West and West and Anor (No.2)
[2008] FMCAfam 63
•7 February 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WEST & WEST & ANOR (No.2) | [2008] FMCAfam 63 |
| FAMILY LAW – Costs Application – applicant wholly successful – offers of compromise – representation that applicant was assisted pro bono – costs application dismissed. |
| Family Law Act 1975 (Cth) ss.117(I), 117(2A) Bankruptcy Act 1966 (Cth) Federal Magistrates Court Rules 2001 (Cth) Schedule 1 Legal Profession Act 2004 (Cth) |
| Penfold v Penfold (1980) 144 CLR 311 Harris & Harris (1991) FLC 92-254 |
| Applicant: | MS WEST |
| First Respondent: | MR WEST |
| Second Respondents: | MR W & MR N AS TRUSTEES OF THE BANKRUPT ESTATE OF [MR WEST] |
| File number: | MLC 11481 of 2007 |
| Judgment of: | O’Sullivan FM |
| Hearing date: | 14 January 2008 |
| Date of last submission: | 14 January 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 7 February 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Dellidis |
| Solicitors for the Applicant: | Lander & Rogers |
| The First Respondent: | No appearance |
| Counsel for the Second Respondents: | Mr Lhuede |
| Solicitors for the Second Respondents: | Piper Alderman |
ORDERS
There be no order as to costs.
All extant applications are dismissed and removed from the pending cases list.
IT IS NOTED that publication of this judgment under the pseudonym West & West is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 11481 of 2007
| MS WEST |
Applicant
And
| MR WEST |
First Respondent
And
| MR W & MR N AS TRUSTEES OF THE BANKRUPT ESTATE OF [MR WEST] |
Second Respondents
REASONS FOR JUDGMENT
This is an application for costs following proceedings for property settlement which concluded in 2007. The principal proceedings were commenced by an application filed 2 October 2006 by Ms West (“the wife”). At that time the wife was represented by Frank Randle, Solicitor.
The first respondent Mr West (“the husband”) was made bankrupt on 29 August 2006. Mr W and Mr N were appointed as Trustees of the husband’s bankrupt estate (“the Trustees”) that day.
On 27 November 2006 pursuant to section 79(11) of the Family Law Act 1975 (“the Act”) the Trustees were joined as second respondents to the principal proceedings and the matter was listed for final hearing.
On 2 February 2007 Frank Randle, Solicitor filed a Notice of Ceasing to Act on behalf of the wife. On 13 February 2007 Lander & Rogers filed a Notice of Address for Service on behalf of the wife.
On 10 April 2007 there were final parenting orders made by consent and the husband took no further part in the proceedings.
The property application was heard on 24 April 2007. There were submissions in writing filed by the parties and judgment was delivered on 20 September 2007.[1] Pursuant to orders made on that day the wife had liberty to apply in relation to any application for costs.
[1] West & West & Anor [2007] FMCAfam 681
On 18 October 2007 the wife filed an application for the Trustees to pay her costs in the principal proceedings. That application was listed in the Court’s duty list on 14 January 2008 (“the costs application”).
At the costs application Ms Dellidis of Counsel appeared on behalf of the wife and there was no appearance by the husband. Mr Lhuede appeared on behalf of the Trustees and indicated they were content to proceed to deal with the costs application as an application for costs in the principal proceedings.
The matter was not reached until late in the afternoon on 14 January 2008 and at the conclusion of submissions the Court reserved its decision.
For the reasons that follow the Court is not satisfied in the particular circumstances of this matter it is appropriate to order costs.
Evidence
The wife’s evidence in the costs application was contained in:
a)the affidavit of Ms Kristina Antioniades sworn 18 October 2007; and
b)exhibit A1 – the referral from the Public Interest Law Clearing House (PILCH) to the wife’s solicitors.
The Trustee’s evidence in the costs application was contained in:
a)the affidavit of Mr Anthony Dyrenfurth sworn 11 January 2008; and
b)exhibit R1 correspondence dated 23 April 2007 from the Trustees solicitors to the wife’s solicitors.
Background
Ms Antioniades is the solicitor who has had the conduct of the wife’s matter since 12 February 2007.[2] Ms Antioniades gave evidence and was cross examined.
[2] paragraph 5 of Ms Antioniades Affidavit
She gave evidence that the wife had been unable to afford ongoing legal representation and had approached the Public Interest Law Clearing House (“PILCH”) for assistance. Ms Antioniades gave evidence about her understanding of how the wife was referred to her firm. The wife was referred to Ms Antioniades’ firm by PILCH on
9 February 2007.[3] The referral letter from PILCH[4] began:
“Thank you for accepting this referral from the Public Interest Law Clearing House (Vic) Inc. (PILCH) to provide pro bono assistance to Ms West.”
[3] Exhibit A1
[4] Ibid
The referral letter also contained the following paragraph:
“You have agreed to act for the applicant on a pro bono basis. This means that you agree to provide your services to the applicant free of charge. However if you enter into a costs agreement with your client and you are successful in arguing your client’s matter, you are entitled to recover costs.
Please note that, in the absence of a costs agreement, you are not entitled to recover costs even if a costs order is made by the court in favour of your client. If you would like a precedent costs agreement, please let us know.”
Ms Antioniades gave evidence that the wife had signed a costs agreement.[5] Ms Antioniades gave evidence that she was satisfied the wife understood the contents of the costs agreement.[6]
[5] Annexure KAA1 to Ms Antioniades Affidavit
[6] Annexure KAA1 to Ms Antioniades Affidavit
Ms Antioniades was asked about the wording of the referral letter from PILCH. Ms Antioniades’ evidence was that whilst the referral made clear it was to provide assistance pro bono it clearly contemplated the wife entering into a costs agreement.
Ms Antioniades confirmed that notwithstanding the terms of the costs agreement the wife had paid no money up front, not made any payments on the invoice rendered[7] and would not be charged interest. It was clear from Ms Antioniades’ evidence that she understood these matters were for others at her firm to determine.
[7] Annexure KAA5 to Ms Antioniades’ Affidavit
Ms Antioniades disclaimed any prior knowledge of written submissions made on behalf of the wife in the principal proceedings that she was represented pro bono. Ms Antioniades’ position was she had not seen the submissions referred to. In her evidence Ms Antioniades indicated she saw no problem with submissions made to the Court (when she was instructing Counsel) that the wife was represented pro bono.
Ms Antioniades maintained that she saw no difficulty with indicating that the wife was represented pro bono when only Counsel appeared pro bono. Ms Antioniades’ position was that parts of the assistance provided to the wife was pro bono[8] and the referral from PILCH allowed for a costs agreement.
[8] Ms Antioniades gave examples such as various telephone attendances
In her evidence Ms Antioniades rejected the suggestion put to her that either the Trustees or the Court had been misled when it had been represented that the wife’s solicitors were acting pro bono.
Ms Antioniades also deposed to the various offers of compromise made on behalf of the wife up to and including the day of the hearing on
24 April 2007.[9]
[9] see Paragraph 8, 11, 13 of ms Antioniades’ Affidavit
Mr Dyrenfurth, the solicitor for the Trustees was not required for cross examination and his evidence went to correspondence between the parties before and after the principal proceedings.[10] Mr Dyrenfurth’s evidence also went to a conversation he had with the wife in February 2007 (when she was between solicitors) where he was told by her she was going to be represented by a firm of solicitors who would be “charging her nothing.”[11]
[10] see Exhibit ASD1 - ASD9
[11] see Exhibit ASD1 to Mr Dyrenfurth’s Affidavit
Given this the Court was asked by the Trustees to infer that the absence of evidence from the wife meant it would have been unhelpful to her in the context of the costs application.
In civil proceedings, the rule in Jones v Dunkel (1959) 101 CLR 298 applies. The rule is that an inference may be drawn from the failure of a party to adduce particular evidence, where such evidence would reasonably have been expected. That inference is that the evidence, if adduced, would not have assisted the party’s case.
Counsel for the wife objected to that submission by the Trustees.
Be that as it may, Mr Dyrenfurth’s evidence was not contradicted. Moreover, in the event it had been necessary and having regard to my observations of the wife in the principal proceedings, it is possible she made such a comment.
Both parties acknowledged the referral from PILCH appeared in part to be a pro-forma letter. The wording of that letter speaks for itself and may go someway to explaining how one party can maintain they acted pro bono yet render invoices pursuant to a costs agreement.
The correspondence between the parties also referred to the issue of costs on several occasions albeit in the fashion not uncommon in the lead up to a final hearing.
At the costs hearing there was some dispute between the partes as to whether the costs agreement itself was a conditional costs agreement.[12]
For the reasons set out below it has not been necessary to express a view on the matter.
[12] Annexure KAA1 to Ms Antioniades’ Affidavit
Application for costs
The normal rule in proceedings under the Act is that each party bear their own costs pursuant to section 117(1). The Court may however make an order for costs if it is satisfied that in the particular circumstances of the case it should do so.
Section 117(2) of the Act provides that in an appropriate case the Court may make an order for costs against one or other parties notwithstanding the general rule described in section 117(1). Section 117(2A) of the Act sets out the factors to which the Court shall have regard when considering an order for costs and provides:
“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.”
The High Court in Penfold v Penfold (1980) 144 CLR 311 has said that the wording of section 117 does not create an onus on either of the parties. Further it is for the Court to consider, having regard to the matters in section 117(2A) of the Act, whether in a particular case to exercise the discretion to order costs or not to order costs.
The authorities also make it clear that an order for costs is compensatory in the sense that it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the legal proceedings (see Latoudis v Casey (1990) 170 CLR 534; Cassidy v Murray (1995) FLC 92-633).
The costs application filed 18 October 2007 had sought costs on an indemnity basis. There was no dispute over the Court’s power to award costs calculated on an indemnity basis (see Kohan & Kohan (1993) FLC 92- 340; and R & Q [2005] FamCA 6).
The principles in relation to indemnity costs were summarised in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FLR 225. However, no doubt mindful of those principles, at the hearing of the costs application on 14 January 2008 Counsel for the wife indicated the application for indemnity costs was not pressed.
The wife’s costs were quantified by her Counsel in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001 (“the Rules”), as $8,423.30 being those costs incurred from the date in April 2007 the written offer of compromise was made to the Trustees.[13]
[13] Annexure KAA3 to Ms Antioniades Affidavit
Consideration of the application
I now turn to deal with the above factors in section 117(2A) of the Act and the submissions made by each of the parties in respect of those factors.
The financial circumstances of each of the parties
The wife made no specific submission on this issue. However as a result of the orders made on 20 September 2007 she is not without resources.
It was submitted by the Trustees having regard to the evidence of
Ms Antioniades there was no prejudice to the wife as she was not liable under the costs agreement. In the alternative it was submitted given
Ms Antioniades’ evidence that it could not be determined what, if any, liability the wife could face under the costs agreement. The Trustees referred to the decision in Gundry v Sainsbury [1910] 1 KB 645 which was said to be authority for a plaintiff not being able to recover costs when they are not under a legal obligation to pay costs.
In Robinson v Higginbotham (1991) FLC 92-207 Nygh J at [12] said of decisions in other jurisdiction in the context of costs applications under s.117 of the Act that the matters in s.117(2A) are “the only matters that are relevant” and “we are not much assisted by what happens in other jurisdictions.” Those comments are equally applicable to this matter.
The Trustees submitted they were without funds in the administration of the husband’s bankrupt estate and in the event costs were ordered it ought be against the husband’s bankrupt estate.
There is no general rule that a party’s lack of funds will necessarily protect him or her from the making of a costs order. In this matter the Court is required to consider the parties’ financial circumstances as one of a number of considerations and competing factors.
Whether either party is in receipt of legal aid
Neither party suggested this issue was a relevant factor and I am satisfied that is the case.
