In the Marriage of Harris

[1987] FamCA 7

In the marriage of HARRIS, G.L. and HARRIS, L.Y.

(1987) FLC ¶91-822

Other publishers' citations: (1987) 11 FamLR 629 (1987) 15 FCR 79

Full Court of the Family Court of Australia at Melbourne.

Judgment delivered 28 April 1987.

Before: Fogarty, Joske and Treyvaud JJ.

Fogarty, Joske and Treyvaud JJ.: This is an appeal against the judgments and orders of Kay J. made on 13 August 1986 and on 26 September 1986 respectively: see (1986) FLC ¶91-763. The original Notice of Appeal contained some 21 grounds and in particular attacked the substance of the orders that were made on 13 August 1986. Those orders, so far as relevant, were in these terms:

``(1) That the husband forthwith transfer to the wife all his right, title and interest in the following:

(a) Pyramid Building Society accounts numbered 007.0000754 and 007.0005178;
(b) the parties joint Custom Credit Investment.

(2) That within thirty (30) days from this date the husband pay to the wife the sum of thirty thousand dollars ($30,000) and within a further sixty (60) days thereafter the husband pay to the wife a further sum of ninety thousand dollars ($90,000) (being a total of one hundred and twenty thousand dollars ($120,000)).

(3) That the sum of ninety thousand dollars ($90,000) aforementioned is to bear interest at the rate prescribed by the Family Law Rules from this date and in the event such sum is not paid by its due date such sum is to bear interest thereafter at fifteen per centum (15%) per annum calculated with daily rests until paid and the sum of thirty thousand dollars ($30,000) is to bear interest at fifteen per centum (15%) per annum from its due date until paid with daily rests.

(4) That the wife upon payment of all moneys due to her (she shall) assign and/or transfer to the husband all of her right title and interest in and to the assets of the partnership known as G.L., L.Y. & J.K. Harris and the husband (shall) indemnify the wife from this day in respect of any claims of whatsoever nature which may be made against her or the said partnership arising out of the affairs of the said partnership.''

On 26 September 1986, Kay J. after having received written submissions from counsel for the parties, made an order in the following terms:

``That the wife's costs properly incurred by her after the 1st day of March 1986 be taxed by the Registrar of this Registry of the Court and when so taxed be paid by the husband.''

At the hearing of the appeal, however, counsel for the appellant husband sought and was granted leave to amend the original Notice of Appeal in accordance with the Notice of Amendment dated 3 March 1987. This had the effect of reducing the number of grounds of appeal from 21 to five. The amended grounds are as follows:

``1. That in ordering the Appellant to pay the Respondent the aforementioned settlement of property within ninety days of the date of making the order the findings by the Learned Trial Judge that the Appellant had more than ample assets available for borrowings and that there was more than ample income available to service those borrowings were not supported by the evidence and the whole of the evidence.

2. That there was no evidence or no sufficient evidence to enable the Learned Trial Judge to decide that the income of the Appellant was $30,000-00 per annum.

3. That the Learned Trial Judge should have found that the Appellant's income was slightly more than $20,000-00 per annum.

4. That the Learned Trial Judge was wrong in law in finding that the Respondent had an obligation to seek to clarify the ambiguity of the Notice of Offer of Settlement.

5. That in so far as the Learned Trial Judge found that such ambiguity could have readily been clarified by a simple letter or phone call made from the Appellant's side His Honour failed to take account of or any sufficient account of any submissions made by the Appellant's Solicitors that `subsequent discussions by the husband's Solicitors with the wife's Solicitors could not clarify this issue and accordingly the offer was never accepted because being imprecise it was not capable of acceptance in that format'.''

It will be seen that the first three grounds relate to the orders made on 13 August 1986, while the final two grounds relate to the subsequent order for costs. It is convenient to deal first with grounds one to three. By these grounds the appellant no longer seeks to attack the actual substance or quantum of Kay J.'s order but seeks rather that the time for payment be considerably extended. In effect the appellant sought orders enabling him to pay the $120,000 by a payment of $70,000 within 90 days and the balance by five annual instalments of $10,000.

Because of the truncated nature of the appeal resulting from the amendment to the Notice of Appeal it is only necessary to deal very briefly with the facts of the case.

