Knudsen v Kara Kar

Supreme Court of NSW|2000-09-08|Before: Austin J, Young J

Background 2 As I said in my reasons for judgment, the proceedings have a tangled history. The first substantial hearing was before Young J, who delivered his reasons for judgment on 13 April 1994. He found for the plaintiffs, holding that the first defendant had committed breaches of trust, and he directed an inquiry before the Master. Master Macready dealt with various aspects of the inquiry in reasons for judgment delivered on 1 February and 22 March 1996. The matter then returned to Young J. In his further reasons for judgment delivered on 4 September 1996, Young J found that the plaintiffs were entitled, as beneficiaries of the Kara Kar Employees Pension Fund, to be paid the sums awarded by the Master. His Honour found that it was too late for the defendants to raise the question whether the trustee had ever exercised its discretion. The defendants appealed to the Court of Appeal, who handed down their reasons for judgment on 27 March 1997. The Court found that the trial before Young J had miscarried, principally because the defendants had in fact taken the point in the first hearing that the trustee had not exercised its discretion to make a distribution, and his Honour had not properly considered it. 3 The case was re-heard before me on 10, 11 and 12 August 1999. In order to permit the Court to concentrate on the matters truly in dispute between the parties, and to avoid the need to re-determine matters that were no longer in dispute, the parties formulated a set of questions for separate determination during the course of the hearing, and gave undertakings contingent on the answers to those questions. Although I did not make any order under Part 31 of the Supreme Court Rules at the hearing, for the reasons given at paragraph 113 of my reasons for judgment of 21 July 2000, I decided that it would be useful to make an order for the determination of the separate questions, having regard to the undertakings given by the parties. On the basis that I would make an order under Part 31, I set out the answers to the separate questions at paragraph 116 of my reasons for judgment.

Form of orders 4 The first matter of contention between the parties relates to the form of orders to give effect to my reasons for judgment of 21 July 2000. The defendants submit that I should simply order the first defendant, as trustee of the Kara Kar Employees Pension Fund, to pay the first and second plaintiffs the sums which have been calculated as owing, namely $57,099 to the first plaintiff and $26,741 to the second plaintiff. The plaintiffs submit that my orders should include an order pursuant to Part 31 Rule 1 (a) that the agreed separate questions be decided separately, an order answering the separate questions, and orders entering judgment for the first and second plaintiffs respectively for those two sums. 5 I agree with the plaintiffs. It is necessary for me to make an order under Part 31 for the determination of the separate questions agreed by the parties, because that is the basis upon which my reasons for judgment of 21 July 2000 proceeded. Once I make the order for determination of separate questions, I must answer them by an appropriate order. All of the defendants have undertaken to the Court that if questions 2 and 10.1 are answered 'Yes', as they are, they will consent to judgment for the first plaintiff in the sum of $57,099 and for the second plaintiff in the sum of $26,741. That being so, there will be separate orders that judgment be entered for the first plaintiff and for the second plaintiff in those respective amounts (plus, in each case, interest calculated in the manner explained below), against all of the defendants.

Interest 6 Interest was claimed in the Further Amended Summons filed on 19 May 1994, when relief in respect of the Kara Kar Employees Pension Fund was first sought. Young J dealt with the question of interest in his reasons judgment of 13 April 1994, remarking that the plaintiffs' claim to money under the superannuation plan looked like a money claim but in reality it was a claim to have a trust properly administered. He referred to 'awkward questions as to interest because interest against the trustee is worked out on a different principle to interest under Schedule J to the Court rules'. In his judgment of 4 September 1996 his Honour referred to his earlier observation to the effect that the action was to administer a trust rather than to recover money, but he then said: 'However, the way it has been contested, the Court rate should be applied; cf Hagan v Waterhouse (1991) 34 NSWLR 308, 393'. In that case Kearney J held that the rate of interest to be paid by an errant trustee was to be a commercial rate and should not be fixed as the 'trustee' rate obtainable from investment in government stock. 7 Young J evidently took the view that the simplest way of determining an appropriate commercial rate was to use Schedule J, which is the rate payable on a judgment debt under s 95 of the Supreme Court Act and Rule 40.7 (2). Schedule J adopts different percentage rates for different periods, to reflect fluctuations in interest rates over time. Although his Honour's orders are not before me, it appears that Young J awarded interest to the plaintiffs at the Schedule J rates from the end of February 1991, when in his view 'the money should have been paid', to the date of the orders in 1996. 8 I have decided, for reasons given below, that Young J's order with respect to costs was extinguished by the orders subsequently made by the Court of Appeal. Equally those orders extinguished his Honour's orders with respect to the capital sums and interest payable to the plaintiffs, leaving me with a discretion to make orders for the entry of judgment in favour of each plaintiff for a capital sum and (if I think it appropriate) interest. 9 All of the defendants have undertaken to the Court that if questions 2 and 10.1 are answered 'Yes', as they are, they will consent to judgment in favour of the first and second plaintiffs for $57,099 and $26,741 respectively, together with interest on each judgment sum at such rates and during such periods as are agreed between the parties, or in default of agreement, as are determined by the Court. Those undertakings are inconsistent with the submission by the defendants that there be no order as to interest. In my opinion the undertakings mean, in light of my conclusions on the separate questions and the absence of any agreement between the parties, that the defendants consent to judgment for interest at the rate and for the period to be set by me. 10 In light of the principles enunciated in Hagan v Waterhouse, it is appropriate to make an order for payment of interest by the first defendant as trustee. Interest should begin to accrue from the time when the trustee exercised its discretion to make a distribution to each plaintiff. According to my reasons for judgment of 21 July 2000, that occurred on 28 February 1991. I agree with Young J that the most appropriate rate of interest is the Schedule J rate, which takes into account interest rate fluctuations during the period from 1991 to date. 11 The purpose and effect of the undertakings given by the defendants was that in the event that I reached a view on the substantive questions that triggered the undertakings, the defendants would become jointly and severally liable for the judgment amounts (both capital and interest) found by me to be appropriate. That being so, the order for payment of interest should extend to all of the defendants by virtue of the undertakings. 12 The defendants submit that any order as to interest should be qualified in two ways. First, they seek to reduce the amount of interest payable by deducting $11,500 ($5,750 for each plaintiff) from the judgment amounts. Indeed, they invite the Court to make an order that the first and second plaintiffs, 'by their company Brookton Holdings Pty Ltd pay to Double K Ranch Pty Ltd an amount of $11,500 pursuant to the undertaking given during the course of these proceedings, that such sum would be allowed if the Court were to find in their favour as to the amounts claimed'. 13 Brookton Holdings No 5 Pty Ltd held 10% of the shares in Kara Kar Holdings Pty Ltd, and was wholly owned by the plaintiffs at all relevant times. The present proceedings were initially proceedings by Brookton Holdings No 5 Pty Ltd for the winding up of Kara Kar Holdings Pty Ltd, essentially on the just and equitable ground. Subsequently the plaintiffs claimed that $115,000 had been wrongly removed from the Kara Kar Employees Pension Fund. After the proceedings were commenced in 1991, there were some negotiations between the parties. At the hearing on 8 September 2000 counsel for the defendants conceded that certain negotiations in 1991 were without prejudice, but as I understand it, that concession did not extend to the negotiations for the sale of Brookton's shares in Kara Kar. In March 1991 Mr Yardy offered to purchase Brookton's shares in Kara Kar at fair market value. The offer was accepted and a valuation was prepared. Brookton's shares were valued at $59,500 and that amount was eventually paid to it in consideration of transfer of the shares. 14 The valuation was made on the assumption that the plaintiffs' claim for the return of the $115,000 to the fund would be unsuccessful. The valuer stated that if the claim succeeded then the fair value of Brookton's 10% interest in Kara Kar would be only $48,000. The plaintiffs' solicitor wrote to be defendants' solicitor on 9 October 1991 saying: 'From the valuation if our clients are successful in the legal proceedings referred to by [the valuer] the value of the shares would be decreased and any award in that case our clients would be adjusted in accordance with the valuation [sic]. If the legal proceedings are not successful the value would remain unchanged.' 