Coulter & Gerardine
[2015] FamCA 287
•23 April 2015
FAMILY COURT OF AUSTRALIA
| COULTER & GERARDINE | [2015] FamCA 287 |
| FAMILY LAW – COSTS – Where the mother seeks indemnity costs against the father after parenting proceedings were resolved by consent orders but in circumstances where the father had maintained a primary application which he ultimately abandoned – Where the mother was a lawyer and sought costs not only for her own lawyers and out of pocket expenses but also for the professional work she did when acting for herself – Consideration of the Chorley exception and whether the mother was entitled to the costs of acting for herself – Consideration of s 117(2A) of the Family Law Act 1975 (Cth) – Where it is found that it is not appropriate to make an order for indemnity costs – Order for costs made in the mother’s favour on a party/party basis up to a certain date to include costs for her own legal work |
| Evidence Act 1995 (Cth) Family Law Rules 2004 (Cth) |
| A & D Douglas Pty Ltd v Lawyers Private Mortgages Pty Ltd [2006] FCA 690 Atlas Corporation Pty Limited v Kayak [2001] NSWCA 10 Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 |
| APPLICANT: | Ms Coulter |
| RESPONDENT: | Mr Gerardine |
| FILE NUMBER: | MLC | 557 | of | 2011 |
| DATE DELIVERED: | 23 April 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 16 July 2014 (reserved in chambers) |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Litigant in person |
| COUNSEL FOR THE RESPONDENT: | Mr Bartfield QC / Ms Vohra |
| SOLICITOR FOR THE RESPONDENT: | Taussig Cherrie Fildes |
Orders
The applicant father pay to the respondent mother her costs of these proceedings from 13 July 2012 until 7 February 2014 (or the date of service on the mother of the father’s Further Amended Application filed 3 February 2014, whichever is the earlier) on a party/party basis as agreed or assessed in accordance with Schedule 3 of the Family Law Rules 2004 (“the Rules”), such costs to include payment to the mother in her capacity as solicitor doing her own legal work during the said period, calculated in accordance with Schedule 3 of the Rules.
Pursuant to rule 19.50 of the Rules, I certify that it was reasonable for the mother to engage senior counsel as counsel to attend on her behalf before Cronin J on 19 October 2012 and on any other occasion that senior counsel has appeared on her behalf and I find that it is reasonable that the mother has engaged senior counsel to assist her in her case and that upon an assessment by the Registrar, senior counsel’s costs should be allowed on a party/party basis.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Coulter & Gerardine has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: MLC 557 of 2011
| Ms Coulter |
Applicant
And
| Mr Gerardine |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
On 13 July 2011, during the course of the defended hearing in Melbourne, final parenting orders (“the 2011 orders”) were made by consent in respect of the two children of the parties who were then three and two years of age. These orders allowed the mother to relocate with the children from Melbourne to Sydney and the children to be educated in Sydney. The 2011 orders also contained provision for the children to spend time with their father predicated upon his intention to reside in Sydney, so that at least from term 1 2013 he would have the children six out of fourteen nights during school term.
By July 2012, the father had decided that he was not going to move to Sydney. On 12 July 2012 the mother invited the father to propose a change of orders based “within their current framework (namely that the children continue to live with me in Sydney and be educated in Sydney)”. After the mother sent this email, the father served upon her his application filed 11 July 2012, in which his principle application was that the 2011 orders be varied so that the children return to live with him in Melbourne and be educated there.
The father maintained this position in the proceedings, originally before Cronin J in Melbourne and after the matter was transferred to Sydney, before me, until he abandoned that position on 7 February 2014.
Since 20 September 2012, as an alternate position in the event that his primary application failed, the father sought orders based on the children remaining in Sydney. The father submitted that he had some time shortly before December 2013, in negotiations with the mother (which were not admissible in the parenting proceedings) conceded that the children would stay in Sydney. However, at a court event on 17 December 2013 before me, senior counsel for the father when explicitly asked, confirmed that the father wanted the children back in Melbourne and submitted that the mother’s Rice v Asplund argument should not be dealt with summarily but in the context of a full hearing.
On 30 May 2014 final orders were made by consent between the parties in respect of the children of the marriage. The orders provided that, amongst other things, the children live with their mother in Sydney and spend time with their father each alternate weekend during school term, travelling to Melbourne no more than once in four weeks, unless otherwise agreed.
The mother now seeks, pursuant to s 117 of the Family Law Act 1975 (Cth) (“the Act”), an indemnity costs order in the sum of $106,724.27 for “costs thrown away by the father’s pursuit of his application to vary the Final Orders made 13 July 2011…”. According to the mother, this sum is comprised of:
a. Costs incurred by external parties up to and including 7 February 2014 on an indemnity basis in the sum of $47,950.17;
b. Costs of providing legal work in the proceedings by the applicant mother in the sum of $58,774.10 calculated on the basis of the time recorded by the mother in her timesheet for a total of 152.66 recorded hours charged at $350 per hour, (plus GST).
DOCUMENTS RELIED UPON
This matter was dealt with upon the basis of written submissions. The mother’s submissions detailed the documents she relied upon and the documents she believed the father was relying upon. The father did not cavil with the mother’s list of documents in his written submissions. I add to the list of documents the wife’s Application in a Case filed 15 November 2013 and her affidavit sworn 14 November 2013.
BRIEF BACKGROUND
The father was born in 1964 and is currently aged 50 years old. The father through a trustee company, which is his alto-ego, has a 50 percent interest in A Pty Ltd and its associated entities.
The mother was born in 1964 and is currently aged 50 years old.
The parties’ first child, S, was born in 2008 and is currently aged seven years old.
The parties’ second child, R, was born in 2009 and is currently aged five years old.
The father resides in and runs his business from Melbourne. The mother and children now live in Sydney.
The 2011 orders were made by FM Maguire (as his Honour then was) by consent on 13 July 2011 on the third day of a defended hearing and amongst other things it was agreed that the children live with the mother in Sydney and be educated in Sydney.
The father filed an Initiating Application on 11 July 2012 seeking to discharge those final orders and seeking orders amongst other things that the children live with the father in Melbourne on a week about basis (by implication the mother also would return to Melbourne) and that the children be educated in Melbourne. The father’s Initiating Application was based on his assertion that he had entered into the 2011 orders on the advice of his lawyers following his cross examination in the final hearing; that subsequently his work commitments had become such that he was unable to parent the children in accordance with the arrangement set out in the 2011 orders; that since the making of the 2011 orders the parties had difficulty communicating and making decisions; and that the children wanted to live in Melbourne.
The mother filed a Response on 2 August 2012 and an Application in a Case on 2 August 2012 seeking an order that the father’s application be dismissed consistent with the principles in Rice v Asplund (1979) FLC 90-725. The mother’s Application in a Case was heard on written submissions and judgment was delivered on 14 January 2013 where Cronin J transferred the matter to the Sydney Registry of the Court. His Honour held:
there is evidence that the existing orders cannot (or will not) be carried out and an alteration to them will affect the relationship of parent and child. The appropriate time for the consideration of whether the case should proceed and on what basis, having regard to s 69ZN, is at the first day of a hearing before a judge…
The father filed an Amended Initiating Application on 20 September 2012. It set out an alternate proposal in the event that an order was not made for the children to return to Sydney.
On 27 March 2013, after the matter was transferred to Sydney, on the first day before myself, orders were made including setting a timetable for the father to file an Application in a Case seeking interim parenting orders, and for the mother to file an Application in a Case seeking costs from the father to fund the litigation if his Initiating Application was to be re-heard in its entirety.
On 15 November 2013 the mother filed an Application in a Case seeking a variation to the 2011 orders so that she had parental responsibility for education and schooling and that the children’s surname be changed. The mother also sought reimbursement of enrolment fees. This application was listed on 17 December 2013. The matter was only part heard on this day and the mother was given leave to amend her Response. The matter was set down for mention on 4 February 2014 (subsequently changed to 7 February 2014).
On 31 January 2014 the mother filed an Amended Response in which she sought a dismissal of both the father’s primary and alternate applications.
On 3 February 2014 the father filed a Further Amended Initiating Application in which he abandoned his application for the children to return to Melbourne and be educated in Melbourne but I am unaware of when this was served upon the mother. When the matter came before me on 7 February 2014, counsel for the father indicated that the father no longer pressed his application to vary the current order for the children live with the mother in Sydney and that they be educated in Sydney. On this day consent orders were also made in relation to the time the children spend with the father during term time. The matter was set down for hearing on 30 May 2014 in relation to the following issues which remained in dispute:
20.1.Children’s surname;
20.2.Children’s schooling in Sydney;
20.3.Time spent at Christmas and Easter;
20.4.Holiday time;
20.5.Changeover arrangements;
20.6.Costs in relation to the residency argument;
20.7.Undertaking of the father relating to his alcohol consumption when having the children in his care.
On 24 March 2014 the mother filed a Further Amended Response.
Apart from the issue in respect of costs, on 30 May 2014 the parties were able to resolve all of the issues in dispute and final consent orders were made (“the 2014 orders”).
THE RELEVANT LAW
Costs
The issue remaining is whether or not any order for costs should be made in the mother’s favour and if so, whether the mother should receive professional costs for the work done by her as a solicitor, whether indemnity costs should be ordered, and if costs were ordered, for what period.
Ordinarily each party bears their own costs (s 117(1) of the Act). However the court, if it considers it just, may make an order as to costs if of the opinion that there are circumstances to justify doing so (s 117(2) of the Act). In considering whether or not a costs order should be made, the court shall have regard to the matters set out in s 117(2A) of the Act:
(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.
Indemnity costs
In Colgate Palmolive Co and Anor v Cussons Pty Ltd (1993) 118 ALR 248, Sheppard J referred to the courts’ “settled practice” that where the court orders one party to pay another party’s costs, the order is for costs to be paid on a party/party basis. His Honour went on to say “there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice.”[1]
[1] As enunciated by Brandon LJ (as he was) in Preston v Preston [1982] 1 All ER at 58.
While the court clearly has a power to award indemnity costs, as opposed to costs on a party/party basis, it is an exceptional case in which indemnity costs are awarded (Kohan & Kohan (1993) FLC 92-340).
As Strickland J said in Bele & Vaughan (Costs) [2012] Fam CAFC 198 at [27], the ordinary rule is that an order for costs is calculated on a party/party basis, and that to depart from that rule exceptional circumstances need to be demonstrated.
In Munday v Bowman (1997) FLC 92-784 at 84,660, Holden CJ highlighted the following examples of circumstances where indemnity costs may be awarded (footnotes omitted):
(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.
This list is not exhaustive, and it is clear that each case shall be assessed on its individual merits (Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029). I infer the mother in this case relies upon example (a) as highlighted by Holden CJ in Munday v Bowman.
The entitlement of the mother, as a solicitor, to professional costs
The mother is a lawyer. Part of the costs order that she seeks relates to legal work undertaken by her.
In Guss v Veenhuizen [No. 2] (1976) 136 CLR 47, the plurality (Gibbs A.C.J., Jacobs and Aickin JJ) affirmed that there is an exception in the case of solicitors who act for themselves to the general rule that a litigant in person may not recover professional costs. At pages 51 – 52 the majority said:
The appellant did not claim costs incurred by him in retaining the professional services of a solicitor in his litigation. He appeared in person. He sought taxation of costs on the basis that he was a solicitor who acted for himself and did so according to the well established rule of practice which entitles a person, being a solicitor, to certain professional costs in those circumstances. London Scottish Benefit Society v. Chorley, Crawford and Chester (1884) 13 QBD 872 . See also H. Tolputt & Co. Ltd. v. Mole (1911) 1 KB 87, 836. Those authorities establish that the litigant in person does not recover such costs in such circumstances in the capacity of a solicitor, but because, he happening to be a solicitor, his costs are able to be quantified by the Court and its officers. In London Scottish Benefit Society v. Chorley, Crawford and Chester, Brett M.R., said (1884) 13 QBD, at p 875 :
"It was contended for the plaintiffs that there is no difference as regards the right to costs between a solicitor and an ordinary person; and for the defendants it was contended that the costs of a solicitor, who is party to a suit, ought substantially to be taxed as if he had been acting for a different person. I think neither contention correct. I cannot think that any privilege of a solicitor exists. I am wholly unable to agree to any argument standing upon that footing. I should have thought that a person wrongfully brought into litigation ought to be indemnified against the expenses to which he is unjustly put; but there cannot be a perfect indemnity, because it is impossible to determine how much of the costs is incurred through his own over-anxiety. When an ordinary party to a suit appears for himself, he is not indemnified for loss of time; but when he appears by solicitor, he is entitled to recover for the time expended by the solicitor in the conduct of the suit. When an ordinary litigant appears in person, he is paid only for costs out of pocket. He cannot himself take every step, and very often employs a solicitor to assist him: the remuneration to the solicitor is money paid out of pocket. He has to pay the fees of the court, that is money paid out of pocket; but for loss of time the law will not indemnify him. When, however, we come to the case of a solicitor, the question must be viewed from a different aspect. There are things which a solicitor can do for himself, but also he can employ another solicitor to do them for him; and it would be unadvisable to lay down that he shall not be entitled to ordinary costs if he appears in person, because in that case he would always employ another solicitor."
Bowen L.J. said (1884) 13 QBD, at p 877 :
"Professional skill and labour are recognised and can be measured by the law; private expenditure of labour and trouble by a layman cannot be measured. It depends on the zeal, the assiduity, or the nervousness of the individual. Professional skill, when it is bestowed, is accordingly allowed for in taxing a bill of costs; and it would be absurd to permit a solicitor to charge for the same work when it is done by another solicitor, and not to permit him to charge for it when it is done by his own clerk. The question before us does not depend on the privileges of a solicitor."
Fry L.J. was of the same opinion, and said (1884) 13 QBD, at p 877: "This is not a question as to a solicitor's privilege." [emphasis added]
As highlighted, the plurality said that the true basis of the exception to the general rule “is that work done by a solicitor can be quantified on a taxation of costs”. This adoption by the majority of the High Court, of the Court of Appeal’s decision in Chorley, was ratio decidendi (“the Chorley exception”).
Subsequently, the plurality of the High Court in Cachia v Hanes and Anor (1994) 179 CLR 403, by way of obiter dicta referred to the Chorley exception as “A somewhat anomalous exception” (at page 411) and went on to say:
If the explanations for allowing the costs of a solicitor acting for himself are unconvincing, the logical answer may be to abandon the exception in favour of the general principle rather than the other way round. However, it is not necessary to go so far for the purposes of the present case. It suffices to say that the existence of a limited and questionable exception provides no proper basis for overturning a general principle [that a litigant in person may not recover professional costs] .....
At page 414, the plurality refer to the table of costs relevant in that case and say that the table of costs:
....makes no provision for the reimbursement of a litigant for time lost in the preparation or presentation of his case. It does provide for solicitors' costs which have been incurred. That affords some basis (although insufficient in our respectful view) for an award of costs in favour of a solicitor acting for himself and so performing professional duties....
The plurality in Cachia go on to refer to the position of a solicitor acting in person as a “relatively rare exception” (at page 414). The plurality did not overrule Guss v Veenhuizen[No. 2]. The minority in Cachia v Hanes refer to the adoption by the High Court in Guss v Veenhuizen [No. 2] of Chorley without further comment.
The New South Wales Court of Appeal in Atlas Corp Pty Ltd v Kalyk [2001] NSW CA 10 found that they were bound by the High Court’s decision in Guss v Veenhuizen [No. 2]. The court in that case expressed an alternate rationale for the Chorley exception in the following terms:
... Such solicitors will have spent time and trouble representing themselves and, to that extent, they will have lost the opportunity of using that time doing professional work for other clients and being remunerated accordingly. The indemnity in the case of solicitor litigants is, therefore, against the opportunity cost rather than the direct cost of their professional time spent on their own case.
These comments are obiter and are a gloss on what the plurality of the High Court said in Guss v Veenhuizen [No. 2]. There is nothing in the ratio in Guss v Veenhuizen [No. 2] which would indicate that a solicitor would have to establish a lost opportunity prior to being able to claim professional costs for their own work. This observation is relevant to one of the submissions made by the father which is discussed below.
As Brett MR went on to say in Chorley:
....the costs of a solicitor appearing in person must be taxed differently from those of an ordinary litigant appearing by a solicitor. The unsuccessful adversary of a solicitor appearing in person cannot be charged for what does not exist, he cannot be charged for the solicitor consulting himself, or instructing himself, or attending upon himself. The true rule seems to be that when a solicitor brings or defends an action in person, he is entitled to the same costs as an ordinary litigant appearing by a solicitor, subject to this restriction, that no costs which are really unnecessary can be recovered.
A number of subsequent judgments have questioned the contemporary appropriateness of the Chorley exception (see in particular Dobree & Others v Hoffman (1996) WAR 36, especially at pages 41 – 48; and for example more recently Mortimer J in Beling v Sixty International S.A. [2015] FCA 250 at [56]).
In Wong v Farkas [2014] NSWCA 29, the Court of Appeal of the Supreme Court of New South Wales considered the Chorley exception in the context of the New South Wales Criminal Procedures Act and the specific meaning in that Act of the words “costs” and “disbursements”. More generally, the Court of Appeal said:
27. The Civil Procedure Act now contains the following definition:
3 Definitions
(1) In this Act:
...
costs, in relation to proceedings, means costs payable in or in relation to the proceedings, and includes fees, disbursements, expenses and remuneration. [Emphasis added.]
28. The introduction of the emphasised word "payable" may at some stage require reconsideration of the application of Chorley in civil proceedings in this State. It is not necessary for present purposes to resolve that question.
29. If Guss v Veenhuizen were determinative of the present case, this Court would be bound to follow it: while Cachia v Hanes casts doubt upon the validity of the principle that the legal practitioner could recover for his time expended in his proceedings, that principle was expressly not abandoned, nor overturned. The change in statutory language may mean that the issue will never arise. It is also not necessary for this Court to consider whether the approach adopted in Dobree v Hoffman by the Western Australian Full Court, which declined to apply Chorley, should be followed. Again, arguably the issue did not arise, because the decision ultimately turned on the legislative provisions in Western Australia. Guss turned on (but did not discuss) the power to award costs in the High Court, which was conferred by reference to the term "costs", undefined in any relevant respect: Judiciary Act 1903 (Cth), s 26. Accepting that Guss v Veenhuizen is binding as to the correct construction of that language in any statute, in principle it would not bind this Court (or another court) in respect of a materially different statutory provision.
In Redmond & Redmond & Anor (Costs) [2014] FamCAFC 55 the Full Court of the Family Court proceeded on the basis that the Chorley exception applied to s 117(2) of the Act which uses the word “costs” without any words that might restrict its meaning (such as the word “payable”).
The Chorley exception has been consistently applied by the Federal Court as it relates to awards for costs under s 43 of the Federal Court Act, which provides that the Federal Court has “jurisdiction” to award “costs in all proceedings before the court” other than proceedings specified in s 43 (see for example Secretary, Department of Foreign Affairs and Trade v Boswell (No 2) (1992) 39 FCR 288 at 294 per Sheppard, Hill and Cooper JJ; A & D Douglas Pty Ltd v Lawyers Private Mortgages Pty Ltd [2006] FCA 690 at [10] per Dowsett J; Re New Tel Ltd (in liq) (No 4) [2008] FCA 1085 at [9] per McKerracher J.)
STATUTORY CONSIDERATIONS
The financial circumstances of each of the parties to the proceedings
None of the financial information contained in the sworn evidence of the parties has been the subject of any forensic testing before me.
The Mother
The mother provided a financial statement which was filed on 18 April 2013. The mother is employed part time as a maritime lawyer and marine consultant. Her average weekly income is $2,784 per week. She has expenditure which she says is $3,255 per week. The mother states that she has assets of $2,825,650, superannuation of $33,125 and liabilities of $1,752,000 (which includes a liability for current and projected legal fees payable to Pure Legal in the sum of $300,000). The mother says in her most recent affidavit that she has in fact only incurred $28,637 in legal fees with Pure Legal.
The mother’s financial statements show that her financial resources have been significantly depleted as a result of the costs of the proceedings which were finalised in 2011 and the current proceedings which were instituted by the father’s 2012 application.
During these proceedings, the mother has at times engaged a solicitor and junior barrister and at other times has done her own legal work. Also at times she has used an experienced family law senior counsel to provide legal advice, strategy and at times advocacy.
The father
The father has provided conflicting evidence about his financial circumstances. It is not possible to know what they are with any precision. The mother relies upon three financial statements sworn by the father (filed 24 May 2011, 11 July 2011 and 16 May 2013) and upon an admission made in cross examination in the 2011 hearing. The main controversy relates to the value to the father of his business interests and assets and the manner in which funds periodically come to the father.
In his first financial statement (24 May 2011), the father provides the following evidence about some of his assets:
Item 38 – J Pty Ltd (100 per cent owned by the father)
$557,550.00
Item 41 – A Pty Ltd
B Pty Ltd (50 per cent owned by the father)
$600,000.00
Item 50 – loan owed to C Investments Pty Ltd by the father
$220,000.00
It is difficult to know what to make of the father’s estimated liability for item 41 given what he says about his interests in those companies at item 38 of his second financial statement.
In his second financial statement (11 July 2011), the father deposes as follows:
Item 38 – 50 per cent interest in A Pty Ltd and associated entities (see additional information Section O)
$7,500,000.00 est
Item 41 – See additional information (Section O)
Item 50 – loan by the father from C Investments Pty Ltd
$220,000.00
Item 56 – interest in any trust – see additional information (Section O)
Part O provided the additional information:
My personal financial holdings
I am a 100 per cent shareholder of J Pty Ltd.
J owns 50 per cent of the share capital in both A Pty Ltd and B Pty Ltd.
A Pty Ltd wholly owns D Pty Ltd and E Pty Ltd. Relevantly:
· D Pty Ltd imports iced tea from the UK.
· E Pty Ltd collects all sales revenue from our direct to store sales team in Australia.
B Pty Ltd holds the intellectual property of A Pty Ltd.
I have not had A Pty Ltd valued. In early July 2011, the closest competitor to A Pty Ltd, F Limited (NZ) was sold at a sales multiple that would value A Pty Ltd at approximately $15mil. If approached by a prospective purchaser, I would not agree to sell A Pty Ltd for less than $25mil.
Each week, I draw on average $835 from A Pty Ltd which is a periodic repayment of my director’s loan to the company.
J Pty Ltd also owns a small shareholding (around 0.1 per cent) in G Pty Ltd. It has never received a distribution and I do not expect it ever will. I regard the investment as valueless.
I am the sole beneficiary of the H Trust, the trustee of which is H Pty Ltd. The only asset of the trust is a property at H Street I Town. That property was recently sold, with settlement completed on 5 July 2011. The net proceeds available were $88,111 which I propose to retain in liquid funds to use at my disposal (in addition to the funds stated at Item 37 above).
My interest in my greater family’s financial holdings
I am a director and shareholder of C Investments Pty Ltd.
Each week I receive a distribution $3,000 from the company.
The assets of C Investments Pty Ltd are valued between $12mil and $15mil.
On the face of the father’s second financial statement, he received distributions on a weekly basis of $3,000 from C Investments Pty Ltd whilst at the same time having previously received a loan from the trust of $220,000 prior to 23 May 2011.
I infer from the additional information in Part O that C Investments Pty Ltd is a company that is the trustee of a trust which has assets valued between $12 million and $15 million. The father is a director and shareholder of the trust and is at least a discretionary beneficiary of the trust.
In cross examination in July 2011, the father said that it was his opinion that A Pty Ltd was worth more than $21 million (which would put the father’s ultimate interest in that company in 2011 in the range of $10.5 million rather than $7 million).
In his financial statement filed in 2013, the father deposes:
Item 38 – loan to A Pty Ltd by J Pty Ltd (100 per cent owned by the father)
$368,264.00
Item 41 – A Pty Ltd (50 per cent interest held by J Pty Ltd ATF Mr Gerardine Family Trust)
*not known
* no value on a net asset basis (see attached Balance Sheet as at April 2013)
Item 50 – loan owed by the father to Ms K and Mr R Gerardine
* $833,700.00
* monies lent to me over the last nine years for living expenses, travel expenses, mortgage payments etc. to assist with all of the above due to deficiency in income
Item 53 – loan from parents for legal costs
$350,000.00
The section of the father’s third financial statement which provides additional information (Part O) is similar to that provided in the July 2011 financial statement, with the additional information that J Pty Ltd is the trustee of the Mr Gerardine Family Trust of which the father is the appointor. I infer from that statement by the father that his interests in A Pty Ltd and B Pty Ltd derive from the fact that the Mr Gerardine Family Trust is his alto ego.
The husband annexes to his 2013 financial statement, balance sheets for A Pty Ltd as at April 2013 (apparently unaudited) which shows its assets at $2,054,924 and liabilities at $4,263,383. The balance sheet does not record any value for D Pty Ltd, E Pty Ltd (which collects all sales revenue), B Pty Ltd (which holds all the intellectual property of A Pty Ltd) and A (NZ) Pty Ltd. Nor does the balance sheet record any goodwill. No profit and loss statement is provided.
At [17] of the father’s written submissions he asserts:
In the father’s financial statement filed 16 May 2013 he deposes to significant debts to his parents [$833,700 at that date] and secured against his home for his business [over $1 million]. He further deposes to over $40,000 per annum in travel and associated costs to spend time with the children. This level of expenditure for his time with the children remains under the agreed final consent orders. As such it cannot be said there is any evidence that the father has the capacity to meet any lump sum costs order or that the position of relative financial strength between the parties is such as to warrant one be made on that basis.
I give little weight to this submission given that the alleged significant debts to the father’s parents were not mentioned in either of the 2011 financial statements and there is no explanation as to why a debt to C Investments Pty Ltd in the sum of $220,000 (in 2011) has been supplanted by a previously unmentioned debt to the father’s parents in respect of “monies lent to me over the last nine years”. It is notable in the context of this application that the husband asserts that he has borrowed $350,000 from his parents for legal costs. This seems to have happened after 8 July 2011 as the liability does not appear on his second financial statement. The debt of almost $1.1 million which appears on the 2011 financial statements and again on the 2013 financial statement is secured against the father’s Suburb M property which in both 2011 and 2013 he estimated was value at $1.7 million.
On the face of it the father has an interest in a group of trading companies that he, on his own evidence in 2011, said were worth to him in excess of $10 million. The father has a significant equity in his own home. The father also has a financial resource in another trust of which C Investments Pty Ltd is the trustee that holds assets worth $12 - $15 million. Although the father seems to pay little periodic child support (and I have no information as to why that might be), the article which is annexure AA to the mother’s most recent affidavit is supportive of the mother’s assertion that the father enjoys an extravagant lifestyle. The father has been represented by senior and junior counsel throughout the proceedings.
By 2012 the father was no longer prepared to establish suitable accommodation in Sydney nor to live for a significant period in Sydney because he had, amongst other things, taken the view that his commitment to “A Pty Ltd” would not allow him to be in Sydney for any significant period of time and that being in Sydney would have a detrimental impact on his role in the business.
At [30] of the father’s affidavit of 30 September 2012, the father describes his business as being in a sector which was “rapidly growing in popularity”, with over 2,500 customers, selling 70,000 products a week and with a turnover of $6 million per annum, growing at approximately 20 – 30 percent.
I acknowledge the incomplete and untested evidence relating to the father’s financial circumstances. In the context of this limited hearing however, I am on the available evidence, and particularly on the evidence contained in the husband’s second financial statement, his oral testimony at the first hearing and his September 2012 affidavit, able to comfortably conclude that the father’s financial position is substantially superior to the mother’s financial position, particularly in respect of capital and financial resources. The father’s trading structure allows him to control what income he personally receives from time to time. In addition, his parents and C Investments Pty Ltd provide him with a significant financial resource.
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
Neither party is in receipt of a grant of legal aid.
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
The mother contends that at no stage did the father’s primary position, presented by him between July 2012 and February 2014, have any merit. She submits:
In the second set of proceedings filed 11 July 2012, just one year later, the mother contends that the father has not adduced any evidence which would leave open to the court any finding that there has been a significant change in circumstances or that a new or material factor has arisen which would result in the likelihood of ordering that the children’s residence should be changed and that the children should be re-located from Sydney to Melbourne.
At [17] to [63] of the father’s affidavit sworn 19 September 2012, the father gives the evidence upon which he relied to support his argument that the fundamental framework established by the 2011 consent orders which were made during a final contested parenting hearing, should be changed.
In her written submissions, the mother says, and I accept:
f. The Father’s case appears to be as follows:
(a)That he entered into the Orders on the advice of his lawyers following his cross examination (paragraphs 17-28 of affidavit of the father sworn 19 September 2012);
(b)That his work commitments are such that he is unable to parent the children in accordance with the arrangement set out in the Final Orders made 13 July 2011 (paragraph 29-54 of said affidavit);
(c)That the parties have had difficulty communicating since the making of the orders and difficulties making decisions (paragraphs 55-59 of said affidavit);
(d)That the children want to live in Melbourne (paragraphs 60-63 of said affidavit).
g. The Mother contented that there was no foundation to the propositions advanced by the Father that the children’s residency should be changed. They represented either propositions which were either completely absent evidence or absent evidence in proper form or evidence that the court put little weight upon or are a restatement of the identical contentions that the Father advanced in the first hearing in July 2011 in relation to his residency case.
h. As to the matters referred to above and adopting the same order the mother submits the following were relevant:
(a)Assuming there is any basis for such contention it is not a new or changed circumstance. The Father’s legal advice was given prior to the making of the Orders. The father has adduced no evidence rather self-serving conclusions that prima facie are not admissible and if admitted would be afforded little to no weight.
(b)That [sic] Father’s current contentions as to (a) the difficulties with his work and (b) his alleged inability to work if he were to spend time with the children in Sydney were the basis of his case in 2011. It is notable that in the father’s evidence given under cross-examination in July 2011 he attested to a flexibility in his work consistent with his subsequent consent to the Final Orders. The fact that the father now seeks to advance an entirely different position in relation to his work flexibility, a position which is at odds both with his sworn testimony in court and his acquiescence to the Final Orders is a matter which goes to the reliability of the father’s evidence. It does not, it is submitted, go any way towards establishing a change of circumstances so as to avoid the application of the rule in Rice v Asplund. The father’s circumstances have not, on his evidence, changed..
(c)Difficulties in communication between the parties allegedly experienced by the father in the implementation of the Final Orders do not make out a finding that new circumstances have materialised, and further, in any event, are not made out in the father’s evidence. It was contented [sic] by both parties in the initial hearing and clear in the evidences that the parties have been able to resolve issues in the past and reach agreement. Indeed agreement was reached in the Final Orders, There is no new evidence led by the father as to some new difficulties that have arisen so as to create a change of circumstances, and further no evidence led as to how, if the father’s application were to have been successful, the regime proposed by the father would ameliorate the alleged difficulties.
(d)These children are aged 6 and 4.
The father makes the following submissions about merits of his primary application:
3. No finding as to the merits or otherwise of the Father’s application to alter the orders dated 13 July 2011 was made. It is submitted that to award costs on the basis that the father would have lost if the matter was litigated is not a basis under sec 117(2A) of the Act. This is especially so in the circumstances of this case in which the matter ultimately resolved by way of final Consent Orders on 30 May 2014 (“the final consent orders”).
4. The Final Consent Orders included matters raised by the mother in her material in response. So for example, in the proceedings in the Federal Circuit Court in July 2011, the Mother sought an order for a change of the children’s surnames to include her own surname “[Ms Coulter]”. This order was not made at that time. In these proceedings however she sought to re-agitate that issue. The Father could have argued there was no demonstrable change in circumstance that justified this aspect of the July 2011 orders being re-litigated. Had he argued this he may have been successful on Rice v Asplund grounds. However he did not argue it. Instead he and the Mother negotiated the Final Consent Orders to include a change in the children’s surname and middle names. It should also be noted that the order agreed to by the parties was not an order which the court was likely to have made as it was not part of any application. From the children’s perspective, however, they now each have a second Christian name which is derived from the names of grandparents. This was an imaginative resolution to a difficult issue as a result of which the children’s names were changed at the same time as acquiring a new two part surname. Because both parents agreed to this arrangement, it has to be seen as being in the children’s best interests.
5. The Final Consent Orders also dealt with the Mother’s application to change the school which the child [S] attends from [N School] to a local Catholic school. There are also comprehensive orders made for the children’s time with each parent, special occasions and holidays and the like. Many of these issues were not agreed by the commencement of the day of the final hearing on 30 May 2014. It was only after the matter was stood down on that day that these were resolved.
6. In circumstances where there was no finding as to the merits of either party’s case and where both parties had applications for orders which remained unresolved until the final hearing, it cannot be argued the Father should pay the Mother’s cost (be they indemnity costs or party-party costs) for the period when his application was to alter the residence orders for the children. Even when that matter was conceded, the parties could not agree on the final orders to be made. The concession as to residence made no difference in the sense that the matter did not then resolve. It still required a final hearing date and on some issues which the Mother alone sought to agitate.
7. In such circumstances it cannot be said that either of the Mother or the father were wholly unsuccessful or wholly successful in the matters ultimately agreed to by them.
The father’s abandonment of his primary application meant that that application, which he had maintained between 11 July 2012 and 3 February 2014, was wholly unsuccessful. True it is, that given the father had changed his mind about coming to Sydney, arrangements concerning the children’s time with him would have to be renegotiated. The mother also wished to renegotiate arrangements in relation to the children’s school in Sydney given the father was not going to have the children six out of fourteen nights during school term (ultimately resolved on the basis that the father pay $250 per school week to assist with the transport of the children to and from school). Other matters, such as the change of the children’s name, were also subsequently agitated by the mother. These matters however, should not obscure the mother’s central legitimate contention, namely that the father took the position in the litigation, to which the mother was forced to respond, which, on its face, and as it turned out was wholly unsuccessful. That is not to say that the father was “wholly unsuccessful in the proceedings” as described in ss 117(2A)(f) of the Act, but it does go to the conduct of the father in relation to the proceedings (ss 117(2A)(c)) and is a relevant matter (ss 117(2A)(g)).
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
These proceedings were necessitated by the father’s decision not to establish a base and spend the necessary time in Sydney, which meant that the 2011 orders were unable to be fully implemented.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
This is not a case where the father has been wholly unsuccessful in the proceedings but rather one where the father has been wholly unsuccessful in his primary application which he pursued between July 2012 and February 2014.
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
The mother has tendered, without apparent objection with her written submissions, documents which she suggests become Exhibits 5 to 12, being the letters and emails referred to by those numbers at page 9 of the mother’s written submissions. I mark those documents Exhibits 5 to 12.
On 17 September 2012 the mother’s solicitor wrote to the father inviting him to discontinue his application without the risk of any penalty as to costs. The father did not reply. On 20 September 2012 the father filed an amended application maintaining his primary position.
The father asserts that it cannot be submitted by the mother that the father doggedly persisted with an application for final orders that the children live and be educated in Melbourne until his concession in open court at the mention of the matter on 7 February 2014 following his filing of his Further Amended Initiating Application on 3 February 2014.
The father, in his Amended Initiating Application filed 20 September 2012, put as an alternative proposal that the children continue to live in Sydney and sought orders for the children to spend time with him during school terms and holidays. That alternate proposal has continued to be in the father’s material from that date.
On 26 September 2012 the mother’s solicitor again wrote to the father’s solicitor setting out the mother’s proposal based upon the fundamental condition that the children stay in Sydney and be schooled in Sydney. The father was in Fiji at the time. The father’s lawyer acknowledged the letter but did not ever provide the promised reply prior to the matter being dealt with by Cronin J on 19 October 2012.
On 19 October 2012 Cronin J at [2] to [3] noted that the mother opposed any alteration to the 2011 orders, including the father’s alternate proposal.
The elder child commenced school in Sydney in term 1, 2013. The mother says the father informed her, by letter dated 17 January 2013, he would not be residing in Sydney and he sought the mother’s agreement for the children to live with her 12 of 14 nights during school term. I accept the father had informed the mother that he would not be in a position to fulfil his obligations under the 2011 orders in relation to having the children for additional nights during the school week as envisaged by the 2011 orders.
On 28 February 2013 (Exhibit 9) the mother’s lawyers sent a letter to the father’s lawyers. The mother acknowledged that the children would remain in her care during those additional school nights and set out a proposal aimed at resolving the matter on a final basis and again predicated on the assumption that the children would stay in Sydney. Apart from the mother’s suggestions in relation to the alteration of time, the mother sought the father discontinue the final orders that he was seeking for the children to return to Melbourne on the basis that he pay $30,000 in costs in respect of the proceedings. The father did not respond nor did he discontinue his application for a final order that the children return to Melbourne.
The matter came before me for the first day of the final hearing on 27 March 2013. On that day the father maintained his primary application that the children return to live with him in Melbourne.
On 18 June 2013 the hearing was adjourned so that the parties could attend mediation. It does not seem that mediation with Mr O proceeded because of issues about confidentiality. A confidential mediation was held with Mr P in October 2013 but was unsuccessful. The father asserts that that mediation was conducted on the basis that the children live in Sydney.
On 2 December 2013 the father wrote a letter to the mother offering to settle issues between the parties predicated on the children remaining in Sydney (Exhibit 10). There were a number of conditions attached to the father’s offer, including (paragraph 22 of his suggested terms), a condition that the father not pay any periodic child support but that he attend to the children’s schooling costs and health cover. On 30 May 2014 no final order was made eliminating the mother’s right to apply for periodic child support against the father.
It is the father’s case that by 18 June 2013, in confidential negotiations, the father was conceding that the children stay in Sydney and, at least by implication, any order for costs should be limited to that date. The difficulty with that proposition is that the father was still presenting to the court his original primary application (and as mentioned, explicitly did so in respect of a direct question by me to his senior counsel on 17 December 2013). The provisions of s 131(1) of the Evidence Act 1995 (Cth) applies to anything that the father had said to the mother confidentially. In addition, the father’s offer on 2 December 2013 was not a unilateral offer to withdraw his primary position. For him to do that, the mother had to accept the terms that he was suggesting.
I take into account the mother sought a dismissal of both the father’s primary and alternate proposals in her Further Amended Response filed 31 January 2014 but note her Further Amended Response filed 24 March 2014 (after the father had abandoned his primary position), sets out her proposal on the basis the children remained in Sydney and the father remained in Melbourne.
Such other matters as the court considers relevant
I have already mentioned that the fact the father was wholly unsuccessful in respect of his primary application is a relevant matter.
I am unable to place any weight upon confidential concessions made by the father to the effect that the children would reside in Sydney in circumstances in which he maintained the right to press an application for final orders that the children live in Melbourne.
CONCLUSION AS TO AN ORDER FOR COSTS
Whether the mother should receive professional costs for work done by her
The mother seeks costs for her own legal work relying upon the Chorley exception.
I accept that the mother is a legal practitioner who has held a practising certificate at all relevant times.
The mother asserts that had she not done the work set out in her time sheets that work would have had to have been done externally by an employed solicitor.
In his written submissions, the father says:
22. The husband’s fundamental submission however is that he ought not bear the mother’s costs, either for “external parties” or her own time. It is that last point that weighs against any application for costs the mother makes for time she has spent on this case to be borne by the husband at her usual charge out rate, that is, it was in her own time.
The father relies on the fact that the mother in her argument cited in support of her contentions the Court of Appeal decision in Atlas Corp Pty Ltd v Kalyk and in particular the obiter dicta in that case indicating that one rationale for the exception would be lost opportunity costs. The father submits:
However there is no evidence that the time spent by the mother as claimed in her time sheet was to the detriment of any of her paid legal work. Notwithstanding her assertion that she holds a Full Practising Certificate, she is an employee/solicitor and is not engaged in private practise on her own account. There is no evidence she could not fulfil her employment obligations because of preparing for this case. As such, no order for costs ought to be made and certainly no order on the basis of a charge out rate of $350 per hour when it seems she was still charging that amount as expected to her employer for her clients.
I will deal with the issue in relation to whether or not costs should be dealt with on a party/party basis below, but as set out above, the statement made in [9] of Atlas Corp Pty Ltd v Kalyk is obiter and should not be seen as an additional gloss on the principle clearly adopted by the High Court in Guss v Veenhuizen [No. 2].
Although the mother contends that the personal time expended in answering the father’s case had directly limited her available time to pursue income earning activities as a lawyer, there is no need for the mother to have established that opportunity was lost.
I find that the mother may recover professional costs for all reasonable work she did as a solicitor in this case, up to the date she was served with the father’s Further Amended Application filed 3 February 2014 or 7 February 2014, whichever is the earlier.
Whether indemnity costs should be ordered
As indicated above, the mother seeks costs incurred by “external parties” up to and including 7 February 2014 on an indemnity basis in the sum of $47,950.17. At [20] of her affidavit filed 20 May 2014, the mother gives the following particulars of the amount claimed:
Federal Court $255.00
Richard Schonell SC $12,320.00
Rossi Siminic Lawyers $5,500.00
Pure Legal/Christine Perry to 8.11.13 $28,637.19
Travel and accommodation $1,238.00
Total $47,950.19
The mother seeks costs for her own legal work in the sum of $58,774.10. Attached to her written submissions are time sheets which she seeks to tender. I mark those time sheets as Exhibit 13. The time sheets according to the mother, record 152.66 hours which she wishes to charge at her ordinary rate of $350 per hour plus GST. She claims that this is her consultant rate charged by her employer and is a rate commensurate with a less senior family lawyer in Sydney or Melbourne CBD.
The costs referred to in the previous two paragraphs, are costs sought by the mother on an indemnity basis. The mother’s argument is that the father commenced and continued an application for a change in the children’s living and schooling arrangements in circumstances where he, properly advised, should have known that he had no chance of success. If that is found as objectively so, then a presumption arises that he has commenced the action or continued it for an ulterior motive, namely, to obtain some forensic advantage in negotiations with the mother about other parenting arrangements arising from the father’s decision to remain in Melbourne.
Even though I have some sympathy with the argument that the husband has commenced and continued his primary application in circumstances where if he was properly advised, he should have known that he had no chance of success, I bear in mind that:
97.1.This is a parenting case and because the focus is on the best interests of the children and because of possible subjective views held by the father about what might be more appropriate arrangements for the children, it would not be usual to make an indemnity costs order;
97.2.Once the father had decided not to establish a base in Sydney so that he was no longer able to fulfil his obligations under the 2011 orders, it was inevitable that the 2011 orders would need to be reconsidered in some way.
I am not satisfied that this is an exceptional case in which indemnity costs should be awarded.
Even if I am wrong in reaching that conclusion, there are other matters which stand in the way of making an indemnity costs order in the mother’s favour.
As the father has submitted, the mother did not comply with rule 19.08 of the Family Law Rules 2004 (“the Rules”) by placing into evidence any costs agreement that she had between herself and her external lawyers. The mother has not provided any itemised accounts from her external lawyers. I am unable to know whether or not the mother’s external lawyers are charging the mother under a costs agreement or at scale. I accept the father’s submission that given there is no costs agreement before the court, it cannot be determined as to how far above scale the costs the mother claims for “external parties” may be.
Further, the mother claims her charge out rate at $350 per hour plus GST on the basis that that is commensurate with a less senior family lawyer in a Sydney or Melbourne CBD practice. Whilst the mother makes that assertion, I have no evidence as to current hourly rates charged by family lawyers in Sydney and Melbourne. Further, the mother has not detailed the experience that she has in family law outside her own matter. The father correctly submits that the mother would not be able to recover time that she has spent reading or researching family law in circumstances where a lawyer who had been employed by her would not have been able to charge for “research” on a party/party assessment given that the substantive case did not raise any new or novel points of law.
In addition as set out above, the rationale for the Chorley exception as explained by the High Court in Guss “is that work done by a solicitor can be quantified on a taxation of costs and as the plurality in Cachia referenced, a party/party order with connection to scale costs affords some basis for an award of costs in favour of the solicitor for himself for performing professional duties.
Accordingly, I find that it is not appropriate to make an order for indemnity costs in the mother’s favour.
Conclusion about the costs order
Taking into account all relevant considerations pursuant to s 117(2A) of the Act, and in particular, the fact that the father conducted the proceedings by asserting and maintaining his primary application for the period that he did, and the respective financial positions of the parties, I find that it is just in this case for a costs order to be made in the mother’s favour.
The mother seeks a fixed order for costs because after the protracted proceedings, she should not be subjected to a lengthy dispute over assessment of costs. An order for fixed sum costs is very attractive given the history of this litigation but unfortunately the mother has not provided sufficient evidence to enable me to fix an amount.
I will order the mother’s costs on a party/party basis in accordance with Schedule 3 of the Rules up until the time the father abandoned his primary application, such costs to include payment to the mother in her capacity as solicitor doing her own legal work calculated in accordance with Schedule 3 of the Rules.
Given that the father has at all times been represented by a senior and junior counsel, the engagement by the mother herself of senior counsel was reasonable. I will certify for senior counsel and express the view that on an assessment it would be reasonable for the Registrar to allow, on a party/party basis, the mother’s costs for the professional services of senior counsel.
I certify that the preceding one hundred & six (106) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 23 April 2015.
Associate:
Date: 23.4.2015
4
8
3