying or not admitting a fact;

   (j) limiting evidence, including cross-examination, to that which is relevant and necessary; …

7. The Rules also provide a regime for each party to keep the other advised, at key stages, of the costs they have incurred and the additional costs they estimate they will incur if the litigation proceeds. The trial Judge drew particular attention to rule 19.04(3), which provides that the “costs notices” must also be given to the court. We note, however, that rule 19.04(6) provides that the notices must be returned to each party at the conclusion of the “court event” at which they are tendered.

8. Although not expressly mentioned by the trial Judge, another relevant provision is rule 19.08(3) which provides that: 

   A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.

9. The Rules provide that the court may make an order for costs on a number of different bases. The relevant rule provides (emphasis added, example omitted):

   19.18 Method of calculation of costs

   (1)      The court may order that a party is entitled to costs:

   (a)      of a specific amount;

   (b) as assessed on a particular basis (eg lawyer and client, party/party or indemnity);

   (c) to be calculated in accordance with the method stated in the order; or

   (d) for part of the case, or part of an amount, assessed in accordance with Schedule 3.

   (2) If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.

10. The Rules also lay down a procedure for the costs payable by one party to another to be assessed by a registrar. Rule 19.33(j) provides that a registrar may “determine whether costs were reasonably incurred, were of a reasonable amount and were proportionate to the matters in issue”.

11. Rule 19.34 lays down principles to be applied when assessing costs.  The rule is expressed in these terms (emphasis added):

    19.34 Assessment principles

    (1) A Registrar must not allow costs that, in the opinion of the Registrar:

    (a) are not reasonably necessary for the attainment of justice; and

    (b)      are not proportionate to the issues in the case.

    (2) If the court has ordered costs on an indemnity basis, the Registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to, among other things:

    (a) the scale of costs in Schedule 3;

    (b) any costs agreement between the party to whom costs are payable and the party’s lawyer; and

    (c) charges ordinarily payable by a client to a lawyer for the work.

    (3) When assessing costs as between party and party, a Registrar must not allow:

    (a) costs incurred because of improper, unnecessary or unreasonable conduct by a party or a party’s lawyer; (b) costs for work (in type or amount) that was not reasonably required to be done for the case; or

    (b) costs for work (in type or amount) that was not reasonably required to be done for the case; or

    (c)       unusual expenses.

12. Schedule 3 to the Rules contains an itemised list of costs that can be charged for specified work. The amounts are increased from time-to-time. In these reasons, a reference to “the scale” may be read as a reference to Schedule 3.

Grounds of Appeal

1. Notwithstanding all the effort the husband put into this appeal, the grounds of appeal are difficult to follow.  All but two can be disposed of without detailed discussion. 

2. Ground 2 asserts, in effect, that his Honour erred in applying s 117AB at all because of its repeal by the amending Act. However, the amendments do not apply to proceedings instituted before the amending Act came into effect – see item 45 of Schedule 1 to the amending Act. These proceedings commenced before the amending Act came into effect.

3. Ground 3, as we understand it, complains about the adequacy of his Honour’s reasons – however, as we see it, the reasons the husband seeks to impugn are those given in the substantive proceedings and not those given in dealing with the application for costs.  There was no challenge to the parenting orders made by his Honour’s substantive judgment.    

4. Ground 4 proceeds on the premise that the trial Judge fixed the costs payable and/or that he also ordered the husband to pay the wife’s costs of the property settlement proceedings, as well as the costs of the parenting proceedings.  His Honour did neither.

5. Ground 6 relies upon the Administrative Decisions (Judicial Review) Act 1977 (Cth) having application – which it does not, because we are here dealing with a judicial decision, not an administrative one.

6. The two grounds that do require consideration are Grounds 1 and 5.

7. Ground 1 contains two discrete challenges. The first is that there was insufficient basis for his Honour to depart from the principle in s 117(1) that each party should bear their own costs. The second is that there was no basis for ordering indemnity costs.

8. The second limb of Ground 1 must be considered with Ground 5, which contains what we apprehend to be the primary challenge to the orders.

9. Ground 5 was expressed in these terms:

   His Honour in Law at several junctures in his Reasons in presuming his opinion or “view” supplants clear and established Law and in any event, a number of his assumptions about the relevant application of the Law are plain [sic] wrong.

10. We take this ground to be directed to the views the trial Judge expressed about the principles relating to indemnity costs.  We will discuss that issue first.

The settled law relating to indemnity costs

1. The law relating to indemnity costs has been well established in this jurisdiction for many years, a fact the trial Judge himself properly recognised. 

2. This Court recognised in Kohan (supra) that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said, at 79,605:

   it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.

3. The Full Court, when re-exercising the trial Judge’s discretion in Kohan, also said, at 79,615:

   When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.

4. At the time Kohan was decided, there was no mention of indemnity costs in the Rules. This is no longer the case, as will be seen from our recital of the Rules earlier. It will also be noted that the requirement for the Court to be informed of the terms of the relevant costs agreement has now been enshrined in the Rules. Notwithstanding this formal recognition of indemnity costs, this Court and trial Judges in this jurisdiction have routinely followed Kohan in holding that indemnity costs orders are to be seen as “a very great departure from the normal standard”.  We consider citation of authority to this effect would be otiose, so well accepted is the proposition.

1. We know of one attempt in another jurisdiction to move away from the “usual rule” that costs are awarded on a party and party basis.  In Marks v GIO Australia Holdings Ltd (1996) 137 ALR 579, Einfeld J gave reasons why the “usual rule” should no longer apply in the Federal Court of Australia.

