Tiernan & Tiernan

[2011] FamCA 245

FAMILY COURT OF AUSTRALIA

TIERNAN & TIERNAN AND ANOR [2011] FamCA 245

FAMILY LAW - COSTS - Circumstances justifying order

Family Law Act 1975 (Cth)

APPLICANT: Ms Tiernan

RESPONDENT: Mr L Tiernan

SECOND RESPONDENT: Mr B Tiernan

FILE NUMBER: MLF 2364 of 2006

DATE DELIVERED: 12 April 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Mushin J

HEARING DATE: By written submissions

REPRESENTATION

COUNSEL FOR THE APPLICANT: In person

SOLICITOR FOR THE APPLICANT: Not applicable

SOLICITOR FOR THE RESPONDENT: Mills Oakley

ITS IS ORDERED THAT

1. The wife pay the husband’s costs of and incidental to the proceedings fixed in the sum of $15,000.

2. The payment of costs referred to in paragraph 1 hereof be stayed for a period of 90 days.

3. All outstanding applications be otherwise dismissed and removed from the list of cases awaiting hearing.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 2364 of 2006

Ms Tiernan 

Applicant

And

Mr L Tiernan

Respondent

And

Mr B Tiernan

Second Respondent

REASONS FOR JUDGMENT

introduction

1. In February and May 2010 the parties conducted proceedings for alteration of property interests before me.  On 10 December 2010 I delivered judgment (“the reasons for judgment”) and made orders (“the orders”) altering the parties' interests in their property.

2. Both the husband and the wife subsequently indicated that they wished to apply for costs of those proceedings, as a result of which I made orders for the filing and service of written submissions. 

The submissions

1. The husband and the wife have filed the following submissions all of which I have considered:

   ·affidavit of Shannon Rippon, the solicitor acting on behalf of the husband sworn on 13 January 2011 and filed on 24 January 2011;

   ·wife's submissions in support of her application for costs filed on 17 February 2011;

   ·husband's submissions in support of his application for costs filed on 17 February 2011;

   ·wife's submissions in response filed on 9 March 2011; and

   ·husband's reply filed on 10 March 2011.

2. It is necessary to refer in particular to the wife's written submissions.  Almost the entirety of those submissions constitute a criticism of the reasons for judgment.  I regard those criticisms as being irrelevant to my consideration of these applications.  Further, there does not appear to be any specific application for costs by the wife contained in those submissions.  Rather, she seeks to deflect any possibility of an order for costs against her in what might be regarded as being pre-emptive.

The parties' proposals

1. As previously noted, the wife does not appear to have made any specific application for costs.

2. The husband seeks his costs of the proceedings in the alternative.  The first alternative seeks the entire costs and the second seeks costs from the making of open offers which are referred to below.

The legislation

1. These applications must be determined in accordance with the provisions of section 117 of the Family Law Act 1975 (“the Act”). The primary provision is that in proceedings under the Act, “… each party … shall bear his or her own costs.” However, subsection (2) empowers me to make “… such order as to costs … as the court considers just.” In considering whether it is just to make an order for costs, I must have regard to the various matters in subsection (2A) (“the subsection”) to which I now turn.

2. The subsection is in the following terms:

   117(2A) [Matters relevant to costs order]

   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.

   I turn to a consideration of the subsection.

Discussion

The parties' financial circumstances

1. I made a number of findings with regard to the parties' financial circumstances in the reasons for judgment.  I held:

   138. The parties' financial circumstances are set out in their respective Financial Statements.  The husband's statement asserts a weekly income of $290 and weekly expenditure of $807.  He asserts a credit card liability estimated at a little over $9,000 together with unbilled legal fees and the alleged debt of $19,000 which I have not accepted.  That debt does not account for the excess of expenditure over income of more than $500 per week.  The husband swore that he received income of approximately $400 per month from his property in Bali. That income also does not account for the deficit.  That is a further reason for my concerns with regard to whether the husband has made a full and frank disclosure.

   139. Likewise, the wife's disclosure appears to be similarly questionable.  She disclosed weekly income of approximately $200 and weekly expenditure of $799.  Her oral evidence suggested that the income figure may have been reduced but there is no adequate evidence to support that proposition.  The wife's liabilities include a debt to friends of a little more than $54,000 together with two credit card debts totalling nearly $28,000.  Her expenditure includes repayments on the credit cards.  The wife's Financial Statement was sworn in November 2009.  The wife did not claim any of the debts referred to in this paragraph as relevant liabilities in the proceedings.

