Rogers & Rogers And Ors

[2010] FamCA 755

FAMILY COURT OF AUSTRALIA

ROGERS & ROGERS AND ORS [2010] FamCA 755

FAMILY LAW – COSTS – Discretion to award – Indemnity basis for costs sought

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 – Rules 6.03, 6.05 AND 19.04

Yunghanns v Yunghanns (2000) FLC 93-029
Limousin v Limousin (2007) FamCA 1178
Fennessy v Gregorian (2009) FLC 93-399
Colgate-Palmolive Co v Cussons Pty Ltd 118 ALR 248

APPLICANT: MS ROGERS

RESPONDENT: MR ROGERS

FILE NUMBER: BRC 3406 of 2009

DATE DELIVERED: 25 AUGUST 2010

PLACE DELIVERED: BRISBANE

PLACE HEARD: BRISBANE

JUDGMENT OF: YOUNG J

HEARING DATE: 19 AUGUST 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR McGREGOR

SOLICITOR FOR THE APPLICANT: BIGGS FIZGERALD PIKE

COUNSEL FOR THE RESPONDENT: MR NORTH SC

SOLICITOR FOR THE RESPONDENT: HERBERT GEER

COUNSEL FOR THE SECOND AND THIRD RESPONDENTS MR CARRIGAN

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER HEMMING & HART

Orders

IT IS ORDERED:

1. THAT the wife, within 120 days or upon the payment to her by the husband of the sum identified in paragraph 8 of the final property orders dated 19 August 2010, whichever event first occurs, pay the legal costs and disbursements of the second and third respondents, in a sum agreed or to be assessed on a party/party basis and of and incidental to each of the proceedings:

   (a)           before Murphy J on 27 July 2010;  and

   (b)           before Young J on 19 and 20 August 2010

2. THAT all extant applications for costs, including on an indemnity basis and orders for reserved costs previously made be otherwise discharged.

IT IS CERTIFIED

1. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for both parties.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 3406 of 2009

MS ROGERS

Applicant

And

MR ROGERS

Respondent

And

MS C
Second Respondent

And

MS C AS TRUSTEE FOR THE C FAMILY TRUST
Third Respondent

REASONS FOR JUDGMENT

1. By order of 27 July 2010 Murphy J granted leave for Ms C, in her own right, and as Second Respondent and Ms C as Trustee for the C Family Trust, as Third Respondent, to be joined as parties in the proceedings between the husband and wife.  Those orders were made following upon a defended hearing, made upon submissions, and when the respondents and each of the husband and wife were legally represented.

2. There are no reasons for judgment available and when questioned Counsel in the hearing before me stated that there were no detailed reasons given by Murphy J, the matter was dealt with on the papers, and costs were reserved to the defended hearing without particular reasons, or any issue as to the then quantum of such costs.

3. The application in a case for leave to intervene in the defended hearing by the respondents was filed 19 July 2010 and the orders sought highlight the urgency with which the matter was listed and with time to be abridged for the hearing of the application.  The response of the wife was filed on the day of hearing, 27 July 2010, and it specifically sought that no leave to intervene be granted to the respondents or otherwise such leave to be granted on a conditional basis to Mrs C only (and not in her capacity as trustee of her family trust).

4. Interestingly I observe that the wife sought orders as against the third respondent for her costs of and incidental to those interlocutory proceedings to be paid on an indemnity basis, or otherwise for Mrs C personally to pay such costs on an indemnity basis.  That approach of the wife and those specific orders sought as to indemnity costs are matters to which I have given due and proper regard in the assessment of just orders in the costs proceedings remaining before me for determination.

5. This defended hearing was to be listed before Murphy J but was transferred on short notice to me and the matter commenced on 19 August 2010.  At that time Mr North, Senior Counsel, appeared for the husband, Mr McGregor of Counsel appeared for the wife and Mr Carrigan of Counsel appeared for each of the Second and Third Respondents.

6. The husband and wife settled the s 79 proceedings before the Court and I pronounced final orders by consent.  I was advised that the intervening respondents were not parties to those out of court commercial and property negotiations but they had reserved for further consideration by the Court the issue of costs as between the wife and themselves.  They, or their legal practitioners, did not execute the typed and handwritten amended final form of court orders provided to the Court.  Mrs C, and both her solicitor and Counsel, were in Court when the property orders were pronounced by consent and certainly did not oppose and clearly indicated to the Court their acquiescence to the agreed outcome of those proceedings.  No part of the orders directly impacted upon the financial circumstances or assets of the respondents, save for the reserved costs as outlined above.

