Aljaro Pty Ltd v Weidmann

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3162/99 ALJARO PTY LIMITED v RONDA BEATRICE WEIDMANN

JUDGMENT 1 HIS HONOUR: There has been argument before me this morning concerning the appropriate order for costs in these proceedings. The question is not an easy one and the situation as to costs is considerably more complicated and confused than is usual. The unusual circumstances of the case are addressed at some length in my substantive judgment in the proceedings: Aljaro Pty Ltd v Weidmann [2001] NSWSC 206 ("my judgment"). 2 Mr Hallen, of Senior Counsel for the defendant, has taken the Court "back to first principles" in quoting a passage from the judgment of McHugh J in Oshlack v Richmond River Council (1998) 193 ALR 72 at 97: "[67] The expression the 'usual order as to costs' embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. [68] As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. …"

Mr Waters, of counsel for the plaintiff, has also relied on that passage from McHugh J emphasising that his Honour said that the purpose of costs orders was not to punish an unsuccessful party. 3 As well as the matters generally set out in my judgment, a number of the matters that I take into account in determining the question of costs in these proceedings are as follows. The summons in the proceedings filed on 13 July 1999, was in simple form, claiming the payment or transfer of the whole of the assets of the estate to the plaintiff. Mr Waters today has frankly and properly conceded that the plaintiff's primary submission at the trial was that it was beneficially entitled to the balance of the estate (after the legacy and costs are met) and, to support that contention, both denied the existence of a secret trust, and argued its failure along the way, if it ever were created. He has also correctly pointed out that the plaintiff did argue at the trial various possible outcomes of the confused situation with which the Court was presented. I should certainly place on record that the conduct of Mr Waters and his instructing solicitors in the matter was at all times entirely proper and straightforward. On the other hand, it is true, as is submitted by Mr Hallen, that there was at the least a very substantial adversarial overtone in the litigation. In the end, as appears from my judgment, the primary issue was whether there was no effective secret trust, so that the plaintiff now took the balance of the fund beneficially, or whether that balance had some other destination, such as that which I ultimately found that it did have. 4 There is therefore some considerable case for the plaintiff being ordered to pay the defendant's costs on the basis that it is the unsuccessful litigant in adversary litigation in accordance with the principle stated in Oshlack supra. However, as I have already indicated, the situation is not a simple one. The Court faced a very complicated situation. The complications related to the estate of the testator and were largely caused by the testator's own actions in deciding to deal with her estate by way of a secret trust as the best way in all the circumstances of making provision for her husband. This was so that if, as occurred, she predeceased him he would be assured of the continuing benefit of her residence or of any fund into which it was converted during the remainder of his life. The secret trust was created orally only and no written record of it was left. It was in its final form communicated only to Jack Singh and not to her other executor, the defendant, who, in the event, is the only executor who acted, placing that executor in a difficult position in face of the allegation of a secret trust. Furthermore, it was communicated to Jack Singh when he was a person already under a cloud in relation to the activities (in which the testator herself had also, to some extent, been involved) which led to his criminal conviction and imprisonment. The complications were rendered all the greater by Jack Singh's subsequent conduct in giving, at different times, different versions of exactly what it was that the testator had said to him at the material time, as has been traversed in my judgment. 5 Mr Hallen has commented upon the hint or suspicion of unworthy conduct on the part of the now controllers of the plaintiff; that is adverted to in para 13 of my judgment. I should, however, say, as Mr Waters has pointed out, that there was no issue joined between any of the Singh boys on the one hand, and Mr Cirulis on the other, as to the circumstances in which the Singh boys' shares were transferred to Mr Cirulis. That matter arose in this case only by a side wind and did not fall for determination. I have been careful to make it plain in [13] of my judgment that, although I thought it necessary to record the matters or circumstances surrounding the transfer of the Singh boys' shares to Mr Cirulis, I recorded them as matters of allegation only, and matters in respect of which I made no finding. It is true that no evidence was given to the contrary of those allegations at the trial, where the matters were not directly in issue, or even now, at the time of the costs argument, when perhaps they might be regarded as having some relevance. However, in all the circumstances I do not think it appropriate to take those matters into account in determining the question of costs. 6 There is, however, conduct on the part of Mr Cirulis in evidence in the proceedings which does, to my mind, have some relevance on the question of costs. That conduct is his writing of a letter, which is Exhibit 3 in the proceedings. That was a letter to Jack Singh, who was already in prison, dated 12 March 1999. The following portions of that letter are material: "I am assisting John [Salmond] with Aljaro matters and the Dos situation. I am endeavouring to make plans to meet with him in London so as to attempt to finalise Aljaro's situation. The anti (sic) continues to rise and it will be expensive to re-stabilise the matter and activate the finance facility. The facts of the situation are as follows:- 1 Aljaro is the beneficiary of Lelia (sic) Salmond Estate and these funds plus more are required to finalise Dos. 2 Current shareholder of Aljaro is myself. Directors are John and myself. ... 7 Bolster was, (sic) probably has, briefed Counsel however no (sic) suggests he requires a statement from yourself. 8 As a previous officer of the (sic) Aljaro you should provide no such statement as the case should be determined on the facts and documentation. ... 12 Aljaro's records show no evidence of it having accepted a trustee position in relation to the funds. The matter is not in its records nor should it be given that it was merely the beneficiary of the estate. Obvious Comments:- On all accounts, Aljaro should be given the funds and it can determine if it hold (sic) these in its own right or as trustee for a supposed beneficiary. Why is Bolster so intent on retaining the funds given that they would then be passed to another beneficiary. Who does Bolster represent. A private investigator advised there was consideration given to having your children the beneficiaries prior to Mrs Salmonds sic) death. ... Bolster has been obtaining statements and has now delayed his advise (sic) from Counsel pending a statement from you. Obviously they have a weak case (or no case) and are still trying to find the support they require to avoid them losing the estate proceeds. The company records show no trust accepted and, given probate documents, the funds obviously belong to Aljaro. This goes well to see the transaction with Dos completed and Aljaro getting its affairs back in order."

I should say at once that I have seen no basis in the evidence for any suggestion that the defendant's solicitors were desirous of keeping the funds for any improper or inappropriate purpose, as seems to be suggested in this letter. The letter, like so much else in this case, is somewhat confused in its terms, but despite at one point suggesting that the plaintiff would determine when it received the funds whether or not it would hold them beneficially or on trust, the principle thrust of the letter is to the effect that the plaintiff desires to obtain the funds for itself and to utilise them in connexion with the mysterious transaction with Dos which has already received mention in my judgment. In pursuing this end, Mr Cirulis, as a then director of the company, urges Jack Singh, as a former director, not to communicate the facts as he knows them to the executor of the estate. Mr Waters has said to me that this letter should be viewed in the context of a somewhat hostile correspondence between the solicitors in which the defendant's solicitor was seeking a statement from Jack Singh, but declining to make available to the plaintiff counsel's advice when obtained. However, the letter does emphasise the adversarial nature of the discourse that was taking place and helps to characterise the proceedings as essentially adversary. There is a decided overtone that Jack Singh had information as to the reality of the situation which it preferred that the defendant as executor of the estate should not have. 7 The three possible courses as to costs as outlined by Mr Hallen are for the plaintiff to be ordered to pay the defendant's costs on the basis that this is essentially adversarial litigation; for the plaintiff's costs to be ordered out of the estate on the basis that a situation of uncertainty was created by the testator and that the plaintiff, in a sense, merely assisted in the resolution of the uncertain situation by bringing the litigation; or the course which Mr Hallen tended to put forward, as the argument progressed, that in the circumstances there should be no order as to the plaintiff's costs. 8 Bearing in mind on the one hand the factor of the essentially adversary nature of the litigation, but on the other hand the situation of uncertainty faced by the plaintiff as well as others, which was created by the actions of the testator and of Jack Singh, I have come to the conclusion that the proper course in the unusual circumstances of this case is to order that there be no order as to the plaintiff's costs to the intent that the plaintiff bear its own costs of the proceedings. 9 That matter having been determined, short minutes have been handed up which are uncontroversial. The only thing that I need to say is in relation to the selection of $15,000 as the sum to be paid to the Seventh Day Adventist Church. The defendant did take the step of making inquiry of the Singh boys (the result of which is that this appears to be the sum favoured by them) and it was entirely appropriate that that should have been done. However, the governing consideration is that I am informed by Mr Waters that the plaintiff has considered the matter as trustee of the fund, and has in its discretion determined that the amount paid should be $15,000. That is the appropriate course pursuant to the terms of the trust as I have found it. The other thing that should be said about these minutes is that, in accordance with a suggestion that I made in my judgment, these minutes provide for the final distribution of the trust estate in the near future, so that there need not be further consideration of the appropriateness of the continuation of the plaintiff as the trustee of the secret trust. This course is sensibly agreed to by the defendant and meets the approval of the Court. There will therefore be orders in accordance with the short minutes initialled by me and placed with the papers.

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