FEDERAL CIRCUIT COURT OF AUSTRALIA
STOCKDALE & STOCKDALE (No.2)	[2014] FCCA 3071	

Catchwords: 
FAMILY LAW – Application for costs – whether offer not accepted by the wife was made pursuant to the Family Law Rules – Court considering offer more in the nature of a Calderbank offer – consideration of relevant issues in Calderbank cases – wife’s failure to accept offer not unreasonable – application dismissed.	

Legislation:  
Family Law Act 1975, s.117(2A)(f)
Family Law Rules 2004, r.10	

Stockdale & Stockdale [2014] FCCA 2359
Carey v Freehills [2013] FCA 1258	

Applicant:	MR STOCKDALE	

Respondent:	MS STOCKDALE	

File Number:	MLC 4599 of 2013	

Judgment of:	Judge Burchardt	

Hearing date:	12 December 2014	

Date of Last Submission:	12 December 2014	

Delivered at:	Melbourne	

Delivered on:	12 December 2014	

REPRESENTATION
Counsel for the Applicant:	Mr Robinson	

Solicitors for the Applicant:	Mills Oakley Lawyers Pty Ltd	

Counsel for the Respondent:	Ms Barbayannis	

Solicitors for the Respondent:	Barbayannis Lawyers	

ORDERS
(1)	All extant applications be dismissed.  

IT IS NOTED that publication of this judgment under the pseudonym Stockdale & Stockdale (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT melbourne	
MLC 4599 of 2013
MR STOCKDALE	
Applicant