15 The plaintiffs' solicitor subsequently confirmed the position in a letter to the defendants' solicitor dated 23 September 1996, as follows: 'We also note that Brookton No 5 Pty Ltd agreed that, should it be shown that $115,000 was not an asset of Kara Kar Holdings Pty Ltd (as has in fact occurred in the litigation) it would reimburse $11,500 to Double K Ranch Pty Ltd in respect of that companies [sic] acquisition of Brookton's shares in Kara Kar Holdings Pty Ltd. As we have pointed out several times during the course of this litigation that agreement to reimburse binds Brookton No 5.' 16 The plaintiffs point out that Brookton Holdings No 5 Pty Ltd has long since ceased to be a party to the proceedings, and there is no claim by the defendants for recovery of the $11,500 in the proceedings as presently constituted. Further, the plaintiffs assert (and this was not contradicted by the defendants) that no demand or refusal to pay that amount has been proved. The plaintiffs therefore submit that the Court cannot order the plaintiffs 'by their company' to pay the amount of $11,500 to Double K Ranch Pty Ltd. I agree, and therefore I shall not reduce the plaintiffs' verdicts on that account. 17 However, I have some sympathy with the defendants' position to the extent that it relates to interest on the judgment amounts. It appears from the evidence that Brookton was at the relevant times owned and controlled by the plaintiffs, and it made a promise to refund the $11,500 in circumstances which have now come to pass. In my opinion it would be unjust to allow the plaintiffs to recover interest on the full judgment amounts in these circumstances. I shall therefore order that interest under Schedule J be calculated on the amount of each judgment debt after deducting, in each case, the sum of $5,750. 18 Secondly, the defendants say that no interest should be payable on the judgment debts during the period between 10 April and 8 November 1995 and the period between 28 August 1997 and 22 May 1998. The significance of the former period is that the matter was fixed for hearing before the Master on 10 and 11 April 1995 but those hearing dates were vacated on the application of the plaintiffs. After two more interlocutory hearings before the Registrar and a hearing before Young J on 17 July 1995, the matter was restored to the Master's call-over list on 27 September 1995 and was ultimately heard by Master Macready at a hearing commencing on 8 November 1995. 19 While there was a delay from April to November 1995 initiated by an application made by the plaintiffs, I cannot on the evidence before me conclude that the plaintiff deliberately prolonged the proceedings during that period or was otherwise at fault. The plaintiffs' evidence, not relevantly contradicted by the defendants, is that the plaintiffs found it necessary to apply to vacate the hearing dates because the defendants filed new affidavit evidence by an actuary on 28 March 1995 and there was insufficient time for the plaintiffs to respond to that evidence before 10 April 1995. Consequently there is no basis for suspending the accrual of interest during that period. 20 I turn to the second period, from 28 August 1997 to 22 May 1998. After the Court of Appeal ordered that the matter be reheard, there was a delay until July 1997, about which there is no complaint by the defendants. On 31 July 1997 the Registrar gave directions for the filing of pleadings and affidavits. The plaintiffs filed their statement of claim on 28 August 1997, six days late. Nothing can turn on that small delay. The plaintiffs' affidavits were due on 3 October 1997, but they sought further time to put on their evidence, and obtained an extension to 14 December 1997. Thereafter there was a delay by the plaintiffs until 11 March 1998, when the defendants applied by two notices of motion to have the proceedings struck out for want of prosecution. Then the plaintiffs' solicitor indicated by letter that the plaintiffs would rely on affidavits already filed, whereupon the defendants countered with a request (found by the Master to be reasonable) for the plaintiffs to identify those parts of the affidavits upon which they would rely at the rehearing. 21 That was the state of affairs when the applications to dismiss the proceedings came before Master Macready on 22 May 1998. The Master dismissed the applications but he directed the plaintiffs to notify the defendants of the parts of the affidavits already filed upon which they would rely at the rehearing. He ordered the plaintiffs to pay the defendants' costs of the motions, with a deduction for the costs which would normally be reasonably attributable to one day's mention for directions. He observed that the delay from December to March came about because a solicitor then (but no longer) employed by the plaintiff's solicitor took no proper steps to advance the matter and comply with the Courts directions during that period. When the plaintiff's solicitor became aware of what had not been done by his employed solicitor, he immediately took steps to rectify the matter and he apologised to the Court for the delay. Nevertheless it would be unfair, in my opinion, to require the defendants to pay interest on the judgment amounts in respect of the period from 14 December 1997 to 22 May 1998. I shall exclude that period from the calculation of interest. 22 In summary, I shall make orders that the defendants pay interest to the first plaintiff on $51,349 (the judgment debt of $57,099 less half of the sum of $11,500) and to the second plaintiff on $20,991 (the judgment debt of $26,741 less the other half of the sum of $11,500). Interest will be calculated for the period of 28 February 1991 to the date of judgment, except for the period from 14 December 1997 to 22 May 1998 inclusive. In order to avoid any further delay and disputation in this unhappy case, I have calculated the amount of interest to be paid assuming judgment is entered on 18 October 2000. Attached to these reasons for judgment is a schedule setting out my calculation. The amount for which judgment will be entered for the first plaintiff is $111,074.69 ($57,099 plus interest of $53,975.69). The amount for which judgment will be entered for the second plaintiff is $48,806.15 ($26,741 plus interest of $22,065.15).

