Hackett and York & Anor
[2020] FamCA 939
•13 October 2020
FAMILY COURT OF AUSTRALIA
| HACKETT & YORK AND ANOR | [2020] FamCA 939 |
| FAMILY LAW – COSTS – Between parties – where de-facto wife and third party seek a costs order in their favour as against the de-facto husband – where the de-facto husband has been wholly unsuccessful on two occasions to have a subpoena issued to the third party – order for indemnity costs made in favour of third party to be paid by de facto husband – order for fixed costs made in favour of the de-facto wife to be paid by the de facto husband |
| Family Law Act 1975 (Cth) s 117(2), s 117(2A) Family Law Rules 2004 r 15.23 |
| Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70 Kohan & Kohan (1993) FLC 92-340 Munday v Bowman (1997) FLC 92-784 Nada & Nettle (Costs) (2014) FLC 93-612 Penfold v Penfold (1980) 144 CLR 311 Phillips & Hansford [2020] FamCAFC 28 Prantage & Prantage (2013) FLC 93 Rankin & Rankin (No. 3) [2019] FamCAFC 133 Sfakianakis & Sfakianakis [2019] FamCAFC 54 Stephens & Stephens and Anor (Enforcement) (Costs) [2010] FamCAFC 172 Worth & Worth (No. 2) [2019] FamCAFC 126 |
| APPLICANT: | Mr Hackett |
| FIRST RESPONDENT: | Ms York |
| SECOND RESPONDENT: | Ms Tate |
| FILE NUMBER: | SYC | 3560 | of | 2018 |
| DATE DELIVERED: | 13 October 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Henderson J |
| HEARING DATE: | 7 October 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Breeze |
| SOLICITOR FOR THE APPLICANT: | B Hayward & Co |
| COUNSEL FOR THE FIRST RESPONDENT | Mr Schonell |
| SOLICITOR FOR THE FIRST RESPONDENT: | Horton Rhodes Legal |
| COUNSEL FOR THE SUBPOENAED PARTY | Ms Reid |
| SOLICITOR FOR THE SUBPOENAED PARTY | Barry Nilsson Lawyers |
IT IS ORDERED THAT
The husband pay the costs of B Pty Ltd on an indemnity basis in relation to the subpoena hearing with Registrar Hayward, the Review and the costs hearing in the sum of $27,215.11 with such sum to be paid within 12 months of the date of these Orders.
The costs incurred by B Pty Ltd in complying with the subpoena of $6,152.30 are to be paid within 28 days.
The monies standing in the husband’s solicitor’s bank account of $3,630 are to be transferred to the trust account of the solicitors acting for B Pty Ltd forthwith in reduction of the costs in Order 2 herein.
The husband is to pay the costs of the wife in the sum of $20,000 with such sum to be deducted from his share of the final property settlement.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hackett & Tate has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
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 r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3560 of 2018
| Mr Hackett |
Applicant
And
| Ms York |
First Respondent
And
| Ms Tate |
Second Respondent
REASONS FOR JUDGMENT
This is an application by the de facto wife, who I shall call the wife for ease, and a company, B Pty Ltd, in relation to costs they have incurred in successfully having a subpoena issued by the respondent de facto husband, Mr Hackett, who I shall call the husband for ease, to B Pty Ltd to produce documents set aside. The husband resists the application.
Ms Reid of Counsel acted on behalf of B Pty Ltd, Mr Schonell on behalf of the wife and Mr Breeze on behalf of the husband.
The material I read was as follows.
For B Pty Ltd:
a)Written submissions prepared by Ms Reid of Counsel;
b)An Application in a Case filed 31 July 2020;
c)An Affidavit of Ms Tate, the sole director of B Pty Ltd and the annexures to that Affidavit;
d)Exhibit A, a letter dated 15 July 2020 from B Pty Ltd’s solicitors to the husband’s solicitors seeking to compromise or settle their costs application.
For the wife:
a)Case outline prepared by Counsel Mr Schonell;
b)Affidavit of the wife together with annexures and a Financial Statement sealed 30 July 2020;
c)Application in a Case sealed 7 August 2020.
For the husband:
a)Case outline of Mr Breeze;
b)Response to the Application in a Case sealed 16 September 2020;
c)Affidavit of the husband together with annexures sealed 16 September 2020 and a Financial Statement of the same date;
d)Affidavit of the husband’s mother, Ms Hackett wherein she deposes she has lent her son $50,000.
A short chronology in relation to this particular application
The Husband first issued his subpoena to B Pty Ltd on 9 August 2019. They filed a notice of objection on 22 August 2019.
B Pty Ltd sent a letter to the husband’s lawyer on 3 December 2019 setting out the extensive costs that will be incurred in complying with the subpoena.
On 5 December 2019, the matter comes before Judge Neville. Her Honour made an order that $3,630 be placed into the husband’s lawyer’s trust accounting pending determination of the costs of B Pty Ltd in complying with the subpoena.
The matter was transferred to the Family Court.
On 3 February, the matter was listed before Registrar Hayward for directions.
On 21 April 2020, B Pty Ltd files an affidavit of Ms Tate and submissions in support of the notice of objection.
On 8 May 2020, Registrar Hayward by order sets the subpoena aside.
On 19 May 2020, the matter is listed before Registrar Hayward for directions, and I note that the wife had taken part in these compliance directions and filing of material and notices of objection to subpoena as well as B Pty Ltd.
On 21 May 2020, the husband files an application in a case seeking to review Registrar Hayward’s decision.
Both the wife and B Pty Ltd file material in support of the of the Registrar’s decision.
The matter is listed for hearing before me and on 19 June 2020.
On 3 July 2020, I delivered Judgment dismissing the subpoena to B Pty Ltd in its entirety.
Now, the costs applications are filed after an unsuccessful review by the husband of a decision of a Registrar, Registrar Hayward, made 8 May 2020, to dismiss the subpoena addressed to B Pty Ltd.
I heard the review on 19 June 2020 and upheld the learned Registrar’s decision in its entirety. Thus, the husband has been unsuccessful on two occasions seeking to pursue production and inspection of material from B Pty Ltd. Additionally, on 3 July 2020, I ordered all documents produced by B Pty Ltd to be returned to the company, as the subpoena had been dismissed.
The wife seeks initially that her costs on an indemnity basis be paid by the husband in relation to both unsuccessful applications or, if not, party-party, or the Court assess the cost to be paid as a lump sum. The wife’s indemnity costs amount to $24,565, together with the cost of running this application of some $7,500.
Similarly, B Pty Ltd seeks their costs be paid on an indemnity basis or, again, party-party basis, or a lump sum as assessed by the Court. B Pty Ltd’s costs on an indemnity basis are $24,158.66, together with the cost of running the application of $5,500.
Additionally, they seek costs in full of complying with the subpoena and the production of the documents, including breaking them up into privileged and non-privileged material which costs are $6,152.30.
The costs sought by each of the Applicants deal with all Court appearances and preparation before the Registrar and the review before me, together with the cost of the costs application, this application.
It is correct that in the Family Court of Australia each party bears their own costs. However, the Court retains a discretion to order costs be paid by one party pursuant to section 117(2) of the Family Law Act 1975 (Cth) (“the Act”). It is a correct statement of law that indemnity costs are only ordered in exceptional circumstances.
The first task is to determine whether or not to exercise the discretion under section under section 117(2) of the Act and order costs. The relevant matters I must have regard to under the Act are at section 117(2A) ;
(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 the party;
(c)the conduct of the parties to the proceedings including, without limiting the generality of the foregoing, the conduct in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of fact, production of documents, and similar matters;
(d)whether the proceedings were necessitated by the failure of a party 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 matter and the terms of any such offer; and
(g)such other matter as the court considers relevant.
Addressing these factors
No party is in receipt of legal aid. B Pty Ltd is in a superior financial position to that of the husband and wife. The husband pleaded significant impecuniosity, pleading he is indebted to his parents in the sum of $50,000, unable to access $98,000 of funds held by O Bank, which total $111,000, as he must attend the branch in Suburb P to withdraw the money, and he cannot do so because he is overseas and COVID-19 has impacted on his income and business.
However, in his financial statement sworn 20 January 2020, he disclosed an income of $4,768 per week, expenditure of $2,428 and assets of some $4 million, and he was in a secure financial position. The husband did not explain how he is in now such a parlous financial position nor what has occurred to his interest in real estate at Suburb Q, which forms part of his wealth.
