Rasheem & Rasheem (No 2)
[2022] FedCFamC1F 666
•2 September 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Rasheem & Rasheem (No 2) [2022] FedCFamC1F 666
File number(s): PAC 1536 of 2020 Judgment of: ALTOBELLI J Date of judgment: 2 September 2022 Catchwords: FAMILY LAW – COSTS – Disclosure – Indemnity costs order made. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17
Cases cited: Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 33 Fam LR 123; [2005] FamCA 158
Idoport Pty Limited v National Australia Bank & Anor [2007] NSWSC 23
Kohan and Kohan (1993) FLC 92–340; [1992] FamCA 116
Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93–664; [2015] FamCAFC 157
Parke & The Estate of the Late A Parke (2016) FLC 93–748; [2016] FamCAFC 248
1 Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Phillips & Hansford (2020) FLC 93–941; [2020] FamCAFC 28
Division: Division 1 First Instance Number of paragraphs: 37 Date of hearing: 6 June 2022 Place: Sydney (via videoconference) Counsel for the Applicant: Mr Stapleton Solicitor for the Applicant: Keypoint Law Solicitor for the Respondent: Ms Armstrong, Veritas Law Firm
Table of Corrections 2 February 2023 Paragraph numbering changed from [2]–[38] to [1]–[37]. ORDERS
PAC 1536 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS RASHEEM
Applicant
AND: MR RASHEEM
Respondent
order made by:
ALTOBELLI J
DATE OF ORDER:
2 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.Within 14 days of these orders the husband pay the wife’s costs of and incidental to the below applications on an indemnity basis fixed in the sum of $133,641.20:
(a)Application in a Case filed 6 July 2020;
(b)Application for Review filed 21 November 2021;
(c)Application in a Proceeding filed 26 November 2021; and
(d)Application for Costs contained in letter dated 6 May 2022.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Rasheem & Rasheem has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
These reasons for judgment explain why the Court has made an order for costs against the husband arising out of interim proceedings to date.
BACKGROUND
Matters of general background to this case are set out at [5]–[9] of my reasons for judgment delivered on 20 April 2022 which is the decision that gives rise to the present costs application.
By way of further background, the wife alleges, and the evidence before the Court including its own record confirms, that the husband has repeatedly failed to comply with orders of this Court for the provision of documents by way of full and frank disclosure. The wife has sought interim orders on a number of occasions. At times, the interim hearings were delayed due to the wife and at other times because of the husband. Finally, on 1 November 2021 a Senior Judicial Registrar made a number of interim orders relating to spousal maintenance in various forms (“the November 2021 interim orders”). The husband, as he was well entitled to do, filed an Application for Review on 21 November 2021 (“the review application”). A stay application in respect to the operation of the November 2021 interim orders was unsuccessful. The review application was heard by this Court on 12 January 2022, and reasons for judgment were published on 20 April 2022 (“the April 2022 interim orders”). The review application was dismissed save for the Court increasing the amount of periodic spousal maintenance payable by the husband.
The husband’s main argument on the review application was that he did not have the capacity to pay spousal maintenance in accordance with the November 2021 interim orders. This issue was dealt with at [20]–[27] of the Court’s reasons for judgment published on 20 April 2022. The Court was satisfied on the evidence before it that the husband did have capacity to pay in circumstances where he had failed to comprehensively disclose his financial circumstances to the Court.
The present application by the wife is for costs (“the costs application”) arising out of the present costs hearing, the husband’s unsuccessful review application, his unsuccessful stay application, and the interim hearing before the learned Senior Judicial Registrar.
EVIDENCE
In support of her case, the wife relied on the following material:
(a)Reasons for Judgment of Altobelli J dated 20 April 2022;
(b)Her Case Outline filed 19 May 2022;
(c)Her affidavit and accompanying exhibits filed 19 May 2022; and
(d)Her Case Outline filed on 9 December 2020.
