Crest & Oates (No. 2)

[2009] FamCA 627

FAMILY COURT OF AUSTRALIA

CREST & OATES (NO. 2) [2009] FamCA 627

FAMILY LAW – COSTS – Costs sought by husband – claim for additional costs he incurred as a result of late and inadequate disclosure by the wife of dealings with funds in her control – application by wife for adjournment of costs pending her appeal in the substantive proceedings, for disqualification of trial judge from hearing the costs claim, and for dismissal of the costs claim – applications of wife dismissed – fixed amount of costs ordered to be paid by wife – payment deferred pending appeal

Family Law Act 1975 (Cth)

APPLICANT: Mr Crest

RESPONDENT: Ms Oates

FILE NUMBER: SYF 2939 of 2006

DATE DELIVERED: 21 July 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 14 July 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Simpson SC

SOLICITOR FOR THE APPLICANT: Athena Touriki Solicitors

THE RESPONDENT: Ms Oates appeared on her own behalf

Orders

1. On or before one month from the date of disposition by the Full Court of the wife’s appeal in the substantive proceedings, being Appeal No EA67/2009, the wife pay to the solicitors for the husband costs fixed in the sum of $70,000. 

IT IS NOTED that publication of this judgment under the pseudonym Crest & Oates is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2939 of 2006

MR CREST

Applicant

And

MS OATES

Respondent

REASONS FOR JUDGMENT

Proceedings

1. On 28 April 2009 I delivered judgment and made orders in financial proceedings between the parties.  On 26 May 2009 the wife filed an appeal from certain of those orders and that remains pending.  On 4 July 2009 Le Poer Trench J stayed orders 2 and 3 pending further order on condition that the wife do all things to ensure the hearing of the appeal is not delayed. 

2. There now arise for determination several applications.  The husband asks that the wife pay certain costs he incurred in the course of the proceedings, in these terms:

   ‘1. That the Wife pay to the Husband within twenty eight (28) days from the date of this Order the costs on an indemnity basis of the Husband incurred by him in respect of:

   (a) the appearance by his Senior and Junior Counsel and his Solicitor at the hearing of these proceedings on 25, 26 and 27 June 2008;

   (b) their further appearances on the application by the wife for the issue of a second certificate pursuant to s.128 of the Evidence Act on 10 October 2008 and 20 November 2008;

   (c) the preparation by his Solicitor of the Schedules Exhibit Nos. 41, 43, 44 and 45 in the proceedings including perusal of documents produced by the Wife and the production of documents on subpoena and examination thereof necessarily incidental to their preparation and attendances on Counsel in respect of their preparation;

   (d) the appearance by his Senior and Junior Counsel and his Solicitor on one of the four hearing days 15 to 18 December 2008.

   2. That the Court fix the sum to be paid pursuant to Order 1 hereof.

   3. That the Wife pay the costs of this Application.

   4. Further or other Order.’

3. The wife applies for several orders: (i) adjournment of the husband’s costs claim until after the appeal; (ii) that I disqualify myself from hearing the costs claim; and (iii) dismissal of the husband’s costs claim.  All of that is in contest.  She had sought an order for a ‘stay’ of publication of the judgment but having been provided with a copy after it had been edited for anonymity she withdrew that application.  Not in her formal application but in paragraph 22 of an affidavit she filed, she had also sought orders that the husband’s solicitor pay her costs, but she abandoned that by withdrawing it at the outset of the hearing.  Nonetheless, Senior Counsel for the husband asks that it be dismissed. 

Adjournment

1. Rather than being persuaded the costs application should be adjourned I am satisfied it is proper to adjudicate it now. 

2. Doing so will reduce the almost inevitable further delay involved in bringing the financial relationship between the parties to an end.  If either party is aggrieved by the outcome now they will have the option of filing an appeal which can attach to the substantive appeal pending and take a parallel course to hearing at or around the time of its disposition by the same appellate Bench familiar with the circumstances of the case.  Indeed the wife stated that if the costs are determined now and the outcome is adverse to her she would appeal and seek a stay in the meantime.  There is no reason to think she would not take the same course if the costs decision were postponed to abide the outcome of the appeal, and the upshot of that would be further delay while the fresh appeal returns to the end of the queue to await another appellate hearing.  The same scenario could result from an outcome adverse to the husband, now or later. 

3. In putting her argument, the wife addressed paragraph 3 of the summary of argument provided by Senior Counsel for the husband.  That paragraph refers to avoiding the delay and additional costs of the assessment process and also to the trial judge being best placed to make assessments about matters such as complexity, difficulty, lawyers’ responsibilities and the conduct of parties.  The wife contends there would be no savings because if costs are decided now there will be further costs associated with her appeal from any order adverse to her.  Yet it is clear that paragraph 3 is a submission directed to the merit of ordering payment of a fixed sum for costs if the husband is successful rather an order in general terms, thus avoiding the need for quantum to be determined by the assessment process reflected in the Rules of Court.  The argument against the adjournment is put later in paragraph 25 of the summary. 

