Roswell & Roswell (No 2)
[2024] FedCFamC2F 248
•28 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Roswell & Roswell (No 2) [2024] FedCFamC2F 248
File number(s): ADC 5529 of 2020 Judgment of: JUDGE BROWN Date of judgment: 28 February 2024 Catchwords: FAMILY LAW – costs – contested property proceedings – wife seeks award of indemnity cost – husband made allegations of fraud which were not accepted at trial – proceeding delayed by husband’s conduct – husband indicated proceedings were consensually resolved but withdrew consent – matter proceeded to trial – husband unrepresented – Calderbank letters – two settlement offers made by the wife – offers not accepted by the husband – legal principles applicable to costs – costs order made in favour of the wife on a party/party basis Legislation: Family Law Act 1975 (Cth) ss 4(1), 75(2), 79, 117, 117C.
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 5, 7, 190, 191.
Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth) Sch 1, rr 4.01.
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) Ch 12; Pt 4.2, 12.8, Sch 3, rr 12.01; 12.08, 12.13, 12.17, 12.47,
Cases cited: Browne v Green (2002) 29 Fam LR 428
Browne v Green (2002) 170 FLR 411
Bulow & Bulow (No 5) [2021] FedCFamC2F 166
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Roswell & Roswell [2023] FedCFamC2F 579
In the Marriage of I & I (No 2) (1995) 22 Fam LR 557
In the Marriage of Kohan (1992) 16 Fam LR 245
In the Marriage of Steel (1992) 15 Fam LR 556
Pennisi v Pennisi (1997) 141 FLR 401
Prantage & Prantage (2013) FLC 93-544
Stasiuk & Guild [2021] FamCAFC 62
Watson & Ling [2013] FamCA 57
Division: Division 2 Family Law Number of paragraphs: 114 Date of hearing: 9 November 2023 Place: Adelaide Counsel for the Applicant: Mr Dillon Solicitor for the Applicant: Shorter Legal Pty Ltd Respondent: Appeared in person ORDERS
ADC 5529 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS ROSWELL
Applicant
AND: MR ROSWELL
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
28 FEBRUARY 2024
THE COURT ORDERS THAT:
1.Within thirty (30) days of the date of these orders, the Respondent Husband, pay the Applicant:
(a)The fixed sum of TEN THOUSAND DOLLARS ($10,000.00) by way of party/party costs arising from the proceedings and relating to the costs application made ancillary to it; and
(b)The sum of the Applicant Wife’s disbursements for her counsel’s fees in the fixed sum of FIFTEEN THOUSAND SEVEN HUNDRED AND FIVE DOLLARS AND SEVENTY-SEVEN CENTS ($15,705.77).
2.The Application in a Proceeding filed 19 June 2023 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These reasons for judgment relate to an application for costs, following contested matrimonial property proceedings.[1] The applicant in the proceedings is Ms Roswell.[2] In her application dated 19 June 2023, she seeks the following orders:
1.Pursuant to section 117 [of the] Family Law Act 1975, the Husband pays the Wife’s costs (on an indemnity basis) in the sum of $90,776.31.
2.The Husband pay the Wife’s costs of an incidental to this Application in a Proceeding.[3]
[1] See Roswell & Roswell [2023] FedCFamC2F 579.
[2] For ease of reading this judgment and without wishing to be disrespectful to her, I will refer to her as either the wife or Ms Roswell. I will adopt a similar nomenclature for Mr Roswell.
[3] See the Application in a Proceeding filed by the wife 19 June 2023.
The respondent to the application, Mr Roswell, was served with the application on 21 June 2023, by electronic means. Undoubtedly, Mr Roswell knows of the application, as he appeared in Court on the date allocated for its hearing, which was 9 November 2023.
However, Mr Roswell has not filed any answering documents. In addition, he did not seek the adjournment of the application. Rather, on 9 November 2023, he asserted that he was, in colloquial terms, broke financially and broken emotionally and wanted the proceedings to be over.
In general terms, I assessed his position as being opposed to the making of the cost order as sought by Ms Roswell on the basis that it is appropriate that each party bear their own costs arising from the case. It is also the tenor of his brief submissions to the Court that he has no financial capacity to pay any order for costs without suffering great personal hardship.
The substantive proceedings, between the parties, were protracted and marked by indications from Mr Roswell that they had been consensually resolved, which indications subsequently proved to be illusory, as the relevant proposals were either withdrawn or not acted upon by Mr Roswell.
In addition, Ms Roswell herself made two offers in writing to settle the proceedings. In her correspondence, which was professionally prepared by her solicitor, she made closely calibrated offers to settle the case, which included a definition of the relevant property pool and how the items contained in it were to be distributed between the parties.
In each such letter, it was indicated that, if the relevant offer was not accepted, the letter itself would be utilised in an application for costs before the Court in the event that any order ultimately made was of a similar quantum to the relevant settlement offers.
As will be shown, in due course, as these reasons unfold, given the final orders made in the case, each of the offers did prove to be apposite and accordingly it is the wife’s case that their rejection by the husband put her to unnecessary expense and so justify an order for cost to be made in her favour.
From time to time, throughout the proceedings, Mr Roswell was represented by solicitors and counsel. At other times, he withdrew his instructions and acted on his own behalf. In these circumstances, it is Ms Roswell’s position that this conduct was capriciously motivated and resulted in her incurring unnecessary costs.
