Lindsay and Lindsay & Ors
[2014] FamCA 1086
•24 September 2014
FAMILY COURT OF AUSTRALIA
| LINDSAY & LINDSAY AND ORS | [2014] FamCA 1086 |
| FAMILY LAW – COSTS – Where certain aspects of the wife’s claim were heard and determined as separate and preliminary matters – Where the Court determined the claims should all be dismissed – Where the first respondent husband sought costs against the wife – Where proceedings were not necessitated by the failure of a party to comply with a previous order – Where wife had been wholly unsuccessful in the preliminary questions, however the balance of proceedings as against the husband remain to be determine – Where Court satisfied the question of costs of the preliminary proceedings between the husband and wife should be reserved to the ultimate trial judge. FAMILY LAW – COSTS - Where certain aspects of the wife’s claim were heard and determined as separate and preliminary matters – Where the Court determined the claims should all be dismissed – Where second and third respondent’s sought costs against the wife’s solicitor or the wife in the alternative – Where Court noted section 117 extends to making an order for costs against a solicitor or non-party – Where court noted that on the facts of the case something more is required than the solicitors prosecution on behalf of a client of a weak case that in total fell short of being absolutely hopeless – Where Court declined to make an order for costs against the wife’s solicitors – Where Court not persuaded there were circumstances justifying the departure from the usual order in relation to costs – Where Court declined to make an order that the wife pay the second and third respondent’s costs. |
| Evidence Act (Cth) s 140 Family Law Act 1975 (Cth) s 117, 118 Family Law Rules 2004 (Cth) r 19.08, 19.10, 19.18 |
| Cassidy v Murray (1995) FLC 92-633 Kohan v Kohan (1993) FLC 92-340 Lemoto v Able Technical Pty Ltd & Ors (2005) 63 NSWLR 300 Muldoon v Carlyle (2012) FLC 93-513 Yunghanns & Ors v Yunghanns (2000) FLC 92-029 Z (A Solicitor) v Limousin (Costs) [2010] FLC93 |
| APPLICANT: | Ms J Lindsay |
| 1ST RESPONDENT: 2ND RESPONDENT: 3RD RESPONDENT: 4TH RESPONDENT | Mr C Lindsay Mr R Lindsay Ms A Lindsay Mr S Lindsay |
| FILE NUMBER: | ROC | 714 | of | 2009 |
| DATE DELIVERED: | 24 September 2014 |
| PLACE DELIVERED: | Townsville |
| PLACE HEARD: | Townsville |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | Last submission received 23 July 2014 |
REPRESENTATION
| THE APPLICANT: | In person |
| SOLICITORS FOR THE 1ST RESPONDENT: | Michael Stockall |
| COUNSEL FOR THE 2ND AND 3RD RESPONDENTS: | Ms Carew QC |
| SOLICITORS FOR THE 2ND AND 3RD RESPONDENTS: | South & Geldard Solicitors |
| COUNSEL FOR COLIN FLEMING & COMPANY: | Dr Brasch |
Orders
The first respondent’s Application for Costs be reserved to the Trial Judge.
The second and third respondents’ Application for costs be dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Lindsay & Lindsay (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER:
| Ms J Lindsay |
Applicant
And
| Mr C Lindsay Mr R Lindsay Ms A Lindsay Mr S Lindsay |
Respondents
REASONS FOR JUDGMENT
INTRODUCTION
On 5 July 2012, Orders were made facilitating the hearing and determination of certain aspects of the wife’s claim as separate and preliminary matters. Those claims included whether or not a partnership or joint venture between the applicant and the respondents existed from 26 July 1997 (and if so, then certain consequential matters) and in the alternative, if there was no such partnership or joint venture, then whether certain rural properties were held subject to a constructive trust in favour of the wife and the husband. The parties to those proceedings were the applicant wife, the first respondent husband, the second and third respondents (being the husband’s parents), and the fourth respondent being the husband’s brother. On 13 June 2014 I determined for reasons published on that day that the wife’s partnership, joint venture and constructive trust claims should all be dismissed.
