Milliford and Milliford
[2019] FamCA 128
•11 March 2019
FAMILY COURT OF AUSTRALIA
| MILLIFORD & MILLIFORD | [2019] FamCA 128 |
| FAMILY LAW – COSTS – Where the husband sought indemnity costs against the solicitor for the wife – Where the wife had sought a declaration that a divorce order and property orders settled by consent in 1998 were improperly obtained – Where the wife was wholly unsuccessful in her application – Where the conduct of the solicitor did not amount to a “serious dereliction of duty” – Application for indemnity costs dismissed. |
| Family Law Act 1975 (Cth) s 117(2A). Family Law Rules 2004 (Cth) r 19.10, 19.11, 19.18 |
| Prantage & Prantage [2013] FamCAFC 105 Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 Hand & Bodilly [2013] FamCAFC 98 Australian Transport Insurance Pty Ltd & Anor v Graeme Phillips Road Transport Insurance Pty Ltd& Ors (1986) 71 ALR 287 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 Jachimowicz & Jachimowicz (1986) 10 Fam LR 566 |
| APPLICANT: | Ms Milliford |
| RESPONDENT: | Mr Milliford |
| SECOND RESPONDENT: | Mr Thomas |
| FILE NUMBER: | SYF | 6832 | of | 1998 |
| DATE DELIVERED: | 11 March 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 17 January 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Valentin |
| SOLICITOR FOR THE APPLICANT: | W Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Young and Muggleton Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Valentin |
| SOLICITOR FOR THE 2ND RESPONDENT: | Mullane & Lindsay Solicitors |
Orders
IT IS ORDERED
That the husband’s application that the wife’s solicitor pay the costs in relation to the application filed 26 July 2017 be dismissed.
That the husband’s application that the wife’s solicitor pay the costs in relation to the application filed 13 February 2018 be dismissed.
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 Milliford & Milliford 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: SYF 6832 of 1998
| Ms Milliford |
Applicant
And
| Mr Milliford |
Respondent
And
Mr Thomas
Second Respondent
REASONS FOR JUDGMENT
Ms Milliford (“the wife”) and Mr Milliford (“the husband”) married in 1994. A decree nisi of dissolution of the marriage was pronounced in July 1999 and became absolute in August 1999.
Consent orders for property settlement were made by the Family Court of Australia on 10 August 1998.
Proceedings were instituted by the wife, acting for herself, by an Initiating Application filed on 6 June 2017 where she sought orders to “quash” the property settlement orders relying on s79A of the Family Law Act 1975 (Cth) (“the Act”). The wife relied on s79A(1)(a) and s79A(1)(b) of the Act. Relevantly, in that application, she did not challenge the making of the decree nisi.
In July 2017 the wife’s Initiating Application was amended. By that time she had instructed a solicitor, Mr Thomas of W Lawyers (the second respondent in this application), in relation to the matter. In the Amended Initiating Application filed by Mr Thomas on 26 July 2017 she sought a declaration that she and the husband had lived in a de facto relationship between August 1999 and June 2016.
The husband filed a response on 5 September 2017, seeking that the application be dismissed and that the applicant pay his costs.
That application was heard on 30 July 2018 and dismissed by judgment delivered on 1 August 2018. The costs application in relation to that hearing will be dealt with in this judgment.
By a second amended initiating application filed by Mr Thomas on 13 February 2018 the wife sought:
Declaration pursuant to section 113 Family Law Act 1975 the Divorce and decree nisi is void and was invalidly obtained.
Declaration that pursuant Property Ordersmade [sic] on 18 August 1998 between the parties were improperly obtained.
Property Orders made on 18 August 1998 vacated.
The wife then sought consequential orders for the distribution of property.
The husband opposed the application and sought costs.
The matter was listed for hearing for two days commencing on 17 January 2019.
The day before the hearing was to commence, the solicitor for the wife sent an email to the Court indicating that all the wife’s applications would be discontinued and filed a Notice of Discontinuance.
Both parties appeared on 17 January 2019. The wife’s applications had all been discontinued.
The husband sought an order, inter alia, that the wife’s solicitor, Mr Thomas, pay his costs both of the proceedings relating to the de facto relationship and of the withdrawn proceedings, on an indemnity basis. The husband did not seek an order for costs against the wife who, it is acknowledged, is in receipt of a social security benefit and has no assets.
Counsel appearing for the wife and Mr Thomas sought an opportunity for Mr Thomas to file an affidavit in response to the application for costs and both parties were directed to advise the Court if the matter should be relisted for further submissions or the application determined in chambers.
Mr Thomas swore an affidavit on 31 January 2019 and written submissions were made on his behalf. The husband was given the opportunity to make submissions in reply and did so, albeit late.
THE LAW
Applications for costs are determined according to the provisions of s117(2A) of the Act in the following terms:
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
Whether costs should be awarded on a party and party basis or an indemnity basis is not governed by the provisions in s117(2A) of the Act.
The Full Court of the Family Court of Australia considered the law in relation to indemnity costs in Prantage & Prantage [2013] FamCAFC 105 (“Prantage”). The majority (Thackray and Ryan JJ) set out the principles to be applied, holding that the principles enunciated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 (“Colgate-Palmolive v Cussons”) should continue to be applied in the Family Court of Australia. The principles (as summarised by Cooper and Merkel JJ in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 at 156-157) were reproduced in Prantage at [82]:
82. …
1.Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2.In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a) the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c) whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
In Hand & Bodilly [2013] FamCAFC 98 (“Hand & Bodilly”) the Full Court of the Family Court of Australia (per Faulks DCJ, Ryan and Watts JJ) considered the appropriateness of an order for indemnity costs, where party/party costs or solicitor/client costs could be ordered. Rule 19.18 of the Family Law Rules 2004 (Cth) (“the Rules”) provides:
(1)That the court may order that a party is entitled to costs:
(a) of a specific amount;
(b) as assessed on a particular basis (eg lawyer and client, party/party or indemnity); …
In Hand & Bodilly, the difference between party/party costs and solicitor/client costs was accepted to be:
91.…
… that on a taxation between parties on a solicitor and client basis, the unsuccessful party has to pay all the costs incurred by his opponent excepting in respect of (1) costs and expenses incurred prior to the institution of the action; (2) journeys and expenses of which the party liable could have no knowledge, and which would not ordinarily be performed or incurred; (3) the employment of more counsel, or the payment to them of larger fees than the circumstances of the case warrant, including the giving of special retainers.
Their Honours went on to compare solicitor/client costs with indemnity costs in the following manner:
102.… Sometimes that discussion equates “solicitor and client” costs with “indemnity” costs but as Santow JA said in Bouras v Grandelis (2005) 65 NSWLR 214:
125. The weight of authority is that solicitor and client costs and indemnity costs are distinct, though the difference between them has been eroded by practice and by inconsistent amendments to the various legislative instruments that make up the costs assessment regime.
126. An order for solicitor and client costs will allow all reasonable costs or all costs as fair justice to the other party will allow. The onus of proving that the costs are reasonable falls on the receiving party.
127. Historically, solicitor and client costs were somewhat more generous than party/party costs. …
It follows that the distinction between indemnity costs and solicitor/client costs, is that the former order provides a complete indemnity for costs actually incurred, with no enquiry as to the reasonableness of the costs incurred. Whereas an order for solicitor/client costs requires an enquiry as to the reasonableness of the costs.
It is open to the Court to make a costs order on the basis of party/party costs, solicitor/client costs or indemnity costs.
When considering whether an order for indemnity or solicitor/client costs would be appropriate, it is instructive to revisit the decision of Sheppard J in Colgate-Palmolive v Cussons at 257 where his Honour reviewed the authorities and said:
4. …The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 ay 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
In Australian Transport Insurance Pty Ltd & Anor v Graeme Phillips Road Transport Insurance Pty Ltd& Ors (1986) 71 ALR 287 at 288 (“Australian Transport Insurance”), with respect to the Court’s discretion in the award of costs, Woodward J said:
That discretion is “absolute and unfettered”, but must be exercised judicially (Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207). Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where “there is some special or unusual feature in the case to justify the court exercising its discretion in that way” (Preston v Preston [1982] 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but, in all the cases I have considered, there has been some further factor which has influenced the exercise of the court's discretion — for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App 40 Christie v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354.
Another case cited in argument was Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 where (at 502) Tadgell J allowed solicitor and client costs because he found the pursuit of the action to have been “a high-handed presumption”.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 at 401 Woodward J, with respect to the award of costs, referred to what he said in Australian Transport Insurance and stated:
No doubt the expression “high-handed presumption” was appropriate in the case Tadgell J [Australian Guarantee Corp Ltd v De Jager [1984] VR 483] had to decide, and he needed to go no further; but in order to establish a convenient principle in such cases it is necessary to be a little more prosaic. I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, 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 or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion. (emphasis added).
The Court needs to be satisfied whether there are exceptional circumstances in this case which would enliven the discretion to depart from the general rule that each party pay his or her own costs, and make an order for costs on a solicitor/ client or indemnity basis.
The Court has the power to make costs orders against legal practitioners. Rules 19.10 and 19.11 of the Family Law Rules 2004 (Cth) provide:
19.10 Costs orders against lawyers
1) A person may apply for an order under subrule (2) against a lawyer for costs thrown away during a case, for a reason including:
(a)the lawyer’s failure to comply with these Rules or an order;
(b)the lawyer’s failure to comply with a pre‑action procedure;
(c)the lawyer’s improper or unreasonable conduct; and
(d)undue delay or default by the lawyer.
(2) The court may make an order, including an order that the lawyer:
(a)not charge the client for work specified in the order;
(b)repay money that the client has already paid towards those costs;
(c)repay to the client any costs that the client has been ordered to pay to another party;
(d) pay the costs of a party; or
(e) repay another person’s costs found to be incurred or wasted.
19.11 Notice of costs order
(1) Before making an order for costs against a lawyer or other person who is not a party to a case, the court must give the lawyer or other person a reasonable opportunity to be heard.
(2) If a party who is represented by a lawyer is not present when an order is made that costs are to be paid by the party or the party’s lawyer, the party’s lawyer must give the party written notice of the order and an explanation of the reason for the order.
The circumstances in which the Family Court of Australia would make an order for costs against a legal practitioner have been discussed by the Full Court of the Family Court of Australia on a number of occasions.
In Jachimowicz & Jachimowicz (1986) 10 Fam LR 566, in circumstances where the legislation then current did not contain provisions for costs to be ordered against solicitors, the plurality of the Full Court of the Family Court of Australia held:
On the question of the Court's power to order a solicitor to pay costs personally the Family Law Rules are silent. There is no provision similar to the English RSC O. 62 r. 8 which gives the Court power to make an order “directing the solicitor to repay to his client costs which the client has been ordered to pay to other parties in the proceedings”, or “directing the solicitors personally to indemnify such other parties against costs payable by them”. The Rule provides that such orders can be made “where in any proceedings costs are incurred improperly or without reasonable cause or are wasted by undue delay or by any other misconduct or default”.
Even the terms of this Rule presuppose that an order is first made against a person other than the solicitor and the solicitor may be then ordered to repay or indemnify such person.
Where the order is made directly and personally against the solicitor it seems that the power to make such an order arises from the inherent power of the Court; and the cases indicate that such orders are not made lightly.
The leading case is Myers v. Elman (1939) 4 All E.R. 484. There, the solicitor for one of the parties had left the conduct of the case in the hands of his managing clerk who was not a solicitor. It was alleged that the solicitor had been guilty of unprofessional conduct in that:
(a) he had filed a defence putting the plaintiff to the proof of her allegations, knowing that the defence was unlikely to succeed; and
(b) had prepared affidavits of documents which no solicitor could help knowing were inadequate.
It was held (Lord Russell of Killowen dissenting), that the affidavits of documents had been inadequate and that in the circumstances the solicitor was guilty of misconduct because, as a solicitor, and as an officer to the Court, he could not escape his responsibility to the Court for the proper discharge of his duties to the Court by delegating them to a managing clerk who was not personally amenable to the jurisdiction exercised by the Court over solicitors as its officers. Viscount Maugham at p. 489 cited with approval the principle laid down by Hatherley L.C. in Re Jones (1870) 6 Ch. App. 497 at p. 499 that it was “the duty of the Court to be equally anxious to see that solicitors not only perform the duty towards their own clients, but also towards all those against whom they are concerned”. In his judgment Viscount Maugham at one stage appears to suggest that the principle would apply in cases of mere negligence by a solicitor; but a close reading of his Lordship's judgment indicates otherwise. Certainly his Lordship said: “If, then, as I think, the authorities show that the jurisdiction may be exercised where the solicitor is merely negligent...”, but the sentence immediately preceding that in his Honour's judgment after referring to earlier cases, reads: “These cases did not depend on disgraceful or dishonourable conduct by the solicitor, but depended on mere negligence of a serious character, the result of which was to occasion useless costs to the other parties”. Thus, although his Honour does use the term “merely negligent”, such term is governed in its context by the expression “of a serious character”. This is further emphasised by his Honour where, at p. 490, he says: “I entirely agree with the contention that the jurisdiction in question ought to be exercised only when there has been established a serious dereliction of duty as a solicitor, either by himself or by his clerks.” Viscount Maugham agreed with the trial Judge that the solicitor in the case had been guilty of “professional misconduct” (see p. 496), and we take that to be a term of greater severity than “mere negligence”.
The judgment of the other members of the Court indicate that, to attract an order for costs under this inherent jurisdiction of the Court, a solicitor must exhibit a degree of blameworthiness beyond mere negligence. Lord Atkin was of the view that the finding that, “in resisting further discovery, the solicitor was obstructing the interests of justice, adding to the difficulties of the plaintiff and causing delay where a speedy judgment was of great importance”, was well warranted (p. 500). His conclusion was: “It is because the rule of conduct was in this case gravely broken that I think that the salutary decision of Singleton J. should be restored.”
Lord Russell of Killowen dissented because he was of the view that the conduct complained of had not been proved. He had “an uneasy feeling that the Judge may, in arriving at his findings of fact, have unconsciously transferred to a solicitor and his clerk the prejudice which properly attached to the rogues for whom they were acting”.
Lord Wright at pp. 508-509 says:
“The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally, as was said by Lord Abinger, C.B., in Stephens v. Hill (1842) 10 M. & W. 28. The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice.”
Lord Porter was of the view that the findings of the trial Judge were enough to fix the clerk and his employer solicitor with “professional misconduct” (p. 522).
In R & T Thew Ltd. v. Reeves (No. 2) (1982) 3 All E.R. 1086 the Court of Appeal consisting of Lord Denning M.R., Dunn and O'Connor L.JJ., following Myers v. Elman (supra), held that the jurisdiction of the Supreme Court over solicitors as officers of the Court is both punitive and compensatory, although, as Lord Denning points out the compensatory jurisdiction still retains “a disciplinary slant”. Discussing this jurisdiction, the learned Master of the Rolls said: “The cases show that it is not available in cases of mistake, error of judgment or mere negligence. It is only available where the conduct of the Solicitor is inexcusable and such as to merit reproof”. Lord Denning referred to the different terms used by the Law Lords in Myers v. Elman (supra) to describe the circumstances which would call for the exercise of the compensatory jurisdiction: “A serious dereliction of duty” (Viscount Maugham); “Gross negligence” (Lord Atkin); “Gross neglect or inaccuracy” (Lord Wright); ``Grossly negligent” (Lord Porter).
In the case of R & T Thew Ltd. v. Reeves (No. 2) (supra) the Court of Appeal refused an application for costs to be paid by solicitors of one party because, although there was error on the part of the articled clerk of a solicitor's firm, it was, in Lord Denning's words, “at worst a mere slip”. In the words of O'Connor L.J., “now that I have seen the account given by the articled clerk of exactly what occurred I find it quite impossible to say that it discloses the kind of misconduct spoken of in speeches in Myers v. Elman which I have cited”.
In Mauroux v. Pereira (1972) 2 All E.R. 1085 at p. 1092 Megarry J. discussed the Court's power to order a solicitor personally to pay the costs of the proceedings. He said:
“It is not entirely clear whether the jurisdiction should be regarded as punitive or as compensatory, or as some combination of the two: the speeches are not altogether consistent, and in any case something may depend on the point of view. A defendant who is ordered to pay a fine of £50 and a defendant who is ordered to pay £50 damages is, in a sense, equally punished by each order. The difference appears in the position of the person injured, in that damages go into his pocket and a fine into the public purse. The better view seems to be that the jurisdiction is compensatory, at least primarily. In Edwards v. Edwards [(1958) 2 All E.R. 179], Sachs J. discussed Myers v. Elman, and then said: “The jurisdiction is exercised not to punish the solicitor but to protect and compensate the opposite party.”
However, even on the footing that the jurisdiction is compensatory, not all breaches of duty suffice to invoke it. As the Judge said, an error of judgment is not enough:
“nor is even an error merely because it is of an order which constitutes or is equivalent to negligence. There must be something that amounts, in words of Lord Maugham, to `a serious dereliction of duty', something which justifies according to other speeches in that case, the use of the word gross. It is not, however, normally necessary to establish mala fides or other obliquity on the part of the solicitors, though it may be that if mala fides is established that might turn the scale in a particular case...”
As counsel for the plaintiff pointed out, in Myers v. Elman Lord Wright said: “A mere mistake or error of judgment is not generally sufficient, but gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice.”
With perhaps an exception for exceptional cases, it is not enough merely to establish negligence.”
In that case Megarry J. found that the conduct of a solicitor did not fall within the scope of the Rule nor that it came within the provisions of RSC O. 62 r. 8.
In Edwards v. Edwards (1958) 2 All E.R. at p. 179 the solicitor for one party was ordered to pay costs on the basis that his conduct in not making a proper appraisal of a situation which he ought to have made after discovery was “of the serious nature” to which the speeches in Myers v. Elman refer. Here, the conduct of the solicitors was held by Sachs J. “to be oppressive and therefore well within the test of Myers v. Elman”. However, Sachs J. in discussing the type of conduct complained of said (at p. 186):
“It is, of course, axiomatic, but none the less something which in the present case should be mentioned, that the mere fact that the litigation fails is no reason for invoking the jurisdiction... nor is even an error merely because it is of an order which constitutes or is equivalent to negligence. There must be something that amounts, in the words of Lord Maugham (ibid. at p. 490) to `a serious dereliction of duty', something which justifies according to other speeches in that case, use of the word gross.”
It would seem, therefore, that something more than “mere negligence” is required before the Court can exercise its inherent jurisdiction in ordering a solicitor to pay costs personally. While it is difficult to reconcile the various expressions used in the cases we have cited we consider they establish that a degree of blameworthiness in the solicitor must be shown including, but beyond, negligence simpliciter: conduct which attracts the censure of the Court in a serious way; or to return to the words of Viscount Maugham “a serious dereliction of duty”.
Thus it is clear that the basis upon which an order might be made for a party to pay costs is different from the basis upon which a lawyer might be ordered to pay. The standard which is applicable to the determination of whether a lawyer should be responsible for costs is a higher and stricter standard than that which applies to a party.
A determination that a party should be liable to pay costs, even indemnity costs, does not automatically translate to a determination that, the party being impecunious, the lawyer should pay the costs.
The tests are entirely different.
In order to understand the basis on which the husband’s application is made, it is necessary to consider the circumstances in which the order for property settlement and the divorce order were made in 1998.
CONSENT ORDERS FOR PROPERTY SETTLEMENT
The proceedings in relation to property settlement were filed in the Family Court of Australia and the Court file is available for inspection.
An Application for Consent Orders for property settlement and parenting orders was filed in the Sydney Registry of the Family Court of Australia on 24 July 1998. The wife was the applicant. The wife was represented by the Legal Aid Commission of NSW. The application was signed by the wife and her signature was witnessed by her solicitor, Ms Tucker who also signed a Statement of Independent Legal Advice. The application recites the date of final separation as November 1997.
At Part F of the Application for Consent Orders, the wife stated:
The child resides with the mother.
The child is supervised by the mother and members of his extended family.
The child is supported by the mother and the father has contributed $50.00/week to his financial support for six months.
In answer to the question “Who else will live in the child’s home?” the wife stated “Mother”.
At Part G, the application recited that the Suburb E property had a value of $170,000 and that she had personal effects worth $30,000. She disclosed a mortgage over Suburb E of $103,000.
The wife swore an affidavit deposing that she had received independent legal advice, that she agreed to the orders being made and that the contents of the application were true.
Thus the equity in Suburb E was asserted to be $67,000.
The consent orders were made on 10 August 1998. The orders provided for the parties’ son to live with his mother and spend time with his father. The parties were to have joint responsibility for long term parenting decisions.
In relation to property, the orders provided that the husband pay the wife $45,000 and indemnify her against liability for the mortgage. Upon payment, the wife was to transfer her interest in Suburb E to the husband and vacate the property taking specified chattels.
The version of events provided in the affidavit of the wife sworn on 30 November 2018, and filed under the cover sheet of W Lawyers bears no resemblance to the Court record.
The wife deposed:
On or about 1998 after [proceedings relating to an apprehended domestic violence order], the Respondent Father’s lawyer (Ms Z) was ringing me to sign some document at her … Office. The respondent father and his lawyer were present at the time of signing. It was no explained to me by a Solicitor and I did not understand at the time that I was transferring my interest in the Suburb E residence to the Respondent Father.
The wife received $45,000 which she said she deposited in her bank account.
The wife deposed that it was not until 2016 that she discovered that she was no longer an owner of the Suburb E property.
That is the extent of the wife’s evidence in relation to the circumstances surrounding the making of the property orders.
THE DIVORCE APPLICATION
The Court file shows that the Divorce Application was filed on 16 June 1999. It was returnable on 30 July 1999. The husband was the applicant. The application stated that the parties had separated in November 1997 and set out the arrangements for the parties’ child in similar terms to those contained in the consent orders.
An Affidavit of Service by a licensed commercial sub-agent was filed on 20 July 1999 deposing to service on the wife on 29 June 1999 and annexing an Acknowledgement of Service. The signature on the Acknowledgement of Service is strikingly similar to the signature of the wife on the Application for Consent Orders.
A decree nisi was pronounced on 30 July 1999 and became absolute on 31 August 1999.
The wife’s evidence in relation to the Divorce Application was also contained in the affidavit sworn on 30 November 2018. She deposed that on 29 June 1999 she was served with the Application for Divorce and asked to sign the acknowledgement. She deposed that she said to the process server that she and the husband were still living together. She signed the Acknowledgement.
The wife deposed that she and the husband had not separated and were still living together. I note that, in the Application for Consent Orders referred to above, the wife deposed that the parties had separated in November 1997.
The wife deposed that she asked the husband about the application and he said “Do not worry, I will fix it”. She asked him if he wanted her to come to Court and he said “no”.
The wife deposed that she attended at the Family Court of Australia on about 13 July 1999 but did not appear before the Court and the order was made in her absence.
The wife deposed that the husband, outside the courtroom, told her “everything was fixed” and that she understood that the application had been withdrawn.
THE PROCEEDINGS IN RELATION TO ASSERTED DE FACTO RELATIONSHIP
This application was determined by orders made on 1 August 2018. The wife’s application for a declaration that the parties had lived in a de facto relationship until 2016 was dismissed.
The reasons for that dismissal are set out in the judgment delivered on 1 August 2018. The wife was unable to establish, on the balance of probabilities, that a de facto relationship had existed.
From the narrative above, it can be seen that the three applications fall into different categories.
The application for a declaration of the existence of a de facto relationship was made by the wife, and her affidavit prepared by her solicitor, on the basis of her version of the relevant circumstances. There was no application already on the Court file and no previous determination dealing with the same allegations. It could not be suggested that the solicitor, had he searched the Court file, would have been alerted to a different version of the relevant events that would have led him to conclude that the wife’s application was without foundation or merit.
I propose to consider the issue of costs in relation to that application separately from those of the applications listed for hearing on 17 January 2019.
COSTS OF THE DE FACTO PROCEEDINGS
Judgment was delivered in relation to this application on 1 August 2018. The application was dismissed, the wife having failed to demonstrate, on the balance of probabilities, that a de facto relationship had existed at the relevant time.
This was a matter where the wife’s evidence was disputed and she bore the onus of proof.
Mr Thomas deposed that he prepared the matter for hearing on the basis of the wife’s instructions. He contended that, had the wife’s evidence been accepted, the Court could have found that a de facto relationship existed.
Although no costs are sought against the wife, it is instructive to look at the provisions of s117(2A) of the Act.
The wife’s financial position is vastly inferior to that of the husband. She is in receipt of a pension and has no assets.
The wife was not in receipt of legal aid.
I was not directed to any conduct on the part of the wife, or failure by her to comply with any order that would warrant the making of a costs order.
The wife was wholly unsuccessful.
The only matter that could attract an order for costs against the wife is that she was wholly unsuccessful. I do not accept that, as submitted on behalf of the husband, the fact that the wife did not institute the proceedings until some 18 years after the orders were made is a relevant factor.
The submissions filed on behalf of the husband make reference to an offer of settlement made on behalf of the husband on 8 August 2019. However, that offer related to the proceedings seeking to set aside the property and divorce orders, not the proceedings seeking a declaration as to the existence of a de facto relationship.
I accept that there was evidence in the wife’s case which, if accepted, could have led to a finding that a de facto relationship existed.
However, whilst the wife was wholly unsuccessful, I do not accept that the conduct of the solicitor, in conducting the proceedings based on the wife’s instructions, falls within that category of conduct constituting “a degree of blameworthiness in the solicitor...including, but beyond, negligence simpliciter: conduct which attracts the censure of the Court in a serious way; or to return to the words of Viscount Maugham “a serious dereliction of duty”.
The application that the solicitor pay the husband’s costs of the application relating to the alleged de facto relationship fails and will be dismissed.
COSTS OF THE APPLICATIONS TO SET ASIDE THE PROPERTY ORDERS AND THE DIVORCE ORDER
The main focus of these applications was the setting aside of the property order and the evidence in relation to setting aside of the divorce order was minimal.
Central to the wife’s case was her contention that she knew nothing of the Application for Consent Orders until some 18 years after the orders were made. She deposed “I only became aware about my interest in the Suburb E residence when I received a letter from the New South Wales Civil and Administrative Tribunal (NCAT) on or about 15 June 2016”.
The wife deposed that in July 2016, she attended at the Family Court of Australia and was given a copy of the Application for Consent Orders filed on 24 July 1998. She set out in her affidavit the errors of fact that she asserted were contained within that document. It is reasonable to assume that the wife’s solicitor had a copy of the application, was aware that the wife was the applicant and that the wife was legally represented when she made the application.
The offer of settlement to which reference was earlier made, was referable to these proceedings. It is necessary to set out the terms of the offer made by email on 8 August 2018, shortly after judgment was delivered in the de facto proceedings:
1.The Court affirms the consent orders made in proceedings SYF 6832 of 1998 on 10 August 1998.
2.Pursuant to the judgement of Rees J made on 1 August 2018, the Court declares that the parties were not in a de facto relationship after 30 March 2006 and therefore this court has no jurisdiction to make orders concerning any such de facto relationship as it is outside the jurisdiction of the Family Court which commenced on 1 March 2009.
3.The Court declares that by reason of the judgement of Rees J made on 1 August 2018, the applicant has no right, title or interest in any property of the respondent including without limitation the proceeds of sale of D Street Suburb E.
4.The application filed by the applicant on 12 July 2017 is dismissed.
5.The amended initiating application filed by the applicant on 26 July 2017 is dismissed.
6.The further amended initiating application filed by the applicant on 13 February 2018 is dismissed.
7.The orders of McLellan J [sic] dated 19 July 2017 be vacated.
8.The respondent’s solicitor, Timothy Young of Young and Muggleton, is ordered to release from his trust account the balance of the proceeds of sale of D Street Suburb E (being $500,000) and pay them to the respondent within seven (7) days of these orders.
9.The applicant is restrained from seeking to set aside the consent orders made in proceedings SYF 6832/1998 on 10 August 1998.
10.Costs of these proceedings awarded to the respondent.
As can readily be seen, orders 1 to 3 of the offer are not orders which would be made by a Court. The balance of the offer, that the applications be dismissed and the wife pay the husband’s costs, is not an offer made for the purpose of compromise but merely restates the husband’s position.
The terms of the offer do not attract consideration for the purpose of s117(2A) of the Act.
In his affidavit, Mr Thomas deposed that, after seeking independent advice, the wife declined to waive her legal professional privilege in respect of advice given to her by Mr Thomas. I accept the submission on behalf of Mr Thomas that, where a solicitor is prevented, because of the constraints of legal professional privilege, from giving evidence of the full circumstances relevant to the case, then the solicitor must have the benefit of any doubt in order to avoid any unfairness.
I accept the submission on behalf of Mr Thomas that there is no evidence the wife would not have pursued the applications had it not been for Mr Thomas’s advice. It is the case that the original proceedings were instituted by the wife at a time when she had no legal representation. Although the relief originally sought by the wife was different in its form from the relief sought in the amended application, the substance is the same, that is, that the consent orders be set aside because of irregularity. I also accept the submission that there is no evidence that, had the wife pursued the applications without the assistance of Mr Thomas, they would have been conducted more efficiently.
I am unable to find that Mr Thomas’s conduct in conducting the proceedings falls within any of the provisions of Rule 19.10(1) of the Family Law Rules 2004 (Cth) or that it falls within that category of conduct which could be described as a “serious dereliction of duty”.
The application that the second respondent pay the husband’s costs of the proceedings will be dismissed.
I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 11 March 2019.
Associate:
Date: 11 March 2019
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