Willans & Enmore (No 2)
[2021] FedCFamC1F 130
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Willans & Enmore (No 2) [2021] FedCFamC1F 130
File number(s): SYC 4725 of 2017 Judgment of: WILSON J Date of judgment: 14 October 2021 Catchwords: FAMILY LAW – COSTS – six day trial – offers of settlement – application for indemnity costs. Legislation: Family Law Act 1975 ss 117(1),(2), (2A) Cases cited: Agosti & Agosti [2021] FedCFamC1F 72
Bacall v Zagar [2020] FamCA 350
Cordell v Second Clanfield Properties Ltd [1969] 2 Ch 9
Donald Campbell and Co Ltd v Pollak [1927] AC 732
Donnelly v Edelsten (1994) 49 FCR 384
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602
Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
Fitzgerald v Fish (2005) 33 Fam LR 123
Gold v Patman and Fotheringham Ltd [1958] 2 All ER 497
Gronow v Gronow (1979) 144 CLR 513
Guild & Stasiuk (No. 2) [2020] FamCA 564
Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] FCA 1429
House v King (1936) 55 CLR 499
Hyde v Wrench [1840] 49 ER 132
In the Marriage of Hogan (1986) 10 Fam LR 681
In the Marriage of Kohan (1992) 16 Fam LR 245
Jackson v Anglo-American Oil Co Ltd [1923] 2 K.B. 601
Jones v Bradley (No 2) [2003] NSWCA 258
Leichhardt Municipal Council v Green [2004] NSWCA 34
Lovell v Lovell (1950) 81 CLR 513
Medlon & Medlon (No 6) (2015) 54 Fam LR 1
Messiter v Hutchinson (1987) 10 NSWLR 525
Norbis v Norbis (1986) 161 CLR 513,
Perry v Comcare (2006) 150 FCR 319
Precision Products (NSW) Pty Ltd v Hawkesbury City Council(2008) 74 NSWLR 102
R v Watson; ex parte Armstrong (1976) 136 CLR 248
Ritter v Godfrey [1920] KB 47
Roberts v Rodier [2006] NSWCA 1084
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97
Stasiuk & Guild [2021] FamCAFC 62
Storie v Storie (1945) 80 CLR 597
Verna Trading (Aust) Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129
White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 910
James J Edelman, Judicial Discretion in Australia, (2000) 19 Australian Bar Review 285
Division: Division 1 First Instance Number of paragraphs: 89 Date of hearing: 24 August 2021 Place: Melbourne Counsel for the Applicant: Ms S. Christie SC Solicitor for the Applicant: Greg Alfonzetti Solicitor Counsel for the Respondent: Mr I. Coleman SC Solicitor for the Respondent: Andrew Cohen Solicitor ORDERS
SYC 4725 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WILLANS
Applicant
AND: MR ENMORE
Respondent
ORDER MADE BY:
WILSON J
DATE OF ORDER:
14 OCTOBER 2021
THE COURT ORDERS THAT:
1.The respondent must pay the applicant’s party/party costs of and incidental to the subpoenae to compel production of documentation that was supplied to the single expert.
2.The respondent must pay the applicant’s costs of and incidental to the application in a case to the Federal Circuit Court of Australia and the appearance before it in respect of that application on 25 June 2018.
3.In respect of the respondent’s application for a case guardian, pursuant to s 117(2) of the Family Law Act I order the respondent to pay the applicant’s party/party costs in the sum of $5247.
4.Pursuant to s (117)(2) of the Family Law Act I order the respondent to pay the applicant her costs of the proceeding assessed on a party/party basis, such assessment to be completed by 20 December 2021 unless otherwise ordered by me, such assessment to cover the period 5 September 2019 to the conclusion of the trial.
5.The costs assessment ordered pursuant to paragraph 4 of these orders shall not include the costs of and incidental to the hot tub of experts conducted on 24 February 2021 and 4 March 2021.
6.In all other respects each party’s costs are to be borne by him and her respectively under s 117(1) of the Family Law Act
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonyms Willans & Enmore has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
Pursuant to reasons handed down by me on 28 May 2021 I determined that the parties’ net assets should be divided as to 50% each, translating into the sum of $4,371,832 each.
Each party sought orders under s 117(2) of the Family Law Act for costs.
This proceeding was commenced in 2017. The trial of this proceeding ran for six days a goodly portion of which was devoted to evidence given by expert accountants who addressed matters that went to the value of J Pty Ltd (“JPL”).
THE PARTIES’ INDIVIDUAL COSTS APPLICATIONS
The costs order sought by the applicant was in several parts. It was in the following terms –
NOTATIONS
A.The Applicant's Application for Costs in these proceedings was made at Order 6 of the final Orders sought in her Initiating Application filed 24 July 2017 and at Order 14 of the Short Minutes of Order Sought submitted for trial on 11 February 2021.
B. The specific Orders in relation to costs that the Applicant seeks in relation to her Costs Application with Judgment in these proceedings having been delivered on 28 May 2021 are set out hereunder.
ORDERS
1.That the Respondent pay the Applicant's costs of and incidental to these proceedings on a party/party basis in respect of the period from 20 June 2017 to 5 September 2019, with the exception of costs which are of and incidental to the Application in a Case filed by the Respondent for the appointment of a Case Guardian, such sum to be paid within 28 days of agreement to the figure in writing or 28 days of assessment, whichever first occurs.
2.That in respect of the Application in a Case filed by the Respondent for the appointment of a Case Guardian, the Respondent pay the Applicant's costs of and incidental to that matter on an indemnity basis in the sum of $5,247, such sum to be paid within 28 days.
3. That within 28 days the Respondent pay the Applicant's costs of and incidental to these proceedings for the period from 5 September 2019 until the conclusion of the trial on an indemnity basis in the sum of $263,620.80.
4. That the Respondent pay the Applicant's costs of and incidental to her Costs Application on a party/party basis within 28 days of agreement to the figure in writing or assessment, whichever first occurs.
As is apparent from that minute, the applicant sought costs over a particular period on a party/party basis, she sought costs in relation to the appointment of a case guardian on an indemnity basis and she sought an order for her costs of the proceeding from 5 September 2019 until the conclusion of the trial also on an indemnity basis.
The respondent sought an order for costs as follows –
1. That the Applicant’s Application(s) for costs in these proceedings be dismissed.
2. That the Applicant pay the Respondent’s costs of and incidental to these proceedings generally since commencement on a party/party basis, subject to Order 3.
3. Such further or other order in addition to or in the alternative to Order 2 as this Honourable Court thinks fit.
In written submissions dated 23 August 2021, Senior Counsel for the applicant submitted that the respondent should pay the applicant’s costs of the costs application.
Each party’s costs contentions must be separately considered. But before doing so it is utile to make some general observations on costs.
In the absence of an order under s 117(2), the usual order in respect of costs is governed by s 117(1) of the Family Law Act such that each party bears his, her or its own costs. Section 117(2) of the Family Law Act enables a court to make an order for costs that deviates from the more usual order under s 117(1) so long as the court is persuaded that one of the subsections to s 117(2A) is enlivened. Only one needs to be enlivened.[1] Even if one of the subsections of s 117(2A) is engaged, in and of itself, a costs order does not necessarily follow because a costs order other than one under s 117(1) should only be made if in all circumstances it is just to do so.[2]
[1] Fitzgerald v Fish (2005) 33 Fam LR 123.
[2] In the Marriage of Hogan (1986) 10 Fam LR 681.
If the court is persuaded to make a costs order under s 117(2), the court is entitled to prescribe the basis of the costs order, whether party/party or indemnity.
So far as indemnity costs are concerned, two things must be said. First, according to a line of authority that has been consistently adopted by Full Courts of the Family Court, an order for indemnity costs is made in exceptional circumstances.[3] What meets the description of “exceptional circumstances” depends on the facts of the particular case.
[3] In the Marriage of Kohan (1992) 16 Fam LR 245, Medlon & Medlon (No 6) (2015) 54 Fam LR 1, Guild & Stasiuk (No. 2) [2020] FamCA 564.
Second, the fact that a party is able to demonstrate that, he, she or it bettered by judgment (or in the case of an arbitration, by award) the amount offered in, say, a Calderbank letter that was refused does not, in and of itself, mean that the offer was unreasonably refused thereby attracting the imposition of indemnity costs. The point was canvased at length by the Court of Appeal of the Supreme Court of New South Wales in Elite Protective Personnel Pty Ltd v Salmon,[4] as well as in Precision Products (NSW) Pty LTD v Hawkesbury City Council.[5]
[4] [2007] NSWCA 322.
[5] (2008) 74 NSWLR 102, 145 (at [90]).
The applicant relied on written submission as well as affidavits she made deposing to certain factual matters, the details of which are recorded below in the context of specific costs claimed.
PROPOSED ORDER 1
The applicant’s proposed order 1 related to her claim that the respondent should pay her costs on a party/party basis over the period 20 June 2017 to 5 September 2019, save for costs concerning the appointment of a case guardian.
In support of that component of her costs application the applicant invoked s 117(2A)(c) of the Family Law Act. She contended that –
(a)the respondent repeatedly failed to comply with court directions leading to delay and attendant expenses;
(b)the respondent failed to comply with the requirements imposed on him pursuant to rule 13.01(1) of the then Family Law Rules by making full and frank disclosure of all relevant information in a timely manner;
(c)the respondent failed to supply documents to the single expert in accordance with court orders made on 6 September 2017 and 22 March 2018;
(d)the respondent failed to appear before the Court (then, when the proceeding was before the Federal Circuit Court of Australia (“FCCA”)) on 25 June 2018;
(e)by reason on the respondent’s failure to comply with paragraphs 2, 3, 5, 6 and 7 of the orders made on 22 March 2018 the applicant was required to issue a subpoena to compel production of various documents; and
(f)by reason of the respondent’s failure to cooperate in the appointment of a single expert real property valuer, on 25 June 0218 the court made orders for the discharge of order 11 of the 22 March 2018 orders and the applicant was permitted to appoint valuers to value real property.
Although several in number and nature, those complaints seemed to boil down to only a few. They were –
(a)the respondent was derelict in his compliance with disclosure obligations necessitating the applicant’s appearance before the FCCA on 25 June 2018 so as to apply for orders for the appointment of valuers; and
(b)the applicant was required to issue a subpoena to compel production of various documents to be submitted to expert witnesses.
Of course, underpinning those specific matters advanced by the applicant was a general grievance about the manner in which the respondent approached and discharged his disclosure obligations under Chapter 13 of the Family Law Rules. As is the common experience of any litigant in this court, on every occasion that the opposite party fails to diligently approach his or her disclosure obligations, the affected litigant is forced to instruct his or her solicitors to consider the consequences of that failure, often to telephone the opposing solicitor to complain, often to write to the opposing solicitor to record the failure and frequently, to pursue correction of the failure by an application to court. All this wastes time, incurs costs and impedes the efficient on-going forward progress of the case. Litigants affected by that behaviour are perfectly entitled to express their disapproval of that conduct. Those litigants affected by such behaviour will undoubtedly entertain anger about the delay and expense occasioned to them by such behaviour and whether their position is ever properly redressed, still less compensated, by a costs order.
That said, it is an altogether different thing to visit a costs order upon the party who has been less than diligent towards disclosure, such costs covering the whole proceeding or even a discrete part of it. In the applicant’s proposed orders, she requested me to make an order that the respondent pay the whole of the applicant’s costs of and incidental to this proceeding, save for costs concerning the case guardian application. In other words, despite the provisions of s 117(1), the applicant contended that, but for an application concerning a case guardian, over two years’ worth of activity in this litigation should be paid for by the respondent.
I have very real difficulty accepting that contention.
No evidence was adduced on behalf of the applicant to the effect that in the period 20 June 2017 to 5 September 2019 the only activity in this case was devoted to the pursuit of disclosure issues created by the respondent.
I accept that the application to the FCCA and the appearance on 25 June 2018 was necessitated by disclosure failures by the respondent. The applicant should have her costs of and incidental to that application. Those costs should be assessed on a party/party basis. I also accept that the applicant should have her costs of and incidental to the need for her to issue one or more subpoenae to compel production of documentation that was supplied to the expert. Those costs should be assessed on a party/party basis. When ordering costs to be assessed “of and incidental” to a particular activity, I expect the registrar undertaking the assessment to apply all applicable learning in respect of that phrase as well as a broad and enabling approach to its meaning, properly taking into account matters that truly are incidental to the particular activity.
PROPOSED ORDER 2
The applicant’s proposed order 2 related to the respondent’s application in a case for the appointment of a case guardian. The applicant sought indemnity costs of $5247 being the costs of and incidental to that application.
The history relevant to that issue may be shortly stated.
On 6 September 20217 the respondent foreshowed his intention to seek the appointment of a case guardian. His Honour Judge Monahan in the FCCA made an order requiring the respondent to file and serve within 28 days of 6 September 2017 any application for the appointment of a case guardian to conduct this proceeding on behalf of the respondent. The respondent was unrepresented before his Honour Judge Monahan on that date. On 21 March 2018, that is to say, the day before the proceeding was to return before the FCCA, the applicant filed an application for the appointment of a case guardian.
On 22 March 2018 the proceeding came before his Honour Judge Monahan. Mr Cohen, solicitor, appeared for the respondent on that day. His Honour adjourned the respondent’s application for the appointment of a case guardian to 2 August 2018 and directed that the respondent file any further affidavits in support of the application by a particular date, that the applicant file a response to the application in a case as well as any affidavit material in opposition and for other responding evidence to be adduced.
On 25 June 2018 the matter was again before the FCCA, although his Honour Judge Monahan indicated that the hearing on 2 August 2018 was limited to the determination of the litigation guardian’s appointment.
The applicant contended in paragraph 35 of her written submissions that the material filed in support of that application did not establish that the respondent was unable to understand the nature and consequences of the case nor did the material establish that the respondent was incapable of conducting the case. The applicant filed a response to the respondent’s application in a case for the appointment of a case guardian. She also filed an affidavit opposing the making of the order, such affidavit having been made on 11 July 2018.
On 12 July 2018 the respondent withdrew his application. The court reserved the applicant’s costs by order of his Honour Judge Monahan made on 2 August 2018.
The applicant quantified her costs on an indemnity basis at $5247. The calculation of those costs was set out as exhibit “Z” to the affidavit of the applicant made 8 July 2021.
I am persuaded that costs in a sum to be assessed should be paid by the respondent to the applicant in relation to the abandoned case guardian application. The respondent informed the FCCA that he intended to bring the application, then he was represented by Mr Cohen before the FCCA, then the respondent was not represented before the FCCA, the respondent was ordered to file the material by a particular time which he did, the respondent then failed to make out a case in support of the application so he withdrew the application, all while putting the applicant to costs and inconvenience. Those costs should be assessed on a party/party basis.
PROPOSED ORDER 3
The more substantial application made by the applicant in relation to costs was proposed order 3 pursuant to which she sought indemnity costs of $263,620.80 being her costs of and incidental to the whole proceeding from 5 September 2019 until the conclusion of the trial.
The applicant cast her case for indemnity costs on the grounds of conduct under s 117(2A)(c) or alternatively under s 117(2A)(f), the terms of an offer in writing. Both grounds were hard fought. To put the contentions in chronological context, this proceeding was transferred from the FCCA to the Family Court of Australia pursuant to orders made by his Honour Judge Monahan on 20 June 2019. Among the incidents on which the applicant relied as demonstrating conduct that enlivened considerations relevant to s 117(2A)(c) was the applicant’s submission that the respondent did not file an affidavit from his expert by 21 October 2019 in accordance with the previous order. The applicant further submitted that the respondent eventually relied on an affidavit of his expert Mr S, whose evidence was the subject of objection, cumulating in the respondent electing not to rely on Mr S’s affidavit.
The applicant also relied on the overall deficiencies of the respondent’s disclosure. She focused on paragraph 135 of my reasons for judgment which stated –
In this case the respondent’s approach to the provision of evidence of property matters was poor. In many instances the details about one or more specific assets have been defective, making it difficult to reliably make the findings required by s 90SM of the Family Law Act.
Of course, disclosure deficiencies were relevant to property issues because any such deficiencies involved principles of the sort canvassed in Bacall & Zagar.[6] It was a separate question whether disclosure deficiencies could be called in aid to support an argument for indemnity costs in reliance upon s 117(2A)(c) of the Family Law Act. The point was not debated before me. For that matter, the parties did not even join issue on the point. It would be erroneous for me to base my decision on this aspect of costs without having heard from both parties on the issue.
[6] [2020] FamCA 350.
In reality, the mainstay of the applicant’s claim for indemnity costs under this ground was her contention that in the overall outcome of the litigation, the outcome that the applicant achieved of $4,371,832 was more favourable than was an offer of compromise made by her with the consequence that the respondent unreasonably refused to compromise in accordance with one or more of the applicant’s Calderbank offers and in those circumstances, her costs assessed on an indemnity basis, should be paid by the respondent.
The applicant deposed to several offers that passed between the applicant and the respondent. In the passages below, I have examined the terms of each. However, in precis form they were –
(a)proposals exchanged at a mediation convened on 29 May 2019;
(b)a proposal recorded in a letter from the respondent to the applicant provided through the mediator at the conclusion of the mediation;
(c)a proposal recorded in a letter from the applicant to the respondent provided through the mediator to the respondent at the conclusion of the mediation;
(d)the applicant’s proposal dated 5 September 2019;
(e)the respondent’s proposal dated 20 September 2019;
(f)the applicant’s 1 June 2020 proposal; and
(g)the respondent’s 22 June 2020 proposal.
It is necessary to address each.
THE RESPONDENT’S 29 MAY 2019 SETTLEMENT PROPOSAL
The applicant deposed[7] that the respondent made an offer at 1:53pm on 29 May 2019. It provided for a payment to her of $3,689,065, being 46.45% of the pool as it then stood.
[7] Paragraph 11 of the applicant’s 8 July 2021 affidavit.
The applicant deposed that she made a counter-offer[8] on 29 May 2019 at the mediation. In her counter-offer the applicant indicated that she would accept payment of $3,714,065, corresponding to 46.77% of the total pool. She added (although her point was more a submission than evidence) that had this litigation been resolved in accordance with her 29 May 2019 proposal, a sum corresponding to 44.8% of the pool was $3,920,703. That offer was not accepted.
[8] As a matter of contract law, the applicant’s counter offer had the effect of rejecting the earlier unaccepted offer, as was held in Hyde v Wrench [1840] 49 ER 132.
THE APPLICANT’S 5 SEPTEMBER 2019 OFFER
On 5 September 2019 the applicant proposed resolution on terms by which she would receive payment of an amount equivalent to 42.95%, namely $3,409,065 of the pool. The applicant deposed in paragraph 26 of her 8 July 2021 affidavit that the respondent would have received $5,226,302 had he accepted the applicant’s 5 September 2019 offer. After trial the respondent was ordered to receive $4,371,832, that is to say, an amount substantially less than the sum offered. No doubt it was for that reason that the applicant sought indemnity costs in this case from 5 September 2019 to the end of the trial. In other words, she argued that this litigation could have been concluded as at 5 September 2019 had the respondent accepted the 5 September 2019 offer. Instead he refused to accept that offer, pressed on to trial ultimately leading to orders being made that were less favourable to him than were the terms of the 5 September 2019 offer. A document was attached to the applicant’s 5 September 2019 offer headed “effect of wife’s settlement offer dated 5 September 2019”. In it the applicant’s solicitor explained the arithmetic associated with her proposal, proceeding on a pool valued at $7,858,00 in which 39% proposed to go to the applicant corresponding to $3,095,00 and 61% proposed to go to the respondent corresponding to $4,763,00. The case was hard fought at trial resulting in an order for payment to the husband of $4,371,832, several hundreds of thousands of dollars less than the sum offered.
The applicant contended that the respondent’s decision to reject the applicant’s 5 September 2019 offer, was in all the circumstances, imprudent.[9]
[9] Paragraph 56 of the applicant’s counsel’s written submissions filed 17 August 2021.
THE RESPONDENT’S 20 SEPTEMBER 2019 OFFER
The applicant contended that when properly construed the respondent’s offer of settlement dated 19 September 2019 sent by letter from the respondent’s solicitor on 20 September 2019 “would have seen the applicant receive 30.9% of the pool. That offer was not accepted.[10]
[10] Paragraph 57 of the applicant’s counsel’s written submissions filed 17 August 2021.
THE APPLICANT’S 1 JUNE 2020 OFFER
This offer was made pursuant to orders of the court dated 12 May 2020 requiring each party to serve on the other a formal offer of settlement by 9 June 2020.
In the 1 June 2020 offer the applicant repeated the offer she made on 5 September 2019. The covering letter dated 1 June 2020 from the applicant’s solicitor enclosing the 1 June 2020 proposal highlighted three important matters. They were that –
(a)the applicant adopted the respondent’s asserted value of JPL, namely $2,900,000 despite her contentions that JPL’s value was higher;[11]
(b)the applicant stated that if JPL’s valuation was found at trial to have exceeded $2,900,000, then the respondent would have been disadvantaged if he did not accept the offer made 1 June 2020 and he would be at significant risk of costs; and
(c)the applicant alerted the respondent that the proposal may be relied upon on an application for indemnity costs.
[11] I found JPL was valued at $3,230,000.
As with the applicant’s 5 September 2019 proposal, the 1 June 2020 offer was accompanied by a document entitled “effect of wife’s settlement offer dated 1 June 2020” in which the applicant proposed a resolution on the basis that she received 39% of the pool and the respondent received 61% of the pool. The percentage ordered after trial was 50% each.
THE RESPONDENT’S 22 JUNE 2020 OFFER
A 5:33pm on 22 June 2020 the respondent’s solicitor sent an email to the applicant’s solicitor with the respondent’s last offer of settlement. According to the applicant,[12] that offer represented a proposed payment to the applicant of 39.4% of the pool
[12] Paragraph 60 of the applicant’s submissions on costs filed 17 August 2021.
That offer lapsed.
The case went to trial.
The applicant achieved a 50% division of assets.
THE APPLICANT’S CASE FOR INDEMNITY COSTS
Expressed most simply, the applicant contended that if the respondent had accepted her 5 September 2019 offer, he would have received $854,470 more than the amount ordered at trial.[13] The applicant also said that by accepting that offer the respondent, from soon after 5 September 2019, would not have needed to incur the costs of his solicitor, his senior counsel or the expert Mr S. Further, the applicant argued that the respondent “would have been better off financially by more than a million dollars in the context of a total pool of $8,744,514.”[14] That led the applicant to submit that the respondent’s conduct constituted an imprudent refusal of an offer of compromise.
[13] Paragraph 72 of the applicant’s written submission on costs.
[14] Paragraph 73 of the applicant’s written submission on costs.
The applicant’s Senior Counsel quite properly recognised that not all imprudent refusals of a settlement proposal will result in the making of an indemnity costs order.[15] Some of the relevant authorities were drawn together in Stasiuk & Guild[16] where it was emphasised that context is important. Very recently, in Agosti & Agosti[17] I examined indemnity costs in relation to Calderbank offers. The applicant contended that this case fits into the category of cases properly allocated the appellation “exceptional”.
[15] Paragraph 74 of the applicant’s written submission on costs.
[16] [2021] FamCAFC 62. For a vastly more sophisticated analysis of the learning on indemnity costs, the primary judgment [2020] FamCA 564 repays close reading.
