Kedis & Bainbridge (No 2)
[2024] FedCFamC2F 587
•13 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Kedis & Bainbridge (No 2) [2024] FedCFamC2F 587
File number(s): NCC 3630 of 2021 Judgment of: JUDGE KEARNEY Date of judgment: 13 May 2024 Catchwords: FAMILY LAW – Costs - should a costs order be made pertaining to substantive de facto property proceedings – on what basis and quantum - whether it was reasonable or not to accept an offer prior to determination – finding a minimal percentage difference in outcome – making a special costs order in favour of de facto wife is justified Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 190, 191
Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: AJO & GRO [2005] FamCA 195; (2005) 33 Fam LR 134
Alston & Alston [2021] FedCFamC1A 96
Bircher & Bircher [2016] FamCAFC 123
Booysen & Ferreira [2022] FedCFamC2F 1248
Brady & Brady [2012] FamCAFC 4
Browne & Green [2002] FamCA 791; (2002) 29 Fam LR 428; (2002) FLC 93-115
Cassidy v Murray [1995] FamCA 91; (1995) 19 Fam LR 492; (1995) FLC 92-633
D & D (Costs) (No 2) [2010] FamCAFC 64
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish [2005] FamCA 158; (2005) 33 Fam LR 123
Jess & Jess (No 2) [2021] FedCFamC1A 49
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45
Lawson & Glenning [2021] FedCFamC2F 118; (2021) 64 Fam LR 414
Lombardi & Rider [2021] FedCFamC2F 57; (2021) 64 Fam LR 103
Medlon & Medlon (No. 6) (Indemnity Costs) [2015] FamCAFC 157; (2015) 54 Fam LR 1; (2015) FLC 93-664
Nada & Nettle (Costs) [2014] FamCAFC 207; (2014) FLC 93-612
Penfold v Penfold [1980] HCA 4; (1980) 5 Fam LR 579; (1980) FLC 90-800
Pennisi & Pennisi [1997] FamCA 39; (1997) 22 Fam LR 249
Prantage & Prantage (Costs) [2014] FamCA 850
Robinson & Higginbotham [1991] FamCA 5; (1991) 14 Fam LR 559; (1991) FLC 92-209
Sfakianakis & Sfakianakis [2019] FamCAFC 54; (2019) 59 Fam LR 419
Division: Division 2 Family Law Number of paragraphs: 72 Date of last submission/s: 2 May 2024 Date of hearing: Heard in chambers on the papers Place: Newcastle Solicitor for the Applicant: Tonkin Drysdale Partners Solicitor for the Respondent: Kilpatrick Hatton Solicitors ORDERS
NCC 3630 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS KEDIS
Applicant
AND: MR BAINBRIDGE
Respondent
ORDER MADE BY:
JUDGE KEARNEY
DATE OF ORDER:
13 MAY 2024
THE COURT ORDERS THAT:
1.Pursuant to r 1.31 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (‘the Div 1 Rules’), as may be applicable, the parties are relieved from the effects of r 8.15(3)(e) of the Div 1 Rules so as to permit them to read and rely upon any annexures to their respective affidavits.
2.By 13 August 2024, the de facto husband is to pay the de facto wife’s costs fixed in the sum of $31,000.
3.All outstanding interlocutory applications are otherwise dismissed.
THE COURT NOTES THAT:
A.The enforcement application filed by the de facto husband remains listed for procedural hearing before a Judicial Registrar on Tuesday 11 June 2024 at 9.30am.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE KEARNEY
INTRODUCTION
The de facto wife seeks a costs order against the de facto husband following the outcome of her property adjustment process (which formed part of the defended trial that was conducted earlier this year). In essence, the de facto wife says that if the de facto husband had accepted an earlier offer, then the family law costs moving forward would have been reduced. The de facto husband rejects the application, in part condemning the de facto wife’s conduct post-judgment. How should I resolve this dispute?
Unless a person’s preference is known to the Court, gender-neutral language will be adopted.
The issues in dispute are:-
(a)Should a costs order be made against the de facto husband relating to the substantive property adjustment proceedings?
(b)If so, on what basis should the de facto husband pay the de facto wife’s costs and what is the quantum?
(c)Following determination of the de facto wife’s costs application; what (if any) costs order should be made?
The proceedings involve a costs dispute invoking:
(a)section 117 of the Family Law Act 1975 (Cth) (‘the Act’);
(b)sections 190 and 191 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (‘the Court Act’);
(c)Chapter 12 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (‘the Div 1 Rules’); and
(d)Schedule 1 of the Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth) (‘the Div 2 Rules’).
Unless otherwise specified –
(a)a reference to a rule will be a reference to the Div 1 Rules;
(b)a legislative reference will be a reference to the Act; and
(c)a reference to an Order will be a reference to the final orders made 21 February 2024.
The applicant to the costs proceeding is MS KEDIS (‘the de facto wife’ or ‘DFW’) and the respondent is MR BAINBRIDGE (‘the de facto husband’ or ‘DFH’).
It is common ground that on 21 February 2024, following a four-day defended trial concluding on 8 February 2024; I made orders resolving all parenting and property adjustment disputes (‘the 2024 final orders’) which, relevantly to this costs application, provided for:
(a)A declared addback of $251,039 in favour of the de facto husband;
(b)A declared addback of $20,000 in favour of the de facto wife;
(c)A settlement sum of $416,814 to be received by the de facto wife (either from cash paid by the de facto husband or the transfer of existing funds from a solicitor’s trust account held jointly on the parties’ behalf);
(d)The de facto wife to vacate B Street, Suburb C (‘the Suburb C property’) upon receipt of the above amount;
(e)The de facto wife to cause D Pty Ltd to be wound-up and deregistered with ASIC before or at the time of her receipt of the settlement sum;
(f)A car and chair to be made available by the de facto husband for collection by the de facto wife;
(g)A superannuation splitting order of $29,865 in favour of the de facto wife from the de facto husband’s superannuation interest.
In the main, the parties have complied with the procedural orders[1] made to support my hearing of the de facto wife’s costs application in chambers. The parties agreed to the costs hearing taking place in chambers in the absence of the parties.[2]
[1] Chambers orders made 21.03.2024.
[2] Joint correspondence from the parties’ lawyers dated 12.04.2024 – marked Exhibit ‘A’.
Where there was a non-observance or an additional act taken, the parties consented to each other’s proposed action.[3]
[3] Email communications between the parties’ lawyers and the chambers of Judge Kearney on 02.05.2024 – marked Exhibit ‘B’.
The evidence before me consisted of:
(a)The judgment published on 21 February 2024 (‘the judgment’);
(b)The application in a proceeding filed by the de facto wife on 20 March 2024;
(c)The affidavit of Ms Kedis filed 20 March 2024 (‘the de facto wife’s affidavit’) for which I have exercised my discretion[4] and dispensed with the effects of rr 2.14(1)(a) and 8.15(3)(e) of the Div 1 Rules and r 2.02, Table 2.1, item 8 of the Div 2 Rules so as to permit the de facto wife to rely on an affidavit with a diminutive font and more than five (5) annexures that will now be read as part of the de facto wife’s affidavit;
(d)Acknowledgment of Service filed by the de facto wife on 8 April 2024;
(e)The de facto wife’s submissions on costs filed 29 April 2024;[5]
(f)The de facto wife’s submissions on costs in reply filed 2 May 2024;[6]
(g)The response to an application in a proceeding filed by the de facto husband on 11 April 2024;
(h)The affidavit of Mr Bainbridge filed on 11 April 2024 (‘the de facto husband’s affidavit’) for which I have exercised my discretion[7] and dispensed with the effects of r 8.15(3)(e) of the Div 1 Rules and r 2.02, Table 2.1, item 8 of the Div 2 Rules so as to permit the de facto husband to rely on an affidavit with more than five (5) annexures that will now be read as part of the de facto husband’s affidavit;
(i)The financial statement of Mr Bainbridge filed 11 April 2024;[8]
(j)The de facto husband’s written submissions filed 30 April 2024.[9]
[4] Rules 1.31 & 1.33.
[5] Marked exhibit ‘W1’.
[6] Marked exhibit ‘W2’.
[7] Rules 1.31 & 1.33.
[8] For ease of reference, in future the contents of this document will be referred to as ‘HFS’ with the item or part no. identified.
[9] Marked exhibit ‘H1’
I have considered all the evidence put before me and thank counsel for the precise way they have framed their respective submissions as being demonstrative of their mutual understanding of the principle – ‘less is more’.
Turning then to the issues.
Should a costs order be made against the de facto husband relating to the substantive property adjustment proceedings?
The de facto wife sought the making of a party and party costs order[10] against the de facto husband fixed in the sum of $41,775.
[10] See Sch 1 of the Div 2 Rules.
Having considered the submissions of the parties, I am satisfied that I should make a costs order against the de facto husband. Considering the legislative framework, my reasons for doing so are set out below.
