Duffy & 2 Ors v Duffy & Anor

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11507/98 - BERNARD JOHN DUFFY & 2 ORS KEVIN MICHAEL DUFFY & ANOR

1 MASTER: The plaintiff seeks an order that the first defendant pay their costs on an indemnity basis. They do not seek this order in respect of the first defendant's wife, Sandra Ann Duffy, the second defendant. The first defendant was unrepresented at the previous hearing. On 28 October 1998 I delivered judgment and made the following orders: 2 (1) The first defendant's defence filed on 24 July 1998 was struck out. (2) Judgment was entered that the plaintiffs be entitled to possession of the land comprised in Lot 2 of Deposited Plan 586210 in the Shire of Cabonne Parish of Borenore and County of Wellington and Lots 171 and 184 in Deposited Plan 756869 in the Shire of Cabonne Parish of Borenore and County of Wellington. (3) The first defendant was to pay the plaintiff's costs of the notice of motion filed 21 August 1998. (4) The defendants were to pay the costs of the proceedings. (5) Leave was granted to issue a writ of possession, such writ not to issue before 25 November 1998. 3 The plaintiffs have sought that their costs be paid on an indemnity basis because the first defendant's actions were an unnecessary burden on the estate, were taken to frustrate the trustees efforts to administer the estate and delay the beneficiaries receiving their entitlements. The plaintiffs submitted that the law has developed so that an obstructive approach is no longer a pre-requisite to an order for indemnity costs and even if the law has not developed to such an extent the first defendant's actions were obstructive. 4 The first defendant's solicitor submitted that the first defendant's conduct had not been unreasonable. He had made offers of compromise which included buying the property and had he not been able to raise the finance within 45 days (later reduced to 30 days), he would have consented to the issue of a writ of possession and vacated the property. In addition, the first defendant has vacated the property by the date set out in my earlier judgment. 5 I turn to give a short history of the relevant matters in relation to costs. 6 On 20 February 1998, the plaintiffs wrote to the second defendant offering to issue to the defendants a contract to purchase the land. On 17 March 1998, the plaintiffs agreed to extend the time for exchange to 5.00 pm on that day. The defendants did not proceed to exchange contracts by that date. The first plaintiff believed that the defendants were unable to raise the necessary finance to proceed with the purchase. 7 On 8 May 1998, the plaintiffs' solicitor wrote to the first defendant's solicitors and advised that in relation to the proposal that the first defendant purchase 70 acres of the property they had been instructed that their clients were not prepared to subdivide the property and that their clients would not contemplate such action unless they had clear support of all the beneficiaries but this was plainly not the case. The plaintiffs' solicitor wrote that he was instructed to press for confirmation that the first defendant would vacate the property by 22 May 1998 and would not take any steps to upset a sale. 8 The plaintiffs' agent erected "For Sale" signs outside the property (the subject of the will and where the first and second defendants and their children were residing). On 22 May 1998, a large sign had been erected on the fence adjacent to the agents notice which read "Inspection of the house and curtilage unavailable". Each time the agent called to arrange for an inspection of the residence, the first defendant informed the agent that it was not convenient. Because of the first defendant's actions, the auction was cancelled. By letter dated June 1998, the plaintiffs once again asked the defendants to vacate the property by 16 Jun 1998 and informed the first defendant that they would take legal proceedings including damages. 9 On 12 August 1998, the first defendant made a further offer (not specified to be an offer of compromise) to buy the property and stated that their client acknowledged that there was no guarantee he would be able to raise the necessary finances within 30 days to exchange contracts, however, if this proposal was accepted by the plaintiffs then the matter would be resolved within 30 days. 10 On 1 September 1998, the plaintiffs wrote a letter saying that if a notice of motion for summary judgment went to a hearing they would be seeking indemnity costs. It should be noted that the first defendant was legally represented when the offer was made and when the defence was filed. 11 A court awarding costs has an "absolute and unfettered" discretion. The normal order for costs is that costs follow the event on a party/party basis (Part 52A r 11). There is inherent jurisdiction of the court to award payment of costs on an indemnity basis (see s 76 of SCA 1970). The plaintiff referred me to Rouse v Shepherd (No 2) (1994) 35 NSWLR 277; Hurstville Municipal Council v Connor & Anor (1991) 24 NSWLR 724 and Ettinhausen v Australian Consolidated Press Limited (1995) 38 NSWLR 404. 12 In Colgate Palmolive Pty Limited v Cussons (1993) 46 FCR 225 Sheppard J reviewed the relevant common law principles and said: "In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course." 13 This passage was cited with approval by Badgery-Parker J in Rouse v Shepherd (No 2). Sheppard J refers to some of the circumstances that have warranted departure from the usual course. They do not purport to cover all the circumstances. The circumstances include where an allegation of fraud was made when it was known that the allegation was

false, where an action was continued which had no chance of success or continued for some other purpose or where there was the wilful disregard of the known facts or clearly established law or where a party had been morally or ethically delinquent. 14 In Connor, Loveday J referred to Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 397 where Woodward J stated: "'…It is appropriate to consider awarding … 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare.' In the result he ordered that portion of the costs be paid in that case on a party and party basis and portion being those costs incurred after publication of a High Court decision, on an indemnity basis…'" 15 Loveday J noted that Fountain was followed and an order for indemnity costs made in favour of the plaintiff by Hunt J in Blackburn v State of New South Wales (Hunt J, 9 August 1991, unreported) in respect of a cross claim which the defendant should have known had no chance of success. In that case however the defendant had been warned by the

plaintiff that there was no basis for the cross claim and that indemnity costs would be sought. Notwithstanding this warning and notwithstanding views expressed by Hunt J the defendant had continued to press the cross claim. 16 Badgery-Parker J in Rouse (No2) referred to Maitland Hospital v Fisher (No 2) (1992) NSWLR 723 where he referred to the objects of the rules of court on indemnity costs as being (a) encourage savings of private costs and avoidance of the inherent risks, delays and uncertainties of litigation; (b) to save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary and (c) to indemnify the plaintiff where notionally the real cause and occasion of the litigation is the attitude adopted by the defendant. Indemnity costs can be awarded where a party pursues a case that has no chance of success. 17 Do the circumstances of this case warrant the court in departing from the usual order that costs be payable on a party/party basis? While some sympathy can be afforded to the first defendant who resided in the family home and was called upon to sell it, it is my view that his behaviour in obstructing the sale of the property and refusing to vacate the property in the circumstances outlined earlier in this judgment, was unreasonable. He also was given two opportunities to buy the property and failed to do so. He also received the benefit of legal advice when proceedings were commenced and he elected to take an unrealistic stance. The plaintiffs are trustees and the delay caused by the first defendant has meant that the beneficiaries have to wait longer for the estate to be administered. Taking these circumstances into account it is my view that the first defendant should pay the plaintiffs' costs on an indemnity basis. 18 The orders I make are: (1) The first defendant is to pay the plaintiffs' costs on an indemnity basis (including the costs of today).

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