Harper & Harper

[2007] FamCA 129

FAMILY COURT OF AUSTRALIA

HARPER & HARPER (MAGUIRE) [2007] FamCA 129

FAMILY LAW – COSTS – CONSENT ORDERS – There was no trial - The husband has been wholly unsuccessful in relation to the s 79A proceedings - The existence and terms of offers in writing to settle the s 79A proceedings - The husband’s conduct in relation to the proceedings - The financial circumstances of each of the parties to the proceedings

Penfold and Penfold (1980) 144 CLR 311
Pennisi and Pennisi (1997) FLC 92-774
Robinson and Higginbotham (1991) FLC 92-209
I and I No. 2 (1995) FLC 92-625
ZH and N [2005] FamCA 828

APPLICANT: Mr Harper

RESPONDENT: Mrs Harper (Maguire)

FILE NUMBER: BRF 4673 of 2000

DATE DELIVERED: 23 February 2007

PLACE DELIVERED: Brisbane

JUDGMENT OF: O'Reilly J

HEARING DATE: 2 November 2006

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Carmody of Counsel

SOLICITORS FOR THE APPLICANT:

O'Reilly Lillicrap

Level 6, Grant Thorton House
102 Adelaide Street
Brisbane  Qld  4000

COUNSEL FOR THE RESPONDENT: Mr Page of Senior Counsel

SOLICITORS FOR THE

RESPONDENT:

MacDonnells Law

GPO Box 79
Brisbane  Qld  4001

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF4673/2000

Mr Harper

Applicant

And

Mrs Harper (Maguire)

Respondent

REASONS FOR JUDGMENT

Application 

The wife seeks an order that the husband pay her costs of and incidental to proceedings under s 79A of the Family Law Act 1975 (the Act) commenced by the husband on 27 September 2004, including reserved costs, to be assessed if not agreed.

1. There is one order for reserved costs, made by Judicial Registrar Smith on 20 September 2005. 

Relevant background facts

1. On 9 May 2000, a consent order was made between the parties containing final parenting orders and a final property settlement order. 

2. On 27 September 2004, the husband filed a second amended application for final orders. By par 2, he sought a lump sum payment by the wife to the husband of $30,000, such further order as the Court may deem appropriate and costs on the indemnity basis. In its terms, that application did not invoke s 79A of the Act. However, having regard to the property order made on 9 May 2000, it is plain that the relief the husband sought was so based.

3. On 21 October 2004, the husband filed a further amended application for final orders. By par 2, he sought, pursuant to s 79A(1)(a) and (b) of the Act, that the order made on 9 May 2000 be varied, and sought substituted provisions as set out in that document including that the wife pay to the husband $30,000, declaratory and other relief and costs on the indemnity basis.

4. On 30 June 2005, the husband filed a further further amended application for final orders.  By pars 2-5, the husband sought: (1) the same relief as in the document filed on 21 October 2004; (2) further relief for an “adjustment” of the assets and financial resources of the parties, excluding a DFRDB superannuation interest, so as to provide 60% to the husband and 40% to the wife; (3) a splitting order in relation to a DFRDB superannuation interest of the wife; and (4) costs on the indemnity basis.

5. On 2 November 2006, in the Defended List, I made a consent order that pars 2-5 of that application be dismissed.

6. In relation to the order for reserved costs made by the Judicial Registrar on 20 September 2005 (not by consent), the substantive orders (made on that date by consent), related to the removal of a caveat lodged by the husband on a property at A, application by the wife of the proceeds of sale of that property in the reduction of debt on a property at C and the giving of notice by the wife to the husband of any intention by her in relation to borrowings or security.

7. Those consent orders were made pursuant to an application in a case filed by the wife on 8 September 2004, which otherwise was dismissed.  (I note that the consent part of the order provides, in par 3, that the wife’s application be dismissed.   However, par 1 of the consent part of the order reflected the wife’s application as filed.  Par 2 of the consent order, relating to the wife’s application of the proceeds of sale and the giving of notice of any intention in relation to borrowings or security was not included in the wife’s application).

The evidence

1. In relation to the wife’s costs application Mr Page of Senior Counsel, for the wife, relied on the following material:

   ·The wife’s response filed on 20 September 2005 (which had sought the dismissal of the husband’s further amended application filed on 30 June 2005)

   ·The wife’s financial statement filed 13 June 2005

   ·The husband’s financial statement filed 29 June 2006

   ·The husband’s financial statement filed by leave on 2 November 2006

   ·Four subpoenae, two issued on 13 January 2006 and two on 13 April 2006

   ·The husband’s three applications filed on 27 September 2004, 21 October 2004 and 30 June 2005 (referred to above)

   ·The order made by Judicial Registrar Smith on 20 September 2005

   ·Exhibits 1-11 and 13, being letters between the parties’ solicitors.

