Reilly and Reilly (No.2)
[2016] FCCA 1706
•24 February 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| REILLY & REILLY (No.2) | [2016] FCCA 1706 |
| Catchwords: FAMILY LAW – Costs – costs stemming from the determination of property adjustment proceedings – where the wife seeks an order that the husband pay her costs – full and frank disclosure – where numerous offers of settlement were made by the wife to the husband – consideration of section 117 of the Family Law Act 1975 – where a party has not demonstrated an outcome focused approach towards the dispute – justifying circumstance satisfied – husband ordered to pay the wife’s costs. |
| Legislation: Family Law Act 1975, ss.60I, 75(2), 79, 117 Federal Circuit Court Rules 2001, rr.1.05, 21.02, 21.09, 21.11, 24.04 |
| Cases cited: Re JJT & Ors; Ex Parte Victoria Legal Aid [1998] FLC 92-812 Collins & Collins (1985) 9 Fam LR 1123 Robinson & Higginbotham (1991) FLC 92-209 Bryant v Hawkesbury Radio Communication Co-operative Society Limited [2014] NSWSC 848 Other Articles Cited: Explanatory Memorandum, Civil Dispute Resolution Bill 2010 (Cth) General Outline. Bathurst, T.F, “The Role of Courts in the Changing Dispute Resolution Landscape” [2012] UNSWLJ1 36, 870, 35(3) Tania Sourdin, “Forum: Civil Dispute Resolution Obligations: What is Reasonable?” (2012) 35 UNSWLJ 889 Ministry of Justice, UK, “Solving disputes in the county courts: creating a simpler, quicker and more proportionate system – a consultation on reforming civil justice in England and Wales”, Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty March 2011, available at Judge Joe Harman, “Should Mediation be the First Step in all Family Law Act Proceedings?” (2016) 27 ADJR 1 |
| Applicant: | MS REILLY |
| Respondent: | MR REILLY |
| File Number: | PAC 4844 of 2013 |
| Judgment of: | Judge Harman |
| Hearing date: | 24 February 2016 |
| Date of Last Submission: | 24 February 2016 |
| Delivered at: | Parramatta |
| Delivered on: | 24 February 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms Obradovic |
| Solicitors for the Applicant: | Shephard & Shephard |
| The Respondent appeared in person |
ORDERS
The husband shall pay to the wife or as the wife may direct in writing as a contribution to her costs with respect to both substantive property adjustment proceedings concluded 23 September 2015 and these proceedings, the sum of $20,000 such costs to be paid within 90 days of today’s date.
With respect to the above award of costs the following shall apply:
(a)Interest shall not accrue upon the sum provided it is paid in full within 90 days and in the event that it is not then interest shall accrue at the rate prescribed by the Federal Circuit Court Rules 2001 from time to time upon so much of that amount as remains outstanding from time to time;
(b)If the above sum is not paid in full within 90 days of today’s date then the wife shall be entitled to commence recovery proceedings in a Court of competent jurisdiction; and
(c)The above award of costs in the sum of $20,000 shall represent a charge upon Mr Reilly’s interest in real estate and specifically his interest in the property, Property J in the State of New South Wales and the wife shall be entitled to record a caveat or writ against title to secure payment, provided however, that upon payment being made in full (together with any interest accrued or costs as might subsequently be ordered) the wife shall forthwith do all things, sign all documents and give all consents, authorities and instructions as may be necessary to cause immediate withdrawal of said caveat or writ.
All outstanding Applications and Responses are withdrawn and dismissed and all issues are removed from the list of matters awaiting hearing.
IT IS NOTED that publication of this judgment under the pseudonym Reilly & Reilly (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
PAC 4844 of 2013
| MS REILLY |
Applicant
And
| MR REILLY |
Respondent
REASONS FOR JUDGMENT
These are proceedings with respect to costs.
The parties to the proceedings are a husband and wife, Ms Reilly, the wife and Applicant and Mr Reilly, the husband and Respondent.
The Application for Costs arises from the conclusion of substantive proceedings for property adjustment. Those proceedings were heard by Judge Donald of this Court on 4 and 5 May 2015. Judgment was delivered by Judge Donald on 23 September 2015.
Applicable rules
An Application in a Case seeking costs was filed on 21 October 2015. I am satisfied that the Application is made within the time limit provided by the Federal Circuit Court Rules 2001. [1]
[1] Rule 21.02 of the Federal Circuit Court Rules 2001.
The Application in a Case, as originally filed, had sought that the husband pay the wife’s costs on an indemnity basis or in default as agreed and in default of agreement as certified by the Family Law Rules 2004. Costs with respect to the determination of the Application in a case were also sought.
It is noteworthy that whilst rule 21.09(2) of the Federal Circuit Court Rules 2001 expressly provides that the Family Law Rules 2004 are not to be applied in proceedings before this Court,[2] rule 21.11 of the Federal Circuit Court Rules 2001 then requires, in any taxation of costs, that the itemised scale of costs at Schedule 3 of the Family Law Rules 2004 (rather than the event based, lump sum Schedule of costs at Schedule 1 of the Federal Circuit Court Rules 2001) be applied.
[2] Save as regards the process and procedure of taxation.
An Amended Application in a Case was filed by Ms Reilly 22 February 2016. The Application seeks that the husband pay the wife’s costs of and incidental to the prior substantive proceedings on a party/party basis or in the alternative in accordance with Schedule 1 of the Federal Circuit Court Rules 2001.
I take the primary plea for relief as being that costs be paid on a party/party basis and taxed in accordance with rule 21.11 of the Federal Circuit Court Rules 2001.
If the primary relief sought by the wife were granted, then a taxing officer – presumably a Registrar of the Family Court of Australia – would determine the appropriate costs by reference to Schedule 3 of Family Law Rules 2004. From the outset I am not satisfied that such a step should be taken. I am satisfied that the Federal Circuit Court Rules 2001 and Schedule 1 thereto provide an entirely appropriate event‑based methodology to calculate costs if they are to be ordered.
The Schedule of costs under the Family Law Rules 2004 is, with all due respect to those who have drafted those Rules, somewhat more complex than Schedule 1 of this Court’s Rules. The Schedule provided by the Family Law Rules 2004 requires a determination, on a discretionary basis, with respect to each and every aspect of work performed in the proceedings, including a calculation of costs with respect to correspondence and the like on a folio basis. It is a methodology of costs assessment which, to these parties, would be onerous, time consuming, potentially exorbitantly expensive and open to significant argument and conflict.
Event‑based costing is increasingly adopted, as the Federal Circuit Rules 2001 have adopted for quite some little time, as a means of obviating against further cost and dispute and providing greater certainty for parties.
The costs, both in time and money that would be incurred through a referral for taxation and application of Schedule 3 would outweigh any benefit to either of these parties of that process, in that any additional amount that might be assessed at taxation would be consumed in the cost of the taxation itself. That is readily predictable and foreseeable.
There is not one specific basis to the Application for costs. I do not start at this point to be offensive to the submissions put on behalf of the wife. Far from it. There are numerous bases upon which costs are sought and touching upon a number of areas of necessary consideration, including allegations regarding the conduct of the proceedings, particularly focused around disclosure, the making of offers and the failure of these parties to effectively negotiate at any time.
Material considered
It is necessary to identify the evidence that is relied upon in dealing with this Application and to touch briefly upon that evidence. I will be as concise as possible in the circumstances.
In the case of the Applicant I have read and considered each of the following:
a)The Application in a Case filed 21 October 2015;
b)The Amended Application in a Case filed 22 February 2016;
c)The Affidavit of Ms Reilly affirmed 21 October 2015 and filed the same date;
d)The Affidavit of an attorney, Ms Vass, sworn or affirmed 5 March 2014 and filed the same date;
e)An Affidavit of a further attorney for the wife, Ms Belovic, sworn or affirmed 22 February 2016 and e‑filed the same date.
In the case of Mr Reilly, I have read and considered his Response and Affidavit, both filed 15 January 2015.
I have also had regard to the Case Outline document provided by Ms Reilly's Counsel, as well as oral submissions that Ms Reilly's Counsel and Mr Reilly have put today.
In addition, I have had some regard to the statements of financial circumstances most recently filed by the parties being, in the case of the wife, a statement filed 24 April 2015 and in the case of the husband, a statement filed 21 April 2015.
I have also had regard to the portions of the husband’s Affidavit filed 21 April 2015, being those portions which the husband has referred to in his Affidavit filed 15 January 2016.
I have considered the Orders that were made by Judge Donald and I have scanned – although have not read in great detail – the reasons that were delivered by His Honour. They have not been read in detail, not as they are not worthy of such consideration, but purely as the constraints of time do not permit it.
This matter is dealt with in a busy duty list. Notwithstanding this reality, the material that the parties have invited the Court to read exceeds 300 pages. All of the above identified material has been read and considered.
Finally, I have regard to the Initiating Application filed by the wife on 7 November 2013 and the Response thereto filed by the husband 28 January 2014. These documents have some relevance to the extent that they particularise the relief that the parties and each of them sought.
The substantive proceedings
The substantive proceedings for property adjustment, from which this Application for Costs arises, were commenced, as would be apparent from the above, by an Application Initiating Proceedings filed on 7 November 2013.
Prior to that Application being filed, correspondence had been forwarded to the husband by the wife’s solicitors that correspondence being dated 3 September 2013. The correspondence conveyed to the husband an offer of settlement in similar, if not identical, terms to the Orders that were ultimately sought in the Initiating Application.
The Response to that correspondence did not specifically address the proposal, other than to make it clear by the very terms of that correspondence that Mr Reilly considered the offer to be wholly unreasonably and outside the range of reasonable outcomes which might be expected. Whether Mr Reilly had obtained advice to that effect or not is unclear.
Mr Reilly had responded by letter 16 December 2013, some 3 months after the correspondence forwarded by Ms Reilly’s attorneys and shortly after the proceedings had been commenced seeking Orders in similar terms to the proposal.
The correspondence forwarded in September 2013 also raised certain issues with respect to pre‑action procedures and disclosure generally. To that end, I make clear, as both parties have referred to it – perhaps more so Mr Reilly – the pre‑action procedures as set out in the Family Law Rules 2004 do not apply in the Federal Circuit Court of Australia. The Full Court made so much clear in their decision of Thompson & Berg [2014] FamCAFC 73.
The Federal Circuit Court Rules 2001 make no provision for pre‑action procedures. Whilst rule 1.05 of the Federal Circuit Court Rules 2001 might be suggested to imply and import the pre‑action procedures of the Family Law Rules 2004 into the Federal Circuit Court Rules 2001, that argument was expressly rejected by the Full Court in Thompson & Berg. That is particularly unfortunate as the Federal Circuit Court of Australia is designed, indeed mandated, by its enabling legislation,[3] to proceed with informality. Consensual resolution of disputes without recourse to litigation and, if litigation is necessary, the conduct of litigation with symmetrical information, would enhance and facilitate informality.[4]
[3] Section 42 of the Federal Circuit Court of Australia Act 1999.
[4] Section 45 of the Federal Circuit Court of Australia Act 1999 and Part 14 of the Federal Circuit Court Rules 2001 do not permit discovery (perhaps the more formal modality of disclosure) without leave of the Court and thus the coercive power of the Court to compel disclosure is somewhat limited, consistent with the informality mandated by section 42 of the Federal Circuit Court of Australia Act 1999.
The resolution of disputes by non‑litigious means is very much in keeping with informality. The non-adoption of pre-action procedures by the Federal Circuit Court of Australia[5] is all the more regrettable as the federal Civil Dispute Resolution Act 2011 specifically excludes proceedings under the Family Law Act 1975, and does so on the basis of a misunderstanding or misapprehension that the Family Law Act 1975 and the Rules which operate in each of the two Courts which deal with matters under that legislation, already have abundantly adequate pre‑action procedures.[6]
[5] Whether through adoption of the pre-action procedures prescribed by the Family Law Rules 2004 via rule 1.05 or by the Federal Circuit Court Rules 2001 making specific provision.
[6] Explanatory Memorandum, Civil Dispute Resolution Bill 2010 (Cth) General Outline.
Post Thompson & Berg the Federal Circuit Court of Australia has no pre‑action procedures whatsoever, save for those specifically provided by the Family Law Act 1975, being section 60I of the Act which, because of its placement within Part VII of the Family Law Act 1975, applies solely in parenting proceedings.[7] That of itself is unfortunate as section 60I of the Act connects to a large extent with Part II of the Act dealing with the Court’s power to refer parties to Family Dispute Resolution. The regrettable absence of pre‑action procedures in this Court could be remedied quickly and easily through one of a number of simple steps including:
a)The Judges of this Court or the majority thereof promulgating Rules to provide for pre‑action procedures;
b)The movement of section 60I of the Act to Part II of the Family Law Act 1975 so that the section applies to all proceedings, not only parenting proceedings;
c)The removal of Family Law Act 1975 proceedings as excluded proceedings for the purpose of the Civil Dispute Resolution Act 2011.
[7] Whilst Part II permits referral by Order to Family Dispute Resolution, this can only occur post filing.
Unless and until action is taken by the Judges of this Court or by the Parliament of Australia, those outcomes cannot be achieved.
To the extent that these parties have from the outset proceeded on the premise that pre‑action procedures under the Family Law Rules 2004 (or the Family Law Rules simpliciter – all correspondence between the parties and the Orders sought by the parties referring to the Family Law Rules 2004) they have been clearly wrong. These proceedings are and, at all times were, governed by the Federal Circuit Court Rules 2001 which contain a number of differences to those which the parties have referred to in their material. One of which is a complaint by Mr Reilly, for which I am not critical of him, simply to point out its inaccuracy, that the wife’s offers as are detailed in her evidence (to which I will return shortly) fall outside of the “28 day rule”. That rule arises from rule 10.06 of the Family Law Rules 2004 requiring that each party must make a genuine offer to settle with all other parties within 28 days of a Conciliation Conference concluding. That rule simply has no application in this Court.
Similarly, Mr Reilly has referred to his being impeded in taking a step required in the proceedings by rule 11.02 of the Family Law Rules 2004 which, again, has no application to these proceedings.
The Federal Circuit Court Rules 2001 do contain remarkably similar provisions to those within the Family Law Rules 2004 regarding disclosure. For the purposes of the Federal Circuit Court Rules 2001, disclosure obligations are contained in rule 24.04 of the Rules. That rule requires that each party must, within 14 days of either commencing proceedings or being served with an Application, serve upon the other party copies of certain documents.
The obligation of disclosure under rule 24.04 of the Rules is far from onerous, being confined as it is to income tax returns and assessment notices for the parties and entities or corporations in which they have an interest, bank statements, and similar, readily available documents which would be in the possession, custody or control of the parties.
Following the commencement of proceedings, Mr Reilly filed a Response. It is instructive to consider the relief that each party sought. It is also important to note that neither party has, at any time during the course of the proceedings, amended their Application or Response.
At hearing, the wife sought Orders that were a variation of those set out in her Initiating Application. However, a Case Outline document, that which contained the amended plea for relief, is not an Application or Response.
The Case Outline was served upon Mr Reilly shortly prior to the hearing. No issue was taken at hearing, although Mr Reilly was self‑represented and Judge Donald proceeded to hear and determine the controversy based upon that which each party presented in opening.
By her Initiating Application, Ms Reilly sought a suite of Orders which might be summarised as follows:
a)That the former matrimonial home of the parties at Property J be sold and that the net proceeds of sale after payment out of the mortgage and sale costs be divided in a 70/30 per cent basis in favour of the wife;
b)That the wife receive certain items of personal property so as to achieve an equal division of furniture and contents of the home;
c)That a superannuation splitting Order be made which would see Ms Reilly receiving $48,050 from Mr Reilly’s superannuation;
d)That each party otherwise retain all assets and remain liable for all debts in their respective names.
By his Response Mr Reilly sought Orders in the following terms:
a)That the Orders sought by the Applicant numbered 1 through 15 be “set aside as unreasonable”;
b)That the matter be transferred to the Family Law Court – presumably the Family Court of Australia;
c)Costs on a party/party basis.
It is unclear whether the plea with respect to costs is a consent to that sought by the wife, although in all probability it is intended to be a plea that the wife pay the husband’s costs, although some difficulty would arise in that regard, Mr Reilly having been self‑represented throughout.
The Application for transfer was dealt with by Judge Stewart on the first return date of the proceedings. The Application was dismissed.
Mr Reilly's Response and the Orders sought by Mr Reilly remained in the above form from the time of its filing, 28 January 2014, until the final hearing and disposal of the proceedings May 2015. Clearly, Mr Reilly did not propose any relief. The Response simply resisted that which was sought by the wife. It might be inferred that Mr Reilly was thus seeking to suggest that it was not just and equitable for any Order for property adjustment to be made. In light of the Judgment delivered by Judge Donald and the reasons for Judgment contained therein, the Court determined that the exercise of jurisdiction and the granting of Part VIII relief was just, equitable and appropriate.
The Response, as it was framed, creates some difficulty for the Court, Mr Reilly and Ms Reilly. Ms Reilly was not afforded due process as regards any plea for relief agitated at hearing by Mr Reilly. I do not raise that issue to suggest any fault or culpability on the part of Mr Reilly, nor any attack upon the integrity of the process comprising the hearing of the case before Judge Donald, simply to observe that Ms Reilly was not ever put on notice of any alternate relief sought by Mr Reilly, simply the opposition by Mr Reilly of that which she sought.
Disputed issues
The issue of alleged deficient disclosure as well as offers made and responses thereto are fundamental to the determination of this costs dispute.
Disclosure
In relation to disclosure, it is clear that prior to the commencement of the proceedings certain documents were sought from Mr Reilly by Ms Reilly’s attorneys. A wealth of correspondence – dozens, if not hundreds, of pages of communication - has flowed in relation to that issue. The issue was complicated, at one point in time, by an Order made by Judge Stewart which required that the wife pay to the husband a sum of $50 to assist him in the cost of copying documents that were to be produced by him.[8]
[8] I do not suggest that Judge Stewart’s Order was the cause of complication but rather the differing “interpretations” of the parties.
I do not refer to that Order as a complication to suggest that it was wrong or should not have been made. It simply would appear to have become the focus of further dispute between the parties rather than resolution of a suggested practical impediment and with the consequence that the documents that were sought to be disclosed, were not disclosed or, at least, so it is alleged.
Following the making of the above Order further correspondence passed regarding the provision of documents. Mr Reilly asserted steadfastly and stridently that he had not been provided with that which Judge Stewart had ordered and thus could not afford the copying of documents and would not provide them.
Ultimately, Ms Reilly’s attorneys issued a subpoena addressed to Mr Reilly seeking the production of the very documents which rule 24.04 of the Rules require the production of and as, indeed, Judge Stewart’s earlier Order required the production of. The subpoena served upon Mr Reilly was accompanied by conduct money of $50, thus by hook or by crook, as it were, the $50 was ultimately provided, albeit not through the informal process that was envisaged by Judge Stewart. Why that was considered necessary is entirely unclear and how the issue could have been allowed to impede progress of the matter let alone its resolution, defies belief and especially so in light of an ample body of High Court of Australia jurisprudence on the issue.[9]
[9] See for example, Aon Risk Services & ANU [2009] HCA 27, Haset Sali v SPC Ltd [1993] HCA 47 and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46.
It is instructive to consider the terms of rule 24.04 of the Federal Circuit Court Rues 2001 as to what was required of the parties. That rule provides:
Unless the Court or a Registrar otherwise orders – [I pause to note that the Order of Judge Stewart may well have impacted upon and modified the obligation of disclosure] – a party required under this Part to file a financial statement or affidavit of financial circumstances must serve on each other party who has an address for service in the proceeding the following documents.
There is then a short list of five categories of documents enumerated. Those documents, as I have already observed, are not voluminous. They comprise income tax returns and assessment notices and the like.
Mr Reilly’s material makes clear that at the time of the hearing, May 2015, that his 2014 tax return had not been completed. There is a common law obligation and a good body of jurisprudence suggesting that this was a dangerous course for Mr Reilly to adopt, even accepting that it was so. The obligation upon a party to provide recent tax returns and assessment notices is far from onerous. That obligation extends to and includes a timely completion of relevant tax returns at least to the point of lodgement if not in fact lodged. I accept that Mr Reilly was and remains a man of limited means. He is not in employment but nor is Ms Reilly. Lack of employment neither precludes nor excuses proper preparation of such material and its disclosure.
Throughout the proceedings Mr Reilly was living in the matrimonial home. It would seem that both parties were at some point in time during the proceedings. Mr Reilly had, to that extent, some “financial advantage” over Ms Reilly. Further, the costs involved in copying and producing documents is not substantial in simple cases such as this. It is a cost which might be described as “an investment in settlement”.
The alternative to service of copies of documents, which Mr Reilly has referred to throughout his material filed in resistance of this Costs Application, is that arrangements might have been made for the documents to be produced by Mr Reilly and inspected, copied and returned to him. That proposal was never raised during the substantive proceedings.
The parties simply were at loggerheads, corresponding backwards and forwards, about the $50 Judge Stewart had ordered to be paid to secure provision of documents. That correspondence and the dispute to which it related was unproductive and resolved nothing. Indeed, it was trivial.
In any event, the matter proceeded to hearing. There would not appear to have been any substantial or significant impediment to the determination of the matter by Judge Donald arising from any suggested lack of disclosure. But certainly a significant amount of time, effort and cost was expended in addressing the issue.
When the subpoena was ultimately issued shortly prior to the hearing, an objection to production was filed by Mr Reilly. The objection was prefaced upon the non‑payment of $50 which Judge Stewart had ordered paid. Clearly, and I accept, production fees and conduct money of $50 were provided and thus I am satisfied the two issues are, to a large extent, one and the same. The balance of the objection I need not consider.
The whole issue does no credit to either party. It reflects a lack of focus upon issues in dispute, let alone resolution of those issues and does a disservice to the litigation process and the legal profession. It is like two children in the playground squabbling over who will use a particular part of the playground when the rest of the playground is empty and available.
Certainly Ms Reilly was entitled to provision of service documents. Mr Reilly should have simply copied them and provided them and, following Judge Stewart’s Order, Ms Reilly should have simply provided $50 as ordered.
Offers
The more significant issue relevant to the costs determination is, perhaps, that of offers of settlement.
There are a number of offers referred to by the wife. Mr Reilly has indicated that he had made one offer in the proceedings, that made at the Conciliation Conference wherein he proposed an equal division of assets (presumably the entire “pool”, including superannuation, or its value).
The wife’s offers, (the first offer having been made prior to the commencement of proceedings and continued or reaffirmed by an offer 29 May 2014), proposed a 52/48 per cent split of the parties’ net pool of assets.
That offer, expressed to be made in accordance with the Family Law Rules 2004 and contained within a form prescribed by those Rules, was prefaced upon the listing and sale of the matrimonial home and payment of a sum certain to the wife from the proceeds of sale together with a superannuation splitting Order for a sum certain. I accept that which is opined in the covering correspondence that the net effect of those Orders in combination was a 52/48 per cent split of the “total pool”[10] in favour of the wife.
[10] The parties would appear to have proceeded, at all times, on the basis of an acceptance that all superannuation and non-superannuation assets would be included in one pool (to adopt the language of the parties).
A further offer was then made by Ms Reilly on 24 October 2014. That offer, again contained within a form prescribed by the Family Law Rules 2004, proposed the listing for sale and sale of the home, payment out of certain expenses, and then a 55/45 per cent division of the net proceeds of sale to the husband. The wife sought a superannuation splitting Order as to 60 per cent to the husband and 40 per cent to the wife. Accordingly, the wife’s third offer would appear to represent, if plotted on a graph, a continuing downward curve as to that which she would accept to bring about a conclusion of the proceedings.
Ultimately, the wife’s final offer, if it might be so described, was that contained within the Case Outline document filed by her Counsel immediately prior to the trial. Therein the wife sought Orders which, whilst prefaced upon the home being listed for sale and sold, would achieve a 55/45 per cent division of the total pool of property in the wife’s favour.
It is germane to note that the reasons for Judgment delivered by Judge Donald recite that reality at the commencement of his reasons.
His Honour also refers to a Minute of proposed Orders provided by the husband at the commencement of the hearing, which I have not located upon the file but which I accept His Honour had before him. His Honour refers to that Minute proposing that the husband pay to the wife an amount representing 35 per cent of the equity in the former matrimonial home and a superannuation splitting Order of $31,000. By reference to the evidence as found by His Honour, that Order if granted would certainly see the wife receiving less than 50 per cent of the total superannuation and, in all probability, would have seen the wife receiving approximately 35 per cent of the “total pool” as found, although nothing turns upon that calculation.
