NIKAS & ANTHIS (No.2)
[2015] FCCA 2309
•27 August 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NIKAS & ANTHIS (No.2) | [2015] FCCA 2309 |
| Catchwords: FAMILY LAW – Costs – Applicant seeks an order for the Respondent to pay the Applicant’s costs of the proceedings from a specified time – where the Applicant made an offer of settlement – where the offer of settlement is similar to the final determination of this Court – factors under s.117(2A) do not warrant such an order and each party to bear their own costs of the proceedings. |
| Legislation: Family Law Act 1975 (Cth), ss.117(1), 117(2), 117(2A),117(2A)(a),117(2A)(c), 117 (2A)(f), 117(2A)(g) |
| Calderbank v Calderbank [1975] 3 All ER 333 Penfold v Penfold (1979 – 1980) 144 CLR 311 Pennisi & Pennisi (1997) FLC 92-774 |
| Applicant: | MR NIKAS |
| Respondent: | MS ANTHIS |
| File Number: | MLC 10460 of 2013 |
| Judgment of: | Judge Bender |
| Hearing date: | 28 April 2015 |
| Date of Last Submission: | 14 August 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 27 August 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr O’Connor |
| Solicitors for the Applicant: | Aaron Eidelson |
| Counsel for the Respondent: | Mr Hall |
| Solicitors for the Respondent: | Barbayannis Lawyers |
ORDERS
The Husband’s application for costs in these proceedings be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Nikas & Anthis (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 10460 of 2013
| MR NIKAS |
Applicant
And
| MS ANTHIS |
Respondent
REASONS FOR JUDGMENT
Introduction
The judgment in relation to property proceedings between the parties was handed down on 17 July 2015.
Having excluded the Wife’s inheritance from the estate of her late Mother from the pool of matrimonial assets to be divided between the parties, I determined the Husband should receive 22.5% of the remaining matrimonial assets, an amount of $303,300.
The parties had also agreed there be a superannuation splitting order equalising the parties superannuation entitlements and orders were made that from the Wife’s current superannuation a base amount of $47,402 be adjusted in the Husband’s favour.
On 2 October 2014 the Husband’s solicitor forwarded correspondence to the Wife’s solicitor offering to resolve the matter as follows:
In order to avoid further costs associated with this litigation, the husband proposes the following to settle the proceedings and obtain final property orders:
1.The wife pay to the husband $337,500.00.
2.After payment of $337,500.00 to the husband, the wife would be entitled to retain all remaining real estate.
3.The husband would retain the liabilities in his name (at least $120,000 including legal costs incurred to date) and the wife would retain responsibility for her liabilities.
4.The husband and wife would each retain their motor vehicle.
5.The wife would retain her superannuation.
6.All remaining assets in the possession or control of the parties, remain in each party’s possession or control.
7.The parties will seek final property orders by consent in accord with this proposal with no order as to costs.
This offer of settlement is open to be accepted by the wife up until 4pm on Friday 17 October 2014, after which time, if not accepted, this offer is withdrawn.
The offer was not accepted by the Wife.
After the judgment was delivered, the Husband was given leave to make oral application for his costs of the proceedings as from
2 October 2014. Orders were made for the Husband to provide written submissions on the question of the Husband’s costs by 31 July 2015 and for the Wife to provide answering submissions by 14 August 2015.
The parties written submissions as to costs have been received in accordance with the Orders made on 17 July 2015.
The Law
Section 117 (1) of the Family Law Act 1975 (Cth) (“the Act”) provides that subject to subsection (2) each party to the proceedings under this Act shall bear his or her own costs.
Section 117 (2) of the Act provides however that the Court, if the Court is of the opinion that justify it doing so may, subject to subsection (2A) make such order as to costs as the Court considers just.
Section 117 (2A) of the Act provides as follows:
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In Lennon & Lennon (Costs) [2012] FamCA 116 Murphy J considered the factors contained in s.117 (2A) of the Act. His Honour’s starting point for that consideration was the High Court decision of Penfold & Penfold (1979-1980) 144 CLR 311. In paragraphs [7] and [8] His Honour cited the following from that decision:
7. In Penfold v Penfold (1979 – 1980) 144 CLR 311 at 315 the plurality of the High Court held
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 sub-section is not paramount to s. 117(2). As sub-s. (1) is expressed to be subject to sub-s. (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.
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this, there is nothing in the subject matter or in the interrelationship 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”.
8.It is important, in my view, to note that the plurality went on to say (at 315 - 316):
Sub-section (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. It does not expressly say so, and in the context of the making of an order for costs, there is no sufficient basis for making an implication. 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 to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised. … Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs. [Citations omitted]
In paragraphs [9] and [10] Murphy J then held:
9.The Court is given the power to award costs upon a finding that “there are circumstances that justify it in doing so” (s 117(2)). The matters that might justify a central finding are at large (s 117(2A)(g)) but must include regard being had to a number of specified matters (s 117(2A)(a)-(f)).
10.It is plain that s 117(2A) does not prescribe that more than one factor must be present or that any one factor has more or less weight than any other. They are each and all matters which inform the overall discretion inherent within the section. (PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123.)
Section 117 (2A)(a) – Financial Circumstances of the Parties
It is submitted on behalf of the Husband that there is a disparity in the current earning capacities of the parties.
It is further submitted on behalf of the Husband that there is a very large disparity in the parties’ financial resources, particularly given the Wife is to retain the entirety of her inheritance plus a greater proportion of the matrimonial assets divided between the parties.
It is the Husband’s submission that after the payment of his personal debts ($43,000) and his legal costs he will be left with a very modest sum in comparison to what he described as the Wife’s vastly superior circumstances.
It is submitted on behalf of the Husband that this large discrepancy in the parties’ financial circumstances of itself justifies an order for costs in favour of the Husband.
It is submitted on behalf of the Wife that there is little difference in the parties earning capacity, particularly if the Husband resumes full time work as a (occupation omitted).
It is further submitted on behalf of the Wife that she has the primary care of the parties’ 10 year old son for whom the Husband has recently had his child support reduced from $350 per month to $33 per month. The Husband’s arrears of child support now exceeds $2,400. It is the Wife’s submission that given the Husband’s failure to support the parties’ son since separation and his recent application to reduce his child support, the Court can have little confidence the Husband will provide financially for their son and she is likely to continue to bear the full brunt of the parties son’s financial support into the future.
It is the Wife’s further submission that as the Court in its decision allowed an adjustment in the Husband’s favour pursuant to s.75(2) of the Act for the discrepancy in the parties financial resources, s.117(2A)(a) is not an invitation to the Court to “re-litigate” section 75(2).
In their written submissions, the Husband’s solicitor made reference to the Full Court decision of Kelly & Kelly (No 2) (1981) FLC 91-108. Their Honours held:
“In the present case there is great disparity in the financial circumstances of the parties. The husband’s assets and financial resources which he controls by far outweigh those of the wife. She is not receiving legal aid. These circumstances might well have justified in order for costs in the wife’s favour whatever the conduct of the husband in the proceedings.”
The principle in Kelly (supra) does not, I believe, justify an order for costs in every case where there is a great disparity in the parties’ financial circumstances. In determining whether an order should be made for costs, all of the matters set out under s.117(2A), where applicable, must be looked at.
Section 117 (2A)(c) – Conduct of the Parties
It is the Wife’s submission that the Husband’s conduct in these proceedings made it extremely difficult for her to ascertain the case she had to meet.
In particular, the Wife highlights the Husband’s limited financial disclosure which necessitated Subpoenas to (omitted) bank, his denial or minimisation of his gambling losses which were found at trial to be in excess of $200,000.00, the necessity of the Wife to hire a private detective to prove the Husband was in paid employment, the Husband’s late filed voluminous and unpaginated affidavits and his failure to file a proper financial statement as examples of the improper way in which the Husband conducted the litigation and why she was unable to determine the case she had to answer until the Husband’s evidence was truly tested at trial.
Section 117 (2A)(f) – Offers to Settle
It is submitted on behalf of the Husband that the Husband “did better at judgment” than he would have if the Wife had accepted the offer contained in the offer of settlement made by him in the correspondence forwarded by his solicitors dated 2 October 2014. It is argued the total received by the Husband pursuant to the judgment including superannuation was $350,702 compared with his offer to settle for $337,000 with no adjustment for superannuation.
It is submitted on behalf of the Husband that his offer was made in clear and unambiguous terms, it was made less than a week after the matter had been listed for final hearing on 29 September 2014, in circumstances where both parties were ready for trial and had prepared there case for hearing and where both parties were aware of the case of the other side and had filed detailed outlines of argument which had been exchanged between the parties.
It is further submitted on behalf of the Husband that when the matter came before the Court on 29 September 2014, I expressed the view that both parties’ starting positions as set out in their respective Outline of Case Documents were unrealistic, a factor referred to by the Husband in the offer of settlement made 2 October 2014.
It is submitted on behalf of the Wife that the Husband’s proposal as at
2 October 2014 equated to a 27.5 per cent split of the assets as valued at that time, some 5 per cent less than received by him at trial.
It is further submitted on behalf of the Wife that given the Husband’s failure to provide proper disclosure, the absence of a properly sworn financial statement and the lack of any explanation as to the basis upon which the Husband’s offer was calculated, the Wife was not in a position to consider the appropriateness of that offer at that time.
It is further submitted on behalf of the Wife that after receipt by the Husband of the independent valuations obtained by him from Mr S, he forwarded a further offer of settlement to the Wife on 6 April 2015 indicating a willingness to resolve the matter on the basis of a payment to the Husband of $420,000, such offer being left open for a period of four days only. As such the Husband’s claim for costs as from
2 October 2014 is offset by this later offer of settlement.
It is further submitted on behalf of the Wife the offer did not meet the principles set out in Calderbank v Calderbank [1975] 3 All ER 333 in that it did not properly set out the pool, contributions made by the parties or the relevant s.75(2) factors or explain the basis upon which the offer was made.
Finally, it is submitted on behalf of the Wife that the Husband’s proposal, in raw terms of his cash offer sought $34,000 more than he was ultimately ordered to receive.
In Lennon (supra) Murphy J in considering s.117(2A)(f) of the Act held at paragraph 70 – 74 as follows:
70. Litigation in this Court is expensive and, it seems, increasingly so. The consistent emphasis of the procedures of this Court and indeed the Rules is to encourage – at every stage of the proceedings – conciliation and the resolution of disputes by agreement.
71. Further, and to that end, separate from the Court processes and procedures, the Court encourages actively the use of private alternative dispute resolution processes.
72. 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.
73. Bona fide offers made in this way can be seen as involving significant peril if litigation is pursued in rejection of them. (See e.g., In the Marriage of Murray (1990) 14 Fam LR 311; In the Marriage of Steel (1992) 15 Fam LR 5; Pennisi & Pennisi (1997) FLC 92-774).
74. In Browne & Green (2002) FLC 93-115 the Full Court said
(at [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 Full Court in Pennisi & Pennisi (1997) FLC 92,774 (at 84,547) held:
…the fact that an offer just exceeds the award is no bar to an award for costs. Equally, however, it is only one of the factors to be considered under s 117(2A) and 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…
In the matter of Weiman & Paige (Costs) [2014] FamCA 173
Le Poer Trench J considered the question of s.117(2A)(f).
His Honour having considered in considerable depth the case law relevant to the consideration of an order for costs based on s.117(2A)(f). Under the heading conclusion, His Honour held at paragraphs 83 and 84 as follows:
83. The above referred to decisions confirm that the difference between an offer of settlement and the outcome of a subsequent trial, is not the only factor relevant to the exercise of discretion in relation to costs where an offer to settle has been made in writing.
84. The Court is required to consider the offer of settlement, including the context in which it was made. This extends to considering the wording of the offer (is it clear and unambiguous), the timing of the offer, the extent of disclosure (which affects the other party’s ability to consider whether the offer is suitable), the variance between offers (if multiple offers have been made), whether the dispute extends to the value of the subject property, the difference between the offer and the property division in the judgment and any other aspect of the offer which is relevant to the particular case.
Section 117 (2A)(g) – Other Matters
In the written submissions of the Husband, reference was made to the decision of Lindenmayer J in Telfer & Telfer (1996) FLC 92-688 in which His Honour referred to s.117 (2A) (g) as the “all-encompassing paragraph” which is “an independent source of discretion that is not limited by the particular matters set out in the previous paragraphs of
s.117(2A).
It is submitted on behalf of the Husband that the Wife has treated the property proceedings between herself and the Husband as a means of inflicting punishment on the Husband and of using her financial superiority in an attempt to win the litigation by attrition in the full knowledge of the Husband’s impecunious state and inability to fund the proceedings.
It is submitted on behalf of the Husband that the Wife ran the proceedings to judgment knowing that this would take considerable time and would force the Husband to live without any means whilst the legal proceedings ran their course.