There is a rebuttable presumption in the family law jurisdiction that each party bear their own costs provided the Court is satisfied that it is “just” to do so: s 117(1) & (2) of the Act. When this section was promulgated, it was suggested that this presumption was to encourage persons to settle their differences.[11]
[11] Explanatory Memorandum, Family Law Bill 1974 (Cth).
In a bid to reinforce the importance of the efficient, cost-effective and equitable management of the Court’s caseload (and the inherent benefits to families in doing so), parties and their lawyers can face costs orders if the Court is satisfied that there has been a failure to comply with the duty to conduct proceedings in a way that is consistent with the overarching purpose: ss 190 & 191 of the Court Act.
I have a broad discretion in exercising the costs jurisdiction including that I do not have to find a clear case to make out a costs order pursuant to s 117(2) of the Act: Penfold v Penfold [1980] HCA 4; (1980) 5 Fam LR 579; (1980) FLC 90-800 at pp 75,053-75,054.
The High Court of Australia in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45 (‘Latoudis v Casey’) at [13] stated as follows:
...in exercising its discretion to award or refuse costs, a court should look at the matter primarily from the perspective of the defendant. To do so conforms to fundamental principle. If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings.
In this regard, see also the Full Court decision (Fogarty, Kay and Hase JJ) of Cassidy v Murray [1995] FamCA 91; (1995) 19 Fam LR 492; (1995) FLC 92-633 at [35].
I have considered all the s 117(2A) matters but for the sake of efficiency, I will only reflect on those that had a significant bearing in relation to the parties’ circumstances and the decision to be made.
The financial circumstances of the parties
As contended by the de facto wife, I have reflected on the findings within the judgment.
In broad compass, and as mentioned earlier, the de facto wife recently received over $400,000 in cash as part of a series of property adjustment orders I made. Whilst that sum may be significant, just like the de facto husband’s legal fees of over $175,000;[12] the de facto wife has a legal bill to pay out of over $236,000.[13]
[12] B-[27].
[13] PJS-[12].
The de facto husband retained equity in the Suburb C property and had until mid-2024 to find the cash needed to satisfy Order 34. Despite being afforded that time, the de facto husband secured the funds early and now finds himself in a situation of his own making – that is, he asserts to having equity in the Suburb C property of about $250,000.[14]
[14] See HFS items 35. and 46.
In addition to the mortgage debt which has impacted on the equity available to the de facto husband; the de facto husband asserts that he owes the paternal grandmother (‘Ms E’) $200,000, his de facto partner, Ms F $49,662 and his brother (‘Mr G’) $6,390. There was nothing in the de facto husband’s evidence to dislodge the finding I made in the judgment about the transaction between Ms E and the de facto husband.[15]
[15] J-143.
As for the other two alleged loans, relevant to my assessment of the de facto husband’s financial circumstances; the transactions are void for uncertainty in material respects[16] because there is (for example) no evidence of when the loans can be called in, what (if any) interest is charged and how that interest is to be calculated and in addition, nowhere in the de facto husband’s financial statement is there an allocation for any repayments towards the two asserted creditors.[17]
[16] See Bircher & Bircher [2016] FamCAFC 123.
[17] cf. the specified mortgage repayments for the Suburb C property debt.
Insofar as the parties’ income and expenses, there are only a few matters worthy of reflection.
Firstly, there was no persuasive evidence before me to dislodge the findings I made previously about each party having an unrealised income earning potential[18], the de facto husband’s access to a financial resource via Ms E[19], nor the reality that the mother will retain primary care of the subject child of the relationship[20]. Secondly, as far as the Suburb C property is concerned, at trial, it was clear that the property has in the past been tenanted[21] and that optional income stream remains available to the de facto husband upon the de facto wife vacating the premises. Thirdly, I have considered the de facto husband’s contention that to cause the de facto husband to be over-extended or required to sell his only real asset would be a significant factor in the exercise of my discretion. In doing so, I note that impecuniosity is not a barrier to the making of a costs order.[22]
[18] J-197(b).
[19] J-193.
[20] J-187, 188 & 197(a).
[21] J-192.
[22] D & D (Costs) (No 2) [2010] FamCAFC 64, (Finn, Coleman and May JJ) at [21]; Nada & Nettle (Costs) [2014] FamCAFC 207; (2014) FLC 93-612 (May, Ainslie-Wallace and Austin JJ) at [11].
