Kruger & Kruger (No. 2)
[2009] FamCA 229
•26 March 2009
FAMILY COURT OF AUSTRALIA
| KRUGER & KRUGER (NO. 2) | [2009] FamCA 229 |
| FAMILY LAW – COSTS – Where husband sought an order for the costs of the proceedings for settlement of property on an indemnity basis – The significance of the husband’s making of an offer to settle the proceedings considered – Not accepted that any aspect of the husband’s offer rendered it invalid and precluded successful reliance upon the offer – Where superficially the wife would have been better off, or at least no worse off, had she accepted the husband’s offer but where further aspects, in complex proceedings, meant that acceptance of the offer would not have seen an end to the dispute –– Where the wife’s claim, though optimistic, was not fanciful – Where the parties had a legitimate dispute to agitate before the Court – Where the trial of those issues was conducted with economy and expedition – Where neither party was wholly successful or wholly unsuccessful – No order for costs appropriate |
| Family Law Act 1975 (Cth) s 117(2)(A)(f) Robinson v Higginbotham (1991) FLC 92-209 |
| APPLICANT: | Ms Kruger |
| RESPONDENT: | Mr Kruger |
| FILE NUMBER: | PAC | 174 | of | 2007 |
| DATE DELIVERED: | 26 March 2009 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Coleman J |
| HEARING DATE: | 20 February 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr de Robillard |
| SOLICITOR FOR THE APPLICANT: | Kent Attorneys |
| COUNSEL FOR THE RESPONDENT: | Mr Dubler S.C. Mr Combe |
| SOLICITOR FOR THE RESPONDENT: | Macquarie Partnership |
Orders
That the husband’s application for costs be dismissed.
That the wife’s application for costs be dismissed.
That each party pay his or her costs of and incidental to the proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Kruger & Kruger is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 174 of 2007
| MS KRUGER |
Applicant
And
| MR KRUGER |
Respondent
REASONS FOR JUDGMENT
COSTS
Introduction
Consequent upon the ultimate determination of the substantive proceedings between the parties, the husband sought an order for the costs of the proceedings on an indemnity basis.
The Court has had the benefit of comprehensive written submissions on behalf of the husband in support of his costs application, such submissions being dated 24 October 2008 and 11 March 2009. The Court has also had the benefit of comprehensive written submissions on behalf of the wife in opposition to the husband’s costs application, such submissions being dated 19 February 2009 and 19 March 2009. The Court has also heard oral submissions from Senior Counsel for the husband in support of the husband’s claim, and from Counsel for the wife in opposition to such claim.
As is apparent from Senior Counsel’s primary written submissions, the husband’s claim is significantly based upon the making of an offer to settle the proceedings conveyed by letter dated 30 April 2008.
It was submitted that the offer “provided, in effect, that the wife would receive 55% of the pool of property and the Husband 45%. The offer was based on the parties receiving one of the residential facilities, with the Wife electing which facility she would accept. Due to the lesser value attributed to Residential Facility One by ON Partners (who were qualified by the Wife), whichever party received Residential Facility One “would receive the other parties’ [sic] 50% share in the matrimonial home. As a further condition in the offer, the parties would transfer, sell or otherwise transfer property such that the Wife would receive 55% of the value of the joint properties”. Senior Counsel for the husband’s submission accurately reflects the substance of the offer of settlement.
As is apparent from its terms, the offer was “open to acceptance” from 30 April 2008 to the commencement of the trial of the proceedings, which was scheduled for 19 May 2008, but actually commenced on 20 May 2008.
It was then submitted:
3.No counter offer was received from the Wife’s former solicitors to the Husband’s offer. The matter was fully contested at trial. The Wife claimed 70% of the nett [sic] pool of property in her Initiating Application. On the first day of the trial (i.e.: 20 May 2008), the Wife amended her position through counsel to claim in effect 57.5% to the Wife and 42.5% to the Husband (see paragraph 5 of the judgment).
It was submitted that the Court’s judgment of 27 June 2008 “provided for a division of the pool of property in the ratios of 48 percent to the husband and 52 percent to the wife”. The husband was accordingly submitted to have “improved his position from that contained in the offer”.
The submissions of Senior Counsel for the husband then addressed the basis upon which costs should be awarded. In the course of such submissions, Senior Counsel for the husband advanced reasons why indemnity costs should be awarded.
Under the heading “Imprudent rejection of the offer” Senior Counsel for the husband made a series of submissions in support of both the husband’s entitlement to an award for costs and his contention that costs should be awarded be on an indemnity basis.
It was submitted in this context that:
12.The Wife’s rejection of the offer here was clearly imprudent. The parties were married from […] March 1967 and separated in January 2006. This was a marriage of some 38 years and 10 months. The children of the marriage were fully grown as at the separation. Both parties had made fairly equal non-financial and financial contributions up until the date of separation. There was no prima facie basis to suggest that the Wife could sustain a claim for the nett [sic] pool of property at 70% as claimed. This was conceded as much by the Wife in the revised claim on the first day of the trial of 57.5%.
It was further submitted that the husband’s claim for an equal division of the assets of the parties had been “reasonable” and the concession conveyed by the offer of settlement to accept 45 percent of the assets had been “reasonable and attractive and accorded closely with her amended position on the first day of the trial.” The wife’s then Counsel submitted that a division of 57.5 percent to 42.5 percent favouring the wife was just and equitable.
Translating the offer into the context of the Court’s findings, it was submitted, with substantial mathematical correctness, that the husband’s concession of 5 percent in favour of the wife represented a sum of “$450,000 to the Wife in the interests of settlement to avoid a costly trial”.
It was submitted that the wife would have been “in a better position” had she accepted the offer made by the husband on 30 April 2008 than she was pursuant to the judgment of the Court. Reliance was placed upon the wife having “amended her claim on the first day of the trial and after the offer expired to approximate the husband’s offer. This was done without responding to the Husband’s offer”. The wife’s conduct was submitted to support the submission that her refusal to accept the husband’s offer had been “imprudent”. It was further submitted that the wife’s “failure to seriously consider the offer as evidenced by a failure to even counter offer based on her amended claim as presented at trial was imprudent”.
There is no doubt that, irrespective of what the Court concludes in this application, as Senior Counsel for the husband asserted, “significant costs and Court time could have been avoided had the offer been accepted”. That however is a consequence of so doing rather than supportive of an inference that the offer should necessarily have been accepted.
It was submitted to be of relevance, as it was in Robinson v Higginbotham (1991) FLC 92-209, that the wife sought to “wear” the husband down by “attrition”. It is correct to submit that the husband has not received any director’s fees from Company One Pty Limited since January 2006, notwithstanding that the wife paid herself the significant sums to which Senior Counsel referred (paragraph 16) during that period. However, the Court does not conclude, given the magnitude of the parties’ wealth, and reality that, even on the wife’s case as it was presented at trial, the husband would have received assets totalling several million dollars, that anything done, or not done by her should be seen as attempting to wear the husband down, or engage in a campaign of attrition. Moreover, the post-separation financial history was taken into account in the determination of the substantive proceedings.
Apart from the offer, Senior Counsel for the husband also relied, both in support of the application for costs, and for costs to be awarded on an indemnity basis, upon the “making of allegations which ought never to have been made, or the undue prolongation of a case by groundless contentions”. Those matters were particularised in a series of paragraphs in Senior Counsel for the husband’s written submissions (see paragraphs 18, 19 and 20).
It was thus submitted that “a reasonable, legally represented party would have realised the allegations of sexual assault…were groundless and irrelevant”. It was further submitted that “Nevertheless they were maintained and the Husband was compelled to answer them”. (Paragraph 21).
By reference to a number of authorities (see paragraph 22), Senior Counsel for the husband accordingly submitted that:
23.…the Husband has been put to unnecessary expense in meeting allegations that had no relevant to the determination of the real dispute. It may be inferred the matter did not settle to permit the Wife to make the allegations. In such circumstances, it is appropriate that the court order the Wife pay the Husband’s costs on an indemnity basis.
In his written submissions in response, Counsel for the wife disputed that the Court should conclude that costs should be awarded, either on a party and party or indemnity basis.
Under the heading “Husband failed to make valid offer under the Scheme”, Counsel for the wife presented an ingenious argument which he articulated in the following terms:
14. Division 10.01(1) requires any settlement offer, in terms, to remain open until “the Court makes an order disposing of the case” or otherwise until a formal withdrawal of the offer has been made in line with the regulatory scheme mentioned above.
15. By letter dated 30 April 2008 (copy of which is annexed to the husband’s submissions (‘the letter”)) the husband impermissibly imposed, at least one and possibly two, time limits on the offer:
(a)“This offer remains open until 9.00 am on the first day this matter is listed for hearing ie: 19 May 2008” (first time restraint).
(b)“May we please have your early reply.” (possible second time constraint).
16. The husband was clearly aware of the workings of the statutory scheme. The letter purported to be an offer “under Division 10.1.2 and also under Division 10.1.1 of the Family Law Rules”.
17. It is respectfully submitted that the letter could not be considered an offer under Division 10.1.1 because, in terms, it impermissibly imposed an expiry date (19 May, 2008) on the offer.
18. Further, the said date 19 May, 2008 (or earlier) was a date which would undoubtedly pre-date the disposition of the matter by the Court. The matter had been set down for hearing over several days commencing on 19th or 20th of May 2008.
With respect to Counsel for the wife, nothing referred to by him, either in his submissions or in section 117 of the Act or rules made pursuant to the Act persuades the Court that the husband’s offer of 30 April 2008 was invalid. The implications of the offer having an expiry date require, and have received, extensive consideration in subsequent submissions made by Counsel for both parties. Inserting an expiry date in an offer does not in the Court’s view thereby render the offer invalid. Indeed, whilst the legislation and rules of the Court facilitate ways of making, and proving offers of settlement, the Court does not understand that so doing precludes from consideration offers which do not fall strictly within the terms which the rules reveal. It is the substance of an offer to settle which assumes significance rather than its form. The significance of the offer is appropriately determined by reference to its terms, and to the circumstances in which it was made and events, including the ultimate decision of the Court, subsequent to its making.
Under the heading “Further failure to comply with the Statutory Scheme” it was submitted that, in reliance upon Family Law Rule 10.06(2), the husband’s offer of settlement having been made on 30 April 2008, well outside the “prescribed 28 days” after the parties attended a conciliation conference on 28 March 2007, the offer was invalid.
If correct, the submission of Counsel for the wife means that only within 28 days after the conciliation conference can a valid offer of settlement pursuant to the rules be made. The illogicality of that proposition is readily apparent. So is its inconsistency with the terms of Rule 10.01(1) to which Counsel for the wife had earlier referred.
Presumably, on the construction advanced by Counsel for the wife, if there had not been a conciliation conference, there could never have been a valid offer to settle. Without venturing to suggest what Rule 10.06(2) might be intended to achieve, the Court does not accept that it rendered invalid the husband’s offer of settlement of 30 April 2008.
Addressing the substance of the husband’s offer on the realistic assumption that the challenges to the validity of the offer were rejected, it was broadly submitted that the husband had failed to establish that the wife’s failure to accept his offer was imprudent. It was submitted that the husband’s claim was based upon an unfair oversimplification of the terms and effect of the offer.
In at least the two respects which he identified (paragraph 31), Counsel for the wife submitted that the husband had not received what his offer of settlement envisaged.
It was submitted that the items in question “represented substantial assets either in terms of value, practicality and/or emotional attachment in relation to future management of the [residential facilities]”. (Paragraph 32).
Senior Counsel for the husband’s contention that the husband had obtained a better outcome than he had anticipated in his offer was thus asserted to be “at best, tenuous”. (Paragraph 33).
