Weldon and Levitt (No.2)
[2018] FCCA 436
•27 February 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WELDON & LEVITT (No.2) | [2021] FCCA 436 |
| Catchwords: FAMILY LAW – Property – costs application against the applicant and his former solicitors on an indemnity basis – the court having found that parties were never in a de facto relationship – costs awarded against the applicant and his former solicitors. |
| Legislation: Family Law Act 1975, ss.90RD, 117 Federal Circuit Court Rules 2001, Pt 1 of Sch 1 |
| Cases cited: Cassidy v Murray (1995) 124 FLR 267; (1995) 19 Fam LR 492; (1995) FLC 92-633 |
| Applicant: | MR WELDON |
| Respondent: | MS LEVITT |
| File Number: | MLC 240 of 2016 |
| Judgment of: | Judge Riley |
| Hearing date: | 11 December 2017 |
| Date of last submission: | 6 February 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 27 February 2018 |
REPRESENTATION
| Counsel for the applicant: | No appearance |
| Solicitors for the applicant: | None |
| Counsel for the respondent: | Ms Marshall |
| Solicitors for the respondent: | Altona Legal |
| Advocate for D & M Lawyers: | Ms Dhanapala |
| Solicitors for D& M Lawyers: | D & M Lawyers |
ORDERS
The applicant pay the respondent $24,000, being 75% of her costs of the proceeding calculated on scale.
D & M Lawyers pay the respondent $8,000, being 25% of her costs of the proceeding calculated on scale.
DIRECTION
The Deputy Principal Registrar of this court refer this matter to the Legal Services Commissioner for consideration of whether Sulaika Dhanapala failed to meet her obligations as a solicitor:
(a)by signing affidavits in the absence of the purported deponents;
(b)by adding statements to the affidavits that the purported deponents had not made; or
(c)in any other manner.
For this purpose, the Deputy Principal Registrar give to the Legal Services Commissioner:
(a)a copy of these orders and the reasons therefor;
(b)a copy of the orders and the reasons therefor in Weldon & Levitt [2017] FCCA 3072;
(c)a copy of the transcript of the proceedings;
(d)a copy of the affidavits purportedly affirmed by Ms B, Ms M and Mr W;
(e)exhibit 1, being a handwritten letter by Ms B dated 3 June 2017; and
(f)any other document from the court file that the Legal Services Commissioner may request.
NOTATION
Section 121 of the Family Law Act 1975 provides that it is an offence punishable by imprisonment for up to one year to publish or disseminate to the public any account of family law proceedings which identifies the parties, witnesses or other people concerned with the proceedings, unless specifically authorised by the court.
IT IS NOTED that publication of this judgment under the pseudonym Weldon & Levitt (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 240 of 2016
| MR WELDON |
Applicant
And
| MS LEVITT |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for costs in relation to de facto property proceedings. The reasons in the substantive proceedings were sanitised and published as Weldon & Levitt [2017] FCCA 3072.
The judgment in the principal proceedings was delivered on 11 December 2017. The court declared that, pursuant to s.90RD of the Family Law Act 1975 (“the Act”), the applicant and respondent were never in a de facto relationship. The court ordered that the applicant’s application for property settlement be dismissed and ordered that the applicant remove a caveat he had placed over the applicant’s property.
When judgment was delivered, the respondent indicated that she wished to apply for costs against the applicant and his solicitor. A representative from the firm of solicitors acting for the applicant was in court to take judgment. As the solicitors had not previously been notified of a costs application against them, the matter could not proceed with oral submissions on that day. The parties agreed that they would file written submissions on the question of costs.
The respondent filed written submissions on 19 January 2018, in which she sought orders as follows:
[1]That the applicant and his solicitors, D & M Lawyers be jointly and severally liable to pay the respondent’s costs of and incidental to these proceedings on an indemnity basis being the sum of $42,579.00; or
[2]Alternatively, that the Applicant and his solicitors D & M Lawyers be jointly and severally liable to pay the Respondent’s costs and disbursements on a party/party basis to be agreed or in default as assessed.
The applicant’s solicitors, D & M Lawyers, filed written submissions in reply on 1 February 2018. D & M Lawyers opposed any costs order being made against them.
In their written submissions, D & M Lawyers stated that they had ceased to act for the applicant on 11 December 2017, the date of the judgment, due to a conflict of interest. They said that their last communication with the applicant was on 22 January 2018, when they provided him with a copy of the submissions made by the respondent. It follows that the applicant is aware of the claim against him for costs. He has not filed any written submissions. D & M Lawyers filed a notice of withdrawal of practitioner on 13 February 2018.
The legislation
Costs applications in family law proceedings are governed by s.117 of the Act. Relevantly, s.117(1), (2) and (2A) of the Act provide that:
(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.
Indemnity costs
The leading case on indemnity costs is Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234; (1993) 118 ALR 248; (1993) 28 IPR 561. That case is a decision of Sheppard J, sitting in the Federal Court. After reviewing the case law, his Honour set out the following principles relating to costs and indemnity costs:
2.The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of O 62, rr 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3.This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. …
4.In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. …
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud …; evidence of particular misconduct that causes loss of time to the Court and to other parties …; the fact that the proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law …; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions …; an imprudent refusal of an offer to compromise … and an award of costs on an indemnity basis against a contemnor … . Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6.It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
Family law authorities on costs
The respondent relied on Tang & Keats [2016] FamCA 99 where Cronin J said at paragraph 27:
It is the general rule, as prescribed in s 117(1) of the Act, that each party should bear their own costs. However, the Court is empowered by s 117(2) of the Act to make an order for costs if it is of the opinion that there are “circumstances that justify it in doing so”. If the Court finds a justifying circumstance, it still has to have regard to the factors in s 117(2A) in considering what order, if any, should be made (see I and I (No 2) (1995) FLC 92-625).
In Martin v Harris [2010] FamCA 239, Fowler J said at paragraph 34:
A solicitor has an obligation to act competently and in accordance with his obligations as an officer of the court. There was regrettably in this case a failure in achieving that standard. A solicitor must not act for a client in a way which puts him in conflict with that duty, no matter how strongly insistent the client might be, nor how much the action is on specific instructions. In those circumstances, if there is a conflict of the proportions that arose in this case, the solicitor should inform the client that if he insists on so instructing then the solicitor will have to cease to act and then do so if the client continues to so insist. Having heard the evidence of the husband and having regard to the conclusions I have drawn about his conduct I can well imagine that he would have been difficult to dissuade from any course upon which he had set his mind. Nevertheless, that is the obligation of the solicitor in circumstances where to follow those client edicts would be to abuse the court process, waste the court's time and incur more particularly for this case the unnecessary costs which could have otherwise been avoided.
D & M Lawyers relied on Cassidy v Murray (1995) 124 FLR 267; (1995) 19 Fam LR 492; (1995) FLC 92-633 to support the proposition that costs orders against a solicitor are the same as other costs orders in that their purpose is compensation rather than punishment.
In the case of PBF v TRF (2005) 191 FLR 294 at [41]; (2005) 33 Fam LR 123; [2005] FamCA 158, Kay, Warnick and Boland JJ said, in relation to s.117 of the Act:
A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs 2(2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
In In the Marriage of McDonald (1994) 122 FLR 401 at 408-409; (1994) 18 Fam LR 265; (1994) FLC 92-508, Mushin J said:
… Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order [for costs]. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order were made.
The Full Court of the Family Court, in In the Marriage of I (No.2) (1995) 125 FLR 332 at 333; (1995) 22 Fam LR 557; (1995) FLC 92-625, disagreed with McDonald. Nicholson CJ, Ellis and Buckley JJ said at 333:
With respect to Mushin J, we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs. The financial circumstances of the parties is but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.
Financial circumstances
The applicant filed a financial statement on 29 November 2016 in which he said that:
a)his total average weekly salary was $800;
b)he has no other income;
c)he pays on average $100 per week income tax;
d)he pays rent of $200 per week;
e)he pays $25 per week for car insurance and registration;
f)he pays $605 per week for other expenses;
g)his average weekly expenditure is $930;
h)he has $500 in a bank account;
i)he has a car worth $5,000;
j)his household contents are worth $2,000;
k)he has $3,852 in superannuation; and
l)he has no debts.
The respondent filed a financial statement on 26 May 2017, in which she said that:
a)she receives Newstart allowance of $297 per week and family tax benefit A and B of $363 per week, making a total of $660 per week;
b)she receives boarder’s income of $100 per week;
c)she receives no child support from the applicant and has no other income;
d)her expenses total $700 per week being:
i)$56 for rates;
ii)$11 for life insurance;
iii)$18 for car insurance;
iv)$16 for home and contents insurance;
v)$8 for car registration;
vi)$118 for a car loan;
vii)$73 for loan repayments to Centrelink;
viii)$400 for other expenses;
e)she owns a house in (location omitted) worth $325,000;
f)she has a nominal amount of money in the bank;
g)she owns a car worth $15,000;
h)she has $1,000 worth of other personal property;
i)she has no superannuation; and
j)she owes $15,260 for a car loan.
D & M Lawyers did not tell the court anything about its financial circumstances.
Legal aid
Neither party was in receipt of legal aid. Obviously, D & M Lawyers was not in receipt of legal aid.
The conduct of the parties in relation to the proceedings
The respondent argued that D & M Lawyers and the applicant misled the court in various ways. The court noted in the judgment in the substantive proceedings that the applicant had lied about various matters that went to the heart of his claim that the parties had been in a de facto relationship for 13 years.
The applicant called his sister, Ms B, to give evidence on his behalf. She told the court in oral evidence that D & M Lawyers prepared her affidavit based on a statutory declaration[1] that Ms B had prepared, which, in turn, was almost identical to a letter Ms B had previously prepared[2]. However, the affidavit, on the one hand, and the statutory declaration and the letter, on the other hand, were vastly different in significant respects. Moreover, Ms B told the court that she did not swear the affidavit in the presence of the solicitor before whom it purported to have been sworn. Rather, Ms B told the court that she signed the affidavit in the presence of the applicant.
[1] Statutory Declaration of Ms B, declared on 3 June 2017, annexure A to the written submissions of D & M Lawyers filed on 1 February 2018.
[2] Handwritten letter written by Ms B dated 3 June 2017, exhibit 1.
The applicant also called his friend, Ms M, to give evidence on his behalf. She also signed her affidavit without having met the solicitor and without having attended the solicitor’s office, even though Ms M's affidavit purported to have been sworn before the applicant’s solicitor.
The applicant also filed an affidavit of Mr W affirmed on 12 June 2017. However, Mr W was not available to give evidence and his affidavit was not relied upon.
However, the affidavits of Ms B, Ms M and Mr W contained numerous passages with identical or almost identical wording. That suggested that there may have been collusion in the preparation of the affidavits, or that the affidavits contained the words of the solicitor rather than the deponents. Ms B and Ms M maintained that they had not colluded with each other about the wording of their affidavits. I accept their evidence on this matter.
D & M Lawyers conceded at page 5 of its written submissions that the affidavits were not properly witnessed. D & M Lawyers attached to their written submissions the preliminary drafts provided by Ms B, Ms M and Mr W. Ms M's affidavit included the following paragraphs, which were entirely unrelated to anything stated in her preliminary draft:
6.It is of my knowledge that Mr Weldon and [C] [the respondent’s son] maintained a close relationship with each other and Mr Weldon was [C]’s father figure. My husband and I spoke about this relationship on many occasions and admired the close relationship that they both shared.
7.It is my understanding that the family went on many holidays together during the time of the relationship.
8.Until the time of separation, my wife [amended in oral evidence to read “husband”] and me considered Mr Weldon and Ms Levitt to be de facto partners.
I conclude that the solicitor drafted the affidavits of Ms B and Ms M by departing significantly from the preliminary drafts provided by them. The changes went well beyond the acceptable limit, such as tightening the language, or omitting irrelevancies. It also appears that the solicitor breached her ethical obligations by signing the affidavits as if they had been sworn or affirmed in her presence when in fact they had not. I will refer the matter to the Legal Services Commissioner for investigation of those issues.
The applicant lied about central aspects of his case. Indeed, he brought a proceeding in which critical facts that he relied upon were untrue. Having said that, the question of whether a de facto relationship exists is a complex legal question, which can be difficult, even for family lawyers.
The conduct of the applicant’s solicitors fell well short of proper standards. The evidence of Ms B and Ms M added about half a day to the hearing time.
Whether the proceedings were necessitated by non-compliance
The proceedings were not necessitated by non-compliance with previous orders.
Whether any party has been wholly unsuccessful
The applicant was wholly unsuccessful in his application to this court.
Whether any settlement offers were made
It was not suggested that either party made a settlement offer in writing. However, the respondent’s solicitor sent the applicant’s solicitor a letter dated 28 November 2016 (annexure A to the respondent’s submissions) in which it was stated that the parties were not in a de facto relationship and asking that the applicant remove the caveat over the respondent’s property. The letter also said that the letter that would be produced on the question of costs if the applicant commenced proceedings.
Any other relevant matters
Although the court found in this matter that the parties were never in a de facto relationship, statements were made by and on behalf of the respondent in parenting and intervention order proceedings to the effect that the parties were in a de facto relationship. In the judgment in the substantive proceedings, the court explained why the respondent was not held to that description of her relationship with the applicant. However, these statements, to some extent, may explain why the applicant brought the proceedings.
Having said that, it is also the case that the applicant threatened the respondent to the effect that he would institute proceedings seeking half of her property if she pursued a claim against him for child support.
Consideration
There are factors in this case that might warrant an order for indemnity costs in a commercial matter. The first is that the applicant instituted the proceedings for an ulterior motive, namely, in retaliation for the respondent seeking child support from him. The second is that the applicant’s solicitor engaged in misconduct in relation to the preparation and swearing of affidavits. The third is that the applicant brought the proceedings in wilful disregard of known facts. That is, the applicant knew that he did not live with the respondent for 13 years.
However, I do not consider that indemnity costs are warranted in this case. That is largely because of the statements made by the respondent or on her behalf in other proceedings in which she conceded the existence of a de facto relationship. Those statements certainly obscured the reality of the situation. Moreover, as mentioned above, the existence or otherwise of a de facto relationship is a complex legal question that even family lawyers find difficult. This case was not as black and white as the ultimate conclusion might suggest.
It is also the case that these proceedings are different from the average family law proceeding, where the dispute is typically about questions of degree, such as the amount of time children should spend with each parent or the proportion of the property pool that should go to each party. The present proceedings did not involve any questions of degree, but concerned whether a de facto relationship existed at all. Unlike most family law proceedings, it was inevitable that one party would be entirely successful and the other would be entirely unsuccessful.
Both parties are in constrained financial circumstances. The applicant works and receives a modest wage. However, he has no assets to speak of and minimal superannuation. The respondent is in receipt of Government benefits, and has no superannuation but does own a modest house outright, largely as the result of an inheritance. In the absence of evidence to the contrary, it seems fair to proceed on the basis that D & M Lawyers are in a substantially better financial position than the parties to these proceedings.
I do not consider that costs should be ordered against the applicant and his former solicitors on a joint and several basis. That would expose the former solicitors to a much greater liability than their conduct warrants.
On balance, I consider that, in all the circumstances of this case, it is just that the applicant pay 75% and his former solicitors pay 25% of the respondent’s costs on scale. There is no allowance in the scale for drafting and settling submissions. However, it seems to me that it is appropriate to include a reasonable amount for those services. By my calculation, the costs are as follows:
Solicitor’s costs
Item 2(a):
Opposing an application which includes interim orders up to the completion of the first court date (this includes the duty list mention on 29 May 2017)
$2,750
Item 7:
Preparation for final hearing – 2 day matter
$5,811
Item 8:
Preparation for final hearing – each additional day after the second day – 1 day
$1,244
Item 13(c):
Daily hearing fee – for a full day hearing – $2,199 per day for three days
$6,597
Item 9(a):
Final hearing costs for attendance of solicitor at hearing to take judgment and explain orders
$299
Items 9(b) and 13(a):
The daily hearing fee mentioned in item 13 that applies to the hearing
Daily hearing fee for a short mention for judgment
$299
Total for solicitor:
$17,000
Barrister’s fees
Item 13(b):
Daily hearing fee for a half day hearing
(the duty list hearing 29 May 2017 – half day hearing)
$1,099
Item 12:
Advocacy loading – 50% of the daily hearing fee mentioned in item 13 that applies to the hearing
(the duty list hearing 29 May 2017 – half day hearing)
$549.50
Item 13(c):
Daily hearing fee for a full day hearing – $2,199 per day for three days
$6,597
Item 12:
Advocacy loading – 50% of the daily hearing fee mentioned in item 13 that applies to the hearing
(three days)
$3,298.50
Closing submissions
Allow one day of the daily hearing fee in item 13(c)
$2,199
Items 9(b) and 13(a):
The daily hearing fee mentioned in item 13 that applies to the hearing
Daily hearing fee for a short mention for judgment
(barrister attending for judgment)
$299
Item 12:
Advocacy loading – 50% of the daily hearing fee mentioned in item 13 that applies to the hearing – daily hearing fee for a short mention for judgment
$149.50
Preparing costs submissions
$1,100
Total for barrister:
$15,291.50
Combined total for barrister and solicitor:
$32,291.50
In my view, it is just to round this figure to $32,000. There will be orders accordingly.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Riley
Date: 27 February 2018
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