Weiman and Paige (Costs)

[2014] FamCA 173

FAMILY COURT OF AUSTRALIA

WEIMAN & PAIGE (COSTS) [2014] FamCA 173

FAMILY LAW – COSTS – PROPERTY PRCEEDINGS – OFFERS IN WRITING MADE – section 117(2A)(f) – where each party ought to have accepted an offer of settlement made in writing albeit at different times – where the husband had no funds following the payment of legal costs which might be available to meet a costs order – where financial circumstances of the parties were significant matters considered

Family Law Act 1975 (Cth)
Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Browne & Green (2002) Fam LR 428; FLC 93-115
Harris & Harris (1991) 15 Fam LR 26; FLC 92–254
Higginbotham & Robinson (1991) 14 FamLR 559; (1991) FLC 92-209
In the Marriage of Pennisi (1997) 22 FamLR 249
Jamal v Secretary, Dept of Health (1988) 14 NSWLR 252
Lennon & Lennon (Costs) [2012] FamCA 116
Lenova & Lenova (Costs) [2011] FamCAFC 141
MacDougall v. Curlevski (1996) 40 NSWLR 430
Oliver & Oliver (No 2) [2010] FamCAFC 174
Penfold v Penfold (1979-1980) 144 CLR 311
Rhazi & Rhazi (Costs) [2011] FamCA 428

APPLICANT: Ms Weiman

RESPONDENT: Mr Paige

FILE NUMBER: SYC 5643 of 2010

DATE DELIVERED: 24 February 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Le Poer Trench J

HEARING DATE: 28 November 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Pender

SOLICITOR FOR THE APPLICANT: J.S. Pinto & Co

COUNSEL FOR THE RESPONDENT: Ms McIntosh

SOLICITOR FOR THE RESPONDENT: JNT Legal

Orders

1. The wife’s application for costs is refused and dismissed.

2. The wife is to forthwith pay to the husband the sum of $6,000 by way of costs.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5643 of 2010

Ms Weiman

Applicant

And

Mr Paige

Respondent

REASONS FOR JUDGMENT

Introduction

1. Following the delivery of a judgment by me determining property division pursuant to section 79 of the Act, the wife makes application to the court for an order requiring the husband to pay her costs. The precise order sought by the wife is as follows: “The husband pay the wife’s costs incurred by her in respect of the s 79 proceedings between the parties as and from 19 April 2012. Such costs to be as agreed or in the absence of agreement as assessed.”

2. The husband opposes the application sought by the wife and seeks an order that the wife’s application for costs, as specified above, be dismissed.

3. In addition to the opposition the husband identified to the wife’s application for costs, he filed an application of his own on 28 November 2013 in which he sought an order that the wife pay his costs as and from 6 May 2010 or such other date as the court may determine. Alternatively, the husband sought orders that the wife pay all of the costs incurred as a result of the appointment of the single expert Mr R to value the husband’s business ($9903.61). Those costs included the fees paid to the single expert together with the costs incurred by him in supplying documents to the single expert and answering all the questions asked of him by the single expert.  The husband also sought costs in respect of two issues which were ventilated during the course of the hearing, those being allegations of the husband’s alleged non-disclosure on and from 20 September 2010 and in relation to a debt owed to the Australian Tax Office as and from 20 June 2011. Further, the husband sought his costs in relation to the costs hearing currently under consideration.

4. In support of the husband’s own application and in the response to the wife’s application, he relied on an affidavit sworn on 22 November 2013 by his solicitor Anthony Laarakkers and a Financial Statement sworn by the husband on 18 November 2013. That affidavit annexed a copy of an offer of settlement made by the husband to the wife on 6 May 2010. I will address that offer later in these reasons.

5. In pursuit of her application, and in response to the application of the husband in relation to costs, the wife tendered documents and made submissions.

6. The hearing of evidence (in the costs applications) concluded on 28 November 2013 and was then followed immediately by submission made on behalf of the application wife on that same day. There was insufficient time on 28 November 2013 for the husband to be able to respond to the wife’s submissions and to provide submissions in support of his application for costs. Having heard from each of the parties’ legal representatives as to the manner in which the proceeding might be concluded, I made the following orders and directions

   1.I grant leave to the husband to rely on his application filed today.

   2.I direct that the husband provide submissions (a.) in response to the wife’s application for costs and (b.) in support of his application for costs by 5 December 2013. The submissions are to be provided to my Associate by email in word form and cc’d to other party.

   3.The wife is to respond to the husband’s submissions in support of  his application for costs by 9 December 2013 The submissions are to be provided to my associate by email in word form and cc’d to other party.

   4.I reserve my judgment .

7. Pursuant to the above orders, the husband’s legal representative provided to the court his written submissions. The submissions were dated 4 December 2013 and received by email on 5 December 2013.

8. On 12 December 2013, the court received submissions (directly from the wife’s counsel Ms Pender) on behalf of the wife pursuant to order (3) made on 28 November 2013. In relation to those submissions, I have only had regard to that part thereof which complies with the order of the court and addresses response to the husband’s submissions in support of his application for costs. No leave was sought, nor was it granted, to permit the wife to canvass in her submissions any matters outside the order number (3) made 28 November 2013.

9. Additionally and on 12 December 2013, the court received from J.S. Pinto and Co (the solicitors for the wife) a copy of the submissions prepared by Emily Pender on behalf of the wife and provided to the Court pursuant to Order (3) of 28 November 2013. In addition, J.S. Pinto and Co annexed a document apparently emanating from the Child Support Registrar and issued on 2 October 2013. No application was made, nor was any leave granted, to the wife to reopen the hearing of the costs application. The Court therefore has not taken into account the contents of that document.

10. On 16 December 2013, the husband’s counsel provided by email a further document purporting to be submissions in response to the submissions of the wife provided pursuant to Order (3) of the 28 November 2013. No leave was sought, or provided, to enable the husband’s counsel to make those submissions. I have not had regard to those submissions.

11. On 20 December 2013, the Court received from the wife’s solicitor J.S. Pinto and Co a document purporting to emanate from the Child Support Agency dated 17 December 2013. No application was made to reopen the hearing for the purpose of tendering that document, nor was any leave given to enable same to be tendered. I have not had regard to that document.

12. On the same date (20 December 2013) the Court received from the husband’s counsel an email opposing the court receiving into evidence the document attached to the wife’s solicitor’s email dated 20 December 2013.

13. A matter which needs to be borne in mind is that the proceeding before the court (in relation to which each party makes a cost application) was not only a property adjustment proceeding, it also included a parenting dispute which did not resolve until the end of the second day (or commencement of day three) of the trial. No application for costs is made arising out of the parenting proceeding.

The wife’s application for costs

1. The wife’s application was supported by a number of documents which became exhibits in the proceedings. Those exhibits consisted of the following:

   a.Exhibit W1: a document titled “Open offer of settlement in relation to property” filed on behalf of the wife on 19 April 2012;

   b.Exhibit W2: a copy email from the wife’s counsel to the Court dated 23 September 2013. Such email requesting a relisting so that the wife may pursue an order for costs.

   c.Exhibit W3: a bundle of correspondence of approximately 60 pages between parties’ lawyers, which is said to canvass possible resolution of the property proceedings;

   d.Exhibit W4: a copy of a “Costs Notice” issued to the applicant wife by her solicitors with date imprint 15 March 2013, together with a document titled “Statement of Account” from the wife’s solicitors to the wife dated 27 November 2013.

   e.Exhibit W5: Copy Child Support Assessment, relating to the parties and their children, issued on 2 October 2013.

2. During submissions, the wife also referred to exhibits which had been tendered in the hearing during March 2013. Where it is appropriate, I will refer to those specific exhibits.

3. In her oral submissions made on 28 November 2013, the wife, through her counsel, put that a relevant authority for the court to have regard to in the determination of this case is Robinson & Higgenbotham 1991 FLC 92-209. The relevance of that authority to the argument being advanced on behalf of the wife was not made apparent to the Court during the course of the wife’s submissions. Given that the decision cited, principally related to the wording of s 117(2A)(f) as it existed in 1990/91 (“whether either party to the proceedings has, in accordance with section 117C  or otherwise, made an offer in writing”) and that since that decision that sub-section has been amended to remove any reference to section 117C, the confusion which the Court finds itself in, as to the relevance of Robinson & Higgenbotham, is probably apparent. Nonetheless, there are some parts of that decision which may prove helpful as hereafter referred to.

4. In order to comprehend what follows in these reasons, the starting point is to record the orders made by the Court on 19 September 2013. Those orders are as follows:

   (1)The parties are to do all things necessary to cause the funds standing to their credit in the controlled monies account held by JNT Legal to be distributed in the following manner and order of priority:

   (a)      an initial sum of $131,329 is to be paid to the wife;

   (b)      a second sum of $51,644 is to be paid to the husband; and

   (c)any balance thereafter is to be divided in the ratio of 65% to the wife and 35% to the husband.

   (2)Other than as provided for in these Orders and as between the parties, the husband and the wife are each declared to be the legal and beneficial owners of all other property and financial entitlements in their names, possession or control, or to which they are each presently legally or beneficially entitled, including furniture and furnishings, monies in bank accounts, real estate, motor vehicles, shares, superannuation entitlements and insurance policies.

   (3)Other than as provided for in these Orders and as between the parties, the husband and wife are each responsible for the payment of all debts and liabilities standing in their name and each party is to indemnify the other in respect thereof.

   (4)Other than as provided for in these Orders, all outstanding applications, save as to costs, are dismissed.

5. The wife addressed her arguments to s 117(2A) of the Act. The wife relied on exhibit W1 and asserted that document established that at the time it was served, the wife indicated clearly that she would settle the proceedings on the basis that she received $184,326 from the proceeds then standing in the controlled monies account (having been generated from the proceeds of the sale of the former matrimonial home) of $199,969. The wife in that offer indicated that the amount was to be equivalent to 60 per cent of the sum of $307,211 and that sum was the product of the funds standing in the controlled monies account together with two amounts totalling $107,242, which were to be treated as notional assets thereby giving rise to a total pool of $307,211. Each party was to retain those assets in their possession and or sole name and each party was to retain their superannuation benefits. The husband was to retain his trade business and tools of trade.

6. The $107,242 figure, referred to in exhibit W1, was said to be made up of $80,000 being the parties withdrawal of $40,000 each from the sale proceeds, and the sum of $27,242.31, being money removed from the parties sale proceeds fund by the Australian Tax Office, to satisfy the husband’s then outstanding tax liability.

7. The orders made on 19 September 2013, as recited above, specified in order (1) how the funds standing in the controlled monies account were to be divided. The determination of the court, as recorded in paragraph 202 of the judgment, found that the amount standing in the controlled monies account was $182,973, together with any interest which may have accrued since the figure referred to had been provided to the parties. Effectively, the wife received $131,329, together with 65 per cent of any additional interest which may have accrued to the account. In determining the figure the wife was to receive from the controlled monies account the court had included as a notional asset the $80,000 figure representing that part of the original sale proceeds fund which the parties had equally received. The only other assets (notional or otherwise) which made up the balance sheet asset items consisted of a car for each of the parties, of about equivalent value (approximately $9,500 each) and identical amounts of household contents for each party valued at $2,500.

8. The wife’s submission is that, given the date of the offer of settlement (19 April 2012), the husband would have received a greater benefit (taking into account additional costs he incurred in the proceedings following that date) than the situation he found himself in following the determination on 19 September 2013. In relation to the offer of settlement contained in exhibit W1, the husband would have received $15,643 from the net proceeds reposing in the controlled monies account. The wife referred to other evidence which established that the funds the husband will now receive from the controlled monies account will be exhausted in meeting outstanding legal costs.

9. The wife then referred the court to page 133 of the affidavit of Mr Laarakkers, affirmed 22 November 2013. The wife submitted that the letter appearing at that page of the affidavit and continuing to page 136 (a letter from the wife’s solicitor to the husband’s solicitor dated 11 February 2011) established that the wife would be prepared to settle the case on the basis that she receive $200,000 from the sale proceeds of the former matrimonial which, at that time, on figures totally relied upon by the wife, was equivalent to 56 per cent of the assets of the parties. It should be noted that part of the pool which the wife asserted existed at that time, was not established by the wife in the property hearing before me.

10. The wife’s counsel then referred the court to page 147 of the affidavit of Mr Laarakkers, being a letter dated 20 April 2012 from the wife’s solicitors to the husband’s solicitors. On page two of that letter (page 148 of Mr Laarakkers’ affidavit) at numbered paragraph (4), the wife confirmed her offer to settle for $144,326 from the balance of the controlled monies account. At that time, each of the parties had received $40,000 from the sale proceeds which had initially been invested in that account. The wife submits that the sum of $144,326 is only marginally more than that which the Court ordered she receive ($131,329) and accordingly, given the costs incurred by the husband since 20 April 2012, it would have been prudent for him to resolve the case at that time on that basis.

11. Although the document marked W1 did not specifically state that the outcome of the offer of settlement would be that the wife would receive from the controlled monies account the sum of $144,326 it was, in my opinion, the only available conclusion.

12. The wife submitted that the offer of settlement contained in exhibit W1 should have been accepted by the husband. She submits that the offer represented only a small amount more than the final orders of the court provided to her. She submitted that it was unreasonable and imprudent for the husband to proceed with the incurring of costs in relation to the property matter in the face of the wife’s offer. I agree with that submission. However, as appears later in these reasons, I have also found that the wife should have accepted an offer of settlement made by the husband at a much earlier date namely 6 May 2010. I conclude therefore that considering section 117(2A)(f) the wife ought not succeed in recovering costs as and from 19 April 2012 as her application sought. There are however other matters under section 117(2A) to be considered.

13. The wife addressed s 117(2A)(a) of the Act. The financial circumstances of the parties were as specified in the reasons for judgment given on 19 September 2013. On behalf of the wife it is submitted that she continues to be the principal caregiver to the parties’ children. It was asserted that the husband’s provision of child support was minimal (in fact nil). This last assertion as to the amount of child support provided by the husband to the wife had been the subject of controversy in the property case hearing.

14. The wife addressed s 117(2A)(c) of the Act. Under this heading, the wife attacked the conduct of the husband in relation to the proceedings. In particular, she submitted that the husband had failed to make an appropriate disclosure of relevant documents and information relating to the business operated by him at and since the date of separation.

15. The wife submitted that although she made offers of settlement, the husband declined to do so (I note the evidence does not support that assertion as will later be specified).  In relation to exhibit W3, she pointed to letters from the husband’s solicitors to the wife’s solicitors dated 8 July 2010, 28 September 2010 and 28 October 2010. She submitted that in each of those pieces of correspondence, the husband advised that “property issues will not be resolved until such time as children’s are finalised.” The applicant wife says this is a matter which should be taken into account against the husband in this costs application. I do not accept that submission. A proper reading of the documents referred to by the applicant wife gives rise to a conclusion that the husband wished to settle the children’s’ matters before addressing property matters. In the circumstances, this is a fairly usual approach as the parties’ responsibility for the care of the children is a significant matter to have regard to pursuant to s 75(2) of the Act in the determination of an application under s 79 of the Act. Further, the husband had made an offer to settle the property matter at an earlier time. I canvass this matter when I consider the husband’s application for costs later in these reasons. Clearly each case needs to be determined on its own facts. In some cases it will be unreasonable for a party to take the position that until parenting issues are resolved no discussion in relation to property division can take place. In other cases that stand may be reasonable. A complete “shut door” on any negotiation in relation to property matters until parenting issues have been determined would, in my view, in almost every case, be unreasonable. In this case each party made overtures to the other about settlement of property in 2010.  They each knew the general outcomes the other was prepared to consider in order to settle property. There had not, in my view, been a “shut door” approach by the husband to considering property settlement before the parenting issues were resolved.

1. The applicant conceded that the children’s consent orders were not entered into until the end of the 2^nd day/beginning of the third day, of the hearing in this matter, which commenced with outstanding disputes in respect of parenting orders and property division orders.

2. Still continuing to address the husband’s conduct of the proceedings, the wife submitted that the husband prolonged the hearing by calling additional witnesses to give evidence in relation to his homemaker and parent contributions. Contrary to that behaviour, the wife says she elected not to pursue evidence of Ms X Weiman (a witness she was proposing to call) and further elected not to cross-examine the jointly appointed expert in relation to the value of the husband’s business.

31.The husband’s contributions as a homemaker and parent were in issue between the parties and the evidence adduced by the husband, also from the same witnesses, addressed children’s issues. I therefore conclude that this submission from the applicant wife does not advance her case. Further, given the nature of the case which the wife sought to run in relation to the value of the husband’s business it is difficult to see how her cross-examination of the single expert might have advanced her case. Nonetheless, I accept some time may have been saved by that decision made by the wife.

1. Further, the wife submits that the husband failed to comply with the courts directions in respect of filing of his affidavit in a timely manner. It was submitted that his affidavit and annexures ran to 680 pages and thereby lengthened the hearing. It was further submitted that his affidavit was not received until one week before the trial.

2. A number of issues flow from this last submission. Firstly, there is nothing to suggest that the wife was prejudiced by the late filing of the husband’s affidavit material.

3. In relation to the size of the husband’s affidavit, it was predominately made up of annexures which supported the affidavit evidence set out in the body of the affidavit. The affidavit, in pages one to sixty-three, addressed the husband’s evidence in respect of both parenting and property applications. The balance of the affidavit consisted of annexures. Those annexures provided corroboration of the evidence provided by the husband in his affidavit.

4. The wife submitted that the husband’s offers of compromise were unrealistic in the circumstances. I am unable to accept that this is a conclusion which I could adequately determine as being correct unless I was made aware of each of the parties’ circumstances at the time the offers were made. I will, in due course, address any offer of compromise relied upon by the husband.

5. It is submitted on behalf of the wife that her attempts to ascertain the extent of the asset pool were frustrated by the husband in the lead up to the hearing. The wife points to exhibit W5 which is a child support assessment notice issued on 2 October 2013. This provided that the there was a nil payment required by the husband to the wife for the period 25 February 2013 until 31 December 2013. The wife also referred the court to exhibit W3, which had been tendered in the hearing on 13 March 2012. That document was dated 5 March 2013 and, inter alia, provided the following information. The current rate of child support payable was nil. There were arrears owing by the husband to the Child Support Agency of $1,634.59. A table of payments received showed that commencing on 17 March 2012 and in every month thereafter, the husband had paid $180 by way of child support. Also forming part of exhibit W3, tendered on 13 March 2013, were two Child Support Assessments, the first one being for the period 6 August 2010 until 15 March 2011, which showed a liability for payment by the husband to the wife at a monthly rate of $432.25; the second for the period 16 March 2011 to 30 June 2011 showed a requirement for the husband to make a monthly payment of $84.25.

6. The wife drew the court’s attention to exhibit W5, which had been tendered in the hearing on 14 March 2013.This consisted of a letter dated 14 December 2011, which had been sent to the Child Support Agency by the husband. It was in the nature of an application by the husband to waive penalties and accrued interest in relation to outstanding child support payments required to be made by him. He applied for a variation of the child support assessment for a period of time during which he said he was without employment.

7. In the letter dated 14 December 2011 (written by the husband to the Child Support Registrar), the wife drew attention to the following paragraph:

   I have no money in any bank account or do not own any item of value to sell; I have given all my worldly goods and everything I have ever owned during my marriage and home to my children and ex-wife at the time of separation. I have come from this separation and now am divorced with nothing, and rely solely on my continuing efforts to obtain work and family support to help me get through to the other side where I will be able to build a new life again with my children with me.

8. The wife then drew attention to other evidence which emerged during the cross-examination of the husband demonstrating that as at 14 December 2011, he did indeed have funds in his bank account. Further, he had paid a deposit in respect of the camping holiday he was proposing to make with the children during the Christmas school holidays. In respect of the funds standing to the credit of his bank accounts, the husband said those funds did not represent profits to him but rather monies which needed to be paid to suppliers when their accounts required payment.  I accept that evidence because of the way in which it was given and also because of the circumstances surrounding the husband’s work as a contractor at the time.

9. The wife referred to exhibit W7 which was provided to the Court on 15 March 2013. This was a copy of a bank statement in respect of an account held in the name of the husband trading as Business S. The date of the statement was 31 December 2010, with the first entry being dated 1 October 2010 and the last being dated 12 December 2010. This account showed that the husband had funds in the account in credit during that period of time. The wife also referred to exhibit H5, which had been tendered on 14 March 2013 and consisted of Business Activity Statements for Business S during the period 1 July 2010 and 30 June 2012. The wife submitted these documents established that the husband had a business earning an income of substance during that period of time.

10. Again the wife took the Court to exhibit W10 which was tendered on 15 March 2013. This document was a bank statement in respect of an account titled “Redi Access Account” being an account of the husband’s. This document showed that on the date when the husband represented to the Child Support Agency (14 December 2011) that he had no funds available, he in fact had in the vicinity of $460 in the account. Otherwise the account appeared to have small amounts of money, with the maximum balance between 12 November 2011 and 7 April 2012 being $753.

11. The wife complained that the husband did not list in his affidavit evidence all of the accounts which he operated at relevant times.

12. The consequence arising from the above matters of non-disclosure, so submits the wife, is that the trial length was extended because it was necessary for her to cross-examine the husband about these matters and elicit evidence which should have been provided at an earlier time. It was submitted the husband had been ordered in May of 2012 to provide copies of all relevant documents, however, he had failed to do so.

13. In response to the wife’s application for costs, the husband relied on the submissions provided in writing by his counsel dated 4 December 2013. In paragraph 26 of the affidavit of Anthony Laarakkers sworn 22 November 2013 he annexes as annexure L a facsimile received from the wife’s solicitor dated 20 April 2012. This facsimile explains the offer of compromise which had been dated 13 April 2012. It explained 60 per cent of the pool figure (as contended for by the wife in this offer) provided a payment to the wife from the fund of $184,326. As the wife had already received $40,000 of that fund, it left $144,326 to be paid.

14. To restate what I have said earlier, the orders made by the Court on 19 September 2013 provided for the wife to receive 65 per cent of the parties’ assets and superannuation where those percentages related to the balance as determined by me. The total net pool I found to be $287,140.50. In addition, there was a superannuation pool of $14,648, making a total of $301,789. The wife was to receive by that determination $186,641 by way of division of assets and $9,522 in superannuation. As the wife already had assets (both real and notional as included in the balance sheet) the orders provided that she was to receive $131,329 from the preserved fund held in the controlled monies account. The husband, for his part, was to receive $51,644 from the controlled monies account fund.

