Berger and Tallis
[2019] FamCA 154
•20 March 2019
FAMILY COURT OF AUSTRALIA
| BERGER & TALLIS | [2019] FamCA 154 |
| FAMILY LAW – COSTS – Where the wife seeks costs on an indemnity basis against the husband’s solicitors in the first instance – Where the wife submits the husband’s application had no reasonable prospects of success and that the husband’s conduct elongated the hearing – Where the wife made settlement offers to the husband – Where the husbands application was wholly unsuccessful – Court finds costs orders against the husband’s solicitors are not justified – Court finds an order for indemnity costs not justified – Order made for payment lump sum costs payment. |
| Civil Procedure Act 2005 (NSW) s 98(4)(c) Family Law Rules rr. 1.04, 5.03, 11.02, 11.03, 19.10, 19.18 |
| Byrnes v Brisconnections Management Company Limited (No. 2) [2009] FCA 1432 Cassidy v Murray (1995) FLC 92-633 Colgate Palmolive Company and AnorvCussons Pty Limited (1993) 118 ALR 248 Hall v Hall (2016) 257 CLR 490 Idoport Pty Ltd v National Australia Bank Limited & Ors [2007] NSWSC 23 Fennessy & Gregorian (2009) FLC 93-399 Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108 Kaufman & Sandor [2018] FCCA 2701 Kohan&Kohan (1993) FLC 92-340 Lenova & Lenova (Costs) [2011] FamCAFC 141 Melville&Dent (No.2) [2009] FamCA 81 Mijac Investments Pty Ltd v Graham [2013] FCA 296 Modra v Victoria (Department of Education and Early Childhood Development and Department of Human Services) (2012) 291 ALR 429 Ryan v Primesafe (2015) 323 ALR 107 Sklavos v Australasian College of Dermatologists [2013] FCA 1065 Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 4)[2012] FCA 652 Specsavers Pty Ltd v The Optical Superstore Pty Ltd [2012] FCAFC 183 Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 Yunghanns & Yunghanns (2000) FLC 93-029 |
| APPLICANT: | Mr Berger |
| RESPONDENT: | Ms Tallis |
| FILE NUMBER: | SYC | 3335 | of | 2018 |
| DATE DELIVERED: | 20 March 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland DCJ |
| HEARING DATE: | 12 December 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Kaylinger |
| SOLICITOR FOR THE APPLICANT: | Helen Cook Solicitors |
| SOLICITOR FOR THE RESPONDENT: | Santone Lawyers |
Orders
THE COURT ORDERS THAT:
The Applicant de facto husband pay the costs of the Respondent de facto wife in the sum of $10,598.44 within 28 days.
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 Berger &Tallis 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 3335 of 2018
| Mr Berger |
Applicant
And
| Ms Tallis |
Respondent
REASONS FOR JUDGMENT
Introduction
On 12 December 2018, this matter came before the Court in relation to an application by the de facto husband, Mr Berger (“the husband”) for interim orders for spousal maintenance payable to him by the de facto wife, Ms Tallis (“the wife”). The orders sought by the husband, in that regard, were contained in his Amended Initiating Application filed on 17 July 2018, in which he sought a number of interim property orders. However, at the hearing, Counsel for the husband informed the Court that his client sought only to press order 5 contained in that document, being:
5. An Order pursuant to s90SE(1) of the Family Law Act 1975, until further order the Respondent pay periodic maintenance to the Applicant in the sum of $700 pursuant [sic] per week, commencing seven days after the date of this order.
On 21 December 2018, judgment was delivered, dismissing the husband’s application for interim spousal maintenance.
Upon delivery of that judgment, the solicitors for the wife sought that directions be made for the filing of costs submissions in relation to the husband’s dismissed application. As such, orders were made for the filing of written submissions.
The wife’s application
The written submissions filed on behalf of the wife state her application to be, as follows:
The [wife] seeks costs on an indemnity basis, [in the sum of $14,674], in relation to her defence of the [husband’s] interim application. The [wife] submits that the [husband’s] legal representatives should be responsible for these costs in the first instance.
…
In the alternative, the [wife] seeks costs on a party-party basis, calculated in accordance with Schedule 3 of the Family Law Rules 2004 (Cth), [in the sum of $10,598.44].
…
Should the Court decline to make an order for costs payable by the [husband] or his legal representatives at this stage, the [wife] seeks that the interim costs order be applied against any monies received by the [husband], should his application for an adjustment pursuant to Section 90SM(4) of the Act be successful, noting the [wife’s] primary position that no adjustment should be made to the asset pool.
Background
The general background to this matter is set out in my judgment dated 21 December 2018.
I will now set out the background facts relevant to the wife’s costs application.
On 8 November 2018, the wife’s solicitor sent a settlement offer to the husband’s solicitor, in respect of his interim application. That settlement offer referred to the husband retaining certain items of property, the value of which were recorded on the joint balance sheet as $55,000 and the interim application otherwise being dismissed, with each party bearing their own costs. That offer was not accepted by the husband.
On 20 November 2018, the wife made a further settlement offer to the husband. This included that the wife pay the husband $10,000 (to be categorised as an interim distribution), that the husband collect several possessions from the C Town properties, the value of which were recorded on the joint balance sheet as $55,000 and that the interim application be otherwise dismissed with no order as to costs. That offer was not accepted by the husband.
As stated, when the application came before the Court, the husband sought only to press his application for an order that the wife pay to him $700 per week by way of spousal maintenance on an interim basis.
The costs incurred by the wife in defending the husband’s interim application (inclusive of GST) were solicitors’ costs of $8,514 and Counsel fees of $6,160. The total fees were therefore $14,674. Annexed to the wife’s written submissions is a schedule of those costs, calculated on an indemnity basis, as well as the original invoices evidencing those amounts.
On 21 December 2018, the husband’s solicitor emailed the wife’s solicitor, indicating that the balance of the husband’s interim application was not pressed.
On 30 January 2019, the wife’s solicitors filed written submissions in respect to the wife’s application for costs.
On 14 February, the husband’s solicitors filed written submissions in response to those of the wife. I note that this was one day after the directions for filing required the provision of those responding submissions to the Court. The wife’s solicitors did not consent to the husband being granted that extension of time for the filing of his submissions. In that regard, the husband seeks relief from rule 11.02(1) of the Family Law Rules 2004 (Cth) (“the Rules”), pursuant to rule 11.03. The husband’s evidence, in that regard, is:
In addressing the rule 11.03(2) factors the reason for the delay was as a result of a simple technical mishap that reverted the prepared submission to a former draft state in a situation whereby it could not be reversed. A request was made for a short extension to allow for the proper submissions to be submitted. The [husband] submits that the extension of half a day has little to no impact to the matter as the submissions are in reply and such a short extension could not reasonably be conceived to have caused any prejudice to the [wife].
In terms of rule 11.03(2), I find that:
a)The husband had a good reason for his non-compliance, in that I accept that the “technical mishap” prevented his legal representatives from providing the written submissions on time: rule 11.03(2)(a);
b)The non-compliance was caused by the husband’s lawyer, rather than by him: rule 11.03(2)(c);
c)The husband’s non-compliance has had no impact on the management of the case: rule 11.03(2)(d);
d)The husband’s non-compliance had no effect on the wife: rule 11.03(2)(e); and
e)The husband’s non-compliance had no impact on the costs incurred by the wife: rule 11.03(2)(f).
For those reasons, I propose to grant relief to the husband pursuant to rule 11.03 of the Rules, in terms of the late filing of his submissions and will accordingly consider those submissions.
The law
Pursuant to s 117(1) of the Family Law Act 1975 (Cth) (“the Act”), the general principle in family law proceedings is that each party to the proceedings shall bear their own costs. The exception to this provision is referred to in s 117(2) of the Act, if the Court is of the opinion that there are circumstances that justify the making of such order as to costs (whether by interlocutory order or otherwise), as the Court considers just.
In determining what orders to make pursuant to s 117(2) of the Act, s 117(2A) sets out the following:
(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.
I will now address those s 117(2A) factors which I consider to be relevant to this matter.
Consideration
The parties’ financial circumstances
In terms of s 117(2A)(a), I have considered the parties’ respective financial circumstances.
The wife submitted that the husband’s impecuniosity should not impede the making of a costs order in her favour, as such an order could be made against the legal representatives for the husband, on the basis of rule 19.10 of the Rules.
For reasons which I set out below, I am not satisfied that an order for costs, made against the solicitors for the husband, is justified. However, it is clear that impecuniosity is not, of itself, a bar to a costs order: Lenova & Lenova (Costs) [2011] FamCAFC 141 at [12].
The conduct of the parties
The conduct of the parties to the proceedings, in terms of s 117(2A)(c) is relevant to my determination of this matter.
The wife unnecessarily incurred costs in defending the husband’s interim application, in circumstances where, as stated, five out of the six interim orders originally sought were not pressed at the hearing. The wife submits that those costs were incurred in respect of:
f)Responding to the husband’s Affidavit filed on 17 July 2018;
g)Conferences with Counsel in preparation for the interim hearing;
h)The drafting of two settlement offers sent to the husband with a view to resolving the interim proceedings; and
i)Preparation for and attendance at the hearing on 12 December 2018.
The wife’s submissions note that her costs of preparation for the hearing include the review of an Affidavit sworn by the husband on 28 November 2018 and an Affidavit affirmed by the husband’s solicitor, Ms Helen Cook, on 11 December 2018. The Court refused the husband’s application for leave to rely upon those Affidavits on the basis that they were filed some six weeks outside the timeframe required by orders made on 2 October 2018.
The wife submits that the conduct of the husband in bringing his interim application, of which only the order in relation to spousal maintenance was pressed at hearing, resulted in the Court being required determine an application which had no reasonable prospects of success.
Further, the wife submits that the husband’s conduct in seeking to tender medical evidence at the hearing elongated the hearing, and so, unnecessarily increased the parties’ costs. The husband sought no prior orders for the filing of expert evidence, however, at the hearing, his Counsel sought to tender several medical certificates which were not in the correct form, in terms of the Rules, or in terms of the requirements for an expert report, as set out in the s 177(1) of the Evidence Act 1995 (Cth). In that regard, the wife submits that the husband had ample opportunity to seek an extension to the filing of his consolidating evidence, or to seek orders for the provision of expert evidence in the appropriate form.
These omissions were surprising, in circumstances where, relatively recently, the High Court in Hall v Hall (2016) 257 CLR 490 at 497, confirmed that, in interim property proceedings, the applicant for relief is required to establish the factual underpinning of their application on the balance of probabilities and, I would add, they must do so by evidence that is admissible and of sufficient weight to influence the trial judge hearing the application.
Whether any party has been wholly unsuccessful
In terms of s 117(2A)(e), a major consideration in this matter is that the husband has been wholly unsuccessful in his interim application.
There are far too many matters in the Court’s duty lists where parties or, more relevantly, their solicitors, have failed to give adequate consideration to the legislative criteria required for a successful claim and to adduce sufficient evidence, in admissible form, to satisfy the Court that the relief sought is justified. This case is an example of that.
Offers of settlement
In terms of s 117(2A)(f), as set out above, the wife’s solicitors sent offers of settlement to the husband’s solicitors on 8 and 20 November 2018. The first of those offers suggested that the husband retain certain items of property, the value of which were recorded on the joint balance sheet as $55,000. The second of those offers provided for an additional interim distribution of $10,000 to the husband. The wife’s submissions note that these offers were a compromise of her position in the substantive proceedings, where she seeks that no adjustment be made pursuant to s 90SM of the Act.
It was unreasonable for the husband to simply reject those offers, thus requiring the matter to proceed to hearing, where it was determined that he was not entitled to the interim relief sought.
Relevantly, r 5.03 of the Rules provides:
Procedure before filing
(1) Before filing an application seeking interim, procedural, ancillary or other incidental orders, a party must make a reasonable and genuine attempt to settle the issue to which the application relates.
(2) An applicant does not have to comply with subrule (1) if:
(a) compliance will cause undue delay or expense;
(b) the applicant would be unduly prejudiced;
(c) the application is urgent; or
(d) there are circumstances in which an application is necessary (for example, if there is an allegation of child abuse, family violence or fraud).
Note: The court may take into account a party's failure to comply with subrule (1) when considering any order for costs (see subsections 117(2) and (2A) of the Act).
In this matter, there was no suggestion that any of the exemptions set out in r 5.03(1) were applicable. In those circumstances, the husband was under an obligation to make a reasonable and genuine attempt to settle the issues relevant to his application prior to its filing.
Further, r 1.04 of the Rules specifies that the main purpose of the Rules is to “ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case”. That is consistent with the obligation of parties and practitioners under ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). Specifically, s 37M(1) provides:
(1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
As described by Tracey J in Mijac Investments Pty Ltd v Graham [2013] FCA 296 at [49], those obligations include an obligation for practitioners to offer “objective and considered advice” to their clients. In that decision, his Honour continued:
… This includes advice as to matters such as whether a proper basis in law exists for the making and pursuit of a particular application and the contents of any affidavits sworn in support of such an application. Without such advice, the just resolution of disputes according to law and as quickly and inexpensively as possible may well be hampered, if not frustrated.
There is similarly an obligation to not unreasonably fail to accept an offer. This is made clear by Greenwood J in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108, where his Honour said, at [94], that this requires a party to “carefully assess all the material, including the discovered material, to determine and confront the strengths and weaknesses of their case”.
As stated by Jagot J in Sklavos v Australasian College of Dermatologists [2013] FCA 1065 at [35]:
These provisions are not merely exhortatory. The duty is real and can be enforced, if necessary, by appropriate costs orders.
That obligation applies to both parties and practitioners. Indeed, as Gray J observed in Modra v Victoria (Department of Education and Early Childhood Development and Department of Human Services) (2012) 291 ALR 429 at [31]:
… the impact of those sections on the obligations of legal practitioners practising in this Court is significant.
In Ryan v Primesafe (2015) 323 ALR 107 (“Ryan v Primesafe”) at [92] Mortimer J said that “there is a clear link, in terms of legislative policy, between ss 37M and 37N, and [the Federal court’s costs power]” and that those sections were:
… designed to empower the Court to sheet home responsibility to legal practitioners, where appropriate, to bear personally the liability to make compensation for parties’ legal costs.
Further, in Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 4)[2012] FCA 652, Katzmann J reduced a successful party’s entitlement to costs to 65 per cent as a result of the manner in which that party had conducted the litigation. In dismissing the appeal from her Honours orders, in Specsavers Pty Ltd v The Optical Superstore Pty Ltd [2012] FCAFC 183, the Full court of the Federal Court described the case management provisions as constituting “a powerful mechanism to encourage compliance” with those duties to which I have referred.
In this matter, the wife has sought an order for costs against the solicitors for the husband. The Court’s power to make a costs order against a practitioner is set out in r 19.10 of the Rules. Such an order is the exception, not the rule. In that regard, the relevant considerations for making such an order were set out in Cassidy v Murray (1995) FLC 92-633, which confirm the power of the Court to award costs against a party’s solicitors is one that should be “exercised with caution”: at 82,359.
In Kaufman & Sandor [2018] FCCA 2701, Judge Mercuri made an order against a party’s solicitors in circumstances where those solicitors had brought a series of applications “which on the face of the material before the court were at best dubious and at worst clearly without any foundation”: at [137].
In this matter, the Court did not consider the balance of the husband’s interim application, which was subsequently discontinued, and in those circumstances, it is not possible to conclude, by the fact that the matters were not pursued, that they were “dubious” or “without foundation”. Further, it is not possible to know what advice was given to the husband by his solicitors, in relation to that application. In those circumstances, while I have significant concerns as to the nature of the relief sought by the husband in that interim application, I will not make an order for costs against his solicitors.
However, it is clear that, as a litigant before the Court, the husband had an obligation to consider and appropriately respond to the wife’s offers of settlement. I do not accept that he has done so.
Other relevant matters
In terms of s 117(2A)(g), the following considerations are relevant.
Indemnity costs
As stated, the wife has sought an order that the husband pay her costs of the interim application on an indemnity basis.
In Melville&Dent (No.2) [2009] FamCA 81, Cronin J discussed the basis upon which the question of indemnity costs arise and referred to, at [33], the decision of Sheppard J in Colgate Palmolive Company and AnorvCussons Pty Limited (1993) 118 ALR 248 (“Colgate-Palmolive Co”) as providing a “pertinent observation” of the “court-endorsed costs structure of litigation”, where his Honour said:
For present purposes it is enough to say that the position is as it is because members of the profession, both solicitors and counsel, and also professional witnesses, have refused to accept as a proper or sufficient guide to their costs and fees the provisions of scales of costs and charges provided for in schedules … Taxing officers have been obliged to tax bills on the basis of the Rules and the Schedule. The fact that the scales themselves provided ranges of fees of charges for various items depending on degree of difficulty, levels of responsibility and time involved, has not overcome the practical problem which exists.
In Kohan&Kohan (1993) FLC 92-340 (“Kohan”) at 79,614, the Full Court noted that it would only be in circumstances of “an exceptional kind” that the Court would depart from the general rule that costs, if awarded, should be on a party/party basis, and make an order for costs on an indemnity basis. In Yunghanns & Yunghanns (2000) FLC 93-029, the Full Court applied Kohan, to confirm that an order for the payment of indemnity costs is “a very great departure from the normal standard”.
Nevertheless, as confirmed by the Full Court in Fennessy & Gregorian (2009) FLC 93-399 at [59], referring to the decision of Sheppard J in Colgate-Palmolive Co, there are circumstances which may arise that “warrant the Court in departing from the usual course” of awarding party/party costs and, instead, awarding costs on an indemnity basis.
While the categories in which indemnity costs may be awarded are not closed, examples of situations which may justify that course of action are usefully set out by Harper J in in Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7] as including where:
(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud
(ii) The making of an irrelevant allegation of fraud
(iii) Conduct which causes loss of time to the Court and to other parties
(iv) The commencement or continuation of proceedings for an ulterior motive
(v) Conduct which amounts to a contempt of court
(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law
(vii) The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial
[References omitted]
A similar summary of the kinds of conduct justifying an order for indemnity costs can be found in Colgate Palmolive Company and AnorvCussons Pty Limited (1993) 118 ALR 248 at 249.
Those principles have generally been applied in this Court: See for instance useful analysis by the Full Court in Limousin v Limousin (Costs) (2008) 38 Fam LR 478; Watts J in Lambert and Jackson [2011] FamCA 275 and see also Ryan v Primesafe at [110].
In this matter, the husband failed to obtain an order for interim spousal maintenance as a result of his failure to adduce admissible evidence of sufficient weight to justify a finding that he was unable to adequately support himself because of a disability, as required by s 72 of the Act. However, inadequate preparation does not, in itself, justify an order for indemnity costs and I will not make such an order in this case.
Lump sum costs
Rule 19.18 of the Rules provides for the methods of calculating costs. These include, in r 19.18(1)(a), the Court fixing upon a specific amount for costs or, in r 19.18(1)(b), an order for the costs to be assessed on a particular basis.
In Stoian & Flemming (Costs) [2014] FamCA 944 at [91], Kent J endorsed the principles relevant to the application of s 98(4)(c) of the Civil Procedure Act 2005 (NSW), as adumbrated by Einstein J in Idoport Pty Ltd v National Australia Bank Limited & Ors [2007] NSWSC 23, stating it was “similar” to r 19.18. Those principles are:
i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation;
ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable;
iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available;
iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place;
v. the gross sum “can only be fixed broadly having regard to the information before the Court” … [References omitted].
Consistent with those principles, it has been determined that, where the matter is relatively simple, it may be appropriate for the Court to fix a lump sum. By doing so, the Court can avoid further delay and inconvenience being occasioned by the requirement to tax a bill: Byrnes v Brisconnections Management Company Limited (No. 2) [2009] FCA 1432 at [51].
In this matter, the wife’s solicitors have provided particulars of the costs incurred by the wife on an indemnity basis and a solicitor client basis. In the context of the matters to which I have referred, including that the solicitors for the wife were required to prepare for matters that were not pursued at the interim hearing, I am satisfied that the payment of solicitor client costs sought by the wife, in accordance with Schedule 3 of the Rules, in the sum of $10,598.44, is “logical fair and reasonable”.
I will therefore make an order for costs in those terms.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice McClelland delivered on 20 March 2019.
Associate:
Date: 20 March 2019
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