The parties were married on 26 May 1956 and separated under the one roof in about February 1982. Physical separation between the parties occurred when the wife left the matrimonial home in May 1984. A decree nisi for dissolution of marriage was pronounced by this Court on 18 October 1984. There are four children of the marriage all of whom are adult and self-supporting. At the time of the hearing the husband was 55 years of age and the wife 53 years.

The parties spent the whole of their married life together on a dairy farm outside Warrnambool and there conducted a dairy business in partnership. It further appears that from about 1978 the parties' son, J, became a member of this partnership. However, Kay J. found that this partnership had been dissolved, at least by the husband who had conducted the farm on his own and to the exclusion of the other partners since March 1985.

The land upon which the partnership business was conducted was not partnership property but was owned by the husband and his then elderly and infirm mother. They owned one allotment as joint tenants and the remaining four allotments as tenants-in-common. In the course of his judgment Kay J. found that the parties had combined assets of a little in excess of $317,000. Of this amount the sum of $138,000 was attributable to the husband's interests in real estate. In addition the wife had the sum of $6,000 invested with Australian Guarantee Corporation and an interest in remainder in the estate of her father from which she will receive, upon the death of her mother, something less than $30,000. The Court was informed by counsel for the husband on the hearing of this appeal that the husband's mother had died on 27 September 1986. As a result of this the husband has become entitled to receive an additional $162,000 worth of real estate. Probate of the mother's will, however, has not yet been granted. It should be noted, however, that for some years the husband and the partnership have enjoyed the unfettered use of his mother's interests in the various parcels of land.

After a careful consideration of the matters the Court is required to examine under sec. 79 of the Act, as they apply to the circumstances of this particular case, Kay J. made the orders which are set out earlier in this judgment. As stated the actual substance of these orders is no longer the subject of attack and what in essence the appellant seeks from his first three grounds of appeal is the granting of a considerably longer period of time in which to pay. It should be observed that $50,000 has already been paid by the husband to the wife.

We do not intend to deal with the first three grounds of appeal in any detail. The first ground was at best argued very faintly by counsel for the appellant husband and no argument at all was addressed by him to grounds two and three. All we feel therefore need be said in the circumstances is that in our view there was abundant evidence before his Honour to enable him to conclude that the appellant did have ample assets available to him to provide proper security for the necessary loan and sufficient income with which to service such a loan. Further his Honour was perfectly entitled to find on the evidence before him that the appellant would in future be in receipt of an income of $30,000 per annum as opposed to an income of slightly in excess of $20,000 as the appellant had suggested. In our view this is all that is necessary to say to dispose of the first three grounds of appeal.

Grounds four and five of the amended Notice of Appeal relate to the order that Kay J. made for costs on 26 September 1986. The background to this order is that following the judgment by Kay J. on 13 August 1986, counsel, who appeared for the wife, made an application for costs. At that time, however, there was some confusion as to what, if any, offers of settlement in writing had been served and filed with the Court pursuant to sec. 117C of the Act. Accordingly, Kay J. reserved the question of costs and as mentioned earlier, invited counsel for each party to provide him with written submissions.

Following the receipt and consideration of those submissions Kay J. concluded that the first offer in writing was one made by the husband to the wife in November 1985. It was in these terms:

``That the husband pay to the wife the sum of $55,000 in full and final satisfaction of her property claim in exchange for the wife transferring to the husband her interest in the whole of the matrimonial property.''

The second offer was from the wife to the husband. It was served on the husband on or about 4 February 1986 and read as follows:

``That the Husband pay to the Wife the Sum of $70,000 in full and final satisfaction of her property claim in exchange for the Wife transferring to the husband, her interest in the whole of the Matrimonial property currently in the Husband's possession.''

Kay J. expressed the view that he felt it was significant that there appeared to have been no correspondence passing between the solicitors for the husband and wife seeking to clarify what on the one hand the husband meant by the phrase contained in his offer ``the whole of the matrimonial property'' and what the wife on the other hand meant by the phrase ``the whole of the matrimonial property currently in the husband's possession''.

Yet a third offer was made by the husband to the wife. This was served on her shortly following 15 July 1986. It was in these terms:

``(i) That the joint investments of the husband and the wife with Custom Credit Corporation Ltd., totalling $13,000 plus interest accrued, be transferred to the wife;

(ii) That Pyramid Building Society Savings Account No. 007-0000754 in the name of G.L., L.Y. & J.K. Harris be transferred solely to the wife and the husband make no claim against the wife in relation to same;

(iii) That apart from the assets mentioned aforesaid, the husband and the wife each retain the assets currently in their possession;

(iv) That the husband pay to the wife the sum of $46,000 in full and final settlement of her application for property division.''

The final offer was served on the wife on 11 August 1986, contemporaneously with the commencement of the hearing before Kay J. Other than the husband increasing the cash sum payable to the wife from $42,000 to $64,000 the terms of this offer remained identical to those of the third offer.

We should perhaps add that the marked difference between the amount of the judgment and the range of offers is apparently explained by the valuation evidence given at trial and which was only obtained shortly before trial.

During the course of his judgment Kay J. said (see (1986) FLC ¶91-763 at p. 75,575):

``In my view any offer in writing to be considered by the Court in the exercise of this jurisdiction to award costs should generally set out the nature of the offer with precision. The amount of precision required must vary according to the circumstances of the particular case. The parties may choose to use terms in the course of their offer that could be readily understood by each other, and the fact that such terms are not necessarily capable of immediate and clear understanding by persons outside the arena of the battle, ought not to inhibit the Court in properly considering the offers made on questions of costs. To the extent that such offer may be ambiguous or unclear to the recipient of the offer, there is, in my view, an obligation on the respondent in the appropriate case to seek to clarify the ambiguity rather than to sit back and simply ignore the offer on the basis of such imprecision or ambiguity.''

We find ourselves unable to agree with the views expressed by his Honour in the latter part of that passage. We agree with his Honour that an offer filed under sec. 117C should be expressed ``with precision''. We do not consider that in ordinary circumstances this would be achieved by the use by a party of esoteric language which that party believes the other party would understand. The offer should be expressed in terms which are objectively capable of being clearly understood. Otherwise difficulties are likely to arise upon a purported acceptance by the other party of that offer or upon the assessment by the Court of that offer on the issue of costs. This view is in conformity with the approach adopted in relation to the procedure surrounding payments into Court in other jurisdictions, in respect of which it has been held that the prescribed form should be strictly adhered to: see Cumper v. Pothecary (1941) 2 K.B. 58.

However, our major disagreement with his Honour is that in our view where the offer contained in a notice filed under sec. 117C is ambiguous or unclear there is no obligation on the offeree to seek to clarify the terms of that notice, at least in the sense that the offeree may be disadvantaged on the issue of costs as a consequence of failing to do so. The only qualification we would make to that is that where the suggested ambiguity or lack of clarity related only to an obvious typographical error or other similar misdescription, the offeree, in choosing to ignore the obvious intent of the offer, may do so at some possible risk on the broad issue of costs under sec. 117.

The procedure provided for in sec. 117C is an important reform in financial matters under the Family Law Act and it is intended to assist in the early settlement of such proceedings. However, if that procedure is to be effective it is essential that the offer put forward by a party under that section be expressed carefully and with precision so that it is readily capable of acceptance or rejection by the other party.

Later in his judgment Kay J. correctly observed that the expression ``matrimonial property'' has no meaning within the context of the Family Law Act. His Honour stated that in his view when the husband and wife used the expression ``matrimonial property'', they were referring to ``the farm, the mortgage moneys, the stock, plant and equipment and the joint accounts and the Pyramid Building Society account''.

At this point it is perhaps worth stating that his Honour's judgments and the manner in which the case was presented before him proceeded upon the basis that the husband and wife had an entitlement to the partnership assets in specie thus ignoring the special nature of the ownership of partnership assets. This is lucidly expressed by Aickin J. in Re Ross Jones; Ex parte Beaumont (1979) FLC ¶90-606 at p. 78,111:

``... It is trite law that the interest of a partner in a partnership and in the partnership assets is a very different one from mere co-ownership of the relevant assets. The interest of a partner in a partnership is in truth his proportionate share of the assets of the partnership after their realization and conversion into money and after the payment of partnership debts. It is convenient to explain the nature of a partner's interest by quoting the observations of Kitto J. in Livingston v. Commr. of Stamp Duties (Q.) (1960) 107 C.L.R. 411 at p. 453:

`An analogy may be seen also in the case of a partner's interest in the partnership assets. That he has a beneficial interest, which the law will recognize and enforce, in every piece of property which belongs to the partnership is clearly established: In re Holland; Brettell v. Holland; Manley v. Sartori; In re Fuller's Contract; and none the less so because the nature of the interest is peculiar in that his share in the partnership, by virtue of which the interest in a given asset exists while the asset belongs to the partnership, consists not of a title to specific property but of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership: In re Ritson, Ritson v. Ritson; Bakewell v. D.F.C. of T.; that is to say, not a `definite' share or interest in a particular asset, no `right to any part' of it, but an interest which `can be finally ascertained only when the liquidation has been completed, and... consists of his share of the surplus': Rodriguez v. Speyer Brothers'.''

Kay J. next observed in relation to the wife's offer:

``If there was any doubt about that classification as not including the other items referred to above when the wife made her offer on the basis of the husband retaining the matrimonial property in his possession, it was clear that the wife intended to cover the field. Any doubt as to who was to get the joint Custom Credit deposit or the money in the Pyramid Building Society account could have readily been clarified by a simple letter or phone call made from the respondent's side. The submissions now filed on his behalf imply that the existence of such a doubt make the wife's offer so imprecise that the Court should disregard it entirely. I do not in the circumstances of this case, accept that submission.''

The problem with this passage in his Honour's judgment is that it ignores a very important passage in the written submissions of counsel on behalf of the husband. It reads as follows:

``This offer (i.e. the wife's) was not clear on the basis that possession of the Custom Credit Investment and Pyramid Building Society Savings Account No. 007-0000754 had not been ascertained. Neither of the parties had possession of those accounts. Subsequent discussions by the Husband's Solicitors with the Wife's Solicitors could not clarify this issue and accordingly the offer was never accepted because being imprecise it was not capable of acceptance in that format.''

The correctness of this statement was not put in issue either in the wife's written submission in reply to the husband's submission or at the hearing before us. Accordingly, in our view, the husband's solicitors carried out the very course of conduct which Kay J., wrongly in our view, held that they were obliged to follow.

In reaching his ultimate conclusion that an order for costs should be made in favour of the wife Kay J. said:

``The wife's offer then as I interpret it, would have meant that the wife would receive from the husband $70,000 and would retain her half-interest in the Custom Credit account, i.e. she would get $76,500. That is what she was prepared to settle for in February 1986. It can only be said that that offer on the written material was no longer open when the wife refused to accept the last offer of the husband.

The value of the last offer of the husband as compared with that of the wife, was $79,297.51 which comprised the whole of the Custom Credit moneys $13,000, the whole of the Building Society moneys $4,297.51 and the whole of the $62,000. By the day on which the husband made his last offer, the wife had of course incurred significant costs in preparing for this action. It is, in my view, quite understandable that whilst she was prepared to accept effectively $76,500 in February, by the day of the hearing, an offer less than $3,000 in excess of that amount was not acceptable to her.

In any event the end result is that she has done much better than any of the offers. Had the husband accepted the wife's offer made in February 1986 (even after some necessary clarification), the whole of this litigation would have been avoided. I propose, in the circumstances, to take into account the four offers filed pursuant to sec. 117C in determining whether it is just to order costs. In the light of the matters I have referred to and in the light of the financial circumstances of each of the parties to these proceedings, I consider it just that the husband contribute towards the wife's costs.''

It is of course clear from which we have already said that in our view Kay J. was in error in concluding that there was an obligation placed upon the husband to clarify the wife's offer. In any event, this was the very thing he attempted, through his solicitors, to do, but without success. The passage just quoted, however, raises some interesting matters.

The first is whether the wife's offer was in fact still open at the trial when the husband made his final offer. For these purposes we will treat the wife's offer as one which was made in terms which were sufficiently precise to be capable of acceptance. Kay J. found on the written material that it was no longer open for acceptance by the husband. This presumably was based upon the statement contained in the husband's submission which read:

``In the course of negotiations the wife withdrew her offer contained in her Notice of Offer of Settlement.''

We must presume that this was an oral withdrawal. The question therefore to be considered is whether it is permissible to withdraw a written offer of settlement other than in accordance with the Act and Rules. Section 117C read as follows:

``(1) Where a party to proceedings under this Act (other than proceedings under Part VI or VII or proceedings to enforce a decree made under Part VII) has made an offer in the form prescribed by the Rules of Court to the other party to the proceedings to settle the proceedings on terms specified in the offer, the first-mentioned party may file, in the court in which the proceedings are being heard, a copy of the offer.

(2) If a party to proceedings withdraws an offer a copy of which has been filed as mentioned in sub-section (1), that party shall file, in the court referred to in sub-section (1), notice that the offer has been withdrawn.''

The relevant rules relating to this topic are to be found in O. 29:

``(1) Where a copy of an offer of settlement in accordance with Form 60 or a notice of withdrawal of an offer of settlement in accordance with Form 61 is filed, the copy or notice shall not be placed on the court file in relation to the proceedings but shall be placed in a separate file.

(2) The withdrawal of an offer of settlement does not preclude a party from making a further offer of settlement.''

There is a sharp contradistinction between the drafting of sec. 117C(1), where the expression ``may file'' appears, and the drafting of sec. 117C(2) where the words ``shall file'' are employed. The problem of deciding whether words such as ``shall'' or ``may'' should be interpreted as being either mandatory or directory is notorious. This problem is well amplified by D.C. Pearce in his book, ``Statutory Interpretation In Australia'', 2nd ed. p. 163:

``... One of the most intractable problems encountered by the courts in the interpretation of legislation is the meaning to be placed on words such as `shall', `must', `is required', etc., which import some sort of an obligation in contradistinction to words such as `may', `it is lawful', `if he thinks fit', etc., which import a discretion in the person concerned. The approach that could, and perhaps should, have been adopted was to have held that the use of the words in the first category imposed an obligation that had to be complied with, while the use of the words in the second category gave a discretion or were directory only. This clear cut approach has not, however, been followed. The courts have chosen rather to probe the true effect of the legislation in an endeavour to determine whether a provision is to be regarded as mandatory or obligatory on the one hand or discretionary or directory on the other. The result of this has been to produce a multiplicity of irreconcilable decisions making it impossible to assert with any certainty that a provision will be held either mandatory or directory in a particular context. The courts have long recognised the problems to which this gives rise. They have equally conceded that no formula is available to resolve those difficulties. `I believe, as far as any rule is concerned, you cannot safely go further than that in each case you must look to the subject matter; consider the importance of the provision that has been disregarded, and the relation of that provision to the general object intended to be secured by the Act; and upon a review of the case in that aspect decide whether the matter is what is called imperative or only directory': Howard v. Bodington (1877) 2 PD 203 per Lord Penzance at 211...''

Lord Diplock said in Grunwick Processing Laboratories v. Advisory, Conciliation & Arbitration Service (1978) A.C. 655 at p. 690:

``... Prima facie this expression (i.e. shall) appearing in a statute is used as a term of art to impose a duty to do what is prescribed, not a discretion to do it or not according to whether it is reasonably practicable to do it, nor a discretion to do something like it instead.''

See also per Lord Salmon at p. 698.

For our part we cannot see how the expression ``shall'' as appearing in sec. 117C(2) can be interpreted otherwise than as imposing an absolute and imperative duty upon the offeror to serve and file a Notice of Withdrawal of Offer of Settlement in accordance with Form 61 in the circumstances where the offeror has elected to file with the Court an offer in writing under sec. 117C(1). If the word ``shall'' is to be interpreted in a manner other than as mandatory there appears to be no purpose in the legislature using the word ``may'' in sec. 117C(1). It would, however, in our view have been more satisfactory for the expression ``shall'' to have been used in both subsections in a mandatory sense.

That is, as sec. 117C is presently phrased a party who has made an offer in the form prescribed by the Rules may, at his option, file a copy of that offer but he is not under any obligation to do so. However, once such an offer has been filed, to withdraw that offer a notice of withdrawal must be filed under subsection (2).

