Billington & Billington

[2008] FamCA 348

FAMILY COURT OF AUSTRALIA

BILLINGTON & BILLINGTON [2008] FamCA 348

FAMILY LAW – COSTS – Certification for Senior Counsel and two counsel – circumstances where appropriate – significance of an offer of settlement.

Family Law Act 1975 (Cth)

G & G [2000] FamCA 889
Penfold v Penfold (1980) 144 CLR 311
Pennisi and Pennisi (1997) FLC 92-774

APPLICANT: MRS BILLINGTON

RESPONDENT: MR BILLINGTON

FILE NUMBER: SYF 3567 of 2005

DATE DELIVERED: 21 May 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: BY WAY OF WRITTEN SUBMISSIONS

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: BY WAY OF WRITTEN SUBMISSIONS

SUBMISSIONS RECEIVED FROM:

SOLICITOR FOR THE APPLICANT: BARKUS EDWARDS DOOLAN

SOLICITOR FOR THE RESPONDENT: WATTS MCCRAY

Orders

1. That the husband pay the wife’s costs or and incidental to:

   (a)       the application of the husband filed 1 May 2007;

   (b)the wife’s application for a production of documents culminating in the order of 12 July 2007;

   (c)the oral evidence of the single expert witness Ms W; and

   (d)the proceedings generally as and from 20 July 2007 unless otherwise covered in (a) to (c) hereof.

2. That pursuant to Rule 19.50 of the Family Law Rules 2004, IT IS CERTIFIED that it was reasonable for the wife to engage two counsel, one of whom was senior counsel.

3. That the application in a case filed 16 January 2008 and the response to the application in a case filed 1 April 2008 are otherwise dismissed.

4. That the payment of the costs referred to in these orders be stayed pending the outcome of the appeal filed by the husband.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: SYF 3567  of 2005

MR BILLINGTON

Applicant

And

MRS BILLINGTON

Respondent

REASONS FOR COSTS JUDGMENT

1. On 14 December 2007 I delivered judgment in property proceedings between the husband and wife after a six day trial which commenced on 9 July 2007.  I made provision for costs applications and submissions.

2. On 16 January 2008, the wife filed an application for costs supported by an affidavit.  In her application, the wife sought that the husband pay her costs generally arising out of her application filed on 22 July 2005.

3. The general order for costs sought was more precisely defined in the written submissions provided by her counsel.  Those submissions included orders sought in various alternatives.

4. No precise details as to the quantum of the costs has been provided.

5. On 1 April 2008, the husband filed a response to the wife’s application supporting it with an affidavit.  In essence, he sought that the wife’s application be dismissed.  That application was ultimately supported in writing by the submissions of counsel. 

6. In her affidavit, the wife set out chronologically, the offer of settlement made by her on 19 December 2005.  She said she offered to settle for orders that provided for her to retain the B property, that any loan account she had in the Family Trust and any interest therein be transferred to the husband along with shares in W Pty Ltd and F Pty Ltd.  She sought appropriate indemnities.  More importantly, she sought that the H property be sold and the net proceeds be divided as to 70 per cent to her and 30 per cent to the husband. 

7. In her affidavit, the wife said that the conciliation conference schedule of assets, liabilities and resources was prepared on the basis that the net pool was said to be $13,487,991 but she said it was significantly less than that from the perspective of the husband.  She then set out in that document, a division of the various assets as she saw them and said that she was seeking 78 per cent of the pool of assets and leaving the husband with 22 per cent. 

8. The wife’s affidavit said that on 10 January 2006, the husband responded proposing that he retain the H property and in addition, the wife pay him $750,000.  Otherwise, the same sort of orders to which I have earlier referred sought by the wife were proposed. 

9. On 20 July 2007, the wife sought a payment of $900,000 in return for the transfer of the H property to the husband.  Otherwise the division of the remaining assets was not controversial.

10. It is significant to point out that the trial had commenced on 9 July 2007 and continued over a period of the succeeding four days.  The offer to which I have just referred therefore occurred during the adjourned period.

11. On 14 August 2007, the husband provided an offer of settlement but the critical page setting out the offer of payment by the husband (if any) was not included in the affidavit of the wife filed 16 January 2008.

12. The wife’s affidavit then affixed a long series of correspondence.  It included a schedule of assets and liabilities which was the document that I was handed in July when the case began.  It is clear from a letter dated 12 October 2007 from the husband’s solicitor to the wife’s solicitor that the husband did not adopt that schedule and Mr Batey of Counsel during the hearing had made that clear. 

13. After the July adjournment, there was correspondence between the lawyers about how to deal with the Family Trust and the shareholding in F Pty Ltd.  The correspondence included assertions about the views of the children as beneficiaries of loan accounts and shareholdings in the respective trust and company.  The parties clearly could not agree on what views their children held. 

14. In submissions on behalf of the wife it was said that the offers of settlement to which I have earlier referred were clear and unambiguous and open to the husband to accept.  It was asserted that they were reasonable in their terms and were exceeded by the adjustment ultimately that I ordered.  On the other hand, it was argued for the husband that the parties were significantly at odds as to the identification and value of the asset pool and that those issues required determination.  Counsel for the husband argued that it could not therefore reasonably be suggested that the husband was in a position where he had both the information and capacity to properly consider his position in relation to the terms of the offer. 

15. In Pennisi and Pennisi (1997) FLC 92-774, the Full Court considered this issue and made clear that the offers had to be seen in the context of the case and the extent of the knowledge of the financial circumstances of the parties whilst the offer was alive. The Full Court gave as an example the fact that it was not uncommon to find relationships where one party had significantly less grasp of the financial arrangements or that the financial arrangements were so complex that it would be premature to accept the offer.

16. I reject the husband’s argument in this case.  The husband must have known of the possibility that his stance may not be accepted in respect of each of the issues about which he was litigating.  He proceeded in the light of that risk.

17. Counsel for the wife submitted that ultimately the husband was ordered to pay a sum significantly exceeding the payment for which the wife was prepared to settle and that that justified an order for costs.

18. Counsel for the husband said that when I turned to s 117(2A) of the Family Law Act 1975 (Cth), I could not make a finding that there were justifying circumstances as an essential preliminary to the making of an order for costs. For reasons which I shall set out, I reject that.

19. Section 117(1) of the Act is the provision which requires that as a general principle, each party shall bear his or her own costs of the proceedings. If the circumstances justify me so doing, I may make an order for costs but when considering what order to make, if any, I am obliged to take into account the matters set out in s 117(2A). It is important to recognise that whilst those matters are to be considered, the list is not exclusive or exhaustive.

20. It is also important to recognise that there is nothing in the provision that requires that I be satisfied that the circumstances are exceptional or unusual.  The obligation is to justify the conclusion that costs should be ordered.

21. In my reasons for judgment, I said there were numerous issues in dispute many of which arose out of the conduct of the litigation itself.  For example I said:

    104.Several questions were asked of the husband about the post-July financial position and his response was that he did not know.  I had not been made aware at that stage of the requests referred to in the letters that I have mentioned.  Senior counsel for the wife asked for an admission that the husband’s accountants had written a letter on 2 August 2007 about the Family Trust’s gain for the year ended 30 June 2007 and that the response had only been produced at the hearing. On the basis of an objection as to its relevance, no admission was forthcoming from the husband.  This required the wife’s solicitor to give evidence of the trail of enquiry from July to the date of the hearing.  The significance of this material was the fact that the husband had possessed some detail about the Trust from his accountants and not produced it.  His evidence before me was that the income was unclassified and that he could not remember details about distributions.  In light of the requests from the wife’s solicitor from July, it is hard to understand the husband’s rather flippant attitude to the obligation of disclosure.  He is the Managing Partner of the [P] Group and I find that he managed the Family Trust. 

    105.Having watched the energy expended on the financial issues in this case and in particular, the involvement of the husband’s accountants, his shadow expert and knowing that the [P] Group had its own internal accountants in the exercise undertaken by the single expert of the valuation of the husband’s interest in [P Group], the husband’s attitude about the 2007 figures is not acceptable.  What saves the husband from stronger criticism is firstly the quantum of the valuation of all of the assets was not really in dispute and secondly, he acknowledged that his ongoing drawing from the [P] Group will be much the same as it had been in the past.  It is a significant income and very relevant to the issue of the factors under s 75(2) of the Act.

22. There was a dispute about the value of what I shall describe as the husband’s business interests.  In my view, that valuation dispute was a modest one but considerable time was spent by the husband challenging it including, unsuccessfully, the admission of evidence from an adversarial witness.  That was an exercise that required time and the expenditure of costs.

23. I added the value of the assets of a trust and family company to the pool notwithstanding the husband’s protestations that he had no control and that the interests of the adult children of the marriage in the accounts of the entities should not be added to the pool.  I found otherwise.  Considerable expense and time occurred there.

24. The wife too argued about issues.  She resisted the adding back to the pool of a payment she made unilaterally to an adult daughter.  That issue too took time.  I found the payment to be a premature distribution by the wife. 

25. There was a dispute about capital gains tax.  Having found that the wife was not likely to sell shares in the foreseeable future, I treated the risk of capital gains tax as a s 75(2) matter. 

26. There were disputes about contribution and s 75(2) adjustments.  These latter issues were in part, dependent upon findings as to the size of the pool. 

27. Having regard to just the matters I have referred to, it is evident that the case was complex and had issues warranting considerable work by the lawyers.  Counsel for the husband in his written submissions described the case as complex.

28. Before turning to the matters that I am otherwise required to determine, I am satisfied that this is a case in which I am justified in departing from the general principle relating to costs having regard to the way in which the matter was litigated.  The wife seeks costs orders with a number of alternatives and in my view, it is appropriate to say that she was justified in seeking costs in respect of some of the matters to which I have referred above and to which I shall return.

29. In respect of the question of s 117(2A), there are a number of discrete topics but as I have earlier mentioned, no one factor is predominant nor do all of them have to be satisfied. Ultimately, the whole question of costs is a broad discretionary one (See Penfold v Penfold (1980) 144 CLR 311).