The law is clear: impecuniosity is no barrier to a Court making a cost order. In the matter of Nada & Nettle (Costs) (2014) FLC 93-612, the Full Court, consisting of May, Ainslie-Wallace and Austin JJ, held at [11]:
That a party is impecunious, even indigent, is not a bar to the making of a costs order if the Court is otherwise of the opinion that such an order ought to be made.
The wife’s financial position in her financial statement is she earns $1,538 a week, has expenditure of $1,739, owns some $13,000 in assets and has about $255,000 in superannuation.
The conduct of the husband in this matter looms large in my determination today, as it did in the Judgment of 3 July 2020, where, from paragraph 9 onwards, I say as follows:
9. It is difficult for me to see the relevance of the documents sought in the subpoena to the husband’s application for 106B orders, given the husband knows the wife transferred a number of shares, what the wife asserts was the value of those shares at the time of transfer. Even if the husband disputes the value of the shares at the time of transfer and currently their value, the subpoenaed documents from an entity not party to the proceedings to produce tax returns, ledgers, contracts for sale, and purchase financial reports for the last four years would not assist him, as I see it, to satisfy the Court that the wife’s transactions ought be set aside.
10. The precise value of the assets transferred does not per se bear directly upon a 106B argument, particularly whereas here there is an indicative valuation of the assets transferred, even if that be disputed as to value. The Court does have an indication of the value assets transferred and, as I see it, that would be sufficient, if required by the Court, in running a 106B application.
11. I accept ultimately, if the husband is successful in his 106B application, the Court may require a valuation of the shares at the time of transfer, as well as their value at today’s date, in order to effect a just and equitable adjustment of the parties’ property. If that be the case, and in the absence of agreement, those values will be ascertained by a valuation prepared by an expert in the area.
12. I accept this expert may require additional information to that which has been provided by the wife and is to be provided by the second respondent and if upon request that information is not forthcoming, they may be required to issue a subpoena to obtain that information to entities such as B Pty Ltd, however, that’s not the stage the matter is at currently. Given that the second respondent, Ms Tate, has now joined the proceedings, she too must provide disclosure pursuant to the rules.
13. Once that disclosure is provided, it will be a matter for the husband to ask for the particulars or details of documents disclosed, if he chooses to do so. If that disclosure proves unsatisfactory or is not fulsome or forthcoming, this may support an argument by the husband to issue subpoenas to entities such as B Pty Ltd. The matter has not reached this stage at this time either.
14. I share the concern of the wife, second respondent, and B Pty Ltd that the documents sought bear no relevance to the husband’s claim at this time, raises spectre of a fishing expedition, and that as the law is that the issue of a subpoena should not be for the purposes of discovery – support for that proposition is Degraff & Degraff [1991] FLC 98-224 – this subpoena should be set aside.
Now, going back to the factors under 117(2) of the Act. The proceedings by the husband were not necessitated by a failure of a party to comply with the orders of the Court.
Relevantly, the husband has been wholly unsuccessful on two occasions in the same proceedings or the same application.
Relevantly, B Pty Ltd made a written offer to compromise its claim on 15 June 2020, accepting $16,911.06 for their legal costs and costs for producing the material at $3,603, and this offer was not accepted by the husband.
The wife made two written offers to compromise the cost issue on 2 and 7 July 2020 in the sum of $22,314.60, which was rejected by the husband.
Given the husband’s conduct in his refusal to even make a counter-offer to the offers made by the wife and B Pty Ltd, and his refusal of these offers, combined with him being unsuccessful on two occasions in the same application on the same facts and circumstances, I find these matters justify my departing from the usual order and I will exercise my discretion to make a costs order.
The issue of the quantum and nature of any cost order I make must now be determined.
The power to award costs involves a wide exercise of discretion and the breadth of that power is not limited, as was recognised in the matter of Penfold v Penfold (1980) 144 CLR 311 (“Penfold”). The Court need not be satisfied that all of the factors under 117(2) of the Act are satisfied before making a costs order. Rather, the Court is required to find a justifying circumstance or circumstances as an essential preliminary step before making any costs order. These is voluminous case law in relation to costs and indemnity costs. Some of these cases are Prantage & Prantage (2013) FLC 93 (“Prantage”), Stephens & Stephens and Anor (Enforcement) (Costs) [2010] FamCAFC 172 (“Stephens”), Penfold, and Kohan & Kohan (1993) FLC 92-340 (“Kohan”).
