Ackerman and Eastwood
[2013] FCCA 1055
•9 August 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ACKERMAN & EASTWOOD | [2013] FCCA 1055 |
| Catchwords: FAMILY LAW – Costs – property and children proceedings – case fixed for hearing in April 2012 but not reached – case re-fixed in November 2012 – case proceeded to judgement after three day trial – husband made written offer to compromise proceedings in May of 2012 – offer rejected by wife – husband made significant further concession regarding occupation of former family home on morning of second day of hearing – matters to be considered – financial circumstances of the parties – conduct of the parties – offers of settlement. |
| Legislation: Family Law Act 1975, ss.117(1); 117(2); 117(2A) |
| In the marriage of I and I (No.2) 22 Fam LR 557 Pennisi v Pennisi (1997) FLC 92-774 |
| Applicant: | MR ACKERMAN |
| Respondent: | MS EASTWOOD (FORMERLY ACKERMAN) |
| File Number: | ADC 2024 of 2011 |
| Judgment of: | Judge Brown |
| Hearing date: | 25 July 2013 |
| Date of Last Submission: | 25 July 2013 |
| Delivered at: | Adelaide |
| Delivered on: | 9 August 2013 |
REPRESENTATION
| Counsel for the Applicant: | Ms Lewis |
| Solicitors for the Applicant: | Weatherly & Associates |
| Counsel for the Respondent: | Ms Ross |
| Solicitors for the Respondent: | Minney & Associates |
ORDERS
The wife pay the husband’s costs fixed in the sum of $8,324.00 within ninety (90) days of the date of these orders.
All extant applications are otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Ackerman & Eastwood is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 2024 of 2011
| MR ACKERMAN |
Applicant
And
| MS EASTWOOD (FORMERLY ACKERMAN) |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings relate to the issue of costs, following a three day hearing, particularly the relevance of a written offer to compromise the case, made prior to the commencement of the trial in question.
Mr Ackerman is the applicant for costs. The respondent, who resists the application in full, is his former wife, Ms Eastwood. They are the parents of X and Y, aged twelve and nine respectively.
On 20 February 2013, following a three day trial, I determined that the parties’ matrimonial estate, consisting of net assets found to be worth approximately $550,000.00 and superannuation valued at approximately $136,000.00 should be divided 42/58% in the husband’s favour, in respect of the non-superannuation assets, with the superannuation to be divided equally.
So far as final parenting arrangements for X and Y were concerned, there was no dispute between the parties that the presumption of equal shared parental responsibility should be applied.
The dispute between them centred on the division of time the children should spend with each of their parents, particularly on a fortnightly basis, during school terms.
The husband aspired to be as fully involved in the care of the two children as possible. His preference was equal time, but he was open to substantial and significant time. The wife raised issues to do with what she categorised as Mr Ackerman’s coercive and controlling behaviour of her and the children and, as a consequence, wanted the children to live mainly with her.
Ultimately, I decided that the children should live for six nights per fortnight with their father and for the remaining eight nights with their mother. This was the regime, which had been in place, since an earlier consensually reached decision, made on an interim basis, on 6 July 2011.
Mr Ackerman is an (electrician) by occupation. Ms Eastwood has no specialised skills. In the past, she has worked as a (omitted).
In my estimation, both parties are decent, hard working and law abiding citizens. As such, apart from the crisis occasioned by the end of their marriage, they are individuals who are unlikely to come into contact with the judicial system, as litigants.
As I described at some length, in the earlier reasons for judgment,[1] the end of the parties' marriage was emotionally traumatic, for each of them, but particularly the husband. It also precipitated a period of financial crisis for the simple reason that two separated individuals cannot live as cheaply as one family.
[1] See Ackerman & Ackerman [2013] FMCAfam 109
As a consequence, the parties were each ill equipped to bear the considerable expense arising from these proceedings, which were bitterly contested. In Ms Eastwood’s case, she borrowed a significant sum from her mother. Mr Ackerman also borrowed funds.
The husband initially commenced the proceedings on 1 June 2011. As previously indicated, on the first directions hearing of the case, the parties agreed on interim arrangements for the care of X and Y.
They were to live for four consecutive nights with their father, in one week of each fortnight and for two consecutive nights in the other week of each fortnight; and otherwise with their mother. School holidays were to be divided.
Following this consensual but provisional resolution, the issues in dispute centred primarily on Mr Ackerman’s desire to have an equal time parenting regime for the children. In addition, as the litigation proceeded, Ms Eastwood wished to reduce the time the children spent with their father. Her preference would have been for four nights but at the commencement of the trial, she was open to five.
Throughout her affidavit material and at trial, the wife had many criticisms of Mr Ackerman’s personality. She characterised him as a domineering and overly punctilious person, with an obsessive eye for tidiness and detail.
Essentially, it was her case that he was an inappropriate role model for the children, who were more than a little apprehensive of him. She unequivocally characterised herself as the children’s predominant provider of care, during the parties' marriage. It is not open to dispute that she performed this role in a loving and tender fashion.
In emotional terms, what the case was about was the husband’s desire to change his role, following the end of the parties' marriage, from bread winner to a more hands on parenting role. From his perspective, he asserted that he knew he had to change and step up to the plate as a single parent.
In contrast, the wife preferred to stay in the same role she had always been in, namely the children’s main carer and confidant. In many ways, her sense of identity was shaped by this role, which she had discharged in an exemplary fashion.
In this sense, the case represents an archetype for our times, given the prevalence of marital breakdown and the changing roles of men and women in society generally, but particularly within the context of divorce.
For obvious reasons, the period following separation, is inevitably a difficult period of adjustment for the individuals concerned. In this particular case, the parties finally separated late 2010. Their marriage, following a whirlwind romance, was about ten years in duration. There was a period of around two years between separation and the final hearing.
The major reason for the delay was that, regrettably, due to pressure of other business, an earlier trial of the parties’ competing applications, fixed for April 2012, was not reached by the court. As is the case with many busy first instance courts in this country, the Federal Magistrates Court (as it then was) over-lists final hearings. In the Adelaide Registry, the over-listing is in a ratio of 3:1.
The practice of over-listing is a reflection of the fact that many cases settle, often at the doorway to the courtroom. As such, it is not in the public interest that expensive judicial resources should not be fully utilised, notwithstanding the high rate of attrition in cases.
Regrettably, even with the most careful of management, occasions arise when two or sometimes even three of the cases scheduled, for any given day, need a formal adjudication. In such cases, the court is placed in the invidious position of having to prioritise matters. This occurred in the present case and unfortunately the trial scheduled for April of 2012 had to be deferred until November of 2012.
Given the personal subject matter of family law cases, there is an emphasis, in such cases, on the court providing mechanisms to the litigants concerned to enable them to resolve the disputes arising between them consensually and in a dignified and orderly manner.
In addition, it is recognised that the prolongation of disputes between parents can have serious adverse emotional consequences for any children concerned. Court cases encourage parents to emphasise the shortcomings of their former partners. The stresses released by these cases often flow onto children, no matter how hard parents attempt to shield their children from them.
In this particular case, the parties were provided with all the usual mechanisms to resolve the issues in dispute between them. These included a financial mediation conference; a family dispute resolution conference, convened by one of the court’s family consultants; as well as a privately funded family assessment report.
In addition, on the first day of the aborted April final hearing, the parties engaged in extensive negotiations via their respective legal advisors. In the husband’s case, Ms Lewis of counsel. In the wife’s counsel, Ms Ross of counsel. Both of whom are extremely experienced lawyers in the conduct of family law work.
Under the aegis of the Australian Government, through its Family Law Council, “Best Practice Guidelines for Lawyers Doing Family Law Work”[2] have been prepared. The Family Law Section of the Family Law Council of Australia, the oversight body for Family Lawyers in this country, has also had input into the preparation of these guidelines.
[2] Best Practice Guidelines for Lawyers Doing Family Law Work (second edition) prepared by the Family Law Council and Family Law Section of the Family Law Council of Australia published October 2010
These Guidelines indicate that best practice, in family law, is characterised by, amongst other things, the narrowing of the issues in dispute between parties and ensuring that costs are not unreasonably incurred by them. In respect of property matters, lawyers are encouraged to bear in mind, at all times, that it is undesirable for the legal costs involved in any case to be disproportionate to the financial position of the separating couple involved.
In a recent decision, concerning interim financial issues, I wrote as follows:
“It is well recognised that one of the most stressful life events that can ever befall an individual is marital separation followed by divorce proceedings, surpassed as an emotional trauma only by the death of a spouse or other near relative.
In most cases, the implications of marital breakdown are far reaching and multi-faceted, encompassing financial considerations; changes in arrangements for the care of children; as well as obvious significant emotional ones for the parties concerned. These are challenging and life changing events.
