Tredrea and Geller & Ors
[2017] FamCA 156
•17 March 2017
FAMILY COURT OF AUSTRALIA
| TREDREA & GELLER AND ORS | [2017] FamCA 156 |
| FAMILY LAW – COSTS – where the respondents seek costs against the applicant – where the respondents further seek costs on an indemnity basis – where the applicant opposes an order for costs – where consideration is given to the circumstances in which indemnity costs are awarded – where the Court held the applicant was not frivolous, malicious or vexatious and the proceedings were not beyond that which is experienced in this Court on a regular basis – where party/party costs awarded in favour of the respondents |
Family Law Act 1975 (Cth) s 117(2A)
Family Law Rules 2004 (Cth) r 19.08(1), 19.08(3), 19.18
| Kohan & Kohan (1993) FLC 92-340 |
| APPLICANT: | Ms Tredrea |
1st RESPONDENT: | Ms Geller |
| 2nd RESPONDENT: | Ms Merritt |
| 3rd RESPONDENT: | Ms Johns |
| 4th RESPONDENT: | Mr Fuller |
| FILE NUMBER: | ADC | 2149 | of | 2016 |
| DATE DELIVERED: | 17 March 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 23 February 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Applicant in person |
| Mr Portway Heuzenroeder Lawyers |
Orders
The applicant pay the respondent’s costs fixed in the sum of THIRTY TWO THOUSAND EIGHT HUNDRED AND THIRTY EIGHT DOLLARS ($32,838) on or before 90 days from the date of this order.
That if the applicant shall fail to pay the costs sum as provided for herein THEN interest shall run on the outstanding amount of such payment from the date of default to the date of payment as prescribed by the Family Law Rules.
That the application for costs do otherwise stand 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 Tredrea & Geller and Ors 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 ADELAIDE |
FILE NUMBER: ADC 2149 of 2016
| Ms Tredrea Applicant And Ms Geller and Ms Merritt and Ms Johns and Mr Fuller |
Respondents
REASONS FOR JUDGMENT
introduction
Following a hearing on 13, 14 and 16 September 2016, Orders were made that dismissed the Further Amended Application in a Case filed 29 August 2016. That order had the effect of resolving all outstanding matters other than the question of costs.
The focus of the proceedings at trial was an attempt by Ms Tredrea (“the applicant”) to seek the enforcement of a term of an order for property settlement made in 1991 in Action No. … of 1990 made between her deceased husband Mr B Fuller and his former wife Ms A Fuller. The respondents to the application are the children of the deceased husband and his former wife.
The issue in dispute was that the applicant sought the transfer of a farming property to the estate of Mr B Fuller notwithstanding that the respondents had signed a contract of sale to an arms-length purchaser.
On 9 November 2016 I ordered the dismissal of the Further Amended Application in a Case filed 29 August 2016. The effect of that Order allowed the respondents to complete the contract for the sale and transfer of the land to the purchaser.
By Application in a Case filed 7 December 2016, the respondents seek that the applicant pay their costs calculated on an indemnity basis in the sum of $44,391 (my calculation).
In support of the respondents’ application they rely upon an Affidavit filed 7 December 2015. The costs have been calculated on the basis of the sum of $39,085 outstanding as at 14 November 2016 and following the unsuccessful attempt to negotiate a resolution to the costs, the further costs incurred in the sum of $5,306.
The applicant filed a Response on 17 February 2017 seeking that the application for costs be dismissed but that if costs are awarded then “they be minimal and affordable to the trust and payable over an extended time period”. The response is supported by an affidavit which sets out the applicant’s argument but also her various offers to settle the proceedings generally, but in particular the question of costs.
BACKGROUND
These reasons should be read in conjunction with the reasons in Tredrea & Geller & Ors [2016] FamCA 634 and Tredrea & Geller & Ors (No 2) [2016] FamCA 949.
The applicant commenced the proceedings by Application in a Case filed 14 June 2016 seeking the enforcement of an order for property settlement.
It is a significant consideration by the respondents that they applied to have the proceedings summarily dismissed. That hearing took place on 4 July 2016 and following reasons being delivered on 5 August 2016, the following orders were made:-
(1)That conditional upon the applicant entering into an undertaking as to damages within seven (7) days of the date of this order, order 1 of the Response filed 17 June 2016 is dismissed.
(2)In the absence of the undertaking as to damages being given as provided for in order (1) hereof, the Application in a Case filed 14 June 2016 be dismissed.
(3)That upon the filing of the undertaking as to damages, the application be placed in the list of cases awaiting trial NOTING that the Court may accommodate an early listing.
Notwithstanding that the respondents were unsuccessful, they rely on what they say was a clear warning to the applicant that her case was weak.
The following passage from that judgment summarises the competing claims of the parties:-
[50]It would seem likely that paragraph 1(d) of the order created a pre-emptive right, not an option. The respondents exercised their obligation to offer. The terms of the offer were not certain in that they did not stipulate a price and only invited the applicant to make an offer. However, subsequently the respondents outlined the terms of their offer inviting the applicant to pay $175,000. The respondents argue that the applicant declined the offer and did not proceed to exercise her pre-emptive right which was thereafter exhausted and permitted the respondents to sell the land to a third party.
[51]It must be said that there is much strength in the argument of the respondents. There is however on the applicant’s case a factual dispute. It must be remembered that what is being argued is not the final merits of the application, but rather, whether the application should be summarily dismissed. The test as considered by the Full Court in Bretton & Bondai (supra) is that there is “no reasonable chance of success”.
[52]Where there is a factual dispute which may then impact upon a consideration of the relevant legal principles, it could not be said that the applicant has no reasonable chance of success. It may very well be that the applicant’s case is weak, but I do not consider that she should be denied the opportunity to be heard. There is a serious legal question to be determined and it may also be a relevant consideration that upon the applicant giving her claim further consideration, a more cogent and cohesive argument may be put.
The respondents argue that any chance of success by the applicant rested upon whether further evidence would invite a reconsideration of the application of the legal principles.
The applicant called evidence from the purchaser and the real estate agent by subpoena. Critically, she did not call her father to give evidence.
There was substantial reliance on his involvement and in particular by reference to various email communication that passed between him and the agents and respondents.
The reasons in Tredrea & Geller & Ors No 2 (supra) records that:-
[38] The applicant accepted that her father’s correspondence with the agent and the fourth respondent were conducted with her knowledge and authority.
The applicant’s own conduct was also the subject of criticism as follows:-
[50]The applicant conceded that her offer to purchase the property in her own right was part of a strategy. It seems that she considered the estate may only have one opportunity to purchase the property and by her purporting to be an arms-length purchaser she may have been able to negotiate a more advantage price for the state.
[51]Whatever the basis for the applicant’s actions, it could not be said that her dealings with the respondents were in any way transparent.
APPLICATION FOR COSTS
Pursuant to rule 19.08(1) of the Family Law Rules 2004 (Cth) (“the rules”), the respondents have applied for an order that the applicant pay their costs. The application is made by application in a case. The respondents also seek an order for costs payable by the applicant on an indemnity basis. Rule 19.08(3) of the rules provides:-
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.
The method of calculation of costs is referred to in Rule 19.18 of the rules:-
(1) The court may order that a party is entitled to costs:
(a) of a specific amount;
(b)as assessed on a particular basis (eg 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.
Sub-Rule 19.18(3) of the rules provides that the Court may consider:
(a)the importance, complexity or difficulty of the issue;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
In considering what order should be made, if any, in respect of the respondents’ costs section 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) requires the Court to have regard to the following:-
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceeding 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 matter as the court considers relevant.
I have a wide discretion in respect of matters relating to a potential costs order.
I have not been informed as to the financial circumstances of either the applicant or the respondents. I do not consider that the financial circumstances of the respondents are significantly in issue. Whatever might be their financial position, as a result of the sale of the subject property, they would receive a sum of $175,000 to be divided amongst them.
The focus is upon the financial circumstances of the applicant. It must be remembered that the applicant purports to represent the estate of her late husband held in trust for their son.
I have been critical of the applicant’s presentation in the proceedings in terms of the lack of transparency as to whose interest she represents from time to time. I am aware that the trust holds significant farming property which is operated and managed by the applicant on behalf of her son. Some assistance is gained from the provisions of paragraph 32 of the applicant’s affidavit:-
The trust has legal bills of around $15,000. The loss of the land has further reduced the profits of the trust. The 10 year average profit of the farm is only around $10,000 pa. The testamentary trust was established to provide for the present and future interests of the infant that has a severe learning disability. Annexure C. It would not be in the best interest of the infant for the trust to be burdened with the applicant’s legal costs when the matter could have been easily resolved on many occasions.
In any event, the applicant was prepared to offer $20,000 to resolve the costs issue. It is reasonable to assume that consideration had been given by the applicant that if accepted such a sum could be raised.
I do not consider that the financial circumstances of either of the parties would speak against an order for costs being made.
The respondents argue that the conduct of the applicant should be a consideration in respect of an order for costs. Whilst adverse findings were made in respect of the applicant and her conduct during the negotiations for the sale of the property, the same could not be said in terms of her involvement in the litigation.
The proceedings were not in any way delayed by her actions and no complaint is made in terms of matters of discovery and inspection and the manner in which she conducted the litigation.
Notwithstanding that it could be argued she did not sufficiently heed the very real warning contained in the judgment dismissing the application for summary dismissal, she was successful in submitting that she had an arguable case albeit a weak one.
The primary focus of the respondents’ application for costs is to argue that the applicant has been wholly unsuccessful in the proceedings. There is strength in that argument. Significant warning was given to the applicant that her case lacked merit and that at trial she would need to present persuasive evidence which was not immediately apparent on an interim basis.
It should therefore have come as no surprise to the applicant when her application was dismissed that she had been wholly unsuccessful.
The applicant sets out the circumstances of an offer to settle. At paragraph 19 of her affidavit the following appears:-
…The only time [the purchaser] was asked if he would willingly hand over his contract was at the court when the judge ordered the parties attempt to deal. [Counsel for the respondents] told me [the purchaser] had agreed to hand over their contract for the good of the cause. I was told the [respondents] would deal at 175,000 plus all their legal costs of $25,000. I believed this was the total cost. I was also told they would not deal at any lower price. At the time, I had no choice but to not accept the offer as I did not believe I had enough money to cover the extra cost.
The applicant complains in paragraph 20 of her affidavit that:-
I was not informed of extra-legal cost’s to complete the trial and I now read in the family court rules if cost are to be awarded then it is a requirement that both parties submit past and future cost to the court and other parties.
Whilst the respondents are silent in respect of any offer to settle the substantive proceedings, they rely upon an offer to settle costs. On 14 November 2016 the respondents offered to settle costs on a solicitor/client basis in the sum of $39,085. That offer was rejected by email dated 30 November 2016. The applicant’s offer was to “pay the costs from the 14/6/16 to the 9/11/16 the cost will be worked out at the family court rate according to schedule 3 and the family court rules including 19.01, 19.04, 19.19 MAXIMUM AMOUNT OF PARTY/PARTY COSTS RECOVERABLE”.
By letter dated 2 December 2016, the indemnity costs of $39,085 was rejected and the applicant offered to resolve the question of costs on the basis of $20,000, purporting it to be calculated on a party/party basis or roughly 60 per cent of the solicitor/client costs charged.
In the correspondence on 14 November 2016 the formulation of the respondents’ costs was supported by the following documents:-
1.The retainer agreement entered into between the respondents and their solicitors.
2.Itemised tax invoice dated 30 May 2016 in the sum of $3,600.
3.Itemised tax invoice dated 22 August 2016 in the sum of $9,947.
4.Tax invoice dated 20 September 2016 for counsel in the sum of $11,000.
5.Tax invoice dated 26 September 2016 for counsel fees in the sum of $11,546.
6.Tax invoice dated 14 November 2016 for counsel fees in the sum of $220.
7.Itemised tax invoice dated 14 November 2016 in the sum of $2,772.
Following what was considered by the respondents to be an offer made by the applicant that she would pay their fees if calculated on a party/party basis, the respondents forwarded an offer on 2 December 2016 enclosing an itemised schedule of costs on a party/party basis in the amount of $35,742.56.
That offer was rejected.
INDEMNITY COSTS
The respondents seek an order that their costs be paid on an indemnity basis.
The explanatory guide to the Rules has been accepted by the Court as an accurate definition of “indemnity basis”; namely:-
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 incurred unreasonably.
The discussion of the Full Court in Prantage&Prantage (2013) 49 Fam LR 197 is of considerable assistance in determining whether and in what circumstances an order for indemnity costs should be made. The Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 in which it was noted that whilst there is nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said at [1]:-
…it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstance of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said:-
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536;(1993) 46 FCR 225.
Whilst there has been judicial comment that the general or usual rule namely, that the Court should not depart from a costs order calculated upon a party/party basis, nonetheless the balance between costs actually incurred for a litigant and the redress that reference to the scale may provide may now been unrealistic and inequitable.
It is reasonably well settled in this Court that the circumstances will be rare before deviating from the application of the usual rule and order costs to be paid on an indemnity basis. In Prantage (supra) the Full Court said at [97]-[98]:-
In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded this should have any impact on the application of the “usual rule” which seeks to balance competing public policy considerations.
The Court also considered other matters which might be relevant to the determination of the basis upon which costs should be ordered, highlighting that it is the party’s conduct as a litigant and not in respect of any past and/or antecedent behaviour.
The respondents’ counsel submitted that because the issues to be determined were not the normal matter that is considered routinely by this Court, that should be a basis to consider indemnity costs. In summary, it was suggested that the complexity of the matters raised in these proceedings are unusual and have therefore required a higher level of attention by the respondents. The costs have been exacerbated and this should be reflected by an indemnity order.
I have not been provided with any information as to how a similar matter may have been treated in a different jurisdiction and whether indemnity costs would inevitably flow.
Whilst I accept that there was a level of complexity in respect of these proceedings, I do not consider that it was unusual or in some way beyond that which is experienced in this Court on a regular basis.
I do not consider that the applicant was frivolous in her claim, nor could it be said that she was in any way malicious or vexatious. She genuinely believed that an interpretation of the original order between her now deceased husband and his first wife should have led to the property being transferred back to the estate.
It could be argued that the interim judgment was a portend of an inevitable outcome. I do not consider that such a consideration alone should inevitably lead to a calculation of costs on an indemnity basis.
It is beyond doubt that the applicant was unsuccessful.
In the circumstances of this case I am not of the view that the disparity between the respondents’ costs being calculated on an indemnity basis and a party/party basis is such that I should err on the side of generosity to the respondents.
I am satisfied that whilst there should be an order for costs made, it should be on a party/party basis and not by reference to solicitor/costs on an indemnity basis.
Both parties have requested that I assess quantum rather than order that the parties have their costs the subject of assessment and taxation.
I am prepared to accede to that application and I am assisted by reference to the schedule of costs prepared on a party/party basis annexed to the affidavit of the respondents’ solicitor filed 7 December 2016. The total claimed inclusive of counsel fees and disbursements up to 14 November 2016 is $35,742 plus $5,306 (although not recalculated on a party/party basis) for the costs incurred in attempting to resolve the question of costs with the applicant. The total is $41,048.
I propose to bring to account the costs as charged, but to apply a discount for the reasonable consideration that on taxation some of the costs may not be properly chargeable, the financial position of the applicant in circumstances where she is potentially liable to the estate for the litigation and the reasonable consideration that at least in respect of the application for summary dismissal, the applicant was successful in having the respondents’ application dismissed.
I propose to reduce the party/party costs payable to the respondent in the sum of $41,048 by 20 per cent leaving an amount for costs fixed in the sum of $32,838.
Given the financial circumstances of the applicant and the likelihood that the estate does not have the ready cash available to discharge the order for costs, I propose to allow the applicant 90 days from the date of this order for the respondents’ costs to be paid.
I certify that the preceding fifty nine (59) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 17 March 2017.
Associate:
Date: 17 March 2017
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