Grant v Grant; Grant v Grant

Judgment

1. This is the Court's third judgment in these two related proceedings. It deals with the successful party's claim for indemnity costs. The Court's second judgment contains the Court's principal findings and conclusions disposing of both proceedings: Grant v Grant; Grant v Grant (No 2) [2020] NSWSC 1288. This judgment should be read with the Court's second judgment. Events, matters, persons and the proceedings are referred to in both judgments in the same way.
2. In the Court's second judgment, Dr Seth Grant, as representative of the estate of the late Dr Alan Grant, was a successful plaintiff in the estate recovery proceedings against the defendants, Ms Nerez Grant and Ms Kashaya Williams. And on behalf of his mother's estate, he successfully defended the family provision proceedings.
3. He now applies for indemnity costs on behalf of the estates in both proceedings based on Nerez Grant's and Kashaya Williams' misconduct in both proceedings.
4. Nerez Grant and Kashaya Williams have lost their respective proceedings for the reasons set out in the Court's second judgment. For this reason, the Court will make an order for costs of the proceedings against Nerez in respect of the family provision proceedings, and against Nerez and Kashaya in respect of the estate recovery proceedings.
5. The next question for determination is whether that order for costs should be made on the indemnity basis.
6. In the second judgment, the Court made serious findings against Nerez, and strongly adverse findings against Kashaya. But as authority stands in New South Wales, not all findings of misconduct will automatically attract an indemnity costs order. In Harrison v Schipp [2001] NSWCA 13, the Court of Appeal overturned an order made by a trial judge for indemnity costs on the following basis (at [132] - [139]): "[132] The trial judge correctly observed that his discretion as to costs extended to ordering costs on an indemnity basis "in appropriate circumstances". He cited from a number of cases, to which I will return, and then said - "This is a case in which the particular circumstances involve relevant delinquency on the part of the Cameron Harrison interests. On my findings, Mr Cameron and Mr Harrison manipulated Mrs Schipp and took unconscientious advantage of her vulnerability. Paragraphs 646 through to 652 of the judgment detail the extent to which Mr Cameron and Mr Harrison took unfair and unconscionable advantage of Mrs Schipp's weakness. Paragraph 634 includes a finding that at least from early 1988 Cameron and Mr Harrison did not seriously intend to develop Mary Street. Generally, paragraphs 635 through to 645 set out the events which occurred and paragraphs 659 through to 676 examine those events from a number of perspectives. Of course not every case in which unconscionable conduct and/or breaches of fiduciary obligation is found will ground a plaintiff's entitlement to indemnity costs from a defendant. The discretion which the court has as to costs is to be exercised judicially, that is to say upon proper grounds and the Court will not lightly depart from standard practice in the awarding of costs. In Warman International Ltd v Dwyer (1995) 182 CLR 544 at 560, Mason CJ, Brennan, Deane, Dawson and Gaudron JJ made it clear that the making of a discretionary order against a fiduciary will depend upon the circumstances of the case including the powers and obligations of the fiduciary and the relationship between those powers and obligations and the subject matter of the claim [cf Jones v Mortgage Acceptance Nominees (1996) 142 ALR 461] The same approach is required to be taken in dealing with unconscionable conduct where found. The circumstances of the case are all important. The present is however a case in which on an over-view of all of the findings at paragraphs 241-253, 383, 423 and 424, 431-456 (particularly 433 and 434), 596-601, 604-606, 607, 638 and 641, 648, 649, 652 and 670, the plaintiff's claim to indemnity costs against the Cameron Harrison interests is in my view made out. In this case the special or unusual circumstances constituted by the defendants' unconscionable conduct and breaches of fiduciary obligation justify the making of an order that the Cameron Harrison interests pay Mrs Schipp's costs on an indemnity basis." 133 Some of the passages from the cases which his Honour cited referred to delinquency, using that word or otherwise, in the conduct of the proceedings (Degmam Pty Ltd (in liquidation) v Wright (No 2 ) (1983) 2 NSWLR 354 and re Smith, ex parte Rundle (No 2) (1991) 6 WAR 299, both referred to as involving "relevant delinquency" in a citation from Oshlack v Richmond River Council (1998) 193 CLR 72 at 89). Other cases spoke of the width of the discretion, without referring to delinquency, one referring to the need for "some special or unusual feature in the case". In Degmam Pty Ltd (in liquidation) v Wright (No 2) the defendant suffered a special order as to costs because she had made deliberately false allegations in her defence and had by prolixity and prevarication grossly prolonged the litigation. Immediately before the passage from his