Marcos & Serina (No 2)
[2024] FedCFamC2F 373
•28 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Marcos & Serina (No 2) [2024] FedCFamC2F 373
File number(s): MLC 11351 of 2020 Judgment of: JUDGE O'SHANNESSY Date of judgment: 28 February 2024 Catchwords: FAMILY LAW – application for costs – respondent “beat” offer in writing in property case – disparity of financial circumstances – weight to be given to offer in writing – “text book” affidavit and application and clear evidence of costs in complex case – policy difference as the different costs rules – application for costs dismissed Legislation: Family Law Act 1975 section 4AA, section 90SF, section 90SM and section 117
Federal Circuit and Family Court of Australia (Family Law) Rules
Cases cited: Browne & Green [2002] FLC 93-115
Cutts & Head [1984] Ch 290
Calderbank [1975] 3 All ER 333
Marcos & Serina [2023] FedCFamC2F 1474
Murray & Murray [1990] FLC 92-173
Stanford v Stanford [2012] HCA 52; (2012) FLC 93-518
Division: Division 2 Family Law Number of paragraphs: 64 Date of last submission/s: 21 February 2024 Date of hearing: 21 February 2024 Place: Melbourne Solicitor for the Applicant: Mr Dunlop of Lander & Rogers The Respondent: Litigant in person ORDERS
MLC 11351 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR SERINA
Applicant
AND: MS MARCOS
Respondent
ORDER MADE BY:
JUDGE O'SHANNESSY
DATE OF ORDER:
28 FEBRUARY 2024
THE COURT ORDERS THAT:
1.The application for costs by the de facto Husband, Mr Serina, be and is 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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR EX TEMPORE JUDGMENT
These are the settled reasons of a judgment delivered ex tempore. These reasons were delivered orally. These settled reasons have been corrected from the transcript where appropriate to correct grammatical errors, to add citations and passages of authorities, and to attempt to make the orally delivered reasons easier to read. The substance is unchanged.
In the matter of Marcos & Serina I am required to determine Mr Serina’s application for costs following a trial before me over 10 and 11 March 2022. On 17 November 2023, I delivered my orders and reasons. In those orders and reasons, I dismissed the applicant de facto wife’s application for property settlement pursuant to sections 90SM and 90SF of the Family Law Act 1975, herein after referred to as “the Act”. I apologised in those reasons for the delay in delivering that decision.
I will refer in these reasons to the respondent to the substantive proceedings’ de facto husband and the applicant to the substantive proceedings, being the de facto wife, as, for convenience, “the husband and wife”.
Background
As to the substance of those proceedings, they can be found within the judgment of Marcos & Serina [2023] FedCFamC2F 1474 and include:
…
2The Wife seeks a property division of 40/60 in the Husband’s favour. She seeks a cash payment equivalent to what would be 40% of the total asset pool including superannuation (on her case in the realm of $1,000,000) to be transferred to her. The Husband seeks that there be no property alterations and for the Wife’s application to be dismissed.
BACKGROUND
3The Wife was born in 1958 and at the time of the final hearing was aged 63 years. She owns a business where she works and maintains good health, save for a medical condition. The Husband was born in 1955 and at the time of the final hearing was aged 66 years. He retired from operating a business in 2017 and relies on funds from a self-managed superannuation fund and rental income. He enjoys good health.
…
152Those articulate submissions point to the Wife’s claim of indirect contribution by her ideas and advice to the Husband about renovating his Suburb F property, her homemaking including her cooking, her provision of a home for the couple to live in (the Suburb E property) for the last three years of the relationship, essentially section 90SM(4) contributions and the significant asset disparity between the parties at the end of the relationship and the Wife’s commitments to support herself.
…
162.I must not make an order adjusting the parties’ property unless I am satisfied it is just and equitable to do so. In all the circumstances I am not satisfied that there is a principled reason to alter the parties’ interests in their property. I am not satisfied, in all the circumstances, that it is just and equitable to make property alteration orders. Accordingly I will dismiss the Wife’s application.
The husband filed an application in a proceeding seeking costs on 14 December 2023. That application was listed before me on 21 February 2024.
Proceedings this day
On 21 February 2024, the husband was represented by solicitor and counsel. Counsel appearing on the costs application was a different counsel from the who appeared in the trial but, nonetheless, had a comprehensive knowledge of the detail and substance of the proceedings, and was of considerable assistance to the Court.
Ms Marcos appeared on her own behalf, as she was entitled to, and she told me that she was no longer able to afford legal representation. Ms Marcos filed an affidavit in response that she had prepared herself on 22 January 2024. Ms Marcos’ affidavit was a cogent, sensible, well‑drafted document.
I need to pause at this point to acknowledge the material relied upon on the costs application by the husband is a textbook example of clear and efficient affidavit and application. The affidavit, in concise and efficient terms with appropriate annexures, provided very detailed but, nonetheless efficiently set out information as to the costs incurred by the husband, and incurred at different points.
Further, by the care of his solicitor and counsel, the husband was able to put forward before the Court, three different quantum of cost, depending whether costs were to be assessed on an indemnity or solicitor-client base, or in accordance with Schedule 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules as are applicable by default in Division 1 of the Federal Circuit and Family Court of Australia.
Further, the husband’s material set out in detail the costs agreement and arrangements between himself and his solicitors as to costs. The husband’s material and the manner of it was of considerable assistance to the Court, as well as being framed in a way that most powerfully advanced the husband’s case.
Decision
At the end of considering all matters, I have determined that I will not make a costs order at all in the proceedings, and I will dismiss the husband’s application for costs.
Reasons for decision
Costs are to be determined pursuant to section 117 of the Act,
Section 117 Costs
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(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.
The substance of the husband’s application relied upon the provisions at 117(2A)(f) and (g). However, the husband’s submissions frankly acknowledged the financial disparity between the parties in regard to considering the matters at section 117(2A)(a). The husband’s submissions acknowledged the starting point of the “each bearing their own costs” provision of 117(1).
The wife’s position in the proceedings was to seek that there be no costs order made and, principally, on the basis that her financial position was now perilous and that, as a result of the debt for legal costs incurred during the proceedings, it was necessary for her to sell her home. Further matters that agitated the necessary sale of the home was the increase in interest rates since the purchase of the home and the hearing. The wife had experienced the end of a previously fixed, and much lower, interest rate in February of 2024.
The wife asserted in the proceedings, and on the costs application, that she was indebted to her former husband, Mr G, in the sum of $158,500. I accept her evidence. It is clear that Ms Marcos intends to repay Mr G, whether that is a legal or only a moral obligation, the funds advanced to her. In considering the matters under section 117(2A), I refer to the following matters.
Section 117(2A)(a) financial circumstances of each of the parties to the proceedings.
In that regard, I refer to and repeat paragraph 149 of the reasons of Marcos & Serina and I found that the existing legal and equitable of the parties in their property was as follows:
$ Wife’s existing assets & liabilities The Suburb E Property (Agreed) 1,300,000 Suburb E property mortgage (488,836[1]) Suburb E Property Equity 811,164 Bank accounts Nominal Household contents modest Motor Vehicle 1 46,000 Credit card debts (not disputed) (17,719) Wife’s Superannuation 38,629 TOTAL Wife’s assets & liabilities 878,074 Husband’s existing assets & liabilities The Suburb F property 1,600,000 The Suburb D property (owned by a trust/trustee controlled by Husband & treated by the parties as if his property)) 2,180,000 Motor Vehicle 3 50,000 Motor Vehicle 4 45,000 Husband’s home contents modest Husband’s Bank accounts Nominal Credit card (not disputed) (33,608) Overdraft facility (not disputed) (19,482) Husband’s self-managed superannuation 385,968 TOTAL Husband’s assets & liabilities 4,277,119 TOTAL ASSETS & LIABILITIES: 5,155,193 [1] Not disputed.
Ms Marcos’ position was that her financial circumstances had deteriorated since that time and, at paragraph 40 of her affidavit, she set out her financial circumstances.
40.I don't agree to this summary of my financial position as it is now. Due to rising interest rates, my fixed mortgage rate expiring in February 2024 and my current liabilities, I'm listing my home for sale in March 2024. In the following summary I'm using the expected sale price that the agent I've contracted with has quoted.
(a)[Q Street, Suburb E] - Equity of $687,862 (expected selling price January 2024 – mid range of $1,150,000).
(b) [Motor Vehicle 1]- Value of $46,000.
(c) Credit card liabilities - $9,000
(d) [Mr G] liabilities - $158,500.
(e) Superannuation- Balance of $38,629.
(f) Selling costs of my home - $31,000.
(g) Legal fee liabilities - $15,000.
Total= $558,991.
In the High Court of Australia case of Stanford v Stanford [2012] HCA 52; (2012) FLC 93‑518(‘Stanford’) the majority stated some fundamental propositions about section 79 proceedings. In Stanford the essential issue was whether it was just and equitable to make any property order at all, in circumstances where the consortium vitae or marriage relationship had not broken down by way of a separation and the Wife’s needs were otherwise provided for.
I had determined in my reasons that Ms Marcos should be regarded, for the purpose of determining the parties’ existing equitable and legal interest in property in regard to the Stanford test as being that Ms Marcos had assets net of debt of about $878,000 and that Mr Serina had assets net of debt of about $4.277 million.
The gist of Ms Marcos’ affidavit is that by an expected deterioration in the value of her Suburb E property, based on the selling agent’s advice, was that she had experienced a significant reduction in the net value of her assets. The husband’s position from his counsel was that it was not disputed that the property would be on the market and be sold at auction. It was not disputed that the market value would be determined by the auction, and that it may be less. The other aspect of the wife’s financial circumstances that differed from paragraph 149 of the previous reasons was that the wife, unsurprisingly and properly for the purpose of the costs application, took account of her liability to Mr G.
I was and am satisfied that the wife has a legal or moral obligation to pay Mr G, and repay him the substantial sum that has been expended on the wife’s legal fees. The wife’s legal fees were funded by Mr G and by her own savings and earnings, and a small part remains outstanding, which she repays by a periodic arrangement with her former solicitors. I did not include the obligation, moral or legal, to repay Mr G as a liability at paragraph 149, being the first step of the Stanford analysis, because I had not included the utility or benefit of the legal services purchased with that liability.
The benefit of that legal representation has now passed, but Ms Marcos is now left with that liability. The net effect of that is that Ms Marcos estimates that her net equity in assets is around about $559,000 rather than the more substantial figure of $878,000, as applied and used for the purposes of determining if it was just and equitable to make any financial settlement. I also, again, note my observations at paragraph 158 of the reasons.
158At the start of the de facto relationship the Husband had about $4.7 million of equity/assets and the Wife had about $250,000 of equity/assets. In addition each had a car/s, superannuation and home contents. At the time of hearing the Husband had about $4.3 million of assets, after enormous expenditure on lifestyle enjoyed by both, and generosity to family and former employees. That is in dollar terms a bit less than what he had at the start of the relationship after a lifetimes work. The Wife, at the time of hearing ended up with assets/equity of about $878,000, that is in dollar terms more than three times what she had at the start of the relationship after her lifetimes work. If those dollar proportions are adjusted for the time value of money or inflation the Husband would likely have even less again than he had at the start and the proportion of the Wife’s increase would be significantly less than “more than three times”. But the Husband has less than he started with and the Wife has significantly more. The Husband may have ended up with about the same as he started with had he not been so generous or had he not spent that enormous amount on the lifestyle of the couple.
Ms Marcos continues to work and told me, and I accept, that as a result of what she clearly regards as the catastrophe of the decision I made not to find that any property adjustment was just and equitable, she has taken further and additional part-time work, including hospitality work, in addition to her training and expertise in the beauty industry. Ms Marcos was not only driven to that circumstance by my decision, but also by the circumstances of the interest rate cliff that she experienced in February 2024.