4. As for that, it is said for the husband that the trial judge is best placed to deal with the question of costs. I agree. The particular heads of claim relate either to appearances before me from the first day of hearing initially set to commence on 25 June 2008 but adjourned for reasons to be mentioned later, or to later appearances where the wife sought and was granted certificates under s 128 Evidence Act 1995 attaching to evidence she proposed filing, or to work undertaken by the husband through his solicitors directed to unravelling and giving some coherence to her financial dealings.  Conceivably there would be cases where the interests of justice or some particular circumstance render it necessary for costs applications to be heard by a judge other than the judge presiding at the relevant time, but nothing of that kind arises here.

5. In her submissions on this application the wife says I made orders overwhelmingly in favour of the husband, she challenges those orders by her appeal which she is prosecuting in a timely fashion, her appeal raises real issues yet to be determined, and therefore it is unfair to hear a costs claim before those matters are finalised.  Of course the merit of her appeal will be examined in due course, but if this is meant to advance the proposition that exercising the right to appeal against orders not to a party’s satisfaction means the question of costs arising from the proceedings – or from some aspect of the proceedings – therefore should be stood over to abide the outcome of the appeal, it is rejected.  If it is meant to suggest that orders not to the satisfaction of a party or a judgment adverse to some aspect of a party’s case means the question of costs should not be determined by that trial judge - or at least not until the appeal is finalised - that is also rejected. 

6. Related to that, there is a submission for the husband that the costs being claimed, by their nature, stand apart from matters to be considered in the appeal, that they are not bound up with the outcome there and the issue will almost certainly be unaffected by the outcome of the appeal.  Rather, the claim is directed to costs incurred by the husband as a consequence of the conduct of the wife breaching orders made by Watts J on 31 May 2007 imposing restraints on her dealing with certain funds, her failure to make proper disclosure of that in a timely manner, and her failure to make proper disclosure of her financial circumstances.  For my part I do not find it necessary to express a view about the degree of disjunction because even if there is an overlap with some of the grounds of appeal that is not sufficient cause to decline to hear and determine costs now. 

7. Finally, the wife places particular emphasis on the husband’s evidence in paragraph 7 of his affidavit sworn 4 June, which is to the effect that he has received the balance of the proceeds of sale of the B property and after paying all of his outstanding legal costs he retained just over $400,000.  The wife draws on this to contend there would be no prejudice to the husband by postponing the hearing of costs.  She argues that not only does he have a ‘substantial’ amount of money at hand but he had received spousal maintenance of around $1,000 per week for well over two years and he had previously received substantial sums of money towards partial property settlement, namely $97,000 and over $27,000 to enable him to move out of the matrimonial home – something she asserts the Court did not deal with in the judgment. 

8. To say the Court did not deal with these payments is wrong: their receipt was recounted in the record of the material facts [paragraphs 57 and 58] on which their entitlements were to be assessed; they were discussed in the context of dealing with argument about the composition of the assets, more particularly the inclusion or exclusion of ‘add backs’ [paragraphs 69–72]; and they were expressly recognised in the evaluation of contribution entitlements, more particularly post separation contributions [paragraph 82].  Putting that aside, the question of prejudice is not solely related to funds a party may have in hand; while ever entitlements remain undetermined there is prejudice inherent in the uncertainty attaching to unresolved claims and the inability in the meantime to order one’s affairs or plan the future.  Apart from that, Senior Counsel for the husband correctly observes that, having paid his costs, the husband is out of pocket by whatever amount he may be awarded.  Prejudice to him by delaying the costs decision, therefore, can be identified.  The wife did not identify specifically any prejudice to her in having the claim heard now.  If she is successful in having the claim dismissed, she will have the advantage of knowing her situation sooner rather than later.  If she is not successful and there is an order for her to pay the whole or part of what is claimed then she will have the advantage of having her appeal from that decision attached to her pending appeal and heard much earlier than otherwise would be the case, as already noted. 

9. The application for an adjournment is without merit and is dismissed. 

Disqualification

1. Not having the benefit of a transcript, no doubt there will be shortcomings in a summary of the wife’s submissions to support her application for disqualification, but since they are relatively brief her views will be put as fully as notes allow. 

2. The wife opened by referring to the High Court decision of Johnson v Johnson (2000) 201 CLR 488 which states the test to be applied in determining whether a judge is disqualified by reason of the appearance of bias: ‘…whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide’.  Passing reference was then made to the earlier High Court decision of Vakauta v Kelly (1989) 167 CLR 568. This was followed by the identification and reading of a number of passages from the decision of the Supreme Court New South Wales Court of Appeal in Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187. Having obtained a copy of the decision after the hearing concluded, it is apparent the passages are from the leading judgment of Ipp JA [with whom Mason P and Tobias JA agreed] and they are these:

   (i)Paragraph 24 records remarks attributed to Sir Thomas Bingham in “The Judge as Juror” (1985) Current Legal Problems 1 at 10-11:

   ‘24 In “The Judge as Juror” (at 8) Sir Thomas Bingham referred to comments of this kind (with which he largely allied himself) made by “three very experienced trial judges”, namely, Lord Devlin, Browne LJ and MacKenna J (whose words Lord Devlin later adopted as his own). I shall repeat the remarks of MacKenna J, which articulate the basic problems with clarity:

   “I doubt my own ability, and sometimes that of other judges, to discern from a witness’s demeanour, or the tone of his voice, whether he is telling the truth. He speaks hesitantly. Is it the mark of a cautious man, whose statements are for that reason to be respected, or is he taking time to fabricate? Is the emphatic witness putting on an act to deceive me, or is he speaking from the fullness of his heart, knowing that he is right? Is he likely to be more truthful if he looks me straight in the face than if he casts his eyes on the ground, perhaps from shyness or a natural timidity? For my part I rely on these considerations as little as I can help.”

   (ii)Paragraph 25 records remarks attributed to Sir Richard Eggleston QC in Evidence, Proof in Probability, Weidenfeld and Nicolson (1983) at 199 and the wife wants particular emphasis to be given to them:

   ‘Many judges think that they can tell from the demeanour of a witness when he is lying, but in the course of my practice at the Bar there were several occasions on which witnesses, whom I firmly believed to be honest and to be telling the truth, displayed evident signs of embarrassment and discomfort in the witness box, sufficient to make them appear to be lying.  I am therefore very sceptical of such claims.’ 

   (iii)Paragraph 26 records remarks of Mr A M Gleeson QC, as he then was, in “Judging the Judges” (1979) 53 ALJ 338 at 344, also given emphasis in the wife’s submissions:

   ‘Reasons for judgment which are replete with pointed references to the great advantage which the trial judge has had in making the personal acquaintance of the witnesses seem nowadays to be treated by appellate courts with a healthy measure of scepticism.  What might be called the Pinocchio theory, according to which dishonesty on the part of a witness manifests itself in a fashion that does not appear on the record but is readily discernible by anyone physically present, seems to be losing popularity.’ 

3. The wife urges that consideration be given also to paragraphs 27 and 28 of the judgment.  Their import is not stated but a reading reveals [to summarise] they are remarks about problems and doubts about ‘demeanour findings’ and the requirement to give reasons for making credit findings based on demeanour.  It is said that a number of these points overlap with points that will be raised in the appeal and there is no reason to doubt it. 

4. The wife then referred to Kelleher and Anderson, said to be a decision of the Full Court of this Court at [2007] 137 but no doubt it is a reference to the decision of Carter J at first instance since that conforms with the paragraphs I am urged to give my attention, namely 311 and 314 which I now set out:

   ‘311.   In Johnson, Callinan J referred with obvious agreement to the judgment of Mason J (as he then was) in Re JRL; Ex parte CJL (1986) 161 CLR 342.  Mason J had said at 352:

   “It needs to be said loudly and clearly that the ground for disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party.  There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties.  But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provided an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way.”

   ……

   314.    In Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 Gleeson CJ, McHugh, Gummow and Hayne JJ had this to say:

   “Judges have a duty to exercise their judicial functions when their jurisdiction is regularly invoked and they are assigned to cases in accordance with the practice which prevails in the court to which they belong.  They do not select the cases they will hear and they are not at liberty to decline to hear cases without good cause.  Judges do not choose their cases; and litigants do not choose their judge.  If one party to a case objects to a particular judge sitting, or to continuing to sit, then that objection should not prevail unless it is based upon a substantial ground for contending that the judge is disqualified from hearing and deciding the case.”’

5. The wife concludes her reference to authorities, at least on this application, with the decision of the High Court in Fox v Percy which is to be found at [2003] HCA 22, in particular to paragraph 14 and to page 29 though their relevance is not apparent.  Since a passage from Fox v Percy is cited by Ipp JA in Goodrich [at paragraph 12] it may have been intended to draw attention to what was said by Gleeson CJ, Gummow and Kirby JJ at 30-31 which [to summarise]; namely, a caution about assessing truthfulness and reliability solely or mainly from the appearance of witnesses and research that casts doubt on the ability of judges [or anyone else] to tell truth from falsehood accurately on the basis of appearance. In any event, to consider the submission I have familiarised myself with the case.

6. The submissions then advanced a number of propositions:

   (i)She identified her application as based not only on bias but also on prejudice and that I will see references to prejudice in the cases to which she referred.  In particular she said she wished to put a proposition she had taken from a paper delivered by Dowsett J at a conference in 2009 but, while she read out a short passage about ‘instinctive’ prejudice, no copy of the paper was provided and the point therefore cannot be elaborated. 

