LM and ZJL and SZ
[2007] FMCAfam 691
•17 September 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LM& ZJL & SZ | [2007] FMCAfam 691 |
| PRACTICE & PROCEDURE – Costs – application for personal costs order against lawyer – whether conduct amounted to negligence, misconduct or default – application dismissed. |
| Family Law Act 1975 Federal Magistrates Court Rules 2001 |
| Baik & Hankuk Grocery Pty Ltd v Minister for Immigration [2004] FMCA 543 Cassidy & Murray (1995) FLC 92-633 Kumar v Minister for Immigration & Multicultural & Indigenous Affairs (No 2)(2004) FCA 18 Landy & Landy & McVeigh [2004] FamCA 1315 De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) FCR 544 |
| Applicant: | LM |
| First Respondent: | ZJL |
| Second Respondent: | SZ |
| File number: | SYM 4344 of 2005 |
| Judgment of: | Sexton FM |
| Hearing dates: | 11 July & 3 August 2007 |
| Date of last submission: | 3 August 2007 |
| Delivered at: | Sydney |
| Delivered on: | 17 September 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr S Docker and Mr C Carroll |
| Solicitors for the Applicant: | Guardian Legal |
| First Respondent: | No appearance |
| Counsel for the Second Respondent: | Mr W Moss |
| Solicitors for the Second Respondent: | Zolton Smith Lawyers (not the firm’s real name) |
ORDERS
The application filed by the husband on 14 July 2006, as amended by application filed 1 November 2006 seeking costs against the Second Respondent be dismissed.
The application for costs by the Second Respondent against the husband be dismissed.
All exhibits tendered in these proceedings be returned at the expiration of one calendar month unless an appeal is lodged.
All outstanding applications otherwise be dismissed and the matter removed from the list of cases awaiting finalisation.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 4344 of 2005
| LM |
Applicant
And
| ZJL |
First Respondent
And
| SZ |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Mr Samuel Zolton (not his real name) was the solicitor for the wife who started proceedings against the husband for property and spouse maintenance orders and later discontinued them. This case concerns the conduct of Mr Zolton in those proceedings for financial orders. The husband asks for a personal costs order against Mr Zolton on an indemnity basis. Mr Wei is the husband’s solicitor. At first, the husband asked for costs against the wife as well as Mr Zolton, but he later discontinued his application against the wife.
The husband has a number of complaints about Mr Zolton’s conduct which he contends, when considered together, warrant a personal costs order against Mr Zolton.
Background
The husband and wife were married in December 2001 with the wife returning to China 2 years later to await a visa for permanent entry to Australia. In June 2004 the husband withdrew his support for the wife to obtain a visa. Each party had a child from a previous relationship but there are no children of this marriage. In May 2005 the husband filed an Application for Divorce which the wife opposed, and the husband later discontinued. The wife retained Mr Zolton in relation to the divorce proceedings and in relation to property and spouse maintenance proceedings. The husband initially acted for himself in relation to the financial proceedings, but later instructed Mr Wei.
Issue
The issue is whether Mr Zolton’s conduct in the wife’s proceedings for property and spouse maintenance warrants the making of a personal costs order against him.
Legal principles
Section 117(2) of the Family Law Act 1975 provides that if the Court is of the opinion that there are circumstances to justify it in doing so, the Court may, subject to subsections (2A), (4) and (5) and the applicable Rules of the Court, make such an order as to costs as the Court considers just. The Court must have regard to the relevant considerations set out in s 117(2A) of the Family Law Act 1975.
Rule 21.07(1) of the Federal Magistrates Court Rules 2001 provides that the Court may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
a)to be incurred by a party or another person; or
b)to be thrown away;
because of undue delay, negligence, improper conduct or other misconduct or default.
Rule 21.07(2) provides that a lawyer may be in default if a hearing may not proceed conveniently because the lawyer has unreasonably failed:
a)to attend, or send another person to attend, the hearing; or
b)to file, lodge or deliver a document as required; or
c)to prepare any proper evidence or information; or
d)to do any other act necessary for the hearing to proceed.
The leading authority in relation to costs against a lawyer is the Full Court decision of Cassidy & Murray (1995) FLC 92-633, where it was held that:
a)Pursuant to s117(2) of the Act, the Court has jurisdiction to make an order for costs against a solicitor or non-party;
b)The Court should not make an order without giving the person to be affected by the order an opportunity to be heard;
c)The Court may make an order for costs against a solicitor without the necessity to establish that the solicitor has been guilty of serious professional misconduct;
d)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 clients;
e)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; and
f)The jurisdiction is compensatory.
