Dudley and Dudley (No 2)

[2009] FamCA 1224

FAMILY COURT OF AUSTRALIA

DUDLEY & DUDLEY (NO. 2) [2009] FamCA 1224

FAMILY LAW – COSTS – Indemnity costs sought – Circumstances justifying order – Where a more favourable offer to settle was rejected by the Husband – Party and party costs ordered from the date of the offer

Family Law Act 1975 (Cth) ss 79 & 75(2)

In the Marriage of Kohan (1992) 16 FamLR 425

APPLICANT: Ms Dudley

RESPONDENT: Mr Dudley

FILE NUMBER: BRC 12821 of 2007

DATE DELIVERED: 14 December 2009

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 2 December 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Hamwood of Counsel appeared for the Applicant Wife

SOLICITOR FOR THE APPLICANT: Dixie Ann Middleton & Associates

COUNSEL FOR THE RESPONDENT: Mr Baston of Counsel appeared for the Respondent Husband

SOLICITOR FOR THE RESPONDENT: Nita Stratton-Funk & Associates

Orders

1. The Husband to pay the Wife’s costs incurred from 12 October 2007 on a party and party basis as agreed or in the event of no agreement then as assessed.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 12821 of 2007

MS DUDLEY

Applicant

And

MR DUDLEY

Respondent

REASONS FOR JUDGMENT ON ISSUE OF COSTS

1. The Wife seeks her costs of the property settlement hearing on an indemnity basis.

2. In written submissions on behalf of the Wife (paragraph 11) reference is made to two offers to settle the Wife’s claim with the first offer being made by letter dated 12 October 2007.

3. The orders which ultimately issued provided for the Husband to receive assets valued at $881,000 (an adjusted figure from that set out in the reasons for judgement).  The Wife was to receive assets valued at $1.321M.

4. This reflected an apportionment of 60% of the net assets to the Wife.  The effect of the orders made resulted in the Husband being ordered to pay a cash adjustment to the Wife in the order of $168,000.  The offer of October 2007 sets out the values the Wife asserted for the various matrimonial assets at that time with a proposal to the Husband to identify which values he disputed.

5. The offer itself is set out at page 4 of the letter in question.  There is no point in making reference to the value of the assets as many of the properties have been sold in the intervening period, with a proportion of the sale proceeds being expended on legal fees.

6. The amount to be distributed to the parties pursuant to the October 2007 offer was based on a division of the assets 54% / 46% in the Wife’s favour.

7. Counsel for the Wife submitted that on the particular facts of this matter it was always likely that on account of s 79 factors to the date of separation contributions would be treated as equal.  He further submitted that in view of the significant income disparity there would be a further adjustment in the Wife’s favour on account of s 75(2) factors.  I accept the force of the submissions in these terms.

8. A further offer was made on 25 June 2008 which made reference to draft orders executed by the Wife and forwarded on 17 June 2008.

9. At page 7 of the Wife’s submissions on the issue of costs a schedule is set out in table form comparing the first and second offers with the findings made in the reasons for judgment.

10. The accuracy of the figures presented was not challenged.

11. The Wife asserts had the Husband accepted the terms of the second offer he would have received assets to a net value of $1.059M compared with the $881,000 pursuant to the orders ultimately made.

12. The Wife says her total costs amount to about $144,000.

13. In paragraph 20 of the submissions I’m asked to fix the costs “to save a further dispute between the parties”.  No submissions were made in response to this proposal.

14. I have perused the two costs agreement, the first agreement is dated 29 August 2007 and the second agreement 12 December 2007.  I am satisfied the terms of the costs agreements reflect the commercial reality for experienced practitioners practicing on a regular basis in this jurisdiction.

15. For the Husband reliance was placed on an affidavit sworn by him on 2 December 2009.  At paragraph 3 of that affidavit he states:

    “I continue to suffer from depression.  The length of time it has taken (a total of 3 years) from the date of separation in December 2006 to reach a conclusion in this matter has caused me significant turmoil and the inability to heal and move on…

    I have repeatedly agreed to settlements that have been negotiated but have then fallen though.  I have been handicapped by my depression and have found it very difficult to properly apply myself to the issues.  Aware of this I have, through my lawyers, attempted to progress to a speedy conclusion.”

16. Statements in these terms are not particularly helpful unless there is some elaboration that the settlement proposals fell through as a result of the unreasonable conduct of the Wife.

17. In paragraph 4 of the same affidavit the Husband deposes:

    “The initial trial before Justice O’Reilly which had been scheduled for 4 and 5 June 2008 did not proceed as we negotiated all day on the first day of trial. On that day our respective lawyers had a one hour phone conference with our accountants in Melbourne to assist with negotiations.  Eventually the matter was settled and consent orders were written up at the end of the first day.  We were to go back in the morning for Justice O’Reilly to make the orders, however on arriving at Court that morning we were informed by the Applicant’s lawyers that the Applicant had changed her mind.”

18. I am not appraised of what the settlement terms were on that occasion and to what extent they may have differed from the offer made in October 2007 or the further offer of the 26 June which is in evidence before me.

19. I accept the matter was made more difficult by the complex financial structure in place governing the party’s financial affairs, with numerous corporate entities and trusts.

20. The Husband in paragraph 6 of his affidavit deposes as follows:

    “6. The dispute with my ex wife over our financial matters has never been simply one about the amount of the cash payment one to the other but has involved many other complex issues to be sorted out.  In particular because of the complicated company structures that were set up over the years, there have been disputes over:

    (a)the tax implications of unravelling the group structure including understanding how to best deal with many intercompany loans;

    (b)who was to receive which entities and which were to be wound up;

    (c)the enmeshment of our grown up children within the structure and whether or not their co-operation would be received;

    (d)which of us was to retain the [O] property owned in our self managed superfund.  This remained a live issue until shortly prior to the date of trial after I conceded the property to the Applicant having purchased for myself the [E] property and having come to the realisation that by the Applicant retaining the [O] property would best secure her future whether it be by renting  it out as it was or by proceeding to develop it with the children under the original family plan;

    (e)the various add backs from sale of properties post separation

    (f)the costs being incurred in relation to the development of the [O] property

    (g)the real position regarding the Applicant’s interest in the [H] property

    (h)significant issues of disclosure as the Applicant had the control of most of the entities

    (i)a complex self-managed superannuation fund with inter entity loans that required specialist advice from Mr [BE] to correctly unravel and split between us.”

21. I accept the force of the matters raised by the Husband in paragraph 6.

22. In the Marriage of Kohan (1992) 16 FamLR 425, the Full Court (Strauss, Lindenmayer and Bulley JJ) held:

    “Indemnity costs are still an exception in this and other jurisdictions.  In so far as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction is to order no more than party and party costs.  Costs have been awarded on this basis even where there has been dishonest concealment of assets or income (emphasis added).”

23. The Wife’s offer amounted to her receiving 56% of the available property.  Pursuant to the judgment she received 60%.  Translated in dollar terms the difference is not so great as to say the Husband’s stance was so unreasonable it should result in an order for indemnity costs.

24. The Husband had legitimate concerns about the high costs of the Wife’s plans for the O premises.  The Husband’s concerns were exacerbated by the poor level of communication between the parties for which each party should accept some responsibility.

25. The Husband’s position was not vexatious.  The allegations he made had a basis in fact, though ultimately the Court rejected the notion the additional building costs should be borne solely by the Wife.

26. The Husband has a superior income stream but he has a significant tax assessment to meet.  He has his own costs to meet (it is noted that he has been able to meet the majority of such costs from his income to date).  As a result of the decision he will have to pay the Wife $168,000 and as a result of the order I’m about to make he will be paying the Wife’s costs.  I do not find the Husband’s conduct was such that it calls for an award of indemnity costs.

27. However, the Husband would have been better off to accept the reasonable offers made by the Wife as early as October 2007.  I propose to order that the Husband pay the Wife’s costs on a party and party basis as from the date of the first offer, namely 12 October 2007 as agreed or in the event of no agreement as assessed.

28. In relation to the submission (paragraph 13 supra) I should fix the costs as a sum certain, I accept this would avoid further costs being incurred in an assessment process and also avoid the risk of ongoing disagreement between the parties.  However, I simply do not have sufficient information to allow me to do so with any degree of accuracy.  I have been informed the Wife’s all up costs amounted to about $144,000.  I have no basis upon which to assess party and party costs.  It is always open to the parties to request a mutually selected costs assessor to assess party and party costs and to agree to be bound by any such assessment.  Failing that the usual process as provided for in the Rules will have to be adhered to.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry.

Associate: 

Date:  14 December 2009