Abbott and Langton (Costs)
[2011] FamCA 26
•28 January 2011
FAMILY COURT OF AUSTRALIA
| ABBOTT & LANGTON (COSTS) | [2011] FamCA 26 |
| FAMILY LAW – COSTS – FINAL HEARING – Where competing applications for costs of proceedings under s 79 of the Family Law Act 1975 (Cth) – Where husband’s financial circumstances at conclusion of proceedings superior to that of wife – Where husband and his case guardian failed to provide relevant updated financial information – Where undertaking as to disclosure made by husband but not his case guardian – Where case guardian's failure to update financial information resulted in wife incurring additional costs – Where case guardian made an offer in writing which was not materially different to wife’s entitlements at conclusion of defended proceedings – Where wife unable to properly consider offer by lack of relevant financial information – Circumstances established by wife justifying departure from s 117(1) – Case guardian to cause husband to pay 50 per cent of wife’s costs of the substantive proceedings FAMILY LAW – COSTS – INTERLOCUTORY APPLICATIONS – Where husband sought costs order where costs reserved – Where husband sought costs of two additional interlocutory applications – No circumstances justifying a departure from s 117(1) – Each party to pay their own costs of interlocutory applications |
| Browne v Green (2002) FLC 93- 115 Child Support Registrar & Kanavos [2010] FamCAFC 244 Penfold v Penfold (1980) 144 CLR 311 Robinson & Higginbotham (1991) FLC 92-209 |
| Family Law Act 1975 (Cth) ss 117, 117(2A)(f), 117AB, 117C Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth) Family Law Rules 2004 |
| APPLICANT: | Ms Abbott |
| RESPONDENT: | M Langton as case guardian for Mr Langton |
| FILE NUMBER: | SYC | 2523 | of | 2007 |
| DATE DELIVERED: | 28 January 2011 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Boland J |
| HEARING DATE: | 15 December 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Gould |
| SOLICITOR FOR THE APPLICANT: | Beswick Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Hill |
| SOLICITOR FOR THE RESPONDENT: | Kenneth Harrison Solicitor & Attorney |
Orders
The Case Guardian’s oral application for costs of the substantive property proceedings, including the review, is dismissed.
The Case Guardian do all acts and things necessary to cause the husband to pay 50 per cent of the wife’s costs of and incidental to the substantive property proceedings, including the review, but excluding the interlocutory applications heard on 16 July 2007, 5 February 2008 and 9 June 2009 as agreed and failing agreement as assessed.
The Case Guardian’s oral application for costs of interlocutory applications heard on 16 July 2007, 5 February 2008 and 9 June 2009 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Abbott & Langton (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 2523 of 2007
| MS ABBOTT |
Applicant
And
| M LANGTON as Case Guardian for MR LANGTON |
Respondent
REASONS FOR JUDGMENT
Introduction
On 10 December 2010 I published reasons for judgment and made orders in respect of a review of orders made by Johnston JR (as his Honour then was) under s 79 of the Family Law Act 1975 (Cth) (“the Act”).
I found the parties had net assets of $539,186.00 and those assets should be divided between the parties as to 55 per cent or $296,552.00 to the wife and 45 per cent or $242,634.00 to the husband. Throughout the proceedings before me the husband was represented by his Case Guardian. For convenience only in these reasons I will refer to applications as being applications of either the husband or wife notwithstanding the husband’s representation by a case guardian.
During the review hearing no submissions were made to me in respect of earlier costs orders, including reserved costs orders made in the proceedings.
On 10 December 2010 I made the following orders:
(1)Any application for costs is listed for hearing before the Honourable Justice Boland at 10.00 am on Wednesday 15 December 2010.
(2)Any affidavit in support of an application for costs is to be filed and served on or before 4.00pm Monday 13 December 2010.
The wife’s solicitors advised my associate on 15 December 2010 that the wife sought to rely on her affidavit filed 14 September 2010 in support of her application for costs. At the hearing of the costs application before me on 15 December 2010 the wife’s solicitor made an oral application as follows:
(a)the husband pay the wife’s costs of and incidental to the proceedings under s 117AB of the Act ; or
(b)the husband pay the wife’s costs of and incidental to the proceedings under s 117 of the Act.
Although the wife’s solicitor initially sought the costs claimed be ordered on an indemnity basis, he subsequently withdrew that application, and sought costs on a party/party basis.
The wife’s solicitor relied on the following applications and affidavits in support of the application:
1.Response to an Application in a Case filed 9 June 2009;
2.Affidavit of the wife affirmed and filed 9 June 2009; and
3.Affidavit of the wife affirmed 13 September 2010, filed 14 September 2010.
The case guardian’s solicitor made an oral application as follows:
(a)The wife pay the husband’s costs of and incidental to the following applications on a party and party basis:
- interlocutory proceedings heard on 9 June 2009;
- proceedings for the removal of the wife’s former solicitors, listed on 8 February 2008;
- interlocutory proceedings heard on 16 July 2007.
(b)The wife pay the husband’s costs of and incidental to the s 79 proceedings, including the review, on a party/party basis.
The case guardian relied on the following affidavits:
1.Affidavit of Kenneth Harrison sworn 14 December 2010, filed 15 December 2010;
2.Affidavit of the husband sworn and filed 4 July 2007;
3.Affidavit of the husband sworn 20 December 2007, filed 28 December 2007;
4.Affidavit of the husband sworn 1 June 2009, filed 2 June 2009.
In additional to the extensive oral submissions of the parties, I received as Exhibits in the proceedings the following documents:
Exhibit “A”Statement of Claim in proceedings 2010/… in Small Claims Division of Local Court of NSW tendered by the wife
Exhibit “B”Letter from wife to Mr Harrison dated 7 March 2008 tendered by the wife.
Exhibit “1”Wife’s Case Outline Document filed 21/08/09 from the Court file tendered by the husband.
Exhibit “2”Two letters dated respectively 8 April 2008 and 15 April 2008 from Kenneth Harrison Solicitor to the wife tendered by the husband.
The wife’s solicitor had prepared written submissions which he used as a skeleton outline of argument. I indicated that I would treat the written submissions as an aide memoir to the wife’s application.
Relevant law
The relevant provisions of the Act are s 117, s 117AB and s 117C.
Section 117 provides as follows:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
Section 117AB provides as follows:
(1) This section applies if:
(a) proceedings under this Act are brought before a court; and
(b) the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.
(2) The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.
Section 117AB was introduced into the Act by the Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth). The effect of the provision was discussed by me exercising the appellate jurisdiction of the Court in Child Support Registrar & Kanavos [2010] FamCAFC 244 at, inter alia, paragraphs 68-71 and 78-84 as follows:
68.Section 117AB was inserted into the Act in 2006 and commenced operation on 1 July 2006.
69.As there is no test or criteria in the section as to what is required to establish that a false allegation or statement has been made “knowingly” it is appropriate to refer to the Revised Explanatory Memorandum (see s 15AB(2)(e) Acts Interpretation Act 1901(Cth).
70.Paragraphs 226 and 227 of the Revised Explanatory Memorandum are as follows:
Item 41 inserts a new provision section 117AB after section 117 which is the section that deals with costs. The new provision provides that a court must order a party to pay some or all of the costs of another party, or other parties to the proceedings, where the court is satisfied that that party has knowingly made a false allegation in the proceedings. This provision implements recommendation 10 of the LACA Report. It attempts to address concerns that have been expressed, in particular that allegations of family violence and abuse can be easily made and may be taken into account in family law proceedings. The provision is broader than family violence or abuse allegations and would apply to any false statement knowingly made.
The LACA Report noted that this approach avoids the need for separate criminal proceedings for perjury which may not be appropriate given that parents need to maintain an ongoing parenting relationship. Perjury can also be difficult to establish given it is a criminal process. The provision ensures a message to the courts that a penalty should be imposed at the same time as the court determination rather than relying on the possibility of protracted criminal proceedings at a later date. The penalty does not prevent criminal prosecution in appropriate cases. The court must be satisfied on the balance of the probabilities that a party has knowingly made a false allegation.
71.On 2 March 2006 when the Family Law Amendment (Shared Parental Responsibility) Bill 2005 was returned to the House of Representatives from the Main Committee, the then Attorney-General, the Honourable P Ruddock said during the debate on proposed amendments to the Bill the following:
The member for Gellibrand also flagged Labor’s concern that the incidence of using costs within the family law jurisdiction risks turning family law into a costs jurisdiction. I suspect that many parties before our courts at the moment would be very surprised to learn that it is not a costly jurisdiction. The question is: who should pay those costs? In cases where proceedings are the result of a party’s disregard of court orders or of false allegations of violence, the government thinks it only just that costs orders should be able to be made where appropriate against the party responsible.(p 25)
…
The bill seeks to address concerns about false allegations and false denials by the inclusion of the new cost provision that applies where a person has knowingly made false allegations or a false statement – and this clearly also covers false denials. This provision implements a committee recommendation. It is appropriate, given the high test that must be satisfied: a person must knowingly make the false statement. In such circumstances criminal penalties could also be applied. (p 46)
…
78.There is little authority in this Court on the interpretation of what is required to satisfy a court that an allegation has been “knowingly made” for the purposes of s 117AB.
79.I was referred to the decision of Cronin J in Charles & Charles [2007] FamCA 276.At paragraphs 22 and 23, his Honour explained that s 117(1) must be read as subject to s 117AB. I concur with that view.
80.At paragraph 24 his Honour discussed the word “knowingly” and said:
“Knowingly” imports a serious subjective element into the question. In respect of many findings of fact as in this case, a trial judge determines which of two versions, sometimes diametrically opposed to one another, he or she believes on the balance of probabilities. Such a finding is not necessarily a statement that one version is patently untrue or that a person is lying; it may simply be that one version is more probable than another. For a court to be satisfied that a person knowingly made a false allegation or statement in the proceedings must mean that a court can be comfortable in finding that the person lied. It would not simply then be a balancing act between two versions. To be satisfied that a lie has been told and to so find requires a careful analysis of two things. The first is that the proffered version of fact is untrue but the second is that it is put knowing it to be untrue. A court must then be cautious about such a finding because of the mandatory consequence. The finding must be elevated above the “probable” level set out in s 140(1) of the Evidence Act 1995 to consider the matters contemplated in s 140(2) of that Act. That is, the Briginshaw test applies. [footnote omitted] (original emphasis)
81.Thereafter his Honour referred to the use of the word “knowingly” in civil proceedings with particular reference to that word in relation to the tort of deceit as discussed by the High Court in Magill v Magill (2006) 231 ALR 27. His Honour also referred to the Revised Explanatory Memorandum, which I have earlier set out and parts of the Attorney-General’s second reading speech. I have earlier, in these reasons, set out the relevant extracts from Hansard.
82.I was also referred to the decision of Ryan J in Sharma & Sharma (No 2) [2007] FamCA 425 where her Honour considered, among other matters, whether the new provision, which was introduced as part of the suite of reforms in the Family Law Amendment (Shared Parental Responsibility) Act 2006, amended the otherwise discretionary position the Court exercises in respect of costs under s 117. Her Honour explained that the application of s 117AB is mandatory provided the criteria in s 117AB(1) are satisfied. I also concur with her Honour’s conclusions in respect of s 117AB.
83.At paragraph 13 of her reasons, Ryan J said:
My finding that some of the wife’s allegations are fabrications introduces the mental element which turns a wrong statement into a deliberate falsehood. This means I am satisfied she knowingly made a false allegation or statement. Again this was a central issue. So that there can be no doubt that the wife adopted her complaints and allegations made to police in these proceedings, at paragraph 112 I find:
“At the close of her case, the mother maintained the veracity of each and every allegation made against the father post 30 April 2004. That is, not only that she has accurately reported the children’s complaints but that the father behaved in the manner described”.
84.The word “knowingly” is considered in Words and Phrases Judicially Defined (4th Edition, Lexis Nexis Butterworths, 2007) at 1313 with reference to various statutes. While many of the examples cited in this text must be read in the context of the statute under discussion, I think the discussion of the meaning of the word by Kellock JA in Sleight v Stevenson [1943] 4 DLR 433 at 441 is helpful in the facts relevant to this appeal. In dealing with a case under a statute pertaining to insurance, his Honour said “I think ‘knowingly’ in the statute is used in the sense that the applicant is in possession of information that what is in fact stated in the application is untrue or does not disclose the truth” (see also Stroud’s Judicial Dictionary of Words and Phrases 7th Edition, Thomson Sweet Maxwell, 2006, at 1449). In other words, I concur with Ryan J there is a conscious mental element involved in the making of a statement.
Section 117C is also relevant to the issues I am required to determine. It provides as follows:
(1) This section applies to proceedings under this Act other than the following proceedings:
(a) proceedings under Part VI;
(b) proceedings under Division 6, 9 or 13 of Part VII;
(c) proceedings to enforce a decree or injunction made under Division 6, 9 or 13 of Part VII.
(2) If:
(a) a party to proceedings to which this section applies makes an offer to the other party to the proceedings to settle the proceedings; and
(b) the offer is made in accordance with any applicable Rules of Court;
the fact that the offer has been made, or the terms of the offer, must not be disclosed to the court in which the proceedings are being heard except for the purposes of the consideration by the court of whether it should make an order as to costs under subsection 117(2) and the terms of any such order.
(3) A judge of the court is not disqualified from sitting in the proceedings only because the fact that an offer has been made is, contrary to subsection (2), disclosed to the court.
Before commencing my discussion, it is important that I refer to the general principles which govern the broad discretion to award costs under s 117. Those principles are clearly explained in Penfold v Penfold (1980) 144 CLR 311 at 315-316 as follows:
It is an accurate description of s. 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s. 117 (2). As sub-s. (1) is expressed to be subject to sub-s. (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in “a clear case”.
Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs. (footnote omitted)
The “broad brush” approach to the question of costs is well recognised (see Browne v Green (2002) FLC 93- 115; Robinson & Higginbotham (1991) FLC 92-209 per Nygh J at 78,417).
