Sunday 2 November 2014

Orders for costs in family law matters

In family law proceedings before the Family Law Courts parties normally bear their own legal costs.

Despite this the court is regularly asked to consider the issue of costs. But a recent case caught my eye as it provided a review of the existing authorities on this topic. The case is known as Nada & Nettle (Costs) [2014].

On 16 July 2014 the Full Court of the Family Court dismissed an appeal brought by Ms Nada, the mother, against Orders that required her and the child to move back to regional NSW from Tasmania. In July 2012 Ms Nada had moved the child from regional NSW to Tasmania without the knowledge or permission of the father. The mother was unsuccessful on the appeal.

The father sought an Order that the mother pay his costs of and incidental to the appeal up to and including 11 March 2014 on a party-party basis and thereafter on an indemnity basis. The mother opposed the application and sought no order be made.

The Court started by setting out section 117(1) of the Family Law Act 1975 and that the guiding principle of that section is that each party to proceedings under the Act should bear his or her own costs unless the Court is of the opinion that there are circumstances that justify the making of a costs order. The Court then turned to section 117(2) which sets out matters to which the Court should have regard in determining what, if any, order should be made. In this case the matters relevant were the financial circumstances of each of the parties, whether a party to the proceedings has been wholly unsuccessful and whether either party to the proceedings has made an offer in writing to settle the proceedings and the terms of that offer.

The mother contended that her financial circumstances are such that, of themselves, there ought be no order for costs because she had no capacity to pay any costs ordered. The Court noted that while the mother stated that she did not have capacity to pay and that any order to pay would have a negative impact she did not state what capacity she did have or what the negative impact would be. The Court noted that just because "a party is impecunious, even indigent, is not a bar to the making of a costs order if the Court is otherwise of the opinion that such an order ought to be made".

The mother conceded that she was wholly unsuccessful but submitted that due to there having been two errors in the first instance judgement there was merit in the appeal. The Court determined that the mother was wholly unsuccessful and the mother was not able to demonstrate a material error of principal in the trial judge’s determination.

The next issue - and the key to the mention of the date of 11 March 2014 - was that the father made an offer to the mother on 11 March 2014.

That letter had sought that the mother withdraw her appeal and if she did so the father would not seek costs. The letter specifically stated that it would be relied upon in seeking an order for indemnity costs. The offer was rejected by the mother.

The Court considered the case of Lenova & Lenova (Costs) [2011] and quoted the following "In this jurisdiction, costs do not “follow the event” ... each party to proceedings under this Act shall bear his or her own costs ... a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation ... A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation."

The Court concluded that the rejection of the father's offer was of sufficient weight to justify an order that the mother pay the father's costs of the appeal.

The question then became what kind of costs was the mother required to pay.

One way in which the Courts will do this is "party-party costs". Such costs are capped at the scale set out in the legislation. Another way in which the Court can order legal costs to be paid by the other party is through "indemnity costs". Indemnity costs are all costs reasonably and property incurred where the conduct of a party warrants such an Order being made. Indemnity costs are most frequently awarded when a party has declined an offer of settlement and has received an outcome less than what was offered.

In this case the Court looked at the established authority of Kohan and Kohan (1993) and quoted " the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind." The Court then considered what circumstances could justify a departure from party-party costs and quoted from Colgate Palmolive Co v Cussons Pty Ltd [1993] where the following list was provided "evidence of particular misconduct that causes loss of time to the court and to other parties ... the fact that the proceedings were commenced or continued for some ulterior motive ... or in wilful disregard of known facts or clearly established law ... the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions ... an imprudent refusal of an offer to compromise"

Ultimately the Court was not persuaded that neither the mother’s failure to accept the offer nor any other aspect of the case falls within the circumstances set out in Colgate-Palmolive nor was there anything in the nature of this appeal that falls within the “exceptional” case in which indemnity costs may be ordered.

On that basis the Court ordered that the mother pay the father's costs of and incidental to the appeal on a party and party basis.

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