Debra Araujo v Michael Araujo

• Jurisdiction: Bermuda
• Judgment Date: 17 March 2008
• Date: 17 March 2008
• Docket Number: Divorce Jurisdiction 2006 No. 19
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Bell, J

Divorce Jurisdiction 2006 No. 19

BETWEEN:

Debra Kaye Araujo

Petitioner

and

Michael Brian Teixeira Araujo

Respondent

Mrs G Marshall for the Petitioner

Mr D Kessaram for the Respondent

The following cases were referred to in the judgment:

Gojkovic v Gojkovic (No. 2)FLR [1991] 2 FLR 233

GW v RWFLR [2003] 2 FLR 108

Costs — Assets held in series of trusts — Conduct of parties during course of litigation — Calderbank correspondence — Effect of Family Proceedings Rules 1991 and Civil Procedure Rules 1998 of UK

RULING ON COSTS of Bell, J

Introduction

1. In the matter I delivered judgment on 11 March 2008 in respect of applications by the parties for the determination of ancillary relief. Although the position was complicated somewhat by the fact that the joint matrimonial assets were held in a series of trusts, in practical terms the orders which I made were that

• • the matrimonial home should be transferred to the Wife, subject to the existing mortgage

• • the Husband's beneficial interest in a promissory note payable by the Husband's business partner, Mr Botelho, to the Tucker's Court Trust should be transferred to the Wife, and

• • the Husband should retain his existing business interests as detailed in the judgment.

The Arguments

2. Both counsel relied on the case of Gojkovic v Gojkovic (No. 2)FLR[1991] 2 FLR 233. For the Wife, Mrs Marshall submitted that there were two principal issues; the first was the manner in which the parties had conducted themselves in the course of the litigation, and the second related to the positions taken by the parties in the Calderbank correspondence which was made available during the hearing. In relation to the first issue, Mrs Marshall identified four points of principle where she submitted that the Husband had taken positions which had been rejected in the judgment. These were the treatment of trust assets as financial resources of the Husband, the relevant date for valuations, the classification of assets as unilateral or non-family assets, and the level of the Husband's income.

3. In relation to the Calderbank correspondence, Mrs Marshall reviewed this (although there was one piece of correspondence missing, to which Mr Kessaram referred). She submitted that the Wife had done better than the Husband's offers, so that it could properly be said that the Wife had needed to bring the application. She submitted that the Husband's case had failed, and that the Wife should therefore be entitled to an order for her costs.

4. For the Husband, Mr Kessaram emphasised those passages in the speech of Butler-Sloss LJ which dealt with the principles governing costs in applications for financial relief, and it is no doubt helpful to set out in full the particular passage on which Mr Kessaram relied, as follows:

‘However, in the Family Division there still remains the necessity for some starting-point. That starting-point, in my judgment, is that costs prima facie follow the event (see Cumming-Bruce LJ in Singer -v- ShareginFLR[1984] FLR 114 at p.119), but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court. One important example is, as the judge pointed out, that it is unusual to order costs in children cases. In applications for financial relief, the applicant (usually the wife) has to make the application in order to obtain an order. If the financial dispute can be resolved, it is usual, and normally in the interests of both parties, that the applicant should obtain an order by consent; and if money is available, and in the absence of special circumstances, such an agreement would usually include the applicant's costs of the application. If the application is contested and the applicant succeeds, in practice in the divorce registries around the country where most ancillary relief applications are tried, if there is money available and no special factors, the applicant spouse is prima facie entitled to, and likely to obtain, an order for costs against the respondent. The behaviour of one party, such as in material non-disclosure of documents, will be a material factor in the exercise of the court's discretion in making a decision as to who pays the costs.’

Mr Kessaram placed weight on the fact that Butler-Sloss LJ had twice referred to the need to consider whether there was money available to meet an order for costs, pointing out that in relation to the additional lump sum which the Wife had sought, I had rejected that part of the Wife's application (paragraph 112 of the judgment) on the basis that I did not believe that the Husband had the liquidity to justify such an order.

