Zimmerman and Bertram (No. 2)
[2008] FamCA 721
•27 August 2008
FAMILY COURT OF AUSTRALIA
| ZIMMERMAN & BERTRAM (NO. 2) | [2008] FamCA 721 |
| FAMILY LAW – COSTS |
| Family Law Act 1975 (Cth) |
| Pennisi and Pennis (1997) FLC 92-774 |
| APPLICANT: | Ms Bertram |
| RESPONDENT: | Mr Zimmerman |
| FILE NUMBER: | SYF | 3586 | of | 2006 |
| DATE DELIVERED: | 27 August 2008 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Moore J |
| HEARING DATE: | 8 May 2008 Written submissions received |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Barkus Edwards Doolan |
| SOLICITOR FOR THE RESPONDENT: | Clinch Neville Long |
Orders
That the application of the wife for costs filed 20 March 2008 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Zimmerman & Bertram is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 3586 of 2006
| Ms Bertram |
Applicant
And
| Mr Zimmerman |
Respondent
REASONS FOR JUDGMENT
Proceedings
The wife claims costs arising from orders made on 19 February 2008 following a contested hearing in parenting, property and spouse maintenance proceedings. She seeks an order that the husband pay her costs of and incidental to the proceedings so far as they relate to the property component on an indemnity basis from 9 January 2007 ‘as agreed, or if agreement cannot be reached between the parties, as assessed’. She also seeks her costs of this application.
The husband seeks the dismissal of her claim. If her application is not dismissed, he asks that costs and disbursements incurred in respect of various categories be excluded from any assessment of costs to be paid. He also asks that the wife pay his costs of this application.
The orders of 19 February 2008 distributed all of the parties’ property at the time of hearing in the proportions of 55% to the husband and 45% to the wife. So far as they relate to property they are these:
6)Of the funds invested from the sale of property at [M]
i)the wife is to receive the sum of $576,236;
ii)the husband is to receive the sum of $525,600;
iii)the balance over and above $1,101,836 is to be distributed in the proportions of 45% to the wife and 55% to the husband.
7)Save as to the cash investment referred to in order 6 hereof each party is entitled to retain all other property presently in the possession or ownership of that party.
The orders also provided for the wife to receive $600 per week spouse maintenance until 18 May 2010 or further order whichever first occurs. The parenting arrangements were reflected in considerable detail.
The wife supports her claim for costs with her affidavit filed 20 March 2008 and the husband’s response is supported by an affidavit of his solicitor, Mr Long, filed 6 June 2008. Submissions were made over time in writing by their legal representatives.
Principles
Costs fall to be determined pursuant to the provisions of s 117 Family Law Act 1975. The general rule expressed in ss 117(1) is that each party is to bear his/her own costs; however, ss 117(2) permits the Court to make such order as it considers just if it is of the opinion there are justifying circumstances. In considering what order [if any] is to be made, regard is to be had to these matters set out in ss 117(2A):
‘(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.’
Submissions
Briefly expressed, the submissions for the wife received first in time contend she is in an inferior financial position to the husband, she made a reasonable offer at an early stage of the proceedings, and pursuant to the final orders she received substantially more than she would have received had her offer been accepted a year earlier. Further, while it is conceded there were proceedings other than property heard, she contends neither party was wholly unsuccessful in those other proceedings where each should bear his/her own costs. Addressing each of the ss (2A) factors in turn, it is said more particularly that the financial position of the wife is significantly inferior to the husband’s given their respective incomes and earning capacities [paragraph (a)]; legal aid is not relevant [paragraph (b)]; conduct is not relied on and there is said to be no evidence which would allow the husband to rely on this factor [paragraph (c)]; she does not rely on failure to comply with an order and nor could the husband [paragraph (d)]; and she does not rely the wholly unsuccessful factor and nor could the husband [paragraph (e)]. The focus of her claim is on paragraph (f) and an offer of settlement she made by letter dated 9 January 2007.
