Ongaro & Abadzhiev (No 2)
[2024] FedCFamC1F 878
•20 December 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Ongaro & Abadzhiev (No 2) [2024] FedCFamC1F 878
File number(s): DNC 306 of 2022 Judgment of: BERMAN J Date of judgment: 20 December 2024 Catchwords: FAMILY LAW – COSTS – Where judgment was delivered following a final hearing – Where the husband seeks costs – Consideration of whether the wife was wholly unsuccessful – Where each of the parties’ cases were arguable and had merit – Where neither party was wholly unsuccessful – Consideration of various offers made by the husband – Consideration of whether it was reasonable for the wife to accept an offer pending valuation reports – Where the offer was open for 14 days – Consideration of whether 14 days was a reasonable time – No order for costs. Legislation: Family Law Act 1975 (Cth) ss 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rr 12 & 15
Cases cited: Goold v Commonwealth of Australia; Rootsey v Commonwealth of Australia (1993) 114 ALR 135
Murray & Murray (1990) FLC 92-173
Ongaro & Abadzhiev [2024] FedCFamC1F 653
Robinson & Higginbotham (1991) FLC 92-209
Roydon & Roydon (2024) FLC 94-194
Division: Division 1 First Instance Number of paragraphs: 99 Date of hearing: 3 December 2024 Place: Adelaide via MS Teams Counsel for the Applicant: Ms Farmer Solicitor for the Applicant: AFL Withnalls Lawyers Counsel for the Respondent: Ms Holtham Solicitor for the Respondent: Story & Associates ORDERS
DNC 306 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR ONGARO
Applicant
AND: MS ABADZHIEV
Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
20 DECEMBER 2024
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed 28 October 2024 and the Response to an Application in a Proceeding filed 22 November 2024 be dismissed.
2.Each party be responsible for their own legal costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
By Application in a Proceeding filed 28 October 2024, Mr Ongaro (“the applicant”) seeks the following orders for costs against Ms Abadzhiev (“the respondent”):
1.Pursuant to Rule 12.28, the Court certify that it is reasonable for the Applicant Husband to engage Counsel for the Final Hearing.
2.That within 28 days pursuant to Rule 12.13(3)(b), the Respondent Wife pay the Applicant Husband costs of an incidental to the proceedings DNC306/2022 from 5 October 2023 to judgement 27 September 2024 on a solicitor client basis in a fixed sum of $115,000 or alternatively in such other fixed lump sum as determined by the Court.
3.That within 28 days, pursuant to Rule 12.17(1) the Respondent Wife pay the Applicant Husband costs of an incidental to this Application in a Proceeding on an ordinary basis in a fixed lump sum of $15,000, or alternatively in such other fixed lump sum determined by the Court.
4.There be a declaration that the amount payable by the Respondent Wife in accordance with Order 6(c)(ii) is $109,091.04; and
5.Forthwith the Respondent Wife pay to the Applicant Husband the outstanding funds and interest pursuant to Order 6(c)(ii).
The Application in a Proceeding is supported by the applicant’s affidavit filed 28 October 2024.
By Response to an Application in a Proceeding filed 22 November 2024, the respondent seeks orders that the Application in a Proceeding seeking costs be dismissed and further, that the applicant pay the respondent’s costs of and associated with the Application in accordance with the scale. The Response is support by the respondent’s affidavit filed 22 November 2024.
The competing costs applications of the parties arises in respect of contested property settlement proceedings which culminated in judgment being delivered on 27 September 2024 in Ongaro & Abadzhiev [2024] FedCFamC1F 653.
The property of the parties available for division was extensive and whilst they were able to reach substantial agreement as to the identification of assets and liabilities together with the values able to be attributed thereto, there were areas of complexity that remained in dispute.
Central to the proceedings was the status and treatment of the interests of the Abadzhiev Family Trust (“the Abadzhiev Family Trust”), effectively controlled by the respondent in her capacity as the appointor and named beneficiary and the shareholding and directorship of the applicant in N Pty Ltd (“N Pty Ltd”) which is the corporate trustee of the N Unit Trust (“the N Unit Trust”). The N Unit Trust was a joint venture entity that held real estate at O Street, City LL. The Abadzhiev Trust holds units equating to a 25 per cent interest in the N Unit Trust which equates to a 10 per cent interest in the joint venture.
