Magnus & Sandri (No 5)
[2024] FedCFamC1F 762
•13 November 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Magnus & Sandri (No 5) [2024] FedCFamC1F 762
File number(s): SYC 3830 of 2019 Judgment of: HARPER J Date of judgment: 13 November 2024 Catchwords: FAMILY LAW – COSTS – Where husband seeks costs in a fixed sum – Where no party wholly unsuccessful – Where both parties claimed the conduct of the other caused delay and unnecessary costs to be incurred – Where husband had been tardy and non-compliant with disclosure during substantive proceedings – Both parties of substantial wealth – Where wife rejected two settlement offers made by the husband – Where wife claimed rejection of offers was not unreasonable as balance sheet was not sufficiently settled when offers were live – Where wife’s rejection of first offer was not unreasonable as offer made early in proceedings – Where wife’s rejection of second offer was unreasonable as she was in a position to assess the strength of her case and the offer provided a better outcome than achieved in final judgment – Where wife’s failure to accept the second offer was a failure in her duty to act consistently with the overarching purpose of s 95 of the Family Law Act 1975 (Cth) – Award of costs justified in husband’s favour from date of expiry of second offer – No basis for indemnity costs established – Wife to pay 40 per cent of husband’s costs as his conduct likely increased his own costs – Costs ordered in fixed sum of $270,000 in favour of the husband. Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 95, 96, 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68
Cases cited: Alston & Alston [2021] FedCFamC1A 96
Atkins & Hunt [2017] FamCAFC 131
Conrad & Conrad (2020) 61 Fam LR 301; [2020] FamCAFC 255
D & D (Costs) (No 2) (2010) FLC 93-435; [2010] FamCAFC 64
Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123; [2005] FamCA 158
Harris & Dewell and Anor (No. 2) (2018) FLC 93-863; [2018] FamCAFC 180
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCa 1178
Magnus & Sandri (No 3) [2024] FedCFamC1F 449
Magnus & Sandri (No 4) [2024] FedCFamC1F 499
McFadzean v Construction, Forestry, Mining & Energy Union (No 2) [2007] VSCA 313
Moorcroft & Moorcroft (2020) 60 Fam LR 361; [2020] FamCAFC 83
Munday and Bowman (1997) FLC 92-784
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Pennisi & Pennisi (1997) FLC 92-774; [1997] FamCA 39
Prantage & Prantage (Costs) [2014] FamCA 850
Raymond & Raymond (No 2) [2024] FedCFamC1A 92
Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44
Division: Division 1 First Instance Number of paragraphs: 69 Date of hearing: 11 November 2024 Place: Sydney Counsel for the Applicant: Mr Bennett Solicitor for the Applicant: Coleman Greig Lawyers Counsel for the Respondent: Mr Sirtes SC with Mr Auld Solicitor for the Respondent: Abbott Delaney Lawyers FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Magnus & Sandri (No 5) [2024] FedCFamC1F 762
CORRIGENDUM
HARPER J:
Amendment has been made to the coversheet and at [55] of these Reasons to reflect application of s 68A of the Federal Circuit and Family Court of Australia Act 2021 (Cth) to proceedings instituted after 6 May 2024 and the substituted application of s 95 and s 96 of the Family Law Act 1975 (Cth).
I certify that the preceding one (1) paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Harper. Associate:
Dated: 6 December 2024
ORDERS
SYC 3830 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MAGNUS
Applicant
AND: MR SANDRI
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
13 NOVEMBER 2024
THE COURT ORDERS THAT:
1.Within 45 days of the date of these orders the Applicant Wife (“wife”) pay the Respondent Husband’s (“husband”) costs of the proceedings for the period after March 2022 fixed in the amount of $270,000.
2.The wife shall pay interest on any sum owing but unpaid in compliance with Order 1 calculated in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
3.All outstanding applications be otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonyms Magnus & Sandri have been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are property proceedings pursuant to Pt VIII of the Family Law Act 1975 (Cth) (“the Act”) between the wife, Ms Magnus (“wife”) who was the applicant in the substantive proceedings and the husband, Mr Sandri (“husband”) who was the respondent in the substantive proceedings.
On 24 July 2024 I delivered final judgment. The relevant procedural history and background to these proceedings are set out in that judgment: Magnus & Sandri (No 4) [2024] FedCFamC1F 499 (“final judgment”). I adopt and will not repeat what I have set out in there unless necessary for this judgment.
On 21 August 2024 the husband filed an Application in a Proceeding seeking orders for costs against the wife.
On 29 August 2024 I made orders regarding the filing of material in relation to costs submissions and an order that the wife is granted leave to apply to my Chambers should she wish to be heard orally by no later than 3 October 2024.
On 13 September 2024 the husband filed amended written submissions in relation to costs.
On 2 October 2024 the wife provided notice in accordance with the orders of 29 August 2024 that she wished to be heard orally in relation to the husband’s application for costs.
The matter was listed to hear oral submissions on 11 November 2024. The listing was conditional upon compliance with Order 2 of the orders made on 29 August 2024 that the wife file and serve responsive written submissions and affidavit by 10 October 2024. The wife filed her written submissions one day late on 11 October 2024. I do not consider this to be non-compliant and I will have regard to them.
On 25 October 2024 the husband filed written submissions in reply to the wife one day late per Order 3 of the orders made on 29 August 2024. Again I will have regard to them.
On 11 November 2024 oral submissions in relation to costs were received and judgment was reserved.
The wife relied on the following material:
(a)Wife’s written submissions filed 11 October 2024;
(b)Wife’s affidavit filed 10 October 2024;
(c)Wife’s affidavit filed 11 November 2024; and
(d)Wife’s Financial Statement filed 10 October 2024.
The husband relied on the following material:
(a)Husband’s Application in a Proceeding filed 21 August 2024;
(b)Husband’s amended written submissions filed 13 September 2024;
(c)Husband’s reply written submissions filed 25 October 2024;
(d)Husband’s affidavit filed 21 August 2024;
(e)Husband’s affidavit filed 11 November 2023;
(f)Husband’s Financial Statement filed 2 July 2024;
(g)Husband’s tender bundle filed 28 October 2024 (marked Exhibit “A”); and
(h)Husband’s supplementary tender bundle filed 8 November 2024 (marked Exhibit “B”).
The wife also relied on the affidavit of Mr Y filed 5 November 2023 which was relied upon for the purpose of final hearing and no objection was taken.
I note that at the oral hearing the husband initially objected to the wife relying upon her affidavit filed on 11 November 2024, but did not apply for an adjournment. I have had regard to the affidavit to the extent it was relevant.
ORDERS SOUGHT AS TO COSTS
By way of his Application in a Proceeding filed 21 August 2024, the husband seeks the following orders:
1. That within 7 days of the date of these Orders, the Wife pay the Husband’s costs of and incidental to these proceedings fixed in the sum of $789,155.85.
2. That in the alternative to Order 1 herein, but without concession, the Wife pay the Husband’s costs of and incidental to the proceedings from 17 November 2019, either on a solicitor-client basis or a party-party basis, as agreed or assessed within 7 days of the date of these Orders.
3. That in the alternative to Orders 1 and 2 above, but without concession, such other Order for costs in favour of the Husband, whether it be a fixed sum or a proportion of the costs incurred, that the Court deems just and or appropriate.
4. That the Wife pay the Husband’s costs of and incidental to this costs application.
The husband gave evidence that he has incurred $1,013,243.57 in legal fees and disbursements. The first order sought by the husband would, if made, in effect provide him with a full indemnification for his costs from November 2019.
The wife makes no claim for costs other than the costs of the husband’s application for costs. In her written submissions filed on 11 October 2024, the wife seeks:
The application for costs by the Husband should be dismissed, and the Wife’s costs of the application paid on a Party/Party basis.
