Huda and Huda and Anor (Costs)
[2017] FamCAFC 104
•2 June 2017
FAMILY COURT OF AUSTRALIA
| HUDA & HUDA AND ANOR (COSTS) | [2017] FamCAFC 104 |
| FAMILY LAW – APPEAL – COSTS – Where the wife filed an application in an appeal to restrain the husband’s solicitors – Where that application was dismissed – Where orders were made for each of the parties to file submissions in relation to costs – Where the husband sought costs against the wife and/or her solicitors on an indemnity basis – Where the husband did not file a Costs Agreement in accordance with the Family Law Rules 2004 (Cth) – Where the wife’s initial application to restrain the solicitors, although unsuccessful, was not unreasonable – Where the financial circumstances of the wife are such that an order for costs would not be appropriate – Whether the wife’s solicitors acted improperly or unreasonably – Where the conduct of the solicitors was not such to warrant a costs order – Application for costs is dismissed. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) r 19.08, 19.10 |
| Cassidy v Murray (1995) FLC 92-633 Huda & Huda and Anor [2017] FamCAFC 17 Kohan & Kohan (1993) FLC 92-340 McMillan and McMillan (2000) FLC 93-048 Orchard v South Easter Electricity Board [1987] 1 All ER 95 Prantage & Prantage (2013) FLC 93-544 Ridehalgh v Horesfield [1994] 3 ALL ER 848 Z (a Solicitor) & Limousin (2010) FLC 93-433 |
| APPLICANT: | Ms Huda |
| FIRST RESPONDENT: | Mr Huda |
| SECOND RESPONDENT: | Mr Laham |
| FILE NUMBER: | BRC | 1238 | of | 2015 |
| APPEAL NUMBER: | NA | 47 | of | 2016 |
| NA | 49 | of | 2016 |
| DATE DELIVERED: | 2 June 2017 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May J |
| HEARING DATE: | By way of written submissions |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 17 June 2016 |
| LOWER COURT MNC: | [2016] FCCA 1256 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Shoebridge |
| SOLICITOR FOR THE APPLICANT: | Firm X |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Hackett |
| SOLICITOR FOR THE RESPONDENT: | Firm Y |
| FOR SECOND RESPONDENT: | No appearance |
Orders
The application for costs is dismissed.
There be no order as to costs.
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 Huda & Huda and Anor 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).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA47 of 2016 and NA49 of 2016
File Number: BRC 1238 of 2015
| Ms Huda |
Applicant
And
| Mr Huda |
First Respondent
And
| Mr Laham |
Second Respondent
REASONS FOR JUDGMENT
Background
Final property orders were made by Judge Vasta on 17 June 2016, as between Mr Huda (“the husband”) and Ms Huda (“the wife”). Also involved in these proceedings is a third party, Mr Laham. The husband and Mr Laham each filed Notices of Appeal on 15 July 2016.
On 14 September 2016, before the appeals were heard, the wife filed an Application in an Appeal seeking that husband’s solicitors be restrained from acting for the husband in the appeal. The application was made, after a legal secretary previously employed by the wife’s solicitors, subsequently commenced employment with the husband’s solicitors. Mr Laham did not participate in the hearing of the application.
On 16 February 2017, the wife’s application was dismissed (Huda & Huda and Anor [2017] FamCAFC 17). Orders were made providing for written submissions on costs. The husband filed an application and submissions seeking costs on 10 March 2017. The wife filed a response and submissions on 31 March 2017.
The Costs Application
The husband’s application for costs seeks the following order:
1.That the Respondent Wife and/or her Solicitors pay the Applicant Husband’s legal costs in respect of the Application incurred by the Applicant Husband on an indemnity basis in respect of proceedings on 15 November 2016 or on such other basis as the Full Court determines is appropriate.
The wife seeks leave to rely on an affidavit filed on 31 March 2017 with her response, that the husband’s application for costs be dismissed. The wife’s affidavit contains information about her current financial circumstances and is relevant to these proceedings. Leave is given to the wife.
The relevant law
The provisions of s 117(1) of the Family Law Act 1975 (Cth) (“the Act”), provide that each party to proceedings are to bear their own costs, subject to s 117(2) and other sections of the Act. Section 117(2) of the Act provides that where the Court is of the opinion that the circumstances justify an order for costs, the Court may make such order as considered just.
The husband’s application seeks costs against the wife, and in addition to, or in the alternative, against the wife’s solicitors. Orders in relation to lawyers are guided by the provisions of r 19.10 of the Family Law Rules 2004 (Cth) (“the Rules”):
RULE 19.10
Costs orders against lawyers
(1)A person may apply for an order under subrule (2) against a lawyer for costs thrown away during a case, for a reason including:
(a)the lawyer's failure to comply with these Rules or an order;
(b)the lawyer's failure to comply with a pre-action procedure;
(c)the lawyer's improper or unreasonable conduct; and
(d)undue delay or default by the lawyer.
(2)The court may make an order, including an order that the lawyer:
(a)not charge the client for work specified in the order;
(b)repay money that the client has already paid towards those costs;
(c)repay to the client any costs that the client has been ordered to pay to another party;
(d)pay the costs of a party; or
(e)repay another person's costs found to be incurred or wasted.