   (ii)She says the issues in the case were not complex ‘no matter how much the husband wants to inflate the matter’ – she and the husband were married late in life, they were in employment, they had no children, there were no complicated web of trusts, there were no major property holdings ‘tucked away’ in trusts or companies in order to hide them ‘as though the wife had been busily constructing a suite of Russian dolls’, there were no offshore accounts, no business dealings for ‘minimisation and tax evasion’, it was not a case where lifestyles were affected by the marriage and there was no detriment to the husband being married to the wife.

   (iii)She says the Court appears to have proceeded by accepting the submissions of Senior Counsel [referring specifically to pages 3 – 19 of the judgment] and simply substituted acceptance of those submissions for the proper function of considering the evidence as a whole.  In fact, she says, the Court did not make one concluded finding about a single issue in the case and, pertinent to this application, any specific finding about the credibility of the wife notwithstanding the many adverse comments that were made about the wife.  It is the adverse statements made about the wife’s credibility prior to any consideration of the evidence and making any concluded finding based on consideration of that evidence that is the basis of the proposition that there is ‘manifest bias’ in the reasoning. 

   (iv)Further, it is said that any reasonable listener or observer could reasonably apprehend bias on my part. 

   (v)It is said to be noteworthy that having made the observations [she said she could put it no higher] that the wife was an unreliable witness, I then observed briefly that there were also difficulties with the evidence of the husband but I proceeded to deal with the matter as though finding his evidence was ‘accurate and acceptable on some level of veracity and accuracy’.  She adds that there is no principle of law in any jurisdiction that if a Court makes a finding about lack of credibility of one party, it follows the Court can find the other party is indeed a ‘witness of credibility’.

1. Unquestionably, the statement of principle related to apprehension of bias is correctly stated [see Johnson v Johnson [per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ] at 492-493].  But the other submissions should not be passed over since that would be leave stand assertions of incorrect fact and irrelevant argument. 

2. Not a single example or instance is given to support the submission that ‘any reasonable listener or observer’ could reasonably apprehend bias on my part, manifest or otherwise, or prejudice.  Implicit in the submission is the suggestion that by tone or tenor of voice or the content of something said or by manner or ‘demeanour’ I exhibited bias against her or prejudice.  On the contrary, not once in any appearance in my Court or at any time throughout the conduct of the hearing could it be said that the wife - or anyone else for that matter - was subjected to or experienced anything other than complete courtesy and a calm and respectful manner.  It is wrong to say otherwise. 

3. It is also wrong to say I made not one concluded finding about a single issue in the case.  As will be apparent from a reading of the judgment, I prefaced the record of the material facts on which evaluations were to be made by saying [paragraph 20] that statements of fact to follow are to be construed as findings of fact and where necessary will rely on the finding just made about credit/reliability.  A constant repetition of the mantra “I find …” is thus rendered unnecessary. 

4. It is also wrong to say that in my reasons I substituted the submissions of Senior Counsel for the function of considering the evidence.  A reading of the judgment will demonstrate that I recorded the substance of those submissions, as I did the absence of any reply to core propositions about her credit by her counsel, before embarking on a discussion of the evidence relevant to her reliability as a witness.  The discussion of what the evidence revealed of that proceeds from paragraph 12 over many pages and includes references to inconsistencies, omissions and the giving of false evidence without plausible explanation and it was specifically sourced to the evidence.  The finding of unreliability and of her failure to fulfil her obligation of proper disclosure of her financial dealings is recorded at paragraph 19.  Nowhere is there any proposition to the effect that a finding about her lack of credibility leads to a finding the husband is a credible witness.  Shortcomings in his evidence were noted but a preference expressed for his evidence subject to the caveat that it is not otherwise established to be ‘incorrect, improbable or inherently unbelievable’. 

5. The wife’s submissions placed emphasis on passages from several judgments which, in some instances, was discussion about the demeanour of a witness being an unsatisfactory basis for the making of credit findings.  No right thinking person would disagree with what was said, but the topic has no relevant connection to the judgment delivered and if it is intended to infer that the finding about the wife’s credit rested in some way on her ‘demeanour’ that would be wrong, as a reading of the judgment would demonstrate.  As a public official, the wife could be taken to know that every day in trial courts up and down the country there are disputes about facts and, in so far as they are material to the issue calling for adjudication, it is the duty and function of the judge to decide whom to believe having regard to the best evidence available.  Guiding the fact finding process are many things including – to draw on a passage from the opinion of Baroness Hale of Richmond in Re B (Children) [2009] 1 AC 11 [at 31] – ‘the inherent probabilities, any contemporaneous documentation or records, any circumstantial evidence tending to support one account rather than the other, and their overall impression of the characters and motivations of the witnesses.’  That is what occurred here.  Findings adverse to the wife did not rest on her demeanour. 

6. Later, in a brief reply to submissions for the husband, the wife says that when judgment was delivered in April I came into Court, published reasons and left and she had no opportunity to make any application for recusal.  This is irrelevant.  On the day in question written reasons were published and made available to the parties and legal representatives and orders were made as set out in the judgment.  That concluded my function at that point and nothing was left to discuss.  Nothing was pending to attract a disqualification application - unless and until a costs claim was to be raised, which happened in due course. 

7. Plainly the wife is aggrieved by the judgment and outcome and she will have the opportunity to agitate her case in the Full Court in time, as is her right.  She may very well harbour in her mind an expectation that costs will be determined against her, but that is not the test [see Re JRL; ex parte CJL (1986) 161 CLR 342] and nor, as stated earlier, does the making of adverse credit findings exclude a trial judge from determining consequent responsibility for costs. Were it otherwise, the system would be ground to a halt by the need to assign to another judge any costs claim arising from proceedings where the daily task of deciding whom to believe had been undertaken and one party found wanting.

8. Nothing here satisfies the test for disqualification, there is no basis for declining to hear and determine the costs claim, and the application is dismissed. 

Costs

The claim

1. The husband’s claim for costs relates not to the outcome of the property proceedings but to the professional costs and disbursements he incurred in the course of the proceedings as a consequences, it is submitted, of the conduct of the wife, being costs directly related to matters which were her responsibility and not the husband’s.  More particularly, costs are claimed with respect to the adjournment of the June hearing, for appearances at Court in October and November, for the preparation of schedules endeavouring to throw some light on the wife’s financial dealings, and for one day of the December hearing.  A fixed amount of $125,501 is claimed and the components are set out below – further particulars are reflected in each instance in the annexure to the affidavit of the husband’s solicitor, as identified:

   a.        June 2008 hearing                  32,796.50 [annexure D]
   b.        10 October 2008                      4,666.86 [annexure J]
   c.        20 November 2008                  3,542.00 [annexure L]
   d.        preparation of schedules       72,736.71 [annexure I]

   e.18 December 2008                11,759.00 [annexure N/para 32]

   125,501.07

The Act

1. Costs are governed by the provisions of s 117 of the Family Law Act 1975. It is the general rule under s 117(1) that each party is to bear his/her own costs but s 117(2) permits the Court to make such order as it considers just if it is of the opinion there are circumstances to justify doing so. In considering what order (if any) should be made, regard is to be had to these matters referred to in s 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)         other matters as the court considers relevant.’

2. As some emphasis is placed by the wife on sub-section (1) providing for each party to bear his/her own costs – what she maintains various cases establish to be the ‘starting point’ - it will be as well to go directly to what the High Court said in Penfold v Penfold (1980) FLC 90-800 [per Stephen, Mason, Aicken and Wilson JJ] at 75,053 and following, namely:

   ‘It is an accurate description of s 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the section is not paramount to s 117 (2).  Subsection (1) is expressed to be subject to ss (2), the former must yield whenever a Judge finds in a particular case that there are circumstances justifying the making of an order for costs. 

   Subsection (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 inter-relationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs.

   ………Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s 117 (2) in a “clear case”.

   Subsection (2) does not in our view as a matter of law require the Judge to specify the circumstances which justify the making of an order.  It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication.  Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue.  The absence of reasons or findings, does not, in itself, indicate that a Judge has erroneously exercised his discretion toward costs, though it will place an appellate court in the position of examining the circumstances of determining for itself whether the circumstances show that the discretion was erroneously exercised…’

The circumstances

1. Before consideration of issues related to costs agreements or quantum and the like, it is first necessary to address the question whether there are justifying circumstances within the meaning of s 117(2) having regard to the provisions of ss (2A).

2. At the heart of the claim is the conduct of the wife and the substance of the case put for the husband follows:

   (i)The first head of claim relates to costs thrown away by the adjournment of the first hearing which had been set for three days to commence 25 June. It was adjourned because the wife failed to make a timely disclosure that she was in breach of injunctions made earlier by Watts J and that her financial position was not as disclosed in the evidence she had filed in her case to that date; rather, her Senior Counsel advised that she would need to prepare and swear to further evidence and time was sought for that to be done. It is not in contest that this disclosure of a state of affairs different from her evidence filed to that point was not made to the husband or his legal advisors until the first morning of the hearing. While the matter was stood down at her request, her further evidence did not become available until some time in the course of the morning on the second day and then only after the wife sought and was granted a certificate under s 128 of the Evidence Act 1995 (Cth).  In the circumstances it was necessary to allow the husband and his advisors time to consider her fresh evidence and the upshot was the adjournment of the hearing the following day so as to allow investigation of her revelation of the state of funds under her control contrary to earlier orders. 

   (ii)As annexure D to the solicitor’s affidavit demonstrates, the amount claimed is $32,796, being costs of the appearance by the husband’s legal representatives - Senior and Junior Counsel and solicitor - on those three days.  Fees for both Counsel make up the vast bulk of the amount claimed while a little over $8,000 relates to the solicitor’s costs based on 33.25 hours at a rate of $220 per hour plus GST. 

   (iii)The second head of claim relates to appearances in October and November when a further certificate under s 128 was sought by the wife and granted for evidence she was to file for the adjourned hearing. In both instances the appearances were largely a consequence of the abandonment of the earlier hearing and to resolve any issue about certificates to attach to the further evidence she proposed filing. As the record will demonstrate, the October appearance was directed to her evidence being prepared for filing and service and an indication given that if a further s 128 certificate was to be sought then that be listed as soon as practicable rather than leave it to the hearing. The November mention related largely to the wife’s application for a s 128 certificate although there were also directions given to ready the case for conclusion and there were orders made by consent about the sale of the B home together with a suspension of the injunction against the wife made on 27 June 2008 for a purpose specific to the sale of the home.

   (iv)The amounts claimed by the husband for these appearances are $4,666 and $3,542 respectively and the detail is to be found in annexure J and L of the solicitor’s affidavit.  Again it is apparent that the bulk of the costs relate to Counsel’s fees, Senior and Junior, and a much smaller component to the solicitor’s costs, being 3.6 hours on 10 October and 4 hours on 20 November as well as some earlier work charged at $220 per hour plus GST. 

   (v)The next head of claim relates to the costs the husband incurred in preparing schedules which became exhibits 41, 43, 44 and 45 at the hearing and for the issue of subpoenas.  The schedules are said to constitute an attempt to unravel the dealings by the wife with funds drawn from her superannuation fund and obtained by her by encumbering the property registered in her name in Queensland.  These investigations had to be made by reason of her inadequate disclosure notwithstanding the opportunity given at the June hearing and later to file further evidence giving a full account of her dealings which, in the result, proved to be inadequate. 

   (vi)The amount claimed for preparation of the schedules is $72,736; the detail is to be found in annexure I to the solicitor’s affidavit.  As is apparent, this covers many pages and includes a component for various disbursements including Senior and Junior Counsels’ fees while the vast bulk is attributable to the solicitor’s costs of around $58,700 based on over 242 hours at $220 per hour plus GST.  

   (vii)The final head of claim is for one day of the four days spent in hearing the matter in December.  Inadequate disclosure by the wife is said to have resulted in considerably more work having to be undertaken in preparation for the hearing and, at a minimum, the need to cross-examine on the wife’s financial position and make related submissions which can be said to have extended the trial by at least one additional day. 

3. Some of the submissions made by the wife relate to the question of indemnity costs which can be deferred until the question arises.  However, there is a submission that may be intended to stand separate from any question of quantum.  That is the contention that the costs agreement the husband signed does not conform to the relevant Rules of Court and is therefore invalid.  As such, the solicitor would not have been able to sue the client on it and the husband did not have to pay the costs rendered.  I shall return to the point later. 

4. The wife put some emphasis on the document which is annexure O to the solicitor’s affidavit, being the disclosure as to costs dated 8 December 2008 which the solicitor was obliged to give pursuant to the Rules of Court.  That contains an item referable to counsel’s fees incurred to Dr Mark McFadden, the particulars being ‘8.3.07 – subpoena argument re [Ms Q] - $1,925.00 – Paid by [the husband] 29.5.07 – proceeds partial property settlement’.  This became the subject of an email the wife sent to the solicitor which, along with other emails tendered by Senior Counsel for the husband, became exhibit 1.  On 6 July the wife caused a subpoena to be issued to the husband requesting ‘copies of all authorisations given by you to your solicitor for payment out of your Trust account in settlement of fees owing by you and by [Ms Q] to any and all solicitors, and to any and all counsel, acting on your behalf and on behalf of [Ms Q] in respect of these and any other proceedings.’  The wife says no such document was produced.  She also says that there is no item in annexure I related to the engagement of Dr McFadden – ‘no letter of engagement, no costs disclosure, no costs agreement, no fees disclosed by Dr McFadden, no break down as to what costs were incurred for what work done, no advices to the client about the engagement of Dr McFadden.’  She asserts there is a ‘real attempt to mislead or conceal the fact [the husband] paid for legal fees incurred by [Ms Q].’  Amongst other things she says these fees were paid in respect of ‘[Ms Q’s] objection’ to a subpoena issued a long time back when the husband, she maintains, was ‘living with [Ms Q] in a de facto relationship’ and the husband and his legal team have done everything they could to mislead this Court about the fact that he was living with her.  She says she has uncovered documents showing his address being her address up to the time of the hearing before Watts J and she is saving these documents for the appeal. 

5. However, the reference to the fees payable to Dr McFadden in the costs disclosure notice [annexure O] has no connection to the question to be decided here.  As Senior Counsel for the husband points out, the husband claims the specific costs referred to earlier, none of which relate to the occasion of the engagement of Dr McFadden in 2007, and therefore the disbursement is not included in annexure I. 

6. The wife also says she has no capacity to pay a costs order and she has no financial resources upon which to draw as the husband has all those.  She advises that she still has a line of credit with the ANZ Bank of $334,000, an overdraft of $20,000, and a personal loan of a little over $9,000.  She says that what money was available in her superannuation fund has been expended paying further legal costs and she still has legal costs outstanding. 

S 117 (2A) findings

Paragraph (a) – financial circumstances

1. For present purposes the parties’ financial circumstances are discussed in the judgment delivered 28 April 2009 and the detail of it need not be repeated here.  Suffice to say that how the wife expended a good deal of capital in her control prior to the hearing is not known and was not disclosed by her in a manner consistent with her responsibilities.  Given that, the argument of incapacity is either not available to her or is undeserving of weight here.  Her position as to capital is unknown and she has a relatively substantial income from her full time employment as a public official.  I am satisfied therefore that her financial circumstances do not exclude an order being made for costs. 

Paragraph (b) – legal aid

1. This is not relevant.

Paragraph (c) – conduct in relation to the proceedings

1. This is a key consideration.  It is recognised that both parties have incurred extraordinary costs in agitating their property dispute.  Senior Counsel for the husband gave figures of over $342,252 by the husband and in excess of $532,000 by the wife and no issue was taken with that.  But the incontrovertible fact is that some proportion of the husband’s costs was the result of the failure of the wife to disclose aspects of her financial dealings, either in a timely way or sufficiently.  It is accepted that costs were thrown away by the events that spanned the three days allocated to the hearing in June, that further appearances in October and November were largely a consequences of that adjournment, and that it is not unreasonable to say that one day of the four taken to hear the matter in December can be sheeted home to the wife’s financial dealings and her failure to disclose them adequately.  Nor was it unreasonable for the husband to have incurred the expense of preparing schedules in an attempt to bring some coherence to the diminution of over $1 million in property that would otherwise have been available for distribution.  Whether it warranted the whole of the expenditure claimed is another question. 

Paragraph (d) – failure to comply with previous orders

1. To the extent relevant, this is taken up in the submissions on conduct per paragraph (c). 

Paragraph (e) – whether wholly unsuccessful

1. This is not taken up specifically and has no relevance separate from what has already been said. 

Paragraph (f) – offers of settlement

1. This is irrelevant and is not the subject of submission. 

Paragraph (g) – other relevant matters

1. To the extent the wife attempts to bring to this application considerations related to the husband’s relationship with Ms Q and the wife’s apparently steadfast conviction that the relationship had not ended when the husband asserted it did, there is simply no foundation in the evidence for any finding consistent with her conviction and therefore it is an irrelevant consideration. 

2. Nor is the contention that the costs agreement is invalid an answer to the costs claim because that relates essentially to quantum.  If the husband was not obliged to pay his solicitors by importing the terms of the agreement, certainly the legal services rendered were not provided pro bono, and if reliance on the costs agreement is contra-indicated for some reason then reasonableness would be implied and the quantum ascertain by other means.  I consider it unnecessary to examine the point any further for the reason I shall state shortly.  In any event, the husband’s case offers the alternative of a general costs order if there is thought to be some ‘technical deficiency’ with the costs agreement. 

Justifying circumstances

1. Having considered the history of developments and the arguments for and against, I am satisfied there are circumstances to justify a departure from the general rule. 

2. It must be beyond reasonable dispute to say that costs were thrown away over the three days in June because of the wife’s failure to have sworn to evidence by the first morning of the hearing about her prior financial dealings, in particular dealings with funds contrary to orders made by Watts J at an earlier time. It was necessary for her to swear to further evidence on the topic while the husband and his legal advisers waited. Received towards the middle of the second day, it was entirely reasonable for the husband and his advisers to require time to consider her evidence and to wish to investigate what the late disclosure had revealed. The October and November mentions were a direct result of the need to adjourn the hearing and they were also the occasion for granting, at the wife’s request, further s 128 certificates attaching to her evidence, even though other matters such as the sale of the B home were dealt with. Also, it was reasonable that some attempt be made to bring some coherence to the web of dealings with funds in the wife’s hands by the preparation of schedules.

3. It would be unjust to the husband to leave him to bear the financial burden of this conduct.  Ordering costs would be consistent with other cases where inadequate financial disclosure by one party has increased the costs of the other and led to costs orders – examples to mention just a few of the better known cases are Penfold (supra), Greedy and Greedy (1982) FLC 91-250, and Oriolo and Oriolo (1985) FLC 91-653.

Basis

1. The question then is what order would be just. The husband wants to be indemnified for the costs he actually incurred. Certainly it is well settled that indemnity costs can be ordered pursuant to s 117 – see Kohan and Kohan (1993) FLC 92-340 [per Strauss, Lindenmayer and Bulley JJ] where at p 79,614 their Honours said:

   ‘The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course.  However, where the justice of the matter so requires, the court may make such order as the court considers just.  As we have pointed out, the court may depart from the scale of costs prescribed under the rules.  However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges.  By O38 r2, the provisions of O38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client.  Order 38 rule7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility.  Consequently, the court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.  See Degmam v Wright (No 2); Wentworth v Rogers (No 5); Hobartville Stud v Union Insurance Co.

   Indemnity costs orders are still an exception in this and other jurisdictions.’

2. This statement of principle has been maintained in the many subsequent cases about indemnity costs decided at appellate level which have invariably drawn on the earlier decision of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) (1993) 46 FCR 225; 118 ALR 248 and in particular this passage [256 of ALR]:

   ‘(2)     The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis …

   (3)      This has been the settled practice for centuries in England.  It is a practice which is entrenched in Australia.  Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it …

   (4)      In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis.  The circumstances of the case must be such as to warrant the court in departing from the usual course…’

3. While there was some discussion in Colgate-Palmolive of the circumstances in which the discretion to award indemnity costs, the category is not closed, as noted by the Full Court of this Court in Yunghanns (2000) FLC 93-029 [per Lindenmayer, Holden and Mullane JJ]:

   ‘[31]…It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought.’

4. Post-hearing the wife provided a note bringing my attention to two cases: Karbines & Anor (Intervenor’s costs) [2008] FamCA 391 at pp 9 and 10 and Rory and Rory [2008] FamCA 426. However, having gone to those cases, both at first instance, they add nothing to statement of principle at appellate level and nor do their facts assist with this decision. 

5. The submission for the husband is that the circumstances here were so egregious as to warrant costs on an indemnity basis.  While not without some merit, in the final analysis I have not been persuaded to order costs on that basis.  The wife’s conduct certainly increased the costs he would otherwise have incurred but falls short of satisfying the ‘exceptional’ caveat underpinning the award of indemnity costs.  It is this conclusion that makes it unnecessary to examine the wife’s broadly stated contention about invalidity of the costs agreement.  In my opinion, something less than complete indemnity is justified. 

Quantum

1. The question is then whether a general order should be made for costs on a specified basis, such as party/party, to be agreed or taxed or whether a sum should be fixed now. 

2. Providing for agreement on quantum after a general costs order is possible of course, but the indicators here suggest agreement is highly improbable.  That would almost certainly continue the Court process and lead to further expense.  Also, there is no reason to think a Registrar would be in any better position than I am to consider the just quantum since the detail of the costs claimed, and the rate charged, is to be found in the several annexures to the solicitor’s affidavit.  In my opinion fixing the costs to be paid by the application of a broad discretion is the preferred outcome. 

3. In that, some regard is had to the level of fees set out in the Schedule to the Rules, to the detail underpinning the amounts claimed in annexures D, J, L, I and N, and to the need to pare back those figures from their indemnity basis, in particular I think it necessary to pare back the amount of time spent on the preparation of schedules - although I do not doubt the complexity of the task confronting the solicitor in the exercise undertaken.  In my view it would be a just result to provide for this:

   (i)two-thirds of the amounts claimed per annexures D, J, and L – that is, payment of $27,338;

   (ii)half of the amount billed for the work undertaken in annexure I – that is, $36,368

   (iii)one day of the hearing in December, say $6,300; and

4. This comes to $70,006 [$70,000].  Orders will be made accordingly. 

Time - payment

1. No submission has been made by either party about time to pay and nor did I think it warranted to list the matter for the purpose of taking further submissions on the prospect of an order deferring payment.  The wife has said she will appeal and apply for a stay in the meantime, which there is no reason to doubt, and I see the further costs inevitably generated by that course best avoided by extending the time for payment beyond the disposition of the substantive appeal.  By that time any appeal from the costs order will also be dealt with or, if not, the Full Court will be in a position to make directions about it.  By deferring payment it is recognised that the husband will be out of pocket until he is paid and that interest according to the Rules will not run until payment is due.  However, not deferring payment until after the appeal means further costs will be incurred. 

2. For that reason, the orders will provide for payment within one month of the disposition of the substantive appeal. 

Dismissal/withdrawal

1. There was no reply by the wife to the proposition that her application for orders against the husband’s solicitor be dismissed.  There may be a distinction in effect between withdrawal and dismissal, but it was not discussed and no point will be served in elaborating it here.  Suffice to say the wife stated her wish to withdraw her application at the outset of the costs hearing and the more prudent course is to take the view that, being withdrawn, there is nothing to dismiss. 

I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date: