Elkin and Wearne
[2015] FCCA 1880
•6 March 2015 (oral reasons) 22 July 2015 (written reasons: never requested by the parties)
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ELKIN & WEARNE | [2015] FCCA 1880 |
| Catchwords: FAMILY LAW – Considerations regarding costs in the light of filing of lengthy documents by Wife that were not able to be dealt with satisfactorily by the Husband – Husband sought order for indemnity costs – consideration of principle for such an order in the light of the Federal Court of Australia decision in Colgate-Palmolive Co v Cussons Pty Ltd – strike out application of Wife’s trial affidavit which comprised four folders (which included 101 unpaginated exhibits) in circumstances where she had previously advised the Court in August 2014 of the readiness of her trial affidavit – considerations of prejudice and trial management in the striking out of trial affidavit. |
| Legislation: Family Law Act 1975, ss.117(1), 117(2A) |
| AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd (2008) 74 IPR 52 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 In the Marriage of Ensabella (1980) 6 Fam LR 174 Kennon & Kennon (1997) FLC ¶92-757 Latoudis v Casey (1990) 170 CLR 534 La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 Penfold v Penfold (1980) 144 CLR 311 Sheehan & Sheehan (1983) FLC ¶91-352 Stephens v Stephens (2011) 44 Fam LR 117 |
| Applicant: | MR ELKIN |
| Respondent: | MS WEARNE |
| File Number: | AYC 11 of 2012 |
| Judgment of: | Judge Neville |
| Hearing date: | 4 March 2015 |
| Date of Last Submission: | 4 March 2015 |
| Delivered at: | Wagga Wagga |
| Delivered on: | 6 March 2015 (oral reasons) 22 July 2015 (written reasons: never requested by the parties) |
REPRESENTATION
| Counsel for the Applicant: | Mr J Levy |
| Solicitors for the Applicant: | Commins Hendriks, Wagga Wagga |
| Counsel for the Respondent: | Mr M Hogg |
| Solicitors for the Respondent: | Friedlieb Byrne, Wagga Wagga |
ORDERS
The Wife pay the Husband’s costs fixed in the sum of $12,000.00.
IT IS NOTED that publication of this judgment under the pseudonym Elkin & Wearne is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT AT WAGGA WAGGA |
AYC 11 of 2012
| MR ELKIN |
Applicant
And
| MS WEARNE |
Respondent
REASONS FOR JUDGMENT
The following reasons in relation to costs were delivered in an oral judgment delivered on 6th March 2015 in Wagga Wagga.
In the light of the reasons given and orders made on 4th March regarding the conduct of the trial (in particular the striking out of the Wife’s trial affidavit), the Husband sought an order for indemnity costs fixed in the sum of $22,880.00. For the reasons given on 6th March, the Court made an order that the Wife pay the Husband’s costs fixed in the sum of $12,000.00.[1] What follows are the reasons of 6th March revised from the transcript.
[1] There will issue an order, amended under the slip rule, in relation to the orders that issued on 4th March which included the order of 6th March in relation to costs.
At the outset, I should note that at no stage since the delivery of the oral judgment on 6th March has there been a request for written reasons – from either party. I should also note that, likewise, there has been no request for written reasons in relation to the multiple grounds upon which the Wife’s voluminous and unpaginated (annexures to the) trial affidavit was struck out on 4th March. Those reasons included:
(a)considerations as to the ability (or inability) properly to cross-examine effectively (see La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299)
(b)unfair prejudice that may arise from failure of a party to disclose the evidence prior to the hearing or to adduce it prior to re-examination of a witness “so as to enable it to be properly considered and responded to by the opponent.” (Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd (2008) 74 IPR 52)
(c)the volume of the Wife’s material, considerations regarding (i) proper use of public resources (AON Risk Services Australia Limited v Australian national University (2009) 239 CLR 175), and (ii) undue waste of time (Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397) were also factors considered by the Court in ultimately determining to strike out the Wife’s trial affidavit, and subsequently making orders for the filing of a fresh affidavit by the Wife and an affidavit in reply by the Husband.
The current reasons in relation to costs are provided now [only] because the Wife has filed an Application in an Appeal by which she seeks to appeal the costs order out of time. It is not to the point that the costs of the appeal, with new Canberra-based lawyers who are well known for their less than timid approach to advocacy, is more than likely to exceed the costs awarded on 6th March. Indeed, the costs to date since the Wife’s most recent solicitors have come on to the record may well have already well exceeded the costs ordered on 6th March, having particular regard to the very large number of transcripts ordered by the Wife, including those that relate to directions hearings and other mentions before Judge Harman and before me.