These reasons relate to the consequent costs applications. The first respondent seeks an order that the wife pay his costs “with respect to the hearing of the discrete matter”. The second and third respondents seek orders in cascading alternatives: firstly they seek an order that the wife’s solicitor pay their costs of and incidental to the hearing before me on an indemnity basis; in the alternative that the wife’s solicitor pay their costs on a party and party basis with an additional percentage of 15 per cent reflective of the complexity of the case; in the further alternative that the wife’s solicitor pay their costs on a party and party basis; in the further alternative that the wife pay their costs on an indemnity basis; and in the final alternative, that she pay their costs on a party and party basis.
The fourth respondent, who self-represented in the trial, has made no application for costs.
The wife opposes any order for costs being made against her. Likewise, the wife’s solicitor, who made written submissions by counsel, opposed any order for costs being made against him.
RELEVANT STATUTORY PROVISIONS
The starting point for a consideration of these applications is s117 of the Family Law Act which relevantly provides as follows:
117(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118 each party to proceedings under this Act shall bear his or her own costs.
117(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) 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.
117(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
It is also relevant to note s118 which provides as follows:
118 The court may, at any stage of proceedings under this Act, if it is satisfied that the proceedings are frivolous or vexatious:
(a)dismiss the proceedings; and
(b)make such order as to costs as the court considers just.
Part 19.4 of the Family Law Rules deals with costs orders. Rule 19.10 specifically contemplates costs orders being made against lawyers. It provides as follows:
19.10(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.
19.10(2) The court may make an order, including an order that the lawyer:
(a) not charge the client for work specified in the order;
(b) repay money that the client has already paid towards those costs;
(c)repay to the client any costs that the client has been ordered to pay to another party;
(d)pay the costs of a party; or
(e)repay another person’s costs found to be incurred or wasted.
Rule 19.08(3) imposes a mandatory obligation in the following terms:
A party applying for an order for costs on an indemnity basis must inform the Court if the party is bound by a Costs Agreement in relation to those costs and, if so, the terms of the Costs Agreement.
Rule 19.18 deals with the method of calculation of costs in the following terms:
19.18(1) The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount assessed in accordance with Schedule 3.
Example
For paragraph (1)(c), the stated method may be in accordance with Schedule 3 but with an additional percentage for complexity.
19.18(2) If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.
19.18(3) In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
THE HUSBAND’S APPLICATION FOR COSTS
It will be recalled that the husband seeks only an order for party and party costs as against the wife. He seeks no order that his costs be paid on any increased basis, or by the wife’s solicitor.
Turning firstly to the financial circumstances of the parties, the husband notes correctly that the most recent financial statements filed by the parties were in 2011. In his financial statement filed 19 October 2011 the husband disclosed that he had a weekly income of $860.00, total property valued at $58,500.00, and superannuation with a value of $51,262.00. By the wife’s financial statement filed 19 April 2011, she disclosed a weekly income of $1,332.00, property totalling a value of $22,200.00 and superannuation of $3,304.00.
No party to these proceedings was apparently in receipt of legal aid.
Turning then to the conduct of the parties to the proceedings, the husband does not appear to contend that the individual steps within the proceedings were inappropriate, but that rather the conduct of the wife in bringing the proceedings at all, insofar as they asserted claims against the property of the partnership of the second and third respondents, is relevant. He specifically submits that “the reasonableness of the order sought by the applicant was questionable.” Whilst I will consider in greater detail in the context of the second and third respondents’ applications for costs the reasonableness of the wife in bringing a claim which ultimately wholly failed, which discussion is necessarily relevant to this consideration as regards the first respondent, for present purposes it is suffice to say that I am not satisfied that the proceeding comprised an abuse of process, was vexatious, or frivolous. Moreover, had it been so, or at least thought to be so by the husband, then the appropriate course would have been at an early stage to bring an application to dismiss the proceedings under s118 of the Family Law Act, or alternatively to seek some other order protecting his position in relation to costs, perhaps by way of requiring the wife to give security for costs.
The proceedings were not necessitated by the failure of a party to comply with previous orders of this court.
The wife has been wholly unsuccessful in the preliminary questions, however the balance of the proceedings as against the husband remain to be determined.
The husband does not rely upon any offer in writing that he made to the wife in connection with the preliminary proceedings, or indeed at all.
The husband does not identify any other matter he contends is relevant to any order under s117(2). On the other hand the wife relies upon the fact that she has the care of the three children of the parties (MM aged 15, NN aged 12 and OO aged 10) and receives no financial assistance from the husband other than child support. She further says that she leads a very frugal life, and any order for costs made against her would greatly impact on the development and education of the children. She also points to the fact that given that the substantive matrimonial proceedings remain unresolved, it would be appropriate to reserve any question of costs, at least as between herself and the husband, pending the determination of those proceedings.
From the written submission of both the wife and the husband, I identify a further relevant matter, namely that an offer has been made by the husband to the wife in respect of property settlement proceedings, which offer has not been accepted. I infer that the terms of that offer are being withheld because the proceedings between the husband and the wife are not concluded. Therefore it is not presently possible to know whether the husband has done “better” than the offer which he has made. Moreover, I further identify that the fact that those proceedings are yet to conclude – which will necessarily potentially impact upon the husband and wife’s financial position – also tells against making a costs order at this point in time.
Weighing those matters, I am of the view that it is not appropriate to presently make an order in relation to costs in the proceedings as between the husband and the wife, but rather the question of costs of the preliminary proceedings between the husband and the wife should be reserved to the ultimate trial Judge.
APPLICATION FOR COSTS BY THE SECOND AND THIRD RESPONDENTS
Principles relating to costs orders against solicitors
There is no dispute between the parties that the power under s117(2) extends to make an order for costs against a solicitor or non-party. What will enliven the jurisdiction is serious misconduct, default or negligence, which if established may be sufficient to justify an order.[1] Such an allegation is of some gravity, and in that context I am mindful of s140 of the Evidence Act. Further, the court must be cautious to ensure that there is a balance between lawyers not being deterred from pursuing their clients’ interests on the one hand, with litigants not being unduly burdened with the costs of inappropriate conduct on the part of solicitors.[2]
[1]Cassidy & Murray (1995) FLC 92-633.
[2]ibid at 82,364-5
A very helpful analysis of the inherent jurisdiction to order a legal practitioner to pay costs was undertaken by McColl JA in Lemoto v Able Technical Pty Ltd & Ors (2005) 63 NSWLR 300. That discussion was in the context of then relatively new amendments to the New South Wales Legal Profession Act, which introduced a suite of provisions which potentially saw costs orders able to be made against solicitors or barristers where they were acting in proceedings where there was no reasonable prospects of success. At [92] her Honour helpfully summarised the pre-existing jurisprudence as follows:
The new Division 5C should be construed against the background of the following principles which can be gleaned from the English and Australian authorities which have considered the power to order legal practitioners to pay the costs of proceedings in which they have represented parties:
(a)The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised “with care and discretion and only in clear cases”: Ridehalgh (at 229), Re Bendeich (1994) 53 FCR 422; Deputy Commissioner of Taxation v Levick [1999] FCA 1580; (1999) 168 ALR 383 per Hill J at [11]; Levick v Deputy Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155 at [44]; Gitsham v Suncorp Metway Insurance Ltd [2002] QCA 416 at [8] per White J (with whom Davies and Williams JJA agreed); De Sousa v Minister for Immigration (1993) 41 FCR 544; Money Tree Management Service Pty Ltd v Deputy Commissioner of Taxation(No 3) [2000] SASC 286;