2. The views expressed by Einfeld J were the subject of prompt criticism by the Full Court of the Federal Court in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151, where Black CJ said at 153:

   Recently, in Marks v GIO Australia Holdings Ltd (No 2)  (1996) 66 FCR 128, Einfeld J expressed the view that it was wrong to begin any consideration of costs by reference to a usual rule. Rather, he considered, the question of costs should be determined on its merits without any usual rule or preconception as to the costs issue (see at 133). Other judges, however, have continued to follow the established approach (see, for example, MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2)  (1996) 70 FCR 236) and it was recently applied by a Full Court in McHattan v Saramoa Charters Pty Ltd (unreported, Federal Court, Full Court, 17 September 1996). Moreover, one of the difficulties with any different approach is that O 62 of the Federal Court Rules 1979  (Cth), the costs order, proceeds on the footing that in the ordinary case costs will be ordered on a party and party basis. This is now reinforced by the provisions of O 23, r 11(4). Order 23 provides for the making of offers of compromise and, in specified circumstances, r 11(4) provides for a presumptive entitlement to costs on a party and party basis up to and including the day an offer was made and for indemnity costs after that day. Another difficulty with any departure from the established approach, an approach described by Sheppard J in Colgate-Palmolive (at 233) as “entrenched”, is the uncertainty that a different approach would involve.

   It may be that on some future occasion a Full Court will nevertheless be asked to reconsider the basis upon which indemnity costs orders in this Court should be made, but no such invitation was extended in this case and the present application for indemnity costs should be considered in accordance with the well established principles discussed by Sheppard J in Colgate-Palmolive and summarised by Hill J in John S Hayes.

3. Cooper and Merkel JJ went further in their joint judgment in Re Wilcox.  They said at 156-157:

   The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.

   The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd  (1993) 46 FCR 225.

   The recent decision of Einfeld J in Marks v GIO Australia Holdings Ltd (No 2)  (1996) 66 FCR 128 has cast doubt on these principles. In Marks , after discussing s 43 of the Federal Court of Australia Act 1976  (Cth) (FCA) and a number of policy considerations in relation to costs, Einfeld J concluded (at 133):

   “The matter of the interaction of ‘the usual rule’, particularly as affects indemnity costs, with the statutory regime of the Federal Court Act is one which in my most respectful opinion requires fresh attention. An interpretation which I believe to be more in keeping with such a statutory provision is that the court is to start with no ‘usual rule’ or preconceptions as to the costs issue. Rather, the question of costs, like other aspects of the case, will fall to be determined on its merits. This means that the applicant for indemnity costs must put forward all of the circumstances which suggest that the most [r]igorous order should be made.”

   In the light of that conclusion it is desirable that we set out our views on the manner in which the court's jurisdiction to award indemnity costs ought to be exercised.

   Until Marks the principles enunciated in Colgate-Palmolive and generally applied in the Court were:

   1.Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.

   2.In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:

   (a)the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;

   (b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;

   (c)whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.

4. Cooper and Merkel JJ went on to consider relevant provisions of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 1979.Having done so, their Honours said, at 158:

   As was pointed out by Sheppard J in Colgate-Palmolive, the costs for which these rules provide are costs on a party and party basis. The rules do not deal with the award of costs on any other basis. Although the gap between actual costs and the scale rate used in determining party and party costs may be increasing, it is relevant to note that the criterion in r 19 in respect of the items for which costs may be recovered allows recovery of all such costs, charges and expenses as appear to the taxing officer:

   “to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party … ”

   …

   The rules apply unless otherwise ordered. The very fact and terms of the relevant rules suggest to us that, unless the justice of the particular case requires or some special or unusual feature arises, the rules should not be departed from by the making of some other order for costs in exercise of the jurisdiction conferred under s 43 [of the Federal Court Act]. The generality of the criteria for departing from the usual rule ensures that the discretion to depart from the rule can be exercised whenever the Court is of the view that after applying the criteria to the facts of the particular case, it is just to do so. Such an approach is consistent with the requirement that the discretion to award costs is to be exercised judicially.

   However, there are other reasons for continuing to apply the principles that have been generally applied in the Court.

   As was also pointed out by Sheppard J in Colgate-Palmolive, for the reasons discussed by him, the ordinary rule in favour of party and party costs, has been settled practice in the courts in England and Australia over a very long period of time. It is not readily apparent why that practice should be changed. It may well be that the scale rates, rather than the principles, require review.

   Further, a general discretion of the kind suggested by Einfeld J is likely to give rise to greater disputation over costs than already exists, with possible inconsistency within the Court and between courts. Such outcomes do not advance and are not in the interests of the administration of justice.

   The combination of these factors leads us to the view that the principles enunciated in Colgate-Palmolive as stated above ought to continue to be applied in the Court.

5. Our research shows that the Federal Court has continued to apply the “usual rule” that costs are payable on a party/party basis.  See Boyapati v Rockefeller Management Corporation (No 2) [2008] FCA 1375, at [29] to [31], where Kenny J referred to the many cases where the rule has been applied in the Federal Court. We observe also that the rule was applied (and Re Wilcox was cited with approval) by this Court in Strahan & Strahan (Appeal Costs) [2009] FamCAFC 225 at [13] per Boland, Thackray and O’Ryan JJ.

