Huxley and Huxley (No.2)
[2008] FMCAfam 1313
•22 December 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HUXLEY & HUXLEY (No.2) | [2008] FMCAfam 1313 |
| FAMILY LAW – Costs – Indemnity costs order sought. |
| Family Law Act 1975, s.117 |
| Colgate Palmolive v Cussons (1993) 118 ALR 248 Preston v Preston [1982] 1 All ER 41 |
| Applicant: | MS HUXLEY |
| Respondent: | MR HUXLEY |
| File Number: | NCC 569 of 2007 |
| Judgment of: | Lapthorn FM |
| Date of Last Submission: | 29 October 2008 |
| Delivered at: | Newcastle |
| Delivered on: | 22 December 2008 |
REPRESENTATION
| Solicitors for the Applicant: | Adrian Holmes |
| Solicitors for the Respondent: | Craney Family Solicitors |
ORDERS
That within 3 months the husband pay the wife’s costs fixed at $13,000.
That order (1) be stayed until the husband’s appeal is determined or a Notice of Discontinuance of the appeal is filed.
IT IS NOTED that publication of this judgment under the pseudonym Huxley & Huxley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT NEWCASTLE |
NCC 569 of 2007
| MS HUXLEY |
Applicant
And
| MR HUXLEY |
Respondent
REASONS FOR JUDGMENT
Introduction
On 7 October 2008 the court made orders in the contested property dispute between the parties. The husband was ordered to transfer to the wife his interest in a piece of real estate at Property T in New South Wales. Apart from that order each party was to retain all other items in their legal and or equitable possession or control. Two days later the wife provided written submissions requesting the court to order the husband to pay her costs on an indemnity basis in the sum of $40,257.58. Her alternative submission if the court was not minded to order indemnity costs was for the sum of $30,000 to be paid. A further alternative submission was that costs be paid in accordance with the Federal Magistrates Courts scale fixed at $17,135.48.
The husband asks the court to dismiss the wife’s application for costs.
Legal Approach
Ordinarily each party to proceedings under the Family Law Act would bear his or her own costs.[1] However if the court is of the opinion that there are circumstances justifying a costs order the court may make such order as it considers just.[2]
[1] Section 117(1)
[2] Section 117(2)
In determining whether to make such an order the court is required to have regard to a number of the factors set out in section 117(2A).
Financial circumstances of each of the parties
The wife earns $35,565 per year before tax and her partner earns $45,760. The orders of the court provided for the wife to receive the real estate in Property T which was mortgage free. She has no dependents. It was submitted on the wife’s behalf that in order to pay her legal costs she will have to mortgage the property at Property T.
The husband’s financial statement indicated he had an income of $850 per week. It was submitted on his behalf that this is an average amount as his income is dependent on his business [G] receiving a profit. The husband has a mortgage over his property at Property C and is expecting a child with his new wife in the not too distant future.
In the substantive proceedings I found that the husband had not made a full and frank disclosure of his financial affairs. This made it difficult for the court to determine the correct state of his business affairs. Whilst the husband’s stated gross income of around $44,200 per annum is modest I am not satisfied that this indicative of his entire financial circumstances.
Legal Aid
Neither party was in receipt of a grant of legal aid.
The conduct of the parties to the proceedings
During the hearing the court was critical of the husband for failure to comply with discovery.
The wife argued that as a result of the husband’s failure to make proper disclosure her costs of these proceedings increased. She says that the hearing time was prolonged as she had to rely on obtaining information from the husband during cross examination which should have been disclosed by him before the trial. Further the parties, because of the lack of disclosure by the husband, were unable to reach an agreement as to the value of items or identify areas of disagreement. It was submitted on her behalf that she was left with the task of preparing for the hearing on the basis that notional adjustments and add backs ought to be made. She also complained that an adjournment of the first day of the trial occurred because the husband had failed to file his case management documents.
The husband argues that the trial had been set down for two days and notwithstanding the adjournment on day one the matter still managed to be completed within time.
I am satisfied that whilst the wife’s case may have involved a different approach as a result of the husband’s lack of disclosure the matter was completed within the time initially set down for it. I take into account the lack of disclosure but I am not satisfied the trial was significantly prolonged as a result of that lack of disclosure.
The wife also argued that the initial response filed by the husband was framed in such a way that any reasonable person would have known that there was no chance of success. The husband initially sought orders that the wife transfer her interest in the Property T property to him and that she pay him the sum of $54,605.38. He claimed this sum was her expenditure along with interest accrued in respect of an ANZ Visa card. His response was filed on the 18 May 2007.
The wife had filed her application on 23 February 2007. She sought the Property T property be transferred to her and that the husband pay her $50,000 within two months.
Two weeks prior to the commencement of the hearing the husband filed an amended response significantly changing his position He no longer sought payment from the wife in relation to the ANZ Credit Card and instead proposed that he pay her the sum of $60,000. He would retain the Property T property.
The Property T property was valued at $260,000.
I accept that the husband maintained a position as to the length of marriage that was open to him to hold even though the court found to the contrary. The court found at paragraph 27 of the judgment that the husband probably intended to separate from his wife in 2003 but that he was not able to fully move on from her until 2005.
The parties disagreed as to the intention of the husband’s step father in providing for the husband in his will and through the provision of a loan to both parties. The wife did not file corroborative evidence on this issue until a couple of weeks prior to the hearing.
These two significant differences between the parties would have led them to form differing views as to the likely outcome of the proceedings. Even allowing for these differences of approach the husband’s initial claim could only be described as an ambit one. The wife’s claim could also be described in similar terms but probably not to the same extent. An ambit claim in itself does not necessarily warrant a costs order but it is a factor I will take into account but give it less weight than the other factors that I will consider below.
Before I leave this area there were a number of submissions about the circumstances surrounding the provision of legal advice to the husband, including the possibility of a conflict of interest and assumptions as to what advice was provided to him. These submissions are irrelevant to the task at hand and I have not placed any weight on them.
Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court.
The substantive proceedings were not necessitated by a failure of either party to comply with previous orders of the court.
Whether any party has been wholly unsuccessful
Neither party was wholly successful in their application to the court. The wife’s application sought not only the transfer of the husband’s interest in the Property T property to her but an additional sum of $50,000. The court declined to order the husband to pay any further lump sum to the wife.
The husband’s amended response which I note was filed only two weeks prior to the hearing saw the husband offer the wife $60,000. This was significantly less that what the wife was asking and indeed what the wife ultimately received in the proceedings. It was also significantly different from the response that had been filed almost one year before the amended response.
I am satisfied that notwithstanding the significantly divergent applications before the court and the ultimate orders made were closer to the wife’s application neither party was wholly unsuccessful.
Consideration of offers made in writing
On 23 August 2007 the wife made a written offer to the husband in order to attempt to settle the proceedings. The offer was said to be open until 4pm on 14 September 2007.
That offer was significantly different to the application filed by the wife. It is incorrect for the solicitor for the husband to argue that the written offer was in any way similar to her initial application. In this offer the wife offered to pay the husband the sum of $50,000 and upon such payment the husband was to transfer his interest in the Property T property to her. The initial application had the husband paying the wife $50,000 as well as the property transfer.
The offer was made not long after a conciliation conference. The written offer was addressed to Kinnear and Company, the solicitors on the record for the husband. The husband submitted that this offer was made at a time when he was moving on from having Kinnear and Company act for him. Kinnear and Company did not file a notice of ceasing to act until December 2007 and on 2 October 2007 a solicitor from Kinnear and Company appeared before the court on behalf of the husband. I therefore do not accept the submission made on the husband’s behalf that he was between solicitors at this time.
I accept the wife’s submission that the offer made was one that was better than the ultimate orders made. This is an important factor that should be afforded significant weight. Litigation is always expensive for parties and offers to settle need to be treated seriously in order to limit the ongoing costs of litigation. Although I have found the different perceptions of the parties may have led them to view the possible outcome differently I am satisfied that the offer to settle was within the range that a prudent litigant should have seriously considered.
Conclusions as to whether a costs order should be made
I am satisfied that it is appropriate for the husband to pay some or all of the wife’s costs. Whilst I have arrived at this decision weighing all of the factors in s.117(2A) I have formed this view primarily because of the offer of settlement made by the wife. For this reason I consider it appropriate that the costs order should be in relation to the litigation beyond the point when the offer was said to expire, ie: 14 September 2007.
Should and indemnity costs order be made
The solicitor on behalf of the wife argues that the costs that the husband should bear should be on an indemnity basis. The basis of that submission is that there are special circumstances in this case justifying such an order. They are said to be the failure of the husband to make a proper disclosure of financial information; the position adopted by him in relation to his initial response being beyond any reasonable view of the likely outcome and an absence of any offer made by him during the proceedings. It was also submitted that the wife’s offer was early in the litigation and therefore one that should have been taken up by the husband.
In Colgate Palmolive v Cussons[3] Sheppard J considered the jurisprudence in relation to the question of costs and confirmed the long standing practice is that such orders are to be on a party and party basis. His Honour held that the court must not make an order on another basis unless the circumstances of the case warrant it departing from the usual practice. In exercising its discretion the court would look to the particular facts and circumstances of the case and consider whether there is “some special or unusual feature in the case to justify the court in departing from the ordinary practice.”[4]
[3] (1993) 118 ALR 248
[4] Preston v Preston [1982] 1 All ER 41
In this case I am not persuaded that there are special circumstances or any unusual feature justifying indemnity costs notwithstanding that the court has been critical of the husband in not making a full and frank disclosure. Whilst that is a significant factor which I have taken into account I do not accept the other submissions of the wife justify indemnity costs. Whilst his initial response might be described as an ambit claim the wife’s own application was itself beyond what she was likely to receive.
Accordingly I decline to order indemnity costs.
Quantum
Having declined to order indemnity costs I turn to the wife’s alternative application for the husband to pay the sum of $30,000. It was said that the scale in Part 1 of schedule 1 of the Federal Magistrates Courts Rules is not a fair basis for calculating costs on a party and party basis due to the unusual difficulties in preparing this matter for trial. I am not persuaded that this particular hearing was in anyway difficult other than the lack of financial information. Whilst the lack of information may have required the wife to take longer in cross examination the matter was still confined to the two days.
This submission is really a second attempt to obtain indemnity costs at a lower rate. For the reasons I rejected the primary submission I reject this submission. I am not persuaded that it is appropriate to depart from the scale of costs.
The solicitor for the wife set out what the costs would be under the scale from the commencement of the proceedings. I have indicated that any costs order should relate to the period after the expiration of the offer to settle. There had been three short mentions after that period. Including those mentions, preparation and the hearing I am satisfied that the costs under the scale would amount to $12,385 excluding disbursements.
The photocopying sought in the disbursements is excessive. The filing fee relates to the commencement of the proceedings and the search fees should have been done prior to the conciliation conference. I therefore will not include them. The hearing fee however is one that is appropriate to include given the matter could have settled on the offer previously made. I will allow $250 dollars for photocopying and the $365 hearing fee which will bring the total costs to $13,000.
I am satisfied that it is appropriate to allow three months for the husband to make that payment.
The husband has lodged a Notice of Appeal in relation to the substantive proceedings. In the event the husband is successful in relation to that appeal there may be a different order for costs.
I propose to stay the order for costs until the appeal has been heard and/or a Notice of Discontinuance of the Appeal is filed.
For these reasons I make the orders set out at the commencement of this judgment.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Lapthorn FM
Associate: Helen Drysdale
Date: 22 December 2008
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