Harrell and Nesland (No.2)
[2018] FCCA 961
•19 April 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HARRELL & NESLAND (No.2) | [2018] FCCA 961 |
| Catchwords: FAMILY LAW – Costs – where Respondent had made offers to settle which had not been accepted – where Applicant obtained an adjustment of property less in value than offers made – where indemnity costs sought – where Applicant ordered to pay Respondent’s costs as assessed on a party-party basis. |
| Legislation: Family Law Act 1975 (Cth), ss.117(2), 117(2A) Federal Circuit Court Rules 2001 (Cth), r.21.02 |
| Cases cited: In the Marriage of Murray (1990) FLC 92–173 Robinson v Higginbotham (1991) FLC 92–209 |
| Applicant: | MS HARRELL |
| Respondent: | MR NESLAND |
| File Number: | BRC 6489 of 2012 |
| Judgment of: | Judge Egan |
| Hearing date: | 18 April 2018 |
| Date of Last Submission: | 18 April 2018 |
| Delivered at: | Brisbane |
| Delivered on: | 19 April 2018 |
REPRESENTATION
| Solicitors for the Applicant: | Matthew Love Family Lawyers |
| Solicitors for the Respondent: | Hirst & Co Family Solicitors |
ORDERS
THE COURT ORDERS ON A FINAL BASIS:
That the Applicant pay the Respondent’s costs of and incidental to the proceedings – excluding the costs of appeal – on and from 27 August 2014 until 10 January 2018, to be assessed on a party-party basis.
That the Applicant pay the Respondent’s costs of and incidental to the Respondent’s application in a case filed on 13 February 2018, including the costs of appearance on 18 April 2018, such costs to be assessed on a party-party basis.
That the Applicant’s response to an application in a case filed on 17 April 2018 be dismissed, and there be no order as to costs in respect thereof.
AND IT IS ORDERED UNTIL FURTHER ORDER:
That paragraph 2(a) of the order of His Honour Judge Baumann (as he then was) be stayed pending the making of further submissions as to whether or not the Property A property should be the subject of a charge, or some other form of security, for the purpose of the payment to the Respondent of the amount of party-party costs assessed as payable to him pursuant to these orders.
That the matter be adjourned to chambers.
That each party have liberty to apply on the giving of three (3) days’ notice, each to the other.
AND IT IS ORDERED BY THE COURT:
That the reasons for judgment of the Court handed down on 19 April 2018 be varied, pursuant to the provisions of Rule 16.05(2)(h) of the Federal Circuit Court Rules 2001, by the inclusion in such reasons, as a new paragraph 17 thereof, of the following:
(a)“As to the Applicant’s financial circumstances deposed to in her affidavit filed on 17 April 2018, I am mindful of the fact that any adverse costs order made against her will negatively impact upon her net wealth. I note also that she has deposed that her solicitors have lodged a caveat over the Property A property as security for the payment of their fees in the amount of some $150,000.00 owed to them by the Applicant. In those circumstances, it is probable that the Property A property will have to be sold in any event to pay the solicitor’s fees from the proceeds of sale. It is, in my view, an illegitimate stance for the Applicant to adopt whereby on the one hand she has unilaterally exposed her home to being sold so as to meet the payment of her own legal fees, whereas on the other hand she impliedly submits that a costs order should not be made against her because that might give rise to the same result. She ought not be allowed, as a matter of public policy, to both approbate and reprobate.”
IT IS NOTED that publication of this judgment under the pseudonym Harrell & Nesland (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRC 6489 of 2012
| MS HARRELL |
Applicant
And
| MR NESLAND |
Respondent
REASONS FOR JUDGMENT
This matter has had a long and protracted history in this Court. The parties met in (country omitted). Proceedings were commenced in 2012 by the Applicant. The Applicant’s claim was based upon the assertion that she had lived in a de facto relationship with the Respondent. The Respondent disputed that any such relationship existed. That issue was determined in favour of the Applicant by order of His Honour Judge Jarrett made on 27 August 2014. Judge Jarrett ordered that the Respondent pay the Applicant’s costs of and incidental to such de facto proceedings.
The current application in a case before me was filed by the Respondent on 13 February 2018. The lawyer for the Applicant, Mr Love, initially submitted that the application was filed out of time, in that the filing date was more than 28 days after the making of final orders in this matter contrary to the provisions of Rule 21.02(1)(b) of the Federal Circuit Court Rules 2001. Those final orders were made by His Honour Judge Baumann (as he then was) on 10 January 2018. Mr Love subsequently withdrew that submission after a search of the court file revealed that the application in a case had been received at the Registry for filing on 5 February 2018 – within the 28 day time limit – but had not been recorded as having been filed until 13 February 2018.
Mr Hirst, who appeared on behalf of the Respondent, submitted that the Respondent had made early offers which, if accepted, would have resulted in the Applicant obtaining a greater percentage share of the asset pool than that which was finally ordered by Judge Baumann. Those offers were made on 17 September 2012 and 14 December 2012 respectively. On the basis of the uncontested evidence of the Respondent as set out in paragraphs 26 – 37 inclusive of his affidavit filed on 13 February 2018, I accept that the offers as made would have had the effect as submitted by Mr Hirst had either of them been accepted. I also accept Mr Hirst’s submission that had the offers been accepted, then the need for further litigation would have been obviated, thereby saving all parties substantial costs.
In the light of the above, Mr Hirst submitted that the appropriate order would be that the Applicant pay the Respondent’s costs of the proceedings, incurred after the handing down of Judge Jarrett’s judgment on 27 August 2014, on an indemnity basis. To put that submission into perspective, a relevant history of the matter is as set out below:
a)Judge Jarrett declared that a de facto relationship existed by orders made on 27 August 2014.
b)The matter proceeded to trial before Judge Vasta on 10 & 11 March 2015. Judge Vasta delivered judgment on 1 April 2015.
c)The Applicant appealed the orders of Judge Vasta.
d)The appeal was heard on 25 November 2015. By judgment delivered on 13 July 2016, the appeal was allowed and the matter was remitted to the Federal Circuit Court of Australia for re-hearing.
e)On 9 November 2016, the Full Court of the Family Court dismissed each of the parties applications for an order that the other party pay their costs of the appeal.
f)The trial was re-heard before His Honour Judge Baumann and judgment was handed down by him, before his appointment as a Judge of the Family Court, on 10 January 2018. By that judgment, the Applicant obtained an adjustment of property in her favour equating to approximately 28% of the pool of $3,045,020.00 (para 64 of judgment of Judge Baumann).
g)The Respondent filed his application in a case seeking an order for costs on 13 February 2018.
h)The Applicant filed a response to an application in a case seeking orders that the Respondent pay the Applicant’s costs of the hearing of 10 & 11 March 2015 on an indemnity basis, and that the Respondent’s application in a case filed on 13 February 2018 be dismissed.
The 28% apportionment ordered by Baumann J on 10 January 2018:
a)Was less than the value of the Respondent’s first offer made on 17 September 2012, which offer equated to an apportionment of 31.5% of the asset pool in favour of the Applicant.
b)Was less than the value of the Respondent’s second offer made on 14 December 2012, which offer equated to an apportionment of 34.5% of the asset pool in favour of the Applicant.
At the close of submissions before me, Mr Love conceded that the only ground of defence to the Respondent’s application for costs was that based upon the financial circumstances of the Applicant relative to those of the Respondent, such matter being one consideration to be taken into account pursuant to s.117(2A) of the Family Law Act 1975 (“the Act”). The material relied upon by Mr Love, in that regard, was an affidavit of the Applicant, as well as a financial statement, each of which were filed on 17 April 2018 together with the Applicant’s response to the application in a case.
