Grady and Chilcott and Ors
[2018] FCCA 1690
•29 June 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GRADY & CHILCOTT & ORS | [2018] FCCA 1690 |
| Catchwords: FAMILY LAW – Application by respondent’s mother and brothers to be joined as third parties – waiver of legal professional privilege – costs – case management. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79(4), 90RD(2), 92, 117(2A) |
| Cases cited: Bishop and Bishop [2003] FamCA 240 Southwell & Jane(No.2) [2011] FamCA 734 Hancock v Rinehart (Privilege) [2016] NSWSC 12 |
| Applicant: | MS GRADY |
| First Respondent: | MR CHILCOTT |
| Second Respondent: | MR A CHILCOTT |
| Third Respondent: | MR B CHILCOTT |
| Fourth Respondent: | MS C CHILCOTT |
| File Number: | MLC 1297 of 2014 |
| Judgment of: | Judge Harland |
| Hearing date: | 24 April 2018 |
| Date of Last Submission: | 24 April 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 29 June 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Stavris |
| Solicitors for the Applicant: | Anthonys Solicitors |
| Counsel for the First Respondent: | Mr Penno |
| Solicitors for the First Respondent: | Bevan-Rhys James |
| Counsel for the Second, Third and Fourth Respondent: | Mr Felkel |
| Solicitors for the Second, Third and Fourth Respondent: | Prior Law |
ORDERS
That Mr A Chilcott be joined to the proceeding as the Second Respondent.
That Mr B Chilcott be joined to the proceedings as the Third Respondent.
That Ms C Chilcott be joined to the proceedings as the Fourth Respondent.
That within 21 days the legal representatives for the applicant and the First Respondent confer and jointly inspect the documents produced by Lander & Rogers and Stonnington & Zervas for the purpose of identifying which documents are subject to the waiver of privilege and shall prepare two lists of documents:
(a)An agreed list of documents where privilege has been waived; and
(b)A list of documents which are subject to dispute as to whether or not privilege has been waived.
In the event there are documents in the category of 4(a) herein, the parties shall copy those documents, index them, and put them in a folder for production to chambers for rulings on the privilege issue.
That within 28 days the parties file and serve a joint trial plan which shall include estimates of opening and closing addresses, and the examination in chief and the cross examination of parties and witnesses.
That the matter be listed for further mention on 14 August 2018 at 9:30am for the determination of the following issues:
(a)the future direction of this case;
(b)as to the timing of the payment to the applicant of her costs quantified in the sum $12,276; and
(c)argument as to the costs of Lander & Rogers and Stonnington & Zervas.
That Stonnington & Zervas file and serve a memorandum of costs for compliance with the subpoena addressed to the respondent within 21 days.
A copy of these reasons and orders be send to Lander & Rogers and Stonnington & Zervas by my Chambers.
IT IS NOTED that publication of this judgment under the pseudonym Grady & Chilcott & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 1297 of 2014
| MS GRADY |
Applicant
And
| MR CHILCOTT |
First Respondent
| MR A CHILCOTT |
Second Respondent
| MR B CHILCOTT |
Third Respondent
| MS C CHILCOTT |
Fourth Respondent
REASONS FOR JUDGMENT
This case has a long history before this court. For a variety of reasons it has not yet had a final hearing despite being set down for trial previously.
The parties participated in a private mediation on 9 February 2018 which lasted the day. The respondent concedes that late in that day he raised for the first time in these proceedings the issue of there being a family arrangement whereby his siblings and mother have a significant equitable interests in four of the five pieces of real estate which are the subject of dispute between the parties. For convenience, I will refer to this as the “Chilcott family arrangement”.
The case was listed for mention before me on 12 February 2018. I directed that any application for third parties to join the proceedings be filed by 22 February 2018.
The foreshadowed application was filed by the respondent’s mother and siblings on 22 February 2018. They are yet to properly articulate their claims. They simply say in their application in a case that they have an interest in the four Property B properties which they seek to be taken into account in these proceedings. At the hearing their Counsel indicated that their claim was in relation to the unimproved land value of the properties with the respondent’s mother claiming a 40% interest and the respondent’s two brothers each claiming a 20% interest, leaving the respondent with a 20% interest in the unimproved land values and a 100% interest in the improvements.
The issues I have to determine for these interlocutory proceedings are:
a)Whether or not the application by the third parties to be joined to the proceedings should be granted;
b)If that application is granted, whether or not the respondent has waived privilege and to what extent;
c)Whether or not the respondent and the third parties should pay costs of mediation and trial that were thrown away due to the issue of the third party interests being raised at such a late stage in the proceedings.
Chronology of the proceedings
The respondent was born on 1959 and is 58 years old. He was previously married to Ms H and has two adult children from that relationship. He says they divorced in the early 2000s.
The applicant was born on 1974 and is 43 years old.
