Baumann & Ors and Rushbrooke & Anor

[2017] FamCA 175

FAMILY COURT OF AUSTRALIA

BAUMANN AND ORS & RUSHBROOKE AND ANOR [2017] FamCA 175

FAMILY LAW – COSTS – Where the applicant and the applicant companies seek their costs in complying with subpoenas previously subject to objections – Where the second respondent joins the application for costs against the first respondent – Where the first respondent opposes the costs application and seeks costs against the applicant, applicant companies and second respondent – Consideration of section 117(2A) - Where it is found that no party was wholly unsuccessful – Where the applications for costs are dismissed – Where the first respondent is ordered to pay the reasonable expenses of the applicant and applicant companies in complying with the subpoenas.

Family Law Act 1975 (Cth) ss 117(2A), 117(2A)(e), 117(2A)(f), 117(2A)(g)
Family Law Rules 2004 (Cth) r 15.23

Baumann and Ors & Rushbrooke and Anor [2016] FamCA 905
Markoska & Markoska and Anor (Costs) (2011) 46 Fam LR 598
Marriage of Kennedy and Evans, Trust Bank (Intervener) (1994) FLC 92-514

Moriarty & Moriarty (2009) 41 Fam LR 336

FIRST APPLICANT:

Mr Baumann

SECOND APPLICANT: B Pty Ltd

THIRD APPLICANT: C Pty Ltd

FIRST RESPONDENT: Ms Rushbrooke

SECOND RESPONDENT: Mr D Baumann

FILE NUMBER: SYC 2032 of 2015

DATE DELIVERED: 23 March 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: McClelland J

HEARING DATE: In Chambers

REPRESENTATION

SOLICITOR FOR THE APPLICANTS: Barkus Doolan

COUNSEL FOR THE 1ST RESPONDENT: Mr White SC 

SOLICITOR FOR THE 1ST RESPONDENT: Michael Conley Lawyers

SOLICITOR FOR THE 2ND RESPONDENT: Uther Webster & Evans

The Court Orders that:

1. The wife is to pay the reasonable expenses incurred by the first, second and third applicants (“the applicants”) in complying with the subpoenas issued to them by the wife.

2. For the purposes of Order (1) above, the reasonable expenses of the applicants shall be:

   (a)Fees payable to E Pty Ltd in the sum of $2,031.14;

   (b)Fees payable to G Bank in the sum of an amount being then equivalent to 500 Euro (to be calculated as at the date of these Orders); and

   (c)       Costs payable to JJ Pty Ltd as agreed or assessed.

3. Other than as provided for in Orders 1 and 2 above, the following be dismissed:

   (a)       Application in a Case filed 23 November 2016;

   (b)       Response to Application in a Case filed 27 January 2017;

   (c)       Reply filed 10 February 2017.

   Note: The form of the order is subject to the entry of the order in the Court’s records.

   IT IS NOTED that publication of this judgment by this Court under the pseudonym Baumann and Ors & Rushbrooke and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

   Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2032 of 2015

Mr Baumann

First Applicant

And

B Pty Ltd
Second Applicant

And

C Pty Ltd
Third Applicant

And

Ms Rushbrooke

First Respondent

And

Mr D Baumann

Second Respondent

REASONS FOR JUDGMENT

Introduction 

1. On 28 October 2016 the Court made orders and delivered Reasons for Judgment in relation to an application made by Mr Baumann(“the applicant”), B Pty Ltd and C Pty Ltd (“the applicant companies”) seeking a review of the Orders made by Registrar Cameron on 19 April 2016 dismissing objections to subpoenas filed by Ms Rushbrooke (“the wife”). The wife is the respondent in the substantive property proceedings commenced by the husband, Mr D Baumann, who is the second respondent to this application (“the second respondent”). The applicant is the second respondent’s father and controls the applicant companies.

2. On 19 April 2016, Registrar Cameron made Orders in relation to the following subpoenas (herein referred to as “the subpoenas”):

   1)Subpoenas to Mr Baumann dated 19 January 2016, 8 June 2016 and 5 July 2016;

   2)Subpoena to B Pty Ltd dated 19 January 2016;

   3)Subpoena to C Pty Ltd dated 19 January 2016; and

   4)Subpoena to E Pty Ltd dated 19 January 2016.

3. On 14 June 2016 and 20 July 2016 I heard the Application for Review of the decision made by Registrar Cameron on 19 April 2016 and the objection made to a subpoena addressed to E Pty Ltd. Judgment in respect to these proceedings was delivered on 28 October 2016.

4. By way of an Application in a Case filed 23 November 2016 the applicant and applicant companies sought costs in respect to:

   1)The proceedings that arose from the objections to subpoenas;

   2)The production of documents in compliance with the subpoenas issued to each of them and to E Pty Ltd.

5. The wife and the second respondent also sought costs in respect to the proceedings which arose from the objections to subpoenas.

The applications

1. In the Application in a Case filed 23 November 2016 the applicant and applicant companies sought the following orders:

   1)That the first respondent pay to the first, second and third applicants their costs and disbursements, in respect of:

   (a)The following Notices of Objection decided at first instance on 19 April 2016 (“the Registrar’s decision”):

   (i)Notice of Objection filed 24 February 2016 in relation to the subpoena to the first applicant filed 19 January; and

   (ii)Notices of Objection filed 1 February 2016 in relation to the subpoenas to the second and third applicants and [E Pty Ltd] filed 19 January 2016; and

   (b)the Application in a Case filed 26 April 2016 and determined on 28 October 2016 seeking a review of the Registrar’s decision; and

   (c)The Notices of Objection filed on 13 July 2016 and determined on 28 October 2016 in relation to the subpoenas to the first applicant filed 8 June and 5 July 2016;

(d)As agreed or assessed.

(2)That the first respondent pay to the first, second and third applicants their costs of and incidental to compliance with the subpoenas to each of them and E Pty Ltd;

(3)It is certified that pursuant to rule 19.50 of the Family Law Rules 2004 it was reasonable for the first, second and third applicants to engage:

(a)Junior counsel to attend the hearing on 14 June 2016; and

(b)senior counsel and junior counsel to attend the hearing on 28 July 2016.

(4)Costs of this Application in a Case.

1. By way of a Response to an Application in a Case filed 27 January 2017 the wife sought the following orders:

   1)That the Application in a Case filed 23 November 2016 be dismissed.

   2)That in the alternative to order 1, the husband indemnify the First Respondent in relation to any costs orders arising from the Applicants’ Application in a Case filed 23 November 2016.

   3)That the first, second and third applicants pay to the first respondent her costs and disbursements as agreed or assessed, in respect of:

   (a)The following Notices of Objection decided at first instance on 19 April 2016 (“the Registrar’s decision”):

   (i)Notice of Objection filed 24 February 2016 in relation to the subpoena to the first Applicant  filed 19 January 2016; and

   (ii)Notice of Objection filed 1 February 2016 in relation to the subpoenas to the second and third applicants and [E Pty Ltd] filed 19 January 2016; and

(b)the Application in a Case filed 26 April 2016 and determined on 28 October 2016 seeking a review of the Registrar’s decision; and

(c)The Notice of Objection filed 13 July 2016 and determined on 28 October 2016 in relation to the subpoenas to the first Applicant filed 8 June and 5 July 2016.

4)It is certified that pursuant to rule 19.50 of the Family Law Rules 2004 it was reasonable for the first respondent to engage:

(a)Senior counsel to attend the hearing on 14 June 2016; and

(b)Senior counsel to attend the hearing on 28 July 2016.

5)Costs of and incidental to this Application in a Case.

1. By way of Reply filed 10 February 2017 the second respondent sought the following orders:

   1.That paragraphs 2 and 5 of the Orders sought by the respondent Wife in the Response to an Application in a Case filed 27 January 2017 be dismissed.

   2.That the respondent Wife pay the Husband’s costs of and incidental to this Reply on an indemnity basis.

The subpoenas

1. By way of summary, the Orders made on 28 October 2016 in respect to the subpoenas were as follows:

Subpoena to Mr Baumann dated 8 June 2016

• The objections to paragraphs 1 (a) and (g) were dismissed;

• Paragraph 2 of the subpoena was varied;

• Paragraph 3 of the subpoena was varied; and

• Paragraph 4 of the subpoena was struck out.

Subpoena to Mr Baumann dated 5 July 2016

• Paragraph 1 was varied;

• Paragraph 2 was struck out.

Subpoena to Mr Baumann dated 19 January 2016

• Paragraph 2 was struck out;

• Paragraph 6 was varied;

• Paragraph 8 was varied;

• Paragraph 9 was varied; and

• Paragraph 10 was varied.

