State Trustees Ltd v Christodoulou & Ors [2010] VSCA 86

1 I will ask Emerton AJA to read the judgment of the Court.

2 This is an application on summons by the applicant, State Trustees, under s 17A(1) of the Supreme Court Act 1986 (Vic) for leave to appeal a costs order made by Kaye J on 14 December 2009.

3 The proceeding below in respect of which the costs order was made was brought against the first and second respondents in the name of Paraskevi Christodoulou (Mrs Christodoulou) by State Trustees as the administrator of Mrs Christodoulou's estate under the Guardianship and Administration Act 1986 (Vic). It arose from the transfer of Mrs Christodoulou's interests in her former matrimonial home to the first respondent, her son. It was submitted that the transfer of property to the first respondent should be set aside on the grounds that it was procured by undue influence or, alternatively, that there was unconscionable conduct by the first respondent. Damages were also claimed against the second respondent, who acted as Mrs Christodoulou's solicitor in the transaction.

4 Mrs Christodoulou was 83 years old at the time of the property transfer. The property in question was her family home, which had been occupied by Mrs Christodoulou and her former husband, who were originally joint registered proprietors. When they became involved in proceedings in the Family Court of Australia, an order was made that the property be sold and the proceeds be shared equally between Mrs Christodoulou and her former husband.

5 On 8 April 2006, Mrs Christodoulou and the first respondent purchased the property at auction as tenants in common. The first respondent obtained a loan to purchase the property, and this loan was secured by a mortgage over his family home.

6 On 17 July 2006, Mrs Christodoulou and the first respondent signed a deed by which Mrs Christodoulou transferred all of her rights over the property, her title and interests to the first respondent. In consideration for this, the first respondent would provide Mrs Christodoulou with care and a life interest to reside in the property.

7 On 18 April 2007, Mrs Christodoulou was placed in an aged care facility. State Trustees Ltd was appointed her guardian by order of the Victorian Civil and Administrative Tribunal on 7 July 2008.

8 State Trustees commenced the proceeding below on 29 December 2008 in the name and on behalf of Mrs Christodoulou, as it was empowered to do by s 58B(2)(l) of the Guardianship and Administration Act.

9 The proceeding was heard by Kaye J over several days in late November and early December 2009. On 14 December 2009, his Honour handed down his judgment. His Honour held that the claim brought in the name and on behalf of Mrs Christodoulou against both defendants (the respondents to this application) should be dismissed. A cross-claim by the first defendant against the second defendant was also dismissed.

10 The transcript of the hearing before his Honour on the day that his Honour handed down judgment records that immediately upon the handing down of judgment, an application for costs on a solicitor/client basis was made by counsel for the second respondent. Counsel commenced her submissions in the costs application by saying:

If I can hand to Your Honour a submission that I prepared and Your Honour, we seek an order that the State Trustees Limited which is the litigation guardian, pay the second defendant's costs of the proceeding including any reserve costs to be taxed on a solicitor and client basis.

Counsel for the second respondent then went on to make submissions as to why the Court should make an order against State Trustees for solicitor/client costs.

11 Although his Honour was critical of the way the case against the second respondent had been made, he indicated that he did not consider this to be sufficient to warrant an order for costs on a solicitor/client basis. Counsel for the first respondent then made an application for costs on a party/party basis against State Trustees, rather than against the plaintiff in a personal capacity.

12 His Honour made a ruling. At the conclusion, his Honour said:

HIS HONOUR: It is an order for State Trustees, is that right?

COUNSEL FOR SECOND RESPONDENT: Yes, it is, Your Honour, because the State Trustees is an administrator but is treated as being as a litigation guardian under the Rules, so it would be State Trustees Ltd.

His Honour then pronounced orders that State Trustees now seeks to challenge on appeal.

13 The grounds of appeal sought to be agitated by State Trustees are set out in the draft notice of appeal. They are:

(1) The trial judge made the costs order on the basis of a mistake of fact, namely that State Trustees Limited had been appointed as litigation guardian of the plaintiff, when in fact no such appointment had been made.

(2) The trial judge erred in making the costs order against State Trustees Limited in circumstances where:

(a) State Trustees Limited was not a party to the proceeding;

(b) State Trustees Limited had no personal interest in the outcome of the proceeding and acted throughout for the benefit of the plaintiff;

(c) State Trustees Limited was not given the opportunity to make submissions as to whether it should be made liable for the costs of the defendant.

14 State Trustees seeks orders that the costs order against State Trustees be set aside, that the question of the costs of the trial of the proceeding be remitted to the trial judge for further hearing and determination, and any further or other orders that the Court deems appropriate.

15 The basis for the first proposed ground of appeal is that counsel for the second defendant was in error when she told his Honour that State Trustees was the plaintiff's litigation guardian. At no stage during the proceeding had State Trustees been appointed to be Mrs Christodoulou's litigation guardian. State Trustees was, at all material times, the administrator of the property of Mrs Christodoulou under the Guardianship and Administration Act, but was not a litigation guardian.

16 In its submissions, State Trustees recognises that an application to the Court of Appeal for leave to appeal against a discretionary order for costs made by a judge would not ordinarily be granted unless there is some good reason, over and above this Court's own opinion of what would have been the best costs order in the particular circumstances. However, it contends that in this case the trial judge's discretion has miscarried because it was made on a false basis; namely, that State Trustees was appointed as Mrs Christodoulou's litigation guardian.