In the decision of Kohan, the Full Court, consisting of Strauss, Lindenmayer and Bulley JJ, found the following:
In an appropriate case, the Court has discretion to order costs on an indemnity basis and such costs may be awarded where they have been incurred under a cost agreement which departs from the usual scale of costs.
Their Honours went on to say:
However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale, and what its likely impact will be on the financial position of each of the parties.
The costs sought by B Pty Ltd and the wife are a significant departure from the scale. However, as their Honours set out in Kohan:
…where the justice of the matter requires, the Court may make such orders as to costs as it considers just. It may depart from the scale of costs prescribed under the rules, but 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.
The principle is set out in the decision of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 (“Colgate-Palmolive”) at [16] is also relevant:
Are there special or unusual features in a matter to justify a departure from the norm, being an order for indemnity costs?
His Honour Sheppard J went on to say in that matter at paragraph [24]:
The ordinary rule is that, where the Court orders the costs of one party to litigation be paid by another party, the order is for payment of those costs on a party-party basis.
This has been settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation…or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it.
In consequence of the settled practice which exists, the Court ought not usually make an order for payment of costs on some basis other than party-party. The circumstances of the case must be such as to warrant the Court in departing from the usual course.
His Honour observes some of those circumstances to be, at [24],
Irrelevant allegations of fraud;
Misconduct that causes the loss of time to the Court and other parties;
Whether proceedings were commenced or continued for an ulterior motive;
The undue prolongation of a case by groundless contention; and
Wilful disregard of known facts or clearly established law.
Four recent decisions of the Full Court of the Family Court deal with the issue of costs, namely, Phillips & Hansford [2020] FamCAFC 28 (“Phillips & Hansford”), Rankin & Rankin (No. 3) [2019] FamCAFC 133 (“Rankin & Rankin), Worth & Worth (No. 2) [2019] FamCAFC 126 (“Worth & Worth”), and Sfakianakis & Sfakianakis [2019] FamCAFC 54 (“Sfakianakis & Sfakianakis”) and each are relevant to this matter and deal with the broad discretion of the Court in relation to costs.
That broad discretion is to award costs on an indemnity basis, solicitor-client, party-party, scale, costs as assessed by the Court, or a taxation with a Registrar or a third party. As always in Family Law proceedings, each case turns on its particular and unique facts. The category of cases in which indemnity costs may be awarded are not closed. Costs on this basis have been ordered in matters where an application is pursued with wilful disregard of known facts, clearly established law, or where there has been an imprudent refusal of an offer to compromise, as stated in Colgate-Palmolive.
In relation to pursuing an application with wilful disregard to known facts or clearly established law, the decision of Phillips & Hansford, Rankin & Rankin, Worth & Worth, and Sfakianakis & Sfakianakis reiterate that indemnity costs may be awarded where the applicant, properly advised, should have known he or she had no chance of success and where a party persists in what should on a proper consideration be seen as a hopeless case.
This principle was referred to by French J in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70. In Worth & Worth their Honours quoted from Justice Holden’ s decision in Munday v Bowman (1997) FLC 92-784 (“Munday”) wherein his Honour sets out the following principles relevant to costs at paragraph 9:
a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have note it had no chance of success. In such cases, the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts.
b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud.
c)Evidence of particular misconduct causing loss of time to the Court and other parties.
d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
e)An imprudent refusal of an offer to compromise.
As their Honours quote in Worth & Worth from Sheppard J in Colgate-Palmolive at paragraph 17:
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 party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course.
Now, it’s trite to say the evidentiary onus is upon the wife and B Pty Ltd to satisfy me, using Sheppard Js words, “that the circumstances of a case must be such as to warrant the court in departing from the usual course.”
The options available to me in determining the cost order to be made are fixed cost at scale, or party-party, or solicitor-client, or as assessed by me in the exercise of my discretion, special costs order, or costs on an indemnity basis.
Their Honours refer to “special costs orders” in Sfakianakis & Sfakianakis at paragraph 9:
The ordinary position in proceedings under the Family Law Act is each party bear his or her own costs (s 117(1)). Where the Court is of the opinion that the circumstances justify in so doing, the Court may make such order as to costs as it considers just (s117(2)) . Thus, an order may be made for the payment of costs on an indemnity basis, although such orders are exceptional.
And at paragraph 10:
It is, however, a mistake to think that if a costs order is made, that the order can only be on a party-party basis or on an indemnity basis. The words “such order as to costs…as the Court considers just” permit the Court to fashion an order that is apt to the circumstances. One such well-known example is an assessment on a trustee basis, which is more generous than party and party costs but falls short of an indemnity. Orders for partial indemnity or for a particular period are obvious possibilities. The Court may also fix costs in a particular sum, taking account of all relevant circumstances; that type of order too is neither one for party and party costs nor an indemnity costs order. For convenience, in these reasons we shall refer to such orders as a "special costs order".
As their Honours opine, it is a broad description.
I will deal with the applications of B Pty Ltd and the wife separately.
B Pty Ltd is not a party to the proceedings and only became involved due to the subpoena issued against it. The Court acts to protect the interests of an innocent 3rd party, such as B Pty Ltd, who have become involved in private inter partes litigation involuntarily, as is the case here. The wife is a party to the proceedings and, as Mr Breeze submitted, the subpoena was not directed to her, although she had a right to intervene, as she did. It is correct that, at first blush, this may not have been her fight.
Dealing with B Pty Ltd’s claim first. The only reason B Pty Ltd was involved and incurred legal fees is that the husband issued a subpoena against them seeking documents which I found had little relevance to his application, being a 106B application to set aside transfer by the wife of shares in a company associated with the B Pty Ltd Group.
B Pty Ltd was then required to attend five Court appearances in December 2019, February 2020, 19 May 2020, 29 June 2020, 3 July 2020, and, additionally, 7 October for this costs application.
Applications, affidavits, and written submission have all been prepared for the appearances before Registrar Hayward when the husband’s subpoenas were dismissed and again for the review before me wherein I upheld the Registrar’s decision. Lawyers on behalf of B Pty Ltd were required to consider the material filed by the husband, including responding to lengthy written submissions of some 13 pages in contravention of the Registrar’s direction that it be limited to five, and then again considering the written submissions of 36 pages at the hearing of the review before me.
B Pty Ltd narrowed its objection to legal professional privilege for some documents in the hearing before me. Ms Tate filed an affidavit to support that claim. This was a time-saving and efficacious matter by which B Pty Ltd pursued its rights. However not only did the husband not accept this clear, credible evidence and reality that privilege did attach to the documents enumerated, they sought at the hearing before me to claim that, in so doing, B Pty Ltd had waived legal professional privilege under sections 118 and 122(3) of the Evidence Act 1995 (Cth). That submission was entirely fallacious and without merit, as those two sections of the Evidence Act 1995 (Cth) apply when evidence is being adduced, a stage this proceedings had not reached as what was being sought was production and inspection only.
Additionally, I found the submission that, because Ms Tate had in the schedule attached to her affidavit, clearly identified the documents to which privilege attached that she had disclosed the substance of the evidence of the documents, and therefore waived privilege. At paragraph 25 of my Judgment of 3 July 2020, I said:
Ms Tate sets out in the schedule to her affidavit at exhibit T3 the documents to which B Pty Ltd claims privilege, as does she, and it is clear to me from a reading of that material that the documents came into existence solely for the purpose of obtaining legal advice in relation to the prospective sale of a property.
At paragraph 26:
I reject the submission of Mr Lloyd [of Senior Counsel] that because Ms Tate had in the schedule clearly identified the documents to which she claims privilege, that this in some way…is a disclosure by her of the substance of the evidence of the documents and therefore the privilege has been waived. The schedule merely clearly identifies the documents from which privilege has been claimed.
27. Having read the schedule, I do not have any idea of the substance of the evidence of the documents, rather a descriptor of what they are and what they may relate to. The description of the documents was necessary and proper to allow the Court to identify the documents for which privilege is claimed and why. In these circumstances I reject the submission that B Pty Ltd has disclosed the substance of the evidence in the documents for which privilege is claimed.
Going now to determine whether I order indemnity costs. In relation to the privileged documents, the husband, properly advised, should have known that his claim in relation to those documents was doomed to failure. This is borne out in the fallacious argument run by his Counsel that sections 118 and 122(3) of the Evidence Act 1995 (Cth) applied when those sections did not and, secondly, that privilege had been waived due to Ms Tate’s fulsome affidavit identifying the documents over which privilege was sought as set out in paragraphs 25, 26 and 27 of my Judgment of 3 July 2020.
In relation to the remainder of the documents sought in the subpoena and the subpoena as a whole, one of the grounds for setting aside the subpoena was that the documents sought bore little relevance to the husband’s claim under section 106B of the Act. As I said in my Judgment at paragraphs 11 to 13, if he was successful in his 106B application, documents sought in the subpoena to B Pty Ltd may have become relevant if disclosure was not forthcoming. This was clearly a concern for the Registrar and she and I were ad idem in that the documents sought were not necessary or relevant to his claim.
A further aspect that caused me concern in my Review Application was that the subpoena had been issued at far too early a stage in proceedings and that discovery, request for particulars and the like had not yet been provided by the intervenor, Ms Tate. That this was correct is borne out by the fact that one of the arguments the husband raises now against costs being ordered against him is that documents requested in the subpoena, other than the privileged documents, have now been provided to him by way of disclosure since Ms Tate joined the proceedings.
This was the tenet of my Judgment: the husband had to wait until such time as disclosure was provided by all parties in the proceedings prior to issuing the subpoena to a non-party. I accept Ms Tate was not joined until 5 June 2020 and that Registrar Hayward’s decision was made on 8 May 2020 and this would not be a relevant consideration for her. However, it was a relevant consideration for me on the review hearing that took place on 19 June 2020.
As soon as Ms Tate joined the proceedings, the husband, if properly advised, should have known his claim for access to the documents in the subpoena in both the privileged and non-privileged category was doomed to failure, as Ms Tate then had, as of 5 June 2020, an obligation of full and frank disclosure, which she has apparently carried out fulsomely. Yet the husband persisted in the review that the entirety of the documents sought in the subpoena, including the clearly privileged documents, be produced, and the husband, properly advised, should have known his application in relation to the entirety of the subpoena at the time of the review hearing before me was doomed to failure.
In Worth & Worth, at [9], their Honours quote from Holden J’s decision in Munday the categories relevant to costs orders which are: where an action has been commenced and continued in circumstances where a party, properly advised, should have known they had no chance of success; making allegations of fraud; evidence of particular misconduct causing loss of time to the Court; making of allegations which ought never to have been made or the undue prolongation of a case by groundless contention; and an imprudent refusal of an offer of compromise.
At the initial hearing before the Registrar, the husband, properly advised, ought to have known the subpoena he issued to B Pty Ltd would be set aside due to the claim for privilege, the wide scope of the documents sought in the subpoena, and the relevance the documents had to his application before the Court.
Secondly, the husband imprudently failed to accept an offer on 15 July 2020 to compromise the claim for costs now made by B Pty Ltd to $16,911, being 70 per cent of the legal fees incurred, and compromise the claim for costs of producing the documents at $3,804 when the claim is now for $6,152. Additionally, accepting this offer would have resulted in there being no application for costs of the Second Respondent of this hearing.
The husband, properly advised, should have known that, once Ms Tate was joined to the proceedings, the review was futile and the Registrar’s decision would be upheld due to Ms Tate’s obligation of full and frank disclosure, and that, by pursuing the review in these circumstances and submitting to the Court that B Pty Ltd had waived privilege on erroneous grounds, the proceedings were unduly prolonged and unnecessary costs were incurred. In these circumstances, I find that the conduct of the husband takes this matter into the special category and there are grounds justifying the Court departing from the usual order of party-party costs.
I will order the husband pay B Pty Ltd’s costs on an indemnity basis for the contested hearing before the Registrar in May 2020 and the review application before me on 19 June 2020 and the costs of this cost hearing before me in the sum of $5,500. These costs total $27,215.11. I accept the husband is currently overseas and has difficulty accessing funds. In these circumstances where it may be some time before the husband can return to Australia due to the current border restrictions, I will give him 12 months to pay this costs order.
Going now to the cost involved in B Pty Ltd producing documents sought which amount to $6,152, the scale costs, I note, are $5,095.79. There is $3,630 in the husband’s trust account to defray those costs of production of the documents. That money is still available and that money will be forwarded to the solicitors for B Pty Ltd forthwith by the solicitors for the husband. These costs are in a separate category to indemnity costs and are governed pursuant to rule 15.23(3) of the Family Law Rules 2004, which provides:
A named person may apply to be reimbursed if the named person incurs a substantial loss or expense that is greater than the amount of conduct money or witness fee payable under this rule.
