Z and Z

[2006] FamCA 786

FAMILY COURT OF AUSTRALIA

Z AND Z  [2006] FamCA 786

COSTS – Appeal against costs orders - Consideration of s 117 of the Family Law Act 1975 (Cth) – No merit in grounds of appeal – No appealable error on behalf of trial judge – Appeal against costs orders dismissed - Costs of substantive appeal – Substantial disparity in capital and income position of parties – Circumstances justify order for costs in favour of wife notwithstanding long separation period and increase in value of assets – Order that husband pay wife’s costs of the appeal.

Family Law Act 1975 (Cth), s 117

Penfold v Penfold (1980) 144 CLR 311; (1980) FLC 90-800
House v The King (1936) 55 CLR 499
Robinson and Higginbotham (1991) FLC 92-209
VG and M (2005) FamCA 1015

APPELLANT:  Z

RESPONDENT:  Z

FILE NUMBER:  BRF 3336 of 1997

APPEAL NUMBER:  NA 77 of 2004; NA 17 of 2005

DATE DELIVERED:  21 August 2006   

PLACE DELIVERED:  Sydney

JUDGMENT OF:  Finn, Coleman and Boland JJ

HEARING DATE:  By way of written submissions

LOWER COURT JURISDICTION:      Family Court of Australia

LOWER COURT JUDGMENT DATE: 17 March 2005

LOWER COURT MNC: [2005] FamCA 354

REPRESENTATION

SOLICITOR FOR THE APPELLANT: Mr Cooper

SOLICITORS FOR THE APPELLANT: Primrose Couper Cronin Rudkin

COUNSEL FOR THE RESPONDENT:  Mr Kirk, SC

SOLICITORS FOR THE RESPONDENT: Lehns Solicitors

ORDERS

1. The husband’s appeal against the costs orders made by the Honourable Justice Buckley on 17 March 2005 is dismissed.

2. That the husband pay the wife’s costs of the appeal against the orders made by the Honourable Justice Buckley on 4 November 2004 as agreed and failing agreement as assessed pursuant to Chapter 19 of the Family Law Rules 2004.

FAMILY COURT OF AUSTRALIA AT BRISBANE

APPEAL NUMBER: NA 77 of 2004; NA 17 of 2005

FILE NUMBER: BRF 3336 of 1997

Z

Appellant

And

Z

Respondent

REASONS FOR JUDGMENT – COSTS APPEAL

INTRODUCTION

1. On 24 October 2005 we delivered our reasons for judgment in respect of the husband’s appeal against the property settlement orders made by Buckley J on 4 November 2004. By Notice of Appeal filed 12 April 2005, the husband appealed the costs order made by Buckley J on 17 March 2005 in relation to the property settlement proceedings. At the conclusion of the hearing of the substantive appeal, we indicated that we would deal with the appeal in respect of the costs orders made by the trial judge, and the costs of the appeal, by way of written submissions.  In our orders made on 24 October 2005 we provided a timetable for the filing of written submissions which were subsequently filed by both parties. 

RELEVANT BACKGROUND

1. In his judgment dealing with the property proceedings, the trial judge found that the property of the parties had a net value of $3,175,179.00 which was to be divided as to 70 per cent (or $2,222,625.30) to the husband and 30 per cent (or $952,553.70) to the wife. 

2. We found no error by the trial judge in the exercise of his discretion, and we dismissed the husband’s substantive appeal.

APPEAL AGAINST THE COSTS ORDERS

The trial judge’s reasons for judgment

1. In his costs judgment dated 17 March 2005, the trial judge recorded the orders sought by the wife (and opposed by the husband) as follows:

   ‘That the Husband pay the wife’s costs of an [sic] incidental to these proceedings, including the reserved costs of 26 June 2004 and 16 and 17 December 2003, on an indemnity basis in the sum of $142,603.14, such sum to be paid within thirty (30) days of the date of this Order.’

2. His Honour noted the quantum of costs sought by the wife included costs arising from earlier orders made by consent by Guest J on 26 June 2003, injunction proceedings before May J resulting in the orders on 16 December 2003, 17 December 2003 and 14 May 2004, as well as the costs of the substantive proceedings which were heard on 10, 11 and 12 May 2004. 

3. The trial judge had received written submissions from each of the parties and referred to those submissions in his reasons for judgment.

4. In dealing with the orders made by May J for injunctive relief, the trial judge referred to paragraphs 100 to 152 of his substantive judgment where he concluded that the wife’s application for injunctive relief was not totally unnecessary.

5. The trial judge also noted the wife’s submissions addressed to s 117(2A) of the Family Law Act 1975 (Cth) (‘the Act’). His Honour noted ‘[t]he Husband’s submissions concede that the Husband’s financial position is superior to the Wife (paragraph 2); that the offer of settlement referred to in the Wife’s submissions was made in October 2002 and remained open until April 2003 (paragraph 5); and relied on the further factors set out in paragraphs 9 to 11 of those submissions’. 

6. The trial judge adopted the wife’s submissions (paragraphs 5 to 36).  In summary, the wife submitted relevant considerations were:

   ·the husband’s capital and earning position was vastly superior to that of the wife;

   ·the husband’s conduct throughout the proceedings resulted in increased legal costs to the wife;

   ·the unrealistic position adopted by the husband in his Response and amended Response;

   ·the assertion by the husband of a liability to Ms B of $584,850.00 which he sought to have taken into account in the proceedings;

   ·the husband’s failure to make a full and frank disclosure;

   ·the husband’s position at trial that the parties’ assets should be divided in accordance with proposed consent orders; and

   ·an offer of settlement made by the wife.

7. The trial judge also adopted paragraphs 13 to 34 of the reasons for judgment delivered by May J on 14 May 2004 in respect of her Honour’s orders of 16 and 17 December 2003. May J’s reasons noted:

   ·the disparity in the parties’ financial circumstances;

   ·the necessity for the wife to apply for injunctive relief;

   ·the failure of the husband to file documents as ordered by the Court resulting in the matter being placed in the defaulter’s list;

   ·failure by the husband to put reliable evidence in relation to property and its value before the Court;

   ·failure of the husband to provide evidence in a timely manner;

   ·failure to put evidence in a proper form of Ms B’s entitlements; and

   ·that the wife was substantially successful in her application.

8. His Honour found the disparity in the parties’ financial positions was particularly relevant to the exercise of his discretion. He also had regard to the fact the husband was largely unsuccessful in respect of issues raised by him. His Honour also had regard to the wife’s offer of settlement.

9. Having determined there were appropriate circumstances which justified making an order for costs, the trial judge then considered whether or not ‘the Husband should pay the Wife’s costs on an indemnity basis or on the usual party and party basis’.

10. Having discussed the relevant authorities on indemnity costs the trial judge said:

    ‘31.In my view, in summary, indemnity costs should only be         ordered if I am satisfied

    (1) that I have sufficient evidence before me in respect of           the terms of the cost agreement; and

    (2)there are circumstances of an “exceptional nature”    that warrant a departure from the ordinary “party        and party” basis.’

11. His Honour concluded ‘there is no clear-cut definition of what qualifies as “exceptional circumstances” and the categories which enliven the discretion to award indemnity costs are not closed’. His Honour said:

    ‘37. I have given this issue detailed and lengthy consideration and I am not satisfied that the circumstances of this case are of such an “exceptional nature” as would justify a departure from costs being awarded against the Husband on a party and party basis’.

12. His Honour thereafter ordered that the husband pay the wife’s costs of and incidental to the proceedings including reserved costs of 26 June 2004 and 16 and 17 December 2003 on a party and party basis, or as agreed between the parties.

THE PARTIES’ SUBMISSIONS

1. The husband relied on his written submissions filed on 11 November 2005. He also sought to rely on written submissions filed on his behalf in respect of the orders made by May J on 16 and 17 December 2003, and his written submissions before the trial judge. The wife relied on written submissions prepared by her senior counsel dated 2 December 2005.

RELEVANT LAW

1. Before we commence our discussion of the grounds of appeal, it is convenient we set out the relevant statutory provisions and case law in respect of costs. 

2. Section 117 of the Act provides:

‘Section 117 Costs

(1)  Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB and 118, each party to proceedings under this Act shall bear his or her own costs.

(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

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

(a)  the financial circumstances of each of the parties to the proceedings;

(b)   whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

(c)  the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

(d)  whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

(e)  whether any party to the proceedings has been wholly unsuccessful in the proceedings;

(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; and

(g)  such other matters as the court considers relevant.’

The power to award costs involves a wide exercise of discretion.  The breadth of the discretion is well recognised by authority, see Penfold v Penfold (1980) 144 CLR 311; (1980) FLC 90-800. 

GROUND 1

‘That His Honour erred in finding, as he did, that Order No. 3 of the Order of Guest J made on the 26^th June, 2003 preserved the issue to the Trial Judge as to whether the unit [ ] was to be included in the property of the parties in the property proceedings.’

1. The husband’s solicitor’s submission was that the Court had power to deal with the unit regardless of whether the orders of Guest J provided for a  transfer of the wife’s interest in that unit to the husband, or the husband’s father.

2. Senior counsel for the wife said ‘I struggle to understand the alleged error of the Trial Judge and this is not assisted by the written submissions’. The wife’s counsel noted that the wife’s interest in the unit was transferred to the husband pursuant to the orders of Guest J. The wife’s counsel further noted ‘[b]y approaching the matter in this way, the issue before Guest J (as to whether the Wife held her ¼ interest for herself absolutely or on a resulting trust for the father) it is hardly surprising that the costs of all parties were reserved to the Trial Judge’.

3. The trial judge noted Order 3 of the orders of Guest J provided as follows:

   ‘(3)     That the issue as to whether the said property ought to be included as part of the property of the parties notionally for the purposes of the property settlement proceeding be determined by the Trial Judge notwithstanding the orders made herein’

4. So far as it may be relevant to this ground, we note in respect of the issues on appeal relating to the unit, Coleman and Boland JJ said:

   ‘149.     We are satisfied, having regard to the trial Judge’s acknowledgment that the 50 per cent interest in the [ ] unit was taken into account by him as a contribution on behalf of the husband, and the husband’s present interest in the unit, that the inclusion of the [ ] unit in the list of the parties’ assets has not resulted in a miscarriage of the exercise of the trial Judge’s discretion,  notwithstanding the erroneous finding in respect of a presumption of advancement between the husband’s father and the wife.  We are fortified in this finding having regard to the small quantum of the wife’s interest relative to the overall asset pool.’

5. We agree with the submissions made on behalf of the wife to this challenge to the trial judge’s orders. We fail to see the relevance of the husband’s submission to the costs order made. We note that the orders made by Guest J were consent orders, which specifically reserved the parties’ costs to the trial judge.

6. The husband’s position before the trial judge was that the unit should be excluded in its entirety from the pool of property available for division between the parties. The husband was unsuccessful before the trial judge in that application, who included the husband’s 50 per cent interest in the property in the pool to be divided between the parties.  Although we found the trial judge was in error in respect of the doctrine of presumption of advancement, this did not negate the trial judge’s overall conclusions in respect of the unit.  We find no merit in ground 1.

GROUND 2

‘That His Honour erred in finding, as he did, that the wife’s application for injunctive relief, which was dealt with by the Honourable Justice May on the 19^th December, 2003 was not a totally unnecessary application in light of the asset pool available for division between the parties.’

1. On behalf of the husband it was submitted the trial judge erred in finding that the order of May J dated 17 December 2003 was necessary. This order provided that the husband be restrained from dealing with his interest in the properties in the Gold Coast area (‘the second property’) and (‘the third property’).  The husband’s solicitor submitted:

   ‘There were ample funds available in the remaining asset pool to satisfy the wife’s entitlement of 30% $952,553.70 … even if the husband had been allowed to deal with those two properties. 

   Thus His Honour erred in finding that the application before Justice May was not totally unnecessary.  The wife was always protected.’

2. The husband relied upon his submissions filed in respect of the orders made by May J on 16 and 17 December 2003 where he said:

   ‘If it is found at trial that:

   (a)      the wife’s entitlements are minimal;

   (b) the settlement with [Ms B] was a genuine settlement    within the range to which she was entitled;

   (c) that there was nothing inappropriate in respect of the husband’s behaviour, as is his case,

   then, the injunction which was placed against the husband by Her Honour out of an abundance of caution to protect the current assets, as opposed to the superannuation assets, whilst understandable in order to protect the status quo pending trial, may well be found to have been totally unnecessary in that the wife’s entitlement once determined was never at risk’. (paragraph 8 submissions dated 9 March 2004).

3. In those submissions, the husband also sought ‘that the costs of and incidental to the applications before the Court on the 16^th and 17^th of December 2003 be reserved to the trial Judge.’

4. Senior counsel for the wife submitted that around the time of the hearing before May J the husband contended the available pool was approximately $2.2 million which was approximately $1 million less than the pool found by the trial judge. 

5. The wife’s counsel also pointed to the position adopted by the husband at trial, namely that he would have difficulty raising funds to pay out the wife.

6. As we have already set out, the trial judge rejected the husband’s contention that he should take into account the asserted liability to Ms B.  We discern no appealable error by the trial judge in adopting the wife’s submissions to him, and before May J, in respect of the injunctive relief sought and obtained. We conclude that this ground is without merit.

GROUND 3

‘That His Honour erred in finding, as he did, that an order for costs was warranted in these proceedings based on the disparity of the parties’ financial circumstances, the conduct of the husband in the proceedings and the fact that the husband was largely unsuccessful in respect of the issues raised by him.’

1. It is submitted that:

   ·    the wife’s financial circumstances have improved considerably as a result of the judgment;

   ·    the trial occurred in unusual circumstances;

   ·    there was a delay of eight years from separation until trial; and

   ·    whilst the husband was largely unsuccessful in respect of the issues raised by him, the wife was substantially unsuccessful in her application to receive 60 per cent of the property pool together with spousal maintenance.

2. It is asserted by senior counsel for the wife that the husband’s solicitor’s submissions ‘truncate’ the findings of the trial judge. At paragraph 19 of his reasons the trial judge said:

   ‘I particularly rely on the disparity of the parties’ financial circumstances in favour of the Husband; the conduct of the Husband as identified in the Wife’s submission, the Reasons for Judgment of May J and my Reasons for Judgment; that the Husband was largely unsuccessful in respect of the issues raised by him; and the offer which the Wife made in an attempt to resolve the matter.’

3. The wife’s senior counsel noted that the trial judge had based his determination to make a costs order in reliance on the four factors enumerated above.  One of those factors was the conduct of the husband. It is noted by the wife’s senior counsel that the husband’s solicitor’s submissions do not address the issue of conduct. There is no doubt that if there are circumstances justifying the Court so doing it has a wide discretion to make an order for costs. In Penfold v Penfold (supra), Stephen, Mason, Aickin and Wilson JJ said at 315 - 316:

   ‘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 subsection is not paramount to s. 117(2). As sub-s. (1) is expressed to be subject to sub-s. (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.

   Sub-section (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”.

   Sub-section (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. ...  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...’.

4. We are satisfied that the trial judge made appropriate findings as to the disparity in the parties’ financial circumstances, the conduct of the husband, the overall result achieved by the wife in the light of the position advanced by the husband at trial, and the wife’s offer of settlement. There is nothing to suggest that the trial judge had regard to any irrelevant consideration or failed to take into account any relevant matter. His Honour clearly identified the circumstances which were the ‘essential preliminary’ to the making of his order. Accordingly we are satisfied there is no merit in ground 3.

GROUND 4

‘That His Honour erred in awarding costs in the wife’s favour in light of the terms of the Offer of Settlement that she had made (this ground of appeal relies on the success of the husband’s appeal in respect of the substantive judgment).’

1. It was submitted on behalf of the husband that the facts of this case justify appellate interference, being ‘one of the “rarest of cases”’ with ‘unusual factors’.  It was submitted:

   ‘the husband’s failure to accept [the wife’s offer of settlement] is explicable given the unusual facts of the case, the length of time between the date of separation and the Trial, the accumulation of assets by the husband post-separation, the fact that the total asset pool had not been quantified at the time the offer was withdrawn.’

2. In making this submission the husband’s solicitor appropriately acknowledged the wide discretion available to a trial judge in a discretionary decision citing House v The King (1936) 55 CLR 499 at 504-5.

3. Senior counsel for the wife noted:

   ‘Whilst this ground of appeal was understandably contingent upon success in the substantive appeal and might have been considered lost when that appeal was wholly unsuccessful, the Husband soldiers on regardless.  He now contends that the Husband’s failure to accept the offer was “explicable given the unusual facts of the case etc”’.

4. The wife filed an offer on 21 October 2002 which was left open for a period of six months. As noted in her written submissions the cash component of the wife’s offer ($150,000.00) was substantially less than the sum awarded by the trial judge ($492,856.00) and upheld on appeal.