17 Moreover, it contends that the trial judge erred in making the costs order against State Trustees as a non-party to the proceeding, in circumstances where it had no personal interest in the outcome of the proceeding and acted throughout for the benefit of Mrs Christodoulou. Furthermore, it says that it was not given the opportunity to make submissions as to whether it should be made liable for the costs of the first and second respondents.

18 It is questionable in our view whether the costs order was in fact made on the basis of a misstated fact of the kind described. As we have previously mentioned, before pronouncing the costs order, the learned trial judge asked whether it was to be made against State Trustees. In answer to this question, his Honour was told that State Trustees was an administrator, but was treated as being 'as a litigation guardian' under the Rules. This, in our view, clarified for his Honour that State Trustees was an administrator, but had not been appointed as a litigation guardian. We accept the submission from the first respondent that had there been any misapprehension in the mind of the learned judge below, it was resolved prior to the making of the costs order.

19 Moreover, as the first respondent points out in his submissions, there is no reason to suspect that the alleged error affected the exercise of his Honour's discretion as to the award of costs. Where an unsuccessful proceeding is brought on behalf of a person with a disability, it is not unusual for the representative to bear the costs, and to be entitled to an indemnity from the represented person.

20 It was also submitted by the first respondent, correctly in our view, that the assertion that State Trustees was denied an opportunity to make submissions on costs is without foundation. Counsel and instructing solicitors for the plaintiff took instructions from State Trustees and not from Mrs Christodoulou, who was not able to provide such instructions. Had separate counsel been required to argue the costs application on behalf of State Trustees, counsel for the plaintiff could have requested an adjournment for that purpose. No such application was made or even mooted. In our view, State Trustees was not denied an opportunity to be heard on the question of costs.

21 Moreover, it is arguable that once State Trustees decided to commence the proceeding in the name of Mrs Christodoulou and to conduct the litigation on her behalf, it ought to have taken the requisite steps under r 15 of the Supreme Court (General Civil Procedure) Rules 2005 to have itself appointed as Mrs Christodoulou's litigation guardian. Rule 15.02 provides that except where otherwise provided by or under any Act, a person under a disability must commence or defend a proceeding by his or her litigation guardian. Although s 58B(2)(l) of the Guardianship and Administration Act authorises an administrator to bring and defend proceedings in the name of the represented party, the rules relating to litigation guardians seem to us to continue to be applicable, at least in this case. Rule 15.03(2) provides that a person authorised by or under any Act to conduct legal proceedings in the name of or on behalf of a handicapped person shall be entitled to be litigation guardian of the handicapped person in any proceeding to which that person's authority extends. In order to do so, r 15.03(6) requires that the litigation guardian either be appointed by the Court or satisfy certain procedural requirements contained in that sub-rule. State Trustees has not taken this step, and now seeks to argue that it is not liable for costs because of this fact.

22 Finally, State Trustees contends that costs ought not to be ordered against it as a non-party unless it satisfies the four criteria that were identified by the High Court of Australia in Knight v FP Special Assets Ltd.[1] In that case, Mason CJ and Deane J recognised what they described as a 'general category of case' in which an order for costs should be made against a non-party. That category exists where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.

23 Rather than regarding the High Court as describing circumstances where an order should be made, State Trustees contends that Knight sets out four necessary matters that must be satisfied before an order for costs against a non-party can be made. In our view this position is misconceived. The learned trial judge was not precluded from making an order for costs against State Trustees as a non-party (if it could properly be so described) because not all of the factors identified in Knight could be satisfied. The Court's general discretion as to costs was not fettered in the way suggested by State Trustees.

24 In any event, as the first respondent points out in his submissions, the definition of 'party' in s 3 of the Supreme Court Act 1986 (Vic) may be sufficiently broad to encompass State Trustees. We form no concluded view on that.

25 Senior Counsel for State Trustees relied upon s 58B(1)(b) of the Guardianship and Administration Act 1986. This section provides, in effect and so far as is relevant, that it is the duty of State Trustees to recover the property of the represented person. This, senior counsel submitted, was what his client was doing in this case. It would be unfair, his submission continued, if in order to do its duty State Trustees was forced to expose itself to an order for costs which it must itself pay when, because the person State Trustees was representing had no assets, no recovery was possible from that source.

26 Whatever the general merits of this argument, it carries no weight in this case when the ownership of the asset sought to be recovered was in contest, where the benefits of recovery (if any) were not made known to the Court and where in any event State Trustees must always assess the requirement to fulfil the duty imposed by s 58B(1)(b) against the requirement imposed by s 49 to act in the best interests of the represented person.

27 In order to obtain leave to appeal, State Trustees must show first that:

(a) the costs order is wrong or attended with sufficient doubt to warrant reconsideration on appeal; and

(b) it would suffer substantial injustice if the costs order were not set aside.

28 So far as the susceptibility of costs orders to appeal is concerned, in Transport Accident Commission v O'Reilly,[2] Ormiston JA stated the principle that:

[i]t is extraordinarily difficult to show that a court of first instance ... with wide discretionary powers has erred in the exercise of its powers to award costs, if there be some basis for making an order other than the conventional order in favour of the successful party.

29 In our view, there is not sufficient doubt attending whether there was some basis for the making of the costs order to warrant its reconsideration on appeal. Moreover, we do not consider that State Trustees will suffer substantial injustice if the costs order is not set aside.

31 The order of the Court will be that the application for leave to appeal is refused with costs.

[1] [1992] HCA 28; (1992) 174 CLR 178, 192-193 ('Knight').

[2] [1998] VSCA 106; [1999] 2 VR 436.