Warrick & Mia (No. 3)
[2021] FamCA 348
•28 May 2021
FAMILY COURT OF AUSTRALIA
Warrick & Mia (No. 3) [2021] FamCA 348
File number(s): PAC 845 of 2017 Judgment of: FOSTER J Date of judgment: 28 May 2021 Catchwords: FAMILY LAW – COSTS – where application for costs made by both parties – where proceedings continued after the death of the applicant husband – where written offer of settlement made by the wife on 4 October 2019 – where that offer rejected – where ultimate result substantially less than the sum provided for in the offer of settlement – where consideration of applicable principles as to costs and indemnity costs – where order made for the estate of the late husband to pay the wife’s costs on a party/party basis as agreed or assessed as and from the date of offer – where payment of capital sum to the estate be restrained pending agreement or assessment of costs – costs as agreed or assessed to be a charge as against the capital sum. Legislation: Family Law Act 1975 (Cth) ss 79(1A), 79(8), 117, 117(2), 117(2A), 117(2A)(f)
Family Law Rules 2004 (Cth) r 19.18(1)
Cases cited: Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160
Browne & Green (2002) FLC 93–115
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Collins & Collins (1985) FLC 91-603
Dorsey & Mallon [2018] FamCAFC 244
Greedy & Greedy (1982) FLC 91-250
Harris & Dewell and Anor (No.2) [2018] FamCAFC 180
Hawkins & Roe [2012] FamCAFC 77
Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23
Luadaka & Luadaka (1998) FLC 92-830
Munday v Bowman (1997) FLC 92-784
Parke & the Estate of the Late A Parke (2016) FLC 93‑748
Penfold v Penfold (1980) 144 CLR 311
Pennisi & Pennisi (1997) FLC 92-774
Robinson and Higginbotham (1991) FLC 92-209
Warrick & Mia (No. 2) [2021] FamCA 249
Number of paragraphs: 49 Date of last submission/s: 19 May 2021 Date of hearing: 27 April 2021 Place: Parramatta Counsel for the Applicant: Mr Todd Solicitor for the Applicant: Du & Associates Solicitor for the Respondent: No appearance by Just In Case Legal ORDERS
PAC 845 of 2017 BETWEEN: MS MIA
ApplicantAND: MR Y WARRICK AS EXECUTOR OF THE ESTATE OF THE LATE MR WARRICK
Respondent
ORDER MADE BY:
FOSTER J
DATE OF ORDER:
28 MAY 2021
THE COURT ORDERS:
1.That the estate of the late husband Mr Warrick pay the respondent wife’s costs on a party/party basis of and incidental to the section 79 proceedings concluded by orders made 29 April 2021 as and from 4 October 2019 together with the costs of this costs application as agreed within one month from this date or otherwise as assessed.
2.That the sum determined as to costs pursuant to the previous order by way of agreement or assessment be a charge as against payment to the estate of the late husband as provided for in orders made 29 April 2021 and such payment to the estate of the late husband be restrained until satisfaction of costs as agreed or assessed.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Warrick & Mia has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
FOSTER J:
On 29 April 2021 final orders as to property were made as between the applicant estate of the deceased husband and the respondent wife.
Those orders provided:
1.Within three months from this date the wife pay to the applicant or as the applicant may, otherwise, direct in writing the sum of $99,500.
2.In default of the wife complying with the previous order, the applicant have leave to make application to the Court for enforcement of the said order by way of the appointment of a trustee for sale of the subject property.
3.The applicant have leave to relist these proceedings as to implementation or enforcement on short notice by application to the Court in chambers in appropriate circumstances.
4.Any application for costs be made by way of written submissions filed and served within 14 days from this date with any submissions in response to be filed and served within a further seven days and upon completion of submissions judgment as to costs reserved to chambers.
Supreme Court Proceedings
5.That proceedings 2017/… in the Supreme Court of New South Wales being proceedings transferred to this Court be dismissed.
The present application for determination is an application by the wife for an order that the executor of the late husband’s estate pay the wife’s costs of these proceedings in the sum of $169,820 plus the costs of the present application. Otherwise, the estate of the late husband has sought an order that the wife pay the estate’s costs of the proceedings in the sum of $90,000 or in the alternative that there be no order as to costs, to the effect that each party pay their own costs.
These reasons for judgment assume familiarity with the primary reasons for judgment delivered 29 April 2021: Warrick & Mia (No. 2) [2021] FamCA 249.
In support of the application for costs, the wife relied upon her affidavit filed 11 May 2021 and her written submissions received 11 May 2021, submissions in response to those of the estate filed 25 May 2021 and an affidavit of Mr M Solicitor filed 25 May 2021.
The estate of the applicant husband relied on written submissions filed 19 May 2021 and the affidavit of its solicitor Mr Q filed 19 May 2021.
The Applicant for Costs Submissions
The proceedings commenced in February 2017 by reason of the husband seeking orders setting aside two financial agreements dated 27 July 2007 and 5 February 2014, and seeking property adjustment orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
On 18 July 2017 both parties conceded that the financial agreement dated 5 February 2014 was not a binding financial agreement and on 12 June 2018 orders were made setting aside the financial agreement dated 27 July 2007.
In December 2018 the husband died. Probate was granted in March 2019 to a Mr N who subsequently pronounced the Grant of Probate. In July 2019 probate was granted to the deceased husband’s son Mr Y Warrick. In October 2019 Mr Y Warrick was substituted as legal personal representative of the deceased husband.
On 2 December 2020 proceedings were listed for judicial case management, there was no appearance by or on behalf of the estate. On 9 December 2020 trial directions were issued in anticipation of the matter proceeding to a final hearing. Subsequent to trial directions, the estate failed to comply with directions to facilitate the matter being prepared for trial.
Subsequently, proceedings were set down for final hearing on 27 April 2021, on which date there was no appearance on behalf of the estate and the matter proceeded undefended and judgment reserved. Judgment was then delivered on 29 April 2021 and orders were made as set out above.
The applicant for costs relies upon an Offer of Settlement made on 4 October 2019 that offered to resolve the proceedings, including proceedings transferred from the Equity Division of the Supreme Court of New South Wales, on the basis that the estate be paid the sum of $250,000 including the sum of $90,000 previously paid to the deceased and a balance of $160,000 within 60 days. The offer expired at 4.00 pm on 3 December 2019. The offer was promptly and unwisely rejected by the estate.
The estate subsequently filed a further Amended Initiating Application seeking the sale of the primary property at a reserve price of $1.5 million, with the proceeds of sale to be applied relevantly as to $90,000 to the wife and 40 per cent of the then balance available to the estate. Such orders would have seen the estate receive approximately $564,000 excluding any allowance for sale costs. A cursory knowledge of the contributions asserted by the husband would have demonstrated that such a position was indeed just an ambit claim.
Ultimately, the final order provided for a payment of $99,500 to the estate, over and above the sum of $90,000 previously paid to the deceased.
The applicant seeks an order that the legal personal representative of the deceased husband Mr Warrick be personally liable for any order as to costs. It is noted that the provisions of s 79(8) provide that an order for property adjustment in favour of or against the estate of a deceased party may be enforced on behalf of, or against, as the case may be, the estate of the deceased party. Similarly, s 79(1A) provides that an order made in property settlement proceedings may, after the death of a party to the marriage, be enforced on behalf of or against, as the case may be, the estate of the deceased party.
It is readily apparent that the Act does not render the legal personal representative of the deceased personally liable in such circumstances, with recourse only being available to the estate of the deceased. The same limitation must apply to any order for costs arising from the primary proceedings.
The Supreme Court Application
The present application is somewhat more complicated by proceedings as between the parties were previously in the Supreme Court of New South Wales. In that Court the wife filed a summons on 20 April 2017, seeking orders that would require the husband to withdraw a caveat registered by him as against the title of the wife’s property at Suburb M. The summons was resisted by the husband and ultimately in the Supreme Court an order was made by consent on 18 May 2017 that the husband’s caveat be extended until the determination of the proceedings in this Court. Costs in the Supreme Court proceedings were reserved.
It is to be noted that at the time of commencement of the Supreme Court application proceedings had already commenced in this Court. It would have been more appropriate for injunctive relief to be sought by the wife in this Court and for the husband, should he seek an order preserving whatever may have been his interest in the Suburb M property, to seek appropriate injunctive relief in this Court, pending determination of his application that had been filed on 28 February 2017. On such a basis, it is not appropriate to consider any order for costs in relation to the Supreme Court proceedings.
Costs
Section 117 of the Act provides that each party to the proceedings shall bear his or her own costs.
That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.
Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: Penfold v Penfold (1980) 144 CLR 311.
The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They are as follows:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party has legal aid and the terms of any grant of aid;
(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 answers, 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 Collins & Collins (1985) FLC 91-603 (at 79,877), the Full Court described the discretion conferred by s 117 as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way.
The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:
17.With respect to the application of the section, in Penfold v Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:
1.Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case".
2.Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
(footnotes omitted)
18.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. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:
… A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (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 subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
In Greedy & Greedy (1982) FLC 91-250 and Luadaka & Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.
The provision relating to the calculation of costs is set out in r 19.18(1) of the Family Law Rules 2004 (Cth) (“the Rules”) which states:
Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount;
(b)as assessed on a particular basis (e.g. 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.
It was said in Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 at [162] that the purpose of the rule enabling an order for costs in a specific amount, without formal assessment or taxation is, commonly with other courts, to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”.
In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 the Court said at [10] that the Court must act judicially, but that does not mean that it must exercise the power to award a lump sum in any “scientific or formulaic manner”.
Murphy J observed in Parke & the Estate of the Late A Parke (2016) FLC 93‑748 at [130]:
If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place” …
The applicant wife seeks an order for costs on an indemnity basis. The law in relation to indemnity costs is well settled.
As to indemnity costs, reference is made to the frequently cited judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and that often repeated statement need not be repeated here. Holden J in Munday v Bowman (1997) FLC 92-784 drew from the decision of Sheppard J the following examples:
(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. …
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud. …
(c)Evidence of particular misconduct causing loss of time to the court and to other parties. …
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions. …
(e) An imprudent refusal of an offer to compromise.
It is also important to note that the category of circumstances which enliven the discretion to award indemnity costs are not closed, and thus the circumstances do not need to come precisely within the examples provided.
In Harris & Dewell and Anor (No.2) [2018] FamCAFC 180 the Full Court said:
23.In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
24.That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
25.The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”
26.Of course, in proceedings under the Act, an overriding “usual rule” is prescribed by s 117(1), namely that each party bears their own costs. The degree of departure between that “usual rule” and a result where one party bears the totality of the other party’s costs can be seen to be all the greater.
The accepted principles were again the subject of affirmation by Murphy J sitting as the Full Court in Dorsey & Mallon [2018] FamCAFC 244 where his Honour said:
21.There is no doubt that an award of indemnity costs is confined to “exceptional” cases. In my view, that must be all the more so in a Court where the usual position is that each party should bear their own costs. Although referring to the Family Law Rules 2004 (Cth), I seek to repeat in that respect, what was said in Prantage & Prantage:
151.…the Act, the Rules read as a whole, and existing authority each evidence a clear intention that a significant disparity between the level of costs provided for in Schedule 3 and the fees payable by a client to their legal practitioner militates against an award of indemnity costs or, if the circumstances otherwise warrant such an order, operates as a brake on the quantum that might otherwise be awarded.
152.Section 117(1) is important in that respect. Indemnity costs are confined to “an exceedingly rare situation” (Callinan J quoted by Thackray and Ryan JJ at [42]) in jurisdictions where “the usual rule” is that a successful party receives an order for costs (i.e. “costs follow the event”). They might, then, be seen to be more so in this jurisdiction where the “usual rule” is that “each party … shall bear his or her own costs” (s 117(1)). The comments by this Court in Kohan that indemnity costs are “a very great departure” from the “normal standard” should be seen in that context. That, it should be observed, is not a fetter on this Court’s discretion to award costs or indemnity costs if justice so requires it (see Oshlack v Richmond River Council (1998) 193 CLR 72, at 134 (particularly subpar [3]), per Kirby J). Rather it recognises that an order for indemnity costs, has a particular context in this jurisdiction.
