JEL v DDF (Repayment on Appeal, and Costs)
[2001] FamCA 907
•16 August 2001
[2001] FamCA 907
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT BRISBANE
Appeal No. NA 7 of 2000
Appeal No. NA 15 of 2000
File No.7719 of 1996
IN THE MATTER OF:
JEL
Appellant/Husband
- and -
DDF
Respondent/Cross-appellant Wife
REASONS FOR JUDGMENT
Before: Kay, Holden and Guest JJ
Heard: By way of written submissions:
Judgment: 16th day of August 2001
APPEARANCES: Mr Kirk of Senior Counsel (instructed by Barkus Edwards Doolan, Solicitors, Level 9, 370 Pitt Street, Sydney, NSW 2000) appeared on behalf of the appellant husband.
Mr Young of Queen’s Counsel assisted by Mr Strum of counsel (instructed by Habermann & Associates, 193 North Quay Street, Brisbane, Qld 4000) appeared on behalf of the respondent/cross appellant wife.
ORDERS – overpayment result of successful appeal – whether husband entitled to interest upon repayment – rate of interest payable on repayment – date from which interest payable on repayment
COSTS – circumstances justifying order - offer of settlement – whether failure to accept offer sufficient to justify the making of a costs order on an indemnity basis
On 26 October 2000 an appeal was allowed from property orders made by May J on 26 November 1999, whereby her Honour divided the property of the parties 65:35 in favour of the husband. In allowing the appeal and re-exercising the discretion, the Full Court ordered the property be divided 72.5:27.5 in favour of the husband.
Following the orders the parties were given the opportunity to file written submissions in relation to: any further orders necessary to give effect to the judgment, the agreed limits of the wife’s capital gains tax liability and the costs of the appeal.
A dispute arose as to the amount the wife would have to repay in order to give effect to the judgment of the Full Court. The husband submitted that the appropriate amount to be paid was $2,462,834.75; the wife submitted that it was $2,438,786.29. The difference, an amount of $24,048.46, is the amount of interest paid by the husband, subject to a consent order, on moneys due and unpaid by him between 24 May 2000 and 5 July 2000 at a rate of 9.55%. The interest was paid in respect of part of the last instalment paid to the wife under the original orders of May J some 42 days after the time prescribed. The amount on which the interest was calculated was $2,188,403.53, which is less than the sum the wife must repay pursuant to the orders of this Full Court.
Held (per Kay, Holden and Guest JJ):
An appellant who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment together with interest: Commonwealth of Australia and McCormack (1984) 155 CLR 273. That McCormack (supra) represents the law in this area has been expressly recognised in far more recent times by various courts: See, for example National Australia Bank Ltd & Ors v Bond Brewing Holdings Ltd & Ors [1991] 1 VR 386 at 597 per Brooking J; Meerkin and Apel v Rossett Pty Ltd (No. 2) [1999] 2 VR 31; Idemitsu Queensland Pty Ltd v Agipcoal Australia Pty Ltd (1996) 1 Qd. R. 26 at 46; Production Spray Painting and Panel Beating Pty Ltd & Ors v Newnham & Ors [No. 2] (1991) 27 NSWLR 659 at 663 and Burke & Anor v Gillett & Anor [1996] 1 VR 196 at 201; Krishna v Loustos [No. 2] [2001] NSWCA 99 (11 April 2001).
It is appropriate that the wife repay the money overpaid by the husband including the money paid by way of interest to him with interest.
The husband’s submission that interest should run from the date of overpayment, that being 5 July 2000, is consistent with authority. Interest should commence from the date of overpayment and run up to and inclusive of the date the payment is made to the husband.
The wife has been aware of the result of the appeal since 26 October 2000. It was apparent that she would have to repay not less than $2,438,786.29. The wife could have taken steps to protect herself against a claim for interest, and the lack of a formal order that she do so is not a sufficient reason.
The economic costs of the overpayment outlined by the husband are not matters that ought to result in the wife paying interest at a penalty rate. The appropriate rate is in accordance with the Westpac Banking Corporation 30-day bank bill investment rate.
Costs of the appeal:
The husband has been substantially successful in relation to his appeal against the division of property, but has been unsuccessful in relation to other aspects of his appeal. The wife was substantially unsuccessful in respect of her cross-appeal against the division of property.
The husband made an offer to the wife on 23 May 2000. If the wife had accepted this offer, she would have received significantly more than from the orders of this Court.
The wife’s failure to accept the husband’s offer, coupled with the comparative success of the parties on appeal ought to lead to an order for costs in favour of the husband. The wife ought not to pay all of the husband’s costs given he was only substantially successful.
The failure to accept an offer which in retrospect, perhaps should have been accepted is without more, insufficient to justify the making of a costs order on an indemnity basis. The rejection of the offer must be at the very least imprudent.
Wife’s application for a costs certificate refused.
The wife is ordered to pay 75% of the husband’s costs of the appeal and the cross-appeal on a party and party basis from 23 May 2000, as agreed or taxed.
Wife to repay the money overpaid by the husband, including the money paid by him by way of interest, with interest calculated at the Westpac Banking Corporation 30-day bank bill investment rate, commencing from 5 July 2000 up until and including the date on which the amount is repaid.
Wife to pay 75% of the husband’s costs of the appeal as agreed or taxed.
Reportable.
May J made orders for settlement of property after a defended hearing on 26 November 1999. The husband appealed against certain of those orders and the wife cross-appealed against others. We heard the appeal and cross-appeal on 7, 8 and 9 August 2000 and delivered judgment on 26 October 2000.
When delivering judgment, we granted the parties liberty to file written submissions with regard to:
(a) any further orders necessary to give effect to our judgment;
(b) the agreed limits of the wife’s capital gains tax liability; and
(c) the costs of the appeal.
The husband’s written submissions were filed on 18 November 2000 and the wife’s on 7 December 2000. The husband filed submissions in reply on 14 December 2000.
On 22 November 2000, the wife filed an application for special leave to appeal in the High Court of Australia. Special leave was refused on 27 June 2001. It became, therefore, appropriate for us to deal with these outstanding matters.
We, however, called for supplementary submissions. We did so for two reasons, the first being the desire of counsel for the husband to draw to our attention an additional authority. The second reason was that we were not satisfied that the parties, and in particular the wife, had in previous submissions adequately dealt with the date from which interest should run if ordered or at what rate the interest should be paid.
The husband’s supplementary written submissions were filed on 30 July 2001 and those of the wife on 6 August 2001.
ORDERS TO GIVE EFFECT TO THE REASONS FOR JUDGMENT
The husband submits that an amendment should be made to the orders to include a variation of preamble 1.8 to the orders of May J of 26 November 1999. It is submitted that the amendment should be:
“That the figures “65” and “35” in Preamble 1.8 be deleted and in lieu thereof, the figures “72.5” and “27.5” inserted.”
Counsel for the wife agrees with that submission and that amendment will be made in due course.
The husband submits that amendment should be made to the orders to include a variation of order 26 of May J’s orders and that the additional order should read:
“That the figure “35” in Order 26.1 be deleted and in lieu thereof “27.5” be substituted, and that in Order 26.2 the figure “65” be deleted and the figure “72.5” be substituted.”
Again, counsel for the wife agrees with that submission and that amendment will also be made.
The husband seeks the following additional orders:
“7.That to give effect to the Reasons for Judgment of the Full Court made 26 October 2000, that the wife:
7.1within 7 days of the date of these Orders, pay to the husband by bank cheque the sum of $2,462,834.75;
7.2within 7 days of the date of these Orders, do all acts and things, cast all votes, and sign all documents necessary to re-transfer to BR Pty Ltd the following WG Ltd shares:
7.2.11,800,001 of the ordinary shares previously held as at the date of the 17 March 1999 agreement; and
7.2.2130,920 of the shares previously held as a result of the 28 May 1999 placement;
it being acknowledged that the purpose of the transfer is to set aside ab initio the previous transfer of the said shares from BR Pty Ltd to the wife made pursuant to the Orders of Justice May made 26 November 1999.”
The making of those orders is opposed by the wife in two respects. The first is that she seeks 28 days, rather than 7 days. We are of the view that the wife has had ample time to re-organise her affairs and that the appropriate period of time ought to be 14 days.
