Zaber and Spencer

[2014] FCCA 2503

FEDERAL CIRCUIT COURT OF AUSTRALIA

ZABER & SPENCER [2014] FCCA 2503

Catchwords:
FAMILY LAW – Application for costs – property and parenting proceedings – why it is sometimes not appropriate to order costs relating to parenting proceedings – in property proceedings significance of husband’s prolixity and non-disclosure.

Legislation:

Family Law Act 1975, ss.79A, 117

Civil Procedure Act2005 (NSW)

Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029
Penfold & Penfold (1980) FLC 90-800
I & I (No.2) (1995) FLC 92-625

Applicant: MS ZABER

Respondent: MR SPENCER

File Number: SYC 3760 of 2011

Judgment of: Judge Altobelli

Hearing date: By written submissions

Date of Last Submission: 2 September 2014

Delivered at: Sydney

Delivered on: 31 October 2014

REPRESENTATION

Applicant: In person

Counsel for the Respondent: Mr Guterres

Solicitors for the Respondent: Craddock Murray Neumann

Counsel for the Independent Children's Lawyer: Mr Ladopoulos

Solicitors for the Independent Children's Lawyer: Legal Aid NSW Sydney Central

ORDERS

1. The Husband is to pay one half of the Wife’s costs calculated from the commencement of the proceedings until the date of this order, as agreed or as assessed.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT WOLLONGONG

SYC 3760 of 2011

MS ZABER

Applicant

And

MR SPENCER

Respondent

REASONS FOR JUDGMENT

Introduction and Background

1. These reasons for judgment explain the orders I have made in a costs Application consequent on lengthy litigation between the parties.

2. Following six non-consecutive days of hearing I delivered two judgments.  The parenting judgment was delivered on 8 May 2014, and the property judgment on 4 June 2014.  Those reasons for judgment speak for themselves.  To the best of my knowledge, no appeal has been lodged in respect of the orders made.

3. On 2 July 2014 the Wife filed an Application in a Case seeking an order for costs.  Her Application was supported by her Affidavit affirmed 2 July 2014.

4. When this fact was drawn to my attention, I made the following orders in chambers: –

   1)The costs application contained within the Wife’s Application in a Case, filed 2 July 2014 be dealt with on the papers and without formal Court appearances.

   2)If the Wife has not already done so, she serve her Application and Affidavit upon the Husband within 14 days of this Order.

   3)Within 35 days of this Order, the Husband file and serve a Response to the Wife’s Application in a Case, and Affidavit in support.

   4)Within 42 days of this Order, the Wife file and serve written submissions as to costs, not exceeding 1000 words.

   5)No later than 56 days of this Order, the Husband file and serve written submissions in reply not exceeding 1000 words.

5. Pursuant to those directions the Husband filed a response on 12 August 2014 supported by his Affidavit sworn 12 July 2014.

6. On 19 August the Wife filed her submissions, and the Husband’s were filed on 2 September 2014.

Orders Sought

1. In her Application in a Case filed 2 July 2014 the wife sought an order that the husband pay her costs as follows: –

   a)From 1 September 2010 to 3 July 2012 on a party/party basis in a fixed sum of $21,573.54 or in the alternative as taxed;

   b)from 4 July 2012 to 2 July 2014 on an indemnity basis in a fixed sum of $95,928.76 or in the alternative as taxed.

   (2) that any order for costs be offset against the payment to be made by the wife to the husband pursuant to order 1(a) of the orders delivered on 4 June 2014 and

   (3)that the respondent husband be liable to pay the applicant wife’s costs of her application in a case filed 2 July 2014 on an indemnity basis as agreed or, in default of agreement, to be taxed.

