Bodilly and Hand and Anor
[2017] FamCA 1094
•20 December 2017
FAMILY COURT OF AUSTRALIA
| BODILLY & HAND AND ANOR | [2017] FamCA 1094 |
| FAMILY LAW – SPOUSAL MAINTENANCE – interlocutory issues – Where the applicant seeks lump sum litigation costs or in the alternative a dollar for dollar order. Where consideration is given to the anticipated costs of the proceedings and the court expresses its concern about the amount of money being spent by the lawyers. Where issues of subpoenae, bifurcation and joinder of the respondent wife are considered. |
Evidence Act1995 (Cth)
| Family Law Act 1975 (Cth) |
| Bodilly & Hand (No. 2) [2012] FamCA 734 Prantage [2013] FamCAFC 105; (2013) FLC 93-544; (2014) 49 Fam LR 197 Relationships Australia v Pasternak & Children’s Representative (1996) FLC 92-699 Strahan [2009] FamCAFC 166; 241 FLR 1; (2011) FLC 93-466; (2009) 42 Fam LR 203 |
| APPLICANT: | Ms Bodilly |
| RESPONDENT: | Mr Hand |
| INTERVENOR: | Ms K Hand |
| FILE NUMBER: | MLC | 10737 | of | 2009 |
| DATE DELIVERED: | 20 December 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 15 November 2017; 15 December 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr St John QC |
| SOLICITOR FOR THE APPLICANT: | Pearce Webster Dugdales |
| COUNSEL FOR THE RESPONDENT: | Mr Matta |
| SOLICITOR FOR THE RESPONDENT: | Sayer Jones |
| COUNSEL FOR THE INTERVENOR: | Dr Smith |
| SOLICITOR FOR THE INTERVENOR: | Lander & Rogers |
Orders
That the objection to the subpoena lodged by Dr U is dismissed.
That the objection by the applicant to the subpoena issued to Y Pty Ltd is adjourned to the final hearing.
That the objection filed by the second respondent to the applicant’s subpoena to her is dismissed.
That the second respondent forthwith provide disclosure as a party.
That the applicant’s application that the second respondent be removed from the proceedings is dismissed.
That the applicant’s application for a bifurcation of the spousal maintenance proceedings is dismissed.
That the first respondent pay on a monthly basis the same costs he has incurred (whether paid or otherwise) to the applicant commencing with a payment on 15 January 2018 for the period from 16 December 2017 onwards until trial.
That the payment of those costs be made on the 16th day of the month.
That the first respondent and the second respondent respectively give instructions to their legal practitioners to provide to the solicitors for the applicant by no later than the 15th of each month hereafter, the amount of costs incurred by their client for the preceding month commencing on the 16th day of that month.
That the application by the applicant for a lump sum payment of costs is dismissed.
That the application for costs generally of all parties is reserved to the trial.
That the amended reply filed in court on 15 December 2017 is otherwise adjourned to the final hearing.
That all outstanding applications are otherwise adjourned to the final hearing.
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 Bodilly & Hand 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 MELBOURNE |
FILE NUMBER: MLC 10737 of 2009
| Ms Bodilly |
Applicant
And
| Mr Hand |
Respondent
And
Ms K Hand
Intervenor
REASONS FOR JUDGMENT
These reasons arise out of a truncated interlocutory hearing on 15 December 2017. The substantive dispute between the three parties is about spousal maintenance. I did not have sufficient time to hear all of the arguments; other court commitments necessitated a wider reading of all of materials to enable some pressing decisions to be made. I now make orders that deal with some of the issues.
The parties
The parties are identified as the applicant and the first respondent because their previously described status has long changed; they are no longer husband and wife. The second respondent is the wife of the first respondent.
The applicant suffers from Multiple Sclerosis which was diagnosed in 1977 and before the marriage to the first respondent. That marriage came to an end in 1998.
In contested proceedings in Sydney before Loughnan J in August 2012 (Bodilly & Hand (No. 2) [2012] FamCA 734) the applicant was awarded spousal maintenance of $3,625 per week which was to be reduced to $3,323 per week from September 2012.
The first respondent married the second respondent in 2000 and from which relationship, there are two children.
One matter that is of serious concern to this court is the amount of legal fees being here expended. The spousal maintenance order is the issue and roughly speaking, the applicant is presently entitled to about $160,000 per year. The costs already expended at this interlocutory stage are said (at least by the applicant) to be over $100,000. It is reasonable to assume that the first respondent has expended considerable legal fees but it is now conceded that he is also paying those of the second respondent. The costs of each party are apparently being charged at rates in excess of the current court scale. The affidavit of the applicant’s solicitor anticipates costs of senior counsel including two days preparation at $9,000 per day and $900 per hour otherwise. I have concluded that senior counsel is retained apart from the asserted complexity also on the basis that he appeared for the applicant in the Sydney trial where Loughnan J ordered indemnity costs against the first respondent. The respondents may not have senior counsel but will presumably have engaged lawyers who are not charging that court scale.
It is not difficult to imagine that the joint expenditure of all parties here is out of all proportion to the quantum of the spousal maintenance involved. The factual issues here are not complicated but there are some legal issues about which the authorities may now be outdated or indeed may be novel. The parties are urged to look at what they are doing but so must the lawyers.
The present substantive applications
Since the 2012 orders, the first respondent has changed employment and earlier in 2017, ceased paying the maintenance. That precipitated the applicant’s action which was filed on 15 August 2017.
By a response filed 25 August 2017, the first respondent sought a discharge of his obligations under the maintenance orders asserting a change of financial circumstances or more particularly, his reduction in income and employment benefits. It is not entirely clear to me at the moment, and it does not affect this determination, but there may be another looming issue about whether it is appropriate to end the maintenance obligation anyway.
In October 2017, the first respondent joined the second respondent as a party to the proceedings. Her position is somewhat obscure but her argument is that she is a person affected by the spousal maintenance order. According to the second respondent, the reduction in the first respondent’s income has meant that her lifestyle and that of their children is at risk of alteration here. Apart from discerning that argument from her affidavit, there does not appear to be evidence that she claims any legal or equitable interest in the first respondent’s assets. That may change depending upon what evidence she relies upon at trial.
Interlocutory issues
With that background, a variety of orders was sought but so too, the court was required to deal with three objections relating to subpoena. I deal with those first.
Subpoenae
The applicant served a subpoena on the first respondent’s treating psychologist who then lodged an objection claiming that disclosure of his notes would prejudice his client’s treatment and health. To that same subpoena, the first respondent also filed an objection but did not claim the same basis as his treating psychologist.
The psychologist Dr U did not attend the court hearing and I have no evidence as to whether or not he was aware of it but it stands to reason that if his client-patient knew of it and had come prepared to argue the matter but on a different ground, the court might have expected the recipient of the subpoena to be present. The form he signed had clear instructions on it. Because of his absence and any explanation, the objection is dismissed.
The first respondent’s objection was apparently not as appeared in correspondence. I am not interested in the arguments flowing back and forth but rather the submission upon which I am required to determine the issue. The claim is for privilege. It is suggested (and it can be no higher than that) the psychologist was told of the legal advice received by the first respondent. That immediately gives rise to questions of whether there has been a waiver of the client privilege. Counsel for the first respondent submitted that the conferences were confidential and therefore there was no intention to act inconsistently with the maintenance of the privilege.
As there was not sufficient time to deal with all of these interlocutory issues, I have adopted the first respondent’s position that his instructors will examine the notes, place those which are said to attract the privilege and then the notes can otherwise be inspected. If, as I expect, the submission will still be raised by the applicant that there has been a waiver, I shall examine the documents to see whether they have the flavour and content of privileged communication and then at trial, the question of waiver can be properly argued.
I so order.
The third subpoena issue arises from a subpoena served on a company called Y Pty Limited which seems to provide advice and financial services. This subpoena was issued by the first respondent. Senior Counsel for the applicant announced that he also acted for the company. As best I can discern, the stance taken by the company was that the respondents had not complied with the rules of court about service, service times and the like. Whilst technically correct, I express concern that technical issues such as that ought be ignored because of the amount of costs that all have incurred and appear to be about to do so again. There was argument in court about what was sought and how the documents could be supplied but it objectively appeared like there was little co-operation of the type required of the practitioners in chapter 1 of the rules. I do not intend to deal with that further and if the issue remains unresolved, it can be heard as a preliminary issue at trial.
The applicant’s solicitors then served a subpoena on the second respondent in terms that objectively have to be seen as very broad. I need only give one example. Item [3] reads:
All documents pertaining to the engagement of a real estate agent(s) (including but not limited to [AB] Real Estate Pty Ltd) for the sale of real estate owned by you and/or [BC] Pty Ltd and/or [BC] Trust and/or [BC] Investment Trust from 1 July 2015 to date, including all authorities executed, correspondence and every valuation and appraisal conducted.
This subpoena was issued before the second respondent was joined by the first respondent as a party. The obligations on the recipient of the subpoena are much less stringent than those placed upon a party. There seems to be an overlap here.
It is unclear to me on reading all of what was before the Senior Registrar whether this same information had been sought from the first respondent and had been refused. If it was not so sought, I would find it inappropriate for the subpoena in its present form to have been issued before exhausting discovery rights against the husband. If that was what occurred, and I make no such finding, the range of documents sought, may be seen as an abuse of process. A subpoena is not a substitute to discovery (Relationships Australia v Pasternak & Children’s Representative (1996) FLC 92-699). Alternatively, if the request had been made and it was refused, the width and extent of the subpoena is too wide. It requires the recipient to contemplate what is being requested. Thus, to search for documents is one thing but to endeavour to understand what is being sought is another. This looks to me like the subpoena is not sufficiently clear to ensure the recipient knew immediately what was being pursued.
The problem however may have been resolved although that too is unclear. I was tantalised by the suggestion that correspondence had again floated between practitioners about what the meaning of words were and what the limits of responsibility on the second respondent was. I again find that concerning.
Dr Smith for the second respondent submitted that as his client was now a party, notwithstanding the timing of the subpoena, she had to fulfil her obligations under the rules to complete disclosure. I am assured that will now happen and I need turn attention to other details.
Litigation funding
The primary interlocutory issue was an application by the applicant for litigation funding. It was sought on the basis of the powers in either s 83 and its consequential general power in s 80 or under s 117 of the Family Law Act 1975 (Cth) (“the Act”).
The application sought in the alternative $170,000 or what has become colloquially known as a “dollar for dollar” order, the latter being her preference.
Senior counsel for the applicant submitted that his client had a house, car and less than $400,000 in superannuation and was otherwise dependent upon the spousal maintenance because her income was a disability pension. Her financial statement shows that she earns no income from her superannuation but no explanation was given to me as to why that is so other than that there were losses in the fund. I found that unhelpful.
It was submitted that the applicant is in penury. I am not sure that expression is apt but I understand it to mean here that the applicant has only the modest assets she has and that without legal funding, she cannot run her case. Bearing in mind that these proceedings were precipitated by the first respondent’s non-payment (which was apparently rectified by an order of the Senior Registrar), there would otherwise be no need to have litigation. However, the first respondent issued his application and that left the applicant with little choice but to continue if she desired to maintain her spousal maintenance rights because the first respondent’s application seeks an order that she receives nothing at all. That was based as I understand it on the ground that the financial circumstances have changed but it was also said in an earlier hearing that the applicant might now be entitled to the new Commonwealth Government Disability Scheme. That is said not to be income tested, and accordingly, the applicant should be able to pursue supporting herself that way. I do not know whether that is still to be the argument.
There is also the argument here brought on by the second respondent that the continuation of the obligations of the first respondent affects her entitlements. Thus, there are a number of complicated issues of law rather than fact. It was because of that that I observed my concern that at least one counsel thought there was some days in this matter. The facts are hardly controversial and as to the parties’ respective financial positions, those should now be clear by discovery. Ironically, the applicant also seeks to have the second respondent removed as a party but as has already been seen, the obligations of discovery have now fallen to her.
What does not seem to be in doubt is that there is a significant capital and income disparity between the respondents and the applicant. The first respondent, and presumably the second as well, are said to have just spent something in the vicinity of $7 million to acquire a new home. The assertion is that it is unencumbered but it was submitted that whatever is being paid either to the applicant or to their own lawyers is coming from a drawdown against their capital. Those suggestions will no doubt be tested at trial but I repeat that the duration of the trial should be contained and limited if discovery is undertaken well in advance.
The respondents argued that whatever may be their respective financial positions, the applicant has access to almost $400,000 in her superannuation and that if that sum was used, a costs order against the respondents could then replenish that drawn down sum. I remain unsure whether that is possible because it is a superannuation fund but I accept that there is little explanation by the applicant as to why that sum cannot be used if it is not earning income. I accept that she is drawing on the capital but why that is so remains also to be explained.
To give the applicant $170,000 out of the respondents’ resources would in my view be a form of tacit approval of the expenditure about which I earlier expressed concern and caution. I do not accept therefore that such a claim is appropriate. If the lawyers consider that such expenditure is essential and that that work is justified, it is hard to understand why they would not be prepared to wait until the trial which is only weeks away. Another way of looking at it is that if the applicant wishes to engage her lawyers at the amounts contemplated by the affidavit of her solicitor, the words of Murphy J in Prantage [2013] FamCAFC 105; (2013) FLC 93-544; (2014) 49 Fam LR 197 have some resonance. There, on an appeal relating to an order for indemnity costs, his Honour said:
[153]…A litigant in this Court must establish that the justice of the case requires an order for costs by reference to (non-exhaustive) statutory considerations before any order for costs is made.
[154]Seen in that context, the significant disparity assumed by the trial Judge between fees payable by a party to their own lawyer pursuant to a costs agreement and the costs payable to that party pursuant to a party and party costs order provides a reason for not ordering costs on an indemnity basis rather than, as the trial Judge held, the opposite. This Court said in Kohan (at 79,605):
The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
…
[157]The trial Judge referred to r 1.08(1)(g), (h), (i) and (j) but other Rules also seek to underscore an intention to keep costs to a minimum. For example, r 1.05(1) makes it mandatory, in the usual course, to comply with the pre-action procedures. One of the Objects of those procedures is, in turn, to “limit costs” (para 1(5)(c) of Schedule 1 to the Rules). The Rules oblige the Court to apply them in a way that “promotes the saving of costs” (r 1.07(1)(d)).
His Honour then referred to a variety of rules in chapter 19 of the court’s rules and the capacity to affect what costs are charged and then said:
…taken together, they evidence, in my view, an intention to apply a brake on what might otherwise be an indemnity governed only by the terms of any costs agreement. So much is, in my view, clear from the introduction of an objective element in r 19.34(2)(c).
If I was simply to allow the sum of $170,000, based on the affidavit of the applicant’s solicitor, that sum would be spent. I do not accept that this case warrants that on the material I have read. That material was prepared for the Senior Registrar to determine on a final basis and should have thus been ready to proceed.
But so too, the same principle must apply to the respondents. It was the first respondent’s choice to join the second respondent and she took no action to be removed. Properly, Dr Smith for the second respondent said it was possible that his client would not be more than a witness but might reserve the right to make submissions on issues that affect her. From a cost-saving point of view, and in particular because of such matters as section 42 of the Evidence Act1995 (Cth), one wonders what utility there would be in the second respondent having the position she currently occupies if she is paying costs in excess of any scale and those fees are being paid by the first respondent.
It is obviously a matter for each individual to contract with their lawyers as they see fit but this court must not be seen to encourage such expenditure when its own rules dictate otherwise both in respect of the way cases are conducted but also costs that this court and its judges consider appropriate in those cases.
In Strahan [2009] FamCAFC 166; 241 FLR 1; (2011) FLC 93-466; (2009) 42 Fam LR 203 relied upon by senior counsel for the applicant, Thackray J albeit ultimately in respect of litigation funding for property proceedings but who otherwise agreed with the plurality said:
[208]As Brereton J observed in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 at [29], “the juridical bases for an order for preliminary provision for litigation costs in matrimonial proceedings are diverse”. However, it is necessary to consider here only the power contained in s 79 and s 80(1)(h) of the Family Law Act 1975 (Cth), since this is the power sought to be invoked by the wife and upon which Strickland J relied in making his order.
[209]The Court may use this power to “require the party who controls most of the assets of the parties to provide the other party with funds to conduct his or her case, with the provision of such funds then being a matter to be taken into account in the final settlement of property between the parties”: Zschokke at 83,215.
[210]The importance of identifying the power relied upon was succinctly stated by Brereton J in Paris King Investments at [30] - “it is the source of power that determines the necessary preconditions and relevant considerations for making the order”.
Having identified the power as senior counsel for the applicant did, I am satisfied that there is an appropriate power available. The observation of Thackray J in [209] is relevant here because on any view, both respondents control most of the assets. The second respondent who wishes to protect her assets is willing to spend some of them to protect them. I am satisfied that on the concessions made by Mr Matta of counsel for the first respondent, the respondents together are in control of a lot more assets than the applicant and it is important to recognise that the first respondent is the real applicant in this case.
The question is why the applicant should have to expend her own capital to defend what she currently is entitled to at law.
A combination of all of those principles, that is, the disparity of financial positions favouring the respondents, the extant entitlement of the applicant and my concern about reigning in the costs means that the most logical conclusion is that to create a “level playing field”, each dollar spent by the first respondent should be matched by him in favour of the applicant. There are undoubtedly some logistical difficulties with that but they are not insurmountable. Each month until the trial, the lawyers for the first respondent will provide to the applicant’s lawyers details of the work in progress for that month and whether or not billed to their client, the first respondent should pay that equivalent.
To the extent that the second respondent considers that she is immune from scrutiny, I reject that suggestion. Her lawyers can similarly provide for the same process and to the extent that it appears that her lawyers are carrying the bulk of the preparation which might favour the first respondent (and I would hope that is not the case professionally), the applicant can have liberty to apply on short notice to seek more from the respondent on the basis that he is ultimately apparently responsible for the costs of the second respondent.
Retrospectivity
I reject any suggestion that it is appropriate here to make these orders retrospective. I well understand that the applicant’s lawyers have chosen to “carry” their client to date but if they are confident about the situation, that should not be a problem as she could charge the superannuation fund in their favour if their position, as articulated, is correct that the funds are accessible but needed to cover living expenses.
To the extent that counsel for the first respondent is correct that any adjustment can be made at trial, that too might be something all practitioners consider when advising their clients about the extent to which these costs should now be incurred as they may not all be recovered in the end. I stress that the fact that Loughnan J made an indemnity costs order is only relevant to the circumstances of that hearing.
Discharge of the second respondent
I did not have the opportunity to consider any significant submissions about the applicant’s request for a discharge of the second respondent but having regard to what I have said above, I do not consider it is necessary or appropriate that I make such an order today.
Bifurcation
A final issue was that the applicant sought that the proceedings be bifurcated to focus on the capacity of the first respondent to pay. I reject that as an appropriate use of the court’s resources when as I have already expressed, the issues here are more matters for assessment and submission rather than evidence. It is not apparent to me that there is any suggestion that the first respondent claims that the applicant is not entitled to maintenance based on her health. If he is, that matters can be cleared up quickly by the lawyers. If that is to be argued, and evidence is called for from the applicant. The lawyers for the respondents need to say so quickly.
I would otherwise see no evidentiary utility is splitting this hearing.
Orders
I make orders at the commencement of these reasons.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 20 December 2017.
Associate:
Date: 20 December 2017
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