Rory and Rory (Costs)

[2008] FamCA 426

FAMILY COURT OF AUSTRALIA

RORY & RORY (COSTS) [2008] FamCA 426

FAMILY LAW – COSTS –  Costs inter party – whether wife should be ordered to pay husband’s costs of property proceedings- Indemnity costs and proportional costs

Family Law Act 1975 (Cth) s117

Woodley & Time and Anor[2008] FamCA 162
Addison & Lahey (inter party costs) [2006] FamCA 1168
Oriolo and Oriolo (1985) FLC 91-653
Weir & Weir (1993) FLC 92-338
Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225

APPLICANT: Mr Rory

RESPONDENT: Mrs Rory

FILE NUMBER: HBF 533 of 2005

DATE DELIVERED: 18 June 2008

PLACE DELIVERED: Hobart

PLACE HEARD: Hobart

JUDGMENT OF: Benjamin J

HEARING DATE: 14 May 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Dixon S.C.

SOLICITOR FOR THE APPLICANT: Murdoch Clarke

COUNSEL FOR THE RESPONDENT: Mr Trezise

SOLICITOR FOR THE RESPONDENT: Dobson Mitchell & Allport

Orders    

1.The wife pay to the husband one half of the husband’s legal costs of the property proceedings as and from 31 January 2008 up to and including the date of final orders on 20 March 2008,  such costs to be determined on a party/party basis;

2.The wife pay to the husband one half of the husband’s legal costs of the application in a case for costs orders, such costs to be determined on a party/party basis. Such costs to exclude the attendance by Senior Counsel on a mention on 14 April 2008.

3.The costs payable pursuant to this order are to be agreed between the parties or as otherwise determined under the Rules of this Court and in that regard time be extended for the filing of a Bill Costs for a period of ninety (90) days from the date of these orders.

4.These proceedings are otherwise removed from the list of cases requiring determination.

5.All subpoenaed documents are to be returned to the persons or institutions from which they emanated and all exhibits are to be returned to the person or persons who tendered same.

IT IS CERTIFIED

6.Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage Senior Counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT HOBART

FILE NUMBER:   HBF  533 of 2005

MR RORY

Applicant

And

MRS RORY

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1.This is an application by the husband for an order that the wife pay his legal costs arising out of a hearing of property proceedings between the parties on the 28, 29 February 2008 and the 3, 4 & 5 March 2008 in circumstances where reasons were delivered (“the reasons”) and final orders in made on 20 March 2008. The husband additionally sought an order for costs of the application in a case for costs.

2.The applications were initially listed before me on 14 April 2008 at which time Senior Counsel for the husband appeared and indicated that husband’s costs application would be pursued.  The application was then listed for argument before me on 14 May 2008.  There was no need for Senior Counsel to attend court on 14 April 2008, as it was merely a mention date to fix a time for hearing of the costs applications.

BACKGROUND

3.The background between the parties were set out in the reasons, which provided:

“9. The husband and wife are both aged 49.  The husband contends that the parties commenced cohabitation in 1980, the wife contends they commenced cohabitation when they married in February 1981.  There is no need to make a determination in relation to this date as it is not significant in terms of the parties’ contributions.

10. The parties separated in February 2002 (this was a finding made at the time of the order for divorce) and their marriage was subsequently dissolved.

11. There are three children of the marriage, M aged 22, K aged 19 and E aged 17 (E turns 18 in July 2008) and he is currently in Year 12 in secondary school.”

4.The net properties of the parties determined in the reasons at paragraph 32, amounted to $4,389,603.00.  I determined that such property ought to be divided equally between the parties[1].  The effect of that division was that the husband retained the following:

Assets

[1] paragraphs 191, 192, 193, 194 & 195 of the reasons.

Nine Tasmanian fishing units	$1,620,000.00
The diving entitlement	$180,000.00
Boats, motor vehicle and equipment	$22,000.00
V property	$33,000.00
M property	$420,000.00
D property	$50,000.00
Property at B	$281,192.00
Telstra Shares	$1,800.00
Husband’s Colonial & AXA Superannuation	$18,270.00
Land at V	$10,000.00
Interest in T property	$70,000.00
Interest in B property	$24,000.00
Total	$2,730,262.00

Liabilities

Debts of N Pty Ltd	$386,825.00
N Pty Ltd debt to S Pty Ltd	$75,000.00
Total	$461,825.00

showing net assets of $2,268,437.00

5.From that net sum the husband was obliged to pay a further sum to the wife of $73,635.50.

6.The wife retained:

Assets

One Tasmanian fishing unit	$180,000.00
S Pty Ltd	$625,000.00
M property	$830,000.00
N Pty Ltd Superannuation Fund entitlement	$373,939.00
Telstra shares	$1,800.00
Wife’s superannuation	$16,200.00
Add-back in relation to sale of property – B3	$150,000.00
6000 units in the Rory property trust	$5,227.00
Total	$2,182,166.00

Liabilities

Wife’s ANZ loan	$11,000.00
Wife’s American Express (Amex)	$19,000.00
Wife’s ANZ MasterCard	$18,000.00
Part of loan for car for the child E	$13,000.00
Total	$61,000.00

THE EVIDENCE

7.Each of the parties relied upon the findings made in the reasons and I include and rely upon such findings in this determination, whether they are specifically mentioned in these reasons or not.

8.Any statement of fact in these reasons is to be regarded as a finding of fact unless contrary intent is clear in the context of such statement.

9.Oral submissions were made on behalf of both parties and the husband tendered a bundle of material (with the consent of counsel for the wife) which included a statement of the husband’s costs and disbursements in relation to these proceedings and the document set out in the Rory document list provided with the exhibit.

10.During the course of argument Senior Counsel for the husband provided a document headed “Proposals by [the husband] re: conference 19 June 2007”.  There was an objection to the husband relying upon this document.  The position was that the wife had changed solicitors between June 2007 and the date of hearing and did not recall whether that document had been given to her.  Senior Counsel for the husband indicated that he was not prepared to give sworn evidence in relation to that document and would make enquiries on the adjournment in respect to any evidence to show that this document had been provided to the wife at a conference. No evidence was produced and accordingly, I give no weight to that document.

11.Both parties relied upon documents filed in an application in a case on 15 August 2006 and each relied upon the affidavit of the wife filed 28 August 2006 and the husband filed 15 August 2006.  Each of the parties relied upon the evidence given by them in the trial. I have had regard to that material and as to the affidavits I have had regard to the material as was raised by Senior Counsel/Counsel in argument.  I have not read the voluminous material in detail as I indicated to Senior Counsel/Counsel that I would read the affidavit material referred to by them.

Legal Principals to be applied

12.In terms of the approach to be adopted with regard to costs, I repeat the principles which I set out in Woodleigh & Time and Anor [2008] FamCA 162 at para 29;

“29. The general rule in relation to s117 (1) of the Act is that each party to the proceedings shall bear his or her own costs of the proceedings, subject to s117(2), s117AA and s118. If I am of the view that there are circumstances that justify me in doing so, I may make such order as to costs, whether by way of interlocutory order or otherwise, as I consider just.  Section 117 of the Act requires me not only to consider that the order for costs be just but also that in the particular circumstances of the case, that there are circumstances that justify the making of the order. Section 117(2A) sets out the matters which I shall have regard to in determining what order if any is to be made under s117(2).

30.In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:

“The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.''

31. In the absence of their being circumstances that justify the court making an order for costs, then s117 (1) provides that each party will bear his or her own costs of the proceedings under the act.

32. The interpretation to be applied to s117 and the inter relationship of s117(1) and s117 (2) was considered by the High Court in Penfold v Penfold (1980) FLC 98-800.  In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:

“It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.

Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case.

Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised.

Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19…(which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest...  (at 75,054).

Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”

33.The case of Penfolds was discussed by Justice Wilson in the High Court decision of Mallet v Mallet (1984) FLC 91-507 (with whom Gibbs CJ, Mason, Dean and Dawson JJ agreed at pp 79,123-79,124). Penfolds case also made it clear that s117(2A) “requires a finding justifying circumstances as an essential preliminary to the making of an order”. It is clear that the court has a wide discretion and that beyond this there is no “additional or special onus” on the applicant for costs which requires the court to make a preliminary finding that special or exceptional circumstances exist before making an order for costs[2].

[2] Jensen and Jensen (1982) FLC 91-263.

34.By virtue of s 117(2A), in considering what order (if any) should be made under s 117(2), I am required to have regard to the matters set out in s117(2A) (a)-(g) in so far as they are relevant. The factors set out in the subparagraphs do not comprise of a closed list of factors, because s117(2A)(g) includes “such other matters as the court thinks relevant”.   I need to consider each of the various factors, subject to their relevance, however, in PBF (as Child Representative for AF (Legal Aid Commission of Tasmania) v TRF and LKL (2005)  FamCA 118 the Full Court held at paragraph 41:

“…Nowhere in subsection 2(A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subsection 2(A).  As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”

35.In the matter of I and I (No 2) FLC 92-625, the Full Court at p 82,277 said:

“that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs.” 

