EAMES & EAMES (No.2)
[2018] FCCA 3908
•19 December 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| EAMES & EAMES (No.2) | [2018] FCCA 3908 |
| Catchwords: HELD – Orders made for the Respondent’s costs to be paid on an indemnity basis – orders that the Respondent’s costs be paid by the Applicant’s solicitor. |
| Legislation: Family Law Act 1975 (Cth), s.117 Federal Circuit Court Rules 2001 (Cth), r.21.07 |
| Cases cited: Lilley & Child Support Registrar & Ors (SSAT Appeal) [2010] FMCAfam 378 Z (a Solicitor) & Limousin [2010] FamCAFC 59 G (A Solicitor) & Monaghan [2013] FamCAFC 63 Huda & Huda & Anor (Costs) [2017] FamCAFC 104 Eames & Eames [2018] FamCAFC 204 |
| Applicant: | MR EAMES |
| Respondent: | MS EAMES |
| File Number: | MLC 4509 of 2013 |
| Judgment of: | Judge Bender |
| Hearing date: | 19 December 2018 |
| Date of Last Submission: | 19 December 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 19 December 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bacon |
| Solicitors for the Applicant: | Manby & Scott Lawyers |
| Counsel for the Respondent: | Dr Smith |
| Solicitors for the Respondent: | Northcote Lawyers |
ORDERS
Pursuant to rule 21.07 of the Federal Circuit Court Rules 2001 (Cth) the Respondent’s costs in relation to the proceedings commenced by way of Initiating Application filed on behalf of the Applicant on 6 September 2017 be paid by the Applicant’s solicitor on an indemnity basis to be determined by the Court.
IT IS NOTED that publication of this judgment under the pseudonym Eames & Eames &(No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 4509 of 2018
| MR EAMES |
Applicant
And
| MS EAMES |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
Introduction
On 13 February 2018 I handed down my decision in this matter that the Initiating Application filed on behalf of the Applicant on 6 September 2017 be summarily dismissed. Together with that decision, I published a 27 page judgment that set out the basis of my determination and why I was satisfied that there was no prospect of success in relation to that application.
As part of my decision, I adjourned the matter in relation to the question of who was to pay the Respondent’s costs arising from that application.
I also flagged in my judgment the possibility that I would consider, in the event an order was made for the payment of the Respondent’s costs, whether those costs should be met by the Applicant’s solicitor, rather than the Applicant in person, given the concerns I raised at paragraphs [71] to [78] of my judgment. Those paragraphs provide as follows:
“71. …it would be remiss to not remark upon the striking similarities between the application presently before the Court and a number of decisions which were referred to in the written submissions filed on behalf of the Mother, each of those previous decisions having been related to applications filed by the Father’s solicitor and each having also been summarily dismissed.
72. In Aish & Greco [2014] FCCA 2283 Judge Burchardt sets out in paragraph [1] the final orders sought by the applicant father in those proceedings as follows:
“1. It is appropriate to commence judgment in this matter by starting with the materials that the parties have actually filed. The father’s initiating application filed on 9 October 2013 sought final orders in the following terms:
“1. From the date of these orders and until a child support terminating event occurs in relation to the children [X] (born [omitted] 2001), [Y] (born [omitted] 2003) and [Z] (born [omitted] 2004) (the children) any monies paid by the applicant to third parties for purposes directly related to the children’s dental, healthcare and contact travel costs (up to $100 per week) be credited as an appropriate percentage against any child support otherwise payable by the applicant to the respondent regarding the children.
2. The applicant be declared to have had a lawful duty to maintain Ms A from 30 August 2006 and that that duty be duly quantified.
3. Any leave required to be given in these proceedings for them to proceed (within the Child Support Agency) under s112 Child Support (Assessment) Act (or otherwise) be so given.
4. Any further order [whether under the Family Law Act, Child Support Assessment or otherwise] required to do justice between the parties.
5. The respondent pay the applicant’s costs of and incidental to these proceedings.”
73. As can be seen, the orders sought by the Father in this matter are identical to those sought in Aish & Greco (supra).