7. By those defended property orders the wife obtained a transfer of a suburban Brisbane property, subject to a mortgage and with a net equity of approximately $600,000, a payment of a loan account balance of $33,660 and a further lump sum payment of $500,000 to be paid by the husband within 120 days.  Additionally the husband’s superannuation entitlements were split in favour of the wife and she had then total superannuation of $115,000 and from the crystallisation of various commercial options, and after applicable tax had been paid, there was due and payable to her a net sum of approximately $790,000 or thereabouts over a stipulated time frame.

8. I have detailed that settlement outcome to highlight the financial circumstances of the wife and I find that she has a financial capacity to pay any order of costs that is found to be just in all of the circumstances of this application.

9. I was further referred to the financial affidavit filed by the wife on 14 July 2010 where her income and other personal assets, liabilities and expenses were detailed and I have read and had regard to the contents of that document.  The wife’s income from her employment is $1,033 per week gross and that well exceeds her personal expenditure.  Save for legal fees she has no other significant liabilities.  The capital sums to be received by her do place her in a comfortable financial position and certainly able to meet any order for costs now made, subject perhaps to the requested stay of 120 days.

10. I have been referred to the financial statement filed by Mrs C on 10 August 2010. Her weekly income is primarily received by a distribution from the R & C Trust and other interest income. She is not otherwise gainfully employed and relies on that investment income. Her expenses are said to be $760 per week and her capital property assets are disclosed and valued in that document. I have generally considered her financial circumstances as it is a relevant matter to be considered pursuant to s 117(2A) of the Family Law Act1975 (Cth) (“the Act”).

11. The s 79 orders provided that each of the husband and wife bear their own costs of and incidental to those proceedings. 

12. By paragraph 34 of those Orders all outstanding applications of the husband and wife and the further orders sought by the second or third respondents were dismissed but subject to the issue of costs between the wife and each of the second and third respondents which was then adjourned for hearing by me on submissions the following day, 20 August 2010.

13. On the costs application Mr McGregor of Counsel again represented the wife and Mr Carrigan of Counsel represented each of the second and third respondents.  The matter proceeded by way of detailed submissions over a period of some four hours and parties and solicitors were present in Court. 

14. The issue before the Court was the claim for payment of costs by the wife of the second and third respondents.  There was no counterclaim made by the wife for any of her costs to be paid. 

15. In the conduct of the proceedings Counsel for the respondents produced a folder of exhibits, marked as exhibit “1” in the proceedings which contained (under tabs) various letters and court documents referred to and relied upon on behalf of the respondents.  I was taken by Counsel to each of the documents and have carefully read and assessed them for the purposes of this Judgment and orders made.

16. Separately to exhibit “1” various other court documents and correspondence between solicitors were tendered and likewise I have read and had regard to all of those documents.

17. Exhibit “2” was a letter dated 16 July 2010 written by the solicitors for the respondents to the wife’s solicitors and copied to the husband’s solicitors.  That letter advised that the respondents would be filing an application to be joined in the matrimonial proceedings and specifically on the basis that an adjournment would not be sought and the trial then listed to commence 19 August 2010 before Murphy J would not be interrupted. 

18. By exhibit “3’ and pursuant to the letter that I required to be produced in compliance with Rule 19.04 of the Family Law Rules2004 the respondents solicitors advised the Court on 19 August 2010 that their costs to that date, and of and including the trial would be as follows:

    (a)for the hearing before Murphy J on 27 July 2010 a sum of $9,804.04.  That amount had been billed and paid by the respondent to her solicitors;

    (b)for the costs and outlays in the trial including the fees of Counsel to the end of trial a sum of $37,243.55.  Counsel’s fees were estimated at $12,512.50 as part of that total amount.  I understood those costs remain unpaid.

19. That letter advised the client that the stated quantum of legal fees may vary subject to the time, length or complexity of the case and other work done but I was advised in Court during this costs hearing that each of those amounts represented the total sum that have or are to be paid by the respondents to their solicitor for legal fees and disbursements.  That total is therefore $47,047.59.

20. As outlined before me the respondents sought costs on an indemnity basis for the proceedings on 27 July 2010 and otherwise costs assessed on a party / party basis for the defended hearing commencing 19 August 2010 and all work of and incidental to that hearing, inclusive of all solicitors preparation and Counsel’s fees.

21. Before examining the Court documents and the actions of the parties and their legal practitioners I first have regard to the Family Law Rules 2004 and in particular Part 6.2 thereof which provides as follows:

    “Rule 6.03     ADDING A PARTY

    6.03(1)         A party may include another person as a respondent by naming the person in the application.

    6.03(2)         A party may add another party after a case has stated by:

    (a)amending the application or response, as the case may be, to add the name of the person;  and

    (b)by serving on the new party a copy of the application or response, and any other relevant document filed in the case.”

22. It is further provided in Rule 6.05 for the intervention by a person seeking to become a party that:

    “RULE 6.05   INTERVENTION BY A PERSON SEEKING TO BECOME A PARTY

    6.05    If a person who is not a party to a case(other than a person to whom rule 6.06 applies) seeks to intervene in the case to become a party, the person must file:

    (a)      an Application in a Case; and

    (b)      an affidavit:

    (i)setting out the facts relied on to support the application, including a statement of the person’s relationship (if any) to the parties;  and

    (ii)attaching a schedule setting out any orders that the person seeks if the court grants permission to intervene.”

23. The Family Law Act provides in s 117(1) that each party to proceedings shall bear their own costs. The qualification provided for in sub-paragraph (2) thereof is that if the Court is of the opinion that there are circumstances that justify it in so doing then it may make such order as to costs as it considers just.

24. In considering what costs order, if any, should be made the matters that are relevant and must be considered are identified in sub-paragraph (2A) thereof and in the particular circumstances of this case, and following upon the submissions of Counsel they are:

    (a)the financial circumstances of each of the parties to the proceedings;

    (c)the conduct of the parties to the proceedings and in particular their action or inaction pursuant to Rules 6.03 and 6.05 of the Family Law Rules and otherwise generally as to all of the instructions given to solicitors, affidavits drawn and documents filed and related matters as addressed by Counsel in their submissions;

    (e)whether any party to the proceedings has been wholly unsuccessful;

    (f)whether either party to the proceedings has made an offer in writing to the other party to settle proceedings and the terms of such offer;

    (g)any other matter considered by the Court to be relevant.

    I have hereafter evaluated each of these factors which form the basis for my conclusions as to what is just and the orders that I have pronounced.

25. The essence of the submission of Mr Carrigan on behalf of the respondents is that, for the particular facts of this case, the wife could have added one or both of the respondents as parties pursuant to Rule 6.03 but did not do so and thereby left it to the intervenors to instigate legal proceedings to become a party pursuant to the provisions of 6.05 of the Rules.  It was said by him that it was that lack of decision making and action on behalf of the wife and her solicitors that was inappropriate and directly required the respondents to act to intervene in the proceedings or otherwise risk the attachment of or orders made against property or corporate entitlements and rights owned by or under their control.  I have therefore examined in more detail the various applications before the Court and other claims and legal discussions as between solicitors which occurred as a background to this costs application.

26. The corporate and commercial structures of the parties are explained in much detail in all of the affidavits that were before the Court in the s 79 proceedings.  A concise summary of the evidence of the respondents, and the background to the corporate entities and trusts, are contained within the affidavit of the respondent identified under Tab 2 in exhibit “1”.  V Pty Ltd (“the trustee company”) is the trustee of the R & C Trust, which is a unit trust in which 50% of the units are held by the respondents on behalf of a family trust.  The remaining units are otherwise held by the Rogers family.  The primary asset of the R & C Trust is a property at S.

27. That commercial background is important to understand that an initial order of the wife, as sought in paragraph 2 of her amended initiating application filed 27 January 2010, was an order for the husband to sign or transfer to the wife his legal and beneficial interest in that property without notice or regard to its co-owner.  Subsequently, and by a further amended initiating application filed by the wife on 16 July 2010, that order sought was then discontinued.

28. By way of background to that discontinuance there had been various letters passing between solicitors for each of these parties highlighting the corporate ownership of that particular property and the necessity for and legal representation of the respondents were such orders as sought to be pursued.  It was this somewhat adventurous and poorly considered order then sought as against the respondents which was the background to Mrs C seeking legal advice and the commencement of legal discussions between respective solicitors and which laid the foundation for legal work represented by the costs now claimed on behalf of the respondents.