153.In this Court, one of the two “seemingly irreconcilable objectives” of awards of costs referred to by Cooper and Merkel JJ in Re Wilcox quoted by Thackray and Ryan JJ can be expressed as “ … protecting access to justice in family law matters by not exposing an unsuccessful litigant in the usual course to an order for costs”. A litigant in this Court must establish that the justice of the case requires an order for costs by reference to (non-exhaustive) statutory considerations before any order for costs is made.
22.Reference has frequently been made in this Court to the judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd and that often repeated statement need not be repeated here. I also refer in passing to what was said in Harris & Dewell (No. 2) at [22] – [25]. In those passages, the Full Court sought to emphasise the rarity of indemnity costs orders in the usual course of events.
Offers of Settlement
The wife properly asserts that there should be an order for costs as a consequence of the rejection of the offer of settlement made in October 2019. It is clear that the acceptance of the offer would have placed the applicant estate in a far better position than that ultimately achieved at final hearing.
The public policy reason behind the encouragement of the making of offers of settlement during proceedings is that it is beneficial to both of the parties, the Court and the public at large if people are able to resolve their disputes themselves without the need for litigation.
As was observed by Nygh J in Robinson and Higginbotham (1991) FLC 92-209 at 78,417, in relation to offers:
… it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition. …
In Pennisi & Pennisi (1997) FLC 92-774, referring to s 117(2A)(f), the Full Court, said at 84,547:
… Offers must be seen in the context of the case and the extent of the offeree's knowledge of the parties' financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties' financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.
In Browne & Green (2002) FLC 93–115 the Full Court commented at 89,163:
… 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 a proper consideration, is something to which very significant weight indeed ought normally be given. …
The applicant contends that proceedings were unnecessarily prolonged by some 16 months by reason of the estate’s refusal to accept the offer. Otherwise, it is properly contended that the offer of settlement was sufficiently clear and certain in terms as to resolve the whole of the proceedings.
It is clear that the wife is in a far superior position than that of the estate. The Grant of Probate in relation to the estate of the late husband is indicative of estate assets to the value of about $36,000, with no asserted liabilities. The solicitor on behalf of the estate contends that costs were incurred by the estate in relation to the proceedings in the Supreme Court of New South Wales in the sum of $90,000.
It is to be expected that the estate has incurred significant additional costs in relation to the proceedings in this Court, to the extent that the estate of the deceased would need to be administered in bankruptcy.
Neither party is on Legal Aid.
There were significant issues during the course of the litigation, including the delay in the Grant of Probate to the present legal representative of the deceased, the wife’s application for security for costs, issues in relation to the caveat registered against the title of the wife’s property and the ultimate undefended hearing, all of which would have been otiose if the estate had accepted the offer of settlement.
It is clear that a payment to the estate pursuant to the orders made 29 April 2021 of $99,500 would simply be absorbed into the liabilities of the estate, and presumably be applied to the estate’s outstanding legal costs to date. In the event of any order for costs made in the context of the present application, such an order would ultimately be illusory as against the estate as it is readily apparent there is most likely no surplus assets over liabilities.
Indemnity costs are the exceptional circumstance. Section 117(2A)(f) contemplates the costs in circumstances such as this that may displace the general rule. This is not a matter for indemnity costs.
In all the circumstances, it is appropriate that there be an order that the estate pay the wife’s costs of and incidental to these proceedings as and from 4 October 2019 on a party/party basis, with such costs to be as agreed or as assessed.
It is, otherwise, proper that the sum ordered to be paid to the estate by reason of orders made 29 April 2021 be restrained pending agreement or assessment of costs, with any such costs to be deducted from the capital sum before payment to the estate.
Orders will be made accordingly.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Foster. Associate:
Dated: 28 May 2021
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