There is nothing easy about this process. Individuals, when placed under stress, do not always behave logically, kindly or even necessarily in ways which are objectively in their best interests.”[3]
[3] See Girvan & Girvan [2013] FCCA 667
In my view, it is in this context that the Best Practice Guidelines have one of their primary applications. It is one of the functions of a lawyer, doing family law work, to protect his or her client from the perils and unforseen consequences of litigation. This responsibility also lies with the court, particularly in its application of the principles relating to the conduct of child-related proceedings as delineated in Division 12A of Part VII of the Family Law Act.
In this case, the family assessment report was prepared by Ms N. Her report was released to the parties in late February 2012. She recommended a continuation of the consensual arrangement inaugurated in July of 2011. She wrote as follows:
“It was the view of the Family Consultant that the current parenting arrangements were ideal for the children at present in that it balanced their need to spend quality time in each parents’ care but not too long a period of time out of their mother’s care. Mr Ackerman’s request that his time increase 1 night a fortnight was not supported at present for concern of the impact on X’s emotional wellbeing, however it was hopeful that in the future years the parties would work towards a shared care parenting arrangement for the children.”[4]
[4] See family report of Ms N dated 29 February 2013
Prior to the trial, Mr Ackerman was open to accepting Ms N’s recommendation, although this had not always been the case. At the end of the trial, for reasons provided at length, I elected to adopt Ms N’s recommendation essentially.
In financial terms, the parties’ most significant asset, was their former family home situated at Property D. The agreed value of the property was $355,000.00. It was subject to a modest mortgage of around $10,000.00. Property D was also the parties’ most significant asset in emotional terms. At separation, Mr Ackerman had moved into a smaller investment property, owned by the parties, nearby. However, initially at least, he wished to retain Property D, as part of his overall settlement of property issues.
His application was based on two considerations. Firstly, he believed his retention of the property would augment his proposal for the children to live on a shared care basis, as this would minimise potential disruption to them. Secondly, given her financial position, he did not believe that it was feasible for the wife to buy him out of the property.
For her part, Ms Eastwood also wished to retain the property. It had been her and the children’s home, for many years. As such, it represented an emotional wrench for her to have to leave it. She also believed that such an outcome would be disruptive for X and Y.
On the morning of 28 November 2012, which was the second day of the trial, Ms Lewis announced to the court that her client, Mr Ackerman, no longer sought to retain the Property D property but was content to allow Ms Eastwood to buy him out of it, if she was able to finance such a purchase. In reference to this decision, on Mr Ackerman’s part, I wrote as follows:
“As previously indicated, Mr Ackerman is a skilled (omitted). Currently, he earns a salary of just over $100,000.00 per annum. Ms Ackerman was out of the workforce, for many years, whilst she cared for X and Y. She has work experience in the (omitted) sector. More recently, she has gained employment as a (omitted) with (omitted) and has a part time job as a (omitted). She earns a salary of around $43,000.00 per annum.
On any view, Ms Ackerman must be regarded as a modest income earner. As such, she has a limited capacity to borrow from a bank or other financial institution. She is significantly indebted to her parents, in respect of her legal fees. One of the issues arising in the case concerns the mechanisms available to the wife to purchase Property D and the overall justice and equity of this situation.
Both parties regard Property D as their and the children’s home. Obviously, they cannot both live in it. This difficult issue, suffused with emotion, has intensified the conflict between the parties. During the course of the hearing, Mr Ackerman indicated that he no longer wished to pursue his application to acquire the Property D property outright.
Accordingly, from his perspective, he is now content to allow Ms Ackerman to purchase his interest in the property, if she has access to sufficient funds to do so. However how this outcome is to be achieved remains problematic.”[5]
[5] See Ackerman & Ackerman (supra) at paragraphs 41-44
Mr Ackerman’s decision to renounce his claim on the Property D property has significance in terms of his application for costs. It is his case that, given this significant concession, it was incumbent on Ms Eastwood to give serious consideration to compromising the proceedings overall, on the basis of terms earlier advanced by him. From Ms Eastwood’s perspective, the concession came too late and was inadequate.
During the course of the hearing, I received evidence from Ms Eastwood that the maximum sum she could borrow was likely to be around $190,000.00 and would depend upon her mother providing a guarantee for the sum advanced. Ultimately, I ordered that the wife pay to the husband, the sum of $128,000.00 in order to secure Mr Ackerman’s interest in the Property D property.
In order to achieve this outcome, I ordered that the husband retain the parties’ investment property, where Mr Ackerman was then living, although the property was not perfectly suited to his needs and would incur some capital gains tax on its realisation, which Mr Ackerman would bear. In the reasons for judgment, I categorised Mr Ackerman’s decision to abandon his claim on the Property D property as being a gesture which seemed to be magnanimously motivated.[6]
[6] Ibid at paragraph 390
As matters have ultimately transpired, Ms Eastwood has been able to retain the Property D property. To do this, she has in fact borrowed the sum of $215,000.00 from the (omitted) Bank. This sum is guaranteed by her mother. The sum in excess of $128,000.00 has, in fact, been utilised to repay the moneys advanced by Ms Eastwood’s mother for legal fees.
The current applications
By way of his application filed on 22 March 2013, Mr Ackerman seeks that Ms Eastwood pay his costs arising from the preparation and conduct of the final hearing, which occurred between 27 and 29 November 2012, in an amount calculated to be $16,648.00.
The relevant judgment was delivered by me on 20 February 2013. Pursuant to the applicable rules of court, such an application must be brought within twenty-eight days of any final order being made.[7] Accordingly, Mr Ackerman is technically out of time. In these circumstances, he seeks an extension of time to file his application. This issue was not agitated, by either party, during the cost hearing before me.
[7] Federal Circuit Court Rules, rule 21.02(1)
Pursuant to rule 1.06, the court is invested with a discretion to dispense with compliance of any of its rules, if it considers it is in the interest of justice to do so. In his affidavit, Mr Ackerman deposed that following the delivery of the judgement, he had been very busy with implementing the resulting orders. The aspect of his evidence was not challenged.
In my view, in the circumstances prevailing, particularly the brief delay in bringing the proceedings concerned, it would be contrary to the interests of justice to dismiss Mr Ackerman’s application on what can only be considered a technical basis. The delay, of itself, is not prejudicial to Ms Eastwood.
The wife’s position, as set out in her response filed 16 April 2013, is that the husband’s application should be dismissed and he should pay her costs incurred in opposing the application.
Each party has filed an affidavit in support of his or her position and each was represented by their respective counsel retained for the final hearing. Accordingly, each party’s representative had a high degree of familiarity with the circumstances of the case.
The sum of $16,648.00, sought by Mr Ackerman, is calculated by reference to the family law costs specified in Part 1 of Schedule 1 to the Federal Circuit Court Rules. He seeks the following sums:
·Stage 5; preparation for final hearing of three days, $6,229.00;
·Stage 8; daily hearing fee times three $8,739.00;
In addition, pursuant to the schedule, he is claiming court fees incurred by him pursuant to the Family Law (Fees) Regulation 2012. These fees are the setting down fee and thereafter two daily hearing fees, which total $1,680.00.
Much of the husband’s case, in respect of his application for costs, turns on a letter written by his solicitor to the wife’s solicitor on 8 May 2012. This letter formalised an offer to compromise the proceedings, which arose during the negotiations of April 2012. In the letter, the husband proposed that he retain 57.5% and the wife 42.5% of the parties’ non-superannuation assets and their respective holdings of superannuation be equalised. As indicated above, this proposal was very close to the actual mechanical division achieved by the court.
However, the husband proposed that he retain the Property D property and refinance the loan, relating to it, into his sole name. In addition, pursuant to the offer, the wife was to receive the parties’ cash holdings of approximately $48,000.00 and the larger proportion of the proceeds of sale of the investment property.
In respect of the children’s issues, Mr Ackerman’s solicitor provided an extensive minute, which reflected a continuation of the status quo in respect of the care arrangements for X and Y. The husband’s offer was expressed as being made on a without prejudice basis but with all rights reserved with respect to costs. On 27 June 2012, the wife’s solicitors wrote to the husband’s solicitors indicating that the offer contained in the letter of 8 May 2012 was not accepted.
In her answering affidavit material, Ms Eastwood deposes that Mr Ackerman resiled from his written offer of 57.45/.42.5% and maintained a position of 60/40% in his favour. As I recall, his counsel, Ms Lewis, opened on the basis of 65/35%.
The first day of hearing was taken up with Ms N’s evidence. In the majority of children’s cases, it is my practice to take evidence from the expert first, in the hope that this will assist the parents concerned to reach consensus, prior to commencement of any painful and potentially destructive cross-examination of the parties concerned.
This set the scene for what happened next, in respect of which a transcript has been provided. At 10:12am on 28 November 2012, the second day of the hearing, Ms Lewis announced that Mr Ackerman was no longer seeking to retain the former matrimonial home. She also advised that Mr Ackerman did not see the (omitted) property, as his long term residential home.
In answer to a question from me, Ms Lewis confirmed that the “generic big picture” for Mr Ackerman remained 65/35% in his favour. Ms Lewis also confirmed that her client had refined his proposal, in respect of school holidays, but otherwise the arrangement for the care of X and Y should remain as it was.
This situation led to the following dialogue between me and Ms Ross, particularly in respect of Mr Ackerman’s concession that he was no longer seeking to retain the Property D property;
“HIS HONOUR: Whether that’s a generous concession on his part or not, that will come out in due course. From your client’s point of view it may be an empty gesture because it depends on the sum that’s required that she has to raise, which ultimately may be a matter that falls to me. The only thing I was going to ask you was if that concession had changed the geography to such an extent that there may be some way to control the matter by way of a negotiated outcome because ultimately the law, I think, is quite clear – if to get a just and equitable outcome the property has to be sold, well, it has to be sold. The other side of the coin is that it would be – putting aside how the children’s time is ultimately divided up – it would be another dislocation for these children ‑ ‑ ‑
Ms R: Yes.
HIS HONOUR: ‑ ‑ ‑ to have to accommodate another major change in circumstances.
Ms R: Indeed, your Honour, yes.
HIS HONOUR: I say this because, whatever the parties differences, and they are many – and I know that the emotional topography of what the parties say about each other, but there’s also other evidence that the parties are they love their children, they’re well motivated, they put their children’s interests before their own, and for the children to have to cope with leaving their home, that’s an added burden on children who are likely to be somewhat stressed because their parents are separated. Putting aside whose fault it was or if it was anybody’s fault, there’s lie the problem, and one issue perhaps becomes more sharply defined, but is there any scope to talk about that between the parties? There are things in one sense – I need to know how much your client can borrow.”[8]
[8] See transcript of 28 November 2012 at page 4
In reply, Ms Ross conceded that Mr Ackerman had made a helpful gesture, which might have shifted the climate or the topography between the parties. She did however indicate her view that issues to do with the children and the property were significantly tied together. In this context, I said as follows:
“HIS HONOUR: But it seems unlikely that, and on both parties’ cases, that one of them will be in a position where he or she has the predominant care of these two children, and neither party, I think, seeks it. We’re talking about dividing the fortnight with a scalpel rather than a cleaver, and there are pros – and perhaps the metaphor is not a particularly good one.”[9]
[9] Ibid at page 5
Thereafter, Ms Ross indicated that she had had a brief discussion with her client about these issues and what had arisen from the cross-examination of Ms N. I asked Ms Ross if she wanted more time to conclude these discussions. When Ms Ross answered affirmatively, the proceedings were adjourned.
When the case resumed, approximately fifteen minutes later, it was apparent to me that there was no prospect of the matter being concluded consensually. Accordingly, the case proceeded to judgment.
Against this background, it is the husband’s position that he made an offer to resolve the proceedings, in his letter of May 2012, which was essentially in line with what the court determined was an appropriate outcome. Accordingly, it is his case that the three day hearing was unnecessary and arose only as a consequence of the wife’s unreasonable rejection of his offer.
For her part, Ms Eastwood would characterise Mr Ackerman’s written offer as being an essentially empty gesture, as it was predicated on the basis that she would have to vacate the Property D property, which he must have known was of central importance to her and the retention of which was the central theme of her case.
In answer to this criticism, Mr Ackerman points to the concession made by him publically on 28 November 2012, which led to the court’s tacit invitation to Ms Ross and Ms Eastwood to discuss matters further to see if there was scope for a negotiated outcome, in the light of this concession.
The normal rule in civil proceedings is that costs follow the event. Essentially the unsuccessful party pays the costs of the party who has succeeded. This is not the position in family law proceedings. Rather, the starting point is that each party should bear his or her own costs.
The rationale for this rule is that the subject matter of family law proceedings is intensely private, dealing as it does with arrangements for the care of children and the division of property. Necessarily such issues precipitate strong emotions in the parties concerned. In addition, the law pertaining to such decisions is discretionary, based upon the court’s assessment of very many factors.
Accordingly what will be the ultimate outcome of family law proceedings may be difficult to predict with certainty. Inevitably, in such circumstances, the parties concerned will each be able to present valid and understandable reasons as to why they have proceeded with an application to court, including pressing on to judgement.
In children’s cases, these reasons invariably relate to the love and concern held in respect of the child or children concerned; in property cases, to the financial moment of the decision concerned, which may arise after many years of personal endeavour and effort to secure the property sought to be divided by court order.
Essentially the parties concerned are each able to present valid proposals as to how a difficult and controversial situation should be resolved and the strong feelings inevitably created by the situation may stand in the way of easy compromise. Considerations such as this make it potentially unjust for there to be any rule that costs should routinely be awarded to a successful party.
Ms Eastwood points to considerations of this type, in support of her contention that it would not be just to award costs against her. She presents as an emotionally vulnerable person, who found these proceedings to be inordinately taxing and emotionally draining. In those circumstances, it was extremely difficult for her to bring a cold blooded forensic attitude to the case.
The legal principles applicable
Section 117(1), abolishes, for the purposes of Family Law Act proceedings the general rule that in civil proceedings costs follow the event. Section 117(2) then provides the court with a general discretion to make costs orders if it is of the opinion that there are circumstances that justify it in so doing. The court may make such order for costs as it “considers just”.
Section 117(2)(A) sets out the matters that the court shall have regard to in exercising this discretion. They include the following: the financial circumstances of the parties concerned; the receipt of legal aid by the parties; the conduct of the parties to the proceedings; whether the proceedings were necessitated by the failure of a party to comply with previous court orders; whether one of the parties to the proceedings have been wholly unsuccessful in them; any offers to settle the proceedings; and any other relevant matter.
The court has a wide discretion as to the calculation of costs. Pursuant to Rule 21.02(2) of the Federal Circuit Court Rules:
“In making an order for costs in a proceeding the Court may:
(a) set the amount of costs; or
(b) set the method by which the costs be calculated; or
(c)refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d)set a time for payment of costs which may be before the proceedings is concluded.”
However, pursuant to Rule 21.10:
“Unless the Court otherwise orders a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Parts 1 and 2 of Schedule 1 and
(b) disbursements properly incurred.”
The discretion in respect of costs placed in the court, pursuant to section 117, is a wide one, which must be exercised having regard to the matters set out in section 117(2A) so far as they are relevant. In the case of In the marriage of I and I (No.2)[10] the Full Court said as follows:
“Section 117 confers upon the court a broad discretion in relation to costs. That discretion is one which the Court should not seek to fetter. As was pointed out by the High Court in Penfold v Penfold:[11]
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 subsection is not paramount to s 117(2). As subs (1) is expressed to be subject to subs (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.
Subsection (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.”
It is now appropriate to consider whether there are any such justifying circumstances present in this case by reference to the specific criteria as set out in section 117(2A).
Consideration of the matters arising under section 117(2A)
[10] In the Marriage of I and I (No.2) 22 Fam LR 557 at 558
[11] Penfold v Penfold (1980) 5 Fam LR 517 at 582;
a)The financial circumstances of the parties
Mr Ackerman is an (omitted). He earns $100,000.00 per annum. His employment is secure. At trial, the evidence elicited from her, indicated that Ms Eastwood earned approximately $40,000.00 per annum, from two part-time jobs. As previously indicated, she has no special employment skills.
More recently, she has deposed that her net weekly income, from her two jobs, is $666.00. In addition, she receives some child support from Mr Ackerman and tax benefits A & B.
At present, her most significant expense is her recurrent mortgage payment to the (omitted) Bank of $325.00 per week. On her calculations, her recurrent level of necessary expenditure, exceeds her weekly income. Accordingly, on any view, her financial circumstances are straitened.
Against this background, Ms Eastwood submits that she has no capacity to pay any component of Mr Ackerman’s costs and to make an order to this effect would necessarily result in her having to sell the Property D property, which would be grossly unfair to her.
b) Legal Aid
The husband was not in receipt of legal aid. The wife borrowed significant moneys to fund her litigation. This does not appear to be a relevant criterion.
c) Conduct of the parties
This specific sub-section directs the court to have regard to the conduct of the parties in respect of the management of the proceedings generally. In this regard, I am not critical of how either party conducted his or her case.
That is not to say that the proceedings were not emotionally gruelling for all concerned. Both parties were noticeably affected by the proceedings. However, the mechanics of the case proceeded without incident. Documents were exchanged as directed and valuations agreed.
It is also clear to me that the parties attempted to negotiate with one another in good faith. However, the case remained an emotionally fraught one, from both parties’ points of view. Both Mr Ackerman and Ms Eastwood considered that they had much at stake in the case, as indeed they did. Necessarily, this made the process of negotiations difficult and a ready resolution hard to achieve.