29. Additionally and in her application filed 27 January 2010 the wife had sought further orders as against the trustee company for her to be appointed its sole director and other consequential orders as were then identified in paragraph 8 of that document of the wife.

30. Those orders were repeated by the wife’s solicitors on her behalf in her orders sought on 16 July 2010 and indeed they were there extended in their scope and effect.

31. Those corporate orders sought were the subject of correspondence between solicitors and in particular I was directed to the letter dated 14 July 2010.  That was a detailed letter, written for clarification, and establishing that the effect of the order then sought by the wife was that she intended that she would become an equal shareholder and director in the trustee company together with the respondents.  That was said to be contrary to the wishes and best interests of the respondents.  It was in that letter that the respondent’s solicitors stated that:

    “Given the wording of paragraphs 2 and 8 of the orders sought by the wife we invite the wife’s solicitors to clarify her position on this issue as a matter of urgency.

    Regardless of the wife’s intention, either interpretation adversely affects our client’s interests. As the retention of the [Rogers] family’s 50% interest in the unit trust, currently held through the [Rogers] Family Trust is in issue, our client is a necessary party under Rule 6.02 of the Family Law Rules 2004 and should have been joined and served.

    Our client’s only option at this point is to make an application to be joined to the proceedings.  However we will await correspondence from the wife’s solicitors by 5.00 p.m. today, 14 July 2010, clarifying her position and particularly clarifying which interpretation of the orders sought in her amended application filed 27 January 2010 are correct.

    In the event that we do not receive any correspondence from the wife’s solicitors by 5.00 p.m. today our client’s application will be filed urgently tomorrow morning”.

32. The reply letter from the wife’s solicitors is dated 15 July 2010 and substantially responds to the matters in issue.

33. That letter, which is contained under Tab 4, in exhibit “1” was written in a somewhat conciliatory and informative basis.  It did identify that if the respondents were not satisfied with the orders then sought they could advise and there would be a level of co-operation to ensure the orders reflected the stated position of the wife.  It was emphasised that the wife’s instructions were not to disturb any of the legal and beneficial entitlements of Mrs C through ownership and control of the various entities related to the S property.  The letter however continued to propose various amendments to the constitution of the trustee company and concluded on the basis that if the respondents wished to be joined as a third party they could consent to the application, including an adjournment of the listed defended trial.

34. A further letter was written that same day by the wife’s solicitors, on a somewhat more competitive basis, advising that the amended orders as sought by the wife would not be changed and that they were then instructed by her to oppose any joinder of the respondents.  That statement was accompanied by the requirement that the wife sought costs on any application brought by the respondents to be joined as a third party but an assurance was given and repeated that their legal and equitable rights were not intended to be altered by the orders then sought by the wife.  That however remained an issue between the parties.  It was in conflict with the final form of orders sought in her Outline of Case document.

35. I have further read and listened carefully to the submissions arising out of the interlocutory hearing before Murphy J. Mrs C identified issues in her further affidavit, Tab 6 of exhibit “1” and in the further letters passing between solicitors and dated 28 July 2010 and 5 August 2010. In particular the provisions of Part VIIIAA of the Act were there the subject of comment and identification as further and ongoing issues.

1. By letter dated 30 July 2010 the wife’s solicitors identified the particular reliance upon those relevant sections of the Act which were further dealt with in the follow up letter dated 5 August 2010.

2. On that same day the final solicitor’s letter tendered to the Court (Tab 10 of exhibit “1”) was faxed from the respondent’s solicitors to the wife’s solicitors and that letter is of some real significance in that it identified that:

   “We note that in paragraph 2 of your correspondence of this day you advised for the first time in these proceedings that your client will now be seeking an order that is binding on our client personally and specifically that [Ms C] register a transfer of shares from the husband to the wife in the trustee company.

   We note your client only confirmed he will be relying on Part VIIIAA of the Family Law Act in any respect on Friday 30 July 2010 in response to our facsimile dated 28 July 2010 requesting that you clarify this issue. We intend relying on this correspondence on the question of costs, noting your client has again materially changed the orders she seeks in her application, this time to seek orders that will bind our client directly and that the notice has occurred fourteen days before the trial”.