Conduct of parties to proceedings
This is the factor on which both parties placed considerable reliance in submissions before the Court. However, if the matter relates simply to the conduct of the proceedings themselves on one view neither party can really be criticised.
I note the correspondence between the parties which indicated that the Trustees were pressing the wife’s solicitors for information to substantiate her claim up to the date of the hearing.[14] The Trustees submitted that they were only acting consistently with their duties under the Bankruptcy Act 1966 and had acted in an appropriate matter throughout the proceedings.
[14] eg. Exhibit ASD3 and ASD4 to Affidavit of Mr Dyrenfurth
The wife’s amended application was served on the Trustees on 3 April 2007 and for the first time specifically sought orders in respect of the vested bankruptcy property (e.g. the husband’s share in the former matrimonial home). Given the date of the final hearing and the limited information available to them I am satisfied no criticism can be made of the Trustees given their duties under the Bankruptcy Act 1966. I also note the Trustees did not cause a delay in proceedings and in fact filed a response and made several counter offers of settlement[15].
[15] See paragraph 10 and 14 of Ms Antioniades Affidavit
In any event despite an inauspicious beginning with several interim Court dates the matter was heard within one day and the parties filed submissions in writing afterwards.
The Trustees in submissions before the Court took issue with what was said to be the misrepresentations made by the wife’s solicitors before the hearing that they were acting pro bono. Importantly for those purposes the Trustees pointed out that the wife’s solicitors wrote to the solicitors for the Trustees on 5 April 2007[16] and said inter alia:
“As you are aware, both Counsel and the writer are acting on a pro bono basis, and as a result of a conference with Counsel yesterday evening, it has come to our attention that our client’s Form 13 Financial Statement which was prepared by our client’s previous solicitor, Mr Frank Randle is erroneous and accordingly we enclose an updated unsworn Financial Statement of our client.”(emphasis added)
[16] Exhibit ASD2 to Affidavit of Anthony Dyrenfurth
The Trustees pointed out there was also the matter of what the Court was told both at the hearing and afterwards. The wife’s outline of case document filed in Court on 24 April 2007 indicated she was represented pro bono as did the submissions in writing filed on her behalf on 26 June 2007. The Trustees noted these submissions were referred to in the decision in the principal proceedings.
In final submissions sent to the Court by the wife’s solicitors it was submitted:
“6.Lander & Rogers have acted on behalf of the wife on a pro bono basis through the Public Interest Law Clearing House (PILCH).”
As noted earlier Ms Antioniades’ position was she had not seen those written submissions.
Whether proceedings necessitated by failure to comply with court orders
Neither party suggested this was a relevant factor in the context of this case and I am satisfied it is not.
Whether any party has been wholly unsuccessful
Submissions made on behalf of the wife were to the effect that as she had been wholly successful her offers to settle should be looked at in that light.[17]
[17] See for example Annexure KAA3 to Affidavit of Ms Antioniades
Counsel for the wife submitted that the Trustees had taken a calculated risk and it was a risk for which they should now pay the price.
The wife relied on the observations of Nygh J in Robinson & Higginbotham (1991) FLC 92-209 and Wright & Barry (1992) FLC 92-323.
It is generally accepted that if a party makes an offer of settlement which is equal to or approximate to the order which was made by the Court at the conclusion of the proceedings, that this may be a circumstance justifying an order for costs. In Robinson & Higginbotham (1991) FLC 92-209 at 78,417 Nygh J said (albeit in the context of the next factor) that:
“… it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided…”
As Ms Antioniades deposed the wife ultimately did do better than the offers made on her behalf. However, and as in the context of this matter the issues that arise under this factor are also relevant for the purposes of the next factor that result cannot be looked at in isolation.
The wife’s solicitors were aware of the requests made on behalf of the Trustees for documentation to substantiate the wife’s claims for an adjustment of matrimonial property under section 79 of the Act in her favour.
Whilst the wife’s application could be described as being “wholly successful”[18] the principal proceedings involved a difficult balance between the interests of the husband’s creditors and the wife, all in the context of a property settlement exercise where there was little matrimonial property to distribute. In any event on what is before me I can not be satisfied, cognisant of the Trustee’s obligations to the husband’s creditors under the Bankruptcy Act 1966, that this factor alone grounds an order for costs.
[18] Wright & Barry (1992) FLC 92-323
Whether any parties to the proceedings made an offer in writing to settle the proceedings
It is clear from the correspondence annexed to the affidavit of material of both parties that in the days prior to the hearing the parties were exchanging offers.[19]
[19] The wife submitted her Amended Application served on 3 April 2007 was tantamount to an offer. The wife relied on Harris & Harris (1991) FLC 92-254
The authorities make it clear that a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs.
The Full Court has emphasised the importance of offers. In Browne v Green (2002) FLC 93-115 the Full Court said:
“[57]We think that whilst s.117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is important for the Court to give property consideration to written offers of settlement that have been made. The insertion of s.117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party of an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.”
However, in this case there was nothing to suggest serious consideration had not been given to the offer(s) made, or that the issues identified in correspondence meant the offer(s) were not accepted after serious consideration.
In this case I accept the Trustees were acting consistent with the obligations under the Bankruptcy Act 1966. This is not a situation such as in Greedy & Greedy (1982) FLC 91-250 where the Full Court held refusal to negotiate which may have been a factor justifying an order for costs. In this matter both parties made offers of compromise. [20]
[20] Exhibit R1 and Annexure KAA3 to Ms Antioniades’ Affidavit
Given this and that the outcome of any litigation which hinges on the exercise of discretion cannot be predicted with certainty I am not satisfied this factor supports an order for costs.
Any other matters as the Court may consider relevant
In Telfer and Telfer (1996) FLC 92-688 Lindenmayer J at (83,139) described in s.117(2A)(g) as an “…all encompassing paragraph which was an independent source of discretion and its effect is not limited by the particular matters set out in the previous paragraphs.”
There is an important distinction between civil proceedings, where costs usually follow the event and proceedings under the Act where the rule described at paragraph 29 and 30 applies. The distinction recognises that parties should not be discouraged from pursuing claims by the threat of costs.
In this case with the assistance of PILCH and her pro bono Counsel (whose assistance on that basis is gratefully acknowledged), the wife was able to litigate her application for property settlement to determination. She seeks costs and the Court is now told she has a costs agreement with her solicitors.
It is unfortunate for all involved, that the offers of compromise were not able to resolve the matter. It is also unfortunate that the terms of the applicant’s representation were not made clearer to the Court sooner, particularly having regard to the submissions made on her behalf at the hearing and subsequently in writing.
In resisting the wife’s application for costs the Trustees position was that the submissions made on the wife’s behalf were intended to convey that she was represented pro bono. Irrespective of whether there was any intent and even taking Ms Antioniades’ evidence at its highest the fact remains the Court was told that the wife was represented pro bono. There was no qualification to the submissions made on her behalf.
Conclusion
Ultimately, in the particular circumstances of this matter I am not persuaded that I should make any orders for costs.
In coming to that conclusion I have balanced all the factors under section 117(2A) of the Act. In my view, some factors favour the success of the wife’s application and others do not.
The final submissions filed on the wife’s behalf were that she was represented pro bono. Those submissions were sent from her solicitors.
In my view, in the particular circumstances of this matter it is appropriate that a party making such a representation be bound by their conduct.Even putting this to one side having regard to all the above factors and the whole of the circumstances of this matter I am satisfied there should be no order as to costs.
As a result it is unnecessary to express a view on (what the parties agreed was a preliminary point in the event the Court decided to order costs) whether the costs agreement in this case[21] between the wife and her solicitors was a conditional costs agreement and prohibited by the provisions of the Legal Profession Act 2004 (Vic) or the Family Law Rules 2001.
[21] Annexure KAA1 to Ms Antioniades affidavit
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of O’Sullivan FM
Associate: Rachelle Lombardo
Date: 7 February 2008
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