Russell & West (No 3)

[2012] FamCA 674

FAMILY COURT OF AUSTRALIA

RUSSELL & WEST (NO. 3) [2012] FamCA 674

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Limited (1993) 118 ALR 248
Kohan & Kohan (1993) FLC 92-340

APPLICANT: Mr Russell

RESPONDENT: Ms West

FILE NUMBER: DGC 4352 of 2008

DATE DELIVERED: 15 AUGUST 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 15 August 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Robinson

SOLICITOR FOR THE APPLICANT: Holding Redlich

THE RESPONDENT: In person

Orders

1. That the respondent Ms West pay towards the costs of the applicant Mr Russell, on an indemnity basis, the sum of $84,500.

2. That the parties be at liberty to inspect and copy all subpoenaed documents from Primary School P including documents produced by Ms B.

3. That the application in a case filed 27 June 2012 is otherwise dismissed.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Russell & West has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: DGC 4352  of 2008

Mr Russell

Applicant

And

Ms West

Respondent

REASONS FOR JUDGMENT

1. On 23 May 2012, I made final parenting orders between Mr Russell (“the applicant”) and Ms West (“the respondent”).  Each was represented by counsel as was the Independent Children’s Lawyer.  Those orders were made by the Court at the request of, and with the consent of, all parties.  There is now a costs application by the applicant to be determined. 

2. By his application filed 27 June 2012, the applicant sought that the respondent pay his costs on an indemnity basis backdated to September 2010 together with disbursements associated with supervisor’s fees and a psychiatrist’s report all of which were connected to the proceedings.

3. A fourth order was sought that documents associated with a primary school produced under subpoena should be released for inspection and copying having regard to the therapeutic program into which one of the children is now engaged.  The respondent did not oppose that order.

4. The evidence which the applicant relied upon was contained in an affidavit filed at the same time as the application. 

5. The case was listed for hearing on 26 July 2012 on which date, the respondent who was then unrepresented, sought an adjournment because she wanted to obtain legal advice and respond to the applicant’s affidavit.  Another basis for the adjournment was that she had been left without legal advice as a result of a decision by her previous lawyers.  Over opposition from the applicant, the case was so adjourned.

6. Despite orders that the respondent file and serve responding material, she did not do so.  She told me she had only been able to get legal advice on the date upon which the responding material was due.  Despite that, she wanted to proceed.  She chose to do so knowing the nature of the orders sought.

7. Because of the controversial nature of those orders, I permitted the respondent to cross-examine the applicant. 

8. This is a case where costs should be awarded and upon the applicant’s application, they should be on an indemnity basis subject to the conditions to which I shall refer below.  I propose however to fix the costs confident that to leave the situation as an assessment or by agreement, will raise further delay, costs and distress most likely to the applicant.

9. This is a Magellan matter but that was not always the case.

10. Final orders were made by the Court in 2009 dividing the time between the parents of the two children.  Indeed, the applicant had more time than did the respondent.

11. On 7 December 2010, the respondent overheld the children and that was the catalyst for what could only be described as extremely unpleasant and controversial proceedings. 

12. There followed a succession of hearings between March 2011 and May 2012 during which time, the applicant’s time with the children was severely curtailed and indeed supervised.  I am not at all surprised that his costs are huge. 

13. On 23 May 2012, when the case was listed for final hearing, consent orders were provided as I earlier set out.  Those orders were final in respect of one child but interim in respect of the other.

14. Two significant observations must immediately be made.  First, attached to the order is a notation which reads as follows:

    The mother abandons the allegations that the father has abused the children.

15. A second important observation is that the respondent relied upon a trial affidavit filed on 24 February 2012.  In a summary of argument drawn by her solicitors, she proposed restricted time between the applicant and one of the children.  In support of those orders, the summary said that the presumption of equal shared parental responsibilities should not apply because the applicant had sexually and physically abused one of the children and that there was an unacceptable risk of the child being sexually abused again.  She further asserted that the applicant had perpetrated family violence against her.  In the context of the evidence of the respondent and the summary of argument put, it would come as no surprise that I asked all practitioners to confirm that the orders which were the antithesis of that summary should be made.  I was specifically told by all parties of the notation to the orders and that there was no risk in making the orders notwithstanding the recent nature of not only the affidavit but also the summary of argument.

16. It is those two matters that in my view justify a careful examination of what led to the litigation and the path that it followed.

