Hackshaw & Hackshaw (Costs)
[2011] FamCA 570
•19 July 2011
FAMILY COURT OF AUSTRALIA
| HACKSHAW & HACKSHAW (COSTS) | [2011] FamCA 570 |
| FAMILY LAW – COSTS – where each party seeks costs on an indemnity basis – whether the wife is entitled to costs pursuant to s 117AB of the Family Law Act 1975 – whether the husband knowingly made a false statement – consideration of “knowingly” – where the husband falsified a relevant document – where husband ordered to pay portion of wife’s costs of and incidental to the proceedings. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Charles & Charles [2007] FamCA 276 Child Support Registrar & Kanavos and Ors [2010] FamCAFC 244 Colgate-Palmolive and another v Cussons Pty Ltd (1993) 46 FCR 225 Fitzgerald v Fish (2005) 33 FamLR 123 at 130 Given & Pryor (1979) 39 FLR 437 Gregory v Commissioner of Taxation (1971) 123 CLR 547 I & I (No. 2) (1995) FLC 92-625 Idoport Pty Ltd v NAB and others [2007] NSWSC 23 In the Marriage of Greeby (1982) AFaLR 669 at 673 In the Marriage of Jensen (1982) FamLR 594 at 595, per Nygh J Kohan v Kohan (1993) FLC 92-340 Krach & Krach (No. 2) [2009] FamCA 886 Lenova & Lenova [2011] FamCAC 141 Penfold v Penfold (1980) 144 CLR 311 Robinson & Higginbotham (1991) FLC 92-209 Sharma & Sharma (No. 2) [2007] FamCA 425 Yunghanns & Yunghanns (2000) FLC 93-029 |
| APPLICANT: | Mr Hackshaw |
| RESPONDENT: | Ms Hackshaw |
| FILE NUMBER: | BRC | 10904 | of | 2007 |
| DATE DELIVERED: | 19 July 2011 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | Written Submissions received: Wife on 4 March 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hamwood |
| SOLICITOR FOR THE APPLICANT: | Robert W Blank & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Kirk of Senior Counsel |
| SOLICITOR FOR THE RESPONDENT: | Lehns Lawyers |
Orders
IT IS ORDERED THAT
The application by the husband that the wife pay his costs of and incidental to the proceedings, including in respect of the application for costs be dismissed.
The husband shall pay:
(a)One half of the of the wife’s party and party costs of and incidental to the proceedings up to and including 7 December 2008;
(b)The whole of the wife’s party and party costs as and from 8 December 2008, including in respect of the application for costs.
The wife shall, within 14 days of the date of these Orders forward to the husband in writing an estimate of the amount of costs represented by paragraph 2 of these orders.
The husband shall, within 14 days of receipt of the written estimate required by paragraph 3 of these Orders, respond in writing as to whether he accepts the amount so specified, in which case:
(a) the said sum shall be paid by the husband within 7 days thereafter; and
(b)payment of the said sum shall be in full and final discharge of the husband’s obligations pursuant to paragraph 2 of these Orders.
In the event that the husband does not accept the amount specified by the wife in accordance with paragraph 3 of these Orders, or pay the said amount within the time so specified, the amount of the costs required to be paid in accordance with paragraph 2 of these Orders shall be as assessed.
In the event that an assessment of the amount of the wife’s costs payable pursuant to paragraph 2 of these Orders is required, and the amount so assessed is equivalent to or greater than the amount specified by the wife in compliance with paragraph 3 of these Orders, the husband shall:
(a)pay the amount of the costs so assessed within 7 days of the date thereof; and
(b)shall, in addition, pay the wife’s costs of and incidental to the said assessment as and from the date of this Order on an indemnity basis.
In the event that an assessment of the amount of the wife’s costs payable pursuant to paragraph 2 of these Orders is required, and the amount so assessed is less than the amount specified by the wife in compliance with paragraph 3 of these Orders:
(a)The husband shall pay the amount of costs so assessed within 7 days of the date thereof; and
(b)The wife shall pay to the husband within 7 days thereof his costs as and from the date of this Order on an indemnity basis.
IT IS NOTED that publication of this judgment under the pseudonym Hackshaw & Hackshaw (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 10904 of 2007
| Mr Hackshaw |
Applicant
And
| Ms Hackshaw |
Respondent
REASONS FOR JUDGMENT (COSTS)
On 10 December 2010 I made Orders and delivered Reasons consequent upon a trial involving competing applications of the husband and wife for settlement of property. On that date, for reasons then given (at [313] – [317]), the parties were given the opportunity to structure the precise terms of orders consistent with my findings. Those Orders were ultimately made on 7 March 2011.
Written submissions were filed on behalf of the wife in support of an application for costs, supported by an affidavit by the wife’s solicitor. The husband’s submissions were subsequently received together with an affidavit from a Mr NH. The wife filed a reply to those submissions on 1 April 2011. The affidavit of Mr NH is objected to.
For her part, the wife seeks an order that the husband pay the wife’s costs of the proceedings:
(a)on an indemnity basis as and from 13 September 2007, or alternatively from the date of the wife’s offer of 8 December 2008; or
(b)alternatively, on a party/party basis as and from 13 September 2007; or
(c)alternatively, on a party/party basis as and from the date of the wife’s offer of 8 December 2008.
The written submissions on behalf of the wife go on to submit:
In the event that your Honour is prepared to order a lump sum as opposed to having [costs] assessed then:
(i) The costs incurred by the wife to date of $711,972;
(ii)The costs yet to be incurred in respect of this costs application and putting in place specific orders for property division are in the course of being incurred and would need to be dealt with separately;
(iii)In the event that your Honour is only minded to order party/party costs, [the wife’s solicitor] has, in her affidavit, given a general estimate that it would be around 48-55% of the costs incurred by the wife.
The husband seeks an order that the wife pay his costs. Written submissions filed on his behalf assert:
8.1As noted in section 2 above, the wife relentlessly pursued an argument in relation to waste and addbacks in respect of which she was entirely unsuccessful. In light of the established law in relation to such matters, set out in paragraphs 81-86 inclusive of the reasons for judgment, it is submitted that the conduct of the case in this matter by the wife falls into that category elegantly described by Sheppard J in Colgate-Palmolive & Anor v Cussons Pty Ltd (1993) 118 ALR 248 as “the undue prolongation of a case by groundless contentions”;
8.1It is submitted that bearing in mind the protracted, unnecessary and fruitless enquiries and the waste of hearing time occasioned by the wife’s insistence on attempting to inflate the asset pool by some $3,500,000, the costs incurred by the husband in meeting the extensive disclosure demands relating to these issues, perusal of and response to affidavits and other material, and preparation and trial cost, it ought to be ordered to be paid to the husband. It is submitted that the husband should be entitled to those costs on an indemnity basis as being nothing more than an expensive waster of time.
Evidence and its Admissibility
In support of the husband’s application for costs and his opposition to the wife’s application, the husband relies upon two affidavits filed by his solicitor and one filed by Mr NH, who is the accountant for “the [Hackshaw] Group”.
In respect of the affidavits from the husband’s solicitor, senior counsel for the wife submits: “Whilst we object to the assertions/submissions made by [the solicitor] in his affidavits, we do not have any issue with your Honour having regard to those matters as supplementary submissions to those provided by the Husband.”
Mr NH’s affidavit is objected to in its entirety.
Mr NH’s affidavit can be seen to depose to three central matters: it is said that the financial performance of the Hackshaw group has deteriorated since the trial; there purports to be a valuation of the group (and consequent interest of the husband) by reference to an offer to purchase it which has been rejected; thirdly, Mr NH gives evidence of matters that formed the basis of additional submissions made on behalf of the husband at the trial and rejected and, finally, he deposes to an asserted current value of the husband’s superannuation fund.
No application to re-open proceedings was made prior to delivery of the judgment (or subsequent to delivery of the reasons pending finalisation of the orders). No appeal was lodged within the time prescribed.
Husband’s Additional Submissions at Trial
At paragraphs 10 to 12 of his affidavit, Mr NH gives evidence in respect of matters that formed the basis of additional submissions made on behalf of the husband. It was asserted that Mr TS (the single expert valuer) had made three errors. A number of findings were made in respect of same and, ultimately, the submissions on behalf of the husband were rejected. (Reasons for judgment [193] to [210]).
It will be observed that the reasons for rejecting the submissions included that, there was neither evidence of, nor cross-examination directed to relevant witnesses in respect of the asserted double count [200]; the second of the three submissions was not maintained by counsel for the husband in light of a number of questions asked of him in respect of the issue [204] – [205]; and, thirdly, consequent upon a concession that “it would have been preferable if [Mr TS had] been cross-examined” about the issue, and the observation that Mr NH himself was not cross-examined about it (nor, gave evidence about it) I declined to make the third alteration.
It seems to me that this portion of the affidavit of Mr NH is an attempt to re-litigate a matter in circumstances where there has been no application to re-open and no appeal. The evidence is, in my view, irrelevant and inadmissible.
Valuation Evidence
It is submitted by senior counsel (citing, for example, Gregory v Commissioner of Taxation (1971) 123 CLR 547) that evidence of a rejected offer is not evidence of value. That submission is, in my view, correct.
Further, the evidence is in my view – at least in part - an attempt to re-litigate an issue merged in the judgment and orders, namely the value of property (and the “amount” of superannuation interests). To the extent that is has that purpose, it is in my view irrelevant to the instant application.
The evidence (or aspects of it) may be relevant for a separate purpose, namely as evidence of the financial circumstances of the person who may be ordered to pay costs. The evidence as offered suffers from the fact that any such probative purpose is clouded by its additional intended purpose as evidence of value.
It is submitted by senior counsel for the wife that “… the wife has a [business] that [deals] predominantly [with] Japan and should up to date valuations/earnings be admissible for costs purposes, the Wife would wish to inform Your Honour of the impact on her business of the recent Japanese earthquake, tsunami and nuclear reactor problems”.
The wife has not sought to place evidence before the court as to ‘financial circumstances” in so far as they might be different to those which pertained at the time of the trial. The expression “should up to date valuations/earnings be admissible for costs purposes” used in senior counsel’s written submissions is, with respect, curious. It would seem to be implicitly submitted that “up to date valuations/earnings” are not admissible for costs purposes. If that is the submission, I reject it.
The statute prescribes the “financial circumstances of each of the parties to the proceedings” as one of the matters that might, in an appropriate case, inform the court’s discretion in respect of what is a distinct application. It seems to me that evidence of the then existing financial circumstances of the parties must plainly be admissible, as would evidence of any other circumstance directly relevant to any exercise of the discretion.
That said, the nature and extent of any such evidence is an entirely different matter.
The broad discretion contemplated by s 117(2A) (note, in particular, s 117(2A)(g)) posits “financial circumstances” as but one relevant factor; it does not, in my view, invite extensive evidence nor does it contemplate an inquiry into the minutiae of parties’ financial circumstances. Any such evidence must take account of the fact that the broad discretion might be exercised by “[j]udges very frequently [making] orders for costs without giving reasons or making findings, even when costs are in issue”. (Penfold v Penfold (1980) 144 CLR 311 at 315). That is, of course, all the more so when the substantive proceedings have themselves had those same financial circumstances as a central component.
It seems to me that the evidence of Mr NH is admissible to the extent that it deposes to knowledge of financial circumstances of the Hackshaw group and, as a consequence the husband, having deteriorated since the trial. That circumstance is potentially relevant (s 117(2A)(a)) if the “general rule” contained in s 117(1) “must yield” either because “there are circumstances justifying the making of an order for costs” or because such a result is mandated by reference to s 117AB.
