Bardsley and Bardsley (No 2)

[2014] FamCA 1161

FAMILY COURT OF AUSTRALIA

BARDSLEY & BARDSLEY (NO 2) [2014] FamCA 1161

FAMILY LAW – COSTS – Circumstances justifying order

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

APPLICANT: Ms Bardsley

RESPONDENT: Mr Bardsley

FILE NUMBER: MLC 2213 Of 2011

DATE DELIVERED:

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 3 June 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Shergold

SOLICITOR FOR THE APPLICANT: Westminster Lawyers

COUNSEL FOR THE RESPONDENT: Ms Nikou QC

SOLICITOR FOR THE RESPONDENT: Argent Law

Orders

1. That the husband’s application for costs filed 18 June 2014 be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Bardsley & Bardsley (No 2) 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 MELBOURNE

FILE NUMBER: MLC  2213  of 2011

Ms Bardsley

Applicant

And

Mr Bardsley

Respondent

REASONS FOR JUDGMENT

Introduction

1. On 3 June 2014 I made orders and delivered my Reasons for Judgment in relation to the husband’s application that the wife’s then-lawyers be restrained from acting on behalf of the wife in respect of her application that two binding financial agreements entered into between the parties be set aside.  That day I made orders restraining the wife’s former lawyers from acting in these proceedings. 

2. In addition to that order, orders 3 to 6 inclusive provided as follows:-

   (3)That no later than 17 June 2014, the husband file and serve any application for costs, such application to be made by written submissions endorsed with the fact that it has been served on the other party, and such application being for costs of and incidental to the application determined by the Judgment dated 3 June 2104.

   (4)That no later than 1 July 2014, the wife file and serve any response by way of written submissions to the husband’s material referred to in paragraph 3.

   (5)That no later than 15 July 2014, the husband file and serve any submission in reply to the wife’s material referred to in paragraph 4.

   (6)That any application for costs made pursuant to the Orders be determined by Johns J in Chambers.

3. Pursuant to those orders the husband has made an application for costs.  His submissions in relation to that application were filed on 18 June 2014.  The husband seeks that the wife be ordered to pay his costs “with respect to the proceedings that were concluded with judgment delivered 3 June 2014 after an interim hearing on 8 May 2014”.  Further, the husband seeks that those costs be paid “on an indemnity or solicitor and own-client basis”.  In the alternative, the husband seeks that the wife pay his costs of the interim hearing on a party and party basis.

4. The wife opposes the husband’s application for costs and seeks that that application be dismissed.  In support of that position, the wife relies on submissions filed in response to the husband’s submissions as to costs filed 1 July 2014. 

Legal Principles

1. Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides that subject to sub-section (2) and other specified sections of the Act, each party to proceedings under the Act shall bear his or her own costs.

2. Section 117(2) provides that if the Court is of the opinion there are circumstances that justify it in doing so, the Court may, subject to the provisions of sub-sections (2A), (4), (4A) and (5) and the Rules of Court, make such order for costs and security for costs as the Court considers just.

3. Section 117(2A) sets out the matters that the Court should have regard to in determining whether to make an order for costs.  Those circumstances are:-

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)such other matters as the court considers relevant.

The Husband’s Application for Costs

1. In support of his application, the husband principally relies upon the fact that the wife has been wholly unsuccessful in the proceedings (s 117(2A)(e)).

2. In support of that position, the husband through the submissions filed on his behalf sets out the chronology of the objections taken on his behalf to the wife’s former solicitor continuing to act.  That chronology is as follows:-

   (a)The wife filed her amended Initiating Application on 19 March 2014 seeking orders to set aside the binding financial agreements entered into by the parties.

   (b)By letter dated 16 April 2014 the husband through his lawyers took objection to the wife’s former solicitor acting on behalf of the wife on the basis of an alleged conflict of interest.

   (c)On 17 April 2014 the husband filed a Response to Initiating Application seeking inter alia an order that the wife’s lawyer be restrained from acting for the wife in these proceedings.

   (d)A further letter was sent on behalf of the husband on 17 April 2014 requesting that the wife’s former solicitor cease acting and giving notice that in the event that that did not occur, the husband would seek a ruling from the Ethics Committee of the Law Institute of Victoria.

   (e)On 24 April 2014 the husband forwarded a written request to the Ethics Committee of the Law Institute of Victoria seeking a ruling in relation to the issue of the alleged conflict of interests.

3. It was submitted on behalf of the husband that the wife’s former solicitors had “ample opportunity” to recuse themselves from acting on behalf of the wife prior to the hearing before me on 8 May 2014.  Accordingly, it is submitted on behalf of the husband that an order for costs of that hearing should follow. 

4. The submissions of the husband are silent with respect to the other matters to which regard is to be had pursuant to s 117(2A). 

5. It is submitted on behalf of the husband that the conduct of the wife in retaining her former lawyers was serious enough to justify an order for indemnity costs.  In the event that indemnity costs are not awarded, the husband seeks an order for costs on either a party/party basis or a solicitor/client basis.

6. The wife opposes the application for costs.  The wife submits that there should be no determination of the issue of costs until the conclusion of the proceedings when it is known whether in fact the wife’s former solicitor has been called as a witness by the husband.  It was submitted on her behalf that “the proceedings should run their course so that a decision is made on the basis of realities rather than probabilities or likelihoods”.  That submission is made on the basis of my finding that that there was a strong likelihood that the wife’s solicitor would be called as a witness in the substantive proceedings, that matter being one of the factors taken into account in the decision that that solicitor should be restrained from continuing to act for the wife.

7. Further, the wife is critical of the lack of particularity in the submissions of the husband in support of his application for costs.

8. The husband does not quantify the amount sought by him with respect to costs. 

9. The wife is also critical of the omission by the husband of correspondence sent by the wife’s former solicitor in response to the letters of the wife’s solicitor referred to in paragraph 9 above.  There is force in that submission insofar as it is clear from the submissions filed on behalf of the wife that the wife’s former solicitor responded to that correspondence and sought particulars as to the basis for the alleged conflict of interest.  In my view it was not unreasonable of the wife’s former solicitor to seek such clarification, particularly in circumstances where she did not anticipate her solicitor being required to give evidence in the proceedings. 

10. It is evident from the correspondence referred to in paragraph 16 of the wife’s submissions that the wife did take issue with the matters asserted by the husband and further that she had an arguable, although ultimately unsuccessful position.  Accordingly, I do not accept the submissions made on behalf of the husband that the wife had no reasonable basis for maintaining her position or that she did not have an arguable case.  Whilst she was ultimately unsuccessful, that does not support the husband’s submission that there was no basis for the position adopted by the wife. 

11. Further it is evident from the responses by the wife’s solicitor that he sought particularisation of the husband’s allegations which were not responded to.  As a consequence those matters were ultimately ventilated at the hearing before me on 8 May 2014. 

12. It is further submitted by the wife that the failure of the husband to quantify the amount sought by costs precludes an order for costs on an indemnity basis. Rule 19.08 of the Family Law Rules 2004 (Cth) (“the Rules”) sets out the procedure for a costs application. Rule 19.08(3) provides as follows:-

    (3)A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.

13. The husband has not complied with r 19.08(3). I have not been informed as to whether or not he is a party to a costs agreement. In those circumstances, I am not in a position to make an order for indemnity costs even were I to find that the circumstances of this case justified such an order.

14. I am satisfied that the wife had an arguable case and that the circumstances of the case do not justify a departure from the ordinary rule that costs be awarded on a party/party basis. Hence, even if the husband had complied with r 19.08(3) of the Rules I am not satisfied that the circumstances of this case are “of an exceptional kind” so as to justify a departure from the ordinary rule with respect to costs. As to the other matters to which I must have regard pursuant to s 117(2A) I find as follows:-

Section 117(2A)(a) The financial circumstances of each of the parties to the proceedings

1. The husband’s submissions are silent as to his current financial circumstances.  His financial statement filed 3 March 2014 indicates that the husband has income of approximately $8050 per week being derived from his superannuation fund and rent received.  The husband discloses expenses of $7498 per week.  Hence his income exceeds his expenses by approximately $552 per week.  Further, the husband discloses assets valued in excess of $7 million and superannuation entitlements of approximately $5,400,000.  He deposes that he has liabilities valued at in excess of $36 million.

2. It is submitted on behalf of the wife that she is aged 63 years, retired and not in receipt of any income.  In support of that position she relies upon her financial statement filed 25 November 2013.  In that document, the wife discloses property valued at $399,585 and liabilities of $74,000.

3. At this interim stage, where the evidence is untested, I am unable to make findings as to the parties’ respective financial positions.  However, I have regard to the parties’ respective financial positions as disclosed in their financial statements and note that having regard to his disclosed income and expenses, presently the husband is in a superior financial position to that of the wife in terms of his weekly income and expenses.  In determining the question of costs I have had regard to the parties’ financial circumstances generally.

Section 117(2A)(b) Whether either party is in receipt of Legal Aid

1. Neither party is in receipt of assistance by way of Legal Aid.

Section 117 (2A) (c) The conducts of the parties in relation to the proceedings

1. The husband is critical of the wife’s conduct in retaining her former lawyers in the face of objection taken by him.  It is his position that she unreasonably retained her lawyers in the face of those objections.  The difficulty with that position is that it is evident from the correspondence passing between the solicitors that the wife sought further particulars as to the basis for the husband’s objections and that the husband failed to particularise his complaint. 

2. I am satisfied that the wife had an arguable, although ultimately unsuccessful, case.  I am not satisfied that the manner in which the wife conducted those proceedings is such conduct which would justify an order for costs. 

Section 117(2A)(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court

1. The proceeding the subject of this application did not arise as a result of a failure of either party to comply with Court orders.

Section 117(2A)(f) Whether either party to the proceedings has made an offer in writing to the other party to the proceedings and the terms of that offer

1. The husband does not seek to rely on any offer of settlement in support of his application for costs.

Section 117(2A)(g) Any other matters the Court considers relevant

1. The husband is critical of the wife’s conduct as noted earlier in this judgment.  Further, he submits that as a result of that conduct there has been a delay in the proceedings necessitated by the requirement that the wife change lawyers.  The necessity for the wife to change lawyers meant that the other interim applications filed by the parties could not proceed until such time as the wife had changed her lawyer.  Accordingly, the husband submits that the wife should meet his costs of that hearing. 

2. I am not satisfied that the circumstances of this case justify a departure from the general rule that each party bear their own costs.

3. The issues determined by me on 3 June 2014 were finely balanced.  The wife had an arguable case.  There was delay in the husband providing particulars to the wife of the basis upon which he took objection to the wife’s solicitor continuing to act.  It is evident from the parties’ financial statements that the husband has the advantage of substantial income.  On the face of the parties’ financial statements, the husband’s financial position in terms of his income-earning capacity is significantly greater than the wife’s.  Accordingly, I am satisfied that the husband’s application for costs should be dismissed.  Accordingly, the order I make is as follows:-

   1.That the husband’s application for costs filed 18 June 2014 be dismissed.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 22 December 2014

Associate: 

Date:  22 December 2014