PARADIN & PARADIN (No.2)

[2019] FCCA 3415

FEDERAL CIRCUIT COURT OF AUSTRALIA

PARADIN & PARADIN (No.2) [2019] FCCA 3415

Catchwords:
FAMILY LAW – Costs – written offer.  

Legislation:

Family Law Act 1975 (Cth), ss.79, 117, 117(1), 117(2A), 117(2A)(a).

Family Law Rules 2004 (Cth), schedule 3.

Federal Circuit Court Rules 2001 (Cth), schedule 1.

Applicant: MS PARADIN

Respondent: MR PARADIN

File Number: MLC 11110 of 2017

Judgment of: Judge Stewart

Hearing date: 6 September 2019

Date of Last Submission: 6 September 2019

Delivered at: Melbourne

Delivered on: 11 September 2019

REPRESENTATION

Counsel for the Applicant: Ms Tulloch

Solicitors for the Applicant: Jane M Curtis & Associates

Counsel for the Respondent: Mr Hoult

Solicitors for the Respondent: Lander & Rogers

ORDERS

1. The Husband pay the Wife’s costs of the proceedings fixed in the sum of $62,000.00 (“the costs payment”) with a stay of 90 days with respect to the payment, PROVIDED ALWAYS THAT the Husband offers security for the costs payment of the costs in similar terms to order 5, 6, 7 and 8 of the orders made 17 July 2019.

2. Liberty is reserved to each of the parties to apply with respect to the security for the costs payment.

IT IS NOTED that publication of this judgment under the pseudonym Paradin & Paradin (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 11110 of 2017

MS PARADIN

Applicant

And

MR PARADIN

Respondent

REASONS FOR JUDGMENT

(As revised from transcript)

1. These proceedings come before the Court as a result of a decision in property matters. Final property orders were made by me on 19 July 2019. The Applicant seeks the Respondent pay her costs of $65,257, being $64,157 plus an admitted disbursement of $1,100. Alternatively she seeks $61,886, being $60,786 plus an admitted disbursement of $1,100. Those costs sought are in preferential order as set out, and include the costs of this costs application. 

2. The difference between the two figures is accounted for by the calculation of costs pursuant to schedule 3 of the Family Law Rules 2004, which is the first preferred position. The alternative position is a calculation of costs pursuant to schedule 1 of the Federal Circuit Court Rules2001, which is the second preferred position. As an aside, I note that there is relatively little difference between the two scales.

3. Costs are sought from 11 April 2018, largely but not solely based on the date the solicitors for the Applicant sent a letter proposing a compromise of the proceedings was forwarded to the solicitors for the Respondent.  The relevant orders that were made on 19 July 2019 this year provide for:-

   (3)    Within 90 days (“the date”) the Husband shall pay the Wife the sum of $146,672 (“the payment”); and

   (4)    Contemporaneously with the payment:-

   (a)    the Wife shall return to the Husband the motor vehicles currently in her possession;

   (b)    the Husband do all such acts and things and sign all such documents as may be required to transfer to the Wife all of his right, title and interest in Property E; and

   (c)     the Husband discharge the mortgage and any other encumbrances affecting Property E.

   It sought that the costs order be payable by that date. 

4. The Applicant had initially sought costs on an indemnity basis, and that claim was abandoned even after the Applicant filed an Amended Application in a Case on 3 September 2019, seeking those costs on an indemnity basis. The Amended Application in a Case was filed after the first return date in the duty list, but prior to the proceedings being heard on 6 September 2019 (because there was not sufficient time to hear the entire costs application in the duty list).

5. The costs application on an indemnity basis was abandoned on 6 September 2019 in recognition of the fact that the Applicant had not entered into a costs agreement with her solicitor, a condition precedent to seeking costs on an indemnity basis. Further, the fees rendered by the Applicant’s solicitor were calculated in accordance with the Family Law Rules 2004.

6. The argument with respect to the payment of indemnity costs was tenuous at best. I do not regard this as a case where the circumstances are exceptional as to warrant a costs order on an indemnity basis, and beyond party/ party costs. 

7. Each of the parties have very helpfully provided submissions in writing. I have read each of those submissions and taken their content into account. Counsel for each of the parties also spoke to their respective submissions and made further submissions during the costs hearing. I have taken all matters into account regardless of whether I have referred specifically to each and every matter in these reasons. 

