Romano and June (Costs)

[2013] FamCA 901

FAMILY COURT OF AUSTRALIA

ROMANO & JUNE (COSTS) [2013] FamCA 901

FAMILY LAW – COSTS – Circumstances justifying order – Where the husband was not wholly unsuccessful – Where the wife was not wholly successful – Assessment – Where costs are ordered on a party and party basis.

Family Law Act 1975 (Cth) s 117(1), s 117(2), s 117(2A)
Family Law Rules 2004 (Cth) r 19.08

Yunghanns & Ors and Yunghanns & Ors and Yunghann [2000] FamCA 681
Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
Prantage & Prantage [2013] FamCAFC 105

APPLICANT: Ms Romano

RESPONDENT: Mr June

FILE NUMBER: BRC 3679 of 2010

DATE DELIVERED: 16 October 2013

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 2 August 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Hackett

SOLICITOR FOR THE APPLICANT: Hirst & Co

COUNSEL FOR THE RESPONDENT: Dr Ingleby

SOLICITOR FOR THE RESPONDENT: Bowen Buchbinder Vilensky

Orders

1. That the husband pay the wife an amount equal to 50% of the wife’s costs of the property adjustment proceedings from their commencement in the Federal Magistrates Court (as it then was) on a party and party basis.

2. That for the purpose of paragraph 1, the wife’s costs of the property adjustment proceedings be determined by agreement and failing agreement as assessed by a registrar pursuant to Chapter 19 of the Family Law Rules 2004.

3. That the husband pay the wife’s solicitor’s costs of defending the husband’s application to restrain the wife’s solicitor from continuing to represent the wife in the substantive proceedings at an amount fixed in the sum of $4,942.38.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 3679 of 2010

Ms Romano

Applicant

And

Mr June

Respondent

REASONS FOR JUDGMENT

1. I gave judgment in substantive property adjustment proceedings between the husband and the wife in this matter on 17 May, 2013. The trial was complex and took many days to complete. My reasons for judgment were eighty-nine pages in length. There had also been many applications heard and determined in the lead up to the trial. Much was in dispute between the parties, but the most significant dispute was as to what constituted the parties’ property that was to be subject to the Court’s property adjustment powers.

2. The wife had asserted that the husband had interests in property worth many millions of dollars that he did not disclose. The husband denied those interests and asserted they were the interests of third parties, whose identities he was prevented from disclosing. I determined that the husband was not being honest about those matters. I determined that several of the witnesses whose evidence the husband also relied upon, close friends and colleagues of his, were also not being honest about those matters. Ultimately, the Orders I made provided for the wife to receive and retain property of far greater value than the husband had contended she should receive.

3. Subsequently, the wife applied for Orders that the husband pay her costs. I am now to determine that application. I am also required to determine the application of the wife’s solicitor for Orders that the husband pay the costs he incurred in defending, just prior to trial, an unsuccessful application by the husband to have him restrained from continuing to represent the wife in the proceedings.

The Wife’s application for costs

1. Whilst s 117(1) of the Family Law Act provides that each party to proceedings under the Act shall bear his or her own costs, s 117(2) confers a discretion on the Court to make such order as to costs as the Court considers just if the Court is of opinion that there are circumstances that justify it in doing so. In the exercise of this discretion, the Court must have regard to the factors set out in s 117(2A).

2. Further, Rule 19.8(1) of the Family Law Rules 2004 provides also 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);

   (c)to be calculated in accordance with the method stated in the order; or

   (d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

3. Rule 19.8(3) of those Rules sets out factors the Court may consider in making an order under Rule 19.8(1). Those factors can, in my view, be fairly described as factors that also fall within the bounds of the factors set out in s 117(2A).

4. Although there is a scale of costs regulating the particular amounts a party can receive in costs from the other party for work their legal representatives have reasonably done for them where the Court makes an order that one party pays the other party’s costs on a party and party basis, it is common for family lawyers and their clients to enter into private fee agreements where the fees charged exceed those provided for in that scale of costs. That is a matter that must be within the contemplation of the individual litigant and his or her solicitor when they are negotiating and entering into a private fee agreement.

5. A private fee agreement was entered into between the wife and her solicitor in this case. Based on that private fee agreement with her legal representatives, the wife’s actual legal costs for the proceedings were a staggering $1,161,466. However, to put that in some perspective, the husband paid his legal representatives, to the end of the trial, an even greater sum of around $1,261,767. Those very substantial costs amounts were incurred by the parties in circumstances where I found the property interests of the parties had a value of at least $31,732,811.

6. By my Orders, the wife is to retain and receive 15 per cent of that property. That is $4,759,921, leaving the husband with property interests that I determined to be valued at $26,972,889, at least.  Accordingly, the wife’s costs are the equivalent of around 25 per cent of her total entitlement in my judgment, whilst the husband’s costs are the equivalent of less than 5 per cent of that which I determined he is to retain.  Those figures tend to highlight the disparity in the actual burden borne by each of the parties in this case by the costs they have had to incur.

7. In addition, the comparative nature of the burden that the payment of their respective legal costs has put upon each of the parties is further understood when viewed against the fact that at the time of the trial, at least, the husband continued to earn a very high income by any standards through his international business career, whilst, in stark contrast, the wife, who has no qualifications, had not been in paid employment since 1994. At trial, she relied on her Australian property investments for income and was receiving nothing like that which the husband was earning.

8. For the wife, it was submitted that the circumstances not only justify an order that the husband pay the wife’s costs of the proceedings but also that they justify an order being made that those costs be paid on an indemnity basis. Counsel for the wife supported that by characterising the husband’s conduct in the proceedings as a “win at all costs” approach. Many examples of the husband’s dishonesty and his other conduct showing that this was his particular approach were given in paragraphs 31 and 32 of the wife’s counsel’s written submissions. Having regard to all of those matters set out in those paragraphs, I accept that there is much merit in the description given to the husband’s approach by counsel for the wife.

9. I am quite satisfied that the proceedings were made far more complex, far more difficult and, therefore, far more expensive for the wife than they would have been, had the husband complied honestly with his disclosure obligations from the outset and taken a less combative approach to the resolution of their dispute.

10. I am also quite satisfied that the wife was far more successful in terms of the outcome of the proceedings than was the husband. It cannot be said that the husband was “wholly unsuccessful in the proceedings”, which is the relevant term used in s 117(2A), or even that the wife was wholly successful. However, although the percentage of the total property interests the wife received fell quite a bit short of that which she was contending for, she still obtained Orders that she retain and receive nearly $5,000,000 worth of property. It is quite proper, in my view, to consider that she was more successful in the proceedings than the husband when one considers the outcome for which the husband was contending, namely, that the wife only receive property worth several hundred thousand dollars.

11. The wife does not just seek an order that the husband pay her costs on an indemnity basis. She seeks an order that he pay her costs fixed in the amount of $1,164,746, being the total amount of costs said to have been incurred by her, presumably up to and including this particular costs application.

12. In support of the submission that such an order that a fixed sum be paid is appropriate, counsel for the wife referred to the evidence of Paul Garrett, solicitor and expert in the assessment of legal costs. Mr Garrett deposed to the belief that the preparation of an itemised account of the wife’s costs in this matter would take six to eight weeks and would itself cost somewhere between $25,000 to $45,000. He deposed to the opinion that the assessment itself at the Court before a registrar, if the amount assessed is disputed by the husband, could take at least a week but probably longer to complete. He also deposed to the opinion that such a hearing would cost a further $20,000 and that the whole process could take over six months to complete.

13. Mr Garrett also deposed to the opinion that the wife’s solicitor’s charge out rate of $440 per hour plus GST, provided for in the costs agreement between him and the wife, is reasonable on an indemnity basis although it is almost twice the amount provided for in the scale of costs included in the Family Law Rules.  He said the same of the wife’s barrister’s fees of $4,000 per day plus GST and $450 per hour plus GST.

14. Counsel for the wife, pointing to the fact that the husband has paid his legal costs as they were incurred, whilst the wife has only been able to pay a relatively small portion of the costs she has incurred to this point in time, submitted that a fixed costs order would help the wife to pay the balance of her unpaid costs as soon as possible by short-circuiting that lengthy process.

15. At the hearing of the costs application, counsel for the husband’s primary submission was that the costs application should be deferred until the determination of the husband’s appeal to the Full Court from my trial judgment. The husband’s appeal was described by the husband’s counsel as “a serious attack on the findings” made by the Court in its judgment. Counsel submitted that it would, therefore, be premature to determine this costs application until the appeal has been determined.

16. However, whilst my determination of this application has been reserved, the husband discontinued his appeal. A Notice of Discontinuation was filed on 23 August, 2013. Accordingly, the primary submission made for the husband can no longer be of any relevance.

17. However, counsel for the husband also submitted that there are matters that mitigate seriously against the appropriateness of the costs order sought by the wife. He submitted that the fact that the Court also made serious findings against the wife’s credit was a relevant factor. He also submitted that a significant proportion of the pre-trial activity was “taken up by unsuccessful enquiries” on the wife’s part.

18. It is correct that I found that the wife had wilfully exaggerated many matters of evidence and that I was not persuaded that she was an entirely truthful witness whose evidence could be completely relied upon. Those facts alone persuade me against determining that it is just in this case to make an order that the husband pays the wife a fixed amount that is said to be equal to all of the costs she has actually incurred in the proceedings to the time of this application. Ordering costs to be paid by one party to the other on a party and party basis is in itself a departure from the usual position in this Court. Indemnity costs orders are therefore to be considered “a very great departure from the normal standard”[1]. I cannot accept that it is just to compensate a party for all of her costs incurred, in the face of a statutory principle that the default position is each party bears her or his own costs, where she too has failed to be entirely honest before the Court.

    [1]Yunghanns & Ors and Yunghanns & Ors & Yunghanns [2000] FamCA 681 and also Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225, see also Prantage & Prantage [2013] FamCAFC 105.

19. That said, I acknowledge that a party to property adjustment proceedings in this Court cannot litigate with impunity or immunity in so far as costs are concerned, notwithstanding the provisions of s 117(1). A party’s conduct in relation to the way in which the proceedings have been conducted, particularly in so far as it is relevant to the amount of costs that have been incurred by the other party in the proceedings, is clearly a matter that the legislature considered could justify the making of a costs order in the other party’s favour.

20. Where a party consistently and vociferously represents to the other party and the Court that their financial position is not as the other party asserts that it is, forcing the other party to the difficulty, time and great expense of having to prove in the proceedings that it is, that first party must expect the Court to consider it just to order him or her to pay some of the costs of the other party if it is ultimately found that he or she has falsely represented their position. Where that party is so well resourced as to be able to use the process of the litigation itself to make it harder for the other party to prove the true position, an order compensating the other party for some of the costs they have had to incur in doing so must be expected by the party who has failed in his or duty to honestly disclose. When the party who has failed to honestly discharge his duty of disclosure is a former practicing solicitor and a very experienced international business person and company director, he could hardly be surprised by a costs order being made against him.  

21. I am quite satisfied that a costs order in favour of the wife is justified in this case. However, having already ruled out a conclusion that indemnity costs should be the measure by which the husband’s costs liability be assessed, I must now determine the extent to which the husband should be held liable for the wife’s costs.  That the wife has, notwithstanding the existence of the statutorily expressed general principle that she is to bear her own costs in these proceedings and the existence of the principle that it is only in very rare circumstances that indemnity costs orders are made, entered into a private fee agreement to pay her legal representatives greater than provided in the scale is not, in itself, good reason for ordering departure from the principle that if it is just to order that one party pay the other party’s costs then it should generally be done on a party and party basis.

22. Having reached this position, the difficulty for the Court in this case still lies in the fact that the wife has incurred costs in respect of the presentation of her case where some of her own evidence was determined to be exaggerated, unreliable and less than frank and honest. Also, I am satisfied that the submission made for the husband that some of the wife’s own “pre-trial activity” was unsuccessful is correct, even though no real attempt to identify specific examples was made in the submissions of counsel for the husband and I am not in a position to be able to accurately and specifically identify any examples myself at this point in time. These factors again lead me to conclude that making an order that the husband pay all of the wife’s costs in the proceedings, even on a party and party basis, would not be just.

23. Whilst I acknowledge and accept that the process of having the wife’s costs assessed will take up more time and incur further costs, I am satisfied that a just outcome in respect of her costs is best achieved by making an order that the husband pay a percentage of the wife’s costs on a party and party basis. I am satisfied that a large proportion of the wife’s costs incurred in these proceedings was incurred in having to prove her case in respect of the disputed questions of fact pertaining to the property interests of the parties. That was a consequence of the husband’s failure to honestly disclose the true position. As best I can do, I estimate that at least 50 per cent of her costs would have been so incurred. Accordingly, I will order that the husband pay 50 per cent of the wife’s costs of the proceedings from their commencement in the Federal Magistrates Court (as it then was) on a party and party basis, to be determined by agreement and failing agreement as assessed by a registrar pursuant to Chapter 19 of the Family Law Rules 2004.

The Wife’s Solicitor’s Application for Costs

1. Not much more than a week before the lengthy trial in this matter was to commence I heard an application brought by the husband for an order restraining the wife’s solicitor and the wife’s solicitor’s firm or agents from continuing to represent the wife in the proceedings. I dismissed that application and reserved the wife’s solicitor’s costs. He has now applied for an order that the husband pay his costs, fixed in the sum of $15,950, being the actual cost of counsel he retained to represent him on that application.

2. For the wife’s solicitor, it was submitted that the decision to make the unsuccessful application was “tactical and designed to see the Wife without legal representation shortly before trial.” It was submitted that as it wholly failed there was no reason why the wife’s solicitor should be out of pocket as a consequence of the husband’s conduct.

3. For the husband, it was submitted that the application was necessitated by repeated failures on the part of the wife to provide costs notification letters in a timely manner and to respond to requests for information as to the source of her legal fees and in circumstances where the extent of the wife’s solicitor’s involvement in the financing of the wife’s legal proceedings only became evident following the issuing of subpoena by the husband.

4. Although I acknowledge that the evidence satisfied me that the wife’s solicitor displayed “clumsiness” in the way he dealt with the husband’s lawyers’ requests for costs notices and information about matters contained therein, I accept the submission of counsel for the wife that whilst there may have been such findings by me, the husband had all the information that was available after receipt of the subpoenaed material but nevertheless did not abandon his application and was, ultimately, wholly unsuccessful in it. Counsel submitted that as the costs sought by the wife’s solicitor are only counsel’s fees for appearing on the hearing of the application, he should be compensated for that expenditure.  

5. Two counsel appeared at the hearing of the application for the wife’s solicitor. An experienced barrister of the junior bar led a more junior barrister. Their retainer letters and fee notes are in evidence. The more senior barrister’s fees were $10,450 including GST, being $4,000 for preparation including conferences (said to have taken eight hours) and $5,000 for the appearance on the hearing and $500 for the appearance on receiving the judgment and making submissions as to costs (plus GST). The other barrister’s fees were $5,500 (including GST) for preparing for and appearing on the hearing of the application with the more senior barrister.

1. To order the husband to pay the sum of $15,950 in those circumstances is effectively to order he pay the wife’s solicitor’s costs fixed on an indemnity basis. I do not intend to make such an order. I do not consider the circumstances so exceptional that they justify an indemnity costs order. However, the husband was indeed wholly unsuccessful in his application and I do consider a costs order against him is justified having regard to that fact.  

2. Pursuant to the Itemised Scale of Costs included in Schedule 3 of the Family Law Rules 2004, junior counsel’s charge out rates are itemised at $251-$357.96 per hour for chamber work including reading, preparation, providing advice and necessary conferences. They are itemised at $744.42-$1,720.74 for hearings or trials taking at least three hours but not more than one day and at $1,774.09 to $2,607.65 per day for other hearings or trials. An amount of between $251-$357.96 per hour is itemised for appearing at the receipt of a reserved judgment.

3. I consider that the application was one in which the wife’s solicitor could have been suitably represented by one junior barrister and that two were not required. I would allow the upper end of the itemised amounts in the scale as the appropriate amount for the husband to pay the wife’s solicitor. I consider eight hours was appropriate for preparation and conferencing. An amount of $2,863.68 for that is, I consider, therefore appropriate. The hearing was one that went for more than three hours but for less than one day. An amount of $1,720.74 is therefore appropriate for that appearance. $357.96 is an appropriate amount for the appearance on the receipt of the reserved judgment. The total of costs calculated pursuant to the Itemised Scale of Costs is, therefore, $4942.38 and includes GST. That is the amount that I will order the husband pay to the wife’s solicitor for his costs of successfully defending the application to restrain him from continuing to represent the wife.

4. I make the orders set out at the commencement of these reasons.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 16 October 2013.

Associate: 

Date:  16 October 2013