Murray & Murray (No 6)

[2020] FamCA 223

FAMILY COURT OF AUSTRALIA

MURRAY & MURRAY (NO. 6) [2020] FamCA 223

FAMILY LAW – COSTS – Where there were no special or unusual features as would attract an order for indemnity costs – Where the husband’s asserted impecuniosity is not a bar to the making of a costs order – Where, taking into account all considerations pursuant to s 117(2A) Family Law Act, it is just to make a partial party/party costs order– Where an order is made for the repayment by the husband of half valuation fees.

Family Law Act 1975 (Cth) s117

Bhatt & Acharya (Costs) [2017] FamCAFC 71
Murray & Murray (No. 3) [2019] FamCA 846
Lenova & Lenova (Costs) [2011] FamCAFC 141
Muldoon & Carlyle (2012) FLC 93-513
Munday v Bowman (1997) FLC 92-784

APPLICANT: Ms Murray

RESPONDENT: Mr Murray

FILE NUMBER: SYC 5665 of 2014

DATE DELIVERED: 1 April 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 25 March 2020

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Pearson Emerson Meyer

SOLICITOR FOR THE RESPONDENT: Litigant in person

Orders

1. The husband pay to the wife at the same time as the payment referred to in order 2, one half of payments made directly to valuers by the wife, one half being  in the sum of $32,064.

2. The husband pay 70% of the wife’s legal costs and other disbursements, of and incidental to these proceedings on a party/party basis as agreed or if not agreed, as assessed, within 28 days of such agreement or assessment.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Murray & Murray has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5665  of 2014

Ms Murray

Applicant

And

Jonathan Murray

Respondent

REASONS FOR JUDGMENT

Introduction

1. The wife filed an Application in a Case on 16 December 2019 in which she seeks an order that the husband pay costs of the proceedings on an indemnity basis which, in her supporting affidavit filed 16 December 2019, she quantifies in the sum of $383,553.90.

2. The wife sought and obtained leave to amend her application to seek, in the alternative, an order that the husband pay the wife’s costs of and incidental to these proceedings on a party/party basis as agreed or if not agreed, as assessed, within 28 days.

3. The wife’s application is in effect to obtain an order for costs not only for the substantive property proceedings but for all applications including all interlocutory applications. Ultimately the issues of child support and maintenance were settled by agreement.

4. The husband in his Response to an Application in a Case filed 30 January 2020, seeks that the wife’s Application be dismissed and he relies upon his affidavit filed 30 January 2020.

5. The wife initiated an application for final property settlement on 10 September 2014. For various reasons, including the husband’s involvement in a criminal investigation and delays otherwise referred to, the matter was not resolved at first instance until a final property settlement order was made on 18 November 2019 after a final hearing over seven days.

The law and relevant principles

1. Section 117(1) Family Law Act 1975 Cth (“the Act”), provides that each party to proceedings shall bear his or her own costs. Section 117(2) of the Act provides that if the court is of the opinion that there are circumstances that would justify it in doing so, the court may, make such order as to costs as the court considers just. Section 117(2A) provides that in considering what order (if any) should be made under ss (2), the court shall have regard to a number of considerations.

Indemnity costs

1. In relation to the wife’s application for indemnity costs, the Full Court in Muldoon & Carlyle (2012) FLC 93-513 said:

   115. It is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated that there are exceptional circumstances, such that the usual order for party-party costs should be departed from (Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225; Kohan and Kohan (1993) FLC 92-340; Munday v Bowman (1997) FLC 92-784; Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; Limousin & Limousin (Costs) (2007) 38 Fam LR 478; Fennessy & Gregorian (2009) FLC 93-399; D & D (Costs) (No 2) (2010) FLC 93-435, Stephens v Stephens and Anor (2010) 44 Fam LR 117).

2. Holden J in Munday v Bowman (1997) FLC 92-784 drew from the decision of Sheppard J the following examples:

   (a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts. …

   (b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud. …

   (c)Evidence of particular misconduct causing loss of time to the court and to other parties.…

   (d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions. …

   (e)An imprudent refusal of an offer to compromise.

Impecuniosity

1. As to whether the impecuniosity of a party is a bar to making a costs order, in Lenova & Lenova (Costs) [2011] FamCAFC 141, Bryant CJ, Coleman and Murphy JJ said at [12]:

   … a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.

2. In Bhatt & Acharya (Costs) [2017] FamCAFC 71, Thackray, Aldridge and Watts JJ said at [20]:

   … impecuniosity is, of itself, no bar to a costs order, otherwise an impecunious litigant would be free to pursue meritless applications at will: Lenova & Lenova (Costs) [2011] FamCAFC 141.

Section 117(2A) considerations

(a) The financial circumstances of each of the parties to the proceedings

1. The overall division of assets based upon the balance sheet settled in the Reasons for Judgment was that the wife would receive net assets to the value of $1,483,044 (73.2 per cent) and the husband would receive $543,372 (26.8 per cent).

2. The wife was given the opportunity of attempting to retain the former matrimonial home at Suburb C where she lives with the children on the basis that she discharged the current mortgage on that property but was otherwise to retain the equity in that property of about $1,085,258.

3. The wife says that her financial circumstances have not significantly changed from those set out in her financial statement sworn 29 August 2018, save for funds at item 37 of her financial statement being depleted to meet mortgage and living costs; applying $24,000 of the $75,484.46 received from H Firm pursuant to order 4 towards outstanding legal fees, mortgage repayments and living costs for herself and the children.

4. The wife also asserts that she has incurred an additional debt to her father in the sum of approximately $48,000 to meet legal fees. 

5. The husband asserts that the only available assets that he has are worth $20,642 and in his affidavit in support of his Response says that the figure of $543,372 was illusory because items in the balance sheet credited to him variously:

   a)Do not have the value asserted

   b)Are addbacks which have been expended or are not readily realisable

   c)Are minority interests and are not readily realisable

   d)Are monies which financial institutions have frozen

   e)Is a rental bond associated with the husband’s accommodation

   f)Is held in superannuation

6. Further the husband says that he has a total of current liabilities in the approximate sum of $982,203 including a liability for tax in the sum of about $175,000; personal loans in the sum of $454,000 and legal fees of $200,000. These liabilities have been excluded from the balance sheet in the Reasons for Judgment.

7. The husband asserts that he does not have the financial capacity to meet any costs order and that the judgment has not afforded him access to any assets that are capable of meeting any costs order. The husband in oral submissions also asserted that he was on the cusp of bankruptcy.

8. The husband asserts that his income and expenses remain approximately the same as set out in his financial statement filed 4 September 2018 subject to a reduction in the rent he is paying from $1,850 per week to $1,250 per week. In oral submissions, the husband reasserted his income was only $150,000 per annum and that this may be reduced owing to the effect on his employer of the COVID-19 virus.

9. In respect of the husband’s reliance upon his financial statement at trial, at [401] of the Reasons, when considering the husband's earning capacity I found that:

   I am unable to find that the husband's level of income, as stated in his Financial Statement, is a true indication as to the benefits he receives from his current agreement with Mr EE… In the end I was unable to make any assessment as to the husband's real current earning capacity. It is certainly higher than $150,000 as asserted by the husband. Whether or not it is over the million he previously earned at H Firm is difficult to say. On balance, I find it is at least likely to be in the vicinity of $750,000 per annum…

10. In those circumstances, it is submitted on behalf of the wife that the Court cannot have confidence in the accuracy of the information provided by the Husband as to his current financial circumstances, provided by way of Affidavit sworn by the Husband on 30 January 2020 and that it is more likely than not that the Husband is in a much stronger financial position than he discloses. 

11. At [179] of the Reasons, I found that:

    I am not confident that the assertions made by the husband in his most recent Financial Statement reflect the husband’s true financial circumstances. This is a case which invites the approach taken by the Full Court in Black & Kellner and Weir & Weir. Accordingly, I do not have to be too careful in making any assumptions or drawing any inferences in the husband’s favour as to what are his actual financial circumstances.

12. Even if the husband is currently in a position of financial stress, his skills and consequent earning capacity will remain available to him over time. Current assertions by him of impecuniosity are, of themselves, no bar to a costs order.

(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

1. Neither party is in receipt of assistance by way of legal aid.

(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

1. The wife submits that the conduct of the husband during the substantive proceedings has made this case more difficult, lengthy and more expensive than it should have been for the wife to conduct.

2. The wife submits as a result of the husband's conduct of the proceedings, including his failure to disclose, the wife incurred substantial additional legal fees, which would otherwise not have been necessary but for the husband's conduct. At [168], [169] and [173] of the Reasons, the following findings were made:

   168.The wife issued a significant number of subpoenas. She discovered many relevant documents which the husband had not provided to her.

   169.Significantly, the wife discovered a number of bank statements which the husband had not provided her which showed significant cash deposits being made into those accounts. The husband did not put into evidence documents which would explain where the significant amount of cash that came through accounts that he controlled ended up. He simply asserted that he had not benefited from any such sums.

   173.Whilst the husband might claim that he eventually produced some significant primary documents, there are examples where the wife’s requests had not been complied with, in one case for four years and in another case for two years and as these reasons otherwise demonstrate, there was still a considerable fog over the husband’s financial circumstances at the time of the trial. 

3. At [17] of the Reasons, there is a long list of examples where the husband was found to be evasive.

4. On the other hand, the husband submits that the fact that the wife had lawyers working for her on and off during the proceedings, meant that the costs she incurred were exacerbated by the fact that they had to re-acquaint themselves from time to time with the progress of the proceedings. He also asserts that the wife’s lack of legal representation extended the time the proceedings took to complete. However as mentioned during submissions, the fact that the wife substantially represented herself during the proceedings meant that she is not claiming the costs of legal representation during substantial periods of the litigation, including the appearance of lawyers during the final seven day hearing.

(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court

1. The wife submits that throughout the proceedings the husband repeatedly failed to comply with orders of the court, which lead to further interim applications and enforcement proceedings and additional costs being incurred by the wife. At paragraphs 29 to 33 of her affidavit sworn 15 December 2019, the wife sets out examples, of the husband failing to comply with court orders.

2. At [177] of the Reasons, I observed: 

   I also take into account the history of the litigation and the husband’s significant non-compliance with orders. The husband’s conduct led to an order having to be made on 3 August 2015 for monies owed to the wife by way of spousal maintenance and child support to be paid directly from H Firm when the husband’s profit share payments fell due. 

3. The husband’s failure is illustrated by notation 2 made 23 August 2016:

   The husband has one final chance to comply with orders that have been made previously relating to him filing evidence for the trial. He has failed to comply with at least orders made on 21 March 2016 and 26 May 2016 to do so. On 26 May 2016 he gave the court an assurance that he would be able to attend to it within a three week period.

4. I accept the husband’s conduct resulted in:

   a)Protracted and extended litigation and a significant number of interim hearings before the court, substantially increasing the wife's costs;   

   b)Lack of full and frank disclosure such that the court was unable to make a final determination regarding the quantum of matrimonial assets;

   c)Failure to disclose in a timely manner, or at all, which resulted in increased costs of the joint accountant; a vacated final hearing date and duplicating legal fees for trial preparation;

   d)A further hearing to adduce new evidence was required after the Final Hearing due to the Husband’s failure to make full and frank disclosure.

(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings

1. The wife asserts she was substantially successful in her application, save that:

   a)The court granted her 6 months, not 12 months (as sought by her) to refinance the mortgage secured over the Suburb C Property;

   b)The Court did not make adjustment orders in respect of I Pty Ltd.

   I am unable to accept that assertion. The wife did not get orders as sought in her case outline. As noted at [4] of the Reasons, the wife contended that she should receive 100 per cent of the pool of assets identified on her version of the balance sheet. That is not the result she achieved although on the husband’s case, she in reality received the bulk of the available known assets.

2. In general terms, the Husband sought that the Suburb C property be sold, the mortgage discharged and there be a distribution of the net assets between the parties 45% to the husband and 55% to the wife. The wife contends that, in broad terms, the husband was wholly unsuccessful in achieving that outcome in the proceedings and in broad terms, that is accurate.

(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

1. Whilst the husband referred to in oral submissions to an offer made by him, the husband does not give any evidence of any offers made.

2. The wife says that she attempted to resolve the matter with the husband throughout the proceedings but his failure to disclose and engage in settlement discussions meant that a resolution was unable to be reached.

3. The wife specifically refers to two written offers. The first on 12 July 2017 was in an email that the wife wrote to the husband. It proposed that the matter be settled on the basis that the home in Suburb C be transferred to the wife unencumbered. As a result of the property settlement order, the wife did not receive the Suburb C property unencumbered but received that property subject to a mortgage of $1,164,742. Accordingly this offer does not assist the wife.

4. However in a letter dated 30 May 2018 forwarded by the wife’s then lawyers by email to the husband’s lawyers, an offer was made that the matter be settled on the basis that the Suburb C property be transferred to the wife and that she would discharge the mortgage on the property (see Tab 7 of the exhibits to the wife’s affidavit). The wife also in that offer sought $20,000 from the superannuation fund and retention of funds then currently quarantined in the S Bank accounts. The wife proposed no order for spousal maintenance. This offer also proposed that the husband would retain all interests in all assets that he otherwise controlled and that he would have his “high earning capacity” available to him to rebuild his assets. The offer of 30 May 2018 is substantially similar to the orders that were ultimately made in the matter and is significantly relevant to the wife’s application for costs in respect to costs incurred by the wife from 30 May 2018 onwards.

(g) Such other matters as the court considers relevant

1. There are no other relevant matters.

Conclusion

1. Taking all of those matters into account, it is just for an order as to costs to be made in wife’s favour, in relation to the substantive proceedings for a property settlement order.

2. The facts do not disclose any special or unusual feature in this case such as would attract an order for indemnity costs. The costs order should be on a party/party basis.

3. Unfortunately the wife’s evidence does not allow for a fixing of her costs on a party/party basis which would have been preferable given the unfortunate length of this litigation. Consequently an order in the alternative form as sought by the wife shall be made.

4. Dissecting out matters relating to child support, spousal maintenance and enforcement would be tedious on a costs assessment. Instead, making a general estimate, I shall award the wife 70% of her overall legal costs in the proceedings, including interim applications and 70% disbursements other than those referred to in the next paragraph.

1. At page 52 of her affidavit filed 15 December 2019, the wife sets out valuation fees she has paid in the amount of $64,128. Those valuation fees were incurred prior to the wife’s offer on 30 May 2018. Those valuation fees should be shared equally meaning that the husband should reimburse the wife the sum of $32,064 at the same time the payment of the other costs becomes due.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 1 April 2020.

Associate: 

Date:  1 April 2020