Lake and Ainsley
[2017] FCCA 2109
•8 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LAKE & AINSLEY | [2017] FCCA 2109 |
| Catchwords: FAMILY LAW – Costs following successful application to set aside Binding Financial Agreement – Costs reserved. |
| Legislation: Family Law Act 1975, ss.79, 117 Federal Circuit Court Rules 2001, rr. 21.02, 21.03 |
| Cases cited: Hawkins v Roe [2012] FAM CAFC 77 Kay & Kay & Anor [2017] FCCA 515 |
| Applicant: | MR LAKE |
| Respondent: | MS AINSLEY |
| File Number: | WOC 790 of 2014 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 18 May 2017 |
| Date of Last Submission: | 18 May 2017 |
| Delivered at: | Wollongong |
| Delivered on: | 8 September 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Rebecca Bailey & Associates |
| Counsel for the Respondent: | Mr Lloyd |
| Solicitors for the Respondent: | Kells The Lawyers |
ORDERS
The Applicant’s costs in the amount of $23,315.00 are reserved.
The matter be stood over to the 3 day Final Hearing commencing on 12 February 2018 at 10.00am.
Both parties file and serve any Amended Application / Response / Financial Statement upon which they intend to rely by no later than 19 January 2018.
Each party is to file and serve one consolidated Affidavit in support of the orders sought by them, together with any other witness’s affidavits by no later than 19 January 2018.
Neither party may rely on any documents filed after 19 January 2018 without leave of the Court, and in the event of non-compliance with these filing directions the Court will at its discretion either vacate the trial dates or list other matters with priority.
Each party is to file and serve a Case Outline document by no later than 4:00pm on 5 February 2017, setting out:
(a)a list of documents to be read in their case;
(b)a precise Minute of Orders Sought;
(c)a list of objections to evidence and the basis for such objection;
(d)a brief summary of argument setting out:
(i)the party’s contention as to the percentage contribution based entitlement asserted and the evidence relied on;
(ii)the party’s contention as to any s.75(2) percentage adjustment sought, the factors in s.75(2) relied on and the evidence relied on;
(e)a joint balance sheet, identifying the agreed and not agreed values of the pool of assets;
(f)a draft of the order sought to give effect to the overall entitlement asserted.
The Applicant is to comply with the payment of any setting down and/or daily hearing fee in accordance with Rules 24.03 and 24.04 of the Federal Circuit Court Rules 2001 or as otherwise directed by the Registry Manager by the date of filing of further material.
Both parties are granted leave to issue such Subpoena as they consider relevant to the issues before the Court.
THE COURT NOTES THAT:
A.A party’s trial Affidavits will not be read until the Case Outline document has been filed and served in accordance with these directions, which may result in the Final Hearing dates being vacated, other matters being listed with priority, or the matter becoming part-heard.
IT IS NOTED that publication of this judgment under the pseudonym Lake & Ainsley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
WOC 790 of 2014
| MR LAKE |
Applicant
And
| MS AINSLEY |
Respondent
REASONS FOR JUDGMENT
Introduction
These Reasons for Judgment explain why the Court has decided to reserve the Husband’s costs in the sum of $23,315, pending the outcome of the s.79 proceedings between the parties.
Background
On 26 July 2016 Her Honour, Judge Henderson published Reasons for Judgment [2016] FCCA 2132 and made orders setting aside the Binding Financial Agreement made between the Husband and the Wife in this case on 1 March 2012. The s.79 proceedings are presently before the Court.
By way of an Application in a Case, filed 23 August 2016 the Husband sought an order that within two months the Wife pay to him his costs fixed in the sum of $23,315. The Wife opposed the making of any order for costs but conceded as an alternative, that the Court might reserve the Husband’s cost so that they might be re-considered after all the evidence in the substantive s.79 proceedings has been heard. As it turns out, the Court has made orders consistent with the Wife’s alternative proposal.
The Husband’s Case
Ms Bailey appeared for the Husband. Her case is summarised in a document entitled Written Submissions of Applicant as to Costs, filed 4 April 2017. This document is reproduced in the first schedule to these reasons. The evidence relied on in the Husband’s application for costs is referred to in the said written submissions. The Court has had regard to the said documents, the other documents referred to therein, and the oral submissions made.
The Wife’s Case
Mr John Lloyd, Senior Counsel appeared on behalf of the Wife, and her case is summarised in a document entitled Respondent Wife’s Submissions in Relation to the Applicant Husband’s Application for Costs, filed 12 April 2017. This document is reproduced in the second schedule to these reasons. The documents relied on by the Wife are referred to in that document. The Court has had regard to the written submissions, the documents referred to therein, and to Senior Counsel’s oral submissions.