3. In the defended property proceedings before me the wife filed on 18 August 2010 her Case Outline of Argument.  She continued with her application to seek orders against the husband to resign from the trustee company and to transfer his share and interest therein to the wife and for consequential orders to be made as against the Rogers Family Trust.  Perhaps of more significance and under the heading “Third Party Orders” the wife there sought for the first time in these proceedings the following orders:

   “14.That the application of [Ms C] as trustee of the [C] Family Trust be struck out.

   15.That [Ms C] as trustee of the [C] Family Trust pay the costs of and incidental to the wife as the respondent to that application.

   16.That if this Court orders the husband to resign as trustee of the [Rogers] Family Trust and appoints the wife as trustee of the [Rogers] Family Trust, then [Ms C] as a director of [V] Pty Ltd shall consent to –

   (i)the resignation of the husband as an office bearer of [V] Pty Ltd;

   (ii)the transfer of any share held in the name of the husband to the wife;

   (iii)the appointment of the wife as a co-director of [V] Pty Ltd.”

4. All parties to the defended property proceedings agreed upon a schedule for filing affidavits and a Case Outline document.  By orders made in chambers on 16 August 2010 Murphy J endorsed those case management orders.

5. The respondents were therefore required to file the trial affidavit they intended to rely upon in the proceedings, and any affidavits of witnesses and a financial statement, and they complied with those orders.  Further, by paragraph 4 of those orders, they were required to file an Outline of Argument, a precise minute of the orders sought, a relevant chronology and a short summary of submissions in support of their legal arguments, including relevant case law.

6. That Outline of Case document is filed with the Court, document 42 in the Court Index. I find that there was considerable time, effort and cost required in the drafting and settling of that document. The orders sought therein respond to those orders as outlined by the wife and all matters then remained in issue and awaiting decision by the Court. The summary of evidence of the respondents included reference to the orders then sought by the wife pursuant to Part VIIIAA of the Act and that discussion and relevant evidence and the third party implications are discussed in some detail in that document.

7. The respondents dealt with the issue of costs in the concluding seven paragraphs of that submission and there in summary highlighted what they alleged to have been the failure of the wife to serve the respondents with documents which materially affected their interests.  It is said that the wife ought to have known that she was obliged to serve Ms C who was a legitimate third party in the proceedings and that she should have been named as a party and thus there would have been no requirement, by the respondents or each of them, to file proceedings to seek leave to intervene in the proceedings.  It is there further stated that costs incurred by the respondents have arisen directly from the actions of the wife and her solicitors in failing to serve and otherwise failing to act responsibly in these proceedings having regard to the known and declared interests of the respondents.

8. Those submissions of the respondents are perhaps of more significance given the legal arguments advanced by the wife’s solicitors on her behalf in paragraphs 15 – 18 (inclusive) of her Case Outline document.  Whilst the filing date of that document is known to the Court whether or not it was earlier served upon the solicitors for the respondents, as required by the chambers order of Murphy J, is unknown.  There does not appear to be any particular cross referencing within either of the Outline of Case documents that would identify a direct response by one to the other.  Nevertheless a careful reading of the wife’s submissions as against the respondents gives support and direction to her then position adopted by her on the advice of her legal practitioners.

9. The wife asserts in paragraph 17, in reliance upon the unit trust deed of the R & C Trust that the Court does not require the consent of any third party for the purposes of orders as sought by the wife.  Further in paragraph 18 thereof the intention to seek personal orders against the second respondent is clearly highlighted though I have due regard to the fact that argument is developed after the orders made by Murphy J on 27 July of this year in allowing the intervention of the third parties.

10. Somewhat belatedly the solicitors for each of the parties in these proceedings turned their attention to settlement discussions.

11. By letter dated 16 August 2010 which is exhibit “W2” of the wife in these proceedings they there submitted an open offer to the respondents solicitors and which was said to be relied upon at the conclusion of the trial as to costs issues.  That offer was for the third respondent to withdraw from the proceedings with no order as to costs and otherwise a conditional offer directed to the second respondent founded upon her consent to the wife assuming the corporate position of the husband should orders be made in the property trial and on that basis that no costs orders would be sought individually against Mrs C.

12. Given the previous exchange of correspondence between solicitors and the interlocutory hearing and all of the affidavits then filed the wife’s offer was somewhat tactical and largely limited in its scope and offering. 

13. Not surprisingly by letter dated 18 August 2010, exhibit “5” in these proceedings that offer was rejected with the additional observation that “had out client not opposed the orders sought by your client she would not have joined herself to these proceedings and incurred significant costs”.

