Dobson and Dobson - [2017] FamCA 485

FAMILY COURT OF AUSTRALIA

DOBSON & DOBSON

[2017] FamCA 485

FAMILY LAW – COSTS – where dispute arises over costs claimed on an indemnity basis for the solicitor – firm acting on its own behalf – where conduct of both firms of solicitors warrants criticism for loss of objectivity – where the court’s time was unnecessarily wasted – no order for costs made.

Family Law Act 1975 (Cth)

Batey-Elton and Elton (Costs) [2010] FamCAFC 219
Moriarty and Moriarty [2009] FamCA 369

APPLICANT:

Mr Dobson

RESPONDENT:

Ms Dobson

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER:

DGC

1915

2015

DATE DELIVERED:

10 July 2017

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

29 June 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Phelan

SOLICITOR FOR THE APPLICANT:

B Solicitors

COUNSEL FOR THE RESPONDENT:

Ms Southey

SOLICITOR FOR THE RESPONDENT:	C Pty Ltd
COUNSEL FOR C PTY LTD:	Mr Thomas

COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER:

Mr Taghdir

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER:

Taft Lawyers

Orders

That the application by C Pty Ltd for costs against the husband rising out of the subpoena objection is dismissed.
To the extent necessary, the objection by C Pty Ltd is dismissed.

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 Dobson & Dobson 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 MELBOURNE