6. The same rule is applied in the Supreme Courts of:

   ·New South Wales (see Michos v Council of the City of Botany Bay (No 3) [2012] NSWSC 1465 at [7]);

   ·Victoria (see State of Victoria v Grawin Pty Ltd [2012] VSC 157 at [24]);

   ·Queensland (see Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc (t/as East Coast Apprenticeships) v Group Training Assoc Qld and Northern Territory Inc [2013] QSC 87 at [16]);

   ·South Australia (see Kenneally v Pouras & Ors [2007] SASC 303 at [13]);

   ·Tasmania (see Hayward v Forest Practices Tribunal (No 3) [2004] TASSC 14 at [6]); and

   ·Western Australia, where in Re Malley SM; Ex parte Gardner [2001] WASCA 83, a bench of five Judges held that a special costs order (another description for an indemnity costs order) will only be made in exceptional circumstances.

7. It will accordingly be seen that if the trial Judge purported to depart from the “usual rule”, he would not only have declined to follow settled authority in this Court, but also authority applied in all other superior courts in Australia.

Did the trial Judge depart from settled authority?

1. There can be no doubt that the trial Judge understood the settled law relating to the ordering of costs on an indemnity basis.  There can also be no doubt that his Honour is of the view that the law requires reconsideration.  He said so at [45] and [47].  However, in those paragraphs, his Honour was careful in the way in which he couched his opinion, saying only that the dicta in Kohan “probably need to be reconsidered” and that the court “needs to contemplate whether there is a change occurring in the community about costs”. 

2. Furthermore, there are other parts of his Honour’s reasons in which he appears clearly to accept that he is bound by the existing law.  Thus, his statement at [52] that the “categories of indemnity costs are … clearly not closed” contains within it acceptance of the proposition that facts need to be found which bring a case within the exceptions to the “usual rule”. 

3. However, our reading of the judgment as a whole leads us to conclude that it would be unsafe to proceed on the basis that his Honour did apply the settled law.  Three examples will suffice:

   ·At [40], in referring to the judgment of Callinan J, his Honour says the “principle” does not arise in the Family Court.  It is not altogether clear what “principle” his Honour had in mind, but it appears he was referring to Callinan J’s statement that orders for indemnity costs should “only occur in an exceedingly rare situation”;

   ·At [46], his Honour said “it defies commonsense” that scale fees are “the benchmark” in circumstances where little control is exercised by the Court over fees charged by experts;

   ·At [53], his Honour said that “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”.  The reference to “the purpose” can be seen as an indication that his Honour proceeded on the basis that a party is prima facie entitled to compensation for the reasonable costs they incur, which is not the law.  We accept his Honour may have been referring to costs awarded under s 117AB; however, he had earlier properly observed that s 117AB does not provide that “once a finding of lying is made, all costs flow to the innocent party”.

4. These examples, together with the statements made by his Honour seeking to distinguish the position in the Family Court from that prevailing in other courts which apply the “usual rule” satisfy us that his discretion miscarried. 

Should the existing law be reconsidered?

1. In Nguyen v Nguyen (1990) 169 CLR 245 it was put beyond doubt that intermediate courts of appeal may depart from their own earlier decisions. The extent to which an intermediate court of appeal regards itself as free to depart from previous decisions is a matter of practice for the court to determine for itself. Where an intermediate court of appeal holds itself free to depart from earlier decisions, it should do so, as was pointed out in Nguyen at [269]:

   cautiously and only when compelled to the conclusion that the earlier decision is wrong. The occasions upon which the departure from previous authority is warranted are infrequent and exceptional and pose no real threat to the doctrine of precedent and the predictability of the law …  

2. It can be seen that this approach promotes certainty in the application of the law and discipline in its development.  It facilitates the doctrine of precedent and brings with it the consequence that decisions of an intermediate court of appeal will be binding on single judges within the same court hierarchy (Transurban City Link Ltd v Allan (1999) 95 FCR 553).

3. Consistent with these principles, there have been occasions when this Court has departed from an earlier decision.  However, as Fogarty J pointed out in Farnell & Farnell (1996) FLC 92-681 at 83,071, “where the previous decision relates to a matter of practice which has been uniformly acted upon in the intervening period so as to develop expectations that will continue to be the case, it may be unsettling to [overturn the decision]”.

4. We recognise that the Rules now expressly refer to orders for costs on an indemnity basis. We recognise also that the rules in this Court are not precisely the same as those in other courts; however, there is nothing in the Rules which indicates that the fundamental principle applied in other jurisdictions should not also be applied in this jurisdiction. Indeed rule 19.18 makes clear that the “default” position is that costs are awarded on a party/party basis.

5. As we have pointed out, the “usual rule” relating to the basis upon which costs are ordered in this jurisdiction is well entrenched.  We consider it would be most unsettling if we purported to depart from the existing practice.  Furthermore, we would not consider it desirable to do so, essentially for the reasons given by Cooper and Merkel JJ in Re Wilcox (supra). 

6. In particular, we respectfully agree with Cooper and Merkel JJ that there are “two seemingly irreconcilable objectives” at stake.  Placing great emphasis on the importance of one objective, namely “relieving a successful litigant from the burden of costs which that litigant should not have been required to incur” will inevitably lead to insufficient emphasis being placed on the importance of the other objective of “protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis”. 

7. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis. 

8. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided.  It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale.  However, even if there have been changes in the market place for legal services, we are not persuaded this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.

Other matters relevant to indemnity costs

1. Apart from his general treatment of established authority relating to indemnity costs, there are other more specific matters in the trial Judge’s reasons which, in themselves, would persuade us that the appeal should be allowed.

