Guha v Guha

Supreme Court of NSW|2020-10-01|Before: Ward CJ

Liverpool City Council v Estephan Estephan [2009] NSWCA 161 Mead v Watson [2005] NSWCA 133 Ng v Chong [2005] NSWSC 385 NMFM Property Pty Ltd v Citibank Ltd (No 2) (Court's "NMFM" Judgment No 11) (2001) 109 FCR 77; [2001] FCA 480 Nowlan v Marson Transport Ltd (2001) 53 NSWLR 116; [2001] NSWCA 346 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 Reliance Financial Services Pty Ltd v Altair Investments Pty Ltd [2020] NSWSC 1138 Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287 Yakmore v Hamdoush (No 2) (2009) 76 NSWLR 148; [2009] NSWCA 284 Category: Costs Parties: Sreyashi Guha by her tutor Debadrita Guha (Plaintiff) Samadrita Guha (First Defendant) NSW Trustee and Guardian (Second Defendant) Representation: Solicitors: King Legal (Plaintiff) S Guha (First Defendant) (Self Represented) NSW Trustee and Guardian (Second Defendant) File Number(s): 2019/00358479 Publication restriction: Nil

Judgment

HER HONOUR: Before me for determination on the papers is an application by the NSW Trustee and Guardian (the NSW Trustee), pursuant to a notice of motion filed on 22 July 2020, that the plaintiff (Sreyashi Guha), who brings these proceedings through her tutor (Debadrita Guha), pay the NSW Trustee's costs of, and incidental to, these proceedings in the lump sum amount of $6,613.75. The other relief sought in that motion (that the NSW Trustee be removed as a defendant to the proceedings, pursuant to r 6.29 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)), was granted by me on 15 September 2020. All that now remains to be determined, therefore, is the question of costs.

