P and P (No.2)
[2005] FMCAfam 22
•31 January 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| P & P (No2) | [2005] FMCAfam 22 |
| FAMILY LAW – Costs – property proceedings – matters to be considered – financial circumstances of the parties – conduct of the parties – offers of settlement Family Law Act 1975 – ss.117 |
| Applicant: | J W P |
| Respondent: | P A P |
| File No: | DNM 425 of 2003 |
| Delivered on: | 31 January 2005 |
| Delivered at: | Darwin |
| Hearing dates: | Written Submission delivered on 11 January 2005 & 13 January 2005 |
| Judgment of: | Brown FM |
REPRESENTATION
| Counsel for the Applicant: | Ms D |
| Solicitors for the Applicant: | D N |
| Counsel for the Respondent: | Ms S |
| Solicitors for the Respondent: | S & A |
ORDERS
(1)That the husband pay the wife’s costs fixed in the sum of $*,***.**.
(2)That pursuant to Rule 21.15 of the Federal Magistrates Court Rules it was reasonable that the wife employ an advocate for the final hearing of this matter.
(3)That the application for costs be otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DARWIN |
DNM425 of 2003
| J W P |
Applicant
And
| P A P |
Respondent
REASONS FOR JUDGMENT
Introduction
On 23 September 2004, following a two-day hearing, which took place on 8 and 9 September 2004, I made final orders in respect of the division of the parties’ matrimonial property.
On 21 October 2004, the solicitors for P A P “the wife” filed an application seeking that J W P “the husband” should pay the wife’s costs, on a solicitor client basis, in respect of the property proceedings for the period between 16 August 2004 and 9 September 2004.
On 30 November 2004, the husband filed a response to this application, in which he sought that the wife’s application for costs be dismissed. These proceedings are concerned with the resolution of these competing applications for costs.
Background
I found that the extent of the pool of property available to be divided between the parties in this matter amounted to $***,***.**. The overwhelming majority of this sum was made up of two pieces of real property, the parties’ former matrimonial home situated at 45 W C, A ($***,***.00) and an investment property at 13 A W, N in W A ($***,***.00). The parties agreed on these values. The wife wished to retain the A property as she had lived in it for many years. As neither party lived in W A, neither had a pressing wish to retain the N property, which both saw as something of a millstone.
The parties were both of retirement age and each had health problems. I remarked in the reasons for judgement that the pool of property was probably not sufficient to meet their respective needs in retirement. At the outset of the hearing, the husband indicated his view that it was appropriate that the parties’ assets be divided equally between them. The wife was of the view that as her overall contributions had been greater during the marriage, it was appropriate that she should receive 65% of the parties’ net assets.
Ultimately, after hearing all the evidence in the matter, it was my view that the parties’ assets should be divided so that the wife received 60% of them and the husband received the remaining 40%. In order to achieve this outcome, I determined that the wife should retain the A property and some other minor items of property, overall to the value of $7,824.00 and the husband should retain the N property and his car, valued at $3,000.00. This meant that it was necessary for the wife to pay the husband the sum of $42,329.60. Accordingly, in dollar terms, the husband received assets to the value of $150,329.60.
The Evidence
The wife relied on an affidavit sworn by her solicitor, Ms S and filed on 21 October 2004. The husband relied on an affidavit sworn by his solicitor, Ms D and filed on 30 November 2004. There is no dispute between the parties as to the contents of various pieces of correspondence, which passed between their solicitors in the period between 16 August 2004 and the conclusion of the hearing of the evidence in the case on 9 September 2004. This correspondence is at the heart of the dispute between the parties regarding the issue of costs.
The solicitors for the parties agreed that it was appropriate that they each provide written submissions in support of their respective positions regarding the issue of costs in order to avoid the expense of a formal hearing. In the wife’s case those submissions were delivered on 11 January 2005 and in the husband’s case his submissions were delivered on 13 January 2005.
Chronology of settlement negotiations(a)
It is agreed between the parties that between 9 August 2004 and the commencement of the hearing, their respective solicitors negotiated with one another in an attempt to settle the proceedings. It is essentially the wife’s position that the husband assumed a recalcitrant position in respect of those settlement negotiations and rejected offers, which, in the light of the final orders, were reasonable ones. Accordingly his attitude made the final hearing unavoidable and so led her to incur the considerable legal costs involved in the hearing of the matter.
On 9 August 2004 the wife’s solicitor wrote to the husband’s solicitor proposing that the matter be settled on the basis of the wife receiving both the A and N properties and paying the husband the sum of $130,000.00. At that stage it does not seem that the parties had formally agreed as to the value of either of the properties. The offer is stated in the letter to be an “open” one.
The husband responded to this offer in a letter dated 10 August 2004. He proposed that the wife retain both properties and pay him the sum of $160,000.00. The offer was said to be open for seven days only. The letter was not marked “without prejudice” and counsel for the husband has not sought to claim privilege in respect of it.
The wife made a further offer in an attempt to reach compromise on
16 August 2004. At that stage she proposed that she retain both the A and N properties in exchange for a payment to the husband in the sum of $150,000.00 and that otherwise each party should retain the other items of property in his or her possession. In the letter the wife’s solicitor indicated that she had obtained a valuation in respect of the A property, which indicated it was worth $260,000.00. She also indicated that she was not in a position to obtain a valuation in respect of the N property but alludes to an appraisal in respect of the property obtained by the husband, which gives $***,***.00 as its value. Accordingly, although in strict terms, the parties had not agreed on the value of the properties, the figures on which they subsequently agreed were exchanged between them at this stage. The offer is expressed to be “Without prejudice save as to costs”. The offer is also said to amount to “approximately 41% of the pool”.
On 18 August 2004 the husband responded to this offer in writing. His solicitor indicated that he was prepared to settle the matter on the basis that the wife retained the A property; he retained the N property and the wife paid him the additional sum of $90,000.00. Accordingly, in round terms, at that stage, he was seeking assets to the value of $195,000.00. An increase of $35,000.00 in the amount, which he had indicated, was acceptable to him in his earlier letter of 10 August 2004. Again the letter was not marked “without prejudice” and counsel for the husband has not sought privilege in respect of it.
This letter drew a response from the solicitors for the wife in a facsimile dated 18 August 2004, which was again headed “Without Prejudice save as to costs”. The correspondence reads as follows:
“In open correspondence dated 10 August 2004 your client offered to settle on the basis that he receive the sum of $160,000.00 and transfer to my client both properties and she retain everything else she has in her possession. An amount equivalent to approximately 43% of the pool of property if the pool is calculated on the combined value of the two properties.
Our client then made a counter offer of $150,000.00 otherwise on the same terms and conditions. Your client now wishes to settle on the basis that he receive the property at Mt N plus the sum of $90,000.00. A total of $195,000.00 or 53% of the pool accepting your client’s appraisal of $***,***.00.
Has your client withdrawn the offer of settlement of $160,000.00?
We have advised our client that the likely outcome in this matter is that there will be a distribution in our client’s favour in excess of 50%. Our client would like to settle this matter but will not agree to a distribution to your client in excess of 50%. We hope to hear from you further in relation to a more realistic offer of settlement.
In the event that your client receives an adjustment of property (not including the property which he currently has in his possession) of less than $150,000.00 we shall seek our costs of and incidental to the hearing of the application.”
It seems that there was no further correspondence between the parties regarding settlement negotiations after 18 August 2004 and the matter proceeded to hearing on the dates set aside for this purpose. It is the wife’s case that in the period between 16 August and 9 September 2004 she incurred costs in the sum of $11,811.25.
On the morning of the hearing counsel for each of the parties submitted a minute of the orders sought on behalf of his or her client. In the husband’s case he sought transfer to him of the N property plus payment to him by the wife of $77,500.00 – a total of $182,500.00. This was predicated on the basis that the wife would retain the A property. In the wife’s case she sought to retain the A property and proposed in exchange that the husband should retain the N property and receive $26,828.00 from her – a total of $131,828.00. Accordingly at the commencement of the hearing the parties’ respective positions had hardened and they were about $50,000.00 apart. However it seems that agreement about the value of each of the pieces of real property had crystallised.
The wife’s submissions
The wife points to the fact that the parties’ pool of assets was a modest one and at least at one stage they were ostensibly only $10,000.00 apart in respect of the sum that each believed represented an appropriate settlement. In these circumstances the wife believes that the matter was one which should have resolved but did not do so only because of the unreasonable attitude displayed by the husband, particularly after he raised his offer of settlement in his letter of 18 August 2004 and failed to respond to the wife’s letter of the same date.
It is the wife’s submission that in cases where the pool of assets can be described as being modest and the parties themselves are in straightened financial circumstances, it is incumbent on the parties concerned to use their best offices to attempt to resolve the issues between them. Something that she asserts has not occurred in the present case from the husband’s perspective. In these circumstances, it is the wife’s case that it is proper for the husband to pay her costs, particularly as he was put on notice that she would be seeking such an order in the event that the husband failed to secure over 50% of the parties’ net assets.
The husband’s submissions
The husband points to his modest financial circumstances and his limited ability to earn an income as being major factors that militate against any award of costs being made against him. It is the husband’s case that he has no capacity to pay any award of costs, which may be made against him.
He also argues that, by necessary implication, the wife withdrew her offer of settlement made on 16 August 2004, as this was not formally her position at the start of the final hearing on 8 September 2004. Accordingly it is his position that “the wife’s withdrawal of previous offers, and the advancement of her [minute of proposed orders] were the triggering factors that necessitated a hearing of the property application”.[1] Essentially, it seems to be his position that the wife’s offer of 16 August had been superseded and therefore he cannot be accused of being unreasonable for not accepting it.
[1] See husband’s written submissions at p 2
However there is no evidence before me to either indicate that the husband was minded to take the 16 August offer at this later stage or that the offer was still open. It seems clear to me that by this time the attitudes of both parties had hardened and they each put forward, in their respective minutes of orders sought, their preferred best outcome at the start of the hearing. Certainly that the time for negotiations was past.
It seems to be the case that the husband argues that the wife’s position at the commencement of the hearing was an unreasonable one. Certainly it is his case that the orders he ultimately obtained at judgement were greatly more favourable to him than those proposed by the wife on 8 September 2004 – that is he should retain the N property and receive the sum of $26, 828.00.
The husband is also critical that the wife’s claim for costs is not currently particularised and is significantly greater than the costs provided by the Federal Magistrates Court Rules. He also submits that he has been recently put to some expense because it has transpired that the certificate of title to the N property has been lost, an occurrence for which he believes the wife is responsible.
In summary, the husband submits as follows:
“The husband attempted to settle the matter. The matter was an unusual and complex matter and neither party obtained orders in terms that they sought in their respective applications.
Mr P is experiencing difficult financial circumstances. He does not have the ability to earn significant sums of money. What he has in terms of property is all that he is likely to possess because of his age and health problems. Any costs order is likely to cause Mr P financial distress.
It is submitted in those circumstances that the wife’s application should be dismissed.”[2]
[2] Husband’s submission as to cost at p 5
From this I take it, it is the husband’s position that he cannot be criticised for failing to compromise the matter after 16 August 2004, as the matter itself was of such inherent complexity that the range of possible outcomes was difficult for him and his solicitor to predict.
The legal principles applicable to costs applications
The making of a costs order is governed by section 117 of the Family Law Act which provides as follows:
Costs
(1)Subject to sub-section (2) and sections 117AA 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 sub-section (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, in accordance with section 117C or otherwise, 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.”
Section 117 (1) abolishes, for the purposes of Family Law Act proceedings, the general rule that in civil proceedings costs follow the event. Section 117(2) then provides the court with a general discretion to make costs orders if it is of the opinion that there are circumstances that justify it in so doing. Section 117(2A) sets out the matters that the court shall have regard to.[3]
[3] See Browne v Green 29 Fam LR 428 at 432
The discretion in respect of costs placed in the court pursuant to section 117 is a wide one, which must be exercised having regard to the matters set out in section 117 (2A) so far as they are relevant. In the case of In the marriage of I and I (No.2)[4] the Full Court said as follows:
[4] In the marriage of I and I (No.2) 22 Fam LR 557 at 558
“Section 117 confers upon the court a broad discretion in relation to costs. That discretion is one which the Court should not seek to fetter. As was pointed out by the High Court in Penfold v Penfold[5]:
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 subsection is not paramount to s 117(2). As subs (1) is expressed to be subject to subs (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.
Subsection (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.”
