Rhazi and Rhazi (Costs) - [2011] FamCA 428

FAMILY COURT OF AUSTRALIA

RHAZI & RHAZI (COSTS)

[2011] FamCA 428

FAMILY LAW – COSTS

Family Law Act 1975 (Cth): s 117(1), s 117(2), s 117(2A)

Hackshaw & Hackshaw [2010] FamCA 1123
Rhazi & Rhazi and Anor [2011] FamCA 262

APPLICANT:

Ms Rhazi

RESPONDENT:

Mr Rhazi

FILE NUMBER:

CAC

114

2010

DATE DELIVERED:

17 May 2011

PLACE DELIVERED:

Canberra

PLACE HEARD:

Canberra

JUDGMENT OF:

Faulks DCJ

HEARING DATE:

17 May 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms P Lyndon

SOLICITOR FOR THE APPLICANT:

Watts McCray McGuinness Eley

COUNSEL FOR THE RESPONDENT:

Mr C McKeown

SOLICITOR FOR THE RESPONDENT:

Jeanine Lloyd & Associates

Orders

IT IS ORDERED THAT:

I order that the respondent husband pay the applicant wife’s costs of and incidental to the proceedings before this Court, including the proceedings this day, in relation to costs in the sum of $16,000. I note that this is an order as to costs not an order for costs and that finalises all proceedings before this Court.
The sum be paid within 60 days of the date of this order.

IT IS NOTED that publication of this judgment under the pseudonym Rhazi & Rhazi (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT CANBERRA

FILE NUMBER: CAC 114 of 2010

Ms Rhazi

Applicant

And

Mr Rhazi

Respondent

REASONS FOR JUDGMENT

Introduction

The applicant wife, Ms Rhazi, seeks that the husband pay her costs of and incidental to these proceedings from 19 July 2010, such costs to be assessed on an indemnity basis. Alternatively, the wife seeks that the husband pay her costs on a party/party basis, and that the husband pay the costs of today’s proceedings.
Final orders and my Reasons for Judgment were delivered on 5 April 2011, following evidence being given on 4 April 2011, and submissions being made on 5 April 2011 (see Rhazi & Rhazi and Anor [2011] FamCA 262).
In support of her application, the wife filed on 18 April 2011 an affidavit in which she asserted that she had offered, in writing, to settle the proceedings on the basis of a payment from the husband of $250,000.
The effect of the proceedings before me, when they were completed, was that there was an order the husband pay the sum of $280,000. A copy of the offer that was made in those circumstances was annexed to the affidavit of the wife as was an estimate of costs based on the rate charged by Ms Lyndon in relation to these proceedings, as well as the fees for counsel.
It is to be noted that the amount charged may or may not be in accordance with Scale. I am told by way of estimate that the costs since the affidavit has been filed and of today would be of the order of a further – I extrapolate – at about $2,000, together with some expenses for Ms Rhazi of attending Court today, as she was required to do, for the purposes of cross‑examination of approximately $160.

Relevant Law & Discussion

Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides a primary position that each party to proceedings shall bear his or her own costs.
Section 117(2) of the Act relevantly provides:
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 orders or otherwise, as the court considers just. (Emphasis added)
The curious part of the wording of section 117(2) is that the Court may make not just an order for costs but as to costs.
If the Court is to make such an order, then it must, in accordance with authority and the terms of the Act, take account of the matters set out under s 117(2A) of the Act.
These matters have been the subject of some submission before me this morning and I deal with it briefly.
The first of these the wife submits that s 117(2A)(a) of the Act is in her favour. That is, that I should take and should have regard to the financial circumstances of each of the parties. I have already indicated that, in my opinion, while the circumstances relating to the husband, at least, as he sets them out in his most recent affidavit would suggest that he has very little either in terms of assets or income. I have very little information about what potential income he may have and where he may be living and what may be the consequences if he is living, for example, in South Central Asia.
Nevertheless, there is no information available to me that would enable me to make such a finding that the wife is in an inferior financial circumstance to the husband and, accordingly, in my opinion, s 117(2A)(a) of the Act does not assist the wife in making an application for costs. I note in this regard that she will have, as a result of the proceedings before me, a sum of cash which would certainly exceed that available to the husband even if the property in which he is living with his son presently were to be sold.
In relation to s 117(2A)(b) of the Act, in this regard, Mr McKeown points out that his client is in receipt of a grant of legal aid. The wife does not have a grant of legal aid. On the one hand, one might reasonably presume that if a party were on legal aid, then that party would have limited capacity to meet an order for costs. It cannot be that s 117(2A)(b) of the Act is simply a revisiting of s 117(2A)(a) of the Act. It seems to me that in the ordinary course of events, s 117(2A)(b) is a disentitling reason for an application for costs. In other words, if a party had been the recipient of a grant of legal aid, then it would not necessarily be the case that the other party should reimburse that party which essentially may be a reimbursement of legal aid for the costs of the proceedings.
In any event, in my opinion, it does not bear upon the proceedings in this matter. I decline, for example, to take account of the fact that the husband is on legal aid to take this as a reason for not making an order for costs against him.
In respect of s 117(2A)(c) of the Act, this paragraph is designed to, it seems, if one reads it, to take account of the fact that one party to the proceedings may have unduly prolonged the proceedings because of his or her failure to make a proper discovery or to fulfil his obligation, which has been reiterated recently in a number of decisions, particularly per Murphy J in Hackshaw & Hackshaw [2010] FamCA 1123 (20 December 2010), as being a complete and important obligation to make a full disclosure. It also takes account of the fact the parties may not have filed documents promptly or done what they were required to do by direction.
In this matter, the proceedings took a relatively short time to come to a final hearing, even though there were some arguments about discovery in the sense of the value of the property in South Central Asia, a failure on the part of the husband to produce witnesses in support of the loan that he asserted had been made by his sister to him and other matters.
In general terms, they were, within my terms at least, within the normal “cut and thrust” of a hearing. I do not regard the conduct of either of the parties as giving rise to a basis in itself for an order for costs in either direction of the one as sought by the husband. Certainly, there was nothing in the conduct of the proceedings by the wife, in my opinion, which in any way could have justified any criticism of her or her legal advisers. There were not any previous orders of the Court that have been not complied with.
Section 117(2A)(d) of the Act, seems to relate to such things as applications that someone be dealt with for contravention of an order. In this case, this matter is not relevant, particularly in the light of the comments I have made in relation to s 177(2A)(c) of the Act.
In relation to s 117(2A)(e) of the Act, I do not accept that either party has been wholly unsuccessful in these proceedings. It may well be that it might be said in relation to the parties’ child that the wife was successful and the husband was not. I do not believe this is a matter in which it is appropriate I should make an order for costs in relation to the child aspect of the matter, although I accept that that has meant that the wife has incurred additional costs.
So far as property is concerned, it is very rare in a matter before this Court where one party is wholly unsuccessful. I think that it would be fair to say in conformity with the submissions made by Mr McKeown that in this matter the husband has not been wholly unsuccessful, although he may feel that that is the consequence of my orders.
That would suggest that the matters that might properly be taken into account in accordance with s 117(2A)(f) of the Act is the question of 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”.
In this regard, Mr McKeown has placed, at least in part, a gloss on the terms of s 117(2A)(f) of the Act, to the extent that he suggests that it is an offer that must in the circumstances have been reasonable for the other party to accept.
I do not accept that this is a proper construction of the terms of s 117(2A)(f) of the Act. In essence, s 117(2A)(f) is within the family law context, in my opinion, the equivalent of the payment of a party into court in civil proceedings in other places such as matters before the Supreme Court.
The payment of money into court, taking that matter separately from s 117(2A)(f) for a moment, is not predicated upon a rationalisation or even a logical interpretation of all the proceedings before the Court, but is a practical and pragmatic offer to resolve the proceedings in a way which would enable the parties to move forward.
The failure in accordance with the ordinary Rules in most Supreme Courts and District Courts or equivalent to accept an offer of payment into court and then not achieving a better result in the final order means that an order for costs is made, in essence, automatically.
Section 117(2A)(f) is not couched precisely in those terms, and for good reason. Family law proceedings are frequently multi-issue proceedings in which there are a number of different factors applying which might be regarded differently by the parties at different times. In this regard, an offer to settle proceedings may or may not be predicated upon certain facts which may be not accepted by both parties at the same time. This means that, in essence, the assessment of whether an offer ought to be accepted or not may be dependent upon factors other than a simple evaluation of whether the offer conforms with what both parties agree or do not agree, as the case may be, is the pool of property and as to whether there will be a determination in one party’s interests and in favour of one party about some of those assets or about some other factors such as contribution or the financial circumstances of the parties in the future which would work one way or the other.
Nevertheless, it seems to me that if an offer is made the party refusing to accept the offer does so at his or her risk as to whether or not in the future the proceedings might be concluded more favourably to the party making the offer than the offer itself was. Such is the case in this matter.
It may well be that the husband took the view that at the time when the offer was made it was unlikely that the wife would succeed in establishing the matters that she finally did in accordance with my rulings which permitted the division of property to be made as it appears in my judgment. The fact that he did not accept that that might be possible does not preclude his accepting an offer which would then preclude the fact that there will be further costs incurred on either side. It may have been, although I make no finding to this effect, that because he was on legal aid it was not a matter that was troubling him as much as it might someone who was paying for his or her own fees.
Nevertheless, it is open to a party to make an offer. It is not required that that party should stipulate the basis upon which the offer is made and if a party to proceedings fails to accept that offer and, subsequently, is less than successful than he or she might have expected to be, then the consequences, it seemed to me, ought reasonably to flow that there should be an order for costs.
If, however, my conclusion about the interpretation of s 117(2A)(f) of the Act is wrong, I do not accept the matters raised by Mr McKeown as providing a basis for refusal of the offer. In other words, if contrary to what I have just indicated, it is open to a party to only react to an offer of settlement if it is reasonable for that party to accept it. It seems to me that the circumstances of this matter were such that Mr Rhazi had to consider that the offer might not necessarily operate on the basis of what he might have believed would be the [way the Court would hold or find, he must nevertheless consider it].
So if he chooses to “take a punt” on the fact that the Court will conclude in his favour on the matters that are in issue then the punt will be unsuccessful if the Court does not do so. In this matter, he was aware of the circumstances of the transfer of the property to his son. He was aware of the controversy associated with a loan to his sister. He was not aware, I accept, about the additional expenses incurred by the wife post‑separation which he may or may not have been prepared to have taken into account in evaluating the offer. In any event, it was open to him, if he wished to do so, to respond by saying, for example, (and I use it only as an example and not suggesting this would have been the terms of the response): “You have offered to settle for $250,000. I do not accept that the Court will take into account the loan to GE Money that you have incurred post‑separation. I would respond by offering to pay you by way of settlement $225,000” or $200,000 depending on how you wanted to look at the mathematics in the matter.
If he had done so, then it would have substantially reduced the prospects of the wife’s offer for settlement being regarded as an appropriate basis for making an order for costs.
There is no evidence that such an offer was made or that there was any disagreement with the circumstances upon which it was based had been made by the husband. Accordingly, in my opinion, s 117(2A)(f) of the Act does have application to these proceedings and is a matter that I should take into account.
Neither party has suggested to me that there are any other matters that I might properly consider to be relevant in these proceedings and I do not find that such matters are relevant (see s 117(2A)(g) of the Act).

Conclusion

In those circumstances, therefore, it seems to me that I should make an order as to costs in this case. I do not accept, as notwithstanding the submissions made by Ms Lyndon, that this is a matter in which there are any indications that there are such special circumstances as would warrant an indemnity costs order.
The indemnity costs order may well be a rational and logical conclusion for proceedings before a Court in the sense that a party should perhaps be put back into the situation he or she was prior to the proceedings before the Court. But the traditional distinction between indemnity costs or solicitor-client costs or penalty costs or whatever term might be applied to it, and party/party costs has been long made in the Courts and I do not propose in this Judgment to overturn it.
I accept that the authorities in this Court in recent times have indicated that it is a matter within the discretion of the Court. But that discretion must be invoked by a proper course not by simply requesting that it be so invoked.
I, therefore, propose to make an order as to costs. I am told that the amount that has actually been incurred in the sense of the bill as being incurred by the wife was, including the fee for counsel, $23,793.80, less $663, so approximately $23,000 from 19 July until 8 April 2011.
I am told that there has been a further figure of $1,372.82 plus the costs of today incurred plus, as I indicated earlier, some time that the wife has lost today as a result of her attending Court. In all, it might be said that the probable costs that she would be obliged to pay, [to her lawyers] in effect, would be in the order of $25,000.
The order sought in such circumstances by Mr McKeown on behalf of the husband is that I should not make a fixed sum order but should rather make an order that the amount be either taxed or agreed. The parties have already been through a substantial period of difficulty in this matter and have spent money, one way or the other, on resolving the issues. It seems to me there are advantages in there being certainty soon as to the amount of costs involved. Assuming that his son is co‑operating with him as was foreshadowed in the terms of my Judgment, the son’s assertions to the Court and, in fact, the position as outlined by the husband personally and through his counsel today, is that the money would likely be borrowed to discharge the obligation owed to the wife.
It seems sensible that I should put a figure on costs so that he knows what he has to borrow and get on with it and that may not be resolved within the period in which he is obliged to make the order. I do not believe that I could justifiably determine what part, if any, of $25,000 might reasonably be said to be party/party costs.
I believe that the appropriate figure that I should order as a lump-sum figure to be paid [as to] costs is a sum of $16,000. I propose to quantify the costs including counsel’s fees in that sum.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks delivered on 17 May 2011.

Associate:

Date: 9 June 2011