8. The governing provision for the assessment of costs is section 117 of the Family Law Act 1975 (“the Act”), which sets out the matters to be taken into account in considering whether an order for costs should be made.  Fundamentally, the process is as follows:-

   a)there is an initial proposition that subject to the various subsections of the Act, each party shall bear his or her own costs. That proposition is subject to the Court forming an opinion that there are circumstances that justify an order for costs being made;

   b)in the circumstances where the Court forms the opinion a party should not bear their own costs, the costs remedy is discretionary and is subject to the various subsections contained in section 117 of the Act and the applicable rules of the Court. The relevant subsection to be considered in that instance is subsection 117(2A) of the Act; and

   c)any orders which are made must be considered to be just.

   Accordingly, once the opinion is reached that the circumstances justify a costs order being made, the discretion is conferred as such that the relevant matters are taken into account. 

9. I also agree with the submissions of Counsel for the Applicant that the discretion conferred is wide and it is not necessarily confined to the Federal Circuit Court scale, but rather can encompass other matters and can be calculated both pursuant to the Family Law Rules 2004 scale and on other matters which are considered relevant.

10. At first instance there are, circumstances which justify a departure from the position set out in section 117(1) of the Act, “that each party should bear their own costs”. The relevant matters to be considered are the following, noting that some of those matters are also matters to be considered pursuant to section 117(2A) of the Act. At this point, I am at the preliminary position as to whether or not I think that there are circumstances that justify a departure from the usual position.

11. First of all, these proceedings were purely financial. That means that the waters were not muddied by parenting issues and the like, and therefore matters of a financial nature become more relevant. Second, the result achieved by the Applicant was overall, more favourable to her than the letter that was forwarded on 11 April 2018, although the result was not identical.

12. At page 9 of the Applicant’s submissions, there is a detailed table which sets out the various outcomes with respect to each part of the application, including spousal maintenance, child support, the departure application and the property proceedings pursuant to section 79 of the Act. One needs to be careful in reading that in that it seems that there has been a juxtaposition of the two columns. However and in general terms, the outcome or the narrative on the far right-hand side of the column is correct, and what is the most compelling is that the orders for the Respondent to pay the Applicant $146,000 or just shy of $147,000, is substantially more than the offer proffered by the Applicant in the sum of $40,000.

13. The application for costs is contested to by the Respondent and he says that he should not have to pay the costs. The gravamen of the Respondent’s position is that the orders are not in identical terms to those which were set out in the offer. Second, that at the time the offer was made the asset pool was unknown. 

14. The Husband says there were various applications that had not at that stage been made, and that it was impossible at that early stage, given the state of the evidence, to properly consider the Applicant’s offer and to make an informed assessment as to whether or not that offer should be accepted. The offer was only open for a limited time, which expired. As far as I am aware there were no subsequent offers after the offer had expired.

15. Those points are well made. Nevertheless, I am satisfied that the offer is so similar in actual outcome to the orders that were actually made following the hearing of these proceedings that such circumstance is not of itself a circumstance which justifies a consideration of whether or not a costs order should be made. 

16. The parties in terms of even the first hurdle of whether the Court should make a costs order, argued things such as conduct of the parties and the like. It is fair to say that during the course of my reasons delivered on 19 July 2019, I was critical of the conduct of both of the parties for different reasons. 

17. The Applicant, for instance, seemed to have had an inflated view of what her entitlements were at the commencement of the proceedings. She sought a figure approximating a $500,000 payment at the commencement of the proceedings. She also sought to pursue a position that the Respondent was in a de facto relationship with a witness in the proceedings, who was also an employee of his business. These reasons should be read in conjunction with the reasons for decision delivered on 19 July 2019. 

18. In terms of the Respondent, I was critical of him in terms of the level of his financial disclosure and how he presented his financial matters to the Court. The Respondent had a rather laissez faire attitude to his obligations towards financial disclosure in the proceedings, sometimes in circumstances where information was so readily available it would have been as simple as picking up the phone and ringing a financial institution. 

19. I was also critical of both of the parties in terms of expecting the Court to undertake a forensic style audit in terms of whether or not certain matters should be included as liabilities and the like. As such, it is fair to say that these proceedings had some of the characteristics of one of those sorts of property cases which involved ambit claims on both sides, and with a degree of obliqueness in terms of the way the case was presented (and I am in no way being critical of Counsel and the way they presented their respective cases by saying this). 

20. Nevertheless, it is a property case. The Applicant has in an overall sense achieved a better outcome than that which she proffered in early 2018. There is no doubt that each of the parties in this case have incurred very substantial legal costs. They are both represented by experienced legal practitioners, and when I was told of at least the Applicant’s costs last week (which were said to be in total in the vicinity of just over $100,000 in terms of what her out of pockets), I was not surprised by that figure in terms of the amount of work undertaken. I imagine that the Respondent’s costs are at least that, if not substantially more.

21. Accordingly, having determined that I should consider whether there should be a costs outcome for the Applicant, I now consider what order, if any, should be made in terms of costs. Pursuant to section 117(2A)(a) of the Act, I have regard to the financial circumstances of the parties. The asset pool, as revised by the Court, is set out at paragraph 181 of the reasons for judgment delivered on 19 July 2019. The asset pool available for division between the parties was calculated at just over $1,400,000. That figure, however, does ignore the fact that the Respondent has substantially more credit card debts which I declined to take into account; about 50 per cent of his stated credit card liabilities, which are set out at paragraph 35 of the reasons for judgment. I assessed his credit card liabilities for the purpose of division at $85,000, however his actual credit card debt was about double that. In taking that into account in considering his financial position now, I cannot ignore that he will have a liability for that amount and nor can I ignore that both of the parties will have significant legal expenses which they are required to be paid.

22. The Respondent achieved a result whereby he received 40 per cent of the revised asset pool, whereas the Applicant achieved 60 per cent. The Applicant has the care of the children of the marriage and although the Respondent is assessed to pay child support, there are issues with respect to payment of that. The Respondent will have some arrears of child support which will need to be dealt with by him. 

23. In an overall sense, the parties are not in such parlous financial positions that such impacts on my assessment of costs. The Full Court has stated that impecuniosity, even if it existed in this case (which it does not), is not in and of itself a reason not to make a costs order. 

24. I also have regard to my findings as to the Respondent’s earning capacity, which is set out in my reasons for judgment. I also have regard for the Applicant’s earning capacity, which I assessed is less than the Respondent’s. Neither of the parties in this case is in receipt of a grant of legal assistance. 

25. In terms of the conduct of the parties, although I have been critical of both of them, I wish to make it clear in these reasons that if this was an application based on conduct alone I would not be moved to make a costs order. 

26. In terms of whether the proceedings were necessitated by the failure of a party to comply with the previous orders of the Court, I am not sure about that. The criticisms of the Respondent, in terms of financial disclosure, may have been as a result of failure to comply with previous orders. However, if it was just that issue, I would not be moved to make an order. Neither party has been wholly unsuccessful in the proceedings in terms of the way they opened their case and that is not a basis. 

27. The real basis is this issue of the offer that was made in writing and whether or not that should be the basis of the costs order being made. I do accept that there is some force in the argument put on behalf of the Respondent, in terms of being able to assess offers. However, equally there was no suggestion in the proceedings that, once the asset pool was ascertained, that there was a position of compromise put by him. I do not regard the issues in this case as being of such difficulty, in terms of when the offer was made, that the Respondent was not, with the benefit of his very experienced legal practitioners, able to assess the offer even if the figures at that stage were a bit rubbery. 

28. Save and except for a couple of motor vehicles which were returned to the Respondent, and some advantages to the Respondent that appear to be in the vicinity of somewhere between $10,000 to $20,000, the offer is similar to the letter that was forward that the Respondent, by virtue of the result achieved is at least $60,000 worse off at least than the offer that was proffered. That is a reasonably significant amount having regard to what the ongoing needs of the parties might be.

29. When I assess other matters, I am very cognisant of the fact that the Respondent is taking on the business with his ill-health as an ongoing concern and that the Applicant is receiving assets that are more corporeal. For instance, the business that the Respondent is taking on has $783,000 of plant and equipment, and the various other plant and equipment that has been valued separately. He has an element of his costs added back, whereas the Applicant is essentially taking real property and a cash payment. 

30. Much of the proceedings were devoted to giving the Respondent time to meet his obligations with running the business as an ongoing concern. I accept that any costs order that I make it will be difficult for the Respondent to get the money together to pay it, because he will have to pay his own legal fees (although he has paid some of them already) and will have to make the payment to the Applicant and whatever costs I order. For that reason, I have determined that the costs should be calculated on the Federal Circuit Court Rules 2001 scale rather than on the Family Law Rules 2004 scale. I cannot recall that there was any contention that quantum was in issue, and as such I calculate the costs at $61,886.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Stewart

Associate:

Date: 6 December 2019