KARA KAR HOLDINGS PTY LTD & ORS v KNUDSEN & ANOR

KARA KAR HOLDINGS PTY LTD & ORS v KNUDSEN & ANOR - [2002] NSWCA 37 - NSWCA 2002 case summary — Zoe

[22]

10.2.2 exercise that discretion in place of the trustee, and if so, in what manner? 10 AUGUST 1999 UNDERTAKINGS We, Niels Knudsen, Suchindra Knudsen, William Yardy, Jennifer Yardy and Kara Kar Holdings Pty Ltd, by our duly appointed solicitors hereby severally undertake to the Court, subject to the Court's power to relieve any of us from any part of these undertakings, and without prejudice to our rights of appeal, as follows: Defendants undertakings 1. If the question numbered 2 in Annexure A is answered "Yes" the defendants will consent to judgment for the first plaintiff in the sum of $57,099 (being the sum of $66,112 less the sum of $9,013 already received by way of withdrawal benefit) and for the second plaintiff in the sum of $26,741 (being the sum of $30,336 less the sum $3,595 already received by way of withdrawal benefit) together with interest on each judgment at the rates and during such periods as are agreed between the parties, or in default of agreement, as are determined by the Court. 2. If the question numbered 4 in Annexure A is answered "Yes" the first defendant will consent to judgment for the plaintiffs in such sums as are decided by the Court in answer to question 3 (the first and second plaintiffs giving credit for the sums of $9,013 and $3,595 received by them respectively as withdrawal benefits) together with interest on each judgment at the rates and during such periods as are agreed between the parties, or in default of agreement, as are determined by the Court. 3. If the question numbered 6 in Annexure A is answered "Yes" the first defendant will consent to judgment for the first plaintiff in the sum of $57,099 (being the sum of $66,112 less the sum of $9,013 already received by way of withdrawal benefit) and for the second plaintiff in the sum of $26,741 (being the sum of $30,336 less the sum $3,595 already received by way of withdrawal benefit) together with interest on each judgment at the rates and during such periods as are agreed between the parties, or in default of agreement, as is determined by the Court. 4. If the question numbered 7.1 in Annexure A is answered "Yes" the first defendant will thereupon take all necessary and appropriate steps to exercise the discretion referred to in question 7.1 in accordance with law and notify the plaintiffs in writing of its decision within 28 days (or such longer periods as is agreed between the parties or permitted by the Court). 5. If the question numbered 7.2 in Annexure A is answered "Yes" the defendants will within 28 days (or such longer period as is agreed between the parties or permitted by the Court) do all things necessary to comply with and carry into effect the Court's exercise of the trustee's discretion.

[26]

11 AUGUST 1999 9 In light of his conclusions and pursuant to his understanding of the effect of these undertakings, Austin J made final orders on 19 October 2000. They were to the following effect: 1. Order pursuant to Part 31, rule 1(a) that the following questions be decided separately from any other question in the proceedings: [The 10 questions were set out] 2. The Court answers the questions: Question 1: Yes Question 2: Yes Questions 3, 4, 5, 6 and 7: These questions do not arise. 3. Judgment for the first plaintiff in the sum of $57,099 together with interest in the sum of $54,044.11. 4. Judgment for the second plaintiff in the sum of $26,741 together with interest in the sum of $22,092.76. 5. Order that the defendants pay the plaintiff's costs of the first hearing, the appeal and the proceedings in accordance with the reasons for judgment dated 9 October 2000 and 19 October 2000. 10 His Honour's reasons are to be found in three judgments which had to be located and which it became necessary to examine in detail (Knudsen v Kara Kar [2000] NSWSC 715, Knudsen v Kara Kar (No 2) [2000] NSWSC 943 (delivered 9 October 2000) and Knudsen & Anor v Kara Kar Holdings Pty Ltd & 2 Ors, Ex tempore judgment, revised 25 October 2000. 11 The latter two sets of reasons explain in detail the bases for special costs orders (see esp [2000] NSWSC 943 at [23]-[66]). In summary Austin J proceeded in this manner: (i) the defendants were ordered to pay the plaintiff's costs of the rehearing, essentially because the defendants contested only the question of proper construction of the trust instrument and it was appropriate that costs follow the event ([23]-[25]); (ii) the costs of the first appeal were not addressed by Austin J because the Court of Appeal had ordered that they should be costs in the rehearing. Austin J construed that order as meaning that he had no discretion independent of his discretion a propos the costs of the rehearing itself. He added (at [35]): However, if there were any discretion for me to exercise, I would order that the plaintiffs' costs of the appeal, like their costs of the rehearing, should be paid by the defendants. Young J decided in favour of the plaintiffs in 1996. The defendants were able to forestall the implementation of his Honour's decision because they had raised a point that his Honour had not considered. But the point proved to be one of no substance. It is fair that they should pay the costs of the entire episode that they initiated by their appeal.

[31]

(ii) the plaintiffs' entitlement was restricted to 80% of their costs with respect to four specified occasions. 22 The appellants, having now succeeded on appeal, contend that the respondents should pay effectively the whole of their costs. For convenience I repeat par 6 of their draft Short Minutes. 6. Subject to any existing orders for costs, the respondents to pay the appellants' costs in the Court below, including: (a) the costs of the initial trial before Young J; (b) the costs of the hearing before Master Macready; (c) the costs of the application for leave to appeal and for an extension of time within which to appeal; (d) the costs of the first appeal; and (e) the costs of the re-hearing before Austin J. 23 In my view (and subject to one qualification) the appellants are correct in their primary submission that costs should generally follow the event. The qualification is that the costs orders should recognise that the early phase of the litigation brought about the result that the $115,000 payment to Mr Yardy was held to be unauthorised. This breach of trust was found by Young J in 1994 and its impact was quantified by Master Macready in 1996 (see [2000] NSWSC 715 at [2]-[3]). Looking back through the tangled mists of time, basing myself on the limited materials put before us in the recent submissions, and concerned to avoid complex costs assessment, I would make no order as to the costs before Young J and award the plaintiffs the costs of the inquiry before the Master. But once the impact of the $115,000 was thereby sorted out, the contest became one in which the plaintiffs substantially failed in the upshot and they should pay the costs of the balance of the proceedings (including the costs of the first appeal which this Court had earlier made the costs of the rehearing). 24 Accordingly, the following orders should be made: 1. The appeal is allowed. 2. The orders of Austin J made on 9 and 19 October 2000 are set aside. 3. Judgment for the defendants on the Statement of Claim filed 28 August 1997. 4. Appellants are to pay the respondents' costs of the Motion dismissed on 21 June 2001. 5. Respondents are to pay the appellants' costs of the Appeal, excluding the appellants' costs of the first set of written submissions filed on 25 May 2001. 6. Subject to any existing orders for costs: (A) the appellants are to pay the costs of the inquiry before the Master; (B) the respondents are to pay the appellants' costs of and relating to the first appeal to this Court, the rehearing before Austin J and the current appeal (having certificates under the Suitors' Fund Act if qualified) (C) no order as to the costs of the proceedings before Young J. 25 STEIN JA: I agree with Mason P. 26 IPP AJA: I agree with Mason P. *****************

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