Ashton v Pratt No 2

Ashton v Pratt No 2 - [2015] NSWCA 134 - NSWCA 2015 case summary — Zoe

Judgment

BATHURST CJ: In Ashton v Pratt [2015] NSWCA 12 (the appeal), the Court dismissed an appeal brought by Ms Ashton (the appellant) from a judgment of Brereton J in which Ms Ashton claimed that the late Mr Pratt had agreed to confer, or represented that he would confer, certain benefits on her in consideration of her agreeing to become, or remaining, his mistress. One of the benefits alleged was that Mr Pratt would set up a trust fund of $2.5 million for each of her two children. The first respondent in the appeal was Mr Pratt's executor.
The appeal was originally fixed for hearing on 18-19 November 2013. However, by notice of motion filed on 23 October 2013, the appellant's children, Indra Heslop-Blochowiak and Xavier Connor Heslop-Kelly (the children), by their tutor, Liam Kelly, sought to be joined as second and third respondents to the appeal.
In material filed in support of the motion, including a draft notice of cross-appeal, the children indicated that they would contend that the promise made by Mr Pratt to create the trust was held by the appellant as trustee for the children. As a consequence, the children contended that any purported release of the promise by the appellant was ineffective for non-compliance with s 23C of the Conveyancing Act 1919 (NSW) and constituted a breach of fiduciary duty by the appellant and was thus liable to be set aside.
On 18 November 2013, the Court ordered that the children be joined as second and third respondents to the appeal and granted them leave to file a cross-appeal. The children filed a notice of cross-appeal on 28 November 2013.
The appeal was dismissed, the Court holding that Brereton J was correct in concluding that the conversation in which Mr Pratt was said to have agreed to confer the benefits was not intended to create legal relations and that the first respondent was not estopped from denying that this was the case. The Court also held, contrary to the submissions of the children, that no intention to create a trust of the promise in the children's favour could be inferred from either the terms of the conversation said to give rise to that trust or the surrounding circumstances: appeal at [187]. It followed that s 23C of the Conveyancing Act 1919 had no application and any release by the appellant of her claims against Mr Pratt did not constitute a breach of her duty as trustee: appeal at [190]-[191]. The Court also held that the releases of February and November 2005 were effective to release Mr Pratt from any legal obligations he may have owed the appellant.
In the result, the Court dismissed the appeal, ordered the appellant to pay the costs of the first respondent and granted the first respondent leave to apply for an order for costs against the children.
The first respondent has sought an order that the first respondent's costs of the cross-appeal be paid by the children and their tutor. It was not in contest that the Court had the power to make such orders: Yakmor v Hamdoush (No 2) [2009] NSWCA 284; 76 NSWLR 148 (Yakmor) at [21], [22], [24], [45]; Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 at 85, 113; Azar v Kathirgamalingan [2012] NSWCA 429 at [202]. Rather, the children and their tutor contended, for five reasons, that, as a matter of discretion, the costs order should not be made.
As the first respondent pointed out, as the children were unsuccessful in their cross-appeal, costs would usually follow the event. In my opinion, the five matters relied on by the children and their tutor do not warrant a contrary conclusion.
The first matter was that the appropriate costs order was the one which had been made. The children contended that the appellant was not in a position to represent their interests insofar as a breach of fiduciary duty was alleged against her. It was submitted that their arguments based on s 23C of the Conveyancing Act 1919 and the alleged breach of fiduciary duty did not have to be determined by the Court, having regard to the Court's conclusion that no binding agreement existed.
In my opinion, this submission ignores the fact that the children actively participated in the proceedings, filed a notice of cross-appeal and supported the appellant, including making additional submissions as to why the releases of February and November 2005 were not effective. Further, the submission does not take into account the fact that the Court rejected the underlying basis of the children's claim, namely, that the promise by Mr Pratt to set up the trust for them was held by Ms Ashton as trustee for their benefit: appeal at [187]-[189]. In these circumstances, it does not seem to me that the fact that the first respondent has a costs order against the appellant in respect of the appeal provides a basis for depriving her of an order against the children and their tutor in respect of the costs of the cross-appeal.
The second matter raised was that the first respondent opposed the joinder of the children. The children pointed out that while they were prima facie entitled to the costs of their motion of 23 October 2013, they did not seek these costs. They contended that the first respondent bore "some responsibility in terms of ensuring the proper constitution of the proceedings below": Ashton v Pratt [2013] NSWCA 400 (joinder judgment) at [33].
This does not seem to me to warrant a departure from the usual rule that costs should follow the event. The fact that a joinder was opposed does not mean that the party joined should not be liable to pay costs if, having made a positive case, he or she is ultimately unsuccessful. No order for costs is sought on the motion for joinder.
Further, although this Court did say in the joinder judgment that the first respondent bore some responsibility in ensuring the proper constitution of the proceedings (at [33]), the primary responsibility rested on the appellant: See News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; 64 FCR 410 at 526, cited with approval in John Alexander's Club Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 at [140].
The third matter was what was described as "the restraint and economy with which the children by their tutor conducted the appeal". In particular, it was submitted that they could have sought to have the judgment below set aside on the basis that, as parties directly affected, they were not joined. They submitted that this approach would have resulted in substantial additional costs to all parties and would have been a waste of the Court's time.
The fact is that the children did not seek to adopt this course. This decision was sensible, as they would have incurred substantial and unnecessary costs themselves. The submission does not provide a reason for denying the successful party of her costs of the cross-appeal.
The fourth matter was that the litigation was brought about by the promise made by the late Mr Pratt and thus, it was appropriate that his estate should bear the costs. The children submitted that an analogy could be drawn between the principle in probate litigation that, if the testator has caused the problem, his or her estate should bear the costs, and cases which have stated that where a party reasonably, but unsuccessfully, raises an issue relating to the affairs of a testator calling for investigation, that party should not have to bear the costs of the other party: Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244 at [13]-[14]; Kostka v The Ukrainian Council of NSW Incorporated [2013] NSWSC 222 at [72].
I do not think that this principle has any application in the present case. This case concerned a promise made by Mr Pratt, during his lifetime, which the Court held was not intended to create legal relations. If the principle is extended, it would seemingly apply to many cases which involved a promise which, for some reason, was unenforceable. Second, it ignores the fact that not only was the enforceability of the promise in issue, but the question of whether any obligations arising from the promise had been released by the appellant was also in issue. This matter was decided adversely to the appellant and the children. Third, as I have already indicated, the Court determined that no intention to create the trust could be inferred from the conversations or the surrounding circumstances. The cross-appeal depended upon such a trust being inferred.
The fifth matter raised by the children was that it would be unfair for their tutor to be liable for any portion of the costs. This argument was made on the basis that he did not stand to personally benefit from the proceedings and only consented to act as tutor because the children were under a legal incapacity. So much may be said for most tutors. Indeed, responsibility for costs is one, but not the only, purpose of appointing a tutor and even if an opposite party has a benefit of orders against both the persons under the incapacity and the tutor, it is for the benefit of that party to be free from the complications of recovery from the incapable person: Yakmor at [21], [30].
In the result, I would make the following orders. The first order, for the dismissal of the cross-appeal, follows inevitably from the judgment on the appeal. By an oversight, it was not made when the orders were pronounced. 1. Cross-appeal dismissed. 2. Order that the second and third respondents and their tutor, Liam Kelly, pay the first respondent's costs of the cross-appeal, excluding the costs of the motion filed on 23 October 2013 and determined on 18 November 2013.
McCOLL JA: I agree with Bathurst CJ.
MEAGHER JA: I agree with Bathurst CJ.

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