Ricci and Jones (No.2)
[2011] FMCAfam 86
•10 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RICCI & JONES (No.2) | [2011] FMCAfam 86 |
| FAMILY LAW – Costs – summary dismissal of de facto property application – no prospect of success – whether circumstances justify costs order – whether circumstances justify indemnity costs order. |
| Family Law Act 1975, s.117 |
| Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; [1993] FCA 536; Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited [1998] FCA 202; (1998) 81 ALR 397; Penfold v Penfold (1980) 144 CLR 311; (1980) 54 ALJR 142; (1980) 28 ALR 213; (1980) 5 Fam LR 579; Yunghanns & Yunghanns (2000) 26 Fam LR 331; (2000) FLC 93-029; [2000] FamCA 681 |
| Applicant: | MS RICCI |
| Respondent: | MR JONES |
| File Number: | MLC 5237 of 2010 |
| Judgment of: | Riley FM |
| Hearing date: | By way of written submission. |
| Date of Last Submission: | 31 January 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 10 February 2011 |
REPRESENTATION
| Counsel for the Applicant: | N/A |
| Solicitors for the Applicant: | Schetzer Constantinou |
| Counsel for the Respondent: | N/A |
| Solicitors for the Respondent: | Fong & Co |
ORDERS
The applicant pay the respondent’s costs of the property aspects of the amended application filed on 10 June 2010 fixed in the sum of $5865.
IT IS NOTED that publication of this judgment under the pseudonym Ricci & Jones (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 5237 of 2010
| MS RICCI |
Applicant
And
| MR JONES |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for indemnity costs in relation to the summary dismissal of an application for property settlement. The applicant claimed that she had been in a de facto relationship with the respondent. In the principal judgment, it was held that the applicant had no prospect of succeeding in her claim.
Legislation
Costs applications in family law matters are governed by s.117 of the Family Law Act 1975. That section relevantly provides that:
(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.
The High Court considered s.117 in the matter of Penfold v Penfold (1980) 144 CLR 311. Section 117 has been amended since that case was decided but is substantially the same. The High Court said of s.117 that:
12.It is an accurate description of s 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s 117 (2). As sub-s (1) is expressed to be subject to sub-s (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
13.Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s 117 (2) in "a clear case".
14.Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent (1970) 92 WN (NSW) 503, at p 505). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
The s.117(2A) matters
I will address in turn each of the matters under s.117(2A) of the Act.
The financial circumstances of each of the parties to the proceedings
The parties agreed that the respondent was in a better financial situation that the applicant. Neither party filed a statement of financial circumstances.
The costs application proceeded by way of written submissions. The order for the filing of written submissions provided for the parties to also file affidavits in support in relation to the costs issue. Neither party did so. Both made various allegations about the other party’s financial circumstances in their written submissions. However, those allegations were not made on oath or affirmation and were not tested.
The applicant in the substantive proceeding filed affidavits which touched on the parties’ financial circumstances. That evidence was not tested, because of the course which the substantive proceedings took.
However, it seems clear from the material that the respondent is very wealthy and the applicant is on Centrelink benefits. On the other hand, the applicant receives a good deal of financial assistance from her family, which is also quite wealthy, and from some of her friends.
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
Neither of the parties is in receipt of legal aid.
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
The applicant criticised the respondent for not filing a response promptly and in accordance with the rules of court and certain consent orders. The application originally only concerned overseas travel by the parties’ daughter. On 19 August 2010, the court permitted the respondent to be served by the documents being delivered to a firm of lawyers. An affidavit of service filed on 25 August 2010 indicates that the initiating application and related documents were delivered to the firm of lawyers on 25 August 2010. The respondent filed a notice of address for service on 30 September 2010. It named a different firm of lawyers as his solicitors.
The applicant filed an amended initiating application on 5 October 2010, which raised the de facto property claim. The respondent did not file a response until 7 December 2010. The delay was in part explained by the parties agreeing to undergo paternity testing of their daughter.
In his response, the respondent sought orders that the property aspects of the application be struck out and that the applicant pay his costs on an indemnity basis. The affidavit in support said that the applicant and respondent had never resided in a de facto relationship. The respondent said further that he understood that his solicitor had first raised the issue of jurisdiction on 9 November 2010 and had later sent a letter dated 3 December 2010 to the applicant’s solicitor. That letter said, in part:
In our view the following orders in your client’s Amended Initiating Application filed 5 October 2010 (your client’s Application) are not within the jurisdiction of the court irrespective of whether our client is the biological father or not:
Final Orders:
1 and 2
Interim or Procedural Orders Sought
1, 2, 3, 4, 5, 6.
Our clients did not live in a domestic relationship as defined by 4AA of the Family Law Act, (1975).
We refer you to that Section.
None of the circumstances referred to in 4AA(2) exist.
Pursuant to S90SB a court may only make an order pursuant to the Sections set out in relation to a de facto relationship if the court is satisfied:
(a) That the period, or the total of the periods of the de facto relationship is at least two years; or
(b) That there is a child of the de facto relationship;
As there was no de facto relationship there is no jurisdiction of the court.
Further, it is clear from the plain meaning of that section that a child does not give right to property proceedings and that it is a child in a domestic relationship of less than two years that gives the court jurisdiction for property proceedings.
Put another way, the mere fact that a couple have children does not give a party a right to make a property application in a court of appropriate jurisdiction.
Please discontinue your client’s Application filed 5 October or file a Further Amended Initiating Application by 7 December 2010.
If you fail to do so application will be made to the court at the adjourned hearing date to strike out your client’s Application and in support of that application to strike out we will produce this letter and any other subsequent correspondence in support and on the question of indemnity costs.
The respondent argued, and I accept, that the applicant had sufficient notice of the arguments to have withdrawn the property aspects of the proceeding prior to the substantive hearing on 17 December 2010, and to have consequently avoided the costs of that hearing for both parties.
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The proceedings were not necessitated by the failure of a party to comply with previous orders of the court.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The applicant was wholly unsuccessful in the substantive proceedings.
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
It seems that there were no offers to settle the proceedings, other than the respondent’s demand for the applicant to discontinue her claims.
Such other matters as the court considers relevant
The respondent submitted that the applicant had brought the application in wilful disregard of known facts and for an ulterior motive. Consequently, the respondent argued that this case warranted an order for indemnity costs. The applicant argued that she had brought her application in good faith, believing it would succeed.
Indemnity costs
The respondent relied on the decision of the Full Court of the Family Court of Australia in Yunghanns & Yunghanns (2000) 26 Fam LR 331; (2000) FLC 93-029; [2000] FamCA 681 to say that an order for indemnity costs may be appropriate in family law proceedings.
In Yunghanns, reference was made to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248. In an often-cited passage, his Honour said at paragraph 24:
2.The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. … In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3.This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. …
4.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. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, "the categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata.
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson (1987) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6.It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
Clearly, Colgate-Palmolive was decided in the context of the Federal Court Rules. Those rules apply in general civil matters where it is customary for the losing party to pay the winning party’s costs on a party and party basis. The present case arises under the Family Law Act 1975, where it is customary for each party to bear his or her own costs.
Nevertheless, in Yunghanns, the Full Court of the Family Court ordered indemnity costs. In that case, the husband and a number of companies under his control succeeded in an appeal. The husband and his companies sought costs orders on an indemnity basis against the wife, the husband and wife’s son and daughter, the wife’s solicitors and counsel and the son’s solicitors. The legal practitioners responded to the effect that the husband and his companies should pay their costs on an indemnity basis. The husband and his companies then withdrew their application against the legal practitioners. The Full Court ordered the husband and his companies to pay the legal practitioners’ costs on an indemnity basis.
In reaching that conclusion, the Full Court in Yunghanns at 87,471 noted with approval earlier authority to the effect that:
However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should ... understand that such an order is a very great departure from the normal standard,
and
… the Court 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.
In Yunghanns, the particular matters that justified an order for indemnity costs were expressed as follows:
32.In this case we consider the facts that the appellants instituted proceedings against the non-parties for an order for costs, on an indemnity basis, founded upon very serious allegations of behaviour which, if established, might well be regarded as unprofessional conduct, and then withdrew the proceedings when met with defences which counter-claimed for costs on the same basis, are quite sufficient to enliven the discretion to award indemnity costs against the appellants, and indeed calls for the exercise of that discretion in the non-parties’ favour. Although the appellants, in withdrawing their claim for costs against the non-parties, have not withdrawn the allegations upon which that claim was founded, it seems to us that the withdrawal of the application, in the circumstances in which that occurred, is tantamount to a concession that the application was ill-conceived, and should never have been made.
33.In any event, none of the material relied upon in support of the allegation upon which the application was founded satisfied us that any of the non-parties was guilty of causing or allowing false or misleading evidence or submissions to be put before the court. We are of the opinion that the evidence and submissions advanced on behalf of the respondents before the trial judge and before us, while in some respects erroneous, and perhaps even misguided, were not “false” and/or “misleading”, so as to justify a claim for costs being made against the legal representatives of those parties, let alone a claim for costs against them on an indemnity basis.
In the present case, the respondent apparently based his claim for indemnity costs on the circumstances mentioned in Fountain Selected Meats (Sales) Pty. Limited v. International Produce Merchants Pty. Limited[1988] FCA 202; (1988) 81 ALR 397, where Woodward J said (at 400-401):
I believe that it is appropriate to consider awarding
“solicitor and client” or “indemnity” costs, whenever it
appears that an action has been commenced or continued in
circumstances where the applicant, 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 or the clearly established law. Such cases are,
fortunately, rare. But when they occur, the court will need to
consider how it should exercise its unfettered discretion.
Fountain Selected Meats was, of course, a civil case conducted in the Federal Court, rather than a matter conducted under the Family Law Act 1975.
I accept that, in an appropriate case, indemnity costs can be awarded by this court in its family law jurisdiction. However, those cases will always be rare, probably even more rare than the cases in which it is appropriate to order indemnity costs in general civil proceedings.
Conclusion
I consider that in this case, there are circumstances that justify the court ordering the applicant to pay the respondent’s costs on scale. The known facts were such that the applicant could not have succeeded. Indeed, one might suspect that the applicant brought the proceedings for the ulterior purpose of negotiating to receive a small percentage of the respondent’s wealth.
If that suspicion were accurate, this case would fall within the class of cases in which an order for indemnity costs might be warranted. However, on balance, I do not consider that it would be appropriate to order indemnity costs in this case. The disparity in the financial positions of the parties militates against such an order. Moreover, the respondent was represented by senior counsel who was undoubtedly much more expensive than a junior counsel of the necessary skill and experience. Nevertheless, the case was bound to fail. Consequently, the circumstances of the case demand that there be a costs order against the applicant. Costs on scale seem to me to be appropriate.
The amended application filed on 5 October 2010 also sought an order that the applicant have sole parental responsibility for the daughter of the applicant and the respondent. However, the parenting part of the proceedings was relatively inconsequential until after the summary dismissal of the property proceedings. I do not consider it would be appropriate to order the applicant to pay any of the respondent’s costs in so far as they are referable only to the parenting proceedings. Indeed, such costs have not been sought. However, to the extent that any legal work concerned the property aspect of the proceedings and, to a minor extent, the parenting part of the proceedings, I consider that the applicant should be responsible for the respondent’s costs.
By my calculation, the appropriate costs on scale in this matter are as follows:
Stage 1: Initiating or opposing application up to completion of first court day on 7 December 2010
$1760
Daily hearing fee
$880
Advocacy loading
$440
Stage 2: Interim or summary hearing on 17 December 2010
$1465
Daily hearing fee
$880
Advocacy loading
$440
Total
$5865
Before pronouncing orders, I will ask the parties to confirm or correct the costs as I have calculated them.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate:
Date: 10 February 2011
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