30. In respect of the financial circumstances of the parties, there can be no argument that the wife has substantially greater assets than does the husband.  The wife acknowledged that in her counsel’s written submissions.  The wife pointed to the fact that the husband has an income approximating $600,000 per annum greater than that of the wife and that that therefore diminishes the significance of the capital disparity.  Counsel for the husband points to the fact that the disparity is more marked in this case by virtue of the fact that the husband is retaining assets which were either notional or not obtainable and it must be remembered that there were some add-backs for legal fees paid.  The disparity between the parties is large and in the circumstances of this case, that would be a basis upon which I would not make an order for costs in favour of the wife if that were the only issue.

31. The wife argued that the conduct of the husband in the proceedings justified an order for costs having regard to his attitude to disclosure and the way in which he conducted the case in respect of the single expert witness.  In addition, it was said that the husband had served affidavit material from six medical practitioners as to his future health and ultimately did not proceed with that material. 

32. Counsel for the husband submitted that the husband could not be criticised for the approach adopted by him in respect of the evidence of a single expert witness because in fact that witness had made an error that was only picked up after consultation with the proposed shadow expert.  In addition, the withdrawal of the material in relation to the medical evidence had been drawn to the attention of the wife’s lawyers immediately prior to the commencement of the proceedings.  There is however still some justification in my view for an order for costs having regard to the attitude to disclosure that the husband took.  That certainly prolonged the hearing.

33. Section 117(2A) requires me to consider whether a party to the proceedings has been wholly unsuccessful in the proceedings. The wife asserted that the husband sought leave to adduce evidence from an adversarial witness and had been unsuccessful. That issue was ventilated initially in the Court on 1 June 2007 and costs were reserved. When the matter was determined by me, the husband was unsuccessful. In the meantime, the wife had incurred costs as a result of that exercise.

34. The husband’s response was that the orders that were made as a result of the initial application were consented to but the husband was ultimately unsuccessful.  He pointed to the fact that had he not undertaken that exercise, the evidence of the single expert witness would have been incorrect.  That does not necessarily follow because the husband would have been entitled to test the evidence and make inquiries of the single expert witness before trial in any event.

35. I have already said that the wife was not entirely successful either.  She did not succeed on the money to the daughter issue nor on the capital gains tax issue.  The litigation of those matters contributed in a modest way to the extension of the hearing.  In my view, they did not have any real impact on the outcome in terms of costs for the parties.

36. In general terms therefore whilst the husband has not been wholly unsuccessful, he has been largely unsuccessful and that is most apparent from the offer of settlement of the wife.

37. The approach of the husband in respect of the single expert witness must mean that the wife incurred costs in a dispute that was modest.  A significant amount of costs was incurred in respect of the dispute about the production of documents that was connected with the single expert witness issue as well as the court time spent in the husband pursuing his view with the witness Ms W.

38. As such, the two matters that justify a departure from the general principle are the offer of settlement and the issue of the single expert witness valuation.

39. In respect of the wife’s offer to settle, the husband, in my view, was at greatest risk from 20 July 2007.

40. Overall, this is a situation in which there is a justification for the husband to contribute towards the costs of the wife in respect of:

    (a)the husband’s application filed 1 May 2007 because that is when he sought to adduce evidence from the adversarial witness;

    (b)the wife’s application for a production of documents culminating in the order of 12 July 2007 because that is an issue that was bound up with the evidence of the single expert witness;

    (c)the oral evidence of the single expert witness Ms W because the issue was a modest one; and

    (d)the costs incurred as and from 20 July 2007 not otherwise covered in (a) to (c) above because of the wife’s offer to settle.

41. Part of the wife’s application is for not only the certification for senior and junior counsel but clearly the allowance for costs in respect of two counsel.  The husband’s responding submission said that in the event that a costs order was to be made, there could be no justification for the certification of two counsel.  Having said that, the husband concedes that:

    There can be no argument that the proceedings before the Court involved complex legal argument and principle in relation to the determination and consideration of the asset pool.

42. In G & G [2000] FamCA 889 the Full Court (Nicholson CJ, Kay and Brown JJ) said that the issue as to whether or not it was appropriate to engage senior counsel in any one matter was an issue for the relevant taxing officer rather than the Full Court. The trial judge is the person who knows the complexity of the matter and can see whether the involvement of not only senior counsel but two counsel, is reasonable in the circumstances. It is interesting to note that Rule 19.52 provides for a registrar to allow the costs of engaging more than one counsel but there is no similar provision in the certification clause in Rule 19.50. That seems to me to be simply an oversight and I do not read Rule 19.50 to exclude a judge from making the same determination that could be made by a registrar. In so far as it might be necessary to do so, I would apply the provisions of Rule 1.12(1) accordingly. In that process, I take into account the number of days over which the matter was conducted and the various tasks that were clearly and obviously undertaken by each counsel. I agree with counsel for the husband that this was a complex matter not only in respect of issues of law. The facts in this case were difficult as well. In the circumstances, I think it was appropriate for two counsel to be involved and I propose to certify for senior and junior counsel accordingly.

I certify that the preceding Forty Two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  21 May 2008