Roydon & Roydon
[2024] FedCFamC1A 105
•5 July 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Roydon & Roydon [2024] FedCFamC1A 105
Appeal from: Roydon &Roydon [2023] FedCFamC2F 1265 Appeal number(s): NAA 297 of 2023 File number(s): CAC 90 of 2021 Judgment of: RIETHMULLER J Date of judgment: 5 July 2024 Catchwords: FAMILY LAW – APPEAL – COSTS – Where the primary judge ordered the appellant pay costs on an indemnity basis – Where the parties made several Calderbank offers – Where outcome achieved by respondent not equal to or better than the offer – Where offer would not have resolved entire proceedings.
FAMILY LAW – APPEAL – COSTS – Indemnity costs not to be awarded simply as a result of achieving a better result than an earlier offer – Unreasonable refusal of an offer in family law proceedings is not necessarily an “imprudent” rejection of an offer for purpose of indemnity costs application.
FAMILY LAW – APPEAL – COSTS – Specific considerations – Lack of success on an issue or interim application can be taken into account when considering costs – Misconduct of party in incurring excessive costs only relevant on costs application to the extent it has caused the other party to incur greater costs in the proceedings.
FAMILY LAW – APPEAL – COSTS – Importance of costs scales in the court rules as setting a reasonable rate for charges by legal practitioners – Regard to be had to at least estimated costs calculated on the costs scale when making significant costs orders – Informal “rules of thumb” estimating difference between “solicitor and own client costs” and scale costs are of insufficient accuracy to be relied upon as each solicitor charges at different rates.
Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 12.17, 12.48
Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth)
Cases cited: Badawi & Badawi (Costs) [2017] FamCAFC 196
CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 76
Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248; (1993) 46 FCR 225
Galbadon & Galbadon [2015] FamCAFC 59
House v The King (1936) 55 CLR 499; [1936] HCA 40
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42
Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664; [2015] FamCAFC 157
Murray & Murray (2020) FLC 94-000; [2020] FamCAFC 293
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Paradin & Paradin (2020) FLC 93-991; [2020] FamCAFC 245
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Prantage & Prantage (2013) FLC 93-544; [2013] FamCAFC 105
Re Marsland & Marsland [1902] St R Qd 219
Roydon & Roydon [2022] FedCFamC2F 533
Warbrick & Warbrick (No. 2) [2021] FamCAFC 101
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; [2023] HCA 48
Withers & Russell (No 2) [2022] FedCFamC1A 197
Worth & Worth (No. 2) (2019) FLC 93-910; [2019] FamCAFC 126
Number of paragraphs: 116 Date of hearing: 27 March 2024 & 12 April 2024 Place: Parramatta Counsel for the Appellant: Ms Bateman (direct brief) Counsel for the Respondent: Ms McMahon Solicitor for the Respondent: GPG Lawyers ORDERS
NAA 297 of 2023
CAC 90 of 2021FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR ROYDON
Appellant
AND: MS ROYDON
Respondent
ORDER MADE BY:
RIETHMULLER J
DATE OF ORDER:
5 JULY 2024
THE COURT ORDERS THAT:
1.Appeal NAA 297 of 2023 be allowed and the Application in a Proceeding filed on 31 October 2022 be remitted for rehearing.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
RIETHMULLER J:
INTRODUCTION
The appellant appeals against an order made on 3 October 2023 requiring the appellant to pay the respondent costs fixed at $100,000, following the settlement of the parties’ property and parenting dispute in late 2022.
The primary judge was confronted with a difficult costs application following bitterly contested litigation. The parties’ legal fees in the proceedings were staggering. Whilst the property pool, inclusive of superannuation and add backs, was under $1.3 million, the parties’ costs were over $1 million, with around $793,600 of that sum being the appellant’s costs and around $264,600 being the respondent’s costs (at [5]). The difficulties confronting the primary judge were exacerbated by the volume of material filed on the costs’ application and submissions. The comparisons of earlier offers and the final property orders were, at best, confusingly opaque (a difficulty that continued at the hearing of the appeal). The appellant failed to put significant arguments to the primary judge and the respondent made submissions that were wrong in law.
BACKGROUND
The parties (who are in their mid to late 30s) commenced their relationship in 2006 and married in 2007. They separated on a final basis in January 2021. There are three children of the relationship (who are 16, 12 and 8 years of age).
The parties were polarised in their views from the outset. At the commencement of the proceedings in January 2021 the respondent sought orders for equal shared parental responsibility for the children to live with her, for the younger two children to spend supervised time with the appellant one day per week, and no specific orders for the eldest child to spend time with the appellant (instead, that she would encourage the eldest child to attend with the younger two children). The respondent also sought orders for the appellant to have a mental health assessment, complete anger management and parenting courses, and engage with the eldest child’s therapist in order to repair their relationship (at [37]).
The appellant sought equal shared parental responsibility, for the children to live with him, for the children to spend no time with the respondent for 28 days (during which period the respondent would undertake drug and alcohol testing), and thereafter, for the children to spend time with the respondent one day per week (at [38]).
The allegations between the parties were serious. Each alleged that the other had mental health issues and had perpetrated family violence. The appellant was charged with assaulting the eldest child, although those charges were not ultimately pursued by police. The appellant alleged the respondent had substance abuse issues. The conduct of the parties during the litigation was also extreme: the appellant took the vehicle the respondent was using when she was attending a counselling session (claiming he thought it had been abandoned and reporting her as a missing person) leaving her with a smaller car; the respondent wrote to the appellant’s employers outlining allegations against him that would have been embarrassing and significantly impacted his employability as upper management of F company.
On 22 April 2021, interim orders were initially made by consent for the children to live with the respondent and the younger two children to spend time with the appellant for several hours twice each week (at [39]). An Independent Children’s Lawyer (“ICL”) was appointed and the matter was listed for a contested interim hearing on 25 May 2021: see Roydon & Roydon [2022] FedCFamC2F 533 at [24]–[25].
The interim applications
The primary judge recounted that there had been two substantial interim hearings during the course of the proceedings (at [8]). The second interim application was heard in two parts many months apart due to the complex array of issues raised by the parties and delays in obtaining an expert report.
The initial interim parenting application – May 2021
The initial interim hearing took place on 25 May 2021. The respondent sought that the children live with her and that the two younger children spend time with the appellant every second weekend on Saturday and Sunday, but only during the day (at [41]). The appellant sought that the children live with him, the two youngest children spend time with the respondent every second weekend, and that the eldest child spend time with the respondent on two separate days each week. He also sought orders with respect to the parties’ properties to allow each parent to occupy one of the two properties (at [40]).
The registrar who heard this application delivered judgment on 28 May 2021 and made orders for the parties to have equal shared parental responsibility, for the eldest child to live with the respondent and spend time with the appellant every second weekend, Friday to Sunday, and for the younger children to live on a week about basis with each parent. A notation was also made with respect to the eldest child being returned to the respondent’s care if the eldest child was unable to transition to the appellant’s care.
On the costs application the primary judge found that:
43Neither party was wholly successful or unsuccessful in this first interim hearing. The [respondent] was more successful than the [appellant] to the extent that [the eldest child] remained living with her and [the eldest child]’s difficulties in spending time with [the appellant] were accommodated by the orders. The parties were equally successful or unsuccessful in relation to the younger children who began living for equal time with each parent.
The primary judge did not determine either parties’ success (or otherwise) to be sufficient to warrant a costs order (at [44]).
The second interim application
On 13 July 2021, less than two months after the 28 May 2021 interim orders (and soon after the expert report was ordered), the appellant filed an Application in a Case which sought orders that the eldest child live with him (at [46]). The respondent responded to the application, seeking orders that time between the eldest child and the appellant be suspended, and that the two younger children live with her and spend time with the appellant on alternate weekends, Friday to Monday (at [47]).
At the time the appellant filed this interim application, the eldest child had consistently refused to spend time with the appellant. The respondent’s evidence in this regard was that of adverse impacts upon the eldest child’s mental health, including “an increase in her self-harming behaviour and an increase in her school refusal” (at [47]), alleged to be the result of repeated attempts by the appellant to collect the eldest child for contact. On 28 July 2021, the Department of Communities and Justice formally intervened in the proceedings (at [48]).
On 29 July 2021, orders were made suspending (although not discharging) the orders for time between the eldest child and the appellant, providing instead for the eldest child to spend time or communicate with the appellant in accordance with her wishes. The respondent’s application to discharge the shared living arrangements for the two younger children was not successful at this point. The interim application was adjourned until 2 December 2021 (at [49]).
The continuation of the second interim application (the relocation issue) - 2022
On 2 December 2021, consent orders were made adjourning the interim hearing to 22 March 2022 as the expert report ordered on 9 June 2021 was not expected to be available until March 2022 (at [49]).
On 21 March 2022, the appellant filed an Amended Response seeking interim orders for the eldest child to attend a “secure live-in adolescent mental health unit operated by the [L Organisation] at [Suburb M hospital] and to attend school at an associated learning centre” (at [53]), and orders for her to live with him and spend time with the respondent every second weekend, Friday to Sunday. However, the Minute of Order filed by the appellant on the hearing day sought orders that (as summarised by the primary judge at [53]):
… required the [Department of Communities and Justice] to develop an integrated multidisciplinary plan for [the eldest child] which addressed issues of her safety, behavioural issues, mental and physical health, medication regimen and education. He sought an order which required both parents to implement the multidisciplinary plan and to consult with each other in doing so. He sought an amendment to the existing orders which provided for [the eldest child to] spend time with him in accordance with her wishes so that the order would be that [the eldest child] spend time with him in accordance with her wishes “or as recommended by [her] treating psychiatrist or psychologist”.
(Emphasis in original)
Whilst the appellant’s application for the child to attend a live-in unit appears extreme, it was prompted by a therapist’s recommendation as the eldest child has significant mental health issues: even some time after final orders (which contained no requirement the child see the appellant) the eldest child was admitted to a live-in facility for a period of time.
The interim hearing was heard over three days in March and April 2022. Lengthy reasons were provided: see Roydon & Roydon [2022] FedCFamC2F 533. Unfortunately, the expert’s report was only filed the day before the interim hearing in March 2022 (at [59]). In the interim parenting judgment, the primary judge recounted the expert’s observations of the appellant and respondent that:
74… the [respondent] showed some “turbulent, compulsive and histrionic traits” which would likely result in sudden shift in her mood and exaggerated expressions of emotion. [The expert] said these aspects of the [respondent]’s personality resulted in an assessment of the [respondent] being at a moderate level of risk of child maltreatment and which required at least a moderate level of therapeutic intervention to mitigate the risk.
…
76… the [appellant]’s early life experiences amount to extreme trauma, following which he was unable to securely attach to anyone. [The expert] said he developed profound feelings of abandonment and feelings of worthlessness. [The expert] said the [appellant] likely developed an overactive stress response system. … .
77Like the [respondent], [the expert] identified in the [appellant] some markers of a problematic personality structure including “turbulent and histrionic traits”. As with the [respondent], she said these may result in the [appellant] having sudden mood changes, exaggerated expressions of emotion and difficulties controlling his emotions. She assessed the [appellant] as having a moderate level of risk for future child maltreatment and said he required moderate therapeutic intervention to mitigate the risk.
(Expert Report dated 21 March 2022)
Whist the ICL favoured the orders sought by the respondent on the interim hearing, the child protection agency was not so favourably disposed to the respondent’s case. In the reasons for judgment on the interim hearing not all of the recommendations of the expert were accepted: the recommendation that the younger two children remain in a shared care arrangement was rejected by the primary judge.
Interim orders were made on 22 April 2022 providing for the respondent to have sole parental responsibility, permitting her to move with the children from the small regional city in which the parties had lived to a capital city over 200 kilometres away, and for the two younger children to spend time with the appellant every second weekend, from Friday to Sunday afternoon (at [57]).
The appellant was “wholly unsuccessful” in obtaining a change of residence for the eldest child (at [49]). The primary judge found, “[t]he [respondent] was successful in this significant interim hearing and the [appellant] was unsuccessful” (at [58]).
The final consent orders of 6 October 2022
Final orders were ultimately agreed between the parties on 6 October 2022, on the third day of a four-day listing for the final hearing (the parties having negotiated for the first two days).
The final consent orders provided that the respondent have sole parental responsibility for the children, the children to continue to live with the respondent, the eldest child to only spend time with the appellant in accordance with her wishes, and the two younger children to spend time with the appellant each alternate weekend from the conclusion of school on Friday until before school on Monday, Wednesday night in the off week, and during school holidays.
The property settlement orders (also made by consent) provided for the parties’ real property to be sold and the appellant to pay the respondent a fixed sum of $425,000 (in addition to $25,000 she had already received by way of an interim property payment), a total of $450,000 together with a splitting order for her to receive $91,220 of the appellant’s superannuation interests.
Both before the primary judge and on the appeal the parties provided little effective assistance in understanding the property outcome in percentage terms. Neither party placed before the court the joint property valuations they had obtained for trial (the appellant’s affidavit filed 15 February 2023 notes that they received joint valuations on 23 August 2022 at paragraph 7(c)), thus, the expected effect of the settlement at the time it was reached is not able to be clearly understood. The ultimate effect of the settlement can be calculated from the post settlement affidavits that identified the net sale proceeds from the sale of the two real properties: $96,000 for one (appellant’s affidavit filed 15 February 2023, paragraph 45) and $359,000 (at [16]) for the other, a total of $455,000.
THE COSTS APPLICATION
The respondent filed an Application in a Proceeding seeking costs on 31 October 2022, over three weeks after the consent orders. The respondent amended the costs application on 8 November 2022 to seek “indemnity” costs. The material filed by the parties with respect to the costs application extended to 600 pages (see pages 144 to 744 of the Appeal Book).
The costs application was heard on 20 February 2023. The primary judge identified the principles set out in s 117(1) and s 117(2) of the Family Law Act 1975 (Cth), and addressed the list of considerations in s 117(2A) of the Act. Judgment with respect to costs was delivered on 3 October 2023 and is the subject of this appeal.
In order to understand the grounds of appeal it is necessary to summarise the findings of the primary judge.
Financial position of the parties
The primary judge found that the appellant had a superior income to that of the respondent (at [22]). The respondent was found to have a net asset position (after legal fees) of around $160,000. The appellant’s liabilities exceeded his assets by around $248,000 (“largely because he spent three times as much as the [respondent] on legal fees”: at [25]).
The respondent earns a gross salary of around $67,700 per annum (with additional funds from social security) and receives around $252 per week in child support from the appellant, totalling approximately $99,000 per annum. The appellant earns around $105,000 per annum from consulting work through his own company and other allowances (such as rent and vehicle allowances). Although the respondent’s counsel submitted before the primary judge that the appellant’s real income may be greater as there was evidence of him issuing invoices for over $82,000 in the period of 3 June 2022 to 12 August 2022.
Conduct of the parties
The primary judge was appropriately cautious with respect to fact-finding as there had been no testing of the evidence, however, her Honour concluded that the “[appellant] did engage in behaviour which was bullying and harassing of the [respondent], and which caused her additional legal costs” (at [28]). This finding was supported by three examples set out in the primary judge’s reasons.
Whether a party had been wholly unsuccessful
The primary judge noted that neither party was wholly successful or unsuccessful at the “first substantial interim hearing” (at [43]–[44]). However, the primary judge found that the appellant was unsuccessful in the second interim hearing concerning the eldest child (the Application in a Case filed 13 July 2021), finding that (at [46]):
Given the history of [the eldest child]’s reluctance to spend time with him, the fact that the difficulties were specifically noted in the orders of 28 May 2021, and the evidence of the adverse impact the repeated attempts were having on [the eldest child]’s mental health, the [appellant]’s application was unlikely to be successful and should not have been brought.
With respect to the balance of the issues in that interim hearing (the continuation of the second interim hearing), the primary judge found that the respondent was successful in that she obtained orders for sole parental responsibility, the younger two children to see the appellant every second weekend for two nights and to be able to relocate to the nearby capital city (at [57]–[58]).
Offers
There were many offers made in the proceedings which were traversed by the primary judge. The respondent made a written offer to the appellant on 2 May 2022 addressing parenting and property settlement issues.
The parenting offer proposed a settlement reflecting the interim orders made on 22 April 2022 (after the second interim hearing). In substance, the respondent’s offer was made on the basis that she have sole parental responsibility for the children, that the children live with her (noting she was permitted in the 22 April 2022 orders to relocate with the children), that the younger two children spend time with the appellant every second weekend from 5.00 pm on Friday to 5.00 pm on Sunday (two nights) and half of school holidays, and that the eldest child spend time with the appellant in accordance with her wishes.
The primary judge identified that the respondent had earlier sought orders for the younger two children to spend four nights per fortnight with the appellant (interim orders sought by the respondent in her Amended Application filed 18 November 2021).
The parenting issues were settled on the basis that the two younger children spend four nights per fortnight with the appellant. The primary judge concluded that:
69… While the extra two nights a fortnight was no doubt important for the [appellant], it was not significant in the context of an offer to resolve the whole dispute. Had the [appellant] engaged with the [respondent] in relation to the offer, he might have been able to achieve an agreement for four nights in any event as the [respondent] had proposed that arrangement only six months earlier in her amended application filed on 18 November 2021.
The respondent’s property offer was formulated according to the values attributed by the parties’ to their properties in their financial statements (as set out in the respondent’s letter of offer dated 2 May 2022). The respondent’s property offer provided for the appellant to retain the parties’ two real properties, and pay her $380,000 (together with 36,490 from the appellant’s O Bank account) within 60 days (that is, a total of $416,490), and for the respondent to receive $65,000 by way of superannuation split (to equalise the parties’ superannuation interests). The respondent was already in receipt of $25,000 due to the earlier partial property settlement which she would retain (at [70]). The primary judge identified that the final orders made 6 October 2022 provided for the respondent to receive $425,000 and a superannuation split of $91,220 (at [71]). The respondent’s offer stated that the offer represented 44.4 per cent of the parties’ property pool, based on the values she attributed to the real property which led to her estimated pool of $1,243,232 at that time.
A number of other offers were made, which served to demonstrate that issues concerning the time for payment of any property settlement were significant.
The respondent made an offer with respect to parenting on 28 June 2022, proposing that she have sole parental responsibility, that the children live with her, and that commencing immediately, the two younger children spend time with the appellant every second weekend from Friday afternoon to the commencement of school on Monday (plus half of school holidays), and commencing in 2023, every second week from the conclusion of school on Thursday to the commencement of school on Monday (four nights) (plus half of school holidays). Notably, the respondent obtained a substantially similar outcome in the final settlement. The primary judge did not consider that this offer was relevant in light of the findings concerning the May 2022 offer (at [82]). However, in light of the findings on the appeal it appears that this offer will become significant.
