Kanjian Holdings No 1 Pty Ltd v Kanjian; Kanjian v Kanjian

Supreme Court of NSW|2021-10-29|Before: Henry J

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 Sydney City Council v Geftlick [2006] NSWCA 280 Sze Tu v Lowe (No 2) [2015] NSWCA 91 Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; (2011) 288 ALR 385 Tonna v Mendonca (No 2) [2020] NSWSC 306 Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 Turkmani v Visvalingam (No 2) [2009] NSWCA 279 Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338 Wentworth v Wentworth (1999) 46 NSWLR 300; [1999] NSWSC 317 Wentworth v Wentworth (2001) 52 NSWLR 602; [2000] NSWCA 350 Yates Property Corporation Pty Ltd v Boland (No 2) [1997] FCA 760; 147 ALR 685 Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 Texts Cited: Nil Category: Costs Parties: Proceedings No 2018/150768 Kanjian Holdings No 1 Pty Ltd (ACN 002 862 660) (Plaintiff/First Cross-Defendant) Kenneth Kanjian (First Defendant/First Cross-Claimant) Phillip Kanjian (Second Cross-Defendant) Victor Kanjian (Third Cross-Defendant) Marianne Yaghljian (Fourth Cross-Defendant) Loris Sarkis Kanjian (Fifth Cross-Defendant) Sonia Kanjian (Sixth Cross-Defendant)

Proceedings No 2018/258352 Loris Sarkis Kanjian (Plaintiff/First Cross-Defendant) Kenneth Kanjian (First Defendant/Cross-Claimant) Kanjian Holdings No 1 Pty Ltd (ACN 002 862 660) (Second Defendant) Sahab Holdings Pty Ltd (ACN 002 728 216) (Third Defendant) Sonia Kanjian (Fourth Defendant/Second Cross-Defendant) Representation: Counsel:

Proceedings No 2018/150768 M Sneddon with T Phan (Plaintiff/First to Fourth Cross-Defendants) A Bannon SC with M Davis (First Defendant/First Cross-Claimant) M Condon SC (Fifth Cross-Defendant)

Proceedings No 2018/258352 M Condon SC (Plaintiff/First Cross-Defendant) A Bannon SC with M Davis (First Defendant/Cross-Claimant) M Sneddon with T Phan (Second Defendant)

Proceedings No 2018/150768 Bull Son & Schmidt (Plaintiff/First to Fourth Cross-Defendants) McMahons Lawyers (First Defendant/First Cross-Claimant) Benjafield & Associates Lawyers (Fifth Cross-Defendant) Office of the NSW Trustee and Guardian (Sixth Cross-Defendant) (No appearance)

Proceedings No 2018/258352 Benjafield & Associates Lawyers (Plaintiff/First Cross-Defendant) McMahons Lawyers (First Defendant/Cross-Claimant) Bull Son & Schmidt (Second Defendant) Office of the NSW Trustee and Guardian (Fourth Defendant/Second Cross-Defendant) (No appearance) File Number(s): 2018/150768 and 2018/258352 Publication restriction: Nil

Judgment

These reasons deal with the issue of costs following the determination of claims in two proceedings that concerned disputes between members of a family over who should have management and control of family companies and trusts and the affairs of elderly parents: Kanjian Holdings No 1 Pty Ltd v Kanjian; Kanjian v Kanjian (No 3) [2021] NSWSC 839 (judgment). They assume familiarity with the principal judgment and use terms and refer to people in the same way as they were used in that judgment.
Each of the active parties (Loris, Ken, Kanjian Holdings and the siblings) experienced some success, although not on all of their claims, and indicated they wanted the issue of costs to be dealt with after the principal judgment was handed down. A timetable was made for written submissions in chief and reply to be filed and served and, having regard to case management and cost issues raised by Ken, the parties were advised that the remaining issues would be dealt with on the papers.
Detailed written submissions on the issue of costs have been served which identify significantly different costs positions. There is no dispute as to the other orders to be made to dispose of the proceedings, including the form of declarations. No further evidence has been filed.
I should record that Sonia, who has not been an active party since financial management orders were made in relation to her affairs in December 2018 and is represented by the NSW Trustee, made no submissions on costs. Subject to one qualification which I will come to, the submissions advanced by the active parties do not seek costs in relation to the claims made against or by Sonia.

Summary of claims and outcomes

In order to determine how costs should be awarded, it is appropriate to start with an overview of the claims and findings in the Corporations and Equity proceedings.

Corporations proceedings

In the Corporations proceedings, which were commenced by Kanjian Holdings against Ken seeking access to documents relating to the company and relief under the Corporations Act 2001 (Cth), the focus of the disputes that arose for determination related principally to the claims made in Ken's ASFCC against Loris, Sonia, the siblings and Kanjian Holdings.
At the hearing, Kanjian Holdings did not press for the production of documents or the Corporations Act relief as most of the documents sought had been produced by Ken pursuant to orders made by Lindsay J on 27 and 31 August 2018. That production was subject to an undertaking noted by the Court that no step outside the ordinary course of business would be taken by any party in relation to the conduct of, relevantly, Kanjian Holdings without giving each party 48 hours' prior written notice.
By his ASFCC, Ken asked the Court to set aside, rescind or declare invalid ten instruments, resolutions and other documents signed by Loris and Sonia in their capacity as directors of Kanjian Holdings and in their personal capacities. This relief was sought on the grounds that those documents had been signed in circumstances where Loris and Sonia lacked capacity or had been induced to sign them by reason of dishonesty, undue influence or unconscionable conduct on the part of the siblings.
Ken also sought management orders in relation to Loris and Sonia pursuant to the NSW Trustee and Guardian Act 2009 (NSW). Ken's claim for orders in relation to Loris was abandoned at the hearing, as was his claim that Loris lacked capacity other than by way of undue influence. Financial management orders were made in relation to Sonia's estate by the Court in December 2018.
In summary, Ken was unsuccessful on all of his challenges to the impugned documents other than in relation to his challenge to Sonia's 2017 Revocation and Power of Attorney.
For the reasons set out in principal judgment, the Court concluded that Ken had not properly pleaded or particularised his claim based on the allegation of dishonesty.
The Court was also not satisfied and rejected Ken's claims that Loris and/or Sonia lacked capacity or were induced to pass or sign the following documents by reason of undue influence or unconscionable conduct on the part of the siblings: 1. the 27 August 2017 Resolution appointing the siblings as directors of Kanjian Holdings; 2. Loris' 2018 Revocation and Power of Attorney and 2018 Revocation of Guardianship; 3. the 18 April 2018 Resolution of directors of Kanjian Holdings and Power of Attorney; 4. the 11 May Authorities; and 5. the 11 May Bondi Direction.
The Court also found against Ken that the issue of whether there was a meeting of directors of Kanjian Holdings held on 27 August 2017 and a resolution passed by Loris and Sonia as directors of Kanjian Holdings did not arise on the pleadings and should not be dealt with as part of the trial. Further, it was not satisfied on the evidence that Ken has established there had been no such meeting.

