Quin and East & Anor
[2020] FamCA 739
•9 September 2020
FAMILY COURT OF AUSTRALIA
| QUIN & EAST AND ANOR | [2020] FamCA 739 |
| FAMILY LAW – COSTS – Between parties – where a third party to the proceedings seeks costs on an indemnity basis – where the respondent joined the third party to the proceedings – where the joinder may not have been proper – where the respondent was given the opportunity to remove the third party by consent without costs – where legal costs incurred by the third party as a result of being joined – where exceptional circumstances not made out so as to order costs on an indemnity basis – respondent to pay the third party’s costs fixed in the sum of $7,800 within 90 days. |
| Family Law Act 1975 (Cth) ss 117(1), 117(2), 117(2A) |
| Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70 Kohan & Kohan (1993) FLC 92-340 Munday v Bowman (1997) FLC 92-784 Nada & Nettle (Costs) (2014) FLC 93-612 Penfold & Penfold (1980) 144 CLR 311 Phillips & Hansford [2020] FamCAFC 28 Prantage & Prantage (2013) FLC 93 Rankin & Rankin (No. 3) [2019] FamCAFC 133 Sfakianakis & Sfakianakis [2019] FamCAFC 54 Stephens & Stephens and Anor (Enforcement) (Costs) [2010] FamCAFC 172 Worth & Worth (No. 2) [2019] FamCAFC 126 |
| APPLICANT: | Mr Quin |
| 1st RESPONDENT: | Mr East |
| 2nd RESPONDENT: | Mr Martins |
| FILE NUMBER: | SYC | 4455 | of | 2015 |
| DATE DELIVERED: | 9 September 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Henderson J |
| HEARING DATE: | In Chambers |
REPRESENTATION
| COUNSEL FOR THE APPLICANT AND 2ND RESPONDENT: | Ms Eldershaw |
| SOLICITOR FOR THE APPLICANT AND 2ND RESPONDENT: | Heard McEwen Legal |
| COUNSEL FOR THE 1ST RESPONDENT | Self-Represented Litigant |
Orders
Mr East is ordered to pay Mr Martins’ costs in the sum of $7,800 within 90 days of the date of this order.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Quin & East has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 4455 of 2015
| Mr Quin |
Applicant
And
| Mr East |
First Respondent
And
| Mr Martins |
Second Respondent
REASONS FOR JUDGMENT
This application relates to a costs application made by Mr Martins.
Mr Martins is the de facto partner of the applicant in the substantive proceedings, Mr Quin.
The substantive proceedings are property proceedings between Mr Quin and Mr East.
In relation to this costs application, I read the following:
a)The affidavit of Mr Martins filed 29 July 2020;
b)The submissions of Mr East, sent by email to Chambers on 29 July 2020;
c)Further submissions of Mr East, sent by email to Chambers on 31 July 2020; and
d)I also note the oral submissions made by Counsel for Mr Martins on 8 July 2020.
In March 2020 Mr East joined Mr Martins to the proceedings.
On 9 April 2020 Mr Martins’ solicitor sent a letter to Mr East setting out the reasons why Mr Martins should not be joined as a party including draft consent orders removing Mr Martins as a party. I note the consent orders included a provision that each party would bear their own costs.
On 10 April 2020 Mr Martins swore a response to an application in a case and an affidavit in relation to his removal as a party to the substantive proceedings.
At the time of service of these documents Mr Martins’ solicitor reiterated that Mr Martins should not have been joined as a party to the proceedings and that Mr East should consent to the removal of Mr Martins as a party.
On 14 April 2020 Mr East communicated by email to Mr Martins’ solicitor that he agreed to remove his client from the proceedings and that he would sign consent orders that had been forwarded to him.
On 16 April 2020 Mr Martins’ solicitor wrote to Mr East asking for the consent orders to be signed and returned. Mr East responded that he was obtaining advice from a family lawyer.
On 17 April 2020 Mr Martins’ solicitor again wrote to Mr East seeking the consent orders be signed.
On 19 April 2020 Mr East sent an email to Mr Martins’ solicitor. The email is lengthy and the following paragraph is seminal:
“Mr Quin was in a relationship with his spouse, Mr Martins, prior to moving out of my home and they have been cohabiting together since 2015. Given the lack of disclosure, I feel it is justifiable Mr Martins be joined as a party to the proceedings.”
