Wei & Xia (No 6)
[2024] FedCFamC1F 545
•15 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Wei & Xia (No 6) [2024] FedCFamC1F 545
File number(s): SYC 196 of 2017 Judgment of: HARPER J Date of judgment: 15 August 2024 Catchwords: FAMILY LAW – COSTS – Financial circumstances a neutral factor – Where no party wholly unsuccessful – Where wife prosecuted factual claims which she must have known to be substantially untrue - Where the wife rejected two formal offers of settlement from the second and third respondents – Imprudent refusal of second offer made after parties’ evidence served and lengthy trial had commenced – Costs ordered on party/party basis up until date of second offer – Indemnity costs ordered from date of second offer.
FAMILY LAW – COSTS – Where the intervenor joined the proceedings as creditor for unpaid legal fees – Where the intervenor filed an Application in a Proceeding seeking that the husband pay their costs on an indemnity basis or in the alternative on a party/party basis – Where the intervenor submits that their involvement in the proceedings was necessitated by the husband’s non-compliance to pay a judgment debt or any provision for payment – Husband is ordered to pay the intervenor’s costs in a fixed sum.
Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 106B, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17(1)
Cases cited: Atkins & Hunt (Costs) [2017] FamCAFC 131
Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119
D & D (Costs) (No 2) (2010) FLC 93-435; [2010] FamCAFC 64
Greedy and Greedy (1982) FLC 91-250; [1982] FamCA 41
Harris & Dewell (No 2) (2018) FLC 93-863; [2018] FamCAFC 180
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Moorcroft & Moorcroft (2020) 60 Fam LR 361; [2020] FamCAFC 83
Munday and Bowman (1997) FLC 92-784; 22 Fam LR 321
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Pascoe & Larsen (No 2) [2022] FedCFamC1A 126
PBF (as child representative for AF (Legal Aid Commission of Tasmania)) & TRF & AKL (2005) 33 Fam LR 123; [2005] FamCA 158
Penfold and Penfold (1980) 144 CLR 311; [1980] HCA 4
Phillips & Hansford (2020) FLC 93-941; [2020] FamCAFC 28
Prantage & Prantage (Costs) [2014] FamCA 850
Rankin & Rankin (No 3) [2019] FamCAFC 133
Re JJT; Ex parte Victoria Legal Aid (1998) 1998 CLR 184; [1998] HCA 44
Sfakianakis & Sfakianakis (2019) 59 Fam LR 419
Wei & Xia (No 5) (2023) 67 Fam LR 421
Wei & Xia (2024) FLC 94-186
Division: Division 1 First Instance Number of paragraphs: 82 Date of hearing: On the papers Place: Sydney Solicitor for the Applicant: Broaden Legal Solicitor for the First Respondent: Metro North Legal Solicitor for the Second and Third Respondents: MLH Lawyers Solicitor for the Intervener: V Pty Ltd ORDERS
SYC 196 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WEI
Applicant
AND: MR XIA
First Respondent
MR B XIA
Second Respondent
MS SIANG
Third Respondent
V PTY LTD
Intervenor
ORDER MADE BY:
HARPER J
DATE OF ORDER:
15 AUGUST 2024
THE COURT ORDERS THAT:
1.The Applicant Wife pay the costs of the proceedings of the Second and Third Respondents as agreed or assessed on a party/party basis up to and including 14 October 2020, and thereafter on an indemnity basis.
2.The First Respondent Husband pay the costs of the intervenor fix in the amount of $25,000.
3.The Application in a Proceeding on 5 September 2023 by the Second Respondent be otherwise dismissed.
4.The Application in a Proceeding filed on 18 September 2023 and the Application in a Proceeding filed on 7 October 2022 by the intervenor be otherwise dismissed.
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 the pseudonyms Wei & Xia have been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are property proceedings under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”) between the wife Ms Wei (“the wife”) who was the applicant in the substantive proceedings, the husband Mr Xia (“the husband”) who was the first respondent in the substantive proceedings and the husband’s father Mr B Xia (“the father”) who was the second respondent in the substantive proceedings.
The husband’s mother was the third respondent to the proceedings. Unfortunately, she passed away after the conclusion of the final hearing.
V Pty Ltd was joined to the proceedings as an intervenor on 13 October 2022 (“intervenor”), being a creditor of the husband for unpaid legal fees pursuant to a judgment in the Supreme Court of New South Wales.
On 16 August 2023, I delivered final judgment. The relevant procedural history and background to these proceedings are set out in that judgment: Wei & Xia (No 5) (2023) 67 Fam LR 421 (“judgment”). I will not repeat what I have set out in there unless necessary for this judgment.
The following is necessary to record for the purposes of this costs judgment.
At [6]–[8] of the judgment I described the three areas of main debate: the source of a large amount of the money, totalling some $13,551,604.98, from Country F, whether the spouse parties hold on trust for the parents several properties and certain funds, and whether matrimonial funds, said by the wife to be partly borrowed from the parents, were used to invest in a project called the J Pty Ltd, together with a claim that certain dispositions, relating to a discretionary trust called the Xia Family Trust, should be set aside pursuant to s 106B of the Act.
At [10] I set out the overall conclusion:
As will be explained, I have concluded that the wife has failed to establish her claims in respect the first and third areas, while the parents have been only partially successful in relation to the second area.
In the final orders, the Court declared the wife and the husband held on trust for the parents:
(a)36 per cent of M Street, Suburb R (“M Street”); and
(b)30 per cent of O Street, Suburb P (“O Street”); and
(c)29 per cent, being $669,900, of the net proceeds of sale of Q Street, Suburb R (“Q Street”)
The orders included orders that within 60 days, the wife and the husband do all acts and things and sign all documents necessary to sell the following properties:
(a)2 D Street, Suburb E (“2 D Street”);
(b)M Street; and
(c)O Street
2 D Street was the former matrimonial home.
The spouse parties were also ordered to make several specific payments to the parents, and the mother was ordered to pay the wife $712,500 in exchange for a transfer of the wife’s 60 shares in a company called C Pty Ltd.
The wife failed in her claims relating to the Xia Family Trust and for the inclusion of some $10,000,000 on the balance sheet as matrimonial property, being the profits from J Pty Ltd held in the Xia Family Trust (see judgment at [469]–[559], and in her claims pursuant to s 106B (see judgment at [595]–[634]. These claims were a substantial part of the case she made.
The parents sought relief which I summarised in the judgment as follows:
33.Beyond that, the parents seek declarations that the wife and the husband hold on trust for them the following assets:
(a) [M Street];
(b) The net proceeds of sale of the property [Q Street, Suburb R] NSW Folio Identifier […]/SP[…] (“[Q Street]”), being $2,095,319.46;
(c)[O Street];
(d)Refunded deposits arising from the rescinded purchase by the husband and wife of properties purchased off the plan, particularly the following properties:
(i)[Z Street], NSW in the sum of $77,420 (“[Z Street]”); and
(ii)[GG Street, Suburb HH], NSW (“[GG Street]”) in the sum of $54,000; and
(e) The wife’s 19 shares in [C Pty Ltd].
34.As relief consequential upon these declarations, the parents seek a payment from the wife of $680,000, and from the husband and wife jointly and severally, a payment of $2,226,739.46, being the total of the amounts in (b) and (d) above, with both amounts to be secured by a charge on [2 D Street].
The parents were not wholly successful at final hearing in relation to these claims.
APPLICATIONS FOR COSTS
The father filed an Application in a Proceeding on 5 September 2023 seeking costs against the wife on behalf of the father and mother.
The wife filed a Notice of Appeal on 12 September 2023 appealing the final orders. The appeal was dismissed on 24 April 2024 (Wei & Xia (2024) FLC 94-186).
I made orders on 22 September 2023 requiring the father and mother to file and serve any written submissions in support of their application for costs against the wife by no later than 8 December 2023. The father complied with this order. The wife was ordered to file and serve any affidavit and written submissions in response by no later than 19 January 2024. The wife did not file any affidavit or written submissions until 23 May 2024, and no leave was sought to rely on such material. However, I have taken her material into account.
The intervenor filed an Application in a Proceeding on 18 September 2023 seeking leave to rely on an Application in a Proceeding filed on 7 October 2022 seeking that the husband pay their costs on an indemnity basis, or in the alternative, on a party/party basis. On 22 September 2023 I made a notation that the Application in a Proceeding filed by the intervenor had been filed in compliance with the orders of the Court.
I made orders on 29 May 2024 for the husband to file and serve any responsive material he proposed to rely upon in relation to the intervenor’s costs application by no later than 13 June 2024, which he did on 12 June 2024. The intervenor filed submissions and an affidavit in reply on 26 June 2024.
On 1 August 2024, I made orders by consent that the father in his capacity as the administrator of the deceased estate of the mother be substituted as the Third Respondent. I ordered that the submissions and evidence filed by the father in support of the application for costs filed on 14 September 2023, be taken to be repeated and relied upon by the Third Respondent mutatis mutandis in support of an application for costs by the Third Respondent. I will refer to the father and the mother’s estate together as “the parents”.
ORDERS SOUGHT AS TO COSTS
According to their Application in a Proceeding filed on 5 September 2023, the parents seek the following orders:
(1)Pursuant to s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) the wife pay the costs of the father and mother of and incidental to the proceedings:
(a)Up to 14 October 2020 on a party/party basis; and
(b)From 14 October 2020 on an indemnity basis.
In her Response filed on 23 May 2024, the wife’s position is that each party pays his or her own costs, but, if a costs order is to be made, that costs be awarded on ordinary basis as assessed/taxed or agreed.
The parents’ application sought no costs against the husband and he filed no material in relation to it.
In the husband’s Response filed on 12 June 2024 to the intervenor’s Application in a Proceeding, he sought orders for each party to bear their own costs of and associated with the intervenor’s application.
DISCUSSION
The relevant principles with respect to costs are well settled, and have been discussed by the Full Court in Parke & The Estate of the Late A Parke (2016) FLC 93-748, followed in Atkins & Hunt (Costs) [2017] FamCAFC 131. The Court has a wide discretion, which is to be exercised judicially (Penfold v Penfold (1980) 144 CLR 311; Phillips & Hansford (2020) FLC 93-941; Rankin & Rankin (No 3) [2019] FamCAFC 133; Sfakianakis & Sfakianakis (2019) 59 Fam LR 419).
In proceedings to which the Act applies, the starting point is that each party shall bear his or her own costs (s 117(1)). If, however, the Court is of the opinion that there are justifying circumstances, the Court may make such order as to costs and security for costs as the Court considers just (s 117(2)). Sub-rule 12.17(1) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) specifies that the Court can make an order for costs in a fixed sum, assessed on a party/party, solicitor/client, indemnity basis, some other basis or assessed on scale in accordance with Schedule 3 of the Rules (Pascoe & Larsen (No 2) [2022] FedCFamC1A 126).
In Re JJT; Ex parte Victoria Legal Aid (1998) 1998 CLR 184 the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) referred to costs in the conventional sense, that is, as indemnity for another’s liability for professional fees and out of pocket expenses reasonably incurred in the litigation (see Hayne J at [97]).
When considering what, if any, order for costs should be made, the Court must have regard to the factors set out in s 117(2A):
(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.
It is well settled that no one factor in s 117(2A) has priority, nor must more than one factor be satisfied; rather, any one factor may be sufficient (Prantage & Prantage (Costs) [2014] FamCA 850 at [12] (“Prantage”); PBF (as child representative for AF (Legal Aid Commission of Tasmania)) & TRF & AKL (2005) 33 Fam LR 123 at [41]).
The Full Court in Moorcroft & Moorcroft (2020) 60 Fam LR 361 confirmed that indemnity costs are awarded only in exceptional circumstances (see also Kohan and Kohan (1993) FLC 92-340 (“Kohan”); Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No 2) (2010) FLC 93-435).
The competing applications are to be determined by answering four questions. The first question is whether the father has established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in his favour. The second question is whether, if there are circumstances justifying a costs order, the wife should pay both the mother and father’s costs on a basis, such as indemnity costs or as a fixed sum, other than costs as agreed or assessed on a party and party basis.
The third question is whether the intervenor has established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in their favour. The fourth question is whether, if there are circumstances justifying a costs order, the husband should pay the intervenor’s costs on a basis, such as indemnity costs or as a fixed sum, other than costs as agreed or assessed on a party and party basis.
Section 117(2A)(a) – the financial circumstances of the parties
The net assets value held by the wife after trial was approximately $1,978,174. The wife submitted that due to further liabilities she will receive net assets of $1,310,298.35, of which $712,500 is to be paid to her by the deceased mother’s estate. The wife suggested she may have difficulties enforcing the order for payment.
The wife contended the husband and father have better financial resources than her as the family own many properties in Australia, though she provided few details. She suggested the husband also receives financial support for his living expenses from the father.
The father submitted that though he has had access to substantial funds, the financial resources available to him are finite and are needed to fund his retirement and needs. He argued the wife is still of working age and has capacity to generate ongoing income. He however, is an elderly man and the legal expenses would diminish his finite assets.
The net assets value held by the husband after trial was approximately $1,161,785.
The intervenor has not suggested they are in any financial difficulty or hardship, nor have they adduced any evidence of their financial circumstances.
Section 117(2A)(c) – the conduct of the parties
The parents relied upon various aspects of the wife’s conduct as justification for an award of costs in their favour.
The parents submitted:
(a)the wife caused a significant volume of material to be produced and reviewed by multiple parties by her filing of 50 subpoenas; for example, the wife filed and served, without leave, two affidavits from an expert which she then deferred the tender of, causing wasted costs to the parents in considering the evidence.
(b)they incurred further unnecessary costs by the "staggered way” in which the wife served her evidence and exhibited many documents (particularly Country F language documents) of unproven provenance and authenticity.
(c)the wife’s objections were unnecessarily lengthy and consumed substantial hearing time.
(d)the wife conducted cross-examination of the father for 7 days which went beyond what was proportionate to resolve the issues in dispute.
(e)the central contentions made by the wife were groundless and should never have been made.
In reply, the wife briefly stated the parents breached disclosure orders and obligations which contributed to the complexity and duration of proceedings.
Section 117(2A)(d) – whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The intervenor submitted their involvement in the proceedings was necessitated by the husband’s non-compliance to pay the judgment debt and the husband’s failure to make any provision for payment from his entitlement to property settlement.
The husband contended he has not failed to comply with the judgment debt on the basis that appointment by REINSW of real estate agents for the sale of the properties is in progress.
Section 117(2A)(e) – whether either party has been wholly unsuccessful
The parents submitted the wife was wholly unsuccessful in obtaining orders against them.
The wife submitted only that neither party was wholly successful.
The intervenor submitted the husband was wholly unsuccessful in resisting the intervenor’s application and an order was made in the intervenor’s favour to receive payment from the husband.
The husband submitted he was wholly successful on his appeal to the Supreme Court of New South Wales and received a variation to the judgment debt in his favour.
Section 117(2A)(f) – offers in writing
The parents relied upon two offers of settlement which were made to the wife. The first, on 14 October 2020, offered:
(1)The wife would retain 2 D Street, M Street and O Street, subject to their mortgages;
(2)The parents would retain D Street;
(3)The parents would pay the sum of $500,000 to the wife;
(4)The parents would retain all monies received by the trustee from the J Pty Ltd Project.
The wife rejected the first offer and made a counteroffer that differed only in that the sum of money to be paid by the parents to her was to be $5,500,000.
On 14 October 2020, the parents rejected the wife’s counteroffer.
On 15 October 2020, the parents made the second offer:
(1)The wife would retain 2 D Street, M Street and O Street, subject to their mortgages;
(2)The wife would transfer her shares in C Pty Ltd to the parents;
(3)The parents would pay the sum of $2,000,000 to the wife;
(4)The parents would retain all monies received by the trustee from the J Pty Ltd Project.
The second offer was made on the fourth day of the final hearing and left open for approximately 8 months. The wife did not accept the second offer and it was withdrawn on 17 June 2021.
The parents argued the two offers made were far more generous to the wife compared to her entitlements as found in the final orders. They contended had the wife accepted the first offer, she would have been $1,538,580 better off against the parents and, had she accepted the second offer, she would have been $3,038,580 better off against the parents.
With respect to M Street, O Street and the cash payment by the parents, they argued that the outcome obtained by the wife at final hearing was worse than what would have been achieved had she accepted the first or second offer by the parents.
In addition, regarding 2 D Street, the shares in C Pty Ltd, and the monies received by the Xia Family Trust from the J Pty Ltd Project, the terms of the first and second offers by the parents were consistent with the outcome at final hearing.
The wife argued that it was not unreasonable for her to reject the offers as she was unable to form any reasonable view of the matrimonial asset pool due to substantial breach of disclosure obligations. The wife submitted that though the Court had found there was reasonable explanation for non-disclosure, the finding was not available to her at the time when the offer was open.
Section 117(2A)(g) – such other matters the Court considers relevant
The parents submitted the unreasonableness of the wife’s approach to litigation was evident from the settlement proposal put forth by the wife which went far beyond what she could reasonably have expected to achieve in litigation.
The parents argued the wife put them in a position where the only rational choice was to litigate because even the worst-case scenario would leave them in a better financial position than accepting the settlement offer of the wife.
The parents relied on Greedy & Greedy (1982) FLC 91-250, where the Full Court stated:
The policy of the Act is to encourage conciliation, and the failure of a party to take part in negotiations in a genuine manner may contribute to delay and cost, and obstruct the proper resolution of a matter.
The parents argued that the making of an excessive offer far in excess of one’s legitimate entitlement and a refusal to negotiate may be factors that justify a costs order.
CONCLUSION ON JUSTIFYING CIRCUMSTANCES
I do not consider the financial circumstances of the any party to disclose or deny a justifying circumstance. I accept the conduct of the proceedings by the wife was disorganised at times, but many other factors, described at [3] of the judgment, contributed to the fragmented nature of the hearing.
The cross-examination of the father was a difficult process in part because of the need for an interpreter, and the opacity of some of the answers. I accept the wife’s submission that neither party was wholly unsuccessful, even though she failed in a substantial part of her case.
However, I find that the wife’s conduct in the proceedings more generally, as submitted by the parents, justify an award of costs against her. In particular the rejection of the second offer of settlement was both improvident and unreasonable. These conclusion are supported by the following matters.
As the judgment makes clear, numerous material factual assertions relied upon by the wife in support of her case were found to be unreliable or baseless. For example her claims to have been a senior management figure in the “family business” were rejected. In the judgment I concluded:
342.The wife’s claims about entitlements to a “share of profits” appear to be no more than self-serving assumptions. I am not satisfied that the wife has proved any entitlement for the husband or her to receive profit distributions, nor any pattern of distribution from the family business to either of them pursuant to such an entitlement. As already pointed out, the wife herself conceded she never actually received a share of profits, just a notional distribution at best, on occasion for the purpose of convincing a lender to grant a loan. Nor is there any persuasive evidence that the husband actually received payments as a “share of profits” between 1997 and 2018. On the contrary, what the spouse parties did receive was considerable largesse from the parents in that period.
343.Overall I conclude that the wife’s evidence about her own role and the role of the husband in the business activities of the parents’ company was unconvincing and I reject it. The discussion above persuades me that the Court should be slow to draw the inferences from the face of most of the documents relied upon by the wife. For the reasons given, almost all the documentary evidence is inadequately contextualised and there is reason to conclude its contents were often unreliable. The evidence demonstrates that the wife had a limited understanding herself of how the businesses in [Country F] operated, relied primarily on what she thought various documents showed, and gives no persuasive basis for her assertion that the husband controlled the family business since 2009. Quite apart from her admissions that she did not work between 2000 and 2016, and only ever received “paper” profits, this deficit in her evidence undermines her assertion that she herself held a senior management position. I am not persuaded she has proved her assertions that the husband held a senior management position such as Chairman or General Manger or controlled the business of the company either as a result of his shareholding or on some other basis, such as by agreement with his parents.
The proper consideration of the wife’s claims in this regard required the detailed assessment of a vast amount of documentary material, much of which was put forward by her without clear provenance or authentication. I concluded numerous documents relied upon by her were not reliable because she called no evidence to contextualise their provenance or authenticity.
By way of further example, the parents also submitted, in relation to the wife’s claims concerning the Xia Family Trust and J Pty Ltd, that:
The s106B claim sought that the entirety of the funds received by the trust from the [J Pty Ltd] Project be paid to her by the Parents. In putting such a claim, properly advised, it would have been obvious to the Wife that she would need to explain how and why, as a matter of law, a former beneficiary of a discretionary trust had an enforceable entitlement to call for a present beneficiary to account to her for the entirety of the funds paid to that beneficiary by the trust (as well as address numerous other apparent issues). No explanation in this regard with a reasonable prospect of success was identified by the Wife.
I accept the parents’ argument that the wife must have known a substantial number of her factual claims were substantially untrue or had no reasonable prospects of success when the proceedings were commenced by her.
By the date of the second offer, the parties’ evidence had been filed and the trial had commenced. The wife was in a position to be thoroughly informed about the strengths and weaknesses of her and the other parties’ cases. Again properly advised the wife should have known clearly by the date of the second offer that her case was unjustifiably broad. The wife’s resort to claims of non-disclosure by the husband and other parties are not a convincing basis to justify rejecting the second offer. At [177] of the judgment I found the wife’s assertion of about non-disclosure to be “over-stated”.
The two factors relied upon by the intervenors under s 117(2A) justify an award of costs in their favour against the husband. I am satisfied this justifies an order for costs in the intervenor’s favour. The question thus remains the basis on which costs should be awarded.
INDEMNITY COSTS
The parents further argue that the circumstances are such that the Court should award indemnity costs in his favour.
The award of indemnity costs in this Court has regularly been called a significant departure from the normal standard, rare, and requires something exceptional. In Harris & Dewell (No 2) (2018) FLC 93-863, 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.”
(Footnotes omitted)
The father referred to Munday and Bowman (1997) FLC 92-784 (“Munday and Bowman”) at 84,660 where Holden CJ set out five circumstances in which an award of indemnity costs might be justified:
(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: see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd.
(c)Evidence of particular misconduct causing loss of time to the court and to other parties: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (French J, Fed C of A, 3 May 1991, unreported).
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ragatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
The parents relied on the conduct of the wife and her rejection of his offers of settlement, described above, as part of his basis for seeking indemnity costs from 14 October 2020. The father stated that:
the central contentions advanced by the Wife were based upon elaborate factual foundations that were false (and she must have known that to be so), were tantamount to a baseless allegation of fraud, or which properly advised she must have known had no chance of success.
(Submissions filed by the father on 8 December 2023, paragraph 35)
As regards the settlement offer proposed by the wife, the father characterised it as “an incendiary and baseless monetary “shake down” of the Parents unconnected with a bona fide or reasonable view of the Wife’s claims”. The father argued the time and cost of litigation thereafter was inevitable given the extreme position of the wife and such conduct was of sufficiently extreme nature to give rise to an order for indemnity costs.
The wife submitted there is no exceptional circumstance to justify an indemnity costs order.
I am satisfied that the situation is relevantly exceptional to justify indemnity costs from the date of the wife’s refusal of the second offer.
I generally accept the parents’ submissions in this regard. I refer to my reasons above at [63]‑[67]. There are persuasive grounds to conclude the wife, properly advised, by the date of the second offer, should have known that substantial elements of her claims had very poor prospects of success, and were based upon factual assertions which she must have known were untrue. Those elements consumed the bulk of the hearing time at trial. Her refusal of the second offer was both improvident and unreasonable, for these reasons, for the reasons given above at [63]-[67], and because it represented a significant improvement upon both what the wife could reasonably have expected to achieve, properly advised, at the time the offer was made, and certainly far better than the ultimate outcome for the wife. It would have resolved the litigation entirely at that point in time, leaving the wife with a substantial cash settlement and three properties, subject to mortgages, including the former matrimonial home.
In relation to the intervenor’s application for costs against the husband, they relied on Kohan and Munday and Bowman in support of their argument that their involvement in the proceedings, being necessitated by the husband’s non-compliance to pay the judgment debt and failure to provide any form of security to ensure compliance, were circumstances of ‘an exceptional kind’ that justified departure from the ordinary rules relating to costs between party and party.
In the alternative, the intervenor submitted that the Court has discretion to award lump sum costs instead of ordering a taxation (Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119). In their submissions filed 26 June 2024, the intervenor suggested the appropriate quantum of costs would be $30,000 plus GST as such quantum would be within the scale of costs applicable for the intervenor’s participation in these proceedings, including solicitor’s and counsel’s fees. I note however that in written submissions dated 18 September 2023, the intervenor submitted $20,000 plus GST was the appropriate lump sum figure. It was not clear from the intervenor’s evidence how a further $10,000 after 18 September 2023 would accord with the scale.
I am not satisfied that the intervenor has demonstrated the necessary exceptional basis for an indemnity costs order in their favour. In the scheme of the overall litigation their involvement was peripheral. However, the conduct of the husband, despite his liability to the intervenor being clear, even if the quantum was adjusted, in my view necessitated their involvement in the proceedings.
In my view, fixing a lump sum is appropriate to avoid further costs. I am not satisfied $30,000 is justified on the evidence of the intervenors. I will order the husband to pay the intervenor’s costs fixed in the sum of $25,000.
CONCLUSION
I find there should be a costs order in favour of the parents. Their costs are to be paid as agreed or assessed up to 15 October 2020, and thereafter on an indemnity basis.
The husband will be ordered to pay the intervenor’s costs of their participation in the proceedings as a party.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 15 August 2024
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