Walden and Roman
[2008] FMCAfam 260
•25 March 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WALDEN & ROMAN | [2008] FMCAfam 260 |
| FAMILY LAW – Practice & procedure – costs of property hearing – offers of settlement during course of proceedings – whether extent of disclosure by husband gave the wife opportunity to give proper consideration to offer. |
| Family Law Act 1975 Federal Magistrates Court Rules 2001 |
| Chang and Su (2002) FamCA 156 Kannis and Kannis [2002] FamCA 1150 Kohan and Kohan (1993) FLC 92-340 Weir and Weir (1993) FLC 92-338 Walden & Roman [2007] FMCAfam 342 |
| Applicant: | MR WALDEN |
| Respondent: | MS ROMAN |
| File Number: | SYM 2079 of 2006 |
| Judgment of: | Sexton FM |
| Hearing date: | 14 March 2008 |
| Delivered at: | Sydney |
| Delivered on: | 25 March 2008 |
REPRESENTATION
| Solicitors for the Applicant: | Hamish Cumming Family Lawyers |
| Solicitors for the Respondent: | Kartsounis & Co. |
| Counsel for the Respondent: | Ms J Haughton |
THE COURT ORDERS THAT:
The husband’s application for costs be dismissed.
The husband pay the wife’s costs of the costs application in the sum of $3,910 within 14 days.
All outstanding applications otherwise be dismissed and the matter removed from the list of cases awaiting finalisation.
IT IS NOTED that publication of this judgment under the pseudonym Walden & Roman is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 2079 of 2006
| MR WALDEN |
Applicant
And
| MS ROMAN |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern the husband’s costs of property proceedings. After a hearing before me in March 2007, final orders were made and Reasons for Judgment published on 29 May 2007.
In his application for costs filed 26 June 2007, the husband sought costs in an amount agreed or as taxed. However, at hearing, the husband sought costs of $17,094.55, calculated in accordance with Schedule 1 of the Federal Magistrates Court Rules2001. The wife sought an order that the husband’s application be dismissed and an order for costs of the costs proceedings.
The husband made written offers of settlement to the wife before he commenced proceedings for property adjustment and during the course of the litigation. The husband’s solicitor submits that the proceedings could have been avoided altogether, or finalised much earlier, had the wife accepted one of the husband’s offers, in particular the offer of
14 August 2006. The wife submits that she was never in a position to assess any offer of settlement from the husband because the husband failed to fully and frankly disclose his financial position despite his obligation to do so.
The husband relies on his Application filed 26 June 2007 and his affidavit sworn 26 June 2007. The wife relies on her Response filed 21 August 2007, an affidavit of her solicitor, Ms Connie Hiloudakis sworn 20 August 2007 and her own affidavit sworn 21 August 2007.
Short history
The husband commenced proceedings for property adjustment on
5 September 2006in the Family Court of Australia. The husband sought orders providing for him to receive $165,000 or 30% of the net proceeds of the sale of the former matrimonial home. In her Response filed 12 December 2006, the wife sought a transfer to her of the former matrimonial home, subject to mortgage. The proceedings were transferred to the Federal Magistrates Court on 13 December 2006. The final hearing was held on 5 and 6 March 2007. In my Reasons for Judgment, I made a finding that the net asset pool including superannuation available for distribution between the parties was $707,613.00. I ordered that the wife receive 65% and the husband 35% of that net pool. As a result of this determination, I ordered the wife to pay the husband $92,137 within 2 months of order and for the husband to transfer his interest in the former matrimonial home to the wife. In the event of failure to comply, I ordered that the former matrimonial home be sold and the net proceeds divided in accordance with each party’s entitlement.
The following facts are not contested:
i)
The husband made offers to settle the proceedings on 7 July 2004, 4 August 2004, 21 October 2005, 5 April 2006,
14 August 2006, 9 October 2006, 13 December 2006,
20 December 2006and 17 January 2007.
ii)
The wife advised the husband either that she was unable to consider an offer of settlement until the husband made full disclosure of his financial position, and/or sought further financial information from the husband by letters of 14 July 2004, 31 August 2004, 27 April 2006, 5 May 2006,
28 September 2006, 5 October 2006, 13 December 2006,
2 February 2007 and 8 February 2007.
iii)The husband remarried in July 2006. The wife was unaware of the husband’s present wife’s financial circumstances or the financial circumstances relating to the cohabitation until 16 February 2007, despite seeking that information from the husband from September 2006.
Legal principles
In accordance with s.117(1) of the Family Law Act 1975 the usual rule in family law proceedings is that each party pay his/her own costs. However, s.117(2) provides that the court may order costs if it is of the opinion that there are circumstances that justify it in doing so, subject to s.117(2A). The Full Court in Kohan and Kohan (1993) FLC 92-340 said that although the Court has a discretion to order costs on an indemnity basis, such an order is an exception in the Family Court and is “a very great departure from the normal standard.” Neither party sought indemnity costs in these proceedings.
Although the husband relies on s.117(2A) (e) and (f) in support of his claim for costs, when the court is considering what order should be made the court must have regard to all the matters referred to in s.117(2A) subsections (a) to (g).
(a) The financial circumstances of each party
The husband concedes that he is in a stronger financial position than the wife. At hearing, I found the husband was earning an annual gross income of $233,000. I found he had a superior earning capacity to the wife and that his income well exceeded his weekly expenses which included a voluntary contribution of nearly $500 a week to superannuation. I found that the husband’s new wife was in full-time employment with a salary in excess of $100,000 per year and although there was a Binding Financial Agreement in place between the husband and his new wife to keep their financial arrangements largely separate, I was satisfied that the husband enjoyed an advantage over the wife in being able to share expenses with Ms V, his new wife.
The husband says he has received a substantial inheritance as a result of his father’s death at the end of 2007. The husband declined to provide the court with details as to the amount of his inheritance without an order to do so. However, as conceded by the husband, I am satisfied the husband is in a substantially better financial position than he was at the time of hearing.
At the time of hearing, I found that the wife was working full time and earning $40,000 per annum as an accounts payable officer. I found her weekly income was significantly less than her expenses and that she had negligible savings.
In her affidavit sworn 21 August 2007, the wife deposes to the former matrimonial home being on the market and to anticipating receiving, after payment of her debts, an estimated $430,000 to $454,000 from the sale. The wife anticipates having to meet costs of purchase at an estimated $21,900 to $24,200 and to being able to purchase a duplex in the area in which she has been living, for between $509,000 and $560,000. I am satisfied it will be financially difficult for the wife to meet the loan repayments on borrowings she will require to purchase a duplex in the area of the former matrimonial home.
It is not necessary for the court to examine in close detail each party’s financial position in a costs hearing. It is enough to consider each party’s position in broad terms[1]. On the basis of my findings at the hearing of the property proceedings, and on the basis of the further financial information available to me in these proceedings, I am satisfied the husband earns a far greater income than the wife and has significantly greater financial resources available to him than the wife. This is a matter to which I have regard.
[1] Browne and Green [2002] FamCA 791 at paragraph 26
(b) Whether a party is in receipt of legal aid
Neither party is in receipt of legal aid.
(c) The conduct of the parties in relation to the proceedings
The wife contends that she was never in a position to give informed consideration to any of the husband’s offers of settlement, because until just before final hearing, the husband had not fully disclosed his financial circumstances. In addition, the wife argues that she incurred costs as a result of the husband’s failure to provide full and frank disclosure of his financial position. In her affidavit sworn 20 August 2007, the wife’s solicitor, Ms Hiloudakis detailed the husband’s and the husband’s solicitors’ conduct during the proceedings, and the additional work she was required to take on behalf of the wife, to ascertain the husband’s financial position. In particular, Ms Hiloudakis claims:
i)The parties separated in May 2004 and in that month, the husband retained solicitors, Slade Manwaring.
ii)By letter dated 14 July 2004, the wife’s solicitors sought particulars from the husband’s solicitors of assertions the husband had made about his financial position. That letter was not answered.
iii)In correspondence in September 2004, following requests from her for further financial information, the husband’s solicitors advised they would collect the further information so each party could exchange that further financial information.
iv)From September 2004 until May 2006, Slade Manwaring did not communicate with the wife’s solicitors such as to clarify the husband’s financial position. The wife’s solicitors received no financial information from the husband until August 2006, by which time the husband had retained Stuart Fowler & Partners to act for him.
v)On 5 May 2006, as a result of an offer of settlement sent from the husband to the wife in April 2006, the wife’s solicitors advised the husband directly by email, they were still awaiting financial particulars and the wife was unable to consider an offer of settlement until those particulars had been provided.
vi)In April 2006 the husband advised the wife by email that he held superannuation of $113,756. By letter of 5 May 2006, the wife’s solicitors questioned this figure because it had barely increased on the figure provided in July 2005. In August 2006, Ms Blanchfield, solicitor of Stuart Fowler & Partners provided the wife’s solicitors with a revised value for the husband’s superannuation at $151,250.
vii)On 30 June 2006 the husband and Ms V entered into a binding financial agreement. Neither the husband nor his solicitors advised the wife of this Agreement until February 2007. Ms Blanchfield of Stuart Fowler & Partners advised Ms V in relation to the Agreement.
viii)The husband married Ms V in July 2006. Subsequently, the husband retained Ms Blanchfield to act for him in the property proceedings.
