Sappho & Sappho
[2022] FedCFamC1F 785
Federal Circuit and Family Court of Australia
(DIVISION 1)
Sappho & Sappho [2022] FedCFamC1F 785
File number(s): ADC 885 of 2020 Judgment of: BERMAN J Date of judgment: 18 October 2022 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Leave to reopen – Where the trial concluded in July and judgment was reserved – Where a settlement claim payable by the husband was contingent during the trial but has since crystallised following the reservation of the judgment – Where the husband seeks leave to adduce further evidence in relation to the settlement claim – Where the settlement is a genuine arm’s length transaction – Where the wife does not seek to challenge the evidence – Orders made.
FAMILY LAW – COSTS – Circumstances justifying order – Where the wife seeks costs on an indemnity basis in relation to the husband’s application to adduce further evidence – Where the husband did not provide sufficient and relevant discovery with respect to the settlement claim payable – Where the prejudice caused to the wife by the husband’s application to adduce further evidence can be remedied by costs – Consideration of party and party costs – Consideration of indemnity costs – Orders made.
Legislation: Child Support (Assessment) Act 1989 (Cth) s 116(1)(b)
Family Law Act 1975 (Cth) s 117(2A)
Cases cited: Aheb & Aheb (No. 3) [2009] FamCA 524
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Gelly and Gelly (no 1) (1992) FLC 92-290
Kohan & Kohan (1993) FLC 92-340
Murray v Figge (1974) 4 ALR 612
Prantage & Prantage (2013) FLC 93-544
Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151
Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256
Stephens & Stephens and Anor (Enforcement) (2009) FLC 93-425
Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471
Division: Division 1 First Instance Number of paragraphs: 64 Date of hearing: 5 October 2022 Place: Adelaide Counsel for the Applicant: Mr Anderson Solicitor for the Applicant: Clelands Lawyers Adelaide Pty Ltd Counsel for the Respondent: Mr Heinrich Solicitor for the Respondent: Camatta Lempens Pty Ltd ORDERS
ADC 885 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SAPPHO
Applicant
AND: MR SAPPHO
Respondent
order made by:
BERMAN J
DATE OF ORDER:
18 October 2022
THE COURT ORDERS THAT:
1.Leave be given to reopen the trial to adduce further evidence relating to the settlement of the claim with Mr FF.
2.The husband pay the wife’s costs in the sum of SIX THOUSAND FOUR HUNDRED AND EIGHTY DOLLARS ($6,480) with such sum to be included in the settlement sum payable by the husband to the wife.
3.The Application in a Proceeding filed 16 September 2022 is 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.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Sappho & Sappho has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
Ms Sappho (“the wife”) seeks orders by way of settlement of property and spousal maintenance. Mr Sappho (“the husband”) opposes the wife’s orders.
The trial commenced before me on 10 July 2022 and after three days of hearing, judgment was reserved on 13 July 2022.
On 8 September 2022, the husband filed an Application in a Proceeding seeking leave to reopen the trial to adduce further evidence relating to a settlement of a civil claim commenced by Mr FF.
Whilst not a concluded settlement at the time of filing of the Application in a Proceeding, it appears that following the close of evidence after the trial, the husband and Mr FF underwent a mediation process which resulted in a settlement of Mr FF’s claim payable by the husband, in the sum of $270,000.
The application was adjourned to enable the husband to provide documents to the wife’s solicitors in respect of the settlement reached but also to provide the Deed of Settlement between the husband and Mr FF and a loan agreement between the husband and Mr GG providing for monies to be loaned to the husband in the sum of $270,000.
The husband intends to on-loan $250,000 to P2 Pty Ltd for payment to Mr FF together with the further sum of $20,000.
Whilst there is complaint by the wife that the husband has been cavalier in providing documents surrounding both the initial claim by Mr FF and then the more recent settlement discussions, it is not controversial that the agreement reached with Mr FF is an arm’s length transaction.
The husband seeks to bring to account the sum of $270,000 as a personal liability as against the assets of the parties. It is readily apparent that the proposed liability represents a significant proportion of the total net assets of the parties.
The husband’s application is opposed.
Background
The husband’s business employed contracted health professionals, pursuant to employment contracts.
In 2020, Mr HH and Mr FF left the business and a dispute arose between each of the contracted health professionals and the husband, as to matters relating to their employment contracts and whether they had received their full entitlement pursuant to the terms and conditions entered into.
At the time of trial, the claim involving Mr HH had been resolved and agreement was reached between the husband and wife to include a liability of $181,000 to JJ Finance for monies provided that enabled Mr HH’s claim to be settled.
At the time of trial, there was no indication that Mr FF’s claim would be settled.
