Gollings and Scott (Costs)

[2007] FamCA 745

FAMILY COURT OF AUSTRALIA

GOLLINGS & SCOTT (COSTS) [2007] FamCA 745

FAMILY LAW - APPEAL – COSTS - Husband appeals costs order that he pay half the wife’s costs of the proceedings – Husband’s principal appeal of the property settlement resulted in a reduction of the amount he was required to pay towards the wife’s mortgage from $274,362 to $150,000 – The trial judge had relied upon the close correlation between the orders the wife had sought and the orders her Honour ultimately made when determining costs – Held that as a result of the principal appeal, that reliance was could no longer be justified – Appeal allowed and initial costs order set aside – In re-exercising discretion, the relevant s 117(2A) considerations being the husband’s superior financial circumstances and the wife’s conduct which unnecessarily extended the trial balanced themselves out and it was inappropriate to make an order for costs in favour of either party

Family Law Act 1975 (Cth)
Federal Proceedings (Costs) Act 1981 (Cth)

De Winter v De Winter (1979) 23 ALR 211; (1979) FLC 90-605; (1979) 4 Fam LR 583
In the Marriage of Harris (1987) FLC 91-822; 11 Fam LR 629

APPELLANT: MR GOLLINGS

RESPONDENT: MS SCOTT

FILE NUMBER: PTW143 of 2004

APPEAL NUMBER: WA5 of 2006

DATE DELIVERED: 26 July 2007

PLACE DELIVERED: Melbourne

JUDGMENT OF: Finn, Kay and Boland JJ 

HEARING DATE: By way of written submissions

LOWER COURT JURISDICTION: Family Court of Western Australia

LOWER COURT JUDGMENT DATE: 28 March 2006

LOWER COURT MNC: [2006] FCWA 10

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Bennett

COUNSEL FOR THE RESPONDENT: Mr McCormack

SOLICITORS FOR THE RESPONDENT: Paynes

ORDERS

(1)The order for costs made by the Honourable Justice Martin on 28 March 2006 be set aside and there be no order for costs in relation to the trial. 

(2)The Court grants the respondent wife a costs certificate pursuant to the provisions of section 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Gollings and Scott (Costs).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT PERTH

Appeal Number: WA5 of 2006
File Number: PTW143 of 2004

MR GOLLINGS 

Appellant

And

MS SCOTT

Respondent

REASONS FOR JUDGMENT

1. This judgment concerns the husband’s appeal against a costs order made by the trial judge Martin J in the Family Court of Western Australia on 28 March 2006 and the costs of the appeal against the principal property orders which was determined by a judgment delivered on 4 May 2007 by this Court.

2. At the conclusion of the principal appeal we made directions for the filing of written submissions.  We have now received the principal submissions of each of the parties in accordance with the directions.

The costs appeal

1. The order made on 28 March 2006 that is the subject of the appeal was that:

   The husband pay to the wife one half of the wife’s costs of the proceedings from 9 February 2005, until 23 March 2005, to be taxed if not agreed, to be paid within three months of the fixing of the costs by taxation or agreement.

2. The appellant husband seeks that the order be set aside and in lieu thereof an order be made that the wife pay $20,000 towards his costs of the trial.  The respondent wife seeks to maintain the order made by the trial judge. 

3. The principal proceedings concerned issues of property settlement, spousal maintenance, adult child maintenance and child support.  They had been commenced by an application filed by the wife on 12 January 2004.   On 2 December 2004 the husband sent an email to the wife enquiring as to why she had considered an offer to settle the action to be unsatisfactory.  The email said:

   …In essence that offer is:

   - [S] Crescent (and its contents) to you,

   - the VW to you (subject to St George loan, which should be down to $20,000 by now),

   - your superannuation to you,

   - I pay $100,000 per year in maintenance being:

   -          $48,000 per annum to you for 6 years,

   -          $13,000 per annum for each of the kids until they respectively complete university (or otherwise settle down to work),

   - I pay school and university fees (and I’ll pay for uniforms, excursions etc),

   - I pay tax on the $100,000 per annum (including your arrears, which I can only do from selling [the D property]),

   - We obtain [Ms C’s] consent to increasing the mortgage on [S] Crescent to $300,000, you receive the extra $40,000 that that frees up and I pay $3,000 per month for 10 years to clear the mortgage

   - you are indemnified and released in respect of everything else…

4. On 6 December 2004 the wife responded by an email that said:

   [Mr Gollings]

   I accept the offer as presented below.

5. When the parties tried to formalise the agreement thus reached it became apparent that there were fundamental differences in its interpretation particularly in regard to the characterisation of the husband’s offer to pay $3,000 per month for 10 years to clear the mortgage.  The husband sought to have that categorised as a maintenance obligation which would be capable of variation if the parties’ circumstances changed whilst the wife sought to have it categorised as a property order which would be incapable of variation. 

6. In an endeavour to resolve the impasse a judicial conference was convened before Penny J.  That conference concluded on 9 February 2005 without the parties having resolved their differences and the matter then went for trial before Martin J commencing 9 March 2005.  The hearing lasted 6 days concluding on 21 March 2005. 

7. The trial judge delivered judgment on 20 January 2006 and made orders on 1 March 2006 that required:

   ·The transfer of the home to the wife;

   ·The husband to discharge the mortgage of $274,361 by making payments at the rate of $3,000 per month;

   ·The wife to receive the VW motor vehicle subject to the St George bank loan;

   ·The husband pay $48,000 per annum spousal maintenance for a period of 5 years of the wife entering into a de facto relationship or remarrying;

   ·The husband to pay $13,000 per annum for each of the 4 children of the marriage until they complete university or undertake full time employment; and

   ·For the husband to pay education expenses. 

8. It can be seen that the orders made by the trial judge closely resembled the terms proposed for settlement of the action by the husband although they did not include the proposed increase in the mortgage sum for which the husband would become responsible nor did they characterise the husband’s obligation to repay the mortgage as a maintenance payment rather than a property settlement as urged by him.  

9. When dealing with the respective claims for costs of the trial the trial judge focused particularly upon the parties’ dispute concerning the interpretation of the offer made by the husband.  Her Honour said:

   30.…The husband’s approach to finalising the orders was obstructive.  The wife’s minutes of orders sought at the commencement of the trial was largely accepted by me (as was her final minute), and the position was again confirmed when she closed her case.  It was the husband’s conduct which led to the trial.  The wife had no alternative but to proceed, and her decision was vindicated by my conclusions.

10. Her Honour went on to identify:

    36.…that a substantial proportion of the trial was consumed with the issue of the husband’s financial position and, in particular, the valuation of his practice.  On this issue, the wife was largely unsuccessful and, frankly, I consider, in any event, the trial was unnecessarily extended by the approach of the wife’s legal team...

11. The trial judge then reached the conclusion that it was just that an order for costs be made that the husband should be required to pay one half of the wife’s costs incurred after the hearing before Penny J on 9 February 2005 to the conclusion of the trial.  

12. As a result of the principal appeal we reduced the amount that the husband was required to contribute towards the wife’s mortgage from $274,361 down to $150,000.  The effect of that adjustment was to radically alter one of the underpinning matters relied upon by the trial judge in making her costs order namely that “the wife’s minute of orders sought at the commencement of the trial was largely accepted”.  

13. We disagree with the submission made by the wife’s counsel that this error was immaterial, or if not immaterial, that the result was plainly right (see De Winter v De Winter (1979) 23 ALR 211 at 218; (1979) FLC 90-605 at 78,092; (1979) 4 Fam LR 583 at 589).

14. In those circumstances we are required to give fresh consideration to what, if any, order is an appropriate order for costs to be made relating to the trial.  Neither party in their submissions has urged us to remit the matter for reconsideration by the trial judge in light of the outcome of the principal appeal. 

15. The matters that the Court must pay attention to in determining whether to make any, and if so, what costs order, are set out in s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”). That sub-section provides as follows:

    (2A)    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.

16. There is an inherent difficulty in an appellate court giving appropriate weight to matters to be considered under sub-paragraph (c) as it is unable to fully understand the dynamics of the manner in which the case was conducted at trial from simply reading the transcript.  Bearing in mind that difficulty we make the following observations as to what appear to be the relevant considerations.

(a)     The financial circumstances of each of the parties

1. As a result of the orders of the Full Court the wife receives almost the entirety of the capital of the parties, of about $700,000 which is mainly represented by her interest in the former matrimonial home.  She was found by the trial judge to have an earning capacity of not less than $22,000 per annum which would be likely to increase as the children completed their education. 

2. On the other hand, the husband can expect to continue to earn over $500,000 per annum and could probably earn in the range of $700,000 to $800,000 per annum.  His ongoing maintenance and child support commitments amount to $100,000 per annum plus education expenses and the orders require him to pay $3000 per month off the wife’s mortgage until it had been reduced by $150,000.    

(c)      Conduct

1. The wife had filed an application seeking interlocutory relief in July 2004.  That application was eventually abandoned in November 2004 but not until the husband had incurred legal costs which he claimed to be about $8000, in preparing his defence to the application.  At the trial much of the time was spent exploring issues concerning the husband’s financial position and in particular the valuation of his practice.  The wife had engaged an expert witness who had come from New South Wales to give evidence.  His evidence was ultimately rejected by the trial judge who, as we have already observed, commented:

   36.…On this issue, the wife was largely unsuccessful and, frankly, I consider in any event, the trial was unnecessarily extended by the approach of the wife’s legal team.

(f)       Written offers

1. It is clear that the husband made an offer in writing to the wife which she purported to accept, but about which the parties had not reached any consensus.  It is in our mind unclear as to how we can place any great weight upon the making of the offer in the circumstance where, as the trial judge said, in reality the husband’s offer of 2 December 2004 proved to be uncertain. 

2. In In the Marriage of Harris (1987) FLC 91-822; 11 Fam LR 629 the Full Court was critical of the parties making ambiguous offers. They said at 76,187; 633:

   The offer should be expressed in terms which are objectively capable of being clearly understood.  Otherwise difficulties are likely to arise upon a purported acceptance by the other party of that offer or upon the assessment by the Court of that offer on the issue of costs. 

3. In this case there was a fundamental disagreement as to what the offer entailed and ultimately, whilst the trial judge resolved that disagreement in favour of the wife, the orders made by the Full Court in the principal appeal favour neither party when compared with that about which each thought they had reached agreement.  The husband’s obligation to contribute toward the wife’s mortgage has been reduced by approximately $125,000 but the amount that he is obliged to discharge is clearly to be discharged by way of property order and not by way of a series of maintenance payments.  The wife receives a sum significantly less than that which she had hoped to receive as a result of her accepting what she understood the husband’s offer to be.  In all of the circumstances we think that little weight can be given to the terms of the offer to settle proceedings.

Conclusion

1. In all of the circumstances we consider that the various factors that favour each of the parties balance themselves out.  It is inappropriate to make any order for costs in favour of either party.  Accordingly the costs appeal will be allowed and the order made by Martin J on 28 March 2006 will be set aside. 

Costs of the appeal

1. The husband seeks an order that the wife should pay his costs and disbursements relating to the appeal.  He seeks to rely upon an offer made to the wife in June 2006 in which he offered to settle the matter by reducing the sum ordered to be paid from $274,361 down to $120,000.  He says that he received no response to the offer.  The order that we eventually made in the principal appeal was to reduce the sum to $150,000 which was a sum greater than that which the husband had offered to pay. 

2. The wife submits that the husband only succeeded in relation to some of the matters that he sought to argue on the appeal and as such he should contribute 75 per cent of the wife’s costs of the appeal or alternatively there should be no order for costs as between the parties but that she should be granted a certificate pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth).

3. The wife submits that the husband only succeeded in relation to some of the matters he sought to argue on the appeal and as such he should pay the wife's costs on the appeal, alternatively contribute 75 per cent of such costs and otherwise there should be no order for costs.  Given that the husband has been significantly successful in relation to the appeal we think it inappropriate that he make any contribution towards the wife’s costs.  As the appeal succeeded on a question of law, it is however, appropriate that we grant a certificate to the wife in relation to her costs.  We note that the husband does not seek any such certificate although it remains open to him to do so.

I certify that the preceding twenty eight (28) paragraphs are a true copy of the reasons for judgment of this Honourable Full Court

Associate: 

Date:  26 July 2007