Would you like to receive $220,000 from your former spouse towards your family law costs?
In a recent judgment of the Family Court of Australia, not only did the wife receive the minority of the property pool (about 26%), but also she has been ordered to pay the other party’s costs fixed at $220,000.
Parties in family law matters usually pay their own costs, but the court does have the power to order costs. In Pope & Pope (Costs)  FamCA 655, the judge did just that, he ordered that the wife pay the husband’s costs.
General rule – each party pays their own family law costs
Generally, each party to proceedings under the Family Law Act shall bear his or her own costs – section 117(1) of the Family Law Act (1975) (“the Act”). However this rule is subject to s 117(2), s 117AA and s 118.
Section 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs (Penfold v Penfold (1980) FLC 98-800).
If there are circumstances that justify it in so doing, the Court may make such order for costs pursuant to s 117(2) as the Court considers just. In considering what order, if any, should be made, the Court must have regard to the provisions of s 117(2A).
57. Relevantly s 117(2A) of the Act provides: 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.
Why were costs ordered in this case?
Counsel for the parties addressed matters in section 117(2A), as relevant, in their submissions.
– Prior offers of settlement
Prior to the final hearing, the husband had made a number of offers to the wife. These offers were varied but some offers were 37.5% and 33% of the property pool. These offers were some 7-11.5% higher than the percentage she received at final hearing.
The net pool was found to be $12.7 million, so the offers would have provided her with $900,000 – $1,460,500 more than she received at the final hearing.
– Understanding of financial circumstances and disclosure
The wife referred to Pennisi (1997) 22 FamLR 251 in which one party had ‘significantly less grasp of the parties financial arrangements or the financial circumstances are so complex that it would be premature to accept an offer’ and situations in which ‘the contents of the offer themselves are the subject of disputed value and legitimate subject matter for determination’.
The court considered that the wife did have control of facts and referred to offers made by the wife, enabling the Court to infer that she had sufficient knowledge to engage in settlement conferences and negotiations and to make the offers.
The wife’s evidence was that the offer “was incapable of acceptance by me as I did not know what the assets and liabilities were at that time”. The court rejected this and considered that she had received adequate disclosure from the husband and was able to understand and evaluate the offer of settlement.
The Court found that the husband’s offers had a pattern of disclosure, details about how the offer was calculated, and representations as to value and in relation to his settlement.
– The financial circumstances of the parties
The property settlement to the wife was about $3.3m and to the husband about $9.4m. The wife argued that even if the husband’s offers of settlement are found ‘to be justifying circumstances’, his demonstrably superior financial circumstances would outweigh any and all factors persuasive of a costs order. The Court did not agree with this.
– Conduct of the wife
The maintenance by the wife of her contentions as to the date of separation of the parties were found to be “troublingly misleading and appears to have been designed to obfuscate rather than illuminate the facts”, there was less than satisfactory approach by the wife to her obligations of disclosure, there was an adverse finding against the wife including the wife’s “selective disclosure and misleading evidence”.
Notwithstanding the wife’s materially inferior overall financial circumstances to the husband, the husband clearly established that as a consequence of the wife’s rejection of offers of settlement and the manner in which she conducted significant components of her case, he has unnecessarily incurred significant legal expenses.
Whilst the wife was ordered to pay $220,000 she may have been ordered to pay more but the husband’s materially superior financial circumstances had a significantly moderating influence on the magnitude of order. The judge indicated he would make an order for costs but allowed the parties to negotiate an agreement for the amount to be paid and it was agreed that the wife would pay the husband $220,000 (representing about 25% of his total costs).
Article written by Claire Naidu, Canberra Family Lawyer.