Charisteas & Charisteas
[2022] FedCFamC1A 160
•7 October 2022
Federal Circuit and Family Court of Australia
(DIVISION 1) APPELLATE JURISDICTION
Charisteas & Charisteas [2022] FedCFamC1A 160
Appeal from: Charisteas and Charisteas & Ors [2022] FCWA 88 Appeal number(s): NAA 109 of 2022 File number(s): PTW 4624 of 2006 Judgment of: ALSTERGREN CJ, MCCLELLAND DCJ & ALDRIDGE J Date of judgment: 7 October 2022 Catchwords: FAMILY LAW – APPEAL – PRACTICE & PROCEDURE – Appeal from orders dismissing the husband’s application to restrain the wife’s lawyers from acting for her – Whether a conflict of interest exists – Where the wife’s lawyers are also acting for the wife’s litigation funder – Where an application for costs has been made against the counsel for the wife upon a successful appeal to the High Court of Australia – Correct test to be applied is whether a fair-minded member of the public might conclude that proper administration of justice requires the restraints – Error established – Real or substantial possibility of a conflict of interest exists – Appeal allowed – Order restraining the wife from instructing the same lawyers who are acting for the litigation funder – Order restraining counsel for the wife from representing the wife in these proceedings.
FAMILY LAW – APPEAL – COSTS – Appeal from a dollar-for-dollar order against the appellant – Whether s 117 of the Family Law Act 1975 (Cth) (“the Act”) empowered the Court to make such an order – Where s 117 of the Act is a source of power to make dollar-for-dollar orders – Challenge to the exercise of discretion – Where the primary judge did not undertake the consideration of recoverability – Failure to take into account a relevant consideration – Appeal allowed – Application remitted for rehearing.
Legislation: Family Law Act1975 (Cth) ss 79, 79A, 114, 117, 117(2A)
Supreme Court Act 1970 (NSW) s 76
Family Court Rules 2021 (WA) rr 7, 141
Legal Profession Conduct Rules 2010 (WA) r 14
Cases cited: AB v FGH [2022] WASC 244
Atkins & Hunt (2018) 57 Fam LR 128; [2018] FamCA 14
Charisteas & Charisteas and Ors (2020) FLC 93-971; [2020] FamCAFC 162
Charisteas v Charisteas (2021) FLC 94-056; [2021] HCA 29
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64
House v The King (1936) 55 CLR 499; [1936] HCA 40
Iphostrou & Iphostrou [2011] FamCA 20
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19
Judd & Treasure [2018] FamCA 50
Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181
Kooky Garments Ltd v Charlton (1994) 1 NZLR 587
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42
Mitchell v Burell [2008] NSWSC 772
Mumbin v Northern Territory of Australia (No 1) [2020] FCA 475
National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 22 FCR 209
Nguyen v Nguyen (1990) 169 CLR 245; [1990] HCA 9
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Parker v Parker (1992) 16 Fam LR 458
Porter v Dyer (2022) 402 ALR 659; [2022] FCAFC 116
Quayle & Perceval [2018] FamCA 664
Re JJT; Ex Parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44
Salvage & Fosse (2020) FLC 93-966; [2020] FamCAFC 144
Shelbourne & Shelbourne (2019) 60 Fam LR 183; [2019] FamCAFC 196
Number of paragraphs: 90 Date of hearing: 5 August 2022 Place: Perth, delivered in Melbourne Counsel for the Appellant: Mr Robertson Solicitor for the Appellant: DS Family Law Counsel for the First Respondent: Mr P Solicitor for the First Respondent: Firm Y The Second to 13th Respondents: Did not participate The First and Second named Third Parties: Did not participate ORDERS
NAA 109 of 2022
PTW 4624 of 2006FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR CHARISTEAS
Appellant
AND: MRS CHARISTEAS
First Respondent
MR BARTON (DECEASED) AND MS EADIE AS EXECUTORS OF THE ESTATE OF MR J CHARISTEAS
Second Respondents
XYZ PTY LTD (and others named in the Schedule)
Third Respondent
AF BUSINESS
First named Third Party
Ms D
Second named Third Party
order made by:
ALSTERGREN CJ, MCCLELLAND DCJ & ALDRIDGE J
DATE OF ORDER:
7 OCTOBER 2022
THE COURT ORDERS THAT:
1.The appellant is granted leave to appeal.
2.The appeal is allowed.
3.The first respondent shall not, in these proceedings, instruct the same lawyers who are instructed to act for AF Business.
4.Ms D shall not, in these proceedings, represent the first respondent.
5.Orders 12–16 made on 19 April 2022 are set aside.
6.The first respondent’s application for an interim costs order against the appellant is remitted for rehearing.