Equity proceedings

In the Equity proceedings, which were commenced by Loris and Sonia against Ken, Kanjian Holdings and Sahab Holdings seeking access to documents relating to their affairs, the disputes that arose for determination related to the claims made by Loris in the SFASC filed on 28 June 2019 and Ken's Cross-Claim against Loris and Sonia filed on 30 November 2018.
At the hearing, Loris did not press for the production of documents as most of them had been produced by Ken pursuant to orders made by Lindsay J on 27 and 31 August 2018. That production was also subject to an undertaking that was noted by the Court that no step outside the ordinary course of business would be taken by any party in relation to the conduct of the affairs of Loris and Sonia or any company or trust in which they have an interest without giving each party 48 hours' prior written notice. The undertaking did not restrict their entitlement to make a will or other testamentary instrument.
By the SFASC, Loris advanced three primary claims against Ken: the Sahab A Class Share Claim, the Senses AFL claims and the Trustee Removal Claim.
As a consequence of the Senses AFL coming to an end, Loris did not press for determination those parts of the Senses AFL claims that sought statutory compensation under s 1317H of the Corporation Act or equitable compensation. At the hearing, he also did not press the allegation that Ken had coerced and tricked Sonia into signing the Senses AFL. Loris otherwise relied on most of the allegations made in relation to the Senses AFL claims in support of his Trustee Removal claim.
Ken defended each of Loris' claims and, by his Cross-Claim filed against Loris and Sonia, asserted the Bondi Estoppel Claim and an estoppel in response to Loris' Sahab A Class Share Claim.
As between Loris and Ken, for the reasons set out in principal judgment, the Court concluded that: 1. Loris failed on his Sahab A Class claim, with the Court finding that he was estopped from requiring Ken to transfer legal title to the A class share in Sahab Holdings as asserted by Ken's Cross-Claim; 2. Loris was unsuccessful on his Trustee Removal Claim. The Court was not satisfied that Loris had established that Ken had negotiated and executed the Senses AFL on behalf of Sahab Holdings without authority, procured a breach by Sahab Holdings of its duty as trustee of the Metropole Trust or breached his obligations as a director by reason of Sahab Holdings' entry into the Senses AFL (Senses AFL issues). The Court was also not satisfied that Sahab Holdings should be removed as trustee because of the breakdown in relations, a failure to provide documents and, amongst other matters, that Ken had acted in legal proceedings without the approval or consent of Sonia; and 3. Ken was unsuccessful on his Cross-Claim seeking an interest in the Bondi property, although the Court accepted that the conversation relied on by Ken in support of that claim occurred.
Kanjian Holdings had also filed a Cross-Claim in the Equity proceedings against Ken in relation to the Senses AFL. In its Cross-Claim, Kanjian Holdings claimed equitable compensation, damages and an account in relation to the Senses AFL by reason of Ken's alleged breaches of fiduciary duties owed to Kanjian Holdings and negligence by breaching his duty of care owed to Kanjian Holdings.
As a consequence of the Senses AFL coming to an end, Kanjian Holdings' Cross-Claim was discontinued by consent on 21 August 2020, with the issue of costs reserved.

Ken's submissions

Ken submits that the preferable approach is for the Court to make a global costs order to apply to all parties across both the Corporations and Equity proceedings. He seeks an order that Loris and Kanjian Holdings pay 95% of his costs on an ordinary basis. In the alternative, if costs orders are to be made in relation to each proceedings, Ken seeks the following: 1. in relation to the Corporations proceedings, Loris to pay Ken's costs on an ordinary basis; and 2. in relation to the Equity proceedings, Loris to pay 40% of Ken's costs on an ordinary basis, and Loris and Kanjian Holdings to pay 50% of Ken's costs on an indemnity basis.
Whatever approach is adopted, Ken submits that any adverse cost order against Loris should be paid by Marianne, and that any adverse cost order against Kanjian Holdings should be paid by Phillip and Victor.
Ken submits that the costs should be determined globally to avoid the practical difficulties in any separate costs assessment given the proceedings were heard concurrently, various claims were abandoned throughout the course of the proceedings, and the parties experienced mixed success on their claims.
Ken submits that Loris and Kanjian Holdings should pay 95% of his costs across both proceedings on an ordinary basis because he experienced success on 60% of the overall issues, which he refers to as comprising the following: one of four issues in the Corporations proceedings (the challenge to Sonia's 2017 Revocation and Power of Attorney), two of three issues raised by Loris in the Equity proceedings (the Sahab A Class Share and Trustee Removal Claims), and each of the three issues that were abandoned in the Equity proceedings (Loris' claim for compensation under s 1317 of the Corporations Act for alleged breaches by Ken of directors' duties in relation to the Senses AFL, Loris' claim for equitable compensation for alleged breaches of Ken's fiduciary duties in respect of the Senses AFL, and Kanjian Holdings' Cross-Claim in relation to the Senses AFL). He then says that a further allowance of 35% should be made in his favour on three bases.
The first concerns the Senses AFL issues. Ken says that an extra allowance should be given because the abandonment of the Senses AFL claims by Loris and Kanjian Holdings came after they had been litigated, with the issues having consumed a significant amount of time during the trial and involved contested evidence, including expert evidence. He also submits that the claims turned on Loris' serious allegations of wrongdoing against Ken, including that Ken coerced and tricked Sonia into signing, which were knowingly false and calculated to cause significant harm to Ken and were acquiesced in by Kanjian Holdings and those who controlled it. He points to the 21 April transcript which contradicted Loris' affidavit evidence and Loris' negative views of Ken as expressed during the hearing. Ken argues that Loris' false allegations were "particularly pernicious" as they led to the appointment of the Receivers to Sahab Holdings at significant cost to the company.
Second, Ken submits that an allowance of costs in his favour is justified by reason of disentitling conduct of Loris, the siblings and Kanjian Holdings in relation to the Corporations proceedings. He submits that disentitling conduct on the part of a successful party may deprive them of costs where their conduct effectively invites litigation or is the cause of proceedings.
Ken contends that the Corporations proceedings were commenced as a result of the siblings creating distrust of him by his parents and division within the family by making misrepresentations about him to Loris and Sonia and their solicitors. At [14(a)]-[14(h)] of Ken's written submissions (KS), Ken points to findings in the judgment, such as about his sacking by Loris and Sonia having occurred as a result of the siblings' encouragement and the development of a relationship of influence, partial dependence, trust and confidence between Sonia and the siblings. Ken submits that had the siblings adhered to the mid-2017 arrangement, not interfered with Ken's management of Sahab Holdings and the Bondi property and not rejected his offer to conditionally release family documents, and had Marianne not removed funds from Sahab Holdings' Westpac account, there would have been no need for the Corporations proceedings. He also submits that the evidence demonstrates that he did everything in his power to try and avoid litigation.
As to Loris' conduct, Ken submits that he was induced to bring his ASFCC in the Corporations proceedings because Loris misled him to believe that Loris was being made to sign documents without a proper understanding of their effect and for an improper purpose. Ken's submissions (KS at [18(a)]-[18(d)]) refer to various findings made by the Court. He relies, in particular, on statements made by Loris as recorded in his file notes (which Ken says were accepted by the Court as reliable evidence) and his own evidence (which Ken says the Court preferred over Loris), to the effect that Loris did not understand what he had signed (in relation to the 27 August Resolution, the 18 April Resolution, the 11 May Authorities and Directions), and Loris' assertions that he was simply signing documents put before him and that he had not signed certain documents (as evidenced by the 21 April transcript). Ken submits that his belief that Loris was being made to sign documents by the siblings was further induced by Loris expressing that he did not want to commence proceedings on various occasions. Ken argues that, as his evidence and the evidence contained in his file notes have been accepted as reliable, Loris actively misled Ken and entrapped him into bringing the ASFCC, which he brought to protect Loris and Sonia, and would not have done so if he had been informed of the true position and Loris not been dishonest.
Third, Ken submits that an allowance is further justified due to his partial success in respect of the Bondi Estoppel Claim, relying on his success on the factual issue of whether his parents made a promise to him about the property in 2014. He argues that Loris' failure to admit the fact of that promise contributed to the length and costs of the trial.
In the alternative, and if the costs of the two proceedings are to be considered separately, Ken submits that there should be no order as to costs between him and Kanjian Holdings and the siblings in the Corporations proceedings as the Court would be justified in departing from the usual position because of Kanjian Holdings and the siblings' disentitling conduct as described at [28] above. In support of his position, Ken relies on Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; (2011) 288 ALR 385 (Tomanovic (No 2)) at [97]-[98] and Giunti v Cavallaro [2004] NSWCA 62 (Giunti v Cavallaro) at [21], [66] and [67]. Ken also submits that if a costs order is to be made against him in favour of Kanjian Holdings and the siblings in the Corporations proceedings, an indemnity costs order is not warranted as the allegations of dishonesty in his ASFCC were not hopeless or improper in light of the Court's findings regarding the siblings' alleged dishonest misrepresentations.
As between Ken and Loris, Ken contends that Loris should pay Ken's costs in the Corporation proceedings by reason of Loris' dishonest and misleading conduct (referred to at [29] above) which caused him to file the ASFCC. He submits that this exceptional costs order is appropriate having regard to principle of fairness and Loris' responsibility for the costs that were incurred, referring to Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] and Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [13].
As to the Equity proceedings, Ken submits that he should be paid 90% of his costs. This is based on Loris being liable for 40% of Ken's costs (for Ken's success on the Sahab A Class Share Claim and the Trustee Removal Claim and an allowance for half of the costs relating to the Bondi estoppel Claim, as set out at [30] above) and Loris and Kanjian Holdings jointly and severally liable for the remaining 50% of Ken's costs, with this proportion representing the costs of the abandoned Senses AFL claims. Ken also contends that he should receive the costs of the Senses AFL claims on an indemnity basis because their abandonment after being tested by affidavit evidence, cross-examination and oral argument amounted to a capitulation by Loris and Kanjian Holdings, referring to One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 (One.Tel). He also submits that indemnity costs are warranted because they arose from Loris' serious allegations against Ken (as referred to at [26] above), relying on Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; 65 ACSR 324 (Ingot Capital v Macquarie) at [24] and Liverpool City Council v Estephan [2009] NSWCA 161 (Liverpool v Estephan) at [95].
Ken also takes issue with Kanjian Holdings' submissions which suggest that Kanjian Holdings' Cross-Claim would have been decided against Ken if it had proceeded to trial and relies on r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).
Ken submits that Marianne should be liable for any costs order made against Loris as she funded Loris' claims and stood to benefit from his success in the proceedings, citing Knight v FP Special Assets Ltd (1992) 174 CLR 178 (Knight v FP Special Assets) at 192-3; [1992] HCA 28 and Bent v Gough (1992) 36 FCR 204. Were the Sahab A Class Share and Senses AFL claims decided in Loris' favour, Ken says Marianne, along with Phillip and Victor, would have obtained management and control of Sahab Holdings and the payment of damages by Ken to the company. He argues that Marianne benefits from Loris' success in the Bondi Estoppel Claim by standing to inherit an interest in the Bondi property through his and Sonia's wills.
Ken submits that Phillip and Victor should be liable for any costs order made against Kanjian Holdings in respect of the Senses AFL claims because they were authorised by the company to bring those claims and similarly had a commercial interest in their outcome, referring to Re Land and Property Trust Co plc [1991] 3 All ER 409, Oz B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128 and Yates Property Corporation Pty Ltd v Boland (No 2) [1997] FCA 760; 147 ALR 685.

Loris' submissions

Loris' primary position is that, as between him and Ken, there should be a global costs order across both proceedings. He says that no order as to costs should be made, with the intent that he and Ken each bear their own costs of the Corporations and Equity proceedings. In the alternative, Loris seeks the following: 1. Ken to pay Loris' costs of the Corporations proceedings; and 2. in relation to the Equity proceedings, Loris to pay 95% of Ken's costs of Loris' claims in the SFASC, Ken to pay Loris' costs of and incidental to the Bondi Estoppel Claim, but otherwise there be no order as to the costs of Ken's Cross-Claim.
Loris submits that no order as to costs should be made across both proceedings as between him and Ken because they have enjoyed broadly equal success, and any costs assessment dealing with the claims separately will be complex and expensive. He submits that costs should be apportioned on a relatively broad-brush basis and largely as a matter of impression without the need for achieving mathematical precision: Bartier Perry Pty Ltd v Paltos [2021] NSWCA 158 (Bartier Perry v Paltos) at [255].
If the Court were to make orders as to the costs of Ken and Loris' claims, Loris submits that, in relation to his Senses AFL claims: 1. no costs order should be made for the claims that were not prosecuted to conclusion as there was no relevant "event" on which r 42.1 of the UCPR operates, and the Court should be slow to order costs against a party abandoning a claim, referring to Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Nichols v NFS Agribusiness) at [6] and [8]; and 2. if an order is made against him on his Senses AFL claims, they should not be made on an indemnity basis as the Court did not find that he brought a claim which he knew should not have been brought and something more than the mere rejection of a claim alleging misconduct is required to justify an order for indemnity costs, relying on Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364; 81 ALR 397 at 400-1.
In respect of Ken's ASFCC in the Corporations proceedings, Loris contends that the Court should not depart from the starting point that costs follow the event in circumstances where Ken was entirely unsuccessful in that cross-claim and abandoned his claim for financial management orders in relation to Loris. He submits that the making of financial management orders in relation to Sonia should have no bearing on costs as those claims occupied little time at trial and Loris was not involved the relevant controversy.
Loris submits that Ken's alleged motive in bringing his ASFCC in the Corporations proceedings is also irrelevant, referring to Lend Lease GPT (Rouse Hill) Pty Ltd v Hills Shire Council (No 2) [2011] NSWLEC 26 (Lend Lease v Hills Shire Council (No 2)) at [32]. In any event, Loris says he was able to express his own views in respect of the documents impugned by the ASFCC and Ken persisted with the litigation knowing that Loris disputed his contentions. Loris also submits that Ken's submissions invite the Court to inappropriately reconsider disputed facts, particularly Ken's allegations of entrapment and dishonesty, on a costs application.
As to Loris' claims and Ken's Cross-Claim in the Equity proceedings, Loris accepts that he was largely unsuccessful, although he says that a modest allowance of about 5% should be made for his success in seeking Ken's production of documents by reason of him having acted as Loris' solicitor in light of the orders made by Lindsay J on 27 and 31 August 2018. He accepts that the Bondi Estoppel and A Class Share claims were discrete and severable issues but says that, in circumstances where Ken dealt with the A Class Share Claim in both his Defence and Cross-Claim, the Court should only make one order for the costs of that issue in Ken's favour to avoid double recovery. He also submits that no allowance in favour of Ken should be made for the Court's factual finding that a discussion to the effect of the 2014 Bondi conversation occurred.

Kanjian Holdings and the siblings' submissions

Kanjian Holdings and the siblings seek costs orders as between them and Ken in respect of each of the proceedings. They seek the following orders: 1. in relation to the Corporations proceedings, Ken to pay Kanjian Holdings and the siblings' costs on an indemnity basis or, alternatively, on an ordinary basis; and 2. in relation to the Equity proceedings, no order as to the costs of Kanjian Holdings' Cross-Claim, with the intent that each of Kanjian Holdings and Ken pay their own costs of that claim.
In relation to the Corporations proceedings, Kanjian Holdings and the siblings submit that Ken should be ordered to pay their costs of Ken's ASFCC as they were successful in defending the claims made except for the challenge to Sonia's 2017 Revocation and Power of Attorney, which was of little significance compared to the other claims in the ASFCC in light of the financial management orders made by Lindsay J in relation to Sonia's estate. They also submit that costs should be ordered against Ken on an indemnity basis by reason of his failure to make out the serious allegations of dishonesty, undue influence, duress and fraud that were raised in his ASFCC, relying on Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 (Colgate-Palmolive v Cussons) at 233-4, Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [44] and Ingot Capital v Macquarie at [24].
Kanjian Holdings and the siblings reject Ken's submission that he should not be liable for their costs because of the conduct referred to above (at [28]), contending that his submissions involve the Court re-examining its findings in the substantive proceeding and that the Court should not attempt to differentiate between the issues on which they were successful and those on which they failed: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]. They also submit that Ken's motives in commencing his ASFCC are irrelevant, citing Lend Lease v Hills Shire Council (No 2) at [32] and McCusker v Rutter [2010] NSWCA 318 (McCusker v Rutter) at [29].
As to the Equity proceedings, Kanjian Holdings and the siblings contend that no order as to costs is appropriate because Kanjian Holdings' Cross-Claim was not adjudicated on its merits due to events that transpired during the course of the proceedings rather than any lack of success on their part: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 (Lai Qin) at 624-5; [1997] HCA 6; Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 and Nichols v NFS Agribusiness at [25]-[29]. They contend that, but for the subject matter of the Cross-Claim having fallen away due to events transpiring before the conclusion of the hearing, it would have been decided, one way or another, against Ken.
The siblings reject Ken's submission that they should bear liability for any costs orders made against Loris and Kanjian Holdings. In relation to Marianne, they submit that the evidence does not unequivocally demonstrate that Marianne solely funded Loris' claims, Marianne's support for Loris is to be commended and not criticised, and that matter is not, of itself, sufficient to warrant such an order, relying on KSMC Holdings Pty Ltd t/as Hubba Bubba Childcare on Haig v Bowden (No 3) [2020] NSWCA 158 (Hubba Bubba Childcare) at [39]-[45] and [50] and Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 10) [2009] FCA 498 at [22]. They contend that Loris' claims cannot be said to have been unreasonable or improper, Marianne did not have an interest, including a financial interest, that was equal to or greater than that of Loris in those proceedings, and that Loris is not insolvent or a man of straw.
They also submit that there is no basis for such orders to be made against Philip and Victor, particularly when regard is had to the factors identified by Basten JA in FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 (FPM Constructions) at [210].

Legal principles relating to costs

The Court has a broad discretion as to costs under s 98 of the Civil Procedure Act 2005 (NSW) and the UCPR to determine by whom, to whom, to what extent and on what basis costs should be awarded. That discretion is unfettered but must be exercised judicially and have regard to the principle that the award of costs is compensatory in nature, not punitive: Latoudis v Casey (1990) 170 CLR 534 (Latoudis v Casey) at 543 (Mason CJ), 566-7 (McHugh J); [1990] HCA 59; Oshlack at [44] (Gaudron and Gummow JJ); Hubba Bubba Childcare at [39], citing Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 at [136] (McColl JA, Sackville AJA and Adamson J agreeing).
Ordinarily, costs will follow the event and be payable on an ordinary basis unless it appears to the Court that some other order should be made: UCPR, rr 42.1, 42.2.
The "event" usually refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39]; Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Doppstadt).
Where there is a mixed outcome in proceedings, the question of appointment to reflect those outcomes is a matter of discretion. Costs can be apportioned on a relatively broad-brush basis and largely as a matter of impression and evaluation without the need for achieving mathematical precision as such precision is illusory: Bartier Perry v Paltos at [255]-[256]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (James v Surf Road Nominees (No 2)) at [36].
Where there are multiple issues in a case, the Court will not generally attempt to differentiate between the issues on which a party has had success and those on which they have not, unless a particular issue or group of issues is clearly dominant and separable: Doppstadt at [17]-[18], citing Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338. Generally, a successful party will receive their costs of the whole proceedings without differentiation between the issues on which they failed and those on which they succeeded. However, where there are multiple issues in a proceeding, awarding costs of the whole proceeding without regard to the outcome of separate issues may cause hardship such that it is appropriate for the costs order to reflect the degree of success on distinct issues. The discretion to depart from the general position should, however, only be exercised in the most exceptional of circumstances: Tonna v Mendonca (No 2) [2020] NSWSC 306 at [169]-[172] and the cases cited therein.
The question of whether the ordinary rule that costs follow the event should be departed from should be approached having regard to the idea of fairness underlying the making of the costs orders. In Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [13], Hodgson JA (Beazley and McColl JJA agreeing) referred to his earlier comments in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] as follows: In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.
A successful party ought not be deprived of their costs or made to pay the costs of the other side, unless they are guilty of some sort of misconduct relating to or leading up to the circumstances in the litigation. The circumstances in which a successful party might be deprived of their costs include where their conduct has generated the complexity and prolongation of the proceedings and the consequence of extra costs, where their "lax" conduct invoked the litigation, or where they obtained relief which the unsuccessful party had already offered in settlement of the dispute: Tomanovic (No 2) at [97]-[98], citing Oshlack at [69]; Giunti v Cavallaro at [21].
That an unsuccessful party may have acted reasonably does not, on that account, justify depriving a successful party of their costs. Refusing to order costs against a party is not a decision to be made to reward that party for their "good" conduct. Generally, a successful defendant will not be made to pay the costs of the unsuccessful plaintiff: McCusker v Rutter at [29]; Lend Lease v Hills Shire Council (No 2) at [32].
While there is no fixed rule as to when an order for indemnity costs is warranted, the conduct of the party against whom such orders are sought must usually exhibit some special or unusual feature: Harrison v Schipp [2001] NSWCA 13 at [139]. The relevant conduct is that pertaining to the conduct of the proceedings, not that which is the subject of the substantive dispute: Re Indoor Climate Technologies Pty Ltd [2019] NSWSC 356 at [8]; Mead v Watson [2005] NSWCA 133 at [9].
Indemnity costs should only be ordered where the party's conduct is "plainly unreasonable", such as where there is some "relevant delinquency" on their part: James v Douglas [2016] NSWCA 178 at [63]; Ballard v Brookfield [2013] NSWCA 18 at [7]-[9]; Sydney City Council v Geftlick [2006] NSWCA 280 at [90]; Oshlack at [44] (Gaudron and Gummow JJ). The circumstances that might give rise to an indemnity costs order include the following: where a party, properly advised, should have known they had no chance of success; where unfounded allegations of fraud or improper conduct are made, such as where they have been made knowing them to be false; the undue prolongation of proceedings by groundless contentions; where there is particular evidence of misconduct that causes loss of time to the court or other parties; the commencement of proceedings for some ulterior motive; and the unreasonable rejection of an offer of compromise: Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 397 at 401; [1988] FCA 364; Liverpool v Estephan at [95]; Colgate-Palmolive v Cussons at 233-4.
Where proceedings are discontinued, the usual order is for the discontinuing party to pay the costs of the other party unless it appears to the Court that some other order should be made: UCPR, r 42.19.
Rule 42.19 does not give rise to a presumption that costs will be ordered against the discontinuing party. Rather, it provides a default position in relation to costs that is subject to the discretion of the Court, with the onus on the discontinuing party to establish that there is some sound positive ground or good reason for departing from the ordinary course whereby they would be required to pay the other party's costs of the proceedings: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [53]-[54].
Where there is a discontinuance or abandonment of claims and without a hearing or final determination on the merits, other considerations may be relevant, including whether the parties acted reasonably in commencing and defending the proceedings and whether their conduct continued to be reasonable until the litigation was settled or its further prosecution became futile: Freelancer International Pty Ltd v O'Kane [2019] NSWSC 159 at [70]-[71]; Nichols v NFS Agribusiness at [25]-[30]; Lai Qin at 624-5.
The principles set out in Lai Qin and Nichols v NFS Agribusiness recognise that the Court should not try a hypothetical action between the parties to determine who would have had success for the purposes of determining who should pay costs. However, in some circumstances, the Court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action or, where both parties have acted reasonably, be in a position to identify that one party was almost certain to have succeeded if the matter proceeded to a final hearing. If it appears that both parties have acted reasonably in commencing and defending the proceedings and continue to act reasonably, the proper exercise of the Court's discretion will usually mean that it will make no order as to costs.
Where the discontinuance or abandonment of claims for relief is, in truth, an effective surrender or capitulation, such as after the claims have been tested by the exchange of affidavits and submissions, in cross-examination or in argument during the trial, costs usually follow the event of their abandonment. However, where a claim is abandoned or discontinued because of some supervening event or settlement, that may result in the proper exercise of the Court's discretion being to make no order as to the costs of the proceedings: One.Tel at 553-5; Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 at [6]-[7]; Nichols v NFS Agribusiness at [29] (Payne JA).
The general position is that costs should only be ordered against a party to the proceedings. The exercise of the discretion to make an order against a non-party is to be approached with caution and has been described as "rare and exceptional", although "exceptional" means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense: Hubba Bubba Childcare at [40]-[45]; Knight v FP Special Assets at 192-3 (Mason CJ and Deane J); FPM Constructions at [214].
The circumstances in which a costs order may be justified against a non-party, or a party to proceedings against which a claim is not made, are not closed. The following criteria have been identified as relevant: 1. the non-party has some connection with the proceedings in which the costs order is sought and there is some causal connection between the non-party and the incurrence of the costs; 2. the party to the litigation is an insolvent person or "man of straw"; 3. the non-party has played an active part in the conduct of the litigation, such as a director of an applicant company who has had effective control; and 4. the non-party, or some person on whose behalf they are acting or by whom they have been appointed, has an interest in the subject of the litigation. See FPM Constructions at [210]; Knight v FP Special Assets at 192-3; Yates Property Corporation Pty Ltd v Boland (No 2) [1997] 147 ALR 685 at 694; Wentworth v Wentworth (1999) 46 NSWLR 300; [1999] NSWSC 317 at [26] (upheld on appeal in Wentworth v Wentworth (2001) 52 NSWLR 602; [2000] NSWCA 350).
Family ties may justify financial support of a party to the litigation by a non-party without the non-party, for that reason alone, becoming exposed to an adverse costs order in the event that the party fails, although family members are not necessarily immune from an adverse costs order. A family relationship is not a shield against a third party costs order if all the circumstances of the case justify such an order: Hubba Bubba at [45] and [50], citing Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 10) [2009] FCA 498.

Consideration and determination

While their interests were aligned, as outlined above, different claims were advanced by and against Loris, Sonia, Kanjian Holdings and the siblings vis-à-vis Ken. Loris and Sonia (until financial management orders were made) were also separately represented to Kanjian Holdings and the siblings, which is a relevant factor to take into account in assessing costs.
As a matter of principle and subject to any exceptional order, the costs orders to be made should reflect the costs referrable to the outcome of the respective party's claims in each proceeding, including the claims that have been abandoned. Accordingly, I start by first assessing the costs positions of each party, or group of parties in the case of Kanjian Holdings and the siblings, in each of the Corporations and Equity proceedings. Once those positions have been determined, I will then consider if it is appropriate to make a global costs order between particular parties or as applying to all of the active parties, and across the two proceedings.

Loris' costs

Applying the approach that costs follow the event, Ken would be ordered to pay Loris' costs of the Corporations proceedings. That order reflects that Ken was unsuccessful with all of his claims in the ASFCC that sought to set aside the impugned documents signed by Loris and the abandonment of his claim for financial management orders in relation to Loris.
The issue raised by Ken's submissions is whether Loris' conduct warrants departure from the ordinary rule that a successful defendant should be awarded their costs, such that Loris should be ordered to pay Ken's costs on an ordinary basis, or there should be no order as to costs as between them. In my view, it does not. This is primarily for the reason that I do not consider Ken's submissions to be entirely consistent with the findings in the principal judgment, nor are they findings that are appropriate to make on this costs application. In particular, I note the following.
First, while Ken's file notes were considered to be generally reliable records, the Court found that they needed to be treated with caution and were unlikely to accurately record the words spoken by Loris. That finding was based on a comparison of Ken's file note of the 21 April meeting and the transcript of the recording of that meeting: judgment at [536]-[537]. The Court had a preference for Ken's evidence where it conflicted with Loris' and was corroborated by Ken's file notes and the objective facts at the time, but it did not accept all of Ken's evidence and reject all of Loris'. Relevantly, the Court also did not make findings in respect of all disputed conversations and matters, but rather focussed on those most relevant to Ken's claims: judgment at [728].
Second, the Court made no finding of dishonesty on the part of Loris. It found that his evidence was given honestly based on his current recollections, and that his age and "mild patchy deficits in memory" were likely to have contributed to the unreliability and inconsistency of his evidence: judgment at [519], [527]. It is not the case that Loris' evidence was or should be rejected entirely.
Third, while finding that Loris was saying different things to Ken, the siblings and his lawyers, that conduct was found to likely be the result of Loris trying to keep the peace within the family: judgment at [759]. The fact that Loris was saying different things to Ken would also presumably have been apparent to Ken given the contents of the communications exchanged between Ken and the various lawyers, as well as the discussions he had with Loris. Further, no finding was made that Loris intended to or did in fact mislead Ken during those discussions.
Fourth, to my mind, Ken's submissions fail to have regard to findings made by the Court that provide context to and explanation for some of Loris' conduct. Those include, for example, the following findings: family relations fractured, particularly between Ken and the siblings, as a consequence of Ken's opposition to the offer to purchase the Northbridge properties (judgment at [738]); the engagement of independent lawyers for Loris did not objectively speak to undue influence in this case (judgment at [745]-[746]); Ken contributed to Loris' mistrust of him, such as by Ken's refusal to produce documents in response to various requests from lawyers acting for Loris, Sonia and Kanjian Holdings and Ken's decision not to pay the Bondi property and Sahab I rental income to Loris and Sonia's Macquarie bank account (judgment at [762]); Ken placed pressure and influence on Loris to sign documents (judgment at [832]); Ken's involvement in administering the Metropole Trust as a director of Sahab Holdings caused friction within the family (judgment at [1048]); and there was some justification for the view that Ken was too controlling and lacked transparency (judgment at [1050]).
Based on the above, I am not persuaded by Ken's submission that the Court's acceptance of his evidence and file notes as generally reliable means that it should now find that Loris actively misled and entrapped Ken into bringing the ASFCC, such as by failing to tell Ken that he had willingly appointed the siblings as directors or about the making and authorisation of the 18 April Resolution. I also accept Loris' submission that much of what Ken asserts in support of a costs order in his favour is seemingly an attempt to re-agitate the merits and have the Court reconsider and make findings on disputed facts and propositions.
For example, Ken's submissions raise the interpretation of what was said by Loris to Ken about the 27 August Resolution and the content and impact of the discussions about Loris' dealings with lawyers and the legal proceedings at the 21 April meeting, which are matters about which the Court has already made findings: see judgment at [609]-[612], [768]-[769], [832]-[836]. That Ken's file note and evidence recorded his impression of Loris as being "horrified" and saying that he would not have signed the letter if he knew it was going to give the siblings full control of Kanjian Holdings does not, in my view, necessarily lead to the conclusion that Loris was subjected to duress or tricked into signing the 27 August Resolution, as Ken's submissions assert: KS at [19]-[21].
As to Ken's submission that Loris did not disabuse Ken of his belief that the siblings' appointments were irregular despite numerous face-to-face meetings with Loris about family issues between 30 August 2017 and 31 August 2018 (the date on which Loris' Defence to the ASFCC was filed), leaving to one side whether such a failure was "dishonest" or misleading on the part of Loris, it seems to me that Loris' position was made plain to Ken when Loris filed his Defence to Ken's ASFCC which denied Ken's claims that he lacked capacity and had been induced to sign the impugned documents by reason of undue influence, dishonesty or unconscionable conduct on the part of the siblings. Even if I were to accept that Ken was induced to commence his cross-claim by Loris' "dissimulation" on the issue (which I do not), Ken chose to continue to press his claims after Loris' defence was filed.
As to the submission that Ken brought the proceedings to protect Loris and Sonia, Ken's motive and "good conduct" are not relevant considerations (Oshlack at [96] (Gaudron and Gummow JJ), [70], [80] (McHugh J), [134] (Kirby J)). Irrespective of whether Ken thought he was doing the right thing to protect Loris, Ken was not expressly encouraged or asked by Loris to take action on his behalf. Ken was on notice that Loris wanted to avoid litigation if possible and denied that he had been subjected to undue influence and unconscionable conduct. Also relevant is the finding that there were aspects of Ken's evidence that did not support his position that he was not impacted by any self-interest but was, and continued to be, concerned that the siblings sought to displace Ken's role in the family and that Loris and Sonia were being used to "attack" Ken: judgment at [532].
The position here is also very different to that in a probate case where the costs of an unsuccessful undue influence allegation in relation to a deceased's will might not be borne by the party who pleaded the claim if substantial grounds for the allegations are shown: Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562 at [36]-[37], citing Kenny v Wilson (1911) 11 SR (NSW) 460. In this case, not only were the persons whose conduct was in question (namely the siblings) alive, but the person allegedly the subject of the impugned conduct (namely Loris) was also alive, competent, and took issue with the claims advanced against and about him. Relevantly, Ken abandoned the allegation that Loris lacked capacity in the usual sense and did not press for relief by way of financial management orders against Loris.
For these reasons, I am not persuaded that Loris' conduct justifies the exceptional course of depriving him of an order for the costs he incurred in successfully defending the Ken's claims in what was significant contested litigation. It follows that, in assessing the final costs orders to be made, I consider that Ken should pay Loris' costs of the claims made against Loris in the ASFCC.

Kanjian Holdings and the siblings' costs

Ken submits that the Court should depart from the usual rule and make no order as to costs against him in favour of Kanjian Holdings and the siblings because of what he refers to as the siblings' disentitling conduct in fomenting division and distrust in the family, which he says unnecessarily caused the commencement of proceedings and precipitated Ken's ASFCC in response. As was put by Ken in his written submissions, if the siblings had not "white-anted Ken in the eyes of [Loris and Sonia]", they would have had no animosity towards or distrust of Ken, and the Corporations proceedings would not have been commenced.
I accept there was conduct on the part of some or all of the siblings that led to tensions and a break in what had been close and trusting family relations for many years, growing mistrust of Ken, and a change in Loris and Sonia's view of Ken. As Ken's submissions identify, some of the findings in the principal judgment were also to the effect that Marianne and Philip had provided false information to Mr Rumore and had misrepresented matters to Loris and Sonia concerning Ken, money, the family assets and family trusts that led to Loris and Sonia's declining trust in Ken.
That said, the Court also made the findings referred to at [74] above, as well as a finding that it was difficult to see Ken's justification in refusing to produce company and trust-related documents in response to requests from lawyers, including documents relating to Kanjian Holdings (judgment at [1049]).
The above matters highlight the complexity and nuance involved in the family relationships and that various aspects of conduct on the part of the siblings and Ken led to the Corporations proceedings, such that the claims in the Corporations proceedings could not be said to have been solely invited or brought about by the siblings' conduct. This is particularly as the proceedings were initiated by Kanjian Holdings to obtain access to company documents from Ken who held them as the company's solicitor and not as a director. Ken's claims in his ASFCC also extended beyond a challenge to Philip and Victor's appointment as Kanjian Holdings' directors to raise serious allegations of undue influence, unconscionable conduct and dishonesty on the part of the siblings in respect of a range of documents, some of which were unrelated to Kanjian Holdings.
As to Ken's submission that his conduct leading up to the commencement of the Corporations proceedings was directed to protecting the family assets from improper use and preventing changes to trust structures in a manner that may exclude him, those matters go more to Ken's motivation in making his claims, which are not of significance to the Court's exercise of its discretion on costs.
Having regard to the above, I do not accept Ken's submission that an exceptional costs order should be made that would result in Kanjian Holdings and the siblings not recovering any costs they incurred in successfully defending Ken's ASFCC.
I also do not accept Kanjian Holdings and the siblings' submission that this is a case where an order for indemnity costs in their favour is justified. Although Ken failed on his discrete dishonesty claim, findings were made to the effect that some of the siblings disseminated false and misleading information about Ken, which were taken into account on the undue influence and unconscionable conduct aspects of his claims. In view of Ken's success on the challenge to Sonia's 2017 Revocation and Power of Attorney and other findings that were made, such as that Loris sometimes succumbed to the influence and wishes of Sonia and the siblings and signed documents under pressure from them (judgment at [756]-[758]), Ken's claims in the Corporations proceedings could not, in my view, be described as having no chance of success. Nor would I characterise his conduct in prosecuting the claims as plainly unreasonable or delinquent.
It follows that I do not consider that an order otherwise than in accordance with the usual approach that costs follow the event should be made as between Ken, Kanjian Holdings and the siblings in relation to the Corporations proceedings. Applying the ordinary rule would mean that Kanjian Holdings and the siblings should have a costs order in their favour in relation to Ken's ASFCC, subject to any allowance for Ken's success on his challenge to Sonia's 2017 Revocation and Power of Attorney. In my view, some allowance should be made in favour of Ken to recognise that success. That aspect of Ken's claims involved evidence and submissions by the siblings on discrete and separable issues to the other claims advanced by Ken, although I accept that the outcome is of less practical significance than the other claims made.
Kanjian Holdings and the siblings did not advance an amount to be apportioned in respect of the costs relating to the challenge to Sonia's 2017 Revocation and Power of Attorney. Ken submissions, which refer to having succeeded on one of four claims in the Corporations proceedings (KS at [55]), suggest that he would contend for an allocation based on success on one of four issues. To my mind, that allocation is too high as my impression is that the evidence, submissions and hearing time in relation to Sonia's 2017 Revocation and Power of Attorney was less extensive and occupied less time than 25% of the total spent on the claims in the ASFCC. Adopting a broad-brush approach, an allocation of 15% is more appropriate to reflect Ken's success on that claim, with the result that I consider that Ken should pay 85% of Kanjian Holdings and the siblings' costs of the ASFCC.

Loris' SFASC and Ken's Cross-Claim

It is common ground between Loris and Ken that the claims on which Loris and Ken had success in the Equity proceedings represent separate events and costs should be apportioned on that basis.
The areas of disagreement relate to Ken's contention that he should receive an allowance of 50% in respect of the Bondi Estoppel Claim by reason of his success on the factual issue of whether Loris and Sonia had made a promise or representation to him about the property in 2014, Ken's claim for costs of the abandoned Senses AFL claims on an indemnity basis, and Loris' claim for some allowance to reflect that Ken produced most of the documents sought in his Summons filed on 22 August 2018.
As to the Bondi Estoppel Claim, I accept that a separable issue can relate to a disputed question of fact: James v Surf Road Nominees (No 2) at [34]. However, the factual issue on which Ken had success did not, to my impression, occupy a significant amount of time. Nor did it unfairly or unnecessarily increase the costs of the evidence, submissions and argument, particularly when compared to the other factual and legal issues in this case.
Ken brought the Bondi Estoppel Claim and had to establish a number of matters in order to succeed on his claim to an interest in the Bondi property. That he succeeded on a foundational factual aspect and may have acted reasonably in commencing and pursuing the claim does not, in my view, warrant depriving Loris of his costs when the practical outcome was that he successfully defended Ken's claim to an interest in the Bondi property. As Loris' submissions observed, the discretion to apportion costs to different issues is one that has been said should be exercised only in the most exceptional circumstances: see, for example, Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 at 220. In my view, this is not an exceptional case.
I am also unpersuaded by Ken's submissions that he should be awarded costs in relation to the Senses AFL claims on the basis that Loris abandoned two of the Senses AFL claims or that the costs associated with those claims should be awarded to Ken on an indemnity basis.
In this case, Loris' claims for pecuniary relief by way of statutory compensation under s 1317H of the Corporations Act and equitable compensation in relation to the Senses AFL were abandoned after judgment was reserved in the context of an intervening event, namely the Senses AFL having been brought to an end. This intervening event made Loris' claim for compensation futile given it was based on the loss of opportunity to sell the Northbridge properties on terms that would have generated more funds than under the Senses AFL. It also meant that Loris' concerns about what he claimed to be the detrimental impact of the long-term lease had been ameliorated. In that context, it seems to me that Loris' late abandonment of his claims for pecuniary relief might not be characterised as a capitulation in the sense that, after the testing of evidence, he recognised that the claims were otherwise doomed to fail.
In any event, Loris did not abandon his Senses AFL claims entirely. Most of Loris' allegations in support of his claims for pecuniary relief were relied on as part of his Trustee Removal Claim: judgment at [929]. To that extent, much of the significant time taken during the trial, the submissions and the evidence served by Loris and Ken relating to the Senses AFL, including the expert evidence, were not abandoned but were relied on and taken into account as part of the final determination of Loris' Trustee Removal Claim. It follows, in my view, that Ken should recover the costs of the Senses AFL claims as part of his successful defence of the Trustee Removal Claim, rather than as costs occasioned by two separate abandoned claims which are weighted equally relative to the other claims on which Ken asserts he did (and did not) succeed in these proceedings.
As to Ken's claim for indemnity costs, this is said to be warranted primarily because Loris' Senses AFL claims involved serious allegations of wrongdoing on the part of Ken, including the allegation that was not pressed at the hearing that Ken had coerced and tricked Sonia into signing the Senses AFL, and Loris' affidavit evidence dated 18 February 2019 involved knowingly false evidence calculated to cause Ken harm and was particularly pernicious because it led to the appointment of the Receivers to Sahab Holdings at a cost to the company.
I have already referred to the Court's findings regarding Loris' evidence at [72]-[73] above, which relevantly did not include any finding that Loris knowingly gave false evidence or that he gave evidence that was calculated to cause harm to Ken. The Court noted and took into account the inconsistencies in Loris' evidence about what he and Sonia were told about the Senses AFL by Ken: judgment at [934]-[935], [946]-[948], [956], [988]. Those matters led to the Court concluding that Loris' evidence on this issue was unreliable, a preference for Ken's evidence and, ultimately, findings that did not support Loris' allegation that Ken had refused Sonia's request to review the Senses AFL before signing and did not explain to her what she was signing: judgment at [538], [946]-[960], [987]-[990]. Further, I do not consider it appropriate on this costs application to revisit and make findings about the evidence that may have been relied on for and the circumstances that led to the appointment of the Receivers to Sahab Holdings.
As to the allegation that Ken tricked or coerced Sonia into signing the Senses AFL, which was not pressed at the hearing after completion of the evidence, my impression is that that allegation did not prolong the hearing time or increase the costs associated with Loris' Senses AFL claims. It was one of many allegations made in support of the contentions that Ken acted without authority or Sonia's informed consent and breached his director's and fiduciary duties by entering into the Senses AFL.
While there were significant discrepancies in Loris' evidence and the Court found that Loris' Senses AFL claims failed, I am also not persuaded that those claims were so unreasonably made or unfounded that indemnity costs should be awarded in favour of Ken. This is in the context where Ken asked Sonia to sign the Senses AFL on an occasion when she was tired and her head was hurting and was aware that Sonia's cognitive state was in decline, which I considered might raise questions about Ken's conduct: judgment at [995]. There was also evidence from Loris' experts to the effect that the Senses AFL (or a long-term lease on similar terms) would likely result in an undercapitalisation of the Northbridge properties and a higher potential value could be achieved from a different type of development: judgment at [1013]-[1016].
I accept that Loris' Senses AFL claims raised serious allegations of wrongdoing on the part of Ken which did not succeed, and aspects of his claims were abandoned at or after the hearing. But, the same can be said about Ken's claims and submissions in relation to the Corporations proceedings. Ken raised serious allegations of wrongdoing on the part of the siblings, abandoned the claim for financial management orders, did not press the claim that Loris lacked capacity in the sense that Loris was mentally or cognitively incapable at the time he signed the impugned documents, and now questions Loris' honesty. Considered in a broad-brush impressionist fashion, it seems to me that, as between Loris and Ken, a fair approach would be to let the costs of their abandoned claims lie where they fall.
I am not persuaded by Loris' submission that an allocation of 5% of costs should be made in his favour in relation to his claim in the Equity proceedings for the production of documents. While not accepting Ken's submission that he was ready, willing and able to release documents to Loris and Sonia subject to reasonable conditions at all material times (judgment at [1049]), the terms on which the documents were produced (as referred to at [15] above) were appropriate given that Ken's claims put in issue Sonia and Loris' capacity to manage their affairs at that time. Ken's position has also been vindicated, in part, by the subsequent financial management orders made in relation to Sonia, and the costs incurred by Loris on this aspect of his claim could also be expected to be small relative to the costs incurred in pursuit of his other claims.
As to the Sahab A Class Share Claim, which was the subject of Loris' SFASC and Ken's Cross-Claim, as a matter of principle, I accept Loris' submission that the appropriate approach is that Ken should only receive one order as to costs in respect of that claim to avoid double recovery on any assessment. I should record that Ken's submission did not take issue with that approach, although he contended for a different overall costs allocation.
Based on the above, in assessing the final costs orders to be made, I consider that, in respect of the Equity proceedings, Loris should pay 100% of Ken's costs of Loris' claims, Ken should pay Loris' costs in relation to the Bondi Estoppel Claim, and otherwise, there should be no order as to the costs of Ken's Cross-Claim, with all costs to be payable on an ordinary basis.

