Whelan and Whelan (No. 2)

[2010] FamCA 864

FAMILY COURT OF AUSTRALIA

WHELAN & WHELAN (NO. 2) [2010] FamCA 864

FAMILY LAW – COSTS – Offers made – Where condition placed on an offer was not certain or clear in its terms

Family Law Act 1975 (Cth) s 117(1), (2) and (2A)

APPLICANT: Ms Whelan

RESPONDENT: Mr Whelan

FILE NUMBER: PAF 1221 of 2006

DATE DELIVERED: 28 September 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 24 September 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Batey

SOLICITOR FOR THE APPLICANT: Adrian Twigg & Co

COUNSEL FOR THE RESPONDENT: Mr Jauncey

SOLICITOR FOR THE RESPONDENT: Jack Rigg Solicitors

Orders

1. The wife’s application seeking costs filed 28 July 2010 be dismissed.

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

.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: PAF 1221 of 2006

MS WHELAN

Applicant

And

MR WHELAN

Respondent

REASONS FOR JUDGMENT

1. By way of application filed 28 July 2010, the applicant wife seeks that the husband pay the wife’s costs of and incidental of this matter, including all hearings and interlocutory proceedings. The application is for an order for costs on a party/party basis.

2. The applicant relies upon an affidavit sworn by her on 24 September 2010 and oral evidence which she gave. During oral evidence, a copy of annexure D to the wife’s affidavit became exhibit BB. That copy was produced from the file of the former solicitor of the husband. The tender was on the basis that counsel for the husband had submitted that annexure D to the wife’s affidavit was only the first page of a document which consisted of more than one page. As will become evident, I am satisfied that that one page was the entirety of the written “offer” which was given by the wife to the husband on 13 March 2009.

3. The husband did not seek to lead any evidence on the costs application.

4. Section 117(1) Family Law Act 1975 (FLA) provides that a party to proceedings shall bear her own costs. However, the court, if it considers it just, may make an order as to costs if the court is of the opinion that there are circumstances to justify doing so (s 117(2) FLA). In considering whether or not a costs order should be made, the court shall have regard to the matters set out in s 117(2A) FLA.

5. Counsel for the wife primarily relied on one matter which was:

   “117(2A)(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”.

6. Counsel for the husband confined his submissions to addressing those made by counsel for the wife in relation to whether an offer in writing had been made would be sufficient to warrant an order for costs.

7. The hearing in this matter proceeded over a period of seven days. Orders and reasons for judgment were delivered on 30 June 2010. Paragraph 104 of the judgment sets out an established balance sheet and paragraph 197 of the judgment sets out the division of assets and liabilities between the parties.

8. That distribution was as follows:

H gets 42.5%
Assets
Item No.	Description	Percentage	Value
2	Former matrimonial [home, Lot 1]	100%	$760,000
4	[Y]  unit	100%	$715,000
6	Mitsubishi	100%	$9,000
12	Jewellery	100%	$25,000
22	Superannuation	100%	$51,174
23	Gambling losses	100%	$91,143
24	Paid legal expenses	100%	$20,500
25	Household contents at [Y]	100%	$10,704
28	TAB Corp shares in the husband's name	100%	$359
29	Bank account	100%	$1,200
30	Husband's other account	100%	$475
31	AXA shares	100%	$12,326
32	Cash taken on 1.9.06	100%	$18,500
Liabilities
Item No.	Description	Percentage	Value
33	Loan secured by mortgage upon the title of the unit [at Y]	100%	$526,735
40	Mr [WS]	100%	$58,000
41	NAB credit card	100%	$0
42	Mycard Citibank	100%	$0
43	Amex card	100%	$0
44	Jetstar liability	100%	$0
H pays W		$4,402
Net Assets		$1,126,244
W gets 57.5%
Assets
Item No.	Description	Percentage	Value
1	Former matrimonial [home, Lot 2]	100%	$935,000
3	[P property]	100%	$700,000
5	Jaguar	100%	$22,000
7	Lladro train	100%	$10,000
8	[W Breeding] Pty Ltd	100%	$40,766
9	Loan account with [W Breeding]	100%	$1,158
10	Loan account with [W Breeding]	100%	$12,435
11	Agistment business	100%	$0
13	Monies appropriated from the agistment business between 1.1.05 and 31.12.08	100%	$0
14	Add back Westpac Banking Corporation a/c in the name of [Whelan & Whelan], a/c […]	100%	$0
15	Add back - discharge of mortgage to Westpac on [P] house	100%	$0
16	$150,000 in relation to the ANZ access a/c	100%	$0
17	Add back sum for rental income from 3 dwellings on the [W] property (excluding the former matrimonial home) between about 1.1.05 and the current date at say $350 per week altogether (on average)	100%	$0
18	Current bank balance (to be provided)	100%	$7,500
19	Contents in the former matrimonial home	100%	$62,400
20	Paid legal expenses	100%	$119,527
21	Superannuation	100%	$3,970
26	Household contents at [P]	100%	$7,040
27	Jewellery	100%	$1,000
Liabilities
Item No.	Description	Percentage	Value
34	Loan secured by mortgage upon the title of the property [at P]	100%	$381,457
35	Citibank	100%	$0
36	Go Mastercard	100%	$0
37	ANZ Visa (legal fees)	100%	$11,000
38	NAB Mastercard (legal fees)	100%	$11,000
39	GE Finance	100%	$0
W receives		$4,402
Net Assets		$1,523,741

1. The distribution of the assets and liabilities as set out in the above table was effected by orders made on 30 June 2010 (annexure A to the wife’s affidavit of 24 September 2010).

2. Although the wife says she made more than two offers during the course of the proceedings, there are two alleged offers that she relies upon in this costs application.

3. The first, I am asked to accept, was made on or about 8 December 2006 in a conciliation conference which was held in these proceedings.

4. The second offer was made on or about 13 March 2009. The hearing of this matter was originally scheduled for 9 - 13 March 2009. I became unwell on the morning of 12 March 2009 and the hearing did not proceed on that day. The parties however apparently continued to negotiate on the Thursday and into Friday 13 March 2009. Counsel for the wife asserted from the bar table that on Friday 13 March 2009 it was anticipated that the continuation of the part heard hearing would recommence on 9 September 2009. I have no evidence which underpins that assertion. According to bench sheets and also the court’s electronic ‘casetrack’ record, this matter had a mention on 5 May 2009 where it was set down for continuation of the hearing on 1 to 4 December, together with an additional listing for mention on 10 August (where hearing dates were confirmed). I have no evidence that any event was anticipated in September.

5. The wife intended to make a further written offer dated 14 October 2009. That offer however was sent by her lawyers to Mr Peoples, the lawyer who had acted for the husband during the first part of the final hearing but who as at 14 October had ceased to act for the husband. Counsel for the wife did not rely upon that offer, notwithstanding that that document is annexed to the wife’s affidavit (annexure F).

6. Counsel for the wife first made submissions about the offer that had been made to the husband on 13 March 2009. That offer was in the following terms:

   “Wife’s offer of settlement pursuant to section 117(2)

   (A)      If option not exercised by September 9

   (1)      Wife retain

   a)  [P property] and contents & Llandro [sic] train

   b)  Lot 2 [W property] and contents

   c)  Jaguar

   d)  Our superannuation

   e)  [W Breeding Pty Ltd] and indemnify husband

   Liabilities

   f)  Mortgage on [P property]

   g)  Payment to husband $50,000 within 28 days.

   (2)      Husband retain

   a)  [W property]

   b)  Lot 1

   c)  [Whelan Group Pty Ltd] and indemnify wife

   d)  Mitsubishi Proton

   e)  Contents of [W property]

   f)  Payment from wife of $50,000

   Liabilities

   g)  Mortgage on [W property]

7. During submissions in the costs application, counsel also provided a copy of a document entitled “Proposed joint balance sheet as prepared on behalf of wife”. The spreadsheet is dated 24 September 2010 and has been relied upon by counsel for the wife as an aide memoir. In the first column, the spreadsheet reproduces the list of assets and liabilities that are set out in paragraph 104 of the reasons for judgment, using the item numbers adopted in the reasons for judgment. The next column in that aide memoir reproduces part of the table which is set out at paragraph 197 of the judgment. That column identifies the assets and liabilities which were distributed to the husband and in accordance with what is set out in paragraph 197 of the reasons for judgment. The document records that the husband received pursuant to the orders, net assets to a value of $1,126,244 or 42.5 percent of the overall net assets.

8. The aide memoir then attempts to analyse the wife’s offer that was made on 13 March 2009.

9. The aide memoir incorrectly records that the husband would receive the Lladro train (item 7) pursuant to the wife’s offer. That seems to be inaccurate. Annexure D clearly indicates that that was something that the wife proposed to retain for herself. The offer is also not explicit in terms of the husband retaining his superannuation (item 22). In fact, the offer seems to suggest that the wife would retain “our superannuation”. Items 23, 24, 28, 29, 30, 31 and 32 are not referred to in annexure D.

10. The result which counsel for the husband calculates is in his aide memoir that the husband would have received, had he accepted the wife’s offer as set out in annexure D to her affidavit (exhibit BB), is net assets to a value of $1,190,646. That figure has to be adjusted by removing the value of items 7 and 22 ($10,000 + $51,174 = $61,174). When that figure is taken away from the calculation of the offer made by counsel for the wife, the husband receives net pursuant to the wife’s offer the sum of $1,129,472. That sum is still more than the value of what the husband received pursuant to the judgment.

11. In relation to items 23, 24, 28, 29, 30, 31 and 32, although the offer does not explicitly refer to them, they are not items the wife has indicated in her offer that she wishes to retain, they are items which at all times were in the husband’s possession, control or added back against the husband and I am not troubled by the fact that they were not explicitly referred to in the offer.

12. Counsel for the husband firstly suggested that annexure D to the wife’s affidavit (and exhibit BB) was only part of an overall offer. In that regard he relied upon the part of the document that said “(A) if option not exercised by September 9”. It was common ground between the parties that the two lots at W, where the matrimonial home was situated, was the subject of an option taken by a developer and it was uncertain in March 2009 as to whether or not the developer would exercise his rights under that option.

13. The wife gave oral evidence. She was not tested on her evidence that exhibit BB was a single page that was handed to the husband’s lawyers on her instructions on 13 March 2009.

14. The wife agreed in cross examination that the price that the parties would have achieved for W property, had the developer exercised his option at the purchase price set out in the auction agreement, was an amount that was considerably more than the value recorded in the reasons for judgment (pursuant to a formal valuation). I do not have evidence before me (nor was I referred to anything in my reasons for judgment) that gave any precise information as to the term of the option to purchase that the parties had entered into with the potential developers of W property. It should be noted that W property was on two titles. The offer (and the final orders) gave the wife Lot 2 and the husband Lot 1. Lot 2 was valued at $935,000. Lot 1 was valued at $760,000.

15. I have no fuller explanation as to what the words “if option not exercised by September 9” means. One interpretation might be that this offer by the wife was open to be accepted immediately and would remain open until 9 September, unless the developer exercised the option in respect of W property in the meantime, in which circumstances the offer would lapse. Alternatively, the words could mean that the husband had to wait to 9 September to see whether or not the developer in the period from 13 March to 9 September 2009 had exercised his option, and if he had not, then the offer became alive and was capable of acceptance.

16. The offer in exhibit BB is clearly conditional. The words “if option not exercised by September 9” are ambiguous in their terms. Given that this is the primary basis upon which the wife seeks a costs order against the husband (presumably from 13 March 2009), I think it would be unsafe to make an order based on this document given my uncertainty about what is meant by the condition placed upon the offer.

17. The second submission made by counsel for the wife relied upon the conciliation conference document (annexure B to the wife’s affidavit). This document was prepared on the wife’s behalf pursuant to case management directions. It set out what the wife asserted to be the financial position of the parties in December 2006. It purports to set out the wife’s position going into the conciliation conference. Although counsel for the husband referred to it during submissions as the wife’s “opening position”, it was not suggested that she asked for more during the conference than what was set out in her conciliation conference document.

18. The wife suggested in her conciliation conference document (at page 3) an appropriate finding based on the contributions made by the parties was that the husband would receive 45 percent of the net assets and the wife would receive 55 percent of the net assets.  The wife sought a further adjustment of 5 percent for factors in s 79(4)(d) to (g) FLA. Overall therefore, the conciliation document proposes that the wife receive a 60/40 division of the overall net assets of the parties.

19. In my reasons for judgment, I concluded that the wife was entitled to an adjustment of the net assets that existed three years later based on contributions as to 60 percent to the wife and 40 percent to the husband. Upon consideration of s 79(4)(d) to (g) matters, I concluded that there should be an adjustment in the husband’s favour of 2.5 percent. The overall difference in percentage terms and what the wife was offering at the conciliation conference in December 2006 and what I ultimately concluded was 2.5 percent in the husband’s favour. 

20. That difference of itself may not have been fatal to the wife’s reliance on the document, however, the conciliation conference document is complicated by the fact that the parties at that time were in dispute about the value of various items of property (particularly the valuation of P property), disputed jewellery, funds applied by Whelan Group to the P property and a tax liability of Whelan Group. There was also a dispute about an item in relation to the husband taking $85,000 from the Whelan Group. These may or may not be the same monies or include the same monies as in items 23 and 32 on the balance sheet which were determined at hearing in the wife’s favour.

21. At page 5 of her document, the wife attempts to set out the effect of the proposal that she was putting forward at the conference. Counsel for the husband points to the fact that the position of the wife was unclear as to how W property would be divided 50/50. The lots were not even in their value. It is not clear how a division in specie would take place or whether or not there would be a sale of the W property. Counsel for the wife did not in his aide memoir complete the calculation in relation to the comparison between the orders and the proposal in the wife’s conciliation conference document of 7 December 2006.

22. What the wife has set out on page 5 of her conciliation conference document is difficult to reconcile with the percentage adjustment she was asserting in other parts of that document. On the face of it, on page 6 she seems to be offering the husband one half of the W property and 63.47 percent of the other assets. This would achieve a result that was well in excess of an even division of the assets but in the husband’s favour. It seems inconsistent with the other statement in her document that she thought an appropriate just and equitable division was 60/40 in her favour.

23. I have no clear evidence as to what offers were put during the conciliation conference in December 2006. Given its internal inconsistencies, I am not confident that I could rely upon the wife’s conciliation conference document dated 7 December 2006 to give me accurate evidence about what offer was made.

OTHER MATTERS

1. Although neither counsel addressed me in relation to other matters referred to in s 117(2A) FLA, I am still to have regard to them.

2. As a result of orders made by me, the wife has obtained a superior financial position to the husband in respect to the distribution of assets. I have no indication that either party is assisted by way of legal aid. Neither party suggested that the conduct of the parties in the proceedings warranted consideration in the context of this costs application, nor did either party assert that the proceedings were necessitated by a failure of a party to comply with orders. It has not been suggested by the wife that the husband was wholly unsuccessful and no other matter was referred to me for relevant consideration apart from the quantum of the costs of the wife has paid in these proceedings. The amount of costs that the wife had incurred was noted in the judgment as the sum of $119,527. That sum had been added back against the wife on the balance sheet and distributed to her as a notional asset. 

3. I find that one interpretation of the ambiguous words in exhibit BB is no more likely than the other. I am not confident that the husband understood precisely what it was the wife was saying about the condition on the offer she made on 13 March 2009. I have no other evidence that would help me know whether or not the husband in fact did know what that condition meant. Counsel for the wife was given the option to call the wife to give further evidence. No evidence was led in relation to what the words “if option not exercised by September 9” meant.

4. Accordingly, I am not satisfied that the wife had on 13 March 2009, made an offer in writing to the other party to settle the proceedings which was in sufficiently clear terms to found findings necessary for me to conclude that it would be just to make a costs order against the husband.

5. Accordingly I dismiss the wife’s application for costs.

6. These proceedings have been protracted and expensive for the parties. The wife’s application for costs is not totally without merit. I do not preclude any further argument arising out of the costs of the costs application, but I express a preliminary view that it would be unlikely that either party would be successful in such an application and would be a risk of having a costs order made against them if they made one.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 28 September 2010.

Associate: 

Date:  28.9.2010