On 15 August 2022, the respondent made an offer with respect to both parenting and property. The appellant sought to accept the property offer, however the respondent insisted that the offer was contingent upon both parenting and property issues settling. I have real concerns as to the appropriateness of making offers of this type, effectively linking the best interests of children to financial settlements. However, the children’s issues offer was less generous than the appellant obtained in the settlement. As it was a combined offer, the respondent did not seek to rely upon it as an offer that was more generous to the appellant than the final property orders.
The respondent made an offer on 9 September 2022. The appellant accepted this offer “in principle” on 12 September 2022. The issues the appellant raised with respect to the offer related to chattels, the provisions for sale costs of the two properties (at [86]), and the time provided for the appellant to meet the payment sought by the respondent. The appellant sought to pay the respondent $50,000 within 28 days, and the balance within 90 days (rather than $100,000 within 28 days). The respondent’s solicitors responded that same day and indicated that the respondent was not agreeable to any further compromise, seeking a fixed amount (at [86]). The appellant’s solicitors confirmed the appellant was agreeable to the respondent receiving the amount as sought by her in the counteroffer and provided draft terms later that evening. The draft terms contained the changes sought by the appellant with respect to the time for payment and return of chattels. The appellant complained that the issue with respect to chattels was illusory as he only sought return of chattels belonging to him that were not to be settled upon the respondent pursuant to the orders. The respondent took issue with the proposed terms and subsequently withdrew her offer (at [87]).
There was no evidence before the primary judge as to why the appellant’s proposed timeframe for payment was unacceptable to the respondent. However, the primary judge did not “regard the respondent’s offer as improperly withdrawn”, going on to say at [88] that “… neither party asked the Court at the time to rule on whether there has been an acceptance of the offer, and both parties continued to prepare for trial.”
Even if a settlement agreement had been reached, it was not an enforceable contract as only a binding financial agreement can exclude the court’s jurisdiction pursuant to s 79 of the Act. The submissions that the appellant could have sought to enforce the alleged settlement agreement were wrong in law and served only to distract the primary judge. The relevance of the events was to show that the appellant was prepared to settle for the amount set out in the respondent’s withdrawn offer or that this was effectively his counteroffer (depending on the view taken of the negotiations). However, the appellant did not achieve a better outcome in the final settlement as the amount the respondent was to receive in accordance with this offer was less than the respondent ultimately achieved. As a result, the offer had little relevance to the outcome other than to demonstrate the ongoing difficulty with respect to the time needed for payment.
The primary judge’s conclusions
The primary judge concluded, with respect to the offers, that:
91The [respondent] achieved a better settlement in the final property orders than what she had offered to accept by way of property settlement in her first offer on 2 May 2022 and her various subsequent offers. She also achieved in the final parenting orders what she had offered on 2 May 2022. She should not be out of pocket for any costs incurred because of the [appellant] rejecting her offers which would also have saved him significant costs and, in relation to the property aspects, would have seen him pay significantly less to the [respondent] by way of property settlement.
Further, the primary judge concluded that an “indemnity costs order” was warranted from 2 May 2022, saying that:
92The most significant factor in my determination is the offer itself which, had it been accepted at that stage, would have settled all matters, and would have saved both parties the significant legal fees subsequently incurred. A further factor weighing in favour of a costs order is that the [appellant] was wholly unsuccessful at each critical stage of the proceedings. The third factor is the conduct of the litigation by the [appellant] which undoubtedly increased the costs of both parties. … However, given the possibility that a different conclusion may have been reached following cross-examination, this is not as strong a point as it might have been at the end of a contested hearing.
…
94Weighing against an order for indemnity costs is the fact that the [appellant] is in a net deficit financial position, even when the property he will take in the settlement is considered. This puts him in a very difficult situation. However, the [respondent] bears no responsibility for this. The [appellant] and his lawyers allowed his legal fees to build up to the value of the whole property pool if his redundancy and inheritance are excluded. He incurred legal costs of almost double the value of the property settlement to the [respondent]. This had the effect of increasing the [respondent]’s legal fees in having to answer correspondence and interim applications. It is hard to understand how the [appellant] and his lawyers allowed this to happen.
There was no evidence as to the likely party and party costs before the primary judge, either using the lump sum scale in the Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), or the scale in the Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth).
The primary judge noted that there were funds held on trust by the appellant’s solicitors, who are also owed considerable sums by the appellant, concluding that:
96… The [appellant]’s solicitors must have known the costs being incurred by their client were disproportionate to the value of the property. If they advised their client appropriately but were nevertheless instructed to take steps which resulted in high costs, that is a matter between them and their client. They are part of one of the largest firms in [City D] and have resources to chase the [appellant] for unpaid fees far exceeding the [respondent]’s resources to chase the [appellant] for unpaid costs. Accordingly, I will not prioritise legal fees due to them over payment of any costs to the [respondent].
The primary judge analysed the costs notices filed by the parties in order to determine the respondent’s costs and concluded that:
93… By the time the proceedings resolved in October 2022, the [respondent]’s costs were a little over $247,000. The extra costs between when she made the offer and the end of the substantive proceedings, therefore, was in the order of $166,500.
The primary judge made a costs order against the appellant, ordering him to pay “the sum of $100,000 to the [respondent] by way of contribution to her costs on an indemnity basis from 2 May 2022”. There are no reasons explaining how the figure of $100,000 was struck, which was a subject of complaint by counsel for the respondent, however no cross-appeal was filed.
APPLICATION IN APPEAL TO LEAD FURTHER EVIDENCE
The appellant sought leave to lead further evidence at the hearing of the appeal. The principles relevant to the discretion were discussed by the High Court in CDJ v VAJ (1998) 197 CLR 172, where McHugh, Gummow and Callinan JJ observed:
114. No doubt the Full Court will readily admit further evidence which is not in dispute and which the Court is able to evaluate and take into account in considering the appeal without the necessity to have the proceedings re-heard. Further evidence of this kind is particularly likely to be admitted where the evidence relates to events occurring after trial. In the case of undisputed evidence which the Full Court can evaluate as part of the evidence in the appeal, the discretion to admit the evidence may even be properly exercised without the Full Court considering what effect it would have had on the trial judge's decision. In that context, the likely effect of the further evidence on the Full Court's view of the evidence before the trial judge is the important consideration. Where there is no need for a new trial or extensive taking of evidence, other discretionary factors such as the availability of the evidence at the trial and the need for finality of litigation are likely to be more relevant in the exercise of the discretion than the effect that the evidence would have had at the trial.
