Kertz and Kertz

FAMILY COURT OF AUSTRALIA

KERTZ & KERTZ

[2010] FamCA 975

FAMILY LAW – COSTS – application to extend the time for filing costs application – costs application where offers of compromise made and rejected

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Clivery v Conway [2007] FamCA 1435
Gallo v Dawson (1990) 93 ALR 479
Browne v Green (2002) FLC 93-115

APPLICANT:

Mr Kertz

RESPONDENT:

Ms Kertz

FILE NUMBER:

SYF

2503

2005

DATE DELIVERED:

3 November 2010

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Justice Le Poer Trench

HEARING DATE:

14 April 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Connor

COUNSEL FOR THE RESPONDENT:

Mr Mater

Orders

The wife is to pay one third of the husband’s costs of the hearing from 2 March 2009 until the conclusion of the trial. Such costs to be as agreed or as assessed.
The wife is to pay one half of the husband’s costs application (as differentiated from his application to extend the time for filing of his cost application). Such costs to be as agreed or as assessed.
There is to be no order for costs in relation to the husband’s application to extend the time for filing the cost application.

IT IS NOTED that publication of this judgment under the pseudonym Ketrz & Kertz (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2503 OF 2005

MR KERTZ

Applicant

And

MS KERTZ

Respondent

REASONS FOR JUDGMENT

Introduction

The applicant husband Mr Kertz (“the husband”) seeks a costs order arising out of a final hearing which was determined by me on 23 December 2009. That application is opposed by Ms Kertz (“the wife”).
The hearing which concluded in a judgment published on 23 December 2009 was a long and hard fought battle between the parties to the marriage and which also drew in their children, the wife’s mother and the husbands’ parents. The hearing lasted 9 days and required written submissions from each party.

Background Facts

At the time of the hearing the husband was 54 years of age and the wife 52 years of age. They had a marriage which lasted 27 years. There were five children born to the parties. Their only daughter died when she was 17 weeks old. Their second child D is significantly handicapped.
In 1995 the wife’s mother commenced to live with the parties in their home. That event later led to an issue as to the terms of the agreement under which she was to reside with the parties.
There were Court proceedings between the husband and the parties’ son P. These proceedings led to the husband incurring a large liability for legal costs, both his and P’s. On one view, for a variety of reasons, that litigation should never have been commenced.
The family is now fractured. The children having found it necessary to support one parent or the other.
The husband’s parents have provided him with very significant funding. They have become estranged to some extent from their grandchildren.
In short the breakup of this family created tragedy upon tragedy.

The Application

The history of the filing of the husband’s applications is somewhat complicated. The evidence establishes that on 22 January 2010 the husband, through his solicitor, attempted to file an Application in a Case which sought an order for costs. The application was rejected for filing by the Court because it was not “executed in the way required by the Rules”. It appears that the Court discerned the application was out of time and that leave to file out of time was required. The application was not immediately given a return date. At a later time it was given a return date of 11 March 2010 and noted as being filed on 16 February 2010.
On 22 January 2010 the husband’s solicitors attempted to serve an unsealed copy of the application accompanied by an affidavit in support sworn by Ms Lawrence, the husband’s lawyer. That attempt was made by facsimile however, a check of records, in the solicitors’ office, at a later time, proved that the transmission had failed.
The affidavit which accompanied the application delivered to the Court on 22 January, by the husband’s solicitor, had no paragraph which addressed any evidence to support his application for extension of time to file his cost application. As it transpired, Ms Lawrence had sworn an affidavit on 22 January which addressed that issue and which was ultimately marked by the Court as filed on 16 February 2010. The husband filed an amended application in a case on 25 March 2010. That application was accompanied by the filing of an affidavit by Ms Lawrence and an affidavit by the husband. The affidavits addressed the costs application on the assumption that the husband was permitted to file same. The husband also filed a Financial Statement on 30 March 2010.
The wife filed a response to an application in a case on 18 March 2010. She filed an Amended Response to an Application in a Case on 9 April 2010. That latter application sought dismissal of the husband’s application for costs and sought a costs order for the determination of the husband’s cost application. The Amended Response was supported by two affidavits sworn by the wife. The first filed 11 March 2010 and the latter filed 7 April 2010. Her affidavit filed 11 March 2010 addresses her financial circumstances following the orders of 23 December 2009. She deposes to circumstances which will see her with only $330,000 following the sale of the house and payment of legal costs which alone amounted to $277,500.

