Westacott and Dunwoody (No. 3)

[2019] FamCA 898

FAMILY COURT OF AUSTRALIA

WESTACOTT & DUNWOODY (NO. 3) [2019] FamCA 898

FAMILY LAW – COSTS – Where application for costs arising from determination under s 90J(2B) that a Termination Agreement is binding – Where consideration of applicable principles – Where order for costs made on a party/party basis.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) r 19.18

Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160
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
Westacott & Dunwoody (No. 2) [2019] FamCA 719

APPLICANT: Mr Westacott

RESPONDENT: Ms Dunwoody

FILE NUMBER: PAC 1144 of 2019

DATE DELIVERED: 28 November 2019

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: By way of written submissions last received on 18 November 2019

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Dorter Family Lawyers And Mediators

SOLICITOR FOR THE RESPONDENT: Blanchfield Nicholls

Orders

1. That the wife pay the husband’s costs of and incidental to the proceedings seeking a declaration that the termination agreement between the parties be declared binding such costs to be as agreed within one month from this date or assessed on a party/party basis and paid with one month from the date of agreement or assessment.

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 Westacott & Dunwoody 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 PARRAMATTA

FILE NUMBER: PAC 1144 of 2019

Mr Westacott

Applicant

And

Ms Dunwoody

Respondent

REASONS FOR JUDGMENT

1. The application for determination is an application for costs made by the husband arising from this Court’s determination on 4 October 2019 that pursuant to section 90J(2B) of the Family Law Act 1975 (Cth) it was declared that the termination agreement signed by the parties in about December 2018 is binding upon them.

2. By Application in a Case the husband sought the following orders:

   a)That within 28 days the respondent pay the applicant’s costs of and incidental to these proceedings on an indemnity basis fixed in the amount of $61,103.28; and

   b)That in the alternative the respondent pay the applicant’s costs of and incidental to these proceedings on a party/party basis as agreed and if not agreed within 28 days as assessed.

3. The applicant relied upon his affidavit filed 4 November 2019 in support of his application for costs together with written submissions filed on the same day.

4. In response to the application for costs the respondent wife relies upon her written submissions filed 18 November 2019.

5. These reasons assume familiarity with the Court’s reasons for judgment in the primary judgment:  Westacott & Dunwoody (No. 2) [2019] FamCA 719.

Costs

1. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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”.

10. 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”.

11. 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”…

12. The law in relation to indemnity costs is well settled.

13. 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.

14. 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.

15. 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.

16. 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. 

The husband’s contentions:

1. As to the consideration set out in section 117(2A):

   a)The husband submits that there is a significant financial disparity in the financial circumstances of the parties. The wife is possessed of significant real estate having a gross value of over $3.5 million, has funds at bank of about $33,000 and shareholdings are having a value asserted by her in her financial statement to be about $390,000.  On the other hand, the husband has net assets of approximately $33,500.

   b)Neither party is in receipt of a grant of legal aid.

   c)The respondent signed the subject termination agreement with the benefit of legal advice and had asserted in an affidavit filed with the Court that it would be unjust and inequitable not to declare the termination agreement binding notwithstanding its otherwise, technical difficulties. Her subsequent conduct in seeking to resile from this position, the husband contends put him to significant expense in seeking the subject orders.

   d)Otherwise, it is contended that the wife was wholly unsuccessful in the proceedings where the only outcome could be either the termination agreement being declared binding or not.

2. The husband further contends in terms of his application for indemnity costs that the Court should consider the complexity of the issues before the Court, the reasonableness of the wife’s behaviour and the costs incurred by the husband.  The husband submits that he has incurred costs of and incidental to the primary application in the total sum of about $61,000.  It is not clear whether those costs have been incurred solely in relation to the issues determined by the primary reasons for judgment or represent his costs to date in respect of which there have been other interim financial proceedings before the Court.

3. The circumstances leading up to the present application are dealt with in detail in the primary reasons for judgment and need not be repeated here.  It is readily apparent that the efficacy of the termination agreement was the important threshold matter that would then facilitate the party seeking orders by consent as to property adjustment from this Court.  Those orders, of course, would in any event be subject to a registrar exercising jurisdiction in relation to consent orders being satisfied that the orders were just and equitable.

The wife’s contention

1. The wife submits that the Court must distinguish between costs incurred in respect to the matter the subject of the primary judgment and other costs incurred by the husband in relation to interim financial proceedings that are not the subject of the present application for costs.

2. The itemised accounts exhibited to the husband’s affidavit in support of this application for costs clearly includes costs incurred and unrelated to the proceedings the subject of the primary determination.

3. The wife, otherwise, contends that an order for indemnity costs is an order of an exceptional kind and a power that is really exercised by this Court in circumstances where there is a primary position that each party pay their own costs.

4. The wife, otherwise, contends that in the event that an order for costs was made it should be limited to costs specifically incurred in relation to the primary matter for determination and be on the basis of party/party costs or as agreed between the parties.

Determination

1. In considering the contentions of both parties as to costs, the Court is mindful of the primary position as to costs as set out in section 117 of the Act.

2. Otherwise, the Court is satisfied that there are circumstances justifying a departure from the general rule as to costs, those circumstances primarily being the significant disparity in the financial circumstances of the parties and the wife’s conduct in initially supporting a declaration that the termination agreement binding and then resiling from that position when it became readily apparent that consent orders sought by the parties were not to be made.

1. This is not an appropriate circumstance for there to be an order for indemnity costs.

2. There will be an order that the wife pay the husband’s costs of and incidental to the proceedings the subject of the primary determination on a party/party basis as agreed within one month of such order or as assessed and paid within one month of that assessment.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 28 November 2019.

Associate:

Date:  28 November 2019