Cost of the rehearing 23 As I noted in paragraph 8 of my reasons for judgment of 21 July 2000, although the Court of Appeal remitted to the entire proceedings for rehearing, the defendants were interested in contesting only the question of proper construction of the trust instrument. I found for the plaintiffs and against the defendants on the primary issue. In my opinion costs should follow the event, and therefore I shall order that the defendants must pay the plaintiffs' costs of the rehearing. 24 Counsel for the defendants submitted that only the first defendant (Kara Kar Holdings Pty Ltd as trustee) should be ordered to pay the costs of the rehearing. I disagree. The rehearing was contested by all defendants and by virtue of the undertakings given to the Court, all defendants have become jointly and severally liable to meet the judgment in favour of the plaintiffs. Additionally, the effect of the order sought by the defendants would be that the plaintiffs' prospect of recovery of costs would be limited to the assets of the Kara Kar Employees Pension Fund, the only remaining assets of which (after the plaintiffs have been paid) belong effectively to Mr and Mrs Yardy. They have been the directors of Kara Kar Holdings Pty Ltd at all relevant times and although the company's interest as trustee was separately represented, they appear to have been the active contradictors of the plaintiffs' position. It is true that Mrs Yardy was joined only as a necessary party to the proceedings, and that she was not shown to be actively responsible for any wrongful conduct. On the other hand, she was a director of Kara Kar Holdings Pty Ltd at the relevant times and there was evidence that she actively participated in meetings of directors (see paragraph 106 of my reasons for judgment of 21 July 2000). 25 In these circumstances the correct order is that the plaintiff's costs of the rehearing be paid by the defendants.

Cost of the appeal (and incidental applications) 26 The defendants submitted that their costs of the appeal, and their costs of the applications to extend the time to file a notice of appeal, and for leave to appeal, should be paid by the plaintiffs. As they pointed out, the appeal was brought by them and was successful, and was resisted by the plaintiffs. 27 There is a simple answer to this submission. The costs of the appeal and incidental applications were expressly dealt with by orders of the Court of Appeal. 28 Care needs to be taken in recording exactly what the Court of Appeal ordered. The judgment has not been reported. The typed reasons for judgment contain a summary sheet as well as the reasons of their Honours. In the summary sheet, the following appears: 'ORDERS 1. Extend the time in which to file a notice of appeal from the decision of Young J dated 13 April 1994 to 27 March 1997. 2. Grant leave to appeal from the decision of Young J dated 4 September 1996. 3. Appeals allowed. 4. Order that the matter be remitted for hearing. 5. Order that the costs of the notices of motion for the leave to appeal and extension of time to appeal be costs in the rehearing.' 29 If the orders in fact made were in those terms, they would deal with the costs of the notices of motion for leave and extension of time, but not the costs of the appeal. The Court's records are to the same effect. 30 However, at the end of her judgment Beazley JA said: 'The orders which I propose in the matter are: 1. Extend the time in which to file a notice of appeal from the decision of Young J dated 13 April 1994 to 27 March 1997. 2. Grant leave to appeal from the decision of Young J dated 4 September 1996. 3. Appeals allowed. 4. Order that the matter be remitted for rehearing. 5. Order that the costs of the notices of motion for leave to appeal and extension of time to appeal and the appeals be costs in the rehearing.' (emphasis supplied) 31 Powell JA expressly agreed with the orders proposed by Beazley JA, and Sheller JA agreed with both judgments. 32 I infer that the Court of Appeal made orders dealing with the costs of the appeals as well as the costs of the notices of motion for leave to appeal and extension of time, but an error was made in transcribing the orders in the Court's records. The Court's orders were that the costs of the appeals and the notices of motion be costs in the rehearing.

What does it mean to order that the costs of the appeal be 'costs in the rehearing'? 33 The plaintiffs drew my attention to a passage in the judgment of Lord Denning MR in J T Stratford & Son Ltd v Lindley (No 2) [1969] 3 All ER 1122, at 1123. There his Lordship said: 'There is no definition in any law book of the words 'costs in the cause'. But every pupil on his first day in chambers is told what it means. 'Costs in the cause' means that the costs of those interlocutory proceedings are to be awarded according to the final award of costs in the action. If the plaintiff wins and get an order for his costs, he gets those interlocutory costs as part of his costs of the action against the defendant. Vice versa, if the defendant wins and get an order for his costs, he gets those interlocutory costs as part of his costs of the action against the plaintiff.'

See also Halsbury's Laws of England , 4th ed, vol 37, para 712. 34 The plaintiffs submit that, mutatis mutandis, 'costs in the rehearing' means that the costs of the appeal are to be awarded according to the award of costs of the rehearing. The consequence is that since the plaintiffs are entitled to their costs of the rehearing, they are also entitled to the costs of the appeal, by force of the Court of Appeal's order. I agree. By ordering that the costs of the appeal be costs in the rehearing, the Court of Appeal was, in effect, making the costs of the appeal depend on the outcome of the tribunal of fact's investigation of the merits of the point that had led to success in the appeal. My conclusion after the rehearing was that the point did not have merit and that there should be judgment for the plaintiffs, with costs. The Court of Appeal's order means, given my conclusion, that the defendants must pay the plaintiffs' costs of the appeal as well as the plaintiffs' costs of the rehearing. 35 The Court of Appeal's order has not left me with any discretion as to the costs of the appeal. 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. 36 I shall order that the defendants pay the plaintiffs' costs of the appeal, including the costs of the application for extension of time to appeal, and for leave to appeal.

