BK & SK

[2005] FamCA 1222

[2005] FamCA 1222 FAMILY LAW ACT 1975

IN THE FULL COURT      
OF THE FAMILY COURT OF AUSTRALIA                   Appeal No WA9 of 2005
AT PERTH  File No PT 4590 of 1991

BETWEEN:

BK
Appellant Husband
- and -

SK
Respondent Wife

REASONS FOR JUDGMENT

CORAM:  KAY, HOLDEN & BOLAND JJ
DATE OF HEARING:                 23 November 2005
DATE OF JUDGMENT:             23 November 2005

APPEARANCES:  Mr Childs of Counsel, instructed by, Carr & Co, Level 9, 37 St George’s Terrace, Perth WA 6000, appeared on behalf of the Appellant Husband.

Mr Hedges of Counsel, instructed by, Max Owens & Co, 2 Zoe Street, Bunbury WA 6230, appeared on behalf of the Respondent Wife.

BK & SK
WA9 of 2005
CORAM:  Kay, Holden & Boland JJ
DATE OF HEARING:         23 November 2005
DATE OF JUDGMETN:     23 November 2005

Catchwords: APPEALS – COSTS - appeal against order not to order costs in favour of the husband after wife abandoned a s79A application at trial after Judge indicated that the non-disclosure alleged would not necessarily lead to the original order being set aside- held trial Judge paid appropriate attention to the matters in s 117(2A) of the Family Law Act 1975 – open to the trial Judge to decline to make an order for costs in favour of the husband – held it had not been demonstrated that the generous discretion available to a trial judge in costs cases has miscarried – appeal dismissed.

1. KAY J:           This is the husband's appeal against an order made by Tolcon J on 19 May 2005 that there be no order for costs in relation to an application by the wife that his Honour had dismissed.  The gravamen of the Notice of Appeal seeks an order setting aside that order and asking that an order be substituted that the respondent to this appeal - that is the wife - pay the appellant's costs of and incidental to a Form 3 application that had been filed by the wife in June 2003.

Background

1. By way of very short background, it is appropriate to note that the parties had cohabited from 1975 until 1991.  They had married in 1978.  The marriage has long been dissolved.  There were four children born of the marriage.

1. Property proceedings between the parties were compromised by orders that were made in May 1993.  In June 2003, some 10 years later, the wife filed an application seeking to set aside the original property orders on the basis of an alleged non-disclosure by the husband of a shareholding in two family companies.  Her application was supported by an affidavit by the husband's brother in which the husband's brother asserted that the husband had told him that in the family law proceedings he had deliberately failed to disclose his shareholdings in the companies in order to help the family - that is, the husband's parents - and their business, and that he had on various occasions, at the time of the proceedings between the husband and the wife in these proceedings, told his brother he had failed to disclose the shareholdings to the wife.

1. Issues were then joined relating to whether there had been a non-disclosure, whether it had been a deliberate non‑disclosure, whether it had been a material non‑disclosure, it ultimately becoming common ground that the shareholding involved were shares in a corporate structure that had been established by the husband's parents. The shares did not carry full voting rights and the ostensible control of the corporate structure vested in the husband's parents during their lifetime.

1. There was a lot of preparation in relation to the case, and it ultimately came on for hearing before Tolcon J on the day the order was made in May 2005.  Before the case was able to get under way, Tolcon J had some discussion with the counsel about issues that were involved in the case and then called the parties forward and spoke to them directly, indicating that there would be a long way to go in the proceedings and that they may ultimately not be resolved satisfactorily, at least as far as the applicant in those proceedings - the wife - was concerned, because even if she could establish the non-disclosure it may turn out to be a non-material non-disclosure, and in those circumstances any discretion his Honour had under s 79A to set aside the property proceedings was likely to be exercised adversely to her.

1. His Honour urged the parties to endeavour to reach a commercial decision about the future conduct of the proceedings and the matter was then stood down for a while. After it was stood down counsel for the wife indicated that his client was withdrawing the application.

1. His Honour then heard submissions from Mr Dowding SC on behalf of the husband, who sought a costs order in his client's favour. Mr Dowding drew his Honour's attention to the various provisions of s 117(2A) of the Family Law Act and to the matters that Mr Dowding submitted were relevant to be taken into account. They included

·      a disparity in the parties' financial position that favoured the wife considerably,

·     the nature of the proceedings was such that they were unlikely to be successful; 

·     that they were doomed, effectively, to failure from the outset,

although he did concede that there was a non‑disclosure and the failure to disclose, quoting Mr Dowding, "may well raise the hackles, if you like, of a party".

1. Then, having drawn his Honour's attention to the disparity and drawn his Honour's attention to the nature of the proceedings, he said that there were other factors;  that the wife had already got a healthy settlement based on the husband's parents' wealth, or her claims about it, and that was a factor that was relevant.  And finally he came back to emphasise the issue of the financial disparity, saying:

"She no longer has dependents" - the wife - "she has substantial real estate, and compared with that of the husband she is in a much better financial position.  We acknowledge the husband's admission he didn't disclose the existence of the shares, but we draw your Honour's attention to the fact that on oath he said he was unaware of them."

1. So it was asserted that it was not a willful non-disclosure. 

1. The matter was immediately then the subject of the judgment in these proceedings, which is the judgment under attack.  It is a very short judgment.  In it the trial Judge says that:

"Mr Dowding has made submissions referring to the relevant factors set out in section 117(2A) and matters extraneous to the matter before me."

1. His Honour made reference to an offer of settlement which the husband had made, but it is now conceded that it is not a matter to which his Honour should have paid any attention, and his Honour then said:

"It was appropriate for the wife to make the inquiries [that is, as to the non-disclosure.] It is to her credit that she sought a ruling and accepted my ruling prior to the taking of evidence."

1. I should interpose to say that the expression of "sought a ruling" was that in the discussion that took place before the wife withdrew, counsel for the wife asked of the judge a likely outcome.  It was not a ruling in the formal sense of placing submissions and evidence but was more in the sense of seeking some indication of what might occur in relation to the proceedings if certain facts were or were not established.

1. His Honour then said:

"It is to her credit that she sought a ruling and accepted my ruling prior to the taking of evidence.  In these circumstances, where a party has failed to make a full and frank disclosure of financial matters, notwithstanding that it may have no material effect on the end result, and where a party was prepared on day one of the proceedings to seek a ruling and accept that ruling without incurring further costs, I do not propose exercising my discretion and I do not propose ordering costs."

1. The provisions of the Family Law Act relating to costs are set out in s 117 of the Act.  Section 117(1) negates the general rule in civil litigation that costs follow the event by providing that, subject to sub-s (2) and ss 117AA and 118:

"Each party to proceedings under this Act shall bear his or her own costs."

1. Section 117(2) then provides that the Court has a discretion to make such order as to costs as the Court considers just. Section 117(2A) provides matters that the Court shall have regard to in considering what order, if any, shall be made under sub-s (2).

1. In Brown (1998) FLC 92-822, a Full Court judgment of my own with which Finn and Burton JJ agreed, I said that:

"The obligation under section 117(2A) is that the Court shall have regard to the various matters set out thereunder. This is in contrast to the previous position under which costs orders were made, namely under the Family Law Regulations and, in particular, regulation 173 which required that the Court may, in making an order, take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter, in my view, of some substance."

1. I went on to say:

"In many cases there will be an outstanding feature of the case that makes an order for costs appropriate, and the feature which so dominates the scene that it can outweigh any of the other section 117(2A) considerations. In those cases the Court may readily infer that the trial judge has given appropriate consideration to the aspects of section 117(2A) but in the shadow of each of the required aspects is appropriate determined that overwhelmingly the case demands an order for costs be made."

Or in the context of this case, an order for costs not be made. 

1. In Brown it was not apparent that the trial judge had paid any attention to the provisions of s 117(2A). This case is quite different from Brown in that I think that it is quite clear that his Honour has paid appropriate attention to the matters in s 117(2A) by reason of them having been drawn to his attention immediately prior to the delivery of judgment and by his Honour commencing to identify the factors that Mr Dowding had referred to, even though he did not set them out seriatim nor repeat the matters that Mr Dowding had sought to emphasise. In my view it is quite clear that his Honour was conscious of each of the obligations under s 117(2A) but determined in the circumstances that it was not appropriate to make an order for costs.

1. His Honour spelt out why he thought it was inappropriate to make an order for costs, and whilst it may well be that another judge might take the view that an order for costs was appropriate, given the time between the original property orders and the application to set aside, and given the failure of the application to set aside brought about by its abandonment, nonetheless, in my view, it was open for his Honour to decline to make an order in favour of the husband and, in my view, he expressly indicated why he thought that was so. The factors that weighed upon him were the fact that there had been a non-disclosure, be it material or otherwise, and the fact that the wife was prepared to abandon the proceedings without incurring further costs for either party.

1. In those circumstances, in my view, it has not been demonstrated that the generous discretion that is available to a trial judge in costs cases has miscarried.  As Nygh J observed in Jensen v Jensen (1982) FLC 91-263; (1982) 8 Fam LR 594:

“Sub-section (2) goes on to say that if the court is of the opinion in a particular case that there are circumstances that justify it in doing so, it may make such order as to costs as it sees fit. The effect of these provisions has been considered by the High Court in Penfold v Penfold (1980) 5 Fam LR 579. It is clear that sub-s (1) introduces a general rule that there shall be no order as to costs in proceedings under this Act. However, the High Court in Penfold v Penfold has made it quite clear that the court has a wide discretion in awarding costs and that it is not necessary for there to be established special circumstances before an order for costs can be made, nor indeed is it necessary for the court to give any reasons at all for making an order as to costs.”

1. Similarly Nicholson CJ and Maxwell J said in McAlpin (1993) FLC 92-411; (1993) 16 Fam LR 888:

“In Harris v Harris (1991) 15 Fam LR 26; [1991] FLC 92-254; at Fam LR 37; FLC 78,711 the Full Court emphasised the long held principle that: “orders for costs are peculiarly a matter which are within the discretion of the trial judge and it is only in the rarest of cases that the Full Court should interfere with a costs order'’. See also Penfold v Penfold (1980) 144 CLR 311; 5 Fam LR 579; [1980] FLC 90-800; In the Marriage of Kelly (No 2) (1981) 7 Fam LR 762; [1981] FLC 91-108.”

HOLDEN J:  Yes.  I would also dismiss the appeal for the reasons given by the presiding judge, to which I have nothing to add.

BOLAND J:  I too agree with the reasons of the presiding judge and Holden J and have nothing to add.

1. KAY J:  The order of the Court is that the appeal be dismissed.

I certify that the 22 preceding
 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.



Associate