ALDRIDGE & KEATON
[2012] FamCA 345
•16 May 2012
FAMILY COURT OF AUSTRALIA
| ALDRIDGE & KEATON | [2012] FamCA 345 |
| FAMILY LAW - PRACTICE AND PROCEDURE – Where the Registrar granted an extension of time to serve an itemised costs account – Review of a Registrar’s decision – Where there was held to be adequate explanation for the delay in service – Where there was held to be no financial hardship on the Respondent in granting the extension – Where the lack of hardship on the Applicant was not a weighty factor – Time for service of itemised costs account extended FAMILY LAW - COSTS AGREEMENT – Whether the ‘pro bono’ nature of the costs agreement is prohibitive to recovering costs – Discussion of the indemnity principle – Where there was held to be a void costs agreement – Where the fair and reasonable value of legal services is in accordance with the scales of costs |
| Family Law Act 1975 (Cth) |
| APPLICANT: | Ms Aldridge |
| RESPONDENT: | Ms Keaton |
| FILE NUMBER: | SYC | 3130 | of | 2008 |
| DATE DELIVERED: | 16 May 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 24 October 2011 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Dettmann Longworth |
| SOLICITOR FOR THE RESPONDENT: | Inner City Legal Centre |
Orders
The time for service of Ms Keaton’s itemised costs account be extended to 19 July 2010.
The time for service of any document in response be extended to 28 days from the date of this order.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Aldridge & Keaton has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3130 of 2008
| Ms Aldridge |
Applicant
And
| Ms Keaton |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
Ms Keaton and Ms Aldridge have had considerable litigation regarding a child (Ms Aldridge’s biological daughter) who was artificially conceived at a time when the parties had a relationship, although as was found at trial, not a de facto relationship. Ms Aldridge appealed the substantive parenting orders and against an order which refused a stay of those orders. Both appeals to the Full Court were heard together in June 2009. Ms Keaton was wholly successful in the Full Court and had a costs order made in her favour for two thirds of the costs, to be agreed or assessed. Ms Keaton failed to serve an itemised costs account in the time required by the Family Law Rules 2004 (Cth) (‘the Rules’). Service was approximately two months late. Ms Aldridge acknowledges that Ms Keaton’s itemised cost account was received on 19 July 2010. Ms Keaton has filed an application for an extension of time to serve the itemised costs account.
On 8 July 2011, Registrar Chayna granted leave for Ms Keaton to serve an itemised costs account out of time. Ms Aldridge now seeks a review of that decision.
DOCUMENTS RELIED UPON
Both parties rely on the same documents and have filed written submissions. The following documents were relied upon:
3.1.Application in a Case (seeking a review) filed 13 July 2011;
3.2.Response to an Application in a Case filed 7 March 2011;
3.3.Affidavit of Ms Aldridge filed 7 March 2011;
3.4.Application in a Case (seeking an extension of time) filed 10 January 2011; and
3.5.Affidavit of Ms K filed 10 January 2011.
THE LAW TO BE APPLIED
The time in which a litigant is required to serve an itemised costs account is specified in Rule 19.21(1) of the Rules as 28 days.
Rule 1.14 of the Rules permits a party to apply for an extension of a time:
(1)A party may apply to the court to shorten or extend a time that is fixed under these Rules or by a procedural order.
(2)A party may make an application under subrule (1) for an order extending a time to be made even though the time fixed by the rule or order has passed.
…
I also note in passing, Rule 1.12(2) allows:
(2) The court may dispense with compliance with any of these Rules at any time, before or after the occasion for compliance arises.
In Gallo v Dawson (1990) 93 ALR 479 at 480 McHugh J discusses the circumstances in which an extension of time may be granted. Although that case considered an application for leave to appeal out of time, the principles he discussed are relevant to all applications for leave to extend time limits. At 480 McHugh J said:
The grant of an extension of time under this rule is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the court or justice to do justice between the parties see Hughes v. National Trustees Executors and Agency Co. of Australasia Ltd [1978] VicRp 27; (1978) VR 257, at p 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time.
It was noted in Prowse v Prowse (1995) FLC 92-557 that:
…it is important to recognise that although the factors set out in various cases are “normally shown” by a successful applicant for an extension of time they should not confine the broad discretion.
McMahon v McMahon (1976) FLC 90-038, another case about leave to appeal out if time, outlines the principles guiding an extension of time as:
9.1.adequate reasons for the delay;
9.2.a substantial issue to be raised on appeal; and
9.3.no hardship or injustice is caused to the Respondent which cannot be compensated.
The consideration whether ‘a substantial issue is to be raised on appeal’ is not relevant to the current circumstances.
In Tormsen and Tormsen (1993) FLC 92-392 it was accepted that the guidelines in McMahon are mere factors to be considered in the overall light of what the justice of the case required, and are not mandatory hurdles to be satisfied. The fundamental issue is whether an extension of time will enable the court to do justice between the parties.
HISTORY OF THE PROCEEDINGS
The parties were in a relationship, from which a child was conceived by artificial means. Ms Aldridge is the child’s birth mother. The initial hearing was held in 2008. CFM Pascoe found the parties were not in a de facto relationship at the time of conception. Consequently the provision of s 60H(1)(a) Family Law Act 1975 (Cth) did not operate in Ms Keaton’s favour and she is not considered to be a parent of the child. However, his Honour made final orders that Ms Keaton have an ongoing relationship with the child.
Ms Aldridge appealed and sought a stay of his Honour’s order. That stay application was refused in April 2009.
Ms Aldridge then appealed against the order refusing the Stay. As indicated, the two appeals were heard together by the Full Court in June 2009. Ms Aldridge was wholly unsuccessful on both appeals. In April 2010, the Full Court ordered that Ms Aldridge pay two thirds of Ms Keaton’s costs.
MATTERS TO BE CONSIDERED
The Reason for the Delay
The reason given for the delay in serving the itemised costs account was that the lawyer who had carriage of the matter at the Inner City Legal Centre (ICLC) had resigned shortly before the costs order was made. The ICLC is a non-profit legal centre and does not employ family lawyers. The centre did not have the resources to replace Ms Keaton’s lawyer, and another lawyer took carriage of some of her matters. Excessive time demands on that lawyer meant that lawyer had difficulty preparing the itemised costs account within the time provided by the Rules. An attempt to have a volunteer do so was ineffective and the volunteer’s work had to be redone.
It is contended by Ms Armstong that Ms Keaton’s lawyers did not provide adequate reasons for delay. Ms Aldridge’s lawyers noted there is nothing to indicate Ms Keaton’s lawyers were not aware of the rule requiring service within 28 days. It is further submitted that Ms Keaton’s lawyer should have sought an extension of time before it had run out. Ms Aldridge’s lawyers referred to the case of Morton & Morton (No. 2) [2008] FamCA 855 which suggested difficulties in complying with time limits should be rectified by consulting with the other party or applying to the court for an extension before time expires. A similar statement was made in Bing & Bing and Anor (No 3) [2009] FamCA 936.
However, a lack of negotiation for an application for extension of time before it ran out is only one factor to take into account.
It is reasonably clear from Ms Aldridge’s affidavit that she would have been oppositional to any approach about an extension of time.
I infer the reality is that the lawyers acting for Ms Keaton simply did not turn their minds to attempting to get extra time before it ran out.
I find there is an adequate explanation in relation to the delay.
Hardship or injustice caused to the Respondent which cannot be compensated
Ms Aldridge’s lawyer argued that Ms Keaton is in a far stronger financial position than Ms Aldridge and if the Court were to grant an extension of time, Ms Aldridge would suffer financial hardship. Ms Aldridge reportedly has:
20.1.limited financial capacity, receiving Centrelink parenting payments and Family Tax Benefits of $997.16 fortnightly;
20.2.little potential income, earning very little from work from home programs and despite having university degrees, she is finding it impossible to gain employment due to her mental health issues;
20.3.limited assets of approximately $2,000;
20.4.the burden of the financial responsibility for the child; and
20.5.poor mental and physical health, including Chronic Fatigue Syndrome and Adjustment Disorder with Anxiety and Depression.
Ms Aldridge contends that Ms Keaton’s salary in the education sector is approximately $97,500, and that she owns her own home and has no financial dependants.
The lawyer for Ms Keaton identified that Ms Aldridge’s claims of financial hardship in the current application, was a replica of the argument rejected in the Full Court. It was submitted that it would be unjust to find for Ms Aldridge on evidence already taken into account by the Full Court when making the cost order in Ms Keaton’s favour.
The Full Court clearly considered the financial positions of both parties before ordering costs in favour of Ms Keaton. At paragraph 32 their Honours said:
We have carefully considered the parties’ respective financial circumstances. While we accept [Ms Aldridge’s] present income is derived from social security benefits, she has tertiary qualifications which she can utilise in future. She has also been able to make arrangements for payment of her legal fees. We have also taken into account the superior financial position of [Ms Keaton] and that she has no financial obligations in respect of the child.
I conclude Ms Aldridge would not suffer financial hardship as a result of a granting of the extension of time, although she may have had dashed an expectation she held for a short period of time if she had concluded Ms Keaton was not going to serve an itemised costs account.
Hardship to Ms Keaton
Although not mentioned in McMahon, Ms Aldridge argued that when exercising the discretion, I should also consider the lack of hardship occasioned to Ms Keaton as a result of any decision about extension of time.
The lawyer for Ms Aldridge argued that given the nature of the costs agreement between Ms Keaton and her lawyer, there will be no financial hardship to Ms Keaton if an extension of time is not granted, only ‘prejudice’ to her lawyers.
The nature of Ms Keaton’s costs agreement
The lawyer for Ms Aldridge complained about Ms Keaton’s failure to provide disclosure of the costs agreement in a timely manner, when its ‘pro bono’ nature, arguably, would mean Ms Keaton’s lawyers could never claim costs. The costs agreement was requested on 19 January 2010. In a letter dated 28 January 2010, Ms Keaton’s solicitors declined to provide the costs agreement. This meant the Full Court did not have Ms Keaton’s costs agreement in evidence when they heard the matter by way of written submissions filed 12 February 2010 and 1 March 2010. The costs agreements were eventually provided to Ms Aldridge on 1 April 2010. For reasons set out below, I am of the view that these agreements are void in any event.
From 1 July 2008 there is no provision in the Rules for lawyer/client costs agreements. Such arrangements are governed by local legal professional Acts and in this case, the Legal Profession Act2004 (NSW) (“LPA”).
The costs agreements between Ms Keaton and her lawyers are conditional costs agreements (as defined in s 323(1) LPA). The agreement between Ms Keaton and her solicitors defines the “successful outcome” as “for a costs order against the other party to be made in your favour.”
Similarly in her letter dated 15 May 2009, Ms Keaton’s barrister, Ms Rees (as she then was), wrote “if the appeal [by Ms Aldridge] is unsuccessful and costs are ordered to be paid, I would expect to be paid from the costs awarded and will render an account accordingly for that purpose.”
Despite the definition of a “successful outcome” having been met, the lawyer for Ms Aldridge argues that Ms K’s affidavit makes it clear Ms Keaton will not be obliged to pay should costs be unable to be recovered.
Given Ms K’s evidence, Ms Aldridge’s lawyers argue this case is similar to Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA 145 where the conditional costs agreement specified the “successful outcome” as being when costs were recovered (or alternatively, when and if the client could pay).
In that case, it was argued that the conditional costs agreement violated the indemnity principle; explained by Santow JA as “where a party to an action has an agreement with their legal adviser that they do not have to pay any costs, then the general law principle states that the party cannot recover party and party costs against their adversary.”
Counsel for Ms Aldridge identified a part of Basten JA’s judgment which dealt with costs payable under a conditional costs agreement at [111]:
This agreement creates a real difficulty in applying the indemnity principle. If the entitlement to recover costs from another party to the proceedings is dependent upon the legal liability to pay those costs to
one's legal advisors, but the obligation to pay is contingent upon establishing a right to recover, the circularity is readily apparent. However, if, as in the present case, the obligation to pay depends not on a right to recover an identifiable amount of costs, but on the actual recovery of those costs, there may be no extant legal obligation to be indemnified even when a costs order is made.On this particular point however, Basten JA and Santow JA were at odds. Santow JA said at [54]:
The general law governing the indemnity principle with its emphasis on flexibility is, in my opinion, quite capable of accommodating conditional fee agreements of this kind. It should do so recognising the importance of such agreements in promoting access to justice which may otherwise be unaffordable…predicating payment on successful recovery is not unreasonable. In the words of Bramwell B this gives no unjustified bonus to the successful party nor does it impose any punishment on the losing one, so as to invoke the rationale behind the indemnity principle.
The distinction between the opinions of Santow JA and Basten JA on that point was not determinative in the case. Their Honours granted leave to appeal against the costs assessor’s decision because he had been acting above his limited powers.
Costs in this case are to be assessed on a party/party basis (see rule 19.18(2)) A Registrar making a costs assessment order on a party/party basis under Chapter 19 of the Rules can, at a maximum, order costs to be paid in accordance with Schedule 3 of the Rules (rule 19.19). The Registrar is not required to have regard to the costs agreement (as they would be when assessing on an indemnity basis; see rule 19.34(2)(b)).
Even if regard could be had to the costs agreement, it would be found that the costs agreement was void. That is because section 323(2) LPA specifically prohibits conditional costs agreements in family law matters:
(2)A conditional costs agreement may relate to any matter, except a matter that involves criminal proceedings or proceedings under the Family Law Act 1975 of the Commonwealth.
Contravention of s 323(2) renders Ms Keaton’s costs agreements void (s 327(1) of the LPA). However under s 327(2) LPA, legal costs are still recoverable:
...
(2) Subject to this section and Division 11, legal costs under a void costs agreement are recoverable as set out in section 319 (1) …..
Section 319 LPA provides:
(1) Subject to the provisions of this Part, legal costs are recoverable:
(c) …. according to the fair and reasonable value of the legal services provided.
Absent any valid fee agreement, the fair and reasonable value of the legal services provided is, in this case, in accordance with the scales of costs in Schedule 3 of the Rules.
I conclude that any lack of hardship occasioned to Ms Keaton is not a weighty factor that I need to take into account when determining this application. If I am incorrect about that, then I conclude that Ms Keaton would suffer a hardship if Ms Keaton is unable to recover fees from Ms Aldridge because Ms Keaton’s lawyers have a right to recover against her for fees in accordance with the scales of costs in Schedule 3 of the Rules. Consequently, the alleged non disclosure of the fee agreement prior to the proceedings in the Full Court has no effect on the costs order made.
CONCLUSIONS
I find Ms Keaton has explained the delay and that Ms Aldridge has not established any hardship sufficient to resist the application for an extension of time. Strict compliance with the Rules would mean that Ms Keaton does not receive the benefit of the Full Court’s decision to award costs in her favour and that is not a proper outcome. I shall order an extension of time for service of the itemised costs account as requested by Ms Keaton.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 16 May 2012.
Associate:
Date: 16.5.12
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