What is also clear from the correspondence that has passed and the submissions of Mr Reilly is that the issues which essentially impeded resolution of the matter, over and above issues of alleged inadequate disclosure (and manifestly a lack of focus upon resolution), were:
a)Firstly, the prefacing of each proposal put by or on behalf of Ms Reilly upon a sale of the home. Clearly, Mr Reilly wished to retain the home. What is absent any of the correspondence, however, is a response to the wife’s offers, including a response to indicate, for example, that the percentage sought was not so much in issue as the precondition of sale. Clearly, Mr Reilly wished to retain the home throughout the proceedings and had made so much clear. However, a response by each to the other’s correspondence at different points in time, to the extent that it was relevant and focused upon issues in dispute and the resolution of those issues, might have assisted;
b)Secondly, Mr Reilly’s correspondence makes clear, as would appear consistent with the percentage proposal advanced by him at hearing, that he sought to quarantine or have, in some fashion, a discounting or taking into account, the receipt by him of $105,000, representing an inheritance and a gift received by him late in the relationship. The reasons delivered by Judge Donald make clear that no such quarantining, reservation or adjustment was made. Thus, Mr Reilly was wholly unsuccessful in that argument;
c)The third issue which would appear to have impeded settlement was a focus upon issues not directly relevant to the proceedings. That is not a criticism of the parties and particularly Mr Reilly, who had raised the majority of such issues. What is clear is that Ms Reilly’s desire to separate and end the marriage was not a desire jointly shared with Mr Reilly, at least at the time the communication began between Mr Reilly and the wife’s attorneys in September 2013. A number of issues – not significant by reference to section 79 or section 75(2) of the Family Law Act 1975 – were operating in the mind of Mr Reilly and clearly communicated by him to Ms Reilly’s attorneys. That focus, however, would appear to have dramatically impeded a focus upon relevant issues which might have assisted in resolution of the case;
d)Fourthly, and finally, the adoption of positional bargaining negotiation techniques by each party would appear to have sabotaged any realistic prospect of settlement of the matter (especially when combined with misconceived or, at least, unsuccessful arguments raised by one party or the other and distraction by irrelevant or unimportant controversies). This positionality is perhaps best reflected by the action of each party at hearing, seeking Orders further apart from those proposed by the other than at any other point in the matter.
The evidence that is before the Court has otherwise been considered in its totality. I do not propose to canvas it in any further detail. I may refer to other aspects of the evidence in dealing with the legislative considerations that I must address. However, for present purposes the evidence that is before the Court, as observed some hundreds of pages of evidence and more evidence than was relied upon in the substantive proceedings, is taken into account in its totality and informs the decision made.
Costs
The Application for Costs is governed by section 117 of the Family Law Act 1975. Section 117(1) of the Act creates what was referred to by the High Court of Australia in Penfold v Penfold (1980) 144 CLR 311 as “the general rule” that being that each party shall bear his or her own costs. I should observe for the sake of completeness that Mr Reilly has submitted that the Orders made by Judge Donald concluded all controversy between the parties, including costs. Certainly each of the parties had sought in the Application or Response filed by them an Order with respect to costs.
Order 10 of the Orders made by Judge Donald provided as follows:
That each party, as against the other, is solely liable for all and any costs, debts, expenses or liabilities of any nature whatsoever attaching to any asset or financial resource to which the party is entitled pursuant to these orders and that the liable party indemnify and keep indemnified the other party in respect of all and any such costs, debts, expenses or liabilities.
I am not satisfied, both having regard to the terms of that Order and from having considered the reasons delivered by Judge Donald, that the Order could possibly be taken to incorporate a determination of costs. It is clear from the Judgment delivered by Judge Donald that the issue of costs was very much at large at the conclusion of the hearing. Mr Reilly indicates in his evidence that certain portions of his trial Affidavit which annexed settlement offers had been specifically excluded by His Honour on the basis that those offers would be considered further in the event that there was an Application for Costs.
The above Order, by its terms, relates to any debt for which either party might be liable or called upon to contribute to or which was secured against any asset or financial resource to be retained by a party. The wife’s costs, as disclosed in her Financial Statement, do not fall within those categories. The wife’s disclosure of her legal fees, paid or otherwise, is entirely appropriate. It might have been the basis (although it would not appear to have been agitated) for an adjustment by reference to authorities such as NHC & RCH [2004] FamCA 633. That the wife disclosed her paid legal fees to date does not, to my mind, attract the above Order or apply it to those fees (or, for that matter, the wife’s unpaid legal fees).
I am not satisfied that the wife’s disclosure of her paid legal fees and the Order made by His Honour could be suggested, particularly having considered the reasons delivered by His Honour, to have dealt with the issue of costs or to create any estoppel as to their determination now.
Thus, I am satisfied that the Court’s jurisdiction to address costs is enlivened and not extinguished.
Section 117(2) of the Act reserves to the Court a general discretion to make an Order for Costs, notwithstanding the general rule in subsection (1). In exercising that discretion, the Court must be satisfied that there is both a justifying circumstance for an award of costs and that it is just and equitable to depart from the general rule (for discussion of same see, Re JJT & Ors; Ex Parte Victoria Legal Aid [1998] FLC 92-812).
In considering the above dual test, the Court must have regard to the prescriptive but non‑exhaustive list of considerations in subsection (2A). I will deal with each of those factors shortly.
Subsection (3), (4), (4A) and (5) are not relevant to this determination, dealing as they do with Applications for Costs by or involving Independent Children’s Lawyers or Child Welfare Agencies.
Financial circumstances of the parties
The financial circumstances of the parties are meagre. There is no other way of describing it. Whilst one might take a global view and consider that Mr and Ms Reilly, with the wealth that they each have, fall within the top two or possibly three per cent of the world’s population by reference to wealth, they would not feel that they are so privileged.
Ms Reilly has the benefit of the payment that she has received as a consequence of the Orders that she obtained from the Court. Those Orders affected a 55/45 per cent division of the total pool (on what might be called a one pool approach, including superannuation as an asset together with the home and other smaller assets). Thus, as is submitted and as I will deal with regarding offers, the wife received better than she had offered to accept, at least in by her last without prejudice offer and obtained that which she had sought at hearing.
However, the amount that the wife has received (a little over $300,000) as well as the assets that the husband has retained (with a value slightly less than that which the wife has received) will be needed by each of them to support themselves and their adult children and other persons for whom they feel or have legal or moral obligations to support for the rest of their lives, which will hopefully be long and fruitful.
The financial circumstances of the parties could not support a finding of justifying circumstance in this case. That is not to say that there might not be cases where an overwhelming disparity in the financial circumstances of the parties might contribute significantly to a finding of justification for costs. However, in this case the consideration is relevant only to justice and equity.
I am not satisfied that the financial position of each party, dependent upon Centrelink benefits for their week to week support and each with assets, (whether in cash or invested in real estate), that are relatively meagre, having regard to the hard work they have each undertaken throughout their lives and the long life they have enjoyed together, would, of itself, create injustice or inequity if an Order were made.
From the wife’s perspective, it is submitted that if she is required to meet the totality of her legal costs from that which she has received, that she will to a significant extent (something in the range of one‑sixth to one‑seventh of the total amount she receives) be deprived of the fruits of her litigation. They are the only funds that she has and the only funds that, realistically, she will have between now and her passing and upon which she is dependant to support herself and to enjoy a quality of life befitting the hard work she has undertaken throughout her life.
I will return to the financial circumstances of the parties in due course.
Legal Aid funding
Clearly, neither party is in receipt of Legal Aid.
The conduct of the parties in the proceedings generally, but including with respect to particulars, discovery and the like
What is immediately apparent from the correspondence annexed to the Affidavits relied upon in this case is the ineffectiveness of communication that has occurred between the parties and their legal representatives.
Mr Reilly submits that the matter could and should have been resolved by other means than litigation, away from the Court and through discussion. There is some real force to that. Indeed, from the Court’s perspective – if not Parliament’s – that is the preference in all cases, save those where it would be unsafe to expect such engagement of the parties, such as those involving substantial family violence or egregious behaviour such as the disposal or non-disclosure of assets.
But I must have regard to how realistic that submission might have been in the context of this case. Mr Reilly’s submissions inherently suggest a criticism of not so much the wife but her legal representatives for being litigious, unwilling to negotiate, unwilling to guide his wife towards negotiated resolution and the like.
I must set that against the reality of that which the parties sought. Certainly, and with the benefit of hindsight, that great talisman of wisdom, the wife’s initial plea for a 70/30 per cent division of the home and an equal division of superannuation was somewhat inflated in light of the range of reasonable outcomes as determined by Judge Donald.
That does not mean that there was not and could not have been any basis to the plea for relief as it was framed, although clearly it did nothing to assist to engage Mr Reilly in a negotiation process. The only response received to that proposal, and ultimately the Application, was Mr Reilly’s rejection of the wife’s position as entirely unreasonable. As the High Court of Australia has been clear in U & U [2002] FLC 93-112, it is the responsibility of the parties, not only for the purpose of litigation but for the purpose of negotiation, to set the parameters of their dispute. No clear parameters were set until, it seems, day one of a two day trial.
Throughout the proceedings the wife was left to seek to negotiate, although negotiation in reality would not appear to have ever occurred in any fulsome way, in light of the Response that was filed, which did not contra‑agitate against the wife’s Application. It simply sought dismissal of her claim as unreasonable. The husband did not seek any Order for property adjustment until the commencement of the trial. The wife, as I have started these reasons thus, did not have due process as regards the case that she was answering on the part of Mr Reilly.
In that environment the position that the position advanced by Mr Reilly that the matter could and should have been resolved must be approached with caution. Each attempt at resolution by Ms Reilly or her attorneys might be described as somewhat brisk and egregious, at least in its perception by Mr Reilly. Offers would be sent to Mr Reilly which commenced with the very precondition which he found unacceptable, distasteful, if not offensive – the sale of the home. It is abundantly clear that at no time was there any concession by Ms Reilly that the home might be retained by Mr Reilly in return for payment out to Ms Reilly nor any response by Mr Reilly to seek to raise any contra‑agitation or to put any counter‑proposal. Each offer was met with rejection or silence.
When the wife, through her attorneys, made an offer to list for sale and sell the home and divide the proceeds in a specific fashion, it was open to Mr Reilly to respond, rather than ignoring the proposal or simply rejecting it as unreasonable and offensive. Mr Reilly would have indicated that he had no difficulty with the figure, purely the mechanism, seeking to accept the offer but on the basis that he pay funds to the wife and retain the home. If Mr Reilly had done so both parties would now be better off and the matter might have resolved without hearing.
That simple response might have taken the matter somewhere towards that which the husband suggested could and should have occurred, namely, consensual resolution.
Overwhelmingly, there is, in the correspondence that has passed, voluminous as it is, a clear suggestion of a distinct lack of focus on end purpose if not a lack of desire to focus upon purpose. There is demonstrated by the correspondence an inability to communicate anything of substance or worth. A great deal of “sabre rattling” has occurred with respect to disclosure and discovery but for no real purpose and to no real end.
That is not to suggest that disclosure is not a significant obligation. It can and should be undertaken and when necessary enforced, in every case. That said, disclosure should not need to be enforced. Parties should come to the table willingly and provide disclosure in accordance with their common law and Federal Circuit Rules 2001 imposed obligation. That is what the Court’s Rules and an ample body of jurisprudence provides.[11]
[11] See, Black & Kellner [1992] FLC 92-287 and Weir & Weir [1993] FLC 92-338.
Disclosure is fundamental to the litigation process. As Justice Felix Frankfurter opined “litigation is the pursuit of practical ends, not a game of chess”. Disclosure is the means of achieving practical ends and is the obligation of each litigant. What is required to give full disclosure varies from case to case largely based on the issues in dispute between parties and the prior knowledge of each party.
Disclosure must be focused on identifying the issues in dispute and establishing the facts relevant to those issues. It is not about producing boxes of documents for no reason. If the parties agree on all facts and are comfortable that their knowledge of those facts and issues is sufficient to allow them to safely enter into agreement or make concessions, then so be it. In those circumstances no disclosure or further disclosure is needed. If a party feels that their knowledge of events and transactions is not sufficient to agree to concede a fact, then documents relevant to those disputed facts must be disclosed. If a fact is agreed, then disclosure is unnecessary as regards that which relates to that fact.
Too often disclosure is an obfuscated and vague process with circular arguments that “we have not had full disclosure” advanced as to why a case cannot be resolved or advanced. In such cases when the question is posed “what documents relevant to what facts or issues in dispute do you say have not been disclosed?” the answer is all too often “we don’t know as we haven’t had full disclosure”. This case has elements of that circularity.
Disclosure is intended to allow forensic decisions to be made as to what relevant facts are agreed or not agreed. If a document is not relevant to that purpose, then it need not be disclosed and need not be requested. Once the facts are established the parties and their legal representatives can locate appropriate case law and engage in an appropriate course of negotiation to resolve the matter.
Disclosure is the means by which the issues in dispute in any case are identified and defined. It is the means by which litigants can assess and determine the relative evidential strengths and weaknesses of their case and the case to be agitated by the other party. Disclosure allows, in the words of Chief Justice Bathurst “…. a better understanding of the strengths and weaknesses of each side’s legal case and of the key issues that are in dispute”.[12]
[12] Bathurst, T.F, “The Role of Courts in the Changing Dispute Resolution Landscape” [2012] UNSWLJ1 36, 870, 35(3), 877.
Disclosure is not a fixed or rigid nor, for that matter, an “onerous” obligation on a party. If disclosure is focused upon and confined to issues in dispute (as it is intended) rather than a means of burying or concealing information within a mass of irrelevant material, blurring the issues or distracting attention from significant and relevant issues, then the obligation is far from onerous. The process of disclosure is not one of obfuscation but of erudition and clarity, of getting to the point and identifying and then clarifying and resolving factual disputes. Sourdin notes that UK research, “suggests that much of the criticism in respect of pre-action obligations [including mandated disclosure] is related to the failure of lawyers and disputants to act ‘reasonably’ or ‘proportionately’”.[13] This “reasonableness” or “proportionality” is, again, fundamentally connected with the role of disclosure in dispute resolution.
[13] Tania Sourdin, “Forum: Civil Dispute Resolution Obligations: What is Reasonable?” (2012) 35 UNSWLJ 889, 907.
One would think, in light of the financial, let alone other costs involved in litigation, that attempts at clearly defining issues and positions might be undertaken or advisable to be undertaken before commencing proceedings or, if proceedings are commenced then as expeditiously and efficiently and effectively as possible thereafter.[14] This would be reflective of litigation being a serious step, a dispute resolution means of last resort, rather than the “go to” or default mode of dispute resolution.
[14] Rule 24.04 of the Federal Circuit Court Rules 2001 provides for disclosure to occur within 14 days of the first Court date.
Disclosure is fundamental to “genuine effort” or “bona fides” or “good faith” in negotiation and in the conduct of litigation. To enable effective negotiation or the conduct of litigation information is required. Information is provided in the form of disclosure. Decisions must be “considered” and must be “informed” by information, including forensic decisions of Dispute Resolution choices, considerations of offers of compromise and the presentation and testing of evidence. If a party contemplates litigation they should factor into that decision a knowledge of that which they can and cannot prove and that which the other party can and cannot prove.
Litigation is a cumbersome, expensive and potentially a destructive process that should be embarked upon or continued with caution and with deliberate choice. Such a choice cannot be validly made when issues have not been clarified, positions formulated, advised and considered and relevant enquiry made to establish realities or assertions and assumptions challenged and tested. That litigation would be commenced or continued in such circumstances is not a function of “ready access to justice” but rather great injustice. It is incurring cost unnecessarily, foregoing opportunities of consensual, self-determined dispute resolution and, to the broader community, consuming resources needlessly and unnecessarily.
Justice cannot be obtained, consensually or by judicial determination, without the precondition of decisions being founded upon evidence (information gathered, exchanged and considered). To commence or continue litigation without such disclosure and due enquiry would reflect great risk,[15] suggest that the claim is other than well considered[16] and potentially an abuse of process.[17]
[15] It is all very well to “assert” fact but due diligence by lawyers would require that some basic enquiry might be made as to how that asserted will, if contested, be proved. Whilst lawyers are creatures of instruction and bound by instruction it does not make them neutral mouthpieces. If a client asserts, for example, that a property is worth $1,000,000 then the prudent lawyer would ask “what enquiry have you made to determine that and how do we demonstrate to the other party that it is so?” Failure to address the forensic merits of a case, including how allegations will be proven, would be a serious cause for concern.