It was submitted on behalf of the wife that:
35. The matter did not involve a simple 55/45 split of the pool of assets as contended. In addition to the matters already mentioned at paragraphs 28 to 30 above:
(a)His Honour was required to undertake a detailed analysis of the contributions of the parties covering a long marriage; see reasons for Judgment 26 June, 2008, [137] to [176]. In particular there were issues such as the St. George Bank ‘difficulty”: [147] of Reasons;
(b)The wife was found to have exaggerated her personal contributions towards the development of the [residential facilities] and the welfare of the children. It is not unusual for people to have an inflated perception of their contribution to society generally. Such perception may be objectively incorrect but cannot be said to have been deliberately overstated.
The Court did agree that, post 1993, the wife’s personal contribution would have exceeded the husband’s ([151] [152] of Reasons).
The value to be placed on such ‘excess contribution’ is one of delicate and skilled judgment. It is a matter over which different Judges could easily and properly reach different conclusions.
It was further submitted that:
36. By contrast, the husband was found to have provided clearly incorrect evidence about much more objectively determinable matters:
(a)[what his specialist qualification was];
(b)whether he was properly entitled to the title “Doctor”; as His Honour referred to the husband in the initial stages of the hearing;
(c)whether the husband’s personal tax returns had been materially true and correct.
The submission on behalf of the wife that:
38.There were potentially difficult issues relating to family trusts, corporate structures as well as issues regarding superannuation funds. (Paragraph 38);
raises a matter of significance.
As the second, third and fourth supplementary judgments of this Court hopefully reveal, there were, and probably were always going to be two significant parts to the matrimonial cause.
The first of those was, as the Court’s primary judgment in June 2008 reveals, the question of the overall percentage division of the parties’ assets which was just and equitable. The second and probably more difficult fundamental issue was whether the wife should retain both the residential facilities as she sought or one, as the husband sought.
Those issues decided, the matter of major complexity fell to be determined. Without being critical of anyone being involved in the case, and with the benefit of hindsight, it can fairly be suggested that the commendable approach at trial of essentially ignoring the legal ownership of assets, and implications of various re-arrangements of them involved a complexity which the husband’s offer of 30 April 2008 did not necessarily acknowledge or recognise.
Expressed another way, even if the wife had accepted the husband’s offer of 30 April 2008, it could not necessarily be assumed that there would not have been significant further legal expenses, whether that had been by negotiations through solicitors or adjudication by a Court, before a final resolution could have been negotiated or judicially imposed. As Counsel for the wife’s submissions implied, reaching broad agreement did not, without a good deal more, mean that the matrimonial cause would have been resolved and further legal costs obviated.
It was submitted in relation to the “irrelevant assertions” submitted to have been made and pursued on behalf of the wife that such allegations had not in fact prolonged proceedings or increased the costs of the proceedings. Moreover, it was submitted, correctly, that Counsel then appearing for the wife had readily abandoned such irrelevant matters, significantly reduced the wife’s claim (from 70 percent to 57.5 percent) and generally conducted the proceedings with expedition and economy. Those submissions are well founded.
During the course of oral submissions on 20 February 2009, the Court raised with Counsel for the parties the significance of the husband’s offer of settlement being incapable of acceptance by the date the trial commenced. The Court posed the question whether in such circumstances, as a matter of discretion or otherwise, the Court could fairly award costs against the wife, other than for the period during which the offer was capable of acceptance. Subsequently the Court received detailed and helpful written submissions addressing that issue.
It was submitted on behalf of the husband that the rules did not subscribe the length of time that an offer made pursuant to the Rules was to remain open. That is clearly the case.
It was further submitted that the only rule “governing the methodology of making an offer” required that the offer “be in writing and is not to be filed”. That too is clearly correct.
It was submitted that the rules permit the withdrawal of an offer and acceptance of an offer at any time before the offer is withdrawn or the Court makes an order disposing of the proceedings. Inherent in the ability to withdraw an offer must be the ability to include a “sunset clause” in an offer at the time it is made.
