Limousin & Limousin
[2008] FamCA 315
•30 April 2008
FAMILY COURT OF AUSTRALIA
| LIMOUSIN & LIMOUSIN | [2008] FamCA 315 |
| FAMILY LAW – COSTS – Indemnity costs sought by husband against the solicitor for the wife following a long complex financial dispute – Applicable principles of indemnity costs discussed together with the basis of costs being sought to be paid by a solicitor. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 |
| Penfold v Penfold (1980) 144 CLR 311 Collins v Collins (1985) FLC 91-603 JEL v DDF (No. 2) (2001) FLC 93-083 Kohan and Kohan (1993) FLC 92-340 Limousin & Limousin and Anor [2004] FamCA 1315 Jachimowicz v Jachimowicz (1986) FLC 91-702 Flower & Hart v White Industries (1999) 163 ALR 744 Williams v Spautz (1992) 174 CLR 509 Edwards v Edwards (1958) 2 All ER 179 Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FLR 225 Jones v Dunkel (1959) 101 CLR 298 Fabre v Arenales (1992) 27 NSWLR 437 at 449 Payne v Parker (1976) 1 NSWLR 191 at 202 |
| APPLICANT: | Mr Limousin |
| RESPONDENT: | Mrs Limousin |
| FILE NUMBER: | MLF | 10522 | of | 1996 |
| DATE DELIVERED: | 30 April 2008 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | The Honourable Justice Guest |
| HEARING DATE: | 20 February 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lipshutz |
| SOLICITOR FOR THE APPLICANT: | Berry Family Law |
| FOR THE RESPONDENT: | No appearance |
| WIFE’S FORMER SOLICITOR: | Issac Brott in person |
Orders
That Issac Brott the former solicitors for the wife in these proceedings do pay 60 per cent of the costs of the husband on an indemnity basis as agreed or in default of agreement as assessed under the Family Law Rules 2004 (Cth) (“the said Rules”) such costs being those incurred on 2 April and 3 April 2003, 12, 13, 14, 26, 27 and 28 May 2003, 31 July 2003 and 1 August 2003.
That ISSAC BROTT do pay:
2.1 All reasonable costs of and incidental to the wife’s application filed on 26 March 2003, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the Rules;
2.2 All costs of and incidental to preparation of all written objections to the trial affidavit of the wife and the trial affidavits of Mr M together with costs for one half day of the proceedings on 1 April 2003 lost in preparation of the substituted affidavit of the said Mr M, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the said Rules;
2.3 All costs of and incidental to the application of the wife filed on 14 May 2003 being the professional costs and disbursements necessary to prepare all answering submissions and receive judgment, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the said Rules;
2.4 All costs of and incidental to the wife’s application filed on 16 July 2003 including the costs of retention of Mr St John SC and Mr Graham QC and for the preparation of all written submissions, such costs to be assessed on an indemnity basis as agreed or in default of agreement as assessed under the said Rules.
That the said ISSAC BROTT do pay all costs of and incidental to the preparation of the costs submissions prepared on behalf of the husband including the written submissions of 5 March 2008 and 4 April 2008, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the said Rules.
That pursuant to rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel including Senior Counsel.
That all applications be otherwise dismissed and the proceedings removed from the Active Pending Cases List
IT IS NOTED that publication of this judgment under the pseudonym Limousin & Liimousin is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 10522 of 2006
| MR LIMOUSIN |
Applicant
And
| MRS LIMOUSIN |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The long litigation pathway of these proceedings including the appeal process has now been completed. The only issue outstanding is that pursuant to orders made by me on 20 February 2008 that the husband provide detailed written submissions in respect of any order for costs sought by him against the wife and/or any other person. Further orders were made for any response to those submissions by the wife and Mr Brott, her legal practitioner at the time of trial.
The husband has sought an order that the wife and/or her solicitor pay the husband’s costs of the trial of the proceedings on the days set out on the face sheet to my judgment delivered 25 May 2004 (save for 31 March 2003), costs arising from specific applications and other matters together with costs of preparation of their submissions dated 5 March 2008 and 4 April 2008. It was submitted that in all of the circumstances such costs be taxed and paid on an indemnity basis or, in the alternative, on a solicitor/client basis.
I have not received any submissions from the wife. On the other hand, the former solicitor for the wife, Mr Issac Brott has filed comprehensive submissions and argued that no order for costs should be made against him as sought, or at all.
APPLICATION OF THE LAW
The applicable section of the Act is as follows:
“117(1)[Party bears own costs] Subject to sub-section (2) and sections 117AA and 118, each party to proceedings under this Act shall bear his or her own costs.
117(2)[Costs Orders] If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in so doing, the court may, subject to sub-sections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.”
Section 117(1) of the Family Law Act (1975) (as amended) (“the Act”) is the basic provision which lays down the general principle that each party shall bear his or her own costs of the proceedings. However, if there are circumstances which “justify it in so doing”, I may make an order for costs (s 117(2)). When considering what order, if any, I should make under sub-section (2), I am obliged to have regard to those matters set out in sub-section (2A). In so doing, I note that it is not, however, an exclusive list having regard to the wide terms of para (u), namely “such other matters as the court considers relevant”.
Accordingly, when considering an application for costs, I must identify and balance the relevant matters enumerated in that sub-section in order to determine whether or not to make such an order. There is clear authority directing me to that course.
Further, it is not necessary that I be satisfied there is a “clear case”, or “an exceptional case” in order to justify my making an order for costs. The requirement is that there are matters in combination of s 117(2) and (2A) of the Act which “justify” the conclusion that costs should be ordered. Accordingly, the overall structure of the Act is to provide me with a broad discretion, the exercise of which commences with the general rule stated in s 117(1).
I am satisfied that in the discrete circumstances before me it is appropriate to order that Mr Brott pay the costs of the husband in the terms later described in this judgment for there are clear circumstances, in combination, justifying such an order. As to the exercise of judicial discretion in an application of this nature, see Penfold v Penfold (1980) 133 CLR 311 and Collins v Collins (1985) FLC 91-603.
The husband has sought costs against the wife and/or Mr Brott. Although the wife has failed to file any answering submissions, I act upon the financial material at the time of trial and it is open for me to find to the requisite standard of persuasion that she is without financial means. That is a significant consideration pursuant to s 117(2A)(a) of the Act and she was marginally successful in one of her claims.
Mr St John submitted that the wife utterly failed in her primary application. He submitted that the proceedings were unduly prolonged, caused (amongst other things) by a case that was based upon:
· “a highly speculative claim.
· a false view of the assets available to the husband
· an assertion of inadequate disclosure of documents by the husband but about which no evidence was ever led
· reliance upon an accountant, Mr M, whose opinion and methodology was, on any proper view, fundamentally flawed
· reliance upon Mr M who lacked professional independence and whose opinion had been influenced by his association with the Wife’s solicitor
· incomplete or incompetent preparation
· a number of groundless applications to the court, including applications which constituted an abuse of process
· an unreasonable refusal to withdraw or moderate claims notwithstanding the evidence as it unfolded over the many days of hearing
· Unreasonably extended and detailed cross examination.”
It was also the submission of Mr St John that the wife and her legal advisors maintained the proceedings despite due warning being given that further pursuit could result in orders for costs being imposed.
Section 117(2A)(g) of the Act provides scope for me to consider “such other matters” as I consider relevant. As matters now stand, Mr Brott is no longer her solicitor. The impression I had from the whole of the proceedings having observed the wife in court and listened carefully to her evidence before me was that she naively compliant to the direction and advice given by Mr Brott and did so without question. Sufficient dialogue was exchanged in court (some of which is referred to in the submissions of Mr St John) such as to alert any reasonable and vigilant litigant to what may be seen as obvious short comings to the application. It seems to me, perforce the conduct of the whole proceedings, that the wife was submissive and acquiescent to the direction of Mr Brott and otherwise to her legal and forensic advisors.
It has never been disclosed how much in fact the wife paid her solicitor by way of fees other than the assertion in the submissions of Mr Brott that he acted on a success fee basis. There was evidence from Mr M on this aspect. In the course of his submissions, Mr Brott lays blameworthiness at the feet of the wife, his former client for her instructions. I do not accept that and given the evidence as to improper purpose I am satisfied that the proceedings were maintained at the direction and under the control of Mr Brott. In the whole of the circumstances I do not propose to make any order for costs against the wife.
Given that I find it is appropriate in the discrete circumstances before me to order costs in favour of the husband, I now turn my attention to whether those costs should be assessed on an indemnity basis or some other, and if so what basis. I accept the legal submissions of Mr St John SC concerning circumstances in which such an order may be made. More recently, the Full Court in JEL v DDF (No. 2) (2001) FLC 93-083 per Kay, Holden and Guest JJ at p 88,441 had this to say:
“62. The issue remains as to whether or not those costs ought to be ordered on an indemnity basis. The category of cases in which it would be appropriate to make an order for indemnity costs does not appear to have been fully defined. The Full Court has, however, set out some general principles. In Kohan and Kohan (1993) FLC ¶92-340 the Court said at 79,614:
``The Proper Exercise of the Discretion
The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O 38 r 2, the provisions of O 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O 38 r 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2) (supra); Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR 368 at 368 to 370.''
63. The principles that emerge from the authorities were conveniently summarised by Sheppard J in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225. His Honour in that case summarised the position as follows:
``...
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 that 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...''
64. His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis. His Honour said at 233:
``Notwithstanding the fact that that is so, 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 (1989) 92 ALR 131 at 152; 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 (supra)); 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 (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.''
65. Insofar as an imprudent refusal of an offer to compromise is concerned, the authorities giving rise to this proposition are in the main New South Wales authorities. The Full Court warned in Kohan (supra), that this is in part attributable to the amendment of the Supreme Court rules of that State which provide for indemnity costs where a plaintiff obtains judgment in terms no less favourable than those of an offer to compromise made by him and not accepted by the defendant.
66. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC ¶93-029 the Full Court specifically acknowledged the category of cases that may give rise to an indemnity order are not closed. The Court said at 87,471:
``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 the discretion that some collateral purpose or species 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 and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis': per Shepherd J in Colgate- Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.''
67. In his written submissions, counsel primarily relies upon the assertion that the wife imprudently refused an offer to compromise.
68. We accept the proposition that the objective of the statutory provision in relation to written offers is to encourage settlements and to reduce the cost of litigation to the parties and the community. That, however, does not mean that the failure to accept an offer will necessarily result in an order for indemnity costs.
69. As the Full Court said in Kohan (supra):
``Insofar as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction so far has been to order no more than costs on a party and party basis. Even in cases where there has been dishonest concealment of assets or income as in Penfold v Penfold (1980) FLC ¶ 90-800 and Oriolo and Oriolo (1985) FLC ¶ 91-653, no more than party and party costs have been awarded.''
70. In our opinion, the failure to accept an offer which in retrospect, perhaps, should have been accepted is without more, insufficient to justify the making of a costs order on an indemnity basis. The rejection of the offer must be at the very least imprudent. We express no opinion as to when the rejection of an offer may be so classified. It is clear to us in the circumstances of this case that the rejection of the offer, although unwise in retrospect was not imprudent.”
I proceed on the basis that departure from costs on a party and party basis should be of an “exceptional kind” and that indemnity costs are an exception to the usual rule and should only arise where there are “special or unusual” features. It has been said that:
“… even in cases where there has been some dishonest concealment of assets or income as in Penfold v Penfold (1980) FLC 90-800 and Oriolo v Oriolo (1985) FLC 91-653, no more than party and party costs have been awarded.”
(Kohan v Kohan (supra) at p 79,615)
I have carefully considered the submissions on behalf of the husband and, on balance, I am persuaded that it is appropriate to make the orders I later define in this judgment. It must be remembered that I am dealing with the costs of and incidental to the final hearing which encompassed a substantial volume of evidence relating to the husband over many years and which has involved many corporate entities and valuation.
In an earlier judgment in these proceedings (Limousin & Limousin [2004] FamCA 1315 I dealt with the issue of costs against a non-party in those proceedings, namely Mr Brott. On the question of the proper approach in law, I had this to say:
“23.I propose to consider firstly whether costs should be personally ordered against Mr Brott for the sorry events that occurred on 1 November 2004. Rule 19.10 of the Family Law Rules 2004 expressly empowers the court to make a cost order against a lawyer, if the lawyer has caused costs to be incurred by a party or another person "because of improper or unreasonable conduct" or to be thrown away because of "undue delay, negligence or any other misconduct or default". The power to order a lawyer of one party to pay costs incurred by the other party is an exception to the general rule that a person who is not a party to the proceedings cannot be ordered to pay the costs of the proceedings. As to the power to order costs against a non-party see Knight & Anor v FP Special Assets Ltd and Ors (1992) 174 CLR 178.
24.Whilst the power to make such an order is clear, it is nonetheless a course that “ought be exercised sparingly and with great caution” (per Wilcox, Burchett and Tamberlin JJ in Levick v Deputy Commissioner of Taxation (2000) 102 FCR 155 at 50). The rationale for such caution can be seen from the judgment of Drummond J in Re Bendeich No 2 (1994) 53 FCR 422 at 426-427:
“The cases show that this jurisdiction must be exercised with caution. There is good reason for caution. Too ready an exposure of the lawyer for a party to personal liability for the costs of his client or of the other party is likely to inhibit the way the lawyer acts in conducting the litigation. It frequently happens that a lawyer will have to make judgments as to which of a number of courses is the optimum one to follow, bearing in mind his duty to advance his client’s interests by all proper means and his duty to the court to conduct the litigation in proper fashion. The introduction of a third consideration into every day litigation that requires a solicitor to keep in mind the need to minimise the chances of a costs order being made against him personally, would raise a conflict between the lawyer’s duties to his client and to the court, on the one hand, and his own interests, on the other. As is understandable, such a conflict would likely be resolved by the solicitor concentrating on identifying and adopting the course most likely to minimise his own personal exposure at the expense of following courses best fitted to advantage his client and to bring the action to an expeditious end.”
See also Levick v Deputy Commissioner (supra) at paragraph 43.
25.Before the inclusion of Rule 19.10, (formerly Order 38 rule 35), the Full Court of the Family Court of Australia in Cassidy v Murray (1995) FLC 92-633 set out the principles relevant in the exercise of the jurisdiction to award costs against a lawyer under the Act. The court considered and referred with approval to Ridehalgh v Horsefield (1994) 3 All ER 848 at 855 (per Sir Thomas Bingham) in holding at page 82,365 that:
“1.Pursuant to s 117(2) of the 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 the 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.”
26.The terminology of Rule 19.10 largely reflects the principles approved by the Full Court in Cassidy v Murray. The use of the words "improper or unreasonable conduct" in Rule 19.10(c) are those used by Sir Thomas Bingham in Ridehalgh v Horsefield. The misconduct or negligence of a lawyer must be of a serious nature to justify an order being made.
27.Some assistance may be drawn from what the Privy Council had to say in Harley v McDonald (2001) 2 AC 678 (at 50) when considering caution against too ready a resort to this sort of application. The Privy Council made it clear, in its opinion, that litigation against a legal practitioner with a view to making a costs order should be confined to questions that are apt for summary disposal by the court, such as: “… Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of the hearing”. Other examples may include the desirability of compensating litigation parties who have been put to unnecessary expense (Medcalf v Mardell (2003) 1 AC 120 at 24) or “… some specific act, neglect or default on the part of a practitioner, of a procedural step along the way … taken or not taken as to occasion costs … or to cause costs to be wasted” (Abrahams & Anor v Wainright Ryan (1999) 1 VR 102 at 40).”
I make it clear that in coming to my determination I have regard to the helpful submissions prepared by both Mr St John SC and Mr Brott, solicitor. I accept the written submissions of Mr St John which, in my view, accurately state the relevant legal principles when dealing with the costs order sought against a non-party. Without derogating from the helpful substance and detail of his submissions, it is clear that:
18.1the power provided for me to order costs (s 117(2) of the Family Law Act (1975) (as amended) is wide and may be made against third parties, including a party’s solicitor;
18.2the Family Law Rules 2004 provide for applications of this nature specifically including a solicitor’s failure to comply with the Rules, his/her improper or unreasonable conduct and for issues of undue delay or default (Rule 19.10(1)(a)(c)(d));
18.3to warrant an order for such costs, it has been said that the degree of blameworthiness must be shown to include, for example, conduct which attracts the “… censure of the court in a serious way” or a “… serious dereliction of duty”. (See Jachimowicz v Jachimowicz (1986) 10 FamLR 566, at 572);
18.4costs can be ordered where proceedings are brought or continued for an improper purpose (Flower & Hart v White Industries (1999) 163 ALR 744). There is a duty upon a solicitor to make an independent assessment of the basis upon which proceedings should be instituted and that an abuse of process is made out where it is found that proceedings are “… brought not to vindicate a legal right, but some other purpose”, or where the proceedings are to gain some collateral advantage beyond that offered by the law (Williams v Spautz (1992) 174 CLR 509);
18.5that a legal practitioner ought not improperly initiate nor maintain proceedings, nor unreasonably continue proceedings in circumstances where there is no, or no substantial chance of success (Edwards v Edwards (1958) 2 All ER 179).
SUBMISSIONS
The gravamen of Mr St John’s submissions is that despite years of investigation and the production of countless documents (see par 362, 363 of my Judgment 25 May 2004) the wife’s claim was entirely speculative and that any reasonable definition of an asset base for distribution could not be determined or identified even prior to the commencement of the trial on 28 March 2003. On 19 March 2003, Mr Udorovic QC, then acting for the wife, informed me that when he asked the wife and her forensic investigating accountants to identify the assets and their value, he was met with a “deafening silence”. In common parlance, in my view the wife’s application was a “floater” braced by unrealistic and unsustainable claims with the progress of the proceedings and which I described in my judgment as “pious expectation” (par 362).
Mr St John emphasised, and such is the fact, that from the outset of the trial and throughout the days of hearing which spanned several months I expressed concern about the questionable reliability of Mr M’s alleged expert valuation and of the wife’s claims all against a framework where the husband had proposed (but been restrained) from entering into an arrangement pursuant to Part X of the Bankruptcy Act 1966. See Order of Frederico J made on 6 September 2002.
Mr St John focused attention upon the fact that Mr Brott ought to have been vigilant to the merits of the wife’s case, the criticisms made of Mr M’s utterly unacceptable valuation and his abject failure to present as an independent professional expert witness. The whole of the evidence, so apparent from early in the proceedings ought to have demonstrated in the clearest terms the obvious risk that there was no reasonable likelihood of success. A plain reading of my judgment covering 200 pages of detailed analysis demonstrates that fact with some clarity and my expressions of concern which were translated by Mr Brott as perceived bias.
On the issue of indemnity costs, Mr St John correctly in my view, drew my attention to relevant authorities and what the Full Court had to say in Munday v Bowman (supra) when considering Sheppard J in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FLR 225. It is appropriate to order indemnity costs where, for example, a litigant properly advised should have known that he/she had no chance of success and that in such cases the action must be presumed to have started and/or continued for some ulterior motive or wilful disregard of known facts. Further, that allegations were made which ought never have been put with associated “undue prolongation” of proceedings by “groundless contentions”, as found by me.
The succinct and compelling submissions of Mr St John, when considering the issue of indemnity costs, formulated the appropriate legal foundation and erected his conclusion upon the findings detailed in my substantive judgment. It is correct to say that I expressed disquiet as to the manner in which the wife’s case was being put and in the course of submissions, Mr St John referred to comments made by me at that stage to Mr O’Shannessy, including:
· “Where the husband’s Form 17 is deposed to under oath has having assets of about $3,750 – I’m going entirely on my recollection – and debts of about $2.5 million. Your client seeks $2 million or such other sum and payable within 60 days. I don’t know where this case is going. Someone behind you or behind Mr St John is utterly out of touch with reality.”
· “I just wonder where we’re going on this, but there was simply no notice of this at all. I mean there is almost a dereliction of duty somewhere along the line. Look, one can fish and speculate and augur, prognosticate and all sorts of things in the future, but, you know, where’s the hard reality of this?”
· “It’s an unparalleled fishing expedition into uncharted seas. That’s impression I have thusfar, Mr O’Shannessy.”
The situation was questionable even at that stage and such as to warrant any prudent solicitor experienced in litigation to consider the commercial, legal and factual reality of the Application which appeared, as opened, to be predicated upon thistledown pillars of hope. A reading of the transcript of the proceedings exposes, in my view, nought but a vain and futile quest against the evidence and the weight of the evidence to generate an asset base for distribution that was never there.
The valuation advanced by Mr M was little short of ludicrous. He was not, and was found not to be an expert witness of independence. I would have thought that a solicitor as experienced as Mr Brott was would have read reality into the process and sought a tactical adjustment aimed at compromise. In the course of my judgment I found (par 369):
“There is, in my view, force in the submissions of Mr St John that Mr [M’s] approach contradicted ‘ … virtually every fundamental of professionalism, objectivity and independence’. The evidence to support that criticism is abundant … Having heard all that I have over the totality of the trial, it appears to me that Mr [M] endeavoured, in a most unsatisfactory way, to create an asset in circumstances where it did not, having regard to proper valuation techniques, exist. …”
It seems to me that wisdom and objectivity was lost and abandoned in the process and that partisanship and personalised instinct dominated Mr Brott. This can perhaps be best evidenced by my findings relating to a meeting on 2 April 2003 between the husband and the wife’s forensic accountants:
“267.In the course of examination, Mr [R] was referred by Mr St John to a meeting he had at the offices of Mr [M] on 2 April 2003. I have earlier detailed Mr [M’s] evidence in relation to this particular incident. Mr [R] said that whilst he was with Mr [M] and during the course of the meeting Mr Brott entered the room. He went on to say:
“… He (Mr Brott) asked who I was. I didn’t answer him at that stage. Mr [M] replied that I was the expert witness for [the husband]. At that stage he mentioned I must be a scum bag and a crook, and he kept saying that for probably about 60 seconds and Mr [M] got up and sort of tried to usher him out of the door.” [T 84]
268.As to the strength of voice used by Mr Brott, it was Mr [R’s] evidence that it was “… more just to make sure that he got his point across and I heard him”. He said that Mr [M] got up from behind his desk and tried to “… shoo him out of the office”. He explained that Mr [M] came around the desk and motioned Mr Brott to leave the office and went on to say:
“… The only additional comments Mr Brott made when Mr [M] was exiting was words to the effect ‘we’ve got more money on him. We’ve got more money on him’.” [T 86]
He said Mr [M] apologised for Mr Brott’s attendance. I have no hesitation in accepting Mr [R’s] version of this incident in reference to that of Mr [M].” (my emphasis)
It is significant that Mr Brott was not called to give evidence concerning this most unpleasant and revealing incident as a result of which it is open for me to draw an adverse inference (see Jones v Dunkel (1959) 101 CLR 298).
Another incident revealing the attitude and in my view a loss of objectivity, of professional impartiality and appropriate detachment from the stress of proceedings concerned the contents of Exhibit “H1” being a letter dated 5 March 2003 describing a meeting between Mr M and Mr McV (the secondnamed respondent) (see par 125, 317-320). In order for the reader to understand this incident, I record the following from the substantive judgment.
“317.In coming to my determination I also have regard to the report dated 13 August 2002 of Mr [McV] to creditors pursuant to the provisions of the Bankruptcy Act. Having first dealt with the background to the husband’s financial circumstances, Mr [McV] assessed the husband’s assets at $4,000 and his liabilities at $2,552,522. In relation to the liabilities, he summarised them as follows:
“Company Debts personally guaranteed
5 creditors for amounts totalling 1,021,220
Company Loan account for drawings
3 creditors for amounts totalling 822,979
Personal Loans
8 creditors for amounts totalling 415,000
Credit Card debts
2 creditors for amounts totalling 25,800
Professional fees
6 creditors for amounts totalling 96,908
School fees 12,507
Miscellaneous
3 creditors for amount totalling 1,108
Debt due under Family Law agreement
1 creditor54,000
Finance Agreement for motor vehicle
amount of debt 25,000
less value of vehicle 25,000 NIL
Debt due pursuant to a covenant in a Deed of
Company arrangement
1 creditor78,000”
318.Mr [McV] made a number of comments in relation to the debts, the contents of which were consistent with the evidence that I have heard in these proceedings. He also set out the husband’s present income position, residence arrangements and commitments at law pursuant to orders of this court. Having regard to all the information available to Mr [McV] it was his recommendation that the husband’s proposal for a deed of arrangement was in the best interests of the creditors on the basis that it would provide a small return to them, which is certain, albeit not commercial, but which would not be available from a bankruptcy.
319.I was impressed with the oral evidence given by Mr [McV] before me. He appeared to me to have a very good recollection of events notwithstanding the passage of time and tempered by the fact that he has since been involved in numerous other commercial matters. He made concessions in circumstances where it was appropriate to do so. He was the consummate, professional witness.
320.Mr [McV] made it clear when examined by Mr St John that when Mr [M] visited his office (in September 2002) their’s was a cordial meeting and that he provided for Mr [M’s] inspection all files in his possession. He said that Mr [M] asked a number of specific questions in relation to the detailed information provided and that towards the end of the meeting there was a discussion of the overall position, as he understood it to be. In relation to that, the following evidence took place:
“What was that discussion? … Generally there was a discussion as to what it was all about and how long it was going to take, that sort of thing, and I actually said to Mr [M], ‘well, what do you hope to get out of this?’ you know, ‘How are you going to get paid out of it?’
What was his response to that inquiry? … His response was that he and Issac dealt with these things all the time and that they just pushed on and on and eventually the family generally settled.
When he made reference to Issac, first of all, did he say the surname of that person? … No, he did not.
Who did you understand Issac to be? … Mr Brott.
When this comment was passed as to pressing on the family and the like, what was your response to Mr [M]? … I made no real response to that particular comment.” (my emphasis) [T 204]
I accept that evidence.
321.Mr [McV] was cross examined at considerable length by Mr O’Shannessy and without meaning any disrespect, for his task was a difficult one, but a number of questions were perplexing and difficult to follow, both as to content and relevance. Mr [McV] said it was his understanding that Mr [M] was investigating the “dramatic” increase in the “apparent indebtedness” without there being any corresponding asset or assets.”
Again, it is significant that Mr Brott did not give some evidence or explanation concerning this extraordinary rationale for the litigation in circumstances where one would reasonably expect a professional advisor would, if such were not the case, indignantly and professionally record his or her denial.
Mr St John emphasised that, in the result, I found the husband’s financial position was, in effect as opened at the commencement of the trial. That which was maintained by the husband from the outset was found to be a fact and in my view the pursuit of the wife’s claim became ever increasingly futile and devoid of professional objectivity with the progress of the trial. In the course of my judgment (par 8) I describe Mr O’Shannessy’s submissions at one earlier stage in the proceedings as “highly speculative”. By the close of the wife’s case it was clear that the capital asset base proffered by Mr M was “utterly unsustainable” (par 362). In the result I rejected his valuation “outright” (par 362) and that his analysis included a “broad brush simplistic historical survey of breathtaking dimension”. (par 94)
It surprised me that Mr Brott, as an experienced professional advisor permitted himself to be party to the professional situation and relationship described in my judgment. I found, for example that that dispossessed Mr M of his independence in the sense of his presentation as a professional expert witness. It was damning that Mr M’s fee was “success based” (par 353) and extraordinary that Mr Brott permitted such a situation to exist. He permitted their professional relationship and importantly, the significance of impartiality, objectivity and professional detachment to be lost.
Any reasonable, sensible and objective professional advisor would have understood the quite untenable situation concerning Mr M for which reason I find it quite alarming that Mr Brott did not do so. In my view, he simply undertook a fishing expedition of planetary dimension built plainly on hope and unreasonable expectation, all this, as it inexorably transpired to his client’s detriment.
The transcript would reveal that my endeavours to manage the trial were met at times with risible applications, with criticism and a continued pursuit of a claim that had little, if any, merit. It lacked a stable evidentiary foundation. It seems to me that Mr Brott’s maintenance of the proceedings was unrealistic and devoid of objectivity. At times, the presentation was blustery, long winded and time wasting. I have rarely, if ever, come across such a situation of professional myopia.
Mr St John conceded one day of the total hearing days as not attracting an order for costs and which was attributed to the wife’s application for spousal maintenance (par 39 and 14 of the Submissions). In relation to the wife’s claim for child support and which was dismissed, he referred to my findings that the wife’s claim was “excessive and unrealistic” (par 437) and that it was given “scant consideration by way of random nominal mention during the course of proceedings” (par 422). It was an “afterthought” (par 435).
An important feature of Mr St John’s submissions was to address what he described as the “true motive” for the proceedings seen from correspondence (Exhibit “H1”) dated 5 March 2003 (Judgment par 37) alleging Mr M informed Mr McV that the property settlement application was being continued “as a pressure tactic” designed to cause the husband’s father to advance funds for settlement in favour of the wife. Connection was made, so it was submitted, to this fact and the statement of Mr Udorovic on 19 March 2003 (“Judgment par 38) who was met with a “deafening silence” when he asked Mr M to identify the assets.
I have earlier referred to the meeting between Mr McV and Mr M and in my substantive judgment I made it clear that I preferred the evidence of Mr McV to that of Mr M (Judgment par 100, 101, 125, 320, 322 and 328). The submissions of Mr St John on this issue are compelling and which I propose to record into this judgment:
“45. The importance of the finding is difficult to overstate, it confirms the improper purpose complained of in the letter forwarded to the Wife’s solicitor (i.e. Exhibit H1). It explains the behaviour of the wife and Mr Brott in pursuing proceedings for settlement of property, a pursuit otherwise impossible to rationally explain. Evidence of this nature is rarely available to be called. The tactical pursuit of proceedings directed not towards the Husband but towards his extended family to obtain a settlement the Wife was on the facts as known to her and those she instructed, not entitled to receive, was a shameful abuse of the Court’s process. The full financial costs to the Husband of this false and improper conduct should be visited upon the wife and Mr Brott both to compensate for costs improperly and unfairly incurred and to demonstrate that such behaviour will not be countenanced by this Court.
46.That Mr Brott had a vested interest in obtaining such an unjustified settlement is manifest from the vast legal costs he is otherwise unlikely to recover from the wife. It moreover explains Mr Brott’s abusive and intimidatory behaviour towards the accountant Mr [R] during his Court-ordered conference with Mr [M] to discuss their conflicting valuations (see Judgment par 102, 103, 267 and 268). Mr [R] was found to be “a very impressive witness indeed, and one upon whom I can safely rely” (Judgment par 298).”
Costs have also been sought by Mr St John on behalf of the husband arising from applications made by the wife on 26 March 2003, 14 May 2003, 28 May 2003, 16 July 2003 and 23 September 2003. In addition, specific submissions have been made for costs arising from objections to affidavits filed by and on behalf of the wife and arising from the evidence given by Mr D Limousin. I have carefully considered those submissions.
The wife filed an application on 26 March 2003 seeking that the proceedings be adjourned sine die. It was returnable on 28 March 2003, on which day senior counsel for the wife withdrew the application requesting that the proceedings commence on 31 March 2003. Accordingly, that day was lost to the husband and an application for costs was foreshadowed.
On 14 May 2003, in the course of the trial the wife made an application for adjournment of the proceedings on the basis of inadequate discovery by the husband and that within the time available for the trial, the issue of sufficiency of the husband’s disclosure of financial affairs could not be properly pursued. I delivered an ex tempore judgment that day and ordered that the application be dismissed. I refer to and rely upon the terms of my findings in that judgment. The costs thrown away for the time taken to make necessary submissions and receive judgment have been sought against Mr Brott for it is submitted, that the failures complained of by the wife were his responsibility to make good.
On 28 May 2003 oral application was made by Mr O’Shannessy that I be disqualified on the grounds of apprehended bias. On that day, I delivered a further ex tempore judgment at the conclusion of which I dismissed the application. The trial resumed shortly after the luncheon break. I refer to and rely upon the findings made in my judgment.
On 16 July 2003 an order was sought that I disqualify myself from hearing the matter on the basis of perceived or actual bias. The application was some 38 pages in length. I ordered responding submissions be prepared by the husband and adjourned the matter to 21 July 2003. Mr St John argued that preparation of his submissions were particularly “time intensive”, having regard to what he described as the prolix nature of the submissions made on behalf of the wife, their wide ranging nature and numerous references to the transcript. With that I agree. Having regard to the terms of my judgment of 24 July 2003, it is plain that there was merit in that submission.
The wife also made application that the hearing be adjourned and in the alternative, be given leave to tender documents in rebuttal and/or to re-open her case. On 21 July 2003, being the return date of the wife’s application and without notice, Mr Brott provided additional supplementary submissions concerning the relationship between Mr St John and myself. In those circumstances it was clearly inappropriate for Mr St John to argue the matter which I adjourned to 22 July 2003 on which day Mr Graham QC appeared on behalf of the husband leading Mr St John to argue the disqualification application.
On 24 July 2003 I delivered judgment and dismissed all applications. I refer to rely upon the clear findings in my judgment. The application was entirely without merit and I found that the primary disqualification application was indeed an abuse of process as was the adjournment application. I have rarely, if ever come across such poor quality submissions as were filed on behalf of the wife, various aspects of which have been accurately recorded by Mr St John (see par 71 and 73). The terms of my judgment from which was no appeal sets out my clear and unequivocal view.
Following conclusion of the evidence and the filing of final written submissions on behalf of each of the parties, the wife caused to be filed a further application on 23 September 2003 to re-open her case and adduce evidence pertaining to the then recent death of the husband’s father and for leave to file a Statement of Financial Circumstances. That application was supported with an affidavit of Mr Brott filed the same day. I heard argument on 3 November 2003 and delivered judgment on 18 May 2004 on which day, I ordered that the application be refused. I refer to and rely upon my findings in my judgment delivered that day.
I have given careful consideration to the answering submissions of Mr Brott and those of Mr St John in reply. Mr Brott concedes, and properly so, that the Family Court has jurisdiction to make an order against a solicitor for a party emphasising that it involves special considerations and must be exercised with caution. So much so is clear. He joins issue with much of what Mr St John argued in his written submissions and I do not propose in this judgment to recite in detail those matters relied upon by him. The law in relation to a costs order of this nature and that of indemnity costs is quite clear.
If I understand Mr Brott’s submissions, he appears to suggest that the court cannot order costs against a legal practitioner where proceedings are brought or continued for an improper purpose (par 4 of his submissions in answer to par 16 of those submissions of Mr St John). If that be so, then in my view he is wrong, for such conduct would clearly be both improper and unreasonable. Albeit in the most abbreviated of form, Mr Brott denied the issue of improper purpose (par 20) and emphatically denied that the wife’s application for a settlement of property in the terms expressed was without merit.
Mr Brott submitted that a legal practitioner can only consider the question of the merit of a case based on the “material, evidence and instructions” provided by the client and advice of counsel. He went on to say that he was “bound by legal professional privilege that is owed … to maintain the confidentiality” of the information provided.
Mr Brott further submitted that he was “provided advice” by Mr Maxwell QC (as he then was), Mr Udorovic QC, Mr Peter Hayes QC and Mr O’Shannessy who conducted the trial. He said that he acted on the advice of the “eminent counsel” (but maintaining privilege) and that if their advice was questioned, it would be appropriate to join them as third parties or respondents. He broadly asserted that “there is no doubt” the decision to proceed was made on the advice of counsel and that he was:
“… bound to maintain the legal professional privilege that is owed to his client and the fact that he cannot adduce all the relevant evidence in defence of the application for costs being made against him precludes the Family Court from making such an order against him.”
In a somewhat broad and sweeping assertion, Mr Brott denied that submitted by Mr St John (par 21) and went on to other aspects which, it appears to me, missed the point. In so doing, he went behind the terms of my substantive judgment. He conceded that Mr Udorovic did “express concerns about a specific aspect” of the wife’s case, namely the identification of an asset. Mr Brott submitted that “the decision of counsel” was to proceed and to rely upon presumptions or inferences as known in law. Furthermore, he submitted that my judgment relied upon “a resolution of issues” between the husband, the wife and others.
Mr Brott opposed the making of an indemnity costs order, submitting that given there was no costs agreement between the husband and his legal practitioners, that there was no practical basis for such an application and that the husband’s legal practitioners can only charge the husband on the basis of the scale set out in the Family Law Rules 2004.
It is not unfair to say that the answering submissions filed by Mr Brott join issue with the contentious arguments raised by Mr St John. The reply by Mr St John demonstrates the ebb and flow of assertion, denial and counter assertion. As I earlier said, it serves no good purpose to detail that argued and it is to be assumed that I act upon the basis that all matters are contested and in issue.
In his submissions, Mr Brott relied extensively upon certain of the judges of the Full Court on appeal in the proceedings which, in my view, is irrelevant to my task. The appeal process has been completed. All appeals have been dismissed. The foundation for any order for costs as sought by the husband commences and ends with the terms of my judgment.
Mr Brott, somewhat ungenerously in my view, argues that it was the wife’s decision to retain Mr M as her forensic accountant and that he was entitled to rely upon Mr M’s professional expertise and judgment. With that said, it may be helpful for Mr Brott to reconsider my findings in relation to Mr M and their own professional relationship.
Some criticism levied by Mr St John in relation to the presentation of the wife’s case is answered by Mr Brott submitting that the manner in which Mr O’Shannessy conducted the trial was for him alone and that he had a duty to exercise his own independent judgment. Mr Brott denied there was a “further purpose” in placing pressure upon the late father of the husband to settle the proceedings. He noted that the comments of Mr M were denied and that in any event they were not made in his presence. They could not in such circumstances be constituted as an admission against him. However, I have made findings on this issue in my substantive judgment.
On the issue of his professional fees, Mr Brott had this to say:
“21.Mr Brott denies paragraphs 46 and states that he has at times, acted on a fee deferred basis, because he principally acts on behalf of wives, who frequently do not have the financial resources to pay for legal representation. The conduct of Mr Brott in acting on a fee deferred basis is not unusual and is not improper and it in fact, helps ensure that wives are not denied the benefit of legal representation, in circumstances, where the husband usually has the control of the financial resources of the marriage.”
As to the commentary of Mr St John dealing with the fact that Mr Brott was not called to give evidence both as to true motive and disclosure (par 47), Mr Brott argued that it was the decision of counsel to determine who should be called to give evidence on behalf of the wife. He submitted that the cross examination of Mr M was designed to attack his credibility and given that Mr M was an expert, it seemed that there was a forensic decision by counsel that it was unnecessary to call him, Mr Brott, to give evidence on an issue that merely related to the credibility of the expert witness.
Dealing with the wife’s application filed 26 March 2008, Mr Brott opposed the orders sought asserting that he briefed Mr Maxwell in “a timely manner” and that any decision to adjourn the application rested with counsel, in consultation with him.
As to the strike out applications, Mr Brott submitted that the affidavits were not drafted nor settled by him. With a lateral arabesque, he argued that any complaint should be directed to counsel who “drafted and/or settled” those affidavits.
As to the evidence of Mr D Limousin, it was Brott’s submission that the decision to call him as a witness rested with counsel and that any complaints about that strategic course ought be directed to Mr O’Shannessy.
As to the wife’s application made on 14 May 2003, it was the submission of Mr Brott that the decision to apply for an adjournment was designed by Mr O’Shannessy on the basis of instructions received from the wife after consultation with Mr Brott. All matters arising from the application, he submitted, was a matter for counsel claiming that he “personally would have been prepared” to have provided evidence in support if requested by counsel. The imputations directed against counsel by Mr Brott are quite clear. He reasserted that the conduct of the cross examination of a witness was “within the province” of Mr O’Shannessy and any complaint ought be directed to him.
Dealing with the application of 28 May 2003, Mr Brott submitted that the decision to proceed was made by Mr O’Shannessy on the basis of instructions received “from the wife and after consultation” with him. He otherwise asserted that he was not in a position to comment any further, for to do so would breach professional legal privilege.
Dealing with the application of 16 July 2003, Mr Brott submitted that the submission of Mr St John was an attempt “to demonise him” and that any costs order against him could be regarded as an attempt to punish him for making an application of the nature launched by him. I thought the submissions of Mr Brott on this issue were bland and quite unpersuasive.
In relation to the application of 23 September 2003, it was the submission of Mr Brott that whether the husband had benefited from the death of his father was a legitimate inquiry and was embarked upon by Mr O’Shannessy on the basis of instructions received from the wife “and after consultation” with him. Mr Brott otherwise argued that he was not in a position to reveal contents of discussions, for to do so would breach legal professional privilege. He claimed that the failure to file a Form 17 Financial Statement had been “an oversight” and should have been corrected by counsel and not attributed to him. It was his submission that the conduct of the case of the wife for spousal maintenance was a matter for counsel and any complaint in respect of that ought be directed to Mr O’Shannessy.
Mr St John was very critical in his reply to Mr Brott’s submissions, asserting they did not constitute a proper response and/or advanced flawed propositions in law and otherwise appeared to re-agitate arguments or justify behaviour that had already been determined by me. He identified, correctly, the submissions of Mr Brott that he relied upon counsel against whom any criticism ought fall. He submitted that reliance by a solicitor upon advice of counsel did not absolve the solicitor from responsibility in relation to institution and conduct of proceedings, relying upon White Industries v Flower & Hart (supra).
Mr St John made the point:
That the arrangements and circumstances in engagement of all counsel and their advice are known only to the counsel, Mr Brott and/or the wife.
The wife made no submission or complaint about counsel.
Mr Brott had not seen fit to join any of the counsel or give precise particulars of any advice allegedly given by them.
If he had a complaint, he was at liberty to take that issue up with counsel, being “a dispute between members of the same legal team” and in circumstances to which the husband was not privy.
Mr St John was also critical of Mr Brott’s assertion that he was unable to fully respond to the husband’s submissions as it would trespass upon solicitor/client privilege notwithstanding that at times, in the course of submissions, he appeared to be making assertions of advice allegedly received from counsel or instructions received from his client. There is no suggestion that if such was the case as argued by Mr Brott, whether he had sought permission of the wife to fully respond in a free and frank manner. Mr St John otherwise criticised the use by Mr Brott of matters stated in the course of argument in the appeal hearings before the Full Court as improper and irrelevant. Objection was taken to those references.
Mr St John made the point that it was “notable” that Mr Brott failed to respond adequately or at all to his submission that under the guise of pursuing the wife’s settlement proceedings he utilised the process of the court for an improper purpose (par 15 of husband’s submissions).
In the course of his submissions, Mr St John recorded the fact that over the years Mr Brott had acted for the wife he had available detailed affidavits of the husband through interim proceedings, the final affidavits of Mr McV, Mr R and the husband’s supporting witnesses. He had “vast quantities of discoverable documents”. He had the assistance of an investigative accountant who had spent years at Mr Brott’s direction.
In relation to the advice provided by the various senior counsel engaged by the wife, Mr St John submitted that whilst it may be “assumed they each gave advice”, the actual nature and extent of that advice could only be speculated upon. He made the point that Mr Brott’s general assertion that he acted upon the advice of various counsel was not evidence and furthermore, the advice “allegedly given” was not disclosed. It is plain that Mr Udorovic, a highly experienced senior counsel in the family law jurisdiction was concerned at the failure of Mr M to identify an asset. Mr St John makes the point that notwithstanding, within days and without the production of any further documents, Mr M provided a report asserting assets in excess of $2 million.
It was the submission of Mr St John that there could be no inference properly drawn that the decision to proceed with the trial was in accord with the advice of counsel. He submitted that evidence of Mr Brott’s motive behind the proceedings had been accepted by me in my substantive judgment. Furthermore, even in the absence of particulars concerning counsel’s advice or the issue of solicitor/client privilege, Mr Brott’s motive justified an order he pay the husband’s costs. It was submitted that it would be unjust for the husband to bear the cost of protracted proceedings based upon “a false and contrived report” that only came into existence as a result of the urgings of Mr Brott.
Specifically dealing with Mr Brott’s submission that the wife made a decision to retain Mr M as her forensic accountant and relied upon his professional expertise and ability, Mr St John had this to say:
“… What the commentary failed to address is the behaviour of Mr Brott towards Mr [M] and the relationship between them as found. It is disingenuous to assert reliance on Mr [M’s] ‘professional expertise and ability’ in the light of those findings, especially Mr Brott’s close association with Mr [M], Mr Brott’s behaviour in prevailing on Mr [M] to produce a valuation of the days leading up to the final hearing and the revelation of the motive of Mr Brott to continue the litigation as a means of pressuring the family of the husband to obtain a settlement. The unhealthy alliance between Mr Brott and Mr [M] in their respective professional roles also renders as fatuous the proposition that the wife was not encouraged to use the services of Mr [M].”
As my substantive judgment records, I was seriously concerned as to the independence of Mr M and his close relationship with Mr Brott. My findings are clear.
It was the submission of Mr St John that any attempt by Mr Brott to wash his hands of responsibility for the conduct of the case had no proper basis in law. With that, I agree.
In each instance, the submissions in reply by Mr St John met and dealt with the submissions made by Mr Brott. I was assisted by those submissions and find that the criticisms made by Mr St John are well made out. The terms of my judgment delivered on 25 May 2004 and findings made are clear. Mr St John has relied upon those findings and accurately recorded them in support of various of the matters raised by him to underpin his application for costs. In my view, his criticisms of the various submissions made by Mr Brott are well made out.
CONCLUSION
I have earlier in this judgment made a number of significant findings which I bring into account when considering my determination on the application for costs. A costs determination such as this is very much an exercise of my independent discretion and I make it clear that I gained considerable advantage in my function as the trial Judge in reaching my conclusion in this application.
My substantive judgment delivered on 25 May 2005 is both long and detailed as to findings, particularly dealing with my observations of the witnesses, my findings on issues of credibility and my view as to the manner in which the wife’s case was conducted. In his written submissions, Mr St John accurately recorded various of my concerns from time to time which expose my disquiet as to the manner in which the wife’s case was being presented and maintained.
Furthermore, in relation to each of the various applications made in the course of the lengthy hearing, I delivered ex tempore judgments which also remain on the court file. I refer to and rely upon the terms of those judgments and my findings when dealing with each of the specific applications referred to by Mr St John.
In his submissions dealing with the wife, Mr St John made a number of powerful and persuasive submissions which are equally applicable to my consideration as to whether or not, in the whole of the circumstances before me and in the exercise of my discretion, I should make an order for costs against Mr Brott, appreciating the caution I must exercise. I accept those submissions. I appreciate that I should not lightly depart from ordinary rules relating to costs between party and party and that circumstances justifying departure should be of an exceptional kind. In my view, this is such a case and which sits seamlessly with the requirements of an order for indemnity costs.
From all that I have observed in the course of the trial, I am satisfied that it was a highly speculative claim launched by the wife under the professional hand of Mr Brott who had a fundamentally mistaken and misguided view of the husband’s asset position in circumstances, despite the assistance of a forensic expert’s investigation over a period of several years with the production of numerous documents, the husband’s position was patently clear.
The position of Mr M’s report, from circumstances of deafening silence on 19 March 2003 to a document shortly thereafter asserting some $2 Million of assets itself can only sound sirens of caution.
From the time of the presentation of Mr M’s report, it was clear that the methodology applied by him was fundamentally flawed and that Mr M himself, having regard to his relationship with Mr Brott, plainly lacked professional independence. My findings on this issue were clear.
I find it difficult to envisage how it is that a professional advisor could have permitted such a situation to have existed, let alone continue and be maintained over the period of the litigation. I agree also with Mr St John’s submissions that groundless, at times risible applications were made, all plainly under the advice and/or supervision of the solicitor.
I have little doubt that there was an abject failure on the part of Mr Brott to achieve the required standard of professional objectivity. His appalling and lamentable conduct in the presence of Mr M and Mr R underpins the powerful subjective view held by him without a reasonable basis and in the face of compelling and persuasive evidence to the contrary.
The statutory provisions of Rule 10.1(c) of the Rules refers to a lawyer’s “improper” or “unreasonable” conduct. Firstly, when considering “unreasonable” conduct, it is central to understand the totality of the terms of my substantive judgment of 25 May 2004 which draws me, in the exercise of my discretion, to a clear conclusion that the conduct of Mr Brott was unreasonable. However, should that alone warrant an order for indemnity costs against Mr Brott for the whole of the proceedings for some other and what part of the proceedings?
The evidence of Mr McV was of real concern to me. I found that Mr M did say that which Mr McV complained of recognising of course that it was said in the absence of Mr Brott. Mr Brott was in court when this evidence was given and was clearly aware of it having regard to the references it generated in the course of the trial, not forgetting of course that the essence of the complaint was made clear to him in a letter from the husband’s solicitors. True it is that the admission as found by me is not evidence against Mr Brott.
It was a damning and serious of evidence clearly underpinning male fide and improper purpose. It struck at the very heart of professional integrity, professional conduct and clearly had great significance in the trial. One must ask oneself, why wasn’t Mr Brott called, at least of his own volition and seek to be heard on what, if untrue, was a scandalous and disgraceful allegation to make?
The serious imputations that may be drawn are quite clear having regard to his professional reputation and many years experience in court. Mr St John argued that in the circumstances it was open for me to draw an adverse inference as explained in Jones v Dunkel (1959) 101 CLR 298 where Windeyer J at page 320-321 had this to say:
“… Then, I think, his Honour should, when the juryman asked his question, have given an answer in accord with the general principles as stated in Wigmore on Evidence 3rd ed (1940) vol. 2, s 285 p.162 as follows: "The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are open always to explanation by circumstances which made some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted”.
The rule was considered by the New South Wales Court of Appeal in Fabre v Arenales (1992) 27 NSWLR 437 at 449 where Mahoney JA said:
“… The significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance. The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship to the fact in issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness ‘blind’.
These matters are of relevance in the present case. A Jones v Dunkel inference may not arise if, for example, the witness has a reason for not telling the truth or refusing to assist and the party who may call him is aware of this ...”.
[See also Payne v Parker (1976) 1 NSWLR 191 at 202 per Glass JA.]
I am satisfied that the failure on the part of Mr O’Shannessy to call Mr Brott on this issue is because he feared to do so, that the evidence would expose facts unfavourable in relation to a highly significant aspect relating to the wife’s case. The risk was taken to rely on Mr M’s denial. A very high risk indeed, particularly given commentary made clear in the course of cross examination of Mr M as founding a base concerning the worth (or worthlessness) of his evidence.
There has been no explanation which would render “some other hypothesis a more natural one”, than fear of exposure. It is plain that Mr O’Shannessy would have been very clear on what Mr Brott could say on the significant issue given his experience in the family law jurisdiction.
To conduct this litigation in the pious hope of “squeezing” a settlement as evidenced by the admission of Mr M is an improper purpose in my view and plainly unprofessional. That too must be gauged against the claim itself which, as I articulated at the commencement of the trial, as being “highly speculative”. It involved an artistic licence in presenting a valuation that was risible and borne from a professional relationship between the forensic expert and the practitioner that was open to significant and appropriate criticism. That relationship, as found by me, alone was destructive of the required level of independence.
I also find that Mr Brott sought to gain an advantage that was simply not open to him upon any rational, professional and objective appraisal of the facts by an undue protraction of the proceedings and to place pressures upon the husband to settle the action. This alone warrants the type of order I propose to make, but when viewed in tandem with all other negative aspects as described by me at considerable length in my substantive judgment, such an order is quite appropriate. I have earlier set out several findings concerning the material underpinning the orders I propose to make. (See par 30, 31, 32 and 33).
I am quite satisfied that Mr Brott acted overall quite unreasonably. As I said, there was what I regard as undue delay in the conduct of the proceedings. In my view, the interests of justice were lost and ignored by Mr Brott and that he failed in attending objectively to the needs of his client which had a significant effect upon the husband, including costs of litigation in circumstances where much could have been ameliorated.
My attempts to bring balance to the trial and expressed concerns were translated by Mr Brott as “bias”. The knee jerk reaction was to make ridiculous applications which I dealt with. He failed to undertake professional vigilance and became deeply, blindly and personally involved. He acted with wilful disregard to the facts and, as I said at trial, entertained an “unparalleled fishing expedition” in “unchartered seas”. Should the cost of this be borne by the wife? I think not.
