Bowie and Bowie-Smith Pty Ltd and Bartlett
[2007] FamCA 1200
•10 October 2007
FAMILY COURT OF AUSTRALIA
| BOWIE AND BOWIE SMITH PTY LIMITED & BARTLETT | [2007] FamCA 1200 |
| COSTS – PROPERTY – in proceedings between the husband and the wife, the husband asserted that the wife had an interest in her sister’s company – ultimately this was determined not to be the case and the sister on both her own behalf and that of her company sought indemnity costs in the proceedings – both parties were not parties to the proceedings – costs ordered under the Rule which would provide for costs similar to those obtained under s 117 of the Family Law Act 1975(Cth) |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Kohan & Kohan (1993) FLC 92-340 Munday & Bowman (1997) FLC 92-784 G & G [2000] FamCA 889 Colgate & Palmolive Company and Another & Cussons Pty Limited (1993) 46 FCR 225 Tetijo Holdings Pty Limited & Keeprite Australia Pty Limited (Federal Court, 3 May 1991) McKewins Hairdressing and Beauty Supplies Pty Ltd & Deputy Commissioner of Taxation [2000] HCA 27 K & V [2006] FamCA 252 |
| APPLICANT: | Ms Bowie & Bowie Smith Pty Limited |
| RESPONDENT: | Mr Bartlett |
| FILE NUMBER: | CAF 710 of 2004 |
| DATE DELIVERED: | 10 October 2007 |
| PLACE DELIVERED: | Canberra |
| JUDGMENT OF: | Faulks DCJ |
| HEARING DATE: | 21 May 2007 |
REPRESENTATION
| FOR THE APPLICANT: | Ms Bowie appeared on behalf of the company |
| SOLICITOR FOR THE RESPONDENT: | Mr Farrar |
Orders
That the respondent pay the reasonable expenses of the applicants of and incidental to the hearing of applications before this Court on 12 May 2005, 15 February 2006 and 16 April 2007 including the costs paid by the applicants to their lawyers.
The costs referred to will be assessed or agreed on the basis that costs include all costs of the applicants except in so far as they are of an unreasonable amount or unreasonably incurred so that, subject to such exceptions, the applicant is completely indemnified by the respondent for the applicant’s costs.
The applications for costs in relation to those matters are removed from the pending cases inventory.
The balance of any outstanding application by the applicants are dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Bowie and Bowie Smith Pty Limited & Bartlett is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
FILE NUMBER: CAF 710 of 2004
| MS BOWIE & BOWIE SMITH PTY LIMITED |
Applicant
And
| MR BARTLETT |
Respondent
REASONS FOR JUDGMENT
Introduction
On 30 March 2007, Ms Bowie filed an Application in a Case seeking indemnity costs against the husband on both her behalf and that of her company, Bowie Smith Pty Limited (“the company”). Ms Bowie and her company were involved in property proceedings between her sister and her sister’s husband through the husband’s assertions that the wife had a significant shareholding and financial interest in the company. This was found not to be the case in Reasons for Judgment in the husband and wife’s property case. Neither Ms Bowie nor the company was ever joined as a party to the proceedings between husband and wife.
Ms Bowie established the company to fund her retirement. The company has substantial property holdings in Sydney and V, in New South Wales.
Background
On 21 April 2005 the father sought to issue five subpoenas. Among these were two to:
1.The Proper Officer, Bowie Smith Pty Ltd – to produce documents including:
i.Company Minute Book recording all company resolutions for the period 1 July 1998 to the date hereof;
ii.Financial statements for the company including the balance sheet, and profit and loss statement for the period 1 July 1998 to the date hereof;
iii.Copies of any accounts evidencing amounts held in the name of the company, either solely or jointly with any other person or entity, during the period 1 January 2003 to the date hereof;
iv.Any documents in the company’s possession evidencing the value of any assets currently held by the company; and
v.Original share transfer in relation to the transfer of the shareholding of [the wife] to [Ms Bowie]; and
2.The Partners, [MB] Accountants – to produce documents in relation to [Bowie Smith] Pty Ltd, particularly:
i.All files in relation to the company (including all correspondence, financial statements, annual returns and other ASIC documentation) for the period 1 July 1998 to the present.
Ms Bowie swore an affidavit on 12 May 2005, filed with leave of the Court on the day of the hearing about the subpoena to the effect that the shares in the company were hers alone. However, she did not file an objection to the subpoenas.
On that day it was ordered that,
1.The material be produced and then be accessible to the parties to the proceedings as I indicated previously.
2.Costs are reserved on both sides.
On 27 July 2005, the husband also sought to subpoena the Commissioner for New South Wales Police, Ms Bowie and the Chief Commissioner of the Office of State Revenue New South Wales for documents in relation to Bowie Smith Pty Ltd. These subpoenas were all objected to on 14 August 2005 and on 13 February 2006 orders were made discharging the subpoenas. The husband was ordered to pay costs in relation to the subpoenas on a party-party basis until 13 September 2005 and on an indemnity basis for 14 September 2005.
On 1 August 2005 the husband made an application seeking to inspect and value the property held by Bowie Smith Pty Ltd and for the appointment of an expert witness to make these valuations. The application was opposed by Bowie Smith Pty Ltd and dismissed. The husband was ordered to pay the company’s costs as agreed or taxed.
On 15 February 2006 the matter came back before me on an application from the husband filed 4 January 2006 seeking that he have permission to adduce evidence at the hearing from a forensic document expert and that the solicitors for the husband
…have liberty to uplift from material subpoenaed in this matter the original share transfer transferring the wife’s shares in [Bowie Smith] Pty Ltd to Ms [Bowie], and the original Minutes of meetings of [Bowie Smith] Pty Ltd in which the share transfer is accepted.
In relation to this application, on 15 February 2006 I made the following orders:
1.The husband’s lawyers have permission to adduce on behalf of the husband at the hearing of the property proceedings evidence from Dr [S] [sic], a forensic document expert.
2.To facilitate the giving of such evidence the lawyers for [the husband] may uplift from the materials subpoenaed in this matter the original shared [sic] transfer of the wife’s shares in [Bowie Smith] [sic] Pty Limited to [Ms Bowie] and the original minutes of the meeting of [Bowie Smith] [sic] Pty Limited in which the share transfer was accepted. Such uplifting is on the basis of the undertaking given by the expert in the affidavit filed in support of this application.
3.The costs of today’s proceedings will be a matter for my determination following the hearing of the property matter between the parties and of consideration of whether or not the expert’s evidence has been used in the proceedings.
4.This finalises the interlocutory matter which was filed on 4 January 2006
I note that in the course of my making an order on 15 February 2006 I provided that “the costs of today’s proceedings would be a matter for my determination…” That does not in my opinion on a proper reading of it confine my subsequent determinations to the costs only of that day but to the costs of and incidental to that day including the preparation for the hearing, the attendance of counsel and the obtaining of advice about the appropriateness of resistance to the subpoena in the application.
On 1 March 2007, judgment was delivered in the property proceedings between the applicant’s sister and former brother-in-law, and provided:
…The husband pursued through various applications attempts to demonstrate that the wife had some beneficial interest in [Bowie Smith] Pty Limited. This appears to have been on the basis that the wife disposed of an interest in that company for significantly less than it was worth, thereby either generating (apparently) some constructive or resulting trust in her favour with the company or with her sister or (alternatively) simply warehousing her interest until the completion of these proceedings. The net effect of these investigations is set out in several judgments delivered by me during the course of the proceedings and demonstrates in my opinion that there was no untoward activity on the part of the wife and that she has no outstanding equitable or other interest in the company.[1]
[my emphasis]
[1] Bartlett & Gibson [2007] FamCA 113 at paragraph [17]
The current application was listed for hearing on 16 April 2007 at which point it was adjourned on the husband’s application to enable him to consider the matter. In addition, the following order was made,
4.The costs of today in relation to Ms [Bowie] are costs in the cause of her application for costs.
The matter then came on for hearing on 21 May 2007.
Orders Sought
Ms Bowie, on her behalf and that of the company seeks the following orders:
1.That the orders made by DCJ Faulks on 12 May 2005 reserving the costs in respect of the applicants’ successful application against the respondents be costs in favour of the applicants on an indemnity basis.
2.That the orders made by DCJ Faulks on 14 February 2006 reserving costs in respect of the respondent’s unsuccessful application against the applicants be costs in favour of the applicants on an indemnity basis.
3.An order for delivery up of all documents in the possession, custody or control of the respondent which relate to the applicants (excluding any documents created in respect of these proceedings).
4.Costs.
The husband did not file any material but sought to resist the application that costs be ordered against him. He maintained further, that if costs were ordered, the payment of those costs should be on a party-party basis.
The Law
Costs in Favour of Non-Parties
I have previously made a decision in these proceedings generally in favour of Ms Bowie and her company to award costs against the husband. That decision is not the subject of appeal and no point was made on this occasion that I was unable properly to make such an order.
In my opinion, such an order might properly be made pursuant to s 117 of the Family Law Act 1975 (Cth). As their Honours in the Full Court of the Family Court stated in Ostasheen Pty Ltd & The Deputy Registrar of Child Support (1998) FLC 98-001 stated at paragraph 76,
… Both s 117(1) (the general rule that each party pays his or her own costs) and s 117(2) (the powers to “make such order as to costs… as the court considers just”) apply to “proceedings under this Act”. In s 4 of the Act “proceedings” are defined to mean “a proceeding in a court, whether between parties or not, and includes cross-proceedings or any incidental proceeding in the course of, or in connection with, a proceeding” (emphasis added). In light of this definition we take the view that when the company applied to the magistrate under O 20 r 17 of the Family Law Rules[2] for an order for its costs in complying with the expenses, there was initiated by it an “incidental” proceeding to the main enforcement summons proceedings. The company was clearly a party to these incidental proceedings and the provisions of s 117 as whole applied to those proceedings.
[2] As they then were
Alternatively, Costs in Relation to Subpoenas
His Honour Justice Carmody in Relationships Australia (Queensland) & M (2006) FLC 93-305 in paragraph 20 stated as follows:
“RA bases this application on paragraph 117(2A)(c). While power to order costs under s 117(2) is wide enough to cover independent parties I think the issue of subpoena costs is more aptly dealt with under either r 15.23(3) or r 15.26(c).”
His Honour goes on to comment in paragraph 21:
“Any award under r 15.23(3) or r 15.26(c) is not intended as a penalty but as a payment by one party to another by way of partial indemnity or compensation for legal and other professional costs incurred.”
And in paragraph 22:
“Rule 15.23(3) envisages reimbursement for ‘a substantial loss or expense’ greater than the amount of conduct money or witness fees payable under the rule. Its terms differ from those of its 1984 forerunner, O 20 r 17, which provided a process for compensating a subpoenaed third party who reasonably incurred costs or expenses (but not losses) connected with compliance. The quantum of the claim also had to be reasonable.”
Rule 15.23 reads as follows:
A named person is entitled to be paid conduct money by the issuing party at the time of the service of the subpoena, of an amount that is:
(a) sufficient to meet the reasonable expenses of complying with the subpoenas; and
(b) at least equal to the minimum amount mentioned in Part 1 of Schedule 4
Rule 15.26 reads:
Objection to subpoena
If a named person or a person having sufficient interest in a subpoena:
(a) seeks an order that the subpoena be set aside in whole or in part;
(b) objects to the production of a document required by the subpoena;
(c) seeks to be paid for any loss or expense relating to the person’s attendance, or the production of a document, in compliance with the subpoena; or
(d) seeks any other relief in relation to the subpoena;
the person must attend court on the court date to apply for the order.
A person who has caused a subpoena to issue and who proceeds in the face of an objection is at risk about costs. If no objection has been filed however that does not mean that an order for costs might nevertheless be made.
It is implicit in his Honour Justice Carmody’s judgment, and in my opinion consistent with common sense, that the “expense” that the “named person” may incur would occur where appropriate by the obtaining of the necessary legal advice to determine whether or not an objection should be made pursuant to rule 15.26. There always remains the discretion in the Court to refuse to make an order for such payment if it considers that the expense was not warranted in the circumstances. It is to be noted that the terms of the rules that were applicable at the time of the Ostasheen & DRCS (supra) decision included the following:
Order 20 Rule 17
“Where in proceedings a person being – (a relevant person for these purposes) … reasonably incurs costs or expenses on the hearing of the application or in connection with the production of the documents, as the case may be, the person may apply to the court for an order as to the assessment and payment of such costs and expenses and the court may make such an order or give such directions as it thinks fit”.
The wording of that rule provoked a certain amount of controversy directed to whether the expenses were to be reasonable or the incurring of them was to be reasonable. The same situation does not directly apply in relation to the existing rules but as his Honour points out[3]
“The court has a discretion to allow or refuse the application wholly or in part it may assess the costs itself or order a taxation”.[4]
[3] 25
[4] His Honour cites Ostasheen (supra) in support of that contention
It seems to me that the Rules permit that the amount that should be paid to Ms Bowie and her company is to represent the actual cost on the basis as an expense incurred in relation to compliance with, or in answer to, the subpoena.
The Court may regard expenses incurred in relation to the compliance or in relation to the subpoena itself as being appropriately dealt with under the Rules. In such case, subject to the Court’s discretion to reimburse the applicant for expenses, considerations relating to indemnity costs do not necessarily arise.
As his Honour Justice Carmody points out in the decision referred to, the ordering of payment by the party issuing the subpoena is not intended as a penalty but rather as a reimbursement and should not be seen as a punishment in some way for inappropriate conduct.
Alternatively I could consider whether I should award costs to the applicants and if so, if I should do so on an indemnity basis.
Indemnity Costs
The traditional position is that when a party to litigation is ordered to pay another party’s costs, those costs are traditionally assessed on a party-party basis - being the proper costs, charges and expenses reasonably and necessarily incurred by one party to the litigation to defend or prosecute their rights. In Kohan & Kohan (1993) FLC 92-340 the Full Court considered awarding indemnity costs and stated at page 79-614 that,
…the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.
In Munday & Bowman (1997) FLC 92-784 the former Chief Judge of the Family Court of Western Australia had an application for indemnity costs before him, and in reviewing the law, including Kohan (supra) he quoted their Honours in the Full Court in that case as follows, at page 84-660:
Indemnity costs orders are still an exception in this and other jurisdictions.
His Honour also cited with approval the summary of his Honour Justice Sheppard in Colgate v Palmolive Company and Another v Cussons Pty Limited (1993) 46 FCR 225 of potential or suggested circumstances in which indemnity costs might be awarded being:
i.an action has been commenced or continued in circumstances where a party properly advised should have known that it had no chance of success; or
ii.the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; or
iii.evidence of particular misconduct causing loss of time to the court and to other parties; or
iv.the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and,
v.an imprudent refusal of an offer to compromise
referring to the dicta of Sheppard J to the effect that there must be some “special or unusual feature in the case to justify the court in departing from the ordinary practice [of awarding only party and party costs]” at page 84-660. However his Honour appear to agree with French J in Tetijo Holdings Pty Limited & Keeprite Australia Pty Limited (Federal Court, 3 May 1991) that the “categories in which the discretion may be exercised are not closed”, at page 84-660.
The judgment of Munday & Bowman (supra) was favourably commented upon by their Honours in the Full Court of the Family Court in G & G [2000] FamCA 889, where the following comment was made at paragraph 9:
Given the view of the Full Court in Kohan that it is fundamental to the exercise of a discretion to award costs on an indemnity basis that the court should know what the terms of any costs agreement are as between the party sought to be indemnified and her own legal practitioners, and given that we have no such information, we are loathe in the circumstances to order costs on an indemnity basis…
Their Honours however went on to indicate that if they had been inclined to make such an order they would have done so in the form suggested by his Honour Justice Gummow in the High Court of Australia in McKewins Hairdressing and Beauty Supplies Pty Ltd & Deputy Commissioner of Taxation [2000] HCA 27, being the following form:
The respondent is to bear the costs of the applicant, such costs to be taxed on the basis that the costs include all costs of the applicant except in so far as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the applicant is completely indemnified by the respondent for the applicant’s costs.
As I commented in K & V,[5]
93.In recent times the difference between solicitor-client costs and indemnity costs seems to have become somewhat blurred. Traditionally solicitor-client costs differed from party-party costs mainly because of the omission of the requirement that such costs must “necessarily” be incurred. This might be illustrated by the fact that a client may require his solicitor to brief counsel of a higher level of seniority than the matter might “necessarily” require. This would then constitute a proper basis for the solicitor to claim such costs from his or her client. It may also constitute a basis for resistance to such additional payment being included in a party-party order made against the other party in the litigation.
94.Although there are many bases and reasons for the ordering of costs, and compensation is only one of them, in more recent times courts have considered that it may be necessary to place a successful party to litigation back into the position that he or she may have occupied if he or she had not been required to bring the matter before a court. This means in essence that the party would be indemnified in respect of all of the costs that he or she had incurred in the proceedings. One would think that this would ordinarily mean an order for what used to be known as solicitor/client costs. Ordinarily, the distinction would not be one of consequence.
95.However one difficulty automatically facing a court seeking to make an indemnity or solicitor/client costs order is the inability on the part of the court to police or supervise adequately the criteria by which such costs should be determined. An order for indemnity costs or solicitor/client costs does not remove the requirement that such costs should be reasonably incurred.
[5] [2006] FamCA 252 at paragraph [93]
DISCUSSION OF THE POSSIBLE APPLICATION OF INDEMNITY COSTS
The ability for a party to seek that a subpoena be issued to require the provision of written material to the Court is in important adjunct to the justice system. It is the obligation of the recipient of the subpoena to comply with that subpoena unless there are proper grounds for objecting to it. It is equally important that those who cause subpoenas to be issued, do so reasonably and responsibly and seek no more information or no more documents then are necessary for the purposes of the proceedings before the Court. Subpoenas should always be issued in expectation not in hope. That is not to say that on occasions subpoenas may have an important exclusionary role in relation to proceedings and the fact that material that has been the subject of a subpoenas is not put into evidence is by no means conclusive that the process has in some way gone astray. Nevertheless, those who receive subpoenas are entitled to be reasonably reimbursed for the expense of complying with the subpoena and this will include in a number of cases more than just nominal conduct money.
If the recipient of a subpoena believes that it has been misdirected or that there are other proper grounds upon which to object to it, the procedures whereby the recipient can make application to the Court to have the matter dealt with are set out in the Rules. In some cases the issues may be complicated because of questions of privilege or alternatively because of corporate structures or potential interpretations of the circumstances of the parties. The recipient of such a subpoena may need to employ a lawyer and the Court can properly consider reimbursement of the recipient of the subpoena subject to the provisions of the Act. In this matter it might reasonably be said that the conduct of the husband in causing the subpoenas to be issued in the light of the denial by the wife of her beneficial interest in the company might fall within the provisions of s 117(2A)(c) it is also the case that s 117(2A)(e) would permit the making of an order for costs against the husband in this matter. The husband has been unsuccessful.
Some documents were provided and some of those documents were able to be inspected. I made orders which facilitated the uplifting of some of those documents but the foreshadowed evidence of an expert about a signature on one of them was not forthcoming.
In my opinion, an order for costs could be made against the husband and this is primarily based on his lack of success in the proceedings rather than upon his conduct. It is unnecessary for me formally to find whether or not his conduct in the circumstances justified the making of an order for costs against him. His lack of success in itself was enough coupled with his perseverance over the matter notwithstanding a number of unsuccessful applications and court attendances. These reflected that any optimism in proceeding with the subpoenas as sought was substantially unjustified.
However, such a determination would not necessarily lift the matter into the realm of indemnity costs from party-party costs. However the matters set out by his Honour Justice Sheppard in Colgate Palmolive Company and Another & Cussons Pty Limited (supra) would in application to this matter, in my opinion, be sufficient to justify the imposition of indemnity costs.
While it is easy to be wise after the event, the first ground (that the action has been commenced or continued in circumstances where a party properly advised should have known that it had no chance of success) is appropriately made out. Allegations of fraud were made in circumstances where necessarily the husband did not know them to be false but where in many respects the allegation was irrelevant to the principal issues between the parties. The husband made no claim that he had made any contribution to the shares held by the wife (except perhaps indirectly) and even if he might have successfully raised the issue that they were a financial resource in the hands of the wife it is difficult to see how that would have substantially affected the outcome of the proceedings.
There is no doubt that the third matter which was that there was a loss of time to the Court and to the other parties as a consequence of this investigation has been made out and it might be reasonably argued that the making of the allegations brought about the undue prolongation of the case by “groundless contentions”.
Accordingly in my opinion there are proper grounds in relation to this application for an order in favour of the applicants against the husband for indemnity costs. However I choose rather to proceed under Rule 15.23 of the Family Law Rules and to order that the husband reimburse the applicants for their reasonable expenses of the company with the subpoenas. Such expenses will include the costs paid by them to their lawyers subject to such costs being properly, necessarily and reasonably incurred.
If I should be mistaken in my interpretation of the Rules I would nevertheless for the reasons set out above award costs on an indemnity basis to the applicants.
Final comment
In the course of her submissions the applicant Ms Bowie sought damages and also the return of property from the respondent. If I assume she sought leave to make applications for these such leave is deemed. The damages claim is unfounded in any jurisdiction of this Court. There is no evidence that the respondent has the property the applicant seeks and in any event the application is misconceived even in the most liberal interpretation of the accrued jurisdiction of this Court.
Other than the order for reimbursement of expenses I make hereafter any outstanding part of the application of Ms Bowie or the company is dismissed.
I certify that the preceding forty four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks
Associate
Date: 10 October 2007
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