Nonetheless, I am satisfied for the purpose of section 117(2A)(a) there is a very significant and considerable financial disparity between the parties. In net terms, the wife will be left with a significant but, nonetheless, sum of money that will be insufficient to purchase a property of the standard of her previous accommodation. On the other hand, the husband will have the assets that are set out in paragraph 149 which, effectively, is an appropriate home to live in and an investment property to provide income to him in his retirement.
Section 117(2A)(b) whether any party is in receipt of Legal Aid
No one is in receipt of legal aid in this case.
Section 117(2A)(c) the conduct of the parties in the proceedings
Counsel for the husband, did not press that there was any conduct of the wife in the conduct of the proceedings relevant to this issue of costs. A perusal of the Marcos & Serina reasons shows that on factual matters, each of the parties were unsuccessful.
Whilst it was always common ground which properties the parties lived in together from late 2012/early 2013 until separation in 2020, there was a significant dispute between the parties as to the nature of their relationship prior to early 2017, when the parties moved together from the husband’s former property to the wife’s renovated, or by then renovated, property in Suburb E.
The husband had maintained, throughout the proceedings and up to the start of the trial with the filing of the outline of case, that the parties residing in the same residence from early 2013 until early 2017 was intended by them, at all material times, to be temporary. By the end of the hearing before me, his position had shifted to concede that, for the whole of that time, the parties were in a de facto relationship. I refer to and repeat paragraph 65 and 123 of the 2023 reasons.
65I accept the Husband’s evidence as asserted in these exchanges. As set out later, the relationship was permanent but each party maintained their own property that each purchased to live in and each then renovated his or her separate property.
…
123.I am satisfied that the parties did not regard their relationship as temporary after late 2012, when the Wife moved into the Husband’s home, and after early 2017, when the parties moved into the Wife’s largely renovated Suburb E property. But I am satisfied, taking into account all of the common ground circumstances and the demeanour of the parties in cross-examination, that the residence arrangements of both living in the Commercial Property from late 2012 until early 2017, and then both living at the Suburb E property until early 2020, was intended by each of them to be temporary in the sense of until it is convenient (to move into your/my own property) but also in the sense of indefinite until it is convenient (to move into your/my own property) and in the context of a permanent relationship that was a de facto relationship within the provisions of section 4AA of the Act, recited earlier.
It was a significant matter for the wife that a significant period when she was living in a de facto relationship with all the characteristics as such a relationship is defined under the Act at section 4AA, that the husband was asserting that this was only a temporary relationship. Those provisions are:
Section 4AA De facto relationships
Meaning of de facto relationship
(1) A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b) the persons are not related by family (see subsection (6)); and
(c)having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
(2) Those circumstances may include any or all of the following:
(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h) the care and support of children;
(i) the reputation and public aspects of the relationship.
(3)No particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship.
(4)A court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.
(5) For the purposes of this Act:
(a)a de facto relationship can exist between 2 persons of different sexes and between 2 persons of the same sex; and
(b)a de facto relationship can exist even if one of the persons is legally married to someone else or in another de facto relationship.
(6) For the purposes of subsection (1), 2 persons are related by family if:
(a) one is the child (including an adopted child) of the other; or
(b)one is another descendant of the other (even if the relationship between them is traced through an adoptive parent); or
(c)they have a parent in common (who may be an adoptive parent of either or both of them).
To the extent that the wife, ultimately, satisfied the Court the parties were in a de facto relationship, notwithstanding that the parties had intentions to maintain separate residences or, at least, the option thereof, she was successful as to a significant finding.
The other aspect as to the conduct of the proceedings that I regard as relevant is that I am satisfied from the evidence in the trial of the very significant agitation of disclosure and discovery of financial circumstances. I refer to, and repeat my observations at paragraph 127 of the 2023 reasons.