In support of his case, the husband relied on the following material:
(a)His Case Outline filed 20 May 2022;
(b)His affidavit filed 13 December 2021;
(c)Affidavit of Ms C filed 21 November 2021;
(d)His Tender Bundle marked FK-4 dated 12 January 2022; and
(e)His written submissions and case outline filed 13 December 2021.
THE APPLICABEL LAW
The law relating to costs in family law proceedings is well settled and is set out in detail in the Full Court decision of Parke & The Estate of the Late A Parke (2016) FLC 93-748.
An application for costs is governed by s 117 of the Family Law Act 1975 (Cth) (“the Act”). Section 117(1) of the Act sets out the general presumption that each party to the proceedings shall bear their own costs. This is subject to s 117(2), which provides that:
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) and (5) and the applicable Rules of Court, make such order as the court may make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) sets out the matters that the Court is to have regard to:
(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.
Although the Court is required to consider each of the abovementioned factors, it is plain that their relevance to a particular matter will depend upon the circumstances of that case and they should be considered in that light. That is, no one factor prevails over another and it is a question of the weight that is to be afforded to each of the relevant factors depending on the circumstances of the matter (Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664 at [24]). There is also “nothing to prevent any factor being the sole foundation for an order for costs” (Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 33 Fam LR 123 at [41]).
Whilst the applicant in a costs application must establish the circumstances justifying the making of a costs order, the Court is not limited to making such an order only in what has been described as a “clear case” (Penfold v Penfold (1980) 144 CLR 311).
It is well settled that when costs are ordered by this Court, such costs are payable on a party-party basis. It has been held that the Court should not lightly depart from the ordinary rule: Kohan and Kohan (1993) FLC 92-340.
The provision relating to the calculation of costs is governed by r 12.17(1) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) which is as follows:
12.17 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount; or
(b)as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c) to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
The rule further provides that:
(3) In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre‑action procedures; and
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
In relation to an award of indemnity costs, the Full Court decision of Phillips & Hansford (2020) FLC 93-941, helpfully summarises the position as follows:
35. Indemnity cost orders are made only in exceptional cases (Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435).
36. Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise” (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).
37. In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401) and where “a party persists in what should on proper consideration be seen to be a hopeless case” (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch & Anor [1993] FCA 70 per French J at 5).
In relation to the Court exercising its discretion to make a costs order in a specific amount pursuant to r 12.17(a) of the Rules, the judgment of Idoport Pty Limited v National Australia Bank & Anor [2007] NSWSC 23 outlines the applicable principles at [9]:
[9]For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion:
i.the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J p 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as “the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation” (All ER p 265)];
ii.the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16];
iii.the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at [22]; [following (Wentworth v Wentworth (CA, 21 February 1996 unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788 Sony Entertainment v Smith (2005) 215 ALR 788 [2005] FCA 228; BC200500963 at [199]; at 200500963 at [199];
iv.a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22];
v.the gross sum “can only be fixed broadly having regard to the information before the Court”: Beach Petroleum at 124;
[In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that … is what the rule contemplates".]
vi.nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120”;
vii.In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at [16]:
On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary “fail safe” discount on the cost estimates submitted to the Court: Leary v Leary at 265 …
SUBMISSIONS MADE ON BEHALF OF THE APPLICANT WIFE
The wife’s case outline filed 19 May 2022 comprehensively sets out the submissions made on her behalf in relation to costs. The wife contends that indemnity costs are payable but that the Court also has the option to order fixed lump sum costs. The key points made include: the complete failure by the husband to comply with any of the orders; his total lack of success at each relevant Court event; the clearly established need of the wife; the extraordinary effort on behalf of the wife to produce relevant evidence to the Court when it was not only the husband’s own material, but it was material that he was obliged to place before the Court; and his purported lack of understanding of his own financial records. Each of these key points is established on the material before the Court.
