Schultheiss & Schultheiss (No 2) [2025] FedCFamC1F 181 (21 March 2025)

Note: The form of the order is subject to the entry in the Court's records.

Note: This copy of the Court's Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Schultheiss & Schultheiss has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

1. On 12 November 2024, the Court made final orders pursuant to Pt VII of the Family Law Act 1975 (Cth) ("the Act") consequent upon the breakdown of the parties' marriage. There has been no appeal filed in relation to the final orders.
2. The final orders provided for any party who wished to bring an application for costs to contact my associate within 28 days. Consistent with those orders, the wife indicated that she sought costs. Directions were made providing for the parties to file written submissions and to speak to those submissions at a hearing on 14 March 2025. At the completion of the hearing, I made an order pursuant to s 44 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) ("the FCFCOA Act") restraining the husband from causing the removal of funds held in his solicitor's trust account pending delivery of reasons.
3. The wife seeks an order that the husband pay her costs of and incidental to the proceedings fixed in the sum of $218,000 together with costs of and incidental to the application in the sum of $17,000. Both sums are said to be calculated in accordance with Schedule 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ("the Rules"). In addition, the wife seeks a further order that pursuant to s 44 of the FCFCOA Act funds held in the husband's solicitors trust account be paid in partial satisfaction of the costs order.
4. Each of the orders sought by the wife are opposed.
5. The background to the parties proceedings is set out more exhaustively in Schultheiss & Schultheiss [2024] FedCFamC1F 759.
6. An application for costs is governed by the provisions of s 117 of the Act, which provides a general rule that each party to the proceedings should bear their own costs.
7. Section 117(2) of the Act reposes in the Court a discretion to make a costs order if the Court determines there are circumstances that justify this and, if there are such circumstances, the Court may make such order as it considers just, having regard to the matters set out in s 117(2A) of the Act.
8. In Penfold v Penfold (1980) 144 CLR 311 at 315, the plurality in the High Court determined that to make an order under s 117(2) of the Act, the Court needs to make a finding of "justifying circumstances" as a preliminary prerequisite to the making of an order. Their Honours also observed that a term such as "a clear case" is not necessarily a determiner of whether an order for costs should be made. All that is required or necessary is that there are justifying circumstances.
9. It is well-settled law that no one factor in s 117(2A) is determinative, and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL [2005] FamCA 158; (2005) 33 Fam LR 123 at 130, the Full Court observed:
   1. ... Nowhere in subsection 2(A) or elsewhere in section 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 subsection 2(A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
10. The wife advances as the sole basis for a costs order the various offers of settlement made by her to resolve the proceedings. Her application thus invokes consideration of s 117(2A)(f) and s 117(2A)(g). Subsection 117(2A)(f) is in the following terms:

(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

1. While s 117(2A)(g) addresses any other relevant matter.

1. I have read all of the evidence relied upon in the proceedings but do not propose to repeat all of it in these reasons. As the High Court reminds in Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447:
   1. ... A judge's reasons are not required to mention every fact or argument relied on by the losing party as relevant to an issue. Judgments of trial judges would soon become longer than they already are if a judge's failure to mention such facts and arguments would be evidence that he or she had not properly considered the losing party's case.
2. The parties have addressed the relevant considerations in their written submissions and expanded on them orally. I have addressed such submissions as were relevant to the determination below.
3. The wife submits that the final orders made by the Court were that the parties' assets be divided as to 62 per cent to her and 38 per cent to the husband. In the process, she expended legal fees in excess of $500,000.
4. The wife relies on two offers of settlement, the first made on 10 December 2021 which provided for a division of the parties' assets as to 52.5 per cent to her 47.5 per cent in favour of the husband. The husband's counsel quite properly conceded that, had the husband accepted that offer, he would have been approximately $600,000 better off than the result achieved at hearing.
5. The wife also relies upon an offer of settlement made on 25 June 2024. That offer, according to the wife's submissions, would have seen a division of the parties' assets as to 56 per cent to the wife and 44 per cent to the husband. Again, the husband's counsel quite properly conceded that, had the husband accepted that offer, he would have been approximately $520,000 better off than the result achieved at the hearing.
6. In each case, had the offers been accepted by the husband he would have been substantially better off, both in terms of the final result and in saving the not insubstantial cost of the hearing which involved the retention on each side of senior counsel. The husband's counsel properly conceded that the offers of settlement made by the wife opened the door to consideration of the costs application.
7. The husband's written submissions in reply correctly identify that the husband's financial position is inferior to that of the wife and assert that he is more than merely impecunious given his financial position and incarceration. I accept that the wife's financial position is vastly superior to that of the husband's in every respect, whether by way of income or asset position. That said, penury is not a bar to the making of a costs order (Nada & Nettle (Costs) [2014] FamCAFC 207; (2014) FLC 93-612). The husband also submitted that the wife's application in light of the husband's impoverished state demonstrated a lack of bona fides. I do not accept that submission. The application is properly brought and has a sound basis in both fact and law. The husband's financial position is a factor, but it does not demonstrate mala fides on the wife's part. Nor is mala fides established just because the order may ultimately be incapable of complete satisfaction. That does not go to the question of the making of the order but to its enforcement.
8. The husband sought to rely on various offers made by him. I accept that he made offers as was required by the Rules. None of his offers would have seen the wife better off had she accepted them. Whilst the offers each party made were against slightly different pools to that finally determined, the husband's counsel properly made the concessions that the husband would have been better off had he accepted the wife's offers.
9. The husband submitted that the wife's offer made 25 June 2024 needs to be seen in the context of the offer the husband made on 16 September 2024. That offer the husband submits would have seen the wife receive 55 per cent of the pool of assets being 1 per cent less than she offered to settle for by the terms of offer dated 25 June 2024. He submits the dollar value was a difference of only $165,598. His submissions proceed to record that the wife did not respond to his offer until some few days before the hearing when it was rejected.
10. Whilst the husband's offer was one percent less than the wife had offered to settle for some three months or so earlier, the making of the offer by him is tacit acceptance that her offer represented a genuine compromise of the proceedings. Her offer should have been met with an acceptance rather than a prolonging of the process with the possibility of obtaining some very modest advantage. The husband took the risk as he was entitled to do that it would be rejected as it ultimately was. I am not satisfied that such an offer by him militates in any way the making of a costs order against him. The submission focusing as it does on the offer made in 2024 ignores entirely the offer made by the wife in 2021.
11. Litigation in this court is time consuming, emotionally taxing and costly both to the parties but also the community. It is for very good reason that the Act and Rules encourages and mandates parties to make offers of settlement. It is incumbent upon a party who receives an offer of settlement to give careful, serious and thoughtful consideration to the offer ending as it would by its acceptance the litigation. I conclude that a counter offer one per cent less is not in all the circumstances a careful, serious and thoughtful consideration but instead just a position adopted to negotiate. A party who rejects an offer of settlement or makes such a counter offer does so at their peril.
12. In Browne v Green [2002] FamCA 791; (2002) FLC 93-115 at [57] the Full Court observed as follows:

...The insertion of s 117(C) is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation on 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 proper consideration is something to which very significant weight indeed, ought normally be given...

1. Whilst the paragraph above is directed to a particular section of the Act, the observations are of wider import and apposite to the circumstances of this case.

1. I am satisfied the offers made by the wife and the consequences financially to the parties by their terms is a circumstance that justifies the making of a costs order. Had either been accepted the husband would have been in a vastly superior financial position than he was by the terms of the final orders. For this reason, an order will be made that the husband pay the wife's costs.

1. The wife seeks an order in a fixed amount. While the husband's counsel made submissions that there were aspects of the wife's cost schedule that were not properly recoverable, he conceded that the costs of the wife could be assessed in the range of $100,000 to $200,000.
2. The Rules and authorities make plain that I can fix an amount for costs. As McClelland DCJ observed in Pascoe & Larsen (No 2) [2022] FedCFamC1A 126:
   1. Rule 12.17 of the Rules sets out the methods of calculating costs. These include the Court fixing a specific amount for costs (r 12.17(1)(a)) or an order for the costs to be assessed on a particular basis (r 12.17(1)(b)).
   2. In Stoian v Fiening (Costs) [2014] FamCA 944 at [91], Kent J endorsed the principles for applying a rule equivalent to r 12.17 when referring to r 19.18 of the now repealed Family Law Rules 2004 (Cth) as adumbrated by Einstein J in Idoport Pty Limited v National Australia Bank Limited & Ors [2007] NSWSC23 at [9]. Those principles include:
      1. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation;...
      2. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable;...
      3. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available;...
      4. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place;...
      5. the gross sum "can only be fixed broadly having regard to the information before the Court";...

(Citations omitted)

1. Consistent with those principles, it has been determined that where a Court orders a party to pay costs, it may be appropriate for the Court to fix a lump sum. By doing so, the Court can avoid further delay and inconvenience being occasioned by the requirement to tax a bill: Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51].

1. The question therefore becomes whether costs should be fixed in a set sum or left to be fought out between the parties by way of agreement (which I consider given the history to be unlikely) or assessment.
2. I propose to adopt the approach taken by the Full Court in Warbrick & Warbrick (No. 2) (2021) FLC 94-030 ("Warbrick") where the Full Court observed that it did "not intend to permit the costs question to become, in effect, satellite litigation" and would fix the costs amount. Those observations are apposite. I am more than comfortably satisfied that to leave the determination of the costs issue to one that was to be agreed or assessed would be to embroil these parties in further conflict and litigation.
3. I have had regard to the schedule of costs prepared by the wife which is Exhibit 2 in the proceedings. That schedule sets out the costs in accordance with Schedule 3 of the Rules both for the proceedings and this application. Having regard to that schedule and my understanding of the issues and their complexity I am satisfied that I have sufficient information to be able to undertake a broad assessment of the costs to arrive at a figure that is fair and reasonable while avoiding the not inconsiderable further cost that will be occasioned by not doing so. Having regard to all of the above considerations, I am satisfied that a fair and reasonable sum for the wife's costs of the proceedings is $165,000 and $9,000 for the application.
4. I also propose to make an order as sought by the wife that the sum be satisfied in part from funds held in the husband's solicitors trust account. It is a sum of money that is available to meet the wife's application. The husband's affidavit refers to the sum being paid to his solicitors in an anticipation of an appeal. No appeal has been lodged, nor does the husband advance any evidence as to whether it ever will be lodged, all he says is that he is intending on appealing (husband's affidavit filed 16 January 25, paragraph 42).
5. Nor is there any evidence before me that in the event that sum was not available to him, he would be denied the opportunity to appeal. The husband does say that if an order for costs were made he would not be able to pay it (husband's affidavit filed 16 January 25, paragraph 57). In those circumstances, making the order sought by the wife ensures that at least some part of the order can be satisfied.
6. I am satisfied for these reasons that it is appropriate to make the order sought by the wife such that the order be satisfied in part from the funds held in the husband's solicitors trust account.

I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell.