Eldred and Eldred (No 2)
[2015] FamCA 188
•24 March 2015
FAMILY COURT OF AUSTRALIA
| ELDRED & ELDRED (NO 2) | [2015] FamCA 188 |
FAMILY LAW – COSTS – Circumstances justifying a departure from the general rule that each party pay their own costs – disproportionate costs incurred during proceedings – certification for senior counsel – costs order
| Family Law Act1975 (Cth) ss 117, 117(2A) Family Law Rules 2004 (Cth) rr 1.04, 15.52, 15.64B, 15.65, 15.69, 19.50, Sch 3 Federal Circuit Court Rules 2001 (Cth) |
| Bergman and Bergman (No 2) [2008] FamCA 414 |
| APPLICANT: | Ms Eldred |
| RESPONDENT: | Mr Eldred |
| INTERVENOR: |
| INDEPENDENT CHILDREN’S LAWYER: |
| FILE NUMBER: | MLC | 10616 | of | 2012 |
| DATE DELIVERED: | 24 March 2015 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Bennett J |
| HEARING DATE: | 11 February 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr St John QC |
| SOLICITOR FOR THE APPLICANT: | Tolhurst Druce & Emerson |
| COUNSEL FOR THE RESPONDENT: | Mr Robinson |
| SOLICITOR FOR THE RESPONDENT: | Clancy & Triado |
Orders
IT IS ORDERED THAT:
The husband contribute to the wife’s costs of the proceedings in the sum of $14,676.29.
Pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) certification is given to the wife for engagement of senior counsel.
Any party wishing to make an application for the costs of this proceeding file and serve by not later than 12 noon on Wednesday 1 April 2015 a written submission to that effect, such submission to be of not more than four pages in length and include (but not be limited to) details of:-
(a) the sum at which such costs could be fixed on a party/party basis;
(b)an itemisation of professional fees for solicitors, counsels’ fees to prepare and counsels’ fees to appear; and
(c)a statement as to whether that party wishes, at this stage, for the matter to be listed for oral argument as to costs.
Any party against whom an application for costs is made file and serve by not later than 12 noon on Monday 13 April 2015 a written submission in response, such submission to be of not more than three pages in length and include (but not be limited to) details of:-
(a)the sum at which the costs claimed should be fixed on a party/party basis in the event that a costs order is to be made; and
(b)a statement as to whether that party wishes, at this stage, for the matter to be listed for oral argument as to costs.
Any party who is served with a response pursuant to the preceding paragraph of this Order may, within 14 days of service upon them of that response, file and serve a written submission in reply, of not more than three pages, confined to alleged errors of fact and law and say, finally, whether that party wants the matter to be listed for oral argument.
If no party seeks to have the matter listed for oral argument on the issue of costs, the Court may proceed to determine the applications for costs based on written submissions.
If either party does seek to have the matter listed for oral argument on the issue of costs, counsel for that party confer with counsel who will be briefed to appear for the other party to ascertain mutually convenient dates on which the matter can be listed before me at 9.00 am estimated to take not more than one hour.
Subject to further order of the court, the times for filing and service of submissions as to costs may be varied by agreement between the applicant for costs and the party against whom costs are sought and any such agreement should be referred to in the submissions or evidenced by correspondence attached to any submission which is filed and served.
IT IS NOTED that publication of this judgment under the pseudonym Eldred & Eldred (No 2) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: MLC 10616 of 2012
| Ms Eldred |
Applicant
And
| Mr Eldred |
Respondent
REASONS FOR JUDGMENT
Introduction
In proceedings which have been financially ruinous for the parties, there were 12 days of hearing over the course of May and June 2014 to determine competing applications for parenting and financial orders. There was an additional hearing date on 10 November 2014.
On 9 February 2015 I pronounced final orders and provided reasons for my decision, which are reported under case neutral citation [2015] FamCA 61. The wife indicated through counsel that she wished to make submissions as to costs. I determined that submissions ought to be made orally and the hearing was held on 11 February 2015. The costs of and incidental to the hearing of 10 November 2014 were dealt with in the final orders and are not at issue here.
It was requested that I certify for the attendance of senior counsel. In light of the small property pool that had been in issue in the proceedings and it being common ground that all the invested funds over which the parties had fought had been spent in legal fees, I required argument about whether it was appropriate for me to certify that it was reasonable for the wife to engage senior counsel as counsel to appear on her behalf at the trial.
Both parties handed up documents detailing the costs sought. Counsel for the husband, Mr Robinson, also submitted a folder containing correspondence related to Calderbank offers made throughout the history of the proceedings and handed up a list of authorities upon which he sought to rely.
In summary, the wife seeks an order that the husband pay her costs which she estimates at $60,995.25. The husband sought that the wife pay his costs estimated at between $30,611 and $38,156. In the result, I have made an award of costs in favour of the wife and payable by the husband in the sum of $14,676.29. That amount should now be paid to the wife from the monies held back by the husband’s solicitors to cover the contingency of an order being made against the husband.
Orders sought
The applicant wife sought that the husband pay the following costs (with fees for senior counsel and his instructing solicitor being claimed in accordance with the itemised scale of costs contained in Sch 3 of the Family Law Rules 2004 (Cth) (“the Rules”)):[1]
· all costs from a one hour mention on 19 May 2014 totalling $1,304.50 ($1,080 for senior counsel and $224.50 for his instructing solicitor);
· all costs of Days 3 and 4 totalling $14,076.29 ($12,336.42 for senior counsel and $1,739.87 for his instructing solicitor);
· all costs of one hour of Day 5 totalling $1,424.50 ($1,200 for senior counsel and $224.50 for his instructing solicitor);
· seventy-five per cent of the costs from Day 5 minus one hour until Day 12 ($32,383 for senior counsel and $7,366 for his instructing solicitor); and
· seventy-five per cent of the costs of eight hours of preparation by senior counsel on 4 June 2014 totalling $4,441.
In terms of the final two points in this list, Mr St John of senior counsel argued on behalf of the wife that because she was “wholly successful” in terms of the children’s issues which, to his calculation, constituted 75 per cent of the proceedings, the husband ought to pay 75 per cent of the ordinary costs incurred.
[1] Applicable to proceedings taking place between 1 January 2014 and 31 December 2014. A new schedule is now in force for 2015.
The respondent husband sought all costs incurred after his final Calderbank offer had been rejected by the wife, in accordance with the scale of costs in Sch 3 of the Rules. The husband leaves it to the Court to determine whether such costs should be calculated from the day after the offer was made (ie, from Day 4) or from the day after it expired (ie, Day 6). The husband also sought the costs of eight hours of preparation by counsel on 4 June 2014. The amounts were detailed as follows:
·if calculated from Day 4, costs for nine days of trial totalling $38,156 ($24,102 for counsel and $11,112.75 for his instructing solicitor, as well as $2,941 for counsel’s preparation on 4 June 2014); or
·if calculated from Day 6, costs for seven days of trial totalling $30,611 ($18,746 for counsel and $8,924 for his instructing solicitor, as well as $2,941 for counsel’s preparation on 4 June 2014).
Legal principles
Types of costs
As my colleague Benjamin J has helpfully summarised,[2] types of costs orders generally fall into three categories:-[3]
a)Party and party costs — which are calculated having regard to the schedule of costs under the Family Law Rules 2004 (Cth);
b)Lawyer and client costs — these are essentially indemnity costs, with the onus upon the costs applicant to satisfy the taxing authority that such costs are on balance fair and reasonable; and
c)Indemnity costs[4] — these are essentially lawyer and client costs, with the onus upon the costs respondent to satisfy the taxing authority that such costs are on balance not fair and reasonable, that is the reversal of the onus of proof.
[2] Xu and Phak [2015] FamCA 10 at [17].
[3] Family Law Rules 2004 (Cth) r 19.18(1)(b).
[4] See also Family Law Rules 2004 (Cth) r 19.08(3).
Here, both applications for costs are made on a party/party basis.
Orders for costs
Section 117 of the Family Law Act1975 (Cth) (“the Act”) contains the general rule that each party to proceedings under the Act shall bear his or her own costs. The object of the rule is to ensure that spouses are not deterred from bringing or maintaining legitimate applications for fear of incurring an intolerable financial burden if they lose.[5] In the case of Penfold v Penfold (1980) 144 CLR 311, the High Court clarified that while s 117(1) expresses the general rule, it is subject to s 117(2) and will yield to it in a particular case if the Court is satisfied that there are circumstances warranting that an order for one party to pay part or all of another party’s costs be made, provided it is just to do so.
[5] In the Marriage of Kohn (1977) 30 FLR 175 at 177.
In order for the wife to succeed in her application for costs, or the husband to be successful in his cross-application for costs, the Court must be satisfied that:
a)the principle contained in s 117(1), that each party should bear his or her own costs, is displaced;
b)there are circumstances which justify the court considering whether a costs order ought to be made;
c)having regard to the factors in s 117(2A) it is just to make an order.
To recover costs, a party has persuade the Court of each of the above elements.
It is appropriate to identify the matters which justify a costs order being made prior to, and discretely from, a consideration of the specific factors which may affect what order (if any) is to be made. The factors which can inform the exercise of the discretion may be the same or similar to the factors in s 117(2A), albeit that they may be differently applied.[6]
[6] See Bevan and Bevan [2013] FamCAFC 116 at [89].
I have already mentioned the relatively small pool of assets divisible between the parties. The primary asset over which the parties ran the financial aspect of the proceedings was the proceeds of sale of the former matrimonial home which originally amounted to about $1 million. However, by the time of the trial only $508,755.98 remained. The husband’s legal costs now exceed the amount that was awarded to him in my final determination. I understand that the wife’s legal costs also exceed the proportion of invested funds to which she is entitled.
The lack of proportionality between the subject matter and the costs of the proceedings was a matter which troubled me when it was mentioned before me some two months before the final hearing, on 11 March 2014. At that time, I explicitly raised my concerns about the burgeoning costs, as follows:
Well, they probably need to tell them what a judicial decision is going to get each of them. You see, in order to get a judicial decision, they’re going to have to go through about six days of trial, at a cost of about 12,000 a day. There’s only $500,000, or something of that nature, in the bank, and the wife’s business, isn’t there?
…
I want the parties to understand that I’m very concerned about the amount of money that they are committing to spend to take what is a very modest matter — what is a modest matter to a trial, and I’m dismayed that that’s the case, because at some stage they have to do — they should consider doing something which is not — doesn’t represent a complete victory for either of them.
By way of a judicial decision, it is more likely than not that both will end up with a decision that they do not want, right, and that they are not particularly happy with. And the greatest component of that lack of happiness, or lack of satisfaction, will be that the amount of money that they actually have after paying their legal costs, is much less than they ever thought they would get …
Ms Rivers, who appeared for the wife on that date, said even then that “the costs in this matter are totally disproportionate to what’s in dispute”. I emphasised the need for the parties to understand what a judicial decision could deliver in net terms and stressed my concern about the amount of money they were spending on what was a relatively modest case.
A guiding principle for the conduct of proceedings in this court, evident from the articulation of the main purpose of the Rules of our court, is to “ensure that each case is resolved in a just and timely manner at a cost to the parties and the court which is reasonable in the circumstances of the case.”[7] I am deeply troubled that the parties have fought a financial and parenting case in this Court and that the end result of the financial proceedings is that practically all of the assets over which they have fought are required to be paid to the lawyers for their services in the proceedings. I say practically all of the assets because the wife has a modest business which she is entitled, as between herself and the husband, to retain. However, there is no certainty that the wife will get to keep the business having regard to the shortfall between her legal fees and the amount of the invested funds to which the wife is entitled pursuant to my decision. The parties’ cars are leased. They have furniture, the husband has two expensive watches and the wife has some jewellery.
[7] Family Law Rules 2004 (Cth) r 1.04.
I do not suggest that the lawyers have charged inappropriately. I am aware of and accept market forces. However, prima facie there is something askew in the proportionality of the wife’s representation when her retention of senior counsel, for which the court is now asked to certify, has contributed in no small part to the wife being left with nothing more than a modest business and an unpaid debt to her legal advisers. The significance of certification for senior counsel, to which I will come later in these reasons, provides a focus for the apparent lack of proportionality. It is ordinarily assumed that a party can spend their own money any way they wish providing that they do not ask the other party to contribute. That means that a party can retain as counsel whomever they chose at whatever cost and for any reason. The impact of a certificate for senior counsel in this case will be to require the husband to pay that part of the wife’s costs at the rate applicable for senior counsel rather than for junior counsel. When I raised this with senior counsel for the wife, he responded that, as the husband was well aware that the wife was represented by senior counsel, he should have been more careful.
A number of recent cases from the United Kingdom have contained expressions of concern about unacceptably disproportionate costs in family law litigation.[8] One such case is Seagrove v Sullivan [2014] EWHC 4110, in which Holman J made the following remarks, at [10], the substance of which is equally applicable in the present case (my emphasis):
What are they arguing about? They are arguing about a claimed half share in an asset that may be worth around £1 million. So they are arguing about £500,000. What they have incurred in costs is not far short of three times the amount in dispute. Others might use other words of description, but as this is a judgment in a courtroom, I will merely say that the costs, and also the scale and intensity of this litigation, have been, and are, completely disproportionate.
[8] See, eg, Evans v Evans [2013] EWHC 506 at [203]; Chai v Peng [2014] EWHC 750 at [7] – [8].
In J v J [2014] EWHC 3654 (Fam), the parties had spent £920,000 litigating over an asset pool of £2,885,000. Moyston J remarked in relation to this that “the time has come when the law-makers in this country, whether they are legislators or judges, must stop saying something must be done [about reforming costs] and actually do something.”[9] His Honour went on to criticise the “grotesque leaching of costs”[10] and “the disfiguring impact of excessive costs”.[11]
[9] J v J [2014] EWHC 3654 (Fam) at [13].
[10] Ibid at [16].
[11] Ibid at [18].
By reason of the concerns I have expressed above, and the fact that each party was significantly successful and unsuccessful, I am satisfied that there are circumstances which justify me departing from the general rule that each party ought to bear their own costs. I am satisfied that there are circumstances which justify me giving consideration to making an order for costs.
In considering whether to make an order, I have regard to the matters set out in s 117(2A).
The weight to be attached to any of the considerations in s 117 (2A) is wholly discretionary. No single factor out-ranks any other but there is nothing to prevent one or other of them from being the sole foundation for a costs order.[12] As Kay J observed in Brown and Brown:[13]
In many cases there will be an outstanding feature … that makes an order for costs appropriate, a feature which so dominates the scene that it can outweigh any of the other s 117(2A) considerations.
[12] LAC and TRF and LKL [2005] FamCA 158 at [41].
[13] (1998) FLC 92-822 at 85,347.
The applicant for costs contends that this application raises the matters in paragraphs 117(2A)(a), (c), (d), (g) and (e), 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)…
(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)…
(g)such other matters as the court considers relevant.
The respondent’s cross application argues that the matter in paragraph 117(2A)(f) is crucial in this case, namely “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”.
The financial circumstances of the parties (s 117(2A)(a))
Mr St John quoted my reasons for decision delivered on 9 February 2015 in arguing that the wife is in a “parlous financial state”.[14] It should be noted that in writing this I was referring to the wife’s circumstances prior to final determination. More’s the pity that the statement remains accurate post judgment.
[14] Eldred [2015] FamCA 61 at [32].
Mr Robinson made no argument in relation to the husband’s financial circumstances, though he did mention that the husband owes $194,000 in legal fees and will not actually be receiving any of the monies he was apportioned in my final decision.
I am satisfied that neither party can afford the magnitude of legal costs which each has incurred in this matter.
The conduct of the parties in relation to the proceedings (s 117(2A)(c))
Mr St John argued that the husband’s approach to the proceedings in a number of respects gave rise to circumstances warranting a costs order against him.
Failure to respond in full to the wife’s evidence in chief prior to trial
The first of these circumstances concerned the husband’s failure to file an affidavit responding in full to the wife’s evidence in chief. Rather than take a methodical approach in response to her evidence, the husband deposed at [180] of his affidavit filed 14 August 2013 as follows:
I have read [Ms Eldred’s] Affidavit filed 21 November 2012, 18 January 2013, 8 July 2013 and 1 August 2013. I have responded to many of the issues raised in her Affidavit in my own Affidavit above therefore I do not intend to respond to each and every paragraph again. Where I do not directly respond to a paragraph, I do not admit the same.
Then, in his trial affidavit filed 6 March 2014 at [48] – [49]:
I do not intend to respond to each and every paragraph of [Ms Eldred’s] Affidavit in response to the [Ms I] Family Report as much of the content of this Affidavit is either [Ms Eldred’s] personal view, a repeat of her previous Affidavit material or a denial of comments made by me to [Ms I].
Where I do not respond to a specific paragraph or allegation in [Ms Eldred’s] Affidavit in response to the [Ms I] Family Report I do not admit the same.
At trial, I made clear that where the husband did not elect to respond directly to the wife’s evidence, I might regard him as having had nothing to say in contradiction. Furthermore, that his statement that “I do not admit” did not, in my view, put the wife to proof of her assertions. Mr Robinson made an oral application for leave to call oral evidence in response to the affidavits when the husband was called to give evidence. Mr St John opposed the application on the basis that the applicant wife was entitled to know the husband’s case before giving her evidence. As a result, I determined that the husband would give evidence first in response to the wife’s affidavit material prior to the wife being called into the witness box.
The husband concedes that the balance of Day 4 of the trial was taken up by the husband giving evidence in response. Mr St John submitted that another hour of Day 5 was spent concluding this evidence; Mr Robinson claimed that is was more like 20 minutes of Day 5. The audio recording of the proceedings satisfies me that only 25 minutes of Day 5 was referrable to the husband giving evidence orally that he had every opportunity to provide in affidavit form.
I consider that a just result is that the husband pay the wife’s costs thrown away by virtue of him having to respond in the witness box to evidence which the wife had put before the Court in more than sufficient time for him to answer it by affidavit. I will order that the husband pay the wife’s costs of Day 4 of the final hearing. I am not going to make an adjustment for time wasted on Day 5 as this was only 25 minutes.
The mention on 19 May 2014
The applicant wife also sought costs in relation to a mention on 19 May 2014, at which I confirmed that a conference should take place between the experts Mr GG and Mr HH, who had each undertaken valuations of the wife’s business.
When this case was still before the Federal Circuit Court, the wife and the husband had each obtained their own valuation of the business. The wife’s valuation was undertaken by Mr FF, who placed the business’s value at $169,200. The husband’s valuation was by Mr HH, who originally placed the business’s value at $725,000 and, later, at $580,000 due to further depreciation). Following the transfer of the matter to this Court, an order for the appointment of a single expert valuer was made by consent on 28 October 2013. Mr GG of NN valuers was appointed and he initially placed the value of the wife’s business at $277,000. This number would eventually become $246,000 at the time of trial due to further depreciation and be conceded by both parties to be correct.
The 19 May mention took place because the husband’s solicitors had contacted the wife’s solicitors seeking consent for Mr HH to approach Mr GG to discuss their valuations. The wife’s solicitors were of the view that, pursuant to r 15.69 of the Rules, the appointment of Mr GG meant that formal leave from the Court would be required before either party could rely on the earlier valuations. The husband’s solicitors had not submitted any written questions to Mr GG within 21 days of his original report per r 15.65 and had also not requested a conference pursuant to r 15.64B.[15]
[15] Exhibit “A” from mention on 19 May 2014.
The conference took place the day after the mention, though Mr GG and Mr HH were not able to come to any agreement as to the value of the business. Ultimately, the husband accepted Mr GG’s valuation and the trial proceeded with Mr GG as the single expert witness on this point.
Mr St John submitted that the husband should pay the costs of the 19 May mention because, if the husband had followed the proper procedures with regard to valuation evidence by a single expert witness, the costs would not have been incurred.
Mr Robinson responded that the mention on 19 May would not have been necessary if the wife’s solicitors had agreed to the husband’s request for a conference between the single expert and a potential expert witness for the husband. Furthermore, Mr Robinson argued that the single expert witness rules the wife sought to rely upon were not applicable to this case because the valuations were obtained when the case was still in the Federal Circuit Court. In light of this, Mr Robinson submitted that the conference that took place on 20 May, and the agreement on 21 May to accept Mr GG’s valuation, should not be grounds for a costs order against the husband. I do not accept Mr Robinson’s contention. The order which this Court made by consent on 28 October 2013 appointing a single expert witness superseded the material filed in the Federal Circuit Court pursuant to that Court’s rules in relation to expert evidence.
I am satisfied that the conference between experts served to quell a controversy and likely obviated the need for an application to be made by the husband pursuant to r 15.52 of the Rules to call other expert evidence. It would have been sensible for the wife to agree to the conference taking place. However, first and foremost, the husband’s practitioners ought to have ensured compliance with the Rules and, had they done so, neither party would have incurred the costs of the mention. In the circumstances, I am satisfied that the conduct of the husband in relation to the expert evidence as to the value of the wife’s business means that it is just to make an order as to costs. However, the costs should only be of a nominal amount having regard to the fact that the wife was, I am satisfied, misguided not to agree to the conference.
The application for recusal
Mr St John submitted that the husband’s unsuccessful application to have me recuse myself should be considered under this paragraph as well as under paragraph (e). He submitted that the application was “without merit”; however, he later withdrew from this position and conceded that the application was not made frivolously. Accordingly, since there is no real complaint as to the propriety of the husband’s application, it is most appropriately considered under paragraph (e) and will be discussed below.
Failure of a party to comply with previous orders (s 117(2A)(d))
Mr St John argued that the husband’s failure to respond to the wife’s affidavit material in a comprehensive manner constituted a failure on his part to comply with previous orders. On 25 February 2014, I ordered that each party file and serve any further evidence relied upon. I did so to avoid the parties having to duplicate earlier evidence filed in accordance with the Federal Circuit Court Rules 2001 (Cth) (see [39] of my reasons of 9 February 2015).[16] I did not relieve the husband from answering the wife’s affidavits as they then would have stood.
[16] [2015] FamCA 61.
I accept the wife’s contention that the husband’s failure to answer the wife’s evidence necessitated more than a day of hearing being devoted to his doing so. I have stated above that it is just to make an order for costs. As to what order for costs should be made, I also have regard to the fact that the husband ultimately had little with which to refute the wife’s earlier evidence. On his own admission, he and his solicitor had gone through the wife’s earlier affidavits and determined that there was little that could be said by him. Accordingly, I question why the husband could not have made that concession and saved the Court’s time and the wife’s money on Day 4 and part of Day 5 of the final hearing.
Wholly (un)successful in the proceedings (s 117(2A)(e))
The application for recusal
At the commencement of Day 3 of the trial, the respondent husband, through counsel, made an oral application that I recuse myself from further hearing the proceedings. Based on the argument made in support of this application, I stood the matter down in order to listen to the recordings from the previous day. There was some delay in obtaining the recordings and, unfortunately, it was not until Day 4 that I was able to deliver my judgment dismissing the application.
Mr Robinson conceded that the application for recusal was entirely unsuccessful and that there was nothing the wife could have done to avoid the costs associated with losing the time in question.
There was a minor dispute as to the amount of time taken on the disqualification application. Mr St John submitted that Day 3 and an hour of Day 4 were lost as a result of this application. Mr Robinson argued that it was about a single day worth of trial time.
I am satisfied that the husband should pay the wife’s costs of Day 3 of the final hearing all of which was lost to the issue. I will also make an adjustment for the time wasted on Day 4 in relation to this matter.
Wife’s success in children’s matters
As mentioned above, Mr St John argued that the wife was wholly successful in relation to the children’s issues which, to his calculation, comprised 75 per cent of the trial and, accordingly, she should be awarded costs in relation to 75 per cent of the ordinary hearing days. Mr Robinson disputed this calculation, claiming instead that more than half of the time spent was on property matters. Mr Robinson submitted that substantial time was spent on financial matters at the hearing, including extensive cross examination of the husband in relation to his earning capacity, his involvement in the projects enterprise at N Pty Ltd, analysis of bank statements and the issue of whether the husband’s car was reasonably sold.
Mr Robinson conceded that the wife was entirely successful in regard to the children’s matters but argued that the husband was not unreasonable in taking the position he did, which was supported by the recommendations in Ms I’s family report, to which Ms I adhered during cross examination. Mr Robinson submitted that it would not be appropriate for there to be costs orders in relation to something that it was entirely reasonable for the husband to argue having regard to expert evidence.
In the result, the husband was entirely unsuccessful in parenting matters. He could have faced an even less favourable outcome but for concessions by the wife in relation to shared parental responsibility.
I am satisfied that the pursuit by the husband of the parenting case lengthened the trial considerably and required the wife, and himself, to incur a considerable amount of unnecessary expense. This is a factor which weighs in favour of the wife being compensated for costs unnecessarily incurred.
Offers made in writing (s 117(2A)(f))
Calderbank offers[17] were made by the husband to the wife and vice versa from the time the proceedings were instituted until trial. At one point I directed that offers be re-made because I was so concerned about the level of costs and modest size of the financial pool.
[17] Calderbank v Calderbank [1975] 3All ER 333.
On Day 3 of the trial, 22 May 2014, the husband made the final offer to settle the property and spousal maintenance aspects of the proceedings by accepting $150,000 in cash, with the wife to take all remaining monies as well as the business. The offer was open until 4.00 pm on Monday 26 May 2014. The wife did not accept the offer and the ultimate result in the trial was that the husband was allocated $187,500 less arrears of child support and an award of costs to the wife in respect of the hearing on 10 November 2014.
The respondent husband’s cross-application for costs consisted of an argument that he made an offer of compromise to the wife in relation to the property, that offer was not accepted by the wife and the wife then failed to get a better result at final hearing.
Mr Robinson argued that the husband ought to be awarded a proportion of the costs attributable to the financial proceedings because, had the wife accepted the husband’s offer, those costs to the husband would not have been incurred.
In response to Mr Robinson’s argument, Mr St John submitted that his client had adopted a reasonable approach to husband’s offer. Mr St John referred to the case of Nada and Nettle (Costs) [2014] FamCAFC 207, which affirmed what was said at [10] – [13] of Lenova and Lenova (Costs) [2011] FamCAFC 141, to argue that a rejected offer is one of the factors the Court must have regard to in considering whether to make an order for costs but it is not necessarily determinative. Furthermore, Mr St John argued that the offer “was made on short notice and for short notice”.
Mr St John made submissions based around about a Calderbank offer put by the wife to the husband on 19 May 2014 which was, Mr St John claims, put by way of reviving an offer previously made by the wife to the husband on 8 August 2013 and then available for acceptance by 14 August 2013 but not accepted. The wife’s letter of 19 May 2019 read as follows:-
Further to the directions given by Her Honour Justice Bennett this morning, we write to confirm that our client will seek to rely upon her offer of settlement contained in our letter to your office dated 8 August 2013. We will be seeking Costs as agreed or taxed by the Court from 8 August 2013, if our client is successful.
The letter made no mention of the 8 August 2013 offer being revived or open for acceptance.
I accept the submission of Mr Robinson for the husband that the correspondence of 19 May 2015 does not constitute an offer which was capable of being accepted by the husband. If it was intended to be so, it would have been easy enough to specify a further period in which it could be accepted.
Mr St John also disputed the claim that the husband had been entirely successful in relation to property matters, pointing to my findings of fact that were contrary to the husband’s assertions — specifically in relation to his income and the amount of money he had brought into the marriage — and also to the final orders substantially increasing the amount of child support he is to pay. Leaving prospective child support to one side and looking at what the husband (or more precisely his lawyers) will actually receive from the invested funds, the husband’s offer to the wife on 22 May 2015 was very well judged. What a different case it would have been if the perspicacity which went into calculation of the husband’s financial offer had been applied to the resolution of the parenting dispute. In the result, the husband is entitled to a share of the invested funds which is greater than that which he said he would accept on 22 May 2015, even having regard to the estimated amount of arrears of child support which will be a deduction from his entitlement. The child support ordered by me was less than the wife sought and more than the husband was offering.
I am satisfied that the pursuit by the wife of the financial case lengthened the trial considerably and required the husband, and herself, to incur a considerable amount of unnecessary expense.
This is a factor which weighs in favour of the husband being compensated for some costs unnecessarily incurred.
Such other matters as the court considers relevant (s 117(2A)(g))
Mr St John did not make a particular argument in relation to this paragraph, submitting instead that I should take into account the fact that the wife made it clear to both the husband and the Court from the start of the trial that she would abide by Ms E’s report.
Certification for senior counsel
The wife retained Queen’s Counsel. The husband did not.
Rule 19.50 provides that the judicial officer hearing the case may certify that it was reasonable to engage a lawyer (including Queen’s Counsel and senior counsel) as counsel to attend for a party.
I have confirmed with Mr St John that certification has no bearing whatsoever on the recoverability of his fees as against his client (the wife) or his instructing solicitor. I made clear in the running, and reiterate, that my comments have no bearing on and should not be construed to be in any way critical of senior counsel for the wife or his performance in the case.
The significance of certification for senior counsel is that, absent any order which provides otherwise, the component of any costs awarded to the wife which is attributable to counsel’s fees will be payable by the husband at the rate for senior counsel rather than for junior counsel. For example, the Rules provide that the daily charge for counsel to appear at a hearing or trial is $824.25 to $6,340.92 for senior counsel and $785.92 to $1,816.68 for junior counsel. Accordingly, if an award of costs is made in favour of the wife, the husband will pay costs for the wife’s counsel at a per diem rate which is much higher than he contracted to pay for his own representation. With this in mind, and troubled as I am by the futility of the financial aspects of this proceeding, I will consider whether or not it is appropriate to certify for senior counsel.
Mr St John argued that the nature of the proceedings and what was at issue in the proceedings, both in terms of property and children’s matters, meant that it was appropriate for senior counsel to be briefed and also for the costs of senior counsel, in line with the scale of costs contained in Sch 3 of the Rules, to be ordered.
As discussed above, it was not until 21 May 2014 that the husband accepted the NN valuers valuation of the wife’s business. Up until that time, he maintained that he would be relying on Mr HH’s valuation. As such, at the commencement of the trial, the husband contended that the business was worth $580,000 and the wife contended that it was worth $277,000 (relying upon the updated valuation by Mr GG). Accordingly, the difference between the valuations amounted to $303,000.
The husband also alleged, when the trial began, the existence of jewellery and household chattels to the value of $250,000.[18] The wife disputed this and the claims in this respect were ultimately abandoned.
[18] Husband’s outline of case document in relation to property matters; trial exhibit “C3”.
In relation to the financial side of the litigation, Mr St John submitted that, in light of the size of the asset pool, the differences in the assets contended by the parties constituted a “profound disparity” making it appropriate to have senior counsel address the matter. Mr St John argued that if the husband’s concessions about these assets had occurred sooner, the wife would have been in a better position to consider briefing less senior counsel; nonetheless, at the beginning of the trial this disparity was live and we cannot now, with the wisdom of hindsight, assess decisions that were made in that context. I raised with Mr St John the fact that this issue was not entirely being raised in hindsight — at the mention that took place on 11 March 2014, there was a discussion of the appropriateness or otherwise of briefing senior counsel and comment was made about the desirability of briefing Mr Strum, junior counsel with considerable experience. Ms Rivers, who appeared for the wife at that mention, expressed that Mr Strum or similar junior counsel was the wife’s preference, “certainly from an economic perspective”. Regardless, at the costs hearing Mr St John stated that Mr Strum had not been available and argued that even if senior junior counsel had been available, this would not make it inappropriate for senior counsel to be involved in the matter.
With regard to the children’s matters, Mr St John submitted that there had been a plethora of issues involved and in particular the husband had been seeking a substantial increase in time with the children. Mr Robinson disputed this, submitting that an increase from four to six nights per fortnight does not constitute a substantial increase in time.
Mr St John referred to Lambert and Jackson and Another [2011] FamCA 275 (“Lambert”), arguing that the factors mentioned therein applied equally to this case:
[143] This is a case where the facts in dispute were contentious. It was reasonable for those representing the wife to conclude that experienced counsel who had requisite skills in cross examination and forensic financial inquiry, were needed to ensure success. …
[144] I am comfortably satisfied that there were features in this case relating to the volume of material to be handled, the nature and extent of the cross examination required and the complexities of the issues of fact, the involvement of serious imputations of personal reputation and integrity that would have made it appropriate in this case for two counsel to be engaged.
