Segur and Segur

[2011] FamCA 633

FAMILY COURT OF AUSTRALIA

SEGUR & SEGUR [2011] FamCA 633

FAMILY LAW – Magellan case – costs order following unreasonable position of one party – s117 AB

APPLICANT: Ms Segur

RESPONDENT: Mr Segur

FILE NUMBER: MLC 11159 of 2008

DATE DELIVERED: 24 May 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE:

Husband’s written costs submissions filed on 1 October 2010.

Wife’s Written Minute of Order and Costs Submissions filed on 25 October 2010.
Husband’s written reply to costs submissions of the wife filed on 26 November 2010.

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms L Colla

SOLICITOR FOR THE APPLICANT: JA Middlemis

COUNSEL FOR THE RESPONDENT: Mr J St. John SC

SOLICITOR FOR THE RESPONDENT: MDM McDonald Partners

Orders

1.      The Wife pay to the Husband his costs of an incidental to the hearing on 8 & 9 February 2010.

2.      The Wife additionally pay to the Husband 25% of his costs of and incidental to these proceedings incurred on or after 20 November 2009 (excluding 8 & 9 February 2010).

3.      That the costs be assessed on a party / party basis.

4.      Pursuant to Rule 19.50 of the Family Law Rules the Court certifies that it was reasonable for the husband to engage one counsel at a time and, in particular:-

(a)to engage junior counsel to appear on 3 December 2009;

(b)to engage junior counsel to settle the documents and to prepare, to the extent (if any) that may be allowed on a party / party basis from 20 November 2009 to 6 February 2010; and

(c)to engage senior counsel to appear at the trial and/or to prepare and/or settle any necessary written submission from 6 February 2010 excluding costs of and incidental to the costs submissions.

5.      That the amount of such costs be agreed and, if not agreed, be assessed in accordance with the Rules.

6.      That in relation to the cost of the submissions as to costs:-

a)Any application for costs be filed and served within 14 days and be supported by a written submission of not more than 3 pages (13 point font and 1.5 spacing).

b)The respondent to an application for costs file and serve any written submissions upon which he/she seeks to rely not more than 14 days after service upon them of the application and such submissions be of not more than 3 pages (13 point font and 1.5 spacing) and specify whether he/she wishes to make oral submissions in addition to written submissions.

c)Any applicant for costs upon whom a response is served, file and serve any reply in writing, such reply to be of not more than 2 pages (13 point font and 1.5 spacing) and specify whether he/she wishes to make oral submissions in addition to written submissions.

IT IS NOTED that publication of this judgment under the pseudonym Segur & Segur 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: MLC 11159 of 2008

Ms Segur

Applicant

And

Mr Segur

Respondent

REASONS FOR JUDGMENT

(COSTS)

1. On 10 September 2010 I delivered my decision in relation to parenting and property matters.  My orders included:-

   COSTS

   (41)Any application for costs be filed and served within 21 days and be supported by a written submission of not more than 7 pages (13 point font and 1.5 spacing).

   (42)Any respondent to an application for costs file and serve any written submissions upon which he/she seeks to rely not more than 21 days after service upon them of the application and such submissions be of not more than 7 pages (13 point font and 1.5 spacing) and specify whether he/she wishes to make oral submissions in addition to written submissions.

   (43)Any applicant for costs upon whom a response is served, file and serve any reply in writing, such reply to be of not more than 4 pages (13 point font and 1.5 spacing) and specify whether he/she wishes to make oral submissions in addition to written submissions.

2. By written submission filed on 1 October 2010 the husband seeks costs, in particular:-

   1.The Wife pay to the Husband all his costs of and incidental to 3 December 2009, such costs to be assessed on an indemnity basis.

   2.The Wife pay to the Husband all his costs of an incidental to the hearing on 8 & 9 February 2010, such costs to be assessed on an indemnity basis.

   3.The Wife additionally pay to the Husband 75% of his costs of and incidental to these proceedings incurred on or after 1 October 2009 (excluding 3 December 2009 and 8 & 9 February 2010 but only if each of paras. 1 & 2 of these Minutes is ordered), such costs to be assessed on an indemnity basis.

   4.In the event the Court declines to make the orders for indemnity costs sought in paragraphs 1, 2 and/or 3 hereof, then the Wife pay to the husband all his costs of an incidental to the applications and hearings as specified in paragraphs 1, 2 and/or 3 hereof but assessed on a party / party basis.

   5.The Husband make no contribution towards the costs of the Independent Children’s Lawyer.

   6.Pursuant to Rule 19.50 of the Family Law Rules the Court certify that it was reasonable to engage both Senior Counsel and junior Counsel on behalf of the Husband, inclusive of the preparation of necessary written submissions AND THAT Senior Counsel’s fee be fixed at $6,500 per day.

   7.Such further or other order as the Court deems appropriate.

3. By written submission filed 25 October 2010 the wife opposes the orders ought against her and herself seeks costs.  In particular:-

   1.That there be no order as to costs in respect of the proceedings, save for order 2 herein.

   2.That the father pay the mother’s costs of an incidental to the costs application on a party/party basis at scale.

4. The husband’s reply was filed on 26 November 2010 and did not specify that he wished to make oral submissions.  I conclude, therefore, that he does not.

5. No reply was filed by the wife in respect of the husband’s submissions in relation to the costs order sought by the wife.  I conclude that she does not wish to make oral submissions.

6. The independent children’s lawyer did not seek costs against any party.

7. The wife’s submission and the husband’s reply were both served late and exceeded the length prescribed in my order of 10 September 2010.  However, as neither took issue with late service or the submissions being longer than they should be, I conclude that neither seeks to be heard in opposition to the party filing same being able to rely on them.  I read the submissions as filed.

8. Section 117 of the Family Law Act1975 contains the general rule that each party to proceedings under the Act shall bear his or her own costs.  The object of the rule is to ensure that spouses are not deterred from bringing or maintaining legitimate applications for fear of incurring an intolerable financial burden if they lose.[1]  However, the Court retains a discretion to make an order for costs if it is of the opinion there are circumstances that justify that course and it would be just to do so.

   [1]          In the Marriage of Kohn (1977) 30 FLR 175 at 177.

9. Section 117AB of the Act provides that, if the court is satisfied that a party knowingly made a false allegation or statement in the proceedings, that the court must order that party to pay some or all of the costs of the other party or parties to the proceedings.

10. In considering whether to make an order the Court must have regard to the matters set out in s.117(2A). The weight to be attached to any of the considerations in sub-s.(2A) is wholly discretionary. However, while no single factor out-ranks any other, there is nothing to prevent one or other of them from being the sole foundation for a costs order.[2]  As Kay J observed in Brown & Brown[3] :

    In many cases there will be an outstanding feature . . . that makes an order for costs appropriate, a feature which so dominates the scene that it can outweigh any of the other s 117(2A) considerations.

    [2]          LAC and TRF and LKL [2005] Fam CA 158 at [41].

    [3] (1998) FLC 92-822 at 85,347.

11. The husband contends that this application raises the matters in paragraphs 117(2A)(a), (c), (e) and (g) and/or Section 117AB. The s117(2A) factors are:-

    (a)  the financial circumstances of each of the parties to the proceedings;
    (c)  the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters; 
    (e)  whether any party to the proceedings has been wholly unsuccessful in the proceedings;
    (g)  such other matters as the court considers relevant.

12. The wife contends that, in addition to the factors relied upon by the husband, sub-section 117(2A)(f) is relevant. It provides that the court have regard to whether either party to the proceedings has made an offer of settlement in writing and the terms of any such offer.

13. It is submitted on behalf of the wife that s117AB does not apply because the court cannot be satisfied that the wife knowingly made a false allegation or statement within the meaning of the sub-section. I am unable to accept that submission. I agree with the submission made on behalf of the husband that “knowingly” means that the representation must not be unintentional or accidental and that whether an allegation is “false” is a matter of fact. I am satisfied, for reasons which I gave in the principal judgment, that the wife pursued the sexual abuse allegation recklessly and maliciously. The wife’s actions were wider than making a false statement. They were a disingenuous perpetuation of a sexual abuse allegation that she knew, or ought to have known, was made up by Brigitte and, I am satisfied, is conduct which is caught by Section 117AB.

14. That is not the end of matters to which Section 117AB applies. I am satisfied that the husband falsely denied, on oath, that he and the wife had sexual relations after separation. Whilst the incidence of an ongoing sexual relationship, or the repudiation of sexual intercourse having occurred, is not an allegation per se, his denials do constitute false statements in this proceeding.

15. I conclude that Section 117AB is engaged in relation to the allegations of the wife and some of the evidence of the husband. Of the two, the wife’s transgression is by far the more serious. If the wife’s allegations had not been disproved, the children would have been deprived of the benefit of a meaningful relationship with the father as well as having possible consequences for his employment. There was, necessarily, much evidence and cross examination directed to the wife’s parenting capacities in the context of Section 60CC(3)(c). The husband’s gainsay of an intermittent sexual relationship with the wife post-separation was galling and, no doubt, humiliating and infuriating for the wife However, it was a sub-topic on which the parties’ post separation parenting was assessed. The wife’s allegations of previous sexual abuse and the implications of her not abandoning them when she should have were overwhelming.

16. I do not construe Section 117AB as requiring that either party contribute to the costs of the independent children’s lawyer absent any application being made by the independent children’s lawyer that there be a departure from the position under Section 117(1), that all parties bear his or her own costs.

17. Insofar as the financial circumstances of the parties are concerned, neither party can afford these proceedings.  It has been a disaster for both of them.  Comparatively, the husband had a higher income earning capacity than the wife at the time of the hearing but she did concede that, if she did not retain primary care of the children she may be able to take more work.  However, there was no evidence on which I can find how much more work the wife can take under the parenting regime that I imposed if, indeed, she can take any further work at all. 

18. The husband had the benefit of being able to borrow money from his family to pay or secure payment of his legal costs.  This is a financial resource which the wife does not appear to have although she did give evidence to the fact that she may approach her brother for financial assistance to retain the former matrimonial home.  The husband’s borrowings from his family have resulted in him having to pay interest at commercial rates which he cannot now afford as well as diminishing his entitlement to share in any testamentary bequest from his father.  In effect, he has used his future inheritance to fund these proceedings and also carries a liability for periodic interest.  I am satisfied that, all in all, the husband is financially worse off than the wife.

19. The conduct of the parties in relation to the proceedings is a relevant factor. The wife’s last affidavit should have been better prepared by her solicitor.  One and a half days were expended in evidence in chief and cross examination on those points.  The costs of 8 and 9 February 2010 were incurred by the husband when they should not have been.  The wife’s demeanour as a witness prolonged the trial considerably.  I do not accept the submission made by the wife that, in effect, the delay was brought about by prolonged or excessive cross-examination of the wife.  The wife’s case and her presentation as a witness warranted the very lengthy cross-examination.

20. I accept that neither party was wholly successful nor wholly unsuccessful.  In the outcome, the husband was more successful than the wife but not so as the lead me to order costs on that basis alone.

21. It was submitted on behalf of the wife that the hearing and outcome on 3 December 2009 are relevant to an offer of settlement in the context of ss.117(2A) (f). I am satisfied, on the evidence, that it was quite the opposite. The wife was not then prepared to adhere to her then recently put without prejudice position. The matter required management by the Magellan judge so an appearance was necessary nonetheless. I do not consider that the wife should pay all of the husband’s costs of 3 December 2009.