In summary, both parties will be left with a modest capital sum/equity, whether I make a costs order or not. Whether the de facto husband has to sell the Suburb C property to meet his current or future financial needs or otherwise secure further support from his family are matters which I refuse to speculate on and there is insufficient evidence to make a positive finding otherwise. Even if I could make a finding that the de facto husband would have to sell the Suburb C property, I would not consider that this finding would result in an unjust outcome; it would simply put the de facto husband in possession of an asset of a similar nature to the de facto wife, albeit of a lesser sum.
The conduct of the parties, and the overarching purpose
Although s 117(2A)(c) is limited to conduct “in relation to the proceedings”, Section 117(2A)(g) enables me to have regard to conduct that I consider to be relevant that would otherwise not fall within s 117(2A)(c).
In the longstanding Full Court decision of Robinson & Higginbotham [1991] FamCA 5; (1991) 14 Fam LR 559; (1991) FLC 92-209 (Nygh J with whom Simpson & Smithers JJ agreed) (Robinson & Higginbotham) observed at page 561 that –
Similarly, when one looks at para (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition. In the circumstances of this case, although para (f) does not have a priority per se, the considerations represented by para (f) are of overriding importance.
(my emphasis)
Rolling forward some thirty-odd years the same concerns are reflected in the overarching purpose. To paraphrase Alstergren CJ in Lombardi & Rider [2021] FedCFamC2F 57; (2021) 64 Fam LR 103 at [44] to [46] – elements of the overarching purpose seek to ensure the efficient use of judicial and administrative resources to ensure the timely disposal of cases. The Court’s obligation to pursue the overarching purpose is the driving force behind the Rules of Court and the Central Practice Direction.
In fulfilling their duty towards the overarching purpose - it is imperative that parties (and their lawyers) need to focus on the just resolution of their case quickly and in a manner that does not cause unnecessary use of Court resources or their own resources: see Judge Reithmuller (as he then was) in Lawson & Glenning [2021] FedCFamC2F 118; (2021) 64 Fam LR 414 (‘Lawson & Glenning’) at [9].
In the context of Nygh J’s commentary in Robinson & Higginbotham cited earlier, and the legislative changes since, the family law jurisdiction has for a long time been concerned about the effect of a party’s conduct on case management. That said, each party’s conduct either before, during or after the conclusion of the substantive proceedings can be the subject of consideration pursuant to either ss 117(2A) (c) or (g).
The de facto husband deposes to the de facto wife’s alleged failure to comply with Order 36 of the 2024 final orders.[23] Given the above analysis, at first blush, the de facto wife’s conduct may be relevant insofar as her obligation to adhere to the overarching purpose and the impact that has had; however, neither party made submissions about this consideration. Notwithstanding this observation, the broad discretion available to me, permits me to reflect on the de facto wife’s conduct.
[23] BB-[21] to [25].
Offers in writing
Section 117C sets out the framework about what constitutes an offer of settlement for the purposes of s 117(2A)(f). Part 4.2 of the Div 1 Rules prescribes the difference between an “open” and “without prejudice” offer and how to make/accept/withdraw an offer. There were submissions to the effect that the offers exchanged by the parties were not always consistent with s 117C.
To the extent that the parties’ financial circumstances are reflected in the previously cited paragraph from Robinson & Higginbotham, the sage words of Nygh J have resonated with me.
Offers must be seen in the context of the case, with consideration given to the offeree’s knowledge of the situation to which the offer relates.[24] An offer that is not sufficiently precise may not support the making of a costs order.[25]
[24] See for example Pennisi & Pennisi [1997] FamCA 39; (1997) 22 Fam LR 249; at pp 259-260 (‘Pennisi’) and Browne & Green [2002] FamCA 791; (2002) 29 Fam LR 428; (2002) FLC 93-115 (‘Browne & Green’) at [57] where the Full Court (Kay, Colan & Warnick JJ) observed that the failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. (my emphasis)
[25] Brady & Brady [2012] FamCAFC 4 (‘Brady’) at [38]
In this case, during the currency of the proceeding, both parties made offers to resolve the property adjustment dispute.[26] The de facto wife’s submissions concisely set out the chronology of events surrounding the making and consideration of these offers.[27] Each party sought the winding up of D Pty Ltd, and both parties informed each other of the expenses (estimated or otherwise) that would be paid out during the course of this case (either within their respective offers or in response to a question asked about that issue).[28]
[26] K-[13] and [18] and the associated annexures.
[27] Exhibit ‘W1’ at [19] to [23].
[28] K-[14] and [18] and the associated annexures.
There are three pertinent aspects about the above circumstances.
Did the de facto husband act unreasonably in rejecting an offer?
One of the de facto husband’s contentions is that it is not open for me to find that the de facto husband’s rejection of the de facto wife’s offer consisting of her offer dated 26 August 2022 (‘the DFW’s first offer’) and the addendum dated 31 August 2022 (‘the addendum’) and collectively ‘the DFW’s consolidated offer’ was unreasonable. In so doing, reliance is placed on the uncertainty around the estimated expenses in the winding up D Pty Ltd.[29] In other words, the de facto husband did not have adequate knowledge to give the DFW’s consolidated offer proper consideration.[30]
[29] Exhibit ‘H1’ at [21] & [22].
[30] See Browne & Green in an earlier footnote.
Looking holistically at each party’s offer and the further exploration of what D Pty Ltd’s expenses looked like (in the context of the DFW’s consolidated offer), the following is revealed:
(a)In mid-2022 the de facto husband considered that the winding up of D Pty Ltd would involve paying out a total of about $62,500 consisting of the pay out of:
(i)$43,158.88 for the payout of the Motor Vehicle 1 finance,
(ii)$3,297.62 for income tax; and
(iii)$16,072.00 for other tax obligations such as PAYG and GST;
(b)In mid-2022, the de facto wife informed the de facto husband that she considered that the winding up of D Pty Ltd would involve paying out a total not exceeding about $97,300 consisting of the pay out of:
(i)$46,336 for the payout of the Motor Vehicle 1 finance,
(ii)$20,437 for all tax liabilities; and
(iii)$1,650 for accountancy fees associated with the winding up;
(iv)$214 for all ASIC fees associated with the winding up;
(v)$10,418 for all GST, stamp duty and income tax liabilities associated with transferring the Motor Vehicle 1 from D Pty Ltd to the de facto wife; and
(vi)$18,226 for leave entitlements; and
in conclusion, the de facto wife reflected that these figures had been adopted from the estimates provided by the parties’ accountant [Mr H] served on your office (the de facto husband’s solicitors) previously. [31]
[31] K at pp. 21 & 22 (Annexure D) being a clarifying letter from Tonkin Drysdale Partners to Kilpatrick Hatton Solicitors dated 31.08.2022 which where applicable amended the de facto wife’s offer made on 26.08.2022 and otherwise confirmed the balance of that offer.
Notwithstanding the variation in each party’s understanding of D Pty Ltd’s exposure to the same (and other) liabilities; it is clear from the correspondence between them, and I find, that the de facto husband had more than adequate knowledge to give proper consideration to the DFW’s consolidated offer, firstly because he was able to formulate his own offer inclusive of the winding up of D Pty Ltd and the subsequent treatment of its liabilities, but also because of the disclosure given by the de facto wife – particularly in the addendum.
In further support of this finding; I note that in response to the de facto husband’s request to better understand what D Pty Ltd’s liabilities were (and thus enhance his knowledge of what the DFW’s first offer meant), in mid-2022, the addendum specified estimates of those liabilities fixed to an upper limit. This meant that the de facto husband knew “worst case” what the parties’ potential personal liability would be for D Pty Ltd’s debts that could not otherwise be met from the $35,000 held on trust for the parties - with the foundation for these estimates derived from disclosure made to both parties by their accountant. Although the balance sheet attached to the DFW’s first offer did not identify the trust moneys, the DFW’s consolidated offer clearly identified the asset and how it was to be treated in the context of winding up D Pty Ltd.
If the quantum of any of those liabilities was less than the estimates, then I acknowledge that the flow-on effect might change the percentage division between the parties and create the uncertainty that perhaps underlies the de facto husband’s submissions. To be clear however, given the nature and quantum of the property pool; and where the de facto husband asserted liabilities of $62,500 and the de facto wife $97,300 “maximum”, the differential of just under $35,000 does not in my view impinge the de facto husband’s knowledge and therefore capacity to give the DFW’s consolidated offer proper consideration.
What weight should I give to an offer that is marginally less than the outcome at trial?
The second issue raised, requires the Court to compare the outcome of the DFW’s consolidated offer with the outcome arising from the 2024 final orders. In Pennisi, the Full Court made clear that it is not the law that an offer of greater or equivalent value will result in a costs order; nor that just because an offer is marginally less than the amount ordered that the offer is not a factor to be taken into account.[32] The Full Court went on to say this –
We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree's knowledge of the parties' financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties' financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.
[32] Pennisi at pp. 259–260.
A consideration of the relevant 2024 final orders against the DFW’s consolidated offer (encompassing figures within the two letters and the balance sheet) is reflected in the below table which identifies the item, and the value of the interest to be retained/received by the respective parties:
Table 1 – comparison schedule of the effect of the 2024 final orders and the DFW’s consolidated offer
Item
De facto wife ($)
De facto husband ($)
The DFW’s consolidated offer
The 2024 final orders
The DFW’s consolidated offer
The 2024 final orders
Suburb C property
585,000
650,000
Motor Vehicle 1
60,000
60,000
J Pty Ltd
70,000
32,861
D Pty Ltd
(31,150) €
(69,000)
(31,150) €
0
Monies held on trust with Kilpatrick Hatton
0*
18,923
0*
0
Other items belonging to the de facto husband
45,000^
34,375^
Other items belonging to the de facto wife
3,000
0
Motor Vehicle 2
1,000
6,000
Monies held on trust for both parties by Kilpatrick Hatton
29,990
Cash adjustment to DFW
364,000
397,891¥
(364,000)
(397,891)
Addback of prepaid legal fees
50,000
51,039
Addback of s 90SM interim distribution
20,000
ANZ mortgage #...64 (Suburb C)
(100,000)
(97,977)
Super Fund 1
66,500§
70,253¶
Super Fund 2
66,500ö
69,654£
Nett property
$463,350
$503,468
$321,350
$372,650
€ The figure adopts the ‘worst case’ estimate of (say) $97,300 in the addendum less the Kilpatrick Hatton trust account monies of $35,000 that existed at the time (leaving a balance of $62,300) which is then divided equally ($31,150) between the parties for them to each pay.
* The DFW’s consolidated offer takes account of the original sum held on trust for the parties ($35,000) as explained above. By the time of the trial, some of those funds had been used ($12,447) to wind up D Pty Ltd.[33]
^ Within the balance sheet forming part of the DFW’s first offer there is a reference to the de facto husband retaining other items, but what that means is not clear although the explanatory letter identifies that certain items have been specifically excluded such as the alleged hidden cash. The amount in the 2024 final orders column is an accumulation of the vehicles and chattels, ASIC unclaimed money and Motor Vehicle 3 identified within Table 2 of the judgment.
¥ Calculated by deducting the Kilpatrick Hatton trust moneys of $18,923 from the total cash adjustment ordered of $416,814.[34]
§ This figure represents the balance when deducting the proposed $28,500 splitting order from the DFH’s identified superannuation interest of $95,000.
¶ This figure represents the balance when deducting the actual $29,865 splitting order from the DFH’s existing superannuation interest of $100,118.
ö This figure represents the balance when adding the proposed $28,500 splitting order to the DFW’s identified superannuation interest of $38,000.£ This figure represents the balance when adding the actual $29,865 splitting order to the DFW’s existing superannuation interest of $39,789.[33] B[14], pp. 27 & 28 (Annexure E).
[34] See Orders 34 & 35.
Relying on Table 1 above, the nett property pool excluding the cash payment to the de facto wife (as reflected in the DFW’s consolidated offer) is about $784,700 ($463,350 + $321,350). The judgment makes clear the nett property pool is $876,118.[35]
[35] J-173.
What that means is that the effect of the DFW’s consolidated offer, using the figures she relied upon to calculate the nett property pool, equates to a property adjustment of 59:41 in favour of the de facto wife. Self-evidently the final orders reflect an adjustment of 57.5:42.5 in favour of the de facto wife.
Table 1 above highlights the changes to values for various items that reflect the expiration of almost 18 months between the making of the DFW’s consolidated offer and the judgment. Without meaning to be trite, parties are not expected to go into a state of suspended animation. Therefore, when “comparing the pair” I have reflected on the proposed percentage property adjustments rather than the values of line items as being appropriate in the circumstances of this case. I am satisfied that the 1.5% differential between what the de facto wife was prepared to accept in 2022 and what I ultimately awarded in 2024 was marginal.
In addition, what transpired since the closure of the DFW’s consolidated offer was that D Pty Ltd was (at least) partially dealt with by the parties a short time afterwards so as to further crystallise each party’s knowledge of their financial circumstances and each party’s costs continued to accrue in part because of their unresolved property dispute.
That latter aspects particularly resonates with me given the significant costs incurred by both parties – over $126,500 for the de facto wife[36] and close to $180,000 for the de facto husband[37] although I acknowledge that I am likely not comparing “apples with apples” because the de facto wife’s sum is confined to her costs post-dating her offer. Notwithstanding this qualification, when viewed through the prism of the overarching purpose – are these sums truly proportionate[38] when they total over $300,000 or about 35% of the nett property pool of $876,118? The point is, that had the de facto husband taken the DFW’s consolidated offer, there had to have been a corresponding reduction in the costs that each of them now have to bear. Put bluntly, these parties (including the de facto husband who ultimately was awarded more by me than what was on the table with the DFWs consolidated offer) because of the costs each of them now have to pay.
[36] K-[20].
[37] B-[27].
[38] See s 190(2)(e) of the Court Act.
I cannot ignore this reality when assessing costs, given the de facto husband had the power to end the dispute in mid-2022 and my obligations to consider the overarching purpose as well as the factors under s 117.
Self-evidently from the above discussion, whether this aspect falls within s 117(2A)(f) or (g) is irrelevant because either way I remain alarmed by the costs that must have accrued on both sides - just because the de facto husband failed to accept an offer that gave the de facto wife only marginally more than she ultimately received; but when taking costs into account, left both of them in a far worse off financial position now, which I could potentially compensate (at least on the de facto wife’s application) by making a costs order.
For the above reasons, there is weight to be given to the DFW’s consolidated offer despite the offer seeking to achieve a marginally better position for the de facto wife than the judgment.
Notwithstanding the above, this ‘principal’ (as Pennisi points out) should not be rigidly applied and I have also reflected on the context of the proceeding and the extent of the de facto husband's knowledge of the parties' financial circumstances and whether, for example, the treatment of the de facto wife’s asserted addback of the de facto husband’s pre-paid legal fees of $50,000 could have required some legal determination (although the judgment identifies that the de facto husband ultimately conceded this point).[39]
[39] J-124 and Table 2, second line item under Addbacks.
Weighing up all the evidence I am satisfied that the de facto husband unreasonably failed to accept the DFW’s consolidated offer because:
(a)he did have sufficient knowledge of the case to seriously consider the DFW’s consolidated offer and effectively assess the strength of his position in respect to the litigation;[40] and
(b)the de facto wife’s proposed property adjustment as between the parties was very close to what was ultimately awarded, albeit the issue of the treatment of the $50,000 addback could have required a legal determination, but in my view because of the character of the transaction, at that time, this would have been known to be unlikely;[41] and
(c)the consequential accumulation of costs could have been constrained had the issues in dispute been reduced through an acceptance by the de facto husband, and thus allow the parties a better chance to conduct their case in accordance with the overarching purpose.
[40] See for instance Alston & Alston [2021] FedCFamC1A 96 (‘Alston’) at [102]; Pennisi.
[41] See for example, AJO & GRO [2005] FamCA 195; (2005) 33 Fam LR 134.
Conclusion as to justifying circumstances
Noting my analysis of those s 117(2A) factors that were significant in my mind, no single factor has priority, and one factor alone may be sufficient to ground a finding that it is just to make a costs order.[42]
[42] Prantage & Prantage (Costs) [2014] FamCA 850 and Medlon & Medlon (No. 6) (Indemnity Costs) [2015] FamCAFC 157; (2015) 54 Fam LR 1; (2015) FLC 93-664 at [24]; Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish [2005] FamCA 158; (2005) 33 Fam LR 123 at [41].
Weighing up the evidence and the submissions, in the exercise of my discretion, I am satisfied that there is justification for making a costs order primarily because:
(a)The de facto husband has the financial capacity to meet such an order and the de facto wife is entitled to some compensation for the costs expended in the intervening period between the making of her offer and the trial; and
(b)The de facto husband unreasonably failed to accept the DFW’s consolidated offer in circumstances where he could properly consider the offer, the differential adjustment was just above what the judgment provided for and the consequential accumulation of costs (about the financial dispute) by both parties appears to me to be an anathema to one of the objectives of the overarching purpose.
On what basis should the de facto husband pay the de facto wife’s costs and what is the quantum?
Although not specifically submitted, it seems that the de facto wife contends for a special costs order fixed in the sum of $41,775: Sfakianakis & Sfakianakis [2019] FamCAFC 54; (2019) 59 Fam LR 419 (‘Sfakianakis’) at [10].
This is because the de facto wife seeks an arbitrary one-third apportionment of what she says are the party and party costs incurred from the expiry of the DFW’s consolidated offer.
The total calculated for party and party costs for the proceeding (inclusive of both the parenting and the property adjustment dispute) is $126,592.23.[43] As to that amount, I was not invited by the de facto husband to make an adverse finding pursuant to r 12.08 of the Div 1 Rules.