The Issues

Should the husband be granted an extension of time in which to file his cost application?
Should a costs order be made as sought by the husband?

Relevant Law

There is one section of the Family Law Act 1975 (Cth) (“the Act”) and a number of relevant rules of the Family Law Rules 2004(Cth) (“the Rules”) which need to be considered in this determination.
FAMILY LAW ACT 1975 - SECT 117 (subsections (3) to (5) omitted as having no application to the dispute to be determined).
Costs
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the Court is of opinion that there are circumstances that justify it in doing so, the Court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the Court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the Court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the Court considers relevant.

FAMILY LAW RULES 2004 - RULE 1.12

Court may dispense with Rules
(1)These Rules apply unless the Court, on application or its own initiative, orders otherwise.
(2) The Court may dispense with compliance with any of these Rules at any time, before or after the occasion for compliance arises.
(3) In considering whether to make an order under this rule, the Court may consider:
(a)    the main purpose of these Rules (see rule 1.04);
(b)    the administration of justice;
(c)    whether the application has been promptly made;
(d)    whether non-compliance was intentional; and
(e)    the effect that granting relief would have on each party and parties to other cases in the Court.

FAMILY LAW RULES 2004 - RULE 1.14

Shortening or extension of time
(1)A party may apply to the Court to shorten or extend a time that is fixed under these Rules or by a procedural order.
(2)A party may make an application under subrule (1) for an order extending a time to be made even though the time fixed by the rule or order has passed.
(3) A party who makes an application under subrule (1) for an extension of time may be ordered to pay any other party’s costs in relation to the application.

FAMILY LAW RULES 2004 - RULE 19.08

Order for costs
(1) A party may apply for an order that another person pay costs.
(2)An application for costs may be made:
(a) at any stage during a case; or
(b) by filing an Application in a Case within 28 days after the final order is made.
(3)A party applying for an order for costs on an indemnity basis must inform the Court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.

Note 1 The Court may make an order for costs on its own initiative (see rule 1.10).
Note 2 A party may apply for an order for costs within 28 days after the filing of a notice of discontinuance by the other party (see subrule 10.11 (4)).
Note 3 A party may apply for an extension of time to make an application (see rule 1.14).
(4) In making an order for costs, the Court may set a time for payment of the costs that may be before the case is finished.

FAMILY LAW RULES 2004 - RULE 1.21

Calculating time
(1) Time in a case runs during a period when the filing registry is closed.
(2)If:
(a) the period allowed by these Rules or an order for an action to be validly taken is 5 days or less; and
(b)the period includes a day when the filing registry is closed;
that day is not counted.
(3) For the calculation of time of one day or more from a particular day, or from the occurrence of a particular event, the particular day, or the day when the event occurs, is not counted.
(4)If the last day for taking an action requiring attendance at a filing registry is on a day when the filing registry is closed, the action may be taken on the next day when the filing registry is open.
(5)Subsection 36 (2) of the Acts Interpretation Act 1901 does not apply to these Rules.

There are a number of decisions which are relevant to the determination of the applications.
In Clivery v Conway [2007] FamCA 1435 the Full Court in an appeal relating to the exercise of discretion in the granting, and/or refusing, an application for extension of time to apply for security of costs, said as follows:
12. Rule 1.14 provides as follows:
1.14(1)         A party may apply to the Court to shorten or extend a time that is fixed under these Rules or by a procedural order.
1.14(2)         A party may make an application under subrule (1) for an order extending a time to be made even though the time fixed by the rule or order has passed.
1.14(3)         A party who makes an application under subrule (1) for an extension of time may be ordered to pay any other party’s costs in relation to the application.
13.The principles in relation to extensions of time provided by Rules were discussed by McHugh J in Gallo v Dawson (1990) 93 ALR 479. Although his Honour was there considering an application for leave to appeal out of time, it is accepted that the principles he discussed are relevant to all applications for leave to extend time limits provided by Rules.
14.The principles emerging from Gallo v Dawson may be summarised as follows:
•         The grant of an extension of time is not automatic.
•The object is to ensure that Rules which fix times do not become instruments of injustice.
•Since the discretion to extend the time is given for the sole purpose of enabling the Court to do justice between the parties, the discretion can only be exercised upon proof that strict compliance with the Rules will work an injustice upon the applicant.
•When determining whether the Rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time.
•When considering an application for extension of time in which to file an appeal or an application, it is necessary also to consider the prospects of success of that appeal or application.
15.The High Court also had occasion to discuss time limits fixed by Rules of Court in FAI v Southern Cross (1988) 77 ALR 411. In that case the Court was concerned with a rule not dissimilar to Rule 1.14 of the Family Law Rules 2004. Wilson J, with whom Brennan, Deane and Dawson JJ agreed, said at 417:
The plain meaning of these words is very wide. The Court may extend “any time” fixed by “any . . . order” and may do so as well after as before the time expires and even though the application to extend is not made until after the time has expired. As Baggallay LJ said in Carter of the analogous English rule, it gives “very full discretionary power; indeed, I can hardly imagine a more extended discretion” … It is a remedial provision which confers on a Court a broad power to relieve against injustice.
16.The principles governing applications for leave to extend time have also been stated by this Court on many occasions. In one of the first published decisions of the Court, Evatt CJ said in McMahon v McMahon (1976) FLC 90-038 at 75,144:
The general principles governing applications for leave to extend time are established by a number of cases. In summary, the applicant must show that there are adequate reasons which explain the delay; that there is a substantial issue to be raised on appeal; and that no hardship or injustice is caused to the Respondent which cannot be compensated by orders as to costs or otherwise.
17.As was pointed out in Tormsen and Tormsen (1993) FLC 92-392 at 80,018, the principles referred to in McMahon are factors to be taken into account, rather than legislative directions.
In the High Court decision of Gallo v Dawson (1990) 93 ALR 479 McHugh J said:
The grant of an extension of time under this rule is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties: see Hughes v. National Trustees Executors and Agency Co. of Australasia Ltd. (1978) VR 257, at p 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time: see Avery v. No.2 Public Service Appeal Board (1973) 2 NZLR 86, at p 92; Jess v. Scott (1986) 12 FCR 187, at pp 194-195. When the application is for an extension of time in which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal: see Burns v. Grigg (1967) VR 871, at p 872; Hughes, at pp 263-264; Mitchelson v. Mitchelson (1979) 24 ALR 522, at p 524. It is also necessary to bear in mind in such an application that, upon the expiry of the time for appealing, the respondent has "a vested right to retain the judgment" unless the application is granted: Vilenius v. Heinegar (1962) 36 ALJR 200, at p 201. It follows that, before the applicant can succeed in this application, there must be material upon which I can be satisfied that to refuse the application would constitute an injustice.
It is the above portion of Gallo v Dawson which formed the basis of the conclusions referred to in Clivery v Conway as referred to above.

THE APPLICATION FOR LEAVE

The husband had sought an order for costs in the Response to Application for Final Orders which he relied upon in the final hearing. That application was not determined in the final hearing by a determination on the merits. However, the husband had clearly put the wife on notice that he would seek to move on an application for costs at the conclusion of the property proceedings.
It is a usual practice, as I see it, for parties to flag to their opponent in Family Law proceedings that costs are a real issue to be addressed at the conclusion of any defended hearing. That is frequently done by seeking a costs order in either an application for final orders or in a response to an application for final orders.
In this case each of the parties had engaged private lawyers to act for them and each understood the other would incur substantial expense in litigating in the Court.
Parties to property proceedings are required to serve on the other party in property proceedings offers of compromise (see Rule 10.06). Those offers again clearly flag that orders for costs will be sought at the conclusion of a trial should the other party refuse the offer and later, not achieve a result which is more favourable than that being offered. In this case offers of compromise had been served.
Lawyers know the perils of proceeding with litigation in this Court. They understand that, whereas it is possible to predict in an educated way a range of possible outcomes in a case, the prospect of being able to predict a precise outcome is very difficult. Advice is given to parties by their lawyers about those perils.
In this case the evidence as to the late filing of the husband’s application for costs, post 23 December 2009, is contained in an affidavit by the husband’s solicitor Ms Lawrence sworn 22 January 2010 and a clerk from that solicitors’ office, sworn 24 March 2010.
It is common ground that the application was required by the Rules of Court to be filed by 20 January 2010. The application was delivered to the Court for filing on 22 January 2010. A requisition was raised by the Court in relation to the application. That requisition was answered and the Court noted the application as being filed on 16 February 2010. The requisition required that the application seek leave to file out of time.
It is submitted by the husband that there are a number of facts which would convince the Court to exercise the discretion in his favour. They are as follows:
·The judgment was published on 23 December 2009. That was immediately before the Christmas break.
·The husband had sought a costs order in his Response to Application for Final Orders. Although that application was dismissed with all outstanding applications by Court order on 23 December 2009, there had been no hearing on the merits of that application.
·The application, at its worst, was 48 hours late in being presented for filing.
·The husband’s solicitor was on leave from work and also unwell during the relevant period. She was thereby unable to apply herself to the preparation of documents and the filing of the husband’s application within the prescribed time.
·Although it is not a matter which the Court can consider in counting days for the purpose of determining how many “clear” days had elapsed between 23 December 2009 and 22 January 2010, there were a number of public holidays in that period and there were other week days between Christmas and 4 January 2010 when the Court registry was not open. The husband submits I can take those matters into account in determining whether to exercise the Court’s discretion in his favour.
·It is conceded by the wife that an offer of compromise, dated (and/or served) 2 March 2009 and served on the wife, offered a settlement to the wife which, had she accepted same, would have provided her with $60,000 more in benefit than the orders made by the Court.
·The prejudice to the wife arising from the late filing is one as to costs. If appropriate that prejudice can be dealt with by the making of a costs order in her favour.
·The refusal to take up an offer of settlement made in a financial matter in the Court creates a strong ground for the making of a cost order. It is not decisive rather it is persuasive of such an order being made.

The wife opposed the granting of leave to the husband to file his application for costs out of time. The wife referred me to the decision of McHugh J in Gallo v Dawson. I do not here repeat the quote. It is well known and referred to earlier in these reasons.
The wife argued that the evidence to support the husband’s application for leave should be restricted to that filed on 22 January with the application. The wife’s Counsel conceded that the relevant evidence is that before the Court at the date of determination.
The wife made the point that her time to seek an order for costs expired on the same day as the husband’s. She submitted that should the husband be able to file his application for costs out of time then she would be significantly out of time should she also wish to now seek an order for costs.
The wife’s Counsel submitted that the wife was considering an appeal against the orders made 23 December 2009. She was watching to see if the husband was going to file an application for costs. She wanted the litigation concluded even though she was disappointed with the orders. She saw the husband’s application filed out of time on 22 January 2010. She saw the evidence in support of the application. She formed a view as to the success of that application. She later had to reconsider that view in light of the further affidavit evidence filed on 25 March 2010 by the husband. Any appeal the wife may now wish to proceed upon is considerably out of time. The wife argues that is why the Court might exercise its’ discretion not to read the evidence of the husband filed post 22 January 2010 to support his application for leave.
As stated earlier, Rule 19.08 provides that a party may apply for an order that another person pay costs. That application may be made by the filing of an Application in a Case within 28 days after the final order is made. That Rule is silent as to the filing of evidence to support the application.
The combination of Rules 5.01(1), (3) and (5) permit a party to file an Application in a Case to seek a costs order following the completion of a trial. Rule 5.02 provides that when an Application in a Case is filed, the applicant “must at the same time file an affidavit stating the facts relied on in support of the orders”.
Rule 1.12 provides that the Court may dispense with compliance with any of the Rules at any time. In considering whether to dispense with compliance with a Rule the Court may consider:
(a) the main purpose of these Rules (see rule 1.04);
(b) the administration of justice;
(c) whether the application has been promptly made;
(d) whether non-compliance was intentional; and
(e) the effect that granting relief would have on each party and parties to other cases in the Court.
The determination of this leave application falls to be answered in two parts:
a)Should the husband be permitted to rely upon any affidavit material which was not filed with the application on 22 January 2010?
b)Should the Court exercise its discretion and grant the husband leave to file his application for costs out of time?
In the determination of the above matters the Court is required, inter alia, to weigh the comparative prejudice to the parties of either allowing or refusing the applications.
In relation to the filing of the affidavit to support the application to extend the time for filing, the husband’s case is that the application was filed in hurried circumstances. The time for filing the application had expired and time was of the essence in filing the application. The husband’s solicitor clearly understood that further time delay in filing the application may work against the application being granted. An explanation for the delay had been given in an affidavit filed 22 January 2010, albeit that it raised some questions.
The prejudice to the husband of refusing his application is that he would not be able to pursue a costs application in circumstances where he has an arguable case for costs by reason of an offer of compromise provided to the wife on about 2 March 2009 (the first day of a nine day trial). The prejudice to the wife is that she has not proceeded with an appeal because she considered the husband’s application for leave would fail based upon her advice as to the outcome of that application. That advice was said to be based upon the only evidence offered in support at the time of filing.
It is clear that the Rules provide for the applicant to file his evidence with the Application in a Case. The husband has not complied with those provisions in that he seeks to rely on further evidence filed at a later time. The later filing of the evidence does not catch the wife by surprise. Such an event might lead to an adjournment as a remedy. The wife’s prejudice arises if the application could proceed with the latter filed affidavit because, presumably, she now sees that with the additional evidence the husband’s application is more likely to succeed.
It is my opinion that the wife commenced on a risky pathway when she chose not to file an appeal but rather to rely upon the dismissal of the husband’s application for costs. Ordinary experience of practice could have put the wife’s lawyers on notice that further evidence may be relied upon by the husband when his application was heard. The wife could have sought leave to appeal on the day she was served with the application for costs by the husband. The wife may yet choose to file an appeal and herself seek leave to appeal out of time.
I have had regard to Rule 1.04. There is nothing in that Rule which particularly impacts upon this determination.
On balance I conclude that the prejudice to the husband of refusing his applications is greater than that of the wife. I consider therefore that the administration of justice would best be served by the granting of the husband’s application to be able to rely upon further evidence to support his application for leave and by the granting of the leave itself.
I conclude that the non-compliance with the Rules was not intentional on the part of the husband. The late filing was due to no fault on his part. The late filing has been explained. The application was delivered to the Court within 48 hours of the time for filing expiring. The time for filing fell across a period of time when many legal firms close for a holiday break. The husband’s lawyer was incapacitated, at least to some degree, by illness during the time allowed for the filing of an application for costs. The husband had made an application for costs during the hearing of the property case and that application was dismissed without a hearing on the merits. The wife must reasonably have anticipated a costs application would be pursued by the husband once the Court orders were made and the offers of compromise considered. Her Counsel admitted as such by telling the Court the wife was waiting to see if the husband sought a costs order before making a decision as to whether she would file an appeal against the decision. The property proceedings were protracted and bitter.
Having stated the above matters I determine that the husband should be permitted to rely upon the evidence identified by him in the hearing of his leave application and further that his leave application should be permitted to proceed.
THE COSTS APPLICATION
The husband’s arguments are contained in the document titled “Outline of Submission and outline of applicant husband re his application for leave/costs of and incidental to hearing of property proceedings.” The somewhat lengthy title foretold the bulky volume (271 pages) which accompanied it and required extensive time to study and digest. The husband also made oral submissions on 14 April 2010.
The applicant husband framed his submissions in a fashion which addressed the sub-sections of section 117(2A) of the Act.
The husband addressed the financial circumstances of the parties. The parties’ financial circumstances were well known to me at the time of making final property orders on 23 December 2009. The husband has placed further evidence before the Court in the form of a Financial Statement filed 30 March 2010. That shows, inter alia that the husband continues to borrow money from his parents following the conclusion of the hearing before me.
I accept the husband was not in receipt of Legal Aid for either the final hearing or the costs application.
The husband addressed section 117(2A)(c) of the Act. This section addresses any relevant conduct of the parties. The husband particularly addressed the issue of the evidence of the parties’ son P Kertz. Ultimately, the wife did not seek to rely upon his evidence.
The evidence of P Kertz went, in part, to a dispute between P and the husband which resulted in a verdict in P’s favour in the Local Court and included an order for costs. The husband says that the wife should not have sought to have the parties’ son P give evidence in the way she did. However, there was a live issue between the parties which I ultimately had to determine. That issue was expressed as “Should any part of the husband’s debt to his parents be included as a balance sheet item?” The husband claimed indebtedness to his parents of $327,283. He sought to have $180,245 included as a liability in the balance sheet. Of that sum $135,909 arose as costs associated with the civil action he brought against his son P. I concluded that the item should not be included in the balance sheet, but rather, be taken into account under section 75(2) of the Act.
The affidavit evidence of P Kertz sought to address other issues including contributions by the parties and matters of credit between the parties. Many paragraphs of the affidavit were either struck out or not to relied upon. As I have said the wife chose not to rely on the evidence of P during the trial.
I have read all the husband’s submissions in relation to the issue of the evidence of P Kertz. On balance, I do not consider that submission warrants any cost order. I consider the same result should apply to his submissions which addressed the wife’s continued refusal to agree to the sale of the matrimonial home in the time preceding the trial.
There is no other aspect of “conduct of the wife”, addressed by the husband, which would move me to exercise the Courts discretion and make an order for costs.
The husband addressed section 117(2A)(e) of the Act. He submitted the wife did not succeed in obtaining the orders sought by her. He submits that the wife was wholly unsuccessful in the claim she made on behalf of her mother. Ultimately, I determined that the provision of funds by the wife’s mother to the marriage were to be treated as a contribution on behalf of the wife. The wife had sought either a specific order for the payment of $65,000 to her mother or alternatively the transfer to her of the house and in those circumstances she would indemnify the husband against any liability to her mother. The wife must be seen as failing on that count.
In fairness it needs to be remembered that the husband sought orders for specific payments to his parents from the sale proceeds of the former matrimonial home. To that extent the husband was unsuccessful.
The husband addressed section 117(2A)(f) of the Act. The various offers of settlement served by each party were referred to in the husband’s affidavit. The offers were analysed in the husband’s folder of documents supporting his application.
The only offers which can really be considered at this stage are the written offers. The earlier offers are not possible to analyse because there is no evidence of the value of the property at any relevant time.
The offer made by the husband on 2 March 2009 is in a different category. It was made on the first day of the trial. It displays a result which, with the benefit of hindsight, the wife should have accepted. The wife’s Counsel conceded the offer, had it been accepted, would have provided the wife with $60,000 more in funds than that awarded by the final orders in the case. On my calculation, having viewed the offer, I estimate the greater benefit to the wife from the offer to be in the order of $180,000 if she had elected to acquire the husband’s interest in the former matrimonial home. Had she decided that a sale was required then she was to receive 55% of the net property as opposed to 43% which she received from the orders of the Court. In addition, the wife was to receive a further benefit in that the offer provided for her mother to be paid $65,000 from the sale proceeds. The Court order did not make any such provision.
The wife made an offer on 18 May 2009, however, that was well outside the ultimate order.
Offers of compromise are made to save on cost. They should, in purist terms, be a compromise position weighing up all of the pitfalls of the forthcoming litigation. Lawyers know well those pitfalls especially in cases where there are many issues to be determined. In this case there were many issues to be determined, all of which may have affected the final split in the parties’ assets. Many issues carried serious consequences to the determination of the final split. The husband, for example, was seeking the inclusion of a debt to his parents of $180,000. The wife was seeking the inclusion of a debt to her mother of $65,000. There were other issues, the determination of which could have made a significant impact upon the ultimate benefit to be received by each party from the orders of the Court.
When offers of compromise are required to be served pursuant to the Rules of Court, lawyers draw on their expertise to weigh the risks and benefits capable of being generated by the proposed proceeding. They provide advice to their clients as to the formulation of offers of compromise. Many clients choose to follow that advice and instruct for an offer to be framed to reflect the advice. Some, no doubt, reject the advice and instruct for an offer, different to that recommended by their lawyer, to be served. The Court has no way of determining what the substance of any particular communication between a party and his/her lawyer has been in any particular case as these matters are the subject of legal professional privilege. It is trite to say, that the provision of advice by a lawyer to a client for the formulation of an offer of compromise in a complex property dispute in this Court, tests lawyer’s credentials to claim expertise in the jurisdiction.
The costs generated by proceedings in this Court are very significant. The wife in this case incurred costs of $277,000. That is nearly 17% of the net assets of the parties at the time of judgment. Some cases generate costs far higher than that. It is conceivable that an order for costs may consume all of the benefit to be received by a party from the proceeding. Thus parties must rely very much on their solicitors’ advice in the formulation of an offer. Lawyers must be cognisant of “proportionality of cost and benefit” at all times.
The importance of “offers of settlement” in the determination of costs applications is eloquently stated in the Full Court decision in Browne v Green (2002) FLC 93-115 at paragraph 57 where the Court said:
54. Had the failure of the husband to make discovery meant that the parties had wasted money in the proceedings on issues which did not have to be fought, or had the failure to make discovery had the real potential of avoiding the proceedings or somehow minimising the costs involved in the proceedings, then it would have been appropriate to give it significant weight. But in these circumstances, where the failure to make the disclosure happened after the trial and ultimately had little or no consequence for the outcome of the proceedings, it is difficult to say that it merits the removal of what might have otherwise be seen to be an appropriate costs order in favour of the husband.
55. We conclude in the circumstances that far too much weight and attention was given to this issue and too little attention was given to the issue that a wife of not insubstantial means brought a wholly unsuccessful application against a husband of greater means and persisted with that application in face of what turned out to be a more than reasonable offer to settle the matter.
56. We would agree with the observations of Nygh J in Robinson and Higginbotham (1991) FLC 92-209; 14 Fam LR 559 at FLC 78,417; Fam LR 561:
i)“…I accept Counsel for the husband’s submission that paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case.
ii)Similarly, when one looks at paragraph (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...”
57. We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. 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. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.
As it transpired the offer of compromise made by the husband to the wife on 2 March 2009 predicted a result which was significantly better for the wife than that achieved in the hearing. Had she accepted the offer she would not have incurred legal expenses associated with at least some of the 9 days of hearing. In the circumstances of this case I consider the making of that offer warrants, prima facie, the making of a costs order in favour of the husband unless there is some other fact or circumstance which would mitigate against that. I need to look to the matters specified in section 117(2A) of the Act to consider the matter further.
One of the circumstances which can be taken into account is that the wife was not wholly unsuccessful in the proceedings.
It can also be said that the husband pursued the inclusion in the balance sheet of the debt owed, by him, to his parents. A significant part of the debt was incurred as a result of the husband suing his son in the Local Court and failing. There were a number of aspects of the hearing which were connected to that litigation. One such aspect was whether the wife had provided documents from the proceeding in this Court to the parties’ son for his use in the Local Court proceedings.
On the other hand, the wife pursued a payment to her mother of $65,000. This was said to be payable as result of the wife’s mother having an equitable interest in the former matrimonial home. That case failed. A considerable amount of time was devoted in the hearing to evidence about the wife’s mother’s interests.
The husband pursued a finding that the wife had not made a full and frank disclosure in relation to two specific areas. The wife pursued a finding that the husband had not made a proper disclosure in relation to trips he took to Thailand post separation and the existence of a business she believed he had developed importing car parts and other items. I determine each had failed to make a full and frank disclosure in relation to specific topics, however, I concluded such failure did not impact upon the final decision.

Some time was spent, in the hearing, leading evidence about the ability of the parties’ son D to live independently from the parties. Ultimately, that issue had only marginal impact on the determination.
There was an issue as to whether the wife’s mother had provided $40,000 in cash to the parties, principally to the husband. The husband denied that was the case. Cross-examination of the husband and the wife’s mother canvassed this issue significantly. I determined that issue against the husband.
Ultimately, I conclude there was a considerable amount of time dedicated to issues which were of no or little consequence to the ultimate determination.
As stated earlier I am aware of the parties’ financial circumstances.
Weighing all those matters, I consider a costs order should be made against the wife, however, it should be limited. In my view, the hearing was capable of being contained to 4 days had the parties contained the issues to the really important ones. After all, this was a case about a long marriage with a number of children where each party had made significant contributions. Both parties had significant health issues and their earning capacities were moderate. There were few other really important facts.
The parties have both been significantly diminished in their wealth as a result of the litigation and the breakdown of their relationship. The family has been very significantly fragmented in a way which should not add to either party’s credit.
I propose to order that the wife pay one third of the husband’s costs of the trial from 2 March 2009 to the conclusion of the trial.
I also need to consider the question of costs of the costs application.
The husband has been successful in the application to extend time and in the costs application, however, the order for costs is not as extensive as he sought. To that extent the wife has had a measure of success.
I am concerned about the amount of work undertaken by the husband on the costs application. In particular, there was a large volume of material accumulated to support his claim for costs based upon the conduct of the wife. I did not consider that any portion of cost should be attributable to the conduct of the wife prior to 2 March 2010.
I consider an appropriate order would be for the wife to pay one half of the husbands’ costs application (i.e. as differentiated from his application to extend the time for filing of his cost application).
The Courts’ jurisprudence illustrates that it is unusual for the respondent to an application for leave to proceed out of time, should the application be granted, to be visited with a costs order. In fact it is usual for the applicant to pay the respondent’s costs of such an application, especially where the application becomes necessary due to an oversight on the part of the applicant. Each case however, has to be judged on its own facts.
In this case the reason for delay was the illness of the applicant’s solicitor coupled with the time running during a period when the Court was closed for some days due to public and public servant holidays. The husband’s solicitor had been on leave from 23 December 2009 until 19 January 2010 at a time when commonly legal firms close for some days, particularly public holidays. It was over a period when it is traditional for solicitors firms to be closed. The wife’s response was to challenge the husband’s solicitors’ evidence that she was ill in circumstances where the solicitor is an officer of the Court and faces very extensive and far reaching consequences were it established that she had been untruthful with the Court or mislead it intentionally. No application was made to cross-examine Ms Lawrence. The wife simply challenged the evidence as adequate to explain the impact of the illness on the husband’s ability to file his application within the prescribed time limit.
Given the wife knew of the offer of compromise delivered to her on 2 March 2009, she must be seen to know that the husband would suffer a substantial injustice were he not able to prosecute his cost application.
In the circumstances, I think it not unreasonable to conclude that the wife should not have opposed the husband’s application for extension of time to file his costs application. She did so at her peril as to costs in my view.
I do not propose to make a cost order against the wife, however, I do not propose to make a cost order in her favour in relation to the application to extend time.

I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench

Associate:

Date: 3 November 2010

[2010] FamCA 975

3 November 2010

Key Legal Topics

Areas of Law

Family Law

Civil Procedure

Legal Concepts

Costs

Appeal