Cainer and Gerller

[2011] FamCA 962

FAMILY COURT OF AUSTRALIA

CAINER & GERLLER [2011] FamCA 962

FAMILY LAW – COSTS – Application for costs – Financial circumstances of the parties – Conduct of the parties – Offers of settlement in writing –No order as to costs made. 

Family Law Act 1975 (Cth) Section 117
Family Law Rules 2004 (Cth) Rules 19.08

APPLICANT: Mr Cainer

RESPONDENT: Ms Gerller

FILE NUMBER: SYC 8564 Of 2007

DATE DELIVERED: 19 December 2011

PLACE DELIVERED: Sydney

JUDGMENT OF: Loughnan J

PLACE HEARD:  Sydney

HEARING DATE: 28 November 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT

HUSBAND:

Mr J. Miller

SOLICITOR FOR THE APPLICANT:

Pearson Family Lawyers

COUNSEL FOR THE RESPONDENT 

WIFE:

Mr B. Richards

SOLICITOR FOR THE RESPONDENT

Briggs & Associates Solicitors

Orders

1.Leave is granted to the wife to apply for costs out of time.

2.No order is made in respect of the costs of the proceedings for property settlement, contravention and a stay.

3.In the event that either seeks an order for the costs of the costs proceedings, that party must lodge and serve written submissions within 28 days or within such further time as the parties may agree. Any submissions in response shall be lodged and served within 7 days thereafter.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8564 of 2007

Mr Cainer
Applicant

And

Ms Gerller

Respondent

REASONS FOR JUDGMENT

1. There are competing applications for costs arising from proceedings between the parties for property settlement and related interlocutory proceedings.

Applications

1. The husband seeks that the wife pay costs assessed in the sum of $100,000 in respect of the costs of proceedings for property settlement, contravention and a stay.

2. The primary application of the wife is that there be no order for costs in respect of the property settlement proceedings. However, the wife formally seeks that the husband pay costs assessed in the sum of $75,000 in respect of the costs of the proceedings for property settlement. In addition she also seeks indemnity costs for proceedings commenced by her Contravention Application filed on 6 October 2010 and costs assessed in the sum of $15,000 in respect of the costs of the proceedings commenced by the husband’s application for a stay filed 16 September 2010. The wife also sought leave to bring costs proceedings out of time.

Documents read

1. The husband relied on the following documents:

Document	Sworn/affirmed	Filed
Application in a case	16.9.10
Affidavit of husband	9.11.10	10.11.10
Affidavit of husband	24.11.10	24.11.10
Affidavit of husband	25.11.11	25.11.11
Affidavit of Susan Pearson	16.9.10	16.9.10
Financial Statement	24.02.10	24.02.10

1. The wife relied on the following documents:

Document	Sworn/affirmed	Filed
Amended Response to Application in a Case	19.10.11
Affidavit of the wife	18.10.11	19.10.11

Short history

1. The substantive proceedings for property settlement and spousal maintenance were commenced by the wife on 12 December 2007 and after a hearing over 5 days in July 2010 were concluded by a judgment delivered by me on 19 August 2010.

The Law

1. The wife’s application for costs was substantially out of time (Rule 19.08 of the Family Law Rules 2004 (Cth) (“the Rules”)) but no objection was made to leave being granted.

2. Section 117 of the Family Law Act 1975 (Cth) relevantly provides as follows:

   117  Costs
   (1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
   (2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
   (2A)  In considering what order (if any) should be made under subsection (2), the court shall have regard to:
   (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.

Discussion

Property proceedings

1. The husband seeks that the wife pay costs assessed in the sum of $100,000 in respect of the costs of proceedings for property settlement, contravention and a stay.

10.The wife seeks that the husband pay costs assessed in the sum of $75,000 in respect of the property proceedings alone although it is submitted on behalf of the wife, in the alternative, that there should be no award of costs and that the general position under subsection (1) should apply.

11.As to the financial circumstances of the parties, in the substantive proceedings I found that my orders would leave the husband with or having had the benefit of non-superannuation assets to the value of $3,149,557 and superannuation assets to the value of $2,564,066. I found that the wife would have or had the benefit of non-superannuation assets to the value of $2,203,815 and superannuation assets to the value of $787,046.

12.There is no subsequent evidence from the husband. His latest affidavit has him as a retired lawyer and non-executive director. I found in the substantive proceedings that the husband earns $2,892 per week, made up of $55 in interest earned on funds invested in Country C, $296 in interest on funds invested with the ANZ Bank, $297 in dividends from D Pty Ltd, $461 in director’s fees from D Pty Ltd and $1,783 by way of an allocated pension from No. 11 Superannuation Fund. I take it that the capacity of the fund to provide income to the husband will be adversely affected by the orders I made. He lives alone and subject to his living expenses, the husband has a surplus of $2,130 in his weekly budget.

13.As was foreshadowed by her in the substantive proceedings, the wife’s evidence in her affidavit sworn 18 October 2011 is that she ceased her employment as a public servant on 22 August 2011 and expected that her employment would be formally terminated as from 31 October 2011. The wife does not anticipate that she will be able to obtain alternative paid employment. The wife anticipates that her income for 2012 will be about $28,883 per annum calculated as the compulsory payment from her self managed superannuation fund. I found that the wife lived alone and that her expenses, inclusive of all living expenses were $841 per week. I noted that “It would seem remarkable that the wife’s living expenses are accommodated by $123.00 per week in credit card payments. Subject to that observation, on the face of her Financial Statement, the wife has a weekly surplus of $717.00.”

14.In addition to her self managed fund the wife has $25,000 in a public service superannuation fund. She owns E Street, Suburb F which, for the purposes of the proceedings had an agreed value of $1,200,000 and owes about $250,000 on that property. She has an interest in G Pty Ltd, subject to a life interest to her mother. The wife’s interest was valued at about $580,000 for the purposes of the proceedings. The wife has about $22,000 in savings.

15.The husband is in substantially more robust financial circumstances than the wife.

16.As to the conduct of the parties in the proceedings –

17.Counsel for the husband submitted that there were delays and difficulties in obtaining relevant information from the wife in regard to her beneficial interest G Pty Ltd.

18.The wife was removed as director of the company on 22 February 2008.  In her affidavit filed 19 October 2011, the wife said, as a result of being removed as director, she was unable to comply with any requests for documents other than for those already in her possession and control.  The wife had only recently obtained employment and was travelling regularly between Sydney and Canberra.  The wife said that these circumstances meant she had limited opportunity to instruct her legal representatives but that she furnished all documents in her possession and control as soon as she practicably could. I cannot find that the wife failed in her duty to produce documents.

19.Following the valuation of the single expert, the husband sought to file an affidavit by his own adversarial expert.  The wife said this inevitably increased her costs because she then sought to appoint her own adversarial expert.  It was submitted for the husband that the wife did not need to go to the expense of obtaining her own adversarial expert and she could have simply adopted the evidence of the single expert. Once an adversarial expert was allowed for the husband, it was not for the husband to advise the wife as to the expert she should retain.

20.Substantial costs were incurred in relation to the husband’s assertion that the wife’s mother lacked testamentary capacity and therefore the wife had a financial resource in her mother’s estate.  The wife maintained throughout the proceedings that any beneficial interest she had in her mother’s estate was not relevant. She opposed incurring additional costs for the appointment of a single expert and argued that she had no expertise that would enable her to form an opinion about whether her mother had legal capacity to amend her Will nor could she compel her mother to undertake a neurological assessment or produce documents in relation to her estate. Ultimately, it was found that there was no evidence that the wife’s mother did not retain the capacity to amend her Will.  It was submitted by the husband that, despite being unsuccessful on this issue, he acted reasonably in the circumstances. Ultimately the husband was unsuccessful on this issue.

21.The wife raised an issue in her affidavit sworn 6 July 2009 in regard to a sum of money received by the husband from Mr H.  It was submitted for the husband that the wife made false allegations, that her conduct was reckless and that it caused him to incur unnecessary costs. The wife said that she was unable to determine the nature of the moneys but, in any event, did not intend to make any allegation of fraud or misconduct.  This issue was heard by Watts J on 30 November 2009.  The wife indicated that she did not intend to rely on the paragraph and it was struck out. In the reasons for judgment delivered on 21 January 2010 his Honour made the following reference:

23.      The husband also seeks a cost order in relation to this application.  My preliminary view, given the findings I have made, is that no such order should be made either way but I will allow either party to make further arguments in relation to any application for costs should either choose to do so. 

22.I note the preliminary view of Watts J and that his Honour was in the best position to make that observation.

23.The wife said in her affidavit filed 19 October 2011 that the husband was non-compliant with orders and directions for financial disclosure, particularly in relation to funds he received from the sale of real estate.  It was submitted for the husband that the wife’s complaints are without foundation.    I did not find that there was a failure of disclosure by the husband.

24.As to offers of settlement in writing –

25.The parties attended mediation and undertook negotiations through their solicitors for several weeks in August and September 2007. On 15 August 2007, the husband’s then solicitor wrote a letter to the wife’s then solicitors making an offer of settlement.  The parties attended mediation on the following day, 16 August 2007, but did not come to an agreement. 

26.On 27 August 2007, the wife’s solicitors wrote to the husband’s solicitor making an offer of settlement.  Omitting the formal parts the letter contained the following:

We refer to our Mr Fowler’s recent discussion with Mr Barkus. It is noted that the parties have had some discussions and that each of them has had some discussions with Mr Benson.

Agreement has not yet been reached. Our client has, however, instructed us to make the following proposal for the resolution of those parts of the dispute about which agreement has not been reached, namely:

1.        That our client receive a sum certain from the proceeds of sale of the home in the amount of $2,500,000.00 together with 35 [per cent] of the amount received for the property in excess of $4,000,000.00

2.        That our client receive by way of further property settlement the sum of $300,000.00 payable by equal monthly installments of $2,500.00 (at the rate of $30,000.00 per year).

3.        That your client’s company advance to our client unsecured save for a guarantee given by [G Pty Ltd] as to repayment the sum of $600,000.00 repayable on our client’s death. The sum is to be an interest free loan.

Please let us know if these terms are agreed and attention can then be given to documents finalising the matter.

27.A counter offer was made by the husband’s solicitors on 28 August 2007 in writing to the wife’s solicitors.  Omitting the formal parts the letter contained the following:

We refer to the offer set out in your letter of 27 August 2007 and are instructed to make the following comments on the numbered paragraphs:

1.        That your client receive $2,500,000 whatever the property is sold for, together with 35 [per cent] of any excess of the net proceeds of sale above $4,500,000. The net proceeds of sale, for the purposes of this paragraph, represent the sum received after costs of sale including legal fees, agent’s commission and other expenses referable to the sale, including advertising and costs of preparing the property for sale including painting etc.

2.        That our client cause payment to your client of $2,500 per calendar month until the death of your client, the death of your client’s mother, our client’s death of the passing of 10 years.

3.        Our client will agree to an interest free loan of $600,000 from [D Pty Ltd], repayable on your client’s death, the amount repayable to be increased by the CPI but he requires security. The purpose of this suggestion and the structure of paragraph 2 by our client was to bridge the gap between your client’s present wish for cash and her future entitlements.

4.        In the alternative to the suggestion in paragraph 3, our client will buy for $600,000, subject to the concurrence of the executor of your client’s mother’s Will and the [Mr G] beneficiaries, your client’s interest in the [G Pty Ltd] shares which she would otherwise receive on her mother’s death. We note that your client values those shares at $520,000. The concurrence referred to is to overcome any suggestion of a failed legacy if your client dies before her mother.

Further, our client requires that your client by her Will, leaves him her entitlement to the shares in [G Pty Ltd] that she is entitled to pursuant to her stepfather’s Will.

Please let us know if we have an agreement so that the necessary documents could be drafted.

As requested by you in our telephone discussion today, we attach a copy of our client’s schedule of assets, liabilities & resources as at June 2007.

28.On 29 August 2007, the wife’s solicitors responded to the husband’s solicitors to the following effect:

Thank you for your letter of the 28 August. We advise that we are instructed to reply thereto as follows:

1.        Not agreed. Our client would agree to the proposal if the excess were set at the net proceeds of sale above $4,000,000.00

2.        Not agreed. Our client would agree to the sum of $300,000.00 being paid by equal installments over 10 years. She would agree that the liability to pay them would terminate on her death prior to their repayment.

3.        Our client agrees to an interest free loan in the sum mentioned. Our client will not agree to a CPI increase. Our client requires the loan to be for her life. She offers the security of a guarantee by [G Pty Ltd]. Your client’s understanding of our client’s future entitlements is flawed. As we have pointed out the death of her mother gives her no cash or even available security.

4.        This proposal will not work inter alia because the company is a private company as you know and our client is informed that consent would not be given to such a transfer. It is understood that your client has already been informed of that fact by the Governing Director. This proposal is not agreed.

Please let us know if we are agreed. Thank you for the revised list you have prepared.

29.The husband’s solicitors wrote back on 31 August 2007. The letter proposed the following change to the offer contained in the letter of 28 August:

…

Our client notes that your client is able to offer “the security of a guarantee by [G Pty Ltd].”

In that regard our client would be prepared to take a first charge over the property acquired by your client on the basis that he consented to a caveat securing the charge being registered over the property. Further, our client would, on the death of your client’s mother, be prepared to exchange the charge over the real estate for a charge over the shares in [G Pty Ltd], subject to receipt of a valuation of the shares being at least twice the amount of the sum secured ($600,000 plus CPI). Our client would also be prepared to give your client the right to repay part of the principal owing if there were any difficulties with regard to the valuation.

…

Your client is invited to accept our client’s settlement proposal as modified by the security question referred to in this letter.

30.On 11 September 2007, the wife’s solicitors responded to the husband’s solicitors in terms which effectively restated the wife’s position as set out in the letter of 29 August 2007.

31.It was submitted on behalf of the husband that if the wife had accepted the husband’s offer of the 28 August 2007, she would have been in a better financial position than she is as a result of the proceedings. 

32.It should be noted that there is no reference in the chain of 2007 correspondence to the terms of the partial agreement to which reference was made in the letter from the wife’s solicitor dated 27 August 2007. Some indication of those terms may be gained from the later correspondence. It should also be noted that it is not possible for me to make findings about the practicability of the competing options that were apparently the sticking points in relation to the element of the proposals dealing with the $600,000 loan.

33.The solicitors for the husband withdrew all settlement offers at the Case Assessment Conference on 27 February 2008.

34.Further offers to settle were made in 2008 and 2009. 

35.On 29 August 2008 the wife’s new solicitor, Susan Pearson, wrote to the wife’s new solicitor, Briggs & Associates enclosing proposed terms of settlement whereby, among other terms, the husband offered to settle on the basis that the wife be forgiven her debts to the husband for $1,500,000 and some other moneys, advanced by him to her or on her behalf.

36.On 25 February 2010 the wife’s solicitors wrote to the husband’s solicitors in the following terms:

In this matter our client will settle all outstanding financial matters between the parties as follows:

1.That within forty two (42) days of the date of orders the husband pay to the wife the sum of $350,000 ("the lump sum").

2.That in accordance with section 90MT(1)(B) of the Family Law Act 1975 the wife is entitled to thirty five percent (35 [per cent]) of the husband's superannuation interest and the entitlement of the husband is correspondingly reduced.

3.That clause 2 of this Order has effect from the operative time which is four (4) days after service of a sealed copy of Orders on the Trustee of the Superannuation Fund.

4.That [D Pty Ltd] in its capacity as trustee of the No. 11 Superannuation Fund shall do all acts and things necessary to:

a.calculate in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 the entitlement created for the wife pursuant to clause 3 of this order; and

b.pay the entitlement whenever the trustees make a splittable payment out of the husband's superannuation interest.

5.     That the wife be declared solely entitled the husband to have no interest in:

a.  The wife's interest in property at [E Street, Suburb F];

b.Monies in any bank, building society or financial institution in the wife's sole name or jointly with any other person;

c.  The wife's shareholding in I Pty Ltd;
         d.  The wife's interest as a remainderman in the Estate of the Late Mr G;

e.Personalty in the wife's possession or control including furniture and effects, art works, jewellery clothing, furs and silver.

6.     That the husband be declared solely entitled the wife to have no interest in:

a.Property at J Street, Suburb K together with contents and wine;

b.  Property at L Town, Country C together with contents;

c.Monies in any bank building society or financial institution in the husband's sole name or jointly with any other person including overseas accounts;

d.  Interest in Life policy with:

i.         MLC;

ii.        M Pty Ltd

e.  2003 Motor vehicle registration no …;
         f.   The husband's interest in D Pty Ltd;

g.The husband's entitlement to the No 11 Superannuation Fund or any other superannuation entitlement due and payable to the husband subject to Orders 2, 3, and 4.

h.Any other personalty in the husband's possession or control including furniture and effects, art works, books and silver.

7.     No order as to costs

37.In a letter from the wife’s solicitor dated 2 September 2010 to the husband’s solicitor, it was noted that the husband made no offer of a superannuation split whereas a superannuation split was ultimately made in favour of the wife.  It was submitted on behalf of the husband that the wife did not seek a superannuation splitting order in the correspondence between the solicitors in August 2007 nor was it sought in her Application for Final Orders filed 12 December 2007.  It was submitted for the husband that the wife maintained her position of not seeking a superannuation splitting order until five months before the trial, therefore, it could not have been a reason for not accepting an offer.

38.The wife said in her affidavit filed 19 October 2011 that the conditions of the husband’s last settlement offer were not practicable in the circumstances.  She also said that the negotiations took place when she was still living in the former matrimonial home with the husband and she was under considerable duress.

39.The wife seemed to make the argument that she was not in a position to assess the husband’s offer of settlement because he had not produced tax returns for himself or for any entity in which he had an interest and because no formal valuations had been undertaken in relation to the matrimonial assets. It was submitted for the husband that the wife must have been satisfied as to the value of net assets because she was in a position to make her own offers of settlement and at no time during the correspondence was it suggested that negotiations should be suspended until any particulars could be ascertained.

40.Given, the delay and the costs subsequently incurred by the parties, it is likely, subject to the entire terms of the proposed settlement being known and subject to the practicability of the proposals in relation to securing the proposed $600,000 loan, that the wife would have been better off than she is now, had she accepted the husband’s offers contained in the letters of 28 or 31 August 2007.

41.As to the argument that the wife was unclear about the husband’s disclosure, it follows from the acknowledgment of the list of assets, liabilities and resources provided by the husband that at that time the dispute about the financial positions of the parties (the pool) was of the order of $700,000 in about $10,000,000.

Conclusion

42.As to the matters referred to in subsection 117(2A) the husband is in a stronger financial position than the wife; there is nothing remarkable about the conduct of the parties in the proceedings; and subject to a number of qualifications that cannot be resolved by me, the wife may have been prudent to accept an offer of settlement in 2007. Taken together, the general position outline in subsection 117(1) should apply. That is to say, the parties should bear their own costs.

Contravention proceedings

43.The husband’s claim is rolled up with the property and stay proceedings. The wife seeks indemnity costs for the proceedings commenced by her Contravention Application filed on 6 October 2010.

44.It is submitted on behalf of the husband that the wife’s contravention application was doomed to failure and in any event was withdrawn by her on 29 November 2010. Thus it is submitted that the wife was wholly unsuccessful. It is argued that the application was formally deficient.

Stay proceedings

45.The husband’s claim is rolled up with the property and stay proceedings. The wife seeks costs assessed in the sum of $15,000 in respect of the costs of the proceedings commenced by the husband’s application for a stay filed 16 September 2010.

46.The submission on behalf of the husband is that as orders were ultimately made in accordance with his application, the wife was wholly unsuccessful in those proceedings.

Discussion

47.The underlying issue in respect of the contravention and the stay proceedings was that the orders for property settlement required the husband to cause a payment to be made out of superannuation funds and he proposed that the payment be delayed until funds could be paid without incurring a penalty for the early withdrawal of invested funds. He also proposed that the ultimate payment be accompanied by an interest component pursuant to the Rules. The wife sought to enforce the obligation and the husband sought that it be stayed.

48.The two sets of proceedings were in effect, concluded by default. By the time the stay application came before the Court the proposed delay was insignificant. In the context of the proceedings, the fact that the stay was ultimately granted was hardly an endorsement of the husband’s original position. In relation to the contravention proceedings a practical election was made not to prosecute.

49.The considerations in respect of the financial circumstances of the parties referred to above, apply equally here.

50.I do not propose to make an order for the costs of either proceedings. The husband was in the wrong in not either complying with the order or securing in a timely way the wife’s agreement or the Court’s indulgence in respect of his failure to comply. Aggravating though that was, a more practical approach is likely to have been available to the wife than simply insisting on compliance with the letter of the order.

Conclusion under Section 117

51.I will make no order for the costs of the various proceedings. There are relevant matters under subsection 117(2A) but they have countervailing effect and the general position under subsection 117(1) should apply. The husband is in a stronger financial position. There was some complexity to the parties’ affairs. Each of the parties was an applicant for property settlement orders. Insofar as the stay and contravention proceedings were the result of the husband’s default, in a perfect world a practical course was open to the parties.

52.The parties raised with me but did not address, the question of the costs of the costs proceedings. They asked that the issue be dealt with by written submissions. In the event that either party presses for those costs they may lodge and serve written submissions within 28 days. Any submissions in response shall be lodged and served within 7 days thereafter.

I certify that the preceding fifty two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan.

Associate:

Date: 19 December 2011