Section 117AB
It is contended on the wife’s behalf that s 117AB of the Family Law Act 1975 (Cth) (“the Act”) applies to the circumstances here. That section provides: :
Section 117AB - Costs where false allegation or statement made
(1) This section applies if:
(a) proceedings under this Act are brought before a court; and
(b) the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.
(2)The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.
Prior to the introduction of that section in 2006, the Act provided for costs to be awarded on a discretionary basis, but subject to the general rule, contained in s 117(1) that “each party to proceedings under [the Act] shall bear his or her own costs”. The discretion given to the court to award costs otherwise is circumscribed by mandatory statutory factors to which the court must have regard (s 117(2A)). Thus, the general rule provided for in s 117(1) must give way when a consideration of the statutory discretionary factors (and any other factors which the court considers to be relevant - see s 117(2A)(g)) are seen by the court to justify an order for costs. (See eg Penfold and Penfold (1980) 144 CLR 311.
It is not necessary to spell out the specific factors relied upon in arriving at a decision that an order for costs should be made, nor to provide extensive reasons for that decision (Penfold above; In the Marriage of Greedy (1982) 8 FamLR 669 at 673; (1982) FLC 91-250). Moreover, it is not necessary to classify a case as “exceptional” before an order for costs is made contrary to the general rule contained in s 117(1). (See eg In the Marriage of Jensen (1982) FamLR 594 at 595, per Nygh J). The question is “whether the overall circumstances justify the making of an order for costs” (I & I (No. 2) (1995) FLC 92-625.)
Furthermore, the Act’s list of a number of non-exclusive factors in s 117(2A) does not lead to the conclusion that more than one of those factors must be present before the general rule provided in s 117(1) is displaced. (See eg Fitzgerald v Fish (2005) 33 FamLR 123 at 130; Robinson & Higginbotham (1991) FLC 92-209.)
Against that background, a number of aspects of s 117AB should be noted:
§ If the terms of the s 117AB(1) are met, the general rule provided for at s 117(1) no longer applies;
§ If the terms of s 117AB(1) are met, the court no longer retains a discretion whether to order costs; a costs order of some type must be made;
§ The section neither quantifies any costs to be awarded (it refers to “some or all” of the costs) nor refers to the basis upon which an order should be made (for example, whether party / party or indemnity); that is, the court retains a discretion otherwise in respect of the basis of the award and its quantum. (As to the last, see Family Law Rules 2004, Rule 19.18; 19.19.);
§ The section’s mandatory requirement is activated upon the finding of a single act of falsity – that is, a course of conduct or series of actions is not required; and
§ The section applies if a court makes a finding that the falsity (or falsities) are made “knowingly”;
§ The section applies, relevantly, to a knowingly made “statement”.
“Knowingly”
In Charles & Charles [2007] FamCA 276 Cronin J held in relation to the word “knowingly” as used in s 117AB:
24.“Knowingly” imports a serious subjective element into the question. In respect of many findings of fact as in this case, a trial judge determines which of two versions, sometimes diametrically opposed to one another, he or she believes on the balance of probabilities. Such a finding is not necessarily a statement that one version is patently untrue or that a person is lying; it may simply be that one version is more probable than another. For a court to be satisfied that a person knowingly made a false allegation or statement in the proceedings must mean that a court can be comfortable in finding that the person lied. It would not simply then be a balancing act between two versions. To be satisfied that a lie has been told and to so find requires a careful analysis of two things. The first is that the proffered version of fact is untrue but the second is that it is put knowing it to be untrue. A court must then be cautious about such a finding because of the mandatory consequence. The finding must be elevated above the “probable” level set out in s 140(1) of the Evidence Act 1995 to consider the matters contemplated in s 140(2) of that Act. That is, the Briginshaw v Briginshaw (1938) 60 CLR 336 test applies.
25.Use of the word “knowingly” in civil proceedings has long been a feature of the common law. It was recently examined in the arguments about the tort of deceit in Magill v Magill [2006] HCA 51 (9 November 2006). Gummow, Kirby and Crennan JJ looked at the very old decision of Derry v Peek (1889) 14 App Cas 337 at 373 quoting Lord Herschell explaining:
First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made.
26.“Knowingly” is unequivocal. There can be no room for misunderstanding or doubt; objectively, the person making the statement cannot believe the statement to be true.
27.Gummow, Kirby and Crennan JJ [in Magill] looked at the modern tort of deceit and said that there had to be a number of elements proved. Their Honours distinguished representations made with the knowledge that they were false from those which were made recklessly or carelessly. In a situation where s 117AB has a mandatory cost sanction where a person knowingly makes a false statement or allegation, it is important to distinguish between one which is knowingly made as a false statement and one which is recklessly made. The test is therefore a stringent one.
Cronin J’s analysis was cited with approval by Boland J (sitting as a single judge on appeal from a Federal Magistrate) in Child Support Registrar & Kanavos and Ors [2010] FamCAFC 244, above as was the decision of Ryan J in Sharma & Sharma (No. 2) [2007] FamCA 425. Boland J said in Kanavos:
83. At paragraph 13 of her reasons, Ryan J said:
My finding that some of the wife’s allegations are fabrications introduces the mental element which turns a wrong statement into a deliberate falsehood. This means I am satisfied she knowingly made a false allegation or statement. Again this was a central issue. So that there can be no doubt that the wife adopted her complaints and allegations made to police in these proceedings, at paragraph 112 I find:
“At the close of her case, the mother maintained the veracity of each and every allegation made against the father post 30 April 2004. That is, not only that she has accurately reported the children’s complaints but that the father behaved in the manner described”.
