Huffman and Gorman
[2017] FamCA 278
•5 May 2017
FAMILY COURT OF AUSTRALIA
| HUFFMAN & GORMAN | [2017] FamCA 278 |
| FAMILY LAW – COSTS – Where the husband seeks orders that the wife pay his costs of substantive parenting and property proceedings on an indemnity basis – Where the final orders were appealed – Where the wife was not wholly unsuccessful in her appeal of parenting orders – Where final property orders were not disturbed on appeal – Where the wife was substantially unsuccessful in regards to property orders – Where the current financial circumstances of each party are unclear – Where each party alleges the other engaged in conduct that added to the time and cost of proceedings – Where there are no exceptional circumstances to justify indemnity costs – Where circumstances do not justify an order for the wife to pay the husband’s costs in regard to parenting proceedings – Where circumstances justify an order for the wife to pay the husband’s costs in regards to property proceedings as agreed or assessed. |
| Family Law Act 1975 (Cth)s 117 |
Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225
Gorman & Huffman (No2) [2015] FamCA 411
Hawkins & Roe [2012] FamCAFC 77
Huffman & Gorman [2015] FamCA 317
Joyce & Fante [2013] FamCAFC 141
PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL (2005) 33 Fam LR 123
Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029
| APPLICANT: | Mr Huffman |
| RESPONDENT: | Ms Gorman |
| INDEPENDENT CHILDREN’S LAWYER: | Legal Aid Commission |
| FILE NUMBER: | PAC | 3882 | of | 2011 |
| DATE DELIVERED: | 5 May 2017 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Hannam J |
| HEARING DATE: | 7 February 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Maddox |
| SOLICITOR FOR THE APPLICANT: | Caldwell Martin Cox |
| SOLICITOR FOR THE RESPONDENT: | No Appearance |
Orders
(1)That the wife pay the husband’s costs of and incidental to the proceedings so far as they related to orders sought for property settlement as agreed between the parties or assessed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Huffman & Gorman has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: PAC 3882 of 2011
| Mr Huffman |
Applicant
And
| Ms Gorman |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application in protracted parenting and property proceedings for orders that the wife pay the husband’s costs.
The husband seeks that the wife pay his costs in the substantive proceedings on an indemnity basis and his costs in respect of a stay application brought by the wife following the final hearing and institution of an appeal.
The wife seeks that the husband’s applications for costs both be dismissed.
The question for me to determine is whether there are circumstances that justify departing from the usual rule that each party shall bear his or her own costs.
Background
On 30 January 2015 I completed property and parenting proceedings which had been heard over 12 days in October and December 2014 and January 2015. The proceedings concerned the long term parenting arrangements for the parties three children and a dispute in relation to a property settlement.
On 29 April 2015 I made final orders and published my Reasons for Judgment[1] (‘the April 2015 judgment’). On that date prior to the delivery of judgment the wife had attempted unsuccessfully to file an Application in a Case seeking to stay the orders which were at that stage yet to be delivered. I also refused an application made on behalf of the wife to deal with any other matter prior to delivering judgment.
[1]Huffman & Gorman [2015] FamCA 317.
The orders made on 29 April 2015 brought about a significant change in the children’s circumstances as they immediately moved from living with the wife to an arrangement where they were to live with the husband and spend no time with the wife for a period of 12 months. After that time they were to spend supervised time with the wife six times per year. Orders made in the property proceedings resulted in the husband receiving 55 per cent of the matrimonial property and the wife receiving 45 per cent.
Costs in the stay application
The wife subsequently lodged an appeal against both the parenting and property orders and filed an application to stay the orders appealed against.
The stay application came before me on 12 May 2015. By that stage the wife was represented by a new firm of solicitors which is the same firm that represent her in these costs proceedings.
On 12 May 2015 the Independent Children’s Lawyer (‘ICL’) sought to adjourn the wife’s stay application as it related to the parenting orders on the basis that in an affidavit in support of her application, the wife made serious allegations about the husband’s recent conduct. The allegations appeared to have been investigated by New South Wales Police and the Department of Family and Community Services but information regarding those investigations was not at that stage to hand. The wife did not oppose the adjournment and the husband did not wish to be heard in relation to it.
The stay proceedings so far as they related to parenting were adjourned to 29 May 2015. The parties agreed however, that the property orders be stayed on conditions and orders staying the property orders were made on that basis with the consent of the parties.
On 29 May 2015 the wife’s application for a stay of the orders with respect to parenting was heard and judgment was delivered on 2 June 2015[2]. The wife’s application for stay of the parenting orders was dismissed.
[2]Gorman & Huffman (No2) [2015] FamCA 411.
The husband’s first cost application relates to these stay proceedings. The application with respect to these proceedings is that the wife pay the husband’s costs on a party/party basis.
Costs in the substantive proceedings
The second costs application brought by the husband relates to the substantive proceedings. An application for an order that the wife pay the husband’s costs in the proceedings on an indemnity basis formed part of the orders that the husband had sought in his Further Amended Initiating Application filed 23 September 2014. Although this order had been sought, there was little focus on it in the substantive proceedings. Orders were made after delivery of the April 2015 judgment that the husband’s costs application be listed by agreement between the parties and my associate on a future date.
On 12 May 2015 when the property orders appealed against were stayed by consent and the stay application in relation to the parenting orders was adjourned, I also directed that the parties file any affidavit in relation to costs upon which they intended to rely in the substantive proceedings and an outline of argument.
On 29 May 2015 when the wife’s application for a stay in relation to parenting orders was heard oral submissions on the husband’s costs application were also made.
Further oral submissions were made with respect to costs on 13 July 2015 but judgment was adjourned to a date to be fixed following the determination of the appeal.
Judgment was given in the Appeal on 15 September 2016 and the appeal with respect to the property orders was dismissed in its entirety. The appeal against the parenting orders was also dismissed in relation to all matters other than the review mechanism in relation to the order that the wife’s time with the children be supervised.
On 7 February 2017 the outstanding costs application was listed again so that the parties could have an opportunity to make any further submissions in relation to costs in light of the Full Court decision.
At the court event on 7 February 2017, an Application in a Case (unrelated to this costs application) filed by the wife on 7 November 2016 was also listed. There was no appearance by or on behalf of the wife. The directions made by the Registrar listing both applications for 7 February 2017 had been sent via email dated 16 December 2016 to the firm of solicitors who had acted for the wife since at least 29 April 2015 and who continue to act for her to date. These solicitors have not ever filed a Notice of Ceasing to Act. However, the wife’s legal representation as at 7 February 2017 was unclear as a new firm of solicitors had filed a Notice of Address for Service on 13 December 2016. Neither a representative of this firm or any other legal representative or the wife herself appeared on 7 February 2017.
Rather than deal with the application for costs to finality on that date, each of the parties was given a final opportunity to file any further submissions in relation to the husband’s costs application in the substantive proceedings in light of the Full Court decision. Written submissions were forwarded to chambers by both parties and have been considered in this judgment.
The Law
The Applicant is seeking that his costs of and incidental to the substantive proceedings be paid on an indemnity basis.
The law in respect of indemnity costs is well settled. The relevant principles are those set out in the Federal Court case of Colgate-Palmolive Company v Cussons Pty Limited[3] where Sheppard J provides examples where the exercise of discretion to award indemnity costs is warranted, including:
a)false and irrelevant allegations of fraud;
b)misconduct that causes a loss of time to the Court and other parties;
c)where the proceedings were commenced or continued for an ulterior motive;
d)the undue prolongation of a case; or
e)wilful disregard of known facts and clearly established law.
[3] (1993) 46 FCR 225
While the category of cases in which an award of indemnity costs may be appropriate is not closed[4] the Full Court has stated in Joyce & Fante[5] at [11]:
… In short, it is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated there are exceptional circumstances such that the usual order of party-party costs should be departed from.
[4]Yunghanns & Ors & Yunghanns & Ors & Yunghanns(2000) FLC 93-029.
