Luna & Luna (No 7)
[2024] FedCFamC1F 540
•13 August 2024
FEDERAL CIRCUIT AND
FAMILY COURT OF AUSTRALIA (DIVISION 1)Luna & Luna (No 7) [2024] FedCFamC1F 540
File number(s): BRC 11516 of 2019 Judgment of: HOGAN J Date of judgment: 13 August 2024 Catchwords: FAMILY LAW – COSTS – Where the Applicant seeks an indemnity costs order against the Respondent – Where the Respondent was wholly unsuccessful in the proceedings – Where the Respondent failed to accept two offers to finalise the proceedings – Where it is ordered that the Respondent pay the costs of and incidental to the application to set aside the Binding Financial Agreement on an indemnity basis from January 2022, as agreed or assessed – Where the Applicant seeks indemnity costs against the Respondent’s former legal representatives – Where it is ordered that the applications for costs against the Respondent’s legal representatives are dismissed Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 68
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.15
Cases cited: Beamish & Coburn (dec’d) (2021) FLC 94-005; [2021] FamCAFC 20
Cassidy v Murray (1995) 124 FLR 267; [1995] FLC 92-633
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; [1993] FCA 801
D & D (Costs) (No 2) (2010) FLC 93-435; [2010] FamCAFC 64
Dongahey & Dongahey (Costs) (2012) 47 Fam LR 306; [2012] FamCA 231
Ex Christmas Islanders Association Inc and Others v Attorney-General (Cth) (No 2) (2006) 233 ALR 97; [2006] FCA 671
Harris & Dewell (No 2) (2018) FLC 93-863; [2018] FamCAFC 180
In the Marriage of Kohan (1993) FLC 92-340; [1992] FamCA 116
Lenova & Lenova (Costs) [2011] FamCAFC 141
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Luna & Luna (No 6) [2024] FedCFamC1F 119
Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664; [2015] FamCAFC 157
Munday v Bowman (1997) 22 Fam LR 321; [1997] FLC 92-784
PBF (as child representative for AF (Legal Aid Commission of Tasmania)) & TRF & LKL (2005) 33 Fam LR 123; [2005] FamCA 158
Prantage & Prantage (Costs) [2014] FamCA 850
Sandison v Thornhill (No 3) [2023] FedCFamC1F 981
Trevi & Trevi (No. 3) (2019) 60 Fam LR 15; [2019] FamCAFC 58
White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169; [1998] FCA 806
Yunghanns v Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Z (a solicitor) & Limousin (2010) FLC 93-433; [2010] FamCAFC 59
Division: First Instance Number of paragraphs: 63 Date of last submission/s: 31 May 2024 Date of hearing: Determined in Chambers following the receipt of written submissions Place: Brisbane Solicitor for the Applicant: Results Legal Counsel for the First Respondent: W. F. Brown Solicitor for the First Respondent: F Lawyers and then Litigant in Person from 11 April 2024 Counsel for the Second Respondent: S. D. McCarthy Solicitor for the Second Respondent: Carter Newell Lawyers Counsel for the Third Respondent: A. Nicholas Solicitor for the Third Respondent: Barry Nilsson Lawyers ORDERS
BRC 11516 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS LUNA
Applicant
AND: MR LUNA
First Respondent
F LAWYERS
Second Respondent
G LAWYERS
Third Respondent
ORDER MADE BY:
HOGAN J
DATE OF ORDER:
13 AUGUST 2024
THE COURT ORDERS THAT:
1.Pursuant to s 117(2) of the Family Law Act 1975 (Cth), the First Respondent shall pay those of the Applicant’s costs of and incidental to the application for an order setting aside the Binding Financial Agreement, dated 23 February 2017, which were incurred after 19 January 2022.
2.For the purpose of Order 1, the costs to be paid shall be assessed on an indemnity basis and shall be in such amount as is agreed between the parties or, failing agreement, as is assessed on the indemnity basis in the manner provided for in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
3.The Applicant’s applications that the Second and/or Third Respondents pay her costs are dismissed.
AND IT IS FURTHER ORDERED THAT:
4.In the event that any party seeks an order that another party pay the costs of and incidental to the Applicant’s application for costs:
(a)any such party shall, by 4.00pm on 10 September 2024, file and serve:
(i)any affidavit necessary to support such application; and
(ii)written submissions in support of such application for costs; and
(b)the party against whom an order for costs is sought shall, within a further fourteen (14) days thereafter, file and serve:
(i)any affidavit necessary for the determination of any such application for costs; and
(ii)any written submissions in answer to the submissions filed and served by the party seeking an order for costs; and
(c)the party seeking an order for costs shall, within seven (7) days of being served with the submissions relied on by the party against whom an order for costs is sought, file and serve any further written submissions, strictly in reply, to the submissions served by the party against whom an order for costs is sought,
and any such application for costs shall be considered in Chambers.
5.All outstanding applications are otherwise dismissed and removed from the pending cases list.
IT IS NOTED THAT:
A.There is no Court known by the name “Federal Circuit and Family Court of Australia”.
B.The design of the seal affixed to this order issued by the Federal Circuit and Family Court of Australia (Division 1) has been determined by the Attorney-General pursuant to the undated Federal Circuit and Family Court of Australia (Seal) Determination 2021 signed by the Attorney-General.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Luna & Luna has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HOGAN J:
On 1 March 2024, I dismissed Mr Luna’s application that a Binding Financial Agreement into which he and Ms Luna entered in February 2017 (the Agreement) be set aside (the proceedings). I did so for the Reasons published that day.[1]
[1] Luna & Luna (No 6) [2024] FedCFamC1F 119.
I also made orders to facilitate any application for an order for costs.
Consequent upon that order, Ms Luna has sought that both Mr Luna and the solicitors who have been engaged by him at varying times be ordered to pay her costs of and incidental to the proceedings on an indemnity basis or, failing that, on a party/party basis, with such costs to be assessed irrespective of the basis on which they are ordered to be paid. She proposed that the amounts to be paid by the solicitors be in a proportion determined by the Court.
Mr Luna and his previous solicitors all oppose the making of any order for costs.
In the event that his opposition proves unpersuasive, Mr Luna advanced that any costs ordered against him should be the subject of assessment. Whilst it is not entirely clear from the submissions filed on his behalf, I have proceeded on the basis that his alternative position also included the proposition that any costs ordered against him should be ordered on a party and party basis and not on the indemnity basis sought by Ms Luna. Mr Luna also sought an order that Ms Luna pay “60% of indemnity costs, including any costs of and incidental to any applications where he was successful” and that any sum ordered to be paid be paid into F Lawyers trust account.
G Lawyers, who provided advice to Mr Luna when he entered into the Agreement and who represented him from the time he commenced the proceedings until 13 October 2021 (when a Notice of Ceasing to Act was filed) sought that:
(a)the application against them be dismissed; and
(b)Ms Luna pay their costs of and incidental to the proceeding.
Whilst they suggested that they may seek the Court’s leave for an oral hearing if this became necessary, no formal application to that effect has been filed.
F Lawyers, who represented Mr Luna from 18 October 2021 (when a Notice of Address for Service was filed) until 11 April 2024 (when a Notice of Ceasing to Act was filed) sought that:
(a)the application against them should be dismissed; and
(b)costs should follow the event and they should be heard on the basis for assessment.
F Lawyers also advanced that, if the Court dismissed Ms Luna’s application for an order that they pay her costs, it would be appropriate for the Court to invite short written submissions about the issue of the costs of and incidental to her application for costs and to provide a mechanism by which any supporting material could be filed.
The parties’ applications that the other pay costs
The starting point in relation to costs under the Family Law Act 1975(Cth) (the Act) is that each party bears their own costs.[2] However, if it is of the opinion that there are circumstances that justify it in doing so, the Court may, subject relevantly to s 117(2A) of the Act, make such order as it considers just.[3] In considering what order, if any, as to costs should be made, the Court must have regard to the matters set out in s 117(2A) of the Act.
[2] Family Law Act 1975 (Cth) s 117(1).
[3] Family Law Act 1975 (Cth) s 117(2).
Consequently, the first question to be determined is whether the circumstances of the current proceedings justify departing from the statutorily prescribed starting point of each party bearing their own costs.
The factors that are to be considered when contemplating the making of a costs order are those set out in s 117(2A) of the Act; the Court may give such weight as it considers appropriate to any relevant factor.[4] It is well settled that no single factor in s 117(2A) has priority, nor must more than one factor be satisfied; rather, any one factor may be sufficient.[5]
[4] Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664 at [24].
[5]Prantage & Prantage (Costs) [2014] FamCA 850 at [12]; PBF (as child representative for AF (Legal Aid Commission of Tasmania)) & TRF & LKL (2005) 33 Fam LR 123 at [41].
Neither party was in receipt of Legal Aid. Both parties engaged privately funded legal representation in the proceedings. There is no suggestion that the proceedings were necessitated by the failure of either party to comply with previous Court orders.
On the evidence relied on by Ms Luna, her solicitors rendered invoices in the total amount of $407,069.[6] As I appreciated it, a little more than half of this amount was said to be the costs associated with Mr Luna’s application to set the Agreement aside.
[6] Inclusive of the costs of Counsel, obtaining valuations and expert reports and disbursements.
Mr Luna sought that Ms Luna pay to him 60 per cent of the costs of and incidental to any interim application in which he was successful and that such amount be on the indemnity basis. His evidence included that, as at 1 March 2024, his solicitors had rendered invoices in the total amount of $208,203.6;[7] it was asserted that the amount on an indemnity basis was $190,640.74.[8]
The parties’ respective financial circumstances[9]
[7] Inclusive of the costs of Counsel.
[8] Affidavit of Mr Luna sealed 28 March 2024, paragraph 6 and Annexure 1.
[9] Family Law Act 1975 (Cth), s 117(2A)(a).
Ms Luna is currently employed as a public official. Mr Luna works in transport. Ms Luna submitted that, whilst Mr Luna may have limited means, this should not properly preclude an order for costs being made against him, particularly where she advances that the proceedings should not have been brought and should have been withdrawn at some time prior to their dismissal.
Mr Luna submitted that there is a large disparity in the financial resources available to the respective parties; he contended that, whilst Ms Luna recently sold a successful business for an undisclosed sum, owns real property and investments and is employed as outlined above, his recent involvement in an accident has meant that his ability to work has been compromised and he faces an uncertain financial future.
I accept that Ms Luna’s financial circumstances are overwhelmingly superior to those of Mr Luna. It is clear, I consider, that her income earning capacity vastly exceeds his; given this, her prospects of recovering financially – at least somewhat – from the enormous financial impost these proceeding have had on her are overwhelmingly better than Mr Luna’s prospects of recovering from the financial impost on him of the same – although I also note that, unlike Ms Luna, Mr Luna has not paid the invoices raised by his legal representatives, save for in the amount of about $51,382.45.[10] That is, as I appreciate it, he owes those who have represented him in these proceedings about $156,821.21.
[10] Costs Notice filed 29 February 2024.
As authority makes clear, impecuniosity (or even relative impecuniosity) is not, of itself, a bar to an order for costs being made where it is otherwise warranted.[11]
Whether any party has been wholly unsuccessful[12]
[11]See, for example, D & D (Costs) (No 2) (2010) FLC 93-435; Lenova & Lenova (Costs) [2011] FamCAFC 141.
[12] Family Law Act 1975 (Cth), s 117(2A)(e).
Ms Luna submitted that it is not controversial that Mr Luna has been wholly unsuccessful in the proceedings.
Mr Luna submitted that, although the matter was set down for trial on two occasions, both attempts at bringing it on for trial were unsuccessful and, consequently, he has never had the opportunity to have the substantive matter heard – it was submitted that, given this, the Court would not be persuaded that he has been wholly unsuccessful. I reject this submission: Mr Luna’s application to have the Agreement set aside was ultimately dismissed – albeit because he had failed to comply with an order that he pay money into court to provide security for Ms Luna’s costs; consequently, he was wholly unsuccessful in his attempt to obtain the relief he sought.
Mr Luna further submitted that he had to prepare for trial without the benefit of subpoenaed material in December 2021 and that his response to Ms Luna’s application for an order for security for costs (which was successful) was prepared absent requested disclosure. Even if such assertions were accepted, they do not change the fact that he has been completely unsuccessful in his attempt to have the Court make an order setting the Agreement aside.
Mr Luna finally submitted that, prior to the ultimate dismissal of the proceedings, Ms Luna had been unsuccessful in her previous attempts to dismiss the proceedings on 7 September 2020 and 27 January 2023.
Reference to the Court record establishes that, on 7 September 2020, an Order made by Judge Tonkin dismissed Ms Luna’s application to summarily dismiss Mr Luna’s application to set the Agreement aside. On 27 January 2023, I dismissed an oral application made that day for the same relief. Given the circumstances in which the oral application was made, heard and dismissed, no costs could reasonably be regarded as relating only to it.
At best for Mr Luna, the matters discussed in the preceding two paragraphs do no more than:
(a)emphasise the duration of time over which he had the opportunity to provide evidence to support and/or substantiate his various assertions of belief about the alleged state of affairs he contended for; and
(b)identify two events to be considered in determining his application that Ms Luna be required to pay his costs; and
(c)perhaps suggest that, if an order is made for him to pay Ms Luna’s costs of and incidental to the proceedings, a proper assessment of the quantum of the same should exclude the costs of and incidental to the applications determined on those occasions.
Mr Luna submitted that he should be awarded the costs of and incidental to all of the “successful court events”, on the applicable scale. Absent further particularisation, I am unclear whether this submission refers to any applications other than those referred to in paragraph 24.
The conduct of the parties in relation to the proceedings and other relevant matters[13]
[13]Family Law Act 1975 (Cth), s 117(2A)(c) and (g); see, for example: Dongahey & Dongahey (Costs) (2012) 47 Fam LR 306.
Ms Luna contended that a paucity of evidence accompanied the initiation of Mr Luna’s application to set aside the Agreement and that, despite the duration of time afforded to him, such paucity was not remedied.
It was also submitted on her behalf that the following are particularly relevant to the determination of whether the circumstances justify the making of an order for costs against Mr Luna and the basis upon which any such costs should be ordered:
(a)despite his financial means being an issue from the time he commenced his proceedings to set aside the Agreement, he continued to prosecute the proceedings; and
(b)the very terms of the Agreement to which Mr Luna had agreed specifically referred to disclosure and value of assets; and
(c)at best, Mr Luna had limited prospects of succeeding on his application (given the paucity of evidence he adduced) and it should never have been brought – further, once commenced, it should have become apparent to Mr Luna at some point between 27 April 2020 and 1 March 2024 that the proceedings should not be continued; and
(d)Mr Luna failed to respond to a Notice to Admit and Notice to Admit Documents; and
(e)on 25 November 2022, Counsel for Mr Luna conceded in open court that there was no evidence other than the belief of Mr Luna before the Court, informed that no expert evidence would be adduced and said that he believed evidence would be adduced in Mr Luna’s trial material in the following two days – but could not say what this would be; and
(f)despite the order made on 16 December 2022 staying the proceedings until he paid $70,000 into Court by way of security for Ms Luna’s costs, he again sought disclosure from her about her financial circumstances and his solicitors did not appear to have advised him about the effect of a stay or the inappropriateness of such a request in the context of a stay of the proceedings.
Mr Luna submitted that Ms Luna had failed to disclose material in a timely manner and had used every means to not disclose, and that her asserted failure to disclose resulted in a number of Court events which contributed to the cost of the proceedings – for example:
(a)in June 2021: a Notice of Objection to Subpoenas was filed on her behalf; and
(b)on 23 December 2021: a hearing was held in relation to the subpoenas; and
(c)on 16 January 2022: an appeal in relation to the subpoena decision was filed; and
(d)on 20 April 2022: Ms Luna advised she would withdraw the appeal in relation to the subpoena decision.
Mr Luna submitted that the appeal and its subsequent abandonment was symptomatic of Ms Luna’s attempts to avoid any form of disclosure relevant to the matters before the Court. He also submitted that whatever funds may have been available to him had been consumed by such applications and that, consequently, he was financially disadvantaged and prejudiced in his conduct of the proceedings. He also submitted, in essence, that he was prejudiced because there was no trial of his application before it was dismissed.
Whether an offer to settle the proceedings was made in writing and the terms of the same[14]
[14] Family Law Act 1975 (Cth), s 117(2A)(f).
I accept that, on 20 April 2021, Ms Luna made an offer to settle the proceedings on the basis that Mr Luna:
(a)withdraw his application; and
(b)pay her $20,000 to represent a notional contribution to the costs incurred as a result of his allegations; and
(c)provide her with a personal apology in writing in relation to the nature of the allegations he had made against her.[15]
[15] Affidavit of Ms Luna filed 28 March 2024 at [15] and annexure MSL-5.
I also accept that this offer gave notice – to both Mr Luna and G Lawyers – that Ms Luna would seek costs on an indemnity basis against Mr Luna in the first instance and, in default, against G Lawyers.
Clearly, this offer was not accepted.
I accept that, on 23 December 2021, Ms Luna made a further offer to settle the proceedings on the basis that:
(a)the matters in respect of property be discontinued; and
(b)Ms Luna pay the sum of $30,000 to Mr Luna; and
(c)each party would bear their own costs.[16]
[16] Affidavit of Ms Luna filed 28 March 2024 at [27(b)] and annexure MSL-8.
On 14 January 2022, the offer was rejected by Mr Luna.[17]
[17] Affidavit of Ms Luna filed 28 March 2024 at [28] and annexure MSL-9.
Mr Luna submitted, in essence, that because Ms Luna had filed an appeal against the decision made in relation to her objection to the subpoenas directed to B Pty Ltd, C Bank and National Australia Bank, he was unable to come to a decision about either accepting or rejecting the offer – although, as noted above, the offer was ultimately rejected.
It is clear that Mr Luna would have been better placed than he is now if he had accepted this offer.
Further discussion and conclusions
Ms Luna submitted that the Court should order costs against Mr Luna from 27 April 2020 to 1 March 2024 or, alternatively, from 19 January 2022 until 1 March 2024.
The combination of the fact that Mr Luna was wholly unsuccessful in his application to have the Agreement set aside and that he failed to accept Ms Luna’s 23 December 2021 offer to resolve the proceedings persuades me, notwithstanding the significant disparity in the financial circumstances of the parties, that the circumstances here justify the making of an order that, from 19 January 2022, he pay her costs of and incidental to his application for an order setting the 2017 Agreement aside. Such conclusion, though, does not determine the basis upon which the costs ordered to be paid should be calculated.
Well-known authority makes it clear that, unless there are exceptional circumstances, an order for costs should be made on the party and party basis; I accept that to order costs to be paid on an indemnity basis is something which is a “very great departure” from the “normal standard” in this and other jurisdictions.[18] I also accept that the categories of circumstances which enliven the discretion to award indemnity costs are not closed.[19]
[18]See Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 per Sheppard J; In the Marriage of Kohan (1993) FLC 92-340; Munday v Bowman (1997) 22 Fam LR 321 at 322; Yunghanns v Yunghanns (2000) FLC 93-029; D & D Costs (No. 2) (2010) FLC 93-435; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; Trevi & Trevi (No. 3) (2019) 60 Fam LR 15 at [12] to [15]; Harris & Dewell (No 2) (2018) FLC 93-863.
[19] Yunghanns v Yunghanns (2000) FLC 93-029 at [31].
However, in Colgate-Palmolive Company v Cussons Pty Limited,[20] Shepherd J provided some examples of circumstances that might justify the awarding of indemnity costs – usefully, Holden CJ in Munday v Bowman,[21] drew from his Honour’s decision the following:
(a)where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts; and
(b)making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud; and
(c)evidence of particular misconduct causing loss of time to the court and to other parties; and
(d)the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and
(e)an imprudent refusal of an offer to compromise.
[20] (1993) 46 FCR 225.
[21] (1997) 22 Fam LR 321 at 322.
Despite the passage of time between the commencement of his application to set the Agreement aside and the order dismissing the proceedings – during which he had every opportunity to prosecute his case for an order setting aside the Agreement – Mr Luna was unable to advance more than asserted “beliefs” about those matters relied upon to found his application. Absent evidentiary support for the same, he continued to repeat allegations and assert beliefs which ought, in my view, not have continued to be promulgated; his imprudent refusal of Ms Luna’s December 2021 offer of settlement was made more so because of his inability to provide evidentiary support for his asserted “beliefs”.
Whilst others may disagree, the combination of all of these matters has persuaded me that the circumstances here justify the very great departure spoken of above; consequently, I am persuaded that it is just to make an order that Mr Luna pay Ms Luna’s costs of and incidental to the proceedings after 19 January 2022 and that he do so on the indemnity basis, in an amount to be agreed or, failing agreement, to be assessed on the indemnity basis.
The application for costs against Mr Luna’s solicitors
Ms Luna generally submitted that the Court would be persuaded that Mr Luna’s solicitors engaged in improper or unreasonable conduct[22] which caused her to incur costs and that, consequently, it would be persuaded that the circumstances justify the making of orders for costs against them as follows:
(a)against G Lawyers: from 27 April 2020 to 4 October 2021; and
(b)against F Lawyers: from 19 January 2022 to 1 March 2024.[23]
[22] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 12.15(1)(c).
[23] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 12.15(4)(d).
The Federal Circuit and Family Court of Australia Act 2021 (Cth) provides that:
(a)without limiting the discretion to award costs in a civil proceeding, the Court may order a party’s lawyer to bear costs personally;[24] and
(b)in exercising the discretion to award costs, the Court must take account of any failure to comply with the duties imposed by subsections 68(1) or (2) of the Act – namely, the obligation cast on parties to conduct the proceeding in a way that is consistent with the overarching purpose[25] and the obligation cast upon a party’s lawyer, in the conduct of the proceeding on the party’s behalf, to take account of the duty imposed on the party and to assist the party to comply with that duty.[26]
[24] s 68 (5).
[25]Defined in s 7 to relevantly mean the overarching purpose set out in subsection 67(1) – which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
[26] s 68(4).
Rule 12.15 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (the Rules) provides:
12.15 Costs order against lawyer
(1) 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 to be incurred by a party or another person, or to be thrown away, because of:
(a) a failure to comply with these Rules or an order; or
(b) a failure to comply with a pre‑action procedure; or
(c) improper or unreasonable conduct; or
(d) undue delay or default.
(2) 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.
(3) An order under subrule (1) may be made on the initiative of the court, or on application by a party to the proceeding or by another person who has incurred the costs or costs thrown away.
(4) An order under subrule (1) may include an order that the lawyer:
(a) not charge the lawyer’s client for work specified in the order; or
(b) repay money that the client has already paid towards those costs; or
(c) repay to the client any costs that the client has been ordered to pay to another party or another person; or
(d) pay the costs of a party; or
(e) repay another person’s costs found to be incurred or wasted.
I accept that, when considering whether there has been a failure to comply or improper or unreasonable conduct by a lawyer that has caused costs to be incurred by a party or to be thrown way, I am to consider non-compliance and conduct that is serious, as opposed to something that is trifling or inadvertent.
I also accept that authority[27] establishes that:
[27]For example: Cassidy v Murray (1995) FLC 92-633; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169; Ex Christmas Islanders Association Inc and Others v Attorney-General (Cth)(No 2) (2006) 233 ALR 97; Z (A Solicitor) & Limousin (2010) FLC 93-433; Beamish & Coburn (Deceased) (2021) FLC 94-005.
(a)the jurisdiction to make an order for costs against lawyers is compensatory and not punitive; and
(b)lawyers have a duty to the Court to promote the interests of justice, whilst at the same time attending to the needs of their clients – such duty includes a duty to be competent in the conduct of legal business; and
(c)absent the waiver of legal professional privilege:
(i)a lawyer is hindered in their defence of an application for an order that he or she personally pay an applicant’s costs by the fact that the privilege protects communications between that person and the client and prevents them from adducing evidence about the advice provided to the client or the instructions given by the client; and
(ii)a lawyer is constrained from explaining in evidence the basis on which a view may have reasonably been formed that the case was arguable; and
(d)by virtue of the matters set out in (c), in considering applications for costs against lawyers, the Court should proceed with extreme care and, where it is precluded by legal professional privilege from knowing the full circumstances, the lawyer must have the full benefit of any doubt in order to avoid unfairness; and
(e)the Court may make an order for costs against a lawyer without the necessity to establish that the lawyer has been guilty of serious professional misconduct – serious misconduct, default or negligence may be sufficient to justify an order, although a mistake or error of judgement would not; and
(f)simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will not invoke the jurisdiction – there must be something more: namely, carrying on that conduct “unreasonably”; and
(g)in this context, “unreasonably” may include some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success, with either:
(i)a recognition that there is no chance of success, but an intention to use the proceeding for an ulterior purpose; or
(ii)a disregard of any proper consideration of the prospects of success; or
(iii)a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice.
(h)to be “unreasonable”, there must be more than acting for a client who has little or no prospect of success – there must be something akin to an abuse of process, such as having an ulterior motive for the proceedings or commencing or pursuing them without any, or any proper, consideration of the prospects of success; and
(i)given the above, not every example of a lawyer acting improperly or unreasonably would necessarily warrant the making of a costs order against that lawyer; and
(j)there is a need to balance the following competing public interests, namely:
(i)the concern that a lawyer should not be deterred from pursuing their client’s interests for fear of being made personally liable for costs; and
(ii)the principle that innocent parties should not be put to costs, which would not otherwise have been incurred, as a result of the inappropriate conduct of the lawyer.
Ms Luna’s overarching submissions included, in essence, that, in considering her applications against Mr Luna’s lawyers, the Court would place particular weight upon the following:
(a)that solicitors have a duty to make an independent assessment of whether proceedings should be instituted; and
(b)in discharging this duty, solicitors are bound by their obligations under the Australian Solicitor Conduct Rules to not allege any matter of fact amounting to criminality, fraud, or other serious misconduct unless:
(i)the solicitor believes on reasonable grounds that available material by which the allegation could be supported provides a proper basis; and
(ii)having been advised of the seriousness and potential consequences, the client wishes to make the allegation.
The Application against G Lawyers
I accept that G Lawyers was engaged by Mr Luna to provide advice on the Binding Financial Agreement, and that the application by which Mr Luna asserted that he had been unduly influenced by Ms Luna to sign the Agreement and that Ms Luna had committed a fraud by failing to disclose a material matter was prepared and filed by G Lawyers on his behalf. That is, having provided Mr Luna with advice in relation to the Agreement before he entered into it, G Lawyers subsequently accepted Mr Luna’s instructions to commence proceedings to have the same set aside.
Ms Luna submitted that Mr Luna’s application to set aside the Agreement was filed without any proper consideration by G Lawyers of the prospects of the success of the same because, as a result of its earlier role in acting for Mr Luna in the processes associated with his execution of the Agreement, G Lawyers knew about the manner in which the parties had decided to approach the issues of disclosure and valuation of assets and it also knew that his evidence at the commencement of the proceedings was primarily as to his “belief” about her asserted conduct, whether of a positive nature or by omission.
Ms Luna also submitted that G Lawyers ought to have turned its mind to the prospects and continuation of Mr Luna’s proceedings on at least four specific occasions during 2021, as set out in the submissions filed on her behalf.[28] She also submitted that G Lawyers ought not to have commenced the proceedings on Mr Luna’s behalf and, if instructed to proceed despite limited or hopeless prospects of success, it should either have withdrawn from the record or obtained written instructions from Mr Luna to record that advice had been given that: the case may be doomed to fail, that a costs order may follow and that he still wished to proceed. Given that Mr Luna has not waived privilege, I simply do not know – and neither does Ms Luna – whether this latter course was in fact followed by G Lawyers.
[28]Namely: on 5 February 2021 (when a Notice to Admit and Notice to Admit Documents were served); on 19 February 2021 (when Mr Luna had not lodged or served a Notice Disputing the Facts or Documents contained in the Notice to Admit and Notice to Admit Documents); on 20 April 2021 (when her first offer was made) and on 4 October 2021 (when its file was produced in answer to subpoena – which ought to have revealed the advice given to Mr Luna and the knowledge he had prior to signing the Binding Financial Agreement).
G Lawyers submitted that there was no basis for the imposition of a costs order against it either at all or on the indemnity basis because:
(a)Ms Luna appeared to concede that Mr Luna’s application had at least some prospects of success; and
(b)the Court could not be satisfied that, in representing Mr Luna, it had engaged in improper or unreasonable conduct within the meaning of r 12.15(1)(c) sufficient to justify an order; and
(c)the fact that Mr Luna is impecunious cannot, without a great deal more, expose his solicitors to an adverse costs order; and
(d)Ms Luna’s submissions failed to identify, with precision, a specific act or series of acts by it which were asserted to have amounted to a failure to comply with the Rules or an Order of the Court such to enliven the Court’s jurisdiction to award costs; and
(e)it was constrained by confidentiality and legal professional privilege in answering Ms Luna’s application for a costs order against it and, given that its ability to rebut her complaints about its conduct is hampered by the duty of confidentiality to Mr Luna, the Court should accord it the benefit of the doubt.
In responding to G Lawyers’ submission, Ms Luna advanced that G Lawyers had failed to address the contentions that it had failed to comply with its duty to make an independent assessment of whether the proceedings instituted by Mr Luna should have been commenced or continued and its obligations under the Australia Solicitor Conduct Rules. She also submitted that G Lawyers was seeking to hide behind the “veil of legal professional privilege” without addressing its duty; it was also submitted, in reliance on Sandison v Thornhill (No 3)[29] (a decision of Henderson J at first instance), that G Lawyers could, without disclosing the advice given, have sworn that advice with respect to his application to set the Agreement aside had been provided to Mr Luna and instructions to proceed had subsequently been received – but they failed to do so.
[29] [2023] FedCFamC1F 981.
Given that neither G Lawyers nor F Lawyers had the opportunity to respond to the above, I do not intend to consider further the view expressed by Henderson J in Sandison.
The Application against F Lawyers
Ms Luna submitted that either on going onto the record on 18 October 2021 or at some time shortly thereafter, F Lawyers ought to have appreciated Mr Luna’s lack of prospects and “acted accordingly”. As was the case in respect of her application against G Lawyers, she also submitted that F Lawyers ought to have turned its mind to Mr Luna’s prospects of success and him continuing to prosecute his application on at least those specific occasions as set out in the submissions filed on her behalf.[30]
[30]On 25 November 2022 (when her application for an order for security for costs was heard, during which Counsel for Mr Luna commented to the effect that there was no evidence before the Court at that time to support Mr Luna’s asserted “beliefs”; on 23 December 2021 (when her second offer was made); on 14 January 2022 (when her second offer was rejected by Mr Luna) and on 6 October 2023 (when she filed an Application in a Proceeding seeking an order that Mr Luna’s proceedings be dismissed because he had failed to comply with the December 2022 order which required him to pay $70,000 into Court by way of security for her costs).
Ms Luna also submitted, in essence, that the fact that Mr Luna sought disclosure from her about her financial circumstances, despite the December 2022 order staying the proceedings until he paid the required amount into Court by way of security for her costs, suggested that F Lawyers had failed to advise him about the effect of a stay or the inappropriateness of such a request in the context of a stay of the proceedings. It was also submitted that F Lawyers allowed Mr Luna to accrue a substantial debt for his legal fees despite knowing that he was of limited financial means and its existence would likely exacerbate his financial difficulties, and that such debt would be unlikely to be paid unless he succeeded in the proceedings.
F Lawyers submitted that the Court would not be persuaded to make an order for costs against it because, in essence:
(a)Ms Luna appeared to concede that Mr Luna’s application had at least some prospects of success; and
(b)even if Mr Luna’s case was hopeless, without anything further, the application for an order for costs against them was not justified; and
(c)absent Mr Luna waiving privilege, they were unable to use privileged communications for their own purposes or benefit and were placed in a fundamental position of unfairness because they could not reveal the advice given to Mr Luna or the instructions received from him; and
(d)the fact that, in December 2021, Ms Luna offered to resolve the proceedings on terms that were ultimately more favourable to Mr Luna than the actual outcome was a matter for him and his conduct vis-a-vis the offer was not conduct that could properly be used to justify an order of costs being made against them; and
(e)them writing to Ms Luna to seek disclosure after the proceedings were stayed and them defending, on Mr Luna’s behalf, her application that his proceedings be dismissed for non-compliance with the order for security for costs did not amount to conduct that justified the making of an order for costs against them; and
(f)the Court should guard against the jurisdiction to make personal costs orders against lawyers being misused by litigants seeking to have their costs paid by an opposing impecunious litigant’s lawyers.
Further discussion and conclusions
I do not accept the submission made on behalf of both G Lawyers and F Lawyers that Ms Luna appeared to concede that Mr Luna’s application had at least some prospects of success – I consider that she has consistently maintained that there was no proper basis for his application to have the Agreement set aside.
Having regard to the principles summarised in paragraph [48] above and the submissions made on behalf of the parties and noting that Mr Luna has not waived the privilege which is his, I am not persuaded that I can safely conclude that:
(a)Mr Luna’s refusal of, at the very least, the December 2021 offer is conduct which justifies the making of orders for costs against his lawyers; or that
(b)the continuation by Mr Luna of the proceedings in which he sought an order setting aside the Agreement into which he and Ms Luna entered in February 2017 is conduct which justifies the making of orders for costs against his lawyers; or that
(c)the conduct of G Lawyers and F Lawyers was improper or unreasonable within the meaning ascribed to such terms for the purpose of enlivening the jurisdiction to make orders for costs against them.
For these reasons, in the exercise of the broad discretion accorded to judges at first instance when dealing with applications for costs, I intend to dismiss Ms Luna’s applications for orders that G Lawyers and/or F Lawyers pay her costs of and incidental to Mr Luna’s application to set the Agreement side.
The orders made will afford the parties the opportunity to be heard in writing in relation to any application for costs arising from Ms Luna’s application for costs. Whether the parties choose to take up this opportunity is, of course, a matter which will no doubt require sensible consideration involving an assessment of the likely costs of the same compared against what can, given the starting point in relation to costs in this jurisdiction, properly be seen as no more than the possibility of success.
Should there be an application for costs, it will be considered in Chambers following the receipt of written submissions.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hogan. Associate:
Dated: 13 August 2024
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