D & D (Costs) (No 2)

[2010] FamCAFC 64

FAMILY COURT OF AUSTRALIA

D & D (COSTS) (NO. 2) [2010] FamCAFC 64

FAMILY LAW – COSTS OF APPEAL – Husband ordered to pay wife’s and receiver’s costs of husband’s unsuccessful appeal and unsuccessful application for leave to adduce further evidence in appeal – Court of opinion that circumstances justified order for costs being made against husband in favour of wife and receiver in reliance upon husband having been wholly unsuccessful – Court not satisfied that exceptional circumstances enlivening discretion to award indemnity costs established – Order for costs on party and party basis in favour of wife and receiver made – Application of husband’s trustees in bankruptcy to avoid any order against husband’s bankrupt estate or trustees in bankruptcy discussed – No order made with respect to either bankrupt estate of husband or husband’s trustees in bankruptcy – Interaction between costs orders against the husband personally and impact upon assets of husband’s bankrupt estate pursuant to provisions of Bankruptcy Act 1966 (Cth) discussed.

Family Law Act 1975 (Cth) s 117(2A)
Family Law Rules 2004 (Cth) rr 10.10; 19.10; 20.07

Limousin & Limousin (Costs) [2007] FamCA 1178
Kohan and Kohan (1993) FLC 92-340; (1992) 16 FamLR 245
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
Yunghanns v Yunghanns (2000) FLC 93-029; (2000) 26 Fam LR 331
Ridehalgh v Horsfield [1994] 3 All ER 848
White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169
A & A [2006] FamCA 102
Lasic & Lasic [2008] FamCA 80

APPELLANT: MR D

RESPONDENT: MS D

RECEIVER MR X

TRUSTEE IN BANKRUPTCY: MR Y AND MR Z

FILE NUMBER: BRF 1325 of 2002

APPEAL NUMBER: NA 37 of 2005

DATE DELIVERED: 25 March 2010

PLACE DELIVERED: Parramatta

PLACE HEARD: Brisbane

JUDGMENT OF: Finn, Coleman & May JJ

HEARING DATE: Written submissions

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 11 May 2005

LOWER COURT MNC: [2005] FamCA 356

REPRESENTATION

COUNSEL FOR THE APPELLANT: C. J. O’Neill

SOLICITOR FOR THE APPELLANT: Stacks Gray

COUNSEL FOR THE RESPONDENT: Dr Mark W. Sayers

SOLICITOR FOR THE RESPONDENT: Whitehead Payne Lawyers

Orders

1. That the Husband (personally) pay the Wife’s costs of and incidental to the appeal and the Husband’s application for leave to adduce further evidence on a party/party basis as agreed or assessed.

2. That the Husband (personally) pay the Receiver’s costs of and incidental the Husband’s application for leave to adduce further evidence on a party/party basis as agreed or assessed.

IT IS NOTED that publication of this judgment under the pseudonym D & D (Costs) (No. 2) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NA 37 of 2005
File Number: BRF 1325 of 2002

MR D

Appellant

And

MS D

Respondent

REASONS FOR JUDGMENT

1. On 31 August 2007 this Court dismissed the Husband’s appeal against orders for settlement of property made by Carmody J on 11 May 2005. At that time the Court made orders for the filing of written submissions in relation to the costs of the appeal.

2. Written submissions have been made on behalf of the Wife and Mr X (“the Receiver”, being the receiver who was appointed under an instrument entered into between the husband, the wife and a creditor, and who controlled a property which had been the major asset of the husband and the wife) in support of a claim for costs by each of them, and on behalf of the Husband opposing the orders sought by the Wife and the Receiver. On behalf of Mr Y and Mr Z (“the Trustees in Bankruptcy” of the Husband) submissions on costs were also made.

3. It is logically appropriate to entertain the applications in the following sequence:

   (1)The application for costs by the Wife;

   (2)The application for costs by the Receiver; and

   (3)The application made by the Trustees in Bankruptcy.

The Wife’s application for costs

1. It was submitted, for reasons articulated in submissions made on behalf of the Wife, that the Husband “now lacks standing to be heard on the question of costs.”. We find this a curious proposition as there has been no suggestion, and correctly so, that the Husband lacked standing to be heard in the substantive appeal, or to bring his further evidence application, notwithstanding that the prospect of there being no net property of the parties was real at all material times.