[5] [2013] FamCAFC 141
Section 117(1) of the Family Law Act 1975 (“the Act”) provides that each party is to bear his or her own costs for proceedings. That section is, however, subject to subsection (2) which gives a Court the discretion to make an order for costs if there are circumstances that it in the opinion justify it in doing so. Any such order for costs is to be pursuant to section 117(2) “as the Court considers just”.
Section 117(2A) sets out the relevant matters, if any are applicable, to which the Court is to have regard in considering an order for costs.The matters relevant in this case are considered below, noting that there is nothing preventing any one factor being the sole determinant for an order for costs.[6]
[6] PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL
(2005) 33 Fam LR 123
The financial position of each of the parties to the proceedings
No additional evidence by way of affidavit or Financial Statement from the husband has been filed in this application for costs. The submissions of the husband as to his financial circumstances are based upon his affidavits filed in the substantive proceedings and findings made in the April 2015 judgment. In that judgment I found that at trial virtually all of the parties’ non-superannuation assets other than a small jointly owned sum in a solicitor’s trust account were held by the wife. Pursuant to the property orders made the wife was to transfer $424,613 to the husband and there would be $325,503 in non-superannuation interests left with her.
There is no other evidence concerning the current financial circumstances of the husband. An affidavit filed in May 2015 by the husband’s solicitor mainly addresses the quantum of legal costs incurred in and associated with the proceedings.
According to that affidavit the husband incurred legal costs to the sum of $239,008.79 in the substantive proceedings. The solicitor deposed that the husband had outstanding fees of $138,309.24 as at May 2015.
In addition to relying upon findings made in the April 2015 judgment, the wife also filed an affidavit and Financial Statement on 25 May 2015 relating to her financial circumstances at that time. At that stage she still owned the former family home valued at $750,000 as the property orders were stayed. The wife was however required to pay the husband $250,000 as a condition of the stay of property orders. The home was subject to a mortgage of approximately $150,000 which was totally the responsibility of the wife. The wife also listed in her Financial Statement $63,000 in outstanding legal fees and a $25,000 personal loan to friends as her liabilities. The wife had available to her in non-superannuation property to the value of $518,970. Since that date, the wife has been required to pay the husband $424,613 as a result of her appeal being dismissed. According to that Financial Statement the wife’s average weekly income exceeded her total personal expenditure by $228.54.
In her affidavit filed on 25 May 2015, the same date as the Financial Statement the wife deposes to her future liabilities and income. Some of the matters deposed to are inconsistent with the contents of the Financial Statement. For example, the wife deposes to owing approximately $13,000 in legal fees in her affidavit and $63,000 in outstanding legal fees in her Financial Statement. Virtually all of the future expenses referred to in the affidavit are estimates including items such as the approximate anticipated costs of renting a property for herself and a child from another relationship, removalist costs and costs associated with selling the former family home.
Although the wife deposes in that affidavit to intending to file a more complete affidavit in respect to the husband’s application for costs, no further affidavit (or Financial Statement) has been filed. Accordingly, I find that after payment of the liabilities listed in the wife’s Financial Statement of 25 May 2015 she had almost $520,000 available to her. From this amount she was required to pay the husband almost $425,000 by way of property settlement. After the payment of this amount according to the wife’s May 2015 Financial Statement, she would have had just under $95,000 available to her and her average weekly income comfortably exceeded her total personal expenditure.
Submissions made on behalf of the wife to the effect that her current financial circumstances are “dire” are not supported by any evidence filed on her behalf.
Other matters set out in the submissions filed on the wife’s behalf relevant to her financial circumstances are contrary to the findings of the court. For example, it is submitted that the court found that the wife is “unwell” and suffers from a personality disorder which it is submitted “may affect her ability to continue with her current employment or find alternate employment”. There is no finding in the April 2015 judgment that the wife is unwell. While I did find that the wife suffers from a personality disorder as identified by the expert in the proceedings, there is no finding that the wife’s personality disorder in any way impairs her capacity for employment. Rather, I accepted the expert’s opinion that the wife’s day to day functioning (including at work) is “supra normal”. Her capacity to present well in external contexts including in the work place is considered at paragraphs 257, 246, 294, 322, 334 in the judgment. When considering financial matters and in particular the matters under section 75(2) I found that each of the parents are equally physically and mentally capable of full time employment in the future [at 413].
Although there is no evidence in relation to the current circumstances of either party, on the basis of affidavits and Financial Statements filed in the proceedings, my findings as set out in the April 2015 Judgment and the wife’s affidavit and Financial Statement filed in May 2015, I am satisfied that the husband has the financial capacity to pay for his legal costs associated with the substantive proceedings and the stay application and that the wife has some financial capacity to satisfy an order with respect to the husband’s costs in the proceedings.
Whether any party to the proceedings is in receipt of assistance by way of legal aid
Neither of the parties was assisted in the proceedings by way of legal aid. As I understand it, the wife has been granted legal aid funding in respect of a separate application not related to the application for costs under consideration.
The conduct of the parties in relation to the proceedings
It is submitted on behalf of the husband that the wife’s conduct in seeking to have recordings and transcripts of covertly recorded conversations between the parties excluded from the material provided to the expert was misconceived by the wife and resulted in considerable additional costs. It is submitted on behalf of the husband that this is relevant to the costs application in respect of the trial only.
An application in relation to the material to be provided to the expert for the purposes of his assessment (the covertly taped conversations and transcript) was determined by Foster J prior to the trial. The husband’s application was unsuccessful and he was ordered to pay the wife’s costs in this regard. That costs order was the subject of an appeal. The conduct of the parties in relation to that issue is not relevant to the costs application under consideration.
It is submitted on behalf of the wife that the husband’s conduct in filing voluminous affidavits and adducing evidence of 21 recorded conversations “added significantly and unnecessarily to the wife’s costs”. It is submitted that the recorded conversations in question “generally lack context” and that the husband’s “enormous affidavits contained large amounts of useless material” which it is submitted increased the costs of the wife.
As can be seen in the April 2015 Judgment, the recorded conversations were crucial evidence in relation to a central matter in dispute being the husband’s allegations of the wife’s violent, coercive and threatening conduct over a number of years. The complaint that the recordings “lack context” was also made by the wife at the trial and rejected. The evidence of the covertly taped conversations is dealt with at length in the April 2015 judgment and in particular from paragraphs 74 to 84, 90 to 92, 96 to 100, 111 to 113, 133 and 137. The context of particular recorded conversations is clearly identified in those paragraphs. Many individual recorded conversations are set out in the paragraphs referred to and formed the basis of my findings of critical matters especially in relation to the wife’s violence.
Although the expert had formed his opinion concerning the wife without listening to the recorded conversations when those recordings were subsequently provided to him, he said in oral evidence that hearing them made him feel more confident in his professional opinion. The expert also felt that “the lived experience of hearing the intensity of the wife’s coercion and verbal aggression [in the recorded conversations] ... reinforced [his] concerns about risk.” [at 240]
Having regard to the foregoing, I do not accept the submission made on behalf of the wife that the recorded conversations added unnecessarily to the wife’s cost of the proceedings and generally lacked context as they were a significant feature of the evidence upon which important findings were made. I also do not accept the submission that the husband’s affidavits were unnecessarily voluminous and contained “large amounts of completely useless material”. While the husband’s trial affidavit was lengthy, there were many serious allegations based upon a large number of individual incidents that required determination in these complex proceedings.
It is also submitted on behalf of the wife that a finding in the April 2015 judgment adverse to the husband that he attempted to minimise his income for the purpose of reducing child support is relevant in these proceedings. In the judgment I did make the finding that the husband attempted to minimise his income for the purposes of minimising child support (paragraph 335) and found that his lack of financial support for the children for 18 months following separation did not reflect well upon his attitude towards the responsibilities of parenthood. However, by the time the final hearing was complete, the husband was working and earning an income again and was committed to supporting the children in the future. At the time of writing of these Reasons, the husband has had the three children in his full time care for two years. His previous poor conduct with respect to providing financial support to the children over six years ago is not a weighty factor in this application for costs in my view.
