Vestri & Vestri (No 7)
[2024] FedCFamC1F 619
•17 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Vestri & Vestri (No 7) [2024] FedCFamC1F 619
File number(s): CAC 405 of 2022 Judgment of: GILL J Date of judgment: 17 September 2024 Catchwords: FAMILY LAW – COSTS – Where the mother seeks her costs be paid by the father on an indemnity basis at a fixed sum – Where both the parenting and property hearings proceeded undefended and final orders were made in line with those sought by the mother – Where the application for costs in relation to the parenting proceedings was filed out of time – Where the father’s non-disclosure, non-filing of trial material and non-participation in the final hearings after having the previous hearing vacated to enable him to take part justify costs being granted on an indemnity basis at the sum sought by the mother Legislation: Family Law Act 1975 (Cth) – s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) – r 15.06
Cases cited: Hawkins & Roe [2012] FamCAFC 77
Kohan & Kohan (1993) FLC 92-340
Penfold v Penfold (1980) 144 CLR 311
Quickley & Pelissier [2016] FamCAFC 124
Division: Division 1 First Instance Number of paragraphs: 43 Date of last submission/s: 12 July 2024 Date of hearing: Heard in Chambers on the papers Place: Delivered in Sydney Solicitor for the Applicant: Neilan Stramandinoli Family Law Solicitor for the Respondent: Litigant in Person - did not participate ORDERS
CAC 405 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS VETRI
Applicant
AND: MR VESTRI
Respondent
ORDER MADE BY:
GILL J
DATE OF ORDER:
17 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.The applicant is granted leave to pursue her application for costs with respect to parenting matters pursuant to Rule 15.06 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.
2.Leave is granted to the wife to rely upon the affidavit of Ms F filed 11 June 2024.
3.That insofar as Order 5 of the orders dated 25 March 2024 requires those costs to be as agreed or assessed such order is discharged.
4.The respondent pay the applicant’s costs of, and incidental to, the substantive proceedings on an indemnity basis from 21 July 2023 until the conclusion of the final hearing in this matter on 17 April 2024 in the fixed sum of $106,726.52, with such amount incorporating the indemnity costs as ordered on 25 March 2024.
5.The costs be paid to the applicant by the respondent within three months of the date of these orders, into a bank account nominated in writing by the applicant.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J
BACKGROUND
These proceedings concern an application by the wife for costs against the husband following parenting and property proceedings in which he ceased to participate. The husband did not participate in the costs aspect of the proceedings either.
ORDERS SOUGHT
The wife seeks orders that her costs be met on an indemnity basis from 21 July 2023, being the point at which directions were made to prepare the matter for a case readiness hearing in preparation for setting the matter down for trial, until the final aspect of the hearing on 17 April 2024. Those costs are sought on a fixed sum basis.
That fixed sum is proposed to incorporate a previous order that the husband pay her costs thrown away on an indemnity basis when, on 25 March 2024, the trial dates of 2-6 April 2024 were vacated on his application and the trial was deferred to 8 April 2024.
In the alternative, the wife seeks that her costs, other than those already the subject of an indemnity order, be met on a party and party basis.
DOCUMENTS RELIED UPON
The wife relied upon:
(a)Application in a Proceeding filed 30 May 2024;
(b)Amended Application in a Proceedings filed 7 June 2024;
(c)Affidavit of the wife 30 May 2024;
(d)Affidavit of Ms F 11 June 2024; and
(e)Tender bundle.
The Amended Application in a Proceeding seeks leave to pursue costs in relation to the parenting aspect of the proceedings despite the application being filed more than 28 days after the making of final orders in relation to that cause of action. The application for costs for both the parenting and property aspects of the proceedings was filed on 30 May 2024. Final orders had been made in the parenting aspect on 8 April 2024, whilst final property orders were made on 3 May 2024.
Accordingly, the Application in a Proceeding filed on 30 May 2024 was within time in respect of the property aspect of the dispute, and outside of time in respect of the parenting aspect of the dispute.
The power to extend the 28 days for the making of a costs application as referred to in r 12.13(3) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) is contained at r 15.06. Rule 15.06 allows for an application for the extension of time even when the time fixed by a Rule has, as here, passed.
