Lambert v Jackson
[2011] FamCA 275
•20 April 2011
FAMILY COURT OF AUSTRALIA
| LAMBERT & JACKSON AND ANOR | [2011] FamCA 275 |
| FAMILY LAW - COSTS - where the wife sought a costs order jointly and severally against the husband and the husband’s solicitor - where the conduct of the husband’s solicitor had been referred to a disciplinary body - application for adjournment by the husband’s solicitor - consideration of legal professional privilege and s 128 and 91 of the Evidence Act - where the referral of the husband’s solicitor to a disciplinary body was not ground for an adjournment of the costs application - whether there should be a stay of any costs order against the husband’s solicitor until after the husband’s substantive appeal against the property orders had been determined - whether fresh evidence about the husband’s financial position should be admitted - where issue estoppel applied - whether indemnity costs should be ordered - where a costs order can be made against the lawyer for an opposing party - whether the discretion to order costs against a third party is confined by the Family Law Rules - the considerations of statutory provisions as they apply to the husband - consideration of s 117AB Family Law Act - indemnity costs order made against the husband - where an indemnity costs order is made against the husband’s solicitor for part of those costs jointly and severally with the husband - whether there should be certification for senior counsel - whether the wife has been charged “unusual expenses” - consideration of the rule in Re:Blyth & Fanshawe - whether the costs should be as agreed or assessed or whether a lump sum should be ordered |
Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
| Legal Profession Act 2007 (Qld) |
| B & Associates (a firm of solicitors) & Bloomfield (2003) 31 FamLR 1 Batey-Elton & Elton (Costs) [2010] FamCAFC 219 Blair v Curran (1939) 62 CLR 464 Brigenshaw & Brigenshaw (1938) 60 CLR 336 Cassidy v Murray (1995) FLC 92-633 Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 Cornwell v The Queen (2007) 231 CLR 260 Fennessy & Gregorian (2009) FLC 93-339 Ferrall v Blyton (2000) FLC 93-054 Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish & Another (2005) 33 Fam LR 123 Fraser & Moedt (NA 42 of 1996 unreported 30 October 1997) Giannarelli v Wraith (1988) 165 CLR 543 Greedy and Greedy (1982) FLC 91-250 Griffin v Pantzer (2004) FCA FC 113 Gyles v Randall (1915) 1QdB 290 Hampton Court Ltd v Crooks (1957) 97 CLR 367 HPM Industries Pty Ltd v Graham (1996) NSW SC 371 Kohan & Kohan (1993) FLC 92-340 McAlpin v McAlpin (1993) FLC 92-411 Marinko and Marinko (1983) FLC 91-307 Martin & Harris (2010) FamCA 239 Munday v Bowman (1997) FLC 92 -784 O’Rourke v P & B Corporation Pty Ltd [2008] WASC 36 Parker & Jacks (No. 3) (2009) FMCA fam 993 Penfold and Penfold (1980) FLC 90-800 R v Lodhi (2006) NSW SC 638 Re: Blyth & Fanshawe (1882) 10 QBD 207 Re: Skinner & Smith’s Bills of Costs (No. 2) [1990] 1QdR 180 Stamp v Stamp (2007) FLC 93-314 Telstra v BT Australasia (1998) 85 FCR 152 Weir and Weir (1993) FLC 92-338 Weiss v Barker Gosling (No 2) (1994) FLC 92-474 Wentworth v Rogers [1999] NSWCA 403 Yunghanns & Ors and Yunghanns & Ors & Yunghanns (2000) FLC 93-029 Z & Limousin (2010) FLC 93-433 |
| APPLICANT: | Ms Lambert |
| RESPONDENT: | Mr Jackson |
| 2ND RESPONDENT: | Ms Y |
| FILE NUMBER: | SYF | 2949 | of | 2006 |
| DATE DELIVERED: | 20 April 2011 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 23 December 2010 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Barkus Doolan Kelly |
| SOLICITOR FOR THE RESPONDENT: | SJP Law |
| SOLICITOR FOR THE 2ND RESPONDENT: | Patrick Murphy |
Orders
IT IS CERTIFIED THAT:
This is a matter where it was proper to retain senior counsel.
IT IS ORDERED THAT:
The husband pay to the wife her costs from the commencement of the proceedings to 5 August 2009 (but excluding costs relating to the parenting proceedings) on an indemnity basis assessed pursuant to Rule 19.18 of the Family Law Rules, 2004(Cth) in the sum of $182,182.
The husband and Ms Y pay to the wife her costs from 6 August 2009 to the conclusion of the proceedings (but excluding costs relating to the parenting proceedings) on an indemnity basis assessed pursuant to Rule 19.18 of the Family Law Rules, 2004 (Cth) in the sum of $140,075 and the husband and Ms Y be jointly and severally liable for the said payment.
Costs ordered pursuant to paragraphs 2 and 3 be paid in full within 42 days and any amount outstanding thereafter carry interest at the rate prescribed from time to time by the Family Law Rules, 2004 (Cth).
It is noted that publication of this judgment under the pseudonym Lambert & Jackson and Anor is approved pursuant to s 121 (9) (g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 2949 of 2006
| Ms Lambert |
Applicant
And
| Mr Jackson |
Respondent
And
| Ms Y |
2nd Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The wife seeks costs against the husband and the husband’s lawyer.
During the proceedings and hearing as to how marital property should be divided, the husband failed to disclose arrangements made between himself and his business partner.
From 30 July 2009 the second respondent became the solicitor on the record for the husband and filed a certificate relevant to disclosure.I found, prima facie, that the husband’s solicitor was an active participant in withholding information from the Court from 6 August 2009.
APPLICATIONS
The wife seeks the following:
1.Order for costs against the husband from the commencement of the proceedings to 31 July 2009 (but excluding costs relating to the parenting proceedings) on an indemnity basis assessed pursuant to Rule 19.18 of the Family Law Rules, 2004 in the sum of $182,042.61.
2.Order for costs against the husband and Ms Y jointly and severally liable from 1 August 2009 to the conclusion of the proceedings including the present application for costs (but excluding costs relating to the parenting proceedings) on an indemnity basis assessed pursuant to Rule 19.18 of the Family Law Rules, 2004 in the sum of $165,317.36.
3.In the alternative, but only in the event the relief sought in paragraphs 1 and 2 is declined:
3.1Order for costs against the husband from the commencement of the proceedings to 31 July 2009 (but excluding costs relating to the parenting proceedings) on an indemnity basis such costs to be agreed and in the absence of agreement as assessed;
3.2Order for costs against the husband and Ms Y jointly and severally liable from 1 August 2009 to the conclusion of the proceedings including the present application for costs (but excluding costs relating to the parenting proceedings) on an indemnity basis such costs to be agreed and in the absence of agreement as assessed.
4.In the alternative, but only in the event the relief sought in paragraphs 1, 2 and 3 is declined:
4.1Order for costs against the husband from the commencement of the proceedings to 31 July 2009 (but excluding costs relating to the parenting proceedings) on a party/party basis as agreed or assessed.
4.2Order for costs against the husband and Ms Y jointly and severally liable from 1 August 2009 to the conclusion of the proceedings including the present application for costs (but excluding costs relating to the parenting proceedings) on a party/party basis as agreed or assessed.
5.Costs ordered pursuant to paragraphs 1 and 2 be paid in full within 28 days and any amount outstanding thereafter carry interest at the rate from time to time prescribed by the Family Law Rules, 2004.
Additionally, the wife seeks certification that this matter was a matter where it was proper to retain senior counsel.
Neither the first respondent nor the second respondent opposes an order being made against the other in the terms sought by the wife.
The husband seeks the following:
1.That the wife’s Application be dismissed.
2.That there be no order as to costs as between the husband and the wife.
3.That the payment of any order for costs made against the husband be stayed pending the outcome of the appeal lodged by the husband against the orders made by the Honourable Justice Watts of 24 May 2010.
4.If the application for adjournment is granted to the second respondent, then the husband also seeks an adjournment.
Ms Y (second respondent) seeks the following:
1.That the application, in so far as it relates to Ms Y, be dismissed.
2.Alternatively that the wife’s application for costs as against Ms Y be adjourned pending the outcome of the hearing of the referral of the 10th of June, 2010 to the Queensland Legal Services Commission.
3.Further in the alternative, that any order made against Ms Y be stayed pending the hearing of the Appeal lodged by the husband against the decision of the Honourable Justice Watts of 24 May 2010.
4.In the event that a costs order is made pursuant to paragraph 2 of the application, that any costs so ordered be paid in full within 12 months.
ADJOURNMENT APPLICATION BY SECOND RESPONDENT
Ms Y submits that it is appropriate that this matter be adjourned until after the resolution of the referral this court made of Ms Y’s conduct to the Legal Services Commission.
The second respondent has chosen to file no evidence in support of her application for an adjournment or stay. There is no evidence that the Legal Services Commission has determined to do anything as a consequence of the referral that I had made.
A number of arguments are put in support of the adjournment application:
11.1.On the basis that the wife’s cost application against Ms Y is categorised as an exercise of this court’s intrinsic power to regulate the conduct of practitioners that appear before it, it is argued that it is more appropriate to have the statutory authority with the responsibility of regulating practitioner’s conduct deal with that issue prior a to costs application being determined. As will be discussed later, this argument must fail on the basis that any cost order must not be punitive. It can only be compensatory.
11.2.Because the costs application against Ms Y is primarily based upon assertions about her misconduct, it is argued that where the alleged professional misconduct at least overlaps, if not actually duplicates the basis for the referral to the statutory authority, then any application in costs should await the outcome of those other proceedings. I find that the wife need not await the outcome of other proceedings, which, although relating to a similar subject matter, does not involve the wife.
11.3.It is argued that because the referral by the court of Ms Y to the statutory authority was made on the invitation, if not the insistence of the applicant, then the applicant cannot complain too loudly if the hearing of the costs application is adjourned to permit the referral to the statutory authority to be completed. It is said the applicant would only suffer prejudice by way of delay in the outcome in the costs application. I observe that the court referred the solicitor to the Legal Services Commission. Whether or not any submission made by the wife could be categorised as an “invitation” or an “insistence”, any such submission should not preclude the wife from pressing her cost application now.
11.4.It is asserted that Ms Y has a right to maintain her silence in respect of the allegations of professional misconduct until such time as a “prima facie” case is made out against her in the proceedings before the statutory authority. In that context it is argued that the “prima facie” findings that I made in my reasons for judgment are made in a different context. Ms Y argues that in order to properly conduct her case in the costs proceedings, it is necessary for her to depose to her recollection of her conduct and she is not prepared to do so at this time because by abandoning her right to silence, she exposes herself not only in relation to the proceedings before the Legal Services Commission, but also possible criminal proceedings and a possible application for contempt of this court. This final submission in support of the second respondent’s adjournment application raises issues about legal professional privilege, the protection offered by s 128 Evidence Act 1995 (Cth) (“EA”) and the operation of s 91 EA.
Is Ms Y restricted by any legal professional privilege of the husband?
In the husband’s affidavit he repeatedly raises issues as to his instructions to the second respondent, her advice and her actions and he does so in the context of his reliance upon that material to defend the present application against him, but in the full knowledge that there is also an application springing from those events as against the second respondent. He has raised as an issue squarely his state of mind reliant upon the advice that he was given and in doing so, he exposes both the advice and the instructions which informed it to scrutiny (see Stamp v Stamp (2007) FLC 93-314 and the cases discussed in Telstra v BT Australasia (1998) 85 FCR 152 at 165-6). The husband also reveals versions of communications with his lawyers. The wife in a letter to the second respondent’s solicitors dated 4 August 2010 clearly puts the second respondent on notice that it was the applicant’s position that there had been a waiver of legal professional privilege going to all matters so that the second respondent could properly address assertions made against her and defend herself.
The second respondent should not be allowed to infer that she has important things to say but is in the invidious position of being precluded from doing so because of the consequences that might flow as a result of her breaching legal professional privilege. The second respondent in the course of these costs proceedings did not attempt to seek any ruling from the court which would have clarified the position in relation to legal professional privilege.
There can be no suggestion that the second defendant may offer as an explanation for choosing not to lead evidence in these proceedings, the assertion that she has not been released from privilege by her former client.
I am comfortably satisfied that the matters raised by the husband in the material read in these costs proceedings results in a waiver of any privilege that the husband may have formerly asserted. I find that any suggestion by the second respondent that she is prevented from providing evidence in this matter as a result of the principles of legal professional privilege, to be without merit.
The protection which might be provided to the second respondent by s 128 Evidence Act 1995 (Cth)
Section 128(1) EA applies if a witness objects to giving particular evidence on the ground that the evidence may tend to prove that the witness:
(a)has committed an offence against or arising under an Australian law or a law of a foreign country, or
(b)is liable to a civil penalty.
If a witness, on reasonable grounds, so objects, then the court is not to require the witness to give that evidence unless the court offers the witness a certificate under s 128 EA. If the witness is required to give the evidence by the court, a certificate must be given (s 128(6) EA).
The effect of the certificate is that any evidence given by the person in respect of which the certificate is given and any information, document or thing obtained as a direct or indirect consequence of the person having given that evidence, cannot be used against that person in any proceeding in an Australian court (s 128(7) EA).
In the event the second respondent is prosecuted for unsatisfactory professional conduct or professional misconduct, such prosecution would arise under Chapter 4 Legal Profession Act 2007 (Qld). Any such proceedings would be determined by a body constituted comfortably within the definition in subparagraph (e) of the definition of “Australian court” in the dictionary to the EA.
Senior counsel for the second respondent asserts that a certificate is “neither a complete nor satisfactory remedy” upon which her client might rely.
Senior counsel for the second respondent submits:
“this is so because the certificate is not retrospective in its operation and does not protect evidence given as at the time of swearing the affidavit. See HPM (sic) Industries Pty Limited v Graham [1996] NSWSC 371; Griffin v Pantzer [2004] FCAFC 113”.
I accept that there is no ability to use the shield provided by s 128 EA after the evidence has been published. I do not accept that if a certificate is not given at the time of the swearing of an affidavit, then the provisions of s 128 EA are impotent. It is not unheard of in this jurisdiction for an affidavit to be prepared and sworn by a party, without that party publishing the evidence in the affidavit by filing and serving the affidavit. The usual practice, when protection is sought, is for the certificate to be applied for prior to the filing and serving of the affidavit.
The next argument of senior counsel for the second respondent is that:
“It is relevant that even in criminal proceedings in which a certificate issues under s 128 Evidence Act 1995 (Cth), such a certificate is no guarantee that a complete or satisfactory remedy. If the certificate can prove deficient in those (criminal) circumstances where there is, arguably, a compelling public policy concern that the interests of justice be served then it is submitted that the protection of the certificate in civil proceedings is even weaker. See: R v Lodhi [2006] NSWSC 638 especially at para 51.”
I do not share senior counsel’s view that a certificate is no guarantee of a complete or satisfactory remedy in the circumstances of this case.
Lodhi, which involved a person who was accused of terrorism offences, presented a very unusual circumstance (as Whealy J acknowledged). The lack of “absolute protection” referred to by the court in that case were described as “the indefinable but no doubt real prejudices that may result where a witness has given evidence of the kind dealt with in s 128 EA which may as a consequence bring him into disfavour with some sections of the community or people who have previously held the witness in high regard. Secondly, the protection may not extend to the consequences that may be involved in disciplinary proceedings instituted against professional persons…”
In this case, the provisions of s 121 Family Law Act1975 (Cth) (“FLA”) and the anonymisation of the reasons pursuant to that section, provide some protection for the second respondent in relation to her professional reputation. As I have already said, the prosecution of the solicitor by a disciplinary body is in my view clearly a prosecution by an “Australian Court” and consequently the protection contained in s 128(7) EA is enlivened and in my view, an absolute protection in this case, subject to the next issue which I now discuss.
The more powerful submission by senior counsel for the second respondent relates to the issue as to whether or not s 128 EA is confined to evidence given during cross examination or whether it might more broadly apply to all evidence that a witness gives, both in evidence given in chief and given in re-examination. Senior counsel for the second respondent submits the certificate is meant to afford a measure of protection only arising out of responses to questions. She says this is consistent with the view that a party is not expected to volunteer evidence that may prove self incriminating and ought only to do so under compulsion; ie in response to questions under cross examination rather than by affidavit deposed beforehand.
In Ferrall v Blyton (2000) FLC 93-054, the husband wished to give evidence about his illegal behaviour. The trial judge granted a certificate pursuant to s 128 EA. The Full Court at paragraphs 89 and 90 said:
89. We think the trial Judge was clearly correct in holding that it was within his discretion to grant such a certificate. Firstly, we think it would be unrealistic to limit the availability of a certificate to a situation where a witness is asked a particular question in cross- examination. We think the availability of a certificate clearly applies to evidence given in chief, otherwise an inappropriate forensic advantage would rest with the other party who would be in a position to prevent the question of an objection arising by simply not seeking to cross-examine.
90. In the particular circumstances of the Family Court of Australia, evidence in chief is normally given by affidavit. We think that in the circumstances of the present case, the witness was objecting, in the sense required by s 128, by indicating that he would not file the affidavit unless a certificate was given. We see the situation as no different from that which would have been the case if he had been sworn in and asked to answer questions concerning the matter in evidence in chief, and had objected to doing so without the issue of such a certificate.
However, in Cornwell v The Queen (2007) 231 CLR 260, the majority of the High Court doubted, without deciding, whether the word “objects” extends to anything other than objecting to answering a question in cross examination:
106.Finally, one other aspect of s 128 may be referred to. The opening words of s 128(1) provide that s 128 only applies if "a witness objects to giving particular evidence". A fair characterisation of the exchanges between counsel for the accused and Howie J set out earlier[99] is that while in one sense the accused "objected" to the 35th question he was asked in chief when he claimed privilege, in another sense he did not object at all. He evidently wanted to give some evidence about the Diez-Lawrence conversations. He could only be sure of giving it in the way he would have liked if he gave it in chief; if he took the risk of leaving its reception to the chance of particular questions in cross-examination, he ran the risk of not being able to give it, or not in the way perceived to be most favourable to his interests. Hence his claim of privilege was arguably not a means by which he "objected", but was an attempt to ensure that s 128 protected him from some potentially adverse consequences of evidence which he did not "object" to giving, but strongly wanted to give.
107.The accuracy of that characterisation is supported by the following factors.
108.First, counsel for the accused carefully spent time in the days preceding 5 May 2003 seeking to prepare the ground for a favourable ruling on the evidence. He had hopes of a favourable ruling before the accused's case opened. While Howie J was resistant to blandishments seeking a favourable ruling, the course being charted for the accused was plainly driven by the desire of the accused to give evidence in chief about the Diez-Lawrence conversations.
109.Secondly, the 34th question was leading and the 35th question explicitly triggered the claim to privilege which the accused made: what was happening was no surprise to the accused.
110.Thirdly, if the accused had objected to counsel's question in the sense of not wanting to answer it, or not wanting it to be asked, the issue probably would have been sorted out before the accused entered the witness box, or the accused could have reacted in such a way as to cause counsel to withdraw the question. The fact that the thirty-fifth question, and all the later questions in chief about the Diez-Lawrence conversations, were asked supports the conclusion that the accused wanted to give evidence about them and instructed counsel to structure events so that he could do so with a measure of impunity.
111.This characterisation raises a question whether s 128(1), and hence s 128 as a whole, applies where a witness sets out to adduce in chief evidence revealing the commission of criminal offences other than the one charged. A criminal defendant might wish to present an alibi, the full details of which would reveal the commission of another crime. A civil defendant might wish to prove the extent of past earnings, being earnings derived from criminal conduct. This raises a question whether witnesses who are eager to reveal some criminal conduct in chief, because it is thought the sting will be removed under sympathetic handling from their own counsel or for some other reason, are to be treated in the same way as witnesses who, after objection based on genuine reluctance, give evidence in cross-examination about some crime connected with the facts about which evidence is given in chief.
112.The view that the accused's claim of privilege in all the circumstances answered the requirements of s 128(1) has difficulties. It strains the word "objects" in s 128(1). It also strains the word "require" in s 128(5) - for how can it be said that a defendant-witness is being "required" to give some evidence when his counsel has laid the ground for manoeuvres to ensure that the defendant-witness's desire to give the evidence is fulfilled? And it does not fit well with the history of s 128(8). For one thing, s 1(e) of the 1898 Act and its Australian equivalents provided that an accused person called pursuant to the legislation could be "asked any question in cross-examination notwithstanding that it would tend to criminate him as to the offence charged"[100], which implies that the protection of the accused's position in chief or in re-examination was a matter between the witness's counsel and the witness. For another thing, the Australian Law Reform Commission, in summarising the pre-s 128(8) law, assumed that s 1(e) and its Australian equivalents were to be construed as applying to questions in cross-examination only[101].
113.The present point was not raised by the DPP either in the courts below or in this Court. It was raised by this Court in the course of oral argument, but was not embraced by counsel for the DPP. "Sometimes this Court will decide a question which has not been referred to or discussed by an intermediate court of appeal but that is not the course which should ordinarily be followed."[102] The present question could be of considerable importance in the day-to-day conduct of trials, since counsel for the accused submitted that in practice s 128 was often employed by prosecutors to elicit evidence in chief. It is not necessary finally to decide this issue, since the appeal is to be allowed on other grounds. And it is not desirable to do so in view of the absence of dispute between the parties on the question and the importance of the question.
Although I acknowledge that the observations by the majority in Cornwell may point to the reasoning of the Full Court of the Family Court in Ferrall being unsound, I am not able to say the approach in Ferrall is plainly wrong and I conclude that I am bound by that decision of the Full Court.
I consequently conclude that s 128 EA is available to the second respondent and on that basis, I find that the assertions by the second respondent that she would be at risk, if she gave evidence in these proceedings after a certificate had been granted, to be without substance. I find s 128 EA provides a complete answer to the concerns expressed by the second respondent. The granting of a certificate affords very powerful protections which are set out in s 128(7) EA.
If I am wrong about that then another difficulty that the second respondent has is that she not only refers to proceedings before Legal Services Commission but also possible criminal proceedings and contempt proceedings. There is consequently no indication that, even if an adjournment was granted until the conclusion of Legal Services Commission proceedings, the second respondent would take any different attitude to her right of silence.
The second respondent is entitled to exercise a right of silence. No inference can be drawn against her arising from that fact alone, I do not intend to grant an adjournment to the second respondent. I will deal with the matter on the basis of the evidence that I have.
Section 91 EA
I also take into account that findings made in the disciplinary proceedings would not be determinative of any relevant fact (or even admissible) in the current proceedings (see s 91 EA).
The husband’s application for an adjournment
Belatedly the husband made an application predicated on the fact that Ms Y is granted an adjournment. In those circumstances, he also sought an adjournment. He further submitted that such an adjournment would ideally cover the period until after the husband’s substantive appeal before the Full Court was determined.
The application by the husband is partly predicated on the basis that I would find that there was merit in the second respondent’s application for an adjournment. I have found that there is no merit in that application.
The substantive argument for the adjournment until after the disciplinary proceedings is the assertion that the second respondent’s conduct could then be viewed in the light of the findings of the Legal Services Commission but that argument overlooks the provisions of s 91 EA. I do not intend to grant any adjournment to the husband.
The second respondent seeks a stay (in the alternative)
The second respondent notes that the husband has filed an appeal against the primary judgment. The second respondent submits that a stay of any costs order against the second respondent would be appropriate because it might be that the wife will receive a lesser overall entitlement in the event that the appeal is successful and the second respondent may have a difficulty in seeking reimbursement for costs paid should the appeal be successful.
There are three answers to that submission. Firstly, I reject as illusory the second respondent’s fear as to her ability to recover should an appeal by her succeed. The wife is not a person of straw, she has significant assets. Secondly, any stay application needs to be grounded in any appeal against any cost order and consequently the application is premature. Thirdly, the extent of the wife’s success pursuant to s 79 FLA is not a relevant factor in respect of the application against the second respondent.
DOCUMENTS RELIED UPON
The wife relies upon the entirety of the evidence at trial and additionally upon the following documents:
40.1.Wife’s application for costs filed 15.6.10
40.2.Wife’s submissions in respect of costs filed 16.8.10
40.3.Wife’s submissions in reply filed 3.9.10
40.4.Wife’s affidavit filed 15.6.10
40.5.Wife’s affidavit filed 1.9.10
40.6.Affidavit of Ms Z filed 15.6.10
40.7.Affidavit of Ms Z filed 13.8.10
The husband relies upon the following documents:
41.1.Amended response filed 27.8.10
41.2.Husband’s submissions filed 26.8.10
41.3.Response to submissions of 2nd respondent 3.9.10
41.4.Husband’s affidavit filed 21.7.10
41.5.Husband’s affidavit filed 27.8.10
41.6.Affidavit of Mr BB filed 26.8.10.
Ms Y relies upon the following documents:
42.1.Amended response to wife’s application filed 13.9.10
42.2.Submissions filed 1.9.10
42.3.Further submissions filed 14.9.10
Ms Y did not file any affidavit material.
Affidavits in the husband’s case which are the subject of objection:
44.1.Affidavit of Ms L Jackson filed 21.7.10
44.2.Affidavit of Mr EN filed 21.7.10
44.3.Affidavit of Mr C filed 27.7.10
Discussion about the three affidavits to which objection is taken
Each of these affidavits is objected to by the wife. The wife submits that whilst they may have been relevant (although contentious) at the trial, in the circumstances where the husband failed to call the evidence at the trial, they are now wholly irrelevant in the context of this cost application. Each of these affidavits goes to evidence of fundamental facts resolved by me in my Reasons for Judgment. The wife submits that for the purpose of the present costs application, the evidence in these affidavits is now the subject of an issue estoppel which operates to exclude the present evidence.