…
116. The failure to have adduced the evidence before the primary judge will be a variable factor, the weight of which will depend upon all the other factors pertinent to the case. Where the evidence has been deliberately withheld, the failure to call it will ordinarily weigh heavily in the exercise of the discretion. In other cases, the failure to call the evidence even if it could have been discovered by the exercise of reasonable diligence may be of little significance. No invariable rule concerning the failure to call the evidence can or should be laid down in view of the wide discretion conferred on the court by the section.
The respondent opposed leave. The evidence was in two parts. The first was an affidavit from the appellant seeking to place evidence before the court as to his capacity to meet the terms of the property settlement offer central to the appeal. This evidence was clearly available at the time of the original hearing and there was no explanation for the failure to put that evidence before the court at that time. I was not persuaded to allow such evidence on the appeal.
The appellant also sought to put copies of two orders made in the proceedings by the primary judge before the court. There could be no dispute that the orders were made in the proceedings, rather, it appears they were omitted from the Appeal Book. There was no prejudice that the respondent could point to in opposing the leave with respect to these orders. For these reasons, I granted leave for the appellant to tender the two earlier court orders in the proceedings.
GROUNDS OF APPEAL
The appellant filed an Amended Notice of Appeal on 17 January 2024, setting out six grounds.
Determinations as to costs are discretionary judgements. In House v The King (1936) 55 CLR 499 at 504–505 the majority of the High Court said:
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
Similarly, in Norbis v Norbis (1986) 161 CLR 513 at 540, per Brennan J, it was stated:
The ‘generous ambit within which reasonable disagreement is possible’ is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.
Reasons for costs judgments are usually brief and not expected to be detailed. In Penfold v Penfold (1980) 144 CLR 311 the majority of the High Court said, at 315 to 316:
Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised. Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
(References omitted)
As was identified in Murray & Murray (2020) FLC 94-000 at [85]:
It has been well established for more than a century that, other than for strong reasons, an appellate court will not interfere with the discretion belonging to the court below to make costs orders (Maiden v Maiden [1909] HCA 16; (1909) 7 CLR 727 at 742; McCauley v McCauley [1910] HCA 16; (1910) 10 CLR 434 at 455). The same general principle applies under the Act, with the Full Court reluctant to interfere with a trial judge’s exercise of discretion to make costs orders (Anison & Anison (2019) FLC 93‑908 (“Anison”) at [9]–[11], [71] and [72]). However, as was acknowledged in Anison, this does not mean the Full Court should never interfere. The Full Court at [11], applying Robinson and Higginbotham (1991) FLC 92-209, specifically noted that where the result is plainly unjust or if the discretion was exercised on wrong principles then this Court must interfere.
It is not necessary to determine in this case whether the amendments to s 117 of the Act (by the addition of the apparently mandatory terms of s 117(2A)) now impose a requirement that there be reasons at least identifying the factors within that provision as the primary judge addressed the provisions.
Whilst it is arguable that an appeal from a costs order may require leave, the respondent did not take this point. Ultimately it was unnecessary to determine this issue as I have found error on the part of the primary judge, and the quantum of the costs order is such as to demonstrate a substantial injustice, and thus leave would have been granted if required.
Ground 1 and Ground 2
It is convenient to deal with Ground 1 and Ground 2 together. Ground 1 alleges that the primary judge erred in concluding that the respondent “achieved a better result” than her offer to settle (at [72]):
1. The [primary judge] made a mistake as to the facts in determining that the [respondent] achieved a better result in the final Orders of 6 October 2022 after the [appellant] did not accept the [respondent]’s offer of 2 May 2022.
Ground 2 addresses how the primary judge considered the offer the appellant had declined, arguing:
2. The [primary judge] acted upon a wrong principle when relying upon section 117(2A) of the Family Law Act 1975 (Cth) as the [primary judge] erroneously applied the principle that the [respondent] achieved a better result in the final Orders of 6 October 2022 after the [appellant] did not accept the [respondent]’s offer of 2 May 2022 rather than considering the terms of the offer of 2 May 2022, as is provided for in section 117(2A)(f) of the Family Law Act 1975 (Cth).
When considering whether the circumstances of a particular case justify a costs order, s 117(2A) of the Act provides a list of factors to which “the court shall have regard”. Section 117(2A)(f) of the Act identifies as a consideration:
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer…
The respondent’s solicitors wrote to the appellant’s solicitors on 2 May 2022 stating that they had “instructions to put forward an offer to settle the proceedings between the parties on a final basis.” (respondent’s letter of offer dated 2 May 2022). The offer set out terms dealing with the property and parenting aspects of the proceedings (but not the spousal maintenance claim) and concluded “[t]his offer remains open for a period of 28 days upon which it will be withdrawn.” The primary judge proceeded on the basis that it was one offer to settle the entire proceedings.
Whilst consideration of offers is often loosely described as deciding whether a party obtained a “better outcome than their offer”, the principle requires consideration of whether declining to accept an offer was unreasonable. The first step in such a consideration is to compare the terms of the offer with the outcome, the second step is to determine whether it was unreasonable to decline the offer in the circumstances of the case.
The parenting aspects of the offer
The offer, in dealing with parenting issues, provided for the appellant to spend only two nights with the younger two children each fortnight. The appellant obtained consent orders for more time each fortnight, but otherwise did not obtain orders that were more generous than the offer. The primary judge concluded that this difference was not significant in the context of resolving the whole dispute (at [69]).
The appellant obtained orders that led to four nights per fortnight with the two younger children, double the time proposed in the offer. For a parent with only two nights per fortnight with a child, an increase to four nights is a significant difference in arrangements. It cannot be accepted that a change which doubled the appellant’s time with the two younger children was not significant. In this respect the appellant obtained an outcome that was better than the offer.
As the appellant obtained more generous time in the final orders than that offered, the primary judge erred in concluding that the respondent “also achieved in the final parenting orders what she had offered on 2 May 2022” (at [91]).
The spousal maintenance issue
The offer made by the respondent did not include resolution of the spousal maintenance issues. Spousal maintenance was settled by the parties entering into a binding financial agreement at the time of the consent final orders (October 2022). This issue was not the subject of an offer and would have remained a live issue even if the offer with respect to property settlement had been accepted: Paradin & Paradin (2020) FLC 93-991 at [32] and [36]. Thus, the primary judge erred in concluding that had the offer “been accepted at that stage, [it] would have settled all matters” (at [92]).
The property settlement aspects of the offer
With respect to the property settlement issues, it is clear that the respondent received a greater share of the assets and superannuation of the parties than she would have received had the offer been accepted. There are a number of arguments that the appellant raises with respect to the property part of the offer.