7.Within 14 days of the date of these orders, the parties are to confer in respect to costs and in the event an agreement is reached, the parties have liberty to approach the Western Appeals Registry with a proposed minute of consent orders.
8.In the event of the parties being unable to reach an agreement in respect to costs, within 28 days of the date of these orders, the parties are to file written submissions of no more than two (2) pages as to what costs order, if any, should be made in respect to the appeal.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Charisteas & Charisteas has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALSTERGREN CJ, MCCLELLAND DCJ & ALDRIDGE J:
Introduction
On 6 October 2021, the High Court of Australia made an order, amongst a number of other orders, remitting the first respondent wife’s application for a property settlement under s 79 of the Family Law Act1975 (Cth) (“the Act”) for rehearing.
On 19 April 2022, a judge of the Family Court of Western Australia determined a number of interlocutory applications in preparation for that rehearing.
Two of those applications are the subject of this appeal.
The first application was made by the appellant husband and sought injunctions restraining Firm Y and Mr P from acting for the wife on the basis that they were also acting for the wife’s litigation funder, AF Business Funding Limited (“AF”), thereby placing themselves in a position of conflict. The husband also sought to restrain Ms D of counsel from acting for the wife, contending that she is also in a position of conflict on the basis that her conduct with the trial judge, during the trial and at the time that his Honour had reserved his decision led, at least in part, to the appeal being allowed. That application for injunctive relief was unsuccessful and he has appealed.
Ms D is now a named party herself and the subject of an application for costs personally, jointly or severally with the wife.
The wife sought an order that the husband pay to her lawyers, on account of her legal expenses, a sum equivalent to the legal expenses incurred or paid for by him, colloquially known as a dollar-for-dollar order. That application was successful and again the husband has appealed.
These reasons will explain why leave to appeal should be granted in relation to both matters and why the appeals must be allowed and the orders set aside.
Dramatis Personae
In order to understand both appeals, it is necessary to detail the parties to the substantive proceedings.
The wife was the applicant for property settlement orders, with the husband being the first respondent. There are 12 other respondents and two third parties in the proceedings.
The first third party is AF. It is a commercial litigation funder and has provided litigation funding to the wife. On 10 October 2014, AF obtained a judgment against the wife and her two daughters (who had guaranteed the advance) for $2,234,741.29, with interest accruing thereon until payment. AF was joined to the proceedings as a third party on 13 July 2018 and seeks orders that it be paid out any money payable to the wife in the proceedings. Whilst the parties differed over the amount presently owed by the wife to AF, it is at least $3.6 million with interest accruing at the rate of 6 per cent per annum.
Firm Y have been the solicitors for AF throughout the proceedings and Mr P has been instructed to appear on AF’s behalf.
The wife’s former lawyers filed a Notice of Ceasing to Act on 8 April 2021. Shortly after the remittal of the matter by the High Court, Firm Y and Mr P have been instructed by the wife. They also continue to act for AF. Additionally, in these proceedings, Mr P acts on behalf of both Firm Y and himself in respect to the restraints the husband is seeking, that is, to prevent them from further acting on behalf of the wife.
Ms D has been instructed by Firm Y to act as junior counsel for the wife. She did not take an active part in this appeal.
Ms D was junior counsel in the hearing that gave rise to the final orders the subject of the High Court appeal. The contact between Ms D and the trial judge led to the orders being set aside and the matter remitted for rehearing. XYZ Pty Ltd, the third respondent, has joined Ms D as a third party to the proceedings and seeks a costs order against her and the wife jointly or severally in relation to its costs of the trial in 2016.
Background
These proceedings have had a long and tortuous history which dates back to 2006. In total, there have been 22 judgments published in the Family Court of Western Australia, this Court and the High Court of Australia in this matter. The history of the dispute has been detailed in many of those published decisions, including those referred to at [1] of the reasons for judgment of the primary judge: Charisteas and Charisteas & Ors [2022] FCWA 88.
For the purpose of this decision, is useful to note the following background facts which are primarily drawn from the decision of the High Court in Charisteas v Charisteas (2021) FLC 94-056, delivered on 6 October 2021, at [2]–[8].
In 2011, property settlement orders were made under s 79 of the Act (“the 2011 Property Orders”), which amongst other things, provided for the early vesting of an identified trust (“the Trust”). Upon its vesting and prior to any distribution, the husband’s mother, who was a general beneficiary of the Trust, was to receive a payment of $338,000 and following this, the trustee was to distribute the trust fund and income in accordance with the trust deed between the husband, the wife and their three adult children (“the Early Vesting Orders”).
In April 2013, the Full Court of the Family Court of Australia (as it was then known) set aside the Early Vesting Orders on the basis that the husband’s mother had been denied procedural fairness. It was subsequently determined by a judge of the Family Court of Western Australia that the 2011 Property Orders were not final orders and that the Court retained jurisdiction to make property settlement orders under s 79 of the Act.
After various procedural issues were litigated, in March 2016, the trial judge, who has since retired, listed the matter for final hearing on 3 August 2016 in respect to the question of what final property settlement orders should be made. For reasons which are not presently relevant, that trial was protracted, with the trial judge delivering judgment and making final orders under s 79 of the Act on 12 February 2018 (“the 2018 Property Orders”).
That judgment was appealed for reasons which included alleged apprehended bias on the part of the trial judge. This was due to the contact between his Honour and Ms D, who was then junior counsel for the wife. Of concern was that the contact occurred during the course of the proceedings and in the period in which judgment was reserved.
The appeal was dismissed by a majority judgment of the Full Court of the Family Court of Australia delivered on 10 July 2020: Charisteas & Charisteas and Ors (2020) FLC 93-971.
The wife successfully appealed that decision to the High Court of Australia, with the High Court upholding the dissenting judgment of Alstergren CJ in respect to the issue of apprehended bias: Charisteas v Charisteas (2021) FLC 94-056 at [11]–[18]. The High Court set aside the orders made on 10 February 2015 and the 2018 Property Orders, and remitted the matter for rehearing, noting that the rehearing should address the Early Vesting Orders (at [28]).
Since being remitted for rehearing, the matter has been case managed by the primary judge. In her reasons for judgment which are the subject of this appeal, the primary judge outlined the many procedural applications that have been made to progress the matter to final hearing.
The wife had indicated that she is not in a position to pay for the services of Firm Y, Mr P and Ms D, so AF is providing her with an indemnity. In practical terms, AF is paying her legal fees. The lawyers assert that if they were not to act for the wife under the present arrangement, no one would.
As to the dollar-for-dollar order, the primary judge found that the wife could not afford to pay her lawyers and had exhausted all potential lenders of funds. On the other hand, whilst the husband’s position was that he could barely afford to make ends meet, he had significant income and was able to pay his own legal fees (at [79]). In those circumstances, her Honour was satisfied that it was appropriate to make the costs order as sought.
Principles concerning an appeal from a discretionary judgment
The appeal is in respect to orders arising from the exercise of discretionary power by the primary judge. In those circumstances, it is necessary for an appellant to establish a ground of appeal that falls within the principles identified by the High Court in House v The King (1936) 55 CLR 499 (“House v The King”) at 505 and Norbis v Norbis (1986) 161 CLR 513 at 539–540; that is, appellate intervention may be required where the primary judge:
(a)Acts upon a wrong principle;
(b)Allows extraneous or irrelevant matters to guide or affect the decision;
(c)Mistakes the facts;
(d)Fails to take into account some material consideration; or
(e)Makes a decision that, upon the particular facts, is unreasonable or plainly unjust.
Consideration
Grounds 1 and 2: Application for restraints against legal representatives
It is convenient to first deal with the husband’s challenge to the decision by the primary judge to dismiss his application for restraints against the legal advisors appearing for both the wife and the litigation funder. As noted by the primary judge at [10], the substance of the orders sought by the husband in that respect were that:
10. …
a)Firm Y and Mr P be restrained by injunction from representing the wife in these proceedings; and
b)Ms D be restrained by injunction from representing the wife in these proceedings.
(Footnote omitted)
The husband’s argument
Ground 1 asserts that the primary judge erred in dismissing the application for injunctive relief and contends that the primary judge should have concluded that:
1. …
(d)the interests of the Wife and AF do actually, or at least have the potential, to conflict with each other and that such conflict is irreconcilable;
(e)whilst the formal position before the Court of the Wife and Ms D is closely aligned, their interests do not closely align and, as a matter of fact, conflict in circumstances where the Wife could potentially, if so advised, join in the claim for costs against Ms D;
(f)Ms D has a professional and financial interest in the outcome of proceedings;
(g)insofar as Ms D is concerned that she has an interest in the outcome of the proceedings and is likely to give evidence;
(h)there was no, or insufficient, evidence before the Court that the Wife had given “informed consent” to the conflicts of interest or potential conflicts of interest between her interests and the interests of AF;
(i)that a fair-minded reasonably informed member of the public would conclude that the proper administration of justice did require Firm Y, Mr P or Ms D be restrained from acting for the Wife;
(As per the original)
Additionally, by linking this with Ground 2, it was contended that the primary judge erred in determining that, in the event of the restraints being granted, there were “virtually no prospects of [the wife] being able to secure alternate legal representation”, in circumstances where the primary judge made a “dollar-for-dollar order” requiring the husband to contribute to payment of the wife’s legal fees.
The wife’s argument
Comparatively, it is contended by the wife that the husband has failed to properly particularise the conflict of interest between the wife and the litigation funder. The wife further contends that, in any event, there is no such conflict of interest because “[t]he interests of AF and the wife in the remaining proceedings are closely aligned, namely to maximise the value of the assets and financial resources to be retained by the wife in the finalisation of the section 79 proceedings” (Wife’s Summary of Argument filed on 27 July 2022, paragraph 13).
Reference was also made to the relevant Family Court Rules 2021 (WA) (“the Court Rules”) and the Legal Profession Conduct Rules 2010 (WA) (“the Conduct Rules”), including:
·Rule 141 of the Court Rules which prohibits a lawyer from acting where an actual, rather than potential, conflict of interest exists;
·Rule 14(1) of the Conduct Rules, which provides:
A practitioner and the practitioner’s law practice must avoid conflicts between the duties owed to 2 or more clients of the practitioner or the law practice.
·Rule 14(2) of the Conduct Rules, which provides:
A practitioner must not provide, or agree to provide, legal services for a client if –
(a)the practitioner or the practitioner’s law practice is engaged by another client in the same or a related matter; and
(b)the interests of the client and the other client are adverse; and
(c)there is a conflict or potential conflict of the duties to act in the best interests of each client.
·Rule 14(3) of the Conduct Rules, which provides:
Subrule (2) does not apply if –
(a)each client is aware that the practitioner or the practitioner’s law practice is also providing legal services to each other client; and
(b)each client has given informed consent to the practitioner or the practitioner’s law practice providing the legal services to each other client; and
(c)an effective information barrier has been established to protect the confidential information of each client.
It was further contended that both AF and the wife have each given informed consent in compliance with r 14(3)(b) of the Conduct Rules, with that informed consent arising from the advice of senior counsel.
In that last respect, it was not disputed that the wife had obtained such advice from senior counsel. However, the advice provided to the wife by senior counsel was not before the Court and, accordingly, there is no basis for finding that the wife has given informed consent to Firm Y acting for her and AF.
In that respect, it was contended at paragraph 24 of the wife’s Summary of Argument that the relevant test to apply in considering whether to restrain lawyers from acting in order to protect the integrity of the judicial process is found in Kallinicos v Hunt (2005) 64 NSWLR 561 (“Kallinicos v Hunt”) at [76], where Brereton J said:
76. …
· The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
(Emphasis added) (Citations omitted)
It was contended that the hypothetical observer would be concerned about the prospect of the wife being without legal representation. In that respect, the wife submitted that:
25.The hypothetical observer would likely consider the cause of justice advanced by the continued representation by Ms D, the counsel who prepared and appeared for the wife at the twelve day trial in 2016, particularly as the further trial will be determined upon much the same evidence as the previous hearing.
(Wife’s Summary of Argument filed on 27 July 2022, paragraph 25)
Disposition
Regrettably, it appears that the primary judge was led into error by the parties in these proceedings, who contended that the relevant principle to be applied in determining whether a legal practitioner should be prevented from acting for a party, in the interests of the protection of the integrity of the judicial process, is the principle set out above.
The correct test that should have been applied by the primary judge, in determining whether a legal practitioner should be restrained from acting on behalf of a party, is that which is adumbrated by the Full Court of the Federal Court of Australia (Besanko, Lee and Abraham JJ) in Porter v Dyer (2022) 402 ALR 659 who applied, with approval, the following statement of principle by Griffiths J in Mumbin v Northern Territory of Australia (No 1) [2020] FCA 475:
39.The relevant principles which guide the exercise of the Court’s separate discretion are broadly as follows:
(a)The Court has an inherent jurisdiction to ensure the due administration of justice, to protect the integrity of the judicial process and to restrain legal practitioners from acting in a particular case as part of its supervisory jurisdiction (see, for example, Grimwade v Meagher [1995] 1 VR 446 at 452 per Mandie J and Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065; 228 FCR 252 at [37] per Beach J).
(b)The test to be applied is whether a fair-minded, reasonably informed member of the public might conclude that the proper administration of justice requires that a solicitor be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice (I prefer this formulation of the principle, as opposed to the use of the term “would”: see Timbercorp at [62] per Anderson J and the cases cited therein, as opposed to the different formulation adopted by Beach J in Dealer Support Services at [94], upon which the Jawoyn Claim applicant relied, but I would regard even that higher standard to have been met in the circumstances here).
…
(Emphasis added)
Additionally, we refer to and adopt that which was said by Thomas J in a New Zealand case, Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 at 590 where, in commenting on the role of legal practitioners as officers of the Court, his Honour stated:
In such cases, apart altogether from the position of the client, the Court is not receiving the assistance of counsel who are observably independent. Independence is a function of counsel. The Court is entitled to assume that solicitors and counsel appearing before it possess that independence. Solicitors not only owe a duty to their clients to do the best for them but also owe an overriding duty to the Court. The same overriding duty is owed by counsel who have been granted a right of audience to appear in this Court. As part of their professional responsibility, therefore, solicitors and counsel must ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called in question.
Significantly, that conflict of interest can arise where the personal or reputational interest of the legal practitioner is at stake in the proceedings. In that respect, in Mitchell v Burell [2008] NSWSC 772, Brereton J stated that:
20. … [The] line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.
Restraints sought against Firm Y and Mr P
For the following reasons, we are of the opinion that the primary judge erred in failing to have regard to a relevant consideration, namely, that there is a “real or substantial possibility of a conflict” between the interests of the respective clients of Firm Y and Mr P as that term has been applied in the context of a fiduciary relationship: John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [91], citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 per Mason J at [97].
In that respect, there can be no doubt that a legal advisor is engaged in a fiduciary relationship to the benefit of their client. Indeed, as noted by Gummow J in National Mutual Holdings Pty Ltd v Sentry Corp (1989) 22 FCR 209 at 229, “even among fiduciaries solicitors stand in a special position”.
In our respectful opinion, the primary judge erred in failing to acknowledge and consider that there is such a real possibility of conflict in the circumstances. The wife currently owes AF, as at 30 April 2022, the sum of least $3.6 million and AF has an interest in ensuring that the adjustment of the parties’ property sought by the wife pursuant to s 79 of the Act is reflected as a transfer of property to the wife, rather than the settlement being structured on an alternative basis. Such an alternative would be to maximise non-property or cash benefits to the wife such as, for instance, the wife receiving a greater adjustment of superannuation in her favour which may be beyond the claim of creditors including AF. Additional options could be structuring any settlement such that the orders provided for the wife to receive ongoing periodic payments of spousal maintenance rather than a lump sum amount, or even, potentially, an entitlement to occupy property for an indefinite period or possibly life. Yet a further alternative would be to provide for distributed property to be held in a discretionary trust for the benefit of the wife and her children.
Such possible alternative structures of property settlement are not merely fanciful possibilities. At the time of the hearing before the primary judge, it was acknowledged that an application was pending in the Supreme Court of Western Australia in the matter of AB v FGH [2022] WASC 244, in which the wife obtained relief of that nature in respect to a family provisions claim that she made against the estate of her late father.
An additional and related potential conflict is the fact that the wife’s two daughters, who are the seventh and eighth respondents in these proceedings, are guarantors of the debt payable by the wife to AF. This places the wife in an uncomfortable position. One incentive for adopting a structure that maximises the adjustment of property and/or cash to her, rather than some alternative structure, is the real possibility that AF will pursue the wife’s daughters for the balance of monies payable by her pursuant to the guarantee. Thus, in that limited sense, the interests of AF and the wife coincide to maximise the adjustment of property and/or cash which she receives from the property settlement, but that is only because of the potential prejudice faced by her daughters as guarantors of the debt payable to AF. In other words, while superficially there is a coincidence of interests, it leaves the wife vulnerable to her emotional concern for her daughters’ interests rather than her own interests exclusively.
Clearly, it is in the interests of the wife to have her own independent legal advice and representation to consider and navigate these complexities. This is particularly so in circumstances where there is a real possibility that the ongoing litigation will so deplete the funds available to be distributed between the parties that the outcome will be one where the wife is left with insufficient funds to pay the debt she owes to AF.
In other words, common sense suggests that if these parties are to contemplate resolution of these proceedings, as a number of judicial officers have implored them to do, there will have to be some compromise by all concerned parties. This includes potential compromise on the part of AF as to the amount they seek to recover from the wife, in circumstances where there is every prospect that the amount she receives pursuant to s 79 of the Act will be insufficient to meet her indebtedness to them.
To his credit, Mr P who, as noted, appeared in this appeal on behalf of the wife, Firm Y and himself, acknowledged the potential for such conflict to arise but indicated he would, at that point, withdraw from acting in the proceedings for AF and only at that point act solely for the wife.
While so much could reasonably be expected from respected counsel acting as an officer of the court, there was no indication that his instructing solicitors, Firm Y, would act in a similar manner.
Moreover, we respectfully disagree with Mr P that actual conflict would only arise if negotiations proceeded to a point where all parties were asked to consider compromising their expectations and, in the case of AF, the potential acceptance of a sum that is less than the amount of the judgment debt payable to them by the wife. That concession, in our view, establishes the existence of actual conflict, over and above potential conflict. This is because the legal advisors for the parties substantially control the subject matter and direction of settlement negotiations. That is, Firm Y and/or Mr P would be in a position to control the direction of negotiations such that they determine whether the negotiations included consideration of all parties contemplating such a compromise or the alternative structures to which we have earlier referred.
In that context, we note that parties to family law proceedings are encouraged to explore non-litigious means of resolving issues in dispute prior to and during proceedings. This is confirmed in r 7 of the Court Rules, which relevantly provides:
To achieve the main purpose, the court must apply these rules in a way that –
(a) deals with each case fairly, justly and in a timely manner; and
(b) encourages parties to negotiate a settlement, if appropriate; and
(c)is proportionate to the issues in the case, their complexity and the likely costs of the case; and
…
In their capacity as officers of the court and in the context of that obligation, both Firm Y and Mr P are presently in a position of conflict of interest. This is because, as legal representatives of both AF and the wife, they have an obligation to consider non-litigious means of resolving these proceedings and, being in that position, have the capacity to determine the substance and structure of those settlement negotiations.
The learned primary judge erred in failing to have regard to the potential and actual conflict between the interests of Firm Y, Mr P and the wife which we have identified. We are satisfied that, if the extent of that actual and potential conflict were identified to a fair-minded, reasonably informed member of the public, they would conclude that the proper administration of justice requires that the restraints sought by the husband against Firm Y and Mr P be established.
We are satisfied that such a fair-minded member of the public would be of that view even if they were informed that the wife had sought independent advice on the issue of conflict and, in the circumstances of this case, the primary judge erred in finding, as a relevant consideration, that the impact of the parties’ conduct on the proper administration of justice had been cured in whole or in part by the wife obtaining such advice. This is particularly so when the content of that advice was not before the Court and it was not possible to determine what factors had been taken into consideration by senior counsel who provided that advice to the wife.
Restraint sought against Ms D
For similar reasons, we are of the opinion that the primary judge erred in terms of the fourth principle adumbrated in House v The King in that she failed to have regard to the fact that Ms D was in a position of conflict of interest in acting for the wife, in circumstances where an application for costs had been made against Ms D.
This is in circumstances where the application for costs arises where the successful appeal to the High Court and subsequent remittal of these proceedings for rehearing occurred, in substantial part, as result of the conduct engaged in by Ms D. We have earlier noted that Ms D is personally subject to an application for costs in respect to the 2016 proceedings. That necessarily gives rise to a conflict between her and the wife because of the tension between whether one or both of them pay costs and in what proportion, in the event of such a costs order being entered against them.
Additionally, the background facts in this matter suggest that it may be in the interests of the wife to obtain independent advice as to whether she has a claim for contribution against Ms D in respect to costs which the wife has incurred in these proceedings.
For that additional reason, Ms D is in a position of actual conflict of interest as to whether she provides advice of that nature to the wife.
Finally, we observe that consideration of a potential costs order against Ms D necessarily involves reputational issues as well as the prospect of Ms D being required to give evidence in these proceedings. Those circumstances give rise to the line referred to by Brereton J in Kallinicos v Hunt at [20] being crossed. Ms D should, in those circumstances, be restrained from further acting in this matter on behalf of the wife.
It was not made clear as to whether the wife had sought independent advice in respect to potential issues of conflict if Ms D continued to act for her. In any event, for reasons which we have earlier set out, we are of the view that such advice would not remedy the concerns we have expressed regarding the parties’ conduct, nor cure the public concern for the proper administration of justice, the need to protect the integrity of the judicial process and the appearance of justice.
Exercise of discretion
As noted in Ground 2 of the husband’s Amended Notice of Appeal, a reason for the primary judge dismissing the husband’s application for restraints against the legal advisors was her Honour’s concern that there was “virtually no prospects of [the wife] being able to secure alternate legal representation”. That conclusion on the part of the primary judge was, with respect, merely speculative and, further, any difficulties that the wife may potentially face in obtaining alternative legal representation does not justify the Court tolerating the actual conflicts of interest which we have identified in these proceedings.
Disposition of restraint issue
Accordingly, we uphold both Grounds 1 and 2 of the appeal. We intend to re-exercise discretion by making an order restraining the wife from engaging the services of the same solicitors and counsel who are acting on behalf of AF. We will also make an order restraining Ms D from acting in these proceedings on behalf of the wife.
Grounds 3 and 4: The dollar-for-dollar order
The costs order was challenged on two grounds. The first was that s 117 of the Act did not empower the Court to make such an order and the second was a challenge to the exercise of discretion.
Ground 3
We do not propose to dwell at length on this ground because it is clear, as was accepted by counsel for the husband, that s 114 of the Act is sufficiently broad enough to encompass such an order.
A dollar-for-dollar costs order is a species of litigation funding order. There is a long history of such orders being made in matrimonial proceedings where one party to a marriage has control of the assets of the relationship. A brief history of such orders, which have been made since the end of the nineteenth century, at least, was set out in Salvage & Fosse (2020) FLC 93-966 (“Salvage & Fosse”) at [4]–[7].
Such an order requires the party in control of the assets, which are the subject of division in the proceedings, to pay the costs of the party seeking division of those assets so as to obviate the obvious unfairness of the position that would otherwise ensue. Whilst the same result can be achieved by an interim or partial property settlement, a costs order remains an available option.
The power to make an interim order for payment towards the costs of another party in family law proceedings was the subject of a series of obiter comments by the members of the High Court in Re JJT; Ex Parte Victoria Legal Aid (1998) 195 CLR 184. The comments supported the making of such orders, although there was no agreement as to the source of power.
Justice Gaudron, who generally agreed with Hayne J, said at [2] that the costs power in s 117 was a “broader power” which included power to authorise an interlocutory order to provide the other party with funds to conduct the proceedings. Her Honour added at [3] that such an order could be made pursuant to the maintenance power, an inherent power or the injunctive power.
Justice Gummow, who agreed with Callinan J, said:
10.Secondly, the basic concept that orders as to costs provide for or towards an indemnity does not deny the competency of an interlocutory order whereby one party is obliged to make available to another funds towards that indemnity. Such an order may be made quia timet, in advance of the indemnity being called upon after the making of final orders. …
Justice Kirby was of the view that the terms of s 117 justified orders for the payment of future costs but that the maintenance power did not do so (at [41.4] and [53]).
At [92], Hayne J said:
92.Section 117(2) enables the Family Court to make orders “as to” costs and that may well enable a broad range of orders to be made. The subject‑matter of those orders must, however, be “costs”: a power to make orders “as to” costs does not enable the court to make orders dealing with something other than costs.
His Honour contrasted such an order with the order that has been made in the Court below and which was under appeal, saying:
94.…it required Victoria Legal Aid to outlay money (or time and services) for the representation of the child, not to pay or provide for the sum that might later be ordered by the Court to be paid by one person to another as indemnity (or more usually partial indemnity) against costs incurred in fighting the suit.
Thus, it appears that his Honour considered that s 117 may empower a future costs order but only where those costs were on account of actual costs that might be the subject of a final costs order. If that is so, careful attention would need to be given to the terms of any such order.
Justice Callinan said:
142.In referring to the considerations which suggest that s 117 does not authorise the making of costs orders against third parties, I have looked at the matter from the viewpoint of the prosecutor which both in form and in substance is a stranger to the litigation. I do not intend to foreclose the power of the Court under s 117 to make an order in circumstances of the nature considered in the passage from Knight’s Case set out earlier in these reasons, nor, whilst not ruling on the point, do I exclude from the scope of s 117(2) orders in the nature of interim orders for costs of the nature made by Bryson J in Parker v Parker. His Honour was exercising the jurisdiction of the Supreme Court of New South Wales under the De Facto Relationships Act 1984 (NSW) but, in support of the course which he took, referred to various authorities founded upon the Family Law Act.
143.Such orders appear to answer the description in s 117(2) of orders “as to costs”. They, and the orders nisi made by Faulks J in this litigation, are not orders “as to … security for costs”. An order for security for costs is not an immediately operative determination as to where the burden of costs falls. Rather, the requirement of the provision of security is imposed as a condition for the continuation of proceedings by the party against whom the order is made.
(Footnotes omitted)
In Parker v Parker (1992) 16 Fam LR 458, Bryson J held that s 76 of the Supreme Court Act 1970 (NSW) (as it was then), which was a general provision to the effect that costs shall be at the Court’s discretion, with full power for it to determine by whom and to what extent costs are to be paid, which empowered an interim order for litigation funding.
In addition, this Court has confirmed that s 117 is a source of power to make litigation funding orders including dollar-for-dollar orders. For example, see Shelbourne & Shelbourne (2019) 60 Fam LR 183; Atkins & Hunt (2018) 57 Fam LR 128; Iphostrou & Iphostrou [2011] FamCA 20; Judd & Treasure [2018] FamCA 50. Thus, even judges who have doubt as to whether s 117 does empower such orders, on it must be said, some reasonable grounds, accept the weight of this authority (see for example, Quayle & Perceval [2018] FamCA 664 (“Quayle”)).
Thus, although some of us hold the doubts expressed in Quayle, we accept the force of those decisions. We are not of the view that they are manifestly wrong (Nguyen v Nguyen (1990) 169 CLR 245).
Accordingly, we are of the opinion that until the High Court holds otherwise, the Court should proceed on the basis that s 117 empowers the Court to make litigation funding orders, including dollar-for-dollar orders.
The point is an arid one in any event. As we have said, s 114 amply provides the basis for such orders and no error would be made by proceeding under that section. Whilst in theory at least, the considerations to be taken into account may differ slightly due to the mandatory terms of s 117(2A) which do not apply to s 114, there is little practical difference in the approach to be taken, as many of those considerations cannot apply to such orders. Therefore, the matters to be taken into account in the current circumstances remain substantially the same.
The challenge to the power to make the order fails.
Ground 4
The appellant then challenged the exercise of the discretion and submitted that her Honour erred by failing to take into account the extent to which any costs paid pursuant to the order could be later adjusted or recovered without recourse to s 79A of the Act.
That is a valid consideration, but not a determinative one (see Salvage & Fosse at [30]–[35]).
We accept that the primary judge did not undertake the consideration of recoverability, but that is not entirely surprising because we are unable to identify any submission put to her Honour that raised it.
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, the majority said:
120.… Counsel for the plaintiffs did not demur from the proposition that when a court is invited to make a discretionary decision, to which many factors may be relevant, it is incumbent on parties who contend on appeal that attention was not given to particular matters to demonstrate that the primary judge’s attention was drawn to those matters, at least unless they are fundamental and obvious.
In Salvage & Fosse, the majority considered that the point was fundamental and obvious, but that was in an entirely different set of circumstances. Here, the point is less obvious, and on balance, we are of the view that the failure to make the submission is fatal to the appeal.
The next point that is of concern is the effect of the orders of easing the financial pressure on the commercial litigation funder. To the extent that Firm Y, Mr P and Ms D were acting for the wife, AF was indemnifying them as to the fees they incurred on her behalf. The costs order therefore relieved part of that burden. It is not known, on the occasions that the lawyers were acting for both the wife and AF, whether they were charging any additional fee. It would be difficult to see how they would charge more than the one fee for daily appearances. If that is so, again, the interim costs order relieved part of the financial burden of AF as to its own representation.
We consider that, in the ordinary course, it would be very difficult indeed to make a litigation funding order, especially a dollar-for-dollar order, in favour or for the benefit of a commercial litigation funder.
This was a relevant consideration to take into account. It was a point raised at the hearing and in oral submissions on the appeal, but was not referred to in the primary judge’s reasons. A failure to take into account a relevant consideration is an error in the exercise of the discretion (House v The King at 505).
It follows that the appeal must be allowed and the application remitted for rehearing. The outcome of the appeal as to the wife’s representation means that there has been a considerable change in relevant matters which will require further evidence and reconsideration.
Leave to Appeal
We have found merit in the grounds of appeal and it would cause a substantial injustice if leave to appeal was not granted. There will therefore be a grant of leave.
Costs
At the conclusion of the appeal it was noted that, in the event of a costs order being made in favour of the husband, the wife may wish to seek a contribution from the other parties to the appeal. Accordingly, we will direct that, within 14 days, the parties confer in respect to the question of costs and if an agreement is reached, to provide a proposed minute of consent orders. In the event that they are unable to reach agreement, within a further 14 days, the parties are to provide short written submissions of no more than two pages as to what order (if any) should be made in respect to the question of costs.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Alstergren, Deputy Chief Justice McClelland & Justice Aldridge. Associate:
Dated: 7 October 2022
SCHEDULE OF PARTIES
PTW 4624 of 2006 Respondents
Fourth Respondent:
MR BARTON (DECEASED)
Fifth Respondent:
MS EADIE AS CASE GUARDIAN FOR MRS CHARISTEAS SNR
Sixth Respondent:
MR E CHARISTEAS
Seventh Respondent:
MS SOLANO
Eighth Respondent:
MS MAGNOLI
Ninth Respondent:
ABC PTY LTD
Tenth Respondent:
THE EXECUTORS OF THE ESTATE OF THE LATE MR J CHARISTEAS IN THEIR CAPACITY AS BENEFICIARIES OF THE ABC TRUST
Eleventh Respondent:
MS EADIE AS BENEFICIARY OF THE ABC TRUST
Twelfth Respondent:
MS SOLANO AS BENEFICIARY OF THE ABC TRUST
Thirteenth Respondent:
G INVESTMENTS PTY LTD
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