The plaintiff, the NSW Trustee and Guardian, commenced proceedings by Statement of Claim on 8 July 2020 against the defendant, Michael Reading ("Michael"). This Statement of Claim sought, amongst other things, an order that the plaintiff be given vacant possession of a property at Bingara on the basis that the gift to Michael contained in the Will of his deceased father granted him a personal right of residence had "adeemed" or "failed" because Michael had not kept the house in a habitable state.
Michael filed a Defence on 10 August 2020. Given the issues raised in the Statement of Claim, he also filed a cross-claim seeking a declaration that he was entitled to the life interest in the property or in the alternative a right to reside in the property and that the plaintiff be permanently restrained from selling or dealing with the property until Michael's life interest or right to reside was determined, as well as an order pursuant to Ch 3 of the Succession Act 2006 (NSW).
The proceedings came before me on 8 December 2020, 15 December 2020 and 15 February 2021 for Possessions List directions pursuant to Practice Note SC CL 6.
On 15 December 2020 I determined that the question of whether the plaintiff was entitled to possession of the property as alleged in the Statement of Claim should be heard first: NSW Trustee and Guardian v Michael Reading [2020] NSWSC 1831.
Through his counsel Mr Hill, at the various directions hearings Michael maintained the position that the filing and serving of the Cross-Claim was a necessary consequence of the Statement of Claim filed by the plaintiff, because of the assertion that he should be forced out of the property that had been gifted to him to live. It was also pointed out early in the proceedings that if the plaintiff's claim failed, there would be no need for Michael to pursue that Cross-Claim.
In January 2021 the plaintiff through its solicitor Mr Johnson indicated that it wished to discontinue the proceedings, but proposed to do so on the basis that the plaintiff pay only the "costs of the defendant in the proceedings on the Statement of Claim as agreed or assessed", but not to pay the costs incurred by the defendant in respect of the Cross-Claim.
Michael maintained that the plaintiff should also pay the costs incurred by him on the Cross-Claim, because the purpose of costs is compensatory and he should be compensated for all of the costs he has incurred in the proceedings. The plaintiff could have limited its liability to pay costs if it had proposed the discontinuance earlier, rather than waiting until the proceedings had been set down for hearing. Further, the proceedings were commenced by the plaintiff at a time when it did not own the property, and so had no proper basis upon which to claim possession.
The Uniform Civil Procedure Rule 2005 (NSW) ("UCPR") relevant to discontinuance of proceedings is:
12.1 Discontinuance of proceedings
(1) The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant -
(a) with the consent of each other active party in the proceedings, or
(b) with the leave of the court.
(2) A notice of discontinuance -
(a) must bear a certificate by the plaintiff, or by his or her solicitor, to the effect that the plaintiff does not represent any other person, and
(b) except where it is filed with the leave of the court, must be accompanied by a notice from each party whose consent is required by subrule (1) to the effect that the party consents to the proceedings being discontinued in accordance with the notice of discontinuance.
(3) If any such consent is given on terms, those terms are to be incorporated in the notice of consent.
(4) If any party has not been served with the originating process, the plaintiff must file an affidavit to that effect.
(5) For the purposes of this rule, proceedings on a cross-claim are taken to be different proceedings to the proceedings on the originating process and to proceedings on any other cross-claim.
Also relevant in relation to costs is r 42.19:
42.19 Proceedings discontinued
(1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1.
(2) Unless the court orders otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued.
…
Mr Johnson submitted that I should take into account that when the proceedings were commenced, they were "justified", but there had been a number of supervening events that militated against success of the proceedings, rendering them effectively futile or wholly removing the plaintiff's cause of action. It argued that it was only after proceedings were commenced that the property was returned to what could arguably be considered a habitable condition, (although there was still some debate about that). The Cross-Claim filed was different in nature and not relevant to the determination of the claim made in the Statement of Claim which was a claim confined to the fact that the property was uninhabitable, regardless of whether the gift was a personal right of residence or a life estate.
Mr Johnson disputed that the plaintiff's Statement of Claim was "misconceived" as asserted by Mr Hill. Things changed when the Court decided to list the Statement of Claim for separate hearing. That event, in combination with the earlier supervening events and the small value of the assets of the estate resulted in the plaintiff determining that it was in the best interests of the beneficiaries of the estate that the Statement of Claim be discontinued. This in no way indicates the Statement of Claim should not have been filed.
Mr Johnson argued that in the exercise of its discretion as to costs, the Court should bear in mind that the circumstances here was not a distinction between a successful party and an unsuccessful party. The position is more complex than that. There should be circumspection applied to whether there could justifiably be a conclusion that a party had not acted reasonably in commencing proceedings when there had not been a final hearing, because the discontinuance was to be filed prior to such final hearing.
Emphasis was placed by Mr Johnson upon the analysis of Basten JA in Bitannia Pty Ltd v Parklane Constructions Pty Ltd [2009] NSWCA 32 and in particular at [81]:
[81] As has been noted on more than one occasion, the variety of relevant factors renders it difficult to reduce the exercise of discretion by characterisation of the reason for discontinuance: see, e.g., O'Neill v Mann [2000] FCA 1680 at [13] (Finn J). There is also a risk that the subjective motivations of the plaintiff in discontinuing may be put forward as a basis for some other order. Except to the extent that such views may have been put before the defendant, for example as a basis for settlement, and be established as such on the evidence, subjective considerations of one party will generally be immaterial, so that the discretion will be exercised on the basis of the objective circumstances established on the evidence."
Mr Johnson rather dogmatically maintained the position that the Michael did not "need" to commence the Cross-Claim in these proceedings, that it was "separate", and that the plaintiff acted appropriately when the evidence "changed", leading to the proposed discontinuance in January 2021.
The plaintiff proposed that the following costs orders should be made:
(a) with respect to the Statement of Claim:
Leave granted to the plaintiff to discontinue the whole of the proceedings on the statement of claim on the following terms:
The plaintiff pay the costs of the defendant of the proceedings on the statement of claim as agreed or assessed.
The Court notes the agreement of the plaintiff not to commence further proceedings in respect of any claim made in the proceedings on the statement of claim.
(b) with respect to the Statement of Cross-Claim:
The statement of cross-claim be transferred to the Family Provision List in the Equity Division of this Court.
or-
Leave granted to the cross-claimant to discontinue the whole of the proceedings on the statement of cross-claim on the following terms:
The cross-claimant pay the costs of the cross-defendant of the proceedings on the statement of cross-claim as agreed or assessed.
The Court notes the agreement of the cross-claimant not to commence further proceedings in respect of any claim made in the proceedings on the statement of cross-claim.
[2]
Decision
The plaintiff's proposed approach ignores the basic fact that it seems that the plaintiff did not own the property at the time it commenced the proceedings for possession and so had no proper basis to commence.
Second, even if I am wrong about that, and it could be held that it did, it ignores the fact that in filing his Defence as required by the UCPR, Michael had an obligation to also consider and file any relevant cross-claim at the same time, otherwise leave of the court would later be required.
Third, the Defence and the Affidavits filed by or on behalf of Michael promptly in August 2020, made it very clear what he would say about why the assertions that the gift had adeemed or failed should not be accepted by a Court. There was nothing new of significance filed between September and January 2021.
Fourth, the plaintiff commenced proceedings on the robust assertion that due to Michael's failures, it was entitled to possession of the property. It included an assertion that the basis of the life estate or gift was now absent, and that Michael had no entitlement to remain in possession. It was entirely appropriate, indeed necessary, for Michael to file a cross-claim to set out the reasons why there was both a procedural and legal basis to assert his rights to remain in possession of the property.
Fifth, it was made clear by Mr Hill at the early directions hearings before me that the Cross-Claim only arose if the plaintiff's assertions in the Statement of Claim were pursued. If the plaintiff did not continue with the proceedings, and actively discontinued them, the Cross-Claim would, obviously, fall away as an issue or proceeding within these proceedings.
Sixth, all defendants have obligations under the UCPR and those rules required that any cross-claim be filed at the same time, in effect, as the Defence: r 9.1(1). The reason for this is obvious. It is best that a plaintiff know early what position a defendant is to take, both in terms of its defence(s) to the matters pleaded in the statement of claim, and any relevant issue between the parties that would provide some other basis upon which the claim(s) made by the plaintiff could be defeated.
If the requirements of that rule were not met, a defendant would have to seek leave of the Court to later file a cross-claim, including explaining why it was late. If the relevant basis for a cross-claim was known at the time the defence was filed, there could be no proper explanation for delaying articulating that in a cross-claim. Indeed the UCPR require that it be articulated at that early stage.
Acting responsibility, it was proper and necessary here for Michael to file the Cross-Claim when he did. He should not be penalised by having to bear his own costs of a cross-claim the UCPR required him to prepare and file.
The issue before me is what I should decide about costs where the plaintiff has acknowledged by its Notice of Discontinuance it wishes to file, that these proceedings ought not be further pursued.
Mr Johnson urged upon me that I should not conclude, because the plaintiff is now discontinuing the proceedings, that it was not entitled to start them and I should be cautious to impose a costs order on a party where issues have not been formally determined.
As a matter of principle, that submission is no doubt correct, however here, I am of the view that the appropriate orders are those contended for by the defendant.
The Statement of Claim posed a direct challenge to Michael's rights to remain on the property. Both the Defence and the Cross-Claim were filed in response to that challenge. Michael should be compensated for the costs incurred in properly meeting that challenge.
I do not accept the plaintiff's submission that things changed significantly after the proceedings commenced. All that "changed" was that Michael, with legal assistance, put his position into affidavit form and acted in accordance with the obligations imposed upon him by the UCPR. The Court then, pursuant to s 56 of the Civil Procedure Act 2005 (NSW), listed for hearing a preliminary question that could significantly shorten the proceedings, which were, as filed, proceedings for possession.
Whilst obviously no Court determined the issues on the evidence filed, there is a valid argument that the plaintiff should not have commenced the proceedings when it did as it had no proper footing upon which to do so.
The issue(s) taken by the defendant was/were articulated clearly and early, but the plaintiff pressed on with its allegations.
It would hardly be just or fair to Michael, where due to somewhat pre-emptory decision-making engaged in by the Trustee, he is forced to incur costs to defend himself to then, in effect, be made to bear those costs, or a proportion of them, because they are paid out of the estate in which he is entitled to share in accordance with his father's Will.
For these additional reasons, I will order that the costs not be paid out of the estate.
Each party proposed that final orders should include an undertaking by the other party not to commence further proceedings in respect of any claim in the Statement of Claim and the Cross-Claim. I am not satisfied it is appropriate to make any such order and would consider it pre-emptory to do so. However I would emphasise to the parties, and in particular to their legal representatives, that considered and courteous notice, and clear and cooperative communication, especially in a matter such as this involving a small estate, ought to be pursued before bellicose and litigious steps are taken.
In mid-September 2021 I notified the parties that I would be delivering judgment in respect of the question of the costs orders that would accompany the agreed discontinuance. Mr Johnson emailed Chambers on 13 September 2021, exhorting me not to publish my judgment and stating that he wished to make an application for orders to allow "one short affidavit", and some written submissions to be filed. The issues to which this material would go were not stated.
I listed the matter before me on 30 September 2021 to obtain an understanding as to what Mr Johnson was seeking. He informed me that he had "multiple" affidavits and needed four weeks to prepare them "because of COVID-19". He was unable to state who would be the deponents or why multiple affidavits were necessary now, or their relevance to costs. It seems the issue to which this material was to be directed was complaint about how and by whom the life estate in the property was currently being exercised, rather than anything to do with the issue of costs, which is the only remaining issue. There was no formal application made, nor was any notice of motion filed.
Having considered the position with the benefit of the transcript of the oral submissions made on 30 September 2021, I do not consider it appropriate to allow the general reopening of the issues in this case in the way proposed by Mr Johnson.
[3]
Orders
The orders I make are:
1. The proceedings of the Statement of Claim and the First Cross-Claim are dismissed.
2. The plaintiff is to pay the costs of the defendant on the Statement of Claim and First Cross-Claim as agreed or assessed and the plaintiff not have recourse to the deceased's estate to pay such costs.
3. The directions hearing listed on Thursday 7 October 2021 is vacated.
[4]
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Decision last updated: 06 October 2021