The applicant filed her initiating application on 18 February 2014. She claims that she and respondent were in a de facto relationship from 2004.
The respondent filed his response and supporting documents on 28 March 2014 in which he disputed that they were in a de facto relationship at all.
At the first return date before Judge Turner on 2 April 2014 a case was listed to 27 October 2014 for Contested Hearing on the threshold issue.
The respondent filed an application in case on 14 October 2014 seeking discovery, permission to sell the Property A property and other interlocutory issues.
On 27 October 2014 the trial was adjourned to a date to be fixed in 2015.
The case then became before me on 7 December 2015 where it was adjourned for an interim hearing in February 2017 on the de facto issue, as the parties advised that criminal proceedings were on foot.
The applicant’s application in a case filed on 22 March 2016 sought that the jurisdictional issue as to whether the applicant and the respondent were living in a bona fide domestic relationship be determined and that the respondent pay the costs of that application. This application came before me on 25 July 2016 where I determined that the matter should remain listed in February 2017 for a contested hearing on the jurisdictional issue.
On 22 February 2017 the proceedings were adjourned for directions on 20 September 2017 and listed for a two-day final hearing commencing on 26 February 2018. Trial directions were made and by consent a notation was made stating that “the parties agree that a de facto relationship existed between the applicant and the respondent pursuant to section 90RD(2) of the Family Law Act 1975.” The parties also agreed to attend private mediation and obtain valuations for any assets where a value was not agreed.
On 19 September 2017 the Directions Hearing was administratively adjourned by consent to 31 January 2018.
On 30 January 2018 further consent orders were made in chambers vacating the Directions Hearing that was listed for the following day and adjourning the matter for mention on 12 February 2018. The parties were to attend a private mediation prior to 10 February 2018 with Mr C and to arrange for the valuations of any assets which remained in dispute.
The matter came before me on 12 February 2018 for Directions Hearing. This was the first time that the issue of a joinder application was raised in Court. I directed that any applications in a case by third parties be filed by 22 February 2018 with a notation that if such application in a case was filed, the trial listed for 26 and 27 February 2018 may be vacated.
On 26 February 2018 I adjourned the joinder application and issue of costs for a contested hearing on 24 April 2018. I made directions for filing of written submissions and further documents to be relied on, and ordered the applicant to file a schedule of costs she sought for costs thrown away.
I listed the matter for hearing before me on 13 April 2018 with respect to Mr G’s objection to the subpoena issued to him, as the respondent’s former solicitor at Lander & Rogers, both to provide documents and give evidence as he was unavailable on 24 April 2018 due to him being on leave. I made orders for him to produce his file on the condition that it was not to be inspected by any parties or the Court without further argument. I further excused him from attending court on 24 April 2018 and reserved his costs.
I heard argument with respect to the joinder application, issue of waiver of privilege and costs on 24 April 2018 and reserved my decision. On that day the respondent’s other former solicitors, Betty Zervas and Theodore Zervas from Stonnington & Zervas, attended Court in answer to subpoena directed to them to produce documents and give evidence. They produced their file but also raised the privilege argument and sought that their costs be reserved. They were then excused from further attendance.
The asset pool
Assets
$
Property A
800,000
Property B1
400,000
Property B2
850,000
Property B3
850,000
Property C
1,000,000
Applicant’s properties in (country omitted)
E112,500
Total Assets
4,012,500
Liabilities
Mortgage on applicant’s properties in the (country omitted)
E41,000
Money owed by applicant to the respondent as a result of the criminal proceedings
56,000
NET ASSETS
3,915,500
The five Australian real properties are in the respondent’s sole name.
It is now the respondent’s case that he only has an equitable interest in one-fifth of the Property B properties and holds the rest on trust for his mother and siblings.
The applicant owns two residential units in the (country omitted). In her financial statement she estimates that they are worth $112,500 and are subject to a mortgage of $41,000. She also owes the respondent $56,000 as a result of the criminal proceedings.
The applicant claims she has spent about $235,000 in legal costs to date. The respondent says he has spent about $160,000. The parties’ costs relate to the criminal proceedings as well as these proceedings.
The Chilcott family arrangement
In 1980 the respondent and his parents started a small family business. The respondent says that his brothers became involved in the business over the next couple of years once they finished school.
At [9] of his written submissions the respondent says that he held a 50% interest in Business 1 and his parents held the other 50% interest, but then he says that the five family members were beneficial owners in equity.
It is not explained how the brothers have an equitable interest if they did not have an interest in the business, given that the respondent says he owned 50% and his parents 50%, and whether or not there was any payment to the respondent for his interest in the business when he ceased his involvement in it. The respondent’s lawyers said that he will provide further evidence as to this at the trial. The respondent will need to provide that evidence much earlier.
The business quickly expanded and the respondent’s parents and his siblings worked full time in it.
The respondent says that the business purchased four blocks of land in Property B in 1985 and 1986. He says that the four blocks of land were registered in his sole name.
The respondent annexes documents to his March 2018 affidavit showing funds from Business 1 being used towards the purchase of the Property B properties in 1985.
The respondent says he stopped working in the business in 1987. His brothers and parents continued to work in the business. He annexes a series of tax returns for the business for the years ending the 30 June 1981 which shows the respondent’s name after the box for ‘name of wife – husband – partner – trustee’. The first tax return describes the business as a business and includes a balance sheet at page 420 of the affidavit which shows current accounts recording the respondent having a 50% interest, his father having a 25% interest and his mother having the other 25% interest. The 1989 tax return for the business records Mr A Chilcott at the section for ‘spouse – partner – trusted – public officer’ where the respondent’s name previously appeared.
The respondent started his own business providing Business 2. He says that when his business needed to expand, the family approved him building a factory at Property B3 as Business A did not need that space.
At page 511 of his affidavit sworn 2 March 2018 he annexes a letter from Mr A dated 15 September 1995 which gives the following information from their records that the partnership between respondent and his parents commenced on 1981 with respondent having a 50% interest and his father and mother having a 25% interest each. The partnership was dissolved on 1987 when the respondent sold his share of the partnership to his brother Mr A Chilcott and Mr A Chilcott and his parents entered into a new partnership. They further state that according to their records the only property bought by the respondent and his parents in the original partnership was the four blocks of land in Property B.[1] The blocks of land were retained by the respondent and his parents when they dissolved their partnership in 1987. They go on to state that the respondent had no interest in the new partnership and that the balance sheets for the new partnership from 1988 to 1994 would not refer to the four properties. They indicated that they did not have any records from the original partnership and could not supply documents prior to 1988. The letter was addressed to the respondent’s then solicitors, presumably with respect to his earlier family law proceedings with Ms H.
[1] They are referring to the properties at Property B. Property B is the adjacent suburb.
The joinder application
Section 92 of the Family Law Act1975 (Cth) empowers the Court to grant leave to a party to intervene in proceedings. A proposed third party needs to establish that they have a personal interest in the proceedings.
Rule 11.03 of the Federal Circuit Court Rules 2001 (Cth) states:
11.03 Person may apply to be included
(1) A person may apply to the Court to be included as a party to a proceeding.
(2) Unless the Court otherwise orders, the application must be supported by an affidavit stating:
(a) the person’s interest in the proceeding or any matter in dispute between the person and a party in the proceeding; and
(b) the orders (if any) that the person will seek if included as a party.
(3) The person must serve a copy of the application and affidavit on each party in the proceeding.
(4) An order for inclusion of the party may be on limited terms.
Neither section 92 nor rule 11.03 place a restriction on at what stage of pending proceedings a person may apply to be joined as a party.
The respondent’s Counsel said that his client had disclosed this Chilcott family arrangement to both his previous family lawyers. He also repeated this submission on 24 April 2018.
I made the following orders on 12 February 2018:
1.The matter remain listed for final hearing on 26 February 2018 at 10.00am (with an estimate hearing time of 2 days).
2.Order 3 of the Orders made 22 February 2017 be amended insofar that the applicant file and serve their one affidavit of evidence in chief and one affidavit of each witness on or before 15 February 2018 and the respondent file on or before 22 February 2018.
3.Any applications in a case by third parties are to be filed by 22 February 2018.
AND THE COURT NOTES THAT:
A. If any third parties file applications in a case, the trial date may be vacated.
The respondent’s mother and two brothers filed their application for joinder on 22 February 2018 and that application is based on the Chilcott family arrangement. They and the respondent say that the respondent holds his interests in the four Property B properties on trust for his family and himself. If this is established at a final hearing then the pool is significantly less than what the applicant understood it to be.
I made further orders on 26 February 2018:
1.The joinder of the proposed second respondents and issue of costs are adjourned for Contested Hearing on 24 April 2018 at 10.00am
2.Leave be granted to the parties to issue more than five (5) subpoenas.
3.All parties, including the proposed Second Respondents, file and serve written submissions on the joinder issue on or before 20 April 2018.
4.The wife provide a schedule of costs she seeks for her costs thrown away on or before 20 April 2018.
5.The husband file and serve any further documents which he seeks to rely upon at the next Court event prior to 5 March 2018.
6.The wife file and serve any further documents which she seeks to rely upon at the next Court event prior to 29 March 2018.
The proposed second, third and fourth respondents relied on the respondent’s evidence as well as their own. Mr A Chilcott filed the primary affidavit for the proposed additional respondents.
