Moriarty & Moriarty
[2009] FamCA 369
•13 May 2009
FAMILY COURT OF AUSTRALIA
| MORIARTY & MORIARTY | [2009] FamCA 369 |
| FAMILY LAW – ORDERS – ENFORCEMENT of property and spousal maintenance orders – Garnishment order – Costs on and expenses for complying with subpoena –Indemnification of issuing party relating to costs and expenses where subpoena necessary because other party in default of discovery orders – Costs generally |
| Family Law Act 1975 (Cth) |
| Deposit & Investment Co Ltd (Receivers Appointed) and Others v Peat Marwick (1996) NSWLR 267 G and D & D [2005] FamCA 1429 Lucas Industries v Hewitt (1978) 18 ALR 555 Mitchell & Co (1996) NSWLR 267 Penfold v Penfold (1980) FLC 90-800 Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 Kennedy and Evans; Trust Bank (Intervener) (1994) FLC 92-514 Relationships Australia (Qld) v M [2006] FamCA 1265 |
| APPLICANT: | Ms Moriarty |
| RESPONDENT: | Mr Moriarty |
| FILE NUMBER: | MLC | 12229 | of | 2007 |
| DATE DELIVERED: | 13 MAY 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | THE HONOURABLE JUSTICE CRONIN |
| HEARING DATE: | 5 MAY 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MS WILLIAMS |
| SOLICITOR FOR THE APPLICANT: | LANDER & ROGERS |
| COUNSEL FOR THE RESPONDENT: | MS COLLA |
| SOLICITOR FOR THE RESPONDENT: | LEANNE CAIN & ASSOCIATES |
Orders
I DECLARE that the husband owes the wife the following pursuant to orders of the Court to date including the costs of these immediate proceedings:
(a) $30,000.00 under the property orders;
(b) $4024.00 in interest;
(c) $680.00 for the costs of Mr W;
(d) $18,900.00 for spousal maintenance due to 6 May 2009; and
(e) $20,000 for the wife’s costs.
I DECLARE that as a sole trader, the husband is owed consultancy fees by A ENTERPRISES PTY LTD, and/or N GROUP PTY LTD and/or N PTY LTD.
IT IS ORDERED that each of the entities referred to in paragraph 2 of these orders collectively pay to the wife the sum of $1,200 per week for so long as they remain indebted to the husband until the discharge of the total referred to in paragraph 1 hereof.
IT IS FURTHER ORDERED that if the husband is paid a lump sum for any accrued benefits attributable to his work as an employee, contractor or consultant to the entities referred to in paragraph 2, whether by way of termination benefits or otherwise, those sums be paid in full to the wife to the extent necessary to discharge the total sum referred to in paragraph 1 hereof.
That in the event that each and/or any of the entities referred to in paragraph 2 no longer owes the husband any money, IT IS DIRECTED that they or any of them provide the wife with a written advice to that effect.
That the order made on 23 April 2009 that the wife pay the costs of LEANNE CAIN & ASSOCIATES fixed in the sum of $400 be discharged.
That the entities referred to in paragraph 2 hereof have liberty to apply on appropriate application in the event that they or any of them require orders relating to the implementation of paragraphs 3 and 4 of these orders.
IT IS CERTIFIED that in the circumstances, it was appropriate to brief counsel to appear for the parties.
That all outstanding applications be otherwise dismissed and all proceedings be removed from the list of cases awaiting a hearing.
IT IS NOTED that publication of this judgment under the pseudonym Moriarty & Moriarty is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 12229 of 2007
| MS MORIARTY |
Applicant
And
| MR MORIARTY |
Respondent
REASONS FOR JUDGMENT
On 21 July 2008, I made orders at the request and consent of the parties resolving parenting, property and spousal maintenance. That was supposed to end all outstanding matters between the parties. Unfortunately, it did not.
The relevant parts of the july 2008 orders
The relevant parts of the orders which have required the parties to continue litigating were:
(a)that the husband pay to the wife $150,000 by instalments as a property settlement;
(b)that the wife provide the husband various chattels; and
(c)that the husband pay spousal maintenance at the rate of $700 per week.
The $150,000 property order was to be paid by instalments as follows:
·$100,000 by 22 September 2008;
·$30,000 before 24 November 2008; and
·$20,000 before 26 January 2009.
It was agreed that when the matter came before the Court in March 2009, the property payments were in arrears. Agreement was reached to vary the payment dates in a minor way but there are still monies outstanding now totalling $30,000.
The $700 spousal maintenance was to be paid until the first of the following events:
(a)31 December 2009;
(b)the wife’s remarriage; or
(c)the wife living in a domestic relationship.
The chattels were described in a long list annexed to the July 2008 orders and included wine, cookbooks and computer files. Whilst there was a collection and handover day, the husband asserted that there were several things he did not receive and he placed a value on them by way of compensation. It was ultimately conceded that I could not make the compensatory orders sought.
The wife said she provided all of the chattels she had notwithstanding it was less than the list required and the husband said he did not know whether the wife still had more or not. It appeared that there were some items put out but the husband did not find them. Such is the level of mistrust and communication.
The husband stopped making spousal maintenance payments in November 2008 on the basis that he believed that his wife was living with her boyfriend. He described his belief as “genuine”.
Orders made in March 2009
In an earlier hearing before Brown J in March 2009, the husband was ordered (with his consent) to provide various documents to the wife. The deadline for so doing passed without his compliance. The orders also provided for the wife to issue subpoenae relating to the husband’s financial position.
The wife issues subpoenae
The husband’s default led the wife to issue subpoenae to various people to obtain documents about his financial position. Two recipients sought reimbursement of expenses in excess of the conduct money provided and two different registrars made orders for those payments. Both registrar orders were matters in dispute before me.
The current applications
This sad and sorry tale brought the parties back to the Judicial Duty List with a variety of applications. They were:
(a)the wife sought to review the registrar’s decision that she pay $400 towards the expenses of the husband’s solicitor when the solicitor complied with the first of the subpoenae mentioned above;
(b)the wife sought enforcement of the arrears of spousal maintenance and the unpaid property sum together with interest at 12.25% per annum;
(c)the wife sought to have the husband indemnify her concerning her obligation to pay the recipient of the second subpoena $680 for compliance and production of documents;
(d)the wife initially sought but ultimately abandoned, the pursuit of a capitalisation of the unpaid spousal maintenance;
(e)the husband initially sought but subsequently did not pursue, the return of the chattels.
The affidvit material and evidence
Each party filed a number of affidavits and a financial statement and gave evidence which was subjected to cross examination.
Leaving aside the formal parts of the wife’s evidence about the proving of the debt due to her under orders, she said that she was reliant upon the child support and spousal maintenance to live. Despite the husband’s assertion to the contrary, she maintained that she was not living with her boyfriend. She said that her boyfriend who provided an affidavit confirming that he was not living with her, had a toothbrush at her rented house and brought a change of shirt if he was staying overnight. Despite a valiant effort by counsel for the husband to tie her down, the wife would not say any more than her boyfriend visited at various times, stayed overnight at various times and there was no pattern.
The wife was cross examined on a rental application form concerning her current residence in which she stated that there would be 2 adults and 1 child residing there. She explained that when the form was completed in 2008, her mother was the other adult referred to. She said it was intended that her mother would live there whilst she went back to work but she was unable to do so because of health and other reasons. She said her mother later moved out. She said that she paid the bond from her property settlement money. In the form, she described her employment as “General Manager” of a company of which she and her sister were directors and shareholders. None of that was news because the husband was aware of the details. The form also required her to disclose her employer but it could also be read as including her accountant as an alternative. She nominated her boyfriend on the basis that he had given her some accounting advice.
The wife was evasive and loquacious as well as distressed giving evidence. However, none of the evidence could possibly satisfy me that she was living in a “domestic relationship”. There was no definition in the July 2008 orders as to what the parties meant by “domestic relationship” but I have construed it to mean much the same as that set out in s 4AA of the Family Law Act 1975 (Cth) (“the Act”) the relevant parts of which read:
A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b) the persons are not related by family; and
(c) having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
Those circumstances may include any or all of the following:
(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e)the ownership, use and acquisition of their property;
(f)the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h)the care and support of children; the reputation and public aspects of the relationship.
(i)It is interesting that the section goes on to say that no particular finding in relation to any of the above circumstances is to be regarded as necessary in deciding whether the persons are in a de facto relationship.
There was no evidence before me to enable me to find that the wife is living in a domestic relationship on even the most liberal of some of the matters set out above.
The husband told me in his evidence that he “genuinely” believed that his wife was living with her boyfriend.
Finding about the spousal maintenance obligation
I find that the wife certainly had a boyfriend but that is as high as it could be put. I do not find there is evidence that the relationship was such that it would trigger the end of the spousal maintenance order.
Chattels
The wife was questioned about chattels. She said that in relation to the wine, she did not drink any after the orders were made and that what the husband got was what was left. This dilemma highlights the problem of courts making orders in less than precise terms such as “approx 100 bottles of vintage wine”, “personal photographs”, “a number of large books mainly cookbooks” and “the husband’s entire stamp collection in 2 bags”. Each party must be conscious that the terminology is bordering on unenforceable despite the fact that each seems to be saying that they know exactly what they are all talking about. It is made more difficult here because I was not dealing with a contravention of an order but rather a request for an order that the wife comply. It was impossible to determine any outcome without some evidence that the existence of the relevant assets could be proved.
The property order
Similarly, the wife’s application sought an order that the husband pay the money due to her under the property settlement. That order had already been made and ought not be made again.
In the wife’s case, there was no application for the husband to be dealt with for contravention of the orders but I did indicate that as the wife was seeking an order for the enforcement of money, she could make an oral application for any of the orders available on such an application. The husband could not argue about being taken by surprise.
The husband’s financial position
In respect of the husband’s financial position, he maintained that he could not afford to pay the capital sums or the spousal maintenance but the problem he faced was that he made conscious priority choices before meeting his obligations. Even allowing for the “genuine” view that he adopted that the wife was no longer entitled to spousal maintenance, he still had obligations to pay the property sums. In cross examination, he conceded that he had significant debts and that he chose to meet some of those by agreement, including a debt to Mr W who was the subpoena recipient to whom I shall turn in a moment. It is also important to note that these debts were extant when the final property orders were made in July 2008.
Mr W and the husband have a long-standing financial arrangement whereby the husband undertakes work and is paid as a consultant. The husband conceded that he had been a director of the Mr W’s company some years ago but as a result of having a taxation debt dispute, he did not believe it appropriate for him to continue. Since then, he had been a self-employed consultant.
In addition to the debt arrangements, the husband also had used his credit cards for Christmas presents, restaurants and the purchase of wine which he said were business–related but for which he was not reimbursed. That evidence highlighted his lifestyle which would seem inconsistent with an inability to pay a maintenance and property instalment obligation.
Another dilemma is that the child of the parties is currently enrolled in a private kindergarten at significant expense to the husband whilst the wife receives Centrelink benefits.
I find therefore that the husband could have chosen to meet his obligations under the Court orders first before engaging in the various financial activities to which I have referred.
There is therefore no basis for him not to have paid the spousal maintenance or the instalments under the property orders.
The problem does not end there though. Mr W has served notice of termination of the financial arrangements with the husband as from the end of May 2009 citing the current economic woes.
The husband gave evidence and I accept what he said, that there was no conspiracy between he and Mr W to somehow avoid his obligations. As the evidence of his statements has been recorded, the future will tell whether I am misplaced in accepting his evidence about the dire financial position.
