Bailey and Bailey (No 3)
[2018] FamCA 857
•24 October 2018
FAMILY COURT OF AUSTRALIA
| BAILEY & BAILEY (NO 3) | [2018] FamCA 857 |
| FAMILY LAW – COSTS – Application by husband seeking an order for costs on a party/party basis – wife did not engage in the settlement process and rejected an offer which would have left her in a better financial position had it have been accepted – Orders made that the wife pay a proportion of the husband’s costs on a party/party basis. |
| Family Law Act 1975 (Cth) s 117 |
| Cachia v Hanes (1994) 179 CLR 403 Catlin & Catlin [2018] FamCA 235 Lenardi & Lenardi (No. 2) [2011] FamCA 604 |
| APPLICANT: | Mr Bailey |
| RESPONDENT: | Ms Bailey |
| FILE NUMBER: | HBC | 958 | of | 2016 |
| DATE DELIVERED: | 24 October 2018 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Hobart - Chambers |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 7 September 2018 by written submissions |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Blissenden Lawyers |
| SOLICITOR FOR THE APPLICANT: | Mr R Blissenden |
| COUNSEL FOR THE RESPONDENT: | Dobson Mitchell & Allport |
| SOLICITOR FOR THE RESPONDENT: | Mr M Trezise |
Orders
The wife pay to the husband his partial legal costs in the sum of $30,000.
Such costs to be paid as follows:-
(a) the first instalment of $10,000 on or before 1 November 2019;
(b) the second instalment of $10,000 on or before 1 November 2020; and
(c) the third and final instalment of $10,000 on or before 1 November 2021.
All extant applications are dismissed.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) it was reasonable to engage counsel to attend.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bailey & Bailey (No. 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth)
.
| FAMILY COURT OF AUSTRALIA AT HOBART |
FILE NUMBER: HBC 958 of 2016
| Mr Bailey |
Applicant
And
| Ms Bailey |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
Mr Bailey (‘the husband’) and Ms Bailey (‘the wife’) were engaged in property proceedings in this Court. Those proceedings were heard in late January 2018 and reasons were published in May 2018.
It was a complex property matter involving consideration of pastoral properties upon which the husband conducted his pastoral business. These properties are held in a trust.
After final orders were made the husband filed an application seeking costs in relation to the substantive property application filed by him and this costs application. That application was opposed.
Shortly after that application was filed the wife caused a response to be filed opposing any costs order. Directions were made in the context of a different matter arising out of the property orders, and those directions provided for submissions to be filed in this costs application.
BACKGROUND
I repeat the background that was set out in the substantive reasons for judgment being paragraphs 8 to 29 as follows:-
8. The husband is aged about 54 and has been a farmer all of his life. He operates a farming business on a property called R (‘the R Property’). He is in good health. The evidence is, and is not challenged, that the husband has a modest income and I have had regard to the details of that income.
9. The husband has been married three times and has two children from his former wife: K aged 17 and E aged 14. These children primarily live with their mother and spend time with the husband.
10. The husband has re-partnered and presently lives in a de facto relationship with Ms L, aged 46. That relationship commenced in May 2017. Ms L has the care of her daughters aged 16 and 10 who live with her and the husband in the house on the R Property. These children do not have contact with their father who is assessed to pay $500 per month in child support.
11. Ms L is not engaged in paid employment, but provides significant assistance to the husband in terms of his operation of the farm.
12. The wife is aged 35. She has the care of the three children of previous relationships namely her son H aged 14, daughters D aged 10 and J aged 7. The wife is in good health and is engaged in the full time care of her three children.
13. There are no children of the marriage between the husband and the wife.
14. The wife is in receipt of a carer’s allowance. During the marriage she undertook study towards a degree and on completion of that course she has undertaken some unpaid work and private work. The wife asserts that she has been unable to find employment in that field. In addition it is likely that she undertakes some work in another industry.
15. The husband and wife commenced living together in February 2012 at the N Property and subsequently married in 2013. The parties separated on 7 September 2015 after having been in a relationship for about three years and seven months. Their marriage was dissolved by a divorce order made in 2017.
16. During the course of their relationship the parties moved from the N Property to a residence on the R Property in June 2013.
17. In August 2013 the wife purchased a property at U Street, Town P (‘the P Property’) which had been owned by her father. I accept the evidence of the husband that the total cost of acquiring that property was some $145,965 of which $5,966 was provided by the wife and the balance of about $140,000 was provided by the husband, drawn against his S Bank line of credit.
