Tamson and Moritz (No 2)

[2019] FamCA 799

FAMILY COURT OF AUSTRALIA

TAMSON & MORITZ (NO. 2) [2019] FamCA 799

FAMILY LAW – COSTS – Where application for costs made by the husband – Consideration of applicable principles – Where question of indemnity costs not enlivened – Where in the circumstances no justifying circumstances to displace the general rule as to costs – Where application dismissed.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) r 19.18

Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Collins & Collins (1985) FLC 91-603
Greedy & Greedy (1982) FLC 91-250
Harris & Dewell and Anor (No.2) [2018] FamCAFC 180
Hawkins & Roe [2012] FamCAFC 77
Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23
Luadaka & Luadaka (1998) FLC 92-830
Munday v Bowman(1997) FLC 92-784
Parke & the Estate of the Late A Parke (2016) FLC 93-748
Penfold v Penfold (1980) 144 CLR 311

APPLICANT: Ms Tamson

RESPONDENT: Mr Moritz

FILE NUMBER: PAC 3629 of 2017

DATE DELIVERED: 31 October 2019

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: By way of written submissions last received on 3 October 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Rosic

SOLICITOR FOR THE APPLICANT: Rowlandson & Co Solicitors

COUNSEL FOR THE RESPONDENT: Mr Campton SC with him Mr Gardiner

SOLICITOR FOR THE RESPONDENT: Coleman Greig Lawyers

Orders

1. That the de facto husband’s application for costs of and incidental to the application for variation of spouse maintenance be dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 3629 of 2017

Ms Tamson

Applicant

And

Mr Moritz

Respondent

REASONS FOR JUDGMENT

1. The application for determination is an application for costs arising out of orders made 15 August 2019.

2. In brief, the primary application was an application by the former de facto wife to vary the terms of a spouse maintenance order made by consent on 1 September 2017. Reasons for judgment were delivered and familiarity with those reasons for judgment is assumed in the context of this determination: Tamson & Moritz [2019] FamCA 552.

3. Relevantly, the order made on 15 August 2019 was that the de facto wife’s application for variation of spouse maintenance be dismissed.

4. Subsequent to that dismissal, the respondent de facto husband made an application for an order for costs by way of written submissions filed 12 September 2019 to which the de facto wife responded by written submissions filed 3 October 2019.

Costs

1. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.

2. That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.

3. Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: Penfold v Penfold (1980) 144 CLR 311.

4. The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They are as follows:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party has legal aid and the terms of any grant of aid;

   (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 answers, questions, admissions of facts, production of documents and similar matters;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (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; and

   (g)such other matters as the Court considers relevant.

5. In Collins & Collins (1985) FLC 91-603 (at 79,877), the Full Court described the discretion conferred by s 117 as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way.

6. The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:

   17.With respect to the application of the section, in Penfold v Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:

   1.Sub-section (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, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case".

   2.Sub-section (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 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 (Kent v Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.

   (footnotes omitted)

   18.The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held 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”. That is not to say that one single matter may not ultimately be determinative. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:

   … A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. 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.

7. In Greedy & Greedy (1982) FLC 91-250 and Luadaka & Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.

8. The provision relating to the calculation of costs is set out in r 19.18(1) of the Family Law Rules 2004 (Cth) (“the Rules”) which states:

   Method of calculation of costs

   (1)The court may order that a party is entitled to costs:

   (a)of a specific amount;

   (b)as assessed on a particular basis (e.g. lawyer and client, party/party or indemnity);

   (c)to be calculated in accordance with the method stated in the order; or

   (d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

9. It was said in Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 at 162 that the purpose of the rule enabling an order for costs in a specific amount, without formal assessment or taxation is, commonly with other courts, to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”.

10. In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 the Court said at [10] that the Court must act judicially, but that does not mean that it must exercise the power to award a lump sum in any “scientific or formulaic manner”.

11. Murphy J observed in Parke & the Estate of the Late A Parke (2016) FLC 93-748 at [130]:

    If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”…

The Parties’ Contentions: The De facto Husband

1. The husband’s submissions as to costs focused on the relevant matters set out in s 117(2A) of the Act.

2. As to financial circumstances, both parties had filed financial statements in the proceedings. Relevantly, the de facto husband is self-employed through his private investment company and draws an annual income of about $110,000 gross. Otherwise, he has access to director’s loans through his corporate entity.  Another of his corporate entities holds property to the value of about $14 million with liabilities asserted to be about $10.12 million.

