Fountain Selected Meats (Sale) Pty Ltd v International Produce Merchants Pty Ltd

What happened

This judgment deals with the wife's application for indemnity costs after the husband brought an unsuccessful application to review an arbitral award about the parties' property interests. The arbitral award had adjusted the property division to 55% in favour of the wife and 45% in favour of the husband [3]. The husband filed an application to review that award (the earlier decision of Wilson J deciding that application is cited as Bakalov & Bakalov [2021] FedCFamC1F 161) [1, 6].

The wife sought indemnity costs totalling $20,067.66: $16,767.66 (as particularised in her affidavit) and $3,300 for resisting the husband's review and for bringing an application to quarantine $25,000 held in trust [2]. The wife argued the usual rule that each party bears their own costs (s 117(1) Family Law Act 1975) should be displaced because the husband’s conduct engaged s 117(2A), specifically subsections (c) (the husband was wholly unsuccessful on his review application) and (f) (offers of resolution or proposals to quarantine funds were made and resisted) [4–6, 11–15].

Wilson J accepted the wife's position. The judge found the husband was wholly unsuccessful on his review application (s 117(2A)(c) engaged) and that his resistance to the $25,000 being quarantined was ultimately futile because he consented only after the wife filed her application (s 117(2A)(f) engaged) [15(a), 15(b), 18]. Critically, the judge characterised the review application as "doomed", the husband had not properly identified whether his challenge was grounded in s 13J or s 13K of the Family Law Act, made no attempt to analyse the elements of either section, and thus had no reasonable prospects of success [9, 17]. On that basis, and following precedent that indemnity costs may be awarded where an applicant, properly advised, should have known the application had no chance (Fountain Selected Meats; Phillips & Hansford), Wilson J ordered the husband to pay the wife's indemnity costs of $20,067.66 from the trust account of D Solicitors by 4:00pm on 9 February 2022 [17, 19].

Why the court decided this way

The decision rests on statutory structure and precedent.

Statutory framework

• s 117(1) Family Law Act 1975 establishes the default that each party bears their own costs.
• s 117(2) permits the court to make orders about costs where it is just to do so.
• s 117(2A) enumerates circumstances (including (c) and (f)) that may justify departure from the default and warrant a costs order. Wilson J emphasised that only one subsection of s 117(2A) need be engaged to justify an order under s 117(2) (citing Fitzgerald & Fish) [7, 10].

Application to the facts

• s 117(2A)(c): The court found the husband to be wholly unsuccessful on his review application and concluded that this alone could justify a costs order, provided it was otherwise just to make such an order [15(a), 10].
• s 117(2A)(f): The court accepted the wife's narrative that she sought the husband's withdrawal of his application and that she proposed holding $25,000 in trust; the husband resisted those proposals, offering lesser amounts, and only consented to $25,000 after the wife commenced proceedings to quarantine the funds. That sequence showed the husband’s resistance to a reasonable resolution was futile and caused expense [13, 18]. That conduct enlivened s 117(2A)(f) [15(b)].

Indemnity costs doctrine

• Wilson J turned to authority that indemnity costs can be awarded where a party, properly advised, should have known the application had no chance of success, relying on Fountain Selected Meats and Phillips & Hansford [17]. The judge concluded the husband's review application was "doomed" because it lacked any attempt to analyse the elements of the relevant statutory provisions (s 13J or s 13K) and thus had no reasonable prospects; accordingly indemnity costs were appropriate [9, 17].

Proportionality and source of funds

• The court observed $25,000 was held in trust and the wife's claimed indemnity costs were less than that sum. The judge assessed the amount as reasonable and proportionate in the context of the trust funds and the litigation, and directed payment from the trust [12, 19].

Before and after state of the law

Before

• The starting point for costs in family law matters is the default in s 117(1): parties bear their own costs. The Family Law Act, however, contemplates departure from that norm in s 117(2) when it is just to do so, with s 117(2A) listing relevant considerations.
• Prior authority established that only one subsection of s 117(2A) needs to be satisfied to justify a s 117(2) costs order (Fitzgerald & Fish) [7].
• The Federal Court in Fountain Selected Meats [1988] FCA 364 had established that indemnity costs may be awarded where an applicant, properly advised, should have known they had no chance of success; that reasoning had been applied in family law contexts in subsequent authorities (including Phillips & Hansford) [17].

After

• This decision applies those principles in the arbitration-review context. Wilson J reaffirmed that:
  • A wholly unsuccessful review application can trigger s 117(2A)(c), supporting a costs order if otherwise just [15(a), 10].
  • Futile resistance to reasonable offers to resolve (here, consenting to hold $25,000 in trust) can engage s 117(2A)(f) [13, 15(b), 18].
  • Where a review application was "doomed", lacking statutory analysis and reasonable prospects, indemnity costs are justified [17].
• The practical effect is a demonstrable application of the indemnity-costs doctrine to review proceedings of arbitral awards, and an explicit direction that costs may be paid from relevant trust funds.

Key passages with plain-English translation

1. "These reasons address the wife's application for indemnity costs consequent upon the husband's unsuccessful application to review the arbitral award. As these reasons explain, in my view indemnity costs should be ordered." [1]

   • Plain English: The judge will explain why the wife should get indemnity costs because the husband's attempt to overturn the arbitration failed.

2. "It was erroneous for him to argue that he was wholly unsuccessful 'on technical grounds.' Sections 13J and 13K are very different... The husband made no attempt to distinguish between the two." [9]

   • Plain English: The husband cannot hide his failure by calling it a technicality; he failed to set out which law he was relying on, and the two possible legal routes are quite different, so his case had no proper foundation.

3. "In my view, the review application was doomed... Without proper examination of the elements of each section, the husband's application had no reasonable prospects of success." [17]

   • Plain English: The judge concluded the review had no real chance of success because the husband did not analyse the legal requirements or fit his evidence to the right statutory ground.

4. "The sum of $25,000 was the subject of a consent order only after the wife brought her application. She was put to expense in bringing that application where, had common sense prevailed, the consent given by the husband should have emerged sooner." [18]

   • Plain English: The husband only agreed to hold the money in trust after the wife had to start court proceedings; his initial resistance caused unnecessary expense.

5. "In those circumstances I order that the wife's indemnity costs of $20,067.66 be paid from the sum in the trust account of D Solicitors Trust Account by 4:00pm on 9 February 2022." [19]

   • Plain English: The judge orders the husband to pay the wife's full legal costs of $20,067.66 out of the $25,000 held in trust by the named solicitor, by the specified date.

What fact patterns trigger this precedent

This judgment will be most directly relevant where:

• A party brings an application (including to review an arbitral award) and is wholly unsuccessful, particularly where the application lacks a properly articulated statutory basis (s 13J v s 13K) and no analysis of elements is attempted [9, 17].
• A party resists reasonable proposals to resolve a dispute about funds (for example, to quarantine a sum in trust) and eventually consents only after the other party issues proceedings to compel that resolution [13, 15(b), 18].
• There are identifiable trust funds or monies held in solicitor trust accounts tied to the dispute, enabling a costs order to be executed against those funds [12, 19].
• The quantum of costs sought is demonstrably less than the funds in trust and can be characterised as reasonable and proportionate to the litigation steps undertaken [19].

In sum, the precedent triggers where the unsuccessful applicant's conduct and the futility of their claim are sufficiently clear to justify shifting from the s 117(1) norm to indemnity costs under s 117(2) and s 117(2A).

How later courts have treated it

The judgment itself does not record subsequent judicial treatment. Within the reasons, Wilson J applied and relied upon existing authorities (Fountain Selected Meats; Phillips & Hansford; Fitzgerald & Fish) when awarding indemnity costs [7, 17]. The decision therefore stands as an application of those authorities to the family law arbitration-review context, and as guidance for practitioners about the consequences of bringing a review application without properly articulating the statutory basis or after refusing reasonable offers concerning funds in trust [15–19]. The judgment does not cite any later appellate authority reversing or distinguishing this application of the principles.

Practitioners should note:

• The judge treated failure to state the statutory basis (s 13J v s 13K) as material and not merely technical [8–9].
• The decision demonstrates willingness to order indemnity costs and to direct payment from trust funds where the claimed costs are proportionate and the losing party's conduct satisfies s 117(2A) criteria [12, 19].

Still-open questions

Several points remain open or are addressed only by reference to principle rather than exhaustive guidance in this single judgment:

1. Threshold for 'doomed' applications

   • The judge describes the husband's application as "doomed" due to lack of analysis of s 13J or s 13K and lack of evidentiary mapping to those provisions [17]. What precise level of deficiency in drafting or advice converts an ordinary unsuccessful application into one that 'should have been known' to have no chance remains a fact-intensive inquiry and will require comparison against further authoritative examples.

2. Quantification and assessment of indemnity costs

   • Wilson J accepted the wife's claimed figure as reasonable because it was less than the trust funds in issue and proportional to the litigation [19]. The decision does not set out a detailed methodology for assessing indemnity costs in such circumstances, leaving scope for argument in future cases about how to assess proportionality and what costs are properly recoverable on an indemnity basis.

3. Interaction with offers and Calderbank-style correspondence

   • The decision recognises offers/proposals to withhold funds and the husband's counter-offers as relevant under s 117(2A)(f) [13, 15(b)]. The precise characterisation of correspondence or proposals that will engage s 117(2A)(f) (formal offers, informal proposals, or correspondence) remains a matter for future determinations to define with greater granularity.

4. Use of trust funds to satisfy costs orders

   • While the court ordered payment from a solicitor trust account here, the extent to which courts will routinely look to solicitor-held funds associated with the dispute as an immediate source for costs (rather than require enforcement proceedings) will depend on the particular facts and any competing claims on those funds.

5. Applicability beyond review of arbitral awards

   • This case directly concerns a review of an arbitral award and a subsequent costs dispute. Further decisions will clarify how readily its reasoning extends to other family law proceedings and to different procedural contexts.

Practitioners should therefore treat this judgment as a clear statement that wholly unmeritorious review applications and futile resistance to reasonable proposals about trust funds can attract indemnity costs, but should remain attentive to how future courts refine the boundary between poor but arguable applications and those properly characterised as 'doomed.'