The applicant opposes the joinder application. The applicant submits that in the respondent’s responding material to her initiating application filed on 28 March 2014 he made no mention of the Chilcott family arrangement and deposes to the total value of the properties in his financial statement. The respondent filed an application in a case on 8 October 2014 seeking orders with respect to the sale of one of the properties and the refinancing of the properties. Significantly, in that application in a case filed on 8 October 2014, he sought to deal with several of the properties, including selling the Property A property and encumbering the others. He made no mention of his family’s interests in this application in a case. The applicant further points to the affidavit filed by the respondent’s accountant, which also does not make any reference to the Chilcott family arrangement.
The applicant’s Counsel submitted that the respondent and his family have made a piecemeal attempt to collect documents spanning over some 30 years and their submissions were based on untested evidence. Of course the nature of these applications are such that the evidence is untested, as is the applicant and respondent’s evidence. The applicant’s Counsel argues that this arrangement is a sham and an attempt to diminish the pool. He also argues that there may be serious tax and stamp duty consequences for the respondent.
The respondent’s Counsel submitted that the respondent will take responsibility for any tax issue that may arise.
The applicant says that she will suffer significant prejudice if the respondent’s family is allowed to join the proceedings at this stage given that the proceedings have been in Court for more than four years and are at the final hearing stage. She says the proposed respondents have known about these proceedings since 2014 and their affidavits are silent as to why they have not brought the application before now.
The applicant also points to the involvement of the respondent’s family in the criminal proceedings. The respondent’s mother gave a statement to the police in the criminal matter on 8 September 2014 and gave evidence at the committal hearing. Mr B Chilcott (the proposed third respondent) was also present at the committal hearing and the respondent says he assisted him to reconcile his bank accounts. The applicant’s case is that the respondent’s family has had ample opportunity to seek to intervene in the proceedings.
The applicant submits that the joinder application must fail if there would be a significant injustice to the applicant. She also refers to the unsworn affidavit of the respondent and his sworn financial statement provided by the respondent’s lawyers the day before the mediation that make the representations that the respondent is the sole owner of the Property B properties.
The applicant also points to the loan agreements which are annexed at page 399 of the respondent’s affidavit sworn 2 March 2018 and following pages which refer to there being ‘clear title’. The respondent’s Counsel submits that this simply reflects the legal title as there was no mortgage. The respondent says he had the authority from his family to deal with the properties.
The applicant’s Counsel also refers to the application in a case the respondent filed in 2014 and the inconsistency of that application with what he is now arguing. He also points out that the email to Lander and Rogers dated 6 August 2014 predated his application in a case filed 8 October 2014 which was prepared by Lander and Rogers is inconsistent with the case he puts now.
There is no restriction on when a joinder order can be made during the course of pending proceedings. In the case of Bishop and Bishop [2003] FamCA 240, the applicant sought to join the husband’s parents and associated entities as parties in the midst of a part heard trial. In that case the Full Court allowed an appeal by the wife against the trial judge’s refusal to join the husband’s parents and associated entities in circumstances where the proposed parties were asserting that the husband and wife are indebted to them. Southwell and Jane (No 2) [2011] FamCA 734 is another example of a joinder issue arising during the course of a final hearing. In that case an issue arose about the husband having a loan account in his favour in a family discretionary trust and as a result, the wife sought to join the corporate trustee of the discretionary trust.
The fact that a joinder order is made does not necessarily lead to orders being made in favour of the third parties after the trial. That will be a matter for evidence at the trial. Counsel for the proposed second, third and fourth respondent submitted that they only need to show that they have personal interest in the proceedings which may be affected.
I am satisfied that it is appropriate to join the proposed second, third and fourth respondents to the proceedings.
Privilege argument
Having disposed of the joinder argument, I now move to consider the privilege argument.
The applicant argues that the respondent has waived privilege with respect to his communications with both his former lawyers with regards to his assertions that he told them he shared ownership of the Property B properties with his family. The respondent makes these comments at [71], [74] and [162] of his affidavit sworn on 2 March 2018:
71. Despite these proceedings being on foot since 2014, neither of my previous lawyers realised the legal implications or acted upon my advice to them that I shared ownership of the property with my family. Based on documentary evidence from old business records recently discovered, I was at most a 50 per cent partner is Business 1 at the time the time Property B lots were acquired, with my parents both holding a 25 per cent share in each business at that time. After my brothers joined it became a fully owned and family run business. My brothers were younger than me but they worked just as hard. As with all other family activities we became equal participants and owners. I do not know of, from memory, and have not located any written family agreement in relation to the family business. It has been and currently is agreed throughout the family business matters that we all share equal interest in the business.
…
74. I have previously advised my former solicitors that all the land was purchased by the family business Business 1 but they focused on the fact I was the registered owner, and they did not ask me further about this.
…
162. …[I] state that my working relationship with my previous lawyers became unworkable due to concerns about conduct by one of the lawyers towards me. Both of my 2 previous lawyers failed to advise me about the effect of my family’s interest on the Property B [properties]. I would have stayed with the lawyers if not for those concerns that I had.
