Fairfield Pastoral Holdings Pty Ltd as trustee of the Piney Ridge Trust v Van Niekerk

1. The applicant is to pay the respondent's costs of the proceeding as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

KENNETT J: 1 On 5 October 2023 I delivered judgment on the substantive prayers for relief in this proceeding: Fairfield Pastoral Holdings Pty Ltd as trustee of the Piney Ridge Trust v Van Niekerk [2023] FCA 1185. I dismissed the application for declaratory relief and consequential orders, including for payment of an amount out of the Litigants' Fund, by the applicant (referred to in my reasons as FPH). I made a costs order in favour of the respondent (referred to as Brenda), conditioned by a further order providing for written submissions to be filed if any party sought a different order as to costs. 2 On 19 October 2023, FPH filed submissions which argued that each party should bear its own costs, or alternatively it should pay no more than 25 percent of Brenda's costs. Brenda filed responsive submissions on 15 November 2023, arguing that she should have her costs on the usual basis, or at most suffer a 20 percent reduction. 3 The proceeding had a fairly convoluted history, which is recounted in my reasons for judgment (at [1] - [20]) and which I will not repeat. It arose out of earlier proceedings in which a large number of dealings between Dr Andrew Hamilton (the sole director and shareholder of FPH) and Steven Van Niekerk (the son of Brenda) were the subject of dispute. FPH had become the trustee of the Piney Ridge Trust (the Trust), which was a trust established for the benefit of the Van Niekerk family in which Brenda was named as the principal beneficiary. White J gave judgment in the earlier proceeding on 4 January 2022: Fairfield Pastoral Holdings Pty Ltd v Ridge Estate Pty Ltd (No 4) [2022] FCA 1. 4 The present proceeding concerned an issue that had been alluded to in the earlier proceeding but was ultimately not the subject of a claim for relief, and that White J did not resolve. It concerned a liability incurred by FPH in the form of a loan of $122,000 from the National Australia Bank (NAB) which it undertook in order to fund the deposit on a property at Whale Beach, NSW. The attempt to purchase the property ultimately failed, for reasons which do not need to be canvassed here, and FPH was left with the debt to the NAB which it had to repay. 5 Threshold questions arose as to whether the claim could properly be maintained by FPH given its close relationship with issues canvassed in the earlier proceeding. Brenda invoked doctrines of res judicata, issue estoppel and Anshun estoppel. I rejected the submissions based on res judicata and issue estoppel, but upheld the submission based on Anshun estoppel and therefore dismissed the proceeding. 6 The substantive question was whether FPH was entitled to be indemnified for the liability that it had incurred. As to this question: (a) FPH pleaded, and Brenda denied, that the liability had been incurred in its capacity as trustee of the Trust (the capacity issue); (b) Brenda contended that the liability fell outside the indemnification clause in the Trust Deed because it arose from a "breach of trust" (the conflict of interest issue); and (c) Brenda also contended that the liability fell outside the indemnification clause because it arose from "gross negligence" on FPH's part (the gross negligence issue). 7 The capacity issue and the conflict of interest issue were ultimately not pressed by Brenda. The former had occasioned the preparation of a corpus of evidence on the part of FPH (although this overlapped to some degree with the evidence relevant to the gross negligence issue). 8 I recorded my conclusions on the substantive issues, as they had been fully argued. But for my conclusion that an Anshun estoppel arose, I would have granted relief substantially in the terms sought by FPH. 9 Despite this, the present is not a case in which both parties have achieved a measure of success. FPH's application was dismissed and it has therefore been wholly unsuccessful. It is true that FPH would have been successful if one issue had been decided differently. However, it is far from uncommon for a case to raise multiple issues (all of which the parties' representatives must address if conducting the case diligently) but ultimately turn on a single point. It is partly for this reason that issues-based costs orders are generally disfavoured in the exercise of the Court's discretion: see eg Commissioner of Taxation v Bosanac [2022] FCAFC 5 at [11]-[12], [16]-[17] (Kenny, Davies and Thawley JJ). Here, it was apparent from the outset that Anshun estoppel was a potential barrier to success. Brenda has been vindicated in her position that the proceeding should not have been commenced and should, prima facie at least, have the benefit of an order for costs. 10 It is therefore appropriate to depart from the usual order as to costs only if there exist special circumstances that call for a departure from the general rule (cf eg Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 90 ALJR 270 at [6] (Firebird Global)). Such circumstances might be found if (as FPH submits) aspects of the conduct of the case by Brenda increased the costs of the proceeding unreasonably. That conclusion should not be lightly reached in relation to a matter in which the trial ran for only two hearing days. 11 The arguments that were raised in relation to res judicata and issue estoppel were rejected, and were to some extent misconceived. However, these added only relatively short legal submissions to the proceeding. They were in effect variations on the successful argument that determined the outcome of the proceeding (an argument which in itself required close analysis of parts of the earlier proceeding). 12 The argument as to conflict of interest was similarly inconsequential in terms of the resources expended on it. The gross negligence issue was a serious point which Brenda was well and truly entitled to run, even though she was ultimately unsuccessful. I do not regard the conduct of any of these aspects of the case as calling for a departure from the usual rule that costs follow the event. 13 The capacity issue is of more concern. It was abundantly clear from the documentary material that FPH had attempted to purchase the Whale Beach property in its capacity as trustee of the Trust and had incurred the liability to NAB solely for the purpose of that acquisition. Careful examination of the relevant documents would have revealed that Brenda had no real prospect of successfully resisting FPH's contention that it incurred the liability in its capacity as trustee. The point was, if not formally abandoned, not pressed. By the time this became clear, FPH had been put to the expense of assembling the evidence necessary to establish this aspect of its case. 14 However, it is not apparent that Brenda's raising of this issue and its late abandonment added significantly to the resources expended on the case. The evidence relevant to the issue was largely documentary and the documents were in FPH's possession. FPH's legal team had acted for it in the earlier proceedings and thus already had some familiarity with its records. If finding relevant documents among these records was a difficult task, that was at least to some extent a result of FPH's own manner of conducting business. Significantly, also, much if not all of the history of the transaction, including relevant dealings between Dr Hamilton and Steven van Niekerk, needed to be put into evidence by the parties in order to litigate the gross negligence issue. 15 In Firebird Global at [6] French CJ, Kiefel, Nettle and Gordon JJ observed that there are "good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like". Those reasons include that it is generally undesirable for the parties and the Court to spend further effort raking over the coals of litigation and making speculative judgments concerning how things might have been different, other than in clear cases involving substantial wasted costs. While the material before me suggests a basis for criticising an aspect of the conduct of the case by Brenda's legal representatives, I do not think that this justifies a departure from the usual rule that costs follow the event. 16 With the conditional costs order that I made on 5 October 2023 having fallen away as a result of the filing of submissions, it is necessary for me to make a fresh costs order. The order will be that the applicant is to pay the respondent's costs of the proceeding as agreed or assessed. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kennett.