Hart and Hart (No.2)

[2014] FCCA 1265

FEDERAL CIRCUIT COURT OF AUSTRALIA

HART & HART (No.2) [2014] FCCA 1265

Catchwords:
FAMILY LAW  ̶  Costs.

Legislation:

Family Law Act 1975 (Cth), s.117

Federal Circuit Court Rules 2001 (Cth)

Applicant: MR HART

Respondent: MS HART

File Number: DGC 2481 of 2011

Judgment of: Judge Phipps

Hearing date: 7 May 2014

Date of Last Submission: 7 May 2014

Delivered at: Dandenong

Delivered on: 18 June 2014

REPRESENTATION

Solicitor for the Applicant: Ms Mimmo

Solicitors for the Applicant: Plaza Legal

The Respondent: No appearance

ORDERS

1. That the respondent wife pay the applicant husband’s costs fixed at $9,003.00.

IT IS NOTED that publication of this judgment under the pseudonym Hart & Hart (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 2481 of 2011

MR HART

Applicant

And

MS HART

Respondent

REASONS FOR JUDGMENT

1. On 19 December 2013 I made orders in the substantive dispute between the parties and reserved the question of costs.  The parties have now filed written submissions on the question of costs.  The husband submits that the wife should pay his costs.  The wife submits that each party should pay their own costs.

2. The dispute between the parties is described in my reasons for judgement of 19 December 2013.  In summary the proceeding arose out of consent property orders made between the parties on 25 June 2012.  During their marriage the parties’ income came from the husband’s work as an (occupation omitted) contractor.  The business was conducted through a company Hart Pty Ltd.  The husband was the sole shareholder and director.  The parties were both employed by the company and were paid salaries, the benefit being it reduced taxation payments.

3. The company had not paid superannuation for the wife pursuant to the Superannuation Guarantee Statutes of the Commonwealth of Australia.  In my reasons I said:

   The charge is payable pursuant to ss.16, 19, & 46 of the Superannuation Guarantee (Administration) Act1992 (Cth) and ss. 5 & 6 of the Superannuation Guarantee Charge Act 1992 (Cth). These provisions mean that the Company not having paid the required amounts into a complying superannuation fund in the wife’s name at the end of each quarter the amount not paid is now a charge payable to the Commonwealth. The wife cannot waive the amount.

4. Prior to the consent order being made and prior to the earlier conciliation conference on 17 November 2011, where the parties reached agreement in principle the wife, had made enquiries of the Australian Taxation Office about superannuation due to her from the company.  She did not disclose prior to or at a conciliation conference or prior to the consent orders being made that she done so and that she intended making a claim for superannuation once the orders were made.  My reasons for judgement describe this process.

5. Once the wife did make that claim the Australian Taxation Office set in train the process which resulted in that office notifying the company that some $35,000 was due as a Superannuation Guarantee Charge.  The wife could not waive the charge.

6. In the proceeding the husband proposed an order that the wife pay the charge which would result in her receiving a payment into a superannuation fund in her name of the same amount less a small administrative charge.  The wife proposed that the husband make the payment and that there be a Superannuation Splitting order allotting the whole of the resulting superannuation payment to the husband.  My decision was that what the wife proposed should happen and I ordered that the husband cause his company to pay the superannuation charge. Orders have been made to that effect.

7. The wife was in breach of her duty of disclosure.  In my earlier judgement I said this:

   In Morrison and Morrison (1995) FLC ¶ 92-573 at 81,670-81,673 the Full Court of the Family Court discussed the meaning of miscarriage of justice in the context of failure to disclose information.  The Court said at 81,670:

   The constant emphasis of the cases is that in order for there to be a just and equitable and an appropriate order altering the interests of parties and their property there must be a full and frank disclosure between them of all circumstances which may be relevant to the determination of the true financial position both presently and in the foreseeable future.

   19. Clearly there has been a failure to disclose relevant information.  The parties had conducted their financial affairs during the marriage for many years on the basis that none of the family income, the company earnings, was paid into superannuation for the wife.  minutes of proposed consent orders were signed and the consent order was made on the basis that all assets and liabilities were disclosed.

