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When Refusing to Settle Costs You Twice: Appeals Court Orders Wife to Pay After Ignoring Offer That Would Have Left Her Richer

In Warszawski & Warszawski (No 2) [2025] FedCFamC1A 203, Justice Christie of the Federal Circuit and Family Court of Australia (Division 1) handed down a clear message about the consequences of unreasonable litigation conduct and rejected settlement offers. The Court awarded costs against the wife after finding she was wholly unsuccessful on her cross-appeal and had refused settlement offers that would have left her financially better off. The judgment underscores the discretionary yet principled approach to costs in family law appeals, particularly under s 114UB of the Family Law Act 1975 (Cth), which permits cost orders when “justifying circumstances” exist.

🧾 Facts and Issues

  • The husband appealed orders made in Warszawski & Warszawski [2025] FedCFamC2F 536, while the wife cross-appealed ([1]).
  • The wife was wholly unsuccessful in her cross-appeal ([7]).
  • Prior to the appeal, the husband made two settlement offers, one of which—had the wife accepted—would have left her in a stronger financial position than the ultimate outcome ([12]–[13]).
  • The wife rejected both offers, disputing the correction of an $803,270 omission from her company account in the property pool ([8]–[11]).
  • The husband sought a costs order of $22,446 for the appeal and $10,000 for the costs application ([17]–[18]).
  • The issue before the Court was whether these circumstances justified a departure from the usual “each party bears own costs” rule under s 114UB of the Family Law Act.

Issues

  1. Did the wife’s refusal of reasonable offers of settlement justify an order for costs under s 114UB?
  2. How did the wife’s unsuccessful cross-appeal and stronger financial position influence the quantum of the costs award?
  3. Should the husband’s procedural missteps—abandoning a ground of appeal late and not applying under the slip rule—reduce the costs payable?

⚖️ Law

Statutory Framework

  • Family Law Act 1975 (Cth), s 114UB(1)–(3) – Courts may make costs orders where “justifying circumstances” exist, considering:
  • Financial circumstances of the parties;
  • Conduct of the proceedings;
  • Failure to comply with rules or court orders;
  • Whether a party was wholly unsuccessful.
  • Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 10.13 – permits correction or variation of orders under the slip rule.

Authorities Cited

  • Warszawski & Warszawski [2025] FedCFamC1A 165 – prior appeal on substantive property division.
  • Penfold v Penfold (No 2) (2020) FLC 93-989 – principle that rejecting a more favourable offer can justify costs.
  • Rogers & Rogers (No 2) [2023] FedCFamC1A 91 – costs discretion exercised where one party’s conduct prolonged litigation.
  • s 117(2A) (predecessor principle) – “justifying circumstances” include financial disparity and unreasonable conduct.

🔍 Application of Law to Facts

Justice Christie applied the multi-factor discretion under s 114UB(3):

1️⃣ Financial Circumstances

The wife’s financial circumstances were stronger than the husband’s ([6]).

This weighed in favour of a costs order, as she was better positioned to bear litigation expenses.

2️⃣ Success and Conduct

The wife’s cross-appeal was wholly unsuccessful, requiring the husband to respond to unmeritorious claims ([7]).

The Court found this sufficient to constitute a “justifying circumstance” ([3], [5]).

3️⃣ Settlement Offers

The husband made two reasonable settlement offers ([8]–[13]):

  • On 22 May 2025, he proposed to accept $1,002,147—less than the eventual amount awarded after re-exercise.
  • The wife’s rejection of the offer, despite acknowledging the $803,270 omission, demonstrated unreasonable conduct ([10]–[13]).
  • Justice Christie held this directly justified a costs order.

4️⃣ Husband’s Conduct

Two mitigating factors reduced the quantum ([15]):

  • He failed to use the slip rule to correct the original error before appealing.
  • He abandoned one ground of appeal only during oral submissions.
  • Although not fatal, these matters warranted a 50% reduction in recoverable costs ([16]–[17]).

🧮 Judgment and Reasoning

  • Costs of Appeal: The Court ordered the wife to pay $11,223—half of the husband’s total claimed costs ([17]).
  • Costs of Costs Application: The Court further ordered $2,500, noting insufficient evidence to justify the full $10,000 ([19]).

Justice Christie reasoned that:

“The wife would have been financially better off had she accepted the husband’s offer… these offers of settlement are relevant justifying circumstances.” ([13]–[14])

The partial reduction was explained as balancing fairness with efficiency:

“Neither of the husband’s procedural oversights persuade me against making a costs order, but they are relevant to my assessment of quantum.” ([16])

💡 Take-Home Lessons

  1. Refusing reasonable offers can be costly. Courts may penalise a party who prolongs litigation by rejecting a financially better settlement.
  2. Costs discretion is calibrated by conduct. Even a successful party’s procedural lapses can reduce the quantum.
  3. Financial capacity matters. Wealthier parties are expected to absorb more litigation risk.
  4. Fairness is two-way. The Court balances equity with efficiency — rewarding reasonableness and penalising obstinacy.
  5. Use the slip rule early. Technical corrections should be sought before appealing to avoid unnecessary costs.

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