2. Ms Carmody of Counsel, for the husband, relied on the following material:

   ·Affidavit by the husband filed by leave on 2 November 2006

   ·Exhibit 12, being an indexed bundle of 13 further letters between the parties’ solicitors.

3. This was the totality of the evidence read and relied upon in relation to the wife’s costs application.

4. However, I have taken the liberty of looking at the wife’s application in a case filed on 8 September 2004 to enable me to identify the precise relief sought by the wife in relation to the caveat, particularly as the wife’s current costs application includes a claim for the costs reserved on 20 September 2004, that is, the costs of that application which, on the face of the order, was dismissed.

5. On 2 November 2006, Mr Page objected to the following paragraphs of the husband’s affidavit filed by leave on 2 November 2006:

   ·Pars 2, 3 and 4

   ·Par 5, except for the last sentence

   ·Pars 15-18.

6. On that date, I disallowed the objections, for reasons then given.

7. It is common ground between the parties that the proceedings between them included the seeking of parenting orders, which were resolved by a consent order made on 3 March 2006, so that in all respects the wife’s costs application relates only to the property proceedings instituted by the husband on 27 September 2004, and the earlier, but related, caveat removal proceedings filed by the wife and dealt with earlier in September 2004.

Wife’s grounds

1. Mr Page of Senior Counsel, for the wife, specified the following grounds in relation to the wife’s costs application, in the following order of what Mr Page described as “priority”:

   Ground 1

   ·The husband has been wholly unsuccessful in relation to the s 79A proceedings: s 117(2A)(e)

   Ground 2

   ·The existence and terms of offers in writing to settle the s 79A proceedings: s 117(2A)(f)

   Ground 3

   ·The husband’s conduct in relation to the proceedings in relation to:

   (a)        discovery and the production of documents; and/or

   (b)the act of seeking the dismissal of the proceedings on the day of the hearing: s 117(2A)(c)

   Ground 4

   ·The financial circumstances of each of the parties to the proceedings: s 117(2A)(a).

The submissions

1. On 2 November 2006, late in the day, Mr Page SC commenced oral submissions.  However, by agreement between the parties, I ordered that there be written submissions, by the wife by 4pm on 3 November 2006; by the husband by 4pm on 6 November 2006; and by the wife strictly in reply by 4pm on 8 November 2006.

2. Those submissions have been received and fully considered.

3. I do not find it necessary, at this point, to set them out.

4. I will refer to the oral and written submissions below, to the extent that I find relevant or necessary.

The principles relevant to this application

1. Section 117 of the Family Law Act 1975 applies. Pursuant to s 117(1) and (2) the parties are to bear their own costs, unless the Court forms the opinion that there are circumstances to justify a costs order in which case it may make such order as it considers just. Before making a costs order the Court must identify the circumstance or circumstances on which it relies to justify the order, and must have regard to the matters in s 117(2A).

2. In Penfold and Penfold (1980) 144 CLR 311 the High Court said at 315:

   It is an accurate description of s.117(1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s.117(2). As sub-s. (1) is expressed to be subject to sub-s. (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.

   Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.  Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. …

   [bold emphasis added]

Ground 1 – husband wholly unsuccessful: s 117(2A)(e)

1. Plainly, by the consent dismissal order made on 2 November 2006, the husband has been wholly unsuccessful in relation to the s 79A proceedings. That is to say, his institution and prosecution of the proceedings did not yield him the benefit of any order in his favour.

2. The material question, however, is whether in this particular case, the fact that the husband has been wholly unsuccessful and all of the other circumstances of the case, on balance, amount to justifying circumstances to make a costs order in the wife’s favour.

3. This question thus involves not only a consideration of the circumstance that the husband was wholly unsuccessful, but also the financial impact on the wife of the husband’s institution and prosecution of the proceedings, the husband’s reasons for consenting to the dismissal, offers to settle between the parties and other relevant matters to which I will refer.

Effect of the “dismissal” order

1. Mr Page of Senior Counsel invited me to consider the circumstance that on 2 November 2006 the husband had “sought the dismissal” of his application, and that the wife had agreed.

2. However, there is no evidence that, in the parties’ negotiations leading to the consent dismissal, the husband, on or before 2 November 2006, “sought the dismissal” of his application as opposed, for example, to the wife seeking the dismissal and the husband capitulating.  Nothing however turns on this.  The effect nonetheless is that the husband was wholly unsuccessful in the proceedings.  To this extent, I do not (and on the evidence cannot) have any regard to which party, in the parties’ negotiations, may have “sought the dismissal” on 2 November 2006.  The parties simply presented a consent order for dismissal.

3. It is plainly understood that in proceedings under the Act, costs do not “follow the event”.

4. Mr Page of Senior Counsel, for the wife, placed much emphasis on the legal meaning and effect of a “dismissal”, as opposed to a withdrawal or discontinuance, referring to the definition in Butterworths Concise Australian Legal Dictionary (3^rd ed) as “an order for the termination of a plaintiff’s action in favour of the defendant”, adding emphasis to the phrase “in favour of the defendant”, in contrast to the circumstance created by a withdrawal or discontinuance as a “neutral” position in that in legal effect withdrawal or discontinuance are circumstances which allow the withdrawing or discontinuing party to start another case on the same or substantially the same grounds, whereas a dismissal on the record operates as a res judicata. However, in my view in this particular case the distinction does not impact upon the wife’s costs application for the reason that, despite the different legal effect of a dismissal, as opposed to withdrawal or discontinuance, under the Rules of Court if a matter is discontinued pursuant to Rule 10.11, then pursuant to Rule 10.11(4) another party may apply for costs within 28 days. Moreover, in my view the submission as to the distinction, in this particular case, served as a distraction which led Ms Carmody of Counsel, for the husband, to submit, which I do not accept, that the true basis of the wife’s application for costs is tantamount to inviting application of the (wrong) principle that “costs follow the event”. As I have emphasised, it is plainly understood that in proceedings under the Act this principle does not apply.

5. Equally plain, however, is the principle that the legal effect of a dismissal on the record is that proceedings cannot be commenced again for the same cause, whereas withdrawal or discontinuance do not have that effect.

The circumstance that there has been no trial – wife’s costs of preparation for the trial – cost impact on the wife

1. I will consider below, under the subheading “Other matters”, the husband’s evidence as to his reasons for not continuing to prosecute the proceedings and for consenting to the dismissal.

2. The more relevant circumstance, presently, is that the husband has caused the wife to incur significant costs in preparing for the trial, from the inception of the proceedings on 27 September 2004 until the consent dismissal of his application on 2 November 2006.

3. Ms Carmody of Counsel, for the husband, urged that the wife “forced the matter on” by not accepting what she submitted were reasonable settlement offers by the husband.  I will deal separately below with the settlement offers made.

4. I do not accept the submission that the wife “forced the matter on”.  It was open to the husband, at any stage of the progress of the matter, to cease causing the wife to continue to incur costs in the proceedings, by filing a notice of discontinuance under Rule 10.11.  However, at all stages of the parties’ negotiations, apparently until 2 November 2006, the husband was prepared to terminate the proceedings only on the basis that the wife accept his proposals for her costs, making clear that if she did not, the matter “would proceed to trial”.  I will refer, in this context, to the following correspondence between the parties’ solicitors:

   ·Wife’s solicitors to husband’s solicitors 13 February 2006 to the effect that the property matters “must proceed to hearing, unless your client is prepared to agree to pay our client’s costs” (ex 13, last sheet)

   ·Husband’s solicitors to wife’s solicitors 14 March 2006 in the context of an offer by the husband of $5,000 for the wife’s costs to the effect that if the offer is not accepted “our client will proceed with the matter to trial” (husband’s affidavit, annexure C)

   ·Husband’s solicitors to wife’s solicitors 25 May 2006 in the context of the husband’s offer of $10,000 for the wife’s costs to the effect that if the offer is not accepted “our client will proceed to hearing on this matter” (husband’s affidavit, annexure E)

   ·Husband’s solicitors to wife’s solicitors 1 June 2006 in the context of the wife’s rejection of the husband’s offer of $10,000 for the wife’s costs to the effect “it would appear that this matter will proceed to trial” (husband’s affidavit, annexure G).

5. Whilst it is true (first letter referred to above) that the wife also maintained the position that the matter “must proceed to hearing” unless the husband agreed to pay her costs, the party with the capacity to terminate the proceedings under Rule 10.11 was the husband, not the wife, and he did not do so.  This position obtained throughout. 

6. Thus, it was the husband who “forced the matter on”, not vice versa.  The function of the Court is to list and hear matters presented to it by litigants.  The husband, as I have said, at any stage before 2 November 2006 could have discontinued the proceedings under Rule 10.11, but did not, thus causing the wife to continue to incur her trial preparation costs including solicitor’s and Counsel’s fees.  Plainly, in all of the circumstances, it was appropriate for the wife to continue to prepare for trial including the continued engagement of her solicitors and Counsel, up to and including 2 November 2006.  If the husband had filed a notice of discontinuance at any stage, the wife’s trial preparation costs would have ceased to continue to be incurred, at that point.

7. Moreover, the wife’s solicitors provided timely warnings to the husband, by his solicitors, that the wife was preparing for trial and that if the husband continued the proceedings, and the wife was successful in resisting his claim, costs would be pursued, as demonstrated by the following correspondence:

   ·Wife’s solicitors to husband’s solicitors 19 September 2005 to the effect that if the matter proceeded to hearing and the wife was successful costs would be “vigorously pursued” (ex 13, sheet 3)

   ·Wife’s solicitors to husband’s solicitors 6 March 2006 in which the wife’s solicitors made plain that the wife was preparing for trial and incurring significant costs (in excess of $31,000 to date and estimated further $20,000 to trial) warning that “further significant costs will be incurred by our client to prepare this matter for trial” (husband’s affidavit, annexure B)

   ·Wife’s solicitors to husband’s solicitors 31 May 2006 specifying that the wife “is confident of resisting your client’s application and obtaining an order for costs” advising that the wife’s costs then stood at $35,000 and that the wife’s instructions were “to continue to prepare this matter for trial unless an agreement can be reached in the interim” (husband’s affidavit, annexure F).

8. Thus, in considering the matter, I take into account not only that the husband was wholly unsuccessful, in the sense which I have explained, that is, that his institution and prosecution of the proceedings did not yield him the benefit of any order in his favour, but also that his institution and prosecution of the proceedings, which continued until 2 November 2006, caused the wife to incur significant costs, the likely amount of which was advised to the husband via his solicitors (as the husband’s agents) in a timely way together with the plain warning that the matter of the wife’s costs would be “vigorously pursued”.

9. As will be seen below, when dealing with Ground 2, it is not as if the substantive matter in issue settled earlier than 2 November 2006, with the remaining matter in issue being only the wife’s costs.  Rather, as the correspondence to which I have referred shows, the husband was insistent that the substantive matter would proceed to trial unless the wife accepted his costs offers.  Whilst the wife also took the position that the matter would proceed to trial unless the husband agreed to pay her costs (letter 13 February 2006, referred to in par 35, which I take to be a reference to costs to be assessed if not agreed), the husband, and only the husband, was in the position to terminate the proceedings earlier by the filing of a notice of discontinuance, which he did not do.  In contrast, in the meantime, the wife was obliged to prepare for trial.

Ground 2 – the existence and terms of offers in writing to settle: s 117(2A)(f)

1. It appears that the following offers in writing to settle were made:

   ·1         Wife 10 August 2004 (before the husband’s property proceedings were          commenced on 27 September 2004)

   Terms:Wife pay husband $10,500 and transfer her interest in S property to husband on the basis that he refinance S mortgage into his name (referred to in ex 1).

   ·2         Husband 9 September 2005 (open for acceptance until 4pm 14          September 2005)

   Terms:Wife pay husband $30,000 from proceeds of sale of A property; splitting order wife’s DFRDB interest 50% to husband; parties bear own costs (ex 13, first and second sheets)

   ·3         Husband 21 December 2005 (open for acceptance until close of         business 6 January 2006)

   Terms:“Walk away” and each party pay own costs (husband’s affidavit annexure A)

   ·4         Wife 13 February 2006 (no closure date)

   Terms:Matter must proceed to hearing unless husband pays wife’s costs (ex 13, last sheet)

   ·5         Wife 6 March 2006 (no closure date)

   Terms:Wife will accept $30,000 for her costs on basis that husband withdraws his application in the property proceedings (husband’s affidavit, annexure B)

   ·6         Husband 14 March 2006 (open for acceptance for 7 days)

   Terms:Husband will pay wife $5,000 for her costs (husband’s affidavit, annexure C)

   ·7         Husband 25 May 2006 (open for acceptance until 4pm 29 May 2006)

   Terms:Husband will pay wife $10,000 for her costs (husband’s affidavit, annexure E).

1. The first two offers related to the substance of the matter.  Plainly, the effect of the consent dismissal on 2 November 2006 is that the wife “did better” than her offer made on 10 August 2004; and that the husband did not “do better” than his offer made on 9 September 2005.  Whilst it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror, and that offers must be seen in the context of the case while the offer is live (Pennisi and Pennisi (1997) FLC 92-774 at 84,547); and it is clear that the purpose of the provision relating to offers to settle is that, if made seriously, they be considered seriously to ensure that the cost of litigation is avoided (Robinson and Higginbotham (1991) FLC 92-209 at 78,417), it is necessary to make the observations as to the first two offers which I have just made.

2. The third to seventh offers related to costs.

3. However, it is not as if “costs only” remained in issue.  Rather, as the correspondence to which I have referred above shows, the husband, as much as the wife, was insistent that the substantive matters in issue proceed to trial unless the matter of the wife’s costs could be resolved.

4. Ms Carmody of Counsel, for the husband, argued that the consent dismissal was “what the husband had been seeking to achieve for about a year by a series of offers” (written submissions, par 6) and that “the husband’s attempts to settle should be weighed against the wife’s unreasonable rejection of those offers”.  However, I do not consider that the wife’s rejection of the husband’s costs offers to the wife (the third, sixth and seventh offers being, respectively, no costs, $5,000 and then $10,000) was unreasonable, in light of the evidence that the wife’s solicitors had communicated to the husband’s solicitors that the wife’s actual costs as at 6 March 2006 were in excess of $31,000 (husband’s affidavit, annexure B); and as at 31 May 2006 were $35,000 (husband’s affidavit, annexure F).

5. The wife was confident that she would defeat the husband’s claim, and thus entitled not to accept the low amounts offered by the husband for her costs, in particular after receiving the advice of Mr Slack of Counsel, as he then was, dated 13 July 2005, that whilst the matter was one in which the Court might reach the conclusion that a ground for miscarriage of justice had occurred (advice, part of ex 13, par 57), and that whilst the outcome was not certain, in his view it was more likely than not that the Court may not exercise the discretion to set aside or vary the consent orders made on 9 May 2000 (advice, par 62).  Indeed, the wife’s solicitors provided a copy of Mr Slack’s opinion to the husband’s solicitors under cover of their letter 19 September 2005 (ex 13, sheet 3 and following).

6. Whilst I am not required to (and in this application not able to) assess the quantum of any costs award which may be made in the wife’s favour,  it is plain on the evidence that the wife’s costs as at 6 March 2006 were already in excess of $31,000, and advised to the husband’s solicitors on that date as being in excess of $31,000, so that the husband’s subsequent offers of $5,000 on 14 March 2006 and $10,000 on 25 May 2006 were not nearly sufficient for me to conclude that it was unreasonable for the wife not to accept those offers while they remained open.  In particular, as at 14 March 2006 ($5,000 offer) and 25 May 2006 ($10,000 offer), the matter had been on foot since 27 September 2004, with much of the preparation of the wife’s case already undertaken, as the correspondence shows, including considerable disclosure and the obtaining of Mr Slack’s opinion (dated 13 July 2005). 

7. Moreover, the wife had incurred pre-action costs before 27 September 2004, including in relation to her offer made on 10 August 2004 (referred to in ex 1), which offer the husband did not accept, and the wife’s application in a case filed on 8 September 2004 for the removal of a caveat which the husband had placed on the A property which necessitated the wife’s engagement of solicitors and Counsel.  It will be recalled that this application by the wife resulted in the consent order made on 20 September 2005 for the removal of the caveat and the further order (not by consent) that the wife’s costs of her application for removal of the caveat be reserved.  Although the wife’s costs in relation to her application for the removal of the caveat preceded the formulation of the husband’s claim filed on 27 September 2004, as I understand the matter, the costs offers between the parties related to what was described in the correspondence as “the property proceedings” which, plainly enough, included the wife’s reserved costs in the related caveat proceedings.  In particular, I would refer to the following paragraph in the letter from the wife’s solicitors to the husband’s solicitors 6 March 2006 (husband’s affidavit, annexure B, second paragraph):

   We have now undertaken an account of our client’s costs in relation to the property settlement issues and advise that they are in excess of $31,000.  In order to avoid doubt we have deducted our client’s costs in relation to the children’s matters as our client is happy for these costs to be borne by each party individually.  We would anticipate our client’s further costs in relation to having the matter proceed through to Trial would be in the order of a further $20,000.

   [bold emphasis added]

8. Thus, although it is plain that upon any scale assessment the wife may not recover all of her costs of the property proceedings, on any view the husband’s offers of $5,000 as at 14 March 2006 and $10,000 as at 25 May 2006 were grossly inadequate.

9. I would add that it is not to the point that the husband did not accept the wife’s offer that she was prepared to accept $30,000 for her costs as at 6 March 2006.  Indeed, neither party places reliance on the making of this offer by the wife and its non acceptance.  Critically, however, in all of the circumstances which I have explained, I am unable to accept Ms Carmody’s submission that it was unreasonable for the wife not to accept any of the husband’s three offers (no costs, $5,000, then $10,000).

Ground 3 – the husband’s conduct: s 117(2A)(c)

1. Mr Page referred to deficiencies in the husband’s disclosure, which he said caused additional or otherwise unnecessary costs by the wife, in particular in causing her to incur the cost of the preparation and issue of the four subpoenae referred to.

2. However, Mr Page conceded that the husband’s conduct in relation to disclosure would not, of itself, warrant a costs order.  In my view this concession is properly made.  In particular, Ms Carmody of Counsel, for the husband, referred to deficiencies in the wife’s disclosure.

3. If the wife should be awarded costs, the matter of the reasonableness of the preparation and issue of the subpoenae, and the costs relating to the subpoenae, will be a matter for the Registrar to consider.

4. As to Mr Page’s reliance on the husband’s conduct in relation to the proceedings based on the act of “seeking the dismissal” of the proceedings only on the day of the hearing, and not before, I have dealt with this matter sufficiently in relation to Ground 1.

Ground 4 – the financial circumstances of each of the parties: s 117(2A)(a)

1. I would refer, without setting out, to Counsel’s submissions as to the parties’ financial circumstances. 

2. Mr Page argued (written submissions, par 8.6, see also pars 8.1-8.5) that the husband’s financial position is superior to the wife’s. 

3. Ms Carmody argued (written submissions, par 14) that there is “no significant discrepancy or financially straightened circumstances of the wife” which would merit a costs order against the husband.  After referring to the wife’s financial position, Ms Carmody submitted that the husband is in “no substantially stronger position”, by reference to his updated financial statement filed on 2 November 2006.

4. I am not able to accept Mr Page’s submission that the husband’s financial position is superior to the wife’s.  However, in my view, the husband’s financial statement filed on 2 November 2006 shows either that he has the financial capacity to pay a costs order, or at least the capacity to so arrange his affairs to pay a costs order.  Whilst the husband’s financial statement filed on 2 November 2006 shows that he owns no real property, a comparison with his financial statement filed on 27 June 2006 (par 59 of each financial statement), shows that between those two dates he disposed of $535,000 sale proceeds of a house property, apparently gifted to his current wife. Further, his financial statement filed on 2 November 2006 shows that his gross income is about $113,932 per year.  The husband has disclosed a mortgage liability of $60,000 (50% of $120,000), although professing to have no equity in any real property, indicating perhaps a “third party” mortgage liability, or perhaps a joint and several liability with his current wife.  The value of the property so mortgaged is not in evidence. His current financial statement shows income tax and expenditure as absorbing almost all of his gross income.  However, one of the items of expenditure (item 28) shows that he spends $478 weekly in relation to a motor vehicle lease and another item (item 32) shows unspecified “other expenditure” of $500 per week (both estimates).  It is curious that although the husband does not disclose that he owns any real property, he shows at item 46 “his share” of 50% of a mortgage (the $60,000 referred to above) which circumstance, on the evidence, is not satisfactorily explained.

5. Nonetheless, as I have said, I am satisfied, on the evidence, that the husband either has the capacity to pay a costs order, or at least the capacity to so arrange his affairs to pay a costs order.  Certainly, his disposition of $535,000 between 27 June 2006 and 2 November 2006 is suspicious, to the extent of his professing now to having no legal or equitable interest in that disposition, or any property which that disposition may now represent.

Other matters

There has been no hearing on the merits of the husband’s application

1. In oral argument, I raised for the parties’ consideration whether there may be a valid distinction, in relation to s 117(2A)(e), (“party wholly unsuccessful”), between cases in which a party has been wholly unsuccessful after a trial, and thus a judicial determination, and cases in which a party has been wholly unsuccessful as the result of the consent dismissal of proceedings. Plainly, after a trial, there is proper opportunity for the trial Judge to assess whether an application, although ultimately it may have been dismissed, on the one hand may have had a reasonable basis for argument, or on the other hand may have been unmeritorious from inception. In contrast, where proceedings result in a consent dismissal before the trial Judge has embarked on a hearing, there is no real opportunity for the trial Judge, or any Judge, to make such an assessment.

2. Ms Carmody of Counsel, for the husband, submitted that a compelling argument against the wife’s application for costs is that the consent order made on 2 November 2006 was not the result of a contested trial which afforded the presiding Judge an opportunity to consider many of the relevant matters set out in s 117(2A) and, in particular, matters relating to conduct and “such other matters as the Court considers relevant”.

3. Mr Page of Senior Counsel, for the wife, submitted to the effect that the structure of s 117, as explained in Penfold’s case (referred to above), has the effect that whilst, in an appropriate case, the circumstance that there has been no trial may be a relevant factor under s 117(2A), there is no principle that costs cannot be awarded when there has not been a hearing, and that the formulation of any such principle would operate to fetter the discretion to be exercised in the manner contemplated by s 117. In support of his argument, Mr Page referred to I and I No. 2 (1995) FLC 92-625, in particular at 82,277 to the effect that all of the relevant matters referred to in s 117(2A) must be taken into account and balanced in order to determine whether the overall circumstances justify the making of an order for costs.

4. I am satisfied that that there is no principle that a costs application must fail when there has been no hearing. Any such principle would be inconsistent with Rule 10.11, which provides for costs applications after the discontinuance of proceedings. Thus, I accept Mr Page’s submission that whilst in an appropriate case the circumstance that there has been no trial may be a relevant factor under s 117(2A), it is but one factor to be taken into account, to be balanced with all other relevant factors.

5. In this particular case, overall, I take into account that there has not been a hearing to enable me to assess whether the husband did, or did not, have an arguable case. 

6. What I am able to do however, on the evidence, is to assess and take into account the husband’s reasons as to why he consented to the dismissal on 2 November 2006, being the hearing date, rather than continue with his claim, particularly having prosecuted the matter (as at the hearing date) for over two years.

7. I will turn now to this aspect of the matter.

The husband’s reasons for consenting to the dismissal on the day of the hearing

1. The husband said that at all times he held the genuine belief that the consent orders made on 9 May 2000 did not reflect “the agreement” between the parties “so far as financial matters were concerned” so that to that extent “they were not consent orders”.  

2. The husband said that, during the proceedings, he endured significant stress and financial hardship, including emotional and expensive participation by himself and his current wife in the IVF program for two years, leading up to the birth of their daughter in January 2006.  This was followed by illness, hospitalisation and surgery concerning his wife; and illness of their young daughter (lactose intolerance) involving some 16 paediatric visits.  The husband’s wife had three surgical interventions, the last of which occurred only about six weeks before 2 November 2006. 

3. In respect of these matters, without further setting out, I would refer to pars 3, 4, 5, 15 and 16 of the husband’s affidavit, which I have carefully read.

4. The husband explained also his “attempts to end the property proceedings early” by his “walk away” offer, and explained, from his perspective, the course of the correspondence and offers to which I have already referred. 

5. In respect of these matters, without further setting out, I would refer to pars 6-14 of the husband’s affidavit, with annexures, which I have carefully read.

6. Then, at pars 17 and 18 the husband said:

   17.I have found these proceedings very stressful, notwithstanding that I believe that they were genuinely instituted.

   18.The above had been factors in my decision to consent to the matter being discontinued.

7. I have fully considered all of the matters raised by the husband. 

8. Ms Carmody of Counsel, in relation to the relevance of those matters, referred to ZH and N [2005] FamCA 828 (Full Court), which I have also considered. In context, Ms Carmody submitted, having regard to the observations of the Full Court in that matter, that in the present case there has been no “delaying tactic” by the husband, and no other conduct by him which would warrant a costs order to be made against him.

Difficulty in assessing the costs claimed by the wife

1. Ms Carmody submitted that a “further complexity” in relation to the wife’s costs application is that considerable time and “doubtless expense” would be required to determine which costs should be allocated to the property matters only, in the circumstances, as mentioned, that the proceedings between the parties included child matters which resulted in consent parenting orders made on 3 March 2006.

2. However, I have referred above to, and set out, a paragraph from the letter dated 6 March 2006 from the wife’s solicitors to the husband’s solicitors wherein they explained that, in estimating the wife’s costs in the property proceedings, they excluded the wife’s costs related to the child proceedings.

Whether a costs order in all of the circumstances would be a just result

1. Ms Carmody submitted that in all of the circumstances, in particular the husband’s reasons for consenting to the dismissal, the wife’s unreasonable conduct in not accepting the husband’s offers to settle (which submission I have rejected), and her submission that the wife “forced the matter on” (which submission I have also rejected), together with the other circumstances referred to in her written submissions (all of which I have taken into account) a costs order in the wife’s favour would not be just, in particular because there has been no “conduct” by the husband which would warrant a costs order.

2. Mr Page submitted that plainly there are circumstances to justify a costs order, and that to not exercise the discretion in the wife’s favour in this particular case would be “plainly unjust”.

Conclusion

1. In my view, having regard to all of the matters which I am required to take into account, I am satisfied that there are circumstances to justify a costs order in the wife’s favour, as an essential preliminary to the making of a costs order, and that the proper exercise of the discretion, in this particular case, would be to make a costs order. The circumstances which I consider to be justifying circumstances are as follows.

   (1)The husband was wholly unsuccessful in the proceedings, in the manner in which I have explained, which essentially were s 79A proceedings.

   (2)The institution of the proceedings by the husband, and his prosecution of them for over two years, has had significant financial impact on the wife in causing her not only to incur costs in preparation for the trial at an early stage of the proceedings, but continued expenditure by her, including the engagement of solicitors and Counsel, until the very morning of the trial, despite timely advice by the wife’s solicitors as to the escalation of her costs and the unequivocal warning by the wife’s solicitors to the husband, by his solicitors, that her application for costs would be vigorously pursued. 

   (3)The husband’s costs offers to the wife, which comprised the only basis on which he would agree to terminate the proceedings, were grossly inadequate.

   (4)Whilst I am sympathetic to the circumstance that the husband endured stress and emotional and financial hardship, in the manner described by him, this must be balanced against the circumstance that the wife had no option but to incur necessary expenditure to prepare for the trial in circumstances in which, procedurally, she was not in the position to earlier terminate the proceedings, other than by accepting unsuitably low offers of costs by the husband, whereas at all times the husband was in control of the proceedings in the sense that he, unlike the wife, could have caused their earlier termination by filing a notice of discontinuance under Rule 10.11, to arrest the escalation of the wife’s costs, of which he was warned. 

   (5)The circumstance that the husband “genuinely believed” in his case does not ameliorate his position; equally, the wife had confidence, based on legal advice to her, that she was likely to defeat his claim.

2. Moreover, it is very relevant, as I have explained, that even though from and after 21 December 2005, when the husband made the “walk away” offer, it is not as if “costs only” remained in issue from that point onwards.  Rather, as the correspondence to which I have referred shows, the husband was insistent, until the morning of the trial, that there be a trial, unless the wife accepted his costs offers which, as I have found, were insufficient for it to be reasonable for the wife to accept them. 

1. Thus, despite the reasons set out in the husband’s affidavit for his consenting to the dismissal on 2 November 2006, they are insufficient to have forced the wife to the “brink” of the door of the Court before surrender.  Indeed, the matters relied upon by the husband of the significant emotional stress and financial hardship he suffered beg the question why he did not terminate the proceedings earlier by a notice of discontinuance, rather than forcing the wife to incur costs until the morning of the hearing.

2. Balancing all of the relevant factors, and taking into account in particular the husband’s reasons for agreeing to the consent dismissal on the morning of the trial, as set out in his affidavit and as referred to compendiously in the concluding paragraphs of his affidavit (pars 17 and 18, set out above), in my view the proper exercise of the discretion weighs strongly in favour of awarding the wife her costs of and incidental to the property proceedings, to be assessed if not agreed, and I will so order.

3. In argument, the question was raised whether, if the wife should be awarded costs, they be awarded only for the period after 1 June 2006, which was the last occasion on which the husband’s solicitors indicated that the matter would proceed to trial.   In my view there is no basis to so limit the wife’s costs.  As early as 19 September 2005, the wife’s solicitors warned to the effect that if the matter proceeded to hearing and the wife were successful, costs would be “vigorously pursued” (ex 13, sheet 3).  Indeed, as at that date, the wife had already been incurring costs since (at least) September 2004.

4. As to the the wife’s costs reserved by the order made on 20 September 2005, it is plain that the husband’s claimed caveatable interest (according to his solicitors, see the letter 30 August 2004, husband’s solicitors to the wife’s solicitors, item 3 in ex 12) was said to “relate to his right to remain a Co-Owner of the A property and to be listed as such until the S Apartment is sold”, apparently relying on par 4 of the consent order made on 9 May 2000.  However, the consent order made on 9 May 2000, despite par 4, by par 6 provided for earlier sale of the A property, making the husband’s claimed position untenable.   

5. More generally, it is not possible, I think, to separate the wife’s caveat removal proceedings from the underlying claim by the husband to re-open the earlier consent property order by the mechanism of his s 79A application.

6. Further, the wife’s costs of and incidental to the property proceedings instituted by the husband ordinarily would include her necessary pre-action costs. Thus, the wife’s costs in relation to her application for the removal of the caveat in my view properly in any event would be regarded as costs of and incidental to her pre-action costs in relation to the husband’s s 79A application. Thus, even without the Judicial Registrar’s reserved costs order, the wife’s costs in relation to that application plainly enough are costs incurred by her of and incidental to the husband’s attempt to re-open the parties’ property settlement by the s 79A means. Alternatively, the husband’s claimed basis to lodge the caveat, by a cursory glance at pars 4 and 6 of the consent order made on 9 May 2000, was erroneously based, providing a separate ground for the husband to pay the wife’s reserved costs of the caveat removal proceedings.

Order

The husband pay the wife’s costs of and incidental to the s 79A proceedings commenced by the husband on 27 September 2004, and the wife’s costs reserved by Judicial Registrar Smith on 20 September 2005, to be assessed if not agreed.

I certify that the preceding eight-six (86) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Reilly

Associate: 

Date:  23 February 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as HARPER & HARPER