(b)A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or a defence which is plainly doomed to fail: Ridehalgh (at 233); Medcalf v Mardell [2002] UKHL 27; [2003] 1 AC 120 at [56] per Lord Hobhouse; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 (affirmed on appeal, Flower & Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134); Levick v Deputy Commissioner of Taxation; cf Steindl Nominees P/L v Laghaifar [2003] QCA 157; [2003] 2 Qd R 683;
(c)The legal practitioner is not “the judge of the credibility of the witnesses or the validity of the argument”: Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289 at 297; the legal practitioner is not “the ultimate judge, and if he reasonably decides to believe his client, criticism cannot be directed to him”: Myers v Elman (at 304, per Lord Atkin); Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26; (2001) 47 ATR 1 at [34] per Callinan J;
(d)A judge considering making a wasted costs order arising out of an advocate’s conduct of court proceedings must make full allowance for the exigencies of acting in that environment; only when, with all allowances made, a legal practitioner’s conduct of court proceedings is quite plainly unjustifiable can it be appropriate to make a wasted costs order: Ridehalgh (at 236, 237);
(e)A legal practitioner against whom a claim for a costs order is made must have full and sufficient notice of the complaint and full and sufficient opportunity of answering it: Myers v Elman (at 318); Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229);
(f)Where a legal practitioner’s ability to rebut the complaint is hampered by the duty of confidentiality to the client he or she should be given the benefit of the doubt: Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229); in such circumstances “[t]he court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so”: Medcalf (at [23] per Lord Bingham);
(g)The procedure to be followed in determining applications for wasted costs must be fair and “as simple and summary as fairness permits…[h]earings should be measured in hours, and not in days or weeks… Judges … must be astute to control what threatens to become a new and costly form of satellite litigation”: Ridehalgh (at 238 – 239); Harley v McDonald [2001] UKPC 18; [2001] 2 AC 678 at 703 [50]; Medcalf (at [24]).
Later at [99]-[115] her Honour elaborated upon the principle referred to by her at para [92](b). Particularly she identified conflict, or at least tension, between the approach taken in the Federal Court on the one hand, with the approach taken in two State Courts on the other. Ultimately her Honour determined that it was not necessary in the instant case to resolve that tension. However she did go on to illustrate that the sorts of cases in which costs orders had been in fact made against practitioners included descriptions of the cases as “untenable.. indeed … nonsense” and cases where there was no evidence to support an essential element of a cause of action. Further she referred to a Queensland decision in which the Court determined not make a personal costs order against a young and inexperienced barrister taking instructions directly from a lay client in a factually complex matter of some years standing.
It seems to me that the power under s117 is akin to the power under the inherent jurisdiction of the State Supreme Courts, and is in marked distinction to the sorts of statutory regimes of which the New South Wales Legal Profession Act is but one example. Nothing in Rule 19.10(1) persuades me to the contrary, at least insofar as any costs order arises because of “the lawyer’s improper or unreasonable conduct.” Therefore the discussion both at para [92](b) and thereafter by McColl JA in Lemoto (supra) is of considerable assistance.
Principles relating to indemnity costs
In order to justify the making of an order for costs on other than a party/party basis, all that is required are particular facts and circumstances of the case in question warranting the making of such an order.[3] That said, such an order is a very great departure from the normal standard, and hence it is imperative that the court be aware of what the nature of the indemnity is, in the sense of what the costs agreement between the parties seeking the order in their solicitors is.[4] That said, such an order remains wholly compensatory and not punitive.[5]
[3]Yunghanns & Ors & Yunghanns (2000) FLC 93-029 adopting Sheppard J in Colgate-Palmolive Company & Colgate-Palmolive Pty Ltd v Cussons Pty Ltd (1993) FCR 225.
[4]See Kohan & Kohan (1993) FLC 92-340 and FLR 19.08(3).
[5]See Muldoon & Carlyle (2012) FLC 93-513 at [115].
It is well established that proceedings brought in wilful disregard of known facts or clearly established law are one of the established categories which justify indemnity costs.[6] An instance of that in this court is the decision of Limousin[7] where the Full Court did not disturb a costs order against a solicitor who had failed to have any proper regard to the prospects of success of a claim.
[6]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364; J Corp Pty Ltd v Australian Building Labourers Federation Union of Workers (WA Branch)(No 2) [1993] FCA 42; Colgate-Palmolive (supra and Yunghanns (supra).
[7]Z (A Solicitor) v Limousin (Costs) [2010] FLC 93-433
Should a costs order be made against the wife’s solicitor on these facts?
The sole basis relied upon by the second and third respondents to justify an order for costs against the wife’s solicitor is that the claim against them “should never have been brought or continued, as it had no prospects of success and this was brought to the attention of the wife and her solicitor as early as April 2011”[8] and “his failure to give proper regard to the prospects of success was improper and unreasonable and warrants the making of a costs order against him personally.”[9]
[8]Written submissions as to costs of the second and third respondent filed 3 July 2014 para 21.
[9]ibid para 22.
Appended to the second and third respondents’ written submissions was a copy of their letter of 20 April 2011 to the wife’s solicitors. Relevantly it provided:
In addition to The Conduct:
(a)your client has not provided details of any alleged “joint endeavour” between herself and [Mr R and Ms A Lindsay], nor has she provided details of the value of or the amount of any money contributed by her to any alleged joint endeavour. What is the alleged joint endeavour, what contributions were made by your client and what is the value (in dollar terms) of those contributions?
(b)what benefit has been obtained by [Mr R and Ms A Lindsay] by virtue of any contribution by your client (which is denied by them);
(c)in relation to the constructive trust alleged by your client to attach to property of [Mr R and Ms A Lindsay]:
·what property is your client referring to?
·who are alleged to hold interests in that property under the alleged constructive trust;
·what shares are each such person alleged to hold in that property?
·what was the joint venture or enterprise between your client and [Mr R and Ms A Lindsay] with respect to that property?
·how does any unconscionability arise against [Mr R and Ms A Lindsay] in relation to their retention of that property absolutely? ([Mr R and Ms A Lindsay] say there is no such unconscionability).
(d)If your client says there was a joint endeavour or enterprise between herself and [Mr R and Ms A Lindsay], what was its scope.
You and your client are also aware:
(e)that in the circumstances, it is not just and equitable that a constructive trust be imposed on any property of [Mr R and Ms A Lindsay] in favour of your client. In fact, it would be unjust and inequitable to do so. The circumstances in this regard include the interests of third parties, including the Banker of [Mr R and Ms A Lindsay];
(i)that a constructive trust is not imposed by a Court by abstract notions of fairness, justice or equity but, rather by reference to established legal or equitable principle;
(ii)even if your client has a legitimate claim (which is denied by [Mr R and Ms A Lindsay]) there are other more appropriate means available to resolve it;
(iii)there is no relevant “unconscionability” attaching to [Mr R and Ms A Lindsay] retaining their property in the circumstances of this case;
(iv)there is no relevant intention to benefit your client (or your client and [Mr C Lindsay) acquiring an interest in any property owned by [Mr R and Ms A Lindsay];
(v)there was no “joint venture” or enterprise between your client and [Mr R and Ms A Lindsay], and no expenditure of monies by your client or sharing of expenditure for any “common intention”; and
(vi)there is and was no common intention that your client should have an interest in any of the property of [Mr R and Ms A Lindsay], nor did your client act to her detriment on the basis of any agreement or common intention (or at all). [Mr R and Ms A Lindsay] deny that there was any relevant agreement or common intention.
The claim to a constructive trust over unspecified property owned by [Mr R and Ms A Lindsay] fails to have proper, or any, regard to the interests of [Mr R and Ms A Lindsay] or relevant third parties.
Any contribution by your client (which is denied by [Mr R and Ms A Lindsay]), even if made out is so trifling in the circumstances as to be “almost de minimis”. Any such contribution (which again is denied) is insufficient to support a claim to a constructive trust, on equitable principles.
We confirm that the intention and desire of [Mr R and Ms A Lindsay] to improve the management and operational performance of their businesses does not reflect on their intentions with respect to the beneficial ownership of their property.
It is plain that the retention and continuing ownership by [Mr R and Ms A Lindsay] of their assets, which they have paid to acquire and to maintain is proper and does not result in any detriment, in the relevant sense, to your client. Further, that continued retention and ownership is not unconscionable…
Later in that correspondence the second and third respondents put the wife on notice that if proceedings were commenced against them, they would seek costs against the wife’s solicitors on an indemnity basis.
The question as distilled by the parties’ submissions is whether the wife’s case against the second and third respondents was so hopeless that her solicitor should have identified that litigating it on her behalf either involved a failure to have any proper regard for the prospects of success of her claim, or alternatively if such regard was had, it should have led to the conclusion that the claim should never have been brought or continued. In light of the comments of McColl JA in Lemoto (supra) I do not think that that is the precise or only question for my determination. As McColl JA said, a practitioner does not necessarily act improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or defence which is plainly doomed to fail. Even accepting that that simple statement of principle may not comprehensively encompass the tension between the Federal Court approach on the one hand and some State Supreme Court’s approaches on the other hand, even on the State Supreme Court approach, as McColl JA identified “something more is required”.[10]
[10]Lemoto (supra) at [111].
Although in the preliminary issues, the wife advanced discrete claims in relation to partnership or joint venture on the one hand, and a constructive trust on the other, there was considerable factual overlap. Particularly the wife appeared to rely upon 11 alleged representations made to her as factually founding each claim. In relation to the constructive trust claim, there was then further consideration needed of whether, in the event such representations had been made, she had reasonably relied upon them to her detriment, and conferred a benefit to the second and third respondents.
The first point to note is that although none of the 11 representations were ultimately established in the pleaded terms, some of the conversations which the wife asserted occurred, although not admitted by the second and third respondents, were nonetheless established. The most telling illustration of that is referred to at [127] of my reasons, relating to a phone call between the wife and the second respondent in or about June 2008. However the second and third respondents properly make the point that notwithstanding those limited “successes” the wife still wholly failed in her case. As I observed in the course of the judgment, this was not a case which ultimately stood to turn upon findings of credit. That said, I was satisfied that each of the respective sides did tend to try and paint themselves in a better light than a fair consideration of the circumstances would justify. Particularly the wife seemed to have an unwarranted view of the significance of her alleged contributions to the business; but by the same token, all the respondents appeared very reluctant to give her the credit which such contributions as she did make deserved.
There are aspects of the wife’s case which were quite hopeless. Particularly her claim for a declaration in relation to a partnership which she claimed existed from the time that she married the husband in 1997, when she was at most 20 years of age, was quite fanciful. She was then in full-time employment which continued after the marriage; at no stage did she ever receive any drawings from the partnership, and indeed the husband was paid wages, not drawings. Neither she nor the husband, nor indeed the fourth respondent, ever became liable for the considerable debts which the partnership had from time to time. The joint venture claim appeared indistinguishable from the partnership claim. Both were hopeless and foredoomed to fail. Moreover, the wife’s own correspondence in the later years of the marriage to the second and third respondents was wholly inconsistent with there then being a partnership or joint venture in existence, and certainly not one in which the wife had been a partner or member since 1997.
On the other hand, the constructive trust claim was not of such a hopeless character. If one or more of the pleaded representations had been made out, then there may have been a live issue as to whether some equitable relief should flow, although it may have been of a very limited nature. I would assess the wife’s claim as weak at best, and even if it had succeeded, only likely to result in relief falling well short of a constructive trust in relation to the very substantial rural properties to which the claim was primarily directed. Indeed I was somewhat surprised by the abandonment of the equitable compensation or lien claim which counsel for the wife made on the first day of hearing before me, but oddly seemed to try and resurrect in written submissions at the conclusion of the trial.
