Roydon & Roydon
[2023] FedCFamC2F 1265
•3 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Roydon & Roydon [2023] FedCFamC2F 1265
File number(s): CAC 90 of 2021 Judgment of: JUDGE HUGHES Date of judgment: 3 October 2023 Catchwords: FAMILY LAW – COSTS – Imprudent rejection of settlement offer – husband wholly unsuccessful – indemnity costs for parenting and property proceedings despite final consent orders Legislation: Family Law Act 1975 (Cth) ss 117 (1), (2) and (2A). Cases cited: Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 118 ALR 248 Division: Division 2 Family Law Number of paragraphs: 96 Date of last submission/s: 20 February 2023 Date of hearing: 20 February 2023 Place: Canberra Counsel for the Applicant: McMahon Solicitor for the Applicant: GPG Lawyers Solicitor for the Respondent: Dr Kennedy
Table of Corrections 31 October 2023 Amendment to paragraph 96 line 9, the phrase “the wife’s solicitors” has been replaced with “the husband’s solicitors”. 31 October 2023 Amendment to paragraph 96 line 10, the phrase “the husband’s solicitors” has been replaced with “them”. ORDERS
CAC 90 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS ROYDON
Applicant
AND: MR ROYDON
Respondent
ORDER MADE BY:
JUDGE HUGHES
DATE OF ORDER:
3 OCTOBER 2023
THE COURT ORDERS THAT:
1.From the funds held on trust for the parties by the conveyancing solicitors, the following sums be paid:
(a)First, any amount owing to the wife pursuant to the orders of 6 October 2022;
(b)Secondly, the sum of $100,000 to the wife by way of contribution to her costs on an indemnity basis from 2 May 2022;
(c)Thirdly, the balance to the solicitors for the husband.
2.Otherwise, all extant applications are dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
REASONS FOR JUDGMENT
Amended pursuant to r 10.14(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on <31 October 2023.>JUDGE HUGHES:
INTRODUCTION
This is an application for costs filed by the wife, following difficult parenting and property proceedings. Although the trial had been listed for four days commencing on 4 October 2022, the parties sought time to negotiate and, on 6 October 2022, final orders were made by consent.
The wife filed her application for costs on 31 October 2022. On 8 November 2022, she amended it to seek indemnity costs. She relied on an affidavit and financial statement filed on 8 December 2022 and written submissions filed on 20 February 2023.
The husband filed a response, affidavit and financial statement on 15 February 2023.
The application was heard on 20 February 2023. The wife’s counsel and the husband’s solicitor each made oral submissions that day.
The costs in the matter were quite extraordinary and in no way proportionate to the issues in dispute or the value of the parties’ property. The parties never produced an agreed balance sheet in the property proceedings because of disagreements about potential add-backs for monies spent by the husband post-separation. However, without the add-backs, the net property pool was a little over $500,000 and the combined superannuation interests had a value of $260,000, making a total net property and superannuation pool of less than $800,000. With the add-backs, the total property pool, inclusive of superannuation, was less than $1.3 million. By the end of the proceedings, the husband’s costs for the substantive proceedings were a little over $768,000 with an estimated additional $25,600 in round terms for the costs application. The wife’s costs were a little over $247,000 with an estimated additional $17,600 in round terms for the costs hearing. Altogether, the parties spent a little under $1,060,000 on legal costs.
BACKGROUND
The wife is a 34-year-old professional in the health care sector. The husband is aged 37 and is self-employed as a professional. The parties commenced a relationship in 2006, married in 2007 and separated on 13 January 2021. They have three children now aged 15, 11 and seven years respectively.
The wife commenced parenting proceedings on 19 January 2021. She alleged the husband suffered mental ill-health and had engaged in family violence both to her and to the children. At the time of separation, the husband was charged with assaulting the eldest child, X, but those charges were ultimately not pursued by police. The husband denied the allegations of violence. He alleged the wife was violent both to him and to the children and was neglectful of the children. He alleged the wife had mental health issues, used illicit drugs and abused both alcohol and prescription drugs. Each party sought orders for the children to live primarily with them.
An independent children’s lawyer was appointed, and the Secretary of the NSW Department of Communities and Justice (DOCJ) intervened in the proceedings from July 2021. There were many procedural hearings and two substantial interim hearings. The second interim hearing ran over three days in March and April 2022. Following that hearing, the wife was granted sole parental responsibility for the children on an interim basis and was permitted to relocate with them from City B, where the family had been living, to the City D/City C district. The husband followed to be closer to the children.
On 14 August 2022, in the lead up to the trial, the wife filed a further amended application seeking sole parental responsibility for the children with a requirement that she consult the husband before making any major long-term decisions concerning them. She sought orders for the children to live with her, for X to spend time and communicate with her father in accordance with her wishes, and for the younger children to spend time with their father every second weekend and half of all school holidays.
In the further amended response filed by the husband on 25 August 2022 he sought orders for equal shared parental responsibility for all three children, for the living arrangements for X to be determined by the Court, and for the two younger children to live with him and spend time with their mother every second weekend and half of school holidays.
The parties ultimately agreed to final parenting orders which gave the wife sole parental responsibility for all three children with a requirement that she consult the husband before making any major long-term decisions concerning the two younger children. The children were to live with the wife. X was to spend time with her father in accordance with her wishes. The younger children were to spend time with him as agreed or, failing agreement, for four nights each fortnight during school term and for half of all school holidays. Various other ancillary parenting orders were made.
The final parenting orders reflect the orders sought by the wife. The only difference was that she proposed the younger children spend two nights per fortnight with their father during school terms, whereas what was ultimately agreed was that they spend four nights each fortnight with him.
The wife commenced property proceedings by way of an amended initiating application on 29 July 2021. The property issues were not complicated. The parties owned two real properties in Town E, NSW, with a combined net value of under $500,000. They had three cars between them, some chattels and funds in bank accounts, and combined superannuation interests worth about $250,000.
A few months after separation in 2021, the husband had received a partial inheritance from the estate of his late grandmother of approximately $223,000. He expected to receive a total inheritance of about $410,000. Later in the same year, he received a redundancy payment of $192,000. The husband deposed that, by the time of the trial, almost all of the first tranche of his inheritance and all of the redundancy had been spent on legal fees, living expenses, and setting up a private company through which he now works.
The final property orders made by consent on 6 October 2022 provided for the sale of the two real properties. The wife was to receive $425,000 in cash in addition to $25,000 she had received as an interim property distribution pursuant to orders of 4 April 2022, making a total of $450,000 in cash. The husband was to take the remaining property. The wife also received a superannuation split from the husband’s interests, calculated using a base amount of $91,220 in round terms. The orders provided for a distribution of various goods and chattels. The parties contemporaneously entered into a Binding Financial Agreement which provided that neither party would pay spouse maintenance to the other.
By the time of the costs hearing, both properties had been sold but the settlement of one had not yet occurred. The costs of sale were known, and the net proceeds were expected to be approximately $359,000. They were to be held in the conveyancing solicitor’s trust account pending determination of the costs dispute. The wife was still due to receive $124,000 in accordance with the orders of 6 October 2022 and the balance was to go the husband’s solicitors. The husband sought that none of the funds be distributed to the wife until after the determination of the costs dispute as he sought that she pay his costs of that hearing. However, given he sought a maximum amount of $13,000, an order was made on 20 February 2023 for the wife to receive $109,000 with the balance to be held on trust pending the determination of this dispute.
THE LEGAL PRINCIPLES
In family law proceedings, the usual course is that each party bears their own legal costs.[1] However, the Court may order that one party pay another’s costs if satisfied that the particular circumstances justify such an order.[2] In considering whether to make a costs order and the quantum of any such order, the Court must consider the matters set out in section 117(2A) of the Family Law Act 1975 which are as follows:
[1] Section 117(1) Family Law Act 1975
[2] Section 117(2)
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
When costs are awarded, it is most commonly on a party/party basis. However, the Court may order indemnity costs if satisfied that the particular circumstances of the case warrant such an order. In Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 118 ALR 248, Sheppard J set out some of the circumstances that have, in particular cases, been found to warrant the award of indemnity costs. Omitting the references, his Honour said:
…it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and imprudent refusal of an offer to compromise and an award of costs on an indemnity basis against a contemnor. Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.[3]
[3] At page 257
THE FINANCIAL CIRCUMSTANCES OF THE PARTIES
Neither party was in a strong financial position at the time of the costs application. The wife was working part-time and earning a gross salary of $1,302 per week or $67,704 per annum. She received Family Tax Benefit A and B of $285 per week and a carer’s pension for X of $65.50 per week. She also received child support from the husband of $252 per week, making a total income from all sources of $1,904.50 per week or $99,034 per annum.
The wife has the primary care of all three children. X is diagnosed with Asperger’s Syndrome, Post-Traumatic Stress Disorder and Anxiety. She also has some learning difficulties and behavioural issues. The wife deposed in her affidavit filed on 8 December 2022 that she had had to take leave to provide care and support for X, whose mental health had declined since the end of the proceedings to such an extent that she had been hospitalised for multiple weeks. The wife had also had to pay for intensive therapy for X, only part of which was covered by Medicare and the National Disability Insurance Scheme.
The husband was formerly employed as a professional at F Company. He is now employed as a professional through his own company, set up after separation. In his financial statement filed on 15 February 2023, the husband declared an income of $1,400 per week plus $620 from the Company in the form of rent allowance and vehicle allowance, making a total of $2,020 per week or $105,040 per year. Counsel for the wife submitted that the husband had understated his income, pointing out that his company had issued invoices for $82,228 for a period of a little over two months from 3 June to 12 August 2022. If the company continued to issue invoices at that level, it would suggest a substantial annual gross income for the company, and ultimately the husband, but there is no information about the period of work covered by those invoices and there is no information about the expenses of the business which would need to be paid from the gross income. However, the only activity of the company is running a business and the only employee is the husband. The company is the structure through which he provides advice to companies. I assume, therefore, that the expenses of the company primarily comprise the husband’s salary and some administrative costs.
The income of the husband depends on him obtaining contracts for his service. He alleged that the wife made this harder for him through the complaints she made about him throughout the proceedings and her obtaining family violence orders against him. However, it appears the husband has had steady work, including from G Organisation, since then. The company structure affords the husband a degree of flexibility in his finances that is not available to the wife as a salaried employee. The husband clearly has a superior income earning capacity to that of the wife, although the extent of the difference is unclear.
As noted earlier, in accordance with the property orders made on 6 October 2022, the wife was to receive a total of $450,000 in cash and a superannuation split of a little over $91,000. Otherwise, she was to retain her car and chattels in her possession. According to the costs notice the wife filed on 20 February 2023, she had paid a total of $247,357 in round terms in legal fees. Some of those fees were paid prior to the hearing, using borrowed funds. Most of her legal fees were paid from what she received in the settlement. The estimated costs of the costs application were $17,630. Of the $425,000 she received by way of property settlement, therefore, a total of $265,000 in round terms was spent on legal fees, leaving her with a net property settlement of about $160,000.
According to the costs notice filed by the husband on 20 February 2023, he had paid $338,633 in legal fees and disbursements and still owed $429,525 in round terms, making a total of legal fees and disbursements for the substantive hearing of $768,158. It was estimated that he would need to pay another $20,125 in unbilled work in progress and another estimated $5,500 in fees to the end of the costs hearing, making a total of $793,783 in round terms.
