Stubbs and Stubbs
[2011] FamCA 293
•14 April 2011
FAMILY COURT OF AUSTRALIA
| STUBBS & STUBBS | [2011] FamCA 293 |
| FAMILY LAW – COSTS – Application by independent children’s lawyer for security for costs – Application dismissed |
| Family Law Act 1975 (Cth) ss 117(2) (2A) and (3), 68L(2) and 4, 68LA Family Law Rules 2004 Rules 6.01 and 8.02 |
| Lane & Holmes [2008] FamCAFC 75 Luadaka & Luadaka (1998) FLC 92-830 Penfold and Penfold (1981) 44 CLR 311 |
| APPLICANT: | Ms Stubbs |
| RESPONDENT: | Mr Stubbs |
| FILE NUMBER: | ADC | 1974 | of | 2009 |
| DATE DELIVERED: | 14 April 2011 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | O’Reilly J |
| HEARING DATE: | 14 April 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Lewis |
| SOLICITOR FOR THE APPLICANT: | Norman Waterhouse Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr McQuaid |
| SOLICITOR FOR THE RESPONDENT: | Caldicott & Co |
| COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: | Ms Horvat |
| INDEPENDENT CHILDREN’S LAWYER: | Mr Stephen Legal Services Commission |
Orders
IT IS ORDERED
The independent children’s lawyer has leave to amend the application in a case filed 5 April 2011 in paragraph 1 by deleting the words ‘pursuant to rule 19.05(1) Family Law Rules 2004 (as amended)’ and inserting the words ‘pursuant to s 117(2) and (3) Family Law Act 1975 (Cth)’.
The application filed 5 April 2011 as so amended is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Stubbs & Stubbs is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 1974 of 2009
| Ms Stubbs |
Applicant
And
| Mr Stubbs |
Respondent
REASONS FOR JUDGMENT
Application
This is an application filed on 5 April 2011 by the independent children’s lawyer for:
1.An order pursuant to Rule 19.05(1) of the Family Law Rules 2004 that each of the parties in these parenting proceedings pay to the trust account of the Legal Services Commission of South Australia $25,000 by way of security for costs incurred by the independent children’s lawyer in the proceedings to be paid within 21 days and
2.An injunction restraining the parties from disposing of assets pending such payment.
Rule 19.05(1) has no application for the reason that the independent children’s lawyer is not a respondent in any sense, as defined in the Rules, for the purpose of Rule 19.05(1), and indeed not a party to the proceedings. See section 68L(2) and (4); section 4(1) (definition of independent children’s lawyer); and section 68LA Family Law Act 1975 (Cth); and Rules 6.01 and 8.02 Family Law Rules 2004.
In these circumstances Ms Horvat desisted in reliance on Rule 19.05 and put the application instead on the basis of section 117(2) of the Act. I allowed Ms Horvat leave to amend the application in a case to delete the words ‘pursuant to Rule 19.05(1) Family Law Rules 2004 (as amended)’ and insert instead the words ‘section 117(2) and (3) Family Law Act 1975 (Cth)’.
Ms Horvat conceded during argument that if I should dismiss order 1 as sought, order 2 as sought must also be dismissed as it is predicated upon the making of order 1.
As amended, orders 1 and 2 as sought read:
1.That pursuant to section 117(2) and (3) Family Law Act 1975 (Cth):
a. That each of the husband and wife, do pay to the trust account of the Legal Services Commission of South Australia the sum of TWENTY FIVE THOUSAND DOLLARS ($25,000.00) as and by way of security towards the costs and disbursements incurred by the Independent Children’s Lawyer incidental to the within proceedings Action No. ADC1974 of 2009.
b. That such sum be paid to the Legal Services Commission within 21 days of the making of this order, or at such other time as may be deemed practicable by the Court.
2.That each party be restrained, and injunction be granted restraining each of them, from disposing of:
a. any of the matrimonial assets,
b. any of the proceeds of the sale of any matrimonial assets, or
c. any proceeds obtained as a result of the property orders made by this Court incidental to these proceedings,
pending payment of the sums referred to in paragraph 1 herein.
The independent children’s lawyer’s application is supported by an affidavit by himself, Terrence Charles Stephen. He deposes that pursuant to the Legal Services Commission Funding Guidelines he is obliged to seek to recover costs and disbursements incurred by the Legal Services Commission in providing representation of children in family law matters.
The Guidelines however, do not provide any such thing. In fact, they provide:
Guideline 3 Independent representation of children's interests
3.1 Assistance for independent representation of a child's interests
…
3.2 Payment for the costs of independent representation by a party not receiving legal assistance
(1) If the Commission makes a Grant of Legal Assistance for an independent children's lawyer the Commission must give consideration as to the ability of the parties to the proceedings to:
(a)contribute to the costs associated with a single expert report
(b)contribute to the costs and disbursements associated with the grant of Legal Assistance for the independent children's lawyer.
(2) The Commission may determine an amount to be paid by each party taking into account:
(c)The party's capacity to pay
(d)The party's legally aided status
(e)Contributions assessed on existing files.
(3) Taking into account that the parties are equally liable to pay a single expert witness’s reasonable fees and expenses incurred in preparing a report (Family Law Rules, R15.47) ordinarily, if a party is unaided, they will be required to contribute to an equal portion of the cost of the single expert.
(4) Guideline 3.2(1) does not apply to proceedings relating to special medical procedures involving a child in which a Grant of Legal Assistance for independent representation of the child's interests has been made, regardless of whether or not any of the parties to the proceedings are receiving legal assistance under a Grant of Legal Assistance.
(5) If a party refuses or fails to pay the amount required by the Commission under this guideline 3.2, legal assistance for the independent children's lawyer should continue to be provided on the condition that the independent children's lawyer in appropriate circumstances seek an order for costs against that party at an appropriate time in the court proceedings.
Ms Horvat said from the Bar table that in practice the decision whether to determine an amount of contribution under clauses 3.2(1) and (2) is made by the independent children’s lawyer as delegate of the Commission.
Ms Horvat contended that such a determination or decision has been made by the independent children’s lawyer. She relies on exhibit 1, which comprises correspondence and a diary note all dated 22 June 2009 referring to an application by the husband for a waiver of contribution and notification by the independent children’s lawyer that the decision on that application will be postponed until the conclusion of the property proceedings between the husband and the wife. See, eg, the diary note referred to, and the first letter in the exhibit, in particular the sentence “A decision will then be made as to your contribution towards such costs and disbursements.”
On 24 March 2011, I made a consent section 79 property order between the husband and the wife. There is no evidence of any determination or decision by the Commission or the independent children’s lawyer as its delegate between 24 March 2011 and today, for example, a document headed “Decision” and stating that it is made pursuant to the Guidelines, and that the matters in clause 3.2(2) have been taken into account, and so forth, so as to set out reasoning which should accompany administrative decisions in case of application for review or challenge as to validity. Ms Horvat says that such is not necessary, and that the decision is “evidenced” by the application and Mr Stephen’s affidavit, in particular, paragraphs 4 to 10 and annexure B, which is a schedule of the independent children’s lawyer costs and disbursements as at 24 January 2011. There is reference in the affidavit to the incurrence of further costs since that date, and correspondence to the parties, copies of which are not attached, but which is said to remind the parties of their “obligations” under the Guidelines.
For my part, I am unable to see that any of this material comprises a “decision” or “determination” under the Guidelines. Further, the parties have no “obligations” under the Guidelines, or to the Commission, unless and until a decision or determination is made.
I find therefore, on the material, that there has been no decision or determination to date. That is to say, if there has in fact been a decision or determination, it is not proved on the existing material.
Be that as it may, for the sake of dealing with the application, I will proceed as if I am satisfied that a decision or determination has been made.
Principles relating to security for costs
The relevant principles recently were referred to in Lane & Holmes [2008] FamCAFC 75:
17. The principles relating to security for costs are well established (See Luadaka (1998) FLC 92-830, Jones & Jones (2001) FLC 93-080 & Adult Guardian and Mother’s parents and B and Child’s Representative (2002) FLC 93-116). The power in this court to make an order for security for costs is found in s 117(2) of the Family Law Act (1975) (Cth). The provisions of s 117(2A) must also be considered.
18. In Luadaka (supra) which was concerned with the making of an order for security in relation to the costs of proceedings at first instance, the Full Court made the following observations:
39. An order that an applicant provide security for costs may be made in appropriate circumstances. However, it must be established that there are circumstances justifying the making of such an order. In considering whether to make such an order regard must be had to the provisions of s 117(2A). The Family Law Act does not separately list factors which should be taken into account when dealing with an application for security for costs of a pending application for relief pursuant to provisions of the Act.
…
61.In our opinion, when dealing with an application for security for costs the general rule provided for in s 117(1) applies, namely that subject to s 117(2) each party to proceedings shall bear his or her own costs. However, if the court is satisfied that there are circumstances that would justify an order then the court may, subject to s 117(2A), make such order for security for costs as the court considers just. It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.
62. The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other. In considering whether or not to make an order, apart from those referred to in s.117(2A), matters which may be relevant include the following:
62.1It may be relevant to take into account the means of an applicant to satisfy an order for costs if he or she is unsuccessful. Ordinarily the means of the applicant is not alone sufficient to justify an order for costs because of the rule that poverty should be no bar to justice. This is reinforced by s.117 (1). However, the financial circumstances of the applicant do not prevent an order being made if there are other grounds which justify an order. Financial weakness may be relevant, for example, if the applicant is a company. In relation to the means of the respondent, who is the applicant for security, it was held by Goldstein J in Alexander and Alexander (supra) and Gee J in B and B (supra) that the question is whether or not the respondent is able to pay his or her costs. Section 117(2A)(a) requires consideration of the financial circumstances of both parties. However, we do not accept that it will only be in cases where the applicant for security does not have the means to meet his or her costs that an order would be made. In appropriate circumstances an order may be made even if the applicant for security has the means to pay his or her costs.
62.2The prospects of success is a relevant matter to take into consideration: Parkinson & Co Ltd v Triplan Pty Ltd (supra). However, ordinarily the court will not undertake a detailed assessment of the likelihood of the applicant's success unless it can be demonstrated that there is a high probability of success or failure: Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420; Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR ¶40-972. This is because of the lack of material at the time the application is dealt with. However, such an assessment may be possible in circumstances where, as in this case, affidavits have been filed in which the case sought to be made out is set out.
62.3 It is a relevant consideration whether the applicant's claim is made bona fide, whether it is genuine and not trivial, vexatious or a sham: Parkinson & Co Ltd v Triplan Pty Ltd (supra); Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; J & M O'Brien Enterprises Pty Ltd v Shell Company of Australia Ltd (1983) 7 ACLR 790.
62.4 It may be relevant to consider whether or not an order for costs would be oppressive or stifle the litigation. In Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304 Byrne J said at 306:
''A factor in deciding whether security should be required is that the order may well mean that the action cannot proceed. That prospect does not require refusal of the application but it is often a significant matter.''
See also Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 and Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 5 ACLC 480.
62.5 It may be relevant to consider whether or not the litigation may involve a matter of public importance: Equity Access Ltd v Westpac Banking Corporation (supra); Jodast Pty Ltd v A & J Blattner Pty Ltd (1991) 104 ALR 248. In Quick on Costs at [ 4.9440] it is said that this will militate against the making of an order. [85508]
62.6 It may be relevant to consider whether or not there has been delay in bringing the application. An application may be refused if there is delay in making the application and prejudice is caused to the respondent to the application: Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 and Loreva Pty Ltd v Cefa Associated Agencies Pty Ltd (1982) 7 ACLR 164.
62.7Other relevant matters may include any difficulties of enforcing an order for costs and the amount of costs to be incurred.
Thus, in order to provide security for costs under section 117(2), I must be satisfied as an essential preliminary that there is a justifying circumstance under section 117(2A).
Argument and conclusions
Ms Horvat did not seek to rely on any ground in section 117(2A) at all, but rather urged that unless I order security for costs the independent children’s lawyer will be unpaid, that is, will not have any contribution from the husband or the wife.
This much is clear factually. The financial circumstances of each of the husband and the wife are made plain by the wife’s affidavit filed 11 April 2011 and an affidavit by a partner in the firm of solicitors for the husband James Cavalier Douglas filed by leave today. The wife’s affidavit points to her financial circumstances claiming an inability to make contribution to the independent children’s lawyers costs and to the circumstance that all moneys she is likely to receive pursuant to paragraphs 1.1.4 and 1.2.4(d) of the section 79 property order will be utilised to pay her own lawyers and even then she will be left with a considerable debt to them. Plainly, if she will be indebted even to her own lawyers she has no capacity to pay contribution to the Commission in that event. The affidavit of Mr Douglas points to the husband’s financial circumstances to similar effect. Each of the affidavits refers with specificity to the amounts likely to be received and to the legal costs and disbursements already incurred in each case. As I understand it, the disbursement of Counsel’s fees is to be added onto the sums referred to in the affidavits.
The scheme in the Guidelines appears to be that the Commission can only require contribution if a party has the capacity to pay. Here, demonstrably, at least on the state of the affidavit evidence read today, neither party has capacity to make a contribution to the Commission. It is true that the affidavit evidence of the wife and Mr Douglas have not been tested in cross examination. There is, however, no reason on the face of the affidavits to not have regard to their contents.
I have said that, for the sake of argument, I will proceed as if there is a decision or determination under the Guidelines, and that security for costs is sought in relation to it.
There is, I think, a fatal difficulty for the independent children’s lawyer in the application.
Clause 3.2(5) allows for a costs application only if there is default in a decision or determination based solely on clause 3.2(2), which requires consideration of capacity etcetera in relation to clause 3.2(2).
Section 117(2) and (2A) require, in contrast, application in the context of section 117(1), as explained in Penfold’s case, requiring a justifying circumstance under section 117(2A) to be established.
In Penfold and Penfold (1981) 44 CLR 311 the High Court said at 315:
It is an accurate description of s117(1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s117(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.
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…..(emphasis added)
Thus, the Guidelines establish an administrative entitlement in the Commission to payment, if a valid decision is made, whereas section 117 is wholly discretionary, and dependent upon the exercise of a judicial discretion.
Leaving aside that problem, however, there is as yet no application for costs by the independent children’s lawyer, but an application for security for costs as explained.
Ms Horvat conceded properly that if I grant order 1, such would accord priority to the independent children’s lawyer over the parties’ own legal advisers, so that whilst in those circumstances the independent children’s lawyer would have contribution under the Guidelines – even if the parties are impecunious so as not to be able to be determined to pay contribution in the first place – the parties’ own lawyers, on the evidence, would be unpaid.
Leaving aside, however, this aspect of the matter, it is fundamental under section 117(2), even if a justifying circumstance is made out under section 177(2A), which here it is not, that I be satisfied that an order for security for costs be just. I cannot be so satisfied in this case as the grant of security to the independent children’s lawyer would be to deprive the parties’ own lawyers, and potentially Counsel, of payment to the same extent, at least pro rata of the amount secured.
Further Ms Lewis, for the wife, raised that section 117(4) provides that if a party to the proceedings has received Legal Aid in respect of the proceedings, the Court must not make an order under section 117(2) against that party in relation to the costs of the independent children’s lawyer. Ms Lewis points to the circumstance that an order for security for costs can only be to “secure” costs, if a costs order is made, but under section 117(4) it cannot be made. Ergo, it is put, a security for costs order similarly cannot be made against the wife.
Ms Horvat submitted in response that the wife has been in receipt of Legal Aid, according to her affidavit, only since 4 April 2011, about a week or so ago, which is very recent, whereas the independent children’s lawyer has incurred costs in the proceedings since the date of appointment. Section 117(4) does not make that distinction expressly or by implication. Moreover, it would be illogical for there to be any temporal distinction. Indeed, as I observed during argument, a determination to claim contribution, even leaving aside section 117(2A) must take into account a party’s capacity to pay at the time it is determined or claimed.
It appears that the scheme of the Guidelines is that if a parent can contribute, such should be sought and paid but if he or she cannot contribute the Commission pays through taxpayer funded means.
I will deal now with other arguments put by Ms Horvat.
First, she submitted that in relation to quantum the independent children’s lawyer, although entitled to charge on the Family Law Scale, has indeed charged under the Legal Services Commission Scale, which is about a third of the entitlement which he might have charged. This argument, it appears to me, has no merit in relation to the applicable principles for security for costs.
Secondly, Ms Horvat submitted that the parties have been on notice from the outset that they would be required to contribute to the independent children’s lawyer’s costs, and that they were on notice of the decision to defer the decision until the property proceedings were concluded, so that the independent children’s lawyer should not now be relegated to last on the list of the persons to whom the parties’ owe moneys, with effect that there should be security because if it is not granted there will be no moneys to pay the independent children’s lawyer by way of contribution which would not be fair.
I have dealt with this in part. It remains to be said that the doctrine of notice seems to have no part to play in relation to the Guidelines or section 117(2) or (2A). Whilst fairness is an important consideration, it would not be fair, in my view, to accord priority to the independent children’s lawyer in relation to its fees and disbursements claimed or to be claimed over and above the parties’ own lawyers in relation to their fees and disbursements.
Thirdly, Ms Horvat put that there are funds presently available for security which will not be available if security is not granted. This is so. However, such does not justify an award for security and thus priority, as already explained. The solicitors for the parties also have claims for fees by private contractual arrangement between the parties and their lawyers. The argument is circuitous.
Fourthly, Ms Horvat submitted that the independent children’s lawyer had no option but to make this application because neither the husband nor the wife has made any effort to take into account any payment to the independent children’s lawyer, and that it has been plain throughout the proceedings that the independent children’s lawyer has been and always would incur significant costs. As I have said, however, the system appears to be that an independent children’s lawyer is appointed in certain matters in proceedings in this Court and the Commission can seek contribution in certain circumstances as set out in the Guidelines. It is not a matter of any “option”, but of whether a case for security is made out as just as between the independent children’s lawyer and the parties’ own lawyers. I have determined it is not.
I accept the submission of Mr McQuade, succinctly put, that if the application were to be granted it would give priority to the Legal Services Commission over and above debts incurred by the parties already to their own solicitors, and there is nothing in section 117 that can be interpreted as effectively giving the independent children’s lawyer priority for legal costs over those incurred by the parties themselves, such that in essence, it would not be just, in the circumstances of both parties being impecunious, that their own solicitors not be paid by grant of the order sought.
In summary:
1.No section 117(2A) grounds were argued, let alone made out.
2.There is confusion, I think, between the intended operation of clause 3.2(5) of the Guidelines, and section 117(2) and (3). However, there is no need to resolve that matter in this case, as the independent children’s lawyer squarely put the case under section 117.
3.It would not be just, in this case, to award priority to the independent children’s lawyer over the parties’ own lawyers.
The application will be dismissed.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Reilly delivered on Thursday 14 April 2011.
Associate:
Date:
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