His Honour Guest J in the matter of Landy & Landy & McVeigh [2004] FamCA 1315 (at paragraph 24) cautioned that the power to make such an order is to be used ‘sparingly’:
“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).’
French J in De Sousa v Minister for Immigration, Local Government and Ethnic Affairs[1] said in relation to personal costs orders against practitioners
I accept the proposition that the jurisdiction is to be exercised with care and discretion and only in clear cases.
[1] (1993) FCR 544
Her Honour Federal Magistrate Barnes, in the matter of Baik & Hankuk Grocery Pty Ltd v Minister for Immigration [2004] FMCA 543 usefully summarises the authorities with respect to a Court exercising its discretion to make such an order. Her Honour says:
“…the authorities in relation to the general discretion of a Court to award such costs suggest that the power should only be exercised in cases of gross neglect or substantial departure from proper professional standards (see White Industries (Qld) Pty Ltd v Flower and Hart (a Firm) (1998) 156 ALR 169 and Flower and Hart (a Firm) v White Industries (Qld) Pty Ltd (1999) 163 ALR 744). As Lord Wright stated in Myers v Elman (1940) AC 282 at 319:
A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which is a solicitor’s duty to ascertain with accuracy may suffice.”
Does Mr Zolton’s conduct justify an order for costs against him?
The husband gives many instances of Mr Zolton’s conduct in the proceedings which the husband’s counsel submits were professionally unsatisfactory. I find it convenient to group them under these headings:
A.Compliance with the Rules.
B.Merits of the wife’s case.
C.Documents filed on behalf of the wife.
D.Efforts to resolve the case.
A. Compliance with the Rules.
Mr Zolton started the wife’s proceedings for financial orders in the Family Court. The husband complains that Mr Zolton did not comply with pre-action procedures as required by the Family Law Rules 2004. Schedule 1 of those Rules sets out the pre-action procedures a prospective party must follow before filing in the Family Court[2]. In summary, the Schedule provides that each prospective party is required to make a genuine effort to resolve the dispute before starting a case, by exchanging relevant information and participating in dispute resolution. Part 1.1(4) of the Schedule provides the circumstances in which the court may accept that it was not possible or appropriate for a party to follow the pre-action procedures. These include cases in which “there is a genuinely intractable dispute.”[3] Part 1.2 of the Schedule provides:
(1)The Court regards the requirements set out in these pre-action procedures as the standard and appropriate approach for a person to take before filing an application in a court.
(2)If a case is subsequently started, the court may consider whether these requirements have been met and, if not, what the consequences should be (if any).
[2] Exhibit 2.
[3] Part (4)(e) of Schedule 1, Family Law Rules 2004.
The husband says that Mr Zolton did not communicate with him about the wife’s intention to seek property and maintenance orders, before filing and serving the wife’s application, nor did he communicate with Mr Wei, his solicitor at that time, about the wife’s intention to start proceedings. Mr Wei says the first time he realised the wife wanted a property settlement was when he was served with the wife’s application. He then contacted the husband who said he would act for himself. Mr Wei says the husband told him that the husband and the wife owned property in China to which the husband had contributed.
Mr Zolton says he wrote to the husband with an offer of settlement and later spoke to the husband twice before starting the proceedings. He formed the view that further dealings with the husband would not advance settlement of the matter. He says the husband asked him “not to help the wife” and said “I have no property”. Mr Zolton says he asked the husband about his massage business and the husband said the “business worth nothing”. Mr Zolton says the husband told him the wife was an illegal immigrant in Australia, that he had withdrawn his support for her to migrate to Australia and the wife would “sue him because she wants to come to Australia.” Mr Zolton says he told the husband to retain a lawyer and to ask the lawyer to contact him.
