DEKKER and DEKKER
[2015] FCWA 56
•17 JULY 2015
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY LAW ACT 1975
LOCATION: PERTH
CITATION: DEKKER and DEKKER [2015] FCWA 56
CORAM: WALTERS J
HEARD: 17 MARCH 2015
DELIVERED : 17 JULY 2015
FILE NO/S: PTW 1698 of 2007
BETWEEN: MS DEKKER
Applicant
AND
MR DEKKER
RespondentAND
PIM DEKKER
Intervener
Catchwords:
FAMILY LAW – COSTS – Property proceedings – Where Intervener wholly unsuccessful – Where husband wholly unsuccessful in his support of Intervener's claim – Relevance of husband's and Intervener's conduct as litigants – Where findings had been made that the Intervener's intervention in the proceedings was unnecessary and done for the sole purpose of making the proceedings as complex and expensive as possible for the wife – Where husband's conduct in pressing the Intervener's claim was similar – Where husband made an offer to settle – Where husband's offer was genuine, timely and reasonable – Where offer was open for an unusually and unduly short period of time – Where wife unable to scrutinise offer and evaluate it effectively – Where wife sought costs on an indemnity basis – Discussion of principles relating to award of costs on an indemnity basis – Where Intervener and the husband ordered to pay two thirds of the wife's costs on an indemnity basis
Legislation:
Family Law Act 1975 (Cth)
Category: Not Reportable
Representation:
Counsel:
Applicant: Mr F Castiglione QC
Respondent: Mr M Nicholls QC
Intervener: Mr H Moser
Solicitors:
Applicant: Elizabeth Wiese & Associates
Respondent: Lewis Blyth & Hooper
Intervener: Oldfield Legal
Case(s) referred to in judgment(s):
Bele & Vaughan (Costs) [2012] FamCAFC 198
Browne & Green (2002) FLC 93-115
Colgate-Palmolive (1993) 46 FCR 225
Dekker & Dekker [2014] FCWA 61
Eades & Wrensted [2014] FCWA 64
G & G [2004] FamCA 1179
Hawkins & Roe (2012) 47 Fam LR 526
J v J [2014] EWHC 3654 (Fam)
Kohan and Kohan (1993) FLC 92-340
Kowalski & Kowalski (1994) FLC 92-501
Lenova & Lenova (Costs) [2011] FamCAFC 141
Maker & Jets (No 3) [2012] FMCAfam 1104
Murray & Murray (1990) FLC 92-173
NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77
Omacini & Omacini (2005) FLC 93-218
Pennisi & Pennisi (1997) FLC 92-774
Prantage & Prantage [2013] FamCAFC 105
Redmond & Redmond (Costs) [2014] FamCAFC 55
Steel & Steel (1992) FLC 92-306
Steinbrenner & Steinbrenner [2008] FamCAFC 193
Yunghanns v Yunghanns (2000) FLC 93-029
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL
JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN
CHANGED
Introduction
1This is an application for costs made by [Ms Dekker] ("the wife") arising out of proceedings in which she was involved with her former husband, [Mr Dekker] ("the husband") and step-son, [Pim Dekker] ("[Pim]").
2On 15 September 2014, I published my Reasons for Judgment: see Dekker & Dekker [2014] FCWA 61 ("the Judgment").
3Final orders were made – pursuant to the Judgment – on 18 September 2014 ("the final orders"). The final orders were in a form to which the parties agreed, but they were not made by consent.
4Pursuant to paragraphs 14 to 18 of the final orders, directions were made regarding the filing of submissions in relation to the issue of costs. Those paragraphs are as follows:
14.In the event that any party proposes to seek costs from any other party, the first party within 42 days file and serve a minute of orders sought as to costs and any written submissions that party wishes to make.
15.In the event that a costs application is made, any party from whom costs are sought by the first party, within 28 days of service of the minute of orders sought as to costs and written submissions file and serve a minute of orders sought as to costs and written submissions that party wishes to make.
16.In the event that any party wishes to make oral submissions with respect to costs, that party within 21 days of service of the documents referred to in paragraph 11 write to the Court requesting the matter to be listed for a special appointment and setting out:
a)the available dates for all concerned parties to appear; and
b)the likely length of the special appointment.
17.Prior to writing to the Court, the parties confer with respect to availability and length of the special appointment.
18.In the event that paragraph 16 does not apply, any costs application be thereafter determined on the papers.
Application for costs
5In these Reasons, and unless otherwise indicated:
a)all statements of fact comprise findings of fact;
b)I have referred to the parties in the manner that I have (and I mean them no disrespect by doing so) – because it is less confusing than referring to them in other terms;
c)I have referred to all affidavits filed by or on behalf of the parties as being "sworn", even if they were affirmed by their deponents (and I note that, in a slightly different context, s 5 of the Interpretation Act 1984 (WA) provides, among other things, that "to swear" includes "to affirm"); and
d)references to legislation are references to the Family Law Act 1975 (Cth) – although, when necessary, I have referred to this enactment as "the Act" or the "FLA".
6The wife filed written submissions in relation to costs on 30 October 2014. A minute of orders sought was filed on 24 November 2014. A covering letter from the wife's solicitors states that the late filing of the minute was due to "an oversight in the office". I note, however, that the orders the wife is seeking were clearly identified in Pt 2 of her submissions, under the heading Summary of Costs Incurred.
7The husband filed a minute of orders sought and written submissions on 3 December 2014. He filed further submissions on 9 March 2015, despite there being no orders providing for any of the parties to file further submissions.
8Pim filed a minute of orders sought and written submissions on 8 December 2014.
9The wife sought the following orders "on an indemnity basis":
1)each of the husband and [Pim] pay one half of 75% of the legal and accounting costs of the wife in these proceedings; or, alternatively,
2)the husband and [Pim] be jointly and severally liable for 75% of the wife's legal and accounting costs.
10The wife quantified her legal and accounting costs at just under $444,000.
11The husband sought that the wife's application for costs be dismissed and that the wife pay his costs relating to her application for costs (fixed at $10,000).
12Among other things, the husband submitted that the wife should not receive anything by way of costs "because the costs that the parties had incurred (including any costs relating to [Pim]'s intervention) were taken into account in the final order adjusting their interests in their property". Regrettably, and with the greatest of respect to the drafter, this submission was incomprehensible. Equally regrettably, nothing said during the course of oral submissions served to clarify the submission. It appears to conflate property settlement and costs issues. In other words, it failed to draw any adequate distinction between the provisions of s 79, including s 79(4)(e) and what are commonly called the s 75(2) factors (on the one hand) and the provisions of s 117 (on the other). I have discussed the husband's submissions in this regard later in these Reasons.
13Pim sought that there be no order as to costs. He also argued that, since the wife had filed her minute late, her application for costs should not be entertained.
14Pursuant to paragraph 16 of the final orders, the wife sought a listing for oral submissions in respect of costs. The matter was listed for 17 March 2015.
15On that day, Mr Castiglione QC appeared for the wife, Mr Nicholls QC appeared for the husband and Mr Moser appeared for Pim. All made submissions on behalf of their respective clients.
16At the conclusion of the hearing on 17 March 2015, I reserved my decision.
Background
17The background to the parties' dispute is set out in detail in the Judgment at [12] to [71]. It is unnecessary to revisit those paragraphs, although I will record that the husband and wife were born [in] 1935 and [in] 1944 respectively. They commenced cohabitation in early 1992 and married [in] 1993. They separated in November 2006. There were no children of the marriage – although each had adult children from previous relationships. Pim is the husband's sixth child from his first wife.
The Law
18I discussed the law relating to costs in family law matters in my decision in Eades & Wrensted [2014] FCWA 64 at [12] to [58]. I need not repeat the entirety of that discussion in these Reasons.
19The question of costs in family law proceedings is dealt with in s 117. A trial judge has a very broad discretion in costs matters.
20It is not the law that a costs order can only be made in what has been described as "a clear case". Although a finding of justifying circumstances is an essential preliminary to the making of a costs order, there is no additional or special onus on an applicant for an order for costs. The general rule is that each party shall bear his or her own costs, but that rule is expressed to be subject to s 117(2), and it must yield whenever a judicial officer finds that there are circumstances which justify the making of a costs order.
21Section 117(2) provides as follows:
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)…and the applicable Rules of Court, make such order as to costs…as the court considers just.
22Section 117(2A) provides as follows:
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, discover, 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.
23The weight to be given to the various factors referred to in s 117(2A) is a matter for the trial judge. All the factors, however, must be taken into account and balanced when considering whether the overall circumstances justify the making of a costs order. On the other hand, there is nothing to prevent any one of the factors being the sole foundation for an order for costs.
24A disparity in financial resources between parties to family law litigation can sometimes justify an order for costs in favour of the party with fewer financial resources. At the same time, the apparent inability of a party to pay costs is not a bar to a costs order being made in circumstances where – for example – that party's conduct as a litigant warrants such an order.
25The law relating to indemnity costs was reviewed by the Full Court in Prantage & Prantage [2013] FamCAFC 105 (“Prantage”). After observing that there is nothing in the FLA which inhibits the making of an order for indemnity costs and confirming that the law relating to such costs has been "well established in this jurisdiction for many years", the Full Court confirmed that the "usual rule" is that costs are awarded on a party/party basis and that an order for indemnity costs is "a very great departure from the normal standard": see Kohan and Kohan (1993) FLC 92-340 at p 79,605.
26In Redmond & Redmond (Costs) [2014] FamCAFC 55, the Full Court cited with approval the following extract from the decision of Strickland J in Bele & Vaughan (Costs) [2012] FamCAFC 198 (references omitted):
[27]The ordinary rule is that an order for costs is calculated on a party/party basis, and it emerges from the authorities … that to depart from that rule exceptional circumstances need to be demonstrated.
[28]As to what might constitute an exceptional circumstance, reference can be made to the oft-cited decision of Sheppard J in Colgate-Palmolive Co & Another v Cussons Pty Ltd where his Honour detailed circumstances that might qualify. Usefully, Holden J in Munday v Bowman (1997) FLC 92-784 … drew from the decision of Sheppard J the following examples:
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.
b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud.
c)Evidence of particular misconduct causing loss of time to the court and to other parties.
d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
e)An imprudent refusal of an offer to compromise.
27The approach described by Holden CJ in Munday & Bowman (supra) (relying, as it does, on Sheppard J's dicta in Colgate-Palmolive (1993) 46 FCR 225) remains good law. In Prantage, however, the Full Court emphasised that Sheppard J referred to an "imprudent refusal of an offer to compromise", and not to imprudence by a party in his or her general approach to the proceedings. The former may be sufficient to enliven the power to award indemnity costs; the latter is not.
28The Full Court in Prantage also emphasised that there is no rule to the effect that indemnity costs will be ordered "where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation" (see NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77). The conduct of a party that is relevant to the issue of indemnity costs is that party's conduct as a litigant.
29I would add that it is, of course, the relevant party's conduct as a litigant to which the reference to conduct in s 117(2A)(c) is directed, and not his or her conduct in other respects.
30Notwithstanding the matters discussed above, "the categories of circumstances which enliven the discretion to award indemnity costs are not closed…": see Yunghanns v Yunghanns (2000) FLC 93-029 at [31].
Section 117(2A) considerations
31I turn now to consider the various matters referred to in s 117(2A).