   22. Had the possibility of a superannuation entitlement to the wife from the company been disclosed by the wife when the property proceedings were settled it would have had to be taken into account.  Payment of the superannuation by the company is a statutory requirement which cannot be waived by the beneficiary of the superannuation.  The parties would have had to use some of the value of their properties to pay the superannuation which would have resulted in a different adjustment of superannuation.

8. The husband’s submission that the wife pay his costs focuses on the wife’s failure to disclose her intention to claim the superannuation.

9. Section 117 of the Family Law Act 1975 (Cth) provides for costs. Section 117(1) says that in proceedings under the Act each party is to pay their own costs. That is subject to s.117(2) which provides that if the court is of the opinion that there are circumstances justifying it in doing so the court may make such order as to costs as it considers just. Section 117(2A) sets out the matters relevant to a costs order. The husband’s submission relies these paragraphs:

   (a)  the financial circumstances of each of the parties to the proceedings;

   (c)  the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (g)  such other matters as the court considers relevant.

10. The financial circumstances of the parties is described in the earlier reasons.  Following the property settlement the wife was unable to refinance the mortgage on the family home so that it was sold.  That resulted in her having $219,762.  She has since purchased a property using this money plus money borrowed on mortgage.  The husband received an interest in an investment property which has since been sold.  His financial statement of 6 May 2013 shows about $126,000 on fixed deposit.  The financial statement showed an income of $692 a week from his (omitted) business and $126 a week from interest.

11. The wife’s financial statement of 27 May 2013 shows wages of $460 per week, family tax benefit $192 per week, rent assistance $49 per week and child support for the parties’ younger child $61 per week.

12. The husband’s cash amount will have been reduced by the superannuation payment but he has received a corresponding increase in his superannuation.  The parties’ financial positions are much the same although the wife has the benefit of owning a home.

13. Relevant to either the conduct of the proceedings or any other matter that is relevant is the conduct of each party.  My earlier reasons for judgement shows that each party can be criticised.  The husband because the superannuation guarantee amount was not paid and the wife because she did not disclose that she intended claiming the superannuation.

14. So far as the current proceedings are concerned they would not have come about if the wife had disclosed prior to or at the conciliation conference or at least prior to the final order being made that she intended claiming the superannuation.  As I said in my reasons if she had the parties would then have taken that into account.  That having been done these proceedings would have been unnecessary.

15. I said in the earlier reasons for judgement that the superannuation guarantee was not paid because that was the way the parties organised their finances.  Both parties were employed by the company because it gave a legitimate tax advantage.  They used all the income for their immediate expenses and paid none into superannuation.  While I concluded in the dispute about who should pay the superannuation that that burden should fall on the husband because the stronger public policy consideration was the need to comply with the superannuation fund guarantee legislation.  I consider a different consideration applies to the costs.

16. These proceedings would have been unnecessary if the wife had disclosed that she intended to claim the superannuation guarantee fund.  She was in breach of the duty of disclosure in not doing so.  These proceedings have been brought about solely because she did breach that duty of disclosure.  I consider that she should bear the costs occasioned by both parties as a result of her conduct which means that there should be an order that she pay the husband’s costs.

17. The husband seeks indemnity costs.  For that to happen there must be exceptional circumstances.  Exceptional circumstances do not exist here.  The wife can be criticised for her conduct but the consequence of that conduct is that she should pay costs in the ordinary way.  Once she had made the claim for superannuation it had to be paid and a way had to be found for adjusting the consequences between the parties.  The wife was not claiming that the husband should bear the burden of paying the superannuation guarantee and she was entitled to keep the benefit of the superannuation.  The case was that while the husband should bear the burden of paying he should have the benefit of the increased superannuation.  That does not justify indemnity costs.

18. Some modification of the costs in schedule 1 of the Federal Circuit Court Rules 2001 (Cth) is needed. I will allow $3,000 for initiating application up to completion of the first court day and preparation for final hearing, $500 for preparation of the superannuation splitting order and appearance and $900 per costs submissions.

19. I will allow the following costs:

    Initiating application and hearing preparation     $3,000

    Conciliation conference   $1,617

    Counsel fees   $2,200

    Hearing judgment      $   271

    Superannuation order 7 May 2013   $   500

    Costs submissions   $   900

    Filing fee $   515

    Total   $9,003

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Date:  18 June 2014