36. In this case Nicholson CJ, Ellis and Baker JJ declined to follow the the approach adopted in the decision of McDonald and Mc Donald (1994) FLC 92-508 in relation to the question of costs. In that earlier case his Mushin J had said at p 81,271;  

``In the first instance it is important to note that the principal proceedings concerned questions of custody. As between parties in the strict sense of that word, it is rare for an order for costs to be made in such proceedings. Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order were made.''

37.The Full Court in I and I (No 2) above, declined to follow this approach and held at p 82,277;

“With respect... we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs. The financial circumstances of the parties is but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.''

Discussion

13.One of the issues to be determined by me relates to a sum of $11,995.50 paid by N Pty Ltd as trustee for the Rory Family Trust to the single expert. 

14.That expert, Mr O, had been appointed as the single expert and the parties had agreed to contribute equally to the preparation of his report.  The first report cost the parties some $23,991.00 and the whole sum was paid on behalf of the husband out of the resources of the family trust.  This must be seen in the context that the husband continued to operate and live from the trust business (the fishing licences) and the wife continued to operate and live from the S Pty Ltd business.

15.In a letter to the wife’s solicitors dated 25 July 2006 the husband’s solicitors said:-

“Our client finds it unbelievable that your client will allege that she does not have sufficient funds to meet one half of the account received from Mr [O].  Your client has known of the work to be carried out by Mr [O] for almost a year now and she has known of her obligation to meet one half of the costs thereof.  She has now advised that she does not have the necessary funds however it is clear that the monies required to meet this obligation have been spent on personal expenses including overseas trips.

Having said that once again our client is required to “pick up the tab”.

We indicate that our client will pay your clients one half of the account from
Mr [O] but it is on the basis that this payment will be taken into account in any property settlement”

16.The issue that arises from this is whether the wife ought to be ordered to pay that sum of $11,995.50 either separately or as part of any costs order.  The expert fees were taken from the family trust which was then valued for the purpose of these proceedings.  Presumably had the money had not been paid from the trust it would have had an additional value of $11,995.50.  The wife’s pool of assets (had she paid the valuer) would have been almost $11,995.50 less. The fees for Mr O have been paid out of a common pool which has been divided between the parties and I see no reason for a further order in that respect as it has to all intents and purposes been taken into account.

17.I have had regard to the wife’s refusal to pay that sum and the need for the husband to find that money in the circumstances of difficult financial circumstances of the trust at that time and the wife’s failure to comply with a court direction.

18.Senior Counsel for the husband submitted that if I decided to make an order for costs it ought to be on the basis of a lump sum amount determined by me.  I do not adopt that course as it would effectively mean assessment by me of the costs and disbursements  from the bench in circumstances where the only material before me were the outlines of the husband’s practitioner/client costs not the party/party costs.  The outcome could not properly determine the level of costs and would in the circumstances of a long and difficult proceedings have been no more than a judicial guess, that approach would not do justice to the parties.

19.Senior Counsel for the husband also submitted that the wife had, on regular occasions, refused to supply financial information.  I accept and find that the wife has, on a number of occasions during the course of these proceedings, failed or delayed provision of financial information to the husband when it was within her capacity to do so and when she ought to have done so.

20.These must be seen in the context of a number of factors.  The first factor is that the parties have relatively complex financial arrangements and owned two substantial business assets.  One was the fishing units and diving licence owned and operated through a family trust. The value of the units and licence floated up and down during the course of the proceedings, but were not difficult to determine.  The other business asset was the S Pty Ltd business which was valued by the single expert a number of times and its value ranged from $445,000.00 up to $800,000.00.

21.Mr O prepared three valuations of that business and was critical of the wife for intermingling family expenses with the business expenses.  I made adverse comment of the wife in regard to this during the course of the reasons. 

22.Each party accused the other of delay, but in any event the consequences of the delay in hearing, in so far as the wife was concerned, was to reduce the possibility that she would be entitled to an adjustment in respect of the “other factors”[3] by reason of the age and the care of the younger children of the marriage.

[3]See the reasons for the definition of this term.

23.I find that the wife has from time to time delayed these proceedings.  The confrontational approach was not limited to the wife. It seems to me, after reading the parties’ affidavits, hearing the evidence and the submissions of their respective Counsel, that both parties were confrontational in respect of this dispute.

24.I note and have regard to the interim applications which were made to me in May 2007, the Chief Justice in August 2006 and Justice Brown in 2005.