The appellant also received more than was contemplated in the respondent’s offer
The appellant argues that whilst the respondent received a greater amount pursuant to the final orders, he also received more than was contemplated in the respondent’s offer of 2 May 2022. This occurred because the respondent’s estimates of the value of the real properties were significantly lower than the amounts those properties realised when sold.
In the absence of evidence as to the value of the properties at the time of the respondent’s offer, it is not possible to determine the overall effect of the 2 May 2022 offer, nor a basis upon which to assess the extent of the risk as to the sale prices for the properties which was to be borne by the appellant. The case highlights the importance of offers being drawn in ways that are able to be readily compared to the final orders, such as using clauses making provision for percentage divisions of the proceeds of the sale of property, at least when a party may not have the capacity to fulfil the terms of an agreement without selling property.
Whilst the offer was made prior to valuations being obtained, it relied on the estimates of the parties within their financial statements. The properties were residential and unlikely to be difficult to have valued. That the appellant may not have obtained advice as to their value by this point reflects upon his preparedness to genuinely consider resolving the dispute. The appellant receiving a greater amount than contemplated by the respondent does not alter the fact that the respondent offered to settle for a lower payment than she achieved in the final orders. The reality of this argument is that the appellant would have obtained an even better result for himself had he accepted the offer. The primary judge took account of the sale prices for the properties. I am not persuaded that the primary judge erred in this respect, particularly given the state of the evidence.
Incomplete disclosure by the respondent
The primary judge deals with the appellant’s claims that a lack of disclosure by the respondent made it unreasonable for him to accept the offer. For the reasons her Honour gives, there appears to be no real issue flowing from any failure of the respondent to make disclosure: her affairs were simple, and her income was from employment. There was no realistic prospect of any disclosure being significant to assessing the terms of the offer. The argument concerning disclosure has no merit.
The terms as to payment were materially different
In both the offer and the final orders, the appellant bore the risks as to the market value of the parties’ real properties upon sale. A significant difference between the property part of the offer and the final orders was the terms for payment of the respondent. The offer provided for the appellant to make payment to the respondent within 60 days, whereas the final consent orders provided for payment to be made in three tranches, the first within 28 days (from the estate of his late grandmother), the second within 120 days ($100,000), and the last within 210 days ($125,000). The final orders also made provision for the sale of the properties to effect the payments. In this regard, the final orders with respect to the property settlement were materially different to the offer as the terms ensured the appellant had sufficient time (and a viable mechanism) to meet the payment required by the orders.
The time for payment had been a significant issue in dispute between the parties in respect of later offers. The inability of the appellant to make the payment in the time sought by the respondent can be inferred from the fact that it was not alleged that he had sufficient cash resources and that he was not working (the later fact being set out by the respondent’s solicitors in the offer itself: “While your client is currently not employed, there are no restrictions on his ability to be gainfully employed.” (respondent’s letter of offer dated 2 May 2022)). The only method of meeting the payment, given that the appellant was unemployed at the time, would have been to sell at least one property, which could not have reasonably occurred in the time required.
The primary judge was aware of this aspect of the appellant’s circumstances, as identified in her Honour’s judgment from 22 April 2022: see Roydon & Roydon [2022] FedCFamC2F 533 at [192(f)].
However, neither the differences between the 2 May 2022 offer terms and the final orders relating to the time for payment, nor the appellant’s inability to meet the timeframe set out in the offer, were raised before the primary judge. The respondent objected to the appellant raising these arguments on appeal.
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 it was said that:
120. … when a court is invited to make a discretionary decision, to which many factors may be relevant, it is incumbent on parties who contend on appeal that attention was not given to particular matters to demonstrate that the primary judge's attention was drawn to those matters, at least unless they are fundamental and obvious.
In Whisprun Pty Ltd v Dixon (2003) 200 ALR 447 Gleeson CJ, McHugh and Gummow JJ explained the principle by saying:
51.… It would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial. Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination. Even when no question of further evidence is admissible, it may not be in the interests of justice to allow a new point to be raised on appeal, particularly if it will require a further trial of the action. Not only is the successful party put to expense that may not be recoverable on a party and party taxation but a new trial inevitably inflicts on the parties worry, inconvenience and an interference with their personal and business affairs.
(Footnotes omitted)
The differences in the terms of the 2 May 2022 offer and the final orders were apparent on the face of the documents and could not be altered by further evidence. Whether it could be shown that the difference was immaterial depends entirely upon the capacity of the appellant to comply with the terms of the offer. In the respondent’s Summary of Argument filed 7 February 2024, the respondent points out that the appellant had access to $204,129 from a bequest (as set out in Order 1 of the final orders made 6 October 2022). Whilst this was not sufficient, of itself, to make the payment required by the respondent’s offer, it demonstrates that there is a real factual issue that may be affected by further evidence. I am not persuaded that the appellant should be permitted to raise these two arguments on the appeal in circumstances where they were not raised before the primary judge.
Conclusions as to the terms of the offer
The primary judge found (at [92]) that the:
… most significant factor in my determination [as to costs] is the offer itself which, had it been accepted at that stage, would have settled all matters, and would have saved both parties the significant legal fees subsequently incurred.
The primary judge relied upon the 2 May 2022 offer as an entire offer that would have resolved the whole of the proceedings, not simply part of the proceedings.
The appellant has demonstrated that the parenting part of the offer was for an outcome worse than what he achieved in the final orders with respect to the younger two children and that the failure of the offer to deal with the spousal maintenance issue meant that the offer did not resolve the entirety of the proceedings.
As it cannot be concluded that the respondent achieved a better result than the overall terms of her offer, and that the offer, if accepted, would have resolved the entire proceedings, the primary judge has erred in making these finding and has therefore taken into account an irrelevant factor: see House v The King at 505. As the offer was identified by the primary judge as the “most significant factor” in the exercise of the discretion the appeal must also be allowed on this basis.
Ground 3
Ground 3 sets out a number of matters that it is said that the primary judge failed to take into account, saying:
3. The [primary judge] did not take into account material considerations in having regard to the conduct of the parties to the proceedings in relation to the proceedings, being:
(a) The [respondent]’s conduct that resulted in the vacation of final hearing dates.
(b) The [respondent]’s conduct that damaged the [appellant]’s incoming earning capacity.
(c) The [respondent]’s conduct in failing to comply with the [appellant]’s relevant request for discovery.
(d) The [appellant]’s conduct in making offers to settle the proceedings.
(e) The [respondent]’s conduct in reneging on agreements between the parties to settle the proceedings.
Ground 3(a) relied upon the fact that the respondent filed a large affidavit shortly before an earlier trial date. The trial was adjourned. The reasons for the adjournment were disputed: the respondent’s late filed affidavit was one factor, but it was also claimed that the ICL and the Department of Communities and Justice required an adjournment to investigate a recent disclose by a school teacher concerning sexualised behaviours of one of the children. The parties could not point to any evidence before the primary judge on the costs application to enable a finding as to whether the adjournment would have been required if the respondent had not filed the affidavit late in the proceedings. In these circumstances, the issues are not of such significance as to lead to a conclusion that they required specific discussion in the judgment.
Ground 3(b) and Ground 3(c) relate to correspondence that the respondent sent to the appellant’s employers and others in government, which appears to have been designed to damage his employment prospects. The primary judge did consider these events and their impact at [22]. Whilst Ground 3(c) makes claims that the respondent failed to make disclosure of the correspondence, this claim does not appear to have been made to the primary judge and the correspondence was placed before the primary judge by the appellant. These arguments are without merit.
Ground 3(d) alleges that the primary judge failed to take into account various other offers made by the parties. It is apparent that the primary judge traversed the large number of offers that were made in at [73]–[91] of her reasons. No submissions were made on the appeal by the appellant to demonstrate that the primary judge failed to have regard to a specific aspect of the other offers that was material to the outcome.
Ground 3(e) alleges that the primary judge failed to have regard to the respondent reneging on an offer that had been accepted. These issues were considered by the primary judge at [83]–[87]. The September offer was less than the respondent achieved in the settlement. The respondent reneging upon her offer (if that were established) did not show that the appellant was prepared to agree to more than she achieved in the final order. At best, this issue led to a small amount of wasted costs when the appellant attempted to accept the offer, however there was no evidence of any costs in this regard. This part of Ground 3 cannot succeed.
The appellant has not shown in Ground 3 that the primary judge failed to have regard to relevant considerations.
Ground 4
Ground 4 is in the following terms:
4.The [primary judge] made a mistake as to the facts in determining that the [respondent] had been wholly unsuccessful in the proceedings, as the [appellant] had not been wholly unsuccessful in the proceedings.
The primary judge did not conclude that the appellant had been “wholly unsuccessful in the proceedings”, rather, that “the [appellant] was wholly unsuccessful at each critical stage of the proceedings” (at [92]). This ground is not made out. Ground 5 addresses the reasons relating to the “critical stages” of the proceedings.
Ground 5
Ground 5 was put on a limited technical basis. The ground sets out:
5. The [primary judge] acted upon a wrong principle in determining as relevant to the costs application that the [appellant] was wholly unsuccessful at each critical stage of the proceedings, that consideration not being a matter that the first instance Court shall have regard to pursuant to subsection 117(2A) of the Family Law Act 1975 (Cth).
The argument put with respect to this ground is that because s 117(2A)(e) of the Act expressly provides that a relevant consideration is whether a party has been wholly unsuccessful in the proceedings, this meant that the primary judge erred by considering whether the appellant was unsuccessful at one or more stages of the proceedings. Clearly the outcomes in each stage or at interlocutory events may be relevant to the question of costs, at the very least pursuant to s 117(2A)(g) of the Act. This technical argument must fail.
It was also argued that the primary judge had erred in finding that the appellant was “wholly unsuccessful at each critical stage of the proceedings” (at [92]). Counsel for the respondent was unable to identify a list of the “critical stages” at which the appellant was “wholly unsuccessful”, that founded this conclusion. The primary judge concluded that “[n]either party was wholly successful or unsuccessful in this first interim hearing” (at [43]). This interim hearing was clearly a critical stage of the proceedings as it was the first substantial interim hearing.
Whilst the appellant was wholly unsuccessful with respect to parenting orders concerning the eldest child, at the second interim hearing (and the primary judge concluded that such application should not have been brought), the appellant’s opposition to the interim relocation application was not found to be unreasonable. Given the rarity of interim relocation orders it would be difficult to see that opposition to such an application could be a basis for an indemnity costs order save in the most unusual of cases. The second interim hearing resulted in a substantial reduction in the appellant’s time with the younger two children, however at least part of the expert’s report favoured continuing shared time. The appellant did have success in obtaining orders in the final settlement that provided for more time with the younger two children than that ordered on the second interim hearing. On the findings of the primary judge the appellant was wholly unsuccessful with respect to the eldest child and there was a finding that at least one of his applications in this respect ought not to have been brought.
The finding of the primary judge that the appellant was wholly unsuccessful at each critical stage overstates the outcomes in a way that is significant to the considerations for indemnity costs (see the discussion below with respect to indemnity costs). As a result, this ground of appeal is made out.
Ground 6
Ground 6 was put in the following terms:
6. The [primary judge] erred in determining that it was appropriate to make a costs Order on an indemnity basis.
This ground relates to the order being for indemnity costs rather than party and party costs. This case is another example of the unfortunate alacrity with which parties in family law proceedings where there is a basis for a costs argument making claims for indemnity costs.
In proceedings under the Family Law Act 1975 (Cth) the law relating to costs differs from the usual rules that apply to civil litigation. Section 117(1) of the Act provides that “each party to proceedings under this Act must bear the party’s own costs”. However, s 117(2) of the Act provides that:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), … and the applicable Rules of Court, make such order as to costs … as the court considers just.
As the ordinary outcome in family law proceedings is no order for costs, then obtaining an outcome equal to or better than an offer is a weighty factor in favour of a “party and party” costs order.
The Full Court has repeatedly emphasised that an indemnity costs order should only be made in “exceptional” cases: see Withers & Russell (No 2) [2022] FedCFamC1A 197 at [13]; Kohan & Kohan (1993) FLC 92-340; Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664; Galbadon & Galbadon [2015] FamCAFC 59; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; and Badawi & Badawi (Costs) [2017] FamCAFC 196. Importantly, as identified in Worth & Worth (No. 2) (2019) FLC 93-910, some circumstances are not sufficient to justify indemnity costs:
10 The wife submitted that indemnity costs were warranted … because:
(a) The wife ought not be “out of pocket”.
(b)“...an award of costs against the Husband in a sum any less than the actual monetary cost to the Wife would work an extraordinary injustice”.
(c)The property settlement order “is a once off opportunity for [the wife] to provide for her future and the future of two young and needy children”, and her entitlement should “not be depleted by having to pay any legal fees incurred in responding to this Appeal” (emphasis as per the original).
(d)The “circumstances in this case, in addition to the extraordinary conduct of the Husband as a litigant” (emphasis as per the original), justify not only that he pay costs, but that they be assessed on an indemnity basis.
11We do not consider that any of those circumstances can be categorised as “exceptional circumstances” such as would warrant indemnity costs. For example, to say that the wife should not be “out of pocket” begs the question, as does the suggestion that an amount less than all of the actual costs incurred would work an injustice, and likewise the plea that the wife’s property settlement entitlement should not be depleted by having to pay any legal fees.
Examples of the nature of the conduct required to support an indemnity costs order are set out in the commonly quoted passage from Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 at 256 and 257:
[24] … it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud… evidence of particular misconduct that causes loss of time to the court and to other parties… or in wilful disregard of known facts or clearly established law… the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions… an imprudent refusal of an offer to compromise…
The matters identified by Sheppard J in Colgate Palmolive as justifying indemnity costs orders all involve significant misconduct in litigation, not simply a party litigating a marginal or speculative case.
The remarks of Sheppard J with respect to offers must be seen in context. The proceedings before Sheppard J concerned commercial litigation where, unlike family law proceedings, costs ordinarily follow the event. In family law cases, ordinarily there are no orders for costs. This practical difference between costs rules for commercial litigation compared to family litigation is particularly important when considering whether a failure to accept an offer is “imprudent”, and thereby justifying an indemnity costs order, rather than a situation where it was not reasonable to have rejected an offer (leading to a party and party costs order): Badawi & Badawi (Costs) [2017] FamCAFC 196 at [27]–[29]. As was said by Murphy J in Prantage & Prantage (2013) FLC 93-544 at [152]:
Indemnity costs are confined to “an exceedingly rare situation” … in jurisdictions where “the usual rule” is that a successful party receives an order for costs (i.e. “costs follow the event”). They might, then, be seen to be more so in this jurisdiction where the “usual rule” is that “each party ... shall bear his or her own costs (s 117(1)).
Thus, in Warbrick & Warbrick (No. 2) [2021] FamCAFC 101, the Full Court said that:
12 … Merely because an offer of settlement which is consistent or better than the outcome of the application or an appeal is rejected, does not establish that the rejection was imprudent or plainly unreasonable. Context is important and, contrary to the submission by the wife to the effect that the outcome of the appeal was a fait accompli, the appeal was not so devoid of merit that the husband’s decision to continue with it and to reject the wife’s offer was foolish or would justify an order for indemnity costs.
The proposition put to the primary judge by the respondent’s counsel at paragraph 47 of her Written Submissions filed 20 February 2023 with respect to the Costs Application that “[w]here a party fails to accept a reasonable offer, the usual course is for party/party costs up to the date of the offer and indemnity costs thereafter”, was plainly wrong. This appears to have resulted in the primary judge placing undue weight on the offer when considering indemnity costs for the whole of the proceedings from the date of the offer.
As was identified by the primary judge, the appellant’s legal fees were enormous. Whilst criticism can be made against the appellant and his legal advisors in this regard, the fact that one party spends far more on legal fees than appears reasonable does not provide a basis, of itself, for a costs order in favour of the other party. The relevance of this factor in the costs application is that his enormous expenditure on legal fees may have caused the respondent to expend greater amounts on legal fees when engaging with the appellant’s lawyers. The extent of any additional expense is difficult to assess without itemised accounts or evidence of a solicitor or costs assessor, which were not placed before the primary judge. Significantly, many of the events said to give rise to such additional costs occurred in periods before the period covered by the costs order and no attempt was made to quantify the effect of that conduct on the respondent’s costs.
The estimate that the respondent’s counsel put in her Summary of Argument, that party and party costs would simply be 70 per cent of the respondent’s legal fees has no logical foundation as every lawyer will charge different fees. There was no evidence that party and party costs would be as much as 70 per cent of the particular fees charged by the respondent’s lawyers. I can only assume that the estimate was founded on an unstated request that the Division 1 costs scale apply (rather than using the much lower amounts from the Division 2 Lump Sum scale), however the assessment of costs on the Division 1 scale requires consideration of each item of work (usually only possible with at least a Short-Form Bill of Costs).
The only evidence as to the costs incurred by the respondent is copies of her invoices from her solicitors and counsel, which are not in an itemised form sufficient to allow an estimate as to the respondent’s party and party costs (unlike a short form bill of costs). The approach propounded by the respondent overlooks, as the Full Court said in Kohan at 164, that “the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges”. That is, the scale fees are the reference rate for assessing the reasonableness of costs, not whatever may be the fees charged by a particular practitioner. This principle is reinforced but the requirement in r 12.48(2) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) that when assessing costs ordered on “an indemnity basis” regard is had to the scale of costs set out in Schedule 3 to the rules.
This case did not involve a modest costs order that a judge may be able to reasonably estimate on limited evidence, nor was it a case that had taken a course common to cases of its type which may also lead a judge to make a lump sum costs order on limited evidence. On the limited materials before the primary judge, together with the absence of reasons as to how the figure of $100,000 was determined, the appellant has established that the broad discretion as to costs miscarried.
CONCLUSION
Both parties sought that the matter be remitted for re-hearing in the event that the appeal was allowed rather than permitting me to re-exercise the discretion. The appellant will undoubtedly seek to rely upon arguments not raised before the primary judge. The respondent will likely seek to provide appropriate evidence as to the costs actually incurred. Whilst remitting a matter simply because each party now wishes to run their case differently is an unattractive argument, a remittal is necessary in this case as there is significant material that was not in the appeal book that may be relevant for the purpose of a re-exercise of the costs application discretion, and in particular a possibility that one of the other many offers may be relevant as a result of the difficulties with respect to the May 2022 offer. In the absence of agreement for me to re-exercise the discretion I will, despite my considerable reluctance to do so, make orders remitting the matter.
Having regard to the way in which each party put their case before the primary judge I am not persuaded that either should be awarded their costs of the Costs Application before the primary judge or on appeal, nor that certificates should issue pursuant to the Federal Proceedings (Costs) Act 1981 (Cth).
I therefore make orders accordingly.
I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Riethmuller. Associate:
Dated: 5 July 2024
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