Davino & Morrow
[2023] FedCFamC1F 358
•11 May 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Davino & Morrow [2023] FedCFamC1F 358
File number(s): SYC 1922 of 2022 Judgment of: ALDRIDGE J Date of judgment: 11 May 2023 Catchwords: FAMILY LAW – COSTS – Where the parenting proceedings were resolved by consent – Where the property proceedings were dismissed by consent – Where the third and fourth respondents seek a costs order against the applicant and his solicitors – Where those respondents are receivers – Costs sought on a limited indemnity basis – Consideration of s 117 of the Family Law Act 1975 (Cth) – Lack of reasonable basis for asserting jurisdiction – No meaningful criticism of the respondents’ costs – Applicant to pay the costs of the respondents in a fixed sum – Order made for further written submissions to be filed. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 12.13, 12.15, 12.17
Cases cited: Cantrell & North and Anor (2020) FLC 93-976; [2020] FamCAFC 175
D & D (Costs) (No 2) (2010) FLC 93-435; [2010] FamCAFC 64
Fisher v Fisher (1986) 161 CLR 438; [1986] HCA 61
Hazeldell Ltd v The Commonwealth (1924) 34 CLR 442; [1924] HCA 36
Lenova & Lenova (Costs) [2011] FamCAFC 141
Milliford & Milliford [2019] FamCA 128
Division: Division 1 First Instance Number of paragraphs: 47 Date of last submissions: 5 April 2023 Date of hearing: Heard by way of written submissions Place: In Chambers Counsel for the Applicant: Mr Neil SC Solicitor for the Applicant: Swan Lawyers The First and Second Respondents: Did not participate Solicitor for the Third and Fourth Respondents: Swaab Attorneys ORDERS
SYC 1922 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR DAVINO
Applicant
AND: MS MORROW
First Respondent
MR MORROW
Second Respondent
MR HANCOCK (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
11 MAY 2023
THE COURT ORDERS THAT:
1.The applicant is to pay the costs of the third and fourth respondents fixed in the sum of $45,000 within 28 days.
2.The applicant’s solicitors are to file and serve written submissions and any supporting evidence as to a costs order against them within 21 days of the date of these orders.
3.The third and fourth respondents are to file and serve written submissions in reply within a further seven days.
4.Pending further order, none of the parties is to disseminate the reasons for judgment other than to their lawyers or to the Federal Court of Australia.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
On 23 March 2022, the applicant commenced these proceedings seeking both parenting and property orders. The first respondent was the wife of the applicant and the mother of the child the subject of the proceedings. She was not served with the Initiating Application and supporting affidavits because it was not known where she was. The second respondent is the father of the child. The third and fourth respondents are receivers and managers of the property of the first respondent (“the receivers”), having been appointed to that role by an order of a judge of the Federal Court of Australia on 22 November 2021.
The parenting aspect of the proceedings was resolved by consent, with final orders made on 29 November 2022. That ended the role of the second respondent in the proceedings.
The balance of the proceedings being the property settlement application, ended on 20 March 2023 when the proceedings were dismissed by consent.
The receivers now seek an order that the applicant and his solicitor pay their costs of the proceedings on a limited indemnity basis or such other basis as the Court may adopt. I say limited because the actual costs of the receivers are identified as $56,888.85. They accept that some ‘minor’ attendances relate to both proceedings in this Court and in the Federal Court, and “on that basis, and applying a further discount of say 15%” the receivers seek an order fixed in the sum of $45,000 (Affidavit of Mr Hayter filed on 28 March 2023, paragraph 10).
In proceedings under the Family Law Act 1975 (Cth) (“the Act”), each party is to bear his or her own legal costs unless the Court considers that there are circumstances that justify it taking another course, in which case such an order as the Court considers just may be made (s 117). In considering making such an order, the Court must have regard to the matters set out in s 117(2A) of the Act.
The financial circumstances of the parties
The applicant has very limited means. It was not suggested otherwise.
Whilst that is a relevant matter to be taken into account, in Lenova & Lenova (Costs) [2011] FamCAFC 141, the Full Court said at [12]:
12.That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order cannot be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.
As the orders of the Federal Court made in the proceedings in that Court to date make plain, the receivers are dealing with the assets the subject of their appointment for the benefit of the creditors of the first respondent. The creditors will ultimately bear the burden of the receiver’s costs by way of reduced dividends.
The conduct of the parties to the proceedings
The submissions made under this consideration extended to other matters including the conduct of the proceedings in the Federal Court and whether or not the present proceedings should have been commenced at all. To the extent such submissions are relevant, but extend beyond this consideration, it is convenient to deal with them here, rather than separately under section 117(2a)(g).
It is helpful to look at the state of matters on 23 March 2022, the day the proceedings were commenced.
The first respondent had gone missing in 2021. She has not been seen or heard from since. It was subsequently found that she had committed a criminal offence.
Those facts in themselves, are sufficient, at the least, to raise a real question as to whether the first respondent was dead or alive on 23 March 2022. Indeed, they lead to the inference that she died prior to 2022. No evidence was called to support a suggestion that the first respondent may have been alive on 23 March 2022 or that there was something that gave the respondent a reasonable, or indeed any, belief that she was alive when the proceedings were commenced.
This Court only has jurisdiction to entertain property settlement proceedings under section 79 of the Act if both parties to the marriage were alive at the time of filing (Fisher v Fisher (1986) 161 CLR 438 at 457 per Brennan J).
As Isaacs ACJ observed in Hazeldell Ltd v The Commonwealth (1924) 34 CLR 442 at 446, it is “the very first duty of any Court, in approaching a cause before it, is to consider its jurisdiction”.
The view seems to have been taken by the applicant that this Court has jurisdiction unless and until it was established that the first respondent was dead. Indeed, in the written submissions as to costs, senior counsel for the applicant pointed out that no application to strike out the property proceedings were made. He also submitted:
68.However, the fact that a party to the marriage is merely, as the Receivers put it, ‘missing presumed dead’ is not sufficient to deny validity to the commencement of proceedings under Part 8. Only an actual, and proven, death can have that drastic effect.
69.As at 23 March 2022, when these proceedings were commenced, [the first respondent] was missing, but her death was not recorded in a death certificate and had not been conclusively proven and found according to law: JLS [10]. The parties were aware that [the first respondent] had disappeared and that a coronial inquest was to be held to determine whether [the first respondent] is dead and if so the date of her death. In fact, that remains the position. The questions of whether [the first respondent] is dead, and if so when she died, are both still unresolved by any finding by the State Coroner, who alone is seized with jurisdiction to determine that question in a legally conclusive way: JLS [2] and [10]. Nor is there is there any legally cognisable evidence before this Court on which it could be found that [the first respondent] was dead as at the commencement of these proceedings on 23 March 2022. In the result, no such finding is available.
(Applicant’s written submissions filed on 5 April 2023, paragraphs 68–69)
I do not agree. As noted earlier, at the time the proceedings were commenced, there was, at least, a real doubt that the first respondent was alive. It was the applicant who bore the onus of establishing that the Court had jurisdiction because he was the one seeking to invoke it. The applicant thus had a burden to prove, on the balance of probabilities, that the first respondent was alive on 23 March 2022. Unless he could add to the information outlined earlier, that would have been a difficult task.
During the course of the inquest into the death of the first respondent, in September 2022, the applicant conceded that it was his belief that the first respondent was dead.
The applicant has not sought to establish the jurisdiction of the Court, but instead, asked it to dismiss the proceedings.
The fact that parenting proceedings against the second respondent were commenced at the same time is irrelevant. Those proceedings did not involve or require the joinder of the receivers.
The applicant correctly pointed to the fact that the Federal Court, absent transfer of proceedings, does not have jurisdiction in matrimonial causes and could not therefore, make orders under s 79 of the Act dividing the property of the applicant and the first respondent or orders under Pt VIIIB, Div 1, Subdiv B dealing with their superannuation. That however, means nothing if this Court had no jurisdiction to make such orders.
It appears that the major asset for division, if the proceedings were soundly based, would be the proceeds of sale of a property owned by the first respondent which are held by the receivers. Absent any other orders, in one matter or another, the proceeds will, in all likelihood, go to her creditors.
The applicant points out, again correctly, that in making property settlement orders the Court is not obliged to ensure that creditors are paid and can divide the parties’ property accordingly. Thus, it seems to follow according to the submission, that the applicant was justified in commencing the proceedings. That is however, too simplistic.
Significant creditors must be given notice of property settlement proceedings and may intervene to protect their interests. See the discussion in Cantrell & North and Anor (2020) FLC 93-976 at [62]–[76]. The Court does not ignore creditors or their legitimate interests.
In this case, by the time the proceedings were commenced, the Federal Court had appointed the receivers over the first respondent’s property. The applicant had asserted that he had an interest in the property and had been directed to file a precise statement outlining the nature of his claim. That claim was not pressed.
Issues also arose in the Federal Court proceedings as to the payment of creditors – who should be paid and the order in which creditors should be paid amongst them.
It is most unlikely that this Court would have waded into those proceedings to make orders that would cut across the course being taken by the Federal Court. That would, at the least, have been confusing, time wasting and give rise to the possibility of conflicting orders. The overwhelmingly obvious course for this Court to take would have been to have adjourned the property proceedings until the Federal Court proceedings concluded having determined what property remained in the hands of the first respondent. That is particularly so given the nature of the creditors’ claims and the extent of them. The likely outcome is that there would have been no property left to divide. That would only leave the superannuation interests which could well have been dealt with by the trustees of the relevant funds exercising their discretion as to who the funds should be paid.
The application was, at the least, premature.
I do not place any weight on the receivers’ application in the Federal Court for an anti-suit injunction restraining these proceedings or the application under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) to transfer the proceedings to the Federal Court, because there was no point to either unless this Court had jurisdiction.
I do not consider that the claims made about the receivers publishing the name of the applicant are relevant.
The receivers did not comply with their obligations to file costs notices, the purpose of which is to identify to themselves, the other parties and the court, the costs being incurred. That is unfortunate. I do not accept however, that such notices would have caused the applicant to change his position. By the time the notices would have been served, the costs would have been incurred.
Further, the applicant had already been involved in proceedings with the receivers in the Federal Court for some time. He did not adduce any evidence to the effect that when he commenced the proceedings he was unaware of the likely legal costs of the receivers. He was aware from at least 22 March 2022 that the receivers considered that the proposed property proceedings were flawed in a number of ways.
I also put to one side the inquest that was held into the death of the first respondent in 2022. The coroner has yet to make findings and yet the applicant determined not to proceed with the application.
These further points are irrelevant if the Court did not have jurisdiction. Having regard to the facts stated above, the applicant’s expression of belief during the inquest and his application to dismiss the application, I am persuaded that the Court did not have jurisdiction due to the death of the first respondent some time prior to 23 March 2023 and that there was no reasonable basis to believe anything to the contrary.
Whether any party was wholly unsuccessful
The applicant was entirely unsuccessful.
The above comfortably satisfies me that in the circumstances it is just that the applicant pay the receivers’ costs.
Should costs be on an indemnity basis?
The receivers did not comply with r 12.13(4) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) because they did not inform the Court whether they were bound by a costs agreement and if so, to provide a copy.
There is a doubt as to whether the rule applies. As explained earlier, the receivers are seeking ‘limited’ or discounted indemnity costs. The reality is that the receivers are asking the Court to fix their costs at a sum greater than would be achieved if the costs were assessed under Schedule 3 to the Rules, but less than a complete indemnity basis. This is a course that can be followed (r 12.17(1)). In that case, the considerations set out in r 12.17(3) apply but not r 12.13.
The only dispute raised by the applicant as to the question of costs claimed is to assert that they are excessive and it has not been established that they are reasonable. There is no criticism of any charge out rate or any individual item set out.
The first task however, is to determine whether there should be a departure from the normal assessment of costs.
Indemnity costs are regarded as being justifiable only in exceptional circumstances (D & D (Costs) (No 2) (2010) FLC 93-435). Well-established “exceptional circumstances” which justify special costs orders include commencing proceedings with a wilful disregard to known facts. Less stringent considerations might well apply when something less than indemnity costs are sought but the default position is that, absent good cause, costs should be assessed under Schedule 3 to the Rules.
I have found that the Court did not have jurisdiction and the evidence did not disclose any reasonable basis for considering that it had.
In all of the circumstances a special costs order is justified.
Having regard to the position of the receivers as acting in the interests of others, the lack of reasonable basis for asserting jurisdiction and the absence of any meaningful criticism of the receivers’ costs, the costs will be fixed in the sum of $45,000.
Should costs be awarded against the solicitor?
Rule 12.15(1) provides:
12.15 Costs order against lawyer
(1)The court may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs to be incurred by a party or another person, or to be thrown away, because of:
(a) a failure to comply with these Rules or an order; or
(b) a failure to comply with a pre‑action procedure; or
(c) improper or unreasonable conduct; or
(d) undue delay or default.
(2)A lawyer may be in default if a hearing may not proceed conveniently because the lawyer has unreasonably failed:
(a) to attend, or send another person to attend, the hearing; or
(b) to file, lodge or deliver a document as required; or
(c) to prepare any proper evidence or information; or
(d) to do any other act necessary for the hearing to proceed.
(3)An order under subrule (1) may be made on the initiative of the court, or on application by a party to the proceeding or by another person who has incurred the costs or costs thrown away.
(4) An order under subrule (1) may include an order that the lawyer:
(a) not charge the lawyer’s client for work specified in the order; or
(b) repay money that the client has already paid towards those costs; or
(c)repay to the client any costs that the client has been ordered to pay to another party or another person; or
(d) pay the costs of a party; or
(e) repay another person’s costs found to be incurred or wasted.
Only r 12.15(1)(c) is relevant here.
Some care must be taken in making a finding of improper or unreasonable conduct against a lawyer. Whilst the rule may have overtaken the well-known authorities (conveniently summarised by Rees J in Milliford & Milliford [2019] FamCA 128) the conduct must go beyond mere negligence.
Senior counsel’s written submissions added as a coda “if the Court is minded to consider making an order against the solicitors, they should be given the opportunity to be separately heard” (Applicant’s written submissions filed on 5 April 2023, paragraph 96). The solicitors have already been afforded that opportunity and filed submissions in opposition to the order. There is much to be said for the proposition that they have chosen to follow a particular path and should be bound by it. However, having regard to the seriousness of the complaint against them, they should be afforded one last opportunity to adduce any evidence and further submissions within 21 days with the receivers having a further seven days to respond.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 11 May 2023
SCHEDULE OF PARTIES
SYC 1922 of 2022 Respondents
Fourth Respondent:
MR ALBON
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