STELZER & WALLACE (COSTS)

[2015] FamCA 90

FAMILY COURT OF AUSTRALIA

STELZER & WALLACE (COSTS) [2015] FamCA 90

FAMILY LAW – COSTS – application for costs where the husband was substantially unsuccessful – partial costs allowed on party/party basis – indemnity costs application refused.

Family Law Act 1975 (Cth) ss 117, 117(2A)

Family Law Rules 2004 (Cth) r 19.08

Black v Black (2008) FLC 93-357

Brown v Brown (1998) FLC 92-822
Cachia v Hanes (1994) 179 CLR 403

APPLICANT: Ms Stelzer

RESPONDENT: Mr Wallace

FILE NUMBER: SYC 5433 of 2007

DATE DELIVERED: 20 February 2015

PLACE DELIVERED: Hobart

PLACE HEARD: Hobart

JUDGMENT OF: Benjamin J

HEARING DATE: By way of written submissions made between 26 September 2014 and 3 December 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Deborah Searle

SOLICITOR FOR THE APPLICANT: Searle & Associates

COUNSEL FOR THE RESPONDENT: Mr Trevor Hall

SOLICITOR FOR THE RESPONDENT: Hall Partners

Orders

1. Pursuant to leave granted 18 March 2011 the time for the wife to apply for costs in the substantive proceedings (order made 31 January 2011) is extended so as to enable the determination of the wife’s costs application filed on or about 2 September 2014.

2. Mr Wallace (“the husband”) pay the legal costs and disbursements of Ms Stelzer (“the wife”).

3. Such costs to be assessed and or determined:-

   (a)On a party/party basis;

   (b)To apply in respect of costs as and from 4 January 2010;

   (c)To include the costs of senior counsel, junior counsel (at times) and instructing solicitor (including solicitor instructing during the hearing of the substantive proceedings); and

   (d)Such costs to include the cost of the costs application incorporating preparation of submissions and responses by senior counsel for the wife.

THE COURT NOTES

1. Submissions by the wife in relation to the costs application were made by senior counsel.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage senior counsel and counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Stelzer & Wallace (Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT HOBART

FILE NUMBER: SYC 5433 of 2007

Ms Stelzer

Applicant

And

Mr Wallace

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. Mr Wallace (‘the husband’) and Ms Stelzer (‘the wife’) were engaged in proceedings in the Family Court relating to a financial agreement and property following the breakdown of their marriage.

2. Those proceedings were heard by me and final orders were made on 11 February 2011 in the following terms:-

   1.      A DECLARATION that the financial agreement dated 29 September 2005 between [the husband] and [the wife] is an enforceable financial agreement under the provisions of the Family Law Act 1975 (Cth).

   2.      A CONSEQUENTIAL ORDER that within twenty eight (28) days from the date of this order, the husband pay to the wife the amount of $3,150,000 plus interest calculated as follows:-

   (i) From 13 July 2007 to 1 March 2010 at a rate of 6.5 per cent per annum.

   (ii) From 2 March 2010 to the date of payment interest in accordance with the rate determined pursuant to the Family Law Rules 2004 (Cth).

   (iii) Interest is to be calculated on $3,250,000 until the date the husband paid $100,000 to the wife (in two sums each of $50,000), including part paid pursuant to orders made by this Court in about 23 August 2010 and thereafter interest on the sum of $3,150,000 until paid.

   3.      Leave is given for the parties or either of them to apply in respect of order 2 in terms of the date of payment of the two amounts of $50,000. Such leave to apply for twenty (28) days from the date of this order.

   4.      Upon the husband complying with orders 1 and 2 above, the wife shall forthwith resign from her position as trustee and in respect of any office she holds in [S] Pty Ltd, in regard to the property at [W] and the wife shall, as soon as is practicable after that time, sign all documents and do all things to assign any interest she has in that property to the husband or his nominee. The husband to be liable for and shall indemnify the wife against any taxes and/or duties arising from this order.

   …

3. Following that determination the husband lodged an appeal with the Full Court of the Family Court, the substantive grounds of which appeal were dismissed by the Full Court in December 2013, when it made orders that:-

   (1)    The appeal is allowed in part.

   (2)    Paragraph 2(i) of the orders made on 11 February 2011 be set aside.

   (3)    In paragraph 2(ii) of the orders made on 11 February 2011 the date “4 January 2010” be substituted for the date “2 March 2010”.

   (4)    The appeal be otherwise dismissed.

   (5)    The husband pay the costs of the wife of and incidental to the appeal with such costs to be assessed in default of agreement.

4. The husband sought leave to appeal to the High Court and that application was dismissed.

5. The initial orders provided for submissions as to costs, however with the appeal the parties sought and I made an order on 18 March 2011 which included:-

   6.     Costs of both parties in respect of the application are reserved.

   7.     Leave is given to the parties to have the issue of costs and submissions determined by me, within twenty eight (28) days after the determination of the husband’s appeal against the orders made 11 February 2011 or such other time as the court may order.

6. In September 2014 the wife filed an application seeking costs orders and (implicitly) an extension of time pursuant to the orders made on 18 March 2011.

ISSUES

1. The issues for me to determine are in a number of areas, namely:-

   (a)Whether the wife’s application for costs order is competent with the submission on behalf of the husband that the wife cannot proceed with her costs application;

   (b)If not, having regard to the normal principals, should the husband pay the wife’s costs of all or part of the proceedings; and

   (c)If so, whether all or part of those costs ought to be on a party/party basis, indemnity basis, or some other basis.

2. In terms of the consideration of costs I considered a number of offers raised by the wife, including one in 2008, one in early 2010, and two subsequent offers.

BACKGROUND

1. In my original reasons I set out some background in paragraphs 21 to 33, which I now repeat:-

   21.At the date of hearing the husband was aged 55 (almost 56) and the wife aged 42.

   22.The husband had been previously married and separated at about the time he commenced a relationship with the wife.  He has three children of his first marriage, C aged 23, L aged 21 and G aged 16 (at the commencement of the hearing).

   23.The husband separated from his first wife in about May/June 1998.  He says that in May 1998 he met his second wife at an [adult entertainment venue] in Sydney and where he says the wife was working as a dancer.  The wife took no issue with that assertion in her affidavit filed 19 August 2010, although she was somewhat anxious with that job description during her evidence.  In any event that meeting was such that, for these parties, their stars aligned.  They travelled overseas and soon commenced living together.  Unhappily, after some years together that celestial alignment dissipated as did the parties’ marriage and their relationship. 

   24.For the husband, the basis of the commencement of the relationship and to some extent even their intimate and personal interactions were put in evidence and in issue.  He alleged that the wife fraudulently induced him to execute a financial agreement and/or that her conduct at the relevant time [being the time just prior to entering into the Agreement] amounted to unconscionable behaviour such as would enliven the Court’s jurisdiction to set the Agreement aside.  The husband said that the wife made a series of express and implied promises so as to induce him to enter into the Agreement.  His case was flavoured by implicit and explicit criticism of the wife.  At many levels this criticism seemed to endeavour to demean her and their relationship bearing in mind the wife’s initial occupation and the circumstances of their meeting.  This approach and that of the allegation of the fraud and/or unconscionable conduct can be seen as an allegory of the ‘tantalising’ description of the occupation alluded to by Lord Justice Ward in Sutton v Hutchinson [2005] EWCA Civ 1773 (9 November 2005).[1]

   25.The husband deposes in his financial statement that he pays $498 per week for the support of his children [C] and [G]. 

   26.The husband and his first wife commenced property proceedings in the Family Court in about 2002.  Consent orders were made in July 2004 and the husband’s marriage to his first wife was dissolved in August 2004.

   27.In June and/or July 2005 these parties lived primarily in separate homes for three or four weeks.  The extent and nature of that alleged separation is a matter for a finding of fact later in these reasons.

   28.On 29 September 2005 the parties entered into the Agreement and each of the parties asserted, in that Agreement, that they were independently advised.  The parties married [in] October 2005.  I am satisfied that each relied upon the others assertion in that regard.

   29.In April 2007 the parties had been having difficulties in their relationship and the husband sent a letter to the wife.  In May 2007 the wife moved out of the matrimonial home and the parties separated at about that time.

   30.These proceedings have had a long and difficult path to hearing.  The proceedings had been previously listed for hearing before or in the dockets of two Family Court Justices but for differing reasons those Judicial Officers decided to recuse themselves from the final hearing.

   31.The proceedings were placed into my docket in late 2009 and in early 2010 the nature of the proceedings changed as a consequence of commencement of the relevant provisions of the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 which was a legislative amendment to deal with an approach adopted by the Full Court in Black v Black (2008) FLC 93-357.

   32.At the commencement of the hearing the wife sought an order for costs to assist her in relation to the proceedings.  She relied upon an affidavit of her instructing solicitor, Deborah Searle.  I raised with the parties, at that time, my concern in respect of the matter if Ms Searle’s evidence was contentious as I had some years ago served with her as a counsellor on the Law Society of New South Wales.  If her evidence was contentious that may have been a problem.  Senior counsel for both parties indicated that there was no issue in respect of Ms Searle’s evidence for the purpose of the costs argument and as such I determined that issue.

   33.The consequence of that determination was that the wife received a costs order of $50,000.  The husband had previously paid to the wife the sum of $50,000.  I have credited those sums against the amount that the husband is ultimately liable to pay.  These sums amounted to the wife having access to matrimonial funds to which she was otherwise entitled[2].  I gave reasons in respect of that order on 23 August 2010.

   [1] Lord Justice Ward said of this occupation ‘[the] appellant is a … dancer. I would not, of course, begin to know exactly what that involves. One can guess at it, but could not faithfully describe it. “The Judge tantalisingly tells us, at paragraph 21 of his judgment that the purpose is "to tease but not to satisfy".

   [2] Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166.

1. In addition there are some other relevant dates and factors to which have had regard, namely:-

   25 September 2005          -   the parties entered into a financial agreement which agreement has been determined as a binding agreement within the meaning of the relevant parts of the Family Law Act 1975 (Cth).

   October 2005  -   the parties married.

   May 2007-   the parties separated.

   August 2007  -   these proceedings were commenced by the husband

   24 January 2008                -   the Full Court of the Family Court delivered reasons in Black v Black (2008) FLC 93-357, which held that an order for a financial agreement to be binding, strict requirements with the requirements of s 90G of the Act is necessary.

   5 January 2010                  -   the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth) (‘the 2009 amendments’) commenced operation. This Act responded to Black v Black (supra) both prospectively and retrospectively changed the requirements to make the financial agreement binding. This was achieved through changes to s 90G of the Act and the introduction of s 90G(1)(A).

   August & October 2010    -   the first instance proceedings were heard before me over seven hearing days.

   31 January 2011                -   reasons were published and were made in February 2011.

   18 March 2011                  -   I made orders vacating the directions regarding costs submissions and further orders providing:-

   5.Leave be given to the parties to apply to have the matter relisted before me on the giving of seven days notice.

   6.The costs of both parties in respect of the application is reserved.

   7.Leave be given to the parties to have the issue of costs and submissions determined by me within twenty eight days after determination of the husband’s appeal against the orders made 11 February 2011, or such other time as the court may order.

   February 2013                   -   hearing of appeal by the Full Court.

   11 December 2013           -   appeal against the substantive orders was dismissed except for orders 2.(i) and 2.(ii) which provided:-

   2.(i)From 13 July 2007 to 1 March 2010 at a rate of 6.5 per cent per annum. 

   2.(ii)From 2 March 2010 to the date of payment interest in accordance with the rate determined pursuant to the Family Law Rules 2004 (Cth).

   2.(ii) was amended to operate from 4 January 2010 rather than 2 March 2010.

   Order 2.(i) related to interest on the amount due to the wife pursuant to the agreement for the period 13 July 2007 to 1 March 2010.

   20 June 2014  -   the High Court of Australia dismissed the husband’s application for leave to appeal the orders of the Full Court and ordered that the husband pay the wife’s costs of that appeal.

   2 September 2014            -   the wife made an application for costs of the first instance proceedings.

2. The parties made written submissions in relation to the question of costs.

3. The wife’s written submissions were dated 26 September 2014 and were prepared by Mr Robert Lethbridge Senior Counsel and Lorna Sproston of counsel.  In that application the wife noted the issues being:-

   (a)Should an order for costs be made in favour of the wife;

   (b)If an order for costs is made should it be on a party/party basis or some other basis; and

   (c)If an order for costs is made on behalf of the wife should it be from the commencement of the proceedings or some other date.

4. The wife contended that costs should be awarded on an indemnity basis and should be from the commencement of the proceedings, and in the alternative if there is a particular date it should be 4 January 2010 when the 2009 amendments came into force.

5. In terms of the husband’s submissions in reply they were prepared by Mr Washington of counsel and dated 7 November 2014.

6. The contentions on behalf of the husband were: firstly, that the wife needed leave to make the costs application and without leave the application for costs was incompetent; and secondly, if the Court determined to either grant leave or otherwise proceed with the question of costs then there ought not be a costs order.  If costs orders were made it ought not to be on an indemnity basis.

7. By submission in reply dated 28 November 2014 the wife responded to the submissions of the husband and also sought to rely upon an affidavit of Deborah Searle, the wife’s solicitor, to be sworn 1 December 2014.

8. The husband sought leave to make further submissions in response to the affidavit of Deborah Searle. Leave was granted, submissions were then filed 3 December 2014.

9. The affidavit of Deborah Searle was dated 1 December 2014.  In that affidavit Ms Searle, the wife’s solicitor, deposed as to the following:-

   (a)By letter dated 14 October 2008 from HWL Ebsworth (former solicitors for the wife) making a Calderbank offer to settle the claim for $2.76 million inclusive of costs.

   (b)A letter from HWL Ebsworth dated 21 January 2010 asking the husband to ‘abandon that part of his application in so far as it is based on non-compliance of s 90G’ ….

   (c)There was an email of 19 August 2010 from Ms Searle stating:-

   …On the basis only that the husband is successful in his application to have the Binding Financial Agreement set aside, the wife will accept, pursuant to her s 79 claim, the sum of $1.5 million in full settlement of this claim.

   (d)Annexed was an email dated 15 October 2010 from Ms Searle containing an offer from the wife to settle her claim for $3.15 million dollars with no order for costs, no order for interest and transfer to the husband of the home unit at W.

THE QUESTION OF LEAVE

1. In the response to the wife’s submissions counsel for the husband contended that as leave was not sought pursuant to my order of 18 March 2011 the wife’s costs application was incompetent and the wife could not proceed.

2. As was rightly contended by the wife, and perhaps conceded by the husband, it was not an application for leave but there needed to be an application for an extension of time.  I am satisfied that such application was implicit in the wife’s application for costs.

3. Given the history of these proceedings, I am satisfied that the time commenced from the date of the dismissal of the husband’s application for special leave to the High Court on 20 June 2014.

4. In her affidavit sworn 27 August 2014[3] it was clear that the wife was aware of the orders made by the Court and the wife’s solicitors on 17 July 2014 sought to enter into agreed arrangements with regard to costs.

   [3] At paragraph 8.

5. I do not accept the characterisation of that claim of being in breach of the relevant practice rules.  It was simply a successful applicant indicating to an unsuccessful respondent that they were seeking costs and the amount of costs that they were seeking.

6. Clearly that request for accommodation was not met favourably by the husband and accordingly the application was filed on behalf of the wife in September 2014.

7. I am satisfied that there is a satisfactory reason for not lodging the application within time and that the delay was, in all the circumstances of these proceedings which had been running for almost seven years, not unreasonable and that in the circumstances I am satisfied that the time ought to be extended to enable the determination of the costs application.

THE LAW

1. There are three areas in which I need to address the law.  The first in relation to whether a costs order ought to be made at all.  The second in relation to whether it ought to be determined on an indemnity costs basis and the third should be as to the date of commencement of that cost order.

2. The power to make costs orders are set out in s 117 of the Family Law Act 1975 (Cth) (‘the Act’) which provides:-

   (1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

   (2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

   (2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

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

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)such other matters as the court considers relevant.

1. In Penfold v Penfold (1980) FLC 90-800 the majority of the High Court expressed the general rule that s 117(1) is not paramount to s 117(2) of the Act. There is no guidance in the legislation between the two sub sections nor any additional special onus on the applicant for an order as to costs. A court must make a finding that there are circumstances justifying the making of a costs order before proceeding to make the orders.

2. There is no threshold in the determination; however the subsection requires that I identify the circumstances which enliven the power under ss 117(2). In this case those factors equate to the matters to which I have referred under 117(2A) of the Act, and I am satisfied that there are circumstance which may give rise to a costs order.

3. The next step is to consider the matters set out in s 117(2A). In Brown v Brown (1998) FLC 92-822 Kay J said when determining whether a costs order ought to be made:-

   15.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.

4. There is nowhere in s 117(2A) that says one factor is providing any hierarchy in relation to the factors. One factor may be enough. The Court has a wide discretion.

5. I considered the difference between the various types of unquantified costs orders available under the Act. There are various types of costs orders, but they generally fall into three categories:-[4]

   a)Party and party costs - which are calculated having regard to the schedule of costs under the Family Law Rules 2004 (Cth);

   b)Lawyer and client costs – these are essentially indemnity costs, with the onus upon the costs applicant to satisfy the taxing authority that such costs are on balance fair and reasonable; and

   c)Indemnity costs[5] - these are essentially lawyer and client costs, with the onus upon the costs respondent to satisfy the taxing authority that such costs are on balance not fair and reasonable, that is the reversal of the onus of proof. 

   [4] Rule 19.18(1)(b).

   [5] See also Rule 19.08(3).

6. Costs orders are restorative and not punitive, and costs cannot exceed the amount actually incurred.  They are an indemnity or partial indemnity, see Cachia v Hanes (1994) 179 CLR 403, where the plurality of the Court, comprising Mason CJ, Brennan, Deane, Dawson and McHugh JJ observed:-[6]

   Whilst the restricted basis upon which party and party costs are awarded may be debated as a matter of policy, it is to be borne in mind that party and party costs have never been regarded as a total indemnity to a successful litigant for costs incurred, let alone total recompense for work done and time lost. Putting to one side the question posed by the relatively rare exception of a solicitor acting in person, there is no inequality involved: all litigants are treated in the same manner. And if only litigants in person were recompensed for lost time and trouble, there would be real inequality between litigants in person and litigants who were represented, many of whom would have suffered considerable loss of time and trouble in addition to incurring professional costs. The partial indemnity which the law allows represents a compromise between the absence of any provision for costs (which prevails as a matter of policy in some jurisdictions) and full recompense. In these days of burgeoning costs, the risk of which is a real disincentive to litigation, the proper compromise is a matter of both difficulty and concern.

   [6] At pages 414 and 415.

1. In determining the relative submissions under s 117A of the Act, I have considered the relevant factors.

2. In terms of s 117(2A):-

Section 117(2A)(a) the financial circumstances of each of the parties to the proceedings;

1. In this case the wife received or is entitled to receive from the husband $3,150,000 plus interest.  The wife has incurred costs of about $800,000 although the amount of those costs payable by the wife given the costs orders pursuant to the orders of the Full Court and the High Court and whether any or such costs are paid by or on behalf of Law Cover was not clear to me.  In any event the costs incurred in the appeal processes were considered by the Full Court and the High Court, costs orders having been made.

2. The husband had assets totalling about sixteen and a half million dollars at the time of the hearing but this could be less the amount payable to the wife.

3. The wife argues that there is a significant disparity in the financial circumstances of the parties.  However, this ought to be seen in the circumstances that the parties to these proceedings are ‘amply provided for and in far better financial circumstances than most people in the community would ever hope to find themselves’.[7]

   [7] Husband’s written submissions in response page 3 paragraph 10.

4. I have considered the effect of the orders in the financial circumstances, and as I understand it, of these parties.  I am not satisfied that this financial disparity, i.e. between wealthy and very wealthy, is a significant issue in terms of the costs between these parties.

Section 117(2A)(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;

1. There is no evidence that either party was in receipt of legal aid or assisted by legal aid.

Section 117 (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;

1. The thrust of the wife’s case was that the husband knew or ought to have known that the agreement was binding and ought to have simply complied with it.  The husband’s case at final hearing was that the agreement was fatally flawed.

2. Between May 2007 and 4 January 2010 the law relating to binding financial agreements was in something of a flux. 

3. The husband had entered into that agreement with his eyes open, and it was his initial determination to make the agreement and require the wife to sign the same.

4. He was not improperly induced to become part of this agreement.  However, during the period from the determination of Black v Black (supra) in early 2008 until the commencement of the 2009 amendments, it could have been determined that the agreement was not binding within the meaning of the Act.

5. Accordingly, over that period the husband had a reasonable and reasoned basis upon which to challenge efficacy the financial agreement.

6. Once the amendment had become law it was, in my view, clear from the terms of the agreement as to what was intended.  That was my view at the time of the first instance determination, and that view has since been affirmed by the subsequent approach of the Full Court of the Family Court and of the High Court in dismissing the special leave application.

7. The husband pursued the proceedings in relation to setting aside the agreement on various factors, including his assertions as to the construction of the 2009 amendments, his assertion of fraud, duress, coercion and unconscionable conduct and his claim that the legislation did not have constitutional validity.

8. I generally accept the submissions of senior counsel for the wife in relation to this aspect, at least as and from 4 January 2010.

9. I reject the submission made by counsel for the husband that some credit should be given to him in that the wife required an order of the Court to uphold the agreement.  It ought to have been clear to the husband, from January 2010, that the technical deficiencies that may have been available to him prior to that time had been cured by the legislative change.

10. Two parts of the orders made by me were changed.  One was a minor change in relation to the commencement date of interest.  The other was in relation to interest on the agreement from shortly after separation at a reduced percentage.  That order was dismissed.

11. They are of a minor nature given the substantive issues and the substantive disputes that were to be determined between the parties.

Section 117(2A)(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

1. There were no submissions in relation to the parties’ failure to comply with previous orders of the Court.

Section 117(2A)(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;

1. In relation to the question of whether the financial agreement was binding under the Act the husband was entirely unsuccessful. He was successful in terms of the relatively minor issues relating to interest from shortly after separation.

2. However, I repeat the comments I have made regarding the husband and the state of flux of the law until January 2010.

Section 117(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; and

1. There were a number of offers made and it was raised with me as to whether they ought to be treated as ‘Calderbank’[8]offers.

   [8] Calderbank v Calderbank [1975] 3AllER 333.

2. In her first submissions the wife referred to her offer of settlement made 19 August 2010.  This was a written offer to settle the property proceedings in the sum of $1.5 million dollars.  However, this offer was predicated upon the husband being successful in his application to set aside the financial agreement.

3. Accordingly I am not satisfied that it was capable of being accepted by the husband in the way in which it was contained.

4. The wife made an offer of settlement in the sum of $3.15 million dollars (less $100,000 already paid to her).  This was made after the conclusion of evidence but before delivery of reasons.

5. Given the late timing of this offer of settlement and that generally such offers only have a prospective effect not a retrospective effect, virtually all of the significant costs, apart from the costs of taking judgment and any costs application, would have been incurred prior to the date the offer was made.

6. It may have had some impact in relation to costs applications in the Full Court and in the High Court, however, those are not matters for me to consider or determine.

7. In the reply to the husband’s response the wife raised two offers that were made by her previous solicitors, HWL Ebsworth.  The first of these was by letter dated 14 October 2008 where the wife said she was prepared to settle the matter for $2.6 million dollars inclusive of costs.  That offer was open for fourteen days and was not conditional upon the husband being successful in his application to set aside the financial agreement.

8. This offer was in the context of being subsequent to the Full Court decision of Black and Black (supra) and prior to any legislative interest in amending that area of law.  It was open for a period of fourteen days at a time when the financial agreement may well have been able to be set aside given the strict approach adopted by the Full Court in Black and Black (supra).

9. The final letter was one from HWL Ebsworth dated 21 January 2010 which, presumably in the light of the 2009 Amendment Act, invited the husband to discontinue his application in so far as it was based on non-compliance with s 90G of the Act.

10. Senior counsel for the wife submitted that the Court should have significant regard to both of the offers including this later offer. 

11. Counsel for the husband said the offer was not described as being without prejudice, does not make any compromise of the wife’s claim but seeks capitulation in relation to that aspect, and indicates the wife will limit her costs, and asserts that it is ineffective as a genuine attempt at compromise to the entitlement that it calls upon. I disagree with this approach, it was an offer which could have reduced significant time in the hearing and avoided the substantial basis of the husband’s contentions.

12. If the husband had withdrawn his pursuit of relief pursuant to s 90G then the hearing would have been substantially reduced and the issues narrowed.

13. I have had some, but not significant, regard to this offer.

Section 117(2A) (g) such other matters as the court considers relevant

1. I have considered all of the factors and facts set out separately and as a whole.

CONCLUSION AS TO COSTS

1. In family law proceedings there is an imperative that costs ought not be generally made. 

2. However, as and from 4 January 2010 it ought to have been clear to the husband, and those who were advising him, that his approach in relation to the financial agreement was no longer available.  The parliament had taken steps to close the door and it was open for the husband to, at that stage, bring the matter to a conclusion.

3. I do not intend to make any award of costs prior to 4 October 2010.  However, I considered, given all of the circumstances, ordering the husband to pay the wife’s costs and disbursements of the first instance proceedings as and from that date.

INDEMNITY COSTS

1. The principles to be considered when determining indemnity costs were summarised in Muldoon & Carylye [2012] FLC 93-513 where the Full Court said:-

   115.It is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated that there are exceptional circumstances, such that the usual order for party-party costs should be departed from (Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225; Kohan and Kohan (1993) FLC 92-340; Munday v Bowman (1997) FLC 92-784; Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; Limousin & Limousin(Costs) (2007) 38 Fam LR 478; Fennessy &Gregorian (2009) FLC 93-399; D & D (Costs) (No 2) (2010) FLC 93-435, Stephens v Stephensand Anor (2010) 44 Fam LR 117). As was said by the Full Court in Stephens (at [67]):

   An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages …

   116.In support of the application for indemnity costs, counsel pointed only to the fact that it was always apparent there was no merit in the appeal. This is in our view not an exceptional circumstance as would justify an order for indemnity costs.

2. In Prantage and Prantage [2013] FLC 930544 the Full Court confirmed that there needed to be exceptional circumstances to justify an order for costs.

3. It is necessary for the Court to have the terms of the costs agreement to assess the difference between party/party and indemnity costs.  Rule 19.08 provides:-

   19.08(1) A party may apply for an order that another person pay costs.

   19.08(2)An application for costs may be made:

   (a)at any stage during a case; or

   (b)by filing an Application in a Case within 28 days after the final order is made.

   19.03(3) A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.

   Note 1 The Court may make an order for costs on its own initiative (see rule 1.10).

   Note 2 A party may apply for an order for costs within 28 days after the filing of a notice of discontinuance by the other party (see subrule 10.11(4)).

   Note 3 A party may apply for an extension of time to make an application (see rule 1.14).

   Note 4 For costs orders related to appeals, see Part 22.10.

4. Given the factors to which I have referred to earlier, I am not satisfied that there are the exceptional circumstances as would base an order for indemnity costs.  Accordingly, I will not do so.

5. I considered whether there ought to be an order for practitioner/client costs which would have been in the form of greater indemnity for the wife.  However, whilst I am satisfied a costs order ought to be made, I am not satisfied that it ought to be other than that provided within the context of party/party costs under the rules.

6. I will however ensure in the orders that the costs of senior counsel and junior counsel for the respondent, assessed or agreed on a party/party basis, are included and it is also clear given the complexity of the nature of the matter that the costs of the solicitor instructing counsel should be included in that party/party assessment.

7. Similarly given the complexity of the questions of constitutional law, the interpretation of the amendments and the various other equitable aspects as to the husband’s claim, there ought to be allowed reasonable preparation time for counsel and senior counsel and for their solicitor involved, including any advices on evidence and the law for the purpose of the proceedings.

8. Given all of those circumstances and submissions I am satisfied that there ought to be a party/party costs order as and from 4 January 2010.

9. In addition there ought to be an order that the husband pay the wife’s party/party costs in relation to this costs application.

I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 20 February 2015.

Associate      :

Date               : 20 February 2015