Darbar and Batey & Anor (No 2)

[2011] FamCA 133

FAMILY COURT OF AUSTRALIA

DARBAR & BATEY AND ANOR (NO 2) [2011] FamCA 133

FAMILY LAW - COSTS – whether orders for costs be made against the first respondent and her solicitor – indemnity costs – whether principles apply

Family Law Act 1975 (Cth) - ss 117, 117(2) and 117(2A)
Family Law Rules 2004 – r 19.10(1)(c)

Penfold and Penfold (1980) FLC 90-800; Kohan and Kohan (1993) FLC 92-340 at 79,614; Yunghanns and Yunghanns (2000) FLC 93-029 at 87,470-1; Colgate-Palmolive v Cussons Pty Limited (1993) 46 FCR 225

APPLICANT: Mr Darbar

FIRST RESPONDENT: Ms Batey

SECOND RESPONDENT: Ms R

FILE NUMBER: SYF 3070 of 2006

DATE DELIVERED: 4 March 2011

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rose J

HEARING DATE: 21 February 2011

REPRESENTATION

SOLICITOR FOR THE APPLICANT:	Karras Partners
COUNSEL FOR THE FIRST RESPONDENT:	J Johnson
SOLICITOR FOR THE FIRST RESPONDENT	Sweeney Tiggemann
SOLICITOR FOR THE SECOND RESPONDENT:	Gayle Meredith & Associates

Orders

1. That the first respondent pay the second respondent’s costs on an indemnity basis of and incidental to the second respondent’s Application in a Case filed in Court on 21 February 2011 including but not limited to all relevant correspondence and preparation in relation to such application as assessed and agreed upon or failing agreement as taxed.

2. That the application of the second respondent for costs against the lawyer for the first respondent is dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Darbar & Batey and Anor (No2) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:  SYF3070 of 2006

Mr Darbar

Applicant

And

Ms Batey

First Respondent

And

Ms R

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. On 21 February 2011, I made the following orders and notation in the proceedings as between the first and second respondents:

   “1.That the Order made 8 December 2010 by Registrar George requiring the applicant to respond to Annexure A to the Affidavit of David James Sweeney sworn and filed 13 January 2011 is set aside.

   2.That the first respondent cause to be filed and served a notice of discontinuance in relation to the orders sought by her in paragraphs 21 to 23 inclusive of her Amended Response filed 24 December 2010 by 4.00pm 21 February 2011.

   3.That in relation to the issue of costs the following submissions and material be lodged with the Associate to Justice Rose by email and served simultaneously:

   (a)On behalf of the second respondent on or before 5.00pm 23 February 2011.

   (b)On behalf of the first respondent on or before 5.00pm 24 February 2011.

   4.That the application to set aside the subpoenas issued by the Court at the request of the first respondent on 13 December 2010 is stood over for determination on Day 1 of the case management event before Justice Le Poer Trench on a date and time to be fixed.

   5.That pending determination of the application referred to in Order 4 the second respondent is relieved from the obligation of producing any documents called upon by any of those subpoenas including M Pty Ltd.

   NOTATION:

   A.That by agreement the legal representatives for the second respondent and the first respondent will collate one bundle of relevant correspondence to be attached to the second respondent’s anticipated submissions.”

2. The first respondent sought the following orders against the second respondent (as well as the applicant) in relation to paragraph 23, as follows:

   “21.The Second Respondent shall transfer to the Wife all of her shares in M Pty Ltd ACN …

   22.That the Second Respondent’s property at P, bearing Torrens Title description folio identifier …, be auctioned for the best available market price and after deduction of:

   (i)any amounts secured against the property by way of registered mortgage,

   (ii)agent’s commission and advertising costs, and

   (iii)the solicitors or conveyancer’s fees of the sale,

   the net proceeds shall be paid in the following manner:-

   A.to the Wife, the amount of money necessary to fund the Husband’s obligations to the Wife pursuant to these orders, and

   B.as to Second Respondent, the surplus, if any

   23.That the Applicant and the Second Respondent be restrained from doing any thing which is likely to compromise or undermine the goodwill of M Pty Ltd and the value of its shares.”

3. The solicitor for the second respondent submitted that the application of the first respondent for the orders sought by her in her Amended Response to Initiating Application filed 24 December 2010 be summarily dismissed for want of jurisdiction.

4. Order 2 made by me on 21 February 2011 was made after the first respondent by her legal representatives informed the Court that she no longer sought the orders in paragraphs 21 to 23 inclusive of her Amended Response to Initiating Application filed 24 December 2010.

5. The second respondent by her Application in a Case and Reply both filed in Court on 21 February 2011 sought orders that the first respondent’s application in her Amended Response to Initiating Application filed 24 December 2010 in terms of paragraphs 21, 22 and 23 inclusive and interim injunctive relief be dismissed with costs on an indemnity basis.  An order for security for costs was sought in the alternative.

6. An additional order was sought that the second respondent be removed as a party in these proceedings.

7. Order 2 made by me on 21 February 2011 will have that effect as the first respondent’s application for orders against the second respondent will be discontinued.  The legal representatives for the first respondent had stated that her client was withdrawing her relevant application.

8. It was agreed that written submissions be lodged and served in relation to the issue of costs.  The orders in that regard have been complied with.

The issue for determination

1. The issue for determination by me is whether or not costs orders should be made as sought by the second respondent.

Historical background

1. The second respondent’s application for costs is in part based upon correspondence that passed between her solicitor and the solicitor for the first respondent.

2. By agreement, the bundle of relevant correspondence was attached to the written submissions made on behalf of the second respondent dated 23 February 2011.  I have read that material.  The written submissions on behalf of the first respondent dated 24 February 2011 do not dispute that the correspondence to which I have referred does in fact include all relevant correspondence.

3. The solicitor for the second respondent provided an accurate summary of that correspondence in section 3 to those written submissions.  A copy of that summary is attached.

4. On 14 January 2011 by letter from the solicitor for the second respondent to the first respondent’s solicitor, notice was given that her client would seek an order for indemnity costs against the first respondent unless her Amended Response to Initiating Application filed 24 December 2010 seeking orders in paragraphs 21 to 23 inclusive are withdrawn within seven days for want of jurisdiction and that in any event the orders sought are not in personam.

5. Further correspondence passed between the solicitors for the first and second respondents regarding extensions of time to seek instructions.

6. On 15 February 2011 the solicitor for the second respondent gave written notice to the solicitor for the first respondent that as there had not been communication from the latter since 19 January 2011 notice was again given that orders for costs would be sought against the first respondent as well as her solicitor on an indemnity basis.

7. On the same date, a further letter was sent by the solicitor for the second respondent to the solicitor for the first respondent providing particulars of the acquisition of property and giving further notice that should the first respondent withdraw the application, to which I have made reference, costs would not be sought.

8. On 17 February 2011 the solicitors for the first respondent wrote to the solicitors for the second respondent informing them that the subject application would be withdrawn.

9. On the last-mentioned date, the solicitor for the second respondent submitted a form of consent orders for completion by the first respondent.  Paragraph 3 of that document made provision for the relevant orders sought in the first respondent’s Amended Response to Initiating Application filed 24 December 2010 to be “dismissed”.

10. There then followed a dispute between the solicitors for the first and second respondents as to whether or not the proposed consent orders should refer to the relevant application for orders in the first respondent’s Amended Response to Initiating Application filed 24 December 2010 to be “dimissed” rather than “withdrawn”.

11. Each of the parties, through their respective solicitors, maintained the approach for that argument put forward on their behalves.

12. On the commencement of the proceedings before me on 21 February 2011, the solicitor for the second respondent stated that she sought to proceed with her client’s application for summary dismissal.  The legal representatives for the first respondent stated that she would withdraw her application so far as it seeks orders against the second respondent.  In addition, the legal representatives for the first respondent stated that a notice of discontinuance would be filed.  An order to that effect was made.

Conclusion

1. I have determined that an order for costs on an indemnity basis will be made in favour of the second respondent against the first respondent for the following reasons.

2. Section 117(1) provides the general principle that in proceedings under the Family Law Act 1975 (Cth) each party bears his or her own costs.

3. Section 117(1) is subject to the discretionary power provided in s 117(2) to make an order for costs should it be just to do so. For the purpose of exercising that discretionary power it is necessary for a circumstance to be established and relevant matters be taken into account pursuant to s 117(2A). The Court has a wide discretionary power.[1]

   [1] Penfold and Penfold (1980) FLC 90-800

4. I am satisfied that a circumstance has been established for the purpose of s 117(2A).  That circumstance is that the first respondent’s Amended Response to Initiating Application filed 24 December 2010, paragraphs 21 to 23 inclusive and interim orders 5(b)(2) and 5(b)(3) are fundamentally flawed due to either a want of jurisdiction or, a lack of any evidence which may attract the exercise of any power to make such orders.

5. I have taken into account the following relevant matters that arise pursuant to s 117(2A).

6. The conduct of the first respondent seeking the orders to which I have referred and the delay in even informing the solicitor that the application for such orders would be “withdrawn” had no legal basis in terms of jurisdiction or power.

7. An issue was never raised that the second respondent held her commercial and property interests in any respect as a trustee for the husband, or that he had any beneficial or equitable interest in such property or commercial entities.

8. I accept the submission made on behalf of the first respondent in relation to the interpretation of ss 90AE(2)(b) and 90AE(3)(a) regarding the power being circumscribed.

9. The first respondent had been given ample notice to withdraw her application found in her Amended Response to Initiating Application filed 24 December 2010, to which I have referred.

10. The first respondent, by her solicitor, was also given ample notice of the order for costs that would be sought against her.

11. The first respondent is a bankrupt.  However, as has been properly conceded by her counsel in his written submissions, the power to make an order for costs may still be exercised against a person who is an undischarged bankrupt.

12. I have concluded that it is just that an order for indemnity costs be awarded against the first respondent in favour of the second respondent.  I have given weight to all of the matters to which I have referred, in terms of ss 117(2) and 117(2A) and in particular the seeking of the relevant orders in the Amended Response to Initiating Application filed 24 December 2010.  In that regard, there was an absence of jurisdiction which should have been obvious to the first respondent upon being properly advised.

13. In my view, it was an absurd argument to delay the discontinuance by the first respondent of the orders so sought on the basis that the minutes of the proposed consent orders should have referred to as being “withdrawn” rather than “dismissed”.

14. The first respondent should have given instructions to her solicitor upon being properly advised to file and serve a notice of discontinuance immediately upon the issues being raised by the second respondents’ solicitor in her letter dated 14 January 2011.  The fact that matters were held in abeyance due to the disagreement, to which I have referred, cannot be reasonably justified.  As a result, the second respondent was placed in a position of incurring further legal costs as a result of the delay in responding to correspondence and the position then taken on behalf of the first respondent.

15. It is an accepted principle that with regard to the possible making of an order for indemnity costs, rather than on an ordinary party/party basis, it has been held that the Court “should not depart lightly from the ordinary rules regarding costs between party and party and the circumstances justifying the departure should be of an exceptional kind”.[2]

    [2] Kohan and Kohan (1993) FLC 92-340 at 79,614; Yunghanns and Yunghanns (2000) FLC 93-029 at 87,470-1; Colgate-Palmolive v Cussons Pty Limited (1993) 46 FCR 225 in particular, “where a party properly advised should have know that he had no chance of success”

16. I have determined that there are indeed exceptional circumstances that justify an indemnity costs order.

17. They are that the first respondent sought the orders to which I have referred.  The high water mark being not only the orders sought, which could not possibly be justified on a jurisdictional basis on the material before me, but also an interim injunction sought to restrain the second respondent (and the husband) “from working in their respective professions as town planners other than as a consultant to or employee of M Pty Limited”.  I agree with the submission made on behalf of the second respondent that seeking such an order in particular is the height of absurdity.

18. The second respondent also sought an order for costs on an indemnity basis against the solicitor for the first respondent.  Written notice was given by the solicitor for the second respondent that such an order would be sought if the matter was not resolved within the time stated.  The matter was only resolved shortly after the hearing commenced.

19. Rule 19.10(1)(c) is relied upon by the solicitor for the second respondent.  The ground given is “the lawyers improper or unreasonable conduct”.

20. Whilst I accept the cogency of the submissions made by the solicitor for the second respondent, I am not persuaded that prima facie such an order may be made.  Indeed, if I had a different view, I accept the submissions made on behalf of the first respondent that her solicitor should be given a further opportunity to obtain independent legal advice with consequential submissions being made on his behalf.

21. I have found that the application made by the first respondent in her Amended Response to Initiating Application filed 24 December 2010, to which I have earlier referred, should not have been made or continued in circumstances where if she had been properly advised she would then have known that there was no prospect of success.  Although at all material times the solicitor has been the solicitor on the record, the evidence falls short of my being satisfied on the balance of probabilities that the first respondent’s solicitor has been able to obtain proper instructions within a reasonable time.  In that regard, I have noted the delay at times in responding to correspondence in circumstances where further instructions were being sought by the solicitor for the first respondent.

22. The finding of “improper or unreasonable conduct” may have grave consequences for the first respondent’s solicitor in terms of a referral to the Law Society of NSW.  That is a matter which I have also borne in mind and given weight.

23. With the benefit of hindsight the solicitor for the first respondent should have either refused to accept instructions to seek the orders that were sought against the second respondent in her Amended Response to Initiating Application filed 24 December 2010, or to cease to act for her should those instructions not have been withdrawn.  However, there is an absence of evidence which may have otherwise explained more fully all the relevant circumstances.

24. Accordingly, the application by the second respondent for a costs order against the solicitor for the first respondent will be dismissed.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rose delivered on 4 March 2011.

Associate: 
Date:  4 March 2011

Annexure A

[Extract from “Submissions on behalf of [Ms R], formerly the second respondent in relation to costs” attached to email dated 23 February 2011]

“3.      Short Chronology of Relevant Events

Attached and marked "A" is a tender bundle of relevant correspondence that has passed between the First Respondent's solicitor and [Ms R’s] solicitor.

24 December 2010         The First Respondent files the wife's Amended Response seeking orders against [Ms R] referred to in paragraph 1.1 above and joining [Ms R] as Second Respondent.

13 January 2011        The solicitors for [Ms R] file on her behalf a Notice of Address for Service in the proceedings which they serve on the solicitors for the Applicant and the solicitors for the First Respondent.

14 January 2011        The First Respondent's solicitor serves Ms R's solicitor with the wife's Amended Response.  (See page 1 of the tender bundle)

14 January 2011        Matter listed before His Honour Justice Le Poer Trench.  [Ms R's] solicitor advises Court she wishes to make application for summary dismissal of the wife's Amended Response as it effects [sic] [Ms R].

14 January 2011        [Ms R's] solicitor writes to the First Respondent's lawyer seeking the First Respondent withdraw her Amended Response as it effects [Ms R] within seven days and in that event [Ms R] would not pursue her for costs.  She gives notice that [Ms R] will thereafter seek an order for indemnity costs.  (See page 2 - 3 of the tender bundle)

19 January 2011        The First Respondent's solicitors write to [Ms R's] solicitors advising they wish to have until 29 January 2011 to respond to the letter of 14 January 2011.  (See page 4 of the tender bundle)

15 February 2011      [Ms R's] solicitors write to the First Respondent's solicitors having not heard from them since 19 January 2011. Notice was again given on behalf of [Ms R] that not only would she seek costs against the First Respondent but costs against her solicitor personally on an indemnity basis and referring them to the decision in Z (A Solicitor) & Limousin 120107 FamCAFC 59.  (See pages 5 — 7 of the tender bundle)

15 February 2011     [Ms R's] solicitors write to the First Respondent's solicitors providing particulars of the acquisition of assets by her and seeking again that the First Respondent withdraw her application and that if she does, [Ms R] will not pursue her for costs.  (See pages 8 — 11 of the tender bundle)

16 February 2011     The First Respondent's solicitors write to [Ms R's] solicitors seeking until 2.00 pm Friday, 18 February 2011 to respond to [Ms R's] offer and seeking particulars in relation to [M Pty Ltd] a company controlled by the Second Respondent.  (See pages 12 — 13 of the tender bundle)

17 February 2011     The solicitors for the First Respondent write to [Ms R's] solicitors for the Second Respondent advising they are instructed to withdraw the application as it affects "our client".  (See page 14 of the tender bundle)

17 February 2011     [Ms R's] solicitor writes to the solicitors for the First Respondent asking whether they meant that the First Respondent proposed withdrawing the application as it affects "your client", namely [Ms R] and enclosing form of consent orders for the First Respondent to sign.  The consent orders provide for the applications as they affect the Second Respondent to be dismissed.  (See pages 15 - 18 of the tender bundle)

18 February 2011     At 11.38 am [Ms R's] solicitor writes to the First Respondent's solicitor having not received back from him the signed consent orders and advising that [Ms R] would file an Application in a Case and supporting evidence that afternoon.  (See page 19 of the tender bundle)

18 February 2011     At 1.58 pm the First Respondent's solicitor sends to [Ms R's] solicitor a changed form of consent orders so that they no longer refer to the application being "dismissed" but rather "withdrawn".  [Ms R's] solicitor writes back at 2.13 pm noting that he had changed the form of consent orders and advising [Ms R] required the orders be dismissed.  The First Respondent's solicitor writes back at 2.29 pm advising his client will only agree to the application being withdrawn.  (See pages 20 - 22 of the tender bundle)

18 February 2011     [Ms R] serves the First Respondent with her Application, Reply and Affidavit in support.  (See page 23 of the tender bundle)

21 February 2011     Matter listed before His Honour Justice Rose and [Ms R] seeks to proceed with her Application for summary dismissal. It is only after the matter is mentioned before His Honour the second time that counsel for the First Respondent advised the Court that she will withdraw her application as it effects [sic] [Ms R].  [Ms R's] solicitor seeks costs.”