The Applicable Law
In the Full Court’s decision in Hawkins v Roe [2012] FAM CAFC 77 (8 June 2012) the Court very usefully summarises the applicable law at paragraphs 13-24 of the judgment:
RELEVANT LAW
In considering the law applicable to the determination of costs applications, it is important to recall the general principle under the Family Law Act 1975 as expressed in
s 117(1), that each party to proceedings shall bear their own costs.In proceedings involving children’s or parenting matters, the general rule is not often displaced. The rationale for this practice is that in such matters it is proper that parents are able to put their case in seeking orders which they believe to be in the best interests of their children. It hardly needs to be said that the nature of family court litigation in relation to children is quite different to a commercial dispute in the state or federal courts.
Section 117(2A) of the Act sets out the matters which the Court is to have regard to when considering what order (if any), should be made as to costs under s 117(2).
The section is in the following terms:
Costs
...
(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.
With respect to the application of the section, in Penfold and Penfold [1980] HCA 4; (1980) 144 CLR 311, the High Court said at 315 and 316:
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".
Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
(footnotes omitted)
The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”. That is not to say that one single matter may not ultimately be determinative. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another [2005] FamCA 158; (2005) 33 Fam LR 123 at paragraph 41:
... A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
With reference to the grounds of appeal propounded by the father, the
s 117(2A) matters relevant to these circumstances appear to be (a), (e) and (f). Although not directly referred to by his Honour, in his reasons the judge appears also to have considered (c).In respect of (a), the financial circumstances of the parties, it is as well to recall previous decisions of this Court that a disparity in financial resources between the parties may justify an order for costs in favour of the party with fewer financial resources (Marinko v Marinko (1983) FLC 91-307, Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605). Also relevantly, the apparent inability of a party to pay costs is not a bar to a costs order being made in circumstances where that party’s conduct is determined to warrant an order (Cross v Beaumont [2008] FamCAFC 68; (2008) 39 Fam LR 389).
In respect of (e), whether any party to the proceedings has been wholly unsuccessful in the proceedings is a well-established consideration. The general rule that costs do not follow the event can be displaced by the result of the litigation as well as its conduct by either party.
Although an appellate court should be very reluctant to interfere with the exercise of discretion in respect of costs (as observed by this Court in Browne v Green [2002] FamCA 791; (2002) FLC 93-115 and Harris and Harris (1991) FLC 92-254), it can and should interfere when the result is “plainly unjust or if the discretion was exercised on wrong principles” (see Robinson v Higginbotham [1991] FamCA 4; (1991) FLC 92-209). It is also accepted that an appellate court will uphold an exercise of discretion to order costs if it is apparent that there are appropriate reasons on which the judge could rely (see In the marriage of Greedy (1982) FLC 91-250).
It was held by Evatt CJ and Gibson J In the marriage of Greedy that “[a]n award of costs ought to bear some relation to the conduct of the proceedings by the parties or to their relative circumstances at the time of the application and hearing of the matter” (at 77,381). It was further said at 77,382:
...There may be situations where refusal to negotiate, to make an offer or to put forward an alternative order may be a factor justifying an order for costs. The failure of a party to take part in negotiations in a genuine manner may contribute to delay and cost and obstruct the proper resolution of a matter.
In the context of offers we would refer to Pennisi v Pennisi (1997) FLC 92-774 where the Full Court said at 84,547:
The husband’s submissions refer to Robinson and Higginbotham [1991] FamCA 4; (1991) FLC 92-209 as authority for the proposition that the fact that an offer just exceeds the award is no bar to an order for costs. Equally, however, it is only one of the factors to be considered under s 117(2A) and it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror – Harris and Harris (1991) FLC 92-254.
We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded.
...
We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.
Finally, the Court notes the powers given to it under rules 21.02, and 21.03 of the Federal Circuit Court Rules when making an order for costs:
FEDERAL CIRCUIT COURT RULES 2001 - RULE 21.02
Order for costs
(1) An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 days after a final decree or order is made; or
(c) within any further time allowed by the Court.
(2) In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
FEDERAL CIRCUIT COURT RULES 2001 - RULE 21.03
Determination of maximum costs
(1) The Court may specify the maximum costs that may be recovered on a party and party basis:
(a) by order at the first court date; and
(b) of its own motion or on the application of a party.
