Kehoe & Seden (No 3)
[2022] FedCFamC1F 749
Federal Circuit and Family Court of Australia
(DIVISION 1)
Kehoe & Seden (No 3) [2022] FedCFamC1F 749
File number(s): SYC 7833 of 2018 Judgment of: HARPER J Date of judgment: 30 September 2022 Catchwords: FAMILY LAW – COSTS – Wife seeks costs against husband and third parties in respect of subpoena objection proceedings – Costs sought on indemnity, or in the alternative, fixed basis – No dispute as to jurisdiction to order costs against third parties – Uncooperative stance by third parties and husband taken into account – Complete lack of success by husband and third parties in relation to one subpoena – Indemnity costs not justified – Certification for senior counsel – Third parties seek costs of compliance with subpoenas – Costs of compliance refused as substantial loss or expense to the third parties not established – Costs ordered in a fixed amount, consistently with overarching purpose. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act2021 (Cth) ss 67(1), 67(4), 68(4)
Family Law Rules2004 (Cth) r 15.23
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 6.01, 6.31, 6.34, 6.35, 12.17, 12.18
Cases cited: Atkins & Hunt (Costs) [2017] FamCAFC 131
D & D (Costs) (No 2) (2010) FLC 93-435; [2010] FamCAFC 64
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123; [2005] FamCA 158
Harris & Dewell (No 2) (2018) FLC 93-863; [2018] FamCAFC 180
Jensen and Jensen (1982) FLC 91-263
Kehoe & Seden (No 2) [2022] FedCFamC1F 346
Kehoe & Seden [2019] FamCA 989
Kennedy and Evans; Trust Bank (Intervener) (1994) FLC 92-514; [1994] FamCA 172
Knight v F.P. Special Assets Limited (1992) 174 CLR 178; [1992] HCA 28
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Lao & Zeng (2021) FLC 94-053; [2021] FedCFamC1A 17
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Markoska & Markoska (Costs) (2012) 46 Fam LR 598; [2011] FamCA 833
Moorcroft & Moorcroft (2020) 60 Fam LR 361; [2020] FamCAFC 83
Moriarty & Moriarty (2009) 41 Fam LR 336; [2009] FamCA 369
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Prantage & Prantage (Costs) [2014] FamCA 850
Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44
Seden & Kehoe [2020] FamCAFC 294
Division: Division 1 First Instance Number of paragraphs: 83 Date of last submission/s: 9 September 2022 Date of hearing: On the papers Place: Sydney Counsel for the Applicant: Mr Kearney SC Solicitor for the Applicant: Pearson Emerson Family Lawyers Solicitor for the First Respondent: Coleman Greig Lawyers The Second Respondent: No appearance required Counsel for the Interveners: Mr May Solicitor for the Interveners: Broun Abrahams Burreket ORDERS
SYC 7833 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS KEHOE
Applicant
AND: MR SEDEN
First Respondent
MS G SEDEN
Second Respondent
MR K SEDEN
First Intervener
DD PTY LTD
Second Intervener
order made by:
HARPER J
DATE OF ORDER:
30 sEptember 2022
THE COURT ORDERS THAT:
1.Within 30 days of the date of these orders, the Respondent Husband, Mr K Seden, and DD Pty Ltd pay costs to the Applicant Wife, jointly and severally, fixed in the amount of $23,270.
2.Pursuant to r 12.28 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), certification is given to the wife for engagement of counsel, including Senior Counsel.
3.The Amended Application in a Proceeding filed by the Applicant Wife on 23 June 2022, together with the Responses filed by the First Respondent Husband on 12 August 2022, and Mr K Seden and DD Pty Ltd on 18 July 2022, be otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kehoe & Seden has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
On 17 May 2022, I delivered judgment in this matter dealing with objections to two subpoenas issued by the Applicant Wife (“the wife”), one to Mr K Seden and the other to DD Pty Ltd (“the third parties”): Kehoe & Seden (No 2) [2022] FedCFamC1F 346 (“the subpoena judgment”). The relevant history of the proceedings is set out in that judgment at [2]–[12]. It is not necessary to repeat it.
In the subpoena judgment, I ultimately dismissed the objection to the subpoena issued to Mr K Seden. I set aside paragraphs 13, 14, and 16 of the subpoena issued to DD Pty Ltd and otherwise dismissed the objection.