The parties were also not able to reach agreement as to the treatment of the applicant’s interest in (“the Super Fund 5 pension”). Although the parties accepted that the Super Fund 5 pension was capable of valuation in the sum of $423,322, it is currently in the payment phase. Further, the respondent did not seek a superannuation splitting order. The applicant argued that whilst capable of being valued, in the circumstances of the case, the Super Fund 5 pension should be treated as a financial resource rather than a balance sheet item.
A further area of contention was the respondent’s claim that the parties’ adult daughter, Ms R (“the daughter”), had provided to the parties and/or was owed the total sum of $115,190 which should be brought to account as a liability against the joint assets of the parties. The applicant did not concede that there was any liability owing to the daughter and accordingly sought to exclude any purported liability.
The applicant sought to include as addbacks his legal fees paid in the sum of $123,523 together with the respondent’s costs of $192,795 with a further $70,000, which came from the sale of shares, that remained in the respondent’s solicitor’s trust account.
A further consideration was the extent to which the sum of $232,930 being the amount removed by the applicant from the Self-Managed Superannuation Fund (“SMSF”), should be added back to the asset pool.
By way of overall adjustment, the foundation for the orders provided for the property of the parties to be apportioned as to 52 per cent to the respondent and 48 per cent to the applicant.
Whilst it is but one aspect of complex orders made, paragraph 1 of the orders made on 27 September 2024 provided that the respondent was to pay the applicant the sum of $708,929 (“the settlement sum”) over and above the property both actual and by way of addback that each of the parties were to retain.
The orders also provided for the respondent to exercise her power of appointor for the Abadzhiev Trust and appoint herself as trustee and in that capacity, within 14 days, enter into negotiations with the other unit holders in the N Unit Trust with a view to sell the 25 per cent unit holding held by the Abadzhiev Trust. Any offer to purchase the unit holding at or above the sum of $170,000 was to be accepted.
If a sale and transfer of the units was not able to be negotiated, then the parties would necessarily have to wait for the sale of the remaining properties held by the N Unit Trust with the net proceeds subject to any CGT payments being made being divided as to 52 per cent to the respondent and 48 per cent to the applicant.
As matters have transpired, the Abadzhiev Trust was able to negotiate a sale of its units in the N Unit Trust to one of the existing unit holders in late 2024 in the sum of $227,273. Given that a capital loss was incurred, the parties received advice from the nominated accountant that there was no assessable capital gains arising from the unit sales.
APPLICATION FOR COSTS
In considering what orders, if any, should be made in respect of the applicant’s costs, s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) sets out that the Court shall have regard to the following:
(a)The financial circumstances of each of the parties to the proceedings; and
(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, admission, 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 is made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offers; and
(g)Such other matters as the Court considers relevant.
Accordingly, whilst the primary consideration of s 117 of the Act is that each party should pay their own costs, the applicant argues that there are circumstances which would justify the Court making an order pursuant to s 117(2A) of the Act.
If an order for costs is made in favour of the applicant, it is argued that the quantum of costs should be assessed and paid on an indemnity basis.
The respondent argues that the applicant has not filed a costs agreement pursuant to r 12 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) and as such, it is open to the applicant to seek that his costs be assessed on an indemnity or solicitor/client basis. The rule does not require the costs agreement to be filed but rather requires a party to inform the Court if they are bound by a costs agreement and if so, disclose and set out the relevant terms. I consider that the applicant’s affidavit adequately sets out the fundamental terms and conditions of the costs agreement.
However, a further preliminary point taken on behalf of the respondent, is that the applicant is out of time to bring his application for costs.
Rule 12.13(3) provides that:
(3) An application for costs may be made:
(a) at any stage during a proceeding; or
(b)by filing an Application in a Proceeding within 28 days after the final order is made.
Rule 15.05 provides that:
(2)if a period of more than 1 day is to be calculated by reference to a particular day or event, the particular day or the day of the event must not be counted.
…
(4)If the last date for taking an action that requires attendance at a registry is a day when the registry is closed, the action may be taken on the next day when the registry is open.
Judgment was delivered and orders were made on Friday, 27 September 2024. Rule 15.05 would provide that the first of the 28 days would be on Saturday, 28 September 2024.
The Application in a Proceeding seeking costs was filed on 28 October 2024, 28 days from the date of judgment would require that the Application in a Proceeding be filed on 26 October 2024. Given that the Application in a Proceeding was filed at 12.25 pm on 28 October 2024 (noting that it was sealed on 30 October 2024) I consider that the application has not been filed in accordance with the Rules.
In any event, whilst there was no formal application for leave to extend time for the filing of the Application, the circumstances are such that 28 days would have required filing on Saturday 26 October 2024 when the Registry would have been closed notwithstanding that the electronic receipt of the application would have been possible.
The Application in a Proceeding filed 28 October 2024 is supported by the applicant’s affidavit filed contemporaneously which annexes the following documents:
(a)The applicant’s offer to settle financial proceedings dated 9 March 2023;
(b)The applicant’s offer to settle financial proceedings dated 23 August 2023;
(c)The applicant’s offer to settle financial proceedings dated 3 October 2023;
(d)The respondent’s counteroffer to settle financial proceedings dated 5 October 2023;
(e)Letter from respondent’s solicitors to applicant’s solicitors dated 8 October 2024 seeking disclosure of the respondent’s written expressions of interest pursuant to order 6 of orders made 27 September 2024;
(f)Letter from respondent to the applicant’s solicitors dated 23 October 2024 advising of the sale of the 25 per cent unit holding held by Abadzhiev Family Trust in the N Unit Trust for $227,273;
(g)Invoices paid by the applicant from 5 October 2023 to the date of the Application in a Proceeding seeking costs; and
(h)A copy of the itemised costs account rendered by the respondent’s solicitors.
The itemised costs statement is for the period between 12 October 2023 and 31 August 2024. The schedule is in taxable form pursuant to Division 1 – Schedule 3 of the Family Law Rules.
On a solicitor/client basis between 5 October 2023 and the delivery of judgment on 27 September 2024, the applicant incurred total costs of $134,926 comprising $89,099 for solicitor’s fees, $36,081 for counsel fees and a further $9,746 for single expert valuations.
The applicant’s total fees are in the sum of $258,815 which include fees for legal services of $193,358, counsel fees of $37,016 and expert fees in the sum of $27,203.
Whilst there is some uncertainty as to the method and manner of calculation, the respondent seeks costs from 5 October 2023 to 27 September 2024 fixed in the sum of $115,000.
A question then arises that if the Court makes an order of costs should it be assessed on a party/party basis or a solicitor/client basis.
The applicant submits that the relevant considerations pursuant to s 117(2A) of the Act are as follows:
(a)The offer of settlement dated 5 October 2023;
(b)The respondent’s conduct in her position contended at trial for the 25 per cent unit holding held by the Abadzhiev Trust in the N Unit Trust to be transferred to the applicant; and
(c)The respondent’s conduct at trial in continuing to advance that there was a liability to the parties’ daughter and that the respondent indemnify the applicant for the contended liability rather than if it were a liability that it be brought to account as such within the asset pool.[1]
[1] Applicant’s Case Summary document filed 29 November 2024.
The respondent argues that the applicant bears the onus to establish circumstances which justify an order for costs and sets out the following, why a costs order should not be made in his favour namely:
(a)The circumstances are such that no good basis exists to consider costs other than pursuant to s 117(1) of the Act namely that each party should pay his or her own costs of the proceedings.
The financial circumstances of each of the parties
Judgment was delivered on 27 September 2024. There has been no challenge to the table of assets and liabilities as set out at [132] of the judgment and by way of overall summary, the total net non-superannuation assets of the parties including addbacks was in the sum of $4,601,608 and the total superannuation entitlements was in the sum of $1,322,232.
As discussed, the judgment provided for a 52/48 per cent apportionment in favour of the respondent such that the applicant was entitled to receive $2,208,771 and the respondent to retain the balance.
Even at the high watermark of the quantum of costs sought by the applicant, the resources of each of the parties are substantial.
I do not consider that the financial circumstances of the parties speak against a consideration of the applicant’s Application for costs.
The conduct of the parties
The litigation between the parties, whilst highly conflicted, was conducted in a civil fashion. I do not consider that there was any significant issue arising as to how each of the parties presented their case. The parties presented sufficient evidence that enabled the Court to make a determination as to the issues in dispute as identified at [45] of the judgment.
Whilst I note the respondent’s assertion that the balance sheet should reflect a liability to the parties’ daughter in the sum of $115,190, the matter was resolved without difficulty in circumstances where the daughter was not called to give evidence.
It could be said that unnecessary costs were incurred in the applicant having to meet the respondent’s case as to the amount purportedly owed to the parties’ daughter, but this has not been quantified.
A further significant issue went to a consideration of the treatment of the applicant’s entitlement to the Super Fund 5 pension. The parties agreed that the applicant’s pension had a value of $423,322 but could not agree as to its characterisation. Simply put, the respondent considered that the value of the applicant’s pension entitlement should be brought to account as an asset whereas the applicant argued that it should be treated as a financial resource.
Whilst the applicant was successful in having a value attributed to his Super Fund 5 pension excluded from the asset pool, it could not be said that the respondent’s assertion was without merit. It was an arguable case albeit unsuccessful in the final analysis.
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
Each of the parties were consistent in their compliance with orders made. There was nothing about the conduct of the proceedings by either party which detracted from a proper consideration of the identification and determination of issues in dispute.
Whether any party to the proceedings had been wholly unsuccessful
The applicant considers that he was successful in the substantive proceedings, asserting that he was “largely successful in that out of the 6 issues disputed, his position was preferred to that of the respondent’s on 5 out of 6”.[2]
[2] Applicant’s Case Outline document, paragraph 33.
It must be remembered that whilst the applicant’s position as set out in the 5 October 2023 offer was that he retain the interest in the N Unit Trust, at trial he did not maintain that position.
Neither of the parties wished to retain the interest and whilst it could be said that the respondent continued to press for an order that required the Abadzhiev Trust to transfer its interest in the N Unit Trust to the applicant, the issue was underpinned by the separate recognition of each of the parties that there was a high level of uncertainty as to the future of the N Unit Trust properties.
I do not consider that it was a straightforward exercise to attempt to reconcile the percentage outcome in the substantive proceedings with the applicant’s position.
The applicant argued that the apportionment of the property between the parties should be adjusted in his favour. It could be argued that the percentage adjustment in the substantive proceedings was closer to the adjustment sought by the respondent being 54/ 46 per cent in her favour.
Whilst I accept that the respondent was not successful in attempting to bring to account monies purportedly owed to the parties’ daughter and in seeking to include the applicant’s Super Fund 5 pension as an asset rather than a financial resource, it could not be said that overall, the respondent was wholly unsuccessful.
Offers made by each of the parties
In Robinson & Higginbotham (1991) FLC 92-209 at 78,417 Nygh J considered the focus of s 117(2A)(f) of the Act and said:
…when one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.
It is a trite observation that the terms of a settlement must be clear and able to be given proper consideration.
Offers should be seen in the context of the case and as such, the knowledge of the offeree of the financial situation is capable for the offer to be properly considered.
In Murray & Murray (1990) FLC 92-173 the wife filed an offer in writing containing a proposed settlement on the basis that she would accept an equal division of the net proceeds of sale of the former matrimonial home which was the only substantive property of the parties. After five weeks the offer was withdrawn. The wife received approximately two thirds of the nets proceeds of sale of the property and notwithstanding that the offer was withdrawn, she applied for an order for costs. The argument raised by the applicant was that the withdrawal of the offer meant that it could not be relied upon for an application for costs.
Nygh J considered that a proper interpretation of s 117(2A)(f) of the Act does not exclude a consideration of offers reasonably made but subsequently withdrawn.
If the offer was reasonable, then it should be given serious consideration. The Court is required to consider the circumstances of each case and whether at the time that the offer was made the financial circumstances of the parties were such that the offeree was able to properly consider the merits of the offer.
The respondent’s affidavit sets out the history of written offers of a settlement exchanged between the parties.
Solicitors for the respondent forwarded offers of settlement on 9 March 2023, 23 August 2023 and 3 October 2023. The offers were rejected by the applicant and the focus of the Application is in respect of a counteroffer made by the applicant on 5 October 2023. The applicant’s contention is that the offer was broadly consistent with the judgment delivered on 27 September 2024.
Annexure “D” to the respondent’s affidavit annexes a letter from the respondent’s solicitors to the applicant’s solicitors dated 5 October 2023 in the following terms:
I refer to [NN Lawyers] correspondence to AFL Withnalls Lawyers 03 October 2023 and advise the offer of settlement contained therein is rejected.
Pursuant to Order 3 of Orders 24 August 2023 (“the Orders”) please find attached by way of service the following:
1. Offer to Settle on a final basis; and
2. Effect of the Orders and Balance Sheet.
Pursuant to Order 1 of the Orders, the single expert’s accounting evidence has not been received and accordingly the attached Offer is made on a percentage basis and addresses both scenarios as to the alleged obligation to pay [Ms R] and without this obligation.
The Offer is predicated on the asset pool as contended for by [Ms Abadzhiev] as set out in [NN Lawyers] correspondence 23 August 2023 except or otherwise identified.
This Offer is open for 14 days from the date of this correspondence, being 20 October 2023.
It is uncontroversial that the terms of the offer to settle are detailed and clear in their intent. As such, there would be no impediment to the respondent being able to give proper consideration to the proposed terms of settlement.
At the time the applicant’s offer was predicated on an adjustment of 52.3/47.7 per cent in his favour.
Assuming that the document setting out the effect of the orders is based upon a balance sheet as promoted by the respondent in her earlier offer of 3 October 2023, the respondent was to retain assets (including superannuation) of $2,597,043 with the applicant to retain assets including superannuation in the sum of $2,850,562.
It is important to note that at the time, the applicant was prepared to retain the interest held by the Abadzhiev Trust in the N Unit Trust in the sum of $170,000. Furthermore, a figure of $414,353 was brought to account as the value of the Super Fund 5 pension.
In circumstances where the terms of the offer were clear and without ambiguity, the first issue for determination is whether it would have been reasonable for the respondent to accept the offer within the narrow window of opportunity being a period of 14 days.
The respondent argues that at the time of the offer valuation evidence received on 13 October 2023 from Mr GG (“the GG Report”) considered that the value for the N Unit Trust was $738,024. By implication, the respondent argues that even though a final order was made such that the interest of the Abadzhiev Trust in the N Unit Trust be sold for an amount not less than $170,000, as at 20 October 2023 (the end date for the applicant’s offer to remain open), there was sufficient uncertainty as to the N Unit Trust and the N Joint Venture generally that it was reasonable for the respondent to reject the value proposed by the applicant in the sum of $170,000.
It is further argued that if a notional value of $738,024 was included in the applicant’s offer the adjustment would have then been 53.6 per cent instead of what he ultimately received which was 48 per cent plus his Super Fund 5 pension entitlement.
The applicant sets out a summary of the financial comparison pursuant to the applicant’s offer of 5 October 2023 and a comparison of the outcome arising from to the final orders.
In summary, the total value of assets retained (including the superannuation entitlement but excluding the Super Fund 5 pension) was in the sum of $2,436,209 by reference to the applicant’s offer whereas he received $2,267,869 pursuant to the orders.
A significant difference is that initially the applicant sought to retain the property at J Street, Suburb K (“the J Street property”) whereas at the hearing the respondent sought to retain the J Street property without opposition from the applicant.
The applicant’s initial offer included a value in respect of the Super Fund 5 pension whereas the final orders treated the Super Fund 5 pension as a financial resource.
The applicant’s contention is that if the respondent had accepted the 5 October 2023 offer, she would have received net assets of $2,597,043 whereas the effect of the final orders was that she received assets to the sum of $2,515,532. It is arguable that there was considerable merit in the applicant’s offer particularly as to the treatment of the Super Fund 5 pension being included by the applicant as an asset with a value of $414,353.
The significant area of contention is whether at the time of the offer it was reasonable for the respondent to accept the intention to retain the N Unit Trust interest at a value of $170,000. What is now known is that the N Unit Trust interest was sold for $227,273. Whilst the difference between the sale price of the N Unit Trust interest and the applicant’s estimated valuation amount of $170,000 is $57,273, the more relevant consideration is the extent to which the applicant’s estimate of value at $170,000 was reasonably foreseeable or whether given the valuation evidence that was to hand held a level of uncertainty, such that it was reasonable for the respondent to reject the applicant’s offer.
The only effective evidence as to the value of the N Unit Trust properties was from the GG report prepared pursuant to the joint instructions by the solicitors for the parties to value the N Unit Trust properties. By report dated 5 October 2023, the market value assessment was $2,600,000. The interest of the Abadzhiev Trust in the N Unit Trust was, at that point, significantly more than the applicant’s offer based upon a valuation of $170,000.
Whilst it is uncertain as to when the parties, but in particular the respondent, received the GG valuation, the window of opportunity was narrow given that the applicant’s offer expired on 20 October 2023.
Exhibit “7” in the proceedings includes documents relevant to the N Unit Trust. In particular, it includes email communication between Mr T, the managing director of MM Pty Ltd and the respondent seeking to purchase the interest held by the Abadzhiev Trust in N Unit Trust.
On 11 August 2022, Mr T forwarded an email to the respondent in the following terms:
[Ms Abadzhiev], would you be interested in selling, I am not offering much as we still have no tenants for 2/3 of the property, as you can see the cash income dropped by $300k last FY. I offered […] $110,000.
On 27 March 2023, Mr T further emailed the respondent as follows:
Hi [Ms Abadzhiev]
Noting I offered to purchase your unit quite some time ago at a reasonable price, the amount can no longer be achieved.
My offer below is based on:
1. We all still own 3 floors
2. Only 1 floor is tenanted
3. The other 2 floors are on the market for sale or rent
4.At this point in time there has been no interest in either rent of (sic) sale
5.Income from the 1 floor tenanted is only barely sufficient to cover the costs of the loan, and will not cover any costs of repairs should any be needed – which could mean a cash injection by shareholders
6.I made […] a very low offer in July 2022 which was made during the middle of fighting the lawsuit with NDIS and we were at the time unsure of success – hence the low offer
My offer to you is $170,000.
It is likely that the figure of $170,000 used by the applicant as part of his offer arises from Mr T’s offer to purchase interest held by Abadzhiev Trust.
A relevant consideration is the extent to which an offer to purchase can be used as an indication of value. In Goold v Commonwealth of Australia; Rootsey v Commonwealth of Australia (1993) 114 ALR 135, Wilcox J comprehensively considered the authorities as to the extent to which an offer to purchase may be brought to account as direct evidence of what a specific purchaser was prepared to pay.
Whilst His Honour concluded at page 143:
29.…it would be anomalous and unjust for the courts to adopt a blanket rule excluding offer evidence. Such a rule might exclude cogent evidence of the interest of a particular purchaser in the land being valued, a person who is willing to pay more than ordinary market price.
Then at page 144, the following is said:
30.Of course, before placing reliance upon a mere offer, a court must consider carefully the question of its genuineness. The offer might be a sham, designed to prop up an inflated compensation claim or to reduce rates and taxes; in either case without any cost to the offeror. It might be an attempt to manipulate the market for some other ulterior purpose, perhaps a purpose extraneous to the litigation. If the offer was genuine when made, it might not have led to a conclude contract, even if resumption had not intervened. The offer might have been withdrawn. The purchaser might have failed to complete the transaction. Because of matters such as these, even a genuine offer cannot be regarded as direct evidence of value. But it seems to me that, once the court is satisfied about genuineness, an offer by an arm’s length party to purchase the land under valuation is something that the judicial valuer ought to take into account in considering the possibility of a sale at a price different from that indicated by conventional evidence, such as an analysis of comparable sales, or of a hypothetical development, or a calculation of the capitalised value of the rental returns. How much weight should be given to such an offer is a question to be determined by reference to the facts of the particular case. In some cases, the appropriate weight may be minimal; in others considerable.
It is apparent from the tenor and content of the emails from Mr T to the respondent that he was prepared to purchase the interest of the Abadzhiev Trust for an amount that was likely to be less than either anticipated by the parties or potentially the subject of valuation by expert assessment. His justification appears to be an inability to rent out the entirety of the premises and a reliance upon poor rental income for the 2022 financial year.
It cannot be said that there was any other information available to the parties other than the offer to purchase.
As matters transpired, the parties received the GG valuation which, if taken at its highest, would have suggested a valuation of the N Unit Trust properties at considerably more than $170,000.
At the time, the circumstances were not so certain that the respondent should have considered that “the writing was on the wall” and have readily accepted the applicant’s assessment of value.
In any event, the question is not just whether the offer was reasonable and should have been accepted but also whether it was reasonable for the offer to have been given proper consideration and then accepted within a period of 14 days.
Whilst I have accepted that other than the valuation for the Abadzhiev Trust interest in N Unit Trust, the applicant’s offer adopted the respondent’s valuation, the lack of evidence as to the value of the interest in N Unit Trust is difficult to reconcile.
In the decision of Roydon & Roydon (2024) FLC 94-194, Riethmuller J allowed an appeal in respect of a decision to award costs on an indemnity basis in circumstances where the offeror had achieved a better result than her offer to settle. At page 82,800 his Honour said:
66.Whilst consideration of offers is often loosely described as deciding whether a party obtained a “better outcome than their offer”, the principle requires consideration of whether declining to accept an offer was unreasonable. The first step in such a consideration is to compare the terms of the offer with the outcome, the second step is to determine whether it was unreasonable to decline the offer in the circumstances of the case.
I find that it was not reasonable for the respondent to reach a concluded position within what appears to be an unnecessarily short period of 14 days given that the only evidence as to value comprised the GG report which had been prepared pursuant to the joint instructions of the parties and Mr T’s offer to purchase.
The applicant further argues that whilst the percentage adjustment sought differed from the basis of the calculation underpinning the final orders, when all of the adjustments are made, his preparedness to include his Super Fund 5 pension in the asset pool, the percentage effectively mirrors that of the judgment.
The issue of the applicant’s Super Fund 5 pension being included in the asset pool was a matter for reasonable argument. If the value of the Abadzhiev Trust’s interest in the N Unit Trust was a figure derived from the valuation report of Mr GG, then the percentage adjustment would not have mirrored the final outcome.
Any other relevant matter
The respondent highlights that in the applicant’s Initiating Application he sought the following orders:
(1)A transfer of F Street, Suburb G to him.
(2)That the respondent pay and discharge any mortgage registered against the Suburb G property.
(3)That the respondent pay the applicant an amount which would cause the non‑superannuation assets of the parties to be divided equally between them.
(4)That the combined superannuation assets be divided 65/35 in the applicant’s favour.
Each of the parties seek the costs arising from the applicant’s Application in a Proceeding. The applicant seeks $15,000 whereas no amount is quantified by the respondent.
Whilst I have determined that when detailed consideration is given to the financial position of the parties in October 2023 to be such that it was not reasonable for the respondent to properly consider the offer, I find that the extent to which the applicant was required to meet the claim of the respondent that monies were owed to the parties’ daughter was egregious in circumstances where she was not called.
The Court documents relied upon by each of the parties presupposes that the respondent’s claim would be based on evidence that realistically could only be obtained from the daughter. Moreover, the orders sought by the respondent was initially that the parties owed their daughter $300,000 and then following a jointly instructed single expert report, the respondent’s claim was amended to the sum of $115,190. If successful, the respondent’s position was not that the parties cause money to be paid directly to their daughter but rather the respondent’s order was in the following terms:
5.That the [respondent] be solely responsible for paying to [Ms R] all monies held on behalf of [Ms R] by the [respondent], and the [respondent] shall indemnify the [applicant] and forever keep him indemnified in relation to the liability to [Ms R].[3]
[3] Amended Response to Initiating Application filed 8 August 2024.
I also bring to account that the respondent sought that the applicant pay a settlement sum of $330,000.
CONCLUSION
I find that there should be no order for costs in favour of the applicant and as such, no costs are payable in respect of the failed Application in a Proceeding.
Whilst it may be considered that the applicant was wholly unsuccessful in his application for costs, I bring to account the manner in which the respondent presented her case and whilst there has been no attempt made to quantify the portion of the costs that relate to the respondent’s claim on behalf of the parties’ daughter, the applicant’s Application in a Proceeding was arguable.
I dismiss the applicant’s application for costs and the cross application of the respondent for costs in respect of the dismissed application.
I make orders as appear at the commencement of these reasons.
I certify that the preceding ninety-nine (99) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 20 December 2024
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