Baxter and Baxter (No.2)
[2009] FMCAfam 618
•23 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAXTER & BAXTER (No.2) | [2009] FMCAfam 618 |
| FAMILY LAW – Property – costs. |
| Family Law Act 1975, ss.117 (1), (2), (2A) |
| Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 Bartlett & Gibson (No. 3) [2007] FamCA 1199 In the Marriage of Brown (1998) 23 Fam LR 349 Cachia v Hanes (1994) 179 CLR 403 Re JJT; ex parte Victoria Legal Aid (1998) 195 CLR 184 Johnston v Johnston (2005) 32 Fam LR 308 Knight v FP Special Assets Ltd (1992) 174 CLR 178 In the Marriage of Kowalski (1994) 18 Fam LR 193 Latoudis v Casey (1990) 170 CLR 534 In the Marriage of Murray (1990) 14 Fam LR 311 Oshlack v Richmond River Council (1998) 193 CLR 72 Penfold v Penfold (1980) 144 CLR 311 In the Marriage of Pennisi (1997) FLC ¶92-774 Telfer & Telfer (1996) FLC ¶92-688 |
| Applicant: | MR BAXTER |
| Respondent: | MS BAXTER |
| File Number: | CAC 607 of 2007 |
| Judgment of: | Neville FM |
| Hearing date: | 11 June 2009 |
| Date of Last Submission: | 11 June 2009 |
| Delivered at: | Canberra |
| Delivered on: | 23 June 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Brzostowski SC |
| Solicitors for the Applicant: | Galland Elder Lulham |
| Counsel for the Respondent: | Mr Howard |
| Solicitors for the Respondent: | Farrar Gesini and Dunn |
ORDERS
The Wife pay one-third of the Husband’s costs, as either agreed or taxed.
IT IS NOTED that publication of this judgment under the pseudonym Baxter & Baxter is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAC 607 of 2007
| MR BAXTER |
Applicant
And
| MS BAXTER |
Respondent
REASONS FOR JUDGMENT
Introduction
In the High Court decision of Re JJT; ex parte Victoria Legal Aid,[1] Gummow J, Kirby J, Hayne J (with whom Gaudron J agreed[2]) and Callinan J, in separate judgments, each set out relevant considerations and principles in relation to costs under the Family Law Act 1975, and more generally.
[1] (1998) 195 CLR 184.
[2] Her Honour added a comment or two in addition to agreeing with Hayne J. Although the context was rather different to the current application before this Court, Gaudron J observed generally that s.117(2) provided a wider power than simply one that enabled costs to be awarded. It extended to authorising orders requiring a party to proceedings under the FLA to provide another party with funds to conduct those proceedings. See 195 CLR at [2].
That case concerned an application for constitutional writs in relation to certain costs orders made by Faulks J. In the result, only certiorari was necessary to quash his Honour’s orders. Prohibition was deemed unnecessary in the circumstances of the case.
In a number of respects, the comments and observations of the members of the High Court in Re JJT are apposite in dealing with the current application before this Court in relation to costs, following the substantive judgment in the property proceedings delivered on 30th January this year. An appeal has been lodged by the respondent wife.
I am advised that that appeal is not likely to be heard until perhaps November 2009.
Among other orders made on 30th January 2009, were that each party should bear their own costs. Following judgment, it was submitted by the applicant husband in the proceedings that because there had been no formal submissions in relation to costs, I should fix a date for submissions to be made on that subject. I acceded to that application and stayed the order of 30th January in relation to costs. As it happened, primarily because of the demands on the respective advocates for each party, the first mutually convenient date for submissions to be argued before me was last Thursday, 11th June.
These reasons proceed in two parts. First I consider the principles that apply in costs applications. Secondly, I then consider the factual matrix to which those principles are to be applied.
General Principles
The essential jurisprudence in relation to costs generally and in the context of s.117 of the Family Law Act 1975 is set out in the judgments of Hayne J and Kirby J. For example, at [90] and [91], Hayne J said:
In Cachia v Hanes, Mason CJ, Brennan, Deane, Dawson and McHugh JJ said:
"It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation."
