[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
BELL CJ: I agree with the reasons of Ward P and White JA, and the orders proposed by Ward P.
WARD P: On 26 August 2022, this Court published reasons for judgment in an appeal relating to six impugned inter vivos transactions by the now deceased Edigio Nitopi (see Nitopi v Nitopi [2022] NSWCA 162). The proceeding at first instance was brought by Giuseppe Nitopi (the respondent in this Court), he being one of the deceased's three children and the administrator of the estate of the deceased. A representative order was made, on 17 October 2018, pursuant to r 7.10 of the Uniform Civil Procedure Rules 2005 (NSW), that the respondent represent the estate on the basis that all and any fruits of the litigation would be for the benefit of the estate of the deceased (being a fund to which each of the respondent and the appellant, Cristina, his sister, was entitled as to one-third).
At first instance, the appellant was held liable to repay the sum of $2,220,335.02 to the deceased's estate, being the sum of six payments made to her by the deceased between June 2009 and June 2010, together with interest at statutory rates. The payments in question, totalling $1,261,000, were found to have been obtained by unconscionable dealing (see Estate of Nitopi (No 2) [2021] NSWSC 748). (There was no such finding in relation to the other impugned payments.)
The outcome of the appeal (which was allowed in part) was, relevantly, that the order for entry of judgment against the appellant (the third defendant in the proceeding below) in favour of the administrator of the estate of the deceased was amended to substitute (for the sum of $2,220,335.02) the sum of $202,000 plus interest calculated at the rate agreed between the parties at the time of entry of the orders made by the primary judge (to be calculated for the period from 4 June 2010 to the date of judgment in the proceeding below); and the respondent (as administrator of the deceased's estate) was ordered to repay to the appellant by way of restitution any moneys paid by the appellant over and above the amount payable pursuant to the order as so varied by this Court, in respect of the impugned payments.
The respondent (as administrator of the deceased's estate) was ordered to pay the appellant's costs of the appeal. As to the costs of the proceeding below, the costs orders made by the primary judge (who, in effect, apportioned the costs of the proceedings, as between Guiseppe and Cristina, such that the costs solely referable to claims on which the plaintiff did not succeed were to be paid by the plaintiff (Giuseppe) and the costs of the proceedings otherwise were to be paid by Cristina - see Estate of Nitopi (No 3) [2021] NSWSC 1136 (Nitopi (No 3))) were set aside. Directions were made as to the filing of any brief written submissions in relation to the costs of the first instance proceedings. Those submissions have since been received and what follows are the reasons for the costs orders now to be made in relation to the proceedings below.
[3]
Respective parties' position as to costs of the proceedings at first instance
The appellant's submission, accepting that her entitlement to retain the one payment made by the deceased after the publication of the QCAT decision on 25 March 2010 was an issue separable from the balance of the issues litigated before the primary judge, is that there should be an order awarding her no less than 90% of her costs of the proceedings below.
In that regard, the appellant notes that the judgment ultimately obtained by Giuseppe, as administrator of the estate of the deceased, corresponded to less than 4% of his total claim; and hence the appellant argues that at least in relation to the vast bulk of the issues contested at trial, the relevant "event" was success for the appellant (reliance being placed on authorities such as Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39] per Gleeson JA, with whom Meagher and Barrett JJA agreed, citing Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861-37,862 per Waddell J; Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] per the Court (Ward, Emmett and Gleeson JJA); and Hansen (t/as Derrawee Pastoral Company) v Monterey (Coolah) Pty Ltd [2012] NSWSC 1383 at [29] per Schmidt J). The appellant invokes the observations made in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38] per the Court (Beazley JA (as Her Excellency then was), Ipp and Basten JJA) as to the principles governing the making of an order as to costs so as to reflect time taken in dealing with a particular issue in which the successful party did not succeed (as reviewed by this Court in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 (Elite Protective Personnel)).
The appellant argues that it would be inappropriate simply to award her a proportion of her costs corresponding to the proportion of the respondent's total claim that ultimately failed, particularly given the emphasis in Bostik on the proposition that any apportioning exercise undertaken in the context of making an order for costs should not aspire to mathematical precision. Rather, the appellant says that her success was substantial; and argues that her entitlement to a significant proportion of her costs is all the more compelling having regard to the ultimate abandonment by the respondent in closing submissions below of claims for undue influence and breach of fiduciary obligations that had until then been persisted with by the respondent.
The respondent, on the other hand, submits that the appropriate order is that the costs of all parties be paid out of the estate.
The respondent notes that the total amount payable by the appellant (including pre-judgment interest) as a result of the varied judgment amounts to $353,538.49, which (albeit less than the sum ordered at first instance) the respondent says represents a significant sum.
The respondent submits that the proceedings were similar, in important respects, to probate litigation; that he pursued a remedy on behalf of a deceased estate; and that there was real doubt as to whether the deceased had possessed the requisite capacity to effect the impugned transactions. The respondent notes that the parties' medical experts were in agreement that the deceased suffered from cognitive impairment (although their opinions diverged as to the severity of that impairment) but that the appellant did not admit any of the impugned transactions as to date or amount nor did she admit that the deceased lacked capacity at the time of any of the transactions or offer to restore any part of the funds she had received to the estate of the deceased.
Thus, the plaintiff submits that the nature of the case was such that the proceedings ought to be approached as a reasonable inquiry and, on that basis, it would be appropriate to depart from the ordinary rule regarding costs following the event (referring to the recent discussion in Maxwell v Maxwell (No 2) [2022] NSWSC 1146 at [11]-[13]; [29]).
The respondent submits that even if the challenge had been limited to the single transfer of $202,000 (on which he succeeded), it is unlikely that the costs of the proceedings would have been significantly less than those which were incurred by the parties in litigating the six transactions.
Reference is also made to an offer of compromise made by the respondent (by letter dated 19 March 2021), such offer expressed to be made pursuant to the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333), in which the respondent offered to settle the whole of the proceedings against Cristina on terms including that the statement of claim as against her be dismissed and that she assign to him her one-third interest in funds then held by Streeter Law (those funds being in the sum of $658,000), with all undischarged costs orders to be vacated and no order as to the costs of the proceedings, with the intent that each party bear his or her costs, respectively.
The respondent says that, as the appellant's interest in the Streeter Law funds was $219,349, had she accepted the respondent's offer, she would have achieved a more favourable outcome than her liability (including interest), pursuant to the orders of this Court, for $353,538.49.
[4]
Determination
The question of costs of the proceedings below is complicated by the fact that the proceedings were brought by the respondent in his capacity as administrator of the deceased's estate (albeit that as a one-third beneficiary of the residuary estate he would expect to benefit from any recovery by the estate of funds from the appellant).
It should also be noted that the proceedings as originally commenced were also brought against the third of the deceased's children (Rosaria) and his former wife (Tina), in whose favour probate of the deceased's Will had been granted. The primary judge made orders as to the costs of the application by Giuseppe to revoke the grant of probate and to be appointed administrator cum testamento annexo of the estate of the deceased (namely, that the costs of Guiseppe and of Tina of the motion be paid out of the estate of the deceased on the indemnity basis). Those orders were not intended to be set aside by this Court. Rather, the costs orders that were set aside and are now to be revisited are the orders as to the costs of the proceedings as between Giuseppe (the plaintiff at first instance) and Cristina (the third defendant at first instance). The primary judge made clear (see at [26] of Nitopi (No 3)) that the costs orders made following the success at first instance of the claim against Cristina were not to include any costs solely referable to the claims against Tina and Rosaria and, in particular, were not to include any costs of the proceedings predating the joinder of Cristina as a defendant in November 2017.
Although not the subject of the most recent written submissions, the order made by the primary judge that the costs thrown away by reason of any amendments to the statement of claim be paid by the plaintiff (Giuseppe) should be reinstated. There is no reason that such an order would not be appropriate.
The sole issue then is as to whether the balance of the costs of the proceedings as between Giuseppe and Cristina should be borne out of the estate of the deceased (as Giuseppe contends) or there should be an order that Guiseppe pay 90% of Cristina's costs. An order of the kind sought by Giuseppe would presumably affect each of the residuary beneficiaries insofar as it will diminish the residue of the estate. In other words, the estate's recovery is now in the order of $350,000 out of which there would be (on Giuseppe's proposal) costs to be paid of all the parties; whereas on Cristina's proposal she will be paid 90% of her costs of the proceeding below by the plaintiff (though since the proceeding was brought by Giuseppe as administrator, those costs would presumably be reimbursed to him out of the estate). Thus, ultimately, the difference between the competing costs orders may prove to be moot.
As to the Calderbank offer made by Giuseppe, this was the subject of an application by him before the primary judge, seeking indemnity costs, and was considered by the primary judge at [40]ff of his Honour's costs judgment (see Nitopi (No 3)). The appellant (Cristina) had argued that it was not unreasonable for her to fail to accept that offer (see his Honour's summary at [41]), a submission with which his Honour found it was not necessary to deal. His Honour considered that a fundamental difficulty with the offer was that the claims being advanced by Giuseppe were on behalf of the estate, yet the offer in effect proposed a compromise of Giuseppe's own ultimate one-third entitlement (see Nitopi (No 3) at [42]-[43]). His Honour thus concluded that it would not have been open to Cristina to have brought the proceedings to an end simply by accepting the offer (see at [44]). It is not here suggested that the primary judge's observations and conclusion in this regard were incorrect. The making of the Calderbank offer is therefore not a factor that should be taken into account in considering afresh the exercise of the costs discretion.
Balancing all the relevant factors, including in particular that the proceeding was brought for the benefit of the estate in circumstances where there was indeed room for reasonable doubt as to the deceased's capacity to make the impugned transactions (and hence the administrator's costs would ordinarily be expected to be able to be recouped out of the estate) against the reality that Cristina was to a substantial degree successful in resisting the claims for recovery of the payments made to her; and noting that, where there is a mixed outcome in the proceedings, the question of apportionment has been said to be very much a matter of discretion the exercise of which is dependent on matters of impression and evaluation (see Bostik at [38]; Elite Protective Personnel at [11]), I agree with White JA that the appropriate outcome as to costs as between Giuseppe and Cristina of the proceeding at first instance is that Giuseppe's costs should be paid out of the estate on the indemnity basis and that Giuseppe should pay 90% of Cristina's costs on the ordinary basis and be entitled to indemnity from the estate in respect of his liability.
I therefore propose the following order:
1. In lieu of the orders made at 46(b)-(c) as to the costs of the proceedings at first instance as between the plaintiff and the third defendant, order that:
1. the costs of the plaintiff be paid out of the estate of the late Edigio Nitopi on the indemnity basis; and
2. the plaintiff pay 90% of the third defendant's costs of the proceedings on the ordinary basis and be entitled to indemnity from the estate of the late Edigio Nitopi in respect of his liability.
WHITE JA: As Ward P explains her in judgment, the appellant, Cristina Nitopi, succeeded in her appeal in having the judgment entered against her at first instance reduced from $2,220,335.02 to $202,000 plus interest. She was awarded her costs of the appeal and the parties were invited to provide written submissions in respect of the costs orders that should be made at first instance.
Cristina submitted that although she was ultimately found to be liable to pay $202,000 plus interest to Giuseppe Nitopi, in his capacity as administrator of the deceased's estate, she was nonetheless substantially the successful party. She sought an order that Giuseppe pay 90% of her costs of the proceedings at first instance.
As Giuseppe brought the proceedings in his capacity as administrator and as there is no suggestion that he acted improperly in the commencement or conduct of the proceedings, he is entitled to be indemnified out of the estate both for his own costs of the proceedings (assessed on the indemnity basis) and the costs he is liable to pay to Cristina.
Cristina's counsel accepts, rightly in my view, that Cristina should not be entitled to all of her costs of the proceedings below because she has ultimately been found liable to pay the estate $202,000 plus interest.
Nonetheless, counsel for the respondent, Giuseppe, submitted that the appropriate order was that the costs of all parties be paid out of the estate. The form of order proposed did not specify whether Cristina's costs should be paid on the indemnity or the ordinary basis, but there is no reason for Cristina's costs to be assessed otherwise than on the ordinary basis.
Assuming that there are (or will be, after payment of the judgment sum) sufficient funds in the estate to pay the costs of Giuseppe as administrator on the indemnity basis of the proceedings below and of the appeal, and to pay all of Cristina's costs of the proceedings below and of the appeal, this would be a more favourable outcome for Cristina than the order she sought. It would be a less favourable outcome for Rosaria, the third beneficiary of the estate. Prima facie, it would also be a less favourable outcome for Giuseppe than that sought by Cristina.
The court does not have sufficient information about the distribution of the estate to know whether there are sufficient undistributed assets to meet all of the costs and any other outstanding debts and testamentary expenses.
Giuseppe has a personal liability to Cristina in respect of costs payable to Cristina from which he is entitled to be indemnified out of the remaining assets of the estate. It is not clear from the terms of the orders sought by Giuseppe whether the order for the payment of costs out of the estate is intended to be in substitution for an order that he be personally liable for the costs with the attendant right of indemnity. If that is his intention, effect should not be given to it to the prejudice of Rosaria, and the possible prejudice to Cristina.
In these circumstances, the order I favour as to the costs of the proceedings below is that:
1. the respondent's costs be paid out of the estate on the indemnity basis; and
2. the respondent pay 90% of the appellant's costs of the proceedings below on the ordinary basis and be entitled to indemnity from the estate in respect of his liability.
[5]
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Decision last updated: 06 October 2022