2. As a matter of natural justice, the Husband being at risk with respect to substantial costs of the Wife and other parties to the appeal and further evidence application, we cannot accept that he ought not be heard. Costs do not follow the event in this Court as the relevant legislative provisions establish beyond doubt. We struggle to understand how the determination of costs pursuant to the provisions of s 117(2A) Family Law Act 1975 (Cth) (“the Act”) could constitute a judicial exercise of discretion if the Husband were not permitted to be heard in relation to the costs of both his unsuccessful appeal and his unsuccessful application for leave to adduce further evidence in the appeal.

3. It was submitted on behalf of the Wife that the orders for costs made by the trial Judge were “ineffective and hollow” leaving the Wife “bearing her costs to trial without contribution from the Husband irrespective of the outcome of the costs of this Appeal.” We are unsure in what way this assertion is suggested to advance the Wife’s claim for costs of the appeal which is clearly determined by reference to provisions of s 117(2A) of the Act. The Wife did not cross-appeal any aspect of the trial Judge’s costs orders of December 2005.

4. On behalf of the Wife, learned Counsel relied significantly on the Husband’s complete absence of success on appeal to this Court, and in his application for leave to adduce further evidence in the appeal in support of her application for the costs of those proceedings.

5. This Court’s judgment of 31 August 2007 speaks for itself. It is unnecessary to engage with many of the submissions made on behalf of the Wife in relation to the Husband’s conduct of the appeal. We need for present purposes only record that both the appeal and the application for leave to adduce further evidence in the appeal were wholly unsuccessful, a matter relevant pursuant to s 117(2A)(e).

6. A number of submissions were made in support of the proposition that the Husband ought no longer have “standing” to be heard in relation to costs. Accepting for the purpose of the submission that the factual scenario asserted by learned Counsel for the Wife is, or proves to be, correct we struggle to understand how the Wife’s position would change in relation to recovery of costs, whether or not any costs order were made after the Husband was heard in relation to that issue. Unless it is assumed, erroneously, that in the absence of the Husband having “standing” to be heard in relation to the costs issue, an order for costs would be made in circumstances where it would not if he did have “standing” to be heard, this submission cannot advance matters. Though colourful, we do not perceive to be constructive the assertion that the Husband conducted the appeal to this Court as if he “had the benefit not merely as a shield in bankruptcy but also of a sword which he could use to put the Wife to futile expense”.

7. For the reasons learned Counsel for the Wife articulated, it was submitted that the “only viable options that remain open to the Wife and this honourable Court” were:

   a.An order against the Husband for the payment of the Wife’s costs (on an indemnity basis or otherwise) and payable in the ordinary course;

   b.An order for costs to be payable in small, periodic amounts commensurate with the Husband’s income and capacity;

   c.An order that the Wife’s costs (on whatever basis is deemed appropriate) be made against and payable by the Husband’s legal practitioner, namely his solicitor on the record.

8. It was submitted that as there was “no surplus, an order for costs against the Husband in the usual form would be of some assistance to the Wife when the Husband emerges from bankruptcy and acquires assets or capacity sufficient to warrant enforcing the debt”. That submission has considerable attraction given the history of the unsuccessful appeal to this Court and the unsuccessful application for leave to adduce further evidence in the appeal but relates more to the effect of making a costs order rather than to whether an order should be made.

9. It was submitted on behalf of the Wife that the order for costs in the Wife’s favour be on an indemnity basis. Learned Counsel referred to the authorities in this Court and elsewhere in relation to the issue of indemnity costs, contending that “no reasonable appellant, if properly advised, would have continued either with the appeal in general or this appeal on the basis of the grounds relied on.”

10. It was further submitted on behalf of the Wife that the Wife’s costs could be paid in “small, periodic amounts” which were within the financial capacity of the Husband. Apart from the obvious practical disadvantage of the parties being locked into a potentially long term instalment order, this Court is not in a position to determine either the costs which should be paid by the Husband, if ordered on either a party/party or an indemnity basis, or the Husband’s “financial capacity” as a prerequisite to the determination of an appropriate instalment regime.

11. It was ultimately submitted that the Wife’s “preferred position is that an order for costs, on whatever basis, be made against the Husband in the usual way and that the Husband be ordered to pay all or part of those costs on a periodic basis starting immediately.” We have already indicated why we do not consider that to be an option that is realistically open to this Court.

