Bulow & Bulow (No 5)
[2021] FedCFamC2F 166
•13 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Bulow & Bulow (No 5) [2021] FedCFamC2F 166
File number(s): ADC 1674 of 2014 Judgment of: JUDGE BROWN Date of judgment: 13 October 2021 Catchwords: FAMILY LAW – application for costs – assessment of legal principles applicable to costs – where proceedings between parties have been vigorously contested – where parties have been self-represented for a majority of the proceedings – where the applicant made a settlement offer before the first trial proceeded – assessment of legal principles applicable to Calderbank offers – where the original trial judge made an order in excess of the offer proposed by the applicant in the offer of settlement – previous order for costs remains outstanding. Legislation: Family Law Act 1975 (Cth), ss 79, 117, 117C
Federal Proceedings (Costs) Act 1981 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), r 4.01
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), Pts 4.2, 12.6, rr 12.08, 12.13, 12.17
Federal Circuit Court Rules 2001 (Cth)Cases cited: Bulow & Bulow (No 3) [2021] FCCA 314
Bulow & Bulow (No 4) [2021] FCCA 1175
Bulow & Bulow [2017] FCCA 2657
Bulow & Bulow [2019] FamCAFC 3
Bulow & Bulow [2020] FamCAFC 120
Browne v Green (2002) 29 Fam LR 428
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
In the Marriage of I & I (No 2) (1995) 22 Fam LR 557
In the Marriage of Kohan (1992) 16 Fam LR 245
In the Marriage of Steel (1992) 15 Fam LR 556
L & L [2003] FamCA 40
Pennisi v Pennisi (1997) 141 FLR 401Other:
J D Heydon, Cross on Evidence (Lexis Nexis, 12th ed, 2020).
Division: Division 2 Family Law Number of paragraphs: 86 Date of hearing: 25 August 2021 Place: Adelaide Counsel for the Applicant: The Applicant appearing In Person Counsel for the Respondent: The Respondent appearing In Person ORDERS
ADC 1674 of 2014 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS BULOW
Applicant
AND: MR BULOW
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
13 OCTOBER 2021
UPON NOTING THAT:
A.There is a previous order of this Court where the respondent was directed to pay to the applicant a lump sum of costs fixed at FIVE THOUSAND AND FORTY FOUR DOLLARS ($5,044.00) and NOTING THAT this costs order remains outstanding.
THE COURT ORDERS THAT:
1.Within twenty eight (28) days of the date of this order, the respondent pay the applicant a lump sum of costs fixed at FIFTEEN THOUSAND DOLLARS ($15,000.00).
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Bulow & Bulow (No 5) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION:
These reasons for judgment relate to various applications for costs arising from lengthy and controversial proceedings between the parties concerned. The applicant for costs is Ms Bulow (“the wife”). The respondent to the application is Mr Bulow (“the husband”). He opposes any order for costs and seeks the dismissal of the wife’s application on the basis that it is an abuse of process.
In broad terms, the wife seeks to be awarded costs, on an indemnity basis, in respect of a trial, which occurred on 23 and 24 November 2016, before Judge Heffernan.[1] The case went to judgment, which was delivered on 22 November 2017. The trial was directed towards the resolution of matrimonial property issues, including what should occur in respect of the husband’s interests in a defined benefit superannuation fund.
[1] It is convenient to refer to this hearing as “the first trial”. See Bulow& Bulow [2017] FCCA 2657.
In general terms, at the end of the first trial, Judge Heffernan ordered that the parties’ non-superannuation assets, which largely consisted of the proceeds of sale of their former family home, should be divided 60/40% in the wife’s favour. More controversially, it was also ordered that there be a split made out of the husband’s superannuation entitlements in the wife’s favour.
The intent of this split was to bring about an equal division of the parties’ superannuation, as at the date of hearing. Controversy arose as a consequence of the different nature of the parties’ respective superannuation holdings. The wife held her superannuation in an accumulation fund; the husband, by dint of his occupation as a public servant, held his in a defined benefit fund.
In addition, it has consistently been the husband’s position that any such split should be made in respect of superannuation values as at the date of the parties’ separation (2012) rather than at trial. It being his case that he made significant salary sacrifice payments into superannuation between separation and trial, in respect of which the wife was not entitled to benefit. On the other hand, it is the wife’s position that she made other relevant contributions, which off-set these payments.
In the context of the current costs proceedings, it is the wife’s position that prior to the commencement of the first trial, she made an offer in writing to the husband, to compromise the proceedings. The husband declined the offer and necessarily the trial had to proceed. It is the wife’s case that Judge Heffernan made an award in her favour, which was greater than what she had earlier proposed to the husband as an appropriate settlement.
In this context, she now asserts that she made her offer because she wished to compromise the litigation in order to avoid for herself the expense and emotional bother of a trial. It is her position that she made her offer knowing full well that it was likely to represent a lesser amount than that she would be likely to be awarded by the Court itself, after all the evidence had been considered. She also wished to avoid incurring the significant expenses involved in a contested final hearing.
As such, it is her view that she provided a powerful inducement to Mr Bulow to compromise the action, which was subsequently vindicated by the final orders made by Judge Heffernan. Essentially, it is her case that it would have axiomatically been in both her and the husband’s interests for Mr Bulow to have accepted her offer, in the light of what has subsequently transpired. In these circumstances, it is her position that she is entitled to receive some form of reimbursement of her costs from the husband, which from her perspective, were unnecessarily incurred as a consequence of Mr Bulow’s unreasonable intransigence in rejecting her offer.
It is also her case that such an outcome would also have been helpful to the overall administration of justice, particularly family law, which relies on parties, wherever possible, resolving their cases expeditiously and consensually. In support of her case, Ms Bulow relies on the statutory provisions of the Family Law Act 1975 (Cth) (“the Act”), particularly section 117(2A)(f), which enshrines the common law principle of what lawyers refer to as a Calderbank offer.
Ms Bulow estimates her costs, for this trial, as being somewhere in the vicinity of $39,000.00. The wife’s application for costs was made on 18 December 2017, approximately one month after Judge Heffernan delivered judgment in the trial concerned. It was supported by an affidavit affirmed by Ms Bulow, to which was annexed the relevant written offer to compromise the proceedings in question. The date of the offer is 30 March 2016.
The application for costs was made returnable on 7 February 2018. The Court record, in respect of this date, indicates that Mr Bulow did not appear. The wife was represented by her counsel at trial, Ms Kari (now Judge Kari of this Court). In the absence of Mr Bulow, the application was listed for hearing on 19 April 2018. It was noted, at the time, that it was the wife’s position that Mr Bulow had been served with the application by both email and by registered post.
The hearing of the costs application was overtaken by intervening events and, as a consequence, has never been previously ventilated until recently. The chief intervening events have been three appeals instituted by Mr Bulow, which have led to the property matters, which were the subject of the first trial being re-ventilated before Judge Heffernan, in proceedings which took place on 13 August 2020, with judgment being delivered on 15 March 2021.[2]
[2] It is convenient to refer to this hearing as “the second trial”. See Bulow & Bulow (No 3) [2021] FCCA 314.
Accordingly, it might be said that the offer to settle the proceedings has been rendered of no effect, given the outcome of the first trial, in respect of which the offer was made, was found to be erroneous to some degree. As such, it was not unreasonable for Mr Bulow to have rejected it, given the outcome of the first trial was rendered nugatory to some extent.
The appeal in respect of the first trial was heard in the second half of 2018, with judgment being delivered on 18 January 2019.[3] The appeal was partially successful, in the sense that the Full Court directed that the Federal Circuit Court reconsider issues relating primarily to the superannuation splitting order, which had been made on the basis that the order made was erroneous in the sense that Judge Heffernan had failed to consider properly the nature and effect of the splitting order as it pertained to the husband’s defined benefit superannuation fund.
[3] See Bulow & Bulow [2019] FamCAFC 3.
It was the view of the Full Court that, as error had been attributed to the trial judge, it was appropriate that each party be granted a costs certificate pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth).
At an earlier stage of proceedings, the Court was called upon to resolve a controversy arising as to what were the appropriate mechanisms for the sale of the parties’ former family home. This was resolved by Judge Mead (as she then was) in December of 2015. The wife’s costs were reserved to trial. Judge Heffernan calculated the costs in question in an amount of $11,889.00, which he incorporated into his calculation of the sum to which Ms Bulow was entitled as a consequence of his assessment of her entitlement to property adjustment. The Full Court specifically noted that this order was undisturbed on appeal.
At the second trial, which took place in the absence of Mr Bulow, Judge Heffernan heard evidence from Mr Y, a lawyer with specific expertise in the valuation of defined benefit superannuation interests. Following this hearing, in the resulting judgment, Judge Heffernan did not resile from his original assessment that there should be a 60/40% division of non-superannuation assets, in the wife’s favour and, in respect of superannuation, it should be equalised.
However, this process of equalisation was informed by the evidence of Mr Y and led to the substitution of a different base amount to be split from Mr Bulow’s superannuation. Ultimately, given his view of issues relating to contribution and other factors, Judge Heffernan elected to adopt the valuations provided by Mr Y in respect of the funds concerned as at August 2020, the date of the second trial.
It is the wife’s position that the re-hearing proceedings resulted in an outcome which was not greatly different in quality to what was the outcome in the first hearing. The essential difference in outcome between the first trial and the second trial being that Judge Heffernan had access to extensive and expert evidence regarding the nature of Mr Bulow’s defined benefit superannuation fund and the practical implications of any splitting order being made in respect of it.
In these circumstances, it is her position that, notwithstanding the appeal and its partial success, so far as Mr Bulow was concerned, it remains the case that she should still be entitled to rely on her Calderbank Offer of 30 March 2016. In broad terms, Ms Bulow proposed an equal division of all assets and superannuation, which, in total, her solicitor, Mr Bell valued at $1,297,855.00. This offer was posited on the basis that the appropriate date for the valuation of the parties’ respective superannuation interests be the date of the offer.
The judgment in the second trial has also been subject to an appeal instigated by Mr Bulow, which is as yet unheard. In these circumstances, given the retirement of Judge Heffernan from the Court, I was called upon to hear an application for a stay of the orders made on 15 March 2021. I declined to make the stay sought by the husband, which largely dealt with a further splitting order made by Judge Heffernan in respect of Mr Bulow’s defined benefit superannuation.[4]
[4] See Bulow & Bulow (No 4) [2021] FCCA 1175.
In coming to this decision, I attempted to review the convoluted and lengthy history of the proceedings between the parties, which have been marked by an extreme level of dysfunction. As previously indicated, Mr Bulow did not take part in the second trial and, as a consequence, it proceeded on an undefended basis. As such, Mr Bulow did not provide any evidence as to his own retirement plans and post separation contributions made by him to his superannuation. I suspect that he is aggrieved by this state of affairs.
By the time of the second trial, Ms Bulow was acting on her own behalf. This has been the situation since about April of 2019. As such, she appeared in person in numerous mentions and short hearings in the lead up to the second trial. These included an unsuccessful application brought by Mr Bulow that Judge Heffernan recuse himself from hearing the case. This decision was also subject to an appeal to the Full Court, which was dismissed.[5]
[5] Bulow & Bulow [2020] FamCAFC 120.
The husband formally responded to the costs application on 1 November 2018. Mr Bulow sought the dismissal of the costs application. Given what has occurred between December 2017 and now, it has not been possible for Ms Bulow’s costs application to be determined. Judge Heffernan, prior to the commencement of the second trial, directed that the relevant document be placed in a sealed envelope on the court file. In addition, Judge Heffernan has recently left the Court. In these circumstances, Ms Bulow has sought that I determine her costs application.
I have not been advised when the Full Court is likely to determine the appeal arising from the second trial. In addition, I understand my decision not to grant a stay in respect of the orders made by Judge Heffernan is also subject to appeal.
