Franz Boensch as trustee for the Boensch Trust v Pascoe [2010] NSWSC 1172 | Case summary

2009/149624 FRANZ BOENSCH AS TRUSTEE FOR THE BOENSCH TRUST v SCOTT DARREN PASCOE JUDGMENT 1 These proceedings concern an application for preliminary discovery under UCPR r 5.3. The only outstanding questions relate to costs. There are two questions. The first is what costs order should be made in the substantive proceedings. The second is what costs order should be made in relation to a notice of motion filed by the plaintiff to set aside a notice to produce served on him by the defendant. Costs in substantive proceedings 2 The defendant was appointed the plaintiff's trustee in bankruptcy in August 2005. Shortly after his appointment, he filed a caveat over property in relation to which the plaintiff was the registered proprietor. The plaintiff contested the defendant's right to do so on the basis that he held the property as trustee. Ultimately, that issue was resolved in the plaintiff's favour. 3 On 21 December 2009, the solicitor for the plaintiff wrote to the defendant in the following terms: "It is my client's view that you had: (a) No reasonable cause to lodge the caveat; and (b) no reasonable cause for failing or refusing to withdraw the caveat when requested to do so on 15 November 2005 by solicitors then acting for the Trust and that therefore the Trust is entitled to compensation from you pursuant to Section 74P of the Real Property Act 1900. Would you please set out the basis on which you maintain you had reasonable cause: (a) To lodge the caveat; and (b) For failing or refusing to withdraw the caveat when requested to do so including any advice on which you relied to support that belief. If any advice upon which you relied was in writing would you please provide me with a copy of the relevant document(s). I refer you to Rule 5.3 of the Uniform Civil Procedure Rules and advise that if you do not provide the information I seek and copies of any relevant documents then my client will make an application for preliminary discovery without further notice to you." 4 Although there was some correspondence between the parties, nothing substantive happened and, on 15 June 2010, the plaintiff commenced these proceedings seeking an order, among others, in the following terms: "1. Order that the defendant give preliminary discovery to the plaintiff pursuant to UCPR Reg 5.3 of all documents upon which the defendant relies in order to maintain that he had reasonable cause: (a) to lodge caveat number AB721857 lodged by him over land of the plaintiff described as lots 37 and 38 in DP 14244 Auto Consol 7366-5. (b) for failing or refusing to withdraw the caveat when requested to do so." 5 UCPR r 5.3(1) provides:

"(1) If it appears to the court that: (a) the applicant may be entitled to make a claim for relief from the court against a person ( the prospective defendant ) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief." 6 After some further correspondence between the parties, on 19 August 2010, Sally Nash & Co, who had been retained by the defendant, wrote to the plaintiff's solicitor asserting that the orders sought in the summons were too wide and poorly framed. The letter, however, enclosed proposed short minutes of order. Order 1 was in the following terms: "Order that the Defendant give preliminary discovery to the Plaintiff pursuant to UCPR Reg 5.3 of all documents which the Defendant had in his possession:- (a) at the time he lodged caveat number AB721857 and which relate to his decision to lodge that caveat; (b) relating to his decision not to withdraw caveat AB721857 when requested to do so on (i) 15 November 2005; (ii) 10 December 2007; (iii) 18 August 2008. except for any court documents, pleadings, Affidavits, exhibits, subpoenaed documents, produced documents or submissions in [various proceedings between the parties]." Proposed order 4 provided that the plaintiff pay the defendant's costs of the summons and of the defendant's compliance with the order. 7 The proposed orders other than in relation to costs were acceptable to the plaintiff and were made by consent. The plaintiff also agrees that he must pay the defendant's costs of compliance with the order. 8 The plaintiff also says that he is entitled to be paid his costs of the application. His argument has two limbs. First, he says that the proceedings were conducted in an adversarial and contested fashion and that consequently, in accordance with the principles discussed by McDougall J in Steffen v ANZ Banking Corporation Limited [2009] NSWSC 883 at [29] and [32]-[38], costs should follow the event. Second, the plaintiff says that, although the parties eventually agreed to consent orders, those consent orders amounted to substantive success on his part. Consequently, if costs are to follow the event, the defendant should pay his costs. 9 I do not accept the second limb of the plaintiff's argument. In my view, there was a serious question whether the plaintiff was entitled to an order for preliminary discovery of the type that he sought. The order did not seek documents which were necessary for the plaintiff to make a decision whether to commence proceedings. Indeed, the plaintiff's solicitor's letter dated 21 December 2009 suggests that the plaintiff already had sufficient information to make that decision. Instead, the order sought all the documents on which the defendant would rely in the event that the plaintiff commenced proceedings under s 74P of the Real Property Act 1900. There must be a serious question whether an applicant for preliminary discovery would ever be entitled to an order in that form. Instead of resisting that application, however, the defendant made a proposal which gave the plaintiff largely what he wanted. In the circumstances of the case, I do not think that that offer could be regarded as a capitulation by the defendant. Rather, it was a sensible proposal to avoid needless legal costs. That offer was accepted by the plaintiff. 10 The general principle is that the court should make no order for costs in relation to the compromised proceedings: see Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; ASIC v Rich [2003] NSWSC 297 at [78] per Austin J. I see no reason to depart from that general principle in this case. In my opinion, what the defendant offered was a genuine compromise of the plaintiff's claim. Costs of the Motion 11 On 8 July 2010, the defendant's solicitor served a notice to produce requiring the plaintiff to produce a broad range of documents. It is clear from the terms of the notice to produce that those documents may have been relevant to an application under s 74P of the Real Property Act 1900, they were not relevant to the application for preliminary discovery. The notice to produce required production of documents by 19 July 2010. 12 On 9 July 2010, the solicitor for the plaintiff wrote to the solicitor for the defendant pointing out that the notice to produce constituted an abuse of process and inviting the solicitor for the defendant to withdraw the notice. 13 The solicitor for the defendant's office asked for some additional time until 13 July 2010 to consider the request. No specific time was mentioned in the letter making the request. 14 By a fax dated 13 July 2010, which was sent at 4.18 pm, the defendant's solicitor gave notice that the notice to produce was withdrawn. Earlier that day, the plaintiff filed a notice of motion to set aside the notice to produce. The plaintiff says that he was required to do that in order to allow 3 clear days for service in accordance with UCPR r 18.4. 15 The defendant accepts that, in the normal course of events, he should pay the plaintiff's costs of the motion. However, the defendant submits that in this case the plaintiff acted unreasonably in proceeding with the motion without first making enquiries of the defendant's solicitor for a response to the plaintiff's solicitor's letter dated 9 July 2010. 16 I do not accept the defendant's submission. The defendant chose to make the notice to produce returnable on 19 July 2010. His solicitor must have known that that meant that any application to have the notice set aside had to be filed on 13 July 2010. In those circumstances, I think the onus was on the defendant's solicitor to make it clear that it was not necessary for the plaintiff to comply with that requirement. She did not do so. In those circumstances, the defendant should pay the plaintiff's costs of the motion. Orders 17 The orders of the court are that:

Franz Boensch as trustee for the Boensch Trust v Pascoe

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