The next matter which requires consideration is the effect of a counter offer upon an offer. Under the law of contract an offer is terminated by the making of a counter offer by the other party: See Hyde v. Wrench (1840) 3 Beav. 334; 49 E.R. 132.

Thus if one were to apply the ordinary principles of contract law to this case the wife's offer of 4 February 1986 would no longer have been in existence after the husband's counter offer on 15 July 1986 was filed and served. If this were the true position in law the effect would be that any litigant who felt threatened by an offer in writing in the prescribed form could extinguish this threat merely by making a counter offer of a lesser amount.

It is our view, however, that this is not a matter which is governed by the law of contract. It is procedural and similar considerations should apply as they do to payments into court in other jurisdictions. Thus in Cumper v. Pothecary (supra), Goddard L.J. who gave the judgment of that Court said at p. 67:

``... there is nothing contractual about payment into court. It is wholly a procedural matter and has no true analogy to a settlement arranged between the parties out of court, which, of course, does constitute a contract. When once the seven days have expired the plaintiff can only get the money if he can obtain an order, and before the court makes an order it must consider whether it is right so to do...''

In our view the only way under the present provisions in which an offer may be withdrawn where the offeror has chosen to file it in court is by the filing and serving of a notice in the prescribed form, and such an offer in writing remains open until it is either withdrawn, accepted or extinguished by judgment. This, however, does not apply where the original offer in writing, although in the prescribed form, has not been filed in the court. Such an offer may be withdrawn orally or in writing. This is a most unsatisfactory position and, as stated earlier, in our view it would be preferable if the word ``shall'' appeared in both subsections of sec. 117C.

In our view the scheme provided by the section and the Rules is not satisfactory. It creates a number of difficulties. Consideration should be given to amendment to the section in the way we have indicated and also to amendment of the Rules and to give the Court greater control over offers of settlement and their withdrawal. For example, in some jurisdictions the Rules provide that an offer of settlement expires at the end of a prescribed period unless accepted or withdrawn in the intervening period.

The next matter which falls for consideration is that in making the order for costs Kay J. took into consideration not only the offer made by the wife but also the three other offers made by the husband. The question is whether Kay J. was entitled to do this under the Act.

So far as relevant sec. 117 provides as follows:

``(1) Subject to sub-section (2) and section 118, each party to proceedings under this Act shall bear his 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 sub-section (2A) and the Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court thinks just.

(2A) In considering what order (if any) should be made under sub-section (2), the court shall have regard to —

...
(f) whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer;''

In our view as the expression ``or otherwise'', which is contained in sec. 117(2A)(f), is intended to embrace other open or not without prejudice offers made by either party. This being so it seems clear that his Honour was entitled to consider the three offers made by the husband in conjunction with that made by the wife. Be this as it may, however, a court should, in our view, be very cautious, when exercising its discretion to make an order for costs, about considering offers in writing made by the party against whom the order for costs is sought. Otherwise a respondent may be worse off by filing a notice of offer and may be discouraged from doing so. In this case, however, it is clear from the context of Kay J.'s judgment that the compelling cause for ordering costs was the offer in writing filed and served by the wife.

In our view this appeal should be allowed. However, counsel for the appellant argued that even if this was the conclusion reached the wife should still receive some of her costs from the husband. It appears from an order of 21 March 1985 that Emery J. ordered both the husband and wife to obtain valuations of the farm at Cudgee, the house at Unit 1, 90 Cramer Street, Warrnambool, and the farm plant and stock. It was only the wife, however, who obtained these valuations. That valuer was called and gave evidence. His costs amounted to $6,900. This figure comprised both the cost of his valuations and of his attendance at court. Kay J. found that it was ``prudent'' for the wife to have obtained these valuations. It was accordingly submitted on behalf of the wife that, bearing in mind the order of Emery J., it was unfair that she should bear the entire burden of the cost of the valuations and of the valuer's attendance at court. With this contention we agree and are of the view that the husband should pay one-half of those costs.

The orders of the Court are:

1. The appeal is allowed and the order for costs made by Kay J. on 26 September 1986 is set aside.
2. Order that the husband pay to the wife the sum of $3,450 by way of costs within two months of this date.