The husband’s application seeks that the costs against the wife and/or her solicitors should be ordered on an indemnity basis. Rule 19.08 provides:
…
(3)A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
Notwithstanding that the husband seeks costs on an indemnity basis; he has failed to comply with r 19.08(3). The rule’s primary purpose is to ensure the court is aware of the quantum of the costs should an order be made on an indemnity basis. The rule can be dispensed with, depending on the circumstances of each case. However, it is noted in this application there is no evidence, even in a general sense of the quantum should an indemnity costs order be made. This failure on its own may defeat such an application.
Relevant authorities, the Act, the Rules and the settled law were fully described in Prantage & Prantage (2013) FLC 93-544. Other than to observe that the general principles applicable to indemnity costs are well known and there must be some special or unusual (sometimes described as exceptional) feature to attract such an order, it is not necessary to refer further to matters of principle. There is no doubt that an indemnity costs order is regarded a very great departure from the standard costs order (Kohan & Kohan (1993) FLC 92-340).
Costs application against the wife
In support of the application for costs, it was submitted that the application to restrain the husband’s solicitors from continuing to act was “always doomed to failure” for two reasons:
a)First, that there was no authority provided in the submissions supporting an order to restrain a solicitor acting in an appeal; and
b)Second, that the wife had failed to establish the legal secretary had any confidential information.
Although the application of the husband does not explicitly refer to these sections, it would seem that his submissions are referring to the following subsections of s 117(2A):
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
…
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
In resisting a costs order, the wife relies on s 117(2A)(a) of the Act which provides that the court shall have regard to “the financial circumstances of each of the parties to the proceedings.”
The wife’s affidavit reveals that she receives a modest income as a shop assistant and is in receipt of Centrelink benefits. Although there is an assessment by the Child Support Agency, the husband is in arrears in his payments to the wife, for the children aged 12 and 10. The assessment, although unpaid, has affected her Centrelink benefits.
Dealing first with the submission that the wife’s application was doomed to fail, it should be noted that the application failed for a number of reasons. The affidavit of the wife did not meet the evidentiary threshold required to support the application:
13.As is apparent from the reference to the evidence above, it is not said by the wife or her solicitors that Ms [M] ever had a conversation with the wife, nor is there any specific reference to matters which may be confidential, for example, that Ms [M] was privy to the instructions from the client.
Of significance, the application did not seek the restraint of a solicitor to act in a trial, rather on appeal.
In addition, there was no suggestion in the submission for the wife on the application that it was likely there would be further evidence advanced on appeal. Thus the appeal court’s deliberations would be limited to the material before the trial judge.
However, I again refer to the comments of the Full Court in McMillan and McMillan (2000) FLC 93-048 at [47] that there are particular and difficult sensitivities which arise in family law. The written submission on behalf of the wife in relation to this costs application notes she was “anxious enough about the factual circumstances set out in her Application that she asked the Court to disqualify the Husband’s solicitors from acting.”
The wife’s application was not unreasonable on her part. Her financial circumstances are poor. As a result of a stay being ordered consequent on the appeals being filed, the wife has not received the moneys as ordered by the property settlement orders.
Overall, the circumstances are such that an order for costs is not justified. Thus, it is not necessary to consider whether indemnity costs are appropriate.
Costs against the solicitor
Reference has already been made to the relevant rule. An order granting costs against another party’s solicitor is rarely made in the Family Court. As can be seen from cases in the United Kingdom it is a “jurisdiction which falls to be exercised with care and discretion and only in clear cases” (Orchard v South Easter Electricity Board [1987] 1 All ER 95 at 100, quoted in Ridehalgh v Horesfield [1994] 3 ALL ER 848 at 858).
The relevant principles are set out in Cassidy v Murray (1995) FLC 92-633, which referred to those English decisions (at 82,365) that:
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.
The essential question for determination is whether the wife’s solicitors acted improperly or unreasonably (r 19.10(1)(c)) or that the respondents costs were wasted (r 19.10(2)(e)). One basis claimed for the order for costs and on an indemnity basis is that there was an absence of evidence to support the wife’s application. Further, it is contended that the unlikely success of the application was raised with the solicitors for the wife in correspondence and ignored by them.
An example of the level of the serious nature of the conduct of a solicitor required for a costs order to be made is Z (a Solicitor) & Limousin (2010) FLC 93-433. The basis for the order was:
203.…the failure of, or disregard by the solicitor, a very experienced practitioner in the jurisdiction, to conclude that the proceedings had no prospect of success, and his failure to advise discontinuance, or for him to withdraw from them, within a reasonable time, which justified the order. …
As the Full Court said (at [131]):
131.An allegation of improper motive for the conduct of litigation made against a legal practitioner is an extremely serious one. In our view it requires clear and cogent proof (see Neat Holdings Pty Ltd v Kurajan Holdings Pty Ltd (1992) 67 ALJR 170). …
In conclusion, the circumstances of the application in the appeal by the wife and the conduct of her solicitors would not lead to a decision that the solicitors conduct was such that an order for costs should be made against them. Consequently there is no need to consider the application for indemnity costs.
The application for costs against the wife and her solicitors should be dismissed and there should be no order as to costs.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice May delivered on 2 June 2017.
Associate:
Date: 2 June 2017
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