12. On behalf of the Wife it was submitted in the alternative that the Court could “characterize the conduct of the Husband’s legal practitioner as negligent” and thus make an order for costs personally against the solicitor.

13. A number of reasons why that course was submitted would attract the Court were advanced, including:

    20.In the event that this honourable Court were to consider the possibility of a costs order personally against the Husband’s solicitor, it is submitted that the relevant factors include the following:

    a.The hearing of this Appeal was initially set down for 2 days at the Appellant’s insistence and this had costs consequences for the Wife in the preparation of her case most of which was virtually thrown away when the hearing concluded part way through the first day;

    b.The vague and general grounds of appeal were not the subject of better definition prior to the appeal (despite having been the subject of challenge in the Wife’s preliminary applications in this appeal) nor was there prior notice from the Appellant that, at the hearing of the Appeal, he would only rely on grounds 2 and 3 both of which factors again resulted in costs virtually thrown away in extensive preparation for the Appeal hearing.

14. On behalf of the Husband it was submitted that the “arguments set out above in respect of costs in the proceedings [that is Appeal No 98/2005 against the cost of the proceedings at first instance] are equally applicable here.” We fail to see how, save in relation to “the financial circumstances of each of the parties”, the submissions made on the Husband’s behalf in an unsuccessful appeal against the trial Judge’s award of costs of the proceedings at first instance are in any way “applicable”, whether “equally” or otherwise to the present issue.

15. More relevantly, it was submitted that “[a]lthough the husband was not successful in his appeal it is submitted that the husband was both entitled to and justified in exercising his right to do so.” The Husband was undoubtedly entitled to appeal against Carmody J’s orders for settlement of property. As this Court’s Reasons for Judgment of 31 August 2007 make clear however, whether the Husband was “justified” in exercising his right to appeal is another question, albeit not one which we need to consider having regard to the terms of s 117(2A) of the Act to which we must refer when determining the Wife’s application for the costs of the appeal and of the application for leave to adduce further evidence in the appeal.

16. It was submitted that the Husband “lost the appeal on a question of the correct interpretation” of facts which were “essentially undisputed”. It was further submitted that the Wife “won the appeal in that her manifest conduct was not considered unlawful”. Though perhaps colourful, these contentions do little to advance the Husband’s attempts to resist an order that the costs of his unsuccessful appeal and his unsuccessful application for leave to adduce further evidence be made against him.

17. Against the background of those submissions, we address the Wife’s application for costs pursuant to the provisions of s 117(2A) of the Act. We perceive the issues requiring determination to be:

    (1)Whether the Wife should have an order for costs;

    (2)Against whom the Wife should have any such order;

    (3)Whether the Wife should have costs on a party/party or indemnity basis; and

    (4)Whether an instalment order should be made with respect to any costs which the Court awards.

18. We accept that the Wife is probably in a superior financial position to the Husband. No part of the Wife’s case is or could be sought to be elevated by reason of the financial circumstances of the parties. The issue is whether the Husband should be permitted, in the circumstances, to use his insolvency as a “shield” against an order for costs if such order should otherwise be made. We are not satisfied that the Husband’s insolvency should disincline us to exercise the discretion to award the Wife her costs of the appeal if we otherwise are of the “opinion” required by s 117(2) of the Act. The Husband has been represented throughout the proceedings in this Court. These proceedings have been extensive, and no doubt expensive. Whether or not the Wife ever recovers any costs which may be awarded to her is another issue. On the evidence before this Court, it is by no means certain that the Wife would necessarily ever recover any costs which might be awarded against the Husband. That is not in our view a reason to decline to order costs in the circumstances of this case if the Wife otherwise establishes an entitlement to such an order.

19. Section 117(2A)(b) is not relevant. Nor, having regard to our conclusions with respect to s 117(2A)(e) of the Act, is either s 117(2A)(c) or s 117(2A)(d) of the Act.

20. In our view, for the reasons which the Court provided in its Judgment of 31 August 2007, there can be no doubt that the Husband was “wholly unsuccessful in the proceedings” both with respect to his appeal and his application for leave to adduce further evidence during the course of such appeal. That reality seems to have been conceded in any event. It is unnecessary to say more about this topic. There is no evidence before this Court in relation to matters falling within s 117(2A)(f) of the Act. No other matter appears to us to be relevant pursuant to s 117(2A)(g).

21. The Husband, as his learned Counsel submitted, exercised his “entitlement” to challenge the orders for settlement of property made by Carmody J after a lengthy trial. None of the challenges, whether to the trial Judge’s findings of fact or his exercise of discretion was successful, nor, for reasons which this Court also gave, was his application for leave to adduce further evidence whilst judgment in the appeal was reserved. The Husband’s total absence of success leads us to form the opinion that the Husband should be ordered to pay the Wife’s costs, whether or not such costs will ever prove to be recoverable.

22. It is then necessary to consider whether the costs awarded against the Husband should be on a party/party or indemnity basis. The submissions of Counsel for the Wife in support of such an order have previously been referred to. No submissions were made on behalf of the Husband in relation to the Wife’s application that she be awarded indemnity costs. Detailed submissions made in opposition to the claims of others also said nothing about the topic of indemnity costs.

23. In Limousin & Limousin (Costs) [2007] 38 FamLR 478, the Court reviewed the authorities in relation to indemnity costs. Reference was there made to the judgment of the Full Court in Kohan and Kohan (1993) FLC 92-340. It was recorded at 79,614 (citations omitted) in which it was said that:

    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 O.38 r.2, the provisions of O.38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O.38 r.7 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) [[1983] 2 NSWLR 354]; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR 358 at 368-70.

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

24. The Court in Limousin (supra) also referred to the judgment of Shephard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 upon which learned Counsel for the Wife relies in support of the present application. Shephard J said in Colgate-Palmolive (supra) (at 256):

    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 …

25. Reference was made to the later decision of the Full Court of Yunghanns v Yunghanns (2000) FLC 93‑029 in which is was said (at 87,471, par 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.

26. As was the case in Limousin (supra), the following passage from the Judgment of Shephard J in Colgate-Palmolive (supra) is instructive (at 257):

    … it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records).

1. Whilst no aspect of the Husband’s appeal or his application for leave to adduce further evidence in the appeal found favour with this Court, to the extent that the circumstances referred to by Shephard J have potential relevance, we do not accept that any aspect of the present case falls within any of those circumstances. We are not persuaded by anything to which we have been referred that this is the kind of “exceptional” case in which indemnity costs should be ordered.

2. It has not been demonstrated that either the conduct of the appeal and/or the application for leave to adduce further evidence in the appeal would enliven the discretion to award indemnity costs. It has not been established that the hearing of the proceedings was prolonged or delayed, or that the hearing of the application itself was prolonged or delayed by anything done by the Husband or those advising him. To the extent that there may be substance in any of the complaints made by learned Counsel for the Wife with respect to the consequences of learned Counsel for the Husband presenting the Husband’s case more expeditiously and economically than had been envisaged, those would be matters which would be supportive of a decision to award party/party costs.

3. Whilst this Court, for reasons which it detailed in its Judgment of 31 August 2007 rejected all of the Husband’s challenges to the trial Judge’s decision, it cannot be said that the arguments raised on his behalf, or the manner in which those contentions were agitated on his behalf were of a kind, or presented in a manner which would enliven the discretion to award indemnity costs.

4. Having found nothing in the basis of the Husband’s challenge to the trial Judge’s orders for settlement of property, or the manner in which those challenges were pursued on his behalf would enliven the discretion to award indemnity costs, it is difficult to see on what basis an order for costs against the Husband’s solicitor should be made, save that the Wife’s prospects of recovering any costs so awarded from the solicitor may be better than the prospects of recovery from the Husband. That would, perhaps thankfully for the legal profession, not be a basis for awarding costs against a solicitor personally.

5. In Limousin (supra) the Full Court considered the authorities relevant to the discretion to make a personal costs order against a solicitor. Reference was there made to the English decision of Ridehalgh v Horsfield [1994] 3 All ER 848 at 855‑856 in which it was said:

   … [L]awyers should not be deterred from pursuing their client’s interests by fear of incurring a personal liability to their client’s opponents; that they should not be penalised by orders to pay costs without a fair opportunity to defend themselves; that wasted costs order should not become a back-door means of recovering costs not otherwise recoverable by a legally aided or impoverished litigant; and that the remedy should not grow unchecked to become more damaging than the disease. The other public interest, recently and clearly affirmed by Act of Parliament, is that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponent’s lawyers. The reconciliation of these public interests is our task in these appeals. Full weight must be given to the first of these public interests, but the wasted costs jurisdiction must not be emasculated.

6. Reference was also made to the decision of Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 at 239 (approved by the Full Court of the Federal Court in Levick v Deputy Commissioner of Taxation (2000) 102 FCR 155) in which his Honour said:

   This analysis of the cases makes it clear that the jurisdiction to order costs against an unsuccessful party’s solicitors is enlivened when they have unreasonably initiated or continued an action when it had no or substantially no prospects of success but such unreasonableness must relate to reasons unconnected with success in the litigation or to an otherwise ulterior purpose or to a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice.  Further, the cases establish the proposition that it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success.

7. We have earlier recorded our conclusion that, although unsuccessful, no aspect of the basis of the Husband’s appeal and/or application for leave to adduce further evidence in the appeal and the conduct of those proceedings would enliven the discretion to award indemnity costs. As was the situation in Limousin (supra), there is no evidence in this Court establishing that, however ill-advised the Husband’s appeal and/or application for leave to adduce further evidence in the appeal might have been, his solicitor did other than act upon the Husband’s instructions.

8. Accordingly, it is appropriate that the order for costs be made against the Husband and not against his solicitor. As was said in Limousin (supra) (at par 55):

   55.…If, for reasons which we cannot know, [the solicitor] gave negligent advice, encouraged the appeal in pursuit of some ulterior motive, or otherwise acted in a manner which led the [Husband] to commence and pursue an appeal which [he] would not have, had [he] received competent and ethical advice, that is a matter between the [Husband] and [solicitor]. Ultimately, it may be that the [Husband] is entitled to be indemnified by [the solicitor] with respect to this order, but that is not a matter about which we can or need speculate.

9. It remains to consider whether the costs to be ordered against the Husband on a party/party basis be agreed or assessed (taxed), or whether this Court should make other than the usual order in that regard by quantifying those costs.

10. This Court is in no position to determine the quantum of the costs which the Husband will be ordered to pay the Wife. As noted earlier, the Court is not in the position to determine the Husband’s means to make instalments, or the quantum of any instalments it might contemplate ordering. We perceive no legislative impediment to the Husband making an application to a Registrar for an order that he meet the Wife’s costs on an instalment basis when assessed if agreement in that regard is not reached.

11. The Husband should be ordered to pay the Wife’s costs of and incidental to the Husband’s appeal and to his application for leave to adduce further evidence in the appeal as agreed or assessed on a party/party basis. It is then necessary to consider the costs application by the Receiver.

The Receiver’s Application for Costs

1. Written submissions were made on behalf of the Receiver in support of his application that the Husband’s solicitor personally pay his costs of and incidental to the Husband’s unsuccessful appeal and application to adduce further evidence in the appeal on an indemnity basis.

2. The Receiver’s submissions appear, and logically so, to be with respect to the costs of successfully resisting the Husband’s application for leave to adduce further evidence in the appeal. That application was filed 11 May 2007. The terms of the application, albeit not made pursuant to the appropriate section of the Act, clearly sought orders against the Receiver.

3. As the record makes clear, the application for injunctive relief sought a variety of orders against the Receiver. To the extent that they were ultimately sought, none of the orders sought against the Receiver by the application was ever made by the Court. As the Court’s Reasons for Judgment make clear, little of significance sought by the Husband in his application against the Receiver was pursued on the hearing of the application for leave to adduce further evidence.

4. In our view, particularly as the Receiver was a third party, the fact that the Husband’s application filed 11 May 2007 in the appeal was “wholly unsuccessful” in relation to relief sought against the Receiver provides sufficient basis for concluding that an order for costs in favour of the Receiver should be made against the Husband.

5. The more significant question is whether, as the Receiver clearly seeks, the costs order should be made against the Husband’s solicitor rather than the Husband. In support of that submission, reliance was placed upon r 19.10(1)(c) Family Law Rules2004 (Cth) (“the Rules”). It was submitted that the Husband’s solicitor had acted “improperly and unreasonably” in his conduct of the Husband’s application. As contemplated by r 10.10(1)(c) of the Rules, a person “may apply” for an order against a lawyer in such circumstances. Whether or not such an order is made involves the exercise of discretion, albeit how that discretion might be exercised has been clarified by the authorities to which we have earlier referred.

