Letham and Jones (No.2)
[2012] FMCAfam 633
•28 June 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LETHAM & JONES (No.2) | [2012] FMCAfam 633 |
| FAMILY LAW – Costs following defended hearing – conduct of the parties as litigants – where the husband was wholly unsuccessful in relation to the issue of property settlement – where offers and counter offers were made by both parties – order to the effect that the husband pay 80% of the wife's costs. |
| Family Law Act 1975 (Cth) Family Law Rules Federal Magistrates Court Rules2001 Federal Magistrates Court Regulations |
| Hawkins & Roe (2012) FamCAFC 77 Hogan (1986) FLC 91-704 I & I (No.2) (1996) FLC 92-625 Kelly & Kelly (No.2) (1981) FLC 91-108 Nemeth (1987) FLC 91-844 Oriolo (1985) FLC 91-653 Penfold (1980) FLC 90-800 Pennisi (1997) FLC 92-774 |
| Applicant: | MR LETHAM |
| Respondent: | MS JONES |
| File Number: | MLC 7045 of 2009 |
| Judgment of: | Walters FM |
| Hearing dates: | 11 – 14 July 2011 25 – 27 July 2011 |
| Date of Last Submission: | 27 April 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 28 June 2012 |
REPRESENTATION
| Counsel for the Applicant: | By written submissions |
| Solicitors for the Applicant: | Carew Counsel Pty Ltd |
| Counsel for the Respondent: | By written submissions |
| Solicitors for the Respondent: | Taussig Cherrie Fildes |
ORDERS
The husband must pay 80% of the wife's costs of and incidental to the proceedings ("the Costs").
In addition, the husband must pay the whole of the wife's costs of and incidental to her application in a case (seeking an order for costs) filed 22 March 2012 ("the Additional Costs").
In the event of the parties failing to agree upon the quantum of the Costs and the Additional Costs by 4 p.m. on 31 July 2012, and pursuant to Part 21 of the Federal Magistrates Court Rules 2001, the Costs and the Additional Costs be referred for taxation under Chapter 19 of the Family Law Rules.
IT IS NOTED that publication of this judgment under the pseudonym Letham & Jones (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 7045 of 2009
| MR LETHAM |
Applicant
And
| MS JONES |
Respondent
REASONS FOR JUDGMENT
Background
On 17 February 2012, I published my Reasons for Judgment ("the Reasons") in relation to the parties' competing applications for property settlement and other orders. Final orders were made on the same day ("the Orders").
Among other things, the Orders provided for the former matrimonial home to be sold and for the whole of the net proceeds of sale (after payment of certain liabilities) to be paid to the wife. The Orders also contained provisions to the effect that the wife's application for spousal maintenance be dismissed and that all extant applications in relation to child support be struck out.
Pursuant to paragraphs 19, 20 and 21 of the Orders, the wife was given leave to file an application for costs, and the husband was given the opportunity to file a response to the application.
In accordance with the arrangements described in the Orders, the following documents have been filed:
a)the wife's application in a case filed 22 March 2012;
b)affidavit of Ms S sworn 16 March 2012;
c)the husband's response to an application in a case filed 12 April 2012;
d)affidavit of Ms R sworn 12 April 2012; and
e)affidavit of Ms S sworn 27 April 2012.
Attached to the affidavits of Ms S and Ms R are the parties' written submissions. These comprise:
a)the wife's primary submissions (annexed to Ms S's first affidavit);
b)the husband's submissions (annexed to Ms R's affidavit); and
c)the wife's submissions in reply (annexed to Ms S's second affidavit).
I shall refer to the wife's primary submissions as "WS1", the husband's submissions as "HS" and the wife's submissions in reply as "WS2".
Relevant Law
The question of costs in family law proceedings is dealt with in section 117 of the Family Law Act. A judicial officer has a broad discretion in costs matters, and it has been said by the Full Court, for example, that it will not ordinarily intervene, unless a costs order is plainly unreasonable. Indeed, it has been held that the Court has an almost unlimited jurisdiction in relation to costs – although, clearly, any order for costs must be just.[1]
[1] See, for example, Kelly & Kelly (No.2) (1981) FLC 91-108, Hogan (1986) FLC 91-704 and I & I (No.2) (1996) FLC 92-625.
It is not the law that a costs order can only be made in what has been described as "a clear case". Although a finding of justifying circumstances is an essential preliminary to the making of a costs order, there is no additional or special onus on an applicant for an order for costs. The general rule is that each party shall bear his or her own costs, but that rule is expressed to be subject to section 117(2), and it must yield whenever the judicial officer finds that there are circumstances which justify the making of a costs order. It follows that both the costs award itself and the amount of costs actually ordered are discretionary.[2]
[2] See, in that regard, the decision of the High Court in Penfold (1980) FLC 90-800.
