Naczek and Dowler

[2009] FamCA 304

FAMILY COURT OF AUSTRALIA

NACZEK & DOWLER [2009] FamCA 304

FAMILY LAW – PROCESS AND PROCEDURE – Costs

Family Law Act 1975 (Cth)

Black and Kellner (1992) FLC 92-287
Briese and Briese (1986) FLC 91-713
Carmel-Fevia and Fevia [2009] FamCA 9
CDJV v AJ [1998] HCA 67; 197 CLR 182
Kelly and Kelly No 2 (1981) FLC 91-108
Oriolo (1985) FLC 91-653
Weir and Weir (1993) FLC 92-338

APPLICANT: Mr Naczek

RESPONDENT: Ms Dowler

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER: MLF 1222 of 2006

DATE DELIVERED: 21 April 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 21 April 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR ST JOHN SC

SOLICITOR FOR THE APPLICANT: WESTMINSTER LAWYERS

COUNSEL FOR THE RESPONDENT: MR NORTH SC with Mr WOOD

SOLICITOR FOR THE RESPONDENT: LANDER & ROGERS

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: VICTORIA LEGAL AID

Orders

1. That by 4.00pm on 15 May 2009, each party provide to the other a financial statement that complies with Chapter 13 of the Family Law Rules 2004.

2. That by 20 May 2009, each party have the opportunity to request from the other such documents as may corroborate the items in the financial statement referred to or clarify any uncertainty arising there from.

3. That by 4.00pm on 5 June 2009, each party make available for inspection such documents requested as required by paragraph 2 of these orders provided that those documents are within that party’s possession or control.

4. That by 4.00pm on 25 May 2009, the wife file and serve any application in a case seeking costs supported by an affidavit of evidence upon which she intends to rely together with any submissions she wishes taken into account.

5. That by 4.00pm on 1 June 2009, the husband by way of reply, file and serve any response to the wife’s said application together with similar affidavit material and any submission upon which the husband relies.

6. That by 4.00pm on 8 June 2009, the wife file and serve any brief response to the affidavit filed by the husband.

7. That the issues of:

   (a)       whether it is appropriate to make an order for costs; and

   (b)if it is so appropriate, whether the order should be made referring the matter to a registrar for an assessment or the quantum of costs to be otherwise fixed,

   to be heard and determined in chambers.

IT IS NOTED that publication of this judgment under the pseudonym Naczek & Dowler is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1222 of 2006

MR NACZEK

Applicant

And

MS DOWLER

Respondent

INDEPENDENT CHILDREN’S LAWYER

REASONS FOR JUDGMENT

1. On 28 November 2008 I made orders relating to children’s proceedings. 

2. On 11 February 2009, at the request of the parties, I conducted a hearing about finalising those parenting orders in so far as they related to the time that the husband was to spend with the children. 

3. At that hearing, the wife raised the question of a costs application she wished to make arising from the outcome of the trial but she also foreshadowed an application for costs that she might incur in relation to an appeal which has been lodged against the November orders.  It is more appropriate in the circumstances that any application of the latter nature be heard by a Full Court.

4. The outcome of the hearing on 11 February 2009 was that I made orders as follows:

   1.That the Independent Children’s Lawyer file any submission upon which she intends to rely by 4 March 2009.

   2.That the husband file any submission upon which he intends to rely by 11 March 2009.

   3.That the wife file any submission upon which she intends to rely by 18 March 2009.

   4.That all parties have liberty to apply in respect of any dispute about information to be provided that will form the basis of the respective submissions.

   5.That if the wife proposes to make any application for costs of the trial or for future litigation funding relating to the husband’s appeal, then subject to any determination by the Full Court or one of its judges to the contrary, the wife provide to the husband before 11 March 2009 the precise details of the proposed costs orders to be sought.

5. The Independent Children’s Lawyer filed her submissions on 6 March 2009.  The husband filed his submissions on 17 March 2009.  The wife to date, has not filed anything.

6. I had the matter relisted on 21 April 2009.  The delay in that listing was due to my absence interstate.

7. The wife’s position as put by Mr North SC was that before seeking an order for costs, the wife wanted to know the husband’s financial details.  The husband’s position as put by Mr St John SC was that the husband should not have to file material at this stage or if he had to, it should be limited. 

8. Mr St John said that as the wife had not filed her submissions concerning the parenting orders, I should determine those matters on the material that had been filed.  It transpires however that on 31 March 2009, the solicitor for the husband wrote to the solicitor for the wife and said inter alia:

   We note with concern that the mention is more than three weeks away, given your intention not to comply with the orders of 11 February 2009 and to file no submissions on behalf of your client until the issue of financial disclosure is determined.  The application you foreshadow should have been commenced well before this.  His Honour’s orders were made almost seven weeks ago.

9. That letter indicated that there had been discussions between the parties and their polarised positions were clear.  In so far as the wife saw the costs issue and the parenting issues as inextricably bound up, I disagree.

10. Accordingly, on 21 April 2009, I ordered the wife to file her parenting issues response by Friday 24 April 2009.  I intend to deal with the matter immediately thereafter.

11. I turn then to the issues of the proposed cost application or more importantly, the pursuit by the wife of financial information from the husband.

12. Mr North said that:

    ·The wife had foreshadowed her costs application;

    ·The husband is not a citizen of Australia but here on a temporary visa;

    ·There had been no financial disclosure by the husband in these proceedings and the last time the wife received any financial detail of substance was in the property proceedings in the United Kingdom and that was sometime in about 2006;

    ·Recently the husband’s employment had been terminated but the wife did not know the terms and conditions;

    ·The wife had filed financial statements on two occasions and it was appropriate for her to file updated documents as well as to set out details of the legal costs rendered, paid and unpaid;

    ·It was appropriate for the husband to file a financial statement including setting out where the assets were located together with details of his legal fees paid and the sources of those funds.

13. Mr St John in relation to costs said:

    ·He did not understand the basis of the wife’s costs application and particularly whether it was put on the basis of a simple point of financial disparity between the parties;

    ·The appeal in relation to the property matters in the United Kingdom was pending and likely to be heard in November 2009 and the outcome of that could alter the financial position of either party;

    ·The husband did not know the quantum of the proposed costs that the wife was pursuing;

    ·The wife was seeking the information for another purpose other than this application;

    ·The husband had provided documents about the termination of his employment but they had been made available to the wife’s United Kingdom lawyers rather than to the lawyers in these proceedings;

    ·The preparation of a financial statement along with any other setting out asset location was an expensive exercise to undertake;

    ·The wife had delayed in bringing her application (as referred to in the quote from the letter above).

14. Mr St John said that if I was to order the provision of financial information, it ought to be limited.

15. Mr North said that the husband would be cognizant of the fact that the wife’s costs were high having regard to the fact that the hearing itself took 15 days and there were an extraordinary number of interlocutory hearings.  Mr North said that the wife had spent $450,000 and there was an excess of $800,000 still to come. 

16. Mr North said there was no evidence that the information was being pursued for any improper purpose. Mr St John was clearly referring to the foreshadowed application for security of costs relating to the appeal. 

17. The documents in relation to the termination of the husband’s employment although provided to the solicitors for the wife in London, could not be used for these purposes as such for reasons which should be clear. The issue of costs in family law proceedings is governed by s 117 of the Family Law Act 1975 (Cth) (“the Act”) and presupposing the wife can satisfy me that I should depart from the rule that each party should pay their own costs and, as part of the factors to be considered in s 117(2A), I would have to examine material as to the financial circumstances of each party.

18. Section 117 requires a court to “have regard to” a series of matters but the last of those is “such other matters as the court considers relevant”. That statement not only reinforces the discretionary nature of the exercise but how wide it is.

19. No guidance is otherwise given as to how the sub-section is to be interpreted nor specifically is any reference made to what documents or evidence should be presented and relied upon.  In a financial case, there is normally a plethora of material made available but in a parenting case, the opposite is true.  In some cases, one might be able to work on a presumption that a wealthy person has capacity to meet a costs order if the proposed order was not significant.  There have been cases where the very disparity of financial circumstances between the parties is a basis to seek and obtain an order for costs (see Kelly and Kelly No 2 (1981) FLC 91-108; Carmel-Fevia and Fevia [2009] FamCA 9.

20. Those two situations do not arise here because the wife says she does not know what the husband’s financial position is.

21. There are no authorities of which I am aware that provide assistance.  Cases such as Oriolo (1985) FLC 91-653, Weir and Weir (1993) FLC 92-338, Black and Kellner (1992) FLC 92-287 were all about hearings where parties had not made proper disclosure and the Court found it difficult to make objective judgments about fundamental issues such as the underlying wealth of the parties. There is something however to be said for what Smithers J said in Briese and Briese (1986) FLC 91-713 which was referred to with approval by the Full Court in Oriolo.  What Smithers J said was:

    Although the case relates to quite different circumstances, I believe that the conclusion in the House of Lords in the case of Livesey v. Jenkins (1985) 1 All E.R. 106 is apposite, namely that in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. In that case it was made clear that full and frank disclosure was required as a matter of principle in the light of the fact that it was the duty of the Court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of a discretion.  This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required.  (emphasis mine)

22. As Smithers J pointed out, in addition to the parties being in a position to understand the financial position of each other, it was the duty of the Court to make a decision based upon the exercise of discretion and as such, the documents had to be disclosed which would provide details of all “material facts”.  The emphasis is on the discretionary nature of the judgment and as such, the Court must be fully apprised of all of the relevant information.  In CDJV v AJ [1998] HCA 67; 197 CLR 182 Gaudron J (although in the minority concerning the outcome of the proceedings) made the observation that:

    It is well settled that if a discretionary power is conferred by a statute which is silent as to the matters which govern its exercise, the discretion is confined only by the subject-matter with which the legislation is concerned…where a general and unconfined discretion is conferred on a court, it is also governed by the requirement that it be exercised judicially and consistently with the judicial process.  It is also well settled that, where a power is granted to a court, it is not to be confined by reference to matters which are not required by the terms of the statutory provision by which it is conferred or the context in which it appears.

23. Section 117 guides a court in relation to the object of the statute but then leaves the discretion extremely wide as I have pointed out above. The discretion is therefore unconfined except in relation to the purpose of s 117 namely to provide an order for costs only in circumstances where the Court feels that it is justified in departing from the rule that each party should pay their own costs. It is well understood that costs are not intended as a punishment but rather to compensate a litigant from having to participate in proceedings brought by or continued by, the other litigant. To ensure that a court has all of the necessary information to determine the question bearing in mind the scope to which I have referred, a financial statement predominantly assists because that identifies various categories of financial areas such as capital assets, liabilities, income and expenses. These identify in a general way the issues that a court has to contemplate when, having determined that an order for costs is justified, whether it should still be made. The categories also assist in relation to determining whether a costs order should be made simply on the basis of the disparity of financial positions. Mr North indicated that the wife was not prepared to commit herself to a position at this stage until she had seen that material.

24. More specific documents than a financial statement which expand upon the categories in the financial statement, assist the Court in knowing the quantum of specific assets such as bank accounts, the value of various parcels of land and items such as motor cars.  Notwithstanding some concerns expressed about the costs of preparing a financial statement, it is a document which most parties would be able to complete by themselves unless there were complex trusts, corporations or superannuation funds.  One would expect that normally those sorts of complex situations would have the benefit of professionals having access to that information anyway. 

25. Once the financial statement is filed, it may in some circumstances be appropriate to call for the supporting documents if it can be shown that there is a basis to say that the generalisations in the financial statement are either vague or not accepted and need to be corroborated. If that situation arises, a good description of what should be made available is the documents that would meet the description in Rule 13.04 of the Family Law Rules 2004. If the financial statement does not sufficiently explain the various categories, each party should produce any available documents that could be used to corroborate the figures. Sadly, in a case such as this where there is no trust between the parties in a poor relationship, it is understandable that each would be unlikely to accept the other party’s word. That is not a basis to pursue relentlessly every corroborating document but it is a basis upon which I would contemplate giving each party an opportunity to seek corroborating documents if they could satisfy me that the financial statement needs to be corroborated in some particular way.

26. In this case, I do not find that it is premature to require an exchange of information before any formal application for costs is made.  It may be that an exchange will encourage the parties to desist from applying.  Alternatively, it may give rise to the Kelly and Kelly type argument.  I see no reason why the wife’s application cannot be filed before all or any specific requested material, other than the financial statement, is made available.  I propose to push the matter on to enable the conclusion of issues so that in the event that the appeal is to proceed, all matters are before the Full Court.

27. Because the husband is not a citizen of Australia, the wife is entitled to know the location of any assets.  Similarly, the husband is entitled to know where the wife has assets such as for example her house and banking or trust funds.  Each party is entitled to know the costs details paid by the other and from what source those payments were made.  Each is entitled to know what costs are outstanding and unpaid.

28. Whilst the United Kingdom appeal proceedings are still pending, and the parties’ financial positions may be different as a result of its outcome, commonsense dictates that the judges of that court would take into account if only for enforcement purposes of their orders, just what each party has at the time of that hearing.  Accordingly, it is not appropriate to take into account that the financial position may change marginally or substantially in the future.  The court must take the parties as they see them at the particular time.

29. Senior counsel for the husband said that his client was concerned about the wife using this information-gathering process for other purposes.  He clarified that as I have indicated to refer to the security for costs application for the appeal before the Full Court.  Even if that were so and there is no evidence at all of it, I would have thought that if the Full Court thought it appropriate to determine any such application, it would be likely to contemplate the same sorts of disclosure that I am contemplating.

30. As for the ambit or quantum of the wife’s claim, it has clearly horrifyingly been put at $1.25 million for the wife and $550,000 for the husband.  Those are simply general terms at this stage.  However, this was a significant trial with many interlocutory hearings and in the early stages, voluminous affidavits.  Each saw the matter as important enough to have senior counsel attend virtually all hearings.  Significant costs would have been inevitable for both sides and neither party could express surprise at the sorts of costs of the other.

31. Under the circumstances, I propose to make orders that the parties file a financial statement that complies with Chapter 13 of the Rules but that there be an opportunity thereafter for each party to seek corroborating documents if those items in the financial statement are not sufficiently clear for them to be accepted. Each party will need to be conscious of the fact that any unreasonable request would place them at risk of a costs order themselves.

I certify that the preceding Thirty One (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  24 April 2009