84.The word “knowingly” is considered in Words and Phrases Judicially Defined (4th Edition, Lexis Nexis Butterworths, 2007) at 1313 with reference to various statutes. While many of the examples cited in this text must be read in the context of the statute under discussion, I think the discussion of the meaning of the word by Kellock JA in Sleight v Stevenson [1943] 4 DLR 433 at 441 is helpful in the facts relevant to this appeal. In dealing with a case under a statute pertaining to insurance, his Honour said “I think ‘knowingly’ in the statute is used in the sense that the applicant is in possession of information that what is in fact stated in the application is untrue or does not disclose the truth” (see also Stroud’s Judicial Dictionary of Words and Phrases 7th Edition, Thomson Sweet Maxwell, 2006, at 1449). In other words, I concur with Ryan J there is a conscious mental element involved in the making of a statement.
I respectfully adopt their Honours’ analyses.
“Allegation or Statement”
In Given v Pryor (1979) 39 FLR 437 at 439, it was held:
It is necessary to examine the meaning of the word “statement” … It seems reasonably clear that a statement may be made orally or in writing. One of the definitions in the Oxford English Dictionary (1933 ed), vol 10, in relation to “statement” is: “A written or oral communication setting forth facts, arguments, demands or the like.”
…
Looking at the question in a broad way it is difficult to see why pictorial material should not form part of a statement. It seems to me a statement may be in any language, including one made by signs that are known and understood by those deaf and dumb people who use them, and one written in shorthand. In the same way I cannot see why pictorial or diagrammatic material should not be included in a statement. …
I can see no reason to “read down” or restrict the ordinary meaning of the expression which, in my view, is as inclusive and broad as that contemplated by the decision to which reference has just been made. Indeed, there seems to me to be a clear legislative intention to have mandatory costs orders apply to a wide category of knowingly false words and conduct.
Relevant to the circumstances here, it is in my view plain that the falsification, and subsequent uttering, of a copy of a cheque butt in circumstances where, as here, the disclosure and production of the copy was required in legal proceedings, amounts to the making of an allegation or statement within the meaning of the section; the cheque is offered as a statement or allegation of that which is revealed on its face.
S 117AB – Application to the Circumstances in this Case
Senior Counsel for the wife submits that passages of the trial reasons lead directly to a consequential finding that the husband has “knowingly made a false allegation or statement” in the trial before me.
The seriousness of a finding to that effect is self-evident and clearly emerges from the authorities earlier referred to. It is also emphasised in a passage cited by Senior Counsel for the husband from the judgment of Murphy J in Penfold, above at 317:
Giving false evidence, orally or in writing, and fabricating evidence are serious offences … Presentation of a false statement of financial circumstances, which puts the other party to the trouble and expense of disproving it, is a circumstance which justifies an order for costs. Courts should regard such circumstances which tend to undermine the integrity of the proceedings with great concern, and should do everything in their power to determine who is responsible in order to maintain that integrity.
Central to the husband’s submissions, are findings made by me with respect to a cheque butt falsified by the husband. It is submitted on his behalf in respect of s 117AB:
6.1The issue of the falsified cheque butt is dealt with at paragraphs 50 to 78 of your Honour’s reasons for judgment. It was clear that this was an egregious, gratuitous and totally inappropriate act on the part of the husband. What is also clear, however, it that apart from affording the wife a forensic triumph, nothing flowed from it in terms of financial consequences with respect to the case. Your Honour, has noted at paragraph 78, “did not form an adverse impression of him as a witness under cross-examination”. Your Honour notes that the original of the cheque butt which was unaltered was in fact discovered. It is also to be noted that whilst the details of the payee were altered, the amount of the payment was not. If the husband’s wish had been to sabotage his credit, he probably could not have done so more effectively. However, in terms of attempting to present a significantly false picture in any respect of the finances of the parties, his action was meaningless;
6.2While it was (sic) clear that the section makes a cost order mandatory, there is no justification for an implication that in circumstances such as this, an order which goes beyond, for example, the reasonable costs of determining and establishing the falsehood is necessary or appropriate. Where it is not the appropriate intention of the section that a punitive or deterrent effect is the appropriate consideration, it is submitted that the court’s enquiry with respect to the appropriate nature and level of costs ought be limited to that sum of costs which naturally flows from the false statement complained of. As your Honour observed at paragraph 65 to 67, there was simply no evidence upon which a finding that there was any extensive scheme to falsely represent that the husband’s financial circumstances and/or deprive the wife of her proper entitlements, was contemplated or in existence. Your Honour might take the view that the relationship exists between the husband’s behaviour in this respect and his levels of alcohol expenditure so minutely detailed by the wife.
As has been pointed out, s 117AB is not dependant for its operation upon a finding that a false allegation or statement is part of “present[ing] a significantly false picture” or “an extensive scheme to falsely represent … the husband’s financial circumstances…” (although the nature, extent and apparent purpose/s of the dishonesty may be relevant to discretion as to the basis for, or quantum of, any costs ultimately awarded).
The submissions on behalf of the husband just quoted mirror, in many respects, submissions made in respect of the copy cheque butt at the trial. In respect of that specific aspect of the matter I found:
51.It is contended on behalf of the husband that, despite this admission in respect of the cheque butt, that it “relat[ed] to an expenditure that was partially in relation to farm expenses and partially to private expense” […] in terms of his credit, it can effectively be disregarded because “he did not attempt to tamper with the original document” because “it is difficult to discern what financial or other advantage he might have expected to, or could ever have gained by this subterfuge, other than the satisfaction of spreading a little confusion in the ranks of the wife’s legal team”.
52.The explanation offered by the husband in that respect is plainly unsatisfactory. In my view, it ignores two important matters.
53.First, it ignores the fact that the admitted alteration of the cheque butt occurred for the specific purpose of presenting an inaccurate picture, not only to his former wife of 30 years, but to a person with whom he was involved in litigation. It also, as a result, presents an inaccurate position to the court. The submission on behalf of the husband ignores, in my view, the earlier-discussed centrally important role of proper (i.e. “frank”) disclosure in litigation in this court.