In addition, throughout the proceedings, Mr Roswell alleged that Ms Roswell had behaved dishonestly, during the parties’ marriage, by fraudulently and clandestinely directing significant amounts of the parties’ joint funds, to her own benefit.
As a consequence, he and solicitors acting for him, filed numerous subpoenas, directed towards financial institutions at which the wife held accounts, seeking evidence of her alleged malfeasance. Again, it is the wife’s case that responding to those subpoenas added to her legal costs and unduly protracted the proceedings.
Ms Roswell denied all these allegations. It was her case that she had been the spouse responsible for managing the parties’ finances during their relationship, which involved the running of a business and a family trust, which had invested in rental properties financed by mortgage advances.
The final hearing took place on 1 and 2 March 2023, with judgment being delivered on 23 May 2023. This followed an earlier listing of the case for final hearing in August of 2022. A short time prior to the trial, Mr Roswell’s then solicitor ceased to act and Mr Roswell began to act on his own behalf. In this context, he failed to appear on the first day of the trial and later asserted that he had mistaken the day.
I contacted him, by telephone, from the courtroom and directed him to attend Court at 2.15 pm. To his credit, Mr Roswell did as was directed of him and appeared at Court. However, I was told by him and Mr Dillon, counsel for the wife that it was considered that the matter was capable of resolution.
In these circumstances, at short notice, it was arranged for the parties to have an impromptu conciliation conference with one of the Court’s registrars. When the matter returned into Court late on the afternoon of 8 August 2022, I was told the matter had resolved but time was needed to formalise the agreement. A mention date was allocated in ten days’ time thereafter.
However no consent order was forthcoming. I accept that it was Mr Roswell who resiled from the relevant agreement. Two days prior to the mention date, he re-engaged his former solicitors and instructed them to issue yet another subpoena to a bank in an attempt to uncover documentary evidence of Ms Roswell’s alleged financial dishonesty during the parties’ relationship.
It is Ms Roswell’s case that this conduct on Mr Roswell’s part unnecessarily and fruitlessly protracted the proceedings between the parties, which had already been significantly delayed. She has further deposed that she incurred legal costs, with solicitors other than those who currently represent her, which she dismissed because she could not afford them.
However, what she would characterise as Mr Roswell’s obsession with his belief that she had defrauded him, compelled her to re-engage solicitors, the cost of which has been unnecessarily inflated because of Mr Roswell’s tactic of alternating acting for himself then being represented.
It is noteworthy, in my view, that prior to the recent trial, Mr Roswell again dismissed his solicitor and acted on his own behalf. At the start of the trial, Mr Roswell sought time to attempt to negotiate a resolution of the matter with those advising Ms Roswell. This overture was rebuffed by Ms Roswell and her counsel. The trial proceeded.
The Court records indicate that Ms Roswell was represented by Ms MM of NN Lawyers from 30 November 2020 until sometime in August of 2021, when she began appearing in Court on her behalf, filing a notice of address for service on 5 November 2021.
Her current solicitor, Ms Shorter of Shorter Legal began to act for her from mid-2022 onwards filing a notice of address for service on 4 July 2022. Ms Shorter retained Mr Dillon of counsel to appear on Ms Roswell’s behalf at both the abortive August of 2022 trial and that of March 2023. His fees between 15 July 2022 and 1 March 2023 amount to $15,705.77.
The most significant finding made following the evidence in the case was that there was no basis whatsoever for Mr Roswell’s assertion that Ms Roswell had either concealed assets or had wasted the parties’ funds through incompetent accounting or through any misappropriation. This decision was not subject to appeal.
In the judgment, under the heading The Evidence I indicated as follows:
[I]n my assessment, [Ms Roswell]’s overall credibility in the case is unassailed and [Ms Roswell]’s case remained one of unfounded speculation and innuendo. Essentially, [Mr Roswell] believes that because he worked so hard, for such a lengthy period of time, during which many properties and motor vehicles were purchased, the parties must be better off now and therefore the only explanation that they are not is that someone has stolen from him. In my view, although I do not doubt the strong emotional attachment of [Mr Roswell] to his theory, he has provided no concrete evidence to support it.
[I]t is abundantly clear to me that [Mr Roswell] has been resistant to the expeditious resolution of these proceedings. The most rational explanation, certainly that proffered by [Mr Roswell], for this conduct has been that he wishes to inflict financial damage on [Mr Roswell]. However, whether [Mr Roswell] is motivated by some such explicable form of motivation or is just, in some other way, stuck and so unable to move on in a manner which is of assistance not only to him but his former partners, is impossible for me to say.
All that has to be said, at this juncture, is that [Mr Roswell] was by far the more reliable witness in the proceedings and she has clearly done all that was in her power to bring them to a conclusion. The same cannot be said of [Mr Roswell], whose case has been characterised by delay; withdrawal and then re-appointment of his legal advice; apparent settlement, which is subsequently repudiated; fruitless attempts to subpoena documents, which are then not relied upon; and most significantly inchoate and subsequently unsubstantiated claims of financial impropriety. [4]
[4] See Roswell v Roswell [2023] FedCFamC2F 579 at [107] & [112] – [113].
Ultimately, it was found that the net pool of assets to be divided between the parties was valued at a little over $2.2m. Controversies raised at trial included monies drawn from joint accounts to pay legal costs as they accrued. Evidence indicated that Mr Roswell had withdrawn $100,000 and Ms Roswell $150,000 from a line of credit, which had been used by each of them for legal fees and general living expenses. Ms Roswell also deposed that she had utilised an inheritance and borrowed from family to pay some of her legal costs.
In her evidence, Ms Roswell asserted that she had utilised $50,000 of the monies from the line of credit on financial support of her and the parties’ children and in these circumstances, it would not be fair to add back this sum into the asset pool.
I found as follows in respect of the issue of whether there should be any direct add back of sums related to legal costs:
Accordingly, the parties’ respective legal costs do not seem to be radically disparate and each has funded them from monies available to them. As such, the proceedings have been ruinously expensive for each of them. In these circumstances, I will approach the sums of money advanced by [Mr S], Aunt [Ms M] and [Ms Z] not as debts due to each of the parties and so requiring to be set off against the parties’ joint assets.
In the circumstances of this case, I do not think such a straight dollar for dollar add back of the sums concerned would be just and equitable given that there can be comprehensive and accurate accounting of all the sums of money accessed by the parties in respect of legal costs and each appears to have utilised joint funds to this end.
As previously indicated, the wife has foreshadowed that she intends to make an application for indemnity costs in an amount of $75,000.00 together with the unspecified amount incurred for in respect of the recently concluded trial.
I am not in a position, for obvious reasons, to deal with such an application before it is made, but am concerned at the potential for injustice to arise if the wife, on the one hand, receives a greater proportion of the parties’ assets on account of the husband’s general dereliction in pursuing these proceedings and then also is granted an additional award of costs. [5]
[5] See Roswell v Roswell [2023] FedCFamC2F 579 at [208] – [209] & [212] – [213].
Contributions were found to favour the wife by 7.5% largely on the basis of post separation factors relating to the parenting of the parties three children, who had lived exclusively with Ms Roswell with scant financial assistance from Mr Roswell. A further allowance was made of 7.5% in Ms Roswell’s favour following the Court’s assessment of factors arising under section 75(2) of the Act.
As previously indicated, I elected to approach the issue of how the parties had applied joint funds to legal costs, in a general way, pursuant to the rubric encapsulated in Watson & Ling pursuant to the provisions of section 75(2)(o). I said as follows:
These proceedings have been significantly protracted and highly controversial. As a consequence each of the parties concerned has incurred very significant legal costs, the full extent of which remain inchoate. What is clear is that they have been largely sourced from the parties’ joint funds.
In [Ms Roswell]’s case, she would characterise some of the monies used to pay her legal fees as being loans - $10,000.00 to [Mr S]; $10,000.00 to [Ms Z]; and approximately $45,000.00 in effect borrowed from herself in the form of the money gifted to her by Aunt [Ms M]. For reasons already provided, I do not consider that it would be just and equitable to regard these as joint debts given [Mr Roswell] has also incurred significant legal fees.
In addition, although it is likely to be the case that [Mr Roswell] has utilised more of the parties’ joint funds, post separation, chiefly because she was in control of the assets controlled by the family trust, it is clear to me that she had by far the greater level of financial need. In addition, her efforts have resulted in the preservation of assets, which has benefitted [Mr Roswell].
More significantly, I am satisfied that the manner in which [Mr Roswell] elected to approach the proceedings has led to their marked protraction. This in turn has resulted in [Mr Roswell] incurring more expense. In my assessment, in general terms, these are factors which must be taken into account as favouring [Mr Roswell].[6]
[6] See Roswell v Roswell [2023] FedCFamC2F 579 at [278] – [281].
In view, it is in this context that the Court must consider Ms Roswell’s application for costs. Necessarily, the Court must bear in mind two incongruent factors. Firstly, to a large extent, Ms Roswell was compensated in a general way for the costs incurred by her in the manner in which the Court exercised its discretion arising under section 79(4). Secondly, there is little doubt that Mr Roswell’s conduct led both the protraction of the proceeding and Ms Roswell’s costs being unnecessarily inflated.
Ultimately, the disposition of the Court, in practical terms, resulted in Ms Roswell retaining the parties’ most valuable asset – the former family home, valued at $910,000.00 and a sum of cash ($264,640.83) relating to the sale of an investment property. This was her preferred outcome.
Mr Roswell retained the home in which he was then living in together with the parties’ holiday home, which he indicated he wished to rent out so that it would provide him with an income stream. The retention of these two properties was an essential part of his preferred outcome.
In order to achieve it, it was necessary for Mr Roswell to pay Ms Roswell the sum of $145,000.00. The sum in question has been paid and the ownership of the relevant properties transferred. Accordingly, the issue of costs is the only outstanding matter between the parties, as I understand it.
THE CURRENT APPLICATION
As previously indicated, Ms Roswell seeks an award in her favour in an amount of $90,776.31, which I assume reflects a close to full indemnity of her costs. More recently she has provided a breakdown of her costs, which fall into four main categories:
·Counsel’s fees incurred between 9 February 2021 and 1 March 2023 totalling $18,603.73.
·NN Lawyers $44,991.22 (paid).
·Shorter Legal costs billed between 26 June 2022 and 6 March 2023 $26,682.76.
·Shorter Legal unbilled $3,131.70.
On my calculations, this totals $93,409.41. As previously indicated each party was found to have utilised the sum of $100,000 from joint funds towards payment of legal fees incurred during the proceedings.
In addition to her assertion that she was put to unnecessary expense by virtue of having to defend unjustified and unsubstantiated allegations of financial impropriety, it is also Ms Roswell’s case that Mr Roswell unreasonably refused to negotiate with her and imprudently rejected offers to compromise the proceedings, which in the light of the Court’s ultimate determination of the case warrant an award of costs in her favour.
