Summerfield and Summerfield
[2007] FamCA 804
•9 August 2007
FAMILY COURT OF AUSTRALIA
| SUMMERFIELD & SUMMERFIELD | [2007] FamCA 804 |
| FAMILY LAW - COSTS - Offer of settlement FAMILY LAW - COSTS - Between parties |
| Family Law Act 1975 (Cth) |
| Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another (2005) 33 Fam LR 123 Penfold v Penfold (1980) 144 CLR 311 Jensen v Jensen (1982) FLC 91-263 McAlpin v McAlpin (1993) FLC 92-411 Brown v Brown (1998) FLC 92-822 |
| APPLICANT: | Mr Summerfield |
| RESPONDENT: | Mrs Summerfield |
| FILE NUMBER: | SYF | 3067 | of | 2003 |
| DATE DELIVERED: | 9 August 2007 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | O'Ryan J |
| HEARING DATE: | 3 August 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lloyd |
| SOLICITOR FOR THE APPLICANT: | Foulsham & Geddes |
| COUNSEL FOR THE RESPONDENT: | Mr Hodgson |
Orders
The Wife pay a portion of the Husband’s costs of and incidental to the proceedings determined by final orders made on 23 November 2006.
In compliance with Order 1 hereof the Wife pay to the Husband by 4.00 pm on 9 October 2007 the sum of $100,000.
The Response filed on behalf of the Wife on 18 January 2007 be dismissed.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice O’Ryan delivered this day will for all publication and reporting purposes be referred to as Summerfield & Summerfield
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 3067 of 2003
| Mr Summerfield |
Applicant
And
| Mrs Summerfield |
Respondent
REASONS FOR JUDGMENT
Proceedings
Before me for hearing are applications for costs of property settlement proceedings determined by final orders made on 23 November 2006. On 7 December 2006 an application was filed by Mr Summerfield who I shall refer to as the Husband and on 18 January 2007 a response was filed by Mrs Summerfield who I shall refer to as the Wife.
The Husband seeks the following:
1. Pursuant to Part 19.3 Rule 19.08(1) of the Family Law Rules 2004, that the Wife pay the Husband’s costs of the Husband’s Application for final property settlement orders.
2. Pursuant to Part 19.5 Rule 19.9(1)(a) and (c) of the Family Law Rules 2004 that Rule 19.18 of the Family Law Rules 2004 does not apply and that the Husband is entitled to costs of $552,424.26 to be calculated as follows:
(a)two-thirds of the Husband’s lawyer and client professional costs inclusive of GST being the sum of $245,048.10 from 30 May 2003 to the date of the Order;
(b)the whole of the Husband’s lawyer and client disbursements of $16,017.41 inclusive of GST from 30 May 2003 to the date of the Order;
(c)the whole of the Husband’s expert’s fees of $119,451.00 inclusive of interest and GST from 30 May 2003 to the date of the Order;
(d)the whole of the Husband’s liability for transcript fees in the sum of $8,051.75 inclusive of GST; and
(e)the whole of the Husband’s counsels’ fees of $163,856.00 inclusive of GST from 30 May 2003 to the date of the Order.
The Wife seeks the following:
1. That pursuant to the provisions of Part 19.. Rule 19.08(1) of the Family Law Rules 2004, the Husband pay the Wife’s costs of and incidental to the proceedings for the property settlement.
2. That the Husband pay the Wife’s costs of an incidental to this Application.
The Husband has incurred costs of $795,399.31 being solicitors’ costs of $383,589.56, counsel’s fees of $163,856, transcripts costs of $8,051.75 and expert’s fees of $119,451. He seeks payment of an amount of $552,424.26.
The Wife gave no evidence about the quantum of her costs nor specified any amount she sought. However, I assume that the Wife’s costs are also very significant.
The property settlement proceedings were commenced by application filed on behalf of the Husband on 7 April 2003. The hearing took place over a period of approximately 13 days between 15 August 2005 and 3 July 2006. The proceedings were determined by final orders I made on 23 November 2006.
In support of the current application the Husband swore affidavits on 6 December 2006 and 2 July 2007. So far as the Wife is concerned she relied on an affidavit sworn by her solicitor Edward Sunna on 17 January 2007.
Relevant Principles
Section 117(1) Family Law Act 1975 (Cth) (“the Act”) provides that subject to s 117(2) and s 117AA and s 118, each party to proceedings under the Act shall bear his or her own costs.
Section 117(2) provides that if, in proceedings under the Act, the Court is of opinion that there are circumstances that justify it in doing so, the Court may, subject to sub secs (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs whether by way of interlocutory order or otherwise, as the Court considers just.
Section 117(2A) provides that in considering what order (if any) should be made under s 117(2), the Court shall have regard to the matters set out in paras (a) to (g).
In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another (2005) 33 Fam LR 123 the Full Court said at 130 :
The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subsection (2A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subsection (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
Section 117AA deals with costs in proceedings relating to overseas enforcement and international Conventions and s 118 deals with frivolous or vexatious proceedings.
The discretion in respect of costs is a very broad one: Penfold v Penfold (1980) 144 CLR 311; Jensen v Jensen (1982) FLC 91-263; McAlpin v McAlpin (1993) FLC 92-411; Brown vBrown (1998) FLC 92-822.
Background
On 23 November 2006 I made the following orders:
1. By 4.00 pm on 16 January 2007 the Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to transfer to the Husband all of her right, title and interest in the property situate at and known as [M] in the State of New South Wales being all of the land contained in Folio Identifier […] subject to the mortgage to ING secured on the title.
2. By 4.00 pm on 16 January 2007 the Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to cause to be paid to the Husband all annual leave and long serve leave entitlements to which the Husband is presently entitled from [D] Pty Ltd, [F] Pty Ltd and/or [S] Pty Ltd such entitlements being approximately $40,553.
3. By 4.00 pm on 16 January 2007 the Wife pay to the Husband, by payment to the trust account of his solicitors, the sum of $393,741.
4. By 4.00 pm on 16 January 2007 the Wife do all acts and things and execute all deeds, documents, instruments and writings and pay all moneys necessary to discharge the parties’ joint indebtedness to the Commonwealth Bank of Australia secured over the property situate at and known as [U] in the State of New South Wales being all of the land contained in Folio Identifier […].