54.Secondly, the argument ignores the fact – considered by me to be extremely important – that, in interlocutory proceedings before me, the husband sought to limit disclosure to no earlier than June 2006, particularly with respect to the relevant bank account. The husband’s Disclosure Undertaking is dated 2 March 2009 (Exhibit W5). The falsified copy of the cheque butt was made a relatively short time after he signed that Undertaking on 2 March 2009.
55.On the same day as that undertaking was signed by the husband, his solicitor advised the court (it must be presumed on instructions) that there were “no cheque butts”. That was said in response to a formal request by the wife for the production of cheque butts and other documents dating back to January 2004. The solicitor said, on the husband’s instructions and on his behalf, “It’s been a matter of close discussion and investigation with my client. He says there aren’t cheque butts”.
56.That statement is manifestly false. Not only were there cheque butts, but, in respect of the cheque butts disclosed, one was intentionally altered by the husband. In a later affidavit, the husband says that he ought to have made clear that “most (not all) transactions were by electronic means”. This is an unsatisfactory “explanation”.
57.Understandably enough, the husband’s conduct in falsifying a copy of a cheque butt was the subject of extensive cross-examination. The husband’s explanation was that he was “annoyed with the wife and her solicitors and “did it to get up their noses”. He said that this purpose was effected because he had previously disclosed to them a copy of the unaltered cheque butt. In fact, this explanation was also manifestly false; he had not done so.
58.The cheque butt was, in fact, in part-payment of services provided to the husband by a prostitute. Whilst one might, perhaps, have thought that this might have provided a motive for the husband’s conduct, it was not a motive asserted by him.
The falsity perpetrated by the husband, and the importance of it, in so far as it is relevant to the application of s 117AB, is not at all diminished by the fact that the lie and its attendant actions were ham-fisted in their execution or effect. Nor is it relevant that “nothing (allegedly) flowed from it in terms of financial consequences with respect to the case.”
It will be clear from the passage just referred to that the inescapable finding in the instant application is that the husband made a statement or allegation which was false and that he did so knowingly. Accordingly, in my judgment, s 117AB applies and an order for costs must be made against the husband.
S 117 – Discretionary Considerations
The written submissions on behalf of the husband extracted suggest (at par 6.2) that a costs order should not extend “…beyond, for example, the reasonable costs of determining and establishing the falsehood”.
I do not consider that any costs awarded need have any nexus with the consequences of the dishonesty. It is in my view unnecessary to establish any causal connection between the falsity and the award of any, or any specific type or amount of, costs. Once s 117AB is enlivened, the discretion is otherwise at large as to the type and quantum of any order, with such discretion guided by the s 117(2A) considerations. As earlier observed, the nature, extent or purpose of the dishonesty might be a relevant consideration (s 117(2A)(g)). Equally, though, dishonesty in the context of proceedings in this court, has a broader context as related to the issue of costs.
Its importance in the present context is not, as asserted in the husband’s written submissions, in “affording the wife a forensic triumph” (if, indeed, that is an apt description of what he did). Rather, its importance lies in the affront to the proper administration of justice and the integrity of the processes which underpin it.
Moreover, as was made clear by Murphy J in the passage from Penfold earlier cited, not the least of the importance of it is that it puts the other party on enquiry about matters that might otherwise not have been necessary, including in relevant cases “ the trouble and expense of disproving it”.
Passages in the relevant Explanatory Memorandum referred to by each of Cronin J and Boland J in the decisions earlier referred to can be seen to refer to what might be described as a punitive element in the award of costs where the section applies:
“The provision ensures a message to the courts that a penalty should be imposed at the same time as the court determination rather than relying on the possibility of protracted criminal prosecution in appropriate cases”.
But, it seems to me that no such notion attends, per se, the award of costs pursuant to the section as passed. Once the application of the section makes a costs order mandatory, the court’s discretion is enlivened in determining the nature and quantum of any such order and the nature and extent of the conduct, and its effect might, in an appropriate case, be matters properly taken into account in the exercise of that discretion.
Indemnity Costs?
Each of the parties seek from the other costs on an indemnity basis. Each relies upon the well-known passage of Sheppard J in Colgate-Palmolive and another v Cussons Pty Ltd (1993) 46 FCR 225. In Kohan v Kohan (1993) FLC 92-340, the Full Court of this Court confirmed that an order for indemnity costs can be made in an appropriate case. (See, too, Yunghanns & Yunghanns (2000) FLC 93-029.) In Kohan, the Full Court held that the power to order indemnity costs should be understood as “a very great departure from the normal standard” (at 79,611).
Here particular reliance is placed by the wife upon the husband misleading the court and an assertion that the husband has conducted proceedings in a way that has caused unreasonable delay and expense. It is said that the husband has been engaged in “blatant and deliberate non-disclosure”.
For his part, the conduct of the case by the wife falls into the category ascribed by Sheppard J in Colgate-Palmolive, above, as “the undue prolongation of a case by groundless contentions”. It is submitted that “the wife relentlessly pursued an argument in relation to waste and add-backs in respect of which she was entirely unsuccessful. In the light of the established law in relation to such matters…it is submitted that the conduct of the case in this manner falls into that category elegantly described by Sheppard J in Colgate-Palmolive…as ‘the undue prolongation of a case by groundless contentions’”.
The written submissions on behalf of the husband go on to assert: -
8.1 It is submitted that bearing in mind the protracted, unnecessary and fruitless enquiries and the waste of hearing time occasioned by the wife’s insistence on attempting to inflate the asset pool by some $3,500,000, the costs incurred by the husband in meeting the extensive disclosure demands relating to these issues, perusal of and response to affidavits and other material, and preparation and trial costs, it ought to be ordered to be paid to the husband it is submitted that the husband should be entitled to those costs on an indemnity basis be nothing more than an expensive waste of time.
It is submitted on behalf of the wife in reply that, whilst she may not have succeeded in respect of having “the husband’s extravagancies” added-back directly, the Reasons and ultimate Orders reflect an adjustment pursuant to s 75(2) for “the extremely large sums of money” the husband expended post-separation. Specific reference is made to para [311] of the trial Reasons.
As I have earlier said, I do not consider that the nature, extent and scope of the dishonesty is relevant to the application of s 117AB. But, I do consider it relevant to the issue of the form of the costs order and its quantum.
It seems to me that, in considering the respective conduct of the parties, a number of different matters ought be taken into account. I referred to some of these matters in my trial Reasons (par [29]ff).
This case evidences features common to many cases in which a party seeks to “add-back” expenditure said to have been “wasteful”; an attempt is made to effectively create a “post-separation audit” of expenditure by one party. There is some merit in the husband’s submissions as to the actions of the wife in seeking to add-back to the pool a very significant sum in respect of which she was ultimately unsuccessful.
However, the wife here was confronted by a cavalier attitude to disclosure by the husband. She was confronted by dishonesty on his part. A complaint that her inquiries and attempts to obtain a complete picture were excessive ring a little hollow in those circumstances.
It is also difficult to be precise about the evidentiary path that should be followed by a party seeking to establish that very significant sums have been wasted, withheld or not disclosed. That problem, in my view, is exacerbated in a Court that does not require pleadings and an accompanying process of particularisation inherent within it.
But, as I said in the trial reasons, it is never open to a party to either ignore the duty to disclose and its consequent responsibilities or “to obfuscate, dissemble or comply less than comprehensively and conscientiously with the duty (and the rules about it more generally)”.
In my view, the circumstances here are not sufficient to warrant the “very great departure from the general rule” that sounds in an order for indemnity costs.
Other Considerations
The total net “pool” of property as found by me is approximately $7.76 million. The result, in dollar terms, saw the husband receiving just short of $3 million and the wife just short of $5 million. There may, indeed, be circumstances impacting upon the financial circumstances of the husband – or the wife – but, in light of amounts involved in the overall settlement, the financial circumstances of the parties do not loom large in the exercise of my discretion.
As will be clear, the conduct of each of the parties is in my view a relevant matter. Together with the matters earlier referred to, an annexure to the affidavit of the wife’s solicitor (Annexure V) details, over 18 closely typed pages, aspects of the husband’s conduct of the litigation, much of which, understandably, relates to allegations in respect of failure to disclose or failure to adequately disclose. Included among the complaints are the failure by the husband to respond to summaries ordered by me and designed to expedite the process of discovery and the particularisation of allegations relating to expenditure and the like. It is in that context that I referred to the husband’s attitude towards the Court’s process generally, and discovery more particularly, to be “arrogant and cavalier”.
To that should be added mention of the husband suggesting that his falsification of the copy of cheque butt was to “get up the nose” of the wife and those advising her. Whilst directed towards the issue of the cheque butt specifically, echoes of that same attitude can be seen in the approach taken by the husband to the litigation more generally. Again, Annexure V to the affidavit of the wife’s solicitor is testament to that assertion.
Of course, as the husband contends, any approbation directed toward him in respect of that cavalier attitude must be measured now against the ultimate finding that there ought be no add-backs in respect of the specific assertions of the “waste” of a very significant amount of money made by the wife. It is submitted in response to that assertion that “… the net result of all that effort was only to prolong the trial to probably twice the time it should have taken and not to add one cent to the value of the pool”.
I am by no means convinced that the attempts by the wife to compile an “audit” of the husband’s expenditure, or to quantify it with specificity, added to the length of the trial in any meaningful way. As I found in my trial reasons, there could be no doubt that the husband expended post-separation very significant amounts of money. Part, at least of that money, was spent on a project which was, initially, kept entirely from the wife. In short, the wife can fairly say, in the particular circumstances of this case, in light of the husband’s attitude towards the transparency of his post-separation expenditure and his general attitude toward disclosure and the process of litigation generally, that the choices open to the wife in order to properly explore a case which – was by no means fanciful – were somewhat limited.
The last matter is important because the fact that the claim for “add-backs” did not, as contended, “add one cent to the value of the pool” is an assertion that can only be made with the wisdom of hindsight based on the ultimate findings made by me.
It by no means follows from the result that no add-backs were made that the process by which add-backs were sought was, as submitted on behalf of the husband, “a massive waste of time and energy”. I specifically reject the submission by the husband that:
…further, given the nature of the process the wife decided to embark upon, it is impossible to determine whether, if at all, any delays in the husband’s responses to that disclosure process impacted upon the amount of time it took for the matter to come to trial. See the affidavit of Mr Blank in relation to the issues of delay.
That submission, in my view, begs the question; a party to litigation in this court should have a reasonable expectation that steps will be undertaken by the other party as directed and, in any event, timeously.
The wife made an offer to settle the proceedings on 8 December 2009. That offer remained open for a period of approximately six months until July 2009.
The terms of the offer are set out at paragraphs 55-58 of the wife’s solicitor’s affidavit in support of her application for costs:
… Pursuant to that Offer, my client proposed that she receive all property in her name or under her control … [and] …In addition, my client proposed that she receive from the husband … his interest in the [Hackshaw] Group No. 1 Super Fund … [and] the sum of $500,000 … The husband was to retain the balance of property in his name or under his control … Pursuant to Clause 20 of the Offer to Settle, each party would have paid his/her own costs provided the Offer was accepted within 14 days, and after which time, whilst the Offer to Settle remained open for acceptance, the wife required the husband to her costs from that time on an indemnity basis.
The offer was withdrawn formally on 15 July 2009. The wife’s solicitor deposes that until 22 December 2008, the wife had incurred costs and outlays of about $170,000 and an additional amount of $73,000 in the approximate six months until the withdrawal of the offer.
It is to be observed that the assessed value of the “[Hackshaw] Group” ‑ at least insofar as it was the subject of an opinion by a single expert valuer, was, at that time, about $3 million higher than it was at the trial. The facts and circumstances relating to that valuation (together with other valuations undertaken during the course of the litigation) is referred to at some length in the trial reasons.
An appendix to the written submissions by senior counsel on behalf of the wife offers a comparison of the components of the wife’s offer of 8 December 2008 and that which she received pursuant to the orders consequent upon my reasons after the trial. That comparison shows the wife receiving approximately $500,000 more in property and cash than that which she offered to receive almost exactly two years previously.
It is submitted in written submissions on behalf of the wife that:
Had the [single expert] valuer of the [Hackshaw] Group of $4,173,010 in his June 2008 report been included in the pool as opposed to the $1,060,879 from [the single experts] to 29 October 2009), the wife’s entitlement would have been substantially higher than what she was, in December 2008 content to receive rather than continue the torturous process dictated by the husband’s conduct. Even with the value of the principal asset (the [Hackshaw] Group) being reduced by $3 million, the wife’s entitlement still exceeds what she was prepared to accept back in December 2008.
In written submissions on behalf of the husband, it is contended:
It is accepted that the wife made an Offer to Settle the proceedings on 8 December 2009 [sic] which remained upon until July 2009. As previously noted, some $122,000 of the assets presently sought to be retained by the wife is a notional add-back of net legal fees paid by her. Further, the offer must be seen in the context of the manner in which the wife chose to run her case; namely the assertion that the notional pool of assets of the parties was $12,524,530. If it is accepted that this was not a mere ambit claim that was a position seriously pursued by the wife, then the fact that the wife made an offer to apparently accept somewhat less than 35% of what she asserted was the pool, would cause the husband to have suspicions that what she sought to receive was not valued with anything like reasonable accuracy and that the wife was seeking by means which were entirely unclear to him, covertly to obtain an advantage. In the circumstances of both the actual and manufactured complexity of these proceedings, it is submitted that the failure of the husband to accept a settlement offer which the wife eventually beat does not have the compelling force it might otherwise have.
The husband does not depose to the suspicions or the concerns about the attempts to “covertly obtain an advantage” contained within those submissions. The proposition can, I think, be answered simply: if that was the suspicion, make an offer to settle indicative of that suspicion. The husband made no offer to settle.
Further, it is, in my view, not for the husband to now second guess, in light of ultimate findings made at a trial the basis upon which the wife may (or may not) have made the offer as made by her. Any offer that might be informed by legal advice is, properly, the subject of legal professional privilege. It ought not be presumed the offer is consistent with advice. Nor should it be assumed that the offer is related to advice. Offers can be made for a variety of reasons informed by a number of considerations.
In Lenova & Lenova [2011] FamCAC 141, the Full Court held:
10.In this jurisdiction, costs do not “follow the event” … 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.
It is, in my view, not to the point whether the wife’s offer was made on the basis of a “ambit claim” or, indeed, on any other basis.
As earlier referred to, an offer to settle may potentially take account of a miscellany of matters including matters entirely divorced from legal advice about potential outcomes. For example, it is by no means fanciful that a party would make an offer – that may be wholly unrelated to advice about a potential outcome or wholly unrelated to evidence about the value of assets or the like – from a purely “commercial” perspective. That is, a party may make an offer based solely on a desire to rid him or herself of the time, trouble and expense of litigation.
Whilst it might perhaps be thought desirable that offers to settle are based upon advice, prospects, an assessment of the evidence and the like, the fact that an offer may be made wholly unrelated to those matters does not, in my view, affect its impact in the context of a statutory regime where costs do not follow the event. What is important is the fact of an offer, its timing and its contents.
In that respect, it is notable that in written submissions on behalf of the husband that complain that the wife “… belaboured the proceedings with unsubstantiated, hyperbolic and unreasonable assertions as the value of add-backs or the characterisation of expenditures” no submission is made, nor is there evidence, that the husband made, at any time, an offer to settle the proceedings within the meaning of s 117(2A)(f). In light of the complaints made by the husband about the toll on him of the proceedings and his contentions as to the unreasonableness of the manner in which the wife conducted those proceedings, that omission is, of itself, significant.
At paragraph 44(e) of the affidavit of the husband’s solicitor filed in respect of the costs application, (noting that the contents are in the nature of a submission as opposed to the deposition as to facts) it is asserted that the husband:
… never had a reasonable opportunity to make an Offer on an informed basis and on such basis it is more good luck than good judgment that the wife made an Offer in the terms of the Offer dated 8 December 2008.
Given that it was the husband who, effectively, controlled the Hackshaw Group and given that Mr NH was the accountant for that group and received instructions from, and liaised with, the husband (among others), that submission is somewhat curious. The fact that there may have been competing opinions as the value of that business is, given its nature and the external factors referred to in the expert opinions and the judgment, is neither surprising nor unforeseeable.
It seems to me that the husband was in precisely the same position as the wife: that is, the husband was in a position to choose to make an Offer to Settle upon any such basis as he might determine so as to bring an end to a lengthy and expensive court process. In that sense, he was in no better, or no worse, position than the wife. I reiterate: a decision about the making of Offers to Settle might be based on a plethora of considerations, some based in the law, some based in the evidence, and some based in neither.
Section 117(2A)(f) specifies as a relevant consideration in the exercise of discretion “whether” a party has made an offer. That is, the consideration is not confined merely to the terms of any offer. It seems to me that the failure to make an Offer to Settle, in relation to an application for costs, is as relevant a matter as the fact of and the terms of any offer which is made.
In respect of the latter, it does not, of course, follow that, merely because an Offer to Settle has been made and might be seen to be more “generous” than the result ultimately ordered by the Court, a costs order follows. Such a proposition is contrary to s 117(1) and the place of an Offer to Settle as but one of the considerations to be taken into account pursuant to s 117(2A).
Nevertheless, the words of the Full Court in Lenova & Lenova are apposite; an offer remains a very important part of a very limited armoury to incentivise parties to bring proceedings to an end by positing potential costs consequences as a failure to do so.