As a result of these disclosures the applicant’s lawyers issued subpoenas to both of the previous lawyers for the respondent seeking the production of documents and for them to attend Court and give evidence.
The applicant argues that the documents that the respondent is withholding on the basis of privilege are central to the dispute with respect to the existence and nature of the Chilcott family arrangement and the representations that the respondent and the proposed third parties rely on. She argues that is it impossible to test these allegations without the relevant documents of the respondent’s former solicitors being disclosed given that it is his case that he disclosed the Chilcott family arrangement to both his previous solicitors.
The applicant also refers to the financial statements that the respondent affirmed on 8 February 2018 and the draft affidavit the respondent’s lawyers provided to the applicant’s lawyers for the mediation. Those documents are silent about any family arrangements, which were disclosed for the first time during the mediation the next day. In his written submissions dated 12 April 2018 the respondent says his lawyers disclosed the Chilcott family arrangement as soon as they became aware of it at the mediation. The respondent’s current lawyer only received instructions to act for him in January 2018. In those circumstances, particularly given the lengthy history of this matter he should not be criticised for this.
At [14] of the respondent’s written submissions on the joinder issue, the respondent submits that he has not waived privilege with respect to documents held by either of his previous solicitors and that he provided heavily redacted emails to his former solicitors Lander and Rogers wherein he refers to his obligations to his brothers and his parents with respect to those properties and says they were annexed “on the basis of answering any issues related to the supposedly late inclusion of the evidence in this matter, and the issue of costs.” The respondent cannot sensibly or reasonably deny that he has raised the issue of the Chilcott family arrangement very late in the proceedings given that he raised that for the first time at a mediation just a couple of weeks before the final hearing. It is important to note that the applicant commenced these proceedings on 18 February 2014.
At pages 513 and 514 of the respondent’s affidavit sworn 5 March 2018 the respondent annexes a heavily redacted email exchange between himself and his then lawyers Lander & Rogers in August and October 2014. In those emails the respondent refers to not being able to sell the Property B properties as he would be obliged to divide them with his brothers and parents as they contributed to the purchase of the properties. The emails read as follows:
6 August 2014
Hello Mr A Chilcott, I would like to point out,
1. I cannot sell the industrial properties as they are committed to tenants by lease. Also, if they were sold, I would be obliged to divide it with my brothers and parents who originally contributed to the purchases 3 decades ago.
…
17 October 2014
… it is a fact that [the applicant] contributed nothing to my assets. These were acquired years ago by my parents, brothers an me.
The respondent says that he terminated Lander & Rogers services because they would not listen to his instructions about the interests of his family members. He says he also raised the issue with the second firm of solicitors he engaged, Stonnington and Zervas, and was not satisfied with their response and terminated their services in January 2018 and engaged his current solicitor.
The respondent also oversimplifies the impact of the Chilcott family arrangement argument on these proceedings. He says it simply means the pool is smaller. However, he adds significantly to the evidence before the Court in the number of parties. The issue of the size of the pool is also intertwined with the principles the court is required to apply in property proceedings pursuant to section 79(4) and section 75(2).
The applicant’s written submissions dated 12 April 2018 refers to authorities with respect to privilege.
13.The requirement in relation to sustaining a claim of privilege is set out in the following passage in Hancock v Rinehart (Privilege) [2016] NSWSC 12:
“To sustain a claim of privilege, the claimant must not merely assert it; but must prove the facts that establish that it is properly made. Thus a mere sworn assertion that the documents are privileged does not suffice, because it is an inadmissible assertion of law; the claimant must set out the facts from which the court can see that the assertion is rightly made, or in other words “expose…facts from which the [court] would have been able to make an informed decision as to whether the claim was supportable”. The evidence must reveal the relevant characteristics of each document in respect of which privilege is claimed, and must do so by admissible direct evidence, not hearsay.”
15.As recently held by Elliott J in IOOF Holdings Ltd v Maurice Blackburn Pty Ltd [2016] VSC 311 at [220], after applying the principle referred to in Hancock:
“In cases where there is a real controversy about privilege claims, compliance [with the need to sufficiently identify documents] is important because, without it, it is likely an opposing party cannot make any proper assessment as to whether or not privilege claims are properly made.”
The applicant’s Counsel also referred to sections 118, 122 and 123 of the Evidence Act 2008 (Vic) (“the Evidence Act”). As these are Commonwealth proceedings the Commonwealth Evidence Act, not the Victorian Evidence Act applies. The state sections and the Commonwealth sections are substantially the same.
The Evidence Act applies to privilege adduced by evidence in the courtroom and not interlocutory procedures.[2] The common law applies to this situation.
[2] Dr Ronald J Desiatnik, Legal Professional Privilege in Australia (LexisNexis, 3rd Ed, 2016) 279
The respondent has annexed heavily redacted emails between himself and his first lawyers. The comments of Elliott J in IOOF Holdings are relevant here where at [48] he held that a person who partially discloses communications of documents whilst maintaining privilege over the rest or who makes an assertion as part of his or her case that puts communications or contents of privilege documents in issue has acted inconsistently with maintaining the privilege.
The applicant argues that the respondent has acted inconsistently with maintaining privilege through his current pleadings and conduct and annexing redacted documents to his affidavit in support of his claims. The applicant argues that the documents that the respondent refuses to disclose are central to the applicant’s claims that the Chilcott family arrangement is a recent invention and that their disclosure is necessary in order to properly understand the communications and assertion that the respondent is making about the Chilcott family arrangement. The applicant relies on [558] of Maria Saravinovska v Krste (Chris) Sarvinovska, Chris Sarinovska v George Sarivinovksa (No 6) [2016] NSWSC 964:
“because…is so central to the entire alleged transaction said to be embodied in that…all communications concerning that…would be “reasonably necessary to enable the proper understanding of the communication or document” concerning…therefore the Court is satisfied that the waiver extends to all communications (the Solicitor) had that would otherwise be privileged…”
In the Attorney-General for the Northern Territory and Maurice and others (1986) 161 CLR 475 Mason and Brennan JJ said at p 488. Dawson J also observed at [497]:
“It would not be fair to allow privilege to be waived with respect to a portion of a document or a conversation without requiring disclosure of the rest of it, at least if the document or conversation deal with the one subject-matter.”
It is not possible to know whether or not the correspondence deals with one subject matter without the unredacted document being inspected.
It is worth setting out the case extracts the applicant’s Counsel refers to at [23] – [26] of his written submissions filed 12 April 2018:
23. In Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297, the NSW Court Appeal discussed the application of principle in the context of alleged waiver by the making of representations and concluded:
“In a case like the present one in which reliance upon representations is alleged, questions such as the following need to be explored: Were the representations made to the party by or behalf of the opponent? Does the party say that he or she relied upon the representations and altered his or her course of conduct? In reliance upon the representation a central, or merely peripheral, aspect of the part’s case? Is it likely that the party received legal advice that had a bearing on the allegations of reliance? Was it likely that the legal advice might raise doubts as to the allegations of reliance or any losses or damage alleged to have been suffered?
24. In DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 127 FCR 499, 519 [58] (cited with approval in Mullett v Nixon [2016] VSC 129 at [44]), Allsop J said the test for implied issue waiver is:
“the party entitled to the privilege makes an assertion (express or implied) or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication” (emphasis added)
25. His Honour said in the context of where a state of mind is a relevant issue (e.g. in a case of the alleged family arrangement/common intention constructive trust such as the present proceeding):
“The importance of the expression of the views of Asprey J on implied waiver is the role of the party claiming the privilege raising the fact, nature and centrality of what took place in the (otherwise privileged and confidential) communication as an issue in the case.”
26. The decision in Mullett at [46] refers to New South Wales Bar Association v Archer (2008) 72 NSWLR 236 where Hodgson JA said:
“If a party, by pleadings or evidence, expressly or impliedly makes an assertion about the context of confidential communications between that party a legal adviser, then fairness to the other party may mean that this assertion has to be taken as a waiver of any privilege attaching to that communication.”
I accept the submissions that the respondent has raised the issue of his state of mind and with respect to the instructions he gave and the advice he received with the respect to the Chilcott family arrangement.
The respondent did not engage with the case law with respect to legal professional privilege in his written or oral submissions.
Having considered the principles in [63]-[68] above and having regard to the facts and circumstances detailed in [27]-[35] and [56]-[63] of these reasons, I am satisfied that the applicant has demonstrated it is likely there has been a partial waiver of at least some of the communications embodied in the documents falling within the categories of documents under consideration. Presently, it seems entirely unfair to permit the first respondent to maintain the contention that one or more of the second to fourth respondents have some equitable interest in the Property B properties and at the same time maintain a claim to privilege over the communications with the firms of lawyers. The extent of that waiver is a matter that will require further consideration and is addressed by the procedural orders sort out at beginning of these reasons.
Ms H
The applicant’s lawyers have also sought information with respect to the respondent’s family law matter with his former wife Ms H. As the applicant and respondent raised this issue in their written submissions. I will address it here. This is relevant to the issue as to whether or not the respondent raised the Chilcott family arrangement in that settlement as the applicant asserts that this is a recent invention of the respondent and his family. The applicant also seeks information with respect to the respondent’s brother Mr B Chilcott’s relationship with Ms H which took place after the respondent’s divorce from Ms H and also resulted in a family law settlement.
The applicant submits that the respondent’s failure to provide the Court file number in relation with those proceedings has meant that she has been unable to evaluate the allegations made by the respondent with respect to the Chilcott family arrangement. Counsel for the applicant also expressed scepticism about the fact that the respondent and his family have been able to find all sorts of documents dating back to the 1980s but not the terms of settlement between the respondent and Ms H and Mr B Chilcott and Ms H.
The issue of whether or not the Chilcott family arrangement was disclosed in the two settlements with Ms H and the first and third respondent is relevant. The objectionable material in the applicant’s trial affidavit filed 19 February 2018 are contained in [37] and annexure G 2. The paragraph refers to non-particularised conversations with Ms H and several pages of what the applicant purports to be text messages between herself and Ms H in 2013 and 2014. Those are clearly inadmissible. She does not annex the text messages themselves. Even if she did there would be other evidentiary issues including issues of hearsay. If the applicant seeks to lead evidence from Ms H she would need to swear an affidavit and be available for cross-examination. Any further evidentiary arguments can be raised prior to the trial
Costs
The applicant seeks costs and says the late raising of these issues caused her considerable prejudice with further delays in the proceedings but also says that the costs that she has incurred up until now have been wasted as she is now expected to meet a different case and that costs of preparation will have to be incurred again.
From the tone of the respondent’s submissions he seems to complain that it is unfair for him to be criticised for raising this issue late in these proceedings given that his position is that he told his previous lawyers about this issue so he is not at fault for the issue only being raised at the mediation and on the eve of trial. He says to order costs against him would be punitive.
The respondent may have a remedy in another forum with respect to this. This does not detract from the applicant’s complaint about the late disclosure to her of this alleged arrangement and the subsequent impact of costs and delay.
The applicant’s solicitor and Counsel also represented her in the criminal proceedings. The applicant says the issue of costs of the family law proceedings need to be isolated from the criminal proceedings. The applicant’s Counsel also stated that costs the applicant seeks are only with respect to the family law proceedings.
The applicant points out that the respondent served trial material on her lawyers in piecemeal tranches over the course of the weekend prior to the trial date on 26 February 2018, which was another reason the trial could not proceed.
The respondent seeks that costs be reserved. At [35] of his written submissions filed on 20 April 2018, the respondent submits that he encountered real difficulties with his previous solicitors accepting and attending to his “reasonable and relevant instructions in an effective and proper way.” The respondent says that he is not legally trained and acted reasonably and “it would be unfair to penalise the respondent for what he sees as a lack of service and relevant advice from his former solicitors which has contributed to the disruption and delay.” This submission misconstrues the basis of applicant’s claim for costs for the costs thrown away to mediation and trial.
The purpose of such a cost order is not be to penalise the respondent but to compensate the applicant for costs that she has incurred outside of her control due to his late disclosure. As stated above, the respondent may well have a remedy against his former solicitors but that is a matter for another forum to determine.
The better argument that the respondent raises with respect to costs is that he says the substantive issue in the matter will be the applicant’s criminal or unauthorised conduct with respect to the removal of funds. There were separate criminal proceedings with respect to that which the respondent says also contributed to the delay of the finalisation of these proceedings. On 7 December 2015 I adjourned the matter for an interim hearing in February 2017 due to the fact that the criminal proceedings were on foot. This is a much longer adjournment than a matter would normally have had for a threshold issue to be determined. The respondent says the issues with respect to costs is clouded by these other proceedings and that given these factors all costs should be reserved until all the evidence has been considered. The applicant also makes complaints about the respondent’s conduct the in criminal proceedings increasing her costs. I cannot deal with costs arising out of separate proceedings.
The respondent submitted that if costs are to be ordered they should be limited to the costs of the mediation and first day of the hearing.
The Counsel for the second, third and fourth respondents acknowledged that a costs order may be made if they are successful in their application given the prejudice to the applicant in the proceedings. I will give the respondents the opportunity to be heard as to the timing for payment of the costs and whether or not the costs should be borne by the first respondent solely or jointly with the other respondents. Given the applicant owes the respondent funds from the criminal proceedings it may be that if the first respondent is liable for costs that it could sensibly be offset against that amount.
I do not accept the applicant’s arguments that her costs thrown away include all the preparation in the family law matter from the commencement of the proceedings to date.
To make a costs order at all is a departure from the ordinary rule. Schedule 1 of the Federal Circuit Court Rules 2001sets out a scale of costs to be applied in family law proceedings and in general Federal Law proceedings. It is an events based costs scale. Part 21 of the Rules deals with costs and disbursements. The applicant prepared costs with respect to the mediation and trial on a solicitor/client basis and in accordance with the Family Court scale of costs but not the Federal Circuit Court scale of costs.
In order for the Court to make a costs order in favour of the parties there must be justifying circumstances as set out in section 117(2A) of the Family Law Act 1975.