And

MS STOCKDALE	
Respondent

REASONS FOR JUDGMENT
(Revised from transcript)
1.	This is a costs application and, as I have just indicated, I am giving an oral judgment, because I have come to a clear view, and I think the parties need finality in the matter.  It is an application for costs by the husband.  The essential point pressed is that the wife refused an offer of compromise and the result ultimately obtained was less beneficent to her than the offer that she rejected.  The application for costs has been strenuously pursued and strenuously resisted.  That was typical of the conduct of the case generally by both sides.  
2.	Both sides criticised some aspects of the submissions of the other.  There are even arguments about the admissibility of some of the documents tendered with the submissions.  
3.	I will start first with the terms of the judgment that has given rise to this matter.  The most substantial matter in issue in the case was when the de facto relationship between the parties first began.  The wife said 2005.  The husband said 2009.  I will read paragraphs 2-6 of my judgment (Stockdale & Stockdale [2014] FCCA 2359):
	“2.	A very significant amount of the time spent in court, and the parties’ materials as filed, was directed to establishing whether the parties first commenced their relationship as a de facto couple in early 2005 (wife’s version) or early 2009 (husband’s version).  
	3.	The reason for this concentration was the fact that the husband, on any view of the matter, amassed very considerable personal wealth in the years 2005 to 2009.  
	4.	The wife seeks distribution of the property pool 40 per cent to her and 60 per cent to the husband.  The husband says that the wife’s best case on any basis would be 20 per cent with 80 per cent to the husband.  
	5.	The parties have agreed that the superannuation gained by the parties during the period of the relationship should be split evenly but otherwise that the parties should retain their own.  
	6.	For the reasons that follow, I have decided that the de facto relationship in fact commenced in early 2007.  I think that the property pool should be divided 23 per cent in favour of the wife and 77 per cent in favour of the husband.”
4.	I should say I have corrected the figures in the copy on the Court file and taken out the unfortunate error that was first inserted.  It is clear that the result was far closer to the husband’s position than that of the wife.  However, there are some relevant extracts in the evidence which I also recorded in the decision.  I will read paragraphs 34, 35, 39, 51, and 54 to 60:
	“34.	Mr C’s evidence was that he first met the wife in early to mid-2005 and that while the wife was “all over” the husband, the husband had told Mr C subsequently that it was a sexual relationship but they were just dating.  Mr C’s evidence as to social functions and the like was consistent with this sort of observation of the relationship.  
	35.	Ms L’s evidence was at the other end of the spectrum, so to speak.  It was her observation that the husband and wife were in a committed relationship from 2005 onwards.  Her evidence was to the effect that she visited the wife’s [E] property frequently and that the applicant and his children often were there.  She deposed at paragraph 8 of her affidavit:
	“[Ms Stockdale] and I often had discussions about her family situation.  I am aware that from [Ms Stockdale]’s perspective, the [E] property was rented as a home base for [Mr Stockdale], [X] and [Y].  I observed that whilst [Mr Stockdale] was overseas he would have his car parked at [Ms Stockdale]’s home, sometimes for weeks at a time.””
5.	At paragraph 39, I continued:
	“In my opinion it does no disservice to the volume of material filed or to any of the witnesses to say that the husband sought through all his witness to minimise the contribution made during the years 2004 to 2009 by the wife and his supporting witnesses were to the same effect.  The wife’s evidence was that she was with the husband, effectively, almost every weekend, that they spent lots of time together either in [W] or in [E], that she had performed extensive domestic duties in both those places, both for the husband and his children, and that the family’s lives had become co-mingled during these years.  Her supporting witnesses were to the like effect.”
6.	At paragraph 51, I said:
	“Contrary to the submissions advanced by the counsel for the husband, the wife was generally a good witness.  There were some areas in which I found her answers unresponsive.  She was certainly determined to craft her answer as she wished and not as counsel was seeking to have her respond to his questions.  To an extent, however, I think both counsel and the wife may be open to some small measure of criticism in this regard.  Counsel was, in my view, overly concerned to leap upon the answers given by the witness before they were finished but, to a greater extent, the wife was concerned, and demonstrably so, to say what she wished to say, whether it directly responded to the question or not.”
7.	At paragraphs 54-60, I set out my conclusions on the de facto issue as follows:
	“54.	In my opinion, this was a classic case of a woman who is more in love with the man she loved than he was in love with her.  I accept that the parties met in 2004 and became intimate and it is clear that she was devoted to him thereafter.  She went down to [W] frequently and he came and stayed with her occasionally in [E].  
	55.	Nonetheless, while it is clear that the wife was open to, and believed herself from early days to be involved in, a committed and enduring relationship, it is equally clear that this was not, at least initially, the husband’s position.  The evidence of Mr C, which I entirely accept, sits understandably with the husband’s state of mind following a bitter separation only recently beforehand in 2004.  
	56.	I think that the wife did more for the husband’s children and him when he lived in [W] than the husband is prepared to concede, but less than she asserts.  She had her own job and a child to look after in Melbourne, and it is probable that the truth lies somewhere between the parties’ competing versions.  