5. By 4.00 pm on 16 January 2007 the Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to transfer to the Husband all of her right, title and interest in the [K] shares.
6. Contemporaneously with the Wife complying with the provisions of pars 1, 2, 3, 4 and 5 above, the Husband do all acts and things and execute all deeds, documents, instruments and writings necessary to transfer to the Wife all of the Husband’s shareholding in [F] Pty Ltd and [S] Pty Ltd, and otherwise assign to the Wife any other interest the Husband might have in the [D] Group of companies including [D] Pty Ltd apart from annual and long service leave entitlements referred to in para 2 hereof.
7. Contemporaneously with the Wife complying with the provisions of pars 1, 2, 3, 4 and 5 above, the Husband do all acts and things and execute all deeds, documents, instruments and writings necessary to transfer to the Wife all of the Husband’s right, title and interest in the property situate at and known as [U], subject to the mortgage secured on the title to the Commonwealth Bank of Australia.
8. Contemporaneously with the Wife complying with the provisions of pars 1, 2, 3, 4 and 5 above, the Husband do all acts and things and execute all deeds, documents, instruments and writings necessary to assign to the Wife the credit loan account(s) of the Husband in [D] Pty Ltd, [F] Pty Ltd and/or [S] Pty Ltd being the sum of $259,318.
9. By 4.00 pm on 16 January 2007 the Husband pay direct to the Wife the sum of $72,547.
10. It be noted that the amount referred to in par 9 hereof may be credited against the amount in par 3 hereof.
11. The Wife do all acts and things and execute all deeds, documents, instruments and writings and pay all moneys necessary to indemnify and keep indemnified the Husband in relation to all claims, actions, suits or demands that may be made against the Husband in relation to or arising out of any loan account which might be standing to the Husband’s debit in [D] Pty Ltd, [F] Pty Ltd and/or [S] Pty Ltd.
12. The Wife do all acts and things and execute all deeds, documents, instruments and writings and pay all moneys necessary to indemnify and keep indemnified the Husband in relation to all claims, actions, suits or demands that may be made against the Husband in relation to or arising out of his having been a director, shareholder and or employee of [D] Pty Ltd, [F] Pty Ltd and or [S] Pty Ltd.
13. Upon compliance by the Wife with pars 1, 2, 3, 4 and 5 above the Husband do all acts and things and execute all deeds, documents, instruments and writings and pay all moneys necessary to indemnify and keep indemnified the Wife in relation to all claims, actions, suits or demands that may be made against the Wife in relation to or arising out of the indebtedness to ING secured over the property situate at and known as [M].
14. The Wife be declared the sole legal and beneficial owner of the proceeds of sale of the property situate at and known as [the Melbourne property] in the State of Victoria being all of the land contained in Certificate of Title Volume […] Folio […] subject to the Wife discharging all existing mortgages over the [Melbourne property] property in the sum of approximately $515,000.
15. The Wife do all acts and things and execute all deeds, documents, instruments and writings necessary to diligently lodge her personal income tax return for the year ended 30 June 2006 and to obtain from the Australian Tax Office an assessment of her liability for tax for the year ended 30 June 2006 and forthwith upon receipt of the assessment provide to the Husband a copy of the assessment together with a copy of the tax return and also a calculation certified by her accountant as to the amount of the assessable tax that was referable to the inclusion in the Wife’s assessable income of the taxable capital gain made from the sale of [the Melbourne property].
16. Within 14 days of receipt by the Husband from the Wife of the documents in par 15 hereof the Husband pay direct to the Wife an amount equal to one half of that portion of the assessable tax of the Wife for the year ended 30 June 2006 that represents the capital gains tax only in relation to the taxable capital gain from the sale of [the Melbourne property].
17. The Husband be declared the sole legal and beneficial owner of [the Brisbane property] in the State of Queensland.
18. In respect of the amount of $914,000 assessed against the Husband by the Australian Taxation Office:
18.1In the event that the Husband’s objection to the Australian Taxation Office against the said assessment for $914,000 is not successful then the Husband and the Wife be jointly liable for and each pay an amount equal to one half of all penalties and interest assessed by the Australian Taxation Office in consequence of the amount of $914,000 not being paid by the due date.
18.2In the event that the Husband’s objection to the Australian Taxation Office against the said assessment for $914,000 is successful and amended assessments are issued against the Husband for income tax, penalties and interest assessed and the total amount of such assessments including penalties and interest is less than $914,000 then the Husband pay to the Wife an amount equal to one half of the difference between $914,000 and the total amended assessments assuming that the quantum of the amended assessments is less than $914,000.
18.3In the event that the Husband’s objection to the Australian Taxation Office against the said assessment for $914,000 is successful and in consequence amended assessments are then issued by the Australian Taxation Office against [D] Pty Ltd , [F] Pty Ltd and/or [S] Pty Ltd for the financial years ended 30 June 1998 to 30 June 2003 inclusive or any one year in that period by reason of the inclusion in the assessable income against [D] Pty Ltd, [F] Pty Ltd and/or [S] Pty Ltd of income that was previously included in the assessable income of the Husband then the Husband pay to each of the said companies one half of the additional amount which is assessed against each of the said companies by reason of the amended assessment.
19. The Husband do all acts and things and execute all deeds, documents, instruments and writings necessary to diligently and expeditiously prosecute with the Australian Taxation Office the objection identified in par 18 hereof.
20. Otherwise than provided for in this Order each of the Husband and the Wife be declared the sole legal and beneficial owner of all other property including superannuation interests in his/her possession, control or ownership as at the date of this Order.
21. Pending the discharge of the parties’ liabilities to the Australian Taxation Office identified in the affidavit of [Mr T], who is an employee of the Australian Taxation Office, sworn on 31 March 2006 the Husband and the Wife each be restrained from encumbering by mortgage, charge or otherwise or assigning, transferring or disposing of or in any way dealing with their assets except for the express purpose of complying with this Order and discharging their respective liabilities to the Australian Taxation Office.
22. Subject to par 18.3 hereof the Wife do all acts and things and execute all deeds, documents, instruments and writings and pay all moneys necessary to indemnify and keep indemnified the Husband in relation to all claims, actions, suits or demands that may be made against the Husband in relation to or arising out of any claim, action, suit or demand that may be made by any person or entity including the Commissioner of Taxation against [D] Pty Ltd, [F] Pty Ltd and/or [S] Pty Ltd.