Although the Second Respondent is a party to the substantive proceedings, she did not participate in the subpoena objections. The Second Respondent is the First Respondent Husband’s (“the husband’s”) mother. Mr K Seden is the husband’s brother, and DD Pty Ltd are the accountants for the Seden Family Group, including the husband and his entities.
ORDERS SOUGHT AS TO COSTS
On 15 June 2022, the wife filed an Application in a Proceeding seeking the costs of the hearing of the subpoena objections and for the husband and Second Respondent to pay the subpoenaed parties’ costs of production. She amended her application on 23 June 2022 to seek as follows:
1.That the 1st Respondent, together with [Mr K Seden] and [DD Pty Ltd] ("the subpoenaed parties"), jointly and severally, pay the wife's costs of and incidental to the Notices of Objection to Subpoena filed 23 November 2021 by [Mr K Seden] and [DD Pty Ltd] on an indemnity basis, fixed in the sum of $41,500.
2.That the 1st Respondent pay the subpoenaed parties' costs of properly complying with the subpoena to [DD Pty Ltd] and [Mr K Seden].
3.That the 1st Respondent pay the wife's costs of and incidental to this Application in a Proceeding.
By her written submissions, the wife proposed in the alternative an order for costs in her favour fixed in the amount of $23,270 or as assessed or agreed.
The husband filed a response on 12 August 2022 seeking the following orders:
1.That pursuant to Rule 6.35 within 28 days of the date of these Orders, the Applicant pay to [Mr K Seden] and [DD Pty Ltd] the costs of complying with the Subpoena to produce documents issued to [Mr K Seden] and [DD Pty Ltd] on 29 October 2021, such costs fixed at $15,092.00.
2.That the Applicant’s Amended Application in a Proceeding filed 23 June 2022 be dismissed.
3.That the Applicant pay the First Respondent’s costs of and incidental to these proceedings on an indemnity basis.
The third parties filed their response on 12 July 2022 seeking substantially the same orders as the husband:
1.That pursuant to Rule 6.35 within 28 days of the date of these Orders, the Applicant pay to [Mr K Seden] and [DD Pty Ltd] the costs of complying with the Subpoena to produce documents issued to [Mr K Seden] and [DD Pty Ltd] on 29 October 2021, such costs fixed at $15,092.
2.That the Applicant's Amended Application in a Proceeding filed 23 June 2022 (Application), to the extent it seeks relief against [Mr K Seden] and [DD Pty Ltd], be dismissed.
3.That the Applicant pay the costs of [Mr K Seden] and [DD Pty Ltd] of and incidental to the Application and this Response to the same as agreed or assessed.
On 22 July 2022, a judicial registrar made orders for the parties to file and serve material, and for the costs application to be determined on the papers.
The wife, husband, and third parties all filed written submissions.
THE LAW
It can be seen that the wife seeks costs not only against the husband, who is a party, but also against the third parties. In Knight v F.P. Special Assets Limited (1992) 174 CLR 178 (“Knight”), Mason CJ and Deane J (Gaudron J agreeing) held at 192–193:
For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
In Lao & Zeng (2021) FLC 94-053, the Full Court commented at [90]:
The power [to order costs] is broad; indeed so broad that, in exceptional circumstances, it even authorises costs orders against persons who are not parties to the proceedings (Re JJT; Ex parte Victoria Legal Aid [1998] HCA 44; (1998) 195 CLR 184 (“Re JJT”) at 189, 202, 220 and 226–228).
In Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 (“JJT”), Gaudron J at [4] referred to Knight and the “exceptional circumstances” in which it may be appropriate to order costs against non-parties pursuant to s 117(2). Gummow J held at [11] that s 117(2) accommodates “orders as to the carriage of costs by third persons with an interest in the litigation of the nature identified by Mason CJ and Deane J, and Gaudron J, in [Knight]”. Callinan J also at [130]–[132] referred to Knight as adumbrating the circumstances in which costs may be ordered against a third party. I accept that the circumstances referred to in Knight, set out above at [10], describe the circumstances of sufficient exceptionality to justify an order against non-parties.
