CREED & RAINE

[2013] FamCA 526

FAMILY COURT OF AUSTRALIA

CREED & RAINE [2013] FamCA 526

FAMILY LAW – COSTS – Application by the husband for the wife to pay costs of the proceedings – Where the wife had refused an offer of settlement – Where the judgment resulted in the wife being 3.4 per cent worse off of the overall property value when compared with the offer of settlement – Applicable principles – Where it was determined that there was  reasonable basis for the making of a costs order from a reasonable time after the making of the offer of compromise – Where an order for costs is made in favour of the husband.

Family Law Act 1975 (Cth) ss 117, 117(2)(A)

Browne v Green (2002) 29 Fam LR 428
Colgate Pamolive Co v Cussons Pty Limited (1993) 46 FCR 225
Munday & Bowman (1997) 22 Fam LR 321
Pennisi v Pennisi (1997) FLC 92-774
Prantage & Prantage [2013] FamCAFC 105

APPLICANT: Mr Creed

RESPONDENT: Ms Raine

FILE NUMBER: SYC 2012 of 2011

DATE DELIVERED: 15 July 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Aldridge J

HEARING DATE: 1 July 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Schonell SC

SOLICITOR FOR THE APPLICANT: Barkus Doolan

COUNSEL FOR THE RESPONDENT: Mr Gould

SOLICITOR FOR THE RESPONDENT: Abrams Turner Whelan

Orders

1. That the wife pay the husband’s costs assessed in the sum of $25 000.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Creed & Raine has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2012 of 2011

Mr Creed

Applicant

And

Ms Raine

Respondent

REASONS FOR JUDGMENT

1. By an Application in a Case filed on 25 June 2013 Mr Creed (“the husband”) seeks an order that Ms Raine (“the wife”) pay his costs of the property proceedings from 23 January 2013, or alternatively 1 April 2011, on an indemnity basis, or alternatively on a party/party basis. 

2. The basis of the application is that the wife is said, unreasonably, to have refused an offer of settlement made by the husband on 23 January 2013 and that the conduct of the trial by the wife, particularly in what was said to be the pursuit of matters of no moment, justified such a costs order.

Proceedings and the judgment

1. The proceedings were commenced by the wife on 11 April 2011 by the filing of an Initiating Application.  The hearing occupied three days between 11 and 13 February 2013.

2. The major asset of the parties at the time of the hearing was the proceeds of sale of W Street, Suburb N in the sum of $1 290 380 held in a controlled money account.  Together with some business equipment, furniture and superannuation the total of tangible assets at the time of the hearing was $1 583 106.  I found that an appropriate division of property was 52.5 per cent as to the Wife ($831 130) and to give effect to that finding, taking into account the furniture and superannuation to be retained by the wife, ordered that she be paid $749 603 from the controlled money account.

3. There was also an order that, conditional upon the husband continuing to receive his disability insurance payments on the basis of a total disability, the husband pay the wife spousal maintenance of $534 per week until the end of April 2017. 

4. For reasons set out in the judgment I did not take the present value of income to be received from royalties into account as an asset of the husband but rather as a financial resource in the sum of $7 500. 

5. For the reasons set out in the judgment I also declined to take into account as an asset or a financial resource the present value ($1.6 million) of the husband’s disability insurance payments of $3 756 per week but took it into account where appropriate as an income stream.

6. Finally, I declined to take into account add-backs totalling $725 206 sought by the wife.  That figure excludes two further add-backs initially sought by the wife but abandoned in submissions. 

7. On 23 January 2013 the lawyers for the husband forwarded an offer for compromise of the proceedings to the wife which was not accepted.  That offer provided for a payment to the wife of $864 228 and that the wife receive 60 per cent of the parties’ total superannuation entitlements.  At the time of the hearing the total superannuation of the parties was $250 726 of which 60 per cent is $150 435.  Thus the total payment offered by the husband to the wife was $1 014 663. The husband’s offer also provided for an equal distribution of the household furniture.

8. However, the offer of settlement did not make any provision for the payment of spousal maintenance whereas the judgment did.  Order 1 made 24 May 2013 provides for spousal maintenance of $534 per week for approximately five years or $138 840 (simply taking the total of the payments to be made, such order was made conditional upon the husband continuing to receive the disability insurance payments in full). 

9. Had the wife accepted the offer she would have received $1 014 663 plus half the furniture ($8 500) being a total of $1 023 163.  Taking into account the above figure for spousal maintenance she received $969 970 pursuant to the judgment. The difference is therefore $53 193 and the wife is worse off by 3.4 per cent of the overall property value.

Applicable principles

1. Section 117 of the Family Law Act provides that subject to the matters set out in sub-section (2) each party to proceedings under the Act shall bear his or her own costs. 

2. If there are circumstances that justify it the Court may make such order as to costs as the Court considers are just. In doing so the Court is obliged to consider the matters set out in s 117(2)(A).

3. The special circumstances relied upon by the husband are the failure of the wife to accept the offer of settlement made on 23 January 2013 and her conduct of the trial. 

Consideration

1. The wife submitted that I should defer the determination of the costs issue until after the determination of the appeal against the judgment which she has filed. She submits that until that time the appropriate basis for a costs order, if any, will remain uncertain.

2. Whilst there is some force in that submission the better view is that this matter should be determined whilst the matters remain fresh in the Court’s mind. This will also facilitate any appeal against the costs order being heard at the same time as the primary appeal.

3. The husband submitted that, as most of the particular matters he relied upon were not the subject of a ground of appeal, any appeal, even if successful, would not affect the costs issue.  Again, there is some force in this position but it is possible that the Notice of Appeal will be amended raising further issues.

4. I turn now to the matters which require consideration under s 117.

5. Each of the parties will receive a significant sum from the controlled money account. 

6. The wife will have to rely upon the sum she received to accommodate herself and possibly to purchase a business for her future support.  Since the hearing she has not earned any income from her business and has been reliant upon the spousal maintenance.  Since the trial the wife has borrowed funds from her relatives for the payment of tax, a holiday, legal fees, business and living expenses, all up she has also incurred significant sums on credit cards.  The extra indebtedness totals $86 490. 

7. The husband has re-partnered.  The husband is purchasing a property with his new partner and has the income and financial benefits, income from the disability insurance payments and financial benefits from the relationship as set out in the judgment. 

8. Payment of costs will be a greater burden upon the wife than the husband. 

9. As far as I am aware neither party was in receipt of assistance by way of a Legal Aid grant. 

10. The husband relied upon six matters relating to the conduct of the proceedings by the wife which he asserted justified the costs order sought by him.

11. The first was that in the Initiating Application and thereafter the wife sought an order that she be paid the entire proceeds of the sale of W Street, Suburb N, which constituted almost all of the property the subject of the proceedings.  That position was, in effect, maintained in final addresses. 

12. Whilst that stance was unreasonable it does not carry any significant weight for the purposes of this application.

13. The second was that the wife sought and obtained an order for the appointment of a single expert to value the royalty stream of the continued use of the husband’s art pieces.  The husband worked as an artist, specialising in the portraying specific subjects for advertising purposes, and received royalties when those art pieces were re-used.  The husband ceased work at sometime in 2010.  His evidence was that his art pieces had a limited life for re-use because advertising campaigns change and the specific subjects change.  The single expert had difficulties in identifying the royalty payments, noting that none had been received in the last fifteen months and that no marketing had been undertaken.  Having regard to that uncertainty he valued the royalty stream $7 500. 

14. Having regard to the time when the husband ceased work and the relatively limited life of the art pieces the husband submits that it was not appropriate to seek the single expert’s opinion and the costs involved were not proportionate to the likely result of the valuation. 

15. The wife was well aware that the husband had ceased work.  Indeed, one of the add-backs which she had sought was a claim for disability insurance payments lost because the husband had failed to make a claim against the insurer at a significantly earlier time.  There was no suggestion that she was not well aware of the nature of the husband’s business.

16. Expert witnesses are expensive. That expense should not be incurred unreasonably and the cost should be proportionate to the expected values. Careful consideration should be given as to whether such reports should be obtained. If such reports are not reasonably necessary, or if the costs of obtaining an expert report are out of proportion to the value of the property the subject of a report, it cannot be assumed by the party obtaining the report that its cost will be equally shared.

17. Whilst the outcome of a valuation can never be precisely foreseen there is force in the husband’s contentions that the costs associated with the wife’s case were not reasonably incurred.

18. The third matter was that the wife sought and obtained the appointment of a single expert to value the present value of the disability insurance payments to be received by the husband.  The valuer was sceptical as to whether this was a proper approach.  Relying on the authorities set out in the judgment I agreed, finding that the disability payments were neither an asset nor a financial resource.  The husband was entitled to the payments only whilst the insurer remained of the view that he was totally disabled within the meaning of the policy.  He had no right to commute the payments.  There was no suggestion that the insurer was prepared to consider any commutation.  The present value of $1.6 million thus did not represent a tangible asset.

19. Again there is force in this submission of the husband. The position of the wife was supported by neither the facts nor authority and the obtaining and use of the expert report was misconceived.

20. The fourth matter was the length of the wife’s affidavit and, in particular, the minutiae with which the renovations of the family property were described. 

21. The affidavit was too long and too detailed.  Having said that the length and detail of the affidavit did not significantly increase the hearing time although it would have increased the preparation time of the husband in having to reply to it.

22. The fifth matter relied upon were the five add-backs originally sought and the three ultimately pressed.  Whilst I found these claims to be misconceived the time taken dealing with them was a relatively short time. 

23. The sixth matter was that the wife pursued a case that her contributions were made more onerous by the alcoholism of the husband.  Whilst I found that the evidence did not justify accepting the proposition it could not be said that it was a position that should not have been pursued. 

24. The proceedings were not necessitated by the failure of a party to the proceedings to comply with the previous orders of the Court. 

25. Whilst the wife did not obtain the orders she was seeking she received a very substantial order in her favour.  She cannot be said to have been wholly unsuccessful in the proceedings. 

26. The sum to be received by the wife pursuant to the offer of compromise exceeded the amount she received from the judgment by $53 193 or 3.4 per cent of the overall available property when the superannuation is split is taken into account. 

27. The fact that an offer just exceeds the amount awarded in a judgment is no bar to an award for costs.  Similarly, because an offer is marginally less than the amount ordered by a Court does not mean that it is a factor not to be taken into account whether determining costs should be awarded.  Pennisi v Pennisi (1997) FLC 92-774 at 84,547.

28. Here, the offer more than just exceeded the award in the judgment.

29. In Browne v Green (2002) 29 Fam LR 428; FLC 93-115; [2002] Fam CA 791 the Full Court said at [57]:

    We think that while s 117(2)(A) 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 had 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.

30. The making of the offer, and its refusal, are thus matters to which very significant weight must be given.

31. The husband sought an order that his costs be paid from the commencement of the proceedings.  There is no basis to do so.  Such an order is not justified merely by the making of an ambitious claim in the Initiating Application.  No other basis for making this order was suggested.

32. There is thus a basis for making a costs order from a reasonable time after the making of the offer of compromise.  Such an order is supported by elements of the wife’s conduct of the proceedings, especially the obtaining and relying upon the two expert reports referred to earlier.

33. Against this, the burden of a costs order will be felt much more keenly by the wife than the husband.

Conclusion

1. Taking all these matters into account it is appropriate that there be a costs order in favour of the husband but, having regard to the disparity in financial position, the order will be that the wife pay the husband’s costs assessed in the sum of $25 000.  That sum is not precisely derived but it reflects an appropriate order in all the circumstances.  The fixing of the sum to be paid will avoid any dispute and costs of assessing costs.

2. It follows from what I have said that it is not appropriate to award costs on an indemnity basis.  Costs on an indemnity basis are exceptional (In the marriage of Munday & Bowman (1997) 22 Fam LR 321; FLC 92-784; Prantage & Prantage [2013] FamCAFC 105). These circumstances are not exceptional. I am not satisfied that conduct of the kind described in Colgate Pamolive Co v Cussons Pty Limited (1993) 46 FCR 225; 118 ALR 248 has taken place as would justify an indemnity costs order (accepting that there is no prescribed list of circumstances and the award of indemnity costs is not limited to the examples given there).

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Aldridge delivered on 15 July 2013.

Associate: 

Date:  10 July 2013