Rawlings and Morris and S Law Firm (No.2)
[2010] FMCAfam 1042
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RAWLINGS & MORRIS & S LAW FIRM (No.2) | [2010] FMCAfam 1042 |
| FAMILY LAW – Costs – application for indemnity costs. |
| Family Law Act 1975, ss.117 |
| Rawlings & Morris & S Law Firm [2010] FMCAfam 938 Penfold v Penfold (1980) 144 CLR 311; (1980) 54 ALJR 142; (1980) Fam LR 579; (1980) 28 ALR 213; (1980) FLC 90-800 McGillivray & Mitchell (1998) 23 Fam LR 238; (1998) FLC 92-818; [1998] FamCA 96 McMillan & McMillan (2000) 26 Fam LR 653; (2000) 159 FLR 1; (2000) FLC 93-048; [2000] FamCA 1046 In the Marriage of R A and E Thevenaz (1986) 11 Fam LR 95; (1986) FLC 91-748; (1986) 84 FLR 10 Yunghanns & Yunghanns (2000) 26 Fam LR 331; (2000) FLC 93-029; [2000] FamCA 681 Munday & Bowman (1997) 22 Fam LR 321; (1997) FLC 92-784 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; [1993] FCA 536 Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited [1998] FCA 202; (1998) 81 ALR 397 |
| Applicant: | MR RAWLINGS |
| First Respondent: | MS MORRIS |
| Second Respondent: | S LAW FIRM |
| File Number: | MLC3322 of 2010 |
| Judgment of: | Riley FM |
| Hearing date: | 25 August 2010 |
| Date of Last Submission: | 22 September 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 6 October 2010 |
REPRESENTATION
| Counsel for the Applicant: | Carmella Ben-Simon |
| Solicitors for the Applicant: | Anthony Raso & Associates |
| Counsel for the first Respondent: | Dr I |
| Counsel for the second Respondent: | Ms N |
| Solicitors for the first and second Respondents: | S Law Firm |
ORDERS
The husband pay the wife’s costs of the application filed on 10 August 2010 fixed in the sum of $5,403.50.
The husband pay S Law Firm’s costs of the application filed on 10 August 2010 fixed in the sum of $4,293.50.
IT IS NOTED that publication of this judgment under the pseudonym Rawlings & Morris & S Law Firm (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC3322 of 2010
| MR RAWLINGS |
Applicant
And
| MS MORRIS |
First Respondent
| S LAW FIRM |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for indemnity costs made by the wife and her solicitors against the husband arising from the interim proceedings decided in Rawlings & Morris & S Law Firm [2010] FMCAfam 938. In that decision, the court dismissed an application by the husband for the wife’s solicitors to be restrained from continuing to act for her. The husband submits that the application for costs made by the wife and her solicitors should be dismissed.
The costs application, at the request of the parties, was addressed by way of written submissions. The wife and her solicitor were represented by separate counsel at the hearing of the interim proceedings but filed joint written submissions on the question of costs.
Costs applications in family law matters are governed by s.117 of the Family Law Act 1975 (“the Act”). That section relevantly provides that:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(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) and (5) 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.
The High Court considered s.117 in the matter of Penfold v Penfold (1980) 144 CLR 311. Section 117 has been amended since that case was decided but is substantially the same. The High Court said of s.117 of the Act that:
12.It is an accurate description of s. 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs. (at p315)
13.Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case". (at p315)
14.Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent (1970) 92 WN (NSW) 503, at p 505 ). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs. (at p316)
The section 117(2A) matters
I will address in turn each of the matters under s.117(2A) of the Act.
The financial circumstances of each of the parties to the proceedings
All parties agreed that the financial circumstances of the husband and wife are modest. Nothing was said about the financial circumstances of the second respondent, S Law Firm.
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
None of the parties is in receipt of legal aid.
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
The wife and her solicitor argued that the husband had unnecessarily joined S Law Firm, the solicitors for the wife, and had thus put the wife to greater expense.
It appears from the reports that the solicitor in question was not joined as a party in McGillivray & Mitchell (1998) 23 Fam LR 238; (1998) FLC 92-818; [1998] FamCA 96, McMillan & McMillan (2000) 26 Fam LR 653; (2000) 159 FLR 1; (2000) FLC 93-048; [2000] FamCA 1046, In the Marriage of R A and E Thevenaz (1986) 11 Fam LR 95; (1986) FLC 91-748; (1986) 84 FLR 10. Accordingly, I accept that the joinder of S Law Firm was unnecessary.
I also accept that the joinder added to the overall costs incurred in this matter. However, I do not see how the joinder could have added to the wife’s costs, unless S Law Firm charges the wife for S Law Firm’s own representation. That would be completely inappropriate. I proceed on the basis that it will not happen.
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The interim proceedings were not necessitated by the failure of a party to comply with previous orders of the court.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The husband was wholly unsuccessful in the interim proceedings.
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
There was no suggestion that any of the parties had offered in writing to settle the interim proceedings. However, the parties had apparently made some efforts to settle the overall proceedings.
Such other matters as the court considers relevant
The husband argued that he had brought his application in good faith, believing it would succeed. The wife and her solicitor submitted that the husband’s application was calculated to impose a costs burden on the wife, and was brought after an undue delay to frustrate the final hearing scheduled for 29 September 2010, or make it extremely difficult for the wife to prepare for the hearing, if she did, in fact, need to get new solicitors. That is, the wife and her solicitor challenged the bona fides of the husband.
There was a good deal of cross examination directed to the husband’s delay in bringing the interim application, the shifts in his evidence and the alleged inaccuracies in his evidence. In view of his responses, I am not satisfied that the husband did bring the application in good faith. If he had been entirely genuine, he would have brought the application much sooner.
Indemnity costs
As indicated, the wife and her solicitor are seeking indemnity costs. They relied on the decision of the Full Court of the Family Court of Australia in Yunghanns & Yunghanns (2000) 26 Fam LR 331; (2000) FLC 93-029; [2000] FamCA 681 and the decision of Holden CJ in the Family Court of Western Australia in Munday & Bowman (1997) 22 Fam LR 321; (1997) FLC 92-784 to say that an order for indemnity costs may be made in family law proceedings.
In both Yunghanns and Munday, reference was made to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248. In an the often-cited passage, his Honour said at paragraph 24:
2.The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. … In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3.This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. …
4.In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. 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 at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) 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.
Clearly, Colgate-Palmolive was decided in the context of the Federal Court Rules. Those rules apply in general civil matters where it is customary for the losing party to pay the winning party’s costs on a party and party basis. The present case arises under the Family Law Act 1975, where it is customary for each party to bear his or her own costs.
Nevertheless, in Yunghanns, the Full Court of the Family Court ordered indemnity costs. In that case, the husband and a number of companies under his control succeeded in an appeal. The husband and his companies sought costs orders on an indemnity basis against the wife, the husband and wife’s son and daughter, the wife’s solicitors and counsel and the son’s solicitors. The legal practitioners responded to the effect that the husband and his companies should pay their costs on an indemnity basis. The husband and his companies then withdrew their application against the legal practitioners. The Full Court ordered the husband and his companies to pay the legal practitioners costs on an indemnity basis.
In reaching that conclusion, the Full Court in Yunghanns at 87,471 noted with approval earlier authority to the effect that:
However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should ... understand that such an order is a very great departure from the normal standard,
and
... the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.
In Yunghanns, the particular matters that justified an order for indemnity costs were expressed as follows:
32.In this case we consider the facts that the appellants instituted proceedings against the non-parties for an order for costs, on an indemnity basis, founded upon very serious allegations of behaviour which, if established, might well be regarded as unprofessional conduct, and then withdrew the proceedings when met with defences which counter-claimed for costs on the same basis, are quite sufficient to enliven the discretion to award indemnity costs against the appellants, and indeed calls for the exercise of that discretion in the non-parties’ favour. Although the appellants, in withdrawing their claim for costs against the non-parties, have not withdrawn the allegations upon which that claim was founded, it seems to us that the withdrawal of the application, in the circumstances in which that occurred, is tantamount to a concession that the application was ill-conceived, and should never have been made.
33.In any event, none of the material relied upon in support of the allegation upon which the application was founded satisfied us that any of the non-parties was guilty of causing or allowing false or misleading evidence or submissions to be put before the court. We are of the opinion that the evidence and submissions advanced on behalf of the respondents before the trial judge and before us, while in some respects erroneous, and perhaps even misguided, were not “false” and/or “misleading”, so as to justify a claim for costs being made against the legal representatives of those parties, let alone a claim for costs against them on an indemnity basis.
In Munday, Holden CJ declined to make an order for indemnity costs, saying that exceptional circumstances did not exist, in a fairly standard dispute between a husband and wife. However, his Honour did order costs on a party party basis.
In the present case, the wife and her solicitor apparently based their claim for indemnity costs on the circumstances mentioned in Fountain Selected Meats (Sales) Pty. Limited v. International Produce Merchants Pty. Limited[1988] FCA 202; (1988) 81 ALR 397, where Woodward J said (at 400-401):
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.
Fountain Selected Meats was, of course, a civil case conducted in the Federal Court, rather than a matter conducted under the Family Law Act 1975.
I accept that, in an appropriate case, indemnity costs can be awarded by this court in its family law jurisdiction. However, those cases will always be rare, probably even more rare than the cases in which it is appropriate to order indemnity costs in general civil proceedings.
In the present case, I do not consider that the husband, properly advised, should have known that he had no chance of success. The case turned in part on the exercise of a discretion and in part on how the court assessed the evidence given during the hearing. The result was not a foregone conclusion.
The wife and her solicitor did not expressly point to any other basis on which indemnity costs should be ordered. However, they perhaps said tangentially that indemnity costs should be awarded because the wife’s solicitor had been unnecessarily joined. I accept that the solicitor was joined unnecessarily. However, I do not consider, in all the circumstances of the case, that that fact warrants an order for indemnity costs in favour of the wife’s solicitor. That is especially so as the solicitor engaged senior counsel, when a reasonably senior junior would have sufficed.
Nevertheless, I do consider that the husband should be required to pay the costs of the interim proceeding on a party/party basis. He was wholly unsuccessful. The application was not in the normal run of family law parenting or property proceedings. The husband’s delay in bringing the proceedings at the very least disrupted the wife’s preparation for the final hearing.
All in all, I consider that it is appropriate to order the husband to pay the costs of the wife and her solicitor on a party/party basis, that is, on scale. The wife and her instructing solicitor provided to the court details of their actual costs, including counsels’ fee slips.
I do not consider that it would be proper to allow the actual fees charged by Ms N, counsel for S Law Firm. It seems to me that it was unnecessary for senior counsel to be engaged for this matter. Accordingly, the usual daily hearing fees should apply.
The solicitor’s attendance at court at the hearing and for the taking of judgment will be allowed in the costs awarded to the wife, as the solicitor’s attendance on both of those occasions was reasonably necessary for the conduct of the wife’s case. However, it would not be appropriate to allow the wife’s solicitor any sum on her own account for her attendance at court on the hearing of the matter, or to take judgment. The wife’s solicitor was present on those occasions in her capacity as a party to the proceeding and as the solicitor for the wife.
Half of the disbursements, other than counsel’s appearance fees, will be allowed in the costs awarded to each of the wife and her solicitor, on the basis that they were probably equally apportionable to both. The written submissions on costs were joint submissions on behalf of the wife and her solicitor. It is proper to allow half of them on the account of each of the wife and her solicitor.
As to the stage 2 lump sum for the solicitor’s preparation, the invoices provided by the wife’s solicitor show, in the same invoices, all of the work being done on behalf of both the wife and her solicitor. It is not always apparent which items are properly chargeable to whom, and, in any event, some items should properly be charged half to the wife and half to her solicitor.
The total amount incurred by both the wife and her solicitor for preparation amounts to about $3,200, by my calculation. The amount allowed on scale for both the wife and her solicitor for preparation, if there had been no duplication, would have been $1,465 each or $2,930 in total. Some of the work was done for both. The amount that clearly seems to have been done for the wife’s solicitor alone is about $550. As an order for indemnity costs has not been made, that amount should be reduced to $350, to give an approximation of the scale amount for the additional work done because the wife’s solicitor was joined as a party. Adding the $350 to the scale amount for preparation for the wife’s case of $1,465 gives $1,815. Sharing that more or less equally between the wife and her solicitor gives a figure of about $900 each for preparation.
Accordingly, the costs are calculated as follows:
a)for the wife $5,403.50, consisting of:
i)response filing fee $176
ii)stage 2: lump sum $900
iii)daily hearing fee $1,750
(being the amount actually charged by Dr I for the hearing)
iv)stage 6: solicitor’s attendance at hearing $1,760
v)disbursements $177.50
(for photocopying and postage, but not the clerk’s attendances which are included in the stage 2 lump sum)
vi)stage 6: to take judgment and explain orders $240
vii)disbursement $400
(being half the amount actually charged by Dr I for the written submissions on costs)
b)for S Law Firm, $4,293.50 consisting of:
i)response filing fee $176
ii)stage 2 lump sum $900
iii)disbursements $177.50
iv)stage 2 daily hearing fee $1,760
v)advocacy loading $880
vi)disbursement $400
(being half the amount actually charged by Dr I for the written submissions on costs)
There will be orders accordingly.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Riley FM
Date: 6 October 2010
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