The husband told me that he could simply go bankrupt but that did not appeal to him and that he would struggle on including working out a way to reimburse Mr W for the debt that he is owed of over $300,000. When I asked how he would struggle on, the husband said that he would find work at various levels. He has accounting qualifications.
I find therefore that he still has the financial capacity to pay the spousal maintenance payments and the outstanding property instalments.
The only avenue of enforcement open to the wife was by way of garnishment order of the husband’s current entitlements because it is common ground that there are no assets.
It was left to me to determine how the garnishee of his existing entitlements would work because neither party had specifically addressed that.
The first subpoena dispute
On 16 March 2009, the parties appeared before Brown J and consented to orders that required the husband by 30 March 2009 to provide “all documents evidencing the matters set out in his financial statement, the husband’s net income from consulting and other businesses…..”
The orders provided that the parties were at liberty to issue subpoenae.
The husband did not provide the documents required.
On 14 April 2009, the wife issued a subpoena to the husband’s solicitor to produce a copy of all trust and office account ledgers maintained concerning the husband.
The subpoena was returnable before a registrar on 23 April 2009. Quite appropriately, the solicitor provided the documents to the Court.
On 21 April 2009, the husband’s solicitor wrote to the Court seeking payment of her costs which she calculated as $743.75. That sum was based on her time plus photocopying and a bookkeeper’s expense.
The registrar made an order that the wife pay the costs of the solicitor fixed in the sum of $400.00. The wife filed an application to review that decision.
The letter from the subpoenaed solicitor set out that she was involved in the document-collating exercise for 1.5 hours and the bookkeeper for 2.5 hours. The bookkeeper involved herself in attending the solicitor’s office, preparing reports, photocopying and reviewing what had been collated.
The review power
Pursuant to Rule 18.10 of the Family Law Rules 2004, the power of the Court on review is described as follows:
1.A court must hear an application for review of an order of a Judicial Registrar, Registrar or Deputy Registrar as an original hearing.
Note In an original hearing, the court rehears the whole matter and does not simply review the decision of the original court.
2. This is therefore a denovo hearing.
The rules relating to expenses to be paid
Claims for reimbursement of expenses and costs by the recipient of a subpoena are dealt with in rule 15.23. It provides:
(1) A named person is entitled to be paid conduct money by the issuing party at the time of service of the subpoena, of an amount that is:
(a)sufficient to meet the reasonable expenses of complying with the subpoena; and
(b)at least equal to the minimum amount mentioned in Part 1 of Schedule 4.
...
(3) A named person may apply to be reimbursed if the named person incurs a substantial loss or expense that is greater than the amount of the conduct money or witness fee payable under this rule.
Rule 15.26(c) must be read with that. It provides that if a named person seeks to be paid for any loss or expense relating to the production of a document in compliance with the subpoena, the person must attend court to apply for the order. The specific attendance at court however should only be compensated for if the party seeking the expenses has indicated what costs and expenses are being pursued prior to the hearing date and there is a disagreement about them.
Rule 15.23(1) refers to Schedule 4 to the rules which provides for $10.00 conduct money to be paid at the time of service of the subpoena. In this current business climate, that sounds very arbitrary and modest but it is intended to cover postage, packaging, transport costs and the like rather than any compensation for lost time.
The dilemma for a practitioner issuing a subpoena is that if the recipient claims not to have been appropriately provided compensated for complying, the recipient has no choice but to attend at court to pursue their expenses. That in turn can lead to further argument about expenses.
The Authorities
The loss or expense that the recipient may seek includes the expenses of finding, collecting, collating, marshalling and producing the documents or materials sought and for the incidental cost of attending the court (Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284).
The view taken under the old rules prior to 2004 was that an order for payment of expenses was intended as a way of compensating a subpoenaed third party but it did not cover loss of income connected with compliance. (Kennedy and Evans; Trust Bank (Intervener) (1994) FLC 92-514)
In some circumstances where a subpoena seeks production of complex materials or the recipient needs to obtain legal or accounting advice, he or she may also include a claim for recovery of the costs of that advice including representation.
Any payment ordered under r 15.23(3) or r 15.26(c) is not intended as a penalty but as compensation for legal and other professional costs incurred (Relationships Australia (Qld) v M [2006] FamCA 1265).
Professional people receiving a subpoena
There may be a tendency to focus on the claims of a professional person whose profits are determined by time. However, the same issue would arise for a bobcat driver who contracts out at an hourly rate or a consultant who charges on either a time billing or value billing basis or for a police officer whose department takes him “off line” so that documents can be collated and brought to court. These claims are often based upon time lost in responding to a subpoena.
In Deposit & Investment Co Ltd (Receivers Appointed) and Others v Peat Marwick Mitchell & Co (1996) NSWLR 267, Bainton J (at 292-293) said the income of a firm of solicitors in any period must first meet its fixed and its variable costs. Anything that remains was divisible among the partners. His Honour pointed out that if a non-professional employee devoted time to searching for documents to answer a subpoena, it was an additional cost which must be met and should be recompensed. If a partner was required to perform such a task, that did not increase the expense to the partnership but it did reduce the income. His Honour was of the view that the effect on the bottom line was the same in principle, though not in amount, because the partner's charge-out rate would exceed an employed solicitor's charge-out rate. His Honour said that that may be overcome by that partner working longer hours, but if that occurred, the end result was that the firm had lost the financial benefit of those longer hours by having the partner’s ordinary working hours rendered in fact non‑income producing by having to search for documents to answer a subpoena.
Bainton J held that if a firm was required to answer a subpoena, it was entitled to be reimbursed in respect of a partner's time spent on that task at the ordinary charge-out rate. If the work was done by an employed solicitor, the reimbursement should be at that solicitor's charge-out rate provided the partner or employee would be otherwise devoting that time to chargeable work.
There are three reasons why that principle should not apply to a professional person who receives a subpoena from this Court. The first is that there is nothing in the rules nor should there be that gives any profession or business sector a right to claim expenses based upon their respective scales or charges. It is inappropriate for a court to look at those scales as anything more than a guide. For example, a solicitor who charged their client based upon a costs agreement would be seeking indemnity costs if not more, as in this case, if the court simply gave them what was sought.
The second reason is that even if a court considered the scale or charge-out rate, is it the loss to the recipient or the firm that is to be compensated? What does a court factor into its deliberations for overhead expenses, taxation and the like? It becomes a difficult and unwieldy task.
The third reason is that the subpoena process is an integral part of the administration of justice. If we are to enjoy the benefits of a justice system, the community must be prepared to bear that cost to some degree. For example, Bainton J referred to a legal firm losing the financial benefit of a partner or employee’s longer hours by non-income producing activity. The same could be said of the bobcat driver who has to work a little longer to make up for the time lost in collating and dealing with the subpoena. In my view, that is a facet of community responsibility.
What is the loss to be compensated?
The rules refer to a “substantial” loss or expense.
The determination of what is substantial is very subjective. In my view, it means that the expense must be large causing loss; it must be unusual in the sense of requiring normal activity to be stopped; or it must cause an unfair inconvenience having regard to the fact that the recipient has nothing to do with the litigation.
Assessment of the reasonableness of burdens involved in complying with a subpoena must take account the capacity of a party to collect and produce the documents. That means that in a large organization, the capacity to cover the expense is greater than in a small organization (see Lucas Industries v Hewitt (1978) 18 ALR 555 and G and D & D (2005) FamCA 1429).
Notwithstanding the administration of justice issue, the rules are not intended to put the individual presenting the documents in a position where they lose income or capital. The rule however refers to a substantial expense and each situation must be determined on its peculiar facts.
However, if the subpoena is simple and clear, requiring the production of the recipient’s own documents, the inconvenience is intended and expected to be minimal.
Thus, in a case where a professional fee is claimed or the bobcat driver claims significant hours of “downtime”, the question still remains whether the finding, collecting, collating, marshalling and producing the documents or materials required the attention of the owner, partner or professional or whether it could be done by a clerical person albeit with some ownership or professional oversight. It is that question that the judicial officer has to ask in every case.
The outcome is determined by the exercise of a discretionary judgment guided by the rules of court.
For a “named person” to seek a sum which is controversial or disputed, there is no other way of being able to exercise the court’s discretion other than by having some evidence and that requires the claimant to file an affidavit or, in the event that the person has attended on the day, by hearing some brief oral evidence as to what expense was and was not reasonable. Whilst I appreciate that process exacerbates and increases the costs problem, to do otherwise and apply some subjective view about what amount of work was done by simply looking at a letter is arbitrary and inappropriate.
The claim by the solicitor
A number of unusual features arise in this case because I was informed that the solicitor had a contractual agreement with the husband and therefore had an obligation to tell him of the subpoena and to then comply with it. It was put by the husband’s counsel that the solicitor billed her client with her time but not the bookkeeper’s time according to her costs retainer.
The named person in this case was the solicitor. The subpoena was issued after the time had expired under the March order in circumstances where the husband had not complied. There was little else that the wife could do. The question is whether the solicitor was entitled to be paid an amount sufficient to meet the reasonable expenses of complying with the subpoena brought about by her client’s default. Initially, the solicitor received conduct money of $10.00 and claimed under sub-rule (3) that she (as distinct from the husband) had incurred a substantial loss or expense.
The requirements of the subpoena were not complicated. That is evident from the wife’s solicitor’s affidavit in which she annexed the documents ultimately received. There were 17 pages and they were computer and handwritten records. No evidence was led as to why it was such a complicated exercise.
The fact that the husband ultimately had to pay the costs to his solicitor is also largely irrelevant having regard to the fact that it is not the client who has the right to determine whether or not the solicitor should comply. The obligation rests upon the recipient of the subpoena.
In this case, I am being asked to determine the issue on the material before me.
The documents were in existence and appear on their face not to be complicated. They only had to be collated. They were the solicitor’s documents so I have concluded she knew what the subpoena was seeking and where the documents were to be found. As a matter of courtesy and prudence, the solicitor contacted her client but that is not a matter that I should take into account as a burden to be imposed upon the issuing party because the obligation was directed to the solicitor regardless of the views of her client. I also do not understand why it would take a bookkeeper 2.5 hours to deal with the task having regard to what I have seen of the documents provided.
The first issue is therefore whether the solicitor has incurred a substantial loss or expense greater than the conduct money provided.
I find that the loss here is greater than the conduct money but I cannot be satisfied that it was a substantial loss. I find that for two reasons. Despite the assertion of the amount of time involved, I do not find that to be reasonable having regard to the evidence before me. The other reason is that it is not the solicitor who has lost here but rather the husband if he is sent a bill for the work done. If that is the case, he is the author of his own problem.
The Registrar’s order must be discharged.
The second subpoena
The second subpoena was served upon the husband’s acquaintance Mr W.
Mr W filed a comprehensive affidavit in which he claimed significant sums. Eventually, the registrar ordered the wife to pay $680.00. That sum was not disputed by the wife but rather that she should be indemnified by the husband because he failed to comply with the order that gave rise to the necessity to issue the subpoenae. On that issue, the husband was modestly quiet.
I agree with the wife’s proposition that she was entitled to issue the subpoenae but more importantly, the husband was on notice that that would occur if he did not comply with the discovery order. The husband however was facing a dilemma. As he saw it, he needed to pay his solicitor for fees to comply with the March 2009 order because otherwise, she would not have been prepared to undertake the work for him. He chose to not comply with the order.
The power to order what is sought comes from the provisions of s 117 of the Act.
Section 117 provides that each party shall bear his or her own costs. However, pursuant to sub-s (2), the Court may make such order as to costs as it considers just if it is of the opinion that there are circumstances to justify doing so.
In considering what order (if any) should be made the Court is required (inter alia) to have regard to the matters referred to in s 117(2A). They are:
(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.”
In Penfold v Penfold (1980) FLC 90-800 High Court of Australia said that the general rule expressed by s 117(1) was not paramount to s 117(2). That is, when a court finds circumstances justifying an order for costs, the principle that each party should bear their own costs should give way.
Thus, s 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.
The circumstances here warrant an order for specific costs because the issue would not have been controversial but for the husband’s failure to comply with the order. Again, he had been on notice. It is particularly relevant in this case that the husband had an association with the recipient of the subpoena and could have facilitated the discovery had he chosen to do so.
Taking into account the financial circumstances of the parties, the failure of the husband to comply and the fact that the wife would otherwise have been penalised for the husband’s default, it is appropriate that the husband pay the wife the sum ordered by the registrar to the recipient of the subpoena.
Outcome
What then is the appropriate outcome on an enforcement application such as this? There is no contravention application but rather the pursuit of what the wife was justly entitled to under the orders.
Chapter 20 of the Family Law Rules 2004 provides for the enforcement of money obligations.
An obligation to pay money may be enforced by an order for the attachment of earnings and debts.
Rule 20.07 provides the Court with power to make the following orders:
(a)declaring the total amount owing under an obligation;
(b)that the total amount owing must be paid in full or by instalments and when the amount must be paid;
(c)for enforcement;
(d)in aid of the enforcement of an obligation;
(e)to prevent the dissipation or wasting of property;
(f)for costs;
(g)staying the enforcement of an obligation (including an enforcement order);
(h)requiring the payer to attend an enforcement hearing;
(i)requiring a party to give further information or evidence;
(j)that a payer must file a Financial Statement;
(k)that a payer must produce documents for inspection by the court;
(l)dismissing an application; or
(m)varying, suspending or discharging an enforcement order.
Whilst the affidavit material of the wife is not entirely consistent with the requirements of the rules, it was obvious to all parties that the issue was how the husband would pay once a finding was made that there was still a liability.
There is provision in rule 20.39 for a person affected by the order to make a claim relating to the sums garnisheed under the orders. In this case, Mr W is familiar with garnishment concepts because that is exactly what he apparently unilaterally did to the husband.
This is not a case where I would require notice to be given to Mr W having regard to his rights to dispute that he owes the husband money and that would appear uncontroversial but there is an element of urgency here on the basis that Mr W has told the husband he will terminate their consultancy arrangement at the end of May.
What happens thereafter is a matter for the husband because:
(a)interest continues to accrue on the outstanding debt; and
(b)Rule 20.40 reads:
(1) This rule applies if:
(a) a Third Party Debt Notice is in force; and
(b)the payer’s employer is required by the Notice to redirect part of the payer’s earnings to the payee.
(2) If the payer ceases to be employed by the employer, the payer must, within 21 days after the payer ceases to be so employed, give the court written notice stating:
(a)that the payer has ceased employment with the employer;
(b) the date on which the employment ceased; and
(c) if the payer has a new employer:
(i) the name and address of the new employer;
(ii)the place of the payer’s employment by the new employer; and
(iii)the amount of the payer’s earnings from employment by the new employer.
(3)If the payer ceases to be employed by the employer, the employer must, within 21 days after the payer ceases to be so employed, give the court written notice of the date on which the payer’s employment ceased.
(4)If the Registry Manager does not receive a written objection from the payee or the payer within 21 days after a notice under subrule (2) or (3) is given, a new Third Party Debt Notice naming the new employer as the third party debtor will be issued.
I do not need to consider whether the employment situation of the husband is one of contractor or consultant or employee because the husband will need to work that out with Mr W.
The debt of the husand to the wife
In the circumstances, I find that the husband owes the wife:
(a)$30,000.00 under the property orders;
(b)$4024.00 in interest;
(c)$680.00 for the costs of Mr W; and
(d)$18,900.00 for spousal maintenance due to 6 May 2009.
Costs
In addition to those matters, I also have an application by each side for costs.
I have set out above the principles in relation to which a court can make an order for costs in a matter such as this. There is no justification for an order for costs in favour of the husband.
There is a justification for the reasons earlier mentioned for the husband to pay the wife’s costs. Costs are not intended as a punishment but rather to compensate a person who has little or no choice but to pursue the remedies to which they are entitled. Were it not for the husband’s consistent default the wife would have her entitlement to property settlement and spousal maintenance met and she would not be faced with the accounts relating to the subpoenae. Taking into account all of those matters and the matters referred to in s 117(2A), I find that the husband should pay something towards the wife’s costs.
The solicitors for the wife claimed $45,739.44 on an indemnity basis and $28,627.28 on the scale.
Notwithstanding I have some sympathy for the wife’s position in being out of pocket, this is not a case where I would make an order for indemnity costs. I accept the husband had the genuine belief about the wife’s spousal maintenance but took the chance that he could establish his interpretation of the order.
I also accept that he has had some financial problems including those foisted upon him by Mr W and that he made a conscious choice not to instruct his lawyer to respond in relation to the discovery. That decision was misguided but still guided by costs consideration.
On the wife’s side, she has chosen to use a firm of practitioners who have dictated the terms of their retainer outside of the schedule to the rules and having signed a costs agreement, the wife must have been conscious of the risk involved in that.
This is a case where indemnity costs ought not be applied.
Costs even on scale are discretionary. The difficulty is that an arbitrary decision does justice to no-one. The only yard stick I can use is that if I deny the wife all of her costs, I render the orders of the court nugatory to a large degree because what she may recover in her ordered property entitlements and maintenance, she would lose in the legal costs she would have to pay if she was not covered by the whole of the amount under the scale. That would be unfair when the wife had little choice but to follow the path that she has.
In the exercise of discretion, I propose to allow $20,000 on the basis that looking at the items claimed by the wife’s practitioner, I am unable to see anything that I consider is unreasonable in all of the circumstances of the evidence I have heard.
Each of the unpaid sums will no doubt continue to accrue interest until paid.
I am satisfied there are no assets immediately available against which an order could be made. That was always known to the wife. That was the basis upon which she settled the property matter.
The only course open is that urged orally by counsel for the wife namely to order the garnishment of the husband’s entitlement from Mr W for as long as that lasts. Thereafter, she will need to pursue the unpaid sums and if that issue is not expeditiously resolved, the husband risks facing further costs and interest.
I have examined the husband’s financial statement. He discloses weekly income as a sole trader at $3,204 per week. He is obliged to pay tax and rent although he has indicated that he has given up the accommodation he had. I see no reason why he should have the right to have Mr W and his own legal practitioner paid ahead of the wife. His credit cards seem to be related to business and a lifestyle that might need to be curtailed pending the completion of his obligations to the wife. He pays child support albeit in a modest sum. He has personal expenditure which includes clothing, holidays, gifts and the like which will also no doubt need to be curtailed. In those circumstances, he has unavoidable expenditure of approximately $2,000 per week. That leaves him with $1200.00 per week.
In the event that he does cease his relationship with Mr W at the end of May, insofar as he receives some lump sum, I propose that that sum be also garnisheed in total. I do so on the basis of the evidence of the husband that he will survive and is already pursuing other lines of work.
I therefore propose the orders set out earlier.
I certify that the preceding One Hundred and Nine (109) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin
Associate:
Date: 13 May 2009
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