Zheng & Cheung
[2022] FedCFamC1F 249
•11 May 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Zheng & Cheung [2022] FedCFamC1F 249
File number(s): PAC2307 of 2019 Judgment of: WILSON J Date of judgment: 11 May 2022 Catchwords: FAMILY LAW – NATIONAL ARBITRATION LIST – husband’s application for indemnity costs against the wife, her former solicitors and her former barrister.
FAMILY LAW – PRACTICE & PROCEDURE – wife pressing for the determination of a constructive trust claim – wife having leave to attempt to substantiate that claim under Country E law – several attempts made by the wife to obtain expert evidence of Country E law in an admissible form to prove her constructive trust claim – wife unable to make good her claim.
COSTS – husband seeking indemnity costs from the wife and also from the wife’s former legal representatives – husband’s claims for indemnity costs dismissed – costs thrown away ordered against wife but on a party/party basis – husband’s costs application on an indemnity basis refused.
FAMILY LAW – COSTS – wife’s former solicitors and wife’s former counsel seeking a costs order against husband for his failed attempt to obtain indemnity costs against them – husband ordered to pay indemnity costs against the wife’s former solicitors and of the wife’s former counsel on the basis that the husband’s costs applications against them were doomed from the start and ought never to have been brought.
FAMILY LAW – LEGAL PRACTITIONERS – husband’s counsel making an unsupportable assertion against other counsel – such conduct to be condemned.
Legislation: Family Law Act 1975 ss 13J, 13K, 79, 117(1) , 117(2) and 117(2A) Cases cited: Agosti & Agosti [2021] FedCFamC1F 72
Aon Risk Services Australian Ltd v Australian National University (2009) 239 CLR 175
Baker v The Queen (2004) 223 CLR 513
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 583
Berrigan Shire Council v Ballerini [2006] VSCA 65
British South Africa Co v Companhia de Mocambique [1893] AC 602
Calderbank v Calderbank [1975] 3 All ER 333
Cao & Trong [2019] FamCA 336
Deiter & Deiter [2011] FamCAFC 82
Donnelly v Edelsten (1994) 49 FCR 384
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602
DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251
Eaby v Speelman [2015] FamCAFC 104
Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
Fitzgerald v Fish (2005) 33 Fam LR 123
Flower & Hart (a Firm) v White Industries (Qld) Pty Ltd (2001) 109 FCR 280
Giannarelli v Wraith (1985) 165 CLR 543
Goodridge and Beadle (No 2) [2019] FamCA 786
Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] FCA 1429
Hatcher v Cohn (2004) 139 FCR 425
Higginbotham & Robinson (1991) 14 Fam LR 559
Insurance Commissioner v Joyce (1948) 77 CLR 39
Jones v Bradley (No 2) [2003] NSWCA 258
Jones v Dunkel (1959) 101 CLR 298
Knight v FP Special Assets Ltd (1992) 174 CLR 178
Levick v Deputy Commisioner of Taxation (2000) 102 FCR 155
Marvel & Marvel (2010) 43 Fam LR 348
May v O’Sullivan (1955) 92 CLR 654
Medlow & Medlow (2016) 54 Fam LR 389
Messiter v Hutchinson (1987) 10 NSWLR 525
Minister for Immigration and Border Protection v WZARH (2015) 256 CLR 326
Morgan v Babcock & Wilcox Ltd (1929) 43 CLR 163
Moy & Pao [2022] FedCFamC1A 17
MT Associates Pty Ltd v Aqua-Max Pty Ltd [2000] VSC 163
Namberry Craft Pty Ltd v Watson [2011] VSC 136
New South Wales Bar Association v Thomas (No 2) (1989) 18 NSWLR 193
Penfold v Penfold (1980) 144 CLR 311
Perry v Comcare (2006) 150 FCR 319
Pollard and Nordberg [2019] FamCA 365
Re Bendeich (No 2) (1994) 53 FCR 422
Redmond & Redmond [2014] FamCAFC 155
Ridehalgh v Horsefeld [1994] Ch 205
Roberts v Rodier [2006] NSWCA 1084
Semco Developments Pty Ltd v Graham [2005] VSC 268
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97
SS & AH [2010] FamCAFC 13
Stanford v Stanford (2012) 247 CLR 108
Street v Queensland Bar Association (1989) 168 CLR 461
Tisdall v Kelly [2005] FCA 365
United Mexican States v Cabal (2001) 209 CLR 165
White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 910
Williams v Spautz (1992) 174 CLR 509
Division: Division 1 First Instance Number of paragraphs: 124 Date of last submissions: 25 February 2022 Date of hearing: On the papers Place: Melbourne Solicitor for the Applicant: Safe Harbour Lawyers Counsel for the Respondent: Ms L Clarke Solicitor for the Respondent: J S Pinto & Co Counsel for the Interested Person: Mr P Batey Solicitor for the Interested Person: DLA Piper Australia ORDERS
PAC 2307 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ZHENG
Applicant
AND: MR CHEUNG
First Respondent
MR TAUBMAN
Interested Person
ORDER MADE BY:
WILSON J
DATE OF ORDER:
11 MAY 2022
THE COURT ORDERS THAT
1.The wife must pay the husband’s costs thrown away of and incidental to the wife’s abandoned constructive trust argument, such costs to be assessed on a party/party basis.
2.The husband must pay the wife’s costs of the proceeding, including the costs of the arbitration assessed on an indemnity basis.
3.A registrar of this Court must assess the party/party costs ordered pursuant to paragraph 1 hereof by 29 July 2022, unless otherwise ordered by me, and the registrar must inform me of such assessment by noon on 30 July 2022.
4.A registrar of this Court must assess the indemnity costs ordered pursuant to paragraph 2 hereof by 29 July 2022, unless otherwise ordered by me, and the registrar must inform me of such assessment by noon on 30 July 2022.
5.I adjourn the further hearing of this proceeding to 5 August 2022 at 10:00am.
6.I dismiss the husband’s applications for costs against Ms G and Ms H.
7.I dismiss the husband’s applications for costs against Mr Taubman.
8.The husband must pay Ms H’s, Ms G’s and Mr Taubman’s costs of and incidental to this application on an indemnity basis, such assessment to be undertaken by a registrar of this Court in like manner as has been ordered in paragraph 3 and 4 hereof.
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 Zheng & Cheung has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
Subsequent to the registration of the arbitral award in this proceeding on 16 September 2021, the husband (the respondent in the arbitration) applied for a variety of orders recorded in his 12 October 2021 application in an arbitration.[1]
[1] Those were mainly an application for costs against the wife, an application for costs against various legal practitioners and a stay application under s 45 of the Family Law Act.
Not all of those applications are extant.[2] The notice of discontinuance seems to have been flushed out the orders the husband sought after I ordered on 25 October 2021 that the husband set his application out in a single document fully particularising all grounds on which the application to set aside or review the award was based. There remains applications for costs. These are the husband’s applications –
(a)that the wife pay “the husband’s costs thrown away, wasted or unnecessarily incurred on an indemnity basis”;
(b)that the wife’s legal representatives Mr Taubman of counsel, Ms G, solicitor and Ms H, solicitor personally pay the husband’s costs thrown away on an indemnity basis; and
(c)that the costs of this application be paid by the wife and by her legal representatives on an indemnity basis.
[2] The husband abandoned his application to set aside the arbitral award by notice of discontinuance filed 18 November 2021.
The wife and the legal representatives retained by her in the arbitration opposed the husband’s costs application. On 8 February 2022 I made orders requiring all parties’ written submissions to be filed by 25 February 2022 after which I indicated I would decide the husband’s applications on the papers. The wife’s previous solicitors and her previous counsel also sought orders in relation to costs.
As these reasons record, I dismiss each costs application made by the husband save for his costs thrown away in relation to the abandoned constructive trust argument. I make a costs order against the husband of and incidental to his failed costs application against the wife’s former solicitors and the wife’s former counsel, such costs to be assessed on an indemnity basis.
FACTUAL BASES FOR THE HUSBAND’S COSTS APPLICATIONS
The husband’s solicitor made an affidavit in support of his client’s costs applications. That affidavit was not well arranged nor was it easy to read or absorb. That said, the husband’s solicitor relied on a collection of factors in support of his client’s application for indemnity costs. In prècis form they were as follows –
(a)in the arbitration the wife advanced a contention that she relied on a constructive trust claim, the details of which were said to have been reposed in an expert report which was later ruled inadmissible, thereby occasioning the husband unnecessary costs to refute the alleged constructive trust claim;
(b)the wife was derelict in complying with her disclosure obligations; and
(c)the husband was put to substantial expense addressing the applicant’s constructive trust claim later abandoned.
The wife resisted all costs claimed by the husband. She asserted that the ultimate award by the arbitrator was nearly identical to offers of settlement made by her during the course of the arbitration. The wife sought her costs of the proceeding.
The solicitors formerly representing the wife (mesdammes G & H) sought orders dismissing the husband’s application for indemnity costs and they sought orders for the husband to pay their costs.
Mr Taubman of counsel denied any liability to the husband to pay or to contribute to the husband’s costs. He sought an order that the husband pay Mr Taubman’s costs on an indemnity basis for bringing a costs application that was doomed.
As these reasons explain, in my view –
(a)the husband’s costs thrown away by reason of the abandoned constructive trust claim should be paid by the wife but not by her legal practitioners and those costs must be assessed on a party/party basis, not on an indemnity costs basis;
(b)no basis was shown for the husband’s claim for costs against the wife’s former legal representatives with the consequence that the husband’s claim against them is dismissed; and
(c)the claim for costs against the husband by the wife’s former legal representatives is made out.
THE ABANDONED CONSTRUCTIVE TRUST CLAIM
The husband’s solicitor deposed in very considerable detail to the factual basis underpinning the wife’s abandonment of her constructive trust claim. To better understand how the husband cast his claim for costs under this head, it is necessary to record some detail beyond the mere fact that the wife abandoned her constructive trust claim. He deposed to the following –
(a)on 4 December 2020 the husband’s counsel alerted the arbitrator and the wife to the fact that the majority of the wife’s documents were not written in the English language and instead were in a foreign language;
(b)the wife relied on an unpleaded constructive trust claim;
(c)the wife purported to advance her constructive trusts claim in reliance upon an expert report;
(d)no evidentiary foundation was laid for including that expert report;
(e)the so-called expert report purported to express an opinion about a document called the “borrowing name agreement”;
(f)following the appointment of the arbitrator on 9 November 2020, the parties participated in the arbitration on 15 December 2020;
(g)the arbitrator told counsel for the wife on 15 December 2020 that the trust issue needed to be decided under Country E law;
(h)the wife relied on her asserted constructive trust contentions in the opening of the arbitral hearing;
(i)on 15 December 2020, by reason of the majority of the wife’s documents being in a foreign language, they were ruled inadmissible;
(j)despite being invited to do so by the arbitrator, the wife did not make the expert report writer available for cross-examination;
(k)on 16 December 2020 the wife’s counsel applied for leave to obtain translations of the documents previously ruled inadmissible and for leave to obtain an expert report with a view to pursuing the wife’s constructive trust claim for which leave was given;
(l)the wife was required to file and serve a single expert report by 25 January 2021;
(m)the arbitration was stood over to 22 and 23 February 2021;
(n)the applicant served her expert report on 19 February 2021, being the last business day before the resumption of the arbitration;
(o)the so-called expert report did not refer to a constructive trust;
(p)the expert addressed the question of whether a Country E court could enforce a sale of property if ordered to do so by an Australian court; [3]
(q)the second expert’s report was in a foreign language and associated documents were not translated;
(r)on 23 February 2021 the arbitrator gave further leave for the wife to obtain translations of documents written in a foreign language;
(s)the arbitration was stood over until 1, 2 and 3 June 2021;
(t)the wife did not agree to the proceeding being brought before the arbitrator;
(u)on 21 May 2021 the wife deposed to there being no constructive trust claim being pursued by her;
(v)on 31 May 2021 the wife’s counsel openly stated that the wife did not rely on any constructive trust claim; and
(w)on 1 June 2021 the wife’s counsel informed the arbitrator that the wife no longer relied on a constructive trust argument.
[3] This was a curious proposition having regard to the demarcation in sovereignty as was held in British South Africa Co v Companhia de Mocambique [1893] AC 602.
The husband’s solicitor deposed to practising for 38 years and never having seen a case “where a party has been given leave to rewrite their case during a part heard case, particularly when the party making the application is under cross-examination”. That was not a proper matter for an affidavit. It was a submission, or worse, an opinion, not a matter of fact to which a deponent should be giving evidence in an affidavit. His addendum “in my experience it is unheard of” added nothing probative or useful. I have paid little regard to his contention in that regard.
The husband’s solicitor complained of some alleged denial of procedural fairness in those events. He asserted the existence of trial by ambush. Yet he made no complaint under s 13K(2)(d) of the Family Law Act. Instead he levelled a general, imprecise, unsubstantiated grievance more properly described as a complaint that the wife’s applications were made allegedly without him having been given the opportunity of being heard on point.
The husband’s solicitor deposed to a day-to-day narrative of events from 11 January 2021 to 31 May 2021 especially the interaction between the parties’ solicitors. On 31 May 2021 the husband’s solicitor deposed to counsel for the wife informing the court that the wife did not press her allegation about a constructive trust. That seemed to reflect a similar position adopted by the arbitrator earlier in the arbitration. It could not seriously be suggested that the wife was persevering with her earlier formulated constructive trust contentions. Those had been abandoned before the arbitrator and before me.
THE WIFE’S VERSION OF THE CONSTRUCTIVE TRUST ISSUE
The wife made an affidavit on 11 October in 2021 in response to the husband’s costs application, although her affidavit mostly addressed her own application for costs that she claimed was based on the husband’s failure to accept what she said was a reasonable offer of compromise.
The wife’s former counsel was separately represented on this costs application. The wife’s former counsel filed his own response to an application in an arbitration on 1 February 2022. In that response he sought orders dismissing the husband’s costs application against the wife’s former counsel and he also sought an order that the husband pay the costs of the wife’s former counsel on this costs application.
The wife’s former counsel made a detailed affidavit on 28 January 2022. So far as is relevant, the following matters were raised by the wife’s former counsel in his 28 January 2022 affidavit –
(a)he was first booked on 13 July 2020 to appear before a judge of the Federal Circuit Court of Australia (“FCCA”), as it was then known, in City K;
(b)he was initially retained to appear on the return of an adjourned directions hearing and possibly on the return of the wife’s urgent interim hearing for the sale of the former matrimonial home together with an appearance for the wife when resisting the husband’s application for orders for the sale of real estate in Country E;
(c)on 23 July 2020 solicitors for the wife formally retained him to appear for the wife;
(d)he prepared a costs agreement on 23 July 2020;
(e)upon familiarising himself with the material in the case he determined that a live issue in the dispute between the wife and husband was whether the wife held real property in Country E in her name on trust for her parents;
(f)the docketed judge of the FCCA had made orders on 25 July 2019 requiring the wife to file an affidavit setting out the circumstances of the purchase of the Country E property;
(g)the wife made an affidavit on 9 August 2019 in which she deposed to her acquisition and maintenance of the Country E property;
(h)the husband made an affidavit on 8 August 2019 in which he deposed to the wife’s endeavours to exclude the Country E property from the asset pool of the marriage;
(i)on 8 April 2020 the docketed judge of the FCCA made orders requiring the wife to file affidavit material in support of her contention that the Country E property was held on a constructive trust for the wife’s mother or for her parents;
(j)on 15 May 2020 the wife’s mother made an affidavit regarding the acquisition and maintenance of the Country E property although the documents exhibited to her affidavit were in Chinese and had not been translated;
(k)on 8 July 2020 the husband made an affidavit in which he deposed to the wife’s parents making a gift of the Country E property in favour of the husband and thereafter the wife placing the property in the wife’s name alone;
(l)he formed a preliminary view that the Country E property had been given to the husband and to the wife jointly as a gift from the wife’s parents, that the husband and wife made no contribution to the Country E property, that the wife believed that the Country E property should not form part of the divisible assets as it was held by the wife on a constructive trust in favour of the wife’s parents and that translated documents disclosed that funds to purchase the Country E property were provided by the wife’s parents and a mortgage was registered in the wife’s name although the wife’s parents occupied the property and had paid regular instalments due under the mortgage;
(m)according to instructions taken by him during his conference with the wife and her solicitor on 23 July 2020, the wife provided instructions that the husband wrongly asserted that the wife’s parents provided the property jointly to the wife and the husband as a marital gift and instead the wife insisted that her parents paid the deposit for the property, for renovations to it and for outgoings because tax advantages inured to them in doing so;
(n)he took the view that it would be necessary for the wife to adduce evidence at a final hearing to establish that the wife’s parents did not give the property to the husband and to the wife jointly as a gift, that the property was held on trust for the wife’s parents and that if those arguments failed, it would not be just and equitable for the Country E property to be included as part of the divisible marital pool of assets;
(o)on 27 July 2020 the wife’s former counsel represented the wife on the wife’s interim application for the sale of real estate at Suburb L;
(p)on 25 August 2020 consent orders were made for the sale of the Suburb L property during which the parties’ representatives canvassed the referral of the FCCA litigation to arbitration;
(q)Mr M was duly appointed as the arbitrator upon the proceeding being referred to arbitration and the arbitral hearing was fixed for 15 and 16 December 2020;
(r)in anticipation of the arbitration the wife’s former counsel noticed a report annexed to the wife’s trial affidavit, such report having been prepared by a member of a Country E law firm, providing an opinion in relation to “borrowing name agreements”;
(s)the wife’s former counsel took the view that the report from the member of the Country E law firm supported a finding of the existence of a constructive trust in relation to the Country E property;
(t)on 4 December 2020 the wife’s former counsel appeared before the arbitrator although nothing of note emerged on that appearance as the wife’s former counsel said nothing more about that appearance; and
(u)on 10 December 2020 the husband’s counsel filed submissions persisting in the husband’s contentions that the Country E property formed part of the divisible pool of assets of the marriage.