23. Subject to the terms of this Order as between the parties, the Husband and the Wife each be solely responsible for the payment of all liabilities, which they have personally incurred or which stand in their sole name.
24. Save as this Order provides to the contrary the party receiving property be responsible for registration fees, legal costs and disbursements in relation to effecting the transfer of any property pursuant to the terms of this Order.
25 Liberty be granted to either party and the Australian Taxation Office to apply within 14 days of the date of this Order for the purpose of submissions as to whether or not this Order reflects the findings in the judgment delivered on the day of this Order and any other machinery or implementation aspects of the Order.
26. Within seven days of the date of this Order the solicitors for the Husband serve a sealed copy of this Order on the Commissioner of Taxation.
27. Upon compliance by the Husband with pars 6 and 7 hereof the Wife forthwith vacate the property situate at and known as [M property] and thereafter the Husband be entitled to exclusive use and occupation of the said property.
28. In the event that the Wife fails to pay to the Husband the amount in par 3 hereof by the due date then thereafter the Wife also pay to the Husband interest on the said amount in accordance with the Family Law Rules.
29. Contemporaneously with compliance by the Wife with par 3 hereof the Husband forthwith comply with the undertaking he gave to this Court on 28 June 2006 to pay to National Transcription Services Pty Ltd the cost of providing his solicitors with a copy of the transcript of the hearing before me on 16, 17, 19 and 20 August 2005 and 3, 4, 5, 6, 7 and 10 April 2006.
The Wife has appealed to the Full Court.
In my reasons for judgment I said:
5 This was a very difficult case for reasons that will become apparent. There are a number of areas where I preferred the evidence of one witness over another. However, with the exception of the expert accountants overall I found the evidence of the parties and some witnesses to be unsatisfactory.
As to the assets of the parties I said:
8 At step one of the preferred approach to the determination of an application pursuant to s 79 there is a significant issue as to the extent and value of the net assets of the parties. The Husband contended that the assets have a net value of $8,591,881. The Wife contended that the assets have a net value of $6,554,031.
I made the following findings in relation to the assets of the parties:
Assets $
· M property (h/w) 3,100,000
· U property (h/w) 2,700,000
· Melbourne property (sold) (w) 900,000
· Brisbane property (h) 685,000
· Funds NAB a/c (…) (w) 3,129
· Household contents (w) 30,450
· Jewellery (w) 10,000
· Commonwealth Life Superannuation Master Trust (w) 18,000
· Shareholding - D Pty Ltd (w) 868,359
· Shareholding - F Pty Ltd (h) 18,213
· Shareholding - F Pty Ltd (w) 18,213
· Shareholding - S Pty Ltd (h) 8,060
· Shareholding - S Pty Ltd (w) 8,060
· Credit loan accounts, D Group (h) 259,318
· Annual/long service leave entitlements (w) 86,377
· Annual/long service leave entitlements (h) 40,553
· Funds at Bank (h) 550
· Shares K(h/w) 1,100
· Funds at Commonwealth Bank (w) 2,006
· Monies expended from Hong Kong bank accounts (h) 172,600
· Partial property settlement (h) 250,000
Total 9,179,988
Liabilities
· Mortgage – M property - ING (h/w) 769,000
· Mortgage – U property - CBA (h/w) 1,300,000
· Mortgage – Melbourne property – X -discharged (w) 515,000
· Loan account, D Group (w) 42,857
· Australian Taxation Office (h) 914,000
Total (3,540,857)
Balance $5,639,131
In relation to the matters of contribution I said:
279 In all the circumstances, I am of the view, that the contribution based entitlements of each party, expressed as a percentage of the net assets, should be assessed as to 50 per cent to the Wife and 50 per cent to the Husband.
As to the ‘other factors’ I said:
289 In all the circumstances, I am of the view, that there should be an adjustment of 2.5 per cent or approximately $141,000 of the net assets of the parties to the contribution based entitlement of the Husband. This is mainly to reflect my findings in relation to the unquantified goodwill value of the shares in the [D] Group and also the unexplained debtors. It represents a disparity of entitlement of $281,957 and this adequately reflects the weight I have given to these matters.
As to the effect of the orders I proposed to make I said:
The Wife will receive an entitlement of 47.50 per cent or $2,678,587 which will comprise the following:-
Assets $
· U property 2,700,000
· Melbourne property (sold) 900,000
· Funds NAB a/c (…) 3,129
· Household contents 30,450
· Jewellery 10,000
· Commonwealth Life Superannuation Master Trust 18,000
· Shareholding - D Pty Ltd 868,359
· Shareholding of husband - F Pty Ltd 18,213
· Shareholding - F Pty Ltd 18,213
· Shareholding of husband - S Pty Ltd 8,060
· Shareholding - S Pty Ltd 8,060
· Credit loan accounts of husband, D Group 259,318
· Annual/long service leave entitlements 86,377
· Funds at Commonwealth Bank (w) 2,006
Total 4,930,185
Liabilities
· Mortgage – U property - CBA 1,300,000
· Mortgage – Melbourne property – X -discharged 515,000
· Loan account, D Group 42,857
· Payment to Husband 393,741
Total (2,251,598)
Balance $2,678,587
The Husband will receive an entitlement of 52.50 per cent or $2,960,544 which will comprise the following:-
Assets $
· M property 3,100,000
· Brisbane property 685,000
· Annual/long service leave entitlements 40,553
· Funds at Bank 550
· Shares K 1,100
· Monies expended from Hong Kong bank accounts 172,600
· Partial property settlement 250,000
· Payment by wife 393,741
Total 4,643,544
Liabilities
· Mortgage – M property - ING 769,000
· Australian Taxation Office 914,000
1,683,000
Balance $2,960,544
Relevant matters
I am not going to repeat all of the factual matters relied upon by each party: Penfold v Penfold (supra) at 315-316 per Stephen, Mason, Aickin and Wilson JJ. I have read, and considered, the material to which I was referred and, as with the hearing of the applications for final orders, there was a significant amount of material.
I am required to consider the financial circumstances of each of the parties to the proceedings. Although this matter was not identified in the written submissions of the Wife and she filed no evidence in chief dealing with this matter, the Wife submitted that it is relevant.