Observing that the application was made shortly after the 28 days period, and within 28 days of the finalisation of the property orders, in the absence of identification of prejudice to the (non-participating) husband, and in consideration of the merits of the underlying application, such an extension will be granted.
The wife further seeks to be excused in relation to non-compliance with orders for the filing of an affidavit of service by a specified date. That non-compliance was marginal and not of consequence and should be the subject of leave.
PRINCIPLES IN RELATION TO COSTS
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) sets out the default position being a general rule that each party bears their own costs, subject to circumstances justifying otherwise. In Kohan & Kohan (1993) FLC 92-340 (“Kohan”), the Full Court observed that:
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the court may make such order as the court considers just.
In Penfold v Penfold (1980) 144 CLR 311 the High Court considered that whilst justifying circumstances, as identified in s 117, must be determined to enable a costs order to be made, no “additional or special onus” is placed upon applicants in their pursuit of costs.
The precondition to making an order for costs is the finding that there are circumstances justifying the making of an order for costs. Once these are found, the default position yields to the Court’s discretion to award costs as it considers just.
The relevant considerations to assess the circumstances are set out at s 117(2A) of the Act as follows:
In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(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 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 answer 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.
In Hawkins & Roe [2012] FamCAFC 77 May and Ainslie-Wallace JJ observed that:
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.
Of these considerations, the wife pointed to egregious failures on the part of the husband to either comply with his obligations as to disclosure or to comply with court directions (even when such were amended and extended for his benefit) for the preparation of the matter, or to even attend court events. These matters each went to the conduct of the husband in the litigation.
The wife also points to the financial circumstances of the parties, and to the making of an offer in respect of parenting. On 20 June 2023 the wife made an offer to settle the parenting aspect of the proceedings in a way that reflected the final outcome at hearing in April 2024.
Principles in relation to indemnity costs
The principles to be applied in relation to indemnity costs are neatly set out by the Full Court in Quickley & Pelissier [2016] FamCAFC 124 at [120]:
We then turn to consider whether costs should be awarded on a party/party or indemnity basis.
In Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 at 256, Sheppard J referred to the “settled practice” that where a court orders one party to pay another party’s costs, the order is for costs to be paid on a party/party basis. His Honour also said “there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice” at 257.
In an appropriate case the court has a discretion to order costs on an indemnity basis. An order made in the exercise of that discretion is a very great departure from the normal approach and the circumstances justifying the departure should be of an exceptional kind (Kohan).
In the recent case of Madin & Palis (Costs) [2016] FamCAFC 25 this Court made reference to the increasing number of applications for indemnity costs and said at [23]:
Finally, we take the opportunity to observe that in so far as the appellant sought an order for indemnity costs, applications for such costs should only be made, and such costs will only be ordered, in the most extreme cases. This is particularly so having regard to the fact that the primary rule in this jurisdiction is that each party should pay their own costs.
In Kohan, the Full Court, in observing that indemnity costs are the exception, said that:
the court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.
PROCEDURAL HISTORY
Proceedings were commenced on 7 March 2022 by the husband who then sought parenting orders.
On 22 April 2022 the wife responded to the parenting application and sought property related orders.
On 21 July 2023 directions were made by Senior Judicial Registrar Evans to prepare the matter for a compliance and readiness hearing. These included directions for the husband to provide disclosure that were only partially complied with, and for financial mediation, which did not take place due to the inadequacy of the husband’s disclosure.
On 1 December 2023 Judicial Registrar Hiles listed the matter for trial to commence on 2 April 2024 for a period of four days.
On 14 February 2024 the husband’s legal representatives withdrew from the proceedings.
On 23 February 2024 the husband was granted an extension of time to file his trial material.
The wife then discovered that the husband had failed to disclose an amount of approximately $2 million held in an account associated with a corporate entity controlled by the husband. This was not discovered by the husband providing disclosure but by the wife’s pursuit of the necessary information to conduct the proceedings by means of subpoenas. Ex parte restraints were given, followed by, on 13 March 2024, orders by consent extending the restraint and directing the husband to provide particular disclosure. The filing deadlines for the trial were again extended.
On 25 March 2024 a case management hearing occurred, and the trial which had been listed to commence on 2 April 2024 was adjourned until 17 April 2024. This adjournment occurred in the face of the husband’s non-compliance with filing directions regarding his trial material. The filing deadlines for the husband were extended until 2 April 2024 and orders were made for the husband to pay the costs thrown away by the Independent Children’s Lawyer (“the ICL”) (at a fixed sum of $1,760) and the wife (on an indemnity basis) in relation to the adjourned trial.
The husband failed to file any trial material prior to or attend both the parenting and the property hearings.
The parenting proceedings proceeded on an undefended basis on 8 April 2024. Ex tempore reasons for judgment were delivered that day, and orders were made in line with those proposed by the ICL, which had been adopted by the mother during the trial.
On 17 April 2024 it was determined that the property proceedings would also be conducted on an undefended basis. On that day, the wife’s application for a $75,000 interim property distribution was granted.
Judgment was delivered in relation to the remainder of the property matters on 3 May 2024. Orders were made in line with the 80-20 division of the property pool sought by the wife in her favour.[1]
[1] Vestri & Vestri (No 6) [2024] FedCFamC1F 292 at [3] – [4]
In relation to this costs application, both the Application in a Proceeding and Amended Application in a Proceeding have been served on the husband, along with the affidavit of the wife. He has not responded.
DISCUSSION
Each party leaves the property proceedings with significant property that provides the means to meet legal costs.
Since orders were made on 21 July 2023, designed to ready the matter for trial, the husband had been non-compliant with either his obligations pursuant to the Rules or pursuant to directions. His filing of documents has been limited to a Notice of Address for Service and Costs Notice on 12 March 2024, and on 25 March 2024 a further Costs Notice.
Despite repeatedly obtaining extensions of time, no trial material was filed. This was at its most stark in the husband obtaining a vacating of the trial date to enable him to file his trial material. This resulted in an indemnity costs order as to costs thrown away by the vacating of the trial. However, after obtaining that indulgence he filed no material and failed to attend the trial.
The husband also failed to provide disclosure, as exemplified in the wife’s discovery, by subpoena, of an undisclosed sum of $2 million held by a company wholly owned and controlled by the husband. This necessitated urgent ex parte orders to secure the sum, which were then continued to the trial with the consent of the husband.
The non-disclosure and non-compliance together form an extreme example of an abusive engagement in the litigation process, seen particularly in the obtaining of repeated indulgences to prepare for trial with the ultimate filing of no trial material and a failure to even attend. When such is added to be significant non-disclosure, the husband’s manner of litigation since the order of 21 July 2024 not only warrants the payment of costs, but also the payment on an indemnity basis.
The husband’s conduct of the proceedings formed a very great departure from the requirements to engage in the litigation process sufficient to warrant the very great departure from the usual imposition of costs on a party and party basis.
An issue arises as to the manner of quantification of those costs.
Whilst the previous order in relation to costs thrown away provided for agreement or assessment, it is appropriate to now quantify the costs in a specific sum, particularly given the prospect of non-engagement by the husband in the assessment process.
To that end the wife has provided the relevant invoices and a basis of calculation (including as to fees not appropriate to include in the order as they were in incurred in respect of proceedings in the Magistrates Court) sufficient to establish the legal expenses incurred.
The itemised conduct appeared directed to the litigation process, and contained many instances where there was either no charge for work done or the time spent undertaking work was discounted. The source documents relied upon by the mother, which indicate an appropriate basis for the quantification of indemnity costs, appear to exceed the amount sought by the mother of $106,726.52. On overall impression the billing appeared appropriate when, in the circumstances of the case, it was necessary to prepare a case that contained both complex parenting and financial issues, in the ongoing expectation that the husband would file material. The amount spent by the wife sits within a reasonable range and is justified by the underlying itemised invoices.
CONCLUSION
Orders will be made requiring the husband to pay the wife’s costs from 21 July 2023 to 17 April 2024 in the sum of $106,726.52. An order will be made to discharge the requirement for agreement or assessment in relation to the order of 25 March 2024, as the indemnity amount is subsumed into the above order.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 17 September 2024
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