On 23 October 2020, Ms MM wrote a detailed ten-page letter to Mr Roswell’s then solicitor, in which she calculated a pool of assets amounting to $2.4m and proposing a 60/40% division of property in her client’s favour on the basis that she retain the former family home and Mr Roswell retain the holiday home and the property then occupied by him.[7] It is Ms Roswell’s evidence that Mr Roswell did not respond to this offer.
[7] See Exhibit Ms Roswell-3 to the wife’s affidavit filed 19 June 2023.
It is also Ms Roswell’s case that Mr Roswell, when he did engage in some form of negotiation, in the lead up to the August 2022 hearing, behaved in a disingenuous fashion by knowingly asserted an inflated value for the former matrimonial home, in the context of ostensibly accepting Ms Roswell’s percentage division.
At the time of these negotiations, the property had been formally valued, as at June of 2022, at $910,000 (which value was ultimately accepted by the Court). Mr Roswell asserted that it was worth $1.3m but did not, and has not, subsequently provided a formal valuation to this effect. In this context, it should be noted that Mr Roswell’s attempts, at trial to establish a greater value than $910,000 were rejected by the Court.
I have already alluded to the circumstances surrounding the trial which had been scheduled for 8 and 9 August 2022. Clearly, in my view, in the period leading up to this trial, Ms Roswell had attempted, through her solicitors, to cogently and clearly delineate the pool of property available and posit what she regarded as a just and equitable division of that property.
In my view, it was highly regrettable that the urgently organised conciliation conference, which I was told by both parties had resulted in agreement, ultimately proved to be abortive. The collateral evidence available to me indicates that it can only be Mr Roswell who resiled from the agreement.
In these circumstances, I can readily understand why she declined to negotiate further with Mr Roswell on the day scheduled for the second trial on 1 March 2023. Necessarily any confidence that she might have that Mr Roswell would negotiate in any transparent way with her must have evaporated, particularly, as once again, he had elected to dispense with his solicitor and act on his own behalf.
Ms Roswell’s concerns, in this regard, can only have been heightened by the fact that, on 9 February 2023, Ms Shorter wrote to Mr Roswell’s then solicitor, Mr Becker, enclosing what she has been characterised subsequently as a Calderbank letter. Again, the letter proposed a 60/40% division of property in Ms Roswell’s favour.[8]
[8] Exhibit Ms Roswell- 10 to the wife’s affidavit filed 19 June 2023.
The essential nature of a Calderbank letter is that any offer to settle is not subject to any complete privilege. Rather its contents can be revealed in the context of an application for costs following the adjudication of a civil suit. This procedure was described in Cross on Evidence as follows:
This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but is now recognised to be of general application. The consequence of marking an offer “without prejudice save as to costs” is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties – they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.[9]
[9] J D Heydon, Cross on Evidence (Lexis Nexis, 12th ed, 2020) 1018 [25360].
Ms Roswell has provided another Calderbank letter, which Ms Shorter forwarded to Mr Roswell, when he was acting on his own behalf on 16 August 2022.[10] In my view, the evidence unequivocally indicates firstly that Ms Roswell wished to settle the proceedings; and secondly, Mr Roswell was on notice, from an early stage, that, if the matter did not resolve consensually, costs would be an issue.
[10] Exhibit Ms Roswell-11 to the wife’s affidavit filed 19 June 2023.
As is commonly the case in matters of this kind, each party asserts that the other has failed in their obligation to make a full and frank disclosure of their relevant financial circumstances. As previously indicated, I can find no basis in respect of this assertion so far as it pertains to Ms Roswell. I am not so sanguine so far as Mr Roswell is concerned.
As a consequence of its enabling legislation, the Federal Circuit and Family Court of Australia is subject to a broadly based system of case management both in terms of actual proceedings before it and what should occur prior to the instigation of such proceedings.
Section 190 of the Federal Circuit and Family Court of Australia Act 2021 (Cth)[11] provides a directive to the Court to, in the application of its practice and procedure, to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. This reflects the objects of the FCFCOA Act as contained in section 5 and is referred to as the Court’s overarching purpose.
[11] Hereinafter referred to as “the FCFCOA Act”.
Section 190(2) of the FCFCOA Act provides that the Court’s overarching purpose includes the following objectives:
·The just determination of proceedings;
·The efficient use of judicial and administrative resources;
·The efficient and timely disposal of cases; and
·The resolution of disputes at a cost proportionate to the importance and complexity of the issues raised by them.
Pursuant to section 191(1) & (2) of the FCFCOA Act both the parties and their lawyers are obliged to conduct litigation before the Court, including negotiations for settlement in ways that are consistent with the overarching purpose. Such principles inform section 191(4) which reads as follows:
In exercising the discretion to award costs in a civil proceeding, the Federal Circuit and Family Court of Australia (Division 2) or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).
It is the contention of Ms Roswell that Mr Roswell has consistently acted in a manner inconsistent with these principles which, of itself justifies some award of costs in her favour. I agree with this contention.
In his submissions to the Court, Mr Dillon conceded, very fairly in my view, that he was not in a position to justify an award on indemnity costs in respect of the monies paid to NN Lawyers, which neither he nor Ms Shorter were able to quantify. In these circumstances, his application was for an award of costs in an amount of $27,000.00 plus disbursements.
LEGAL PRINCIPLES APPLICABLE
Section 117(1) of the Act abolishes for the purpose of family law proceedings, the general rule that, in civil proceedings, costs follow the event. It provides that each party should bear his or her own costs in proceedings under this Act.
The expression proceedings is defined in both section 4(1) of the Act and section 7 of the FCFCOA Act in the following terms:
A proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceedings.
However, pursuant to section 117(2), if the Court is of the opinion that there are circumstances that justify it in doing so, it may, subject to a number of stipulated considerations, make such order as to costs as it considers just. The power is subject to the provisions of subsection (2A) and any applicable rules of Court. In this case, the applicable rules are the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).[12]
[12] Hereinafter referred to as “the Rules”.
The relevant considerations are set out in section 117(2A) of the Act and are as follows:
·The financial circumstances of each of the parties to the proceedings;
·Whether any party to the proceedings is in receipt of legal aid;
·The conduct of the parties to the proceedings, including in respect of issues of discovery and production of documents;
·Whether the proceedings were 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;
·Whether any party has made an offer in writing to settle the proceedings and the terms of any such offer; and
·Such other matters as the Court considers relevant.[13]
[13] See Family Law Act 1975 (Cth) s 117(2A).
In the case of In the Marriage of I & I (No.2)[14] the Full Court said as follows:
Section 117 confers upon the Court a broad discretion in relation to costs. That discretion is one which the court should not seek to fetter. As was pointed out by the High Court in Penfold v Penfold:
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 subs (1) is expressed to be subject to subs (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.
Subsection (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 (citations removed).[15]
[14] See In the Marriage of I & I (No 2) (1995) 22 Fam LR 557.
[15] See In the Marriage of I & I (No 2) (1995) 22 Fam LR 557, 558 (Nicholson CJ, Ellis and Buckley JJ).
Accordingly, the principle that each party should bear their own costs is to be regarded as being general in nature and in its application. It is subject to potential modification if one of the circumstances provided by section 117(2A) is engaged. There is no particular onus arising from any of these factors.
Rather, their application depends on the existence of sufficient circumstances to justify their application. In this context, given section 117(2A)(g) – other matters, which the Court considers relevant – the Court’s discretion to make an order for costs is a wide one. However, the discretion remains one which must be exercised carefully and judicially.
Given the inter-relation between subsections (1) and (2) and the nature of family law proceedings generally, orders for indemnity costs are extraordinary or exceptional in nature. The Full Court of the Family Court noted Inthe Marriage of Kohan that an order for indemnity costs as being a very great departure from the normal standard.[16] In this context, the Full Court said as follows:
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.[17]
[16] See In the Marriage of Kohan (1992) 16 Fam LR 245, 254 (Strauss, Lindenmayer and Bulley JJ).
[17] See In the Marriage of Kohan (1992) 16 Fam LR 245, 258.
In an earlier case concerning the award of costs in family law proceedings, I made some general observation regarding litigants in family law proceedings as follows:
It is frequently the case that litigants in family law proceedings have no personal experience of the court system or in dealing with legal professionals. A case involving division of marital property or arrangements for children may be the first time they have ever even entered a courtroom. Necessarily such cases are replete with emotion and, as such, do not enable the individuals concerned to exercise dispassionate judgment about the issues raised, and the cost, both in emotional and financial terms, of pursing their preferred outcome.[18]
[18] See Bulow & Bulow (No 5) [2021] FedCFamC2F 166 at [38].
I stand by those comments. Family law proceedings have these idiosyncratic features given the private nature and emotional content of the litigation involved. In this context, it is necessary to differentiate between party and party costs, on the one hand and indemnity costs, on the other and the rationale which attaches to each such type of costs order. This is potentially significant because of what has been described as the increasingly widening gap between the amounts able to be calculated by reference to the two heads.
In all his dealings with me, Mr Roswell was unfailingly polite. He presented, both during the final hearing and the costs application, as somewhat bemused and overwhelmed by the proceedings. In these circumstances, I accept that the end of the parties’ marriage represented an emotionally devastating occurrence for him, particularly as it coincided with the severance of his relationship with his three children.
However, at the same time, I do not consider that he can be considered a financial naïf or a totally unworldly person so far as litigation is concerned. In my assessment there are aspects of both naivety and disingenuity in how he has approached the case. Certainly, he displayed a singular inability to approach the case in a cohesive and rational manner and remains, to this day, fixated on his view that he has been the victim of a financial conspiracy. He submitted as follows during the costs hearing:
…Now, just in short, I had to pursue what I knew was wrong because I had brought my abilities to the business, and I taught [Ms Roswell] what how was – how the billing structure and the cost structure of our business was. Now, I have pursued this external to the court, because I feel this is not my realm, and I have pursued it through the ATO investigating, and I have pursued it through the federal government, and now it is in the hands of the treasury. Hopefully, things will came back and you will be sitting at the bench to undo whoopsies done.
In general terms, party/party costs are calculated by reference to a prescribed list of costs allowable for discrete events occurring in the litigation in question. Necessarily, their effect is not to reimburse a litigant for all of the costs payable as a consequence of such litigation. On the other hand, the effect of indemnity costs is to provide full (or close to full) reimbursement of costs incurred to a successful party.
In a number of cases, both in the Full Court of the Family Court and the Federal Court, it has been characterised as the usual rule, in jurisdictions in which costs are routinely awarded following the event, that such costs are to be calculated on a party/party basis. As described above, there is no such usual rule in family law proceedings. Rather the usual rule is that there should be no costs order.
Given the effect of section 117(1) of the Act, the fact that, in family law proceedings, party/party costs are not to be awarded in accordance with any such general rule, this underlines the exceptional quality of an award of indemnity costs, in family law proceedings. In these circumstances, it is to be recognised that an order for indemnity costs has a particular context in family law cases.[19] Essentially, indemnity costs in family law proceedings are even more exceptional than in jurisdictions in which the award of party/party costs, to the successful party, is the usual practice.
[19] See Prantage & Prantage (2013) FLC 93-544 at 87,216 [152] per Murphy J.
There is no closed category of cases in which indemnity costs may appropriately be awarded. In Colgate Palmolive Co v Cussons Pty Ltd (‘Colgate Palmolive’),[20] Sheppard J of the Federal Court indicated that there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice of awarding a party deserving of an award of costs only party/party costs. The kinds of situation in which indemnity costs might be considered included those in which a litigant had:
·Commenced or continued an action knowing it to have no chance of success;
·Made false or irrelevant allegations of fraud;
·Made groundless allegations, which prolonged the case concerned; and
·Imprudently refused an offer to compromise.[21]
[20] See Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
[21] See Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 231-233 (Sheppard J).
The essential attributes of the various situations outlined above is that each represents an exemplar of one which has resulted in a party having to defend aspects of litigation which should not have been brought at all. As such, the respondent to them has been put to a level of expense which cannot be justified on any base. Thus, the extraordinary circumstances necessary to justify the award of indemnity costs is established.
However, His Honour went on to indicate that the categories of matters in which the discretion to award indemnity costs could never be considered to be closed. Essentially, as I understand the relevant authorities, there can be no exhaustive lists of circumstances justifying the award of indemnity costs. Their award must depend on the idiosyncratic circumstances of the case concerned and the application of a closely considered judicial discretion to such circumstances.
In the current matter, I accept that it was entirely appropriate that Mr Roswell commence the relevant proceedings. It was obviously necessary that the financial relationship between the parties be terminated, and their property distributed between them. However, in my view, the other criteria detailed by Sheppard J are obviously applicable to how he approached the case throughout.
In this context, however, in my view, I am still bound to consider the special nature of family law proceedings with their heavy inherent emotional quotient. Necessarily, they are not analogous to other species of civil litigation, which very often have a more commercial flavour.
As was emphatically pointed by the Full Court in Stasiuk & Guild[22] I am bound to apply both Kohan and Prantage. Accordingly, I take it that, if I determine that there are circumstances which justify the making of a costs order in the wife’s favour, those costs should ordinarily be calculated on a party to party basis and an order for costs should be made only if exceptional circumstances can be demonstrated.
[22] See Stasiuk & Guild [2021] FamCAFC 62 at [8].
Exceptional is an ordinary English word, it means unusual; atypical; extraordinary. In my, the type of spousal conflict characterised in this case is, sadly, not atypical. Nor is the propensity for bitterly separated spouses to allocate very significant sums of money towards funding litigation arising between them. In this case, as was noted in the earlier judgment, the parties each agreed that they would utilise $100,000 each from their joint line of credit to fund these proceedings. Accordingly, I accept that each of the parties has expended significant sums of money in funding these proceedings.
As previously indicated, the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), which came into force on 1 September 2021, are the rules applicable to this matter. Chapter 12 thereof deals with costs.
In general terms, the current regulatory regime is to be characterised as being more proscriptive in terms of the obligations of legal practitioners in respect of costs and envisages the Court having a role in the management of the costs incurred by the parties in proceedings before it [see rule 12.01(1)(c)].
These proceedings are being determined in Division 2 of the Court, which has its own discrete regime of costs. In particular, it has a schedule of costs to be calculated by reference to fixed Court events.[23]
[23] See Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), particularly rule 4.01.
The procedure in respect of such methodology being designed to allow the ready calculation of costs, by either the parties themselves or the Court, which have been incurred following the various procedural stages of litigation from filing to finalisation with judgment. In my view, it is a scheme directed towards less complicated litigation.
I do not consider that this schedule is appropriate to the current matter, given the complexity and protracted nature of the proceedings concerned. Accordingly, pursuant to the rules, I am authorised to apply the general family law rules. As I understand it, Ms Shorter has calculated her costs pursuant to this provision. As previously indicated, Mr Dillon concedes that he is not in a position to provide such a calculation in respect of the costs relating to NN Lawyers.
If the Court determines to make an order for costs, it has a wide discretion as to the calculation of such costs. Pursuant to rule 12.17 of the Rules, it may order costs in a specific amount or to be assessed on a designated basis, such as by reference to party/party; solicitor/client; or on an indemnity basis. It may also direct that costs be calculated pursuant to a methodology prescribed in a schedule – Schedule 3 – to the Rules.
In brief, the schedule enables the calculation of fees by the length of documents prepared and the hourly rates of those engaged in working on the proceedings. This sets hourly rates for work done by a lawyer at $276.33.
It is implicit that the Court may make an order that costs be as determined or taxed by a Judicial Registrar pursuant to the provisions of Part 12.8. Only such costs as are fair and reasonable and which are proportionate to the issues arising are allowable.
If the Court has ordered that indemnity costs are to be paid pursuant to rule 12.47, the Judicial Registrar must have regard to the costs specified in Schedule 3 and any cost agreement. In addition, the rule directs that in assessing indemnity costs regard be made to what is reasonable.
Pursuant to rule 12.13(4) of the Rules a person seeking indemnity costs must provide to the Court a copy of any relevant costs agreement with his/her solicitor. The wife has provided her cost agreement with her solicitor and senior counsel.
Rule 12.17(2), in my view, enshrines the principle that if an order for costs is made, in a family law proceeding, ordinarily it should be on a party/party basis. More significantly, if any order for costs is made, pursuant to rule 12.17(3), the Court must have regard to the following considerations:
·the importance, complexity or difficulty of the issues;
·the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in sub-rule 12.08(2);
·the rates ordinarily payable to lawyers in comparable proceedings;
·whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
·the time properly spent on the proceeding, or in complying with pre‑action procedures; and
·whether expenses (paid or payable) are fair, reasonable, and proportionate.
Accordingly, in my view, the rules envisage that costs should be proportionate to the issues and complexity of the case. Rule 12.08(2) provides a list of criteria, for the Court to apply, as to whether costs have been incurred fairly, reasonably and proportionately. They include whether one or other of the parties concerned has:
·complied with all relevant rules and orders of the Court, including requirements that documents be filed or provided to other parties by a given date;
·acted reasonably in raising, pursuing or contesting a particular allegation or issue;
·made reasonable efforts, subject to the client’s instructions, to resolve the dispute through negotiation, mediation or arbitration;
·made reasonable efforts to narrow the issues in dispute;
·filed no more interlocutory applications than are reasonably necessary in the circumstances of the proceeding; and
·filed no more affidavits or other documents than are reasonably necessary in the circumstances of the proceeding.
Rule 12.08(3) provides criteria to determine whether a party’s costs are fair and proportionate. These include the complexity of the case involved; the quality of the work done; and the seniority of the lawyer concerned. In the current matter, it is not controversial that it was a matter which required a significant level of expertise on both sides, given the idiosyncratic circumstances of the parties.
Accordingly, the current regulatory regime does specifically envisage the making of indemnity costs orders. In addition, the current regime also makes reference to case management principles as being something potentially germane to whether costs should or should not be awarded and their overall quantification.
In Prantage the Full Court did not accept that the previous regulatory regime had negated the application of the earlier enunciated principles applicable to the award of indemnity costs. The majority said as follows:
We recognise that the Rules now expressly refer to orders for costs on an indemnity basis. We recognise also that the rules in this Court are not precisely the same as those in other courts; however, there is nothing in the Rules which indicates that the fundamental principle applied in other jurisdictions should not also be applied in this jurisdiction. Indeed rule 19.18[24] makes clear that the “default” position is that costs are awarded on a party/party basis.[25]
[24] The analogous rule is rule 12.17(2).
[25] See Prantage & Prantage (2013) FLC 93-544 at 87,209 [94].
In my view, although it is clear, I think, that the Court is to assume a greater degree of oversight in respect of costs, particularly in terms of disclosure of costs and the reasonableness of all concerned in proceedings, in terms of how they are to approach litigation in family law proceedings and more particularly lapses from what is regarded as objectively reasonable conduct have the potential to be sanctioned, I do not consider that I have authority to disregard what was said in Kohan regarding what is necessary to justify an award of indemnity costs. I also note the gloss provided by Prantage that in a jurisdiction which does not have a rule regarding costs following the events, the award of indemnity costs is even more exceptional.
DISCUSSION
It is now necessary to consider whether there are any circumstances which justify a departure from the general rule provided by section 117(1) by virtue of any of the considerations specified in section 117(2A). As a corollary of this exercise, it is also necessary to consider whether there are any circumstances of such an exceptional nature to justify an order for indemnity costs.
The financial circumstances of the parties
The purpose of an inquiry under section 117(2A)(a) is to enable the Court to have some concept of the relative financial positions of the parties.[26] As a consequence of conducting the final hearing in the current matter, I have extensive knowledge of each of the parties’ finances. At the date of judgment, neither party was in paid employment – Ms Roswell was studying and engaged in homemaking duties; whilst Mr Roswell was awaiting surgery.
[26] See Browne v Green (2002) 170 FLR 411 at 414, [20].
However, each received a significant amount of marital capital as a consequence of the Court’s determination. I appreciate, in Mr Roswell’s case that is not easily able to be liquidated. He needs somewhere to live and wishes to retain the holiday home as an income stream.
One of the more contentious issues at the trial was Mr Roswell’s capacity to return to work as a tradesperson, which is necessarily physically onerous work. Mr Roswell is in his late-fifties and contended that his capacity to return to this work is limited. I bear these factors in mind, but in my view, his apparent lack of liquidity should not alone prevent an order for costs being made.
Receipt of legal aid
Neither party was in receipt of legal aid during these proceedings. Accordingly, this is not a relevant consideration.
Conduct of the parties
This is the most relevant criterion. It deals with the conduct of the parties in a general sense, not merely in respect of procedural issues and directions. This is clear from the specific wording of the provision, which is as follows:
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.[27]
[27] See Family Law Act 1975 (Cth) s 117(2A)(c).
In my view, it cannot be denied that the conduct of Mr Roswell in the proceedings has added significantly to the costs incurred by Ms Roswell. I accept that his fixation with his view that she had salted monies away, leading him to issue subpoenas to a wide variety of financial institutions, leading to the production of a plethora of documents, which those advising Ms Roswell had to consider was one such factor but there were others.
Ms Roswell had to prepare for a portended financial audit, which did not materialise. In addition, she herself, with her legal advisers, had to engage in a forensic analysis of the parties’ various business structures to negate the husband’s persistent allegations of financial irregularity and deception.