The matter came before Registrar Bastiani on 21 April 2020 where Mr Martins’ solicitor again raised the improper joining of Mr Martins as a party.
The matter then came before me on 8 July 2020 and during the course of the proceedings Mr East consented to the removal of Mr Martins as a party and orders to that effect were made by consent.
THE LAW
Mr Martins seeks his costs on an indemnity basis. Mr East argues he should not pay any of Mr Martins’ costs.
It is correct that in the Family Court of Australia each party bears their own costs however the Court retains a discretion to order costs be paid by one party pursuant to section 117(2) of the Family Law Act 1975 (Cth) (“the Act”).
It is a correct statement at law that indemnity costs are only ordered in exceptional circumstances.
The first task is to determine whether or not to exercise the discretion under section 117(2) to order costs given the usual order in this Court is each party bears their own costs. The relevant matters under section 117 are as follows:
(1) Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, 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), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(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.
In this matter neither party is in receipt of legal aid.
Mr Martins is a third party to the proceedings and the relationship and has not filed a financial statement in this matter and as such, his financial circumstances are not known to the Court.
In his financial statement Mr East asserts his income and assets are negative. I accept his only income is a disability pension. It is apparent that Mr East is not a man of means. However, impecuniosity is not a barrier to the making of a costs order.
In the matter of Nada & Nettle (Costs) (2014) FLC 93-612 the Full Court (May, Ainslie-Wallace and Austin JJ) held at [11]:
That a party is impecunious, even indigent, is not a bar to the making of a costs order if the Court is otherwise of the opinion that such an order ought to be made.
Mr East’s conduct in joining Mr Martins to these proceedings necessitated Mr Martins obtaining legal advice and filing material.
On 14 April 2020 Mr East agreed to remove Mr Martins as a party and agreed in Court on 8 July 2020 to remove Mr Martins as a party and consent orders were made to that effect.
The offer of 14 April 2020 and accepted by Mr East on the same day to withdraw the joinder also provided each party bear their own costs. Mr East reneged on his acceptance of this offer on 20 April 2020. This was an imprudent rejection by the respondent a consequence of which is that a third party incurred additional costs from that date and the offer was no longer on the table.
Mr Martins’ solicitor has on no less than three occasions attempted to resolve this matter in having his client removed from the proceedings.
Mr East has been wholly unsuccessful in his application to resist Mr Martins being removed as a party to these proceedings.
On these facts I find there are reasons why I would exercise my discretion to make a costs order.
The issue of the quantum and nature of any costs ordered must now be determined.
The power to award costs involves a wide exercise of discretion and the breadth of that discretion is not limited as was recognised in a matter of Penfold & Penfold.[1] The Court need not be satisfied that all the factors under section 117(2A) have occurred before making a costs order, rather the Court is required to find a justifying circumstance or circumstances as an essential preliminary step before making any costs Order.
[1]Penfold & Penfold (1980) 144 CLR 311.
There is voluminous case law in relation to costs and indemnity costs. Some of these cases are Prantage,[2] Stephens,[3] Penfold,[4] and Kohan.[5]
[2]Prantage & Prantage (2013) FLC 93.
[3]Stephens & Stephens and Anor (Enforcement) (Costs) [2010] FamCAFC 172.
[4] Above, note 1.
[5]Kohan & Kohan (1993) FLC 92-340.
In the decision of Kohan,[6] the Full Court consisting of their Honours Strauss, Lindenmayer and Bulley found the following:
In an appropriate case the Court has discretion to order costs on an indemnity basis and such costs may be awarded where they have been incurred under a costs agreement which departs from usual scale of costs.
[6] Above, note 5.
Their Honours went on to say:
However, 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.
The cost sought by Mr Martins is a significant departure from the scale, however, as their Honours set out in Kohan:[7]
…where the justice of the matter requires, the Court may make such order as it considers just. It may depart from the scale of costs prescribed under the Rules but should not depart lightly from the ordinary Rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.
[7] Above, note 5.
The principle set out in the decision of Colgate-Palmolive v Cussons Pty Ltd (“Colgate-Palmolive”)[8] at [16] is also relevant:
Are there special or unusual features in a matter and in this case to justify a departure from the norm in order for indemnity costs?
[8]Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801.
His Honour Sheppard J went on to say in the that matter at [24]:
The ordinary rule is that, where the Court orders the cost of one party to litigation to be paid by another party, the order is for payment of those costs on a party and party basis.
This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation…or a decision of an intermediate court of appeal or of the High Court would be required to alter it.
In consequence of the settled practice which exists, the Court ought not usually make an order for payment of costs on some basis other than the party and party basis. The circumstances the case must be such as to warrant the Court in departing from the usual course.
His Honour observed some of those circumstances are:
Irrelevant allegations of fraud;
Misconduct that causes a loss of time to the Court and other parties;
Whether proceedings were commenced or continued for an ulterior motive;
The undue prolongation of a case by groundless contention; and
Wilful disregard of known facts or clearly established law.[9]
[9] Above, note 8 at [24].
Four recent decisions of the Full Court of the Family Court deal with the issues of costs namely Phillips & Hansford,[10] Rankin & Rankin (No. 3),[11] Worth & Worth (No. 2),[12] and Sfakianakis & Sfakianakis,[13] are each relevant to this matter and deal with the broad discretion of the Court in relation to a costs application.
[10]Phillips & Hansford [2020] FamCAFC 28.
[11]Rankin & Rankin (No. 3) [2019] FamCAFC 133.
[12]Worth & Worth (No. 2) [2019] FamCAFC 126.
[13] Sfakianakis & Sfakianakis [2019] FamCAFC 54.
That broad discretion is to award costs on an indemnity basis, solicitor/client basis, party/party basis, scale costs, costs as assessed by the Court or a taxation by a Registrar. As always in family law proceedings, each case turns on its particular and unique facts.
The category of cases in which indemnity costs may be awarded are not closed. Costs on this basis have been ordered in matters where an application is pursued with wilful disregard of known facts or clearly established law, where there has been an imprudent refusal of an offer to compromise, as in the decision of Colgate-Palmolive.[14]
[14] Above, note 8.
In relation to pursuing an application with wilful disregard to known facts or clearly established law, the decisions of Phillips & Hansford,[15] Rankin & Rankin (No. 3),[16] Worth & Worth (No.2)[17] and Sfakianakis & Sfakianakis,[18] reiterate that indemnity costs may be awarded where the applicant properly advised should have known he had no chance of success and where a party persists in what should, on a proper consideration, be seen to be a hopeless case.
[15] Above, note 10.
[16] Above, note 11.
[17] Above, note 12.
[18] Above, note 13.
This principle was referred to by his Honour Justice French in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2).[19]
[19] J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70.
In Worth & Worth (No. 2),[20] their Honours quoted from Justice Holden’s decision in Munday v Bowman,[21] where his Honour set out the following principles relevant to costs at [9]:
(a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts.
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud.
(c)Evidence of particular misconduct causing loss of time to the court and to other parties.
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
(e)An imprudent refusal of an offer to compromise.
[20] Above, note 12.
[21] Munday v Bowman (1997) FLC 92-784.
As their Honours quote in Worth & Worth (No. 2),[22] from Sheppard J in Colgate-Palmolive [23] at [17]:
In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course.
[22] Above, note 12.
[23]Above, note, 8.
It is trite to say that the evidentiary onus is upon Mr Martins to satisfy me, using Sheppard J’s words that ‘the circumstances of the case must be such as to warrant the court in departing from the usual course.”
The options available to me in determining the cost order to be made are; fixed costs at scale, party/party costs, solicitor/client costs, or as assessed by me in the exercise of my discretion or on an indemnity basis.
Their Honours say in Sfakianakis & Sfakianakis,[24] at paragraph 9:
The ordinary position in proceedings under the Family Law Act1975 (Cth) is that each party is to bear his or her own costs (s 117(1)). Where the Court is of the opinion that circumstances justify it in doing so, the Court may make such order as to costs as it considers just (s 117(2)). Thus, an order may be made for the payment of costs on an indemnity basis, although such orders are exceptional.
[24] Above, note 13.
Paragraph 10: [25]
It is, however, a mistake to think that if a costs order is made, that that order can only be on a party and party basis or on an indemnity basis. The words "such order as to costs…as the court considers just" permit the Court to fashion an order that is apt to the circumstances. One such well-known example is assessment on a trustee basis, which is more generous than party and party costs but falls short of an indemnity. Orders for partial indemnity or for a particular period are obvious possibilities. The Court may also fix costs in a particular sum, taking account of all relevant circumstances; that type of order too is neither one for party and party costs nor an indemnity costs order. For convenience, in these reasons we shall refer to such orders as a "special costs order".
[25] Above, note 13.
As their Honours opine, there is a broad discretion in the making of a costs order. Mr Martins seeks an indemnity costs order as Mr East’s actions and his actions alone resulted in him incurring legal costs.
The thrust of Mr East’s submissions are that the non-disclosure of Mr Quin, the other party in the substantive proceedings, forced Mr East’s hand in having to join Mr Martins as a party to these proceedings. That Mr Quin, his former partner, did not disclose Mr Martins being a spouse from on or around 2015 and as a result of this, Mr East was forced to issue multiple subpoenas and other requests for disclosure. Mr East was not satisfied with the result of these processes and the information received and he joined Mr Martins as a party.
Many of Mr East’s submissions in relation to the costs issue go towards feeling intimidated and harassed, and other matters that are important to Mr East, but are irrelevant to this costs application. Mr East has been represented previously in the matter and has incurred substantial legal fees in pursuit of his claim against Mr Quin.
Mr East also submits he took advice from the Legal Centre who advised him a joinder was the most appropriate course of action.
Mr Martins is the partner of Mr Quin and so far as the substantive proceedings are concerned, is a third party to this matter. It may be he will be called as a witness, and that the issuing of subpoena in relation to his financial position may be proper as he may be a financial resource to Mr Quin. I accept that the commencement date of Mr Quin and Mr Martins’ relationship may be a fact in issue as they have been partners for a considerable period. I accept Mr East has raised the issue of mingling of assets.
However to join him to the proceedings is a step that may carry consequences and may sound in costs if the joinder is opposed and proves to be unnecessary or improper.
It is correct that the Court acts to protect the rights of third parties. Fortunately Mr East has now agreed that the joinder was not proper and has minimised future costs for Mr Martins. I accept that the joinder of Mr Martins was not necessary in order to progress the matter.
Mr East was given multiple opportunities to consent to the removal of Mr Martins as a party to these proceedings in a timely fashion and for each party to bear their own costs.
Mr East agreed to this course and later reneged and as a result of this conduct, Mr Martins was forced to file material in response and meet the case brought against him. However the matter has not progressed much further than that at this time.
Given Mr East did agree to remove Mr Martins from the proceedings well before significant costs were incurred in the further conduct of the matter I do not see his conduct is so “special” or “unusual” that it warrants an indemnity costs order.
I will proceed to assess the costs to be paid given the fulsome evidence of how they were incurred provided by Mr Martins.
Going to the quantum of costs.
Mr Martins sets out in his affidavit filed 29 July 2020 from paragraph 13 onwards, the costs incurred by him.
Mr Martins engaged Counsel who was required to have a conference with their client and instructing solicitor in order to obtain instructions, obtain advice, and then prepare documents such as the response to an application in a case and affidavit material seeking removal of himself as a party to the substantive proceedings.
Mr Martins indicates Counsel’s fees were $3,630 for two appearances.
Mr Martins also deposes to the fees incurred by his solicitor in preparing this matter for a mention before Registrar Bastiani and a hearing of the application for removal as a party before myself being $7,887.
Mr Martins also deposes to incurring $1,430 of legal fees in relation to the preparation of this costs application being a total of $12,947.
I have assessed the reasonable costs for having to file material and be involved in the matter at $7,000 up to and including the removal hearing. I will allow as a separate item the costs of the costs application at $800 being total costs of $7,800
Mr East is ordered to pay Mr Martins’ costs in the sum of $7,800 within 90 days of the date of this order.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Henderson delivered on 9 September 2020
Associate:
Date: 9 September 2020
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