Mr Zolton concedes that he did not send a copy of the pre-action procedures document with his letter to the husband of 5 September 2005 and did not specifically ask the husband to provide him with his financial details. Mr Zolton says the husband told him on the phone that he had no assets and would not cooperate. Given the husband’s attitude, Mr Zolton says he formed the view the dispute was intractable. With the benefit of hindsight, Mr Zolton says he believes his view was justified given the husband’s subsequent behaviour. Being on notice by the letter of September 2005[4] of the wife’s intention to claim half the value of the massage business, it is not disputed the husband transferred the massage business to a former employee, 3 days after being served with the wife’s application. Mr Zolton says he believed the massage business had a significant value because he was shown business records by a friend of the wife called “Jenny” which disclosed weekly business income of $3,000-$6,000. Mr Zolton says there is further support for his assessment that the prospects of settlement were unlikely in Registrar Jurd’s notation on the Procedural Directions Sheet dated 15 November 2005[5]:
“As to a conciliation conference, I formed the view that the parties are in such fundamental disagreement on the facts there is no reasonable likelihood the case would resolve.”
[4] Annexure C to Mr Zolton’s affidavit sworn June 2007.
[5] Annexure F to Mr Zolton’s affidavit sworn June 2007.
Mr Zolton does not refer to his letter to the husband of 5 September 2005 or his telephone calls with the husband in his first affidavit sworn 15 November 2006. In response to this criticism, Mr Zolton says that he only included “the main points” in his first affidavit, responding to Mr Wei’s, not the husband’s affidavit which was filed later. The husband’s counsel cross examined Mr Zolton at length about the timing of his affidavit, sworn 15 November 2006, and the court’s direction of 21 November 2006 that the husband himself file and serve an affidavit. Counsel put squarely to Mr Zolton that his evidence on this issue was intentionally false.
I am not persuaded Mr Zolton was attempting to mislead the court or that he was untruthful in his answers on this issue. Mr Zolton does not speak fluent English and I am not satisfied he was always sure what he was being asked. Certainly, at times his answers were unresponsive to counsel’s questions but I am not satisfied this was deliberate. I understand Mr Zolton’s evidence to be that he did not include details of his communications with the husband in September 2005 in his first affidavit because he was responding to the main points in Mr Wei’s affidavit and did not believe the September 2005 letter or his phone calls with the husband were relevant. While I find Mr Zolton’s failure in his November 2006 affidavit, to include details of his communications with the husband, imprudent, I am satisfied he believed it was not relevant to include those details in his affidavit filed in November 2006. I am satisfied that it was not until Mr Zolton read the husband’s affidavit in which the husband specifically denied any communication with Mr Zolton prior to the filing of the wife’s application, that Mr Zolton realised the letter of 5 September 2005 was pertinent and he therefore included it in his subsequent affidavit.
I accept Mr Carroll’s submission that the court should give limited weight to Mr Zolton’s evidence about the telephone communications with the husband, given the material was not included in either affidavit and neither the husband nor Mr Wei were required for cross-examination and have therefore had no opportunity to answer the assertion. However, this does not alter my finding on this issue.
I should add here that the husband’s counsel cross-examined Mr Zolton about the offer letter of 5 September 2005 annexed to Mr Zolton’s second affidavit sworn in June 2007. I am not satisfied Mr Zolton’s answers to counsel’s questions in cross examination on this issue reflected poorly on Mr Zolton’s credit or in any way assisted the husband’s case.
The husband’s counsel alleges Mr Zolton failed to comply with the Family Law Rules when he issued a subpoena to the husband for production of the husband’s financial documents[6]. Mr Zolton says he issued a subpoena when he did, because the husband had failed to file any responding documents to the wife’s application and failed to provide him voluntarily with any financial information. While I accept Mr Zolton did not comply with the Rules in relation to the timing of the issuing of a subpoena, it is noteworthy that neither the husband nor Mr Wei say that there was a formal objection to the subpoena on the return date of the subpoena, and it is not in dispute that the husband never complied with the subpoena. Though the Registrar notes on the bench sheet of 17 January 2006 that “the issues relating to subpoena be adjourned to 13.03.2006” there is no reference to subpoena issues in the bench sheet of 13 March. Though I accept Mr Zolton should not have issued a subpoena when he did without leave of the court, I find no evidence of any loss occasioned by the husband as a result of Mr Zolton’s action.
[6] Exhibit 5.