What is clear in this case is that the applicant incurred costs of the mediation in circumstances where late in the day the case changed significantly. That having happened there was no prospect of the mediation resolving issues or even narrowing issues.
I am satisfied that it is appropriate to make an order for costs with respect to the mediation. I am not satisfied that there should be indemnity costs ordered. Indemnity costs should only be ordered in exceptional cases[3]. It is important to bear in mind that making a costs order at all in a family law matter is a departure from the usual rule.
[3] See Prantage and Prantage [2013] FamCAFC 105.
The applicant’s costs of the mediation are:
a) Half of the mediator’s fees;
$1650
b) Venue hire;
$350
c) Counsel’s attendance; and
$3,000
d) Instructing solicitor attendance
$3,195.05
Total:
$8,195.05
I have given serious consideration as to the appropriateness of ordering costs of the trial thrown away. Again given the timing of the issues it was reasonable for the applicant and her legal advisors to prepare for the trial. Indeed the respondent and his advisors took the same view as borne out by their filing the trial material. I am satisfied that it is appropriate to order costs of the first day of the trial. I will not order costs of preparation or attendance of a second day as it was not necessary to attend Court on the second day and not all the preparation will be wasted. Counsel’s fees for attending the first day of the hearing are $3,000. In this regard, I refer to the comments of Judge Scarlett in Kemp & Wilkinson (No.2) [2015] FCCA 2268 at [28] and [29] and rule 21.15 of the Federal Circuit Court Rules 2001. The argument was concluded before lunch on that day. I propose to allow solicitor’s fees of $1,081 in accordance with item 13(b) of the Federal Circuit Court scale. It was reasonable for Counsel to appear as advocate and I will allow Counsel’s fees at $3,000.
In the circumstances of the case I find it is proper to quantify the applicant’s costs thrown away for the mediation and the court appearance at the first day of the trial in the sum of $12,276.
I will hear from the parties on the next occasion as to when the costs should be paid and in what proportions by the respondents.
Costs with respect to the subpoenas
The subpoenas issued to Lander & Rogers and Stonnington & Zervas were objected to on the basis of privilege and that they were a fishing expedition. The solicitors were obliged to raise the privilege argument because the ability to waive privilege lies with the client.
The applicant also argues that the respondent should be responsible for Mr G’s costs in answering the subpoena. The respondent’s lawyers did not advise the applicant’s lawyer that he had the Lander & Rogers file until well after the subpoena was issued. The respondent also did not answer the earlier notice to produce. The applicant’s lawyer wrote to the respondent’s lawyers and Lander & Rogers on 24 February 2018 and neither responded advising the applicant’s lawyer that the file had been provided to the respondent’s current lawyers. The quantum that Mr G seeks is another issue. He has provided costs set out on a solicitor client basis and also in accordance with the Family Court scale of costs but not in accordance with the Federal Circuit Court scale of costs. Looking at some of the costs charged, such as senior and junior solicitor attending at court, they seem excessive. The subpoenaed party is entitled to reasonable costs.
There is also the issue of the costs of Stonnington & Zervas, including for their attendance at Court to give evidence. They will be given the opportunity to particularise their costs. They attended court pursuant to the subpoena requiring them to give evidence as well as produce documents and were at court all morning. It is reasonable for them to be able to recoup their reasonable costs associated with this.
Next steps
It would now be necessary for the respondent to identify the documents which are subjected to the waiver of privilege so that they can be inspected by the other parties.
I am concerned about the future conduct of the case and the likely court resources the case will require given the number of parties involved in issues in dispute. To assist with this, I am going to direct that the parties file a trial plan setting out the number of witnesses each will seek to call, as well as the likely time that be necessary for cross-examination of witnesses and submissions.
At the hearing of this matter the parties indicated that they each have computer experts who were involved in the criminal proceedings that they will seek to call. They also seek to call accounting experts. The respondent also seeks to call a psychologist. It will be necessary to obtain valuation evidence. In addition to this there will be the evidence of each of the parties.
The estimate the parties gave at the hearing of these interlocutory issues was four days. Given the nature of the issues in dispute I am concerned that this estimate is unduly optimistic. The Federal Circuit Court is a busy trial court with a high number of cases in its dockets. I am mindful of the protocol between the Federal Circuit Court and the Family Court. I am also mindful of the length of time these proceedings have been before this court and the desirability of identifying matters that are appropriate for transfer between courts early in the proceedings. The circumstances of this case did not make that possible. Before making the decision as to whether or not it is appropriate to transfer this matter, I will give the parties the opportunity to submit the trial plan to make further submissions with respect to this and any other interlocutory issues.
I will direct my chambers send of copy of these reasons and the orders to Lander & Rogers and Stonnington & Zervas.
I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Judge Harland
Date: 29 June 2018
CORRECTION
The fourth respondents name was changed to MS C CHILCOTT
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