Katic and Katic and Anor

[2014] FamCA 917

FAMILY COURT OF AUSTRALIA

KATIC & KATIC AND ANOR [2014] FamCA 917

FAMILY LAW – COSTS – Wife’s application for costs dismissed

Family Law Act 1975 (Cth)

Fitzgerald (as Child Representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123
Hitch & Hitch [2012] FamCAFC 124
Lenova & Lenova [2011] FamCAFC 141
Penfold v Penfold (1980) 144 CLR 311

APPLICANT: Ms Katic

RESPONDENT: Mr Katic

2^ND RESPONDENT: Mr B

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER: MLC 7934 of 2010

DATE DELIVERED: 28 October 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By Way Of Written Submissions

SUBMISSIONS RECEIVED FROM

SOLICITOR FOR THE APPLICANT: Boon Legal

SOLICITOR FOR THE RESPONDENT: Allan McMonnies

Orders

1. That the wife’s application for costs is dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Katic & Katic and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7934 of 2010

Ms Katic

Applicant

And

Mr Katic

Respondent

And

Mr B

2^nd Respondent

Independent Children’s Lawyer

REASONS FOR JUDGMENT

1. On 10 September 2014, I made final property orders as between the husband and the wife.  Those orders are subject to an appeal. 

2. The wife seeks that I determine her costs application now.  That application is set out in the written submission filed on 9 October 2014.  Provision was made for that process in the orders pronounced on 10 September 2014. 

3. On 24 October 2014, the solicitor for the husband filed a submission in reply to that of the wife but within it was a submission that said:

   The respondent contends that this matter ought not be considered until after determination of the appeal filed by the husband.

4. In my view it is more sensible to determine the costs application now and obviously before the appeal so that if any appeal was to arise out of such an order for costs, it could be dealt with as part of the substantive appeal.  To do otherwise would potentially give rise to the prospect of a second appeal.  Accordingly, I propose to determine the costs application now.

5. The order I made on 10 September 2014 provided that a response to any costs application was to be filed by 24 October 2011 (sic).  That must clearly have been understood.  Having begun writing these reasons, I was given a further submission dated 27 October 2014.  Accompanying it was an email from the husband’s solicitor saying a “supplementary submission” had been received that day from the husband’s counsel.  No suggestion was made that an indulgence was required or sought either from the Court or the solicitor for the wife.  I have read the submission notwithstanding the discourtesy but even though some of the things I will say hereafter may appear very similar to the “supplementary submission”, I had prepared these reasons before reading it.  I do not intend to take the new matters into consideration because of rule 11.02(1).

6. The orders made on 10 September 2014, amounted to an alteration of property interests.  They included the sale of the former matrimonial home and the division of the proceeds as well as the division of other real property between the parties.  These proceedings involved the parties’ adult son as an intervener.

7. The wife’s submission seeks party/party costs as and from 3 January 2012 primarily on the basis of an offer in writing made to the husband on 3 January 2012.  It is submitted that the offer contained a settlement proposal under which the wife would be prepared to accept a global 55 per cent of the “pool” inclusive of any allocation of the settlement to capitalise spousal maintenance. 

8. After the offer was made by the wife, the husband filed an amended response that bore no relationship to the settlement offer made by the wife.  It included a payment by the wife of $417,000 plus interest to the husband from which money was to be paid to the Australian Tax Office.  It included that the wife pay to the husband damages representing the loss of rental income on the two properties that were ultimately split.  That particular position adopted by the husband was not amended any further and no alternate submission was made by counsel for the husband at trial.

9. The outcome of the proceedings as perceived by the wife was that the judgment of the Court was that she receive 65 per cent of the global share of the “net pool” which she described as “significantly better” than the offer made to the husband and one which he ought reasonably have accepted.

10. The husband’s response as outlined in the submission filed on his behalf referred to the fact that the offer was conditional on the basis that the husband indemnify the wife in relation to claims brought by the intervener.  For reasons that are not clear to me, the submission went on to say that the wife’s offer was served on the husband’s former solicitor.  What that clearly indicates to me is that at least the husband had legal advice.

11. The wife submitted that not only did the husband refuse the offer, he pursued property orders that might be characterised as being wholly outside any “possible range”.  It was submitted that the offer was highly competitive and it was certainly not one which was narrowly eclipsed by the result.

12. The submission of the wife then said that the question of the offer was one thing but the husband’s conduct during the proceeding was another in terms of his non-disclosure of assets and the movement of funds.  Reference was made to findings by the Court about the husband’s conduct in relation to those matters.  The submission noted that neither party was legally aided nor was it based upon a failure to comply with orders of the Court save as to the disclosure just mentioned.

13. It was observed and submitted that the offer of the wife was made some two years prior to the conclusion of the proceeding and that significant weight ought to be attached to the husband’s failure to accept it. 

14. The husband’s submission was that even if there was a failure on the part of the husband to accept the offer, that was not sufficient to depart from the usual rule that each party should be responsible for its own legal costs.