There was no dispute that the Court has power to order costs against non-parties. No argument was made that the Court lacked jurisdiction to make orders against the third parties. Nonetheless, I should state that by reason of the husband’s involvement in the Seden Family Group and his rights under the Seden Family Group Rules, I am satisfied that Mr K Seden, who is the brother of the husband, is also bound by the Seden Family Group Rules, and is a member of the Seden Family Board, has a sufficient interest in the litigation. I am also satisfied that DD Pty Ltd are acting on behalf of the husband and in part, at least, in concert with and on behalf of Mr K Seden.
The relevant principles with respect to costs are well settled, and have been discussed by the Full Court in Parke & The Estate of the Late A Parke (2016) FLC 93-748, followed in Atkins & Hunt (Costs) [2017] FamCAFC 131. The Court has a wide discretion, which is to be exercised judicially.
In proceedings to which the Family Law Act 1975 (Cth) (“the Act”) applies, the starting point is that each party shall bear his or her own costs: s 117(1). If, however, the Court is of the opinion that there are justifying circumstances, the Court may make such order as to costs and security for costs as the Court considers just: s 117(2). In JJT, the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) referred to costs in the conventional sense, that is, as indemnity for another’s liability for professional fees and out of pocket expenses reasonably incurred in the litigation (see Hayne J at [97]).
When considering what, if any, order for costs should be made, the Court must have regard to the factors set out in s 117(2A):
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(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 that party;
(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;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings 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 proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
It is well settled that no one factor in s 117(2A) has priority, nor must more than one factor be satisfied; rather, any one factor may be sufficient; Prantage & Prantage (Costs) [2014] FamCA 850 at [12] (“Prantage”); Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123 at [41].
The Full Court in Moorcroft & Moorcroft (2020) 60 Fam LR 361 confirmed that indemnity costs are awarded only in exceptional circumstances (see also Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No 2) (2010) FLC 93-435).
The first question is whether the wife has established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in her favour. The second question is whether, if there are circumstances justifying a costs order, the husband and third parties should pay the wife’s costs on a basis, such as indemnity costs or as a fixed sum, other than costs as agreed or assessed on a party and party basis.
In her written submissions, the wife relied upon ss 117(2A)(a), (c), (e), and (g) in support of her application for costs. For convenience, I will adopt the same headings as used by the wife in her submissions.
I note here that the third parties did not differentiate the position as to costs between themselves, adopting a common position in resistance to any costs orders. They did not submit that any different considerations applied to one but not the other. They have had, at all times, common representation. Accordingly, in this judgment I will treat the position of the third parties as undifferentiated.
DISCUSSION
Section 117(2A)(a) – the financial circumstances of the parties
The wife is presently unemployed and residing in the United States of America with her parents, who are both retired, and her three year old daughter of the relationship.
She is wholly reliant on spousal maintenance and child support payments from the husband. Her only assets of significance are cash of approximately $160, household contents of $1,500, cryptocurrency worth approximately $25,000, and superannuation worth approximately $72,000.
Conversely, she describes the husband’s financial position as “less than clear,” and that in any event, it pays no regard to the substantial resources available to him via the Seden Family Group. By a letter dated 6 May 2021, the husband’s solicitors asserted that the value of the H Seden Family Testamentary Trust is $14,743,782, in which the husband has a 1/6 interest. By reference to his financial statement, the husband owns and operates a business with an income of approximately $160,000 per year, and is also the sole registered proprietor of the former matrimonial home at W Street, Suburb E with a value of approximately $2.4 million (wife’s affidavit of 14 June 2022, paragraph 43).
The husband stated in his affidavit filed on 12 August 2022 that his financial circumstances had not changed significantly since his affidavit filed on 30 September 2021. There, he stated that “I do not have the income or availability of monies to pay the costs of [DD Pty Ltd] nor the expert valuer” and explained that he has a weekly income of $1,054.
No evidence was adduced as to the financial circumstances of either of the third parties.
The husband submitted that he is a mere discretionary object, in whose favour the Seden Family Group makes no distributions. Accordingly, it is said, the financial circumstances of the parties should not be considered a relevant factor.
