M and M

[2006] FCWA 5

JURISDICTION:

FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: M and M [2006] FCWA 5

CORAM: THACKRAY J

HEARD: WRITTEN SUBMISSIONS

DELIVERED: 6 JANUARY 2006

FILE NO/S: PT 6420 of 2003

BETWEEN: M

Applicant/Husband

AND

M

Respondent/Wife

Catchwords:

Costs - offers of settlement.

Legislation:

Family Law Act 1975, s 117

Category: Not Reportable

Representation:

Counsel:

Applicant : Self Represented Litigant

Respondent : Mr R Hooper

Solicitors:

Applicant :

Respondent : Anderson Kershaw

Case(s) referred to in judgment(s):

Collins & Collins (1985) FLC 91-603

Steel & Steel 1992 FLC 92-306

1[Mr M] (“the husband’) and [Mrs M] (“the wife”) have been involved in litigation since November 2003, when the husband commenced proceedings for parenting orders and property settlement. The matter eventually came to trial in March 2005. Judgment was delivered in June 2005.

2 The judgment resolved the dispute relating to parenting orders.

However, it was agreed it was not appropriate for me to resolve all of the issues relating to property settlement at that time. Instead, I was

asked to delay determining issues relating to the valuation and

division of the husband’s superannuation entitlements. Nor was I asked to rule at that stage on the dispute about which party should receive the former matrimonial home. Both parties provided further written submissions in relation to those outstanding issues and I delivered judgment in relation to them in July 2005.

3The wife then made an application for costs, which she has quantified at $22,458. She provided fairly succinct written submissions in support of that application. Regrettably, as he is now self-represented, the husband’s submissions in reply were prolix and sanctimonious. Whilst making a number of valid and well-considered arguments, he also raised many issues that could have no possible relevance to a costs dispute.

4 The husband cross-applied for an order for costs against the wife.

Not only did he seek costs in relation to discrete portions of the proceedings, but he also sought a variety of payments from her, which clearly cannot be ordered now that the substantive proceedings have been concluded. The total amount he sought was $23,728.

The law

5Section 117(1) of the Family Law Act 1975 provides that, subject to subsection (2), each party to proceedings shall bear his or her own costs. Subsection (2) provides that if the Court is of the opinion there are circumstances that justify doing so, the Court may, subject to subsection (2A), make such orders as to costs as it considers just.

6 Section 117(2A) provides as follows:

“In considering what order (if any) should be made under sub- section (2), the court shall have regard to –

(Page 4)

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

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

7The Full Court in Collins & Collins (1985) FLC 91-603 confirmed that the discretion conferred by s 117 is a broad one and that the factors contained in s 117(2A) are not to be read in a restrictive way.

Costs relating to parenting proceedings

8The main issue of significance relating to the children concerned residence of the youngest child, [D]. Both parties wanted [D] is to live with them.

9The wife was successful in obtaining an order for residence of [D]. The contact orders made were also closer to those she proposed than those proposed by the husband. However, there were arguments in favour of the position adopted by both parties. It was entirely appropriate for the husband to seek an order that would have had the effect of the children being reunited and living in the same residence.

Although I found that the arguments in favour of [D] staying with the wife outweighed the arguments for the husband, this was by no means a clear-cut decision. In my view, it would be quite inappropriate to make an order for costs in relation to this part of the proceedings.

10 I turn now to consider the primary matters of importance relating to the costs associated with the financial proceedings.

Financial circumstances of the parties

11 The financial positions of the parties are set out in the judgment delivered on 3 June 2005. The husband has a much higher income earning capacity than the wife. On the other hand, as a result of my decision, the wife has received a greater proportion of the assets than the husband received. Neither party relied upon the disparity in their financial positions in support of their respective applications for costs.

Legal Aid

12 Neither party was in receipt of legal aid.

Conduct of the parties

13 I did not consider there was any aspect of the conduct of the proceedings that was relevant, other than in relation to the superannuation issues discussed below.

Failure to comply with previous orders

14 The proceedings were not necessitated by the failure of either party to comply with previous orders.

Whether any party has been wholly unsuccessful

15 Neither party was wholly unsuccessful in the proceedings. The wife received more of the pool of assets/superannuation than the husband considered appropriate, but on the other hand, she was required to take more of her share of the pool in the form of superannuation than she wanted.

16 In considering the constituent parts of the proceedings, it is appropriate to note that the wife was entirely successful in persuading the Court that contributions should be assessed as being equal and that the s 75(2) factors warranted a 10% adjustment in her favour. The husband had originally submitted that contributions should be assessed 60:40 in his favour, but even his counsel in his closing

address had to concede that a finding that contributions were equal would be well within the range of the Court’s discretion. The husband had originally agreed with the wife that there should be a 10% adjustment for s 75(2) factors in her favour, but the husband’s counsel resiled from that position during the course of his closing address. He unsuccessfully argued there was no basis for anything more than a 5% adjustment.

17 Each party had a measure of success in persuading the Court to their point of view in relation to individual aspects of the dispute. Some of these are referred to in paragraph 7 of the wife’s first set of submissions. However, this is the nature of litigation in this jurisdiction – “you win some, you lose some”. I did not consider the fact one or other of the parties succeeded on a particular issue should give rise to a costs order.

Offers of settlement

18 There were a variety of written offers made during the course of the proceedings. I accept the thrust of the husband’s submissions that in matrimonial proceedings it is sometimes problematic to compare offers of settlement with the final outcome. During the earlier stages of the proceedings, neither party usually has all of the information they would wish in order to assess the strength and weaknesses of their own case. There are often reasonable differences of opinion in relation to valuations and these are often not resolved until closer to trial or at trial. There can also be fluctuations in the value of property during the course of protracted proceedings, particularly in a rising market. All of these matters should lead to caution in assessing the merits of various offers made along the way.

19 A further complication in the present proceedings is that each party always made their offers on the assumption [D] would be living with them. The determination of the place where children will be living almost always has an impact on the s 75(2) adjustment. An offer that might be considered reasonable if a party were successful in their application relating to parenting orders might not appear to be so reasonable if their parenting application were unsuccessful. Whilst regrettably it rarely occurs, it would be desirable if parties made financial proposals in the alternative where there is also a dispute concerning the placement of the children. Such offers could then lead to settlement of the financial aspects, pending the determination of the

parenting issue. Regrettably for the husband, he did not succeed on the parenting issues and he therefore had no offers on the table based on the eventuality that [D] would end up living with the wife.

20 The first “offer” of relevance in these proceedings was the proposal contained in the husband’s application initiating the proceedings. He thought that he should retain the former matrimonial home and all of his superannuation entitlements. The wife was to receive the sale proceeds of the [country] property. This was a patently ridiculous proposal given the circumstances of this marriage. However, the wife’s Form 3A Response provided no parameters for the financial dispute, since she made no specific proposal at all in relation to property settlement.

21 Both parties made references to proposals set out in Conciliation Conference Particulars and the husband also referred to discussions at conferences. Section 117(2A)(f) is confined to offers made in writing and hence it is inappropriate to have any regard to verbal discussions at conciliation conferences, which are conducted on a “without prejudice” basis. Furthermore, I am not convinced that parties are entitled to rely upon their Conciliation Conference Particulars in support of costs applications. I consider that even though not expressly stated to be such, these documents are provided on a “without prejudice” basis as part of the dispute resolution process. In the absence of any evidence to indicate they were expressed to be “without prejudice save as to costs”, they are privileged: Steel & Steel (1992) FLC 92-306.

22 The Rules prescribe the means by which parties are required to exchange offers of settlement. Rule 10.06 specifically requires each party to file an offer of settlement within 28 days of the Conciliation Conference. The Conciliation Conference Particulars document performs a different function. The Particulars form itself requests parties only to set out their current “proposal” by identifying in tabular form those assets each party is to receive. Parties completing the document are not required to specify the form of orders that should be made to give effect to their proposal. Often in family law litigation, “the devil is in the detail”. The detailed orders proposed to be made should be included in the formal Offer of Settlement.

23 I therefore do not intend to take the Conciliation Conference

Particulars into account.

(Page 8)

24 On 30 April 2004, the wife filed a formal Offer of Settlement proposing a division of property 60:40 in her favour. It is significant to note that this offer contained a schedule indicating that the wife considered the assets were then worth about $504,000 whereas I found the pool to be worth about $560,000.

25 The wife’s offer permitted the husband to retain the [suburban] and the [country] properties. However, in other respects the summary of the offer contained in the wife’s submissions was not entirely accurate. Furthermore, the calculations attached to the offer contained an error, since the offer called for the husband to pay the wife

$228,742, whereas the figure shown in the schedule is $226,064. There is no evidence the husband ever drew this error to the wife’s

attention. It might be reasonable to speculate the wife would have modified the proposed figure had the error been drawn to her attention, since the offer expressly indicated that the wife was seeking to divide the asset pool 60:40 in her favour. As it stands, however, the proposed division would have resulted in the wife receiving 60.9% of the total pool. More significantly, on her calculations at the time, the wife was prepared to take only $74,975 in the form of superannuation.