The second is that the wife asserts that the appropriate amount to be paid to the husband is not $2,462,834.75 but rather, should be $2,438,786.29. The difference between the two amounts is the sum of $24,048.46. That is the amount of interest paid by the husband between 24 May 2000 and 5 July 2000 on the moneys due and unpaid by him pursuant to paragraph 2.3 of the orders of May J at a rate of 9.55%.
This interest that was actually paid to the wife was in respect of part of the last instalment paid to the wife under the original order of May J some 42 days after the time prescribed. The amount on which the interest was calculated was $2,188,403.53. This is a sum that is less than the amount the wife must repay pursuant to the orders of this Full Court. It is submitted, therefore, that to permit the wife to retain that interest in such circumstances would be unjust.
The payment of the interest was the subject of consent orders made by May J on 8 June 2000 in order to accommodate the husband who was purportedly unable to make the required payment in full to the wife by the date ordered by the learned trial Judge.
The wife submits that in agreeing to grant the husband the extension of time within which to make the balance of the payment, the wife thereby enabled the husband to avoid the operation of paragraph 2.4 of the orders of May J which would have resulted in the sale of the Mermaid Beach properties which the husband wanted to retain for his own use and benefit. It is argued that if the husband had wanted to avoid the payment of interest, he could have sought a stay of the operation of the orders. It is common ground that he did not seek such a stay.
As far as this aspect of the matter is concerned, we do not agree that whether or not the husband sought a stay of the orders is the point in issue. It must be remembered that if May J had ordered that the wife receive 27.5% of the value of the assets, the husband would never have been placed in the position of having to consider a sale of those properties in the first place. In our opinion, the real issue is whether or not the husband is entitled to restitutio in integrum.
In determining that issue, we also intend to deal with the next order sought by the husband, which is:
“8.That the wife pay to the husband interest on the sum of $2,462,834.75 calculated at the rate prescribed by the Family Law Rules from time to time, said interest to commence on 5 July 2000 (being the date the final instalment was paid by the husband) and to run up to and inclusive of the date on which the wife makes the payment of the sum of $2,462,834.75 to the husband.”
Counsel for the husband relies heavily upon the decision of the High Court in Commonwealth of Australia and McCormack (1984) 155 CLR 273. In that case it was held per curiam that an appellant who satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment together with interest. The Court said at 276:
“ “Restitutio in integrum is the right of every successful appellant”: per Lord Field in Cox v. Hakes [(1890) 15 App. Cas. 506, at p. 547]. An appellant who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment of the money paid by him with interest: Rodger v. The Comptoir D’Escompte de Paris [(1871) L.R. 3 P.C. 465]; Merchant Banking Co. v. Maud [(1874) L.R. 18 Eq. 659]. In the former case, Lord Cairns said [(1871) L.R. 3 P.C., at p 475.]:
“… one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the Suitors, and when the expression ‘the act of the Court’ is used, it does not mean merely the act of the Primary Court, or of any intermediate Court of appeal, but the act of the Court as a whole, from the lowest Court which entertains jurisdiction over the matter to the highest Court which finally disposes of the case.” ”
Counsel for the wife argues that English authority which has been adopted by the High Court stands for the proposition that a judgment on appeal is not ipso facto antedated by reason that it is substituted for the judgment below, and interest will run from the date of the judgment on the appeal unless the appellate court was persuaded to antedate its judgment to the date of the judgment below.
We have been referred to the case of Borthwick v The Elderslie Steamship Co Ltd(No. 2) [1905] 2 KB 516 at 519-20:
“This is an application on the part of the plaintiff that judgment should be entered for him with interest. At the trial the learned judge gave judgment for the defendants, and consequently at that time there was no sum payable to the plaintiff. That decision was reversed by this Court, and our judgment, in favour of the plaintiff, for an amount to be ascertained, was affirmed on appeal to the House of Lords. The result of the litigation has unquestionably been that there was a long interval between the trial of the action and the time when it was finally ascertained that the plaintiff was entitled to judgment. The amount of damages to which the plaintiff is entitled has been agreed between the parties and is to be paid with interest. The sum due having been ascertained, the plaintiff claims interest upon it, not merely from the date when it was first decided that he was entitled to recover judgment, but from the date of the trial, on the ground that if his rights had been understood at the hearing he would have been entitled to an inquiry as to the amount of damages, and judgment would have been entered for a sum to be ascertained, carrying interest from the date of the judgment. But at the trial he did not obtain judgment, and he had to come to this Court, in which, for the first time, he was successful. … The judgment is not ipso facto antedated by reason that it is substituted for the judgment in the Court below. The power to antedate ought, in my opinion, only to be used on good ground shewn, and when I examine the facts of this case I can find no such ground. There was no delay attributable to one of the parties, no contumacy or unreasonable act of the defendants, who ought not to be treated as in default by reason of the postponement of the question of their liability, as if it arose from an act of theirs. I think, therefore, that no case has been shewn for antedating the judgment of this Court in order that the plaintiff may get interest for the time that elapsed between the trial and that judgment.”
We were also referred to Nitrate Producers Steamship Co Ltd v Short Bros Ltd [1922] All E.R. Rep. 710 at 712 where Lord Buckmaster stated:
“…where judgment is, for the first time, directed to be entered in favour of any litigant party by this House, the date which that judgment will bear must be the date when the order is made. It is, of course, a totally different proposition where the effect of an order in this House is to restore a judgment of the court of first instance which has been reversed by an order of the Court of Appeal. In that case the judgment of the court of first instance is expressly restored and remains standing as from the date when it was given. But, in this case, there was no judgment until the time when it was directed that that judgment should be entered and made. I, therefore, entertain no doubt that there was no power whatever reserved by the order of this House for any of the judges who were to make that order operative to make it operative on any date different from that which it bore.”
It is asserted by counsel for the wife that these decisions have been followed by the High Court in L Shaddock & Associates Pty Ltd v The Council of the City Parramatta (No.2) (1982) 151 CLR 590 at 597 and in Nichol v Allyacht Spars Pty Ltd(No. 2) (1988) 165 CLR 306.
The wife relies upon the English authorities and the decision in Nichol (supra) as authority for the proposition that the husband is entitled to interest not from the date of the overpayment, but only from the date that orders are ultimately made requiring repayment.
We agree with the submission of counsel for the husband that the various authorities referred to by counsel for the wife are easily distinguishable. They all deal with an unrelated factual circumstance in that they are all cases where an appellant has succeeded for the first time on appeal and the issue was whether or not the judgment ought to be antedated. The situation in McCormack (supra) was entirely different in that the High Court was dealing with a situation in which an overpayment resulted due to the appeal being successful. That the cases are distinguishable is implicit in the judgment of the High Court in Nichol’s case in that it was not thought necessary to refer to McCormack (supra). That McCormack (supra) represents the law in this area has been expressly recognised in far more recent times by various courts. See, for example National Australia Bank Ltd & Ors v Bond Brewing Holdings Ltd & Ors [1991] 1 VR 386 at 597 per Brooking J; Meerkin and Apel v Rossett Pty Ltd (No. 2) [1999] 2 VR 31; Idemitsu Queensland Pty Ltd v Agipcoal Australia Pty Ltd (1996) 1 Qd. R. 26 at 46; Production Spray Painting and Panel Beating Pty Ltd & Ors v Newnham & Ors [No. 2] (1991) 27 NSWLR 659 at 663 and Burke & Anor v Gillett & Anor [1996] 1 VR 196 at 201; Krishna v Loustos [No. 2] [2001] NSWCA 99 (11 April 2001).
In our view, it is appropriate that the money overpaid by the husband including the money paid by way of interest be repaid to him with interest. The husband seeks that interest be paid as from the date of overpayment by him, that being 5 July 2000. We agree with the submission that a finding that interest should run from the date of overpayment is consistent with authority.
Counsel for the wife submits that if interest is ordered to be paid, she should be allowed not less than 60 days to repay the husband and that interest ought not run until the expiry of that period. He so submits because:
“The Full Court delivered its Reasons for Judgment on 26 October 2000 and, by paragraph 6 of its Orders, called upon each of the parties “to file written submissions with regard to further orders necessary to give effect to this judgment, the agreement limits of the wife’s CGT liability and the costs of the appeal …” within a relatively short period of time. Each of (sic) parties duly filed submissions, the last in time being the husband’s submissions in reply filed 14 December 2000. It is submitted, with the greatest of respect, that the wife should not be penalised with interest in respect of the period from 26 October 2000 until the present time when there were no substantive orders of the Full Court other than –
That the figures “65” and “35” in order 1 be deleted and in lieu thereof the figures “72.5” and “27.5” inserted.
Since 14 December 2000, the parties have been waiting for the further orders of the Full Court necessary to give effect to the Judgment, the agreed limits of the wife’s CGT liability and the costs of the appeal. It is submitted that, in the circumstances, the wife should not be required to pay interest in respect of the period from 26 October 2000 until the present time.”
We do not agree. The wife knew the result of the appeal on 26 October 2000. As is apparent from paragraph 11 of these reasons, she knew she would have to repay not less than $2,438,786.29.
The reality is that she could have repaid that amount at any time after the judgment of the Full Court and she did not do so because she was awaiting, as were we, the determination of her application for special leave to the High Court.
The written submissions filed late last year made only oblique reference to “the agreed limits of the CGT Liability”. The calculation of this liability was agreed between the parties and was recorded in a minute handed to the Court during the course of the appeal. This could not have been a factor influencing the wife’s decision not to repay at an earlier date.
Similarly, the outcome of the costs applications could not have had any bearing on the decision as to whether or not to repay.
The only real reason advanced by the wife as to why she did not repay that portion of the overpayment which was not in dispute was that there was no formal order that she do so. That is not, in our view, a sufficient reason. It was always open to her to take steps to protect herself against a claim for interest. We are, therefore, of the view that interest should be paid on the overpayment as from 5 July 2000.
Before leaving this aspect of the matter, we refer to the assertion of counsel for the wife that in considering whether to “backdate interest” we must consider the overall justice and equity of the matter. We are urged to take into account the fact that two properties that had agreed values were subsequently sold by or on behalf of the husband at a considerably higher price.
On 24 July 2000, the wife filed a Form 42A application seeking that pursuant to s 93A(2) of the Family Law Act 1975, this Court receive further evidence upon the hearing of the appeal.
At the trial before May J in June 1999, two properties had an agreed value of $10,900,000 and $267,500 respectively. The further evidence sought to be introduced was that they were actually sold for $13,300,000 and $500,000 respectively.
In opposing that application the husband swore an affidavit on 31 July 2000. Without going into detail the effect of that affidavit was:
There had been a significant increase in the value of certain assets retained or received by the wife;
There had been an increase in the outgoings of the L Group; and
There were losses and decreases in the value of shares held by the L Group.
In the result, it was unnecessary for us to make any findings as to the value of the asset pool due to the fact that the parties had reached an independent agreement concerning various aspects of the matter. As we were not called upon to determine what losses or gains had been made by each of the parties, we agree with the submission of counsel for the husband that it would be unfair to focus on only two assets whilst ignoring the rest. We therefore reject the submission.
The husband seeks that the interest should be paid at the rate prescribed by the applicable Rules of Court, namely 11.3%. Counsel for the wife submits that the appropriate rate would be in accordance with the Westpac Banking Corporation 30-day Bank Bill rate referred to in paragraph 16 of the husband’s supplementary submissions.
Counsel for the husband submits that the prescribed rate of interest is just and appropriate “having regard to the economic costs of the overpayment, which had to be known to the wife”.
Those economic costs are said to be:
(a) the loss of an ability to invest $2,462,834.75;
(b)the costs incurred in having to realise an asset said to be $466,417.15; and
(c)the loss of an income producing capital asset with a net annual yield of between 10% and 10.5%.
We are of the view that these are not matters which ought to result in the wife paying interest at what can only be described as a penalty rate.
Firstly, to arrive at any other conclusion would be effectively to find that the manner in which the husband satisfied the judgment of the trial Judge was the only and/or the most cost effective way that he could have done so. We do not consider that we are in a position to make such a finding.
Secondly, the husband could have, but did not seek a partial stay of the operation of the orders of May J of 26 November 1999. It is unnecessary for us to determine what prospects of success such an application would have had. Suffice it to say that we would have thought that the extent of the economic consequences which it is alleged the husband would irrevocably suffer in the event that the appeal was successful would have been a powerful argument in support of such an application.
Finally, it is our view that to order the wife to pay interest at the prescribed rate would be to effectively place some blame on the wife for the economic consequences suffered by the husband. We do not see in the original or supplementary submissions any reason to attach such blame to her.
As we have indicated, counsel for the husband submitted that in the event we are not inclined to order the wife to pay interest at the prescribed rate, then the appropriate rate would be the Westpac 30-day bank bill investment rate. In his supplementary written submissions, counsel for the wife accepts the appropriateness of that rate in the event that the wife is ordered to pay interest. Accordingly, we propose to order that interest be paid at that rate.
COSTS
The husband seeks the following orders for costs:
“1.1. Certify for the attendance of Senior Counsel.
1.2.That the Respondent/Cross-Appellant pay the Appellant’s costs of and incidental to the Appeal and Cross-Appeal on an indemnity basis from 23 May 2000 as agreed or taxed.”
The wife also seeks certification for the attendance of counsel, including senior counsel and otherwise submits that there ought to be no order as to costs of and incidental to the appeal and cross-appeal. We do not intend to certify for the attendance of senior counsel, see Dickson and Dickson (No. 2) (1999) FLC 92-857.
The issues that remain to be determined are whether or not we should order the wife to pay all or part of the husband’s costs and, in the event that we do so, whether or not they should be payable on an indemnity basis.
Costs are governed by s 117 of the Family Law Act 1975. Section 117(1) provides that subject to sub-section (2) and sections 117AA and 118 each party to proceedings under the Act shall bear his or her own costs. Sections 117AA and 118 have no relevance to this case. Section 117(2) provides that this Court may make an order for costs if it is of the opinion that there are circumstances that justify it in doing so. Section 117(2A) sets out those matters that the Court shall have regard to in considering what order (if any) should be made.
We now turn to consider such of those matters as we consider relevant. The respondent argues that there ought to be no order for costs having regard to the disparity in the financial circumstances of the parties. Given the value of assets that will be retained by each of the parties, we are of the opinion that this is not a case in which the financial circumstances of either of them would mitigate against an order for costs being made.
We are required to consider the conduct of the parties in relation to the proceedings. Notwithstanding the submissions put forward by counsel for the husband in his written submissions, we take the view that there is nothing in the conduct of the parties that ought to lead to an order for costs being made against either of them.
We are required to take into account whether either party has been wholly unsuccessful in the proceedings.
The husband was substantially successful in relation to his appeal against the division of property. He was, however, unsuccessful in relation to his appeal as to his contributions in respect of S, which he withdrew, trusts and indemnification issues and realisation costs and capital gains tax and notional taxation liability on any theoretical collapse of the corporate/trust structure.
The wife on the other hand was substantially unsuccessful in respect to her cross-appeal against the division of property.
The vast majority of the written submissions and the hearing was devoted to the issue of contributions. The degree of success of each of the parties is perhaps best illustrated by the fact that the wife, on the one hand, increased her award by something in excess of $250,000 but, on the other hand, has to repay to the husband a sum of $2,462,834.75 and return to him WG shares. We are of the view that the comparative success of each of the parties would justify an order for costs in favour of the husband.
We are required to take into account whether either party to the proceedings has, in accordance with s 117(C) 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.
The husband relies on two offers. The first of these was an offer to settle the trial before May J made by the husband on 15 June 1999. For reasons that will become apparent, it is not necessary for us to consider this offer in view of the fact that the order for costs sought by the husband only seeks those costs from 23 May 2000. That is the date of the second offer made by the husband. That offer was annexed to the husband’s written submissions.
Counsel for the husband submits that the effect of the husband’s offer, if the wife had accepted it, would have been that she would have received an additional $849,590.30 and 772,368 shares in WG Ltd in excess of what she received from this Court. Counsel for the wife, in his written submissions, does not assert that the calculation is incorrect.
Counsel for the wife submitted that although the husband’s offer was more than the wife ultimately received under the orders of this Court, the offer completely disregarded the wife’s cross-appeal in relation to the Stockwell’s debt and the husband’s and L Group’s available and significant tax losses. We do not follow that submission. Surely what is relevant is the overall result and there can be no doubt that the wife would have been significantly better off had she accepted the husband’s offer.
The wife complains that the offer was only open for 35 days. These proceedings were litigated before the trial Judge between 7 and 11 and 15 and 18 June 1999. At trial, there were written submissions filed at various times exceeding 400 pages. Her Honour’s reasons for judgment covered some 79 pages. In our view, it cannot be said that the wife did not possess the necessary information so as to be unable to give informed consideration to that offer within a period of 35 days.
It is our view that the failure of the wife to accept the husband’s offer to settle, coupled with the comparative success of the parties on appeal, ought to lead to an order for costs being made in favour of the husband. We are not persuaded that the wife ought to be ordered to pay all of the husband’s costs. He succeeded on some issues but failed on others. Furthermore, he was only substantially and not entirely successful in achieving the result that he sought on appeal.
The issue remains as to whether or not those costs ought to be ordered on an indemnity basis. The category of cases in which it would be appropriate to make an order for indemnity costs does not appear to have been fully defined. The Full Court has, however, set out some general principles. In Kohan and Kohan (1993) FLC 92-340 the Court said at 79,614:
“The Proper Exercise of the Discretion
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O. 38 r.2, the provisions of O. 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O. 38 r. 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No. 2) (supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR at 368 to 370.”
The principles that emerge from the authorities were conveniently summarised by Sheppard J in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225. His Honour in that case summarised the position as follows:
“…
2.The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis… .
3.This has been the settled practice for centuries in England. It is a practice that is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it… .
4.In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course… .”
His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis. His Honour said at 233:
“Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.”
Insofar as an imprudent refusal of an offer to compromise is concerned, the authorities giving rise to this proposition are in the main New South Wales authorities. The Full Court warned in Kohan (supra), that this is in part attributable to the amendment of the Supreme Court rules of that State which provide for indemnity costs where a plaintiff obtains judgment in terms no less favourable than those of an offer to compromise made by him and not accepted by the defendant.
In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 the Full Court specifically acknowledged the category of cases that may give rise to an indemnity order are not closed. The Court said at 87,471:
“It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied that some “particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.”
In his written submissions, counsel primarily relies upon the assertion that the wife imprudently refused an offer to compromise.
We accept the proposition that the objective of the statutory provision in relation to written offers is to encourage settlements and to reduce the cost of litigation to the parties and the community. That, however, does not mean that the failure to accept an offer will necessarily result in an order for indemnity costs.
As the Full Court said in Kohan (supra):
“Insofar as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction so far has been to order no more than costs on a party and party basis. Even in cases where there has been dishonest concealment of assets or income as in Penfold v Penfold (1980) FLC 90-800 and Oriolo and Oriolo (1985) FLC 91-653, no more than party and party costs have been awarded.”
In our opinion, the failure to accept an offer which in retrospect, perhaps, should have been accepted is without more, insufficient to justify the making of a costs order on an indemnity basis. The rejection of the offer must be at the very least imprudent. We express no opinion as to when the rejection of an offer may be so classified. It is clear to us in the circumstances of this case that the rejection of the offer, although unwise in retrospect was not imprudent.
It must be remembered that by far the most significant aspect of this appeal was the assessment of the parties’ entitlements based upon their respective contributions within the meaning of s 79(4)(a), (b) and (c). The wife had the benefit of a judgment at first instance. It was an appeal against a discretionary judgment. The principles applicable to such an appeal were set out fully in the principal reasons for judgment and need not be repeated here. This is a case in which we acknowledged that there was no “uniquely correct answer”. Furthermore, we said at paragraph 174:
“Her Honour approached this matter diligently. Apart from the issues of the Stockwell debt and the failure to take into account the tax losses, there is nothing in her Honour’s reasons which point to a particular error.”
At paragraph 126 of the judgment, we acknowledge that in the absence of an error in approach or principle, the failure to take into account relevant circumstances, or the taking into account of irrelevant circumstances, the challenge must be that the orders fell outside a reasonable exercise of discretion, that is, that the orders were “unreasonable or plainly unjust”.
In our view, neither the husband nor the wife nor, indeed, their legal advisers could have, in advance, confidently predicted the outcome of this appeal. To that extent the refusal to accept the offer of compromise was not unreasonable or at least so unreasonable that it should attract an order for indemnity costs.
STAY
The wife in her written submissions sought that if we were to make orders for repayment that we stay the operation of such orders pending the determination of her application for special leave to appeal to the High Court and the determination of her appeal in the event that such leave is granted. The application for special leave having been refused, it is not necessary for us to consider this aspect of the matter.
FEDERAL PROCEEDINGS (COSTS) ACT 1981
The wife, in her written submissions, applied for:
“(a)a costs certificate for herself as respondent to the husband’s appeal, pursuant to section 6(3)(a);
(b)a costs certificate in respect of any costs she may be required to pay to the husband in respect of his Appeal pursuant to section 6(3)(b); and/or
(c)a costs certificate for herself in respect of her Cross-Appeal pursuant to section 9(1).”
The application is made on the basis that each of the appeal and cross-appeal succeeded, in part, on questions of law. The only submission put forward by the wife is:
“In the present case, the financial resources of the wife, whilst substantial by community standards are considerably less than the husband’s income, earning capacity, property and financial resources.”
In Tyson and Tyson (No. 2) (1993) FLC 92-401, the Full Court said as follows at 80,111:
“The grant or refusal of a costs certificate under the Act is purely discretionary, and the Act itself lays down no guidelines for the exercise of that discretion. Without intending to be exhaustive, matters such as the overall reasonableness or otherwise of the attitude adopted throughout the proceedings by the party applying for the certificate to the relief sought by the other, the financial resources of the applicant, and the likely quantum of that party’s total costs of the appeal, as compared with the “prescribed maximum amount” payable upon a costs certificate (in this case $4,000.00), all appear relevant for consideration by the Court in the exercise of that discretion, as too is the fact that the funds to honour such a certificate must come from the public purse.”
Having considered all of those matters, we are of the opinion that, in the proper exercise of our discretion, the wife’s application for a costs certificate should be refused.
PROPOSED ADDITIONAL ORDERS
The additional orders that we propose to make are as follows:
1.That the figures “65” and “35” in preamble 1.8 be deleted and in lieu thereof the figures “72.5” and “27.5” inserted.
2.That the figure “35” in order 26.1 be deleted and in lieu thereof “27.5” be substituted and that in order 26.2 the figure “65” be deleted and the figure “72.5” be substituted.
3.That to give effect to the reasons for judgment of the Full Court made 26 October 2000:
3.1The wife within 14 days of the date of these orders pay to the husband by bank cheque the sum of $2,462,834.75
3.2The wife within 7 days of the date of these orders do all acts and things, cast all votes, and sign all documents necessary to re-transfer to BR Pty Ltd the following WG Ltd shares
3.2.11,800,001 of the ordinary shares previously held as at the date of 17 March 1999 agreement; and
3.2.2130,920 of the shares previously held as a result of the 28 May 1999 placement
(It being acknowledged that the purpose of the transfer is to set aside ab initio the previous transfer of the said shares from BR Pty Ltd to the wife made pursuant to the orders of Justice May made 26 November 1999.)
4.That the wife pay to the husband interest on the sum of $2,462,834.75 calculated according to the Westpac Banking Corporation 30-day bank bill investment rate from time to time, the said interest to commence from 5 July 2000 and to run up to and inclusive of the date on which the wife makes the payment of the sum of $2,462,834.75 to the husband.
5.That the wife pay 75% of the husband’s costs of the appeal and cross-appeal on a party and party basis from 23 May 2000 such costs to be taxed in default of agreement.
6.All other applications for costs be dismissed.
Although each of the parties has asked us to make a notation on the orders noting an agreement that has been reached between them with respect to the realisation costs to be borne by the wife we decline to do so on the basis that to include notes on orders is not the usual practice of this Court.
I certify that the preceding 80 paragraphs are a true copy of the reasons for judgment delivered by this Honourable Court
Associate
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