In Blair v Curran (1939) 62 CLR 464 at 531, Dixon J said:
“A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order, necessarily established as the legal foundation or justification of its conclusion…”
The husband contends that s 117(2A)(a) FLA requires a consideration of the financial circumstances of the parties as at the date of the costs application, citing Marinko and Marinko (1983) FLC 91-307 as authority. It is correct to say that case discussed the position under the previous Family Law Regulations which made financial circumstances of a party against whom an order was sought, a relevant consideration. It is also true that in that case, the Full Court indicated that there was nothing in those Regulations or the case law that had previously discussed those Regulations which confined the court to a consideration of either party’s financial circumstances at the time before judgment. The Full Court said it may be appropriate to look at the end result of the actual property order in deciding whether to award costs. The Full Court commented that it would be an especially important consideration where a party had to meet a substantial order which might reduce their ability to meet an order for costs. In this case, however, when I look at the husband’s situation as it presents itself after the order has been made, based on the information I had at the hearing, it is unclear as to what the husband’s situation was.
The husband submits that it is abundantly clear that the evidence in the affidavits of Mr C, Mr EN and Ms L Jackson relates to the husband’s present financial position. The husband submits that, pursuant to s 117(2A)(a) FLA, I must “have regard” to considering the husband’s current actual “financial circumstances” at the date of the costs hearing.
It is correctly submitted that the net assets to which I referred in paragraph 360 of my Reasons contains a finding about the husband’s financial position at trial, arrived at by the inclusion of a range of notional adjustments and the exclusion of certain liabilities. These findings were made as part of a process to reach a just and equitable division pursuant to s 79 FLA.
The husband submits that the affidavit of Mr C demonstrates that an assumption made against the husband in the Reasons that a debt was included as a liability in the financial statements for the trading entities was incorrect. Mr C also gives evidence about an addback for unexplained drawings. The husband seeks to introduce this fresh evidence to point in the opposite direction to the finding that was made.
Next, the affidavit of the husband’s former wife, Ms L Jackson, deposes to the fact that she actually received her 50 percent entitlement, such that in assessing the husband’s current financial position (ie his ability to pay the wife’s legal costs at the current time), it would be inappropriate to notionally include monies that the husband had disbursed.
The affidavit of the husband’s former business partner, Mr EN, deals with his evidence about the ultimate disposition, after the hearing, of his interests in the business he and the husband jointly owned.
It is the fundamental submission by the husband that the objection of the wife, based upon issue estoppel, ought to fail on the basis that it has been demonstrated that the cause of action/issues are not identical. In support of that proposition, the husband relies upon Halsbury’s Laws of Australia Volume 12 at 190-100 where the learned authors state:
“In matters of fact, issue estoppel is confined to those ultimate facts that form the ingredients in the cause of action; there is no estoppel as to evidentiary facts found in the course of determining the affirmative or negative of an issue. Accordingly, there is nothing to prevent a party from tendering in a later proceeding, in relation to a particular issue, facts negatived in an earlier proceeding when they were tendered in relation to a different issue.”
In reply, the wife argues that the husband has misapplied the principle. It is submitted that in issue estoppel the plea is that a relevant issue or matter in the action before the court is taken to have been necessarily decided by a prior action and that it is clear that a central and fundamental issue in the substantive judgment concern the husband’s wealth at that time.
The submissions of the husband identify as the “different issue” the husband’s financial position today rather than at the time of the judgment.
I do not accept the husband’s arguments. It is not disputed that his current financial circumstances may be a relevant matter. As the wife concedes, if, subsequent to the judgment, he had suffered some material financial set back, or indeed, a material financial windfall, then it would not be suggested that he was prevented from adducing evidence of those matters relevant to the present application.
I agree with the submission made by the wife that in this case, the distinction is that he does not contend that what the court found to exist at the time of judgment has changed, but rather that the findings at the time were wrong or can now be supported to the contrary by different evidence. He then endeavours to draw those corrected facts forward as being representative of his present position.
I find that such a course is not open to him. I find that issue estoppel operates to preclude him from adducing evidence that relies, as a starting point, upon an allegation of error in the judgment.
More generally and beyond strict principles of issue estoppel, if such a course were to be permitted, namely after a lengthy trial, where findings of fact had been made, to then permit a party in a cost application in the same proceedings between the same parties to endeavour to secure a contrary finding on the same facts, this in my view would constitute an abuse of process. Cost applications are not meant to become “satellite litigation” or “parasitic litigation” (see Martin CJ in O’Rourke v P & B Corporation Pty Ltd [2008] WASC 36).
For these reasons, I conclude that, I should not read, in these proceedings as to costs, the affidavits of Ms L Jackson, Mr EN and Mr C.
If I am wrong about that, there is another reason why, in the context of this costs application, I am not particularly concerned about the husband’s current financial circumstances. The wife’s fundamental submission about the justice of a costs order in her favour arises from my findings as to the husband’s lack of full and frank disclosure (a factor relevant under s 117(2A)(c) FLA). There is nothing to prevent that one factor being the sole foundation for such an order. Once that factor is present, I am at large in relation to making a costs order against the husband if I consider it just.
In Batey-Elton & Elton (Costs) [2010] FamCAFC 219, the Full Court said:
27…we consider the comments of the Full Court in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish & Another (2005) 33 Fam LR 123 at [41] about justifying circumstances in s 117(2A) are apposite:
A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
THE LAW TO BE APPLIED
Statutory provisions
Ordinarily each party bears their own costs (s 117(1) FLA). However, the court, if it considers it just, may make an order as to costs if the court is of the opinion that there are circumstances to justify doing so (s 117(2) FLA). In considering whether or not a costs order should be made, the court shall have regard to the matters set out in s 117(2A).
Section 117AB FLA provides:
(1) This section applies if:
(a) proceedings under this Act are brought before a court; and
(b) the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.
(2) The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.
Failure to disclose under section s117(2A)(c) FLA
Costs awarded on account of a failure to disclose information or in obstructing enquiries is contemplated under section 117(2A)(c) FLA, especially where the other party has incurred additional costs as a consequence (see Weir and Weir (1993) FLC 92-338). Where difficulty arises merely from imprecise book-keeping, an order for costs may not be appropriate (Greedy and Greedy (1982) FLC 91-250).
Giving false evidence under section 117(2A)(c) or s117AB
Relevant to the conduct of the parties under section 117(2A)(c) FLA is whether a party gave misleading or false evidence, and whether this resulted in increased costs for the other party to disprove that evidence. In Penfold and Penfold (1980) FLC 90-800 Murphy J said:
“Giving false evidence, orally or in writing, and fabricating evidence are serious offences…Presentation of a false statement of financial circumstances, which puts the other party to the trouble and expense of disproving it, is a circumstance which justifies an order for costs. Courts should regard such circumstances which tend to undermine the integrity of proceedings with great concern, and should do everything in their power to determine who is responsible in order to maintain that integrity.”
Unlike the discretionary terms in section 117(2A) FLA, in the event that the provisions of s 117AB FLA apply, I must make an order for costs if I decide that the husband’s misleading information regarding the progress of the deal to buy out his business partner in R Pty Ltd was made knowing it was inaccurate. The extent of the costs ordered remains a matter of discretion.
Indemnity Costs
The wife submits that in this case the special and unusual circumstance to justify costs order on an indemnity basis against both the husband and Ms Y is straight forward. That is, that they each separately and in some instances jointly, acted in a manner that was dishonest, contrary to their respective obligations at law with the undoubted intent to undermine the integrity of the proceedings and in doing so, put the wife to unjustifiable inconvenience and expense in meeting the consequences of their behaviour.
The wife points to time expended by the her lawyers at trial exploring the husband’s financial circumstances to reveal the truth of those circumstances and in addition, the costs of the investigation to be able to do so, having been faced with his obstructive and unhelpful conduct in the provision of that information prior to the trial.
While the Court clearly has a power to award indemnity costs, as opposed to costs on a party/party basis, it is an exceptional case in which the general rule is departed from and indemnity costs are awarded (Kohan & Kohan (1993) FLC 92-340).
In Yunghanns & Ors and Yunghanns & Ors & Yunghanns (2000) FLC 93-029, the Full Court, following Kohan, affirmed that the making of an indemnity costs order is “a very great departure from the normal standard” and referring to the decision of Sheppard J in Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225, said:
“It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of discretion that some collateral purpose or specie of fraud be established against the party against whom such an order is sought. All that is required is that the court asked to exercise the discretion be satisfied that some ‘particular facts or circumstances of the case in question warrant the making of an order for the payment of costs other than on a party/party basis’; per Sheppard J in Colgate at page 233.”
The Full Court in Fennessy & Gregorian (2009) FLC 93-339 adopted the following extracts from the Colgate-Palmolive case at page 83,360-1:
(2)The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis …
(3)This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it …
(4)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 the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course …
……
… it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes); evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson; Maitland Hospital v Fisher (No 2); Crisp v Keng) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). [citations omitted and emphasis added]
An example of another circumstance attracting indemnity costs is extracted below in Fraser & Moedt (NA 42 of 1996 unreported 30 October 1997) where the Full Court said:
“Having regard to our findings as to the husband’s blatant and deliberate non-disclosure, the magnitude of the sums involved and comparisons with the fact situations in Weir’s case and Kohan’s case, this is a case where we consider the wife should receive all rather than half of her costs of the proceedings and that such costs should be ordered on a solicitor and client basis. The wife should not have to bear the cost consequences of the husband’s intentional tactics and we propose to order accordingly.”
Another is where a party has misled the court and/or the conduct of the proceedings has caused unreasonable delay and expense (see Wentworth v Rogers [1999] NSWCA 403). I have no difficulty in accepting that another category would be circumstances where the conduct of a party and/or their solicitor was intended to undermine the integrity of the proceedings (see for example Parker & Jacks (No. 3) (2009) FMCA fam 993 at paragraphs 67 and 87).
The Full Court recognised in Kohan that in considering an application for indemnity costs, the court should be aware of the terms of the agreement between the parties and their lawyers (see page 79-611). I have evidence of the fee agreements between the wife and her respective lawyers before me.
The basis upon which a costs order can be made against the second respondent
It is only in the most unusual cases that it would be proper to seek an order for costs against the lawyer to an opposing party. To encourage such actions, particularly during the course of ongoing litigation, is to invite a circumstance where lawyers may feel deterred from vigorously and properly pursuing their client’s case. Consequentially, a court would only sparingly exercise discretion to order costs against a lawyer for another party.
The principles relating to making cost orders against lawyers were set out the following way in Cassidy v Murray (1995) FLC 92-633 at [82365] (and approved in Z & Limousin (2010) FLC 93-433 at [84704]):
“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.”
Rules 19.1(1) and (2) Family Law Rules 2004 (Cth) (“FLR”) (or clause 6.10 of schedule 6 for matters commenced before July 2008) states:
(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:
(d) pay the costs of a party; or
(e) repay another person’s costs found to be incurred or wasted;
In this case, the allegation against Ms Y is one of improper conduct. The nature of a lawyer’s obligations in proceedings is well understood and his or her duty to his or her client is subject to an overriding duty (described as a paramount duty) to the court. Mason CJ said in Giannarelli v Wraith (1988) 165 CLR 543 at 555-6:
“The performance by counsel of his paramount duty to the court will require him to act in a variety of ways to the possible disadvantage of his client. Counsel must not mislead the court, cast unjustifiable assertions on any party or witness or withhold documents and authorities which detract from his client’s case….
The duty to the court is paramount and must be performed, even if the client gives instructions to the contrary.”
Rule 1.08(1)(b) FLR casts responsibilities on both parties and lawyers to ensure compliance with the duty of disclosure (the lawyer’s role being reinforced by rule 1.08(2) FLR).
Due to the compensatory nature of these costs, the conduct of a lawyer, even if serious misconduct has taken place, will only attract costs if that conduct caused a loss to a party. Fowler J noted in Martin & Harris (2010) FamCA 239 that:
“This Court is not a professional tribunal however and it is not open to it to make orders for costs by way of punishment for inappropriate professional behaviour. What the court has to do is find that the behaviour of the solicitor was such as required the wife to incur unnecessary costs and to compensate her only to that extent.”
Senior counsel for the second respondent asserts that an application that the second respondent pay the applicant’s costs on a joint and several basis with the husband from a particular date “is governed exclusively by rule 19.10 FLR and that effectively, this Honourable Court has no residual or other power to order costs against [Ms Y]”. That proposition is not meant to say that the court does not have an intrinsic power to regulate its own processes or the practitioners that appear before it. Clearly the court does have that power. I accept that punitive action in relation to the second respondent is currently a matter for the appropriate disciplinary authority.
The fundamental submission made by senior counsel for the second respondent is that implicitly the court cannot make an order against the second respondent other than for costs that were “thrown away” as a result of the conduct of the second respondent.
Senior counsel makes the point that upon the introduction of the new version of the FLR in 2004, the former rule in order 38, rule 35 which provided that the court might make orders against a practitioner for costs incurred due to improper or unreasonable conduct of the practitioner was removed. It was submitted that that removal was significant. I do not agree. I interpret the removal of that rule simply as an acknowledgment that the rule was unnecessary in circumstances in which the wider powers contained in s 117(2) FLA more than adequately covered the situation.
I cannot accept the submission by senior counsel for the second respondent that the court is confined exclusively by rule 19.10 FLR when dealing with the issue of costs in relation to the second respondent. The wife makes clear in her submissions that she relies, as a source of power, upon s 117(2) FLA which was observed by Nicholson CJ and Maxwell J in McAlpin v McAlpin (1993) FLC 92-411 to be such that contrary statements no longer represent the law (see discussion at page 80,211 - 5) and that s 117(2) provided a jurisdiction without limitation in terms of power to make orders against third parties and subsection (2) was expressed in the “widest possible terms”.
The introductory words that the rule making power in s 123(1) FLA make it clear that the power given to the judges of the court to make rules of court should not be inconsistent with this Act. Rules made under a delegated power make rules “in relation to practice and procedure” are not capable of placing limitation upon the powers conferred by the Act.
Rule 19.10 is not inconsistent with the wider power contained in s 117(2). Whilst it is directed to particular circumstances in which it may be appropriate to make a costs order against a lawyer, it does not purport to prohibit the making of an order in terms that are wider than the statement in the rule. I do not accept the fundamental proposition asserted by senior counsel for the second respondent, that an order for costs against the second respondent must necessarily be limited to those costs which are “thrown away”, and that the wife’s application, because it seeks a wider relief, ought to be dismissed.
The Full Court made it clear in Z (a solicitor) and Limousin [2010] FLC 93-433 that the jurisdiction to order a legal practitioner to pay costs has to be exercised “with care and discretion and only in clear cases”. Where a legal practitioner’s ability to respond to the complaint is hampered by the duty of confidentiality to the client he or she should be given the benefit of the doubt.
In this case the second respondent has not in a concerted way, attempted to assert that her duty of confidentiality hampers her ability to rebut the complaint. The husband has well and truly waived any claim to legal professional privilege, as discussed earlier.
DISCUSSION OF MATTERS PURSUANT TO s117(2A) AS THEY RELATE TO THE COSTS CLAIM AGAINST THE HUSBAND
The statutory considerations relating to Legal Aid, refusal of offers, or whether the litigation was necessitated by a failure to comply with orders, are not relevant in the current matter. The major issue to be considered was the husband’s conduct during and leading up to the proceedings.
The conduct of the parties in relation to the proceedings
The husband’s conduct has caused increased expense for the wife in a number of ways, including:
91.1.Repeated failure to comply with directions or orders of the Court;
91.2.Repeated failure to comply with directions or orders in a timely manner;
91.3.Failure to respond to correspondence in a timely manner;
91.4.Necessity of specific listings to ensure compliance with Court directions or orders;
91.5.Failure to provide a complete list of discovery documents on two occasions;
91.6.Failure to comply with two Notices to Produce;
91.7.Husband’s objections to subpoenas – allegedly to avoid full and frank disclosure;
91.8.Failure to disclose two entities for valuation, only discovered through the wife’s investigations;
91.9.Failure to disclose the sale of three properties during negotiations;
91.10.Failure to file affidavit material for some months until the wife made an application for an undefended hearing, and soon after the husband served his affidavit material;
91.11.Making a misleading representation regarding the deal negotiated with regards to the ownership of R Pty Ltd;
91.12.Requiring specific listings to deal with non-disclosure; and
91.13.Providing incomplete lists of documents for discovery.
In my reasons for judgment dated 6 May 2010 I made repeated reference to the husband being untruthful throughout cross-examination.
The financial circumstances of each of the parties to the proceedings
Senior counsel for the husband contends that the financial disparity between the parties is such that it alone can be a defence to the application for costs made by a party with greater resources. It is submitted by senior counsel for the husband that the disparity in the financial position of the parties is stark, with the husband’s liabilities exceeding his assets and the wife having “up to $4.1 million in available funds. Not only does she end up with around $2.8 million after removing legal fees paid, but she has $1.3 million in debts to her very wealthy parents. She will never repay if history is any guide”.
Senior counsel for the husband submits that any costs order against the husband would be an order that the husband was incapable of performing and be a precursor to bankruptcy and that that would apply whether or not the costs order was on an indemnity or a party/party basis. I note that the analysis of the husband’s financial position does not take into account my finding that I was in fact unable, because of the state of the husband’s non disclosure, to reach any concluded view as to what was the husband’s financial situation.