I propose to deal firstly with the competing applications for costs of the s 79 proceedings. I will then deal with the three specific interlocutory applications in respect of which the husband seeks costs. I propose to consider the applications and submissions in support of them by reference to s 117(2A) of the Act.
The evidence in support of the competing applications
The wife’s solicitor relied on paragraphs 91 to 160 and paragraph 187 of the wife’s affidavit affirmed on 13 September 2010. He also relied on an Undertaking as to Disclosure (in accordance with r 13.15 of the Family Law Rules 2004) (“the rules”) signed by the husband and filed on 23 August 2010. The latter document is not dated, but appears to have been signed by the husband after the appointment of his son as his case guardian. The undertaking is witnessed by the husband’s solicitor.
Paragraphs 96 to 97 of the wife’s affidavit deal with the consent orders of 16 July 2007 and are not directly relevant to the wife’s application.
The wife referred to orders made on 15 August 2007 requiring the husband to produce documents. She relied on correspondence from her former solicitors to the husband’s solicitors, and recorded that on 30 June 2008 the single expert, Mr B, had not received all relevant documents. She recorded that further orders were made on 3 July 2008 requiring the husband to provide documents to her solicitors, and to Mr B. She deposed that Mr B wrote to the parties on 11 July 2008 advising that information he had requested had not been provided.
In paragraphs 106 and 107 the wife referred to correspondence, including a request for a spreadsheet referred to in an affidavit of Mr L dated 17 December 2008, and deposed no response was received to that request. I pause here to note that before me no attempt was made to provide relevant up to date information from Mr L until the second day of the hearing before me (see paragraph 74 of my reasons for judgment). She also deposed Mr B had requested information on nine separate occasions between July 2007 and February 2009.
The wife also testified that she did not receive copies of strata notices, council rates or land tax notices in respect of the parties’ former matrimonial home, and was not aware of them being overdue.
The wife deposed that she had subpoenaed the husband’s bank records to prepare tables in an attempt to reconcile cash withdrawals made by the husband from August 2008 to June 2009.
Later, in paragraphs 129 to 131, the wife deposed to difficulties which she asserted occurred in the conduct of the valuation of the matrimonial home.
At paragraphs 132 and 137 the wife deposed
132.On 30 July 2009, Beswick requested that Kenneth Harrison provide them with [the husband’s] consent and authority to the Australian Taxation Office to provide information concerning his financial circumstances. On 11 August 2009, Kenneth Harrison wrote to Beswick requiring reasons for the request. On 17 and 18 August 2009, Beswick wrote to Kenneth Harrison to provide reasons. On 20 August 2009, Beswick requested that Kenneth Harrison send to them the signed Freedom of Information Request to the Australian Taxation Office as a matter of urgency. Kenneth Harrison has not responded and I remain unaware of [the husband’s] taxable income or the content of his tax returned for the past 27 years. At Part 31 of WA01 is a bundle of the correspondence referred to above.
…
137.On 24 August 2009, the first day of the final hearing, [the husband’s] Counsel produced to the Court an Affidavit prepared by [the husband] sworn 24 August 2009. He informed the Court that this contained everything that [the husband’s] Financial Statement would have set out. We did not receive this until we were in the court room. Prior to that, the last Financial Statement received from [the husband] was dated December 2008. In the affidavit sworn 24 August 2009 the husband states at paragraph 6 that he has “withdrawn about $500 per week, on average, to pay for living expenses”. Upon reference to the bank statements of the husband produced under subpoena, this is a gross understatement. (original emphasis)
At paragraph 146 the wife deposed that Cohen J made orders on 9 November 2009 requiring the husband to make further disclosure of financial documents, and that it had been necessary for her solicitors to send a number of letters to the husband’s solicitors. She deposed a request for bank statements, made on 23 December 2009, remained unanswered. She also deposed to the service of Notices to Produce and said “most of the documents requested were not produced by [the husband]” (paragraph 151). The wife set out the details of the financial statements filed by each of the parties. The husband filed only two financial statements on 8 June 2007 and 19 December 2008. I note that the Case Guardian did not file any updating financial statement.
At paragraph 187 the wife deposed that she had issued 36 subpoenas. The wife’s evidence was that her solicitors had used the documents produced under subpoena to prepare a spreadsheet “of the total amount of money deposited into [the husband’s] personal and business accounts (which appear to be intermingled) from the date of …separation …in June 2006 to date”.
The wife was not challenged at the hearing in respect of any of the material on which she relied in support of the costs application.
The husband relied on an affidavit of his solicitor, Kenneth Harrison sworn 14 December 2010. That affidavit is relevant to offers of settlement and I will deal with those offers when considering s 117(2A)(f). Other affidavits of the husband relied on have no relevance to the principal proceedings and were relied on in support of the costs sought in respect of the interlocutory applications.
