Peat & Northup
[2022] FedCFamC1F 322
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Peat & Northup [2022] FedCFamC1F 322
File number(s): ADC 554 of 2018 Judgment of: BERMAN J Date of judgment: 13 May 2022 Catchwords: FAMILY LAW – COSTS – Circumstances justifying an order – Where the applicant seeks costs on a party-party basis only in relation to the property aspect of the proceedings – Where the respondent opposes the application – Where the application is brought out of time – Where the delay was not significant and the respondent was aware costs was a live issue – Where no prejudice would be caused if leave were given for the filing of the application – Consideration of the financial circumstances of the parties – Consideration of the conduct of the parties – Where the respondent was not wholly unsuccessful – Where offers to settle were made – Where an order for costs should be made. Legislation: Family Law Act 1975 (Cth) s 117(2A)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021(Cth) r 15.06
Cases cited: Browne v Green (2002) FLC 93-115
Collins & Collins (1985) FLC 91-603
Gallo v Dawson (1990) 96 ALR 479
Rouse & Rouse (1981) FLC 91-073
SCVG & KLD [2009] FamCAFC 56
Division: Division 1 First Instance Number of paragraphs: 82 Date of hearing: 5 April 2022 Place: Adelaide Counsel for the Applicant: Ms Bailey Solicitor for the Applicant: Culshaw Miller Lawyers Counsel for the Respondent: Litigant in person ORDERS
ADC 554 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR PEAT
Applicant
AND: MS NORTHUP
Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
13 MAY 2022
THE COURT ORDERS THAT:
1.The respondent pay the applicant’s costs fixed in the sum of THIRTY THREE THOUSAND DOLLARS ($33,000) inclusive of GST on or before thirty (30) days from the date of this order.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 the pseudonym Peat & Northup is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
By Amended Application in a Case filed 17 December 2021, Mr Peat (“the applicant”) seeks an order that he be granted leave to file an application for costs out of time and if successful he seeks the following orders against Ms Northup (“the respondent”):
4.… that within 30 days of the date of this Order the respondent … pay the Applicant’s party-party costs relating to financial matters only incurred in the period 19 March 2019 to the end of trial to the trust account of the applicant’s solicitors [in] the sum of $ (to be clarified upon receipt of the Estimate of Costs prepared by [Mr FF]).
5.That in the event that the respondent fails to pay the said sum within 30 days she shall pay interest on any amount outstanding at the rate of 6.10% per annum from the date of default until payment shall be made in full.
…
7.That within 7 days of the date of this Order the respondent do pay to the Applicant husband’s costs in respect to the enforcement proceedings, in the sum of $4,290 (including GST).
(As per the original)
At the commencement of the hearing, counsel for the applicant confirmed that the quantum of costs sought was fixed in the sum of $50,062.50.
The respondent opposes the costs order sought by the applicant.
BACKGROUND
The parties were not able to resolve their differences in respect of the parenting arrangements for X born 2007 and Y born 2010. In addition, the parties were in conflict as to settlement of property.
Following a final hearing which commenced on 31 August 2020, judgment was delivered on 24 December 2020. The judgment set out the reasons for parenting and property settlement orders.
The applicant does not seek a costs order in respect of the child related proceedings.
The orders for property settlement and division included the following order by way of a settlement sum payable to the respondent:
(12)That in full and final settlement of any claim that either party may have against the other or at any time in the future for settlement of property or alteration of interests in property:-
(a)That the husband and wife do all things necessary to distribute the funds in the NAB joint account representing the net proceeds of sale from the [Suburb F] property in the following manner:-
(i)To the wife the sum of THREE HUNDRED AND SIXTY FIVE THOUSAND TWO HUNDRED AND TWENTY SEVEN DOLLARS ($365,227);
(ii) To the husband the balance.
The parties signed documents necessary to close the joint NAB account with the settlement sum being transferred to the respondent.
On 23 February 2021, the respondent filed a Notice of Appeal in respect of parenting and property.
The Appeal was heard by the Full Court on 21 June 2021 with judgment delivered on 12 November 2021.
The respondent was unsuccessful and was ordered to pay the applicant’s costs fixed in the sum of $30,000.
The applicant filed his application for costs on 9 March 2021 and sought an order for leave to bring the costs application out of time.
EXTENSION OF TIME
The applicant concedes that he had 28 days in which to bring his application for costs but did not do so.
Rule 15.06 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) provides as follows:
(1)The court may at any time, on the application of a party or on the court’s own initiative, shorten or extend a time that is fixed under these Rules or by procedural order.
(2)A party may apply under subrule (1) for an order extending a time even though the time fixed by the rule or procedural order has passed.
(3)A party who makes an application under subrule (1) for an extension of time may be ordered to pay any other party’s costs in relation to the application.
The Rules do not set out any threshold test or the matters to be considered in relation to an application for an extension of time.
The exercise of the discretion is not automatic. In Gallo v Dawson (1990) 96 ALR 479 McHugh J said:
The discretion to extend time is given for the sole purpose of enabling the court or justice to do justice between the parties: see Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257 at 262.
What is required is that the applicant show adequate reason to explain the delay, that there is an issue of significance or substance to be determined and that there is no hardship caused to the respondent.
In SCVG & KLD [2009] FamCAFC 56 O’Ryan J summarised the relevant case law in respect of an application for an extension of time as follows:
39.Various authorities have established that in order to determine whether compliance with the Rules would work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation and the consequences of the parties of the grant or the refusal of the extension of time: see Gallo v Dawson (supra) per McHugh J at 480-1; Lawecki & Marcel Kalfus & Co (1985) FLC 91-644; Prowse v Prowse (1995) FLC 92-557 at 81,568-81,573 but in particular at 81,572-3; Morrison v Morrison (1995) FLC 92-573 at 81, 674; and more recently OP v HM (supra).
Following the delivery of judgment on 24 December 2020, it is not controversial that the applicant’s solicitor’s office was closed until 11 January 2021.
By letter dated 19 January 2021, the respondent was put on notice that the applicant intended to seek a payment from the respondent in respect of his costs.
The letter was detailed in that it included an offer to settle the issue of costs without further litigation.
On 22 January 2021, the respondent’s former solicitor contacted the applicant’s solicitor advising that it was the respondent’s intention to appeal the parenting and property orders but that there was a delay in that the respondent did not file a Notice of Appeal within 28 days from the date of judgment delivery and accordingly, had filed an application to appeal out of time.
The respondent filed her application on 22 January 2021. The application was successful and the respondent’s appeal was heard on 21 June 2021 with judgment being delivered on 12 November 2021.
The respondent was successful in relation to a limited parenting issue but the balance of the appeal was dismissed and the respondent was ordered to pay the applicant’s costs fixed in the sum of $30,000.
The reason for the delay in filing the application for costs has been adequately explained. The applicant’s solicitors were closed until 11 January 2022 and almost immediately thereafter correspondence was forwarded to the respondent advising that unless the respondent accepted a settlement proposal in respect of costs, an application would be filed. The applicant’s solicitors sought a response by 2 February 2021.
The respondent’s solicitors acknowledged receiving the letter of 19 January 2021 and that a response would be forthcoming.
As matters transpired, no agreement was reached and the application for costs was filed out of time.
As discussed, I consider that the delay in filing the application for costs was not significant and given the correspondence and communication passing between the solicitors for the parties, the respondent was not taken by surprise.
No prejudice was occasioned to the respondent by the delay and given the question of costs was a live issue, it could not be said that the application for costs was in respect of an issue or a matter that lacked substance or merit.
I propose to grant retrospective leave for the filing of the application for costs.
BACKGROUND TO THE COSTS APPLICATION
On 24 December 2020, an order was made that the respondent receive a settlement sum of $365,227.
In addition to each party receiving property currently in their separate possession, power and control, the orders also provided for the respondent to receive the sum of $73,177 by way of a superannuation split from the applicant’s splittable entitlement.
On 19 March 2019, the applicant forwarded a letter of offer to the respondent offering her the following:
(a)$400,000 cash settlement;
(b)Her Motor Vehicle 2 vehicle;
(c)The retention by her of $66,000 by way of partial property settlement;
(d)$16,000 retained by the applicant at the time of separation; and
(e)An equalisation of the superannuation entitlements of the parties.
On 27 February 2020, the respondent’s solicitors put forward the following offer whereby she would receive the following:
(a)The sum of $396,171.44, being the balance of the net sale proceeds from the Suburb F property;
(b)A further cash payment of $70,000;
(c)The retention of $120,000 received by her for litigation funding;
(d)$98,680 by way of previous distributions;
(e)A superannuation split based upon a 70/30 apportionment in her favour; and
(f)A binding child support agreement in respect of the payment of child support and other financial gratuities.
The applicant rejected the respondent’s counterproposal and on 3 March 2020 put forward the following proposal:
(a)A settlement sum of $382,666.58 less $11,259.50 owed to the applicant for disbursements.
(b)The retention of the balance of funds in the respondent’s solicitors’ trust account being approximately $45,000;
(c)Retention of funds received by way of partial property settlement being $99,680;
(d)The respondent’s Motor Vehicle 2; and
(e)50 per cent of the superannuation asset pool.
No response was received.
The total costs incurred by the applicant at the conclusion of the trial on 4 September 2020 was in the sum of $265,945.55.
The applicant does not seek any component for costs incurred prior to 19 March 2019. From that date, the total fees incurred were $218,678.25.
The applicant instructed Mr FF, solicitor, to prepare an assessment of the likely party-party costs which would underpin the quantum of costs to be sought by the applicant if his application is successful.
The complexity to the exercise was that Mr FF was required to attempt to separate the costs in respect of property settlement as opposed to the costs incurred in litigating parenting issues.
Mr FF has been an admitted legal practitioner since 1981. He has been a member of the Law Society Costs Committee for decades and since 2019 has run a legal practice which specialises in the assessment of costs.
He has provided many lectures, seminars and papers on the subject of costs and I consider that he brings considerable expertise to the exercise undertaken by him.
In summary, Mr FF considered that the legal costs that relate to the property matters are in the sum of $75,000 with counsel fees and disbursements in the sum of $26,000.
If assessed on a party-party basis the amount that Mr FF considered was recoverable for the property component of the proceedings is in the sum of $33,400 and counsel fees in the sum of $16,662.50, making a total of $50,062.50 for party-party fees and disbursements incurred as and from 19 March 2019 to the conclusion of the trial.
There was no effective challenge by the respondent to the exercise undertaken by Mr FF. In the circumstances of this case, the concession by the applicant that costs and disbursements should be assessed on a party-party basis is appropriate. The broad approach undertaken by Mr FF that the total costs and disbursements should be apportioned equally between the parenting issues and the property division has merit, not simply because of the equality of the percentage adjustment but because Mr FF has supported his opinion as a result of a careful line by line analysis of the total costs paid.
I acknowledge that the respondent sought to challenge the accuracy of the invoices rendered by the applicant’s solicitors for the costs incurred.
I have given careful consideration to the respondent’s claim but taking into account the detailed work undertaken by Mr FF, the quantum now sought by the applicant if successful is reasonable.
SHOULD AN ORDER FOR COSTS BE MADE IN FAVOUR OF THE APPLICANT
In considering what order should be made, if any, in respect of the applicant’s costs, s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) requires the Court to have regard to the following:
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of such offer; and
(g) such other matters as the court considers relevant.
Accordingly, I consider I have a wide discretion in respect of matters relating to a potential costs order.
Financial circumstances of each of the parties
It is not necessary to engage in a detailed analysis of the financial circumstances of each of the parties. It is however relevant to enquire generally as to whether there is a significant disparity in the financial circumstances of each of the parties.
Given that the proceedings involved property settlement, there is enough evidence to consider the respective financial positions of the parties.
Moreover, the applicant appropriately conceded that his financial circumstances are secure whereas having regard to the financial statement filed by the respondent, whilst it could not be said she is impecunious, the settlement sum she received represents the extent of her assets.
In considering the exercise to make a costs order, the ability of a party to satisfy an order as to costs is part of the broad discretion (see Collins & Collins (1985) FLC 91-603 at 79,877).
The financial statement of the respondent filed 31 March 2022 reveals weekly income of $841 with modest personal expenditure of $98. The total property available to the respondent is $233,000.
Whilst not determinative, a relevant consideration is that the costs order sought by the applicant would represent almost one fifth of the value of the total property held by the respondent.
It must be remembered however that impecuniosity is not in and of itself a barrier to a costs order being made. An order for costs was made in favour of the applicant following the unsuccessful appeal by the respondent.
The conduct of the parties
The applicant contends that the respondent was unsuccessful in her pursuit of the L Family Trust being included in the assets of the parties which if successful would have enhanced the balance sheet by the inclusion of the following:
·Distribution from the family settlement trust (Location T proceeds) - $1,071,356
·25 per cent interest in the family settlement trust - $609,664
·Funds received by the husband from the family settlement trust in the 2018 financial year - $27,828
·Funds received by the husband from the family settlement trust in 2019 - $89,170
The applicant rejected that he had any available interest in his late father’s estate. He did acknowledge that there would be income available to him by way of distribution in the 2021 year of about $80,000.
The broad contention of the respondent was that whilst the will of the applicant’s late father provided for the shareholding to be divided equally amongst the grandchildren when they attain the age of 25 years, nonetheless she considered that the applicant’s sister, as joint shareholder in the trustee company, and the three directors of the trustee entity were the puppets of the applicant. In short, even though the respondent acknowledged that the applicant did not control the trust directly, she argued that because the applicant’s sister would do his bidding, in reality his ability to influence her gave him effective control.
I found that there was no evidence of collusion between the applicant and his sister nor was there any evidence that the applicant and his sister would likely cause a premature distribution of the trust property, contrary to the testamentary wishes of the applicant’s late father.
On appeal, the respondent pressed the following grounds:
4.The learned Judge erred in his finding that there was no evidence to support a contention that the Husband, in concert with third parties, caused the premature distribution of assets of the [L Family Trust] and further, the learned Judge erred by failing to include the value of the Husband’s interest in the Sydney property in the adjusted asset pool.
5.The learned Judge erred in his finding that there was no evidence to support a proposition that the Husband together with third parties acted in concert thwart [sic] the testamentary intention of the late [Mr Peat Snr] thereby increasing the assets available for distribution to the parties.[1]
After careful consideration of the submissions made on behalf of the respondent, the Full Court found as follows:
66.We also add that there was no evidence at all before the primary judge that the husband had ever attempted to suborn his sister with the aim of defeating the purpose of the trust. The contention before the primary judge was nothing more than speculation and he was entirely correct to reject it.[2]
The conduct of the parties to litigation is a matter of significance, it usually relates to circumstances where a party gives false or misleading evidence, is fraudulent in their conduct or behaviour, relies upon unreasonable or irrelevant evidence or by their conduct causes unnecessary delay.
An order for costs may also be made where the conduct of a party causes unnecessary costs to be incurred in order to meet an issue which is ultimately unsuccessful (see Rouse & Rouse (1981) FLC 91-073).
There is little doubt that the gravamen of the respondent’s case, both at trial but also the focus of her appeal, was her contention that the value in the family settlement trust should be included as property of the parties. To give the issue some financial perspective, the adjusted property pool which did not include any component relating to the family settlement trust was in the sum of $1,608,455 which was comprised largely of uncontroversial property. The amount sought to be included in the property pool available for division would almost have doubled the net balance of property.
Whether any party to the proceedings has been wholly unsuccessful
It cannot be said that the respondent was wholly unsuccessful. Whilst it is acknowledged that she was unsuccessful in respect of a significant component of her case, it is difficult to find that there were no other issues in the proceedings beside the consideration and treatment of the family settlement trust.
Whether any parties of the proceedings made an offer in writing to the other party
In Browne v Green (2002) FLC 93-115 the Full Court said the following:
57.We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. …
Accordingly, a party should not reject or ignore a reasonable offer.
A without prejudice offer contained in correspondence was forwarded to the respondent on 19 March 2019. Broadly speaking, the correspondence adequately sets out the financial history of the parties and provides a current asset pool which is not dissimilar to the final outcome.
The offer properly disclosed that the applicant was a beneficiary of the family settlement trust and set out the arrangements as between the applicant and his three siblings that would result in the grandchildren of the applicant’s late father being the ultimate beneficiaries of the trust upon them reaching the vesting age of 25 years.
The offer was valid and remained open to be accepted only for 7 days. If the offer was not favoured with a response then the applicant put the respondent on notice that he intended to bring an Amended Initiating Application.
The respondent was later represented by solicitors. By letter dated 21 June 2019, no reference was made to the written offer but there was a request for the sum of $60,000 by way of partial property settlement and litigation funding.
It was not until 27 February 2020 that the respondent put forward a counterproposal. It is common ground that the counteroffer was rejected. A further proposal that the applicant would waive the funds he considered were owed to him in the sum of $11,259.50 which would then result in a settlement sum of $382,666.58 was sent to the respondent, however no response was received.
It is apparent that the respondent would have been well advised to have accepted either the first offer (although it was subsequently withdrawn after seven days) and on the eve of the trial, the second offer put by the applicant.
Other relevant matters
To the extent that I do not feel that the pursuit by the respondent of the inclusion of the family settlement trust in the pool fits comfortably with a consideration of the conduct of the parties, it is an easier inclusion in s 117(2A)(g) of the Act, being other matters that the Court may consider relevant.
CONCLUSION
As discussed, the applicant’s fees in respect of the property component have been assessed at $33,400 with counsel fees totalling a further $16,662.50. Given that I have found that the respondent was unreasonable in her pursuit of the inclusion in the property pool of the family settlement trust, that at the very least she rejected not only the first offer but in particular the second offer in circumstances where no counterproposal was made, I consider that an order for costs should be made but should be tempered by some consideration of the respondent’s financial position as compared to that of the applicant.
The component for solicitor’s fees on a party-party basis should be in the sum of $20,000 with a further portion of counsel fees representing the equivalent of three days totalling $10,000.
I consider that there was merit in the application for costs being filed in circumstances where the respondent opposed any order for costs and has been unsuccessful.
Again, tempering the quantum of costs sought by the applicant in the sum of $4,290, I propose to order a further $3,000 be paid by the respondent.
Accordingly, the respondent is to pay the applicant’s costs fixed in the sum of $33,000. I bring to account the financial circumstances of the respondent but note that she has money available to her and as such, I do not consider there is any basis upon which to give an extended time for payment of the costs order.
I propose that the sum of $33,000 be paid to the applicant within 30 days of this order.
I make orders as appear at the commencement of these reasons.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 13 May 2022
[1] Northup & Peat [2021] FedCFamC1A 63 at [57].
[2] Northup & Peat [2021] FedCFamC1A 63.
0
4
0