Penfold v Penfold

1. On 5th October 2012, the Court made orders in relation to property division between the parties. Among the orders then made was that, absent any submissions in writing within seven days, there would be a self-executing order for each party to pay their own costs.
2. On 12th October, the applicant Wife filed an Application in a Case seeking orders which provided that (1) the respondent Husband pay the costs of the Wife as agreed or taxed; (2) the costs assessment be referred to the Registrar of the Federal Magistrates Court for assessment.
3. The Wife filed detailed written submissions at the same time as the Application. Unfortunately, the Husband was rather dilatory in filing submissions with respect to costs in response. Those submissions were filed only on 12th December 2012. The Wife filed submissions in reply to those filed by the Husband on 19th December.
4. The first point of reference in matters of costs is ss.117(1), (2) and (2A) of the Family Law Act 1975 ("the Act"), which I set out in full, thus:
   • (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.

1. The Wife submits that all possible settlement options were exhausted by her prior to the hearing.
2. Formal findings were made at trial that the Husband earned a superior income to that of the Wife and had additional financial resources courtesy of his current Wife. That said, I note that the Wife has a not insignificant income, albeit that it is approximately half that of the Husband.
3. The Wife submitted that she had been put to the costs of the preparation for the trial, which although it involved two days of hearing, there were, in fact, three days because of the matter not having been reached before a different Federal Magistrate on the first occasion. In addition to the costs of hearing (counsel and solicitor), there were costs of valuations of property and superannuation, as well as costs of the preparation of detailed written submissions.
4. The Wife submits further that as the case law indicates, such as Marinko & Marinko [1983] FamCA 1; (1983) FLC 91-307, disparity of income alone can justify the making of a costs order. The Wife further submits that she has been wholly successful in securing a property adjustment in her favour in circumstances where any adjustment was opposed by the Husband. The net effect of the Court's orders was for the Wife to receive a property adjustment of $520,000, which was comprised of $280,000 by way of cash adjustment and $240,000 by way of superannuation split.
5. The Wife sought orders from the Court that she receive a global distribution of the asset pool of 56%. She submits that the effect of the Court's judgment is that the Wife will receive a net distribution of the global asset pool of 52%. The Wife further contends that the Husband maintained a position that the Wife be entitled to no further adjustment of property other than what the Wife already owned or retained at the date of the separation of the parties.
6. The net effect of the Husband's position, vis-à-vis the Court orders, is that he has been wholly unsuccessful, as submitted by the Wife. In her detailed written submissions, the Wife outlined various offers of compromise that were made by her prior to the commencement of proceedings, and prior to trial, with particular reference to an offer made on 11th June 2011. The details of that offer are set out in para.16 of the written submissions. I need not detail it further here.
7. It is sufficient simply to note that that offer concluded by saying that the applicant Wife would settle the matter on the following terms: a $400,000 cash payment within 60 days and a $125,000 CSS superannuation split. The Wife relied upon the cases of Pennisi v Pennisi [1997] FamCA 39; (1997) FLC 92-774, and the earlier decision in the curiously (if not unfortunately) named decision of Greedy [1982] FamCA 41; (1982) FLC 91-250.
8. The Wife stressed that in terms of the ultimate result, her offer of 11th June 2011 came within approximately $5000 of the award ultimately ordered by the Court. The Wife further submitted that the Husband made no reasonable offers of compromise either before proceedings commenced or before trial. The only offer of settlement made by the Husband was a cash adjustment to the Wife in the sum of $110,000.
9. At trial, he maintained his position that no further adjustment should be made between the parties. The Wife submitted that had the Husband accepted the offer of 11th June 2011, both parties and in particular the Wife would have been able to avoid the significant costs of the litigation, which included the whole of the preparation of the matter for trial, the costs of the trial and hearing fees, the costs of submissions and subsequent time regarding the conduct of the litigation in toto.
10. In all of the circumstances, the Wife submitted that where she (a) has been successful in the litigation, (b) had made an offer of settlement in terms that are significantly close to what the Court ultimately ordered, and (c) the litigation was funded by the Wife on an income significantly less than that of the Husband, the Court should make an order for costs against the Husband.

1. Amongst other things, the Husband submitted that it is important for the Court to consider the respective financial circumstances of the parties in total. Thus, for example, taking into account the effect of the orders made by the Court, the Wife will retain her home at [omitted] worth almost $700,000, she will receive a cash payment from the Husband of $280,000 and will receive a split of the Husband's superannuation interest to the extent of $240,000, which will supplement her existing superannuation interest of $897,717.
2. The Husband noted that he does not own a property in which to reside. The detail of his current living situation, being on assignment in New Zealand, is set out in the principal judgment delivered on 5th October 2012. He has the proceeds of sale of two properties which, after paying the Wife $280,000 cash, leaves him with $440,000 plus other cash sums of approximately $160,000, together with pearls and shares referred to in the principal judgment. His superannuation interest will be reduced by the splitting order previously made.
3. The Husband also noted, as recorded in the principal judgment, the slight age difference between the parties, as well as a capital gains tax liability which will fall to the Husband resulting from the sale of the [omitted] property. The Husband also submitted that there is nothing about the conduct of either of the parties to the proceedings which has caused increased costs.
4. The Husband submitted that the proceedings continued to the final hearing and judgment as a result of the fact that the parties could not agree on the outcome. Further, the Husband says, there is nothing about the conduct of any aspect of the litigation itself which caused one party to incur increased costs by reason of the conduct of the other party. Further, the Husband submits, neither party was wholly unsuccessful and, correspondingly, neither party was wholly successful in the proceedings.
5. The Husband then turned to the issue of offers of settlement. He said that the submissions made on behalf of the Wife ignore the said to be obvious and material difference between the terms of the offer and the terms of the orders made by the Court. The terms of the Wife's offer of June 2011 made by the Wife required the payment of a significant amount of cash in 60 days. The Husband noted that the effect of the orders of the Court is that the Husband is to pay a significantly lesser amount in cash in 60 days and a split of the superannuation interest of $240,000.
6. The Husband submits also that an important aspect of determining the justice and equity of orders made by the Court is to consider the practical effect of them rather than simply their money value. He says that justice and equity may require in a particular case an outcome whereby a superannuation interest accumulated by one party during the marriage is to be substantially shared between both parties in order to enable the party with a superannuation interest to obtain sufficient of the cash or non-superannuation property of the parties to enable that party to have the present use of the cash or property.
7. The Husband submitted that the orders actually made by the Court are significantly and materially different to the settlement offer that was made by the Wife in June 2011 and the difference between those two things is a significant consideration for the Court. Consequently, he contended, it is not to the point to claim that the end result was only some $5000 difference between what the Court ordered and what the Wife offered in June 2011. The Husband submitted that the Wife failed to obtain a result which would have required the Husband to pay her the substantial cash which was sought in both of the alternatives and the offer made on 20th June 2011.
8. Further, the Husband submits that a substantial offer was made by the Husband, which offer was rejected by the Wife, who then made a counter offer of $450,000, plus a $75,000 split of the Husband's superannuation interest, together with specified chattels.
9. In conclusion and in summary, the Husband submitted that neither party has succeeded in obtaining the orders sought by that party. The Wife's financial circumstances are better than those of the Husband as a result of the orders made by the Court. The Husband is significantly better off by reason of the orders made by the Court than he would have been had orders been made which were in accordance with the terms of the offer made by the Wife.
10. In my view, I do not need to traverse the further brief submissions in reply from the Wife that were filed on 19th December.

1. Three cases, in my view, guide the Court's resolution of the current Application in a Case for costs brought by the Wife. Those cases begin with the High Court decision in Penfold v Penfold [1980] HCA 4; (1980) 144 CLR 311, the Full Court decision in Stephens v Stephens [2010] FamCAFC 172; (2011) 44 Fam LR 117, and a recent decision of Kent J in Firmer & Britton (2012) FamCA 576. I take the liberty of noting the following summary, particularly from the latter two cases to which I have referred.
2. In Stephens, beginning at [62], the Full Court (May, Boland, and O'Ryan JJ) noted that s.117(2A) of the Act provides that in considering what orders (if any) should be made under s.117(2), the Court shall have regard to the matters set out in paragraphs (a)-(g).
3. Their Honours also noted, at [64] - [66], the relationship between s.117(1) and s.117(2), as discussed in Penfold by the High Court, from the joint reasons of Stephen, Mason, Aickin and Wilson JJ, at CLR p.315. For ease of reference, I set out the following from Stephens (and as the Full Court cited from Penfold), thus (emphasis added):
   • [64] Section 117(2A) of the Act provides that in considering what order (if any) should be made under s 117(2), the court shall have regard to the matters set out in paragraphs (a) to (g). In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another [2005] FamCA 158; (2005) 33 Fam LR 123 the Full Court (Kay, Warnick and Boland JJ), referring to s 117(2A), said at 130:
     • A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
   • [65] As to the relationship between s 117(1) and s 117(2) of the Act in Penfold v Penfold [1980] HCA 4; (1980) 144 CLR 311, in joint reasons, Stephen, Mason, Aickin and Wilson JJ said at 315:
     • 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 sub-section 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.
4. In accordance with longstanding authority, the Full Court in Stephens at [67], also noted that an order for costs is made to compensate a party against expense incurred in litigation; it is not punitive in nature. Costs are not a penalty or damages.
5. Even more recently, in Firmer & Britton, Kent J dealt with an application for costs in relation to a property dispute that was originally heard by Monteith J. His Honour similarly referred to the High Court decision in Penfold, where the High Court held that section 117(1) is not paramount to s.117(2) and that as s.117(1) is expressed to be subject to s.117(2), the former must yield whenever a judge determines in a particular case that there are circumstances that justify it in making an order. At [10] of his judgment, his Honour noted that:
   • It is clear from the decision of the High Court in Penfold, and indeed in other decisions of this Court, including the Full Court, that section 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.
6. One further matter should be noted from Kent J's judgment. At [13] in Firmer & Britton, his Honour observed, as did the Full Court in Stephens:
   • It should be noted that for the purpose of justifying circumstances, it is not necessary that a party establish what might be termed "extraordinary or exceptional circumstances". There merely needs to be the existence of circumstances which justify an order in favour of the parties seeking an order for costs.

1. In my view, accepting all of the arguments put forward by the Husband, the strongest argument put forward by the Wife is that the ultimate orders of the Court came within such a very short dollar amount and percentage terms of the offer that was made by the Wife in June 2011, a very significant time before the commencement of the trial. Accepting that the Husband made a counter-offer earlier, nonetheless, he maintained throughout the trial that no further financial adjustment should be made to the Wife other than for her to retain the property that she had. In those circumstances, and it being but one factor, it is, nonetheless, in my view, a significant factor that should sound, at least to some degree, in costs. However, I am not minded to make precisely the orders as sought by the Wife.
2. I fear that if those orders were made, yet further costs would be incurred in the preparation of bills of costs, the appearance before a Registrar to go through a taxing exercise, not to mention the time (and attendant cost) that would continue to consume the parties and their legal advisers. Rather, in order to ensure that the matter is dealt with and finalised with no further incurring of cost, it seems to me that it is best for the Court, as the Court may do under its rules, to make a lump sum payment order rather than refer the matter to a Registrar for taxation.
3. Having regard to the matters that have been set out in detail in the submissions to which I have referred, in my view, it is just and equitable, indeed proper, for the Court to make a costs order in the sum of $15,000 in favour of the Wife, to be paid by the Husband within 60 days of the date of these orders. The Court so orders.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Neville FM**.**