Warin & Warin (No 6)
[2022] FedCFamC1F 457
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Warin & Warin (No 6) [2022] FedCFamC1F 457
File number(s): MLC 7368 of 2020 Judgment of: WILSON J Date of judgment: 4 July 2022 Catchwords: FAMILY LAW – INDEMNITY COSTS – indemnity costs sought for failed joinder application – party/party costs ordered – indemnity costs sought against the solicitor for the second and third respondents – application for costs refused.
FAMILY LAW – DISCLOSURE – persistent failure by bankrupt to give disclosure to enable the question whether any of his property was vested property to be ascertained – bankrupt persistently thwarting a determination being made about whether he has standing yet he persists in participating in this litigation as if he is man of substance when he is a man of straw.
FAMILY LAW – self executing orders.
Legislation: Family Law Act 1975 (Cth) ss 117(1), (2), (2A) Cases cited: Warin & Warin (No 4) [2022] FedCFamC1F 160
Warin & Warin (No 5) [2022] FedCFamC1F 452
Warin & Warin [2021] FedCFamC1F 269
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225Fitzgerald v Fish (2005) 33 Fam LR 123
Garston & Yeo [2022] FedCFamC1F 235
Stasiuk & Guild [2020] FamCA 564
Hatch v Cohn (2004) 139 FCR 425In the Marriage of Hogan (1986) 10 Fam LR 681
Hearne v Street (2008) 235 CLR 125
Limousin v Limousin (Costs) (2007) 38 Fam LR 478
Medlow & Medlow(No 6) (2015) 54 Fam LR 1
Zheng & Cheung [2022] FedCFamC1F 249Division: Division 1 First Instance Number of paragraphs: 24 Date of hearing: 21 June 2022 Place: Melbourne Solicitor for the Applicant: Vadarlis & Associates Solicitor for the First and Second Respondent: Sebastian Rubera & Associates Solicitor for the Third and Fourth Respondents: Maddocks Lawyers ORDERS
MLC 7368 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WARIN
Applicant
AND: MR WARIN
First Respondent
MR STANTON & MR BASFIELD IN THEIR CAPACITY AS TRUSTEES IN BANKRUPTCY OF THE BANKRUPT ESTATE OF THE RESPONDENT HUSBAND
Second Respondent
MS INSTON
Third Respondent
WARIN PTY LTD
Fourth Respondent
ORDER MADE BY:
WILSON J
DATE OF ORDER:
4 JULY 2022
THE COURT ORDERS THAT:
1.The third respondent must pay the costs of the failed attempt to join Mr N and Ms P on a party/ party basis to be assessed by a registrar by no later than 14 November 2022.
2.The application for an order for indemnity costs against the solicitor for the second and third respondents is refused.
3.On or before 4:00pm on 18 July 2022 the bankrupt must give disclosure in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 in specific reference to vested property within the meaning of the Bankruptcy Act.
4.If the bankrupt fails to comply with paragraph three hereof then any application by the applicant in relation to staying the bankrupt’s application in this proceeding or in relation to security for costs must be filed and served by 4:00pm on 1 August 2022 properly supported by affidavit material.
5.The further hearing of this proceeding is adjourned to 10:00am on 8 August 2022 for directions in addition to the previously listed mention at 9:30am on 6 July 2022.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Warin & Warin is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
On Friday 21 June 2022 I determined[1] the wife’s application to be relieved of the implied undertaking imposed upon her pursuant to Hearne v Street[2] and indicated that I would hand down reasons in relation to the third respondent’s unsuccessful application to join Mr N and Ms P. These are my reasons.
[1] Warin & Warin (No 5) [2022] FedCFamC1F 452.
[2] (2008) 235 CLR 125.
The applicant wife has applied for a costs order against the third respondent as well as against the third respondent’s solicitor, Mr Rubera, on an indemnity basis.
As these reason explain, in my judgment it is just[3] to make an order for costs to be paid by the third respondent in relation to the failed attempt to join Mr N and Ms P. However, I decline to make any form of costs order against Mr Rubera.
[3] In the Marriage of Hogan (1986) 10 Fam LR 681.
When refusing the third respondent’s application to join Mr N and Ms P I took the view that no proper basis had been demonstrated for their joinder.
The fact that the application failed is not, without meeting one[4] of the matters in s 117(2A), a sufficient reason for ordering costs under s 117(2) in a manner that deviates from the ordinary order under s 117(1) of the Family Law Act. Here, the wife argued that for the purposes of s 117(2A), the third respondent was wholly unsuccessful in the joinder application in relation to which the wife expended costs in opposing. The wife submitted that indemnity costs were appropriately ordered.
[4] Fitzgerald v Fish (2005) 33 Fam LR 123.
In addition, the wife sought a costs order in relation to the unsuccessful opposition to her application to be released from the implied undertaking. Mr Rubera opposed that application.
It became necessary to dissect each costs application, even though in both the wife succeeded.
The first was the failed joinder application. In my view that application had no prospect of success and ought not to have been brought as was recorded in my earlier reasons.[5] It was wholly unsuccessful, thereby enlivening a specific subsection of s 177(2A) which justified an order under s 117(2) rather than an order under s 117(1).
[5] Warin & Warin (No 4) [2022] FedCFamC1F 160.
But that is not the same as imposing an order for costs to be assessed on an indemnity basis. An array of authority has held that indemnity costs should only be ordered in exceptional circumstances,[6] notwithstanding the observations in Colgate Palmolive Co v Cussons Pty Ltd,[7] and the authorities I surveyed in Guild & Stasiuk (No 2) although the ultimate result was reversed.[8] Further, the expression “exception circumstances” has been the subject of my consideration in Zheng & Cheung[9] and Garston & Yeo[10] where I applied the construction given to the phrase by Kiefel J (as the Chief Justice then was) in Hatch v Cohn[11] so as to mean “out of the ordinary”.
[6] Medlow & Medlow(No 6) (2015) 54 Fam LR 1; Limousin v Limousin (Costs) (2007) 38 Fam LR 478 and Stasiuk & Guild [2020] FamCA 564.
[7] (1993) 46 FCR 225.
[8] [2020] FamCA 564.
[9] [2022] FedCFamC1F 249.
[10][2022] FedCFamC1F 235.
[11] (2004) 139 FCR 425.
The question then became whether exceptional circumstances existed, that is to say circumstances out of the ordinary, to warrant the imposition of indemnity costs. Bringing an application for an ulterior purpose of causing hardship or wilfully inflicting financial harm on a party may well amount to circumstances out of the ordinary, if evidence existed to support that conclusion. No such evidence was given. The wife’s solicitor referred to the third respondent deposing to information to which she was not capable of deposing. That of itself could not support an indemnity costs order.
In my view –
(a)a costs order under s 117(2) is appropriately made against the third respondent in relation to the failed joinder application; and
(b)those costs must be paid on a party/party basis.
The wife frankly conceded that she was unable to say on what advice the decision was made to seek the joinder of Mr N and Ms P, especially whether Mr Rubera gave that advice. It would be peculiar were it otherwise. But many (if not most) applications in this Court are brought on the basis of legal advice. The fact that a particular application fails does not mean that the solicitor who may have advised on bringing the application, in and of itself does not mean the solicitor becomes amenable to a costs order personally, still less an indemnity costs order. In those circumstances it is inappropriate to order Mr Rubera personally to pay the wife’s indemnity costs on the unsuccessful joinder application. The costs order operates only against the third respondent.
Finally, it became necessary to address costs of the wife’s application for leave to rely on certain documents to which the Hearne v Street undertaking otherwise attached. The wife wholly succeeded. A ground under s 117(2A) was thereby enlivened. She should have her costs. However, it is not appropriate to fasten the first respondent’s trustee-in-bankruptcy with such a costs order. The question is whether the third respondent should be visited with the costs of the wholly unsuccessful opposition to the wife’s application for leave to rely on the documents she says she will use on the application to CSA. In my view it was not appropriate to so order.
It must not be forgotten that the husband, an undischarged bankrupt, has previously agitated his standing in this litigation. Pursuant to earlier reasons given my me,[12] I determined that the bankrupt had no standing to personally participate in this litigation insofar as his claims relate to vested property that is to say property that, pursuant to the provisions of the Bankruptcy Act, vested in the trustee-in-bankruptcy by force of the fact of the first respondent presented his own petition in bankruptcy. In earlier reasons given in this litigation, I have ruled that the bankrupt’s disclosure has been so defective that it has been impossible to ascertain precisely what is vested property and that until a determination can be made about the vested property in this case, the bankrupt’s standing cannot be determined.[13] That said, the bankrupt continues to be derelict in his disclosure obligations with the consequences that, by that conduct, he continues to thwart the determination of the question of his standing and yet he persists in participating in this proceeding as if he is unaffected by his own bankruptcy, causing the wife to incur attendant costs.
[12] Warin & Warin [2021] FedCFamC1F 269.
[13] Ibid.
That must cease.
If he continues to refuse to provide disclosure so as to enable a determination to be made about his standing I will entertain an application that any further steps by him in this litigation be halted until he does provide such disclosure. If such an order were made, and of course I have yet to hear it, then the wife’s application will continue notwithstanding the halting of the s 79 application he brings. Time may well tell.
The bankrupt should not be permitted to vex the wife in this proceeding as if he is a man of substance when in truth he is a man of straw.
Alternatively, if the bankrupt persists in his failure to discharge his duty of disclosure, I will entertain a security for costs application against him.
Precisely how the bankrupt had standing for, and on what legal and factual basis the bankrupt opposed, the wife’s application that I determined on 21 June 2022, was not stated. His solicitor had an ethical obligation to be satisfied that a proper basis existed, consistent with the overarching purpose of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”). If he failed to do so, he may very well be exposed to a personal costs order.
In that regard I make the orders set out hereunder.
By 4:00pm on 18 July 2022 the bankrupt must give disclosure in accordance with the Rules in specific reference to vested property within the meaning of the Bankruptcy Act.
If the bankrupt fails to comply with the order recorded immediately above by the time and date ordered, then the wife may apply by 4:00pm on 1 August 2022 in relation to staying the bankrupt’s applications in this proceeding or in relation to security for costs so long as such an application is properly supported by affidavit material.
I shall then convene a directions hearing in this proceeding at 10:00am on 8 August 2022 to make directions consequent either upon the disclosure the bankrupt gives or alternatively, consequent upon any application being filed by the wife.
Returning to the costs application concerning the Hearne v Street undertaking, it is intolerable that the bankrupt fails to do as he is required to do thereby frustrating the orderly ascertainment of his vested property yet he concurrently participates in this litigation, instructing his solicitor as if he were not a bankrupt. That conduct may well give rise to professional conduct issues for Mr Rubera on which he may wish to obtain independent legal advice. I shall hold over a determination of the issue of costs on the Hearne v Street undertaking issue until the further hearing of this proceeding.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 4 July 2022
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