Moreton and Moreton (Costs)
[2009] FamCA 51
•5 February 2009
FAMILY COURT OF AUSTRALIA
| MORETON & MORETON (COSTS) | [2009] FamCA 51 |
| FAMILY LAW – COSTS – Application for Settlement of Property – Offers to Settle – Conduct of Proceedings |
| Family Law Act 1975 (Cth) |
| Penfold v Penfold [1980] FLC 90-800 |
| APPLICANT: | Mr Moreton |
| RESPONDENT: | Ms Moreton |
| FILE NUMBER: | BRC | 5963 | of | 2007 |
| DATE DELIVERED: | 5 February 2009 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy J |
| WRITTEN SUBMISSIONS RECEIVED: | Applicant Husband: 09/01/2009 Respondent Wife: 30/01/2009 Applicant in reply: 04/02/2009 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Barry & Nilsson Lawyers Brisbane |
| SOLICITOR FOR THE RESPONDENT: | Anne Murray & Co Solicitors Emerald |
Orders
The wife pay the husband’s costs of and incidental to the proceedings as and from 14 May, 2008 and including the costs of and incidental to the instant application for costs.
Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter is one proper for the attendance of Senior Counsel.
IT IS NOTED that publication of this judgment under the pseudonym Moreton and Moreton (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 5963 of 2007
| MR MORETON |
Applicant
And
| MS MORETON |
Respondent
REASONS FOR JUDGMENT
COSTS
On 19 December 2008 I delivered Reasons for Judgment in a contested application pursuant to s 79 of the Family Law Act, the trial of which took place on 15 and 16 December 2008.
The husband seeks orders that the wife pay his costs of and incidental to those proceedings. As a specific issue, the application seeks to include costs incurred by the husband in responding to a specified report obtained by the wife and filed on 11 December 2008. An order certifying for senior counsel is also sought.
Written submissions in support of costs and in response thereto were ordered on 19 December 2008. Order 13 of those Orders provides that I will deal with the matter of costs in Chambers unless further oral submissions are required by the parties. Neither party has requested the opportunity to make further oral submissions and, accordingly, the application for costs is to be determined in accordance with the written submissions filed on behalf of each of the parties.
Leave was granted to the wife to file an affidavit by her solicitor sworn 19 December 2008. It was ordered that the husband file a responsive affidavit on 9 January 2009. That has been done.
The Family Law Act 1975 (Cth) as amended provides, of course, that in proceedings in this Court, each party shall bear their own costs. (s 117 (1))
In Penfold v Penfold (1980) FLC 90-800 the High Court held (Stephen, Mason, Aicken and Wilson JJ) in a joint judgment, at 75,053-4:
“It is an accurate description of s 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the section is not paramount to s 117 (2). Subsection (1) is expressed to be subject to subsection (2), the former must yield whenever a Judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making an order. Beyond this there is nothing in the subject matter or in the inter-relationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs.
Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s 117 (2) in a “clear case”.
Subsection (2) does not in our view as a matter of law require the Judge to specify the circumstances which justify the making of an order… Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not, in itself, indicate that a Judge has erroneously exercised his discretion toward costs, though it will place an appellate court in the position of examining the circumstances of determining for itself whether the circumstances show that the discretion was erroneously exercised…”
The applicant relies, essentially, upon the terms of an offer to settle made by him.
Offers to settle are, of course, but one of the matters which the Court is instructed to consider in the exercise of the discretion with respect to costs. (s 117(2A) (f)) (See also eg; Robinson v Higginbottom (1991) FLC 92-209 at 78,417 per Nygh J).
Litigation in this Court is expensive and, it seems, increasingly so. The consistent emphasis of the procedures of this Court and indeed the Family Law Rules is to encourage – at every stage of the proceedings – conciliation and the resolution of disputes by agreement.
Further, and to that end, separate from the Court processes and procedures, the Court encourages actively the use of private alternative dispute resolution processes.
Courts fulfil a vital role within our democracy and, as a result, attract significant public funding. Litigation is, therefore, also expensive for the public. The workload of the Court is enormous with many more cases seeking a trial than those which can be accommodated within the resources allocated to it.
Where negotiation – whether formal or informal – fails, for whatever reason, there is, as a matter of practical reality, but one method by which parties can seek to avoid for themselves the cost of litigation. That is by making a written offer to settle demonstrating their bona fides and asserting clearly and unequivocally what they consider to be (relevantly) a just and equitable outcome of the proceedings the subject of their dispute.
Bona fide offers made in this way, seen within the context just described, can be seen as involving significant peril if litigation is pursued in rejection of them. (In the Marriage of Murray (1990) 14 FamLR 311; In the Marriage of Steel (1992) 15 FamLR 5; Pennisi v Pennisi (1997) FLC 92-774, 84,547)
In Browne v Green (2002) FLC 93-115 the Full Court said (at para. 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 is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation on 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.”
The terms of the offer made in this case will shortly be considered in more detail.
In the passage just quoted, reference is made to “adequate knowledge of the parties at the time the offer is made”. The affidavit of the wife’s instructing solicitor earlier referred to seeks to suggest that such information was lacking. That assertion is addressed in the affidavit by the husband’s instructing solicitor earlier referred to.
By reference to the annexures of the latter affidavit (of Mr Steel), I am not persuaded that there is merit in the assertions of recalcitrance, by the husband.
I do not propose, though, to enter upon a detailed examination of the factual assertions and counter assertions. I am by no means persuaded that, even if the assertions as to recalcitrant disclosure have merit, this had any reasonable impact upon the capacity of the wife to consider reasonably the offer of settlement made by the husband.
That offer of settlement was made on 13 May 2008. Attached to it was a schedule outlining the husband’s assertions as to the assets liabilities and superannuation of the parties or either of them.
Despite claims of non-disclosure resulting in an incapacity to properly consider that offer, the wife’s solicitors responded by making an offer of their own on 22 May 2008.
Included in the correspondence outlining that offer, the wife did not accept the joint valuers’ opinion of the major property the subject of the proceedings. In effect, the wife asserted that the pool of assets, liabilities and superannuation of the parties or either of them was different to that which was asserted by the husband.
There is no material before me which suggests that any offers save those as just described were made by either party.
In particular, given what the wife asserts with respect to delay and non disclosure, I note, significantly, that there is before me no evidence of any offer made by her subsequent to the filing of all material upon which the husband relied at the trial and prior to its commencement. Obviously, there was nothing which precluded any such offer being made.
In my opinion this case is entirely distinct from, and no evidence supports the suggestion that the case is akin to, the circumstances confronting the Full Court in Nemeth v Nemeth (1987) FLC 91-944 referred to by the wife in the written submissions made on her behalf.
Before considering the terms of the offers made in detail, it is necessary to refer to the other relevant factors mandated for consideration by s 117(2A).
The wife submits that there is “some financial imbalance between the parties” stemming from the fact that the husband is to retain the grazing property the major asset the subject of the proceedings. However, he also retains various significant debts as was made clear in the Reasons for Judgment.
The husband’s average gross income was also referred to in the Reasons for Judgment. The wife is currently employed as a teacher receiving approximately $80,000 per annum gross. The wife stands to receive a cash payment of $1,100,000 pursuant to the terms of my orders.
There is no impediment to her meeting an order for costs – it can, clearly enough, be met from the cash payment otherwise due to her.
I have already referred to the issue of “conduct”, relevant by reason of s 117(2A)(c).
The affidavit material of the wife at the trial discloses no assertion of lack of disclosure (in the sense referred to in decisions such as Black v Kelner and Weir v Weir).
The affidavit material makes no other assertion in respect of lack of or recalcitrant disclosure of information or documents. No application was made by her in that respect. It was not raised at the hearing. No cross-examination was directed to the husband in respect of it. No adjournment was sought.
The husband asserts in written submissions on his behalf that the wife was eleven days late in filing her affidavit material for the trial and attempted to rely on a report by Mr A. I will refer to the issue of Mr A later.