2. A number of preliminary observations need to be made about the orders sought. The court could not discern from the wife’s evidence the basis on which costs for the period 1 September 2010 to 3 July 2012 could be fixed at $21,573.54. It is impossible to tell, for example, whether the fixed sum purports to be calculated by reference to party/party costs, indemnity costs, or by reference to the Federal Circuit Court Rules. Moreover, there is no procedure known to the Court as taxation, the relevant procedure being assessment, but the Court will assume that is what is meant. Clearly, the second aspect of the claim for costs is based on indemnity costs. What is known from paragraph 14 of the wife’s affidavit is that her total costs amount to $129,118.82 which would create an inference that the $21,573.53 must be indemnity, or at least close to that.

3. Moreover, order 2 asks for the costs to be offset, but the Court’s consideration of the costs application cannot be dictated by reference to when the wife needs to make a payment to the husband.  Other considerations are relevant as to the priority in which this Court deals with its judgments.

4. In his response filed 12 August 2014 the husband sought seven orders.  There is no point reproducing them here because, as will be discussed below, most of them are irrelevant.  What is relevant, however, is order 4 in which he asks that the Wife’s Application in a Case “be put aside.  Each party will bear their own costs.”  Order 4 goes on to refer to an add-back of $65,248.83 on the balance sheet “so the husband won’t be paying 65 per cent of the wife’s costs.”  Before dealing with extraneous matters, the Court will give the Husband the benefit of the doubt and accept that what he meant to say was that he opposed the Wife’s Application for Costs and sought an order that each party pay and bear their own costs.

5. The rest of the orders sought by the Husband are irrelevant to the application before the Court and are unresponsive to the directions made 8 July 2014. What is before the Court is a costs application. If the Husband wishes to appeal the orders that have been made, he should file an application in the appeals registry. If the Husband considers that there are grounds under section 79A of the Family Law Act to vary or set aside the property orders made, he should make an application in the proper form, supported by the proper evidence, but carefully consider the cost implication before he does so.  Apart from order 4, the rest of the Husband’s response is summarily dismissed.

The Evidence

1. In her affidavit filed 2 July 2014 the Wife sets out the history of her legal representation and evidence about the legal fees she incurred, together with supporting documentation. Importantly, she sets out documents evidencing her contention about offers of settlement made but rejected. She also deposes to the extensive problems she confronted as a result of the husband representing himself in these proceedings. For example, she deposes that the case was initially set down for three days, but ultimately ran for six days. That is clearly correct. She deposes that the Husband insisted on cross-examining the Family Consultant before the Independent Children’s Lawyer. The assertion is correct. She asserts that as a result of this, the cross-examination of the Family Consultant was unnecessarily long, the inference being that the Independent Children’s Lawyer’s counsel could have achieved this much more efficiently. That assertion is, again, undoubtedly correct.

2. She asserts that the Husband had been advised by her own lawyer, and by the Court several times, that he should obtain legal advice or legal representation.  Again, that is unquestionably correct.  She asserts that the Husband filed six amended applications throughout the course of the proceedings.  That is correct.  She asserts that she was put to cost in dealing with each of these applications.  The Court is prepared to accept that as being correct. 

3. She asserts that the Husband filed voluminous evidence including an affidavit that was over a thousand pages in length.  That too is correct.  She asserts that she incurred extra legal fees as a result of this.  The Court is prepared to accept that that is correct. 

4. She asserts that until the commencement of the hearing it was not clear to her what orders the Husband was seeking.  Again, that is correct, at least from the perspective of the Judge who had to hear the matter.  She also complained about his lack of willingness to engage in settlement discussion or to provide disclosure.  In relation to disclosure, the Court made a certain finding that need not be repeated.  The parties in question know what was said.  The Wife also complained about the tendency of the Husband to answer even simple questions, or very discrete requests for information, with prolix and often irrelevant answers and material.  That too, was unquestionably the case.

5. The Husband’s affidavit of 12 July 2014 is 46 pages long, only a few of which are directly relevant to the matter before the Court.  He gave evidence about the cost that he had himself incurred with solicitors – about $2000.  He repeated the contention made in the substantive proceedings about his Wife having paid her legal fees, at least in part from joint funds.  He complains about the interest costs he incurred as a result of what he considered to be the Wife’s non-compliance.  He complains that the value of the former matrimonial home adopted in the proceeding is not right, and is certainly not current.  He refers to costs that he himself incurred in preparing his case.  He refers to correspondence with the children’s school.  Of relevance, however, he does refer to some settlement correspondence.

