Levy v Harpur [2004] VSC 461

Supreme Court of Victoria|2004-11-16|Before: HARPER J

The application was successful. The plaintiffs now contend that, as a consequence, they are entitled to declarations against each of the defendants that the relevant property forms part of the estate of the late Mr Rand, and that the deed of trust of 27 August 1997 is "null and void and of no effect."[2] The plaintiffs also seek orders against each defendant for the plaintiffs' costs of the proceeding, including reserved costs. They submit that so much follows ineluctably from their success on the hearing of their summons.

The defendants beg not only to differ, but to turn the question of costs completely around. Their principal submissions are, first, that no declarations should be made against either Mr or Mrs Harpur. They were not necessary or even proper parties: as they say in their written outline of submissions, "the proper party to the proceedings was the third defendant as trustee."[3] Not only should the individual defendants therefore not be required to pay the plaintiffs' costs, but their costs should be paid, on an indemnity basis, by the plaintiffs. Secondly, any order for costs in favour of the plaintiffs should be made only against the third defendant (Kai Tak Pty. Ltd.) and "should be restricted to the costs incurred in respect of the particular question determined by the judgment." The defendants accordingly submit "that the Court should fix the proportion those costs bear to the total costs of the proceedings".

In my opinion, the plaintiffs are correct in their submission that Mr and Mrs Harpur were proper, even if they were not necessary, parties. First, the terms of settlement - by which, of course, both they and the plaintiffs are bound - required that they be joined as defendants. This is hardly surprising. An indication of the depth of their interest in the outcome of the case is given by the fact that they have throughout been active in maintaining and advancing their opposition to the plaintiffs' claims. At stake is property worth millions of dollars, to say nothing of individual reputations.

The second and allied reason why Mr and Mrs Harpur are proper parties is that they are the occupiers of property known as "The Sisters" at 3080 Nepean Highway, Sorrento. This property, unless it was the subject of a valid disposition effected by the deed of trust, forms part of the estate. If the deed of trust is void, then these defendants will lose their right of occupancy of "The Sisters" - and not only that, but any other interest they might have under the deed.

The third relevant factor in relation to the individual defendants' position as proper parties (albeit one in which Mrs Harpur has but an indirect interest) is that Mr Harpur's credit is very much in issue. If the plaintiffs' allegations about his part in the creation of the deed of trust were made out, the first defendant has been and is guilty of very serious fraud. And a fourth factor is that both Mr and Mrs Harpur are directors of Kai Tak Pty. Ltd.; and that company is the trustee of the P & GR Harpur Trust. Mrs Harpur is the appointor of that trust as well as being a general beneficiary.

When the proceeding commenced, Mr Finlay E. Davis represented the defendants as their solicitor. On 20 August 2002, their present solicitors, Mills Oakley Lawyers, replaced him. Four months later, on 17 December, that firm wrote to the solicitors for the plaintiffs with an invitation immediately to discontinue against the individual defendants. The invitation was accompanied by a warning. If the plaintiffs did not file and serve an appropriate notice of discontinuance within seven days, "we will make an application that the action be summarily dismissed as against" Mr and Mrs Harpur.

The invitation was not taken up. A notice of discontinuance was not filed. But nor was the foreshadowed application made. As a result, the individual defendants have retained their status as such.

It is in these circumstances proper that those defendants not be able to escape orders for costs simply on the basis that the plaintiffs ought to have discontinued against them. By their acceptance of the terms of settlement, Mr and Mrs Harpur made a choice. They opted to obtain whatever benefits flowed to them as defendants, rather than as bystanders, to the proceedings. Having made that choice, and having thereby committed the plaintiffs to whatever additional expenditure was necessary as a consequence, it was incumbent on the individual defendants to do one of two things if they wished to revoke their earlier decision. Either they could apply to the Court for their release; or they could include, in any request of the plaintiffs for that release, an offer to pay any costs thrown away by their joinder following the agreement of 23 March 1999. The defendants did neither. As things presently stand, the individual defendants ask the Court to ignore both the fact that they were willing participants in their joinder in the first place, and the fact that they have since enjoyed whatever advantages flowed from that joinder - the cost of which has possibly been borne, in part, by the plaintiffs.[6] In these circumstances, it seems to me to be unjust to use, as a reason why the individual defendants should escape an order for costs which otherwise would be made against them, the (accurate) proposition that they were not necessary parties to the present proceeding. Still less is there any basis for an order that the plaintiffs pay the first and second defendants' costs on an indemnity basis.

On the other hand, I should not, it seems to me, accede to the plaintiffs' submission that their costs of the entire proceeding be paid by the defendants. The summons by means of which the plaintiffs obtained judgment was concerned with but one of the grounds upon which the plaintiffs sought declarations to the effect that the deed of trust was null and void. It nevertheless proved to be sufficient for the plaintiffs' purposes. It was open to them to issue it, and bring it on for hearing, immediately after pleadings were closed. It raised no issue of contested fact. It succeeded or failed depending on the view taken by the Court on a question of pure law. Its success has meant that all the costs of each party save those reasonably spent up to the close of pleadings, and thereafter on the litigation of that question, have been wasted.

By s.24(1) of the Supreme Court Act 1986, the Court has "full power to determine by whom and to what extent the costs are to be paid." The costs of a trial are therefore in the discretion of the trial judge. This, of course, is a discretion that must be exercised judicially; that is to say, it must be exercised subject to and in accordance with O.63 of the Rules of the Supreme Court. Rule 63.02 relevantly provides that "[t]he power and discretion of the Court as to costs under s.24 of the Act shall be exercised subject to and in accordance with this Order."