Kanjian Holdings' Cross-Claim

Based on the matters known to the Court, in my view, a different approach to the costs of Kanjian Holdings' discontinued Cross-Claim to that of Loris' Senses AFL claims is warranted.
Unlike the position in respect of Loris' Senses AFL claims which were relied on in support of his Trustee Removal Claim, the entirety of Kanjian Holdings' Cross-Claim was discontinued. As a consequence, the default position is that Kanjian Holdings should pay Ken's costs: UCPR, r 42.19.
While it is true that the discontinuance occurred after the claims had been the subject of affidavits, cross-examination and submissions in chief, Kanjian Holdings did not address the substance of its claims during final oral submissions. This was in the context where the prospect of the Senses AFL coming to an end had been raised on the first day of final submissions. On that occasion, Kanjian Holdings' Counsel submitted that its claims for loss and damage for Ken's alleged breaches of fiduciary duties and negligence would be "hypothetical" if the Senses AFL were to be terminated and requested the Court defer adjudicating on the issues raised by its Cross-Claim until the position regarding the Senses AFL and whether it would come into effect on a long-term basis was known.
As events transpired, the Senses AFL was brought to an end, Kanjian Holdings' Cross-Claim was discontinued by consent, and the issues raised by that claim were not adjudicated upon or determined by the Court.
Although Kanjian Holdings' Cross-Claim included a claim that might be said not to have fallen away when the Senses AFL did, namely its claim that Ken had breached his fiduciary duties to Kanjian Holdings by charging fees for the Senses AFL and obtaining unauthorised benefits, that aspect of Kanjian Holdings' claim was not significant in terms of the amount claimed (just over $22,000). It was also apparent from the way in which the case was put in chief that Kanjian Holdings was pursuing the Cross-Claim to recover a loss of capital value and future income from the Northbridge Drycleaner by reason of the Senses AFL, which loss and damage was predicated on the Senses AFL coming into and remaining in effect.
Having regard to the above, I accept Kanjian Holdings' submission that it discontinued its Cross-Claim because of a supervening event during the course of the proceedings which rendered its claim for loss and damage otiose, namely the termination of the Senses AFL, rather than a capitulation or surrender in recognition of the hopelessness of its case.
I should record that, to the extent Kanjian Holdings' submission that the Cross-Claim would have been decided "one way or another" against Ken is intended to convey that Kanjian Holdings would have succeeded on its Cross-Claim against Ken, I reject that submission. The Court's findings in relation to Loris' Senses AFL claims suggest that Kanjian Holdings might have had difficulty succeeding with its claims, especially in relation to the claim that Ken breached his fiduciary duties to Kanjian Holdings as he failed in "obtaining the fully informed consent of Kanjian Family Trust to [act] for it as its solicitor in relation to [the Senses AFL]".
That said, Kanjian Holdings' Cross-Claim raised other allegations of a different nature to those raised by Loris' Senses AFL claims, such as that Ken breached his fiduciary duties owed to Kanjian Holdings by reason of his alleged position of actual or potential conflict as between the Kanjian Family Trust and the Metropole Trust. The interests of those trusts were said to be in conflict because of factors such as the unequal contributions in respect of the Northbridge Drycleaner and the Northbridge Village to any joint development, the unequal entitlement to income, and the Vasir Superannuation Fund being in a pension phase. Those issues, and Kanjian Holdings' claim for loss (which was also of a different nature to that claimed by Loris), were not adjudicated upon in the principal judgment. In my view, it is not appropriate to do so on this costs application. I also do not consider it open to conclude that Ken would have "almost certainly" succeeded in defending all of the allegations made against him.
Nor do I consider that there was a marked difference in the reasonableness of the actions taken by Kanjian Holdings and Ken in respect of Kanjian Holdings' Cross-Claim such that one party should be rewarded and the other should suffer a detriment in the form of a costs order against them: Nichols v NFC at [33]. The allegations made by Kanjian Holdings could not be described as frivolous or lacking any foundation and it did not act unreasonably in commencing or conducting its case concerning the Cross-Claim.
There is another matter which, while not determinative, is relevant to the Court's consideration of this issue, which is that neither Kanjian Holdings nor Ken filed expert evidence in relation to Kanjian Holdings' Cross-Claim. Kanjian Holdings relied on Loris' expert evidence, particularly that of Mr Brady, and my impression is that the bulk of Ken's evidence and submissions relating to the Senses AFL issues were directed to Loris' Senses AFL claims.
Weighing up the above and the submissions of the parties, I have concluded that the proper exercise of the Court's discretion is to order otherwise than in accordance with the usual rule that a discontinuing party pays the other party's costs and make no order as to the costs of Kanjian Holdings' Cross-Claim.

Global orders and conclusion

Loris and Ken both submit that a global costs order is appropriate in this case, recognising that it would be difficult for the parties and any costs assessor to disentangle or unravel attendances between the two proceedings and that such an order would be more efficient and cost effective in the long run. I agree.
Having regard to my findings at [80] and [104] above, I have concluded that, as between Loris and Ken, the appropriate order is that they should each bear their own costs of the claims they made (and defended) in the Corporations and Equity proceedings, as Loris submits. To my mind, in broad terms, there was an overall draw as between them.
Loris and Ken each failed on significant claims, had some success, and abandoned claims during the hearing. Loris successfully defended all of the claims brought against him by Ken in the Corporations proceedings and I consider that he should be allocated 100% of his costs on an ordinary basis for that success. In my view, the claims involving Sonia do not warrant any reduction as Loris was not a necessary party to the dispute regarding Sonia's 2017 Revocation and Power of Attorney and played no role of substance in its determination. Loris' failures on his Trustee Removal Claim (which included the Senses AFL issues) and the Sahab A Class Share Claim warrant Loris paying Ken's costs of Loris' claims in the Equity proceedings on an ordinary basis. When regard is had to Ken's failure on the Bondi Estoppel Claim and, the time and evidence (including expert evidence) directed to the Senses AFL issues, my overall impression is that, across both proceedings, about 50% of the time and evidence was directed to the claims in respect of which Loris succeeded and 50% to those on which Ken did.
As this global approach means that no costs are to be paid by Loris, the issue raised by Ken's submissions as to whether Marianne should bear the costs liability of Loris does not arise. However, I should record that I was not persuaded by Ken's submission that non-party orders of the nature he proposed were appropriate in this case in relation to Marianne, primarily for the reasons advanced in Kanjian Holdings and the siblings' submissions, as referred to at [47] above.
The position is different in relation to costs as between Ken, Kanjian Holdings and the siblings across the two proceedings. The siblings were only parties to the Corporations proceedings, as cross-defendants to the ASFCC, and there were different outcomes on costs as between Ken and Kanjian Holdings in the two proceedings. Given those matters, I have concluded that the appropriate result is to make separate costs orders in each of the Corporations and Equity proceedings in relation to those parties rather than adopting a global approach to their costs across both proceedings.
Cognisant of trying to avoid any unnecessary complexity in any costs assessment process and determining costs in a broad brush and impressionistic way, I will order Ken to pay 85% of Kanjian Holdings and the siblings' costs of his ASFCC on an ordinary basis (as per [89] above) but will make no order as to costs in relation to Kanjian Holdings' Statement of Claim and let costs in relation to that aspect of the Corporations proceedings lie where they fall. In addition to the matters referred to at [102] above, Kanjian Holdings' submissions did not specifically address the costs of its claim for Ken to produce the documents sought.
For the reasons set out at [105]-[115], there will be no order as to costs in relation to Kanjian Holdings' Cross-Claim. It follows that the issue of whether Kanjian Holdings' costs liability should be borne by Philip and Victor also does not arise.

Orders

For these and the above reasons, I make the following orders: In proceeding 2018/150768: 1. Declare that, pursuant to s 36(3) of the Powers of Attorney Act 2003 (NSW), the enduring power of attorney granted by the Sixth Cross-Defendant to the Second Cross-Defendant on 10 October 2017 is invalid. 2. Declare that, pursuant to s 36(3A) of the Powers of Attorney Act 2003 (NSW), the enduring power of attorney granted by the Sixth Cross-Defendant to the Cross-Claimant, the Third Cross-Defendant and the Fourth Cross-Defendant jointly on 22 May 2014 remains valid. 3. No order as to costs as between the Cross-Claimant and the Fifth Cross-Defendant in relation to the First Cross-Claim Amended Statement of Cross-Claim filed on 7 August 2018 (Cross-Claim), with the intent that each party is to pay their own costs of the Cross-Claim. 4. The Cross-Claimant to pay 85% of the costs of the First, Second, Third and Fourth Cross-Defendants of the Cross-Claim. 5. The Cross-Claim otherwise be dismissed. 6. No order as to costs of the Statement of Claim filed on 12 June 2018, which is otherwise dismissed. In proceeding 2018/258352: 1. Declare that the Plaintiff is estopped from requiring the First Defendant to transfer legal title to the A Class Share in the Third Defendant to the Plaintiff. 2. No order as to costs as between the Plaintiff and the First Defendant in relation to the Second Further Amended Statement of Claim filed on 28 June 2019 (Amended Statement of Claim) and the First Cross-Claim Statement of Cross-Claim filed on 30 November 2018 (First Cross-Claim), with the intent that each party is to pay their own costs of and incidental to the proceeding. 3. The Amended Statement of Claim and First Cross-Claim otherwise be dismissed. 4. No order as to costs of the Second Cross-Claim Statement of Cross-Claim filed on 7 March 2019 and discontinued on 21 August 2020 (Second Cross-Claim), with the intent that the parties to the Second Cross-Claim are to bear their own costs.

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: 29 October 2021

Trustee and Guardian Act 2009(NSW)

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