Discussion
I propose to first consider the application made on behalf of the wife for costs pursuant to s 117AB.
No submissions were made to me that the husband or the case guardian had “knowingly” made false allegations or statements in the proceedings although reliance was placed on the husband’s undertaking as to disclosure. It was also submitted that the husband had attempted to conceal his inheritance from the wife. While I accept there may initially have been concealing by the husband of his inheritance, by the commencement of the hearing before me documents were produced on behalf of the case guardian relevant to the husband’s inheritance. I accept those documents were not produced in a timely manner.
However, I am not satisfied to the requisite standard that the wife has established the husband “knowingly” made false allegations or statements, and in these circumstances I am not satisfied the necessary criteria under s 117AB has been established.
I turn then to discuss the competing applications under s 117 in respect of the substantive proceedings. I will do so by reference to s 117(2A).
(a)the financial circumstances of each of the parties to the proceedings
The wife’s solicitor submitted that although the husband, as a result of my orders, received less of the assets than the wife, by reason of his inheritance the husband was in a superior financial position to that of the wife. I accept that neither party has substantial assets. I accept there is some merit in the submission made on behalf of the wife in respect of the husband’s superior financial position.
(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
It is convenient to deal with these two subsections together.The wife relied on the material which I have set out above to support her claim for costs. In summary she submitted her legal costs had been increased by reason of the failure of the husband (and then the case guardian) to make a full frank and proper disclosure of the husband’s financial position.
I accept the submission made on behalf of the wife that the husband’s Financial Statement was out of date and no attempt was made to provide up to date information to the Court by the case guardian.
While the wife asserts that the husband’s financial disclosure was false, I was not so satisfied. I accept rather what occurred was a failure on behalf of the case guardian to satisfactorily explain, inter alia, how the husband had dealt with funds received from the sale of the personal services business operated by the parties, or to provide relevant and up to date evidence about the broking business. That failure was referred to by me at paragraph 39 and again at paragraphs 57 and 107 of my reasons as follows:
39.I pause here to note that it was not in dispute before me that the husband, despite the evidence before the Court which lead to the appointment of a case guardian, had continued to operate the business, and there was simply no up to date evidence before me which would support a finding that the client base attached to [the business], or that it had been lost to the husband.
…
57.It is important that I record at this point that Mr [L] gave evidence that the case guardian provided him with financial information, but no material by way of updating was filed on the husband’s behalf by the case guardian. That failure has made my task considerably more difficult. The Full Court (Nicholson CJ Buckley and Kay JJ) in Kannis & Kannis reported in part in (2003) FLC 93-135 set of the obligations of a case guardian (then referred to in the rules as a “next friend”) at paragraphs 59 and 60 of their reasons. The Full Court dealt with the authorities relating to non disclosure and, at paragraph 51 (unreported), the Full Court said:
Whether the non-disclosure is wilful or accidental, is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute. Where the Court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances it may be appropriate to err on the side of generosity to the party who might be otherwise be seen to be disadvantaged by the lack of complete candour. This is the course the trial Judge adopted. It was a course clearly open to him and one that does not merit appellate interference
…
107.Before me counsel for the wife strongly submitted that I should find the case guardian had failed to make a full frank and proper disclosure of the husband’s financial affairs and be robust in those circumstances in my approach to the assets and liabilities. In the alternative, he submitted that I should under s 75(2)(o) make an adjustment in the wife’s favour for the failure to disclose and the additional costs she had incurred because of that failure. I indicated the appropriate way to deal with the matter of additional legal costs may be under s 117 rather than an adjustment under s 75(2)(o). However, as indicated earlier in my reasons, it was regrettable that no attempt was made to provide any relevant updated information to the Court, notwithstanding a year had elapsed since the Judicial Registrar’s orders, and procedural orders had been made to enable the matter to be properly re-heard. I find the dicta of the Full Court in Kannis about the duty of the case guardian apposite in this matter. There was simply no attempt made to place any relevant up to date material before the Court until I permitted an indulgence to the case guardian to rely on a proof of evidence by Mr [L] and for him to be called on the second day of the hearing. I am, however, satisfied that the appropriate manner to address losses suffered by the wife by way of additional legal costs is under s 117 of the Act.
