Marley & Ormonde (No 2)
[2022] FedCFamC1F 353
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Marley & Ormonde (No 2) [2022] FedCFamC1F 353
File number(s): SYC 3012 of 2018 Judgment of: CAMPTON J Date of judgment: 20 May 2022 Catchwords: FAMILY LAW – COSTS – Where the father failed to discharge his disclosure obligations and in doing so created layers of complexity to his financial circumstances that inflated the costs incurred by both parties – Where the mother made two reasonable offers prior to the final trial event – Where the father would have achieved a superior outcome had he accepted either one of the mother’s offers – Where the father alone had full knowledge of the parties’ financial circumstances and it was unreasonable for him not to engage with the mother’s offers – Where there is no evidence of the terms of any offer made by the father – Where the father maintained an unreasonable contention throughout the litigation as to there being no warrant for any property adjustment in favour of the mother – Where the father failed to conduct the proceedings in a manner consistent with the overarching purpose of the Federal Circuit and Family Court (Family Law) Rules 2021 (Cth) to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible – Where the rules are a factor amongst others in the fixing of costs – Costs ordered in a fixed sum. Legislation: Family Law Act 1975 (Cth) s 90SM
Family Law Rules 2004 (Cth) rr 1.04, 1.08, 10.05
Federal Circuit and Family Court of Australia(Family Law) Rules 2021 (Cth) rr 1.04, 12.08, 12.17
Cases cited: Atkins & Hunt [2017] FamCAFC 131
Browne & Green (2002) FLC 93-115; [2002] FamCA 791
Calderbank & Calderbank [1975] 3 ER 333
Collins & Collins (1985) FLC 91-603; [1985] FamCA 15
Idoport Pty Limited v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23
Luadaka & Luadaka (1998) FLC 92-830; [1998] FamCA 1520
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Robinson & Higginbotham (1991) FLC 92-209;
Warbrick & Warbrick (No 2) (2021) FLC 94-030; [2021] FamCAFC 101
Division: Division 1 First Instance Number of paragraphs: 82 Date of last submission/s: 6 May 2022 Date of hearing: 1 April 2022 Place: Sydney Counsel for the Applicant: Mr Finch Counsel for the Respondent: Mr Givney Solicitor for the Respondent: John & Co Lawyers ORDERS
SYC 3012 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MARLEY
Applicant
AND: MR ORMONDE
Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
20 MAY 2022
THE COURT ORDERS THAT:
1.The respondent father pay the applicant mother’s costs of and incidental to her s 90SM claim determined by way of the orders made on 27 January 2022 fixed in the sum of $35,000, such payment to be made by the father simultaneously on completion of the sale of E Street, Suburb F or within three months from the date of this order, whichever is the earlier.
2.The respondent father do all such things as are necessary to cause the costs as ordered herein to be charged upon, and to be paid to the applicant mother from, his share of the proceeds of sale of E Street, Suburb F.
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 the pseudonym Marley & Ormonde has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
INTRODUCTION
On 27 January 2022, for reasons then delivered, final orders were made as to the parenting of the children of Ms Marley (“the mother”) and Mr Ormonde (“the father”) and as to the adjustment of property between them pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”).
The mother sought by way of an Application in a Proceeding filed on 24 February 2022 (“the Costs Application”) orders that the father pay her costs of and incidental to her Initiating Application filed on 14 May 2018 (as amended on 15 June 2018) on an indemnity basis, or in the alternative, on a party and party basis, as agreed or assessed. She also sought that the father meet any payment of her costs from his share of the sale proceeds of the parties’ home at E Street Suburb F (“the Suburb F property”) as adjusted and sold pursuant to the final orders.
By way of an Amended Application in a Proceeding filed on 15 April 2022, the mother amended her relief sought such that the father pay her costs of and incidental to her Initiating Application filed 14 May 2018 (as amended on 15 June 2018) in the fixed sum of $50,000, such costs to be payable from and secured upon the father’s share of the sale of the Suburb F property.
The father by way of a Response to an Application in a Proceeding filed on 22 April 2022 sought that the Costs Application be dismissed, and that the mother pay his costs and incidental to his Response to the Costs Application.
The Suburb F property was sold at auction in2022 for $4.06 million. The sale is scheduled to complete on or about 11 June 2022.
