Iphostrou and Iphostrou & Ors (No 3)

[2011] FamCA 138

FAMILY COURT OF AUSTRALIA

IPHOSTROU & IPHOSTROU AND ORS (NO 3) [2011] FamCA 138

FAMILY LAW – COSTS - Costs against legal practitioner - Indemnity costs refused

Family Law Act 1975 (Cth)

APPLICANT: Ms E Iphostrou

1^ST RESPONDENT: Mr S Iphostrou

2^ND RESPONDENT: Mr P Iphostrou

3^RD RESPONDENT: Mr J Iphostrou

4^TH RESPONDENT: Mr V

8^TH RESPONDENT: J Pty Ltd

12^TH RESPONDENT: P Pty Ltd

REMAINING RESPONDENTS: Corporate entities (as per Schedule attached to orders)

FILE NUMBER: MLC 8731 of 2009

DATE DELIVERED: 7 March 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: CRONIN J

HEARING DATE: 28 February 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Burnside QC With Mr Edmunds

SOLICITOR FOR THE APPLICANT: G Firm

COUNSEL FOR THE 1^ST RESPONDENT: Mr North SC

SOLICITOR FOR THE 1^ST

RESPONDENT:

Belleli King & Associates

COUNSEL FOR THE 2^ND RESPONDENT: Ms Loughan SC With Mr Watts

SOLICITOR FOR THE 2^ND

RESPONDENT:

Altus Lawyers

COUNSEL FOR THE 3^RD RESPONDENT: Ms Loughnan SC With Mr Watts

SOLICITOR FOR THE 3^RD

RESPONDENT:

Altus Lawyers

COUNSEL FOR THE 4^TH RESPONDENT: Mr Geddes QC With Mr Barbayannis

SOLICITOR FOR THE 4^TH

RESPONDENT:

Voitin Lawyers

COUNSEL FOR THE 8^TH RESPONDENT: Mr Geddes QC With Mr Barbayannis

SOLICITOR FOR THE 8^TH

RESPONDENT:

Voitin Lawyers

COUNSEL FOR THE 12^TH

RESPONDENT:

Ms Loughan SC WITH Mr Watts

SOLICITOR FOR THE 12^TH

RESPONDENT:

Altus Lawyers

COUNSEL FOR THE REMAINING RESPONDENTS: Mr Denton SC With Ms Djohan

SOLICITOR FOR THE
REMAINING RESPONDENTS: Natalie Rompotis

SUBPOENAED PARTIES (MS M AND MR C) Ms Jenkins

SUBPOENAED PARTIES (MR S) In Person

Orders

1. That [Mr G] pay the costs thrown away for the hearing on 28 February 2011 of:

   (a)       the 4^th and 8^th respondents;

   (b)       the 2^nd, 3^rd and 12^th respondents

   (c)the respondents numbered 1 to 18 in the annexure to the orders made 28 February 2011.

2. That the costs referred to be by agreement and failing agreement, as assessed.

IT IS NOTED that publication of this judgment under the pseudonym Iphostrou & Iphostrou and Ors (No3) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 8731 of 2009

Ms E Iphostrou

Applicant

And

Mr S Iphostrou

Respondent

REASONS FOR JUDGMENT

1. In Ridehalgh v Horsefield [1994] 3 All ER 848, Sir Thomas Bingham MR said at p 236:

   A judge considering making a wasted costs order arising out of an advocate’s conduct of court proceedings must make full allowance for the exigencies of acting in that environment; only when, with all allowances made, a legal practitioner's conduct of court proceedings is quite plainly unjustifiable can it be appropriate to make a wasted costs order.

2. On 28 February 2011 on the application of a number of parties and over opposition from the wife, I adjourned the hearing of proceedings by the wife against the husband and a number of other entities and individuals. 

3. Upon the successful applications for adjournment, the individuals and entities sought indemnity costs against the wife and/or her solicitor Mr G.

4. I propose to make costs orders against Mr G because I am satisfied that despite the environment referred to above, his conduct is plainly unjustifiable as a legal practitioner.  I could not attribute the “waste” to the wife.

5. The s 106B proceedings under the Family Law Act 1975 (Cth) (“the Act”) were adjourned because on the material presented, I was not satisfied that a number of persons and entities were properly (if at all) joined and if they were, they had not been properly served.

