Oliver & Oliver (No. 2)
[2010] FamCAFC 174
•10 December 2010
FAMILY COURT OF AUSTRALIA
| OLIVER & OLIVER (NO. 2) | [2010] FamCAFC 174 |
| FAMILY LAW - APPEAL – Costs appeal – Judgment of the Federal Magistrate made from written submissions – Appellate court able to interfere with the exercise of discretion in respect to costs when the result is plainly unjust or exercised on the wrong principles – Husband in a superior financial position – Parties’ conduct did not give rise to an adverse costs order – Neither party wholly unsuccessful in the proceedings – Considerable reliance placed on the terms of the offers made by the husband – Three offers made by husband rejected by the wife – Wife ultimately received at the end of the trial a better result than all of the offers provided – Adverse costs order made due to the wife’s conduct in refusing the offers under ss 117(2A)(c) and (f) of the Family Law Act 1975 (Cth) – Error to afford too much weight to the wife’s initial application – Error to disregard the wife’s subsequent offer – That the wife was “worse off” was not based on any evidence – The wife’s conduct did not constitute an obstruction to the settlement of the matter – An order that the wife bear the whole of the husband’s costs is disproportionate and unreasonable – Appeal allowed. FAMILY LAW - APPEAL – Re-exercise of discretion – Federal Magistrate now retired – Impractical to remit the matter – No order to be made as to costs of the trial – Both parties attempted to settle the matter without success – Husband in stronger financial position – No other justifying circumstances – Each party to bear their own costs. FAMILY LAW - COSTS OF THE APPEAL – Parties at liberty to file written submissions in regard to the costs of the appeal. |
| Family Law Act 1975 (Cth) s 79, s 117(2A), s 117(2A)(c), s 117(2A)(f) Family Law Rules 2004 |
| Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 House v R (1936) 55 CLR 499 In the marriage of Greedy (1982) FLC 91-250 |
| APPELLANT: | Mrs Oliver |
| RESPONDENT: | Mr Oliver |
| FILE NUMBER: | BRC | 7484 | of | 2007 |
| APPEAL NUMBER: | NA | 50 | of | 2010 |
| DATE DELIVERED: | 10 December 2010 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May J |
| HEARING DATE: | 3 September 2010 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 19 October 2009 |
| LOWER COURT MNC: | [2010] FMCAfam 220 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Cameron |
| SOLICITOR FOR THE APPELLANT: | Hillhouse Burrough McKeown Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Willams |
| SOLICITOR FOR THE RESPONDENT: | Romans & Romans Lawyers |
Orders
That the appeal be allowed.
That the order made by Federal Magistrate Wilson delivered by Federal Magistrate Slack, on 26 February 2010 be set aside.
That there be no orders as to costs for the trial.
The parties are at liberty to file written submissions with regard to the costs of the appeal in accordance with the following timetable:
(a) On behalf of the appellant within 21 days of the date hereof;
(b)On behalf of the respondent in response thereto within 21 days thereafter;
(c)On behalf of the appellant in reply thereto within seven days thereafter, and;
(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
IT IS NOTED that publication of this judgment under the pseudonym Oliver & Oliver( No. 2) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISIDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 50 of 2010
File Number: BRC 7484 of 2007
| Mrs Oliver |
Appellant
And
| Mr Oliver |
Respondent
REASONS FOR JUDGMENT
Introduction
A notice of appeal was filed on behalf of the wife on 19 May 2010 appealing the costs order of Federal Magistrate Wilson delivered by Federal Magistrate Slack on 26 February 2010. The decision was made after written submissions were received, affidavit material was also filed. The reasons were delivered subsequently on 10 March 2010.
There is one order:
(1)That the respondent wife shall pay the applicant husband’s costs of and incidental to the proceedings, including the application for costs filed 23 September 2009 to be taxed on the party and party or standard basis.
In the wife’s notice of appeal the following seven grounds of appeal are identified:-
1.That His Honour erred in failing to properly exercise his discretion.
2.That His Honour has misdirected himself as to the proper approach to be followed in determining the costs application in this case.
3.That His Honour’s discretion miscarried by ordering that the Wife pay the Husband’s costs of an incidental to the proceedings, including the application for costs filed 23 September 2009.
4.That His Honour erred by giving undue weight to the offers of settlement of the Husband,
5.That His Honour erred in failing to give any weight or sufficient weight to the offer of settlement of the wife dated the 30th November, 2007.
6.That His Honour erred in failing to find on the evidence that no costs be made in favour of the Husband.
7.That His Honour erred in failing to find on the evidence that a costs order be made against the Husband in favour of the Wife.
The last ground was not pursued. In oral submissions it was apparent that the order sought by the wife was that each party pay their own costs of the trial.
Reasons for Judgment
On 28 August 2009, Federal Magistrate Wilson made orders and delivered reasons, adjusting the property of the parties pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
It was found that the net non-superannuation assets of the parties were $476,364.37. The pool was to be adjusted so that the husband received $297,965.91 and the wife to receive $178,398.46. In order to facilitate this, the husband was to pay to the wife the sum of $164,398.46. The parties were to retain all assets and liabilities in their respective names, including their superannuation. The husband was to retain the Toyota Camry vehicle and the wife the Holden Astra motor vehicle.
The husband applied for an order that the wife pay his costs of and incidental to the proceedings, either on an indemnity basis or on a party and party bias. This application was opposed by the wife, who sought her costs of the husband’s application for costs.
In his reasons for judgment it was found that the financial circumstances of the parties, as a consideration, did not warrant an order for costs being made in the husband’s favour. It was said that this was due to the fact that the husband is “undoubtedly in stronger financial circumstances than the wife”.
Further it was found that the parties conduct in the proceedings did not give rise to an adverse order for costs. Due to the fact that both parties received an adjustment of property in their favour, it could not be said that either party was wholly unsuccessful in the proceedings.
In the reasons for judgment the Federal Magistrate placed “considerable reliance” on the terms of offers made with a view to settling the proceedings, a consideration under s 117(2A)(f) of the Act. It was said by his Honour that it was appropriate, in his view, to consider such offers in light of not only what each party was seeking at the final hearing, but also what each party received. As a result of the property settlement, the wife received her motor vehicle, her bank accounts and superannuation, and remained liable for the credit card debt in her name. It was asserted that the husband always conceded these items, with the only dispute being directed towards the amount of money the husband had to pay the wife. This figure, as outlined in paragraph 6 of this judgment, was ultimately $164,398.46.
The husband, in his application for final orders filed 21 June 2007 sought that he pay the wife $120,000. The wife, in her response filed 22 August 2007 was seeking a payment of $700,000. The husband’s submission that this was an unrealistic figure was accepted by his Honour.
Three written offers of settlement were made by the husband.
· On 19 April 2007, an amount of $120,000 was offered, being $50,000 directly and $70,000 from the husband’s superannuation fund;
· On 9 May 2007, $120,000 in cash was offered;
· On 30 November 2007, the husband offered $130,000, half the furniture and the Accor Vacation Club interest.
Following the trial on 3 April 2008, the evidence was re-opened and further evidence was adduced on 13 August 2009. This was at the request of the husband, but also due to the substantial delay in the delivery of the judgment.
It was submitted on behalf of the wife, that due to the fact that each offer was less than what the wife ultimately received, no adverse costs order should be made. This was rejected by his Honour, as he was of the opinion that each offer must be considered in the context of when it was made and the position of the parties as a result of rejecting the offers. It was his view that the wife would have been financially “better off” had she accepted one of the offers made, as she would not have to bear the costs of contesting the proceedings.
The Federal Magistrate said that by not accepting the offers, the wife’s conduct in relation to the proceedings, a consideration prescribed in s 117(2A)(c) of the Act, warrants an adverse costs order being made against her. His Honour also used s 117(2A)(f) of the Act to justify his order for costs.
Although the husband sought indemnity costs, his Honour was of the view, that applying the reasons of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, the wife’s conduct did not warrant such an order to be made. The Federal Magistrate was also mindful that an order for indemnity costs would “obliterate” the property settlement order made in favour of the wife.
Following on from this, his Honour stated that he was also mindful that any costs order made against the wife would “substantially diminish” the amount that she would receive. The position of the husband, and the expenses incurred by him in litigating the proceedings were also considered. The Federal Magistrate ultimately stated that:
24.…the husband as been put to considerable expense in litigating proceedings which ought not to have proceeded to a final hearing had the wife, and her advisors, adopted a more realistic attitude. The husband ought not be required to suffer financial loss in circumstances where he has made a number of realistic offers that have not been accepted, and where the wife has made unrealistic claims against him.
A primary difficulty about the judgment is that it completely ignored the offer made by the wife. The only reference to both parties making an offer is contained in paragraph 10 as follows:-
Considerable reliance is made by each party on the terms of offers made to settle the proceedings, a consideration made relevant by s.117(2A)(f) of the Act. In the context of considering such offers it is, in my view, relevant to view such offers against not only what each party was seeking at the final hearing but also what each party received.
His Honour then stated at paragraph 12:-
By his Application for Final Orders filed 21 June 2007 the husband sought orders that the wife keep those items to which reference has been made and that he pay $120,000.00. The husband submits that the additional amount ordered to be paid to the wife following the final hearing ($44,398.00) is, in the context of the pool, relatively insignificant. I agree. By contrast, in her Response filed 22 August 2007 the wife sought a payment to her of $700,000.00. I accept the submission by the husband that that claim was unrealistic.
No direct reference was made to the offer made by the wife.
Ultimately, his Honour said:-
19.However, in my view the question of costs can be decided without reference to what occurred at the mediation. The husband made three offers the effect of which was to gradually increase the amount offered to the wife. Each offer fell short of what the wife ultimately achieved, but it must be borne in mind that if the wife had accepted any of the husband’s three offers she would undoubtedly have been better off financially than contesting the proceedings to final hearing. The difference between the amount proposed by the husband in his Initiation Application and what the wife received following the final hearing has undoubtedly been consumed by legal fees. If any of the offers made by the husband, and to which reference has been made, had been accepted by the wife she would have been better off financially. In my view, by not accepting the offers, the wife’s conduct in relation to the proceedings, being the consideration under s.117(2A)(c) of the Act is such as to warrant an adverse order for costs against her. The fact that the wife was unwilling to accept any of the husband’s three offers is also a factor that warrants an adverse order for costs against her under s.117(2A)(f) of the Act.
…
24.In that regard I am mindful also of the fact that the amount of costs estimated to have been incurred by the husband would entirely obliterate the property settlement order made in favour of the wife if an order for indemnity costs was made. Indeed I was mindful that any order for costs against the wife would substantially diminish the amount that she receives. However, the husband has been put to considerable expense in litigating proceedings which ought not to have proceeded to final hearing had the wife, and her advisors, adopted a more realistic attitude. The husband ought not be required to suffer financial loss in circumstances where he has made a number of realistic offers that have not been accepted, and where the wife has made unrealistic claims against him. In my view an order for costs is appropriate in this case. However the costs should be paid on the standard or party and party basis.
Submissions of the wife
The wife submits that this is an appropriate case in which to displace the general presumption that the Court should be reluctant to interfere with a trial judge’s discretion about costs. The wife contends the decision is “plainly unjust” and exercised on wrong principles. Reliance is placed on the decision of Pennisi v Pennisi (1997) FLC 92-774 in this regard.
It is argued that the trial judge should not have solely based his decision on the fact that the wife did not accept the offers made by the husband, as the written submissions of her counsel outline, there were reasons, in her opinion, for not accepting the offers.
In terms of the first offer, the wife rejected the offer as “barring some dramatic change in her circumstances” she would be unable to access the majority of the funds for another ten years. It is the wife’s submission that it is difficult to see how she could have been any “worse off” in refusing this offer.
With regard to the second offer, this offer was made prior to the valuation of the parties’ real property. Consequently, it is submitted that it is difficult to be critical of the wife for rejecting this second offer of settlement.
It is also of relevance to note that each of the two previous offers only remained open for acceptance by the wife for a little over a week.
The husband’s third and final offer was made pursuant to the Family Law Rules 2004. This offer was made however, similarly to the proceeding offers, before there was an agreement as to the value of the property pool.
Counsel for the wife contends that the wife ultimately received a figure $34,398.46 more than the husband’s best offer. It is submitted that this amount, which is equivalent to 7.22% of the property pool, is significant given the length of the marriage, the absence of children and the contributions of the parties. It is asserted that it is difficult to determine that the wife has in effect weakened her position, especially when there is no evidence before his Honour to justify such a finding.
It is submitted that the Federal Magistrate erred in his determination that the court was obliged to consider “whether a party [was] better or worse off as a result of rejecting the offers”, as by doing so he placed a constraint on the test to be applied which was not recognised in Pennisi & Pennisi. It is submitted that his Honour applied the principle “too rigidly” as he failed to consider other matters, namely the dispute over the property pool.
It is also submitted that the wife’s offer to the husband was not considered. The wife, on 30 November 2007, made an offer to the husband in an attempt to settle the matter. This offer proposed a 70/ 30 division of the property in favour of the husband. The wife’s 30% was to be made up of $150,000 cash and $52,300 from the husband’s Colonial Mutual Superannuation Fund. It is noted that this offer was made on the same day as the husband’s final offer, before the commencement of the trial after the parties had attended mediation.
Submissions of the husband
The husband contends that this case does not fall within the realm of the “rarest cases” in which the discretion of a trial judge can be interfered with, and that his Honour appropriately considered the relevant considerations prescribed in s 117(2A) of the Act.
Counsel for the husband also submits that the third offer was made by the husband a day after a mediation conference, in which the net pool of assets was agreed to be $937,633 in total.
It is also submitted that the wife’s claim that the offers were premature are without merit. This is attributed to the fact that there is no evidence that the wife was not familiar with the martial assets, that she was unable to make her own enquiries as to the value of the property pool, that she did not understand what the values of the pool would be, that she enquired as to the basis of the husband’s valuations, that she communicated to the husband that she objected to his estimate of the property pool and that the wife was not precluded from making her own assessment or enquires as to the values of the pool. Counsel for the husband referred to the reasoning of the court in Galway & Cuthbert (No. 2) [2008] FamCA 453.
In addition, it is asserted that the Federal Magistrate did not exceed the broad ambit of his discretion, that the wife would have undoubtedly have been better off financially had she accepted one of the offers, and that the greater amount that the wife ultimately received was relatively insignificant.
With regard to the wife’s position, counsel for the husband asserted that no evidence has been provided that the wife is in an inferior position, and that the Federal Magistrate was entitled to base his judgment on his own experiences, and the husband’s assertion that the wife would be likely to have spent approximately $44,400 on legal costs.
It is submitted that the husband’s approach and conduct was realistic and appropriate at all times. An attitude, as was submitted by the husband’s counsel as in the interests of public policy and in accordance with parliament’s intention in enacting the applicable legislation.
In fairness to the husband, it must be observed that the affidavit of the husband filed 23 September 2009, which was before the Federal Magistrate set out precisely his costs of the dispute, the parties’ current financial circumstances, attendance at mediation and the offers made by each party.
Relevant Law
It was established in House v R (1936) 55 CLR 499 that;
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
Section 117 of the Act governs costs. Subsections 117(1), (2) and (2A) relevantly provide:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(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. (emphasis added)
Although an appellate court should be very reluctant to interfere with the exercise of discretion in respect of costs, it can and should interfere when the result is “plainly unjust or if the discretion was exercised on wrong principles” (see In the marriage of Robinson (1991) FLC 92-209). It is also accepted that, an appellate court will uphold an exercise of direction to order costs if it is apparent that there are appropriate reasons on which the judge could rely (see In the marriage of Greedy (1982) FLC 91-250).
It was held In the marriage of Greedy, that “[a]n award of costs ought to bear some relation to the conduct of the proceedings by the parties or to their relative circumstances at the time of the application and hearing of the matter.” It was further said:-
…There may be situations where refusal to negotiate, to make an offer or to put forward an alternative order may be a factor justifying an order for costs. The failure of a party to take part in negotiations in a genuine manner may contribute to delay and cost and obstruct the proper resolution of the matter.
In view of the omission of the important fact of the wife’s offer, especially in view of the criticism of the quantum sought by her in her response, it is useful to recall what was said by Gibbs and Aickin JJ in De Winter v De Winter (1979) 4 Fam LR 583 where a finding was as Aickin J described is “not merely erroneous but not supported by any evidence” (at p 597). Gibbs J said at p 588 after referring to House v R that:-
It is apparent from this statement, and is clear law, that a discretionary judgment which is based on a mistake of fact will not be upheld merely because the result reached in itself does not appear unreasonable or unjust. In Storie v Storie (1945) 80 CLR 597, both Latham CJ, at p 600, and Rich J, at p 604, cited from the judgment of Viscount Simon LC in Blunt v Blunt [1943] AC 517 at 526 ; [1943] 2 All ER 76 at 79: “If it can be shown that the court acted under a misapprehension of fact in that it either gave weight to irrelevant or unproved matters or omitted to take into account matters that are relevant, there would, in my opinion, be ground for an appeal. In such a case the exercise of discretion might be impeached, because the court's discretion will have been exercised on wrong or inadequate materials. …” There are many other authorities, from Young v Thomas [1892] 2 Ch 134 at 137 to Australian Coal and Shale Employees’ Federation v Commonwealth (1953) 94 CLR 621 at 627, that recognize that a mistake of fact is a ground for overruling a decision involving discretionary judgment. It may, in some cases, appear that the mistake of fact has not affected the final result, or that its effect has been negligible, or that in any case the conclusion reached was correct, notwithstanding the error. But it is not right to say, as the majority of the Full Court appear to have said in the present case, that a discretionary judgment which has proceeded upon a mistake of fact should be upheld simply because the order was well within the range of the discretion of the primary judge.
Conclusion
This is not a case where it can be said that the wife’s conduct constituted an “obstruction” to the settlement of the matter. It seems the husband incurred considerable costs; however the delay of the matter through the re-opening of the case for new evidence by the husband is not attributable to the wife. Even if the costs order were sustainable by reason of the last offer, to order that the wife bear the whole of the husband’s costs is disproportionate and unreasonable.
There are three main errors in the judgment of Federal Magistrate Wilson:
· The placement of too much weight on the wife’s initial $700,000 claim contained in her response, while ignoring her subsequent offer;
· The finding that the wife was “worse off” by refusing the husband’s offers, and to a lesser degree;
· The failure to properly consider the respective financial circumstances of the parties and the impact of the proposed order.
The wife’s initial claim
It appears from Federal Magistrate Wilson’s judgment that considerable weight was based on the wife’s response. On 22 August 2007, the wife filed a response that she be paid $700,000 in cash. It was concluded by his Honour that this exemplified the “unrealistic” and “unreasonable” conduct of the wife.
The wife’s counsel submits that it can be inferred that the wife previous solicitors filed the response, before the property pool had been determined, in an effort to preserve the wife’s interests. It was said to allow the wife considerable scope to move in attempting to reach an agreement, without understating her possible entitlement.
In affording the response of the wife such weight, Federal Magistrate Wilson did not have regard to the wife’s subsequent offer, an important consideration in this case. This offer was not far off what the wife eventually was awarded by his Honour. When the offer is properly considered the criticisms of the wife’s conduct are not valid.
The finding that the wife was “worse off”
The wife ultimately received a judgment that was better than all of the three offers made by the husband. In this context it is difficult to see how she was “worse off” other than factoring in some amount for legal costs expended by her.
Counsel for the wife submits that there was no evidence available to his Honour that would support a finding that the wife would have been “better off” in accepting one of the husband’s three offers. No evidence was lead as to the wife’s legal costs. The Federal Magistrate was not entitled to have regard exclusively to his own experience in establishing that the wife was “worse off”. There was simply no evidence to justify this finding.
The failure to consider the parties financial circumstances
It appears that the Federal Magistrate Wilson did not adequately consider the financial circumstances of the parties, with the only reference made to such an important consideration being:
6.The husband is undoubtedly in stronger financial circumstances than the wife. The assets the each party retains as a result of the orders made are set out in my earlier reasons for judgment. The orders of 28 August 2009 required the husband to pay to the wife $164,398.46. In determining whether the property settlement orders were just and equitable, at paragraph [73] of my reasons I observed that that sum of money would enable the wife to rehouse, bearing in mind her current level of income. I noted, at paragraph [64] that the husband was employed as a medical practitioner earning some $6,185.00 per week. That included rental he received from properties owned by him. He earned some $280,000.00 per annum from his medical work. The wife earns approximately $900.00 per week in her work as a nurse. The financial circumstances of the parties, as a consideration, does not warrant an order for costs being made in the husband’s favour.
Having made these remarks, the Federal Magistrate did not adequately consider the consequences that making such an order would have on the wife. It was not denied that his Honour’s order would completely exhaust the wife’s share of the property settlement. This is a matter which should have been considered.
Re-exercise of discretion
I am of the opinion that the conduct of the parties, and in particular, the conduct of the wife, does not justify a costs order being made. There are significant grounds to interfere with the Federal Magistrates exercise of discretion to which I have made reference. I am satisfied that the result is plainly unjust and that there are no grounds upon which this order could be justified.
Federal Magistrate Wilson has retired, thus it would be impractical to make an order remitting the matter. Consequently I will re-exercise the discretion.
Given the circumstances of the case, I will make an order that there be no orders as to costs. In particular, I take in account that both parties endeavoured to settle the matter but without success. The husband is in a far stronger position than the wife in relation to his income. There are no other justifying circumstances.
A departure from section 117(1) of the Act is not justifiable. Each party should bear his or her own costs.
I certify that the preceding fifty three (53) paragraphs are a true copy of the reasons for judgment of the Honourable Justice May delivered on 10 September 2010.
Associate:
Date: 10 September 2010
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