14. Of importance, and as at the day prior to the defended trial commencing, there were no open offers or discussions whereby the wife was prepared to stand aside from orders impacting upon the second or third respondents.  There may have been good legal reasons which were never properly explained or otherwise there may have been tactical reasons to promote discussions out of court as to why those orders sought remained alive.  The consequence however was that the second and third respondents were required to maintain appropriate legal representation and to prepare for the defended hearing, including the filing of her trial affidavit and witness affidavits and otherwise complying with the further requirements of the Court.  All of these actions of the solicitors for each of the respondents were reasonable and proper.

15. The above chronology and facts as I have recorded in these reasons for judgment traverse all of the instructions of the clients and the actions of their respective solicitors in preparing their cases for trial.  The costs to both parties were substantial and the reality is that the s 79 proceedings were compromised out of court without resorting to any orders made against the respondents, or any financial contribution or other corporate actions required of them.

16. The respondents were properly entitled to intervene in the proceedings given the orders sought against each of them.  I find that the wife should more reasonably have considered the context and impact of her orders sought and have added each of the respondents as a party pursuant to Rule 6.03.  Such a course of action would have expedited the proceedings, limited costs and provided procedural fairness to each of the respondents.  It was common ground in the case, and Mr McGregor fairly conceded, that neither of the respondents had earlier been served with the wife’s amended application and orders sought.  Indeed it was only when the husband invited Mrs C to file an affidavit on his behalf that she was alerted to the orders sought against her personal and corporate interests.

17. Mrs C was entitled to take legal advice and thereafter be represented in the proceedings.  Her application to intervene was both responsible and necessary.

18. The wife’s solicitors at all times knew of the existing corporate structure of both the Rogers and the C family and their respective trusts.  The orders sought should have been more carefully considered and drafted in her initiating application.  Considerable cost and expense has been occasioned to the wife and particularly to each of the respondents by the lack of foresight and care in the drafting of appropriate orders sought.

19. These comments are most certainly relevant to the delayed consideration of necessary orders sought pursuant to Part VIIIAA of the Act, and as were identified and developed in the later correspondence between solicitors.

20. I conclude it was both reasonable, proper and necessary to the preparation of the respondent’s case for her trial affidavit to be prepared and filed and likewise for the affidavits of witnesses, notwithstanding that they were not required to give evidence given the settlement of all proceedings out of court.

21. I have earlier made reference to s 117 of the Act and in particular the matters to be considered if any order for cost is to be made on the basis that it would be a just outcome in the proceedings. I am satisfied that in her now settled financial circumstances the wife has the capacity to pay costs as I will order after she receives the $500,000 to be paid to her by the husband, as provided for in paragraph 8 of the property orders. I will stay the obligation of the wife to pay costs in these proceedings for 120 days, or the payment of that sum of money, whichever event first occurs. If then unpaid after that date interest must be paid on the balance then outstanding from time to time at the rate provided for in the Family Law Rules.

22. I do not make any conclusive finding upon sub-paragraph (f) of s 117(2A). Both offers were conveyed by solicitor’s letter very late in the proceedings and both were largely inconclusive and always likely to be rejected.

23. I am not assisted by sub-paragraph (e) thereof as the proceedings were concluded out of court.  Whilst clearly no orders were made against the respondent and her property and assets were not affected by the orders I nevertheless do not feel the necessity to make any concluded finding within this sub-paragraph.

24. It is primarily the conduct of the proceedings by and on behalf of the wife, her failure to add the respondents are parties, her failure to identify appropriate orders sought, her failure to serve and notify the respondents and ultimately the concluded outcome of the s 79 proceedings which did not impact upon the respondents that highlight the need for an order for costs.  I find in the circumstances that it is just for the wife to pay the costs of the respondents and I will so order.

25. As I have earlier set out the costs of and incidental to the trial on 19 and 20 August 2010 were sought by the respondents on a party / party basis.  That is appropriate.  The remaining issue now for consideration is whether the costs of the interlocutory hearing before Murphy J should be paid on an indemnity basis.

26. The Court has jurisdiction, in its discretion, to make an award of costs on an indemnity basis.  The purpose for such an award would be to more fully, or even wholly, have repaid to a party the legal costs and disbursements incurred by them in the proceedings.