However, in Kehoe & Seden [2019] FamCA 989, Stevenson J was of the view (at [32]) that there were “convincing indications that financial resources are available to the husband within the [Seden Family Group].” Similarly, the Full Court in Seden & Kehoe [2020] FamCAFC 294 noted (at [49]) that “There can be no doubt that evidence disclosed that the applicant’s interest in the Testamentary Trust involved something more than an expectation of benevolence on the part of his mother and brothers.” Whatever the husband’s exact present financial circumstances may be, the evidence appears to be clear that his resources far exceed that of the wife’s.
I am satisfied that this factor should be given some weight.
Sections 117(2A)(c) and (g) – the conduct of the parties
The wife asserts that the husband’s and third parties’ conduct in respect to both the subpoena objections and the proceedings as a whole should weigh in favour of a costs order being made. She relied on the statement of Nygh J in Jensen and Jensen (1982) FLC 91-263 at 77,472, where his Honour said that
if as a result of non-cooperation, obstructiveness or otherwise, one of the parties causes the conduct of the proceedings to be unduly prolonged or made unduly expensive to the other side, clearly an order for costs would be warranted.
As explained at [28] above, it is apparent that the husband’s interest in the Seden Family Group is a significant issue in dispute and the wife seeks disclosure to enable her to fully identify said interests. The wife thus argued that the conduct of the husband and third parties, in resisting production of the material as part of disclosure requirements, was what necessitated the issue of the subpoenas in the first place.
The wife pointed out that the husband had previously consented to a range of orders for the production of same or similar material, on 19 March 2019, 2 March 2021, and 10 May 2021. The orders of 10 May 2021 were made by consent. The evidence shows that the wife had attempted to obtain the documents pursuant to these orders, however both the husband and third parties had failed to produce them.
The success of her argument requires that the documents specified in the orders of 19 March 2019, 2 March 2021, and 10 May 2021 be identical in substance or form to the documents ultimately sought in the subpoenas. Having regard to the documents identified in the previous orders, as well as the subpoenas issued, it is clear that some of the documents were materially different. This is also reflected at paragraph 16 of the husband’s affidavit filed on 12 August 2022, which sets out a number of documents requested in the subpoenas that had not been subject to earlier orders for production. Furthermore, he gave evidence that the wife made no requests for disclosure following the orders of 10 May 2021 and prior to issuing the subpoenas.
The husband contended that he complied with his duties of disclosure to the best of his ability. Although accepting there is a general duty pursuant to r 6.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“2021 Rules”), he submitted that there was no argument that the documents sought related to the provisions in that rule except for being “information relevant to the proceedings.” Without more, the documents sought were not of such a category or description that would warrant a costs order. The third parties made the submission, which the husband adopted, that although relevance was ultimately established in the course of the subpoena objection proceedings, this was not evident nor obvious due to the final relief being sought by the wife. At the time that the substantive issue was being heard, the wife sought as final relief the sum of $3.2 million from the proceeds of sale of a property owned by the husband. This, the third parties argued, meant that it was not obvious as to how the documents sought in relation to the Seden Family Group were relevant. It should, however, be noted that in that same Amended Initiating Application, which was filed on 29 March 2021, the wife anticipated amendment of her application upon full and frank disclosure being provided by the husband (Order 1). I do not fully accept the argument of the husband and the third parties in this regard. Their submissions do not adequately focus upon the question of what documents had “apparent relevance”, although I accept however that the financial structures at the heart of the proceedings are complex. I accept that the wife acted reasonably in issuing the subpoenas. As I concluded at [55] of the primary judgment, the subpoenaed material had apparent relevance to the resolution of the issues in dispute. This is, however, a different question to whether the conduct of the husband and the third parties justifies the making of a costs order.
The husband submits that he had discharged his obligations by making the necessary enquiries to the persons who the husband understood as possessing the necessary documents, namely the Seden Family Group accountants, DD Pty Ltd. Reference was made to the affidavit of Ms T, a senior manager of DD Pty Ltd, filed on 30 September 2021. In that affidavit, Ms T stated that she had contacted Mr K Seden seeking approval for the release of documents pursuant to the 2 March and 10 May 2021 orders. She was informed verbally that no consent was given, meaning release of the documents was not possible. However, this was only in respect of some of the documents sought, and the balance had been produced pursuant to the earlier court orders.
Furthermore, the husband argued that many of the documents which he had been ordered to produce were not and could not be within his possession. There is no dispute that the husband “has never been, and is not eligible to be a member of the [Seden Family Board]” (at [23] of the subpoena judgment). This fact, it is said, limited the documents which he had access to. The wife argued that he had access to the relevant documents “pursuant, if on no other basis, to the provisions of the relevant Rules governing the affairs of the Group”, specifically clauses 25.3 and 25.4.
The husband submitted that these clauses do not support such an entitlement. The relevant clauses are as follows:
25.3 The [Seden Family Group] must provide to each Interest Holder within a reasonable time following the end of each Financial Year a profit and loss account and balance sheet for that Financial Year. The [Seden Family Group] will ensure that each Interest Holder has reasonable access to these accounts, subject to any security requirements which the [Seden Family Group] may impose to ensure that third parties do not access the information.
25.4 The Family Members are entitled, with the [Seden Family Board’s] consent, to inspect or copy information of the [Seden Family Group] and the [Seden Family Board] must not unreasonably withhold consent.
The husband submitted that in light of the definition of “Interest Holder,” he is only entitled to a profit and loss account and balance sheet for the entities of which he is a registered owner. Accordingly, he was and is not entitled to seek the quantum of documents set out in the subpoenas to either Mr K Seden or DD Pty Ltd.
However, such an argument fails to address the husband’s entitlements under cl 25.4. The Group Rules define “Family Members” as including “each of the Children,” which includes the husband. He was, therefore, entitled to request information from the Seden Family Group, and consent could not have been reasonably withheld. There was no requirement that the husband be a member of the Seden Family Board, as was implied by the husband in his submissions. There is no evidence that the husband made any request for consent to inspect or copy information from the Seden Family Board.
The position is different in relation to documents in the possession of DD Pty Ltd. In this respect, I accept the husband had no clear entitlement to request to inspect or copy information.
Furthermore, notwithstanding this argument, the husband contended that he had either complied with, or was not otherwise requested to provide the relevant documents, identifying at [16] of his affidavit the items which were not subject to the March or May 2021 orders, and which the wife had not requested from him prior to filing the subpoenas. It is not necessary to identify each of these contentions. The wife submits that such an argument should be disregarded because the orders were clear and unequivocal, and clearly included material not produced and that was ultimately the subject of the subpoena. In addition, it was submitted that the husband is under a general duty of disclosure which obliged him to produce, or to have done everything possible, to obtain and produce the same.
Finally, it was submitted by the husband that the dispute was clearly one as between the wife and the third parties, with the husband merely adopting the submissions of the third parties and providing further submissions in support. I do not accept this argument. The third parties are not, at least at present, parties to the litigation. The husband chose to contest the objections to the subpoenas by making submissions in support of the objections. He took an adversarial position to the wife thereby conceding an interest in the outcome of the objections.
The third parties made similar contentions, suggesting that any complaint about conduct should have no bearing upon the question of whether a costs order should be made against them, as they are not subject to any general duty of disclosure. Accordingly, it is said, any such complaint should be pursued against the husband instead.
Whilst the third parties are correct in asserting that there is no general duty of disclosure imposed upon them, the terms of s 117(2A)(c) do not require any such duty to exist. It specifies that any conduct, including “pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters” may be relevant, and that this does not limit the generality of the conduct which can be considered under this provision.
The wife further submitted that DD Pty Ltd has no interest independent of the husband, Mr K Seden, and the Seden Family Group, and that for present purposes, it is clear that they were acting at the behest of the Group on the instructions of Mr K Seden. This was made clear from the conduct of DD Pty Ltd following court orders, notably Ms T’s failure to release documents in light of the absence of consent from Mr K Seden. I accept the interests of the husband and the third parties are broadly aligned. However, I am unable at this stage of the proceedings to find, for the purposes of a costs judgment, that DD Pty Ltd have no interest independent of the husband.
It was also argued that DD Pty Ltd had previously been the subject of a subpoena on 28 March 2019, which sought financial documents of a similar nature and character, and the firm had withdrawn objections made on the basis of relevance. In other words, by withdrawing the objection, the third parties conceded the apparent relevance of the same or similar documents. The third parties did not address this argument.
Section 117(2A)(e) – whether either party has been wholly unsuccessful
The wife was wholly successful in resisting the Notice of Objection filed by Mr K Seden, who was wholly unsuccessful. The wife was largely successful in respect of the subpoena issued to DD Pty Ltd.
The third parties submitted that the wife was not wholly successful, since the third parties successfully had four of the eleven paragraphs objected to in the subpoena to DD Pty Ltd set aside. This is incorrect, as three paragraphs were set aside.
The husband also submitted that the wife was not wholly successful. He argued this confirmed that the objection to the DD Pty Ltd subpoena was appropriate to be argued.
In short, the third parties and the husband were wholly unsuccessful in upholding the objection to the subpoena issued to Mr K Seden. No party was wholly unsuccessful in relation to the subpoena issued to DD Pty Ltd.
CONCLUSION ON JUSTIFYING CIRCUMSTANCES
In my view, the disparities in the parties’ financial positions, the uncooperative stance taken by the third parties and the husband in respect of both subpoenas, and the complete lack of success in relation to the subpoena issued to Mr K Seden justify an order for costs in the wife’s favour.
INDEMNITY COSTS
The wife argues that the circumstances are such that the Court should award indemnity costs in her favour.
The award of indemnity costs in this Court has regularly been called a significant departure from the normal standard, rare, and requires something exceptional: Harris & Dewell (No 2) (2018) FLC 93-863, where the Full Court said:
23. In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
24. That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
25. The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”
(Footnotes omitted)
The wife argued that the husband and third parties ought to have known that their positions in relation to the issues of relevance were doomed to fail, and this therefore gives rise to the presumption of some ulterior motive or a wilful disregard of the facts.
Secondly, the wife argued that the husband’s failure in attempting to access any or all of the documents, in the face of his obligations as to disclosure and prior court orders made, justifies an award of indemnity costs.
I do not accept these arguments. The discussion above of the conduct of the parties, the complex nature of the financial arrangements of the husband’s family, and the fact the wife has not enjoyed total success combine to deprive the circumstances of the exceptional element which would justify indemnity costs.
CERTIFICATION FOR SENIOR COUNSEL
The wife, husband, and third parties all engaged senior counsel for the hearing of the subpoena objections. The third parties also engaged junior counsel.
Rule 12.28 of the 2021 Rules provides that the judicial officer hearing a proceeding may certify that it was reasonable for senior counsel to be engaged.
The wife submitted that the issues in the proceedings warranted the briefing of senior counsel, particularly in light of the fact that the husband engaged senior counsel, and the third parties briefed both senior and junior counsel.
The third parties argued that simply because other parties had engaged senior counsel does not mean that a certificate should be issued. They submitted that it could not be suggested that the application was so difficult such that it would warrant senior counsel, yet to also argue that the subpoena objections were so hopeless as to warrant an order for indemnity costs. The husband adopted these submissions.
As I intend to refuse the wife’s application for indemnity costs, this argument no longer has force. I am satisfied that it was reasonable for the wife to retain senior counsel, particularly in light of the representation engaged by the husband and third parties. Although I propose to order costs in a fixed amount, I will certify for senior counsel.
FIXED AMOUNT FOR COSTS
As noted, the wife in the alternative seeks a fixed amount of $23,270 for her costs. The third parties resist such an order, arguing costs should be assessed in the ordinary course. They did not separately contend that the amount proposed for fixed costs was excessive or inappropriate.
The Court has power to order costs in a fixed amount pursuant to r 12.17(1) of the 2021 Rules. In making such an order, r 12.17(3) provides:
(3)In making an order under subrule (1), the court may consider the following:
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c)the rates ordinarily payable to lawyers in comparable proceedings;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre‑action procedures;
(f)whether expenses (paid or payable) are fair and reasonable and proportionate.
Subparagraphs (d), (e), and (f) are considerations which broadly echo the overarching purpose of “family law practice and procedure provisions” set out in s 67(1) of the Federal Circuit and Family Court of Australia Act2021 (Cth), as follows:
(1)The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a)according to law; and
(b)as quickly, inexpensively and efficiently as possible.
The “family law practice and procedure provisions” are defined in s 67(4) to be:
(a)the Rules of Court;
(b)any other provision made by or under this Act, or any other Act, with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
Rule 1.04 also requires the Court to interpret and apply the Rules to achieve the overarching purpose.