The question of the undertaking given to the Court and filed on behalf of the husband on 23 August 2010 requires some comment. The document was filed on behalf of the husband when he was represented by a case guardian on the basis of his incapacity. I am at a loss to understand how, in these circumstances, the document could have been signed by the husband particularly when witnessed by his solicitor who was well aware of the appointment of the case guardian. The document is one of vital importance in financial proceedings. Rule 13.15 of the rules provides as follows:
(1) A party (except an independent children’s lawyer) must file a written notice:
(a) stating that the party:
(i) has read Parts 13.1 and 13.2 of these Rules; and
(ii) is aware of the party’s duty to the court and each other party (including any independent children’s lawyer) to give full and frank disclosure of all information relevant to the issues in the case, in a timely manner;
(b) undertaking to the court that, to the best of the party’s knowledge and ability, the party has complied with, and will continue to comply with, the duty of disclosure; and
(c) acknowledging that a breach of the undertaking may be contempt of court.
(2) A party commits an offence if the party makes a statement or signs an undertaking the party knows, or should reasonably have known, is false or misleading in a material particular.
Penalty: 50 penalty units.
(3) If the court makes an order against a party under section 112AP of the Act in respect of a false or misleading statement mentioned in subrule (2), the party must not be charged with an offence against subrule (2) in respect of that statement.
(4) A notice under subrule (1) must comply with subrule 24.01 (1) and be as follows:
‘This Notice is filed in accordance with rule 13.15 of the Family Law Rules 2004 .
I [ insert name ]:
(a) have read Parts 13.1 and 13.2 of the Family Law Rules 2004;
(b) am aware of my duty to the court and to each other party (including any independent children’s lawyer) to give full and frank disclosure of all information relevant to the issues in the case, in a timely manner; and
(c) undertake to the court that, to the best of my knowledge and ability, I have complied with, and will continue to comply with, my duty of disclosure.
I understand the nature and terms of this undertaking and that if I breach the undertaking, I may be guilty of contempt of court.
.................................... ....................................
( signature of person making statement ) ( full name of person making statement )
....................................( date of signature )
....................................
....................................( signature of witness ) ( full name of witness )
....................................( date of signature )
The document should not have been signed by the husband if he lacked capacity to give the necessary undertaking, but rather by the case guardian. I infer that the case guardian may not have been prepared to sign the undertaking given the lack of up to date evidence before the Court, including a full explanation of the husband’s financial dealings post separation. I am satisfied the undertaking as to disclosure was not properly made.
I accept that the husband and his case guardian on his behalf failed to provide relevant and up to date information to the Court or to fully comply with court orders to do so. This failure necessitated the wife in incurring additional legal costs. I am satisfied it also extended the hearing time by reason of the necessity to call Mr L. These matters strongly militate in favour of a costs order in the wife’s favour. As will be shortly seen they are also relevant when I consider s 117(2A)(f).
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings
It was submitted on behalf of the husband that the wife had been unsuccessful in her application given her counsel submitted she should receive 67.5 per cent of the parties’ net assets and liabilities (which she contended exceeded the sum found by me). However, I note that the husband sought that he should retain 70 to 75 per cent of the net assets, excluding his inheritance.
I am satisfied that neither party was wholly unsuccessful in the proceedings. Therefore I disregard this factor as relevant to my determination.
(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
The essential gravamen of the submissions made on behalf of the husband by his solicitor was that there had been a number of offers of settlement which he submitted should have been accepted by the wife.
The first offer relied on was an offer made on 28 March 2008. That offer was that the wife retain her furniture, jewellery and superannuation and receive a total cash entitlement of $251,000.00 (that sum included $33,000.00 already held by the wife from the proceeds of the personal services business). It was asserted that the broking business conducted by the husband had no value. Further it was asserted, without explanation, that the monies held by the husband from the proceeds of the personal services business were $158,000.00. The offer was open for ten days.
On 23 October 2008 a further offer was made by the husband pursuant to directions made by Registrar Chayna on 25 September 2008. In the offer the husband asserted the parties’ assets and liabilities including motor vehicles and superannuation entitlements were $436,152.00 (I note that I found the parties’ net assets, excluding the inheritance, to have value of $539,186.00. This sum included paid legal fees, but excluded jewellery which was subject of a discrete order). The husband’s offer was on the basis the wife retain her jewellery, motor vehicle and superannuation and that the wife receive $219,000.00 including $33,000.00 already held by the wife. This offer was open for 28 days
On 21 August 2009 the wife made offer of settlement in writing. That offer was made in the alternative. It is unnecessary that I set out details of the offer which in summary was made on the basis that the wife receive the sum of $465,000.00 and the parties otherwise keep the property and superannuation then in their respective possession.
On 24 August 2009 a further offer in writing was made on behalf of the husband. That offer was made on the basis the parties had assets and liabilities of $638,000.00, and that the wife should receive $255,500.00 made up and explained as follows:
…
Practically, it is to be noted that your client has, or has already received the following:
(i) Moneys shortly after separation in the amount of $80,000.00
(ii)Moneys pursuant to consent orders in June, 2009 in the amount of $12,000.00
(iii)Motor vehicle $10,000.00
(iv)Superannuation $21,000.00
(vii)Jewellery $25,000.00
(viii)Home contents $20,000.00
$168,000.00
Accordingly, my client would pay your client a further cash amount of $87,500.00, taking the total to $255,500.00 (40% of net assets). This will of course avoid the cost of three days of hearings. (original emphasis) (Mr Harrison’s affidavit filed 15 December 2010, Annexure G, p 2)
A further offer was made by the husband in writing on 7 June 2010. This offer was made after the proceedings before the Judicial Registrar, and after the husband’s mother had died. That offer was based on the wife receiving a cash adjustment from the husband of $225,000.00 and retaining assets having the following values:
(i) Jewellery in [the wife’s] possession $20,000.00
(ii) Your client’s superannuation $15,000.00
(iii) The motor vehicle in your client’s possession $10,000.00
(iv) Household contents in your client’s possession $20,000.00
$65,000.00
(Mr Harrison’s affidavit filed 15 December 2010, Annexure H, p 1)
The offer did not specify whether the cash adjustment to be made by the husband was exclusive of the sums already received by the wife. The offer purported to give the wife 20 per cent more than she received under the orders of Johnston JR (as his Honour then was). The Judicial Registrar found the wife should receive $246,933.00 which included assets of $59,909.00 in her possession including $33,167.00 retained from the personal services business and a cash adjustment of $187,024.00.
Given the manner in which the offer of 7 June 2010 was made I infer that the cash adjustment to be made to the wife was inclusive of the $33,167.00 which at that time was retained in an account by the wife but subject of an injunction. Thus the true effect of the offer included the wife’s jewellery at $20,000.00 and a cash payment of $225,000.00 which included the $33,167.00 retained by the wife but subject to the injunction. In other words the husband would provide a cash adjustment of $191,833.00.
Pursuant to my orders the wife retained her bank account, superannuation, household contents and car as proposed by the husband and received a cash adjustment of $225,213.00, together with a proportion of the proceeds of the sale of the wedding/engagement ring.
Thus, it may be seen that the cash component of the last offer on behalf of the husband did not differ materially from that which I ordered if the $33,167.00 was included, and if it was not, the offer was substantially identical to the sum which I ordered should be paid to the wife.
It is unnecessary I discuss in any detail the final offer of settlement made by the wife except to note she sought to retain funds of $500,000.00.
The question of the type of conduct which will sound in an order for costs is discussed by the Full Court in Browne & Green. Particular apposite to this application is their Honours discussion at paragraph 50 and 51. Kay, Coleman and Warnick JJ said:
50. Indeed in Harris and Harris (1991) FLC ¶ 92-254; 15 FLR 26 Ellis, Strauss and Lindenmayer JJ went so far as to say (perhaps stating the position at its highest):
“Orders for costs are peculiarly a matter which are within the discretion of the trial judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.”
51. But that immunity is not complete. Although in Nemeth and Nemeth (1987) FLC ¶ 91-844 Evatt CJ, Smithers and Baker JJ said at 76,385:
“The failure of a party to be completely open and forthcoming as to his or her financial position, should always place that party at risk in relation to an order for costs.”
the weight to be given to a failure to make discovery will in each case need to be assessed in the light of the nexus, if any, between the failure and the costs incurred, the substance of the non-disclosure, and of course the other relevant factors in the case.
Later, at paragraph 57, their Honours 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 very important for the Court to give proper 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 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.
I am satisfied that if there had been a full, frank and complete and up to date disclosure by the case guardian then the offers of settlement made, but particularly the offer made on 7 June 2010, would have been determinative of the costs application. But the offers including the offer of 7 June 2010 must be viewed against the background of incomplete financial information provided by the husband, and the costs incurred by the wife to ascertain the true financial position of the husband.
In summary I am satisfied that the wife’s ability to give realistic consideration of the husband’s offers, or offers made on his behalf, must be seen in the context of repeated failure by the husband to provide up to date financial information necessitating the issue of numerous subpoenae on the application of the wife, and an improper, or at the very least, a questionable undertaking as to disclosure. The only evidence which gave some explanation of the disposal of the proceeds of the sale of the personal services came very late in the day from Mr L and was not evidence on which I could rely with confidence. The wife did not have that evidence until the second day of the hearing. In these circumstances I am satisfied the wife’s legal representatives could not properly advise her as to the propriety or otherwise of the offers made.
Conclusions costs of the substantive proceedings
It is tragic that these parties, who have modest assets have been unable to resolve their property matters. I am satisfied if there had been prompt, and complete financial disclosure by the husband the dispute was eminently capable of an early resolution. I am satisfied that did not occur principally because of the tardiness or unwillingness of the husband, and later his case guardian, to ensure a full, frank and complete disclosure of his financial affairs. I also take into account the failure to disclose to the wife, in a timely manner, the details of the husband’s inheritance.