Neither party submits that there is any relevant conduct of either of the parties to be considered in relation to the costs application with respect to the wife’s application for stay.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The wife was wholly unsuccessful in relation to the property settlement orders she sought in the proceedings. The wife’s case was conducted on the basis that the husband’s percentage entitlement to the total matrimonial property available for distribution should be five per cent at the most.
Although the wife’s proposed orders would have seen the husband receive a very small amount of the total matrimonial property (of around $35,000) each of the contentions on which this percentage entitlement was based were rejected by the court.
I accept the submission made on behalf of the husband that the magnitude of the discrepancy between the wife’s proposed orders and the orders made by the court that the husband receive 55 percent of the total net assets in reality means that the wife was wholly unsuccessful in the proceedings.
The wife’s appeal with respect to financial orders was dismissed.
The wife’s application for parenting orders was also to a very large extent unsuccessful. She had proposed orders that she have sole parental responsibility for the children, that they live with her and spend defined time with the husband.
The husband was successful as he ultimately proposed orders that he have sole parental responsibility for the children, that they live with him and spend limited supervised time with the wife. These orders were made by the court following trial and were not disturbed on appeal.
Whether either party to the proceedings made an offer in writing to the other party to settle the proceedings and the terms of any such offer
There is no evidence of any offers in writing that either party made to the other to settle the proceedings. The various applications made by each of the parties over time are dealt with later when considering other relevant matters.
In submissions made on behalf of the wife, it is suggested that there have been “various offers put to the applicant husband from the commencement of these proceedings” but there is no evidence in support of this submission. In any event, even if I were to accept that the only offer referred to in some particularity in the wife’s submissions was made, it does not favour the wife in this application. It is asserted on her behalf that on 20 March 2012 the wife’s solicitor made an offer to settle the matter on the basis that the husband receive 24 per cent of the matrimonial assets which was declined. This offer was well below the amount sought by the husband at the time and the orders that were made in the proceedings.
Other relevant matters
So far as parenting is concerned, the parties had previously reached agreement concerning a parenting arrangement for the children and had sought that orders be made by consent in the Federal Magistrates Court as it was then known in August 2012. As noted in paragraph 38 of the April 2015 judgment on 22 August 2012 as the husband had made serious allegations of violence against the wife in his affidavit filed in those proceedings, the Federal Magistrate declined to make the consent orders sought. A short time thereafter, each of the parents adopted entrenched positions that the children live with one parent and spend defined time with the other.
In relation to property, the husband filed four Initiating Applications in August 2011, August 2012, October 2012 and September 2014 respectively. Each of the first three applications sought orders that were less favourable to the husband than the orders that were made in the proceedings. In each Response the wife sought that the husband receive a percentage of the property less than he proposed. The husband sought that the property be divided with the wife receiving 65 per cent of the matrimonial property and he receiving 35 per cent in the first two applications. He then proposed that the property be split giving 60 per cent to the wife and 40 per cent to the husband in the third application. In his final proposal he sought the payment of $462,000 by the wife being $37,387 more than that which was awarded.
The authorities do appear to make some distinction between pursuing applications with respect to property that appear to have poor chances of success and parenting proceedings.
In Hawkins & Roe[7] the majority of the Full Court said at [147]:
Whilst the categories of occasions when costs may be ordered is not limited, the occasions on which such an order should be made in a parenting dispute should have some particular features. Where there is a complete absence of preparedness to compromise in the face of unambiguous expert evidence, where false allegations are made, or where one party is clearly motivated by self interest rather than the best interests of a child, then a judge may well conclude that there are circumstances justifying an order for costs.
[7] [2012]FamCAFC 77.
The majority of the Full Court clearly indicates that there must be quite particular circumstances in a parenting dispute in order to displace the rule that parties pay their own costs of the proceedings.
Discussion
I am of the view that this is not a case where there are any exceptional circumstances that justify departure from the usual order of party/party costs.
Although it may be said with the benefit of hindsight that the wife was unreasonable in her proposal that would see the husband receive so little of the matrimonial interests, her case was based on the contention that the husband made no financial or non-financial contributions to the property or relationship prior to their marriage in 2005. There was also a dispute between the parties about the husband’s contribution following the marriage. Where those versions differed I preferred the husband’s version which I noted was supported by independent evidence including bank records and other documents.
In the April 2015 judgment I assessed the original financial contribution of the wife as significantly greater than the husband and found that the financial contribution of each party throughout the relationship until their physical separation was roughly equal. I also found that the financial contribution of the wife was slightly greater than the husband after separation. I also took into account that the husband’s financial contributions and parental contributions were diminished by his reduced capacity to advocate for and protect the children throughout the marriage from the mother’s violence. Overall, I made a five percent adjustment in favour of the wife on the basis of relevant contributions up to the date of hearing and a ten percent adjustment in favour of the husband on the basis of the section 75(2) factors attaching particular weight to his future full time care and control of the three children of the marriage who were aged between four and nine years of age.
Had the factual matters in dispute been resolved in favour of the wife, the relative percentage entitlement of each party is likely to have been significantly different. It is highly unlikely however, in my view that the husband would have ever received as little as five percent of the matrimonial assets as proposed by the wife. These are in my view, weighty factors as noted earlier in these Reasons but are insufficient to justify the “very great departure from the normal standard” involved in the awarding of costs on an indemnity basis.
I now turn to the question of whether the circumstances of this case warrant the making of an order for costs on a party/party basis.
The High Court in Penfold v Penfold[8] indicated that the circumstances justifying an order for costs need not be exceptional, but they must, of themselves, be sufficient to justify the making of an order for costs. Therefore, there is no additional or special onus on an applicant seeking an order for costs other than the Court finding justifiable circumstances to make such an order.
[8] (1980) 144 CLR 311
Section 117(1) and the section 117(2A) factors discussed above are relevant to any order the Court may make for costs.
I am of the view that there are circumstances which justify making an order that the wife pay the husband’s costs in the substantive proceedings to the extent that they relate to the application for property adjustment.
As noted I find that the husband has the financial capacity to pay for his legal costs associated with the substantive proceedings but the wife also has some financial capacity to satisfy such an order also. I attach particular weight to the lack of success of the wife in the property proceedings and the history of the various applications for property orders made by the husband, each of which was more favourable to the wife by a significant margin than the orders made following the hearing. The final orders sought by the husband were only $38,000 below that which he was proposing. In a pool of total net assets of $913,000 where the wife proposed orders that would see the husband receive around $35,000 this is a matter of some significance.
I also attach weight to the wife’s response to the husband’s three previous proposals which were much more generous to her than the orders finally made. She continued to seek orders that would see her receive the vast majority of the matrimonial property with only a small sum going to the husband. The property orders made were vastly more generous to the husband than her proposed orders and were not disturbed on appeal.
For the reasons given, I am of the view that having found circumstances that justify the making of a costs order that it would be “just” for that order to be made on a party/party basis.
In my view, there are insufficient circumstances to justify the awarding of costs against the wife with respect to the substantive proceedings so far as they related to parenting orders. She was entitled to challenge the opinion of the expert and seek to prove her allegations in relation to the husband’s behaviour.
I am also not satisfied that there are justifiable circumstances to make an order for costs in relation to the application for stay. On the husband’s case, there was nothing untoward about the conduct of the wife in those proceedings, nor were the proceedings necessitated by her failure to comply with previous orders of the court. Although the wife was wholly unsuccessful in the sense that the court did not stay the parenting proceedings for the reasons given, the wife is not to be criticised for seeking a stay of the parenting orders in circumstances where she had appealed against them. No offer to settle this application was made. Although the wife was substantially unsuccessful with respect to the parenting orders, she was not wholly unsuccessful. The Full Court did find that there was an error which was remedied on appeal.
For the foregoing reasons I make the orders as set out at the forefront of this judgment.
I certify that the preceding seventy one (71) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hannam delivered on 5 May 2017.
Associate:
Date: 5 May 2017
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