17. The applicant referred to the allegations that were made in a variety of forms.  Statements were made to expert witnesses, affidavits were filed and evidence was given in another court.  Those allegations were:

    ·That the applicant pushed the respondent down stairs whilst holding their daughter in June 2009;

    ·That the applicant and the respondent’s sister “digitally raped” one of the children on a number of occasion;

    ·That the applicant cut chunks out of the child’s hair;

    ·That the applicant intimidated the respondent and her partner at the Court;

    ·That the applicant broke into the respondent’s property and stole items;

    ·That the applicant made threats to the child who was having contact with him during a supervised visit;

    ·That he burnt a child with a “stove top lighter” whilst she was in his care;

    ·That the applicant treated the child like a “slave”;

    ·That the applicant pushed the other child against a tree when he was four years of age;

    ·That the applicant had “violently raped” the respondent throughout the relationship;

    ·That the applicant had locked the respondent out of the home;

    ·That the applicant had an “inappropriate relationship” with the respondent’s sister; and

    ·That the applicant had breached intervention orders.

18. The allegations mentioned above were found in various forms as I have indicated.  Those are a summary and it was the applicant’s contention that they exacerbated the proceedings causing experts to investigate things as well as the evidence being put before the Court.

19. The respondent cross-examined the applicant when I drew those assertions to her notice.  To each of her questions, the applicant responded calmly denying that he had done anything wrong.  Having regard to the orders I made on 26 July 2012, the respondent knew that these allegations were the basis upon which the complaint about costs was made.  No evidence was called in circumstances where it could have been.  For example, one of the assertions of the applicant was that he had been accused of intimidating the respondent.  The respondent asked whether in fact a security guard of the Court had been brought down to intervene.  Her partner was present with her at that time but there was no effort made to call any of that evidence.  When it was put to the applicant that he had yelled at her, he calmly denied it.  She said he was alone yet he pointed to the fact that he was standing alongside his barrister.  He said as a result of accusations made against him previously, he always ensured that someone was with him.

20. Another example was that in relation to the assertion by the applicant that he had been accused of improperly entering her property, he said that he had entered the property in the company of a police officer because he had been asked to find certain materials.  No police officer was called yet the respondent knew of that incident.

21. Another example was the applicant asserted that the respondent accused him of making threats to one of the children during a supervised visit.  The applicant pointed to a report from a commercial supervising agency which made reference to such an accusation including that the applicant had threatened the child with knives.

22. Another example was that the respondent accused the applicant of forcing her to sleep on the front door step and in her car.  He denied such an assertion and pointed to the fact that that was an accusation she had made which was untrue.  She made reference to the fact that he had rung her father and he calmly responded that he had done so but it was in an effort to find out where she was.  No evidence was called by the respondent in relation to that issue.

23. It will be seen from the above that another example is that the respondent accused the applicant of raping her.  She repeated the accusation in cross-examination and again, he calmly denied ever having done so.  No previous material was ever put to indicate that such an accusation had been made until these proceedings began.

24. The respondent cross-examined the applicant about intervention orders and whilst there appears to have been intervention by the police, they ultimately withdrew those proceedings.  The respondent tried to argue that that was because of the age of the child but the applicant’s evidence was that the police thought the accusations were unsubstantiated and that if anything, what had occurred was a technical breach.

25. Other serious allegations set out by the applicant were not the subject of cross-examination by the respondent.  No evidence was called by the respondent and as such, the applicant having subjected himself to cross-examination, I have no reason to doubt that the accusations were indeed made and that they would not have been proved had they proceeded.  Whilst there may be some debate about some of those accusations, there can be no doubt about the important one which related to the applicant sexually abusing one of the children.  The notation to the order indicated that that was abandoned.  Sadly, it was abandoned at the very last moment. 

26. The accusations in this case may very well have been caused by statements made by a child.  But the width and extent of the allegations went far beyond the statements of the child.  Early in the litigation, none of the objective witnesses had any concerns and that included a family consultant and a psychiatrist.

27. The respondent had alleged in the proceedings that she had been suffering from a brain tumour and indeed, the applicant had been taking her to the hospital.  An inquiry of the hospital however produced no such records.  That issue was never resolved and placed the respondent in a curious position because the hospital did not support her assertion.

28. The respondent had also made an allegation that her own sister had interfered with one of the children.  That sister supported the applicant.

29. Dr A was called in to assess the situation and he concluded that there was no evidence that he could see that supported any of the allegations.

30. Despite all of those problems, the respondent continued with the proceedings until the day of the hearing.  As an attempt to try and deflect responsibility, the respondent said in submission (albeit without any supporting evidence) that she had tried to negotiate and had been unsuccessful.  That flies in the face of the summary of argument that had been presented to the Court in May.  It flew in the face of her own affidavit.  In addition, the respondent said in submission that she was presented with complicated minutes of orders and told to sign them.  As I indicated to her, she might take that matter up with her lawyers but I was entitled, having regard to the involvement of both counsel and an Independent Children’s Lawyer, to treat the matter as one in which I could rely upon what I was being told that the orders were in the best interests of the children.

31. The applicant produced a cost agreement which he had executed when he engaged his solicitors. An examination of that agreement dated 21 December 2010 shows that he was paying lawyers in excess of what the scale under the Family Law Rules 2004 provides. An examination of the agreement indicates very little that is otherwise controversial.

32. The application of the applicant sought $130,000 costs on an indemnity basis.  I explained to the respondent the problems she faced and what she had to address.  Her only response was that she did not resile from her allegations and that she had no money.  Indeed, it transpired notwithstanding the evidence did not so indicate, the respondent is an undischarged bankrupt.  She said that her bankruptcy estate which is currently in the hands of a trustee, has liabilities of just over $40,000.  It is conceivable therefore that subject to the payment of those liabilities, she could be discharged.

33. It was also brought to my attention that an order was made on 26 July that the respondent pay costs fixed in the sum of $2420 from her entitlement to a property settlement.  As will be obvious, she having been declared bankrupt, the respondent has no entitlement to a property settlement whilst she is an undischarged bankrupt and any property she has, vested in the trustee upon becoming bankrupt.  That does not affect the right of the Court to make an order for costs because it may be that she is discharged or alternatively, the applicant will join the list of unsecured creditors. 

34. The applicant through his counsel sought indemnity costs as a result of the provisions of the now repealed s 117AB. I rejected that on the basis that I could not make a finding that the respondent had deliberately lied. She did not give evidence and I would not be in a position to make such a finding at this stage. I say that even taking into account the acknowledgement in the notation attached to the May 2012 orders. There are many reasons why people settle cases including pragmatism. It is one thing to settle and another to make a finding that a litigant deliberately lied.

35. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party in proceedings before the Court shall bear their own costs unless there are circumstances justifying a departure from that principle. If the Court is satisfied there are justifying circumstances, it must take into account the matters set out in s 117(2A).

36. In this case, I am satisfied that there are justifying circumstances. I do so find for the reasons set out above. I turn then to the question of s 117(2A).

37. Normally when one finds a party who is a bankrupt, the conclusion could be readily drawn that their financial circumstances are poor. Section 117(2A) only requires the Court to have regard to the matters there set out. It may be that financial fortunes could change in the future. One of those in this case may be that the respondent will be discharged from bankruptcy. On any view, she currently has some entitlement to a property settlement through her trustee in bankruptcy and that may be sufficient to discharge her liabilities.

38. Another consideration concerns legal aid entitlements.  As I understand it, the respondent is not legally aided.

39. I take into account the conduct of the parties in the proceedings.  I made a specific order for the purposes of ensuring that both parties had an opportunity to have material placed before the Court.  In her conduct of the hearing before me, the respondent appeared intelligent and articulate.  She cross-examined in such a way that although distressed, I could conclude that she knew exactly what she was doing.  Thus, even if she was without legal representation, she would have been able to understand the concept of the necessity to call evidence to rebut what the applicant was saying.  She failed to comply with the order and that made the task so much more difficult. 

40. The applicant’s case has always been that he should have his costs paid on an indemnity basis and to the extent that any costs order is made, I can find that the respondent has been wholly unsuccessful in the proceedings. Those proceedings were the parenting matters.  The respondent consented to orders which did not sit comfortably with her position then or now.

41. I am only obliged to take those matters into account but having considered them all, I am convinced that there is a basis here to make an order for costs.

42. Should the order for costs be on an indemnity basis?

43. The Court should only order indemnity costs where they are reasonably incurred. That is because this Court is, by legislative decree, except for s 117AB (which in itself has been repealed), a no-costs jurisdiction. Where costs are awarded, Rule 19.34(1) requires the assessment to exclude costs not reasonably necessary for the attainment of justice or those not proportionate to the issues in the case. Rule 1.08(1)(g), (h), (i) and (j) reinforces that concept. Thus, whilst costs are discretionary, the Court must look at what was reasonable including where the costs sought are calculated on an indemnity basis.

44. There can be no doubt that the cost agreement is higher than the scale under the rules but not significantly so.  Attached to his affidavit, the applicant set out all of the bills so I have been able to examine what costs he incurred and for what reason. 

45. In Kohan & Kohan (1993) FLC 92-340, the Full Court considered an appeal from an indemnity costs order. Whilst acknowledging the discretionary nature of the costs power, the Court said that it was fundamental to the exercise of the discretion that a Judge should understand that an indemnity costs order was a “very great departure” from the “normal standard” but also to see what impact such an order would have on the financial position of each party because of the extent to which the costs being charged to the litigant seeking the order exceeded the scale.

46. Their Honours reinforced the concept of the “normal standard” by referring to the fact that indemnity costs orders were the exception rather than the rule in not only this Court but others as well.

47. Costs submissions seeking indemnity orders often refer to the decision of Sheppard J in Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Limited (1993) 118 ALR 248. That decision is from the same period as Kohan (supra) and this Court needs to contemplate whether there is a change occurring in the community about costs. In Colgate-Palmolive, Sheppard J examined the Federal Court Rules which have a distinct philosophical similarity to the rules of this Court.  The Federal Court rules provided that on a taxation, the taxing officer was to allow costs as appeared to that officer to have been necessary or proper for the “attainment of justice” or for maintaining or defending the rights of a party but were not to be allowed where those costs were incurred through “over-caution, negligence or misconduct”.

1. His Honour noted that particularly in long complex cases, it was:

   a matter of notoriety that the indemnity for costs which one party recovers from another pursuant to the common order that one pay the costs of the other does not very often provide the party entitled to the benefit of the order with anything approaching a full indemnity for the costs which have in fact been incurred.

2. His Honour observed that the disparity between costs incurred and costs recovered was widening.  Sheppard J set out a number of circumstances from cases previously determined in which costs should be ordered on an indemnity basis. His Honour used as examples, the making of allegations of fraud knowing them to be false, the making of irrelevant allegations of fraud, misconduct that causes loss of time to the Court and to other parties, proceedings commenced or continued for some ulterior motive 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 and an imprudent refusal of an offer to compromise.

3. In parenting cases, the objects of the Act are set out in s 60B. In respect of parenting cases, indemnity costs might be contemplated where there are “groundless contentions” having regard to the clear philosophical direction of the legislature that orders should only be made if they are in a child’s best interests. The “imprudent refusal of an offer to compromise” in parenting cases might include refusing to foster another parent’s relationship with a child or refusing to work with a social scientist outside of litigation to try and repair a fractured or non-existent parent-child relationship. The emphasis to which Sheppard J was referring was on parties who must have or should have known their approach was simply imprudent and I agree.

4. Notwithstanding the legislature’s recent removal of s 117AB, if allegations of dishonesty are made and a finding follows (other than on the balance of probabilities) that deliberate lies were told, an indemnity costs order might be contemplated. That is not because of punishment concepts but because of the trouble to which the untruthful litigant has put the other where the answer is clear. It has also resulted in a waste of the Court’s time which in turn incurs costs for the other litigant.

5. As I pointed out to the respondent, this was not about punishing her but rather compensating the applicant for having to have participated in proceedings which on any view, were unnecessary if one accepted that her position right up until the commencement of trial was that only supervised time should be ordered because of the risks to the child. That position was abandoned by the notation and the orders. Using the tests just referred to, I conclude that the allegations were groundless and having regard to the obligations to consider the matters set out in s 60B of the Act, it was imprudent not to try and resolve the matter much earlier along the lines of what ultimately occurred. As will be seen from the assertions in the applicant’s affidavit, none of the allegations made against him were proved. He subjected himself to cross-examination without any rebutting evidence. There was nothing about his evidence that would make me think he was not telling me the truth. On that basis, I find that the contentions of the respondent were groundless and that they unduly prolonged the case.

6. Because of the way in which the Court had an obligation to cautiously approach that case, orders were made for experts to be involved and supervision to take place.  Those were unnecessary costs having regard to what ultimately occurred and I see no reason why they should not be treated as expenses of the respondent rather than of the applicant.  Accordingly, I propose to make an order for those expenses.

7. I then turn to the question of what it is that should be allowed.

8. Whilst very subjective, costs are discretionary.  As earlier mentioned, it would be impossible to expect these parties to resolve the matter by agreement and to send them to an assessment with registrar would be unreasonable having regard to the complexity of the matters with which I have been dealing.  I have had the advantage of reading each of the bills which sets out in some detail the necessary costs incurred.  However, some of those costs relate to drafting of documents for what I consider to be unreasonable.  I would not be prepared to allow “preparation time for court” by lawyers who presumably know their files.  I would also not be prepared to allow drafting of court documents if those drafting times and costs were unspecified as was the case here nor should research be charged to a client.  The applicant was also involved in proceedings in the Magistrates’ Court and County Court associated with intervention orders and I do not accept that is appropriate for this Court to be dealing with the costs associated with those proceedings particularly where costs associated with intervention orders are governed by State legislation. 

9. Accordingly, having done the best I could, I have taken the costs claimed and reduced them by the amounts which I consider are reasonable in the circumstances.

10. I propose therefore to allow $70,000 for professional costs and expenses associated with reports of the two psychiatrists and the expenses associated with the professional supervisor.  I propose therefore to make an order that the respondent pay the applicant’s costs fixed in the sum of $84,500 which includes those expenses.

I certify that the preceding Fifty Seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 15 August 2012.

Associate: 

Date:  15 August 2012