For the reasons I provided, at some length, in respect of the stay application, I was not persuaded that Mr Bulow had provided sufficiently cogent grounds of appeal to justify Ms Bulow being deprived of the fruits of the judgment pending the outcome of the appeal. That is not to say that there might not remain a possibility that the appeal will ultimately prove to be successful.
As I endeavoured to explain in the reasons which I provided, the litigation between the parties concerned has been both protracted and convoluted. The chief difficulty arising from the second trial being that Mr Bulow did not take part in it and so did not provide any extensive evidence in regards to the substantive issues arising in it, the chief of which related to his plans in respect of retirement. In addition, he did not provide his own independent expert evidence in respect of the financial implications of the splitting order proposed and, through his absence, was not in a position to challenge the evidence of Ms Bulow’s expert, Mr Y.
In these circumstances, it is not beyond the bounds of possibility that the Full Court will find that Judge Heffernan’s discretion miscarried in respect of the splitting order made by him in the absence of the husband. In these circumstances, the Full Court may itself re-exercise that discretion or remit the case back for a third hearing. In such circumstances, it is arguably premature to consider cost arising from the first trial given that the ultimate outcome of the case may not be reflective of the offer to settle made by Ms Bulow.
However, it seems to me that there was no impediment to the trial judge determining the application for costs prior to the hearing of the appeal. In fact, this seems would have been the preferable course, as the Full Court could then have determined any outstanding controversy flowing from such a course. Without wishing to be disparaging of either myself or Mr Bulow, it seems improbable that he would easily accept any adverse order for costs made against him and is likely therefore to launch yet another appeal, as is his entitlement.
Given there is an appeal on foot, in these circumstances, it seems to me to be the preferable course that I determine the outstanding costs application, in respect of the first trial, which if necessary can be reviewed, by the Full Court in the currently pending appeal process.
THE LEGAL PRINCIPLES APPLICABLE
Section 117(1) of the Act abolishes for the purpose of family law proceedings, the general rule that, in civil proceedings, costs follow the event. It provides that each party should bear his or her own costs in such proceedings.
However, pursuant to section 117(2), if the Court is of the opinion that there are circumstances that justify it in doing so, it may, subject to a number of stipulated considerations, make such order as to costs as it considers just.
The relevant considerations are set out in section 117(2A) of the Act and are as follows:
•The financial circumstances of each of the parties to the proceedings;
•Whether any party to the proceedings is in receipt of legal aid;
•The conduct of the parties to the proceedings, including in respect of issues of discovery and production of documents;
•Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court;
•Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
•Whether any party has made an offer in writing to settle the proceedings and the terms of any such offer;
•Such other matters as the court considers relevant.[6]
[6] Family Law Act 1975 (Cth) s 117(2A).
The Court’s discretion to make an order for costs is a wide one and includes the authority to make an order for indemnity costs. However, the discretion remains one which must be exercised carefully and judicially.
In the case of In the Marriage of I & I (No.2),[7] the Full Court said as follows:
Section 117 confers upon the court a broad discretion in relation to costs. That discretion is one which the Court should not seek to fetter. As was pointed out by the High Court in Penfold v Penfold:
It is an accurate description of s 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s 117(2). As subs (1) is expressed to be subject to subs (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs.[8]
[7] In the Marriage of I & I (No 2) (1995) 22 Fam LR 557.
[8] Ibid 558 (Nicholson CJ, Ellis and Buckley JJ).
Section 117C deals specifically with offers of settlement. Subsection (2) provides as follows:
If:
(a)a party to proceedings to which this section applies makes an offer to the other party to the proceedings to settle the proceedings; and
(b)the offer is made in accordance with any applicable Rules of Court; the fact that the offer has been made, or the terms of the offer, must not be disclosed to the court in which the proceedings are being heard except for the purposes of the consideration by the court of whether it should make an order as to costs under subsection 117(2) and the terms of any such order.
Given the inter-relation between subsections (1) and (2) and the nature of family law proceedings generally, orders for indemnity costs are extraordinary or exceptional in nature. The Full Court of the Family Court noted Inthe Marriage of Kohan that an order for indemnity costs as ‘being a very great departure from the normal standard’.[9] In this context, the Full Court said as follows:
The court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.[10]
[9] In the Marriage of Kohan (1992) 16 Fam LR 245, 254 (Strauss, Lindenmayer and Bulley JJ).
[10] Ibid 258.
It is frequently the case that litigants in family law proceedings have no personal experience of the Court system or in dealing with legal professionals. A case involving division of marital property or arrangements for children may be the first time they have ever even entered a courtroom. Necessarily such cases are replete with emotion and, as such, do not enable the individuals concerned to exercise dispassionate judgment about the issues raised, and the cost, both in emotional and financial terms, of pursing their preferred outcome.
It is even more difficult to be dispassionate if one is representing oneself, and so does not have the guidance and steadying influence of an experienced lawyer. However, it is not the function of the Court to protect such individuals from themselves. In addition, a person should not be penalised because they have taken the prudent step of securing legal representation, often at great personal expense, whilst the other party has not elected to do so.
Regrettably, it is not unknown for parties to be motivated by malice in how they approach litigation, particularly if they are not burdened by having to pay for representation. Every case has its idiosyncratic features, which must be balanced against each other in order to ensure that whatever order for costs is made, it is a just and fair one.
There is no closed category of cases in which indemnity costs may appropriately be awarded. However, in Colgate Palmolive Co v Cussons Pty Ltd,[11] the Full Court of the Federal Court indicated that the kinds of situation in which indemnity costs might be considered included those in which a litigant had:
•Commenced or continued an action knowing it to have no chance of success;
•Made false or irrelevant allegations of fraud;
•Made groundless allegations, which prolonged the case concerned; and
•Imprudently refused an offer to compromise.[12]
[11] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
[12] Ibid 231-233 (Sheppard J).
The previous regulatory regime applicable to costs and which was in force at the time of the first trial was the Federal Circuit Court Rules 2001 (Cth). These Rules have been repealed and replaced by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), which came into force on 1 September 2021. Chapter 12 thereof deals with costs.
If the Court determines to make an order for costs, it has a wide discretion as to the calculation of such costs. Pursuant to rule 12.17, it may order costs in a specific amount or to be assessed on a particular basis, including in respect of indemnity costs.[13] It may also direct that costs be calculated pursuant to a methodology prescribed in schedules to the Rules.
[13] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17.
In brief, the schedules concerned enable the calculation of costs on either a party/party basis or by reference to fixed court events. The procedure in respect of the latter methodology is clearly designed to allow the ready calculation of costs, by either the parties themselves or the Court, which have been incurred following the various procedural stages of litigation from filing to finalisation with judgment.
The schedule in question is referenced in the Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), particularly rule 4.01, which provides that in applying Chapter 12, the Court may apply the events based cost system detailed in Schedule 1.
Accordingly, the Court in the present matter may make an award of costs based on fixed fees relating to the preparation of the case up until certain stages or, as the wife advocates, make an award for indemnity costs, the latter approach requiring the application of Part 12.6 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
If this second approach is adopted, pursuant to rule 12.17(3), amongst other things, the Court may have regard to the reasonableness of each parties’ behaviour in the proceedings concerned and the level of expense sought and whether they are fair, reasonable and proportionate to the matter concerned.
Rule 12.08 provides a list of criteria, for the Court to apply, as to whether costs have been incurred fairly, reasonably and proportionately. Pursuant to rule 12.13(4) a person seeking indemnity costs must provide to the Court a copy of any relevant costs agreement with his/her solicitor.
In the present matter, at relevant times, Ms Bulow was subject to such a costs agreement, which she has provided to the Court. It provides an hourly rate for the provision of legal services which varies according the experience and qualifications of the person concerned. It ranges from $400.00 per hour for a partner to $140.00 per hour for a paralegal. It also authorises disbursements, particularly counsel fees.
In the present matter, Ms Bulow seeks reimbursement of counsel fees in an amount of $14,740.00 and other costs in an amount of $24,347.00, presumably calculated by reference to the cost agreement. In the alternative, she seeks costs be taxed or be calculated by reference to the applicable fixed event schedule, which she calculates allows costs of $12,641.00.
DISCUSSION
It is now appropriate to consider whether there are any circumstances which justify a departure from the general rule provided by section 117(1) by virtue of any of the considerations specified in section 117(2A).
The financial circumstances of the parties
The purpose of an inquiry under section 117(2A)(a) is to enable “the court to have some concept of the relative financial positions of the parties.”[14] As a result of judgment of Judge Heffernan, following the first trial, I am well aware of the parties’ respective financial situations.
[14] See Browne v Green (supra) at 432 at [20]
The husband has apparently recently retired from his position at the government and relies on his superannuation pension for his financial support. He is aggrieved that, due to the splitting order, this has been diminished. He is aged in his late fifties. At first blush, it is difficult to see how Mr Bulow would satisfy any award of costs made against him.
The wife is a little younger and has qualifications as a health care worker. She has the security of employment but cannot be regarded as being able to easily afford the exigencies of litigation. The monies she has paid in legal fees, so far as current state of financial circumstances are concerned and her future security in retirement must be considered to be crippling.
The amount of actual property to be divided between the parties – largely the proceeds of sale of their former family home – were modest. Axiomatically, they have each been deprived of the item of property best calculated to provide them with future security, namely their own home.
This is not a case in which there is a marked discrepancy in financial resources. Neither could afford this case, which has been a financial disaster for each of them. Its outcome is likely to destine each of them to a penurious old age. The case was folly in financial terms. The major distinction between them being the wife chose to proceed with legal advice and the husband did not.
Receipt of legal aid
Neither party was in receipt of legal aid during these proceedings. Accordingly, this is not a relevant consideration.
Conduct of the parties
I come into the case after much water has flowed under the bridge. The relevant documents produced by each of the parties in the case now occupy two cardboard document files. There have been appeals and numerous interlocutory applications. In respect of the sale of the home, nothing was conceded and the hearing before Judge Mead was required. To say the proceedings have been rigorously contested is an understatement.
Regrettably, it is my view, that this case represents the worst aspects of adversarial litigation as it applies to family law proceedings. The extent of the pool of property available to the parties did not justify litigation of such intensity. The major distinction, in respect of their conduct leading up to the first trial, was that Ms Bulow elected to be represented, whilst Mr Bulow did not.
Mr Bulow’s lawyer withdrew in March of 2016, well before the trial. A few weeks earlier, the lawyer concerned had engaged in a process of settlement negotiations, which ultimately led to Ms Bulow’s formal offer to compromise, which is central to the current deliberations. In this context, I accept unequivocally Ms Bulow’s evidence that she fervently wanted to avoid a final hearing, which she could ill afford.
The dynamic between the parties was and remains an extremely difficult one. In these circumstances, I can appreciate why Ms Bulow would have been unwilling to proceed to the first trial without legal representation. Mr Bulow was entitled to proceed without representation but that does not absolve him of responsibility for the consequences of this for Ms Bulow. It did not provide him with carte blanche to be as unreasonable as he wished. He was not entitled to proceed with impunity because his actions had no direct financial implications for him.
I am concerned that the fact that Mr Bulow was not incurring legal fees in the months leading up to the trial and during the trial itself, whilst Ms Bulow was incurring legal fees, was utilised as a mechanism to gain an advantage over her. Essentially, Mr Bulow could be foolhardy or even malicious because such conduct had no immediate consequences for him. The only remedy to such a situation is an award of costs.
Failure to comply with previous orders
This is not a relevant consideration in this matter.
Party wholly unsuccessful
This is not a relevant consideration in this matter. The relevant proceedings did not represent a zero sum game. There was always going to be a division of property and some form of splitting order made. The controversy in the case was on the parameters of the division and the split.
Offers to settle in writing
This, along with the respective financial circumstances of the parties, constitutes the most important consideration in this case. The import of section 117(2A)(f) is to ensure that, when offers to settle are made, they are seriously considered by the other party concerned.
Litigation is expensive and for that reason is not to be embarked upon lightly. Accordingly, courts such as this one should encourage the parties to litigation to seek a compromise of their proceedings and should discourage a party from cavalierly disregarding any reasonable offers to settle.
Generally speaking, negotiations between the parties and/or their legal advisers, to compromise proceedings under section 79 of the Act are privileged.[15] Section 117(2A)(f) does not specifically delineate how an offer to settle proceedings is to be made, other than it is to be made “in writing”. Section 117C is more specific. It authorises offers to settle in accordance with rules made by the Court and stipulates that such offers are not be disclosed to the Court itself, until such time as an application arises under section 117(2) of the Act.
[15] See In the Marriage of Steel (1992) 15 Fam LR 556, 560 (Nicholson, Strauss and Nygh JJ).
Part 4.2 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) stipulates that an offer to settle is made without prejudice, unless the offer states that it is an open offer. Such offers need not be filed with the court. They may also be withdrawn. They remain privileged until an issue of costs arises following the completion of the matter.
Accordingly, sections 117(2A)(f) and section 117C, together with the applicable rules, recognise the procedure known as a “Calderbank” letter or offer. This procedure was described in Cross on Evidence as follows:
This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but is now recognised to be of general application. The consequence of marking an offer “without prejudice save as to costs” is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties – they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.[16]
[16] J D Heydon, Cross on Evidence (Lexis Nexis, 12th ed, 2020) 1018 [25360].
In Browne v Green, the Full Court said as follows:
We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.[17]
[17] See Browne v Green (2002) 29 Fam LR 428, 439 [57] (Kay, Coleman and Warnick JJ).
The relevant offer, made by Ms Bulow, was in my mind, carefully considered and calibrated. It was also made well in advance of the date set for the final hearing and so provided Mr Bulow with ample time to consider it. Its concluding paragraph placed Mr Bulow on notice that the offer would be relied upon, if necessary, in respect of the issue of costs.
Ms Bulow’s offer was made in response to an offer made by Mr Bulow’s former solicitor. In that offer, Mr Bulow indicated his opposition to there being any split made from his superannuation in the wife’s favour, in lieu thereof he proposed that she should receive a larger proportion of the proceeds of sale of the former family home. In terms of the split, he utilised figures as at the date of the parties’ separation. He calculated the sum due to the wife as being $313,620.00 and that each otherwise keep the superannuation standing in their respective names and other items of property.
In this context, the wife was prepared to concede that the husband keep his superannuation but proposed that she receive a greater cash payment reflecting a larger combined asset pool, with superannuation valued as at the current date. Ultimately, at the first trial, Judge Heffernan adopted current figures and divided non-superannuation assets in a manner which favoured the wife and split superannuation equally, requiring a split to be made from Mr Bulow’s defined benefit fund.
It is Ms Bulow’s evidence that the outcome of the first trial resulted in her receiving a total division of property and superannuation, which was $112,781.50 in excess of what she offered to compromise the proceedings. This figure is calculated on the basis of the value of superannuation and property being combined, at trial, which was the she had advocated in her settlement offer.
However, Judge Heffernan ultimately determining that issues of justice and equity dictated he make adjustments in respect of both superannuation and non-superannuation assets, an approach ironically which neither party had advocated in their respective pre-trial offers.
If Mr Bulow had accepted the offer in question it would have negated the concerns and complaints he has made subsequently about the unfairness of a split to his defined benefit superannuation to him. In essence, Ms Bulow indicated a willingness to take more of the non-superannuation property so that Mr Bulow could retain the entirety of his defined benefit superannuation, which was the outcome apparently preferred by him.
Essentially, Ms Bulow considered her situation at the date of trial was better served by her having access to a large cash payment. What was her motivation in this regard is not clear to me but given her age, continued employment, the fact that she had some corpus of superannuation, it may well have been the case that her idiosyncratic preference was to be able to preserve and pay down the home which she had acquired post separation in order to give her the degree of financial security to which she individually aspired.
The Court, in property cases, is often confronted by the challenge represented by how to equitably distribute superannuation and non-superannuation assets between separated spouses, who may have disparate aspirations and future needs.[18] Parties may have different views as to what suits them in this regard. In such circumstances, it makes sense for them to endeavour to settle cases on a mutually acceptable basis.
[18] See L & L [2003] FamCA 40 (Moore J).
The dilemma demonstrated by the Full Court arising from this case (and indeed all cases concerning defined benefit superannuation) is that the value of such funds is unknowable because the obligation to payout the superannuation, once it reaches the payment phase, is open ended. In general terms, the ability to access an income stream for the remainder of one’s life is potentially – depending on the vagaries of individual lifespan – a very valuable asset indeed and, as the holder’s life ensues, an asset of increasing value.
The difficulty for a court dividing such a financial resources between separated spouses is that it can only rely on informed estimations of the value of such a fund derived from actuarial in doing so. In addition, the quality of the fund split off in favour of a former spouse is fundamentally of a different nature, as it becomes an accumulation interest.
Ms Bulow’s offer avoided this difficulty. She was prepared to trade off the advantage of receiving more superannuation, albeit in accumulation form, which would have enabled Mr Bulow to retain the uncertain but open-ended benefit of having an income stream available to him for the remainder of his life. Necessarily such an outcome would has been of great but inchoate potential benefit to him and importantly seems to have been his preferred outcome throughout the entirety of the proceedings.
In all these circumstances, it is in my view that it represented an axiomatically good offer, particularly given Judge Heffernan adopted a different approach. Although the Full Court was critical of how Judge Heffernan approached the issue of the split, particularly in terms of the evidence available to him as to the implications of the split, it did not reject the notion that such a split should not be made. Nor did the Full Court reject the proposition that valuations at trial should be adopted – this was Ms Bulow’s view but not that of Mr Bulow.
Accordingly, I find that the compromise put forward by Ms Bulow did represent a significant reduction in what were entitlements at trial and the form of her offer was one calculated to appeal to Mr Bulow, particularly given what he had indicated were his personal priorities. His refusal to accept the offer put Ms Bulow to considerable expense, which she could ill-afford.
In Pennisi v Pennisi,[19] the Full Court of the Family Court said as follows:
“…it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror… We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded…
The plain words [of section 117(2A)(f)] 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 payment 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 should be given to this factor in considering the question of costs. The principle must not, however, be rigidly applied. Offers must be seen within 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 if 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.” [20]
[19] Pennisi v Pennisi (1997) 141 FLR 401.
[20] Ibid 411 (Nicholson CJ, Barblett DCJ and Faulks J).
In all these circumstances, it was not objectively reasonable for Mr Bulow to have rejected the offer in question. Ms Bulow’s offer was a commercially based and pragmatic compromise motivated by her understandable desire to avoid vitriolic litigation.
CONCLUSIONS
At the end of the day, it is the responsibility of the Court to balance the various matters set out in section 117(2A) to arrive at a result, which it considers just. I am well aware of the serious consequences for the husband, if an order for costs is made against him. However, in my view, it would result in an injustice to the wife, if the husband was able to escape the consequences of rejecting the wife’s carefully considered offer, with their explicit threat as to costs, by merely pleading tightened financial circumstances now, particularly given the assertive attitude he has adopted in the litigation to date. Accordingly, I have reached the conclusion that an award for costs should be made in the wife’s favour.
The more difficult aspect of the case is considering what should be the quantum of those costs. Adoption of the relevant schedule results in a figure of $12,641.00, which falls short of the sums actually expended by the wife. She is also entitled to the earlier award in her favour made by Judge Mead (as she then was), which Judge Heffernan calculated to be $5,044.00 and which remain outstanding.
I propose allowing her costs in an amount of $15,000.00 together with the costs already awarded in her favour and confirmed by the Full Court. For all these reasons, the orders of the Court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 13 October 2021
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