[146] There is no hindsight involved in making this assessment. I accept that coming into the trial that the wife believed that she was not being given a full and honest picture of the husband’s involvement in his business activities. I do not accept the assertion made by senior counsel for the second respondent that the issue of inadequate disclosure only arose as the case closed. I am comfortably satisfied that this is a case in which the costs of senior counsel may fairly be imposed upon the opposite party because of the special difficulties which arose as a result of the husband’s non disclosure. …
Mr St John referred to Moreton and Moreton (Costs) [2009] FamCA 51 (“Moreton”), an case in which senior counsel appeared at all times without a junior, and submitted Murphy J’s remarks are equally applicable to this case:
[81] The reasonableness or otherwise of engaging senior counsel ought, in my view, be determined by reference to those issues apparent on the face of the material or otherwise evident, at the time when counsel was engaged for the hearing.
[82] Prior to the resolution of significant aspects of the property pool and the issue relating to [Mr A], it seems to me that issues of reasonable complexity were involved in this case.
Finally, Mr St John referred to Stoian and Fiening (Costs) [2014] FamCA 944 (“Stoian”), wherein Kent J made orders as to the costs from a three day trial to finally determine the property interests of the parties to a marriage. His Honour determined that the net pool of assets and financial resources at issue in the case, including superannuation interests, totalled $1,119,755. The husband in the case had behaved fraudulently and dishonestly in respect of the disposition of a jointly owned asset. The wife sought, and was awarded, costs of and incidental to litigating this issue on an indemnity basis. The wife also sought the remainder of her costs on an indemnity basis, arguing that the husband’s rejection of offers made by her and his conduct in relation to the proceedings (which included significant issues as to his credit; repeated failure to comply with court orders and directions; and failure to provide full and frank disclosure) justified the making of such an order. Mr St John quoted Kent J’s reasons as follows:
[74] It is important to note that whilst the wife retained senior counsel she did not retain junior counsel in addition. That is, the wife seeks certification for one counsel, albeit senior counsel, and not for both senior and junior counsel.
[75] In my judgment, with respect to the engagement of senior counsel, it is not the appropriate test of reasonableness under r 19.50 to view the case in retrospect and, if it can be said that an experienced junior counsel could have adequately managed the party’s representation, this renders the conclusion that the engagement of senior counsel was unreasonable. There are, it seems to me, a number of factors to be considered.
[76] First, senior counsel was engaged to “attend” a final property trial … The point to be made is that the nature of the hearing, and thus the significance of the attendance, is an important consideration. At issue here were final property orders sought at a trial.
[77] Second, and related to the first, on the case mounted by the husband as to the “pool” of assets for which he contended … The wife had a lot at stake, given the husband’s case.
[78] Third, whilst final submissions to this effect were not ultimately pursued at trial; it was a theme of the husband’s affidavit evidence and oral evidence at trial that in relation to one of the central issues in the case, the substantial loss of capital, responsibility for that could or ought be attributed to conduct of the wife … That aspect aside, the fact that there was a substantial loss of capital from the outset gave the case some greater than usual legal and factual complexity in assessing contribution-based entitlements …
[80] Fifth were the conduct issues, particularly the gravity of the husband’s conduct with respect to the boat issue and the shadow that cast over other disputed disclosure issues …
[81] In my judgment the nature of the attendance, a final trial of property proceedings; the nature of the issues involved as outlined above and more fully in the trial reasons; and the potential consequences for the wife having regard to the case agitated against her by the husband; combine in supporting the conclusion that it was reasonable, within the meaning of r 19.50 of the Rules, for the wife to engage senior counsel …
In summarising his argument pursuant to the above authorities, Mr St John sought to emphasise three points. First, that he appeared as senior counsel in this case without the assistance of junior counsel. Second, that the retention of senior counsel did not extend the case or in any other way affect the procedures adopted by the Court. Third, that in his submission the complexity of the matters, particularly the husband’s case at the commencement of trial in relation to the financial aspect of the proceedings but also in relation to the children’s matters, meant that the wife was justified in retaining senior counsel to represent her interests.
Mr Robinson argued that the disparity between the two valuations the parties were relying upon at the commencement of proceedings did not constitute complexity but was, rather, a matter of the multiplier to be applied — a matter, he submitted, to which the experts could give evidence. With respect, I think that Mr Robinson is undervaluing the significance of the multiplier. With regard to the jewellery and chattels initially claimed by the husband, Mr Robinson pointed out that there was no evidence of jewellery and no evidence as to the value of any chattels. He also submitted that his client had been willing to compromise on the chattels and stressed his submission that none of this was so complex as to require senior counsel.
Mr Robinson argued that while having senior counsel might enhance a case by pursuing arguments the wife clearly wanted pursued — namely those in relation to the husband’s earning capacity, his involvement in the projects enterprise at N Pty Ltd and so on — the wife was not ultimately successful in these various arguments. With respect, unsuccessful arguments can be pursued by senior and junior counsel.
Mr Robinson cited various cases in support of his argument that senior counsel was not necessary in this case. He began quoting [74] of Stoian, set out above. Mr Robinson also referred to Stone and Stone (No 2) [2013] FamCA 479, wherein Fowler J discussed why the matter was appropriate for senior counsel. In that case, the property pool was significantly larger than that at issue in these proceedings. Moreton was cited by Mr Robinson for the same reason; that case involved a property pool of around $7 million. Mr Robinson also cited Bergman and Bergman (No 2) [2008] FamCA 414, wherein both sides had engaged senior counsel which wasn’t the case here, and Lambert, wherein the complexity of the case and volume of material were discussed as being circumstances relevant to establishing the appropriateness of involving senior counsel in a matter. Mr Robinson argued that none of those issues was at play here. With regard to Mr St John’s quotation from Lambert in relation to matters of personal reputation and integrity, Mr Robinson submitted that that case involved clear allegations of impropriety against one of the parties’ practitioners and, as such, was very different from the present matter.
This was a case with a number of live issues but so are most cases in this Court. The nature of the case was changed entirely by reason of the transfer of the proceedings from the Federal Circuit Court. In particular, the parties went from reliance upon non-single expert witnesses for the valuation of the wife’s business to reliance upon a single expert witness. The wife’s success in obtaining an order that provided for a further family report to be prepared by a social scientist other than Ms I resulted in a family report which was significantly more supportive of the wife’s position as to parenting than was Ms I’s report. The wholesale replacement of all expert evidence in this case, which occurred following the transfer of the proceedings to this Court, was fundamental to the outcome of the proceedings. However, these changes in expert evidence were implemented by orders obtained on the first mention of this matter before me rather than in the running of the trial.
Mr St John submitted that the test in relation to certification for senior counsel is not whether other (junior) counsel could have performed the requisite duties but whether it was reasonable to retain senior counsel. I agree that is the case. Accordingly, the fact that I am satisfied that junior counsel could have presented the wife’s case adequately does not bear on the issue of certification.
I am not satisfied that it was unreasonable of the wife to retain senior counsel. It follows, therefore, that it was reasonable for senior counsel to be retained to appear and I will certify accordingly.
Should costs be ordered to be calculated at the rate applicable for junior counsel rather for senior counsel?
Notwithstanding that I have certified for the attendance of senior counsel for the wife, it is open to me to order that costs for counsel be calculable on the rate applicable to junior counsel.
Neither party made submissions in this respect. I did not seek that they do so. More importantly, though, I have considered what I regard to be the pertinent matters in the preceding section of these reasons in relation to certification for senior counsel as well as the costs order. Ultimately, the costs to be paid by the husband to the wife are costs attributable to a mention (albeit a notional amount) and costs thrown away by virtue of the husband’s failure to put on evidence in response and his failed disqualification application. I do not consider that the justice of the situation requires that those costs be payable at a lesser rate than that which is claimed by the wife.
Conclusion
I am satisfied that there are circumstances which justify departure from the general rule that each party should pay his or her own legal costs.
I have had regard to the purpose of an order for costs on a party/party basis being to partially indemnify once party to the proceedings for expenses properly incurred in proceedings. I have regard to the fact that any order for costs must be just and have outlined above the relevant factors that I have taken into account.
I find that it was reasonable for the wife to retain senior counsel in this proceeding.
I am satisfied that the wife should recover the nominal amount of $600 for the mention on 19 May 2014 occasioned by the husband belatedly (but sensibly) securing a conference between the single expert witness and his potential adversarial witness.
I am satisfied that the wife was put to unnecessary expense by virtue of the husband spending a day responding to her affidavit evidence in the witness box and that the husband ought to be responsible for the wife’s costs thrown away in that respect. For the avoidance of doubt, I am not ordering costs for the 25 minutes spent on the subsequent day.
I am satisfied that the wife incurred unnecessary expense by virtue of the husband’s unsuccessful recusal application and that the husband ought to be responsible for the wife’s costs thrown away in that respect.
I have given very careful consideration to the factors which bear upon each party’s application for costs for the balance of the trial. Essentially, that the husband pay the wife’s costs of the parenting component of the hearing in which she was wholly successful and the wife pay the husband’s costs of the financial proceedings in which the result was, in part, better than that which he had offered to accept. I am satisfied that it is just that no order for costs for the balance of the trial be made. I am not setting off one lot of costs against the other because I do not consider that the costs are evenly matched and the proper exercise of my discretion does not call for that degree of precision. It is simply that, in the exercise of my discretion to make such order as is just, I am comfortably satisfied that the justice of the situation requires that no order be made.
Accordingly, I will order that the husband pay the costs incurred by the wife which, unless fixed, are to be calculated on a party/party basis in accordance with Sch 3 to the Rules:-
a)the costs of the appearance on 19 May 2014 fixed in the sum of $600;
b)the costs of Day 3 on the disqualification application, being $6,168.21 for senior counsel and $673.50 for instructing solicitor; and
c)the costs of Day 4 on the disqualification application and the husband giving evidence in response to the wife’s affidavits being $6,168.21 for senior counsel and $1,066.37 for instructing solicitor.
The money held back by the wife’s practitioners on the contingency of an order being made against her can be released. The amount due under the costs order, to be paid by the husband to the wife, should be paid from the money held back by his solicitors and the balance then remaining be released.
Costs on each party’s application for costs
I did mention to both counsel, without requiring a response:-
a) that I hoped that due consideration would be given to whether it was cost effective to prosecute an application for costs; and
b) whether, having regard to the fact that the liquid asset, being the invested funds, has been lost to the parties because each party has spent more than their share of the funds on legal fees in these proceedings, counsel might consider appearing gratis for his client on any costs application.
I can only assume that there may be a claim for costs in respect of this application for costs. Accordingly, I will allow submissions in writing in relation to costs arising from this decision.
I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett
Legal Associate:
Date: 24 March 2015
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