I am in my opinion entitled, if not required, in the exercise of my discretion on costs to take into account the fact that the plaintiffs had available to them a potentially very inexpensive path to judgment - inexpensive certainly in comparative, and probably in absolute, terms. It was inexpensive for the very reason that it could be explored before involving the parties in such interlocutory steps as were relevant only to those aspects of their claim that gave rise to disputed issues of fact. The statement of claim raised four distinct issues, of which three required for their resolution a close examination of evidence going to the deceased's state of mind in the final months of his life. Of those three, two also raised very serious allegations of fraud; fraud of the kind which, if the allegations are true, involve perfidy and which illustrate perfectly the insight behind Sir Walter Scott's famous aphorism from Marmion:

"Oh what a tangled web we weave, When first we practise to deceive"[7] .

It is a fair assumption that, until the issue of the plaintiffs' summons of 4 March this year, the attention of all parties was focussed on whether or not there was a web and, if there was, how tangled it had become. Indeed, Mr Israel Bock, a member of the firm of solicitors acting for the plaintiffs, exhibited to an affidavit sworn on 25 August 2004 a chronology prepared by him. It shows that pleadings effectively closed with the filing on 5 November 1999 of the defence of all three defendants. That was five years ago. Since then the statement of claim has been amended once: by orders made by me on 4 May last, leave was granted to the plaintiffs to add to paragraph 25 an allegation that, by reason of the matters alleged in that paragraph, Mr Rand (if, as the defendants contend, he did execute the deed of trust) did not in so doing understand its meaning and effect. The only other addition to the pleadings has been the issue - by the third defendant alone - of a counterclaim the defendants to which are the plaintiffs to the claim, together with Michael Aquilina. It is alleged by the counterclaim that the defendants to it have failed to deliver up to Kai Tak Pty. Ltd. as trustee of the P & GR Harpur Trust the property the subject of that trust.

The counterclaim depends for its validity on the validity of the deed of trust. It therefore fell with that deed when, on 2 July, I gave judgment for the plaintiffs on the summons of 4 March. Equally importantly for present purposes, the point remains that since November 1999 the parties have known that one of the issues on which they were divided was that which the present summons brought to a head. They have also known that that issue could have been dealt with either pursuant to r.23.01(2) or pursuant to r.47.04 - by which the Court has power to order (among other things) that any question in a proceeding be tried before the trial of the proceeding. An application pursuant to r.47.04 could have been made as well by the defendants as by the plaintiffs.

Gold v Patman and Fotheringham Ltd[8] is a case in point. The plaintiff was a building owner; the defendants, building contractors. The building site gave inadequate support to adjoining buildings. Adjoining landowners sought compensation. The plaintiff was not insured against such claims. This, he said, was the fault of the builder, which by the building contract was bound to effect insurance in the names of both owner and builder against this risk. The defendant contended that it was obliged to insure only itself. This argument having been rejected by the trial judge, the builder appealed. The Court of Appeal agreed with the builder. The question of costs then arose. The owner pointed out to the Court of Appeal that in the court below six out of eight days were dedicated to the trial of issues (of fact and concerning the construction of the building contract) on which the builder wholly failed and which were not the subject of the appeal. In the result, therefore, the builder was ultimately successful; but only because of its success on another construction point. Accordingly, the plaintiff argued, there should be an apportionment of the costs.

The Court of Appeal accepted the owner's submission on costs. The appeal was therefore allowed, but the builder obtained only half its costs at first instance. In agreeing with Hodson LJ on the question of costs, Romer LJ said:

"I only wish to say once again what I have said on more than one occasion before, that I wish litigants would take advantage of the facilities which are afforded of having a preliminary point of law decided. That could very well have been done in this case. As it turned out before this court, the matter had depended on the construction of the contractual documents. If the defendants had asked for that point to be decided and they had lost on it, it would still have been open to them to raise all their other defences at the trial, and for my part I wish that they had done so. It seems to me that this was a case par excellence in which the facilities should have been used."[9]

Gold's case was considered with apparent approval by Gobbo J in Byrns and Anor. v Davie and Ors.[10] His Honour in that case gave judgment for the defendants but was satisfied that:

"some 70% of the hearing was taken up with those parts of the proceedings ... in respect of which the plaintiffs were successful and in respect of which the second and thirdnamed defendants failed ... In my view, the general discretion as conferred by the Act and the rules enables me to make an order ... fixing what proportion of a party's costs should be paid by another party ..."[11]

In my opinion, I should apply this reasoning to the circumstances of this case. The plaintiffs are entitled as against all defendants to their costs including any reserved costs (a) of the summons of 4 March 2004; (b) separately attributable to the determination of the issue decided by the judgment on that summons; and (c) up to and including the date of service on them of the defence issued on 5 November 1999. Since either set of parties (with the necessary exclusion of Mr Aquilina) could thereafter have taken the step which, on the basis of the outcome of the summons of 4 March, would have brought the proceeding to an end, neither is entitled to an order for costs after that date. The third defendant must pay Mr Aquilina his costs of its counterclaim.

[1] Amended statement of claim, para. 18.2.

[3] Defendants' written outline of submissions dated 27 August 2004, p.1

[6] As a general proposition, this is true to the extent that the plaintiffs' costs have been increased by the presence of three defendants rather than one.

At a glance

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Judgment (25 paragraphs)

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Legislation Cited (8)

Cases Cited (1)