W & T

[2006] FamCA 433

[2006] FamCA 433

FAMILY LAW ACT 1975

IN THE FULL COURT       
OF THE FAMILY COURT OF AUSTRALIA                  Appeal No WA05 of 2005
AT PERTH  File No PTW1032 of 2004

BETWEEN:

W
Appellant Husband
- and -

T
Respondent Wife

REASONS FOR JUDGMENT

CORAM:  BRYANT CJ, KAY & BOLAND JJ
DATE OF HEARING:                 21 November 2005
DATE OF JUDGMENT:             1 June 2006

APPEARANCES:  Mr Hooper of Counsel, instructed by Marks & Sands, Level 9, 30 The Esplanade, Perth WA 6000, appeared on behalf of the Appellant Husband.

Mr Dowding of Senior Counsel, instructed by Holden Barlow, Level 9, 16 St George’s Terrace, Perth WA 6000, appeared on behalf of the Respondent Wife.

W and T
Appeal No WA05 of 2005
CORAM:  BRYANT CJ, KAY & BOLAND JJ
DATE OF HEARING:  21 November 2005
DATE OF JUDGMENT:                1 June 2006

CATCHWORDS:     PROPERTY SETTLEMENT – Whether trial Judge’s “adding back” to the pool available for distribution $70,000 removed by husband and unsatisfactorily accounted for was appropriate – “Add back” dependant on trial judge drawing inferences from husband’s less than full and frank disclosure.

Whether a 10 per cent adjustment based on s 75(2) factors in favour of wife appropriate – Adjustment based on husband’s failure to disclose financial interests in New Zealand – Any such interests were either inherited from husband’s family with the wife making no contribution to them or were acquired with the monies already notionally added back into the pool – Not appropriate to further adjust asset pool beyond the 60/40 contribution based entitlement that already favoured the wife.

COSTS – Assessment of quantum – Trial Judge indicated he would make an order on a party/party basis – Costs order exceeding that conceded as reasonable  – Where the court intends to depart from calculating a figure approximating a scale amount, there is an obligation to explain why such departure is appropriate – Order according with party/party costs on the scale basis made.

1. This is the husband’s appeal against property orders made by Tolcon J in the Family Court of Western Australia on 6 April 2005 and against a costs order made by his Honour on 7 April 2005.

1. The effect of the property orders was to divide a pool of assets worth approximately $1.4 million as to 70 per cent in favour of the wife and 30 per cent in favour of the husband.  The costs order required the husband to pay $40,000 towards the wife’s costs of the trial.

1. By his appeal the husband asserts that the pool of assets should be reduced by $69,170 and that the remaining pool should be divided 60 per cent in favour of the wife and 40 per cent in favour of the husband.  He further asserts that the costs order should be reduced to $25,000.

Background

1. The husband is now aged 62 and the wife 55.  They commenced cohabitation late in 1989 or early 1990 and were married in June 1992.  Each of the parties had been previously married and had children from their earlier marriages.  The wife’s children lived with the parties.

1. The parties separated in October 2002 when the husband went to live in New Zealand.  The marriage was dissolved in August 2004.

1. At the commencement of cohabitation the wife had about $85,000, plus some furniture and a motor vehicle.  The husband had about $35,000 and an entitlement in a superannuation scheme worth in excess of $60,000 in 1992.  The husband remained in employment until October 1998 when he received a superannuation payout of $218,000 and unused leave entitlements of $63,000.  The wife accepted that those monies were then applied towards the family’s investments. 

1. When the parties commenced cohabitation the husband was an electrical contractor and the wife a hotel manager.  They each remained in employment during the early years of the marriage.  In 1997, together with some friends, they purchased the leasehold of a tavern in M.  They had earlier built a home on land they had acquired in  C.  The home was said to cost $240,000.  The parties jointly borrowed $115,000.  The wife provided $75,000 and the husband $50,000.  The wife said that they both assisted in the construction of the home.

1. Once the husband retired in 1998 he began to work at the tavern.  The partnership that had acquired the tavern acquired a food and beverage leasehold of a function centre, restaurant and 100 room hotel known as  P in  S.P. in 1998.  That year it also acquired with borrowed monies the freehold to  the tavern which it sold in October 2002 making a profit for the parties of about $300,000. 

1. In July 1998 the partnership also acquired an interest in the leasehold of a cafe.   

1. In 1999 the partnership was offered an opportunity to purchase the leasehold of a resort in B.  This involved managing 38 strata title units, a conference centre, restaurant and tavern.  At about the same time the parties sold their home in C and purchased a property at O. Promenade,  in M.

1. In May 2001 the parties decided to renovate the home in M which project involved substantial building works.  They bought another property in W where they could live whilst the renovations took place. 

1. An opportunity then arose to acquire the freehold of the resort at B.  A syndicate was formed which acquired the property.  The husband and the wife held one seventh of the shares in the syndicate. 

1. There was then a consolidation of the parties’ business interests so that by the time of the separation their substantial business investment was their one seventh share of the resort. 

1. The renovations of the home at M had originally been expected to cost $240,000 but grew to the extent of approximately $500,000.  This necessitated the sale of the W property with settlement taking place about one week prior to the husband leaving Australia.

1. The husband’s father died in New Zealand in 2000.  Thereafter the husband made several trips to New Zealand ostensibly to attend to matters concerning his father’s estate. 

1. Some time prior to the final separation the husband commenced a relationship with one  R.C. in New Zealand.  At the time of the trial the husband was living with Ms C at a unit in T, New Zealand, in a property that he claimed belonged to his father’s estate.  The husband’s mother was entitled to the income of the estate during her lifetime and the husband was one of five beneficiaries entitled to share the residue of the estate upon the death of his mother.

1. When the husband left for New Zealand the renovations to the M home had not been completed.  There were significant monies owing to builders and sub-contractors and the wife was left to arrange finance and find contractors who would complete the work.  She also had to attend to management arrangements that needed to be made for the ongoing functioning of the resort, including replacing the husband as the approved licensee of the resort in accordance with the requirements of the Department of Liquor Licensing.  There were outstanding matters to be attended to relating to the winding up of the companies that had been involved in the previous investments.  The wife deposed that attending to all these matters in the absence of the husband placed a great strain upon her and affected her health and well-being.

1. The trial Judge determined the pool of assets available for division between the parties to be as follows:

Assets
M property (to be sold)	E$1,300,000
Resort (1/7th share)  (to be sold)	E$    400,000
Husband’s Subaru Sedan	16,000
Wife’s Superannuation	14,165
Wife’s ANZ Bank Account	16,000
Total Assets:	$1,746,165
Add Backs
Husband’s paid legal fees	21,117
Defiance Mining shares sold by husband	9,000
Husband’s AMP Superannuation taken by him	16,624
Funds taken by husband from Trust A/c	34,273
Cash removed by husband 10/7/01 to 16/10/02	69,170
Wife’s paid legal fees	39,000
Total Add Backs:	$189,184
Liabilities
Husband’s outstanding income tax	14,000
Overdraft taken out by wife December 2002	250,000
Bankwest credit card (Joint)	10,000
National Bank credit card (Joint)	10,000
Bankwest credit card (Wife)	10,000
David Jones credit card (Wife)	8,000
Virgin Credit Card (Wife)	10,000
Business loan	201,000
Invoices from Builder Unpaid	6,775
Balance to pay builder	15,000
Loan from wife’s mother	35,000
GST on sale of Nissan Patrol	5,581
Funds to be paid to S G Pty Ltd	20,000
Total Liabilities:	$595,356
Net Assets:	$1,339,993

1. The trial Judge then assessed the contributions of the parties to the date of separation as equal and that the wife should receive a credit of a further 10 per cent of the pool by way of her post-separation contributions, leading to a conclusion that when assessing all of the contributions to the date of trial they should be measured as to 60 per cent in favour of the wife and 40 per cent in favour of the husband.  He then determined that there should be a further 10 per cent adjustment in favour of the wife to give weight to the husband’s undisclosed financial interests in New Zealand which his Honour found to be “substantial”.

The Appeal

1. At the hearing of the appeal Mr Hooper on behalf of the appellant husband indicated that he proposed to limit his submissions to:

·    a challenge to the inclusion in the pool of assets by way of add-back of the sum of $69,170 identified by the trial Judge as “cash removed by husband 10/7/01 to 16/10/02” and

·    a challenge to any division of the balance then remaining, whether by way of contribution or by way of an allowance for s 75(2) factors beyond a division of 60/40 in favour of the wife. 

He also made submissions relating to the appeal against the costs order which we will deal with shortly.

Add-backs

1. At trial counsel for the parties prepared a document headed “Agreed Schedule of Assets, Liabilities” showing matters agreed and matters in dispute.  The wife included on that Schedule an item described as “cash removed between 10.07.01-16.10.02 Husband in cash – no vouching $69,170”. 

1. The husband sought to explain several of the withdrawals.  He prepared a list of tradesmen to whom he said he had paid cash totaling $44,290 claiming to have recorded the payments in his diary.  He sought to explain the balance of the unaccounted for monies as being cash that he had utilised to meet his day to day personal needs post-separation.

1. The issue as to whether or not it was appropriate for the trial Judge to notionally add-back into the pool of assets the cash removed by the husband between July 2001 and October 2002, depended upon the trial Judge’s acceptance of the husband’s explanations as to the expenditure.  It also depended upon whether the trial Judge erred in not adding-back into the asset pool monies that had been available to the wife post-separation. 

1. In Omacini and Omacini (2005) FLC 93-218 the Full Court identified three clear categories of cases where it was appropriate to notionally add back to the pool assets that were said by the Full Court to “no longer exist”. Their Honours said:

“30.To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist.  They are:

(a)Where the parties have expended money on legal fees.  In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:

‘11.6For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.’

(b)Where there has been a premature distribution of matrimonial assets.  In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:

‘In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets.  What the husband did was to distribute to himself an asset in which the wife had a legitimate interest.  In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2).  It seems to me that the husband has had the benefit of that money.  Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case.  Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.’

(c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:

‘As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:

(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or

(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.’

Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of s 79.” 

1. Of the three classes identified in Omacini, the monies the subject matter of dispute in these proceedings comfortably fit under the heading of there having been a premature distribution of matrimonial assets.  The Full Court in Omacini pointed out at par 39 that where one party has expended money which has been jointly accumulated by the parties it is necessary for the trial Judge to examine and make some assessment of the reasonableness or otherwise of the expenditure.  In this case the manner in which the monies had been expended by the husband depended entirely upon the trial Judge’s acceptance of the husband’s version of events.  It was clear that the husband had a clandestine relationship in New Zealand for some period prior to separation taking place.  It is clear that he had made some financial provision in anticipation of furthering that relationship.  It is clear that he had possession of a home in New Zealand that had cost more than $250,000 and the source of monies to acquire the home had not been fully explained.  It was clear that he had been living in New Zealand for about 2½ years prior to the trial, taking with him his tools of trade as an electrical contractor.  There were questions raised in the trial surrounding some business projects undertaken by members of his family in the immediate geographical area of where the husband was living, being an area where the family had not previously had any connection. 

1. His Honour found that the husband had been significantly reluctant in disclosing his financial affairs in New Zealand.  He said (emphasis added):

“7.      The husband’s evidence in relation to his financial affairs in New Zealand and his relationship with Ms C was unsatisfactory.  His Statements of Financial Affairs (Forms 13, sworn 10 November 2004 and 30 March 2005) were inaccurate, incomplete and misleading.  Generally the husband was unco-operative and reluctant to produce or make available documentation and the like in relation to his financial affairs.  I was not prepared to accept his evidence unless it was corroborated and where it was in conflict with that of the wife, I preferred her evidence.  The husband acknowledged that he had breached his undertaking to the court (see Exhibit 21).

…       

16. The events leading up to the date of separation satisfied me that the husband had planned to leave the wife and relocate to New Zealand and reside with Ms C and in doing so, surreptitiously –

·received his superannuation entitlements and later banked them in an account in New Zealand in the amount of $16,624

·sold his motor vehicle

·removed his personal effects and chattels from the matrimonial home and had them shipped to New Zealand as unaccompanied luggage and in addition stored furniture with a neighbour

·removed cash from the parties’ bank account and the W Trust Account totalling $34,273

In addition, the husband had withdrawn moneys from ATMs, claiming that those moneys were building expenses.  In his oral evidence he endeavoured to persuade me those moneys were utilised to meet building expenses on the matrimonial home.  The evidence in this regard was unsatisfactory.  However, having regard to –

·Prior to May 2002 the parties met weekly and recorded expenses incurred;

·After May 2002 the husband failed to continue that practice and ignored the wife’s request to formally meet and record expenditures;

·Husband’s relationship with Ms C;

·Husband’s subsequent removal of funds from Australia and investment of those funds in New Zealand;

·Husband’s lack of candour with respect to his relationship with Ms C and his financial affairs in New Zealand;

·Statements made by husband to Australian Bureau of Statistics;

·Wife’s inability to reconcile the cash money removed from the ATM by the husband;

·Costs of renovations had increased from $180,000 as budget to costs exceeding $473,000, the husband purporting to supervise the work

it is open to me to infer, and I do, that the husband has used those funds for his own purposes and I propose taking into account the sum of $69,170 as an add-back, being moneys received by the husband.

…

19The husband was an executor of his father’s Will and a residuary beneficiary.  The husband failed to make a full disclosure of his interest in his father’s estate and of his investments and financial affairs and could have obtained and provided to this court all relevant information regarding his father’s estate.  The evidence satisfied me that the husband was well aware of the financial position of his father’s estate and his entitlement thereto.  It is open to me to infer, and I do, that the husband has entered into a financial arrangement with the beneficiaries of his father’s estate and has received his entitlement, or part thereof and has utilised that in acquiring the house where he new [sic] resides.

20The evidence satisfied me that the husband was not open and frank about –

·his interest in the unit in T, New Zealand

·his arrangement  with members of his family to utilise moneys from his father’s estate

·the work carried out by him in New Zealand;  in cross-examination he stated he worked for his brother on an unpaid basis

·the utilisation of a bank account in which he purported to pay rent to his father’s estate.

21The husband could have called evidence from New Zealand to clarify his financial interests in New Zealand, but he did not and instead, chose only to disclose matters when pressed.  I draw the inference that the husband has assets in New Zealand of significant value, but which I am unable to quantify, save that the Unit in which he resides, has a value of in excess of $250,000.  I propose having regard to the husband’s interests in New Zealand when I consider the Section 75(2) factors.”

1. Given the finding by the trial Judge in par 7 that he would not accept the husband’s evidence unless it was corroborated, it was open to the trial Judge, in our view, to arrive at the conclusion that the husband had not satisfactorily explained how he had dealt with the cash withdrawals and thus reach a conclusion that absent any other explanation the husband had inappropriately utilised the joint assets of the parties in a manner that would make it unjust to the wife to ignore the fact that the husband had taken cash and not properly accounted for it.

1. The second argument advanced on behalf of the husband as to why it was inappropriate to add the husband’s drawings back into the pool of assets was that in so doing the trial Judge had acted inconsistently in the manner in which he dealt with monies taken by the wife.

1. The wife tendered at trial a summary of her expenditure from October 2002 to March 2005.  It disclosed average weekly expenditure of $876.11.  Included in that figure was the sum of $11,244 spent on furniture.  As against that sum there was reference to the wife recouping $4,600 from the sale of furniture.

1. There is no reference in the reasons for judgment as to the manner in which the trial Judge dealt with the wife’s drawings and expenditure in the period post-separation.  We would observe, however, that there does not seem to be anything remarkable in her having required a sum of less than $900 per week for her self-support during that period. 

1. In fairness to the trial Judge it should be noted that in final addresses the husband’s counsel Mr Culshaw barely touched upon the issue of any add-backs for the wife’s unexplained expenditure saying only (AB689):

“…we seek that also added back are the shares sold by the wife, and what we submit is the additional amount which represented personal expenditure of the wife over--which she has taken from the overdraft amount.”

1. Absent the matter being stressed as a live issue before the trial Judge we do not think it was incumbent upon the trial Judge to make any further comment about it nor to make any findings about it.  The issues that related to the wife’s post-separation expenditure differed significantly from the issues raised by the husband’s removal of cash that the trial Judge was not satisfied had been satisfactorily accounted for in circumstances where the husband was subsequently able to acquire assets in New Zealand.  Whilst it may have been appropriate for the trial Judge to make some allowance for the husband’s necessary living expenses for 2½ years in New Zealand post-separation, given that the trial Judge was totally unsatisfied as to exactly what the husband’s economic circumstances were in New Zealand, including his capacity to earn income in New Zealand, it was open to the trial Judge to remain unsatisfied as to the explanations proffered for the manner in which the funds had been expended and to notionally add them back into the pool as a premature advance to the husband of assets jointly accumulated by the parties in the course of their relationship.  It is important to note that there is no concept of double counting in that the assets which the husband might have acquired in New Zealand by utilising the funds removed from Australia have not been added into the pool of assets available for division between the parties.

The contribution adjustment

1. The trial Judge dealt with the contributions as follows:

“25It is not my intention to deal with the manner by which the parties acquired and developed their various financial interests.  It is well documented and in general the parties are in agreement.  What did emerge from the evidence is –

·prior to the date of separation, the wife has made a substantially greater initial financial contribution than the husband;

·throughout the marriage the wife has been in employment and on occasions held three positions at the same time, and her income and financial contribution were greater than as set out in paragraph 23 of the husband’s affidavit;

·the wife has received monies from her mother (over and above the $35,000 I have provided for) amounting to approximately $15,000;

·for his part, the husband has earned substantial income and in addition has made a contribution from his superannuation and leave entitlements;

·after his retirement the husband was involved in the various business interests of the parties and renovation of the matrimonial home;

·the parties made an equal contribution as home-makers.

26When I balance the parties’ contributions to the date of separation, I would regard them as being equal.

Post-separation contributions

27       When I consider –

·the wife was left with the burden of finalising the renovations to the matrimonial home;

·the wife had to raise finance to meet the parties’ commitments;

·the wife’s income was utilised to met [sic] some of the parties’ expenses;

·the husband’s removal of moneys from the parties’ account at a time when it was necessary to meet their commitments;

it is open to me to infer from the evidence, and I do, that as a result of the husband leaving the wife and the additional pressure put on her to handle the parties’ financial interests in Western Australia, that her health  deteriorated.  Had the wife not taken over the burden of managing the financial matters and the renovations to the matrimonial home the result may well have been that the parties’ assets in Western Australia were substantially less than what they are today. It is because of the wife’s substantial post-separation contributions that I would assess their respective contributions as 60% for the part of the wife and 40% for the part of the husband.”

1. The gravamen of the complaint is that the trial Judge has exaggerated the significance of the wife’s initial financial contribution and failed to pay proper attention to the very significant contribution made by the husband from his superannuation and long leave entitlements.  In addition, it was said that the adjustment for post-separation contribution gave too much weight to the events that occurred between separation and trial. 

1. The trial Judge had identified the relevant contributions at par 9 and par 10 of his judgment.  We have already made reference to these matters, namely that the wife’s initial capital was $85,000 plus a motor vehicle whilst the husband’s was $35,000.  In addition he had superannuation entitlements that were valued at $62,708 shortly after the marriage.  The superannuation and long service leave entitlements were finally liquidated in 1998.  There is no challenge to the proposition that they were applied by the husband towards the joint benefit of the parties.

1. It is submitted, and we think with some force, that to identify the disparity in the initial capital contribution ($50,000) as “a substantially greater initial financial contribution” and then to make an almost passing reference to the husband’s $218,000 superannuation plus leave entitlements of $63,000 as “a contribution” pays inadequate attention to the significance of the husband’s contributions.

1. In his written submissions, and confirmed by his counsel before us, the husband conceded he did not seek to upset an overall outcome based on an assessment of 60 per cent in favour of the wife, and 40 percent to him, subject to the “add-back” of $69,170.  As we have already reached the conclusion that it was open on the evidence for the trial Judge in the exercise of his discretion to add-back such sum for reasons we will set out shortly, we conclude an overall division of the pool as found by the trial Judge as to 60 per cent to the wife and 40 per cent to the husband is appropriate.  Accordingly, we do not think it is necessary to make any further observations in relation to the conclusions reached by the trial Judge in respect of the parties’ respective contributions. 

Section 75(2) factors

1. Having made the intermediate assessment of the parties’ relevant contributions the trial Judge then set to examine whether any further adjustment should be made under s 79(4)(e) having regard to what are described as s 75(2) factors.

1. The trial Judge concluded that the wife would have the capacity to earn income to support herself post-separation.  He concluded that the husband would have the capacity to earn income.  He identified that the husband was in a new relationship but could not ascertain with any confidence the financial arrangements relating to that arrangement.  He concluded by saying:

“29…As previously mentioned, the husband has financial interests in New Zealand.  The husband’s conduct in these proceedings, and in particular his failure to provide relevant financial information about his financial affairs in New Zealand, leads me to conclude that his interests there are substantial.”

1. Having identified those factors his Honour concluded that a further 10 per cent adjustment was appropriate in favour of the wife.

1. What his Honour failed to expressly identify and give weight to was the disproportionate share of the visible capital that the wife would be receiving by reason of the contribution assessment.  That entitled her to receive assets to the value of 20 per cent of the pool in excess of those of the husband, namely an extra $268,000.  Whatever the shortcomings in the husband’s evidence, it appeared fairly clear that the genesis of any assets that the husband held in New Zealand had come mainly from the husband’s father’s estate to which the wife could not be said to have made any contribution.  To the extent that the acquisition of the New Zealand assets were otherwise dependent upon monies that had initially been earned through the joint efforts of the parties, that factor had already been adjusted for by the notional add-back of approximately $70,000 removed by the husband.  The effect of dividing the pool of assets on contribution 60/40 in favour of the wife was to already give her an allowance for 60 per cent of the monies so removed.  In all of the circumstances, we find it difficult to identify any factor that would make it appropriate to further adjust the pool of assets beyond the contribution based entitlement.

1. Whilst the authorities such as Black and Kellner (1992) FLC 92–287 and  Weir and Weir (1993) FLC 92–338 make it clear that the Court can be generous in drawing adverse conclusions as to the size of the pool of assets available for distribution in circumstances where there has been less than full and frank disclosure, the unusual aspect of this case is that the extent of the unknown financial resources available to the husband arose almost exclusively out of matters unconnected to the wife, namely the husband’s inheritance. It has not been suggested with any force that whatever the husband has managed to accumulate in New Zealand he has done so by the improper utilization of the parties’ jointly earned assets nor does the case involve circumstances where the wife is unable to adequately support herself.

Re-exercise of the discretion

1. Whilst we are conscious of the limitations on appellate interference in a discretionary judgment, we nonetheless conclude that no further adjustment ought to have been made by the trial Judge in relation to any factors properly identified under s 79(4)(e) and that accordingly it is appropriate that the appeal be allowed and the orders adjusted accordingly.

1. In order to achieve that result it will be necessary to vary Orders 5(k) and 7(e) as pronounced by the trial Judge.

1. The balancing sum calculated by the trial Judge in Order 5(k) of $105,129 represents 70 per cent of $150,184 for the husband’s add-backs included in the pool of assets.  As we are reducing the wife’s entitlement to 60 per cent of that figure the sum will need to be reduced to $90,110.

1. The orders that we propose to make are:

1.      The appeal be allowed.

2.      That Order 5(k) of the orders made by the Honourable Justice Tolcon on 6 April 2005 be varied to read:

“the balance be divided 60 per cent to the applicant and 40 per cent to the respondent and from the respondent’s share the sum of $90,110 be paid to the applicant”.

3.      That Order 7(e) made by the Honourable Justice Tolcon on 6 April 2005 be varied to read:

“the balance be divided as to 60 per cent to the applicant and 40 per cent to the respondent.”

The costs appeal

1. After delivering his judgment Tolcon J heard an application by the wife for the costs of the proceedings.  Mr Dowding SC on behalf of the wife sought to rely upon the husband’s failure to make proper disclosure and further sought to rely upon an offer that was contained in correspondence that had passed between the parties’ solicitors in September 2004.  He said (Transcript 715):

“…it’s our respectful submission in all these circumstances that there ought to be an order based on an indemnity cost and we’ve indicated that that was a basis of our application.

HIS HONOUR:          What were your costs and your instructor’s costs for the period from the day—first day of trial?

MR DOWDING:        Your Honour we’ve estimated—we’ve estimated these costs to the—to—

HIS HONOUR:          From the—I think we started on the 29th of March.

MR DOWDING:        We did, your Honour.

HIS HONOUR:          From the 29th of March, up to and including today, the costs are?  That’s counsel fee and instructor’s fee.

MR DOWDING:        Roughly, $42,000, your Honour.

HIS HONOUR:          Right.  Yes.  Thank you. 

(TO MR CULSHAW):  Yes, Mr Culshaw.  You needn’t address me on the indemnity basis.”

1. After hearing some submissions from the husband as to the disparity in the financial position of the parties the trial Judge delivered a short costs judgment in which he said that:

“Having regard to the conduct of the husband and his failure to comply with orders of this Court, balanced against the financial circumstances of each party as a result of my judgment, and taking into account my warning to the parties at the commencement of proceedings, it is appropriate that the husband should pay some costs. 

The costs that I propose are that he should bear the costs as from and including the first day of trial.  The trial has taken 7 days.  Counsel for the wife has estimated them to be in the order of $42,000. 

It is not appropriate to have costs taxed, I can use my discretion.  It is appropriate that the order for costs should be -- having regard to the fact that the husband resides in New Zealand and will be leaving shortly that I fixed [sic] costs.  The amount that I propose fixing is the sum of $40,000, to be paid by the husband to the wife and that shall be deducted from his share of the proceeds of sale of the former matrimonial home.”

1. The appellant contends that on a party/party basis the appropriate amount for costs should not have exceeded $25,000.

1. Section 117 of the Family Law Act (1975) (Cth) provides the Court with a wide power to “make such order as to costs…as the court considers just”. 

1. Rule 19.18 of the Family Law Rules (2004) (“the Rules”) provides that absent a valid costs agreement between a lawyer and a client the maximum amount of costs a lawyer may charge and recover for work done for a case is to be calculated in accordance with Schedules 3 and 4 of the Rules.  Rule 19.19 provides:

“19.19 Party and party costs

(1)      The court may order that rule 19.18 does not apply and that a party is entitled to costs:

(a)      of a specific amount;

(b)as assessed on a lawyer and client basis or an indemnity  basis 

(c)to be calculated in accordance with the method stated in the order, or

(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

Example

For paragraph (1) (c), the stated method may be in accordance with Schedule 3 but with an additional percentage for complexity.

(2)In making an order under sub rule (1), the court may consider:

(a)the importance, complexity or difficulty of the issues;

(b)the reasonableness of each party’s behaviour in the case;

(c)the rates ordinarily payable to lawyers in comparable cases;

(d)whether a lawyer’s conduct has been improper or  unreasonable;

(e)the time properly spent on the case; and

(f)expenses properly paid or payable.”

1. In this case, the maximum scale amount for counsel to appear was $2,171 per day and the amount to be allowed for an instructing solicitor would be calculated at $182 per hour in the absence of a costs agreement.  The conceded amount of $25,000 for seven days is an amount slightly in excess of scale.

1. Given that the trial Judge indicated to counsel appearing on behalf of the husband that he was not intending to make an order on an indemnity basis and given that no other explanation was made as to why it was inappropriate to depart from the normal rule that party/party costs ought to be paid on a scale basis, we would conclude that in accordance with the dictates of natural justice an order that exceeds that which has been conceded by the husband cannot stand.  Whilst there is clearly power to make any order for costs that the Court thinks appropriate, where the Court intends to depart from calculating a figure that approximates a scale amount, there is an obligation on the Court to explain why it is appropriate that there be departure from the obligation.  Absent any such explanation, an order that accords with party/party costs on the scale basis is the appropriate order that should be made.

1. We will further order that Order 1 of the orders made by the Honourable Justice Tolcon on 7 April 2005 be varied by substituting the sum of $25,000 for the sum of $40,000 therein appearing.

Costs of the appeal.

1. At the hearing of the appeal the respondent sought an order for costs even if the appeal was allowed.  In the alternative she sought a certificate under the Federal Proceedings (Costs) Act 1981 (Cth). The appellant resisted any order for costs being made in the respondent’s favour if the appeal was allowed. He also sought a certificate under the Federal Proceedings (Costs) Act 1981 (Cth).  There was an application made to Tolcon J for a stay of enforcement pending the appeal.  On 28 September 2005 his Honour made orders relating to that application and reserved the question of the costs relating to the stay to the Full Court.  Neither counsel addressed us in relation to those costs.  Assuming that was an oversight we propose to invite short submissions on those reserved costs.  

1. This appeal having succeeded on a question of law we think it is appropriate to grant the relevant certificates to both parties.

Orders

1.        The appeal be allowed.

2.        That Order 5(k) of the orders made by the Honourable Justice Tolcon on 6 April 2005 be varied to read:

“the balance be divided 60 per cent to the applicant and 40 per cent to the respondent and from the respondent’s share the sum of $90,110 be paid to the applicant”.

3.        That Order 7(e) made by the Honourable Justice Tolcon on 6 April 2005 be varied to read:

“the balance be divided as to 60 per cent to the applicant and 40 per cent to the respondent.”

4.        Order 1 of the orders made by the Honourable Justice Tolcon on 7 April 2005 be varied by substituting the sum of $25,000 for the sum of $40,000 therein appearing.

5. The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.

6. The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.

7.        If either party wishes to make an application for costs incurred in the stay application dealt with by the Honourable Justice Tolcon on 28 September 2005 and reserved to the Full Court then that party should file and serve a short written submission in support of the application upon the other party within 7 days of the publication of these reasons. Any submission in response thereto shall be filed and served within 7 days thereafter.

I certify that the 56 preceding
 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.



Associate