HEDGER & HEDGER

[2015] FamCA 157

FAMILY COURT OF AUSTRALIA

HEDGER & HEDGER [2015] FamCA 157

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

I and I (No 2) (1995) FLC 92-625).

Prantage & Prantage (2013) FLC 93-545

APPLICANT: Ms Hedger

RESPONDENT: Mr Hedger

FILE NUMBER: MLC 2579 of 2013

DATE DELIVERED: 12 March 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By Way Of Written Submissions

SUBMISSIONS RECEIVED FROM

SOLICITOR FOR THE APPLICANT: Gadens Lawyers

SOLICITOR FOR THE RESPONDENT: Berger Kordos Lawyers

Orders

1. That the husband pay the wife’s costs of and incidental to these proceedings from 1 October 2014 to 30 January 2015 by agreement and failing agreement as assessed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hedger & Hedger 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 MELBOURNE

FILE NUMBER: MLC 2579  of 2013

Ms Hedger

Applicant

And

Mr Hedger

Respondent

REASONS FOR JUDGMENT

1. Ms Hedger (the wife) seeks an order for costs against Mr Hedger (the husband) in the interlocutory stages of this property proceeding. The application was made orally on 30 January 2015 and each party asked to be given the opportunity to file written submissions (which they have now done) and for the matter to be determined in chambers.

2. To understand how the problem giving rise to the oral application arose, some background is necessary. Although some of the matters that follow were not the subject of the written submissions, they come from the Court record and could not be seen as controversial.

3. The proceedings began in April 2013 with the wife initiating the application. The husband responded.

4. In September 2013, Macmillan J made interlocutory orders with the consent of the parties about a variety of financial matters but of significance, a notation appeared at the foot of the orders indicating (for what it was worth) that each reserved their right to make further interim applications; in the husband’s case, in respect of “the cost and breadth of valuations” and in the wife’s case, “discovery and spousal maintenance”.

5. Importantly, having made those interlocutory orders, her Honour placed the case in the queue for final determination. One would be entitled to think that by that time, the parties were preparing for a trial. As part of the lawyers’ due diligence and in an endeavour to avoid a costly and conflictual trial, the parties also added to the notations on the order that they were going to mediation. In hindsight, with the dispute about the cost and breadth of valuations and also discovery, one wonders how they could have mediated.

6. In May 2014, the case was allocated to the list for a final hearing to be fixed and I made orders requiring the parties to attend for a first day or directions hearing before me. I also ordered (without hearing from the parties) that if disclosure and discovery had not been completed, lists be exchanged and inspection occur. Again in hindsight, it seems that was a pointless order because even though the wife complied, it seems the husband did not.

7. The first day hearing was to take place on 7 July. On 1 July, at the request of the solicitors for the husband, the matter was listed and a request was made to vacate the hearing fixed for 7 July. The wife opposed that. The basis for the request was said to have been the husband’s inability to comply with inter alia the discovery order. The wife having opposed the adjournment, I ruled that the first day should proceed.

8. On 7 July 2014, both parties appeared by counsel and the matter was set down for final hearing in December. Helpfully in the written submissions relating to costs now before me, the transcript of that July 2014 hearing was provided. It showed senior counsel for the wife complaining that there had been “significant non-disclosure” by the husband but that it (whatever that was) had been explained to him by counsel for the husband. Senior counsel said his client wanted to be pragmatic and go forward.

9. Both counsel seemed to say they did not see any problems with “interlocutory steps” ahead. A valuer had been agreed “subject to the relevant reasonable costs”. Reference was made to a list of documents required by the wife which had been sent the month before.

10. Significantly (it seems) in the context of this costs dispute, it was said that the 2013 tax return would be ready “in either one or two months”. Counsel for the husband “joined” with the request for the hearing to be fixed. He added:

    The practical reality is this…..standard orders assume substantial discovery and then have a catch-all last-minute discovery.

11. Counsel for the husband went on to say that having regard to the request for documents that had been received in June, it was unsurprising that there was “a little bit of time in getting that together”. He went on to say (and this seems to be the main bone of contention):

    What’s proposed is that we will provide the financial statements for the significant entities as soon as they’re available. (emphasis is mine)

12. By November, it was clear that the trial could not proceed.

13. On 2 December 2014, at the request of the parties, a mention hearing was convened. The wife’s counsel said that it was agreed the trial could not proceed but added that that was because the material had not been provided to the expert valuer (mentioned in paragraph 9 above). Claims were made by counsel that the husband had been “dragging his heels” and he questioned when documents would be provided by the husband. The solicitor for the husband said that meetings had been held and authorities given. He said that there had been problems with the valuer moving firms and there was the problem of the cost of the valuation (as foreshadowed in paragraph 4 above).

14. The thrust of the argument and the underlying concern of the wife at the 2 December hearing was that the husband was saying he had given the wife access to get the documents but not provided the documents himself. That has to be seen in the context of the Family Law Rules 2004 which place a heavy onus on a litigant to provide discovery. That also has to be seen in the context of the statement of the husband’s counsel in July that getting the documents would take time (see paragraph 10 above). It seems however that the real problem that caused so much difficulty was the 2013 financial statement or tax return. That issue came back more prominently in the costs submissions but it was certainly raised in 2014.

15. With the vacating of the trial date, the matter was adjourned to 30 January 2015.  On this date, the same lawyers appeared for the parties and the same complaints were made. Counsel for the wife said that the valuer had not been provided with the updated financials and it was obvious from material produced under subpoena that they had been prepared. It was therefore submitted that the trial had been vacated because of the husband’s lack of discovery. The solicitor for the husband submitted that was not the case but rather that the valuation had not been done, part of which was due to the valuer not having provided the cost details about the report. After I insisted that the valuer be approached to see what had happened, the Court was told that he had not been provided with all that he needed.  The parties lost their priority in the list of cases because of these problems but I now understand that the case has been given priority before another judge.

16. Thus, the only issue for me concerns the costs application of the wife.

17. One of the submissions in reply drawn by the solicitor for the husband was that no attempt had been made by the wife’s practitioner to address the issues in s 117 of the Family Law Act 1975 (Cth) (“the Act”) and that it seemed that the wife was seeking damages. I did not perceive the wife’s submission that way and it is not essential that reference be made to legislation or authority. The Court is usually assisted by lawyers referring to those matters for confirmation of its jurisdiction and power to make the orders sought. That was not necessary here.

18. At paragraph 46 of the wife’s submissions, the author wrote:

    The wife seeks an order for her costs of and incidental to the proceedings from 17 May 2014 to date; by reason of the case not having progressed since that date because of the husband’s deliberate non-production of relevant documents.

    Although perhaps inelegantly put, there could be no doubt about the order that was being sought. No suggestion was made of indemnity costs and it remains to be seen from what follows whether the various matters required by s 117 can be drawn from the submission and the documents to which it refers, to enable any costs order to be met.

19. Turning then to those provisions, it is the general rule, as prescribed in s 117(1) of the Act, that each party should bear their own costs. However, the Court is empowered by s 117(2) of the Act to make an order for costs if it is of the opinion that there are “circumstances that justify it in doing so”. If the Court finds a justifying circumstance, it still has to have regard to the factors in s 117(2A) in considering what order, if any, should be made (see I and I (No 2) (1995) FLC 92-625).

20. Prantage & Prantage (2013) FLC 93-545, a case predominantly about indemnity costs, Murphy J (whilst agreeing with the views of the other members of the Full Court) referred to s 117(2) of the Act and said that a departure from the “usual rule” in this Court that each party shall bear his or her own costs could occur if the justice of the case required.

21. The submissions to which I turn below point out how each party differently perceived (and still perceives) what had happened to abort the trial. From the wife’s perspective, the husband was not taking obligatory steps in relation to discovery which, if he had, would have enabled the work of the valuer to be completed and the trial commenced.  The husband was accused of obfuscating to delay the trial.

22. The husband returned fire. He said these issues were tactical delays by the wife. The submission observed that no order for costs should be made now because a trial judge would have a much better view about who, if any of the parties, was being truthful. The solution proffered by the husband was to “reserve” the issue of costs for the trial. In my view, that would be inappropriate as I will not be the trial judge and thus further expense and time would be spent when I am seised of this peculiar task.

23. In my view, the correspondence and the various submissions point to the conclusion that the husband was not diligent in respect of his obligations and the wife’s complaint that she was fobbed off is well justified. In my view, that justifies the departure from the standard. The question is whether the other matters in s 117(2A) can be satisfied.

The submissions

1. Each of the submissions ran to many pages with the annexures included. Notwithstanding I may not make specific reference to them, I have read them all.

2. The wife referred to all of the matters I have mentioned above. She asserted that the husband “must have known” in July 2014 that the financial statements were available when his counsel made the statement to the Court (Paragraph 10 above). In an obtuse way, the husband’s submission in reply was that the financial statements had been prepared but it would have been premature to release them until such time as an audit was completed (my emphasis). No such suggestion had been made to the Court and there was no reference in the wife’s material about an audit. 

3. The wife was aware from a subpoenaed documents that the financial controller had “signed” the returns on 6 December 2013. Further (and inconsistent with waiting for an audit) the husband provided the document to a bank for a loan to buy a house in January 2014.

4. The husband’s submission in reply to those facts was equally perplexing. It did not deny the facts but said that they were “irrelevant”. It was submitted that the “short delay” between the finalisation of the accounts and their production was “clearly occasioned by the audit process taking place as conveyed to the Court by” counsel.  That was a peculiar submission to make because the transcript does not reveal that at all. What counsel said was the documents would be provided as soon as they were available.

5. With the uncertainty I had about whether the statements just mentioned were a difference without a distinction, I went to the annexed correspondence. In October 2014, the solicitors for the wife complained the documents had not been made available. 4 days later, the solicitor for the husband replied. No reference was made to an audit. On the contrary, it was said that the discovery was voluminous and many items were of “questionable” relevance. On that same day, the husband’s solicitor wrote to the valuer enclosing various financial documents but not those about which there was controversy. No mention was made about the audit process apparently under way.

6. In November, another letter was written by the solicitors for the wife which made the assertions about the husband’s primary discovery obligation. That was met with a response suggesting an “urgent meeting of practitioners … to clarify and particularise what is being sought”.  No mention was made of an audit. It hard to avoid an inference that the husband was obfuscating. The valuer raised the subject of having only up until 2012 financials on 10 November 2014. The parties’ practitioners then had a meeting. That was followed up with a letter of request by the solicitor for the wife for the provision of documents. It ended with a request for “the most recent financials by .. 17 November”. Significantly, the wife’s solicitor then threatened to issue a subpoena to the company to get the documents (and ultimately she did).

7. On 14 November, the solicitor for the husband raised the likely impossibility of the trial proceeding in December and pointing to the unanticipated problems of the valuer when the directions were made in July.  That response must be seen as obfuscation because on the subject of discovery, the solicitor wrote:

   Our client is collating the documents requested however advises that he has had extremely urgent financial matters that needed to be attended to and he has been delayed in obtaining the information.

8. It is not necessary that I go further than to say that no reference was made to any audit nor to the explanation for the delay other than that which was just mentioned. One wonders how that could be explained in the context of the document being produced under subpoena and it having been provided by the husband to a bank. For the submission of the husband to say those matters were irrelevant is rather odd.

9. The wife’s submission was that this conduct of the husband (and she specifically excluded the solicitor from any criticism or wrong doing) was blatant frustration of the process. It is difficult for me to see how the husband’s response could be justified. He said it was denied and nonsensical. He repeated the mantra about what counsel had said in July and then submitted that the 2013 documents made no difference to the matter proceeding to trial. He submitted that the reason why the case could not proceed was because of the absence of the valuation evidence “through no fault of the husband”.

10. I earlier mentioned the husband’s position that the Court could not and should not make findings about who was at fault here because the evidence at trial would be much more comprehensive. I disagree. All of the correspondence and the hearings point to one question, the answer to which remains unanswered: why was the document not provided even if an audit was under way (and I do not accept that it was) with some form of disclaimer? The submission responded to that point by saying that if the husband had provided the document (presumably without the disclaimer) he would have been criticised. I reject that having regard to the complete absence of any explanation as to what was holding up the provision of the document.

11. In my view, I consider the behaviour of the husband clearly shows a justifiable reason to depart from the s 117(1) principle.

12. I turn then to the matters in s 117(2A).

The financial circumstances of the parties

1. The evidence before the Court as to the financial circumstances of both parties but particularly the husband is that there are significant assets here. The husband was said to have provided the financial statement to a bank to purchase a house. That indicates he has funds.

Legal aid

1. There is no evidence that anyone is in receipt of assistance by way of Legal Aid.

The conduct of the parties

1. There is no need for me to say more than what I have above. This, in my view, was an appalling lack of response to detailed obligations; it was simply obfuscation. The wife’s solicitor said it was nothing to do with the solicitors for the husband and whilst that is a gratifying concession, the submission seemed to lack the foundation for the assertions the husband made. No doubt, that will all be explored at trial.

2. For the purposes of the conduct under consideration, it must be that as a litigant (see Prantage (supra)).

3. I find the husband has not conducted himself properly.

Written settlement offers

1. No written offers to resolve the dispute were apparently made and nothing has been suggested that any offer to contribute towards costs has since been made.

Any other relevant matters

1. This matter is now apparently proceeding to trial under the hand of another judge. The obligations to comply with the rules of the Court about disclosure will no doubt be mentioned again.

Conclusion

1. There should be an order for costs here. The question is the quantum. The wife sought costs from May. In my view, that would be an inappropriate order. Because the costs of the day thrown away at the various hearings in December and January do not reflect what really was going on, I propose to order that the husband pay the wife’s costs by agreement and in default of agreement, as assessed on scale, from 1 October 2014 when the wife was pressing for discovery. There were two hearings at which counsel attended and those fees should be paid by the husband.

2. Costs are not intended as a punishment but rather to compensate the litigant who has little choice (as occurred here) but to participate. The amount of costs here reflects the fact that the wife was chasing the husband to comply with his obligations. She incurred costs with her own lawyers unnecessarily. That should not have happened. That justifies the costs for the period from 1 October 2014.

3. An order will be made for costs on the basis of an agreement and failing agreement as assessed.

I certify that the preceding Forty Five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 12 March 2015.

Associate: 

Date:  12 March 2015