Sewin & Cheals (No 2)
[2023] FedCFamC1F 364
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Sewin & Cheals (No 2) [2023] FedCFamC1F 364
File number(s): PAC 4193 of 2018 Judgment of: SCHONELL J Date of judgment: 12 May 2023 Catchwords: FAMILY LAW – COSTS – Where the three respondents sought costs against the applicant – Where the applicant filed three Contempt Applications against the respondents which she subsequently discontinued – Consideration of factors in s 117 of the Family Law Act 1975 (Cth) – Where an offer was made which the applicant rejected – Costs ordered against the applicant on a party/party basis. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Bant & Clayton (Costs) (2016) 56 Fam LR 31; [2016] FamCAFC 35
Colgate Palmolive Company and Another v Cussons Pty Ltd (1993) 118 ALR 248; [1993] FCA 801
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123; [2005] FamCA 158
Penfold and Penfold (1980) 144 CLR 311; [1980] HCA 4
Shwarz and Schwarz (1985) FLC 91-618; [1985] FamCA 21
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Division: Division 1 First Instance Number of paragraphs: 43 Date of last submissions: 20 April 2023 Date of hearing: 12 May 2023 Place: Sydney Solicitor for the Applicant: Christina Lam & Associates Counsel for the First Respondent: Mr McCaw Solicitor for the First Respondent: Brighton Lawyers Counsel for the Second and Third Respondents: Mr Blackah Solicitor for the Second and Third Respondents: Justice Family Lawyers ORDERS
PAC 4193 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SEWIN
Applicant
AND: MR CHEALS
First Respondent
MS NANG
Second Respondent
MR G CHEALS
Third Respondent
order made by:
SCHONELL J
DATE OF ORDER:
12 MAY 2023
THE COURT ORDERS THAT:
1.The applicant pay the costs incurred on a party/party basis as agreed or assessed of the first, second and third respondents in the period between 28 October 2022 and 9 February 2023 in relation to the three Application–Contempt filed by the applicant.
2.Upon such assessment and/or agreement, the applicant shall pay the costs from any funds received as a consequence of orders being made on a final basis in the financial proceedings as between the parties.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Sewin & Cheals has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
This is an application for costs brought by the first, second and third respondents against the applicant as a consequence of the filing of a Notice of Discontinuance by the applicant in relation to three Application–Contempt filed 28 October 2022. Each of the first, second and third respondents seek orders on an indemnity costs basis and alternatively on a party/party basis.
DOCUMENTS RELIED UPON
The applicant relied upon the following documents:
(1)Written submissions of applicant filed 28 March 2023; and
(2)Financial Statement of applicant filed 13 February 2023.
The first respondent relied upon the following documents:
(1)Affidavit of Mr G, solicitor filed 17 March 2023;
(2)Written submissions of the first respondent filed 17 March 2023; and
(3)Written submissions in reply of the first respondent filed 20 April 2023.
The second and third respondents relied upon the following documents:
(1)Affidavit of Mr M, solicitor filed 10 March 2023;
(2)Written submissions of the second and third respondents filed 10 March 2023; and
(3)Written submissions in reply of the second and third respondents filed 13 April 2023.
BACKGROUND
On 28 October 2022, the applicant filed three Contempt Applications as against the first, second and third respondents. The first return date of the applications was on 11 November 2022. On that date the matter was adjourned to 16 December 2022 for further directions in circumstances where the applications had not been served in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
On 16 December 2022, the Court listed the matter for hearing on 14 February 2023, directing the applicant to file and serve any evidence and submissions on which she intended to rely on by 4.00 pm on 20 January 2023.
The applicant did not comply with that direction and on 9 February 2023 filed a Notice of Discontinuance in relation to the Contempt Applications. At the listing on 14 February 2023, the Court formally dismissed the applications and made directions for the parties to file written submissions as to costs.
Each of the respondents contend that on the basis of the evidence adduced so far by the applicant, she could never have satisfied the Court on the requisite standard of proof that there had been a breach of an order. The first respondent submits:
22. In summary, the evidence provided by the applicant was defective, paultry, and there was no prospect of the application succeeding. The applicant was given two opportunities to produce and file further evidence and failed to comply with court orders. The first respondent submits that the application was doomed to fail and amounted to no more than a waste of resources of the Court and the respondents.
(First respondent’s written submissions filed 17 March 2023)
Whilst the second and third respondents submit that the Contempt Applications themselves were fatally flawed because:
1. They do not specify whether the alleged contempt is pursuant to Family Law Act s. 112AP (1)(a) or s. 112AP (1)(b); they do not allege flagrant challenge to the authority of the Court;
2. They refer to but do not annexe the orders of 15 September 2022; they only annexe the orders of 15 June 2022;
3. They allege that “the Respondent” further dissipated all proceeds of sale without identifying which Respondent is being referred to;
4. They contain a word that is not known in the English language, “depsite”; and 5. They refer to “the time the order was made” without identifying which order is being referred to
(Second and third respondents’ written submissions filed 10 March 2023, page 3)
They further contend:
Further, the wife’s Affidavit of 17 October 2022 in support of the Contempt Applications is defective and deficient because:
1. Much of it is inadmissible; the whole of paras 8, 9, 11 & 12, para 10 commencing on line 1 with the words “which showed” to the end of the paragraph and including Annexure “A”, paragraph 13 commencing on line 2 with the words “in an attempt” to the word “proceedings” on line 3, and para 14 all words from and including “in clear breach” to the end of the paragraph; and
2. The bases of the inadmissibility of those parts of the wife’s Affidavit are hearsay, opinion, and in the case of Annexure “A” it fails to fall within the exception to the hearsay rule in Evidence Act s. 69 because of sub section (3)(a) – it was prepared for the purpose of these proceedings
3. What remains is incapable of sustaining the charge
(Second and third respondents’ written submissions filed 10 March 2023, page 3)
Each of the respondents seek orders initially on an indemnity costs basis and alternatively on a party/party basis.
The applicant contends that the Court should not make a costs order in circumstances where, as a consequence of her changed legal representation, she ultimately withdrew the applications.
DISCUSSION
The authorities make it plain that an order for indemnity costs is not one that is made lightly and there should be circumstances of an exceptional kind that warrant orders for costs on an indemnity basis. In Kohan & Kohan (1993) FLC 92-340, their Honours in the Full Court observed at 79,614:
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.
Indemnity costs orders are still an exception in this and other jurisdictions. …
Justice Sheppard in Colgate Palmolive Company and Another v Cussons Pty Ltd (1993) 118 ALR 248 observed as follows at 256–257:
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1. The problem arises in adversary litigation, ie litigation as between parties at arm’s length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
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. In this court the provisions of O 62, rr 12 and 19, and the Second Schedule to the rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission and Handley JA in Cachia v Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
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. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5. 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); 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 Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). 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.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
The category of cases in which a court may make an indemnity costs order are not closed and are not limited to those identified by Shepard J. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 at 87,471, the Full Court said:
… 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.
There is nothing exceptional about this matter that would bring it within the categories of cases that warrant an order for indemnity costs or, for that matter, are such as to depart from the making of an order on a party/party basis. I am cognisant that the above authorities referring to the circumstances in which a court may make an order for indemnity costs include an imprudent refusal to accept an offer of settlement. That needs to be seen, however, within the context of proceedings where costs follow the event which is different to circumstances that prevail in proceedings before this Court.
I am not satisfied that in this case the circumstances justify the making of an order for indemnity costs or on any other basis other than party/party costs. Accordingly, I will now consider if there are circumstances that justify an order for costs on a party/party basis.
An application for costs is governed by the provisions of s 117 of the Family Law Act 1975 (Cth), which provides a general rule that each party to proceedings should bear their own costs.
Section 117(2) reposes in the Court a discretion to make a costs order in circumstances where the Court determines that there are circumstances that justify it making an order and, if there are such circumstances, the Court may make such order as it considers just, having regard to the matters set out in s 117(2A).
In Penfold and Penfold (1980) 144 CLR 311, the plurality in the High Court determined that to make an order under s 117(2), the Court needs to make a finding of justifying circumstances as a preliminary prerequisite to the making of an order. Their Honours also observed that terms such as ‘an exceptional case’, ‘special circumstances’ or ‘a clear case’ are not necessary determiners of whether or not an order for costs should be made. All that is required or necessary is that there are justifying circumstances.
It is well-settled law that no one factor under s 117(2A) is determinative and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123, the Full Court observed:
41. … Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs
Dealing now with the relative subsections in s 117(2A).
(a) the financial circumstances of each party to the proceedings
I have had regard to the Financial Statement relied upon by the wife. Neither of the other three respondents directed my attention to a Financial Statement filed on their behalf.
In that respect the first respondent contends:
25. The financial circumstances of the party’s [sic] are, to some extent, in dispute in the substantive proceedings. The applicant seeks a share of property from the first respondent, who claims that a number of the assets that are in his name are held on trust for family members, or that third party’s hold a legal or equitable interest in those assets.
26. It is impossible to make clear findings about the precise means of the first respondent in those circumstances, however, it is accepted that the first respondent is funding the proceedings privately and does not have a grant of legal aid.
27. The applicant is however under a grant of legal aid, though there is no evidence of the terms of that grant.
(First respondent’s written submissions filed 17 March 2023)
I know nothing about the financial position of the second and third respondents beyond the contention in the submissions that they are retired people. The applicant contends that her financial circumstances are straitened, that she is not currently employed and that any costs order would have financial implications upon her given that she is the primary carer of the parties’ two children.
That said, impecuniosity is not a basis for not making an order for costs.
(b) whether the parties are in receipt of legal aid
Neither of the respondents are in receipt of legal aid. The applicant is in receipt of legal aid. The mere fact that a party is in receipt of legal aid is not in and of itself an impediment to an award of costs (Schwarz and Schwarz (1985) FLC 91-618).
(c) the conduct of the parties to the proceedings
Each of the respondents point to the conduct of the applicant in bringing an application which was ultimately withdrawn.
What is relevant is conduct of a party which in some way or other leads to an increase in costs by the other party. Such factors may include uncooperative behaviour, obstruction, prolonging litigation or the bringing of unreasonable or unmeritorious applications. It may include non-disclosure or a failure to comply with the Rules in relation to disclosure.
The mere fact that the applicant filed a Notice of Discontinuance is not such as to lead to the conclusion that the conduct of the applicant in relation to the proceedings is in and of itself a basis for the making of a costs order. Even if it were, I accept that upon the change of solicitors the applicant has properly attempted to mitigate any costs incurred by the respondents in appropriately filing a Notice of Discontinuance.
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court
It could not be said that the proceedings were necessitated by a failure to comply with a court order. That said, the applicant does contend that there was a breach of a court order by the terms of her application but, in circumstances where the proceedings have been discontinued, I am not able to make any findings about that.
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings
The second and third respondents contend that the applicant was wholly unsuccessful.
I do not accept that submission. The sub-section refers to a party being unsuccessful in the proceedings.
The term “wholly unsuccessful” refers to a situation in which proceedings as a whole have been unsuccessful rather than necessarily an application (see Bant & Clayton (Costs) (2016) 56 Fam LR 31). It could not be asserted that the applicant was wholly unsuccessful in the proceedings.
(f) whether any party has made an offer in writing
The first respondent contends as follows:
37. On 9 February 2023, after the applicant had filed the notice of discontinuance, the first respondent offered to consent to the discontinuance on the basis that the applicant pay the first respondents costs as agreed or assessed (the 9 February offer). That offer was swiftly rejected.
38. That correspondence shows that the first respondent has attempted to resolve the application reasonably. Had the 9 February offer been accepted by the applicant, the hearing on 14 February 2023 and the subsequent orders made by the Court as to the filing and service of further evidence submissions would have been unnecessary, and costs would have been reduced.
39. It follows that the costs incurred by the first respondents (and respondents collectively) have ballooned because the applicant has refused an offer that would have likely resulted to negotiations of a fixed sum of costs to be paid.
(First respondent’s written submissions filed 17 March 2023)
I do not accept those submissions. The costs of the first respondent of appearing on 14 February 2023 were, in my view, unnecessary in circumstances whereby there had been filed a Notice of Discontinuance. To suggest that counsel should have been retained to appear on that occasion is in my view absurd.
The second and third respondents rely upon an offer made by them on 15 November 2022 addressed to the applicant’s former lawyers inviting her to withdraw her application by a certain date, failing which they would seek an order on an indemnity costs basis. In the event that she withdrew her application by the said date, then no costs would be sought on an indemnity basis.
Clearly, had the applicant accepted the proposal contained in the letter of the second and third respondents by the due date then the costs, not only of the applicant but also all of the respondents, would have been significantly less. This is a relevant matter for me to take into consideration in the making of a costs order.
(g) any other matter the Court considers relevant
In my view there is no other matter relevant.
I also note s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) is as follows:
67 Overarching purpose of family law practice and procedure provisions
(1) The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Note 1: See also paragraphs 5(a) and (b).
Note 2: The Federal Circuit and Family Court of Australia (Division 1) must give effect to principles in the Family Law Act 1975 when exercising jurisdiction in relation to proceedings under that Act.
(2) Without limiting subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 1);
(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court’s overall caseload;
(d) the disposal of all proceedings in a timely manner;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3) The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4) The family law practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a) the Rules of Court;
(b) any other provision made by or under this Act, or any other Act, with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
The overarching purpose is reinforced by the Rules and the Central Practice Direction – Family Law Case Management (CPD), especially the core principles which include that parties must conduct the proceedings (including negotiations for settlement of the dispute) in a way that is consistent with the overarching purpose.
CONCLUSION
The applications filed by the applicant were one that required her to establish the elements of a contempt according to the criminal standard. The evidence filed in support of the applicant’s application on its face would have struggled to meet the requisite standard of proof. The applicant did not comply with the Rules as to service and whilst the Court does not embrace the proposition that the application was fatally flawed, as all of the evidence in support of it had not been filed, the filing of the application resulted in the incurring of costs by the respondents.
I am satisfied that there are circumstances that justify the making of a costs order on a party/party basis from the date of the filing of the applications until the filing of the Notice of Discontinuance on 9 February 2023. I have, however, had regard to the financial circumstances of the applicant and will make an order that the applicant is only required to pay the costs of the first, second and third respondents on a party/party basis out of any monies that she receives as a consequence of the final property proceedings.
I will make orders accordingly.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 12 May 2023
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