Beeson and Spence

[2008] FamCA 28

FAMILY COURT OF AUSTRALIA

BEESON & SPENCE [2008] FamCA 28

FAMILY LAW – COSTS – application dismissed

Family Law Act 1975 (Cth)

APPLICANT: Mr Spence

RESPONDENT: Ms Beeson

FILE NUMBER: SYF 2511 of 2004

DATE DELIVERED: 30 January 2008

PLACE DELIVERED: Sydney

JUDGMENT OF: Moore J

WRITTEN SUBMISSIONS RECEIVED: 6 December 2007 and 25 January 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Schonell

SOLICITOR FOR THE APPLICANT: Milne Berry Berger & Freedman

SOLICITOR FOR THE RESPONDENT: Mr Gonzalez,
Levy Partners

Orders

1. The application of the husband for costs is dismissed. 

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Moore delivered this day will for all publication and reporting purposes be referred to as Beeson and Spence

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:  SYF2511 of 2004

MR SPENCE

Applicant

And

MS BEESON

Respondent

REASONS FOR JUDGMENT

Applications

1. The husband seeks to have the wife pay his costs related to the financial component of proceedings concluded by judgment on 2 February 2007; more particularly, the costs he incurred from 23 June 2004 with the quantum to be an amount agreed or taxed.  The start date is the date on which the wife first sought orders for property settlement.  Later she also sought orders for child support departure and amended her property claim so as to confine it to a splitting order in her favour related to the husband’s superannuation entitlement.  The wife seeks the dismissal of his costs claim. 

Principles

1. The provisions of s 117 of the Family Law Act 1975 govern the making of costs orders. It is the general rule under s 117(1) that each party is to bear his/her own costs but s 117(2) permits the Court to make such order as it considers just if it is of the opinion that there are justifying circumstances. In considering what order (if any) should be made regard is to be had to the matters referred to in s 117(2A). They are:

   ‘(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.’

Submissions

1. Having set out in his written submissions the orders sought, a brief account of the relevant background and the provisions of s 117, counsel for the husband made submissions by reference to paragraphs (a), (f), and (g). The substance of the arguments advanced in each instance are:

   Paragraph (a)
   There is considerable disparity in the parties’ financial circumstances.  The husband is an undischarged bankrupt working in his father’s business for an allowance of $500 per week, part of which he pays to his wife as his contribution towards their household expenses, along with the provision of a motor vehicle and telephone.  He has no assets other than his $1.4 million superannuation entitlement which he cannot yet access by reason of his age and work.  By contrast, the wife has assets in excess of $2.1 million which consists of assets of the trust she controls, motor vehicle, personalty, and paintings.  She has had the advantage of having received funds of $216,000 from friends and her fiancé for which, it was found, she has no obligation to repay.  Accordingly, it is submitted, she has the capacity to meet an order for payment of the husband’s costs, from the sale of artworks if necessary which would not have any material impact on her financial security or the quality of life she enjoys or provides for the children.  

   Paragraph (f)
   The husband’s position throughout was that her application should be dismissed and that was the result.  He wrote to her in November 2004 suggesting that she withdraw the application for property orders and they each retain what they had at the time.  His proposal combines with the ready findings about her control of the trust to reinforce the significant weight said by the Full Court [see Brown v Greene (2002) FLC 93-115 at paragraph 57] to attach to offers of settlement.

   Paragraph (g)
   It is said the wife raised matters of little or no merit at the hearing.  Her resistance to the husband’s s 106B application as it related to the Deed of Variation of the trust and the arguments she advanced were without substance and were dismissed in turn by the judgment.  She also advanced a case of obligation to repay loans, also dismissed, in circumstances where she called no evidence from any of the so called creditors and her own evidence was unsatisfactory by its failure to provide specifics about the fundamentals of proving a debt such as timing and the amounts advanced.  Her claim for departure from the child support assessment, while not adding greatly to the burden of the litigation as it otherwise stood, resulted nonetheless in an order for substantially less than she had sought. 

2. The written submissions on behalf of the wife in reply addressed each of these factors and others. 

   Paragraph (a)

   In summary, her financial circumstances are such that the consequences of being forced to pay the husband’s costs would be ‘dire’ as the debt would be difficult for her to sustain in circumstances where the trust monies have dissipated and she is responsible for her own expenses and the expenses of the children to which the husband contributes little.  It is also said that there was an agreement the artwork would be retained by her to fund the children’s future education costs, more particularly private secondary fees, and his suggestion that the artwork be sold to pay his costs represents a departure from this agreement.  The assets she has are likely to be used to meet future contingencies and she still maintains an obligation to repay loans of $216,000.  She generates no income and is not in paid work.  Further, the husband’s position is likely to change when he is discharged from bankruptcy in March 2008 by reason of his ability to generate significant income in light of his past business experience, so it would be unfairly disadvantageous to the wife to rely solely on the husband’s financial circumstances at the hearing. 

   Paragraph (c)

   It is submitted that the wife did not conduct the proceedings in an improper manner.  While the costs claim relates only to the financial proceedings, reference is made to the background and developments in the parenting proceedings and the position taken by her there in contrast to the husband’s stance.  As for the property claims, it is said the major issue was whether the assets of the trust should be considered ‘matrimonial property’ and therefore available for distribution.  The husband’s argument to the effect the trust was a sham was not accepted.  While the court found in favour of the husband’s argument to support his s 106B application, it is not open to say that the outcome was obvious - apparent from the time devoted to the issue in the judgment - and her application was ‘within the range’ of her entitlement to property settlement. 

   Paragraph (e)

   The submissions point out that the husband was wholly unsuccessful in his quest for equal shared care in the parenting proceedings and the wife’s position was supported by the Family Reports and reflected in her application and offer of settlement on the issue.  Had he accepted her offer of settlement which was similar to the consent orders made on the first day of the hearing, their costs would have been significantly reduced and the estimated hearing time shortened. 

   As for the property component, his letter of 23 November is acknowledged, but it is pointed out that his formal application at the time was for the wife to pay him $2 million and he did not succeed in achieving that.  Nor was he successful in relation to the trust in that his argument about it being a sham was not accepted.  While he succeeded in his s 106B claim, it could not be said the issue was without any substance or merit as suggested for the husband.  Also, though she was not successful in securing a finding of an obligation to repay the loans, she still maintains she has such an obligation. 

   As for child support departure, she was successful in having a nil assessment increased to $50 per week per child, to be paid until March 2008 when the husband’s earning capacity can be reassessed having regard to his discharge from bankruptcy at that time.  Accordingly, he cannot be said to be entirely successful in the child support claim. 

   Paragraph (f)

   An earlier submission is repeated; namely, costs would have been saved had the husband accepted her offer about parenting matters when she made her offer of settlement on 29 April 2005.  She did not accept his offer of settlement of the property proceedings as it was her firm view the assets belonging to the trust should be excluded from the asset pool by reason of the Deed of Variation.  Her position was not without foundation and it was not improper for her to pursue a claim for a splitting order.  Her claim was within the range of entitlements and she should not be disadvantaged by having to pay his legal fees when she was pursuing a legitimate claim. 

   Paragraph (g)

   The husband has not given any particulars of his actual claim for costs nor for what period the wife is to be responsible for his costs. 

   In conclusion, there is no justification for departure from the general principle that each party should pay their own costs and the husband’s application should be dismissed. 

Conclusion

1. I do not accept unequivocally some of the submissions made on behalf of the wife, but when the merits are weighed one against the other, the balance just tips in favour of each bearing their own costs. In other words, in a closely weighted balance I am unable to find justifying circumstances sufficient to depart from the primary position reflected in s 117(1).

2. That view has due regard to the early offer made by the husband to settle the proceedings which ultimately reflected the outcome.  The fact that he had a formal claim on foot at the time for her to pay $2 million is an irrelevant consideration.  Had his offer been accepted within a reasonable time after it was made the property proceedings could have been brought to an end and costs related to that component of the litigation avoided.  There was nothing unclear or unambiguous about what he proposed [Harris and Harris (1987) FLC 91-822]. Also, it is recognised paragraph (f) does not have any particular priority amongst any of the others in ss(2A) and the weight given to it must be appropriate to the circumstances [Robinson and Higginbotham (1991) FLC 92-209], but there is nothing about the facts of this case or the context in which the offer was made or the extent of the wife’s knowledge or her grasp of their financial circumstances sufficient to say she could not reasonably have accepted it. It is also recognised that an offer does not necessarily lead to an order for costs in favour of the offeror [Harris and Harris (1991) FLC ¶92-254] although the failure to heed a reasonable offer where there is adequate knowledge to give it proper consideration is of significant weight [Browne v Green (2002) FLC 93-115].

3. That view also has regard to the parties’ respective financial circumstances as outlined in the submissions.  More particularly, the current assets of the husband are tied up in his superannuation which he cannot yet access and he has a quite limited income from the work he undertakes for his father, whereas the wife has control of assets of a greater value and her assets do include paintings which could be realised to pay his costs without undermining her or the children’s immediate financial needs. 

4. Yet against those considerations there is the cumulative weight of a number of other relevant factors.  While the husband’s costs claim relates only to the financial component of proceedings, it is nonetheless relevant to take into account the fact that the parenting proceedings were not settled until the first day of the hearing and the consent arrangement was in accordance with the position put by the wife much earlier.  But by that time the costs related to that component of the proceedings had been incurred and the wife will be left to pay those costs.  It is also of some relevance, though not of any great weight, to note that the outcome of the child support departure application was not consistent with the position argued for either.  Certainly it was far from the outcome proposed by the wife, but by the same token the result was not consistent with the husband’s position and it was made operative for a relatively short period to coincide with the discharge of his bankruptcy when it can reasonably be expected he will be better placed to use his experience and expertise to boost his financial circumstances.  Finally, it is accepted there are artworks available to provide some recompense to the husband for the costs he outlaid in litigating the property matter, but it has not been disputed that they are the subject of an agreement about their use to fund the children’s education later down the track.  As the argument to withhold them for that agreed purpose was put by the wife in resisting the husband’s costs claim, it can be assumed she will honour their agreement in the future when the question arises more directly.  

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date: