Baumanis bht Baumanis v Brennan

Supreme Court of NSW|2024-07-11|Before: Hmelnitsky J

V Hartstein (First to Fourth Plaintiffs) L Gidley (sol) (Defendant)

Aubrey Brown Lawyers (First to Fourth Plaintiffs) Glass Goodwin (Defendant) File Number(s): 2023/208850

JUDGMENT

I delivered my principal reasons for judgment and made substantive orders in this matter on 5 June 2024: Baumanis bht Baumanis v Brennan [2024] NSWSC 681. These reasons should be read with that earlier judgment.
The gist of my judgment was to award the plaintiffs, the children of the late William John Baumanis, a total of $1,100,000 in provision from his notional estate, plus their costs of the proceedings. I designated two properties legally owned by the defendant as notional estate to the extent required to satisfy an amount of $1,000,000, plus costs. I further designated $100,000 in the defendant's bank account as notional estate for the purpose of satisfying the balance of the orders for provision. I made consequential orders to provide for the nomination of an administrator to realise the notional estate.

Costs

As contemplated by those orders, the plaintiffs have sought a variation of the costs order, which is resisted by the defendant. Before addressing this, it is necessary to note that in my judgment I made two related findings, both of which have some importance on this application. First, I held at [122] that the defendant "knew about the proceedings at some point during late 2023 but chose not to take any action to participate until immediately prior to the date of the first hearing". Second, I held at [124] that the defendant had sworn an affidavit which was false about matters that went to the heart of the issues in dispute and which was provided to the plaintiffs at the hearing on 25 March 2024.
The plaintiffs rely on those findings, together with my general findings as to the defendant's conduct in the carriage of the case, to submit that: "the appropriate order for costs in this matter is that the Defendant pay the Plaintiffs' costs on the ordinary basis up until and including 25 March 2024. From 25 March 2024 until the final orders be made in this matter, the Defendant pay the Plaintiffs' costs on the indemnity basis."
The plaintiffs also point out that I found the defendant to be an entirely unreliable witness and that I would not accept anything the defendant said to be true unless corroborated by other evidence: at [137].
The plaintiffs make a further submission that I would make an indemnity costs order for the following reasons: "(d) In her conduct prior to the deceased's death, the Defendant: (i) entered into transactions with the deceased explicable only by a desire to thwart the children's family provision claims; (ii) caused the Plaintiffs considerable mental suffering by not telling them that their father was ill and dying then in not telling them of his death, (e) In her conduct subsequent to the deceased's death, the Defendant; (i) attempted to conceal the death of the deceased by withholding the token gifts the deceased had left to three of the children until after a year had passed and by not telling them their father had died and asking their father's sisters not to tell them; (ii) evaded service which not only delayed the hearing of the matter, but added considerably to the Plaintiffs' costs in bringing this matter to court and made it impossible for them to compromise their claims by negotiating with her"
The defendant provided submissions to the Court which were signed by her personally, despite her solicitors from the hearing remaining on the record. I will return to aspects of this below. However, insofar as costs are concerned, the defendant submitted that costs should be shared equally, or that each party should pay their own costs, seemingly on the bases that she would have to pay CGT on the sales of the properties (one of which is said to be her "residential home"), that she had incurred further costs due to her first solicitor ceasing to act, that she had acted with expedition to list the properties for sale and that she had generally suffered through her relationship with the deceased.
The defendant further submitted as follows: "If the other side can consider being reasonable in their legal fees that I need to pay, then this can all be settled and finalised quickly I respectfully ask if we can amicably agree on a reasonable costs amount that I need to pay to finalise this matter and not cause any more costs to either party."
While the parties are free to settle the costs aspect of the dispute, the Court will, in default of agreement, determine the costs payable in the usual way. I am not prepared to have any regard to this submission and do not consider it further.
Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides: "(1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis."
In family provision cases, as was explained by Beazley P in Salmon v Osmond [2015] NSWCA 42 at [170]-[174], the "overall justice of the case" is the key consideration, although that is not too far removed from the usual rule that costs follow the event. See also Haertsch v Whiteway (No 2) [2020] NSWCA 287 at [4]-[8].
The usual rule, I should note, is 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": r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW).

The defendant's proposed costs orders

I can deal with the defendant's submissions as to costs in short order. She provides no good reason why costs should not follow the event. To the extent she will incur CGT liability, that is, at least to some degree, a problem of her own making. It is not a matter that bears on the exercise of my discretion to award costs in any material way. There is also no evidence to suggest that her decision to change solicitors was in any way referable to the plaintiffs.
In fact, there is every good reason, as will be clear from my judgment, why costs should follow the event, given the conclusions I reached as to the manner in which the defendant conducted her case and the administration, such as it was, of her and the deceased's affairs.

The plaintiffs' proposed costs orders

I note two additional matters before addressing the plaintiffs' submissions as to costs. In Bassett v Cameron (No 2) [2021] NSWSC 419 at [26], Ward CJ in Eq (as her Honour then was) said: "As to special costs orders referable to the unreasonable conduct of litigation, the discretion to award indemnity costs may be exercised where there is some special or unusual feature or circumstances in the case (concerning the conduct of the party against whom the order is made and relating to the proceedings in question) to justify such an order (i.e., some "relevant delinquency" by the party as a litigant - see Oshlack at [44] per Gaudron and Gummow JJ). In that regard, "relevant delinquency" does not mean moral delinquency or some ethical shortcoming but delinquency bearing a relevant relation to the conduct of the case (see, for example, White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303 at [11] per McDougall J). Conduct in relation to the matter may be discreditable to an extent warranting a party being deprived of costs (see, for example, Jamal v Department of Health (1988) 14 NSWLR 252 at 271 per Mahoney JA)."
Her Honour's reference to reasons of Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44] has particular relevance here: "It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part."
In my view, there is a relevant delinquency in this case, being the defendant's choice "not to take any action to participate until immediately prior to the date of the first hearing", which I found was a deliberate act on her part: see [122]. That caused needless cost to the plaintiffs who turned up on 25 March 2024, when the hearing was scheduled to commence with an estimate of three days, only to be met by a defendant, by this stage represented (but utterly unprepared to engage in the hearing) and to be provided with the false affidavit to which I have already referred. The "just, quick and cheap" resolution of the real issues in dispute demanded much more than that: s 56(1) of the Civil Procedure Act 2005 (NSW).
The plaintiffs should be compensated for the defendant's imposition on them in this respect. That does not quite, however, sound in a costs order of the kind sought by the plaintiffs. There was always going to need to be a hearing. I am also mindful that costs orders are not punitive: see, e.g., Oshlack at [1], [44], [67] and [134(6)]. As such, I do not think it is appropriate that the plaintiffs obtain their costs of the hearing - an expense which was always very likely to be incurred, regardless of the defendant's delinquency - on an indemnity basis.
For these reasons, I will not order the defendant to pay the plaintiffs costs on an indemnity basis after 25 March 2024, as they have sought. However, I will order the defendant to pay the costs of the 25 March 2024 hearing on an indemnity basis.
I will also not make the order sought by the plaintiffs to the effect that the defendant would be personally liable for the costs I have ordered. The costs should come from the notional estate, the practical effect of which is that the surplus funds available for the defendant will be less than otherwise.

Other matters

There was a further directions hearing in this matter on 2 July 2024. The reason for that further hearing was that in her submissions provided to the Court on 28 June 2024 to which I have already referred, the defendant stated that she had already placed both the Ashtonfield property and the Lee St property on the market for sale. A public auction of the Lee St property was scheduled for 3 July 2024. The defendant therefore asked the Court not to appoint an administrator despite Order (8) made in my principal judgment.
This state of affairs was somewhat alarming given the terms of the orders I had made. This course of conduct by the defendant, whatever its intentions, was inappropriate. It had the evident effect of frustrating an order of the Court for an independent administrator to bring in and realise the notional estate.
Nonetheless, having been presented with this fait accompli, counsel for the plaintiffs agreed that the more practical course in the circumstances was simply to let the defendant sell the properties on condition that any proceeds be paid into the trust account of the defendant's solicitor. She recognised that there was some risk in allowing the sales to occur in this way but that, ultimately, the risk of the properties not bringing their highest value at auction was borne by the defendant, not the plaintiffs.
It was for these reasons that I made the following orders, which it is appropriate to note here: "The Court: 1. Notes the correspondence received from the defendant dated 28 June 2024; 2. Notes that the Lee St property and the Ballydoyle Drive property as identified in the reasons for judgment dated 5 June 2024 have been listed for sale at public auction; 3. Orders that the defendant is to direct payment of the net proceeds of sale of the Lee St property and the Ballydoyle Drive property at settlement, after selling costs, to be paid to the trust account of her solicitors, Glass Goodwin, for the purpose of meeting the amounts of provision and costs ordered to be paid in these proceedings. 4. Defendant to pay the plaintiffs' costs of today's hearing."
As Allsop J said in White v Overland [2001] FCA 1333 at [4], "Litigation is not a game. It is a costly and stressful, though necessary, evil". Bearing this in mind, I further directed that a penal notice be attached to those orders to make it clear to the defendant that, whatever her intentions, the Court would not tolerate any attempt to frustrate the payment of the legacies owing to the plaintiffs.
When I made substantive orders on 3 June, I granted liberty to apply in view of the fact that the getting in of the notional estate was a matter that may yet require some level of supervision by the Court. That remains the case and, as these orders are final orders, I will grant the parties liberty to restore the matter if required.
Accordingly, the orders of the Court will be: 1. Vary order 9 made on 5 June 2024 to read: "Order that plaintiffs' costs on the ordinary basis as agreed or assessed be paid out of the notional estate of the late William John Baumanis, save that the plaintiffs' costs of the hearing on 25 March 2024 are to be paid on the indemnity basis" 1. Note that no administrator will be appointed to realise the notional estate with the intent that the plaintiffs receive their legacies from funds to be paid into the trust account of Glass Goodwin pursuant to the orders made on 2 July 2024; and 2. Grant liberty to restore the matter on 24 hours' notice via email to my Associate.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 July 2024

At a glance

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Judgment (8 paragraphs)

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Legislation Cited (2)

Cases Cited (9)