The Husband’s submissions make reference to paragraphs 38 – 41 of his affidavit sworn 15 April 2015 in which he makes particular reference to text messages forwarded by the Wife to the Husband in December 2014 in the following terms:
“Court Judge Bender has the right to press charges for fraud talk to your barrister go check evidence loser. Enjoy working at the gardens.”
“by the way the Judge doesn’t decide on the day it takes months so by the time I borrow settlement will be in a year haha suffer.”
“you’re the one who’s causing it especially since you have so little contact with him. He is happy with me he doesn’t miss out on anything you are the scum in the scumbag in the streets enjoy it for another year loser”.
Conclusion
In October 2014 the Husband in this matter made an open offer of settlement to resolve this matter in terms that are very similar in quantum to the final determination of this Court.
The Husband’s offer was made within a week of this matter not being able to be reached and in circumstances where both parties would have proceeded to trial if the Court had been able to accommodate the matter on that day.
The Husband’s offer of settlement was left open for a period of 14 days and was not accepted by the Wife.
In these circumstances it is submitted by the Husband that the Wife should bear his costs as from the making of his offer of settlement on
2 October 2014 to the conclusion of the final hearing.
It is further submitted on behalf of the Husband that given the discrepancy in the parties’ financial circumstances and the malevolence of the Wife in pursuing this litigation to final hearing in the face of his reasonable offer, there should be an order that the Wife pay his costs.
It is submitted on behalf of the Wife that at the time the Husband made the offer for settlement, he provided no explanation as to the basis for his proposal both in term of its percentage of the total property pool or on what basis that proposal was made in terms of contributions and
s.75 (2) factors.
It is further submitted on behalf of the Wife that at the time of the Husband’s offer he had failed to make full and frank disclosure of his financial circumstances, his employment status, the extent of his gambling during the course of the marriage, his residence and his income such that it was not possible for her to make a genuine assessment of the appropriateness of the Husband’s offer of settlement at that time and within the very short period that the offer remained open.
It is further submitted on behalf of the Wife that the Husband made a subsequent offer to settle this matter for an amount of $420,000, a figure greatly in excess of the amount awarded to him at final hearing.
It is also submitted on behalf of the Wife that whilst there is a discrepancy in the parties financial resources, that is a factor that was taken into account in the determination of this matter and a considerable weighting in the Husband’s favour was accorded him as a result of that factor. It is submitted that to further pursue this matter by way of a s.117 (2A) application is an attempt to re-litigate this issue.
Further, it is submitted on behalf of the Wife that whilst there is a discrepancy in their financial resources, the Wife bears the sole practical and financial responsibility for the parties’ 10 year old son. The Husband has since the hearing of this matter had his child support reduced from $350.00 to $33.00 per month. The Wife submits the Court can be satisfied that the Husband is unlikely to fulfil his financial responsibilities for his son into the future.
In these circumstances it is submitted on behalf of the Wife that her ongoing responsibility for the parties’ son offsets any discrepancy in the parties financial circumstances and the Court should not make an order she pay the Husband’s costs based on s.117 (2A) (a).
In this regard I am in complete agreement with the Wife. Whilst the parties have disparate financial capacities and resources, the ongoing responsibilities of the Wife for the parties’ son, is such that I am satisfied this is not a factor that warrant’s an order being made that she pay the Husband’s costs of these proceedings.
Similarly, the less than pleasant text messages sent by her in the lead up to the finalisation of this matter does not satisfy me that the Wife ran this matter all the way to final hearing out of malice. Having heard the Wife’s evidence and observed her demeanour in the witness box, I am satisfied the Wife’s proposals for the division of the parties assets, whilst not agreed to by me, reflected her genuine belief as to the Husband’s entitlement in these proceedings.
Whilst the Husband made an offer to resolve this matter on
2 October 2014 which does not substantially differ to the final determination of this matter, I am satisfied that at the time of the making of that offer the Wife was not in a position to genuinely assess its appropriateness given the Husband’s failure at that time to have made full and frank disclosure or to properly explain the basis upon which that proposal was being put.
Therefore, I am of the view that they are not circumstances that would justify this Court making an Order that would disturb the provisions of s.117 (1) that each party to the proceedings bear his or her own costs.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Bender
Associate:
Date: 27 August 2015
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