Penfold v Penfold [1980] HCA 4; (1980) 144 CLR 311 (13 February 1980)

HIGH COURT OF AUSTRALIA

PENFOLD v. PENFOLD [1980] HCA 4; (1980) 144 CLR 311

Family Law

High Court of Australia
Stephen(1), Mason(1), Murphy(2), Aickin(1) and Wilson(1) JJ.

CATCHWORDS

Family Law - Costs - Statutory requirement that each party to proceedings bear own costs unless court is of opinion that circumstances justify making order as to costs - Principles applicable - Family Law Act 1975 (Cth), s. 117 - Regulations, reg. 173.

HEARING

Sydney, 1979, November 14; 1980, February 13. 13:2:1980
APPEAL from the Family Court.

DECISION

1980. February 13.
The following written judgments were delivered: -
STEPHEN, MASON, AICKIN AND WILSON JJ. This is an appeal by special leave order for costs made in the Supreme Court of New South Wales (Allen C.J. in F.L.D.). A decree for the dissolution of the parties' marriage was made by the Supreme Court in October 1968. Thereafter consequential orders were made, relating in the main to maintenance of the children of the marriage. (at p312)

2. In May 1976 the appellant wife filed an application which in its amended form was presented on 10th March 1977. By this application she sought orders increasing the maintenance payable in respect of the children, orders relating to the enrolment of three of the children as boarders at educational institutions on the footing that the respondent would pay their fees and expenses, and orders relating to a trust and to the former matrimonial home in which the appellant claimed an interest. (at p312)

3. The judge made orders increasing the maintenance to be paid to the appellant in respect of each of the four children of the marriage, the increases varying from $5 to $10 per week. He also ordered that the respondent should pay to the appellant any school fees already paid by her. As the respondent agreed to pay the fees and expenses of the enrolment of the three children as boarders at education institutions, no order was made in relation to this matter. The judge noted that the parties contemplated that the children would undertake some form of tertiary education and that the orders for maintenance might require review on this account. This part of the order was his Honour's response to the appellant's application that the order for maintenance for each of the two younger children should continue in force until the child completed a chosen course of tertiary education. The judge refused to make an order with respect to the former matrimonial home partly on jurisdictional grounds and partly on the merits. The application to the extent to which it related to the trust and to the matrimonial home, was dismissed. (at p313)

4. His Honour ordered the respondent to pay the costs of the application and of an interlocutory application for similar relief which the appellant had made to the vacation judge the costs of which had been reserved. His Honour said: "An application has also been made for an order for the applicant's costs of this application and for the interlocutory application made earlier to the vacation Judge. I have considered the matter and am of the opinion that the applicant has established that she is fairly entitled to the order for costs which she seeks." His Honour made the order for costs in these terms: "(k) Respondent to pay the applicant's costs as above stated, in which respect I would suggest reference to reg. 173." and continued - "Although this order is not made under s. 117 (2), nonetheless, the provisions therein for assessment and reference, if necessary, to the Registrar might be availed of in order that taxation may be avoided, if practicable." (at p313)

5. In the Full Court, Evatt C.J. (with whom Asche and Lusink JJ. agreed), after referring to s. 117 (2) of the Family Law Act 1975, as amended, said:
"His Honour, so far from purporting to act under s. 117 (2), said that he was not making an order under that subsection. One is left not knowing what power his Honour thought he was exercising; I am forced to the conclusion that his Honour did not exercise correctly his discretion under s. 117 (2) but acted on some other principle. Because of that, I must reach the view that his Honour erred in the exercise of his discretion in regard to costs."
Evatt C.J. concluded by saying:
"On a review of the circumstances of the case, the matters which Mr. Molloy has so ably put (and put in some detail) would not be sufficient to persuade me that this was a clear case in which an order for costs should be made."
The Court then discharged the order for costs made by the primary judge. (at p313)

6. The foundation of the Full Court decision was that the primary judge erred in principle in making the order for costs in favour of the appellant. According to the Full Court, he expressly disclaimed s. 117 (2) as his source of authority to make the order; yet it was the only source of authority for the making of such an order. The initial question is whether the Full Court was mistaken in thinking that the primary judge disclaimed s. 117 (2). (at p313)

7. Section 117 (1) and (2) provide:
"(1) Subject to sub-section (2) and section 118, each party to proceedings under this Act shall bear his own costs. (2) If the court is of opinion in a particular case that there are circumstances that justify it in doing so, the court may, subject to the regulations, make such orders as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court thinks just."
Regulation 173 provides:
"(1) Where a court proposes to make an order for costs under sub-section 117 (2) of the Act, it may, in making the order -
(a) take into account the financial circumstances of the person against whom the order is to be made;

(b) take into account the availability of legal aid;
(c) obtain an assessment of his costs from the party in whose favour the

order is to be made or his legal practitioner;
(d) obtain a report from the registrar or other officer of the court as to the proper amount of costs incurred;
(e) consider the conduct of all parties at the hearing and determination of the proceedings, including their conduct in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admission of facts, production of documents and like matters; and

(f) take into account all other relevant matters.
(2) As far as practicable, the court shall fix the amount of the order

for costs or security for costs without recourse to the taxing of costs." (at p314)

8. In our view the Full Court was wrong in concluding that a judge who was experienced in family law matters was unaware that the sole source of his power to make the order for costs lay in s. 117 (2). The last sentence of his Honour's judgment provides internal evidence that he was intending to refer to a provision other than s. 117 (2) and his reference to reg. 173 shows that he must have regarded s. 117 (2) as the source of his authority to make the order. The judge, after making mention of s. 117 (2), says, "the provisions therein for assessment and reference, if necessary, to the Registrar might be availed of in order that taxation may be avoided". The sub-section contains no provisions of this kind. However, reg. 173 (1) does contain provisions for obtaining an assessment of costs and for obtaining a report from the registrar as to the proper amount of costs incurred - see pars. (c) and (d). (at p314)

9. Regulation 173 only operates when an order for costs is made or is proposed to be made under sub-s. (2) of s. 117. Express mention of the regulation therefore indicates that his Honour was aware that he was acting under the authority conferred by the sub-section. (at p315)

10. Accordingly, it is apparent that his Honour's reference to s. 117 (2) was a mistaken reference to reg. 173. In effect his Honour said that, although he was making no orders in terms of pars. (c) and (d) of reg. 173 (1), those provisions might be availed of, if the necessity arose subsequently, with a view to avoiding a taxation of costs. In this respect his Honour had an eye to reg. 173 (2). (at p315)

11. Mr. Rogers for the respondent submitted that, even if it be accepted that the primary judge relied on s. 117 (2) in making the order for costs, he erroneously exercised the discretion which the sub-section entrusted to him. In support of this submission four points were made: (1) that the general rule enunciated by s. 117 (1) is that each party should bear his own costs; (2) that, in order to take a case out of the general rule, s. 117 (2) requires that a judge should find and specify the particular circumstances which justify a departure from that general rule; (3) that the judge failed to specify particular circumstances; and (4) that, in any event, there were no circumstances which justified the making of the order. (at p315)

12. It is an accurate description of s. 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs. (at p315)

13. 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". (at p315)

14. 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 (1970) 92 WN (NSW) 503, at p 505 ). 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. (at p316)

15. Regulation 173 (1) does not advance to the point. It is enabling, not mandatory. Regulation 173 (1) (e) does no more than identify matters which are generally thought to be relevant to the question of costs, and par. (f) ensures that the matters previously mentioned are not exhaustive. On 1st August 1979 reg. 173 was replaced by reg. 173A. The new regulation specifically requires that the court shall take into account the matters mentioned in the new pars. (d) to (g) inclusive. Such a provision may perhaps give some support to the notion that the judge should specify justifying circumstances and it is not inappropriate that he should do so. (at p316)

16. We are left, then, with the question whether there were justifying circumstances within the meaning of s. 117 (2). The question must be answered in the affirmative. True it is that the appellant obtained only some of the orders which she sought. However, it appears that she would have obtained other orders, those relating to the enrolment of the children as boarders in educational institutions, but for the circumstance that after the hearing before the vacation judge and immediately before the hearing before Allen C.J. in F.L.D. the respondent agreed to the arrangements proposed. Moreover, the transcript shows that it was only after the respondent's financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a form 19 statement relating to his financial position. It presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest. In his own right, as a beneficiary in an estate and through a company and a family trust he had interests in shares in W.C. Penfold Holdings Ltd. valued at not less than $800,000 and he enjoyed a substantial income. The form 19 statement gave no indication of these assets, with the result that the appellant was compelled to establish the respondent's financial position. Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order. (at p317)

17. We would therefore allow the appeal. (at p317)

MURPHY J. Although the primary judge stated that his order for costs was not made under s. 117 (2) of the Family Law Act 1975, that sub-section was the only source of his authority to order costs. He gave no reasons for his order. It seems that on appeal in the Family Court, the parties' submissions did not explore the circumstances as closely as they did in this Court. This led understandably to the view in the Family Court that the order for costs was not justifiable. (at p317)

2. Section 117 states:
"(1) Subject to sub-section (2) and section 118, each party to proceedings under this Act shall bear his own costs.
(2) If the court is of opinion in a particular case that there are circumstances that justify it in doing so, the court may, subject to the regulations, make such orders as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court thinks just. . . ."
On this appeal, both parties correctly asserted that the section was intended to displace the general rule applied under the repealed Matrimonial Causes Act 1959 and earlier State Acts that the husband should be ordered to pay the costs, and also to exclude the rule applying in most judicial proceedings that where costs may be awarded, costs should in general follow the event. (at p317)

3. The general rule expressed in s. 117 (1) is that each party shall bear his or her own costs; this is subject to the exception expressed in sub-s. (2). The phrases, "in a particular case" and "circumstances that justify it in doing so" emphasise that s. 117 (1) expresses the general rule, which is not to be departed from unless the court forms the opinion in a particular case "that there are circumstances that justify it in doing so". (at p317)

4. The facts referred to in the judgment of Stephen, Mason, Aickin and Wilson JJ. show that this is an exceptional case in that the circumstances justify an order for costs. Giving false evidence, orally or in writing, and fabricating evidence are serious offences (see ss.35 and 36 of the Crimes Act 1914 (Cth), as amended). Criminality and liability for punishment extend to "any person who aids, abets, counsels, or procures, or by act or omission is in any way directly or indirectly knowingly concerned in, or party to, the commission of . . ." the offence (s. 5 of the Crimes Act). Presentation of a false statement of financial circumstances, which puts the other party to the trouble and expense of disproving it, is a circumstance which justifies an order for costs. Courts should regard such circumstances which tend to undermine the integrity of proceedings with great concern, and should do everything in their power to determine who is responsible in order to maintain that integrity. On this appeal, this Court is, of course, confined to dealing with the evidence which came from the courts below. (at p318)

5. The appeal should be allowed. (at p318)

ORDER

Appeal allowed. Order of the Full Court of the Family Court set aside. Order for costs made by the Supreme Court of New South Wales restored. Respondent to pay appellant's costs of the appeal to the Full Court of the Family Court and of the appeal to this Court.