74. In paragraph [8] of Judge Burchardt’s judgment he sets out in its entirety paragraph [28] of the affidavit filed by the applicant father in those proceedings in support of his application. It reads as follows:
“At paragraph 28, he deposes:
“28. I have had relatively extensive dealings with the Agency over the years. They have sent me countless letters, we have had numerous phone calls and I have been through various change of assessment decisions. I would from time to time even telephone the Agency and discuss how I might best handle my child support affairs. Never once throughout my dealings with the agency was I advised that I could make a “claim” for the support I provided to Ms A. The first time this was brought to my attention was in mid-2013 when my lawyers discussed this with me. I felt completely duped that the Agency had not specifically brought this matter to my attention. In any event, my lawyers advised me that I did not need to let this issue rest. I was advised that I could still seek permission from the court for the Agency to go back to 2006 and thoroughly investigate my proper obligations to pay child support from 2006 and onwards based upon the support I’ve provided to Ms A. I note I brought these proceedings as quickly as I could thereafter.”
75. Paragraph [19] of the affidavit sworn 26 May 2017 by the Father in these proceedings reads as follows:
“I have had extensive dealings with the Agency over the years. The Agency has sent me countless letters and we have had numerous phone calls. I have also been through the change of assessment process several times. I would even from time to time telephone the telephone the Agency and discuss how I might best handle my child support affairs. Never once throughout my dealings with the Agency was I advised that I could make a “claim” for the support I provided to Ms A’s children. The first time this was brought to my attention was in mid 2017 when my lawyers discussed this with me. I felt completely duped that the Agency had not specifically brought this matter to my attention. In any event, my lawyers advised me that I did not need to let this issue rest. I was advised that I could still seek permission from the court for the Agency to go back in time and thoroughly investigate my proper obligations to pay child support from mid-2015 and then onwards based upon the support I have provided to Ms A’s children. I note that I have brought these proceedings as quickly as I could thereafter.”
76. In the matter of Webb & Webb [2016] FCCA 1123 Judge Williams determined a costs application flowing from her summary dismissal of the applicant father’s Initiating Application filed in the Magistrate Court on 23 October 2016. The father in those proceedings was represented by the Father’s solicitor in this matter. In Her Honour’s judgment she makes reference to the orders being sought by the father in that matter being in virtually the same terms as the orders sought in the matter of Aish & Greco (supra) which was summarily dismissed by Judge Burchardt.
77. This discovery leaves one with the unfortunate impression that these applications are being brought by the Father’s solicitor on behalf of those who are seeking his professional advice as to the appropriateness of such applications in the full knowledge by that solicitor that such applications are unlikely to achieve a successful outcome if they proceed to hearing before this Court.
78. If that unfortunate impression were to in fact be the reality, it would clearly amount to an abuse of process and of professional misconduct by the Father’s solicitor.”
On 5 March 2018, the Applicant filed a Notice of Appeal in relation to my orders of 13 February 2018. With the consent of all parties, the question of the Respondent’s costs in relation to the application that proceeded before me was adjourned until the Family Court had heard and determined the Applicant’s appeal.
On 1 November 2018 the Full Court of the Family Court dismissed the Applicant’s appeal and made an order that the Appellant (as he was before that Court) pay the costs of the Respondent on an indemnity basis.
In the decision of the Full Court[1], their Honours Alstergren DCJ, Aldridge & Austin JJ were very clear that the appeal was totally without merit, and were persuaded that indemnity costs should be ordered, for reasons set out in paragraphs [97] to [113] of their joint judgment.
[1] [2018] FamCAFC 204
The appeal having been determined, the matter was listed back before me today to determine the question of the Respondent’s costs and, in the event the Court was satisfied that the Respondent should not bear her own costs, whether those costs should be on an indemnity basis and whether they should be paid by the Applicant’s solicitor rather than by the Applicant.
The Applicant seeks that no orders be made as to costs and that each party should bear their own costs.
The Law
Section 117(1) of the Family Law Act1975 (Cth) (“the Act”) provides:
“(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.”
Section 117(2) provides that:
“If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.”
Section 117(2A) sets out the factors that the Court can take into account when determining whether or what costs order it should make as follows:
“(2A) 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.”
Submissions
The Respondent
In submissions made on behalf of the Respondent, Counsel relied primarily on subsections 117(2A)(c) and 117(2A)(e).
With respect to subsection 117(2A)(c), Counsel brought to the Court’s attention the finding of the Full Court that the application made under section 66N of the Child Support (Assessment) Act 1989 (Cth) (“the Assessment Act”) was brought for a collateral purpose, being to reduce the amount of child support payable to the Respondent by increasing the number of relevant dependent children for the purposes of assessing liability.
With respect to subsection 117(2A)(e), it was put on behalf of the Respondent that the Applicant’s application was wholly unsuccessful, and that this is apparent by the summary dismissal of the application, and the subsequent dismissal by the Full Court of the Applicant’s appeal.
Further, it is submitted on behalf of the Respondent that this is a matter where an order for indemnity costs is justified as the Applicant, properly advised, would have known there was no reasonable prospect of success, that the claim under section 66N of the Assessment Act was for a collateral purpose, and therefore an abuse of process, and that the costs of the proceedings were out of proportion to the amount the subject of the litigation.
Counsel for the Respondent referred the Court to a number of decisions that considered the question of whether a solicitor should be responsible for the payments of costs, and I am appreciative of him for so doing.
In particular, Counsel for the Respondent made reference to two decisions of May J, being Huda & Huda & Anor (Costs) [2017] FamCAFC 104 and G (A Solicitor) & Monaghan [2013] FamCAFC 63.
In the decision of G (A Solicitor) & Monaghan (supra) at paragraph [45] her Honour states:
“45. It is well established that a specific power to make such orders exists under s 117(2) of the Family Law Act 1975 (Cth). Cassidy & Murray [1995] FamCA 91; (1995) FLC 92-633 was cited, correctly, in the submissions on behalf of the father, as authority for the principles relevant to the exercise of the jurisdiction under the section. The Full Court (Fogarty, Kay and Hase JJ), referring with approval to the decision of the Master of the Rolls, Sir Thomas Bingham in Ridehalgh v Horsefield (1994) 3 All ER 848 at 855, said (at p 82,365):
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 solicitors clients.
5. A mistake or error of judgment would not justify an order for costs against a solicitor. However, misconduct, default of negligence, any of which are found by a court to be or a serious nature, maybe sufficient to justify an order.
6. The jurisdiction is compensatory.”
At paragraph [48] her Honour states:
“48. As to the relationship between the power in s 117 and specific provisions in the Rules of Court, their Honours said in Cassidy & Murray (at p 82, 363-4):
This Rule addresses a particular set of circumstances in which it is appropriate to make costs orders against parties' legal representatives. However, in no way should it be seen as circumscribing the general power to make orders for costs. The fact that Judges of this Court, in exercising their rule-making powers under the Act, have chosen to highlight a particular instance in which such orders might be made does not curtail the ambit of the statutory provision, or the discretion which it creates.
...
Once the discretion provided by s. 117(2) is acknowledged to be as broad as we have indicated, the existence of Order 38 Rule 39 is seen as simply an example of its exercise contemplated by the Judges of this Court, and enacted into Rule form for sound case-management reasons. The Rule does not confine the operation of the section — the power to make costs orders against solicitors exists in circumstances which do not fall within the Rule.”
The Applicant
Mr Bacon, who appeared on behalf of the Applicant, relied on the decision of Lilley & Child Support Registrar & Ors (SSAT Appeal) [2010] FMCAfam 378. In that decision, Riethmuller FM (as he was then known) made the observation that litigation in child support seemed to his Honour to be in a category where careful regard should be had before making costs orders.
In relation to who should be responsible for payment of the Respondent’s costs, Mr Bacon’s ability to make full submissions was severely curtailed by the fact that the Applicant had not sought independent legal advice on this question and had not waived his legal privilege.
Mr Bacon was therefore unable to make any submissions whatsoever with respect to the nature of the Applicant’s instructions to him and more particularly, the nature of the advice that he offered the Applicant with respect to the application’s prospects of success.
Should the Respondent bear her own costs?
Firstly, in response to the submissions made on behalf of the Applicant that child support is an area where careful consideration should be given before making a costs order, I would make the observation that all family law matters require careful consideration before a costs order is made. There is a very strong reason why section 117 of the Act exists, and there is the initial presumption that parties bear their own costs.
However, there are circumstances where orders should be made that the costs of one party be met by another, and I am more than satisfied that this is one of them.
Further, as was found by this court and the Full Court the Applicant’s application pursuant to section 66N of the Assessment Act was brought for a collateral purpose that is to reduce the child support paid by him.
It is apparent that the Applicant was completely unsuccessful with respect to his application.
It is therefore apparent that the Respondent has been put to costs that she should not have had to incur. I am therefore satisfied this is a matter where there should be an order made that the Respondent’s costs should not be borne by her.
Should the Respondent’s costs be paid in accordance with Court scale or on an indemnity basis?
Very helpfully, the Full Court in their judgment dismissing the Applicant’s appeal has provided a useful summary of the relevant matters to be taken into account when determining whether an indemnity costs order should be made. The Full Court said at paragraphs [100] to [103]:
“100. Orders for indemnity costs are exceptional (Kohan and Kohan (1993) FLC 92-340 at 79,614; Limousin v Limousin (Costs) [2007] FamCA 1178; (2007) 38 Fam LR 478 and D & D (Costs) (No.2) [2010] FamCAFC 64; (2010) FLC 93-435).
101. Whilst the categories of cases in which such costs are awarded is not limited, a commonly accepted list of such circumstances appears in Colgate Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225. Sheppard J said at 233 – 234:
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes [1989] FCA 540; (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
102. It can be seen that the respondent relies on the first two examples given by Sheppard J.
103. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 Woodward J said at 401:
I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.”
For the purposes of today’s decision, I adopt those paragraphs as being a very clear and succinct summary of the law applicable in determining the question of whether an indemnity costs order should be made.
An order that one party pay the costs of another on an indemnity basis is made only in the most exceptional circumstances. There is no definitive list of what factors the Court is to consider in determining whether it will or will not make such an order. Guidance can be provided however by looking at the various cases where this matter has been determined.
I am of the view, in accordance with the submission made on behalf of the Respondent, that this is a case where properly advised, the Applicant should have known that there was no prospect of success in the application brought before the Court.
I am also of the view, as outlined in my decision of 13 February 2018, that the application under section 66N of the Assessment Act, as pleaded, was made purely with the view to reducing the amount of child support payable.
More concernedly, it is apparent that the costs incurred by both parties well and truly exceed any possible outcome that would have been achieved in the context of the applications that were before the Court.
In all those circumstances, I am satisfied that this matter falls into the exceptional category, as described in the Full Court’s decision. An order will therefore be made that costs be payable on an indemnity basis.
My ire as to my inability to determine what the quantum of those costs should be has already been fully expressed in open Court during the hearing of this matter. I am loathe to send people off to taxation as that is just more costs.
Subject to anything that Mr Bacon may wish to put to me on his client’s behalf, I am going to direct the Respondent’s solicitors to file an affidavit setting out what they say are the costs that should be ordered on an indemnity basis. I will then, if possible, determine the quantum of these costs in chambers. If that is not possible however, the quantum of costs may have to be determined by taxation.
Who should be responsible for the payment of the Respondent’s costs?
As was flagged in my decision of 13 February 2018, consideration must also be given in this matter as to whether the Respondent’s costs should be paid by the Applicant personally, or whether this is a matter in which this Court should make an order that those costs be paid by Mr Bacon.
That this Court has the power to make orders for costs against a lawyer is not in issue. Section 117(2) is sufficiently broad to include that power.
Further, rule 21.07 of the Federal Circuit Court Rules 2001 (Cth) provides as follows:
“(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.”
The determination of this issue is made the more complex because the Applicant, as is his right, has declined to waive his legal privilege. Therefore, what Mr Bacon was able to put to me in the context of the instructions that he received and, more particularly, what advice he gave his client in relation to whether the proceedings should be continued, are not matters that can properly be put by him.
The Applicant was afforded an opportunity to obtain independent legal advice in relation to whether, for the purposes of these costs issues, he should be independently represented. He has chosen not to do so. This has not assisted in the determination of what would be an appropriate order in the circumstances of this case.
The central tenet upon which I flagged the possibility of making orders for Mr Bacon to pay the Respondent’s costs rather than those costs being paid by the Applicant, arose primarily in two circumstances.
