Steele and Stanley (Costs)

[2008] FamCA 332

FAMILY COURT OF AUSTRALIA

STEELE & STANLEY (COSTS) [2008] FamCA 332

FAMILY LAW – COSTS – Costs inter party – whether husband should be ordered to pay wife’s costs including a claim for costs on an indemnity basis

Family Law Act 1975 (Cth) s117

Woodley & Time and Anor[2008] FamCA 162
Addison & Lahey (inter party costs) [2006] FamCA 1168
Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225

APPLICANT: Ms Steele

RESPONDENT: Mr Stanley

FILE NUMBER: SYF 4369 of 2005

DATE DELIVERED:  15 May 2008

PLACE DELIVERED: Hobart

PLACE HEARD: Parramatta

JUDGMENT OF: Benjamin J

HEARING DATE: 22 April 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Mr Twigg
SOLICITOR FOR THE APPLICANT:	Adrian Twigg & Co.

COUNSEL FOR THE RESPONDENT: Ms Christie

SOLICITOR FOR THE RESPONDENT: Wyatt Attorneys

Orders

1. The husband pay 50 per cent of the wife’s costs of the property proceedings, on a party/party basis; such costs to be as and from the 14 August 2007 up to and including the date of final orders on 8 February 2008, subject to the following:-

   (a)    such costs are not to include the fees of the single expert in relation to the preparation of any of her expert reports and the expenses associated with her giving evidence;

   (b) noting that these were complex proceedings for which the attendance of senior counsel for both parties at the hearing was certified pursuant to rule 19.50 of the Family Law Rules.

2. The husband pay the wife’s costs, on a party/party basis, on the application for costs.

3. Costs payable pursuant to this order are to be as agreed between the parties or as otherwise determined under the Rules of this Court and in that regard time be extended for the filing of a Bill of Costs for a period of ninety (90) days from the date of these orders.

4. This application for costs is removed from the lists of cases requiring determination.

5. All subpoenaed documents are to be returned to the persons or institutions from which they emanated and all exhibits are to be returned to the person or persons who tendered the same.

   IT IS CERTIFIED

6. Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage Counsel to attend on the costs application for each of the parties.

IT IS NOTED that the publication of this judgment under the pseudonym Steele & Stanley (Costs) is approved pursuant to s121(9) (g) of the Family Law Act 1975(Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 4369 of 2005

Ms Steele

Applicant

And

Mr Stanley

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application by the wife for costs orders against the husband arising out of the hearing of property proceedings between the parties in Sydney on the 8, 9, 10 and 26 October 2007 where judgment was delivered and final orders made by me on the 8 February 2008.

2. The wife’s application for costs was filed on 7 March 2008 and was supported by an affidavit of the wife filed the same day.  The husband filed a response opposing the costs orders on the 21 April 2008 and relied upon his own affidavit filed the same day.

3. Part of the background between the parties was set out in my reasons in paragraphs 7-11 which provided:

   “7. The husband is aged 55 and the wife is aged 53.  They married in May 1984 and separated in August or October 2004, this being a marriage of over 20 years. 

   8. There are three children of the marriage, [N] aged 20 (“[N]”), [A] aged 18 (“[A]”) and H aged 14 almost 15 (“[H]”).  In 2007 [H] was in year 9 and [A] in year 12 at a private secondary school in Sydney. [N] has been living with the husband for about the last twelve months but she has recently commenced spending one to two nights per week with the wife.  The relationship between the wife and [N] is somewhat volatile.  [N] had recommenced tertiary studies earlier in 2007 and completed one semester but she has now withdrawn from that study.

   9. The husband earns about $122,000.00 per annum as a […] and in 2007 he paid child support of $409.00 per week for [A] and [H] and he meets some of [N’s] living expenses. That child support will reduce in 2008 as [A] has now completed her secondary education and in December 2007 attained the age of 18 years.  In respect of [A] and [H], the husband paid one half of their private school fees and half of the extras in relation to those school fees. 

   10. The evidence was that [A] would complete her secondary education in 2007 and that she proposes to enrol in University in 2008 and undertake study towards an undergraduate degree. From there she has ambitions to study medicine, as a second tertiary degree.  For the year 2008 [A] is considering residing […] College, Sydney.  The parties have both contributed to the private education of the children in the past and they have supported [N] in her tertiary studies. I infer that they will continue to financially support [A] in her tertiary studies.