3. On the other hand, the de facto wife is in receipt of Centrelink disability pension payments of about $440 per week together with Centrelink family tax benefits relating to the children in her care of about $230 per week and ongoing child support payments from her former partners of about $416 per week.  Otherwise, the de facto wife earns a modest income as self-employed operated through a corporate entity.

4. It is contended by the husband that the objective bank documents at hearing were not consistent with the wife’s assertions as to income from her business: Reasons at [56].

5. Neither party in this matter has a grant of legal aid.

6. The husband contends that the wife did not make full and frank disclosure of her financial affairs including income from her self-employment.  It is a further complaint from the husband that financial documents relevant to the wife’s circumstances were not available until shortly before the commencement of the hearing.

7. The husband, otherwise, contends that the wife was wholly unsuccessful in that her application for variation of spouse maintenance was dismissed.

8. The husband contends that the matters referred to above are sufficient to displace the general rule that each party pay their own costs.

9. Otherwise, the husband seeks to have costs assessed on an indemnity basis as against the wife. 

10. The law in relation to indemnity costs is well settled.

11. As to indemnity costs reference is made to the frequently cited judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and that often repeated statement need not be repeated here. Holden J in Munday v Bowman (1997) FLC 92-784 drew from the decision of Sheppard J the following examples:

    (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. …

    (b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud. …

    (c)Evidence of particular misconduct causing loss of time to the court and to other parties. …

    (d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions. …

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

12. It is also important to note that the category of circumstances which enliven the discretion to award indemnity costs are not closed, and thus the circumstances do not need to come precisely within the examples provided.

13. In Harris & Dewell and Anor (No.2) [2018] FamCAFC 180 the Full Court said:

    23.In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”.   In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts.  Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.

    24.That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation.   His Honour said that an order for indemnity costs should “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”.  

    25.The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]).  Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”

    26.Of course, in proceedings under the Act, an overriding “usual rule” is prescribed by s 117(1), namely that each party bears their own costs. The degree of departure between that “usual rule” and a result where one party bears the totality of the other party’s costs can be seen to be all the greater.

14. The application determined by the Court was a simple financial application. The husband was represented by senior counsel. The husband asserts that his solicitor client costs totalled $55,326 including his counsel fees that included senior and junior counsel totalled $24,750.  The expenditure of a totality of fees of that magnitude in the context of what is a fairly run-of-the-mill financial issue is inexplicable.

15. In the circumstances of this matter, it is readily apparent that the issue of indemnity costs does not arise. Such application is to be dismissed.

The parties’ contentions: The de facto wife

1. In response to the husband’s contention the wife makes reference to the general background of litigation although such is of little moment in the context of this discrete financial application for determination.

2. As to her financial circumstances the wife discloses assets comprising a car, some household contents and a small balance of superannuation. She has outstanding bank and credit card liabilities totalling around $25,275, outstanding legal fees to her solicitor of about $60,000 and is in debt in relation to outstanding school fees for her children.

3. She suffers from ongoing health difficulties that see her eligible for a disability pension.

4. She correctly describes her financial circumstances as “dire”.  On the other hand, she describes the husband as a man of “significant wealth”.

5. The wife complains of the husband’s failure to make full and proper disclosure of his financial circumstances including his assets, liabilities and financial resources. Such disclosure, of course, did not impact on the discrete issue for determination in this matter as the wife’s application for variation to spouse maintenance failed at the first step thus making it unnecessary to give consideration to the husband’s circumstances.

Discussion

1. In considering the parties’ contentions outlined above and having regard to the significant financial disparity in the position of both parties in the context of the discrete financial issue for determination, this is not a circumstance where there are justifying circumstances to depart from the general rule that each party pay their own costs.

2. The husband’s application for costs will be dismissed.

I certify that the preceding thirty seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 31 October 2019.

Associate:

Date:  31 October 2019