As a result of the property orders of 6 October 2022, the husband was to receive the net proceeds of sale of the two City B properties and retain his inheritance, redundancy, and other items of property in his name but was required to make a payment of $425,000 to the wife. He was to retain his superannuation interests, less the split to the wife. The husband filed a financial statement on 15 February 2023 for the purpose of the costs hearing. By then the H Street property had been sold. The husband declared total assets, including his business, the proceeds of sale of H Street, and the equity in J Street, of $557,122. He declared total liabilities, including outstanding fees to his solicitors, of $805,107, leaving net liabilities of almost $248,000. This puts him in a financial position at the time of the costs hearing which was, overall, worse than that of the wife. However, this is largely because he spent three times as much as the wife on legal fees.
The husband is 37 years old and presumably has many years of working life ahead of him. He is required to pay child support for the children but his superior income earning capacity will assist him in recovering financially from the proceedings.
Neither party was on a grant of legal aid.
THE CONDUCT OF THE PARTIES
In support of her costs application, the wife relied on the husband’s conduct throughout the proceedings. She argued that the husband used the proceedings for an improper purpose, namely, as a means of continuing the coercive and controlling behaviour she alleged he had engaged in during the parties’ relationship. She argued that this, in turn, resulted in significantly increased legal costs for her. In circumstances in which there has been no testing of the evidence and no findings, there are obvious challenges in assessing this argument. However, some assessment can be made on the basis of evidence that was either agreed or uncontested. I am satisfied on this basis that the husband did engage in behaviour which was bullying and harassing of the wife, and which caused her additional legal costs. Three examples follow.
About a week after the parties separated in January 2021, the wife attended an appointment with her psychologist whose office is in one of the main streets of City B. She parked outside but, when her appointment was over, her car was gone. She rang the police to report it stolen. While waiting for the police to arrive, she received a text message from the husband who said he had found the car abandoned on the side of the road and taken possession of it. The wife was also advised by police that the husband had reported her as a missing person. The husband said this was because she had failed to respond to his messages for 24 hours. It would have been obvious to the husband that the wife was seeing her psychologist, that she was not missing and that her car was not abandoned. There was no reason for him to take the car, except to cause her difficulty. The husband filed multiple affidavits in the proceedings after the wife first deposed to these events and had ample opportunity to present a different version of events but did not ever do so. I infer he did not have different version of events.
The wife repeatedly sought the return of the vehicle. The husband refused to return it and arranged instead for her to have a smaller vehicle which was, according to the wife, inadequate for her needs given she had the majority care of the three children and X’s therapy dog. Eventually on 4 April 2022, well over a year later, orders were made by consent for the husband to pay the wife the sum of $25,000 to enable her to buy a more appropriate vehicle. In the meantime, the wife had been greatly inconvenienced and had been put to the cost of repeated futile correspondence about the issue.
The second example of adverse conduct by the husband in the proceedings was his many, ultimately unsubstantiated, allegations about the wife. In his first affidavit filed on 22 March 2021, the husband alleged the wife posed a serious risk of harm to the children. He alleged she was a regular user of illicit drugs, that she abused alcohol and that, when he returned to the home with police to collect belongings after the family violence order was made, he found marijuana in her bedside table along with a bag of white powder and unlabelled “pills”. He alleged the wife was inappropriately medicating the children. He reported these matters to the police and to the child protection authority. The wife denied the allegations made by the husband. She admitted historical but limited recreational drug use and denied any recent use. She promptly agreed to urinalysis drug screening and hair follicle drug screening, both of which produced negative results. The wife denied all knowledge of the marijuana or white powder allegedly found by the husband in her bedside table and believed the husband put them there. The unlabelled pills were tested and found to be confectionery.
In early 2021 the husband was charged with breaching the family violence order by sending certain emails to the wife. A senior caseworker employed by DoCJ deposed that, during an interview of the husband in mid-2021, he said that the wife had logged into his work email account and sent the emails to herself.[4] This resulted in the wife being investigated. She denied the allegation. The husband subsequently denied making the statement to the caseworker. He deposed that he told the caseworker that the wife had previously hacked into his emails and could have sent them to herself.[5] The difference in language is marginal. Whatever he said to the caseworker caused problems for the wife.
[4] Affidavit of Ms K filed 29 August 2022 at paragraph 35
[5] Husband’s affidavit filed 2 September 2022 at paragraph 9(b)
The husband made various other allegations about the wife, each of which was investigated by the child protection authority and not substantiated. Nevertheless, the wife had to deal with them, which was time consuming and costly.
The last aspect concerning the husband’s conduct of the proceedings relates to his pursuit of unrealistic outcomes. He continued to seek orders either for all three children or for the younger two to live with him, right up to the trial when he conceded their residence to the wife. He also continued to press for orders for X to spend time with him, long after it should have been obvious to him that this was unable to be achieved. Interim orders made by a (then) senior registrar on 28 May 2021 provided for the two younger children to live on a week about basis with each parent and for X to live with her mother and spend every second weekend with her father. At the time of the interim orders, X was aged 13. In the week leading up to the first weekend she was due to spend with her father, X was resistant to going. She became highly dysregulated, made various statements about self-harm and potential suicide both to her support worker and to the wife. She was seen by the Child and Adolescent Mental Health Service (CAMHS) on two occasions and was refusing to attend school from where the husband was to collect her. The independent children’s lawyer wrote to the husband after speaking with CAMHS and suggested that the child’s time with her father be postponed. The husband refused to agree to that and attended the child’s school. He did not collect the child as she had refused to attend school.
The following fortnight X again became increasingly anxious as the weekend approached. She went to school but refused to leave with the husband on the Friday. The husband deposed that he was told by school staff earlier in the day that X did not want to go with him and that the school would not compel her to do so. The husband attended the school in any event. The child became distraught and destructive in her behaviour. The principal eventually asked the wife to take her home. The husband drove to where the wife was parked and attempted to get her to hand X over to him. He then followed the wife and X in his car which the wife said was intimidating both to her and X. The husband said he was not deliberately following the wife and was simply driving on the same road as her. However, as noted in my interim decision of 28 April 2022, given what the father himself had observed of X’s behaviour at school that afternoon and the anxiety he had observed in the behaviour of the wife and child when he approached in the wife’s car, he must have known he would cause further anxiety by following behind the wife on the same route as her. He could have waited a few minutes to let them leave before driving on the same road.
X remained resistant to spending time with her father throughout the proceedings. The husband continued to press for orders to address this, including seeking orders for X to live with him and spend no time with the wife for various periods. None of the husband’s applications were successful but each had to be dealt with. The wife deposed that the husband’s constant pressure for X to spend time with him caused unnecessary stress, exacerbated the child’s mental health issues, and caused additional cost to the wife, both in obtaining appropriate supports for X and in increased legal costs.
WHETHER EITHER PARTY HAS BEEN WHOLLY UNUCCESSFUL
As mentioned earlier, when the wife commenced the proceedings in January 2021, she sought orders for equal shared parental responsibility and for the children to live with her. She sought orders for the two younger children to spend supervised time with their father one day each week and that she be required to encourage X to attend with her siblings. She sought orders for the husband to undergo a mental health assessment by a psychologist, to complete an anger management course and a parenting course, and to engage with X’s therapist to begin repairing his relationship with her.
In his response, the husband sought orders for equal shared parental responsibility, for all three children live with him and spend no time with their mother for 28 days during which they would only have telephone or FaceTime communication with her. During the 28 days the wife would also be required to undertake drug and alcohol testing. Thereafter, the children would begin spending time with the wife as agreed or on one day each week.
The first interim orders were made by consent on 22 April 2021. Apart from various procedural orders including the appointment of an independent children’s lawyer, the orders provided for the children to live with their mother and for the two younger children to spend time with their father for several hours twice a week and to speak with him by telephone once a week. The mother was required to offer X the same opportunity for contact with her father. By consent the wife was to undertake hair follicle testing for illicit substances and random supervised urinalysis. The matter was listed for an interim hearing on 25 May 2021.
In the lead up to the interim hearing, each party sought slightly different orders to their original applications. The husband filed a case summary document on 17 May 2021, again seeking that all three children live with him, that X spend time with her mother on two separate days each week and that the younger children spend time with their mother every second weekend. He also sought orders giving him sole occupation of the former matrimonial home in J Street, Town E, where the wife and children had been living since separation. He sought an order requiring the parties to give notice to the tenants of their investment property in H Street, Town E, and for the wife to be at liberty to occupy that property when it was available.
The wife filed an outline of case summary document on 18 May 2021 in which she sought orders for the children to live with her and for the younger children to spend time with their father every second weekend on Saturday and Sunday but not overnight. She sought various ancillary and restraining orders.
The competing interim applications were heard by a senior registrar on 25 May 2021 with judgment delivered on 28 May 2021. Orders were made for the parties to have equal shared parental responsibility, for X to live with the wife and spend time with the husband every second weekend from Friday to Sunday. However, the orders noted the difficulty the parties had experienced in getting X to spend time with her father and indicated that, if the transition to his care was unsuccessful, the child was to be returned to her mother. The orders provided for the younger children to live on a week about basis with handover each Friday. Both parties were restrained from using illicit drugs or abusing alcohol.
Neither party was wholly successful or unsuccessful in this first interim hearing. The wife was more successful than the husband to the extent that X remained living with her and X’s difficulties in spending time with her father were accommodated by the orders. The parties were equally successful or unsuccessful in relation to the younger children who began living for equal time with each parent.
I do not consider the success or otherwise of either party’s application at this first substantial interim hearing sufficient alone to warrant a costs order.
On 9 June 2021, the proceedings were set down for a three-day final hearing on dates to be advised. By consent the parties were to engage a private expert to carry out an assessment and prepare a report to assist the parties in relation to the parenting issues and the psychological health of each party.
On 13 July 2021, less than two months after the interim hearing, the husband filed an application in a case seeking that relevant orders made by the senior registrar on 28 May 2021 be discharged and that X now live with him and spend every second weekend with her mother. The basis of his application was that X was not spending any time or communicating with him, despite him attending at her school to collect her and asking to speak with her when he telephoned the younger children. He deposed that the wife had told him she was unable to force X to spend time or communicate with him. Given the history of X’s reluctance to spend time with him, the fact that the difficulties were specifically noted in the orders of 28 May 2021, and the evidence of the adverse impact the repeated attempts were having on X’s mental health, the husband’s application was unlikely to be successful and should not have been brought.
On 27 July 2021, the wife filed a response to the husband’s application. She sought that the orders for X to spend time with her father be suspended until further order and that the younger children’s time with their father be reduced to every second weekend from Friday to Monday. She also sought various orders preventing the husband from engaging with any of X’s treating medical and allied health professionals. She subsequently sought sole parental responsibility for X with an obligation for her to consult the husband about any major long-term issues concerning her. The basis of her application was the father’s continued attempts to compel X to spend time with him had caused a deterioration in X’s mental health, an increase in her self-harming behaviour and an increase in her school refusal. She deposed that the husband’s forceful insistence on speaking with X when he rang to speak with the younger children caused stress and distress to the whole household.
On 28 July 2021 the Secretary of DoCJ filed a formal notice of intervention. The Department had been involved with the family since around the time of separation and had received many notifications about risks to the children in the care of each party.
On 29 July 2021 the competing interim applications came before the Court. All four parties were legally represented. The proceedings were adjourned to 2 December 2021 for mention or interim hearing. That listing date was later changed to 21 March 2022 as the expert report ordered on 9 June 2021 was not going to be available until then. In the meantime, all previous orders in relation to X spending time or communicating with her father were suspended and she was required to only spend time and communicate with him in accordance with her wishes. The wife was required to take all reasonable steps to support and facilitate her doing so. The husband was wholly unsuccessful in obtaining a change of residence for X which was the major issue in contention that day. The wife was successful in having the orders in relation to X suspended but unsuccessful in obtaining a reduction in the husband’s time with the younger children. The parties agreed to orders to facilitate therapeutic counselling for their second child, Y.
X’s mental health remained problematic. In late 2021 she began living with her maternal grandparents outside of City J, NSW. The wife also lived there every second week while the younger children were with their father. During the weeks the younger children were in the care of the wife, she lived with them in the former matrimonial home in Town E.
On 18 November 2021, the wife filed an amended initiating application seeking property orders.
On 18 March 2022, in preparation for the interim hearing, the independent children’s lawyer filed an outline of case document. The expert report was released the day after the document was prepared but the independent children’s lawyer did not change her position having read it. She did not support the husband’s application for X to live with him. She contented in the case outline that the available evidence suggested there would be serious risks to X’s mental health and well-being if such an order was made. She sought orders for the younger children to spend only alternative weekend daytime periods with their father. She set out in detail the reasons for reaching that position, including concerns about the father’s parenting capacity and insight, and the history of his alleged coercive and controlling behaviour, reinforced by his post-separation behaviour.
Undeterred, on 21 March 2022, the husband filed an amended response seeking equal shared parental responsibility for the children, for all three children to live with him and for the children to spend time with their mother as agreed between the parties or as determined by the Court. On interim basis he sought that the parents take steps to facilitate X attending a secure live-in adolescent mental health unit operated by L Organisation at a Suburb M hospital and to attend school at an associated learning centre. He otherwise sought that X live with him and spend time with her mother every second weekend from Friday to Sunday. He sought an order for the parents to engage a private psychologist to provide therapeutic support to Y. On the same date, 21 March 2022, the husband also filed a minute of orders sought which were different to those in his amended response. In the minute, he sought orders that required the DoCJ to develop an integrated multidisciplinary plan for X which addressed issues of her safety, behavioural issues, mental and physical health, medication regimen and education. He sought an order which required both parents to implement the multidisciplinary plan and to consult with each other in doing so. He sought an amendment to the existing orders which provided for X spend time with him in accordance with her wishes so that the order would be that X spend time with him in accordance with her wishes “or as recommended by [her] treating psychiatrist or psychologist”.
In relation to the property aspect of the proceedings, the husband’s amended response sought non-particularised final orders, simply seeking a just and equitable property division. On an interim basis he sought orders for discovery and for the sale of the two properties the parties owned in Town E. He also sought leave to use any family law documents in his pending criminal and family violence order proceedings in the NSW Local Court.
The report by the court expert Dr N, a clinical and forensic psychologist, was released on 21 March 2022, the day before the interim hearing. It was discussed at length in the reasons for decision following the interim hearing.
The interim hearing began on 22 March 2022 but there was insufficient time to complete it. The proceedings were adjourned part-heard to 4 April 2022. Some orders were made, mostly by consent, on 4 April before the proceedings were further adjourned to 6 April 2022 for submissions in relation to the issue of the use of the family law documents in the Local Court proceedings.
Substantive interim parenting orders were made on 22 April 2022 with reasons for decision being provided on 28 April 2022. The orders provided for the wife to have sole parental responsibility for the children with an obligation to consult the husband prior to making any major long-term decisions concerning them. The children were to live with their mother who was permitted to relocate with them to the City D/City J district and to enrol them in schools in that district. X was to spend time and communicate with her father only in accordance with her wishes. The younger children were to spend every second weekend with their father from Friday afternoon to Sunday afternoon and for half of all school holidays. The younger children were also to have telephone communication with their father once each week. Various other ancillary orders were made. The wife was to replace the husband as X’s representative for the purpose of her NDIS funding. The husband was restrained from being involved in any way with X’s physical or mental health treatment and from attending at any of the children’s schools unless agreed in writing by the wife or ordered by the Court. Various other restraining orders were made.
The wife was successful in this significant interim hearing and the husband was unsuccessful.
The final hearing was originally listed for three days commencing 14 September 2022 but subsequently moved to commence on 4 October 2022.
In preparation for the trial, the wife filed a further amended application on 14 August 2022. In relation to the parenting aspects, she sought sole parental responsibility for the three children with a requirement that she consult the husband before making any major long-term decisions concerning any of them. She sought orders for the children to live with her, for X to spend time and communicate with the husband in accordance with her wishes and for the younger children to spend time with their father every second weekend, for half of all school holidays, on special occasions and at other times as agreed. She sought an order restraining the husband from being involved in issues concerning X’s physical or mental health or attending at any of the children’s schools without her written consent.
The husband filed a further amended response on 25 August 2022 in which he sought that he and the wife have equal shared parental responsibility for the children, for X to spend time with each parent as determined by the Court, and for the younger children to live with him and spend time with their mother every second weekend, half of school holidays and on special occasions.
The final parenting consent orders gave the wife sole parental responsibility for all three children with a requirement that she consult the husband before making any major long-term issues concerning the two younger children. They provided for the children to live with the wife. X was to spend time with the husband in accordance with her wishes. The younger children were to spend time with their father as agreed or, failing agreement, for four nights each fortnight during school term, for half of all school holidays and extra time on special days. Various other ancillary parenting orders were made.
As can be seen, the final parenting orders made by consent very substantially reflect the orders sought by the wife. The only significant difference was that she proposed the younger children spend time with their father during school terms on two nights a fortnight, whereas what was agreed was that they spend four nights a fortnight with him. It was argued on behalf of the husband that this was a significant difference, but I do not agree. In the context of a dispute which encompassed issues of parental responsibility and where the children would live, this is a minor difference.
The property orders sought by the wife in her further amended application filed on 14 August 2022 were for the two real properties in Town E to be sold with 85 per cent of the net proceeds to be distributed to her and the balance to the husband. She also sought a cash payment from the husband to her of $250,000. She sought a superannuation split from the husband’s interests calculated using a base amount of $150,000. She sought an order for spouse maintenance payable to her by the husband in the sum of $250 a week for a period of two years. She sought that each party take particular but modest sums from bank accounts and that the husband take personal items and other items belonging to his mother and grandmother. Otherwise, she proposed that each party retain all items of property in their name or possession.
In his further amended response filed on 25 August 2022, the husband also sought that both Town E properties be sold with the net proceeds to be shared equally between the parties. He sought a superannuation split to the wife calculated using a base amount of $65,000. He sought various chattels be returned to him and, otherwise, each party keep what they had.
Neither party achieved the property orders they proposed at that time.
OFFERS
Throughout the proceedings each party made several settlement offers to the other. The first offer made by the wife of 2 May 2022 is the most significant for the purpose of the current proceedings.
The wife’s offer of 2 May 2022 and the husband’s offer of 10 June 2022
The first offer was made by the wife on 2 May 2022 following the substantial interim hearing that occurred over three days.[6] At that stage of the proceedings, each of the parties had filed multiple affidavits; the expert report by Dr N had been considered at length; the DoCJ had filed two substantial affidavits setting out the various allegations made by and about each parent, the investigations undertaken by the Department and the results; the independent children’s lawyer had stated a clear position to the other parties and there was a lengthy interim judgment analysing the evidence to date, albeit without the benefit of cross-examination. Accordingly, much of the contentious evidence in the parenting aspect of the proceedings was known and it did not change significantly prior to the final hearing.
[6] Husband's tender bundle 20 February 2023 at page 8
The wife offered to settle the parenting proceedings on 2 May 2022 on the basis that the final parenting arrangements reflect the interim orders made on 22 April 2022. As discussed earlier, this is what the parties ultimately agreed, except that the final orders provided for the younger children to spend four nights a fortnight with their father during school terms, rather that two nights a fortnight as provided in the interim orders. While the extra two nights a fortnight was no doubt important for the husband, it was not significant in the context of an offer to resolve the whole dispute. Had the husband engaged with the mother in relation to the offer, he might have been able to achieve an agreement for four nights in any event as the mother had proposed that arrangement only six months earlier in her amended application filed on 18 November 2021.
In relation to property issues, in the offer of 2 May 2022, the wife’s solicitors set out what they understood to be the property pool at that time. The offer was for the property to be distributed on a 60/40 percent basis in favour of the wife and an equalisation of the parties’ superannuation interests. Taking into account the partial property settlement already paid to the wife to enable her to buy a car and the funds she already had, this would have required the husband to make a cash payment to her of $380,000 and a superannuation split calculated using a base amount of $65,000.
The final orders required a cash payment to the wife of $425,000 and a superannuation split calculated using a base amount of $91,220 in round terms.
The husband did not accept the wife’s offer. The wife achieved a better result five months later. In the meantime, very significant legal costs were incurred by both parties.
On 10 June 2022, the husband’s solicitors rejected the wife’s offer and made a counteroffer. [7] In relation to the property issues, the husband’s offer was for both Town E properties to be sold and for the net proceeds of sale be divided on a 60/40 per cent basis in favour of the wife. He excluded the husband’s redundancy and inheritance from the property pool. He proposed a superannuation split to the wife calculated using a base amount of $50,000. The wife achieved more than this in the final property orders.
[7] Husband's tender bundle 20 February 2023 at page 12
In relation to parenting issues, the husband proposed that the parties have equal shared parental responsibility for the two younger children and the wife have sole parental responsibility for X with an obligation to consult the husband prior to making any major long-term decisions. He proposed that X live with the wife and spend time with him in accordance with her wishes or as recommended by her treating psychiatrist or psychologist. He proposed that the younger children live with each parent on a week about basis and spend half of all school holidays and extra time on special days with each parent. He proposed the parties and children engage in family therapy to repair the various relationships, to assist the children with the relocation and to improve the communication and co-parenting relationship between the parents. He also proposed a range of non-contentious information sharing orders and restraining orders. The wife rejected this offer and achieved a better outcome in the final parenting orders.
At the time the wife made her offer of 2 May 2022, she had already incurred significant legal costs. The costs notice she filed on 22 March 2022, the first day of the interim hearing, indicated she had incurred costs of $50,480 with a further $7,000 estimated for the interim hearing and a further $70,000 estimated to complete the final hearing. The husband also filed a costs notice on 22 March 2022 indicating he had incurred costs of $301,865 in round numbers with a further $7,000 estimated for the interim hearing and a further $100,000 estimated for the final hearing.
By the time of the final hearing, both parties had incurred substantially more costs than their solicitors had estimated in March 2022. The wife’s actual costs to the completion of the substantive proceedings were $247,357 in round terms. Had the husband accepted her offer of 2 May 2022, the wife would have been spared an extra $189,255 in legal fees and the husband would have saved a further $204,129 spent on his own legal fees.
During the costs hearing, it was argued on behalf of the husband that it was reasonable for him to reject the wife’s offer of 2 May 2022 because it was made prior to him receiving full financial disclosure from the wife and prior to there being any valuations of the two real properties which were the major assets owned by the parties. These arguments were not persuasive. At various times throughout the litigation, each party complained about a lack of disclosure by the other. Under cover of letter of 4 May 2022, two days after she made her offer, the wife’s solicitors provided discovery of the wife’s three most recent tax returns, up to date bank statements for the wife’s accounts for the last two years, her current employment agreement, her three most recent pay advices, and the three most recent child support assessments. In response, the husband’s solicitors sought bank statements for one of the wife’s bank accounts back to a year prior to separation and sought information about regular transfers of cash to X’s bank account. The wife explained that the transfers were to cover the cost of X buying her own and her carer’s lunch on outings. The husband also sought discovery of any documents relating to any companies, businesses or trusts in which the wife had an interest. She had none.
The husband already knew about the wife’s financial circumstances. At the time of separation both parties working for F Company. The wife was a part-time professional, and the husband was a professional. At the time of the interim hearing in March and April 2022, the wife was living for one week each fortnight with the younger children in the former matrimonial home in Town E and during the other week she lived with X in the home of the maternal grandparents in the City J area. She was working part-time on a modest salary which she had declared in her various financial statements. Once the interim orders permitted her to relocate with the younger children to the City D/City J district, the wife continued working part-time in the field in which she had experience and which was notoriously poorly paid. The husband had more to disclose given he had received a redundancy and an inheritance in more than one tranche, some of which had not been received at the time of the wife’s offer. The husband had also commenced a new business using a corporate vehicle which was effectively his alter ego. I am not persuaded on the evidence before me that there was any significant lack of discovery by the wife or that it should have impeded proper consideration by the husband of her offer. It did not prevent the husband making his own offer eight days later.
I am similarly unpersuaded by the argument that a lack of formal valuation of the real properties prevented proper consideration of the offer. The point of offers is to try to avoid the cost of litigation, including the cost of valuations in appropriate cases. The husband made his counteroffer on 10 June 2022 without the benefit of the valuations. Further, the letter accompanying the husband’s counteroffer indicated that the husband intended to move to City D and suggested that, in those circumstances, the two real properties in Town E should be sold. The sale of the properties would have crystallised their value in that event. In the meantime, the parties could have obtained an assessment of the value of those properties through market appraisals. Although the wife’s offer had been expressed in terms of a cash sum payable to her, her solicitors had explained in the offer that the sum was calculated on the basis of the wife taking 60 percent of the assumed value of the parties’ combined assets. If the husband disagreed with the assumed value, he could have addressed it.
Lastly, it was submitted on behalf of the husband that the final orders made by consent on 6 October 2022 were agreed in the context of the parties entering into a Binding Financial Agreement (BFA) in which each party agreed that neither would be liable for any spouse maintenance payments to the other. It is true that the wife’s application at trial still contained a spouse maintenance claim. However, her offer of 2 May 2022 did not include any spouse maintenance payable by the husband. The husband’s counteroffer on 10 June 2022 was not conditional upon the parties entering into a BFA, rather it simply contained an order which dismissed all outstanding applications. The husband made a different offer of 9 September 2022 which similarly contain no requirement for the parties to enter a BFA. I do not consider the parties executing the BFA contemporaneously with the final property orders as amounting to the husband doing better at that time than what he was offered on 2 May 2022.
The offer of 2 May 2022 is very influential in my determination. There were, however, various further offers that each party relied on in the hearing.
The offers of 28 June 2022 and 15 July 2022
A second offer was made by the wife on 28 June 2022 and by the husband on 15 July 2022.[8] Each was rejected and neither is relevant for the current purposes.
[8] Husband's tender bundle 20 February 2023 at pages 28 and 32
The wife’s offer of 15 August 2022
On 15 August 2022 the wife made a further offer.[9] It was a holistic offer to resolve both the parenting and property proceedings. The offer was expressed to remain open for a period of seven days. On 17 August 2022 the husband’s solicitors wrote to the wife’s indicating that the offer was accepted in relation to property matters but rejected in relation to parenting matters.[10] This did not resolve the proceedings as the wife made it clear that her offer remain contingent upon both aspects fully resolving.
[9] Ibid at page 45
[10] Ibid at page 49
The offers of 9 September 2022
On 9 September 2022, three weeks prior to the trial date, the husband made a further offer to the wife in relation to the property aspects only.[11] The details are not relevant as the wife made a counteroffer the same day about which the parties then negotiated. The husband’s solicitor argued that the husband accepted this offer and that it was subsequently and improperly withdrawn.
[11] Ibid at page 51
The wife proposed that she would receive a lump sum of $100,000 within 28 days and a further sum of $218,850 within 90 days, making a total cash settlement to her of $318,850 (plus the 25,000 she had already received) and a superannuation split calculated using a base amount of $66,216.50.[12]
[12] Ibid at page 59
The husband’s solicitors responded on 12 September 2022 to say that the husband accepted the offer in principle and they were preparing draft terms of settlement, but that the husband also sought an allowance for the cost of sale of the real properties.[13] The wife’s solicitors replied on the same day, 12 September 2022 at 4.52pm, advising that their offer was for the wife to receive a fixed amount and that she did not agree to any further compromise.[14] They advised they had instructions to withdraw the offer if not accepted by 5.30pm that day.
[13] Ibid at page 62
[14] Husband's tender bundle 20 February 2023 at page 63
At 5.12pm, the husband’s solicitors confirmed in writing that the husband was agreeable to the wife receiving the amounts stipulated in her letter of 9 September 2022 and that they would shortly provide draft consent orders for the wife’s consideration. [15] At 8.07pm that evening, the draft orders were provided. However, a change had been made to the wife’s proposal. The husband’s solicitors advised that the husband was unable to pay $100,000 within 28 days and proposed instead that she receive $50,000 within 28 days and the balance within 90 days. That change was reflected in the draft orders. They also included orders about the return of particular items to the husband which he asserted were in the wife’s possession and which included two computers.[16] At 10.26pm the wife took issue with the orders drafted by the husband’s solicitors and formally withdrew the offer.[17] The wife’s solicitors explained in their correspondence that the husband had had occupancy of both properties in Town E for some time and that the former matrimonial home contained most of the furniture and personal items belonging to the husband. Further, the wife did not agree to give the husband the two computers he sought as they were being used by her and the children for personal use and schoolwork.
[15] Ibid at page 65
[16] Ibid at page 67
[17] Ibid at page 73
On 13 September 2022, the husband’s solicitors objected to the wife withdrawing her offer, asserting it had already been accepted. They pointed out that, if the wife did not have personal items belonging to the husband, the draft orders would not require her to do anything. They indicated the husband was content for the wife to retain the two computers except that he sought the hard drive from one of them as it contained documents related to his various criminal proceedings and other personal documents. They provided a further draft minute of consent orders. The wife maintained her position that the offer had been withdrawn on 12 September 2022. There was then further argument about whether the draft by the husband was a counteroffer or a mere articulation of the mechanics required to put the wife’s proposal into effect. I do not regard the wife’s offer as improperly withdrawn but it has no bearing on the current dispute in any event, given the wife’s offer of 2 May 2022. Further, neither party asked the Court at the time to rule on whether there had been an acceptance of the offer, and both parties continued to prepare for trial.
The offers of 23 and 29 September 2022
On 23 September 2022 the husband made a further offer to the wife, open for seven days.[18] He proposed that the wife receive a total amount of $318,850 and a superannuation split calculated using a base amount of $66,216.50, and that the husband be appointed sole trustee for sale of the two real properties, have exclusive occupation of them and be liable for the home loans in relation to them, pending sale. He proposed that he retain all the chattels located in the real properties and that, otherwise, each party be declared to be the sole owner of all items of property and superannuation in their name or possession and indemnify the other in relation to them. There was no requirement for the parties to enter a BFA, but rather an order dismissing all outstanding property and spouse maintenance applications.
[18] Husband's tender bundle 20 February 2023 at page 81
On 29 September 2022 the wife rejected the husband’s offer and made a counteroffer which was effectively agreed and reflected in the final property orders entered on 6 October 2022.[19]
[19] Ibid at page 89
The wife achieved a better settlement in the final property orders than what she had offered to accept by way of property settlement in her first offer on 2 May 2022 and her various subsequent offers. She also achieved in the final parenting orders what she had offered on 2 May 2022. She should not be out of pocket for any costs incurred because of the husband rejecting her offers which would also have saved him significant costs and, in relation to the property aspects, would have seen him pay significantly less to the wife by way of property settlement.
DETERMINATION
I am satisfied that, in the circumstances of this case, an indemnity costs order in favour of the wife is warranted from the time of the wife’s offer of 2 May 2022. The most significant factor in my determination is the offer itself which, had it been accepted at that stage, would have settled all matters, and would have saved both parties the significant legal fees subsequently incurred. A further factor weighing in favour of a costs order is that the husband was wholly unsuccessful at each critical stage of the proceedings. The third factor is the conduct of the litigation by the husband which undoubtedly increased the costs of both parties. An obvious example is the husband’s repeated forceful attempts to compel X to spend time and communicate with him, despite being urged by the wife, the independent children’s lawyer and X’s mental health practitioners to reconsider his approach. He persisted with applications for the children to live with him beyond the point when it should have been obvious that such applications were unlikely to be successful. Other behaviour by the husband, such as him taking the wife’s car when she was attending her psychologist’s appointment and making various allegations about her which he likely knew or ought to have known were not true, suggests he was motivated at least partly by feelings of animosity towards the wife rather than what was in the children’s best interests. However, given the possibility that a different conclusion may have been reached following cross-examination, this is not as strong a point as it might have been at the end of a contested hearing.
Quantifying the wife’s costs after 2 May 2022 requires some calculation. Both parties filed costs notices immediately prior to the interim hearing in March and April 2022. According to the wife’s costs notice filed on 22 March 2022, she had already spent $50,480 on legal fees. It was estimated that the costs of the interim hearing would be $7,000 but it was not known at that stage that the interim hearing would continue over multiple days. Counsel’s fees for the interim hearing ultimately amounted to $21,945. For the sake of the current exercise, I will assume the cost to the wife of the interim hearing, including solicitor’s fees, was $30,000. This would increase the wife’s total legal costs to the end of the interim hearing to $80,500 in round terms. By the time the proceedings resolved in October 2022, the wife’s costs were a little over $247,000. The extra costs between when she made the offer and the end of the substantive proceedings, therefore, was in the order of $166,500.
Weighing against an order for indemnity costs is the fact that the husband is in a net deficit financial position, even when the property he will take in the settlement is considered. This puts him in a very difficult situation. However, the wife bears no responsibility for this. The husband and his lawyers allowed his legal fees to build up to the value of the whole property pool if his redundancy and inheritance are excluded. He incurred legal costs of almost double the value of the property settlement to the wife. This had the effect of increasing the wife’s legal fees in having to answer correspondence and interim applications. It is hard to understand how the husband and his lawyers allowed this to happen. The Central Practice Direction of the Federal Circuit and Family Court of Australia sets out the core principles applicable to all family law proceedings. Core Principle 7 includes the following:
Parties and their lawyers are expected to take a sensible and pragmatic approach to litigation, and to incur only such costs as are fair, reasonable and proportionate to the issues that are genuinely in dispute.
On the information available to me, it appears that neither the husband nor his lawyers complied with this core principle.
There are funds held on trust from the sale of the last property of the parties. Given the information available at the time of the hearing on 20 February 2023, those funds should now be approximately $250,000. The wife is still owed $13,000 from the amount payable to her in the settlement which was withheld pending this determination. Once that is paid, the funds available should be in the order of $237,000. The husband’s solicitor argued that they should be released to them in satisfaction of their legal fees before being used to pay any costs order in favour of the wife. I do not agree. The husband’s solicitors must have known the costs being incurred by their client were disproportionate to the value of the property. If they advised their client appropriately but were nevertheless instructed to take steps which resulted in high costs, that is a matter between them and their client. They are part of one of the largest firms in City D and have resources to chase the husband for unpaid fees far exceeding the wife’s resources to chase the husband for unpaid costs. Accordingly, I will not prioritise legal fees due to them over payment of any costs to the wife.
I certify that the preceding ninety-seven (96) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Hughes. Associate:
Dated: 3 October 2023
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