Kilich & Wood

[2003] FamCA 629

[2003] FamCA 629

FAMILY LAW ACT 1975

IN THE FULL COURT OF THE
FAMILY COURT OF AUSTRALIA

AT SYDNEY  Appeal No. EA1/03

File No. SY6218/01

IN THE MATTER OF:  KILICH
  Asuman S

Appellant

AND:  WOOD
  Arthur Stanley

Respondent

CORAM:  KAY, WARNICK AND WADDY JJ

DATE OF HEARING:  26 MAY 2003

DATE OF JUDGMENT:  29 AUGUST 2003

JUDGMENT OF THE COURT

Appearances:             Mr Hodgson of Counsel, instructed by Peninsula Law Firm, Suite 6b, 15 Orchard Street, Brookvale, NSW, 2100, appeared on behalf of the Appellant Wife

Ms Knox of Counsel, instructed by Shipton & Associates, Solicitors, Suite 1, 1 Raglan Street, Manly, NSW, 2095, appeared on behalf of the Respondent Husband

Name of Appeal	Kilich and Wood
Appeal Number	EA 1 OF 2003
Date of Appeal Hearing	26 May 2003
Date of Judgment	29 August 2003
Coram	Kay, Warnick and Waddy JJ

Catchwords:  COSTS –Appeal against order for costs of the trial - Whether an oral offer of settlement may be taken into consideration under s117(2A)(g) FLA – COSTS – Of withdrawn appeal and application for dismissal of appeal or security

This truncated version of the reasons for judgment report concerns only an appeal against costs orders made at the trial of the action.

COSTS APPEAL

1. On 3 December 2002, Rose J determined an application by the husband that the wife pay his costs in relation to the trial of property issues.  His Honour ordered that the wife pay the husband’s costs in relation to each of the three days of hearing.

2. The wife (by amended Notice of Appeal upon which she was given leave to rely) challenged the order on two grounds.  In short, firstly that the trial Judge failed to place sufficient weight on the disparity in the parties’ financial circumstances, and secondly that the trial Judge erred in placing any weight or at least undue weight upon an oral offer of settlement made on the morning of the first day of hearing.

A.The judgment of the trial Judge

1. The trial Judge commenced his consideration of the application for costs by recording some of the circumstances of the trial.  He noted that the effect of the orders he made in settlement of property issues was that the wife received and/or retained property with a net value of $69,859, which included notional property of $9,400 used for legal costs.  His Honour also noted that the sum which the wife was to receive might vary, having regard to the orders for sale of the former matrimonial home.

2. The trial Judge then considered some issues that had been raised in the trial and the outcomes of those issues:

   ·sole use and occupancy – determined against the wife;

   ·the wife’s claim of a payment of $38,000 to the husband to acquire a half interest in his yacht ‑ determined against the wife.

3. He also recorded that he had found the wife had given deliberately false evidence and that she had fabricated evidence.

4. His Honour then referred himself to section 117 of the Family Law Act and said:

   “23. Section 117 of the Family Law Act (“the Act”) provides the general principle that each party pays his or her own costs in proceedings before the Court.

   24.  The Court has a wide discretion to make an order for costs in favour of one party provided that there are circumstances that justify doing so.  As the High Court emphasised in Penfold v Penfold (1980) FLC 90‑800 a special circumstance is not required.

   25.  In my view, there are circumstances which justify an order for costs being made.

   26.  They are represented by the findings of fact made contrary to the wife’s case in relation to her alleged financial contributions, the time taken in order to hear the evidence; and from the perspective of the husband’s legal representatives the preparation in relation to it; my findings as to the wife’s credibility to which I have referred; and the offer of settlement that was made on the morning of the first day of the three day hearing.

   27.  However, the matter does not rest there, as I am required pursuant to sub‑section (2A) to have regard to the following matters which are considered to be relevant.

   28.  The first of those is the financial circumstances of each of the parties to the proceedings.

   29.  The findings I made were that overall the husband’s financial circumstances were superior to those of the wife.  His income well exceeded that of the wife as well as his asset position.  However, the husband is a man of 86 years of age and retired.

   30.  The wife is 49 years of age and is unemployed. … However, I found that she did have a capacity to earn income from gainful employment which the husband did not have.  Further, the wife had the potential indirect financial benefit of income earned by her adult son with whom she has a close relationship.”

5. His Honour then discussed further evidence that had been put before him by the wife on the costs application, as to her health, but for reasons he gave was “not prepared to give considerable weight to” the evidence of a Dr Pickles.  The trial Judge was of the view that the other new evidence, that of a Dr Bean, was more optimistic about the wife’s health than earlier evidence from that doctor.

6. The trial Judge returned to other factors which he saw as bearing on the application for costs.  He said:

   “42.         With regard to the conduct of the parties in relation to the proceedings that were determined by me, on the evidence before me there had been delays by the wife or by those on her behalf which were largely unexplained.  They are set out in detail in the affidavit of the husband’s solicitor.

   43.  With regard to the matter of success in the substantive proceedings, whilst neither party was totally successful the husband achieved a large measure of success having regard to the orders that were made by comparison to those that were sought by him.  The orders made in favour of the wife were far below the orders that had been sought by her.

   44.  So far as an offer to settle the proceedings is concerned, there had been an offer made by correspondence earlier in the year for the wife to compromise the proceedings on the basis of her accepting $10,000.  That offer was rejected.

   45.  The further evidence is that on the morning of the first day of the hearing an offer was made on behalf of the husband for payment to the wife of $60,000 in settlement of the proceedings that were then about to be heard.  That offer was rejected.  There is some difference in the evidence before me as to the terms of that offer.

   46.  The wife’s material before me contends that the offer was on terms that she be paid $10,000 on the basis of her vacating the former matrimonial home within seven days and $50,000 from the proceeds of the sale of the former matrimonial home.  That offer was rejected by the wife.

   47.  As events transpired the wife received orders which were equivalent to approximately half of the last‑mentioned offer.

   48.  In my view, there should be an order for costs in favour of the husband.”

7. His Honour did not, however leave the discussion of matters relating to costs there.  The husband had sought costs on an indemnity basis, as his Honour noted, “in relation to the actual three days of hearing plus costs associated with certain aspects of preparation”.  His Honour then returned to the matter of the wife’s conduct and his findings about her credibility on what was “probably the most significant contribution which she relied upon …”.  He noted that “That aspect of the case occupied considerable time”, and said that “In addition, I also give considerable weight to the offer of settlement”.

8. The trial Judge further said:

   “52.         … I also take into account that the wife has failed to comply with the orders made by me in relation to not only vacating the former matrimonial home, but for the purpose of completing and executing various documentation required for the purpose of ensuring that the sale of the former matrimonial home proceeded in accordance with my orders.  That had the effect that an application was required to be made on behalf of the husband for orders pursuant to section 106A of the Act which were ultimately made by a Deputy Registrar.”

9. Finally, his Honour said that he took into account the wife’s current financial circumstances which are “very modest” and he said that having regard to that, he did not consider it proper to order costs on an indemnity basis.

B.Principles on Appeal

1. In the written submissions of counsel for the wife, the following appears:

   “It is conceded that once an order for costs in a party’s favour has been made, the Full Court should be “very reluctant to interfere with the exercise of discretion in respect of costs” (Robinson v. Higginbotham (1991) FLC 92‑209).  In order to persuade the Full Court “to interfere”, it would be necessary to demonstrate that “the result was plainly unjust” or that the discretion of the Trial Judge was exercised “upon wrong principles”.  It is also conceded that the Full Court should only interfere in the “rarest of cases”.”

2. We think these concessions sufficiently cover matters of principle for the purposes of this appeal.

C.Ground 1

1. In full, this ground reads:

   “That the Trial Judge was in error in the exercise of his discretion in making an award of costs in favour of the Husband in failing to place sufficient weight upon the overwhelming disparity between the financial circumstances of the Husband and the Wife in favour of the Husband, having regard to their respective assets, liabilities, financial resources and incomes, particularly when the effect of this order would substantially diminish the amount which the Trial Judge awarded to the Wife by way of property settlement.”

2. Of course, in the passages quoted earlier, the trial Judge has said something about the weight that he gave particular factors.  He gave “considerable” weight to the wife’s conduct in giving false evidence and to the offer of settlement.

3. It was not argued that the trial Judge was not entitled to give these factors considerable weight.  Moreover, it was conceded that one relevant factor could be determinative, though a number of other considerations favoured the opposite conclusion.

4. Clearly, from the passages of the judgment earlier set out, the trial Judge did not overlook the disparity between the parties’ financial circumstances.  However, because he gave considerable weight to the two factors referred to, and no doubt some weight to his findings as to other factors favouring an award of costs (none of which were challenged on the appeal), he concluded a costs order should be made.

5. We are not persuaded that there is any basis to interfere with the exercise of discretion on this ground.

D.Ground 2

“That the Trial Judge was in error in the exercise of his discretion in making an award of costs in favour of the Husband in placing undue weight upon an offer of settlement made on behalf of the Husband on the morning of the first day of the hearing, which was not in writing and which was to the effect that the Husband would pay to her by way of property settlement an amount of $10,000.00, if she vacated the premises within one (1) week and a further $50,000.00 upon the sale of the former matrimonial home at North Narrabeen.”

1. The written submissions elevated (without objection) this ground to a proposition that in taking account of the oral offer, the trial Judge was wrong in law. The argument was that section 117(2A) of the Family Law Act 1975 as amended prevented regard to oral offers when deciding a question of costs.

2. The sub‑section in relevant parts provides:

   “117(2A)  [Matters relevant to costs order]        In considering what order (if any) should be made under sub‑section (2), the court shall have regard to –

   (a)…

   (b)…

   (c)…

   (d)…

   (e)…

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

   (g)such other matters as the court considers relevant.”

3. On behalf of the Appellant, it was submitted that because paragraph (f) obliged the court to take account of an offer in writing, the court was excluded (by necessary implication) from taking into account as relevant to an issue of costs, an oral offer.  It was suggested that no doubt the purpose of this differentiation was to recognise the certainty of content of an offer in writing, as opposed to that of an oral offer.

4. To the argument that an oral offer might be brought to account as a relevant consideration by the terms of sub‑section (g), Counsel for the Appellant responded that it would be inconsistent to adopt that approach when the words “in writing” are prescribed in paragraph (f).  Had it been the intention of Parliament to permit regard to also be had to oral offers, then it could simply have deleted the words “in writing” in paragraph (f).

5. We were not referred to, and have been unable to find, any authority of this Court directly on this point.  There has, however, been discussion of the juxtaposition of paragraph (g) with the preceding paragraphs in the sub‑section.

6. In Telfer v Telfer (1996) FLC 92‑688, his Honour Justice Lindenmayer considered sub‑section 117(2A). At page 83,139, his Honour said:

   “Mr Slack has submitted that paragraph (g) of that subsection is essentially a completely separate head of power, or at least identifies a completely individual source of discretion for the making of costs orders, and that it is not to be limited by reference to the particular matters referred to in paragraphs (a) to (f) inclusive.  As support for that proposition he referred to and relied upon certain dicta in Penfolds’s case, Penfold v Penfold (1980) FLC 90‑800, in the joint judgment of the four members of the High Court who delivered a joint judgment in that case at page 75,054.  I do not propose to refer to that particular passage, but it does, in my view, support the argument, although in that case what was being referred to was an earlier provision of the regulations, which was in similar terms, although not identical terms, to s 117(2A).  What it does, I think, support, is the proposition that paragraph (g) is an independent source of discretion and its effect is not limited by the particular matters set out in the previous paragraphs.”

7. While acknowledging some force to the argument of the Appellant, there is, of course, another available interpretation of the relevant sub-paragraphs.  That is, that while the legislation makes it mandatory that the Court have regard to terms of offers in writing, it may have regard – and shall, if it deems it relevant – to an oral offer.  On this interpretation, there remains a distinction between the position of offers in writing and those not so.  Accordingly, both sub-paragraphs serve a purpose in relation to the consideration of offers, in writing or oral.

8. Something of the origins of section 117(2A) of the Family Law Act can be ascertained from the report of the Joint Select Committee on the Family Law Act, of July 1980. There, (in Volume I, paragraphs 11.46 and 11.47) the Committee said:

   “11.46Factors (d)-(f) of the Law Council’s proposed amendment to s.117(2) provide for certain other circumstances not at present specifically incorporated in the Act or Regulations, to be taken into account when an order for costs is being considered by the court. With regard to factor (f) the Committee noted the Law Council’s further recommendation to mr Justice Williams that the Family Law Regulations would also need to be amended to provide that:

   (a)a party to a marriage may serve on the other party to the marriage at any time either before or after the commencement of proceedings by way of matrimonial cause proposals for settlement;

   (b)the proposals for settlement shall be in accordance with a prescribed form;

   (c)the terms of any proposals for settlement served  in accordance with this regulation shall be admissible in proceedings by way of a matrimonial cause in any court exercising jurisdiction under the Act only on the question of costs and shall not be disclosed to the court until all other matters except the question of costs have been decided by the courts in the proceedings to which such notice of settlement relates.

   11.47The Committee considers that the inclusion of the factors listed for consideration by a court in deciding if any order for costs and if so, what order should be made in a particular case, in the Law Council’s suggested amendment to s.117(1) and (2) of the Act, would provide for more specific guidelines, greater certainty and a wider exercise of the discretion to order costs than has been exercised under the Family Law Act. The Committee does not anticipate that the ambit of the discretion would be limited to a consideration of these factors alone.  (emphasis added).”

9. Although as earlier noted we are not aware of any ruling of this Court on point, the decision of Thomas J in Transit Australia P/L v Crawford Australia P/L [1997] QSC 141 (12 August 1997) contains some helpful remarks. The case concerned an order for costs made by an arbitrator pursuant to the terms of the relevant section of the Commercial Arbitration Act 1990 (Qld). Subsection (6) of that Act provided:

   “Where in accordance with rules of court an offer of compromise has been made in relation to a claim to which an arbitration agreement applies, the arbitrator or umpire shall, in exercising the discretion as to costs conferred on the arbitrator or umpire by subsection (1), take into account both the fact that the offer was made and the terms of the offer.”

10. Thomas J said:

    “In my view that subsection requires an arbitrator to take into account offers that comply with the rules of court, but it does not necessarily limit the wider general discretion which permits the taking into account of offers that do not comply with those requirements.

    A similar situation sometimes confronts the courts.  The “offers to settle” that are referred to in O.26 of the Rules of Court are written offers which must be “served”.  Notwithstanding this, informal offers to settle may in appropriate cases be taken into account by the Court (Smith v Smith 1987] 2 Qd R 807”, 809-810, 813; Cutts v Head [1984] Ch 290). The public policy behind taking account of such offers is that

    “parties should be encouraged so far as possible to settle their disputes without resort to litigation.”

    and that

    “it is hard to imagine anything more calculated to encourage obstinacy and unreasonableness than the comfortable knowledge that a litigant can refuse with impunity whatever may be offered to him even if it as much or more than everything to which he is entitled in the action.”

    (Cutts v Head above at pp 299 and 306)”

    …Usually such offers are in writing.  Oral offers would commonly suffer the disadvantage of not being able to be precisely proved.  However, in principle, there is no reason why an oral offer to settle cannot be proved, and if it is, why the fact that it as made cannot be brought before the court or tribunal in due course when the result is known.”

11. In the end, we see no reason to adopt the interpretation of paragraph (f) urged upon us by the Appellant.  Paragraph (g) is not restricted in its terms, save as to relevance.

12. It was further submitted that the trial Judge should not have had regard to the offer because of some uncertainty as to its terms.  However, it is to be noted that the trial Judge had regard to the offer as it had been understood by the wife.  Notwithstanding that the offer required the wife to vacate the former matrimonial home virtually immediately, this did not render the offer unworkable.  No error is shown in his Honour’s assessment of the offer.

13. Accordingly, we see no merit in this ground.

14. However, before we leave the question of the status of oral offers in respect of applications for costs, we stress the likely difficulties associated with the proof of the terms of oral offers.  It is highly undesirable that at the end of a trial an application for costs raises yet further factual dispute.

E.Conclusion

1. As neither of the grounds of appeal has been made out, we intend to dismiss the appeal.

COSTS OF THE COSTS APPEAL

1. We take account of each of those matters to which regard must be had pursuant to section 117(2A). We are, of course, conscious of the result of the appeal. However, while we do not consider that, having regard to those factors which were relevant to the decision of the trial Judge in determining the costs of the trial, the disparity in the parties’ financial circumstances was an overwhelming factor, we consider that it is so in relation to this issue, namely costs of the costs appeal.

2. We consider that there should be no order as to costs.

I certify that the 41 preceding
 Paragraphs are a true copy of the reasons for judgment delivered by this
Honourable Full Court.
Sgnd:  T. Zellner

Associate