B Pty Ltd put the Second Respondent on notice very shortly after the subpoena was served of the significant expense and cost in complying with the voluminous documents to be produced. In circumstances where B Pty Ltd is a third party to the litigation, I will order costs incurred by that organisation in complying with the subpoena, which has been dismissed by the Registrar and a Judge of this Court, totalling $6,152.30 be paid by the husband within 28 days and money standing in his lawyer’s trust account in the sum of $3,630 be transferred forthwith to those lawyers to defray in part, compliance with the costs orders I have made today.
Going now to the wife’s claim for costs. I accept the submission of Mr Breeze that the subpoena was not directed to the wife. However, the wife clearly had an interest in this subpoena, as the claim by the husband is that she has acted improperly in transferring her shareholding in a company to a company within the B Pty Ltd Group in 2017, and her interests in relation to the documents sought in the subpoena may well have been different to those of B Pty Ltd. Thus, it was important she had input into this matter at this time and I reject any submission that the fact the subpoena was not directed to her would disentitle her to any costs. However, the wife is a party to the proceedings, unlike B Pty Ltd, who is not.
Part of my reasoning in making an indemnity costs order in relation to B Pty Ltd is that they are not a party to the proceedings and were improperly involved by the husband in a private inter partes dispute with his former wife and they incurred significant costs protecting their rights. This is not a relevant factor in the wife’s case.
In these circumstances, I do not see the conduct of the husband vis-à-vis the wife is so out of the ordinary, so extreme or such a departure from the norm, using the words of Sheppard J in Colgate-Palmolive, that I would exercise my discretion to make an indemnity costs order in relation to the wife’s costs. Although I will not exercise the discretion to make an indemnity costs order, the husband, upon being properly advised, should have known he would not be successful at the hearing before the Registrar, given the clear claim of privilege, the breadth of the subpoena, and that the documents sought were not relevant to his application.
The wife made two offers of settlement prior to the costs hearing, before me, which were rejected. The husband’s actions of unduly prolonging this litigation is one of the relevant factors set out in Munday. Mr Dura’s written submissions before me on the review on behalf of the wife were consistent with those before Registrar Hayward and I adopted them in their entirety. Thus, the husband should, when properly advised, have known that the review before me had little prospect of success.
Secondly, once Ms Tate became a party to the proceedings, the husband should have known, upon being properly advised, that his Review Application was doomed to fail yet he proceeded and maintained the Review.
These circumstances warrant me departing from the usual rule of party and party costs or solicitor and client, and I have a fulsome explanation of the costs incurred by the wife, the cost agreement she has entered into with the solicitors, and how her costs have been calculated. Consistent with the decision of Sfakianakis & Sfakianakis, I will assess the wife’s costs as she has asked me to do and make a lump sum order so that the matter is not to be taxed.
Mr Breeze’s submission to me that in some way I was unable to assess the costs or that it would be more efficacious or cheaper to order the costs be assessed independently, is rejected by me. This matter has been going on since 2019 on this issue and I propose today to end this small, but expensive chapter of this particular litigation and will not prolong it any further.
The wife sought her costs of this cost application on a lump sum basis and submitted she would accept a figure of $4,000. The actual costs were $7,500 and I find her costs claimed is a reasonable fee for this costs application.
The wife submitted if I was not inclined to order indemnity costs I fix her costs of the matter at some $16,000, being 60 per cent of the actual costs incurred by her.
I find this is a reasonable sum in circumstances where the husband has been wholly unsuccessful twice on the same application and the same facts; has unreasonably prolonged the litigation in circumstances where, properly advised, he should have known he had no chance of success at both hearings; made submissions in wilful disregard of established law, namely, that sections 118 and 122(3) of the Evidence Act 1995 (Cth) applied and that privilege could not attach to the documents as they had been produced when those sections relate to evidence being adduced, not produced; that Ms Tate was a party to the proceedings at the time of the review and had an obligation of full and frank disclosure, which she has fulsomely complied with.
The wife’s assessed costs total $20,000. The wife submitted that payment of this ought to be stayed until the finalisation of the property proceedings and I accept that is appropriate in these circumstances and I will so order.
I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Henderson delivered on 13 October 2020.
Associate:
Date: 12 November 2020
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