[43] K-[20].
Where there was disputation, was in the de facto wife’s contention that relying on her evidence, I should exercise my discretion and determine that the sum of $41,775 was fair, reasonable and proportionate.[44] No evidence was before me that addressed the considerations set out in r 12.08 (2), (3) and (4). Relying on what is patently inadmissible evidence (hearsay) from unnamed sources, the de facto wife estimates that one-third of the legal work went towards the property adjustment dispute.[45] For obvious reasons, little weight is placed by me on this aspect of the de facto wife’s evidence.
[44] Rule 12.08.
[45] K-[19].
That said, in reply, the de facto wife countered in submissions that the apportionment of costs between issues was not a new concept; upon reading the Full Court’s decision in Jess & Jess (No 2) [2021] FedCFamC1A 49 (Alstergren CJ & Strickland J) at [10], the Court’s discretion as to apportionment was founded not only on a party’s contentions but their own experience of the appeal.[46]
[46] Jess & Jess (No 2) at [11].
As a result of my role at trial, clearly I have some lived experience of how the de facto wife’s legal costs were incurred, at least for that limited proportion of the proceeding. In my view about one day (or 25%) of the trial was taken up with issues related to property adjustment.
Rule 12.13 permits the Court to make an order for costs including as to the due date for payment and on an indemnity basis (provided certain evidence is before the Court). I infer that the mother does not seek indemnity costs because this would mean her claim would increase to in excess of $51,275.25.
In determining what is a just sum to order and noting the calculation of party and party costs pursuant to Schedule 1 of the Div 2 Rules; I have also reflected on Judge Kemp’s observation in Booysen & Ferreira [2022] FedCFamC2F 1248 at [53] that this Schedule was designed to effect the remit of the Court to deal with matters as efficiently as possible in the exercise of its judicial power. Although I appreciate the effort taken in breaking down all the work done and categorised within item 15 of Sch 1 of the Div 2 Rules, I do not intend to embark upon a formal costs assessment process because neither party contended for an order for assessment pursuant to r 12.17(1) (b) and to be frank, going down that path, after the litigation the parties have endured to-date and may continue to endure through an enforcement process; is neither just nor in the spirit of the overarching purpose.
So, I return to the exercise of my broad discretion to make an order that is ‘just’. As articulated by the Full Court in Sfakianakis at [10], the language of s 117(2) of the Act permits the Court to fashion an order in the context of the circumstances before it, such that an order for partial indemnity or a particular period are possibilities as well as for a “special costs order” being a fixed sum that is neither on a party and party basis or on an indemnity basis.
Further, the categories of circumstances which may enliven the discretion to make a special costs order are not closed - and through the prism of s 117(2) of the Act - may be made whenever the particular facts and circumstances warrant it.[47]
[47] Sfakianakis at [12].
I am satisfied that it is just to make a special costs order against the de facto husband, fixed in the sum of $31,000 payable by 13 August 2024 because of:
(a)the factors previously identified;
(b)my assessment of the apportionment of resources and costs for the trial;
(c)my assessment that the sum is fair, reasonable and proportionate to the property adjustment dispute; and
(d)the de facto wife’s conduct post-judgment which has required the institution of enforcement proceedings (with an unknown result) and the (perhaps) unintended consequence that the de facto husband has been unable to fully realise the income-earning potential of the Suburb C property and thus assist him in meeting any costs order I may make (which has significantly informed the due date for the order to be paid).
Following determination of the de facto wife’s costs application; what (if any) costs order should be made?
Insofar as the costs application was concerned:
(a)The de facto wife contended for the making of a costs order against the de facto husband fixed in the sum of $2,093.62;[48] and
(b)The de facto husband contended for an unspecified indemnity costs order.[49]
[48] Ex ‘W1’ at [34.b.].
[49] Response to an Application in a Proceeding at item 4.2., Pt B.
Neither party was wholly unsuccessful[50] because the de facto wife did achieve a significant measure of success in the prosecution of her case, as did the de facto husband in the defence of the application - if not in its dismissal than at least in the reduction of the quantum.
[50] Section 117(2A)(e).
Considering the parties’ financial circumstances and the criticism of the de facto wife’s conduct, I am not satisfied that it would be just nor appropriate for a costs order to be made. The presumption at s 117(1) is not rebutted and hopefully this decision will encourage the parties to “settle their differences” moving forward.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Kearney. Associate:
Dated: 13 May 2024
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