   11. The parties’ marriage was dissolved in November 2005.  In December 2005 the wife married [Mr Steele].  The wife and [Mr Steele] have resided together since their marriage and they have a stable relationship.”

4. The primary proceedings commenced on the 8 November 2005 when the wife filed an application for property orders under s79 of the Family Law Act 1975 (“Act”).

5. The husband filed a response on the 12 December 2005 and subsequently filed an amended response on 15 May 2006.

6. The matter was heard before me on the 8, 9, 10 and 26 October 2007 and I delivered my reasons for judgement on 8 February 2008 and made orders in accordance with those reasons.

THE EVIDENCE

1. The wife relied on her affidavit filed on the 7 March 2008 (the “wife’s affidavit”).

2. The husband relied upon his affidavit filed the 21 April 2008 (the “husband’s affidavit”).

3. Neither party sought to cross-examine the other in relation to the material contained in their respective affidavits.

4. Tendered in evidence on behalf of the wife was a letter from Adrian Twigg and Co. to Wyatt Attorneys dated the 8 September 2005[1].  Tendered as an exhibit in the husband’s case was a letter from Wyatt Attorneys to Adrian Twigg & Co. dated the 19 July 2007[2].

   [1] Exhibit W1.

   [2] Exhibit H1.

5. Both parties relied upon findings made in my reasons published the 8 February 2008 and I include such findings in this determination.

6. Oral submissions were made on behalf of both parties and the husband’s counsel provided an outline of her submissions which were filed in court on the 22 April 2008.

7. It was conceded by counsel for the wife that that ss (b), (c), (d) and (e) of s117 (2A) did not apply. The relevant considerations were:-

   (i)s117(2A)(a) – the financial circumstances of each of the parties to the proceeding;

   (ii)s117(2A)(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;

   (iii) s117(2A)(g) – such other matters as the court considers relevant; as is set out in the husband’s outline of submissions.

8. Any statement of fact in these reasons is to be regarded as a finding of fact unless contrary intent is clear in the context of such statement.

9. The husband is employed as a manager.  The circumstances of his employment and his entitlements are set out in my reasons.  The wife is presently unable to undertake paid employment and in relation to her ability to obtain employment I have set them out in my reasons.

10. One of the factors which I am to have regard to when determining what costs order (if any) should be made is the financial circumstances of each of the parties to the proceedings and in that regard there was evidence during the hearing and in the subsequent filed material as to the wife’s present husband, Mr Steele.  In respect of his earnings I have regard to the findings in my reasons, that is, that the wife is in stable relationship and that she is, to a significant degree, financially supported by Mr Steele.

11. In terms of her financial circumstances, the unchallenged evidence of the wife is that she has incurred practitioner/client costs of about $137,000.00 which costs include the sum of about $65,654.00 which have been incurred since an offer was made in June 2007[3].

    [3] Paragraph 8 of the Wife’s affidavit filed the 7 March 2008.

12. In accordance with the orders made 8 February 2008 the wife is required to pay the husband about $577,000.00.  I note the findings in my reasons in relation to the financing of that sum.  In her affidavit the wife says that she may need to either borrow funds or sell the D home[4].  The wife’s equity access loan has increased since the hearing and is now a liability of about $436,925.00.  A part of that increase in that liability was money expended by the wife on a European holiday in December 2007 and January 2008[5].  The husband asserted that this was a trip where the wife, two of their three children and Mr Steele travelled business class overseas for a period of seven weeks[6].  This assertion of fact is not challenged by the wife.  The wife continues to use the overdraft secured on D property to fund her lifestyle out of capital.

    [4] Ibid at paragraph 9(a).

    [5] Annexure O of the Wife’s affidavit filed the 7 March 2008.

    [6] Paragraph 21 of the Husband’s affidavit filed the 21 April 2008.

13. The effect of the orders made on 8 February 2008 was that wife receives a significantly larger proportion of the matrimonial assets than the husband.  Included in the husband’s smaller proportion is the sum of about $81,000.00 in an accumulative superannuation fund with Clearview.  The wife has a sum of about $13,000.00 with Clearview. I have had regard to those sums which are not readily available to either party. 

14. In relation to his financial circumstances the husband deposes at paragraph 19 of his affidavit that he continues to pay child support for A and has incurred further legal costs subsequent to the making of the orders.  He says he has no capacity to pay a costs order and continues in his desire to have sufficient capital to re-house himself[7].

    [7] Ibid at paragraph 24.

15. In terms of the offers, the wife sets out the history of the offers in her affidavit and says that there were essentially four offers which are set out at paragraph 6(a), (b), (c) and (d).  On a pure money sense the wife’s offers in September 2005 and subsequently were better than the end result received by the husband if the amount payable by the husband is set off against the value of the wife’s lump sum entitlements to the husband’s D Scheme superannuation entitlements. There was argument if this simple set off was an appropriate approach.

16. It was on that basis that it was argued on behalf of the wife that the husband ought to pay the wife’s costs on an indemnity basis because of the serial nature of the offers.  The husband set out the details of his offers in his affidavit including offers subsequent to the making of the orders.  I am obliged to have regard to all offers, although I give little or no weight to the offer made subsequent to the 8 February 2008.

17. The hearing was difficult in terms of a number of areas, one of which was the valuation of L Pty LTd.  This was a significant asset and how the interest of the wife could be determined was complex.  In that regard expert evidence was given by Ms B and the refining of the value of that asset was only determined at trial. This asset and its nature was discussed in my reasons and I have had regard to it in this determination. The single expert needed to value the husbands D Scheme entitlements and this was likewise the subject of up to date evidence at the hearing. Having regard to the evidence of the single expert and the complex nature of the underlying property I determine that her fees ought to be met equally by the parties.

18. There were live issues at the trial as to add-backs, contribution and to the other factors.  It was a complex property matter at which both parties properly engaged senior counsel (I have certified for senior counsel under the Family Law Rules), where lengthy and voluminous case outlines were provided and lengthy outlines of submissions provided in addition to the oral submissions. 

LEGAL PRINCIPLES TO BE APPLIED

1. In terms of the approach to be adopted with regard to costs, I repeat what I set out in Woodleigh & Time and Anor [2008] FamCA 162 at para 29 where I said:-

   “29. The general rule in relation to s117 (1) of the Act is that each party to the proceedings shall bear his or her own costs of the proceedings, subject to s117 (2), s117AA and s118. If I am of the view that there are circumstances that justify me in doing so, I may make such order as to costs, whether by way of interlocutory order or otherwise, as I consider just. Section 117 of the Act requires me not only to consider that the order for costs be just but also that in the particular circumstances of the case, that there are circumstances that justify the making of the order. Section 117(2A) sets out the matters which I shall have regard to in determining what order if any is to be made under s117(2).

   30. In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:

   “The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.''

31. In the absence of their being circumstances that justify the court making an order for costs, then s117 (1) provides that each party will bear his or her own costs of the proceedings under the act.

32. The interpretation to be applied to s117 and the inter relationship of s117 (1) and s117 (2) was considered by the High Court in Penfold v Penfold (1980) FLC 98-800.  In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:

“It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.”

“Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case’” .

“Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the 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.”

“Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19…(which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest...” (at 75,054).

“Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”

33.The case of Penfolds was discussed by Justice Wilson in the High Court decision of Mallet v Mallet (1984) FLC 91-507 (with whom Gibbs CJ, Mason, Dean and Dawson JJ agreed at pp 79,123-79,124). Penfolds case also made it clear that s117(2A) “requires a finding justifying circumstances as an essential preliminary to the making of an order”. It is clear that the court has a wide discretion and that beyond this there is no “additional or special onus” on the applicant for costs which requires the court to make a preliminary finding that special or exceptional circumstances exist before making an order for costs[8].

34.By virtue of s 117(2A), in considering what order (if any) should be made under s 117(2), I am required to have regard to the matters set out in s117(2A) (a)-(g) in so far as they are relevant. The factors set out in the subparagraphs do not comprise of a closed list of factors, because s117(2A)(g) includes “such other matters as the court thinks relevant”.   I need to consider each of the various factors, subject to their relevance, however, in PBF (as Child Representative for AF (Legal Aid Commission of Tasmania) v TRF and LKL (2005)  FamCA 118 the Full Court held at paragraph 41:

“…Nowhere in subsection 2(A) or elsewhere in section 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 subsection 2(A).  As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”

[8] Jensen and Jensen (1982) FLC 91-263.

35.In the matter of  I and I (No 2) FLC 92-625, the Full Court at p 82,277 said:

“that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs.” 

36. In this case Nicholson CJ, Ellis and Baker JJ declined to follow the the approach adopted in the decision of McDonald and Mc Donald (1994) FLC 92-508 in relation to the question of costs. In that earlier case his Mushin J had said at p 81,271;  

``In the first instance it is important to note that the principal proceedings concerned questions of custody. As between parties in the strict sense of that word, it is rare for an order for costs to be made in such proceedings. Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order were made.''

37.The Full Court in I and I (No 2) above, declined to follow this approach and held at p 82,277;

“With respect... we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs. The financial circumstances of the parties is but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.''

1. The first question for me to determine is whether I am of the view there are any such justifying circumstances in this present case in considering whether a costs order ought to be made.  I find that the financial circumstances of the parties’ and the various offers made (prior to the publication of my reasons) constitute circumstances justifying a consideration of an order for costs.

RELEVANT FACTORS

1. As such I then need to consider the relevant factors being paragraphs ss (a), (f) and (g) of s117 (2A).

   s117(2A)(a) – the financial circumstances of each of the parties to the proceeding;

2. Then having regard to the matters I must consider under s117(2A)(a) – the financial circumstances of each of the parties to the proceedings, I repeat that the essence of the reasons is to leave the wife asset rich and income poor (comparative to the husband). The wife has a significant equity in the D home and she continues to live a lifestyle where her capital (except at some levels) is applied for those purposes. I do not take the financial circumstances of Mr Steele into account as I am not obliged to do so under the provisions of s117(2A) of the Act and I was urged not to do so by the wife’s solicitor.

3. However, I have regard to the finding in respect of his financial support of the wife and the stability of their relationship.  I also have regard to the parties’ continuing support for the two younger children of their marriage.

4. A submission was made on behalf of the husband that the extent of the financial circumstances of each of the parties may be “sufficient to ground the departure from the “usual rule” in itself.  In her submissions, counsel for the husband said that in this case that provision is not being used as a “sword” but is being used as a “shield”.  There was merit to that argument.

5. As I indicated earlier, included in the husband’s “non-superannuation assets” is the Clearview entitlement which is a relatively large amount of money in comparison to the pool of assets the husband otherwise has available to him.

6. The wife will have access to the D Scheme superannuation sum and her Clearview sum when she turns 55 (if she choses to take the funds at that time).

7. One of the primary submissions on behalf of the wife (in addition to her financial circumstances and the amount of costs that she has incurred in these proceedings) is with regard to the offers which are set out in the wife’s affidavit.  It was put in submissions that the offers are either close to or better than the outcome pursuant to the orders made by me.  In coming to that conclusion the wife seeks to have the court treat the sum of about $268,000.00 by way of a splitting order as cash to be set off against the payment provided under the orders to be paid to the husband.  This is set out in paragraph 5 of the wife’s affidavit.

8. The splitting sum from D Scheme cannot be treated as cash as it will not be available to the wife for some two years (or more if she choses to return to work or decides to wait until she attains the age of 60).  The simple deduction is, as was submitted by counsel for the husband, comparing “apples with oranges”.

9. I have not attached any weight to the offers that were made in relation to the settlement offers made post March 2008.  I have had regard to the exchange of offers that passed between the parties which are reflected in the two affidavits and the exhibits.

   s117(2A)(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;

10. The offers must be seen in the context of the complexity of these proceedings.  One of the issues was the valuation of L Pty Ltd which the wife initially asserted had a value of $25,000.00 and was eventually determined by me to have a value of $476,760.00.  There were also issues of the valuation of the underlying assets and issues of how the life entitlements of the wife’s parents ought to be treated in terms of that valuation.

11. There were complex issues with regard to the various real estate transactions by the parties which were numerous and where the evidence was not always clear.  There was the add-back claimed by the husband of some $487,740.00 which was, at the end of the hearing, not acceded to but which involved a significant contribution by the husband towards the care of the children.

12. I am satisfied on the evidence that there was not a clear picture as to assets and liabilities of the parties until about August 2007.  I add that absolute clarity was only determined after all the evidence was before me.

13. I have had regard to the offers and counter offers and considered those in the light of the outcome in these proceedings.

14. There was an issue as to the husband’s desire that there not be splitting of his superannuation.  His submissions were clear, that is if I accepted his approach to a division of the property there ought not to be a splitting order of superannuation.  As an alternative his submissions were that there ought to be a splitting order.

15. I have given weight to the offers made by the wife and set out in her affidavit.

    s117(2A) (g) – such other matters as the court considers relevant;

16. The final matter is such other matters the court considers relevant.  I am satisfied that the wife has the capacity to fund the capital sum payable to the husband in a number of ways and again I refer to the findings made by me in my reasons.

17. It was submitted on behalf of the wife that the end result of this case was “very clear”.  Hindsight is a wonderful thing whereas in complex financial arrangements looking ahead can be more difficult.  The tension in the dispute between the parties is the superior asset position of the wife (including non-superannuation assets), the superior income position of the husband and the proximity of the offers in terms of the overall result (albeit putting superannuation and non-superannuation assets together). 

INDEMNITY COSTS OR PARTY/PARTY COSTS

1. There is also a question of indemnity costs. The principals in that regard were discussed by me in Addison & Lahey (inter party costs) at paragraphs 90 onwards:-

   “90.The only matter remaining for determination is whether it is appropriate in the circumstances of this case that I make an order that the husband pay the wife’s costs on an indemnity basis.

   91.Counsel for the wife submitted that any costs awarded in favour of the wife should be awarded on an indemnity basis.  The basis of his argument was threefold:

   (a)   firstly that the Court has the power to order indemnity costs;

   (b) secondly that indemnity costs are the norm in case, and referred to the rules which he submitted were in force at the date of the reasons for my judgement in particular Rule 19.18 (3) of the Family Law Rules 2004 (Cth) as amended by Statutory Rules 2004 No:351, and;

   (c)    thirdly that exceptional circumstances existed in this matter so as to justify the making of an indemnity costs order.

   92.In reply counsel for the husband submitted this was not a matter where indemnity costs were appropriate and that if the Court were to adopt the reasoning of the wife’s counsel in relation to the application of the Family Court Amendment Rule No 3/2004 in relation to indemnity costs “it would turn matters on their head as we know them”.

   93.Counsel for the husband also submitted that although the Court can in prescribed circumstances make an order for indemnity costs, “the circumstances must be of an exceptional kind, and it should appear that the proceedings were commenced in circumstances where a party properly advised had no chance of success and that the Court would draw an inference that the actions taken were for ulterior motive.”[9]  He submitted this was not a case where circumstances were of an exceptional kind, and where proceedings had been commenced for an ulterior motive by the husband, and on this basis an order for indemnity costs should not be made against the husband.

   94.Section 117 of the Act authorises me to make such orders for costs as I consider just. The most common form of assessment is for costs on a “party and party basis”, as agreed or taxed, however costs may also be made on a “solicitor and client” or “indemnity basis”. The general rule is that indemnity costs should only be ordered where there are “circumstances of an exceptional kind”.[10]

   95.Where costs are sought on an indemnity basis and the costs incurred arise under a costs agreement, the terms of the agreement must be disclosed to the Court.[11] 

   96.The Explanatory Guide to the Family Law Rules provides a definition of indemnity basis as follows:

   “an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been unreasonably incurred”.[12]

   97.In Munday and Bowman (1997) FLC 92-784 Chief Justice Holden reviewed the relevant authorities and principles in relation to indemnity costs.  His Honour noted at that whilst there is no doubt that the Court has the power to award costs on an indemnity basis[13] the decision in Kohan and Kohan (1993) FLC 92-340 “did not give any indication of what might be regarded as exceptional circumstances”.[14] His Honour then turned to the Federal Court decision of Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225 and noted the circumstances identified by Sheppard J in that case where the exercise of the discretion to award costs on an indemnity basis have been thought to be warranted.  Holden CJ set these out at 84,660:

   [9] Ibid at paragraph 60.