Subpoena to B Pty Ltd dated 19 January 2016

• Paragraph 2 was varied;

• Paragraphs 4 was struck out;

• Paragraph 7 was struck out; and

• Paragraph 8 was struck out.

Subpoena to C Pty Ltd dated 19 January 2016

• The objection to paragraph 1 was dismissed;

• Paragraph 2 was varied;

• Paragraphs 4 was struck out;  

• Paragraphs 7 was struck out; and

• Paragraph 8 was struck out.

Subpoena to E Pty Ltd dated 19 January 2016

• The objection to paragraph 2 was dismissed;

• Paragraph 4 was struck out;

• Paragraph 5 was struck out;

• Paragraph 6 was struck out; and

• Paragraph 7 was struck out.

• Paragraph 8 was varied.

• Paragraphs 9 was varied.

1. E Pty Ltd is an accounting firm engaged by the applicant and the applicant companies.

Issues

1. The issues in this matter are therefore as follows:

   1.   Are the applicant and applicant companies entitled to costs incurred in the proceedings arising from their objections to the subpoenas?

   2.   Is the second respondent entitled to costs in respect to his support of the applicant and applicant companies in those proceedings?

   3.   Is the wife entitled to costs incurred in the proceedings arising from the applicant and applicant companies’ objections to subpoenas?

   4.   Are the  applicant and applicant companies entitled to their expenses reasonably incurred in respect to the:

   a)costs of and incidental to compliance with the subpoenas; and

   b)obtaining advice in respect to the applicant and applicant companies’ obligations pursuant to the subpoenas.

Costs of the applicant and the applicant companies relating to the objections to the subpoenas and subsequent proceedings

1. As noted, the applicant and applicant companies assert that they are entitled to their costs in respect to the proceedings arising from their objections to the subpoenas. That application is supported by the second respondent who also seeks his costs from the wife on an indemnity basis in respect to the proceedings. The application is opposed by the wife who seeks the payment of her costs in opposing the Application in a Case filed 23 November 2016 and in respect to the proceedings that arose from the objections to subpoenas. The wife also sought that, in the event an order was made for her to pay the applicant and applicant companies’ costs of compliance with the subpoenas, those costs should be borne by the second respondent.

2. In Markoska & Markoska and Anor (Costs)(2011) 46 Fam LR 598, Murphy J usefully summarised the relevant principles, in respect to costs, under the Family Law Act 1975 (Cth) (“The Act”), as follows:

   6. The Family Law Act 1974 (Cth) (the “Act”) provides that, as a general rule, each party to proceedings under the Act shall bear their own costs (s 117(1)). But, the Court retains a discretion to award costs in circumstances considered appropriate to justify an award.

   7. The Court is required to have regard to a number of specified matters in the exercise of that discretion (s 117(2A)). Yet, while regard must be had to those matters, the discretion ultimately remains at large (s 117(2A)(g)).

   8. Thus, it is not necessary for a court to be satisfied that all of the factors enumerated in s 117(2A) of the Act are satisfied before an order for costs is made. (See generally Fitzgerald (as Child Representative for A (Legal Aid Commission of Tasmania)) & Fish and Another [2005] FamCA 158; (2005) 191 FLR 294; 33 Fam LR 123)

   9. So too, it is not necessary for an applicant for costs to satisfy “any additional or special onus”; rather what is required is “a finding of justifying circumstances as an essential preliminary to the making of a order” (Penfold v Penfold [1980] HCA 4; (1980) 144 CLR 311 at 315-316).

3. Section 117(2A) of the Act relevantly provides:

   (2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (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.

Written submissions and material relied upon

1. The parties agreed for the issue of costs to be determined on the basis of written submissions. The written submissions received were as follows:

   a)written submissions of the applicant and applicant companies dated 12 January 2017;

   b)written submissions of the wife contained within the wife’s case outline document dated 27 January 2017;  

   c)written submissions in reply from the applicant and applicant companies dated 20 February 2017; and

   d)written submissions of the second respondent dated 24 February 2017.

2. In addition, the applicant and applicant companies relied on an affidavit of Mr Baumann sworn 23 November 2016.

3. Further, in addition to the Orders and Reasons for Judgment dated 28 October 2016 (as amended pursuant to the slip rule) the wife relied upon an affidavit sworn by her and filed on 27 January 2017 and her Financial Statement filed on 7 June 2016.