The letter proposed that the husband receive 55% of the net proceeds of the sale of the M property, she take the remaining 45% and each retain all items of personal property in his/her possession. It is said that the orders were substantially less favourable to the husband and the submission is put that the orders
‘…were similarly that each party retain all items of personal property in their respective possession and that of the funds invested in the proceeds of sale of the [M] property, the wife receive $576,236 and the husband receive $525,600. The balance over and above $1,101,836 was to be distributed in the proportions of 45% to the wife and 55% to the husband.’
However, this is questionable. There is a difference between the offer and the orders. The offer applies the 55/45 distribution only to the sale proceeds of the M property and otherwise each was to retain whatever else they had then in his/her possession. The orders provided for a 55/45 distribution of the total value of all assets; they would retain the assets they then had and the differential in the total value of those assets was adjusted through the cash entitlement to be received from the sale proceeds.
The offer does not specify the amount invested at the time to which the proposed 45/55 distribution would apply although an earlier offer from the husband on 22 December 2006 states a figure of $1,407,530 [before later agreed distributions] which can be taken to be close enough. Splitting the sale proceeds [after later distributions] 45/55 matched the order. But the value of their ‘other’ assets at the time of the offer is not known. This means her offer for each to retain what they had cannot be compared with the split of the known value of their ‘other’ assets 55/45 as ultimately ordered. At hearing it was known that the husband’s ‘other’ assets were worth $658,673 net and the wife’s were worth $392,716. For the sake of the exercise, if their paid legal costs are excluded - because they came from agreed distributions of the sale proceeds - the value of the husband’s other assets are reduced to $513,673 and the wife’s to $280,293. On that footing, the husband had almost 65% of the total value of $793,966. If the legal costs are not excluded, he had almost 63% of the total. Either way he had more than 55% of the total value under the orders. If their situation was similar at the time of the order the submission that the orders were ‘substantially less favourable’ to the husband than the offer would be on firmer ground.
That overview aside, the submission for the wife based on her offer nonetheless has merit. For an offer to be given weight in the exercise of the discretion s 117 confers there is no need for an offer to be evaluated with any precision in a match against a later order and whether or not the husband here would have received more if he had accepted the offer to retain the assets he had at the time, he certainly would have saved the costs he incurred thereafter - at least so far as they are referable to the property component of the proceedings.
In my assessment, the wife’s offer was within such a range of the later orders as to conclude either the husband would have been better off by taking it or, if not, then close enough to better off, particularly considering the savings in later costs. As I find, the offer deserves due weight.
In so doing it is recognized and account is taken of the counter arguments put for the husband. It is said the wife cannot ‘cherry pick’ one element of the proceedings to support her costs application since they involved a myriad of interrelated issues. More particularly, the proposition is put that offers are but one of the many considerations in the exercise of discretion [correct] and he also made offers to settle. That he did so in good faith and with a genuine intention to compromise the proceedings is not questioned. Citing Pennisi and Pennisi (1997) FLC 92-774 there is argument directed to the offer being seen in context and that his rejection of it in January 2007 was not unreasonable since there were still significant valuation and disclosure issues outstanding and unresolved up to the hearing. In my opinion context and prematurity can be a good counter-argument in some cases, but this is not one of them since the major asset had been sold at the time, what remained was superannuation and chattels, and entitlements fell to be evaluated over a relatively short marriage.
Apart from matters related more to the offer, there are other submissions for the husband directed to the wife’s conduct in the property matter, which allegedly impaired a cooperative approach to resolution, including her refusal to inform him of the whereabouts of chattels she had removed from the residence, her lengthy and irrelevant evidence about her role in the renovation work on the property, as well as the unsuccessful extensive cross-examination of the husband challenging his initial contributions, which had the consequence of unduly prolonging the hearing. It is pointed out that he agreed to interim distributions of cash on two occasions which undoubtedly saved legal costs. These matters are not without merit and are worth consideration. There is also merit in other submissions put on the husband’s behalf falling either within one of the other paragraphs of ss (2A) or paragraph (g). It is true, as submitted, that there was no offer or resolution of the wife’s spouse maintenance claim which was overblown and considerably higher than awarded. Nor was there any resolution of the parenting proceedings which occupied a considerable part of the preparation reflected in affidavits and other processes as well as the actual hearing time.