[17] [2021] FedCFamC1F 72.
THE RESPONDENT’S POSITION ON THE APPLICANT’S COSTS APPLICATIONS
So far I have addressed only the applicant’s costs applications namely the applicant’s claim to indemnity costs of the proceeding from 5 September 2019 to the conclusion of the trial. The respondent protested about a costs order being made against him.
In support of the respondent’s contentions on costs, his solicitor Andrew Cohen swore an affidavit on 10 August 2021. Mr Cohen also prepared a 36 page written submissions document dated 23 August 2021. In Mr Cohen’s affidavit, he put into evidence documents that he said the applicant had omitted to adduce, including various financial statements, bank statements, a costs tender bundle and various emails, all of which I have read and considered. Some of the documentation produced by Mr Cohen appeared to be responsive to the applicant’s assertions that the respondent was derelict in his disclosure obligations, pointing out that the applicant was derelict as well.[18]
[18] For example, Mr Cohen’s email dated 22 November 2018 being page 3 to Mr Cohen’s tender bundle to his affidavit. There were others.
By March 2021 Mr Cohen provided copies of emails that passed between him and Mr Alfonzetti to my associates, a practice of which I do not approve. It was inappropriate to embroil my associates in those exchanges. Solicitors should exercise greater care than endeavouring to infuse court staff (especially those connected with the trial judge) in their disputes over disclosure. Fortunately, none of that email exchange passing between Mr Cohen and Mr Alfonzetti came to my attention at any point prior to my writing these reasons on costs.
The tenor of the communications between Mr Cohen and Mr Alfonzetti was at times hostile, including a direction made in early November 2020 from Mr Cohen to Mr Alfonzetti that Mr Alfonzetti not write directly to the barrister for the respondent.
Mr Cohen also produced in his submissions the Cutcher & Neale forensic accounting report dated 25 November 2020, for reasons not readily apparent, and earlier iterations of that report.
Mr Cohen produced correspondence dated 8 August 2019 in relation to the accountant Mr AB. To describe that correspondence, passing between Mr Cohen and Mr Alfonzetti, as inflammatory was an understatement. The correspondence related to the sum of $5,514 said to have been due to the ATO by JPL Superannuation Fund. Mr Cohen’s letter to Mr Alfonzetti included phrases such as the following –
The mischievous nature of of (sic) your client with respect to both of your August 1 letters to me and to Mr AB is patent.
…
Mr AB has respected that, whereupon your client has belatedly caused him concern and distress by your aggressive letter to him of August 1, 2019 pressing unreasonably that he as a conflict of interest and that he has acted improperly by being earmarked by my client’s counsel and confirmed by me to the court on 29 July and today, of the intention that he give evidence in a court case.
Your letter dissuade them from doing so.
That letter is reprehensible by reason of its threatening nature
…
This tirade and threat against Mr AB is mischievous in the context that your client has not only delayed her bombshell that she will not comply after 14 months to consider this and her silence of this intention and acting as though she would consent.
Throughout this period, your client has deliberately and unlawfully withheld information from Mr Enmore/Mr AB pertinent to the SMSF’s obligations to be the subject of compliance notwithstanding the line of correspondence relating to the SMSF between your client, your firm, Mr AB’s firm and my firm.
…
I remind you that this is a 2nd and now simultaneous effort by your client, to be disruptive and deliberately noncooperative (sic), the benefit of which, escapes us and is for a period of years, now.
That email chain was not easy to follow. Other instances emerged. Even recognising that it is far from uncommon for correspondence between solicitors to contain self-serving hyperbole, the material quoted below flirted unacceptably closely with inappropriate correspondence which ought to have been put in more polite, measured and professionally courteous terms. It was as follows –
Accordingly, equitable principles of part performance, laches and coming to court with clean hands, are all relevant to any resistance to the mandatory injunction requiring your client to provide the appropriate documentation and authorisation, to allow the SMS to become compliant, notwithstanding every effort and some actual progress towards making it compliant, until now.
Although it is separate to the other orders to be sought, which will basically require your client, if made, to produce documentation she has withheld but more importantly to provide for the formality of Mr AB’s authority that she has so mischievously and belatedly refused to do.
…
If your client were aware of this anomaly, why did she wait until August 1, to demand her apparent proposal to take total control, albeit with no plan how to do so.
…
Your client’s instructions that you have taken up that by reason of some sort of agenda, Mr AB is disqualified and that you will take the matter of his remaining the SMSF tax agent, is speculative.
…
Your client has not gone to all the trouble nor the expense that Mr Enmore has, only to be frustrated by this 11th hour attempt to mischievously scare Mr AB off.
The only purpose of the continuing acts and omissions of your client, causing the SMSF difficulty, can be to frustrate deliberately and mischievously, give fuel to the continuing difficulties of this SMSF, at my client’s expense, while feigning repeatedly, that by doing so, your client is acting in the best interests of the SMSF and its beneficiaries and of course as per your letter of 12 December, 2019 because your client demanded it.
In the context that if it were otherwise not intentionally mischievous, we see it in the light that this is not the only mischief, because if she were not being deliberately disruptive, your client would not have withheld documents for the last 3 years since separation while apparently deciding to let things run, while deliberately keeping quiet about her intention to launch this ambush when she thought she would do this, at a time that suited her purposes waiting to strike over a 14 month period, perhaps longer as her opportunity to take the action of August 1, became patent in June last year, in the context of her withholding of documents goes back to the year before last, 2017.
Although he is not my client, any suggestion that Mr AB has acted improperly whilst instructed by my client on a professional or other basis, would be, to my view, be nothing less than causing him a public mischief.
…
You are looking for an injunction, apparently if Mr AB is not bullied into withdrawing, but again, consider the equitable principles of part performance, laches and coming to court with clean hands.
It is difficult to image precisely why Mr Cohen was driven to repeatedly use such vituperative language. His frequent use of “mischievous” reflected poorly upon him and his client. It also tended to support Ms Christie’s contentions that the conduct of the respondent unnecessarily prolonged the life of this litigation.
Other documentation produced by Mr Cohen revealed that subsequent to the applicant’s 5 September 2019 settlement proposal and subsequent to the respondent’s 19 September 2019 settlement proposal, the parties remained locked in accusations about disclosure deficiencies.
Mr Cohen’s written submissions with respect to costs were dated 23 August 2021. While lengthy, and doing the best I can to distil the essence of those submissions, the main points made by Mr Cohen in his submissions were as follows –
(a)it was the applicant who delayed in the discharge of full and frank disclosure obligations;
(b)the respondent was focused on his responsibilities to JPL;
(c)the respondent “courteously”[19] encouraged the applicant to provide full and frank disclosure;
(d)the respondent had to meet accusations that he had been misleading, guilty of fraud and had inferentially hidden assets;
(e)the respondent “met what was asked of him by the applicant;”[20]
(f)the applicant conducted her case in a manner that was “wholly oppressive, and in the circumstances of the respondent’s health, well known to the applicant, may or may not have been calculated, but even if it were not, it remains indefensible”;
(g)much of the respondent’s cross examination was taken up with the applicant’s endeavours to show that JPL was worth more than the value as was found; and
(h)the value of JPL became a central issue in the case.
[19] That was the word used on page 2 of respondent’s written submissions, although I do not share his characterisation of the noun “courtesy.”
[20] Page 3 of the respondent’s written submissions.
So far as the various offers to compromise to the litigation were concerned, Mr Cohen addressed each. It is necessary to paraphrase those submissions in respect of each proposal.
THE RESPONDENT’S 29 MAY 2019 PROPOSAL
On behalf of the respondent, Mr Cohen submitted that on a proper construction of the figures then under consideration, the respondent proposed a resolution of the proceeding on the basis that the applicant received $3,695,930 being 46.25% of the value of the pool. Mr Cohen submitted that a dispute arose about the accuracy of the figures underpinning the financial information to which the proposal applied.
It was common ground that the respondent’s proposal produced at the mediation was not accepted.
THE APPLICANT’S MAY 2019 PROPOSAL
Mr Cohen submitted that the applicant’s response to the respondent’s proposal produced at the end of the mediation emerged on 31 May 2019. That date did not align with the contentions advanced by the applicant. Be that as it may, Mr Cohen submitted that the applicant’s proposal corresponded to an alteration of property interests equivalent to 47.5% of the amount then under discussion.
THE APPLICANT’S 5 SEPTEMBER 2019 OFFER
Mr Cohen’s submissions about the 5 September 2019 settlement proposal proceeded on the basis that the overall figure was $7,991,874. The overall net asset position as found after trial was $8,743,664. It was not $7,991,874. Mr Cohen challenged the applicant’s contentions that the correct balance sheets were the May 2019 balance sheets. Mr Cohen submitted that the applicant created a new set of figures for insertion as an exhibit in her affidavit made to support her costs application. Mr Cohen submitted that the applicant’s document headed “effect of wife’s settlement offer dated 5 September” was “wholly inaccurate” and was “faulty as to its assertion that the effect was to provide 39% to the applicant and 61% to the respondent.” [21] Then followed Mr Cohen’s analysis of the 1 June 2020 settlement proposal. That analysis was anything but straight forward and, in part, it defied comprehension in the absence of narrative, which was not supplied.
[21] Page 14 of the respondent’s written submissions.
Mr Cohen referred to the sum as found ($8,743,664).[22] However, he made a submission I found curious.[23] It was as follows –
Key:**total asset pool at trial was $8,743,664 (percentages in the the (sic) right column relate to the actual asset pool at trial, as agreed, and the perception pursuant to the assertions/disclosures of the Applicant as was available and known by the Respondent at the time of the offer).
What does not easily enter this submission, and is therefore left to hearing, is any comparison of what has been, for convenience, described as the Respondent’s_ ongoing (sic) concerns, and the findings of this Honourable Court in relation to the materialisation or otherwise of such concerns as matters of substance or otherwise.
Accordingly, there was no latitude to ignore what appeared to the Respondent husband to be, should he have accepted the offer, a retention of the assets that actually were, after trial to be retained by the Applicant wife, that if the figures she relied on were accurate, a further $208,313 needs to be taken into account, such that the actual percentage as set out above, would have been different, by a factor of that perceived amount of a further $208,313(sic).[24]
[22] Page 20 of the respondent’s written submissions.
[23] Ibid.
[24] Errors in the original document.
Accepting that the respondent and Mr Cohen had their own views of the September 2019 proposal, precisely why it was said that a further $208,313 needed to be taken into account was anything by immediately apparent.
The respondent advanced yet a further reason why he contended that the proposal put by the applicant was difficult for him to consider. He said[25] the true asset picture of the asset pool was difficult for him to consider “by reason of these proceedings by the applicant.”[26] Mr Cohen then made the following submission –
To be colloquial, if the Respondent had accepted either of the second or third offers, on the basis as encouraged both times that he would receive 61%, he would have been wrong and given that the third offer of settlement was put so long after the second, whether or not this was intentional, both offers were intended to be conveyed as though the EFFECT OF SETTLEMENT documents could and should be relied upon by the Respondent, or she would not have place so much importance on them at the time the offers were made and it was both times, nothing less than misleading, and if unintentional being put a second time was, when the third offer was made, potentially deeply so (sic).[27]
[25] Page 24 of the respondent’s written submissions.
[26] Ibid.
[27] Errors and emphasis in original document.
He described the second and third offers as likely ineffective “because of this intentional or unintentional gross misrepresentation of both settlements.” Language such as “gross misrepresentation” is florid, intemperate and pejorative. I found it most unhelpful and unnecessary if the point was that the offers were incapable of acceptance, or ambiguous or that the respondent, for his own reasons, was unable to adequately comprehend them.
