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Appellants Disputes Cost Orders In Favor of Respondent

Jess & Jess (No 2) [2021] FedCFamC1A 49 (5 November 2021)

The applicants/appellants appeal against a declaratory order.  Their recusal appeal succeeded on a question of law.  The first respondent sought for overall costs to be apportioned at 90 per cent to the appeal against the declaratory order.  On the other hand, the applicants/appellants sought that they pay 70 per cent of the First Respondent’s costs.  The Court, in deciding what costs order to make, determined whether there exists exceptional circumstances justifying a departure from the ordinary rule of calculating costs on a party/party basis.

Facts:

On 25 August 2021, the Court made orders in relation to a Notice of Appeal filed on 13 December 2019.  The orders the subject of the appeal were first, Order 2 of the orders made on 15 November 2019, namely a declaration that the Deed of Declaration of Trust was not executed on the date it bears (“declaratory order”), and secondly, Order 4 whereby the primary judge dismissed an application seeking that her Honour recuse herself from further involvement in determining the proceedings (“the recusal”). 

On 25 August 2021, the Court found that leave to appeal was required to appeal both orders, ordered that the application for leave to appeal the declaratory order be dismissed, the application for leave to appeal the recusal be granted and the appeal be allowed, the primary judge be disqualified from any further hearing of the proceedings, and the balance of the proceedings be determined by a judge other than the primary judge. 

On 7 September 2021, the first respondent filed written submissions seeking that the Appellants pay 90% of the costs incurred by the First Respondent in relation to the appeal, on an indemnity basis and fixed in the sum of $238,335.57, payable within 28 days; or in the alternative to (a), the Appellants pay 90% of the costs incurred by the First Respondent in relation to the appeal, on a party/party basis and fixed in the sum of $163,242.42, payable within 28 days; and that the First Respondent be granted a costs certificate pursuant to the provisions of section 6 of the Federal Proceedings (Costs) Act 1981 (Cth). 

On 8 September 2021, the applicants/appellants sought that they pay 70% of the First Respondent’s costs of and incidental to the application for leave to appeal from Order 2, such costs to be taxed on a party/party basis unless otherwise agreed; that the Third Respondent pay the Applicants’/Appellants’ costs of and incidental to the application for leave to appeal, and the appeal from, Order 4, including the Notice of Contention dated 2 January 2020, such costs to be taxed on a party/party basis unless otherwise agreed.  

If the Court makes no order for costs in favour of the Applicants/Appellants then they seek cost certificates in relation to their application for leave to appeal, and the appeal from, Order 4.  The third respondents sought that the Appellants pay 90% of the costs incurred by the Third Respondents in relation to the appeal, on an indemnity basis and fixed in the sum of $400,583.70, payable within 28 days; or in the alternative, the Appellants pay 90% of the costs incurred by the Third Respondents in relation to the appeal, on a party/party basis and fixed in the sum of $289,377.80, payable within 28 days; and the Third Respondents be granted a costs certificate pursuant to section 6 of the Federal Proceedings (Costs) Act 1981 (Cth).  The third respondents were the trustees of the bankrupt estate of the husband, and thus they had to have regard to the interests of the husband’s creditors.

Issues:

I. Whether or not an order for costs should be made against the applicants/appellants in favour of the first respondent. 

II. Whether or not there should be a costs order at all in favour of the third respondents in relation to the application for leave to appeal and the appeal from the declaratory order.

Applicable law:

Family Law Act 1975 (Cth) ss 28(4)(a)117 - relevantly provides that if, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 17(2)(b) - permits the course where the remaining judges, upon resignation of a bench from hearing and determining an appeal, may deal with the question of costs if consented by the parties. 
 
Federal Proceedings (Costs) Act 1981 (Cth) s 6 - provides that where a Federal appeal succeeds on a question of law, the court that heard the appeal may, on the application of a respondent to the appeal, grant to the respondent a costs certificate in respect of the appeal. 
Federal Proceedings (Costs) Act 1981 (Cth) s 9 - provides that a Federal appeal referred to in paragraph (d), (j), (ja) or (k) of the definition of federal appeal in subsection 3(1) succeeds on a question of law. 
 
Family Law Rules 2004 (Cth) rr 19.18, 19.34 - relied upon by the applicants/appellants in submitting that the size of the amount sought “justifies a proper assessment being undertaken having regard to the assessment principles.
 
Federal Circuit and Family court of Australia (Family Law) Rules 2021 (Cth) r 12.17 - supports the principle that wherever practicable the costs payable should be fixed. 
 
Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160[1995] FCA 350 - provides that the obvious purpose of such the rule that wherever practicable the costs payable should be fixed, is to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”. 
 
Colgate-Palmolive Co and Anor v Cussons Pty Ltd (1993) 46 FCR 225[1993] FCA 801 - provides for examples of exceptional circumstances that warrant departure from the ordinary rule. 
 
Jess & Jess [2021] FamCAFC 159 - where the Court delivered reasons for judgment and made orders in relation to a Notice of Appeal filed on 13 December 2019. 
 
Limousin v Limousin (Costs) (2007) 38 Fam LR 478[2007] FamCA 1178 - provides that the court ought not usually make an order for costs to be calculated otherwise than on a party/party basis, but where there are exceptional circumstances that warrant departure from the ordinary rule, then indemnity costs can be awarded. 
 
Munday v Bowman (1997) FLC 92-78422 Fam LR 321 - held that 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. 
 
NMFM Property Pty Ltd v Citibank Ltd (No 2) [2001] 109 FCR 77[2001] FCA 480 - provides that what is relevant in the issue of fraud is “the conduct of the party in the litigation, not the conduct of the party in the antecedent facts”. 

Analysis:

The applicants/appellants concede that they ought to pay the first respondent’s costs of and incidental to the application for leave to appeal, and the appeal from the declaratory order, on a party/party basis, but submit that those costs should be reduced by 30 per cent to reflect the outcome of the recusal appeal.  The applicants’/appellants’ submission is that because the application for leave to appeal and the appeal were “wholly successful”, citing s 117(2A)(e) of the Act, that is a circumstance which justifies this Court departing from the general principle in s 117(1) that each party bear their own costs.  However, pursuant to s 117(2A)(e), the first respondent has been wholly unsuccessful in relation to the recusal appeal, but that appeal succeeded on a question of law, and specifically an error by the primary judge in the application of legal principle. 

The financial circumstances of the parties here are such that they can have no relevance to whether or not an order for costs is made.  The first respondent submitted that, “the appellants adopted a scattergun approach to this appeal, pursuing all 25 grounds of appeal in relation to the Declaratory Order even where many of those grounds overlapped, amounted to mere repetition of the arguments advanced below, had no prospect of success and all were ultimately unsuccessful”.  On the question in relation to what basis should the costs be calculated, the court ought not usually make an order for costs to be calculated otherwise than on a party/party basis, but where there are exceptional circumstances that warrant departure from the ordinary rule.  The first respondent relied upon the applicants/appellants perpetration of fraud and the lengthy hearing of appeal as exceptional circumstances.

However, as to the issue of fraud the applicants/appellants submitted correctly that what is relevant is “the conduct of the party in the litigation, not the conduct of the party in the antecedent facts”.  As to the nature of the appeal, it cannot be said that the length of the appeal book, the length of the summaries of argument, and the duration of the hearing demonstrates exceptional circumstances.  The applicants/appellants submit that there should be no cost order in favor of the third respondents because it was unnecessary for them to take part in the application and appeal.  Given that their written submissions were a repetition of the ones by the first respondent, all they needed to do was adopt those submissions, and that would have amply satisfied their “obligation” to the bankrupt estate and the creditors, and avoided the incurring of significant legal expenses. 

Conclusion: 

The Court concluded that circumstances justify an order for costs against the applicants/appellants in favour of the first respondent, and she should have 90 per cent of her costs, representing the costs relating to the application for leave and the appeal against the declaratory order, without any reduction for the outcome of the recusal appeal.  There are no exceptional circumstances justifying a departure from the ordinary rule of calculating costs on a party/party basis.  It was further held that the third respondents’ participation in the declaratory appeal was largely unnecessary.  The Court ordered the applicants/appellants to pay the costs of the first respondent fixed in the sum of $163,242.42.  The applications for costs made by the applicants/appellants is dismissed.  The application for costs made by the third respondents is dismissed.  The Court grants to the applicants/appellants a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth).   The Court grants to the first and third respondents a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth).  

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