Firstly, as an experienced solicitor practising almost solely in child support matters, it should have been apparent to Mr Bacon that there was no prospect of success in the application being brought by the Applicant, and he should have advised the Applicant accordingly and used his position to dissuade the commencement of this litigation.
The second major issue of concern was the discovery by me of previous cases in which applications of a similar type had been brought by Mr Bacon on behalf of clients where those applications had also been unsuccessful, either resulting in summary dismissal or being found to be unsuccessful after the hearing of the evidence.
As noted at the outset of the consideration by me of this issue, Mr Bacon’s capacity to respond fully to this aspect of the application is severely curtailed by the reality he is bound by his client’s legal privilege, and he was therefore limited in saying to the Court that at all times he was acting pursuant to his client’s instructions.
An order for a solicitor to pay costs, rather than the party, is not an order that is made often in this jurisdiction. As was held by May J in the matter of G (A Solicitor) & Monaghan (supra), it is an order that can only be made in circumstances where the Court is satisfied that the solicitor’s conduct is of a sufficiently serious nature such that it requires such a costs order to be made.
Reference is made by May J in her decision of Huda (supra) to the matter of Z (a Solicitor) & Limousin [2010] FamCAFC 59, where the Full Court, in dismissing an appeal against orders that a solicitor pay costs, held at paragraph 203:
“…the failure of, or disregard by the solicitor, a very experienced practitioner in the jurisdiction, to conclude that the proceedings had no prospect of success, and his failure to advise discontinuance, or for him to withdraw from them, within a reasonable time … justified the order.”
As I have previously indicated, it cannot be known whether Mr Bacon advised the Applicant to discontinue these proceedings. However, at paragraph [19] of the Applicant’s affidavit sworn in support of his Initiating Application, the Applicant deposes that:
“Never once throughout my dealings with the Agency was I advised that I could make a “claim” for the support I provided to Ms A’s children. The first time this was brought to my attention was in mid 2017 when my lawyers discussed this with me. I felt completely duped that the agency had not specifically brought this matter to my attention. In any event, my lawyers advised me that I did not need to let this issue rest. I was advised that I could still seek permission from the court for the Agency to go back in time and thoroughly investigate my proper obligations to pay child support from mid-2015 and then onwards based upon the support I have provided to Ms A’s children. I note I have brought these proceedings as quickly as I could thereafter.”
In circumstances where there has been a finding by both this Court and the Full Court that these were proceedings that were without any chance of success, in circumstances where part of the application was improperly brought in as much as it relates to section 66N of the Assessment Act, and in the circumstances where previous applications filed by Mr Bacon of a very similar nature to this one had been wholly unsuccessful, I am of the view that Mr Bacon, a very experienced practitioner in child support, should have been fully cognisant that this application was without merit, and should not have pursued that application on the Applicant’s behalf. If the Applicant was insisting on the application being brought, Mr Bacon should have ceased to act if his advice was not being followed.
I am therefore satisfied that this matter does fall into the rare ambit of cases where an order should be made for the costs to be paid by the solicitor rather than the client. It is my view that the Respondent’s costs in relation to the proceedings that were brought before me should be met by Mr Bacon personally, and I will so order.
In paragraph [3] of this judgment I set out paragraphs [71]-[78] of my judgment of 13 February 2018. I raised the question of whether Mr Bacon’s conduct was such that it was an abuse of process and could be considered professional misconduct such that he should be referred to the Law Institute of Victoria.
A finding of professional misconduct by Mr Bacon has very serious implications for him. Accordingly, and in accordance with the Briginshaw test, such a finding must be on the basis of the balance of probabilities at the highest level.
In circumstances where I do not know what advice Mr Bacon gave the Applicant or the specific instructions Mr Bacon was given by his client, I do not have sufficient evidence before me that would enable me to be satisfied that Mr Bacon’s conduct reaches the level of professional misconduct.
Quite clearly, it is a matter for the Applicant as to what he may choose to do in the context of what has occurred as between himself and his solicitor, but I will not be taking this matter beyond the orders that I have made today.
I certify that the preceding fifty four (54) paragraphs are a true copy of the reasons for judgment of Judge Bender
Date: 10 January 2019
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