Kuether v Kuether

SUBMISSIONS AND CONSIDERATION

1. The applicable principles have recently been summarised by Ward CJ in Eq in Baller Industries Pty Ltd v Mero Mero Leasing Pty Ltd [2019] NSWSC 1067 at [19]-[22]: "19. …where there has been no hearing on the merits, it is not appropriate for the Court to conduct what would amount in effect to an hypothetical trial in order to determine an application for costs (see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 (Lai Qin) at 624 per McHugh J). In Lai Qin, McHugh J observed, among other things, that when there has been no hearing on the merits, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order (namely, success in the action or on particular issues). However, his Honour went on to say (at 624-625) that: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, 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. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation… Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 20. The use of the word 'so' in the first of the paragraphs extracted above indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred (as I noted in Renton v Kelly [2018] NSWSC 1377 at [56]). 21. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Agribusiness) as to the appropriate considerations in cases where there has been no hearing on the merits, Basten JA said (at [8]) that: … although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon. 22. It is also relevant here to emphasise that the overriding mandate in respect of the conduct of litigation in this Court (see s 56 of the Civil Procedure Act) is for the just, quick and cheap resolution of the real issues in dispute."
2. Written submissions of 12 pages in length were prepared on behalf of Will in support of his application for an order that Monika pay his costs of the proceedings.
3. Submissions of 9 pages in length were prepared on behalf of Monika.
4. Submissions in reply of 8 pages in length were prepared on behalf of Will.
5. I have considered all of those submissions. It is sufficient to set out a high level summary of the substance of the submissions in order to determine Will's application in relation to costs.
6. The submissions canvased the long history of dealings between Will and Monika prior to the commencement of this proceeding, including Monika's responses to Will's requests for access to the Property in April 2019, more than one year before this proceeding was commenced. Many aspects of this factual background, including whether or not Will threatened, bullied or intimidated Monika in 2019, are the subject of dispute between the parties. Consistently with the principles set out in [36] above, the Court will not embark on a process of determining those factual disputes for the purpose of determining Will's application in relation to costs.
7. As I have referred to earlier in these reasons, Monika consented (without admissions) to the interim order made on 11 May 2020 granting Will access to the Property, and agreed in the Heads of Agreement dated 24 June 2020 to Will continuing to reside in the Property pending its sale by Monika and Lydia as executors of the deceased's estate. It was submitted on behalf of Will that this was a capitulation by Monika, resulting in Will succeeding in his claims and that Monika should therefore be ordered to pay his costs of the proceeding.
8. Underlying this submission is a contention that Will would have succeeded in his claim and Monika recognised this by consenting to the interim order made on 11 May 2020 and by subsequently entering into the Heads of Agreement. In response to Monika's submission identifying several arguments that she would have made if the matter had proceeded to a contested hearing on the merits and that (in Monika's submission) may have resulted in the Court refusing to grant the relief sought by Will, Will submitted that it was not open to Monika to "float" these arguments after capitulating.
9. One of the arguments referred to in Monika's submissions is the same matter to which I referred in concluding on 7 May 2020 that Will's case, on the evidence then available was not a strong case. That was one reason why Will's application for interim relief was dismissed and the matter listed for urgent final hearing on 11 May 2020. That final hearing did not proceed because the parties consented (without admissions by Monika) to an interim regime pending mediation. The matter was then resolved following mediation as I have referred to [30]-[30] above. Thus, there has been no hearing on the merits. The Court cannot conduct a hypothetical trial in order to determine whether Will would have succeeded and should have his costs paid by Monika. Without such a hypothetical trial, the Court cannot determine whether Will's case - which was not strong as at 7 May 2020 ­­- was strengthened or weakened by the evidence served after that date. This is not a case in which the Court can feel confident that Will was almost certain to succeed if the proceeding had not settled.
10. Will submitted that Court should reject Monika's evidence that she agreed to the interim orders on 11 May 2020 and entered into the Heads of Agreement for the reasons given in her affidavit of 27 July 2020 to which I have referred in [26] above. He submitted that, if Monika had been motivated to vacate the Property by his continuing presence outside the Property, it is to be expected that she would have done so shortly after he took up that position on 17 April 2020 and before the commencement of this proceeding on 7 May 2020. Will further submitted that Monika's consent to the interim order 11 May 2020 came only after both parties had served all of their evidence for the urgent final hearing and that "the weight of the evidence in [Will's] favour weighed heavily on [Monika's] decision to consent to the interim orders on the morning of 11 May 2020".
11. Applying the principles referred in [36] above, the Court will not assess the weight of the evidence concerning the substantive matters that were in dispute and have now been resolved solely for the purpose of determining Will's application for an order that Monika pay his costs of the proceeding. In any event, Monika's explanation for her decision to reach an interim compromise on 11 May 2020 has a ring of truth to it. It is readily understandable that the commencement of the proceeding lead Monika to the conclusion that Will had no intention of moving to a different location and that, as Monika put it in her submissions, either outcome of the proceeding was therefore unpalatable to her.
12. Moreover, the sale of the Property in accordance with the deceased's will was inevitable, so that Monika would have to vacate the property in the near future irrespective of the outcome of the proceeding. As referred to in [23] above, Monika proposed mediation to agree on a pathway for sale of the Property and Will's living arrangements in the meantime on 8 May 2020, before all of the parties' evidence for the final hearing was served. In this context, it would be mere speculation to interpret Monika's "capitulation" as reflecting her assessment of Will's prospects of success, as opposed to her pragmatic acceptance of her need to vacate the Property and a desire to avoid further costs of litigation.
13. Will also made submissions to the effect that he had not acted unreasonably in commencing the proceeding without formally notifying Monika of his intention to do so, and the lack of any such formal notice should not deprive him of his costs as the successful party. Monika made submissions in response.
14. For the reasons that I have explained above, I do not regard Will's position as equivalent to the position of a party who has succeeded on the merits. It is therefore not necessary to address these submissions further.
15. Will also submitted that Monika had acted unreasonably in denying him access to the Property since the death of the deceased in April 2019 until 8 May 2020. Whether or not Monika's conduct was unreasonable depends on the merits of Will's claims and Monika's defences to them, about which there has been no hearing or determination. It is not appropriate to conduct a hypothetical trial of those claims and defences for the purpose of determining Will's application in relation to costs.
16. For all of those reasons, it would be inappropriate in all of the circumstances of this case to order the defendant to pay the plaintiff's costs of the proceedings. The appropriate outcome is that there be no order as to costs.
17. The parties have abandoned the application for the Court to make a declaration by consent and costs has been the only remaining issue in dispute since 25 August 2020. It is necessary to make some order formally disposing of the summons. It seems to me, that the appropriate course is therefore to make an order that the summons be dismissed with no order as to costs.
18. If, for some reason not apparent from the evidence and submissions, the plaintiff is prejudiced by the summons being dismissed rather than discontinued, the plaintiff may apply under r 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to set aside the order for dismissal and substitute an order granting leave to the plaintiff to file a notice of discontinuance. Any such application will need to be accompanied by draft orders which contain provisions appropriate to avoid UCPR r 42.19 overriding my decision that there be no order as to costs.

Conclusion

1. For all of the reasons set out above, I make the following notations and order: 1. Note that the plaintiff's application for interim relief in prayers 1 to 7 of the summons was determined on 7 May 2020. 2. Note that the parties withdrew their application for the Court to make a declaration by consent in terms of prayer 8 of the summons, following which the only remaining issue in dispute between the parties was what order (if any) should be made in relation to the costs of the proceeding. 3. Order that the summons otherwise be dismissed with no order as to costs.

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