The facts of this case are such that it is proper, having regard to the particular circumstances in question as to warrant the making of an order for the payment of costs other than on a party and party basis. I make it quite clear that I appreciate very much this is the type of order that is an exception to the usual rule and should only arise where there are special or unusual features. It is plain to me that there are, within the factual matrix of this case, such circumstances. So too there has been established a strong basis for making an order against Mr Brott personally because of improper or unreasonable conduct and indeed, undue delay as I have already referred to in the course of my substantive judgment. This is a jurisdiction that must be exercised with caution. I regard the whole of the circumstances surrounding the conduct, attitude, and maintenance of the proceedings by Mr Brott very seriously and such as to justify the order I propose to make.
In making my orders I propose to allow for a certain percentage of the overall trial to clearly demonstrate that it was an adequate and sufficient allowance for Mr Brott to have understood the professional status of the litigation and acted in the best interests of his client. What I propose to do is order that Mr Brott be responsible for 60% of the husband’s costs of trial on an indemnity basis as later set out in this judgment. That is, in my view having regard to the whole of the facts and circumstances of the trial, a generous consideration and provides a period of time in which the wife, through Mr Brott, could be seen to have had every opportunity to present an arguable case.
Dealing with the application for costs of the adjournment sought by the application filed on behalf of the wife on 26 March 2003 and heard 28 March 2003. I agree with the overall submissions of Mr St John and his observation that Mr Brott appears to have shifted all responsibility upon his then counsel. In his submissions in reply, Mr St John describes that argued by Mr Brott as “preposterous”. In my view, that is a generous adjective. Given the long lead up to trial it ought to have been ready, but clearly was not, for reasons best known to Mr Brott. It amounted to an inexcusable waste of time. I propose to order that Mr Brott personally pay the costs of and incidental to that application which was foreshadowed on the day. Those costs shall be assessed on a party/party basis.
Dealing with the application for costs arising from objections taken to the affidavits filed on behalf of the wife and to strike out those clearly inadmissible and objectionable parts, I find favour with the submissions of Mr St John. The first affidavit of Mr M was simply a disgrace. In the result, a new affidavit had to be drawn and that too was subject to detailed objection resulting in vast tracts being struck out. I made my view of those two affidavits quite clear at the time of trial. Those affidavits, including the affidavit of the wife offended Rule 15.13 in a significant way and more relevantly, the affidavits of Mr M were devoid of professional drafting, skill, care and attention.
In his argument, Mr Brott shifted responsibility to counsel. The preparation and content of these affidavits is a professional responsibility and not within the ordinary expertise of the wife. I propose to order that Mr Brott personally pay all costs of and incidental to the preparation of the written objections to the affidavits of the wife and of Mr M together with allowance for a one half day on 1 April 2003 and lost in preparation of the substitute affidavit which also, in any event, was of poor professional quality. Those costs too shall be assessed on a party/party basis.
As to the evidence of Mr D Limousin, a plain reading of the transcript would reveal the turgid and prolonged evidence of that witness. I agree with the submissions of Mr St John which accurately record the situation. As usual, Mr Brott casts blameworthiness upon counsel. I suppose that it could be said counsel got lost in the voyage of irrelevancies and minor detail in an endeavour to elicit a utopian goal that was simply non existent. What I propose to do is to subsume this futile, time wasting exercise in the 40% aspect of the total trial conceded in my order. A generous view, by any measure.
The application made on behalf of the wife on 14 May 2003 falls on the terms of my ex tempore judgment delivered that day. The submissions of Mr St John accurately outline the reality of that application the responsibility for which, Mr Brott claims, falls with counsel engaged by him on which there is no evidence. I find favour with the submissions of Mr St John in paragraphs 5, 6 and 7 of his submissions in reply.
In the circumstances, I propose to order that Mr Brott be responsible for all costs thrown away of and incidental to the application of 14 May 2003 being costs to prepare necessary submissions and receive judgment and that those costs be assessed on a party/party basis.
Dealing with the oral application made on behalf of the wife on 28 May 2003. It is said that sometimes applications of this nature are made for appellate purposes. This application was not the subject of appeal. My detailed ex tempore judgment delivered that afternoon spells out my view of the application which was plainly, “threadbare” in content. It had no merit.
Mr St John claims one half day lost for the application. However, given the order I propose to make concerning Mr Brott’s responsibility for 60% of the husband’s costs of trial, I do not propose to make that order sought. This too, is, in my view, a generous one to take in the whole of the circumstances for the submissions put by Mr St John were highly arguable.
The application filed on behalf of the wife on 16 July 2003 and argued on 22 July 2003 falls into quite a different arena. My judgment of 24 July 2003 details my view of that application and my findings are perfectly clear from which there was no appeal.
The submissions of Mr St John accurately summarises the background and how it came about that Mr Graham QC was called upon to argue the issue raised. It was an application entirely without merit and variously an abuse of process, “incorrect”, and “ill-informed”. I have rarely come upon such a pitiful exercise and in respect of which I expressed my very clear view.
The minimal response of Mr Brott itself reveals the inarguable position taken on behalf of the wife. I propose to order in the exercise of my discretion that Mr Brott personally pay all costs of and incidental to the wife’s applications including the cost of retention of both Mr St John and Mr Graham and for the preparation of all written submissions. Those costs are to be assessed on an indemnity basis.
Finally, dealing with the wife’s application filed on 23 September 2003, heard on 3 November 2003 and which I dismissed on 18 May 2004. I refer to my view of that application, which is clearly set out in my reserved judgment delivered that day.
I have carefully considered the application and I am satisfied the application to re-open the wife’s case to adduce evidence concerning the recent death of the husband’s father was a reasonable one to make in the whole of the circumstances, albeit, given the material provided in response, the answer was reasonably clear.
The application for leave to file a Form 13 Statement of Financial Circumstances was erected on a platform of incompetence at worst and ineffective professional practice at best. However, given the time taken in association with the major issue raised on that application, I do not propose to make the orders sought.
In the whole of the circumstances I propose to make the following orders:
110.1That ISSAC BROTT the former solicitors for the wife in these proceedings do pay 60 per cent of the costs of the husband on an indemnity basis as agreed or in default of agreement as assessed under the Family Law Rules 2004 (Cth) (“the said Rules”) such costs being those incurred on 2 April and 3 April 2003, 12, 13, 14, 26, 27 and 28 May 2003, 31 July 2003 and 1 August 2003.
110.2That ISSAC BROTT do pay:
2.1all reasonable costs of and incidental to the wife’s application filed on 26 March 2003, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the Rules;
2.2all costs of and incidental to preparation of all written objections to the trial affidavit of the wife and the trial affidavits of Mr M together with costs for one half day of the proceedings on 1 April 2003 lost in preparation of the substituted affidavit of the said Mr M, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the said Rules;
2.3all costs of and incidental to the application of the wife filed on 14 May 2003 being the professional costs and disbursements necessary to prepare all answering submissions and receive judgment, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the said Rules;
2.4all costs of and incidental to the wife’s application filed on 16 July 2003 including the costs of retention of Mr St John SC and Mr Graham QC and for the preparation of all written submissions, such costs to be assessed on an indemnity basis as agreed or in default of agreement as assessed under the said Rules.
110.3That the said ISSAC BROTT do pay all costs of and incidental to the preparation of the costs submissions prepared on behalf of the husband including the written submissions of 5 March 2008 and 4 April 2008, such costs to be assessed on a party/party basis as agreed or in default of agreement as assessed under the said Rules.
110.4That pursuant to rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel including Senior Counsel.
110.5That all applications be otherwise dismissed and the proceedings removed from the Active Pending Cases List.
I certify that the preceding 110 numbered
paragraphs are a true copy of the
reasons for judgment herein of
the Honourable Justice Guest.
Associate to Guest J
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