Malloy and Stopford Malloy (No 2)

[2020] FamCA 773

FAMILY COURT OF AUSTRALIA

MALLOY & STOPFORD MALLOY (NO. 2) [2020] FamCA 773

FAMILY LAW – PRACTICE AND PROCEDURE – application for disclosure – where parties agreed in late 2016 for exchange of redacted copies of retainer agreements – where privilege claimed by wife over parts of retainer agreements – where claim for privilege undisputed – where wife provided redacted copies of retainer agreements – where wife’s lawyers disclosed agreement for legal fees to be paid on a “no win, no fee” basis – where husband alleges undisclosed funding arrangement – no evidence of undisclosed funding arrangement – no basis to disturb claim for privilege – application dismissed – costs ordered against the husband.

Family Law Act 1975 (Cth) ss 117
Family Law Rules 2004 (Cth) rr 13.04, 13.13, 16.10, 19.04

Commissioner of Australian Federal Police v Propend Financial Pty Ltd (1997) 188 CLR 501
CSR Limited v Eddy (2008) 70 NSWLR 725
El Rashidy & El Rashidy and Anor [2020] FamCAFC 40
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish and Anor (2005) 191 FLR 294
Kirby v Centro Properties Ltd (No 2) (2012) 87 ACSR 229
Malloy & Stopford Malloy [2019] FamCA 986
Prantage & Prantage (Costs) [2014] FamCA 850
Stoian & Fiening (Costs) [2014] FamCA 944

APPLICANT: Mr Malloy

RESPONDENT: Ms Stopford Malloy

FILE NUMBER: ADC 2595 of 2015

DATE DELIVERED: 18 September 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Harper J

HEARING DATE: In Chambers by way of written submissions

REPRESENTATION

THE APPLICANT: Mr Malloy

COUNSEL FOR THE RESPONDENT:

Mr Wells QC

Mr McGinn

SOLICITOR FOR THE RESPONDENT: Piper Alderman

Orders

1. The Application in a Case filed by the husband on 7 February 2020, seeking un-redacted copies of the wife’s Retainer Agreements with her legal counsel and experts, be dismissed.

2. The husband pay the wife’s of his application costs as agreed or as assessed on a solicitor client basis in accordance with scale.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Malloy & Stopford Malloy has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: ADC 2595 of 2015

Mr Malloy

Applicant

And

Ms Stopford Malloy

Respondent

REASONS FOR JUDGMENT

Introduction

1. These are parenting and property proceedings between Mr Malloy (“the husband”) and Ms Stopford Malloy (“the wife”).

2. This judgment, one of at least nineteen other judgments already delivered in these long running proceedings, relates to a discrete issue arising from the Application in a Case filed by the husband on 7 February 2020. By that application, he seeks access to un-redacted retainer agreements between the wife and her legal counsel and experts. He relies upon rr 13.04 and 19.05(4) of the Family Law Rules2004 (Cth) (“the Rules”). He also seeks costs against the wife.

3. It is appropriate at this point to note that there is no such sub-rule as 19.05(4) in the Rules. I will assume the husband meant to refer to r. 19.04(5). It is not necessary to set out the terms of rr 13.04 and 19.05(4), although I have considered them. Rule 13.04 imposes a mandatory obligation of full and frank disclosure on all parties in a financial case. Rule 19.04(5) requires, in a notice under subrule (2) or a statement under paragraph (3)(b), specification of a source of funds paid or to be paid. But Rule 19.04 only applies to three Court events, namely, a conciliation conference, the first day of the allocated dates mentioned in rule 16.10, or any other Court events that the Court orders. None of those Court events are relevant in this application. In any event, for the reasons given below, I am satisfied the wife has disclosed the source of funds to be paid for legal fees.

4. The wife filed a Response on 7 April 2020. She seeks an order that the husband’s application be dismissed with a costs order in her favour.

5. It is necessary to detail some relevant chronology to contextualise the orders the husband seeks.

6. On 18 October 2016, the husband’s then solicitors, Howe Jenkin sought disclosure of copies of the retainer agreements of the wife’s legal counsel and experts pursuant to the same Rules, namely, rr 13.04 and 19.05(4) of the Rules.[1] By way of a letter dated 17 November 2016, the wife’s solicitors, Piper Alderman, claimed legal professional privilege and contended that production of the requested retainers was not relevant to the pending proceedings. Nonetheless, so as to save costs of litigating the issue, they proposed an exchange of redacted copies of retainer letters between the parties.[2]

   [1] Husband’s Affidavit filed 7 February 2020, pg. 2 [2].

   [2] Wife’s Affidavit filed 7 April 2020, pg. 6 [ENH-1].

7. The husband’s solicitors responded in a letter dated 18 November 2016, agreeing to the wife’s proposal, that is, to an exchange of redacted copies of retainer agreements.[3]

   [3] Ibid, pg. 8 [ENH-2].

8. On 24 November 2016, according to the husband, his lawyers provided to the wife un-redacted documents including a letter attaching their costs dated 29 June 2015, a signed Costs Agreement dated 22 July 2015 and a letter dated 21 July 2016 advising of an increase in charge out rates.[4]

   [4] Husband’s Affidavit filed 7 February 2020, pg. 3 [7].

9. On 28 November 2016 by email, the wife provided redacted copies of her retainer with the following: Piper Alderman signed on 18 April 2016, Mr Wells QC, being a letter dated 12 April 2016, Mr McGinn of Counsel, being a letter dated 13 April 2016, and Mr NN, being a letter signed on 8 September 2016 as reproduced and annexed to her Affidavit sworn and filed on 7 April 2020.[5]

   [5] Pg. 9 – 39 [ENH-3].  

10. As the wife submitted, it also clear that “[t]he un-redacted portions of the Wife’s legal representatives’ retainer agreements affirm that the Wife is to meet her legal costs and disbursements of a successful proceeding”.[6]

    [6] Wife’s Written Submissions filed 31 July 2020, pg. 4 [20].

11. On 21 September 2018, the wife filed an Application in a Case seeking, amongst other things, orders against the husband for a dollar for dollar litigation funding in her favour.

12. In her affidavit in support, affirmed on 18 September 2018 at [18] the wife stated “[m]y solicitors have agreed to represent me on the basis that their fees will be met at the conclusion of the financial proceedings”. In his responding affidavit sworn on 11 December 2018 at [3.12] the husband admitted this. Both these affidavits were referred to by the wife in the application before me.

13. It did not seem to be in dispute that, in the hearing before Tree J for litigation funding, at no point was there any call for the production of the wife’s un-redacted retainer agreements. Rather the husband’s written submissions accepted the following as correct: “[t]he Wife’s Lawyers have indicated that they will continue to act for her without any requirement for payment prior to the final determination of the matter”.[7] Nor was the wife’s claim for privilege in respect of the redacted documents put in issue. Until this application it has at all times been maintained.

    [7] Husband’s Written Submissions filed 4 April 2019, pg. 17 [66].

14. On 13 December 2019, judgment was delivered by Tree J in which he made the litigation funding orders as sought by the wife.[8] Tree J’s judgment also dealt with other matters which it is not necessary to mention for the purposes of this judgment.

    [8]Malloy & Stopford Malloy [2019] FamCA 986.

15. In his judgment, at [154], Tree J commented regarding litigation funding that:

    It is not in contention that the husband continues to lead an extravagant lifestyle of luxury housing and expensive, exotic cars.  On the other hand, the wife is in receipt of social security and the $650.00 weekly payment made by the husband, and only has the benefit of legal representation because her solicitors are prepared to act for her, seemingly on a no-win no-fee basis. Her counsel have similarly agreed to act for her, but have not necessarily agreed to continue to do so at any trial.

16. At [155] Tree J detailed a number of factors as favouring the making a litigation funding order in the wife’s favour, among which I note the following:

    ·So long as the husband remains legally represented, there will not be a completely level playing field, in that the wife is dependent upon solicitors acting without any guarantee of reward, whereas the husband’s solicitors are guaranteed of payment;

    ·In light of the above, it is self-evident that the husband’s financial position is vastly superior to the wife’s, and can be legitimately be regarded, as counsel for the wife suggests, as unlimited;

    ·Even though the husband claims that his father will not provide funding for legal costs if a litigation funding order as sought by the wife is made, there is no reason to think, especially now that the husband’s father and the Malloy Group are parties, that the husband’s interests will really, in any practical way, be prejudiced if that occurs;

    ·The wife’s case for substantive relief is arguable, and deserving of being heard;

    ·The ferocity of the resistance to the wife’s case inevitably means her costs will be significant going forward.  Already both parties have accrued fees exceeding $1million; and

    ·A dollar-for-dollar order, if the husband remains represented, will ensure something like parity in legal resources.

17. Tree J gave “[particular weight] to the enormous disparity between the reality of the parties’ financial positions, and the arguable merit of the wife’s case”.[9]

    [9] Ibid, [157].

18. In an affidavit filed on 23 April 2020, to which the wife made reference, the husband disputed a number of the findings of Tree J. He asserts his financial position is not as found by Tree J and his lavish lifestyle has vanished.[10] For the purposes of this application I am unable to determine the accuracy of the husband’s evidence in this regard, in light of its divergence from the findings of Tree J.

    [10] Husband’s Affidavit dated 23 April 2020, [50] - [51].

19. Two points are clear from the extracts from the reasons of Tree J. The first is that the husband has had, certainly in the past, access to considerable financial resources which have far exceeded those of the wife during the proceedings, while the wife has been in a straitened financial position. The second is that the wife’s legal representatives have been acting without guarantee of reward on a no-win no-fee basis, a position which the husband had known about since late 2016, admitted in affidavit evidence, and accepted in argument.

20. So it can be seen that after the exchange of redacted and un-redacted copies in late 2016 it appears that no challenge or concern was raised by the husband or his lawyers about the wife’s production of redacted copies, until the husband himself emailed the wife’s solicitors on 20 January 2020, over three years after the initial exchange. In this email the husband required production of un-redacted copies of the redacted documents provided in 2016 and specified at [9] above. The email concluded with the sentence “[f]ailure to provide the requested documents will result in an Application being made in the Family Court seeking full and frank disclosure, pursuant to Rule 13.04 of the Family Law Rules 2004”.[11]

    [11] Wife’s Affidavit dated 7 April 2020, pg. 42 [ENH-4].

21. The wife’s solicitors responded in an email on 22 January 2020, stating that the husband’s request had been previously addressed in late 2016 with his then solicitors and that the wife maintains that the terms of the retainers are both privileged and not relevant to the proceedings before this Court.[12] The husband then filed his Application in a Case.

    [12] Ibid, pg. 41 [ENH-4].

22. The wife contends that there are no other written agreements between the wife’s solicitors and counsel apart from those already provided.[13] Against this, the primary contention of the husband is that the wife has an undisclosed arrangement, being an agreement or security agreement, in place for the funding of her legal representatives and experts which she has failed to disclose.[14]  I am unable to accept the husband’s argument.

    [13] Ibid, pg. 3 [10],

    [14] Husband’s Written Submissions filed 27 July 2020, pg. 10 [50].

23. The husband relied on affidavit evidence and extensive written submissions. Intending no disrespect, it is unnecessary to refer to them in detail. The essential basis for his application can be ascertained from the following paragraphs of his Written Submissions:

    65. As the wife has already stated in her Affidavit filed 21 September 2018, at paragraph [18], that she has an agreement with her legal counsel to act until the conclusion of proceedings, she can only be refusing to provide the unredacted version of her retainer agreements, so as to not disclose to the Court that she has secured funding for her legal costs through some undisclosed arrangement.

    66. The wife and her present legal counsel have been funding this matter for nearly four (4) and half years and continue to fund the litigation and thwart a trial at every opportunity. This indicates there is an unlimited financial resource to fuel the efforts of her legal counsel and experts.

    67. I believe that that the wife and her legal counsel are withholding information from this Honourable Court regarding the funding of their retainer agreements and are not disclosing either of the following:

    1) A Funding Agreement

    2) A Security Agreement

24. It should be emphasised that the husband has only now raised any contest to the wife’s claim for privilege over the redacted parts of her retainer agreements, made in the original exchange of correspondence. As I understand his argument, the husband does not contend that the wife’s privilege, as claimed, has been lost in some way. He argues that the wife failed to comply with Rule 13.13(2) and failed to file and affidavit in support of her claim for privilege. This argument is misconceived. In late 2016 the claims for privilege were dealt with by agreement between the parties, as is not unusual. As made clear at [6] to [9] above, the parties agreed to the exchange of redacted documents. Compliance with Rule 13.13(2) was not required.

25. The husband’s main disclosure argument is that the wife has breached her obligation of disclosure imposed by Rule 13.04. At [50] of his written submissions, the husband lists 12 points which he argues show the wife “has an undisclosed financial arrangement in place for the funding of her legal counsel and experts”. I have considered each of these points closely. None of them prove the existence, even by inference, of any undisclosed funding arrangement. Rather, they all tend to prove the opposite; namely, that there exists a disclosed funding arrangement and that arrangement is as the parties have accepted at all times until now, that is, the wife’s lawyers are acting without guarantee of reward on a no-win no-fee basis. The contention in paragraph [66] of the husband’s submissions, “[t]he wife and her present legal counsel have been funding this matter for nearly four (4) and half years and continue to fund the litigation and thwart a trial at every opportunity” is not sustained by any evidence. Indeed, again the evidence shows the opposite. It is clear that no one has been funding the wife’s legal costs, at least until the dollar for dollar order was made by Tree J. The wife’s lawyers have been continuing to appear “without any guarantee of reward” on a “no-win no-fee basis”.[15] As already pointed out, the husband conceded this was the position in his evidence and argument before Tree J, who made findings to that effect. The obvious purpose of the application for a dollar for dollar litigation funding order by the wife was to obtain a source of funding where none had previously existed, because the husband had financial resources far greater than those of the wife. The disparity of wealth between the parties was key the finding of Tree J to support the dollar for dollar order.

    [15]Malloy & Stopford Malloy [2019] FamCA 986, [154] – [155].

26. I note here that the husband also argued that the wife’s claim for privilege failed the “dominant purpose” test, because “funding agreements are not created for the dominant purpose of the giving or receiving of legal advice or of being used in existing or anticipated legal proceedings”.[16] Again this is misconceived. The redacted parts of the wife’s documents were redacted to avoid a possible argument that she had waived privilege by providing un-redacted copies of retainer agreements. In Commissioner of Australian Federal Police v Propend Financial Pty Ltd (1997) 188 CLR 501 at 569 Gummow J observed:

    “…the privilege extends to any document prepared by a lawyer or client from which there might be inferred the nature of the advice sought or given. Examples include communications between the various legal advisers of the client, draft pleadings, draft correspondence with the client or the other party, and bills of costs.”

    It is thus well established, for example, that insofar as retainer agreements identify the nature of legal advice sought, they are privileged to that extent.[17] It is clearly settled that the provisions Rule 13.04 do not somehow override a claim for privilege, a contention which appeared to be implicit in the husband’s argument.[18] The husband does not point to any other basis for the wife’s claims to privilege, which have stood undisturbed for over three years by agreement between the parties, to now be lost.

    [16] Husband’s Written Submissions filed 27 July 2020, pg. 11 [53].

    [17] CSR Limited v Eddy [2008] NSWCA 83; (2008) 70 NSWLR 725, [62]; Kirby v Centro Properties Ltd (No 2) [2012] FCA 70; (2012) 87 ACSR 229, [17].

    [18]El Rashidy & El Rashidy and Anor [2020] FamCAFC 40, [56] - [60].

27. I take it that the husband’s argument that the wife and her lawyers have been thwarting “a trial at every opportunity” is intended to suggest they have been in a position to drag out the litigation due the existence of an undisclosed source of funding. However, there is no evidence, direct or indirect, to support this contention. The proceedings may have been dragged out, but on the evidence before me I am not satisfied the wife or her lawyers should be held responsible for this. The husband has himself filed a number of applications which has caused delay in the finalisation of the proceedings. At this stage of the proceedings, I assign no responsibility for delay. Delay in progress of the proceedings of itself provides no basis for an inference that some undisclosed source of funding exists, and the matters referred to at [25] - [26] above are directly against any such inference. Consequently, I decline to draw the inference that either the wife or her lawyers have been deliberately thwarting a trial because of some undisclosed funding arrangement.