Then Mr Cohen asserted that the applicant had failed to conduct settlement negotiations in a bona fide manner. Even recognising that negotiations are usually impressed with privilege, that does not give a legal practitioner license to engage in malevolent assertions about the behaviour of the other party. Greater restraint was called for than was exercised in the respondent’s submissions in this case.
CONDUCT OF THE CASE
Mr Cohen addressed one of the applicant’s threshold criticisms, namely that the conduct of the respondent during the life of the litigation prolonged this litigation adding unnecessarily to costs and delays. To that Mr Cohen submitted[28] that the respondent “conducted himself in this case as expeditiously as may reasonably be done”.
[28] Page 33 of the respondent’s written submissions.
In support of that contention, Mr Cohen relied on a collection of factors. They included –
(a)the respondent encountered post-separation personal difficulties necessitating his consulting three therapists including a psychiatrist;
(b)the respondent had limited function at times and at others, dysfunction; and
(c)the respondent’s concession[29] that “delays were on him” although he behaved “as expeditiously as he could have done”.
[29] Page 35 of the respondent’s written submissions.
Embedded in Mr Cohen’s submissions were unhelpful and indecipherable statements[30] that the respondent does not “in this submission sweat on the minutiae” and “presumably the applicant decided not to sweat the small stuff”. Colloquialisms are no substitute for forensically supportable, legally maintainable and professional responsible submissions. Those comments fell foul of all those matters. Solicitors should apply more rigour in formulating submissions than to indulge in such imprecision.
[30] Ibid.
I do not accept Mr Cohen’s characterisation that the applicant behaved in an oppressive manner towards the respondent. To the contrary. In my view the applicant and her legal representatives behaved perfectly properly in advancing this litigation on the applicant’s behalf. They encountered a significant resistance from the respondent. He adopted an approach towards non-disclosure that was less than cooperative. He delayed and engaged in unnecessary skirmishing in the disclosure process, a procedure that should have been undertaken with a degree of greater timeliness, politeness between solicitors and purpose. The correspondence that Mr Cohen introduced into evidence revealed hostility between legal representatives and their clients which was uncommon. Allegations of impropriety, oppression and the like were repeatedly made. Such intemperate language should have been avoided. A more cooperative approach should have been adopted.
The question then became whether any of the reasons submitted by Mr Cohen as providing satisfactory explanations for the respondent’s conduct were made out. I accept that for a time the respondent was not represented when he appeared before the FCCA on several occasions. If he suffered from psychological complications or even psychiatric complications at the time, that may have explained an inability to understand or progress what was required of him in the running of his defence in the FCCA. However, he was represented on one occasion before the FCCA when Mr Cohen was concerned with a proposed litigation guardian application that was eventually abandoned. Yet the respondent has been represented for a significant portion of the life of this litigation. Despite that representation, the case was burdened with an obdurate approach towards disclosure, punctuated by resistance, opposition and discordance. It is one thing to advance a party’s interest, and to do so forcefully. It is an altogether different thing to adopt an attitude of hostility, dissidence and disjunction in undertaking a task that by its very nature is at the core of a case involving the alteration of the parties’ legal and equitable interests in property. The language adopted on behalf of the respondent when communicating with the applicant’s solicitor highlighted the hostility displayed by or on behalf of the respondent, not in any way conducive to even a hard fought case. Even in Mr Cohen’s written submission[31] he characterised the behaviour of the applicant as being representative of “instances of carefully contrived dishonesty or subterfuge practised by the respondent.” There was no warrant for such a submission.
[31] Page 37 of the respondent’s written submissions.
THE CASE GUARDIAN APPLICATION
The respondent submitted[32] that the mere fact that the responded acceded to the suggestion to seek the appointment of a case guardian did not render the respondent amenable to a costs order in circumstances where that application was abandoned. To my mind, that submission wholly missed the point put against the respondent. In the passage above[33] Ms Christie SC laid out a chronologically maintainable and sequentially consistent chain of events by which –
(a)for some little time the respondent was unrepresented before the FCCA;
(b)a suggestion was made that he should seek orders for the appointment of a case guardian;
(c)the respondent adduced evidence in support of an application for orders for the appointment of a case guardian;
(d)the evidence was defective, according to the applicant, who brought those deficiencies to the attention of the respondent; and
(e)with only the slightest persuasion the respondent abandoned his application for the appointment of a case guardian, the case thereafter proceeding with the respondent being represented.
[32] Page 31 of the respondent’s written submissions.
[33] Specifically at paragraph 31 of the respondent’s submissions.
That application for the appointment of a case guardian was wholly unsuccessful. It enlivened one of the subsections of s 117(2A). The real question is whether indemnity costs should follow. Those costs are to be ordered if exceptional circumstances exist. While the respondent should not be permitted to engage in that conduct with impunity, I take the view that an indemnity costs order would be crushing. Cost on a party/party basis are appropriate.
CONSIDERATION OF INDEMNITY COSTS FOR BETTERING THE SEPTEMBER 2019 SETTLEMENT PROPOSAL
Ms Christie SC put before me some authorities in the Family Court relevant to indemnity costs. Under no circumstances could it be said that those authorities have exhaustively addressed the learning on indemnity costs. My attempt to better inform the learning in this burgeoning area[34] was perfunctorily dashed.[35] The area continues to attract observations in the Federal Court of Australia as well as the Court of Appeal in the Supreme Court of New South Wales.[36] However none of those decisions were debated before me so on principles of procedural fairness,[37] as those cases were not argued before me, it would be wrong for me to rely on them in these reasons and so I do not.
[34] Guild & Stasiuk (No. 2) [2020] FamCA 564.
[35] Stasiuk & Guild [2021] FamCAFC 62.
[36] Donnelly v Edelsten (1994) 49 FCR 384, Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602, Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] FCA 1429, Leichhardt Municipal Council v Green [2004] NSWCA 34, Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322, Jones v Bradley (No 2) [2003] NSWCA 258, Messiter v Hutchinson (1987) 10 NSWLR 525, Roberts v Rodier [2006] NSWCA 1084, Perry v Comcare (2006) 150 FCR 319 Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 and White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 910.
