Cross & Beaumont - [2008] FamCAFC 68

FAMILY COURT OF AUSTRALIA

CROSS & BEAUMONT

[2008] FamCAFC 68

FAMILY LAW - APPEAL – Costs – trial Judge erred in failing to have sufficient regard to the financial circumstances of the party ordered to pay costs – appeal allowed – discretion re‑exercised – no order made as to costs

FAMILY LAW - APPEAL – Costs – Offer of settlement – trial Judge did not pay sufficient regard to means of a party to repeat an earlier higher offer

Family Law Act 1975, s 79(5), s 117

Browne v Green (2002) FLC 93‑115
De Winter and De Winter (1979) FLC 90‑605
Fitzgerald v Fish (2005) 33 Fam LR 123
Gronow v Gronow (1979) 144 CLR 513
Harris and Harris (1991) FLC 92‑254
House v The King (1936) 55 CLR 499
Norbis v Norbis (1986) 161 CLR 513
Penfold v Penfold (1980) 144 CLR 311
Pennisi v Pennisi (1997) FLC 92‑774
Robinson and Higginbotham (1991) FLC 92‑209

APPELLANT:

Mr Cross

RESPONDENT:

Ms Beaumont

FILE NUMBER:

2007

APPEAL NUMBER:

HBF

1168

2004

DATE DELIVERED:

Canberra

PLACE DELIVERED:

26 May 2008

PLACE HEARD:

Adelaide

JUDGMENT OF:

Finn, Thackray and Strickland JJ

HEARING DATE:

13 February 2008

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

12 June 2007

LOWER COURT MNC:

[2007] FamCA 568

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Self represented

SOLICITOR FOR THE APPELLANT:

N/A

COUNSEL FOR THE RESPONDENT:

Mr Trezise

SOLICITOR FOR THE RESPONDENT:

AT Legals

Orders

That the appeal be allowed.
That orders 2 and 3 made by the Honourable Justice Watt on 12 June 2007 be set aside.
That there be no order as to costs in relation to the substantive proceedings.
That the Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by him in relation to the appeal.
That the Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by her in relation to the appeal.

IT IS NOTED that publication of this judgment under the pseudonym Cross and Beaumont is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT

Appeal Number: HBF 1168 of 2004
File Number: SA 57 of 2007

Mr Cross

Appellant

And

Ms Beaumont

Respondent

REASONS FOR JUDGMENT

This is an appeal by the husband against orders made by Watt J on 12 June 2007 in which he:
i)ordered the husband to pay 65% of the wife’s costs incurred in property settlement proceedings (restricted to the period after 27 September 2004);
ii)dismissed the husband’s applications for costs against the wife and the wife’s lawyer; and
iii)dismissed the application of the interveners (members of the husband’s family) for the wife to pay their costs.
The focus of the husband’s appeal was on the order requiring him to pay 65% of the wife’s costs.

