Hearst and Hearst and Ors

[2012] FamCA 494

FAMILY COURT OF AUSTRALIA

HEARST & HEARST AND ORS [2012] FamCA 494

FAMILY LAW – PROPERTY – Application for costs.

Family Law Act 1975 (Cth)

APPLICANT: Ms Hearst

FIRST RESPONDENT: Mr Hearst

SECOND & THIRD RESPONDENTS: Ms Somers & Ms Kent

FILE NUMBER: SYC 5110 of 2008

DATE DELIVERED: 16 May 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Parramatta

JUDGMENT OF: Stevenson J

HEARING DATE: 4 November 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lethbridge SC

SOLICITOR FOR THE APPLICANT: Campbell Paton & Taylor

SOLICITOR FOR THE RESPONDENT: Lee Dalton & Associates

COUNSEL FOR SECOND & THIRD RESPONDENTS: Mr Givney

SOLICITOR FOR SECOND & THIRD RESPONDENTS: Messenger & Messenger

Orders

IT IS ORDERED

1. That all applications for costs are dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hearst & Hearst and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC5110/2008

Ms Hearst

Applicant

And

Mr Hearst

First Respondent

Ms Somers and

Ms Kent
Second and Third Respondents

REASONS FOR JUDGMENT

the proceedings  

1. On 18 October 2010 Coleman J made orders for property settlement and delivered written reasons for judgment.  On 10 June 2011 his Honour heard two subsequent applications but disqualified himself from determining competing claims for costs.  I heard the costs applications on 4 November 2011 and reserved judgment.   

2. The parties to the proceedings were the wife, the husband and his two sisters, of whom made various claims for costs.  It was agreed that any costs orders be made on an agreed or taxed basis. 

The Costs Claims

1. The applicant wife sought the following orders as to costs:

   1.That the Costs Application by the Second and Third Respondents against the Applicant wife be dismissed.

   2.In alternate to Order 1, the Respondent husband indemnify the Applicant wife for all liability whatsoever in relation to any Costs Order made against her in favour of the Second and Third Respondents.

   3.That the Respondent husband pay the Applicant wife’s costs of and incidental to her claim for improvement and contributions made to the homestead at [OE Property] and her costs of and incidental to the proceedings pursuant to S66G.

   4.In the alternative to Order 3, the Respondent husband pay the Applicant wife one half of her costs of and incidental to pursuing the claim against the Respondent husband, Second and Third Respondents for the improvement and contribution made to the homestead [OE Property] and in respect of the S66G claim.

   5.That the Respondent husband pay the Applicant wife’s costs in relation to his failure to give proper and timely disclosure in relation to the wife’s claim pursuant to Section 79 of the Family Law Act.

2. The husband sought that the wife pay his costs on a party/party basis.  He sought no orders for costs against the second and third respondents.  The second and third respondents sought an order that the husband and wife pay their costs of the proceedings. 

Approach To These Proceedings

1. Costs applications are determined in accordance with the provisions of section 117 of the Family Law Act, which provides:

   (1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

   (2)  If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

   (2A)  In considering what order (if any) should be made under subsection (2), the court shall have regard to:

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

   (b)  whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

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

   (d)  whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)  whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)  whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

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

   (3)  To avoid doubt, in proceedings in which an independent children’s lawyer for a child has been appointed, the court may make an order under subsection (2) as to costs or security for costs, whether by way of interlocutory order or otherwise, to the effect that each party to the proceedings bears, in such proportion as the court considers just, the costs of the independent children’s lawyer in respect of the proceedings.

   (4)  However, in proceedings in which an independent children’s lawyer for a child has been appointed, if:

   (a)  a party to the proceedings has received legal aid in respect of the proceedings; or

   (b)  the court considers that a party to the proceedings would suffer financial hardship if the party had to bear a proportion of the costs of the independent children’s lawyer;

   the court must not make an order under subsection (2) against that party in relation to the costs of the independent children’s lawyer.

   (5)  In considering what order (if any) should be made under subsection (2) in proceedings in which an independent children’s lawyer has been appointed, the court must disregard the fact that the independent children’s lawyer is funded under a legal aid scheme or service established under a Commonwealth, State or Territory law or approved by the Attorney‑General.

   Subsections 117(b) and (f) are irrelevant for present purposes, as no party was in receipt of a grant of legal aid and no offer of settlement was relied upon in support of any costs application.

2. I have little knowledge of the financial circumstances of the parties.  There was no submission, however, that the husband or the wife would be unable financially to meet an order for costs.

Consideration

1. At the commencement of the trial the second and third respondents agreed not to seek costs against the wife.  They maintained, however, that she unilaterally altered her position in final written submissions on the issue of an equity of exoneration in respect of mortgage debts on the title to the properties OE Property and Property A.

2. It appears from paragraphs 83 and 84 of his Honour’s reasons that the wife purported to withdraw her concession in favour of the second and third respondents only in respect of Property A.  Her concession that they were entitled to an equity of exoneration in respect of OE Property subsisted at all times.  His Honour found that the second and third respondents were entitled to an equity of exoneration in respect of the whole of the mortgage debt, which was the order sought on their behalf.

3. The written submissions filed on behalf of the wife in the present application acknowledge that she withdrew her concession in regard to the equity of exoneration.  Her counsel wrote:

   8.  It is acknowledged that the applicant wife in her submission withdrew her concession in relation to the issue of exoneration.  However it is submitted that the applicant wife’s position did not add any further costs to the second and third respondents as it was only the conduct of the respondent husband which necessitated the second and third respondents to remain present beyond the first day of the trial.

4. As a matter of logic, it seems to me that the costs of the second and third respondents could not have been increased by this change in the wife’s position at the point of final submissions.  Their conduct of the proceedings could not have been affected by a circumstance of which they were unaware until a later time.

5. Further, it seems that there was a live issue in relation to occupation fees until the end of the trial.  The second and third respondents were partially successful only in respect of that issue. 

6. For these reasons I will make no order that the wife pay the costs of the second and third respondents.  That being so, it is unnecessary that I consider the wife’s application that the husband indemnify her in relation to any such costs.

7. The second and third respondents sought an order that the husband pay their costs.  The basis of this application was not entirely clear to me.

8. At the commencement of the trial counsel for the husband submitted a draft balance sheet, which included:  “charge in favour of the husband and wife against the second and third respondents $315,000”.  It was not the case, therefore, that the husband resisted the wife’s claim against the second and third respondents in respect of improvements to the homestead at OE Property throughout the proceedings. 

9. As noted, there was an issue as to the quantum of the occupation fee sought by the second and third respondents, upon which they were not wholly successful.  There was also a live issue as to the equity of exoneration sought by the second and third respondents.  In these circumstances I do not consider it appropriate to order the husband to pay the costs of the second and third respondents.

10. The husband sought that the wife pay his costs on a party/party basis.  On his behalf it was submitted that he was entitled to a costs order because of the wife’s conduct and because he was “wholly successful in relation to the major issue in the proceedings”. 

11. This “major issue” was said to be the value of the company Z Pty Limited, which was found by his Honour to be “effectively the alter ego of the wife”.  The husband relied on evidence from Mr P, who valued the company at $1,550,572.  The wife relied on evidence from Mr G, who valued the company at $1,150,000.  His Honour found that Z Pty Limited had a value of $1,445,500.  His Honour noted: 

    110.  [Mr G] and [Mr P] were both cross-examined.  Both [Mr G] and [Mr P] have impeccable professional qualifications and abundant experience in relation to the valuations undertaken by each of them.  There is no suggestion that the methodology adopted by either valuer was flawed or deficient in any material respect.  Nor is it suggested that the opinion evidence of either expert was ultimately based on material errors of fact, or upon any misapprehension or misconception with respect to the entity which each valued.

12. Both valuers adopted an approach of capitalisation of future maintainable earnings.  They disagreed on the figure to be adopted for future maintainable earnings and in relation to the capitalisation rate.  The difference arose because Mr P based his figure on income for 2008 and 2009, whereas Mr G also included the 2007 earnings.  His Honour found it appropriate to adopt Mr G’s approach but observed that the issue was “by no means clear cut”. 

13. As noted, the experts disagreed on the multiple to be applied to future maintainable earnings.  Mr P adopted a multiple of 2, whereas Mr G selected a figure of 1.75.  His Honour noted that each expert “sensibly acknowledged that the choice of a multiplier ultimately is a subjective decision” and that neither maintained that the opposing figure was “necessarily wrong”.  His Honour adopted a mid point of 1.875 as the appropriate multiplier.

14. The experts disagreed on the net business assets required to maintain the future earnings of Z Pty Ltd.  His Honour adopted Mr P’s opinion as to the correct figure, while noting that “the issue is not without uncertainty”. 

15. It is thus the case that his Honour’s finding as to the value of Z Pty Limited was based on a combination of factors.  Not all of Mr P’s opinions or the submissions of the husband’s counsel found favour with the court.  For these reasons I am not persuaded that the husband in fact was “wholly successful in relation to the major issue in the proceedings”.

16. Each of the husband and wife complained about the conduct of the other in the course of the proceedings.  I do not propose to analyse the litany of complaints and the solicitor’s correspondence in exhaustive detail. 

17. The husband and wife blamed each other for adjournments of the case conference and conciliation conference.  In my view, it is arguable that they both contributed to the delay in these conferences and the apparent lack of cooperation between their solicitors did not assist the situation.  It is also arguable, in my view, that the conciliation conference was adjourned because the parties were unable to agree upon joint instructions to valuers.  The conference would have proved largely futile in these circumstances.

18. The husband and wife each complained of the other’s conduct in relation to an alleged deed of family arrangement dated 6 August 2004.  The wife complained that the husband denied the existence of any such agreement, which clearly was relevant to the issue of the extent of the husband’s interest in the rural properties.  The husband complained that the wife possessed a copy of the deed in question, while she simultaneously insisted that he produce the document.

19. The husband and wife blamed each other for difficulties encountered with the valuation of Z Pty Limited.  The husband claimed that the wife’s solicitor unilaterally sent a letter dated 6 January 2009 to Mr G, which was incorrectly represented as joint instructions to prepare a company valuation.  The wife complained that the husband required her to produce extensive documentation for the purpose of the valuation, some of which could have been obtained directly from the company accountant.

20. The wife complained that the husband failed to disclose the existence of a towers lease in respect of Property A until three weeks before the trial.  She claimed that she was then required to obtain a supplementary valuation.  The husband maintained that all documents in relation to the towers lease were discovered to the wife and that she had attended meetings with various people involved in this enterprise.

21. The wife complained that the husband failed to join in her claim against the second and third respondents, in relation to improvements to the homestead at Property OE, yet ultimately he benefitted from an increase in the value of the matrimonial pool.  The wife failed to specify how the husband’s failure to support her claim increased her costs.  In any event, there remained issues of an equity of exoneration and occupation fee until a very late stage in the trial.

22. The written submissions on behalf of the second and third respondents stated that the husband’s counsel required them for cross-examination when the trial resumed for the fifth day.  The previous four days of the hearing had taken place in Dubbo in August 2009 and the final day of 8 December 2009 occurred at the Parramatta Registry.  On the final day, the second and third respondents were informed that they were not required for cross-examination.

23. It was suggested that these matters justify an order for costs against the husband in favour of the second and third respondents.  In my view, the reality is that the legal representatives of the second and third respondents were required to remain until the end of the trial in order to make final submissions on their behalf.

Conclusion

1. The tenor of the correspondence between the solicitors for the husband and wife suggests that an already bitter dispute was probably enhanced by an apparent lack of cooperation between their lawyers.  It was my impression that each of the parties could readily have found another complaint to counter any grievance raised by the other.  I am unpersuaded that one party’s conduct was so much more obstructive or unreasonable as to warrant any order for costs as between the husband and the wife.  As indicated above, I am unconvinced that any order for costs is warranted as between the husband, the wife and the second and third respondents.  Accordingly, I will dismiss all applications for costs.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 16 May 2012.

Associate:     

Date:              16 May 2012