18. The P Property is owned by the wife and the liability arising from its purchase is included as part of the husband’s liability with regard to his line of credit with S Bank, which as at 31 December 2017 stood at $1,111,550.
19. The husband’s business has been paying the interest on that loan since its acquisition and continues to do so. He arranged for the wife to pay rates and insurance; the wife’s evidence is that this ended in 2016. The situation is not clear. I have assumed that the rates and insurance continue to be paid by the wife.
20. The P Property was and seemingly remains tenanted. For the period between August 2013 and December 2013 the rent was paid to the S Bank line of credit. Since that time it has been paid to the wife. The P Property now has a value of $185,000 which is a net increase in value of about $39,000.
21. In December 2013 the husband and wife agreed that the rent paid by the tenant of about $200 per week for this property be paid to the wife and that the husband would otherwise pay housekeeping bills. The husband asserts, and I accept, that the wife said that she would be responsible for the payment of rates and insurance on the P Property. In terms of the payment of the loan on the P Property, I have had regard to that capacity of the husband in terms of both a property adjustment and the wife’s maintenance application.
22. In 2013 the wife wished to move to Hobart for job opportunities and for the education of her children. The wife found a property at Suburb T (‘the T Property’) and the husband and wife purchased that property. The purchase price was $445,000 plus stamp duty and other expenses. It now has an agreed value of $515,000, being an increase in value of about $70,000. That property was funded by way of a loan through the Q Bank.
23. Since separation the loan repayments in respect of the T Property have been met by the husband, together with council rates and other expenses. I have had regard to his in terms the husband’s earning capacity and in respect of the wife’s maintenance application. After the T Property was acquired, the husband, the wife and her three children moved to that home and the husband’s two children, from time to time, spent some time at that home.
24. Towards the end of the relationship I accept that the husband spent more time on the R property than at the T Property. I accept the evidence of the husband that he has paid some fees for the wife’s son to attend a private school in Hobart and has paid some school fees in relation to one of the wife’s daughters attending a private school.
25. I accept that during cohabitation the husband made contributions as set out in paragraph 102 of his trial affidavit, including the purchase of Motor vehicle 1 for the wife at a cost of $32,000 and, a caravan, a horse and an expensive engagement ring.
26. I also accept that during the course of the relationship the husband has effectively paid the mortgage repayments in respect of both the T and P properties, paid health insurance for the wife and her children at least until April 2016, paid water rates and gas accounts at the T Property up to 2016 and some Paypal expenditure. I accept the husband’s evidence in that regard as set out in his trial affidavit.
27. The husband also asserts that he paid significant monies in relation to upgrading the home at the R Property for the benefit of the wife. Much of those have remained in respect of that property which the husband is entitled to occupy, at least into the medium term future.
28. I accept that there was contribution by the wife’s father and brother in terms of the reduced costs of painting and that there was some new furniture, whitegoods and the like also purchased. Some of those possessions remain with the wife, some of them remain with the husband.
29. After the parties separated the husband commenced property proceedings in November 2016.
In these reasons any statement of fact is to be regarded as a finding of fact unless the contrary is clear from the context.
What then happened was that the husband filed the application in a case seeking costs by on 5 June 2018 together with a supporting affidavit by the husband’s solicitors of the same day.
The wife filed a response to the costs application on 17 July 2018 seeking dismissal of the husband’s costs application.
There was a further dispute between the parties regarding settlement of the jointly-owned Suburb T property, which was resolved by determination made by this Court on 19 July 2018 and which does not feature in any meaningful way in this costs application.
Each of the parties provided written submissions in relation to costs. The husband relied upon a Case Summary and Outline of his Application for Costs filed 14 August 2018 together with his brief submissions in reply filed 6 September 2018.
The wife relied upon her Submissions in relation to Costs filed 31 August 2018.
THE EVIDENCE
The husband relied upon the following documents:-
·his Application in a Case filed 5 June 2018;
·an Affidavit of his solicitor filed 5 June 2018;
·the wife’s Response to substantive application filed 21 February 2017;
·the wife’s Case Outline filed 24 January 2018; and,
·Exhibit E13, being a statement by the wife’s showing that her costs totalled about $30,000.
The wife relied upon the following documents:-
· her Response to an Application in a Case filed 17 July 2018;
· her Financial Statement filed 10 January 2018;
· Exhibit W5 to her affidavit of 11 July 2018, being a report of Dr GG, a Paediatrician, in relation to the health issues in respect of a child of the wife. I have had regard to that material; and
· Exhibit 13 in the substantive proceedings.
Whilst not raised by the parties directly, it was clear in the submissions that the Court ought to have regard to the final judgment delivered 9 May 2018. I have had regard to that material.
THE LAW RELATING TO COSTS
This costs application was considered and determined under the provisions of s 117 of the Family Law Act 1975 (Cth) (‘the Act’).
There are two areas to which I need to address the law. The first is in relation to whether a costs order ought to be made at all, and the second is in relation to whether it ought to be on an indemnity basis.
The power to make costs orders are set out in s 117 of the Act, which relevantly provides:-
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 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), (4A) 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 Penfold v Penfold (1980) FLC 90-800 the majority of the High Court expressed the general rule that s 117(1) is not paramount to s 117(2) of the Act. A court must make a finding that there are circumstances justifying the making of a costs order before proceeding to make the orders.
There is no guidance in the legislation between the two sub sections nor any additional special onus on the applicant for an order as to costs.
It is necessary to consider the facts in the light of the provisions set out in s 117(2A) of the Act. There is nowhere in s 117(2A) that says any one factor provides a hierarchy in relation to the other factors. One factor may be enough. As such the Court has a broad discretion in determining costs.
It is of value to repeat what I have said in earlier judgments that the Court needs to consider the difference between the various types of unquantified costs orders available under the Act. There are many variations of types of costs orders, but they generally fall into three types:-
a)Party and party costs - which are calculated having regard to the schedule of costs under the Family Law Rules 2004 (Cth);
b)Lawyer and client costs – these are essentially indemnity costs, with the onus upon the costs applicant to satisfy the taxing authority that such costs are on balance fair, reasonable and proportionate; and
c)Indemnity costs - these are essentially lawyer and client costs, with the onus upon the costs respondent to satisfy the taxing authority that such costs are on balance not fair and reasonable and not on balance proportionate, that is the reversal of the onus of proof.
It should be borne in mind that costs orders are restorative and not punitive, and costs cannot exceed the amount actually incurred. They are an indemnity or partial indemnity. In Cachia v Hanes (1994) 179 CLR 403 the plurality of the Court, comprising Mason CJ, Brennan, Deane, Dawson and McHugh JJ observed:-
Whilst the restricted basis upon which party and party costs are awarded may be debated as a matter of policy, it is to be borne in mind that party and party costs have never been regarded as a total indemnity to a successful litigant for costs incurred, let alone total recompense for work done and time lost. Putting to one side the question posed by the relatively rare exception of a solicitor acting in person, there is no inequality involved: all litigants are treated in the same manner. And if only litigants in person were recompensed for lost time and trouble, there would be real inequality between litigants in person and litigants who were represented, many of whom would have suffered considerable loss of time and trouble in addition to incurring professional costs. The partial indemnity which the law allows represents a compromise between the absence of any provision for costs (which prevails as a matter of policy in some jurisdictions) and full recompense. In these days of burgeoning costs, the risk of which is a real disincentive to litigation, the proper compromise is a matter of both difficulty and concern.
I accept the submissions on behalf of the husband, which is in any event conceded by the wife, that the discretion as to costs is broad. I also accept the principals referred to in respect of impecuniosity in Nada & Nettle (Costs) (2014) FLC 93-612 and Lenova & Lenova (Costs) [2011] FamCA 141 as to the impecuniosity of one party or the other. I also adopt the observations of Berman J in Catlin & Catlin [2018] FamCA 235 at paragraphs 37 to 38 giving a broader definition of ‘wholly unsuccessful’:-
37.In Penfold & Penfold (1980) FLC 90-800 consideration was given by the Full Court to the extent to which an applicant had been substantially successful in the relief sought and whether that should be a factor in determining an order for costs. The majority of the Full Court said at 75,054:-
… True it is that the appellant obtained only some of the orders which she sought. However, it appears that she would have obtained other orders, those relating to the enrolment of the children as boarders in educational institutions, but for the circumstance that after the hearing before the vacation judge and immediately before the hearing before Allen C.J. in F.L.D. the respondent agreed to the arrangements proposed. …
38.I consider that for a finding to be made that the husband was “wholly unsuccessful” does not require the wife to establish that no part of the husband’s claim for a set off was successful.
SECTION 117 COSTS CONSIDERATIONS
(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
The husband asserted that his financial circumstances are effectively negative $421,159. I accept that this is the case, although the husband has a financial resource in terms of the pastoral property which he leases.
I also accept that the husband spent about $97,479 in these proceedings and that such monies were paid from his financial resource and sale of shares.
The husband has a good earning capacity although this is subject to the vagaries of weather and farming life.
The wife asserts that the husband was and will remain in a vastly superior financial circumstance to her. I in part accept that in terms of his ability to draw money against the loan up to $1.4 million dollars.
As to the wife I accept that she is in receipt of a carer’s allowance and has three young children in her care including her daughter who has special needs and I have had regard to the medical report in that respect.
I have had regard to her financial circumstances as set out in her statement of financial circumstances filed 13 January 2018 for these proceedings. I accept the wife is to receive funds from the sale of the Town P property and further has received other funds when she took ownership of the Suburb T property.
I accept that the wife has limited capital and limited income.
(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;
Neither party is in receipt of legal aid.
(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;
The husband asserted that there could be no criticism of his conduct in these proceedings and I accept that assertion.
It is a factor that the wife failed to engage in any attempt to resolve the issue of property settlement and I have had regard to the correspondence between the husband’s solicitors suggesting a negotiation and the wife’s approach to that sensible suggestion.
The letter to the husband in reply to that solicitor’s letter was aggressive, insulting and in some ways threatening. It is important for parties to have meaningful discussions about resolving disputes before proceedings commence and during the course of proceedings.
These parties between them expended about $130,000 in legal costs which neither could afford, and in a circumstance of a short marriage and no children where a solution ought to have been found.
The wife’s approach in rejecting an invitation to sensible and considered discussion is a significant feature to which I have had regard.
Furthermore, the wife raised a Kennon[1] claim late the proceedings. I accept the submissions, but the wife failed to provide any reliable evidence in respect of that claim and I note my findings that the wife’s evidence in that respect was either exaggerated or fabricated.
[1] Kennon & Kennon (1997) FLC 92-757.
Parties have an obligation to look for solutions rather than to conflict.
Parties have an obligation that if they make a claim, particularly a serious claim such as a Kennon claim, it ought to be based upon reliable evidence. This was not the case in these proceedings. As such, this is a factor in terms of the question of costs.
The husband asserted that he was put to the expense of making extensive and relevant disclosure in regard to the trust. It was reasonable for the wife to seek such disclosure, particularly given the type of trust and the history of trust as this case would have been different had the trust property been deemed the property of the husband. I do not accept the husband’s solicitors’ approach in relation to her enquiries and her argument in respect of the trust.
(d)Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
Neither party made submissions in respect of that provision.
(e)Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
I have considered the detailed submissions of the husband and the wife in this respect. I am not satisfied that the wife was wholly unsuccessful even with the broader view outlined by Collier J in Lenardi & Lenardi (No. 2) [2011] FamCA 604, where he said:-
29.Mr Campton further asserted that the husband was successful in that a number of findings that were made were contrary to the interests of the wife or critical of her. I am satisfied that “wholly unsuccessful” as it appears in subsection (e) refers to success as to the ultimate outcome of the proceedings. Even allowing that findings of the kind asserted by Mr Campton were made against the wife (and they were), I am satisfied that to have such a finding made against the other party is not to demonstrate that the party against whom the finding has been made has been wholly unsuccessful within the meaning of the subsection as I understand it.
30.“Wholly unsuccessful” is difficult to define. However, to my mind, what it means is that a party has completely failed to attain what he or she sought by way of substantive relief.
(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
The husband made an offer to the wife on 22 December 2013 which, if accepted, would have had the wife receive about $200,000 plus other items making a total of $232,650.
I am satisfied on the evidence before me and on the submissions that the offer was far greater than that amount which the wife received pursuant to the determination of the Court.
(g)Such other matters as the court considers relevant
I have considered all of the factors separately and jointly. I am very conscious of the wife’s difficult financial circumstances, but I am also concerned that litigation like this ought not be conducted in an aggressive way and that the parties have an obligation to enter into meaningful negotiations and not allow their distress, anger or bitterness of a relationship breakdown be driven through the court proceedings as seemed to be the case, at least at some levels, in these proceedings.
As a consequence I intend to make a partial costs order. I am satisfied that the costs of the husband for a three day hearing were, in all the circumstances, relatively modest given the type of dispute involved in a hearing of this nature and the complexity and the need for full and frank disclosure.
I do not intend to put these parties through the trouble or expense of further proceedings by way of assessment or taxation of costs.
What I intend to do I is order that the wife pay to the husband the sum of $30,000 which I assess would represent a sum of significantly less than 30 per cent of the husband’s practitioner/client costs, but would be well less than the husband’s likely party/party costs.
Exercising that broad discretion I will order that the wife pay that sum.
This is likely to put a burden on the wife however, I will allow the wife three years to pay this sum. Provided she commits to pay $10,000 per year no interest will accrue.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 24 October 2018.
Associate:
Date: 24 October 2018
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