6. Particulars of the alleged “improper or unreasonable conduct” of the Husband’s solicitor were advanced in support of the claim that he pay the Receiver’s costs. It was submitted, accurately, that the claim for injunctive relief pursuant to s 79A of the Act was “clearly the wrong vehicle and the application for that reason alone was always doomed to failure”.

7. The Husband was submitted to have persisted in the application when it must have been known (inferentially by the Husband’s solicitor) that the Court had no jurisdiction and that the property had in fact been sold.

8. On behalf of the Receiver, it was contended that when the application came before the Court “they”, presumably a reference to the Husband and his solicitor, were aware that neither party would receive anything from the proceeds of sale of the N property and that the “orders sought against the Receiver were redundant”.

9. It was further submitted that the Husband “at the time of the application was a bankrupt and the solicitors should have known that the application was entirely misconceived and doomed to failure”.

10. Accordingly it was submitted that “the only possible reason for the application was for the Appellant’s solicitors to try and recover their costs of this action personally from the Receiver”. It also was submitted that the Husband failed to “put the right material before this court”.

11. The Receiver relied upon a history of correspondence seeking information on behalf of the Husband, and the provision of relevant information by the Receiver in response to such requests. Those are not matters about which this Court is in a position to form any conclusions.

12. Ultimately, it was submitted that the Husband had “persisted with the application against the Receiver notwithstanding the sworn complaints against the Receiver had been dealt with by:

    (a)correspondence by the Receiver to the Applicant’s solicitors;

    (b)the N Property had sold at $125,000 over value”.

13. In “conclusion” it was submitted on behalf of the Receiver that:

    4.1It is inappropriate under these circumstances to pass these costs onto the wife who would have to pay for them from non matrimonial funds as she is not a bankrupt and liability squarely falls on her.

    4.2The costs of the Appellant’s application increased the receivership costs by approximately $14,000.

    4.3This is now well beyond the sum $22,000 which was allowed by the Receiver for in doing the receivership.

14. Indemnity costs were sought “because these costs should not be visited on the mortgagees as the mortgagors do not have any funds to pay for them.”

15. On behalf of the Husband, detailed submissions were made in response to submissions of the Receiver. With respect to learned Counsel for the Husband, many of the submissions thus made (commencing at paragraph 10 of his submissions in reply) do not relate to matters which are relevant, or capable of being relevant, for present purposes. Relevantly for present purposes however the submissions on behalf of the Husband do raise disputed issues of fact in relation to the provision of information relevant to the receivership with respect to the N property.

16. Just as we are unable to accept as established a number of the assertions of fact relied upon by the Receiver in support of his claim for costs, we are unable to accept as established a number of the allegations of fact made by Counsel for the Husband in opposition to such assertions.

17. As noted earlier, the Husband’s application filed in the appeal on 11 May 2007, and determined by this Court on 31 August 2007 was “wholly unsuccessful” within s 117(2A)(e). It is clear that the basis of the application was misconceived. As the Court’s Reasons for Judgment of 31 August 2007 make clear, much of the application against the Receiver was withdrawn on the hearing of the application. Whilst the application was misconceived, nothing to which we have been referred persuades us that we should exercise our discretion to order that the Husband’s solicitor personally pay the costs of that application. In our view an order for costs should be made against the Husband with respect to the application, essentially on the basis that it was wholly unsuccessful.

18. We have earlier referred to the decision of this Court in Limousin (supra). As was the case in Limousin (supra) nothing to which this Court has been referred establishes that the application of the Husband filed 11 May 2007 in the appeal was not filed on and persisted with pursuant to the Husband’s instructions in that regard. Despite the at times colourful allegations and counter allegations, we are not persuaded that the solicitor’s conduct in relation to the failed application was such as to establish that the Husband’s solicitor had either “an ulterior motive and/or perpetuated and supported proceedings he knew had no prospect of success” (Limousin (supra) at par 49). Nor does the evidence establish circumstances of the kind to which Shephard J referred in Colgate-Palmolive (supra).