On its face, then, the reference in s 117 to "costs" is a reference to "costs" as that word is ordinarily understood in the law: the amount which the person to whom the order is directed must pay to some party to the litigation as partial indemnity for the professional legal fees and expenses incurred by that party in the course of the litigation. Section 117(1) provides, in effect, a prima facie rule that each party is to bear his or her own costs of the proceeding but that prima facie rule is subject to the operation of s 117(2) which, in turn, is dependent upon the court concluding "that there are circumstances that justify" the making of an order.[3]
[3] The internal reference to the earlier High Court decision in Cachia v Hanes is (1994) 179 CLR 403 at p.410. Other references are omitted.
His Honour later set out further general comments about how s.117(1) is, in effect, a statutory reversal of the standard common law principle of costs following the event, and that s.117(2) is, in effect, something of a re-enactment of that common law principle, having regard to the matters set out in s.117(2A). In his Honour’s own words, at [97] – [98], Hayne J said:[4]
Appearing, as it does, in the context of a provision enabling a court to make orders for costs, which is a provision remarkable only because it departs from the ordinary rule that costs follow the event in favour of a prima facie rule that each party abide his or her own costs, nothing in the context of s 117 supports the construction of s 117(2) upon which the impugned order must depend if it is authorised by that sub-section.
Indeed, the list of matters set out in sub-s (2A) to which the Family Court is directed to have regard in making orders under s 117(2) indicates clearly that the subject-matter of the orders to be made under s 117(2) is the costs which a person may be ordered to pay another as indemnity for that other's liability for professional fees and out of pocket expenses reasonably incurred in the litigation, that is, "costs" as that expression is ordinarily understood in the law.
[4] I note that the paragraph numbering in the “on-line” version of this judgment does not accord with the authorised version of the judgment in 195 CLR. I have used the numbering from the authorised reports.
For his part, at [11], Gummow J said:
… whilst s 117(1) is directed to the carriage by the parties of their own costs, Penfold v Penfold established that s 117(1) must yield to s 117(2) whenever the court forms the opinion "that there are circumstances justifying" it in making an order of the description in s 117(2). That sub-section speaks not of parties but of certain orders. In considering what order (if any) should be made, the court is obliged by s 117(2A) to have regard to certain matters. These are set out in pars (a)-(g). Whilst pars (a)-(f) are focused upon the parties to the proceedings and their circumstances and conduct, par (g) speaks of "such other matters as the court considers relevant". The result is to accommodate within s 117 orders as to the carriage of costs by third persons with an interest in the litigation of the nature identified by Mason CJ and Deane J, and Gaudron J, in Knight v FP Special Assets Ltd.[5]
[5] The citations for Penfold v Penfold and Knight v FP Special Assets Ltd are (1980) 144 CLR 311 at p.315 and (1992) 174 CLR 178 at pp.192-193 & 205, respectively. Otherwise, internal citations have been omitted.
I do not understand his Honour to circumscribe, in any way, the operation of s.117(2A)(a)-(f), other than by the express terms of those sub-sections, or that sub-paragraph (g) was in any way limited either by the earlier sub-paragraphs of the section or to costs orders in relation to third parties.
Similarly, Kirby J said, at [14]: “In Aiden Shipping Ltd v Interbulk Ltd, speaking of the provisions of the Supreme Court Act 1981 (UK) affording the power to award costs, Lord Goff of Chieveley remarked: "It is strange that courts should think it right to impose, by way of implication, a limit upon a wide statutory jurisdiction". It is still strange. Limits upon such wide statutory powers may be imposed by constitutional law. Sometimes controls are imposed by the statute itself. But where, by valid legislation, a power to award costs is afforded to a court in general terms, the grant of power should be given an ample interpretation and not narrowly construed.”[6]
[6] Emphasis added. The citation for Aiden Shipping is [1986] AC 965 at p.979. In the same footnote, his Honour also referred to Oshlack v Richmond River Council (1998) 193 CLR 72 at p.87.
Kirby J made similar comments at [41], including the following: “A grant of power to a court to make orders as to costs will not, in the absence of a legislative indication to the contrary, be construed narrowly.”
In addition to being bound by this authority, respectfully, I agree with his Honour’s comments.
Finally, at [126], Callinan J observed that s.117(2A)(g) “… could hardly … be expressed in wider terms.”
In addition to the expansive and plain comments of the High Court in Re JJT, in Telfer & Telfer,[7] Lindenmayer J said that “… paragraph (g) [of s.117(2A)] is an independent source of discretion and its effect is not limited by the particular matters set out in the previous paragraphs.”
[7] (1996) FLC ¶92-688 at p.83,139.
This somewhat extended discussion arises in the current proceedings because it was argued on behalf of the respondent wife in the principal proceedings, and in the costs application that s.117(2A)(g) should be read according to the maxim ejusdem generis, and, therefore, that it was of limited (if any) application here. Alternatively, it was also submitted that I should follow – although not formally bound by - the decision of Faulks DCJ in Bartlett & Gibson (No 3),[8] which is a decision in relation to the operation and application of s.117(2A)(f) concerning offers of settlement. Other than to resist the immediate application, why this course was otherwise urged upon me is explained by reference to the facts of the matter to which I will turn shortly.
[8] [2007] FamCA 1199.
Two other comments should be made. First, it is important to recall the basal principle in relation to costs generally that was articulated by the High Court in Latoudis v Casey and Oshlack v Richmond River Council.[9] For current purposes, it is sufficient to note the observations of Mason CJ in Latoudis (at p.542-43). The comments of the Chief Justice in Latoudis were repeated and endorsed by McHugh J in Oshlack, at p.102:
Mason CJ, Toohey J and I were all of the view that one starts with the proposition that a successful party to litigation (the defendant in Latoudis) can usually expect to receive a costs award in its favour unless its own conduct disentitles it from the benefit of the discretion. It is the conduct of the successful party, and not the conduct or motives of the unsuccessful party, which is relevant to the exercise of the costs discretion. Thus Mason CJ said:
"in exercising its discretion to award or refuse costs, a court should look at the matter primarily from the perspective of the defendant. To do so conforms to fundamental principle. If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings". [Internal citations omitted.]
[9] (1990) 170 CLR 534 and (1998) 193 CLR 72 respectively.
It is equally important to recall, and not for the first time, Nygh J’s observations in Murray, where his Honour said:[10]
If one considers the issue as a matter of policy, that is, on the basis of what the Parliament's objective and purpose was in enacting the legislation, it is clear that the Parliament wished to encourage settlements thereby reducing the cost of litigation to the parties and to the community. That must mean that a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs. At the same time a party cannot sit tight and postpone a decision as to acceptance until a matter is at the door of the court. By that time an offer which might have been acceptable to the offeror because of savings in time and preparation costs, may have become unattractive. In this case the offer was left open for a reasonable period, was clear and capable of acceptance which would have saved the parties considerable costs….
[10] (1990) 14 Fam LR 311 at p.313. His Honour’s comments were cited, albeit in a slightly different context, with apparent approval by the Full Court (Baker, Rowlands & Lindenmayer JJ) in Kowalski (1994) 18 Fam LR 193 at pp.199-200.
Summary of Relevant Facts
At the outset, I am constrained to observe that what follows might more readily be described or characterised as a lament rather than a judgment. I say this because of the simple fact that two offers were made by the husband even before proceedings commenced. I will come back to them shortly, both as to detail and as to legal import (if any). By any measure, they were, in my view, very measured offers, almost bordering on the generous – as will be explained soon enough. If they had been accepted, the parties would have been able to get on with their lives in significantly better financial shape than is currently the case. Indeed, the reality now is that the only beneficiaries of this litigation will be the lawyers. And even there, from what I was told in the course of the costs application, it may be that at least one of the firms of attorneys involved may come up rather short. The exceedingly modest asset pool is steadily being consumed by increasing legal costs. And now, with the advent of an appeal, the fast evaporating pool risks being totally consumed. Perhaps the respondent wife considers it the last throw of the dice - an all or nothing pitch. The allusion to betting is not inapt.
As already indicated, two offers were made by Mr Baxter prior to the commencement of proceedings. In my view, even if I acceded to the contention that they were offers that did not strictly fall within the purview of s.117(2A)(f), nonetheless they are “matters” that are otherwise caught by sub-paragraph (g) and relevant, even if only to set in context all that has transpired since. They are certainly “other matters” to which the Court should at least have regard.
These ‘first round offers’ were in letters from Mr Baxter to Ms Baxter. They are annexed to his affidavit of 10th June 2009. They are dated 15th August and 6th September 2006 respectively. In the first letter
Mr Baxter suggested that the net value of the asset pool, excluding both parties’ superannuation, totalled $65,000. This was on the basis that the house was worth approximately $270,000, and the mortgage was $210,000. He suggested that his legal advice indicated that a 50/50 split would be likely. However, with a view to settling the matter he said that he would accept a payment of $15,000, so that Ms Baxter could keep the former matrimonial home, and she would assume responsibility for the `three joint credit card debts’, which amounted to $15,000.To this offer, Ms Baxter replied in writing, in an undated letter but which Mr Baxter noted to have been sent or dated 23rd August. It rejected Mr Baxter’s offer. Helpfully, after indicating that she thought that Mr Baxter should look after his Amex debt, and with some other observations, Ms Baxter indicated that she would be `more than happy to meet and discuss’ future settlement options.
In his letter of 6th September 2006, Mr Baxter indicated that he would accept either of two alternatives: option A (in summary) provided that he would transfer the house to Ms Baxter in exchange for payment to him of $8,000 together with a small range of listed furniture (he would also assume responsibility for the Amex card). Option B (also in summary) provided that he would transfer the house to Ms Baxter in exchange for payment to him of $10,000 and Ms Baxter would keep the items of furniture (excluding personal effects).
The facts speak for themselves as to what might have been.
After proceedings were commenced, there were two offers from
Mr Baxter’s solicitors. The first came in a letter from Mr Kennedy, dated 14th February 2007, headed “without prejudice save as to costs.” The principal joint [non-superannuation] asset remained the former matrimonial home, which was estimated to be valued at $300,000, but with a mortgage of $216,000 (incorrectly noted in the letter as $261,000). This left equity of $84,000.The first offer (in summary) provided that Ms Baxter pay Mr Baxter $42,000, following which the former matrimonial home would be transferred to her. Each party would keep their respective superannuation interests intact. This offer was left open for 14 days.
The second offer was made by letter dated 27th June 2007 to
Ms Baxter’s solicitors. This was immediately after the conciliation conference. That offer, also open for 14 days, was in slightly similar terms to the first, save that it now sought payment of $50,00 from
Ms Baxter. Presumably, the increase in payment sought took into account that legal fees were now on the rise.For her part, by affidavit filed in Court on 11th June 2008, Ms Baxter annexed a number of documents, which included the document filed and used by Mr Baxter at the conciliation conference.
The first written offer of settlement from Ms Baxter’s new lawyers, is dated 23rd July 2008. Sensibly, that offer was prefaced with comments on the small size of the asset pool, how long the matter had been proceeding, and that the matter should be settled “as quickly as possible.” Would that that had occurred! The offer from Ms Baxter was the Mr Baxter should pay Ms Baxter $30,000, and that she would also keep the house. The “offer” also proposed that each party keep their respective superannuation entitlements.
There was some “argy-bargy” over the more exact value of the house, but in my view, that was and is of little moment.
The next “offer” from Ms Baxter came on 6th August 2008. It proposed (in summary only) that Ms Baxter keep the former matrimonial home and each keep their superannuation untouched by the other. By letter of 21st August, Ms Baxter’s solicitors inquired about the acceptability or otherwise of the offer of 6th August. They also inquired why there was no offer on the table from Mr Baxter.
An important fact needs to be interposed or noted here. The original hearing of this matter was scheduled for May 2008. Because Ms Baxter was not ready to proceed on that occasion, in part because she was seeking legal aid, the hearing dates had to be vacated. The matter was ultimately heard in September with final submissions being received on 10th October 2008. Following the vacation of the original hearing date, it necessarily followed that Mr Baxter incurred costs which were, in common parlance, “thrown away.” I ordered that Ms Baxter pay the costs of Mr Baxter’s agents for that person’s attendance (Mr Baxter’s principals are in Goulburn).
There seems to remain a dispute about the costs payable on that occasion. In the event that the issue of Mr Cameron’s costs remains in dispute, the following observations or comments should apply.
Ms Baxter contends that she should only have to pay costs in accordance with the scale as provided by this Court, whereas the itemised account forwarded by Mr Baxter’s solicitors was crafted in accordance with the Family Court Rules. The amount now in contention on this aspect is the difference between the amount sought by Mr Baxter of $567.60, and the amount said by Ms Baxter she ought pay according to the scale of fees of this Court.