Litigation had been issued and a Statement of Claim formed part of the evidence in the proceedings, outlining the particulars of claim which totalled $679,922.
At trial, the respondent contended that he had received advice from his solicitors that his liability may well be in or around $450,000 and as such, it should be brought to account as a liability of either the business or the husband.
Mr KK, the jointly appointed single expert, was asked to consider the employment claim and it was his opinion that it was contingent and until crystallised, either by judgement or agreement, it was not able to be properly assessed.
An issue of contention between the parties is the extent of discovery that would have enabled the wife and the Court to better understand the husband’s defence to the claim. The husband did not provide his defence but in evidence, he conceded that he did not consider he should be liable to Mr FF at all.
It is conceded that there were a raft of documents that could have been provided, including letters of advice from the husband’s solicitors and without prejudice correspondence (Exhibit “13”).
The submission of the wife was that the liability was contingent and in circumstances where there had not been full and frank disclosure, then the claim should be ignored. It is an argument that had merit.
What has now transpired, is that the claim has settled and whether it is conceded or not, the evidence persuades me that the settlement with Mr FF, as contained in the Deed of Settlement, is a genuine arm’s length transaction. I am also satisfied that the claim is to be paid by money the husband has borrowed from Mr GG.
What remains uncertain, is whether the settlement was reasonable in all the circumstances and made good commercial sense as opposed to the husband being prepared to settle for an unreasonably high amount.
The wife’s further applications in a proceeding
Presumably in answer to the husband’s Application in a Proceedings seeking leave to adduce further evidence, the wife filed two Applications in a Proceeding. The first Application in a Proceedings sought orders that she be granted leave to tender a letter from Australian Government Services (Child Support) dated 24 August 2022, acknowledging that the Registrar has now received notice of the child support departure orders as sought in the Amended Initiating Application filed 22 June 2022.
As is apparent, the email notification from the wife’s solicitors to the Registrar dated 23 August 2022, is significantly after the date upon which judgment was reserved.
I consider that the focus of the child support scheme is the administrative resolution of child support issues rather than what is an exceptional pathway namely, a determination by a court pursuant to s 116(1)(b) of the Child Support (Assessment) Act 1989 (Cth) (“the CSA Act).
For reasons that will be discussed, I do not consider that it is appropriate to embark upon a consideration of child support in circumstances where, the requirements of the CSA Act are clear and were not satisfied.
The second Application in a Proceeding is in reality, an enforcement application, seeking the following orders:-
(1)The husband pay the wife the net sum of $5,210.
(2)The husband pay the wife’s costs of incidental to this enforcement application in the sum of $1,725.
By order made on 11 April 2022, the husband was obliged to pay spousal maintenance to the wife in the sum of $521 per week.
It appears that the husband was less than diligent and as 8 September 2022, the arrears of spousal maintenance are in the sum of $5,210.
The difficulty with the application is that the entirety of the arrears have accrued since 13 July 2022, being the date that judgment was reserved.
Legal principles
I have considered the often quoted decisions of Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471, Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 and Stephens & Stephens and Anor (Enforcement) (2009) FLC 93-425 (“Stephens”), in particular [272-274].
I have also had regard to the decision of Murray v Figge (1974) 4 ALR 612, Gelly and Gelly (no 1) (1992) FLC 92-290 and Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256 at [32] (“Smith”).
The cases were also referred to by counsel and comprehensively encapsulate the common law principles that apply when a court is required to consider either an application for leave to adduce further evidence or to reopen a case.
The overarching principle is that to grant leave to adduce further evidence, is an exercise of discretion, guided and tempered by the interest of justice.
I consider that whilst the husband’s application is to reopen his case and adduce further evidence, it is a distinction without a difference. The common thread through the case law can be summarised by Murphy J in Aheb & Aheb (No. 3) [2009] FamCA 524:-
35.In a case involving an application for settlement of property, it can be said that common law principles govern applications to reopen in this court (see eg Gelley v Gelley [1992] FLC 92-290 and the cases there discussed). Those principles make it clear that the granting of leave to reopen is discretionary. That discretion is guided by the interests of justice. The essential question is: is the court more able to do justice in the facts and circumstances of the particular case if the application is granted.
(Citations omitted)
Of significance to the application at hand, the High Court in Smith (supra), stands for the proposition that an application brought in a timely fashion (albeit towards the end of the evidence) will raise the primary consideration of the extent of any prejudice such an application may cause if granted. In this case, the antidote may be remedied by a cost order.
In Stephens (supra), there is a convenient and apposite summary:
273.We observe that in Australian Securities and Investments Commission v Rich (2006) 235 ALR 587 Austin J set out at 593 what he described as a “useful statement of relevant discretionary factors” to the exercise of discretion to permit a beginning party in a civil penalty proceeding to adduce further evidence after it had closed its case. The factors included:
•the nature of the proceeding;
•whether the occasion for calling further evidence ought reasonably to have been foreseen;
•the importance of the issue on which the further evidence is sought to be adduced;
•the degree of relevance and probative value of the further evidence;
•the prejudice to the other party;
•the public interest in the timely conclusion of litigation;
•the explanation offered for not having called the evidence.
It may also be relevant to consider what the High Court recently said in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175.
Conclusion
I have given careful consideration to the various factors that are likely to be influential on the success or otherwise of the husband’s application to adduce further evidence.
I do not consider that the purported settlement of Mr FF’s claim was either a tactical manoeuvre or lacks veracity.
If the claim had settled during the course of the proceedings there could have been no objection to the evidence being introduced.
Moreover, the parties reached agreement that the liability to JJ Finance should be brought to account in circumstances where monies were borrowed to settle the claim with Mr HH.
The difficulty for the husband is that during the course of the proceedings he sought to bring to account as a liability, the potential settlement sum of $450,000. It is a matter of conjecture as to what would have happened if that amount was brought to account and the husband subsequently settled with Mr FF for a lesser sum.
The more significant concern, is that during the course of the proceedings there was a distinct lack of discovery by the husband in respect of information surrounding Mr FF’s claim. It is noted that the lack of disclosure extended to the pleadings in the litigation but in particular, the husband’s defence.
The majority of the documents which would have enabled the Court, if necessary, and the wife to be satisfied as to the progress of the claim and the nature of the proceedings, were not provided.
Having said that, the claim with Mr FF has now resolved for a sum certain.
As I understand the wife’s position, she does not seek to challenge the settlement nor that either the husband or any other person be recalled for cross examination.
I consider that the amount as settled with Mr FF is substantial as a proportion of the asset pool and at the very least, the existence of the claim was the subject of disclosure.
I propose to order that the proceedings be reopened to enable the husband to adduce evidence of the settlement of his claim.
To the extent that the husband’s actions in not disclosing relevant documents in a timely fashion has added to the mistrust of the wife and indeed may well have made an application unnecessary in circumstances where if there had been some foundation laid, the wife may have agreed, I consider that the prejudice to the wife can be remedied by costs.
Wife’s costs
The wife seeks the sum of $6,480 on an indemnity basis or $4,276 on a party / party basis.
The wife’s application for costs is opposed by the husband.
I have indicated that I consider the manner in which the husband has conducted the litigation, has been cavalier, at least as to his clear obligation to provide full and frank disclosure of documents relating to the claim.
In considering what orders should be made, if any, in respect of the wife’s costs, s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) sets out that the Court shall have regard to the following:-
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
Accordingly, I have a wide discretion in favour of matters relating to a potential costs order.
Should an order for costs be made in favour of the wife?
As discussed, whilst ultimately the husband’s application to reopen the proceedings and adduce further evidence was successful, the real issue is the husband’s conduct in not providing the disclosure of documents that underpin the civil litigation with both Mr HH and Mr FF.
Whilst it may not have made a difference, equally it is entirely possible that the wife may have been satisfied that the manner in which the husband was conducting the civil proceedings was such that the settlement ultimately reached, was appropriate.
The husband did not give the wife the advantage of such a consideration.
Accordingly, I consider that the lack of production of relevant documents is a basis for an order for costs in favour of the wife.
The question that remains is whether costs should be payable on a party / party basis or an indemnity basis.
The discussion of the Full Court in Prantage & Prantage (2013) FLC 93-544 (“Prantage”), is of assistance in determining whether and in what circumstances, an order for indemnity costs should be made. The Full Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 (“Kohan”) in which it was noted that, whilst there was nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said in Kohan (supra) at 79,605:-
…it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale, and what its likely impact will be on the financial position of each of the parties.
This impact was a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under sec 117(2A)(a), or perhaps even more as a relevant matter under (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
In Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said:-
156.The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd. (1993) 46 FCR 225.
In Prantage (supra) the Full Court said at 87,209:-
97. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
98. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.
(Emphasis per original)
Whilst I do not consider that the matters before the Court were of significant complexity nonetheless, the obligation to make full and frank disclosure underpins proper functioning of the Court for the determination of litigation.
That consideration alone is sufficient to impose an order for indemnity costs in the sum of $6,480 which is to be included as part of the overall settlement sum in favour of the wife.
I make orders as appear at the commencement of these reasons.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 18 October 2022
0