Therefore in my view a proper appraisal of the wife’s case by her solicitor should have led to it being evaluated as weak in terms of its prospects of success, and even if successful, any likely recovery, small. However the claim in totality was not absolutely hopeless.
In my view, litigants are entitled to bring weak proceedings, with the attendant risk of costs being ordered against them. Solicitors would be prudently advised to explain frankly the prospects of success to their clients, together with candid advice as to the potential consequences of the likely failure, but it is quite another thing to say that the solicitor thereby becomes an underwriter of the likely successful parties’ costs. In my view, on the facts of this case, I would require something more than the solicitor’s prosecution of a weak case that fell short of being absolutely hopeless. I decline to make any order for costs against the wife’s solicitor, whether on an indemnity basis or otherwise.
To cover the eventuality that my discretion may have miscarried, I should also say that even if I had been persuaded to have made a costs order against the wife’s solicitor, I would not have been persuaded to make it on a basis of an indemnity costs order. I say that because the material does not persuade me that the constructive trust claim was brought in wilful disregard of known facts or clearly established law. However I would have been prepared to order a 15 per cent uplift on party/party costs to reflect the complexity of the matter.
SHOULD A COSTS ORDER BE MADE AGAINST THE WIFE?
This requires a traverse of the considerations listed at s117(2A) of the Act.
Turning to the financial circumstances of each of the parties to the proceedings, I have already noted the wife’s financial circumstances when considering the husband’s application for costs against her. However unlike the husband, the second and third respondents are undoubtedly asset rich. They own two substantial grazing properties, although they secure some debt. They also own substantial plant, equipment and stock. Although Ms Carew QC, who appeared for the second and third respondents and settled the relevant written submissions as to costs, said her clients lived frugal lives, were “income poor” and are subject vagaries of weather including drought or flood, that cannot detract from the fact that they are vastly more wealthy than the wife. Moreover, they do not have the care of three young children.
Neither of the relevant parties were in receipt of legal aid.
No assertion of misconduct on the part of the wife, beyond her bringing of the proceedings against the second and third respondents in itself, was relied upon by those parties. However the wife does rely upon the conduct of the second and third respondents, in that she says that, if they were of the view that her claim was completely hopeless, their appropriate remedy was to bring an application under s118. The second and third respondents dispute that, in part because they say that cross-examination of the wife was necessary to expose her overstatement of, or attribution of disproportionate significance to, her contributions to the alleged partnership. There is some truth in that, but it does not wholly rebut the wife’s argument. Further, the wife says that by having the preliminary matter determined in advance of the other matters raised in the litigation, she acted so as to curtail, or at least contain, the adverse costs implications to the second and third respondents in the event that their arguments prevailed. I give both of those arguments advanced by the wife some weight.
The proceedings were not necessitated by the failure of either of the relevant parties to comply with previous orders.
The wife was wholly unsuccessful in the proceedings against the second and third respondents.
It does not appear as though either of the parties to the proceedings made any relevant offer in writing to settle the proceedings.
As between the wife and the second and third respondents, I cannot identify any other matter which I consider relevant to the exercise of the s117(2) discretion.
Weighing those factors in the balance I am not persuaded that there are circumstances which justify departing from the usual order in relation to costs. I decline to make an order that the wife pay the second and third respondents’ costs, whether on an indemnity basis or on a party and party basis.
To cover the eventuality that the exercise of my discretion miscarried, I should also say that if I were persuaded to make an order for costs, it would not be on an indemnity basis. I say that because the material does not persuade me that the constructive trust claim was brought in wilful disregard of known facts or clearly established law.
I decline to make any order for costs against the wife in favour of the second and third respondents.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 24 September 2014
Associate:
Date: 24 September 2014
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