Under the Rules of this Court, and otherwise according to authorities of long-standing in relation to a court having the inherent power to control matters before it, so as to resolve at least this aspect of the on-going disputation between the parties, the costs ordered to be paid by
Ms Baxter on 2nd May 2008 should be in the sum of $450.00.One final factual matter needs to be observed. In Ms Baxter’s Amended Response, which was filed on 5th August 2008, two options were proposed. The first was that she sought to retain the house and have Mr Baxter also pay her $50,000. In the alternative, Ms Baxter sought retention of the house together with a splitting order of
Mr Baxter’s superannuation, also in the sum of $50,000. In the light of the orders that were ultimately made, which (summarily stated) were predicated on the length of the marriage and the financial contributions of Mr Baxter, and having due regard to the medical evidence advanced on her behalf, to put it as neutrally as possible, in my view, the proposals of Ms Baxter were ambitious if not significantly inflated.It remains to consider the matters otherwise set out in s.117(2A), and to do so in the light of relevant authority, not least the High Court’s observations in JJT, and the Full Court’s admonitions in, among other places, In the Marriage of Brown and in Johnston v Johnston.[11]
[11]In large measure, the factual matters to be addressed by the section have been canvassed in my judgment, and briefly noted here. For example, little has changed in the parties’ financial position since judgment except that Ms Baxter has incurred further debt in relation to some limited borrowings from relatives to meet a small percentage of her outstanding legal fees. Such matters are set out in her affidavit filed in Court on 11th June 2009. It also remains the case that she is in full-time employment, and also works part-time to earn extra income. And it is also remains the case that her income is rather less than that of Mr Baxter. I do not understand either party to be in receipt of any legal aid.
Given what I have already said, I do not propose dealing in any more detail with the conduct of the proceedings, or with the conduct of the parties in complying with Court orders. I do not propose commenting on submissions made during the costs application, such as those made on behalf of Ms Baxter that Mr Baxter had failed to make any further offers other than those noted above.
For ease of reference, I note again that the last offer made by
Mr Baxter was that Ms Baxter pay him $50,000 in exchange for which he would transfer the former matrimonial home to her. He also proposed that each party keep their superannuation, untouched by the other.In my orders of 30th January 2009, I ordered that Ms Baxter pay
Mr Baxter $54,329.90 within 60 days of the date of the orders, whereupon Mr Baxter would transfer the house to Ms Baxter. I also ordered that each party should keep their respective superannuation interests intact.In my view, the statement of Full Court authority that should guide the outcome of this application, in the light of the facts narrated, is that in Pennisi (1997) FLC ¶92-774 at p.84,547. There, the Full Court (Nicholson CJ, Barblett DCJ & Faulks J) said:
The plain words of the paragraph 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 payments 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 that should be given to this factor in considering the question of costs. This 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 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 it 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.
For completeness, I note that the context of the Full Court’s judgment was a consideration of s.117(2A)(f).
If one has regard only to the very last offer in writing from Mr Baxter’s solicitors, some 14 months or thereabouts before the hearing in October 2008, the award ultimately made was very close to that offer of settlement. In my view, that offer was most reasonable and would have obviated all the costs that have been incurred since. Conversely, in my view, the counter-offers were unrealistic.
Having particular regard to (a) the High Court general instruction in Oshlack not to punish the unsuccessful party, (b) the last offer made by Mr Baxter many months before trial, and (c) Ms Baxter’s financial position (in accordance with s.117(2A)(a)), in my view, it would be unjust for Mr Baxter’s application not to succeed. However, the circumstances of the case as outlined above dictate that he should receive but one third (⅓) of his costs, either agreed or taxed. It will be so ordered.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Neville FM
Associate: R. Davidson
Date: 23 June 2009
(1998) 23 Fam LR 349 and (2005) 32 Fam LR 308 respectively. In passing, I note that the paragraphs quoted from Johnston by Mr Brzostowski SC in his written submissions on behalf of
Mr Baxter are stated to be by the Full Court. However, the initial paragraphs he cites at par.3.5 of his submissions are the Full Court quoting from the first instance decision of Moore J. Mr Brzostowski cites from the judgment reported in (2004) FLC ¶93-189 at p.79,176. I readily concede that distinguishing what paragraphs are attributable to which court is often more difficult in the layout and configuration of the judgment in the FLC report than in the judgment found in the Family Law Report, particularly at p.312 [8]. Nothing, however, turns on such things.
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