6. Mr Geddes QC for Mr V and J Pty Ltd claimed indemnity costs on the basis that his clients had not been served with annexures to an affidavit.  Correspondence had been exchanged as a consequence of the wife’s solicitor endeavouring to serve documents for the final hearing that was listed to commence on 28 February 2011. 

7. Ms Loughnan SC for Mr J Iphostrou and Mr P Iphostrou together with P Pty Ltd claimed similar indemnity costs on the basis that they had to be served properly.  She said that they had not been joined although some documents had been sent to the legal practitioner who had previously acted for them.  I found that any legal connection between Ms Loughnan’s clients and that practitioner had ended at least by 11 February 2011. 

8. Mr Denton SC for a variety of corporate entities sought costs thrown away by his clients on the basis of an assurance by the wife’s solicitor on 10 February 2011 that the wife’s application was ready to proceed despite Mr Denton’s challenge that it was not ready just on service issues alone.

9. Mr Burnside QC for the wife and on behalf of his instructor Mr G, resisted any order for costs saying that if I was to reject that position, costs should be reserved.  He said that if I disagreed, he pointed to the authority of Colgate Palmolive Co and Anor v Cussons Pty Ltd (1993) 118 ALR 248. He said that even if there was some inclination to make an order, this was not a case which justified indemnity costs.

10. In respect of his instructor, Mr Burnside QC said that Mr G had done everything he could to “patch up” a deficiency.  The deficiency referred to, concerned joinder and service and he pointed to correspondence showing the attempt made by Mr G to have the instructor of Mr Denton deliver the documents to Mr Geddes’ clients.  The closeness of the working relationship of the various respondents did not satisfy me that there was any tactic designed to thwart the application of the wife proceeding.

11. The crux of the dilemma arose from an interlocutory hearing called by me on 10 February 2011 at very short notice based on a concern raised by junior counsel who had been acting for the wife that there may have been problems about the case proceeding because of litigation funding orders that I had made and their consequences.

12. In the hearing on 10 February 2011, Mr G appeared for the wife and in his presence, Mr Denton SC made four significant observations:

    (a)He, Mr Denton, and his instructor Ms Rompotis, did not act any longer for Mr J Iphostrou and Mr P Iphostrou and P Pty Ltd;

    (b)That a Mr V had not been served with any documents;

    (c)The application of the wife as pleaded, did not seek material orders that would have made any difference to the wife’s position; and

    (d)The matter was plainly not ready for trial.

13. Mr G observed that he had been unable to obtain the services of his counsel and that he had not been “hands on” the case because he had suffered an assault.  He said however that he was assured that the matter was ready to proceed.  He went further and expressed doubt about whether Mr V had been joined.  Despite Mr Denton’s urging to not proceed with the listing, I considered it important to presume that the wife’s case was ready.

14. Thereafter, as is now evident, there were attempts made to serve documents on Mr V and also to enlist Ms Rompotis to assist in that process despite her clear indication that she did not so act.

15. I have not heard evidence about the financial circumstances of the wife although it has been constantly asserted by her that she has limited assets.  There has always been a spousal maintenance application extant.  In respect of Mr G, it was not asserted by Mr Burnside that he was impecunious.  Both of those matters are relevant for the purposes of s 117(2A).

16. Whilst the order proposed by the three relevant counsel was initially against the wife, in turn, each has also pursued Mr G in his capacity as the solicitor for the wife. 

17. Section 117(1) of the Act provides that each party shall bear their own costs but that is subject to s 117(2). That provision requires a court to find that there are justifying circumstances to make an order but in so finding, the court must have regard to the various matters set out in s 117(2A) each of which refers to a party to the proceedings. S 117(2) also does not define and therefore does not restrict, against whom an order for costs can be made. The power to make an order against someone other than a party has been made clear in a number of authorities. (see Yunghanns & Yunghanns [2000] FamCA 681 (2000) FLC 93-029, Ryan & CGU Professional Insurance & Rees & Rees [2010] FamCAFC 147 at paras 39-40 and Cassidy & Murray [1995] 92-633). Whilst s 117(2A) may appear to have no reference to non-parties, those matters provide guidance as to what should be taken into consideration in the discretionary exercise. However, the last of the factors mentioned in s 117(2A) is “such other matters as the court considers relevant”.

18. Thus, there is a wide discretionary power once an application is made.

19. The justifying circumstances here arise from assertions by Mr Denton SC over some weeks that the case was not ready to proceed. However, two important warning bells were sounded on 10 February 2011. First, it was asserted by Mr Denton that Mr V was a person who might be significantly affected by an order under s 106B of the Act and he had not been served with documents. Secondly, the issue of the prospect of proceeding on 28 February 2011 was slim if the documents had not been, and were still to be, served.

20. An assurance by Mr G was given which could not be clearer on its face.  The assurance and the aftermath, meant that on 28 February 2011, a variety of lawyers attended who had not been previously involved each of whom insisted that they did not know what it was that their clients were to meet nor had they had anywhere near sufficient time to prepare, having regard to the activities that had occurred between 10 February 2011 and 28 February 2011.  Unfortunately, the costs of those parties arising from the engagement of their lawyers were significant.

21. There are circumstances here that justify making an order for costs against either the wife or Mr G.  Having regard to the position that Mr G adopted on 10 February, it could hardly be said that the wife had control of the process despite the usual acceptance of the position that legal practitioners are deemed to have acted on instructions.  That being so, no order for costs could be justifiably visited upon the wife. 

22. To the extent that s 117(2A) is relevant, I do not know of the financial circumstances of Mr G but it was not suggested that he was impecunious.  There was no suggestion that legal aid was involved in this case.  It was not suggested that there had been a breach of orders.  It must be accepted that the wife was wholly unsuccessful.  The wife was in the position of her own application not being able to proceed as a result of the actions of Mr G.

23. In Cassidy, when discussing standards to be contemplated when a costs issue arose, the Full Court said:

    Whereas some of the cases say that there must be "a serious dereliction of duty" by the solicitor before a costs order can be made against that solicitor, in our view the matters identified by the Master of the Rolls in Ridehalgh v. Horsefield accurately          reflect the law, which, in its application to this jurisdiction, can be set out as follows:

    1.Pursuant to s.117(2) Family Law Act, the Court has jurisdiction to make an order for costs against a solicitor or a non-party.

    2.The court should not make such an order without giving the person to be affected by the order an opportunity to be heard.

    3.The Court may make an order for costs against a solicitor without the necessity to establish that the solicitor has been guilty of serious professional misconduct.

    4.The solicitor has a duty to the Court to promote the interests of justice whilst at the same time attending to the needs of the solicitor's client.

    5.A mistake or error of judgment would not justify an order for costs against a solicitor. However, misconduct, default or negligence, any of which are found by a Court to be of a serious nature, may be sufficient to justify an order.

    6.        The jurisdiction is compensatory.  

24. In respect of the matters earlier mentioned, I find:

    1.There is no dispute about jurisdiction;

    2.Mr G has had an opportunity to be heard;

    3.This is not a case where I am in a position to say either what Mr G told the Court or what he did thereafter was serious professional misconduct but the failed attempt at “patching up a deficiency” was very significant in respect of the case not being ready to proceed;

    4.It is important to note the complexity of the legal issues in s 106B of the Act no doubt made more complex by the involvement of the entities and individuals who may have been affected. That complexity was well known because the wife filed an amended application on 24 November 2010 seeking to join a significant number of individuals and entities. In this case, it was complex more so because the hearing on 28 February 2011 was to have been a discrete issue about setting aside a variety of transactions. Thus, the readiness for hearing was critical. Having regard to the number of potential litigants involved and the scarce resources of the Court to allocate significant time to hear the discrete issue, Mr G had an obligation to ensure that no stone had been left unturned.

    5.This was neither a mistake nor just an error.  I have not heard evidence from Mr G such as would enable me to make any finding about negligence but I am satisfied about the lack of specific attention to detail where the warning had been made clear on 10 February 2011 if not earlier and that that amounts to a default.

    6.Albeit that I have no evidence or specific details of the financial circumstances of any of the relevant parties, I am satisfied that significant costs have been incurred that cannot simply be ignored. 

25. Sir Thomas Bingham MR referred to the exigencies of the environment.  That gives rise to the question of what is the appropriate professional standard expected of a lawyer.  In Levick v Commissioner of Taxation (2000) FCA 674 French J (as his Honour then was) said:

    Whether acting in the public interest or to advance a moral purpose, whether charging the highest fees or acting pro bono and whether counsel or solicitor, legal practitioners have a duty to the client and to the court to be competent in their conduct of legal business.

26. Chapter 19 of the rules provides specifically for costs orders against lawyers.  Rule 19.10(1) entitles a person to apply for an order for costs against a lawyer thrown away for such things as improper or unreasonable conduct and undue delay or default.  That is clearly consistent with the expressed views of the Full Court in Cassidy.

27. Chapter 19 of the rules also requires that the lawyer be given an opportunity to be heard and as I have pointed out, Mr G had that opportunity in this particular case.  I am satisfied in this case that there was default in preparation and ensuring the readiness of the matter for trial.

28. Various authorities refer to the standards of a reasonably competent legal practitioner (see Allen v Sir Alfred McAlpine and Sons Limited [1968] 2 QB 229 at 224). A reasonably competent legal practitioner must understand the importance of not only joinder and service but of the simple concepts of natural justice. Mr G had a responsibility to ensure that all of those matters were concluded. On 10 February 2011, Mr G referred to the fact that he had been incapacitated but that exacerbates the situation because it gives rise to a duty of care on the part of the solicitor to take positive steps to ensure that a case that has been set down for trial is ready to proceed.

29. Rule 1.04 of the Family Law Rules 2004 makes clear that the purpose of the rules which include issues associated with joinder of parties and service upon them, is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the Court that is reasonable in the circumstances of the case. Rule 1.08 makes it clear that lawyers have a responsibility to comply with the main purpose of the rules as far as possible and that includes “ensuring readiness for court events”.

30. Rule 1.08(3) requires that when a lawyer attends a court event, he or she must be familiar with the case and be authorised to deal with any issue likely to arise.  The statements of Mr G on 10 February were somewhat perplexing.

31. Each of the three applicants for costs sought that those be ordered and paid on an indemnity basis.  The issue of indemnity costs has also been the subject of considerable comment in the authorities of the Full Court of this Court.

32. Costs do not follow the event as a matter of course in this jurisdiction. Justifying circumstances must be shown and if so shown, and there is a need to address the question of why there should be a departure from the costs prescribed under the rules. The circumstances justifying that departure should be of an “exceptional” kind. (Kohan and Kohan (1993) FLC 92-340.) The types of situations that might give rise to an indemnity costs order were set out in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248. They included making false allegations of fraud, “misconduct” that caused loss of time in court and to other parties, making groundless contentions and imprudent refusals to compromise litigation. Despite those types of circumstances arising, costs still remain a discretionary matter.

33. In this Court, it is clear that the categories of circumstances which enliven the discretion to award indemnity costs are not closed. (Yunghanns v Yunghanns (2000) FLC 93‑029).

34. I could not find here that the loss of time mentioned by Sheppard J in Colgate-Palmolive fits into the misconduct description nor that the circumstances were exceptional. Here, the things that should have been done were simply not. Thus, the basis for an indemnity order is not present.

35. I am also not in a position to fix specific costs.  Mr Geddes QC expressed concern that simply reserving costs meant that they may become lost or forgotten particularly in complex litigation such as this.  Whilst I agree, the difficulty also is that determining the quantum of the costs leaves the parties embroiled in another piece of litigation if agreement is not reached.

36. It is appropriate in the circumstances for me to make an order that the parties reach agreement about the costs and failing that agreement, they be assessed.  Rule 19.18(1) provides that costs may be assessed according to a schedule to the rules.  In making that order, the attention of the Court is drawn to Rule 19.18(3).  None of the parties seeking costs addressed that issue and it may be that attention will need to be given to Rule 19.19(2) which limits what costs may be recovered.  Albeit that each of the applicants for costs was represented by senior and junior counsel, no specific certificate under Rule 19.50 or 19.52(2) was sought or made.  In the assessment process therefore, the practitioners will have to consider whether, if the only reason for their attendance was to seek an adjournment, it may not have been reasonable in the circumstances to engage the calibre of the representation they did.  I make no finding about that nor should I, as it is a matter for the determination of the registrar in the event of disagreement.

37. Accordingly, I make orders that the solicitor for the wife pay the costs thrown away for the day for the clients represented by Mr Denton SC, Mr Geddes QC and Ms Loughan SC

I certify that the preceding Thirty Seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 7 March 2011.

Associate: 

Date:  7 March 2011