Bartlett and Gibson (No. 3)

FAMILY COURT OF AUSTRALIA

BARTLETT & GIBSON (NO. 3)

[2007] FamCA 1199

FAMILY LAW – PROPERTY – COSTS – both the husband and the wife sought costs against the other party in their property proceedings – the husband was supported by an offer of settlement which was not close to the sum which the wife received at final hearing – each party to pay their own costs – the husband had unsuccessfully pursued the wife’s disposal of shares in her sister’s company – the wife should not have to pay the husband’s costs in relation to such unsuccessful litigation by the husband and the husband should pay her costs incurred in that part of the litigation

Family Law Act 1975 (Cth)

Pennisi & Pennisi (1997) FLC 92-774

APPLICANT:

Mr Bartlett

RESPONDENT:

Ms Gibson

FILE NUMBER:

CAF 710 of 2004

DATE DELIVERED:

10 October 2007

PLACE DELIVERED:

Canberra

JUDGMENT OF:

Faulks DCJ

HEARING DATE:

16 April 2007, 21 September 2007 and 4 October 2007

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Farrar, Gesini and Dunn

COUNSEL FOR THE RESPONDENT	Ms J Godtschalk
SOLICITOR FOR THE RESPONDENT	Delaney Lawyers

Orders

It is ordered that:

The husband will pay the wife’s costs of and incidental to any application made or subpoenas issued by the husband in relation to Ms Bowie or Bowie Smith Pty Ltd.
Otherwise there is no order for costs as between the parties in relation to property matters.

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

FAMILY COURT OF AUSTRALIA AT CANBERRA

FILE NUMBER: CAF 710 of 2004

MR BARTLETT

Applicant

And

MS GIBSON

Respondent

REASONS FOR JUDGMENT

(Costs in Property Proceedings)

Background

By an application filed on 9 March 2007 the husband sought that the wife pays his costs of and incidental “to proceedings for property settlement which were determined by orders made on 5 March 2007”.
The wife, in her response filed on 3 April 2007, sought that the husband pays her costs of and incidental to the property proceedings.
The wife was represented in these proceedings by Ms Godtschalk of counsel.
The husband was initially represented by Mr Farrar who was previously represented him in these proceedings. The issue of costs in the property proceedings was before me on three occasions – on 16 April 2007, 21 September 2007 and 4 October 2007. However, between the date of the application for costs having been made and the final hearing of the application, Mr Crowley, who previously had represented the wife, joined the firm of Mr Farrar and on the day of final hearing Mr Farrar attended Court and withdrew from representing the husband who subsequently represented himself.
Although there had been no formal application until shortly before the hearing on behalf of the wife that Mr Farrar disqualify himself, it was clear on the first day that this matter was due to be argued before me that this was an issue before the Court.

The husband’s application

The husband confined his application effectively to an argument that he had made two offers to resolve the proceedings which were more advantageous to the wife than was the final result of the property proceedings.
The husband, in his oral submissions to the Court in response to a question from me, did not assert that there were any other matters pursuant to s 117(2A) of the Family Law Act 1975 (the Act) which would properly ground an application for costs in the property matter on his behalf.

The relevant law

Section 117 of the Act deals with the question of costs. I set out the section below:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
(3)To avoid doubt, in proceedings in which an independent children's lawyer for a child has been appointed, the court may make an order under subsection (2) as to costs or security for costs, whether by way of interlocutory order or otherwise, to the effect that each party to the proceedings bears, in such proportion as the court considers just, the costs of the independent children's lawyer in respect of the proceedings.
(4)However, in proceedings in which an independent children's lawyer for a child has been appointed, if:
(a)a party to the proceedings has received legal aid in respect of the proceedings; or
(b)the court considers that a party to the proceedings would suffer financial hardship if the party had to bear a proportion of the costs of the independent children's lawyer;
the court must not make an order under subsection (2) against that party in relation to the costs of the independent children's lawyer.
(5)In considering what order (if any) should be made under subsection (2) in proceedings in which an independent children's lawyer has been appointed, the court must disregard the fact that the independent children's lawyer is funded under a legal aid scheme or service established under a Commonwealth, State or Territory law or approved by the Attorney‑General.
Leaving to one side for a moment the primary prescription in s 117(1) it is clear that the husband in his application relied upon the provisions of s 117(2A)(f)
“whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer”.
The first offer that the husband relied upon in my opinion does not attract the operation of that section. The offer was obviously made in anticipation of the commencement of proceedings but at the relevant time there were no proceedings in existence. Accordingly at the relevant time there was no “party to the proceedings” and as there were no proceedings there could not be an offer to “settle the proceedings”.
The connexion of the offer to the proceedings and the common sense associated with making an offer to prevent proceedings occurring may give rise to the proposition that such an offer might properly be considered under s 117(2A)(g):
“such other matters as the court considers relevant”.
However, the explicit provisions of s 117(2A)(f) would not in my opinion in accordance with the ordinary principles of statutory interpretation permit another form of offer to be brought into account.[1]
[1]Expressio unius est exclusio alterius
That means that if the husband is to succeed in his application he relies upon the offer made on 13 July 2005.[2]
[2] Father’s affidavit filed 6 July 2007, paragraph 20, Annexure ‘M’
He argues that the effect would have been to have given the wife assets of $368,809 whereas the judgment gave her net assets of “$281,104.50, her 45 per cent of the selling costs and CGT” (the meaning of the latter part of that sentence is not clear to me).
Although in his schedule to his affidavit the husband suggests that the effect of his offer was to give the wife a total of $368,089, the offer was to some extent complicated by the final paragraph of the letter from Mr Farrar to the wife’s then solicitors. That read relevantly as follows:
“It seems to the right that the parties should attempt to resolve the property matter. You have not responded to our client’s allegations concerning the share transfer and it seems to us clear that the transfer took place last year. It would seem to us that under payment of stamp duty and capital gains tax issues arise (sic). Moreover, as we understand it the real value of those shares is in the vicinity of $500,000. In those circumstances it seems to us that the resolution of this matter is in your client’s interests”.
This seems to suggest that the husband was, at the time of making the offer still insisting that the wife in fact had an equitable interest at least in the sum of a further $500,000 worth of shares in her sister’s company, Bowie Smith Pty Ltd, which implicitly she would keep.
In his table of comparison or comparative values the husband suggests that the wife’s result from the judgment would be $281,104.50 (less CGT, selling costs, and outgoings). This is not quite so. The asset pool omitting liabilities was found to be $2,148,296. The liabilities were found to be $1,142,224. The husband includes in his comparative tables an add-back relating to what he describes as a non-contentious liability included in paragraph 66 of the property judgment of March 2007 but omitted later from paragraph 75 of the judgment of $184,042.
That was in part the subject of appeal but that appeal was discontinued so it is inappropriate for that to be included.
This determination is strengthened by the terms of paragraph 56 in my property judgment to which the mother’s Counsel drew attention during the course of these costs proceedings. This records as follows:
“Where I have not included an asset or liability it can be assumed I have not been satisfied on the evidence or from submissions of counsel that it would be just and equitable for me to make an order in relation to it”.
Accordingly, if I were to take the judgment result for the wife she would have received $452,732 which included a sum of $88,809 (being superannuation and chattels that the wife had in her possession at the time) and a payment of $363,923.
The husband in his table goes on to deduct costs of sale, capital gains tax and other rates and taxes. These deductions are not appropriate in the circumstances. In the property judgment I drew attention to the fact that there may be advantages in the parties’ reaching agreement about how the properties might be disposed of. They were unable to reach agreement about those matters and subsequently I made orders requiring the sale of the properties.
In paragraph 95 of my property judgment I indicated that the husband had sought to retain the properties. I did not believe he could do so but was willing to give him an opportunity to try. In those circumstances the amount the wife would have received would have been the $363,923 referred to above plus the $88,809 she already had. The offer of settlement may be enhanced one would think from the conceded retention by the husband in his offer of settlement of the wife’s purported share in the shares of her sister’s company - which I subsequently found she did not have. Hence, by my determination in the judgment and by the husband’s concession at the time of the offer the additional shares would not have necessarily affected the division of the other property between the parties.
In summary, the offer (properly construed) contained in the letter of 13 July 2005 was that the wife would receive in total some $368,809.
My calculations are that as a result of the judgment and the assumption that the properties were not to be sold, and expenses incurred, that the wife would receive $452,732. The Bowie Smith Pty Ltd shares were excluded implicitly by the husband in his offer and explicitly by me because I found that the wife had no interest in my judgment.
The two figures are therefore not closely comparable. The difference is that the wife did about 23 per cent better as a result of the judgment.
In Pennisi & Pennisi (1997) FLC 92-774, their Honours in the Full Court said in relation to offers, at page 84,547
“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 that should be given to this factor in considering the question of costs. Principle must not however be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree’s knowledge of the party’s financial circumstances while the offer is live”.
In this matter although there were matters in dispute at the time the offer was made (including the value of the husband’s business and including the effect, if any, of the transfer of shares from the wife to her sister as referred to in the husband’s letter of offer), it seems to me that the offer has little weight.
There is a qualification however to that determination.
The husband’s subsequent pursuit of the Bowie Smith Pty Ltd issues involved expenditure both on his part (obviously) and on behalf of the wife and on behalf of Ms Bowie, and on behalf of her company. For reasons set out in a separate judgment, in my opinion, the husband should pay Ms Bowie’s and her company’s costs of and incidental to those proceedings and for reasons I will shortly outline hereafter it seems to me he should also pay (on a party and party basis) the costs of the wife in relation to that part of the proceedings.
The primary prescription under s 117 is that each party should pay his or her own costs.

The wife’s application that the husband pay her costs

The wife’s submissions about costs involved a consideration of the discrepancy in the parties’ financial resources. For reasons I have mentioned above it seems to me that it is true that the wife has limited financial resources partly as a result of the costs of this litigation but it is fair in the context of the overall proceedings to say that the same must now be true of the husband notwithstanding that he received 10 per cent more than her in the division of property.
I may be suspicious about the husband’s failure to obtain employment, notwithstanding his various promises to do so but suspicions do not constitute evidence. The evidence before me supports the proposition that the husband is in a relatively poor financial state and I cannot, on the basis of the evidence before me, come to any conclusion that there is such a discrepancy in the parties’ financial circumstances as to justify by making an order for costs.
Ms Godtschalk also asserted that I should take account of the conduct of the husband, in particular his failure to disclose financial matters.
Leaving to one side the husband’s conduct in relation to the Bowie Smith Pty Ltd shares it is hard in the circumstances of this matter to find that his conduct was such that it ought in some ways to be reflected in an order for costs. The issues about property were complicated (in part by the parties approach to them). The business and its valuation remained a matter of complexity and difficulty until the end. The husband asserts that it was always he who was cooperative and seeking some form of resolution. I do not accept this assertion but equally I cannot and do not find that the husband’s conduct generally during the course of the proceedings was such as would justify an order for costs against him.
I take a different view about the shares in Bowie Smith Pty Ltd. I have already identified most of the issues about these shares. The wife, from the beginning, asserted she had no interest in them. Ultimately that was my finding. I had along the way made various suggestions to the husband and questioned his perseverance with trying in some way to prove that the wife had a beneficial interest in these shares. In the end his recalcitrance on this matter and lack of perception brought about additional expenses not only for himself but also for Ms Bowie and her company and in the circumstances also for the wife.
Her involvement in processes related to her sister was proper and reasonable and her costs in relation thereto ought in my opinion to be paid by the husband.

Conclusion

In my opinion the husband’s application for costs fails. His sole relevant offer was not such on examination as to overcome the primary prescription of s 117(1).
Generally speaking in my opinion the wife has also been unable to demonstrate factors which would prevail over the primary prescription except in relation to Ms Bowie and Bowie Smith Pty Limited.
The wife will have an order on a party and party basis for her costs of and incidental to the husband’s applications and subpoenas in connexion with Ms Bowie and Bowie Smith Pty Limited. Otherwise there will be no order for costs between the parties in relation to property matters.

Additional Matter

The father has leave to amend the Application in a Case (so called) filed on 7 August 2007 seeking certain matters relating to enforcement to convert such application pursuant to s 79A of the Family Law Act (Cth) and I order that the parties attend upon a Registrar of this Court for the purposes of discussing the differences with a view to trying to resolve them without further recourse to litigation if they are able to do so.
That there be no order for costs in relation either to the leave to amend or in relation to the attendance at Court in relation thereto.

I certify that the preceding forty one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks.

Associate

Date: 10 October 2007

[2007] FamCA 1199

10 October 2007

Key Legal Topics

Areas of Law

Civil Procedure

Family Law

Legal Concepts

Costs