6. Both parties filed written submissions which will be discussed below.

The Applicable Law

1. Section 117(1), (2) and (2A) relevantly state:

   Costs

   (1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC 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), (4A) 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.

2. The effect of section 117 is that the Court must consider whether an order for costs be just, and that there are circumstances that justify it in making the order. Unlike the procedure under the Civil Procedure Act2005 (NSW), for example, there is no principle that costs should follow the event under the Family Law Act 1975 (Cth). In Penfold & Penfold (1980) FLC 90-800, the High Court stated that section 117(2A) requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs.

3. Subsection (2A) lists the matters to be taken into account.  The Full Court in I & I (No.2) (1995) FLC 92-625 at 82277 stated that the relevant matters in subsection (2A) must all be taken into account and balanced in order to determine whether the overall circumstances justify the making of an order for costs. Once the Court has done that, however, the weight to be given to a particular consideration under subsection (2A) is a matter for the Court’s discretion.

4. Each of the parties addressed section 117 in their written submissions.

Discussion

1. The substantive proceedings were both in relation to parenting issues, and property. Section 117 of the Act makes no distinction as regards costs, between parenting and property proceedings. Of course, this is a matter the Court may consider under sub-section (2A)(g).

2. In both reasons for judgment, the Court referred to the power struggle between the parents, certainly as regards their children, but spilling over into financial matters.  It is quite possible that the power struggle has been perpetuated in the present application about costs. 

3. Whilst there may be little jurisprudence to support the proposition that as regards parenting proceedings, a Court should be reluctant to make any order for costs, there is nonetheless much sense in following this course, in an appropriate case. The very nature of parenting proceedings makes it much more difficult to, for example, make the distinctions that would otherwise need to be drawn for the purposes of sub-section (2A)(c) and (2A)(e). For example, the whole notion of success, or lack of success, in parenting proceedings is a difficult one to conceptualise. As a matter of policy it might be unwise to think of proceedings in relation to children as being proceedings that are either won, or lost.

4. Moreover, the open ended invitation to consider “the conduct of the parties” in (2A)(c), even if it was simply limited to the proceedings, invites the making of value judgments that are impossible to be made, even after six days of hearing.  The fact is, in the parenting case, neither parent escaped criticism, not just about their role as parents, but also in regards to their role as parents running litigation. 

5. Parenting proceedings are often considered to be more of an investigation into what is best for the children although, obviously conducted within a judicial framework which is adversarial. In those circumstance, and particularly on the facts of this case, the Court’s preference is to make a clear distinction, albeit a somewhat arbitrary one.  The Court assesses that about half of the six day trial was spent on parenting matters, and half on financial matters.  In relation to the parenting proceedings, the Court declines to make any order for costs. 

6. The Court takes into account sub-section (2A)(e) that the proceedings related to children for whom it is important to have an ongoing relationship with both parents.  The risk in the present case is that imposing a costs order on the Husband which is in some way attributable to the parenting case will lead to resentment on his part which might undermine his own relationship with the children.  This is not a risk the Court is prepared to take.  The financial benefit to the Wife of having a costs order pertaining to the parenting proceedings does not justify the perceived risk.

7. The effect of the forgoing is that the Husband’s maximum liability to costs will be no more than for half of the costs incurred.  The question now becomes whether any cost liability arises?

8. By way of summary of the Wife’s claim for costs, she contends that there were three main factors that point towards the making of a costs order against the Husband.  Firstly, that he failed to provide full and frank disclosure, thus significantly increasing her legal costs.  Secondly, that the material that he filed was prolix and irrelevant.  Thirdly, that she made offers for settlement that he should have accepted, but declined to do so. 

9. Turning to the specifics, however, she contends that her financial circumstances are such that she needs a costs order and, indeed, the strong inference to be drawn from her application is that it would make retaining the home more manageable in a financial sense.  By contrast, she asserts, what is known about the Husband’s financial circumstances indicates he is more comfortable, with the emphasis being on what is known.  The Court’s findings in its reasons for judgment are quite clear.  The Husband is in a stronger financial position to the Wife particularly because she has the primary care of the children.  The Court was, and remains suspicious about the Husband’s financial circumstances.  The absence of full disclosure about his partner’s financial circumstances was significant.  It is not an answer, as the Husband contends, to provide only limited disclosure, for example, payslips.

10. Subject to other considerations, the financial circumstances of the Wife tend to support her application for costs and those of the Husband do not contraindicate the same.

11. What is probably the Wife’s strongest claim for costs arises out of what she considers to be his conduct in the proceedings which, she says, includes the filing of prolix and irrelevant material, the making of prolix submissions, and prolix cross-examination.  The Husband’s prolixity was plainly apparent to the Court.  Quite frankly, the Husband was unstoppable.  To have stopped him would have created the even greater problem of the Husband believing that he had not been given the opportunity to present his case.  The Court is satisfied he was given every opportunity to present his case, but now he has to become accountable for his prolixity.  There is simply no question – the hearing of the property case was prolonged by at least a day, and probably a day and a half, as a result of the Husband’s prolixity.  Objections, cross-examination, and submissions took far longer than necessary.

12. The next limb of the Wife’s case pertaining to the husband’s conduct was his non-disclosure, the limited findings made to this effect, and the enormous cost to which she was put.  There is some substance to the Wife’s complaint here, but the findings were not nearly as great she contended.  It is a factor the Court takes into account, but not the strongest factor in support of her claim. 

13. On balance, the (2A)(c) considerations do point towards a costs order in favour of the Wife, mainly because of the Husband’s prolixity, but also because of the limited findings about non-disclosure.

14. The Wife’s claim for costs is also based on her written offers. Insofar as the offers related to financial matters, the Wife appears to have made two relevant cash offers that buy out the Husband’s interest in the home. The first was on 4 July 2012 with a cash payment of $201,000, the second on 8 July 2013, for $150,000. The order made by the Court was for $165,000.

15. The difficulty with considering the relevance of settlement offers in costs applications is that each offer made is made in a particular context, and on the basis of assumptions that may not, and indeed frequently are not, consistent with the Court’s findings.  When comparing an offer to an outcome the claim for costs becomes more compelling if it is a comparison between apples and apples rather than apples and oranges.  It is certainly not clear from the evidence that the offers made, and the outcome, represent the same kind of fruit.

16. Another factor that the Wife contends for is the Husband’s unreasonable behaviour and ambivalence about settlement, and his preference to litigate.  The Court is not satisfied, however, that he did not take the settlement process seriously.  The Husband clearly did. He had a firm view in this own mind about what was reasonable, and what was not.  There is no doubt that what the Wife considered to be the Husband’s unwillingness to negotiate, was considered by him to be a considered, and appropriate rejection of an offer.

1. On balance, sub-section (2A)(f) does not unequivocally assist the wife. 

2. On balance, an order for costs should be made in favour of the Wife relating to the financial part of the proceedings which the Court is prepared to attribute one half of the total cost. 

3. The Wife seeks an order for indemnity costs. The well known rule is that the Court should not depart from the ordinary rule relating to costs between party and party, and the circumstances justifying the departure should be of an exceptional kind (Yunghanns (2000) FLC 93-029 at 87470 - 87471). The Wife has not demonstrated to the Court why an indemnity costs order should be made. The greatest criticism that can be levelled against the Husband is attributable to his prolixity, which is characterological, for this litigant. No exceptional circumstances have been demonstrated. An order for costs is appropriate, but not on an indemnity basis.

Conclusion

1. Having regard to all of the above, and to the relevant evidence and materials before the Court on the costs application, the Husband is ordered to pay one half of the Wife’s costs calculated from the commencement of the proceedings until the date of this order, as agreed or as assessed.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Altobelli

Associate:  

Date:  31 October 2014