Alfred and Alfred - [2007] FMCAfam 711

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ALFRED & ALFRED (No.2)

[2007] FMCAfam 711

FAMILY LAW – COSTS – Were the proceedings necessitated by the failure of the party to comply with previous orders – whether either party to the proceedings made an offer in writing to the other party to settle the proceedings and the terms of such offer.

Calderbank v Calderbank [1976] FAM93
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
JEL v DDF no 2 (2001) FLC 93-083
Yunghanns v Yunghanns (2000) FLC 93-029

Applicant:

MS ALFRED

Respondent:

MR ALFRED

File number:

BRM 8622 of 2005

Judgment of:

Burnett FM

Hearing date:

30 July 2007

Delivered at:

Brisbane

Delivered on:

17 September 2007

REPRESENTATION

Solicitors for the Applicant:

Mr S.P. Horgan
Wheldon & Associates

Solicitors for the Respondent:

Mr N.J. White
James White Lawyers

ORDERS

That the Respondent pay the Applicant’s costs of the proceeding to be assessed on a standard basis to 16 October 2006 and thereafter upon an indemnity basis.

IT IS NOTED that publication of this judgment under the pseudonym Alfred & Alfred is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRM 8622 of 2005

MS ALFRED

Applicant

And

MR ALFRED

Respondent

REASONS FOR JUDGMENT

Following the trial of this matter I made various declarations and an order that the Respondent pay to the Applicant a sum of $287,835.63.
I did not make an order for costs and invited the parties to make submissions in respect of an appropriate costs order.
Submissions have been filed by each of the Applicant and Respondent concerning the matter of costs. At the outset it is relevant to note that the Respondent concedes that an order for costs in favour of the Applicant should be made taking into account that earlier offers had been exchanged between the parties. The issue however is whether or not such costs should be assessed on an indemnity basis.
Although on their face the issues at trial were relatively straightforward the transactions underlying the issues in this case were complex. The Respondent owned or had an interest in various properties. The issues alive in the proceedings concerned the interests held by the Respondent in some of those properties and the circumstances of their disposition.
The Applicant also sought an accounting of all matrimonial property and financial resources which picked up a consideration of properties situate at R and a property at G. Those properties had not been the subject of discrete application.
Whilst the Respondent conceded in his response that declarations be made in respect of the A property and the B property as sought in the application no such concessions were made in respect of the R and the G properties despite they being the subject of a notice to admit.
Further despite the concession in the Response that the B property formed part of the matrimonial pool a live issue between the parties concerned contributions. In respect of the A property, although it was conceded that the property formed part of the matrimonial estate the transaction relating to its acquisition was one which warranted examination because of the suspicious circumstances in which the property was acquired. That issue was relevant to questions of assessment of creditability.
There were additionally issues to be examined in respect of the R property and the G property in respect of which there was no admission of beneficial ownership by the Respondent. Concerning those properties the findings were that the R property was held by the Respondent’s son in trust for him and in respect of the G property the finding was that although it was conveyed to the Respondent’s ex-wife who in turn conveyed it to the Respondent’s son giving rise to a presumption of advancement the disposition constituted a premature disposition of matrimonial property and enlivened an entitlement to the Applicant to an interest in the consideration received by the Respondent from his ex-wife for the conveyance.
In addition to arguments concerning the property there were also arguments concerning the disposition of cash by the Respondent. On the whole the Respondent’s evidence was regarded as most unsatisfactory and it was in my view necessary for the Applicant to take issue with the Respondent in respect of all matters which were the subject of debate between the parties at trial.
In terms of the broad orders sought by the respective parties the Applicant sought orders that the property be divided equally between the Applicant and the Respondent and the Respondent sought orders that the property be divided 80/20 in favour of the Respondent. In terms of the orders sought concerning division of property neither the Applicant or Respondent could be said to have been successful.
Following the commencement of the Application correspondence was exchanged between the parties.
Initially by correspondence dated 28 July 2005 the Applicant by her solicitors broadly detailed the property alleged by her to form part of the matrimonial pool. That included in particular the R and G properties which were in dispute. The Applicant also alleged claims in respect of accounts held by the Respondent with the ANZ Bank and Suncorp Bank. In that regard it was noted that there were a number of assets owned by the Respondent which were not held in his name but in the names of other persons including fictitious names.
The Respondent’s response to that correspondence did not address those allegations. The Applicant by her solicitors in turn wrote again on 25 August 2005 noting that there had been no meaningful response to their letter of 12 August and that if proceedings were commenced they would also seek costs.
On 23 December 2005 the Applicant wrote without prejudice that she was prepared to accept “in full and final satisfaction a claim for property settlement…a transfer to her of the residence known as Property B and a sum of $40,000”.
Having regard to the admitted value of that property together with the sum of $40,000 effective settlement was a sum of $290,000[1].
[1] It is to be noted that by the reference to the ultimate judgment that offer exceeded the final determination that the Respondent pay the sum of $287,835.63 by a sum of $2164.37.
By letter dated 16 October 2006 the Applicant’s solicitors forwarded a further offer offering on a without prejudice basis to settle on the payment of “a sum of $165,000 and that each party otherwise retain their own property without any further claim by the other party and that (the Applicant) will vacate the A residence within 28 days of payment”.
As the Applicant had no title to any property save for her personal chattels and a small sum of superannuation the effective value of the offer was $191,307. This sum fell well below the sum ultimately awarded following trial.
By letter dated 23 October 2006 the Respondent rejected the Applicant’s offer. He counter-offered offering a sum of $120,000 in full and final settlement in the same terms as set out in the letter of

16 October 2006
. Even adopting a generous interpretation of that letter and adding to the sum of $120,000 the Applicant’s superannuation that offer fell far short of the final judgment.
The only other relevant factor arising concerning the preparation of trial remained the matter of disclosure. A complaint was made by the Respondent that there had been inadequate disclosure by the Applicant. In broad terms it was alleged by the Respondent that whilst he was in prison the Applicant took possession of various documents which had been at his residence and that because those documents remained in the Applicant’s possession was unable to adequately prepare for trial.
Concerning costs, Section 117 of the Family Law Act provides,
(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 was 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.”
In respect of section 117(2A) matters the Applicant particularly relied upon:

Financial circumstances of each of the parties

The Applicant contended that of a matrimonial pool to the value of $828,387.52 the wife had a direct entitlement to only $16,307. Accordingly it was submitted that notwithstanding the award of $287,835.63 the value of that award would be significantly eroded if she was required to pay her own costs. It was submitted that other considerations aside the Applicant would also have to vacate her then current place of residence and that by reason of the disproportionate holdings even after judgment the Applicant was significantly disadvantaged because of her uncertain employment prospects when compared to the Respondent who continued to enjoy income from his assets.

Conduct of the parties to the proceedings

The Applicant maintained that the Respondent’s conduct in failing to disclose his financial position contributed significantly to the costs incurred in the proceedings. It was submitted that despite the Respondent being ordered to file and serve material in response to the wife’s application the Respondent failed to file any material until his response and financial statement filed on 31 October 2006 with the first substantive affidavit being filed on 15 November 2006. It was submitted that substantial time and considerable costs were incurred by the Applicant gathering evidence as to identification of the matrimonial pool and that in essence she sustained a greater forensic task than that which was presented to the Respondent.
The Respondent largely contended that in this regard there was a failure by the Applicant to make full disclosure of documents which she had in her possession and control until after trial affidavits had been filed. It was contended that the Applicant filed her trial affidavits on 15 November 2006 which exhibited some documents which had never been previously disclosed by her. It was contended that by reason of this inadequate disclosure the husband’s recollection of events was impaired. It was submitted that had proper disclosure been made by the Applicant at an earlier stage the outcome of exchange of offers on 16 and 23 October may have been different.
Concerning those matters I note that the Respondent was for some of the time leading up to trial imprisoned at the [X] Prison. The evidence before the Court at trial however demonstrated that during the course of his imprisonment he expended a considerable sum on legal fees. The complaint that he was unable to effect preparation for the trial because of difficulties in consulting lawyers rings hollow in those circumstances.
Further the complaint by the Respondent that the inadequate disclosure by the wife of documents of his which she had taken possession of was an impediment to his recollection is also a matter which I regard as disingenuous. For reasons which were articulated by me in my decision I did not regard the Respondent as a particularly truthful and forthcoming witness. Whilst no doubt the Respondent’s access to those documents may have assisted him in developing an appreciation of the full extent of the Applicant’s knowledge of his affairs I am not satisfied that the Respondent was broadly unaware of the ambit of information contained within those documents. He would in my view clearly have been aware of the general ambit of that information. In any event despite his knowledge of the Applicant having possession of those documents he made no attempt in a formal sense to seek access to those documents by way of application for orders or otherwise.

Were the proceedings necessitated by the failure of the party to comply with previous orders

The principal contention for the Applicant is that the Respondent’s failure to comply with the orders as to filing of financial statement denied the Applicant the opportunity to make investigations of the husband’s financial circumstances at an earlier time in the proceedings. While that might strictly be the case the framing of the trial orders made on 17 May 2006 would probably have not had any material bearing upon the outcome of that matter even if the orders had been complied with. I do not regard this particular matter has being overly significant in the question of my discretion as to costs.

Any party to the proceedings has been wholly unsuccessful

In her submissions the Applicant contends that limited weight should be given to the orders framed in the application particularly because at the time the application was made the Applicant would have had a very limited knowledge of the matrimonial pool. However by the time her case outline was filed on 8 December 2006 the Applicant’s case had firmed to a claim for 35 per cent of the matrimonial pool or a sum of $200,000 whichever was the greater. As at the commencement of the trial the Respondent contended for orders that the Applicant be awarded a sum of no more than $81,476 representing an 80/20 split of the matrimonial pool. Undoubtedly on any measure the Applicant succeeded in bettering the final orders sought as claimed in the case outline. Equally she successfully resisted the Respondent’s claim in respect of final orders.
In a formal sense the Respondent was on notice as to the final relief sought only from the filing of the case outline on 7 December 2006. The trial commenced on 12 December 2006. On this basis the Applicant could be said to have been successful in respect of the relief sought only from the date alleged in her case outline.

Whether either party to the proceedings made an offer in writing to the other party to settle the proceedings and the terms of such offer

As I have indicated above a series of offers were exchanged between the parties. Materially the Applicant’s offer of 16 October 2006 represented an offer which was not beaten by the Respondent. No offer made by the Respondent came close to the final determination.
On the basis of exchanged offers the Applicant’s position is that the Respondent had available to it an offer to settle on and from 16 October 2006 which was clearly reasonable when measured against the final determination.

Indemnity Costs

In her submissions the Applicant acknowledged that the Court would not be likely to part from the ordinary rule relating to costs between parties being assessed on a party and a party basis. The circumstances justifying any departure should be of an exceptional kind. It was submitted however that in this case the principles identified in Colgate Palmolive Co v Cussons Pty Ltd[2] existed in this matter and justified a departure from the ordinary course and the award of indemnity costs. In Colgate Palmolive Co v Cussons Sheppard J observed at page 233,
“Notwithstanding the fact that it is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought neither to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp – Keng (unreported, Court of Appeal, NSW, Kirby P, Preistley JA, Cripps JA, No 40744/1002, 27 September 1993) and an award of costs on an indemnity basis against a contermnor (eg Megarry V-C in EMI Records (supra)). Other categories of causes are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis:”
[2] 1993 46 FCR 225
The class of circumstances justifying the award of indemnity costs is not closed: see JEL v DDF no 2[3]. In that case the Court affirmed the earlier Full Court decision of Yunghanns v Yunghanns[4] where the Court held,
“It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied some “particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis per Shepherd J in Colgate – Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 223”.
[3] (2001) FLC93 - 083
[4] (2000) FLC 93 - 029
In this case there was an offer from 16 October 2006. It was in all the circumstances reasonable as it represented a willingness on the part of the Applicant to resolve the proceeding for a sum considerably less than that which was ultimately awarded in her favour.
The offers were not couched strictly in terms of the principles in Calderbank v Calderbank[5]. In that case the Court considered the difficulty of noting correspondence “without prejudice” but not continuing to assert that it was without prejudice “save as to costs” (see discussion by Cairns LJ at page 105-106).
[5] [1976] FAM93
In my view there was an appropriate offer available for settlement made on 16 October 2006. The Applicant has been substantially successful in terms of beating the offer she made on that date. It follows in my view that she should be entitled to an award of costs on an indemnity basis from that time.
Given the complexities associated with the conduct of this proceeding in particular the consideration that would have necessarily been given to the documentation because of the difficult forensic task presented to the Applicant I do not consider it appropriate to have regard to standard scales for the purposes of assessing costs.

Rule 21.02(2)(b) Federal Magistrate Court Rules provides that in making an order for costs in a proceeding a Court may set the method by which costs are to be calculated or (b) refer the costs for taxation under Chapter 19 of the Family Law Rules. In my view having regard to the issues in this case and the necessity for appropriate consideration to be given to the work involved in preparation of the matter for trial it is appropriate that costs be assessed in accordance with Chapter 19 of the Family Court Rules.
In all the circumstances having regard to the matters I have identified above and in particular by reason of the exchange of offers and the complexity of issues advanced and investigated at trial it is appropriate that costs be allowed on an indemnity basis from 16 October 2006 and that those costs be the subject of discreet assessment rather than lump sum determination in accordance with the simplified costs assessment procedure available under the Federal Magistrates Court Rules. In that regard I reject the Respondent’s submissions concerning the award for indemnity costs as articulated in their outline of argument.

Orders

I order that the Respondent pay the Applicant’s costs of the proceeding to be assessed on a standard basis to 16 October 2006 and thereafter upon an indemnity basis.

I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Burnett FM

Associate: Bev Schmidt

Date: 17 September 2007