No. 6409 of 1999
- On 15 September 2000 I handed down in writing my decision in
this proceeding. In the written reasons I set out proposed draft orders
subject to hearing any submissions to be made by the parties. I did that so as
to enable, if possible, the parties to reach agreement
as to the appropriate
arrangements to be made so that my findings might take effect. Regrettably the
parties were unable to reach
agreement as to an appropriate course to follow
and accordingly I heard further submissions from the parties on 19 September
2000.
- The plaintiff seeks payment to her of the sum of $418,500 in
accordance with my finding as to the value of her share of the net
real
property assets of the parties to be apportioned between them. The defendant
submits that his interest in the properties situate
at 826 and 828 Heidelberg
Road, Alphington (which are valued at $405,000) should be transferred to the
plaintiff free of any mortgage
or encumbrance and that in addition he should
pay the sum of $13,500 to her, in satisfaction of the transfer to him of the
balance
of the property owned by the parties.
- The defendant submits that the sum of $418,500 cannot be paid
to the plaintiff by him without sale of property and that the fairest
way to
divide the real property of the parties is to transfer the two properties
situate in Heidelberg Road to the plaintiff. The
defendant submits further
that in the event of his being ordered to pay a lump sum of $418,500 to the
plaintiff there will be a necessity
for him to sell property and he would be
required to meet all costs of sale. He submits that that would be an unfair
imposition
upon him in all the circumstances. He submits further that it is
unfair that he in effect "insure" that the plaintiff will receive
$418,500 by
his taking the risk that that sale of the properties will not achieve the value
established by the evidence before me.
- The plaintiff on the other hand contends that she may,
depending upon the order for costs to be made in this proceeding, be required
to sell any property transferred to her and that it is not reasonable that she
should have to bear the costs of such sale.
- Obviously, depending upon the course of events which is to
follow any order made by me, one party or the other may suffer some benefit
or
detriment of a presently unknown description in respect of the disposition of
property. For example, it may be that the sworn
valuation of the real property
placed before me as evidence by the agreement of the parties in the course of
the hearing is proved
to be an over or under valuation of the market value of
the property in question. However, I must endeavour to achieve a just and
equitable distribution of the interests of the parties on the basis of the
evidence before me and not upon the basis of some speculative
event in the
future.
- In such circumstances it appears to me to be fair, just and
equitable to order pursuant to s.291(1) of the Property Law Act 1958
("the Act") that on or before 15 December 2000 the defendant transfer all
his rights, title and interest in the land situate at 826 and 828
Heidelberg
Road, Alphington and that such transfer be free of any mortgage encumbrance. I
propose to order that the plaintiff transfer
to the defendant all her right,
title and interest in the land situate at 1 Como Street, Alphington, 816
Heidelberg Road, Alphington
and 130 Marshall Street, Ivanhoe. I propose to
make these orders because in my view a division of the property held by the
parties
is the fairest method of apportioning their interests. The defendant
has care of his children at his residence at 130 Marshall Street.
He conducts
his childminding business from 1 Como Street and 816 Heidelberg Road,
Alphington. In my view fairness does not dictate
that he lose this interest in
these properties. It does dictate that he lose his interest in the investment
properties situate at
826 and 828 Heidelberg Road, Alphington.
- In addition I propose to order that the defendant pay the sum
of $13,500 to the plaintiff on or before 18 December 2000. I propose
to
declare that the plaintiff holds a 50% interest in 549 Coles Myer shares and in
100,000 units in the Global Property Fund. I
propose a further order that
a declaration be made that the plaintiff holds a one-eighth shareholding in
Dimax Pty Ltd. I should
say in this regard that the plaintiff seeks an order
for an accounting in respect of the value of her share in Dimax Pty Ltd. It
appears to me that the value of Dimax is not of great substance and that the
costs of the conduct of such accounting may well exceed
the sum of money which
might be obtained by the plaintiff in consequence of the accounting. I do not
propose to order an accounting
at this stage because I am hopeful that the
provision of appropriate financial records to the plaintiff's solicitors by the
defendant's
solicitors will enable agreement to be reached as to the value of
the plaintiff's one-eighth share. I do intend however to order
that there
be liberty to apply in respect of this matter as, if the parties are unable to
reach agreement about this issue the only
way of resolving the matter will be
to order an accounting.
- Counsel for the plaintiff submits further that interest should
be awarded to the plaintiff upon the sum of money found by me to
represent the
value of the plaintiff's interest in the real property. I do not accept this
submission. It does not appear to me
to be appropriate to award interest in
respect of a finding by me as to the appropriate adjustment of the interests of
the parties
in their joint property. First, there is a probability in my view
that the property in which the plaintiff has an interest has increased
in value
throughout the time that the proceeding has been in progress. Interest in such
circumstances would penalise rather than
compensate. However, of more
significance, it does not appear to me to be appropriate to award interest upon
an order adjusting
the interests of defacto partners in property under s.285 of
the Property Law Act 1958. Whilst it is true that the powers of the
court under s.291 of the Act are very wide, I think it unlikely that an award
of interest is appropriate in the ordinary case brought before the court under
Part IX of the Act. This is of course not to say that there may well be
exceptional cases in the future whereby the circumstances justify the making
of
such an order. In my view there are no such circumstances in the present case.
- I turn now to the vexed issue of the costs of this proceeding.
Counsel for the plaintiff contends that the defendant should pay
the
plaintiff's costs on a solicitor client basis. She submits that this is so
because the plaintiff has succeeded in obtaining
an order as sought by her in
the writ. Furthermore, senior counsel for the plaintiff, Ms Molyneux QC
submits that such costs should
be taxed as between solicitor and client up
until 28 April 2000, when the defendant served an offer of compromise of
$400,000 plus
costs.
- The defendant through his counsel, submits that no orders
should be made as to costs in this proceeding. First, Mr Udorovic QC
submits that although the plaintiff has succeeded in obtaining an order
adjusting the interests of the parties, she has not succeeded
in much of her
claim. He submits that the plaintiff failed to establish that the business
Gumnut, is of any value of significance.
He submits further that a
considerable amount of the time spent in the proceeding was spent in relation
to issues relevant to the
valuation of the business. He submits that the
appropriate way of dealing with the costs in this proceeding, which has been
heard
in this court only by reason of the decision of Re Wakim [1999] HCA 27; (1993) 73
ALJR 839, is to follow an approach similar to that which would have been
followed by the Family Law Court pursuant to the Family Law Act 1985.
In these circumstances it is necessary to look at the background of this
proceeding and the manner of its conduct.
- The plaintiff first brought proceedings seeking an adjustment
of property interests in the Family Court of Australia in 1997. The
defendant
appeared to that proceeding. By a reply filed on 24 November 1998 he claimed a
set off against the plaintiff's claim for
adjustment of property interests on
account of his contribution. Subsequently and in the course of the Family
Court proceedings
on 21 April 1999 the defendant filed an affidavit of
documents. This affidavit of documents was vague in the extreme. It set out
in Part 1 of Schedule 1, 21 classes of documents. As an example of the vague
and imprecise nature of the affidavit paragraph 11
states: "The respondent's
bank statements and credit card statements relating to the period prior to
cohabitation between the parties
commencing". Paragraph 18 reads: "Most
records relating to the expense account, credit account and Bankcard account
operated by
the applicant since 1983". I shall refer further to the inadequacy
of discovery.
- Subsequent to the commencement of proceedings between the
parties in the Family Court of Australia the High Court handed down its
decision in Re Wakim. Consequent upon the decision in Re Wakim
the Family Court proceedings were discontinued and the proceedings were issued
by the plaintiff in this court on 6 August 1999 by
writ, seeking inter alia,
relief pursuant to s.285 of the Property Law Act 1958. Had it not been
for the decision in Re Wakim it is clear that proceedings would never
have been issued in this court and that this matter would have been concluded
in the Family
Court of Australia.
- The proceeding came on for directions before Ashley J on 12
August 1999 and he made a number of interlocutory orders including the
filing
of the affidavits of documents previously filed in the Family Court proceedings
on the basis that the affidavits would stand
as affidavit of documents in the
proceeding before this court.
- The proceeding first came on for hearing before me on 13 April
2000. Although the case had been listed with an estimate of only
three days,
the hearing of the evidence and submissions took eight days. On several
occasions in the course of the hearing I expressed
concern to the parties'
representatives that the costs of the proceeding could prove to be out of
proportion to the issues under
consideration. Regrettably this was to no
avail.
- The plaintiff gave evidence throughout the first two days of
the proceeding. In all the circumstances it did not appear to me that
either
the examination-in-chief or the cross-examination was inordinately lengthy,
taking into account the number of issues before
the court. The defendant gave
evidence throughout much of the third, fourth, fifth, sixth and seventh days of
the hearing. The
cross-examination of the defendant was lengthy and wide
ranging. However, it appeared to me that many of the difficulties facing
senior counsel for the plaintiff in the course of her cross-examination of the
defendant were caused by the inadequate state of discovery
provided by the
solicitors for the defendant and the inadequate state of inspection of the
discovered documents by the solicitors
for the plaintiff. During the hearing a
considerable amount of time was spent in calling for further documents,
producing documents
and then standing down the hearing for further
consideration of such documents. In the end result, however, it appears to me
that
the blame for the inadequate preparation of the case in terms of provision
of documents falls equally upon both parties. The affidavit
of discovery
provided by the defendant was woefully inadequate in terms of detail. On the
other hand, it was incumbent upon the
solicitors for the plaintiff to seek
proper discovery and to undertake adequate inspection of the discovered
documents well before
the trial commenced.
- Senior counsel for the plaintiff contends that ultimately the
plaintiff succeeded in obtaining an order in her favour in respect
of the
valuation of and apportionment of the real property. However, senior counsel
for the defendant submits that an inordinate
amount of time in the course of
the hearing was taken up with issues related to the valuation of shares and to
the value of the business.
Mr Udorovic QC submits that although the
plaintiff succeeded in obtaining an order for the apportionment of real
property in her
favour, the issue of the value of such property is a relatively
small issue and that much time was consumed in the course of the
proceeding in
relation to the business and other issues upon which the plaintiff did not
succeed in establishing any substantial
value or interest. Whilst this is
true, it is apparent to me that the plaintiff and her advisers, perhaps through
their failure
to undertake appropriate investigation of the documents, had, at
the commencement of these proceedings, little understanding of the
values of
shares and other property of the parties apart from real property.
Furthermore, they relied upon the evidence of Mr Bice
which evidence I
concluded, was not soundly based. I do not consider that the submission made
by Mr Udorovic QC to the effect that
the plaintiff substantially failed to
achieve the orders claimed by her is of overwhelming strength in the
circumstances.
- Mr Udorovic further submits that in circumstances where
the parties, through no fault or desire of their own, are forced to institute
proceedings in this court rather than in the Family Court, cognisance should be
given to the usual approach to costs taken by the
Family Court. In my view
there is merit in this argument and it is appropriate to consider the course
which might have been followed
by the Family Law Court had the proceedings been
able to continue to their finality in that court.
- Section 117 of the Family Law Act 1975 states:
"Costs
(1) Subject to sub-section (2) and section 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
sub-section (2A) and the applicable Rules
of Court make such order as to costs
and security for costs, ... as the court considers just.
(2A) In considering what order (if
any) should be made under sub-section (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, in accordance
with section
117C or otherwise, made an offer in writing to the other party to the
proceeding to settle the proceedings and the terms
of any such offer; and
(g) such other matters as the court considers relevant."
- In the circumstances of the case before me I do not conclude
that any of the matters referred to in s.117(2A) of the Family Law Act
are such as to vary the principal thrust of s.117 of the Family Law Act that
each party to proceedings under the Family Law Act should bear his or
her own costs.
- Clearly, the financial circumstances of the parties in
consequence of the orders to be made in this case will be sufficient for
them
to each meet an order for payment of their own costs, although it is apparent
that the effect of a costs order will have a more
significant impact upon the
share of the real property assets to be awarded to the plaintiff. I do not
consider that any issue of
significance arises in relation to the conduct of
the parties to the proceedings. It cannot be said that either party to the
proceeding
has been wholly unsuccessful.
- However reliance is placed by Mr Urdorovic upon the fact
that two offers of compromise were made by the defendant in the course
of the
proceedings. The first offer of compromise was made immediately before the
hearing of proceedings commenced. The defendant
at that time offered to pay
the plaintiff the sum of $300,000 in consideration of the transfer to him of
all real property and her
interest in Dimax Pty Ltd. On 28 April 2000, the
sixth day of the hearing, a further offer of compromise was made whereby the
defendant
offered to pay the plaintiff $400,000 on the basis that the plaintiff
transfer to him her right title and interest in all properties
and transfer her
shareholding in Dimax to him. It should be noted that that offer of compromise
proposed that the defendant pay
the plaintiff's party party costs in respect of
the proceedings from the date of the transfer of the proceedings from the
Family
Court to the Supreme Court until the date of the offer of compromise.
Such costs by that time were clearly of a substantial order.
Although this
offer of compromise was made at a late stage and although the sum of $400,000
offered is less than the sum which was
finally decided to be the value of the
plaintiff's share of any assets of the parties, it was on any view "in the ball
park" of the
final result. No evidence was put before me to suggest that any
response whatsoever to such offers was made at any time by the plaintiff.
- In my view the fact that the defendant endeavoured to
negotiate realistically with the plaintiff immediately prior to the
commencement
of the hearing and in the course of the hearing is a matter which
weighs to some extent in his favour in the determination of the
issue of costs
to be paid.
- The question of the appropriate order to be made as to the
issue of costs is a matter which has caused me considerable vexation.
There
can be no doubt that the issue of legal costs will be a considerable burden
upon both parties if each party is required to
bear its own costs. On the
other hand a costs order in favour of the plaintiff may well prove to be
crushing upon the defendant.
In this context it should be remembered that the
aim of Part IX of the Act is to achieve a just and equitable adjustment of the
interests of the parties in real property. In all the circumstances
it appears
to me that in the proper exercise of my discretion as to costs the appropriate
order is consistent with s.117(1) of the Family Law Act 1975 and to the
effect that each party should bear its own costs of the proceedings in this
court. Accordingly, I order as follows:
1. That on or before 15 December 2000
(a) the defendant transfer to the plaintiff all his right title and interests
in all those pieces of land situate at 826 and 828
Heidelberg Road Alphington
and that such transfer be free of any mortgage encumbrance;
(b) the plaintiff transfer to the defendant all her right title and interest in
all those pieces of land situate at 1 Como Street
Alphington, 816 Heidelberg
Road Alphington, and 130 Marshall Street Ivanhoe;
(c) the defendant pay to the plaintiff the sum of $13,500.
2. I declare that the plaintiff and the defendant are the joint beneficial
owners of 549 Coles Myer shares and 100,000 units in
the Global Property Fund
and I reserve liberty to apply for orders that such shares and units be sold if
the parties are unable to
reach agreement as to the appropriate transfer or
other determination of such ownership.
3. I declare that the plaintiff has and has had since 27 October 1997 a
one-eighth shareholding in Dimax Pty Ltd. I reserve liberty
to apply for
orders for an accounting in respect of the value of such shareholding in the
event that the parties are unable to reach
agreement as to this matter.
4. I order that each party bear her and his own costs of this proceeding.
Liberty to apply generally.
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