The husband retained the whole of the business (the net value of which is unknown to me). I need not be unduly cautious when making assumptions about his financial circumstances. I can assume he has a substantial income and earning capacity arising out of his involvement in entrepreneurial activities. The wife received a significant asset base but little opportunity to produce income from it.
Also, in the context of this costs application, the wife also relies upon the assertion made by the husband that he has the right to be indemnified by his former solicitors, in respect of any costs order made against him. The husband was represented during the proceedings by two solicitors, Mr GA and Ms Y.
It may be that in another place at another time the husband has the benefit of a full right of indemnity against Mr GA and/or Ms Y. Certainly the husband’s submissions would indicate that he has that indemnity and I accept the submission by the wife that these assertions should be taken at their highest in support of the wife’s position for indemnity costs.
The wife’s entitlement to a just and equitable property order will be substantially diminished if costs are not ordered.
Whether any party in the proceedings has been wholly unsuccessful in the proceedings
Senior counsel for the husband conceded that the husband was spectacularly unsuccessful. Senior counsel for the husband submits that the husband’s submissions at trial were not wholly unrealistic given that the husband took a particular view about how contributions should be assessed in relation to the increase in the value of his company post separation and a particular view about the reality of the wife’s mother’s seriousness about recovering the debt from her daughter. I do not accept that these views were “not wholly unrealistic”.
The husband’s proposed orders were entirely unrealistic and his submissions had the effect that the wife would receive about a quarter of what I eventually ordered she receive.
Other relevant matters
Initially it appeared that the husband wished to raise as a shield against the wife’s claim for costs, assertions as to the incompetence of both his former family lawyers.
The husband in his submissions in reply accepts that he cannot hide behind his solicitors’ incompetence to avoid the wife’s claims; he was aware that he could join Mr GA; and that he recognises that he ought to be responsible (in the first instance) for any failures of his solicitor that gives the wife a claim for costs.
Senior counsel for the husband submits that indemnity costs should not be made against the husband in circumstances where he relied upon the second respondent as an accredited family law specialist to advise him as to what he should do in circumstances where he had given the second respondent all relevant information for her to be able to furnish that advice. Senior counsel for the husband submits that the second respondent’s actions do not form a ground for indemnity costs against the husband.
Any suggestion that claims about incompetent legal advice should be sufficient to avoid the wife’s claim for indemnity costs also must fail.
The husband in the evidence that he has filed in the costs proceedings, makes assertions about the conduct of his former solicitor, Mr GA.
I note firstly that the evidence of the husband in this costs application proceeds under the shadow of the finding I have made in the substantive proceedings that the husband’s credibility is seriously compromised. It was submitted that if the husband wanted to make out a case that any culpability on his part leading to a costs outcome in favour of the wife should properly be recognised as a consequence of the fault and actions of his former solicitor Mr GA, then he ought have joined Mr GA seeking appropriate relief (indemnity or perhaps even a positive costs order in his own favour) to enable the factual issues to be ventilated in an environment where a contradictor was available.
Clearly the husband has taken the forensic decision that any action against Mr GA that the husband may choose to take in the future will be dealt with in another “more convenient forum than the Family Court in Sydney”.
As to Ms Y, if the husband is serious about his contentions, then it is unclear to me as to why he did not seek, in these costs proceedings, an order against her himself, or at least support the wife’s application against her.
I find an order for indemnity costs is appropriate on the facts before me. The inexhausive list of circumstances where indemnity costs are appropriate (Colgate Palmolive v Cussons, extracted in Munday v Bowman (1997) FLC 92 -784, lists the situation of “misconduct causing loss of time to the court and to other parties”. The husband’s and Ms Y’s misconduct placed a greater burden on the wife’s lawyers to investigate the truth of the situation through the lies. In attempting to cover up the truth of the matter, the Court’s time was wasted and aimed to frustrate the Court’s administration of a just and equitable outcome.
Moreover, indemnity costs in such a situation where a blatant non disclosure has occurred was granted in Fraser v Moedt and I note the Judge’s intention that “The wife should not have to bear the cost consequences of the husband’s intentional tactics”. Similarly here, the husband failed to disclose the full extent of the R Pty Ltd agreement as a tactic to improve his outcome in the family law proceedings. The Husband’s lawyer has acted in a similar manner, and I find that indemnity costs could appropriately be made against both of them.
Conclusion about the husband paying party/party or indemnity costs
The special or unusual feature of this case that justifies indemnity costs in this case was that the wife was forced to pursue legal proceedings in circumstances where her husband had inappropriately conducted the litigation and had not disclosed his true financial position to the wife. The husband mislead the court. The matter may well have resolved at a far earlier time had he not done so.
It is clear in this case that if an order for indemnity costs is not made there will be a significant gap between the costs the wife is committed to pay her own lawyers and the amount recoverable on a party/party taxation.
In multiple paragraphs of my Reasons for Judgment of 6 May 2010 I made reference to the husband knowingly making false statements in the proceedings. Under section 117AB FLA this requires me to make an order for some or all of the wife’s costs. Given the husband’s poor conduct throughout the proceedings, including the act of blatant non-disclosure regarding the R Pty Ltd arrangement, the order for costs against the husband is a path I would have taken regardless, under section 117(2A) FLA.
CLAIM AGAINST MS Y
Section 117(2) FLA provides the basis for making a just order for costs against the second respondent. Because she is not a party to the proceedings, s 117(2A)(a)-(f) FLA does not mandatorily apply to a consideration of what is just.
Senior counsel for the wife acknowledged that the findings as to serious issues ordinarily involve a higher level of satisfaction even when considering a determination pursuant to a civil standard of proof (see s 140 EA; Brigenshaw & Brigenshaw (1938) 60 CLR 336). That general standard of proof however may be satisfied by evidence which is un-contradictive, where the relevant circumstances are within the particular knowledge of the person against whom the findings are being made. As Dixon CJ said in Hampton Court Ltd v Crooks 97 (1957) CLR 367 at 371, “slight evidence may be enough unless it is explained away by the defendant and that the evidence should be weighed according to the power of the party to produce it”.
Any duty that the second respondent had to her client was overridden by her paramount duty to the court. It was her duty not to mislead the court and she failed in that duty.
As already mentioned, Rule 1.08(2) FLR says that a lawyer for a party has a responsibility to ensure, as far as is possible, that their clients comply with the duty of disclosure.
Senior counsel for the second respondent characterises the second respondent’s involvement to be limited to:
“(a) [Ms Y] had some familiarity with one proposal for the husband’s acquisition of [Mr EN’s] partnership share; and
(b) This particular proposal had not been disclosed to the applicant wife or to the court.”
I am unable to find that a reading of my reasons for judgment can be confined in that way. The second respondent engaged in a pattern of conduct with the husband which continued from 6 August 2009 to the fourth day of the trial. If successful, it would have significantly undermined the entire subject of the litigation.
Senior counsel for the second respondent noted that there is no evidence before the court as to the intentions or objectives of the second respondent and submitted that although there is some evidence of the second respondent’s conduct in the Sparke Helmore file, it is insufficient evidence to discharge the burden of proof.
This submission ignores the clear language of the documents in the Sparke Helmore file. The accounts in that file explain the second respondent’s objective in ensuring that certain matters were not disclosed in these proceedings.
In my principle judgment, I expressed views and reached conclusions involving serious issues concerning the second respondent. I reached those views on a prima facie basis. This was in circumstances where, although the second respondent had been present throughout the hearing in her capacity as a solicitor for the husband, she was not a party to the proceedings. Issues unfolded in a way that meant that she had no opportunity to call her own evidence or to offer an explanation or to contradict facts.
In the context of this cost application, she has been given an opportunity to file evidence and has had the opportunity to seek the advice of senior counsel. The second respondent has consciously elected not to file any evidence in this application.
The wife submits that in each of the areas of the judgment where I expressed a prima facie view as to the conduct of the second respondent, in the absence of any contradictory evidence those prima facie findings should become concluded findings for the purposes of this costs application.
The second respondent was in a position to provide any relevant evidence that might have assisted herself. She has chosen to call no evidence from any of the participants in the relevant communications recorded in the Sparke Helmore file and no evidence to explain the absence of evidence from those persons.
In relation to Ms Y the husband says he disclosed all information to her as he was required to, and left the rest to her. He submits that the choice to conceal the progress of the R Pty Ltd agreement was Ms Y’s decision and the husband was unaware of the ramifications. The husband’s affidavit repeatedly raises issue as to his instructions to the second respondent, her advice and her actions and does so in the context of his reliance upon that material to defend the present application against himself, but in full knowledge that there is also an application springing from those events as against the second respondent. The second respondent has chosen not to provide any evidence in response to her client’s evidence.
Ms Y submits that:
127.1.The husband was found to be a witness lacking in credibility;
127.2.The husband was attempting to exculpate his conduct by attributing blame to both his former solicitors;
127.3.There is little particular detail in terms of the assertions made by the husband in his affidavit against the second respondent; and
127.4.It is said, without particularity, that his assertion that he relied on the second respondent’s advice is contrary to evidence that he gave during his cross examination.
I take those submissions into account when weighing the uncontradicted evidence of the husband against the second respondent in the context of this costs application.
It is not doubted that the husband is deprived of credibility. However, the second respondent has:
129.1.Failed to offer contradictory evidence;
129.2.Failed to seek to engage the opportunity to cross examine the husband about the assertions he makes in his affidavit; and
some of the contents of the Sparke Helmore file point heavily in the direction of the husband relying on the second respondent’s advice.
I find that the second respondent breached her ethical obligations as a solicitor and her duties to the court. She entered into a series of steps designed to present a contrived position to the court for the express purpose of improving the chances of the husband receiving a superior alteration of the joint property of the parties than he would otherwise have been expected to, had the deliberate concealment not taken place. The second respondent prepared and witnessed the husband’s provision to the court of an undertaking as to disclosure. She prepared the husband’s affidavits knowing that they were misleading by omission. She remained in court and continued to act for the husband during a time during which he gave oral evidence and she knew herself that evidence to be untrue.
I particularly refer to the following paragraphs of my primary judgment: 108; 116 - 118; 126; 127; 131; 152 - 157; 167; 170; 172; 174; 175; 178; 179 - 186; 196 and 348.
Senior counsel for the wife also drew attention in this costs application, to the additional document from the Sparke Helmore file which is annexure E to Ms Z’s affidavit filed on 13 August 2010.
I conclude that the second respondent’s acts were intentional and were of the most serious kind. The second respondent deliberately contrived to conceal important and relevant financial information from the court. The husband embarked upon a course of action which was aided and abetted by the second respondent. The sole purpose of acting in that fashion was to increase the likelihood that the husband would receive a more favourable outcome but the method employed was one that undermined the integrity of the proceedings.
I have no difficulty in concluding that this course of action from the point of time when the second respondent commenced it, made the proceedings more expensive, lengthier and more difficult. An assumption has to be made, in favour of the wife in the context of this costs application, that had the second respondent encouraged the husband to openly disclose matters which were deliberately not disclosed, settlement discussions may have taken place which may have shortly thereafter led to the wife agreeing to a properly informed equitable outcome. I conclude that it would be wholly inequitable for this court to leave the wife out of pocket because of the second respondent’s conduct.
The second respondent has filed no evidence as to her financial circumstances. I know she is an accredited family law specialist and is a partner in a legal practice. The second respondent does not argue that she lacks the financial means to satisfy an order for costs.
I find that it is just that the second respondent should also pay costs in this matter from 6 August 2009. Ms Y engaged in unreasonable conduct by ensuring the R Pty Ltd deal was not finalised or disclosed until the family law proceedings had been completed, thereby misrepresenting the husband’s financial situation and assets. I refer to the principles in Cassidy and Murray and note the following:
136.1.That Ms Y has been given a chance to be heard by me following these proceedings and was given the opportunity to file evidence which she has not;
136.2.That although Ms Y suggests I adjourn the costs hearing until after the Law Society determination of misconduct, whether a finding of professional misconduct is made or not is a matter which is separate from this application;
136.3.That in her actions, Ms Y failed to promote the interests of justice in the Family Court;
136.4.That Ms Y’s behaviour was no mere mistake, but clear and calculated misconduct; and
136.5.I note that orders on this basis are to be compensatory. The wife submits that the conduct of Ms Y prolonged the proceedings, and made the Court’s task of ‘unearthing the truth’ to come to a just and equitable resolution, more difficult. I accept that is so.
The actions of the second respondent justify a cost order being made on an indemnity basis.
The second respondent seeks an order that in the event any costs order is made against her she should have twelve months to pay. The second respondent has filed no evidence that could lend support to that application and no order in those terms could therefore be justified.
SHOULD I CERTIFY FOR SENIOR COUNSEL AND HAS THE WIFE BEEN CHARGED “UNUSUAL EXPENSES”?
The costs agreement between the wife and her solicitors is attachment “C” to the affidavit of Ms Z sworn 15 June 2010. Clauses 8.2 and 8.3 of the costs agreement provide as follows:
8.2The firm shall not retain senior counsel without the client’s prior approval;
8.3The firm shall not, without the client’s prior approval, brief a barrister other than on the basis that the barrister’s fees shall not exceed the maximum permissible under the scale provided by the Family Law Rules.
The solicitor for the wife gives evidence about how senior counsel for the wife was retained by the wife. A copy of senior counsel’s retainer agreement dated 30 March 2009 is attached and marked as annexure E to the affidavit of the wife’s solicitor sworn 15 June 2010. It is not disputed that the wife signed that retainer agreement.
Senior counsel’s rate of $7,700 per day (including GST) is said, by counsel for the second respondent, to be clearly in excess of the rate provided for in the scale at Schedule 3 of the FLR which, it is submitted, would be the maximum allowed on a party/party taxation.
The husband makes no submission that the certification for senior counsel is other than proper. The second respondent does not concede such a certification should be made.
This is a case where the facts in dispute were contentious. It was reasonable for those representing the wife to conclude that experienced counsel who had requisite skills in cross examination and forensic financial inquiry, were needed to ensure success. These proceedings were sufficiently complex and serious as to warrant the retention of senior counsel.
I am comfortably satisfied that there were features in this case relating to the volume of material to be handled, the nature and extent of the cross examination required and the complexities of the issues of fact, the involvement of serious imputations of personal reputation and integrity that would have made it appropriate in this case for two counsel to be engaged.
I infer in this case that senior counsel for the wife accepted the brief without a junior and he certainly appeared during the trial without a junior.
There is no hindsight involved in making this assessment. I accept that coming into the trial that the wife believed that she was not being given a full and honest picture of the husband’s involvement in his business activities. I do not accept the assertion made by senior counsel for the second respondent that the issue of inadequate disclosure only arose as the case closed. I am comfortably satisfied that this is a case in which the costs of senior counsel may fairly be imposed upon the opposite party because of the special difficulties which arose as a result of the husband’s non disclosure. I find that it is entirely appropriate, pursuant to rule 19.50 FLR to certify that this was a matter where it was proper to retain senior counsel.
The rule in Re: Blyth & Fanshawe (1882) 10 QBD 207
The second respondent argues that if an order for indemnity or partial indemnity costs is made, a client cannot recover costs in excess of that client’s liability to pay costs. I accept that that is so. Senior counsel for the second respondent submits that a solicitor cannot recover from a client costs which constitute an “unusual expense” and argues that I should conclude in this case that:
147.1.Engaging senior counsel in this case constituted an ‘unusual expense’;
147.2.The wife was not warned about this expense being ‘unusual’; and
147.3.Consequently the wife is not obliged to pay senior counsel’s fees.
In Weiss v Barker Gosling (No 2) (1994) FLC 92-474 Fogarty J said (in relation to the costs agreement in that case) at 80,928-80,929:
“Clauses 3 and 4 are presumably intended to negative the impact of what is frequently referred to as the rule in In Re Blyth and Fanshawe (1882) 10 QBD 207. At p 210, Baggallay LJ stated the rule as follows:
‘I take it to be the general rule of law, and an important rule which is to be observed in almost all cases, that if an unusual expense is about to be incurred in the course of an action it is the duty of the solicitor to inform his client fully of it, and not to be satisfied simply by taking his authority to incur the additional expense, but to point out to him that such expense will or may not be allowed on taxation between party and party whatever may be the result of the trial.’
…
It may be possible for costs agreements to contain clauses which clearly negative the rule in Re Blyth (supra) but as the cases referred to above and other similar cases demonstrate, the requirement is quite strict. The requirement is to ‘‘inform his client fully of it’’ and this is a particularly important issue at the present time where counsel’s fees can amount to very significant sums (often far beyond what an ordinary person in the community could anticipate or expect) and may represent a significant portion of the overall account.”
The agreement between the wife and her senior counsel does caution the wife that reservation fees may be incurred as a consequence of the agreement and informs the wife that there are undoubtedly many well qualified and experienced barristers who are willing to be retained and will not require an agreement as to reservation fees or similar and that it may be in the wife’s interest to explore the availability and retention of counsel who will not charge such fees before accepting the terms of the agreement. I accept that reservation or cancellation fees are not standard charges and in that sense, senior counsel for the wife’s fee agreement contained “unusual expenses” in circumstances where reservation or cancellation fees were charged under that agreement. However, there is no indication in the actual accounts rendered by senior counsel for the wife any reservation or cancellation fees have in fact been charged.
