Indemnity Costs and Rejected Offers in Family Law: A Deep Dive into Roydon & Roydon [2024] FedCFamC1A 105

Weighing the Scales: A Judge's Crucial Decision in a Family Law Case

Introduction

The Federal Circuit and Family Court of Australia recently examined a complex appeal on indemnity costs in *Roydon & Roydon [2024] FedCFamC1A 105*. This case delved into the principles surrounding the application of costs orders, particularly in relation to offers made during family law proceedings. The court's decision highlights the fine balance courts must strike between the parties' litigation conduct and achieving fairness in cost allocations.

Facts of the Case

1. Mr. and Ms. Roydon, after a tumultuous marriage, separated in January 2021. They were involved in a high-conflict family law dispute over property and parenting arrangements concerning their three children (ages 16, 12, and 8). Both parties had contrasting claims regarding parental responsibility, mental health issues, and family violence. The total legal costs were exorbitant, with the appellant incurring approximately $793,600 and the respondent around $264,600.
2. The appellant appealed a decision made on October 3, 2023, where he was ordered to pay the respondent’s costs fixed at $100,000 on an indemnity basis. This order was based on several Calderbank offers made by the respondent, which the appellant rejected. The primary judge ruled that these offers would have resolved the dispute earlier and at a lower cost. The appellant sought to appeal this decision, arguing that the outcome was not equal to or better than the offer made and that the offer did not resolve the entire proceedings.

Issues

1. Was the appellant’s refusal of the Calderbank offers unreasonable to justify indemnity costs?

2. Did the primary judge err in determining that the respondent’s offer was more beneficial compared to the final outcome?

3. Did the primary judge adequately consider the full scope of the proceedings, including spousal maintenance, in concluding that the offer would have settled the entire matter?

Applicable Legislation, Regulations, and Rules

• Family Law Act 1975 (Cth) s 117: Governs the awarding of costs in family law proceedings.
• Federal Circuit and Family Court of Australia Act 2021 (Cth): Sets out the court's powers and functions.
• Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth): r 12.17 (indemnity costs), r 12.48 (general costs orders).

Relevant Case Law:

• House v The King (1936) 55 CLR 499: Established principles for appeals from discretionary judgments.
• Paradin & Paradin (2020) FLC 93-991: Addresses costs considerations and whether an offer resolves all issues in the proceedings.
• Badawi & Badawi (Costs) [2017] FamCAFC 196: Informs on the criteria for indemnity costs.

Analysis

The crux of the appeal centered on whether the primary judge properly exercised discretion in awarding indemnity costs and whether the respondent's offer should have been accepted as a reasonable settlement.

1. Rejection of the Calderbank Offers:

  The primary judge concluded that the respondent’s offer was rejected imprudently and would have settled the matter, thus justifying the costs order. However, the appellant argued that the offer did not resolve critical issues, including spousal maintenance, and that he achieved a better outcome in the final parenting orders. This was supported by the fact that the appellant secured more time with the children (four nights per fortnight instead of two) than what the respondent offered.

2. Comparison of Final Outcome and Offer:

While the respondent's offer involved fewer nights of parental contact for the appellant, the primary judge found this difference insignificant. However, on appeal, Justice Riethmuller found that this difference was substantial—doubling time with the children—and should have been properly considered. Therefore, the appellant's refusal to accept the offer, in this aspect, was not imprudent.

3. Scope of the Offer:

The respondent’s offer failed to address spousal maintenance, a key element of the proceedings. According to **Paradin & Paradin**, an offer that does not settle all matters cannot be relied upon to justify an indemnity costs order. The primary judge's determination that the offer would have settled all issues was therefore erroneous, as it did not cover the entirety of the dispute.

Given these factors, the appellate court held that the primary judge incorrectly exercised discretion, relying on a flawed assessment of the offers and their impact. The matter was remitted for rehearing to properly consider costs in light of the parties' complete legal arguments and the unresolved issues in the original proceedings.

Conclusion

The appeal was allowed, with the costs application remitted for rehearing. The appellate court ruled that the primary judge erred in awarding indemnity costs based on an incomplete and incorrect evaluation of the offer’s scope and the final orders achieved. Both the appellant and respondent will have an opportunity to present their cases afresh in relation to costs.

Take-Home Lesson

In family law, the rejection of an offer does not automatically lead to an indemnity costs order, especially if the offer does not fully resolve all matters at issue. Parties should carefully consider the terms of any offer in light of the entire proceedings, as an incomplete offer may not justify severe cost penalties. This case underscores the importance of ensuring that all issues, including ancillary matters like spousal maintenance, are addressed before using an offer to seek indemnity costs.