I am not persuaded that the conduct of either of the parties to the proceedings in the sense referred to in the sub-paragraph should weigh in the exercise of my discretion in relation to costs.
It is not seriously submitted that either of the parties was “wholly unsuccessful”.
The relative degree of each of the parties’ “success” or “lack of success” is, though, in my view, an issue relevant to the consideration of the parties’ respective offers to settle. (see eg Penissi v Penissi above).
It is submitted on behalf of the wife that the potential taxation and realisation costs taken into account by me as a liability ought be relevant to this application because:
“…if for some reason that scenario did not eventuate then the husband will not incur that liability and hence will have received the benefit of paying a lesser sum to the wife than the calculations (excluding the liability) as applied in this case would have resulted.
It is similarly submitted in that respect (each of which are said to be relevant to the Court being able to take into account “such other matters the Court considers relevant” (s 117(2A)(g)) that “if a costs order were to be made against the wife, this may effect whether the overall net result to the wife remains “just and equitable”.”
With great respect, it seems to me that the submission misconceives the distinction between an order for costs and an order otherwise judged to be just and equitable by reference to the evidence available to the court at the time of the hearing of the s 79 application.
A decision was made about the liabilities (and potential liabilities) based on the evidence at the trial, including after any (or the absence of any) cross examination on a particular point.
In respect of the offers to settle, it is first necessary to observe that, at the time each was made, the parties appear to have been working on their own calculations of the net property of the parties or either of them.
In that respect, the schedule attached to the correspondence of 13 May 2008, incorporating the offer of the husband, asserted net assets, including superannuation, totalling $7,421,515.
As earlier observed, the wife at that time appears to have contended for a “pool” different to that contended by the husband. (See the references at paragraph (g) on page 4 of the written submissions in respect of costs made on behalf of the husband, which do not appear to be challenged in submissions by the wife.) It appears that the pool of the assets used by the wife to calculate her offer was $7,642,515.
In my reasons for judgment I found that the property of the parties was largely agreed. Ultimately the net assets of the property of either of either of them within the meaning of s 79 (but including superannuation) was found to be $6,761,869.65. I assessed contributions in the proportions 77.5% to the husband and 22.5% to the wife. An adjustment was made pursuant to s 79(4)(e) in favour of the husband.
At the conclusion of that aspect of my Reasons for Judgment I said:-
“A precise calculation of 20% [to the wife] would see the wife receiving a cash sum of $1,087,377… I propose to order that the wife receive, in addition to the property otherwise received by her the sum of $1,100,000.”
Thus, it can be seen that the wife ultimately received fractionally more than 20% of the net pool of the property available for division.
The offer made by the husband on 13 May 2008 saw the wife receiving $1,500,000.
Of course, at that time, the “pool” of property used to make the offer was greater than that which was ultimately found by me at the trial. Calculations contained in the written submissions on behalf of the husband (unchallenged in the written submissions by the wife), see the wife then receiving a total of cash other assets and superannuation of $1,756,529 pursuant to that offer which equates to 23.66% of the then “matrimonial pool”.
It can be seen immediately, then, that the order made by me sees the wife receive significantly less in dollar terms than that which she would have received pursuant to the offer and more in percentage terms than was ultimately ordered by me.
In that respect:-
“…It is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror… We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded…” (Penissi v Penissi above).
Of as much significance, in my view, is the offer made to settle the action by the wife.
In that offer, the wife received in kind the property and superannuation which had been offered to her by the husband (and that which was ordered by the Court). But she sought in addition a cash payment of $2,950,000. That is, almost $1.5m more than that which was offered by the husband and nearly $2 million more than that which was ultimately ordered by the Court.
As the submissions by the husband point out, using the wife’s then calculation of the “matrimonial pool” saw the husband’s offer as being 22.98% of the then “pool” – also greater than that received by the wife.
The written submissions made on behalf of the husband calculate the offer of the wife as being 41.95% of her matrimonial pool.
Thus, it can be seen that the offer to settle made by the wife was, in percentage terms, more than double that which was ultimately awarded to her by the Court.
The assertions made on behalf of the wife with respect to lack of disclosure previously referred to and the specific submission made in the written submissions for the wife that “… the wife continued with her request for disclosure before she was able to give any considered opinion in regards to the offer being made…” even if it was made out, ought be seen in the light of this stark, and very significant disparity between the two offers made. I repeat though, that I do not consider a claim, or lack of, or recalcitrant disclosure, can be sustained.
The reference in those submissions to the decision in the Queensland Court of Appeal In Castro v Hillery [2003] QdR651 has, in my view, no application to the circumstances before me, because I consider that the wife does not make out a case that she did not have an “informed opportunity to assess the chances of the other side doing better”.
I see the offer made by her as bearing no relationship to any such issue of alleged recalcitrance in disclosure asserted by her.
I repeat that I have no evidence that any further or other offer was made by the wife after 22 May 2008. Axiomatically, the making of an offer in writing does not preclude the making of further or other offers, including an offer made prior to the incurring of costs specifically related to the conduct of the hearing.
Although made in respect to a different consideration, (namely s 117(2A)(e)), I mention in the current context submissions made on behalf of the wife that:
“…both parties are not so much asserting their rights but are making different contentions as to which way a difficult situation be resolved in the context of this subsection.”
“It is perhaps, worthy to note the observations made by [me] regarding the great variations in property entitlement awards made in farming cases and the comments referred to of Watson J in V v G (1982) FLC 91-207 at 77,096 whereby the difficulty of discerning specific principles that divide how cases of this kind should be decided was averted to. No doubt, the wife faced these same difficulties when endeavouring to assess her own entitlement and hence, she could not be criticised in the circumstances for “chancing her arm” at trial. As [I] also commented in the judgment, the “deceptively simply proposition” about what cash sum ought the husband pay to the wife was “clouded by significant matter…” namely the overall justice and equity of the orders.” [footnotes omitted].
There is no doubt that the wife, just as with any other litigant, is entitled to “chance her arm” by proceeding with a matter to trial. The issue is whether the husband ought be burdened with meeting his costs of her doing so.
The breadth of the discretion inherent in applications pursuant to s 79 has been commented on by courts of the highest authority. This is a profoundly important reason why negotiation and, specifically, the making of reasonable offers, ought be pursued and pursued assiduously.
The fact that the court’s judgment (as distinct from what each of the parties might consider is just and equitable) is, subject to successful appeal, determinative, ought to continuously direct the parties’ minds to the makeup of reasonable settlement proposals.
It is precisely to avoid one party paying for the other party “chancing their arm” in circumstances where, ultimately, a court finds that the “chanced” position is unreasonable, that the court’s discretion with respect to the awarding of costs can be enlivened and precisely why the making of offers to settle is an important component in the exercise of that discretion.
Balancing all of the s.117(2A) considerations which I consider to be relevant in relation to the exercise of my discretion, I consider that the wife should pay the costs of the husband of and incidental to these proceedings as and from 14 May 2008 in such sum as might be agreed between the parties or otherwise as assessed.
The Report of Mr A
In submissions filed on behalf of the husband an order for the costs of responding to Mr A’s report is sought in circumstances where, otherwise, an order for costs is not made in the husband’s favour.
The submissions are framed in these terms presumably because the costs of responding to Mr A’s report would be included in an order for costs in the husband’s favour “of and incidental to” the proceedings.
However, the written submissions filed on behalf of the wife might be seen as submissions in favour of the exclusion of any costs in responding to Mr A’s report from any “general” order for costs. Accordingly, I propose to deal briefly with this matter separately.
At the commencement of the hearing the entire report by Mr A was objected to on a number of bases.
First, a joint single expert had been ordered to provide evidence of the value of the rural property the subject of the proceedings. No application was made for permission to adduce adversarial expert evidence (as required by Rule 15.52). It is submitted that no special reason (as required by Rule 15.49) is demonstrated that would have justified permitting the respondent to adduce that evidence.
It is pointed out that the report (in an unsigned and facsimile form rendering some of the report illegible) was forwarded to the applicant’s solicitors by facsimile at 11.06am on Thursday 11/12/08, only one clear day before trial contrary to paragraph 6 of the orders made on 26 August 2008. Prejudice to the applicant was, then, a second basis of objection to the report.
In addition, objection was taken on the basis that :-
“His only relevant academic qualification being a three year diploma course in agriculture, purports to express numerous opinions, which on the face of his qualifications and experience set out in his report, he [was] not qualified to give.”
A further submission was made pursuant to s 135 of the Evidence Act in respect of the rejection of the report.
Ultimately, after some discussion at the start of the trial, I was advised that reliance upon the report was not being pressed. It is said in the respective submissions of the parties in respect of costs that this resulted from discussions between counsel prior to the hearing.
A number of submissions are made in the written submissions by the wife, none of which, with respect, seem to me to have any relevance to the inclusion of the costs of responding to Mr A’s report.
For example a submission is made that the report didn’t cause or result in any undue waste of time at the hearing. Similarly it is submitted that “the report was merely commissioned by the wife to assist in obtaining an informed position and in this regard the substantive costs of the report are solely borne by the wife”.
It seems to me, with respect, that these submissions miss the point. The report was filed and flagged as intended to be relied upon up to the very moment that pre-trial discussions occurred between counsel prior to the commencement of the trial.
In that respect, I should say that the list of documents intended to be relied upon by the wife included the document. As I indicated at the commencement of the hearing, I did not read the report because, a single expert report having been obtained, I anticipated that an objection to it might be taken at the commencement of the hearing.
However, I assumed, and it seems to be me the husband was entitled to assume, that reliance was being placed on the document until discussions resolved otherwise and, as such, he and his solicitors were entitled to do such reasonable things as might be required in order to meet that evidence including, as occurred, the preparation of detailed objections to its receipt.
It seems to me that the costs of meeting the report of Mr A should properly form part of the party and party costs of the husband of and incidental to the proceedings. I make it clear that those costs ought not be excluded from any such assessment.
Senior Counsel
The order sought by the applicant husband seeks certification for senior counsel.
That order is opposed and in that respect it is submitted:-
i.although important to the clients, the case was not sufficiently more important than other matters of greater complexity when dealing with the alteration of property interests to merit the retention of senior counsel over that of junior counsel;
ii.the matter was dealt with by all parties in the your step approach adopted by the Family Court;
iii.the fact that the husband’s solicitors instructed senior counsel was entirely a matter for the applicant and it should not in any way be oppressive for the wife
The reasonableness or otherwise of engaging senior counsel ought, in my view, be determined by reference to those issues apparent on the face of the material or otherwise evident, at the time when counsel was engaged for the hearing.
Prior to the resolution of significant aspects of the property pool and the issue relating to Mr A, it seems to me that issues of reasonable complexity were involved in this case.
It was a “farming case” that involved potential arguments with respect to a number of aspects, not the least of which were potential taxation and realisation costs. The “pool” of property (as contended for) was in the region of $6-7m.
As just outlined, there was a very significant disparity between the positions of each of the parties (amounting to some $1.5m and some 20% of the pool). A result consistent with that contended for by the wife would have seen the husband lose property owned and worked by him for many years prior to the commencement of the instant relationship, and for some time since its cessation, and which the husband sought to transfer to members of his family upon his death.
Senior counsel appeared at all times without a junior. It is not suggested that involvement of senior counsel in any way protracted or prolonged the proceedings.
In all of the circumstances I consider it reasonable to certify for senior counsel, and I do so.
For those reasons I will order that:
(1)The wife pay the husband’s costs of and incidental to the proceedings as and from 14 May, 2008 and including the costs of and incidental to the instant application for costs.
(2)Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter is one proper for the attendance of Senior Counsel.
I certify that the preceding eighty-seven (87) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy
Associate:
Date: 5 February 2009
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Costs
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Procedural Fairness
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