(2) However, an amount specified must not include an amount that a party is ordered to pay because the party:
(a) has failed to comply with, or has sought an extension of time for complying with, an order or with any of these Rules; or
(b) has sought leave to amend a document; or
(c) has otherwise caused another party to incur costs that were not necessary for the economic and efficient progress of the proceeding or hearing of the proceeding.
(3) The Court may vary the maximum costs specified if, in the Court's opinion, there are special reasons and it is in the interests of justice to do so.
This is a somewhat unusual case where I am asked to decide the question of costs, not having heard the substantive proceedings. I made the following observations in a recent decision, Kay & Kay & Anor [2017] FCCA 515 at paragraph 5:
5.I want to make some preliminary observations. I am not sure whether it was an advantage or a disadvantage seeking to adjudicate on the costs issue in respect of the hearing that I did not actually hear. On the one hand, there is the obvious disadvantage caused by the fact that all that I can rely on is the judgment itself, whereas if I heard the case I probably would have had a much deeper understanding of the evidence and be able to make observations that go beyond something that can be achieved just by reading the various documents that the parties asked me to look at in the course of this consideration. Nonetheless, one advantage is that I do not have those nuances and therefore come to this matter with a degree of freshness and impartiality. Even my involvement in this case back in 2014 is sufficiently in the past as to create distance and therefore even greater objectivity.
The present case is similar to the above in that I was previously involved in the case management, but the final hearing was heard by another judge. The reasons for judgment of Her Honour Judge Henderson set out critical findings of fact at paragraphs 12-16 of her reasons for judgment:
12.I accept the following findings from the evidence I have heard:
a)The husband and wife did not seek to deal with each other’s superannuation and they each intended they would retain what superannuation they had.
b)There was no superannuation splitting order or reference to superannuation in the body of the agreement.
c)The wife did not put anything next to item 13 of schedule A which reads: “MS AINSLEY’s superannuation”; it was specifically left blank.
d)The husband knew the wife had superannuation at the time of entering into the agreement as in evidence he said he had seen a document in about 2000 showing she had a then balance of $6,000.
e)The husband believed the wife’s superannuation was at the time of signing the agreement some $6,000.
f)The husband is in serious default of his obligation under the binding financial agreement in two parts. He failed to comply with clause 8 and pay towards the mortgage the sum of $2,166 per month and at the date of the sale of the former matrimonial home he was in arrears of this clause in the sum of $17,806.
g)Secondly the husband breached clause 6(b) of the deed in that he failed to cause the overdraft of $20,439 of the business he retained pursuant to the deed which to be paid out of his own company funds or his own funds. That overdraft was paid out of the net proceeds of sale of the former matrimonial home thus reducing the monies paid to the wife at settlement of the sale as she was to retain all the net proceeds of sale pursuant to clause 6(c) of the deed.
h)The husband’s total default under the deed amounts to no less than $38,241 being the additions of my findings of the above paragraphs. The wife’s solicitors informed the husband that he was in arrears by a letter dated 28 April 2014 and the wife then sought to enforce the deed and have the sum of $38,241 paid to her.
i)The wife has complied with her obligations under the deed, in clause (6), in that upon determining she was unable to purchase the former matrimonial home from her husband which was an intention under the deed she ensured the home was listed for sale within 21 months of the date of the agreement.
j)The husband and his new partner purchased a home one month after the settlement of the sale of the former matrimonial home.
13.Mr Rosic has satisfied me from his cross-examination of the husband and from the cross-examination of the wife of these matters. However, they are not, as I see the law, relevant to the fact in issue. The fact in issue is whether the wife failed to disclose a material fact therefore falling within the definition of fraud under section 90K of the Family Law Act.
14.Clearly she did fail to disclose a material fact, albeit without any intention to defraud in the usual meaning of such a phrase. The wife failed to disclose to the husband the value of her superannuation at the relevant time namely the signing of the deed.
15.I reject any argument on behalf of the wife that she and her husband discussed her superannuation at the various round table conferences the parties had with the lawyers prior to signing the deed. The husband rejects any disclosure by her and I am not satisfied this occurred on the evidence.
16.There is not one independent piece of evidence to support the wife’s claim of disclosure. Although the wife may believe she disclosed her superannuation amount there is not one thing in writing sent to the husband’s solicitors confirming same and that is an important factor in this matter.
This Court is clearly bound by Her Honour’s findings, as are the parties. An appeal was filed, but subsequently did not proceed. The findings made by Her Honour, as it turns out, are quite critical to understanding the Court’s reasons for quantifying and reserving the Husband’s costs.