As previously indicated, Mr Roswell chose to be represented and then acted on his own behalf. In my view, this was a tactical device on his part. It made it difficult for Ms Roswell to engage with him in a productive fashion.
Most significantly, the husband indicates that he accepted proposal of settlement than resiled from them. One trial was lost. The proceeding lasted more than two years. These factors all favour the wife’s application for costs, including her claim for indemnity costs. As previously indicated, when given an opportunity to present his claims of malfeasance against Ms Roswell, Mr Roswell singularly failed to prosecute them.
Failure to comply with previous orders
In my view, Mr Roswell did not comply with a number of the orders of the Court and as delineated above, when he chose to represent himself, this made the active management of the case more difficult.
Party wholly unsuccessful
To a certain extent each of the parties has been successful. One of the extraordinary ironies of this case is that Mr Roswell was, ostensibly at least, open to the division of property, which the Court ultimately adopted.
Offers to settle in writing
This, along with the respective financial circumstances of the parties, constitutes the most important consideration in this case. The import of section 117(2A)(f) is to ensure that, when offers to settle are made, they are seriously considered by the other party concerned.
Litigation is expensive and for that reason is not to be embarked upon lightly. Accordingly, Courts such as this one should encourage the parties in litigation to seek a compromise of their proceedings and should discourage a party from cavalierly disregarding any reasonable offers to settle.
Generally speaking, negotiations between the parties and/or their legal advisers, to compromise proceedings under section 79 of the Act are privileged.[28] Section 117(2A)(f) does not specifically delineate how an offer to settle proceedings is to be made, other than it is to be made “in writing”. Section 117C is more specific. It authorises offers to settle in accordance with rules made by the Court and stipulates that such offers are not be disclosed to the Court itself, until such time as an application arises under section 117(2) of the Act.
[28] See In the Marriage of Steel (1992) 15 Fam LR 556, 560 (Nicholson, Strauss and Nygh JJ).
Part 4.2 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) stipulates that an offer to settle is made without prejudice unless the offer states that it is an open offer. Such offers need not be filed with the Court. They may also be withdrawn. They remain privileged until an issue of costs arises following the completion of the matter.
In Browne v Green, the Full Court said as follows:
We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. 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 a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.[29]
[29] See Browne v Green (2002) 29 Fam LR 428, 439 [57] (Kay, Coleman and Warnick JJ).
In my view, each of the offers to settle, advanced by Ms Roswell, were carefully considered and closely calibrated. Ms Shorter went to some pains to calculate the asset pool and explain the basis of the division proposed by her. If Mr Roswell had accepted the offers in question, each of the parties would have been spared considerable expense and anguish.
In addition, the ultimate determination of the Court was in proximate terms to the outcome proposed by Ms Shorter both before the August 2022 trial and after the conciliation conference negated by Mr Roswell. In Pennisi v Pennisi,[30] the Full Court of the Family Court said as follows:
“…it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror… We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded…
The plain words [of section 117(2A)(f)] do not limit a Court’s attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the Act carry the same consequences as payment into Court in common law matters.
We do however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight should be given to this factor in considering the question of costs. The principle must not, however, be rigidly applied. Offers must be seen within the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that if would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.” [31]
[30] Pennisi v Pennisi (1997) 141 FLR 401 (Nicholson CJ, Barblett DCJ and Faulks J).
[31] “Pennisi” at [411].
In all these circumstances, it was not objectively reasonable for Mr Roswell to have rejected the two offers in question. Ms Roswell’s offers were commercially based and a pragmatic compromise motivated by her understandable desire to avoid vitriolic litigation.
CONCLUSIONS
At the end of the day, it is the responsibility of the Court to balance the various matters set out in section 117(2A) to arrive at a result, which it considers just. I am well aware of the serious consequences for the husband, if an order for indemnity costs is made against him. I accept that he is not likely to have ready access to a liquid sum and it is only in exceptional circumstances that the Court should make an order for indemnity costs, given the general rule applicable to family law litigation.
At the same time, in my estimation, Mr Roswell’s conduct in the litigation requires some form of censure in an award of party/party costs in Ms Roswell’s favour to reflect three facts primarily. Firstly, the outcome proposed by her solicitor in the relevant Calderbank letters was the one reached by the Court. Secondly, none of the allegations of financial impropriety alleged by Mr Roswell were made out and his attempts to establish them added to Ms Roswell’s costs. Thirdly, Mr Roswell reneged from his indications both to Ms Roswell and the Court that the matter had settled.
Accordingly, I have reached the conclusion that an award for costs should be made in the wife’s favour. The more difficult aspect of the case is considering what should be the quantum of those costs. As previously indicated the Court has a wide discretion as to the manner in which it calculates costs. I do not propose to make an order referrable to the costs incurred by Ms Roswell prior to the involvement of her current solicitor.
I also keep in mind the fact that each party were found by me to have allocated the same amount of jointly owned money towards the provision of their legal expenses and in a diffuse sense issues to do with exposure to legal costs were a factor in the Court determining that the section 75(2) factors, particularly the general ones encapsulated in section 75(2)(o) of the Act, favoured the wife and called for an adjustment in her favour. In my view, these factors call for a discount on the amount of costs which otherwise would be awarded.
In these circumstances, I propose to allow Ms Roswell the sum of $10,000.00 by way of party/party costs together with disbursements, relating to her counsel, Mr Dillon’s fees, in an amount of $15,705.77, which total $25,705.77. For all these reasons, the orders of the Court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 28 February 2024
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