Kilby v O'Brien (No 2) [2006] ACTSC 90 (13 September 2006)

Last Updated: 13 February 2007

JOSEPH MAHONY KILBY v JOYCE PATRICIA O'BRIEN (No 2)

[2006] ACTSC 90 (13 September 2006)

DOMESTIC RELATIONSHIPS - costs following property application.

Domestic Relationships Act 1994

Kilby v O'Brien [2006] ACTSC 20

Kardos v Sarbutt (No 2) [2006] NSWCA 206

Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115

No SC 195 of 2004

Judge: Connolly J

Supreme Court of the ACT

Date: 13 September 2006

IN THE SUPREME COURT OF THE )

) No SC 195 of 2004

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: JOSEPH MAHONY KILBY

Plaintiff

AND: JOYCE PATRICIA O'BRIEN

Defendant

ORDER

Judge: Connolly J

Date: 13 September 2006

Place: Canberra

THE COURT ORDERS THAT:

1. There be no order as to costs and that each party bear his and her own costs.

1. This is an application for costs following my judgment of 29 March 2006 (Kilby v O'Brien [2006] ACTSC 20) in an application for property adjustment under the Domestic Relationships Act 1994 (the Domestic Relationships Act). The parties had been in a relationship from about the end of 1996 to the end of 2002. In my judgment I determined that the joint assets of the parties amounted to $351,236 and I ordered that there be a property adjustment from the female defendant (in whose name the assets were held) to the male plaintiff of half that amount, being $175, 618. I gave the parties leave to bring an application for costs and the plaintiff now seeks costs.

2. It seems to me that, while costs are of course always discretionary, the normal rule that "costs follow the event" must be treated with caution in the context of an application for a property adjustment under the Domestic Relationships Act. As Brereton J (with whom Basten JA and Hunt AJA agreed) said in Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]- [29]:

... the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct. ... The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary...

In this type of litigation, it is artificial to resolve liability for costs according to the accident of who is plaintiff and who is defendant, so as to leave a plaintiff free to litigate confident that he will receive costs however unreasonable his claim, unless the defendant betters her offer. There is no reason why the defendant should bear the risk of costs to the exclusion of the plaintiff where neither makes a realistic offer.

3. It seems to me that, on the material before me at the costs application, both parties in the pre-trial negotiations were in broad agreement that the distribution of the assets should be at about the range of 70 percent to 30 percent, with both the plaintiff and the defendant of the view that they were entitled to 70 percent and the other party to 30 percent. In the end, I determined that the asset pool should be evenly split.

4. It was common ground that the various offers made by the plaintiff to settle never amounted, in the Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115 sense, to a Calderbank offer. In August 2003 the plaintiff put forward a settlement offer of $182,500, which is an amount greater than the final award of $175,618, but counsel for the plaintiff conceded, properly, that the asset pool, being principally the residential property in Chifley, had substantially increased in value between August 2003 and the judgment in March 2006, and that in values at the date of the hearing (December 2005) the August 2003 offer was in reality more in the order of $207,000.

5. It seems to me that the defendant cannot be said to have acted unreasonably in rejecting such an offer. Moreover, there was a real legal question for determination in these proceedings, as the plaintiff's position, which was unsuccessful at the hearing, was that amounts of money he had advanced to the defendant on two occasions at the time of the initial acquisition by her of a residential property, and at the time of extensions to that property, were an equitable contribution towards an acquisition of joint property. The defendant took the view that both amounts were loans. I found that the first advance was a loan that had been repaid, but that the second amount was a contribution to be taken into account. On this point the parties were, in a sense, both partially successful and partially unsuccessful at hearing and it cannot be said that the defendant's rejection of the plaintiff's offer was unreasonable.

6. The Court of Appeal in Kardos v Sarbutt acknowledged that, even absent a Calderbank type offer, costs might be awarded to a plaintiff on the basis of "substantial success". As Brereton J explained at [31]:

For this purpose, "substantial success" is not to be judged merely by the circumstance that a plaintiff obtains an adjustment in his or her favour. It involves an evaluation of the outcome, in the light of the forensic and negotiating positions of the parties, such that it can be said that one party has been clearly more successful than the other, to the extent that the costs of the proceedings can be seen to be attributable to the unsuccessful party's opposition, rather than to the matters referred to by Hislop J in Vollmer v Hauber Davidson [2006] NSWCA 79 - including, in particular, the necessity for both parties that their property interests be separated, and the failure of both parties to adopt a realistic position."

7. I am not satisfied that the plaintiff in these proceedings can be said to have achieved "substantial success" in the sense of the term used by Brereton J so as to justify an award of costs in his favour. In my judgment dated 29 March 2006 I made the observation at [9] that:

The parties were in acrimonious disagreement about most aspects of their joint financial affairs, and much time was spent analysing old bank statements during the course of their relationship as to whose salary paid mortgages and other outgoings.

8. Neither party, it seems to me, adopted a "realistic position". Both parties, as is apparent in the material before me in the costs application, were of the view that they should retain the bulk of the joint assets.

9. I am also mindful that a costs award in one party's favour would have a substantial impact on the real financial position of the other party. The total joint assets, on my findings, were in the order of $350,00, which I ordered to be evenly split. The costs sought in this application are in the order of $36,000, and if the defendant was ordered to pay these costs, as well as her own legal costs, her real share of the joint assets would be substantially reduced. This is a proper consideration to take in such matters. As Brereton J said at [32] in Kardos v Sarbutt:

... proceedings for property adjustment almost invariably involve the division of an identified pool of property having regard to the considerations prescribed by s 20 of the Act, and costs orders made in isolation from that process have the potential to impact on the justice and equity of the overall result. As an illustration, using figures which might approximate the present case, if in the context of a pool of property worth $1 million, the plaintiff was held entitled to 40% (or $400,000), and each party had incurred costs of $100,000, then a costs order in favour of the plaintiff would result in the defendant bearing all the costs and each party receiving 50% ($400,000) of the pool net of costs ($800,000), whereas if the costs came out of the pool first, the plaintiff would receive 40% of $800,000 or $320,000, and the defendant $480,000.

10. It seems to me that there should be no order as to costs, so that each party will bear his and her own costs out of their share of the assets.

I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 13 September 2006

Counsel for the plaintiff: Mr G Brzostowski SC

Solicitor for the plaintiff: KJB Law

Counsel for the defendant: Mr G Mackey

Solicitor for the defendant: Greg Mackey & Associates

Date of hearing: 8 September 2006

Date of judgment: 13 September 2006