It is pointed out that the parenting outcome was not fully aligned with what either was seeking, but it has to be said that the wife’s reluctance and resistance to accept or embrace change did represent a significant stumbling block in those proceedings. The expert’s evidence represents support for that. It is accurate to say that while she did make some concessions on parenting arrangements as the matter made its way towards final hearing, the increments were rather limited in scope and were coincidental with already scheduled interim hearings. Her difficulty in making those decisions was recognised by the appointed expert and by the court and what is said here is not to detract from that. But it must also be said that her reactions, attitudes, reluctance and resistance to change, even with the benefit of the expert’s opinion, had the consequence that the husband incurred the costs of addressing these matters.
Lest it be thought otherwise, it is recognised the husband is not seeking an order for costs related to the parenting proceedings; nonetheless, he is well able to rely on that component of the proceedings and the final hearing in shielding himself from a costs claim confined to one aspect of the proceedings [s 117(2A)(g) if not another factor]. Meeting the wife’s resistance and reluctance in those proceedings and the inevitable added costs as a result weighs on his side of the scales. It follows that I do not accept at face value the submission for the wife in reply that the property, spouse maintenance and parenting proceedings were ‘primarily separate and independent of one another’. The whole of the proceedings are able to be considered and what is that the husband has done.
Conclusion
As I find, there is weight in the argument supporting the offer of settlement on the property component made about a year before the orders were made and giving due weight to offers of settlement is well established in the authorities. For example Robinson and Higginbottom (1991) FLC 92-209 [Nygh J] at 78,417 underscores the argument:
‘Paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case…..when one looks at paragraph (f), it is quite clear that the purpose of the provision is to ensure that Offers to Settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the work load of the Court is lightened, and one other consideration is certainty that a party with greater wealth is not placed in a position whenever he or she can wear out the other party by simple attrition.’
Along the same lines is the decision of Browne v Green (2002) FLC 93-115 at 89,163:
‘57. We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given.’
On the other hand there is the decision of Harris and Harris (1991) FLC 92-254 which states it is not the law that an offer of greater or equivalent value to that which results from court order will lead to an order for costs in favour of the offeror, an observation supported by a later Full Court in Pennisi v Pennisi (1997) FLC 92-774 at 84,547 where some caution was added on the need to see offers in their context:
‘….We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded………The plain words of the paragraph [s 117(2A)(f)] do not limit a Court's attention to offers which are greater than the amount awarded. Nor does the paragraph state what consequences flow from whether the offer is greater or lesser than the amount awarded, or how much that is the case. Words of limitation should not be imported into the provision and nor should it be read as though offers in proceedings under the Act carry the same consequences as payments into Court in common law matters.
We do however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. The principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree's knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties' financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.’
The wife’s offer in the property proceedings weighs in her favour.
On the other side of the scales there is weight in the husband’s favour for the costs he incurred in the proceedings and at the hearing in the parenting proceedings and in meeting a claim for spouse maintenance which had limited success compared to the wife’s claim. Weighed one against the other, the balance tips in favour of dismissing the wife’s application and leaving each party to meet his/her own costs. There is some disparity in their financial situations but by the same token this is a relatively short marriage and neither are without the means to pay their costs.
For completeness it should be said that the indemnity basis of the wife’s claim for costs was not the subject of submissions on her behalf and even if costs had been ordered there is nothing in this case or the surrounding circumstances to justify a departure from the more usual party/party basis according to the principles discussed by Sheppard J in Colgate-Palmolive Co and Anor v Cussons Pty Ltd (1993) 46 FCR 225 and in this Court in Kohan and Kohan (1993) FLC 92-340 at 79,614 and Yunghanns and Yunghanns (2000) FLC 93-029 at 87,471.
Finally, each party seeks costs of the costs claim. While the husband has been successful in shielding himself from an order, I am unable to find justifying circumstances to depart from the general position pursuant to s 117(1) on that claim.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore
Associate:
Date:
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Costs
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Remedies
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