On 8 April 2022 an order was made as to security of costs as follows:
7.On the Application of [the mother] for security for costs pending further order the [father] is restrained from doing any act or thing so as to transfer, deal with or adversely affect the sum of $50,000 payable to him by way of the application of the proceeds of sale of the [Suburb F] property as ordered 27 January 2022, save and except to cause the said sum of $50,000 from those proceeds to be deposited into the trust account of his current solicitors John & Co Lawyers at [Suburb CP].
For the reasons that follow it is just in the circumstances to depart from the usual rule that each party bear their own costs, such that the father pay the mother’s costs of the proceedings for property adjustment, fixed in the sum of $35,000, and that such payment be secured from the father’s share of the proceeds of sale of the Suburb F property.
BACKGROUND
On 14 May 2018 the mother commenced proceedings for property adjustment pursuant to s 90SM of the Act, and sought urgent orders as to spouse maintenance. On 25 May 2018, the father filed a Response to an Initiating Application opposing any orders as to financial adjustment or maintenance. In seeking that the mother’s s 90SM relief be dismissed he opposed the mother being adjusted any part of his interest in the Suburb F property of which he was the sole legal owner. This remained his position throughout the financial proceedings including at trial.
By way of his Response, the father joined parenting matters to the proceedings.
On 4 April 2019 the father’s mother, Ms Ormonde (“the second respondent”) filed a Response to the Amended Initiating Application claiming an equitable or beneficial interest in the Suburb F property, or in the alternative, recovery of alleged loan funds.
On 5 April 2019 the father’s brother, Mr C Ormonde (“the third respondent”), filed a Response to the Amended Initiating Application claiming an unspecified interest in the Suburb F property. He filed an Amended Response on 9 August 2019, claiming an equal beneficial interest in the Suburb F property and seeking an order for repayment of $50,000 purportedly loaned by him to the father in 2009 to assist in the purchase of motor vehicle 1.
On 11 March 2021 McClelland DCJ delivered reasons for judgment on the hearing of a number of discrete issues. The judgment recorded that:
(a)the second respondent did not hold any interest in the Suburb F property and no finding was made as to the father and/or the mother being indebted to the second respondent; and
(b)the father beneficially held for the third respondent 33.94 per cent of the Suburb F property grounded from the third respondent contributing $780,000 to the purchase, subject to any adjustments; and
(c)the third respondent had advanced to the father a sum of $50,000 to assist in the purchase of motor vehicle 1 and that the father was not legally obliged to repay that sum.
The second respondent was wholly unsuccessful in the prosecution of her relief sought. Notwithstanding that, she remained a party to the proceedings until the first day of the trial, being 22 November 2021. The second respondent gave evidence in the father’s case at trial.
The third respondent was partially successful in one of his prayers for relief sought and unsuccessful in the other. He did not participate in the proceedings subsequent to the reasons for judgment delivered and orders made on 11 March 2021. The financial proceedings at final trial were determined on an undefended basis as against him.
The relevant procedural history and background to these proceedings are set out in the final judgment as to parenting and property adjustment delivered on 27 January 2022. I will not repeat what I have set out therein unless necessary for this judgment.
Documents relied on by the mother
·Amended Application in a Proceeding, filed on 15 April 2022;
·Affidavit of mother filed, on 24 February 2022;
·Mother’s written submissions, filed on 24 April 2022.
Documents relied upon by the father
·Father’s Response to Application in a Proceeding, filed on 22 April 2022;
·Father’s affidavit, filed on 22 April 2022;
·Father’s written submissions, filed on 6 May 2022.
THE LAW AND PRINCIPLES
The relevant principles with respect to costs are well settled and are set out in detail in the Full Court’s decision of Atkins & Hunt [2017] FamCAFC 131. The Court has a wide discretion as to costs, which is to be exercised judicially.
While the general position established by s 117(1) of the Act is that each party should bear their own costs, s 117(2) allows a Court to make such costs order as it considers just if there are circumstances which justify doing so.
It is not necessary to establish extraordinary or exceptional circumstances, however, there must be circumstances which at the absolute discretion of the Court justify a costs order. The High Court made it clear in Penfold v Penfold (1980) 144 CLR 311 that s 117(2) of the Act requires a finding of justifying circumstances before any costs order can be made.
In considering what costs order (if any) should be made and in what form, the Court is required to have regard to the matters set out in s 117(2A) of the Act, so far as they are relevant. Those matters are as follows:
(2A) …
(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 has priority under s 117(2A), nor must more than one factor be satisfied; any one factor may be sufficient. There may be a dominant or outstanding feature that makes an order for costs appropriate; thus although any one factor may be sufficient, no one factor is essential.
In Collins & Collins (1985) FLC 91-603 the Full Court described the discretion conferred by 117 of the Act as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way. In Luadaka & Luadaka (1998) FLC 92-830 the Full Court made it clear that it is unnecessary to spell out detailed reasons for the decisions in cost matters.
The Family Law Rules 2004 (Cth) (“the old Rules”) applied to the conduct of the proceedings prior to 1 September 2021. Rule 1.04 of the old Rules prescribed amongst other things that the main purpose of the old Rules was “to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case”.
Rule 1.08 of the old Rules imposed an obligation on, among others, the parties to promote and achieve the main purpose of the Rules, including readiness for Court events, assisting the just, timely and cost-effective disposal of cases, and being satisfied there is a reasonable basis for alleging, denying or not admitting a fact.
The Federal Circuit and Family Court of Australia(Family Law) Rules 2021 (Cth) (“the current Rules”) have applied to the conduct of proceedings since 1 September 2021. Rule 1.04 of the current Rules is relevant to determinations as to costs. It mandates that the overarching purpose of the Rules is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible, and that parties to family law proceedings must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.
Rule 12.08 of the current Rules provides that legal costs incurred in proceedings must be fairly, reasonably and proportionally incurred and must be fair, reasonable and proportionate in amount in the circumstances of the proceedings. It includes considerations as to parties complying with relevant rules and orders of the Court and acting reasonably in raising pursuing or contesting particular allegations or issues in the proceedings. It requires litigants to make reasonable efforts to resolve disputes by way of negotiation or other methods.
As to the method of the calculation of costs, r 12.17 of the current Rules provides:
(1) The court may order that a party is entitled to costs:
(a)of a specific amount; or
(b) as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c) to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
In determining the calculation of costs, r 12.17(3) permits the Court to take into account some of the matters identified in r 12.08(2), which provides:
(2)In considering whether a party’s legal costs have been fairly, reasonably and proportionately incurred, regard must be had to all relevant matters including, but not limited to, whether a lawyer representing the party, a lawyer representing any other party, or any self‑represented litigant has:
(a) complied with all relevant rules and orders of the court, including requirements that documents be filed or provided to other parties by a given date; and
(b)acted reasonably in raising, pursuing or contesting a particular allegation or issue; and
(c)made reasonable efforts, subject to the client’s instructions, to resolve the dispute through negotiation, mediation or arbitration; and
(d)made reasonable efforts to narrow the issues in dispute; and
(e)filed no more interlocutory applications than are reasonably necessary in the circumstances of the proceeding; and
(f)filed no more affidavits or other documents than are reasonably necessary in the circumstances of the proceeding.
The mother’s case
The mother submitted that the justifying circumstances for an award of costs are:
(a)The father’s identified conduct during the course of the proceedings. She highlights his disclosure failures, his disposition of the parties’ property in the course of litigation without the mother’s knowledge, he giving evidence in the proceedings that he knew or ought to have known was misleading. It is her case that the way he conducted the financial litigation “created layers of complexity that were unnecessary and caused costs”; and
(b)The father’s failure to accept offers of settlement made in the financial proceedings on 20 September 2019 and 14 April 2021.
She further submitted that the resultant financial circumstances of the parties upon the implementation of the final orders are not so disparate so as to warrant an exercise of discretion not to order costs. She contends that the fixed sum sought does not significantly impact on the financial circumstances of the father.
The father’s case
The father submitted that:
(a)Upon implementation of the final orders, his “three significant financial liabilities including child support, outstanding payment of legal fees and liability to the Australian Taxation Office” will leave him in a position of “limited funds” such that he “does not have the capacity to meet an order as to costs”; and
(b)The findings identified by the mother in her evidence and written submissions as to the his conduct in the proceedings, including his disclosure failures, have been taken “into account under s 75(2) of the Act and as such formed part of the adjustment of 15 per cent in favour of the mother”; and
(c)The mother’s first offer of settlement made on 20 September 2019 “does not include the third respondent’s [being the father’s brother] claim and actually disputes the third respondent’s claim” leading to the matter being incapable of resolution unless agreement had been reached between all of the parties as to the claim made by the third respondent. Hence, it is submitted that the father could not have accepted the first offer of the mother without the acceptance of it by the third respondent. Additionally, the value of the Suburb F property in the first offer was asserted by the mother to be $3,800,000 and at the time of the hearing the value was found to be $4,000,000; and
(d)That the mother’s second offer dated 12 April 2021 was made to the father and the third respondent. It was submitted that “the first step had to be that the third respondent had to accept this settlement before it could be acted upon by the respondent.” The offer did not assert a value to the Suburb F property and hence the father did not know whether the offer was “within the range”. He contended “unprecedented growth in the market” by way of upward movements over the following eight months between the date of the offer and the trial leading to the conclusion that the value of the 12 April 2021 offer would result in the mother achieving a higher percentage than she achieved on determination at hearing. Further, the option of that offer did not take into account the “obvious interest” of the third respondent. It was submitted that if the third respondent’s claim was for $780,000, “this does not mean that the offer made at the time was equal to, slightly better [than], or slightly less than the ultimate decision”.
Section 117(2A)(a) The financial circumstance of each of the parties
The reasons for judgment delivered on 27 January 2022 record that the value of the Suburb F property at $4 million, that the mother will receive property valued at $632,537 after allowance for payment of her Australian Tax Office (“ATO”) debt, and that the father will retain property valued at $340,591 after payment of his ATO debt.
The mother contends that at a sale price of $4.06 million after payment of selling expenses, the payment of the beneficial interest of the third respondent and the discharge of the mortgage secured upon the Suburb F property, will result in her receiving $584,979 in cash and the father receiving $578,232 in cash. These calculations were supported by a table in her written submissions.
The father gives evidence in his costs affidavit estimating the value of his share of the net proceeds of sale of the Suburb F property being $530,000 (he did not particularise the foundation for his calculation).
I prefer and accept the mother’s estimation of the value each of she and the father will retain from the proceeds of sale of the Suburb F property in circumstances where she had particularised and specified the foundations supporting her contentions.
The mother will be required to pay from her share of the proceeds of sale:
(a)her tax debt of $88,152;
(b)her unpaid rendered legal fees due of $118,398;
(c)and loans for paid legal fees in the range of $156,000.
This totals $362,550.
The father’s evidence is that his liabilities to be met from these proceeds are:
(a)to the ATO $406,715;
(b)his Child support arrears $55,655; and
(c)unpaid rendered legal fees due of $98,125.
This totals $560,495
The reasons for judgment record as to the father’s failures to engage with the ATO after separation to reduce or negotiate the value of his liability. In his costs affidavit the father says:
6. (c)I have previously attempted to negotiate with the ATO to reduce this liability however, have been infom1ed payment would need to be made immediately in order to enable this. Given I have been uncertain how much I may be left with, I have not been able to make any arrangements in relation to this. I do not know if the ATO would be willing to reduce this liability and if so, by how much.
The father’s ATO debt formed a liability in the balance sheet comprising the parties’ property at trial. Allowance has been made for the payment of the fact and quantum of the debt resulting in the father retaining as identified in the primary reasons for judgment, property valued at $340,591. I accept that the father’s financial circumstances are adversely impacted upon by his obligation to pay his taxation liabilities. That said, the father has neglected to provide evidence as to the particulars of, or as to the context of, the foundations of his uncertainty as to the quantum of the ATO debt that he will “be left with”. This evidentiary lacuna, which existed at trial, continues to date. It detracts from the weight to be afforded to the ultimate capital circumstances of the father when compared to those of the mother after implementation of the primary orders.
The reasons for judgment record the mother’s taxable income was historically modest and is currently $27,375 per annum. I was unable to make a reliable finding as to the father's current income. A finding was made that the father has a superior income earning capacity to the mother. He says in his costs affidavit that he has now applied for a job-seeker allowance, he receives a Family Tax benefit and that KPL, his process serving enterprise, is currently generating income of about $400 per week but after paying expenses is trading at a loss.
The father gives evidence that he currently has $8.04 in his personal bank account and $955 in the KPL bank account and that otherwise he “does not have access to any other funds whatsoever”. In the primary judgment a finding was made that he has the benefit of a significant financial resource by way of BE Pty Ltd.
The mother gives evidence that the father currently is not paying child support in circumstances where the children live with her on 10 out of 14 days in a fortnight during the school term and for half of the school holidays. The value of the child support arrears has increased from $41,038 as recorded in the primary reasons for judgment to now stand at $55,655.
I find that on the available evidence, the mother’s capital financial circumstances are superior to those of the father but that the father’s current and future income earning capacity is superior to the mother’s.
I do not accept the father’s evidence that he is unable to pay costs in the amended sum sought if ordered.
This factor, on balance, weighs in favour of the father.