1. The findings which I made in the reasons for judgment included a significant amount for prepaid legal costs in accordance with the authorities.  On the part of the husband, those costs were found in the sum of $61,730.

2. I found that the wife had prepaid legal costs in the sum of $51,830.  That figure is replicated in the wife's submissions in support of a costs application and is particularised.  The sum of the particulars is a little over $47,000 but nothing turns on that.  The wife's submissions include the assertion that she has a further liability for costs in the sum of $57,210.27.  That figure includes solicitor's costs until 12 March 2010 and disbursements including counsel's fees until 17 February 2010.

3. As I have noted below, the wife represented herself for the last five of the eight days of this trial.  The husband was represented by counsel throughout the trial.  Accordingly, while it has not been particularised it is reasonable to infer that the husband's costs of these proceedings are greater than those of the wife.

4. The orders provided for the husband to pay the wife a sum of $150,000, in return for which the wife was required to transfer all her right title and interest in the parties' farming property at [E] to the husband.  Otherwise, each party retained assets of relatively small value.  Accordingly, I find that the parties are in a very similar financial position in which neither of them is able to enjoy other than a basic standard of living.

Legal aid

1. Neither party has received legal aid at any relevant time in these proceedings.

Conduct

1. Throughout the trial and in the reasons for judgment, I made substantial criticisms of the parties for the way in which the proceedings were conducted.  I found that substantial portions of the affidavit material were irrelevant and, at times, “… were sworn to by the parties in an effort to denigrate and smear.”  I found that it was “a disgrace” that such material was included.  I also expressed my concern over the hostility between the parties and the effect that that was having on their credibility.

2. However, perhaps my strongest criticism was levelled at what I found to be “… a significant doubt as to whether the parties have been honest with me in their disclosures.”  I noted my consideration of whether I should refer the papers to the Commissioner of Taxation arising out of the apparent lack of full and frank disclosure.  By way of conclusion on the issue of the parties' credibility, I found:

   21. While there is insufficient evidence to make a finding on the balance of probabilities, I strongly suspect that they have not wanted me to hear the intricacies of their financial affairs which may well have caused them significant embarrassment.  That issue has made my responsibility to do justice and equity between the parties more difficult than it need have been. 

3. Accordingly, the issue of the parties' conduct in these proceedings is relevant in my consideration of these competing applications for costs.

Non-compliance

1. Neither party has submitted that any issue of non-compliance with previous orders of the court is relevant to my consideration of these costs applications.

Either party wholly unsuccessful

1. A number of issues were litigated during the trial.  However, two of the most important issues were first, whether the husband or wife should receive the property at E, and secondly, whether a transfer of the business from the husband to one of the parties' sons should be set aside.

2. The wife was wholly unsuccessful on the first of those issues.  As already noted, I ordered that the husband retain the farm and pay $150,000 to the wife.  However, the husband was unsuccessful on the second of those issues.  While I dismissed the wife's application to set aside the transaction, I was very critical of both the husband and the son.  I included the value of the business as sworn to by the single expert witness as a notional asset of the husband in the asset pool.

3. Accordingly, it cannot be said that either party was wholly unsuccessful in the proceedings.

Offers in writing

1. The affidavit of the husband's solicitor referred to above annexed copies of five open offers made between the parties.  As was also evident during the trial, those offers make it clear that ultimately, the parties were in dispute about who was to retain the property at E.

2. The first written offer was made on behalf of the wife on 2 February 2010.  She sought a transfer of the property at E to her by the husband together with water rights, plant and equipment and stock.  She also sought the payment to her of the trust funds of $80,000 and further lump-sum spousal maintenance of $75,000.  Accordingly, she sought the farm together with a lump sum of $155,000.  She proposed that the husband retain his interest in his property in Bali together with any interest in the business which was the subject of the wife's application to set aside the transaction.  The parties agreed to the value of the property at E as being $404,000 and was unencumbered.  That offer was therefore beyond any reasonable expectation and fundamentally different to the ultimate result.

3. The husband's first written offer was made by letter dated 12 February 2010 and faxed to the wife's then solicitors.  It proposed that the wife transfer to the husband all her interest in the property at E in return for a payment of $175,000.  That offer was more favourable to the wife by $25,000 than the orders which provided for payment to the wife of $150,000.