   [10] Kohan and Kohan (1993) FLC 92-340 at 79,614.

   [11] Rule 19.08(3) of the Family Law Rules 1975.

   [12] CCH Australian Family Law Handbook Court at Page 7,432.

   [13] At 84,659.

   [14] Ibid at  84,660.

   “a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.

   (b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd. (supra)

   (c) Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991)).

   (d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).

   (e) An imprudent refusal of an offer to compromise.”

   98.Later the Full Court (Lindenmayer, Holden and Mullane JJ) in Yunghanns v Yunghams (2000) FLC 93-029 followed the decision of Kohan (supra) and commented that the category of circumstances which would satisfy an order for indemnity costs is not closed.  The Court said (full citations omitted):

   “31. …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.”

   99.In JEL and DDF (No 2) (2001) FLC 93-083 the Full Court (Kay, Holden and Guest JJ as he then was) commented that “the category of cases in which it would be appropriate to make an order for indemnity costs does not appear to be fully defined”. [15] Kay, Holden and Guest JJ (as he then was) held that the failure to accept an offer to compromise was without more insufficient to justify the making of a costs order on an indemnity basis.  They stated at page 88,422:

   “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…”

   100.More recently in Zhu & An / ZH & N [2005] Fam CA 828 Bryant CJ with whom Coleman and May JJ agreed, held that there were particular facts and circumstances in that case (actions taken by the husband were to delay the progress of the case) which warranted the making of a costs order other than on a party party basis.  The Chief Justice also affirmed the decision of the Full Court in Yunghanns (supra) that a collateral purpose need not be established against the person against whom the indemnity costs order is sought:

   “13. In Roth v Quinn [2005] FamCA 6, an unreported judgment of the Full Court delivered on 6 January 2005, the Court considered the question of indemnity costs.  In that case their Honours referred to the decision of the Full Court in JEL v DDF No 2 (2001) FLC 93-013 at 88,441-2, 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.”

   14.I do not intend to repeat the long quote from JEL v DDF that their Honours then referred to; suffice it to say that that case considers a number of authorities, including the well-known case of Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248, a number of Federal Court authorities, Family Court authorities, including Yunghanns v Yunghanns (2000) FLC 93-029 where again the Full Court specifically acknowledged the category of cases that may give rise to an indemnity order not being closed.  At page 87,471 the court in Yunghanns said as follows:

   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-party basis (per Sheppard v Day and Colgate Palmolive Co v Cussons Pty Ltd)…

   17.I would, for my part, be prepared to infer on that basis that the appeal was instituted as a delaying tactic.  But in any event, it is not necessary, as the Full Court in Yunghanns said that some collateral purpose be established.  I am satisfied, for my part, that there are particular facts and circumstances in this case in the nature of the appeal and its subsequent abandonment that warrant the making of an order for the payment of costs other than on a party-party basis...”

   [15] At page 88,441.

1. As I have indicated earlier in these reasons I am satisfied that the financial circumstances of the parties and the offers are such that the essential preliminary circumstances to the making of an order for costs is established. 

CONCLUSION

1. Exercising the broad discretion I have in relation to such costs matters I determine that the husband should pay 50 per cent of the wife’s costs as and from the letter of 14 August 2007. 

2. These costs should be on a party/party basis.  I am not satisfied that the facts in this application falls within the principles set  out in Colgate Palmolive v Cussins Pty Ltd referred to above.

3. This is not a case where the husband has commenced or continued proceedings in circumstances where, properly advised, he should have known that he had no chance of success. 

4. It is not a matter where there were making allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud nor is there evidence of particular misconduct caused to the court and to the parties.

5. None of the examples raised in Colgate Palmolive v Cussins appear to have been relevant in these particular proceedings.

6. The basis of the indemnity costs application is on the consistency of the offers as set out in the wife’s material. Exercising my broad discretion in this regard I do not propose to make an order for indemnity costs.

7. Having regard to all of the circumstances of this application and having regard to all of the factors under s117(2A) I determine that the husband should pay the wife costs of the costs application on a party/party basis.

I certify that the preceding fifty two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin

Legal Associate: 

Date:   15 May 2008