Section 68 stipulates that parties have a duty to conduct their litigation consistently with the overarching purpose. In relation to costs, s 68(4) provides:
(4)In exercising the discretion to award costs in a civil proceeding, the Federal Circuit and Family Court of Australia (Division 1) or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).
In light of these provisions, in my view, the exercise of the discretion in r 12.17 to fix an amount of costs should be informed not only by the circumstances of the case and the considerations in r 12.17(3), but also by the statutory overarching purpose to dispose of a costs application as quickly, inexpensively, and efficiently as possible. The rule should be applied to help achieve the overarching purpose. This seems especially apposite in relation to a narrow interlocutory application such as an argument about objections to subpoenas. I do not consider that putting the parties to the further time and expense of assessing costs, with the consequent imposition on the resources of the Court, is consistent with the overarching purpose in relation to the application the subject of this judgment. Accordingly, I will fix the amount of costs payable at $23,270.
COSTS OF COMPLIANCE
The third parties seek a separate order against the wife for the costs of complying with the subpoenas. It is open to a subpoenaed party to seek payment of the costs of compliance beyond any conduct proffered by the issuing party pursuant to r 6.34 and r 6.35 of the 2021 Rules. Those Rules require notice of “substantial loss or expense” by the recipient to the issuing party before complying. They are in the following terms:
6.34 Order for cost of complying with subpoena
Subject to rule 6.35, the court may, on application, make an order for the payment of any loss or expense incurred in complying with a subpoena.
6.35 Cost of complying with subpoena if not a party
(1)This rule applies if:
(a)a subpoena is addressed to a person who is not a party to the proceeding; and
(b)before complying with the subpoena, the person subpoenaed has given the issuing party notice that substantial loss or expense would be incurred in properly complying with the subpoena, including a particularised estimate of the loss or expense; and
(c)the court is satisfied that substantial loss or expense is incurred in properly complying with the subpoena.
(2)Unless the court otherwise directs, the amount of the loss or expense estimated under paragraph (1)(b) is payable by the issuing party.
(3)The court may fix the amount payable having regard to the scale of fees and allowances payable to witnesses in the Supreme Court of the State or Territory where the person is required to attend.
(4)The amount payable is in addition to any conduct money paid.
(5)If a party who is to pay an amount under this rule obtains an order for the costs of the proceeding, the court may:
(a)allow the amount to be included in the costs recoverable; or
(b)make any other order it thinks appropriate.
The statutory right to claim “substantial loss or expense” has been associated with compliance with a subpoena for a long time. Rule 15.23 of the Family Law Rules2004 (Cth) (“2004 Rules”) used the same expression. It is quite separate to claiming costs pursuant to s 117 of the Act. Murphy J pointed out in Markoska & Markoska (Costs) (2012) 46 Fam LR 598 at [79] that:
The “substantial loss or expense” ordered pursuant to r 15.23 is a separate head of power [to s 117], noting that the sum so claimed might, in appropriate circumstances, include legal costs or expenses (see e.g. Kelleher & Anderson [2008] FamCA 113; Moriarty & Moriarty [2009] FamCA 369; Fuelxpress Pty Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284).
Again, in relation to former r 15.23(3), in Moriarty & Moriarty (2009) 41 Fam LR 336, Cronin J said:
47. The loss or expense that the recipient may seek includes the expenses of finding, collecting, collating, marshalling and producing the documents or materials sought and for the incidental cost of attending the court (Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284).
48. …
49. In some circumstances where a subpoena seeks production of complex materials or the recipient needs to obtain legal or accounting advice, he or she may also include a claim for recovery of the costs of that advice including representation.
Cronin J continued:
57. The rules refer to a “substantial” loss or expense.
58. The determination of what is substantial is very subjective. In my view, it means that the expense must be large causing loss; it must be unusual in the sense of requiring normal activity to be stopped; or it must cause an unfair inconvenience having regard to the fact that the recipient has nothing to do with the litigation.
59. Assessment of the reasonableness of burdens involved in complying with a subpoena must take account the capacity of a party to collect and produce the documents. That means that in a large organization, the capacity to cover the expense is greater than in a small organization (see Lucas Industries v Hewitt (1978) 18 ALR 555 and G and D & D (2005) FamCA 1429).
