Demara and Demara (Costs)

[2017] FCWA 40

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: DEMARA and DEMARA (COSTS) [2017] FCWA 40

CORAM: O'BRIEN J

HEARD: 8 NOVEMBER 2016

DELIVERED : 28 MARCH 2017

FILE NO/S: PTW 7229 of 2013

BETWEEN: MS DEMARA

Applicant

AND

MR DEMARA
Respondent

Catchwords:

COSTS - where indemnity costs sought - where the circumstances do not warrant a departure from party-party costs - appropriate use of notice to admit facts - where refusal by the wife to admit facts within her knowledge put husband to additional expense - where the conduct of the proceedings by the wife warrants a costs order - party-party costs awarded in a fixed amount.

Legislation:

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Category: Not Reportable

Representation:

Counsel:

Applicant: Mr F Robertson

Respondent: Mr F Castiglione QC

Solicitors:

Applicant: Rattigan & Associates

Respondent: Elizabeth Wiese & Associates

Case(s) referred to in judgment(s):

Kohan & Kohan (1993) FLC 92-346

Madin & Palis (Costs) (2016) 55 Fam LR 59

Parke & the Estate of Parke (2016) FLC 93-748

Tang & Keats [2016] FamCA 99

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

Introduction

1Following a three day trial, final orders were made on 12 August 2016 in the financial proceedings between [Ms Demara] (“the wife”) and [Mr Demara] (“the husband”).

2The husband subsequently sought orders that the wife pay his costs and disbursements from 8 April 2015 up to and including 12 August 2016, on an indemnity basis. The wife opposed that application and both parties filed written submissions.

3Proceedings were then side tracked by a contention in the wife’s submissions that the husband, having sought costs on an indemnity basis, had not sought in the alternative an order for costs on a party-party basis. That misguided contention necessitated further correspondence and a directions hearing. Both parties then sought the opportunity to make oral submissions, which were heard on 8 November 2016.

Background

4The factual matrix to these proceedings is set out in the reasons for judgment delivered on 12 August 2016. I do not intend to repeat that history here but I incorporate it to the extent it is relevant.

5For the reasons given in that judgment, I found that the overall contributions of the parties should be regarded as equal and that the wife should receive a five per cent adjustment to what would otherwise be the contributions-based result. Those orders provided for the wife to retain a particular property, her savings and assets and receive $120,000.00 in the form of superannuation. Conversely, the husband received a sum of $174,752.00 from the wife and retained the funds remaining in the joint accounts of the parties.

The law

6There are two matters for determination; whether there are circumstances that justify an order for costs and if so, what order for costs is just.

7Subsection 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides that, subject to s 117(2), each party to the proceedings shall bear his or her own costs.

8Subsection 117(2) provides that if the court is of the opinion there are circumstances that justify doing so, the court may, subject to s 117(2A), make such orders as to costs as it considers just. Subsection 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, 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.

9The discretion conferred by s 117 is broad. The factors set out in s 117(2A) are not to be read in a restrictive way and any one of those factors may in appropriate circumstances be the sole basis for an order for costs. That said, the relevant matters in the subsection must be taken into account and balanced in order to determine whether an order for costs is justified.

Consideration of the factors

10The financial circumstances of the parties are as set out in my reasons for decision published on 12 August 2016.

11In short, the parties had available for division between them assets and superannuation to a total value, after deduction of relevant liabilities, of $1,342,173.00. The wife was aged 52 at trial. She was working part-time from home making use of her [knitting] and associated skills, generating income of about $16,000.00 per annum. She has a number of health difficulties. The husband was aged 51 at trial, and working full-time as a [labourer] earning a gross salary of $1,853.00 per week, plus travel allowance and superannuation contributions. He too has a number of health issues.

12Neither party suggested that their financial circumstances had changed since trial other than by implementation of the orders made that day.

13Both parties were represented at trial; neither was in receipt of Legal Aid.

14The proceedings were not necessitated by any failure of either party to comply with previous orders of the court. Neither was wholly unsuccessful in the proceedings.

15In support of his application for costs the husband relies primarily on the conduct of the proceedings by the wife and the written offers made by the parties.

The conduct of the parties to the proceedings – the alleged debt and the notice to admit facts

16In her affidavit filed 24 July 2015, the wife alleged that the adult son of the parties owed the husband $200,000.00. In her trial materials she sought that the alleged debt be included as an asset of the husband in the pool of assets available for distribution between the parties, and be retained by him.

17The husband argues that he was put to additional expense by virtue of the wife’s allegation and that from the moment it was raised any sensible prospect of an agreed settlement was lost.

18The husband’s position was that in 2011 loan documents were prepared by a solicitor at the instruction of both parties (the contact details for the solicitor having been provided by the wife to the husband) to falsely show that the son owed them $200,000.00. The husband said the documents were prepared for the sole purpose of protecting the son against any potential claim by his then girlfriend, by falsely characterising financial gifts to the son as repayable debts.

19He asserted that the wife well knew the true position, and was party to the deceit. He argued accordingly that the allegation of the existence of a repayable debt, and the attempt to include that amount as an asset to be retained by him was disingenuous at best.

20The allegation having been raised, the husband then took appropriate steps to attempt to resolve it without incurring undue expense.

21On 25 September 2015, he served a Notice to Admit Facts calling on the wife to admit that:

1.The parties agreed in 2011 to “have the loan agreements drawn up” stating that the parties’ son “owed the parties $200,000 in order to try to protect [the son’s] assets in the event his then girlfriend made a property settlement claim”;

2.The wife had “obtained and provided the Respondent with the contact details of [the solicitor] to assist in the preparation of the above-mentioned loan agreement”;

3.The wife was “aware that the Respondent was going to meet with [the solicitor] to provide instructions for the preparation of the loan agreement”; and

4.The husband had informed the wife that “he had entered into the two separate loan agreements with [the son] for $100,000 each approximately a week after he had executed the loan agreement”.

22The husband’s notice complied with r 11.07(2).

23On 7 October 2015, the wife served a Notice Disputing a Fact or Document in the following terms (errors as they appear in original):

1.The Applicant denies paragraph 1.

2.As to paragraph 2, other than to say the Applicant cannot recall ever obtaining the contact details of [the solicitor] the Applicant otherwise denies paragraph 2.

3.The applicant denies paragraph 3 and 4.

24The husband then filed affidavits from the parties’ son and daughter as well as the solicitor who prepared the loan documents. The affidavits not only confirmed the husband’s version of events, but also the wife’s involvement in the very arrangement she refused to admit.

25The wife abandoned her contention as to the existence of the alleged debt only at the commencement of trial. She conceded that there was in fact no such outstanding amount owing to the husband. She also no longer required the parties’ son and daughter, or the solicitor involved in preparing the loan document to present, for cross-examination, having previously given notice that they would be required.

26The husband now asks the court to draw the inference that the wife “took a strategic position to abandon the issue given the evidence presented by not only the two children… but also by the solicitor”.

27Counsel for the wife submitted that the court should find that the husband was not without fault himself in relation to the issue. In the wife’s written submissions she questioned how her conduct could be singled out for criticism when the husband was complicit in creating the documents which were knowingly false and designed to defeat a potential claim from their son’s ex-partner.

28I reject that argument as irrelevant to present considerations. The present issue for determination is whether an order for costs is justified, in circumstances where it is clear that the husband was put to entirely unnecessary expense by the wife’s refusal to admit facts which she knew to be true. The husband’s argument rests not on the conduct of the parties generally prior to the separation, but on the conduct of these proceedings by the wife.

29The purpose of r 11 of the Family Law Rules 2004 (Cth) (“the Rules”) is to provide a mechanism whereby the parties can narrow issues in dispute, thereby reducing delay, consumption of court resources, and legal costs.

30That in turn is consistent with the main purpose of the Rules, which is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case: r 1.04.

31Each party to the proceedings has a responsibility to promote and achieve the main purpose of the rules, including assisting the just, timely and cost-effective disposal of the case, identifying the issues genuinely in dispute in the case, and being satisfied that there is a reasonable basis for alleging, denying or not admitting a fact. That responsibility extends, as far as possible, to lawyers representing the parties: r 1.08.

32If a party who is served with a notice to admit in turn serves a notice disputing the fact sought to be admitted, and the fact is later proved in the case, the party who disputed the fact may be ordered to pay the costs of proof: r 11.08(3).

33In my view, in circumstances where the fact sought to be admitted is within the direct knowledge of the person from whom the admission is sought, an order for payment of costs incurred by the other party arising directly from the refusal to make the admission will likely follow.

34This is such a case. I find that the conduct by the wife of the proceedings in the context of the allegation as to the debt, refusal to make the admissions sought by the husband (and indeed active denial of the propositions), and pursuit of the question through to its abandonment at the commencement of trial is such as to justify an order for costs.

35Unfortunately when asked, Senior Counsel appearing for the husband on the hearing of the application for costs was unable to provide me with even the most basic or general estimate of the costs incurred by his client as a direct result of the refusal by the wife to make the requested admission.

36Had that entirely predictable enquiry on my part been anticipated by those advising the husband, and appropriately answered, I would have been inclined to make an order requiring the wife to pay the whole of the husband’s costs identifiable as having been incurred solely because of her refusal to make the requested admission.

37In the absence of the necessary information, I am unable to do so. I will, however, place significant weight on the wife’s conduct of the proceedings in so far as it related to the alleged debt in considering what order for costs is just in all the circumstances.

The conduct of the parties to the proceedings more generally

38The wife presented her case on the basis that she did not have the physical capacity to work full-time, asserting that her [medical condition] debilitated her for one week in every four.

39At an early stage in the proceedings, the wife had disclosed a report obtained by her solicitors from her treating specialist, [Dr X]. While Dr X was not called to give evidence, the report was put to the wife in cross-examination.

40Relevantly, in response to specific questions from the wife’s solicitor, the report had recorded Dr X’s opinions as follows:

A)I do not think that her [medical] condition will affect her ability to compete in the workforce.

B)I do not think she will be inhibited from engaging in fulltime employment unless she has reasons to have a [an operation] performed which will result in 6 – 8 weeks medical leave to recover from the procedure.

C)There are no forms of employment that she should not engage in.

D)I do not see any [medical] reason for a restriction on her capacity to perform in the workforce.

41Under cross-examination the wife admitted that she had not called Dr X to give evidence, as that evidence would not have been helpful to her case as presented. That rather begs the question as to why her case was presented in the way it was.

42When questioned by me in that regard in relation to the issue of costs, counsel for the wife suggested that the issue was insufficient to rebut the general rule that each party should bear their own costs, and suggested that if the court descends into an examination of the evidence of the parties in relation to discrete issues, including where that evidence is challenged in cross-examination, the intent of the general rule would be lost.

43I reject that submission. It cannot seriously be suggested that there should not be a risk of cost consequences where a litigant consciously presents his or her case by making an assertion in relation to matters of significance which are known both to be untrue and contradicted by expert evidence obtained by that party but not presented to the court.

44Both parties made submissions in relation to other aspects of the conduct of the proceedings, primarily by reference to the unsuccessful pursuit of certain points including, by way of example only, the proposition that certain expended funds should be notionally “added back” for the purpose of determining the asset pool available for division. None of the aspects of conduct so referred to were such as to justify an order for costs, whether individually or cumulatively.

Whether either party to the proceedings has made an offer in writing to settle the proceedings

45On 9 February 2015 the wife made an offer to divide the net assets in a 60 to 40 per cent split. An asset and liability schedule was attached to that offer.

46In a letter dated 8 April 2015, the husband rejected that offer and counter proposed that the net assets be divided in the proportion of 55 to 45 per cent in favour of the wife.

47There were differences between the asset pools to which the proposed percentage divisions were to be applied, both as between the parties and in due course as to the asset pool as eventually determined by me.

48Various issues were raised by both counsel as to what they would assert to be issues relating to the degree of precision incorporated in the offers and elements of uncertainty as to the inclusion in the calculations, and valuation, of certain assets.

49Nothing turns on those issues. As I observed to counsel, the difference between a 55 percent allocation to the wife (as offered by the husband) and a 60 per cent allocation (as offered by the wife) is within the generous ambit in which reasonable disagreement is possible.

50In those circumstances, nothing in the exchange of offers justifies the making of an order for costs.

Indemnity costs versus costs generally

51Having found that the circumstances justify the making of an order for costs in favour of the husband, it remains to consider what order for costs is just. In determining that question, I incorporate the findings already made above.

52The husband seeks that the wife pay on an indemnity basis the whole of his costs and disbursements of the proceedings as from 8 April 2015 (the date of his written offer) up to and including the date of delivery of the judgment.

53The husband’s costs for that period total $92,375.12.

54For the reasons outlined above, I do not regard the date on which the husband’s offer was made as being significant, let alone an appropriate ‘starting date’ from which to calculate any entitlement to costs.

55Nevertheless, costs calculated on an indemnity basis are sought.

56The Full Court has repeatedly made it clear that consideration of costs orders on a party-party basis should not be “lightly departed from” unless circumstances of an exceptional kind exist: Kohan & Kohan (1993) FLC 92-346.

57Additionally, costs should not be awarded as a mean to punish an unsuccessful party; rather they are compensatory in nature: Tang & Keats [2016] FamCA 99 at [28].

58The principles applicable to the making of an indemnity costs order are well-known, and established by authorities referred to by the parties in their submissions. They do not need to be repeated here.

59However, I do consider it appropriate to repeat the Full Court’s more recent admonition in Madin & Palis (Costs) (2016) 55 Fam LR 59 at [23]:

Finally, we take the opportunity to observe that in so far as the appellant sought an order for indemnity costs, applications for such costs should only be made, and such costs will only be ordered, in the most extreme cases. This is particularly so having regard to the fact that the primary rule in this jurisdiction is that each party should pay their own costs. Unfortunately, however, applications for indemnity costs are increasingly being made in this jurisdiction, thereby imposing further burdens on the court’s limited resources and causing further unnecessary expense for litigants.

60I drew that admonition to the attention of both counsel before submissions as to costs were filed. Regrettably, that had no effect. The husband sought costs on an indemnity basis in circumstances which could not on any sensible view be regarded as “extreme”.

61I conclude that an order for the payment of costs to the husband in an amount appropriate to compensate for the additional costs incurred by him as a result of the elements of the wife’s conduct of the proceedings detailed above is just in all the circumstances.

62The difficulty is that I was presented with no information or submissions to assist me in determining what that amount should be. As I pointed out to Senior Counsel for the husband during his submissions, one of the prime purposes of the service of a Notice to Admit Facts is at least in part defeated if the court is not able to be informed in even the most general way as to the additional costs incurred by virtue of the facts then being disputed.

63I have considered whether in those circumstances it would be appropriate to make an order requiring the wife to pay the husband’s costs incurred by virtue of her refusal to admit the disputed facts, in an amount to be assessed if not agreed.

64Bearing in mind the fees already spent by the parties, the extent to which they have already consumed limited court resources, the circumstances which lead to an inability on my part to quantify the costs so incurred, and the entirely inappropriate pursuit by the husband of an order for indemnity costs from 8 April 2015 against the background of Senior Counsel having been alerted to the observations of the Full Court in Madin & Palis, I do not consider such an order to be appropriate.

65Fortunately, the power to award a gross sum does not require the assessment of that sum to be undertaken in a scientific or formulaic manner. The function of the court is to weigh up the competing factors and considerations to reach a determination as to what order for costs is just.

66I note also the comments made by the Full Court in Parke & the Estate of Parke (2016) FLC 93-748 at [130]:

If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”…

67Doing the best I can on the information provided, and taking into account all the matters referred to above including the overall quantum of costs incurred by both parties, I conclude that it is just to order that the wife contribute to the husband’s costs in the amount of $5,000.00.

Orders

1.[Ms Demara] (“the wife”) contribute to the costs of [Mr Demara] (“the husband”) fixed in the sum of $5,000.00.

I certify that the preceding [67] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court

Associate
28/03/2017