Section 117(2A) Considerations

1. The most relevant consideration in this matter is that, in terms of section 117(2A)(e), no party has been wholly unsuccessful in the proceedings. It is the case that, as a result of the objections filed by the applicant and applicant companies, orders were made either striking out, or varying, a number of paragraphs of the subpoenas. I accept the summary provided by the applicant and applicant companies, set out at paragraph 9 of their written submissions dated 12 January 2017, that objection was taken to twenty-eight paragraphs in the six subpoenas and, in respect to those objections, orders were made striking out thirteen paragraphs, varying or limiting eleven of those paragraphs, and dismissing four of those paragraphs.

2. On the other hand, I dismissed four of the twenty-eight objections that were taken by the applicant and applicant companies. Further, a relevant consideration in varying or striking out particular paragraphs of the subpoenas was a concession made by senior counsel for the applicant and applicant companies that the net worth of the applicant, Mr Baumann, and the entities he controls, is not less than $85 million. I accept the contention set out in the wife’s written submissions dated 27 January 2017 that that concession was a relevant consideration in respect to eleven of the twenty-eight paragraphs.

3. My determination in respect to the objections to the subpoenas was based on rejecting elements of each party’s respective contentions. In those circumstances it could not be said that any party was wholly successful or unsuccessful.

4. Each party applied considerable resources to their respective cases. I am not in a position to determine whether those resources were disproportionate to the extent to which any such documents will be of utility in these proceedings.

5. Further, after the applicant and applicant companies filed their Application in a Case seeking a review of the Registrars decision, the wife issued further subpoenas to the applicant and applicant companies which were also the subject of objections. Indeed a third subpoena issued to the applicant and applicant companies was filed on 5 July 2016. This was subsequent to the first day of hearing on 14 June 2016.

6. This conduct by the wife is a factor relevant to my consideration of the applicant and applicant companies’ application for costs. However, as will be discussed, that conduct needs to be considered in the context of the totality of the proceedings.

7. In terms of section 117(2A)(f), I note that when this matter was before the Court on 9 May 2016, I invited the parties to consider engaging in discussions with a view to narrowing the issues in dispute. I expected that each party would participate in that process in good faith.

8. In that context I note that, by letter dated 20 May 2016, the solicitors for the applicant and applicant companies submitted a detailed written proposal to the solicitors for the wife with a view to resolving the applicant and applicant companies’ concerns in respect to the subpoenas. The letter also sought to address concerns in respect to the anticipated cost of production of the documents pursuant to the subpoenas.

9. It is regrettable that it was necessary for the solicitors for the applicant and applicant companies to send a further letter dated 31 May 2016 seeking a written reply from the solicitors for the wife. That reply was eventually provided on 7 June 2016 in anticipation of the hearing listed before the Court on 14 June 2016. I note that the reply by the solicitors for the wife was substantially dismissive of the proposals by the applicant and applicant companies’ solicitors. However, the reply did propose three modifications whereby the request for documentation was limited to transfers and expenditure of monies over the sum of $1000. That concession was, in my view, reasonable.

10. In terms of section 117(2A)(g), I note that a reason why the wife issued the subpoenas was her concern that the second respondent had failed to provide proper financial disclosure and, specifically, it was alleged that he had failed to disclose income received by him which had been paid into a bank account in the name of an entity controlled by the applicant.

11. It is further noted that the wife contended that, having regard to the second respondent’s qualifications and extensive experience, the second respondent is substantially understating his earning capacity.

12. In submitting that the subpoenas should be upheld, senior counsel for the wife stated that a reason for issuing the subpoenas was the non-disclosure by the second respondent as well as lack of trust on the part of the wife concerning the veracity of the second respondent’s assertions regarding his earning capacity.

13. Nevertheless, at the same time, it needs to be recognised that the applicant and applicant companies are third parties to the substantive proceedings between the wife and second respondent.

Evaluation of section 117(2A) considerations

1. In the context of the wife’s concerns regarding the second respondent’s non-disclosure and her belief that he is substantially understating his earning capacity, it is understandable that the wife would seek access to documents verifying information that the second respondent had provided to her.

2. In so doing, however, there was considerable overreach on the part of the wife in respect to some of the documents which she required the applicant and applicant companies to produce in circumstances where they are third parties to the substantive proceedings.

3. It is also regrettable that the wife’s legal representatives did not make a more concerted effort to narrow the issues in dispute; however, that lack of effort could not, in the circumstances, be characterised as demonstrating a lack of good faith.

4. Ultimately, however, the most relevant consideration in dismissing each party’s application for costs is the fact that no party was wholly unsuccessful in the proceedings. Accordingly, I will dismiss each party’s application for costs.

Expenses of the applicant and applicant companies in complying with the subpoenas

1. Rule 15.23 of the Family Law Rules 2004 (Cth) (“the Rules”) relevantly provides:

   Conduct money and witness fees

   (1)A named person is entitled to be paid conduct money by the issuing party at the time of service of the subpoena, of an amount that is:

   (a)sufficient to meet the reasonable expenses of complying with the subpoena; and

   (b)at least equal to the minimum amount mentioned in Part 1 of Schedule 4.

2. Part 1 of Schedule 4 of the Rules specifies that the minimum amount for conduct money to be attached to a subpoena is $25. In this case it is not in dispute that conduct money of $20 was paid in respect to each subpoena.

3. In respect to this issue, the substance of the applicant and applicant companies’ argument is that, pursuant to rule 15.23 and subrule 15.23(1)(a), it is open for the Court to make orders for the wife to pay the reasonable expenses of the applicant and applicant companies in complying with the subpoenas. This, it was asserted, is on the basis that the costs incurred by the applicant and applicant companies in complying with the subpoenas considerably exceeded the conduct money provided, and the applicant and applicant companies should therefore be recompensed in a reasonable amount.

4. The law in respect to the issues raised in this matter is summarised in the decision of Butler J in the Marriage of Kennedy and Evans; Trust Bank (Intervener).[1] In that case, Butler J considered the concept of reasonable expenses in complying with a subpoena and determined that a third party, required to produce documents to the Court in compliance with a subpoena, is entitled to recover the costs actually incurred but is not entitled to recover profit costs in respect to that production.

   [1] (1994) FLC 92-514.

5. In terms of costs actually incurred, Butler J held that the subpoenaed party is entitled to include labour, together with a margin for additional statutory payments, but is not entitled to add a component for profit in calculating those costs.

6. In this case the applicant has not sought costs in respect to his own time in retrieving, collating and copying relevant documents. Similarly, the applicant companies have not sought such costs in respect to time incurred by officers and/or staff employed by the applicant companies.

7. Instead, an application is made by the applicant and applicant companies to be reimbursed for costs rendered by their accountants, E Pty Ltd. The invoice submitted by E Pty Ltd is Annexure “C” to the affidavit of Mr Baumann sworn on 23 November 2016 and is in the sum of $2,031.14. That account, as evidenced in the invoice submitted by E Pty Ltd, is, in my view, reasonable and should be paid by the wife. 

8. In addition, the applicant and applicant companies seek reimbursement of fees charged by G Bank, an overseas financial institution, for the production of documents in their possession. The account is in the sum of 500 Euro which  I note is approximately AUD$700. In those circumstances, I do not consider it appropriate for the applicant and applicant companies to have to engage in correspondence with G Bank, with a view to insisting on a further breakdown of its account which is Annexure “D” to the affidavit of Mr Baumann sworn on 23 November 2016. Accordingly, it is also appropriate that this fee be paid by the wife.

9. In respect to fees payable to Mr HH and Ms II of JJ Pty Ltd, in my decision dated 28 October 2016 I considered an argument that the applicant and applicant companies may have difficulty in interpreting aspects of the subpoenas served upon them, including the reference to entities over which the applicant had “direct or indirect power or control.”[2] In that context, I noted that, in appropriate circumstances, the recipient of a subpoena may be justified in seeking the recovery of professional costs associated with obtaining advice.[3]

   [2] Baumann and Ors & Rushbrooke and Anor [2016] FamCA 905 at [185].

   [3] Moriarty & Moriarty (2009) 41 Fam LR 336 at [49].

10. In the circumstances of this case, including the age of the applicant and the complexity of the subpoenas issued, the applicant was entitled to seek appropriate legal advice.

11. I will not, however, order that the wife pay the costs of JJ Pty Ltd, as set out in Annexure B to the affidavit of Mr Baumann sworn 23 November 2016. To do so, would effectively be to order the payment of costs incurred in respect to those legal services on an indemnity basis. Instead, I will order the wife to pay the reasonable legal costs incurred by the applicant in obtaining advice from JJ Pty Ltd as agreed or assessed.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 23 March 2017.

Associate:

Date:  23 March 2017