In my view, it is a very important consideration in this case.
The husband makes an application that the wife pay his costs of and incidental to these proceedings. The gravamen of the submission can be seen at paragraph 8.1 of the written submissions on his behalf:
It is submitted that bearing in mind the protracted, unnecessary and fruitless enquiries and the waste of hearing time occasioned by the wife’s insistence on attempting to inflate the asset pool by some $3,500,000, the costs incurred by the husband in meeting the extensive disclosure demands relating to these issues, perusal of and response to affidavits and other material, and preparation and trial cost, it ought to be ordered to be paid to the husband. It is submitted that the husband should be entitled to those costs on an indemnity basis as being nothing more than an expensive waste of time.
It will, I think, be clear from all that I have earlier said, that I do not consider that the submitted basis provides any foundation for an order being made in favour of the husband for costs, let alone an order for indemnity costs.
Conclusion as to Costs
In all of the circumstances I am persuaded that:
(a)an order for costs should be made in favour of the wife as against the husband on a party and party basis;
(b)no order for costs should be made in favour of the husband as against the wife.
Quantum of Costs
Senior Counsel for the wife refers to Rule 19.18 (1)(a) of the Family Law Rules 2004 which authorises the Court to make an order for a specific amount of costs.
In the affidavit file by the solicitor for the husband earlier referred to, it is submitted that:
if, contrary to these submissions and the submissions of [counsel for the husband], your Honour is minded to make a costs order in favour of the wife, because of the matters herein before set out in this affidavit in paragraphs 5 to 12, the wife should be required to provide an itemised Bill of Costs so that the husband may, if need be, avail himself of rights of objection/assessment.
In support of that contention, by reference to the paragraphs there referred to, the solicitor refers, for example, to what is asserted to be an error in the addition of the total amount of costs claimed (a difference of $38,660.29); a comparison between the hourly rate charged by the current solicitors for the mother and those of her previous solicitor and the solicitors for the husband and the method of charging, the fact that more than one practitioner was present for the wife in respect of inspections and the like.
It is, of course, axiomatic that a party ought have the opportunity to be heard in respect of an amount of costs claimed by one party as against the other. The process of assessment provides that very opportunity.
That said, the process of assessment in respect of the amount of costs in excess of $700,000 (which the solicitor for the wife estimates on a party and party basis as being in the region of half of that sum) is likely to involve both parties – and, in particular, the wife in whose favour a costs order will be made – in an expensive and undoubtedly lengthy process. (See eg the comments of Bennett J in Krach & Krach (No. 2) [2009] FamCA 886 at [40].)
Senior Counsel for the wife submits that Rule 19.18(1)(a) provides a basis for the fixing of an amount of costs. Whilst the Rule might do so by implication, Rule 19.19 of the Family Law Rules 2004 provides specifically:
19.19(1) The Court may order that a party is entitled to costs:
(a) of a specific amount …
The Rule goes on to provide:
19.19(2)In making an order under subrule (1) the Court may consider:
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyers conduct has been improper or unreasonable; or
(e)the time properly spent on the case, or in complying with the pre-action procedures; and
(f)expenses properly paid or payable.
Senior Counsel for the wife refers to a decision in the New South Wales Supreme Court by Einstein J in Idoport Pty Ltd v NAB and others [2007] NSWSC 23 in respect of “a similar power arising under the Civil Procedure Act 2005”. Included among the considerations outlined by his Honour “which inform the exercise of discretion” to order a fixed sum, his Honour said that “the gross sum can only be fixed broadly having regard to the information before the Court” and that “nevertheless the power to award a gross sum must be exercised judicially and after giving the parties adequate opportunity to make submissions on the matter”.
In a different context (namely the consideration contained at s 117(2A)(e)) Senior Counsel for the wife submitted that the notion of a party being “wholly unsuccessful” “…is generally not a factor which complies conformably to the issues and outcome in property proceedings”. Whilst I consider, with respect, that the statement, as far as it goes, is correct, it seems to me that a proper consideration of all of the relevant factors in the case must pay regard to the fact that, in the ultimate, considerable costs were expended in and about an unsuccessful attempt by the wife to convince the Court that $3,500,000 ought be added back to the pool.
Whilst, as her senior counsel argues, it might not be correct to say that she has been “wholly unsuccessful” in that attempt, by reason of an adjustment having been made pursuant to s 75(2)(o), that result is, as it seems to me, markedly different from the add-back of a very considerable sum which would have significantly increased the pool of assets available for distribution. The lack of the success of the wife in that specific aspect of her case should, in my view, find reflection, as a matter of justice, in any costs order made in her favour.
I propose to take account of that factor by reducing the costs payable by the husband by awarding a percentage of party and party costs. I also propose to give the Offer to Settle the importance which I consider it deserves by distinguishing between the pre-8 December 2008 period and the period after the offer was made on that date.
I consider that the husband should pay one-half of the wife’s party and party costs up to 8 December and the whole of them thereafter.
I am acutely aware that this litigation has stretched over a considerable period of time and the parties need to get on with their respective independent lives. Furthermore, I am acutely conscious of the fact that the process of assessment can take a very significant period of time and be very expensive and aggravating to both parties in circumstances where each of them would contend that the proceedings have, thus far, been particularly expensive and aggravating. My intention is to avoid yet further legal proceedings and their attendant costs. However, that should not come at the cost of failing to afford either party the opportunity to be heard should they be so minded. That should though, come with an incentive to both parties to avoid that process and, should their desire to pursue an assessment ultimately prove to be unreasonable, then the prolongation of the proceedings and the attendant costs should be borne in their entirety by the party whose actions can be seen to have brought about that situation. My orders attempt to achieve those purposes in the mechanism by which my costs order is to be carried out.
I certify that the preceding one hundred and three (103) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy delivered on 19 July 2011.
Associate:
Date: 19 July 2011
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