5. Mr Kessaram also relied upon the authority of GW v RWFLR[2003] 2 FLR 108. The judgment in that case, by Nicholas Mostyn QC, sitting as a deputy High Court judge, included a review of the position then current in the United Kingdom. On the basis of GW v RW, Mr Kessaram submitted that the appropriate order in this case was to make no order as to costs. In relation to the Calderbank offers, he referred to a letter which had not been brought to my attention by Mrs Marshall, dated 24 January 2008.

6. Finally, Mr Kessaram submitted that the costs in this case had been increased by the level of information which the Wife had sought, referring to her requests as having been ‘over the top’, with particular reference to her fifth affidavit, and the rule 77 requests.

The Relevant Authorities

7. I reviewed the case of GW v RW in the ruling on costs which I gave in Davy v Zouppas-Davy on 9 February 2005, and concluded that the learned judge was not only giving effect to the ‘seismic shift’ in the law which there had been in the United Kingdom since Gojkovic, but was also giving weight to the provisions of the Family Proceedings Rules 1991 and the disapplication in those rules of the general rule contained within the Civil Procedure Rules of 1998 that the unsuccessful party should pay the costs of the successful party. I took the view that the shift towards a starting point of no order as to costs had its roots in the new procedural rules in the United Kingdom, which have not yet been adopted in Bermuda.

8. I do of course recognise that since the ruling in Davy, the Rules of the Supreme Court 1985 have been amended so that the position in relation to costs now accords entirely with the position in the United Kingdom at that time of the judgment in Gojkovic, insofar as the provision of Order 62 rule 3 (3) (that costs should follow the event except where the circumstances of the case cause the Court to take a different view) has been disapplied by Order 62 rule 3 (5) in relation to proceedings under the Matrimonial Causes Act 1974. Nevertheless, in Davy, I had indicated that I was satisfied that the decision of the Court of Appeal in Gojkovic reflected the position in Bermuda, and I had set out what I took to be the relevant principles. In giving its judgment in Davy when the matter went further on appeal, the Court of Appeal, having quoted from the judgment of Butler-Sloss LJ in Gojkovic, said:

‘There are indeed good arguments which can be advanced for changing the rule that costs should follow the event in matrimonial matters, but that is not to say that this Court, constrained by statutory provisions as it is, should ignore them and proceed to create new law without the blessing of the Legislature. We think that the learned judge was right to resist the invitation to re-write the law of costs in matrimonial proceedings without legislative assistance. It is a simple matter for the Legislature to amend Order 62 if it should so wish.’

And by this last reference to the legislature amending Order 62, my understanding is that the Court of Appeal was not referring to the relatively minor change to the rules which took place with effect from 1 January 2006, but rather was referring to the combined effect of the Family Proceedings Rules 1991 and the Civil Procedure Rules 1998, of the United Kingdom, to which the Court had referred earlier in its judgment. It is those further changes which have caused the position in the United Kingdom to change beyond the position as it was following the judgment of the Court of Appeal in Gojkovic.

The Appropriate Order

9. It is my view that it was necessary for the Wife in this case to take these proceedings to a hearing in order to obtain the orders which I made. I further take the view that resolution by consent was made difficult, if not impossible, by the position which the Husband took in relation to the various matters identified by Mrs Marshall, and particularly by his position that the trust assets should not be treated as part of his financial resources.

10. I should also refer to Mr Kessaram's submission that the Husband should not be made responsible for the Wife's costs because of his relative lack of liquidity. First, I would note that as part of her claim for ancillary relief, the Wife was looking for a lump sum of $450,000, said to be an amount designed to enable her both to pay off her debts (primarily in the form of outstanding legal fees) and to achieve some reduction in the level of her mortgage. It was in respect of this level of payment that I had commented that I did not see that there was the liquidity to justify any such order.

11. But I do not see that the comments made by Butler-Sloss LJ in Gojkovic as to the availability of money were intended to apply in circumstances where, as I have found, the Husband has business interests which, depending on the level of discounting which might be applied to them, vary in value between just less than $2 million and more than $3 million, in approximate terms. I do not see that it can properly be said that in these circumstances, an order for costs which ought otherwise to be made should not be made. It seems to me that that would impose a very great hardship on the Wife.

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