25.In July 2005 the husband filed an application in a case seeking orders that:

a.Order 2 of the Orders made in the Family Court of Australia on 13 April 2005 be amended as follows:

“that such report take into account financial details of the said Company up to and including 30 June 2005 within a period of 7 days from the making of this Order by supplying to Mr [O] all financial data in relation to [S] Pty Ltd by way of MYOB premier current data file on CD rom from 1 of July 2004 until 30 June 2005”[4]

[4] Order 1 of the Orders sought by the husband.

b.Order 3 of the Order made in the Family Court of Australia on 13 April 2005 be amended as follows:

“As part of the said report Mr [O] be authorised to examine and audit the accounts of [S] Pty Ltd from the 1s day of July 2003 up to and including 30 June 2005 for the purpose of identifying, if any, the non-core and non-business related payments that are currently included in the accounts of [S] Pty Ltd and the affect if any on the accounts of [S] Pty Ltd of those activities if any.”[5]

c.the respondent wife pay the applicant husband’s costs of and incidental to this application.[6]

[5] Order 2 of the Orders sought by the husband.

[6] Order 3 of the Orders sought by the husband.

26.The basis of the husband’s application was two fold, firstly that the wife had not complied with the Orders made by Registrar Whenn in the Family Court on the 13 April 2005 by failing to provide the financial information for S Pty Ltd, up to and including the end of February 2005, to the single expert.[7]

[7] Paragraph 4 of the husband’s affidavit filed 27 of July 2005.

27.Secondly that the wife would not agree to vary the orders to include an amendment sought by the single expert to base the report on the financial statements for the year ending the 30 of June 2005 rather than the end of February 2005, as they would provide a “better comparison basis.”

28.The wife filed a response on the 10 August 2005 seeking orders that:

(a)the husband’s application in  a case be dismissed and;

(b)the husband provide to the wife details of all [fishing] sales, income and the manner in which funds were received from the [fishing] sales either by the husband or [N Pty Ltd];

(c)the husband instruct the accountants of [N Pty Ltd] to prepare and finalise taxation returns for [N Pty Ltd] and the [Rory]  Family Trust for the years ending 30 June 2004 and 2005;

(d)the financial statements and tax returns must reflect that for the financial year ending 30 June 2004, the profit of the [Rory] Family Trust is distributed to:-

(i)the wife, the sum of $36,000.00

(ii)the husband, the balance then remaining.

(e)the husband or in his capacity as director of [N] Pty Ltd pay and indemnify the wife against the taxation liability arising from the distribution under paragraph (d) above.

(f)the husband pay the wife’s costs of the application.

(g)There be such further Orders as the Court considers appropriate.

29.The wife also sought specific orders in relation to the provision of financial information from the husband.  The wife alleged the husband had not provided her with any income from the Rory Family Trust for the 2003 and 2005 financial years and had only received $36,000.00 in 2004. The wife also alleged that during this period of time the husband had the sole benefit of the fishing units and dive entitlements operated by the Trust and had retained the funds for his exclusive use.[8]

[8] Ibid at paragraph 9.

30.The husband’s application was determined by Brown J on 11 August 2005 in circumstances where Her Honour Ordered that:

1.That paragraph (2) of the orders made herein on the 13 April 2005 be amended as follows:

(a) that such report take into account financial details of the said company up to and including 30 June 2005 and within a period of seven days from the making of this order the wife supply to the expert and to the solicitors husband, all financial data in relation to [S] Pty Ltd by way of MYOB premier current date file and CD Rom from 1 July 2004 until 30 June 2005.

2. That paragraph (3) of the said orders of the 13 April 2005 be amended as follows:

(a)as part of the said report the expert be authorised to examine and audit the accounts of [S] Pty Ltd from the 1 July 2003 up to and including 30 June 2005, for the purposes of identifying, if any, the non-core and non-business related payments that are currently included in the accounts of [S] Pty Ltd and the effect if any on the accounts of [S] Pty Ltd of those activities, if any.

3.That the wife be at liberty to discuss the terms of reference with the expert and advise him of any alleged discrepancies in the instructions provided to him by the husband, such discussion and provision of information to occur within 21 days hereof.

4. That within 21 days the husband advise the solicitors for the wife in writing:

(a)what sum is alleged to have been distributed to her by the [Rory] Family Trust in the 2003, 2004 and 2005 financial years; and

(b) the precise form of each such distribution, and without limiting the generality of this sub-paragraph whether by book entry to loan account; credit to bank account or otherwise; cash or direct payment to her; or payments allegedly made on her behalf and, if so, to whom.

5. That the husband forthwith instruct the accountants of [N] Pty Ltd to prepare and finalise the taxation returns for [N] Pty Ltd and the [Rory] Family Trust for the financial years ending 30 June 2004 and 30 June 2005 and submit those returns to the wife for approval prior to lodgement with the Australian Taxation Office.

6. That the form 2 filed the 13 July 2005 and the form 2A filed 10 August 2005 be otherwise dismissed.

7. That the form 2 filed the 21 April 2005 and the form 2A filed the 5 May 2005 be struck out.

31.There was no order for costs.

32.In August 2006 the husband filed a further application in a case which was heard before the Chief Justice. One of the issues raised was the question of the costs on the application before the Chief Justice in circumstances where costs had not been either reserved and the interim proceeding had been completed.

33.On the 15 August 2006 the husband filed an application in a case seeking orders in respect of obtaining financial information relating to the operation of S Pty Ltd to enable Mr O to provide an up to date valuation of S Pty Ltd and also up to date valuations of various real estate owned by the parties.  The basis of the husband’s application was that he was unable to comply with the trial directions in order for the matter to proceed to trial because the wife would not agree to:

a.   provide the information about the operation of [S Pty Ltd] to Mr [O] to enable him to complete his up to date valuation report and;[9]

b.   obtaining up to date valuations of the parties’ real estate, as some of the valuations were now two and a half years old. [10]

[9] Paragraphs 5-9 of the husband’s affidavit filed 15 August 2006.

[10] Ibid at paragraphs11-42.

34.The wife filed a response to an application in a case on the 28 August 2006 opposing the husband’s application and sought an order that the husband’s application be dismissed. The basis of the wife’s response was that she had

“no information, anecdotal or otherwise, to suggest that “updated” valuations would result in any figure significantly different from those valuations already obtained”[11].

[11] Paragraph 17 of the wife’s affidavit filed 28 August 2006.

35.The wife’s objection to providing the information in relation to the operation of S Pty Ltd was that she had supplied to the husband (in his capacity as a shareholder) every year full financial statements, specifically for the 2002, 2003, 2004, 2005 and 2006 years.[12] The wife argued that she had complied, before the husband, with her duty of disclosure under the Family Law Rules 2004.[13] The wife also opposed the husband’s application on the basis that she could not afford Mr O’s fees and “certainly, could not afford further fees nor bear any further delay” which a further valuation of S Pty Ltd would result in.[14]

[12] Ibid at paragraph 19(e).

[13] Ibid.

[14] Ibid at paragraph 19(d).

36.On the 29 August 2006 the Chief Justice made orders in terms of the husband’s application in a case.  In relation to the question of costs Her Honour ordered that “the costs of such valuations be shared but the wife have liberty to apply to the trial judge for an order requiring the husband to be responsible for the costs in the event the real estate valuations provide unnecessary”.

37.Senior Counsel for the husband submitted that because the Chief Justice had not dismissed the husband’s application in a case the question of costs still remained alive and formed part of the proceedings and was ultimately an issue which had to be determined by me.

38.As I intend to exercise my discretion I will not make a costs order in respect of this application in a case.

39.In May 2007 the wife filed an application in a case seeking a number of orders including injunctive orders in respect of the operation of N Pty Ltd and the Rory Family Trust, secondly in relation to her having access to the financial records of the Rory Family Trust, thirdly an interim property order in her favour in the sum of $100,000.00 to enable the her to meet the costs of the litigation and finally that leave be granted to enable her to call expert evidence in relation to the financial transactions involving N Pty Ltd as trustee of the Family Trust.  

40.The wife alleged that the husband had not paid child support to her for their three children and provided little care. The wife also alleged that she had not earnt sufficient income from the business to enable her to run the business and to meet expenses including the costs associated with preparing and presenting her Family Court Case.[15] The wife also alleged that the husband had refused to allow her to have any say in the management of the trust and had refused to provide her with any financial information in relation to the trust. On the 29 May 2007 the husband filed a response seeking orders that the wife’s application be dismissed. The husband in his affidavit filed the 29 May 2007 denied the allegations made by the wife.

[15] Paragraphs 1 to 6 of the affidavit of the wife filed 9 May 2007.

41.This application was determined by me on 31 May 2007 and orders were made in term of the wife’s application save and except that I ordered the sum of $65,000.00 be paid into the trust account of the solicitors for the parties to be used for legal costs, expert evidence and disbursements in respect of the proceedings.

42.The husband, in his costs application submitted that the wife has not made full and frank disclosure as is required in decisions such as Oriolo and Oriolo (1985) FLC 91-653 and Weir & Weir (1993) FLC 92-338.  In the decision of Oriolo and Oriolo (supra) the Full Court held at 80-256:

“…..There is a clear obligation on a party to proceedings in this Court to make a full and frank disclosure of all relevant financial circumstances. The mere compliance with the rules of court or practice directions does not alter the basic principle of the need for full and frank disclosure.

………….

“We consider the judgement principles to be correctly stated in the judgement of Smithers J in the case of Briese (unreported 27 June 1985) where he said …………..

“I believe that a person has a positive obligation to set out at any early stage his financial position in a clear and comprehensive manner.”

……………..

the need for each party to understand the financial position of the other is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding.

……….

In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred.  Livesey V Jenkins makes it clear that mere compliance with rules of court or practice directions does not alter the basic principle of the need for full and frank disclosure by the parties.”

43.The Full Court in the decision of Weir & Weir (supra) at 79-593 upheld the principle that:

"This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC 92 -287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC 91 -757, and Muzzacappa and Muzzacappa (1987) 11 FamLR 957.”

…………….

It seems to us that once it has been established that there has been a deliberate non disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.”  

44.In February 2007 the wife caused a company called GP Pty Ltd to be registered.[16] The wife did not make disclosure about the company GP Pty Ltd until shortly before trial when in January 2008 she disclosed that company.  The solicitor for the husband observed in a letter to the wife’s solicitors dated 31 January 2008 that was the first they heard of that company.  In a letter in reply of 8 February 2008 the wife asserted:-

“[GP Pty Ltd] is no more than a borrowing vehicle for the purposes of the ongoing operations of [S Pty Ltd].   …. The result was the establishment of the corporation of [GP] Pty Ltd.  Using this entity and exercising her business acumen and skills, [the wife] raised finance with …. “

[16] Paragraph 164 of the reasons of His Honour Justice Benjamin delivered on the 20 March 2008.

45.Initially the wife said that GP Pty Ltd was a device to raise funds that she said that she could not raise through S Pty Ltd. The wife did not ask the husband for permission to raise funds for S Pty Ltd which she said she needed, nor was there any evidence of her applying to a bank for such a loan. Mr O was instructed to prepare his final report in early October 2007. That was well after GP Pty Ltd had been incorporated and after GP Pty Ltd had traded.  The wife did not provide any detail of GP Pty Ltd or its activities to Mr O.[17]

[17] Ibid.

46.I did not accept the wife’s evidence in that respect.[18]

[18] Ibid at 165.

47.During cross-examination of the wife she conceded that GP Pty Ltd purchased material for S Pty Ltd and on sold it.  The wife also eventually conceded that the assets of GP Pty Ltd were equivalent to its liabilities.[19]

[19] Ibid at 167.

48.In respect of GP Pty Ltd I have regard to the findings in my reasons, that is, the wife failed to make full and frank disclosure of the companies she had set up.  Further I found that the wife did not make discovery of all the records of GP Pty Ltd. [20]

[20] Ibid at paragraph 26.

49.Although GP Pty Ltd had no value and the wife is to be criticised for her failure to disclose it does not amount to a false allegation or statement pursuant to which a costs order must be made.

50.In terms of the sale of the land at B3 to the parties eldest son this, likewise, does not amount to a false allegation or statement. 

51.Throughout the course of the proceedings the wife has sought an adjustment of property on the basis of an additional percentage to her whether that be 5 per cent or 10 per cent.   Many of her offers submissions involved a 60 per cent/40 per cent split of the property in her favour. The husband has throughout the proceedings sought a division of property on an equal basis, which was the eventual outcome.

52.One of the problems facing the parties was the change in value of the assets.  The value of the fishing licences floated from as low as $180,000.00 to as high as $225,000.00 per unit during the course of the proceedings.  The value of S Pty Ltd was difficult bearing in mind the nature of the business and the involvement of the parties children in that company.

53.During the course of the negotiations between the parties the wife on regular occasions asserted that there ought to be an add-back to the husband’s account for the proceeds of sale of a property at B of about $92,000.00.  This was despite her knowledge that the proceeds of sale of that property had been applied to the liabilities of the parties.

54.During the course of the proceedings the wife, from time to time, asserted that the husband retain an interest in a testing system company in excess of $100,000.00 where that system had no value.

55.The wife, also from time to time during the course of the negotiations sought credit for a liability with N Trust of about $140,000.00. 

56.The wife also initially agreed to include the value of her land at B3 as an asset but later sought to resile from this agreement in circumstances where she has made a gift of a substantial value of that property to the son in the absence of the husband’s knowledge consent or approval.