127There was no suggestion the Husband’s lack of knowledge was feigned. From the rhythm of the cross-examination, the Husband’s demeanour and his preparedness to make concessions, I am satisfied the Husband’s evidence of the extent of his knowledge of his own and/or the Wife’s financial documents was genuine. I am not satisfied the Husband had an informed knowledge, as opposed to a vague opinion, of what should and should not have been disclosed and what has or has not been disclosed by himself or the Wife. I am not satisfied either party had a detailed or sophisticated understanding of their own financial history. The nature of the financial affairs of the parties during the relationship meant that neither ever had, nor kept, any substantial contemporaneous record of expenditure during their relationship. Further, each relied heavily on their lawyers to analyse and interpret their own and the other party’s bank statements. The Husband relied entirely on his lawyers’ analysis. The Wife had, at least, during the litigation read at least some of the Husband’s affidavits and bank statements. The Husband had not even read most of the Wife’s documents. I am not satisfied that the Husband had any real understanding of his own bank statements and what they showed. The Wife pressed for documents or records assumed to exist when I am not satisfied they did.
I am satisfied that the husband’s production of documents was, and to quote him, that he was (like the wife) “a bit slow at times”.
The other aspect is that by the end of the analysis of the parties’ financial affairs, it was apparent that some roughly, at least, million dollars has been spend of the husband’s money during the relationship on what was described as “lifestyle matters”. I am satisfied that the extent of the expenditure was a matter that perplexed the wife considerably. Very considerable time, effort, and expense on legal fees was put into attempting to track down either a failure to disclose financial information or an explanation for expenditure.
I was not satisfied that the expenditure was unexplained, rather, that the parties had no proper record, or even contemplation at the time, of the extent of that lifestyle expenditure. Nonetheless, the nature of the husband’s attitude to his own financial affairs and his lack of interest in the wife’s financial affairs, contributed significantly to both parties’ expenses in the proceedings.
Another controversy within the proceedings that consumed considerable time, energy and money for both sides was the cost of the renovations of the wife’s property paid for by the husband. Ultimately, I was satisfied that neither party had any clear record, let alone a recollection, of the extent to which they had spent the husband’s money on renovating the wife’s property.
I was not satisfied that the figure was the $120,000 as asserted by the husband, or only the figure of $33,000 as asserted by the wife. Both parties were unsuccessful in agitating for the amount that they sought.
Section 117(2A)(d) whether the proceedings were necessitated by the failure to comply with any order
The proceedings arose from the de facto relationship of the husband and wife, and did not, in any way, arise or be necessitated by previous orders of the Court.
Section 117(2A)(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings
It is put and relied upon, not unreasonably, by the husband that the wife’s application for property settlement was dismissed, and it is correct to say that, in that sense, she has been wholly unsuccessful in the proceedings. That the wife was wholly unsuccessful in the proceedings is a matter of very considerable weight that I must take into account, and I do. The wife was unsuccessful in the final outcome, however, it should not be concluded that I regarded the proceedings as doomed to fail or careless or foolhardy.
The wife was ultimately successful in satisfying the Court and, indeed, the husband of the nature of their relationship over the disputed, or potentially disputed, period of four years from late 2012 until early 2017. Nonetheless, I give the issue of the wife being wholly unsuccessful as to outcome considerable weight.
Section 117(2A)(f) whether either party of the proceedings has made an offer in writing
Counsel for the husband relied heavily on the fact of offers in writing. The history of those offers is as follows, and I note follow mediation.
21 April 2021
The husband’s solicitors sent to the wife’s solicitors a letter headed “Without prejudice save as to costs” and that also referred to reliance upon the letter on the question of costs pursuant to section 117 of the Act, and referred to the principles in Cutts & Head [1984] Ch 290 and Calderbank [1975] 3 All ER 333.
The offer that was put was as follows,
Our client puts the following offer of settlement to finalise this matter:
1. Our client pay your client the sum of $50,000 (the payment);
2.Contemporaneously with the payment your client sign all documents and do all acts and things required to withdraw all caveats registered by her against our client's properties, at her expense; and
3.The parties sign a Financial Agreement in relation to the payment and spousal maintenance, with the payment to be made within 14 days of such agreement being signed by both parties;
4. Your client's Initiating Application filed 19 October 2020 be dismissed; and
5. The parties otherwise bear their own costs in relation to this matter.
I am satisfied that that offer was clear and unambiguous, and determined all aspects of the proceedings, and was readily able to be understood by any lawyer and, indeed, party to the proceedings. That offer was to remain offer for 14 days.
27 April 2021
Before that 14 days had expired, the wife responded in a letter from her solicitors to the husband’s solicitors also headed “Without prejudice save as to costs”. That letter referred in similar terms to reliance upon the letter for the purpose of section 117 of the Family Law Act and, referred to the principles in Cutts & Head and Calderbank. That offer simply proposed as follows:
Dear Mr…
…
We are instructed without prejudice to settle property matters on a final basis.
Our client proposes the following:
1.Your client makes a payment to our client in the sum of $375,000.
If your client is agreeable to our client’s proposal in relation to property matters, we are instructed to draft a minute of consent orders.
The above offer is open for acceptable until 4 pm on 10 May 2021, at which time it will be expressly withdrawn.
…
We await your response.
On 7 May 2021
The husband made a further offer just before that forewarned timeframe of 10 May 2021 was to expire on 7 May 2021. The husband made an offer in identical terms to his first offer of 21 April 2021, save that the sum for payment was now $40,000 and that letter also contained the statement:
As we noted in our letter of 21 April 2021, our client’s offer contained in that letter will not be repeated.
It is clear from the decision I made in the 2023 orders and reasons that the wife achieved a result significantly worse than that which was proposed in either the first or second offer. With the assistance of the careful and detailed material filed by the husband, it was relatively straightforward to ascertain the costs that the husband had expended at the time of the offer. I am satisfied, as agreed by counsel for the husband, that at that time, the husband had spent or expended in the order of $55,000 on legal fees.
As discussed with the husband’s counsel, I am satisfied that the wife’s costs would have been in the same ballpark and likely more than the husband’s costs expended at that time, and I accept the submission of counsel for the husband that, procedurally, the parties had been “joined at the hip in terms of the procedure so far, and they had been to a mediation […] at that stage”.
I note that the total costs expended by the husband are in the order of $167,000 and that his total costs expended after the date of the first offer was in the order of $111,700. The material put forward by the husband enabled scale costs to be readily ascertained, either in accordance with Schedule 3, as is applicable in Division 1 by default, and applicable at the option of the Court pursuant to the Rules.
There is the option for the Court to either apply the costs scale as applicable in Schedule 3 of the 2021 Rules or the different and slightly lower scale in regard to the costs applicable in Division 2.
Helpfully, the husband’s counsel, was able to propose a sensible and appropriate test for differentiating between the two scales and the manner in which they differed.
MR DUNLOP: … Ultimately, my submission was going to be based on one reading of both rules, and a reading of Division 2 rules are very much event or court-based event orientated in terms of it being court-based events and little regard to the work backstage, if I can put it that way… in terms of the professional costs incurred by a party via lawyers or disbursements in terms of counsel and whatnot (as complied to the applicable scale for Division 1)
Had I been determined or decided that I should order costs, I would have adopted Mr Dunlop’s explanation for the difference between the two scales, as it has much to commend it. Ultimately, the husband sought costs on an indemnity basis as follows,
4.The Husband seeks orders for the Wife to pay his legal costs of these proceedings as follows.
(a) On an indemnity basis and in sum of $167,028.53; or
(b)In the alternative, his legal costs on scale in accordance with Schedule 3 of Federal Circuit and Family Court of Australia (Family Law) Rules in the sum of $97,643.05.
The costs submissions of the husband had the advantage of being persuasive because of efficiency and lack of exaggeration or overstatement.
Section 117(2A)(g) such other matters as the Court considers relevant
The further matter relied upon by Mr Dunlop, and I regard this as being a matter that could be relied upon under section 117(2A)(g), is what was the disparity between what the wife sought in her written offer, being a $375,000 payment and her application being for an award equivalent to 35 per cent of the total asset pool, but varied upwards in outline of case and opening to a payment so that she ended up with about 40 per cent of the total asset pool, or a figure of about $1 million.
I am satisfied that the disparity of between what the wife was prepared to take and what she pressed for in case may, in some cases, be relevant. In this case, counsel for the husband pressed that I should find, based on those circumstances, that it was a mere ambit claim and that this was highly relevant to the issue of an award of costs. I accept that such a situation may well be highly relevant in some cases and, in some cases, even determinative. I am not so satisfied of that in this case. I am not satisfied that the claim was merely an ambit claim.
The wife’s case was that, at all times, she was relying upon legal advice. She was relying upon legal advice of experienced and competent solicitors. I cannot and will not go behind the essential veil of legal professional privilege to ascertain the basis upon which the wife made the offer of $375,000 or the private discussions with her lawyers that resulted in the claim of 35 or 40 per cent.
In terms of the offers in writing, I was referred to the decision of Nygh J in Murray & Murray [1990] FLC 92-173 the passage referred to me by the husband’s counsel are as follows.
“…a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs. If one considers the issue as a matter of policy, that is, on the basis of what the Parliament’s objective and purpose was in enacting the legislation, it is clear that the Parliament wished to encourage settlement thereby reducing the cost of litigation to the parties and to the community. That must mean that a party cannot reject or ignore a reasonable offer seriously made except at his or her peril as to costs. At the same time a party cannot sit tight and postpone a decision as to acceptance”
I was also referred to the decision of Browne & Green [2002] FLC 93-115 at 56 and 57.
56.We would agree with the observations of Nygh J in Robinson and Higginbotham (1991) FLC 92-209; 14 Fam LR 559 at FLC 78,417; Fam LR 561:
“…I accept counsel for the husband’s submission that paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case.
…
Similarly, when one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition...”
57.We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.
In that case, the additional relevant circumstances was that by the end of the case, the husband, against whom costs were sought based on the offer of compromise, was in a far superior financial position to the wife. The husband had just on $2.98 million of assets compared to the wife’s $1.29 million.
However, I accept that the offer in writing is a very powerful matter to be taken into account. Nonetheless, the offer in writing was, very much to my satisfaction, in the nature of a “go away” type offer. At the time of making the offer, the husband would have known that the wife’s costs would have been approximately a bit more than what the extent of the offer was. Nonetheless, as events turned out, it would have been wise of the wife to have accepted that offer.
I am not satisfied that the offer was of substance given the circumstances that, at that time, the husband had assets of something in the order of $4.3 million and the wife had assets of something in the order of $800,000.
The other matter that I place very significant weight upon is the disparity in financial circumstances of the parties. The husband is in a far superior financial position. The extent to which he has spent costs in these proceedings will not significantly harm his enjoyment of life in his. The husband was able to afford the costs of the proceedings. I also note that in my assessment, having looked carefully at the detail of the husband’s costs, that his costs in quantum were reasonable, notwithstanding the very significant amount of work involved.
The number of different items of costs, which just shows the complexity and labour intensive nature of hard-fought litigation, includes about 400 separate items of costs in addition to disbursements for counsel’s fees. The husband received more than adequate service for his costs and, ultimately, he could afford it. That does not mean that the payment of those fees and the lack of compensation for them will not be a great unhappiness and a burden for the husband. It will be both.
Nonetheless, the extent of the financial disparity between the parties and the financial hardship relative to the circumstances during the relationship that the wife now faces must be balanced against her having been:
·entirely unsuccessful in the proceedings; and,
·having failed to “jump over” or do better than the clear and precise offer for costs.
Nonetheless, balancing those matters, I place greater weight in the final analysis upon the disparity of the financial circumstances and the likely diminution or impact upon the wife, as compared to the circumstances during the relationship, than I do upon the offer in writing. I do take into account the offers in writing, but they are not determinative of the entire section 117 costs, and I do give some weight and consideration to the section 117(1) of the starting point of each bearing their own costs. Those are my reasons.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 26 March 2024
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