Duncan and Duncan (No.3)
[2015] FCCA 945
•30 April 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DUNCAN & DUNCAN (No.3) | [2015] FCCA 945 |
| Catchwords: FAMILY LAW – Application for costs – application by wife for enforcement response by husband seeking financial agreement be set aside or not enforced dismissed – subsequent order for payment of monies owing under financial agreement – application for costs by wife – whether costs order should be made – justifying circumstances – what order for costs should be made. |
| Legislation: Family Law Act 1975 (Cth), ss.117, 117, (2A) |
| Duncan & Duncan [2014] FCCA 2729 Duncan & Duncan (No.2) [2015] FCCA 944 |
| Applicant: | MS DUNCAN |
| Respondent: | MR DUNCAN |
| File Number: | MLC 10227 of 2012 |
| Judgment of: | Judge O’Sullivan |
| Hearing date: | On the papers |
| Date of Last Submission: | 20 April 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 30 April 2015 |
REPRESENTATION
| Solicitors for the Applicant: | Pearsons Lawyers Pty Ltd |
| Solicitors for the Respondent: | Sebastian Rubera & Associates |
ORDERS
The husband pay the costs of the wife in accordance with Chapter 19 of the Family Law Rules 2004 and in default of agreement as assessed in accordance with the provisions of Part 19 of the Family Law Rules.
IT IS NOTED that publication of this judgment under the pseudonym Duncan & Duncan (No.3) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT AT MELBOURNE |
MLC 10227 of 2012
| MS DUNCAN |
Applicant
And
| MR DUNCAN |
Respondent
REASONS FOR JUDGMENT
These reasons for decision concern an application by Ms Duncan (“the wife”) for costs arising from proceedings that were commenced by her against Mr Duncan (“the husband”).
The background to these proceedings is set out in Duncan & Duncan [2014] FCCA 2729. For the reasons set out in that decision the Court dismissed an argument made by the husband that a financial agreement entered into between the parties and dated 18 November 2009 wasn’t enforceable and/or should be set aside. As the reasons published as Duncan & Duncan [2014] FCCA 2729 make clear the financial agreement was found by the Court to be binding.
On 20 February 2015 the Court made the following orders for the reasons set out in Duncan & Duncan (No.2) [2015] FCCA 944:
“THE COURT DECLARES THAT:
1.The sum outstanding to the Applicant wife by way of enforcement of the Binding Financial Agreement dated 18 November 2009 is $85,905.12.
THE COURT ORDERS THAT:
2.It is ordered pursuant to the provisions of s.90KA(c) of the Family Law Act 1975 (“the Act”) that the aforementioned Binding Financial Agreement is to be enforced as if it were an order of the Court on application of the wife made on 12 December 2012.
3.The Respondent husband pay the sum of $85,905.12 to the Applicant wife in the following manner:
(a)That paragraph 3(b) to 3(d) inclusive of these Orders are binding on (omitted) (“the Trustee”) of (omitted) Superannuation Fund (“the Superannuation Fund”) member number (omitted).
(b)That pursuant to section 90MT(1)(b) of the Family Law Act 1975 (“the Act”) whenever a splittable payment becomes payable in respect of the husband’s interest in the Superannuation Fund, the Wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) using the base amount of 100% and there be a corresponding reduction in the entitlement of the husband to whom the splittable payment would have been made but for these orders.
(c)That Order 3(b) has effect from the operative time and that the operative time for such Order be four (4) business days after the service of a sealed copy of these Orders made by the Court on the Trustee of the Superannuation Fund.
(d)That the Trustee of the Superannuation Fund, in accordance with the obligations set out under the Act and the Regulations, do all acts and things and sign all such documents as may be necessary to calculate the entitlement of the Wife and make payment to the Wife in accordance with these Orders and to give effect to these Orders.
(e)The balance outstanding by cash payment be made by 4.00 pm on 20 April 2015 to the wife’s solicitors, Pearsons Lawyers Pty Ltd.
4.The Applicant file and serve all material and written submissions in relation to her application for costs by not later than 4.00 pm on 6 March 2015.
5.The Respondent (and if necessary his legal representative separately) file and serve all material and written submissions in relation to the application for costs by not later than 4.00 pm on 27 March 2015.
6.The Applicant file and serve any further material in reply by not later than 4.00 pm on 7 April 2015.
AND THE COURT NOTES:
A.The parties consent to the decision in relation to costs being dealt with on the papers after the conclusion of the parties filing their respective submissions unless requested otherwise in written submissions.
B.Once the parties have filed their respective written submissions they are to email a copy in word format to associate.judgeo’[email protected] as soon as practicable.
C.The respondent did not oppose orders (1), (2) and (3).”
As indicated in the above orders, unless otherwise requested in the written submission the wife’s costs application was to be dealt with on the papers in chambers.
Background
In order to understand the wife’s application for costs it is necessary to set out briefly some of the relevant background.
The parties entered into an agreement dated 18 November 2009 which provided for the division of property between them. This agreement purported to be a financial agreement under s.90C of the Family Law Act 1975 (“the Act”) (“the Agreement”).
The proceedings were commenced in 2012 after the wife faced demands from a financial institution for a property (which she was entitled to under the Agreement) to be sold because of a debt under a (omitted) Bank debt. After a number of interlocutory hearings, where interim orders were made by consent including orders providing for the sale of various property, payment of monies to a third party (following her involvement in the proceedings), the appointment of a litigation guardian for the husband and a number of adjournment applications, the matter came to trial on 13 October 2014.
So far as is presently relevant the rest of the factual and procedural background is set out in Duncan & Duncan [2014] FCCA 2729 at paragraphs [4] to [21].
For the reasons set out in that decision on 22 December 2014 the Court dismissed the husband’s argument that the Agreement wasn’t enforceable and/or should be set aside and adjourned the wife’s enforcement application to 20 February 2015.
On 20 February 2015 the Court made the orders set out at paragraph 3 above for the reasons set out in Duncan & Duncan (No.2) [2015] FCCA 944 for the enforcement of the Agreement and directions for filing of submissions in relation to the wife’s costs application.
The wife filed submissions on 13 March 2015 in support of her application for costs. The husband and the husband’s solicitor (separately) filed submissions on 13 April 2015. The wife filed submissions in reply on 20 April 2015.
Wife’s submissions
In her written submissions filed 13 March 2015 the wife’s position was:
“1.The Wife makes application for payment of her costs, arising from the proceedings.
2.In the first instance she seeks an order that the Husband pay her costs. Alternatively, that the solicitor acting for the Husband pay her costs, or part thereof. Thirdly, it is open to the Court to make an order providing for the solicitor to show cause why he should not pay the costs ordered against the Husband (if any).
3.Section 117 provides a preliminary premise that each party shall bear their own costs, unless circumstances exist which justify the making of a costs order. The section provides mandatory considerations for the Court to address if an application for costs is made.
4.Section 117(2A)(a) requires the court to consider the financial circumstances of the parties. The Wife’s Financial Statement discloses she is of modest means, and has the ongoing care of the 2 children. The Husband continues to receive in excess of $1,000 a week by way of insurance payments, following his inability to work, due to his health.
5.Section 117(2A)(c) requires scrutiny of the conduct of the parties referable to the litigation. This should be read in the context, in this particular instance, of Section 117(2A)(e), being whether or not a party was wholly unsuccessful. The Husband in these proceedings was wholly unsuccessful in his bid to establish that a Financial Agreement, signed by him, was not binding.. The Wife was required to incur very significant legal costs in order to pursue her claim for monies already owing to her pursuant to the provisions of a Financial Agreement. The amount she ultimately received, calculated as the amount due to her upon judgment in her favour, was $85,905.12 (Order of 20 February 2015). She had previously had various other financial orders in her favour, on 17 October 2013 in the sum of $15,000, and had secured the sale of real estate by court order, the proceeds of which were applied to discharge the $203,000 (omitted) Bank debt, following the Husband’s default on payment (Order made 15 March 2013). The Orders and relief she sought were solely directed to the enforcement of the terms of the Financial Agreement. Those terms were obligations of the Husband. His default was the sole reason for the institution and continuance of the proceedings instituted by the Wife. Should the Wife not have the benefit of a costs order in her favour, the amount she has recovered, being an amount the Court found the Husband liable to pay following his default, will be very significantly eroded by the amount she had been required to expend, to enforce payment. It is submitted that is not equitable, or just.
6.The conduct of the Husband, and it is submitted his solicitor on occasion, inflated the costs incurred by the Wife, in an unnecessary way. Adjournments were sought on 19 February 2013, and on 13 May 2014 on behalf of the Husband. On the second occasion a costs order was made in the sum of $5,270 in favour of the Wife. It is submitted the costs reserved on 19 February 2013 should also now be the subject of an order in favour of the Wife, as the matter was adjourned due to the failure by the Husband to file any material. If that default was the fault of the Husband, he should pay the costs, if the fault of the solicitor, then he should bear the liability. The Wife had no part in the wastage associated with the adjournment.
7.On 15 March 2013 consent orders were made, to provide for the sale of land, (the sale) in order to pay the (omitted) Bank debt. This interim process was necessitated by the Husband’s default on that payment, and the Wife’s inability to pay it. The Husband did not comply with the consent orders for the sale, and a Section 106A(1) order was required, necessitating the generation of further work and costs on behalf of the Wife. The difficulties did not conclude there. On 5 August 2013 further orders were made by consent injuncting the Husband from involvement with the sale. The application heard on 5 August 2013, filed by the Wife on 2 August 2013, affidavit material, ancillary attendances and court attendance could have been avoided had there been compliance by the Husband with the earlier order.
8.On 5 August 2013 the Husband’s solicitor informed the Court of a guarantee, extended by the Husband to another person, previously undisclosed by him, which allegedly had frustrating impact on the Wife’s application for enforcement, and, more immediately, the sale. No disclosure of that frustration to sale had been made prior to that date, despite two sets of consent orders dealing with it’s management, and a Section 106A order. Orders were made on 17 October 2013 to join a party, one Ms R (the beneficiary of the Husband’s guarantee). Orders were made, upon the application of the Wife, resolving the guarantee problem, by payment of $15,000 from Ms R to the Wife. The orders, and legal work, were necessary because good title could not be delivered for the sale without disposing of the guarantee, unilaterally entered into by the Husband, and not previously disclosed by him.
9.On 7 October 2013, the very day the sale was to settle, despite a plethora of correspondence, and numerous court appearances to ensure the sale of the Property H land, the solicitor for the Husband lodged a caveat over the title, on his own behalf, by which he sought to secure legal costs outstanding to him personally from the Husband. (See Affidavit of Wife’s solicitor filed 14 October 2013). It is submitted the solicitor should personally pay all costs associated with his action, on an indemnity basis.
10.During the course of the proceedings the husband, and his solicitor, who appeared for him at all times, were alerted to the possibility of a costs order being made.
11.Mr Rubera chose to continue to act, even though he was the solicitor who advised the Husband with respect to the Financial Agreement. The difficulty of that situation was mentioned to him on a number of occasions by the Court. He argued on behalf of the Husband that the Husband did not understand the terms of the Financial Agreement to mean he was required to pay the (omitted) Bank debt. However he was aware the Husband had paid that debt, following the execution of the Agreement, for considerable time. He argued the Husband had made a mistake, yet the “mistake” as to interpretation of the terms was made by the Husband at a time when Mr Rubera was advising him.
The argument raised by Mr Rubera, on behalf of the Husband, was ultimately rejected by the Court.
12.The case law applicable to circumstances which give rise to costs orders against practitioners includes Iphostrou & Iphostrou (No 3) (2011) FamCA 138; Wade & McPherson (2014)FCCA 1321; and Freye & Gingo and Anor (2012) FamCA 942; Limousin & Limousin There is no need to establish serious professional misconduct. A mistake or error of judgment would not justify an order against a solicitor. However misconduct, default or negligence, of a serious nature, may be sufficient to justify an order. Freye & Gingo. Where an unsuccessful argument clearly originated from the lawyer, as distinct from a lawyer taking on a difficult argument that the client was determined to pursue, it is necessary for the lawyer to be satisfied there is a rational basis upon which the argument might succeed. Wade & McPherson It is submitted that the final submissions dated 21 August 2014, drawn by, and relied upon, by Mr Rubera, disclose argument devised by him. It is not an argument closely related to his client’s actions, or the evidence. It is submitted the Husband’s case was acquiescent to the advice given to him. Such a circumstance justifies an order against the lawyer so advising, in this instance Mr Rubera. Limousin & Limousin at paragraph 12.
13.The costs of the Wife incurred to date, on a solicitor client basis, are approximately $94,340. The client is claiming $52,420. An event based assessment of the costs are contained in the schedule attached hereto.”
As noted above the wife’s submissions estimate her costs to date on a solicitor client basis as $94,340. However those submissions then indicate the wife was only claiming $52,420 and attach what was said to be an “event based assessment” of the costs.
Husband’s Submissions
In submissions filed 13 April 2015 after referring to the background to the substantive proceedings[1] and what was said to be a ‘chronology of relevant facts to be taken into account’[2] the husband’s submissions (filed by his solicitor) went on to respond to the wife’s submissions seriatim. Those submissions addressed s.117 of the Act; noted the wife had not filed a financial statement[3] and then made submissions addressing s.117(2)(a).[4] In relation to paragraph 6 of the wife’s submissions the husband’s submissions alleged there was no evidence to substantiate the allegation his conduct had inflated the costs of the wife by reference to claims about the husband’s health.[5]
[1] See paragraphs 1-4
[2] See paragraphs 5-31
[3] The wife’s application was an enforcement application and for the purposes of Rule 25B.02 she was not required to file a financial statement
[4] See paragraph 35
[5] See paragraph 36
In relation to the matters canvassed at paragraphs 7, 8 and 9 of the wife’s submissions the husband’s submissions at paragraphs 37, 38 and 38 rehearsed the husband’s claims about why each of the court events was either necessary or proceeded as it did.
At paragraphs 39 and 40 of his submissions the husband took issue with the wife’s submissions at paragraphs 9, 10 and 11 before noting those matters referred to at paragraph 12 of the wife’s submissions were relevant to the issue of whether an order for costs should be made against his solicitor.[6]
[6] See paragraph 41
Finally the husband’s submissions at paragraph 13 referred to a costs consultant’s assessment of the costs claimed by the wife[7] before making submissions about ss.117(1), (2A) by reference to inter alia Penfold v Penfold (1980) 144 CLR 311 (“Penfold”) and Kohan and Kohan (1993) FLC 92-340 at 79,605 (“Kohan”) and submitting there was both no grounds to make an order for indemnity costs and arguing there should be no order for costs.[8]
[7] See paragraph 42 and Annexure C. This consultant was apparently engaged unilaterally on behalf of the husband and without an order of the Court.
[8] See paragraphs 43-52
Submissions on behalf of husband’s solicitor
Submissions were also filed on behalf of the husband’s solicitor. Those submissions provided:
“2.Sebastian Rubera (Rubera) opposes the application in so far as costs are sought against him.
3.There is no basis for any costs order to be made against Rubera as the onerous criteria for an order for costs to be made against a legal practitioner has not been satisfied.
4.Further, the Applicant also appears to be seeking that the Court fix her costs entitlement in a specific amount, without a taxation of those costs taking place.
5.In the event that a costs order is made against him, Rubera opposes any fixing of the Applicant's costs in the absence of assessment.”
The submissions filed on behalf of the husband’s solicitor then went on to rehearse the ‘legislative and regulatory framework’[9] before claiming there was no evidence to support the amount of costs sought.
[9] See paragraphs 6-9
The husband’s solicitor’s submission then claimed:
“10.The Applicant's costs application against Rubera is based on the assertions that:
(a)The conduct of Rubera on occasion inflated the costs incurred by the Applicant, in an unnecessary way.
(b)Rubera chose to continue to act, even though he was the solicitor who advised the Respondent with respect to the Financial Agreement.
(c)The submissions made by Rubera in the final hearing, disclose argument devised by him, not closely related to his client's actions, or the evidence.”
The husband’s solicitor’s submissions then addressed the claim/s that his conduct inflated costs.[10] In conclusion the husband’s solicitor submissions were:
“31.In the circumstances, there is no basis for the Court to find that Rubera has acted in such a manner to give rise to an order that he pay the Applicant's costs. There is no evidence that he caused any adjournments of the proceeding.
The evidence is that the adjournments were as a consequence of the Respondent's serious medical condition. There is no basis for the assertion that the unsuccessful argument was devised by Rubera and originated from him, as distinct from him taking on a difficult argument that the client was determined to pursue. Finally, there is no evidence that Rubera had any ulterior purpose in pursuing the Respondent's opposition to the Financial Agreement.
32.Accordingly, the Applicant has failed to satisfy the criteria for an award of costs to be made against Rubera and the application must be dismissed insofar as it relates to Rubera.”
[10] See paragraphs at 11-29
Wife’s submissions in reply
In submissions filed 20 April 2015 the wife responded to the husband and his solicitor’s separate submissions as follows:
“1.As to the submissions made on behalf of the Respondent Husband, they contain much material directed at an application for indemnity costs. No application for indemnity costs is made against the Respondent Husband, and the submissions pertaining thereto are irrelevant.
2.As to the entirety of paragraph 35, the proceedings were primarily an application for enforcement of the terms of an agreement between the applicant and the Respondent, which agreement was ultimately declared to be a Binding Financial Agreement. There were a number of interim applications, together with an application for a declaration, and various applications for specific enforcement procedures. All applications and responses were ancillary to the primary relief sought by the Applicant – that of practical enforcement of the terms of the original agreement. The Respondent sought to avoid that enforcement, and have the agreement declared void. He was entirely unsuccessful. No “new” benefit was obtained by the Applicant beyond satisfaction of what was found to be the terms of the original financial agreement. She had herself been required to pay instalments on the loans, during the time taken to determine the proceedings. The final orders were, in part, calculated as an indemnity for those outgoings she had incurred, upon the default of the Respondent. She had made the payments in order to save her home from mortgagee repossession. No “added value” to the Applicant was ever pleaded or asserted by the respondent during the course of the proceedings, nor could it have been properly asserted, in the face of his default.
3.Rather, the enforcement of the terms has resulted in the Applicant incurring very significant legal costs, which, if not recovered by her, result in her entitlements being severely diminished. Her entitlements are diminished to an amount directly referable to any sum not recovered by her. She has already been disadvantaged by the difference between the party party costs she seeks, and the sum of costs she has actually incurred.
4.As to paragraph 36, it contains submissions with respect to the conduct of the proceedings on behalf of both the respondent and his legal practitioner, Mr Rubera. The submissions purport to be drawn by Mr Rubera, in circumstances where the respondent cannot himself provide instructions, lacking the capacity to do so. They should be read accordingly.
5.As to paragraph 38, the Respondent had historically, unilaterally, and without any disclosure to the Applicant, provided a bank guarantee for the benefit of his former business partner. He had never mentioned or disclosed that arrangement, however must have had knowledge of it. The location of the Deed of Guarantee by him in September 2013 was immaterial to his prior knowledge of the liability he had created. The disclosure of the Deed was also immaterial to its enforceability by the bank, which also must have been known to the Respondent prior to his production of it.
6.The entirety of the costs associated with the investigation of the Guarantee, the joinder of the third party in order to render discharge of it enforceable, and all steps necessary to release the title, were a direct result of the Respondent’s actions. He failed to reveal the existence of the guarantee, until it effectively frustrated a court order for the proposed settlement of a sale of real estate. He had consented to the order being made in the first instance, but had not disclosed the relevant encumbrance created by him, being the guarantee. Settlement was unable to proceed on the original date (7th October) due to that fact. The respondent wholly failed to deal with the discharge of his guarantee, to which the Applicant was not party, outside of these court proceedings. He could and should have done so. If he had done so, the costs in relation to that matter would not have been incurred by the applicant at all.
7.As to paragraph 39, no conduct is imputed to the respondent, save for his actions which frustrated the initial settlement date of 7th October. The point made is that Mr Rubera lodged a caveat, on his own behalf, to again encumber the property, once the guarantee had been disposed of, and settlement could otherwise proceed.
8.The proceedings were wholly brought about by the Respondent’s failure to comply with the terms of what was ultimately declared to be a Binding Financial Agreement. The proceedings were not brought about by a need to interpret, as is alleged on the part of the respondent. Significant evidence before the Court was the respondent’s compliance with the terms of the agreement for a substantial period of time, prior to his default. The evidence also disclosed he had formally, and formerly, prior to proceedings, complied with an agreement he had made with the Applicant to pay the proceeds of sale of a property he wished to sell into the (omitted) Bank debt. He had required the applicant’s consent to the sale, as the property constituted her security for the discharge of the (omitted) Bank debt. He formally complied, by paying the proceeds into the (omitted) Bank debt, a condition the applicant had placed on her release of the security, but then immediately withdrew them again. The evidence disclosed he used the drawdown solely for his own purposes. The respondent’s actions in this regard created a debt crisis, which in turn caused the bank to threaten repossession of her home, in the absence of instalment repayments by the respondent. The Applicant was forced to institute these proceedings.
9.As to the submissions made on behalf of Mr Rubera, and insofar as the issue is raised in the respondent’s submissions, it is conceded that a right to taxation of costs exists, in the absence of consent. The potential quantum is put before the Court as it may be a matter relevant to the exercise of s117(2A) (a) and (b). It is submitted it is certainly a matter relevant to the exercise of discretion when considering the justice of the circumstance, most particularly given the proceedings were effectively enforcement proceedings.
10.As to the submission that Mr Rubera has not been given an opportunity to be heard, he has been given the opportunity to seek advice, be represented, and make submissions. This does amount to an opportunity to be heard, in compliance with the requirement. Mr Rubera made no complaint about that course being adopted, in answer to his quite proper request to be heard, on the last hearing day. Indeed he consented.
11.As to paragraphs 13, 14 and 15, the adjournment applications were not preceded by proper notice to the applicant by Mr Rubera. He was aware, or should have been aware, at all relevant times, of his client’s ongoing medical condition, and whether it affected his capacity to provide instructions. It is submitted preparation and notification prior to Court listings, addressing those matters, was properly required by Mr Rubera, in order to prevent unnecessary appearances, and costs thrown away. Rather, Mr Rubera informed the Court, on the days of listing, that these were difficulties he prospectively needed to address.
12.As to paragraph 16, the contents of the Applicant’s earlier submissions are reiterated. The caveat was lodged by Mr Rubera on his own behalf, and has been addressed herein at paragraph 7. The apparent purpose of the caveat, that of securing payment to himself of $25,000, as a priority to discharge of the Respondent’s debt on the (omitted) debt, frustrated the very purpose and agreement between the parties for the disbursement of the proceeds of sale upon settlement. There were costs incurred as a result of Mr Rubera’s conduct by the Applicant for attendances, correspondence, and the like, necessitated for the rectification of the situation, and the provision of clear title. It is immaterial to those costs that Mr Rubera did consent to withdraw the caveat, prior to the need for judicial intervention.”
Application for costs
The normal rule in proceedings under the Family Law Act 1975
(“the Act”) is that each party pay their own costs (s.117(1)). However, the Court may make an order for costs if it is satisfied that in the particular circumstances of the case it should do so.
Section 117(2) of the Act provides that in an appropriate case the Court may make an order for costs against one or other parties notwithstanding the general rule in s.117(1). Section 117(2A) of the Act sets out the factors to which the Court shall have regard when considering an order for costs.
“In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.”
The High Court in Penfold (supra) has said that the wording of that section does not create an onus on either of the parties and that it is a matter for the Court in each case to consider, having regard to the matters in section 117(2A) of the Act, whether in a particular case to exercise discretion to order costs or not to order costs.
The authorities also make it clear that an order for costs is compensatory in the sense that it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the legal proceedings (see Latoudis v Casey (1990) 170 CLR 534; Cassidy v Murray (1995) FLC 92-633).
In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another [2005] FamCA 158 the Full Court (per Kay, Warnick and Boland JJ) referring to s117(2A) said at 130:
“A number of factors are then listed in the subparagraphs.
The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”
Finally s.117(2) of the Act requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs.
Consideration of the application
I now turn to deal with the factors set out above having regard to submissions made by each of the parties in respect of those matters.
The financial circumstances of each of the parties
The wife’s submissions purport to deal with her financial circumstances. The husband’s submissions made much of the claims referred to therein about the impact of these proceedings on his financial circumstances. As has been made clear in the authorities impecuniosity is not a reason in and of itself to refuse to order costs.
Whether either party is in receipt of legal aid
Neither party submitted this was a relevant factor and I am satisfied that is the case in this matter.
Conduct of parties to proceedings
I accept the wife’s submissions that the conduct of the husband looms large as a relevant factor in this case. As was noted in those submissions it was the husband’s conduct both before and during the course of these proceedings which resulted in the wife incurring significant costs in enforcing the Agreement.
Whether proceedings necessitated by failure to comply with court orders
I also accept the wife’s submissions in relation to this particular factor and find that the husband’s conduct in failing to comply with a number of the orders made during the proceedings resulted in the wife incurring significant costs.
Whether any party has been wholly unsuccessful
The parties’ submissions on this factor are set out earlier and neither the husband nor his solicitor cavilled with the submission made by the wife that the husband was wholly unsuccessful. In light of the reasons in Duncan & Duncan [2014] FCCA 2729 they could hardly do otherwise.
Were there any parties to the proceedings who made an offer in writing to settle the proceedings
Neither party submitted this was a relevant factor and I am satisfied this is the case in this matter.
Any other matters the Court may consider relevant
The parties’ submissions have been set out earlier and there was no suggestion that any particular issue needed to be taken into account under this factor.
Consideration
In this case the following facts support a departure from the principle that each party should bear their own costs:
·the husband was wholly unsuccessful;
·the wife was successful in her application for enforcement of the Agreement;
·the husband conducted his case in such a way that the wife was required to incur significant expense in responding to it; and
·the husband was on notice that costs would be sought.
These factors support an order being made which would relieve a party who incurred costs unnecessarily from having to meet the burden of those costs.
The husband in submissions makes claims that his financial position has deteriorated. Whether that is the case or not, impecuniosity is not a reason to refuse to order costs. The proceedings were wholly necessitated by the husband’s failure to comply with his obligations under the Agreement. The proceedings were in the nature of enforcement proceedings. These considerations along with the factors set out above provide a proper basis for the husband being responsible for and paying the wife’s costs.
Having weighed all of the relevant matters set out in s.117(2A), I am satisfied the wife has demonstrated justifying circumstances for the Court to make an order for costs.
Costs against husband’s solicitor
As is clear from the wife’s submissions, her application for costs gave rise to the need to consider whether an order for costs should be made against the husband’s solicitor. The relevant legal principles with respect to costs being award against a legal practitioner were outlined in Cassidy & Murray (1995) FLC 92-633 at 82,354 as follows:
“1.Pursuant to s.117(2) Family Law Act, the Court has jurisdiction to make an order for costs against a solicitor or a non-party.
2.The court should not make such an order without giving the person to be affected by the order an opportunity to be heard.
3.The Court may make an order for costs against a solicitor without the necessity to establish that the solicitor has been guilty of serious professional misconduct.
4.The solicitor has a duty to the Court to promote the interests of justice whilst at the same time attending to the needs of the solicitor’s client.
5.A mistake or error of judgment would not justify an order for costs against a solicitor. However, misconduct, default or negligence, any of which are found by a Court to be of a serious nature, may be sufficient to justify an order.
6.The jurisdiction is compensatory.”
In Z (a solicitor) & Limousin [2010] FamCA FC 59 the Full Court provided detailed consideration of the principles relating to a costs order being made against a solicitor at paragraphs [45] to [62].
Rule 21.07 of the Federal Circuit Court Rules 2001 (“the Rules”) provides in relation to this issue:
“Rule 21.07 Order for costs against lawyer
(1) The Court or a Registrar may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
(a)to be incurred by a party or another person; or
(b)to be thrown away;
because of undue delay , negligence, improper conduct or other misconduct 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 for costs against a lawyer may be made on the motion of the Court or Registrar, or on application by a party to the proceeding or by another person who has incurred the costs or costs thrown away.
(4)The order may provide:
(a)that the costs, or part of the costs, as between the lawyer and party by disallowed; or
(b)that the lawyer pay the costs, or part of the costs incurred by the other person; or
(c)that the lawyer pay to the party or other person the costs, or part of the costs, that the party has been ordered to pay to the other person.
(5)Before making an order for costs, the Court or Registrar:
(a)must give the lawyer, and any other person who may be affected by the decision, a reasonable opportunity to be heard; and
(b)may order that notice of the order, or of any proceeding against the lawyer be given to a party for whom the lawyer may be acting or any other person.”
The wife’s submissions in support of an order for costs against the husband’s solicitor have been set out earlier. However they included the submission that:
“10.During the course of the proceedings the husband, and his solicitor, who appeared for him at all times, were alerted to the possibility of a costs order being made.
11.Mr Rubera chose to continue to act, even though he was the solicitor who advised the Husband with respect to the Financial Agreement. The difficulty of that situation was mentioned to him on a number of occasions by the Court. He argued on behalf of the Husband that the Husband did not understand the terms of the Financial Agreement to mean he was required to pay the (omitted) Bank debt. However he was aware the Husband had paid that debt, following the execution of the Agreement, for considerable time. He argued the Husband had made a mistake, yet the “mistake” as to interpretation of the terms was made by the Husband at a time when Mr Rubera was advising him.
The argument raised by Mr Rubera, on behalf of the Husband, was ultimately rejected by the Court.
12.The case law applicable to circumstances which give rise to costs orders against practitioners includes Iphostrou & Iphostrou (No 3) (2011) FamCA 138; Wade & McPherson (2014)FCCA 1321; and Freye & Gingo and Anor (2012) FamCA 942; Limousin & Limousin. There is no need to establish serious professional misconduct. A mistake or error of judgment would not justify an order against a solicitor. However misconduct, default or negligence, of a serious nature, may be sufficient to justify an order. Freye & Gingo. Where an unsuccessful argument clearly originated from the lawyer, as distinct from a lawyer taking on a difficult argument that the client was determined to pursue, it is necessary for the lawyer to be satisfied there is a rational basis upon which the argument might succeed. Wade & McPherson It is submitted that the final submissions dated 21 August 2014, drawn by, and relied upon, by Mr Rubera, disclose argument devised by him. It is not an argument closely related to his client’s actions, or the evidence. It is submitted the Husband’s case was acquiescent to the advice given to him. Such a circumstance justifies an order against the lawyer so advising, in this instance Mr Rubera. Limousin & Limousin at paragraph 12.”
The husband’s solicitor’s submissions have also been set out earlier. However relevantly for present purposes those submissions claimed:
“10.The Applicant's costs application against Rubera is based on the assertions that:
(a)The conduct of Rubera on occasion inflated the costs incurred by the Applicant, in an unnecessary way.
(b)Rubera chose to continue to act, even though he was the solicitor who advised the Respondent with respect to the Financial Agreement.
(c)The submissions made by Rubera in the final hearing, disclose argument devised by him, not closely related to his client's actions, or the evidence.”
The husband’s solicitor’s submissions then addressed the claim/s that his conduct inflated costs.[11] In conclusion the husband’s solicitors were:
“31.In the circumstances, there is no basis for the Court to find that Rubera has acted in such a manner to give rise to an order that he pay the Applicant's costs. There is no evidence that he caused any adjournments of the proceeding.
The evidence is that the adjournments were as a consequence of the Respondent's serious medical condition. There is no basis for the assertion that the unsuccessful argument was devised by Rubera and originated from him, as distinct from him taking on a difficult argument that the client was determined to pursue. Finally, there is no evidence that Rubera had any ulterior purpose in pursuing the Respondent's opposition to the Financial Agreement.
32.Accordingly, the Applicant has failed to satisfy the criteria for an award of costs to be made against Rubera and the application must be dismissed insofar as it relates to Rubera.”
[11] See paragraphs at 11-29
Having considered the submissions filed by the parties, on the evidence before the Court, I am unable to find that misconduct, default or negligence on the part of the husband’s solicitor has been established.[12] I am also unable to conclude on the evidence before the Court that there was inappropriate conduct of the husband’s solicitor’s part such as to warrant an order for costs against him.[13]
[12] See Limousin & Limousin [2008] FamCA 315 at paragraph [39]
[13] See Freye & Gingo and Anor [2012] FamCA 942 at paragraphs [38] to [43]
There is no persuasive evidence of undue delay, misconduct, default, negligence or improper conduct of a serious nature on the part of the husband’s solicitor in the conduct of the proceedings on behalf of his client. There was otherwise not demonstrated inappropriate or unjustifiable conduct by the husband’s solicitor.[14] Accordingly I am not satisfied there is a basis for a costs order against his solicitor.
[14] Ibid
What orders for costs should be made?
The wife’s submissions sought costs in the amount of $52,420.00. The husband’s submissions filed by his solicitor submitted there were no grounds to deviate from the general principle that each party bear their own costs. The husband’s solicitor’s submissions were that the wife had failed to satisfy the criteria for an award of costs against the husband’s solicitor and the application against him should be dismissed.[15]
[15] See paragraph 52 of the husband’s submissions
However, as noted earlier the husband’s submissions had attached a costs consultant’s assessment of the costs claimed by the wife in her submissions. The wife in her submissions in reply did not respond to the submissions made by the husband in reliance upon that assessment.
Conclusion
The authorities make it clear an order for costs in compensatory in the sense it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the proceedings.
I am sympathetic to the wife in relation to the very large amount of costs she has incurred. I note in her submissions in reply the wife disavowed any intention to seek costs on an indemnity basis against the husband. In any event and for the reasons set out above, I cannot identify particular facts or circumstances in this case (even allowing for the parties submissions) on which to make the order for indemnity costs (see Prantage & Prantage [2013] FamCA FC 105).
In light of the consideration of the s.117(2A) factors and the finding of justifying circumstances the Court has clearly the power to make an order for the husband to pay the wife’s costs and in my view they should be calculated in accordance with Division 21.2 of the Rules.
As noted earlier the husband’s submissions attached a costs assessment done in accordance with Schedule 1 to the Rules and this was in response to the event based assessment in the wife’s submissions. However, Rule 21.02 provides that the Court retains the discretion to order that costs be calculated other than in accordance with Schedule 1 of the Rules if the circumstances are such as to warrant that departure. As the reasons in Duncan & Duncan [2014] FCCA 2729 make clear this matter was an unusual (and protracted) enforcement application. If the Court were to fix costs in accordance with Schedule 1 of the Rules this would in no way shape or form compensate the wife for the costs of the enforcement application.
Accordingly the appropriate order is that the husband pay the wife’s costs and pursuant to Rule 21.02(2)(c) of the Rules they be calculated in accordance with Chapter 19 of the Family Law Rules 2004 and in default of agreement assessed in accordance with provisions of Part 19.
I certify that the preceding fifty four (54) paragraphs are a true copy of the reasons for judgment of Judge O’Sullivan
Date: 30 April 2015
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