Background

The background to the present application, discerned from the pleadings that have been filed and the submissions that have been received, is as follows. It is set out here simply for context. I make no findings as to any disputed issues of fact.
The plaintiff is the mother of the first defendant and was formerly the sole proprietor of a property in Marayong, New South Wales (the Marayong Property) (see the statement of claim filed 5 February 2020 at 1-(b)). The plaintiff is a widow and suffers from an intellectual disability in the form of delayed cognitive ability and impaired adaptive functioning (statement of claim at [5]-[6]; 1).
On 12 March 2018, orders were made by the NSW Civil and Administrative Tribunal (the Tribunal) for the appointment of the NSW Trustee as the guardian of the plaintiff for a period of twelve months (statement of claim at [14]).
On 14 May 2018, the Tribunal made an order varying the appointment of the NSW Trustee as financial manager and guardian of the plaintiff.
On 12 May 2019, orders were made by the Tribunal appointing another of the plaintiff's daughters (Ms Debadrita Guha, the tutor in the present proceedings, to whom I will refer as the Tutor), and the NSW Trustee jointly as guardians of the plaintiff's estate and for the appointment of the Tutor as the plaintiff's financial manager; those appointments being for a period of two years (statement of claim at [15]).
The plaintiff's estate has therefore been subject to management under the NSW Trustee and Guardian Act 2009 (NSW) (NSW Trustee and Guardian Act) for some time. On or around 19 November 2019, the first defendant lodged an application in the Guardianship Division of the Tribunal seeking orders for the revocation of the appointment of the Tutor as the plaintiff's financial manager (see statement of claim at [16]).
Meanwhile, on 6 March 2018 (after the first defendant had lodged a guardianship application in respect of her mother but before the hearing in the Tribunal of that application, which was the application that ultimately led to the making of the first order appointing the NSW Trustee as guardian of the plaintiff's estate), a transfer was signed (purportedly by the plaintiff) in favour of the first defendant of a 50% interest in the Marayong Property for nil consideration and, it is alleged, without the plaintiff having the benefit of independent legal advice (see statement of claim at [17]). On 16 March 2018, that transfer was registered.
On 20 March 2018, the NSW Trustee lodged a caveat over the Marayong Property, citing the financial management orders made by the Tribunal on 12 March 2018; on 8 March 2019 the solicitors acting for the NSW Trustee lodged a further caveat over the Marayong Property, citing again the management orders made by the Tribunal on 12 March 2018 (see statement of claim at [20]-[21]).
In July 2019 lapsing notices were served in relation to the first and second caveats.
On 19 August 2019, a second transfer of the remaining 50% interest in the Marayong Property was signed (purportedly by the plaintiff) in favour of the first defendant, again allegedly for nil consideration and without the plaintiff having the benefit of independent legal advice (see statement of claim at [23]). The second transfer was recorded on the folio of the Marayong Property on 11 November 2019 (see statement of claim at [24]).
On 8 October 2019 a third caveat was registered over the Marayong Property, this time by the solicitors acting for the plaintiff.
By summons filed on 14 November 2019, these proceedings were commenced, in which relief was sought, including interlocutory relief for leave to lodge a further caveat in respect of the Marayong Property. In the summons the NSW Trustee was named as the second defendant to the proceedings and the Registrar General of New South Wales as the third defendant to the proceedings. Also sought in the summons was an order for the appointment of the Tutor to act on behalf of the plaintiff in the proceedings.
The summons came before Pembroke J, sitting as duty judge, on 14 November 2019, on an ex parte basis. His Honour made orders, including for the filing and service of the Tutor's consent to act, and stood the matter over to 19 November 2019 before the duty judge.
On 19 November 2019, the matter came before Kunc J, who appointed Debadrita Guha as the Tutor, and granted leave for the plaintiff's solicitors to lodge a fresh caveat pursuant to Pt 7A of the Real Property Act 1900 (NSW) to prevent the Marayong Property being sold or encumbered by the first defendant pending the outcome of these proceedings (see statement of claim at [25]). The NSW Trustee says that it sought to be removed as a party on that occasion but that the application was not entertained by his Honour on that occasion as the plaintiff was then ordered to plead her claim(s) (T 1.39). (My reading of the transcript and orders made on that occasion suggests that the issue as to whether the NSW Trustee was to have any further involvement in the proceedings was certainly raised on that occasion and his Honour, though recognising that serious allegations of the kind raised would require pleadings, stood the matter over for a short period for the first defendant to consider what her defence would be so that she could explain to the Court on the next occasion why the subject property ought not be reconveyed to the plaintiff. Nothing here turns, however, on the timing of the procedural directions for the matter to proceed on pleadings.)
On 5 February 2020, the plaintiff's statement of claim was filed, alleging undue influence by the first defendant over the plaintiff (see statement of claim at [26]-[30]) and unconscionable conduct by the first defendant (see statement of claim at [31]-[37]), as a result of which it was alleged that the plaintiff had suffered loss or damage as a result of the purported execution of the transfers. The plaintiff sought orders that the transfers be set aside and cancelled from the register.
The statement of claim also brought an alternative claim against the Torrens Assurance Fund (hence the joinder of the Registrar-General), alleging that the signature on the second transfer was forged and claiming compensation from the fund as a consequence of loss suffered by reason of the fraud (see statement of claim at [38]-[42]).
The statement of claim on the coversheet named the Registrar General as the second defendant but, in the party details at the conclusion of the pleading, named the NSW Trustee as the second defendant and the Registrar General as the third defendant.
It is relevant at this point to note that in neither the summons nor the statement of claim was any substantive relief sought against the NSW Trustee. Hence the NSW Trustee's ultimate application to be removed as a party to the proceedings which came before me in September this year (pursuant to the notice of motion filed 22 July 2020 to which I have already referred).
What appears to have occurred is that, from the time of acknowledgement of service by the NSW Trustee of the plaintiff's summons (on 18 November 2019), the NSW Trustee sought to persuade the plaintiff's solicitors that the NSW Trustee was not a proper party and that the proceedings should not be continued as against the NSW Trustee; and in that correspondence expressly adverted to the issue of the NSW Trustee's costs (see the emails dated 18 November 2019, 14 February 2020, 20 February 2020, 28 April 2020, 27 May 2020 and 9 July 2020 annexed to the affidavit sworn 22 July 2020 by the NSW Trustee's solicitor, Mr Gregory Mackey, filed in support of the 22 July 2020 notice of motion). In the course of that correspondence, the plaintiff's legal advisers were informed (among other things) that the matter would be referred to the NSW Trustee's insurer and that, because the NSW Trustee had been sued in its corporate capacity, it considered that it was obliged to claim costs against the plaintiff on a discontinuance.
No substantive reply to that correspondence was received until the provision by the plaintiff's legal representatives on 27 May 2020 of a notice of discontinuance (which did not make provision for any order as to the NSW Trustee's costs).
In the subsequent 5 June 2020 email from the NSW Trustee's legal representatives, it was said that the NSW Trustee had reviewed a submission as to whether or not the notice of discontinuance would be signed without insistence upon the payment of its costs by the plaintiff, but that the submission had been rejected and that payment of costs was a prerequisite for signing the discontinuance. The plaintiff's legal advisers were provided at that time with an assessment of the NSW Trustee's professional cost to date. The email also indicated that it was not considered appropriate that the plaintiff should bear any personal liability for these costs and sought advice from the plaintiff's legal advisers as to what arrangements they were prepared to make to pay these costs themselves.
There was no response to that, nor to a similar enquiry on 9 July 2020, until 13 July 2020 when the plaintiff's legal advisers advised by letter that they did not accept any responsibility for legal costs incurred by the NSW Trustee.
Meanwhile, on 2 June 2020 the Tribunal reviewed the first defendant's application and the plaintiff says that the legal services function was removed from the NSW Trustee and added to the responsibilities of the Tutor.
Also in that interim period (according to the plaintiff's written submissions), on 1 July 2020 a grant of legal aid was approved for the plaintiff. It does not appear that the plaintiff has put before the Court any evidence of such a grant.
On 13 July 2020, the NSW Trustee informed the plaintiff's solicitors that it would not be willing to allow the Tutor to avail herself of an indemnity claim as against the plaintiff and provided the plaintiff's solicitors with a copy of a proposed notice of motion (seeking the removal of the NSW Trustee and orders as to costs), and an updated itemisation of costs. That produced no satisfactory response to the NSW Trustee.
It was against that background that, on 22 July 2020, the notice of motion was filed.
On 7 September 2020, the plaintiff's solicitors were notified of what was described by them in their submissions as an extension of the grant of legal aid approved for the Tutor (which I understand was approved on 3 September 2020). Again, the plaintiff has not put before the Court evidence of the grant.
When the matter came before me in the applications list (referred by the Registrar) on 15 September 2020, I made an order for the removal of the NSW Trustee as a defendant (having regard to the fact that no relief was sought against it and it did not appear to be an appropriate or necessary party to be joined to the proceedings), which order was not opposed by the plaintiff. I made directions for the issue of costs to be determined on the papers.

NSW Trustee's submissions

As noted above, the NSW Trustee seeks an order pursuant to s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) that its costs of the proceedings be paid by the plaintiff, and pursuant to s 98(4) of the Civil Procedure Act that they be ordered to be fixed as a lump sum. The NSW Trustee accepts that costs are in the discretion of the Court and invokes the general rule as to costs as stated in r 42.1 of the UCPR.
In essence, the NSW Trustee says that the general rule applies because it succeeded on the motion for it to be removed as a party to the proceedings. Of course, it is relevant in that context to note that this was without any hearing on the merits of the application, it ultimately not being opposed by the Tutor (T 2.13).
The NSW Trustee's complaint here is that the plaintiff's legal advisers never provided any explanation as to why it was joined as a party to the proceedings and nor was any claim made against it or relief sought from it in the proceedings. Thus the NSW Trustee submits that the general rule should apply and that the plaintiff (or the Tutor) should pay the costs of the proceedings and of the notice of motion, as assessed or agreed.
The NSW Trustee says (and I accept) that following its removal as a party to the proceedings it will no longer be involved in the proceedings (except for the supervisory role which the NSW Trustee retains concerning the tutor as financial manager).
It is noted that the plaintiff's legal advisers have been aware since the commencement of the proceedings that the NSW Trustee would seek payment of its costs in the event of a discontinuance. It is said that, in circumstances where no relief has ever been sought by, or on behalf of, the plaintiff as against the NSW Trustee, nor any particulars provided as to why it is appropriate or necessary for it to have been made a party to the proceedings, an order should be made for the plaintiff to pay the NSW Trustee's costs of, and incidental to, the proceedings.
As to the effect of an order under s 47 of the Legal Aid Commission Act 1979 (NSW) (Legal Aid Commission Act), the NSW Trustee says that there is no evidence before the Court as to the grants of legal aid (to which the plaintiff has referred in her submissions) but accepts that if such an order has been made then the Court cannot make an order for payment by the plaintiff of the costs of the NSW Trustee as and from the date of the grant of legal aid (though an order for costs can be made in favour of the NSW Trustee against the plaintiff up to the day legal aid was granted, referring to s 47(3) of the Legal Aid Commission Act). The NSW Trustee complains that on three occasions it has unsuccessfully sought particulars of the date when legal aid was granted for the substantive proceedings.
The NSW Trustee here seeks an order for payment of its costs by the plaintiff with respect to the substantive proceedings up until the date that the plaintiff was granted legal aid (whatever that date may be) (excluding the costs of the 22 July notice of motion) and an order for payment of its costs with respect to the notice of motion from 12 July 2020, when it commenced preparation for filing of the notice of motion, up to, and including, 2 September 2020 (although the details of costs provided in the annexures commence only from 17 July 2020).
As to the costs of the notice of motion filed on 22 July 2020, the NSW Trustee claims from the plaintiff the amount of $1,406.00 with respect to costs incurred by it, up to and including, 2 September 2020 (noting that the NSW Trustee does not charge GST in such circumstances) (those costs being set out in Annexure 1 to the submissions). As to the costs of the substantive proceedings, excluding the costs in relation to the notice of motion filed on 22 July 2020, the NSW Trustee claims from the plaintiff (and/or the Tutor, since the submissions appear to address both possibilities) the amount of $8,237.00 (again noting that it is not charging GST) (those costs being set out in Annexure 2 to the submissions). There seems a small overlap in the cost entries on those Annexures, as I read them.
Those costs are claimed from the plaintiff subject to the application of s 47(3) of the Legal Aid Commission Act, which (as noted above) provides that the Commission shall not be liable to pay any costs incurred by, or on behalf of, a person in respect of a period during which that person was not a legally assisted person (even though those costs were ordered to be paid at a time when that person was a legally assisted person), and that that person shall be liable for the payment of those costs.
Further, the NSW Trustee submits that the plaintiff should pay its costs on the indemnity basis (pursuant to s 98(1)(c) of the Civil Procedure Act and r 42.5 of the UCPR). The NSW Trustee submits that the costs particularised in the Annexures to its submissions were not unreasonably incurred, or of an unreasonable amount, and that they ought be allowed in full.
In contrast, the NSW Trustee submits that the conduct of the plaintiff's legal representatives was unreasonable and unnecessary, in prolonging the involvement of the NSW Trustee in the proceedings when such involvement was wholly unnecessary; and that it was so unreasonable as to make it unjust that the NSW Trustee should be limited in its recovery to party and party costs. It is said that the conduct was "out of the ordinary" and, thus, the actions of the plaintiff are in a special category of case, rather than in the ordinary category of case (citing NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77; [2001] FCA 480 (NMFM No 11)).
As to the claim by the NSW Trustee for the costs to be ordered as a lump sum, it is said that the costs claimed by the NSW Trustee cover a short time period; and that the items to which they relate are not controversial or complicated. It is submitted that the Court will not be required to conduct a detailed examination more akin to an assessment hearing. Further, it is said that the quantum of the costs is in proportion to the nature and complexity of the issues litigated or agitated between the parties. Again, it is submitted that the plaintiff's legal representatives have unnecessarily contributed to these costs. The NSW Trustee submits that the Court is here in a position to be able to deal fairly as between the parties in relation to the claim for costs and that this is not an appropriate matter to be consigned to the delays and uncertainties of the assessment process (see in this regard the principles articulated in Hamod v State of New South Wales [2011] NSWCA 375 (Hamod), which I discuss below.) The NSW Trustee also submits that this is not a matter where it is appropriate to apply a discount in assessing the costs on a gross sum basis.
As to whether a "forthwith" costs order be made with respect to any costs order, it is noted that this is a discrete costs order, separate and distinct from any costs order to be made in the substantive proceedings, and that it relates to an issue (or, more precisely, the absence of any issue against it that is separately identifiable from the substantive issues in the proceedings). It is again submitted that the costs were incurred as a result of unreasonable conduct by the plaintiff's legal representatives. It is noted that it will be many months before the substantive proceedings are heard and a decision given; and it is said that it is unreasonable for the NSW Trustee to have to wait until resolution of the final proceedings before being paid its costs (referring to the principles articulated by Barrett J, as his Honour then was, in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 at [11]-[13]).
The NSW Trustee also raised in its submissions the prospect that an order pursuant to s 99 of the Civil Procedure Act ought here be made, such that the Tutor's solicitor becomes personally liable for the payment of any costs ordered. However, it was accepted by the NSW Trustee that there is no evidence at this stage that would permit such an assessment to be made (and that there are notice requirements to be complied with in that regard). The NSW Trustee accepts that the plaintiffs' legal representatives would need to be afforded procedural fairness including an opportunity to be heard in relation to the application. Nevertheless, the position of the NSW Trustee is that, regardless of what may or may not have had occurred between the Tutor and her solicitors in this regard, it was incumbent upon the plaintiff's solicitors to take active steps to advise her that it was appropriate and proper for the discontinuance to be submitted to the NSW Trustee and an appropriate costs order negotiated at an early stage in the proceedings. The NSW Trustee maintains that the Tutor's solicitors failed to act in a proper, professional and proactive manner in the best interests of both the plaintiff and the Tutor to resolve this issue and to minimise costs unnecessarily incurred (or even to remove the necessity for a costs order). The NSW Trustee contends that the action, or inaction, of the Tutor's solicitors in these circumstances is wholly unreasonable and is a direct cause of the incurring of these unnecessary costs.
Reference is made to Kelly v Jowett (2009) 76 NSWLR 405; [2009] NSWCA 278 (and the cases referred to therein at [55]-[68]). It is submitted that it is not appropriate or in the interests of justice that the NSW Trustee should be financially prejudiced by the unjustifiable conduct of litigation by the plaintiff's solicitors. Rather, it is submitted that it is just, in all the circumstances, that an order be made that the plaintiff's solicitor pay the whole of the NSW Trustee's costs assessed on a lump sum basis. The NSW Trustee notes that this particular relief is not sought in the notice of motion but, should it be considered necessary, seeks leave to amend the notice of motion so as to add this additional relief to it.

Plaintiff's submissions

In the written submissions dated 22 September 2020, (i.e., prepared after the NSW Trustee had been removed as a party to the proceedings) filed on behalf of the plaintiff, not only is there complaint made as to the conduct of the NSW Trustee (not contained in the pleadings) (namely, an allegation of negligence or fiduciary duty in failing to file an application seeking an order for an extension of the first and second caveats, but for which it is said that the plaintiff would not have commenced the substantive proceedings, but also the plaintiff maintains that the NSW Trustee will "continue to be involved" in these proceedings as the NSW Trustee retains a supervisory role in regard to the Tutor as financial manager and continues to hold a "Guardianship Order" in relation to the plaintiff's affairs). Reference is made in this regard to a letter dated 14 September 2020 from the NSW Trustee in which it is said, among other things, that the approval of the NSW Trustee was necessary for the continuation of the proceedings (and to defend the notice of motion itself) unless the Tutor irrevocably undertook herself to bear any adverse costs order over and above $5,000.
The plaintiff's submission seems to be that the NSW Trustee was joined as a party because it was a party that "ought to be bound" by orders made in the proceedings. If, by this, it is suggested that the NSW Trustee was an appropriate or necessary party to join to the proceedings because it held a supervisory role in relation to the plaintiff's affairs or because its approval was necessary for the conduct of proceedings in respect of which the plaintiff might be exposed to adverse costs orders for which she might not be able to obtain reimbursement or indemnity out of the grant of legal aid, then I cannot accept that proposition. It simply was not necessary for the NSW Trustee (in its capacity as the guardian of the plaintiff's estate) to be joined as a defendant in proceedings where no relief was being sought against it and where its interests would not in any relevant sense be affected.
Nor is it instructive here to explore the allegations made in the plaintiff's submissions as to whether there was some negligence or failure on the part of the NSW Trustee to fulfil its duties in relation to the management of the plaintiff's estate in circumstances where there is no (and has never been any) pleaded claim for any relief against the NSW Trustee (whether for breach of duty or otherwise). The allegation made in submissions that the NSW Trustee failed in its responsibility to the plaintiff "to effect due diligence and fiduciary duty arising from their relationship of trust" is extraordinary when there is no pleaded claim of any such kind.
As to the costs issue more generally, the plaintiff emphasises the requirement for proportionality of costs (see s 60 of the Civil Procedure Act) and says that the practice and procedure of the Court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute (which I note is a relevant consideration to take into account when considering applications for gross sum costs orders - see below).
The plaintiff says that, as the NSW Trustee held the function for legal services until 2 June 2020, the Tutor was not authorised to deal with the estate (other than to protect the assets) until she had obtained all necessary authorities from the NSW Trustee; that the NSW Trustee's approval had to be provided prior to any legal costs being incurred by the Tutor on behalf of the plaintiff; and that the Tutor did seek and obtain written approval from the NSW Trustee before commencing proceedings. (That may be accepted but nothing turns on this. When the question is as to the proprietary of the joinder of the NSW Trustee to the proceedings and the delay in acceding to its removal.)
The plaintiff further says that, as a result of the orders made on 21 May 2019, the Tutor has fulfilled her role as the plaintiff's guardian and financial manager by ensuring that all the plaintiff's finances and assets are carefully and appropriately managed. It is said that the Tutor was not notified of either of the lapsing notices and that the first and second caveats lapsed due to the negligence of the NSW Trustee and its lawyers, in that they failed to file an application to extend the caveats. (I interpose to note that, as can be seen from the above, there appear to be accusations of negligence or unreasonable conduct on both sides and apparently no reluctance on either side in attributing blame or fault to the respective legal advisers. Suffice it here to note that this submission seems to be put as a response to complaint as to the unreasonableness of the plaintiff's conduct in relation to the bringing of the proceedings - which does not seem to me to be to the point as I will explain shortly.)
The plaintiff accepts that the appropriate starting point in the present case remains the presumption under r 42.1 of the UCPR and says that the enquiry then becomes whether, in the exercise of the court's discretion, that presumption should be displaced (citing Nowlan v Marson Transport Ltd (2001) 53 NSWLR 116; [2001] NSWCA 346 at [37], per Heydon JA, as his Honour then was, Mason P and Young CJ in Eq, as his Honour then was, agreeing), referring to the unfettered nature of the discretion subject to specific costs provisions that impact thereon, and to what was said in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack); Hamod at [813], per Beazley JA, as Her Excellency then was, Giles and Whealy JJA agreeing; and Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 at [11], per the Court). As already noted, reference is made by the Tutor to the principles of proportionality (s 60 of the Civil Procedure Act).
As to the question of indemnity costs, the plaintiff refers to Mead v Watson [2005] NSWCA 133 (at [8]) as to the need to exercise the discretion judicially; the need for careful reasoning (citing Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354); and the caution recognized as being required in making such an award (citing Leichhardt Municipal Council v Green [2004] NSWCA 341; Ng v Chong [2005] NSWSC 385 (Ng v Chong) at [13], per Hamilton J). Reference is also made to a raft of authorities as to the application of the principles in this regard: Harrison v Schipp [2001] NSWCA 13 at [139], per Giles JA, Handley and Fitzgerald JJA; Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233-234, per Sheppard J; [1993] FCA 801; Oshlack; Ingot Capital Investment v Macquarie Equity Capital Markets (No 7) [2008] NSWSC 199 at [24], per McDougall J; Liverpool City Council v Estephan Estephan [2009] NSWCA 161 at [95], per Giles JA, McColl JA agreeing; Hamod v State of New South Wales [2002] FCA 424; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4], per Allsop P, Beazley JA, as Her Excellency then was, and Campbell JA agreeing; Hillebrand v Penrith Council [2000] NSWSC 1058; and Wentworth v Rogers (No 5) (1986) 6 NSWLR 534.
