Crittenden & Collins (No 3)

[2017] FamCA 1121

FAMILY COURT OF AUSTRALIA

CRITTENDEN & COLLINS (NO. 3) [2017] FamCA 1121

FAMILY LAW – COSTS – Where the husband forwarded privileged material to his lawyers knowing it was confidential in the hope of gaining forensic advantage - Where an injunction was made restraining the husband from continuing to instruct his then lawyers and requiring him to destroy copies of certain documents – Where the circumstances of the case warrants an order that the husband pay the wife’s costs fixed in the sum of $40,000. 

Family Law Act 1975 (Cth)
Family Law Rules 2004

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 FamLR 123
Kohan & Kohan (1993) FLC 92-340
Penfold v Penfold [1980] HCA 4; (1980) 144 CLR 311
Prantage & Prantage (2013) FLC 93-544
Yunghanns v Yunghanns (2000) FLC 93-029

APPLICANT: Ms Crittenden

RESPONDENT: Mr Collins

FILE NUMBER: BRC 3770 of 2014

DATE DELIVERED: 22 December 2017

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Carew J

HEARING DATE: In Chambers upon receipt of written submissions on 20 and 23 October 2017

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Keating Lehn Solicitors

SOLICITOR FOR THE RESPONDENT: Barkus Doolan

the court orders

1. That the husband pay the wife’s costs of and incidental to the application filed 18 July 2017 (as amended by leave) fixed in the sum of $40,000 with payment to be made within thirty (30) days.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Crittenden & Collins (No. 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 3770 of 2014

Ms Crittenden

Applicant

And

Mr Collins

Respondent

REASONS FOR JUDGMENT

1. On 15 September 2017 I delivered judgment in a matter that had been heard by me on 21 and 31 August 2017. The order made that day included an injunction restraining the respondent husband from continuing to instruct his then lawyers and requiring him to destroy copies of certain documents forthwith. Additionally, the order provided that if the parties were unable to agree within 21 days what costs order, if any, should be made, each party was to file written submissions and, unless either party contended to the contrary, the costs application would be heard in chambers.

2. On 20 October 2017 the husband filed written submissions and on 23 October 2017 the applicant wife filed written submissions. The husband sought to reserve the right to reply to the wife’s submissions if “any additional matters” were raised by the wife in her written submissions.  

3. Neither party has contended that the application for costs should not be dealt with in chambers and no further submissions have been received.

4. Out of an abundance of caution the parties were notified on 14 December 2017 by the case co-ordinator that in the absence of any further submissions judgment would be delivered on 22 December 2017 at 10.00 am and if either party proposed to file any further submissions in reply that should occur by 4.00 pm on 20 December 2017. No further submissions were received.

background

1. The background to this matter is set out in detail in my reasons delivered on 15 September 2017 and I shall not repeat them here. Suffice to say, the husband came into possession of documents that were prima facie subject to legal professional privilege in favour of the wife. Notwithstanding his knowledge that the documents were confidential he gave them to his lawyer with the intention of obtaining some forensic advantage.

2. The lawyer with the carriage of the matter perused the documents and continued to act for the husband for many months before informing the wife’s lawyers of the state of affairs.  

3. The wife’s request that the husband’s lawyers cease to act was resisted. At the first hearing on 21 August 2017 it became apparent after cross-examination of the husband that he retained copies of the documents in question which led to leave being granted to the wife to amend her application to seek an additional order that required the husband to destroy the copies.

4. The husband wished to be heard about the precise form of the amendment (which was left to Queen’s Counsel to draft after the hearing on 21 August 2017) and accordingly a further appearance and oral submissions were made on 31 August 2017.

How costs applications are determined

1. In this jurisdiction parties are generally required to bear their own costs.[1] However, where justifying circumstances exist, s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) empowers the Court to make such order for costs as the Court considers just.

   [1] Section 117(1) Family Law Act 1975 (Cth)

2. In the exercise of that discretion regard must be had to the factors set out in s 117(2A) of the Act, so far as they are relevant.

3. Those factors are as follows:

   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.