B. Merits of the wife’s case.
The husband’s counsel refers to two decisions of this court[7] to support the contention that when a court is satisfied a practitioner has commenced proceedings with little or no prospects of success and the practitioner is using the court process for an ulterior purpose, the practitioner will be liable for a personal costs order. Counsel for Mr Zolton, in his written submissions, referred the Court to his Honour Justice Mansfield’s summary of the authorities with respect to this issue in the case of Kumar v Minister for Immigration & Multicultural & Indigenous Affairs (No 2)(2004) FCA 18:
“The Full Court in Levick also addressed the issue of whether the institution or maintenance of a proceeding which has little or no prospect of success itself exposes the solicitor acting for the party to the risk of a costs order. They cited with approval at [41] Goldberg J in White Industries in the following terms:
The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more, namely carrying on that conduct unreasonably. It is not clear what is encompassed by “unreasonably” initiating or continuing proceedings if they have no or substantially no chance of success. It seems to me that it involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success with either a recognition that there is no chance of success but an intention to use the proceeding for an ulterior purpose or with disregard of any proper consideration of the prospect of success.”[8]
[7] MZWOR v Minister for Immigration [2005] FMCA 845; Khotsimeuang v Workcover Corporation of SA [2006] FMCA 204.
[8] At 585.
The husband claims Mr Zolton was aware from the outset that the wife’s application had no merit because:
a)The husband told Mr Zolton he had no assets;
b)Mr Wei told Mr Zolton the only property the parties owned was in China, outside the jurisdiction of the court;
c)The husband told Mr Zolton the wife was bringing the application to improve her chances of obtaining a visa to come to Australia; and
d)The wife did not disclose in her affidavit any ground for a spouse maintenance claim.
In relation to (a), Mr Zolton says he did not accept the husband’s assertion that he had no assets. Mr Zolton says he had instructions from the wife that the husband did own assets to which the wife had contributed. Those assets included a massage business and a motor vehicle which the wife included in her sworn Financial Statement along with bank proceeds and personal property with a total gross value of over $100,000. Mr Zolton says the wife instructed him that she had lived and worked in Australia with the husband and had played a significant role in the running of the massage business. The husband acknowledges owning a massage business but says he gave it away because he could not meet his debts. Mr Zolton says the husband told the court on 15 November 2005 that he had no assets of any kind but on 28 November 2005 his search of the husband’s massage business revealed the husband had given the business to a third party on 14 October 2005. The husband also acknowledges giving away a motor vehicle. The husband says he had other minor assets in his name and the wife owned a property in China which he valued at $80,000 and to which he had made substantial contributions.
The husband’s counsel submits that Mr Zolton was aware of the husband’s financial position when the husband’s material was served in January 2006 and Mr Zolton should then have known that the wife’s case had no prospects of success. An issue arose as to when Mr Zolton was served with those documents, but the Affidavit of Service does not specify what documents were served on 3 February 2006. Whatever the date of service, I do not accept counsel’s submission. The husband discloses in his responding documents that he gave away the massage business and a car. Given Mr Zolton’s instructions from the wife as to the value of the business and her contributions to it, it should have been clear to both parties at that stage, that the value of the business was a central issue in the proceedings as was the extent of each party’s contributions to the parties’ various assets.
In relation to reason (a) I am not satisfied the evidence establishes a basis for Mr Zolton to have concluded that the wife’s case had no merit on the basis of the husband’s assertion to him that he held no assets or on the basis of the husband’s responding documents.
In relation to (b), Mr Wei is incorrect. This court has the power to make orders in relation to property held outside Australia if the court is satisfied one or other of the parties holds an interest in the property.
In relation to (c), it is the husband’s case that Mr Zolton knew that the wife’s sole purpose in bringing an application for property settlement was to obtain a visa to come to Australia. The husband relies on the Bench sheet for the directions hearing before a Registrar on 15 November 2005 and the timing of the filing of the wife’s Notice of Discontinuance to support his contention.
On 15 November 2005, Registrar Jurd made the following entry on the court record:
“The wife cannot come to Australia without a visa. If the Court requires her to attend it would improve the case for a visa – so her solicitor argued. I held it inappropriate for me to order her to attend as there are electronic means available and it is therefore not accurate to say she must be here.”
In June 2007, the wife instructed Mr Zolton to file a Notice of Discontinuance in relation to her property and spouse maintenance application, after she failed to obtain a visa to enter Australia.
Mr Zolton says the wife did not mention anything about her need for a visa when she first retained him to act for her. The letter of retainer requests Mr Zolton to act in relation to the husband’s divorce application and in relation to property settlement[9].
[9] Annexure A to Mr Zolton’s affidavit sworn June 2007.
Mr Zolton says that once he had filed the wife’s initiating documents in the property proceedings, he told the wife she must attend the Case Assessment Conference on 15 November 2005. Mr Zolton says that on 26 October 2005, the wife told him she could not attend as she could not obtain a visa. Mr Zolton says the wife instructed that she wanted her share of the marital property and believed the only way she could recover her property was to come to Australia to “be a witness.” Mr Zolton agrees he raised the issue of the wife’s visa with Registrar Jurd and with this Court once the matter was transferred, because Mr Zolton wanted the wife in Australia to prepare the case. Mr Zolton gives these reasons for needing the wife in Australia:
i)The wife told him she had friends in Sydney who had first hand information about the massage business, and would be needed as witnesses to prove its true value. Mr Zolton says the wife instructed “the husband was a gangster” and these witnesses were frightened of him. Mr Zolton says a friend of the wife known as “Jenny” showed him some business records and asked him not to disclose his source to the husband as she was “scared.” The wife told Mr Zolton she would need face to face contact with these people to persuade them to give evidence; and
ii)The wife told him she owned a safety box in the Bank of China in her name and she wanted to collect various items contained in that box.
Mr Zolton acknowledges that the wife told him on 26 October 2005 that it would help her application for a visa to the Australian Embassy in New Zealand if the Court ordered her to attend Court personally.
On consideration of these factors, I am not persuaded that Mr Zolton had a basis for concluding that the wife’s application was without merit and based solely on her desire to obtain a visa for Australia. It is not uncommon for a solicitor in this Court to complain to the court about the significant difficulties involved in acting for a litigant residing overseas.
In relation to (d), the wife deposes to being a resident in New Zealand and to having no income, having previously worked with the husband in the massage business in Sydney. Although, as later noted, the wife’s affidavit is poorly drafted and contains a significant amount of irrelevant material, it would in my view have been premature for Mr Zolton to have concluded that the wife had no basis for a claim for a spouse maintenance order.
CDocuments filed on behalf of wife.
The husband alleges that the wife’s documents were inaccurately and incompetently prepared by Mr Zolton in both the divorce and property proceedings. He gives these examples:
a)On Mr Zolton’s sealed copy of the husband’s application for divorce, the husband’s address is blacked out[10]. Mr Zolton says he does not know who blacked out the address. Mr Zolton says the wife never knew the husband’s private address, only his business address;
b)In the wife’s Application for Final Orders[11] filed 11 October 2005 the box marked ‘Applicant’ is incorrectly crossed at Page 8 instead of “lawyer”; the date at Part I may be an error; “ordinarily resident in Australia” at No 11 is incorrect; the child referred to at No 17 is a child only of the wife, not the parties, and the name of the child’s biological father is incorrectly included in the box marked “Full name of mother”. Mr Zolton acknowledges these errors in the wife’s Application;
c)In the wife’s Financial Statement, the wife discloses no income and no expenses. Mr Zolton says he completed the document in accordance with his instructions and that is the information the wife gave him. When asked why the Form 13 was sworn on 2 August 2005 when Mr Zolton deposes to receiving instructions in relation to property issues between 9 August and 15 September 2005, Mr Zolton says he must have sent the wife the Form 13 earlier and made a mistake in his affidavit as to the timing of his instructions. Mr Zolton acknowledges an error when deposing to the wife’s Form 13 being witnessed by a Mr Wilcox, when Mr Wilcox was the witness to the wife’s Application for Final Orders. The wife says in her financial statement that she holds a 50% share of a 2001 motor vehicle with the husband. The husband denies the parties ever owned such a vehicle, though the husband deposes to giving away a Toyota Corolla, without specifying its year of manufacture, in the 12 months prior to the filing of his Financial Statement;
d)The husband says he does not recognise the signatures on the wife’s Form 1 and Form 13 as her own, though in his affidavit he says they were his wife’s signature, though I assume this might be a typographical error. Mr Zolton says the documents he filed on behalf of the wife were signed by the wife in New Zealand. The husband does not say on what basis Mr Zolton should have concluded the signatures were not those of his client, and I do not find this issue assists the husband’s case;
e)In relation to the wife’s affidavit of 120 paragraphs sworn 10 March 2006 in support of her property application, the husband complains most of the contents are irrelevant and he and Mr Wei wasted a lot of time going through the document. The husband says he “had great difficulty to read and had spent many hours to peruse the document. I spent more than half a day with my solicitor to go though with the document”. Mr Zolton was cross examined as to why the affidavit contained so much irrelevant material. Mr Zolton says although he states that he prepared the wife’s affidavit, the wife herself drafted the affidavit, and he edited the document. Mr Zolton says he omitted a lot of irrelevant material included by the wife which she wanted to include. He says that he asked the wife to omit or change the content of other paragraphs, but she insisted that certain paragraphs be included, despite his advice, because she wanted to expose the husband’s bad character.
[10] Annexure B to Mr Zolton’s affidavit sworn June 2007.
[11] Annexure D to Mr Zolton’s affidavit sworn June 2007.
I agree with the husband’s counsel’s submission that the affidavit of the wife in support of her application for property settlement and spouse maintenance contains a substantial amount of irrelevant material and is very poorly drafted. I accept his submission that Mr Zolton should not have filed that document in that form. However, it is clear from the wife’s affidavit that the wife claims to have established and operated the massage business, and that one of the central issues in the case was likely to have been the value of that business and the contributions made by each party to the business. Although undoubtedly irritating, I am not satisfied Mr Wei should have been required to spend a long period perusing and obtaining instructions on the irrelevant parts of the document.
I have already noted that Mr Zolton is not fluent in English, which may contribute to some of the inaccuracies he made in the wife’s documents. I find Mr Zolton has made a number of errors in the wife’s documents which do his professional standing no credit. I find Mr Zolton has also made errors in his own affidavit material which indicates a carelessness in his attention to detail. Mr Zolton acknowledges most of the mistakes.
The authorities make clear that mistakes and errors of judgment in themselves do not justify a personal costs order against a practitioner. I am not persuaded that the inaccuracies in the documents I have referred to, and the instances of poor drafting by Mr Zolton are so serious as to warrant a personal costs order against him.
D. Efforts to resolve the case.
The husband alleges that neither the wife nor Mr Zolton attempted to negotiate with him to settle the matter during the course of the litigation. Mr Wei says between the time of the filing of the wife’s application and the time Mr Wei was retained in the matter, Mr Zolton made no offer of settlement.
On 15 November 2005 Registrar Jurd states:
As to a Conciliation Conference – I formed the view that the parties are in such fundamental disagreement on the facts there is no reasonable likelihood the case would resolve.
As already noted, Mr Zolton sent an offer of settlement to the husband directly in September 2005 before the proceedings had started. Once Mr Zolton filed the wife’s initiating documents, the husband did not serve his responding documents on Mr Zolton in accordance with the Rules, nor in response to Court orders that he do so. Mr Zolton complains that he issued a subpoena to the husband because the husband did not voluntarily provide him with financial information. It is difficult to see on what basis Mr Zolton could have made a further offer of settlement before being served with the husband’s material and before obtaining instructions on that material. Instead the husband applied for security for costs against the wife. In any event, even when Mr Zolton was served with the husband’s responding documents, the wife instructed him she did not accept the husband’s evidence. Mr Zolton says the wife believed the massage business and the car had a significant value and she wanted a share of the value of those assets.
Mr Wei complains that he wrote to Mr Zolton on 6 March 2006 offering to settle the matter and again on 14 June 2006. The husband’s counsel cross-examined Mr Zolton in relation to the husband’s offer of settlement.[12] The husband offered to settle the matter on this basis:
[12] Annexure G to Mr Wei’s affidavit sworn 31 October 2006.
·The wife’s application be dismissed;
·The wife pay the husband $40,000 within 21 days;
·Upon payment, the wife be declared the owner of a property in China;
·The husband be entitled to the contents of a safety deposit box in the Bank of China, George Street, Sydney, held in the wife’s name;
·That otherwise each party be declared the owner of all items of property held by each of them, including motor vehicles, shares and superannuation.
·The offer be accepted by 3.00p.m on 16 June 2006 (2 days after the letter was sent).
Mr Wei then wrote:
We further advise that unless the matter is settled promptly, we shall seek orders as to indemnity costs from the wife as well as from her solicitors in due course, and that the husband reserves the right to report the matter to the Law Society and Legal Services Commission for investigation of any possible professional misconduct/unprofessional conduct, breach of relevant professional rules and gross incompetence on the part of the wife’s legal representatives and/or agents in this matter.
Mr Zolton says the “offer was nonsense” and the wife was “very angry”. He says as at the date of receiving the husband’s offer of 14 June 2006, he was still instructed to proceed with the case. He says the wife believed that the husband had deliberately delayed the proceedings by filing an Application for Security for Costs and not complying with orders of the Court in relation to the filing of documents. However, on 19 June 2007, Mr Zolton says he was instructed to file a Notice of Discontinuance. Mr Zolton says he was instructed the wife’s visa application had been refused, which meant she could not prepare her case as she had hoped, but there were a number of reasons for her decision not to proceed.
It is open to a party in the Federal Magistrates Court to decide whether or not to accept an offer of settlement, although such an offer may provide grounds at the end of the matter for the party who makes the offer to bring a costs application against the other party. In this case, the husband was asking inter alia, for approximately half the value of the China property while the wife, inter alia, was asking for half the value of the massage business. I am not persuaded Mr Zolton’s decision not to respond to the husband’s offer of settlement warrants a personal costs order against him.
The husband further complains that because the wife discontinued her property and spouse maintenance claim one working day before the date the husband’s security for costs application was listed for hearing, the husband incurred costs unnecessarily for which Mr Zolton should be liable. While it may be that the husband had an arguable case for costs against the wife herself on the basis of her discontinuance at this time, I find no basis in this issue for a personal costs order against Mr Zolton.
Conclusion
In assessing Mr Zolton’s conduct in the wife’s financial proceedings, I take into account the difficulties facing Mr Zolton in acting for this client. Mr Zolton took instructions from the wife by phone from New Zealand because the wife was unable to enter Australia without a visa. The wife was claiming she needed to be in Sydney to talk to witnesses whose evidence may have been critical to the outcome of her claim. The wife does not speak or write in the English language and therefore all material sworn by the wife had to be translated from and into the Chinese language.
As already noted, I find that Mr Zolton has been at fault in a number of respects in the running of the wife’s case, in particular in the standard of preparation of the wife’s documents. I am not satisfied Mr Zolton has followed the Best Practice Guidelines for Lawyers doing Family Law Work[13]. I urge him to follow these guidelines in the future. However, as submitted by Mr Zolton’s counsel, the court should only exercise its discretion to make a personal costs order against a practitioner in cases of “substantial departure” from proper professional standards and only in “clear cases” and where the court is satisfied a party has suffered a loss[14] as a result of such conduct by a practitioner. In this case, I am not satisfied Mr Zolton’s conduct has led to loss to the husband, nor am I satisfied Mr Zolton’s conduct meets the test propounded by the authorities earlier referred to. I therefore dismiss the husband’s application.
[13] Family Law Council, 29 March 2004.
[14] Cassidy & Murray (1995) FLC 92-633
It is noteworthy that I also find fault with the husband’s conduct in the matter. The husband’s delay in filing responding documents, despite court orders that he do so, undoubtedly added to delay in the progress of the matter. To compound the delay, the husband’s solicitor initiated these proceedings for costs in the wrong court and gave an inaccurate estimate of the hearing time.
Mr Zolton seeks his costs of the husband’s application in the event the husband’s application is unsuccessful. As already noted, I must consider the factors in s.117(2A) when deciding whether or not to make a costs order. I have regard to each party’s financial position. Apart from the fact that Mr Zolton is a full time legal practitioner operating his own firm, there is no evidence before me as to Mr Zolton’s financial position. The husband was not required by Mr Zolton for cross-examination in these proceedings. The only evidence of the husband’s financial position is set out in his Financial Statement sworn on 16 January 2006. The husband deposes to a modest income and minimal assets. Given this evidence was not the subject of challenge, I accept it and take it into account.
In addition, I have regard to the fact that the husband was wholly unsuccessful in the proceedings. I have regard to my criticisms of Mr Zolton’s conduct of the case. On a weighing of these factors, I am not satisfied there is a basis for departure from the usual order in family law proceedings that each party pay their own costs.
Mr Zolton’s counsel forwarded a further submission as to Mr Zolton’s costs to my Associate a few days after the hearing. The husband’s solicitors objected to the service of this further submission by letter to my Associate dated 8 August 2007, on the basis that leave was not given for the service of further written submissions. Given I make no order for costs against either Mr Zolton or the husband, I have no regard to these further submissions.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Sexton FM.
Associate: Collette McFawn
Date: 17 September 2007.
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