The plaintiff maintains that the Tutor acted in a proper and proactive manner, which was in the best interests of plaintiff, by seeking the approval of the NSW Trustee prior to commencing the proceedings to protect the plaintiff's estate assets; that the Tutor has not breached her fiduciary duty in her capacity as tutor; has not abused the process or unnecessarily prolonged proceedings; and that the substantial proceedings are not without substance. Hence it is said that any order for costs should not be made on an indemnity basis.
As to the application for a specified sum by way of costs, the plaintiff accepts that an order for a specified gross sum (instead of assessed costs) may appropriately be made where the financial circumstances of the party ordered to pay costs is impecunious (again citing Hamod at [813]-[820].
The plaintiff's position is that Interlocutory relief was sought and ordered on 19 November 2019 and that the NSW Trustee's costs, if awarded, should be costs in the cause. (The NSW Trustee says, to the contrary, that this is not a situation where, having succeeded in obtaining the interlocutory relief, the NSW Trustee's costs of the notice of motion should be costs in the cause (referring to Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287), on the basis that the NSW Trustee will no longer be involved as a party in the proceedings. I agree.)
The plaintiff again emphasises her position that the Tutor was justified in bringing the proceedings and in engaging separate independent legal representation from that of the NSW Trustee, and says that the Tutor sought Counsel's advice prior to commencing the proceedings. It is submitted that a tutor "or submitting party" is not in the same position as an active party, and that the power to make a costs order against such a person or organisation is to be exercised with restraint (citing Ng v Chong at [12]; although I note this citation appears to go only to the issue of Calderbank offers). (I interpose also to note that I do not see a tutor as being in the same position as a "submitting party". It is quite clear that a tutor will be personally liable for adverse costs orders in appropriate circumstances - see Yakmore v Hamdoush (No 2) (2009) 76 NSWLR 148; [2009] NSWCA 284 where Giles JA (with whom Ipp and Tobias JJA agreed) stated (at [25]) that: "[t]he cases generally do not distinguish between the tutor's liability to pay costs pursuant to an order made against the person under an incapacity, and the tutor's liability to pay costs pursuant to an order made against the tutor himself or herself. The liability, however, is clear…".)
As to the effect of the grant of legal aid, it is said that both the plaintiff and the Tutor are legally assisted persons and therefore that they will be indemnified against any costs orders made against them (though as noted above, there appears to be no evidence as to the grant of legal aid - there is simply the reference to unidentified "Government Record[s]" in the chronology contained within the plaintiff's submissions). It is noted that costs may be ordered against government bodies such as legal aid providers, albeit in an extreme case (reference being made to Collins & the Victorian Legal Aid Commission (1984) FLC 91-508; In the Marriage of Millea and Duke (1995) 122 FLR 449; FLC 92-584). The plaintiff submits that this is not a case in which an adverse costs order should be made.
In summary, it is said for the plaintiff that she is a person lacking mental capacity; being cared for by the Tutor, in receipt of a Centrelink pension, with extremely limited resources; and the subject of a financial management and guardianship order; and it is submitted that the NSW Trustee failed to protect the estate assets of the plaintiff and to exercise its duty of care and fiduciary duty in the first instance. It is said that the Tutor was in a position where the plaintiff's interests needed to be protected; that this course of action was a legitimate action for the Tutor as financial manager to take; and that the NSW Trustee approved expenditure of the plaintiff's funds to pursue this legal action. It is said that this approval would not have been given if the action was not legitimate or worth pursuing.
Again, it is contended that the plaintiff commenced these proceedings due to the negligence of the NSW Trustee in not taking all reasonable steps to protect the estate assets of the plaintiff, being her unencumbered home, and with whom they have a relationship of trust under a financial management and guardianship order. It is said that, by filing the notice of motion seeking costs against the plaintiff, the NSW Trustee has further jeopardised the plaintiff's estate, as any costs awarded against the plaintiff would further deplete the plaintiff's resources (which it is said that the NSW Trustee has a legal obligation to protect). Complaint is further made that the NSW Trustee has engaged the legal services of independent legal representatives, whose costs have been charged to the plaintiff's account (i.e., as I understand it, the plaintiff asserts that the legal services should have been provided "in-house", and seemingly considers that this should have been without charge).
The plaintiff maintains that the NSW Trustee's costs of $9,643.00 as at 5 June 2020 (being $1,406.00 for the notice of motion and $8,237.00 for the substantial proceedings), are excessive given that the NSW Trustee has an in-house solicitor and that, on 5 June 2020, the NSW Trustee's invoice was in the amount of $4,245.45. Reliance is placed on the indication by the NSW Trustee that it does not consider it appropriate for the plaintiff to bear the costs.
In conclusion it is again submitted that the Tutor has acted appropriately in commencing these proceedings and in joining the NSW Trustee, as the plaintiff was a protected person within the meaning of NSW Trustee and Guardianship Act. It is said that the relief sought (against the NSW Trustee) was that of costs. The plaintiff submits that an order for costs in favour of the NSW Trustee in these circumstances would not be fair and equitable.

Determination

It seems to me that the present costs application is the end result of a misconception on the part of the plaintiff or her legal advisers that it was necessary or appropriate for the NSW Trustee to be joined as a party to proceedings brought in the name, and on behalf of the plaintiff as a protected person. That is not the case. Nor is it an answer to say that the "relief" sought against the NSW Trustee was costs. There was simply no cause of action pleaded against the NSW Trustee in the statement of claim (and no basis has been identified on which a costs order would appropriately have been sought against it had the matter proceeded by way of the summons which preceded the statement of claim).
The fact that the substantive proceedings (seeking relief against the first defendant) were appropriately brought, or that the NSW Trustee approved the incurring of costs in relation to those proceedings, is not to the point. It may be accepted that the substantive claim (against the first defendant) could not be said to be "without substance", "groundless", "fanciful or hopeless" or so weak as to be futile (as might warrant an indemnity costs order in relation to the substantive proceedings in accordance with the principles set out in the cases referred to above), but the question here is not as to the first defendant's costs or the merits of the claim against the first defendant.
Rather, what is here in issue is whether the NSW Trustee should ever have been joined to the proceedings in the first place and whether, when the NSW Trustee promptly pointed out that it was not an appropriate party and sought to be removed from the proceedings, the plaintiff (through her legal representatives) failed to respond in a timely fashion (causing the NSW Trustee necessarily to incur legal costs in seeking its removal from the proceedings and in taking steps in the proceedings to date).
It is not correct to say, as the plaintiff seems in her written submissions to suggest, that the 22 July 2020 notice of motion was one simply seeking costs. The principal relief there sought was the removal of the NSW Trustee as a defendant in the proceedings (relief that was not ultimately opposed). The necessity for such a notice of motion seemingly arose (at least from May 2020) because of the dispute as to who should bear the costs of the unnecessary joinder in the first place. However, the fact remains (and the plaintiff's submissions do not grapple with this) that the NSW Trustee should not have been put to the expense of taking steps in the proceedings to which it was neither a necessary nor appropriate party.
I see no reason, simply because the plaintiff is a protected person, not to apply the general rule that costs follow the event in accordance with r 42.1 of the UCPR. The NSW Trustee acted promptly in seeking to have the proceedings against it discontinued. It was forced to incur legal costs in seeking to achieve what should have been the obvious and straightforward result - namely, the discontinuance of the proceedings against it. In coming to this decision, I bear in mind the words of Bredmeyer M in Giles v Silipo (Supreme Court (WA) 1998, unrep), to the effect that: The normal rule in this situation is that the plaintiffs should pay the Registrar's [Registrar of Titles] costs. The plaintiffs have discontinued the action against him. They have obtained no order against him, neither have they got any relief against him in an out-of-court settlement. … From the Registrar's point of view, he was joined unnecessarily. The overwhelming justice of the plaintiffs' actions in that they should pay the costs of a party unnecessarily joined in the action.
As to the complaint that external legal costs should not have been incurred, that is difficult to accept in circumstances where it seems that the plaintiff's (unpleaded) position is that the NSW Trustee was in breach of duties owed to her (which one would think would inevitably and appropriately have led to the involvement of external and independent legal advisers - and, as I understand the NSW Trustee's submissions, to the referral of the matter to its insurers). It is appropriate in these circumstances for the NSW Trustee to have its costs of the proceedings and of the notice of motion (up to the date at which there was a relevant grant of legal aid).
As to whether the costs should be on an indemnity basis, indemnity costs may be awarded in cases that are commenced or continued where there is no chance of success. In the present case, there is much to be said for the proposition that a case where no cause of action is brought against a defendant cannot possibly have been one that was commenced or continued with any chance of successfully obtaining relief against that party. I have concluded that, although there are a number of unsatisfactory aspects to the dilatory response by the plaintiff to the request that the NSW Trustee be removed as a party to the proceedings, this is not a case where the joinder of the NSW Trustee to the proceedings (and the delay in addressing its request to be removed as a party) was in all the circumstances so unreasonable as to warrant an indemnity costs order. In that regard, I have in mind that the plaintiff is a legally protected person and has limited financial means. I also bear in mind that an award of indemnity costs should be compensatory and not punitive (by reference to Oshlack at [44], per Gaudron and Gummow JJ). I will therefore order costs on the ordinary basis (and I will apply a 75% discount to the solicitor/client costs to reflect the relatively small quantum of the costs and the likely discount on an assessment process).
As to the application for a lump sum costs order, both parties referred to the principles applicable on such an application as set out in Hamod at [813]-[820]. Those principles include that, before exercising the power, the court should be confident that the approach taken to estimating costs is fair, logical and reasonable. The terms of s 98(4) of the Civil Procedure Act, together with the more general considerations reflected in ss 56-60 of the Civil Procedure Act, are recognised as suggesting that the factors that merit particular consideration include: the degree of any disproportion between the issue litigated and the costs claimed; and the complexity of proceedings in relation to their cost. As was noted by Slattery J in Bahamad v Wong [2020] NSWSC 991 at [19], the power may be exercised where a party's conduct has unnecessarily contributed to the cost of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceeding.
The Court in Hamod indicated that the assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings, interlocutory processes, preparation for hearing and the final hearing, but that in the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to a formal costs assessment process; rather the costs ordered should be based on an informed assessment of the actual costs having regard to the information before the Court.
As noted, the approach to be taken must be logical, fair and reasonable, but this may involve an impressionistic discount of the costs actually incurred or estimated in order to take into account the contingencies that would be relevant in any formal costs assessment process. In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213, Giles JA (at [22]) noted that the specified gross sum can be fixed under s 98(4)(c) of the Civil Procedure Act by the application of what has been described as a "broad brush" approach. See also: Hadid v Lenfest Communications Inc [2000] FCA 628 at [35], per Lehane J; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7], [25], per Campbell AJA; and, more recently, Reliance Financial Services Pty Ltd v Altair Investments Pty Ltd [2020] NSWSC 1138 (Reliance) at [46], per Kunc J. In Reliance, Kunc J noted that a discount is typically applied in assessing costs on a gross sum basis by reference to what was said in Hamod at [814].
Applying those principles in the present case, I consider a gross sum costs order to be appropriate in circumstances where: the costs involve a discrete part of the proceedings; the costs are not large and it would not be likely to be worth the costs and delay involved in a formal assessment process; and the conduct of the plaintiff (in joining the NSW Trustee without any proper basis and then in delaying in responding to requests for the disposition of the proceedings against it) contributed to the costs incurred by the NSW Trustee. I consider that the material put before the Court sufficiently discloses the costs that have been incurred and provides an objective basis on which to form a view as to the fair and reasonable amount of the costs now to be the subject of a costs order. In particular, I do not consider the costs incurred to be manifestly excessive.
I propose to apply a 10% discount to the amount awarded for costs to reflect the contingencies that might arise on an assessment of costs on the party and party basis, rounding those figures up to round sums. (I do not consider a further discount is warranted in all the circumstances.) I also consider that a forthwith costs order is appropriate, having regard to the principles referred to above as to when such an order should be made.
I do not consider that leave should now be granted to amend the notice of motion to permit an application for a costs order under s 99 of the Civil Procedure Act. In circumstances where such an amendment will inevitably lead to yet further costs being incurred, I do not consider that to be appropriate or consistent with the just, quick and cheap resolution of the real issues in dispute. There must be an end to the issue of costs in relation to the inappropriate joinder of the NSW Trustee as a defendant to the proceedings once and for all.
On the assumption that the plaintiff can and does provide evidence to the NSW Trustee as to the dates on which legal aid was granted first to the plaintiff in respect of the substantive proceedings, and subsequently to the Tutor (and assuming such dates are those that were stated in her submissions) in relation to the notice of motion, I will make orders for the costs only up to those respective dates. (However, I will give liberty to apply to vary the sums in the event that those dates were not accurately stated in the submissions).
Finally, as to the submissions made by the Tutor to the effect that she be treated as a "submitting party", this ignores her role as tutor in the proceedings. Her consent to be appointed as a tutor must have been on the basis that she was made aware that she might be personally liable for the costs of the proceedings. That would include the costs of the notice of motion.