27. The category of cases in which an indemnity costs order is appropriate are not closed and in the decision of Yunghanns v Yunghanns (2000) FLC 93-029 the Full Court (Lindenmayer, Holden and Mullane JJ) said (at [31]):

    “It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought”.

28. Counsel for the respondents referred the Court to the decisions of Limousin v Limousin (2007) FamCA, 1178 and in particular to paragraphs 41 – 49 (inclusive) thereof.  The subsequent case relied upon was Fennessy v Gregorian (2009) FLC 93-399 at paragraphs 53 – 73 (inclusive) thereof. I have read and considered each of these decisions of the Full Court together with the various other reported cases identified in or referred to in each of those judgments.

29. The principle underlining an award of indemnity costs is that there are exceptional or other very clear and significant circumstances so as to persuade the Court to depart from the usual award of costs on a party and party basis.  Those principles underpinning indemnity costs were classically summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd 118 ALR 248 at 256 where it was said:

    “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 / party basis;

    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 / party basis.  The circumstances of the case must be such as to warrant the court in departing from the usual course.”

30. Sheppard J continued, at page 257, and observed some of the circumstances which may warrant the exercise of the discretion to award indemnity costs and they included false and irrelevant allegations of fraud, misconduct that causes loss of time to the court and other parties, where proceedings were commenced or continued for an ulterior motive or even wilful disregard of known facts and clearly established law.  On the facts of the case now before me none of these particular issues were suggested by Counsel for the respondents though I have otherwise more carefully evaluated his submission on the circumstances which brought about, he would say by necessity, the actions of his client in filing an application for leave to intervene and all legal costs and outgoings associated therewith.  This course of action was said to be necessitated, it was argued, by the failure of the wife to add the appropriate and required respondents to her proceedings.

31. I conclude that the respondents have not established exceptional circumstances or matters of such significance upon which an award of indemnity costs could reasonably be pronounced.

32. In summary the failure to serve the respondents with the original application initiating proceedings and then the failure to add the respondents as parties and all of the other issues which I have evaluated in my reasons do not meet the high level of exceptional circumstances required to succeed on indemnity costs.

33. I will order, as to those interlocutory proceedings, that the wife pay the respondent’s costs, as agreed or as assessed on taxation, on a party / party basis.

34. I do well and truly understand that an award of costs on a party / party basis will leave a reasonable shortfall of costs to be paid by the respondents.  Nevertheless that ultimately is not the test of the basis on which indemnity costs could or should be paid.

35. Near to the conclusion of the submissions I raised with Counsel whether the Court would or could consider orders to avoid the necessity of the process of taxation and assessment of costs by a Registrar of this Court.  There was discussion in Court and Counsel was asked to consider, if indeed costs were to be ordered on a party / party basis, whether clients could give instructions and be comfortable with an order substituting the payment of 60% of costs and disbursements, in lieu of an order for assessment and taxation thereof.

36. Whilst one party agreed the other party would not compromise as was her right with any such suggestion from the Court which was intended in good spirit and to minimise cost and further involvement with solicitors.  On that basis, and in the context of the lack of agreement of one party, I will not make any such order and will require bills of costs to be prepared and taxation and assessment thereof by a Registrar, unless otherwise the parties through their solicitors can agree and negotiate out of court on these issues.

37. The quantum of costs is both substantial and somewhat surprising but I carefully avoid any criticism of the costs rendered by legal practitioners.  I observe from the exhibit “W1” that of the wife’s costs $20,000 were attributable to her solicitor’s costs on third party proceedings and that sum did not include Counsel’s fees.  There was a greater level of work and fees to be incurred on behalf of the respondents in terms of the interlocutory hearing and then in preparing for trial but nevertheless the quantum of $47,000 approximately for an interlocutory hearing and defended proceedings that settled out of court are most certainly significant.

38. For all of the above reasons I have concluded that a just order is for the wife to pay the legal costs and disbursements of the second and third respondents.  Such costs are on a party / party basis and include all fees and outgoings of and incidental to the proceedings before Murphy J and before myself.  I stay the payment for the period that I earlier outlined and otherwise all extant applications for costs, including indemnity costs and reserved costs are dismissed.

I certify that the preceding seventy-three
(73) paragraphs are a true copy of the reasons
for judgment of the Honourable Justice Young
delivered on 25 August 2010.

Associate: …………………………

Date:  ………………………….