Quantification of Costs
It was conceded by Senior Counsel for the Wife, quite appropriately, that if costs were to be ordered the quantification proposed by the Husband was appropriate. The Court entirely agrees in this regard. If anything, it is a conservative application of costs calculated in accordance with the schedule to the Federal Circuit Court Rules. Quantification of costs is, therefore, not an issue in this case. Whether the Wife should be liable for the Husband’s costs is contested by her.
Application of Section 117
Financial Circumstances of the Parties
The Court accepts that the financial circumstances of the Husband and the Wife as deposed to in their respective financial statements is untested. That is not a reason for making a costs order, if one is otherwise appropriate. Indeed, costs orders are routinely made in this Court without the benefit of cross-examination as to relevant matters. Consistent with authority referred to earlier in these reasons, if a costs order is otherwise appropriate, the mere fact that the financial circumstances of the payer for costs might otherwise contraindicate the making of an order, is not reason not to make the order. Thus, even if the financial circumstances of the Wife are as she states, that does not mean that an order should not be made.
The Conduct of the Parties
Paragraph (c) of s.117 (2A) states:-
“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, admission of facts, production of documents and similar matters.”
The Court finds the submissions made on behalf of the Wife by her Senior Counsel (in relation to paragraph (c)) to be compelling. In short, and without doing these submissions justice, it is contended that the Husband’s conduct in relation to the Binding Financial Agreement as found specifically by Judge Henderson would strongly contraindicate the making of a costs order, or at the very least incline the Court to reserve costs pending a more fulsome assessment of the evidence. The Court believes that the findings made by Judge Henderson against the Husband are quite damming: see paragraphs 12(d), (e), (f), (g), (h) and (j). With great respect to the Husband, he hardly came to the proceedings relating to the Binding Financial Agreement with clean hands. The Court accepts the detailed submissions made on behalf of the Wife in this regard. To make an order for the Husband’s cost of the proceedings, but to ignore his own conduct in relation to the Binding Financial Agreement, could easily be misconstrued as sanctioning what was clearly bad behaviour on his part. There is a sense in which the Husband’s application to set aside the Binding Financial Agreement might be regarded as opportunistic.
The force that might otherwise have been given to the Husband’s submission as to the Wife’s alleged failure to make proper and timely financial disclosure is rendered less compelling by his own behaviour.
Accordingly, the Husband’s conduct, as found by Judge Henderson, is a matter which the Court considers contraindicates the making of the costs order that he seeks.
Whether any Party to the proceedings has been wholly Unsuccessful in the Proceedings
It is clear that the Wife was wholly unsuccessful in her application to seek to enforce the Binding Financial Agreement. This has reopened the s.79 issue, which will be dealt with by the Court in due course. This is a strong reason for otherwise making an order in the Husband’s favour, but the Court finds compelling the submission made on behalf of the Wife that the contest in relation to the division of the assets remains live and thus the better outcome is to reserve costs. This means that on the facts of this case, a consideration that might be determinative in other cases, receives much less weight.
Whether a party has made an offer to settle
Whilst the Husband was entirely successful in the proceedings before Judge Henderson in the sense of having the Binding Financial Agreement set aside, the Court is not satisfied that the offer that he made falls within the present consideration. The offer he made to settle the proceedings before Judge Henderson was clearly conditional on the Wife accepting his contention about property settlement, which remains a live issue.
Conclusion
Having regard to the above, and even though the Court is comfortable in quantifying the Husband’s costs, the Court is not prepared to make the order for costs against the Wife that he seeks - at least not for the time being. His conduct militates against the making of a costs order at this time. However, with the more fullness examination of the evidence of both parties, which is likely to take place at a hearing of their respective applications under s.79, the Court may well come to a different conclusion.
In closing, the Court acknowledges that by reserving costs as it has, it is probably making settlement of this case much harder. That is a consideration that the Court is entitled to take into account under paragraph (g) of subsection (2A). The seemingly intractable conflict between these parties and their palpable lack of trust for each other probably means that a hearing will be necessary in any event.
Directions
The matter needs to be heard and directions will be made accordingly, at the time these Reasons are published.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Date: 8 September 2017
Schedule 1
Written Submissions of Applicant as to Costs
| DOCUMENTS RELIED UPON BY APPLICANT |
Application in a Case filed 23 August 2016
Affidavit of MR LAKE sworn and filed 23 August 2016
Financial Statement of MR LAKE sworn and filed 28 March 2017
Financial Statement of MS AINSLEY filed 9 September 2014
Amended Financial Statement of MS AINSLEY filed 2 February 2016
Further Amended Financial Statement of MS AINSLEY filed 24 February 2017
Judgement of Judge Henderson dated 26 July 2016
Notice to Produce dated 4 April 2017
| SUMMARY OF ARGUMENT AS TO COSTS |
Legislation and Case Law
Pursuant to section 117 of the Act, each party to the proceedings shall bear his or her own costs subject to the discretion afforded to the trial judge which, at subparagraph (2) provides as follows:
"If the court is of the opinion that there are circumstances that justify it in so doing, that it may, subject to the further subsections hereof and the applicable rules of court, make such order as to costs as the court considers just".
It is submitted on behalf of the Applicant that the circumstances of this case warrant the court to make a costs Order against the Respondent to ensure justice to the Applicant.
The justifiable circumstances, referred to in subparagraph (2A) of section 117 are relevantly referred to below as follows:
(a)the financial circumstances of each of the parties to the proceedings;
The Respondent is employed as an (occupation omitted). She earns a yearly income of approximately $37,000.00 and receives child support payments of approximately $6,400.00 as indicated in her Further Amended Financial Statement sworn 24 February 2017.
Her Further Amended Financial Statement also indicates that she is some four months from being entitled to receive long service leave. The Husbands income (less the child support payable by him to the Respondent) is comparable.
The Respondent’s financial circumstances are not significantly dissimilar to that of the Applicant.
The Respondent has the capacity to meet the costs order from her assets.
At any rate, impecuniosity of the Respondent should not be a bar to the Applicant’s claim for costs.
From 9 September 2014 to 2 February 2016 the Wife increased the level of debt (mortgage) on her property at Property A from $282,000.00 to $301,000.00 (refer to Financial Statement sworn by the Wife). No evidence is provided by the Wife as to what she did with those funds. The Wife fails to acknowledge that in the time frame from 2014 to 2017 that the value of her property has increased at all.
From 2014 to 2017 the Wife increased the level of her credit card debt from $13,000.00 to more than $18,000.00.
The Wife failed to give evidence that following the sale of the former matrimonial home she retained the proceeds of sale which sum was applied to the purchase of real estate now in her name.
Presumably the Respondent has been informed of the risks of litigation of this kind. She would have been made aware of the likely costs she would incur in terms of her own legal fees and that which would be payable to a successful opponent. She decided to run that risk and now appears to rely on the debt incurred by her as a result of her own legal fees as an excuse in this costs matter.
(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
Neither party was in receipt of a grant of Legal Aid at any time during the proceedings for property settlement.
(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, admission of facts, production of documents and similar matters;
The Respondent’s conduct has had significant bearing in the relevant circumstances of this case. The Respondent’s conduct is specifically referred to in the Applicant’s affidavit. Details regarding the Respondent’s failure to give financial disclosure and comply with court directions and orders are detailed in the Applicant’s Affidavit.
Failure by the Respondent to give financial disclosure resulted in the significant cost to the Applicant of issuing subpoena (including filing fees and conduct and service fees, and legal fees in the issue of Subpoena and attendance at Wollongong Registry to inspect and copy).
The Respondent's failure to provide full and frank financial disclosure was the main feature of the litigation. That is, she knowingly refused to provide the full detail of her financial circumstances in the Binding Financial Agreement. She then knowingly refused to give those same details (her superannuation and bank accounts) during the course of litigation despite repeated requests made on behalf of the Applicant.
The Respondent maintained her superannuation position as "Not known" in her Financial Statement sworn 26 August 2014. She did not give the name of her second superannuation fund or the value of that fund until she swore her Amended Financial Statement in February 2016.
She did not comply with a Notice to Produce served on her in the proceedings and referred to in the Affidavit of the Applicant.
The Respondent sought and obtained Orders delaying the Applicant's Costs Application on the basis that she would be pursuing an Appeal. She then failed to file the Appeal in a timely manner contributing to further expense and delay for the applicant and ultimately resulting in her Application in an Appeal being dismissed.
The Respondent did not comply with the court’s rules in relation to the provision of financial disclosure. The Applicant was forced to incur legal fees in obtaining information about the Respondent's financial circumstances.
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
Not Applicable.
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
The Applicant sought that the Respondent’s application for enforcement be dismissed. The Respondent was wholly unsuccessful in pursing her Application.
The Applicant was wholly successful in defending the Respondent's Initiating Application.
(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;
The outcome of the proceedings regarding the Binding Financial Agreement was entirely in accordance with the Order proposed by the Applicant. The Applicant made numerous offers to the Respondent to this effect throughout the proceedings referred to in his Affidavit.
(g)such other matters as the court considers relevant.
The costs incurred by the Applicant are reasonable in the abovementioned circumstances. See Applicant’s Affidavit.
Provisions of the Family Law Rules 2004, particularly Rule 19.18, provides for the method of calculations of costs. In that rule, it provides as follows:
(1) The Court may order that a party is entitled to costs:
(a) Of a specific amount;
(b) As assessed on a particular basis (for example, lawyer and client, party/party or indemnity)
(c) Be calculated in accordance with the method stated in the order or;
(d) For part of the case or part of an amount assessed in accordance with schedule 3.
The rule further provides, in subparagraph (3), that:
In making an order under sub rule (1), the Court may consider:
(a) The importance, complexity or difficulty of the issues;
(b) The reasonableness of each party’s behaviour in the case;
(c) The rates ordinarily payable to lawyers in comparable cases;
(d) Whether a lawyer’s conduct has been improper or unreasonable;
(e) The time properly spent on the case or in complying with pre-action procedures and;
(f) Expenses properly paid or payable.
It is submitted on behalf of the Applicant that the Court can be satisfied that the particular circumstances of the case (as noted above) warrant the making of a costs order in order to achieve justice to the Applicant.
Calculation of Costs
In Colgate-Palmolive Co& Cussons Pty Limited at 257 Sheppard J said:
4. ...The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costsas between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, 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 (1989) 92 ALR 131 at 152 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 (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 ay 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order forcosts on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment ofcosts other than on a party and party basis.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd& Ors [1988] FCA 202; (1988) 81 ALR 397 at 401 Woodward J, with respect to the award of costs, referred to what he said in Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd and stated:
No doubt the expression “high-handed presumption” was appropriate in the case Tadgell J [Australian Guarantee Corp Ltd v De Jager [1984] VicRp 40; [1984] VR 483] had to decide, and he needed to go no further; but in order to establish a convenient principle in such cases it is necessary to be a little more prosaic. I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity”costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
The Applicant does not seek indemnity costs.
In relation to Party Party costs, the Applicant relies upon the schedule of costs and disbursements (in relation to the BFA setting aside aspect of the case only) prepared and annexed to his Affidavit at Annexure K.
The Applicant seeks payment of costs as follows:
That within two (2) months of the date of these Orders, the Respondent Wife pay the costs of the Applicant Husband fixed in the sum of $23,315.00.
In seeking a lump sum payment of a specific sum as a preferred Order, the Applicant seeks to minimise further costs likely to be incurred by him in the assessment and/or taxation of his account including disbursements. He also seeks to finalise the Costs case as soon as possible whilst also recovering some of the costs incurred by him.
In the event that the Court does not accept as reasonable the proposed lump sum amount, then the Applicant seeks that the Court consider making an Order for costs to be assessed on a solicitor/client or party/party basis. It is submitted that the circumstances of the case warrant the Court in making such an Order.
The Respondent was deceptive in her failure to provide her full and frank financial disclosure to the significant expense of the Applicant who was forced to issue subpoena, conduct court attendances, and pursue a Final Hearing to circumvent the Respondent’s ability to enforce a Binding Financial Agreement.
It is submitted on behalf of the Applicant that the Respondent should have known that her case for enforcing the Binding Financial Agreement had no chance of success.
This is a case where the Court can be satisfied that there were exceptional circumstances which would enliven the discretion of the Court to award an Order for Costs on a solicitor/client basis or otherwise, on a party/party basis at least.
Schedule 2
Respondent Wife’s Submissions in Relation to the Applicant Husband’s Application for Costs
LAKE v AINSLEY
No. WOC 790 of 2014
RESPONDENT WIFE’S SUBMISSIONS IN RELATION TO
THE APPLICANT HUSBAND’S APPLICATION FOR COSTS
(A) APPLICATION
1.It is understood by the Respondent Wife that the Applicant Husband moves on an Application in a Case filed 23 August 2016 supported by his Affidavit filed the same day.
(b)DOCUMENTS TO BE RELIED UPON BY RESPONDENT WIFE
1.Section 90C Agreement dated 1 March 2012.
2.Initiating Application of Respondent Wife filed 9 September 2014.
3.Financial Statement of Respondent Wife filed 9 September 2014.
4.Affidavit of Respondent Wife filed 9 September 2014.
5.Response to Initiating Application of Applicant Husband filed 20 February 2015.
6.Financial Statement of Applicant Husband filed 20 February 2015.
7.Affidavit of Applicant Husband filed 20 February 2015.
8.Amended Response to Initiating Application of Applicant Husband filed 8 July 2015.
9.Amended Response to Initiating Application of Applicant Husband filed 28 January 2016.
10.Amended Initiating Application of Respondent Wife filed 2 February 2016.
11.Affidavit of Applicant Husband filed 2 February 2016.
12.Affidavit of Respondent Wife filed 2 February 2016.
13.Affidavit of Applicant Husband filed 23 August 2016.
14.Reply of Respondent Wife filed 24 February 2017.
15.Affidavit of Respondent Wife filed 28 March 2017.
(C)RELEVANT LEGISLATION
1.The relevant legislation is found at s.117 of the Family Law Act 1975 (as amended).
2.It is not proposed to regurgitate the legislation but rather deal with those parts of it which are relevant.
3.The starting point is that each party bears their costs subject to ss.117(2), 70NFB(1) (not relevant), 117AA (not relevant), 117AC (not applicable) and 118 (again, not relevant).
4.Accordingly, s.117(2) requires submission and comment:
(a) the financial circumstances of each of the parties to the proceedings:
The latest Financial Statement of the Husband is sworn 21 March 2017. Without testing that document, it would appear his net available assets inclusive of superannuation total $162,628. He has an excess of personal expenditure over income and the source from which such shortfall is paid is not identified.
On the other hand, the Wife’s financial position as identified in her Further Amended Financial Statement filed 24 February 2017 discloses net assets of $198,973 inclusive of superannuation. Her expenditure is marginally greater than her average weekly income and she identifies 5 separate credit cards which clearly are being utilised to fund that minor shortfall and her day-to-day expenses.
Both parties are in employment. The Wife’s employment is transparent to the extent that she is employed as an (occupation omitted) with (employer omitted), and on the other hand, the Husband is self-employed as identified in his Financial Statement of 21 March 2017. The Husband clearly needs to be cross-examined in relation to the contents of that document given the non-clarity of some of the answers, particularly under Parts F, H, I and K.
It should be noted in the Husband’s latest Financial Statement that his outstanding legal fees amount only to $739 with the clear inference being that all of his fees have been paid from some source unidentified from his financial statement, if it be accepted as accurate.
On the other hand, the Wife’s Statement of Financial Circumstances clearly shows an inability to pay any order for costs.(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:
Not applicable.
(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:
This sub-section needs some detailed analysis. It is submitted on behalf of the Wife to this application that the Husband’s conduct most certainly does not warrant an order for costs being made in his favour for the following reasons:
(i)The costs application has as its genesis the Judgment of Judge Henderson in the setting aside of the s.90C Agreement. An order for costs would not follow simply because that order was made;
(ii)The relevant s.90C Agreement was entered into by the parties on 1 March 2012. By 9 September 2014, 2 ½ years after the event, the Husband had fallen into arrears of his obligations under the agreement. The Wife brought an application for enforcement in her Application filed 9 September 2014 referred to above. She filed a Statement of her Financial Circumstances on that day and also swore an Affidavit, the contents of which are vitally important and in particular from [7] onwards. The Wife incorporates into the submissions [7] to [21] inclusive of that Affidavit.
(iii)Its importance comes about as a consequence of an affidavit filed by the Husband on 2 February 2016, more particularly commencing at [38]. It is here that the Husband acknowledges his failure to comply with the terms of the agreement as particularised in [7]-[11] of the Wife’s Affidavit of 9 September 2014;
(iv)[39] of the Husband’s Affidavit explains the reason he had not complied with it because he said he could not;
(v)The Husband then adopts in [40] ([13]-[15] of the Wife’s Affidavit), but contends the variation of the agreements was the subject of a supplementary verbal agreement;
(vi)Importantly at [41] of the Husband’s Affidavit, he seeks to explain that he relied upon representations made by the Wife consistent with the terms of the deed to the extent that he contended he relied upon them;
(vii)At [42], he acknowledged the existence of the BFA.
These recognitions by the Husband during the time period as identified by the Wife become vitally important to the issue of conduct because by the time the Wife sought to enforce the agreement, the Husband’s acknowledgment of his obligations under the agreement continued right up until it was apparently discovered by his new solicitor that there was an omission in the Schedule of Assets and Liabilities in the original agreement. That submissions is supported by the Husband’s Affidavit filed 23 August 2016 at [11]. Clearly, the Husband’s current advisers only learnt of that omission on or about January 2015 prior to filing the Husband’s Response on 20 February 2015.
Pausing there, the Response that was filed by the Husband did not seek an order setting aside the agreement but incompetently simply sought to start s.79 proceedings in the face of the agreement still being binding at that time.
What becomes even more curious in the Husband’s conduct is the contents of his Affidavit filed 20 February 2015 at [43], where he contends that in late 2013 he sought legal advice about the validity of the BFA having some suspicions that the Wife had not been honest about her financial position. He goes on to say that somehow or other he and whoever that legal adviser was, assumed that as a legal secretary, the Wife would have superannuation with (omitted) Super, so he obtained information by way of a Form 6 Superannuation Information Kit (which has not been discovered so far as the writer is aware) and that he became aware of the value of the Wife’s superannuation in late 2013.
What the Husband does not and cannot explain is –
(i)The identity of the person from whom he sought legal advice in late 2013;
(ii)Discover the Form 6 Superannuation Information Kit that he said he received;
(iii)What steps he took in late 2013 once he was armed with the knowledge that the Wife had superannuation;
(iv)Why he did not seek an order for the setting aside of the agreement until 28 January 2016 some years later; and
(v)Why he continued to comply (to his apparent ability) with the terms of the agreement until some years later in January 2015;
(vi)Clearly the Husband determined in late 2013 that the quantum of the Wife’s superannuation as discovered by him did not materially affect his obligations or any reason why he should challenge the agreement.
It is abundantly clear that the Husband’s Response to the Wife’s Initiating Application was simply an attempt to have the agreement set aside on a basis that clearly did not disturb him for some years after learning of her entitlement.
What is even more curious is that when the Husband’s current solicitor received the file from the Husband’s previous attorneys, there was no reference to the Form 6 Superannuation Information Kit, the Husband swore he received in late 2013.
[11] of the Husband’s Affidavit of 23 August 2016 simply states that he has had his solicitors write to say that, “the writer [his solicitor] has not been able to identify where your client provides her proper disclosure regarding her superannuation”. One would have thought she would have been armed with the fact that a Form 6 was obtained in late 2013 because that is precisely what the Husband had ascertained and obtained.
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court:
Not applicable.
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings:
At this stage of the proceedings, the Wife has been wholly unsuccessful in her attempt to enforce the s.90C Agreement and has yet to ascertain her entitlement under s.79.
Now that there is a contest between the parties in relation to the division of their assets (as opposed to an agreement), the Wife will have available to her all of the court mechanisms such as the issuing of subpoena, the administration of specific questions, experts’ report and the like to ascertain in fact what the Husband’s financial position has been post the execution of the agreement and indeed whether his current statement of financial circumstances is accurate. In other words, the contest in relation to the division of their assets remains live and a determination as to whether the benefits the Wife enjoyed under the agreement will be far greater or lesser are yet to be determined.
Whilst it is conceded at Step 1 of these entire proceedings, the Wife has been unsuccessful in seeking to enforce the agreement and unsuccessful in seeking to uphold it, the Wife would respectfully submit that these are early days in relation to Part VIII proceedings coupled with a failure of the Husband to explain his conduct as outlined above. It is clearly submitted that at this stage, costs of those proceedings should be costs in the cause.(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:
The Husband made an offer to resolve the matter as identified in [11] of his Affidavit of 23 August 2016. The offer itself is not confined to the setting aside of the BFA. The offer is yet to be determined as to whether the Husband is successful or not given the third limb to the offer, that is, “that each party shall retain ownership of those assets, liabilities and superannuation in the current name and possession”.
That part of the offer is yet to be determined by the s.79 proceedings. The offer was not bifurcated and can only be read as a whole.
(g) such other matters as the court considers relevant:
In these proceedings, the Wife has sought to join her solicitor as identified in her Reply filed 24 February 2017. Her suit against her solicitor is for negligence and the attorneys representing her have advised the court that they no longer wish to make submissions in relation to the court’s power to deal with her as a party to the proceedings.
Clearly, the suit against her involves the same justiciable issue and indeed given the contents of the Judgment of Judge Henderson in her recital of that passage from Blackmore v Webber (2009) FMCAFAM 154, that there is no reason why the Husband’s solicitor ought not be joined to the proceedings as well because they too were no doubt potentially negligent in not advising their client, the Husband, of the omission which clearly stood out in the Schedule of Assets and Liabilities where there was no number provided for the Wife’s superannuation.
5.In all of the circumstances, an order for costs ought not be made at this stage and at worst be reserved as costs in the cause for the reasons outlined above.
0
8
3