Freye & Gingko & Anor
[2012] FamCA 942
•14 November 2012
FAMILY COURT OF AUSTRALIA
| FREYE & GINGKO AND ANOR | [2012] FamCA 942 | |
| FAMILY LAW – COSTS – Indemnity Costs – Conduct of Solicitor – Where the Solicitor has failed to give proper and reasonable attention to the relevant law in seeking the application for costs – Where costs have been incurred as a result of such failure – Circumstances justifying an Order for costs on an indemnity basis against Solicitor | ||
| APPLICANT: | Ms Freye |
| RESPONDENT: | Mr Gingko |
| INTERVENER: | Ms B |
| INDEPENDENT CHILDREN’S LAWYER: | Dixie Ann Middleton & Associates |
| FILE NUMBER: | BRC | 11600 | of | 2008 |
| DATE DELIVERED: | 14 November 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Bell J |
| HEARING DATE: | 19 October 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Andrew of Counsel appearing for the Applicant |
| SOLICITOR FOR THE APPLICANT: | Ms Dart, Solicitor of Legal Aid Queensland appearing for the Applicant |
| COUNSEL FOR THE RESPONDENT: | No appearance required |
| SOLICITOR FOR THE INTERVENER: | Mr Rozario, Solicitor of Delta Law appearing for the Intervener |
| COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: | No appearance required |
Orders
It is ordered
The Intervener’s oral application made on 8 October 2012 for costs of the trial is dismissed.
The legal representative for the Intervener, Mr Rozario of Delta Law, personally pay the Applicant’s (Ms Freye) costs of and incidental to the adjournment of the application for costs on an indemnity basis, as agreed within twenty-four (24) days from today’s date or in default of such agreement as assessed under the Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Freye & Gingko has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 11600 of 2008
| Ms Freye |
Applicant
And
| Mr Gingko |
Respondent
And
| Ms B |
Intervener
REASONS FOR JUDGMENT
Introduction
This is in relation to an application for costs sought by the Intervener, Ms B, against the Applicant, Ms Freye, and/or her legal representatives, Legal Aid Queensland. It also concerns an oral application for an award of costs, on an indemnity basis, sought by Counsel for the Applicant, Mr Andrew, against the solicitor for the Intervener, Mr Rozario personally for the costs of the adjournment of the costs application.
The substantive proceedings were for parenting orders for the children of the Respondent Father, Mr Gingko. The Intervener is the Father’s adult child and the children’s half-sister. The Applicant was caring for the children at the commencement of the proceedings.
The matter was settled by consent orders made on 8 October 2012. On this day, Mr Rozario made an oral application for costs and requested he be allowed seven days to file written submissions. Mr Andrew was ready to proceed on the application for costs but Mr Rozario advised he was at a disadvantage and would need time to prepare. Mr Andrew submitted that there was no reason for Mr Rozario to be at a disadvantage as to the issue of costs as it was clear from at least a week before that, Mr Rozario had known a costs issue may arise.
Nevertheless, so as not to disadvantage the Intervener, Mr Rozario was given time to prepare written submissions on costs. Notwithstanding that I indicated to him that I was ready to hear the matter and commented that if he was unsuccessful, costs of the adjournment may be sought by the Applicant.
Mr Andrew sought the costs of the adjournment should the Intervener’s application be unsuccessful. I reserved the Applicant’s costs of the adjournment pending determination of the Intervener’s application on costs of the trial.
The Respondent and Independent Children’s Lawyer were given leave to be excused from the costs hearing.
Mr Rozario did not file written submissions on costs until 8:28am on the morning of the hearing, 19 October 2012. Further, such submissions were wholly insufficient and based on erroneous principles of law.
Mr Andrew seeks the costs of the adjournment be paid by Mr Rozario personally on an indemnity basis.
Costs under the Family Law Act
Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) sets out the law regarding costs orders in the family court jurisdiction. This section outlines a general rule that each party shall bear his or her own costs.
The Full Court in Benworth & Benworth (Costs) [2012] FamCAFC 116 summarised the principles, stating that the general rule (at [6]-[7]):
…is subject to a broad discretion permitting an award of costs in circumstances considered to justify such an award (s 117(2)). In the exercise of that discretion the Court is required to have regard to a number of specified matters (s 117(2A)).
While regard must be had to those matters, the discretion ultimately remains at large (ss 117(2), (2A)(g)). It is not necessary for the Court to be satisfied that all of the factors enumerated within s 117(2A) are satisfied (see, for example, Fitzgerald (as Child Representative for
A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123). So too, an applicant for costs is not required to satisfy “…any additional or special onus…”; rather, what is required is “…a finding of justifying circumstances as an essential preliminary to the making of an order.” (Penfold v Penfold (1980) 144 CLR 311 at 315). Moreover, any one of the factors may be the sole foundation for an order for costs (Fitzgerald at 130) and, conversely, all of the relevant factors should be taken into account and balanced in arriving at an appropriate decision (In the Marriage of I and I (No 2) (1995) FLC 92-625 at 82,277).
Submissions on behalf of the Intervener
The Intervener is seeking a costs order against the Applicant and/or her legal representative, Legal Aid Queensland.
In the Intervener’s written submissions, Mr Rozario fails to outline the particular costs order that is sought, and the factors in section 117(2) which point to the circumstances justifying an order for costs.
Despite section 117 specifically being raised to Mr Rozario on the 8 October 2012, when I asked for the basis upon which the principle that parties bear their own costs should be departed from, Mr Rozario failed to mention the essential section in his submissions.
The submissions made are insufficient to establish a basis for an order of costs against the Applicant. The facts outlined have some relevance to the factors the Court shall have regard to pursuant to section 117(2) of the Act and thus will be considered.
Mr Rozario’s oral submissions, in support of his written submissions, presented on the 19 October 2012 were also unhelpful. Mr Rozario relied upon a case, Chief Executive of the Department of Main Roads & Regan & Ors (2000) 22 QLCR 151, that is not relevant in Family Law and based his arguments on a principle that is not applicable in this court: namely, that the ‘established principle is that a successful party receives its costs’ (Transcript 19 October 2012 page 2). He did not refer to section 117 let alone the principles.
Mr Rozario did raise the case Hackshaw & Hackshaw (Costs) [2011] FamCA 570 and section 117AB in his oral submissions but failed to establish how this section is applicable in the circumstances to justify departure from the general rule.
Application of section 117(2A)
Section 117(2A) outlines a list of factors the court shall have regard to in deciding whether to make an award for costs.
Mr Andrew applied, albeit very briefly, these factors to the facts in his oral submissions. Mr Rozario has merely indicated in his submissions facts that would be relevant to some of the factors listed.
In regards to the financial circumstances of each of the parties, the Applicant is not in receipt of benefits or income. The Intervener’s submissions do not deal with the Intervener’s financial circumstances in light of this section and the principles relating to costs specifically but do state that she is unemployed and has ‘meagre resources’ (Intervener’s written submissions filed 19 October 2012 at [45] and [51]).
The Applicant was funded by Legal Aid, which is not by itself a reason for not making a costs order but is an indication of the Applicant’s financial position (see Schwarz & Shwarz (1985) FLC 91-618). Mr Andrew states that he was under the impression that the Intervener was represented on a pro bono basis and has been working on this erroneous assumption (Transcript 19 October 2012 page 12, lines 21-33). Mr Rozario clarified in his written submissions that he was not acting pro bono for the Intervener.
The conduct of all parties has resulted in this matter being drawn out over a period of many years. Mr Rozario states the conduct of the Applicant has been problematic to say the least (Intervener’s written submissions filed 19 October 2012 at page 3). The Applicant had ample opportunity to bring her case to an end and persisted with seeking the children live with her despite making admissions to Mr C, the report writer, that she did not want the children. Mr Rozario submitted the Applicant continued the case for a collateral purpose ‘or at the very least it was vexatious and betrayed a failure on the part of Legal Aid Queensland to prosecute this matter more economically and honestly’ (Intervener’s written submissions filed 19 October 2012 at pages 4-5). He criticised the Applicant for attacking the Intervener and Respondent and putting the Intervener through great expense in responding to such attacks.
Mr Andrew states that the Applicant had in fact abandoned the claim for the children to live with her long before the hearing. Mr Andrew submits that the delay and length of the proceedings was not a result of the Applicant’s conduct. Mr Andrew stated that the Applicant was ready, willing and able to proceed to trial in June/July 2012 however an adjournment was ordered due to the actions of the Intervener and Respondent. He states that in relation to the Intervener there was non-filing of material, and in relation to the Respondent, there was non-attendance on the psychiatrist (Transcript 19 October 2012 page 7, lines 4-10). Mr Andrew submits that the reason the trial did not go ahead on the last occasion was due to Mr Rozario, who was representing both the Intervener and Respondent at the time, needing an adjournment to consider the matter. The Applicant had not filed any new material since June/July and thus there was no further work required in respect of the Applicant’s material (Transcript 19 October 2012 page 7 line 30-35).
Mr Rozario states the Applicant was wholly unsuccessful in the proceedings as the Applicant had originally sought an order for the children to live with her and this was not in accordance with the final orders. The proceedings were finalised by consent orders and it is hard to justify how a party could be ‘wholly unsuccessful’ in the circumstances.
Mr Andrew stated in his oral submissions on 19 October 2012, that it could not be said that the Applicant was unsuccessful in circumstances where she had months before abandoned her order seeking the children live with her and had since been merely seeking orders relating to her spending time with the children. As the consent orders provided for this, it was Mr Andrew’s submission that the Applicant had actually been successful in respect of the orders she was seeking (Transcript 19 October 2012, page 11).
The Applicant had previously offered to settle the proceedings on similar orders to those entered into on the day of the hearing (see the Applicant’s letter to the Intervener dated 10 August 2012 – exhibit 1). The Intervener replied on the 25 September 2012 failing to refer to the Applicant’s letter and offer and instead referring to the previous orders sought by the Applicant prior to her change in position. It further states that if the Applicant did not amend her application then the Intervener would ask the court to award costs on an indemnity basis.
There is not sufficient evidence put forward to establish circumstances that justify departing from the general rule and making an order for costs of the trial against the Applicant.
Costs of the Adjournment
It is next necessary to consider the application for costs brought by Mr Andrew, on behalf of the Applicant, in respect of the adjournment. It is noted the Applicant is not seeking costs of the trial.
Mr Andrew seeks the costs of the adjournment on an indemnity basis to be personally paid by Mr Rozario. Mr Andrew presented an outline of costs incurred in appearing on the 19 October 2012 in the sum of $1,835 (Exhibit ‘A’).
As outlined above, section 117 governs the general rule for costs and section 117(2) outlines when a court may make orders for costs as the court considers just.
Relevant here is the conduct of the parties to the proceedings. Mr Rozario’s conduct is the cause of the costs of the adjournment being incurred when firstly, he should have been ready to proceed on 8 October 2012 and secondly, he should have known that the application was unlikely to succeed. The Intervener was wholly unsuccessful in the costs application against the Applicant.
I find that the circumstances considered justify an award of costs of and incidental to the adjournment.
The costs have been sought on an indemnity basis and it is necessary to consider if the circumstances warrant this.
Indemnity Costs
The Full Court in D & D (Costs) (No. 2) [2010] FamCAFC 64 (subsequently approved by Davida & Davida (Costs) [2011] FamCAFC 61) has outlined the authorities relevant to determining whether costs should be awarded on an indemnity basis stating (at [26] – [29]):
In Limousin & Limousin (Costs) [2007] 38 FamLR 478, the Court reviewed the authorities in relation to indemnity costs. Reference was there made to the judgment of the Full Court in Kohan and Kohan (1993) FLC 92-340. It was recorded at 79,614 (citations omitted) in which it was said that:
The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the court may make such order as the court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O.38 r.2, the provisions of O.38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O.38 r.7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2) [[1983] 2 NSWLR 354]; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR 358 at 368-70.
Indemnity costs orders are still an exception in this and other jurisdictions.
…
The Court in Limousin (supra) also referred to the judgment of Shephard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 upon which learned Counsel for the Wife relies in support of the present application. Shephard J said in Colgate-Palmolive (supra) (at 256):”
…
“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 …
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 …
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 …
Reference was made to the later decision of the Full Court of Yunghanns v Yunghanns (2000) FLC 93‑029 in which is was said (at 87,471, par 31):
It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought.
As was the case in Limousin (supra), the following passage from the Judgment of Shephard J in Colgate-Palmolive (supra) is instructive (at 257):
… 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 willful 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 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records).
In D & D (Costs) (No. 2), the Full Court found the circumstances were not ‘exceptional’ to justify an order for indemnity costs (at [31]). The Full Court found that the conduct of the Husband nor those advising him did not prolong or delay the proceedings or the hearing of the application itself. The Full Court stated (at [32]) that while it rejected the Husband’s challenges on appeal:
…it cannot be said that the arguments raised on his behalf, or the manner in which those contentions were agitated on his behalf were of a kind, or presented in a manner which would enliven the discretion to award indemnity costs.
I think the circumstances in this case justify an award of costs on an indemnity basis. The conduct of the Intervener and her solicitor in pursuing the costs application, in failing to be prepared on the 8 October 2012 despite evidence that the issue of costs had been raised prior, in not being on top of the facts of the case, the relevant case law nor the relevant Act, have enlivened the discretion to award indemnity costs. The matter has been prolonged and delayed by the conduct of the Intervener. It has caused the Applicant to incur more costs which should never have been incurred (see infra).
I accept that the Court should not depart lightly from costs on a party and party basis. I find that the circumstances of this case are exceptional to justify departure from party and party costs and award indemnity costs.
Having established that the costs of the adjournment should be paid on an indemnity basis, it is necessary to determine who should pay the costs. Prima facie the Intervener should pay the costs of the adjournment, however, for subsequent reasons; I am of the view that the claim against the solicitor is proper.
Costs against Mr Rozario personally
Rule 19.10 of the Family Law Rules 2004 provides that a person may apply for costs against a lawyer of a party.
The Full Court in Z (A Solicitor) & Limousin [2008] FamCA 315 (per May, Boland and O’Ryan JJ) looked at the principles surrounding a costs order against a solicitor and stated:
45. In this Court the question of when a costs order (colloquially at times, in other jurisdictions, referred to as a “wasted costs order”) should be made, and the applicable principles were discussed by the Full Court in Cassidy & Murray (1995) FLC 92-633. Their Honours, having referred to the decision of the High Court in Knight & Anor v F P Special Assets Limited & Ors (1992) 174 CLR 178, concluded that the Court had the power to make an order against a non-party to the proceedings.
46. Having satisfied themselves that the order made against the solicitor was within power, the Full Court then examined, by reference to English authority (including particularly Ridehalgh v Horsefield (1994) 3 All ER 848) the circumstances or criteria to be established before a wasted costs order could be made. At 82,364-5 their Honours said:
Whereas some of the cases say that there must be ‘a serious dereliction of duty’ by the solicitor before a costs order can be made against that solicitor, in our view the matters identified by the Master of the Rolls in Ridehalgh v. Horsefield accurately reflect the law, which, in its application to this jurisdiction, can be set out as follows:
1. Pursuant to s. 117(2) Family Law Act, the Court has jurisdiction to make an order for costs against a solicitor or a non-party.
2. The court should not make such an order without giving the person to be affected by the order an opportunity to be heard.
3. The Court may make an order for costs against a solicitor without the necessity to establish that the solicitor has been guilty of serious professional misconduct.
4. The solicitor has a duty to the Court to promote the interests of justice whilst at the same time attending to the needs of the solicitor’s client.
5. A mistake or error of judgment would not justify an order for costs against a solicitor. However, misconduct, default or negligence, any of which are found by a Court to be of a serious nature, may be sufficient to justify an order.