15. In that context, I turn to the legal issues.

16. It is the usual rule, prescribed in s 117(1) of the Act, that each party should bear their own costs.  Are there circumstances here to justify an order for costs and, if so, what should it be?

17. In Penfold v Penfold (1980) 144 CLR 311, the plurality said that it was an accurate description of s 117 (1) to say that it expressed a general rule but that it was not paramount to s 117 (2) which provides that the “no costs rule” had to yield if, in a particular case, there were circumstances justifying the making of an order for costs.

18. Interestingly, on the question of how to approach the  determination of whether there was a justifying circumstance, in Hitch & Hitch [2012] FamCAFC 124, Thackray J said, at [116] – [117]:

    116.It is also essential to appreciate the breadth of the language employed in s 117(2), which provides that the Court may make such order as to costs as it considers “just”.  There is arguably no more imprecise word in the legal lexicon…

    117.    For better or for worse, the legislature has determined that decisions about costs in the family law jurisdiction are to be made on the basis of the judicial officer’s sense of what is “just”, albeit guided by reference to prescribed factors. Regrettably this means that, having resolved the substantive issue, the trial judge is then often faced with a second dispute about who should bear the costs. 

19. If the Court finds a justifying circumstance, it still has to consider the factors set out in s 117(2A) of the Act. It is relatively easy here to deal with those matters because the only one of some significance relates to the offer earlier mentioned. The financial circumstances of the parties are not such that they could be described as affluent.  Having said that, they have money and were able to defraud the Australian Taxation Office of significant cash in a business in which the husband still works. Their financial circumstances here should not affect their capacity to pay costs.

20. The question of conduct in relation to compliance with orders is relevant and the wife complained about the husband’s compliance with the provision of documents but she too was not forthcoming with information as I shall set out below.

21. It seems common ground that there are no legal aid issues in this case. The main argument concerns the offer of settlement. Whilst much focus was placed by the wife on that issue, there is no specific requirement that any one factor in s 117(2A) dominate. Indeed, neither s 117(2) nor s 117(2A) demand that any one factor has more weight than any other factor nor is it necessary that more than one factor must be present (Fitzgerald (as Child Representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123).

22. In relation to the wife’s focus on the offer she made, it is timely to recall what the Full Court said in Lenova & Lenova [2011] FamCAFC 141 that costs do not “follow the event”. On the subject of the offer, their Honours said that a timely offer in writing genuinely made might be an important part of a limited armory available to prospective litigants seeking to avoid the costs of litigation as would be a comparison between an offer to settle and the ultimate result. These are factors, albeit important ones, in the exercise of discretion but they are not determinative.

23. In my view, whilst the wife did make the offer, it would seem there is something to be said for the husband’s response that it was made in a vacuum.  Despite that, the financial position was clear to the parties because they knew or should have been able to work out holistically what each other had done with the significant cash assets which were the parties’ focus in the proceedings. Accordingly, examining the offer and the outcome in percentage terms does not assist me much.

24. What is of significance here is the question of the justification to depart from the s 117 principle.  Although in the wife’s submission, emphasis was placed on the behaviour of the husband in relation to the proceedings, the wife knew there had been cash money involved that ironically, both were fighting about. Much of the proceeding was taken up with disclosure on both sides. The wife failed to disclose inheritance interests and was evasive about on what she had spent money she took from the parties’ joint account. In addition, there was clear tax fraud.  The paucity of the husband’s costs submission did him (and his practitioners) little credit but I consider the just approach to this determination must come from the observations I made about the parties as litigants.

25. I said of the wife that she:

    ·    was evasive as a witness;

    ·    was (at trial) still evasive about what had happened to money she took at separation;

    ·    Was deliberately evasive and unco-operative;

    ·    conceded she had small parcels of land overseas;

    ·    was evasive and responded to questions by simply saying that her answer was whatever was written on “the paper”;

    ·    conceded she had lent a sum of $8000 to a woman she described as a friend she met in a refuge. She conceded that that had occurred in November 2012 and she had not been repaid that loan by that woman. That was not referred to in her financial statement at all.

26. I said of the husband that he:

    ·    asserted that the “Asset pool” included $417,679 that the wife “took from the business” during the marriage that she had not declared for taxation purposes. This was said to be the undeclared or “omitted” income as calculated by the parties’ accountant. The evidence did not support an assertion that the wife took that money. The husband called that stealing. There was hypocrisy in his statement;

    ·    knew that the profit as disclosed to the accountant, was much less than his actual earnings.

27. Of the wife, I said I could not get a sense of her true financial position.

28. I did not accept the husband’s evidence about the taxation issue that the wife was solely responsible for this fraud on the Australian public. Of the parties generally, I said (their) taxation dishonesty was a joint enterprise.

29. As to the parties, I said that I had an absence of confidence in (their) evidence.

30. I made a determination on the evidence as best I could taking into account what I have just said about both parties. In my view, there is no basis for me to find it just here for a departure from the principle in s 117(1). The application for costs must fail.

I certify that the preceding Thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 28 October 2014.

Associate: 

Date:  28 October 2014