Leo and Leo - [2007] FamCA 1667

FAMILY COURT OF AUSTRALIA

LEO & LEO

[2007] FamCA 1667

FAMILY LAW – OFFER OF SETTLEMENT – COSTS – Both parties acted reasonably in the offers and counteroffers of settlement. Section 117 Family Law Act 1975 (Cth) discussed. M & M [2006] FamCA 913, C & C [2005] FamCA 429 and Penfold & Penfold (1980) 144 CLR 311 cited. The award of costs in this context involves discretion and should not encourage litigation rather than acceptance of offers. AMS & AIF [1999] 199 CLR 160 cited. No order for costs.

Family Law Act 1975 (Cth)

M & M [2006] FamCA 913
C & C [2005] FamCA 429
Penfold & Penfold (1980) 144 CLR 311

APPLICANT:

Ms Leo

RESPONDENT:

Mr Leo

FILE NUMBER:

PAC

2660

2007

DATE DELIVERED:

23 November 2007

PLACE DELIVERED:

Parramatta

PLACE HEARD:

Parramatta

JUDGMENT OF:

Coleman J

HEARING DATE:

23 November 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Kenny

SOLICITOR FOR THE APPLICANT:

Coleman & Greig

COUNSEL FOR THE RESPONDENT:

Mr Wong

SOLICITOR FOR THE RESPONDENT:

Matthews Folbigg

Orders

That orders be in accordance with the Consent Orders marked as Exhibit “X”.
That there be no order for costs.

