Ross and Kelso

[2013] FCCA 330

FEDERAL CIRCUIT COURT OF AUSTRALIA

ROSS & KELSO [2013] FCCA 330

Catchwords:
FAMILY LAW – Costs in interlocutory de facto property proceedings – conduct of parties – conduct of lawyers – indicia of existence of de facto relationship including creation of embryos via IVF (embryos now in storage).

Legislation:
Family Law Act1975, s.117(1) – (2A)

Cases cited:
Aldridge v Keaton (2009) 235 FLR 450; (2010) 42 Fam LR 369; (2009) FLC ¶93-421
B v J (2006) FLC ¶93-259
Candlewood Navigation Corporation Ltd v Mitsui OSK Lines Ltd [1986] AC 1
Donald Campbell & Co Ltd v Pollack [1927] AC 732

Applicant: MS ROSS

Respondent: MR KELSO

File Number: CAC 1710 of 2012

Judgment of: Judge Neville

Hearing date: 10 May 2013

Date of Last Submission: 10 May 2013

Delivered at: Canberra

Delivered on: 24 May 2013

REPRESENTATION

Solicitor/Advocate for the Applicant: Mr Farrar

Solicitors for the Applicant: Farrar Gesini & Dunn

Counsel for the Respondent: Mr Howard

Solicitors for the Respondent: Armstrong Legal

ORDERS

1. The Respondent pay to the Applicant by way of costs the sum of $3,500.00.

IT IS NOTED that publication of this judgment under the pseudonym Ross & Kelso is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT CANBERRA

CAC 1710 of 2012

MS ROSS

Applicant

AND

MR KELSO

Respondent

REASONS FOR JUDGMENT

Introduction & Background

1. This matter was heard recently to determine whether or not a declaration should be made regarding the existence of a de facto relationship.  It was to be determined as a preliminary issue.

2. Although listed for one day with the agreement of the lawyers for both parties, voluminous amounts of affidavit material were ultimately filed by each side.  If it became necessary to consider it all, and to cross-examine even a selection of the deponents of the affidavits, the matter would never have concluded in the time allocated.  If this had occurred, in certain respects, the scarce resources of the Court would, thereby, have been used rather inefficiently, if not potentially squandered.

3. Fortunately, it was helpfully suggested by counsel for the Respondent that the Court might consider giving a “preliminary indication” as to whether or not, for example, there existed, prima facie, a de facto relationship.  The Court took this course. 

4. The preliminary view indicated, and based primarily upon the affidavits of the parties more so than the respective supporting “casts”, was that a de facto relationship did exist between the parties.  In the circumstances it was unnecessary to make any particular order (or even to express a preliminary view) as to the duration of the relationship.  That said, on the Applicant’s “best case” scenario, the relationship existed for a very modest number of years, perhaps 3½ years.

5. After having given the Court’s preliminary view, and after the parties took time to consider it, the Respondent indicated his preparedness to accede to the declaration sought by the Applicant to be made. 

6. The declaration has now been made and the matter referred to a conciliation conference to see if the matter might be resolved without the need for further litigation.

7. The only matter that remains to be determined is what order, if any, should be made in relation to costs in the light of what ensued at the scheduled ‘preliminary hearing.’

The Subject of Costs: Discussion & Determination

1. Following the making of the declaration, the Applicant sought an order for costs, according to scale, under the Rules of this Court for a one day hearing (as well as in relation to preparation).  The Respondent sought an order that costs be reserved.

2. Section 117 of the Family Law Act 1975 relevantly provides as follows:

   (1)  Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 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), (4A) 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.

3. First, in the circumstances, the Court cannot make any formal findings.  Accordingly, the Court should be even more cautious in considering any application for an order for costs.

4. Secondly, by way of general observation, and having regard to the considerations in s.117, the matters that weigh most prominently in the Court’s consideration on this subject are as follows (noting that most of the following matters were canvassed in open court, with the lawyers and parties present).

5. There seems little dispute that, because of the Applicant’s arduous treatment for her breast cancer, she has not worked for some time and now finds herself in very difficult financial circumstances. The Respondent, on the other hand, is gainfully employed.  In his Financial Statement filed on 19^th April 2013, he deposed having an average weekly income of $3394.

6. In relation to other matters gleaned from the affidavits, the Applicant’s material was extensive.  The documents attached to her primary affidavit, in my view, on any fair reading, make a reasonably compelling case for the existence of a de facto relationship between the parties.  For example, one of many documents annexed are those that relate to the engagement of IVF services for the creation of embryos, prior to the Applicant commencing chemotherapy.  A number of embryos were created and are currently in storage.  What is to become of them is a delicate issue for another day.  To enter into such an agreement, in my view, was more accurately described by the Applicant than by the Respondent’s account, where he said he entered into it, and the enterprise of creating the embryos, because he felt sorry for the Applicant.

7. The Applicant’s advocate argued that a very significant amount of work went into the preparation of her case, which, he said, was necessary because the Respondent refused to acknowledge the reality of the relationship.  Certainly, on the face, and in light of the volume, of the documents filed on behalf of the Applicant, together with the number of lawyers who have either appeared on her behalf and or those who have been engaged in the preparation of documents, the number of personnel involved has been very significant.  Indeed, the Court may infer from the number of persons whose names appear on documents (affidavits, submissions, etc) and/or who have appeared, and as submitted by her advocate (a senior family law practitioner), not to mention para-legal and other support staff, that the Applicant’s costs are and will be substantial.  In fact, the Court may reasonably infer that the costs will be extremely substantial.  However, some other observations are apposite.

8. First, parties and their lawyers are, of course, free to conduct their litigation as they deem appropriate.  Secondly, again by way of observation and example only, I conducted one of the last appeals to the Privy Council (on behalf of the partly successful Respondent).  It involved major international shipping and marine insurance companies.  The appeal ran before the Privy Council for three days.  Apart from Counsel, the day to day preparation for it involved me and my secretary in Sydney, and from time to time, the solicitor from the London agents.[1]  All of this is to say that the preparation for a Privy Council appeal seems to have involved fewer personnel than the preparation for the interlocutory application in this matter.  I confirm that I make no formal findings on such matters, and raise the two cases for comparison only.

   [1] The result of the appeal was ultimately reported: see Candlewood Navigation Corporation Ltd v Mitsui OSK Lines Ltd [1986] 1 AC 1. Should it be of any interest, the Privy Council comprised Lords Fraser, Roskill, Brandon, Templeman and Griffiths.

9. Thirdly, and quite unfortunately, the preparation and attention to some of the detail on behalf of the Applicant was less than adequate or satisfactory.  For example, first instance judgments were cited in written submissions when there had in fact been Full Court decisions from them, and which had been reported for a number of years.[2]  Clearly, no one on the Applicant’s legal team was aware of the relevant Full Court decisions.  This is rather troubling given the long-experience of the Applicant’s solicitors in family law, and that the firm (in my view properly so) holds itself out as being a leading, specialist firm in family law.  In my view, neither the Applicant nor the Respondent should be responsible for any costs associated with erroneous or inadequate preparation. 

   [2] The most obvious and glaring omission in this regard was the reference in the Applicant’s written submissions (which bears the signature of yet another lawyer – not the advocate or the solicitor with carriage of the matter) to the judgment at first instance, rather than to the widely-reported decision of the Full Court (Bryant CJ, Boland & Crisford JJ) in Aldridge v Keaton (2009) 235 FLR 450; (2010) 42 Fam LR 369; (2009) FLC ¶93-421.

10. The same comment applies in relation to another matter that arose in the course of the costs application.  As with inadequate research, it is most unfortunate that the Court needs to detail it. 

11. The advocate for the Applicant sought to tender some documents in support of a contention that certain matters had been raised with the Respondent’s solicitors quite some time ago.  Counsel for the Respondent objected to the tender, primarily and reasonably, on the basis that the documents that were proposed for tender were already annexed to the Applicant’s earlier affidavit.  The advocate for the Applicant countered that it was difficult to ‘get across such a large amount of material.’  Respectfully, that is what lawyers are paid to do.  If they do not do it, and especially in the case of counsel, they are usually not briefed again.  As with the inadequate or inattentive preparation and research, in my view, neither the Applicant nor the Respondent should be responsible for any costs associated with such things.

12. On the Respondent’s side, in my view, the degree of documentation provided by the Applicant should have been accepted at an earlier point in time to indicate the existence of a de facto relationship.  By not so agreeing or acknowledging (or doing so at an earlier point in time – accepting that the Applicant’s affidavit was filed only on 19^th April), the Respondent put the Applicant to the considerable expense and genuine trauma (given her extremely difficult health circumstances of which the Respondent was obviously aware) of having to establish the existence of the relationship alleged by a significant documentary trail.

13. Finally, out of many cases that have articulated principles in relation to costs applications, it is sufficient to note those set out by the Full Court (Holden, Warnick & Boland JJ) in B v J.[3]  In that case, the Court said, commencing at [32]:

    His Honour [Young CJ in Eq] then reviewed various decisions, commencing with that of the House of Lords in Donald Campbell & Co Ltd v Pollack [1927] AC 732.  He quoted what Viscount Cave (at 812) said with regard to the exercise of discretion:

    “the Judge ought not to exercise it against the successful party except for some reason connected with the case.  Thus, if – to put a hypothesis which in our Courts would never in fact be realized – a judge were to refuse to give a party his costs on the ground of some misconduct wholly unconnected with the cause of action or of some prejudice due to his race or religion or…to the colour of his hair, then a Court of Appeal might well feel itself compelled to intervene.  But when a judge, deliberately intending to exercise his discretionary powers, has acted on facts connected with or leading up to the litigation which have been proved before him or which he has himself observed during the progress of the case, then it seems to me that the Court of Appeal…is prohibited by the statute from entertaining an appeal from it.”

    [3] B v J (2006) FLC ¶93-259.

14. Then at [35] and [36], the Court said:

    [35] In Minister for Immigration & Multicultural Affairs v Vadarlis (No.2) (2001) 188 ALR 143, the Full Court of the Federal Court, in respect of the power to award costs, referred with approval to the decision of Bray CJ in Cretazzo v Lombardi (1975) 13 SASR 4 (at 11) where Bray CJ said:

    “I think the guiding principle still stands as it left the House of Lords in the famous case of Donald Campbell & Co v Pollak, that the general discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation.

    [36] The Full Court then said:

    “[12] The award of costs to a successful party is principally by way of perceived restorative justice.  The general rule assumes that where an applicant succeeds it will have incurred costs because the respondent’s conduct made it necessary for the applicant to bring the proceedings.…The order made in such cases is compensatory:

    ‘If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party.  They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings: Chilli v Abbott (1981) 53 FLR 108 at 111.’

15. Having regard to (a) the facts as outlined, (b) the terms of s.117, and (c) the principles set out by the Full Court in B v J (particularly the reference to costs being “compensatory” and not punitive), in my view, an order for costs should be made in the Applicant’s favour.  Having regard to all of the matters to which I have referred in the course of these reasons, it should be a modest sum, namely $3500.  The Court cannot (and does not) take into account that this sum will, most likely and most unfortunately, cover only a very small percentage of her actual costs.

16. The Court so orders.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Neville

Date:  24 May 2013