[16] Consideration of the forensic merits of a case involves a balancing of fact and law. The balancing of fact requires consideration of the likelihood that important elements in each case can be proven.
[17] The High Court of Australia is clear (see for example U & U [2002] FLC 93-112) that it is incumbent upon the parties to place a proposal before the Court. A proposal cannot be properly formulated without due consideration of the forensic merits of the case. To commence proceedings absent a clear position to be agitated for and having considered the evidence required to establish that position as “just and equitable” (and having marshalled that evidence as regards required disclosure and valuation from the perspective of that party) is fraught with difficulty, exposes a litigant to cost and potentially Costs Orders and misuses Court resources.
As was observed in the Woolf Report:[18]
The cause of such futile litigation is (a) the failure by one or both parties to get to grips with the issues in good time or (b) the failure of the parties to have any effective dialogue.[19]
[18] Ministry of Justice, UK, “Solving disputes in the county courts: creating a simpler, quicker and more proportionate system – a consultation on reforming civil justice in England and Wales”, Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty March 2011, available at courts.pdf .
[19] This and the above 5 paragraphs have previously been published in a similar form in a paper by me “Should Mediation be the First Step in all Family Law Act Proceedings?” (2016) 27 ADJR 1 at pp11-48.
Disclosure is an investment in settlement. Parties cannot negotiate with asymmetrical information and disclosure cures this. Although it is unclear the extent to which the information that was ultimately sought, and one would hope might have been provided, at least in part, has impacted upon decisions made in the case it would seem that the obsession around contest and challenge with respect to basic disclosure vastly exceeded the relevance or value of that exercise. The harder Ms Reilly pushed the more ardently Mr Reilly resisted. It became an expensive game.
The issue of disclosure is discussed in detail in authorities such as Black & Kellner [1992] FLC 92-287, Weir & Weir [1993] FLC 92-338, Medlon & Medlon (No.6) (Indemnity Costs) (2015) FLC 93-664 and the like. I am conscious of that which fell from their Honours in those cases as to the obligation of disclosure. The correspondence that has passed between these parties has, to a large extent and without wishing to be offensive to either party or the wife’s attorneys, been very much a waste of paper. It has established allegations and positions but it has not sought to articulate the basis for those positions or move from them. It has simply assisted the parties in becoming further entrenched in their positional bargaining stance.
That aside, however, the husband’s strident resistance of the provision of documents due to an inability to fund the cost of copying and without any alternate proposal, does him little credit. Rather than to stand on ceremony, as it were, it might have been simpler for Mr Reilly to respond and say, “I will bring the documents to your office and you can copy them yourselves”.
It might be that trust between the parties was not that abundant. The tone of correspondence would suggest that this was so. However, it was a simple issue to resolve and, as the High Court of Australia has discussed continuously in authorities such as, Haset Sali v SPC Ltd [1993] HCA 47, Aon Risk Services & ANU [2009] HCA 27 and, more recently, Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46, parties should, whether legally represented or not, find a resolution to such issues, rather than to require the Court’s intervention or to generate cost around the issue.
The issues around disclosure do not of themselves, to my mind, generate a justifying circumstance for costs. I am conscious in that regard, however, by reference to authorities such as I & I (No.2) (1995) FLC 92-625, Collins & Collins (1985) 9 Fam LR 1123, Browne & Green (2002) FLC 93-115, Harris v Harris (1991) FLC 92-254, that all factors must be considered and that whilst an individual factor might, in some circumstances, be dispositive in other cases factors cumulatively might tip the balance rather than only one doing so. Indeed, that is inherent in the submissions put on behalf of the wife by reference to Collins & Collins, to which I have referred, that the discretion to award costs is broad.
As was stated clearly in I & I (No.2) all factors:
Must all be taken into account and/or balanced in order to determine whether the overall circumstances justify the making of a costs order.
As also observed in Fitzgerald (As Child Representative for A (Legal Aid Commission of Tasmania)) v Fish and Anor [2005] FamCA 158, there is nothing to prevent one factor becoming a sole determinant for an Order for Costs or, perhaps, the greatest weight upon the scale, which does not quite tip the scale itself but requires some other small weight to achieve that purpose.
Whether the proceedings were necessitated by failure to comply with a previous order
Clearly these proceedings were not so necessitated.
Whether a party has been wholly unsuccessful – that is always difficult to judge in any proceedings
In parenting proceedings, it might be suggested that to be “wholly unsuccessful” is impossible as the subject matter of the proceedings are the interests of the child rather than of the parties. In property proceedings success or its absence is a matter of relativity.
The position that was agitated at trial by the wife was a 55/45 per cent division in her favour. The wife was, to that extent, wholly successful. The provision does not focus upon success, however. Rather, the negative proposition of lack of success.
The husband at trial – although it would appear to be the first time that a position was fully or formally put before the Court – sought a 35/65 per cent division in his favour. In that regard, the husband was, as regards percentages, wholly unsuccessful.
The husband, as regards his plea to be offered the opportunity to retain the home and pay a sum of money to the wife, was successful. The difficulty – or perhaps, the reality of that possibility having not been previously considered– is twofold.
Firstly, the husband’s Response did not propose any relief at all let alone retention of the home by him. Thus, the wife could not be overly criticised for failing to consider that “proposal”.
Secondly, as Judge Donald observed, commencing at paragraph 81 of his reasons, the wife was no doubt somewhat sceptical of the husband’s ability to raise funds and probably of the view, particularly in light of the husband’s correspondence asserting his relative poverty such as his inability to fund the photocopying of documents which would have cost no more than $50, that the husband had no capacity to retain the home. Judge Donald had noted at paragraph 81:
I note the desire of the husband to retain the former matrimonial home. Given the current financial circumstances of the husband and his current lack of employment, I am doubtful that the husband will be able to gather sufficient funds to pay to the wife in satisfaction of her entitlement pursuant to these findings. He should, however, have that opportunity.[20]
[20] Reilly & Reilly [2015] FCCA 2513 (unpublished).
The Orders made by Judge Donald afforded an opportunity to Mr Reilly to pay funds to Ms Reilly and there is no issue that payment was made as required and thus the sale of the home obviated.
In relation to Ms Reilly’s relative if not complete success, the Full Court discussed relative success in Davida & Davida (Costs) [2011] FamCAFC 61 and stated:
The other justifying circumstance is the husband’s relative success. True it is that the relevant paragraph in section 117(2A) refers to a party being “wholly unsuccessful”, but I think it is fair to say that the practice has been to look at what one might term the relative merits of success or lack of success between the parties, even if necessary doing that under the last matter mentioned in section 117(2A), being any “other” matter.
In that context, wholly unsuccessful means there was no justified basis for the position adopted, having regard to the outcome of the proceedings. Being wholly unsuccessful must look not just at the outcome but the position adopted by the party as well.
The above is of some real relevance to this case. Prior to the commencement of the trial, 4 May 2015, there was no formal position adopted or advanced by Mr Reilly. That and Ms Reilly’s success in obtaining that which she sought lends some support to a justifying circumstance and a finding thereof.
Offers of settlement
Clearly offers of settlement are significant in this case.
Offers have been discussed by the Full Court at some length in Browne & Green, the Full Court said the following at paragraph 57:
The insertion of section 117C in legislation is 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 the circumstances where there is adequate knowledge to 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.
The relevance of offers has been commented upon further by, for example, Murphy J in Lennon & Lennon (Costs) [2012] FamCA 116 wherein his Honour opined:
Litigation in this Court is expensive and, it seems, increasingly so. The consistent emphasis of the procedures of this Court and indeed the Rules is to encourage – at every stage of the proceedings – conciliation and the resolution of disputes by agreement.
Further, and to that end, separate from the Court processes and procedures, the Court encourages actively the use of private alternative dispute resolution processes.
Where negotiation – whether formal or informal – fails, for whatever reason, there is, as a matter of practical reality, but one method by which parties can seek to avoid for themselves the cost of litigation. That is by making a written offer to settle demonstrating their bona fides and asserting clearly and unequivocally what they consider to be (relevantly) a just and equitable outcome of the proceedings the subject of their dispute.
Bona fide offers made in this way can be seen as involving significant peril if litigation is pursued in rejection of them.
Similarly, in Robinson & Higginbotham (1991) FLC 92-209 it had been opined that the reason that offers must be treated seriously and weighted heavily is:
To ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened.
It is germane to note that the wife and her attorneys did not receive a response to the offers that were put by them. That included offers which would have seen the wife receive less than she ultimately received. Mr Reilly did not evince, in any of his communication with the wife’s attorneys, any desire to negotiate. Mr Reilly’s correspondence was accusatory, judgemental and unfocused. Mr Reilly did not propose mediation or other forms of Dispute Resolution nor, it would seem, did Mr Reilly make any offer of compromise or articulate any clear position other than at the Conciliation Conference.
Certainly, the husband is critical of the wife’s attorneys in particular for failing to ensure that the matter took those particular paths. However, it is not their obligation alone. It is the obligation of the parties plural to pursue a resolution. The offers that were forwarded by Ms Reilly’s attorneys without response by Mr Reilly were reasonable and might have been accepted or at least the subject of response if not counter offer especially once the proceedings were on foot.
Some of the offers that were made by Ms Reilly immediately prior to the commencement of proceedings and at various times during the proceedings fell above the outcome which the wife obtained. However, the balance of offers would have seen a far more cost effective resolution of issues for these parties than that which was required to pursue the matter to finality and, importantly, would have seen Ms Reilly receiving less (and correspondingly Mr Reilly more) than that determined by the Court.
A reduction in costs incurred by these parties (and principally Ms Reilly who was legally represented) appeared all the more likely, having regard to the relative simplicity of the issues in dispute, (and leaving aside for one moment the lack of focus on resolution). Such reduction in costs appeared unattainable as Mr Reilly was focused primarily upon the dispute rather than its resolution. Mr Reilly would appear to have also maintained an entirely appropriate and explicable focus upon the desire to avoid a sale of the home – never clearly articulated in response to any offer or proposal – and the desire to quarantine certain assets from the available pool of assets.
Finally, with respect to offers, I am conscious of that which has occurred in other civil jurisdictions, such as the Supreme Court of New South Wales, wherein Sackar J in Bryant v Hawkesbury Radio Communication Co-operative Society Limited [2014] NSWSC 848 expressed the following:
In my view, in the modern era…. parties have an obligation to constructively collaborate not just on the issues to be ventilated at trial but on the most efficient methods to do so. As has been otherwise said, litigation is not a game and the expense of the courts to the public is so great that their use must be made as efficient as is compatible with just conclusions.
The correspondence between the parties, lengthy and detailed as it is, demonstrates very little, if any, “collaboration”. Instead it is like two horned mountain goats in the Himalayas ramming their heads together, ignoring what is going on around them and ignoring the consequence to either. If Court determination is treated as the hunter in this analogy, then the butting together of heads sees the parties ignoring the hunter approaching and the cost to them of that being so. There has simply been a desire by the parties to argue, a desire to obfuscate, a desire to respond in kind to anything that is considered as a criticism, particularly on the part of Mr Reilly, although not exclusively.
The net result has been that the parties have not been able to pursue negotiation, although I make clear that the majority of fault from the correspondence that is attached to the material filed is ascribed to those who have not responded to offers, who have not provided information, and have not sought to place a position before the other party which, sadly, in this case, is Mr Reilly.
Similar determinations to that of Sackar J have been made by the Victorian Court of Appeal in Setka v Abbott [2013] VSCA 345 and Yara Australia P/L v Oswal [2013] VSCA 337. Each of those cases have referred to the overarching purpose[21] of seeking to avoid litigation and to find a resolution of disputes which is just, efficient, timely and cost effective.
[21] Whilst specifically referring to the “overarching purpose” of Civil Procedure legislation, the same overarching purpose has been articulated in common law jurisprudence from the High Court down and across jurisdictions and over a significant period of time.
These proceedings have been complicated by the reality that the wife has never had a position against which to agitate. She has simply had opposition to her Application, her offers and any step that she has sought to take in the proceedings.
I am satisfied that those issues would, by and of themselves and especially when in combination with the other matters to which I have referred, establish a justifying circumstance.
Finally with respect to offers, I am conscious of the words of Fitzgerald JA in Studer v Boettcher [2000] NSWCA 263:
It is often impossible to predict the outcome of litigation with a high degree of confidence. Disagreements on the law occur even in the High Court. An apparently strong case can be lost if evidence is not accepted, and it is often difficult to forecast how a witness will act in the witness-box. Many steps in the curial process involve value judgments, discretionary decisions and other, subjective determinations which are inherently unpredictable. Even well‑organised, efficient courts cannot routinely produce quick decisions, and appeals further delay finality.
Factors personal to a client and any inequality between the client and other parties to the dispute are also potentially material. Litigation is highly stressful for most people and notoriously expensive. An obligation on a litigant to pay the costs of another party in addition to his or her own costs can be financially ruinous. Further, time spent by parties and witnesses in connection with litigation cannot be devoted to other productive activities. Consideration of a range of competing factors such as these can reasonably lead rational people to different conclusions concerning the best course to follow.
The particular relevance of those sage words is evidenced by the failure of the parties to focus upon that which was relevant, in issue and to be determined and to deal instead, (in the case of Mr Reilly as evident from the correspondence annexed to the Affidavit material), with matters irrelevant to the dispute. Rather than respond to the wife’s assertions and address them with disclosure and counter agitation, Mr Reilly simply rejected anything raised or put by Ms Reilly as unreasonable. Rather than simply saying, “What the wife seeks and is offering me is unreasonable” if Mr Reilly had thought to go on and say “Here are the reasons why and here is what I say is reasonable”, the matter might have taken a different path. However, on each occasion there was silence on such relevant matters, and instead, in that vacuum, the matter proceeded to a determination. That was largely necessary due to a lack of good will and a failure to engage in meaningful negotiation.
Other matters
I am not satisfied that I need consider other matters in any great detail, save and except that the objects and principles of the Family Law Act 1975 are designed to assist parties, as much as is possible, in maintaining their decency, their dignity and as much of their wealth as is possible and so as to achieve a just outcome. Those objects and principles are not about encouraging parties to negotiate at all costs, to make concessions that are unrealistic, unreasonable or unsafe, but to encourage parties to reach a point of resolution that allows conclusion of the matter, movement forward and without the further need for cost and expense. It encourages early, costs effective resolution for the benefit of the parties, the Court and the community.
The effective conduct of financial litigation is far from complex. The common law system within which financial litigation (including proceedings under the Family Law Act 1975) evolved from the regulation of commerce with a view to a stable and ordered society. The adversarial common law system of justice evolved from and is particularly adept at the determination of rights and interests between parties[22] and the provision of remedy (restitution or retribution). Whilst the common law system of adversarial determination of disputes between parties is challenged, if not perhaps flawed, in its application to parenting disputes, where the subject matter of the proceedings and the rights and interests to be determined are those of a non-party child rather than the parties, but no such challenges arise in the determination of property disputes between individuals.
[22] Or between the community (represented by government) and individuals in the case of, for example, the criminal law or child welfare jurisdictions.
The purpose and intent of the common law system is the uninterrupted order of commerce and society. This is achieved through timely, consistent and predicable determination of disputes such that clear principles are established and applied and outcomes can be predicted. With clear established principle and consistent application of those principles and competent advice as to those principles and their application, litigation should be largely unnecessary as outcomes, with some margin for compromise, are predictable.
That is how commercial litigation (and property adjustment litigation between husbands and wives is nothing more or less) has been conducted in this jurisdiction since invasion and colonisation. It is nothing new or modern.
What is a modern phenomenon is judicial case management (and correspondingly and in all probability and for the same reasons, the rise of mediation). Modern judicial case management in the Australian context began in the 1970’s and as a response to the dual challenges of increasing caseloads and increasing resources.[23] All that judicial case management has sought to do and more recently, Uniform Civil Procedures legislation and Rules of Court, is to guide if not codify that which has applied for centuries being:
a)A focus on early resolution of disputes (preferably away from the Court);
b)A clear identification of issues in dispute (including in many civil jurisdictions by adoption of pleadings and particulars);
c)Early disclosure of evidence that proves or disproves the facts necessary to establishing the cause of action.
[23] And perhaps also declining levels and standards of representation such that it was perceived that case management could no longer be left to Court users.
In this case the range of possible outcomes, if determined by the Court by reference to settled principle and authority, was limited. The possible outcomes were always relatively clear and predictable. Any uncertainty would have been resolved through appropriate focus on issues relevant to the dispute and their resolution and by co-operation, including but not limited to, provision of necessary disclosure.
Those obligations or focus and disclosure apply to both parties, whether legally represented or not and if a party is, for whatever reason, unrepresented, they must inform themselves of those obligations and discharge them.
All of those considerations would, again, point towards a justifying circumstance for an Order for Costs of some quantum in this case. The issue then becomes what quantum.
I am satisfied that the most substantial basis upon which an Order for Costs might be pressed, sought and awarded is that of the offers that were made.
I am not satisfied that the offer that was put before the proceedings commenced fell within a reasonable range of outcomes. Of course, the wife and her attorneys are not to be overly criticised for that. They did not have all of the information available which was required to fully and properly assess the position. Quite clearly, when that information became available, principally through inquiries external of Mr Reilly, the position was altered and amended offers were made.
The offer that was put on 29 May 2014 most assuredly fell within the range of outcomes that the wife might expect. To the extent that it was prefaced upon a precondition of sale of the home, it was, again, open to Mr Reilly to respond and to accept the percentage, the outcome intended and envisaged but on the basis of his making a cash payment, whether including super splitting Order or not. If that offer had been accepted, significant costs would have been avoided and the matter would have been concluded at a vastly earlier stage and with vastly less cost.
Whilst I accept that Mr Reilly is and was self‑represented, including for the very valid reason that he has put forward - that the cost of representation was onerous and burdensome to him - the reality remains that the offer was entirely reasonable and represented, save and except for the precondition of sale of the home to achieve the release of funds and the division of funds, a perfectly reasonable offer which can and should have been accepted on any prudent consideration of the legislation and precedent.
The position that was agitated at trial by Mr Reilly not only did not find favour with Judge Donald but could not, on the evidence as was presented, have been described as reasonable.
I am conscious that conducting litigation without the benefit of Counsel is difficult. Indeed, as Harry Brown described, “A fair trial is one in which both parties are competently represented and all issues are fully and properly ventilated”.
Such “fairness” simply cannot occur in circumstances such as this.
I am referred by Counsel for the wife to earlier decisions of my own, including that in Watton & Smart (Costs) [2014] FCCA 2826, which does not depart from the discussion above and takes into account many of the same authorities already discussed. As I had stated in that case, I am not satisfied that a self‑represented litigant should receive any substantial favour over and beyond a litigant who is represented. If a litigant does not obtain advice or does not inform themselves, it is not to cast the disadvantage that flows therefrom onto the party who has expended funds on legal representation.
The cost, in that sense, should be borne by the party with whom, for want of a better description, the fault lies. Certainly as of the offer that was made by the wife through her attorneys on 29 May 2014, being before the allocation of hearing dates, was abundantly reasonable and sensible. Indeed, the offer was made on the same day as Judge Donald listed the matter for a two day trial, (albeit on dates to be allocated, there being at that point in time no dates available to allocate). Thus, the entirety of preparation and conduct of the hearing could have been avoided through acceptance of the offer.
I am satisfied that it is just and equitable that an Order for Costs be made. I am conscious and I accept that which is submitted by Mr Reilly that an Order for Costs will create significant financial hardship to him. However, it will create significant financial hardship to Ms Reilly if she is required to pay the totality of her costs, particularly when she had signalled that she was prepared to take less than that which she ultimately obtained, and had signalled that nearly a full year before the hearing occurred, and certainly some 18 months before she received anything. There would be injustice and inequity to Ms Reilly if there was not an Order for Costs.
Thus, I am satisfied of the dual test of both justifying circumstance and justice and equity that costs are appropriate.
As regards quantum, I am required by Part 21 of the Federal Circuit Court Rules 2001 to have regard to Schedule 1 of those Rules. For reasons that I am not aware of the scale of costs provides significantly more generous remuneration for those in general federal law than family law. Similarly, it is often discussed within the Court that the scale of costs is far too frugal and does not provide any real recompense for parties. I do not subscribe to the latter view. The scale of costs, perhaps not in this case but in many others, provides for recompense well beyond that which has, in fact, been charged by practitioners. Perhaps that reflects a regional anomaly.
That is not to suggest that the costs charged in this case are inflated. Far from it. Legal costs are expensive. The overheads of legal practice are high and, in this case, costs have increased through the completely unproductive correspondence that has gone backwards and forwards without apparent purpose and certainly without resolution of any issue.
I am not satisfied that the totality of Ms Reilly’s costs should be paid by Mr Reilly and certainly not on an indemnity basis and for the reasons discussed by the Full Court in Prantage & Prantage [2013] FamCAFC 105. However, from the time that the offer was made, 29 May, and, in effect, the time that the matter was listed for hearing, I am satisfied that Ms Reilly is entitled to her costs on a party/party basis and in accordance with the Schedule.
The Schedule is not descriptive, it is illustrative. It provides for event‑based costing. It is intended to ensure that there is certainty and forewarning to parties in the event that costs are contemplated or ordered. Departure can occur, although I am not satisfied that in this case it need necessarily occur.
I am satisfied, by reference to Schedule 1, that the costs to which the wife would be entitled comprise:
a)Preparation for final hearing, two days, item 7 - $5412;
b)The hearing itself, items 13 and 14, the daily hearing fee and advocacy loading thereupon - $8,192.
I do not propose to include Counsel’s fees as a disbursement for two reasons.
Firstly, it would be at odds with a body of jurisprudence developed within the Court, and particularly from my colleagues in the general federal law jurisdiction, which suggests that Counsel’s fees should be addressed by the daily hearing fee rather than as a disbursement.
Secondly, I note that the disbursements referred to in the scale relate to matters such as Court fees and photocopying. I am not satisfied one should treat Counsel on the same basis as a photocopying fee. They are far more valuable and important. In any event, I am satisfied that what should be permitted with respect to the hearing is the daily hearing fee and advocacy loading for Counsel, together with a daily hearing fee, albeit at the half‑day hearing fee, for instructing attorney. Thus, an amount of $3072 per day for Counsel, $1024 per day for instructing attorney totalling $8,192 as above.
Clearly item 9 for attending and taking Judgment, which was published as a written Judgment, and explaining Orders should be allowed - $278.
Those amounts would produce $13,882.
There are also disbursements which would properly be included. The photocopying, vast as it is, as claimed, $294.80, would appear reasonable at least as that undertaken.
I am satisfied that the Court fees that are incurred should be included, at least in relation to the fees of $220 which would appear to relate to filing fees for subpoena. Similarly, conduct money on subpoena should be included.
I am satisfied that the cost of the superannuation report together with the cost of the property valuation should be included together with the cost of searches undertaken.
All of the above amounts would appear to amount to $2081.12.
Thus, the total of costs and disbursements would be $15,963.12.
Then there are the costs with respect to this Application. The Application should, I am satisfied, be treated as an interim or summary hearing as a discrete event, item 3, being $1706. Again, the daily fee and advocacy loading would be appropriate for the Application itself. A further $3072.
There was an earlier mention which should be included at the short mention fee, $278.
The above three items represent additional costs of $5056.
The total cost that would be produced thereby is thus an amount of $21,019.12. I propose to discount that amount slightly to take into account the financial circumstances of Mr Reilly, although no doubt to his great annoyance not to a significant extent, so as to produce a lump sum payment of $20,000.
Mr Reilly has made clear that he would require time to pay. He has alluded to an application to pay some dollars per week or month towards the fee from his pension. That simply could not be permitted as the debt would never be paid and interest would exceed the payment.
At some dollars a week that sum would not be paid in full until the next millennia. That would not be doing justice to either party, keeping a debt of that magnitude hanging over the head of Mr Reilly accumulating interest at a rate greater than the payment being attended to. Nor would it do justice to Ms Reilly who is immediately liable for the fees which have been incurred in the conduct of her litigation.
I propose to allow a period of 90 days.
Accordingly, I make Orders as follows (see Orders).
I certify that the preceding one-hundred-and-eighty-four (184) paragraphs are a true copy of the reasons for judgment of Judge Harman
Date: 7 July 2016
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