Peter Deerson & Ors v Elizabeth Dee

Orders made by consent 26As I mentioned above, settlement discussions between the parties resulted in orders being made by consent on 25 June in the following terms: The Court orders: 1. The defendant to pay all outstanding rates in respect of Lot 60 DP 756725 (Lot 60). 2. The Plaintiffs to pay all outstanding rates (other than for Lot 60) and all future rates, in respect of lots transferred to them pursuant to order (3). 3. The trust under the will of the late Garth Deerson as varied by Consent Order of 22 May 2007, be wound up by the defendant providing to the plaintiffs signed transfers and certificates of title to the following lots within 28 days, transferring the land to the plaintiffs: a. Lots 8,9,10,11,12,13 in DP 45188 b. Lots 24,25,27,34,60 in DP 756725 c. Lot 1 in DP 799309 d. Lot 1 in DP 809689 e. Lot 1 in DP 799311 4. Within 2 months, the Defendant prepare an s88B CA instrument which provides for covenants in substance as follows: Burdening Lot 60 and Lot 5 DP 48667 (Lot 5), and benefiting the Local Council, advising future owners of either properties of the existence of the development consent dated 18 October 2000 (DA 06/2000) and the conditions of approval. 5. The plaintiffs not to lodge the transfer in respect of Lot 60 or otherwise sell or transfer Lot 60, for 6 months or up to the date of the registration of the s.88B CA instrument (whichever shall first occur), so as to allow the defendant to prepare a s.88B instrument (or otherwise take the steps in 7 below). 6. The plaintiffs reasonably co-operate in all respects with the lodgement of the s.88B instrument prepared by the defendant as soon as practicable after it is supplied to them (including by providing any necessary consent, lodging or signing any documents or lifting any caveat). 7. Further, in the event that a s.88B CA instrument is not able to be lodged in whole or in part, the plaintiffs will reasonably co-operate in all respects with the lodgement of a s.46A RPA or s.88E CA instrument prepared by the defendant, to the same effect (but benefiting each adjoining lot if under s.46A RPA) as the covenants (or part of the covenants) proposed above, which is not able to be lodged under s.88B CA, as soon as practicable after it is supplied to them (including by providing any necessary consent or lifting any caveat). 8. Liberty to apply with 7 days' notice. 9. The Summons and Cross-Summons be otherwise dismissed. The Court notes the following further agreement between the parties: 1. The defendant to take all reasonable steps to have Lot 60 separated from Lots 4 and 5 for Council Rate purposes. 2. The plaintiffs agree that once Lot 1/799311 is transferred to them that they: a. will be bound by the terms of the Access Licence Agreement dated 23 August 2000, as novated, varied and extended; and b. will, if requested by the Defendant, sign a new licence agreement for the benefit of the Lessee of the communication facility on Lot 5 in the same terms as the Access Licence Agreement. 3. The plaintiffs jointly and severally to indemnify the defendant as executor of the Estate, and as trustee of the trust, from and against liability for capital gains tax that may be assessed on the estate, or the trust, as a result of the 2007 consent orders, the winding up of the trust or the transfers of the lots pursuant to these orders. 4. The parties mutually release each other from any claims or liability in connection with the administration of the trust or the estate (other than obligations created under today's court orders and this agreement). 5. The plaintiffs are liable to pay any stamp duty, if any, in respect of the land transfers set out in clause (3) above. And the Court directs as follows in connection with costs: 1. The defendant to file and serve submissions on costs (and any associated bundle of documents) by 4 July 2014. 2. The plaintiffs to file and serve submissions in response (and any associated bundle of documents) by 11 July 2014. 3. The defendant to file and serve any submissions in reply by 18 July 2014. 4. Either party may write to the Court, prior 20 July 2014, to seek to re-list the matter to arrange a time for oral submissions. If no such re-listing is arranged, the question of costs will be determined on the papers. 27As is clear from the final four paragraphs, the issue of costs remained outstanding. Written submissions were provided on the question of costs, and it was not necessary for counsel to make oral submissions. Therefore the question of costs was determined on the papers, the plaintiffs contending for an order for indemnity costs and the defendants contending that there be no order as to costs.

The plaintiff's submissions 28The plaintiff seeks indemnity costs, and orders pursuant to UCPR rule 42.25 that the defendant's costs, including the costs ordered in these proceedings, not be paid out of fund held in the trust. It is acknowledged that this order may not have much practical effect given the trust was to be wound up as a result of the orders made on 25 June. 29The plaintiff acknowledges the principles in Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, to which I will return, but points to the statement by McHugh J that "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". In the present case, the plaintiffs submit that they had no other alternative but to commence proceedings given the prior history of the parties and the asserted failure of the defendant to comply with consent orders made in 2007. 30The plaintiff asserts that there was a clear breach by the defendant of her obligations as trustee, and that ample warning letters were sent to the defendant about the nature of the plaintiff's claims and the consequences as to costs at all times. 31Although some correspondence appeared in the court book, largely the following correspondence was attached to the submissions of the plaintiff and no objection was taken. 32On 29 June 2012, the solicitors for the plaintiff wrote to the defendant to arrange for the transfer of title to the lots outlined in the consent orders. It was noted that the letter would be tendered in an application for costs. 33On 17 July 2012, the solicitors for the plaintiff wrote to the defendant's solicitor, highlighting the time period that had elapsed since the consent orders were made and requesting that the defendant be advised of the costs consequences. 34On 16 April 2013, the solicitors for the plaintiff wrote to the defendant's solicitor to invoke the principle in Saunders v Vautier. Again, the issue of costs being sought against the defendant personally was clearly emphasised. 35On 6 May 2013, the solicitors for the plaintiff wrote to the defendant's solicitors and reiterated their position from the letter of 16 April. 36On 9 April 2014, an offer of compromise was made by the plaintiffs, purporting to be compliant with the relevant rules under the UCPR but otherwise taking effect as a Calderbank letter. 37On 11 June 2014, a settlement offer was made which the plaintiff asserts was at least as favourable as that obtained at the hearing (subject to a costs order). This offer included a claim for $30,000 to be paid on account of the plaintiff's costs. 38It should be noted that the plaintiff does not seek costs from a particular date or offer, but rather on an indemnity basis more generally.

The defendant's submissions 39Counsel for the defendant makes three key submissions in support of the position that there be no order as to costs. 40The first point is that the outcome of the proceedings was a compromise that did not involve the hearing of evidence. Counsel for the defendant asserts that the court is deprived of the information necessary to properly evaluate who might bear the burden of costs. 41In Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625, McHugh J held: In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. 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 extracurial 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. ... 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. [emphasis added, footnotes omitted] 42More recently, in Stateland Developments Pty Ltd v Princi [2007] NSWSC 709 at [11], Gzell J observed: Furthermore, the court should be careful not to raise the ogre of shadow trials of issues in cases that have not comprised a hearing on the merits. That course of action would discourage parties from settling their disputes and is not a process that the court should encourage in the just, quick and cheap resolution of the real issues in the proceedings. 43The defendant asserts that there was no capitulation because she achieved partial success both on the cross-summons (in relation to the Optus tower access licence) and beyond (a comprehensive release in connection with the administration of the trust and estate, an indemnity in respect of income tax and confirmation that the plaintiffs were liable for any stamp duty). The defendant also points to the relief sought by the plaintiffs which was not obtained, namely certain rates being paid by the defendant and an immediate transfer of the house lot. 44The second point relied upon by the defendant is that the rules relating to the imposition of costs on an executor, trustee or litigant in a claim under the Family Provision Act should be adhered to. The plaintiff relies upon UCPR rule 42.25 in relation to the costs being paid out of the funds held as trustee. UCPR rule 42.25 provides: 42.25 Costs of trustee or mortgagee (1) Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be. (2) The court may order that the person's costs not be so paid if: (a) the trustee or mortgagee has acted unreasonably, or (b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund. 45Reliance is also placed on my observation in Ploder v Garcea (as executrix of the estate of the late Garcea) [2013] NSWSC 1360 at [109] that it is not uncommon in family provision cases that no order as to costs is made against an unsuccessful applicant. 46The third point is that the offers of compromise made by the plaintiff do not assist them in obtaining indemnity costs, on the basis that the defendant did better than those offers and obtained greater and broader relief. No challenge is made to the compliance of those offers with the rules, although a final offer made by the plaintiffs on 11 June 2014 includes a requirement that costs of $30,000 be paid which is said to undermine any evaluation of whether the offer was better or worse than the final outcome achieved. 47Counsel for the defendant compares the various offers made and asserts that it cannot be said that Ms Dee did worse than any offers made to her, or that she unreasonably rejected the offers made to her (per East West Airlines Ltd v Turner (No 2) [2010] NSWCA 159 at [13]-[15]). 48It should be noted that although the defendant also made offers of compromise, these are not relied upon to shift the burden of her costs.

Discussion 49Although at the beginning of the hearing I expressed tentative views on a number of issues, they were made having only read the papers and before any evidence or submissions on the merits, which of course never took place. As Gzell J observed in Stateland Developments, it is inappropriate for me to conduct a shadow trial of those issues on an argument as to costs. 50It may well have been the case that certain findings could have been made, for example, as to the reasonableness of the defendant's conduct, or whether the consent orders made in 2007 should be set aside. However, in the absence of a hearing on the merits, a case such as this would really entail the Court acting as a clairvoyant and exercising discretions on the basis of mere speculation and untested evidence. 51It is clear, as I indicated on 25 June, that there would have been undoubtedly have been a number of disputed questions of fact, issues of credit and complex questions of law (T41/18). 52In my view, none of the matters discussed by McHugh J in Ex parte Lai Qin that would justify an order for costs have been established in this case. I am certainly not satisfied that either the plaintiffs or the defendant has acted so unreasonably that the other party should obtain the costs of the action, nor that either was almost certain to have succeeded if the matter had been fully tried. 53Finally, the defendant seeks to vacate an order made on 17 September 2013 that she pay the plaintiff's costs of that day. 54The short minutes of order indicate that the defendant was to file and serve its cross-summons by 22 October 2013 (previously any cross-claim was to be filed and served by 10 September 2013). The court file indicates that there were no appearances on 17 September and it is not clear whether these orders were consented to. 55The defendant seeks that I exercise my discretion to vacate the order for two reasons, namely the general operation of UCPR r 42.25 in conjunction with the fact that the plaintiffs are receiving the totality of the trust estate, and the relatively weak financial position of the defendant. No submissions are made by the plaintiff on this point. 56In my view, there is not sufficient material upon which I consider that I could exercise judicially my discretion to vacate an order. The only description given by the defendant is that "in some sense this costs order stands in isolation as a purely procedural event", without any further detail or background. Given the order appears to have been made in the absence of appearances, the costs order may well have been consented to by the defendant in exchange for the plaintiffs consenting to an extension of time. However, in the absence of a convincing basis upon which to set aside the order, I am not minded to do so in this case. 57Therefore there will be no order as to costs, other than that already made on 17 September 2013. Given the lack of practical utility, I do not propose any order in relation to the defendant's costs being paid out of trust funds.

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