The basis maintained by the wife of her entitlements was however unrealistic given her knowledge of the value of the real property, the proceeds of the personal services business and its liabilities, and the information she obtained by way of subpoena.
In these circumstances I am satisfied the appropriate order is that the husband pay 50 per cent of the wife’s costs of the proceedings as agreed and failing agreement as assessed under Chapter 19 of the rules.
The interlocutory applications
(a) application listed for hearing on 16 July 2007
(b) application listed for hearing on 5 February 2008
(c) application listed for hearing on 9 June 2009
Costs in respect of three interlocutory applications were agitated by the husband before the Judicial Registrar and dismissed by him. (Order 17, Johnston JR’s orders, 28 August 2009). The application listed for hearing on 16 July 2007 was not agitated before the Judicial Registrar but costs were reserved. No application was made by the husband to review the Judicial Registrar’s orders of 13 June 2007.
The three applications, none of which were tendered before me, or relied on in the parties’ outline of case documents, in respect of which the husband sought costs were as follows:
(a)16 July 2007 - The husband’s solicitor asserted this was an application by the husband for the payment of land tax and that costs had been reserved. The husband’s solicitor relied on an affidavit of the husband sworn 4 July 2007. He acknowledged the application had been resolved by the making of consent orders with costs reserved. The husband’s solicitor submitted that the wife should pay all of the husband’s costs up to the date of the application (which was not specified). The wife’s solicitor resisted this claim, but was unable to provide detailed submissions as he did not act for the wife at the relevant time.
(b)5 February 2008 - The husband’s solicitor asserted this was an application by the husband to restrain the wife’s solicitors continuing of act for her. He relied on an affidavit of the husband filed on 28 December, 2007. In that affidavit the husband asserted that the wife’s then solicitors had acted for him in relation to his broking business and for F Business. It was submitted that the wife’s former solicitors filed a Notice of Ceasing to Act the day prior to the listing of the husband’s application. On behalf of the husband his solicitor sought the “full costs of these proceedings”.
(c)9 June 2009 - It was submitted on behalf of the husband that the wife should pay the husband’s costs of an application. It appears the application was filed after the husband was served with two statements of claim. The first statement was a claim for unpaid strata rates, and the second was in respect of unpaid council rates. The husband asserted in his affidavit he did not have funds to pay the levies and rates.
The first application
I am satisfied that the issue of the land tax is not a matter which warrants departure from s 117(1) and there are no relevant justifying circumstances. The husband had the conduct of the land tax negotiations after settlement. While it appears the proceeds of sale of the personal services business were subject of injunctive orders (see paragraph 33 of the reasons for judgment of Johnston JR), the husband remained in control of the broking business, had access to his loan account and occupation of the matrimonial home.The matter was resolved by the making of consent orders.
The second application
My examination of the lengthy correspondence between the wife’s former solicitors and the husband’s solicitor discloses unfortunate allegations and counter allegations about each party’s then solicitor having a conflict of interest. The husband’s solicitor was at pains to point out that the allegations in respect of him related to a former firm not his firm. It is regrettable that the wife’s then solicitors continued for some time to assert they were not subject of a conflict of interest. No personal order for costs was sought against the solicitors. While there is some basis for the husband’s claim for costs in respect of this interlocutory application, I am again satisfied that the circumstances are not such as to warrant a departure from s 117(1). Accordingly each party should pay their own costs of and incidental to this application.
The third application
This application arose by reason of the husband’s failure to ensure that strata levies payable by K Holdings Pty Ltd, as registered proprietor of the former matrimonial home, were paid as and when due. The application also related to outstanding council rates.
It was submitted on behalf of the wife that she did not receive copies of the rate notices and was consequently unaware that there were outstanding levies and rates. The wife’s solicitors letter dated 12 May 2009, while noting the husband had occupation of the matrimonial home, proposed a compromise to the husband’s solicitors, namely, that funds be released from a Bendigo Bank account operated by the husband to meet the levies, and a similar amount be paid to the wife. That compromise was rejected by the husband’s solicitors. However, as noted by Johnston JR, at paragraph 35 of his reasons, ultimately the orders made were that funds be released to pay the strata levy debt and council rates, and the sum of $12,000.00 was released to the wife for her own use. Against this factual background I am again satisfied there are no circumstances which would warrant departure from s 117(1).
I conclude by recording it is regrettable that the two applications for costs by the husband which were found by the Judicial Registrar to be substantially without merit were once again agitated.
I certify that the preceding sixty nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Boland delivered on 28 January 2011.
Associate:
Date: 28 January 2011
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