Farina & Lofts (No. 3)
[2021] FamCA 328
•21 May 2021
FAMILY COURT OF AUSTRALIA
Farina & Lofts (No. 3) [2021] FamCA 328
File number(s): BRC 10102 of 2012 Judgment of: CAREW J Date of judgment: 21 May 2021 Catchwords: FAMILY LAW – COSTS – Between parties – Where dispute between the parties about which party is liable for a single expert’s fees in substantive proceedings – Where single expert joined to proceedings – Where the first respondent found to be liable for single expert fees as between parties to substantive proceedings – Where first respondent is ordered to contribute to costs of applicant in a fixed sum – Where circumstances are not exceptional such as to justify indemnity costs. Legislation: Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Collins & Collins (1985) FLC 91-603
Fitzgerald v Fish sub nom PBF v TRF (2005) 191 FLR 294
Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Ltd v Donald Robert Argus [2007] NSWSC 23
Kohan and Kohan (1993) FLC 92-340
L Associates & Conlon and Anor [2015] FamCA 659
Parke & the Estate of the Late A Parke (2016) FLC 93-748
Penfold v Penfold (1980) 144 CLR 311
Pilkvist & Coburn (Deceased) [2020] FamCA 92
Prantage v Prantage (2013) 49 Fam LR 197
Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Number of paragraphs: 47 Place: Brisbane Solicitor for the Applicant: Bluewater Lawyers First Respondent: Self-represented Solicitor for the Second Respondent: Bluewater Lawyers Solicitor for the Third Respondent: Bluewater Lawyers Solicitor for the Fourth Respondent: Results Legal Fifth Respondent: Self-represented ORDERS
BRC10102/2012 BETWEEN: MR WAGNER
Applicant
AND: MR FARINA
First Respondent
C PTY LTD
Second Respondent
D PTY LTD (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
CAREW J
DATE OF ORDER:
21 MAY 2021
THE COURT ORDERS THAT:
1.Mr Farina pay Mr Wagner’s costs fixed in the sum of $12,500 within 30 days of the date of this order.
2.All outstanding applications be otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Farina & Lofts has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAREW J
On 8 November 2012, parenting and property proceedings were commenced between Mr Farina and Ms Lofts to which Mr Wagner and others were joined in 2014 (“the substantive proceedings”).
Mr I of U Pty Ltd was engaged as a single expert to provide a valuation of various business assets in the substantive proceedings.
The substantive proceedings were finalised by consent and resultant orders made on 12 November 2018 (“the November order”) and 29 January 2019 (“the January order”).
U Pty Ltd’s professional fees were not paid in full and on 22 February 2021 it was confirmed by the Court that Mr Farina was liable for those fees, as between the parties to the substantive proceedings. Mr Farina was ordered to pay $43,156 within 14 days.
The matter returned to Court for the determination of competing costs’ applications in relation to proceedings commenced by Mr Wagner to clarify whose responsibility it was to pay U Pty Ltd’s fees. Those proceedings were finalised on 22 February 2021. With the consent of the parties, the issue of costs is determined in chambers upon consideration of written submissions. Mr Farina did not provide written submissions. The remaining respondents are under the control of Mr Wagner and did not provide separate submissions.
THE APPLICANT’S SUBMISSIONS
Mr Wagner seeks an order that Mr Farina and U Pty Ltd’s lawyers pay his costs in the proportion 75/25 on an indemnity basis fixed in the sum of $74,130.80 or on a party and party basis or, in the alternative, that Mr Farina alone pay Mr Wagner’s costs.
It is argued that as between the parties to the substantive litigation, Mr Farina was at all material times liable for U Pty Ltd’s fees, as confirmed by the further clarification of the November order and January order on 22 February 2021. Mr Farina was given the opportunity to settle the matter on 23 April 2020 without any costs application against him, on the basis that he pay the sum then owing to U Pty Ltd, namely, $28,363.13. After commencement of the proceedings relating to the payment of U Pty Ltd’s fees, Mr Farina repeatedly delayed the proceedings which only increased the costs.
It is further argued that U Pty Ltd’s lawyers should bear some of the costs because they pursued relief which the Court had no jurisdiction to grant, to which they allegedly conceded after the conclusion of the proceedings.
THE FOURTH RESPONDENT’S SUBMISSIONS
U Pty Ltd seeks an order that their costs be paid on an indemnity basis fixed in the sum of $17,937.43 or, in the alternative, on a party and party basis, by the parties to the substantive proceedings or, in the alternative, that Mr Wagner pay its costs or, in the further alternative, that Mr Farina pay its costs.
It is argued that the proceedings commenced by Mr Wagner (in relation to the payment of U Pty Ltd’s fees), to which U Pty Ltd was joined, were wholly unnecessary when there had already been a clarification of the November order and January order on 9 April 2019 which confirmed that the January order was to be read subject to the November order. The November order made specific provision for Mr Farina to pay U Pty Ltd’s fees. A notation was included on the order made 9 April 2019 to the following effect:
It is noted that Bluewater Lawyers and Dowd & Co informed the Court that if the clarification as sought by Bluewater Lawyers was made there was no need to make the order sought by Mr Farina.
The notation reflected the application made by Mr Farina for any remaining sum held by Bluewater Lawyers (after payment of the car debt) to be paid to U Pty Ltd.
It is further argued that Mr Farina has at all material times acknowledged his responsibility to pay the U Pty Ltd fees.
Finally, it is submitted by U Pty Ltd that they were joined to the proceedings unnecessarily. They were not parties in the substantive litigation so no order made between those parties was binding upon them and, as confirmed by the Court on 22 February 2021, U Pty Ltd’s contractual rights to pursue the parties to the substantive litigation remains.
THE FIFTH RESPONDENT’S SUBMISSIONS
Ms Lofts submits that no order for costs should be made but, in any event, no costs order should be made against her. It is argued that the debt is one owed by Mr Farina as confirmed by the Court most recently on 22 February 2021 and as such if any costs order is made it should be against Mr Farina.
U PTY LTD’S LAWYER’S SUBMISSIONS
While conceding the power to make a costs order against a third party, including lawyers, it is argued that no order should be made where they have played no active part in the litigation and have no interest in the subject matter of the litigation. It is denied that any concession was made that the Court lacked jurisdiction to determine the contractual dispute as between U Pty Ltd and the parties to the substantive litigation. Reliance is placed on a decision of Loughnan J in L Associates & Conlon and Anor[1] where his Honour said among other things:
[46] … the Court has the power to order how the ultimate responsibility for the costs of the proceedings should be borne between the parties to the proceedings
…
[53] The question then arises as to the Court’s power to revisit the wording of the earlier orders in the ways proposed by the applicant. In my view the Court has that power. Firstly, the Court has an obligation to facilitate the payment of the fees of a witness before the Court. Secondly, among other instances, where an order has had an unintended consequence on the rights of a third party, the Court must retain power to remedy that situation.
[1] [2015] FamCA 659 (“L Associates”).
It is further argued that but for Mr Wagner joining U Pty Ltd to the proceedings, no relief would have been sought by U Pty Ltd in this jurisdiction. The proceedings were entirely unnecessary where the November order and the January order had already been clarified; U Pty Ltd could not be bound by orders made to which they were not a party and Mr Wagner could have met his contractual obligations to pay U Pty Ltd’s fees and then seek contribution/indemnity from Mr Farina.
Finally it is submitted by U Pty Ltd’s lawyers that they have at all times acted in good faith and upon a proper basis such that the Court ought be very cautious in considering the costs application against them.
In support of their application for Mr Wagner to pay their costs of responding to his application for costs against them, U Pty Ltd’s lawyers argue that his application “has been made purely for strategic reasons given that no recovery will be made from Mr Farina in view of his impecuniosity”.
HOW COSTS APPLICATIONS ARE DETERMINED
Although each party generally bears their own costs in this jurisdiction (s 117(1) of the Family Law Act 1975 (Cth) (“the Act”)), the Court has a broad discretion[2] to make such order as to costs as the Court considers just where there are circumstances that justify it in doing so (s 117(2)).
[2] Collins & Collins (1985) FLC 91-603 at 79,877.
An applicant for costs bears no “additional or special onus” other than the establishment of “justifying circumstances”.[3]
[3] Penfold v Penfold (1980) 144 CLR 311 at 315.
In the exercise of the discretion to award costs, regard must be had to the factors set out in s 117(2A) of the Act, so far as they are relevant.
Those factors are as follows:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the Court considers relevant.
It is sufficient for one factor in s 117(2A) to be present.[4]
[4] Fitzgerald v Fish sub nom PBF v TRF (2005) 191 FLR 294.
A court will not lightly make an order for costs to be paid on an indemnity basis. There needs to be some circumstance of an exceptional kind to justify that course.[5]
[5] Kohan and Kohan (1993) FLC 92-340 at 79,614; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (“Colgate-Palmolive”).
Rule 19.08(3) of the Family Law Rules 2004 (Cth) (“the Rules”) requires the terms of any costs agreement to be disclosed when indemnity costs are sought.
In Re Wilcox, Ex parte Venture Industries Pty Ltd[6] the Full Court of the Federal Court of Australia per Cooper & Merkel JJ said at 156:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225.
[6] (1996) 72 FCR 151 at 156 – 157 (“Re Wilcox”).
The Full Court (per Cooper and Merkel JJ) went on to restate the principles from Colgate-Palmolive v Cussons Pty Ltd as follows at 156 - 157:
(a)the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c)whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.[7]
[7] Re Wilcox (n 7).
While the categories of cases in which an indemnity cost order may be awarded are not closed, indemnity costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law”.[8]
[8] Colgate-Palmolive (n 6) at 233.
The explanatory guide to the Rules provides a useful definition of costs on an “indemnity basis”, namely: [9]
[A]n entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.
[9] Prantage v Prantage (2013) 49 Fam LR 197 at 200.
Rule 19.18 empowers the Court, when awarding costs, to make an order for costs:
(a)of a specific amount;
(b)as assessed on a particular basis (e.g. lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount assessed in accordance with Schedule 3.
In considering what specific order should be made, the same rule provides that the Court may consider any of the following factors:
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
Rule 19.10(1) provides that a person may apply for an order against a lawyer for costs thrown away during a case for a reason including:
(a)the lawyer’s failure to comply with these Rules or an order;
(b)the lawyer’s failure to comply with a pre-action procedure;
(c)the lawyer’s improper or unreasonable conduct; and
(d)undue delay or default by the lawyer.
Rule 19.10(2) permits the Court to make an order, including an order that the lawyer:
(a)not charge the client for work specified in the order;
(b)repay money that the client has already paid towards those costs;
(c)repay to the client any costs that the client has been ordered to pay to another party;
(d)pay the costs of a party; or
(e)repay another person’s costs found to be incurred or wasted.
Rule 1.08(2) creates a responsibility for lawyers to ensure that any orders sought are reasonable in the circumstances of the case and that the Court has the power to make those orders (see r 1.08(1)(a)).
In Pilkvist & Coburn (Deceased)[10] I recently had cause to consider an application to make a costs order against lawyers and include the relevant parts of my judgment in relation to the applicable principles from [26]:
[10] [2020] FamCA 92 (upheld on appeal Beamish & Coburn (Deceased) (2021) FLC 94-005).
In Cassidy v Murray the Full Court of this Court considered a number of authorities in various jurisdictions relating to the circumstances in which a court might order costs against a lawyer and identified the following principles:
(a) The discretion to order costs against a lawyer should be exercised with caution;
(b)There is a need to balance the competing public interests involved, namely, the concern that lawyers should not be deterred from pursuing their clients’ interests for fear of being made personally subject to orders for costs, and the principle that innocent parties should not be occasioned costs, for which they would not otherwise be liable, as a result of the inappropriate conduct of lawyers;
(c)The Court may make an order for costs against a lawyer without the necessity to establish that the lawyer has been guilty of serious professional misconduct;
(d)The lawyer has a duty to the Court to promote the interests of justice whilst at the same time attending to the needs of the lawyer’s client;
(e)A mistake or error of judgement would not justify an order for costs against a lawyer. However, misconduct, default or negligence, any of which are found by a Court to be of a serious nature, may be sufficient to justify an order; and
(f) The jurisdiction is compensatory not punitive.
Subsequent to Cassidy v Murray the Rules were amended and while incorporating some of the principles identified in that case, the amendments also extended the potential liability of lawyers to costs thrown away during a case for reasons including the lawyer’s failure to comply with the Rules or the lawyer’s improper or unreasonable conduct (see r 19.10).
In Z (A Solicitor) & Limousin the Full Court dismissed a solicitor’s appeal against a personal costs order. The case provides a comprehensive overview of the jurisprudence in this and other jurisdictions and considers the substantial amendments made to the Rules in 2004 including the addition of objects, principles, and responsibilities imposed on parties to litigation as well as their lawyers. The Full Court noted that the amended Rules include a ‘main purpose’, namely, “to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case” and that r 19.10 exposes lawyers to a personal costs order if they do not comply with the Rules or if they engage in improper or unreasonable conduct. The Full Court adopted the principles extracted from a number of cases by French J (as his Honour then was) in Ex Christmas Islanders Association Inc and Others v Attorney-General (Cth) (No 2) including the following:
(a)The need for caution when legal professional privilege has not been waived and the Court does not know the details and circumstances of a client’s instructions;
(b)While no comprehensive definition of ‘unreasonable’ conduct is possible it must be more than acting for a client who has little or no prospect of success. There must be something akin to an abuse of process e.g. having an ulterior motive for the proceedings or commencing or pursuing proceedings without any, or any proper, consideration of the prospects of success;
(c)Lawyers have a duty to their client and to the Court to be “competent in their conduct of legal business”.
Importantly, the Full Court adopted the principle that a failure to give any, or any proper, consideration to the prospects of success does not require demonstration of any collateral or ulterior purpose.
DISCUSSION
I will deal firstly with Mr Wagner’s application for costs. While it is true to observe that the November order and January order had already been clarified on 9 April 2019, confirming that the January order should be read subject to the earlier order, it is not correct, as argued by U Pty Ltd and their lawyers, that Mr Farina, at all relevant times, conceded his obligation to pay. Mr Farina argued variously that Bluewater Lawyers should have paid the fees prior to paying his former lawyers his entitlement under the orders and/or that Mr Wagner should pay at least part of the fees as he had previously paid them from one of the entities who had been joined to the proceedings.
In circumstances where there was a dispute between the parties to the substantive proceedings as to who was responsible for the fees, it is at least arguable that it was reasonable for Mr Wagner to seek the Court’s assistance to rule on that dispute. What is less clear is why U Pty Ltd were joined to the proceedings. Any order made, as between the parties to the substantive litigation, could not bind U Pty Ltd or preclude them from pursuing their contractual rights against all parties, given that all parties signed letters of engagement with U Pty Ltd.
Mr Farina should have paid U Pty Ltd’s fees as he was required to do. He rejected a reasonable offer by Mr Wagner to pay those fees and avoid the prospect of a costs order. He did so at his peril. Mr Farina also delayed the finalisation of the proceedings which in turn increased Mr Wagner’s costs.
Mr Wagner’s claim for costs against U Pty Ltd’s lawyers is more complicated. Had U Pty Ltd responded to Mr Wagner’s application by simply seeking to remove them as parties, there would be no question that the application against U Pty Ltd’s lawyers should fail. The complicating feature arises because relief was sought by U Pty Ltd which arguably the Court had no jurisdiction or power to grant. I am not persuaded that the submissions made on behalf of Mr Wagner at earlier hearings made their position plain i.e. that the Court lacked power. On the contrary, they seemed to engage with the argument for the relief sought by U Pty Ltd.
U Pty Ltd’s lawyers were given the opportunity to file further written submissions on the question of the Court’s jurisdiction or power to make the order sought by U Pty Ltd. They did not do so. In their most recent submissions they refer to a decision of Loughnan J in L Associates & Conlan and Anor.[11] In that case, the order as between the parties to the substantive litigation was amended pursuant to the slip rule so as not to disadvantage a single expert who had already commenced proceedings in the State jurisdiction to recover his professional fees against one party. The amendment to the order simply provided for the other party to the substantive proceedings to indemnify the party who was being sued in the local court. There was no suggestion in the current case, on behalf of U Pty Ltd, that any order already made by this Court could be amended pursuant to the slip rule.
[11] (n 1).
An order for costs against a lawyer for a party is one that should be exercised cautiously. I am not persuaded that the circumstances in this case warrant such an order.
I am persuaded, however, that Mr Farina should be liable for Mr Wagner’s costs but the circumstances are not exceptional such as to justify indemnity costs.
An order for a specific sum is preferable to an order requiring an assessment because the latter will inevitably involve the parties in yet further conflict, delay, and cost. Murphy J in a separate judgment in the Full Court’s decision in Parke & the Estate of the Late A Parke[12] provides a helpful example of the process involved in awarding a specific sum and his Honour draws assistance from the observations made by Einstein J in Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Ltd v Donald Robert Argus[13] when considering an analogous provision to that contained in r 19.18(1)(a) of the Rules. Murphy J said in particular at [130] – [131]:
If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court” (Beach Petroleum NL v Johnson (No 2) [1995] FCA 1250; (1995) 57 FCR 119, at [24]cited in Idoport at [9]). The process does not “by its very nature ... envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”. (Idoport at [9](v), citing Harrison v Schipp[2002] NSWCA 213; (2002) 54 NSWLR 738).
Obviously enough, the court must act judicially in fixing or specifying a sum of costs, but:
...the requirement that the power to award a gross sum should be exercised judicially does not mean that it must be exercised in any scientific or formulaic manner. At the heart of the judicial function is the responsibility to weigh up competing factors and considerations, many of which might conflict, to reach a determination. Acting judicially carries with it an obligation to apply the rules of natural justice, to act impartially and to apply the law to the facts. ...
(Idoport, at [10] per Einstein J.)
[12] (2016) FLC 93-748 at 81,943–81,944, [122]–[134].
[13] [2007] NSWSC 23 at [9].
The material before the Court includes the costs agreement between Mr Wagner and his lawyers and a calculation of his costs pursuant to that agreement. I have also had regard to Schedule 3 (Scale of costs) of the Rules and in my view an appropriate sum to order is $12,500 payable within 30 days.
Turning to consider U Pty Ltd’s application for costs against one or a number of the parties to the substantive proceedings. As already noted, if the only relief sought by U Pty Ltd was to remove them as parties, their application for costs against Mr Wagner, in particular, would be on fairly solid ground. However, their response sought relief which arguably the Court had no jurisdiction or power to grant. They did not take the opportunity to file written submissions to argue that point, perhaps wisely. The order made against Mr Farina on 22 February 2021 included a component for U Pty Ltd’s incurred and anticipated legal costs of $15,165.14. It is not clear to me why a further order inclusive of such costs would now be ordered. In any event, I am not persuaded that any further costs order should be made in their favour.
Finally, U Pty Ltd’s lawyers seek costs against Mr Wagner for his costs application against them. While Mr Wagner’s application against them has been unsuccessful, I am not persuaded that it was “purely for strategic purposes given that no recovery will be made from Mr Farina”. I have no current evidence about Mr Farina’s financial circumstances. U Pty Ltd’s lawyers did include in their client’s response, an application for relief arguably outside the jurisdiction or power of the Court and when invited to file further written submissions to support the claim, chose not to do so. Nevertheless, I am not persuaded that the circumstances warrant a costs order against Mr Wagner.
In conclusion, there will be no costs order other than against Mr Farina. He will be ordered to contribute to Mr Wagner’s costs fixed in the sum of $12,500 payable within 30 days.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew. Associate:
Dated: 21 May 2021
SCHEDULE OF PARTIES
BRC10102/2012 Respondents
Fourth Respondent:
U PTY LTD
Fifth Respondent:
MS LOFTS
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