Pope and Pope (Costs)
[2012] FamCA 655
FAMILY COURT OF AUSTRALIA
| POPE & POPE (COSTS) | [2012] FamCA 655 |
| FAMILY LAW – COSTS – Application by the husband for costs of property settlement proceedings – Where the wife refused offers of settlement made by the husband – Where the offers significantly exceeded the entitlement ultimately received by the wife – Whether the wife unnecessarily prolonged the proceedings - Where the wife provided selective disclosure and misleading evidence – Where husband incurred unnecessary legal expenses – Certification for senior and junior counsel - Order for costs made against the wife. |
| Family Law Act 1975 (Cth) s 117(2A) |
| Kelly (No.2) (1981) FLC 91-108 Lenova v Lenova (Costs) (2011) FLC 93-467 Jensen (1982) FLC 91-263 |
| APPLICANT: | Mr Pope |
| RESPONDENT: | Ms Pope |
| FILE NUMBER: | SYC | 5303 | of | 2008 |
| DATE DELIVERED: | 9 August 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | 19 July 2012 and by way of written submissions |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Kearney |
| SOLICITOR FOR THE APPLICANT: | Swaab Attorneys |
| ADVOCATE FOR THE RESPONDENT: | Mr Holmes |
| SOLICITOR FOR THE RESPONDENT: | KDB Holmes |
Orders
That the wife pay the husband’s costs of and incidental to the proceedings instituted by application filed on 10 September 2008 fixed in the sum of $220,000.00 (“the costs order”) by 5:00pm on 19 September 2012.
That if the wife fails or neglects to pay the costs order in accordance with Order 1, interest shall accrue on such amount of the costs order as shall be outstanding calculated at the rate prescribed in the Family Law Rules from 19 August 2012 and the wife shall pay such interest to the husband at the same time as payment of the costs order.
That within 7 days of the date of these orders the wife shall at her sole expense do all acts and things and sign all documents necessary to sell real property situate at and known as Sydney suburb 2 property (folio identifier …) by public auction and in particular to:
(a)instruct a solicitor to prepare a contract for sale of land for Sydney suburb 2 property;
(b)list Sydney suburb 2 property with a real estate agent (“agent”) for the sale of the property by public auction within 6 but no later than 8 weeks of the date of the listing;
(c)pay all costs relating to the sale as and when same shall fall due;
(d)execute all documents requested by the agent for the sale of Sydney suburb 2 property;
(e)set a reserve price to be placed on Sydney suburb 2 property for the purposes of the auction sale (“the reserve price”) to be determined by agreement between the husband and the wife within 7 days of the date of these orders, failing which such reserve price shall be ascertained by adopting the mean of the market appraisals obtained by each of the husband and the wife for such purpose within 14 days of the date of these orders, each to obtain no more than two such appraisals;
(f)request the agent to appoint an auctioneer to auction Sydney suburb 2 property;
(g)attend the auction sale and negotiate with the highest bidder if the reserve price is not reached;
(h)execute the contract for sale of land of Sydney suburb 2 property;
(i)cooperate in every way with the agent in relation to the auction of Sydney suburb 2 property; and,
(j)execute all other documents necessary to complete the sale of Sydney suburb 2 property.
That if Sydney suburb 2 property is not successfully auctioned pursuant to Order 3, that the wife do all acts and things and sign all documents necessary to cause Sydney suburb 2 property to be serially resubmitted to auction between 2 and 3 months of the date scheduled for the auction preceding it at a reserve price of not less than 10 per cent below the reserve price at the previous auction, and such cycle of auction sales shall continue until Sydney suburb 2 property is sold.
That within 7 days of the date of these orders the wife shall at her sole expense do all acts and things and sign all documents necessary to sell real property situate at and known as K property (folio identifier …) by private treaty and in particular to:
(a)instruct a solicitor to prepare a contract for sale of land for K property;
(b)list K property with a real estate agent (“agent”) for sale;
(c)pay all costs relating to the sale as and when same shall fall due;
(d)execute all documents requested by the agent for the sale of K property;
(e)set a sale price to be placed on K property for the purposes of the sale (“the sale price”) to be determined by agreement between the husband and the wife within 7 days of the date of these orders, failing which such sale price shall be ascertained by adopting the mean of the market appraisals obtained by each of the husband and the wife for such purpose within 14 days of the date of these orders, each to obtain no more than 2 such appraisals;
(f)execute the contract for sale of land of K property;
(g)cooperate in every way with the agent in relation to the sale of K property; and,
(h)execute all other documents necessary to complete the sale of K property.
That if K property is not successfully sold pursuant to Order 5 within 56 days of the listing pursuant to Order 5(b), that the wife do all acts and things and sign all documents necessary to cause the sale price for K property to be reduced by 10 per cent every 70 days, such cycle of successive reductions to continue until K property is sold.
That from the proceeds of sale of the Sydney suburb 2 and K properties the wife do all acts and things and sign all documents necessary to cause the proceeds of such sale or sales to be paid in the following manner and priority:
(a)in payment of the agent’s commission (and auction expenses if any) due on the sale;
(b)in payment of the legal costs and disbursements of the sale;
(c)in payment of the amount due to the husband pursuant to Orders 1 and 2 herein; and,
(d)the balance to be paid to the wife or to her nominee.
That pending the wife’s compliance with Orders 1 and 2 herein, the wife:
(a)be and hereby is restrained from transferring, assigning, encumbering or otherwise dealing in any way with her interests in each of Sydney suburb 2 and K properties; and,
(b)pay all outgoings in respect of Sydney suburb 2 and K properties as and when the same fall due including all rates, taxes, charges, insurance and expenses in relation to repairs and improvements, arrears, repayments and other sums due or accruing in respect of Sydney suburb 2 and K properties.
That forthwith the wife do all acts and things and sign all documents necessary to discharge the Litigation Lending loan secured against Sydney suburb 2 property by application of funds paid to the wife by the husband pursuant to the orders of 4 April 2012.
That simultaneously with the wife’s compliance with Order 9 herein, Orders 1 and 2 dated 19 July 2012 (“the Sydney suburb 1 orders”) be discharged and the husband do all acts and things and sign all documents necessary to cause any caveats lodged by or on behalf of the husband against title to the real property situate at Sydney suburb 1 (folio identifier…) (“the Sydney suburb 1 property”) to be withdrawn.
That pending compliance with Orders 1 and 2 herein, the wife do all acts and things and sign all documents necessary to permit the husband to register caveats by consent over Sydney suburb 2 property and K property (“the husband's caveats”) at the husband’s sole expense.
That simultaneously with the wife’s compliance with Orders 1 and 2 herein:
(a)Orders 3 to 7 inclusive be discharged;
(b)Order 8(a) and (b) be discharged; and,
(c)the husband do all acts and things and sign all documents necessary to cause the withdrawal of the husband’s caveats at his expense.
That the husband and wife are granted liberty to apply to the Court in relation to the implementation of these orders and/or any further or other variation to the orders including for the sale of the Sydney suburb 1 property in the event of Sydney suburb 2 property and/or K property failing to sell pursuant to these orders.
That for both parties pursuant to r 19.50 of the Family Law Rules 2004 it is certified that it was reasonable to engage senior and junior counsel.
That save as otherwise provided herein:
(a)all outstanding applications be and hereby are dismissed; and,
(b)each party shall bear their own costs of and incidental to all proceedings in the Family Court of Australia between the parties.
Notations
A.The wife warrants to the husband and to the Court that there are presently no encumbrances upon or to any third party interests secured over, in or referable to Sydney suburb 2 property or K property other than the Litigation Lending loan of $240,000.00 against Sydney suburb 2 property.
B.The husband agrees that he will not lodge any form of notification on the title to Sydney suburb 2 property or K property other than pursuant to Order 11 herein.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pope & Pope (Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5303 of 2008
| Mr Pope |
Applicant
And
| Ms Pope |
Respondent
REASONS FOR JUDGMENT
On 4 April 2012 I made final orders between Mr Pope (“the husband”) and Ms Pope (“the wife”) pursuant to s 79 of the Family Law Act 1975 (Cth) (“ the Act”). The parties’ net assets were valued at $12.7 million of which the wife received 26 per cent or $3.305 million and the husband received the balance. As part of her property settlement the wife received three pieces of real estate with a combined value of $1.95 million and a cash payment of $463,155.00.
The orders required that the husband transfer his interest in joint assets and pay an adjusting amount far less than, even before the proceedings commenced, he offered the wife. Primarily as a consequence of the consistently larger offers of settlement made by him, he seeks costs of and incidental to the proceedings instituted by the application filed by him on 10 September 2008. This includes the costs of senior and junior counsel for the hearing. In the alternative, he seeks costs of and incidental to the valuation of the entertainment group (“the group”) at the date of cohabitation; including but not limited to the costs incurred in relation to the oral evidence of the single expert, Ms Delbridge-Bailey.
Certification pursuant to r 19.50 of the Family Law Rules 2004 is sought in relation to senior and junior counsel. Although the wife opposed the application for costs, as she too retained senior and junior counsel, she appropriately conceded r 19.50 certification should be ordered.
On the occasion when the property settlement orders were entered, directions were made in relation to the husband’s application for costs. In circumstances where the parties continued to file submissions and affidavits beyond that for which provision was made, of the Court’s own motion the costs application was listed for further hearing. After it was indicated that an order for costs in the husband’s favour would be made, the parties reached agreement as to quantum. So that it is clear, the wife continued to oppose the making of an order against her, but in the event an order is made, the parties agree that the amount is to be $220,000.00. This constitutes a sizeable proportion of the husband’s party/party costs and is in the vicinity of 25 per cent of his actual costs.
Background Facts
These reasons should be read in conjunction with those delivered in the substantive proceedings. However, to give context to this application, it is useful to refer briefly to key findings. Evidence presented in the costs application will also be addressed.
The wife was born in 1966.
The husband was born in 1972.
C, who is the wife’s son from a previous relationship, was born in 1990.
In 1991 the group was established. At establishment, it comprised five members, one of whom was the husband. The group was incorporated in 1993.
The parties met in August 1994.
At Easter 1995, the parties commenced cohabitation. The wife and her son moved into the husband’s home which he purchased a few months earlier. Details of the parties’ initial contributions are set out in the substantive reasons. It is sufficient to record that the husband’s initial contributions vastly exceeded those made by the wife.
The parties married in February 1996.
In March 1996, they purchased in joint names land at Sydney suburb 1 for $174,000.00, of which $157,000.00 was jointly borrowed from a bank. A home was constructed at Sydney suburb 1 and in November 1996 the parties and the wife’s son took up occupation. This is where they lived until September 2004 when they separated and the husband moved out. The wife and children (C and N) continue to reside at Sydney suburb 1, which, pursuant to the orders of 4 April 2012, she retained. From the outset there was no issue that the wife would retain the Sydney suburb 1 property.
P Pty Ltd was incorporated in April 1996. The parties were each allocated one of the two issued shares and both were appointed directors. P Pty Ltd was the corporate vehicle in relation to the husband’s involvement with the group and which received the vast majority of group related income.
The parties’ only child, N, was born in 1997. N lives with the wife and C and spends time with the husband on Monday afternoons and at other agreed times.
In their joint names, in August 2003, the parties purchased land at rural town K for $58,500.00 funded by an inheritance recently received by the wife and the parties’ joint savings. In 2005 construction of a new home was completed (after the parties separated) funded by a joint loan from a bank of $384,000.00 following which the wife’s aunt and uncle moved in. Pursuant to the orders on 4 April 2012 the wife retained the K property. By his first offer of settlement and his Amended Application filed 12 October 2008, the husband proposed that the wife retain the K property.
In January 2004, the parties purchased in the wife’s name commercial premises at Sydney suburb 2 for $590,000.00. The funds for this purchase were borrowed from a bank. On 23 June 2008 the husband paid $510,000.00 to discharge the mortgage. Pursuant to the orders the wife retained the Sydney suburb 2 property. By offer of settlement dated 6 January 2009, in addition to K property and Sydney suburb 1 property, the husband proposed that the wife retain Sydney suburb 2 property.
In January 2004, the husband commenced collecting celebrity memorabilia. The collection significantly increased when, in 2007, he purchased memorabilia worth $388,000.00 and again in 2008 when he spent in excess of $4 million. In about January 2009, the husband established KK Company to produce and sell merchandise and display celebrity memorabilia. At trial, the value of the celebrity memorabilia owned by the husband was $2,257,625.00. The memorabilia owned by KK Company had an agreed value of $1.97 million. Pursuant to the orders, the husband retained the celebrity memorabilia.
The parties purchased in joint names a property at outer Sydney suburb, L, in mid 2004. They jointly borrowed the entire acquisition costs plus an additional amount which was used to develop K property and suburb L property. Pursuant to the orders the husband retained suburb L property.
In September 2004, the parties separated. The husband moved to L property and the wife remained at Sydney suburb 1 property. Although the wife sought to argue that separation occurred in 2008, in this respect she was unsuccessful. Following separation the husband provided significant financial support to the wife.
Whilst on tour with the group in August 2006, the husband became unwell following which he left the tour early. Having taken further medical advice, in October 2006 he resigned. Until his recent return, this was the last time he performed with the group.
In advance of settlement, on 29 June 2007 the group paid the husband $2,000,000.00. In total he received a prepayment in the amount of $2,502,445.00 plus franked dividends of $800,000.00.
By early 2008 the husband’s settlement negotiations in relation to his payout from the group were well advanced. Although the wife suggests that she was not adequately informed about the looming settlement, annexure A, C and D to the husband’s affidavit sworn 26 April 2012 dispels that notion.
On 15 March 2008 the husband made an offer of settlement to the wife which proposed that she retains the Sydney suburb 1 and K properties, her superannuation, cash and a car, with an additional cash payment (from the anticipated settlement from the group) of $5.58 million. The remaining assets were to be retained by the husband. Based on the husband’s calculations and representations his proposed settlement meant that she would receive net assets worth $7,167,243.75. This equated to 37.5 per cent of the assets of the parties, calculated as follows:
[Table omitted for anonymisation]
Description
Value
Net Value
Offer to Wife
Total
$19,112,650.00
$7,167,243.75
As will be seen the values attributed by the husband provided a platform for ongoing negotiations and inferentially at least, were accepted by the wife as reliable. It is accepted that the husband’s representations were genuinely made. Subject only to adjustments required when the husband did not achieve the nominated settlement figure and more accurate taxation advice, if any aspect of the assertions he made about value or the structure of the asset pool was rejected by the wife, she did not say so. So that it is clear, the wife did not then impugn the accuracy of the husband’s representations nor has she presented any evidence which would tend to suggest that it was unreliable.
On 29 March 2008 the husband made a further settlement offer to the wife calculated on a similar basis as the 15 March 2008 offer. This offer was made after more complete tax advice was received with respect to the proposed settlement with the group and is set out below.
[Table omitted for anonymisation]
Description
Value
Net Value
Offer to Wife
Total
$19,052,537.50
$7,144,701.56
Although the overall offer to the wife deceased slightly, the cash payment component increased. This is because in this offer the husband included the net rather than the unencumbered value of the K property included in the previous offer. This offer still represented 37.5 per cent of his estimate of the parties’ property.
On 14 April 2008, the husband and P Pty Ltd, entered into a settlement agreement with the group for a significant sum (including the advance payment). As is readily apparent the settlement was less than the amount the husband included in his representations above. The tax paid on the settlement was also slightly less than the more recent tax figure at $5,560,695.00.
From the settlement, the husband gave the wife $350,000.00. This is in addition to the significant payments he made post separation by reason of which she was on a sound financial footing. There is no doubt that she had sufficient funds to obtain legal representation (which she did), valuation and accounting advice. Simply put, there is no doubt that the wife was financially able to fully and fairly participate in the settlement negotiations.
On 21 May 2008, the wife was provided with a copy of the settlement agreement between the husband and the group. The copy was not stamped and according to the wife she was concerned about its authenticity. The gravamen of her evidence is that it was not until 11 April 2011, when she inspected the original agreement, that these concerns were alleviated. This is an argument without foundation. In a letter sent from one of the wife’s former solicitors (Bradfield Anderson) dated 17 October 2008 her solicitors did not query the validity of the document nor request a copy of the stamped original. As the following extract from the letter shows, the only reference to the agreement assumes as a fact the settlement amount received by the husband:
2. Our client advised that the settlement your client received from [the group] when he left was well below the actual valuation of his share and that your client was intimidated by the management people of [the group] and was not willing to confront them in relation to his full entitlement and, as such, settled for the amount offered.
The husband’s solicitors provided a further copy of the agreement to another of the wife’s former solicitors (Branston Neville Solicitors) on 26 May 2009, which is when the authenticity of the document was first questioned. It is the wife’s evidence that her then lawyers wrote to the husband’s lawyers on 9 June 2009 and stated:
We note the copy supplied by you does not seem to be an accurate copy of the original executed document as it is not properly executed by all parties and there are pages which seem to have been copied and we have concerns over the integrity of the document. We would like to see the original executed copy to satisfy our clients concerns in relation to the authenticity of the document.
The husband’s solicitors wrote back to the wife’s solicitors on 20 August 2009 stating that in relation to the settlement with the group, they acted for the husband. The husband’s solicitors confirmed that the agreement was a correct copy, that it accurately recorded the terms of the settlement and provided the wife’s solicitors with their file copy. They also provided details of the legal firm who acted on behalf of the group and who held the original agreement which the husband authorised the wife and her legal representatives to view. To describe this as no more than provision to the wife of “a crudely photocopied document with an assertion that that was the correct document” is surprising and fallacious. (See also s 48 Evidence Act 1995 (Cth)).
In any event, the chronology itself suggests that this was no impediment to the wife’s willingness to conduct settlement negotiations, express her willingness to litigate and the like. Clearly the wife waited 12 months after the initial provision of the agreement to query its authenticity. At that point the husband’s solicitor provided an avenue for her and/or her legal representative to sight the original agreement which was not done for another 18 months. It is common ground that the initial agreement is a true copy of the original and that the husband’s solicitors did not mislead the wife or her representatives. It follows that the wife was fully informed as to the value of the settlement between the husband and the group from 21 May 2008.
Nor can the wife take any comfort from the husband’s working documents used in the settlement negotiations. Far from keeping these matters hidden, he used a computer at the wife’s home to work on the settlement, which self evidently she was able to access. These do no more than show the husband’s genuine and thorough attempts to achieve the best possible outcome and that the valuers retained by each side held different views about the value of the group. Although the husband hoped to achieve more than he ultimately accepted, that he hoped his share was worth $35 million, does not mean that it was. Informed by her lawyers, the wife was fully capable of understanding the limited (if any) forensic value of those working documents in her negotiations with the husband and potentially, subsequent proceedings.
In May 2008, the husband incorporated PP Pty Ltd with him its sole director and shareholder. This company was incorporated primarily to carry out property development which is how, following receipt of his settlement from the group, the husband proposed to advance his career. After the wife removed him in 2009 as a director of P Pty Ltd, PP Pty Ltd became the vehicle through which the husband received group related income (non APRA royalties).
PP Pty Ltd purchased its first property in July 2008 and within five months had purchased five more at a total cost of $6.115 million. However, with the decline in the market for luxury homes and a fall in the property market generally, the husband’s venture into property development was notably unsuccessful. All the properties have now been sold, most at a significant loss, with the last one disposed of in January 2012. In broad terms $3.4 million was lost as a result of this venture.
On 31 July 2008, as the result of a settlement conference between the parties and their solicitors (the wife at that time represented by Watts McCray – who also represented and advised her in relation to matrimonial matters in 2006), the husband made an offer of settlement to the wife that she retain the Sydney suburb 1 and K properties, both unencumbered, as well as those assets in her name and that she transfer to him her interest in their other assets. The settlement offer included a cash payment to the wife in the amount of $4.5 million. This offer expired on 1 August 2008. Although the time frame for acceptance was short, this needs to be considered in the context of negotiations and offers of settlement having been underway for five months. Based on the husband’s calculations above this represented a property settlement of about $6 million to the wife. The monetary adjustment alone was far more than she received. So that it is clear, the wife’s evidence that this offer “was incapable of acceptance by me as I did not know what the assets and liabilities were at that time” is rejected. In my view she had received adequate disclosure from the husband and was well able to understand and evaluate the offer of settlement.
On 5 August 2008 the husband’s solicitors wrote to the wife’s then solicitors confirming the offer made on 31 July 2008 and advising that the husband sought to proceed with mediation in relation to the financial issues. It does not appear that a response was received to this correspondence. In relation to this and the offer of settlement to which the 5 August 2008 letter referred, as will be discussed later, significant weight is attached.
On 10 September 2008, the husband filed an Initiating Application in which he sought to retain L property, Sydney suburb 2 property, P Pty Ltd and CH Pty Ltd (a company incorporated by the parties in 2000, which, it was agreed has negligible value) and to pay the wife $1 million. This was amended on 8 October 2008 to include an order that he transfer to the wife his interest in the K property. In neither applications is reference made to the Sydney suburb 1 property. It is accepted that this is an omission in relation to which there is no issue that at all times the parties agreed that the wife would retain Sydney suburb 1 property and that the contentious issue was what other property she would receive. On the basis that the wife would retain Sydney suburb 1 property, she would thus receive that property plus the K property, $1 million and otherwise retain assets in her sole name. Because of subsequent payments made to the wife and their treatment, this proposal is afforded little weight.
On 11 September 2008 the husband’s solicitors were advised that Bradfield Anderson Solicitors now represented the wife.
On 22 September 2008, the wife, through those solicitors, offered to settle on the basis that she receive unencumbered (which all three properties were) Sydney suburb 1 property, K property and Sydney suburb 2 property, 25 per cent of the memorabilia collection and the CC vehicle as well as $6.5 million property adjustment and $3 million spousal maintenance. Although the wife did not provide an estimation as to her valuation of the pool of assets at this time, using the husband’s calculations contained in his 29 March 2008 offer of settlement, which appears to be the basis on which the offer was made, this equated to a property settlement in favour of the wife in excess of $12 million. In a letter dated 2 October 2008 from the husband’s solicitors to the wife’s solicitors, it was observed that this offer equated to approximately 68 per cent of the parties’ net assets. The offer was formally rejected by the husband.
On 10 November 2008, consent orders were made between the parties and provided, inter alia, for the husband to pay the wife $100,000.00 partial property settlement within seven days.
On 6 January 2009, the husband made a further offer of settlement to the wife via email proposing that she retain Sydney suburb 1 property, K property and Sydney suburb 2 property and a cash adjustment of $3.8 million. This offer expired on 14 January 2009. Considered in specie there is no doubt that the husband proposed an offer greatly above that which the wife received. This offer was formally rejected by the wife on 13 January 2009. In the email sent from the wife to the husband rejecting the husband’s offer, she proposed two alternative property settlements:
· Sydney suburb 1 property, K property and Sydney suburb 2 property to be transferred to her unencumbered, with additional cash payments of $4.5 million payable to the wife and an additional $1 million to be held on trust for the benefit of the two children, OR
· Sydney suburb 1 property, K property and Sydney suburb 2 property to be transferred to the wife unencumbered, with additional cash payments of $3.8 million payable to the wife and an additional $2 million to be held on trust for the benefit of the two children.
Based on the husband’s earlier calculation (which appear to have been accepted by the wife as sufficiently reliable to underpin their negotiations), these offers equate to approximately $6.7 million and $6 million respectively in favour, plus the suggested amounts to be held in trust for the benefit of the children. Considered in specie a common feature of the parties’ proposals is that the wife would receive the three specified parcels of real estate and a sizeable cash adjustment. According to the husband this would be $3.8 million whereas the wife sought a total amount of between $5.5 million and $6.8 million. So that it is clear, although the husband had begun to invest in property and celebrity memorabilia, it was much later those losses were incurred and before any of the complexities about how those losses should be treated arose. Sufficient was known by both parties about the nature and structure of the asset pool, the value of the settlement and asserted values of the real estate (plus outstanding liabilities) to negotiate and settle. The point being that from when the husband settled with the group and at least through to this period the asset pool was not particularly complex and its nature and value readily ascertainable. That the wife rejected a materially better offer than she received is afforded reasonable weight.
In September 2009 the wife retained her present solicitors.
On 8 October 2009, consent orders were made between the parties which provided for the husband to pay the wife (to be held on trust by Slade Manwaring Solicitors) $100,000.00 partial property settlement (legal fees) within 28 days.
The husband filed a further amended application on 19 May 2010. In this application he proposed that the wife receive Sydney suburb 1 property unencumbered, P Pty Ltd (to which he would repay any amount he owed the company) and excluding Sydney suburb 2 property, that the wife retain assets in her name or possession.
On 7 October 2010, consent orders were made between the parties which provided for the husband to pay the wife $350,000.00 with the majority to be paid within six weeks. The orders provided that of the $350,000.00, $200,000.00 was a partial property settlement with the remaining $150,000.00 to be categorised at the final hearing.
In early 2011, the parties met in a café to discuss settlement. The wife’s participation in this meeting, the documents she created arising there from and the stance she adopted belies any claim she now makes that her misleading evidence, lack of adequate disclosure and the like should be considered in the context of her being somehow personally disadvantaged.
On 29 January 2011, Ms B was appointed as single expert to prepare a report as to the value of the husband’s interest in the group at cohabitation.
On 5 May 2011, the husband’s solicitor wrote to the wife’s solicitor proposing an agreement for the final hearing that the husband’s interest in the group in April 1995 be valued at $1.725 million. This figure was drawn from a report dated 6 April 2009, prepared by forensic accountant Dr RF at the request of the husband. Dr RF valued the husband’s interest in the group as at April 1995 to be between $1.46 million and $1.99 million, with a mid-point of $1.725 million. The correspondence from the husband’s solicitors to the wife’s solicitors on 5 May 2011 indicates that the RF report was provided to the wife’s solicitors at that time. The wife rejected the husband’s offer, her rationale being as set out in her solicitor’s letter dated 5 July 2011. The matters raised by the wife are set out below:
1.His Report has been prepared from limited financial information. Apparently, no Financial Statements were provided to Mr [RF]. We note at page 14 of the draft Report that Mr [RF] has merely been provided with an email from [Mr BM] dated 30 July 2008 and a Profit & Loss Spreadsheet Summary prepared by Mr [BM].
2.His Report has assumed that the June 1995 results would have been apparent in April 1995. There is no basis for this assumption.
3.Whilst not necessarily indicative, there has been no consideration of financial performance prior to 1995. Correspondence from [Mr BM] to your client suggests that there had been limited profits and even losses in earlier years.
4.Mr [RF] has based his valuation on an assumed maintainable earnings of between $1,150,000 and $1,250,000 which is an increase between 20-25% on 1995, without a proper analysis to support this.
5.Mr [RF] has assessed gross profitability at 50% of revenue, yet the gross profitability in 1995 was significantly less.
6.Mr [RF] has adopted a capitalisation rate of between 12.2% and 14.9%. In adopting this low rate, Mr [RF] is effectively assuming that the [group] was a less risky investment than say a diverse share market portfolio. Given that the group had only been established for a few years, had limited profitability, had possibly incurred losses and may have been heavily reliant on each founding member for early brand recognition, the capitalisation rate is seemingly very low.
7.Mr [RF] acknowledges that he has not been provided with Balance Sheets of the relevant [group] entities and cannot be certain that there are not other assets or liabilities that need to be taken into account.
8.Mr [RF] has found it was not appropriate to allow a minority discount, and relies upon events as recent as in 2006 (paragraph 8.2(d)) in arriving at that view.
On 18 August 2011 the final hearing commenced. In broad terms the husband contended that the net asset pool was in the vicinity of $12.6 million in relation to which he claimed 85 per cent. It was agreed that the wife would retain the Sydney suburb 1 property, as well as the K and Sydney suburb 2 properties. In the event the effect of the Court’s findings was that in order to retain these properties the wife would be required to pay the husband an adjusting amount, he forwent the adjustment. The wife contended that the net asset pool was in the vicinity of $12 million which she said should be divided equally. As has been mentioned the gravamen of the orders was that the wife received 26 per cent of the parties’ total net assets.
In an affidavit sworn on 18 August 2011, which annexed a report prepared by her, Ms B valued the husband’s interest in the group in April 1995 at $1.8 million. Her opinion was consistent with that previously provided by Dr RF. On 18 August 2011, Ms B rendered a tax invoice for $18,018.80 plus GST ($19,820.68) for her work which included, inter alia, the valuation of the husband’s interest in the group at the commencement of cohabitation.
Final orders
On 4 April 2012, I ordered:
(1)That forthwith the husband do all acts and things and sign all necessary documents in order to transfer to the wife all of his right title and interest in the following properties:
1.1rural town K property, being the whole of the land contained in folio identifier …;
1.2Sydney suburb 1 property, being the whole of the land contained in folio identifier …; and,
and the wife shall indemnify the husband and keep him indemnified in respect of all liability of the husband whenever and however arising in relation to each property, including but not limited to any liability for taxation in respect of any income received or deemed to have been received in respect of any such property.
(2)That as between the husband and the wife, the wife be declared to be solely entitled in law and equity to the property at Sydney suburb 2, being the whole of the land contained in folio identifier … and the wife shall indemnify the husband and keep him indemnified in respect of all liability of the husband whenever and however arising in relation to such property.
(3)That as between the husband and the wife, the husband be declared to be solely entitled in law and equity to the property at outer Sydney suburb L, being the whole of the land contained in folio identifier … and the husband shall indemnify the wife and keep her indemnified in respect of all liability of the wife whenever and however arising in relation to such property.
(4)That the wife do all acts and things and sign all necessary documents to effect transfer by the wife to the husband or as he may direct of all right, title and interest in and to each of the following entities, including but not limited to all issued capital and credit loan accounts:
4.1 P Pty Limited; and,
4.2 CH Pty Limited;
AND other than as provided in Order 5 herein, the husband shall indemnify the wife and keep her indemnified in respect of any and all liability whenever and however arising as a result of the wife’s involvement and association with each of the said entities, including but not limited to any liability arising as a result of the wife having been an officeholder or shareholder of either entity and having been or being indebted to either entity on any loan account or otherwise.
(5)That the wife shall indemnify the husband and keep him indemnified in respect of any liability arising as a consequence of or in relation to the involvement of each of the wife and/or Mr G:
5.1 in and with P Pty Limited; and,
5.2 in and with CH Pty Limited; and
5.3any financial or other arrangement between either or both of them and any other natural person or entity (including but not limited to the above entities) pursuant to any written or oral contract or otherwise;
which is not the subject of and included in the reports prepared by Ms B as single expert in these proceedings, which liability shall include but not be limited to all costs incurred and liability arising as a result of any claim, action or demand directed to any act or omission by or on behalf of either of the wife and/or Mr G or in respect of any monies asserted to be owing to either of them and for the avoidance of doubt such indemnity shall expressly extend to and include any liability for taxation (including any interest and penalties) of the husband, P Pty Limited and/or CH Pty Limited arising in relation to the payment of $80,000.00 and/or any other moneys to or for the benefit of Mr G.
(6)That forthwith and notwithstanding any other order herein the wife shall do all acts and things and sign all necessary documents to put into effect such of the recommendations of Ms B (as single expert) in relation to the winding up of P Pty Limited [the company] as set out in her report dated 22 August 2009 and identified as “…B-9” as may be requested by the husband including but not limited to by:
6.1the wife forthwith effecting the removal of [Mr G] as director and simultaneously appointing herself as director and secretary of the company; and,
6.2the wife forthwith amending her 2010 personal taxation return to include and acknowledge receipt by the wife of each of:
6.2.1 a franked dividend of $51,000 in respect of funds already received by the wife from the company; and,
6.2.2 a deemed dividend of $115,075 pursuant to Division 7A of the Income Tax Assessment Act;
and otherwise join with the husband in doing any act or thing necessary to address any outstanding issue in relation to the affairs of the company, including in relation to any taxation issue, provided always that the husband will be solely responsible for any taxation for which the wife is consequently assessed as liable to pay.
(7)That within three (3) months of the date of these orders the husband pay to the wife $463,155.00.
(8)That within four (4) months the parties shall put to auction, with an auctioneer nominated by the husband, the 57 items of named memorabilia following which the net sale proceeds shall be divided 26 per cent to the wife and the balance to the husband. In the event that some or all of the [memorabilia] fail to sell they shall be distributed in specie 74 per cent to the husband and the balance to the wife.
(9)That save in accordance with and for the purpose of Orders 4, 5 and 6 herein, the wife be and hereby is restrained by doing and/or causing or permitting to be done, any of the following:
9.1alienating or further encumbering any of the assets, income or undertakings of P Pty Limited [the company];
9.2alienating or further encumbering any of the shares in the company;
9.3issuing any new shares or otherwise altering the shareholding (including any rights and entitlements attaching to or any other incident of the same) in the company;
9.4removing, replacing or appointing any director or other officeholder the company;
and the wife shall forthwith notify the husband in writing upon the receipt by the wife of any notice of and/or upon otherwise becoming aware of any intention by any other person or entity to take any action so as to permit or cause any of the matters subject to Orders 7.1 to 7.4 (inclusive) above to occur.
(10)That save as otherwise provided herein, each of the husband and wife is declared to be solely entitled to all property and financial resources in their respective name, possession or control or to which they may be or become entitled.
(11)That if either party refuses or neglects to sign any document necessary to implement these orders, that a registrar sign the necessary document on behalf of the defaulting party pursuant to section 106A of the Family Law Act 1975 (Cth).
(12)That the application of the wife for spouse maintenance be dismissed.
(13)That publication of these reasons or their contents beyond the parties and their legal and accounting advisors is suppressed.
(14)In the event there is an application for costs written notice is to be given to the other party within 14 days and written submissions and material in support of the application is to be filed with the Associate to Ryan J and served on the other party within a further 14 days (28 days total).
(15)Written submissions and material in response shall be filed with the Associate to Ryan J and served within a further 28 days.
(16)Written submissions and material in reply shall be filed with the Associate to Ryan J and served within a further 7 days.
Pool of Assets and Liabilities as at the date of hearing
The pool of assets and liabilities of the parties available for distribution as detailed in the substantive judgment was as follows:
Description Agreed Value ASSETS L property (H) Agreed $4,500,000 Sydney suburb 1 property (J) Agreed $950,000 K property (J) Agreed $525,000 Sydney suburb 2 property (W) Agreed $475,000 Funds in bank (W) Not agreed $54,442 Funds in bank (H) Not agreed $15,908 Shares (W) Not agreed $18,034 1256 IAG Shares (H) Not agreed $4,157 Toyota Tarago motor vehicle (W) Agreed $16,000 Toyota Kluger motor vehicle (H) Agreed $50,000 Yamaha motorcycle (H) Agreed $4,150 Kia motor vehicle (H) Agreed $30,000 W Pty Limited (W) Agreed Nil PP Pty Limited (H) Agreed Nil KK Company (H) Agreed $1,970,000 KKN Pty Limited (H) Agreed Nil JP Pty Limited (H) Agreed Nil P Pty Limited (W) Agreed $1,666,000 CH Pty Limited (W) Agreed Nil CH Pty Limited – loan account (H) Agreed $1,041 P Investments Pty Limited (W) Agreed Nil Furniture, contents and jewellery (W) Agreed $21,825 Furniture, contents and jewellery (H) Agreed $61,875 Celebrity memorabilia (H) Agreed $2,257,625 Wife’s solicitors trust account (W) Agreed $9,834 Future Royalty Stream $834,000 Total $13,464,891 ADDBACKS Partial property settlement pursuant to orders (10 Nov 2008 and 8 Nov 2009) (W) Agreed $200,000 Money paid via P Pty Ltd pursuant to orders dated 7 October 2010 (W) Agreed to $200,000 $350,000 Sold celebrity memorabilia (H) Agreed $590,416 Informal property settlement advance (W) Not agreed $200,000 Legal Costs (H) Agreed $458,644 Total $1,799,060
LIABILITIES Bank of Qld line of credit (H) Agreed $523,391 P Pty Limited (H) Agreed $1,111,353 P Pty Limited (as at 1 August 2011) (W) Agreed $486,917 Potential Tax on funds withdrawn from P Pty Limited(deemed dividends) (W) Agreed $115,348 Potential Tax on from funds withdrawn from P Pty Limited (deemed dividends) (H) Agreed $297,430 P Pty Limited – further taxation payable on adjustment (H) Not agreed $43,208 E Auctions (H) Not agreed $34,903 Credit cards (H) Agreed as to $51,394 $51,394 Total $2,663,944 SUPERANNUATION MLC (H) Agreed $89,947 MLC (W) Agreed $21,754 Total $111,701 TOTAL NET ASSETS $12,711,708
The applicable law
Section 117(1) of the Family Law Act (1975) (“the Act”) is the basic provision concerning costs and provides the general rule that that subject to s 117(2), s 117AA and s 118, each party to proceedings under the Act shall bear his or her own costs. Neither party submits that s 117AA nor s 118 is relevant. Section 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs (Penfold v Penfold (1980) FLC 98-800). If there are circumstances that justify it in so doing, the Court may make such order for costs pursuant to s 117(2) as the Court considers just. In considering what order, if any, should be made I am required to have regard to the provisions of s 117(2A). It is not necessary for a Court to be satisfied that all of the factors referred to in s 117(2A) are satisfied before an order for costs can be made.
Relevantly s 117(2A) of the Act provides:
In considering what order (if any) should be made under subsection (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 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.
Discussion
An application for costs and written submissions were received from the husband on 26 April 2012. The wife’s written submissions were received on 4 June 2012. The husband’s reply to the wife’s cost submissions were received on 12 June 2012. On 10 July 2012, the wife filed further cost submissions in reply. In addition a related interlocutory application was filed by the husband on 6 July 2012, which was subsequently amended on 10 July 2012. Due to the increasing number of submissions being received the costs proceedings were listed with the interlocutory application on 12 July 2012. As well as oral submissions with respect to the costs applications, the husband’s interlocutory application was determined. The matter was adjourned for one week, on which occasion further directions in relation to costs submissions were made. Final submissions were received from counsel for the husband on 26 July 2012.
Counsel for the husband submits that a consideration of the terms of offers of settlement made by the husband is “such as to justify an order for costs in favour of the husband without more”. It is submitted that each offer made by the husband to the wife was “clear and unambiguous”, “was open for acceptance by the wife who, at all relevant times, had both the information and capacity to properly consider her position” and “was reasonable in its terms and exceeds the adjustment ultimately received by the wife”. Counsel for the husband points out that the wife had the benefit of legal advice from late 2006 and that each of the settlement offers in dollar figures significantly exceeded the entitlement ultimately received by her. Subject only to the evidence which establishes that the wife did not retain solicitors during 2007 and the offer made prior to the husband’s settlement with the group, these submissions are accepted.
Counsel for the husband, in his submissions, sets out the details of each offer analysed by reference to the property settlement ultimately received by the wife and the husband’s representations as to value at the time. Each settlement offer is detailed above and need not be repeated here. Reference was made by counsel for the husband that a number of the early offers were made on the basis that the husband would receive the Sydney suburb 2 property. However, it was agreed during the proceedings that the wife should retain this property, which ultimately she did. To account for the fact that the wife received this property counsel for the husband adjusted downwards the cash components of each of the offers in which this is an issue to its value at trial. Thus, excluding his Initiating and Amended Applications it is submitted that the wife received between $3.336 million and $4.95 million less than she would have otherwise received had she accepted the husband’s offers. This analysis is reasonably apt.
However, it is important to not overlook that the value of the asset pool diminished over time, largely due to the husband’s unsuccessful property development venture. Indeed when the first offers were made, the property pool was asserted by the husband at approximately $19 million. The value of the pool as determined at the final hearing was $12.7 million. Of course, the husband offered to settle on a percentage value of the first two offers to the wife, being 37.5 per cent, based on his valuation of the property pool. As is patently clear the husband’s early offers to the wife expressed as a percentage of the overall pool as calculated by him were well above the 26 per cent that she ultimately achieved. The offer made after settlement was about 33 per cent of the pool on which the parties negotiated. Again this is considerably more than the wife received.
Counsel for the husband submits that had the wife accepted any one of the husband’s offers of settlement, not only would she have been provided with property materially greater than she ultimately achieved, but four years of litigation and expenditure in excess of $1 million on legal fees between them would have been avoided. The correctness of this submission is unarguable.
With respect to s 117(2A)(a), counsel for the husband submits that while the husband has substantially greater assets that the wife this is reflective of his entitlements pursuant to s 79 of the Act and his superior financial contributions over the course of the marriage. It is also submitted that the wife’s refusal to accept any of the offers and the consequent expenditure on legal expenses contributed in part to the disparity in financial circumstances. It is argued that this should weigh heavily against the contention that the wife’s present financial circumstances should weigh against an order for costs otherwise justified against her.
It is submitted on behalf of the husband that the conduct of the wife in the proceedings is also a matter which justifies an order for costs against her. Without going into detail, counsel for the husband referred to findings made in the substantive judgment with respect to her selective disclosure and misleading evidence; in particular paragraphs 25, 29, 30, 40, 89, and 166.
It is also submitted on behalf of the husband that the wife was wholly unsuccessful in her contentions as to the date of separation, the value of the husband’s interest in the group at cohabitation, her attempt to explain or justify her expenditure of funds received by her following separation and her application for spousal maintenance. It is submitted that the pursuit by the wife with respect to these issues prolonged the trial and resulted in unnecessary expense in relation to the husband’s preparation for and participation in the trial. These submissions are accepted.
The wife submits that the offers of settlement and the weight to be given them can not be a foundation for a costs order in light of the comparative financial circumstances of the parties. This submission can be readily dismissed.
In Lenova v Lenova (Costs) (2011) FLC 93-467 the Full Court held [10-12]:
10.In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (2) … each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.
11. A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation. Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs.
12. That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.
It is the wife’s submission that the offers of settlement were not unambiguous, clear and precise and thus not a decisive factor on costs as submitted on behalf of the husband. Reference was made to Pennisi (1997) 22 FamLR 251 which referred to situations in which one party has ‘significantly less grasp of the parties financial arrangements or the financial circumstances are so complex that it would be premature to accept an offer’ and situations in which ‘the contents of the offer themselves are the subject of disputed value and legitimate subject matter for determination’. It is contended that the wife had significantly less grasp of the parties’ financial arrangements, the husband’s financial circumstances were complex and she was legitimately entitled to seek independent evidence of value. Moreover it is submitted that there was significant uncertainty surrounding the husband’s financial position throughout the proceedings in relation to the totality of the financial interests, his interests from the group and the significant number of property development transactions. It was also submitted on behalf of the wife that the extent of the husband’s interest in the group and his remuneration was fluid to the extent that the case had to be reopened, solely by reason of his contractual arrangement with the group, this being a legitimate matter of enquiry by the wife at that time.
With respect to the offers of settlement made by the husband, it is submitted on her behalf that the fact they exceeded the ultimate adjustment is of no material consequence as the pool of wealth was not at that time clearly determined. Moreover the wife submits that direct comparisons between what she was offered and what she received are unhelpful as the husband had unfettered control over the parties main asset, that is the settlement with the group, and that this was in part used to fund the ultimately unsuccessful venture into property development, thereby reducing the overall asset pool affecting both parties.
In relation to the 15 March 2008 offer, it is the wife’s submission that this was no more than an invitation for discussion:
… with many uncertainties and question marks, unsubstantiated values, and a one line reference to the major asset of the marriage being “share sale price”. The [husband] was the party possessed of full knowledge and control of the financial information relating to the spreadsheet and [the wife] did not.
This submission does not withstand scrutiny. Firstly, the wife was the sole registered proprietor of the Sydney suburb 2 property. She lived in the Sydney suburb 1 property and controlled the K property, where her aunt and uncle resided. In relation to the L property, it was accepted that L property was purchased in the parties’ joint names and they jointly borrowed its acquisition costs. It was accepted that following separation in 2004 that they “continued to deal with property issues jointly” and that in relation to the development of L property “the wife was reasonably well informed about the magnitude of the improvements the husband intended for the L property. It appears that because she remained hopeful they would reconcile and that she would join him at L property, she did not object to the scale of expenditure and development undertaken”. In relation to the L property it was accepted “the parties obtained a $1.4 million construction loan” and it was accepted that “indirectly she contributed (financially) by joining with the husband in various asset protection strategies, which included her sharing responsibility for significant debt and corporate accountability”. The point being, that other than in relation to the group and its value, it is not accepted that the wife was “a person with less than adequate knowledge and skill to consider the matter objectively and properly”.
In relation to the wife’s financial capacity, in the substantive judgment I recorded her senior counsel’s appropriate concession that in terms of the provisions of funds post-separation she “could not complain at all. She has been extremely well provided for until a point of time, which was the making of the first order. That provision was extremely generous and indeed it was paid, I put it to [the husband] voluntarily; he put it, pursuant to an agreement. The end product is that he paid it, my client accepted it”. The point being, as is recorded in the substantive reasons the husband provided the wife with very significant funds post-separation and there is no doubt that she had the financial capacity to obtain advice (including cross-checking representations as to value), relevantly from when the husband’s first offer was made and continually thereafter.
The wife’s submission that that and the subsequent offers made around that time “is not an ‘offer’ in the sense of s 117(2A)(c)” is rejected. That and the subsequent offers of settlement, including those to which significant weight is afforded are consistent with the Court’s pre-action protocol. However, it is accepted that as at 15 March 2008 the value of the husband’s settlement with the group had not been determined, and that this only occurred when the agreement was signed on 14 April 2008.
The next offer, however, was made after the husband’s settlement with the group and before losses were incurred as a result of the property development venture. Although the pool had not been “determined” by a Court, its nature and value was reasonably stable and movements, such as discharging mortgages were communicated. In specie, it was offered to the wife that she keep the Sydney suburb 1 and K properties (both unencumbered), assets in her name and that she receive $4.5 million. By then the wife had been continuously represented for months and, as has already been found, was well informed in relation to the husband’s settlement with the group. The gravamen of the correspondence is that the offer was the culmination of various offers and on this occasion was available to be accepted for 24 hours. Although in other circumstances such a short time frame may weigh against this being afforded significant weight, the overall context means that the wife had sufficient time to give it proper consideration. The wife’s argument that the offer lacked clarity and could not amount to justifying circumstances is rejected. This is an offer upon which significant weight is placed.
Lest there be any doubt about the adequacy of the wife’s control of the facts, that through her then solicitors, she herself made an offer on 22 September 2008, enables the Court to infer that she had sufficient knowledge to engage in settlement conferences and negotiations and to make the offer referred to. It is noteworthy that nowhere in this letter does the wife cavil with the accuracy of the husband’s representations about the nature and value of the asset pool. This lends strong support to an inference, which is drawn, that the wife was satisfied that the husband’s representations were reliable.
At page 8 of the wife’s costs submissions, it is submitted that throughout the proceedings:
… the Balance Sheet … was very much in issue. The extent of the husband’s interest in [the group] and his remuneration was fluid to the extent that the case that the case (sic) had to be reopened, solely by reason of his contractual arrangements with [the group] – this all being the legitimate matter of enquiry by the wife at that time.
At the commencement of the Final Hearing on 18 August 2011, there was disagreement as to the value of or treatment of the following items in the Balance Sheet:
(a)[L property].
(b)Overcapitalisation on [L property].
(c)Property losses and overcapitalising on [PP] Pty Limited.
(d)Surveillance paid by husband to serve [Mr G] with subpoena.
(e)[Celebrity] memorabilia and motor vehicles sold by the husband.
(f)Money paid to the wife via [P Pty Ltd] pursuant to orders dated 7 October 2010.
(g)Informal property settlement advance to the wife.
(h)Husband’s legal fees.
(i)[P Pty Ltd] – further taxation payable on adjustment.
(j)[E] Auctions liability.
(k)The husband’s future royalty streams from [P Pty Ltd] and APRA.
(l)Car gifted to [the wife’s aunt].
(m)Car gifted to [the wife’s uncle].
While this is correct, of greater significance, is that the overwhelming majority of these issues arose after the 2008 offers of settlement. The point being, these were not factors which could have reasonably influenced the wife’s decision to reject the various offers made by the husband. These findings also apply to the husband’s settlement offer made 6 January 2009. Although in the circumstances the point has little significance, it is appropriate to observe that many of the issues raised by the wife referred to above were not resolved in her favour.
In relation to the husband’s offers, there is a pattern of disclosure, details about how the offer is calculated, and representations as to value and in relation to his settlement with the group provision of a copy of the agreement. Throughout, the wife had legal advice and representation and the financial capacity to fully negotiate. During that period, it is not accepted that the wife was “a person of more limited capacity”. Rather, it is assessed that she was informed and able to understand and evaluate the various offers. Whether calculated by reference to percentages or dollar amounts, it is accepted that every offer the husband made after the settlement with the group significantly exceeded the result she achieved at the final hearing. Although, by the time the matter came to final hearing values had fallen and losses occasioned as a consequence of the husband’s actions, that the husband made a series of carefully calculated and apparently generous offers to the wife, constitutes both justifying circumstances and weighs heavily in favour of an order for costs in his favour.
It is thus appropriate to turn to the wife’s submission “[t]he task for the Court, ultimately it is submitted, is to decide what weight, if any, is to be given to what the Husband would apparently contend were reasonable Offers of Settlement, as against what the Wife would contend, in these Submissions, are the disparate financial circumstances of the parties, following the making of final Orders”. In this regard, it was submitted by the wife “that the Offers of Settlement and the weight, if any, to be given to them, cannot be the foundation for a Costs Order in light of the comparative financial circumstances of the parties”. This submission has already been rejected. However, the gravamen of the submissions would also appear to suggest that it is argued that the Court should not depart from the usual approach that each party pays their own costs, and even if the husband’s offers of settlement are found to be justifying circumstances, his demonstrably superior financial circumstances would outweigh any and all factors that are persuasive of an order for costs in his favour.
There is no dispute that as a consequence of the final orders the husband received net assets of about $9.4 million whereas the wife received net assets worth $3.3 million. As disclosed in her recent affidavits, her assets have been depleted and she now has assets in the vicinity of $2.05 million. Other than about $10,000.00 in outstanding legal fees, she has no liabilities. Her most significant assets comprise the three unencumbered properties. She has comparatively modest income in relation to which it is notable that the husband pays minimal child support. It is accepted that the husband’s materially greater assets, as well as his income is a material factor which weighs in favour of the wife’s contention that there should be no order as to costs.
As to the remaining matters, it is useful to recite in full the submissions made by the husband:
30.The conduct of the wife in the proceedings is, it is submitted, a matter which justifies an order for costs and/or orders for costs in respect of at least aspects of the proceedings. In particular, the Court’s attention is directed to:
30.1the maintenance by the wife of her contentions as to the date of separation of the parties which the Court found to be “troublingly misleading and appears to have been designed to obfuscate rather than illuminate the facts” [reasons, para.40];
30.2the less than satisfactory approach by the wife to her obligations of disclosure [see for example reasons, para.25, 29, 30, 89, 166]; and,
30.3the voluminous, but ultimately unreliable, evidence adduced by the wife as to her historical expenditure [reasons, para.86ff, 166];
resulting in adverse findings, including as to the wife’s “selective disclosure and misleading evidence” [reasons, pars 25, 30, 40].
31.The wife was wholly unsuccessful in her contentions as to each of:
31.1the date of separation of the parties;
31.2the value of the husband’s interest in ‘the group’ at cohabitation;
31.3her attempts to explain and/or justify her expenditure of funds received by her following separation; and,
31.4her application for spouse maintenance;
and whilst it is not suggested in respect of the first 3 items that the Court ought ‘double-count’ such matters by a repeated consideration pursuant to difference sub-sections, the relevance of such matters to multiple sub-sections of section 117(2A) reinforces their support in each instance of an order for costs against the wife.
32.The pursuit by the wife of each of the above issues prolonged the trial and ought be found to have involved the husband in significant, and ultimately unnecessary, expense in relation to his preparation for and participation in the trial: for example Kelly (No.2) (1981) FLC 91-108 and Jensen (1982) FLC 91-263. (husband’s submissions dated 26 April 2012, pp 15-16)
In relation to these submissions, on the wife’s behalf it was submitted:
… that there is nothing of sufficient significance raised in either party’s Submissions such as would amount to justifying circumstances. The Wife’s complaint that she was denied access to source documentation relating to [the group] Agreement (Contract of Sale) has been mentioned in her Affidavit. It must be remembered that, like many broken marriages, this was one where trust had broken down and where one party held the marital fortune in his own name and the other party had fears and anxieties based upon documents of the Husband that she had seen.
On the wife’s behalf further submissions commented upon the parties’ respective capacities to negotiate and conduct proceedings, the disparity in which was said to place the husband in an advantageous position. On the basis of the facts discussed above the wife’s submissions are not accepted. However, for the avoidance of doubt, attached to the affidavits is an array of material under her hand or presented on her instructions which show her command of the facts and willingness and ability to understand the issues and properly engage with the process. It is appropriate to observe that she had no qualms in ejecting the husband from P Pty Ltd or informing him that he allowed himself to be bullied into an inadequate settlement with the group. In short the wife showed that she ensured she was well able to participate and was not labouring under a disadvantage.
It is further submitted on the wife’s behalf that “Neither party was wholly unsuccessful. The matter constituted a legitimate adjudication of a contested property and maintenance dispute between the parties to a marriage which involved children and the discretionary factors which then apply to such case. The Court made Orders pursuant to the Act. The Wife received a settlement. Individual issues do not amount to justifying circumstances.”
It is submitted by the solicitor for the wife that paragraph 31 of the husband’s submissions ignores the words “in the proceedings” as set out in this sub-paragraph and seeks to replace them with selective “contentions”. This is something of a dry argument. If the solicitor for the wife’s analysis of the effect of s 117(2A)(e) is accepted, the matters referred to in paragraph 31 of the husband’s first submissions comfortably constitute factors which can be considered pursuant to s 117(2A)(c). The matters identified at par 30 and par 31 of the husband’s submissions were all matters of significance and in relation to the matters referred to at paragraphs 30.1 – 30.3 in particular, involved considerable time and effort in preparation and at the final hearing. There is little room for doubt that the wife’s approach to these matters resulted in significant and ultimately unnecessary expense to the husband. Excluding the item which refers to the value of the husband’s interest in the group at the commencement of cohabitation, these matters weigh reasonably heavily in favour of an order for costs to him.
In my opening remarks, reference was made to the husband’s claim that the wife pays the single expert’s costs in relation to the value of his interest in the group at the commencement of cohabitation. Although it would have been reasonable for the wife to adopt the husband’s expert’s evidence, in the context of the matter proceeding to a final hearing, it was not unreasonable for her to require evidence on this point from a neutral single expert. The wife’s approach to this issue is thus excluded from consideration of whether and in what amount an order for costs should be made in favour of the husband.
There are no other relevant factors which require consideration.
Conclusion
On balance, the husband has presented a strong case for a significant order for costs in his favour. Notwithstanding the wife’s materially inferior overall financial circumstances, it is not accepted that she is destitute or that an order for costs of some magnitude would tip her into destitution. While she may well need to realise one of her investment properties if she is required to pay anything more than a very small amount, a sizeable order would still see the wife with an unencumbered home worth $950,000.00 and an investment property. Although the husband’s financial circumstances make it plain that he does not need funds by way of costs in order to meet expenses and the like, he has clearly established that as a consequence of the wife’s rejection of offers of settlement and the manner in which she conducted significant components of her case, he has unnecessarily incurred significant legal expenses.
As is apparent, it is not accepted that the wife had insufficient command of the facts or somehow, notwithstanding that she was consistently represented throughout 2008 and thereafter, that she was not fully able to engage in the settlement process. Nor is it accepted, that she was at a disadvantage such as the Court would disregard the matters referred to at par 30 and par 31 of the husband’s submissions earlier referred to. However, the husband’s materially superior financial circumstances have a significantly moderating influence on the magnitude of order which I am satisfied should be made against the wife.
As was previously indicated, after I advised the parties that an order for costs would be made, quantum was settled in relation to which the Court having found that the wife is to pay costs to the husband, the amount is settled at $220,000.00. Both the fact of an order and the quantum are assessed as just.
I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 9 August 2012.
Associate:
Date: 9 August 2012
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Costs
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Offer and Acceptance
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Remedies
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Procedural Fairness
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Statutory Construction
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