The matters to which Senior Counsel for the husband has referred the Court in his supplementary submissions reinforce the conclusion of the Court recorded earlier that the offer of 30 April 2008 was not invalid.
In further support of his contention that the expiry provision in the husband’s offer of 30 April 2008 did not militate against making an order for costs in reliance upon it, or making such costs order as should be made to cover the costs incurred subsequent to its expiry, Senior Counsel for the husband submitted:
10.Had the offer made by the Husband remained open to acceptance at any time (including after the evidence of both parties and their submissions had been made) the intent of the legislation would be defeated. There would have been no incentive on the Wife to consider the offer before embarking on the trial. Indeed, if the Wife’s submission is accepted, it would negate entirely the effect of section 117(2A)(f) of the FLA as there could be no penalty of any effect.
It was further submitted in this context that:
11.If the Wife’s submissions were carried through to their logical conclusion, a party may make an offer at some point in proceedings but only without a time limit for acceptance. If an offer can only be validly made without a limit for acceptance, it would potentially result in the unworkable situation where an offer is made a reasonable time prior to a trial; the trial is conducted; and the offer may be accepted at the very end of the trial after both parties have presented their evidence, made submissions and heard the views of the Court as to final orders ascertained. Therefore, the recipient of the offer could simply let the trial runs [sic] to see how his or her case is received and then, having forced the offeror to the expense of a trial, accept the offer without suffering any form of costs penalty.
Unsurprisingly, Senior Counsel for the husband placed significant reliance upon the judgment of Nygh J In the Marriage of Murray (1990) 14 Fam LR 311 in which his Honour said:
“My ruling does not mean that in every case where an offer is made which is subsequently withdrawn, an order for costs would be appropriate. Clearly, that will depend on the circumstances of each case”.
The logic underpinning Nygh J’s analysis of the policy considerations in relation to offers of settlement is difficult to refute.
Ultimately it was submitted in relation to the significance of the “sunset” provision in the husband’s offer of 30 April 2008 that:
18.The statement by Nygh J is also apposite to the consideration of policy reasons why the court may take into account the offer notwithstanding that it had an expiry date. Policy intentions to encourage early settlement would be negated if the court would not be able to impose a punitive costs penalty for any costs incurred after the expiry date. Policy intentions to encourage early settlement would be negated if the Court would not be able to impose a punitive costs penalty for any costs incurred after the expiry of an offer. The effect of this outcome would be that the Court would only be able to impose a costs penalty to the time when the offer expires. This would result in the untenable and unworkable imposition of costs penalties that are so small as to not encourage serious consideration of settlement at all.
Senior Counsel for the husband submitted that the absence of authority supporting the proposition that a withdrawn offer ceases to have effect for the purpose of a costs application, and authorities upon which he relied supporting reliance upon such offers, were significant.
It was further submitted that the wife “could have protected herself from the imposition of the costs penalty based on failure to accept the offer by making a counter offer, which she failed to do”.
Considerable reliance was placed upon the wife’s asserted failure to have “ever made an offer or counter offer to settle these proceedings”. Senior Counsel submitted that “the only party who has ever made a serious attempt to settle this mater before trial and thereby avoid the costs of protracted litigation”.
In his written submissions in response to those of Senior Counsel for the husband to which reference has been made, Counsel for the wife submitted that offers of settlement had in fact been made on behalf of the wife. It was conceded that there had, prior to Counsel’s submissions, been no evidence of the making of those offers. There remains no evidence before the Court of those offers.
The Court however is prepared to proceed on the basis that Counsel of experience and competence, as the wife’s Counsel undoubtedly is, knowing the seriousness of so doing, would not have made the submissions he did (see paragraph 3) had he not seen the offers to which his submission refers, copies of which Counsel properly provided to Senior Counsel for the husband.
Without having seen the offers, the Court can say nothing about their substance or possible effect. They apparently predate by approximately 2 years the offer of the husband of 30 April 2008 upon which his Senior Counsel relies.