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

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 2660 of 2007

MS LEO

Applicant

And

MR LEO

Respondent

REASONS FOR JUDGMENT

This is an application by the applicant wife (“the applicant”) for what perhaps is best described as a partial costs order in relation to the proceedings under Part VIII Family Law Act 1975 (Cth) (“the Act”), which concluded earlier today by the making of consent orders in accordance with a document which became Exhibit X. I incorporate the terms of Exhibit X in these reasons without reading those terms on to the record.
The primary basis of the application for costs is that the husband, who is the respondent to this application and was the respondent in the Part VIII proceedings (“the respondent”), rejected until a time when the costs of preparing for trial had already been incurred the acceptance of an offer which had been, to use the colloquial, on the table for some weeks prior to the date set for trial at the time shortly before the trial. The effect of this was that the orders of the Court made by consent were no less favourable to the applicant than the offer which had been available for some time.
It is thus submitted, in essence, on behalf of the applicant that the Court would, pursuant to s 117(2) of the Act, form the requisite opinion ‑ namely, that in the circumstances an order for costs was appropriate. Secondary reliance was placed upon the disparity in the financial positions of the parties, it being submitted that the respondent’s superior financial position would reinforce the strength of the applicant’s claim for a costs order.
The application raises some factual and perhaps broader issues to which, hopefully, adequate but brief reference will now be made. The background to the proceedings and to the events which assume pivotal significance in relation to costs is that the applicant commenced the substantive proceedings by application filed on or about 11 May 2007, which appears to have had a first return date before the Court of 14 June 2007. It appears from the record that on or about 20 July 2007 the respondent filed a response, the effect of which was a joinder of issue between the parties in relation to their Part VIII dispute. The matter then was scheduled to go to a conciliation conference. For reasons which the Court cannot know, and does not need to know in any event, that apparently did not occur. The matter was then set for trial.
Whilst, as learned Counsel for the applicant contends, the case was at one level ‑ namely, the factual level ‑ not apparently of significant complexity, the discretionary issues which emerged from the pleadings and affidavit evidence‑in‑chief of the parties could not properly be necessarily so described. As decisions such as that of the Full Court in M & M [2006] FamCA 913 make clear, the exercise of discretion where a significant aspect of the property, or part of the property howsoever defined, of parties to a Part VIII dispute is represented by a vested interest in superannuation is considerable, whilst determining the facts in this case would not appear to have been a challenging exercise for a trial Court, the Court does not accept that exercising its discretion by reference to the relevant statutory provisions and the authorities ‑ namely M & M (supra) and, prior to that, C & C [2005] FamCA 429‑ would have been by any means a simple exercise. The point of all this is that, whilst certainty perhaps surrounded the facts relevant to the case, the exercise of discretion was rather more uncertain.
Turning, then, to the history of the offers of settlement and perhaps lapsing into some editorialisation in chronicling those steps or staging in the litigation, on 18 October 2007, the attorneys for the respondent initiated what the evidence before this Court suggests to have been the formal course of negotiations for settlement. The letter of 18 October 2007 from the respondent’s attorneys to the applicant’s attorneys speaks for itself and is incorporated into these reasons without being read on to the record, save to note that a composite offer was made, and was conveyed by that letter ‑ namely, a cash component of $50 000 and a splitting order component of $10 000. That resulted in an offer of settlement from the attorneys for the applicant, which was forwarded on or about 26 October 2007. It is apparent from the offer that, at least inferentially, the respondent’s offer of 18 October 2007 was rejected.
The offer of settlement dated 24 October 2007 communicated by letter of 26 October 2007 speaks for itself and is incorporated in these reasons without reading the document on to the record, save to note that the essential conceptual differences between that offer or counteroffer and the earlier offer on behalf of the respondent were twofold: firstly, as to the quantum of the benefits offered, instead of $50 000, a figure of $80 000 emerged; secondly, as to the manner in which the respondent would satisfy such obligations, if accepted, instead of $50 000 in cash and $10 000 by way of superannuation interest, the applicant indicated a desire to receive $80 000 in cash.
The next development, silence having prevailed for what was clearly only a few days, was on or about 1 November 2007 when the attorneys for the applicant wrote to the attorneys for the respondent seeking advice as to whether or not the counteroffer conveyed on 26 October 2007 was to be accepted. It indicated, sensibly, that if the offer were to be accepted, then neither party would incur significant legal costs in preparing for trial.
The attorneys for the respondent on 9 November 2007 forwarded another offer in more formal terms than the 18 October 2007 to the attorneys for the applicant. Learned Counsel for the applicant informed the Court, and the Court accepts, that the offer was received on or about 12 November 2007. The Court incorporates the terms of that offer in these reasons without reading the offer on to the record, save to note that the offer differed from the previous offer in relation to the superannuation interest sought to be conferred as part of the benefits to be payable to or provided to the applicant. The figure of $30 000 in lieu of $10 000 was provided in the formal offer. Also offered was a motor vehicle. Whilst a minor matter, but indicative of the bone fides of the respondent, the cash component of $50 000 was offered within 60 days in lieu of 90 days as provided by the offer of 18 October 2007.
It is common ground that the offer forwarded on 9 November 2007 and received 12 November 2007 was formally rejected on 16 November 2007, which was a Friday, and that at some stage on the following Monday 18 November 2007 the parties reached agreement on the basis of the last offer of the applicant, which the attorneys for the respondent, by letter of 18 November 2007 clearly intimated to the attorneys for the applicant.
The general provision in relation to s 117(1), is that subject to s 117(2), each party pay his or her costs of proceedings in this Court. The High Court in Penfold & Penfold (1980) 144 CLR 311 made clear that no special circumstances need to be demonstrated by an applicant for costs and that all that was required was that the Court, having regard to the matters referred to in s 117(2A), be of or form the opinion that in all the circumstances a costs order is appropriate.
In this case, there are two categories of circumstances within s 117(2A) which are specifically relevant, and there is, in this Court's view, a third matter to which neither Counsel expressly referred, but which the Court considers to be not irrelevant to the exercise of its discretion in the circumstances of this case.
Dealing with the matters not in order of significance, the comparative financial circumstances of the parties, though clearly favouring the respondent, do not in the circumstances of this case in the Court’s view, advance the applicant’s claim for costs. The respondent was always, by virtue of the contribution history revealed by the material filed in the suit, going to have somewhat more by way of assets and/or superannuation interests than would the applicant, whatever the outcome. In the Court’s view, the effect of the disparity in financial circumstances between the parties in this case is that if the applicant has a valid entitlement to costs, the financial circumstances of the parties would not operate to cause the Court not exercise its discretion to award such costs. It does not automatically, in the Court’s view, in this case follow that a financial disparity works in reverse. There would be cases where that could be so, but the extent of the disparity is not such in this case as would give rise to that situation.
The more significant matter is the position in relation to the offers of settlement. Although not so expressed, in reality, the applicant’s claim in relation to the offers for settlement is necessarily reduced to one in which it can be submitted accurately on behalf of the applicant that an offer of settlement made by or on her behalf communicated on 26 October 2007 was ultimately accepted by the respondent. Literally, that is correct, but to do justice to the case, one has to look somewhat beyond that.
It was earlier observed that the outcome of this dispute was by no means certain or readily able to be predicted. Realistically, the ambit of the dispute was probably delineated by the initial offer on behalf of the respondent and the counteroffer eight days later on behalf of the applicant. The offers raised the broader consideration of the conduct of the parties.
It is not without significance that the respondent initiated the formal offer process. It is also not without significance that the offer contained therein, though more favourable to the applicant than the parties agreed to be appropriate, was not an unreasonable offer, albeit necessarily, it must have reflected what, on advice, the respondent hoped to be the more favourable end of the range from his perspective.
The counteroffer clearly must be seen as having been reasonable by virtue of the respondent’s ultimate acceptance of it. It does not automatically flow in the Court's view that by ultimately accepting the offer the respondent should be seen as having acted unreasonably.
The further offer made on behalf of the respondent on 9 November was also not unreasonable, and in three material respects it represented a not insignificant shifting of position. They were identified earlier, and they were the expedition in payment of the cash component of the settlement, a threefold increase in the amount to be provided by way of splitting order and the provision of a motor vehicle, which appears not to have been sought in the offer of 26 October.
The respondent, in the Court's view, did not act unreasonably in putting that proposal, nor did the respondent act unreasonably when, on 16 November 2007, he was informed that his last offer was rejected, as evidenced by his acceptance on 18 November 2007 of the earlier offer of the applicant.
The Court is exercising broad discretion in determining costs applications in all instances. That discretion is perhaps broader in a case such as the present, but there is a further factor to which the Court considers reference should be made. The parties, to their credit, resolved this litigation, the outcome of which was uncertain. It does not follow in the Court’s view that, by his acceptance of the applicant’s offer the respondent should be deemed to have in some way retrospectively acknowledged that his position, as evidenced by his earlier offers, was unreasonable. His decision may have been influenced by a number of pragmatic considerations of which the Court must be unaware.
The Court has a concern that if the practice, other than in clear cases ‑ and this is not one of them ‑ of seeking costs after settlement of discretionary claims and cross‑claims is achieved, an unintended consequence may flow ‑ namely, that litigants will be put in the position where they go to trial rather than resolve matters against a background of reasonable offers and counteroffers rather than run the risk that a Court, having adopted what Kirby J may consider to be a pernickety approach in which a minute forensic examination of settlement offers and counteroffers is undertaken, determines that costs should be awarded (see AMS & AIF [1999] 199 CLR 160 J at 150).
The timing of the offers in this case is significant. Superficially, one month elapsed between the first formal offer and a concluded agreement. That however is a simplistic view of events. Weekends intervened, there were some days lost through the fault of neither party, as offers were communicated between attorneys and clients and responses provided. Whilst the applicant’s claim for costs as and from perhaps 16 November, at which time the applicant formally rejected the last counteroffer of the respondent that might be attractive, the Court does not consider in all the circumstances that such an approach is desirable.
The reality is that both parties benefited by this settlement. Whatever costs both parties incurred in preparing, further costs were obviated by their having reached a settlement. Costs of a possible appeal, costs of a trial, which may or may not have proceeded today, all of those costs were averted on both sides. In all the circumstances, and particularly having regard to the reasonableness of the two offers made by the respondent, the Court is not of the opinion that any order for costs should be made in this case this. There will, accordingly, be no order for costs.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman J

Associate

Date: 5 March 2008