FILE NUMBER: DGC 1915 of 2015

Mr Dobson

Applicant

And

Ms Dobson

Respondent

INDEPENDENT CHILDREN’S LAWYER

REASONS FOR JUDGMENT

C Pty Ltd (“CPL”) is a firm of lawyers which acts for the wife in pending property and parenting proceedings but in this discrete matter, CPL stands by itself and seeks an order for costs against the husband.
The costs sought amounts to $7700. Counsel for CPL acknowledged that was “indemnity costs” for what is said to be compliance with a subpoena issued by the court at the request of the solicitors for the wife.
At the commencement of the hearing, which encompassed a range of other interlocutory disputes and including a management of the substantive pending trial, the court was told that the document dispute giving rise to the costs argument had been resolved. Thus, the outstanding issue was costs. Even as the hearing progressed, disputes arose around documents which had been the subject of the subpoena.
It is immediately apparent that there is a distinction here between the costs sought and the expenses claimed which were said to be associated with compliance with the subpoena. CPL was seeking its legal costs not expenses. There had not been compliance with the subpoena because the relevant documents had not been lodged on the basis that CPL took the view that until its claim for expenses was resolved, it did not have to respond. It is not necessary for me to determine that particular issue today save that I doubt that view is correct.
This whole dispute has been clumsily handled by all concerned and is quite frankly, unseemly. Whilst I shall refer to the wife’s position as articulated by CPL’s counsel, there is a pervading sense that the husband and wife had been on the sidelines watching this argument carried out by their respective lawyers.
In my view, there is no justification for an order for costs here and importantly, as no specific “expenses” were sought, there is no necessity for me to deal with any order in respect of them either.
In respect of the parties’ substantive litigation, consent orders were made between the husband and wife in 2015; the pending financial application by the husband is made under s 79A of the Family Law Act 1975 (Cth) (“the Act”) to set those orders aside.
The nature and basis of the husband’s application was unclear and it required his counsel to describe what part of s 79A he was relying upon.
Whilst counsel for the wife readily admitted that she understood from the history, and also the evidence in chief filed by the husband, what s 79A grounds there were, this whole dispute including discovery, seemed unregulated. I take into account that there is also a parenting dispute here about which there is significant controversy. That issue is not presently relevant.
The management of issues to assist in the conclusion of substantive proceedings is dictated by, and guided by, the Family Law Rule 2004. It is timely to remind all about them.
Rule 1.04 provides:
The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.
Note: Section 43 of the Act sets out the principles that the court must apply when exercising its jurisdiction under the Act.
Rule 1.07 provides:
To achieve the main purpose, the court applies these Rules in a way that:
(a)      deals with each case fairly, justly and in a timely manner;
(b)      encourages parties to negotiate a settlement, if appropriate;
(c)is proportionate to the issues in a case and their complexity, and the likely costs of the case;
(d)      promotes the saving of costs;
(e)gives an appropriate share of the court’s resources to a case, taking into account the needs of other cases; and
(f)promotes family relationships after resolution of the dispute, where possible.
Rule 1.08 provides:
(1)Each party has a responsibility to promote and achieve the main purpose, including:
(a)ensuring that any orders sought are reasonable in the circumstances of the case and that the court has the power to make those orders;
(b)complying with the duty of disclosure (see rule 13.01);
(c)ensuring readiness for court events;
(d)providing realistic estimates of the length of hearings or trials;
(e)complying with time limits;
(f)giving notice, as soon as practicable, of an intention to apply for an adjournment or cancellation of a court event;
(g)assisting the just, timely and cost‑effective disposal of cases;
(h)identifying the issues genuinely in dispute in a case;
(i)being satisfied that there is a reasonable basis for alleging, denying or not admitting a fact;
(j)limiting evidence, including cross‑examination, to that which is relevant and necessary;
(k)being aware of, and abiding by, the requirements of any practice direction or guideline published by the court; and
(l)complying with these Rules and any orders.
(2)A lawyer for a party has a responsibility to comply, as far as possible, with subrule (1).
Note: The court recognises that a lawyer acts on a party’s instructions and may be unable to establish whether those instructions are correct.
(3)A lawyer attending a court event for a party must:
(a)be familiar with the case; and
(b)be authorised to deal with any issue likely to arise.
Note:The court may take into account a failure to comply with this rule when considering costs (see sub-rule 19.10(1) and subclause 6.10(1) of Schedule 6).
The very strong impression created about the s 79A application, added to which is my concern about the way this subpoena issue was handled, draws in a question of whether the parties and their lawyers had focussed on those rules. The costs have not been the parties’ focus and one wonders why.
The immediate interlocutory dispute was not proportionate to the issue in this case. Nothing I heard indicated there was an attempt to promote the saving of costs. Rule 1.08(1) and (2) speak for themselves.
CPL briefed counsel to represent its interests in the subpoena dispute but so too, it briefed counsel for the wife who was not present because of child-minding issues. Her absence in hindsight, was unfortunate.
Each of the two counsel was instructed by a solicitor. CPL took the position that it was the person subpoenaed and had to therefore comply with various court obligations in its own right. Because of the matters that follow, I consider that the lawyer-attention, was unnecessary. I am comforted by the fact that CPL said that because of its position, if it did not recover its pursued indemnity costs against the husband, any shortfall would not be claimed against the wife. In my view that was sensible and appropriate.
I am quite satisfied that there was no definitive line between CPL and its client, the wife. These matters should have been dealt with much more expeditiously and with an eye to Chapter 1 of the rules.
The husband’s solicitor B Solicitors were equally unhelpful in that they wrote a letter to the court that commenced this dispute explaining the need to issue the subject subpoena. At best, the letter was poorly drafted and at worst, quite misleading. The squabble between the law firms wasted much of the court’s day but the argument between the lawyers which can be seen in the correspondence.
There is no argument that the wife had a wide-ranging disclosure obligation (Chapter 13 of the rules). Section 79A applications create an unusual dilemma for the court because of the question of what is relevant but here, two important points must be made. First, the wife had made an application for summary dismissal of the husband’s s 79A claim and had failed. As such, the husband’s s 79A application was alive and heading for trial. Secondly, there was no application to bifurcate the proceedings nor to deal with the s 79A matter as a threshold issue. Counsel for the wife conceded that discovery was therefore obligatory and the wife had to produce documents.
Despite all of that, it was uncontroversial that prior to the final consent orders, the husband and wife purchased a property which became the wife’s sole legal entitlement in the consent orders. After those orders, the property, or one of them, was compulsorily acquired. The wife’s solicitors acted for her on that compulsory acquisition. The husband wanted to know about the compulsory acquisition. As best I can determine, no formal request of, nor any complaint about non-compliance with disclosure by, the wife, occurred in respect of those compulsory acquisition documents. One must therefore ask why the subpoenae was issued.
With that background, I now set out the sequence of events.
On 18 May 2017, CPL in its capacity as the solicitors for the wife, wrote to the court requesting the issue of six subpoenae. One of those was directed to B Solicitors. Justifying its relevance to the court, the solicitor said:
The wife seeks a subpoena that ([B Solicitors]) produce a trust account statement showing the funds paid to them by (the husband). (The husband) has failed to provide this document.
That last statement curiously indicated that the husband would not provide the solicitor’s trust account statement.
I am not blessed with more detail but I am appalled that a non-contentious and non-privileged document was refused by the husband or his solicitor. On any view, rule 19.04(3) would have come into play in one sense here because at some point, the solicitors had to explain the costs that the husband had incurred, and would incur. Rule 13.07 requires disclosure of documents relevant to an issue in the case. This is not a matter that should have required the time and attention of the court but rather, should have been dealt with by the lawyers because of their own obligation in Chapter 1 of the rules.
If there was a letter by CPL which was ignored by B Solicitors, the matter did not warrant a subpoena, but rather, the raising of the matter at the hearing which was only a month later. Nothing critical would have occurred had that time gone by.
If on the other hand, there was no response by the husband, or no agreement to comply with the request to provide the detail, an explanation by B Solicitors should have been given. This may be a minor issue but it feeds into what follows. There is a real sense of loss of objectivity here.
Another subpoena was requested by CPL to be issued to the husband’s partner to produce her private financial documents. Whilst a gross invasion of her privacy, counsel for the wife justified it on the basis that it was “relevant” to s 75(2) of the Act. I have significant doubts as to where it fits in s 75(2) when the first obligation lies with the husband in respect of disclosure.
Matters became more unusual when the solicitor at B Solicitors (as distinct from the husband’s partner) lodged an objection to the subpoena on the ground that it was “an abusive process, fishing, not relevant and oppressive (“imposes a task that is too onerous”)”. Yet, notwithstanding B Solicitors briefed counsel for the husband, there was no appearance by or on behalf of, the partner.
It was disconcerting that the partner had not complied with the subpoena notwithstanding the filing of the objections a month had gone by from its service. The absence of the solicitor from B Solicitors who was shown on the form as the objector and, more importantly, the person whose privacy had been invaded, meant that the objection was struck out. Counsel for the husband could hardly argue otherwise as she was not briefed in that matter.
The objection by the husband’s partner had substance but in her absence, it was unnecessary for the matter to be argued. I would not want the dismissal of the objection to be seen as the court endorsing a policy that subpoenae (as a matter of course) should be issued “for s.75 purposes” in a property matter. Lawyers might heed s.75(2)(m) before invading a non-party’s privacy.. There was then an agreement between counsel that the documents would be produced in a few days time. Objectivity again may be questioned but importantly, court time was wasted.
On 31 May 2017, B Solicitors sent to the court a subpoena addressed to CPL for issuing. Quite properly (because oddly, B Solicitors did not indicate its relevance and it must be kept in mind that the issuing of a subpoena by the registrar is discretionary) the court on 2 June 2017 asked:
1.What is purpose of subpoena?
2.Have the solicitors previously sought this information from (CPL)?
By letter 7 June 2017 B Solicitors relevantly wrote:
1.I note that on this matter ([CPL]) already served a similar subpoena on our office. We note that they had not asked for that information from our office prior to issuing the subpoena. We confirmed that an issue in the case may be evidence in regards to the parties’ current income earning capacity, and for that reason we assume that ([CPL]) served the subpoena on us as they are trying to ascertain how our client has been paying for his legal fees. We provided that information to the court. We consider that if it was a relevant issue in the matter, then likewise we should obtain similar information regarding (the wife)…
I am appalled that such approach should be taken.
The letter went on to say:
2.However, our subpoena also asked for information regarding the file from when ([CPL]) acted on behalf of (the wife), while she was in a relationship with (the husband) in regards to the compulsory acquisition of the property. We had previously raised this as a potential conflict of interest and ([CPL]) had denied acting at that time. In the respondent’s trial affidavit, it does confirm that ([CPL]) acted on her behalf in relation to that compulsory acquisition… (The emphasis is mine).
It is now common ground that:
(a)there is a factual dispute about whether the husband and wife were in a relationship when “the compulsory acquisition” occurred but on any view, that happened after the consent orders were made. It is apparently the s 79A ground of the husband that by implied conduct, the consent orders were set aside by virtue of the reconciliation; and
(b)the emphasised sentence was not correct. At no time had that been said by CPL. Indeed, the relevant correspondence was read to the court.
Disturbingly, the first sentence in Item 1 (of para [31]) above) sounds extraordinarily like “tit for tat”. The court expects better than that from its lawyers. The issue that followed concerning the costs question however highlights the questionable objectivity in this matter.
The registrar being satisfied of “relevance”, issued the subpoena addressed to CPL. The subpoena relevantly sought:
2.Trust account statement and ledger for (the wife)…showing trust funds received from the commencement of each of the following matters to date and the source of those funds with respect to:
(a)their family law files; and
(b)her intervention order filed.
3.Provide copy of file including all correspondence, contracts and statements associated with the property at (property named) including but not limited to the purchase and compulsory acquisition.
4.Provide copy of file including all correspondence, contracts and statements associated with the purchase of (property).
An affidavit was filed on 28 June 2007 by a partner of CPL and he deposed to the fact that at the time the subpoena was served on 16 June 2017, the only amount of money that was provided with it was $25 by way of conduct money. He then wrote to B Solicitors saying that of the three categories mentioned above, one of them had some 2100 documents. He said the file would have to be reviewed in full and there would be “significant cost involved”. He said he expected not less than 100 hours and more if the scope was not “reduced or clarified”.
It is unnecessary for me to comment on what was sought but in any discovery sense, it was hardly controversial. Be that as it may, the letter referred to the other categories of documents and said that CPL had to consider what “advice” to give the wife because of potential claims of privilege.
I was informed by counsel that the wife gave instructions that she did not waive the privilege although it remains unclear how that could be so if the file had not been “reviewed” to enable the advice to be given.
There was then a justifiable complaint that the subpoena conduct money of $25 was not sufficient. Reference was then made to various authorities (although not of this court) which I will not address. Those authorities are not consistent with the Family Law Rules.
Alarmingly, the letter went on to say:
Given the costs of complying with this subpoena are likely to exceed $33,000 we intend to seek security for those costs prior to commencing work. Please confirm what security your firm, or your client offers (within 48 hours).
Accordingly, given the matters detailed above we also invite you to either reduce the scope of your subpoena or withdraw it entirely and pay our costs to date of $750. If you intend to do so we require you to do so by email…
It is clear that CPL knew about the obligations to comply with the subpoena even if the issue was one of conduct money because this appeared in the letter:
In the absence of further instructions, we intend to bring the matter before the court concerning security for our reasonable costs of compliance urgently. However, we hope that may be resolved by agreement.
Finally, the letter again repeated that CPL would comply with the subpoena but it then said:
We will apply the correct lawyers to the correct task to ensure costs are minimised. We remind you that our estimate of costs to be no less than $33,000 plus GST. In those circumstances, we will inform you if we expect to exceed that time estimate of 110 hours.

An objection was then filed by CPL claiming both privilege and costs.
Leaving aside the extraordinary suggestion of requiring 110 hours, the reference to the involvement of the “correct” lawyer to correct task, is concerning. This was a case in which there may have been some 1000s of documents but did it require the “correct lawyer” to trawl through it? Why was it not an administrative matter for some clerical person? If the wife did not want the husband to see privileged communications, it was she who presumably would have been seeking the advice and therefore paying for it.
The resolution of all but the costs dispute indicates the discovery obligation of the wife was not controversial. Because of the concession by counsel that the documents were part of the wife’s discovery obligation, why was it necessary for B Solicitors to take the course it did?
On 20 June, B Solicitors wrote to CPL:
In response to your very detailed correspondence in response to the subpoena that we have served upon your office, we note that your client has a duty of disclosure in regards to the material requested in the subpoena that our office has issued on behalf of our client. We note that the (property) is a relative issue in these proceedings.
I interpolate here, if B Solicitors recognised that obligation and it seems common ground that no request had previously been made, why was the subpoena directed to CPL?
The letter then went on to say:
We advise that the alleged volume of documents and the alleged level of costs involved for your office to produce the material as required by the subpoena are completely unreasonable.
The letter then specifically confined the matter to the documents B Solicitors wanted to see. If it was that simple, why had the subpoena been drawn as widely as it had?
The same letter went on to address other family law matters but of course, CPL were apparently corresponding as the firm rather than as advised as practitioners to the wife. The line between the two was fine.
I have set out the sequence of events I hope fairly, because I consider the court’s processes have been abused.
I now turn then to the issue of CPL’s costs. That claim is $7700 and as I have indicated, it was sought on an indemnity basis. Counsel tendered an “itemised” account but that was only list of attendances most of which related to “reviewing”, “considering” and discussing with and attending upon counsel (all without time elements mentioned) in relation to the hearing over the dispute concerning the objection and/or the conduct money.
I accept the B Solicitors point about reasonableness in their letter but then again, they started this problem by issuing a subpoena in the first place. Even if there had been a request to the wife to produce the documents under a disclosure obligation, surely the appropriate action would have been to issue the subpoena to the wife and/or raise the failure to comply with the disclosure obligations at the court particularly bearing in mind that there was a hearing pending.
The first issue however distinguishes between costs and expenses. In my view, to the extent that it could be said there was an argument about expenses here, as I have mentioned, CPL well knew what course was open to them. They did not take it. Even had they done so, I refer back to what I said in Moriarty and Moriarty [2009] FamCA 369 at [57] et seq.
There would have been no justification in this case for a solicitor to trawl through 1000s of documents and/or pages of a file to then decide what advice to give to the wife. The wife well knew what the transactions were because they were less than two years old. She well knew what conversations she had had with the solicitors and would therefore have been able to quickly identify any possible privileged documents. In those circumstances a claim for $33,000 and/or 110 hours of legal work could never have been justified in this case.
The application by CPL for an order for costs as a non-party to the proceedings still lies in s 117 of the Act. In Batey-Elton and Elton (Costs) [2010] FamCAFC 219 the Full Court of this Court examined the question of jurisdiction to make costs orders against non-parties and said:
[8]It is beyond doubt that this Court has the power to make a costs order against a non-party. In their joint judgment in McAlpin & McAlpin (1993) FLC ¶92-411 Nicholson CJ and Maxwell J (at 80,215), after considering the High Court decision in Knight v FP Special Assets Ltd (1992) 174 CLR 178, said:
It seems clear from the above authority that while a discretion to order costs against a non-party should be exercised sparingly the jurisdiction to do so, at least in relation to cases governed by legislation similar to that contained in s5 of the Judicature Act (1890) is unlimited. Further, where cases fall into the category identified by their Honours, they appear to consider that the Court should make such an order.
In our view, on a natural reading of s117(2) of the Family Law Act, this Court's jurisdiction to order costs is similarly unlimited. It is true that s117(1) and (2A) refer to “parties” but s117(2) is not so limited and is expressed in the widest possible terms. We therefore see no reason to confine the jurisdiction of this Court in this area.
If this view be incorrect then the cross vested jurisdiction of the State and Territory Supreme Courts would seem to confer such a power, subject to any limitations contained in particular State or Territory legislation. See Gilbert and Gilbert (1988) FLC ¶91-966.
Whilst those authorities relate to orders against non-parties, if the jurisdiction is there to make that order, it must also be there to make an order on the application of a non-party against a party.
For that order to be made, the court must determine that there are “circumstances that justify it in doing so” but that is then still “subject to” the relevant consideration in s 117(2A).
The justifying circumstances here are said to be the fact that for no explicable reason, B Solicitors issued the subpoena to the solicitors rather than taking the appropriate discovery route. Against that, CPL, notwithstanding their protestations about the fact that the subpoena had been addressed to them personally, acted for the wife. They sought instructions from her about the subpoena and responded. The wife’s position of taking the high ground of legal professional privilege rather than responding in relation to the discovery obligation, caused an escalation of the dispute. Common sense should have then prevailed to the point that two objective lawyers would have got to the bottom of what was really in issue and to the extent that they disagreed in principle, they each then knew there was a hearing pending where some direction could have been obtained from the court.
The list of attendances that gave rise to the request for $7700 costs simply shows that there was a lot of thinking going on as well as and discussion with counsel. It might have been more sensible to have had a telephone discussion with the other solicitor who handled the family law matter to sort out the problem. In my view, there are no justifying circumstances here to make an order for costs at all having regard to the way the matter was handled by both firms of solicitors.
Section 117(2A) requires the court before making any order to give consideration to a number of factors. Ironically, one of the complaints in the letter from CPL to B Solicitors was that the husband was impecunious and therefore they were seeking security for costs. I think I can draw the conclusion that the financial circumstances of “the parties” are such that the husband has little by way of assets. CPL are not a party to the proceedings as a litigant but they engaged a partner at over $500 per hour along with other lawyers to deal with this matter. That must mean that their financial circumstances are sound. There is clearly a disparity between the husband’s financial position and that of CPL.
Section 117(2A)(c) refers to the conduct of the parties to the proceedings but in this case, CPL do not fall into that category. On any view however, if the court was to focus on the personal conduct of the husband, there not be criticism of him. He watched his lawyer send a subpoena to a firm of lawyers rather than taking the obvious simpler route of requesting (and indeed possibly enforcing) discovery. It is to that course of action that s 117(2A)(c) is directed. Nothing in the husband’s conduct can be seen to warrant criticism and I would not be prepared to draw the conclusion that his solicitors were acting as his agents in respect of how they fulfilled what is clearly their obligations to the court.
Section 117(2A)(d) refers to whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court. It seems that there was a conciliation conference for which discovery obligations had to be fulfilled. Just who sought what and who provided what, remains unknown. I could not again draw any criticism against the husband.
In respect of other issues such as whether the applicant for the costs was wholly unsuccessful in the proceedings, I can conclude that there was agreement for the production of the relevant discovery documents so to that extent, the substantive part (if that is what it was) of the subpoena dispute had more or less run its course by the time the case came before this court.
There was an open offer that CPL would accept $750 if the subpoena was withdrawn. B Solicitors did not respond to that notwithstanding their letter suggests that they were clarifying what they were seeking under the subpoena. That clarification means that common sense then prevailed. Because much more legal work was done by CPL thereafter, including briefing counsel, the $750 option had ended. In my view, even the $750 was unreasonable having regard to the wife’s discovery obligations.
Finally, s 117(2A)(g) gives the court the opportunity to consider any other matter that is relevant. In my view, what occurred here was less than what the court expects from its lawyers as officers of the court. It was unfortunate that the parties were dragged into an unnecessary dispute but equally, as I have said, the court’s resources were wasted. In my view, all of those matters justify the court in concluding that there is no circumstance here that warrants an order for costs in favour of CPL. Their application is therefore dismissed.

I certify that the preceding Sixty Seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 10 July 2017.

Associate:

Date: 10 July 2017