4. The trial commenced on 15 February 2010.  On the following day, the solicitors for the husband faxed a letter to the then solicitors for the wife confirming a discussion between counsel which was asserted to have taken place on the first day of the trial.  The discussion incorporated an offer by the husband to the wife which was essentially the same as that referred to in the previous paragraph save that the figure of $175,000 was increased to $185,000.  I note that offer was more favourable to the wife by $35,000. The letter referred to what was essentially a counter offer which was that the wife receive the property at E together with the sum of $80,000. 

5. On 17 February 2010, the trial was adjourned part heard because the wife had ceased to engage her then solicitor and counsel.  She informed me that she hoped to receive funds from family or other sources to enable her to instruct alternative solicitors and counsel.  I ordered that the wife pay to the husband the sum of $8,624 and the third party $3,000 by way of costs of the adjournment. 

6. The trial resumed on 24 May 2010 and continued for a further five days being a total of eight days of hearing.  The wife had been unable to obtain alternative legal representation.  Accordingly, she represented herself from the resumption of the trial until its conclusion.  At the resumption and on at least two or three subsequent occasions I expressed my grave concern over the costs which were being incurred in the proceedings in circumstances in which the asset pool did not appear to justify the time or expense.  In particular, counsel for the husband had made an open offer in court which was essentially the same as that which resulted from the orders, being the payment of $150,000 in return for the wife transferring her interest in the property at E to the husband. On several occasions, I warned the wife that she might regret having rejected that open offer.  She did not heed my warnings.

7. On 24 May 2010 the solicitors for the husband delivered a letter by hand to the wife.  The letter of that date commenced:

   We refer to the opening remarks and preliminary views expressed by the presiding Trial Judge, the Honourable Justice Mushin this morning and in particular his concerns about the significantly increasing legal costs in this proceeding.

   The letter cited a “genuine endeavour to resolve this matter” in making a proposal for settlement pursuant to which the wife would receive the sum of $185,000 together with monies held in trust for the parties' son of $80,000 and “… any other property/financial resources in your keep.”  In return, it was proposed that the husband retain the property at E.

8. The letter referred to in the previous paragraph put an alternative proposal pursuant to which the property at E would be sold, necessary outgoings would be paid, the sum of $25,000 would be paid to the wife and the balance would be divided equally between the parties.  In addition, it was proposed that the $80,000 invested on trust be divided equally between the parties.  Otherwise the parties were to retain property presently in their possession.  Further, it was proposed that the wife's application to set aside the transfer of the business referred to above be withdrawn with no order as to costs.  The letter warned that it was written on the basis of being “without prejudice save as to costs” and that it had “significant costs consequences”.

9. On 26 May 2010 a further letter from the husband’s solicitor to the wife was delivered to her by hand.  Again, it was written on the basis of “without prejudice save as to costs”.  It proposed that the husband pay the wife the sum of $185,000 and that she retain the $80,000 invested in trust.  The husband was to receive the wife's interest in the property at E.  I note this offer is some $115,000 more favourable to the wife than the orders. Again, an alternative proposal was made pursuant to which the property at E would be sold and the proceeds divided in accordance with the offer referred to in the previous paragraph.  The $80,000 investment was to be divided equally between the parties.

10. The letter of 26 May 2010 contained a third alternative proposal.  That provided that the wife retain the property at E and pay the husband the sum of $139,000.  The husband was to retain the $80,000 investment and the parties were to otherwise retain property in their possession.  Alternatively, in the event that the wife was unable to pay the sum of $139,000, the husband was to pay the wife the sum of $265,000 which included the investment monies of $80,000 in return for which the husband was to retain the property at E.  In all alternatives, the application to set aside the business transfer was to be withdrawn with no order as to costs.

11. On my calculation, the alternative by which she received the farm and paid the husband $139,000 would have resulted in her receiving the net amount of $115,000 in excess of that which she received from the orders.  She would have also had the opportunity to earn income from the property at E which was her fundamental stated wish.

12. The letter referred to above noted that the offer had been put to the wife on the morning of 26 May 2010 and had been “instantly rejected” by the wife.  However, the offer was left open until 4 p.m. that day.  Again, the same warning with regard to the significance as to costs was included.

Any other relevant matter

1. It was not submitted that there was any other relevant matter to which I should have regard in determining these applications.

Is it just to make an order for costs?

1. The essence of the husband's application is that irrespective of the findings which I made with regard to conduct and nondisclosure, he made significant efforts to resolve the matter by way of four separate written open offers in accordance with the legislation, all of which would have produced a better result for both parties, and particularly the wife, if any one of them had been accepted.

2. Further, it is asserted on behalf of the husband that the wife was wholly unsuccessful in her application to set aside the transaction of the business from the husband to the parties' son.

3. The essence of the wife's submissions is that she could not have determined the quantum of a just and equitable alteration of property interests because of the husband's conduct and nondisclosure.

4. During the trial I speculated that the fundamental issue was not so much the setting aside of the transfer of the business as the question of who should retain the property at E.  The wife's primary position was that if she were to retain the farming property, she would have an income earning asset which would be to her benefit.  In my view, even on the basis of the affidavit material there was no realistic prospect of the property at E being transferred to her.  Such a transfer would have required a substantial payment by her to the husband which was never within her financial capacity.  Despite all the warnings, the wife chose to continue with her application and she totally failed in that regard.  In that regard, I held in the last sentence of the reasons for judgment:

   I am also satisfied that there is no realistic prospect of the wife receiving the farm in her own name to the exclusion of husband.

5. Accordingly, the husband's submission with regard to his written open offers has considerable force.  The provision relating to open offers has a policy aspect to it in that it promotes settlement of proceedings, thereby minimising costs and Court time.  In my view, particularly in circumstances such as these applications, that must be given significant weight.  If it were not for other mitigating factors discussed below, the argument that the husband should receive his legal costs would be close to insurmountable.

6. In the previous paragraph I referred to mitigating factors.  The first of those is conduct.  In the reasons for judgment I was very critical of both the husband and the third party, the parties' adult son, with regard to their conduct over the transfer of the business to the son.  At paragraph 82 of the reasons for judgment I held:

   In [the husband's transfer of the business] … neither [ the son] nor the husband gave the slightest consideration to the possibility of the wife benefiting from at least the stock.

1. The second mitigating factor is the issue of nondisclosure.  While the wife did not escape my criticism in that regard, the husband should not be permitted to avoid the consequences of his nondisclosure.  While I do not accept the wife's submission that she was unable to determine what would be a just and equitable settlement because of the husband's nondisclosure, one of the fundamental principles underlying the conduct of litigation is the requirement of full and frank disclosure.  On the basis of the criticisms which I made of all three parties during the trial and in the reasons for judgment, I cannot be satisfied that I understand the parties' financial circumstances even to the present time.  The husband must bear his share of the responsibility for that.

2. The third mitigating factor is the parties' financial circumstances arising out of the orders.  The greatest difficulty faced by the wife in the proceedings was my decision to include in the asset pool the sum of $427,500 being the net proceeds of the sale of certain freehold.  The wife's evidence in rebuttal of the inclusion of that sum was totally inadequate and was a significant element in my criticism of her for nondisclosure.  Had she provided that rebuttal the result of the applications would probably have been quite different.  The wife must bear responsibility for that failure.

3. The parties' financial circumstances referred to in the previous paragraph include the legal costs which each of them has had to pay in these proceedings.  I have already inferred that the husband's costs are expected to be greater than those of the wife because of the wife's self representation for five of the eight days of this trial.  Those legal costs would have been very significantly less had the wife accepted any one of the husband's offers of settlement.  As I have already noted, the end result would have been more advantageous to her as well.

4. The husband has retained the property at E which is an income earning asset although, on the basis of my findings, not of a significant value.  During the trial I speculated that upon the conclusion of these proceedings the husband may well choose to live with his partner in Bali and not to conduct the farm as a going concern.  In those circumstances, I would expect that he will transfer the farm to his son who was the third party in these proceedings.  I emphasise that the previous sentence is speculation and was not the subject of evidence.

5. The wife has the prospect of earning from her business although her submissions in these applications suggest that such earnings will be very small.  Further, the wife's submissions include the assertion that the funds which she has received as a result of the orders will not cover her liabilities.

Conclusion

1. Ultimately, I find that it is just to give effect to the policy of requiring the parties to make written open offers to each other in an effort to settle the proceedings.  These proceedings should have settled and should not have occupied eight days of Court time.  Accordingly, the husband should benefit from an order for costs.

2. However, the question of the quantum of any such order is important.  Arising from the issues of conduct and nondisclosure, it would not be just to make an order for costs in the husband's favour dating from the first of his written open offers.  He should receive part of his costs from that time.  The quantification must take into account the parties' respective financial circumstances.  In light of the wife's apparent circumstances, I have determined that it is just that the wife pay the husband the sum of $15,000.  I estimate that that is equivalent to approximately 3 days of the husband's costs of the trial. I will stay that order for a period of 90 days.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Mushin

Associate: 

Date:  12 April 2011