ix)By letter of 14 August 2006, the husband’s solicitors sent a letter to the wife’s solicitors with a folder of documents relating to the husband’s financial position and a Financial Statement sworn by the husband on 11 August 2006. However, the husband did not forward statements in relation to his account with ING Bank, nor in relation to the joint account held with his wife Ms V. In his financial statement sworn 11 August 2006, the husband did not disclose his interest in the joint account with Ms V, and did not disclose his interest in nor liability in relation to Trendwest time share. In his financial statement sworn 1 September 2006, the husband disclosed his interest in Trendwest time share but did not disclose his interest in an account with Ms V. He disclosed that Ms V earned $126,376 per annum and that he earned $233,324 per annum. As a result of these high incomes, the wife believed the husband and his wife may have accumulated savings or purchased other assets.
x)
The wife’s solicitors requested details as to Ms V’s financial position by letter of 5 October 2006 and further letter of
2 February 2007. By letter dated 5 February 2007, the husband’s solicitor said “our client is not able to provide the information as to his wife, Ms V.”
xi)
Ms V affirmed an affidavit as to her financial position on 16 February 2007, in compliance with a court order of
8 February 2007, following her objection to a subpoena issued to her for the production of financial documents by the wife’s solicitors in January 2007.
xii)The wife incurred costs in relation to the issuing of a subpoena to Ms V, costs of a process server and professional fees of two appearances in this court, as a result of the husband’s refusal to provide particulars as to Ms V’s financial position.
While the husband does not contest these assertions, the husband denies he failed to fulfil his obligation to provide full and frank disclosure of his financial position. I do not accept the husband’s contention. On the basis of Ms Hiloudakis’ evidence, I am not satisfied the husband provided full and frank disclosure of his financial position in accordance with his statutory obligation to do so.
(d) Whether the proceedings were necessitated by a failure of a party to comply with a previous court order
This factor is not relevant.
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings
This factor is not relevant.
(f) Whether a party has made an offer in writing to the other party to settle the proceedings and the terms of any such offer
In Browne and Greene [2], the Full Court (Kay, Coleman and Warnick JJ) made it clear that:
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 ought normally to be given. It is clearly a circumstance that would justify the making of an order for costs.
[2] [2002] FamCA 791 at paragraph 57
The husband made a number of written offers to settle the proceedings:
i)In July 2004 the husband offered to settle on the basis of 60% of the net assets to the wife, and 40% to the husband. The assets taken into account excluded a debt to the wife’s mother, which was included by the court at final hearing, and included a debt to the husband’s father which was excluded by the court at final hearing. The wife achieved a better result at hearing than the husband’s offer being a 65/35 division in her favour. I am satisfied the July 2004 offer does not assist the husband’s case for costs.
ii)In August 2004, the husband offered to settle on the basis of a 60/40 division in favour of the wife including sale of the former matrimonial home. Similarly to the July 2004 offer, I find this offer does not assist the husband’s case for costs.
iii)
By letter of 14 August 2006 the husband made an offer to settle on the basis of a 70-75% division in the wife’s favour, depending on whether or not there was a sale of the home (and a consequent saving in sale costs). The offer provided for the husband to transfer his interest in the home to the wife, on condition the wife pay the husband $70,000 and discharge the loan secured by way of mortgage on the home. The husband would receive his superannuation entitlements and motor vehicle, and retain his liabilities, which included a $20,000 debt to his father. This offer remained open for
7 days from the date of the letter and was accompanied by a sworn financial statement and a folder of financial documents. The letter from the husband’s legal representatives states that “because our client understands that there has been some question in your client’s mind as to the frankness of disclosure to date, we enclose with this letter a sworn Financial Statement and a folder of documents by way of disclosure.”[3] The husband then agreed to extend the period by a further 7 days at the request of the wife’s solicitors.
iv)By letter of 20 December 2006[4] the husband offered to settle the matter on the basis of a payment to him of $107,000. Given the wife was ordered to pay the husband less than this amount at trial, I am satisfied this offer does not assist the husband’s case for costs.
v)On 17 January 2007 the husband made a further offer to settle the proceedings which provided for the wife to pay him $80,000 and to discharge the joint mortgage within 14 days and for the husband to transfer the former matrimonial home to the wife. The offer remained open for 24 hours. [5] The wife’s counsel did not take issue with the period of time the offer remained open.
[3] Annexure E to husband’s affidavit filed 26 June 2007
[4] Annexure P to husband’s affidavit filed 26 June 2007
[5] Annexure Q to husband’s affidavit filed 26 June 2007
I address this factor in my Determination.
(g) Any other matter the court considers relevant
The wife’s counsel, Ms Haughton, submits that Ms Blanchfield’s conduct in failing to disclose details of Ms V’s financial position and details of the husband’s financial relationship with Ms V, when she had acted for Ms V in relation to the Binding Financial Agreement, is an additional matter to which I should have regard.
Stuart Fowler & Partners did not act for the husband at the hearing of these proceedings and adduced no evidence as to their position in relation to Ms Haughton’s contention. I therefore make no finding in relation to this factor.
Determination
The wife’s counsel submits the husband should not be rewarded with a costs order when he prevented the wife having sufficient information about his financial position, to enable her to decide whether or not to accept an offer of settlement. The husband’s solicitor does not dispute the facts asserted by the wife’s counsel, but submits the husband is nevertheless entitled to a costs order on the basis of his efforts to settle the matter, and in particular his offer of settlement dated 14 August 2006, which would have resulted in a better result for the wife than the court ordered after final hearing.
As the Full Court made clear in Browne and Greene [6] a reasonable offer made in circumstances when each party had adequate knowledge of the other’s financial position, would normally carry significant weight in deciding whether a costs order is justified. The central question in this case is whether the wife had adequate information about the husband’s financial position to give proper consideration to the husband’s offers between August 2006 and January 2007.
[6] [2002] FamCA 791 at paragraph 57
I find the husband failed to fully disclose his financial position until very close to the date of hearing. As already noted, I am satisfied that as at August 2006, the wife was not aware of Ms V’s financial position, nor the financial circumstances relating to the husband’s cohabitation with Ms V, nor was the wife aware of the husband’s interest in a time share. With the benefit of hindsight, the husband can say that his time-share interest had no bearing on the outcome of the case. While this is true, I am not persuaded that this excuses the husband’s conduct in failing to disclose this interest.
In relation to Ms V’s financial position, in my Reasons for Judgment, I made a finding that Ms V was in full time employment earning in excess of $100,000. Ms V’s financial position was a factor I took into account in assessing the wife’s entitlement to a s.75(2) adjustment of 15%. I made it clear [7] this factor increased the wife’s overall entitlement to 65% of the net asset pool. Once cohabiting with Ms V, the husband had an obligation to provide details of the financial circumstances relating to his cohabitation with Ms V. It is not contested that he had not done so when he made his offer to settle the matter in August 2006 and in January 2007.
[7] Walden and Roman [2007] FMCAfam 342 at paragraph 42
It is well established by authority that each party has an obligation to make full and frank disclosure of his/her financial position in financial proceedings. The Full Court in Kannis [8] approving the decisions of Chang and Su [9] and Weir [10] held that whether disclosure is wilful or accidental is not relevant.
The duty to disclose is absolute. Where the Court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated.
[8] [2002] FamCA 1150
[9] (2002) FamCA 156
[10] (1993) FLC 92-338
I find that the husband’s decision not to provide full and frank disclosure to the wife deprived the wife of the opportunity to give proper consideration to the husband’s offers of settlement.
Having regard to my findings in relation to the factors in s.117(2A) of the Act, I am not satisfied an order for costs in favour of the husband is justified. I therefore dismiss the husband’s application for costs.
Costs of the costs application
The wife seeks her costs of the costs application. Although the wife’s counsel did not quantify the wife’s claim and the husband’s solicitor did not make submissions in relation to the wife’s application I am satisfied there is enough evidence before me to decide this question without inviting further submissions from either party.
As already noted, costs are governed by s.117 of the Act. In relation to the factors listed in s.117(2A), I have regard to subparagraphs (a) (c) and (e). I take into account my finding that the wife is in an inferior financial position to the husband. I take into account that the husband was wholly unsuccessful in the costs proceedings. I take into account my findings in relation to the husband’s conduct in the substantive proceedings. On the basis of these factors, I am satisfied a costs order in favour of the wife is justified.
In assessing quantum, I have excluded the mention on 4 February 2008 because that appearance was necessary as a result of the wife’s solicitor’s error in relation to dates. I take into account the following items in the schedule:
| Lump sum for opposing interim application up to completion of first court day | $1875 |
| Court attendance: 24 August 2007 | $205 |
| Court attendance: 18 October 2007 | $205 |
| Preparation half day hearing (discretionary) | $500 |
| Hearing fee half day (+50% advocacy loading): 14 March 2008 | $1125 |
TOTAL: | $3910 |
I am satisfied an overall costs order in the sum of $3,910 is reasonable and I order accordingly. The husband’s solicitor did not address me on the question of time to pay, but acknowledged the husband had recently received a significant inheritance from his late father. I will require the husband to pay the costs ordered within 14 days.
I certify that the preceding 34 paragraphs are a true copy of the reasons for judgment of Sexton FM.
Associate: Skye Owen
Date: 25 March 2008
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