This represented only 38% of the superannuation, whereas she wanted

75% of the non-superannuation assets.

26 The husband filed an offer on 7 May 2004. His proposal was that the wife receive only $100,000 by way of a cash settlement and a little more than $127,000 by way of superannuation. Using the schedule attached to the wife’s offer as a guide, this represented the wife receiving nearly 66% of the superannuation and only 33% of the non-superannuation assets.

27 In his amended application filed on 26 November 2004, the husband proposed the wife receive $150,000 cash and about half of his superannuation. This represented an almost equal division of the assets.

28 On 9 March 2005 the wife’s solicitors proposed two options for settlement, one of which involved the wife retaining the former matrimonial home and the other permitted the husband to retain the home. Both offers were made on the basis of a 60:40 division of assets; however, in both cases the wife was to receive only $50,000 of her share of the assets by way of superannuation. This therefore

constituted a settlement weighted even more heavily away from superannuation than the earlier offer.

29 At the first part of the trial, I determined that the assets should be divided in proportions 60:40 in favour of the wife. Following that part of the trial, the wife continued to push for her share of the settlement to be weighted away from superannuation. She wanted to take only about 30% of the superannuation, whereas the husband proposed an equal division. I accepted the husband’s proposal about the mix of assets each party should receive. The ultimate orders involved the wife receiving over $230,000 in cash, together with $101,500 by way of superannuation.

30 It will be noted from this discussion that the wife’s offers of settlement were much closer to the mark than the husband’s, since she was for a long time advocating the 60:40 split I found was the appropriate division. However, it will also be noted that her proposed “mix” of assets was weighted much more heavily away from superannuation than I ultimately considered to be appropriate.

31 In looking at what the wife ultimately obtained, it is also important to recall that her earlier offer was made at a time when the asset pool was thought to be worth about $55,000 less than what I found to be the case at the time of trial.

Other relevant matters

32 The other relevant matters that were raised in the submissions primarily concerned the issues not resolved at the first part of the trial. However, there was also one issue concerning the valuation of the [country] property that I considered to be relevant.

The matrimonial home

33 The husband complains in his submissions about the wife having been given leave to amend her application at trial to seek an order that she receive the former matrimonial home. The fact of the matter is that leave was granted, for the reasons I gave at the time. In any event, the husband now says the fact this dispute was resolved in his favour should support his application for costs.

34 Just as the decision concerning residence might have been resolved differently, so could the dispute concerning the home. There were arguments in favour of the position adopted by both parties. I ultimately considered those arguments presented on behalf of the

husband were more persuasive than those presented for the wife; however, the fact she failed on this point is not a reason for ordering costs.

Mix of superannuation/other assets

35 The husband also claims that his success on this issue should support an order for costs. However, once again, there were cogent arguments on both sides and it was only in the exercise of my discretion that I preferred the position adopted by the husband. There is no justification for an order for costs merely because the husband was successful with this part of the argument.

Costs associated with the husband’s superannuation entitlements

36 The husband had three different types of superannuation interest.

The one that caused the greatest controversy was the defined benefit portion of his [superannuation] fund.

37 The husband had obtained a valuation of his defined benefit interest early in 2004. This was provided by the fund itself. The wife apparently had difficulty in accepting that the husband’s interest was worth the amount set out in the valuation provided by the fund. On 9

September 2004 a direction was made at the pre-trial conference for

the parties jointly to obtain a valuation of the husband’s superannuation.

38 By letter dated 23 September 2004, the wife proposed that [KFS] be engaged to value the husband’s superannuation. The letter indicated that the cost would be only $500 plus GST. In his response dated 13 October 2004, the husband insisted on the appointment of [Mr B]. The wife’s solicitors indicated in their letter of 18 October

2004 that they were not prepared to agree to the appointment of [Mr B]. Given this stalemate, the wife apparently did nothing, presumably because the husband had not at that stage amended his application to seek a superannuation splitting order.

39 The husband did not apply for a superannuation splitting order until late November 2004, by which stage he needed leave of the Court to amend. It is true that proposals for splitting of the superannuation had been made during the course of negotiations, but there was no formal application until the husband actually sought a splitting order. It was the husband who would primarily benefit from ensuring he was not left with the whole of the superannuation, and it

was therefore incumbent upon him to make the application. This amendment did not occur until after the parties had attended two pre- trial conferences. In fact, the leave granted for the amendment was given on the same day the trial date was allocated. (As it turned out, the order proposed to be made by the husband was not an order that could be made in any event.)

40 In my view, having amended his application, there was no obligation on the husband to engage an actuary to value his superannuation. Both parties had been ordered to obtain a joint valuation of his superannuation previously. In the absence of agreement about who should undertake the task, it was open to the husband simply to rely upon the valuation obtained from the fund itself. Nevertheless, the husband eventually instructed [Mr B] to prepare a valuation in January 2005. A few weeks later, he delivered further instructions to [Mr B] to provide a report of much wider scope. The husband then proceeded, without leave, to file an affidavit by [Mr B] on 28 February 2005. This was only two weeks before trial. [Mr B] had carried out his additional instructions and his affidavit therefore went well beyond providing a valuation of the husband’s superannuation in accordance with the Regulations.

41 The wife had also instructed her own actuary, [Mr W], to undertake a valuation of the husband’s defined benefit fund. It is unclear when this occurred, but there is a suggestion in the wife’s costs submissions that there was delay in [Mr W] being provided with relevant information. In any event his report was not provided to the husband until shortly after the commencement of the trial. The two valuations, although both purporting to be prepared in accordance with the Regulations, came up with different figures. The difference was about $17,000, which represented over 3% of the asset pool.

42 It was considered desirable for the valuers to confer to see if they could bridge the difference between the two figures. By the end of the trial there was still no statement of the result of their conference (if they had one at all). This was one of the reasons the decision concerning the valuation/split of the superannuation was postponed. It was hoped that, given time, the valuers could agree or narrow the areas of difference. Furthermore, once the percentage split was known, the parties would have a firmer base on which to attempt to agree the mix of assets each would receive.

(Page 12)

43 The husband is wrong in asserting that the superannuation issue could have been resolved without adjournment, in light of the failure of the parties to compromise the dispute relating to the valuation of the fund. His own counsel joined in seeking the adjournment. The husband is also quite wrong in suggesting that the calculations of the actuaries were redundant by the time of trial and that the superannuation issue should have been resolved on the basis of a “percentage split”. The latter proposition displays an (understandable) ignorance of the complexities associated with splitting a superannuation fund that is still in the growth phase.

44 As it turned out, the valuers were still unable to reach agreement after they conferred. They did, however, narrow the gap between them considerably. According to the superannuation submissions filed by the husband on 30 May 2005, [Mr B] was claiming at the time of trial that the husband’s superannuation was worth $168,036, whereas [Mr W] was claiming the superannuation was worth

$150,584. At the end of the day, both experts increased their valuation – [Mr B] to $177,000 and [Mr W] to $179,202.

45 Neither party is free of blame for the fact that the superannuation issue was not resolved at the first trial. Too many things were left to the last minute and the matter was therefore not properly ready. This was most unfortunate, but does not justify one party being ordered to pay the other party’s costs. Had the husband accepted the wife’s suggested valuer (as she had accepted his for the [country] property), the superannuation valuation would have been prepared for $500, and it is unlikely there would have been any dispute about the Regulation value. The same could be said if the wife had accepted [Mr B] as the Single Expert. However, had that occurred, the husband would not then have been able to engage [Mr B] to provide the additional evidence he originally planned to use in support of his case.

46 In considering the husband’s cross application for costs relating to superannuation issues, it needs to be borne in mind that there were two different aspects of the disagreement between the parties. The first related to the Regulation valuation of the defined benefit fund, discussed above. As the fee rendered by [Mr W] shows, this does not need to be a particularly expensive exercise.

47 The second part of the superannuation dispute itself had two different components. The first was what the wife’s counsel claimed

(Page 13)

was an anomaly in the formula used to provide the Regulation value of the defined benefit fund. The second issue related to the matters contained in [Mr B]’s report relating to what he called the “asymmetry adjustment”. The main costs associated with [Mr B]’s work on behalf of the husband must have related to this latter aspect of the dispute. [Mr B] did not provide any evidence at all concerning the alleged anomaly. Furthermore, only a very small proportion of the husband’s superannuation submissions filed on 30 May 2005 relating to the so- called anomaly.

48 It needs to be recalled that the wife’s counsel had referred to the alleged anomaly only as a factor to be taken into account in determining what mix of assets and superannuation assets the wife should receive. This was a novel proposition in what I accept is a developing area of the law. As will be apparent from the detailed discussion in my judgment, it raised a conceptually difficult issue. However, there is merit in the husband’s submission that the so called anomaly would only ever have been relevant if the husband retired early from his employment at the [workplace] and there was no evidence to suggest this was at all likely. On the other hand, if the husband had, for some reason, left his employment early, there would have been greater merit in the argument.

49 The wife would have incurred almost no costs in making the “anomaly” proposition, since it was almost a throw away line in her submissions. The husband did not incur great costs in relation to this discrete issue either, since his expert did not comment on it and his own submissions dealt with the argument in a perfunctory fashion. The costs associated with this issue should not be confused with the larger costs the husband incurred in mounting a sophisticated (and appropriate) argument to demonstrate the disadvantage he would suffer if his settlement were weighted too heavily towards superannuation. I regard that evidence as simply being part of the proper presentation of the husband’s case. Ultimately the husband did not even rely upon the relevant portion of [Mr B]’s affidavit and I was able to reach my decision without the benefit of his assistance.

50 I am therefore not persuaded the wife should be required to meet [Mr B]’s expenses. She will, of course, be responsible for meeting [Mr W]’s fees.

(Page 14)

Valuation of [country] property

51 The husband seeks an order for the parties to share equally the costs associated with the valuation of the [country] property and the attendance of the valuer at trial. At the pre-trial conference on 9

September 2004, an order was made for the parties to obtain jointly a valuation of the [country] property. However, by the time the matter

came back for a further pre-trial conference on 5 November 2004, the valuation had not been obtained.

52 The husband’s submissions indicated that he instructed his advisors to appoint [Mr C] to value the [country] property “after a period of indecision/inactivity by the wife’s counsel”. In fact, the attachments to the affidavit filed by the husband on 26 November

2004 indicate that the husband wrote to the wife’s solicitors on 21

September 2004 proposing [FF] as the Single Expert to value the

[country] property. The wife’s solicitors promptly replied on 23

September 2004 indicating that they accepted his suggestion. Nothing had happened by 18 October 2004, and the wife’s solicitors then wrote to the husband’s solicitors confirming their agreement to the appointment of [FF] and asking for details of the valuer’s

qualifications and charges. However, it subsequently transpired that the husband was unable to locate a valuer by the name of [FF], notwithstanding that it was he who proposed him/them in the first place. There is no evidence to suggest that the wife was obliged to do anything between 18 October 2004, when her solicitors agreed with the appointment of [FF], and 15 November 2004, when the husband’s

solicitors requested [Mr C] to carry out his valuation.

53 [Mr C] was not appointed as a Single Expert but leave was granted for his valuation to be relied upon. He was required to attend for cross-examination, although when he was entering the witness box the wife’s counsel advised the Court that the valuation was agreed. However, [Mr C] was then cross-examined on other issues associated with the property.

54 Given that [Mr C] was engaged following an order of the Court requiring the parties to obtain jointly a valuation of the [country] property, I consider ordinarily it would be reasonable for the parties to share equally in the cost of his valuation report ($1,485) and his fee for appearance at trial ($450). The husband also notes that his solicitors did all of the work associated with engaging [Mr C] and

(Page 15)

getting his evidence before the Court and arranging for his attendance at trial. He says these costs amounted to $893, which I must say seems a rather large amount.

55 In her submissions in reply, the wife did not mount any argument to indicate why [Mr C]’s fees should not be shared equally between the parties. However, she did ask for any contribution she was required to make to be offset against costs orders she hoped to obtain against the husband.

Conclusion

56 The strongest factor supporting an order for costs was the failure of the husband to make a remotely sensible offer for settlement until November 2004. Had he been successful in his application relating to [D], that offer would have been within the range of possible outcomes. All his other offers were well outside the range. Had he made an offer based on the possibility that [D] might remain with his mother, there could have been some prospect of the financial issue being settled. However, no such offer was ever made.

57 The wife made offers of settlement that were very much closer to the ultimate outcome. However, I have indicated above the caution that should be exercised in considering offers of settlement. Furthermore, in my view, the wife’s offers were too heavily weighted away from superannuation. This is particularly true of her final pre- trial proposal made in March 2005.

58 Had the husband adopted a realistic approach to negotiations from the outset, I would have been inclined to accept his argument that the wife should pay one half of his reasonable costs associated with the valuation of the [country] property. However, because of the unrealistic position he adopted for most of the proceedings, I consider the appropriate outcome is for both applications for costs to be dismissed.

Order

59 The applications for costs of both parties be dismissed.

I certify that the preceding [59] paragraphs are a true copy of the reasons for judgment delivered by this Honourable Court

Associate

(Page 16)