15. One of the matters to be remembered in determining the arguments of the parties, in relation to offers of compromise, is that a single expert, Mr R, was appointed to value the husband’s business. This appointment was over the objections of the husband, who had volunteered to include in the balance sheet an agreed figure of $5000 for the value of his business. This concession was made in open court in the lead-up to the trial. The wife, however, refused the offer and insisted on a valuation. Subsequently a valuation was obtained at a cost of about $11,000 and that established the value of the husband’s business as nil. I was informed by the wife in her costs argument that she would not be pursuing the husband for any part of the costs of the single expert appointed to value his business.

16. There are a number of authorities which deal with offers of compromise and the proximity of those offers to the final result achieved at the hearing. Those authorities consider s 117 of the Act and, in particular sub-section (2A)(f).

17. The starting point, in any consideration of the provisions of section 117, is appropriately the jurisprudence which falls from the High Court.  In Lennon & Lennon (Costs) [2012] FamCA 116, Murphy J cited the following portion from the High Court decision in Penfold v Penfold (1979-1980) 144 CLR 311:

    In Penfold v Penfold (1979-1980) 144 CLR 311 at 315 the plurality of the High Court held

    It is an accurate description of s 117(1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s 117(2). As subs (1) is expressed to be subject to subs (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.

    Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this, there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s 117(2) in "a clear case.

    [8] It is important, in my view, to note that the plurality went on to say (at 315-316):

    Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs, there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised ... Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs. [Citations omitted]

18. Section 117(2A)(f) of the Family Law Act 1975 states:

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

    …

    (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.

19. In 2005, s 117(2A)(f) was amended to remove the reference to section 117C from the subsection. Some of the authorities considered in these reasons pre-date that amendment.

20. The Family Law Rules provide in Pt 19.4 the circumstances in which a party may seek an order for costs.

Applicable Law: The Full Court

1. Full Court decisions regarding costs, where a party has rejected an offer of settlement, include:

   ·Higginbotham & Robinson (1991) 14 FamLR 559; (1991) FLC 92-209 (“Higginbotham”);

   ·Harris & Harris (1991) 15 Fam LR 26; FLC 92–254 (“Harris”);  

   ·In the Marriage of Pennisi (1997) 22 FamLR 249 (“Pennisi”); 

   ·Browne & Green (2002) Fam LR 428; FLC 93-115 (“Browne & Greene”); and

   ·Lenova & Lenova (Costs) 2011 FamCAFC 141 (“Lenova”).

2. In Higginbotham, the wife made an offer to settle in terms that were almost identical to the orders made following the trial.  The only difference between the offer and the orders was that the husband retained a horse trailer.  The trial judge refused to award costs on the basis that the orders, which the wife had originally sought, were outside the range.  The wife appealed.

3. The Full Court said (at 560):

   It is quite clear, and it was accepted by her Honour, that the offer made on behalf of the wife, albeit not made within the terms of Family Law Act 1975 (Cth) s 117C was an offer which quite remarkably anticipated the outcome of the hearing. It was, therefore, argued that having regard to the provisions of s 117(2 A)(f) the wife was entitled to her costs.

4. The Full Court said it was “reluctant indeed to interfere with the exercise of discretion in respect of costs.” 

5. The Court concluded (at 561):

   It is quite clear that the offer made by the wife was not in accordance with s 117C but comes within the terms of the words “or otherwise” and in this matter it is a most relevant consideration. I accept Mr Rose's submission that para (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case. To give an example, if a party has brought a proceeding in this court totally without any merit which is summarily dismissed, I would have thought that in those circumstances, para (e) would become of great weight and importance and it would be difficult in that case, unless there were some peculiar circumstances, to resist an argument that costs should be awarded against the unsuccessful party because that is what para (e) is all about.

   Similarly, when one looks at para (f) it 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 position whereby he or she can wear out the other by simple attrition. In the circumstances of this case, although para (f) does not have a priority per se, the considerations represented by para (f) are of overriding importance.

   It is, therefore, my view that her Honour erred in not awarding the wife reasonable costs incurred after the date on which the offer was made, 12 April 1990. There was an application before her Honour for a specific inclusion of certain costs and on certain bases. It is my view that those are matters to be properly considered by the taxing registrar who, no doubt, will also consider the remarks that have fallen from this court.

6. In Harris, the wife made an offer to settle by way of consent orders, the proposed minutes of which she filed.  The husband rejected these proposed orders, and the trial judge held that the filed minutes constituted an offer to settle. The trial judge made an order for costs against the husband.  One of the husband’s grounds of appeal concerned the costs order.  The Full Court said:

   Under s 117(2A)(f), one of the matters to which the court shall have regard is “whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer…” His Honour considered that the minutes constituted an offer to settle “otherwise” than in accordance with s 117C, and that, for that reason, an order for the costs incurred by the wife since the filing of the minutes was appropriate.

   We do not wish to be taken as endorsing the view that where a party recovers that which he or she seeks by way of property settlement in an application or in any other documents such as, for instance, the minute in question here, an order for costs should follow as a matter of course. However, we are also of opinion that in the circumstances of this case the trial judge was within the limits of the proper exercise of his discretion: cf In the Marriage of Higginbotham and Robinson (1991) 14 Fam LR 559 ; [1991] FLC 92-209. Orders for costs are peculiarly a matter which are within the discretion of the trial judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.

   We would add that we perceive nothing which would indicate that the trial judge failed to take into account, or did not give proper weight to, the wife's financial position. The trial judge was fully aware of the financial position of the parties.

7. In Pennisi, the trial judge made an order for costs against the wife. The wife had rejected the husband’s offers to settle. The husband made these offers under s 117C of the Family Law Act. The matter proceeded to trial. The property orders made after trial were more favourable to the husband than the settlement offer which he made in his section 117C offer. The wife appealed the costs order.

8. There was a 1 per cent difference between the husband’s offer and the final property division under the orders. The Full Court (Nicholson CJ, Barblett DCJ, Faulks J) held:

   The husband's submissions refer to In the Marriage of Higginbotham and Robinson (1991) 14 Fam LR 559 ; FLC 92–209 as authority for the proposition that the fact that an offer just exceeds the award is no bar to an award for costs. Equally, however, it is only one of the factors to be considered under s 117(2A) and it is not the law that an offer of greater or equivalent value to that which results from the court will lead to an order for costs in favour of the offeror: In the Marriage of Harris (1991) 15 Fam LR 26 ; FLC 92–254.

   We would also add that just because an offer is marginally less than the amount ordered by a court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded.

   The requirement to take account of certain types of offers is mandatory, providing of course the fact of those offers are in evidence. The relevant portion of s 117(2A) is as follows:

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

   …

   (f) whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer. [Emphasis added]

   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.

1. In Browne & Green, the question of costs depended on, amongst other factors, disclosure and an offer of settlement.   

61.The Full Court (Kay, Coleman and Warnick JJ) stated at [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.

1. In Lenova, the Full Court (Bryant CJ, Coleman and Murphy JJ) delivered a costs judgment following an appeal. The husband sought costs of the appeal. He relied upon his written offer to settle the appeal. The wife opposed the order for costs and inter alia, informed the Court that all of the funds which had been received by her from the orders of the court at first instant ($850,000), had been paid to her legal representatives in satisfaction of their fees. Additionally the wife had received $39,000 pursuant to a s 90C Financial Agreement entered into by the parties contemporaneously with final property orders. She informed the court that all those funds had also been expended upon legal costs and living expenses. The wife’s only income was derived from her occupation as a “supermarket attendee”.

63.At [10] – [13] the Court stated:

10. In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (2) … each party to proceedings under this Act shall bear his or her own costs” (s 117(1)).  As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.

11. A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation.  Conversely (sic), where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs. 

12. That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations.  But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.

13. Whilst regard is had to the financial circumstances of the respondent wife, she was advised by legal practitioners at each stage of the proceedings. She can, in our view, be seen to have known the risks of refusing to compromise in the face of a written offer made before the appeal was filed. That factor, together with the husband’s success in the appeal warrant an order for costs being made in favour of the husband.

1. Clearly in paragraph 11 of the above decision the word “conversely” was mistakenly included and a word similar to “additionally” should be read in its stead.

2. There are some first instant judgments which are also of assistance in considering the operation of s 117(2A) of the Act.

3. Rhazi & Rhazi (Costs) [2011] FamCA 428, per Faulks DCJ, considered s 117(2A)(f). In that case the applicant wife sought an indemnity costs order against the husband. The wife had made an offer to settle prior to the trial. She had offered to settle the proceeding upon the husband paying her $250,000. The matter proceeded to trial, and the Court ordered that the husband pay $280,000 to the wife.

4. Faulks DCJ concluded that s 117(2A)(f) is the equivalent of payment into Court in the Supreme and District Courts (at [22]). As that determination is at odds with the Full Courts determination in Pennisi I need to consider the decision.

   22. In this regard, Mr McKeown has placed, at least in part, a gloss on the terms of s 117(2A)(f) of the Act, to the extent that he suggests that it is an offer that must in the circumstances have been reasonable for the other party to accept. 

   23. I do not accept that this is a proper construction of the terms of s 117(2A)(f) of the Act. In essence, s 117(2A)(f) is within the family law context, in my opinion, the equivalent of the payment of a party into court in civil proceedings in other places such as matters before the Supreme Court.

   24. The payment of money into court, taking that matter separately from s 117(2A)(f) for a moment, is not predicated upon a rationalisation or even a logical interpretation of all the proceedings before the Court, but is a practical and pragmatic offer to resolve the proceedings in a way which would enable the parties to move forward.

   25. The failure in accordance with the ordinary Rules in most Supreme Courts and District Courts or equivalent to accept an offer of payment into court and then not achieving a better result in the final order means that an order for costs is made, in essence, automatically.

   26. Section 117(2A)(f) is not couched precisely in those terms, and for good reason. Family law proceedings are frequently multi-issue proceedings in which there are a number of different factors applying which might be regarded differently by the parties at different times. In this regard, an offer to settle proceedings may or may not be predicated upon certain facts which may be not accepted by both parties at the same time. This means that, in essence, the assessment of whether an offer ought to be accepted or not may be dependent upon factors other than a simple evaluation of whether the offer conforms with what both parties agree or do not agree, as the case may be, is the pool of property and as to whether there will be a determination in one party’s interests and in favour of one party about some of those assets or about some other factors such as contribution or the financial circumstances of the parties in the future which would work one way or the other.

   27. Nevertheless, it seems to me that if an offer is made the party refusing to accept the offer does so at his or her risk as to whether or not in the future the proceedings might be concluded more favourably to the party making the offer than the offer itself was.  Such is the case in this matter. 

   28. It may well be that the husband took the view that at the time when the offer was made it was unlikely that the wife would succeed in establishing the matters that she finally did in accordance with my rulings which permitted the division of property to be made as it appears in my judgment.  The fact that he did not accept that that might be possible does not preclude his accepting an offer which would then preclude the fact that there will be further costs incurred on either side.  It may have been, although I make no finding to this effect, that because he was on legal aid it was not a matter that was troubling him as much as it might someone who was paying for his or her own fees.

   29. Nevertheless, it is open to a party to make an offer.  It is not required that that party should stipulate the basis upon which the offer is made and if a party to proceedings fails to accept that offer and, subsequently, is less than successful than he or she might have expected to be, then the consequences, it seemed to me, ought reasonably to flow that there should be an order for costs. 

5. Having set out the above in his judgment, the DCJ did acknowledge that his view that the making of an offer to settle in a property proceeding, pursuant to s 117C (or otherwise in writing), was the equivalent of making a payment into court of funds in a civil action in an Australian State or Territory Supreme or District Court, may be wrong.

6. Given that I am bound by the decisions of the Full Court, I must conclude Faulks DCJ’s above stated determination did not conform with the current position determined by the Full Court. If something could be drawn from Faulks DCJ’s above determination it is that it highlights the importance the DCJ placed upon the impact of a written offer to settle property proceedings in the Family Court of Australia, where such offer proves to be the same as, or greater than, the result the party receiving the offer ultimately achieves in the proceeding.

7. In addition to the comparison between a written offer of settlement made under the Family Law Act and a payment into court in a civil proceeding conducted in State or Territory Supreme or District Court being the subject of the Full Courts statement in Pennisi a comparison between section 117(2A)(f) and the determination of costs applications made in a State or Territory Supreme or District Court (at least so far as NSW is concerned) in civil proceedings, may not be of great assistance in the determination of a cost application in this court, because of the differing application of law in those courts.

8. Drawing on NSW as an example (and not seeking to suggest that the procedure and application of law in NSW is identical to other States and Territories), the determination of a cost order in a civil proceeding is subject to the provisions of the Civil Procedure Act 2005 (NSW)  and the Uniform Civil Procedures Rules 2005 (NSW).

9. The relevant sections of the Civil Procedure Act 2005(NSW) providing the power to make an order for costs in a civil proceeding is found in ss 98 and 183.

CIVIL PROCEDURE ACT 2005 - SECT 98

Courts powers as to costs

98 Courts powers as to costs

(cf Act No 52 1970, section 76; SCR Part 52A, rules 5, 6, 7 and 8; Act No 9 1973, section 148B; Act No 11 1970, section 34)

(1) Subject to rules of court and to this or any other Act:

(a)costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

CIVIL PROCEDURE ACT 2005 - SECT 183

General power of Court to make orders

183 General power of Court to make orders

(cf s33ZF FCA) 
In any proceedings (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings.

1. The Uniform Civil Procedure Rules also have application to the making of an order for costs in civil proceedings. Rules 42.1 to 42.11 are the applicable Rules. Rule 42.1 states:

UNIFORM CIVIL PROCEDURE RULES 2005 - REG 42.1

General rule that costs follow the event

42.1 General rule that costs follow the event

(cf SCR Part 52A, rule 11) 
Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

42.642.842.9

1. There are some Rules in the Uniform Civil Proceure Rules which provide for no discretion in particular circumstances. See Rules  .  Amendment of pleading etc. without leave; .  Dispute of fact subsequently proved or admitted; .   Dispute of authenticity of document subsequently proved or admitted.

2. The discretion reposed in the courts, as provided in Rule 42.1 above, is attended by jurisprudence providing guidance as to the circumstances in which the discretion not to make an order for costs in favour of a successful party has been exercised see Jamal v Secretary, Dept of Health (1988) 14 NSWLR 252 at 271-272 (considering costs of an appeal which would generally be awarded against an unsuccessful appellant), MacDougall v. Curlevski (1996) 40 NSWLR 430 (a successful party in an action being a re-hearing following an arbitration, had an order for costs made against them).

3. As can be seen from the matters set out above, the provisions of the NSW Civil Procedure Act and Rules, are quite different from the provisions of s 117(2A) of the Family Law Act. That section specifies in a mandatory form the matters which the Court must consider when determining a costs application made in proceedings under that Act. The section prescribes no weighting which the court ought to give to any of the sub-sections of s 117(2A). The discretion to make a costs order as provided for in s 117(2) is not as broad as that which a judge in the NSW State Supreme Court and District Court has by virtue of the Civil Procedure Act and UCPR. As part of considering how to exercise the discretion reposed in a Family Court judge by virtue of s 117(2) the judge must consider all of the matters referred to in subsection (2A).

4. In Lennon & Lennon (Costs) [2012] FamCA 116, Murphy J discussed the rationale for and application of s 117(2A)(f). He said at paragraph 70 and following:

   Offers to settle -- s 117(2A)(f)

   [70] Litigation in this court is expensive and, it seems, increasingly so. The consistent emphasis of the procedures of this court and indeed the Rules is to encourage -- at every stage of the proceedings -- conciliation and the resolution of disputes by agreement.

   [71] Further, and to that end, separate from the court processes and procedures, the court encourages actively the use of private alternative dispute resolution processes.

   [72] Where negotiation -- whether formal or informal -- fails, for whatever reason, there is, as a matter of practical reality, but one method by which parties can seek to avoid for themselves the cost of litigation. That is by making a written offer to settle demonstrating their bona fides and asserting clearly and unequivocally what they consider to be (relevantly) a just and equitable outcome of the proceedings the subject of their dispute.

   [73] Bona fide offers made in this way can be seen as involving significant peril if litigation is pursued in rejection of them. (See eg, In the Marriage of Murray (1990) 14 Fam LR 311; In the Marriage of Steel (1992) 15 Fam LR 5; Pennisi & Pennisi (1997) FLC 92-774).

   [74] In Browne & Green (2002) FLC 93-115 the Full court said (at [57]):

   We think that whilst 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 is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation on 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.

5. Further at paragraph 88 and 89 of his reasons Murphy J said:

   [88] Secondly, it was submitted that the husband could not accept the offers regarding property settlement without knowing what the parenting arrangement would be. In cases such as the present where both property and parenting issues are in dispute, it was submitted that those two matters are so interrelated that it is not possible to consider either of them discretely. I do not accept that.

   [89] There is no form prescribed in the Rules for making an offer. The Full court has observed that an offer does not have to precisely accord with s 117C before it may be taken into account (see for eg, Harris & Harris (1991) FLC 92-254; Kilch & Wood (2003) FLC 93-169). There is nothing preventing a party setting out extensively -- indeed prosaically -- the basis upon which they will accept an offer. It was open to the husband to respond to the wife's offers setting out the property settlements he would accept, depending on various parenting arrangements. There is nothing to prevent it and much to commend it.

6. The above quoted section of Murphy J’s judgment deals with a problem which the parties faced in the case under consideration by me. The parties in this case litigated about the parenting matter until the third day of the trial.

7. The application of s 117(2A)(f) has led the Court to conclude that no costs order should be made, despite offers of settlement being made in the property proceeding and where the result achieved by the party receiving the offer was not as advantageous as that presented by the offer to settle.

8. In Oliver & Oliver (No 2) [2010] FamCAFC 174, May J found that the applicant wife’s conduct in refusing offers of settlement had not obstructed the settlement of the matter (even though it proceeded to trial in the Federal Magistrates Court, with an appeal and re-exercise of discretion by May J in the Full Court). However, a variety of errors on the part of the Federal Magistrate (who had retired by the time the appeal was heard), new evidence from the husband (which led to the case being reopened), the injustice of requiring the wife to bear all of the husband’s costs led May J to make no order as to costs.

9. In contrast with the determination in Lenova, May J said that a costs order against the wife would obliterate the property that the wife received following the trial and that was a matter which was taken into account and given substantial weight.

Conclusion

83.The above referred to decisions confirm that the difference between an offer of settlement and the outcome of a subsequent trial, is not the only factor relevant to the exercise of discretion in relation to costs where an offer to settle has been made in writing. 

84.The Court is required to consider the offer of settlement, including the context in which it was made.  This extends to considering the wording of the offer (is it clear and unambiguous), the timing of the offer, the extent of disclosure (which affects the other party’s ability to consider whether the offer is suitable), the variance between offers (if multiple offers have been made), whether the dispute extends to the value of the subject property, the difference between the offer and the property division in the judgment and any other aspect of the offer which is relevant to the particular case.

Determination of the Wife’s Costs Application.

1. Before determining the applications for costs there is something which should be said about the approach the wife took to two issues which dominated her case. The first issue was the value of the husband’s business.

2. The husband is a tradesman. He operates a one-man business, namely himself. He has no employees. As he needs assistance in any job for which he has been contracted, he engages the services of contract labour and trades persons.

3. Any reasonable consideration of the circumstances of the husband and his business must reach a conclusion that it is most unlikely that his business would have any goodwill saleable on the open market. The husband’s tax returns, bank records and other business documents, on any reasonable analysis by a skilled lawyer with Family Law experience, should have manifested a conclusion that the business would have no saleable value, outside of its stock, plant and equipment.

4. The relevance of the husband’s business in this case ultimately rested upon illustrating the husband’s ability to earn an income and the quantum of same. It may have been that the wife was of the opinion that the receipts of the business did not accurately reflect the income received. This sometimes occurs in cases where there is an allegation that part of the income of the business was received in the form of cash and not deposited to any bank account conducted by the business or the proprietor of the business. A spouse facing such a circumstance then has to embark on a process of satisfying the court that the books of the business do not reflect its true trading position. The wife in this case did not do that, or if she did it was not made apparent to the court in the running of the case.

1. In this case, the consequence of the wife’s apparent pursuit of the issue of the value of the husband’s business proved to be a costly exercise for her which on any objective view had little to no chance of success.

2. The second issue which stands out as being an issue which should never have been pursued by the wife was the payment of the husband’s tax debt by the removal of funds by the Australian Tax Office from the Controlled Monies Account of the parties. The wife was entitled to be upset about the way in which the money was removed and the husband’s role in that process, however, the evidence is that the husband had been asking the wife to consent to the payment of the tax from the fund for some period of time before the funds were removed. The wife declined to give her consent. Part of the reason for her refusal to give consent appeared to be her seeking information about when and how the tax was incurred. A greater part of her refusal was that she held the opinion the tax should have been paid from another source of funds within the husband’s province.

3. Ultimately, the wife was unsuccessful in convincing the Court that the husband should be responsible for the payment of the subject tax. Again, any real attempt to analyse the situation in an objective manner appeared to be absent from the wife’s perspective. The tax was clearly incurred in the pre-separation period. No fund could be identified from which the husband should have paid the tax other than the sale proceeds of the parties’ property which ultimately made its way into the controlled money account.

4. The wife has established that her offer of compromise made 13 April 2012 should have been accepted by the husband. I am unable to estimate the costs which may be the subject of a costs assessment if an order for costs was made for a number of reasons.

   a.The wife does not seek any cost incurred by her relating to the work done by the single expert nor any cost incurred by her relating to the valuation prepared by the single expert.

   b.The proceeding included a parenting dispute which was heard at the same time as the property proceeding at least until the conclusion of the second day of the trial. No evidence has been provided to show how the costs incurred in relation to the property case might be isolated from necessary costs incurred in relation to the parenting proceeding.

5. Assuming the costs sought to be recovered by the wife are substantial and not a trivial amount (if trivial the cost application would not have been made) the question of the parties current financial circumstances require to be considered. The husband is already in a financial position where he is unable to meet his liability for legal costs incurred in the hearing and conduct of the case. He does not have an income against which an order might reasonably be made to pay any cost order by instalments of any meaningful magnitude. As pointed out by the husband’s counsel any order for costs made against the husband will inevitably lead to his bankruptcy.

6. I need to also have regard to the financial circumstances of the wife. Her financial position is not strong. She will lose from her judgment sum nearly $85,000 to pay her legal costs. She has already paid $30,000. There will, no doubt, be further costs to be paid in relation to this application.

7. The wife will have the care of the parties’ children for a greater proportion of time than the husband. Currently there is a nil payment required to be paid by the husband to the wife as child support. There is nothing to indicate that will increase substantially in the near future.

8. I conclude that, apart from the offer of settlement made by the wife, there is no other basis upon which I would be prepared to exercise my discretion and make an order for the husband to pay any part of the wife’s costs. I do not accept that the wife has sufficiently made a case for payment of her costs on any other basis required to be considered by s 117(2A).

9. In relation to making an order for the husband to pay the wife’s costs based upon the offer of compromise contained in exhibit W1, I would not be prepared to make such an order for the following reasons:

   a)As will be seen later in these reasons, there was an earlier offer of compromise made by the husband in the proceedings (May 2010), which I conclude the wife should have accepted.

   b)There is no reasonable prospect that the wife would ever recover any amount of a costs order if made.

   c)The making of an order is likely to lead to further litigation between the parties, being proceedings for enforcement of any order made and/or Bankruptcy proceedings.

10. Having considered the wife’s application for costs, I would not be prepared to exercise my discretion and make an order in her favour as sought by her.

The husband’s application for costs

1. On 28 November 2013, the husband filed an Application in a Case by which he sought an order that the wife pay his costs of the proceedings on and from 6 May 2010 or such other date as the court determined. In the alternative, the husband sought an order that the wife pay the husband’s costs of:

   a.   The appointment of the single expert, Mr R, to value the husband’s business ($9903.61);

   b.   Alleged non-disclosure of the husband ($1782);

   c.   The issue of the add-back in relation to the husband’s taxation garnisheed from the controlled monies account held on behalf of the parties ($1221).

2. The husband also seeks an order in respect of the costs application itself.

3. Although the Application in a Case, above referred to, was filed out of time, no point was taken in relation to same as the issue was then before the court as a consequence of the wife having notified the court of her intention to seek an order for costs. Further, in the Application for Final Orders (the wife’s) and the Response (the husband’s) filed in the proceedings determined by me on 19 September 2013, each of the parties had sought orders for costs. In the circumstances, had there been a challenge to the application of the husband on the basis of its late filing, I would have granted leave to the husband to proceed with his application, notwithstanding that late filing.

4. The arguments in support of the costs application are contained in the written argument provided by the husband’s counsel. The evidence to support the application is found in an affidavit sworn by the husband’s solicitor, Anthony Laarakkers, on 22 November 2013 and a Financial Statement sworn by the husband on 18 November 2013. The husband’s counsel provided her written submissions addressing the various sub-sections of s 117(2A) of the Act. The first subsection is the financial circumstances of each of the parties to the proceedings. The husband’s counsel recites that the orders of the court provided the wife was to receive $131,329 from the controlled monies account, held on behalf of the parties, and the husband was to receive $51,644. In the husband’s Financial Statement filed on 28 November 2013 he identifies an outstanding liability to his lawyers JNT Legal of $78,702. His assets consist of the funds which he is entitled to, pursuant to the orders of the Court made 19 September 2013, together with a small amount in a bank account and his motor vehicle. He also has a small amount of household contents. It is clear that unless he can come to some arrangement with his lawyers in respect of repayment of his outstanding legal fees, he may well be facing further proceedings (recovery and/or bankruptcy).

5. The husband relies on the wife’s counsel’s statement that the wife’s financial position has not changed since the conclusion of the hearing. The wife therefore remains in employment earning around $1000 per week. She resides with her partner, Mr K, who is also in employment. She has other assets including the contents of her abode and a motor vehicle. She has a liability for her legal costs, which, in the judgment of 19 September 2013, I recorded as $84,307. I expect that sum has increased with the pursuit of her costs application. The husband’s counsel makes the point that even if the wife was successful in her costs application it would be most unlikely to give rise to any payment by the husband to her. The most likely outcome would be bankruptcy proceedings taken against the husband.

6. The husband’s counsel addressed the “conduct of the parties to the proceedings”, as referred to in s 117(2A)(c). The husband says the costs incurred in relation to the appointment of the joint expert engaged to value the husband’s business, arises as a direct result of the wife’s conduct. In the affidavit by Mr Anthony Laarakkers, at paragraph 40 he sets out relevant evidence in respect of the costs incurred. On 28 May 2012 in open court, the husband offered to have the value of his business included in the balance sheet, for the purpose of the trial, at $5000. Notwithstanding that offer, the wife pressed to have the business valued and when the report was made available, it showed a value of nil. The wife relied on an alternative value as referred to by the single expert which relied upon the court accepting evidence that the value of the husband’s tools was greater than that attributed to same by the husband. The wife sought, in the hearing, to prove the value of the husband’s tools in a manner which those representing her must clearly have understood was unacceptable. That evidence was rejected by the Court.

7. Apart from incurring the cost of engaging the single expert, the husband incurred costs with his solicitor, which costs were associated in providing materials and engaging in correspondence and otherwise taking other action in order to comply with the order for the appointment of the single expert. The husband’s solicitor has included in his affidavit an itemised account for the work attributed to this valuation issue and has claimed an amount of $4158 including GST.

8. The husband addressed the issue between the parties in relation to the removal by the Australian Tax Office from the controlled monies account of a tax debt owed by the husband.

9. The husband’s solicitor says at paragraph 45, and following, in his affidavit, that on 20 June 2011 requests were made by the husband to the wife through their solicitors for permission to pay, from the controlled monies account, the amount outstanding on the husband’s tax debt. The husband says information was provided as to when the tax was incurred and it is submitted the tax liability was incurred in relation to the period of cohabitation. The wife refused to provide her consent.

10. The husband incurred costs in relation to this issue as set out in his solicitor’s affidavit. Those costs have been assessed at $1221. It is submitted, on the part of the husband, that at paragraphs 178-187 of the judgment I made conclusions in relation to the tax issue. That conclusion was that the amount of tax paid from the parties controlled monies account should not be added as a notional asset to the balance sheet.

11. The husband addressed the issue of costs incurred as a result of dealing with the wife’s allegation that the husband had failed to make a proper disclosure of relevant matters. In broad terms, the husband’s case is that during the course of the proceeding, disclosure was sought from the husband by the wife. It is alleged that the husband made disclosure by providing numerous documents to the wife’s solicitors. It is claimed, by the wife that, notwithstanding that provision of documents by way of disclosure, certain documents had not been produced.  The wife made a number of consecutive requests for documents which had already been produced. An itemised account of the costs incurred by the husband in answering requests for disclosure is set out in Mr Laarakkers’ affidavit at paragraph 49 and following. A total of $1,782 is claimed as the costs incurred by the husband in dealing with the wife’s requests for disclosure.

12. The husband’s submission is that although the wife made a claim during the hearing that he had not made a full and frank disclosure no omission of any moment was established by the evidence.

13. In submissions made by the wife at the conclusion of the property trial (which gave rise to the judgment on 19 September 2013), the wife made allegations that the husband had not made a “full and frank disclosure”. In particular, the wife addressed the failure by the husband to provide copies of bank statements in relation to all accounts conducted by him. Whilst the husband denied not having provided all of the relevant bank statements, the wife asserted that he had not provided at least some of those statements relating to particular numbered accounts. The evidence was very confusing as to what had or had not been provided in the nature of copies of bank statements by the husband to the wife. In any event, ultimately the wife did agree she had obtained copies of the bank statements, albeit through the medium of subpoena issued by or on her behalf. There was nothing of any moment (in dollar terms) arising from such bank records, although it was clear from the wife’s case, that she held the view the husband had hidden money which would be immediately available to him should he so desire. Certainly there was no finding by me to that effect.

14. The husband says the wife has been unsuccessful in certain aspects of her case. He submits that she was unsuccessful in her endeavour to have the Australian Tax Office debt (money taken from the controlled monies account) included as a notional asset on the balance sheet. It is submitted that the wife’s pursuit of this relatively minor fund prolonged the hearing and incurred costs for the husband.

15. As stated earlier, the order sought on behalf of the husband is that the wife pay the husband’s costs incurred by him as and from the date of his offer of settlement dated 6 May 2010, or such other date as the Court deems appropriate.  In the submissions made by the husband, he relies on paragraphs 6-26 of his solicitor’s affidavit. In particular, attention is drawn to the offer to settle made by the husband to the wife on 6 May 2010.

16. The husband relied upon annexure C to the affidavit of his solicitor, which is a letter dated 6 May 2010 from the husband’s solicitors to the wife’s solicitors, being an offer of settlement expressed under the heading “Without prejudice save as to costs”. In that letter, under various headings relating to “property”, the husband offers to resolve the property proceedings. The husband confirms an agreement he claimed to have with the wife, to sell the former matrimonial home and to “extinguish liabilities of the parties”. In addition, it is proposed that the mortgage, agency fees and conveyance costs would be paid from the sale proceeds. Thereafter, it was proposed that the balance be paid 60 per cent to the wife and 40 per cent to the husband. He proposed a division in specie of the household contents. There was no proposal in relation to superannuation, but rather a request that the wife provide details of her superannuation. The husband proposed to retain his Rodeo dual-cab ute and proposed the wife retain her Holden Berlina motor vehicle. The husband proposed that he retain his business and it be acknowledged that it had no value.

17. The husband says had the wife accepted that offer, then she would have been significantly better off than she finds herself at the conclusion of the trial and the judgment published. A difficulty with the offer is that it provides no details of what was to be encompassed under the “extinguishing liabilities of the parties” as proposed by the husband. That problem was overcome by the proposed joint application for approval of consent orders, and a copy of the consent orders proposed by the husband, which appears at pages 100, 106, 114, and 117 of the affidavit of Mr Laarakkers.

18. On page 85 of the affidavit of Mr Laarakkers is a copy of a letter dated 25 May 2010 from the husband’s solicitors to the wife’s solicitors. This letter refers to a proposed agreement apparently brokered between the parties themselves, and encloses a proposed application for consent orders to be made. The correspondence which thereafter flows shows an unrealistic approach to this litigation by the wife and a failure on her part to comprehend the impact of the cost of running this litigation whilst contending for a result which was, in my view, either at the maximum height of a possible range of results or above same.

19. It is a matter of agreement between the parties that the property was sold for $775,000 and the net proceeds after payment of agreed expenses was $300,392.97, which sum was deposited to the controlled monies account (see the wife’s affidavit of 2 August 2012 paragraph 180).

20. Sixty per cent of $300,392.97 is $180,235. Had the wife accepted the offer proposed by the husband in May 2010, her costs would have been considerably less than that which she faced at trial and thus she would have received a far more advantageous outcome than that which she has today.

21. As it transpired, the parties resolved the parenting proceedings on a basis very similar to that proposed in the original terms of settlement and the outcome of the property proceedings saw the wife achieve 5 per cent more of the equity in the former matrimonial home than that which was proposed in the original terms. However, in real terms the pool had been reduced substantially from that which would have been available immediately upon the sale of the property. In real terms, the wife suffered a significant loss by failing to agree to a division of the net sale proceeds of the former matrimonial home in her favour to the tune of 60 per cent.

22. Were it not for the financial circumstances of the wife (together with another matter referred to by me hereafter), and the fact she will be the primary carer for the children, the Court would be pre-disposed to making an order against her requiring a payment relating to the costs incurred by the husband in the property proceeding from the date of his offer in May 2010. The financial circumstances of the wife and her responsibility for the ongoing care of the children to a greater extent than that of the husband, mediate against that course of action. The net funds which will be available to the wife following meeting her legal costs will be substantially less than the $131,329 which she should receive pursuant to the Court’s order. Thus the financial circumstances of the parties, when weighed by me, convince me there should not be an order for costs in the broad terms as sought by the husband (the whole of the husband’s costs from May 2010).

23. I also take into account my conclusion that the husband should have accepted the offer made by the wife as referred to in her application for costs.

24. I conclude, however, that the wife should have been responsible for meeting the costs paid to the single expert which amount to $11,491 (see paragraph 43 of Mr Laarakkers’ affidavit). That sum has been deducted from the pool of money sitting in the controlled monies account and which was the subject of the orders of the Court. The orders of the Court realised a conclusion that the parties’ net assets should be divided in proportions 65 per cent to the wife and 35 per cent to the husband. The wife therefore should have been required to pay to the husband 35 per cent of $11,491, namely, $4022.

25. The husband in the affidavit filed by his solicitor sought (at paragraph 44) a payment from the wife of $5,745.61, being one half of the fees paid to Z Firm (Mr R’s firm). The husband also sought a payment of his costs incurred to his solicitor for the work done consequent upon the appointment of Mr R as the single expert. Those costs are calculated at $4,158 (paragraph 42 of Laarakkers affidavit).

26. I conclude the wife should make a contribution towards the husband’s costs arising from the engaging of Mr R. Were it not for the matters relating to the wife’s current financial circumstances I would have ordered she make a significant contribution towards the husband’s costs in relation to the valuation issue.

1. The husband sought an order that the wife pay his costs of preparing for the issue relating to the deduction of the husband’s tax debt from the controlled monies account. I consider that he should have a contribution towards his costs of that issue paid by the wife. The issue should not have been pursued by the wife. A considerable amount of hearing time was involved in determining the issue. At paragraph 48 of his affidavit, at the conclusion of a very detailed bill, Mr Laarakkers calculates the husband’s costs of that issue at $1,221.

2. I have considered both of the detailed accounts included in Mr Laarakkers affidavit and referred to above and the accounts seem to me to be appropriate and recoverable should the court make an order for indemnity costs. No order for indemnity costs is sought and if it was I would not accede to same in the circumstances of this case as outlined herein.

3. The husband also sought his costs be paid in relation to the issue of his alleged non-disclosure. I would not be prepared to make such an order as I am not completely satisfied he had made disclosure of all relevant bank statements. The financial considerations referred to by me above also mitigate against an order as sought by the husband.

4. The making of an order for costs under section 117 and in particular 117(2A) of the Act, involves an exercise of discretion by the court. That discretion is informed by a number of matters specified in section 117(2A). I propose to exercise that discretion by making a small order for costs which I acknowledge leaves the husband out of pocket in relation to the legal costs he incurred in relation to the issues I have determined he should have a costs order in his favour. As stated earlier the most significant matter which impacts upon the exercise of discretion by me in determining the quantum of the costs order is the financial circumstances of the parties.

5. I propose to determine an amount of costs which takes into account that party and party costs, if assessed in relation to the particularised account, would produce an outcome of between half and two thirds of the sum sought by the husband’s solicitor. I also propose to take into account the wife’s financial position following the conclusion of the property case. I will have regard to the husband’s current financial circumstances. I have regard to the clearly obvious circumstance that the parties should not incur any further legal costs.

6. Taking all the above matters into account I propose to order that the wife pay the husband the sum of $6000 as contribution towards his costs as determined by me herein.

I certify that the preceding one hundred and thirty (130) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 20 February 2014.

Associate: 

Date:  24 February 2014