Vaile and Labrum and Ors (No.2)
[2019] FCCA 3477
•9 December 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VAILE & LABRUM & ORS (No.2) | [2019] FCCA 3477 |
| Catchwords: FAMILY LAW – Costs – where applicant seeks indemnity costs having regard to first respondent’s conduct – general principle that each party to bear own costs – where general principle yields to power to award costs – relevant considerations – power to set the amount of such costs – power to set quantum, determine method for computation or to refer to taxation – quantum set. |
| Legislation: Family Law Act 1975 (Cth), ss.4, 117 |
| Cases cited: Browne v Green [2002] FLC 93-115 Pennisi & Pennisi (1997) FLC 92-2774 |
| Applicant: | MS LABRUM |
| First Respondent: | MR LABRUM |
| Second Respondent: | MR F LABRUM |
| Third Respondent: | MR H LABRUM |
| Fourth Respondent: | MS G LABRUM |
| Fifth Respondent: | C PTY LTD |
| File Number: | MLC 6854 of 2018 |
| Judgment of: | Judge A Kelly |
| Hearing dates: | 19, 20 August 2019, 2 October 2019 |
| Date of Last Submission: | 28 November 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 9 December 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr C. Dunlop |
| Solicitors for the Applicant: | Hassel's Litigation Services |
| Counsel for the First Respondent: | Mr G. Thexton (19-20 August 2019) |
| Counsel for the First Respondent: | Mr J. Hall (2 October 2019) |
| Solicitors for the First Respondent: | Thexton Lawyers |
| Counsel for the Second to Fifth Respondents: | Ms M. Smallwood (2 October 2019) |
| Solicitors for the Second to Fifth Respondents: | Tisher Liner FC Law |
THE COURT ORDERS THAT:
The first respondent pay the applicant’s costs of and incidental to the proceeding fixed in the sum of $15,000.
Paragraph (7) of the Order made on 23 October 2019 be varied so as to add after paragraph (7)(b) thereof:
“(7)(ba) payment to the applicant of the costs payable pursuant to paragraph (1) of the Order made on 9 December 2019.”
IT IS NOTED that publication of this judgment under the pseudonym Vaile & Labrum & Ors (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 6854 of 2018
| MS VAILE |
Applicant
And
| MR LABRUM |
First Respondent
| MR F LABRUM |
Second Respondent
| MR H LABRUM |
Third Respondent
| MS G LABRUM |
Fourth Respondent
| C PTY LTD |
Fifth Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain why an order for costs has been made in this proceeding in favour of the applicant against the first respondent. They should be read together with the reasons for judgment given on 23 October 2019 in relation to an application for an adjustment of property interests as between parties to a de facto relationship: [2019] FCCA 2867.
In particular, the most unsatisfactory nature of the procedural history is set out in those reasons at [2019] FCCA 2867, [12]-[49] and [57]-[58].
Each of the applicant and first respondent have taken the opportunity to file detailed submissions which I have considered.
Applicable principles
The applicable principles are settled. In general, parties to a proceeding under the Act should bear their own costs: Family Law Act 1975 (Cth), s 117(1). However, power is conferred on the court to make such order as to costs as it considers just where it is of the opinion that circumstances justify it in doing so: s 117(2). The power is subject to a number of provisions, including s 117(2A) and the Rules of Court.
In s 117(2A) of the Act, a number of factors are listed which the court must consider in deciding what order for costs (if any) should be made. I address those factors below. Further, the Federal Circuit Court Rules 2001 (Cth) confer power when making an order for costs, to either: set the amount of costs; set the method by which such costs are to be calculated or to refer the matter for taxation in the manner there provided. In addition, the court may set the time for payment of costs: r 22.02(2).
The power to make an order for costs is constrained by the requirement that the court has formed the opinion that circumstances exist to justify making an order for costs. Where that opinion has been formed, s 117(2A) provides that the court shall have regard to the matters enumerated in that provision in considering what order (if any) should be made in relation to costs.
Properly construed, there is nothing in s 117 which prescribes either that more than one factor must be present before an order for costs may be made or that a comparative evaluation of the weight of each such factor must be undertaken in the exercise of the discretion to award costs.[1] In Fitzgerald (as child representative for AF (Legal Aid Commission of Tasmania) v Fish,[2] the Full Court stated:
Nowhere in subsection (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 sub-s (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
[1]Fitzgerald (as child representative for AF (Legal Aid Commission of Tasmania)) v Fish (2005) 33 Fam LR 123, [41]; Eldred & Eldred (No.2) [2015] FamCA 188, [22].
[2] (2005) 33 Fam LR 123, [41].
While the weight to be given to any of the particular factors prescribed by s 117(2A) calls for the exercise of discretion, the factors relevant to that exercise must be taken into account.[3] Further, the authorities recognise that there may be one factor which so dominates the particular facts and circumstances of the case that it may sufficiently provide a sole basis for the conclusion that the discretion ought to be exercised in favour of, or against, an order for costs. I address those matters in turn.
[3] I & I (1995) FLC 92-625;
Parties financial circumstances – par 117(2A)(a)
The requirement to consider the parties’ financial circumstances draws attention to the need to address whether there is a disparity in the parties financial position. However, the court is authorised to adopt a broad brushed approach. The underlying objective is to enable the court to have some appreciation of the relative financial positions of the parties.[4]
[4] Browne v Green [2002] FLC 93-115.
Legal aid – par 117(2A)(b)
This factor has significance as requiring that the court cannot disregard legal aid as consideration where it applies. Further, it draws attention to the need to reflect upon the general principle that a party cannot recover costs which he or she is subject to a liability to pay such costs.[5]
[5] In the Marriage of Conroy (1976) 2 Fam LR 11,223.
Parties conduct – par 117(2A)(c)
The court is required to consider the parties’ conduct:
. . . 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
Where the particular conduct of a party has caused an additional burden resulting in costs to be incurred by their opponent, this will commonly constitute a consideration which may engage the power to award costs. This consideration is not confined to non-cooperation or obstructiveness but may involve unjustifiable conduct of any kind which has caused costs to be incurred which ought not to have been incurred.[6] It is not perhaps without some irony that In the Marriage of Greedy,[7] the Full Court recognised that the refusal to negotiate or to put forward an alternative appropriate order may be a factor which warrants the favourable exercise of discretion. Manifold circumstances may constitute conduct that warrants attention under par 117(2D)(c).
[6] In the Marriage of Fisher (1990) 13 Fam LR 806.
[7] (1982) 8 Fam LR 669.
Compliance with orders – par 117(2A)(d)
The court is required to consider “whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court.” While it may be relevant, it is not necessary to establish that the party’s failure to comply with previous court orders entailed any culpable conduct (whether by act or omission).
Whether wholly unsuccessful – par 117(2A)(e)
It should be noted that the prescribed conduct to which par 117(2A)(e) draws attention is whether any party to the proceedings has been wholly unsuccessful in the proceedings. In this connection, the authorities recognise that although a party’s submissions may have been wholly unsuccessful, they may not have been without merit.[8] The Full Court endorsed the statement in Hawkins & Roe,[9] that “even a meritorious case can be ‘unsuccessful’ when the other case is found to have greater merit.”
[8] Wrensted v Eades [2016] FamCAFC 46 [85]-[87].
[9] [2012] FamCAFC 77.
Written offer to settle – par 117(2A)(f)
The court must also consider whether either party to the proceeding made a written offer to settle, the terms of the offer and their precision.
This requirement reflects policies of the Act including to encourage conciliation, the very real public interest to incentivise settlement, lighten the court’s workload and the drain on scarce judicial resources.[10] In Browne v Green, the Full Court underlined the importance of proper consideration being given to the making of an offer, its terms, the time at which it had been made and that it be contrasted with the result which was achieved instead by judgment:
The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it proper consideration, is something to which very significant weight indeed ought normally be given.
[10]Cf In the Marriage of Greedy; Robinson & Higginbotham (1991) 14 Fam LR 559, 561; see also s 117C.
It follows that parties may proceed at their peril in rejecting a reasonable offer of settlement. At the same time, the court should be slow to approach the evaluation of the question of costs from a backwards looking perspective by simply asking whether the result achieved had been worse than that which had been offered at an earlier time. The reasonableness of the offer and the context in which it was made remain important ‘forward looking’ considerations.[11]
[11] JEL v DDF (Repayment on Appeal, and Costs) (2001) 28 Fam LR 119.
Equally, the context in which an offer was made includes that there are “cases where the contents of the offer are themselves [the] subject of disputed value and [they are the] legitimate subject matter for determination”.[12] That is to say, the surrounding context may support a conclusion that a backwards looking evaluation of an offer may pay insufficient attention to the circumstances which obtained at the time that the offer was made and that the issue in dispute was one which a litigant was reasonably entitled to press for determination at trial.
[12] Pennisi & Pennisi (1997) FLC 92-2774.
Any other matter– par 117(2A)(g)
While there is evident overlap between this provision and the various factors prescribed by pars 117(2A)(a)-(f), it is settled that the terms of par 117(2A)(g) could hardly be expressed in wider terms.[13]
[13] Parke & The Estate of the Late A Parke [2016] FamCAFC 248, [36].
Apart from the special provision made by s 117(1) of the Act, in civil litigation, a party who has succeeded in the litigation is generally entitled to a favourable exercise of discretion to an award of costs: cf Latoudis v Casey.[14] The decision affirms the settled principle that an award of costs is compensatory and not punitive and are intended to indemnify the successful party against the expense to which they have been put by reason of the proceeding.[15] As Mason CJ observed, it is fundamental to the exercise of the discretionary power respecting costs that the issue be considered from the perspective of the successful party.
[14] (1990) 170 CLR 534.
[15] Latoudis 170 CLR 534, 542-543.
Equally, it is clear that an order for costs is not intended to operate by way of a complete indemnity. To the contrary, an order for costs is confined to legal costs and expenses which are properly incurred by a successful party.[16] The entitlement to costs, so understood, is then confined to costs of the kind for which the relevant rules of court provide. The entitlement is not at large.
[16] Cacchia v Hanes (1994) 179 CLR 403, 410.
However, this general principle is explained in part by the circumstance that in most jurisdictions, the court is given a statutory discretion which is not constrained by the prescription of relevant considerations or criteria.[17] As noted above, the position is quite different under s 117 of the Act which recognises that proceedings under the Act are not the same as civil litigation in many respects.
[17] Latoudis v Casey 170 CLR 534, 541.
Consideration
As the matter constituted a ‘proceeding’[18] under the Act, there is no doubt that the power to award costs is controlled by s 117. Accordingly, unless the court is of the opinion that there are circumstances justifying the making of an order for costs, the power to award costs is not engaged. Once the court forms the requisite opinion, the power is engaged subject to the applicable rules of court and, relevantly, the matters addressed by s 117(2A). Once the court has formed that opinion, the general rule as expressed in s 117(1) must yield to the power conferred by s 117(2).[19] It is therefore not the case that the power to award costs may only be exercised in a clear case or that exceptional circumstances be shown.[20]
[18] Act, s 4.
[19] Penfold v Penfold (1980) 144 CLR 311, 315.
[20] Mallett v Mallett (1984) 156 CLR 605, 631-632.
I am of the opinion that the circumstances of this case justify that I should consider whether an order for costs should be made. While it is not necessary that the court should make particular findings in relation to an order for costs,[21] I have addressed the principles applicable to each paragraph of sub-s 117(2A) and each of the factors that it prescribes. I address only those factors which are relevant to this case.
[21] In the Marriage of Kelly (No.2) (1981) FLC 91-108.
Contrary to the first respondent’s submissions and adopting a broad brushed approach there is no disparity in the parties’ financial positions.
As concerns the parties’ conduct, I reiterate the findings that were made and distilled in relation to the procedural history of the matter. I accept the comprehensive submissions of counsel for the applicant that there has been: repeated failure to respond to requests for proper financial disclosure; failure to comply with orders for the preparation of trial including a trial affidavit, financial statement and outline of case (despite being given several opportunities to do so); a failure to cooperate in the preparation of joint expert reports on valuation (despite consent orders) and either passive or active lack of cooperation and obstruction in the valuer’s inspection of properties; failure to respond to requests for, or to participate in the, preparation of court books; a failure to provide instructions. In all the circumstances of the case, an available inference and one which I am prepared to draw is that the first respondent adopted a stance of deliberate obstruction in the determination of the proceeding.
Had a more co-operative approach been taken, the case could well have been completed in less than two days. Instead, it was prolonged unnecessarily and complicated having regard to the solutions which were advanced by the first respondent’s siblings and mother and which, in the event, his counsel submitted were “well within the range.” In this sense, both the adjournment and the third day of the hearing were necessitated by the failure to comply with earlier orders.
I accept the first respondent’s submission that an order for costs operates upon principles of restorative justice and that the authorities make clear that such an order is not by way of punishment.[22] Although it was not submitted, it could not be said that the first respondent had been wholly unsuccessful. Further, this was not a case in which evidence was put before me of any offers to settle the case.
[22]The respondent cited Minister for Immigration and Multicultural Affairs v Vardalis (No.2) (2001) 188 ALR 143 citing Chilli v Abbott [1981] FCA 70, [11].
As concerns any other relevant matter, I accept that proceedings under the Act are to be distinguished from civil proceedings in the sense that they are not strictly inter partes. However, that consideration draws attention to the fact that where parties seek an adjustment of property interests, they are, in my view reasonably entitled to expect that their rateable share in their asset pool will not be unnecessarily eroded by unwarranted disputes. As observed in the course of the proceeding, it is necessary to recognise the scarcity of the available resources and that the diversion of those resources from the demands of other cases is a relevant consideration. Where a case is unnecessarily prolonged, a direct effect of that prolongation is to deny other parties access to the court.
I am not persuaded that this it is a case in which indemnity costs is appropriate.[23] There were no unwarranted allegations in this case and it was not a case in which the respondent was not justified in seeking the determination of the parties’ property interests if agreement on those issues could not otherwise be achieved. However regrettable they may be, I do not regard the first respondent’s failures to comply with orders as constituting misconduct of a kind which would justify indemnity costs.
[23] Cf Rafferty v Wheler (No.2) [2019] FCCA 461, [29]-[32] and cases cited.
In relation to quantum, it is clear the rules of court confer power to set costs. The first respondent’s submissions were themselves responsive to the applicant’s submissions on costs.[24] In turn, the applicant’s written submission sought indemnity costs of $38,052.25 together with $3,533.75 representing one half of the costs and expenses of securing valuations of the properties and $275 being a cancellation fee charged on the occasions that the first respondent hindered a valuer’s inspection. In this context, the first respondent’s submissions did not directly challenge the quantum or reasonableness of any of those costs.
[24] See first respondent's written submissions on costs, [2].
Having regard to the facts and circumstances considered above and those addressed in greater detail in the principal judgment, I consider it appropriate to make an order which allows a lump sum for the costs incurred by the applicant in relation to all of those matters. I fix those costs in the sum of $15,000.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 9 December 2019
0
12
3