RD v DB (No. 2)[2011] QSC 124

SUPREME COURT OF QUEENSLAND

1. On 15 April 2011 I published my reasons and directed the parties to submit minutes of orders.^[1]  The parties reached agreement on the terms of orders that gave effect to the property adjustment order that I pronounced.  The parties have also made written submissions in relation to costs.  The defendant seeks an order for costs against the plaintiff.  She relies upon a formal offer to settle that was made on
   17 December 2008 and the substantial costs that have been incurred by her since then.  She seeks costs from the date of the offer or some other order that will award her a significant proportion of the costs that she has incurred since December 2008. 

Relevant provisions and principles

2. Section 341(1) of the Property Law Act 1974 (“the Act”) provides that each party to proceedings under Part 19 bears the party’s own costs.

3. The Court may make an order that a party pay costs if it is satisfied that there are circumstances justifying it making an order. In that case the Court can make such order as it thinks appropriate. In considering whether there are circumstances justifying the making of an order for costs the Court must consider the following matters:

(a)the income, property and financial resources of each of the parties;

(b)whether any party has legal aid and the terms of the legal aid;

(c)the conduct of each of the parties in relation to the proceeding, including, for example, conduct about pleadings, particulars, disclosure, inspection, interrogatories, admissions of facts and production of documents;

(d)whether the proceeding results from a party’s failure to comply with a previous order made under Part 19;

(e)whether any party has been wholly unsuccessful in the proceeding;

(f)whether any party made an offer to settle under the Uniform Civil Procedure Rules 1999 (UCPR) and the terms of the offer;

(g)any fact or circumstance that the court considers the justice of the case requires to be taken into account.^[2]

4. The principles that govern the power to order costs under s 341 are not in dispute. For there to be any departure from an order that each party pay its own costs, the Court must be satisfied that there are “justifying circumstances”.^[3]

The defendant’s offer to settle under the Uniform Civil Procedure Rules 1999

5. On 17 December 2008 the defendant made an offer to settle in accordance with chapter 9, part 5 of the Uniform Civil Procedure Rules 1999 (“the offer”).  Essentially, the offer provided for the sale of Campbell Terrace, with the sale proceeds being allocated as to $60,000 to the defendant and, after the payment of expenses, the balance to the plaintiff.

6. A mediation was held nearly a year later on 11 December 2009. Significantly, prior to that date, the plaintiff did not respond to the offer nor make any counter-offer. The plaintiff did not, for example, raise any concern during that period about valuation issues or indicate that she was not in a position to respond to the offer due to a lack of information. The defendant submits that the lack of any response is indicative of the approach which the plaintiff had adopted at that time.

7. The defendant submits that if the plaintiff had accepted the offer then she would have had the benefit of sale proceeds of approximately $300,000, and the use of those funds for approximately two years after a sale in around March 2009. The defendant’s submissions acknowledge that the value of Campbell Terrace at that time was probably less than its value of $510,000 at the date of trial. She points to a valuation of $500,000 in August 2009. In the absence of other formal valuations, I conclude that the value of Campbell Terrace as at December 2008 and in the first few months of 2009 was probably slightly less than $500,000.

8. The defendant submits that even if the net effect of the offer in December 2008 was as low as $280,000 and the proceeds of sale were not received until March 2009, then, adopting an interest rate as low as six per cent per annum, the net effect of the offer by trial was $313,600. Adopting eight per cent it was worth $324,800. Based upon assumed sale costs, the defendant calculates that if, under my orders, there was to be a sale at current valuation, the amount payable to the plaintiff would be $303,817. Accordingly, she submits that it can reasonably be concluded that the judgment was “not more favourable” than the terms of the offer.^[4]

9. The defendant first retained her solicitors on 5 February 2008. She incurred costs in the period from the date of the offer until the date of the mediation of $49,259.31. She incurred a further $69,415.95 in costs from the mediation until trial.

10. The preparation for trial involved substantial analysis of assets and bank statements over an extended period. It involved obtaining valuations of property. It was an expensive exercise.

11. The defendant submits that, in circumstances where litigants are “ordinary people” attempting to bring an end to the financial aspects of a failed relationship, there should be added encouragement for any reasonable offer to be seriously considered and acted on. She submits that to refuse a reasonable offer which results in considerable costs being incurred that otherwise could have been avoided is a “justifying circumstance” as prescribed by s 341(1) of the Act.

12. The plaintiff submits that the offer of settlement is only one factor to take into account, and that an examination of it reveals that:

(a)It is dated 17 December 2008 and is expressed to expire in 14 days, that is, on 1 January 2009.  The timing of the offer was said undoubtedly to be strategic.  The reality was, with the Christmas break, there was only until 24 December to accept it.  Six clear days did not give much time within which to consider an offer when it was known that the plaintiff resided in the United Kingdom.

(b)The terms of the offer required the property to be sold.  That is not a result that either party contended for except as a default provision.

(c)The offer required that the defendant receive $60,000 from the net proceeds of sale.  What is not known now—nor was it known at the time—is the value of the property at the time of the offer.  There had not been a valuation of the property at that time.  There was no valuation at that time of the other properties involved in the proceedings—Raymont Road and Fletcher Parade.  Without valuations of all the properties (in particular Fletcher Parade and Campbell Terrace), the plaintiff submits that it is idle to suggest that the plaintiff ought to have been in a position to accept the offer. 

(d)The variables which are unknown, in addition to the value of the property, are the mortgage debt at the time and any costs of preparing the property for sale and marketing costs;  nor is it known when the property would sell or at what price.

(e)It is not possible to know now what the true effect of the offer was as there is still no evidence of what the offer meant as at December 2008/January 2009 in order to compare and contrast it with the orders made by me.

(f)The plaintiff did make a formal offer under the Rules on 18 December 2009, after a mediation.

(g)It is reasonable for the plaintiff to have made her offer at a time when the parties had the benefit of valuations and, even after the mediation, where the parties were to attempt to resolve the matter.

(h)The defendant’s submissions tend to imply that the offer was open for acceptance beyond the date expressed in it.  Not only was it not open on the face of the document but subsequent offers and the orders sought by the defendant make it clear it was not open.  The defendant agitated for orders that the plaintiff receive only her registered interest in the Campbell Terrace property.

(i)The reality is that the defendant has not made a formal offer which has been bettered at trial and cannot point to evidence to contend otherwise.

13. I do not conclude that the timing of the formal offer was necessarily strategic. However, in circumstances in which the plaintiff resided in the United Kingdom, and the offer remained open only for a period of 14 days, it is unsurprising that the plaintiff did not respond to it within that time.  Although it is not possible to be sure what was the value of Campbell Terrace at the time of the offer or in early 2009, for present purposes I proceed on the basis that it was likely to be slightly less than $500,000.  Although the plaintiff has not had the benefit of any funds that may have been derived from the sale of Campbell Terrace in early 2009, both she and the defendant have had the benefit of rental income from it.  I am not satisfied in all the circumstances that the judgment was “not more favourable” than the terms of the offer.  However, even if it was, this is only one matter to be taken into account, albeit an important one. 

14. I am not satisfied that it was unreasonable in the circumstances for the plaintiff not to have accepted that offer within the time that it remained open for acceptance.

15. That said, the formal offer that was made in December 2008 was a reasonable offer in the circumstances. If the plaintiff had asked the defendant to renew the offer in early 2009, and accepted any renewed offer if it had been forthcoming, then both she and the defendant would have been spared very substantial legal costs.

16. Justice Nygh in Robinson v Higginbotham, when discussing the effect of s 117(2A)(f) of the Family Court Act 1975 (Cth), which deals with offers to settle, said:

“paragraph (f)does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case…. [W]hen one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.”^[5] 

17. I am not in a position to conclude that the defendant’s offer to settle was not considered seriously by the plaintiff. It deserved serious consideration and if it had been accepted then very substantial costs would have been avoided. However, I do not consider that the offer or its terms are sufficient, when regard is had to other circumstances, to justify an order that the plaintiff pay a significant proportion of the defendant’s costs since the date of the offer.

Other circumstances

18. I am required to have regard to each of the matters referred to in s 341(4). Some of them are not relevant.

19. The first relevant matter is the income, property and financial resources of each of the parties. These have been addressed in my judgment. The plaintiff points to the following matters:

(a)The plaintiff resides in the United Kingdom and earns a salary of the equivalent of approximately AUD$62,000, but she bears a higher cost of living;

(b)The defendant earns a gross salary of $125,000;

(c)The defendant also receives income from the Raymont Road property.  She has the use of Fletcher Parade (free from encumbrance) as her residence;

(d)The plaintiff will receive 30 per cent of the net value of Campbell Terrace and Fletcher Parade, being approximately $308,353, plus her managed funds and shares, credit card debts and superannuation entitlements;

(e)The defendant has the property at Raymont Road, and will receive 70 per cent of the combined net value of Fletcher Parade and Campbell Terrace, i.e. approximately $719,489, plus the value of her equity in Raymont Road of $266,000—totalling $985,489—plus her shares, managed funds, savings, car, credit card debts and superannuation entitlements;

(f)The defendant therefore has a much higher income than the plaintiff and retains assets with a considerable higher value than that of the plaintiff.

20. Neither party is in receipt of legal aid.

21. The defendant does not point to anything in the conduct of the litigation that is relevant. However, I take into account the imprecision and inaccuracy of many of the financial details contained in the plaintiff’s affidavit. The plaintiff sought to excuse these inaccuracies on the basis that she did not have access to relevant documents at the time the affidavit was sworn. However, the defendant was put to considerable expense in investigating matters and, in effect, correcting substantial matters in the plaintiff’s affidavit.

22. It cannot be said that the proceeding results from a party’s failure to comply with a previous order made under Part 19 of the Act.

23. Neither party can be said to have been successful or unsuccessful in the application or defence of it. Nor was the case a matter in which either party could allege that the other did not have an arguable case. It was a case involving the dissolution of a
    13 year domestic relationship and was encumbered with the emotional consequences of that.

24. In terms of any “fact or circumstance the court considers the justice of the case requires to be taken into account”, the plaintiff submits that I should also take account of the fact that by virtue of the plaintiff residing overseas throughout the period of the dispute, the defendant has effectively had the use of the plaintiff’s share of the property since separation—that is, the defendant had the sole benefit of the rental income received from the Fletcher Parade property from separation until June 2008, and since June 2008 the defendant has resided in the property, in which the plaintiff has been found to be entitled to a one third share. I have taken account of these matters in arriving at the property adjustment order, and I do not consider that they should again be taken into account in relation to costs.

Conclusion

25. Viewed in isolation, the defendant’s December 2008 offer to settle and its terms might justify an order that the plaintiff pay a proportion of the defendant’s costs after the date of the offer. The offer was a reasonable one, but I am not satisfied that the judgment was “not more favourable” than the terms of the offer. I accept that the power to award costs under s 341 should be exercised so as to encourage a reasonable offer to be seriously considered and acted on. However, I am not satisfied that the plaintiff acted unreasonably in not accepting the offer in all of the circumstances. Having regard to the offer and all of the circumstances that I am required to consider under s 341(4), including the income, property and financial resources of each of the parties, I am not satisfied that there are “justifying circumstances” that warrant a departure from the position stated in s 341(1), namely that each party bear the party’s own costs.