The parties' financial circumstances
32I discussed the parties' financial circumstances in detail in the Judgment. The effect of the final orders is summarised in the Judgment at [498] to [504]. I do not intend to reproduce those paragraphs here.
33The wife submits that the husband and Pim are in a substantially better financial position than she is and that both are capable of paying her costs. I accept the wife's submission in this regard: see the wife's submissions at [10] to [12].
34The husband makes no submissions in relation to his ability to pay. Pim does little more than correct the wife's estimation of his assets.
35It is possible that the husband's submission regarding the effect of paid legal fees having been added back to the asset pool (see para 12 above) could be understood as a submission in respect of undue financial hardship.
36The argument appears to be that costs have essentially been considered in determining a just and equitable property settlement and that, as such, any further distribution would result in the husband suffering undue financial hardship.
37With respect to counsel, this misunderstands the concept of adding paid legal fees back into the asset pool for the purposes of property division. The Judgment took into account only costs paid at the time of trial (which would otherwise have been available for distribution between the parties). This is different from costs incurred.
38The following passage appears in the husband's primary submissions (footnotes omitted):
In the present case, the applicant's costs were put into the pool of assets available for adjustment at $227,318, including the costs relating to all of the matters that the applicant complains of, and then an adjustment was made of 7.5% in the applicant's favour on the s 75(2) factors, primarily because of the disparity in capital, a disparity that had resulted at least in part from the costs that the applicant had incurred.
39The husband's paid legal fees "added back" amounted to $314,943 (and I shall henceforth refer to the expression without parentheses). As indicated above, the wife's paid legal fees added back amounted to $227,318. These figures were agreed between the parties, as was the fact that they represented sums that had been paid by each of the parties up until the commencement of the trial. It was not in dispute that the philosophy behind the add backs was that these sums would have been available to the parties if they had not been utilised for the purpose of paying legal fees. To that extent, it was agreed that the sums should be treated as "notional assets" in the hands of each party – on the basis that, to do otherwise, would be to give one party or the other the benefit of a premature distribution of property otherwise available for division between them. It was precisely because fairness, justice and equity requires costs to be determined after the conclusion of the proceedings that paid legal fees were dealt with in this manner. I accept that other alternatives may have been available to the parties – such as excluding paid legal fees altogether and dealing with them elsewhere in the property settlement exercise, with or without consideration of unpaid (but outstanding) or anticipated future legal fees. The fact of the matter is, however, that the trial was not run on that basis. As the husband's primary submissions observe at footnote 11 on page 3, no explanation was required in relation to the add back of the paid legal fees. That was so because the manner in which they were to be dealt with was agreed. This is a normal and uncontroversial approach: see, for example, Omacini & Omacini (2005) FLC 93-218 at [30(a)]. There was no suggestion – at any stage during the trial – that paid legal fees (or unpaid but outstanding or anticipated future legal fees) should be dealt with in any other way. To raise the issue at this late stage is tantamount to raising an argument on appeal that was not run during the course of the trial; indeed, it is tantamount to raising an argument on appeal that was specifically disavowed during the course of the trial.
40The husband's supplementary submissions contain the following argument:
… [The] true effect of the practice of "adding back" paid costs is that questions relating to the expenditure of money on costs – that is, spending money that would otherwise have been available to the parties – can be dealt with in the context of the s 79 adjustment of interests to achieve an overall just and equitable result, and that there is no need to have resort to s 117.
41To the extent that I understand the above argument, I disagree with it. In my opinion, the "true effect" of adding back paid costs is to recreate something akin to a level playing field. The Court's discretion to make an order for costs after the event (pursuant to s 117) is unaffected; indeed, the discretion to make an order for costs after the event remains whether or not the Court decides to add back paid costs. As indicated above, the discretion is separate and unrelated to the Court's discretion inherent within the exercise of its powers under s 79. In that regard, dicta from cases litigated in jurisdictions having very different legislative provisions and jurisprudence from those that bind this Court – such as J v J [2014] EWHC 3654 (Fam), which is referred to in the husband's supplementary submissions – neither illuminate nor enrich the argument mounted on behalf of the husband.
42Taking into account my findings in the Judgment regarding the financial position of the parties, I am satisfied that both Pim and the husband are capable of paying any costs order that the Court might be minded to make.
Whether any party was in receipt of legal aid
43None of the parties was in receipt of legal aid.
The conduct of the parties in relation to the proceedings
44I reiterate that this factor requires the Court to have regard to the parties' conduct as litigants.
45It is under this general heading that the wife's submissions in relation to Pim appear concentrated. The wife submitted that Pim 's conduct caused her to incur unnecessary costs.
46She argued that Pim –
a) commenced and continued his claim for ulterior motives; and
b) failed to be open and frank in relation to the veracity of his claim.
47Additionally, she argued that the husband –
a)failed to provide full and frank disclosure, particularly in relation to the value of the business and the assessment of goodwill;
b)falsely represented to the Court that an agreement existed between the husband and Pim; and
c) delayed proceedings on the basis that further evidence was to be obtained.
48I made certain findings in relation to Pim's intervention in the proceedings in the Judgment at [400] – although the word "exchanges…" in line #2 should read "exchange is…". Relevantly, I found that Pim's intervention was unnecessary and done for the sole purpose of making the proceedings as complex and expensive as possible for the wife. Those findings relate directly to Pim's conduct as a litigant.
49In the circumstances, Pim's conduct as a litigant was reprehensible.
50The husband's conduct in supporting and pressing Pim's claim was little better. At paragraph 234(m) of the Judgment, I concluded that:
When it was put to the husband that he had "conspired" with Pim to present to the Court a false story about Pim 's alleged entitlement, he responded that he "did not know" and "really could not remember". In my opinion, his evidence in relation to the steps taken to crystallise Pim's claim at $530,000 and to involve Pim directly in these proceedings as an intervener was wholly unsatisfactory. Although he eventually denied having "conspired" with Pim to present evidence that was false, his denial was unconvincing…
51I found that the husband acted deliberately to involve Pim in the proceedings. I am satisfied that his motives were no different to Pim's motives: to draw out the proceedings and cause the wife to incur additional costs.
52I also found that the husband deliberately shut down [Company D] in order to deny the wife any entitlement to that asset. As I said at [260] of the Judgment:
… In my opinion, there was no valid commercial or other reason for shutting down Company D and commencing Company W. I find that these events occurred in an attempt to crystallise Pim's alleged entitlement. The events and the transactions associated with them were directly related to the conduct of these proceedings, and occurred at the direction of, or in the interest, of the husband. The transactions or dispositions associated with the shutting down of Company D and the subsequent commencement of Company W occurred for the purpose of defeating anticipated orders in these proceedings or, alternatively, for the purpose of minimising the wife's potential claim to the greatest extent possible.
53I consider that the actions of both Pim and the husband delayed the proceedings. They also made the proceedings far more complex than they should have been. I am satisfied that the predominant purpose of those actions was to attempt to minimise the wife's claim unjustifiably, and to cause her as much financial discomfort (in the form of excessive legal and other costs) as possible.
Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court
54This does not appear to be a relevant consideration, and none of the parties suggests that it is.
Whether a party has been wholly unsuccessful
55The orders sought by the parties were summarised at [72] to [80] of the Judgment. It is clear that the husband was unsuccessful in obtaining the orders he sought. The history of the orders sought by the parties is recorded adequately in the wife's submissions at [36] to [44].
56Pim was wholly unsuccessful with his claim. In fact, it would not be inaccurate to say that he was spectacularly unsuccessful, as was the husband in regard to his support of Pim's claim.
57Both the husband and Pim submit that the wife actively pressed for the intervener to join the proceedings. I find, however, that while counsel for the wife was critical of Pim's failure to intervene to that point (given the nature of his claim), this is not the same as actively pressing for his involvement.
58That Pim was wholly unsuccessful in his claim does not mean, of course, that the wife was wholly successful in obtaining the orders she sought. Indeed, she was not wholly successful in obtaining the orders she sought against the husband – but Parliament has directed the Court's attention to a party's lack of success in preference to a party's success in the proceedings. As Thackray J said in Hawkins & Roe (2012) 47 Fam LR 526 at [161], "even a meritorious case can be 'unsuccessful' when the other case is found to have greater merit". In the current proceedings, it must be said that "meritorious" is certainly not an adjective that springs to mind when considering aspects of the husband's case (and, a fortiori, Pim's case).
Whether an offer to settle was made
59The wife received an offer from the husband on Tuesday 18 May 2010 at 3.17 p.m. The offer was withdrawn on Thursday 20 May 2010 at 4.13 p.m.
60Annexure C to the wife's submissions comprises a copy of the offer. Its terms were as follows:
a)[Property A]be listed for sale by a real estate agent nominated by the husband forthwith.
b)The wife vacate [Property A] within 14 days, and surrender all keys, remote controls, access fobs and the like to the husband's solicitors.
c)Contemporaneously upon the wife's compliance with (b) above, the husband pay the wife $650,000 as follows:
i)$50,000 within 14 days; and
ii)the balance upon the settlement of the sale of [Property A], or within 12 months, whichever occurs first.
d)If the settlement of the sale of [Property A]takes longer than 12 months, then the husband pay interest pursuant to the Family Law Rules 2004 (Cth).
e)The following vest in the husband absolutely:
i)the funds remaining from the sale of [Property A] after the payment to the wife referred to above;
ii)any motor vehicle registered in the husband's name;
iii)the caravan in the husband's possession;
iv)any bank savings, superannuation interest and shares held by the husband, including any entity the husband controls; and
v)any other item owned by the husband.
f)The following vest in the wife absolutely:
i)any motor vehicle registered in the wife's name;
ii)any bank savings, superannuation interest and shares held by the wife;
iii)all items removed by the wife from [Property A] since 2007; and
iv)any other item owned by the wife.
g)Each party bear his/her own legal costs relating to these proceedings.
h)The proceedings be otherwise dismissed.
61During his submissions on 17 March 2015, Mr Castiglione submitted that the settlement offer had "all the hallmarks of a tactical offer". He argued that it was difficult to understand, and that it was not open for acceptance long enough to be considered a genuine offer.
62Mr Castiglione also submitted that the offer failed to address a number of specific facts, including the existence of the caveat over Property A lodged by Pim. At the time of making the offer, the husband knew of the existence of the caveat, but this was not disclosed to the wife or to her lawyers.
63Mr Castiglione suggested that the husband made the offer for the purpose of bettering his position in relation to any possible future costs application.
64Mr Nicholls submitted that the offer was a genuine offer, and that it was open to the wife to clarify its terms if she was dissatisfied with them, which she failed to do.
65There can be no doubt that s 117C(2A)(f) does not take priority over any of the other considerations referred to in s 117C(2A), and that the importance of an offer must be weighed in the light of all the circumstances of the case. Further, and as the Full Court said in Robinson & Higginbotham (1991) FLC 92-209 at [78,417]:
… when one looks at [s 117C(2A)(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 … that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.
66In Pennisi & Pennisi (1997) FLC 92-774, the Full Court observed at [84,547]:
… [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.
The requirement to take account of certain types of offers is mandatory, providing of course the fact of those offers are in evidence. …
…
The plain words of [s 117C(2A)(f)] do not limit a Court's attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the [FLA] carry the same consequences as payments into Court in common law matters.
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.
67In Browne & Green (2002) FLC 93-115 the Full Court said at [57]:
… 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. …
68More recently, the Full Court dealt with the relevance of an offer to settle in Lenova & Lenova (Costs) [2011] FamCAFC 141. Their Honours said:
[10]In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (2) … each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.
[11]A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation. Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs.
[12]That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.
69Clearly, the Full Court has indicated that weight should be given to an offer to settle – but the offer must be genuine, timely and reasonable, and the person to whom it is made must have "adequate knowledge" to consider the offer. There is nothing wrong with an offer being "tactical", given that its purpose is to avoid the incurring of further costs by causing the other party to reconsider his or her determination to pursue litigation. Like the other matters in s 117(2A), however, a genuine, timely and reasonable offer made to a person equipped to give it adequate consideration is simply one of a number of factors affecting the exercise of the Court's discretion as to the ordering of costs. It may or may not be decisive.
70All admissible offers, whether or not they are subsequently withdrawn, can be taken into account. This includes offers contained in correspondence in which it is stated that the letter in question will be used on the question of costs: see Murray & Murray , Kowalski & Kowalski and Steel & Steel ). The court's attention is not limited to offers which are greater than the amount awarded where the offeror is the payer, or less than the amount awarded when the offeror is the payee. Where a payer's offer is under the amount finally awarded, then the closer that the offer is to the award, the more the weight that should be given to it as a relevant factor in relation to the question of costs. Similarly, if a payee's offer is above the final award, then the closer that the offer is to the final award, the more weight it is likely to carry.
71The final orders made pursuant to the Judgment required the husband to pay the wife the sum of $514,115. It follows that the wife did not "beat" the offer – which provided for a payment of $650,000 to her. Save for the timeframes within which these amounts were to be paid, there was no other significant difference between the final orders made and those proposed in the offer.
72I accept that the husband's offer was poorly drafted, and that it contained inconsistencies and ambiguities: see the wife's submissions at [19]. Having said that, these difficulties were capable of being overcome if the offer had remained open for a longer period of time.
73I am satisfied that the offer was genuine, timely and, subject to my previous comments, reasonable. I find, however, that the offer was open for an unusually and unduly short period of time and that this would likely have prevented the wife and her legal representatives from scrutinising the offer and evaluating it in a conscientious, responsible and dispassionate manner. In this regard, it is important to take into account the wife's knowledge of the parties' financial circumstances while the offer was live. I have no doubt that the wife had significantly less grasp of the parties' financial arrangements than did the husband and his advisers. The window of opportunity for the wife and her advisers to assess the offer in the manner to which I have referred was minuscule. Put another way, I accept the wife's submission that "manifestly insufficient time was given to properly consider the offer".
74It cannot be denied, however, that the offer was made and that the wife did not "beat" it.
75The existence of the offer and the fact that, with the benefit of hindsight, it would have been financially advantageous to the wife to have accepted it comprise a significant consideration for the Court to take into account in determining whether or not to make an order for costs. It is a factor, however, that must be balanced against all other relevant considerations.
76The husband made a further written offer to the wife on the third day of the trial. He offered to pay her $450,000 within 120 days. This was over $60,000 less than the wife received pursuant to the Judgement and, as a result, the existence of the offer does nothing to buttress the husband's defence to the wife's claim for an order for costs.
77Pim also made certain offers of compromise: see the wife's submissions at [23]. Like the husband's written offer made during the course of the trial, Pim’s offers were ineffective in shielding him from the wife's claim for costs.
Other relevant matters
78I have already discussed the parties' conduct as litigants elsewhere in these Reasons, but to the extent that it is not relevant to the parties’ conduct, I repeat the comments I made in the Judgment at [260] – which I have quoted above.
79In all the circumstances, it is not unwarranted to conclude that the husband was motivated by resentment towards the wife and a desire to deny her access to a valuable asset, and not by a desire to assist the Court to understand the relevant issues and make orders which might be considered just and equitable.
80In Maker & Jets (No 3) [2012] FMCAfam 1104, I said at [84]:
In broad terms, the general law is to the effect that it is just and reasonable that someone who causes a person to incur legal costs should reimburse that person for those costs: see, for example, Latoudis v Casey (1990) 170 CLR 534. Costs (relevantly, party and party costs) are compensatory, in the sense that they intended to partially indemnify a successful litigant against his or her liability for legal costs. In other words, they are compensatory, not punitive: see Braithwaite (2007) FamCA 468. To that extent, "punishment" and "penalty" are not relevant considerations. Indeed, they are fraught concepts, given that a successful litigant who has fought long and hard through the court system to clear himself or herself of serious and perhaps malicious allegations that may have been made against him or her (which allegations may have the most profound effect on his or her relationship with his or her children, or on his or her financial well-being) might fairly consider that a reluctance of the part of the Court to order costs in his or her favour is tantamount to being punished, or penalised, for having chosen to litigate instead of, say, to metaphorically "walk away".
81Put another way, when considering whether it is just to make an order for costs, the Court is not concerned with "punishing" the husband or Pim for their behaviour, or for the fact that they were unsuccessful in the proceedings. Similarly, the Court is not concerned with "punishing" them because they were (or arguably could have been) guilty of ethical or moral delinquency which either gave rise to the litigation, or prolonged, complicated or impeded it after it commenced. The Court is obliged, however, to consider whether there are circumstances that justify the making of an order for costs, and if so, what a just order as to costs might comprise. The circumstances that justify the making of an order for costs have been explained elsewhere in these Reasons, and there can be no doubt that, among other things, they include the parties' conduct as litigants.
82The husband's primary submissions include the following comment:
Another problem is that the applicant's submissions do not place a dollar value on the behaviour said to justify an award of costs.
83This somewhat startling proposition seems to be related to an earlier comment in the husband's primary submissions (footnotes omitted):
Another difficulty in contemplating awarding costs is placing a dollar value on the factors said to justify an award of costs, whether part of the "justifying circumstances" or part of the considerations in s 117(2A). Not every act of bad behaviour, as it might be perceived to be, can be included in the "justifying circumstances", because "conduct" for costs purposes is regarded as being conduct (or more likely misconduct) in the way the litigation is conducted. And it must have a financial effect on the litigation. So if the conduct of one of the parties in the litigation has been wanting, it must be wanting in a way that involves how the litigation was conducted and its effect on the cost of work done by lawyers.
84Not surprisingly, the above submissions were not supported by authority. They appear impenetrable, but to the extent that I understand them, I reject them. As indicated above, the Court is not concerned with "punishing" the husband or Pim. It is simply exercising its discretion as it is required to do pursuant to s 117. It is unnecessary (and probably impossible) to ascribe a monetary value to each of the considerations in s 117(2A), any more than it is necessary to ascribe a monetary value to each of the considerations in s 79(4) when carrying out the property settlement exercise. Indeed, the Full Court has been highly critical of any attempts by trial judges to attempt the latter course of action.
85In the Judgment, I referred to the following passage from G & G [2004] FamCA 1179 in relation to the exercise of judicial discretion in property proceedings:
…[Words] will often (perhaps always) fall frustratingly short of an incontestable explanation for any particular exercise of discretion – or, for that matter, for a finding by an appellate court that a particular exercise was wrong. All the relevant factors can be described, with modifiers in abundance, but still the analysis will beg the question, “Yes, but why that figure and not another?” or “Why was that the range rather than some other parameters?”
The deficiency is unavoidable. When there are a number of “right” results available, the explanation for the choice of one over others can never be incontestable. Nor can the reasons for saying that a result is outside a range be beyond challenge. The very nature of a discretionary exercise that ascribes mathematical consequences to a batch of actions and events amenable only to descriptive evaluation, means that it is impossible to place beyond argument the explanation for all the steps to the ultimate selection of result. ...
(In) respect of virtually every exercise of discretion, by definition, it will not be possible to deliver a judgment which excludes reasoned argument that another result was available.
86It is also worth noting what Coleman J, sitting as a single judge exercising appellate jurisdiction, said in a well-known passage from Steinbrenner & Steinbrenner [2008] FamCAFC 193:
Given that the evaluation of contribution based entitlements inevitably moves from qualitative evaluation of contributions to a quantitative reflection of such evaluation, there will inevitably be a "leap" from words to figures. That is the nature of the exercise of discretion, whether it be in the assessment of contributions in the matrimonial cause, assessment of damages in a personal injuries case, or determination of compensation in a land resumption case.
87In my opinion, it is clear beyond argument that the exercise of discretion under s 117 can fairly be added to the examples to which his Honour referred.
88The gravamen of the husband's supplementary submissions appears in the following paragraph:
… [Making] a costs order would subvert the primary purpose of the court, which was to make an order that provided for the future financial needs of the parties, having taken into account all the matters that it was required to consider, including the costs they had incurred, so there are no circumstances that would justify a court making a costs order within the meaning of s 117(2).
89I reject this submission. The "primary purpose" of the Court is not "to make an order that provided for the future financial needs of the parties" but to make orders which are just and equitable within the meaning and contemplation of s 79: see my discussion of the law relating to alteration of property interests, commencing at [101] of the Judgment. The suggestion that the making of a costs order might "result in a state of affairs that would be neither just nor equitable within the meaning of s 79" (see the husband's supplementary submissions on page 1) is misconceived, and unnecessarily and unjustifiably commingles an application for costs pursuant to s 117 (and the Court's discretion associated with such an application) and an application for alteration of property interests pursuant to s 79 (and the Court's discretion associated with such an application). Clearly, one of the considerations that the Court is required to take into account under s 117(2A) comprises the financial circumstances of each of the parties. It follows that, if it were so minded, the Court could decline to make an order for costs on the sole basis that to do so would be unjust to one of the parties, having regard to his or her financial circumstances – provided, of course, that the Court also gave due consideration to the other matters referred to in s 117(2A): see the discussion of the law relating to costs set out above.
90I have taken into account all relevant considerations in forming the conclusions set out below. It also goes without saying that the discretion I have exercised in relation to the issue of costs differs from the discretion exercised in relation to the s 79 proceedings.
Conclusion
91It is my view that there are circumstances which justify the making of an order for costs in the wife's favour. The most significant of those circumstances are –
a) the fact that Pim was wholly unsuccessful in the proceedings;
b) Pim's conduct as a litigant; and
c) the husband's conduct as a litigant.
92The conduct of both Pim and the husband as litigants has been discussed in detail in the Judgment, as has their lack of success in the proceedings.
93I have not ignored the fact that the wife did not "beat" the offer made by or on behalf of the husband, and am conscious that the wife could have accepted the offer when it was first put to her in May 2010. However, and as I have noted elsewhere in these Reasons, the existence of the offer and its terms amount to no more than one of a number of factors that the Court is required to take into account. I accept that the offer comprises a factor that would mitigate against the making of an order for costs, but I am satisfied that the other relevant factors clearly, and significantly, outweigh it. I am also satisfied that it would be unjust and unfair for the Court to fail to make an order for costs in the wife's favour.
Form of costs order
94As explained above, the "default" method for assessing costs is on a party/party basis. Although it is unusual for this Court to make orders on any other basis, it has power to do so.
95The wife seeks an order for indemnity costs. Before making such an order, the Court must recognise that indemnity costs amount to a very great departure from the usual basis upon which costs are assessed, and be satisfied that the circumstances justifying that departure are exceptional in nature.
96Dealing firstly with the claim against Pim:
a)I am satisfied that the proceedings initiated by Pim were commenced and continued in circumstances where, had he been properly advised, he should have known that he had no chance of success. I am also satisfied that he commenced and continued proceedings for an ulterior motive. As I said in in the Judgment at [400]:
Taking into account all the evidence to which I have referred, and bearing in mind the exchange that I had with Pim at the conclusion of his evidence (which exchange [is] quoted above), I find that Pim's intervention in these proceedings was unnecessary. I find that Pim intervened for the sole purpose of making the proceedings as complex and as expensive as possible from the wife's point of view. The decision to intervene was invidious, and was made, I find, for base and legally unjustifiable reasons. I find, further, that, properly advised, Pim should have known that he had no chance of success in his claim for the orders sought in his original application and in the papers for the judge. As I have indicated, I am satisfied that his claim was commenced and continued for an ulterior motive. His intervention in these proceedings caused them to be prolonged unduly, and it made them significantly more complex than they ought to have been.
b)Pim's involvement in the proceedings caused significant loss of time to the Court and to the wife; put another way, the case was prolonged by groundless contentions pressed by or on behalf of Pim.
c)Indeed, in the Judgment at [396], I said:
To the extent that the orders sought by [Pim] included claims to the effect that the wife (whether solely or jointly with the husband) should be found to owe [Pim] $530,000, and to pay that amount to him, I regard such claims as preposterous. No evidence whatsoever was presented to the Court to support them. [Pim] could not explain why the wife was included in his claims, and Mr Moser made no attempt to provide such an explanation.
97I turn now to the claim against the husband:
a)I am satisfied that the husband, properly advised, should have known that he had no chance of success in the orders he sought at trial – being the orders set out in the Judgment at [74]. Notwithstanding the offer he made in 2010, he sought, in effect, that no payment (or no substantial payment) be made to the wife. He also sought a declaration to the effect that he held 30% of the proceeds of sale of Company D on trust for Pim. He was wholly unsuccessful in relation to those claims. Having regard to the findings made in the Judgment and the comments made in these Reasons, I am satisfied that the husband pressed for these orders in wilful disregard of the known facts.
b)The history of Pim's claim, and the husband's involvement in and support of it, is dealt with in the Judgment. I made a number of findings about Pim's alleged entitlement, including the following:
i)At [234]:
m)When it was put to the husband that he had "conspired" with [Pim] to present to the Court a false story about [Pim’s] alleged entitlement, he responded that he "did not know" and "really could not remember". In my opinion, his evidence in relation to the steps taken to crystallise [Pim’s] claim at $530,000 and to involve [Pim] directly in these proceedings as an intervener was wholly unsatisfactory. Although he eventually denied having "conspired" with [Pim] to present evidence that was false, his denial was unconvincing – coupled, as it was, with clear concessions that –
i)the lodging of the caveat over [Property A] by [Pim] in May 2010 was with his full knowledge and approval;
ii)very shortly before [Pim] took steps to intervene the husband had wholly failed to mention the alleged debt to a person who he acknowledged was a trusted advisor; and
iii)at approximately the same time, he had actually prepared a will in which he had left $400,000 to [Pim].
n)Indeed, the husband conceded that there had been discussions with [Pim] "all the way through" – from prior to the lodging of the caveat over Property A to the time when [Pim] formally intervened in these proceedings. He also conceded that the purpose of those discussions was to ensure that the wife "got as little as possible". He said that it was "his advisers" – his own lawyers in the current proceedings – who had explained to him that he "owed" [Pim] $530,000 and not $400,000.
ii)At [234(p)], I referred to the desire of the husband (and [Pim]) to ensure that the wife was disadvantaged in the proceedings and would receive as little as possible.
iii)At [260] – which I have quoted above.
c)The husband's support of [Pim’s] claim caused significant loss of time to the Court and to the wife. The case was prolonged by the groundless contentions (in relation to this subject) pressed by or on behalf of the husband.
98I conclude that there are circumstances that justify the making of an order for costs against both Pim and the husband. In relation to Pim, those circumstances are so unusual and so exceptional as to justify the making of an order for costs on an indemnity basis. In relation to the husband, those circumstances are so unusual and so exceptional as to justify the making of an order for costs on an indemnity basis in relation to that part of the wife's costs that relates to [Pim’s] claim and the husband's support of that claim. In relation to the balance of the wife's costs, I am not satisfied that the circumstances are so unusual and so exceptional as to justify the making of an order for costs on an indemnity basis. The circumstances are more than sufficient, however, to warrant the making of an order for costs on a party/party basis.
99Where costs are to be assessed on a party/party basis, the itemised scale of costs contained in Schedule 3 of the Family Law Rules 2004 (Cth) applies.
100Although r 19.18(1)(b) provides that the Court may order that a party is entitled to costs as assessed on a "lawyer and client" basis (in other words, legal practitioner/client basis), Murphy J in Prantage argued persuasively that such an option does not exist and that the rules provide for only two options – being costs on a party/party basis and costs on an indemnity basis. The other members of the Full Court in Prantage (Thackray and Ryan JJ) seemed to accept that costs can indeed be assessed on a "lawyer and client" basis, and added that it would ordinarily be appropriate for a judge to consider awarding costs on such a basis before awarding costs on an indemnity basis.
101Because the precise manner in which costs awarded on a "lawyer and client" basis are to be assessed is not as clear as it could be, I find that an order to the effect that costs be assessed on such a basis would be likely to condemn the parties to a protracted dispute regarding the relevant assessment principles.
102It is apparent that the wife signed a costs agreement with her solicitors: see annexure A to the wife's submissions. It was not suggested that the method of calculation reflected in the costs agreement is unreasonable in any respect or that the charges or rates are excessive or punitive.
103The wife's submissions record that the total of the wife's "legal and accounting costs" is approximately $443,800. Nearly $262,000 of this amount relates to the costs and disbursements of the wife's solicitors, approximately $141,350 relates to counsel fees and the remaining $40,600 reflects the costs and disbursements of the expert called on behalf of the wife, Mr Charles Napoli. Again, no challenge was made to the reasonableness of these sums.
104The final question to be determined, therefore, relates to the apportionment of costs between the husband and Pim and the structure of an appropriate costs order. Pim's claim, and the evidence relating to it, occupied a significant amount of the Court's time at trial. Similarly, a significant proportion of the costs incurred by the wife resulted from the existence of Pim's claim and the husband's involvement in it. In reality, Pim's claim comprised the largest single issue in the proceedings.
105In my opinion, and as I have indicated, it is just and appropriate that Pim and the husband should pay the wife's costs of, and incidental to, Pim's involvement in the proceedings and the husband's support of that involvement. These costs should be assessed on an indemnity basis. It is also just and appropriate that the husband should pay the balance of the wife's costs on a party/party basis.
106In order to avoid complexities associated with assessing costs on two different bases and endeavouring to allocate the liability for such costs between Pim and the husband, I am satisfied that is just and appropriate to make an order for indemnity costs in respect of the totality of the proceedings, but to reduce the liability of Pim and the husband by one third of the totality of the costs assessed on that basis to reflect my conclusion that part of the husband's liability for costs should be (or should have been) assessed on a party/party basis. In essence, this is what the wife has done in seeking orders that the husband and Pim pay a total of 75% of "the wife's legal and accounting costs" – although the notional "discount" applied by the wife amounts to 25%, as opposed to the one third that I have deemed appropriate.
107I have not overlooked the husband's submission to the effect that he was "successful in maintaining a claim to legal professional privilege over some documents held by his accountants … and in resisting the claims that his counsel had waived legal professional privilege on 27 June 2011 when applying for leave to adduce further evidence". In my opinion, the one third "discount" referred to above deals adequately with this submission.
108Further, to reflect the fact that the husband's liability for costs should be greater than Pim's liability (given that he alone should be responsible for the wife's costs for those aspects of the proceedings which do not relate to Pim's claim), I am satisfied that the most appropriate course of action is to reflect the imbalance in the following manner:
a)the husband and Pim should be jointly and severally liable for 60% of the wife's assessed costs (being two thirds of the wife's costs of and incidental to the proceedings assessed on an indemnity basis); and
b)the husband should be solely responsible for the remaining 40% of the wife's assessed costs.
Costs of the costs application
109The wife and Pim did not seek any orders in relation to the costs of the application for costs. As indicated above, the husband sought an order that the wife pay his costs relating to the application for costs (which he quantified at $10,000).
110In order to avoid further delay, cost and inconvenience to the parties, I propose to deal with the costs of the costs application at this stage.
111I have already dealt with the law relating to costs issues, and have discussed the various considerations under s 117(2A). I need say nothing more about the parties' financial circumstances, grants of legal aid, failure to comply with previous orders and offers to settle. Similarly, the parties' conduct as litigants – as it relates to their conduct referable to the wife's application for costs – was unremarkable. It does not amount to a relevant factor when considering the costs of the application for costs.
112Clearly, the husband and Pim were wholly unsuccessful in their opposition to the wife's application for costs. Pim proposed that there should be no order as to costs; the husband proposed that the wife's application for costs be dismissed and that she pay his costs of the application (fixed in the sum of $10,000).
113In my opinion, there are no other relevant matters to be considered in relation to this subject.
114I am satisfied that there are circumstances which justify the making of an order for costs in the wife's favour in relation to her application for costs. Those circumstances arise from the fact that the husband and Pim were wholly unsuccessful in their opposition to the application. That factor, alone, is sufficient to warrant an appropriate order for costs.
115I am not satisfied, however, that the circumstances referred to above are either unusual or exceptional. It follows that I am not satisfied that the making of an order for costs on an indemnity basis (in relation to the wife's application for costs) is warranted.
116I find that it is just and appropriate that the husband and Pim should pay the wife's costs of and incidental to her application for costs, on a party/party basis. Having regard to the fact that the husband's submissions were more complex than Pim's submissions, and took longer to argue, I am also satisfied that it is just and appropriate to order the husband to be responsible for 60% of the relevant costs and Pim to be responsible for the remaining 40%.
Orders
117The orders I propose to make are as follows:
(1)In these orders,
(a)"the wife's total costs" means the whole of the wife's costs of and incidental to the proceedings (including the fees and disbursements charged by counsel or senior counsel briefed by or on behalf of the wife from time to time and the fees and disbursements charged by the wife's accounting expert, Mr Charles Napoli of Barrington Partners), as assessed on an indemnity basis;
(b)"the wife's discounted costs" means two thirds of the wife's total costs; and
(c)"the wife's additional costs" means the wife's costs of and incidental to her (informal) application for costs forming the subject of the submissions filed on her behalf on 30 October 2014 and the minute of orders sought received by the court on 24 November 2014, as assessed on a party/party basis.
(2)In the event of the parties failing or refusing to agree the quantum of the wife's total costs (or, alternatively, the wife's discounted costs) within 28 days from the date of these orders, the wife's total costs be assessed – on an indemnity basis – by a Registrar pursuant to Chapter 19 of the Family Law Rules 2004.
(3)The husband and Pim must pay the wife's discounted costs in the following manner:
(a)the husband be solely liable for, and must pay, 40% of the wife's discounted costs; and
(b)the husband and Pim be jointly and severally liable for, and must pay, the remaining 60% of the wife's discounted costs.
(4)In the event of the parties failing or refusing to agree the quantum of the wife's additional costs within 28 days from the date of these orders, the wife's additional costs be assessed – on a party/party basis – by a Registrar pursuant to Chapter 19 of the Family Law Rules 2004.
(5)The husband must pay 60% of the wife's additional costs.
(6)Pim must pay 40% of the wife's additional costs.
I certify that the preceding [117] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
0
14
0