The parties were each entitled to seek an adjudication of their competing applications from the court. Necessarily, there must be some cases, which are so hedged with difficulty and controversy, that a court decision is required.
However, the efficient administration of justice, particularly in family law matters, relies on the parties concerned and their legal representatives, making every attempt to resolve the matters in dispute between them. This is particularly so, where the costs of the litigation involved grow to the point where they are out of proportion to the magnitude of the issues involved.
In this case, the pool of property was comparatively modest, when the extent of the parties’ respective exposure to legal costs is considered. In addition, as I observed to Ms Ross, on the morning of 28 November 2012, this was not a case where one parent was to be significantly excluded from the lives of the children concerned.
Rather, it was a case where the time X and Y were to spend with their mother and father respectively was to be divided with a scalpel. It was a case where the permutations of time varied between 10/4 and 8/6 days per fortnight.
In these circumstances, it seems to me that it behoved Ms Eastwood to give very careful consideration to the written offer made by Mr Ackerman’s solicitors, particularly in the light of the concession made formally on 28 November 2012. However, I acknowledge that this concession came late and prior to it, the issue of who would retain Property D was of paramount importance to Ms Eastwood.
d) Failure to comply with previous orders
This is not a relevant consideration in this matter.
e) Party wholly unsuccessful
As I have already indicated, I accept that the subject matter of this case, both in respect of its property component and the portion which related to care arrangements for X and Y, was of the utmost importance to each of the parties. I accept that they did not come to court lightly and would have preferred to avoid proceedings, if at all possible.
In this context, it is fatuous to consider the case in terms of who has won and who has lost it. Rather, it would seem to me that the matter was ultimately resolved, by the court, within the broad parameters of what each would have accepted as a fair and reasonable outcome. The tragedy of this matter is that, although it was an emotionally difficult and finely balanced case, it was also a readily settleable one.
At this juncture, I cannot throw the runes or look into a crystal ball and determine why the case did not settle. However, the fact that it did not, would appear to be as a consequence of a combination of the parties’ respective personalities and overall circumstances. It can only be conjecture, on my part, to consider whether, if Mr Ackerman’s concession about Property D had been made earlier, particularly in the context of the May letter, it would have resulted in a consensual resolution of the case.
f) Offers to settle
This, along with the respective financial circumstances of the parties, constitutes the most important consideration in this case. The import of section 117(2A)(f) is to ensure that, when offers to settle are made, they are seriously considered by the other party concerned.
Litigation is expensive and for that reason is not to be embarked upon lightly. Accordingly, courts such as this one, should encourage the parties to litigation to seek a compromise of their proceedings, whenever possible, and should discourage a party, when appropriate, from cavalierly disregarding any reasonable offers to settle.
Generally speaking, negotiations between the parties and/or their legal advisors to compromise proceedings under section 79 are privileged.[12] However section 117(2A)(f) authorises the court to consider “an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such order.”
[12] See Steel & Steel (1992) FLC 92-306
Accordingly, the section recognises the procedure known as the Calderbank letter or offer. This procedure is described in Cross on Evidence as follows:
“This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but is now recognised to be of general application. The consequence of marking an offer “without prejudice save as to costs” is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties – they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.”[13]
[13] Cross on Evidence (1996 Australian Edition) at paragraph 25360
The letter from Mr Ackerman’s solicitors, of 8 May 2012, contains the following paragraph:
“This offer is made on a without prejudice basis. All rights reserved with respect to costs.”
Accordingly, in my view, the letter is clearly relevant to the determination of the husband’s application for costs. It was intended to put the wife and her advisors on notice that there were considerable perils for Ms Eastwood in pursuing the litigation, in the light of Mr Ackerman’s offer to settle the matter.
In my view, the husband’s offer had been closely calibrated on the basis of the evidence and advice that was then available to him. The only lacuna in respect of the offer concerned the Property D property. Apart from this issue, the outcome advocated by Mr Ackerman in his letter, was subsequently vindicated by the order made after trial.
It is also highly significant that the offer was made some five months prior to the date the trial was scheduled to recommence. As such, it cannot be considered to be a piece of last minute brinkmanship. Its only purpose can be to act as a serious incentive to avoid the litigation, if possible, and the costs associated with it.
The Best Practice Guideline, to which reference has already been made, reinforce that practitioners should ensure that their clients understand the ramifications of receiving both “without prejudice save as to costs” offers and more formal offers of settlement under section 117C.[14]
[14] see Best Practice Guidelines (supra) at Part 3 Costs Guideline 2.4
The fact of the letter cannot, of itself, be determinative of the husband’s application for costs. However, in my view, in all the circumstances of this case, it is a matter to which significant weight must be given. This is particularly so given the small extent of the property pool and the fact that there were no great disputes between the parties regarding the value of the significant items within it.
In addition, the husband indicated a willingness to resolve the children’s aspect of the case, in the manner recommended by the expert, many months prior to the trial. As matters transpired, the court ultimately accepted Ms N recommendation.
Accordingly, Mr Ackerman’s offer must be regarded as a reasonable one. This is not a case where there was a gross discrepancy between either of the party’s knowledge of their financial situation or their financial resources to litigate. They both faced the same perils and pitfalls of litigation from a relatively equal financial position – that of ordinary citizens without special capacity to fund litigation.
It makes no sense if parties are left free to litigate in the face of such offers and so incur punitive costs for the other party involved, without the prospect of facing some penalty in the form of costs.
In Pennisi v Pennisi[15] the Full Court of the Family Court said as follows:
“…it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror… We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded…
The plain words [of section 117(2A)(f)] do not limit a Court’s attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the Act carry the same consequences as payment into Court in common law matters.
We do however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight should be given to this factor in considering the question of costs. The principle must not, however, be rigidly applied. Offers must be seen within the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that if would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.”
[15] Pennisi v Pennisi (1997) FLC 92-774 at p 84,547
In this case, Mr Ackerman’s written offer to settle was very close to the amount ultimately awarded to the wife. The exception being the issue of the retention or otherwise of the Property D property, which I accept was a very significant area of contention for both parties. As such, it was likely to represent a significant barrier to Ms Eastwood being able to settle the case in the terms proposed by Mr Ackerman in May of 2012.
When Mr Ackerman made his concession, regarding the property, on 28 November 2012, Ms Eastwood’s emotional situation can perhaps be compared to an aircraft carrier proceeding at full speed in the open ocean. Such vessels need much time and space to either turn around or slow down. On 28 November, Ms Eastwood was in the grip of the litigation.
I mean Ms Eastwood no disrespect, but she is not a person with sufficient flexibility of spirit to be able to make a momentous decision quickly. She is not naturally a decisive person. However, Ms Eastwood was not alone or without resources on 28 November. She was represented by counsel and the earlier offer had been on the table for a significant period of time.
The children’s issues are in a different category. Mr Ackerman abandoned his aspiration to shared care at a much earlier time. He paid heed to the recommendations of Ms N. Ms Eastwood did not. She relied on her characterisation of Mr Ackerman as a coercive and controlling person as the basis of her application to reduce the children’s time with their father. Ultimately I did not accept Ms Eastwood’s categorisation of Mr Ackerman nor the legal consequences said to follow from it.
In my view, notwithstanding the natural sympathy the court is likely to feel for Ms Eastwood, as a sensitive person out of her comfort zone in these proceedings, there must be some financial consequences for her of not settling the proceedings earlier, particularly on 28 November.
Conclusions
At the end of the day, it is the responsibility of the court to balance the various matters set out in section 117(2) to arrive at a result that it considers just. The difficulty in this case is that the parties embarked on litigation, which has proven to be ruinously expensive for them both, when neither had recourse to ample funds to finance such litigation without occasioning prejudice to their respective future financial security. This is particularly so in the case of the wife.
Neither party was ever going “to scoop the pool” in respect of the ultimate judgement of the court. In that sense proceeding with the litigation to judgement posed a threat to them both. Both parties should have had a vested interested in reaching some form of accommodation with the other. Despite the best intentions expressed in such documents as the Best Practice Guideline the system has failed the parties.
The husband’s closely calibrated offer to settle the proceedings, particularly in respect of the children’s issues, which was in line with the recommendations of the family report writer, dictate that the wife should pay the husband’s costs arising from the trial. The question is how that amount should be calculated to achieve a just outcome in the light of the various considerations arising under section 117(2A) as I have summarised them.
Taking into account the wife’s constrained financial circumstances; the emotional context of the proceedings generally; and the fact that the concession regarding Property D was made during the hearing itself and this issue was of the upmost significance to Ms Eastwood; I have come to the view that I should discount the sum of costs sought by Mr Ackerman by 50%.
Accordingly, I propose making an order that the wife pay the husband’s costs fixed in the sum of $8,324.00. I will allow her ninety days to pay the sum fixed.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and sixteen (116) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 9 August 2013
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