Costs of the initial hearing 37 On 4 September 1996 Young J ordered that there should be a verdict for each plaintiff for a specified amount, calculated to include an interest factor, and he ordered that the defendants pay the costs of the proceedings. He referred to Master Macready the question whether the costs order should be on other than the ordinary basis. On 25 September 1996 Master Macready rejected an application by the plaintiffs for costs to be assessed on an indemnity basis. Consequently the order was for the defendants to pay the plaintiffs' costs on the ordinary party/party basis. 38 The plaintiffs submit that Young J's order remains in effect and covers all aspects of costs save for the dispute about the point concerning whether the trustee exercised its discretion. The plaintiffs contend that although Young J's order was an interlocutory order (so characterised by the Court of Appeal), it was an interlocutory order of the kind described by the Court of Appeal in Amalgamated Television Services v Marsden [1999] NSWCA 313, at para 38. That is, it was an order of a substantial nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. The Court is not justified in revisiting an order of this kind unless there is a material change of circumstances. Therefore, say the plaintiffs, Young J's order as to costs should be taken as determining all matters other than 'the point'. 39 I disagree with this submission. In my view, for reasons I shall set out, the Court of Appeal's judgment and orders in this case had the effect of extinguishing all of the orders of Young J, including the order as to costs. Either their Honours left the question of costs of the first hearing to my discretion, as the judge in the rehearing, or those costs (like the costs of the appeal) are costs of the rehearing. Since I would exercise any relevant discretion in favour of the plaintiffs, who are entitled to the costs of the rehearing, the outcome is the same whichever alternative is correct. 40 The Court of Appeal made orders that the appeals be allowed and that the matter be remitted for rehearing, and dealt with the costs of the appeal and incidental applications. It did not expressly deal with the question of costs of the first hearing. The question is whether the Court of Appeal's orders dealt with the costs of the first hearing by implication. 41 I have consulted the 'Redrawn Notice of Appeal' which is in the Court of Appeal's file, but it sheds no light on the question, except to show that the appellants sought an order for costs. In my opinion an order allowing an appeal does not itself imply that any of the particular orders sought in the notice of appeal has been made. Nor, in my view, could the Court of Appeal's order with respect to costs of the appeal be taken to imply an equivalent order with respect to the costs of the first hearing, if it were considered in isolation from the other orders and the reasoning of the Court. 42 It is arguable that an order that the matter be remitted for rehearing itself implies vacation of all of the orders of the trial judge. Section 51 of the Supreme Court Act 1970 (NSW) appears to use the word 'remit' as the corollary of the word 'remove'. The word 'remit' is defined in Butterworth's Australian Legal Dictionary (1997) to mean (relevantly) 'the return of a case to a lower court from a higher one'. Section 51 and the dictionary definition suggest that the word 'remit' has a wide general meeting. An order by an appeal court to 'remit' a case to a judge may mean only that the judge is to continue the hearing of a case already commenced. When the order is that the case be 'remitted for rehearing', the whole proceedings are returned to the court of first instance but a new hearing is to be undertaken. In the latter case, but not the former, the substantive orders of the trial judge must have been impliedly vacated by the order of the appeal court if there is no express order, since the can be no rehearing of a matter already determined by orders. Arguably, therefore, an order which is appurtenant to the substantive orders (the order for costs) is also extinguished. 43 In neither case, however, does the order to 'remit' the matter inherently dispose of the costs incurred at first instance up to that time. If an order to remit for rehearing necessarily extinguishes the orders of the trial judge, it would be pointless for appeal courts to deal expressly with those orders, as they commonly do: see, for example, John Pfeiffer Pty Ltd v Rogerson (2000) 74 ALJR 1109; Tamworth Base Hospital v Durant [2000) NSWCA 209. 44 Therefore the order that the matter be remitted for rehearing is, with respect, ambiguous when considered in isolation. If there were no indications in the judgment of the Court of Appeal in this case, the position may have been that I should decline to make any order about the costs of the first hearing at this stage, leaving it to the parties to approach the Court of Appeal for clarification of their orders. However, I believe there is a sufficient indication of their Honours' intention in the judgment to resolve the ambiguity sufficiently to permit me to deal with the question without subjecting the parties to the additional cost of further argument before the Court of Appeal. 45 Having dealt with the question of extension of time for filing a Notice of Grounds of Appeal, Beazley JA said: 'That does not finally dispose of the matter as orders have been entered following the second judgment. In my opinion, leave to appeal from that decision ought to be granted and the entire matter remitted to the Equity Division for rehearing.' 46 Sheller and Powell JJA agreed and did not add to this part of her Honour's judgment. 47 The orders that had been entered included an order for costs. This passage in the judgment indicates, to my mind, that the intention of the Court was to leave the 'entire matter', including the question of costs of the first hearing, to me for determination. It follows that the Honours intended to extinguish Young J's costs order. The Court of Appeal's reasoning means that either I have a discretion to award the costs of the first hearing to either party, or those costs should abide my decision on the costs of the rehearing. I shall proceed on the basis that I have a discretion in the matter, noting that if the costs of the first hearing are to abide the rehearing, the outcome will be the same in the present circumstances. As the judge presiding at the re-hearing, I have jurisdiction under s 76 of the Supreme Court Act to deal at my discretion with the costs of the initial hearing, in the absence of a contrary direction from the Court of Appeal: Wojcic v Incorporated Nominal Defendant (No 2) [1968] VR 533. 48 It has been said that where a court of appeal orders a new trial, the costs of the first trial should as a general rule be made to abide the event of the second. That proposition appears in Williams' Supreme Court Practice: Victoria, 2nd ed, para 65.1.12. The authors rely on Stewart v McKinley (1885) 11 VLR 802, 809; see also Monaco v Arnedo Pty Ltd (1994) 13 WAR 522. In that case the Full Court of the Supreme Court of Victoria contemplated that there may be special circumstances providing a reason for departure from the general rule. In one of the cases before the Full Court, a new trial was ordered because of the wrongful reception of evidence. The appellant had objected to the evidence at the trial, but the respondent had pressed it. It was held that the respondent should pay the appellant's costs of the first trial, notwithstanding the general rule. 49 In the present case Young J, in a reserved judgment in 1996 after the case had returned to him from the Master, held that it was not open to the defendants to raise the point whether the trustee had validly exercised its discretion, on the ground that the point had been raised too late and the case had been conducted before the Master on a different basis. In fact, the point had been raised before his Honour when the matter first came before him, some two years earlier, and so His Honour's reasons for judgment were based on a false premise. It would have been open to the plaintiffs to correct the misimpression when his Honour handed down his reasons for judgment, but there is nothing to suggest that they attempted to do so. Indeed, the plaintiffs' submission to Young J was the one he accepted, namely that the point was raised too late and the proceedings before the Master had been conducted on a basis that precluded the defendants from raising the issue. 50 In the Court of Appeal, the plaintiffs/respondents conceded that the point had in fact been raised at the first hearing before Young J. The appeal was allowed and a rehearing was ordered on the basis of that concession (see p 10 of Beazley JA's reasons for judgment). 51 It might appear to be arguable, in those circumstances, that the general rule should not be followed, since an earlier concession by the plaintiffs might have avoided the necessity for an appeal. However, I am not able to reach that conclusion on the evidence before me. I have no evidence that the defendants invited the plaintiffs to make any such concession, nor any evidence as to the circumstances which led the plaintiffs to make the concession that they eventually made in the Court of Appeal. All I have are the bare facts that: · having made submissions to Young J on the basis that the point was not raised at the first hearing, the plaintiffs conceded at the appeal that the point had in fact been raised; and · the Court of Appeal did not regard the plaintiffs' conduct as sufficient to justify an order that they pay the costs of the appeal, whatever the outcome of the rehearing. 52 I take into account the facts that after two hearings, Young J found 'on the merits' in favour of the plaintiffs, and that the subject matter of the appeal, and its determination by the Court of Appeal, related to a technical point of construction of the trust instrument - a point which, in the event, I eventually found to have no substance. In the circumstances I believe I should follow the general rule, to the extent that I have a discretion in the matter. 53 I shall therefore order that the plaintiffs' costs of the initial hearing (including both hearings before Young J, the hearings before Master Macready and all other interlocutory applications, but subject to the exceptions noted below) be paid by the defendants.

Miscellaneous exceptions 54 The defendants contend that even if the general costs of the proceedings are awarded against them, certain exceptions should be made. First, they draw attention to the numerous amendments to the summons in the proceedings, which were the subject of trenchant criticism by Powell JA in the Court of Appeal. They say that the defendants should not be ordered to pay the plaintiffs' costs of the originating summons filed on 17 January 1991, an amendment made on 4 June 1991, a further amendment of 18 March 1994, yet another amendment on 19 May 1994, and all costs relating to those amendments. It is true that the proceedings were poorly organised and the relief claimed in the summons, in its various manifestations, traversed such a wide area that is hard to believe only one set of proceedings was involved (see the brief summary at paragraph 1 of my reasons for judgment of 21 July 2000). Nevertheless, the various amendments were made in accordance with the rules and procedures of this Court and led to a substantial hearing in which relief was granted to the plaintiffs. I reject the submission that the costs order in favour of the plaintiffs should be qualified by reference to the history of amendments. 55 The defendants submit that the costs of Brookton Holdings No 5 Pty Ltd, which was initially a plaintiff, should not be allowed since no relief was granted in its favour. In my opinion it would be artificial to segregate the costs of Brookton from the plaintiffs' costs and I see no proper basis for doing so. Nor do I see any adequate basis for an order excluding the costs of the second plaintiff prior to the filing of the Further Amending Summons on 18 March 1994. The fact that she was not a party until that amendment is limitation enough. 56 The defendants submit that the order for costs in favour of the plaintiffs should exclude the plaintiffs' application to vacate the hearing date set down before the Master for 10 and 11 April 1995, and other costs until 8 November 1995, when the Master heard the matter. I have already rejected the contention that interest should not be allowed to accrue during this period, and I reject the argument as to costs for the same reason. While the evidence indicates that the April hearing date was vacated on the application of the plaintiffs, there is evidence that the plaintiffs found it necessary to make the application because of the late filing by the defendants of an actuary's affidavit and report, and therefore there is no basis for my attributing fault to the plaintiffs. 57 Finally, the defendants submit that the costs order in favour of the plaintiffs should exclude costs incurred during the period from 28 August 1997 (when the statement of claim was filed pursuant to the Registrar's directions) to 22 May 1998 (when the Master dealt with the defendants' applications to strike out the proceedings for want of prosecution). I have held that, since there was a delay from 14 December 1997 to 22 May 1998 caused by the failure of a solicitor employed by the plaintiff's solicitor to advance the matter, interest should not accrue during that period. However, in his reasons for judgment of 22 May 1998 Master Macready observed that no particular form of prejudice had been identified flowing from the delay, and the complaint seemed to him to be merely about the passing of time. That is enough to suspend the accrual of interest, but not, in my view, sufficient to make an exception from the general costs order. 58 In summary, I do not accept that any of the above matters is a basis for an exception to my orders that the defendants pay the plaintiffs' costs. 59 The defendants submit that I should order the plaintiffs to pay their costs of defending the application to vacate the hearing before the Master which had been set down for 10 and 11 April 1995, the subsequent mentions before the Registrar on 13, 20 and 24 April 1995, the hearing before Young J on 17 July 1995 at which the plaintiffs sought orders for the taking of accounts, and the call-over before the Master on 27 September 1995. The Master reserved costs in respect of the application to vacate the hearing date. As I have already indicated, there is no sufficient basis for me, at this stage, to make any exception from my general costs order to deal with that application, let alone to order the plaintiffs to pay the defendants' costs of the application. The subsequent applications between April and November 1995 would not have occurred but for the vacation of the April hearing dates, but that is not enough to justify my ordering the plaintiffs to pay the defendants' costs of those applications. 60 During the period from 14 December 1997 to 22 May 1998 there were three mentions before the Registrar (12 February, 19 March and 2 April). The defendants submit that I should order the plaintiffs to pay their costs of those mentions, because they occurred during the period of delay. But I have already held that there is no basis for making an exception from my general costs order in favour of the plaintiffs for costs incurred during the period of delay, in the absence of evidence of prejudice, and for the same reason I shall not order the plaintiffs to pay the defendants' costs of those mentions. 61 On 22 May 1998 Master Macready heard the applications by the defendants to dismiss the proceedings for want of prosecution. The Master ordered the plaintiffs to pay the defendants' costs of those motions, with a deduction for the costs which would normally be reasonably attributable to one day's mention for directions. In my opinion that order should stand, for the reasons advanced by the Master in his ex tempore judgment of that day. The second matter dealt with by the Master on 22 May 1998 was an application by the plaintiffs to strike out the defences. The application succeeded but for reasons which he gave, the Master made no order as to costs of the motion. In my opinion be Court should not take any different attitude to the costs of that application now. 62 The proceedings came before the Registrar on 28 September 1998. The Registrar directed the plaintiffs to file and serve affidavits in reply by 2 October 1998, and ordered them to pay the defendants' costs of the day. Once again, I see no reason for interfering with the Registrar's order as to costs. 63 In summary, I shall qualify my general orders for costs in favour of the plaintiffs by confirming the costs orders of the Master on 22 May 1998 and the Registrar on 28 September 1998 that the plaintiffs pay the defendants' costs of the matters specified by their orders. 64 On various other occasions costs were reserved. In my opinion the costs of those occasions should be governed by my general orders for costs in favour of the plaintiffs.

Costs of the hearing as to costs and orders 65 The plaintiffs have applied for costs of the hearing on 8 September 2000 and previous mentions. Since their contentions as to costs have been successful to a large extent, they are entitled to an order for costs. However, they opposed any reduction in interest to reflect the debt of $11,500 owed by Brookton Holdings No 5 Pty Ltd, their company, and to reflect the delay from 14 December 1997 to 22 May 1998, and they contended that I should reverse the costs orders made by the Master on 22 May 1998 and the Registrar on 28 September 1998. They were unsuccessful to that extent. In my opinion they were unreasonable to seek interest notwithstanding the Brookton debt. I have therefore decided to reduce the costs recoverable by 20%. 66 I shall order the defendants to pay 80% of the plaintiffs' costs with respect to the hearing on 8 September 2000 and the mentions on 11 August and 5 September 2000, to and also the preparation of short minutes of orders to reflect these reasons.

Suitors Fund 67 At the hearing on 8 September 2000 the defendants foreshadowed that if the costs of the proceedings were awarded to the plaintiffs, they would make an application under the Suitors Fund Act 1951 (NSW). This is a case where the defendants were successful in their appeal, with the result that a point not properly considered at the first hearing was the subject of determination of the hearing, the point was decided against them and so they have failed in the proceedings will have to pay costs and interest. The circumstances do not fall within any of ss 6, 6A and 6B, but the Director-General is a discretion authorise a payment under s 6C. Given the success of the appeal, the fact that the point raised for determination was difficult in fact and law and certainly arguable, and therefore that it was reasonable for the defendants to raise it, my view is that this may be a proper matter for the favourable exercise of the Director-General's discretion. The defendants may therefore think it appropriate to make an application to the Director-General under s 6C.

Conclusions 68 I shall make orders for the determination of the separate questions agreed by the parties, and for answering those questions. I shall order that judgment be entered for the first and second plaintiffs, against all defendants, for $57,099 and $26,741 respectively, plus interest calculated, after deducting $5,750 from each amount, in accordance with Schedule J except for the period beginning on 15 December 1997 and ending on 22 May 1998. The final figures are $111,074.69 and $48,806.15, as at 18 October 2000. 69 I shall order that the defendants pay the plaintiffs' costs of the proceedings, including the costs of the initial hearings before Young J and the Master, the appeal, and the rehearing, and all interlocutory applications except those dealt with by the Master's orders of 22 May 1998 and the Registrar's orders of 28 September 1998. I shall order that the defendants pay the plaintiffs 80% of their costs of the mentions on 11 August 2000 and 5 September 2000, and the hearing on 8 September 2000, and the preparation of draft short minutes of orders to reflect these reasons. 70 I shall direct the plaintiffs to serve on the defendants draft short minutes of orders reflecting these reasons on or before 5pm on Friday 13 October 2000, providing a copy of the draft to my associate. If I accept the draft and the defendants do not communicate any written objection to my associate before 5pm on Tuesday 17 October 2000, I shall make the orders in chambers on Wednesday 18 October 2000. I intend to adopt this procedure so that the costs of a further mention can be avoided unless there is a substantial contention to be resolved. * * * * * * * * *

Last Modified: 10/30/2000 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.

Suitors Fund Act 1951(NSW)

CITATION : Knudsen v Kara Kar (No.2) [2000] NSWSC 943 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1150/91 HEARING DATE(S) : 8 September 2000 JUDGMENT DATE : 9 October 2000

COUNSEL : P Dodson (P) J De Meyrick (D) Koffels (P) SOLICITORS : Harpers (D1) Lincoln Smith & Company (D2-D3) CATCHWORDS : COSTS - costs of re-hearing where plaintiffs succeeded at first hearing, defendants succeeded on appeal and plaintiffs succeeded at re-hearing - meaning of 'costs of the re-hearing' - whether costs order at first hearing was extinguished when Court of Appeal ordered that the matter be remitted for re-hearing - basis for plaintiffs' recovery of interest LEGISLATION CITED : Supreme Court Act 1970 (NSW) s 94 Amalgamated Television Services v Marsden [1999] NSWCA 313 Hagan v Waterhouse (1991) 34 NSWLR 308 J T Stratford & Son Ltd v Lindley (No 2) [1969] 3 All ER 1122 CASES CITED : John Pfeiffer Pty Ltd v Rogerson (2000) 74 ALJR 1109 Monaco v Arnedo Pty Ltd (1994) 13 WAR 522 Stewart v McKinley (1885) 11 VLR 802 Tamworth Base Hospital v Durant [2000) NSWCA 209 Wojcic v Incorporated Nominal Defendant (No 2) [1968] VR 533 DECISION : Orders for determination of separate questions, answering of separate questions, and judgments for plaintiffs; defendants to pay interest; defendants to pay plaintiffs' costs of first hearing, appeal and re-hearing, subject to certain allowances.

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