It is now appropriate to consider whether there are any such justifying circumstances present in this case by reference to the specific criteria as set out in section 117(2A).
The financial circumstances of the parties(a)
[5]Penfold v Penfold (1980) 5 Fam LR 517 at 582; FLC 90-800 at 75,053
As a result of conducting the final hearing in this matter I have some knowledge of the current financial circumstances of the parties. It is common ground between the parties that neither of them is in a strong financial position. Certainly this is not a case where there is a gross disparity between the husband and wife either in respect of their accumulated capital or capacity to earn income.
Both parties are now in their mid 60’s and largely retired. The husband’s main source of income is a disability P. The wife works part time but also receives an aged P. Accordingly both parties have reached the stage of life when they must begin to utilise capital set aside during their working lives for the purpose of self-support in the years of their retirement. The proceeds, which each party received as a result of the judgement in this case, represent the sole source of that capital for both the husband and the wife.
As I remarked in the initial judgement in this case, at the end of the long marriages between the parties, neither of them has been left with recourse to large amounts of capital and both of them are likely to be reliant on government benefits as their major source of support for the remainder of their lives. In this context, the issue of legal costs has great significance for both parties. In both cases the payment of legal costs will come out of accumulated capital, which is unlikely to be replenished.
In the husband’s case, the amount sought by the wife in costs amounts to approximately eight percent of the amount he received by way of final settlement. I have not been advised as to the amount he has already expended in the provision of his own legal services to date. In the wife’s case, the reimbursement of her costs clearly also has great moment for her.
Receipt of Legal Aid(b)
Neither party was in receipt of legal aid in these proceedings. Accordingly this is not a relevant consideration.
Conduct of the Parties(c)
The wife places great emphasis on this consideration in her written submissions. It is her case that the conduct of the husband from
18 August onwards was unreasonable and necessitated the final hearing of the matter.
It is clear that both parties attempted to resolve the proceeding in the period prior to the date allocated for final hearing. In this regard settlement proposals were exchanged between the parties, which by
16 August 2004 had left them ostensibly $10,000.00 apart. However, two days later, on 18 August, the husband, radically changed tack and increased the amount he sought in settlement and the basis on which it should be provided. I appreciate that his solicitor had indicated that the offer made on his behalf on 10 August 2004 was open for seven days only. However, in my view, it was legitimate for the wife’s solicitor to inquire as to whether the earlier offer was still open and by implication to ask why there had been such an extreme change of heart.
In her facsimile of 18 August, the solicitor for the wife left open the channels for further negotiation between the parties and invited a further offer of settlement from the husband. Of great importance, she also raised the issue of costs at this early stage. Particularly she put the husband and his solicitor on notice as to her view of the likely outcome and advised that if such an outcome eventuated she would seek her client’s costs. The husband and his solicitor chose not to respond formally to this overture.
The husband was entitled to seek an adjudication of the competing applications from the court. However the efficient administration of judgement, particularly in Family Law matters, relies on the parties concerned and their legal representatives, making a bona fide attempt to resolve the matters in dispute between them. This is particularly so where the costs of the litigation involved grow to the point where they are out of proportion to the magnitude of the issues involved.[6]
[6] In this regard see “Best Practice Guidelines for Lawyers Doing Family Law Work” August 2004 published by the Public Affairs Unit, Australian Government Attorney-General’s Department Publication number 31/03. This document was produced by Family Law Section of the Law Council of Australia and the Family Law Council and provides guidelines for lawyers involved in family law practice as to what constitutes “best practice”. These guidelines do not create new duties for lawyers or override lawyer’s existing duties either to their clients or as officers of the court. The guidelines apply to proceedings in the Federal Magistrates Court. Guideline 1.2 in Part 7, which deals with Property/Spousal Maintenance reads as follows:
“In respect of matters relating to financial issues, the principles of proportionality should be borne in mind at all times. It is undesirable for the legal costs involved in any case to be disproportionate to separating couples’ financial position.”
As already indicated, the husband categorises this as a difficult and unusual case. Certainly it was unusual in that the parties had been married to each other twice. The proceedings occurred when the parties were both in their mid sixties and no longer had responsibility for the care of children. The husband assessed it as a 50/50 case. The wife believed her contributions were greater both in a financial sense and in regards to the care of the parties’ children in the period between the marriages. Ultimately the wife’s view was preferred.
The husband’s argument seems to be that, in the unusual circumstances of this case, the range of outcomes in the application of judicial discretion was difficult to predict and therefore he cannot be criticised for seeking a 50% share of the pool and proceeding to trial when it was not forthcoming.
The outcome of any litigation, which hinges on the exercise of discretion, cannot be predicted with complete certainty. That is a truism. However in assessing the degree of uncertainty in outcome, the parties cannot allow themselves to lose sight of the magnitude of the issues at stake, when set against the possible costs involved. In this case 10% represented about $37,500.00. A sum which both parties should have readily foreseen being rapidly reduced by legal costs.
Failure to Comply With Previous Orders(d)
This is not a relevant consideration in this matter.
Party Wholly Unsuccessful(e)
At the outset of the hearing on 8 September 2004, both parties seem to have been resigned to the fact that there would be a hearing and accordingly both put forward their best positions at its commencement. Neither can be criticised for this.
The husband points to the fact that neither party was wholly successful in respect of the position advocated by him or her at the commencement of the hearing. This is so. However it cannot be overlooked that the result ultimately achieved was that largely predicted by the wife’s solicitor in her facsimile of 18 August 2004.
The view of the wife and her solicitor that this was not a 50/50 case, because the wife’s contributions were greater than those of the husband, was vindicated. However the husband’s view that given the parties’ ages; the length of their relationship with one another; and their equally pressing future needs; the case should be regarded overall as one of equality, cannot, in my view, be regarded as spurious. In other words “so out of the ballpark” as to be absurd.
(f) Offers to Settle
This, along with the respective financial circumstances of the parties, constitutes the most important consideration in this case. The import of section 117(2A)(f) is to ensure that, when offers to settle are made, they are seriously considered by the other party concerned. Litigation is expensive and for that reason is not to be embarked upon lightly. Accordingly, courts such as this one should encourage the parties to litigation to seek a compromise of their proceedings and should discourage a party from cavalierly disregarding any reasonable offers to settle.
Generally speaking negotiations between the parties and/or their legal advisers to compromise proceedings under section 79 are privileged.[7] However, as a result of the inclusion of the phrase “or otherwise” in section 117(2A)(f), an offer to settle need not be made in accordance with section 117C before it may be taken into account in respect of an application for costs under this provision. Accordingly the section recognises the procedure known as a Calderbank letter or offer. This procedure was described in Cross on Evidence as follows:
“This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but is now recognised to be of general application. The consequence of marking an offer “without prejudice save as to costs” is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties – they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.”[8]
[7] See Steel and Steel (1992) FLC 92-306
[8] Cross on Evidence (1996 Australian Edition) at paragraph 25360
The central facsimiles in this case, sent by the wife’s solicitor to the husband’s solicitor on 16 and 18 August 2004 each bear the heading “Without Prejudice Save As To Costs”. Accordingly, in my view, they are clearly relevant to the determination of the wife’s application for costs. The husband’s correspondence is not so marked. However the husband’s solicitor has not attempted to claim privilege in respect of it and even if such privilege had been claimed, in my view, it would not have affected the overall flavour of the negotiations between the parties. The important fact to be drawn from those negotiations is that in her two facsimiles the wife firstly proposed compromising the matter on the basis that the husband receive assets to the value of $150,000.00 and secondly intimated that if the matter proceeded to trial and the husband received assets to a value of less than this sum, she would seek an order for costs themselves.
The consequence of this correspondence was that, from the wife’s point of view at least, the husband was put on notice that there were considerable perils for him in pursuing the litigation without regard to the wife’s offer to settle the matter. Clearly that was the intention of the wife’s solicitor in compiling the facsimile of 18 August 2004 in the way that she did. In my view it cannot be described in any way as being merely an empty gesture or threat. The wife’s offer had been closely calibrated on the basis of the evidence and advice that was then available to her. As matter transpired, the position, which she adopted at that stage, was subsequently vindicated by the order made after the trial. In my view, it is also appropriate that I bear in mind that the offer was made approximately three weeks prior to the commencement of the trial and cannot be considered to be a piece of last minute brinkmanship.
The Best Practice Guideline, to which reference has already been made reinforce that practitioners should ensure that their clients understand the ramifications of receiving both “without prejudice save as to costs” offers and offers of settlement under section 117C.[9]
[9] see Best Practice Guidelines (supra) at Part 3 Costs Guideline 2.4
I do not accept the husband’s argument that the wife effectively withdrew her offer as a consequence of the filing by her of a different proposal in the form of the minute of orders sought filed at the commencement of the trial. The effect of the wife’s facsimile of
18 August 2004 was to indicate to the husband that she was amenable to further negotiations with him, within certain parameters. Effectively she left “the ball in the husband’s court” in respect of settlement and he chose not to respond. From his silence the wife could only conclude that the matter would have to proceed to hearing. In such circumstances, as her offer to settle was obviously not acceptable to the husband, it is not unreasonable for her to put the best possible gloss on her position at the commencement of the hearing.
It is true however that the ultimate form which the orders of the court took was materially different to that proposed by the wife in her offer of settlement of 16 August in which she proposed that she retain both pieces of real property and pay the husband the sum of $150,000.00. Both parties throughout their negotiations displayed ambivalence about the N property. In addition, at trial neither party displayed any burning desire to retain the property, as by the time of the trial, the parties’ ambitions in regards to it had moved on to a considerable degree and the property itself had been revealed to be a somewhat imprudent investment.
However the fact remains that ultimately the husband received property to the value of $150,329.60 at the conclusion of the trial, where in comparison the wife in her facsimile of 16 August had offered him property to the value of $150,000.00, with him to retain the property already in his possession. Accordingly the wife’s offer of 16 August 2004 is likely to have left him marginally better off, in dollar terms, than the final orders of the court.
This fact is not of itself determinative of the wife’s application for costs. However, in my view, in all the circumstances of this case it is a matter to which great weight must be given. This is particularly so given the small extent of the property pool and the fact that there were no great disputes between the parties regarding the value of the significant items within it. The offer itself was a reasonable one. This is not a case where there was a gross discrepancy between either of the party’s knowledge of their financial situation or their financial resources to litigate. They both faced the same perils and pitfalls of litigation from essentially the same financial position. It makes no sense if parties are left free to litigate in the face of such offers and so incur punitive costs for the other party involved without the prospect of facing some penalty in the form of costs.
In Pennisi v Pennisi[10] the Full Court of the Family Court said as follows:
“…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…
The plain words [of section 117(2A)(f)] do not limit a Court’s attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the Act carry the same consequences as payment into Court in common law matters.
We do however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight should be given to this factor in considering the question of costs. The principle must not, however, be rigidly applied. Offers must be seen within the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that if would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.”
[10] Pennisi v Pennisi (1997) FLC 92-774 at p 84,547
Conclusions
At the end of the day, it is the responsibility of the court to balance the various matters set out in section 117(2) to arrive at a result that it considers just. The difficulty in this case is that the parties embarked on litigation, which has proven to be ruinously expensive for them both, when neither had recourse to ample funds to finance such litigation without occasioning prejudice to their respective future financial security. Neither party was ever going “to scoop the pool” in respect of the ultimate judgement of the court. In that sense proceeding with the litigation to judgement posed a threat to them both. Both parties should have had a vested interested in reaching some form of accommodation with the other. Despite the best intentions expressed in such documents as the Best Practice Guideline the system has failed the parties.
I am well aware of the serious consequences for the husband if an order for costs is made against him. However he must bear a significantly larger proportion of the responsibility for the matter proceeding to trial than the wife. In this case I am satisfied that it is appropriate to depart from the general rule that each party to family law proceedings should bear his or her own costs. The tension in this case is created by the obviously straitened financial circumstances of the husband and his temerity in proceeding with his application in the face of the wife’s offer to settle made on 16 August 2004. The husband’s decision had severe financial consequences for her also. Although the husband is ill equipped to bear a costs order his conduct must be subject to some penalty by way of costs. In my view it would result in an injustice to the wife if the husband was able to escape the consequences of rejecting the wife’s carefully considered offer, with its explicit threat as to costs by merely pleading tight financial circumstances. After all the wife too suffers financial insecurity, which has been compounded by the husband’s actions.
The more difficult aspect of this case is assessing the quantum of those costs, without again exposing the parties to the payment of still greater quantities of costs. The wife seeks costs in the sum of $11,811.25. She has not provided any details as to how this sum is calculated. In particular, at trial the wife was represented by counsel. However the wife has not provided any details as to how much of this sum is represented by counsel’s fees.
The Court has a wide discretion as to the calculation of costs. Pursuant to Rule 21.02(2) of the Federal Magistrates Court Rules:
In making an order for costs in a proceeding, the Court may:
a) set the amount in costs; or
b) set the method by which the costs are to be calculated; or
c) refer the costs for taxation under order 62 of the Federal Court Rules or under order 38 of the Family Law Rules; or
d) set a time for payment of costs, which maybe before the proceeding is concluded.
However, pursuant to Rule 21.10:
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
a) Costs in accordance to schedule 1; and
b) Disbursements properly incurred.
Pursuant to Rule 21.15:
The Court or a Registrar may certify that it was reasonable to employ an advocate, or more than 1 advocate, to appear for a party in a proceeding.
In this particular case I am satisfied that it was reasonable for the wife to employ an advocate to present her case at final hearing and I intend to make the appropriate certification pursuant to Rule 21.15. Rule 21.16 sets out the mechanism by which such counsel’s fees are to be calculated by reference to schedule 1 of the Rules.
In section 3(2) of the Federal Magistrates Act, the legislature sets out the objects of the Federal Magistrates Court as follows:
(a)to enable the Federal Magistrates Court to operate as informally as possible in the exercise of judicial power; and
(b)to enable the Federal Magistrates Court to use streamlined procedures; and
(c)to encourage the use of a range of appropriate dispute resolution processes.
No doubt, the intention of the legislature in this regard was to reduce the cost of court proceedings pursuant to Federal legislation and provide litigants with a cheap and cost effective means of accessing justice within the Federal jurisdictional sphere. Rule 21.10 creates a scale of costs by reference to the occurrence of fixed events. In my view, the creation of such a scale was designed to help achieve these objects.
In this case, I believe the appropriate means of assessing the wife’s costs is pursuant to Schedule 1 of the Federal Magistrates Court Rules. The adoption of this schedule will also avoid the need for a taxation, which is potentially time consuming and likely to lead to more expense for the parties.
During the course of the proceedings, the wife’s solicitor seems to have attempted to keep costs to a minimum. In particular the wife relied on her initiating affidavit of evidence filed on 23 October 2003 and did not chose to prepare another affidavit for trial. Thereafter, on 23 and 27 August 2004, she filed two additional affidavits from her sons,
T and W P, on which she relied at trial, although neither was required for cross-examination. She also filed an up-dated statement of her financial circumstances on 27 August 2004 and caused a subpoena to be issued to the ANZ Bank requiring it to produce records to the court. The parties were able to agree as to the value of the real property involved in the case. Accordingly I do not believe that the matter was an especially complicated one to prepare.
Although two days was set aside for the hearing of the competing applications. The reality was that the case took up less than this time. On the second day both parties were able to complete their submissions well before the time scheduled for the luncheon adjournment. Accordingly the case occupied one and a half hearing days.
Application of schedule 1 to the matters raised by this case provides the following items of costs:
Stage 5: Preparation for a two day final hearing:
$3,600.00
Stage 6: Attendance by solicitor at final hearing:
$2,050.00
Explaining orders:
$190.00
Counsel’s fees as calculated pursuant to Rule 21.6 (Daily Hearing Fee + Advocacy Loading of 50%
$3,075.00
Total
$8915.00
Having considered the nature of the hearing between the parties and the various matters set out in section 117 of the Family Law Act, I have come to the conclusion that it is just for the husband to pay 60% of the sum I have assessed, namely $*,***.** by way of costs to the wife.
In reaching this conclusion I have borne in mind the financial circumstances of both parties; the fact that the stance adopted by the husband in categorising the case as being one of equality of contributions overall cannot be regarded as being totally without merit; and the circumstances of the wife’s offer to settle. I have attempted to balance these factors against each other to reach an appropriate outcome that is just.
For all these reasons the orders of the court will be as set out at the commencement of these reasons for judgement.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: C White
Date: 31 January 2005
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