2. His Honour’s statement, at [50], that Sheppard J’s emphasis in Colgate-Palmolive was “on parties who must have or should have known their approach was simply imprudent” does not, in our view, accurately reflect the law as explained in Colgate-Palmolive and other cases dealing with indemnity costs. 

3. It is true, as the trial Judge noted, that Sheppard J included in the list of situations that might give rise to an order for indemnity costs “the imprudent refusal of an offer to compromise”.  However, in our view, imprudence by a party in “their approach” is not sufficient to enliven the power to award indemnity costs. 

4. It is important in this context to recognise, as Lindgren J did in NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 at [56], that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation”.

5. Lindgren J went on to point out (original emphasis): 

   Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party will be on the party and party basis.  The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant.  But, as noted below, the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as litigant.  

6. We accept that it could be argued that a party’s conduct as a parent and their conduct as a litigant are intertwined.  Nevertheless, we have difficulty in accepting his Honour’s statement, at [50], that a failure to foster a parent’s relationship with a child or a refusal to work with a “social scientist” to repair a relationship could themselves lead to an order for indemnity costs.  These are matters that seem to us to relate to a party as a parent, not as a litigant. 

7. However, we do accept that the imprudent refusal of an offer to settle on terms that involved a party attending on a “social scientist” to help repair a fractured relationship might provide some basis for a costs order, especially if combined with a party giving evidence, later found to be false, denying their own part in the “fracture”.  Furthermore, failure to comply with an order to attend therapy, which then led to further litigation, might be a material matter, as it relates to behaviour as a litigant, as well as behaviour as a parent.

8. Whilst it seems undoubtedly correct, on his Honour’s findings, that the husband should have behaved differently as a parent, there was no indication in any of the material before us that the husband, for example, rejected an offer of settlement that would have allowed the children to remain living with him on an interim basis whilst family therapy was undertaken.  This was the order the trial Judge made in December 2010, and was closer to the position adopted by the husband than it was to the position adopted by the wife, who proposed the children be removed from the husband.  See Prantage & Prantage [2011] FamCA 481 at [12] to [14].

Conclusion

1. In Harris & Harris (1991) FLC 92-254 this Court said at 78,711:

   orders for costs are peculiarly a matter which are within the discretion of the trial Judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.

2. Although this may state the proposition “at its highest” (Browne v Green (2002) FLC 93-115), this Court is usually most reluctant to interfere with a decision of a trial judge in relation to costs (Robinson & Higginbotham (1991) FLC 92-209).

1. However, this is one case where we consider appellate intervention is justified.  Not only did his Honour depart from settled authority, he impermissibly conflated the husband’s conduct as a parent with his conduct as a litigant in determining that costs should be payable on an indemnity basis.

2. In concluding, we respectfully record our disagreement with the trial Judge’s statement at [53] that if one party contracts to pay fees outside the prescribed scale they can “hardly complain” if costs are awarded against them at a level in excess of the scale.  We consider that a party in that position could justifiably complain since, following the direction given by the Full Court in Kohan, they should have been advised that in the event they succeeded in the litigation and obtained an order for costs they should not expect to recover costs at the level they contracted to pay (and hence conversely could not expect to pay costs above the scale) unless there are grounds for departure from the usual rule. 

Re-exercise of the discretion

1. For the reasons given, we propose to allow the appeal.  Both parties asked us to re-exercise the discretion of the trial Judge on the material available to us.  In the interests of saving further legal costs, we propose to do so.  This will, however, require careful consideration of the statutory provisions. 

2. Putting aside for the moment s 117AB, it will be seen from our earlier discussion that the Act provides for costs to be awarded at the discretion of the court, subject to a general rule that each party “shall bear his or her own costs”. The general rule gives way when consideration of the factors in s 117(2A) is seen to justify an order for costs. The question to be determined is “whether the overall circumstances justify the making of an order for costs” (I & I(No. 2) (1995) FLC 92-625 at 82,277).

3. However, if the terms of s 117AB are satisfied, the general rule no longer applies, and the court must make a costs order, which may either be for “some or all of the costs” of the party in whose favour the order is made.  Hence, the court retains discretion both as to the proportion and quantum of costs payable.    

4. Importantly, examination of s 117AB makes plain that it is activated upon the court being satisfied of a solitary instance of a party knowingly making a false allegation or statement. 

5. Cronin J discussed the meaning of the word “knowingly” in the context of s 117AB in Charles & Charles (supra), where his Honour said (original emphasis):

   24.“Knowingly” imports a serious subjective element into the question.  In respect of many findings of fact as in this case, a trial judge determines which of two versions, sometimes diametrically opposed to one another, he or she believes on the balance of probabilities.  Such a finding is not necessarily a statement that one version is patently untrue or that a person is lying; it may simply be that one version is more probable than another.  For a court to be satisfied that a person knowingly made a false allegation or statement in the proceedings must mean that a court can be comfortable in finding that the person lied. It would not simply then be a balancing act between two versions. To be satisfied that a lie has been told and to so find requires a careful analysis of two things. The first is that the proffered version of fact is untrue but the second is that it is put knowing it to be untrue. A court must then be cautious about such a finding because of the mandatory consequence. The finding must be elevated above the “probable” level set out in s 140(1) of the Evidence Act 1995 to consider the matters contemplated in s 140(2) of that Act.  That is, the Briginshaw v Briginshaw (1938) 60 CLR 336 test applies.

   25.Use of the word “knowingly” in civil proceedings has long been a feature of the common law.  It was recently examined in the arguments about the tort of deceit in Magill v Magill [2006] HCA 51 (9 November 2006). Gummow, Kirby and Crennan JJ looked at the very old decision of Derry v Peek (1889) 14 App Cas 337 at 373 quoting Lord Herschell explaining:

   First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made.

   26.“Knowingly” is unequivocal.  There can be no room for misunderstanding or doubt; objectively, the person making the statement cannot believe the statement to be true.

   27.Gummow, Kirby and Crennan JJ [in Magill] looked at the modern tort of deceit and said that there had to be a number of elements proved.  Their Honours distinguished representations made with the knowledge that they were false from those which were made recklessly or carelessly.  In a situation where s 117AB has a mandatory cost sanction where a person knowingly makes a false statement or allegation, it is important to distinguish between one which is knowingly made as a false statement and one which is recklessly made.  The test is therefore a stringent one.

6. Cronin J’s analysis was cited with approval by Boland J (sitting as a single judge in the appellate jurisdiction) in Child Support Registrar & Kanavos (2010) 44 Fam LR 422. Her Honour also cited with approval remarks made by Ryan J in Sharma & Sharma (No. 2) [2007] FamCA 425.

7. Boland J said in Child Support Registrar & Kanavos:

   83.At paragraph 13 of her reasons [in Sharma & Sharma (No. 2)], Ryan J said: 

   My finding that some of the wife’s allegations are fabrications introduces the mental element which turns a wrong statement into a deliberate falsehood.  This means I am satisfied she knowingly made a false allegation or statement.  Again this was a central issue.  So that there can be no doubt that the wife adopted her complaints and allegations made to police in these proceedings, at paragraph 112 I find: 

   “At the close of her case, the mother maintained the veracity of each and every allegation made against the father post 30 April 2004.  That is, not only that she has accurately reported the children’s complaints but that the father behaved in the manner described”. 

   84.The word “knowingly” is considered in Words and Phrases Judicially Defined (4th Edition, Lexis Nexis Butterworths, 2007) at 1313 with reference to various statutes.  While many of the examples cited in this text must be read in the context of the statute under discussion, I think the discussion of the meaning of the word by Kellock JA in Sleight v Stevenson [1943] 4 DLR 433 at 441 is helpful in the facts relevant to this appeal. In dealing with a case under a statute pertaining to insurance, his Honour said “I think ‘knowingly’ in the statute is used in the sense that the applicant is in possession of information that what is in fact stated in the application is untrue or does not disclose the truth” (see also Stroud’s Judicial Dictionary of Words and Phrases 7th Edition, Thomson Sweet Maxwell, 2006, at 1449).  In other words, I concur with Ryan J there is a conscious mental element involved in the making of a statement.

8. Subject to comments we make below, we respectfully agree with Boland J in adopting what was said by Cronin and Ryan JJ in the passages cited above.    

9. It is also important to understand what is meant by the words “allegation and “statement”, both of which appear in s 117AB. 

10. As for the latter, we concur with Murphy J who, in Hackshaw & Hackshaw (Costs) [2011] FamCA 570, adopted for the purposes of s 117AB the definition of “statement” in this citation from Given v Pryor (1979) 39 FLR 437 at 439:

    It is necessary to examine the meaning of the word “statement” … It seems reasonably clear that a statement may be made orally or in writing. One of the definitions in the Oxford English Dictionary (1933 ed), vol 10, in relation to “statement” is: “A written or oral communication setting forth facts, arguments, demands or the like.”

11. The Oxford Dictionary defines “allegation” as being “a claim or assertion that someone has done something illegal or wrong” – but adds that typically an “allegation” is made “without proof”.  The Merriam-Webster dictionary gives two meanings.  One is “a positive assertion; specifically: a statement by a party to a legal action of what the party undertakes to prove” and the other is “an assertion unsupported and by implication regarded as unsupportable”.

12. Given that “allegation” appears in s 117AB in conjunction with “knowingly” we consider the terms of the provision are satisfied when a party makes a false assertion which they know is unsupported by any evidence.  We are inclined to the view that the provision captures any allegation which comes within any of the three formulations in Derry v Peek (1899) 14 App Cas 337, namely one that is “made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false”. We respectfully agree with Lord Herschell that a person who makes a statement “recklessly, careless of whether it be true or false” can have no real belief in the truth of what he or she states.

13. We would accordingly not exclude from the operation of s 117AB, as Cronin J apparently did in Charles & Charles (supra), a statement that is made recklessly in the sense just described.  His Honour’s reason for doing so appears to relate to his understanding of the decision of the High Court in Magill v Magill (2006) 231 ALR 277, where his Honour said that Gummow, Kirby and Crennan JJ had “looked at the modern tort of deceit and … distinguished representations made with the knowledge that they were false from those which were made recklessly or carelessly”.

14. It is true that their Honours in the High Court did distinguish between the two (or three) types of statement, but in effect they treated them as one and the same thing, just as Lord Herschell had done in Derry v Peek (supra).  That this is so appears from the following passage from Magill (footnotes omitted save for footnote 101 which cited Derry v Peek):

    [114] The modern tort of deceit will be established where a plaintiff can show five elements: first, that the defendant made a false representation; secondly, that the defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not;¹⁰¹ thirdly, that the defendant made the representation with the intention that it be relied upon by the plaintiff; fourthly, that the plaintiff acted in reliance on the false representation; and fifthly, that the plaintiff suffered damage which was caused by reliance on the false representation …

15. Just as the courts in dealing with fraud and deceit have treated a statement made recklessly, careless of whether it be true or false, as being the same as a false statement made knowingly, we too would treat such a statement in the same way when construing s 117AB. 

16. On the basis of the analysis above, we would arrive at the same view as the trial Judge that the discretion in s 117AB is enlivened.  His Honour found, as a fact, that the husband’s allegation about the photographs at the swimming pool was false, and knowingly false.  His Honour’s finding can be taken as acceptance of the fact that the husband either knew his allegation was untrue, or was reckless or careless as to whether the allegation was false or not.  The husband produced no evidence to substantiate his allegation and his Honour rejected his explanation for his failure to do so: Prantage & Prantage (supra) at [115].

17. The discretion in s 117AB having been enlivened, an order must be made for the husband to pay some or all of the wife’s costs.  However, save for the submissions made to us in argument by counsel for the wife, we have no means of determining the extent to which this false representation impacted upon the conduct of the proceedings. 

18. In saying this, we do not suggest that the costs consequences of the making of a false representation should necessarily be confined to costs incurred in showing the representation was false.  Although the trial Judge expressed the view that the intention of s 117AB is to compensate rather than to penalise, there is another view: see Hackshaw & Hackshaw (supra at [41] and following) where Murphy J noted that the Explanatory Memorandum accompanying the legislation which introduced s 117AB made reference to costs being awarded as a “penalty”.

19. However, given that the allegation about the provenance of the photographs was but one discrete matter, we are of the view that consideration of the wife’s application for costs should not focus on s 117AB, since there is a strong basis for costs being ordered without reliance on that provision.

20. In dealing with the wife’s application for costs, we propose to address briefly each of the matters referred to in s 117(2A). We do so by reference to the written submissions each party provided to the trial Judge.

The financial circumstances of each of the parties to the proceedings

1. We accept that the making of a costs order will have a serious negative impact on the husband’s financial position.  At the time of providing his submissions on 30 April 2012, the husband had already expended $722,773 on legal costs.  This figure did not include the costs the husband had been ordered to pay to the wife and the Independent Children’s Lawyer in relation to the contravention application.  It also did not include the costs associated with the property settlement appeal.  Furthermore, the litigation has continued since the date on which the husband provided his costs submissions and further costs will therefore have been incurred.

2. The husband can ill afford to meet all of those costs, but similarly the wife can ill afford to meet the costs of $416,767 she has incurred (which does not include costs she incurred in responding to the husband’s property settlement appeal).  It is true the wife has capital available to her, but we accept she also has responsibilities to the children. 

Whether any party was in receipt of legal aid

1. Neither party was legally aided.

The conduct of the parties in relation to the proceedings

1. There is a lacuna in the wife’s submissions on costs which we assume is the result of a word processing error.  As a result, we do not have the benefit of any submissions relating to this factor.  Given the decision we have reached, this omission is of no consequence.

Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court

1. As a result of the lacuna just mentioned, we do not have the benefit of all of the submissions that the wife apparently wanted to make under this heading.  Sufficient of her argument appears in the appeal books to allow us to be aware that the wife complains about the husband’s compliance with the orders relating to family therapy.  The husband’s submissions in reply did not join issue with this part of the wife’s submissions.  While we therefore consider it is likely there is merit in the wife’s complaint under this heading, it is unnecessary for us to arrive at any concluded view, given there is another strong basis for ordering the husband to pay the wife’s costs.

Whether either party made an offer in writing to the other party

1. There was no reference in the submissions to any offers of settlement.

Whether any party was wholly unsuccessful

1. The husband has been wholly unsuccessful in the litigation relating to the parenting issue.  Importantly, this lack of success was associated with him maintaining a position concerning the children’s conduct that was not sustainable.  In this context we note that the husband did not seek in his written costs submissions to engage with the assertions made in paragraphs 13 and 14 of the wife’s costs submissions relating to matters that came to light following the making of the orders in December 2010.

2. In his submissions in response to the wife’s application for costs, the husband asserted that the wife had been wholly unsuccessful in the child support part of the proceedings.  The wife filed a reply to the husband’s submissions and did not dispute this assertion, which appears borne out by reference to the substantive judgment delivered in December 2010.  However, perusal of those reasons indicates that the child support aspect of the matter was a fairly minor part of the proceedings.  Furthermore, we note that the husband relied on his success in this discrete part of the proceedings as a shield rather than a sword.  It was open to the husband to seek an order for costs in relation to that element of the proceedings, but he failed to do so.

Other relevant matters

1. We note that the trial Judge foreshadowed, at [26], that “considerations such as [the wife’s] 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”; however, when his Honour came to the substantive part of his discussion he appears not to have considered any of those matters. 

2. The husband’s costs submissions did not refer to these matters, save to draw attention to the trial Judge’s finding that the wife’s evidence in relation to the financial issues was “evasive to the point that her professed ignorance was implausible”.  Given that the property settlement issues are to be the subject of a new hearing, it would seem to us that any costs issues relating to the wife’s conduct of those proceedings is a matter properly to be considered at the time of finalisation of those proceedings.

The outcome of the re-exercise of discretion

1. Taking all of these matters into account, but in particular the fact the husband was wholly unsuccessful, we are satisfied it is appropriate the husband should pay the wife’s costs.  Given the absence of a cross-appeal, we consider the costs payable should be those incurred from 28 January 2010. 

2. The issue that arises now is the basis upon which the costs should be assessed.  The argument proceeded on the unstated assumption that the choice was between costs on an indemnity basis or costs on a party and party costs.  The issue of the distinction between solicitor and client costs and indemnity costs was not raised and we therefore propose to say nothing on that topic, other than to observe that in Hand & Bodilly [2013] FamCAFC 98 this Court recently observed that the weight of authority is that solicitor and client costs and indemnity cost are distinct; albeit that an order for solicitor/client costs may, in some circumstances, provide a complete indemnity. Assuming that is the case, it would ordinarily be appropriate for a judge to consider awarding costs on a solicitor and client basis before awarding costs on an indemnity basis.

3. We are not persuaded that the costs we propose to order should be calculated on anything other than a party and party basis.  It is true that, on the trial Judge’s findings, the husband’s behaviour was reprehensible, but his poor behaviour was primarily in his capacity as a parent rather than as a litigant.  We also consider it relevant that the husband, albeit belatedly, consented to the children living with the wife after hearing the recommendation of an expert. 

Formal orders and costs of the appeal

1. For the reasons we have given, we propose to allow the appeal and set aside paragraphs 1 to 3 of the orders of the trial Judge. Orders 4 and 5 are not contentious and will remain in force. In lieu of the orders set aside, we propose to order the husband to pay the wife’s costs of the parenting proceedings from 28 January 2010 on a party and party basis, to be agreed or assessed pursuant to Chapter 19 of the Rules.

2. The parties sought costs certificates under the Federal Proceedings (Costs) Act1981 (Cth) in the event the appeal was allowed.

3. The appeal has been allowed on a question of law and it would not be appropriate to make an order for costs.  It is, however, appropriate for each party to receive a costs certificate as requested.

Murphy J

1. I have had the advantage of reading in draft form the reasons of Thackray and Ryan JJ.  I agree that the appeal should be allowed and with their Honours’ reasons.  Specifically, I agree that the trial Judge sought to depart from settled authority and I, too, am not persuaded that anything to which his Honour refers is “exceptional” or “compels” a conclusion (Nguyen v  Nguyen (1990) 169 CLR 245) that the principles outlined in Kohan are wrong.

2. I also agree that this Court should re-exercise the discretion and I agree with the orders their Honours propose in that respect and their Honours’ reasons for those orders.

3. In respect of two matters, I wish to add some comments to what Thackray and Ryan JJ have said.

4. As their Honours point out, there is clear authority for the proposition that this Court has the power to award indemnity costs and the principles governing the award of costs on an indemnity basis are, as their Honours set out, clear.  In suggesting that Kohan “probably need[s] to be reconsidered”, the trial Judge suggests that a perceived significant disparity between the costs provided for in Schedule 3 to the Family Law Rules 2004 (“the Rules”) and the fees charged as between solicitor and client pursuant to a costs agreement provides a basis for an award of indemnity costs.

5. In my respectful view, his Honour erred in that respect. First, in his Honour’s discussion of the issue, I consider that his Honour conflates the issues of whether costs should be awarded on an indemnity basis with the issue of the quantum of indemnity costs if awarded. Secondly, the Act, the Rules read as a whole, and existing authority each evidence a clear intention that a significant disparity between the level of costs provided for in Schedule 3 and the fees payable by a client to their legal practitioner militates against an award of indemnity costs or, if the circumstances otherwise warrant such an order, operates as a brake on the quantum that might otherwise be awarded. 

6. Section 117(1) is important in that respect. Indemnity costs are confined to “an exceedingly rare situation” (Callinan J quoted by Thackray and Ryan JJ at [42]) in jurisdictions where “the usual rule” is that a successful party receives an order for costs (i.e. “costs follow the event”). They might, then, be seen to be more so in this jurisdiction where the “usual rule” is that “each party … shall bear his or her own costs” (s 117(1)). The comments by this Court in Kohan that indemnity costs are “a very great departure” from the “normal standard” should be seen in that context.  That, it should be observed, is not a fetter on this Court’s discretion to award costs or indemnity costs if justice so requires it (see Oshlack v Richmond River Council (1998) 193 CLR 72, at 134 (particularly subpar [3]), per Kirby J). Rather it recognises that an order for indemnity costs, has a particular context in this jurisdiction.

7. In this Court, one of the two “seemingly irreconcilable objectives” of awards of costs referred to by Cooper and Merkel JJ in Re Wilcox quoted by Thackray and Ryan JJ can be expressed as “ … protecting access to justice in family law matters by not exposing an unsuccessful litigant in the usual course to an order for costs”.  A litigant in this Court must establish that the justice of the case requires an order for costs by reference to (non-exhaustive) statutory considerations before any order for costs is made.

8. Seen in that context, the significant disparity assumed by the trial Judge between fees payable by a party to their own lawyer pursuant to a costs agreement and the costs payable to that party pursuant to a party and party costs order provides a reason for not ordering costs on an indemnity basis rather than, as the trial Judge held, the opposite.  This Court said in Kohan (at 79,605):

   The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.

9. Like Thackray and Ryan JJ, I am not, with respect, persuaded that there is the difference in “commercial realities” to which the trial Judge refers and I respectfully agree with their Honours that the facts in Kohan might suggest otherwise.  However, even were that the “commercial reality”, I am not persuaded that any such reality would provide a basis for the conclusion contended by the trial Judge to flow from that. 

10. The context provided by s 117(1) of the Act remains unchanged in the 20 or so years since Kohan was decided. The context provided by the Rules has changed during that time, but, in my view, not in a manner consistent with the conclusion reached by the trial Judge.

11. The trial Judge referred to r 1.08(1)(g), (h), (i) and (j) but other Rules also seek to underscore an intention to keep costs to a minimum. For example, r 1.05(1) makes it mandatory, in the usual course, to comply with the pre-action procedures. One of the Objects of those procedures is, in turn, to “limit costs” (para 1(5)(c) of Schedule 1 to the Rules). The Rules oblige the Court to apply them in a way that “promotes the saving of costs” (r 1.07(1)(d)).

12. Despite the reference in r 19.18(1)(b) to “lawyer and client” costs as basis for an award, it should be noted that Part 19.4 of the Rules (entitled “Lawyer and client costs”)) and r 19.53 (headed “Lawyer as counsel – lawyer and client costs” were each repealed by amendments in 2008. Rule 19.34 was amended by those same amendments in 2008. The current r 19.19 was inserted by subsequent amendments in 2008.

13. Rule 19.34 seeks to distinguish between the amounts embraced by an assessment of “costs on an indemnity basis” and “party and party” costs (rr 19.34(2) and (3) respectively). 

14. Absent an order by a Judge, r 19.19 “caps” the amounts of party and party costs to those provided for in Schedule 3. Rule 19.34 provides that a Registrar “must not allow costs” which are not “reasonably necessary for the attainment of justice” (r 19.34(1)(a)) and which “are not proportionate to the issues in the case” (r 19.34(1)(b)). The rule is not, in terms, confined to party and party costs; the rule refers merely to “costs”. “Costs” is defined to mean “…an amount paid or to be paid for work done by a lawyer, and includes expenses.” No distinction is made between “party and party costs” and “indemnity costs” in r 19.34(1) and neither expression is defined. Accordingly, the prohibition contained in r 19.34(1) would appear to apply equally to either party and party costs or indemnity costs (an interpretation reinforced by r 19.19 and its terms and by the fact that r 19.34 goes on to make separate provision for indemnity costs (r 19.34(2)) and party and party costs (r 19.34(3))).

15. All of those matters point, in my view, to “commercial realities” not justifying any departure from existing principle in ordering indemnity costs including, specifically, any disparity between what a party pays his or her lawyer and the amount recoverable under a party and party costs order.

16. If the justice of the case requires a departure from the “usual rule” in this Court that each party shall bear his or her own costs and, in turn, “a very great departure” from the usual rule that any such order should be on a party and party basis, so as to order indemnity costs, consideration should, in my view, be given, separately, to how the terms of any such order might affect the quantum of any such order.

17. As has been mentioned, absent other order or agreement between the parties, an order that one party should pay the costs of the other on an indemnity basis brings with it stipulated parameters governing the quantum of any such costs:

    (a)Rule 19.34(1) provides that any item/s assessed as “not reasonably necessary for the attainment of justice” or “not proportionate to the issues in the case” must be disallowed;

    (b)Rule 19.34(2) mandates the costs that must be allowed but limits those to costs “reasonably incurred” and, if reasonably incurred, of a “reasonable amount”;

    (c)The same rule mandates the (non-exclusive) matters to which regard must be had in assessing whether the amount is reasonably incurred and, if so, whether any individual amount is reasonable:

    i.The Schedule 3 scale of costs;

    ii.“[A]ny costs agreement between the party to whom costs are payable and the party’s lawyer”;

    iii.“[C]harges ordinarily payable by a client to a lawyer for the work.”

18. The point is again made that, insofar as the Court might make orders altering the manner or amount of any assessment, the matters just referred to ought not be seen as fettering the Court’s discretion.  However, taken together, they evidence, in my view, an intention to apply a brake on what might otherwise be an indemnity governed only by the terms of any costs agreement.  So much is, in my view, clear from the introduction of an objective element in r 19.34(2)(c).  That matter is, in my view, relevant to (but, of course, not determinative of) the exercise of discretion by a Judge.

19. By reference to the provisions of the Rules just outlined, I am, with great respect to the trial Judge, not entirely clear what is intended by the inter-relationship of Orders 2 and 3 made by his Honour. The terms of Order 2 of his Honour’s Orders require (absent agreement) assessment by a Registrar. As has been seen, r 19.34(2) mandates what a Registrar must allow if an order for indemnity costs is made (“all costs reasonably incurred” in a “reasonable amount”). The parameters of what is reasonable in each case must be measured by reference to three specified matters (r 19.34(2)(a), (b) and (c)). Order 3 of his Honour’s orders provides that any assessment by a Registrar shall be confined to “the parenting part of the proceedings” and “shall be by reference to the costs agreement …” and otherwise, “the principles … to be applied shall be those set out in rule 19.34(1) of the said rules”.

20. An order such as Order 3, which provides that the quantum of costs shall be assessed “by reference to” a costs agreement in the context of an order otherwise providing for indemnity costs but which makes that “otherwise” subject to r 19.34(1) raises the question of how a Registrar is to assess, in an order providing for indemnity costs, an item considered by the Registrar “not proportionate to the issues in the case” (r 19.34(1)) but which is clearly “provided for in the costs agreement”.  

21. A Judge is, of course free, by order, to depart from the application of the Rules (r 1.12). When seeking to make orders governing the assessment of a costs order, care must be taken to ensure that the orders so made provide clear guidance to a Registrar who is later charged with the task of assessment. In particular, it should be clear, what, if any, Rules have been determined to be inapplicable and what, in lieu, is the intended basis of the assessment.

I certify that the preceding one hundred and sixty seven (167) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 4 July 2013.

Associate: 

Date:  4 July 2013