SUBMISSIONS MADE ON BEHALF OF THE RESPONDENT HUSBAND
At the outset, the Court acknowledges that all submissions that could have been made on behalf of the husband were in fact made on his behalf. The husband’s Case Outline filed 20 May 2022 comprehensively sets out the submissions made on his behalf. It is, for the most part, a pragmatic document recognising that if the Court determines that the parties should not each bear their own costs, then the husband faced some difficulty in the costs application. The general tenor of the document is an attempt to convince the Court that if costs should be paid, it should be paid on an ordinary basis, limited to the review application and not the earlier applications, and should in any event be made payable at the end of the proceedings. The submissions were sometimes defensive in tenor. The husband denied non-disclosure. There were allusions to the Court’s interpretation of the D Online documents as being flawed, which led to incorrect inferences being drawn. The husband denies the existence of any other resource or asset available to him. On his behalf it was contended that he could not possibly pay any costs order made against him.
There was some common ground as between both submissions. There was recognition of the benefits of making a lump sum costs order, if any costs order were made, in order to spare the parties the further cost and inconvenience of having any costs order quantified.
PRELIMINARY ISSUE
The Court raised as a preliminary issue whether it should make any determination about costs arising from interim proceedings in circumstances where liability for costs is in so many ways dependent on impressions formed from evidence, rather than findings of fact made after evidence was tested in cross-examination. The Court asked: would it not be better to simply reserve costs until after the hearing which is listed for 26 April 2023 for seven days?
The husband somewhat enthusiastically embraced this idea suggesting that it left less room for judicial error and was ultimately more certain, effective and efficient.
The wife resisted the idea on a number of bases, which the Court ultimately accepts. The wife should not be deprived of a costs order that she is otherwise entitled to as a result of the proper application of the law. There was neither a principle of law nor an established practice precluding costs orders arising out of interim applications and this could become a tactical weapon in cases such as the present where the wife contends that there is information and financial asymmetry. Moreover, the wife had been put to extraordinary effort, and therefore cost, to put before the Court material which the husband was himself obliged to disclose, not just in terms of substantive information, but as to its interpretation and practical meaning. It was submitted that this in itself was a ground to make a costs order, even if factual findings were different at a final hearing. The Court accepts these submissions. A further submission was made, however, that the Court does not accept. It was submitted on behalf of the wife that any uncertainty as to whether impressions formed at an interim hearing are converted to findings made at a final hearing could be reflected in a discount of any costs order made. Whilst the Court accepts that it has considerable discretion in quantifying costs orders especially as lump sums, any discretion which is quantified as a percentage discount is too imprecise for this Court’s liking. In the circumstances of this case where it is highly unlikely that the husband will pay any costs order because of his conduct to date, a likely scenario is enforcement of a costs order as part of any s 79 order made at a final hearing. This provides another opportunity to reconsider any costs order made.
DISCUSSION
Based on the material before the Court, and the submissions made, the Court is satisfied that there are circumstances that justify making a costs order in this case.
The financial circumstances of the wife are clearly inferior to what is known about the financial circumstances of the husband. The orders that have been made for maintenance reflect the disparity in their financial circumstances. It was incumbent on the husband to properly disclose his financial circumstances to the Court. He has had many opportunities to do so, but the Court is satisfied that he has not. At the costs hearing his solicitor explained that the husband’s legal costs are being met by the husband’s family.
Neither of the parties are in receipt of assistance by way of Legal Aid.
There is no conduct of the wife that would disentitle her receiving a costs order if she is otherwise entitled to. The Court accepts the submission that she has made, through her lawyer, extraordinary efforts to present to the Court details of the husband’s financial circumstances, which he has not himself done but which he was at all relevant times obliged to do. The conduct of the husband in this litigation has been to avoid not just proper disclosure but then to minimise the implications of the documents that he has himself produced, and then to cast doubt on those of his documents which the wife was able to present to the Court. He has consistently refused to comply with orders made.
These proceedings were not, however, necessitated by the failure of the husband to comply with the previous order of the Court.
The husband has been entirely unsuccessful in the proceedings so far. He was unsuccessful before the learned Senior Judicial Registrar. He was unsuccessful in his stay application. He was unsuccessful in his review application. As will be seen, he was unsuccessful in his resistance to the making of a costs order. In each instance he forced the wife to incur significant legal cost.