As I have stated, at no time has the Wife (or anyone else) requested written reasons. Yet, in the Wife’s affidavit, filed 26th June 2015, the Wife deposed (at para.36, emphasis added) that the filing of her Notice of Appeal against the costs order actually made on 6th March “had been hindered because I have been unable to obtain the transcript for the hearing on 6 March 2015. In addition to that, no written reasons have been issued by his Honour in support of the orders made on that date.” This statement, in my view, is unconscionable and mis-leading. It should not have been made. The Wife, nor anyone on her behalf, has ever asked for written reasons. It is, of course, a matter for the Full Court to determine what import such mis-leading statements have on the Application before that Court.
Principles Regarding Costs Orders
The statutory and jurisprudential considerations in relation to the making (or not making) orders for costs are well known. Although well known, it is sufficient to note the following from the Full Court decision in Stephens v Stephens.[2] Beginning at [62], the Full Court said (emphasis added):
[2] Stephens v Stephens (2011) 44 Fam LR 117.
[62] Section 117(1) of the Act provides: “[s]ubject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.”
[63] Section 117(2) of the Act provides that if, in proceedings under the Act, the court is of opinion that there are circumstances that justify it in doing so, it may, subject to sub-ss (2A), (4) and (5), and the applicable rules, make such order as to costs, whether by way of interlocutory order or otherwise, as it considers just.
[64] Section 117(2A) of the Act provides that in considering what order (if any) should be made under s 117(2), the court shall have regard to the matters set out in paragraphs (a) to (g). In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 the Full Court (Kay, Warnick and Boland JJ), referring to s 117(2A), said at 130 [41] :
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 s 117, 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.
[65] As to the relationship between s 117(1) and s 117(2) of the Act in Penfold v Penfold (1980) 144 CLR 311, in joint reasons, Stephen, Mason, Aickin and Wilson JJ said at 315:
It is an accurate description of s. 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in “a clear case”. (emphasis added)
[66] As to the nature of the hearing of an application pursuant to s 117 of the Act in Penfold their Honours said at 315-16:
Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent [(1970) 92 W.N. (NSW) 503, at p. 505]). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
[67] We also observe that in Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) of the Act referred to costs in the conventional sense and thus to the payment by one party to litigation of money by way of a partial indemnity for professional legal fees and expenses actually incurred by another party in the course of the litigation: see Hayne J at 219. An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages: Latoudis v Casey (1990) 170 CLR 534 per Mason CJ at 543 and McHugh J at 567; Ruddock and Ors v Vadarlis and Ors (2001) 188 ALR 143 per Full Court of the Federal Court at [12] and Brott and Joachim (2006) FLC 93-259 per Full Court (Holden, Warnick and Boland JJ) at 80,403-404.
In the same case, the Full Court commented summarily on the award of indemnity costs, relevantly at [73]:
An order for costs may be made on an indemnity basis, subject to a judicial determination capable of being made that there ought to be a departure from the usual basis that costs be payable on the party and party basis. For a discussion of the jurisdiction to order indemnity costs and its exercise see Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 per Sheppard J at 256-257 and NMFM Property Pty Ltd and Others v Citibank Ltd (No 2) (Court’s “NMFM” Judgment No 11) (2001) 109 FCR 77 per Lindgren J at [53] to [90].
The decision of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (noted by the Full Court) is a regularly cited authority for relevant principle regarding the awarding of indemnity costs.[3] In that judgment, his Honour outlined the following principles, at pp.232 – 234, which I set out in full (emphasis added):
[3] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:-
1. The problem arises in adversary litigation, i.e. litigation
as between parties at arm's length. Different considerations
apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg. a government agency or statutory authority.
2. The ordinary rule is that, where the Court orders the costs
of one party to litigation to be paid by another party, the
order is for payment of those costs on the party and party
basis. In this Court the provisions of Order 62, rules 12 and
19, and the Second Schedule to the Rules will apply to the
taxation. In many cases the result will be that the amount
recovered by the successful party under the Order will fall
short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v. British Transport Commission and Handley JA in Cachia v. Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4. In consequence of the settled practice which exists, the
Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata.
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) 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); 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 721at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal)and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). 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.6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
In the light of these principles, I note the following.
Consideration & Disposition
The Court has before it what might be described, and has been described, as a global objection to the Wife’s voluminous affidavit. Among other flaws, it has 567 paragraphs, while its 101 exhibits/annexures, contained in three binders, are unpaginated. To navigate through such volumes of material without pagination poses very difficult logistical problems, among others. The time-wasting that would likely ensue in the course of the trial is likely to be significant. In consequence of the range of problems articulated by Counsel for the Husband, Mr Levy, he presses an application to strike out the whole of the Wife’s trial affidavit.
The Husband relies upon a decision of Hogan J in Sheehan & Sheehan where his Honour refused prolix affidavits to be relied upon. He did so, among other reasons, because of the extreme cost that would be incurred to respond to them.[4] In my view, in large measure, the comments there made by his Honour apply to a very significant degree to the prolix affidavit that has been filed by the Wife.
[4] Sheehan & Sheehan (1983) FLC ¶91-352 at p.78,361.
I am conscious that the matter has been on foot for a significant period of time, although part of that time has related to parenting issues. And I also recall quite clearly on the few occasions that it has been before me in recent times for directions, that there has invariably been a contest over the provision of information.
I am also very conscious of the risk of prejudice to one or either party, including the possible risk of prejudice to the Wife if the application is successful in striking out the affidavit in its entirety, but also the risk of prejudice to the Husband in having to face a very wide range of accusations, comments and documentation. The Wife’s Counsel, Mr Hogg, suggested that it was [simply] a case of ‘someone telling a rather long and complex story.’ However, as Mr Levy rightly submitted, this is a Court of law and rules of evidence apply, which are designed to assist the parties and the Court. In my view, it is a very finely balanced matter as to where the greater prejudice lies, and the question therefore is: how, if in any way, the prejudice against one or either party might be remedied?
I am immediately attracted to the prospect of striking out the affidavit. That attraction is not for any personal concern about how much time would be consumed in going through each of the individual objections to parts of the affidavit (as suggested by Counsel for the Wife). My primary concern, however, is that if I was to strike out the affidavit in its entirety, it would risk prejudicing the Wife’s claim, or claims.
Initially, I resisted the application for the affidavit to be struck out in its entirety.
I directed that, after the resumption of the matter after lunch, I wanted to be advised, specifically from the Wife’s side, as to which paragraphs from the affidavit were not going to be relied upon. I stressed again that, as a general observation, much of the material in the Wife’s trial affidavit I found either confusing, irrelevant and, to use something of the vernacular that Mr Levy did (echoing the comments of Hogan J in Sheehan), it may well be an exercise of throwing a wide range of material with a view to seeing what actually stuck. To do that in an affidavit in the form that it is, in my view, risks prejudicing the Husband in the conduct of the trial.
In the result, for reasons given at the time (on 4th March) and summarised in part earlier in these reasons, I acceded to the Husband’s application to strike out in its entirety the Wife’s trial affidavit. There followed submissions in relation to costs.
Costs Submissions
For the sake of convenience and ease of reference, I set out in detail, the submissions of the Husband in relation to costs from 4th March 2015. In delivering oral reasons on 6th March, I indicated that, in large part, I accepted the submissions made by the Husband, except in relation to indemnity costs as sought by him. The submissions were relevantly as follows:[5]
[5] Transcript (4th March 2015) pp.44 – 46.
MR LEVY: In relation to costs, your Honour, I think I’m obliged to start with information in relation to the sum of the costs that are sought and the basis. So can I hand your Honour, and I’ve shown this to my friend a schedule of what I say are the husband’s costs thrown away as a result of the adjournment.
HIS HONOUR: Yes.
MR LEVY: Can I say immediately that my application is for an order for indemnity costs, and I intend to come back in my submissions as to why your Honour would make an order for indemnity costs in that amount. But could I start, your Honour, just on the question of an order for costs generally. Section 117(2)(a), I would say, your Honour, in various parts is applicable to the situation we find ourselves in this afternoon. Firstly, I would say that the court would have regard to the financial circumstances of the parties. The husband earns about a third per week of what the wife earns. The wife is in control of a company which last year had a gross profit, I think, your Honour, I wrote down there of 440-odd thousand dollars, and which in – sorry, not last year, but the year before, and which is currently paying – I withdraw that. In which in 2013 paid director salaries of $119,000, the wife being one of those directors.
But more than that, the evidence would establish that the benefits that flow from that company far exceed the salary paid. The benefits that have flowed would appear to be the supply of funds at various times for the various purposes of other companies, albeit at other times the flow has been the other way the wife would say. I would submit that one can’t reconcile the wife’s evidence as to her income as contained in her financial statement which I think is a salary of $1150 a week or thereabouts with – in circumstances where both parties give evidence that my client’s salary throughout has been at about $600 a week with the generation of the assets that are now available for distribution as a result of these proceedings. There’s something that’s sorely missing in that whole view that we’ve got of the case at the moment.
The only explanation, in my respectful submission, given that the parties at ad idem in relation to my client’s income throughout the marriage, that is, he simply took what he was given by way of salary as arranged by the wife through [R]. The only other explanation is that the wife has had access to funds which far exceed what she says is the salary paid to her by [B]. Where that ultimately ends up, of course, we don’t entirely know because it will be subject to the cross-examination of the wife, and probably the provision of the outstanding financial documents that we’ve just been discussing, but it’s open to me to submit, I would say, that there is a great deal of doubt as the veracity of the wife’s protestations as to only earning about $1100 a week by way of wage or salary.
So I say that in relation to 117(2)(a) that the reality is that the wife’s financial circumstances are far greater and far better than my client’s. Secondly, and, perhaps, even more importantly under subsection (c) your Honour can take into account the conduct of the parties. That section, your Honour, right at the end specifically refers to the production of documents and similar matters. It refers to pleadings as being matters that are referrable to the conduct of the parties. That’s squarely on foot with the objection that I took to the affidavit and the success of that application today. So I would say that your Honour is entitled to depart from the general rule under section 117(1) both because of the difference in the financial circumstances of the parties, and because of the conduct of the wife in filing a prolix affidavit which has now been struck out.
Your Honour, probably with less force, but still with some weight, I would say subparagraph (d) also applies. Perhaps, not specifically because of an order of the court, although there was an order made which contemplated the filing of the affidavit earlier than it was eventually filed, but, your Honour, because of what was said to the court – and there doesn’t seem to have been any issue taken with what I put on the record – what was said to the court in August last year about when that affidavit would be filed. So, as I said earlier, if the affidavit had been filed, as was originally ordered by the court in August, or even if it had been September last year, we wouldn’t have been here today having the argument we had to have about that affidavit, and it’s the failure to comply with that order which, in my respectful submission, leads in part to the position we were in today.
I say subparagraph (e) also applies because the wife opposed the application I made today and was wholly unsuccessful, and your Honour could take that into account. So, in my respectful submission, there are a number of powerful reasons under section 117(2)(a) as to why your Honour would make an order for costs in favour of the husband today. I repeat the submission that I made earlier, your Honour, that if an order for costs is not made today there is going to continue to be a fundamental unfairness to my client because of the costs that have been thrown away. So I might put that under the last subsection of 117(2)(a) as being relevant – any other matter being relevant. So there are solid grounds for the making of an order. I would submit that’s step 1.
If that’s right then step 2 is a consideration of what sort of costs order should be made, and I couldn’t argue with the proposition that your Honour has a number of options available to you ranging from reserving costs at an undetermined amount through to making an order for indemnity costs in the amount that I seek. When your Honour comes to consider the question of indemnity costs I understand that Colgate-Palmolive v Cousins remains – even though it’s of some antiquity now – remains the authority that most accurately sets out the principles applicable.
HIS HONOUR: Everyone still refers to it.
MR LEVY: Cohand and Munday [sic], I think, are two other cases that were decided by the Family Court that were relevant, and I know that Coleman J right at the end of his judicial career made a decision about indemnity costs, but for the life of me I can’t remember the name of it, and I apologise for that. Colgate-Palmolive v Cousins seeks to set out a series of circumstances in which the court said an order for indemnity costs might be made. One of them is relevant, I would say, which is the making of allegations which ought never to have been made, or the undue promulgation of a case by groundless contentions, and I put, what I say, as a serious Kennon argument littered throughout the struck out affidavit as being in that category, but if your Honour is not with me on that what Colgate-Palmolive v Cousins also stands for is that the circumstances in which an order will consider – in which a court will considering making an order for indemnity costs is not closed.
Your Honour can take into account the peculiar facts of the particular case that is before you and decide whether in your Honour’s discretion that should be, or that constitutes the circumstances in which your Honour should make an order for indemnity costs, and I say that when one considers all of the matters I’ve already referred to, but particularly the conduct of the wife in saying that she will be serving an affidavit in August last year, and then serving it late basically on the eve of the trial, and then the document that is served is 85 pages and 580-something paragraphs long, and is accompanied by three large ring folders of supporting documents some of which have never been supplied before, that, in itself, would constitute the grounds for your Honour making an order for indemnity costs because it is behaviour on the part of a litigant which, in my respectful submission, is unconscionable if for the reason that your Honour has already articulated placed my client in a position of fundamental unfairness. To not make an order for indemnity costs is not to fully remedy the unfairness that was caused, because he has been occasioned the costs that are set out in the document that I’ve tendered to your Honour.
And so if your Honour is to undo the unfairness, in my respectful submission, it requires not just the striking out of the affidavit but the order that would compensate the husband for the costs that he has had to go to related to the affidavit and the consequential throwing away of the remaining two days of the hearing time. So for those reasons I would ask your Honour to make an order for costs and to make it on an indemnity basis in the amount sought. Is there any other matter your Honour would like me to address?
Also for completeness (and convenience), I set out the Wife’s submissions in relation to costs from 4th March 2015 (emphasis added):[6]
[6] T 47 – 50.
MR HOGG: Thank you, your Honour. Your Honour, it would be quite wrong, in my submission, for there to be a negative inference drawn for someone who has actually complied with the orders of the court. There was, and the court is aware, a genuine misunderstanding that no one really understood what was happening when two sets of orders had been issued by two separate courts. When that issue was clarified the evidence was filed. So to suggest that my friend’s client has been caught unawares is quite wrong. He was given the affidavit in accordance with the timetable ordered by you in this court, as was amended from the previous orders of Judge Harman. ..... that issue.
HIS HONOUR: ..... Don’t questions of proportion and other things come into play at all?
MR HOGG: Perhaps, your Honour, that might be the case if my client wasn’t unrepresented at the time. From her perspective she simply wasn’t aware. She gets two sets of orders in a relatively short period of time and tries to engage in conversations with the other side to work out what they mean. There was an order that she has complied with. In my submission, that’s where it stops.
Your Honour, my primary submission would be that this issue is an issue that is best dealt with at the conclusion or part of the trial which your Honour ..... My friend raises a number of issues which quite frankly are unattested, and to draw an inference that they can be relied upon without a full ventilation of that evidence is .....
HIS HONOUR: The Kennon issue obviously is a matter, in particular, that has been raised, it’s challenged, but it’s untested.
MR HOGG: Indeed. Indeed. Also ..... in relation to my client’s financial position, she said she draws X amount of income. There is a whole line of cross-examination as to what other benefits she may ..... from the company. To actually – to take it any further than her receiving on the face of it one half of the director’s salaries that are on the face of the document and presented to the court at this stage would be an unsafe proposition, in my submission.
HIS HONOUR: Well, I understand that but the court now has before it by way of a tender document, to which there was no objection, on its face, financial records for [B] Australia Pty Limited, that clearly state a not insignificant amount of money paid to directors ‑ ‑ ‑
MR HOGG: .....
HIS HONOUR: ‑ ‑ ‑ by way of salary, so ‑ ‑ ‑
MR HOGG: So ..... ‑ ‑ ‑
HIS HONOUR: Sorry, fees. So ‑ ‑ ‑
MR HOGG: Sorry, your Honour. Yes. Your Honour, certainly on the face of financial records which are currently before the court, clearly there are two directors and clearly there is 119-odd thousand dollars worth of drawings. Save for that, I’m not sure as to exactly what that means, whether one director gets more, or whether one director gets less, it’s unclear. That goes back to my original submission that it’s difficult to deal with these matters when that evidence will and must remain unclear until there is an opportunity to deal with it.
Your Honour, my client’s evidence is – and this is available in her affidavit – she’s in receipt of approximately $1200 a week. Her evidence also is that she has been meeting the costs save for approximately $29 a week in child support that she receives from the husband. And also, your Honour will have read in the materials that she asserts that she has been meeting the shortfall – or the shortfall is being met of the various liabilities, the matured matrimonial debts, and now that this matter is going to continue to push out until September, arguably is going to have to continue to meet those from some way, shape, or form.
So in my submission, until such times as your Honour is able to identify exactly how the finances have ebbed and flowed between the various entities, you’re left with the proposition that she is in effect in receipt of approximately $1200 a week. I can’t take that argument any higher.
HIS HONOUR: Certainly that it raises some tantalising questions that I can’t wait to explore in September as to where has the money gone.
MR HOGG: Well, your Honour, she is very clear in her affidavit where the money has gone. Needless to say, ..... benefit that she receives in terms of salary in wages is demonstrated in those directors’ drawings. Your Honour, the other issue is that there is no doubt that application was made. There is no doubt that that application has been successful and I can’t shy away from that.
But your Honour, your Honour will remember there were other factors mitigating in your Honour’s decision. Certainly, my client’s position was – and was prepared to continue to argue – the merits of the other remaining materials. We will not know as to what success or unsuccess that may have resulted in, but needless to say there has been a general consensus made by the court, and an appropriate case management strategy adopted, to ensure this matter can finalise itself at a future date. That’s not to back away from the fact that there were some issues with the affidavit, but the weight ‑ ‑ ‑
HIS HONOUR: Always renowned for your discretion, Mr Hogg.
MR HOGG: Your Honour, perhaps it goes to your Honour’s earlier comment about the appropriate apportionment is that; yes, there was some conduct, yes, but for some of that material the costs issue may not have arisen, and nevertheless it has. The other issue is, your Honour, your Honour will remember it has been raised a number of time that my client was – and her position still is – that she was unrepresented at the time. She has put her best foot forward.
HIS HONOUR: Could I say ‑ ‑ ‑
MR HOGG: Yes.
HIS HONOUR: And it’s no criticism of anyone.
MR HOGG: Yes.
HIS HONOUR: My recollection is that, respectfully, your client held her own.
MR HOGG: In what sense, your Honour?
HIS HONOUR: In her own advocacy.
MR HOGG: Yes. Yes. Yes, indeed.
HIS HONOUR: It was fulsome, it was not shy – which is not a backhanded way, but as we know that self-represented litigants are sometimes, you know, cowed by the court or otherwise just in coming to court – maybe not cowed by the court, but still. But she was very fulsome. Could I say – again without criticism – almost voluble in her exchanges.
MR HOGG: I accept what your Honour says in relation to that. The only distinction that I would make is there is a difference between able to hold one’s own in front of the court and to understand technical aspects ‑ ‑ ‑
HIS HONOUR: No. No, I understand that. Yes, indeed.
MR HOGG: ‑ ‑ ‑ that go with preparation .....
HIS HONOUR: I understand. I understand.
MR HOGG: Her position and the position I’ve advanced to the court this morning was, she tried to get the story out as best she could. If there are consequences to that then so be it. What I ask the court to do is to have consideration to the circumstances of which she found herself in, and also the circumstances that she still has to deal with up until this matter can be determined by the court.
Again, your Honour, my application is that it should go off. My friend presses it on. If your Honour is of a mind to make a decision, then, in my submission, your Honour has to have due consideration to the difficulties with actually making a decision now. And the best evidence is her untested evidence, which is $1200 a week, limited child support. Is there anything else I can address your Honour on?
HIS HONOUR: No. Thank you, Mr Hogg. Anything further, Mr Levy?
MR LEVY: Just two things, your Honour. Can I tender – partly in answer to a submission made by my friend – a letter written by the wife to my instructing solicitors dated 22 December 2014, and I could just take your Honour to the last page, where it’s clear that at December 2014 she was in receipt legal advice, and it’s specifically referred to in the correspondence. There’s one other thing I will say ..... my friend’s ..... Thank you, your Honour.
HIS HONOUR: So the letter from the wife to the husband’s solicitors dated 22 December 2014 will be marked exhibit C.
EXHIBIT #C LETTER FROM WIFE TO HUSBAND’S SOLICITORS DATED 22/12/2014
HIS HONOUR: Yes, Mr Levy.
MR LEVY: Coming back to conduct, your Honour, both in terms of its relevance to section 117(2A) and its relevance to the question of indemnity costs, my friend has still not cavilled with the proposition that in August last year the wife told this court that her affidavit was all but ready. The only way your Honour can then interpret what has just been submitted by my friend to the court is that she then deliberately delayed the filing of that affidavit until February this year, relying on a technicality of a conflicting order; but worse, in circumstances where she was already in receipt of my client’s trial affidavit.
That conduct in itself in my respectful submission was designed – it’s open to you to find – to catch by client by surprise, to not forewarn him about what her case was, and to file the affidavit at the last possible moment, when we all know that it could have been filed six months ago. That conduct in itself would justify an order for costs in my respectful submission.
HIS HONOUR: Yes. Thank you, Mr Levy. Not just because of the hour, but I would like to look at – let me rephrase that. I think I should look at some further of the documents and particularly the applications and responses, etcetera, plus the orders that were made, before the court makes a determination in relation to the costs application. Again, subject to any other notification from the court, my expectation is that I will deliver brief reasons and make orders on Friday at 9.30. There would be no requirement for the parties to attend unless they wish to, and if counsel have to be or wish to be somewhere else, then ..... ‑ ‑ ‑
Three things should be emphasised from the submissions and exchanges set out in these extracts from the transcript of 4th March 2015:
(a)On 4th March, the Court confirmed that brief reasons would be provided on the following Friday (6th March). Thus all parties were aware of the Court’s intention to pronounce orders and to provide brief reasons, which occurred on that date. Notwithstanding this notice to all, the Wife’s current solicitors, who were not on the record at the time, and who were not present on either the 4th or the 6th of March, represent and plead to the Full Court that no reasons were provided in relation to the costs order. Further, in correspondence with the Appeals Registry, the same solicitors represent or insinuate that no written reasons were provided by the Court, but do not disclose that written reasons were never requested;
(b)Although raised earlier in the context of the strike out application, Counsel for the Husband confirmed that a Kennon-type argument was being run by the Wife.[7] This argument was raised for the first time in the voluminous material filed by the Wife;
(c)Exhibit A in the proceedings are copies of financial statements for the corporate entity known as [R] Pty Ltd. This company is one among a number that are effectively controlled by the Wife. Among those records it is disclosed that directors salaries of $119,600 were paid in 2013 (and $69,272.41 in salaries in 2012). It is not immediately apparent, as Counsel for the Husband submitted, that these salaries figure in the Wife’s Financial Statement.
[7] Kennon & Kennon (1997) FLC ¶92-757. See the earlier references to the Kennon argument being raised for the first time in the Wife’s large trial material: Transcript (4th March 2015) pp.7, 9, 16, 23, 28, 30 & 31.
Further, I note that in the Wife’s Financial Statement, filed 12th February 2015, she swore that her average weekly income was $1727.00, her weekly personal expenditure was $1905.73, the total value of property owned by her was $1,213,972.00 (with superannuation of $73,923.00), and liabilities of $513,250.00. In my view, her net wealth is not insubstantial. She has retained experienced solicitors for the hearing, as well as Counsel.[8] It is also not disputed that the Wife retains control over the business entities that are the subject of the property litigation.[9] Indeed, in her trial affidavit, at paras.563 – 566, the Wife set out what she says is a summary of the asset pool and arrives at a net pool of $1,210,334.00, somewhat different to what she had deposed to in her Financial Statement. She then deposed that of this pool and the assets it comprised, the Husband “currently has possession or control of a net asset value of $193,039.00, or 16% of the net asset pool.” It must follow from this that the Wife controls the balance of the asset pool.
[8] For completeness, I note that whatever the Wife’s financial circumstances, it has not prevented her from retaining, firstly, family lawyers in Wagga Wagga (and Counsel) for the original trial, and secondly, further lawyers in Canberra, with some lawyers in Sydney who the Wife says did very little for her in between the Wagga Wagga and Canberra retainers; the latter have taken a very different litigious tack compared to the first lawyers, but which course has now, and will in the future, very likely increase the costs of the litigation substantially. Changes in litigious direction almost invariably result in increased costs – for everyone. The same is necessarily true for any and all additional applications. In short, any trip to any court results in increased costs for all, with a necessary reduction in the asset pool.
[9] See Transcript (4th March 2015) p.39.
Disposition
In my view, and in the light of the matters already noted in these reasons, the following matters warrant an order for costs in the Husband’s favour, but not on an indemnity basis.
In addition to what has already been observed, by way of general principle, according to the High Court in Penfold v Penfold (noted earlier), in an application for costs there is a need for a preliminary finding to justify such an order. In my view, that preliminary requirement is met by the Court’s evaluation of and determination to strike out the entirety of the Wife’s affidavit that was filed on 12th February 2015.
I accept the Husband’s submissions that in August 2014, the Wife advised the Court that her affidavit material was virtually complete, and the reasonable inference, if not stated expressly by her, was that it would be filed shortly.[10] Indeed, as the Husband submitted, had the Wife’s affidavit been filed in a timely way or in accordance with what she indicated in August 2014, recognising, of course, that at the time she was self-represented, the issues regarding its volume, detail and the range of objections that have flowed from it, could – indeed, most likely would – have been dealt with prior to the trial, and therefore the trial would have been able to go ahead.
[10] Further, as seen in the submissions from Counsel for the Husband set out below, according to Exhibit C (a letter from the Wife to the Husband’s solicitors dated 22nd December 2014), the Wife was then in receipt of legal advice at least in relation to matters of disclosure of documents relevant to the trial.
It follows that, but for the filing of such a large amount of material (the bulk of it unpaginated), none of the following would have been necessary: (a) dealing with a very large number of objections at the outset of the hearing, (b) those objections remaining unresolved, (c) the strike-out application being renewed by the Husband and, in turn, (d) the need to re-file the Wife’s affidavit, and, in turn, (e) the adjournment of the hearing.
In addition to what has been stated already, summarily I note that:
(a)s.117(2) constitutes an exception to the general rule in relation to costs set out in s.117(1); in order to make an order for costs outside of the general rule requires that there be circumstances that justify such a course;
(b)the High Court decision in Penfold (and other cases) confirms that there is a broad discretion in relation to costs, and that no specific findings are required to justify such an award. It is sufficient if there are justifying circumstances;
(c)costs have been awarded in circumstances where documents filed have been prolix and of unnecessary length, which has resulted in the other party having to deal with – at significant expense - such lengthy material.[11]
[11] See the comments of Fogarty J in In the Marriage of Ensabella (1980) 6 Fam LR 174.
Otherwise, having regard to the circumstances generally, which includes the Court issuing two slightly different trial directions (one by Judge Harman and the other by me) for which some allowance should be given, I generally should be taken to accept the submissions made on behalf of the Husband.
For these reasons, the Wife should pay the Husband costs in the sum of $12,000.00.
Postscript
Since delivering the abbreviated reasons in early March in Wagga Wagga, in late June the Court became aware of the Wife’s Application to the Full Court in relation to the 6th March costs order (incorrectly dated 4th March – but which will be remedied under the slip rule). Some comment should be made in the light of the conduct of the Wife and or her solicitors in recent times, with further, more detailed comment, in reasons provided in relation to the transfer application of the matter to the Family Court of Australia.
In a Draft Notice of Appeal, filed on 26th June 2015, the Wife’s most recent solicitors pleaded as one of a number of grounds of appeal that I “failed to give any reasons in support of Order 8” (the costs order). Leaving to one side that the Wife’s current solicitors (who filed the said Application) were not in attendance at the hearing in Wagga Wagga on 4th (or 6th ) March, curiously, on the same date (26th June) the same solicitors filed an affidavit in this Court, sworn by the Wife, in which she deposed (at paras.31 & 33, emphasis added) that (a) her solicitor appeared on 6th March “to take judgment with respect to the question of costs” and (b) her solicitor informed her that I “did not hand down a written decision but did deliver oral reasons.”
In my view, it is, primarily, a matter for the Full Court to determine whether it is [simply] a case of negligence on the Wife’s solicitors to have their client swear an affidavit which deposes to material that is contrary to what is in her Application before that Court (filed by the same solicitors), rather than, for example, an unexplained misleading of the Court.
Further, another ground of appeal asserts that costs were awarded on an indemnity basis. True it is that costs were sought by the Husband against the Wife on an indemnity basis, but as explained above, the principles articulated by Sheppard J in Colgate-Palmolive were not relevantly satisfied. Yet, solicitors who were not present at the delivery of the oral reasons nonetheless plead erroneously to the Full Court that costs were awarded on an indemnity basis. I should add that there is/was nothing in the original orders (wrongly dated 4th March) to suggest or to indicate that the costs awarded were anything other than on the ordinary basis, and not on an indemnity basis. But there was obviously no regard to the terms of the order.
As well, another ground of appeal asserted by the Wife’s solicitors is that there was no consideration of s.117 of the Family Law Act1975 in the Court’s determination that there be an order for costs. Again I note that the Wife’s current solicitors were not present when reasons were delivered in Wagga. Nor was the Wife present. She was present (as were her former solicitors) during the whole of the discussion on 4th March when Counsel for both parties (but primarily Counsel for the Husband) outlined, by reference to s.117 of the Act, why costs should be awarded. The reasons delivered on 6th March, and in these revised written reasons, plainly refer to and consider s.117 of the Act.
I am so concerned about the possibility (or likelihood) of the Full Court being mis-led by factually incorrect statements in the documents filed by the Wife in that Court, and which are contradicted by facts deposed by her in material filed in this Court, that in addition to these reasons (which are required by the Full Court in any event), I request the Registrar of this Court to provide to the Registrar of the Appeals Division a copy of the reasons in the transfer application.[12] So startling if not egregious are the factual differences between the two sets of documents filed in the two Courts by the same solicitors, and where they have permitted their client to depose to facts that are different to what is in the Application in an Appeal filed on her behalf, such conduct almost warrants being referred immediately to the Law Society. However, I leave such matters to the Full Court.
[12] See Elkin & Wearne (No.2) [2015] FCCA 1881.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Neville
Associate:
Date: 22 July 2015