Wardy v Wardy & Ors

Judgment 1HIS HONOUR: The remaining questions to be determined concern claims made by John Wardy and by the three applicants for family provision orders for payment of interest on costs to which they are entitled. On 28 March 2013 I made orders, which was varied by an order made on 25 July 2013, provide for, first, that Hassiba Wardy pay the defendants' costs for her claims of relief and each of the cross-claims so far as they seek to propound the copy of the will, those costs to be payable on the ordinary basis. Secondly, that the costs of John Wardy in defending the claim of the plaintiff, and his costs of his amended cross-claim to the extent they are not recovered from the plaintiff, be paid out of the estate on the indemnity basis. And, relevantly, thirdly that William and Sam Wardy pay the costs of the defendants to their cross-claims other than their claim that there be a grant of probate of the copy will to the NSW Trustee and Guardian. 2John Wardy's solicitor, Mr Phillip Brand, has advised Hassiba Wardy's solicitors that in his view the costs recoverable from Hassiba Wardy amount to, approximately, $195,397. He has advised the solicitors for Sam and William Wardy that in his view the costs recoverable by John Wardy in respect of the cross-claim amounts to, approximately, $108,179. 3By his notice of motion filed on 23 May 2014, John Wardy seeks the following orders: "1 An order that Hassiba Wardy pay interest on the costs payable by her to John Wardy pursuant to Order 6 made on 28 March 2013 as amended in accordance with the formula set out in the schedule to this motion; 2 An order that William Wardy pay interest on the costs payable by him to John Wardy pursuant to Order 9 made on 28 March 2013 in accordance with the formula set out in the schedule to this motion; 3 An order that Sam Wardy pay interest on the costs payable by him to John Wardy pursuant to Order 9 made on 28 March 2013 in accordance with the formula set out in the schedule to this motion; 4 An order that, to the extent that the costs of John Wardy pursuant to Order 7 made on 28 March 2013 as amended, are paid out of the estate of the late Edmond Wardy, that John Wardy is entitled to interest on such costs in accordance with the formula set out in the schedule to this motion; 5 An order that John Wardy be entitled to interest in accordance with the formula set out in the schedule to this motion in respect of his costs pursuant to the order to be made pursuant to conclusion 6 of paragraph 234 of the Judgment dated 30 April 2014 in proceedings 2010/226874 (Sam Wardy v Salier); 2010/233072 (William Wardy v Salier) and 2010/237742 (Hassiba Wardy v Salier); 6 An order the NSW Trustee and Guardian make an interim payment towards to the costs of John Wardy payable out of the estate of the late Edmond Wardy pursuant to Order 8 made on 28 March 2013 and the order to be made pursuant to the Judgment dated 30 April 2014 within 14 days of the date of this order." 4The formula, according to which interest on costs is claimed, is the formula derived from the Lahoud v Lahoud [2006] NSWSC 126. As originally formulated, the formula would have provided for interest on costs which John Wardy is liable to pay, as well as for the costs and disbursements actually paid. In the course of oral submissions, his counsel has not pressed a claim for interest on costs except in respect of costs actually paid. 5There is evidence on this application as to what costs have been paid by John Wardy in respect of the various proceedings. Payments have been made between 20 November 2009 to 28 March 2014 in a sum of $491,447.39. Mr Brand estimates that it will take more than fifteen months for the costs to be assessed. 6No party submitted that the claim was out of time and that the notice of motion seeking interest on costs ought to have been filed within fourteen days of the orders having been made in the probate proceedings. For the reasons I gave in Short v Crawley (No 45) [2013] NSWSC 1541, I consider that there is power to entertain the application pursuant to s 98(3) of the Civil Procedure Act 2005 (NSW). 7The principle upon which the claim for interest on costs is to be determined is that interest is intended to be compensatory, on the basis that the person entitled to costs has been wrongly required to spend money on litigation to enforce established rights (Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 at [403].) There, the Court of Appeal said that: "In the absence of any countervailing discretionary factor, it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of the costs it has paid. There is no requirement to establish that the circumstances of the case are out of the ordinary." (See Lahoud v Lahoud at [83], and Drummond & Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331 at [4].) 8Mr Loofs, who appears for Sam Wardy, submitted that the evidence advanced for the claim for interest on costs was insufficient. He cited Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No. 2) [2013] NSWCA 211; (2013) 84 NSWLR 436, where the Court of Appeal said (at [38]): "...A party who contends that there should be an order for interest on costs must do more than point to the fact that the proceedings were protracted and that it had to outlay moneys on its own costs over a long period. The reasons for the protracted nature of the proceedings are of obvious relevance. To take a hypothetical example, one can imagine a case in which one party deliberately seeks to prolong proceedings with an eye to some collateral benefit of its own for which it is quite happy to pay the price of being out of the money it progressively outlays for costs. That hypothetical case can be contrasted with another in which a party has made strenuous effort to expedite matters and to avoid all delay with a view to the earliest possible trial but has been frustrated in those efforts by actions of the other party. A middle course is where each party acts with reasonable diligence and dispatch but the nature of the proceedings and their subject matter is such as to prolong them. A court might well take different attitudes to applications for interest on costs in these hypothetical cases." 9It has been said that that passage conflicts with other statements of the Court of Appeal; namely, that of Macfarlan JA with whom Tobias JA agreed in Drummond v Rosen (No. 2) at [3] and [4] (see Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [43] and DSG Holdings Pty Ltd v Hellenic Pty Ltd (No 2) [2014] NSWCA 142 at [5]). 10Orders for interest on costs have been made with less evidence than has been provided in this case. (See, for example, Lahoud v Lahoud at [80] and [81] and Drummond & Rosen (No 2)). In Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No. 2), no application for interest on costs had been sought from the primary judge (at [34]). The point being made by the Court of Appeal was that how a party who sought interest on costs has conducted the litigation will be, or can be, material to the discretion to make such an order. Hence one might think there is a need for such an application to be raised at first instance so that the primary judge, who will be better placed to consider how the litigation has been conducted than would be the Court of Appeal, is able to consider and deal with any questions that might arise in that respect. 11In the present case no submission has been made, and I'm not aware of any basis on which it could properly be made, that the proceedings were protracted due to any fault on the part of John Wardy. In other words, the matter which was of particular concern to the Court of Appeal in the Illawarra Hotel Company case does not arise here. 12Prima facie, as he has been out of pocket for the costs some of which he will be entitled to recover, John Wardy should be awarded interest on costs. Mr Confos who appeared for William Wardy submitted that the discretion should not be exercised in John Wardy's favour because of the way in which he said the power of appointment which was in issue on the cross-claim had been irregularly obtained by John Wardy. Mr Confos said that by this he meant that the instrument had not been executed with the late Edmond Wardy's solicitor or accountant. It does not appear to me that that is a matter which affects the exercise of the discretion at all. Those were matters which were advanced on the hearing of the cross-claim as going to the validity of the instrument. 13Given that the cross-claim failed, and given that there was no adjustment to the usual costs order that was made by reason of the consideration advanced, I do not think it can affect the discretion toward her interest on costs. 14Mr Loofs who appears for Sam Wardy raised a different point. He submitted that if the claim now made had been raised before the claim for Family Provision orders had been heard and determined, then the making of the claim might well have affected the order for provision made in favour of Sam Wardy. I think there is substance in that argument, and the same argument applies also to the position of William Wardy. 15In para [186] of my reasons for judgment (Wardy v Salier [2013] NSWSC 473) I referred to the cost order made against William and Sam Wardy that they pay John Wardy's and Linevale's costs to the cross-claim. I observed that claims for costs were made by John Wardy and Linevale in the amounts of $105,000 and $115,000 respectively, and that those claims included a discount to the cost billed to those parties reflecting what their solicitors considered to be the likely outcome on an assessment. I proceeded on the basis that each of William and Sam Wardy was likely to have a liability of $110,000 in respect of such costs, that is a half of $220,000. 16In the case of Sam Wardy, I referred (at [211]) to the debts he owed on his house secured by a mortgage, claims made by his former solicitor, and his current solicitor. I referred to some other debts and to his liability estimated to be approximately $110,000 in respect of the costs he was ordered to pay in respect of the unsuccessful cross-claim. I also observed that a substantial portion of the costs claimed by his solicitors should be met by an order for costs in the proceedings. 17At para [214] I concluded that a provision of $900,000 was adequate as a sum to be applied towards discharge of his debts. That was a step along the process of reasoning to the ultimate order for provision that was made. Had it been contended that Sam Wardy's liabilities included an additional liability for interest on the costs, then it could be expected that that potential liability would have been taken into account in determining his need for provision. 18The same reasoning applies to the process by which the provision made in favour of William Wardy was arrived at. In William Wardy's case the position was somewhat more complicated because I concluded that whilst, like Sam Wardy, it was proper to take into account the costs that were reasonably incurred in challenging the validity of the power of appointment, there were other parts of the cross-claim which should not have been pressed and which resulted in the incurring of liabilities which should not be reflected in the order for provision. I said at para [187] that in assessing the financial needs of William and Sam Wardy, their liability to pay costs in respect of the earlier proceedings was a matter to be taken into account in assessing their need for provision in the same way as if they had been unsuccessful parties in unrelated litigation. 19At para [190] I said that adequate provision for the proper maintenance and advancement in life of William Wardy required a provision that included a sum of $200,000 towards the expenses and liabilities incurred in the reasonable promulgation of the cross-claim, that is the promulgation of the cross-claim to the extent it is sought to challenge the validity of John Wardy's appointment as appointer of the trust. Had a claim for interest on the costs orders for which William Wardy was liable been made at that time, it would be something which I expect would have been taken into account in assessing his need for provision. 20This was a point that was raised by the solicitors for Sam Wardy in September 2013 when judgment was reserved. On 29 August 2013 Bartier Perry, the solicitors for John Wardy, advised Teece Hodgson & Ward, solicitors for Sam Wardy, that they had instructions to seek a Lahoud type order for the payment of interest on costs to be recovered. In response, Teece Hodgson & Ward wrote on 6 September 2013 advising that they would oppose such an application. They said that if the application were to be persisted in they asked that Bartier Perry specify the amount of interest John Wardy claimed to be entitled to, so that they could consider having the matter re-listed to inform the Court that their client had an additional need for provision of which he was not previously aware. There was no response to that request. 21Now, it is true that the calculation of the amount of interest applicable to the specific cross-claim would be a difficult task. Even now no specific amount of interest is claimed. There have been 19 separate payments that go to make up the total payments of $491,447.39, and presumably it will be necessary to dissect how much of each of the payments related to the costs incurred on the cross-claim. But that difficulty does not change the fact that had the claim for interest now made been made then, an attempt to calculate the interest for which William and Sam Wardy would be liable could have been made, and probably would need to have been made in order to determine their need for provision. 22However, the same reasoning does not apply to the case of Hassiba Wardy. In her case I found that her liability for costs, and, indeed, the costs she incurred herself in the probate proceedings were incurred because she chose to bring a case that on the findings of fact I made was entirely without merit, and there was no reason that any of the other beneficiaries of the estate or any other discretionary object of the Trust should indirectly bear the consequences of her decision to bring the probate proceedings. (See at [162], and [187] and [171].) 23Having rejected her claim to have her liability for costs taken into account in assessing her need for provision, there would have been no occasion to instead take into account a claim for interest on costs had such a claim been raised at the time of the hearing. The same reasoning would have applied to such a claim for interest on costs. 24For these reasons, I consider that John Wardy is entitled to interest under the various costs orders except in respect of the costs payable by William and Sam Wardy. 25John Wardy also seeks an order that the New South Wales Trustee and Guardian make an interim payment towards the costs payable out of the estate pursuant to order 8 made on 28 March 2013 and the order that I made today and had foreshadowed at conclusion six at [234] of my judgment, namely that the costs of the defendants in each of the family provision proceedings be paid out of the estate on the indemnity basis. 26The order referred to of 28 March 2013 was an order directing that if the costs payable by Hassiba Wardy to the defendants to her claim have been agreed or assessed but not paid prior to the NSW Trustee making a distribution out of the estate to Hassiba Wardy, then NSW Trustee would be justified in paying such costs of the defendant entitled thereto out of her share of the estate. 27It would not be appropriate for the NSW Trustee and Guardian to make an interim payment as sought; namely, the payment within 14 days of today, in respect of that order made on 28 March 2013 given that the occasion for any such payment being made hasn't arisen. However, it is clear that John Wardy will be entitled on an indemnity basis to a substantial payment of costs out of the estate in respect of the family provision proceedings. 28I do not think I should make an order for interim payment at this stage. I am told by counsel appearing for the NSW Trustee and Guardian that although the notice of motion was served earlier it only came to the attention of the solicitors and counsel acting for the NSW Trustee as recently as yesterday. I was told that the NSW Trustee is concerned that it is not in a position to make a proper estimate as to what will be the tax liabilities of the estate in respect of the 2013 and 2014 years for which cash will be required. 29The orders made earlier today included the reservation of liberty to apply. Given that John Wardy is entitled to his costs on the indemnity basis in respect of the family provision proceedings, I would expect a sensible approach to be taken to making at least an interim payment out of the estate on account of those costs, provided that to do so would not embarrass the administration of the estate. Because I am not in the position to assess whether there might be such an embarrassment to the administration of the estate, I do not think I should make the order sought, but the liberty to apply will include liberty to John Wardy to restore the claim in order 6 of the notice of motion at a convenient time that can be arranged with my Associate. I suggest that that not be done until the parties have discussed how an assessment of the tax liabilities of the estate is to be made. 30This morning I made orders that the costs of Hassiba Wardy, William Wardy and Sam Wardy in each of their respective proceedings be paid out of the notional estate on the ordinary basis. Mr Loofs, supported by Mr Confos and Mr Ellison, has sought a further order that interest be paid out of the notional estate on the costs payable to Sam Wardy, William Wardy and Hassiba Wardy pursuant to that order. 31Initially the interest was sought in accordance with the formula set out in the schedule to John Wardy's notice of motion as filed. That is to say, the claim was made for payment of interest not only on costs and disbursements paid by the three applicants, but also on costs which they were liable to pay. 32When that claim was initially pressed reliance was placed on the decision of Hamilton J in Woods v Woods [2001] NSWSC 1108 at [39]. In that case Hamilton J made an order for interest on costs which had been incurred but not paid where the successful plaintiff's lawyers had taken the case on a speculative basis, but stipulated for interest on their costs from the time a successful outcome was manifested. 33His Honour's order was made pursuant to s 76 of the Supreme Court Act 1970. His Honour observed that s 95(4) of the Supreme Court Act would limit an order for interest on costs to interest from the date or dates when amounts in respect of costs had been paid. 34The reasoning that underpinned the order in Woods v Woods is no longer good law. Hamilton J preferred the decision that had been made by Rogers CJ Comm D in McWilliams Wines Pty Ltd v Liaweena NSW Pty Limited (1993) 32 NSWLR 190 to the decision of Goldberg J in White Industries (Qld) Pty Limited v Flower & Hart (No 2) (2000) 103 FCR 559. However, the decision of Goldberg J was upheld by the Full Court of the Federal Court (Flower & Hart v White Industries (Qld) Pty Ltd [2001] FCA 370; (2001) 109 FCR 280 and that decision was approved by the Court of Appeal in Spedding v Nobles; Spedding v McNally (No 2) [2007] NSWCA 87. The effect of those decisions is that s 98 of the Civil Procedure Act and formerly s 76 of the Supreme Court Act are not a source of power to order interest on costs. The source of that power is s 101. Section 101(5) (like the former section 95(4)) provides for interest to be calculated as from the date or dates on which the costs concerned were paid, or such later date as the Court might order. (See also Spedding v Nobles; Spedding v McNally (No 2) at [15], [17] and [18].) 35In the course of submissions the claim for payment of interest on costs incurred but not paid was dropped and I did not understand counsel for Hassiba Wardy or William Wardy to seek to maintain such a claim. 36There is evidence, albeit not precise evidence, as to the applicants having made payments to their lawyers in connection with the costs of the litigation. Some of those costs would relate to the family provision proceedings which orders were made in those applicants' favour. In any event, even without such evidence for the reasons in Drummond v Rosen (No 2) and in Lahoud v Lahoud, I think an order for interest on costs paid should be made so as to compensate those applicants for being out of pocket. There is no countervailing circumstance that would warrant the refusal of the order sought. 37I will make orders accordingly. 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: 19 June 2014