COWAN & COWAN (No.2)
[2019] FCCA 2267
•19 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COWAN & COWAN (No.2) | [2019] FCCA 2267 |
| Catchwords: FAMILY LAW – COSTS – Husband seeks costs after final property hearing – wife counter claims – whether or not any costs should be ordered. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2)(o), 117(1), 117(2A) |
| Cases cited: Calderbank v Calderbank [1975] 3 ALL ER 333 |
| Applicant: | MR COWAN |
| Respondent: | MS COWAN |
| File Number: | MLC 5967 of 2016 |
| Judgment of: | Judge Harland |
| Hearing date: | 13 May 2019 |
| Date of Last Submission: | 7 June 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 19 August 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Trim |
| Solicitors for the Applicant: | Whyte Just & Moore |
| Counsel for the Respondent: | Ms Fisken |
| Solicitors for the Respondent: | Harwood Andrews Lawyers |
ORDERS
The application in a case filed on 16 April 2019 and the response to the application in a case filed on 17 April 2019 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Cowan & Cowan (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 5967 of 2016
| MR COWAN |
Applicant
And
| MS COWAN |
Respondent
REASONS FOR JUDGMENT
The Court handed down final property orders in this matter on 22 March 2019. Both parties are seeking costs against the other.
The husband commenced proceedings on 2 November 2016. The procedural delays in this matter have been significant. Such delays caused the trial to be adjourned for nearly twelve months after it was commenced in February 2018. The proceedings were finalised after the trial recommenced in January 2019.
The matter proceeded to trial on 1 February 2018 for two days and was adjourned part heard to 23 April 2018. The wife made an application in a case on 20 April 2018 necessitating the adjournment of the trial. There were further listings for 27 April 2018 and 12 October 2018. The trial resumed on 21 and 22 January 2019.
On 22 March 2019 I delivered my reasons in this matter. The circumstances of the application in a case made by the wife on 20 April 2018 are set out in my primary judgment Cowan & Cowan [2019] FCCA 720. Those reasons should be read with these reasons for background.
The husband filed an application in a case on 16 April 2019 with respect to costs. The application sought an order that the husband pay to the wife $120,000 rather than the sum of $151,037 that was ordered on 22 March 2019 which would allow for a discount for some of the husband’s costs.
The wife filed a response on 17 April 2019 in which she made a cross application for costs. Her application sought an order for the husband’s application in a case to be dismissed and that the husband pay to the wife “such sum as is deemed appropriate by this Honourable Court”.
The matter was listed before me on 13 May 2019 where I made Orders providing for a timetable for written submissions in relation to costs arguments.
The husband’s submissions sent to Chambers on 17 May 2019 changed the husband’s position in relation to the costs order he sought. He now seeks that the wife pay his lawyers $15,000. Both parties filed detailed written submissions. It is not necessary for me to set them out in detail.
The wife’s submissions sent to Chambers on 7 June 2019 updated the wife’s position in relation to costs. She now seeks costs on a party-party basis and that the husband pay her costs of $37,036. The wife submits that this figure represents her costs from the time of the adjournment of the first part of the final hearing on 2 February 2018 until the handing down of the Judgment on 22 March 2019 together with the costs of responding to the husband’s application in a case filed 16 April 2019. She sets out the calculation of costs in accordance with the Federal Circuit Court costs scale.
Section 117(1) of the Family Law Act 1975 provides that each party to proceedings shall bear their own costs. The Court may make a costs order in favour of either party, if there are justifying circumstances as set out in s.117(2A):
(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.
The financial circumstances of each of the parties to the proceedings
My primary reasons set out the financial circumstances of the parties.
The husband’s submissions state that he owes approximately $100,000 in legal fees and is unable to pay this debt. His submissions do not contain a summary of costs that confirm this amount, rather the husband annexes a statement of costs dated 23 August 2018 to his affidavit filed 16 April 2019. The statement of costs does not reflect the current amount owed by the husband. He also submits at page 4 of his written submissions that there is ‘barely enough equity in the Property B property for the Husband to pay out the Wife plus his legal fees’.
Conversely, the husband’s submissions argue that the wife’s father has paid for her legal fees so she is debt free in this regard. He submits that the wife did not pursue her claim for her father’s payments to be considered a loan, and that consequently, they should not be considered as such.
The wife submits that she currently has a loan in the amount of $120,604 owing to her father. The wife’s submissions annexe an affidavit affirmed by the wife’s father Mr Y which states that he lent the wife money to fund the continuing legal proceedings.
It is of concern that the wife’s father is filing an affidavit in a costs application. At paragraph 67 of my reasons for judgment I pointed out that “most importantly her father has not sworn an affidavit about this alleged loan”. The wife had the opportunity during the proceedings to file an affidavit by her father and this was not done. It is too late to try and fix this omission by filing this affidavit in a costs application.
The husband also submits that the wife has re-partnered. He submits that the Orders provide for her to receive 60% of the net pool of assets and that she ‘basically has an investment property’ due to the Orders made 22 March 2019. The husband states that he has not re-partnered.
Whether any party to the proceedings is in receipt of assistance by way of legal aid
Neither part is in receipt of legal aid.
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
In my reasons for judgment I criticised both parties for their conduct throughout the proceedings.
The husband’s submissions state that the wife was consistently seeking $300,000 which he submits would have left him with barely anything. He submits that her position was “unjustifiably maintained” and “wholly unreasonable” and, as such, her conduct during the proceedings justifies an order for costs. The husband’s submissions state that the wife’s position meant that she was seeking 90% of the net hard pool of assets. This is based on his version of the pool.
The husband also submits that the way in which the wife continuously changed her approach during the proceedings increased costs for all parties and that the volume of “problematic” subpoenas issued by her and her lawyers were to blame for increased costs as well. He completely ignores his own contributions to this.
The wife’s submissions state that the husband’s conduct during the proceedings in regards to discovery and production of documents was of considerable criticism by the court. At paragraph 114 of my reasons for judgment I note that “much of the delay and additional expense that both parties incurred could have been reduced if he had been full and frank in his disclosure.” When the trial commenced in February 2018 the husband and Ms H both gave evidence. When cross-examined, both omitted any reference to Ms H’s business Company J. This is a significant omission and the wife certainly had grounds to be suspicious and apply for the trial to be adjourned in order for her lawyers to make further enquiries.
At paragraph 1 of my reasons for judgment I stated that “Both have taken unrealistic and unreasonable positions with respect to various aspects of these proceedings.” The husband’s actions with respect to disclosure and his omission of any reference to Company J in cross examination was an unrealistic and obstructive approach to take. The relevance of this information is obvious and the husband’s conduct during the course of the trial should be considered one of the causes of the increased costs for both parties. Somewhat childishly the husband commences his submissions by saying the wife has been more unreasonable than him.
In April 2018 the wife discovered the existence of Company J due to the subpoenas issued during a part heard trial. Although the husband’s lack of candour caused the wife to issue the subpoenas, no explanation has been provided as to why they were not issued before the trial began in February 2018. Equally, the husband should have been upfront. Thorough enquiries and preparation prior to trial may have avoided the need to adjourn the trial in the first instance. Both parties have increased their own and each other’s costs through their conduct of the case.
On 17 July 2018 the matter was before me for a subpoena objection hearing. On this occasion the wife’s Counsel argued that the husband was attempting to ‘pass off’ funds through Ms H’s business. Counsel for the proposed second respondent correctly pointed out that passing off is a cause of action that requires the satisfaction of particular elements. I made the following Orders dated 17 July 2019 providing for the wife to address the particulars of her claim:
6. On or before 14 August 2018, the wife file and serve Contentions as to Fact and Law detailing with specificity:
a. The cause(s) of action upon which the wife’s claim against the proposed respondents is based;
b. The material facts and particulars which support the identified cause(s) of action;
c. The relief sought against the proposed respondents; and
d. The contentions as to law which give rise to:
i. The cause(s) of action identified;
ii. The wife’s standing to bring such claims; and
iii. The relief sought.
7. Within 28 days of receipt of the wife’s Contentions as to Fact and Law, the husband and proposed respondents file any contentions as to Fact and Law in reply.
The wife failed to comply with the above Orders and instead filed an application in a case on 19 September 2018 seeking to withdraw her application for Ms H to be joined as a second respondent to the proceedings. This is one example of many during the proceedings where the parties’ legal representatives failed to forensically evaluate the issue or address a practical way to further the proceedings. The wife’s lawyers issued injunctions and joinder applications but failed to turn their minds to how this would work as a matter of practical application. The multiple applications and listings that were involved in this matter in the period between the first and second parts of the trial were voluminous and increased the costs for both parties.
With respect to the parties giving evidence at trial the wife submits that the husband’s non-disclosure about Business C and Company J was a “deliberate and wilful” omission on his part. Both can be criticised for their candour whilst giving evidence. The husband’s omission in relation to Company J was referred to multiple times in my reasons for judgment. The wife also lacked candour when cross-examined about the living arrangements of [X]. I was not impressed by the wife’s vacillation about when she moved in with her current partner and there was a lack of clarity surrounding whether [X] was living with her at the time.
Lastly, the husband submits that the wife is attempting to “double dip” by making a cross application for a costs order. He submits that as there was a 10% adjustment under s.75(2)(o) in her favour due to his failure to disclose then a costs order is unnecessary. There is some merit in that submission. I note that her position at the return date of this application was that there should be no order for costs.
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of` the court
This element is not applicable.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
In his affidavit filed 16 April 2019 the husband states at paragraph 14 that the wife was wholly unsuccessful in relation to her position at closing addresses where she sought 70% of the hard asset pool.
This argument was not addressed in the husband’s written submissions. The wife submits in her written submissions that the argument appears to be misconceived and abandoned considering its absence in the husband’s written submissions.
The wife was not wholly unsuccessful in the proceedings, rather, both parties enjoyed some success in relation to certain aspects of their claim and were unsuccessful in others.
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
The husband’s affidavit filed 16 April 2019 annexes 3 letters sent to the wife’s lawyers dated 1 May 2017, 8 January 2018 and 30 April 2018.
In his written submissions the husband primarily relies on the “Calderbank” letter sent to the wife’s solicitors dated 30 April 2018. The letter proposes an offer on the following terms:
1. He retain the former matrimonial home (Property B), together with its financial obligations;
2. Your client retain Property A, together with its financial obligations;
3. Our client pay your client $175,000;
4. There be an equalisation of superannuation entitlements;
5. Our client retain the business;
6. Your client retain her motor vehicle without debt.
We are of the view that our client’s formal position is within the range of possible outcomes, and his offer set out herein is generous. Our client’s offer set out herein is open for acceptance for ten (10) business days of this letter being received by you, ad is made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 ALL ER 333.
The husband submits in the event the wife had accepted this offer she would have been about $24,000 better off in addition to the further legal costs she has incurred and the proceedings would have ended approximately one year earlier. This ignores the reality of the state of the case at that time.
The Calderbank offer primarily relied upon by the husband in his submissions is one of three offers made over the course of the proceedings. The offer made on 30 April 2018 must be viewed in conjunction with the trial being adjourned shortly beforehand due to the discovery by the wife of the husband’s lack of disclosure. At the time of the offer there were real issues surrounding the husband’s disclosure which the wife had a right to investigate.
The Calderbank offer was open for acceptance by the wife for 10 business days. It should be noted that the wife had only filed her application in a case on 20 April 2018, 10 days prior to the Calderbank offer by the husband. Due to the volume of material returnable by way of the subpoenas issued part way through the initial trial and the complexity of the matter, 10 days was too short of an amount of time for the wife to ascertain whether she should agree to the offer as she could not have known at this stage the exact asset pool.
In her submissions the wife opposes the husband’s reliance on the Calderbank offer. The wife’s submissions refer to In the Marriage of Pennisi (1997) 22 Fam LR, at page 547 where the Full Court in Harris and Harris (1991) FLC 92-354 is quoted:
“..it is not the law that an offer of greater or equivilant value to that which results from the Court will lead to an order for costs in favour of the offeror”.
The wife’s submissions cite further authority from In the Marriage of Pennisi quoting the Full Court at page 260:
“Offers must be seen in 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 it 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.”
The offer made on 1 May 2017 was open for 14 days. It was long before the disclosure issues were raised. This also applies to the 8 January 2018 offer.
In considering the context surrounding the Calderbank offers, I must take into account the short period of time that the offer was open for, the timing of the offer and the circumstances of the parties. It is also clear that at that stage there was a real issue in dispute about disclosure and the pool.
As the matter proceeded there were real issues in relation to addbacks, disclosure and also changing valuations for both properties. In these circumstances the wife could not have reasonably been expected to accept the husband’s Calderbank offer of 30 April 2018.
The last offer made on 30 April 2018 does not include a breakdown of the asset pool, asserted by the husband at that time.
Considering all of these issues the Calderbank offers do not assist the husband’s costs claim.
Conclusion
As I noted in my primary reasons both parties increased their own costs and each other’s through their conduct. This has now been compounded by this application. In his affidavit the husband complains that the wife was more unreasonable than him. The wife’s response is opportunistic and the filing an affidavit by her father seeking to fix a gap in her case is inappropriate. The amount of costs the parties incurred and the imprudence of incurring further costs in pursuing this application is concerning.
By the time of her written submissions the wife sought $37,036 and the husband reduced his claim to $15,000.
I am not satisfied that an Order for costs should be made in either party’s favour.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Judge Harland
Date: 19 August 2019
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