What I need to ascertain is a broad overview of the financial circumstances of the parties if I do not already have that broad overview. I do not have to conduct a wholesale examination into every aspect of the parties’ financial circumstances. An inquiry, where the financial circumstances of the parties may be relevant, is an inquiry to enable me to have some concept of the relative financial positions of the parties. It is not a search for minutiae; nor is it to be seen as an appropriate exercise to conduct inconsequential arguments over the value of each party’s assets: Browne v Green (2002) FLC 93-115 at 89,158.
Neither party filed a financial statement in relation to their current financial circumstances. However, I have set out above the effect of the property settlement order. In my judgment I also made the following findings:
281 The Husband is 65 years of age and the Wife is aged 70 years.
282 The Wife is in good health. The Husband has had health problems.
283 Given that the Wife will have the benefit of the [D] Group she has a greater opportunity for employment and a greater income. However, I take into account that she is 70 years of age and this capacity is finite.
284 So far as the Husband is concerned he has some capacity for gainful employment. However, this is not a matter to which I attach any significant weight given his age, state of health, and that, in my opinion, he probably has a very limited capacity for gainful employment except if he were to operate his own business.
285 As a result of my findings as to the contribution based entitlements each party has an entitlement to one half of the ascertained assets.
The Wife however contended that the Husband failed to make a full and frank disclosure of his financial circumstances. I will set out my understanding of the material the Wife relies upon.
In the written submissions of the Wife dated 15 April 2007 it was said that the Wife sought that her application for costs be adjourned to enable her to undertake further enquiries as to whether the Husband had made a full and frank disclosure of his financial circumstances during the hearing. The hearing was adjourned to enable this to happen.
In about June 2004 the Husband gave instructions to an accountant to acquire a shelf company which the Husband wanted to use for future trading when he was able to carry on a business. As a result a company called Q Pty Ltd was acquired. As well, in 2004 in the United States the Husband registered a business name called RF Inc. Then in about March 2007 the Husband registered a company in China.
In an affidavit sworn on 16 April 2007 the Husband said that Q Pty Ltd has never traded; has no assets or liabilities; does not have an ABN and he has never received “notice” from the Australian Securities and Investments Commission.
The Husband said that he has never traded in the United States and nothing has been done with the business name.
The Husband said that the company in China has never traded.
The Husband said that none of the above entities have a bank account or any assets although he hopes to commence business after the proceedings in this Court are completed.
I allowed the Husband to be cross examined and in addition a number of documents were tendered on behalf of the Wife. These documents revealed a number of matters.
There was put into evidence a copy of a “Pay invoice and check Company Statement” dated 30 June 2006 from the Australian Securities and Investments Commission in relation to Q Pty Ltd. It was then put to the Husband that he had received “notice” from the Australian Securities and Investments Commission and that what he said in his affidavit of 16 April 2007 was wrong.
In July 2004 there was incorporated in California a company called RF Inc and the Husband and Ms C are officers of the company. The Husband is entitled to receive 2000 shares upon payment of US$20,000. There was put into evidence three documents relating to this Californian corporation.
In 2004 the Husband and Ms C sought the establishment in Shanghai of a company called V Ltd or Q Ltd or RF Ltd. There was put into evidence copies of e-mails dated 17 July 2004, 1 September 2004 and May 2005.
Notwithstanding cross examination and the tender of the documents, the Husband maintained that as yet nothing has come of the entities and thus they have not traded and have no assets.
Although it is not set out in detail in my judgment the Husband had given evidence to the effect that he had been exploring the prospects of establishing a business and that Ms C was involved. In my judgment I said:
138 On 2 May 2003 the Husband acquired shares in V Pty Ltd. He is the sole director and shareholder. The Company has not commenced to trade and has not earned any income. It has no stock however, it does have a bank account with the National Australia Bank. The Husband deposited funds which he had withdrawn from the bank accounts in Hong Kong to the credit of this bank account. He also deposited amounts he received when he surrendered certain superannuation entitlements.
I also referred to the trips that the Husband and Ms C had made overseas.
I am not satisfied on the evidence before me that the Husband has failed to make a full and frank disclosure of his financial circumstances either at the hearing of the property settlement applications or in the current proceedings. There are a number of other issues that arise, such as when, where and how the Wife obtained the documents tendered however, in my view those issues are not relevant to what I have to decide in the current proceedings. Counsel for the Wife foreshadowed an application pursuant to s 79A of the Act.
I am required to consider 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. This matter is not relevant.
I am required to consider the conduct of the parties 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. No submissions were made in relation to this matter. However, I am of the view that this matter is relevant.
I am required to consider whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court. No submissions were made in relation to this matter.
I am required to consider whether any party to the proceedings has been wholly unsuccessful in the proceedings. No submissions were made in relation to this matter. However, I am of the view that this matter is relevant.
I am required to consider 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. This was a matter that both parties relied upon.
There are at least two means that parties may adopt to make an offer to settle. One is pursuant to the Rules of Court: Pt 10.1, Family Law Rules. Part 10.06 of the Family Law Rules provides that an offer to settle “must” be made in a property case. The other is to make an informal offer. The words “or otherwise” appear in s 117(2A)(f) and thus an offer to settle that is not made in accordance with the Rules of Court may be taken into account. At common law the informal offer was usually put in a document headed “without prejudice”: Calderbank v Calderbank [1976] Fam 93 at 106; Cutts v Head (1984) Ch 290; Marks v GIO Australia Holdings Ltd (1996) 137 ALR 579. A letter written by, or on behalf of one party to the other, which may be endorsed “without prejudice except as to costs” offering to settle the litigation for a specified sum exclusive of costs, which has not been accepted by the other party, is relevant to the order for costs to be made where the judgment entered is more favourable to the party making the offer than the settlement offered if the Court is satisfied that the offer ought to have been accepted by the party to whom the offer was made. In matrimonial causes it is not necessary for the letter of offer to be expressed to be “without prejudice”: Rogers v Rogers (1964) 114 CLR 608. However, in my view, in matrimonial causes notice has to be given to the party to whom the offer was made that the letter of offer may be used in subsequent costs proceedings. In any event, s 131 of the Evidence Act 1995 (Cth) now prohibits evidence being adduced of the content of communications made in an attempt to settle a civil dispute unless an exception in subs (2) applies. Section 131 is regarded as a statutory code dealing with communications in connection with an attempt to negotiate a settlement of a dispute and there is no room for the common law to apply: Bruinsma v Menczer (1995) 40 NSWLR 716 at 719 per Santow J. One of the exceptions is s 131(2)(h) which allows documents and communications, otherwise within the prohibition in s 131(1), relevant to the issue of costs to be admitted into evidence on that issue whether or not the communication has the Calderbank reservation. In the result, it is not necessary for me to enter into any consideration of the distinction, if any, between the offer procedure under the Rules of Court and an informal offer or for that matter the utility or purpose of Pt 10 except perhaps r 10.06: Messiter v Hutchinson (1987) 10 NSWLR 525 per Rogers J at 528 and Pennisi v Pennisi (1997) FLC 92-774.
As to the procedure under the Rules of Court, s 117C(2) provides that if a party to proceedings to which the section applies makes an offer to the other party to the proceedings to settle the proceedings, and the offer is made in accordance with any applicable Rules of Court, the fact that the offer has been made, or the terms of the offer, must not be disclosed to the Court in which the proceedings are being heard except for the purposes of the consideration by the Court of whether it should make an order as to costs under s 117(2) and the terms of any such order. Section 117C(3) provides that a judge of the Court is not disqualified from sitting in the proceedings only because the fact that an offer has been made was, contrary to s 117C(2), disclosed to the Court.
The relevance of an offer to settle has been considered by the Full Court in a number of cases: Murray v Murray (1990) FLC 92-173; Harris v Harris (1991) FLC 92-254; Robinson v Higginbotham (1991) FLC 92-209; Pennisi v Pennisi (1997) FLC 92-774 and Johnston v Johnston (2004) FLC 93-189.
In Robinson v Higginbotham (1991) FLC 92-209 at 78,417 Nygh J said “…[i]t is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a situation whereby he or she can wear out the other by simple attrition…”.: See also Hillier v Sheather (1995) 36 NSWLR 414 per Kirby P at 422-423. In Browne v Green (supra) the Full Court affirmed what Nygh J said in Robinson v Higginbotham and said at 89,163:
57. We think that while s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.
In Pennisi v Pennisi (supra) at 84,547, referring to s 117(2A)(f), the Full Court comprised of Ellis, Strauss and Lindenmayer JJ said:
The plain words of the paragraph do not limit a Court's attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the Act carry the same consequences as payments into Court in common law matters.
We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree's knowledge of the parties' financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties' financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.
By letter dated 30 May 2003 the Husband made an offer of settlement. In the letter it was proposed that the Wife would receive assets at an estimated value of $5,000,000 including the M property valued at $3,000,000 and the Melbourne property valued at $900,000. On behalf of the Husband it was submitted that the offer proposed the Wife receive assets and benefits of a value which exceeded her ultimate entitlement. The offer proposed that the Wife would receive assets on an unencumbered basis. Excluding items 3 to 10 inclusive identified in the offer, the Wife would receive an entitlement of a value of $4,406,000. There was no value placed on the D Group of Companies. There was no response to this offer.
In his affidavit Mr Sunna contended that the offer of 30 May 2003 was incapable of acceptance because it was uncertain or deficient for reasons given.
In relation to the various offers a number of submissions were made on behalf of the Wife. It was submitted that the offer of settlement of 30 May 2003 failed to set out all what the Husband contended to be the net assets of the parties available for division and as such, it was impossible for the Wife and her advisers to determine whether such offer was reasonable or appropriate. It was submitted that the offer was made in circumstances where the Husband had disclosed in his financial statement of 7 April 2003 the existence of the Hong Kong Standard Chartered Bank account in which there was an amount of $310,000.
By letter dated 7 May 2004 on behalf of the Husband a further offer of settlement was made. It was proposed that there be an equal division of the net assets of the parties “to be settled by the payment in cash in whole or in part or transfer of assets in whole or in part and based upon the valuations currently filed in the proceedings”. There was no response to this offer. On behalf of the Husband it was submitted that the offer had the effect of identifying that the Husband was prepared to divide the assets equally between the parties so as to eliminate any argument about the issue of contributions.
In his affidavit Mr Sunna contended that the offer of 7 May 2004 was incapable of acceptance because it was uncertain or deficient for reasons given.
On behalf of the Husband it was submitted that by 26 July 2004 the Wife had retained Ms E to report on the valuation of the D Group of Companies. The Husband had already obtained a report from Mr S dated 22 March 2004. It was submitted that it was apparent that there was a live issue in relation to the opinions expressed by both experts as to the value of the D Group of Companies. To overcome that impasse the Husband made a further offer of settlement dated 12 August 2004.
In the offer of 12 August 2004 the Husband proposed that there be a division of net assets as to 52.5 per cent to the Wife and 47.5 per cent to the Husband to be effected by transfer to the Husband of the D Group of Companies at the values given to them by the Wife’s valuer Ms E. It was submitted that the offer provided a sensible solution in relation to the acquisition of the other shareholder’s interests. It was submitted that there was no response, although there should have been a response to this proposal.
By letter dated 12 August 2004 a further offer was made on behalf of the Husband. The offer was put on the basis that the parties had agreed on the value of all assets other than the shares in the D Group of Companies in respect of which the valuations of Mr S and Ms E varied considerably. The Husband proposed an equal division of all assets to be effected by a transfer in kind at agreed net values or sale and equal division of the net proceeds, the payment to the Husband by the Wife of one half of the value of the shares in the D Group of Companies and that the hearing be limited to the evidence of Mr S and Ms E. In summary, the proposal was that the hearing would be limited to a determination of the difference of opinion expressed by the two experts and to otherwise proceed on the basis that there be an equal division of the assets. It was submitted that had that proposal been accepted it is estimated the hearing would have been reduced from approximately 13 days to no more than two days.
Counsel for the Wife made a number of submissions in relation to the inconsistencies between the two offers of 12 August 2004. In his affidavit Mr Sunna contended that the offers of 12 August 2004 were incapable of acceptance because they were uncertain or deficient for reasons given.
On behalf of the Wife it was submitted that the subsequent offers of 7 May and 12 August 2004 again did not set out all the Husband’s contentions as to the value of the net asset pool available for distribution. It was submitted that whilst both the first and second offers referred to an equal division of the net assets, the third offer referred to a division of 52.5 per cent to the Wife and 47.5 per cent to the Husband and that it was again impossible for the Wife or her legal advisers to determine the appropriateness or otherwise of the offers.
The hearing was due to commence on 16 August 2004 however it commenced on 15 August 2005.
By letter dated 2 August 2005 the Husband made a further offer of settlement. In this letter it was contended that the assets had a net value of $8,500,000. The value given to the D Group of Companies was $3,600,000 being the value contended for by Mr S. The offer proposed an equal division of the assets on the basis that the Wife would receive as part of her entitlement the D Group of Companies and the Husband would receive as part of his entitlement the property at M. On behalf of the Husband it was submitted that there may have been a dispute in relation to the value of the D Group of Companies, but nonetheless it was open to the Wife to limit the argument to the quantification of the assets and not to argue matters of contribution.
In his affidavit Mr Sunna contended that the offer of 2 August 2005 was incapable of acceptance because it was uncertain or deficient for reasons given.
On behalf of the Wife it was submitted that on 2 August 2005, shortly before the commencement of the hearing, the Husband, for the first time, put forward a proposal which set out his belief as to the assets and liabilities of the parties and his contentions as to the composition of the net asset pool. It was submitted that he contended that the net asset pool was $8,500,000 and that on the basis of an equal division he would receive $4,250,000. However, ultimately it was determined he would receive or retain assets of a value of $2,960,000 which was significantly less than his offer. Further, the Husband sought to exclude the amounts he had retained in the Hong Kong bank account and the amount of $250,000 which he had already received by way of part property settlement.
By letter dated 17 August 2005 being well in excess of two years after the proceedings commenced the Wife made an offer of settlement. This offer proposed that the Wife receive the following:
·U property
·Melbourne property
·The D Group of Companies
The offer proposed that the Husband receive:
·The M property subject to the mortgage
·Brisbane property
·The Hong Kong bank accounts.
If, as an exercise, consideration is given to what is the effect of this offer having regard to my findings as to the net assets then it may look something like this:
Assets $
·U property (h/w) 2,700,000
·Melbourne property (sold) (w) 900,000
·Funds NAB a/c (…) (w) 3,129
·Household contents (w) 30,450
·Jewellery (w) 10,000
·Commonwealth Life Superannuation Master Trust (w) 18,000
·Shareholding - D Pty Ltd (w) 868,359
·Shareholding - F Pty Ltd (h) 18,213
·Shareholding - F Pty Ltd (w) 18,213
·Shareholding - S Pty Ltd (h) 8,060
·Shareholding - S Pty Ltd (w) 8,060
·Credit loan accounts, D Group (h) 259,318
·Annual/long service leave entitlements (w) 86,377
·Funds at Commonwealth Bank (w) 2,006
Total4,930,185
Liabilities
·Mortgage – U property - CBA (h/w) 1,300,000
·Mortgage – Melbourne property– X -discharged (w) 515,000
·Loan account, D Group (w) 42,857
Total(1,857,857)
Balance$3,072,328
This represents 86.77 per cent of what I found to be the net assets of the parties.
During the first week of the hearing counsel for the Husband was unable to attend on the first day and indeed on 18 August 2005 a lay day was given with the hearing resuming on 19 August 2005. On 18 August 2005 the Husband made a further offer of settlement and he again proposed that there be an equal division of assets. It was submitted that this offer effectively eliminated any argument about the value of the D Group of Companies. The Husband proposed that the value of the D Group of Companies be included at $1,750,000 however, it provided a mechanism by which the Wife’s bona fides was tested in relation to her evidence submitted through Ms E. The hearing continued on 22 and 23 August 2005 and 3, 4, 5, 6 and 10 April 2006.
In his affidavit Mr Sunna contended that the offer of 18 August 2005 was incapable of acceptance because it was uncertain or deficient for reasons given.
On behalf of the Wife it was submitted that in the Husband’s offer of 18 August 2005 he was contending that he would receive assets of a value of $4,766,000 which again was significantly greater than what he ultimately received. In this offer he proposed that he would receive the D Group of Companies and it was submitted that no explanation was given for the change in his position in relation to the value of the D Group of Companies.
On 16 March 2006 a further offer of settlement was made on behalf of the Wife. This offer proposed that the M home be sold and after the payment of costs and discharge of the mortgage $1,581,200 be paid to the Husband and $749,800 be paid to the Wife. It was proposed that the Wife receive U property and the D Group of Companies. It was proposed that the property in Victoria be sold and after the payment of costs and discharge of the mortgage the Husband receive $322,500 to be satisfied by the amount already received of $250,000 and $72,500 paid to Mr R on account of his legal costs and payment to the Wife of $173,400. The Husband would also receive the Brisbane property and the monies deposited in the Hong Kong bank account. It was contended that this offer was based on a equal distribution of the net assets to the parties.
On 20 April 2006 the Husband made a further offer of settlement. The effect of the offer was that the Husband receive the M property subject to a mortgage of not more than $770,000, the Brisbane property and some personal property.
In his affidavit Mr Sunna contended that the offer of 20 April 2006 was incapable of acceptance because it was uncertain or deficient for reasons given.
On behalf of the Wife it was submitted that the Husband’s final offer was made on 20 April 2006 and again he sought assets of a value of $3,060,000 being a greater amount than his ultimate entitlement.
On 26 May 2006 a further offer of settlement was made on behalf of the Wife. This offer proposed that the M home be sold and after the payment of costs and discharge of the mortgage an amount of $1,985,852 be paid to the Husband and $345,148 be paid to the Wife. It was proposed that the Wife receive U property and the D Group of Companies. It was proposed that the property in Victoria be sold and after the payment of costs and discharge of the mortgage the Husband receive $322,500 to be satisfied by the amount already received of $250,000 and the amount of $72,500 paid to Mr R on account of his legal costs and payment to the Wife of $173,400. The Husband would also receive the Brisbane property and the monies deposited in the Hong Kong bank account. It was contended that this offer was based on a division of the net assets of the parties as to 49 per cent to the Wife and 51 per cent to the Husband.
On behalf of the Husband it is submitted that the offers made by the Wife bear no resemblance to the ultimate outcome.
