Teterin v Linrod Pty Ltd

Supreme Court of NSW|2025-02-04|Before: Pike J

JUDGMENT

On 19 December 2024, I delivered judgment in these proceedings: Teterin v Linrod Pty Ltd [2024] NSWSC 1635 (Principal Judgment). This judgment assumes familiarity with and uses the same defined terms as appear in the Principal Judgment.
Although further relief was claimed in the proceedings, only two issues remained for determination in the Principal Judgment: 1. Whether the first defendant (Linrod) should be removed as trustee of the Trust and replaced by an independent trustee; and 2. Whether the third defendant (Norman) has disclaimed any interest, benefit, or entitlement in or under the Trust and ceased to be a beneficiary.
In the Principal Judgment, I determined both of those issues adverse to the plaintiff, determining that Linrod should not be removed as trustee of the Trust and that I was not satisfied that Norman had ceased to be a beneficiary.
At [209] of the Principal Judgment, I stated: 209 I will give the parties an opportunity to agree orders including as to costs. Prima facie, it seems to me that the statement of claim should be dismissed and the plaintiff should pay the costs of the first, third and fourth defendants. Failing agreement, I will determine any remaining issues on the papers.
The parties were not able to agree orders, and written submissions were made by all parties. Those submissions focused on the appropriate costs order. The remaining defendants - Norman, Stephanie and Linrod - each contended that the statement of claim should be dismissed and the plaintiff did not advance any submissions on this point.
I will order that the statement of claim be dismissed. These reasons deal with the appropriate costs order.
Each of the remaining defendants supported the preliminary view I expressed at [209] of the Principal Judgment, contending that the plaintiff should pay their costs of the proceedings.

Overview of the plaintiff's position

The plaintiff advanced a variety of submissions on costs - summarised as follows.
First, the plaintiff contended that the proceedings should be viewed as falling into two stages - the first from the filing of the summons on 7 September 2021 to immediately before the filing of the statement of claim on 15 March 2023, with the second stage being from the filing of the statement of claim to the conclusion of the hearing. Reliance was placed in this regard on the principle set out, for example in Murdocca v Murdocca (No 2) [2002] NSWSC 505 at [71] and In Re Buckton; Buckton v Buckton [1907] 2 Ch 406 (In Re Buckton) at 414, that whether the proceedings are in substance adversarial litigation, or litigation raising questions in the administration of a trust, including questions of construction, has a bearing on who bears the costs of litigation.
It was then contended that the first stage of the proceedings fell largely within the second category of cases discussed in In Re Buckton at 416 - namely that although commenced by a beneficiary, were made by reason of some difficulty of construction or administration, which would have justified an application by the trustees - and that therefore the plaintiff should not have to pay the active defendants' costs of the first stage. The plaintiff accepted that one aspect of the first stage was adversarial so far as Linrod was concerned in that the summons sought the removal of Linrod as trustee, but even so, an element of that aspect involved the construction of trust documents and, as such, an alternative submission was made that the plaintiff should pay 20 percent of Linrod's costs of this first stage.
As to the second stage, separate submissions were made by the plaintiff as to the costs of the trustee removal issue and the costs of the disclaimer issue. As to the remaining issues which fell away prior to the hearing, the plaintiff contended that once the Removal Deed was disclosed, the plaintiff acted promptly to narrow the issues before trial. It was contended that the Removal Deed should have been executed earlier and as such, the plaintiff should not bear any adverse costs consequences by reason of the narrowing of issues for trial.
On the costs of the trustee removal issue, the plaintiff contended that Linrod did not properly comply with orders made in June 2022 for the production of documents, and that had there been proper compliance, the costs incurred by the defendants would have been less. It was also contended that once the Trust's affairs were explained by Stephanie, documents produced on subpoena and the plaintiff had an opportunity to test that explanation in cross examination, the Court found that there was no breach of duty on Linrod's part. This was said to amount to disentitling conduct on the part of Linrod and Stephanie, disentitling them to the costs of the trustee removal issue up to the service of Stephanie's second affidavit on 13 October 2023.
As to Norman's costs of the trustee removal issue, the plaintiff contended that Norman should bear his own costs on the basis that his position was identical to that of Stephanie and Linrod and two sets of costs should not be permitted.
On the costs of the disclaimer issue, the essence of the argument advanced by the plaintiff was that the issue was one for the benefit of the trust generally and the plaintiff sought no personal benefit. The plaintiff contended that the appropriate order is that he ought not to have to pay Norman's costs of the disclaimer issue and Norman should pay his own costs. Further, the plaintiff contended that he should not have to pay any costs of Stephanie and Linrod on the disclaimer issue, if they incurred costs.
The plaintiff also sought to agitate the costs of certain extant motions and that the remaining defendants should be ordered to pay the plaintiff's costs liability to Mr Evans. I consider these issues separately below.

Overview of the defendants' position

Each of Norman, Stephanie and Linrod advanced detailed submissions in support of the preliminary view I expressed at [209] and in response to those advanced by the plaintiff. In substance, it was contended that: 1. the proceedings, properly characterised, were adversarial in nature. The division into two stages contended for by the plaintiff should not be accepted. The statement of claim did not fundamentally change the nature of the litigation. The plaintiff was simply required to plead the basis on which the relief sought in the summons should be ordered; 2. there is no basis for the plaintiff's alternative contention that he should only pay 20 percent of Linrod's costs of the first stage - Courts do not normally apportion costs based on different issues and, in any event, the plaintiff failed on all fronts; 3. reliance on the Removal Deed is misplaced in circumstances where, notwithstanding the existence of the Removal Deed, the plaintiff maintained the claim that Linrod should be removed as trustee; 4. the so-called late production of documents did not change the course of the proceedings as the plaintiff still wished to have the opportunity of testing the information produced in cross examination; 5. the claim that Norman had disclaimed his interest was, in substance adversarial in nature. No other beneficiary other than the plaintiff contended that Norman had disclaimed his interest and the plaintiff lost on this issue.
Having regard to the arguments advanced by the plaintiff it is convenient to separately consider: 1. the costs of the remaining defendants; 2. the costs of extant motions; and 3. Mr Evans' costs.

Determination of the remaining defendants' costs

I do not accept the submissions advanced by the plaintiff. The division of the proceedings into two stages is artificial. The filing of the statement of claim on 15 March 2023 did not fundamentally alter the nature of the proceedings. The statement of claim was to set out the basis of the relief already sought in the proceedings as set out in the summons.
Further, the proceedings as between the plaintiff, Norman, Stephanie and Linrod, properly viewed always were adversarial in nature. No other beneficiary appears to have been aligned with the plaintiff. Properly viewed, the case does not fall within the second category identified in In Re Buckton, but rather falls within the third category.
I do not accept the plaintiff's submission that the other relief initially sought in the statement of claim was not pressed due to the late disclosure of the Removal Deed which rendered academic the issues involving Mr Evans and those concerning the 2002 Variation Deed. I deal separately below with the issues concerning Mr Evans. No detail was given by the plaintiff to support the contention that the other issues (not the removal of Linrod and Norman's alleged disclaimer) fell away by reason of the Removal Deed.
Further, the alleged late production of documents did not change the course of the proceedings in any substantive way. The plaintiff sought to test what had been produced, including by way of cross examination of Stephanie at the hearing. In any event, the essence of the case for the removal of Linrod as trustee remained firmly focused on a contention that Linrod, through Stephanie as its sole director, was not impartial, at least in the respects alleged. This issue was pursued to the end and was not impacted by the documents that were produced late. The plaintiff lost on this issue including, if need be, on discretionary grounds.
I do not see any basis to deny Norman any costs incurred on the trustee removal issue. Whilst it is clear, that his position was identical to that of Stephanie and Linrod, the case was not conducted in any way by Norman on this issue so as to increase the costs of the hearing.
The disclaimer issue was, properly viewed, an adversarial one, on which the plaintiff lost. There is no reason why costs should not follow the event in this regard.

Costs of extant motions

The plaintiff contended that the Court should separately determine the costs of certain extant motions. I deal with each in turn.
First, the plaintiff sought separate determination of the costs associated with the plaintiff's motion filed 7 March 2022 and Norman's amended motion filed 2 August 2022, concerning access to documents produced by Mr Evans under notice to produce dated 17 November 2021 issued by the plaintiff. Access was sought by the plaintiff to the documents produced and Norman contended that access should be refused on the grounds of client legal privilege.
There was a dispute on the submissions as to whether there was ever any hearing of these motions before Kunc J. The plaintiff contended that there was not, whereas Norman contended that there was a hearing during which Kunc J was satisfied that the documents within Norman's amended motion were protected by client legal privilege and that his Honour then ordered that pleadings be filed so that any question of waiver of privilege could be determined. The plaintiff thereafter never sought to press for access.
It is not necessary for me to determine this factual dispute. In circumstances where the plaintiff ultimately did not press his motion for access to the documents produced, I see no reason why Norman should be denied his costs in relation to these two motions. There is no reason for the Court to make any separate determination in relation to the costs of these two motions. They will simply form part of the costs order in favour of Norman.
Second, the plaintiff contended that Norman should pay the plaintiff's costs of Norman's motion filed 7 December 2023, by which Norman sought orders for paternity testing of the plaintiff and leave to withdraw admissions in his defence that the plaintiff was his child.
The plaintiff contended that because the motion was ultimately dismissed by consent, Norman should pay the plaintiff's costs. In response, Norman contended that it was necessary for the motion to be filed because the plaintiff did not consent to be tested, and the plaintiff ultimately capitulated and agreed to be tested after orders were made for further evidence to be filed and the motion be fixed for hearing.
In circumstances where the motion was only filed because the plaintiff did not agree to be tested, and the plaintiff ultimately agreed to be tested, but after directions had been made for further evidence to be filed and for the motion to be heard, I do not propose to order Norman to pay the plaintiff's costs of the motion. The motion was ultimately dismissed because the paternity test proved that the plaintiff was Norman's child, thus obviating the need for the further relief sought. Had the plaintiff agreed to be tested, there would have been no need for a motion to be filed. The result of the motion was however, that the plaintiff was Norman's child.
In the circumstances, the appropriate order is that there be no order as to costs of the motion filed 7 December 2023, to the intent that each of Norman and the plaintiff bear their own costs of the motion.

Mr Evans' costs

At the commencement of the hearing on 25 November 2024, I granted leave to the plaintiff to discontinue the proceedings against Mr Evans and ordered that the plaintiff pay Mr Evans' costs from 19 July 2023. My reasons for so ordering are set out at [197] to [206] of the Principal Judgment.
At [207] of the Principal Judgment I stated: 207 If the plaintiff wishes to contend that the remaining defendants were somehow delinquent in making the Removal Deed when they did, and that this provides a basis for the plaintiff to pass on all or some of his costs liability to Mr Evans, then I reserve to the plaintiff liberty to apply for such an order.
In his written submissions dated 28 January 2025, the plaintiff took up that invitation and sought an order that the remaining defendants should bear all of the plaintiff's costs liability to Mr Evans. Each of Norman, Stephanie and Linrod opposed such an order.
The essence of the position advanced by the plaintiff in this regard, centred on the failure of the remaining defendants to make a timely disclosure of the August/September Deed and/or execute the Removal Deed. In so doing, it was contended that the remaining defendants stood by and allowed costs to be incurred by Mr Evans, knowing that there was a quick and cheap means of resolving the trustee identity issue and with it, Mr Evans' role as a party.
The remaining defendants contended that the plaintiff's application in this regard rests on a shaky factual premise - Mr Evans was well aware of the position taken by Norman, Stephanie and Linrod - as reflected in the August/September 2020 Deed, but nonetheless he actively defended the proceedings to refute the plaintiff's allegations of breach of trust against him made in the statement of claim. Mr Evans' was not joined to the proceedings at the insistence of the other defendants, quite the contrary, and as such there is no basis for making the order sought by the plaintiff, which is in substance a Bullock order.
I do not accept the position advanced by the plaintiff. As set out at [205] of the Principal Judgment, it was not necessary for the plaintiff to allege the matters he did against Mr Evans, and it was these matters that caused Mr Evans to take an active role in the proceedings. Prior to the making of these allegations, Mr Evans had made it clear that he was content to file a submitting appearance and let the main protagonists fight it out. It was the making of the allegations that caused his position to change and thus the costs to be incurred.
Nothing said by the plaintiff in submissions filed after the Principal Judgment causes me to depart from anything I said at [205] of the Principal Judgment. The failure to disclose the August/September Deed was not causative of Mr Evans' incurring the costs that he did. Mr Evans was well aware of the position taken by Norman, Stephanie and Linrod. It is clear that he retreated from his neutral position - as reflected in the submitting appearance - and took an active role in the proceedings by reason of the allegations of breach of trust made against him.
Had the allegations of breach of trust not been made, Mr Evans would not have played an active role in the proceedings and thus would not have incurred the costs that he did. The making of the allegations against Mr Evans was entirely a matter for the plaintiff.
I do not propose to make any order that the remaining defendants bear the plaintiff's costs liability to Mr Evans.

Orders

For the reasons set out above, the Court orders that: 1. The statement of claim be dismissed. 2. Subject to order 3, the plaintiff pay the first, third and fourth defendants' costs of the proceedings. 3. There be no order as to costs of the third defendant's motion filed 7 December 2023, to the intent that the plaintiff and third defendant bear their own costs of the motion.

Amendments 20 February 2025 - Reference to "fourth" in order 3 changed to "third" (replicated in paragraph 41 (3)) 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: 20 February 2025

At a glance

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Judgment (8 paragraphs)

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Cases Cited (2)