Walker and Morton (No 2)
[2016] FamCA 1086
•20 December 2016
FAMILY COURT OF AUSTRALIA
| WALKER & MORTON (NO 2) | [2016] FamCA 1086 |
| FAMILY LAW – COSTS – Application by the wife that the husband pay the costs of their property and parenting proceedings on an indemnity basis – Consideration of s 117(2A) of the Family Law Act – Where the wife was wholly unsuccessful in the parenting proceedings – Where both parties were unsuccessful in regards to their respective applications for property settlement – Where extensive offers of settlement were exchanged between the parties – Where exceptional circumstances do not exist to warrant an order for indemnity costs – Orders made that the husband pay half of the wife’s costs of the proceedings as assessed or agreed. |
| Family Law Act 1975 (Cth), s 117(2A) Family Law Rules 2004 (Cth) r 19.18 |
| Prantage & Prantage (2013) 49 Fam LR 197 Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 Hand & Bodilly [2013] FamCAFC 98 Australian Transport Insurance Pty Ltd & Anor v Graeme Phillips Road Transport Insurance Pty Ltd& Ors (1986) 71 ALR 287 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 |
| APPLICANT: | Ms Walker |
| RESPONDENT: | Mr Morton |
| FILE NUMBER: | SYC | 1793 | of | 2012 |
| DATE DELIVERED: | 20 December 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | In Chambers |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | McDonell Milne Toltz Family Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Slater and Gordon |
Orders
IT IS ORDERED
That the husband pay one half of the wife’s costs of the proceedings from 6 March 2013 to the conclusion of the trial as assessed or agreed, such payment to be made within 30 days of the assessment or agreement.
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 Walker & Morton (No 2) 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 SYDNEY |
FILE NUMBER: SYC 1793 of 2012
| Ms Walker |
Applicant
And
| Mr Morton |
Respondent
REASONS FOR JUDGMENT
On 10 June 2016, Reasons were delivered and Orders made in proceedings for parenting orders and financial orders between Ms Walker (“the wife”) and Mr Morton (“the husband”).
The Orders made provided for the children to live with each parent on a week-about basis and for the property of the parties to be divided as to 75 per cent to the wife and 25 per cent to the husband. In these Reasons, the parties’ jointly owned former home is referred to as “Suburb E”.
On 1 July 2016, the wife filed an application seeking orders that the husband pay her costs of the proceedings on an indemnity basis.
On 26 September 2016, Senior Registrar Campbell made the following directions:
IT IS ORDERED THAT
1. On or before 4pm 3 October 2016 the Application for costs and the supporting affidavit filed on 1 July 2016 is to be served in accordance with the Family Law Rules 2004.
2. By 4pm 31 October 2016 the Respondent must file and serve any Response to the Application for costs together with any affidavit on which the Respondent wishes to rely.
3. By 4pm 28 November 2016 each party file and serve written submissions indicating, inter alia, whether they wish an opportunity to speak to the submissions in Court or whether they ask that the matter be dealt with in chambers.
4. In the event that either party seeks for the matter to be dealt with in open court, the matter be listed for hearing by arrangement through Registrar Campbell.
5. The Application is adjourned to a chambers hearing before Registrar Campbell at 7am on 30 November 2016 for compliance check and further directions as needed.
The husband has filed no response to the application, no affidavit and no submissions.
Two affidavits of service by the wife’s solicitor have been filed. I am satisfied that the wife’s application and her affidavit in support of that application were personally served upon the husband. I am also satisfied that the husband was notified of the Directions made on 26 September 2016. I am satisfied that the wife’s submissions have been served upon the husband.
I will therefore determine the wife’s application for costs on the basis of the material before me.
RELEVANT LAW
The application is governed by the provisions of s 117(2A) of the Family Law Act 1975 (Cth) which are set out below:
(2A) 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.
Financial Circumstances
As a result of the Orders, the husband will receive approximately $250,000 and the wife will receive approximately $750,000.
In the judgment, I found that the wife’s income was $80,444 per annum and the husband’s income was $144,040 per annum.
Conduct
The aspects of the husband’s conduct of the proceedings which are submitted to be relevant to this determination are:
· The wife’s Initiating Application was filed on 28 March 2012 and listed for a Case Assessment Conference on 29 June 2012. The husband did not file either a Response or a Financial Statement and the Case Assessment Conference could not proceed. Costs were thrown away. He did not file until 6 July 2012.
· The Conciliation Conference on 8 August 2012 was adjourned at the husband’s request.
· The husband did not attend a teleconference on 31 January 2013. Costs were thrown away.
· The matter was settled in principle at the Conciliation Conference on 6 March 2013. The wife’s solicitors forwarded terms of settlement to the husband. He did not respond.
· Numerous letters were written by the wife’s solicitors requesting documents to which the husband did not respond.
· On 23 September 2013, Senior Registrar Campbell in a directions hearing noted on the record:
I note that the husband’s lawyer acknowledges that the husband persists in his failure to provide full & frank disclosure.
Was either party wholly unsuccessful?
At trial, the wife sought orders that the children live with her. The husband sought orders that would continue the week-about arrangement that had been in place for some time.
The wife was wholly unsuccessful in her parenting application.
At trial, the wife sought an order that she retain Suburb E and that the husband retain only his personal property. The husband had personalty (excluding superannuation) valued at $27,371. The net asset pool was $1,147,974. The wife’s application would have had the result that she received about 97.5 per cent of the assets. She received 75 per cent.
The husband’s application at trial (modified in the course of submissions) was that he retain Suburb E and pay the wife $350,000. That would have resulted in an overall division in favour of the husband of about 64 per cent of the asset pool. He received 25 per cent.
They were both unsuccessful in relation their respective property applications.
OFFERS OF SETTLEMENT
On 6 March 2013, the solicitor for the wife forwarded to the solicitor for the husband draft orders to which she was prepared to consent. Those orders provided that the children live in a week-about arrangement with the parties and that Suburb E be sold and the proceeds divided as to 62.5 per cent to the wife and 37.5 per cent to the husband. The net effect of that offer, using the values adopted in the judgment, was that the husband would receive about 36 per cent of the net assets.
He did not accept that offer.
On 30 September 2013, the husband’s solicitor forwarded an offer of settlement to the wife’s solicitor in relation only to financial matters. He proposed that Suburb E be sold and the proceeds divided as to 65 per cent to the wife and 35 per cent to the husband. The net effect of that offer, using the values adopted in the judgment, was that the husband would receive about 34 per cent of the net assets.
The wife did not accept that offer but made a counter-proposal, again only in relation to financial matters, on 1 October 2013.
She proposed the sale of Suburb E and the division of the proceeds as to 30 per cent to the husband and 70 per cent to her. The net effect of that offer, using the values adopted in the judgment, was that the husband would receive about 29.5 per cent of the net assets.
The husband did not accept that offer.
On 12 June 2014, the wife made a further offer. She proposed that the children live in a week-about arrangement with the parties and that Suburb E be sold and the proceeds divided as to 62.5 per cent to her and 37.5 per cent to the husband. The net effect of that offer, using the values adopted in the judgment, was that the husband would receive about 36 per cent of the net assets.
The husband did not accept that offer. A further offer of settlement was made by the wife on 14 May 2015. Again the wife proposed a week-about arrangement for the children and the sale of Suburb E with the proceeds to be divided as to 57.5 per cent to her and 42.5 per cent to the husband.
The husband did not accept that offer and made a counter proposal on 1 June 2015. He proposed a week-about arrangement for the children and the sale of Suburb E with the wife to receive 55 per cent and the husband to receive 45 per cent.
The wife did not accept that offer.
On 4 September 2015, the wife made a further offer of settlement. In that offer, the wife proposed a different arrangement for the children, resiling from her position that they should live in a week-about arrangement with each parent and proposing that they spend time with the father from Thursday after school until Monday morning in one week, and overnight on Thursday in the second week. Otherwise, the children would live primarily with her.
In relation to property, the wife proposed the sale of Suburb E and the division of the proceeds as to 60 per cent to the wife and 40 per cent to the husband.
The letter accompanying the offer made it clear that the husband could accept the offer in relation to property and reject the offer in relation to parenting.
The husband did not respond to this offer at all.
The wife made a further offer on 23 May 2016 in relation to financial matters only. She proposed that Suburb E be sold and the husband receive $300,000 and the wife the balance. The net effect of that offer, using the values adopted in the judgment, was that the husband would receive about 24 per cent of the net assets. This last offer was slightly less advantageous to the husband than the orders which were made but the margin of one percent would be outweighed by the costs expended by each party on the trial. One percent of the net asset pool was about $11,500.
It is necessary to consider the respective offers in relation to parenting and to financial matters separately.
In relation to parenting, the wife proposed a week-about arrangement until September 2015 when she withdrew that proposal. At trial she sought orders that the children live substantially with her. She was unsuccessful.
In relation to property, the wife from March 2014 made offers in which the husband would have received a greater share of the assets than he did at trial.
Those offers have significant weight in this determination.
CONCLUSION
The wife was unsuccessful in pursuing the majority care of the children and, although until May 2015 she was prepared to agree to a week-about arrangement, that was not her position at trial.
The wife, from March 2013, made offers of settlement which were more generous than the husband achieved at trial.
The husband should pay the costs of the financial proceedings from 6 March 2013. There is no evidence about the relative costs attributable to parenting and to property and I propose to order that the husband pay one half of the costs.
INDEMNITY COSTS
The Full Court has most recently considered the law in relation to indemnity costs in Prantage & Prantage (2013) 49 Fam LR 197 (“Prantage”). In their majority judgment, Thackray and Ryan JJ set out the principles to be applied, holding that the principles enunciated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 (“Colgate-Palmolive v Cussons”) should continue to be applied in the Family Court of Australia.
The relevant principles (as summarised by Cooper and Merkel JJ in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 at 156-157) were reproduced in Prantage at [82]:
82. …
1.Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2.In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a) the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c) whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
Rule 19.18 of the Family Law Rules 2004 (Cth) provides:
(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); …
In Hand & Bodilly [2013] FamCAFC 98 (“Hand & Bodilly”) the Full Court (per Faulks DCJ, Ryan and Watts JJ) considered the appropriateness of an order for indemnity costs, where party/party costs or solicitor/client costs could be ordered. In Hand & Bodilly, the difference between party/party costs and solicitor/client costs was accepted to be:
91.… on a taxation between parties on a solicitor and client basis, the unsuccessful party has to pay all the costs incurred by his opponent excepting in respect of (1) costs and expenses incurred prior to the institution of the action; (2) journeys and expenses of which the party liable could have no knowledge, and which would not ordinarily be performed or incurred; (3) the employment of more counsel, or the payment to them of larger fees than the circumstances of the case warrant, including the giving of special retainers.
Their Honours in Hand & Bodilly went on to compare solicitor/client costs with indemnity costs in the following manner:
102.… Sometimes that discussion equates “solicitor and client” costs with “indemnity” costs but as Santow JA said in Bouras v Grandelis (2005) 65 NSWLR 214:
125. The weight of authority is that solicitor and client costs and indemnity costs are distinct, though the difference between them has been eroded by practice and by inconsistent amendments to the various legislative instruments that make up the costs assessment regime.
126. An order for solicitor and client costs will allow all reasonable costs or all costs as fair justice to the other party will allow. The onus of proving that the costs are reasonable falls on the receiving party.
127. Historically, solicitor and client costs were somewhat more generous than party/party costs …
It follows that the distinction between indemnity costs and solicitor/client costs, is that the former provides a complete indemnity for costs actually incurred, with no enquiry as to the reasonableness of the costs incurred. Whereas an order for solicitor/client costs requires an enquiry as to the reasonableness of the costs.
It is open to the Court to make a costs order on the basis of party/party costs, solicitor/client costs or indemnity costs.
When considering whether an order for indemnity or solicitor/client costs would be appropriate, it is instructive to revisit the decision of Sheppard J in Colgate-Palmolive v Cussons at 257 where his Honour reviewed the authorities and said:
4. … The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Walkerward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance (sic) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Walkerward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Walkerward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 ay 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
In Australian Transport Insurance Pty Ltd & Anor v Graeme Phillips Road Transport Insurance Pty Ltd& Ors (1986) 71 ALR 287 at 288 (“Australian Transport Insurance”), with respect to the Court’s discretion in the award of costs, Walkerward J said:
That discretion is “absolute and unfettered”, but must be exercised judicially (Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207). Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where “there is some special or unusual feature in the case to justify the court exercising its discretion in that way” (Preston v Preston [1982] 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but, in all the cases I have considered, there has been some further factor which has influenced the exercise of the court's discretion — for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App 40 Christie v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354.
Another case cited in argument was Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 where (at 502) Tadgell J allowed solicitor and client costs because he found the pursuit of the action to have been “a high-handed presumption”.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 at 401 Walkerward J, with respect to the award of costs, referred to what he said in Australian Transport Insurance and stated:
No doubt the expression “high-handed presumption” was appropriate in the case Tadgell J [Australian Guarantee Corp Ltd v De Jager [1984] VR 483] had to decide, and he needed to go no further; but in order to establish a convenient principle in such cases it is necessary to be a little more prosaic. I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, 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 or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion (emphasis added).
The Court needs to be satisfied that there are exceptional circumstances in this case which would enliven the discretion to depart from the general rule that each party pay his or her own costs, and make an order for costs on a solicitor/ client or indemnity basis.
In the present matter I am unable to find that such special or unusual circumstances exist.
The husband’s refusal to accept the wife’s offers of settlement do not warrant the making of an order for indemnity costs.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 20 December 2016.
Associate:
Date: 20/12/2016
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