Brady & Brady [2012] FamCAFC 4 (23 January 2012)
Last Updated: 30 January 2012
FAMILY COURT OF AUSTRALIA
FAMILY LAW – APPEAL – Appeal from a costs order of a Federal Magistrate – Where the wife was ordered to pay $8,000 towards the husband’s costs – Where the costs order was made against the wife as she rejected an offer which appeared comparable to the final orders of the Federal Magistrate
FAMILY LAW – APPEAL – Appeal from a costs order of a Federal Magistrate – Where the wife submitted that the offer was rejected as it could not be accepted as the shares required to be transferred to the husband did not exist and should the wife borrow money to satisfy the asserted value she would receive a proportion of the property pool considerably less than that ultimately ordered – Where the husband’s offer was found not to be the based on a comparison of the property pool – Where the Federal Magistrate made a mistake of fact resulting in an erroneous decision – Appeal allowed
FAMILY LAW – RE-EXERCISE – Where it was apparent that other offers were made and further evidence may be needed to be filed – Matter remitted to the Federal Magistrate for re-hearing
FAMILY LAW – COSTS – Cost certificates granted to each party for the costs of the appeal
|
| Family Law Act 1975 (Cth) Federal Magistrates Court Rules 2001 (Cth) Federal Proceedings (Costs) Act 1981(Cth) |
| De Winter v De Winter (1979) 4 Fam LR 583 House v R [1936] HCA 40; (1936) 55 CLR 499 In the marriage of Greedy (1982) FLC 91-250 In the marriage of Robinson [1991] FamCA 4; (1991) FLC 92-209 |
REPRESENTATION
ORDERS
(1) The appeal be allowed.
(2) That part of paragraph 2 of the orders made by Federal Magistrate Baumann made 22 August 2011, as amended on 20 September 2011 ordering the wife to pay a contribution to the husband’s costs fixed in the sum of $8,000 within ninety day be set aside.
(3) The application for costs of the proceedings in the Federal Magistrates Court be remitted for re-hearing before Federal Magistrate Baumann.
(4) The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
(5) That the Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Brady & Brady has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.
| IN THE APPELLATE JURISIDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appellant
And
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
- On 17 October 2011 the wife filed an appeal from an order for costs made on 20 September 2011 being part of orders made by Federal Magistrate Baumann. Orders made by his Honour on 22 August 2011 and then amended on 20 September 2011. The relevant order provided:
- The Wife shall pay the Husband the sum of $75,000 (representing a property adjustment of $67,000 and a contribution to the Husband’s costs fixed in the sum of $8,000) within ninety (90) days.
...
- If the Wife is unable, or unwilling to pay to the Husband the said sum of $75,000, then the parties shall have liberty to apply to Federal Magistrate Baumann for orders facilitating the sale of the former matrimonial home.
- The grounds of appeal (later amended on 22 December 2011), as relied on by the wife are as follows:
- His Honour was misled by the incorrect and misleading submission made on behalf of the Husband that the Husband’s offer made 28 June 2011 was over and above what his Honour ordered.
- Due to this incorrect and misleading submission, His Honour made a finding of fact that the Wife should have accepted the offer made on 28 June 2011. However, it was impossible for the wife to accept the offer because she could not transfer to the Husband the ... Bank shares alleged to be worth $46,150 and owned by her as the offer required. The shares did not exist, and the Husband conceded this at the commencement of the trial.
2A. His Honour’s finding that the Wife should have accepted the Husband’s offer made 28 June 2011 was an improper exercise of his discretion.
- In Clause 5g) of his Honour’s Reasons for Judgment, the decision made in the exercise of his discretion was clearly wrong. He decided the Wife could afford to pay $8,000 costs because she has $14,722 spare in savings. However, the Wife needed those savings to make repairs and paint the home and to pay legal fees.
- The essence of the appeal is whether the Federal Magistrate was correct in making an order for costs by reason of an offer made by the solicitor for the husband on 28 June 2011.
- The wife asks that each party pay their own costs of the Federal Magistrates Court proceedings and that the husband pay the wife’s costs of and incidental to the appeal.
- It was asked that further evidence be adduced on the appeal and it was conceded that should the appeal be allowed the matter be remitted to Federal Magistrate Baumann for re-hearing.
BACKGROUND
- The husband and the wife are aged in their 70’s. They were married in 1960 and finally separated in 2009, after some 14 years living in separate bedrooms under the same roof. They have four adult children.
- The husband filed the initiating application for property settlement in early 2010.
- As in many cases, there was a genuine dispute between the parties as to the composition of the pool of assets and their value. In particular, there was an issue whether the wife held Bank shares with a possible value of $41,500 and whether the husband has a life insurance policy of a value of approximately $80,000.
- The solicitors for the husband and no doubt the husband, thought that the wife held these shares because they appeared in her Centrelink statement. The wife believed the husband had the insurance policy relying on statements made by him.
- At the outset of the proceedings it was apparently conceded that the wife did not hold those shares. However, this was an important aspect because an offer made by the husband assumed their existence and in the mathematical calculations asked that those shares be transferred to him.
- The wife unsuccessfully pursued her claim at trial that the husband had another insurance policy. While not accepting this claim the Federal Magistrate was not overly critical of the wife in this respect.
- His Honour delivered reasons in the parties’ property dispute on 5 August 2011.
- Subsequent to the orders being made, the husband, by way of written submissions, sought an order that the wife pay his costs on an indemnity basis. Those costs were quantified at $32,717.76. In the alternative, it was asked that an order be made against the wife pursuant to the Federal Magistrates Court Rules 2001 (Cth).
- The wife asked that each party pay their own costs.
- The orders from which the wife appeals required her to pay the husband’s costs fixed in the sum of $8,000.
- It was said by his Honour in his reasons for judgment in relation to costs on 20 September 2011 that:
- It was, in many ways, a sad case for determination and, by order made 22 August 2011, the Court divided the modest property pool of $489,308 in the proportions of 52% to the Wife and 48% to the Husband which, on the basis of the Wife retaining the home required the Wife to pay the Husband $67,000.
REASONS OF THE FEDERAL MAGISTRATE
- The Federal Magistrate after providing a brief history and summary of the parties applications, moved to consider s 117 of the Family Law Act 1975 (Cth) (“the Act”).
- After acknowledging the general rule that each party bear their own costs, his Honour considered the provisions contained in s 117(2A) of the Act. The Federal Magistrate said:
- I have read the written submissions and deal with the s 117(2A) factors in the following way:
- Both parties, post the order, will be in a similar modest financial position. The Wife, by retaining the home, will have a mortgage. The Husband is unlikely although his assets retained will be mostly cash, have sufficient funds to buy a home in the Brisbane area.
- I have read the written submissions and deal with the s 117(2A) factors in the following way:
b) Neither party was in receipt of Legal Aid.
- The Husband says the Wife’s conduct is a factor which compels consideration of a costs order. The Husband alleges unreasonable delay by the Wife. It is clear that the Wife has serious physical and emotional challenges, and this largely contributed to the delays and inability at times for her solicitor to be in a position to convey to the Court and her opponent the Wife’s instructions. More than the usual number of directions hearings were necessary. I am satisfied the Wife did delay in filing material. I think this was largely due to her emotional state and the difficulties she experienced in facing the reality of these proceedings. I also accept both parties were tardy in making full and complete disclosure. Although the Wife complains about uncertainties associated with an alleged ... Insurance Policy (which the Wife, even at trial, continued to assert would mature when the Husband turned 80 years) as my reasons indicate, the Husband always denied such a policy existed and the Wife was unable to prove that it is in existence.
The Wife’s fixation with the claimed existence of that additional asset, clearly acted as an emotional hurdle to properly considering any offers of settlement.
- Not relevant.
- It cannot be said that either party was “wholly unsuccessful”.
- The Husband says he made “several” offers throughout the course of the matter and claims the Wife would not negotiate. The matter was listed for trial at a directions hearing on 1 July 2011. On 28 June 2011, the Husband made an offer to settle (see letter attached to submissions), which sought that the Wife pay the Husband $35,300 and would retain the home and bank accounts. The “net result” to the Wife, estimated to be 52% of the Pool (as the Court found to be appropriate), was that her entitlement amounted to $266,848.
Whilst I accept that the pool adopted by the Husband in his offer did not include his [C] State interest (which the Husband said should be taken into account as a s. 75(2) factor), nonetheless the payment she was required to make of $35,300 was almost exactly what the Court found was just and equitable (see paragraph 23 of the reasons for judgment). The Wife should, in my view, have accepted the offer and therefore would have avoided incurring her own costs and forcing the Husband to go to trial and thereby incur costs.
- The Court shall have regard to “such other mater (sic) as the Court considers relevant”. The Wife contends that a costs order “in favour of the Husband will put an end to the Wife’s ability to retain the Home”. I cannot, on the evidence, accept that to be so, although I do accept the Wife will be financially stretched. The payment of $67,000 took into account the Wife retaining her own bank accounts of $31,722. The Wife says, in her submissions, she can borrow an amount in the vicinity of $50,000. I accept the home needs maintenance. That seems to have been the case for many years. (original emphasis)
- In conclusion the Federal Magistrate said:
6. I have formed the view that the Court should make an order for costs. The circumstances of this case do not persuade me that there are any exceptional features, so as to order costs on an indemnity basis.
- Considering the Scale fees and all the circumstances, I propose to make an order for fixed costs. I estimate it is just for the Wife to make a contribution to the costs of the Husband fixed in the sum of $8,000. This sum should be paid at or prior to the Husband being required to transfer his interest in the home to the Wife.
- In that regard, the order that issued on 22 August 2011 does not accurately and fulsomely reveal the Court’s intention. As I think was well understood from the reasons, the Wife was to pay the sum of $67,000 within 90 days, and contemporaneously the Husband was to transfer his interest in the home to the Wife, with each party retaining all other assets in their possession and control.
- Pursuant to r.16.05 (“slip rule”) of the Federal Magistrates Court Rules 2001 the order of 22 August 2011 has been amended.
- It can be seen from the reasons that the primary reason the Federal Magistrate made an order for costs was the offer made by the husband on 28 July 2011.
- It is necessary to appreciate the following essential elements of that offer:
- The property pool to be divided between the parties was said to be worth $471,000 (the Federal Magistrate found the pool to be valued at $489,308).
- The percentage division said to be appropriate was that the property be divided equally (the Federal Magistrate found that the proper division was 52 per cent to the wife and 48 per cent to the husband).
- Of the property listed there was included $46,150 for the Bank shares which subsequently were conceded not to exist.
- To obtain what was said to be one half of the value of the assets the husband was to receive $235,533 to be satisfied by the payment from the wife to the husband of $35,300, transfer of shares valued at $46,150 to him, and various bank accounts to be retained or transferred to him.
- It was not explained to the Federal Magistrate that the offer could not have been accepted in that form because of the inclusion of the shares.
- There was also the difficulty with the suggestion in the offer that the husband’s C pension found by the Federal Magistrate to have a value of $39,326 not be included in the pool or added to the property to be received by the husband, rather that it only be taken into account as a s 75(2) factor.
THE APPEAL
- In summary, it is submitted on behalf of the wife that his Honour made a mistake of fact and that this error resulted in an erroneous decision.
Mistake of fact
- In the written submissions filed on behalf of the wife it is explained that it was “very difficult to reconcile the pool of assets contained in the offer made by the Husband on 28 June 2011 with the pool contained in the Reasons for Judgment delivered by Federal Magistrate Baumann on 5 August 2011”. A table comparing the two pools was then provided. It is useful to reproduce the table:
Letter
|
Item
|
Offer Value (as shown in the Husband’s submissions)
$ |
Judgment
Value $ |
a
| Furniture and tools |
200.00
|
Not included
|
b
| Husband’s ANZ term deposit account ... |
25,000.00
|
25,037.00
|
c
| Husband’s ANZ term deposit account ... |
40,000.00
|
40,000.00
|
d
| Husband’s ANZ cheque account ... |
9,000.00
|
8,612.00
|
e
| Joint ANZ account ... |
3,535.00
|
3,535.00
|
f
| Joint ANZ account ... |
3,142.00
|
3,142.00
|
g
| Joint ... term deposit account ... |
10,000.00
|
10,000.00
|
h
| Husband’s Union Co-op trading account ... |
6,891.00
|
6,891.00
|
i
| Husband’s ... term deposit account ... |
Not included
|
4,085.00
|
| Wife’s Bendigo term deposit ... |
4,000.00
|
4,138.00
| |
j
| Wife’s Bendigo Bank account ... |
4,500
|
4,436.00
|
k
| Husband’s ... Life Insurance |
10,500.00
|
10,542.00
|
l
| Husband’s costs add back |
14,000.00
|
16,325.00
|
m
| [Bank shares] alleged by Husband to be owned by the wife |
46,150.00
|
Not included
|
n
| Payment to Husband |
35,300.00
|
35,651.00
|
o
| Husband’s C |
31,326.00
|
39,326.00
|
p
| Husband’s [vehicle] |
1,250.00
|
Not included
|
a
| [Former matrimonial home] |
260,000.00
|
260,000.00
|
b
| Wife’s furniture |
2,000.00
|
Not included
|
c
| Wife’s Bendigo Bank term deposit account ... |
23,148.00
|
*23,148.00
|
| Wife’s [PR] Bank Shares |
Not included
|
6,000.00
| |
d
| Add back Husband’s legal costs |
4,000.00
|
4,400.00
|
e
| Campervan and contents |
5,000.00
|
5,000.00
|
f
| Wife’s [vehicle] |
8,000.00
|
Not included
|
| Wife’s [super policy] |
Not included
|
14,691.00
| |
g
| Less payment to the Husband |
-35,300.00
|
-35,651.00
|
$511,642.00
|
$489,308.00
|
* Denotes that in the Judgment, the wife had to transfer this asset to the Husband. (Other than that, the items a to p first listed were to go to the Husband, and the items a to g second listed were to go to the Wife.
- The reference to $35,651 is the sum the husband was entitled to as a result of his Honour’s orders being 48 per cent of the total pool in addition to the assets he was to retain.
- It can be seen that the parties retained the following property as described in the reasons:
The wife
On the basis of say a 52%/48% division of the pool and with the Wife retaining:-
House $260,000
[P R] shares 6,000
Campervan and contents 5,000
Super Care Policy 14,691
Add back (legals) 4,400
$290,000
The husband
she would have to pay the Husband about $35,651 for him to retain his 48% of the pool – or $234,867, made up as follows:
Wife’s bank accounts 31,722
Husband’s bank accounts 84,625
Joint/frozen accounts 16,677
[Life Insurance] 10,542
Allocated Pension 39,326
Add back (legals) 16,325
199,217
Plus payment 35,651
$234,868
- It can be seen by comparing the schedule above, the sum the wife was required to pay the husband was approximately the same as that offered, that each party retained the assets sought by them, in particular that the wife retain the home, but there were some assets of relatively significant value either not included ([C State Interest]) or in the case of the shares included.
- It was submitted on behalf of the wife that the offer could not be accepted because the Bank shares did not exist. In addition it was said that should the wife have borrowed funds to pay the husband the alleged value of the shares, the husband would have received 58 per cent of the property pool and the wife 42 per cent.
- The solicitor for the wife submitted that the husband’s statement in paragraph 26 of his written submissions before the Federal Magistrate, that “[t]he Husband has made two offers to the Wife over and above what Your Honour has ordered ...” was incorrect and misleading, as the offers made to the wife attributed a $46,150 asset to the wife, which was conceded at trial not to exist.
- Further it was said:
These mischievously false submissions have resulted in his Honour erring by making a finding of fact that “the Husband made an offer .... Which sought that the Wife pay the Husband $35,300 and would retain the home and bank accounts. The “net result” to the Wife, estimated to be 52% of the pool was that her entitlement amounted to $266,848.” ... The reality was because ... Bank shares did not exist, her entitlement (if she paid the money in lieu of transferring shares) amounted to $220,698.
- In concluding the written submissions on this ground it was submitted on behalf of the wife that:
Had his Honour addressed the point made on page 2 of the Wife’s Submissions that the judgment required the Wife give the Husband $67,373 in additional assets over and above all joint assets whereas the offer required her to pay $89,950.00 in additional assets, he would have seen the difficulty in reconciling the two scenarios (namely the non-existent asset) and found that the offer was less advantageous to the Wife than his judgment.
- Counsel for the husband explained that although a letter was received on 2 June 2011 (being the letter attached to submissions in reply in the appeal) the husband’s solicitors were entitled to make further enquiries. A letter from the husband’s solicitors dated 16 June 2011 was tendered (Exhibit 1). I understand there was no reply to their letter.
- It was apparent that there was an offer from the wife where the proposed division was 60 per cent in the wife’s favour.
RELEVANT LAW
- Section 117 of the Act addresses the issue as to costs in family law proceedings. Subsections 117(1), (2) and (2A) relevantly provide:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 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) 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. (emphasis added)
- Given the nature of a costs order, being entirely discretionary, subject to the provisions of the Act, it is useful to make reference to the well known passage from House v R [1936] HCA 40; (1936) 55 CLR 499where it was said by Dixon, Evatt & McTiernan JJ at 504-05:
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
- Given the grounds of appeal it is also useful to recall the comments of Gibbs and Aickin JJ in De Winter v De Winter (1979) 4 Fam LR 583 where a finding was as Aickin J described is “not merely erroneous but not supported by any evidence” (at p 597). Gibbs J said at p 588 after referring to House v R that:
It is apparent from this statement, and is clear law, that a discretionary judgment which is based on a mistake of fact will not be upheld merely because the result reached in itself does not appear unreasonable or unjust. In Storie v Storie [1945] HCA 56; (1945) 80 CLR 597, both Latham CJ, at p 600, and Rich J, at p 604, cited from the judgment of Viscount Simon LC in Blunt v Blunt [1943] AC 517 at 526 ; [1943] 2 All ER 76at 79: “If it can be shown that the court acted under a misapprehension of fact in that it either gave weight to irrelevant or unproved matters or omitted to take into account matters that are relevant, there would, in my opinion, be ground for an appeal. In such a case the exercise of discretion might be impeached, because the court’s discretion will have been exercised on wrong or inadequate materials. ...” There are many other authorities, from Young v Thomas [1892] 2 Ch 134 at 137 to Australian Coal and Shale Employees’ Federation v Commonwealth [1953] HCA 25; (1953) 94 CLR 621 at 627, that recognize that a mistake of fact is a ground for overruling a decision involving discretionary judgment. It may, in some cases, appear that the mistake of fact has not affected the final result, or that its effect has been negligible, or that in any case the conclusion reached was correct, notwithstanding the error. But it is not right to say, as the majority of the Full Court appear to have said in the present case, that a discretionary judgment which has proceeded upon a mistake of fact should be upheld simply because the order was well within the range of the discretion of the primary judge.
- Although an appellate court should be very reluctant to interfere with the exercise of discretion in respect of costs, it can and should interfere when the result is “plainly unjust or if the discretion was exercised on wrong principles” (see In the marriage of Robinson [1991] FamCA 4; (1991) FLC 92-209).
- It was held In the marriage of Greedy, that “[a]n award of costs ought to bear some relation to the conduct of the proceedings by the parties or to their relative circumstances at the time of the application and hearing of the matter.” It was further said:
...There may be situations where refusal to negotiate, to make an offer or to put forward an alternative order may be a factor justifying an order for costs. The failure of a party to take part in negotiations in a genuine manner may contribute to delay and cost and obstruct the proper resolution of the matter.
- It was apparent from the submissions that there were other offers and that unfortunately the precision needed, especially to support a costs order was lacking in some of the offers.
CONCLUSION
- In view of the circumstances of this case I am of the view that the appeal should be allowed. A comparison of the pool asserted by the husband being the basis for the offer was not the same as that found by the trial judge so that the sum payable by the wife to the husband was not the same. However, that was not apparent to the Federal Magistrate and should be remitted to him for re-hearing as he is in the best position to decide this question.
- There will be a number of matters to be considered and doubtless further evidence. It may ultimately be shown that the order made by the Federal Magistrate was correct but his discretion should be examined based on a full appreciation of the facts.
COSTS
- At the conclusion of the hearing submissions as to costs of the appeal were heard. It was submitted on behalf of the wife that the husband should pay the costs as his lawyers had misled the judge.
- There is no reason to conclude that the lawyers had behaved improperly.
- The appropriate order in this case is that each party be granted costs certificates under the Federal Proceedings (Costs) Act 1981 (Cth).
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice May delivered on 23 January 2012.
Associate:
