Patterson and Patterson (No. 2)

[2008] FamCA 1036

FAMILY COURT OF AUSTRALIA

PATTERSON & PATTERSON (NO. 2) [2008] FamCA 1036

FAMILY LAW – COSTS – Offers of settlement

APPLICANT: Mr Patterson

RESPONDENT: Ms Patterson

FILE NUMBER: SYF 2583 of 2006

DATE DELIVERED: 11 June 2008

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: STEVENSON J

HEARING DATE: 22 May 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Snelling

SOLICITOR FOR THE APPLICANT: Ms Caroline Chung,
Milne Berry Berger

COUNSEL FOR THE RESPONDENT: Mr Foster

SOLICITOR FOR THE RESPONDENT: Mr Michael Kinchington,
Bob Rosic & Kinchington

Orders

I make the following orders:

1. That the wife pay to the husband, within three months of the date of these orders, an amount equal to his costs of 2 November 2007 only, on a party-party basis.

2. That there be no order as to the costs of this application.

IT IS NOTED that publication of this judgment under the pseudonym Patterson & Patterson is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: SYF 2583 of 2006

MR PATTERSON

Applicant

And

MS PATTERSON

Respondent

REASONS FOR JUDGMENT

THE PROCEEDINGS

1. This is the husband’s application that the wife pay his costs of contested proceedings for parenting orders and property settlement.  The hearing commenced before me on 31 October 2007 and, late that day, the parties reached an agreement in relation to parenting issues.  On 2 November 2007 I made parenting orders by consent and heard submissions in relation to property issues.

2. On 1 February 2008 I delivered judgment and ordered that the net pool of property be divided as to 57.5% to the husband and 42.5% to the wife.  I found that the net pool of property had a value of $1,280,421.  As a result of the orders, the husband retained the former matrimonial home and took two investment properties.  He was required to make a payment to the wife of $97,000.  The wife took two investment properties and received a payment of $97,000.  The whole of the parties’ mortgage liability was secured on the former matrimonial home and was assumed by the husband.

3. Applications for costs orders are determined with regard to the matters set out in section 117(2A).  I will now consider those factors in the context of this application.

   Section 117(2A)(a):           the financial circumstances of each of the parties to the proceedings;

4. There is a substantial financial imbalance between the parties, with the husband’s income being approximately three times as great as that of the wife.  She expects to be able to earn approximately $40,000 gross per annum on her return to Sydney, whereas the husband’s salary package amounts to about $120,000 per year.  The wife will probably become liable to pay child support when she begins to earn this level of income, as the children live primarily with their father.

   Section 117(2A)(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;

5. Neither party was in receipt of a grant of legal aid.

   Section 117(2A)(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;

6. No conduct of either of the parties is relevant to this application. 

   Section 117(2)(d):              whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

7. Neither party failed to comply with any order of the court.

   Section 117(2A)(e):  whether any party to the proceedings has been wholly unsuccessful in the proceedings;

8. No party in the proceedings was wholly unsuccessful.

   Section 117(2A)(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;

9. In support of his application for costs the husband relied on offers of settlement made by him on 17 March 2006, 14 November 2006 and 13 September 2007.  It is important to look carefully at the details of each of the offers and the circumstances in which these proposals were put forward.

Offer of 13 March 2006

1. The hsuband offered a division of the net pool of property as to 65% in his favour and the balance of 35% to the wife.  This offer gave no indication of what he contended to be the nature and value of the assets, nor the extent of the parties’ liabilities.  This offer is clearly of no assistance to the husband in his pursuit of costs for the property proceedings. 

2. In this same letter he offered to settle the parenting issues on the basis that the children live with him and spend time with their mother each alternate weekend from 6:00pm on Friday until 6:00pm on Sunday and on Mothers Day.  On his behalf it was submitted that this offer was “substantially the same as made on 2 November 2007”, which I assume is a reference to the consent parenting orders.

3. In fact there are significant differences between this offer and the consent parenting orders which were ultimately made.  One such difference is that the terms of settlement contained provision for the children to spend half of all school holidays with their mother and to share the Christmas period between their parents.

4. The husband’s offer provided that the children spend time with their mother each alternate weekend from 6:00pm on Friday until 6:00pm on Sunday.  This proposal was put at a time when the parties were separated under one roof and before the wife departed Sydney to live in the Newcastle area.  It must be assumed, therefore, that this time was all that the husband was prepared to allow the children to spend with their mother during both term time and school holidays, on the basis that both of the parties were living in Sydney.  The terms of settlement provided that the children spend time with her each alternate weekend from after school on Friday until the beginning of school on Monday and on Wednesday overnight in each other week, once she relocates to Sydney.

5. If the wife had accepted this offer, the children would spend two nights rather than four nights per fortnight with her.  She would have no time whatsoever with the children during the school holidays and she would not see them at all during the Christmas period.  In my view, this offer does not assist the husband in respect of his application for costs of the parenting proceedings.

Offer of 14 November 2006

1. This offer related to property settlement only and proposed a division of the net pool of property as to 60% to the husband and 40% to the wife.  The value of the net pool of property asserted by the husband in this offer was $1,504,600.  He proposed that the wife take the four investment properties, inter alia, and assume a mortgage liability of $420,000. He would retain the former matrimonial home and assume a mortgage liability of $360,000.

2. This proposal was predicated on the wife receiving net property worth approximately $616,500 and the husband $888,100.  The offer made no provision for the selling costs or capital gains tax which the wife would incur in respect of the four investment properties.  The orders which I ultimately made were intended to distribute these liabilities as evenly as possible between the parties.

3. The values of some of the assets as asserted in this offer differed from my findings at the hearing.  In my view, it is not legitimate for the husband to import the values found at hearing into his offer and rely on this outcome to support his application for costs. 

4. Even if this approach were to be regarded as proper, the proposal would have given the wife approximately $32,000 less than the amount which she received pursuant to my orders.  I can see no reason why she should be held liable for the husband’s costs because she refused to accept $32,000 less than my finding as to her entitlement.  For these reasons, it is my view that this offer fails to assist the husband in his application for costs.

Offer of 13 September 2007

1. In this offer the husband proposed a division of the assets as to 57.5% to himself and 42.5% to the wife, on the basis of a net pool of non-superannuation assets of $1,172,802 and superannuation benefits totalling $115,610.  This offer was predicated on the wife taking all four investment properties and the husband retaining the former matrimonial home.  The wife would assume a mortgage liability of $360,000 and the husband approximately $440,000.  The superannuation benefits would be divided equally, with the husband transferring $41,195 to the wife’s fund. 

2. This distribution of assets differs from my orders in that the wife took only two investment properties and received a lump sum payment from the husband.  I had regard to the need to distribute the liabilities for capital gains tax and selling costs on the investment properties as evenly as possible and to the wife’s need for cash, to re-establish a home for herself in Sydney.

3. It is thus the case that, although the percentage split proposed by the husband is identical to my orders, the scheme of division of assets was quite different.  Pursuant to my orders the parties shared liability for capital gains tax and selling costs and the husband’s superannuation constituted no part of the wife’s award.  The whole of the mortgage liability remained with the husband and the wife received a lump sum payment of a significant amount.

The Offer Allegedly Made by the wife on 2 November 2007

1. In his affidavit sworn on 21 May 2008 the wife’s solicitor, Mr Kinchington, deposed that an oral offer of settlement was made on her behalf on 2 November 2007.  This offer was to the effect that she receive 43% of the net pool of property.

2. In an affidavit sworn on 21 May 2008 the husband’s solicitor, Ms Chung, disputed that any such offer was ever made.  Ms Chung maintained that the only offer ever put by the wife was contained in a letter from her solicitors dated 31 August 2007, which proposed a division of the net pool as to 52.5% to her and 47.5% to the husband.

3. In oral submissions to me, counsel for the husband directly accused Mr Kinchington of “concocting the file note after the event”.  This submission followed the tender into evidence of Mr Kinchington’s file, including notes made during the course of the trial.  In fact, it would also have to be the case that Mr Kinchington created a letter to his client, dated on its face 5 November 2007, at some later time.  This letter contained a lengthy account of the trial, and surrounding negotiations, and made reference to the alleged offer.

4. It is clear that, if this offer was on the last day of the hearing, there would be no impact on the costs of the parties.  Effectively, they were already liable for their legal costs of the whole of the trial.  It is thus unnecessary for me to attempt to make findings of fact on this very serious issue.  I observe that I would be most reluctant to make a finding that an officer of the court would mislead me, solely to gain a financial advantage for his client, on the basis of the available evidence.

   Section 117(2A)(g):  such other matters as the court considers relevant

5. There was a real dispute between the parties as to parenting issues until late on the afternoon on the first day of the hearing.  This dispute impacted on the fate of the former matrimonial home, until agreement was reached that the children live primarily with their father.  It was only at that point that it became clear that it was preferable that he retain the property and live there with the children.  Otherwise an order for sale was a real possibility, if such were necessary to cater to the children’s needs.  At all previous times, the wife sought an order for the sale of this property.

6. The wife’s relationship with the children, especially the oldest child N, has been troubled in recent times.  The parenting orders made by consent were predicated on her living within 20kms of the child S’s school.  It was hoped that the children will choose to increase the time which they spend with their mother, when she is in closer proximity to them.

7. The wife expects that she will need some $500,000 to $700,000 to purchase a suitable home on her return to Sydney.  It is obvious that she will be in fairly demanding financial circumstances and will need all cash and income available to her.

8. The orders which the husband seeks would take approximately $37,000 from the wife’s overall award of approximately $544,000, not allowing for capital gains tax and selling costs on her two investment properties.  Such an outcome would only make it more difficult for her to re-establish herself in Sydney and to repair her relationship with the children.

Conclusion

1. In my opinion the only offer which might assist the husband’s costs application is that made on 13 September 2007.  It should be remembered, however, that there was uncertainty about the fate of the former matrimonial home until the parenting issues were resolved on the first day of the trial.  As well, there was no allowance in this offer for capital gains tax and selling costs in respect of the four investment properties which the wife would take, if she had accepted his proposal.  Further, $51,195 of the wife’s entitlement would have consisted of superannuation benefits, whereas only $10,000 of her award was in this form pursuant to my orders.

2. In my view it is relevant, however, that the wife made no response to the husband’s offer of 13 September 2007.  It was always open to her to accept the percentage division proposed by him but to submit a different proposal for the distribution of the assets.  In reality, though, this observation has significance only for the final day of the hearing.  In the period between 13 September 2007 until the end of the first day of the trial, the parties were occupied with both parenting and property issues.  

3. For all of these reasons I propose to order that the wife pay the husband’s costs of the last day of the hearing only.  I was given no evidence of the quantum of these costs, thus I can make an order only in general terms.

4. I will make no order as to the costs of this application.  The husband has been largely unsuccessful and the wife had valid arguments to put in opposition to his application that she pay his costs amounting to $37,000, or any lesser amount between that sum and the quantum of these orders.

I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson

Associate:     

Date:              11 June 2008