In the very recent decision of Hawkins & Roe (2012) FamCAFC 77, the Full Court said:[3]
The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, … 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 … (Further), there is nothing to prevent any factor being the sole foundation for an order for costs.
[3] At paragraph 18 (case references omitted)
The Full Court in Hawkins & Roe also cited with approval the following passages from Pennisi (1997) FLC 92-774:[4]
… (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 …
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.
[4] Case references omitted
Orders sought
The wife seeks an order that the husband pay her costs "of and incidental to the proceedings for such sum as is agreed between the parties, or, in default of agreement within 30 days, as taxed under Chapter 21 of the Federal Magistrates Court Rules 2001".
The husband seeks an order that the wife's application for costs be dismissed and that she pay his costs of and incidental to the application.
The husband also seeks "such further and other orders" as the Court considers appropriate.
Relevant considerations
I turn now to consider the factors under section 117(2A).
Each party's financial circumstances
I have dealt with the parties' financial circumstances in the Reasons. I concluded that the husband's earning capacity is approximately four times that of the wife. I also found that the value of the husband's shareholdings in [O] and [I] is not less than $150,000, and quite possibly as high as $450,000 to $480,000 (if not higher).[5]
[5] see paragraph 157 of the Reasons
In HS, reference is made to the following passage from the Reasons:[6]
Given the fact that he will not be receiving any money from the net proceeds of the sale of the former matrimonial home …, and that the evidence before me does not reveal that he has any readily available source of funds to meet the payment of $18,099 to the wife (apart from his income), I have determined that the husband should pay the relevant amount to the wife on a periodic basis.
[6] see paragraph 286
It is clear, however, that I was referring to a lack of readily available funds in the above passage, and not to any shortage of capital (in a broader context). The effect of the Reasons from the husband's point of view is summarised in paragraph 272 of the Reasons. Including the husband's interest in the Property P, his shareholdings in various entities, his motor vehicle and his superannuation entitlements (and taking into account the husband's credit card liabilities) the husband was retaining property worth a net amount of slightly over $308,000 – at the very minimum. The Orders provide that he must pay the wife $18,200 at the rate of $175 per week for two years. The likelihood is that the periodic payments will be made from the husband's income, and hence the husband's capital position is unlikely to be substantially affected.
I am aware that it is asserted in HS that the husband's financial position has deteriorated since trial. In WS2, this assertion is met by the following submission:
… it is most inappropriate to make submissions not based on the evidence. It is most unfortunate that the husband has attempted to lead evidence in his submissions about his current indigent circumstances. It is accepted that the wife in submissions following a trial is not at liberty to refer to her current impecuniosity or the husband's current attitude to the payment of child support. The evidence is the evidence … (Emphasis added.)
I agree with WS2 in this regard. I am not prepared to give weight to submissions that are not based upon evidence that was before me at trial (unless such evidence is conceded as being accurate).
Even if I am wrong in that regard, I note that:
a)the husband's counsel conceded that his earning capacity can be treated as being in the order of $200,000 per annum; and
b)I found that the husband has the present capacity to earn a total package of approximately that amount (if not more).[7]
It follows that the fact that the husband may be earning less than $200,000 per annum at the present time is of marginal relevance.
[7] see paragraphs 225 and 226 of the Reasons
I accept that the husband may not have readily available cash resources with which to meet a costs order, but that is not the same thing as suggesting that he does not have the capacity to pay such an order.
In all the circumstances, this factor is not of great significance in considering what costs order (if any) should be made – and neither party seems to suggest that it is.
Legal aid
This factor does not appear to be relevant.
Conduct of the parties as litigants
In broad terms, section 117(2A)(c) requires the Court to have regard to the parties' conduct as litigants.
I dealt with the issue of full and frank disclosure in the Reasons. Although I made a number of comments about the husband's failure to make full and frank disclosure of his financial position in a timely fashion, it is sufficient for me to refer to the following paragraphs from the Reasons:
112. Of particular relevance to the circumstances of this case (including, in particular, the husband's attitude as reflected in the appeasement communications) is the following passage from the Full Court's decision in Nemeth (1987) FLC 91-844:[8]
[8] At pp. 76,384-5
(The trial judge) summarised the husband's attitude in the litigation as being one of saying to the wife:
"Go and find out for yourself.''
Because of this attitude the wife was obliged to engage expert professional persons to make extensive investigations, and, in the light of the great complexities of the husband's affairs, the resultant cost to her was substantial. ...
The decision in Oriolo[9] shows that it is fundamental to the operation of the Family Law Act in financial cases that there should be this obligation to make a full and frank disclosure of all matters relevant to the ascertainment of the financial position of each party, over and above mere compliance with the rules. There is a positive obligation on a party to set out at an early stage his financial position in a clear and comprehensive manner. This includes evidence as to the value of his assets and not merely a recital as to what they are. It is not enough to argue, as the appellant did in this case, that he had disclosed his assets (which he did eventually), and that it was for the wife to provide valuations as to them. In particular this is not appropriate in the light of the complications attached to the ascertainment of values. The Family Law Act demonstrates by its terms that it is aimed at early resolution of disputes, where this is possible. Inadequate disclosure almost inevitably prevents there being a properly based approach to the question of settlement. Where the case goes to trial inadequate disclosure may lead to delays, sometimes requiring adjournment; invariably it leads to more protracted and costly proceedings. The failure of a party to be completely open and forthcoming as to his or her financial position, should always place that party at risk in relation to an order for costs. (Emphasis added.)
113. The wife's affidavit sworn 21 October 2010 records a detailed history of the wife's attempts to understand and place an appropriate value on the husband's shareholdings and business interests. I accept and adopt that history, and find that the husband's disclosure in relation to such matters was piecemeal, delayed and generally inadequate. In the circumstances, I am clearly permitted to take what might be considered a robust view in relation to findings regarding the husband's financial position and, if necessary, to err on the side of generosity to the wife (who was the party that would otherwise be disadvantaged by the husband's lack of candour).
114. I would add that Mr Williams seemed to suggest, on a number of occasions, that it was for the wife to provide valuations of the husband's shareholdings and business interests and that, in essence, the husband was justified in taking the attitude that the wife should "go and find out for herself". That suggestion flies in the face of long years of authority in the area of Family Law. The true position is, of course, as set out in the passage that I have cited from Nemeth above.
[9] Oriolo (1985) FLC 91-653
Under the heading "The Parties' Credibility and Approach to the Proceedings", I wrote:
117. Generally speaking, extracting financial information from the husband was a very difficult exercise. I find that he was reluctant to make relevant disclosures unless he felt that there was no other option. I find that the husband was not prepared to make full and frank disclosure of his financial position – or, alternatively, that he was not prepared to make anything approaching full disclosure until the dying stages of the proceedings. Clearly, if the husband had been open and frank in relation to his financial position at an early stage, then the Court’s time could have been used more efficiently. Similarly, much of the posturing that characterised both parties' cases could have been avoided and, significantly, what I assume were very substantial legal and accounting fees could have been markedly reduced.
118. The conduct of the husband’s case in relation to financial matters can be characterised by the use of two short expressions. The first is "too little, too late"; the second is (as in Nemeth, discussed above) "Go and find out for yourself." In my view, those expressions adequately describe the type of scenario faced by the wife and by the Court. (Emphasis added.)
WS1 contains further examples of the husband's unsatisfactory conduct as a litigant, and the effect of such conduct. Among other things, the husband failed to assist his own expert witness (Mr F) to prepare relevant and comprehensive valuation evidence. WS1 also makes reference to my observations to the effect that Mr F:
a)did not dispute that he had received instructions on "a need to know basis";
b)accepted that the information provided to him had been piecemeal, incomplete and inconsistent;
c)conceded that he may not have been "told the full story"; and
d)confirmed that he relied on information provided by the husband and Mr G, as a result of which he was not informed about certain of the entities forming part of or associated with the [I]Group.
In HS, reference is made to the introductory comments contained in paragraphs 2 to 3 of the Reasons. In those paragraphs I recorded my views about the manner in which the case had been prepared and presented. I also observed that it was not apparent to me that the parties had made a genuine attempt to analyse the practical effect of the orders they sought (and then compare the result so achieved with the practical effect of the orders sought by the other party).
HS also makes reference to my comments in paragraph 7 of the Reasons. While it is true that I there indicated that the wife and her advisers had appeared to lose sight of the wood for the trees, and while I observed that "only token efforts" were made by the wife and her advisers "to draw the various threads together to assist the Court to fully understand the parties' past and present financial position", I did not suggest that the wife's criticisms of the husband's failure to make full and frank disclosure were exaggerated or inappropriate. Indeed, I accepted then, and I still accept, that the wife made a considerable and sustained effort to gain access to information or documents relating to the husband's financial position. My concern was not with the wife's efforts to obtain full and frank disclosure but with her less obvious efforts to absorb and make sense of relevant information and documents when they became available.
There can be no doubt, however, that the primary cause of the confusion and inadequate preparation that characterised certain aspects of the presentation of the parties' cases was the husband's failure to make full and frank disclosure of his true financial position in a timely fashion. As I recorded in paragraph 8 of the Reasons, I am satisfied that the husband's failure in that regard was not accidental. On the contrary, it was because "he believed that it would impede the wife in the presentation of her case and make it difficult for the Court to make clear findings that he perceived may be to his detriment".
I do not accept that the wife's conduct "expanded the scope of the arguments before the Court to include matters of no bearing on the outcome of the case at the expense of more considered and relevant substantive analysis and argument". Even if the wife's conduct could be categorised in this fashion, the fact remains that the primary cause of each party's confusion and inadequate preparation (the avoidance of which may have led to better considered and more relevant substantive analysis and argument) was the husband's failure to make full and frank disclosure of his true financial position in a timely fashion in the circumstances described above.
I also reject the submission in HS to the effect that the wife's amendment to her application at a late stage, and the time at which she sought to obtain the assistance of an expert witness, somehow neutralised or ameliorated the husband's unsatisfactory conduct as a litigant. In this regard, I note and accept paragraphs 1(v), (vii) and (vii) of WS2 – save that the directions for the trial did not make the filing of the wife's affidavits dependent upon receipt of the husband's affidavits. Once again, although the wife's trial material should have been filed in accordance with the Court's directions, the primary cause of the confusion and inadequate preparation that characterised certain aspects of the presentation of the parties' cases was the husband's failure to make full and frank disclosure of his true financial position in a timely fashion (which incorporates the late filing of the husband's trial material).
In all the circumstances, this factor strongly supports the making of a costs order in the wife's favour.
Whether the proceedings were necessitated by the failure of a party to comply with previous orders
This factor does not appear to be relevant.
Whether a party has been wholly unsuccessful in the proceedings
WS1 makes no reference to this factor. HS does little more than restate the orders sought by the husband in his amended initiating application filed 28 June 2011 and by the wife in her amended response filed 7 July 2011. I accept, however, that this factor is alluded to (somewhat obliquely) in paragraph 249 of HS. I have discussed this paragraph below.
I dealt with the difficulty of identifying the precise nature and effect of the orders sought by each party in paragraphs 85 to 96 of the Reasons, under the heading "Orders Sought". Of significance to the current application for costs are my comments in paragraph 94:
It is fair to say that the parties' respective cases passed like two ships in the night. It was only in the closing stages of the trial that it became apparent that the parties were no more than approximately $45,000 apart in their competing property settlement applications.
As I said in paragraph 96 of the reasons, however, the core question (at least in relation to property settlement) boiled down to whether the wife was to retain the entire net proceeds of sale of the former matrimonial home, or whether the husband should be paid some moneys from the sale proceeds. Seen in that light, the husband was clearly unsuccessful in relation to the issue of property settlement.
Neither party was unsuccessful in relation to issues relating to child support. The fact of the matter is that I ordered that all extant applications in relation to child support be struck out. My rationale for doing so is set out in the Reasons. It follows that the dispute between the parties in relation to child support could not be and was not resolved at trial. It remains open as to whether the approach sought by the wife will ultimately be preferred to the husband's proposed approach.
Paragraph 249 of HS is as follows:
While at first glance the wife appeared to be successful on property matters the fact is that the property case was intimately entwined with the child support departure application and spousal maintenance applications. Parenting issues resolved by consent during the course of the trial. Expert witnesses were introduced late. This is not a simple matter where by one party was wholly successful on a discrete point. The matter and the decision were more complex than that …
In WS2, it is asserted that the submission in paragraph 249 of HS is "fundamentally flawed" because:
a)the husband's conduct was the primary reason why expert witnesses were introduced late; and
b)the "test" to which this factor is directed relates to whether a party was "wholly unsuccessful", and not whether a party was "wholly successful".
I have already discussed the effect of the husband's unsatisfactory conduct as a litigant, and accept that it was this conduct that caused the late introduction of expert evidence. I have also commented that the parties were neither successful nor unsuccessful (whether "wholly" or otherwise) in relation to the child support aspect of the proceedings. Similarly, I have recorded that, seen in the light of my summary of the parties' property settlement dispute contained in paragraph 96 of the Reasons, the husband can fairly be regarded as having been wholly unsuccessful in the property settlement proceedings – in that the sine qua non of his case was that he should receive some moneys from the net proceeds of sale of the former matrimonial home, and he received no such moneys.
It is true that the wife's application for spousal maintenance was dismissed. The subject is discussed in paragraphs 281 to 289 of the Reasons. These paragraphs make it clear that the spousal maintenance application was only dismissed because of my decision to the effect that the wife should receive her full entitlement by way of property settlement. In a practical sense, there is very little difference – from the parties' point of view – between the actual effect of the orders sought by the wife by way of spousal maintenance and the order for periodic payments made by the Court by way of property settlement.
Although paragraph 249 of HS also refers to parenting issues, the reality is that these issues did not occupy any time at trial.
In all the circumstances, it is clear that the husband was wholly unsuccessful in relation to the property settlement proceedings (in the context discussed above), and that neither party was wholly unsuccessful in relation to the child support and spousal maintenance aspects of the proceedings. It follows that this factor supports the making of a costs order in the wife's favour.
Offers in writing
WS1 and HS reveal that a series of offers and counter offers were exchanged between the parties prior to trial. Unfortunately, the way the parties elected to structure their proposals meant that comparisons between the two approaches were not as easily made as they could have been. Each party's unwillingness to carefully assess the meaning and effect of the other party's proposals carried over to trial, and was a subject to which I made reference in the Reasons.[10]
[10] see, for example, paragraphs 112 to 118 of the Reasons
Still, certain broad undercurrents were clearly apparent in the offers and counter offers.
Its seems that a total of nine letters containing proposals passed between the parties. I shall refer to the letters as follows:
a)Letter 1: letter from wife's solicitors to husband's solicitors dated 24 March 2011;
b)Letter 2: letter from husband's solicitors to wife's solicitors dated 19 April 2011;
c)Letter 3: letter from wife's solicitors to husband's solicitors dated 5 May 2011;
d)Letter 4: letter from husband's solicitors to wife's solicitors dated 11 May 2011;
e)Letter 5: letter from husband's solicitors to wife's solicitors dated 23 May 2011;
f)Letter 6: letter from wife's solicitors to husband's solicitors dated 26 May 2011;
g)Letter 7: letter from husband's solicitors to wife's solicitors dated 30 May 2011;
h)Letter 8: letter from husband's solicitors to wife's solicitors dated 21 June 2011; and
i)Letter 9: letter from husband's solicitors to wife's solicitors dated 22 July 2011.
It should be noted that the trial commenced on 13 July 2011. It was then adjourned, and resumed on 25 July 2011. The trial concluded on 27 July 2011. Thus, Letter 8 was the last relevant communication between the parties prior to the commencement of the trial. Letter 9 was sent from the husband's solicitors to the wife's solicitors between the first and second phases of the trial.
The effect of the Orders made at trial (from the husband's point of view) is set out in paragraph 272 of the Reasons.
Thus, looking at matters from the husband's point of view, and focusing on the issues of property settlement and spousal maintenance only, the following is apparent:
Letter 1
The difference between the wife's proposal in Letter 1 and the Orders is that –
a)the wife proposed that the husband assume responsibility for the debt associated with the Astra motor vehicle (comprising a liability of approximately $23,100 at trial);
b)the wife proposed that the husband assume responsibility for her Centrelink debt (comprising a liability of $10,000 at trial);
c)the wife proposed that the husband assume responsibility for outstanding rates and charges in respect of the former matrimonial home (amounting to slightly over $1,600); and
d)the wife proposed that the husband pay her $20,000 in respect of an "add back", as described in the letter.
The Orders required the wife to assume responsibility for (a) and (b) above. Item (c) did not form the subject of the Orders. For the reasons discussed elsewhere in this decision, the practical effect of the Orders is that, instead of paying the wife $20,000 as proposed in (d) above, the husband was required to pay her $18,200 by periodic payments of $175 per week.
It is arguable, therefore, that the husband would have received approximately $35,000 less than he received at trial if he accepted the wife's offer contained in Letter 1.
Letter 2
The difference between the husband's proposal in Letter 2 and the Orders is almost impossible to assess because it requires the wife to make a payment to the husband (from the net proceeds of sale of the former matrimonial home) of such amount as is necessary "to give effect to an overall division 65/35 in (the wife's) favour (including superannuation)". The precise amount of the payment is not specified.
It is clear from Letter 2, however, that the husband was proposing that he retain those items that he eventually retained pursuant to the Orders, save that –
a)he was proposing that he also retain all or almost all of the "other half" of the parties' total superannuation entitlements (being the half – valued at approximately $102,000 – that was ordered to be retained by the wife); and
b)he was proposing that the wife pay him an unspecified amount from the net proceeds of sale of the former matrimonial home.
It is arguable, therefore, that in Letter 2 the husband was asking for at least $102,000 more than he received at trial. When regard is had to the fact that the Orders required the husband to pay the wife $18,200 by periodic payments, it is also arguable that the husband was actually asking for at least $120,000 more than he received at trial.
Letter 3
The husband's proposal in Letter 2 was rejected by the wife in Letter 3, but a further offer was made.
The difference between the wife's proposal in Letter 3 and the Orders is that –
a)the wife proposed that the husband retain the whole, or almost the whole, of the parties' superannuation entitlements; and
b)the wife did not require the husband to pay any moneys to her (by way of spousal maintenance or otherwise – except in the form of child support).
The Orders required that the parties' superannuation entitlements be divided equally between them and that the husband pay the wife $18,200 by periodic payments.
It follows that, in Letter 3, the wife was offering the husband something in the order of $120,000 (being approximately $102,000 in respect of her half share of the superannuation entitlements and $18,200 in respect of the periodic payments) more than he received at trial.
Save for the payment to the husband of an unspecified amount from the net proceeds of sale of the former matrimonial home, the wife's proposal in Letter 3 was very similar in its effect to the husband's proposal in Letter 2.
Letter 4
The difference between the husband's proposal in Letter 4 and the Orders is that –
a)the husband proposed that he retain the whole, or almost the whole, of the parties' superannuation entitlements; and
b)the husband proposed that the wife pay him $50,000 from the net proceeds of sale of the former matrimonial home.
The Orders required that the parties' superannuation entitlements be divided equally between them, that the wife retain the whole of the net proceeds of sale of the former matrimonial home and that the husband pay the wife $18,200 by periodic payments.
It follows that, in Letter 4, the husband was asking for something in the order of $170,000 (being approximately $102,000 in respect of the wife's half share of the superannuation entitlements, $50,000 from the net proceeds of sale of the former matrimonial home and $18,200 in respect of the periodic payments) more than he received at trial.
Letter 5
The difference between the husband's proposal in Letter 5 and the Orders is that –
a)the husband proposed that he retain the whole, or almost the whole, of the parties' superannuation entitlements; and
b)the husband proposed that the wife pay him $40,000 from the net proceeds of sale of the former matrimonial home.
The Orders required that the parties' superannuation entitlements be divided equally between them, that the wife retain the whole of the net proceeds of sale of the former matrimonial home and that the husband pay the wife $18,200 by periodic payments.
It follows that, in Letter 5, the husband was asking for something in the order of $160,000 (being approximately $102,000 in respect of the wife's half share of the superannuation entitlements, $40,000 from the net proceeds of sale of the former matrimonial home and $18,200 in respect of the periodic payments) more than he received at trial.
Letter 6
The difference between the wife's proposal in Letter 6 and the Orders is that –
a)the wife proposed that the husband retain the whole, or almost the whole, of the parties' superannuation entitlements; and
b)the wife did not require the husband to pay any moneys to her (by way of spousal maintenance or otherwise – except in the form of child support); and
c)the wife proposed that the husband receive $30,000 from the net proceeds of sale of the former matrimonial home.
It follows that, in Letter 6, the wife was offering the husband something in the order of $150,000 (being approximately $102,000 in respect of her half share of the superannuation entitlements, $18,200 in respect of the periodic payments and $30,000 from the net proceeds of sale of the former matrimonial home) more than he received at trial.
A comparison of Letters 5 and 6 reveals that the parties were then only approximately $10,000 apart in real terms. The wife was offering to accept some $150,000 less than she received at trial; the husband was proposing that she should accept some $160,000 less than she received trial.
Letter 7
The wife's proposal in Letter 6 was rejected outright by the husband in Letter 7. No explanation was given, and no counter offer was made.
Letter 8
The husband's proposal in Letter 8 is identical, or almost identical, to his proposal in Letter 5. He again proposed that he retain the whole, or almost the whole, of the parties' superannuation entitlements and that the wife pay him $40,000 from the net proceeds of sale of the former matrimonial home.
It follows that, in Letter 8, the husband was again asking for something in the order of $160,000 (being approximately $102,000 in respect of the wife's half share of the superannuation entitlements, $40,000 from the net proceeds of sale of the former matrimonial home and $18,200 in respect of the periodic payments) more than he received at trial.