reasons last set out the trial judge set out from re Smith, ex parte Rundle (No 2) , with underlining for emphasis, that orders for costs on a solicitor and client or indemnity basis are - " … normally made in circumstances where the conduct of a party against whom such an order has been [made] in connection with the litigation has been deserving of criticism." (at 301) 134 Mr Harrison contrasted with this the "relevant delinquency" by regard to which the trial judge apparently exercised his discretion, delinquency in that Mr Cameron and Mr Harrison had acted unconscionably and in breach of fiduciary duty. He submitted, in my view correctly, that the delinquency on which his Honour acted was not the delinquency in the conduct of the proceedings which the cases cited by him, and a number of other cases to which Mr Harrison referred, regarded as warranting a special order as to costs. And he said, again correctly, that Warman International Ltd v Dwyer (1995) 182 CLR 544 at 560 was not concerned with costs, but with an order for accounts against a defaulting fiduciary. Indeed, the costs order in Warman International Ltd v Dwyer was not a special order, see (1992) 46 IR 250 at 262 (Derrington J); 23 February 1992, unreported (CA); (1995) 182 CLR 544 at 570 (HC). 135 Mrs Schipp's response emphasised the width of the discretion as to costs. She said that there was "relevant delinquency" within the cases, even if the trial judge had not acted by regard to it, in that "much of the time during the trial was taken up by Harrison in propounding the authenticity of documents which they [sic] must have known to be false". And she said that it was open to his Honour to act by regard to unconscionable conduct or breach of fiduciary obligation, delinquency not in the conduct of the proceedings, in order to ensure "that the restitution to the defrauded beneficiary is complete: see Hagan v Waterhouse (No 2) (1992) 34 NSWLR 400". 136 The trial judge did not exercise his discretion by regard to the time taken by Mr Harrison in propounding false documents, or otherwise by regard to delinquency in the conduct of the proceedings. Hagan v Waterhouse (No 2) provides no support for indemnity costs as a means of providing complete restitution, or otherwise for regard to the substantive unconscionable conduct or breach of fiduciary duty when exercising the discretion as to costs, and such regard would in my view not be correct. The unconscionable conduct or breach of fiduciary duty leads to compensatory or other relief and costs on the normal basis, and more must be established for a special order as to costs. In my opinion his Honour's exercise of his discretion was on a wrong principle. 137 The discretion must be re-exercised. It is true that evidence of Messrs Cameron and Harrison was not accepted, indeed they were found to have given false evidence and propounded false documents. But I do not think there was delinquency approaching that considered to justify a special order as to costs in Degmam Pty Ltd Pty Ltd (in liquidation) v Wright (No 2 ), or that departure from the ordinary basis on which costs should be assessed between litigants was otherwise warranted. 138 It was necessary that the circumstances in which Mrs Schipp came to put her money into the two properties and leave it with Messrs Cameron and Harrison be gone into, in particular with exploration of her understanding of what she was doing and the influences working upon her. I am not satisfied that this was a case in which the appellants, properly advised, should have known that they would be found liable (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401), or that the Court's time and Mrs Schipp's money were wasted on "totally frivolous and thoroughly unjustified defences" (Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362), to use some of the expressions relevant in this area. 139 Departure from the settled practice of costs on a party and party basis is discretionary, and beyond the need for a sufficient special or unusual feature in the case no fixed rule can be laid down. Some of the matters thought to justify it are collected by Sheppard J in Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225 at 233-4. In the present case no other sufficient special or unusual feature is present. The trial judge's order as to costs should be set aside so far as it provided for costs on an indemnity basis. 140 The trial judge did not exercise his discretion by regard to the time taken by Mr Harrison in propounding false documents, or otherwise by regard to delinquency in the conduct of the proceedings. Hagan v Waterhouse (No 2) provides no support for indemnity costs as a means of providing complete restitution, or otherwise for regard to the substantive unconscionable conduct or breach of fiduciary duty when exercising the discretion as to costs, and such regard would in my view not be correct. The unconscionable conduct or breach of fiduciary duty leads to compensatory or other relief and costs on the normal basis, and more must be established for a special order as to costs. In my opinion his Honour's exercise of his discretion was on a wrong principle."