	57.	On any view of the matter, the parties, while clearly involved in a sexual relationship, (one which I would infer was entirely satisfactory to both of them, as they continued it, and there is oblique reference to this in the husband’s emails while in Malaysia) did not live permanently in the same place.  They did not live permanently together, but rather commuted frequently but not invariably between each others’ homes.  They had no co-mingled finances.  
	58.	The evidence suggests that while they attended some events together, as persons in a sexual relationship obviously sometimes do, they were by no means seen routinely or on every social occasion in each others’ company.  Even when they were, the way in which the husband introduced the wife to his friends was not consistent with a couple committed to a genuine domestic relationship as that phrase is known to the law.  
	59.	Things clearly changed over time.  The question is when.  Once again, and despite all the evidence filed, in my view, the position is fairly clear.  By mid-2007, when the husband went to Malaysia, he had come to realise how much he missed and loved the wife.  His emails to her are clear.  By January 2008, he is devastated at the thought of separation.  The thesis that the parties were not in a committed genuine domestic relationship before then simply cannot be sustained.  It is true there was no co-mingling of finances, but each was caring for the other’s children, to an extent.  [Y] had been to Malaysia and [X] had, as I find, spent at least a week in Melbourne during her work experience with the wife.  The wife did undoubtedly provide a measure of domestic support to both the husband and his children in Melbourne, as Ms L’s evidence confirms.  
	60.	The calibration of all the relevant indicia clearly suggests to me that by no later than July 2007, the parties were in a committed domestic relationship to the exclusion of all others within the meaning of a de facto relationship within the meaning of s.4AA of the Act.”
8.	So it seemed that the de facto relationship was found by me to have been in place no later than July 2007.  This was neither 2005 for which the wife contended or 2009, for which the husband contended.  
9.	I turn now to the costs submissions of the parties.  The husband’s submissions were filed on 7 November 2014.  The point stressed was s.117(2A)(f) of the Family Law Act 1975 (“the Act”).  It disclosed an offer to settle of $350,000 made by letter on 31 May 2013.  If one goes to the submissions filed and to annexure HCS1, which is the letter of 31 May, I note that it is asserted therein that the relationship started in or about December 2008.  The offer was for $350,000 and half the super created during the relationship, which I note was the outcome that ultimately obtained.  
10.	A number of points may be made about this offer.  First, it had no time limit.  Second, it did not assert that indemnity costs would be sought if the offer was not accepted.  Third, the offer did not refer to either Family Law Rules 2004 (“the Family Law Rules”) r.10 or to the doctrine of Calderbank & Calderbank.  Fourth, the offer did not address in terms whether it was inclusive of costs, although this might be inferred.  The wife did not accept that offer, and the husband repeated it by letter dated 17 January 2014, which is annexure HCS3.  The relevant text of that letter is:
	“We refer to a letter received from you dated 20 December 2013, forwarded by ordinary post which was received by us on Tuesday 7 January, 2014 being the day after which our respective offices opened in the new year.  We note that the offer had already lapsed at the date it was received.  
	Our client instructs that his offer dated 31 May, 2013 remains open for acceptance by your client.”
11.	The points I would make about that letter are:  first, so far as I can see, the offer had not lapsed, because it had no time limit.  Second, the renewed offer likewise had no time limit.  It is common cause that the offer was withdrawn on 22 July 2014.  The husband’s submissions go on to refer to the time spent on the de facto issue at trial, but it should be noted that given the parties’ competing positions, the wife was by no means wholly unsuccessful in relation to this particular issue.  
12.	The husband’s submissions then referred to an affidavit of Mr T, which would disclose a figure, on Mr T’s view of the matter, of a taxed outcome for costs under the Family Law Rules of just over $243,000.  
13.	The wife’s submissions in response are dated 21 November 2014.  These took issue with the characterisation of the ultimate outcome of the proceeding.  If one looks at subparagraph C(d), this matter is put in issue there.  
14.	The submissions made, however, as to the characterisation of the outcome in subparagraph C(d) on page 2 of the wife’s written submissions are, in my view, disingenuous.  The $63,000 paid to the wife was paid pursuant to orders made in December 2013.  The husband repeated his offer in January 2014.  So that figure had already been dispersed by then.  Further, the wife’s business was always clearly going to be retained by her, even though there is no express reference to chattels or choses-in-action in the husband’s offers.  It is clear to me that the wife did not beat, so to speak, the $350,000 offer.  
15.	The wife’s submissions went on to assert that the wife could not have accepted the offer because the assets had not then been valued.  The wife’s submissions asserted that the offer to settle was disingenuous because proceedings were issued shortly after it was originally made.  The submissions put in issue the time spent on the start of the de facto issue and its outcome.  There is some force to these submissions, but the fact is that the offer was open until July 2014.  The wife, in my view, had a perfectly reasonable amount of time to evaluate her position, and to either accept or reject the offer.  
16.	The wife’s submissions went on to refer to the parties’ respective financial positions, a matter to which I will return.  She then complained of the failure of the husband to mediate, and asserted a profligate proliferation of costs on the husband’s part.  It was further submitted that any cost orders should be made on the relevant Federal Circuit Court scale, which would be greatly lesser than those that the husband claimed.  
17.	The husband’s submissions in reply are dated 2 December 2014.  One might have thought that enough had already been said, but the submissions in reply are substantial.  Much of it is merely responsive and/or argumentative.  There are a number of points, however, to be taken from the submissions.  On page 2, there is a denial of the assertion that the husband’s offer was a Calderbank offer.  It is asserted that “The offer complies with rule 10.01(3)”.  
18.	Next, the submissions deal with disputes as to the quantification and identification of the pool, but these, in my view, add nothing given my finding that the wife had had enough time reasonably to consider her position.  At page 10, it is asserted that the Court has powers to order costs pursuant to the “Family Court Rules”, which, I take it, is a reference to the Family Law Rules.  
19.	I will read out paragraph J on page 10 of the submissions:
	“Your Honour has power pursuant to Rule 19.18 of the Family Court Rules (2004) and Rule 21.10 of the Federal Circuit Court Rules (2001) to order costs otherwise than under Schedule 1 of the Federal Circuit Court Rules (2001).  This matter is an appropriate case for an award of costs outside of Schedule 1 having regard to the amount of time the husband’s offer was open for acceptance, the unreasonableness of the wife’s position and the quantum of costs incurred in the necessary preparation and hearing to obtain a just result.  
Even on the wife’s own submissions, the asset pool was the subject of valuations by 30th September 2013.”
20.	Even this was not the end of the matter.  By letter dated 3 December 2014, Barbayannis Lawyers wrote to the Court, containing certain objections to the admission of without prejudice correspondence.  Documents CSR3 dated 12 March 2013 and CSR8 of 15 May 2013 do not, in fact, contain any proposals to settle.  They merely disclose discussions about valuations and reference to discussions.  Although marked “without prejudice”, in substance they are not without prejudice communications.  It is well established that the nature of a so‑called “without prejudice” offer depends upon its content, not on its heading.  
21.	CSR3 goes to refute a suggestion that the wife would not get valuations until late 2013.  CSR12, however, is clearly without prejudice, and it is the wife’s privilege.  It should not have been forwarded.  I should note that CSR3 does not change my view of the wife’s position.  These were the figures as they were then understood.  
22.	I turn now to consideration of the matter.  Section 117, subsection (1) provides what is often referred to as a general rule; it is that each party bears their own costs.  But subsection (2) provides that the Court may make an order for costs where there are circumstances that justify it in doing so.  This, of course, is subject, inter alia, to s.117(2A), which requires the Court, in considering whether to make an order, mandatorily, to consider the matters there set out.  
23.	Subsection (a) is concerned with the financial circumstances of the parties.  On any view of the matter, the husband is much better off than the wife.  This is so, whatever view one takes as to the precise figures.  My orders alone confirm the husband is far better off.  The wife will obtain a modest lump sum only and has to re‑establish her business in Melbourne.  Most of her lump sum would be subsumed if I make the orders that the husband seeks.  
24.	Subsection (b), as to legal aid, is irrelevant.  
25.	Subsection (c) is concerned with the conduct of the parties.  This was a case fought hard by both sides, but there is no suggestion in the written submissions, nor, in my view, would there sustainably be room for such a submission, that this subsection has work to do.  I agree with that.  
26.	The next subsection, (d), is concerned with failure to comply with Court orders.  That is not relevant.  
27.	The next subsection, (e), is whether a party has been wholly unsuccessful.  That is also irrelevant.  Both sides had at least some measure of success.  
28.	The next subsection is subsection (f), whether there has been an offer in writing, and, of course, this has been the battleground in the written submissions.  I note that s.117C(2), to which neither party has referred, reads as follows:
	“(2) If: 
	(a) a party to proceedings to which this section applies makes an offer to the other party to the proceedings to settle the proceedings; and 
	(b) the offer is made in accordance with any applicable Rules of Court; 
	the fact that the offer has been made, or the terms of the offer, must not be disclosed to the court in which the proceedings are being heard except for the purposes of the consideration by the court of whether it should make an order as to costs under subsection 117(2) and the terms of any such order.”
29.	But it should be noted this Court has no specific rule about offers to settle.  The husband has asserted that his offer complied with r.10.01 of the Family Law Rules, but if one turns to r.1.05 of this Court’s Rules, it reads as follows:
	“(1)	It is intended that the practice and procedure of the Court be governed principally by these Rules.
	(2)	However, if in a particular case the Rules are insufficient or inappropriate, the Court may apply the Federal Court Rules or the Family Law Rules, in whole or in part and modified or dispensed with, as necessary.
	(3)	Without limiting subrule (2):
	(a)	the provisions of the Family Law Rules set out in Part 1 of Schedule 3, apply, with necessary changes, to family law or child support proceedings.”
30.	Schedule 3 incorporates various Family Law Rules, but r.10 and, indeed, the whole of Chapter 10 is not in Schedule 3.  It follows, therefore, that since Family Law Rule 10 can only ever apply if the Court exercises the discretion to apply it, the husband’s offer was not made pursuant to r.10.01 because the Court had not given leave for that rule to apply in that instance.  Accordingly, s.117C is not engaged, and we are back to s.117(2A)(f).  
31.	Here the offer was clearly in writing.  It had no express time limit but was open for an appreciable amount of time.  It did not specify that it would be used to support an indemnity costs order.  Whatever the technical position might be, in my opinion, it had the character, in substance, of a Calderbank offer.  I note the position under the Family Law Rules is itself different to offers‑of‑compromise regimes in other courts’ rules, such as the Federal Court or the other superior courts.  
32.	Turning to Calderbank offers, there is copious authority on these, and I have chosen the most recent reference I was able to find in a Federal Court googling exercise.  In Carey v Freehills [2013] FCA 1258, Kenny J reviewed the authorities, in my respectful view, extremely helpfully at [16]-[18] as follows:
	“16.	Mere refusal of a Calderbank offer followed by a result more favourable to the offeror than that represented by the offer does not of itself warrant an order for indemnity costs: see Black v Lipovac (citation omitted).  To justify an order for indemnity costs in favour of the party who made the Calderbank offer, the offeror must show that the refusal to accept it was unreasonable in all the circumstances: see Black v Lipovac; Brookfield Multiplex at [11] and the authorities there cited.  The reasonableness of the conduct of the offeree is to be viewed in the light of all the circumstances as they existed when the offer was rejected.”
33.	I emphasise:
	“The fact that the offeree ultimately failed to make out its case does not of itself mean that it acted unreasonably in rejecting an offer. (Alpine Hendwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 at [28]).  
17.	As Griffiths J said in Specsavers: [A] helpful but non‑exhaustive list of circumstances which may be relevant in determining whether the rejection of a Calderbank offer is reasonable or not is set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 AT [25] and includes:
	(a)	the stage of the proceeding at which the offer was received;
	(b)	the time allowed to the offeree to consider the offer;
	(c)	the extent of the compromise offered;
	(d)	the offeree’s prospects of success, assessed as at the date of the offer;
	(e)	the clarity with which the terms of the offer were expressed; and
	(f)	whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejection of it.”
34.	Here the critical issue, in my view, is whether the wife’s failure to accept the offer was unreasonable in the light of the circumstances at the time the failure to accept occurred.  It is clear that the offer was open for an extensive period of time, and I will perhaps refer briefly to the other matters, but this is the critical one.  It is clear that if the wife had succeeded in establishing 2005 as the date of the start of the de facto relationship, the result in this case would have been radically different.  
35.	The husband has not submitted, despite extensive submissions, the wife would never have beaten the offer to settle even if 2005 was the correct date.  The costs application has proceeded on the at least implicit assumption that the wife would have beaten the offer to settle if 2005 was the correct date.  Although the actual exercise of working out the nuts and bolts of that conclusion has not, for obvious reasons, been undertaken, I share the view implicit in the parties’ positions.  In other words, the wife would have beaten the offer if the 2005 date had been established.  
36.	Here the wife thought at all times up to judgment that the relationship began in 2005.  This was an honest and reasonable belief on her part given my findings which I have referred to earlier.  Her refusal of the offer to settle was not, in my view, unreasonable at the time it occurred.  The wife would reasonably have assessed her chances of establishing 2005 as the commencement date of the relationship as good or, at the very least, strongly arguable.  In my view, the wife’s non‑acceptance of the offer to settle was not, in all the relevant circumstances, unreasonable.
37.	Taken in conjunction with the parties’ financial circumstances, this being the only other relevant matter, the Court will not exercise its discretion to make a costs order.  I should just say in parenthesis that there are a number of other aspects in the consideration of Calderbank offers set out in the list referred to by Griffiths J which might be thought to make some impact.  
38.	The offer was certainly made in a timely way.  The wife had plenty of time to consider it.  It undoubtedly did offer a compromise, and quite a significant one, and the offer, while not wholly clear, was at least, in my view, sufficiently clear, and the wife would have been, in my view, under no illusions that a costs application, at the very least, although arguably not an indemnity costs application, would follow.  
39.	Having said that, there is one other thing I should make clear.  Even if I was minded to make an order for costs, it would not have been an order for indemnity costs or costs on the Family Law Rules in any event.  Rule 21.10 of this Court’s Rules provides that costs are assessed in accordance with the Schedule unless the Court otherwise orders.  Schedule 1 is event‑based.  This trial ran for three days.  It was not, in my view, unusually complicated, albeit that it was strenuously contested.  It was not, in my view, a case of such complexity as to make it appropriate for taxation under the Family Law Rules.  
40.	Accordingly, even if I am wrong, my conclusion would have been significantly unsatisfactory from the husband’s point of view in any event.  Accordingly, the application for costs is dismissed.  
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate:  

Date:  30 January 2015