On behalf of the Husband it was submitted that parties have an obligation to earnestly and honestly explore the possibility of a resolution. The parties have an obligation to minimise court time in resolving issues which are clearly identifiable and capable of resolution such as issues of contribution, valuation and so on. It was submitted that that could have been done in this matter at least as to contributions. It was submitted that lawyers particularly have an obligation to advise clients in relation to the possible outcome of the proceedings and only seek to litigate matters which are “truly in dispute”.
On behalf of the Husband it was submitted that the first offer made by the Wife was after the commencement of the hearing in circumstances where the Husband had put numerous proposals to the Wife for her consideration which were all deserving of a proper and sensible response both in relation to the issue of contributions and valuation.
In summary, on behalf of the Husband it was submitted that from the commencement of the proceedings the Husband exercised a proper conciliatory approach and made numerous offers of settlement in an attempt to avoid litigation and subsequent costs. The proposals put forward by the Husband broadly fell into two categories, first the preparedness to proceed with the matter on the basis that contributions be agreed leaving only the issue of quantification of any asset value in dispute and second, proposals which effectively eliminated the possibility of an ongoing dispute in relation to the value of the D Group of Companies.
On behalf of the Wife it was submitted that in summary the offers do not provide a basis for an award of costs. It was submitted that a further difficulty is that each of the parties proposed to receive or retain particular assets, rather than a liquidation of all the assets and a subsequent division. It was submitted that the significant disparity between the expert accountants was “an almost insurmountable barrier to settlement negotiations”. As well, another significant issue related to how the taxation liability of the Husband should be dealt with.
It was submitted that apart from the Wife’s contentions that she had no knowledge of the funds held in the Hong Kong bank account until the disclosure was made by the Husband in his financial statement of 7 April 2003, the issues that occupied the hearing ultimately involved appropriate contributions and the appropriate value to be ascribed to the D Group of Companies, the personal loans of the Wife, the Husband’s debt to the Australian Taxation Office and how to deal with the funds in the Hong Kong bank account.
Other submissions were made on behalf of the Wife in relation to the quantum of costs sought by the Husband.
As seen at step one of the preferred approach to the determination of an application pursuant to s 79, the Husband contended that the assets had a net value of $8,591,881 and the Wife contended that the assets had a net value of $6,554,031. I found that the net assets had a value of $5,639,131.
There was an issue about the value of the shares in D Pty Ltd, F Pty Ltd and S Pty Ltd. I rejected the opinions of both valuers. I included in the list of assets a value of $1,180,223 including loan accounts. However I took into account pursuant to s 75(2)(o) an unquantified higher value.
There was an issue about the notional inclusion in the assets of an amount of $500,000 for unexplained debtors and an amount of $1,000,000 for unexplained stock. I did not accept the amount of $1,000,000 for missing stock. However I accepted that there should be recognition of a notional amount for unexplained debtors and I took this into account pursuant to s 75(2)(o).
There was an issue about whether the amount of $312,600 taken by the Husband from the Hong Kong bank account after separation should be included in the list of net assets. I included an amount of $172,600 taken from the Hong Kong bank account.
There was no issue about the notional inclusion of the amount of $250,000 paid to the Husband as partial property settlement.
There was an issue about whether the debts of the Wife of $7,900 should be included in the net assets. I excluded these debts.
There was an issue about whether debts of the Husband of $1,244,000 should be included in the net assets and this included an amount of $914,000 due to the Australian Taxation Office. I excluded the unsecured debts of the Husband but included the amount of $914,000 owed to the Australian Taxation Office.
In summary it can be seen that there were significant issues about the assets and liabilities of the parties and ultimately both parties were successful on some issues and not on others. It is however apparent to me that the parties should have attempted to resolve some of the step one issues.
As to step two of the preferred approach, I made a finding that the contribution based entitlements be assessed as to 50 per cent to each party. There is no doubt that the Husband had sought the Wife’s agreement to an outcome whereby there was an equal division of assets. This was also the position he adopted at the trial and he succeeded. However the Wife contended that having regard to the matters of contribution the outcome be between 55 per cent and 60 per cent to her and between 45 per cent to 40 per cent to the Husband. As will be seen shortly, given what the Wife contended should happen when consideration was given to the matters in s 79(4)(d), (e), (f) and (g) of the Act, the Wife was in fact seeking that she receive 60 per cent of the net assets having regard to the matters in s 79(4)(a), (b) and (c).
There was a great deal of evidence given about the matters of contribution and I had to make findings. The percentage difference the Wife contended for, namely five per cent or 10 per cent, was significant. I will not repeat what I said in my judgment, but an important example related to the role of the Husband in the establishment and conduct of the D Group of Companies.
As to the matters to be considered at the third step of the preferred approach, the Husband contended that there should be no further adjustment having regard to the ‘other factors’ if I made the findings as to contribution contended for by him. This position was also on the basis that I made the findings he contended for in relation to the extent and value of the net assets. The Wife contended that there be no further adjustment having regard to the ‘other factors’ if I made the findings as to contribution contended for by her. However the Wife contended that there should be a further adjustment in her favour having regard to the ‘other factors’ of five per cent of the net assets if I found that her contribution based entitlement was 55 per cent. Ultimately the Husband received 52.50 per cent because I made an adjustment in his favour of 2.5 per cent to reflect consideration of the ‘other factors’. This further adjustment in favour of the Husband was largely to reflect the unquantified value of the D Group of Companies and the unexplained debtors.
When consideration is given to the terms of the Act and the Family Law Rules there is some support for the submissions that parties have an obligation to earnestly and honestly explore the possibility of a resolution; that parties have an obligation to minimise court time in resolving issues which are clearly identifiable and capable of resolution such as issues of contribution, valuation and so on. Further, I accept that lawyers have an obligation to advise clients in relation to the possible outcome of the proceedings and only seek to litigate matters which are “truly in dispute”. In support of this it is only necessary to consider the responsibilities of parties and lawyers set out in Pt 1.2 r 1.08 of the Family Law Rules in achieving the main purpose of the Rules. I note that Pt 1.2 r 1.08(h) identifies “issues genuinely in dispute”.
Part IIIA of the Act deals with obligations to inform people about non-court based family services and about court processes and services. Section 12A(c) which is in Div 1 of Pt IIIA provides that one of the objects of Pt IIIA is to ensure that people are informed about ways of resolving disputes other than by applying for orders under the Act. Section 12E places on lawyers an obligation to provide certain documents to persons who are considering instituting proceedings.