Orders

For the reasons set out above, I make the following orders: 1. Direct the plaintiff to provide to the NSW Trustee within 7 days a copy of the document(s) issued by the Legal Aid Commission confirming the dates on which legal aid was granted to the plaintiff in relation to the proceedings and in relation to the plaintiff's tutor in relation to the notice of motion filed by the NSW Trustee on 22 July 2020 in these proceedings. 2. Order the plaintiff and the plaintiff's tutor jointly and severally to pay the costs of the proceedings of the NSW Trustee (excluding the costs of the notice of motion filed on 22 July 2020) on the ordinary basis for the period up to and including 30 June 2020, such costs to be fixed in the sum of $3,200.00 and to be payable forthwith; and order the plaintiff's tutor personally to pay the balance of the NSW Trustee's said costs of the proceedings from 30 June 2020, such costs to be fixed in the sum of $1,900.00 and to be payable forthwith. 3. Order the plaintiff's tutor to pay the costs of the NSW Trustee of and incidental to the notice of motion filed on 22 July 2020, including costs of its preparation from 12 July 2020, up to and including 2 September 2020 on the ordinary basis, such costs to be fixed in the sum of $950.00 and to be payable forthwith. 4. Grant the NSW Trustee liberty to apply to vary the amount of the lump sum costs orders if one or both of the dates on which legal aid was granted is, (or are) not in accordance with the plaintiff's submissions on the present application. 5. List the matter for directions before the Equity Registrar on 7 October 2020.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 October 2020

Trustee and Guardian Act 2009(NSW)

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