Galway and Cuthbert (No. 2)

[2008] FamCA 453

FAMILY COURT OF AUSTRALIA

GALWAY & CUTHBERT (NO. 2) [2008] FamCA 453

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

Robinson and Higginbotham (1991) FLC 92-209
Browne v Green (2002) FLC 93-115
Pennisi v Pennisi (1997) FLC 92-774

APPLICANT: Mr Cuthbert

RESPONDENT: Ms Galway

FILE NUMBER: SYF 2082 of 2006

DATE DELIVERED: 23 June 2008

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 19 June 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Mater

SOLICITOR FOR THE APPLICANT: Broun Abrahams Burreket

COUNSEL FOR THE RESPONDENT: Mr Livingstone

SOLICITOR FOR THE RESPONDENT: Richardson Legal

Orders

1. The wife is to pay to the solicitors for the husband party/party costs calculated from 25 May 2007, the quantum to be agreed within one month from the date of these orders and failing agreement in the amount assessed, and payment to be made within one month of agreement or assessment, whichever applies. 

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2082  of 2006

Mr Cuthbert

Applicant

And

Ms Galway

Respondent

REASONS FOR JUDGMENT

Applications

1. The husband has brought a costs application arising from orders made after a contested hearing about the parties property settlement.  By his application filed on 19 May 2008 he seeks an order that the wife pay his costs of and incidental to those proceedings from 24 April 2007 ‘as agreed within 14 days or as taxed’.  The range of costs incurred by the husband from 24 April 2007 on a solicitor/client basis is around $54,650 plus $18,150 counsel fees.  By her response the wife seeks its dismissal. 

2. The orders for property settlement were made on 18 April 2008 in these terms:

   ‘1.On or before one (1) month from the date of these orders the husband is to pay to the wife the sum of $106,500.

   2.Subject to order 1 hereof, each party is entitled to retain absolutely all property of whatsoever kind presently in the possession and owned by that party.

   3.The husband is to be solely responsible for payment of capital gains tax referable to the sale of the property situated at […] in the United Kingdom.’

Principles

1. The issue is to be determined pursuant to the provisions of s 117 Family Law Act 1975. The general rule expressed in ss 117(1) is that each party is to bear his/her own costs. However, ss 117(2) permits the Court to make such order as it considers just if it is of the opinion there are justifying circumstances. In considering what order [if any] is to be made, regard is to be had to the matters set out in ss 117(2A) which are these:

   ‘(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.’

1. What follows is to be read in conjunction with Reasons for Judgment delivered on that day.

Husband’s case

1. The husband’s argument is focussed upon paragraph (f); that is, the terms of offers of settlement.  The sequence of exchanges in correspondence between the solicitors is summarised below:

   (i) offer from husband in letter dated 24 April 2007

2. This proposal was put on the husband’s behalf:

   1)That our client pay to your client a lump sum of $150,000;

   2)That other than as provided for above each of the parties will be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession, ownership or control of each party.

   3)That each party pay their own costs of and incidental to the proceedings.

3. It was to remain open for a period of 14 days until 8 May 2007.

   (ii) counter offer from wife in letter 24 April 2007

4. That same day the wife advised that she would accept the payment of $150,000 as representing payment of half the rent received from the United Kingdom property over the past 10 years, but she also sought half the current value of that property. 

   (iii) further offer from husband in letter dated 10 May 2007

5. On 10 May 2007 the husband’s solicitors wrote advising no rent had been received on the property for the preceding 10 years, a summary was given of his mother’s stays in a nursing home, advised that the home had first been rented from April 2001 [rent statements enclosed], and that the rent had been applied towards his mother’s expenses.  It was said that if the wife were to receive half the rent and half the current value (net), she would receive $145,000 [calculations were attached].  The husband then offered to increase the payment to $170,000, each to retain property they owned, and each to pay their own costs of the proceedings.  Again, the offer was to remain open for 14 days until 24 May 2007.

   (iv) further counter offer from wife in letter dated 11 May 2007

6. The following day, 11 May, the offer was rejected by the wife.  On the basis of calculations set out, which included figures for the value of the three parcels of real estate in Australia and the United Kingdom, the letter advised she would be pursuing a claim for 50% of the ‘equity’ which was asserted to be $621,101.50 and arguments were put about the merit of her pending claim.  She offered to settle for payment of $600,000. 

7. The obvious point is made for the husband that the two offers to pay $150,000 and $170,000 significantly exceeded the $106,500 the wife received and that it was implicit he would also bear the capital gains tax on the sale of the United Kingdom property.  Since it was registered in his sole name before sale, that is accepted. 

Wife’s case

1. The wife meets the claim based on these offers with assertions about lack of adequate knowledge of the value of their combined property, uncertainty about the accuracy of what the husband had said of his assets, he had not made a proper disclosure to her of the events related to the United Kingdom property, and drew attention to the finding at paragraph 9 of the Reasons for Judgment which made reference to the husband’s failure to disclose to the wife the transfer of the property to his name.  It is said there was dispute about the value of the United Kingdom property - the joint valuation was not received until 24 May 2007 – and there was also disagreement about the value of the properties in D, T and C as well as the husband’s business.  These values were not known at the time the offers were made. 

2. As for her financial circumstances, she describes them as being ‘more or less the same’ as in March 2008 when she swore her financial statement, although she has paid a further $23,000 in legal costs, making her total legal costs to the conclusion of the hearing approximately $106,000. 

3. Her counsel observed in submission that the husband had not ‘covered himself in glory’ in the proceedings and should not benefit by a substantial departure from the usual rule that each is to pay his/her own costs.  Also, if it was the husband’s intention to ‘reduce the Court’s workload’ by making an offer, as his counsel submitted, it is ‘rather strange’ he did not have an offer on foot after the expiry of the offer made on 10 May 2007 which, like the first offer, was left open only for 14 days.  It was not incumbent upon the wife, it is said, to value the properties both in Australia and overseas in that time.

4. However, the submission of counsel for the husband is to the effect that any deficit in her knowledge of the value of the realty when the offers were made could not support her position.  She might have obtained market appraisals in circumstances where she owned two of the properties in Australia and she could have made those enquiries in the period the offers were open.  As for the significance of the offers made by the husband, the following passage from the judgment of Nygh J in Robinson and Higginbotham (1991) FLC 92-209 at 78,417 is cited:

   ‘... paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case ... when one looks at paragraph (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…’

5. It is also submitted for the husband that the wife did not approach the matter objectively when she was obliged to do so and her lack of objectively is reflected in her evidence exaggerating her own contributions and maintaining an inflated view of her entitlement.  Attention is drawn to the many finding favourable to the husband, described as a credible witness, and the many issues on which his evidence was preferred to that of the wife which contained inconsistencies, exaggerations and often lacked objectivity.  The upshot of her failure to take up his ‘generous’ offers was the continuation of the case for another year when he spent another $50,000 in legal fees which might otherwise have been saved. 

6. It is submitted that his superior financial position is the result of the management of their own financial affairs post separation and, in any event, the wife has assets worth in excess of $1 million; therefore their respective financial circumstances should not inhibit the exercise of discretion as to costs in the husband’s favour. 

Conclusion

1. In my assessment the claim to the effect that at the time the offers were open to her the wife lacked requisite knowledge or they were premature is without merit.  She was familiar with their property, as her account of the financial history demonstrated.  She knew the United Kingdom property was to come to the husband [or to them] at some point in the future, her case asserted a certain arrangement with the husband’s mother, and the husband’s earlier failure to tell her it had been transferred to him was not a failing having any impact on her ability to consider his offers. 

2. It may well be that they did not then have single expert opinion about the value of any of the realty, but it was open to the wife to make enquiries by other reasonable means and there was opportunity for her to do so within the 28 days the two offers lay on the table.  As correctly noted, she was the registered proprietor of two of the Australian properties and it would have been a simple exercise to arrange for an appraisal of them and of the husband’s property.  As for the property in the United Kingdom, there were no special considerations attaching to the exercise of getting an appraisal of its value to render that exercise difficult – such as remoteness, or uncertainty of identification, or language barrier or something of that nature.  It may well be the case also that she did not then have a valuation of the business but she had worked in the business for years at an earlier time and, while she may not have had a figure of its worth, she did know something of its magnitude.  As I find, therefore, there was no deficit in her knowledge sufficient to inhibit her serious consideration of the two offers the husband made and left on the table for 28 days.  It might also be said that this was apparently not sufficient to prevent her putting a counter offer, being for a very precise figure in her letter of 11 May.  Both offers have to be seen as a serious attempt to settle the matter at an early stage whereas the wife’s counter offer was completely unrealistic.  He went on to incur relatively substantial costs which would have been avoided had the wife given proper consideration to the position.  They were clear and unambiguous [see Harris and Harris (1987) FLC 91-822 per Fogarty, Joske and Treyvaud JJ]. They deserve to be given significant weight in the circumstances.

3. In my opinion, it would not meet the purpose and effect of s 117(2A)(f) to dismiss the husband’s costs claim [see Robinson and Higginbotham (1991) FLC 92-209; Browne v Green (2002) FLC 93-115 per Kay, Coleman and Warnick JJ at 89,163]. Their weight is not displaced by other considerations such as lack of sufficient knowledge or prematurity [see Pennisi v Pennisi (1997) FLC 92-774 per Nicholson CJ, Barblett DCJ and Faulks J at 84,547], they were left open for a reasonable period of 28 days in total, they were reasonable and a genuine attempt to settle, and both exceeded the wife’s ultimate entitlement.

4. Regard is also had to the parties’ respective financial circumstances.  The husband does have property valued considerably in excess of what the wife is to receive, but her property is worth over $1 million and includes investments other than the premises where she lives.  She is able to pay a portion of the husband’s costs. 

5. Turning to the form of order, party and party costs are the appropriate basis.  As for the time from which costs should run, conscious as I am that even the earlier offer exceeded the judgment amount, I fix the time at the end of the 28 day period as the time from which the husband’s costs should be paid.  The order will provide one month to pay after agreement on quantum or assessment, whichever applies. 

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date: