Rendon and West and Ors (No.2)
[2019] FCCA 461
•28 February 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RENDON & WEST & ORS (No.2) | [2019] FCCA 461 |
| Catchwords: FAMILY LAW – Costs – general principle that each party to bear own costs – where general principle yields to power to award costs – relevant considerations – where open offer made to compromise issues in dispute – pursuit of untenable claims – parties agreed that court has power to set the amount of such costs – order for indemnity costs, including for costs of application – power to set quantum, determine method for computation or to refer to taxation – quantum set. |
| Legislation: Family Law Act 1975 (Cth), ss.79, 79A, 117 Federal Circuit Court Rules 2001 (Cth), r.22.02 |
| Cases cited: Browne v Green [2002] FLC 93 Cacchia v Hanes (1994) 179 CLR 403 Eldred & Eldred (No 2) [2015] FamCA 188 Hawkins & Roe [2012] FamCAFC 77 Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298 JEL v DDF (Repayment on Appeal, and Costs) (2001) 28 Fam LR 119 LAC & TRF & LKL [2005] FamCA 158 Latoudis v Casey (1990) 170 CLR 534 Mallett v Mallett (1984) 156 CLR 605 Marriage of Conroy (1976) 2 Fam LR 11 Marriage of Fisher (1990) 13 Fam LR 806 Marriage of Greedy (1982) 8 Fam LR 669 Marriage of Kelly (No 2) (1981) FLC 91 Marriage of Robinson & Higginbotham (1991) 14 Fam LR 559 Munday & Bowman (1997) FLC 92 Parke & The Estate of the Late A Parke [2016] FamCAFC 248 Penfold v Penfold (1980) 144 CLR 311 Pennisi & Pennisi (1997) FLC 92 Rendon & West & Ors [2018] FCCA 3678 Wrensted v Eades [2016] FamCAFC 46 |
| Applicant: | MR RENDON |
| First Respondent: | MS WEST (nee RENDON) |
| Second Respondent: | MS BLAKE |
| Third Respondent | COMPANY A PTY LTD |
| File Number: | MLC 6802 of 2014 |
| Judgment of: | Judge A Kelly |
| Hearing date: | 21 February 2019 |
| Date of Last Submission: | 21 February 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 28 February 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Testart |
| Solicitors for the Applicant: | Scammell Black Mileo |
| Counsel for the Respondents: | Mr Crofts |
| Solicitors for the Respondents: | McKean Park |
ORDERS
The first respondent pay the applicant’s costs of and incidental to the applications filed on 29 August 2017 fixed in the sum of $24,000.
IT IS NOTED that publication of this judgment under the pseudonym Rendon & West & Ors (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 6802 of 2014
| MR RENDON |
Applicant
And
| MS WEST (NEE RENDON) |
First Respondent
| MS BLAKE |
Second Respondent
| COMPANY A PTY LTD |
Third Respondent
REASONS FOR JUDGMENT
Introduction
On 12 January 2018, reasons for judgment were published respecting an application in a case filed on 29 August 2017 by the first respondent and the applicant’s response thereto: [2018] FCCA 3678. By orders made on that date, the applicant was ordered to indemnify the first applicant in relation to certain tax liabilities (but not others). Further, relief was granted to the applicant pursuant to s 79A of the Family Law Act 1975 (Cth) (Act) providing, in effect, for the first respondent to pay monies towards certain break costs which were incurred in order to effect settlement of the sale and transfer of property pursuant to consent orders made pursuant to s 79 of the Act. These reasons for judgment which concern an application for costs should be read with those reasons.
The applicant seeks an order for indemnity costs respecting that application, alternatively an order for costs on a standard basis.
Applicable principles
The parties agree that, in general, parties to a proceeding under the Act should bear their own costs: s 117(1). However, power is conferred on the court to make such order as to costs as it considers just where it is of the opinion that circumstances justify it in doing so: s 117(2). The power is subject to a number of provisions, including the Rules of Court.
Before me it was common ground that the Federal Circuit Court Rules 2001 (Cth) confer power when making an order for costs, to either: set the amount of costs; set the method by which such costs are to be calculated or to refer the matter for taxation in the manner there provided. In addition, the court may set the time for payment of costs: r 22.02(2).
The power to make an order for costs is relevantly constrained by sub-s 117(2A) which provides that the court shall have regard to the matters enumerated in that provision in considering what order (if any) should be made in relation to costs. Properly construed, there is nothing in s 117 which prescribes either that more than one factor must be present before an order for costs may be made or that a comparative evaluation of the weight of each such factor must be undertaken in the exercise of the discretion to award costs: LAC & TRF & LKL [2005] FamCA 158, [41]; Eldred & Eldred (No 2) [2015] FamCA 188, [22]. The authorities recognise that there may be one factor which so dominates the particular facts and circumstances of the case that it may sufficiently provide a sole basis for the conclusion that the discretion ought be exercised in favour of, or against, an order for costs. I address each of those matters in turn.
Parties financial circumstances – par 117(2A)(a)
The requirement to consider the parties’ financial circumstances draws attention to the need to address whether there is a disparity in the parties financial positions. In this context, the court is authorised to adopt a broad brushed approach. The underlying objective is to enable the court to have some appreciation of the relative financial positions of the parties: Browne v Green [2002] FLC 93-115.
Legal aid – par 117(2A)(b)
The prescription contained in par 117(2A)(b) has significance as requiring that the court cannot disregard legal aid as consideration where it applies. Further, it draws attention to the need to reflect upon the general principle that a party cannot recover costs which he or she is not liable to pay: In the Marriage of Conroy (1976) 2 Fam LR 11,223.
Parties conduct – par 117(2A)(c)
The court is required to consider the parties’ conduct:
. . . 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
Where the particular conduct of a party has caused an additional burden sounding in costs to be incurred by their opponent, this will commonly constitute a consideration which may engage the power to award costs. This consideration is not confined to non-cooperation or obstructiveness but may involve unjustifiable conduct of any kind which has caused costs to be incurred which ought not to have been incurred: In the Marriage of Fisher (1990) 13 Fam LR 806 . It is not perhaps without some irony that In the Marriage of Greedy (1982) 8 Fam LR 669, the Full Court recognised that the refusal to negotiate or to put forward an alternative appropriate order may be factors which warrant the favourable exercise of discretion. Manifold circumstances may constitute conduct that warrants attention under par 117(2D)(c).
Compliance with orders – par 117(2A)(d)
The court is required to consider “whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court.” While it may be relevant, it is not necessary to establish that the party’s failure to comply with previous court orders entailed any culpable conduct (whether by act or omission).
Whether wholly unsuccessful – par 117(2A)(e)
It should be noted that the prescribed conduct to which par 117(2A)(e) draws attention is whether any party to the proceedings has been wholly unsuccessful in the proceedings. In this connection, the authorities recognise that although a party’s submissions may have been wholly unsuccessful, they may not have been without merit: Wrensted v Eades [2016] FamCAFC 46 [85]-[87]. The Full Court endorsed the statement in Hawkins & Roe [2012] FamCAFC 77, that “even a meritorious case can be ‘unsuccessful’ when the other case is found to have greater merit.”
Written offer to settle – par 117(2A)(f)
By par 117(2A)(f) the court is obliged to consider whether either party to the proceedings had made a written offer to settle the proceedings and the terms of any such offer. The court should also consider the precision of the terms of the offer that was made and by extension, whether any counter-offer was made.
This requirement reflects policies of the Act including to encourage conciliation, the very real public interest to incentivise settlement, lighten the court’s workload and the drain on scarce judicial resources: cf In the Marriage of Greedy; Robinson & Higginbotham (1991) 14 Fam LR 559, 561; see also s 117C. In Browne v Green, the Full Court underlined the importance of proper consideration being given to the making of an offer, its terms, the time at which it had been made and that it be contrasted with the result which was achieved instead by judgment:
The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it proper consideration, is something to which very significant weight indeed ought normally be given.
It follows that parties may proceed at their peril in rejecting a reasonable offer of settlement. At the same time, the court should be slow to approach the evaluation of the question of costs from a backwards looking perspective by simply asking whether the result achieved had been worse than that which had been offered at an earlier time. The reasonableness of the offer and the context in which it was made remain important considerations: JEL v DDF (Repayment on Appeal, and Costs) (2001) 28 Fam LR 119.
Equally, the context in which an offer was made includes that there are “cases where the contents of the offer are themselves [the] subject of disputed value and [are the] legitimate subject matter for determination”: Pennisi & Pennisi (1997) FLC -92-2774. That is to say, the surrounding context may support a conclusion that a backwards looking evaluation of an offer may pay insufficient attention to the circumstances which obtained at the time that the offer was made and that the issue in dispute was one which a litigant was reasonably entitled to press for determination at trial.
Any other matter– par 117(2A)(g)
While there is evident overlap between this provision and the matters prescribed by pars 117(2A)(a)-(f), it is settled that the terms of par (g) could hardly be expressed in wider terms: Parke & The Estate of the Late A Parke [2016] FamCAFC 248, [36]
Apart from the special provision made by s 117(1) of the Act, in civil litigation, in usual circumstances a party who has succeeded in the litigation is entitled to a favourable exercise of discretion to an award of costs: cf Latoudis v Casey (1990) 170 CLR 534. The decision affirms the settled principle that an award of costs is compensatory and not punitive and are intended to indemnify the successful party against the expense to which they have been put by reason of the proceeding: Latoudis 170 CLR 534, 542-543. As Mason CJ observed, it is fundamental to the exercise of the discretionary power respecting costs that the issue be considered from the perspective of the successful party.
Equally, it is clear that an order for costs is not intended to operate by way of a complete indemnity. To the contrary, an order for costs is confined to legal costs and expenses which are properly incurred by a successful party: Cacchia v Hanes (1994) 179 CLR 403, 410. The entitlement to costs, so understood, is then confined to costs of the kind for which the relevant rules of court. The entitlement is not at large.
However, this general principle is explained in part by the circumstance that in most jurisdictions, the court is given a statutory discretion which is not constrained even by the prescription of relevant considerations or criteria: Latoudis 170 CLR 534, 541. As noted above, the position is quite different under s 117 of the Act which recognises that proceedings under the Act are not the same as civil litigation in many respects.
Consideration
As there is no question that the matter constituted a proceeding under the Act, there is no doubt that the power to award costs is controlled by s 117. Accordingly, unless the court is of the opinion that there are circumstances justifying the making of an order for costs, the power to award costs is not engaged. Once the court forms the requisite opinion, the power is engaged subject to the applicable rules of court and, relevantly, the matters addressed by s 117(2A)(a)-(g). Once the court has formed that opinion, the general rule as expressed in s 117(1) must yield to the power conferred by s 117(2): Penfold v Penfold (1980) 144 CLR 311, 315. It is therefore not the case that the power to award costs may only be exercised in a clear case or that exceptional circumstances be shown: Mallett v Mallett (1984) 156 CLR 605, 631-632.
I am satisfied that an order for costs should be made. It is not necessary that the court should make particular findings in relation to an order for costs: In the Marriage of Kelly (No 2) (1981) FLC 91-108. However, it is necessary to conclude, and in this case I am of the opinion, that there are circumstances justifying the making of an order for costs.
Although I have addressed the principles applicable to each paragraph of sub-s 117(2A), it is necessary only to address those which are relevant to this case.
Contrary to the first respondent’s submissions and adopting a broad brushed approach there is no disparity in the parties’ financial positions.
Concerning the parties’ conduct and without rehearsing the matters considered in the principal judgment, it is clear that from the outset the applicant was willing to waive his claim for break costs in satisfaction of that which he contended to be the true measure of his liability under the indemnity for the first applicant’s taxation liability. A claim for indemnity of $56,575.40 was reduced to a judgment for $654. The pursuit of that claim is to be evaluated in the context that the applicant made open offers from ~$27,000 to ~$32,000
Contrastingly, the communications from the first applicant’s accounting and legal advisors made plain that claims for indemnity passing far beyond the express terms of the indemnity in the parties’ consent orders were being pressed. As I have found, some of those claims were untenable. Equally, the first applicant remained implacably opposed to entertaining the applicant’s claim respecting her share of the partnership liability for the break costs which were demanded by Westpac. The tenor of the parties’ communications confirms that the matter was not to be resolved except, in effect, on the terms being demanded by the first respondent.
In relation to the question whether the second respondent has been wholly unsuccessful in the proceedings, it is not without hesitation that I accept that at least some of her contentions were not without merit. The same must be said also of the applicant’s level of success. However, to adapt the statement in Hawkins & Roe, supra, I accept that whatever merit there may have been in her case, it has been unsuccessful in circumstances where the applicant’s submissions have been found to have greater merit.
And adopting the principles considered at [14]-[16] above, I do consider that a significant factor in this case involves the applicant’s offer which were made to resolve this matter so as to avoid litigation. I also consider the first respondent’s attitude that she would rather pay her lawyers that resolve the matter as speaking loudly to her abject disinterest in exploring a conciliatory means of resolving the matter. The attitude displayed by the first respondent’s accountants appeared to reinforce the instructions being received rather than to reflect a plain reading of the terms of the consent order. Properly advised the first respondent would not have pressed for indemnity in relation to capital gains tax. The true scope of the indemnity would then have been the only matter in issue. At that level, the applicant’s offers were more than reasonable in terms of seeking to compromise the issue in dispute. It follows that I regard the rejection of those offers as being imprudent.
In relation to any other relevant matters, there are at least two factors which warrant consideration. First, while the statutory discretion conferred by s 117 to award costs is constrained by the prescription of the considerations or criteria listed in s 117(2A), the observation that proceedings under the Act are different from civil litigation is to divert attention from why that difference matters. In particular, in an application for the adjustment of property interests, each of the party’s is concerned with a just and equitable adjustment of the assets which comprise their asset pool. By extension, each of them is reasonably entitled to expect that their rateable share in that pool will not be unnecessarily eroded by unwarranted post-litigation disputes. Secondly, I am most concerned that in this court, it is necessary to recognise the scarcity of the available resources and that the diversion of those resources from the demands of other cases is a relevant consideration. So must was accepted by the parties’ counsel.
While it is clear that the applicant is entitled to a costs order, the question arises as to the basis on which that award should be made; that is, whether an award should be made for costs on a standard or indemnity basis. In Parke & the Estate of the Late A Parke, supra, the Full Court considered the principles appropriate to the determination of whether an award of indemnity costs should be made. May and Ryan JJ at [47]-[49] reviewed the authorities which were to be applied on that issue and endorsed the statement in Munday & Bowman (1997) FLC 92-784 that:
(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.[1]
In the present case I consider that the factors identified in (a), (d) and (e) are relevant to the present matter.
[1] Citations omitted.
The factors which may be relevant in assessing whether an offer has been unreasonably refused were considered in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298, [23], [25] and include: (a) the stage at which the offer was received; (b) the time allowed to consider the offer; (c) the extent of the compromise offered; (d) the offeree’s prospects of success; (e) the clarity of the terms being offered; (f) whether the offeror forewarned the offeree that an application for indemnity costs would be made if the offer was refused.
Properly advised the first respondent could not reasonably have considered that she was entitled to pursue a claim for indemnity in relation to her assessed liability to capital gains tax. She cannot have done so because the express terms of the terms of settlement as embodied in the consent orders excluded any liability in the applicant for an indemnity in respect of capital gains tax. In the same vein, to pursue allegations and contentions that the applicant was liable to indemnify her for such capital gains tax liabilities was to pursue groundless claims. As a consequence and in all the circumstances of the case, it was self-evidently imprudent of the first respondent to have refused the substantial offer of compromise which was made. More than adequate time was allowed to the first respondent to consider the offers being made (being offers made before and at an early stage in the proceeding).
I am satisfied that an order for indemnity costs is appropriate.
The parties were agreed that the powers to set the amount of costs, the method by which costs were to be calculated or to refer the matter for taxation were independent and did not for example, require that the court set a method for the calculation of costs before setting an amount of costs pursuant to r 22.02(2)(a).
They were further agreed that in addition the application itself, the costs of the application for costs should also be determined by the court. I have had regard to the various computations of the costs prepared by the applicant’s solicitor (both on an indemnity and standard basis) and to the objections which were raised by the solicitors for the first respondent.
Although I have had regard to the calculation of costs on an indemnity basis as prepared by the applicant’s solicitor, I also recognise that the manner of that calculation was in dispute.
Upon my assessment of what sum ought be awarded on an indemnity basis in relation to the applicant’s costs, including the costs of the application for costs, I have set those costs at $24,000.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 28 February 2019.
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