COSTS IN PROCEEDINGS UNDER THE ACT
In proceedings to which the Act applies, the starting point is that each party shall bear his or her own costs (s 117(1)). If, however, the Court is of the opinion that there are justifying circumstances, the Court may make such order as to costs and security for costs as the Court considers just, being costs in the conventional sense, that is, as indemnity for another’s liability for professional fees and out of pocket expenses reasonably incurred in the litigation (s 117(2); Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 per Hayne J at [98], with the majority in agreement).
The Court has a wide discretion, which is to be exercised judicially (Parke & The Estate of the Late A Parke (2016) FLC 93-748; Atkins & Hunt [2017] FamCAFC 131). When considering what, if any, order for costs should be made, the Court must have regard to the factors set out in s 117(2A):
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
It is well settled that no one factor in s 117(2A) has priority, nor must more than one factor be satisfied; rather, any one factor may be sufficient (Prantage & Prantage (Costs) [2014] FamCA 850 at [12]; Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123 at [41]).
The first question is whether the husband has established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in his favour. The second question is whether, if there are circumstances justifying a costs order, the wife should pay the husband’s costs as a fixed sum or as indemnity costs, other than costs as agreed or assessed on a party and party basis.
I have had regard to all the factors set forth in s 117(2A).
DISCUSSION
Section 117(2A)(a) – the financial circumstances of the parties
The final judgment made orders for property division 56/44 in favour of the wife. Both parties hold substantial wealth. I am not persuaded the financial circumstances of the parties raise any justifying factor for a costs order in favour of the husband.
Section 117(2A)(c) – the conduct of the parties
Each party relied on evidence and submissions which raked through the rubble left by their long dispute, to impugn the conduct of the other in excruciating and unhelpful detail. I will mention only some of this material, which is both enlightening and germane to the costs argument.
The husband argued the conduct of the wife during proceedings caused him to incur significant and unnecessary costs. The husband pointed in particular to the wife’s unsuccessful claim to addback approximately $15,000,000 in relation to a perceived unexplained fall in the value of the husband’s share portfolio. He submitted this part of the wife’s claim should not have progressed past May 2023 when consent orders provided for the wife’s accountant to analyse the husband’s financial records.
But in August 2023, three months before trial, a single expert, Mr Z, was appointed by consent to conduct tracing of the husband’s share trading and the husband claims the late retention of the expert resulted in the loss of hearing dates in November 2023. In his affidavit the husband claims he suggested to the wife that she obtain independent advice rather than having the Court appoint a single expert and that he raised concerns about the potential delay of trial. He submitted the wife, despite the findings of the expert report, persisted in her claim “with an almost wilful blindness to the facts and circumstances of the parties” including the husband’s use of funds to pay expenses related to mortgage repayments and spousal maintenance.
In her written submissions, the wife argued that maintaining her claim for addbacks was reasonable in the context of “wild fluctuations” in the share trading accounts and non‑disclosure by the husband about the disbursement of proceeds from the sale of shares, which she claimed delayed and limited the expert report. In the final judgment I did not accept the wife’s contention that the expert report was compromised by a lack of disclosure by the husband (at [137]). I also consider the appointment of Mr Z was necessary and his evidence assisted the Court in its final determination.
The wife submitted that she was not “blind” to the circumstances raised by the husband but rather they were irrelevant. She denied the retention of the single expert and the timing of the appointment as a basis for costs as the husband had consented and the orders to do so were made on just and equitable grounds. The wife denied the November 2023 hearing dates were lost due to the appointment of the expert but instead argued the trial was adjourned on the defaults of the husband to provide timely disclosure.
The husband additionally claimed the wife took a “maximalist” approach to carrying out proceedings including issuing 60 subpoenas and serving an affidavit of 887 paragraphs of which 70 per cent was unread at the hearing. The husband set out further examples of the wife’s conduct in his reply submissions.
It was the wife’s position that the 60 subpoenas arose from non-disclosure issues by the husband and her lengthy trial affidavit was a “cautious and necessary” approach in circumstances where the agreed division of assets between the parties had not been formally recorded, but once confirmed by the husband the wife limited the paragraphs to be read at the hearing. The wife submitted the conduct of the husband, in particular his non-compliance with various orders including for disclosure, led to the number of subpoenas and should be considered against his costs application.
I note here that the husband made an unsuccessful application to reopen prior to the delivery of the final judgment which was dismissed with a costs order in the wife’s favour (Magnus & Sandri (No 3) [2024] FedCFamC1F 449).
I am not satisfied that the conduct of the wife constitutes a circumstance justifying a costs order against her. It is true numerous subpoenas were issued by the wife, but on the evidence I am unable to conclude this was unreasonable or excessive. Her devotion to arguments supporting the claimed $15,000,000 addback, while unsuccessful and brave, were not in my view either entirely misconceived or devoid of any merit. The substantial reduction in the value of the husband’s share portfolio between separation and trial was very substantial and required explanation. Although the wife’s accountant may have been provided with access to the husband’s financial records, it was the expert evidence which provided that explanation and undermined her arguments on this issue. The report of Mr Z was not received until the start of the trial, and his cross examination by the wife, although unproductive, did not materially lengthen the trial in my view.
Section 117(2A)(e) – whether either party has been wholly unsuccessful
Neither party was wholly unsuccessful.
Section 117(2A)(f) – offers in writing
The husband made two written offers of settlement to the wife on 25 November 2019 and 23 March 2022. He claimed both offers, had either been accepted, would have provided a better outcome for the wife than the 56/44 division she achieved in the final judgment. The husband states almost 70 per cent of his costs have been incurred since the making of the 25 November 2019 offer.
The first settlement offer by the husband proposed a property division 57/43 in favour of the wife. The offer was initially open for acceptance from 25 November 2019 to 16 December 2019, but after ongoing correspondence between the parties the offer was not formally withdrawn until 7 February 2020. The offer provided the following:
(a)Wife retains the Suburb C property unencumbered (value $10,500,000 as at 2019);
(b)Wife retains two artworks;
(c)Husband to pay the wife the sum of $1,206,033.51;
(d)Wife receives the value of split from husband’s superannuation in sum of $892,349.42.
(e)Total net asset pool retained by the wife of $13,410,133.92.
The husband submitted that when adjusted against the net asset pool on the trial balance sheet, had the wife accepted the 2019 offer it would have equated to a 66 per cent property division in her favour and net assets valued at $18,561,828.93.
The husband’s second offer was for a property split 53.5/46.5 in favour of the wife and was open from 23 March 2022 until 6 April 2022. In summary the material terms of the offer were:
(a)Wife retains the Suburb C property unencumbered;
(b)Wife retains funds in joint SS Bank accounts;
(c)Wife retains four artworks;
(d)Wife retains G Investment Company which includes the T Apartment and cash;
(e)Wife makes a cash payment to the husband of $32,693 upon his discharge of E Bank loans.
(f)Total net asset pool retained by the wife of $15,334,322.
The husband submitted that although the second offer property division of 53.5/46.5 was lower than the result in the final judgment, the net pool identified by the husband in that offer was greater. He submitted that had the March 2022 offer been accepted it would equate to a 70 per cent split in favour of the wife and net assets valued at $19,495,302 when compared to the pool of assets existing at the time of final judgment. I agree this is broadly correct.
Clearly a significant feature of both offers was that the wife would retain Suburb C unencumbered and for the husband to discharge the E Bank loans totalling some $2,400,000. The wife achieved a materially less favourable result in the final judgment, because although she retained Suburb C, she was ordered to discharge the E Bank loans secured against Suburb C which stood at about $2,452,949 and to pay the husband $1,433,560.
In the first offer, the superannuation split and cash payment to the wife provided her some additional $2,000,000, conversely in the final orders there was no superannuation split. The second offer required the relatively modest payment to the husband of $32,693, compared to the payment required of the wife in the final orders.
The wife argued that her failure to accept the husband’s offers was not unreasonable in the context when each offer remained open because the extent of her knowledge of the parties’ financial circumstances was clouded by unresolved substantial disputes about items on the balance sheet. The wife stated the balance sheet was unresolved to such an extent that her rejection of the offers should not attract a costs consequence.
The reasonableness of an offer and of any failure to accept is in part to be assessed by reference to a settled balance sheet and an objective assessment of the state of knowledge of the offeree at the time the offer was made. In Pennisi & Pennisi (1997) FLC 92-774 (“Pennisi”) at 84,547, when referring to s 117(2A)(f), the Full Court said:
The husband’s submissions refer to Robinson and Higginbotham (1991) FLC 92‑209 as authority for the proposition that the fact that an offer just exceeds the award is no bar to an order for costs. Equally, however, it is only one of the factors to be considered under s. 117(2A) and it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror – Harris and Harris (1991) FLC 92‑254.
We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded.
….
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.
The Full Court has endorsed these views in Conrad & Conrad (2020) 61 Fam LR 301 at [25]–[30] and Raymond & Raymond (No 2) [2024] FedCFamC1A 92 at [11].
Here the financial arrangements were complex and the wife had a significantly lesser grasp of their detail as at November 2019, especially concerning the husband’s share trading. It is also not uncommon that a reasonable understanding of the overall composition of the balance sheet between the parties relies upon determinations made by the Court and expert evidence, which may substantially affect the pool of assets sheet upon which the Court relies in making property division orders.
In respect of the first offer, the wife agreed to the 57/43 division but she pointed to tax implications and the value of shareholdings as central items that remained unclear at the time the offer was “live”, in addition to there being non-disclosure about proceeds from the sale of shares. The wife claimed she did not have reasonable time to consider the offer as it was withdrawn on 7 February 2020 while the parties were still engaging in discussions concerning the balance sheet, which shows it remained insufficiently settled at the time.
The issues regarding the valuation of shareholdings and non-disclosure to be determined at final hearing were different to the issues that were in dispute in November 2019 when the first offer was made. The husband submitted that the wife should have been in a position to make an informed (if necessarily incomplete) assessment of the strength of her case as at November 2019 and the reasonableness of the husband’s offer. The offer was accompanied by a detailed balance sheet. The balance sheet was supported by substantial documentary evidence including capital gains tax estimates by a qualified finance professional, disclosure updates and the wife’s proposed valuations were adopted for certain items. This evidence was part of Exhibit “A” at the oral hearing on costs and there was no dispute the wife received this material in support of the 2019 offer. The husband argued that his approach to liabilities as estimated at the time meant the risk fell on him, which favoured the wife. On the basis of the documentation made available the husband argued the two month period for acceptance was sufficient for the wife to reasonably consider the first offer. It is significant that in November 2019 the husband’s share portfolio was valued by him at $16,071,397. The correspondence shows that the wife asserted the husband’s share portfolio should be given an agreed value of $18,000,000 to take account of its substantial fluctuations in value.
Nonetheless, the parties had moved sufficiently towards consensus by December 2019 for the husband’s solicitors to submit to the wife’s solicitors a set of draft proposed consent orders. However, by letter dated 4 February 2020, the wife’s solicitors informed the husband’s solicitors that she would not sign the proposed consent orders until a Binding Child Support Agreement was signed simultaneously, and agreement was reached about a rewards scheme. Otherwise, the substance of the proposed consent orders, materially embodying the first offer, were not obviously put in dispute. However, on 7 February 2020 the husband’s solicitors communicated withdrawal of the first offer on the basis the husband’s financial position had deteriorated by at least $5,000,000 comprised of share losses and a taxation liability of $2,000,000. The wife’s solicitors in response sought a further offer and asked for further details of the husband’s financial position.
The value in the share portfolio was largely gone five years later at trial, and was not available for division or to be taken into account, despite the wife’s unsuccessful attempt to have it included as an addback. It can be seen that the composition of the balance sheet in November 2019 was substantially different to the balance sheet at final hearing in 2024. In November 2019 it was open to the wife to receive Suburb C unencumbered plus a substantial cash settlement of $1,206,033 in addition to other assets, in a context where there still existed a substantial share portfolio owned by the husband. The husband argued these factors, taken together, made the wife’s failure to accept the offer unreasonable in December 2019.
I do not agree. The wife’s solicitors made clear by correspondence in December 2019 that they would be conferring with the wife in January 2020. It was the husband’s sudden change of position at the start of February 2020 which caused the first offer to be withdrawn, rather than an unreasonable refusal by the wife to accept it. I am not satisfied the wife took an unreasonably long time to consider the first offer, nor did she unreasonably reject it. Indeed, as pointed out above, the parties were close to an agreed set of orders by the end of December 2019. The balance sheet provided by the husband with the first offer in November 2019 included an estimated tax liability for 2019 of just under $2,000,000 so it was not made clear why this liability formed part of the reason why he withdrew the first offer only two months later.
In relation to the second offer of 23 March 2022, the wife submitted the balance sheet was unclear regarding a $2,000,000 differential in valuation for real property and that the offer contained addbacks against the wife which did not form part of the final judgment. After each offer was made the wife engaged in ongoing negotiations with the husband and sought further disclosure in relation to disputed items on the balance sheet.
The husband argued the wife’s rejection of the second offer was also unreasonable given the extensive information already then available to her, much of which had been in her possession for more than two years. As mentioned, the husband’s documentary evidence supports the argument that the wife received information underlying the valuation of the share portfolio at approximately $16,000,000 as at November 2019. Between the first and second offers the asserted value of the share portfolio fell, but it appears the wife continued to receive updated disclosure from the husband regarding its value. In her affidavit at paragraph 57 the wife refers to making ongoing requests for information regarding the reductions in the husband’s shareholdings and pointed to the evidence of correspondence contained in annexure C of the affidavit of Mr Y filed 5 November 2023. It is also relevant to note that the husband provided a further balance sheet and further proposed consent orders to accompany the second offer and although the offer formally expired on 6 April 2022, the solicitors continued to discuss the balance sheet. A further balance sheet was provided by the husband’s lawyers on 24 May 2022. By a lengthy and detailed letter dated 20 July 2022 the wife’s solicitors responded to the balance sheet dated 24 May 2022 and the proposed consent orders. A further draft set of orders, to resolve valuation disputes, and an updated balance sheet were provided by the husband’s lawyers on 21 July 2022.
At the oral hearing, it was not disputed the wife received updated disclosure from the husband at the time of the second offer including for his shareholdings, though she considered the information to be incomplete in relation to the share portfolio. The correspondence from the husband’s lawyers states the wife was provided with a portfolio valuation for financial year 30 June 2021 and a screenshot of holdings as at August 2021 in September 2021; she was also provided screenshots of the portfolio as at September 2021 in October 2021; as at November 2021 in December 2021; as at February 2022 in February 2022 and March 2022 and a further screenshot of the portfolio in April 2022. The parties’ correspondence also referred to the wife having received prior to November 2021 the K Company share portfolio transaction history as at September 2021, and screenshots of the S Portfolio as at February 2022 in March 2022. Annexure C did not contain the attachments of the screenshots or identify the exact valuations provided to the wife, however it is clear she received updated disclosure from the husband regarding the state of his shareholdings prior to and during the time the second offer was live between 23 March 2022 and 6 April 2022.
It was the husband’s submission that irrespective of what information the wife was provided, she was not willing to accept any offer and she maintained a scepticism of the balance sheet that was not reasonable. The husband submitted both offers were supported by comprehensive balance sheets and could be reasonably assessed on the information made available.
In assessing the reasonableness of the wife’s failure to accept the first offer, it is relevant to note the wife commenced these proceedings on 14 June 2019. It has regularly been recognised that where an offer is made early in proceedings a party may not, at that stage, be in a position to effectively assess the strength of their position in respect to the litigation (Pennisi; Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [22]; McFadzean v Construction, Forestry, Mining & Energy Union (No 2) [2007] VSCA 313 at [9]; Alston & Alston [2021] FedCFamC1A 96 at [102]). The husband made oral submissions that despite the lack of trust between the parties, the offer was comprehensively detailed and there was sufficient information disclosed to the wife for her to make a reasonable assessment of the offer at an early stage of proceedings. The first offer was made only some five months after the proceedings had commenced. Even if the husband had provided considerable information, which the wife disputes, I do not consider the wife’s failure to accept the first offer before it was withdrawn to be unreasonable in the circumstances.
However, I am not satisfied the same considerations apply to the second offer. Even if the balance sheet was not entirely settled by March 2022, the wife was in a much better position to assess the strength of her case by March 2022. As recorded in the final judgment at [52], the parties agreed to a percentage division of 53.5 per cent in favour of the wife in December 2021. The outcome arising from the second offer in March 2022, three months later, would have delivered to the wife a percentage division of the assets, as they then stood, closely approximating the percentage in the wife’s favour agreed in December 2021, including Suburb C unencumbered and a modest payment to the husband of $32,693. It is true that the value of the husband’s share portfolio fell markedly between July 2021 and June 2022. But I found this was explained by ordinary market forces, finance restructuring by companies, as well as sales and purchases of shares (final judgment at [132]). I am also satisfied the wife was apprised of the value of the husband’s shareholdings up to March 2022 and while the second offer remained open for acceptance. The outcome for the wife arising from the second offer would have been materially better than the actual outcome in the final judgment, and the point is that any falls in the value of the husband’s shareholding in the first half of 2022, of which the wife was aware, made the second offer more beneficial to the wife. For this reason, the precise value of the shareholding on the balance sheet had less importance from the wife’s point of view, in assessing the second offer, and also made its acceptance more obviously prudent. I find that the wife’s failure to accept the second offer, while it was open, was unreasonable. This is a circumstance justifying a costs order in the husband’s favour.
Section 117(2A)(g) – such other matters
It is relevant to take account of the obligation of parties imposed by s 68 of the Federal Circuit and Family Court of Australia Act2021 (Cth) (“FCFCOA Act”) (now found in s 96 of the Act) to conduct proceedings, including negotiations for settlement of their dispute, consistently with the overarching purpose set forth in s 67 of the FCFCOA Act (now found in s 95 of the Act). This purpose is to facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible. By March 2022 the overarching purpose applied to both parties in these proceedings. After 6 May 2024, s 67 and s 68 ceased to apply to proceedings instituted after that date, and s 95 and s 96 of the Act, which are materially the same, apply. The husband’s application for costs is a proceeding instituted after 6 May 2024. Separately to s 117(2A)(g), s 96(4) of the Act now also requires the Court, in exercising discretion to award costs to take account of any failure to comply with the duty to conduct the proceedings consistently with the overarching purpose. As pointed out, s 68 (now materially replicated in s 96 of the Act) specifically mentions negotiations for settlement, which in my view includes written offers of settlement. In my view, having concluded the failure to accept the March 2022 offer was unreasonable on the part of the wife, I also conclude she failed in her duty to act consistently with the overarching purpose, and I take this into account, as I must, in exercising the discretion in s 117 to award costs.
The wife’s failure to accept the March 2022 offer and her concomitant failure to comply with a duty to conduct the proceedings consistently with the overarching purpose constitute circumstances justifying an award of costs in the husband’s favour.
INDEMNITY COSTS
The award of indemnity costs in this Court has regularly been called a significant departure from the normal standard, rare, and requires something exceptional (Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No 2) (2010) FLC 93-435; Moorcroft & Moorcroft (2020) 60 Fam LR 361; Harris & Dewell and Anor (No. 2) (2018) FLC 93-863 at [23]–[25]).
The husband relied on Munday and Bowman (1997) FLC 92-784 at 84,660 (“Munday and Bowman”), where Holden CJ set out five circumstances in which an award of indemnity costs might be justified:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts: see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd.
(c) Evidence of particular misconduct causing loss of time to the court and to other parties: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (French J, Fed C of A, 3 May 1991, unreported).
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ragatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
The husband claimed that other than the making of allegations of fraud, the listed circumstances were evident in the wife’s conduct throughout proceedings.
In particular, he submitted the wife’s rejection of his first settlement offer is sufficient reason for an order for his total costs, or a significant portion thereof, to be awarded from the date the offer was made. As already mentioned, I found the wife’s rejection of his first offer to be not unreasonable.
The wife submitted that there was no basis for indemnity costs and that none of the circumstances set out in Munday and Bowman were substantiated by the husband. Furthermore, her rejection of the husband’s settlement offers were not a circumstance of an “exceptional kind” that warranted an indemnity costs order, or any costs order against her.
Other than her refusal of the second offer of settlement, I am not persuaded any of the factors listed in Munday and Bowman are applicable to the conduct of the wife. The wife clearly had reasonable prospects of success at all stages of the proceedings, she did not make specious allegations of fraud, was not guilty of particular misconduct which caused loss of time, nor did she make groundless allegations or pursue groundless contentions.
The question is whether the refusal of the second offer not only justifies an order for costs against the wife, but also indemnification of the husband after March 2022. I do not find that it does.
In answering the question of whether there is something “exceptional” in the circumstances which falls to the feet of the wife, account should be taken of the conduct of the husband and its impact upon the quantum of his costs. I accept the wife’s submissions that the husband conceded he had been tardy in providing information and disclosure during the proceedings, that he breached timetables, and the original trial dates in November 2023 were vacated largely because of the defaults by the husband and not the wife. I am not satisfied a basis for indemnity costs has been established.
CONCLUSION
It follows that the award of costs should not be in effect a full indemnification from November 2019 as the husband seeks in his first proposed order.
My conclusions mean that the award of costs should relate only to the costs incurred by the husband after March 2022. According to the husband’s evidence he incurred $679,528.61 in costs after March 2022.
The question is whether the wife should pay costs as claimed by the husband, or a proportion thereof, or in a fixed amount, on a party and party basis after March 2022 or some higher basis, such as indemnification after March 2022, on a solicitor and client basis or a sum fixed by the Court.
I find that there should be a costs order in favour of the husband for some of his costs incurred after March 2022. On the evidence it is not possible to dissect the amount of $679,528.61 paid by the husband so as to attribute amounts to particular issues or to determine the extent to which the husband’s own actions resulted in additional costs. I am satisfied that while a substantial proportion of the husband’s costs after March 2022 would have been avoided if the wife had accepted the second offer, the actual quantum of the husband’s costs was likely increased by aspects of his own conduct in that period. The wife gave numerous instances of such conduct in her evidence and submissions which I accept are substantially accurate. Accordingly I am satisfied that it is appropriate to order the wife to pay approximately 40 per cent of the husband’s costs.
It is in the interests of both parties for all costs arguments to be finalised by this judgment. In my view no further Court resources, and no further time and expense should be spent or incurred by the parties in undertaking an assessment of costs. Accordingly, I will fix the amount to be paid by the wife, in the sum of $270,000.
I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 13 November 2024
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