Carano & Carano (No 3)
[2024] FedCFamC2F 833
•2 July 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Carano & Carano (No 3) [2024] FedCFamC2F 833
File number(s): MLC 10929 of 2021 Judgment of: JUDGE O'SHANNESSY Date of judgment: 2 July 2024 Catchwords: FAMILY LAW – costs application – whether section 102NA scheme is “legal aid” – whether unintended consequence of section 102NA scheme – order for proportion of scale costs to be paid by Wife to Husband – where Wife was unsuccessful in several claims – where Wife had rejected offers in writing which “beat” the amount she received at trial – order for scale costs to be paid by Wife to Second and Third Respondents – where Wife was wholly unsuccessful in her claim against Second and Third Respondents – orders for costs are by way of compensation, not punishment. Legislation: Family Law Act 1975 (Cth) ss 102NA, 117, 117(2A) Cases cited: Browne & Green [2002] FLC 93-115
Calderbank v Calderbank [1975] 3 All ER 333.
Murray & Murray [1990] FLC 92-173
Division: Division 2 Family Law Number of paragraphs: 53 Date of last submission/s: 27 May 2024 Date of hearing: 21, 27 May 2024 Place: Melbourne Counsel for the Applicant: Ms Clarkin and Mr Brear Solicitor for the Applicant: Le Brun & Associates Counsel for the First Respondent: Ms Taylor Solicitor for the First Respondent: SMR Legal Counsel for the Second and Third Respondents: Mr Livitsanos Solicitor for the Second and Third Respondents: Perry Weston Lawyers ORDERS
MLC 10929 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS CARANO
Applicant
AND: MR CARANO
First Respondent
MR C CARANO
Second Respondent
MS B CARANO
Third Respondent
ORDER MADE BY:
JUDGE O'SHANNESSY
DATE OF ORDER:
2 JULY 2024
THE COURT ORDERS THAT:
1.Ms Carano (‘the Wife’), pay the sum of $92,543 on account of costs of and incidental to these proceedings to Mr Carano (‘the Husband’) contemporaneously with her receipt of the payment she is to receive pursuant to the orders of 22 March 2024 (‘the Husband’s scale costs’).
2.Ms Carano (‘the Wife’), pay the sum of $40,868 on account of costs of and incidental to these proceedings to Mr C Carano and Ms B Carano, the second and third respondents (‘the senior Caranos’) contemporaneously with her receipt of the payment she is to receive pursuant to the orders of 22 March 2024.
3.For the avoidance of doubt, the Husband be and is entitled to set off or deduct the Husband’s costs against the payment due to the Wife pursuant to the orders of 22 March 2024.
4.IT IS DIRECTED THAT the car keys tendered at trial by the Husband, and the original documents tendered by the senior Caranos be delivered to the Husband’s solicitor via post for distribution.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
RES TEMPORE REASONS FOR JUDGMENT
JUDGE O’SHANNESSY:
These are the settled reasons of an oral judgment delivered some time after the hearing. These reasons were delivered orally. These settled reasons have been corrected from the transcript where appropriate to correct grammatical errors, to add citations, passages of authorities and evidence, and to attempt to make the orally delivered reasons easier to read. The substance is unchanged.
INTRODUCTION
In the matter of Carano, I must determine applications for costs filed by Mr Carano (‘the Husband’), and his parents, Mr C Carano and Ms B Carano, the second and third respondents to the proceedings (‘the senior Caranos’). Following a trial before me which commenced on 12 March 2024 and proceeded over seven days, I delivered my orders and reasons on 22 March 2024, see Carano & Carano (No 2) [2024] FedCFamC2F 461.
The effect of those orders was that each of the Husband and Wife were to retain certain chattels. The Husband was to retain the property, being the former matrimonial home (‘the property), and pay to the Wife the sum of $447,000 within 120 days (‘the payment’) or the property was to be sold, and the Wife was to receive the payment plus interest from the proceeds of sale. In addition, the Wife was to receive a superannuation payment split from the Husband's superannuation of $163,000. Those figures are rounded.
The senior Caranos were entitled to retain as their own property the chattels and their share of the other jointly owned chattels that the Wife had claimed belonged to the Husband and were available for property settlement between the Husband and her. The cases of the Husband and the senior Caranos were aligned. The Husband had accepted and promoted the claims of the senior Caranos.
