A v N

Claimant) E (by the NSW Trustee & Guardian (formerly Office of the Protective Commissioner) as Manager of the Estate of the Second Defendant) (Second Defendant/Second Cross Defendant) Representation: Counsel Ms K Millist-Spendlove (Plaintiff/First Cross Defendant) SS Ahmed (First Defendant/Cross Claimant) C Zucker (Solicitor) (Second Defendant/Second Cross Defendant) Solicitors Hunt & Hunt (Plaintiff/First Cross Defendant) Buttar Caldwell & Co (First Defendant/Cross Claimant) Zucker Legal (Second Defendant/Second Cross Defendant) File Number(s): 09/287664

Judgment 1HER HONOUR: On 13 April 2012, I published my reasons for judgment in these proceedings, finding for the plaintiff and dismissing the first defendant's cross-claim. I made orders for the transfer of certain property to the plaintiff but I reserved, among other things, the question of costs so that the parties would have the opportunity to make submissions in relation thereto. On 18 May 2012, by consent, I made orders disposing of the remaining substantive relief to give effect to my determination in these proceedings (orders for the appointment of trustees for sale of another property the subject of the original dispute) and heard submissions in relation to costs. I reserved the question of costs and I now publish my reasons on that final issue. 2The background to the dispute is set out in some detail in my judgment of 13 April 2012 and I do not repeat that here. In summary, the dispute was between A (the second wife of E, a person in respect of whom orders under the Guardianship Act 1987 (NSW) have been made) and N (E's daughter from his first marriage). A sought to enforce a Deed of Settlement entered into between each of E, A and N in March 2008 following a mediation of disputes that were then the subject of other proceedings in this Court. N sought orders to set aside the March Deed, broadly on the basis of alleged undue influence by A over E (who was alleged to lack capacity to enter into the deed) and unconscionable conduct and duress of A over N herself. A Contracts Review Act 1980 (NSW) claim was made by N against A. It was alleged that A was in breach of an essential term of the March Deed and an unclean hands defence was raised by N to A's claim. 3The NSW Trustee and Guardian, as E's tutor in these proceedings, submitted that, to the extent that the claims made by N might be upheld, the Court should nevertheless, as a matter of discretion, uphold the deed provisions insofar as they affected E (pointing out that a number of the provisions were to E's benefit - such as the dismissal of the 2007 Court proceedings). 4A broad range of issues was raised on the pleadings and the hearing occupied some 10 days. Leading up to the hearing there had been a number of iterations of the pleadings. Relevantly, for the purposes of the costs orders that the respective parties have now sought, I note that on 8 April 2010 an amendment was made to the pleadings in which A raised a claim based on an alleged collateral agreement with E, which, if successful, would have increased the ambit of her claim by a considerable amount - it being a claim to E's remaining half interest in the Leichhardt property and for payment of his share of the proceeds of sale of the Summer Hill property once that property was sold in accordance with the March Deed (the latter being the property that is now the subject of the appointment of trustees for sale). (That claim was resisted not only by N but also by E.) 5At the commencement of the hearing, a Further Amended Statement of Claim was filed, by leave, in which A abandoned that collateral agreement claim. 6In summary, I found that A had made out her claim for relief by way of an order to compel performance of the obligation of N to effect a transfer of her half interest in the Leichhardt property to A and that N failed in her claims for relief against A. A was thus successful in obtaining an order for N to transfer to her N's half interest in the Leichhardt property. N was wholly unsuccessful on her cross-claim. 7I granted a declaration that N's interest in that property had been held on trust for A from the date of the March Deed. I did not grant A the declaration she had sought as to E's capacity to enter the March Deed (for the reason, as set out in [468] of my principal judgment, that I was not satisfied that the possibility of a lack of mental capacity had been excluded on the evidence adduced by A) and I did not grant the order sought by A for the vacation by N of the Concord property (for the reason set out at [592] of my principal judgment, namely that the circumstances in which N's right to occupy the property had been suspended no longer applied - and the March Deed had not dealt with the circumstances that had arisen since then). Nevertheless, as between A and N it was A who was substantially successful in her claim. 8As to costs, orders were made by Black J in favour of the defendants on 7 July 2011 following the vacation of the first hearing date on the application of A (and it is not suggested that those costs orders should be disturbed). His Honour ordered that: The Plaintiff pay the Defendants' costs thrown away by vacating the hearing and of and incidental to this application, as agreed or as assessed. 9The position of the respective parties as to costs following the outcome of the hearing may be summarised as follows: (i) for A, it is contended that: (a)she should have her costs of prosecuting the claim and defending the cross-claim (on the basis that costs follow the event and that she was substantially, if not wholly, successful in the proceedings), other than the costs ordered against her by Black J on 8 July 2011 following the vacation of the original hearing date; (b)she should recover her costs after 11 March 2009 (or alternatively after 10 April 2009) on an indemnity basis on the ground that she had made a verbal settlement offer on or about 10 March 2009 (and settlement offers on 1 and 9 April 2009 to essentially the same effect) which was at least as favourable as the end result (that being said on the premise that, had the circumstances surrounding E's accommodation remained the same at the hearing as they were at the time of the offers, the whole of the March Deed would have been upheld) and which it was unreasonable for the first defendant to reject; and (c)N should bear the costs of E (on the basis that E had an interest in defending the claims made by N and in having the March Deed upheld and the sale of the Summer Hill property carried out); (ii) for N, it is contended that: (a)she should have her costs of the proceedings (although unsuccessful in the ultimate result) on an indemnity basis from 11 March 2009 (on the ground that the offer was at least as favourable as the end result and that it was unreasonable for A not to accept a Calderbank offer made on 10 March 2009); (b)alternatively, that N should have her costs on an indemnity basis from 9 April 2009 (again on the ground that it was unreasonable for A not to accept a settlement offer made on 8 April 2009); (c)further in the alternative to either of the above, that she should have her costs on an ordinary basis from either of those dates; (d)next in the alternative that, in light of the respective offers made by N, the Court should order that each of A and N pay her own costs; (e)finally, that if there is an order for the payment by N of A's costs she should only be ordered to pay somewhere in the order of 25% - 50% of those costs (A having rejected the respective offers made by N); support for the above is placed on the abandonment by A of the collateral agreement claim (reducing the quantum in dispute from A's perspective from over $1 million to around $300,000); and (f)as to E's costs, it is submitted that A should pay E's costs in full or alternatively that they should be borne equally by A and N; (iii) for E, it is contended that: (g)his costs of the proceedings (other than the costs already ordered by Black J to be paid by A) should be paid by N (on the basis that most of the evidence related to the issue of E's capacity to enter into the March Deed or otherwise the validity of the March Deed, on which N was unsuccessful); and (h)further, it is contended that whatever the position as between A and N consequent upon the settlement offers does not affect E's position. Legal Principles 10I do not understand there to be any dispute between the parties as to the applicable legal principles when determining the costs of contested proceedings such as these. Briefly, those principles are as follows. 11The Court's power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is, subject to the rules of court and to statute, discretionary. The discretion is a very wide one (Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72; (1998) 152 ALR 83; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322). It must be exercised judicially (having regard to its statutory context, established principle and the circumstances of the relevant case). The overriding statutory context in which this discretion falls to be exercised is that for which provision is made in s 56 of the Civil Procedure Act, namely, the just, quick and cheap resolution of the real issues in dispute. 12Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, subject to Part 42, if the court makes any order as to costs, it is to order that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. The general rule is thus that a successful party will be the recipient of an order for costs in its favour (those costs to be on the ordinary or party/party basis). This requires a determination to be made as to what is the relevant "event" for the purposes of the order to be made in accordance with the general rule (a task that may be difficult where there are multiple events - Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 586 per Bergin CJ in Eq). Where there is a mixed outcome in proceedings, an apportionment of costs between issues may be made (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20) and, if so, may be made on a broad brush basis (Fexuto; Golding v Vella (No 2) [2001] NSWSC 731). It has, however, been recognised that it is only in exceptional circumstances that this should occur (Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; (1979) 42 FLR 213; (1979) ATPR 40-141; Stena Rederi Aktiblag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12]). 13Costs orders are compensatory in nature, to reflect the vindication of the successful claim or defence thereof, not punitive (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45; Ohn v Walton (1995) 36 NSWLR 77). Save where there is a special costs order by reference to the procedure provided for under the Rules or in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586, it has been said that a court should depart from the general rule and award indemnity costs only where the conduct of the party against whom the order is sought is "plainly unreasonable" (Sydney City Council v Geftlick [2006] NSWCA 280; Dunstan v Rickwood (No 2) [2007] NSWCA 266). In Leichhardt Municipal Council v Green [2004] NSWCA 341 Santow JA (at [57]) said that indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs. 14Here, both the main protagonists invoke the principles in Calderbank, to argue that special costs rules should apply. The rationale for those principles lies in the public policy (and private interest) recognised in the early settlement of litigation and the discouragement of wasteful litigation (see Commonwealth v Gretton [2008] NSWCA 117). In Leichhardt Municipal Council, Santow JA said at [14]: ... the practice of Calderbank letters is allowed because it is thought to facilitate the public policy objective of providing an incentive for the disputants to end their litigation as soon as possible. Furthermore, however, it can be seen as also influenced by the related public policy of discouraging wasteful and unreasonable behaviour by litigants. 15The Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 recently reiterated the public policy objectives of special costs orders. Basten JA (with whom McColl and Campbell JJA agreed) referred at [6] to the objects underlying the formal offer of compromise procedures under the then court rules that were identified in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 as including: