Thomas and George

[2011] FamCA 557

FAMILY COURT OF AUSTRALIA

THOMAS & GEORGE [2011] FamCA 557

FAMILY LAW - COSTS – Interim costs of contravention application later withdrawn - Circumstances justifying order – Written offer made – Financial circumstances of the parties

Family Law Act 1975 (Cth)

APPLICANT: Ms Thomas

RESPONDENT: Mr George

FILE NUMBER: SYC 8066 of 2010

DATE DELIVERED: 15 July 2011

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Le Poer Trench J

HEARING DATE: 27 June 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Segel

COUNSEL FOR THE RESPONDENT: Mr Schonell SC

Orders

1. The wife is to pay the husband’s costs of the contravention application filed by her on 6 April 2011 on a lawyer and client basis. Such costs to be as agreed or alternatively as assessed.

2. In the assessment and/or settling of the amount to be paid, the husband will be entitled to claim one half of the legal costs incurred by him of attendance at the Court on 27 June 2011.

3. The payment of the order is to be made by the wife to the husband within 21 days of the date of final property orders being made in this matter.

IT IS NOTED that publication of this judgment under the pseudonym Thomas & George is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8066/2010

Ms Thomas

Applicant

And

Mr George

Respondent

REASONS FOR JUDGMENT

1. Before the Court is an application by the respondent husband for the applicant wife to pay his costs of, and incidental to, a contravention application filed by the wife on 6 April 2011. The costs application is opposed by the wife.

2. On 6 April 2011 the wife filed a contravention application alleging three breaches of consent orders made on 12 January 2011. The alleged breaches are as follows.

3. The first allegation is that “the respondent without reasonable excuse has failed to comply with order 2 and is interfering with the wife’s occupation of the former matrimonial home, [F Street, Sydney Suburb 1] in that he is refusing to maintain insurance for the property.” Order 2 made on 12 January 2011 is in the following terms “that pending further order, the husband shall take no step nor do anything to interfere with the wife’s occupation of the former matrimonial home [F Street, Sydney Suburb 1].”

4. Secondly, it is alleged the husband breached order 8 made on 12 January 2011. The allegation is that “in breach of order 8 between 4 January and 26 January 2011 the respondent without reasonable excuse changed the beneficiaries listed under the [N] insurance policy from the applicant to his parents.” Order 8 of 12 January 2011 is as follows “that pending further order the husband shall be restrained from dealing with the [N] insurance policy in his name.”

5. Finally, it is alleged the husband breached order 11 made on 12 January 2011. The allegation is that “In breach of order 11 the respondent has without reasonable excuse failed to provide the wife with reimbursement of medical and dental expenses”. Order 11.4 of that date provided that “the husband shall within 24 hours of receipt of the reimbursement in his bank account transfer that sum to the wife’s account.” This related to claims for reimbursement for payments made in relation to the wife’s medical and dental expenses. The medical insurance was apparently in the husband’s name and any claim for reimbursement gave rise to a payment to his bank account.

6. On the 23 June 2011 the husband’s solicitors wrote to the wife’s solicitors. That letter is in the following terms:

   We refer to your client’s application for contravention listed for hearing on 27 June 2011. We note there are three alleged breaches arising from the orders made by consent on 12 January 2011.

   Please advise if your client intends to proceed with the hearing of that application.

   It is, and will be, contended for and on behalf of the husband that there are no acts or omissions by him which could constitute a breach of the orders as alleged by your client. Specifically in this regard:

   1.We refer to our letter of 1 May 2011 in respect of medical and dental reimbursements and note that we have had no response;

   2.There is no order requiring our client to maintain insurance of any kind at the property occupied by your client;

   3.In relation to the [N] policy we confirm that any directions given by our client in respect of the beneficiaries of that policy were made prior to the orders of 12 January 2011.

   In the circumstances we invite your client to withdraw the application. In the event that she seeks to proceed with it on all or any of the three grounds and the application fails we will seek an order for indemnity costs.

   Our client will consent to an order to amend the beneficiary of the [N] policy to that as expressed prior to separation of the parties, as disclosed in the enclosed policy document dated 16 July 2004, provided that your client consents to an order that she pay our client’s costs of the contravention application on an indemnity basis.

   We await your advice.

7. On 23 June 2011 the wife filed an application in a case which was also made returnable on 27 June 2011. That application sought, inter alia, that the husband cause changes to the N life insurance policy to change the sole beneficiary from his parents to the wife. Further injunctions were sought against the husband in relation to “selling, encumbering or transferring or otherwise dealing with” seven bank accounts. Another injunction was sought, in the same terms, in relation to shares and or stock options held by the husband. The wife also sought an order for payment of $100,000 by way of interim costs.

8. On 27 June 2011 orders were made pursuant to a short minute of consent order as follows:

   1.The husband forthwith do all acts and things to reverse his instructions to [N] Life Insurance in respect of policy no. […] deleting his parents as nominated beneficiaries and restoring in lieu thereof “his spouse”.

   2.Order no.7 made 12 January 2011 be amended by adding after the words “[G] employee share options” the words that appear in paragraphs (b) to (i) in proposed order no.3 of the wife’s application in a case filed 23 June 2011.

   3.That the balance of the proposed orders in the wife’s application in a case filed 23 June 2011 be stood over to a date to be fixed.

   4.That the wife and husband file all affidavits on which they wish to rely in relation to final applications for parenting together with any amended applications and responses by 16 September 2011.

Relevant Law

Indemnity Costs

1. The Court may order that costs be paid on an indemnity basis. Indemnity costs are all costs that a party reasonably and properly incurred. Basically, the person in whose favour the order is made should not be out of pocket. However, the court will not give the party a “blank cheque” allowing the beneficiary to claim any amount paid however unreasonable or fanciful: The Marriage of Munday and Bowman (1997) 22 Fam LR 321 at 323; FLC 92–784 at 84,661.

2. Section 117 of the Family Law Act 1975(Cth)(“the Act”) grants the Court power to make an order for costs. Rule 19.8(1)(b) of the Family Law Rules 2004 (Cth)(“the Rules”) states that the Court may order that a party is entitled to costs as assessed on a particular basis such as lawyer and client, party/party or indemnity. Rule 19.8(3) requires that “A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.”

3. In the Marriage of Kohan(1992) 16 Fam LR 245; (1993) FLC 92–340 (FC) and In the Marriage of Munday and Bowman(1997) 22 Fam LR 321; FLC 92–784 are the leading authorities on indemnity costs in the Family Court. In these cases the Full Court of the Family Court emphasised that it should not lightly depart from the ordinary rules relating to costs between parties and that the circumstances justifying the departure “should be of an exceptional kind”, indemnity costs being “still an exception in this and other jurisdictions”: Kohan at Fam LR 258; FLC 79,614.

4. The authority of Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 is discussed in Munday and Bowman and gives the following examples where indemnity costs might properly be awarded at [250]:

   (xii) The question must always be whether the particular facts and circumstances of the case warrant the making of an order for payment of costs other than on party and party basis. Circumstances warranting the exercise of the discretion to award indemnity costs include:

   (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.
   (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 (Fed C of A, French J, 3 May 1991, unreported).
   (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 (Fed C of A, Davies J, 5 March 1993, unreported).
   (e)  An imprudent refusal of an offer to compromise.

5. These principles have also been followed in JEL v DDF (Repayment on Appeal, and Costs)(2001) 28 Fam LR 119; FLC 93–083 and Starkey v Starkey(2009) 41 Fam LR 177.

6. A recent example of the Full Courts’ reluctance to order indemnity costs is in Stephens v Stephens(2010) 44 Fam LR 117; [2010] FamCAFC 172. At 73 the Full Court relevantly said:

   An order for costs may be made on an indemnity basis, subject to a judicial determination capable of being made that there ought to be a departure from the usual basis that costs be payable on the party and party basis.

7. At [118] the Full Court discussed the Federal Court decisions of Botany Municipal Council v Secretary, Department of Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412; 27 ALD 481 at 484 and NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480. In Botany Municipal at 415 Gummow J stated that "I accept that the discretion conferred by s43 [of the FCA Act] is not so circumscribed that an order of this character [for indemnity costs] may be made only against an ethically or morally delinquent party." Lindgren J qualified this statement in NMFM Property at [54] by stating that “His Honour [Gummow J] was saying only that the presence of ethical or moral delinquency is not an essential condition of a valid exercise of the discretion.” The Full Court notes that Lindgren J made clear at [56]: “The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant.”

8. The application for costs is made pursuant to section 117 of the Act. That section, having stated a general provision that each party to proceedings should bear his or her own costs, goes on to provide that the Court may make an order for costs where there are circumstances that justify it doing so.

9. Section 117(2A) sets out the criteria the Court is to have regard to in considering what order to make.

10. There is little evidence before the Court as to the financial circumstances of the parties. I am aware that there are property proceedings and that the orders of 12 January 2011 provided, inter alia, for the husband to pay $27,000 by way of interim costs to the wife. I am aware that there is a former matrimonial home at F Street, Sydney Suburb 1. I am aware the husband was ordered to pay interim spouse maintenance of $1,950 per week. I know that the husband was restrained from dealing with $50,000 of the funds held in a Westpac bank account and that the husband transferred $18,000 to the wife to be dealt with in the final property settlement as determined by the trial judge. I am also aware that the husband owns shares and stock.

11. Section 117(2A) of the Act requires me to have regard to whether either of the parties is in receipt of assistance by way of legal aid. There is no evidence that either party is in receipt of such aid.

12. I am required to take into account the conduct of the parties to the proceedings. I am required to have regard to whether any party was wholly unsuccessful and whether there was an offer in writing. I am also required to have regard to such other matters as the Court considers relevant.

13. The proceedings before the Court were financial proceedings. The issuing of an application for contravention of a financial order and indeed any order of the Court is a serious step to take. Ultimately, the wife chose to withdraw her contravention application. It seems, from the material made available, that the wife had little chance of establishing the alleged breach of orders.

14. By his letter dated 23 June 2011, the husband provided the wife with an opportunity to withdraw the contravention application. She did not do that. Instead she filed and served a further application in a case.

15. Both husband and wife are legally represented in the proceedings. Each party must understand that commencing a process which requires a formal response and attendance at Court from the other side will generate a costs liability for the other party.

16. In my view, (subject to one matter referred to later) the wife should have taken the opportunity offered to her on 23 June 2011 and withdrawn her application.

17. There was no objection raised by the husband to the wife being permitted to proceed with her application in a case filed on 23 June 2011. The consent orders made on 27 June 2011 reflected a compromise in relation to some of the injunctive orders sought by the wife in her application in a case filed on 23 June 2011.

18. In my view, the last paragraph of the husband’s letter dated 23 June 2011 to the wife’s solicitors provided an unreasonable demand. Ultimately, the husband did consent to an order amending the beneficiary of the N insurance policy to that expressed prior to the separation of the parties, without a consent order that the wife pay the husband’s costs of the contravention on an indemnity basis. I note the consent order does differ from the order sought by the wife in relation to the N insurance policy.

19. The payment of costs on an indemnity basis is reserved for extraordinary circumstances. This is not a case which would in my view warrant the making of an indemnity costs order, however, I take the view it is close to such a case.

Orders to be made

1. In my view, it is appropriate that the wife pay the husband’s costs of the contravention application. The costs should be paid on a lawyer and client basis. Those costs should include one half of the cost of attendance at Court on 27 June 2011. I take that view because there were two applications before the Court on that day and one of those applications gave rise to what appears to be perfectly appropriate orders which were made by consent.

2. Given that I do not know the precise financial impact of a costs order on the wife I propose to order the payment of any such costs be made within 21 days of the final property orders being made in this case.

3. I propose to make orders as set out at the commencement of my reasons.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench

Associate:   

Date:  15 July 2011