Blanche & N Lawyers

[2008] FamCA 138

FAMILY COURT OF AUSTRALIA

BLANCHE &  N LAWYERS [2008] FamCA 138

FAMILY LAW – COSTS—Taxation of costs—where the Applicant seeks stay of costs assessment pending resolution of State Supreme Court claim against the Respondent practitioners for negligence in respect of Family Court litigation—Application in a Case dismissed.

APPLICANT: MS BLANCHE

RESPONDENT: N LAWYERS

FILE NUMBER: BRF 2365 of 2005

DATE DELIVERED: 26 February 2008

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 26 February 2008

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Cooper, Solicitor from Charles Cooper Lawyers appeared for the Applicant

COUNSEL FOR THE RESPONDENT: Mr Clutterbuck of Counsel appeared for the Respondent

SOLICITORS FOR THE RESPONDENT: N Lawyers

Orders

1. The Applicant’s Application in Form 2 filed on 25 February 2008 is dismissed and the proceedings are removed from the Active Pending Cases List.

1. The Applicant to pay the Respondent’s costs of and incidental to today’s proceedings as agreed or as assessed.  Such costs not to be payable until the finalisation of the costs issue in this Court and finalisation of proceedings in the Supreme Court … of ….

IT IS NOTED that publication of this judgment under the pseudonym Blanche & N Lawyers is approved pursuant to s 121 (9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF 2365 of 2005

MS BLANCHE

Applicant

And

N LAWYERS

Respondent

REASONS FOR JUDGMENT

1. The respondents to this application are the solicitors who previously acted for the applicant wife in property settlement proceedings in this Court throughout 2005 and 2006.  As I understand the position the property settlement proceedings settled when consent orders were made by Buckley J in March 2006.  I do not find it necessary to refer in detail to those orders.

2. The applicant wife asserts that in order to facilitate the settlement during the course of negotiations there was an agreement by a solicitor in the respondent firm to limit the legal costs she would incur to $15,000 all up, that is to include counsel's fees.  A preliminary point was determined in June last year by Bell J.  He dismissed an application that N Lawyers were estopped from pursuing recovery of their costs on the basis of the so-called agreement to limit such costs to $15,000.  Since then the matter has wound its way expensively and slowly through the system.

3. A very detailed notice in form 15, being a notice disputing the itemised cost account, was filed on 25 June last year.  The effect of that notice is in the left hand column, the notice provides for the amount claimed to be set out and then the amount offered to be set out at the right hand column.  So the total costs of $25,684 claimed by the solicitors, which I take it does include counsel's fees - the total amount offered is $5323.  It is a far cry from the $15,000 which, seemingly, the applicant was prepared to settle on some time ago. 

4. The costs assessment is now set down for a two day taxation of those costs next week on 3 and 4 March, next Monday and Tuesday.  In the meantime, on 19 February this year the applicant instituted proceedings in the Supreme Court of Queensland in the Brisbane Registry claiming in excess of $300,000 for damages for negligence from the respondent firm for the way in which they conducted their legal affairs relative to the litigation in this Court. 

5. There was, in addition, an application filed in this Court on 25 February, that is an application in form 2, where the wife seeks that the cost assessment hearing listed for 3 and 4 March be adjourned until the completion of the Supreme Court proceedings between herself and N Lawyers commenced by writ number … of …, and that N Lawyers pay her costs in relation to this application.  There is no indication before me as to precisely how long it is anticipated that civil proceedings will take to wend their way through the system in the Brisbane Supreme Court.  My own experience would tell me the likely period of time is several years.

6. For the wife in today's application it was argued she has just commenced a new job and it will be difficult to take time off work.  I made it quite clear that I was not enamoured of that argument and it was not pressed.  It was further argued that the costs of the assessment will be costs thrown away.  Well, they will only be thrown away if the applicant's case is ultimately successful in both jurisdictions.  Presumably the costs of any assessment as ordered by a Registrar can be reviewed by a Judge of this Court.  Presumably they may be litigated in the Supreme Court as an extra head of damages. 

7. It has been further argued that if the costs assessment proceeds and the costs assessor issues a costs certificate it has the same effect as a judgment and this could then lead to the applicant having to sell her home or even face bankruptcy.  I accept that is the case.  It does not go to the issue, it simply goes to a question of enforcement.  She could pay it.  She could borrow the funds.  She could make arrangements to pay it.  There are all sorts of other outcomes, but the fact that somebody may have to sell a property when there is a judgment debt, in effect, is to reverse the logical progression.  A debt is either owing or it is not.  If it is owing it should be paid.  If it is not paid then the judgment creditor has the rights at law to enforce same.  That is the position the respondent faces.  It is not a ground for adjourning a costs assessment.

8. It was further argued that the loss to the wife would be substantial whilst the loss to N Lawyers would be trivial.  I have no idea of the size of N Lawyers Firm or how they operate but I am not prepared to accept that a firm of solicitors is so awash in assets they would regard $25,000 as a trivial amount, particularly where it includes counsel's fees and other outlays.  It was argued, and I was not quite sure of the relevance of this, that the wife has six years to commence the proceedings she has commenced now.  That may be so.  She has elected to commence at this point in time.  It is fortuitous that she has done so perhaps.  It may be more than fortuitous in view of the timing, but it does not go to the grounds of why the costs assessment should or should not proceed.

9. It was further argued that she could potentially lose everything.  I shall have more to say about that later, but that is part of the risks of litigation in any shape or form.  Whether costs are owing or not, the Registrar can deal with issues of incompetency and negligence.  I refer to, for example, Rule 19.10 Costs Orders Against Lawyers:

   "A person may apply for an order sub-r.2 against a lawyer for costs thrown away during a case for a reason, including the lawyer's failure to comply with these rules or an order, the lawyer's failure to comply with a pre-action procedure, the lawyer's improper or unreasonable conduct and undue delay or default by the lawyer.  (2)  The Court may make an order including an order that the lawyer; (i) not charge the client for work specified in the order; (ii) repay money that the client has already paid towards those costs; (iii) repay to the client any costs that the client had been ordered to pay to another party; (iv) pay the costs of a party or (v), repay another person's costs that had to be incurred or wasted."

10. Rule 19.12 provides:

    "A lawyer must not charge; (a) an amount for costs improperly, unreasonably or negligently incurred by the lawyer or for work done for the administration of the lawyer's office.  A lawyer must not make an agreement with a client to avoid the requirement under par.1(a)."

11. In 1993 Murray J in the Family Court in South Australia dealt with an allegation of negligence as a basis for non-payment of costs.  The husband's former solicitor had rendered a bill of costs.  There was a notice disputing costs.  The Registrar issued a certificate of taxation of costs.  The husband applied for a review of the reconsideration.  He complained that the solicitor had been incompetent and/or negligent.  The application was dismissed.  Her Honour relevantly held:

    "As a matter of law a Registrar has no power to determine a general allegation of negligence which goes to the whole action, but pursuant to what was then O.38 r.29(2) has the power to determine whether specific items of costs can be disallowed of any of the three grounds specified in that rule.  The question remains whether the Family Court had the jurisdiction and power to determine such an allegation of negligence which went to the whole course of action as the husband urged."

    Her Honour said she did not see a counter claim for negligence arising out of a claim for costs by a solicitor against a litigant as having that appropriate relationship to proceedings for property settlement so as to bring it within the definition of matrimonial cause.  This was particularly so where property proceedings were intermingled with custody and access proceedings.  Her Honour saw the counterclaim for negligence arising out of the contractual relationship between the solicitor and the husband and that contractual relationship existed independently regardless of whether the husband had commenced proceedings in the Court or not.  So her Honour, for the reasons she gave, held that such a counter claim was not a matrimonial cause therefore she did not have the jurisdiction to determine the question of negligence.  Presumably that is why the wife is suing in the Supreme Court.

12. Reference was made to various letters of complaint written by the applicant to the Legal Services Commissioner and the State Attorney-General at the time.  The obvious point is made that such letters can be no better than the evidence of the wife herself.  It was submitted by Mr Cooper for the wife, that they rebutted any suggestion of recent invention by the wife.  I do not know that the Court needs any convincing on that score.

13. Counsel for the solicitors argued the letters of complaint evidenced the wife had a degree of control over the business decisions made by her husband.  She had a hands-on approach to the business.  I find that is not a matter I have to determine at this point in time.

14. For the respondent solicitors counsel succinctly made four points.  He argued:

    (i) for there to be a stay there must be a demonstrated cause of action.  He makes reference to his written submissions to suggest that the statement of claim filed does not disclose a proper cause of action;

    (ii) it was further submitted the principal claim for damages is loss of business.  I am not fully apprised of all the material in this matter.  I have only come into the matter this morning and heard submissions on this fairly limited issue as to whether to adjourn the costs assessment, but I gather the allegation was that the husband had engaged in conduct to make the business worthless.  He had somehow run it into the ground.  It was argued that the letter by the wife to the Attorney-General reveals that she had had this hands-on approach to the business.  I can simply observe that if someone has the power to act as a director or partner and fails to do so for whatever reason, I find it difficult to justify how that person's solicitors can be liable if the spouse engages in conduct contrary to the interests of both parties, particularly where the matter was later the subject of consent orders. In making these observations I am aware of claims that the wife gave specific instructions for injunctions to issue, however, that matter remains to be determined by the Supreme Court and I will not trespass any further in that regard.

    (iii)Reference was made to the decision of Bell J, that there is a question mark over the applicant's veracity.  That was challenged by way of rebuttal points.  I do not find it necessary to determine that point.

    (iv)Finally, it was argued that Buckley J had signed the minutes of consent orders.  The wife is bound by the consent orders.  Counsel would have given a recitation of the facts at that time and in effect the wife has acquiesced in the settlement and she has therefore acquiesced in the husband's behaviour of running the business down.  I am not prepared to make any observation on that submission.  It would, certainly, at the very least, need a transcript of that day's hearing to take the matter further.

15. As I have said, I have to consider issues such as delay prejudice and such like.  I have proceeded on two bases.  One is to assume that there is no merit whatsoever in the wife's claim.  If the Court accedes to the order that she seeks, the solicitor is precluded from seeking recovery of costs and outlays for a period of years.  Interest would not even accumulate as costs have not yet been assessed and interest can only accumulate when there is a sum certain.  I then assume under this heading, that the wife's claim for negligence is unsuccessful.  By that stage there would have been costs incurred by the wife in that unsuccessful expense of Supreme Court litigation, and ultimately it may well be that when the solicitors do proceed with the costs assessment, there are no assets left, or there is an excess of liabilities over assets.

16. I take the reverse position.  I assume the wife's claim for negligence is sound.  The Registrar can rule on that vis-à-vis costs issues.  A Judge of this Court can review any Registrar's decision.  I notice that in the notice disputing costs, it is conceded that there is only $5000 owing.  If that was to be the case, presumably if all other avenues fail, the wife could pay that, perhaps pay it under protest and add it to her damages claim.

17. The reality is, if she does proceed and is successful for negligence, not only is there a professional indemnity scheme where the wife's payment is guaranteed subject to payment of a fairly modest claim by the solicitors involved she is fully protected.

18. The fact the firm of solicitors has difficulty in being protected is a factor I have taken into account in determining whether to accede to their request for an adjournment.

19. It has to be borne in mind the two jurisdictions are quite distinct.  One exercises State jurisdiction; one exercises Federal.  One is a claim for costs arising out of litigation in the Federal jurisdiction; one is a claim for negligence by a professional firm acting as lawyers in the matter.  I see no reason why the claim for costs should not proceed.  If, at some point in time, bankruptcy looms or she is about to be thrown out of the house, it may be appropriate at that point in time to seek a stay, maybe even the solicitors may accept a stay of enforcement subject to payment of interest and certain other guarantees and assurances.

20. Before concluding, I would simply like to remind practitioners and the litigants of a quotation of Sir Owen Dixon when he was Chief Justice of the High Court of this country and he addressed an audience at a conference and said what a tremendous responsibility a legal representative has when the legal representative stands with a client before the Temple of Justice and advises for or against entering the Temple.  It is a weighty issue.  It seems to me the amount of costs involved barely warrants the amount of expenditure to date.  However, time will tell.

    RECORDED  :  NOT TRANSCRIBED

    ORDER DELIVERED

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry

Associate: 

Date:  26 February 2008