Section 79(9)(a) provides that the Court shall not make an order under s 79 in property settlement proceedings unless the parties to the proceedings have attended a conference with a Registrar in relation to the matter to which the proceedings relate.
Part 1.2 r 1.04 of the Family Law Rules provides that the main purpose of the Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case. Part 1.2 r 1.05 provides that before starting a case, each prospective party to the case must comply with the pre-action procedures. Part 1.2 r 1.06 deals with how a court must apply the Rules to promote the main purpose and actively manage each case and the obligations include by encouraging and helping parties to consider and use a dispute resolution method rather than having the case resolved by trial, and the issues in dispute early in the case and separating and disposing of any issues that do not need full investigation and trial. Part 1.2 r 1.07 deals with how a court is to apply the Rules to achieve the main purpose and includes encouraging parties to negotiate a settlement, if appropriate. Part 10.2 r 10.06 deals with compulsory offers to settle. It is also instructive to consider the Best practice guidelines for lawyers doing family law work as at 29 March 2004 drafted by a joint committee of the Family Law Section of the Law Council of Australia and the Family Law Council.
In this case on a number of occasions namely 30 May 2003, 7 May 2004, 12 August 2004, 2 August 2005, 18 August 2005 and 20 April 2006 the Husband made offers to settle. In my view the offers were made seriously. I am satisfied that the terms of the offers were framed clearly, with reasonable certainty and with precision. It is not a case there the Wife had significantly less grasp of the parties’ financial arrangements. I accept that there were assets and liabilities that were the subject of disputed value and, in the absence of compromise, the legitimate subject matter for determination. However it is not a case where the financial circumstances were so complex that it would have been premature to accept an offer.
In conclusion I am of the opinion that in the circumstances of this matter pa (f) of s 117(2A) is relevant.
I am required to consider such other matters as I consider relevant. There is nothing further I need to say about this matter.
Conclusion
The hearing took place over an extended period for a number of days and the reasons for this are set out in my judgment. There were significant issues at step one of the preferred approach to the determination of s 79 applications and I have identified these above.
The Husband was successful in relation to step two of the preferred approach. He had contended for this position since 2003 and attempted in various offers to get an agreement from the Wife. The Wife was unsuccessful.
The Husband was also successful at step three of the preferred approach particularly because of consideration of matters dealt with at step one. The Wife was unsuccessful.
What is particularly troubling is that there is no evidence that the Wife or those advising her at any time responded in any way to the offers made by the Husband prior to the offer made by the Wife. There was no attempt on behalf of the Wife to seek clarification or explanation of what the Husband had put or enter into any dialogue about any matter whatsoever that was relevant to the resolution of the proceedings or the resolution of any issue. For example, I have no doubt that there would have been a significant savings of public and private cost if the parties had agreed on the contribution based entitlements and confined the hearing to simply adjudication of the issues about the extent and value of the net assets.
I reject the almost pro forma response by Mr Sunna that the offers were incapable of acceptance because they were uncertain or deficient. The offers were clear and should have led to constructive responses. The failure to do so is important. This approach of the Wife suggests a number of things or ideas which I reject. They include that an offer can only be made when the balance sheet (step one) is settled. Further that an offer can only be relevant to resolution of the whole of the proceedings and not issues.
I do not accept the contentions made in relation to the various offers made by the Husband that it was impossible for the Wife and her advisers to determine whether each offer was reasonable or appropriate. Amongst other things, the Wife was in control of the D Group of Companies, was residing in the M home, was in possession of a number of other assets, was aware of the Hong Kong bank account and had retained the services of an expert accountant. I am of the view that the Wife and those advising her were able to determine whether the offers were reasonable or appropriate.
I have come to the conclusion that the Husband has established justifying circumstances and that an order for costs should be made. I am of the view that paras (c), (e) and (f) of s 117(2A) are relevant. If s 117(2A)(e) does not include the outcome in relation to issues and only the whole proceeding then I take it into account pursuant to s 117(2A)(g).
The Wife should have responded to the offers of the Husband and engaged in a dialogue which should then have lead to the resolution of at least a number of important issues. However she failed to do so and in adopting this stance she did so at her risk as to costs.
This case in my view is an example of a failure to adhere to the very clear directions in the Family Law Rules as to how litigation in the Family Court should be conducted. The Husband and his lawyers attempted to engage the Wife and those advising her but to no avail.
Ultimately it should have been only a step one case and perhaps a step three case depending on the outcome of step one. There were issues to be considered at step one that in the absence of compromise had to be adjudicated upon. I am of the view that the Wife should only have to pay a portion of the Husband’s costs.
I am of the opinion that the costs should not be assessed on a lawyer to client basis or an indemnity basis. I am of the opinion that the costs should be assessed on a party to party basis.
I could refer the matter to taxation on the basis that the Wife had to pay a percentage of the assessed costs of the Husband. However as I indicated in discussion the history of this litigation and the complete lack of co operation and other matters demonstrates to me that such an order would probably only lead to more extensive and expensive litigation. This is also apparent from the written submissions of the Wife.
I have the power to order that a party is entitled to a specific amount of party to party costs and that is what I propose to order. In so doing I take into account the matters in Pt 19.5 r 19.19(3) of the Rules. The Husband has estimated costs of in excess of $700,000. The Husband has legal costs of in excess of $500,000 if the expert’s fees are excluded. I am of the view that the Wife should pay one fifth of the costs of $552,424.26. However I will round the amount off at $100,000. This reflects my assessment of the costs that were incurred by the failure of the Wife to respond to the offers of the Husband.
In so far as there may be issues between the Wife and her legal advisers, that is a matter for them and not of concern to me. No order is sought by the Husband pursuant to Pt 19.3 r 19.10 of the Rules.
As to the application by the Wife it is apparent from the written and oral submissions on her behalf that she was largely seeking to defend the Husband’s application. In my view the Wife has not established any justifying circumstance. I therefore propose to dismiss the Wife’s application.
I certify that the preceding 112 paragraphs are
a true copy of the reasons for judgment
of the Honourable Justice O’Ryan
………………………………………………………..
Associate:
Date: 9 August 2007
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