28. I am not persuaded any factual basis has been shown by the husband to infer the wife enjoys the benefit of an undisclosed litigation funding arrangement. The wife maintains claim for privilege over the un-redacted parts of her retainer agreements, which I see no basis to disturb. I will refuse the husband’s application.

29. For completeness, I record that the husband made submissions about a change of circumstances. He points to a series of events since the Orders of Tree J made on 13 December 2019 on the basis of which he asserts that the circumstances of 18 November 2016 have “changed significantly”:

    a)on 8 January 2020, he filed an Notice of Appeal seeking leave to appeal and if leave is granted to appeal against orders made by Tree J on 13 December 2019;

    b)on 13 January 2020, the wife filed an Application for Costs; and

    c)on 20 January 2020, the husband had sent the wife’s solicitor an email requesting that un-redacted retainer agreements be produced, which was declined.[19]

    [19] See Husband’s Written Submissions filed 27 July 2020, pg. 3 [11] – [18].

1. The husband also is no longer represented.

2. These changes of circumstance were said to justify the wife producing un-redacted copies of her retainer agreements. It was not explained why a change of circumstances was relevant to the husband’s application. Certainly, the changes of circumstances, referred to in [29] and [30] above, go no distance in supporting his claim that an undisclosed funding arrangement exists in favour of the wife. Indeed the wife’s application for costs is more consistent, in the circumstances, with a need to recover some legal costs in favour of her lawyers which otherwise may not be paid unless she is successful in the substantive proceedings.

3. By reference to the wife’s Applications in a Case respectively filed on 21 September 2018 and 13 January 2020, the husband asserts that his request for the wife’s un-redacted retainer agreements becomes “more relevant”.[20] I do not accept this argument. The wife argues that the determination of the costs application of 21 September 2018 has no connection with her 13 January 2020 application for costs in respect of which judgment stands reserved. She also points to the fact that the husband in responding to the wife’s Application in a Case filed 13 January 2020 did not argue or seek an adjournment of the argument of the application to facilitate his tender of un-redacted retainers.[21] 

   [20] Ibid, pg. 14 [70].

   [21] See Wife’s Written Submissions filed 31 July 2020, pg. 5 [25].

4. Both parties sought a costs order against the other. To save further costs to the parties with regard to the husband’s application, I am satisfied costs should be dealt with in this judgment. The starting position in this jurisdiction is that parties bear his or her own costs.[22] Section 117(2) of the Family Law Act 1975 (Cth) (“the Act”) gives the Court discretion to make a costs order in the appropriate circumstances and the Court has regard to the factors set out in s 117(2A) of the Act to determine whether a costs order is warranted. To achieve an order for costs, it is not necessary to establish extraordinary or exceptional circumstances, but there must be circumstances which, at the absolute discretion of the Court, justify a costs order.[23] It is well-settled that no one factor has priority under s 117(2A), nor must more than one factor to be satisfied, any one factor may be sufficient.[24]

   [22]Family Law Act 1975 (Cth), s 117(1).

   [23]Stoian & Fiening (Costs) [2014] FamCA 944, [19].

   [24] Prantage & Prantage (Costs) [2014] FamCA 850, [12]; Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish and Anor [2005] FamCA 158; (2005) 191 FLR 294; (2005) 33 Fam LR 123, [41].

5. One factor specified in s 117(2A) is whether a party has been wholly unsuccessful. The husband has been wholly unsuccessful in this application. This justifies the making of a costs order in favour of the wife. I have taken account of the husband’s assertions that he is now in parlous financial circumstances, but I have been unable to make a finding about these assertions and they do not outweigh the husband’s complete lack of success. I will order the husband to pay the wife’s costs of his application as agreed or assessed.

I certify that the preceding thirty four (34) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Harper delivered on 18 September 2020.

Associate:

Date:  18 September 2020