4. No one factor has more weight than any other nor is it necessary for more than one factor to be present.[2]

   [2] see Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 FamLR 123 at 130

5. When discussing the subparagraphs in s 117 the High Court in Penfold v Penfold[3] said:

   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 sub-section is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (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.

   Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. 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”.

   [3] [1980] HCA 4; (1980) 144 CLR 311 at 315

6. When considering what specific order to make, Rule 19.18 of the Family Law Rules 2004 (Cth) (“the Rules”) empowers the Court to make an order:

   a)of a specific amount;

   b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);

   c)to be calculated in accordance with the method stated in the order; or

   d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

7. In considering what specific order should be made the same Rule provides that the Court may consider any of the following factors:

   a)the importance, complexity or difficulty of the issues;

   b)the reasonableness of each party's behaviour in the case;

   c)the rates ordinarily payable to lawyers in comparable cases;

   d)whether a lawyer's conduct has been improper or unreasonable;

   e)the time properly spent on the case, or in complying with pre-action procedures; and

   f)expenses properly paid or payable.

8. A court will not lightly make an order for costs to be paid on an indemnity basis. There would need to be some circumstance of an exceptional nature to justify that course.[4]

   [4] Kohan & Kohan (1993) FLC 92-340; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; Yunghanns v Yunghanns (2000) FLC 93-029

9. The Full Court in Prantage & Prantage[5] discussed the meaning of ‘indemnity costs’ and said:

   16. Before discussing the merit of the appeal, we should state our understanding of the meaning of the expression “indemnity  basis”.

   17. Although the Explanatory Guide to the Family Law Rules 2004 (“the Rules”) is not formally part of the Rules, we accept as accurate its definition of “indemnity basis” when applied to a costs order as being:

   an entitlement to  costs , including  costs  under a  costs agreement, for all  costs  incurred, other than  costs  that are unreasonable in amount or that have been incurred unreasonably.

   [5](2013) FLC 93-544

wife’s submissions in support of a costs order in her favour

1. The wife seeks an order for her costs of and incidental to the hearings on 21 August 2017 and 31 August 2017, and, of and incidental to the application for costs to be paid by the husband on an indemnity basis.

2. The wife’s costs of and incidental to the hearings on 21 and 31 August 2017 total $56,258.37 including Queen’s Counsel fees of $28,028. No sum is identified for the costs application itself but in addition to the written submissions the wife relies upon an affidavit from her lawyer annexing the relevant fee agreements and correspondence.

3. The disparity in the financial positions of the parties is highlighted in the submissions made on the wife’s behalf viz. the husband has assets of $3,085,111 as against the wife’s of $708,922. The husband’s weekly income is $853 per week as against the wife’s $169 per week.

4. It is submitted by the wife that the conduct of the husband and his then lawyers warrant a costs order and on an indemnity basis. Particular reliance is placed on the following findings made in the reasons for judgment:

   50.      In the case before me there is no issue that the documents are on their face privileged. There is also no doubt that the husband knew the documents were confidential and that he provided them to BNL for the purpose of perceived forensic advantage to his case.

   …

   54.      It is most unfortunate (to say the least) that BNL delayed in taking appropriate steps immediately upon receipt of the privileged documents. While Rule 31 of the Australian Solicitor Rules may not strictly apply the intended mischief to be addressed is absolutely clear in my view. The following actions should have been taken by BNL:

   a)        KLS should have been informed immediately;

   b)        The documents should all have been provided to KLS with a request as to whether privilege was claimed;

   c)        The husband should have been advised to destroy the documents in his possession and ensure all copies were destroyed;

   d)        [Ms C] should have ceased acting; and

   e)        The information barrier and undertakings should have been put in place.

   55.      It is only then that BNL might have been able to resist the injunction now sought.

   56.      I accept the submission made on behalf of the wife that the proposed information barrier is ‘too little too late’.  Had such action been taken immediately upon receipt of the documents it may have sufficed but BNL continued to act for the husband for a further six months before even informing the wife of the situation. [Ms C] and [Mr E] worked as a team on the matter and while [Mr E] did not read the documents, [Ms C] did and the risk of unconscious contamination of the information provided to [Mr E] and others in the office (including to administration staff) renders the proposal inadequate. I have no confidence that the systems set up in recent times by BNL will achieve what it is intended to achieve. The risk of contamination is still high in my view given the fact that [Ms C] continued to act for the husband in conjunction with [Mr E] until July 2017. I note that it is still proposed by the husband that [Mr E] continue to act for him.

5. The conduct of the husband in failing to destroy the copies of privileged material only became apparent during cross-examination and the failure of the husband’s then lawyers to advise the husband to destroy the copies also only became apparent during cross-examination of the husband’s lawyer. This led to the wife needing to amend her Application which in turn led to a further hearing, and costs incurred in relation to the amendment were $3,801.60.

6. Despite the order made on 15 September 2017 which restrained the husband from:

   a)Discussing or communicating to any other person the contents of any of the [privileged] documents;

   b)Making use for the purpose of the said proceedings of any information derived from the documents.

   the husband wrote to the wife’s lawyer on 29 September 2017 referring to the content of those documents.

7. The husband was wholly unsuccessful in his resistance to the injunction restraining him from continuing to retain his then lawyers and the form of order requiring him to destroy the documents was in the terms of the open offer made by the wife prior to the second hearing on 31 August 2017 and tendered during that hearing.

8. The fee agreement between the wife and her lawyer is before me as are the retainers from the two Queen’s Counsel who represented the wife at the hearings.

9. An order for a lump sum is sought in an effort to avoid further costs being incurred.

husband’s submissions

1. The husband’s primary submission is that “having regard to the nature of the issues between the parties which involve an application seeking to set aside final orders for alteration of property interests and having regard to the nature of the dispute the subject of the Orders made 15 September 2017” costs should be reserved to the trial judge.

2. In the alternative, it is submitted that each party should bear their own costs having regard to the following matters:

   a)Following the hearing on 21 August 2017 the wife was granted leave to amend her application resulting in further hearing and submissions;

   b)The matters subject of the determination involved significant legal issues;

   c)The propositions advanced by the husband in resisting the application were reasonably arguable.

3. Reference is made to the financial position of each party as set out in their financial statements but it is submitted that the ultimate position of each party is dependent upon the outcome of the s 79A proceedings.

4. As to conduct it is submitted that “the ultimate determination of the merits of the s 79A case will necessarily canvass the issue of conduct of each party generally, and is a reason why any decision as to costs should be reserved to the trial judge and abide the final outcome.”

5. Further, it is submitted that “ultimate success of the wife on this application arises in circumstances where she did not proceed on the basis of her original Application filed 18 July 2017 but rather pursuant to a grant of leave for an Amended Application which necessitated further submissions on 31 August 2017.”

6. If costs are ordered, it is submitted that “there is no warrant for invocation of the indemnity costs provisions” and any costs on a party and party basis should be only a proportion thereof because of the “difficult nature of the injunctive proceedings”; “their context within s 79A proceedings”; and “the wife seeking and being granted leave to amend her Application” requiring a further appearance.

discussion

1. The husband is in a stronger financial position than the wife although his circumstances may change depending upon the outcome of the substantive proceedings.

2. The husband forwarded privileged material to his lawyers knowing it was confidential and in the hope of forensic advantage.

3. The husband has been wholly unsuccessful in resisting the injunction that he cease to retain his former lawyers and rejected the open offer in relation to the further injunction sought against him that necessitated a further hearing. The amendment to the wife’s Application only became necessary when it was revealed during cross-examination that the husband retained the documents in question.

4. The six month delay in informing the wife that her documents were in the husband’s and his lawyer’s possession while the husband continued to retain his lawyers is a relevant matter in my view. It is something that should not have occurred for the reasons expressed in my earlier judgment.

5. The circumstances of this case warrant an order for costs. I am not persuaded however that costs on an indemnity basis should be awarded. The costs incurred by the wife (not including this costs application) are $56,258. I propose to make an order that the husband pay the wife’s costs fixed in the sum of $40,000 and that the costs be paid within 30 days.    

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 22 December 2017.

Associate:

Date:  22 December 2017.