Tuohey v Tuohey

Supreme Court of Victoria|2002-05-24|Before: McDonald J

Costs: plaintiff unsuccessful in proceedings to have defendant removed from office of executor and trustee of estates; offer in settlement made by defendant and not accepted by plaintiff; defendant to recover against plaintiff costs as between party and party before offer and as between solicitor and client after offer.

In these proceedings I delivered judgment on 8 May 2002 and ordered that the proceedings of the plaintiff be dismissed. On that day application was made on behalf of the defendant for an order that the plaintiff pay the defendant's costs of and incidental to the proceedings and that such costs be paid on a "full indemnity basis". That application was resisted on behalf of the plaintiff. I reserved the question of costs of the proceedings and gave directions that written submissions be furnished to me on behalf of each of the plaintiff and the defendant relevant to the question of costs. I have now received submissions from counsel on behalf of each of the parties to the proceedings relevant to the question of costs.

Pursuant to Rule 63.28(a)-(d) of the Rules of Civil Procedure of the Court, it is provided:

"Subject to this part costs in a proceeding which are to be taxed shall be taxed on - (a) a party and party basis; or (b) a solicitor and client basis; or (c) an indemnity basis; or (d) such other basis as the Court may direct."

"On a taxation on a solicitor and client basis all costs reasonably incurred and of reasonable amount shall be allowed."

"(1) Subject to paragraph (2), on a taxation on an indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been reasonably incurred. (2) Any doubt which the Taxing Master may have as to whether costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable."

The discretion of the Court to make an order as to costs "of and incidental to all matters in the Court" is vested in the Court pursuant to s. 24(1) of the Supreme Court Act 1986. Such discretion must be exercised judicially.

"The power and discretion of the Court as to costs under s. 24 of the Act shall be exercised subject to and in accordance with this order."

The discretion vested in the Court to make an order as to costs on an indemnity basis as distinct from an order for costs on a solicitor and client basis, apart from the provisions of what was formally Rule 63.28(c) and which is now Rule 63.28(d), was provided by amendment to Rule 63.28 by SR 111 of 2001 r. 8 and 9 which operated from 25 October 2001.

As a general rule an order for costs will follow the event. Further, as a general rule the Court will order costs on a party and party basis. That this is so is reflected by Rule 63.31 which provides:

"Except as provided by these rules or any order of the Court costs shall be taxed on a party and party basis."

The Court, however, may order costs on a measure higher than on a party and party basis if there exists circumstances which warrant the Court from departing from the ordinary rule as to costs. The question that must be addressed in each case where costs are sought, other than on a party and party basis, is whether, in the circumstances as existing, justice requires that an order for costs be made other than on a party and party basis[1].

On behalf of the defendant it was submitted that there were a number of facts and circumstances relevant to this case which would warrant an order being made that the defendant have his costs against the plaintiff on a measure higher than on a party and party basis. It was submitted that one such matter was that in this proceeding the plaintiff made serious allegations of impropriety and misconduct against the defendant which were not accepted by the Court. It was submitted that those allegations of impropriety and misconduct included, that the defendant had brought the Magistrates' Court proceedings, which proceedings I have referred to in my judgment, for an ulterior purpose, being not to resolve the question of ownership and the right to possession of the piano, but out of a desire to attack the plaintiff; that by instituting and prosecuting those proceedings he had wrongly committed funds comprising the estate of Patrick John Tuohey; that he had placed himself in a position of conflict between the estates of Mercia Tuohey and Patrick John Tuohey and that he was unfit to be the executor of the will of each of Mercia Tuohey and Patrick John Tuohey and the trustee of their respective estates.

It was submitted further that although it had been found that Anthony Tuohey had not distributed the sum of $1,582.79 among the residuary beneficiaries of the estate of Patrick John Tuohey, deceased, it had been held that such matter was not an omission which would warrant him being removed as the executor of the aforesaid wills or trustee of the aforesaid estates, and in the result should not cause the Court to award costs in a lower measure than it would otherwise award costs in favour of the defendant.

It was further submitted on behalf of the defendant that a further matter which should cause the Court to order costs on a measure higher than as between party and party was that the nature of the proceedings brought by the plaintiff were misconceived and that the real matter central to the disputes between the plaintiff and the defendant as executor of the aforesaid wills and trustee of the aforesaid estates was the issue as to who was entitled to the ownership and possession of a piano of small value which could well have been determined in the proceedings issued in the Magistrates' Court and in respect of which the plaintiff had submitted to the jurisdiction of the Court.

Further, it was submitted that having regard to the nature of the proceedings which were brought by the plaintiff against the defendant in this Court and bearing in mind that there was "substantially no estate" either with respect to Mercia Tuohey or John Patrick Tuohey, that as the plaintiff was aware of this before he instituted these proceedings he should be required to fully indemnify the defendant in respect of his costs as he was and remains the executor of the will of each of the deceased and the trustee of their respective estates.

Further, on behalf of the defendant, it was submitted that in litigation involving trusts and estates the ordinary basis of costs was on a solicitor and client basis. It was submitted that this was reflected by the provisions of Rules 63.32 and 63.33.

Further, it has been submitted on behalf of the defendant that in the particular circumstances of this case when regard is had to a letter written by the defendant's solicitors to the plaintiff's solicitor on 6 August 2001 that the plaintiff should be obliged to pay the defendant's costs on an indemnity basis. A copy of that letter which is Exhibit PJVD30 to the affidavit of Phillip John Vincent Dwyer sworn on 21 September 2001 was attached to the submissions of counsel for the defendant. In that letter the solicitor for the defendant writing to the solicitor for the plaintiff stated, inter alia, "rather than having the dispute resolved in a speedy and cost effective manner in the Magistrates' Court your client has chosen to `blow the dispute out of all proportion'. Given the costs of litigation in the Supreme Court your client's actions in bringing the proceeding, are a serious error of judgment on his part and will not assist any member of the family". By that letter the solicitor for the defendant sought to have the plaintiff withdraw the proceedings in this Court and discontinue the same stating that if the plaintiff agreed to such course the defendant would not seek his costs of and incidental to the proceeding but that each party should "walk away bearing their own costs". The final paragraph of that letter stated "should your client elect to continue with the Supreme Court proceeding and our client is successful, our client will seek its costs on a full indemnity basis. It reserves the right to produce this letter to the Court on such application."

On behalf of the plaintiff it was accepted by his counsel, in her submissions, that in the usual course costs follow the event and on a party and party basis and that before the Court should make an order for costs on a measure higher than as between party and party, there must exist circumstances to warrant the Court making such order. On behalf of the plaintiff it was submitted that no circumstances existed which would warrant the making of an order for costs on a basis higher than as between party and party. It was submitted that although there was only small amounts of money involved in this case there were issues as to conflict of interest and misuse of funds which were serious issues and treated by the Court seriously. It was submitted that the fact that there was small amounts of money involved did not warrant the Court departing from the usual order as to costs. It was submitted on behalf of the plaintiff that there was nothing about this case which distinguished it from a "standard case" in which issues have been determined against the plaintiff. In her submissions counsel for the plaintiff drew attention to the fact that the Court found that there was a sum held by the defendant which ought to have been distributed to the beneficiaries of the will of Patrick John Tuohey and although no specific direction had been given with respect to that matter nevertheless it was an issue found in favour of the plaintiff.

It was submitted that when regard is had to the letter relied on on behalf of the defendant, to which I have previously referred, that letter makes no allowance or admission as to any part of the estate of Patrick John Tuohey being paid to the beneficiaries of that estate from funds held by the defendant. It was submitted that in all the circumstances the plaintiff was entitled to properly bring these proceedings that, therefore, the plaintiff ought to pay any costs ordered only on a party and party basis.

It was further submitted that having regard to the finding in favour of the plaintiff he ought to be treated as at least in part successful and that the most appropriate order was that the plaintiff ought to bear his own costs of the proceedings and the defendant ought to have "recourse to the estate fund". Having regard to the evidence before the Court at trial and to the likely cost of proceedings in this Court it can be seen that if that latter submission was acceded to the defendant would be out of pocket to a large extent and therefore obliged to carry the burden of his costs.

Finally, counsel for the plaintiff by her submission said that she could say nothing about the usual right of an executor to obtain his costs out of the estate fund on a solicitor client or indemnity basis to the extent not met by any costs ordered against the plaintiff. As to this matter counsel for the plaintiff referred to Rule 63.26 which provides:

"A party who sues or is sued as trustee or mortgagee shall, unless the Court otherwise orders, be entitled to the costs of the proceeding out of the fund held by the trustee or out of the mortgage property insofar as the costs are not paid by any other person."

In Spencer v Dowling[2] Winneke P. after stating that in litigation in superior courts the usual measure of costs awarded is "costs on a party/party basis" and stating further that a court has power to award costs "on a higher measure if circumstances require it", his Honour said:

"This practice in the superior courts is in my experience universal although it is well recognised that there is occurring an ever increasing gap between party/party costs and those actually incurred... This practice has continued to apply notwithstanding expressions of view by individual judges that it is capable, in today's circumstances of working in justice: see, for example, per Rogers J (as he then was) in Qantas Airways Ltd v Dillingham Corp (unreported) NSW Supreme Court 14 May 1987. The practice is designed to reflect compromise between the interests of successful an unsuccessful litigants."

In Colgate-Palmolive Co v Cussons[3] Shephard J noted a number of circumstances where courts had thought that the existence of the same warranted a court, in the exercise of its discretion as to costs, making an order for costs on a higher measure than as between party and party. I do not tabulate the examples referred to by his Honour. Again in Czerwinski v Syrena Royal Pty Ltd[4] Warren J at p. 1-2 of her judgment, having reviewed a number of authorities, set out a number of grounds on which Courts, in the exercise of their discretion as to costs, had awarded "solicitor and client costs". Again, I do not set out the numerous grounds identified by her Honour.

The fact that the proceeding brought by the plaintiff was to determine what may be regarded as a matter of "little moment" having regard to the value of the piano in issue and having regard to the amount of the residuary estate of Patrick John Tuohey which had not been distributed is not a consideration which is relevant when determining whether the Court in exercise of its discretion should order costs on a measure higher than as between party and party[5]. In his judgment Chernov JA with whom Callaway and Buchanan JJA agreed, at p. 14 said, that the fact that the proceeding was brought to determine a "matter of principle only" which was of "little moment" was a consideration not relevant to the question whether there should be a departure from the ordinary cost rule. His Honour cited that said by Lord Diplock in Bremer Vulkan Schiffbau and Maschinenfabirk v South India Shipping Corporation Ltd[6] where His Lordship said:

"Every civilised system of government requires that the state should make available to all of its citizens a means for justice and peaceful settlement of disputes between them as to their respective legal rights. The means provided are courts of justice to which every citizen has a constitutional right of access in the roll of plaintiff to attain the remedy to which he claims to be entitled in consequence of an alleged breach of his legal or equitable rights by some other citizen, the defendant."

As appears from my judgment I found that there was remaining in the estate of Patrick John Tuohey the sum of $1,582.79 which had not been distributed by the defendant among the four beneficiaries of that estate and which ought to be so distributed if a beneficiary sought distribution of a quarter share of such sum. However it was held by me to be a circumstance which did not constitute an omission on behalf of the defendant which would warrant that he be removed from the office of executor of the will or trustee of the estate of Patrick John Tuohey. The gravamen of the plaintiff's claim against the defendant and in this proceeding was that he was not fit to be the executor of the wills and trustee of the estates of his deceased mother and father. The relief sought by him was to have him removed from the office of executor of the will and/or trustee of the estate of his parents Mercia Tuohey and Patrick John Tuohey. The plaintiff failed on his claim and his proceedings were dismissed. There is no reason why it should not be ordered that the plaintiff pay the defendant's costs of the proceedings including reserved costs. The issue is whether those costs should be ordered on a party and party basis or a solicitor and client or indemnity basis. The principle which must be adhered to by the Court in determining such an issue is whether in justice as between the plaintiff and the defendant circumstances exist which warrant the Court ordering costs on a measure higher than as between party and party.

The fact that the defendant was sued in his capacity as executor of the will and trustee of the estates of Mercia Tuohey and Patrick John Tuohey is not a circumstance in this case which would warrant an order being made that the plaintiff pay the defendant's costs on a measure higher than as between party and party. The nature of this proceeding was adversarial, the plaintiff being at arms length with the defendant. Such being the case it may well be concluded that the plaintiff should be ordered to pay costs on a party and party basis only. However, there exists the letter written by the defendant's solicitor to the plaintiff's solicitor on 9 August 2001.

On receipt of that letter the plaintiff ought reasonably to have known that in the event of him being unsuccessful in the proceeding that it would be most likely that he would be ordered to pay the defendant's costs of the proceedings and that in the event of him being successful against the defendant it would be likely that he would recover costs against the defendant. The plaintiff when considering these matters, on receipt of that letter, should have been advised as to the provisions of Rule 63.26 and the effect of the same as is set out in the submissions of his counsel. The plaintiff ought reasonably to have appreciated that if an order was made in favour of the defendant pursuant to Rule 63.26 in the event of him being not successful in this case, that such costs to which the defendant would be likely to be entitled out of such undistributed residuary estate of Patrick John Tuohey, would exhaust the whole of that sum and the defendant would be likely to be still out of pocket. By that letter an offer was made on behalf of the defendant to the plaintiff for him to discontinue the proceedings on a basis that each party should bear his own costs. Such costs that the defendant would be required to bear, had such offer been accepted, would be as between solicitor and client. That offer was not accepted. In my view in determining the issue as to the basis on which costs should be ordered against the plaintiff for the benefit of the defendant I am able and should, as I do, take into account the offer made by the defendant to the plaintiff at this time and its non-acceptance by the plaintiff.

The conclusion that I have reached, in the circumstances of this case and having regard to the submissions made to me, is that the defendant should have his costs of and incidental to the proceeding against the plaintiff until seven days from the date of this letter as between party and party, that the defendant should have his costs of and incidental to the proceedings against the plaintiff from eight days after the date of that letter as between solicitor and client and further it should be ordered that the defendant have his costs out of the estate of Patrick John Tuohey as between solicitor and client to the extent not met by the aforesaid order as to costs against the plaintiff. I allow the period of seven days after the date of the letter as a reasonable period during which the plaintiff was able to give consideration to the offer. Further, having regard to the fact that the defendant may need to rely on the third part of such orders that I propose to make by reason of the fact that he will recover costs against the plaintiff, on a party and party basis to the time seven days after the date of the aforesaid letter the defendant should not be required to distribute any part of the sum of $1,582.79 among any of the four beneficiaries of the estate of Patrick John Tuohey until it is determined by him whether there remains any part or portion of that sum remaining having regard to the orders made as to costs. Accordingly, it is ordered:

1. That the plaintiff pay the costs of the defendant of and incidental to the proceedings to and including 16 August 2001, including reserved costs during that period as between party and party.

That the plaintiff pay the costs of the defendant of and incidental to the proceedings from 17 August 2001 including any reserved costs subsequent to that date as between solicitor and client.

2. That insofar as the costs of the defendant of and incidental to these proceedings are not paid by the plaintiff to the defendant, the defendant is and shall be entitled to his costs of the proceedings out of the undistributed residuary estate of Patrick John Tuohey.

[1] Spencer v Dowling [1996] VSC 51; [1997] 2 VR 127 Winneke P. at 147.

[4] Unreported [2000] VSC 135.

[5] See PZRZ Investments Pty Ltd v National Golf Holdings Ltd and Anor (unreported, [2002] VSCA 25.

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