Clayton & Clayton (No 4)
[2024] FedCFamC2F 1018
•27 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Clayton & Clayton (No 4) [2024] FedCFamC2F 1018
File number: SYC 8412 of 2019 Judgment of: JUDGE LIOUMIS Date of judgment: 27 August 2024 Catchwords: FAMILY LAW – COSTS – Where the matter was listed for interim hearing in September 2023 in relation to the mother’s Application for the father’s solicitors at that time to be restrained from acting for the father – Where the mother’s Application for restraint was based on inadvertent disclosure to the father’s solicitors of confidential and privileged communication between the mother and her solicitors – Where findings were made that the father’s solicitors failed to provide disclosure to the mother’s solicitors of the inadvertent disclosure, and failed to comply with rule 31 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) – Where the mother seeks orders as to her costs in seeking that the father’s former solicitors be restrained from acting – No order as to costs made against the father’s former solicitors – Order made for the father to pay the costs of the mother on an indemnity basis in relation to the mother’s Application for restraint – Costs to be paid as agreed or assessed Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 12.13, 12.15, 12.17
Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) r 31
Cases cited: Badawi & Badawi (Costs) [2017] FamCAFC 196
Cassidy & Murray (1995) 19 Fam LR 492
Clayton & Clayton [2023] FedCFamC2F 1375
Clayton & Clayton (No 2) [2023] FedCFamC2F 1385
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 119 CLR 118
Collins & Collins (1985) 9 Fam LR 1123
Ex Christmas Islanders Association Inc v The Attorney-General for the Commonwealth (No 2) [2006] FCA 671
Kohan & Kohan (1992) 16 Fam LR 245
Krach & Krach (No 2) [2009] FamCA 886
Munday v Bowman (1997) FLC 92-784
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123
Penfold v Penfold (1980) 144 CLR 311
Division: Division 2 Family Law Number of paragraphs: 83 Date of last submission: 23 February 2024 Place: Sydney Solicitor for the Applicant: Mr Naddaf, Dimocks Family Lawyers Solicitor for the Respondent: Ms Middleton, Barkus Doolan Winning ORDERS
SYC 8412 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS CLAYTON
Applicant
AND: MR CLAYTON
Respondent
INDEPENDENT CHILDREN'S LAWYER
ORDER MADE BY:
JUDGE LIOUMIS
DATE OF ORDER:
27 AUGUST 2024
THE COURT ORDERS THAT:
1.The Father pay the costs of the Mother on an indemnity basis in relation to the Application restraining the Father’s solicitors from appearing.
2.The costs in Order 1 be paid as agreed or assessed.
3.The Father pay the costs ordered within 28 days of agreement of the finalisation of the assessment.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
This matter concerns an Application in a Proceeding filed by the Applicant mother, Ms Clayton (“the mother”), on 27 September 2023 (sealed 22 February 2024) (“the costs Application”). In this Application, the mother seeks orders as to her costs in seeking that the former legal representatives of the Respondent father, Mr Clayton (“the father”), be restrained from acting for the father, as sought in the Application in a Proceeding filed 3 August 2023 (sealed 14 August 2023) (“the interim Application”).
In the costs Application, the mother seeks that the father pay the mother’s costs in seeking this order on an indemnity basis or in the alternative, that the father’s former legal representatives, KK Lawyers, pay the mother’s costs on an indemnity basis. In her Written Submissions filed 5 December 2023, the mother sought that her costs be paid on an indemnity basis or in the alternative, on a solicitor/client basis or in the alternative, on a party/party basis.
The father opposes the making of any costs order and seeks that the costs Application be dismissed, with each party bearing their own costs of the Application.
For reasons that will become apparent in this judgment, I make Orders for the father to pay the mother’s costs in seeking Order 1 of the interim Application on an indemnity basis as agreed or as assessed.
EVIDENCE
The mother relies on the following documents:
(a)Written Submissions filed by the mother on 5 December 2023;
(b)Written Submissions in Reply filed by the mother on 23 February 2024;
(c)Outline of Case Document filed by the mother on 4 September 2023;
(d)Application in a Proceeding filed 3 August 2023 (sealed 14 August 2023);
(e)Affidavit of Ms Clayton filed 3 August 2023;
(f)Ex Tempore Reasons for Judgment delivered by Her Honour Judge Lioumis on 6 September 2023: Clayton & Clayton [2023] FedCFamC2F 1375;
(g)Financial Statement filed by the mother on 13 April 2022;
(h)Application in a Proceeding filed 27 September 2023 (sealed 22 February 2024);
(i)Affidavit of Ms Clayton filed 27 September 2023; and
(j)Updated Financial Statement filed by the mother on 17 January 2024.
The father relies on the following documents:
(a)Amended Written Submissions filed by the father on 15 February 2024;
(b)Financial Statement filed by the father on 15 January 2024; and
(c)Paragraphs 11 – 20 of the Affidavit of Mr Clayton filed 12 February 2024.
Both parties relied on the Orders of 6 September 2023.
I have read and considered all material relied upon by the parties.
As seen in the below extract of the Orders made on 7 November 2023, the former legal representatives of the father were provided the opportunity to file and serve any written submissions in reply to the parties’ written submissions by 4 pm on 16 February 2024. No submissions were filed by KK Lawyers.
BACKGROUND
This matter has an extensive and complicated history and involves significant and serious allegations against each party. The background relevant to the conduct of the parties in giving rise to the costs Application is as follows.
The mother commenced the substantive proceedings by filing an Initiating Application in the Federal Circuit Court of Australia (as it was then known) on 10 February 2021.
The father filed a Response to Application for Final Orders on 28 July 2021.
On 3 August 2023, the mother filed an Application in a Proceeding which was sealed on 14 August 2023 (“the interim Application”) and an affidavit in support. Order 1 of the interim Application sought that the father’s legal representatives at that time, KK Lawyers, be restrained from acting for the father. As part of the interim Application, the mother also sought a range of interim parenting orders, personal protection orders and orders relating to the father undertaking hair follicle testing and CDT testing.
The father filed a Response to Application in a Proceeding and an affidavit in support on 21 August 2023. In his Response, the father sought that the mother’s interim Application be dismissed, as well as a suite of interim parenting orders and for a report to be prepared by a single expert.
The matter was listed for interim hearing on 6 September 2023 in relation to the interim Application. On this date, I dealt with the preliminary issue of the mother’s Application for injunctive relief restraining the father’s solicitors from continuing to act and asked for submissions in relation to this issue only. Although the Independent Children’s Lawyer was present, they did not take part in these proceedings in relation to this preliminary issue. Orders were made restraining KK Lawyers by its solicitors and employees from acting for the father. My reasons were provided ex tempore, and the parties were later provided with the settled reasons for judgment on 27 October 2023: Clayton & Clayton [2023] FedCFamC2F 1375 (“Clayton & Clayton [2023]”).
The matter was also listed for further interim hearing on 28 September 2023, and the costs from the Court event were reserved.
Paragraphs 9 – 13 of Clayton & Clayton [2023] canvas the relevant background to the mother’s Application for the father’s former legal representatives to be restrained from continuing to act:
[9] Focusing on the relevant background to the wife’s application, I find as follows:
(a) That [in mid] 2023, the wife became aware, following discussions with the New South Wales Police, that the husband’s phone contained 175 screenshots of her diary and calendar.
(b) On 26 July 2023, the wife’s solicitor wrote to the husband’s solicitor to ask if they were privy to correspondence between the wife and her solicitors.
(c) On 2 August 2023, the husband’s solicitor wrote to the wife’s solicitor in reply as follows:
2. We do acknowledge that our client had in the past, sent screenshots of your client’s email to and from your firm to our [Ms L]. However, all the necessary steps, in strict compliance with the Rules were taken, in good conscience and observing the principals [sic] of ethics, namely:
a) That material was deleted as soon as possible upon becoming aware of it being communication between you and your client;
b) That material was not saved or disseminated in any way whatsoever;
c) The sender of the material, being our client, Mr [Clayton], was informed of the inappropriateness of the disclosure, was told explicitly and definitely not to access nor disseminate any such material to our firm or to [Ms L] or to anyone else.
3. We have raised this issue with [Mr K], Senior Ethics Solicitor of Law Society of NSW. He has advised that there has been no breach of any Rule or ethical obligation in this matter.
[10] What is interesting in this letter, and what is of significant concern to me, is that as part of this letter, the solicitors for the husband did not provide the following information:
(a) The dates upon which the husband made the disclosure of the confidential information;
(b) What the confidential information was that was disclosed;
(c) How many times disclosure had occurred;
(d) How much information had been disclosed; and
(e) Why the solicitor for the husband had not, as they were obliged to which I will discuss shortly, advised the solicitor for the wife of the inadvertent disclosure.
[11] It also became clear in written submissions that when the letter refers to the advice that the solicitors for the husband received from the Senior Ethics Solicitor of the Law Society of New South Wales, that that advice was not obtained, sought or received until after the letter from the wife was received.
[12] The husband, in his affidavit filed 2 September 2023, provides evidence that he had access to the wife’s email accounts and she had access to his accounts. He says that the wife inappropriately used his account and that she admitted to accessing his account until 2020. With the greatest respect to those acting for the husband, that misses the relevant point. That is:
(a) That the husband sent the material to his solicitor, and that material is no doubt subject to privilege and is confidential;
(b) That his solicitor read the material; and
(c) That his solicitor did not disclose to the wife’s solicitor that they had received the material.
[13] When I say, “his solicitor,” it must have been read by someone in that firm in order for the decision to have been made that it was an inadvertent disclosure of confidential information and that steps had to be taken. Whether or not that was [Ms L] is beside the point.
(citations omitted)
On 27 September 2023, the mother filed an Application in a Proceeding seeking costs which was sealed on 22 February 2024 (“the costs Application”).
On 28 September 2023, judgment was reserved in relation to the remaining orders sought in the interim Application. A Notation was also made adjourning the mother’s costs Application to the next listing date. The Court was advised on this date that the former legal representatives of the father had been served with a copy of the costs Application, and they were invited to attend Court on the next listing date so that further directions could be made.
On 7 November 2023, interim parenting Orders were made and written Reasons for Judgment were delivered and released to the parties: Clayton & Clayton(No 2) [2023] FedCFamC2F 1385. On this date, Orders were also made for the parties and the father’s former legal representatives to file and serve written submissions in relation to the costs Application as follows:
1. The Applicant Mother shall file and serve written submissions in respect to her application for costs by 4pm on 5 December 2023.
2. The Respondent Father shall thereafter file and serve any written submissions in reply by 4pm on 15 January 2024.
3. The former legal representatives of the Respondent Father shall file and serve any written submissions in reply by 4pm on 16 February 2024.
4. Any further written submissions in reply shall be filed and served by the parties by 4pm on 25 February 2024.
5. Upon the last filing of material in conformity with Order 4, judgment in relation to the Mother’s application for costs filed 27 September 2023 is reserved to a date and time to be advised by Chambers.
(emphasis as per original)
A series of other Orders were also made on this date in relation to the substantive proceedings, including directions to prepare the matter for trial in February 2024.
COMPETING APPLICATIONS
The mother seeks the following orders in her Written Submissions filed 5 December 2023:
7. The Applicant seeks an Order that her costs in relation to the Application in a proceeding filed 3 August 2023 and sealed on 14 August 2023 be paid on an indemnity basis and as assessed if not agreed.
8. If the Court is not minded making such an Order, the Applicant seeks in the alternative that her costs be paid on a Solicitor and client basis and in the alternative on a party/party basis, in accordance with the scale of costs.
(citations omitted)
The father, in his Amended Written Submissions filed 15 February 2024, opposes the making of any costs order and seeks that the mother’s costs Application be dismissed and each party bear their own costs of the Application. The father contends that in the event that the mother is successful, the mother’s costs ought to be assessed. In the event that the mother is successful with respect to Order 2 of her filed costs Application, namely that KK Lawyers pay the mother’s costs on an indemnity basis, the father submitted that the order as it relates to KK Lawyers be dismissed and in that respect, the father does not seek to enforce any order that KK Lawyers be required to file written submissions.
THE LAW
Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides that, subject to certain exceptions, each party shall bear their own costs. Section 117(2) provides that if the Court is of opinion that there are circumstances that justify it in doing so, the Court may, subject to subsection (2A) and the applicable Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”), make such order as to costs as the Court considers just.
As the High Court of Australia made clear in Penfold v Penfold (1980) 144 CLR 311 at [13]:
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs.
In considering what order, if any, should be made under section 117(2) of the Act, the Court must have regard to the following factors set out in section 117(2A):
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In considering these factors, no one factor has more weight than any other, nor is it necessary for more than one of the factors to be present: Krach & Krach (No 2) [2009] FamCA 886 at [15]; PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123 at [41].
In relation to the Court’s power to order costs on an indemnity basis, the Full Court in Kohan & Kohan (1992) 16 Fam LR 245 confirmed that the Court has a discretion to order costs on an indemnity basis “where they have been incurred under a costs agreement which departs from the usual scale of costs.”
In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 119 CLR 118, Sheppard J reviewed a range of authorities and concluded at [24] that where the Court orders for the costs of one party to be paid by another, payment of the costs is ordinarily to be made on a party and party basis, and to depart from this ordinary practice, the Court must consider “whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.”
Sheppard J also noted some of the circumstances justifying an order for indemnity costs, as later endorsed by Holden CJ in Munday v Bowman (1997) FLC 92-784 at 84,660:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts …
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud …
(c) Evidence of particular misconduct causing loss of time to the court and to other parties …
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions …
(e) An imprudent refusal of an offer to compromise …
(citations omitted)
As held by the Full Court in Badawi & Badawi (Costs) [2017] FamCAFC 196 at [27], “costs on an indemnity basis are awarded only in exceptional cases.”
The Rules also provide that the Court may make an order for costs on a number of different bases.
Relevantly, rules 12.13(2) and 12.13(3)(a) specify that a party may apply for an order that another person pay costs at any stage during a proceeding. Rule 12.13(4) provides that where a party applies for an order for costs on an indemnity basis, that party must inform the Court if the party is bound by a costs agreement(s) in relation to those costs and if so, the terms of such cost agreement(s).
Rule 12.17 of the Rules sets out the methods of making an order for costs. The Court may set the amount of costs or set the method by which the costs are to be calculated.
Pursuant to rule 12.15(1) of the Rules, the Court has power to make a costs order against a lawyer (or an employee or agent of the lawyer) in the following circumstances:
(1) The court may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs to be incurred by a party or another person, or to be thrown away, because of:
(a) a failure to comply with these Rules or an order; or
(b) a failure to comply with a pre‑action procedure; or
(c) improper or unreasonable conduct; or
(d) undue delay or default.
Rule 12.15(4) specifies the types of orders that may be made under subrule (1).
The Court’s power to make an order that a lawyer of one party pay costs incurred by another party is also contained in section 117(2) of the Act, as confirmed by the Full Court in Collins & Collins (1985) 9 Fam LR 1123.
In Cassidy & Murray (1995) 19 Fam LR 492, the Full Court confirmed the following principles:
(a)Section 117(2A) of the Act grants the Court with jurisdiction to make an order for costs against a solicitor or a non-party, and such jurisdiction is compensatory.
(b)The Court should not make such an order without affording the person to be affected by the order an opportunity to be heard.
(c)It is not necessary for the Court to establish that the solicitor has been guilty of serious professional conduct to make an order for costs against a solicitor, however a finding of misconduct, default or negligence of a serious nature may be sufficient to justify an order for costs.
(d)A mistake or error of judgment would not justify an order for costs against a solicitor.
ARE THERE JUSTIFYING CIRCUMSTANCES?
In relation to the preliminary question of justifying circumstances, the mother argues that her having to meet the expenses of making an Application to dismiss the father’s lawyers on record at that time justifies the making of a costs order.
The mother contends that the father’s legal representatives at that time were in breach of rule 31 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) (“Australian Solicitors’ Conduct Rules”) relating to inadvertent disclosure. The mother argues that the failure of KK Lawyers to notify the mother’s solicitors of such a breach made it necessary for the Application to be made.
I refer to my findings in Clayton & Clayton [2023] in relation to this breach and accept that there are justifying circumstances for an order for costs to be made.
SECTION 117(2A) FACTORS
I now turn to the factors I must consider under section 117(2A) of the Act in considering what order, if any, should be made as to costs. I note that the consideration at section 117(2A)(b), namely whether any party to the proceedings is in receipt of assistance by way of legal aid, is not relevant to this matter and is therefore not considered below.
The parties’ financial circumstances
The Financial Statement filed by the mother on 13 April 2022 records her total average weekly income as $819. The mother filed an Updated Financial Statement on 17 January 2024 which records her total average weekly income as $1,075.
In her affidavit filed 27 September 2023, the mother says she incurred legal fees and disbursements between 26 July 2023 – 11 September 2023 in the amount of $11,876.17 to restrain the father’s former legal representatives from acting. In her Written Submissions filed 5 December 2023, the mother notes that this figure was provided in error and that the total costs incurred in relation to this specific issue across this date range is $18,643.37. Pages 11 – 13 of the mother’s Written Submissions provide an itemised invoice of “costs rendered to [Ms Clayton]” prepared by Dimocks Family Lawyers for this date range.
The mother also deposes in her Written Submissions in Reply that she has incurred further costs in making the costs Application, drafting two sets of submissions, and considering two sets of submissions filed by the father, and seeks that these costs be included in the costs Application.
The father, in his Amended Written Submissions, contends that the mother’s interim Application sought other orders which were determined at a subsequent interim hearing, inferring that the total sum deposed to by the mother was not incurred solely by attempting to restrain the father’s former legal representatives from acting. The father also argues that little weight should be placed on a number of the line items contained in the invoice attached to the mother’s Written Submissions, and that the mother’s affidavit material is deficient in providing evidence as to all of the line items and how they are referrable to the costs sought by the mother. The father also raises issue that the mother’s account of costs is for preparing the interim Application as a whole, and is not limited simply to the issue of restraining the father’s former legal representatives which the costs Application solely relates to.
To account for this concern raised by the father, the mother in her Written Submissions in Reply suggests a concession of $2,000 is made to discount approximately 5.5 hours of billable time on the matter. The mother also argues that if the father’s former legal representatives had withdrawn prior to the interim hearing as invited to do so by the mother’s legal representatives, there would not have been the need for two interim hearings, decreasing the legal costs payable by the mother.
The Financial Statement filed by the father on 15 January 2024 indicates that his total average weekly income is NIL. A note to his Financial Statement indicates that as at the date of filing this Financial Statement, the father is self-employed as a tradesperson and that he is not currently contracted or working on any jobs. The father deposes that when he does secure work, he usually works between two to three days a week, charging $30 per hour.
In the father’s affidavit filed 12 February 2024, he deposes that since filing his Financial Statement, he has commenced work two days per week (or 15 hours per week) for a close friend. The father says that when he is “short of cash,” the friend provides the father with advances that the father repays when he is able.
The father records in his Financial Statement that his net taxable business income for the financial year ending 30 June 2023 was $11,000. This appears to be at odds with his affidavit filed 12 February 2024 which indicates that the second amended tax return filed on his behalf in November 2023 for the financial year ending 30 June 2023 declared an income of $119,108.
The mother, in her affidavit filed 27 September 2023, deposes that based on the father’s previous financial disclosure, he has a capacity to earn approximately $3,440 per fortnight.
Pursuant to the Orders made on 7 November 2023, judgment in relation to the costs Application was reserved upon the deadline for the last filing of material, being 4 pm on 25 February 2024. While the evidence must be considered as at that time, it is worth noting that the parties entered into consent Orders finalising all property issues on 27 February 2024. These Orders provided, inter alia, that:
(a)All funds standing to the credit of the Controlled Monies Account be paid to the father (being the sum of $127,000);
(b)The property at HH Street, Suburb JJ be transferred to the mother;
(c)The mother transfer to the father the sum of $125,000;
(d)Whenever a splittable payment becomes payable to or on behalf of the mother from her interest in her superannuation fund, the father be entitled to be paid 100 per cent of the splittable payment; and
(e)Save for the costs Application, each party pay their own costs of the property proceedings.
The conduct of the parties to the proceedings
The mother submits that the manner in which the father’s former legal representatives refused to withdraw from the proceedings despite the breach of rule 31 of the Australian Solicitors’ Conduct Rules is critical. The mother refers to my findings at [17] of my judgment in Clayton & Clayton [2023] which reads as follows:
I find that the solicitor for the husband had an absolute duty to notify the solicitor of the wife immediately upon being made aware of the inadvertent disclosure, to disclose what was disclosed and when, and to advise of the steps that they took in respect of that disclosure. That they failed to do so in accordance with the Australian Solicitors’ Conduct Rules remains inexplicable.
The mother also submits that the conduct of both the father and his former legal representatives in defending the interim Application is relevant in that they failed to disclose what information was inadvertently disclosed, when such inadvertent disclosure occurred, and why the mother’s legal representatives were not notified of the inadvertent disclosure. In relation to this submission, the mother refers to paragraphs 19 & 26 of my judgment in Clayton & Clayton [2023]:
[19] When I look at this matter, my task has been made all the more difficult by the failure of the husband’s solicitor to disclose when the information inadvertently was given, what the information was, and why they did not provide any advice to the solicitor for the wife in respect of that disclosure. That information was clearly in the control of the husband’s solicitor and the husband, and they have, I assume, made a calculated decision not to provide that information. The husband says that the Court can be assured that no inappropriate use of the information has or will be made. Unfortunately, I find that it is impossible to make that finding in the face of their lack of disclosure and their lack of adherence to their responsibilities under the Australian Solicitors’ Conduct Rules.
…
[26] …Who in the firm saw the correspondence, I do not know. When that correspondence was viewed, I do not know. And how the decision was made that it was confidential and subject to rule 31 of the Australian Solicitors’ Conduct Rules, I do not know. And I do not know because I was not told. The letter at Exhibit F5 is not, in my view, a fulsome or an appropriate letter to send in the current circumstances. It is, in my mind, misleading.
The mother argues that such a response given the circumstances was “unreasonable” or “unmeritorious”, and that the father’s response sought to “level blame” at the mother and put her on notice that the father intended to seek orders restraining her lawyers from acting.[1]
[1] Written Submissions filed by the mother on 5 December 2023.
The father, in his Amended Written Submissions filed 15 February 2024, refers to the findings made by the Court in Clayton & Clayton [2023] at [12] – [13] (as extracted earlier in this judgment) and submits that in the circumstances, there can be no doubt that the father accessed or had access to the mother’s email accounts.
Whether the proceedings were necessitated by a party’s failure to comply with Orders
The mother submits that the proceedings were necessitated by the failure on the part of KK Lawyers to comply with the Australian Solicitors’ Conduct Rules and their refusal to withdraw from the proceedings even in light of the admissions made.
The father submits that this factor is not relevant.
Section 117(2A)(d) requires the Court to consider “whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court.” While I accept that the father’s former legal representatives failed to comply with the requirements in relation to inadvertent disclosure in rule 31 of the Australian Solicitors’ Conduct Rules, as per my findings in the judgment of Clayton & Clayton [2023] extracted above, such a breach was of a legislative rule and not a previous order of the court. I therefore do not accept this submission by the mother as being relevant to the consideration outlined in section 117(2A)(d), however I find this submission to be a relevant consideration under section 117(2A)(g).
Whether any party has been wholly unsuccessful
The mother submits that the interim Application insofar as it related to seeking a restraint on the father’s former legal representatives from continuing to act was wholly successful.
While the father does not disagree with this submission, he submits that the Court should not depart from the general rule that each party is to bear their own costs of the proceedings.
Whether either party has made any offer in writing to settle the proceedings
The mother submits that her legal representatives wrote to KK Lawyers on 26 July 2023, prior to the filing of the interim Application, for the purpose of putting KK Lawyers on notice and inviting their withdrawal if they were privy to correspondence.[2] The mother submits that KK Lawyers responded on 2 August 2023 refusing to withdraw.
[2] Affidavit of Ms Clayton filed 27 September 2023, Annexure E.
The mother submits that on 18 August 2023, after receiving a letter of offer to finalise both property and parenting matters (which was later rejected), the mother’s legal representatives again invited KK Lawyers to withdraw.[3]
[3] Affidavit of Ms Clayton filed 27 September 2023, Annexure G.
The father contends that neither party made an offer to resolve the dispute. He acknowledges that on 26 July 2023, KK Lawyers were “put on notice to withdraw” from the proceedings if they answered the questions posed by the mother’s legal representative in their letter in the affirmative.[4] The father does not concede that his legal representatives were “requested to withdraw” in that correspondence, as the mother submits.[5]
[4] Amended Written Submissions filed by the father on 15 February 2024, page 11.
[5] Amended Written Submissions filed by the father on 15 February 2024, page 11.
I find that the father’s position is not sustainable in circumstances where a fair reading of the correspondence would make clear the position of the mother.
Such other matters as the Court considers relevant
The mother submits that she has been “left out of pocket” in circumstances where the father’s solicitors failed to immediately notify the mother’s lawyers of the inadvertent disclosure of confidential and privileged information.[6] As evident in her Written Submissions filed 5 December 2023 at page 6, it is the mother’s case that the conduct of the father’s former legal representative in refusing to withdraw is so “exceptional” as to warrant an order for costs on an indemnity basis, and that the mother “has been put out of pocket as a result of solicitor misconduct.”
[6] Written Submissions filed by the mother on 5 December 2023, page 6.
It is the mother’s case that the conduct of the father’s former solicitor falls within the scope of rule 12.15(1)(c) of the Rules. In her Written Submissions filed 5 December 2023 at pages 7 – 8, the mother argues that the conduct of KK Lawyers in maintaining a defence to the mother’s Application to withdraw in the manner that they did, and their blatant failure to comply with the Australian Solicitors’ Conduct Rules, was “improper or unreasonable conduct.” The mother also argues that pursuant to rule 12.15(1)(d) of the Rules, there was “undue delay or default” by the father’s former solicitor in not notifying the mother’s solicitor immediately upon being made aware of the inadvertent disclosure, resulting in the mother expending costs in making the interim Application.
It is the mother’s case that the father’s filed Response to the interim Application failed to give proper consideration to the legal and/or factual questions relevant to determine the Application. The mother referred to the case of Ex Christmas Islanders Association Inc v The Attorney-General for the Commonwealth (No 2) [2006] FCA 671 at [22] as authority for the submission that a costs order may be made where a solicitor has “so failed in the duty to give proper consideration to the legal and/or factual questions involved in the preparation and presentation of an application as to be seriously derelict in his or her duty to the client and/or to the Court.” As noted at paragraph 26 of my judgment in Clayton & Clayton [2023] extracted above, no adequate explanation was provided by the father’s former legal representatives as to the circumstances of the inadvertent disclosure.
The mother argues that “a considerable amount of time” has been wasted dealing with this issue which could have been avoided by KK Lawyers either withdrawing from the matter when put on notice, or notifying the mother’s legal representatives as soon as the confidential material was inadvertently disclosed.[7] The mother submits that information regarding the circumstances of the inadvertent disclosure was withheld strategically and that the inadvertent disclosure would not have been disclosed to the mother if not for the discovery of New South Wales Police. It is the mother’s case that this has not only resulted in financial loss for the mother but has also wasted the Court’s time.
[7] Written Submissions filed by the mother on 5 December 2023, page 6.
In response, the father submits that the mother’s interim Application was not solely limited to the question of restraining the father’s legal representatives at that time, but also sought both parenting and property orders. However, this submission ignores that the issue relating to the restraint of the legal practitioner was run as a preliminary issue and necessitated the adjournment of the interim parenting proceedings. This, of course, resulted in additional costs for the mother.
The father submits that it is fatal to the mother’s costs Application that the mother has failed to specify how much of the anticipated costs were relevant solely to the issue of restraining KK Lawyers. It is the father’s case that in the circumstances of the matter, it would be unjust for the Court to make any costs order in favour of the mother, including an order for costs on an indemnity basis.
Conversely, in her Written Submissions in Reply, the mother submits that it is unjust for the Court to not make a costs order in favour of the mother in such circumstances.
DISCUSSION
The father chose to oppose the mother’s Application to restrain his former legal representatives from continuing to act and was wholly unsuccessful in that opposition.
A fair reading of the relevant Australian Solicitors’ Conduct Rules would have indicated to the solicitors and the father that the mother had reasonable grounds to contend that the solicitors for the father should be restrained from acting.
It is the father who provided instructions to his solicitors to oppose the Application. The Application was opposed, and the father instructed counsel to appear on his behalf. It would have been apparent to all parties that the Court would need to deal with the Application for restraint first. It would have also been apparent that had that Application been successful, the father would either have had to proceed unrepresented or the matter be stood over for the father to secure new representation.
As a consequence of the father’s opposition, the mother incurred unnecessary costs in proceeding to hearing to determine her Application to restrain the father’s solicitors. The Court was then required to relist the interim parenting matter for hearing following the determination of the mother’s Application to restrain the father’s solicitors. In relation to this, the mother then incurred further costs.
This is a matter where it is appropriate for me to exercise my discretion and award costs against the father. I say this due to the following findings:
(a)The father’s conduct was the reason for the application to have been brought by the mother.
(b)The mother’s solicitors provided a reasonable avenue for the father to withdraw his instructions to his solicitors.
(c)The solicitors for the father should have been aware that they had been in breach of the Australian Solicitors’ Conduct Rules in the handling of the material received by the father.
(d)The solicitors for the father failed to provide disclosure as required and have failed to provide complete disclosure as to what information was received and when it was received.
(e)The mother was wholly successful in her Application.
(f)The mother was put to unnecessary costs in bringing the Application and determining this Application delayed the determination of the interim parenting Application.
I am able to order costs against a solicitor if I find that they have acted improperly or unreasonably. In this matter, I have determined that the solicitors breached the relevant Australian Solicitors’ Conduct Rules. However, I am unable to determine the circumstances in which they were instructed to oppose the Application for restraint. The father does not assist in this regard, and it was within his knowledge to do so. In the circumstances, I decline to make a costs order against KK Lawyers.
The mother asks for indemnity costs and the father opposes this Application. As noted above, it is well settled that indemnity costs orders are to be made only in exceptional circumstances.[8]
[8] Badawi & Badawi (Costs) [2017] FamCAFC 196.
I confirm the mother has provided the Court with the relevant costs agreements to satisfy rule 12.13(4) of the Rules.[9]
[9] Affidavit of Ms Clayton filed 27 September 2023, Annexure B.
I find that this case falls within the exceptional circumstances that warrant an order for costs to be made on an indemnity basis for the following reasons:
(a)The father maintained his position in relation to the Application to restrain his solicitors and in doing so, put the mother to the cost and trouble of conducting this Application.
(b)The father knew or ought to have known that the prospects of success in defending the Application were remote.
(c)The mother’s solicitors invited the father’s solicitors to withdraw from the matter.
(d)The provisions of the Act and the Rules mandate that parties to litigation are subject to an overarching obligation to advance that litigation in a cost-effective and efficient manner. The conduct of the father does not meet this obligation.
When I consider the table provided by the mother in her Written Submissions, I agree with the father’s submission that it is unclear as to whether the costs incurred were in relation to the specific issue of the restraint on the father’s lawyers or the interim issues at large. I am not satisfied that the mother’s submission that an amount of $2,000 be deducted to account for this concern is able to cure these issues.
CONCLUSION
I therefore order that the father pay the costs of the mother in relation to the Application restraining the father’s solicitors from appearing on an indemnity basis. I will further order that these costs be paid as either agreed or assessed.
I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Lioumis. Associate:
Dated: 27 August 2024
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