19. In our view the Husband should be ordered to pay the Receiver’s costs of the application filed 11 May 2007. Those costs should be payable on a party/party basis. Nothing raised by the Receiver persuades us that the circumstances of the case are “exceptional” or otherwise a legitimate basis for enlivening the discretion to award indemnity costs. Apart from the fact that we could not award indemnity costs in this case (see A & A [2006] FamCA 102 and Lasic & Lasic [2008] FamCA 80), the obvious absence of any prospect of the husband being granted relief in the terms sought by him militates against exercising the discretion to award more than party/party costs. The order of the Court will thus be that the Husband pay the Receiver’s costs of and incidental to the application filed in the appeal on 11 May 2007 as agreed or taxed or assessed on a party/party basis.

The Trustees in Bankruptcy’s Application

1. It remains to consider the position of the Trustees in Bankruptcy. The thrust of the Summary of Argument filed on behalf of the Trustees in Bankruptcy appears to be that, whatever order for costs the Court might make, any such order not be against the bankrupt estate of the Husband, or against his Trustees in Bankruptcy themselves, whether such costs be awarded on an indemnity basis or otherwise.

2. As noted in the Court’s Reasons for Judgment of 31 August 2007, the Husband’s Trustees in Bankruptcy, for good reason, took no part in, or had any control over any aspect of the Husband’s appeal to this Court and/or his application for leave to adduce further evidence in the appeal. It was conceded, by the Trustees that, subject to matters to which reference will shortly be made, costs should be ordered against the Husband. For the reasons which we have earlier advanced, we agree that the Husband should pay the Wife’s costs and the costs of the Receiver.

3. It is necessary to consider the matters raised by the Trustees under the heading “Who should pay the costs of the Appeal (including reserved costs)”. In that context it was submitted that an award of costs against the Husband in circumstances where the Husband is a bankrupt, and his bankruptcy estate is “not funded”, would constitute an award of costs against the Husband’s creditors and his Trustees in Bankruptcy “none of whom are responsible in any way for the costs incurred by the parties to this Appeal”. The trustees, accurately, submitted that the court file “would record that the Respondent Trustees have not sought to intervene in these proceedings, other than to point out the operation of section 58 of the Bankruptcy Act 1966”.

4. It was submitted that, in adopting the submissions of the other parties seeking orders for costs that “it is evident from the Judgment of the Family Court of Appeal dated 31 August 2007 that the appeal, and/or the application heard on 30 July 2007, were destined to fail, and that such an outcome ought to have been apparent to the Appellant’s solicitors”.

5. It was thus sought that if an order for costs is made against the Appellant/Husband, the costs ought to be either:

   a.        repaid to the Appellant/Husband by his lawyers; [or]

   b.        paid by the Appellant/Husband’s lawyers in the first instance;

   so as to avoid the limited assets of the estate in bankruptcy of the Appellant/Husband being unreasonably and unnecessarily diminished by the costs order.

6. No submissions were made as to whether the costs to be awarded should be on a party/party or indemnity basis, understandably, given that the position of the Trustees in Bankruptcy is clearly that any costs awarded not ultimately be borne by the Husband’s bankrupt estate, or by the Husband’s trustees.

7. The submissions on behalf of the Husband in reply filed 1 November 2007 do not address the submissions made on behalf of the Husband’s Trustees in Bankruptcy. We do not understand on what basis an order for costs against the Husband would in any way be liable to fall upon the Husband’s Trustees in Bankruptcy, and the basis upon which that outcome is said to be likely or possible has not been made clear to us by the Trustees.

8. The submissions of learned Counsel for the Wife proceed on the basis that any order for costs against the Husband would not be likely to be satisfied out of his bankrupt estate. If, as the Trustees in Bankruptcy submit, the effect of making an order for costs against the Husband is to reduce the assets of the bankrupt estate in some fashion in accordance with the operation of the provisions of the Bankruptcy Act 1966 (Cth), that does not seem to us a reason for declining to make an order against the Husband.

9. The real issue raised by the submissions of the Husband’s Trustees in Bankruptcy is that, in order to protect the creditors of the Husband’s bankrupt estate, the order should be made against the Husband’s solicitor. We have earlier addressed the matters raised in support of exercising our discretion to make an order against the Husband’s solicitor at the request of other parties to these proceedings and our reasons for declining to do so. Those reasons are also relevant to the position of the Trustees in Bankruptcy.

10. The orders of the Court will be as we have earlier indicated.

I certify that the preceding sixty nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court 

Associate: 

Date:  25 March 2010