Gray v Gray [2005] NSWCA 129 | Case summary

"THE COURT 1. ORDERS that the appeal be allowed in part by deleting orders 1(c), 1(d), 2(c) and 2(d) of the Orders in proceedings 114938 of 1999 made on 21 February 2003 and otherwise the appeal be dismissed. 2. ORDERS that the appellant pay 90% of the first respondent's costs of the appeal. 3. ORDERS that the appellant pay the second respondent's costs of the appeal on the indemnity basis. 4. DECLARES that the second respondent is entitled to be indemnified out of the estate of the late Lillian Gray in respect of its costs of the appeal. 5. ORDERS that interest on costs be paid from the date of this order. 6. NOTES that the foregoing orders do not affect the order in paragraph 6 of the orders made by Austin J on 21 February 2003 in relation to the passing of accounts." 6 The appellant does not cavil with the orders, declaration and notation 1, 2, 4 and 6. He objects to the words "on the indemnity basis" in order 3. 7 The appellant seeks to adjust the orders for costs below as follows: "3. Orders that the appellant and the second respondent pay respondent's costs of the proceedings No 114938 of 1999, and that the order in paragraph 95(3) of the judgment of Austin J made on 1 August 2003 in the proceedings of the court below be amended accordingly. 4. Orders that the appellant pay 90% of the second respondent's costs of the cross-claim in proceedings No 114938 of 1999, and that the order in paragraph 95(4) of the judgment of Austin J made on 1 August 2003 in the proceedings of the court below be amended accordingly." 8 The second respondent (trustee) agrees with the first respondent's version of the orders. 9 There thus appear to be three issues to resolve, viz: (a) Whether the second respondent should have its costs on the indemnity basis; (b) Whether the order for costs of the trial before Austin, J should be varied; and (c) Whether there should be an order for interest on the order for costs. 10 (a) As to indemnity costs, the argument in favour is that the second respondent is a trustee in proceedings where the real disputants are the other parties. The second respondent endeavoured to obtain the concurrence of the parties to an arrangement pursuant to which the second respondent could have filed a submitting appearance. The first respondent agreed to this course, but the appellant only did so at the eleventh hour when the second respondent was actively involved in preparation. 11 The point that the appellant was asked to consider on 24 November 2003 and would not concede to the second respondent until 1 June 2004 was that he did not (until close to the hearing) agree that if the second respondent were to file a submitting appearance with respect to the appeal, the appellant would not take any point that the orders sought in the amended cross-claim were not validly or properly sought by the second respondent. 12 Further, on 3 June the second respondent wrote to the appellant asking whether if a submitting appearance was filed there would be any application for costs. This was only answered the day before the hearing of the appeal. 13 The first respondent replied promptly to the second respondent's requests. 14 The appellant says that he did not misconduct himself in any way in and about the appeal. He says that he had no legal obligation to give the assurance sought by the second respondent. Furthermore, he points out that I remarked during the hearing that as the second respondent was the moving party on the cross-claim, it was appropriate that it be represented at the hearing of the appeal. 15 It does not seem to me to be of concern that the second respondent might have been compelled by the appellant's inaction to appear at the hearing. All this means is that, the appellant having substantially failed against it, it will have to pay a larger amount in costs than would otherwise be the case. It does not also mean that those costs should be on the indemnity basis. 16 If the litigation were commercial litigation the principle set out in the judgment of Mahoney P with whom Priestley JA and Rolfe AJA agreed in FAI General Insurance Ltd v Burns (1996) 9 ANZ Insurance cases 61-384 at 77,220 might have come into play, that is that if a party does not co-operate in the efficient disposal of proceedings, indemnity costs orders might be made against that party. 17 Although I recently applied this principle in an equity suit between commercial parties, see New Cap Reinsurance Corporation Ltd v General Cologne Re Australia Ltd (No 2) [2005] NSWSC 276, I would not, at least at this stage of the development of the guidelines as to when indemnity costs are to be awarded, be prepared to apply it in a case involving beneficiaries under a testamentary trust. 18 I do not think there is any other recognized guideline considered in the leading judgement of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 233 or subsequently that would justify an order for indemnity costs in this case. 19 (b) As to the costs below, Austin J took considerable trouble to fine tune his orders as to costs in his reasons of 1 August 2003 published as Gray v Guardian Trust Australia [2003] NSWSC 704. 20 The only possible reason for adjustment of his Honour's orders would be that two small claims which occupied very little of the total time either here or below, have been disallowed on appeal. 21 I do not consider that this matter is sufficient to warrant an adjustment of the order for costs made below. 22 (c) The affidavit of Ms Alex Munday shows that the first respondent, Mr Ventry Gray, has already paid virtually the whole of his costs to his solicitors. It is submitted that the appellant should thus pay the first respondent interest on the cost order made by this Court from the date of its pronouncement. 23 A similar application was made before Austin J in respect of the costs of the trial. His Honour ruled on that application in his third judgment in these proceedings published as Gray v Guardian Trust Australia [2003] NSWSC 887. 24 His Honour there held, following a line of authority including the decision of this Court in Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342 that the normal rule was that in an equity suit, costs carried interest only from the date the costs were assessed. However, the Court, in its discretion under sections 76 and 95(4) of the Supreme Court Act, had power to order otherwise. 25 His Honour ruled (see [34] -[35]) that he considered that there was a sufficient risk that the appellant would delay the process of assessment of costs that he should exercise his discretion to order that costs should bear interest from the date of the order. 26 There was no appeal against that decision. 27 The decision is in harmony with other decisions including the decision of this court in Roads and Traffic Authority v Cremona (No 3) [2005] NSWCA 13. In that case, Sheller JA at [26] pointed out that the purpose of the existence of the discretion was "to recompense a litigant for being out of pocket whilst the other side has had the use of the money." 28 The appellant says that those words do not cover the present case as the advances ordered to be repaid will not come into the first respondent's hands until distribution. However, this with respect, misses the point. The first respondent has paid costs out of his own pocket, the trial judge after a long hearing considered that there was a sufficient risk that there would be such a delay in cost assessment, that it was proper to make a special order. There was no appeal or challenge to that view which I am entitled to adopt in order to make a similar order for interest on the costs of the appeal. 29 Accordingly, I would propose the following orders:

Gray v Gray

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Judgment (20 paragraphs)

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