Pausing at that juncture, this costs application is an interlocutory application in respect of which the case law prescribes that a particular approach must be taken in relation to the determination of conflicting factual matters.[4] In essence, factual findings must be made on such applications with great circumspection. Suffice it to say that immediately prior to the commencement of the arbitration, counsel then appearing for the wife formed the view that with the verification of certain issues, an arguable case could be advanced consistent with the wife’s instructions that a constructive trust existed in relation to the Country E property. On this costs application the solicitor for the husband referred to the claim about the existence of a constructive trust as being unpleaded. That may be true but there was no evidence that the arbitrator required pleadings in relation to that point or, in the absence of an order for pleadings, that it was incumbent upon the wife to provide them. She was under no such obligation absent on order for pleadings. In my view the wife’s former counsel behaved entirely properly in asserting that the wife had an arguable case, consistent with his client’s instructions. He did not have at his disposal sufficient information to do otherwise than raise the argument before the arbitrator, which he did. No evidence suggested that he submitted before the arbitrator that the wife possessed an undeniable case about the existence of a constructive trust. The wife’s former counsel did not put her contentions as high as that.
[4] The cases include Marvel & Marvel (2010) 43 Fam LR 348, Deiter & Deiter [2011] FamCAFC 82, SS & AH [2010] FamCAFC 13, Eaby v Speelman [2015] FamCAFC 104, Redmond & Redmond [2014] FamCAFC 155 and Pollard and Nordberg [2019] FamCA 365.
Any contention by the husband or by his solicitor to the contrary was erroneous.
The wife’s former counsel deposed to the arbitration commencing on 15 December 2020. One of the first issues dealt with by the arbitrator was evidentiary objections. He deposed to the husband’s counsel objecting to documents that were written in the Country E language being admitted into evidence. He said the arbitrator indicated that the arbitrator was unable to read the documents in Country E language so the wife’s former counsel did not press for the tender of documentation in Country E language. The wife was then cross-examined for the balance of 15 December 2020.
The wife’s former counsel deposed in paragraph 54 of his affidavit to a conference he had with the wife on 15 December 2020 in which counsel told the wife that if the wife wanted to win the case the wife needed to pay for translated documents that were written in a foreign language. Counsel did not say what his instructions were from the wife following that conversation. However, he subsequently deposed to making a verbal application for leave to have documents previously ruled inadmissible translated. It may be inferred from that statement that the wife instructed him to press that application.
He deposed to applying ore tenus on 16 December 2021 (an erroneous reference to 16 December 2020) for leave to obtain translations of documents earlier ruled inadmissible and for leave to obtain expert evidence from a qualified expert in Country E law in relation to the existence of constructive trusts under Country E law. The arbitrator handed down ex tempore reasons on those applications on 16 December 2020 and otherwise stood over the arbitration to 22 and 23 February 2021. The wife’s former counsel exhibited to his affidavit his written advice that he provided to his solicitors on 18 December 2020 in which he recorded that the arbitrator directed that all documents written in a language other than English needed to be translated. The wife’s former counsel gave evidence that he also advised the wife that it would be necessary to have an Australian expert provide an opinion on Country E law, preferably an expert familiar with Australian equity principles especially those pertaining to constructive trusts. He deposed to not being involved in that aspect of the case. However, he deposed to settling a draft letter of instructions to be prepared by his solicitors, intended for the Country E expert.
An expert was duly retained, conversant with Country E law. He was Dr N. Dr N made an affidavit in support of the wife’s constructive trust claim. He was a Country E legal practitioner. He addressed what was called a “borrowing name agreement”. He said the following –
Our Opinion
12. [Country E] law does not have similar equity rules to that of Anglo-American common law. They do however have a legal system that recognises the right of individuals to assign or transfer real and personal property to other individuals on the basis that the transferred property can be held indefinitely and returned to the original owner at some time in the future. The original transferor has the right to make a lawful claim on that property at any time they may choose
13.In the case of [Ms Zheng’s] legal ownership of the property situated at [C Street, D District, F City, Country E] being currently occupied by her parents, clearly the documentary evidence establishes that the parents took responsibility of the monetary transfers for the deposit, purchase, mortgage payments, land taxes, renovations and general maintenance of the property.
14. In [Country E] civil law, inter alia, they employee terminology … if directly translated into English it means a “Borrowing Name Agreement”. In [Country E] society, it is common practice for parents to register real property in the names of their children because of tax concerns. The [Country E] Civil Code permits people to conclude any type of contract or agreement which does not violate mandatory rules, public policy or morals.
15. Because [Country E] people have such a long tradition of registering property in their children's names, the [Country E] judicial system (predominately the [Country E] Supreme Court ~ equivalent to Australia's High Court), has recognized and perfected the operation of Borrowing Name Agreements in its decisions over the past three decades. In effect Borrowing Name Agreement is a consensus agreed verbally or in writing, either expressly or impliedly, among the parties, which empowers one party ("Party A") to use the other party's ("Party B") name solely for the registration of certain property (“target property") in the government’s land/asset administration books, but Party A retains the powers to use, to manage, to profit from, and to dispose of the target property freely. Party B does not bear any costs, debts, or taxes incurred in the process internally between Party A and Party B since Party B is not entitled to any benefits accrued from the target property . Party A may terminate the agreement and then request for the registration of ownership back to Party A at any time or at a certain time as agreed. Party A is called a nominator while Party B is called a nominee.
The wife’s former counsel deposed to the resumption of the arbitration on 22 and 23 February 2021. He exhibited the relevant transcript of those days. The arbitrator’s ruling on the wife’s application for leave to rely on the report of Dr N was transcribed and produced.[5] It seemed that the husband made submissions about a denial of procedural fairness, a point he ventilated before me, although the basis for that contention seemed tenuous to me. The arbitrator placed heavy reliance upon a six point test set out by Vickery J of the Supreme Court of Victoria in Namberry Craft Pty Ltd v Watson,[6] interpreting the guiding principles of Aon Risk Services Australian Ltd v Australian National University.[7]There, Vickery J held that six considerations were engaged in an application to adduce evidence late. They were doing justice between the parties, delay, costs, unfair and non-compensable prejudice, case management issues and public confidence. Ultimately, the arbitrator held that leave should be given to the wife to rely on expert evidence.
[5] Pages 714 et seq of exhibit PS to the affidavit of the wife’s former counsel.
[6] [2011] VSC 136.
[7] (2009) 239 CLR 175.
The wife’s former counsel deposed to the wife not complying with the ruling handed down by the arbitrator on 23 February 2021.
On 18 March 2021 Dr N provided a further report which the wife’s former counsel exhibited to his affidavit. It must be said that the report of Dr N went considerably beyond the expression of an opinion about Country E law, especially his gratuitous observations about the economic attitudes of various persons towards investments. Be that as it may he said the following –
As previously advised in my Report dated 18th February 2021, [Country E] law would award in favour of the Applicant’s parents if this matter was not fully resolved in Australia.
On 26 March 2021 consent orders were made to the effect that the wife was not permitted to rely on the 18 March 2021 Dr N report. The wife’s former counsel deposed to his recommendation to the wife to withdraw her assertion that she held the Country E property on a constructive trust for her parents.
The wife’s former counsel referred to orders made by me on 31 May 2021 in which the wife publically expressed in open court that –
(a)she did not press the constructive trust argument at the arbitration of this proceeding; and
(b)she did not rely on the borrowing name agreement at the arbitration of this proceeding.
The arbitration resumed on 1, 2 and 3 June 2021, concluding on 3 June 2021. The arbitrator published his award on 1 September 2021.
In paragraph 85 of his affidavit, the wife’s former counsel deposed as follows –
[Ms Zheng] was successful in her arguments with respect to the [Country E] Property and it was excluded from the divisible asset pool of the parties.
SUBMISSIONS OF THE PARTIES
Bearing in mind that the husband sought indemnity costs from the wife as well as costs orders against non-parties, his submissions needed to pinpoint precisely the factual and legal propositions that he said made good those points. In my view, the husband’s submissions failed to do so.
THE HUSBAND’S SUBMISSIONS
On behalf of the husband, counsel who argued the case before the arbitrator and before me prepared written submissions on these costs applications. Certain assertions were embedded in those submissions, some of which were incorrect or which did not accurately state the position. For example, in paragraph 2 of the husband’s submissions he asserted that a trust was not pleaded in the wife’s initiating application. Pleadings in this Court usually require a specific order as was canvassed in Cao & Trong.[8]When the husband asserted that a trust was not pleaded, that was for the simple reason that no pleadings were ordered.[9] The wife’s case outline mentioned that paragraph 3 of the husband’s submissions was not a pleading within the contemplation of the authorities I surveyed in Cao v Trong. It was therefore incorrect for counsel for the husband to assert that on that occasion the husband was first notified of a formal pleading by the wife concerning the asserted constructive trust. In paragraph 5 of his submissions the husband pointed out that the L & T document was ruled inadmissible. That much seemed to be common ground.
[8] [2019] FamCA 336.
[9] The proceSuburb L orders were made by his Honour Judge Myers (there being no Justice Myers).
In paragraph 6 and following of his submissions the husband addressed a variety of observations under the heading “pleadings” even though no pleadings were ordered in this case. The husband asserted that for the first time, at 4:20pm on 31 May 2021 the husband knew the case he had to answer. The husband’s selection of the date 31 May 2021 was curious as the husband’s solicitor in his affidavit made 8 October 2021 did not mention the date 31 May 2021 until its reference in paragraph 140 when the husband’s solicitor asserted that the wife’s former counsel informed the Court that the wife did not intend to press the existence of a constructive trust, the borrowing name agreement or to rely on the expert report. The date mentioned by the husband’s counsel on 31 May 2021 was erroneous.
The husband’s submissions in paragraph 6 developed a collection of contentions about foreign law, the mandatory nature of pleadings against affected parties when a trust claim is asserted and other things. Several things must be said of those largely unparticularised assertions. First, the husband asserted that he learned for the first time that the wife intended to rely on Country E law when, on 15 December 2020, the wife’s former counsel affirmatively answered a question from the arbitrator to the effect that the trust issue needed to be determined according to Country E law.
According to the wife’s former counsel at paragraph 43 of his affidavit he prepared a case outline for the wife in which the question of trust was squarely raised at paragraph 5. It was in the following terms –
In relation to the [Country E] Property
a)An issue as to whether it is held by the wife as trustee for her parents.
b)If it is found not to be the case it will be argued that the funds for the acquisition, conservation and improvement of the property were a sole contribution of the wife through her parents.
c)Further the parties treated the [Country E] property differently from the other property and the issue of Stanford v Stanford [2012] HCA 52 (sic) will be raised in relation to that asset.
The front page of that case outline indicated that it was prepared for the arbitration. Presumably it was circulated at or prior to the commencement of the arbitration.
It seemed to me that a factual debate emerged in relation to when and in what circumstances the wife asserted her trust claim. In the absence of cross-examination on point I was left with the submissions of the husband (which arguably were not supported by the material) and the affidavit of the wife’s former counsel which was verified as to dates and events. While I should be circumspect in making factual findings on disputed issues on an interlocutory application such as this, I can say at this juncture that I have real hesitations in accepting the veracity of the version of events given by the husband in relation to when the wife disclosed her contentions about the trust case that she advanced.
This was a costs application not a review application under s 13J of the Family Law Act nor an application to set aside the arbitral award under s 13K of the Family Law Act, the latter application having been abandoned. Questions of the correctness of the wife addressing matters of foreign law, questions about the veracity of her trust contentions or questions about choice of law do not bear upon the remaining costs issues unless, somehow, the husband was able to render them meaningful in reliance upon one of the subsections of s 117(2A) of the Family Law Act. In paragraph 5 of his submissions, the husband made no endeavour whatsoever to link his assertions there set out with a provision in s 117(2A) of the Family Law Act. The final sentence of paragraph 6 of the husband’s submissions was wholly irrelevant.
So far as the issue raised in paragraph 7 of the husband’s submissions was concerned, the arbitrator granted leave, despite the husband’s submissions before the arbitrator to the effect that leave should not be granted. The husband had not challenged that ruling. The husband accepted that ruling. The matter raised in paragraph 8 of the husband’s submissions agitated the correctness of the ruling made by the arbitrator. No application was before me to do that. Quite frankly, the submission in the final sentence of paragraph 8 is as much irrelevant as it is disrespectful. The characterisation of the arbitrator’s decision as being “leave to (the wife) to rewrite her case during a part heard arbitration” ignores the manner in which the wife’s amendment application unfolded.
Similarly, paragraph 9 of the husband’s submissions was irrelevant except to the extent that it may have bore upon on a matter under s 117(2A).
So far as paragraph 10 of the husband’s submissions was concerned, the proposition that the husband was somehow denied procedural fairness was –
(a)a submission that should have been made to the arbitration if the husband took the view he needed to be heard;
(b)something that was relevant prior the arbitrator ruling on point; and
(c)a matter that does not concern me on this costs application having regard to the fact that no application is presently pressed under s 13J or s 13K of the Family Law Act.
The husband’s counsel made no submissions on how the statement of principle expressed to apply to administrative decision-makers in Minister for Immigration and Border Protectionv WZARH[10] applied to arbitrators appointed by agreement or pursuant to court order.
[10] (2015) 256 CLR 326.
In my view the whole of paragraph 11 of the husband’s submissions was an attempt to reagitate submissions that preceded the arbitrator’s ruling. It was of very little utility to me.
Paragraphs 12 to 18 inclusive of the husband’s submissions represented a reagitation of points either put, or which should have been put, to the arbitrator prior to the ruling granting leave. This costs application was not the proper vehicle for the ventilation for those submissions. At all events, even if valid they must be taken to have merged in the arbitrator’s ruling.
Paragraphs 19 to 27 inclusive represented the husband’s trawling over matters anterior to the ruling by the arbitrator. But not all of those submissions were innocuous. In paragraph 26 counsel for the husband wrote the following –
[Ms Zheng’s] legal representatives skilfully played the Arbitrator against the Arbitration List Judge.
I find that statement not only offensive but improper. The statement that the arbitrator was “skilfully played” against me as the National Arbitration List judge is beyond a submission that responsible counsel could legitimately make. I deliberated over requiring the author of that statement, Ms Clarke to show cause as to why I should not refer her to the relevant disciplinary board regulating the conduct of legal practitioners, but concluded not to do so. Counsel and legal practitioners must always be cognisant of their duties and obligations to the Court and the administration of justice. Statements such as that recorded above actively undermine the administration of justice and do no more than add further vitriol this to proceeding.
Robust submissions have a place in the law. But rude and offensive comments under the guise of privilege do not.
Between paragraphs 38 and 40 of the husband’s submissions Ms Clarke of counsel outlined the way in which the husband’s costs submissions against the wife’s former counsel were advanced. In essence the husband argued as follows –
(a)the wife’s former counsel pressed a constructive trust claim that was not supported in law;
(b)he continued to press that claim on and after 22 February 2021 thereby wasting time in the arbitration;
(c)the duty to the court[11] owed by the wife’s former counsel was paramount, citing Giannarelli v Wraith,[12] Street v Queensland Bar Association,[13] and New South Wales Bar Association v Thomas (No 2);[14] and
(d)the husband argued that the wife’s former counsel –
(i)did not act independently and impartially;
(ii)became a mere mouthpiece for his client;
(iii)was not frank with the arbitrator;
(iv)pressed documents he knew to be fatally flawed; and
(v)he adopted that stance throughout the entire arbitration.
[11] Counsel for the husband did not address whether the duty to the court extended to arbitrators as opposed to judicial officers.
[12] (1985) 165 CLR 543.
[13] (1989) 168 CLR 461.
[14] (1989) 18 NSWLR 193.
Those are very serious allegations made against another member of counsel. It would only be ethically proper for Ms Clarke to have made those allegations, irrespective of the client’s instructions to her, if she was independently satisfied that a proper factual and forensic basis existed for the making of those submissions. To assert that an opposing counsel is a mere mouthpiece is an assertion that may well be made in the heat of battle but not in the cold light of day when submissions intended for a superior court are being formulated. Similarly, the allegations that the wife’s former counsel did not act independently and impartially is a submission that required very cogent evidence before being made. On this interlocutory application for costs I refuse to pass judgment on the manner in which the wife’s former counsel discharged whatever duties he owed the arbitrator nor will I pass judgment on whether he behaved otherwise than in accordance with professional conduct normally required of practising counsel. That is a matter for another body if there be foundation in the assertion at all, which I presently doubt, but for which I now say no more.
THE HUSBAND’S CONTENTIONS ABOUT THE WIFE’S SOLICITORS
So far as the husband’s assertions against the solicitors, Ms G and Ms H were concerned, Ms Clarke as the signatory to the husband’s submissions contended that neither Ms G nor Ms H had filed affidavit material, that such a failure was unexplained and that, according to Ms Clarke, I should draw an adverse inference against them that their evidence would not have assisted their case.[15]
[15] The husband purported to invoke the learning in such authorities as Morgan v Babcock & Wilcox Ltd (1929) 43 CLR 163, Insurance Commissioner v Joyce (1948) 77 CLR 39, May v O’Sullivan (1955) 92 CLR 654 and Jones v Dunkel (1959) 101 CLR 298.
Without saying to whom the duty was owed or how it arose, counsel for the husband contended that Ms G owed a duty to ensure that the wife “was fully and appropriately advised of the legal foundation for her constructive trust claim” and that “ignorance cannot be claimed”. The husband seemed to somehow contend that the asserted duty became actionable in his hands or that a costs obligation in his favour was somehow enlivened for any breach of that alleged duty. Ms Clarke wrote in her client’s submissions that Ms G and Ms H had the option of withdrawing from the case once the wife’s counsel brought to the wife’s attention that the constructive trust claim was seemingly problematic. Ms Clarke submitted that by not withdrawing, Ms G and Ms H were “vulnerable to costs”.
That is wrong.
I do not share Ms Clarke’s enthusiasm for the notion that the wife’s solicitors were obliged to withdraw in the circumstances for which she contended. I am unaware of any legal principle that would compel a solicitor to withdraw from a case upon being told (if it be the proven fact that the wife’s former counsel so informed his solicitors, and I cannot say it is) that a particular legal or factual proposition sought to be advanced by the client was problematic. If Ms Clarke was correct in that submission, most hard fought cases in which competing factual challenges were urged, would collapse upon solicitors withdrawing. The point need only be probed for its absurdity to be exposed. As against Ms H, an employee solicitor of Ms G, the husband submitted that Ms H filed certain documents having being told by the wife’s former counsel that those documents were inadmissible. Ms Clarke submitted that “practice, procedure and case management are not dependant on client instructions.”
Embedded in that submission is the unstated assertion that Ms H was obliged by “practice, procedure and case manage principles” (whatever they may be and Ms Clarke did not say) to not file documents she had been told (although the circumstances of that disclosure were not revealed) that the documents being filed were inadmissible. I reject that contention.
Every day in this Court and in courts across Australia, hundreds (possibly thousands) of documents are filed containing inadmissible material. Ordinarily, documents are filed despite containing inadmissible material for the simple reason that the inadmissibility of the evidence in those documents is not determined when the document is filed. Sometimes, a document thought (at least by one party) to contain inadmissible material is then admitted into evidence after debate about admissibility. On Ms Clarke’s analysis, no doubt written on her client’s instructions or with his approval or acquiescence, a document thought to contain inadmissible material, even if erroneously so thought, could not be filed as a precursor to a debate about admissibility. That is not a practice with which I am familiar and does not accord with the way in which most evidentiary debates in Australian courts unfold. I reject Ms Clarke’s submissions as fanciful.
In addition, by my acceding to Ms Clarke’s submission, on the facts of this case I would visit an impossible burden on an employee solicitor who may very well not have authority to decide such tactical decisions as refusing to file a document when the document suffers from alleged but untested evidentiary defects. If the refusal to file a document was contrary to the client’s instruction, such a decision may well have professional liability consequences for the employee solicitor’s employer.
In short, I have real misgivings about accepting the husband’s criticisms of the conduct of Ms H. Likewise, I have real misgivings about the husband’s criticisms of the conduct of Ms G or, for that matter Mr Taubman. In my view, the husband’s criticisms of each were sorely misplaced.
MS G & MS H’S SUBMISSIONS
The wife’s solicitors, Ms G and Ms H, submitted that the husband’s application for indemnity costs against them should be dismissed. They sought, as their own application, costs against the husband. Such an order against the husband must be made.
They pointed out in their submissions prepared on their behalves by Ms Gillies SC that nowhere did the husband identify the precise provision of s117(2A) on which he relied in support of his indemnity costs application against Ms G and Ms H. On a threshold issue, Ms Gillies SC made the following written submissions –
In making his application the husband makes extensive criticism of the wife for her reliance upon inadmissible evidence. He does so even though large sections of the affidavit that were sworn in support of his application, by his own solicitor Mr Pinto, must fail because they are hearsay, opinion, submission or lack the requisite relevance to the Application before the Court.
She contended that any delay or prolongation of the arbitral proceeding cannot be laid at the feet of Ms G or Ms H. I agree.
Ms Gillies SC also contended that the authorities reveal a collection of significant impediments to the imposition of a personal costs order against a legal practitioner.
The submissions of Ms G and Ms H may be distilled in the manner that follows. It was –
(a)a costs order against a legal practitioner ought to be exercised sparingly and with great caution;[16]
(b)instituting or maintaining a proceeding on behalf of a client which has no or no substantial prospect of success will not of itself invoke the jurisdiction of the court to make a costs order against a legal practitioner;[17]
(c)on the facts of this case, and the husband failed to engage on point, Ms G and Ms H were obliged to act for the wife and provide advice in the conduct of this proceeding which each did; and
(d)a solicitor should not be the subject of a costs order simply because he or she has been instructed to pursue a case that has failed, when the point is pursued honestly and not in the furtherance of some ulterior motive.[18]
[16] Levick v Deputy Commisioner of Taxation (2000) 102 FCR 155 and Re Bendeich (No 2) (1994) 53 FCR 422.
[17] Flower & Hart (a Firm) v White Industries (Qld) Pty Ltd (2001) 109 FCR 280.
[18] Ridehalgh v Horsefeld [1994] Ch 205.
Ms Gillies SC pointed out correctly it seemed to me, that Ms G and Ms H did nothing other than to properly act on instructions of their client.
SUBMISSIONS ON BEHALF OF MR TAUBMAN
Detailed written costs submissions were prepared on behalf of Mr Taubman by Mr Batey of counsel. Mr Taubman denied any liability for the husband’s costs. In essence, Mr Batey on behalf of Mr Taubman pointed out –
(a)the husband’s assertion that the Country E property should form part of the pool of assets failed,
(b)the arbitration would have concluded earlier but for the husband’s relentless pursuit of assets to which he never had an entitlement;
(c)for his claim to have any legitimacy, the husband’s claim to costs against Mr Taubman must be grounded in rule 12.15 of the Federal Circuit and Family Court Of Australia (Family law) Rules2021;
(d)the husband bears the onus of showing the elements of rule 12.15(1)(a)-(d) or rule 12.15(2)(a)-(d);
(e)it was patently clear by the time Mr Taubman was retained that issues were joined regarding the Country E property as between the parties including an assertion by the wife that she held the Country E property on a constructive trust;
(f)it is not readily comprehensible why the husband asserted that he was not aware of the wife’s contentions in relation to a constructive trust as that had been her position since prior to July 2020;
(g)Mr Taubman was under no obligation to return his brief merely by reason of there being documents that were not translated;
(h)his case outline identified that one of the issues in the case related to the existence or otherwise of a constructive trust;
(i)Mr Taubman acted appropriately in waiting for the expert report as the foundation for the asserted constructive trust and he was correct in not abandoning the ground merely because objection was taken to the admissibility of the expert’s report;
(j)it was not a foregone conclusion that the wife’s parents were amenable to joinder even if they were helpful to buttress the wife’s constructive trust argument;
(k)no complaint is made by the husband that Mr Taubman’s cross-examination should have been stood over until all evidence had been adduced;
(l)the fact that the translated documentation was not prepared cannot be visited upon Mr Taubman;
(m)the husband’s legal representatives resisted the idea of having the arbitration relisted before the arbitrator in January 2021;
(n)Mr Taubman is in no way responsible for confusion in the husband’s camp emanating from documentation served on 15 January 2021 and from documentation on which the wife sought to rely on 19 February 2021;
(o)when Mr Taubman endeavoured to rely on the report from Dr N, it was readily apparent that the report was out of time, for which the wife needed leave to rely on it, and the resultant debate before the arbitrator was consistent with an appropriate level of emphasis placed by Mr Taubman in support of the wife’s leave application;
(p)after receiving Dr N’s second report and recognising the deficiencies in it, coupled with the wife’s ongoing non-compliance with directions for the filing of the expert report with admissible translations, Mr Taubman quite properly advised on the significant damage those matters caused to her constructive trust claim;
(q)Mr Taubman then recommended that the wife withdraw the assertion that she held the Country E property on a constructive trust for her parents;
(r)to the extent that the husband inferred that the wife’s legal representatives had no instructions to withdraw the constructive trust argument in their appearance before me on 1 June 2021, such a contention is extraordinary; and
(s)even though the husband repeatedly challenged the wife’s legal representatives about the inadmissibility of documentation on which she relied to make good her constructive trust assertion, Mr Taubman was alerted to those difficulties and he endeavoured to address those shortcomings by preserving such evidence as was available in relation to the constructive trust argument, which was subsequently allowed by the arbitrator, and any suggestion that Mr Taubman had behaved with dishonesty, or that he had engaged in misleading conduct or other nefarious conduct should be rejected out of hand.
Having recorded the evidentiary bases of the respective costs claims advanced by those claiming costs and having also recorded the submissions urged in support of those costs claims, it became necessary to examine the merits of those costs claims, to which I now turn.
THE HUSBAND’S COSTS APPLICATIONS AGAINST THE WIFE
Stripped to its core, the husband argued that the wife should pay his costs thrown away by reason of her fluctuating position in relation to the constructive trust argument and her eventual abandonment of it. As a secondary issue, the husband sought a costs order against the wife’s legal representatives. He did not say whether he cast his case for such a cost order in addition to an order for costs against the wife or as an order in case his recovery of costs thrown away from the wife failed for some reason. Self-evidently, he could not recover costs twice, that is to say, from the wife and then also the same costs from her former legal advisors.
It must be remembered that the wife’s legal representatives were at all times in this arbitration the wife’s agents, acting in accordance with her instructions. They had no authority to act unilaterally in the absence of instructions from the wife. Accordingly, in the absence of compelling evidence that they acted in disobedience of the wife’s instructions or that the wife’s former legal representatives acted without instructions, I have proceeded on the basis that as officers of the court each of Ms G, Ms H and Mr Taubman acted with instructions, consistently with those instructions and not otherwise.
In this case the husband was confronted with the wife’s position in which she expressly abandoned her constructive trust claim. Up until that date, it seemed to me that the wife was legitimately entitled to maintain that she had a valid and enforceable claim in respect of the asserted constructive trust. Put differently, it could not be said that the wife’s constructive trust claim was unarguable unless and until the arbitrator either –
(a)permanently struck out the constructive trust claim after the husband moved to dismiss it, or moved to strike it out; or
(b)refused leave to the wife to advance the constructive trust argument in any other shape or form.
Neither of those events occurred. Instead, the wife eventually conceded that she was unlikely to meet the expert evidentiary requirements necessary to advance her constructive trust claim so she did not press it.
At that stage and not earlier the husband may have become entitled to his costs thrown away of and incidental to her abandoned constructive trusts claim. Of course, a costs order in favour of the husband, even upon the wife abandoning her constructive trust claim, was by no means a forgone conclusion. An order in favour of the husband had to be made in accordance with s 117(2) of the Family Law Act before the wife was burdened to meet any costs of the husband’s. He needed to invoke one (but only one)[19] of the provisions of s 117(2A). Even if a costs order in his favour was to be made, absent exceptional circumstance those costs became payable on a party/party basis. I see nothing exceptional so as to attract the imposition of an indemnity costs order by reason of the wife’s abandonment of her constructive trust claim. The main authorities on indemnity costs in this court[20] speak of an order for indemnity costs being made if “exceptional circumstances” exist for the making of such an order. The authorities do not offer guidance on the constituent elements of exceptional circumstances. However, other authorities[21] have held that exceptional circumstances are those out of the ordinary. I am unable to see how the everyday occurrence of not pressing a particular cause of action or claim for relief, as earlier asserted, represents a state of affairs that is out of the ordinary. To the contrary. That occurrence is an everyday event in all common law courts and in this court as well as before arbitrators. I decline to ascribe it to a status it does not deserve by calling it an exceptional circumstance. It is not. Indemnity costs are not payable as costs thrown away.
[19] Fitzgerald v Fish (2005) 33Fam LR 123.
[20] Moy & Pao [2022] FedCFamC1A 17 and Medlow & Medlow (2016) 54 Fam LR 389 to name but two.
[21] United Mexican States v Cabal (2001) 209 CLR 165, Baker v The Queen (2004) 223 CLR 513, Hatcher v Cohn (2004) 139 FCR 425 and Tisdall v Kelly [2005] FCA 365.
As to whether the events described above enliven a consideration of matters prescribed by s 117(2) and s 117(2A) of the Family Law Act, in my view they do, the relevant subsection being s 117(2A)(c), which invokes an examination of the conduct of the party against whom a costs order is sought. Of course, only one of the relevant subsections of s 117(2A) needs to be enlivened for an order to be made.[22] Here, it seemed to me that the wife’s purported advancement of her constructive trust argument then the later abandonment of it represented conduct warranting the imposition of a costs order. After all, by that approach she caused the loss of some time in the conduct of the arbitration by at least two leave applications. She also caused the husband to incur legal costs while the adequacy of her evidence was considered. She caused the husband to incur costs in his counsel preparing for and arguing before the arbitrator about the adequacy of the wife’s evidence, especially in respect of translated documents. I doubt that those costs thrown away will be substantial but they are lost and must be met by the wife, on a party/party basis.
[22] Fitzgerald v Fish (2005) 33 Fam LR 123.
As is apparent from the foregoing I take the view that the husband is entitled to his costs thrown away. Whether he has in fact sustained any costs thrown away and if so how much, must be determined by a registrar. I direct that the determination of the husband’s entitlement to any costs thrown away must be –
(a)determined by a registrar of this court,
(b)determined by not later than 29 July 2022, and
(c)brought to me as judge-in-charge of the National Arbitration List by 30 July 2020 or such later date as only I extend (the registrar will have no power to do otherwise than determine those costs by that date unless I otherwise order).
In his submissions on behalf of Mr Taubman, Mr Batey of counsel made detailed submissions concerning a wasted costs order. Whether the correct terminology is “cost thrown away” or “wasted costs” may need to await another day. The expression “wasted costs” order is traceable to English authorities which I surveyed in Goodridge and Beadle (No 2).[23]
[23] [2019] FamCA 786.
Once the registrar determines the amount of costs thrown away and thereby quantifies the sum payable by the wife I will hear this proceeding again so as to determine what further steps must be ordered for the payment of those costs. To that end I adjourn further hearing of his proceeding to 5 August 2022 at 10:00am.
THE HUSBAND’S APPLICATION FOR COSTS AGAINST THE WIFE’S FORMER SOLICITORS
While it is beyond doubt that this court has power to make a costs order against a person who is not a party to a proceeding,[24] and that in the present circumstances that will include the legal representatives of a party, in my view no such order should be made in this case in relation to Ms G and Ms H.
[24] Knight v FP Special Assets Ltd (1992) 174 CLR 178.
I say that for several reasons.
First, Ms G and Ms H were acting as the wife’s solicitors and, to that end, they were obliged to explore their client’s instructions in relation to factual matters that could be turned into propositions of law or equity with a view to better advancing the wife’s interests under s 79 of the Family Law Act. It was not their task to foreclose on a matter legitimately arguable. To the contrary, they were duty bound to explore factual matters that may have had merit. As with most cases, only with the development of a point could it be seen to have real merit beyond being a possibility or something that seemed arguable. They identified the wife’s assertion in relation to a constructive trust as being worthy of exploration. It called for a barrister on which to provide advice. That was done here. Mr Taubman indicated that the point was worth exploring but that it needed expert evidence from overseas. The expert was duly sourced. His opinion was requested. His report was obtained. It was defective. Despite defects in the expert’s report, the wife’s constructive trust contentions were not beyond argument, however. In order to preserve the wife’s entitlement to even advance her constructive trust argument, her solicitors needed to comply with certain procedural directions. As it happened, the wife was unable to comply with those directions including a direction for certain documents to be translated. Her expert’s report ultimately fell far short of the standard required by the rules applicable to the arbitration.
In the face of that state of affairs, the husband, opportunistically in my view, endeavoured to persuade me that Ms G and Ms H ought to be visited with an indemnity costs order.
I refuse to make a costs order of any description against Ms G and Ms H.
As has been held in Levick v Deputy Commissioner of Taxation,[25] the power to make a costs order against a legal practitioner ought to be exercised sparingly and with great caution. A similar warning was given six years earlier by Drummond J in Re Bendeich (No 2).[26] In this case Ms G and Ms H were presented with a factually difficult case that their client instructed them to pursue. To my mind, the observations of Goldberg J in Flower & Hart (a Firm) v White Industries (Qld) Pty Ltd)[27] are on point where his Honour held that the jurisdiction to make a costs order against legal practitioners will not be invoked by simply instituting a proceeding or maintaining one on behalf of a client that has no or substantially no prospects of success.
[25] (2000) 102 FCR 15.
[26] (1994) 53 FCR 422.
[27] (2001) 109 FCR 280.
Ms G and Ms H did as they were instructed to do. They had a difficult case. They did the best they could do with a factually difficult case. That does not translate to circumstances warranting the invocation of the jurisdiction of this court to make a costs order against a legal practitioner. I reject the husband’s assertions that Ms G and Ms H are in any way liable for the husband’s costs. His application for costs against Ms G and Ms H is dismissed. He must pay their costs instead.
THE HUSBAND’S COSTS APPLICATION AGAINST MR TAUBMAN
Similarly, I dismiss the husband’s costs application against Mr Taubman.
In Williams v Spautz[28] the High Court held that a solicitor is under a duty not to institute a proceeding to gain some collateral advantage beyond that offered by law. Mr Batey of counsel for Mr Taubman brought to my attention a collection of cases in which a cost order was made against a non-party. Most have already been addressed above.
[28] (1992) 174 CLR 509.
In this case I am persuaded that Mr Taubman acted cautiously in his appearance before the arbitrator and before me. His affidavit revealed an equally measured and appropriate approach towards his instructions in relation to the constructive trust argument his ultimate client, the wife, wished to advance. He advocated getting the facts. That was entirely appropriate. He recognised that the wife’s constructive trust argument needed development by a detailed factual analysis. Rather than initially conceding that the wife’s constructive trust claim was hopeless, devoid of merit or even underdeveloped, Mr Taubman appeared before the arbitrator and obtained the benefit of time so as to do whatever the wife could do to shore up her unparticularised claim, as best as she may have been able. In doing that, not only did Mr Taubman do as good counsel would have and should have done but he advanced his client’s interests in keeping alive a component of the wife’s case. He had no licence to tell the arbitrator that his client’s case was hopeless. No one had a sufficient grasp of the facts to enable such a statement to be made. It was not until the ongoing documentary translation difficulties were organisationally insuperable, coupled with the vague, imprecise and forensically abstract comments of Dr N being known from his second report that Mr Taubman’s position became untenable such that he had no choice but to concede that the wife’s constructive trust argument was unlikely to ever improve. To my way of thinking, no impropriety of any description had been exhibited by Mr Taubman. The fact that the husband failed to achieve a peremptory dismissal of the wife’s constructive trust argument speaks volumes of the very sound and wise judgment of the arbitrator who must be taken to have recognised that the constructive trust argument may have been arguable if it could be supported by a legally and factually maintainable framework that could withstand the rigours of adversarial testing. This arbitration was the exemplar of hard fought adversarial combat.
Under no circumstances is it appropriate or jurisdictionally sound for me to make a costs order against Mr Taubman. He is blameless in this application. He is to be commended on his fearless conduct as counsel.
CONCLUSIONS ON THE HUSBAND’S COSTS ORDER APPLICATIONS
It is possible to state in prècis form the upshot of my reasons appearing aforesaid on the husband’s applications for costs against the several parties from whom he has sought costs orders. They are as follows –
(a)the husband is entitled to his party/party costs thrown away, of and incidental to the wife’s abandoned constructive trust argument, such costs to be assessed by a registrar of this court with such assessment being concluded by 29 July 2022 absent any order by me extending that date;
(b)I dismiss the husband’s application for costs against Ms G and Ms H; and
(c)I dismiss the husband’s application for costs against Mr Taubman.
THE WIFE’S COSTS APPLICATION AGAINST THE HUSBAND
In her response filed 12 October 2021 the wife set out her six applications that responded to the husband’s costs applications. The wife’s applications were as follows –
(a)that the application in a proceeding for costs filed by the husband be dismissed;
(b)that any other application filed by the husband in relation to a stay of the arbitration award be dismissed;
(c)that pursuant to s 117(2A)(2)(f) of the Family Law Act 1975 the husband is to pay to the wife costs as calculated by a registrar after a cost assessment and such cost assessment is to occur not later than 29 November 2021;
(d)that the costs payable by the husband be in respect to the wife’s costs of the arbitration and the concurrent proceeding in the Federal Circuit and Family Court of Australia from the date of the wife’s reasonable offer of settlement dated 4 February 2020;
(e)that in addition to the costs assessment listed in subparagraph (d) above, the husband also pay the wife’s costs of this costs application; and
(f)following the assessment by the registrar of costs payable, the husband is to make payment to the wife within 28 days.
The wife made an affidavit on 11 October 2021. In it she deposed to offers of settlement. She contended that the husband unreasonably rejected those settlement proposals for which he should be ordered to pay the wife’s costs from the date of her reasonable offer. Independently, the wife contended that the husband’s conduct, through his solicitor, Mr Pinto, and his counsel, Ms Clarke, ought to be taken into account in any assessment of costs.
OFFERS OF COMPROMISE
It is well accepted that a party who unreasonably rejects an offer of compromise thereby prolonging the litigation is amenable to a costs order and that it is appropriate to impose those costs on an indemnity basis. In Agosti & Agosti[29] I examined the learning on point. I adhere to my observations there expressed.
[29] [2021] FedCFamC1F 72.
The chronological evolution of offers and counteroffers was set out by the wife from paragraph 6 of her affidavit. The proceeding did not settle at a conciliation conference conducted on 16 January 2020.
On 4 February 2020 Ms G on behalf of the wife made a without prejudice offer to the husband, through the husband’s solicitor, Mr Pinto. In essence the wife proposed the following –
(a)the husband retained the Suburb O property;
(b)the wife retained the Country E property;
(c)the Suburb L property be sold and the net sale proceeds be divided as to half each;
(d)superannuation be divided as to half each;
(e)the joint bank account balances be split as to 70% to the wife and 30% to the husband; and
(f)various indemnities were proposed along with her motor vehicle.
On 27 February 2020 the husband’s solicitor rejected the wife’s 4 February 2020 proposal by putting a counter-proposal. The counter-proposal dated 27 February 2020 was, in essence, as follows –
(a)the Suburb L property be sold and (inferentially, from the net proceeds of sale) the mortgage over it be discharged along with the second mortgage over the Suburb O property;
(b)any remaining net proceeds of sale be divided equally;
(c)the husband retain the Suburb O property subject to the first mortgage;
(d)the wife retain the Country E property; and
(e)the parties equally share the superannuation.
The proposal in the 27 February 2020 letter from Mr Pinto was expressed to remain open until 6 March 2020.
Ms G’s letter of 6 March 2020 began by rejecting the husband’s proposal. She put a counter offer in the following (summarised) terms –
(a)the Suburb L property be sold and the net proceeds be applied towards discharging the first mortgage with the balance being divided equally between the parties;
(b)the husband retain the Suburb O property then refinance both mortgages so as to release the wife;
(c)the wife retain the Country E property;
(d)the parties’ superannuation be equalised; and
(e)the parties retain all items of personal property.
No date was stipulated in the 6 March 2020 Ms G proposal as the date by which the proposal was open to be accepted.
On 2 April 2020 Mr Pinto sent Ms H at Ms G’s office an updated balance sheet together with an updated valuation of the wife’s Country E property and an updated valuation of the husband’s superannuation and shares which Mr Pinto said had “declined drastically due to the outbreak of coronavirus”. The wife deposed in her affidavit that “the figures were no longer agreed”. In Mr Pinto’s proposal he wrote –
Please ask your client to consider both scenarios and advise if we can settle both the property and the children matters as neither party can afford to continue running these matters in court with little on (sic) or no equity left except for [Country E].
There seems to have been no response to the correspondence from Mr Pinto set out immediately above. On 19 November 2020 Ms G wrote to Mr Pinto with a new proposal, that one being expressed to be made pursuant to the principle in Calderbank v Calderbank.[30] On behalf of the wife the following settlement proposal was put, recorded in prècis form as follows –
(a)the parties instruct Ms G to jointly disburse, equally, the net proceeds of sale of the former matrimonial home in Suburb L;
(b)the husband refinance the mortgage liability over the Suburb O property into his own name after which he would be declared sole owner;
(c)if the husband failed to refinance the Suburb O property so as to remove the wife’s name then the parties would sell the Suburb O property and after selling expenses were accounted for, the net proceeds would be paid to the husband;
(d)the wife would retain the Country E property; and
(e)personal effects would remain each party’s.
[30] [1975] 3 All ER 333.
The wife deposed to that offer representing 69% of the asset pool being divided in her favour.
That proposal was rejected on 20 November 2020.
The wife contended that her offer in February 2020 was her “first reasonable offer immediately following the conciliation conference in February 2020”. That was a curious description.
At all events, the wife asserted (and this was a submission rather than a statement of fact that the Rules require an affidavit to contain) that the arbitrator adjusted 70% of the parties’ assets in her favour with the respondent receiving 30% which, she said, corresponded almost identically with the offers she made from February to November 2020.
Additionally, the wife asserted that every offer she made to the respondent “entailed me having no interest in the Country E property.” She said she was successful in that regard in the arbitration. She said she sought alternative proposals the first of which involved the exclusion of the Country E property from the asset pool and the second involved its inclusion.
The wife asserted that the husband was wholly unsuccessful in relation to the application to alter her interest in the Country E property. She argued that the arbitrator held that the husband failed to establish that it was just and equitable to alter the interest in the Country E property.[31]
[31] Paragraph 143 of the award.
While it was true that the wife did not ultimately press the constructive trust claim, it was also true that her resistance to the husband’s claim that the Country E property was a gift to him and the wife ultimately prevailed.
To my mind, there is considerable merit in the wife’s contention that as the husband failed in his claim that the Country E property was a gift to the two of them, he should be responsible for the payment of a costs order under s 117(2A).
It is first necessary to address the wife’s argument that she should have the benefit of orders under s 117(2) of the Family Law Act, as opposed to bearing her own costs pursuant to s 117(1) of the Family Law Act. She submitted that the husband rejected settlement proposals with the consequence that the wife’s costs should be paid by the husband. She relied on observations of the High Court in Penfold v Penfold[32] as well as observations of Higginbotham & Robinson[33] to the effect that s 117(2A)(f) operates in such manner that offers to settle must be considered seriously so as to avoid the costs of litigation.
[32] (1980) 144 CLR 311.
[33] (1991) 14 Fam LR 559.
In Agosti & Agosti[34] I examined in some little detail the learning among the authorities on the consequences of an unreasonable rejection of an offer of settlement, in that context a properly formulated Calderbank offer. The need for precision in the formulation of the offer is critical.[35] In Agosti & Agosti I distilled the holdings in Elite Protective Personnel in the following way –
[34] [2021] FedCFamC1F 72.
[35] Perry v Comcare (2006) 150 FCR 319, Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602, Roberts v Rodier [2006] NSWCA 1084 and Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322.