Counsel for the wife referred to a decision of Mushin J in Farlow v Farlow [2009] Fam CA 46 (4 February, 2009). In that case his Honour made an order for costs for a limited period, for reasons which he detailed.
It was submitted that Mushin J’s decision, and reasons for it, “supports the proposition that costs may be allocated for the finite period during which the offer remains effective. Secondly it supports the proposition that any offer must be one made under the Scheme before it may be considered under sub paragraph (f)”.
With respect to Counsel for the wife, the submissions which immediately follow the submission in reliance upon Mushin J’s decision in Farlow (supra) appear somewhat inconsistent with those submissions.
In support of his further contentions that any costs awarded against her should not be on an indemnity basis, Counsel for the wife made a number of submissions particularly in reliance upon the decision of the Full Court In the Marriage ofKohan (1992) 16 Fam LR 245.
Interestingly, one of the authorities upon which Counsel for the wife relied in this context (Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker (No 2) [2007] NSWCA 194 (10 August 2007)) contained a statement that “the fact that an offer does not comply with (the rules of the Supreme Court) does not render it invalid”. It will be remembered that Counsel for the wife had earlier submitted by reference to the rules of this Court that the husband had never made a valid offer.
Addressing the question of the weight appropriate to be given to the husband’s offer if, contrary to the wife’s Counsel’s submissions, the Court concluded that the husband had made a valid offer, it was submitted to be of relevance that:
21.…
(a)the timing of the offer (in relation to the scheduled date of the trial); and
(b)the amount of time during which the offer remained open.
It was also submitted that:
22.The lateness of the Husband’s offer meant that substantial costs had already been incurred by both sides, contrary to the Scheme’s policy favouring an early consideration of settlement.
Likewise, judicial time had already been reserved to the detriment of other litigants.
By reference to the judgment of Giles and Tobias JJA in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 (6 May 2008) it was submitted that “the Court should not be ungenerous to an offeree in determining whether a time is reasonable”.
Reliance was also placed upon the judgment of Basten JA in that case in which his Honour said:
“To do that [establish an entitlement to indemnity costs] it [the applicant] must demonstrate that its offer was left open for a period which was reasonable in all the circumstances…Because the present case is truly borderline, it should be concluded that Kooee [the applicant] has failed to establish that its offer was left open for a reasonable time”.
The period of 18 days in which to respond was thus asserted to have been too short as to constitute a reasonable time to consider the offer and respond to it.
Under the heading “Misunderstanding or Misuse of the Scheme” Counsel for the wife made a number of submissions the effect of which was sought to demonstrate that:
“…the Husband’s campaign to extract an order for Indemnity costs against the Wife demonstrates clearly the Husband’s deliberate misuse of the Scheme. This is one matter which ought be borne in mind when determining the Costs orders that should be made in relation to the Husband’s Costs Application.”
Counsel for the wife re-asserted that the “complexity of the proceedings” were relevant to the issue, and to the time which should have been granted to the wife to consider the husband’s offer. The “general principles” were then restated. The principles are not in serious doubt, as the submissions of Counsel for both parties confirm.
Submissions with respect to a series of “miscellaneous” matters were then made by Counsel for the wife. With respect to him, for reasons which will become apparent, it is unnecessary to refer to those matters.
Discussion
In Penfold v Penfold (1980) 144 CLR 311 at 315 the High Court said:
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s 117 (2) in "a clear case".
As the authorities to which both Counsel have referred make clear, the legislative intention is that, subject to the provision of s 117 (2) of the Act, each party pay his or her costs of proceedings in this Court.
The legislature clearly intended by the insertion of s 117(2)(A)(f) that a relevant matter in determining applications for costs was whether there had been offers to settle the proceedings, and the terms of any such offers.
In this case, there was undoubtedly an offer to settle the proceedings. Given that the trial of the proceedings was scheduled to commence on 19 May 2008, it would be reasonable to suggest that, by 30 April 2008, or very shortly thereafter, the wife and those advising her would have been in a position to make an informed decision in relation to the husband’s offer of settlement.
The Court accordingly does not conclude that the time when the offer was made relevant to the stage the proceedings had reached or the proximity of the offer to the commencement of the trial preclude successful reliance upon the offer of settlement of 30 April 2008.
In reality, if costs are awarded, from the evidence before this Court, the costs which would be covered by such order would be those incurred subsequent to the making of the order, and not earlier than that date. There may be cases where the timing of the order not only limits its potential effect but is so short as to render reliance upon it unjustified. This is not such a case.
The fact that the order was not capable of acceptance after the trial commenced does not in the Court’s view preclude the husband from relying upon it, largely for the reasons Nygh J discussed in Murray (supra). Even though the offer had expired by the time the trial commenced, it would have been open to the wife to either by notice in writing, purport to accept the offer or make an offer in the terms of the, by then, expired offer of the husband.
Realistically, as Senior Counsel for the husband submitted, by failing to accept the offer prior to the commencement of the trial, all the costs of preparation of the trial which had been incurred, on both sides, had been reasonably incurred.
The Court has earlier indicated that it does not accept that any aspect of the husband’s offer of 30 April 2008 rendered it invalid. Nor does any aspect of the making of the offer, the circumstances in which it was made, or any other matters upon which Counsel for the wife has relied, persuade the Court that the offer should be rejected for the purposes of exercising the discretion reposed in the Court by s 117 of the Act. In the Court’s view, the critical aspects of the current dispute relate to the substance of the offer.
It is correct to assert that, at least superficially, the wife would have been better off had she accepted the husband’s offer of 30 April 2008. She might, having regard to the figures to which Senior Counsel for the husband referred, have been approximately $270 000 better off than the Court’s orders provided. She would have been no worse off than the Court’s orders provided in that she would have ceded Residential Facility One to the husband.
There were however, at the time of the trial, clearly other matters which take the matter beyond the simplistic analysis which the Court has thus far provided. As her Counsel submitted, the wife’s endeavours to retain Residential Facility One were, though unsuccessful, not unreasonable. The Court was exercising a broad discretion. Other trial judges may have awarded the wife both residential facilities.
As Brennan J observed in Norbis v Norbis (1986) 161 CLR 513 (at 539 – 540):
The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference
When evaluating the offer of settlement of 30 April 2008, it could not have been presumed, or accepted, that the wife would necessarily fail to retain both residential facilities, either as a matter of discretion or of practicality. With respect to Senior Counsel for the husband, on the 52 percent to 48 percent division of the property which the Court concluded to be just and equitable, given the real estate holdings of the parties, an outcome in which the wife was awarded both facilities, and the husband the overwhelming bulk of the real estate assets would not have been incapable of practical implementation.
The wife, as the Court found, had historically been more involved than the husband in the running of the residential facilities. Indeed, that was influential in her being awarded 4 percent more of the property of the parties than was the husband against the background of almost four decades of cohabitation and substantial contributions by both parties.
As the transcripts of the proceedings, and the Court’s primary and various supplementary judgments all confirm, the case was substantially about the residential facilities, both in terms of past contributions to their acquisition, conservation and improvement, and as to the competing claims of the parties with respect to them in the future. Nothing advanced on behalf of the wife in any of those contexts was fanciful or devoid of merit.
In the Court’s view, the second matter of significance relates to the complexity of the proceedings to which Counsel for the wife referred, or perhaps more significantly for present purposes, the complexity of implementing any agreement in principle which might have arisen from the husband’s offer of settlement of 30 April 2008. Without being critical, the offer of settlement, probably necessarily, dealt with what could perhaps best be considered “Heads of Agreement”. Had the offer been accepted, or a counter offer made which led to an agreement in principle, it would be naive to suggest that the dispute would have thereby necessarily been resolved.
Realistically, subsequent to the delivery of the Court’s primary judgment in the proceedings, three subsequent hearings took place, and three supplementary judgments were produced before the matter was able to be finalised. It would not be an exaggeration to suggest that the proceedings subsequent to the primary judgment were no less complex or keenly contested than were the proceedings up to the primary judgment. Thus, whilst it could superficially be suggested that the acceptance of the offer would have been both better for the wife and an end to the dispute, the latter proposition is highly contestable.
So far as the percentage division is concerned, whilst the Court exercised its discretion in the way it did, it could not realistically be said that the wife’s claim for 57.5 percent of the net property of the parties, though optimistic, was fanciful, any more than it could be suggested that the husband’s claim for 50 percent of the property was. Thus, whilst the submissions on behalf of the husband have some attraction, the Court does not consider that, when all of the circumstances are taken into consideration, the husband’s offer to settle should have the significance asserted on his behalf.
The Court concludes that no order for costs should be made in the circumstances of this case. Objectively, and at the risk of adopting a simplistic approach in circumstances where the Court has rejected a simplistic approach for other purposes, given the value of the assets of the parties, and aspects of the contribution history of the parties subsequent to 1993 and 2006, the parties had a legitimate dispute to agitate before the Court with respect to the appropriate percentage division of their property and the ultimate fate of their residential facilities.
As the transcript would confirm, the trial of those issues was conducted by experienced and competent Counsel with economy and expedition. Those are matters relevant to the exercise of discretion.
Neither party was wholly successful or wholly unsuccessful. Irrelevant issues were abandoned at trial. Given the contributions of the parties and their assets, the substantive outcome of the proceedings and the subsequent course the proceedings took, there is, in the Court’s view, an essential fairness in each party paying his or her own costs of the proceedings.
So far as the claim for the costs of the costs dispute made by Counsel for the wife is concerned, the Court does not propose making any order. As the cogent written submissions of Counsel for each party confirm, and hopefully the Court’s judgment reveals, the costs dispute was keenly contested and finely balanced. On the material presented others exercising their discretion may have come to a different conclusion. No fact or circumstance persuades the Court that any order for costs of the costs application would be justified.
In case the matter requires the attention of other courts, it is probably desirable to say something about the husband’s application for costs on an indemnity basis. The authorities have been referred to by Counsel for the parties in their submissions.
In Limousin v Limousin(Costs) (2008) 38 Fam LR 478; [2007] FamCA 1178 the Full Court considered the question of indemnity costs in the following terms:
41.The decision of the Full Court of the Family Court (Strauss, Lindenmayer and Bulley JJ) in Kohan and Kohan (1993) FLC 92-340; (1992) 16 Fam LR 245 held that nothing in s 117 or 123 of the Family Law Act1975 (“the Act”) prevents the Court making an order for costs on an indemnity basis. It was recorded at FLC 79,614; Fam LR 258 (citations omitted):
The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the court may make such order as the court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O 38 r 2, the provisions of O 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. Order 38 rule 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2); Wentworth v Rogers (No 5); Hobartville Stud v Union Insurance Co.
Indemnity costs orders are still an exception in this and other jurisdictions.
42.The principles underpinning indemnity costs were summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 at 256:
(2)The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis …
(3)This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it …
(4)In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course …
43.In the decision of Yunghanns v Yunghanns (2000) FLC 93-029; (2000) 26 Fam LR 331 the Full Court of the Family Court (Lindenmayer, Holden and Mullane JJ) acknowledged that the category of cases in which an indemnity costs order is appropriate is not closed. It was recorded in paragraph 31:
It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought.
As was the case in Limousin (supra), the following passage from the Judgment of Shephard J in Colgate-Palmolive (supra) is instructive (at 257):
… it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson; Maitland Hospital v Fisher (No 2); Crisp v Kent) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records).
The Court is not persuaded that the circumstances of this case could properly enliven the discretion to award indemnity costs. The reasons why that is so have largely been articulated earlier in the context of explaining why the Court does not consider that a costs order should be made. If the Court is wrong in concluding that no order for costs should be made, those very same matters would, in the Court’s view, militate against an award of indemnity costs.
I certify that the preceding ninety one (91) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman
Associate:
Date: 26 March 2009
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