The Applicant in her affidavit deposed that she was 70 years of age and was retired at the present time. Her receipt of income was recorded as being the sum of $844.00 per fortnight by way of an old age pension. She also deposed to her performing (employment omitted). She swore that by such (employment omitted) she was able to earn an additional average weekly amount of $61.00. She swore that all of her income was spent on day-to-day living, rates and outgoings for her unit, and she also deposed to her having to supplement her day-to-day living expenses from her small savings. She swore that she had no assets other than that set out in her financial statement. She deposed to owing legal fees to her solicitors in the amount of $150,000.00. She swore that her solicitors had placed a caveat over her Property A property as security for the fees owed to them. She swore that she was looking to obtain a loan or reverse mortgage in order to meet payment of those legal fees. She did not provide details as to whether she was hopeful of obtaining any such loan or not. She otherwise swore that she had no capacity any amount to the Respondent in respect of legal costs. The Property A property is unencumbered.
The Applicant’s financial statement recorded the value of her Property A property as being $670,000.00. The total value of her assets was said by her to be in the amount of approximately $728,979.00.
The Respondent, in his affidavit filed on 13 February 2018, deposed at paragraphs 82 – 88 inclusive that he is 70 years of age and semi-retired on the basis that he was assisting his brother as a (employment omitted) on a part-time basis earning an amount of approximately $500.00 per week on average. He deposed that he was living in a property but does not receive any rental income. He also deposed that he has had to use the proceeds of sale of a marina berth toward the payment off of debts, and further that he had also sold a motor vehicle for such purpose. He deposed that at the date of swearing his affidavit he owed his solicitors and counsel a total of $115,209.11, and that he had further debts in his name totalling approximately $250,000.00.
The Respondent has also referred in his affidavit to other relevant factors which Mr Hirst submits ought be taken into consideration as relevant matters under s.117(2A) of the Act. As said earlier, the allegations in the Respondent’s affidavit are uncontested. Those factors raised by Mr Hirst have been conveniently listed in the Respondent’s affidavit as follows:
a)Applicant’s Conduct:
i)The Respondent alleges that he has been put to significant expense during the course of the proceedings by answering extensive requests for disclosure, which requests have included the provision of entire files from solicitors in both (country omitted) and Brisbane; the provision of statements for bank accounts in Australia, (country omitted) and (country omitted) from June 2010 onwards; the provision of financial accounts and tax returns for a trust and trustee company owned by his brother to which he had no entitlement; and the provision of documents in relation to maintenance of a yacht named “(omitted)”. At the trial which commenced on 10 March 2015, only a limited number of those documents were ultimately referred to by the Applicant in her trial affidavit. The Respondent swore that notwithstanding his preparedness to make such disclosure as referred to above, the Applicant made no corresponding disclosure despite requests by the Respondent’s lawyers that she do so. When asked at the trial why she had not produced any bank statements from (country omitted), the Applicant responded that she didn’t think she had been asked to, and also that it was difficult to get documentation from banks in (country omitted).
b)Caveat:
i)On 4 June 2012, the Applicant caused a caveat to be lodged over a property situated at Property B. That was a property owned by a company of which the Respondent was the sole director and shareholder. Despite requests made in September 2014 and October 2014 for the Applicant to remove the caveat, the Applicant refused to do so. The Respondent was required to file an application in a case on 30 October 2014 for removal of the caveat. When the matter came before Judge Jarrett on 27 January 2015, a consent order was made for the removal of the caveat, albeit on terms.
c)Failure to facilitate refinance:
i)The Respondent swore that he had taken steps in late 2014 to obtain approval from (omitted) Bank to refinance loan facilities with another financial institution in respect of a business conducted by him. Any refinancing would have substantially reduced the Respondent’s liabilities in relation to loan repayments. The Applicant failed to sign any refinancing documentation and the Respondent was thereby put to considerable unnecessary expense due to his inability to refinance the loans.
d)Failure to Comply With Orders:
i)The Respondent complied with court ordered directions requiring him to file an affidavit of documents by 1 December 2014. Though the Applicant made some disclosure, the Applicant failed to make any disclosure in relation to historical bank statements for accounts held by her in (country omitted).
e)Failure to Succeed on Trial Issues:
i)Before Judge Baumann, contrary to the Applicant’s conduct of her case, and no doubt involving substantial time, the Respondent succeeded on issues relating to:
1. GST payable on the sale of a marina berth being taken into account in the property pool;
2. The yacht “(omitted)” being included in the property pool at its trial market value rather than at its purchase price;
3. The Respondent’s Mercedes Benz motor vehicle being included in the property pool at its trial market value rather than at its purchase price;
4. The GST payable upon the sale of the yacht “(omitted)” being taken into account in the property pool;
5. Whether each party’s legal fees met from capital be added back to the property pool contrary to the Applicant’s submission that the entirety of the Respondent’s paid legal fees (including those met from post-separation income) be added back;
6. Whether payments made by the Respondent to his partner post-separation be not added back to the pool;
7. Whether the Applicant should receive an award for lump sum spousal maintenance.
There is no suggestion that either party received Legal Aid for the purpose of the conduct of legal proceedings in this matter.
Of further relevance to my considerations is the fact that not only did His Honour Judge Baumann make no order for lump sum spousal maintenance, as referred to above, His Honour made an adjustment of property equating to the Applicant receiving only 28% of the property pool in circumstances where:
a)On 19 July 2012 the Applicant filed an initiating application seeking that she receive 70% of the pool, with the trial before Judge Vasta being conducted on that basis;
b)Prior to the re-trial before Judge Baumann, the Applicant amended her application to seek 50% of the pool, with the actual re-trial being conducted on that basis.
The award of costs is discretionary. Section 117(2) of the Act provides that the court may make such order as to costs as it thinks just if it is of the opinion that there are circumstances which justify it in doing so. In this case, it is significant that at a very early stage of proceedings the Respondent made offers which were more favourable to the Applicant than either of the orders made by Judge Baumann or Judge Vasta. Had the Applicant accepted either such offer then the substantial costs which had been incurred by each of the Applicant and the Respondent would have been saved.
There are many decided cases which have emphasised the desirability of parties closely considering the terms of any offer made to them with a view to such party being penalised by the making of an adverse costs order should they unreasonably ignore a reasonable offer, genuinely made, with a view to resolving all issues in dispute between the parties. In that regard I refer to In the Marriage of Murray & Murray (1990) FLC 92 – 173 at 178 per Nygh J and Robinson v Higginbotham (1991) FLC 92 – 209 at 417 Simpson, Nygh and Smithers JJ.
In this case, the sole ground advanced on behalf of the Applicant in favour of the proposition that this is not an appropriate case for the making of a costs order against the Applicant is the Applicant’s submitted poor financial circumstances. When addressing such submission, I have had regard to the judgment of the Full Court in Lenova v Lenova (Costs) [2011] FamCAFC 141 at [13] where it was said:
“Whilst regard is had to the financial circumstances of the Respondent wife, she was advised by legal practitioners at each stage of the proceedings. She can, in our view, be seen to have known the risks of refusing to compromise in the face of a written offer made before the appeal was filed. That factor, together with the husband’s success in the appeal, warrants an offer for costs being made in favour of the husband.”
I also refer to the judgment of Murphy J in Marello v Marello (Costs) [2013] FamCA 868 at [33] where His Honour said:
“I accept that the financial circumstances of the parties is a highly relevant consideration, including the financial consequences of an order for costs. Yet, again, that factor cannot be determinative; if it was, an impecunious litigant could litigate with impunity and, indeed, immunity. Present and possible future financial consequences is each an important factor, but only one such factor.”
As to the Applicant’s financial circumstances deposed to in her affidavit filed on 17 April 2018, I am mindful of the fact that any adverse costs order made against her will negatively impact upon her net wealth. I note also that she has deposed that her solicitors have lodged a caveat over the Property A property as security for the payment of their fees in the amount of some $150,000.00 owed to them by the Applicant. In those circumstances, it is probable that the Property A property will have to be sold in any event to pay the solicitor’s fees from the proceeds of sale. It is, in my view, an illegitimate stance for the Applicant to adopt whereby on the one hand she has unilaterally exposed her home to being sold so as to meet the payment of her own legal fees, whereas on the other hand she impliedly submits that a costs order should not be made against her because that might give rise to the same result. She ought not be allowed, as a matter of public policy, to both approbate and reprobate
In reliance upon the authorities last referred to, I consider in all of the circumstances that the Applicant unreasonably failed to accept the reasonable offers made to her by the Respondent at a very early stage of proceedings. She was legally represented throughout. The latter is not insignificant when one considers the content of an email recently sent by her to the Respondent on 6 February 2018. That email is reproduced at paragraph 3 of the affidavit of Mr Hirst filed on 16 April 2018. It is an admission by the Applicant of her reason for pursuing a case which was clearly not accepted by either Judge Vasta or Judge Baumann. In part, that email read:
“You were NEVER going to get away with giving me nothing Mr L, that’s the law but I wish I hadn’t listened to that lawyer of mine who kept pushing me to ask for more. I can tell you I only ever wanted somewhere to live that’s it. …”
Though I am not satisfied that the Applicant’s non-acceptance of the Respondent’s offers was driven largely by legal advice proffered to her, as the email seems to suggest, (one could not do so in the absence of such issue being properly ventilated at a full hearing), I am satisfied that the Applicant’s reasonable expectations that she be provided with somewhere to live would have been more exceeded by either of the offers made to her. I am also satisfied that the Applicant would have well appreciated that each such offer exceeded her expectations, and further that she well knew that by not accepting either such offer, each party would be liable for substantial ongoing legal expenses. In those circumstances, I do not consider that the Applicant is entitled to walk away with immunity. I consider that the Respondent has established that there are circumstances in this case which justify a departure from the rule that each party should bear his or her own costs.
It has been submitted to me that in all of the circumstances I ought to make an order for indemnity costs in favour of the Respondent in the amount of $265,187.48. Those costs represent the actual costs paid by the Respondent subsequent to the making of the de facto declaration order by Judge Jarrett. They do not include the costs of the substantive appeal which are not claimed.
I am not satisfied that in all the circumstances the Applicant ought to be penalised by the making of an indemnity costs order. It may be that there were other factors motivating her to take the course which she did. There was some uncertainty on her part concerning the extent of assets which might properly form part of the pool, and in my view the Applicant’s insistence on extensive disclosure, though unnecessary in the main, was not motivated by spite. I accept, however, that the Applicant was largely unsuccessful on most of the contested issues at trial. I consider that an award of costs to be assessed on a party-party basis is warranted. Any such assessment will necessarily take into account the fact that there were two trials essentially dealing with the same issues, and that there ought in such circumstances be no double-dipping.
I accordingly order that the Applicant pay the Respondent’s costs of and incidental to the proceedings – excluding the costs of appeal – on and from 27 August 2014 until 10 January 2018, to be assessed on a party-party basis.
I further order:
a)That the Applicant pay the Respondent’s costs of and incidental to the Respondent’s application in a case filed on 13 February 2018, including the costs of appearance on 18 April 2018. The application was opposed and costs should in my view follow the event. Those costs are also to be assessed on a party-party basis.
b)That the Applicant’s Response to an Application in a Case filed on 17 April 2018 be dismissed, and that there be no order as to costs in respect thereof.
c)That paragraph 2(a) of the order of His Honour Judge Baumann be stayed pending the making of further submissions as to whether or not the Property A property should be the subject of a charge in favour of the Respondent, or subject to some other form of security for the purpose of the payment to the Respondent of the amount of party-party costs assessed as payable to him pursuant to these orders.
d)That the matter be adjourned to chambers.
e)That each party have liberty to apply on the giving of 3 days’ notice, each to the other.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Egan
Date: 19 April 2018
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