Section 117(2A)(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
The reasons identified in the primary judgment delivered record in the following paragraphs:
45.The parties purchased [motor vehicle 2] in 2014 funded by joint savings. The vehicle is registered in the father's name. The mother sought an order that the father transfer to her his interest in [motor vehicle 2]. The mother drove this vehicle during the relationship.
46.The father said in cross-examination "[motor vehicle 2] doesn't get driven very much. I have lent it to a friend in Queensland for the time being". It emerged that the father had provided [motor vehicle 2] at no cost to that friend 12 months ago. He conceded that he had not disclosed this fact to the mother and that he knew she wished to retain the vehicle.
263.In cross-examination the mother made a number of concessions as to the proper application of funds by the father from the [BW Street] Proceeds being paid to meet debts incurred in the relationship. The father cross-examined the mother on these matters by putting propositions to her and requiring her to rely on her recollection of events or documents. He did not provide to her in the witness box many of the source documents he said he had recording the fact and date of the payment achieving some her concessions. The mischief of his process obtaining some of the mother’s concessions was illustrated in his own cross-examination.
264.During his cross-examination the reliability of his schedule further eroded. It contained a number of other errors and deficiencies.
265. I find that the father:
(a)knew or ought to have known that some of the propositions he identified in his affidavit and put to the mother in cross-examination were false; and that
(b)in including each of these monies in his table of expenses, he misled both the Court and the mother.
268.I find that the father has not discharged his disclosure obligations as to the use and application of the funds he retained in the [KPL] account from the [BW Street] Proceeds.
269.I am mindful as to the significant value of funds retained by the father for his own purposes, with no direct or indirect benefit to the mother, and their importance in ensuring the s 90SM(3) mandate. I am unable to make a safe finding as to the value of the sum retained by the father from the [BW Street] Proceeds, for which the mother received no direct or indirect benefit.
299.The father’s undertaking as to disclosure was Exhibit D. I find the father has failed in this undertaking. Particularly, he failed to disclose to the mother in a timely fashion, or at all:
a)The fact and terms of the sale of the first edition books;
b)The receipt of insurance monies for [X’s] car, which he purported to have purchased from the [BW Street] Proceeds;
c)The use and application of the [BW Street] Proceeds;
d)The disposal of [motor vehicle 2] vehicle to his friend in Queensland;
e)The use and application of the monies loaned by him from [KPL], originating from monies purportedly loaned from [BCC] and [BEL]; and
f)The fact and extent of his involvement in [BEL].
300.His approach to provide volumes of bank statements to the mother and contending that satisfies his disclosure obligations is inadequate. I find for the reasons identified, as the father has failed to comply with his obligations as to disclosure and in the circumstances, a robust approach may be taken to inferring findings of fact in favour of the mother (Black & Kellner (1992) FLC 92-287; Weir & Weir (1993) FLC 92-338).
The father does not seek to avoid the fact of the adverse findings made in the primary judgment as to disclosure, or that the identified deficiencies in disclosure played a role in the litigation. I do not accept his implicit submission that because this factor has been already “taken into account” in the s 90SM enquiry that to do so in the costs dispute would occasion some form of “double count” against him. This contention conflates the “non-disclosure case” successfully prosecuted by the mother for the purposes of the s 90SM discretion as identified in the primary reasons and the fact of the additional costs impact generated from the disclosure failures. The father’s disclosure failures of his relevant his financial circumstances caused the mother to expend additional time and costs by way of pre-trial processes, the preparation of evidence and cross-examination at trial. I find there is merit to the mother’s contention that the father created layers of complexity to his financial circumstances that on occasions were opaque or internally inconsistent as identified in the primary reasons for judgment.
The proceedings in this matter were as to parenting and property. The contentions of the mother to ground an exercise of discretion as to costs arising from the father’s conduct are restricted to as to the financial proceedings. The mother’s evidence and submissions do not support a costs discretion in her favour in the parenting proceedings.
This factor militates to a cost order in the mother’s favour by way of the father’s conduct in the financial cause.
Section 1172A(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
In Robinson & Higginbotham (1991) FLC 92-209 (“Robinson & Higginbotham”) at [12], Nygh J described the purpose of s 117(2A)(f) as:
…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.
The Full Court in Browne & Green (2002) FLC 93-115 said at [57]:
…the insertion of s 117C in the legislation is 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 the circumstances where there is adequate knowledge to the parties at the time of the offer is made to give it proper consideration, is something to which very significant weight indeed ought normally to be given.
In Warbrick & Warbrick (No 2) (2021) FLC 94-030 (“Warbrick”) at [9], the Full Court held:
That circumstances where a party makes an offer to settle “on terms consistent with the outcome” of, in that case, an appeal, may justify an order for costs on that party’s favour. Specifically, in that case, the Full Court held that “the compatibility of [the mother’s] offers of settlement and the outcome of the appeal justifies an order for costs in her favour”.
The relevance and importance of offers of settlement in financial proceedings is both self-evident and is specifically recorded and identified in s 117C of the Act. Section 117C is included in the Act to sharpen the minds of litigants who elect to ‘roll the dice’. A party cannot reject or ignore a reasonable offer seriously made in financial litigation except at his or her own peril as to costs.
The mother gives evidence as to two offers made in writing in the course of the proceedings in an effort to reasonably compromise the litigation.
The first offer of 20 September 2019 proposed that the father pay to the mother a fixed sum of $500,000 in full and final settlement of the property adjustment proceedings. The offer was grounded from the Suburb F property having a value of $3.8 million. It included as potential liabilities loans from the second respondent in the range of $454,000, from the father’s brother of $1,254,670, and a further $50,000 loan for the motor vehicle 1. The offer was made “in accordance with the principles encapsulated in Calderbank & Calderbank [1975] 3 or ER 333”. It records a reference to r 10.05 of the old Rules. Importantly, the offer made it clear to the father that it would be tendered in support of an application for costs.
The offer proposed that the father retain the Suburb F property in specie, that he pay to the mother the sum of $500,000 “in full and final settlement of these proceedings”, and for the father to indemnify the mother in respect of the monies due to second and third respondents. In the alternative the offer proposed a sale of the Suburb F property and for the mother to receive $500,000 and the balance to be retained by the father.
The offer of 20 September 2019 records in its opening paragraph that the mother does not accept the father’s “open offer” dated 14 August 2019. It records that the letter of 20 September 2019 was “a counter offer”. The father did not put into evidence his open offer dated 14 August 2019. He does not put into evidence any offer to compromise the litigation at any time. This may be reflective of what might be described as a “stone wall” to the mother’s claim for property adjustment as identified in Robinson & Higginbotham, it being broadly uncontested that he being the party with party with greater wealth adopted a position whereby he could attempt to wear out the mother by simple attrition. This conclusion is supported by the fact that the father’s case at trial, consistent with that articulated from the time he filed his response to an initiating Application in May 2018, was that there be no orders as to adjustment of property in favour of the mother. His position was, from the date of his response, absent merit and improbable.
I accept the father’s submission that at the time of the first offer the value of the second and third respondent’s claims were significant outstanding issues in the balance sheet. I accept that these values were important for him to know in assessing likely outcomes at final hearing and that there is no evidence of acceptance by the second or third respondent of the mother’s offer as made 20 September 2019. That said, the terms of the mother’s offer made 20 September 2019 were clear. They represented an appropriate basis upon which the litigation as between she and the father could be settled. The terms of the offer permitted the father not only retain the Suburb F property but to engage with the second and third respondent to settle their claims absent input from the mother. These balance sheet issues did not prevent the father from putting a further counter proposal to the mother, such as the value of her claim being dependent on the success or otherwise of the claims of the second or third respondent, or accepting the mother’s general proposal as to he indemnifying her in circumstances where he knew the value and integrity of each of the familial claims. Contrary to the submission of the father as to the value of the third respondent’s claim being unknown, it is recorded in the offer to be valued at $1,254,670. In the reasons delivered 27 January 2022 it was valued at $1,293,600. The offer recorded a value of the claims of the second respondent at $273,800. By way of the reasons delivered on 11 March 2021, the value of her claim was zero.
The father held the province of the documents and information as to the relevant financial circumstances of the he and the mother throughout the period of co-habitation. He controlled the property of the parties subsequent to separation. I accept the submission of the mother that he had within his possession or control the relevant documents and access to financial information as at 20 September 2019 to adequately consider the fact and terms of the mother’s first offer of compromise and to respond to it. On the evidence, it does not appear that he did so.
It was unreasonable for the father not to have heeded to the reasonable offer made by the mother in circumstances where he alone had full knowledge of the parties’ financial circumstances at the time. The dicta of the Full Court in Browne & Green (2002) FLC 93-115 is apposite to these circumstances.
In the event the father accepted the first offer made by the mother, either conditionally or otherwise:
(a)he would have achieved a superior result from that he achieved at trial, such that the amount that the mother would receive by way of property adjustment from the offer would be less than what she achieved at trial, and the father would have retained the Suburb F property, the first edition books and motor vehicle 2 in specie. This circumstance resonates with the guidance provided by the Full Court in Warbrick; and
(b)The parties would have been spared substantial expense by not meeting the costs of the financial proceedings from that time – any dispute between the father and the second and third respondents could be the determined discretely between them without engagement with the mother.
The second offer of settlement of the mother was made on 14 April 2021. It was cast after the delivery of the reasons for judgment on 11 March 2021. The offer repeated the proposal that the father to pay to the mother an adjusting sum of $500,000 and on that basis, the father retain the Suburb F property and indemnify the mother against any claim made against him by way of the second or third respondent, and that each party otherwise retain their respective property and liabilities. In the alternative, it provided for the Suburb F property to be sold and for the mother to receive $500,000 from the proceeds of sale, the third respondent to receive $780,000 with the balance then remaining after discharging the mortgage and meeting payment selling costs being paid to the father.
It is self-evident that in the event the father accepted the mother’s second offer he would have achieved a superior result from that that he achieved at trial, including retaining the Suburb F property in specie, the first edition books and motor vehicle 2. Again this circumstance resonates with the guidance provided by the Full Court in Warbrick.
I reject the father’s submission that as to the second offer “the first step had to be that the third respondent had to accept this settlement before it could be acted upon by the respondent.” The father had a range of options available to him as recorded above as to the first offer. He had access to all of the information to quantify an adjustments to the percentage due to the third respondent arising from the reasons delivered 11 March 2021. As recorded in the primary reasons delivered on January 2022, the value of the adjustments reducing the quantum of the third respondent’s claim was $17,368.95.
I do not accept the submission that the father did not know whether the second offer was ‘within the range” because the offer did not assert a value to the Suburb F property. The father had a range of options to him, including making his own enquiries as to the value of the property so as to access the integrity of the second offer. The contention as to “unprecedented growth in the market” by way of upward movements over the following eight months between the date of the offer and the trial leading to the conclusion that the value of the 12 April 2021 offer would result in the mother achieving a higher percentage than she achieved on determination at hearing attracts no weight in circumstances where it has no evidentiary foundation. The father’s submission that the second offer did not take into account the “obvious interest” of the third respondent, or the fact of it identifying it at $780,000, or that the offer was not less than the ultimate decision, are not accepted. They are either self-evidently incorrect or rejected for the same reasons identified earlier as applying to the first offer.
It was unreasonable for the father not to have engaged with the second offer of the mother, either conditionally or otherwise as was the circumstance applicable to the first offer.
The rules of Court require parties to focus on the benefits of being reasonable in the course of litigation and on a bona fide basis compromise the litigation.
The old Rules in force at the time of the making of each of the offers impose an obligation on litigants to promote and achieve the main purpose of the rules assisting in the just and timely and cost effective disposal of cases. If the father engaged with either of the mother’s offers he had the opportunity to finalise or to conditionally conclude the s 90SM litigation in a timely and cost effective manner. The fact that he did not do so, coupled with it was unreasonable for the father to have refused either of the mother’s offers, are weighty considerations favouring a cost discretion in favour of the mother.
The father did not put any evidence before the Court as to the terms of any offer of settlement of the financial case. The father’s failure to adduce that evidence implies that no reasonable offer was made by him. In that circumstance the fact of him not making a reasonable offer ought to be considered unreasonable. The father’s conduct in not engaging with the mother’s offers ought to be considered unreasonable. Rhetorically, how then could the mother avoid the financial litigation other than by way of trial? The father’s failure to comply with his obligations pursuant to the rules as identified earlier in these reasons attracts further weight as to an exercise of a costs discretion in her favour.
The father put the mother to significant legal expense in failing to attempt to progress or compromise the property proceedings subsequent to the mother making her first offer on 20 September 2019 and thereafter by continuing the financial litigation subsequent to the making her second offer on 14 April 2021. This, together with the father’s failure to put into evidence the terms any reasonable offer he made as mandated by the rules are justifying circumstances to warrant an order for costs being made against him. Additionally, I find that the father’s conduct in the course of the financial litigation reinforces the exercise of discretion to reach this conclusion.
CONCLUSION AND QUALIFICATION
The mother’s affidavit records that she had incurred $207,454 in total costs from the time of the making of her first offer on 20 September 2019 until the date of the making of her second offer on 14 April 2021, and an additional $18,500 from the date of that second offer until the conclusion of the trial. Hence the total of her legal costs incurred was $225,954 from the date of the first offer. She has exhibited to her affidavit the tax invoices issued by her legal representatives from 20 September 2019 to 14 April 2021. She contends that about “half the costs” were related to financial issues and half for parenting issues, being an amount in the range of $112,977 for financial issues and $112,977 for parenting issues.
The father did not give evidence in his costs affidavit as to the total costs he had paid in the substantive proceedings. It ought to be implied that he elected not to put that evidence before the Court for the costs dispute. He did not appear to materially put into issue the contention of the mother as to about half of the costs she incurred relating to financial matters and the other half as to parenting matters.
The father records that the costs claimed by the mother in her affidavit cover the period of litigation focused on the discrete issue determined by the judgment delivered on 11 March 2020 as to the interests of the father’s brother and mother. He correctly submits that the memorandums of fees or costs invoices attached to the mother’s affidavit contain items related to this discrete issue or as to the parenting issues.
The mother sought that in the order as to costs be fixed. The mother did not give evidence as to what her costs would be if assessed on a party and party basis at scale.
The father does not expressly oppose any fixing of costs. I will assume that the father opposes any fixing of costs and that, by default, it is the father’s contention that any costs ordered ought to be agreed or assessed.
The father concedes that the Court can deal with the issue as to costs “with a broad brush”. He submits that the discretion as to fixing costs must be exercised on the evidence so as to ground any assessment as to costs. I accept each of these submissions.
Rule 12.17(a) permits the Court to adopt a course to fix costs, although it is accepted that it is entirely a matter of discretion. Some guidance as to the appropriate matters to be considered can be found in the judgment of Einstein J in Idoport Pty Limited v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23 (“Idoport”) at [9] where his Honour considered that:
9.For present purposes it seems convenient to commence with the recitation of the principles which inform the exercise of the discretion:
i.the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as “the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation” (All ER page 265)];
ii.the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable;
iii.the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, per Giles JA at [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith [2005] FCA 228; (2005) 215 ALR 788];
iv.a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22];
v.the gross sum “can only be fixed broadly having regard to the information before the Court,”: Beach Petroleum at 124;
[in Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enables fixing a gross sum “only if I apply a much broader brush than would be applied on taxation, but that….is what the rule contemplates.”]
vi. nevertheless, the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120;
vii. in terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No. 2) (1995) 57 FCR 119, put the matter as follows, at [16]:
“On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary “fail safe” discount on the cost estimates submitted to the Court: Leary v Leary at 265….”
The parties have been in litigation over four years since 2018. It is inevitable that the process of assessment of costs will in itself involve considerable further costs and delay. In the circumstances of the father’s failure to put into evidence any reasonable counter proposal I infer that the father will not adopt a reasonable and pragmatic approach to any agreement as to the quantification of costs. This militates to the fixing of costs.
This financial litigation was hard fought. It has persisted for some years. If parties elect to conduct financial litigation in this way they ought to understand that orders for costs will loom on the horizon. Litigants in this Court have an obligation to engage in litigation responsibly. The absence of reasonableness to the positions of the father for the reasons recorded above ought to be reflected in the quantum of the costs ordered.
The father submits that it is necessary for the mother to attempt to quantify what would be appropriate in the circumstances, and that the mother has made no such endeavour to do so. I do not accept that submission. I have considered the amounts claimed by way of the mother for costs and the basis for their calculation. I take into account the father’s submission that parenting costs could be identified in any assessment process and separated from financial costs. I am satisfied taking into account the factors identified in Idoport that it is appropriate to fix her costs as to the property litigation only, commencing with a consideration of the longstanding disclosure failures of the father followed by a proportion of the mother’s costs from the date of the first offer of 20 September 2019 insofar as they related to the financial case. A consideration of the items recorded in the invoices exhibited to the mother’s cost affidavit cast against the scale of costs contained in Schedule 3 to the old Rules and Schedule 3 to the current Rules ground the basis of a calculation so as to make an assessment and order.
I find that I have sufficient information and a sensible foundation for a making of a fixed sum so as to achieve an outcome that is just as to costs.
I am satisfied that in this case in it is appropriate to fix an amount of the mother’s costs of the s 90SM application in an amount of $35,000.
The mother sought to secure the payment of any costs as ordered on the father’s share of the proceeds of sale of the Suburb F property. The father did not make any express submission in opposition to this course. I am satisfied that such course is just in the circumstances so as to ensure there are no further issues, litigation, or costs disputes as between the parties by way of enforcement and will so order.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 19 May 2022
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