There have been no relevant offers in writing to settle the proceedings.
An order for costs should be made against the husband.
THE SCOPE OF THE COSTS ORDER
On behalf of the husband it was submitted that if any costs order is made, it should be limited to the review application. No cogent rationale for this submission emerges. As it turns out the husband has been unsuccessful in the wife’s interim application for spousal maintenance, in the stay application, in the review application and in the present costs application. Any costs order should relate to the entirety of the interim proceedings including the application before the Senior Judicial Registrar.
should costs be ordered on an indemnity basis?
On behalf of the wife it was contended that the special or unusual feature of this case was that the husband has put the wife to proof of his own financial position. That is entirely correct. Even though it was his legal obligation to do so, the Court only gained an insight into the true financial circumstances of the husband as a result of the wife’s forensic investigation and presentation of the evidence before the Court. This put her to enormous legal cost. Even when the wife produced the husband’s documents pursuant to subpoena, he offered alternative and implausible explanations of what the documents meant. The lack of clarity about the husband’s financial circumstances was only exacerbated by his solicitor’s explanation to the Court that even though the husband had not complied with Court orders, and even though the wife’s substantial costs were largely unpaid, his costs were being met by his family, which clearly suggests they are an important and significant financial resource available to him. No cogent submission was made against the making of an indemnity costs order in the circumstances of this case.
Should costs be fixed?
Both parties submitted, in substance, that it would be preferable for the Court to fix costs in order to spare the parties from what Counsel for the wife described as parasite litigation. The Court agrees. The rules empower the Court to make an order in a specific amount. The Full Court decision in Parke & the Estate of the Late A Parke (2016) FLC 93-748 stated at [130]:
If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”…The process does not “by its very nature…envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”
The wife’s evidence is that she has incurred total costs of $123,013 (inclusive of GST) in the period from 1 April 2021 to 1 November 2021. The subsequent stay application lead to incurring costs of $14,443 (inclusive of GST). The review application meant total costs of $36,740 (inclusive of GST). The application for costs was anticipated to cost $16,720 (inclusive of GST). The wife’s costs, therefore, total $190,916 (inclusive of GST). Curiously, and perhaps ironically, the wife also gives evidence that the total amount of arrears for all payments that the husband was ordered to make amounts to $74,638.96. From the husband’s perspective, one cannot help but observe that it would have been cheaper for him to comply with the order in the first place. From the wife’s perspective, whilst recognising the necessity for these proceedings, the quantum of her costs does seem disproportionate to the amount of arrears.
Her counsel submitted that a lump sum reflecting between 80–90 per cent of the actual costs incurred would be an appropriate figure. The solicitor for the husband pointed to the very high hourly rate of the wife’s solicitor, being $600, compared to her hourly rate, being $400, and the scale at approximately $260 per hour. Inferentially, the husband’s solicitor was raising the issue of proportionality between costs incurred and the issue to be determined. She also urged caution about ordering costs when the work undertaken could be as relevant to the substantive property (and perhaps even parenting) proceedings, as it was to the applications in question.
The Court has a wide discretion as regards the quantification of the lump sum order. The Court takes into account the submissions made. The Court also draws on its own experience to recognise the possibility of double dipping in the sense of failing to recognise that work undertaken could be equally relevant to the substantive proceedings. The wife’s costs will be assessed as a lump sum representing 70 per cent of her total incurred costs of $190,916 (inclusive of GST). There was some suggestion in the husband’s case that the Court might consider postponing payment of the costs so that it comes out of any final property settlement order made. The Court does not agree. The costs notice filed on behalf of the husband on 15 March 2022 suggests his actual costs incurred and paid to date total $228,000. If the husband is confined to the money from his available financial resources to meet his own costs, there is no reason why he should not be able to pay the wife’s costs in the sum of $133,641.20.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 2 September 2022
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