60. Notwithstanding the administration of justice issue, the rules are not intended to put the individual presenting the documents in a position where they lose income or capital. The rule however refers to a substantial expense and each situation must be determined on its peculiar facts.
61. However, if the subpoena is simple and clear, requiring the production of the recipient’s own documents, the inconvenience is intended and expected to be minimal.
In construing r 6.34 and r 6.35 of the 2021 Rules, it is noteworthy that r 15.23(1) of the 2004 Rules stipulated an entitlement for the named recipient of a subpoena to be paid conduct money “sufficient to meet the reasonable expenses of complying with the subpoena” and at least equal to a specified minimum amount of conduct money. The concept of “substantial loss and expense” in r 15.23(3) was qualified by the words “that is greater than the amount of the conduct money…payable under this rule”.
Conduct money is now addressed in r 6.31 of the 2021 Rules and specifies conduct money “sufficient for return travel” between the residence or place of employment of the recipient and the Court. An express standard of sufficiency and reasonableness associated with conduct money in the former r 15.23(1), embodied in the expression “sufficient to meet the reasonable expenses of complying with the subpoena”, is now absent. Rules 6.34 and 6.35 do not expressly reintroduce it. As can be seen, they refer only to “substantial loss or expense” in complying with the subpoena. It may be, as a matter of construction, that it is appropriate to imply a standard of reasonableness in relation to the incurring of any established substantial loss and expense. However, on the view I take it is unnecessary to express a concluded view on this question.
As the third parties point out, r 6.34 and r 6.35 set out the requirements which must be met to make an order for the wife to pay the costs of compliance. I accept that r 6.35(1) would make the wife prima facie liable to pay the costs unless the Court otherwise orders. I am also satisfied that the letter to the wife’s solicitors dated 22 November 2021 constituted “notice that substantial loss or expense would be incurred” with a particularised estimate of the loss or expense for the purposes of r 6.35(1)(b).
Historically, the costs of compliance were assessed in a two part process, the first part of which required a determination of whether the costs and expenses claimed were reasonable, and the second part, the assessment: Kennedy and Evans; Trust Bank (Intervener) (1994) FLC 92-514 at 81,306–81,307. The entitlement was to recover the costs actually incurred, but not to recover profit costs in respect to production.
The third parties relied upon the affidavit of Mr K Seden in respect of their claim for the costs of compliance. The evidence was given on behalf of both third parties. There was no separate evidence from a partner at DD Pty Ltd about the costs of compliance. No objection was taken to the evidence.
This evidence showed the costs of DD Pty Ltd complying would be $9,702 based on an hourly rate of $462 per hour and a total of 21 hours. The total hours include finding, collecting, and collating documents for production. The compliance claim also includes lawyer’s costs of reviewing and providing advice upon the documents prepared for production. The total claim is for $15,092.
There was no evidence which would allow the Court to form a view on questions such as whether the expense was unusual in the sense of requiring normal activity to be stopped, or whether it constituted an unfair inconvenience. For the reasons given above at [13], I do not conclude that the third parties have nothing to do with the litigation. It is not clear any of the claimed amount is referrable to a loss as opposed to an expense. While I accept that the volume of documents sought on the face of the subpoenas support an inference that compliance would take time, no evidence was given which supported the asserted time required (21 hours) to collect, collate, and produce the documents. There was no evidence which went any distance to support a conclusion of unfair inconvenience to the third parties.
I am not satisfied that the third parties have established that substantial loss or expense was incurred in complying with the subpoena for the purposes of r 6.35(1)(c).
Accordingly, I refuse the third parties’ claim for the costs of compliance.
COSTS OF THIS APPLICATION
The wife sought orders for costs of her application for costs. The husband and the third parties sought costs against the wife in respect of her application. Although the wife has succeeded in achieving an order for costs in a fixed amount, and the husband and third parties have failed in their resistance, for the same reasons why I consider it appropriate to award costs to the wife in a fixed amount (at [68] above), I am persuaded that that there should be no separate order for the costs of this application.
CONCLUSION
For the reasons given in the foregoing paragraphs, I make the orders set forth at the commencement of these reasons.
I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 30 September 2022
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