[37] See especially the judgment of Cordell v Second Clanfield Properties Ltd [1969] 2 Ch 9.
That leaves the lingering theme of the learning on indemnity costs in this court, informed by decisions such as In the Marriage of Kohan, Medlon & Medlon (No 6) and Guild & Stasiuk (No. 2). In short, the jurisprudence of the family law does not enthusiastically embrace indemnity costs orders unless exceptional circumstances are shown. In my view, it would stretch the concept of “exceptional circumstances” to conclude that the respondent’s conduct met that description. In common parlance exceptional circumstances are shown by something out of the ordinary. Was the respondent’s conduct in refusing the applicant’s 5 September 2019 settlement proposal out of the ordinary? Was it unreasonable? In my view, the respondent’s conduct in not resolving the litigation in accordance with the applicant’s 5 September 2019 proposal was not out of the ordinary. As it transpired, a large amount of time in the trial was consumed by contested issues in relation to the value of JPL. The amount for which the applicant agitated was not the amount as found. While I accept that the disclosure process was arduous, to say at the least, it is a lamentably regular occurrence in this court that parties either have a poor appreciation of their disclosure obligations or they are less than deft in their execution of those obligations.
One of the guiding principles in the making a costs order under s 117(2) of the Family law Act is the requirement that any costs order must, in all the circumstances, be just.[38] An indemnity costs order is not just in the circumstances of this case.
[38] In the Marriage of Hogan (1986) 10 Fam LR 681.
On the other hand, a party/party costs order in relation to the period from 5 September 2019 to the conclusion of the trial is just. In the 5 September 2019 proposal the applicant offered to resolve the litigation on a percentage division of 39% to the applicant and 61% to the respondent. That offer was not accepted. The case proceeded to trial, at considerable expense thereafter. In the upshot, the ultimate division to the applicant was substantially greater than the sum she herself indicated she was willing to accept as long ago as late 2019. While I accept that one of the complications for the respondent’s consideration of the 5 September 2019 proposal was the fluctuating overall figure of the totality of the assets, the percentage that the applicant was willing to accept (39%) should have formed the basis of much more focused discussions. Instead, the parties locked themselves into a seemingly irretrievable position of trial, without compromise.
In debate on 24 August 2021, Mr Coleman SC very helpfully pointed out[39] that if I were minded to make a costs order against the respondent of the sort urged by the applicant, I should carve out costs associated with the expert opinion evidence with respect to JPL. The making of a costs order in respect of a discrete issue in a proceeding has a substantial body of precedent to commend it.[40] That said, a costs order is quintessentially discretionary and so the guiding principles adumbrated by the High Court in relation to the proper exercise of judicial discretion apply.[41]
[39] Transcript T11 L32 et seq.
[40] Ritter v Godfrey [1920] KB 47, Jackson v Anglo-American Oil Co Ltd [1923] 2 K.B. 601, Donald Campbell and Co Ltd v Pollak [1927] AC 732, Gold v Patman and Fotheringham Ltd [1958] 2 All ER 497, and Verna Trading (Aust) Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129.
[41] House v King (1936) 55 CLR 499, Storie v Storie (1945) 80 CLR 597, Lovell v Lovell (1950) 81 CLR 513, R v Watson; ex parte Armstrong (1976) 136 CLR 248, Gronow v Gronow (1979) 144 CLR 513, Norbis v Norbis (1986) 161 CLR 513, and see James J Edelman, Judicial Discretion in Australia, (2000) 19 Australian Bar Review 285.
To my mind, the respondent is correct in propounding a costs order that carves out costs associated with the hot tub evidence during the trial. The valuation evidence produced in the lead up to trial was necessary to enable the parties to be better appraised of the competing positions on JPL’s value. However once that evidence had been filed, the applicant pressed at trial for her expert evidence to be accepted. It was not so accepted for reasons set out at length in my reasons handed down on 24 May 2021. In my view, the respondent succeeded on that component of this litigation. He should not be forced to bear the applicant’s costs associated with the hot tub.
A registrar must assess the applicant’s party/party costs. So as to bring finality to this litigation I direct that costs ordered pursuant to these reasons be determined by no later than 20 December 2021 unless I order otherwise.
COSTS ON THE COSTS APPLICATION
The applicant sought her costs in debating costs. The respondent sought his costs of the proceeding on a party/party basis.
In the passages above I have already recorded my reasons ordering for the costs of the proceeding. Subject to the carve out in relation to the costs of the hot tub, I have ordered the respondent to pay the applicant’s costs of the proceeding on a party/party basis from 5 September 2019 to the conclusion of the proceeding. Accordingly, the respondent’s application for a costs order in his favour of the proceeding since the commencement is refused.
So far as the costs of the debate about costs, I take the view that it is squarely an area to which s 117(1) of the Family Law Act applies.
CONCLUSION
The foregoing has been lengthy, but necessarily so. In the upshot the following orders will be made –
(a)the respondent must pay the applicant’s party/party costs of and incidental to the subpoenae to compel production of documentation that was supplied to the single expert;
(b)the respondent must pay the applicant’s costs of and incidental to the application in a case to the Federal Circuit Court of Australia and the appearance before it in respect of that application on 25 June 2018;
(c)in respect of the respondent’s application for a case guardian, pursuant to s 117(2A) of the Family Law Act I order the respondent to pay the applicant’s party/party costs in the sum of $5247;
(d)pursuant to s (117)(2) of the Family Law Act I order the respondent to pay the applicant her costs of the proceeding assessed on a party/party basis, such assessment to be completed by 20 December 2021 unless otherwise ordered by me, such assessment to cover the period 5 September 2019 to the conclusion of the trial;
(e)the costs assessment ordered pursuant to paragraph (d) above shall not include the costs of and incidental to the hot tub of experts conducted on 24 February 2021 and 4 March 2021; and
(f)in all other respects each party’s costs are to be borne by him and her respectively under s 117(1) of the Family Law Act
I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 14 October 2021
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