Background

The wife filed an application for property settlement (and parenting orders) in March 2004. She proposed that the husband pay her $150,000 and transfer a motor vehicle to her. She also proposed that the husband retain his interest in his [business] and his farming activities.
The parties attended a conciliation conference on 24 August 2004 at which time offers of settlement were exchanged. The matter was not resolved and directions were made for the husband’s mother, sister and brother to be joined as parties. They were named as respondents in an amended application filed by the wife on 27 September 2004 and in due course obtained leave to intervene.
By her amended application the wife sought an order for the husband to pay her $100,000 by three instalments spread over two years (together with other orders similar to those in her original application). In the alternative, the wife sought an adjournment for five years pursuant to s 79(5) of the Family Law Act1975 (“the Act”). In the event the adjournment was granted, the wife sought an order permitting her to lodge a caveat against the title to a farming property and restraining the husband’s mother, brother and sister from dealing with their interest in that property.
The farming property had been the parties’ home throughout their marriage; however, they did not own the land, which comprised part of the estate of the husband’s late father. The husband’s mother had a life interest in the property, but upon her death it was to be divided equally between the husband and his two siblings. The husband’s mother was 85 years of age at the time of trial.
The husband and wife were able to resolve issues concerning their children and consent orders were made on 18 November 2004. The property dispute proceeded to trial over five days in August 2005 and continued on 1 September 2005 for the hearing of submissions.. Pursuant to the judgment, delivered on 10 May 2006, the husband was ordered to pay the wife $93,860 as follows:
a)$31,000 by 30 June 2006; and
b)the balance within 90 days of the death of the husband’s mother or upon him obtaining access to the residuary estate of his late father (“access” being defined to include obtaining permission to secure borrowings against the farm).
Watt J ordered the husband to pay interest on any part of the sum of $93,860 that remained unpaid at the rate prescribed by the Family Law Rules 2004. His Honour also ordered the husband to transfer to the wife a motor vehicle in her possession and otherwise made orders for each party to retain the assets then in their possession.
The husband appealed the property settlement orders. The appeal succeeded only to the extent that the Full Court ordered that the interest on any unpaid portion of the settlement be set at 5% per annum, rather than the rate prescribed by the Rules.
On 24 May 2006, the wife applied for an order that the husband pay her costs of the property settlement proceedings after the date of filing of her amended application on 27 September 2004. The husband sought an adjournment of costs issues pending resolution of the property appeal, but the application for an adjournment was dismissed.
The husband filed a response to the wife’s costs application seeking orders that:
(1)the wife’s lawyer pay the wife’s costs incurred since 9 September 2003;
(2)the wife’s lawyer pay the husband’s costs from the same date;
(3)the wife’s lawyer pay to the husband and wife in “equal portions, monies to the equivalent of [the wife’s lawyer’s] personal income for the previous three years or other costs penalty the Judge deems appropriate for a just outcome”.
(4)the wife’s lawyer pay the costs of the husband and wife in relation to any appeals, retrials and other legal actions associated with the husband and wife receiving a final separation settlement; and
(5)in the event the above orders were not granted, the wife or her lawyer pay the husband’s costs of and incidental to the proceedings since 9 September 2003.
At a hearing on 2 August 2006, Watt J determined that he lacked power to make the orders sought in paragraphs (1), (3) and (4) above and ordered that paragraphs (2) and (5) were “to be deemed to seek an order that the wife or her legal representative pay the husband’s costs since 9 September 2003”.
Both parties made written submissions in support of their applications for costs, followed by an oral hearing on 9 November 2006. Watt J delivered his judgment on 12 June 2007 and made the costs orders which are now the subject of this appeal.

The trial Judge’s reasons

Watt J commenced his reasons with relevant background information, some of which we have summarised above. His Honour noted that when the substantive property settlement matter had first come before him in August 2005 he had expressed the view that the wife’s application for an adjournment was unnecessary, since the husband’s interest in his father’s estate had already vested, albeit it would not fall into possession until the expiration of the life tenancy. (Until that time both the husband and the wife had been treating the husband’s interest in the estate as a financial resource rather than as property.)
His Honour went on to note that he had found that the asset pool, including the interest in the estate, was worth $303,242 (not including superannuation valued at $26,917). Although not mentioned in the costs judgment itself, reference to the substantive judgment (para 184) indicates that the interest in the estate was valued at $216,667. Accordingly, the entire asset pool, excluding the estate and the superannuation interests, was worth only $86,575, of which $8,600 was in the possession of the wife.
Watt J then recorded that he had divided the asset pool in proportions 37.5% to the wife and 62.5% to the husband and had apportioned the superannuation equally. The net result was the order for the husband to pay the wife the amount of $93,860. His Honour further recorded that the $31,000 which the husband had been ordered to pay the wife by 30 June 2006 had been calculated by reference to the amount the husband had indicated in his final submissions at trial he was prepared to pay by June 2006 as a “combined payment of property settlement and child support”.
Having set out the provisions of s 117 of the Act, his Honour proceeded to discuss the husband’s application for costs. For reasons that will become apparent, it is unnecessary for us to make reference to most of those portions of his Honour’s reasons which deal with the conduct of the wife’s lawyer.
His Honour first referred to the husband’s complaint that the wife (or her lawyer) had failed to comply with the “pre-action procedures” prescribed in the Family Law Rules 2004. He observed that in the course of preparation of judgment it had come to his attention that the 2004 Rules had not come into effect until three weeks after the wife commenced proceedings, hence the pre-action procedures had no application. His Honour nevertheless noted that prior to the commencement of the new Rules, the legislature and the Court strongly encouraged parties to engage in primary dispute resolution, both before and after commencement of proceedings.
His Honour recorded that the husband’s lawyer had made several attempts to have the parties engage in counselling or mediation in relation to children’s issues and property matters, but the wife had not been prepared to participate. However, his Honour observed that he would have
great difficulty in finding that the wife’s refusal to engage in face to face dispute resolution with the husband was unreasonable having seen for myself the very significant differences in their levels of assertiveness and the husband’s capacity to express himself aggressively in circumstances where he considered that he was in the right.
His Honour also observed that there were “other matters that would have made early attempts at dispute resolution extremely difficult”. He went on to say:
49.Negotiation in respect of financial matters can only be meaningful where the parties are negotiating on a properly informed basis. Here the husband acknowledged that he did not provide the wife with financial information “on the drip” – see page 16 of his affidavit sworn 9 August 2006 set out below – and it was clear to me at the trial that there had not been a free flow of information that the wife was seeking in order to deal with financial issues on an informed basis:
The judgment then continued with a recitation of the relevant paragraph of the husband’s affidavit of 9 August 2006, which contained his costs submissions. The paragraph read thus:
[The wife’s lawyer] makes an issue of not receiving financial documents. There are several issues here. The husband had willingly agreed to provide [the wife’s lawyer] with a copy of the contract of the [sale of the business] [[when there was one] and other financial details, however, as your honour knows, no contract was ever finalised and the sale fell through early in 2004. My lawyer agreed with me that no useful purpose would be served ‘drip-feeding’ incomplete and possibly misleading, financial figures to [the wife’s lawyer] …
His Honour then went on:
50.The evidence at trial established clearly that during cohabitation, it was a case where the husband controlled the only accounts that related to his [business] and farming activities, and the wife had little or no knowledge of the state of the family’s finances: see paragraphs 102-104 of the judgment. It would have required very full and frank disclosure very soon after separation for there to be any meaningful negotiations on financial matters at that stage and the husband’s own statement about not giving the wife information “on the drip” makes clear that she would not have been in a position to negotiate on an informed basis.
51.It was a case where the husband had been in control of the income and assets of his [business] and farming activities at all relevant times, and the wife was not familiar with the finances as managed by the husband.
52.There was, therefore, a very real need for the husband to put the financial position before the wife in some detail before she could negotiate on an informed basis and even at the time of trial, financial information that might have assisted in understanding the husband’s finances and the parties’ financial position was not forthcoming – see judgment paragraphs 182 and 183.
His Honour next mentioned guidelines relating to mediation published in the CCH Family Law and Practice Commentary, including a statement that
Mediation might not be suitable in cases involving… discernible power imbalances between the parties, eg one spouse has historically always deferred to the other, or one has total control of finances;
Having regard to all of these matters, his Honour reiterated that he was not satisfied that the wife’s unwillingness to attempt to resolve matters by mediation or otherwise was conduct on her part that should give rise to a costs order against either the wife or her lawyer.
His Honour then turned to consider the husband’s response to the wife’s claim that “her approach to the quantum issues was much closer to the outcome than the husband’s”. He noted that the husband relied upon an oral offer he made at the conference in August 2004 and concluded, in effect, that evidence of the offer was admissible.
His Honour then recorded that the wife had
based her claim for costs in part on the husband’s approach to the proceedings (in terms of the outcome she sought from 27 September 2007 [his Honour meant 2004] to trial) and being much further from the outcome that I ordered than the wife’s approach.
His Honour noted that in response to this submission, the husband had relied on the terms of the offer made at the 2004 conference, which involved the wife receiving three instalments of $20,000 over a two year period ending in August 2006. His Honour went on to say
That is an outcome that, as [the husband] points out, would have placed the wife in a position where, if she had accepted it, she might have saved about $20,000 in costs and, on that scenario, would have been $80,000 “better off” by August 2006.
His Honour next recorded the husband’s submission that the orders ultimately made meant that the wife may not receive the greater part of the sum ordered for six or more years, having regard to the evidence of the life expectancy of the husband’s mother.
His Honour said this in relation to these propositions
60.These submissions would have great weight if there was evidence that [the husband’s] August 2004 offer had been kept open up to, or repeated at, the commencement of the hearing. But [the husband] makes no assertion that the offer was ever repeated, and having been rejected by the wife, it lapsed. The wife’s amended application filed 27 September 2004 picked up the same timetable for payments, but sought greater amounts. There is no evidence, however, that the husband’s offer was ever repeated after that amended application was filed.
His Honour then went on to recite the wife’s summary of the proposals of settlement made by the husband, other than the one made at the conference. We further summarise the wife’s chronology of the husband’s proposals as follows:
·In his Form 1A response filed in April 2004, the husband proposed that he pay the wife “a sum equivalent to one half of the net assets of the parties”. Reference to the parties’ statements of financial circumstances at the time would indicate that the wife would have received a cash payment of less than $5,000 on that proposal.
·In his amended Form 1A response filed on 1 November 2004, the husband proposed that he pay wife “a sum equivalent to 60% of the net assets of the parties, which equates with a payment to the wife in the sum of approximately $29,000”.
·In his case summary document filed on 28 July 2005, the husband proposed a distribution of property 70:30 in favour of the wife, which would have resulted in a payment to the wife of only $9,635.
·In his “case of argument” filed on 10 August 2005, the husband proposed a payment to the wife of 20% of the property pool, which would involve a payment to the wife of $25,202.
·In his amended final submissions filed on 26 August 2005, the husband proposed a payment to the wife of $26,387 (of which $11,387 would be paid within 90 days and the balance would be paid by 1 June 2006). In addition the husband proposed a lump sum child support payment of $5,000.
His Honour then turned to discuss the merits of the parties’ competing claims for costs. Given the nature of the attack made on his judgment, we set out his discussion in full below.
61.I conclude that at August 2004, the husband put an offer that, if accepted at the time, would have provided the wife with benefits much closer to the order that I made than the position that he adopted after the rejection of that offer up to and including the trial. I have no basis for knowing how the husband would have funded this offer had it been accepted. It was clear, however, from the husband’s evidence at trial, and assertions that he made in these costs proceedings, that at the time he made that offer, he anticipated that a sale of his [business] would be effected at a much higher price than was ultimately achieved. From the time that that offer was rejected in August 2004, however, the husband’s position did not ever approach an outcome that was anywhere close to the outcome that the wife achieved, even with the reduced interest rate.
62.This falls ^[sic] for consideration of subparagraphs (c) (e) and (g) of s 117(2A). In that context, I consider that the husband’s approach to the outcome of the proceedings (in quantum terms) was unreasonable to the point that the wife was put to considerable expense in achieving an outcome that recognised the significant value of the asset that will come into the husband’s possession, and the fact that that asset had increased in value during the parties’ cohabitation, an increase towards which the wife made contributions.
63.A very considerable amount of time was occupied at the trial in ascertaining whether certain amounts that the husband claimed should be deducted from the valuation of his farming activities and [business]. He was unsuccessful in most of those: see inter alia paragraphs 173, 175, and 179 of the judgment. There were also disclosure issues of significance: see paragraphs 182 -183.
64.The parties’ respective financial circumstances is another matter on which the wife relies in seeking an order for her costs, and in particular the much greater income available to the husband. I do not, however, consider that the disparity is such as to justify or support an order for costs. The husband’s earnings and earning capacity should be taken into account in relation to the payment of child support, and to take them into account again here could be seen as double counting.
65.Had the wife’s application been in terms that were closer to the orders that I made, there would have been a strong case for an order for all her costs to be paid by the husband. Having regard to the husband’s approach to and conduct of and in relation to the proceedings, however, as previously set out, I consider that, it would be appropriate for him to pay more than half of the wife’s costs, and the proportion that I consider just and appropriate in all the circumstances is 65%, to be taxed in default of agreement…

His Honour then dealt with the interveners’ claim for costs, but it is unnecessary for us to consider that aspect of his judgment as no submissions were put by the husband to challenge his Honour’s orders in this regard.

Law relevant to costs disputes

The general rule, under s 117(1) of the Act, is that each party to proceedings should bear their own costs. Section 117(2) enables the Court to make an order for costs if it considers there are justifying circumstances.
The matters the Court “shall have regard to” in considering what order (if any) to make under s 117(2) are set out in s 117(2A), namely:
(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 Court has a broad discretion in determining costs disputes. The majority of the High Court (Stephen, Mason, Aickin and Wilson JJ) in Penfold v Penfold (1980) 144 CLR 311 said at 315:
It is an accurate description of s. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s. 117(2). As sub-s. (1) is expressed to be subject to sub‑s. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117(2) in “a clear case”.
Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent [(1970) 92 WN (NSW) 503 at 505]).
There is nothing to prevent any factor in s 117(2A) from being the sole foundation for an order for costs. In Fitzgerald v Fish (2005) 33 Fam LR 123, the Full Court said:
41.… Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.

Principles relevant to appeals against costs orders

This is an appeal against the making of a discretionary order. The principles applicable to such appeals are well-known. Unless:
·there was a procedural irregularity at the trial;
·the trial judge acted on a wrong principle;
·the trial judge mistook the facts;
·the trial judge failed to take into account some relevant matter;
·the trial judge placed inappropriate weight on relevant matters; or
·the trial judge was influenced by extraneous or irrelevant matters;
an appeal will generally only succeed if the order falls outside a reasonable exercise of discretion – i.e. the order was “unreasonable or plainly unjust”: House v The King (1936) 55 CLR 499; De Winter and De Winter (1979) FLC 90‑605; Gronow v Gronow (1979) 144 CLR 513 and Norbis v Norbis (1986) 161 CLR 513.
Costs orders are considered to be “particularly immune” from appellate interference, as was observed by this Court in Browne v Green (2002) FLC 93‑115 at 89,162. In Harris and Harris (1991) FLC 92‑254; Ellis, Strauss and Lindenmayer JJ went so far as to say at 78,711:
Orders for costs are peculiarly a matter which are within the discretion of the trial judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.
In Robinson and Higginbotham (1991) FLC 92‑209, Nygh J with whom Simpson and Smithers JJ agreed, acknowledged the breadth of the discretion in costs disputes, but reiterated that its exercise is nevertheless subject to appellate interference. His Honour said at 78,417:
…this Court should be very reluctant indeed to interfere with the exercise of discretion in respect of costs. Indeed, it may be fair to say that generally speaking this Court has been more reluctant to interfere in such determinations than it has even in respect of the exercise of discretion pursuant to section 79. But that does not mean that this Court should never interfere with the exercise of that discretion … [I]f the result is plainly unjust or if the discretion was exercised on wrong principles then this Court must interfere.”

The Notice of Appeal

In his Notice of Appeal the husband sought an order, in the event that the appeal was allowed, that the “wife pay the husband’s costs (or an appropriate proportion thereof) of and incidental to the proceedings” or alternatively that there be an order that each party pay their own costs. However, in his written summary of argument, the husband indicated that if the appeal was allowed, he would seek an order that the wife’s lawyer pay his costs and the wife’s costs since 11 September 2003, as well as the costs incurred by the interveners. In the event such orders were not made, the husband sought an order that the wife pay his costs since 24 August 2004 as well as the interveners’ costs.
We pointed out to the husband on the hearing of the appeal that he would need formal leave of the Court to amend his Notice of Appeal in order to seek the relief proposed in his summary of argument, which went well beyond what was proposed in the Notice. The husband did not seek formal leave and indeed indicated that he would consider that “justice had been done” if we set aside the costs order against him and made no order for costs against the wife.

The Grounds of Appeal

The husband initially relied upon ten grounds of appeal, but abandoned two prior to the commencement of the hearing. The grounds ultimately relied upon were these:
1.That the learned Trial Judge erred in failing to apply Section 117 of the Family Law Act to achieve a just and equitable result as is required pursuant to the said Act.
2.That the learned Trial Judge erred in failing to attach any, or any sufficient weight, in the exercise of his discretion to the following facts:
(a)that the wife had commenced the Trial on the basis that any interest in the property known as […] was a financial resource, rather than an asset and that the learned Trial Judge, of his own motion, directed the parties to the fact that the wife’s interest in the said property was an asset rather than a financial resource;
(b)that the wife’s solicitor opened her case on the basis that the wife sought a verdict in excess of $150,000.
(c)that the husband was not financially able to make a payment to the wife greater than the $60,000 that he had offered.
3.That the learned Trial Judge erred in failing to take into account at all, or sufficiently, that:
(a) the wife had made offers in excess of the Judgment received;
(b)the husband had made offers that were as close as or nearly as close as the verdict as were the wife’s various offers;
(c)that the husband had no financial ability, or otherwise, to make an unconditional payment to the wife in the terms of anything greater than his offer of $60,000.
…
6.That the learned Trial Judge erred in fact and in law in taking into account in his decision to award costs to the wife, that the wife could or would not attend the proposed mediation conference.
7.That the learned Trial Judge erred in the exercise of his discretion as to costs by failing to give any or any proper weight to the submissions put by the husband in relation to the issue of costs.
8.That the learned Trial Judge erred in fact and law in making a Costs Order against the husband which was, on the evidence, beyond the capacity of the husband to meet.
9.That the learned Trial Judge erred in fact and law in not expeditiously handing down the costs decision, which resulted in the husband having to lodge two appeals.
10.That the learned Trial Judge erred in fact and law in not properly assessing the financial circumstances of each of the parties respectively as is required pursuant to Section 117(2A) of the Family Law Act.
Given the conclusion we have reached in relation to the other grounds of appeal, it is unnecessary to say more about Grounds 6, 7 and 9 than that we were not persuaded they had any merit. Ground 1 was, in effect, a catch‑all ground, which would only have merit if we found merit in one of the more specific grounds. The only grounds we consider require discussion are Grounds 2 and 3 (which primarily relate to the way in which his Honour dealt with the various offers of settlement) and Grounds 8 and 10 (which relate to the extent to which his Honour took into account the parties’ financial circumstances).

Grounds 2 & 3 – The offers of settlement

The husband submitted that the offer of $60,000 he made at the 2004 conference was a reasonable proposal, which the wife ought to have accepted, and that his Honour should have taken this into account when determining the costs dispute. The husband further asserted that his offer must be considered in the context of the fact that until the commencement of the trial, both parties were proceeding on the basis that his interest in the estate should be treated only as a financial resource. He also drew attention to the fact that Watt J himself observed in his judgment that there was no basis for knowing how the husband would have been able to fund the $60,000 offer had it been accepted. This highlighted the fact that the husband had very limited means to make any proposal for settlement.
The husband acknowledges that after the wife rejected the $60,000 offer, all of his subsequent offers were for amounts significantly less. However, he submitted this was the inevitable consequence of the fact that he was obliged to incur further legal costs in meeting the wife’s demands for property settlement. Any funds he was required to outlay on legal costs decreased his capacity to pay the wife by a corresponding amount.
The husband further submitted that at no time did the wife make an offer of settlement that he could afford to accept. The payment schedule she proposed in her amended application required him to find $40,000 within 30 days; a further $40,000 within a year and the balance of $20,000 within a further year. At trial the wife proposed that the husband should pay her $100,000 within 90 days or alternatively $150,000 by three equal instalments over two years (see para 25 of the substantive judgment).
The wife’s Counsel was unable to make any submission before us to show how the husband would have been able at the relevant time to pay anything like $100,000, which was the minimum amount the wife was ever prepared to accept. Counsel did refer, in another context, to the husband’s concession during the course of the substantive proceedings that he had a capacity to earn a greater income, but there was no suggestion he would have been able to put together $100,00 within two years, even if he fully exerted his earning capacity. Furthermore, reference to the substantive judgment (para 208) indicates that his Honour accepted that the husband did not have the capacity to pay anything more than $31,000 until he had obtained access to his interest in the estate. Indeed, his Honour was only able to infer that the husband could find $31,000 because he had made an open proposal to pay that amount.
Given his Honour’s findings in relation to the extent of the wife’s knowledge of the husband’s financial circumstances, we accept that the wife could not be criticised for failing to accept the husband’s offer at the conference. Conversely, however, we do not consider that the husband can be criticised for having failed to offer to pay the wife amounts greater than he could afford. In this regard, we accept that his ability to fund a settlement diminished as he expended his limited funds in responding to the wife’s application.
In Pennisi v Pennisi (1997) FLC 92‑774 the Full Court (Nicholson CJ, Barblett DCJ and Faulks J) said at 84‑547:
The husband’s submissions refer to Robinson and Higginbotham (1991) FLC 92‑209 as authority for the proposition that the fact that an offer just exceeds the award is no bar to an order for costs. Equally, however, it is only one of the factors to be considered under s 117(2A) and it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror – Harris and Harris (1991) FLC 92‑254.
We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded.
Importantly, the Full Court in Pennisi went on to emphasise the importance of considering offers in the context of each individual case. Their Honours said:
We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. 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.
We concur with these views and stress it is critical to consider the context in which an offer is made. If the recipient of the offer is demonstrably unable to comply with his or her obligations under the proposed settlement, it is difficult to see how the offer could be relied upon in support of an application for costs. Similarly, the failure of a party to make an offer beyond their ability to pay could provide no basis for an order for costs. At no stage during the substantive proceedings did either party make a proposal which involved payment of a portion of the settlement being delayed until the husband received his interest in the estate. No doubt this was due to the fact that both parties were treating the interest in the estate as only a resource. Their positions did not change even when his Honour drew attention to the fact that the husband’s interest had already vested; however, his view on this issue was only made known shortly prior to the commencement of the trial.
His Honour did say in paragraph 61 of his judgment that:
It was clear, however, from the husband’s evidence at trial, and assertions that he made in these costs proceedings, that at the time he made that offer [i.e. the offer at the 2004 conference], he anticipated that a sale of his [business] would be effected at a much higher price than was ultimately achieved.
Although there was no ground of appeal specifically directed to this finding, the husband took issue with it in the course of his submissions. It emerged before us that it was common ground that the husband had received an offer for the [business] at $210,000 but it was also common ground that the offer had lapsed prior to the conciliation conference. Reference to his Honour’s substantive judgment (para 110) suggests that the offer was “a tentative offer” and that it included blocks of land adjoining the [business], stock and plant and equipment. After the offer had lapsed, the parties commissioned a valuation by a Single Expert, who found that the [business] was worth only $8,146.
The husband had reminded his Honour in his written submissions on costs [Appeal Book 76 and 80] that the offer to purchase the [business] had fallen through well prior to the conciliation conference. Although the point was not stressed in the costs submissions, reference to the substantive judgment (para 109) indicates that his Honour had been made aware that the valuation of the [business] had been prepared shortly prior to the conference. His Honour did not record anything in his substantive judgment to indicate that the husband had given evidence that he anticipated that a sale of the [business] “would be effected at a much higher price than was ultimately achieved”. This does not mean to say that such evidence was not given, but our careful examination of the written and oral submissions made to his Honour also does not reveal anything to support the finding that the husband had asserted during the costs argument that he had any such expectation at the time of the conference – or at any later time. The [business] was sold shortly prior to trial and the net proceeds were included in the pool at $12,631.
In light of this discussion, we conclude that his Honour erred in placing weight on the fact that after the husband’s offer was rejected at the conference, “[his] position did not ever approach an outcome that was anywhere close to the outcome that the wife achieved”. In our view, this observation (together with the allied finding that the “the husband’s approach to the outcome of the proceedings (in quantum terms) was unreasonable”) did not pay sufficient regard to the fact that the husband did not have the means to repeat his earlier offer nor the means to perform the obligations which would have been imposed had he accepted the best of the wife’s offers.
We therefore find merit in Grounds 2 and 3 insofar as they relate to the order for costs made against the husband. There is no merit in those grounds insofar as they relate to the order dismissing the husband’s application for costs against the wife.

Grounds 8 & 10 – The financial positions of the parties

His Honour dealt with the parties’ financial positions very briefly in paragraph 64 of the judgment, which we have set out above. He noted that the wife relied upon the greater income available to the husband but found that the disparity was not such as to support an order for costs, since the husband’s earning capacity would be taken into account in relation to child support and that to take it into account in relation to costs would amount to “double counting”.

His Honour made no reference at all to any other aspect of the parties’ financial circumstances. The husband conceded on appeal that he had not expressly urged his Honour to find that his capital position was such that it would be impossible to meet any costs order; however, we accept it was reasonable for him to anticipate that the Court would have regard to the overall financial position of the parties – especially as they had been required to file an up‑to‑date statement of financial circumstances and s 117(2A)(a) requires a consideration of the parties’ financial circumstances.
In ordering the husband to pay 65% of the wife’s costs, his Honour made no mention of the fact that the husband’s liabilities exceeded his available assets – even before taking into account the property settlement he was obliged to pay. There was also no evidence that the husband could afford to borrow money from any source to meet the costs ordered. On the contrary, the husband had provided evidence that he would be unable to borrow funds unless he could provide security – which he could not.
We do not suggest that the apparent inability of a party to pay costs is a bar to an order being made, since there are cases where the conduct of an impecunious party will warrant costs being ordered without regard to the difficulties likely to be associated with enforcement. Although his Honour was critical of the way in which the husband presented part of his case, his conduct was not such as to make it immediately obvious why he should be required to pay costs he clearly could not afford. We are of this view notwithstanding the wife also has virtually no assets (other than her entitlement to the property settlement) and a significant liability relating to legal costs.
We conclude that his Honour erred in failing to have sufficient regard to the husband’s financial circumstances in determining the application for costs. There is therefore merit in Grounds 8 and 10.

Re‑exercise of discretion

As we have found merit in the husband’s grounds, the appeal must be allowed. We turn now to consider the re-exercise of his Honour’s discretion, since clearly the additional costs and delay associated with remitting the matter for rehearing would not be justified.
In our view, there are only two matters that might justify an order for costs against the husband. These are the two issues identified in paragraph 63 of his Honour’s judgment.
The first of these related to the fact that the husband was unsuccessful in relation to “most” of his submissions that there should be deductions from the value of “his farming activities and [business]”. The fact that submissions made by a party at trial are not accepted is not remarkable and usually not a sufficient basis for awarding costs. It was not apparent to us that the propositions upon which the husband relied were entirely without merit and we are not satisfied they provide a basis for an award for costs.
This leaves then only the issue of the husband’s non‑disclosure. In dealing with this matter, his Honour noted only that there were “disclosure issues of significance” but did not discuss the impact these had on the length of the hearing or the wife’s costs. Furthermore, reference to paragraphs 182 and 183 of his Honour’s substantive judgment (to which he made particular reference in relation to the disclosure issue) makes clear that the husband had already been “penalised” for his non‑disclosure of financial accounts. In those paragraphs, his Honour indicated that he was not prepared to have regard to certain liabilities because of the husband’s failure to provide relevant documents. Finally, we note that the wife’s submissions in support of her application for costs made no reference to any costs arising from the husband’s non-disclosure.
In these circumstances, we are not persuaded there are circumstances which would justify a departure from the general rule that each party should pay their own costs. The order for costs should be discharged and no order for costs made on the re‑exercise of the discretion.
Before concluding, we think it proper to record that his Honour’s task was made much more difficult than it needed to be as a result of the way in which the husband presented his case. His costs submissions were prolix, highly argumentative and directed primarily at criticising the wife’s lawyer, the Judge and the Court, rather than drawing his Honour’s attention to what were the real merits of his case.

Costs of the appeal

Both the husband and counsel for the wife requested that certificates be granted pursuant to the Federal Proceedings (Costs) Act 1981 in the event the appeal succeeded. The appeal has succeeded on a point of law and it is appropriate for certificates to be granted.

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date: 26 May 2008