Carr v Douglass

Supreme Court of NSW|2016-09-19|Before: Slattery J

Judgment

The Court gave its first judgment in these proceedings on 24 June 2016: Carr v Douglass [2016] NSWSC 854. In the first judgment the Court: extended time under Succession Act 2006, s 58(2) to allow the plaintiff, Tina Carr, to bring proceedings for provision out of the deceased's estate; designated certain property of the third defendant, Margaret Carr as notional estate of the deceased for the purposes of making orders under Succession Act, Chapter 3; and, granted a legacy to Tina Carr in the sum of $275,000 out of the estate of the deceased. The Court also ordered on 24 June that the plaintiff's costs of the proceedings be paid out of the estate and the notional estate of the deceased.
The Court gave liberty to the parties to re-list the matter for any argument about costs in relation to the third defendant. The plaintiff re-listed the proceedings on 22 August 2016 and foreshadowed that she would seek an order for indemnity costs against the third defendant by reason of the service of an offer of compromise upon her.
The third defendant was not represented on 22 August. So the proceedings were adjourned to 19 September. For the adjourned date the plaintiff was required to formulate her motion for indemnity costs and to serve that motion together with any supporting affidavit evidence on the third defendant.
That was done and the third defendant, Margaret Carr appeared on 19 September by her counsel Mr S. O'Brien. Mr G. Smith of counsel continues to appear on behalf of the plaintiff. This judgment determines the plaintiff's claim for indemnity costs against the third defendant.
These reasons should be read in conjunction with the Court's reasons for decision in the first judgment. Events, matters and persons are referred to in the same way in both judgments.

The Plaintiff's Offers of Compromise

The plaintiff made two separate offers of compromise to the third defendant pursuant to UCPR, Part 20: one on 23 September 2014 and the other on 12 June 2015. She relies upon the earlier of the two offers.
The 23 September 2014 Offer of Compromise. On 23 September 2014, Ms Susan Dinkha of Emmaus Legal, the plaintiff's solicitor, sent a letter by post and by email to Business Lawyers (Liverpool), the third defendant's solicitors, enclosing a document headed "Offer of Compromise". The letter stated that the enclosed offer was intended as an offer of compromise under UCPR, Part 20, or in the alternative, as an offer made in accordance with the principles stated in Calderbank v Calderbank [1975] 3 WLR 586 ('Calderbank').
The enclosed offer proposed settlement of the plaintiff's claim for a legacy of $190,000 from the notional estate of the deceased. It expressed itself to be an offer of compromise in accordance with UCPR, r 20.26. It was open for acceptance for 30 days from the date it was made.
The 12 June 2015 Offer of Compromise. Ms Dinkha on behalf of the plaintiff sent a further email to the solicitors for the third defendant on 12 June 2015, enclosing a second Offer of Compromise. Like the 23 September 2014 Offer of Compromise, the letter stated that the offer was an offer of compromise made pursuant to UCPR, Part 20, or in the alternative, was to operate as a Calderbank offer.
The plaintiff's June 2015 offer was that: 1. The plaintiff receives a legacy of $150,000 from the notional estate of the deceased, held by the Third Defendant. 2. This offer of compromise is made in accordance with Part 20 Division 4 of the Uniform Civil Procedure Rules, 2005 and in particular r 20.26. 3. This offer shall remain open until 4:00pm on 16 June 2016.
Margaret Carr did not contest that the result the plaintiff had achieved in these proceedings was no less favourable to the plaintiff than the first (and the second) of these offers. She conceded that if her jurisdictional arguments and arguments for the apportionment of costs failed that the plaintiff would be entitled to indemnity costs from 24 September 2014 in accordance with the earlier of the two offers of compromise.
Resolution of the contest between the parties in relation to UCPR, r 36.16 depends upon the relevant terms of the principal judgment, the orders made on 24 June 2016 and the presence or absence of correspondence between the principal judgment and the filing of the motion for a special costs order on 19 September 2016. These reasons now cover those matters before dealing with the parties' submissions.

The Principal Judgment and Correspondence Following

After indicating that a legacy in the sum of $275,000 should be awarded in the plaintiff's favour in the principal judgment, the Court reserved for further consideration (at [108]) certain aspects of the third defendant's costs, as follows: "It is unclear exactly what order is wanted in relation to the third defendant's costs upon this outcome. Moreover, the Court assumes that the estate has not incurred any costs because the proceedings are being defended by the third defendant. For that reason no special costs order is probably required with respect to the estate. But if this is wrong, liberty to apply will be granted."
Through its orders in its first judgment (at [109]) the Court picked up aspects of what had been said in [108] concerning the third defendant's costs. The Court's orders made on 24 June (at [109]) were as follows: "(1) Extend time under Succession Act, s 58(2) up to and including 14 May 2014 to allow the plaintiff to bring these proceedings for provision out of the deceased's estate; (2) Pursuant Succession Act, Chapter 3.2 designate the deceased's joint interest (and the proceeds of sale thereof) in the Austral property as notional estate of the deceased for the purposes of making orders under Succession Act, Chapter 3. (3) The Court orders that the plaintiff, Tina Carr, be granted a legacy of $275,000 out of the estate and the notional estate of the deceased. (4) Order that the plaintiff's costs of these proceedings paid out of the estate and the notional estate of the deceased. (5) Order that if the issue of the third defendant's costs cannot be resolved but the parties are at liberty to relist the matter to argue about her costs by contacting my associate. (6) Exhibits may be returned. (7) Grant liberty to apply in relation to the implementation and, if necessary, the further formulation of these orders."
When judgment was given on 24 June 2016 Mr Smith was present for the plaintiff and Mr O'Brien for the third defendant. The Court's orders and notations that day do not contain any indication that Mr Smith made an oral application (even without a formal written motion) foreshadowing the present claim for a special indemnity costs order. Neither in the correspondence that passed between the parties after 24 June 2016, nor in the written and oral submissions to the Court since then, has the plaintiff maintained that such an application was either made or foreshadowed on 24 June 2016. The evidence contains no correspondence between the parties about costs between 24 June 2016 and 10 August 2016.
On 10 August 2016, the plaintiff's solicitors wrote to the third defendant's solicitors inquiring whether their client intended to dispute that the plaintiff was entitled to her costs being paid from the designated notional estate: (i) on the ordinary basis up until 23 September 2014, being the date when the first offer of compromise was made; and (ii) on the indemnity basis from 24 September 2014, being the day after the first offer of compromise was made, to the conclusion of the matter. The letter also requested a reply by 5:00pm on 11 August 2016, and stated that in lieu of a response the plaintiff would approach the Court for a date to argue her costs.
On 22 August 2016, Mr Michael Donovan, on behalf of the third defendant responded by letter noting that "Your letter is the first time that the question of the plaintiff's costs has been raised following final judgment". Mr Donovan said in this letter that he had been informed by counsel who appeared on 24 June 2016 that no mention was made at the hearing of any offers relevant to costs or the intention to seek a special costs order. Mr Donovan then drew the plaintiff's solicitors' attention to UCPR, r 36.16 and foreshadowed that the third defendant would seek an indemnity costs order against the plaintiff if the plaintiff proceeded with the motion and failed.
The plaintiff's solicitor, Ms Dinkha responded by email on 8 September 2016, noting that the plaintiff had made a UCPR, Part 20 Offer of Compromise to the third defendant on 23 September 2014; and stating that it was the plaintiff's position that pursuant to the costs consequences set out in UCPR, Part 42.14, the plaintiff's costs were to be paid from the designated notional estate on the ordinary basis up until and including 23 September 2014 and on the indemnity basis from 24 September 2014 to the end of closing submissions.
The parties then put oral submissions at the hearing on 19 September. But the Court gave leave to the parties to file further written submissions by 26 September 2016, which they did.

The Parties' Submissions

Margaret Carr's Submissions. The third defendant submits, in summary, that the Court has no power to make the orders sought by the plaintiff. She argues that UCPR, r 36.16(3A) provides that if a special costs order is sought, a motion seeking such order must be filed within 14 days of a judgment in which an order for the plaintiff's costs has been made. The third defendant submits that the rule applies to the making of a special costs order, as it does to any other order that varies orders as originally entered. The defendant further submits that the rule cannot be circumvented by the Court granting liberty to apply, and that it is to be applied strictly.
In support of her contention, the third defendant relies upon: (i) UCPR, r 36.16(3C); and (ii) Civil Procedure Act 2005 ("CPA"), s 14. As to the former provision, she argues it expressly precludes the Court from extending the time period designated by r 36.16(3A). The latter provision empowers the Court to dispense with rules of court where it is satisfied that it would be appropriate to do so. But she argues that the Court of Appeal has limited the operation of CPA, s 14 and held that it can only be used as a means of extending time in relation to a special costs order, where all the parties and the Court have been notified of the application within the first 14 days after judgment. And the third defendant submits that has not occurred in this case.
Tina Carr's Reply Submissions. In reply, the plaintiff points out that the orders in the principal judgment do not stipulate whether the plaintiff's costs are to be paid either on the ordinary or on the indemnity basis. And she further submits that this is a matter that requires clarification in the order that was made. The plaintiff argues that in these circumstances r 36.16(3) does not apply to the form of orders made and the issue of ordinary or indemnity costs remains open.
Margaret Carr's Alternative Submission. The third defendant also contends that, should the Court determine that despite UCPR, r 36.16 it does have the power to make a special costs order, that the appropriate order in these circumstances is that 60% of the plaintiff's costs be paid out of the estate. The third defendant submits that such an apportionment is justified on two grounds: first, the plaintiff failed on the discrete and severable issue that the deceased's superannuation fund, the Coachwood Superannuation Fund, be designated as part of the notional estate, argument which occupied a significant court time; and secondly, the plaintiff is not entitled to costs incurred in preparing for and hearing issues concerning the third defendant's son, Mr Adam Carr, especially any of those costs that were incurred after his solicitor was instructed not to pursue any claim on his behalf.
As to the question of the plaintiff's costs incurred in relation to Adam Carr's situation, Tina Carr conceded through her counsel in the course of argument that she will not seek to recover those costs in any event. The issue no longer arises.

Consideration

There are two questions now before the Court: (1) whether the Court has jurisdiction to make a special costs order that would vary the costs order made in its principal judgment at [109(4)]; and (2) if the Court does have such jurisdiction, should the Court make the proportional costs order the plaintiff seeks.

(1) Does the Court have jurisdiction to make a special costs order?

These reasons first consider the general legal principles applicable to the entry of the Court's orders on 24 June 2016, then apply those principles to the orders entered on 24 June 2016.
At general law, the Court is not permitted to vary orders once they have been entered but may do so before entry: DJL v Central Authority (2000) 201 CLR 226; [2000] HCA 17 at [38] - [40].
The general law position became more restrictive in a practical sense once the Court determined that an order is "entered" once it is recorded in the Court's computer systems. This is usually done on the day of the order, with the result that there is no longer a time gap between the making of an order in open Court and its entry. So UCPR, r 36.16(3A)-(3C) was introduced to ameliorate the position under general law by providing a statutory authority for the Court to set aside or vary a judgment or order within 14 days after entry. In full, UCPR, r 36.16 provides as follows: "36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it: (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B)."
The provisions of UCPR, r 36.16(1) - (3) were not argued here to be applicable to the present application.
UCPR, r 36.16(3A) confers on the parties a time limited power to set aside or vary a judgment or order: that following the entry of a costs order any application by a party to set aside or vary the order must be made by Notice of Motion within 14 days after it has been entered: AT v Commissioner of Police (NSW) (No.2) [2010] NSWCA 337 at [7]; Capital Finance Australia Ltd v Chief Executive Officer of Customs [2007] NSWSC 1368. The Notice of Motion must set out the substance of the variation sought: Cooper v Kinsella (No.2) [2011] NSWCA 140. And it must attach "any necessary evidence": Kekatos v Stafford [2009] NSWCA 219. The Court upon considering such a Notice of Motion may then determine whether to set aside or vary the judgment or order, as the case may be, as if it had never been entered.
The law governing motions filed where this time period has expired is clear. The Court of Appeal has held that there is no power to set aside or vary the order except in limited defined circumstances: AT v Commissioner of Police (NSW) (No.2) [2010] NSWCA 337, per Basten JA (Beazley JA and Macfarlan JA agreeing) at [7].
The Court of Appeal has considered the possibility in limited situations that an extended order could be varied, notwithstanding an applicant's failure to file a Notice of Motion in time through the Court's exercise of its power under CPA, s 14: Roads and Traffic Authority of New South Wales v Refrigerated Roadways Pty Ltd (No.2) [2009] NSWCA 336 at [10] ("Refrigerated Roadways"); see also Spina v Permanent Custodians Ltd (No.2) [2009] NSWCA 419 at [9].
CPA, s 14 provides discretion to Courts that "in relation to particular civil proceedings, the Court may, by order, dispense with any requirement of the rules of court if satisfied that it is appropriate to do so in the circumstances of the case". But the Courts have approached the application of CPA, s 14 to circumvent the operation of r 36.16(3A) with caution, in part because r 36.16(3C) precludes parties from relying on the general power contained within UCPR, r 1.12 to extend the 14 day period within which to file a Notice of Motion under r 36.16(3A).
The Court of Appeal considered the operation of UCPR, r 36.16 in relation to out of time applications for special costs orders in Kable v State of New South Wales (No.2) [2012] NSWCA 361 ("Kable"). Following the delivery of judgment by the Court of Appeal in that case on 8 August 2012, the respondent, the State of New South Wales, filed a Notice of Motion seeking to vary the Court's costs orders concerning the costs of the trial. This Notice was filed on 24 August, two days out of time, although the State had given email notice of its application within time on 9 August. The appellant challenged the power of the Court to vary the costs orders that had been made. The State accepted that its application was filed beyond the time limited under UCPR, r 36.16(3A) and (3C). The appellant argued that in the interests of justice, the Court should exercise its discretion under CPA, s 14 to dispense with the need to file a Notice of Motion.
In Kable, Basten JA (Allsop P, Campbell JA, Meagher JA and McClellan CJ at CL agreeing) held (at [15]) that no injustice would arise from the Court making an order under CPA, s 14 dispensing with the requirement to file a motion in the prescribed form with respect to the costs of the trial, because the Crown solicitor's letter of 9 August 2012 had foreshadowed the substance of the proposed application within time. And even oral notice within time has been accepted as potentially sufficient: Refrigerated Roadways at [6], per Campbell JA.
The authorities are clear. A party applying for a special costs order or to vary an order subsequent to judgment being handed down, must apply formally to the Court by (i) filing a Notice of Motion that clearly expresses the order sought; and (ii) do so within the 14 day notice period required by r 36.16(3A), but (iii) in some circumstances the giving of some oral or written notice within time other than by formal notice of motion will suffice. To determine otherwise would tend to undermine the purpose of the rule to give effect to the public interest that judgments and orders be final and certain: Deputy Commissioner of Taxation v Meredith (No. 2) [2008] NSWCA 133.
What costs orders did the Court make on 24 June? Order 4 of the orders made on 24 June is not expressed to have been made against the first, second or third defendants. But it is expressed in a form commonly accepted for the making of costs orders in relation to claims out of a disputed fund, including upon applications for orders for family provision out of an estate or notional estate. Order 4 is an order that the costs of the plaintiff be paid out of the disputed fund. That fund is held: as to the sum of $51,615, being the deceased's actual estate, by the deceased's executors, the first and second defendants; and as to the balance, designated as notional estate, by the third defendant. The reasons for judgment adequately identify the notional estate, as being the proceeds of sale of the Austral property but exclude the assets held in the Coachwood Superannuation Fund. There was never any dispute in the case that the deceased's notional estate was held only by the third defendant. In my view, in these circumstances Order 4 made on 24 June 2016 must be construed as an order for costs against the first and second defendants so far as the $51,000 held by them is concerned (noting that that amount has varied since the trial) and as to the balance, an order for costs against the third defendant.
Unless a costs order specifically indicates that it is a costs order made on the indemnity basis or that it is a costs order for only a portion of the plaintiff's costs, it will be construed as a costs order for the whole of the plaintiff's costs assessed on the ordinary basis: UCPR, r 42.2. Order 4 is clear enough in referring to "the plaintiff's costs of these proceedings", which simply means all the plaintiff's ordinary costs.
The intent of paragraph [108] of the first judgment is to deal with the question of whether there may possibly be a claim for indemnity by the third defendant against the estate. Such a claim might have been arguable by the third defendant in this case on the grounds that the third defendant had taken a position in the proceedings to attempt to defend the estate against the plaintiff's claim. This was quite a separate question from the plaintiff's recovery of costs against either the estate or the third defendant on the indemnity basis.
The correct conclusion is that on 24 June 2016, the Court made orders for costs in the plaintiff's favour against parties including the third defendant.
The plaintiff's application for indemnity costs is therefore out of time. An application for indemnity costs was not foreshadowed on 24 June 2016. A letter foreshadowing the plaintiff's application for indemnity costs was only first written on 10 August. That was more than 14 days after the entry of judgment. Thus, none of the special circumstances exist here in which the Court may take into account the giving of some form of notice within the 14 day period without a full formal Notice of Motion.
The plaintiff argues that it can nevertheless take advantage of the Court's grant of liberty to apply in Order 7 of the orders made on 24 June 2016. But that contention has two answers. The first is that construed in context the grant of liberty to apply here is only the liberty foreshadowed in paragraph [108] of the first judgment, which as indicated, is limited to a possible application by the third defendant for costs against the estate. The second is that the reservation of liberty to apply does not alter the finality of an entered judgment including a final costs order, and itself provides no basis for their subsequent variation or revocation: Katter v Melhem (2015) 90 NSWLR 164; [2015] NSWCA 213 at [69] - [81] (per Campbell AJA).
As the plaintiff's application for indemnity costs is out of time it must fail on that ground.

(2) Should the Court make a proportional costs order?

This question does not arise. The Court granted liberty to the third defendant to file a motion in Court on 19 September 2016 seeking that only 60 per cent of the plaintiff's costs be paid out of the notional estate of the deceased. But the third defendant only pressed this motion forward in circumstances where it failed to defeat the plaintiff's motion for indemnity costs on jurisdictional grounds. But it has succeeded in defeating the plaintiff's motion. The third defendant's motion can therefore be dismissed with costs in her favour.

The Costs of this application

The plaintiff has failed on her motion filed on 19 September 2016. The hearing on 19 September was principally occupied with argument on that motion. I see no reason why costs should not follow the event. The plaintiff should be ordered to pay the third defendant's costs of her motion.
But as earlier indicated by letter dated 22 August, the third defendant put the plaintiff on notice that an order for indemnity costs would be sought on the precise basis which has now been argued under UCPR, r 36.16. After explaining this argument, the third defendant's solicitor stated in the 22 August letter: "In light of the above, we put you on notice of our strong and in our view well-founded opposition to the orders proposed by the plaintiff as set out in Your Letter. Finally, we intend to rely upon this letter at any costs hearing in these proceedings to seek costs against your client personally and on an indemnity basis."
On the basis of this notice, the third defendant now seeks an order for indemnity costs against the plaintiff in respect of the current application.
An order for indemnity costs should not be made. The defendant solicitor's letter of 22 August 2016 did not make a clear offer capable of immediate acceptance nor does it define a compromise. It does not in my view qualify as conforming with the principles of Calderbank v Calderbank (1975) 3 WLR 586. As it does not set out a clear compromise position which the plaintiff could have accepted at that point to bring the plaintiff's foreshadowed motion to an end, then it was not unreasonable for the plaintiff not to accept it.
It would have been unclear to the recipient of the letter of 22 August 2016 whether the third defendant was proposing that she would bear her own costs up to that point, or whether she was seeking costs from the other side, or was taking some other position. The 22 August letter is a mere invitation to withdraw the proceedings on unspecified terms and does not qualify as a Calderbank letter.
There has been sufficient argument about costs in this case. Further disputation about costs is not to be encouraged. The parties have given pre-trial estimates of costs which will no doubt have varied slightly because the trial took longer than was originally estimated. The third defendant now has a costs order in her favour in relation to the current motions. It is highly desirable in these circumstances that the parties agree rapidly upon a mutually acceptable net costs figure. This matter should not have to go to an assessment.
If there is no agreement, the Court is prepared to consider the possibility of making a lump sum costs order under Civil Procedure Act, s 98(4)(c) but if and only if the parties have exhausted all possibility of reaching an agreement as to a net cost figure and can clearly demonstrate that to the Court. Limited liberty to apply will therefore be granted until Friday, 28 October 2016 for that purpose alone.

Conclusions and Orders

For the reasons given, the Court has found that the costs order in Order 4 of the 24 June 2016 orders cannot be varied to provide for assessment on the indemnity basis, as the plaintiff's motion for variation was first foreshadowed and filed more than 14 days after the entry of the Court's orders on 24 June 2016 and outside time provided for by UCPR, r 36.16(3A).
The Court's orders will therefore be the following: 1. Dismiss the plaintiff's motion dated 19 September 2016; 2. Dismiss the defendant's motion dated 19 September 2016; 3. Order the plaintiff pay the third defendant's costs of the dismissal of the motions pursuant to orders 1 and 2 on the ordinary basis; 4. Grant liberty to apply until 28 October 2016 in respect to any remaining issues as to the assessment of costs between the plaintiff and the third defendant; 5. That exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

Amendments 28 September 2016 - [6] change 2015 to 2014 [12] change 2012 to 2015 [38] McClellan CJ add at CL [45] delete Katter v Melhem reference (repeated) 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: 28 September 2016

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Judgment (11 paragraphs)

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Cases Cited (16)