Wallace and Wallace (No. 2)

[2018] FamCA 766

FAMILY COURT OF AUSTRALIA

WALLACE & WALLACE (NO. 2) [2018] FamCA 766

FAMILY LAW – COSTS – Between parties – Circumstances justifying order – Indemnity costs

Family Law Act 1975 (Cth) ss 117(2A)(a), 117(2A)(d), 117(2A)(e)

Family Law Rules 2004 (Cth) rr19.08(1), 19.08(3), 19.18, 19.18(3)

Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Kohan & Kohan (1993) FLC 92-340
Prantage & Prantage (2013) FLC 93-544
Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151

APPLICANT: Ms Wallace

RESPONDENT: Mr Wallace

FILE NUMBER: ADC 3290 of 2015

DATE DELIVERED: 26 September 2018

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 11 September 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Dickson

SOLICITOR FOR THE APPLICANT: Pascale Legal Barristers & Solicitors

COUNSEL FOR THE RESPONDENT: Mr Roberts

SOLICITOR FOR THE RESPONDENT: Salisbury Lawyers

Orders

1. That the mother’s costs in respect of the interim proceedings be such sum as may be agreed or in default of agreement as may be determined by a Registrar on an indemnity basis.

2. That the mother forthwith instruct Pascale Legal to transfer to the trust account of Salisbury Lawyers the sum of TWELVE THOUSAND TWO HUNDRED AND FIFTEEN DOLLARS AND FORTY TWO CENTS ($12,215.42) plus interest.

3. That the father be restrained and an injunction granted restraining him from instructing Salisbury Lawyers to disburse the settlement sum other than in respect of the payment of the mother’s costs as agreed or taxed either whole or in part SAVE AND EXCEPT that any balance that shall remain after the payment of the mother’s costs, if any, is to be retained by the father’s solicitors for and on his behalf.

4. That the principal solicitor of Salisbury Lawyers will forthwith advise the mother’s solicitors of any instruction by the father to disburse the settlement sum or part thereof or of a notice to terminate their instructions whereupon the settlement sum shall be placed in an account operated by the Controller of Finance of the Family Court of Australia.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Wallace & Wallace (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 3290 of 2015

Ms Wallace

Applicant

And

Mr Wallace

Respondent

REASONS FOR JUDGMENT

introduction  

1. Following a final parenting hearing in December 2017, orders were made on 14 March 2018 that Ms Wallace (“the mother”) have sole parental responsibility for C born in 2008 (“C”) and D born in 2011 (“D”) (collectively “the children”), that the children live with her and commencing 12 April 2018, spend time with Mr Wallace (“the father”) each alternate weekend, for one half of all school holiday periods and on special occasions.

2. On 30 May 2018 the mother filed an Initiating Application seeking to discharge orders that provided for the children to spend time with the father and further, that he be restrained from approaching the children, the mother, the children’s school or any health professional engaged in the children’s ongoing care.

3. By way of interim relief the mother sought that the father deliver up the children to her care and if he failed to comply, that a recovery order do issue pursuant to s 67Q of the Family Law Act 1975 (Cth) (“the Act”).

4. The application was supported by the mother’s affidavit which alleged that the father had retained C from 31 March 2018 and D from 13 April 2018.

5. It was further alleged that the father had not taken the children to school and that he did not facilitate any contact or communication with the mother.

6. The mother filed a Notice of Risk on 30 May 2018 alleging that the conduct of the father constitutes abuse for the following reasons:-

   (1)The respondent father is preventing the children from attending school and advancing their education.

   (2)The respondent father is refusing to allow the children to leave the confines of his parent’s property.

   (3)That respondent father is refusing to allow the children to have any contact or communications with the mother or the outside world.

   (4)The Respondent father is preventing the children from attending upon their psychologist to obtain the necessary support that [they] require.

   (5)The respondent father is encouraging the children to believe they have been abused by the mother and are at risk of being abused by the mother.

7. By Response filed 26 June 2018 the father sought orders that he have the sole parental responsibility for the children, that the children live with him and spend no time with the mother.

8. His position in relation to the children spending time with the mother was amended in his Response filed 3 September 2018 to provide for the children to spend time with the mother each alternate weekend from the conclusion of school on Friday to the commencement of school on Monday and in the intervening week from the conclusion of school on Wednesday until the commencement of school on Thursday. The proposed orders also provided for the children to spend one half of the school holidays with the mother.

9. The alternative proposal was that the children live with each parent on a week about basis.

10. On 28 June 2018, a Recovery Order was made requiring the father to deliver up the children to the mother.

11. Following police intervention, the children were recovered and following their return to the mother they have not spent time with the father.

12. The interim proceedings were adjourned for hearing to 11 September 2018.

13. The mother filed a further Affidavit on 7 September 2018 which in part alleged that the father had engaged in surreptitious conduct enabling him to communicate with the children online through an online gaming platform and by a hyperlink to a webpage created by the father.

14. Given my involvement in the final hearing of the matter in 2017 and the adverse findings made in respect of the father in judgment, I considered that I should recuse myself. There was no opposition to that proposed course and arrangements have been made for the parenting proceedings to be heard and managed by a different judge.

MONEY OUTSTANDING TO THE FATHER

1. On 11 December 2017 a consent order was made resolving all claims for property settlement as between the parties.

2. The sum of $12,215.42 remained in the mother’s solicitors trust account which she acknowledged should be distributed to the respondent.

3. The mother contends that the sum payable was not able to be distributed in the absence of the father’s solicitor providing his trust account details. Exhibit “1” refers to a letter from Pasquale Legal to EE Lawyers dated 11 May 2018 conceding that there had been an oversight on behalf of the mother’s solicitors, acknowledging that the money should have been transferred and advising that appropriate action will be taken as soon as possible.

4. The mother’s position changed as a result of the issuing of proceedings for the recovery of the children. The following appears at [183] of her Affidavit filed 30 May 2018:-

   Realising that we would have to now initiate proceedings requesting the return of the children and noting how much I had already expended on legal fees, I instructed my solicitor to not distribute funds and instead make an application for security for costs.

5. The father seeks an order that the sum of $12,215.42 plus interest as assessed or agreed bet transferred from the trust account of the mother’s solicitors to the trust account of the father’s solicitors pursuant to orders made 11 December 2017.

6. The transfer of the funds is now resisted by the mother by reference to her application for costs incurred in bringing proceedings seeking that the father deliver up the children to her and in particular in respect of the application for recovery.

MOTHER’S COST APPLICATION

1. The mother seeks an order for costs in respect of the proceedings issued to date to recover the children.

2. A schedule of costs tendered by the mother’s counsel with a total of $21,420 being the costs as and from the filing of the initiating application for the recovery of the children to 6 September 2018 (Exhibit “2”).

3. Pursuant to r 19.08(1) of the Family Law Rules 2004 (Cth) (“the Rules”), the mother has applied for an order that the father pay her costs. The application is made by the mother’s Initiating Application.

4. The mother seeks an order for costs to be paid by the father on an indemnity basis. Rule 19.08(3) of the Rules provide:-

   A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.

5. The method of calculation of costs is referred to in r 19.18:-

   (1)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.

6. Sub-rule 19.18(3) of the Rules provides that the court may consider:

   (a)the importance, complexity or difficulty of the issues;

   (b)the reasonableness of each party’s behaviour in the case;

   (c)the rates ordinarily payable to lawyers in comparable cases;

   (d)whether a lawyer’s conduct has been improper or unreasonable;

   (e)the time properly spent on the case, or in complying with pre-action procedures; and

   (f)expenses properly paid or payable.

7. In considering what orders should be made, if any, in respect of the mother’s costs, s 117(2A) of the Act requires the court to have regard to the following:

   (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 fact, 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.

   (h)

Should an order for costs be made in favour of the mother?

1. The mother relies upon subsections 117(2A)(a), (d) and (e).

2. To date the mother has spent in excess of $196,000 on the proceedings. She considers that the father’s conduct was in part to blame for the complexity of the litigation.

3. The application for recovery of the children was required in order that the children be returned to the mother’s care in compliance with the final orders. The mother relies upon the reasons as set out in the judgment to support her contention that the final orders should be considered as in the children’s best interests and the conduct of the father in retaining the children almost at the first opportunity available to him without application to suspend or vary the orders indicates a clear disregard for the rationale of the orders crafted to promote the best interests of the children by placing them in the mother’s primary care and providing that they spend time with the father.

4. It is further argued that the recovery order was made necessary by the father retaining the children contrary to the orders. The father was wholly unsuccessful in his opposition to an order requiring the children to be delivered up and it then necessitated a recovery order to restore the children to the mother’s care.

5. The father resists the application for costs and refers to his Response and affidavit filed 26 June 2018. The father’s affidavit provides no assistance as to the basis for his retention of the children, but instead seeks a certificate pursuant to s 128 of the Evidence Act 1995 (Cth). No submissions were made by the father as to why the claim for protection against self-incrimination was necessary, or how any evidence may tend to prove that he had committed an offence under Australian law.

6. The overarching position of the father was to resist the order for delivery up.

7. The father has been wholly unsuccessful.

8. It is further argued on his behalf that he is impecunious and accordingly, his financial circumstances is a relevant consideration.

9. Whilst impecuniosity is not in and of itself a bar to successful application for costs it is a relevant consideration. In the circumstances of this case, the father is entitled to receive the sum of $12,215.42 from the mother’s solicitors trust account. That sum is identified as a source from which any costs order could be paid in whole or part.

10. The orders sought by the father seek the transfer of the funds from the mother’s solicitors trust account to the trust account of the father’s solicitor. At the hearing, counsel for the father submitted that the funds should be transferred directly to the father. It was the Court’s position that in circumstances where the father was represented, it would be inappropriate to do other than to fall in with the father’s order as presently drafted.

11. In circumstances where I have found that there is merit in the mother’s application for costs and where the father is purportedly impecunious other than the funds that he is to receive, it is reasonable that following the transfer of funds, the father be restrained and an injunction granted restraining him from seeking to have those monies paid to him unless he has given 30 days’ notice of his intention to request payment. The father will also be restrained from giving any other instruction which would allow the funds transferred to be used as to any other purpose than to satisfy the mother’s application for costs.

QUANTUM OF THE MOTHER’S COSTS

1. The mother seeks an order for costs on an indemnity basis. As discussed, Exhibit “2” is a schedule of costs from the filing of the Initiating Application on 30 May 2018 to 6 September 2018 with a total of $21,420. A significant component of the sum sought is an amount of $15,662.90 representing work in progress for Pasquale Legal as at 6 September 2018. Those costs have not been itemised.

2. The mother seeks an order for the entirety of her costs to date. Her costs are not confined to the recovery of the children, but also include the costs arising from the filing of her Initiating Application which seeks to re-litigate the parenting arrangements for the children. The orders sought by the mother are fundamentally different to the final orders and whilst she may contend that they are brought about by the actions of the father, at present there can be no determination as to whether the final orders that she seeks or those set out in the father’s response, will be made.

3. Until the substantive proceedings have been finally determined, the question of the parties costs generally and those of the mother in particular are not able to be determined.

4. Accordingly, the parameters of the mother’s application for costs should be limited to the interim orders sought for delivery up and recovery, subsequent attendances by counsel to argue the application, solicitors’ fees and necessary disbursements.

5. I am not provided with a schedule for costs which would enable the Court to exercise its discretion and to fix an amount payable.

INDEMNITY COSTS

1. The explanatory guide to the Rules has been accepted by the court as an accurate definition of “indemnity basis”; namely:-

   An entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.

2. The discussion of the Full Court in Prantage & Prantage (2013) FLC 93-544 is of assistance in determining whether and in what circumstances an order for indemnity costs should be made. The Full Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 in which it was noted that whilst there was nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said in Kohan at 79,611:-

   …it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.

3. In Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said at 156:-

   The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.

   The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.

4. In Prantage (supra) the Full Court said at 87,209:-

   97. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.

   98. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.

1. Given the complex history of this matter and the proximity to the application for the recovery to the final parenting orders made on 14 March 2018, it is reasonable to consider whether the assessment of the mother’s costs should be on an indemnity basis.

2. The matters before the Court are of significant complexity. The application was necessary to cause the return of the children to the mother’s care pursuant to the final orders.

3. The application was made necessary by the precipitous conduct of the father in retaining the children without warning or advice and in circumstances where he could have proceeded in an orderly fashion by bringing an application seeking to suspend or vary the parenting orders.

4. The conduct of the father was unreasonable and has placed the mother in the unnecessary position of having to bring proceedings.

5. The mother’s costs should be assessed on an indemnity basis.

6. I make orders as appear at the commencement of these reasons.

I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 26 September 2018.

Associate: 

Date:  26 September 2018