6. The jurisdiction is compensatory.
Whilst the English cases talk of the conduct needing to be ‘serious or gross’, it adds nothing to set the threshold at ‘serious or gross’, rather than at ‘serious’, ‘gross’ being a more extreme term than ‘serious’. We think that this represents an appropriate balance between 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 solicitors.” (my underlining)
Mr Rozario had been given an opportunity to be heard. It was made clear to him on the 8 October 2012 that if he proceeded with his application for costs and the seeking of an adjournment to prepare submissions, then an application for the costs of the adjournment may be sought. Mr Rozario had ample opportunity to respond to the application both in his submissions and orally on 19 October 2012. I asked Mr Rozario as to where he had directed his attention to whether he should pay the costs on the 19 October 2012 (Transcript 19 October 2012 page 4). Nevertheless, Mr Rozario failed to provide any specific response to why the application should be dismissed.
Mr Andrew relies on the case of Burns & Caldwell and Anor (Costs) [2011] FamCAFC 84 where Coleman J stated that when considering making a personal costs order against a solicitor, the Court is to balance certain public interests. Coleman J cited Ridehalgh v Horsfield [1994] 3 All ER 848 which stated at 855-856:
…lawyers should not be deterred from pursuing their client’s interests by fear of incurring a personal liability to their client’s opponents; they should not be penalised by orders to pay costs without fair opportunity to defend themselves; that wasted costs order should not become a back-door means of recovering costs not otherwise recoverable by a legally-aided or impoverished litigant; and that the remedy should not grow unchecked to become more damaging than the disease. The other public interest, recently and clearly affirmed by Act of Parliament, is that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponent’s lawyers. The reconciliation of these public interests is our task in these appeals. Full weight must be given to the first of these public interests, but the wasted costs jurisdiction must not be emasculated.
(my underlining)
Coleman J also cited Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 at 239 (approved by the Full Court of the Federal Court in Levick v Deputy Commissioner of Taxation (2000) 102 FCR 155):
This analysis of the cases makes it clear that the jurisdiction to order costs against an unsuccessful party’s solicitors is enlivened when they have unreasonably initiated or continued an action when it had no or substantially no prospects of success but such unreasonableness must relate to reasons unconnected with success in the litigation or to an otherwise ulterior purpose or to a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice. Further, the cases establish the proposition that it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success.
The task in determining whether to award costs against Mr Rozario involves balancing the public interest between solicitors not being deterred from pursuing clients’ interests and the principle that parties should not incur costs which they would not otherwise have incurred, as a result of a solicitor’s inappropriate conduct (as per Ridehalgh v Horsefield (supra)).
Was the conduct of Mr Rozario ‘inappropriate’ or ‘unjustifiable’?
As said by Mr Andrew, this matter could have been resolved weeks before 8 October 2012 with offers to settle on terms that are similar to the final consent orders. Mr Rosario, on behalf of the Intervener, had rejected the Applicant’s offers and further expressed prior to 8 October 2012 that his client may be seeking costs against the Applicant in this matter. Yet Mr Rozario was not prepared to argue the matter for costs on the day of the hearing. He was warned about the fact that costs for the adjournment may be awarded should the Intervener continue the application for costs.
Mr Rozario has failed to give proper and reasonable attention to the relevant law in seeking the application for costs. Had sufficient attention been given, it is apparent that there were no real prospects of success on the application for costs.
Notably, Mr Rozario was asked whether he had specific instructions to seek costs and did not put forward any response or evidence on this notwithstanding that in his application for costs he states (Intervener’s submissions at [53]):
We ask for costs against the Applicant, and, absent an explanation by the Applicant and/or Legal Aid Queensland that the matter was continued on her instructions in all respects, then a costs order against Legal Aid Queensland personally
(original emphasis)
With all circumstances considered, I believe his conduct in pursuing the order for costs, which on the face of it would have to fail, was unjustifiable. I believe that the Intervener should not be required to pay the costs of the adjournment in these circumstances.
I order that Mr Rozario personally pay the costs of the Applicant in this adjournment.
In regards to the quantum of costs, amounts have been put forward by the Applicant which appear to be reasonable. However, since I am no expert on costs, I order that Mr Rozario pay the Applicant’s costs of the adjournment as assessed on an indemnity basis.
Notwithstanding that the solicitors representing the Applicant have come from the Legal Aid Queensland office, I see no reason why they should not be compensated for the costs expended.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bell delivered on 14 November 2012.
Associate:
Date: 14 November 2012
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