The more general submission made by senior counsel for the second respondent was that the rule has not been complied with simply because senior counsel was retained in this case without there being any evidence of a warning being given to the wife that junior counsel may have been adequate.
Senior counsel for the second respondent submits that unless the wife in this case was given a warning (in circumstances where the rate proposed to be charged by senior counsel being so clearly in excess of the upper limit of the scale fell within the description of one which “may not be allowed on taxation between party and party”), the wife would have no liability to pay fees at the level charged by senior counsel.
The second respondent relies on certain authorities, including Re: Skinner & Smith’s Bills of Costs (No. 2) [1990] 1QdR 180 which was a case where a client authorised briefing three counsel for the appeal but in circumstances where she was not given the prior warning required in accordance with the principles in Re: Blyth & Fanshawe; see also Gyles v Randall (1915) 1QdB 290.
Senior counsel for the second respondent also attacks the hourly rates contained in the solicitors’ costs agreement on the basis that no order could be made for indemnity costs without an inquiry as to whether or not the hourly rates contained for the solicitors in the costs agreement fell within the description of them being “unusual expenses”.
The claim of the second respondent turns on the assertion that the rates charged by senior counsel and the rate charged by the solicitors under the wife’s fee agreement are so great as to be “unusual”.
I have already found that it was proper for the wife to retain senior counsel in this case and it was not unusual to do so.
The wife’s signature on her senior counsel’s fee agreement is evidence of her approval within the term of paragraphs 8.2 and 8.3 of her fee agreement with her solicitors.
In relation to the reasonableness of the costs agreement, senior counsel for the wife submits there is nothing remarkable in the fact that there are charges in the costs agreement which are in excess of scale amounts. I agree it goes without saying there would be little point in entering into fee agreements with clients if the lawyer intended to rely upon the scale of fees in order to charge their client for the work done. Senior counsel for the wife suggests that I could take judicial notice of regular fees seen in numerous cases in the Sydney Registry on a day to day basis. I am reluctant to accept rates of charges in Sydney as common knowledge, particularly in circumstances where the participants come from interstate. The fact is that I do not have any evidence one way or the other as to what the current going rates are. I am simply invited to compare the fees charged in the fee agreements in this case with the published court scale. I consequently have no evidence one way or the other as to whether or not the fees that are being charged could be described as “unusual”.
This is not the type of case (as was the case in B & Associates (a firm of solicitors) & Bloomfield (2003) 31 FamLR 1) where it is the nature of the work that was done which was found to be unusual. I have already found that there is no suggestion in this case, particularly given the non disclosure by the husband, that anything the wife did was in the nature of unnecessary work.
I have no evidence or other reason to believe the solicitor hourly rates are unusual.
For these reasons, I reject submissions made by senior counsel for the second respondent, which rely on the operation of the rule in Re Blythe & Fanshawe.
ORDER A LUMP SUM OR ORDER THAT COSTS BE AS AGREED OR ASSESSED
Rule 19.18(1)(a) FLR authorises the court to make an order that a party is entitled to costs in a specific amount as opposed to setting the matter for further assessment. If I am to order a specific amount under rule 19.18(1) FLR, it is not necessary for me to become involved in a traditional taxation or assessment of costs. By the very nature of the exercise, what I am required to do is reach a fair and reasonable gross sum assessment.
It is submitted in this case that the wife should be spared further appearances and assessments in relation to fixing the quantum of costs in accordance with the rules. It is submitted that the wife’s solicitor’s evidence provides a cogent path and rationale for the assessment of the wife’s costs relating to the present proceedings.
Senior counsel for the husband submits that the husband’s current solicitor was not in a position to make a reliable assessment of the lump sum sought by the wife in her case. It is asserted that this is because the husband’s current solicitor has not been in the proceedings throughout. Senior counsel for the husband submits in those circumstances the only just outcome, if costs are ordered, is for them to be assessed.
In response, senior counsel for the wife notes that:
164.1.There has been no request for particulars in any form; and
164.2.The husband has not sought, as it was at least open to him to do so, to ask any questions of the wife’s solicitor in cross examination as to the approach that she has taken in reaching her assessment.
I accept the submission that those matters ought fairly be regarded as fundamental precursors to any legitimate controversy about the matter.
Both respondents have been given an adequate opportunity to make submissions about the quantum of costs.
Senior counsel for the second respondent suggests that if an order for costs is made against the second respondent, then it should be confined in either of the following ways:
“By agreement between the parties, having an experienced costs assessor examine the wife’s solicitor’s file without the need for an itemised account to be prepared….or have the wife’s solicitor’s prepare an itemised costs account which can then be assessed in accordance with the Family Court Rules”
The wife’s documentation in this matter is in 33 lever folders. The wife faces the future legal costs of the assessment process.
Given the extensive history of this litigation, any future cost assessment process is likely to be time consuming and costly. The solicitor for the wife estimates an itemised cost account will require the expenditure of a further amount in excess of $20,000.
The affidavit by the wife’s lawyer sworn 15 June 2010 exhibits a copy of all the tax invoices issued to the wife from the 30 November 2005 to 31 May 2010. Each tax invoice attaches a schedule which itemises and particularises, in chronological order, each piece of work done by the wife’s solicitors. The tax invoices also set out disbursements incurred for the period and include copies of invoices from counsel and other third parties detailing those disbursements.
The tax invoices relate to work done on both the dispute between the parties as to what parenting orders should be made and what alteration of property should be ordered. The solicitor for the wife has identified which items relate to which part of the proceedings. She has prepared schedules which set out that dissection. The solicitor for the wife then divided the costs and disbursements relating to the property dispute into two periods before and after 31 July 2009 (the date Ms Y commenced to act for the husband).
I find that I am able on the material to estimate costs on a logical, fair and reasonable basis.
The figures at paragraphs 18-20 of the wife’s solicitor’s affidavit filed 15 June 2010 indicate total costs and disbursements of $182,042.61 to 31 July 2010 and $144,329.36 from that date.
A small adjustment needs to be made, as the date at which the second respondent becomes liable is 6 August 2009 not 1 August 2009. The wife chooses this slightly earlier date as the date at which the second respondent’s liability should start seemingly because accounts are rendered monthly. However, 6 August 2009 is the first date which has been identified from which the second respondent assisted the husband to conceal the true situation about agreement which had been reached between the husband and Mr EN.
The tax invoice for August 2009 (see the exhibit to the affidavit of the wife’s solicitor sworn 15 June 2010 at page 263), shows charges from 1 August 2009 to 6 August 2009 totalling $140 ($35 + $35 + $70). These should be excluded from any claim against the second respondent. That amount can be added back against the claim for costs made solely against the husband.
The hearing concluded on 29 October 2009. I published my reasons on 6 May 2010 and at the request of the husband and wife, I allowed a further time to provide further submissions about the form of the orders. Final orders were made on 24 May 2010.
Work done as set out on invoices for November and December 2009 and January and February 2010 should not be the subject of any costs order.
Some of the work done in May 2010 should be allowed as it clearly related to work done in relation to the form of the orders. The amount that I exclude from the invoice of 31 May 2010 will be $825. I have deducted $200 from the charge made by the solicitor on 24 May 2010 (the overall charge was $455, see page 348 of the exhibit to the wife’s solicitor’s affidavit). I have also disallowed from this order for costs, the last seven items on page 348 ($200 + $210 + $35 + $35 + $35 +$35 + $35 + $240 = $825).
Accordingly, the amount to be ordered solely against the husband will be in the sum of $182,182 ($182,042 + $140).
The sum ordered jointly and severally against the husband and Ms Y will be in the sum of $140,075. That amount is calculated by deducting from the amount claimed in the sum of $144,329 (see paragraph 18 of the wife’s solicitor’s affidavit sworn 15 June 2010), the sum of $4,254.
The deduction of $4,254 is calculated in the following way:
Fees between 1.9.2009 and 6.9.2009 $140.00
Invoice for 30.11.2009 $1218.80
Invoice for 7.12.2009 $712.80
Invoice for 31.12.2009 $115.50
Invoice for 31.1.2010 $661.10
Invoice for 28.2.2010 $580.80
Amount deducted as per paragraph 178 $825.00
$4,254.00
JOINT AND SEVERAL LIABILITY
I find that the second respondent should have a joint and several liability with the husband for a payment of the wife’s costs from 6 August 2009. They will have rights of contribution against each other, depending against whom the wife might seek to enforce the order.
STAY APPLICATION PENDING APPEAL OF COSTS ORDER
Senior counsel for the husband says he has instructions that, in the event that any costs order is made against the husband, the husband intends to appeal. Any consideration of granting a stay in those circumstances is premature. The husband can make any application he desires if an appeal is lodged against the cost order.
I certify that the preceding one hundred and eighty-three (183) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 20.4.2011.
Associate:
Date: 20.4.2011
10
10
0