57.There is on the part of the wife a failure to adequately and promptly disclose financial information.  This in terms of her expenditure on the truck and the horse float and in terms of the delay and her reluctance to inform the husband of the sale of the block of land to the parties’ eldest son.  These do not, however, amount to a non-disclosure but do amount to a reluctant, at time insufficient and late disclosure.

58.In Family Court proceedings the processes which must be adopted by the parties is “show and tell” rather than “hide and seek”.

59.The first question for me to determine is whether I am of the view that there are any such justifying circumstances in this present case in considering whether a costs order ought to be made. I am satisfied that there are justifying circumstances to enable me to consider whether a costs order should be made.

RELEVANT FACTORS

60.Having come to the view set out above to determine if there ought to be costs orders (in either substantive proceedings and/or on the costs application itself) I need to consider the relevant factors being paragraphs s117(2A)(a),(c) and (f) of the Family Law Act in light of the evidence presented by the parties.

s117(2A) (a) the financial circumstances of each of the parties to the proceedings:

61.As to the financial circumstances of the parties each will end up with assets totalling about two million dollars. Each party has a business able to generate income well in excess of $100,000.00 per year for each of the parties.  

62.On behalf of the wife it was submitted that I should have regard to the different nature of the assets in so far as the husband’s assets which derive income of approximately $200,000.00 per annum without personal exertion and the wife’s primary assets which fall into a number of categories. 

63.The first is the home in which houses herself and the two youngest children of the parties’ marriage with a value of some $830,000.00.  It was submitted on behalf of the wife that it was not open for the Court to determine that the home would be developed by the wife as opposed to the assets which had been retained by the husband and had been developed by him to produce income. I have had regard to the different nature of the respective businesses.

64.The second category is that S Pty Ltd has a value of $625,000.00.  This business involves the wife in significant management and day to day involvement.[21] I do not fully accept this argument as the evidence during the trial was that much of the day to day management of the S Pty Ltd business was left to employees and further that the wife was often able to work from her home.

[21] Paragraph 67 and 68 of the wife’s affidavit filed the 14 June 2007.

65.The wife was left with superannuation property with a value totalling $373,939.00. The wife will not have access to this fund until she retires. There was no evidence before me at the trial that the wife was likely to retire in the immediate or medium term future.

66.Another category was the add back of the property at B3, which the wife had gifted to the parties’ eldest son.  The wife argued that although the property was in her hands in a “notional sense” she did not have the property because if belonged to the son and as a consequence should not be seen as an asset from which she could derive income. As I have said earlier the wife chose to make a gift of a substantial part of the value of this property without the husband’s knowledge and consent and in circumstances that she was well aware its value was at least $125,000.00. She agreed to include its value in the pool of assets and cannot now complain about her own actions.

67.Counsel for the wife submitted that although the wife had retained one fishing unit worth approximately $180,000.00 it only yielded her an income of $20,000.00 per annum as apposed to the guaranteed income of approximately $200,000.00 which the husband received as income from the nine fishing units which he had retained. The wife asserted that the income from the fishing units allowed the husband the freedom to do what he wanted with his future employment, such as continuing the property development that he had done in the past. The wife complained that the assets which she had retained did not allow her this freedom. For the reasons set out above I give this submission little weight.

68.I have had regard to the nature of the wife’s assets and in particular the superannuation asset. 

69.I have had regard to all the submissions made by Counsel for the wife.

s117(2A)(c) the conduct of the parties to the proceedings in relation to the proceedings, including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

70.As to the conduct of the parties I have discussed that earlier in these reasons.  The wife at all times she was seeking a significant adjustment in her favour in what, in the circumstances of these parties, is a significant amount of money.  Even at the commencement of the trial it ought to have been clear to the wife that an adjustment of 10 per cent in her favour was unrealistic.

71.Counsel for the wife submitted that any delay in the proceedings was caused by the “behest of the husband” and not of the wife.  The parties separated in 2002 and proceedings were commenced in 2004.  The proceeding took some three years to four years to come to trial.  The wife argued it was clear at the start of the proceedings that the three children of the marriage were in her care, but despite this the wife did not receive any cash child support from the husband. In respect of the payment of child support by the husband I have regard to my findings in the reasons, that is the husband has paid the majority of private school fees since separation and has made gifts to the children. In 2007 he contributed half the costs of the car to the child E and made income contributions to the wife in 2003, 2004 and 2005.  The wife and the children had the use of the former matrimonial home since separation and that is a significant contribution.  He also provided capital in terms of the sale of properties, as set out in my reasons and he maintained their MBF.[22]

[22] Paragraph 176 of the reasons.

72.Counsel from the wife also submitted that the delay in the matter was detrimental to the wife’s case because each day that passed without the matter resolving her claim under s75(2) was reduced.  By the time the proceeding reached a trial two of the children were aged over 18 and the younger child was aged almost 18 years.  The value of the fishing units had decreased from $245,000.00 per unit to $180,000.00 per unit. The wife submitted that the delays which occurred in the hearing of the proceeding caused her greater harm to her case than good. Whilst that may be the case, the wife was from time to time responsible for delay.

73.The wife argued that delay was also caused by the husband “freezing everything” as a result of the interim application filed on 15 August 2006 requesting updated valuations which was determined by the Chief Justice on the 29 of August 2006 which I have dealt with elsewhere in my reasons.  I do not accept this submission as the wife had effective control of S Pty Ltd and applied its income to her own benefit.

74.Counsel for the wife submitted that there was delay caused by the preparation and release of Mr O’s updated valuation of the S Pty Ltd business and real estate.  As a consequence further expense was incurred and the matter was prolonged for a further eighteen to twenty months all of which argued the wife was unnecessary delay which she fought hard to avoid.  I do not accept this submission and I refer to my earlier findings set out in the reasons and these reasons.

75.Counsel for the wife submitted that the wife’s instructions were that the matter be heard in November 2007. However the matter could not be heard as the husband’s Senior Counsel was unavailable at that time and the trial was listed for February 2008. This meant that the trial was further delayed and that the wife had additional cost of engaging a new solicitor, as her previous solicitor commenced employment at her husband’s solicitor’s law firm.  The change of employment of a solicitor cannot be regarded as a factor which was caused by either party, it could equally have been claimed that the trial proposed in November would have needed to have been aborted by reason of that employment change.

s117(2A)(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;

76.In January 2007 the husband made an offer of settlement to the wife comprising of two proposals.  The first was that there be a division of property 56/44 per cent in favour of the husband. The second was that there be a division of property 46/54 per cent in favour of the husband.  In a letter from her solicitors dated the 23 January 2007 the wife said she was “prepared to accept almost in its entirety” the second option proposed by the husband but made a counter offer which was not accepted. The January 2007 offer, if accepted in the form suggested, would not have left either party with the property that they said they wanted and deserved. The wife’s refusal to accept that offer was reasonably understandable bearing in mind the way the assets were left at separation and the type of division each party sought at the end of the hearing. I have had regard to this offer in making this determination.

77.Apart form the January 2007 offer, none of the offers made and referred to by Senior Counsel on behalf of the husband matched the eventual outcome.  On the submissions on behalf of the wife, the closest these figures came to was about $41,000.00. 

78.Each of the parties has spent well in excess of $100,000.00 in costs and disbursements in terms of these proceedings.

CONCLUSION

79.In exercising the broad discretion I have in relation to costs matters I determine that the wife should pay one half of the husband’s costs  of the substantive proceedings as and from the 31 January 2008.  The date from which the costs are to be paid is determined by having regard to the history of the proceedings and the time when it ought to have been clear to the wife what the asset pool was and the likely outcome of the trial and also having regard to all of the matters set out above.

80.These costs should be determined on a party/party basis. I am not satisfied that the facts in this application falls within the principles that would base an indemnity costs order having regard to the principles set out in Colgate-Palmolive v Cussins Pty Ltd (1993) 46 FCR 225. The husband did not make an application for indemnity cost and in the circumstances of these proceedings, such an order would not have been made by me.

81.This is not a case where the wife has commenced or continued proceedings in circumstances where, properly advised, she should have know that she had no chance of success.

82.Neither is it a matter where the wife made allegations of fraud knowing them to be false or made irrelevant allegations of fraud nor is there evidence of particular misconduct caused to the court and to the parties.

83.None of the examples raised in Colgate-Palmolive v Cussins (supra) appear to have been relevant in these particular proceedings.

84.Having regard to all the circumstances of this application and having regard to all of the factors under s117(2A) of the Act I determine that the wife should pay one half of the husbands costs of the costs application on a party/party basis.  However, it was only shortly before the commencement of the hearing that the full financial position of both parties was known. 

85.The husband was partly successful in his substantive costs application and having regard to all of the matters set out in these reasons I determine that there should be an order for the wife to pay one half of the husband’s costs on the application in a case for costs.

I certify that the preceding eighty five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin

Legal Associate:      

Date:   18 June 2008