Background
As to the substance of those proceedings, they can be found within the judgment of Carano (No 2). This was a long marriage with three children, and two of those children are now adults. It is unnecessary to recite here every dispute within the primary dispute that the parties pressed for resolution or that was necessary to determine. A summary of that decision will be apparent from the following passages:
116The Husband made considerable initial contributions. He brought in the land of the [property] unencumbered, including with a shed constructed upon it, but not a house. He brought in a period of working from when he was 17 with his employer, where he ultimately received a redundancy payment in about 2004 relating to that period of employment. He brought in a significant number of items of old machinery, albeit at that time they were of little value, or at least far less value than what they came to be worth with the growing interest in the discipline of old machinery collection that the valuer was able to value in 2022. It is clear that the Husband made a significantly greater initial contribution than the Wife.
…
119 I am satisfied, however, that the Wife's support of the Husband during his illness is a significant matter as to her contribution. I am satisfied that the extent of the Husband's illness is a significant aspect of the life of the Husband and Wife together. The Husband's evidence was compelling and had a real verisimilitude about it when tested as to the extent of his psychiatric or depressive disability during the relationship. I accept his evidence in that regard.
120The other side to that coin is that that made the Wife's necessary contribution and activities in home-making and parenting and assisting the Husband with his medication and attending medical appointments all the more onerous and difficult. Hence, I regard the Wife's contribution of supporting the Husband during the period of his illness as very significant.
…
133The substantial initial contributions by the Husband are taken into account, but they are overwhelmed by the many years of contribution of both of the Husband and the Wife over many years. Those overwhelming contributions include the Wife's contribution and the Husband's contributions after separation, and the other aspects that make the Wife's contributions of a higher quality than otherwise as described above relating to the Husband's illness and [X]'s circumstances.
134The Wife's very onerous contributions as home-maker and parent were largely invisible to the Husband and once upon a time to the men of society. In regards to contributions before, during, and after the separation, I am satisfied overall that both of these parents worked long and hard in different roles to the extent that they were able. That is so notwithstanding that in different ways each now regards the relationship as unhappy for significant periods. In those circumstances, I will regard and assess contribution as being roughly equal during the relationship up to this point in time.
…
143The Husband's case is that during the relationship he suffered depression but not as extensively as asserted by the Wife, nor with the impact upon the Wife that she asserts. But he asserts that that condition, though less serious than the Wife asserts during their marriage, is such that it will likely prevent him from ever having any useful paid employment in the future, save for minimal income from tinkering with his machinery.
144The Wife has the reverse of that conundrum. Her position is that the Husband's condition during the relationship was significantly more serious than the Husband has recognised, and made her contribution role more difficult, but now that the parties are separated, the Husband's condition is such that in the future he will be able to engage in paid employment.
…
148To make an adjustment for section 75(2) factors means that property is taken from one and advanced or given to the other. I must not only consider each parent's relevant factors, but both parents' relevant section 75(2) factors and balance those. The Husband's significant depression is a very significant factor to be taken into account.
149Balancing all of those matters, I'm not satisfied that there should be a section 75(2) adjustment in either party's favour in all of the circumstances.
…
151I'm satisfied that it is just and equitable that the Husband has the opportunity to retain the [property]. I acknowledge the Wife has contributed significantly to the [property] over many years, and to all of the party's property over many years. Nonetheless, the Husband owned the land of the [property] before marriage and has retained it since. I take into account [Dr BB]’s evidence as to the impact and consequences of the Husband not having the opportunity to retain that [property]. I acknowledge that the Wife will be profoundly disappointed in not being able to retain the [property]. She will instead retain cash at its value as it is.
…
155I am not satisfied that it is practical to divide the items up in the manner that is sought. I must take into account orders that will least likely promote further dispute and litigation and will best separate the financial interests of the parties. The items that the Wife seeks, and that the Husband agrees she should retain, can be readily ascertained and made available for her collection.
…
157The most practical outcome is that the Wife retains the now agreed $33,600 further bundle of items, together with those items that she already has. I also take into account that many of the items are either a complete, or part of, an evolving complete collection of [machinery]. To the Husband, having the collection or line of [machinery] makes them more valuable to him, and he is intensely interested in the change or progression of one model of [machinery] to the next, or with the same model, the progression or changes made by the manufacturer from one time to the next.
The Husband and the senior Caranos, by their counsel, made applications for costs on notice to the other side before me on 21 May 2024. The costs hearing continued part-heard on 27 May 2024.
These costs proceedings
On 21 and 27 May 2024, all parties were represented by counsel, and some counsel had been involved in the Final Hearing, which was quite helpful as counsel and solicitors had comprehensive knowledge of what was a factually dense case. The Husband's material on costs set out in detail the arrangements between himself and his solicitors as to costs. The Husband's material and the manner of it was of considerable assistance to the Court, as well as being framed in a way that powerfully advanced the Husband's case for a costs order.
Costs sought by the Husband
The Husband sought his costs incurred after his offer in writing to the Wife to settle the dispute had not been accepted, up to the end of the trial. That was in the sum of $144,633. That was all his costs incurred, or indemnity costs, and alternatively, in the sum of $101,527, being his costs assessed on scale. In addition, he sought the costs of the cost application, which proceeded over two days, in the total sum of $17,000. His total actual cost of the entire proceedings, including the cost applications, were in the order of $227,000.
The Husband's application pivoted around the offers he made in writing, being an offer after mediation on 24 October 2022 (‘the first offer’), and an offer after the first day of a judicial settlement conference on 19 May 2023 (‘the second offer’). The terms of the Husband's second offer meant that, had the Wife accepted that offer, she would have received assets and payment of non-superannuation assets of some $31,000 more than the total assets, including the payment, she is to receive by the orders I made. In the vernacular of litigation, the Husband “beat” his offer by a fair margin, that is about $31,000 or about 4.8 per cent of the assets the Wife was to receive, and about 2.4 per cent of the non-superannuation asset pool as determined by me.
The Husband relied upon the extent to which his case was “closest to the pin” of the final decision. He had pressed for a 45/55 split in his favour (of non-superannuation assets) and that he retain the farm and the bulk of the valuable and disputed chattels. The Wife had pressed that non-superannuation assets be divided 80/20 in her favour, that she retain the property and a more substantial part of the chattels than conceded by the Husband.
Cost sought by the senior Caranos
The senior Caranos sought their costs incurred from the date of their offer in writing to the Wife to settle the dispute. That offer was not accepted. Costs sought were in the sum of about $66,000 plus further costs of about $15,000. The latter being for their costs application. In the alternative, they sought costs on scale of about $31,000 plus further costs of $15,000 on account of their costs application.
The senior Caranos' costs application pivoted around their being entirely successful, and their offer in writing to the Wife made on 18 May 2023 – being an offer after mediation on 24 October 2022, and after the first day of the judicial settlement conference on 16 May 2023. The terms of the senior Caranos' offer meant, had the Wife accepted it, that their claim to the controversial Annexure D jointly owned chattels, having a value of about $29,000, would be abandoned so that those assets or that share of those assets would be included in the pool of assets available for property settlement between the Husband and Wife. Given I determined the Wife would receive 50 per cent of the non-superannuation assets, the Wife would likely have received assets and payment (of non-superannuation assets) in the order of some $14,000 more in total assets than she is to receive by the orders I made. In the vernacular of litigation, the senior Caranos “beat” their offer by a fair margin. Further, the failure to accept the offer made by the senior Caranos meant that the Husband's costs in resisting the Wife's claim about the Annexure D assets were substantial.
DECISION: COSTS ORDERS TO BE MADE
In the end, after considering all matters, I have determined that the Wife should pay costs to the Husband in the sum of $92,543 and costs to the senior Caranos in the sum of $40,868. The effect of that is that, from the property settlement the wife is to receive, she will need to pay, or have deducted from her property settlement, the sum of, roughly, $133,411. I take into account the substantial impost that that will be upon the remaining resources that the wife has to get on with the rest of her life. I will order for the following reasons.
The legal principles
Costs are to be determined pursuant to section 117 of the Family Law Act 1975 (Cth) (‘the Act’):
Section 117 Costs
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, 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), (4A), (5) and (6) 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.
15The substance of the Husband's application relied upon the provisions of section 117(2A)(e) through to (g). The substance of the senior Caranos' application was helpfully set out in written submissions prepared by their solicitors and filed on 7 May 2023. Those submissions stated, inter alia:
2. On 22 March 2024 Final Orders were made in this matter by this Honourable Court. Insofar as those Orders relate to the second and third named respondents, the Orders provide for at Order 8 thereof,
2.1 " there be a declaration that the goods and chattels listed in Annexure C are the sole property of the second and third respondents, [Mr C Carano] and [Ms B Carano]" and ''there be a declaration that the goods and chattels referred to in Annexure D are the property of the second and third respondents, [Mr C Carano] and [Ms B Carano], to the extent of the percentage entitlement set out therein."
2.2 That Order reflects precisely the order sought by the second and third respondent in their Statement of Claim filed in this matter on 13 February 2023. The second and third respondents have accordingly been 100% successful in terms of what they sought from the Court in these proceedings. Whilst it is conceded by the second and third respondents that the general rule in s117(1) of the Family Law Act is that each party to proceedings shall bear his/her own costs, the second and third respondent submit that there are circumstances that justify a departure from this, and a costs order against the applicant should be made.
3.Further, the second and third respondents submit that the circumstances of this matter are exceptional and therefore justify the making of a costs order against the applicant on an indemnity basis[1].
[1] Medlon & Medlon (No 6) (Indemnity Costs) [2015] FamCAFC 157 @ 27-28; see particularly @ 28.
4. In Medlon, it was stated that:
"It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought."
In Colgate-Palmolive Company v Cussons Pty Limited, Sheppard J provided some examples of circumstances that might warrant the exercise of discretion to award indemnity costs, and usefully, Holden CJ in Munday v Bowman (1997) FLC 92-784 at 84,660, drew from his Honour's decision the following:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] FCA 202; [1988] 81 ALR 397.
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra).
(c) Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991)).
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v Westpac Banking Corporation (unreported Federal Court, 5 March 1993)).
(e) An imprudent refusal of an offer to compromise.
(emphasis and footnotes as in original)
Wife opposed any cost order
The Wife's position in the costs proceedings was to seek that there be no costs order made. She relied upon her financial circumstances following the making of the orders on 22 March 2024. Her position included that I needed to take into account that she lived with the parties' special needs and school-aged son in the cramped and modest home of her mother, her substantial debt to be paid to her past and present solicitors from the payment she was to receive, and the ‘each pay their own’ starting position of section 117(1) of the Act. It was asserted that the Husband's conduct of his case and the senior Caranos' delay in joining the proceedings had unnecessarily increased the Wife's costs.
As to the Wife being unsuccessful in:
·claiming the Annexure C and Annexure D items were really the Husband's property; and
·claiming the Husband had hidden and removed valuable chattels and dismantled others after separation and before valuation; and
·claiming the Husband had presented chattels for valuation in a manner that meant some were incorrectly valued for a less than market value sum; and
·achieving an outcome better than the senior Caranos' long ago offer in writing; and
·achieving an outcome better than the Husband's long ago second offer in writing; and
·achieving an outcome close to her 80 per cent claim of the non-superannuation pool;
it was submitted that the Wife had pursued her honest and reasonable beliefs: that the senior Caranos' chattels belonged to the Husband,[2] and that he had manipulated the presentation of chattels and hidden or removed others, and that she not unreasonably “wanted her day in court” to which she was entitled.
[2] The disputed chattels had been long situated on the property of the former matrimonial home, the property, and many items had been recorded against the Husband's name and the machinery “register” kept by the Husband.
Further, the Wife owed her previous solicitors some $123,000 that would have to be paid from the $447,000 payment, and that as a result of the orders, the Wife:
·had no home;
·had no business;
·had the care of a child in receipt of NDIS payments.
And so, it was said (and more persuasively than this precis) the circumstances meant that the primary position of section 117(1) of the Act should prevail and “each should bear their own costs”.
No dispute as to costs quantum claim
There was no dispute or request for assessment of the quantum of costs claimed. The Wife's costs were of a not dissimilar quantum as the Husband claimed. By interrogation of the parties’ counsel at the costs hearing and being assisted by the detailed material provided, I have ascertained that costs incurred were as follows:
Incurred by Husband Incurred by Wife Incurred by 2nd & 3rd 1. Total costs incurred to end of 27 May 2024 Hearing (indemnity) $210,382
$166,084
$66,662
2. Total costs outstanding as at end of 27 May 2024 (indemnity) $144,633
$147,868
$25,550
3. Costs incurred since date of second or relevant offer $142,417 (indemnity) $105,707 (indemnity) $39,514 (indemnity) $101,527 (Div 2 scale) Scale N/A $30,696 (Div 1 scale) 4. Total costs of costs application for day one of Hearing $9,650
· Including counsel $2,200
For both days
· $26,000 solicitor
· $5,566 principal counsel
· $2,530 2nd counsel
$12,029
· $4,350 counsel
· 7,679 solicitors
5. Total costs of costs application for day two of Hearing $7,350
· $1,000 prep
· $2,500 solicitors
· $3,850 counsel
$3,245
· $2,750 counsel
· $495 solicitors
6. Total costs of costs application
(indemnity)$17,000 $34,096 $15,274 Application of section 117
Turning then to the terms of section 117(1). I take into account the starting position, that is that each party should pay their own costs unless there are circumstances, as provided in section 117(2A), that would mean another decision is appropriate.
Section 117(2A): financial circumstances of each of the parties
Neither party is in receipt of any substantial income other than social security benefits. Their asset positions, by the end of my March orders, are as determined at [163] and [164] of my reasons:
163 The Husband will retain:
Description Value 1 Town G property $660,000 2 Resource licences - sought to be retained by Husband $8,200 3 Money in T Trust account (rounded) 4 Part property settlement (Wife) 5 Part property settlement (Husband) $40,000 6 Plant & Equipment owned by Husband in possession of Husband
$378,505[3] less that to be retained by Wife Annexure ‘A’- $33,600$344,905
7 Asset 178 Wife now concedes is owned by Ms AA NK 8 Husband’s Plant & Equipment jointly owned with his parents $29,285[4] 9 Increased value of P&E: Not included 10 Motor Vehicle – in shed $2,750 11 Shares (about) $1,500[5] Payment to the Wife ($447,493.50) Total to Husband $639,146.50 Superannuation Husband’s super’n $331,694 less payment split $162,889- $168,805 [3] I have relied upon the figure in the Husband’s outline of case that was not controversial as to the actual arithmetic.
[4] Ibidem (or as above)
[5] Accept Wife’s rounding not Husband’s figure of $1,493.94
164 The Wife will retain:
Description Value 1 Payment from Husband $447,493.50 2 Resource licence $93,330 3 Money in T Trust account (rounded) $6,933 4 Part property settlement $40,000 5 Annexure A Plant & Equipment to be retained by Wife $33,600 6 Chattels in possession of Wife inc motor vehicles $17,790 Total to Wife $639,146.50 Superannuation Wife’s super’n $5,916 + $162,889 split $168,805
For those listening, that table shows that the Husband would end up with, after a payment of $447,000 to the Wife, net non-superannuation assets of about $639,000 and, after a payment split, about $168,805 in superannuation. The Wife would end up with $639,000 in non‑superannuation assets and another $168,000 of superannuation assets. Against the Wife's net assets of $639,000 (as referred to in the reasons of my earlier decision) to be retained by her, she has the substantial liabilities of outstanding legal costs of at least $148,000, including $123,000 to her previous solicitor who had assisted the Wife prepare the very detailed trial material and had carried her through the bulk of the proceedings until shortly before trial. The $40,000 part property settlement is now not available to her having been spent on legal fees. Hence, of the payment, the Wife is likely to retain only some $299,000 or so. In addition to that, she would be able to relatively quickly sell the resource licence entitlement previously related to the property, valued at about $93,000. That is included in the total assets figure of $639,000.
Against the Husband's net assets of $639,000 to be retained by him, he has the substantial liabilities of outstanding legal costs of at least $145,000 to his solicitors, who have substantially carried him through the proceedings. Like the Wife, his $40,000 part property settlement is now not available to him, having been spent, including on legal fees and maintaining the property.
I am not precisely aware of the net asset position of the senior Caranos. Taking into account their statements to social security, they are not wealthy people, but are of modest means, and the substantial costs they have incurred in this proceeding is a substantial impost on them.
It should be made clear that given the many factually dense disputes, particularly at the first or “asset pool identification” stage and the health assessment at the third “section 75(2) factors” stage of the orthodox four-step section 79 analysis, a very substantial volume of high quality, detailed and carefully put together admissible evidence was assembled by the regional solicitors who carried the Wife and the Husband close to final hearing. That material, including that of the senior Caranos, was felicitously loyal to, and helpfully explanatory of, the parties' cases. Hence, although I have referred to the substantial legal costs involved, it should not be discerned that there is any criticism or question in my mind as to the quantum of the costs of the respective solicitors who had the responsibility to prepare the detailed material in a digestible form. Less competent or less efficient solicitors, in the circumstances, could well have incurred even greater costs and without the clarity of the respective and diametrically opposed cases.
Section 117(2A)(b): whether any party is in receipt of legal aid
This provision has not been revised since the insertion of section 102NA and the Family Violence and Cross-Examination of Parties Scheme in the Act. The Wife was in receipt of a grant of aid pursuant to the section 102NA scheme consequent upon an order I made that she would not be permitted to cross-examine the Husband, nor he cross-examine her personally in late 2023. The Husband and the senior Caranos were funding their trial representation privately.
The scheme of section 102NA, although not means tested, is administered by legal aid authorities. The Husband, from his point of view and not unreasonably, complained at the length of the trial and his cross-examination conducted on the Wife's instructions when he was paying for his trial representation from his pocket and the Wife was being represented at public expense under the section 102NA scheme. This is a legitimate grievance of the Husband.
On the other hand, the provisions of section 102NA are mandatory. The Wife, who I am satisfied knew her material well and may well have been able to conduct her case herself (after the detailed material had been prepared and filed by former solicitors), simply had no say in it at all. Whatever her views may been about conducting the trial and cross-examination of the Husband herself, if that were allowed, because of the mandatory provisions of section 102NA, she was not permitted to cross-examine the Husband herself. This may well be one of the many unintended consequences of the mandatory provisions of the section 102NA scheme.
It was not asserted that the section 102NA scheme is “legal aid” for the purpose of section 117. Taking that into account and in all of the circumstances, I do not regard the Wife's section 102NA representation at trial as a material matter to be taken into account on this costs application.
Section 102(2A)(c): the conduct of the parties in proceedings
Counsel for the Husband did not press that there was any conduct of the Wife in the conduct of the proceedings relevant to the issue of the costs, save for the matters discussed later. The Wife pressed that the Husband had failed to comply with notices to produce. I do not accept that assertion. I am satisfied that early on in the litigation, the Husband's conduct and non-engagement of the proceedings, including the unilateral withdrawal of approximately $100,000 from a bank account at separation and the Wife's pursuit of that, added to the wife's costs.
In the end, I take into account that the nature of the parties' assets and the history of their contributions over many years necessitated very detailed and quite complex material. I am not critical of the conduct of either party, in the sense that that should sound in costs.
Section 117(2A)(d): …proceedings … necessitated by failure to comply with any order
The proceedings arose from the breakdown of the relationship between the Husband and the Wife and their dispute about property division and the nature of the many different items of property that they had. The proceedings were not necessitated by any failure to comply with previous orders of the Court and hence I place no weight on that consideration.
Section 117(2A)(e): whether any party to the proceedings has been wholly unsuccessful
Both the Husband and the senior Caranos argued that the case of the Wife was wholly unsuccessful. The Wife was unsuccessful in:
·her case that the Husband had hidden or removed or dismantled valuable chattels after separation to reduce any settlement to her; and
·her case that the senior Caranos' assets were really the Husband's; and
·her case that the Husband had manipulated his presentation to his treating psychiatrist over many years; and
·her case that she should receive 80 per cent (four times as much as the Husband's share) of the asset pool as she said it should be (that is, more than the actual available assets) including a substantial adjustment on account of section 75(2) factors.
The Wife was successful in resisting the Husband's allegation and case that she had dishonestly broken into the buildings after separation and removed valuable and undisclosed chattels. This necessarily time-consuming saga included the curious case of the disappearance of the pet and watchdog, and her return to the property months later when the Husband was away from the property for both events.
Early on, the Wife was successful in obtaining orders for the return of substantial funds unilaterally removed by the Husband. The Husband was forced to pay back most of the funds withdrawn by Orders made by consent on 19 November 2022 into an interest-bearing trust account from where part-property settlements were distributed to the parties.
Section 117(2A)(f): where either party of the proceeding has made an offer in writing
Counsel for the Husband relied heavily on the fact of offers in writing. Counsel for the senior Caranos relied heavily on the fact of offers in writing. The history of those offers, and it is unnecessary to set out the entire history, is as follows.
Husband’s second offer[6]
[6] Affidavit of Husband’s solicitor filed 7 May 2024.
Second Offer of Settlement
9. On 16 May 2023 the parties attended a Judicial Settlement Conference before Chief Judge Alstergren.
10.On 19 May 2023 a formal Offer of Settlement was served on [Ms Carano] by way of an email to [Ms N] of [D Law Firm] who were acting at the time on behalf of [Ms Carano] ("the Second Offer"). A copy of this email and the letter containing the Second Offer are annexed hereto and marked with the letters "FAM3".
11. The Second Offer resulted in [Ms Carano] receiving approximately 50% of the net asset pool at that time (excluding the items owned by the Second & Third Respondents and the Third Parties) with [Ms Carano] to retain the following:
1 Payment from Husband $513,000.00 2 Party property settlement $40,000.00 3 Money in [T Trust] account $6,933.07 4 Chattels in possession of Wife $17,790.00 5 [Resource licence] $93,330.00 Total to Wife $671,053.07 12. In addition to [Ms Carano] retaining the above assets, the Second Offer included a superannuation split in favour of [Ms Carano] in order to equalise the total superannuation of the parties at that time.
13. On or about 8 March 2024 Ms Stacey Taylor, Counsel briefed on behalf of [Mr Carano] informed Ms Marian Clarkin, Counsel briefed on behalf of [Ms Carano], that the Second Offer would remain open until the commencement of the Final Hearing on 12 March 2024.
14. The amount [Ms Carano] would have received pursuant to the Second Offer is more than [Ms Carano] is to receive pursuant to the Final Orders made by this Court on 22 March 2024, being assets to a total value of $639,146.50 and a superannuation split to equalise the total superannuation.
Senior Caranos’ offer[7]
21.The parties attended a judicial settlement conference ("JSC") with the Chief Justice on 16 May 2023. His Honour made Orders providing for the parties to serve open offers of settlement prior to the second day of the conference commencing, which was hearing the following week on 22 May 2023. Quite extraordinarily, The Chief Justice adjourned the JSC to a second day as His Honour made clear that he did not believe the second and third respondents should remain in the proceeding, and that the applicant’s case against them lacked any merit.
22. In furtherance of that Order the Second and Third Respondents served an Open of Offer of settlement on the other parties on 18 May 2023, annexed hereto and marked C is a true copy of that open offer, forwarded to the Applicant's solicitor on that day. That offer was expressed to be open for a period of 14 days.
23. The open offer of the second and third Respondents proposed that there be a declaration that they retain the items referred to in Schedule 1 of the Statement of Claim, but otherwise not pursue their interest in the jointly owned items in Schedule 2 of the Statement of Claim.
24. The effect of that offer had it been accepted by the Applicant would have been that a further $41,495 worth of machinery and equipment would have been available and included in the asset pool of the Applicant and First Respondent for division between them by the Court.
25. That would have resulted in a better outcome for the Applicant than is now the case as a result of the Final Orders made on 22 March which declares the Second and Third Respondents interest in the jointly owned items to be retained by them and as a consequence not forming part of the asset pool.
[7] Written submissions made by senior Caranos’ solicitors filed on 7 May 2024.
The long and the short of the Husband’s offer, made as long ago as 19 May 2023 and left open for 14 days at that time (referred to in these reasons as ‘the second offer’), was that the Wife would receive a bundle of property to the value of about $671,000. The Wife ultimately received a bundle of property in the sum of $639,146. The offer the Husband made included that the Wife retain the resource licence rights that she had pressed for in an earlier offer of settlement that she had made.
The Husband and the senior Caranos relied upon their offers on the question of costs pursuant to section 117(2A)(f) of the Act and referred to the principles relating to what is known as ‘Calderbank’[8] offers and the usual suspects of decisions of the Full Court of Family Court of Australia as to the role of offers in writing.
[8] Calderbank [1975] 3 All ER 333.
In terms of the offers in writing, I look to the many authorities referred to, including the following from the decision of Nygh J in Murray & Murray [1990] FLC 92-173 referred to me by the Husband’s counsel:
“…a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs. If one considers the issue as a matter of policy, that is, on the basis of what the Parliament’s objective and purpose was in enacting the legislation, it is clear that the Parliament wished to encourage settlement thereby reducing the cost of litigation to the parties and to the community. That must mean that a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs. At the same time a party cannot sit tight and postpone a decision as to acceptance”
I also refer to the decision of Browne & Green [2002] FLC 93-115 at [56] and [57]:
56.We would agree with the observations of Nygh J in Robinson and Higginbotham (1991) FLC 92-209; 14 Fam LR 559 at FLC 78,417; Fam LR 561:
“…I accept counsel for the husband’s submission that paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case.
…
Similarly, when one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition...”
57.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.
The Husband “beat” his offer made roughly a year before the final hearing by a not insignificant amount. The effect of this offer, open for 14 days, was that the Wife would not receive the farm, which she sought, but would receive the resource licence shares that she sought in her offer and a payment of $513,000, but less of the chattels than the Wife ultimately received. I do not place any weight on the oral repetition of the earlier written offer made by counsel. It is not an offer in writing. However, I accept that an offer in writing is a very powerful matter to be taken into account.
Section 117(2A)(g): such other matters as the Court considers relevant
I take into account that the nature of the relationship of the Husband and Wife and the nature of their assets and the disparate contributions they each made within the meaning of section 79(4) necessitated expensive and complex hearings. I do take into account that the matters that the Wife has raised, as referred to earlier and upon which she was unsuccessful, significantly added to the Husband's expense. I also take into account that it was not unreasonable for the Wife (albeit late in the litigation) to press for a significant share of the chattels of the parties. I take into account that it was not unreasonable for the Wife, after many years of contribution, to press that she should retain the farm rather than the Husband.
I also take into account what I regarded as a lack of practical suggestions on just how the more than 400 different items of old or collectable machinery was to be transferred from one place to another. I remain unconvinced that it was simply a matter of arranging for removal of items. To remove the items that the Husband was to retain on the Wife's case would have required an army of men and an army of equipment to remove the numerous and sometimes fragile and usually very heavy items of machinery from one property to another. Nonetheless, the nature of the parties' assets and the nature of their contribution required a great deal of evidence.
I take into account that orders for costs are by way of compensation, not by way of punishment of a party. I accept that the Wife was entitled to her day in court, and I accept that she genuinely believed and did not “make up” her claim or understanding that the Husband owned the items of the senior Caranos that she claimed. Nonetheless, I am satisfied that the Wife simply turned her eyes away from factual matters that would, and should, have caused her to reconsider her genuine belief about who owned what.
I have determined that I will not make orders based on indemnity costs, although I do take into account the total costs that have been incurred by the parties. I also take into account that the parties were not in the position of being able to only incur costs on scale. It is usually necessary and was necessary in this case that each of the parties retain solicitors to assist them prosecute their claims for property division in this Court. Parties to litigation in this Court are rarely presented with a position where they will incur costs only on scale. Parties are usually presented with the position where they have no choice but to incur costs based on costs agreements as sought on an indemnity basis.
The point of indemnity costs is that the total costs incurred, provided they have not been incurred unreasonably, are taken into account. In this case, I am not satisfied that any party's costs in the circumstances were unreasonably incurred. Nonetheless, I am satisfied that there are aspects of each of the Husband and the Wife's costs that were not only very carefully prepared, but went to an extreme degree of clarification for the purpose of articulating their case.
The position with indemnity costs is that they are not usually made and that exceptional circumstances are required. In this case, notwithstanding that in many cases a party beating an offer in writing would warrant indemnity costs, I am not satisfied that is proper and just. I am satisfied that I should have regard for scale costs rather than for everything that has been done on behalf of the Husband and/or the senior Caranos. I am satisfied that the Husband and the senior Caranos instructed their solicitors to pursue detail that was sensible and, by and large, ultimately successful, but not necessarily warranted, and I am not satisfied that the Wife should compensate them for all of that care taken in the proceedings.
The reality of scale costs is that they are effectively the minimum costs that the more unsuccessful party should pay when an order for costs is made. In this case, I am satisfied that scale costs are appropriate. Balancing all of the matters to which I have referred and circumstances that costs are by way of compensation, not punishment, I am satisfied that the Wife should pay the Husband 80 per cent of the scale costs incurred after the date of the second offer. I am so satisfied because of the nature of the dispute and the matters to which I have referred to, including the matters where the Husband was not successful and his earlier conduct in the proceedings.
In regard to the costs sought, really on an indemnity basis, in regard to the two-day costs application, I am not satisfied that it is proper and just to award all of those costs against the Wife. I am not satisfied, given the quality of the written material put in support of that, that it was necessary for the hearing to be conducted over two days. I acknowledge and accept that only part of the first day was available as I had listed the matter in the urgency of the application together with other matters. Nonetheless, the detailed, careful and concise written material and submissions and evidence of the Husband and of the senior Caranos meant, in reality, that only a little oral further submission was required, if any at all.
In those circumstances, I acknowledge that costs were unnecessarily incurred on the costs application. I am satisfied that the Wife should pay to the Husband two-thirds of the $17,000 costs of the costs application, hence the Wife will be required to pay a total of $81,221, being 80 per cent of the scale costs after the service of the second offer of $101,527, plus two-thirds of the costs of the two days of costs application of $17,000, being $11,322, and together totalling $92,543.
In regard to the senior Caranos costs, I note that they were unrepresented during the trial itself. The trial itself was conducted by their daughter, the sister of the Husband, as a litigant in person and litigation guardian. Her case was entirely aligned with the Husband's case on the relevant aspects. Because the senior Caranos are, from my perspective, innocent of the serious controversy between the Husband and Wife and because they were completely successful in their claims and because of the nature of their offer in writing, which was not accepted, I am satisfied that they should receive 100 per cent of their scale costs on division 1 scale, being the sum of $30,696.
In regard to the $15,274 of costs sought including of counsel's fees on the costs application, I am satisfied that only two thirds of those costs are appropriate to be paid by the Wife to the senior Caranos. In fixing the sum of costs, I note that no party sought for assessment or taxation of costs and that I am entitled, pursuant to rule 12.17(1)(a) of the Rules, to order a specific amount of costs. I am satisfied that that is just and equitable because of the need for the parties to know their position prior to the date for the payment by the Husband to the Wife. And also because the costs of ascertainment of the proper scale costs and because of my concern at the potential for the cost of assessment or taxation of costs to be out of all proportion to the benefit to the parties.
Those are my reasons.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the res tempore Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 11 July 2024
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