5. The importance and weight to be afforded to offers of settlement in property matters is not in doubt, the principles being clearly enunciated in cases such as Robinson and Higginbotham (1991) FLC 92-209, where Nygh J said at 78,417:

   ‘…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.’

6. The husband was well aware of his own financial position and thus able to assess the offer made. We are satisfied it was appropriate for the trial judge to have regard, amongst other matters, to the circumstances of the offer made by the wife. We find no merit in this ground.

CONCLUSIONS

1. The husband makes a general submission that each party should pay their own costs of and incidental to the proceedings. The trial judge concluded there were circumstances warranting a departure from the general provision contained in s 117(1). We discern no appealable error on behalf of the trial judge in determining that the husband should pay costs as ordered. Accordingly, the husband’s appeal against the costs judgment is dismissed.

COSTS OF THE APPEAL AGAINST THE PROPERTY SETTLEMENT ORDERS

1. On delivery of our reserved judgment on the appeal, we provided a timetable for the parties to file written submissions in respect of the costs of the substantive appeal. 

2. The written submissions since received by us disclose that the husband sought that each party pay their own costs of the appeal.  Senior counsel on behalf of the wife sought that the husband pay the wife’s costs of the appeal, as agreed, or failing agreement, as assessed.

3. We have already set out in these reasons the provisions of s 117 of the Act which are apposite to this application, and have referred to relevant case law.

4. The husband’s solicitor submitted that each party should bear their own costs, notwithstanding that the husband was unsuccessful in respect of the appeal.  Particularly, the husband’s solicitor submitted that the wife’s financial circumstances were significantly improved as a result of the husband’s efforts post separation, and increased property values in the period from separation to the appeal.

5. Further, the husband’s written submissions referred to the decision of VG and M (2005) FamCA 1015. We will return to our discussion of that case shortly.

6. For her part, the wife relied on the husband’s absence of success in relation to the substantive appeal and, as submitted by senior counsel for the wife, the husband’s ‘vastly superior asset position and earning capacity’.  

7. We turn firstly to consider the husband’s submission that the appeal was not without substance and his reference to the decision in VG and M (supra). In that case the Full Court declined to make a costs order in favour of a successful appellant who brought an appeal against orders of a trial judge, who permitted a mother to relocate a young child to the United Kingdom, but ordered the relocation be postponed for a number of months. In declining to make an order for costs, the Full Court said:

   ‘44. In ordinary circumstances an order would be made that the appellant pay the respondent's costs of an unsuccessful appeal such as the present, and indeed such an order was sought by the respondent father. However the appeal was not without substance and involves issues of considerable importance to the parties. It is also appreciated as Counsel urged upon us that both parties will have substantial expenses ahead of them in meeting the costs of contact. Overall we are not persuaded that the circumstances of this case justify an order for costs.’

8. It is apparent there were very different considerations in the circumstances of VG and M (supra) to the present case. Whilst we take into account the long period from the parties’ separation until trial, during which period the parties’ assets increased substantially, in the overall circumstances of this case these factors cannot be determinative of the application.

9. The thrust of the husband’s submissions was that the wife’s financial circumstances were greatly improved by the husband’s efforts. We accept as a result of the trial judge’s judgment, confirmed by us on appeal, the wife will retain assets to the value of $952,553.70 whilst the husband will retain assets to the value of $2,222,625.30. 

10. As Coleman and Boland JJ, with whom Finn J generally agreed, noted at paragraph 171 the wife had earnings of $404.00 per week and, by contrast, the husband had capacity to substantially reduce mortgage indebtedness and to make payments to Ms B at the rate of $8,000.00 per month. 

11. It is apparent there is an enormous disparity in the parties’ financial circumstances both as to capital and income.

12. We accept the submissions of senior counsel for the wife, who noted that the husband failed in respect of each area of challenge to the orders of the trial judge, thus supporting the wife’s application for costs of the appeal.

13. We conclude, given the substantial disparity in the capital and income position of the parties, and the fact the husband was wholly unsuccessful in the appeal, there are circumstances justifying an order for costs in favour of the wife, notwithstanding the long separation period, and the increase in value of the assets. 

I certify that the preceding fifty four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date: 21 August 2006