Letter 8 was the last written offer made by either party prior to the commencement of the trial.
Letter 9
The proposal made by the husband in Letter 9 is structured differently to the proposals made in the earlier letters.
In broad terms, the difference between the husband's proposal in Letter 9 and the Orders is that –
a)the husband proposed that the wife retain the whole, or almost the whole, of the parties' superannuation entitlements; and
b)the husband proposed the wife pay him $110,000 from the net proceeds of sale of the former matrimonial home.
It follows that, in Letter 9, the husband was asking for something in the order of $26,200 (being $110,000 from the net proceeds of sale of the former matrimonial home, less approximately $102,000 in respect of the wife's half share of the superannuation entitlements, plus the $18,200 in respect of the periodic payments) more than he received at trial.
Were the wife's offers "a package deal"?
In HS, it is submitted that Letters 1, 3 and 6 contain proposals dealing with the issue of child support (and perhaps spousal maintenance) and that, as a result, "the offers to settle the property matters by the wife were made contingent on ongoing spousal maintenance and child support", neither of which were ultimately ordered by the Court. I note that a number of the husband's offers also dealt with the issue of child support.
Further, in paragraph 249 of HS, it is submitted that "the property case was intimately entwined with the child support departure application and spousal maintenance application".
In WS2, it is submitted that:
(the) child support issue was not the primary issue for determination. … There is no basis that the submission that offers to settle the property matters by the wife were made "contingent on ongoing spousal maintenance and child support …"
It is also submitted in WS2 that child support matters "occupied the Court for a minimum time in comparison to the issues relevant to the adjustment of their property interests".
I agree that the child support issue was not the primary issue for determination, and that a very small amount of time at trial was devoted to it.
I also agree that there is no basis for the husband's submission to the effect that the wife's various written offers were made "contingent on ongoing spousal maintenance and child support". There is no evidence to that effect. In reality, the husband has suggested that the offers contained in Letters 1, 3 and 6 were "package deals" and that he could not accept one part of the package without accepting the rest. The fact of the matter is, however, that the various offers made by the wife were not expressed to be package deals, and proposals relating to property settlement were clearly separated from proposals relating to child support. The only proposal that appears to be structured as something like a package deal is the husband's final proposal (contained in Letter 9). I note, as well, that the husband's offer contained in Letter 8 clearly deals with the issue of property settlement only.
In my opinion, there was no reason why the husband could not accept the wife's offer relating to property settlement whilst at the same time rejecting her offer relating to child support (and/or spousal maintenance). If he was genuinely concerned as to whether the offers were "package deals", then he could have caused relevant inquiries to be made by his solicitors. No such steps were taken. Further, and in any event, the contents of Letters 1 to 9 clearly reveal that the husband was not prepared to accept any proposal in relation to property settlement which did not involve a payment to him of a proportion of the net proceeds of sale of the former matrimonial home.
Effect of offers
In all the circumstances, it is clear that the husband could have and should have accepted the wife's offer contained in Letter 3. The wife's rejection of the husband's offers in those of Letters 2 to 8 which emanated from his solicitors was prudent and reasonable (particularly in the light of the orders eventually made at trial). It follows that this factor strongly supports the making of a costs order in the wife's favour – with effect from (at least) the date of Letter 3, being 5 May 2011.
Other matters considered relevant
In paragraphs 52 to 58 of the Reasons, I described an exchange of emails between the husband and Mr G. In paragraph 59 of the Reasons, I referred to the last email in the exchange (sent by the husband) as the "'completely poor' email". I referred to the total email exchange on 12 May 2009 as "the appeasement communications".
In paragraph 60 of the Reasons, I wrote:
In my opinion, the sentiment expressed in the "completely poor" email and the appeasement communications perfectly reflects and encapsulates the husband's attitude to the financial aspects of these proceedings.
In paragraph 66 of the Reasons, and after having quoted an extract from the husband's affidavit sworn 20 October 2010 in which he complained and expressed concerns about the wife's alleged failure to "provide discovery" in relation to her financial circumstances, I wrote:
In all the circumstances, it is clear that the husband's expressed "concerns" were disingenuous. The paragraph quoted (from the husband's affidavit) was little more than posturing and irrelevant bluster, and a further manifestation of the husband's attitude as reflected in the appeasement communications. True it is that the husband eventually disclosed more and more information regarding his financial position, but the fact of the matter is that – to use a colloquialism – the wife and her advisers were put "on the drip feed". I have discussed a litigant's obligation to make full and frank disclosure of his or her financial position under the heading "Full and Frank Disclosure" below. The husband failed to meet that obligation. Worse, he obfuscated and dissembled in the process of pretending to meet the obligation.
I made further reference to the appeasement communications under the general heading of "Full and Frank Disclosure" in the Reasons.
I accept that, to a large extent, the husband's attitude as manifested in the appeasement communications is arguably a subset of the factors that I have already discussed under the heading "Conduct of the Parties as Litigants" above. The appeasement communications are important, however, because they effectively "set the scene" for the parties' dealings and negotiations from that point onwards, and for the conduct of the proceedings themselves (at least in relation to financial matters). The appeasement communications occurred in May 2009, approximately one month after the parties separated. The husband filed an initiating application on 11 August 2009, but by then the husband's attitude to full and frank disclosure (as manifested in the appeasement communications) appeared to be entrenched.
I have not overlooked the fact that parenting issues were also in dispute between the parties right up until trial, and that there is no evidence that the husband's failure to make full and frank disclosure in a timely fashion impacted on the non-financial aspects of the proceedings. Still, and in all the circumstances, I consider that the husband's attitude as manifested in the appeasement communications is a relevant factor to take into account in considering whether to make a costs order in the wife's favour (and the quantum of any relevant order) – irrespective of whether the factor stands alone under section 117(2A)(g) or more properly falls within section 117(2A)(c).
Conclusion
In my opinion, there are circumstances which justify the making of an order for costs in the wife's favour. The most significant of those circumstances are:
a)the husband's conduct as a litigant (as discussed above), including his attitude as exemplified in the appeasement communications – and the effect of that conduct and attitude;
b)the fact that the husband has been wholly unsuccessful in the property settlement proceedings; and
c)the various written offers passing between the parties as discussed above.
Given that parenting issues were also in dispute until a very late stage in the proceedings, and given that the Court was unable to resolve the dispute in relation to child support as discussed in the Reasons, but ignoring the fact that the wife's application for spousal maintenance was dismissed (because, in a purely practical sense, the order for periodic payments by way of property settlement effectively took its place), I have decided that the most appropriate order is that the husband should pay 80% of the wife's costs of and incidental to the proceedings in their entirety.
Orders
Rule 21.10 of the Federal Magistrates Court Rules 2001 provides that, unless the court otherwise orders, a party entitled to costs in a proceeding is entitled to costs in accordance with Schedule 1, together with disbursements properly incurred. Rule 21.02(2) provides that, in making an order for costs, the court may, among other things, set the amount of the costs, set the method by which the costs are to be calculated or refer the costs for "taxation" (now called "assessment") pursuant to the Family Law Rules. It follows that Chapter 19 of the Family Law Rules has no application unless costs are to be assessed.
Having regard to the orders sought by the wife, I propose to make orders to the following effect:
a)The husband pay 80% of the wife's costs of and incidental to the proceedings.
b)In the event of the parties failing to agree upon the quantum of those costs by 4 p.m. on 31 July 2012, and pursuant to Part 21 of the Federal Magistrates Court Rules 2001, the costs be referred for taxation under Chapter 19 of the Family Law Rules.
Further, and taking into account the fact that the husband has been wholly unsuccessful in obtaining the orders sought in his response to the wife's application in a case filed 12 April 2012, I propose to order that the husband pay the wife's costs of and incidental to her application in a case filed 22 March 2012, such costs also to be referred for taxation if the parties are unable to agree upon the quantum of the same by 4 p.m. on 31 July 2012.
In my opinion, the only relevant factor in determining the costs associated with the wife's application for an costs is the fact that the husband has been wholly unsuccessful in relation to it. That factor is sufficient in itself to warrant the making of an order for costs, and neither party suggested (in HS or WS2) that any other factor might be relevant to the question of the costs of the application in a case.
The actual orders that I propose to make are as follows:
a)The husband must pay 80% of the wife's costs of and incidental to the proceedings ("the Costs").
b)In addition, the husband must pay the whole of the wife's costs of and incidental to her application in a case (seeking an order for costs) filed 22 March 2012 ("the Additional Costs").
c)In the event of the parties failing to agree upon the quantum of the Costs and the Additional Costs by 4 p.m. on 31 July 2012, and pursuant to Part 21 of the Federal Magistrates Court Rules 2001, the Costs and the Additional Costs be referred for taxation under Chapter 19 of the Family Law Rules.
I certify that the preceding ninety-eight (98) paragraphs are a true copy of the reasons for judgment of Walters FM
Date: 28 June 2012
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