22. I identify the hearing on 3 December 2009 as the point by which the parties, but most particularly the wife, should have carefully assessed her position.  On the evidence, this was the point at which she should have abandoned requirements for supervision and put to rest the sexual abuse allegations. However she was not prepared to do so and that is something which weighs heavily in favour of the husband succeeding to some extent with his application for costs.

23. The husband seeks 75% of his costs from 1 October 2009.  The evidence does not fall in such a way that I am satisfied that there is particular merit in 1 October 2009.  Doubtless, if the husband were to succeed with 1 October 2009 as a starting date then the very considerable cost of preparation of his trial materials would be taken into account but I do not regard that as an appropriate outcome.  The wife and her advisers knew the case she was required to meet by virtue of the husband’s case being meticulously committed to affidavit evidence.  I find that it would have been within a week or so of the husband’s large affidavit of evidence in chief, sworn 9 November 2009, being filed and served that the wife must assume some responsibility for costs incurred by the husband thereafter.

24. I will order that the wife make a contribution to the husband’s costs to reflect:-

    a.The costs unnecessarily incurred by the husband on 8 and 9 February 2010 by virtue of the wife’s deficient affidavit evidence;

    b.That from a date not later than 20 November 2009 (which I estimate to be a week or so after service of the husband’s affidavit of 9 November 2009), it was inappropriate for the wife to pursue the case which she did pursue for most of the trial.  I will not order costs of the hearing on 3 December 2009 separately.

25. I intend that the contribution be meaningful. 

26. I accept the husband’s position that all of the costs of 8 and 9 February 2010 ought to be allowed.  I will discuss shortly whether that is to include certification for two counsel and/or be on an indemnity basis.

27. I accept that the husband seeks only three-quarters of his costs from a certain point to allow for the fact that there were financial matters in respect of which he does not seek costs. However, the proportion of costs sought by the husband is way too high having regard to the matters to be taken into account and the fact that there needs to be some allowance in favour of the wife, pursuant to Section 117AB, in respect of the husband’s false evidence about the parents’ post separation sexual relationship.

28. In all of the circumstances, I am satisfied that it is appropriate for the wife to pay to the husband 25 per centum of his costs of and incidental to these proceedings incurred on or after 20 November 2009 but excluding the costs of 8 and 9 February 2010 which are dealt with separately.

29. The husband seeks a certificate for senior and junior counsel and that senior counsel’s fees be fixed at $6,500 per day.  The husband’s case was very well prepared.  I accept that there was a lot at stake for the husband in the outcome of the parenting proceedings.  It is understandable that the husband sought the comfort of an exhaustively and meticulously prepared case. However, it was a level of preparation and presentation that exceeds what I regard as appropriate for the wife to be responsible.

30. I will not certify for junior and senior counsel to prepare or to appear together.  In the context of a costs order against the wife it was appropriate for the husband to have only one counsel at any time.

31. I am satisfied that it is appropriate for the costs up to and including two days before the trial to be calculated on the basis of junior counsel’s rates and, thereafter, on rates applicable to senior counsel.  In making this determination, I am not saying that senior and junior counsel did anything other than discharge their professional responsibilities in an entirely appropriate manner.  They clearly worked hard and were diligent but retaining two counsel was a personal choice of the husband and their combined fees should not be visited on the wife.

32. The husband seeks costs on an indemnity basis.  The wife opposes indemnity costs. 

33. The relevant authorities in relation to indemnity costs are usefully set out in the decision of Full Court of the Family Court of Roth & Quinn [2005] FamCA 6. At paragraph 37 the court comprising Holden, May and Strickland JJ commented:-.

    [37]. The category of cases in which it would be appropriate to make an order for indemnity costs was recently discussed by the Full Court in JEL and DDF (No. 2) (2001) FLC 93-083 at 88,441-442, where the Full Court said:
    "… The category of cases in which it would be appropriate to make an order for indemnity costs does not appear to have been fully defined. The Full Court has, however, set out some general principles. In Kohan and Kohan (1993) FLC 92-340 the Court said at 79,614:
    The Proper Exercise of the Discretion
    The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O. 38 r. 2, the provisions of O. 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O. 38 r. 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No. 2) (supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR at 368 to 370.”

    63. The principles that emerge from the authorities were conveniently summarised by Sheppard J in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225. His Honour in that case summarised the position as follows:

    2.      The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis… .

    3.       This has been the settled practice for centuries in England.  It is a practice that is entrenched in Australia.  Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it…

    4.       In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis.  The circumstances of the case must be such as to warrant the Court in departing from the usual course….”

    64.       His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis.  His Honour said at 233:

    Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

    […]

    66. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 the Full Court specifically acknowledged the category of cases that may give rise to an indemnity order are not closed. The Court said at 87,471:

    It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied that some ‘particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis’: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.

    67.       In his written submissions, counsel primarily relies upon the assertion that the wife imprudently refused an offer to compromise.

    68.       We accept the proposition that the objective of the statutory provision in relation to written offers is to encourage settlements and to reduce the cost of litigation to the parties and the community.  That, however, does not mean that the failure to accept an offer will necessarily result in an order for indemnity costs.

    69.       As the Full Court said in Kohan (supra):

    Insofar as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction so far has been to order no more than costs on a party and party basis. Even in cases where there has been dishonest concealment of assets or income as in Penfold v Penfold (1980) FLC 90-800 and Oriolo and Oriolo (1985) FLC 91-653, no more than party and party costs have been awarded.

    70.       In our opinion, the failure to accept an offer which in retrospect, perhaps, should have been accepted is without more, insufficient to justify the making of a costs order on an indemnity basis.  The rejection of the offer must be at the very least imprudent.  We express no opinion as to when the rejection of an offer may be so classified.  It is clear to us in the circumstances of this case that the rejection of the offer, although unwise in retrospect was not imprudent."

1. With respect, I adopt that as an accurate statement of the law in relation to solicitor / client and/or indemnity costs. 

2. Indemnity costs were also the subject of comment in Arundle Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) HCA 26, delivered on 16 February 2001, in which Callinan J stated:

   I would not order indemnity costs as the occasion for an order for these should, in my opinion, be exceedingly rare as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers.

3. In this case I would not characterise the costs incurred by the husband as being extravagant.  However, he and his advisers should have borne in mind the concept of proportionality.  The husband incurred more costs than he can afford to pay or the wife can justifiably be required to contribute to.

4. I do not regard this as a case where costs, as between the husband and the wife, should be calculated other than in accordance with scale or on an indemnity basis.

5. I am not in a position to, and nor was I asked, to fix costs.  The costs will have to be assessed.  That includes the fee for senior counsel where applicable as I decline to fix the daily rate sought.

6. Neither party addressed, specifically, responsibility for the costs of the costs submissions.  They are at large.  Any party wishing to make an application for that the other party pay those costs can make an application by written submission.

7. This is a result in which the husband will recover considerably less costs from the wife than he seeks and the wife will be liable for much more of the husband’s costs than she is willing to pay.  Each will feel aggrieved.  In spite of that, I encourage the practitioners for the parties to assist them to try to negotiate a result without recourse to a full blown assessment of costs (which is a costly exercise in itself).  The wife’s entitlement from an alteration of property interests will fall a long way short of covering her own costs as well as her responsibility for the husband’s costs as ordered by me.  The costs for which she is responsible pursuant to this decision may exceed the costs which she incurred for the conduct of her own case.  I trust that the interests of the relevant practitioners, who in effect will receive the wife’s entitlement to an alteration of property interests, will bring some commercial sense to bear on the implementation of this award of costs.

8. I make orders set out at the commencement of these reasons.

I certify that the preceding forty one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 24 May 2011.

Associate:

Date:  30 June 2011