Samowitz v Wilson

Judgment 1HIS HONOUR: The plaintiffs wish to discontinue these proceedings. Unless a contrary order is made the plaintiffs will be liable to pay the defendant's costs up to the filing of the notice of discontinuance (Uniform Civil Procedure Rules 2005, r 42.19(2)). The plaintiffs seek such a contrary order. The defendant consents to the discontinuance but opposes the application that the plaintiffs have leave to discontinue the proceedings on terms that each party pay her own costs. The defendant submits that there is no reason to depart from the prima facie position that the defendant is entitled to her costs. 2Rule 42.19 relevantly provides: "42.19 Proceedings discontinued (cf SCR Part 52A, rule 21; DCR Part 39A, rule 24; LCR Part 31A, rule 19) (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. ..." 3The plaintiffs are daughters of the defendant. They commenced these proceedings on 30 April 2012 by summons. The summons sought declarations that three instruments executed by the defendant dated 17 February 2011 and 30 November 2011 were invalid due to the defendant's incapacity. They also sought a declaration that a power of attorney executed by the defendant dated 5 November 2009 was valid and an order that a Mr Cowen produce accounts and records relating to the defendant's estate. Mr Cowen was not joined as a defendant notwithstanding that an order was sought against him. 4On 5 November 2009 the defendant executed a power of attorney appointing the plaintiffs and Mr Cowen as her joint attorneys. The power was expressed to be an enduring power, that is, one that would persist notwithstanding that the defendant might become incapable. By their summons the plaintiffs asserted that that power of attorney remained on foot. By instruments dated 17 February 2011 the defendant purportedly revoked the power of attorney of 5 November 2009 and appointed Mr Cowen as the defendant's sole attorney and as enduring guardian. The plaintiffs contended that the plaintiff had no capacity to execute the instruments of revocation of the initial power of attorney and the appointment of Mr Cowen as the defendant's sole attorney and guardian. 5The defendant had been admitted to St Vincent's hospital in August 2010 following an hypoxic brain injury following seizures. The medical report following a neuropsychological assessment of 10 August 2010 stated that she had suffered significant cognitive, behavioural and sensory/visual deficits. 6A report of Dr Tisch, a consultant neurologist, dated 26 October 2010 stated that the defendant had improved significantly after her discharge from hospital. His report stated that the defendant had suffered significant parietal occipital brain injury and required constant supervision because of poor organisational skills and visual impairment. Dr Tisch said that nonetheless there was scope for further slow improvement in her overall level of function. In a referral dated 7 March 2011 to a psychiatrist, Dr Tisch stated that the defendant's seizure disorder had come under good control and she had returned to living in her flat with the assistance of a carer, and that although she had word-finding difficulties, there was surprisingly little cognitive impairment following the illness. 7There is evidence that the reason the defendant gave to her solicitor, Mr Vesely, and to Mr Cowen, for executing the documents on 17 February 2011 was that she did not want her daughters to have any further say in, or control of, her life. She is said to have complained that her daughters had not properly paid her carers, that she wanted a person who would pay for carers whom she chose, and she wanted jewellery returned. There were apparently other complaints. 8On 8 March 2011 the defendant's solicitor, Mr Vesely, asked Dr Tisch to provide a report as to whether as at the date of a consultation he had with the defendant on 24 February 2011, he believed that she had the mental capacity to understand the nature and extent of her assets and to understand the effect of cancelling the power of attorney which she had previously given to her daughters and of granting a substitute power of attorney to another person. It appears from a later letter from Mr Vesely to Dr Tisch of 19 September 2011 that Dr Tisch did not provide that opinion. On 19 September 2011 Mr Vesely wrote again to Dr Tisch. He said that he had not pursued the matter raised in March as there seemed to have been an acceptance of the status quo by the defendant's daughters. He wrote that nonetheless, issues had again arisen and he sought the opinion that he had previously requested. He also asked for Dr Tisch's opinion as to whether as at that date the defendant understood the nature and extent of her assets and the effect of cancelling and granting a power of attorney. 9On 17 November 2011 the defendant executed a confirmation of the documents that she had previously signed dated 17 February 2011 that revoked the power of attorney given on 5 November 2009 and gave a sole power of attorney to Mr Cowen. 10On 1 December 2011 Mr Vesely advised the plaintiffs' solicitors that the defendant had acted on the recommendation of Dr Tisch in executing a confirmation of the revocation of the power of attorney and a confirmation of the substitute power of attorney which she did after a conference with Mr Vesely on 30 November 2011. In his email of 1 December 2011 Mr Vesely advised the plaintiffs' solicitors that Dr Tisch had referred the defendant for evaluation by a Dr Burke at the psychogeriatrics department at St Vincent's hospital, but that Dr Burke had not accepted the referral because the defendant's age did not qualify her as a geriatric. Mr Vesely advised that Dr Tisch had referred the defendant to a neuropsychologist, a Dr Stewart, and that an appointment had been made with Dr Stewart for 21 December 2011. In that email Mr Vesely also advised that the defendant had made it clear that she did not want her daughters to have any involvement with a proposed sale of a Vaucluse property and that she was upset by what was said to be their refusal to return jewellery. 11Dr Stewart provided a report dated 5 January 2012. Dr Stewart reported that her assessment of the defendant was limited by the defendant's inability to tolerate a longer interview and by her unwillingness to participate in a formal assessment. Accordingly, Dr Stewart offered only an interim opinion. She said that a more comprehensive opinion would require a further appointment with the defendant and the defendant would need to co-operate with the formal assessment. Dr Stewart reported that on her initial assessment the defendant demonstrated very poor insight into the nature of her cognitive difficulties and her health in general. She said that the defendant's reasoning as to why she wanted to remove her daughters as attorneys appeared emotive rather than reflective. There was evidence of problems with memory and the defendant had difficulty with abstract conceptualisation, problem-solving and judgment, and was repetitive when giving vague and poorly thought out replies. Dr Stewart reported that the defendant did not appear to understand the full meaning and significance of her removing her daughters as attorneys and how this might impact on her vulnerability by leaving a sole attorney. She said that the defendant's cognitive condition on assessment did not provide evidence that the defendant necessarily understood the implications and far-reaching ramifications of the changes she was making to the power of attorney document that she signed. She did not appear to know the extent of her property or the value of her assets and relied solely on Mr Cowen's expertise and knowledge of her financial particulars. 12Mr Vesely took issue with Dr Stewart's conclusions and asserted that her report contained internal inconsistencies. 13The plaintiffs urged that Dr Stewart be allowed to complete her assessment and report, but Mr Vesely terminated Dr Stewart's retainer. He said that the defendant's reasons for the termination of the retainer included that Dr Stewart was unsympathetic with the defendant's increasing tiredness throughout the three-hour examination to the point where the defendant had to end it. Mr Vesely advised on 24 February 2012 that the defendant was willing to submit herself for assessment by another independent expert and that he had approached Associate Professor Tuly Rosenfeld, a senior specialist and consultant geriatrician who, Mr Vesely said, had extensive experience in the assessment of mental capacity in legal matters. On 24 February 2012 Mr Vesely asked Associate Professor Rosenfeld whether he was prepared to accept instructions to evaluate the defendant's capacity as at February 2011 when the previous power of attorney was revoked and a fresh power given to Mr Cowen, and as at November 2011 when she confirmed the previous documents. 14The plaintiffs were of the view that Associate Professor Rosenfeld was not an appropriate specialist to engage because he was a senior specialist geriatrician and the defendant was not geriatric. They commenced these proceedings on 30 April 2012. Associate Professor Rosenfeld provided a report to Mr Vesely on 6 May 2012. It was his opinion that the defendant continued to recover from brain injuries sustained during what had been described by Dr Tisch as an illness associated with brain hypoxia due to seizures when she was admitted to St Vincent's hospital. He noted that the documented damage to the defendant's brain was not associated with frontal lobe dysfunction. He expressed the opinion that the defendant retained capacity to undertake the granting of a power of attorney and to understand the nature and effect of a guardianship appointment. He did not proffer a retrospective opinion as to the defendant's capacity in February and November 2011. 15On 15 May 2012, after receipt of Associate Professor Rosenfeld's report, the defendant executed a fresh power of attorney in favour of Mr Cowen. 16On 6 September 2012 the plaintiffs filed a notice of motion seeking the appointment of a single clinical neuropsychological expert to examine the defendant. On 31 October 2012 the defendant's solicitor served a report of Professor Watson, a neurologist, on the question of whether in his opinion an additional assessment by a neuropsychologist would be of assistance and whether it would be warranted to assist the Court to make a determination of the defendant's mental capacity at the requisite time. Professor Watson provided an opinion on those matters in the course of which he noted that the reports indicated that much of the defendant's dysfunction related to the posterior regions of the brain rather than the frontotemporal regions. This meant that one would expect less interference with respect to capacity than would have been the case had there been similar degrees of damage to the frontal and temporal regions. 17The defendant objected to being further assessed by Dr Stewart. On or about 5 November 2012 orders were made by consent that the defendant submit to a medical examination by Mr Andrew Rock, a clinical neuropsychologist. The orders provided that the examination was to be limited to a clinical, as opposed to a psychometric, assessment of the defendant's mental capacity specifically in relation to the issues set out in the summons. Orders were made to seek to ensure that the assessment was not onerous to the defendant. Mr Rock was directed to limit his clinical assessment in its duration and nature, as he considered clinically appropriate and ethical having regard to the available medical material, the defendant's pre-disposition to fatigue and inability to undergo extended periods of interview, and the defendant's previous negative experience with a clinical neuropsychologist and with psychometric testing. The assessment was directed to be limited in time to no longer than one and a half hours. 18Mr Rock's report was provided to the plaintiffs on about 4 February 2013. He concluded that the defendant then had the capacity to sign and give an enduring power of attorney. He expressed the opinion that he would "cautiously conclude" that her capacity was "most likely impaired" in November 2011 and in February 2011. The latter conclusion was based on Dr Stewart's findings. 19After receipt of Mr Rock's report the plaintiffs offered to discontinue the proceedings. The plaintiffs' solicitor stated that the plaintiffs considered on the basis of Mr Rock's report that there were reasonable prospects of its being found that the defendant lacked capacity to execute the instruments that were the subject of the summons, but it was likely to be found that she currently had capacity to provide a power of attorney and that in essence nullified the purpose of seeking the orders in the summons. The plaintiffs proposed that the defendant consent to orders that the proceedings be discontinued with no orders as to costs. 20In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 McHugh J said (at 624-625): "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 extra-curial 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. ... 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." (Citation of authorities omitted.) 21The plaintiffs submit that they acted reasonably in commencing the proceedings and that they continued to act reasonably in the litigation until its further prosecution became futile following the defendant's execution of a fresh power of attorney on 15 May 2012 and the confirmation in the report of Mr Rock that the defendant had current capacity. 22In Australiawide Airlines Limited v Aspirion Pty Ltd [2006] NSWCA 365 and Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32, the Court of Appeal held that the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin are not readily applicable to a decision under UCPR r 42.19(2) or r 42.20(1). (Rule 42.20(1) provides in substance that if the court makes an order for the dismissal of proceedings then, unless the court orders otherwise, the plaintiff must pay the defendant's costs. This is similar to r 42.19(2) that provides that unless the court otherwise orders, or the notice of discontinuance (filed pursuant to leave or by consent) otherwise provides, the plaintiff must pay the defendant's costs.) This was because those rules provide a different starting point for the exercise of the court's discretion as to costs from that stated in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin which concerned a different rule of court that provided no starting point for the determination of how costs should be borne where proceedings are to be dismissed or discontinued by consent without a hearing on the merits. McHugh J drew heavily on the observations of Hill J in Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201. The relevant rules of the Federal Court were different from r 42.19 and r 42.20 in that they did not provide the same starting point for the exercise of the costs discretion. (See Federal Court Rules, Order 22, r 3 and Order 62, r 26 which provide no starting point for the exercise of the costs discretion if a proceeding is discontinued with leave.) 23In Australiawide Airlines Limited v Aspirion Pty Ltd and Bitannia Pty Ltd v Parkline Constructions Pty Ltd the Court of Appeal held that whilst the question whether the plaintiff acted reasonably in commencing and continuing proceedings was a relevant consideration, it was not determinative (Austwide Airlines Limited v Aspirion Pty Ltd at [45], [64]). In some cases it would not be possible without a hearing on the merits to say whether the plaintiff was acting reasonably in commencing the proceedings (Bitannia Pty Ltd v Parkline Constructions Pty Ltd at [57]). Mr Smallbone, who appeared for the defendant, submitted that this is such a case. 24The plaintiffs submitted that Dr Stewart's report provided a reasonable basis for the commencement of the proceedings. They were not bound to accept Mr Vesely's criticisms of that report. Although the force of those criticisms could not be determined without a hearing, they were not such as could have affected the reasonableness of the plaintiffs' decision to commence proceedings. 25Mr Smallbone also referred to an email written by the first plaintiff in November 2010 when the defendant was in the early stages of her recovery and prior to her signing the instruments of 17 February 2011. The first plaintiff expressed her own view indicating that she believed her mother had capacity to consider a proposal for the purchase of a property at Vaucluse on favourable terms to the first plaintiff and her husband. 26Moreover, the plaintiffs commenced the proceedings when they knew that a report had been commissioned from Associate Professor Rosenfeld, without waiting for that report. 27Having regard to the last two of these matters, I accept Mr Smallbone's submission that a hearing would be necessary to determine whether the plaintiffs did act reasonably in commencing the proceedings. 28In any event, a finding that the plaintiffs acted reasonably in commencing and continuing the proceedings would not be a sufficient reason to depart from the prima facie position that the plaintiffs should pay the defendant's costs on discontinuing the proceedings. The plaintiffs relied upon the fact that the proceedings had become futile because the defendant had executed yet a further power of attorney on 15 May 2012 and the medical evidence would be to the effect that she had capacity, by that time, or, in any event, by the end of 2012, to make a fresh power of attorney. In some cases, the occurrence of a supervening event that renders the proceedings futile will provide a sufficient reason to order otherwise pursuant to r 42.19(2) or r 42.20. But in this case the proceeding only served any real purpose insofar as it provided a vehicle for the plaintiffs to obtain an assessment of the defendant's current capacity. The plaintiffs did not assert that any transaction had been entered into by Mr Cowen through the instruments impugned by the summons. A determination that the defendant lacked capacity to make the instruments of 17 February 2011 or 30 November 2011 would have had no substantive consequence if she had capacity to make a fresh power of attorney, as she did on 15 May 2012. It does not appear that the plaintiffs had evidence that the defendant lacked capacity to make a fresh power of attorney, at the time the proceedings were commenced. They did not wait for the report of Associate Professor Rosenfeld. 29When the plaintiffs obtained the report of Mr Rock they were persuaded that there were no reasonable prospects of their establishing that the defendant then lacked capacity to make a fresh power of attorney. But it is not a sufficient reason to deprive a defendant of his or her costs that a plaintiff comes to the realisation before the hearing that the evidence is likely to be insufficient for the plaintiff to succeed. That is not a relevant supervening event. 30For these reasons I do not consider that I should make a contrary order under r 42.19(2). The plaintiffs should have leave to discontinue the proceedings, but pursuant to r 42.19(2) they must pay the defendant's costs. Rule 42.26 provides that if a party to proceedings has become liable under the rules to pay any of the costs of the proceedings of any other party, the court may order the party so liable to pay those costs. As Mr Smallbone noted, the rule is needed because it is necessary to have an order for costs in order to proceed to an assessment (Legal Profession Act 2004 (NSW), s 353(1)). I will make an order accordingly. 31The costs of the notice of motion filed on or about 6 September 2012 were reserved by the orders made by Gzell J on or about 5 December 2012. Mr Hourigan for the plaintiffs submitted that the plaintiffs were successful in obtaining an order for the examination of the defendant by a neuropsychologist and accordingly even if the plaintiffs were ordered to pay the defendant's costs of the balance of the proceedings, that order should not extend to the costs of the notice of motion. 32The defendant's concern appears to have been a concern about the onerousness of a psychometric assessment by a neuropsychologist. The consent orders of 5 December 2012 provided safeguards against an examination that would be too onerous to the defendant. The orders involved an element of adjustment on both sides. The notice of motion was but part of the gathering of evidence in the proceedings. It was an ordinary incident of the litigation. In my view the costs of the notice of motion should be costs in the proceedings and therefore covered by the general order as to costs. 33For these reasons I make the following orders: