Richards v Gray No 2

Court of Appeal (NSW)|2014-03-28|Before: Bathurst CJ, Beazley P, McColl JA, Basten JA, Meagher JA, McCallum J

Judgment 1BATHURST CJ: This judgment should be read in conjunction with the judgment of this Court of 2 December 2013, Richards v Gray [2013] NSWCA 402 (the 2 December 2013 judgment). 2The 2 December 2013 judgment dealt with four issues summarised in pars [7]-[11] of that judgment. The appellant was successful on the first and second issues. All members of the Court held that it was not appropriate to award damages to the respondent for an amount to manage the funds set aside to pay the fees incurred in managing the verdict she obtained (funds management on funds management). All members of the Court also held that it was not appropriate to make an allowance for the costs of managing income derived from the investment of the fund the subject of the verdict (funds management on funds income). 3The respondent was successful on the third and fourth matters in issue, namely, the question of whether any deductions should be made from the fund for the purpose of calculating fund management fees and whether allowance for those fees should be based on the rates charged by The Trust Company as compared to the fees charged by the NSW Trustee and Guardian. 4The result was that the verdict in favour of the respondent in respect of fund management fees was reduced from two million and two hundred and twenty two thousand dollars ($2,222,000) to one million and four hundred and ninety five thousand dollars ($1,495,000), a reduction of seven hundred and twenty seven thousand dollars ($727,000). 5In these circumstances the parties made submissions as to the appropriate orders for costs in this Court and in the Court below. 6With respect to costs in the Court below, each party contested the decision of the primary judge to award the respondent half of her costs after 19 August 2011. This was the subject of the respondent's cross-appeal. The reduction by the primary judge was made taking account of the fact that the plaintiff persisted, after the service of an affidavit of a Mr Farrell on 19 August 2011, in the allegation that the fees disclosed by the NSW Trustee and Guardian did not represent the true cost of fund management borne by clients of that entity. The appellant contended that this affidavit put the matter beyond doubt. The appellant contended that the respondent should bear the costs of the proceedings after 19 August 2011, whilst the respondent contended there should have been no reduction in the costs payable by the appellant for this period.

The costs of the trial 7So far as costs for the trial were concerned, the appellant contended for the latter of the two costs orders foreshadowed by Basten JA in his judgment of 2 December 2013 (at [234]), namely, that each party bear his or her own costs from the date of the first judgment, 16 August 2011 or that the respondent pay the appellant's costs from the period 16 August 2011 to 8 December 2011. The appellant stated incorrectly that the other members of the Court agreed. They did not; they only agreed with the orders proposed by Basten JA for the disposition of the costs question. 8The appellant also submitted that as the evidence of the fee structure of the NSW Trustee and Guardian was found by this Court to be inadmissible (judgment of 2 December 2013 at [160]) the primary judge erred in taking the evidence into account. He submitted that irrespective of the success of the respondent on the choice of trustee, the vast preponderance of the time taken up after 8 August 2011 was in respect of issues on which the appellant was successful and in these circumstances the Court should order the respondent pay the appellant's costs on and from 8 August 2011. 9The appellant had made an offer of settlement piror to the hearing before the primary judge (the Offer). The respondent submitted that it was relevant in considering the appropriate order for costs that the ultimate verdict obtained by her was greater than the Offer. The appellant submitted that it was irrelevant, presumably on the basis that the Offer was not accepted. 10The respondent submitted that costs should follow the event unless it was shown that the successful party had acted unreasonably. She submitted that she was justified in investigating the NSW Trustee and Guardian fees as there were in fact indirect fees, albeit that they were offset by rebates and a reduction in the investment fee charged. The respondent submitted that the offset was only established when Mr Farrell served an affidavit of 3 November 2011, after which the point was conceded. She said the primary judge overlooked the fact that the appellant could have not challenged the choice of trustee. 11The respondent acknowledged that she was unsuccessful on the matters the subject of the judgment of the primary judge on 16 August 2011. She accepted she should pay the appellant's costs from and including 8 August 2011 to 16 August 2011. She submitted that after that date, as her conduct led to a substantial improvement in her position and it was open to the appellant to accept that fund management costs awarded by reference to the rates of a private Trustee were reasonable, the appellant should not be rewarded with a reduction in costs after that date.

The costs of the appeal 12The appellant submitted that the respondent was unsuccessful on her cross-appeal and largely unsuccessful in resisting the appeal. As I have indicated, the cross-appeal related to the costs order made by the primary judge in respect of the proceedings after 19 August 2011, a matter which was not determined by the first judgment (Gray v Richards [2011] NSWSC 877). 13The appellant submitted in the circumstances it was appropriate that the respondent pay the cross-appeal and 80% of the appellant's costs of the appeal. 14The appellant submitted that the Offer was irrelevant to the determination of the appropriate order for costs of the appeal. He further stated that although the matter was of general importance, the necessity to bring the appeal resulted from the continued assertions made by the respondent. 15The respondent submitted that having regard to various factors (including the fact that the appellant was only partially successful in the appeal, the fact that the ultimate verdict was greater than the highest offer made by the appellant at trial, the fact that the appellant was a severely brain-damaged person and the broad concern of the matters in the judgment to the appellant's insurer), the appropriate order was that each party pay their own costs of the appeal.

The costs of the trial 16The hearing of 16 August 2011 involved the issues on which the respondent was unsuccessful on appeal. As such the respondent should pay the costs of and incidental to that hearing. That does not seem to be contested. 17The issues on which the respondent was successful on appeal were dealt with by the primary judge in her third judgment on 13 April 2012 following a hearing which took place on 29 March 2012 (Gray v Richards (No 3) [2012] NSWSC 344). The primary judge concluded that the appellant should pay half the costs of the proceedings from 19 August 2011 to 8 December 2011. In reaching this conclusion the primary judge accepted (at [23]) that the respondent had been unsuccessful in respect of a substantial and costly part of her case but noted that it did not affect the outcome of that part of the claim. 18Her Honour noted in her third judgment that Mr Farrell's evidence, contained in his affidavit of 19 August 2011, ultimately was uncontested. However, her honour accepted that the issue was complex and warranted some investigation. Her Honour reached her conclusion taking these matters into account as well as the ultimate success of the respondent on the issue to which the evidence was directed. 19No error of discretion has been shown in the approach adopted by the primary judge. Further as Basten JA pointed out (2 December 2013 judgement at par [232]) the assessment made by the primary judge was made with full knowledge of the material submitted and the position taken by the parties in the course of the hearing. In these circumstances there seems to be no reason to disturb her Honour's orders in this regard. 20Subject to these above matters it was accepted by the parties that the appellant should bear the costs of the proceedings in the court below.

The costs of the appeal 21In his judgment of 2 December 2013, Basten JA pointed out that the appellant was unsuccessful on the funds management on funds management issue and the funds management on funds income issue. He stated that in relation to the deductions from the fund, the appellant was partly successful and party unsuccessful. 22Basten JA (at [237]) recognised that the case was treated as a test case. In these circumstances he expressed a provisional view (at [238]) that the respondent, having been unsuccessful in her cross-appeal and largely unsuccessful in resisting the appeal, must bear part of the costs of the appellant. Basten JA suggested that an appropriate proportion might lie in the range of 50%-80%. 23The approach of Basten JA to the question of costs of the appeal in my respectful opinion was correct. However, the judgment of the majority differed from Basten JA in that the respondent was wholly successful on the question of deductions from the fund and the choice of trustee for the calculation of rates. The fact remains that these issues occupied less time on the appeal than those on which the appellant was successful and the appeal resulted in a significant reduction in the verdict payable. 24I do not think that it is relevant that the ultimate verdict was greater than an unaccepted offer made by the appellant prior to the hearing at first instance. 25Taking all these issues into account, in my opinion the appropriate order is that the respondent be ordered to pay 50% of the appellant's costs of the appeal. 26In these circumstances I would make the following orders in addition to those made on 2 December 2013: (1)Set aside Orders 1A, 6 and 7 of the orders made by the primary judge and entered on 16 December 2011. (2)The defendant pay any part of the judgment amount not yet paid to the Trust Company Limited pursuant to s 77(3)(b) of the Uniform Civil Procedure Act 2005 (NSW). (3)Set aside the order for costs made by the primary judge contained in par [38] of her judgment of 13 April 2012 and in lieu thereof make the following orders: (a)Subject to subpars (b) and (c) hereof, order that the defendant pay the plaintiff's costs of the proceedings. (b)Order that the plaintiff pay the defendant's costs of and incidental to the hearing of 16 August 2011. (c)Order that the defendant pay one half of the plaintiff's costs of the proceedings from 19 August 2011 to 8 December 2011. (d)Order that the respondent pay 50% of the appellant's costs of the appeal. (e)If eligible the respondent be granted a certificate under s 6B(2) of the Suitor's Fund Act 1951 (NSW). (f)Cross-appeal dismissed. (g)Order that the respondent pay the appellant's costs of the cross-appeal. 27BEAZLEY P: I agree with Bathurst CJ. 28McCOLL JA: I agree with Bathurst CJ. 29BASTEN JA: I agree with the orders as to costs proposed by the Chief Justice and with his reasons. 30MEAGHER JA: I agree with Bathurst CJ.

Amendments 01 April 2014 - 2nd line delete "hundred" to read "two million and two hundred and twenty two thousand dollars" Amended paragraphs: [4] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 April 2014

Uniform Civil Procedure Act 2005(NSW)

Suitor's Fund Act 1951(NSW)

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