In Elite Protective Personnel Pty Ltd v Salmon[36], the Court of Appeal of the Supreme Court of New South Wales was concerned with the consequence of the non-acceptance of an offer, expressed to be without prejudice except as to costs, in circumstances where the offer of a particular sum inclusive of costs in full settlement of the matter, was open until a specific date. The Court of Appeal made a number of important observations about Calderbank offers, including the following –
(a) citing Messiter v Hutchinson,[37] the court held that a Calderbank letter makes an offer of settlement and warns that the letter will be relied upon on the question of costs if and when that issue arises;
(b) citing Jones v Bradley (No 2)[38] the court held that Calderbank offers are a well-recognised means of making offers of settlement in circumstances where the party making the offer ultimately seeks a costs advantage if the offer is not accepted;
(c) citing Donnelly v Edelsten[39] the court held that it is relevant for the court to consider the conduct of the offeree especially whether the offeree had an appropriate opportunity to consider and deal with the offer;
(d) citing Smallacombe v Lockyer Investment Co Pty Ltd[40] the court held that a Calderbank letter expressed to be inclusive of costs will not warrant departure from the usual basis upon which a successful party’s costs are calculated;
(e) the court observed that authorities such as Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd[41] and Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd)[42] recognise the importance of isolating the costs component in such manner as it is clear and capable of proper assessment independently of the principal claim as part of a Calderbank letter;
(f) citing White v Baycorp Advantage Business Information Services Ltd[43] the court held that a line of authority exists to the effect that it is not appropriate for a plaintiff who claims payment of a sum of money to serve a Calderbank offer offering to settle a claim upon payment of a particular sum of money inclusive of costs because the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim as opposed to the costs incurred in advancing it;
(g) referring to Victorian authority in MT Associates Pty Ltd v Aqua-Max Pty Ltd,[44] Semco Developments Pty Ltd v Graham[45] and Berrigan Shire Council v Ballerini[46] the court held that all-in Calderbank letters pose difficulties when a court came to consider the reasonableness of not accepting the offer; and
(f) against those Victorian authorities the court cited the decision of Allsop J (as the Chief Justice was then) in DSE (Holdings) Pty Ltd v InterTAN Inc[47] in which Allsop J held that no definitive rule exists to the effect that in an application for costs, an all-inclusive offer could not, in any circumstance, be taken into account in an application for indemnity costs.
[36] [2007] NSWCA 322.
[37] (1987) 10 NSWLR 525.
[38] [2003] NSWCA 258 (at [5]).
[39] (1994) 49 FCR 384, 396.
[40] (1993) 42 FCR 97.
[41] [2006] NSWSC 583.
[42] [1998] FCA 1429.
[43] [2006] NSWSC 910.
[44] [2000] VSC 163.
[45] [2005] VSC 268 (at [28]).
[46] [2006] VSCA 65.
[47] [2004] FCA 1251.
In this case the wife cast her case for an order for costs in her favour under s 117(2A) on three grounds –
(a)bettering the offers of settlement from February 2020;
(b)obtaining an award to the effect that the Country E property was not found to be a joint gift to the parties; and
(c)the conduct of the husband in unduly prolonging the case by groundless contentions.
Central to the first component of the wife’s argument for a costs order was her contention that she bettered the offers of compromise. She supported that contention arguing that at all times she propounded that the Country E property was not to form part of the pool of assets and, in the upshot, the arbitrator so ordered.
At its core, the wife invited me to accept that she was entitled to her costs, from November 2020, by reason of the fact that the arbitrator held that the Country E property did not form part of the divisible pool of assets, just as she had maintained. To my mind, her contention was correct, even recognising that she advanced her constructive trust argument until abandoning it. It was not inconsistent for her to argue, concurrently, that the Country E property was not a gift nor part of the pool, on the one hand, while also arguing that the Country E property may have been held on a constructive trust, the trustee of which was the wife while the beneficiaries were her parents. Put differently, those proposition were wholly consistent. The fact that the husband challenged the wife’s evolving versions of her constructive trust argument did not change her fundamental position, namely, that the Country E property did not form part of the pool of assets that fell for division in this case. The wife was ultimately vindicated in that fundamental position.
However, that was only part of the terms of her offers of compromise. The wife argued that she put forward a variety of configurations of proposals for resolution, all equating in approximate terms to a division of the pool as to 70% in her favour and 30% to the husband. She argued that the arbitral award, when properly construed, is to like effect.
The husband did not suggest that the wife’s offers of compromise were too imprecise to be given effect nor that her offers as communicated by Ms G were technically defective in some way.
In my view, the real issue was whether the husband acted unreasonably from a date immediately prior to the arbitration in pressing on with the arbitration rather than settling the case on the terms offered by the wife. I am of the view that he did. The wife abandoned her constructive trusts claim yet the husband persisted in pressing his claim in the arbitration and on a major point in his armoury, namely, his contention that the Country E property was a gift to him and the wife, he failed. Once that asset was excised from the pool of divisible assets, the arbitrator made orders largely in accordance with the position advocated throughout by the wife and which was first proposed by the wife prior to the commencement of the arbitration. Costs should be ordered against him for doing so. The wife sought orders that her costs be assessed on an indemnity costs basis. A recognised basis exists for ordering indemnity costs where a party equals or betters an offer of compromise following trial.[48] Here the wife equalled or bettered the result after arbitration that was offered as at November 2020. I see no reason why principles ordinarily applicable to the ordering of indemnity costs should not apply here.
[48] Agosti & Agosti [2021] FedCFamC1F 72.
The same orders should be made for the registrar’s assessment of the wife’s costs as have been made for the assessment of the husband’s costs by the registrar. Whereas the orders I have made against the husband extend only to cost thrown away by reason of the abandonment of the wife’s constructive trust argument, in relation to the wife, her costs of the arbitration from November 2020 must be paid by the husband on an indemnity basis.
There remains my consideration of the costs claimed by the wife’s former legal representatives against the husband, to which I now turn.
MS G’S AND MS H’S COSTS APPLICATION AGAINST THE HUSBAND
In this section I have segmented the costs that may legitimately be claimed by Ms G against the husband from the cost that Ms H purports to claim against the husband. That is because Ms H was at all relevant times an employee of Ms G, not an owner of Ms G’s firm, so Ms H is unlikely to have incurred any actual costs. If I am wrong about that, then my orders recorded at the commencement of these reasons are sufficiently broad to cover recovery of any costs actually incurred or sustained by Ms H. It should be observed that submissions prepared by Ms Gillies QC were written on behalf of both Ms G and Ms H, suggestive of the fact that each had a cost liability that must be addressed.
At its core, Ms G represented the wife in the arbitration which resulted in the wife having interests altered in her favour by the arbitrator. On the wife’s instructions, Ms G was required to, and did, advance the wife’s contentions about a constructive trust said to have arisen between the wife and the wife’s parents. Throughout the arbitration and in this proceeding itself, the husband advanced the contention that the Country E property was an asset to be divided as between the parties, it having been made over as a gift to the husband and the wife upon their marriage. The wife steadfastly resisted the husband’s assertion in that regard. She instructed Ms G to adduce evidence so as to demonstrate the truth of the wife’s assertion. Consistent with her instructions Ms G prepared court and arbitral documentation in an endeavour to make good the wife’s instructions that the Country E property fell outside of the divisible pool of assets in this case.
It is true that Ms G encountered considerable difficulty in formulating evidence in an admissible form to be adduced in the arbitration of this case in relation to the wife’s constructive trust claim. But it is far from unusual that pleadings, for example, are imperfectly expressed then they are struck out yet the underlying cause of action is permitted to remain as an issue in the case. So too here, the first attempt to adduce expert evidence about the wife’s constructive trust claim was unsuccessful. She instructed Ms G to try again, which Ms G did. In the end, the task of properly and sufficiently advancing the wife’s constructive trust claim became near impossible so the wife instructed her legal advisors to make the appropriate submissions to abandon the constructive trust claim.
For reasons already canvassed above, that state of affairs did not render the wife’s legal advisors amenable to a costs order. After all, they diligently pursued their client’s instructions as far as circumstances permitted.
Should they jointly be forced to bear the financial burden of resisting the husband’s ill-conceived application for costs against them or, if not them jointly, should Ms G suffer that fate? In my view the answer is unequivocally in the negative, as I have recorded above.
Equally, should Ms G be left without remedy in being forced to retain Silk to resist the husband’s ill-conceived costs application against the wife? Again, the answer is unequivocally in the negative.
The husband’s costs application against Ms G was wholly unsuccessful for the purpose of s 117(2A) of the Family Law Act. In my view his application for costs against Ms G was doomed from the start and should never have been brought. The husband’s legal advisors should have advised him against bringing the application for costs against Ms G. It had no prospects of success. Ms G was entitled to resist. She was entitled to retain Senior Counsel to demonstrate the utterly forlorn nature of the husband’s application. In my view exceptional circumstances exist for the making of an indemnity costs order against the husband for unsuccessfully pursuing Ms G for costs on this application. His costs application against Ms G and Ms H should not have been brought. Ms G should be indemnified by him for her costs and expenses.
MR TAUBMAN’S COSTS APPLICATION AGAINST THE HUSBAND
The same comments apply apropos Mr Taubman and the husband. In my view the husband must pay Mr Taubman’s costs on an indemnity basis.
AN END NOTE
These reasons have been lengthy. No shortcut was otherwise available having regard to the many costs issues that arose. That said, several issues remain before it is possible for me to finally dispose of this proceeding.
A registrar of this court must assess the following costs orders recorded earlier –
(a)the wife’s indemnity costs of the proceeding and of the arbitration;
(b)the husband’s costs throw away of and incidental to the wife’s abandoned constructive trusts argument, such costs to be assessed on a party/party basis; and
(c)the indemnity costs of Ms G, Ms H (if any) and Mr Taubman of and incidental to this costs application.
I certify that the preceding one hundred and twenty-four (124) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 11 May 2022
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