Brett Raymond Gooley as executor of the Estate of the late Melville Gooley v Gooley

[2023] NSWSC 1117

Supreme Court

New South Wales

Medium Neutral Citation:

Brett Raymond Gooley as executor of the Estate of the late Melville Gooley v Gooley [2023] NSWSC 1117

Hearing dates:

8 September 2023

Date of orders:

8 September 2023

Decision date:

08 September 2023

Jurisdiction:

Equity - Applications List

Before:

Kunc J

Decision:

Gross sum costs order made

Catchwords:

COSTS — Party/Party — General rule that costs follow the event — Proceedings discontinued or dismissed — Gross sum costs order — No issue of principle

Legislation Cited:

Uniform Civil Procedure Rules 2005

Cases Cited:

Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6

Eastmark Holdings Pty Ltd v Owners Strata Plan 74602 [2009] NSWSC 1483

Category:

Costs

Parties:

Brett Raymond Gooley as executor of the Estate of the late Melville Gooley (plaintiff)
Aleta Gooley (defendant)

Representation:

Counsel: JP Knackstredt (plaintiff)
R Size (defendant)

Solicitors: Macpherson Kelley Pty Ltd (plaintiff)
David Leamey Solicitors (defendant)

File Number(s):

2022/383436

EX TEMPORE JUDGMENT (REVISED)

Summary

1. The one thing about which the parties in this matter can agree is that the summons filed on 20 December 2022 should be dismissed. They cannot agree on costs. Without disrespect, I shall refer to the parties by their given names.

2. The plaintiff, Brett, and his sister Aleta, the defendant, have been in dispute in this Court in several hard fought proceedings for a number of years concerning the affairs of their late father.

3. Brett seeks an order that Aleta pay his costs of the summons on a gross sum basis of $42,000. Aleta submits that Brett should pay her costs pursuant to Uniform Civil Procedure Rules 2005 Part 42 Rule 42.20(1):

If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which they have been dismissed.

4. For the reasons that follow, being in summary that the proceedings were reasonably commenced and Aleta then capitulated, the Court will order that Aleta should pay Brett’s costs. The gross sum order will be made because it will avoid the disproportionate and inevitable prospect of future disputation were the question of what a relatively small claim for costs is to go to assessment.

5. Mr J P Knackstredt of Counsel appeared for Brett. Mr R Size of Counsel appeared for Aleta.

Facts

6. The facts were not in dispute, being established by the correspondence between the parties’ solicitors: Mr C Frawley or Mr T Reid for Brett, and Mr D Leamey for Aleta.

7. On 6 June 2022, to resolve a substantial dispute between them, Brett and Aleta entered into a document entitled “Binding Heads of Agreement” (HOA), which included:

“…the parties hereby agree that these terms are immediately binding upon them but at the same time propose to have these terms restated in a deed of settlement which will be fuller and more precise but not different in effect:

1.   Aleta assigns to Brett or an entity nominated by him any and all rights, title and interest she owns (whether as director, shareholder, beneficiary, appointer, alternative principal or otherwise) and any control in each of the following entities and any trust in respect of which any of these entities is or was a trustee: [there follows a list not reproduced here] …

2.   Aleta will sign all documents and do everything else in her power to transfer the control of all assets including all funds held by or on behalf of any entity listed in cl 1 to Brett or an entity nominated by him, including with the intent that any unpaid distributions as at 6 June 2022 revert to the relevant trust.

…

8.   Aleta to procure and provide to Brett the MYOB files and general ledgers in respect of the following entities and any trust of which they are or were at any time, a trustee, for the period 2010 to 6 June 2022: [there follows a list not reproduced here] …

…

11.   Brett and Aleta agree to execute and cause their related entitles to execute:

a.   a deed of settlement incorporating the above terms; and

b.   any other document required to give full effect to this agreement.”   

8. On 24 June 2022 at 4:42am, Mr Leamey wrote to Mr Reid:

“The Mediation was on 6th June 2022 & any agreement made was conditional. We have not yet been told that the condition has been satisfied or waived by your client.

In the circumstances, a reasonable period has elapsed since the Mediation and my client gives notice that if the Deed is not provided by 5pm on 27th June 2022 that she will not consider herself bound by any agreement made at the Mediation and in that respect hereby makes time of the essence for the provision of any Deed as a result of the Mediation.”

9. Mr Reid replied several hours later on 24 June 2022, including:

“Attached is a copy of the Binding Heads of Agreement (HOA).

The HOA is immediately binding on the parties. Contrary to your email, the HOA is not “conditional”. The settlement agreed by the parties is binding and enforceable.

The HOA provides that the parties intend to execute a deed of settlement incorporating the terms of HOA, which will be fuller and more precise terms but not different in effect. That is, the HOA falls within category 1 of Masters v Cameron.

There is no date by which a deed must be executed. Similarly, there is no obligation on any one party to prepare the deed. Although it is not our client's sole responsibility to prepare the deed, we are doing so, and will provide the draft as soon as it is ready. There is no basis for your client's threat to “consider herself not bound” by the terms of the HOA if a draft deed is not provided by our client before your unilateral and arbitrary deadline.

The settlement is not without complexity. The settlement involves, in some form, over 20 entities. There are also likely to be various ancillary documents required to give effect to, at least, clauses 1, 2 and 4 of the HOA.”

10. On 27 June 2022, Mr Leamey wrote to Mr Reid:

“Now that you have advised that the other settlement is proceeding, we withdraw the Notice making time of the essence for today.

However we maintain that a reasonable period applies for the provision of the deed and suggest that a period of one month would be a reasonable period of time to provide the Deed and in that regard we say that if you have not provided the Deed within one month of the date of the MOA that we will assume that your client has abandoned the MOA.”

11. On 19 July 2022, Mr Reid wrote to Mr Leamey enclosing a copy of the proposed draft deed saying:

“Could you please let us have your clients’ comments in respect of the draft.

ln the meantime, we will continue to prepare the various documents referred to in the draft deed.”

12. A month later, on 18 August 2022, Mr Reid sent further draft documents to Mr Leamey:

“Ancillary Documents

We attach a zip file containing drafts of the ancillary documents. The zip file is organised by reference to each entity. The zip file also contains a folder titled “Directions (Companies)”. It is anticipated that the various directions contained in this folder will be replicated for each relevant entity.

Further Amendments to Draft Deed

Please note that in the process of drafting the ancillary documents, it has become apparent that a number of amendments to the draft deed will be required. Those amendments include:

…

We will await your comments on the draft deed before making any further amendments.

…

Next Steps

Please let us have your comments on the draft deed as soon as possible.”

13. On 27 September 2022, Mr Leamey emailed Mr Reid:

“I apologise for the delay in getting this back to you.

I attach version 9 of the Deed of Release in word & pdf.

I ended up giving up on markup as it became too complex. There are some formatting issues also.

There are two things that we need to discuss:-

…

We might need to have a conference to go through the amendments.”

14. In the course of submissions, Mr Size placed some emphasis on what he submitted should be understood from that email as an offer to have a conference. I do not accept that the language of the email goes that far, but in the end nothing turns on whether it should be read as an offer or not. It certainly may be understood as an expression of willingness to confer if Brett’s legal advisers also thought it was necessary.

15. On 21 October 2022, Mr Frawley responded to Mr Leamey in a letter marked “without prejudice” (although read without objection before me), which included:

“Draft Deed of Settlement

We refer to your email dated 27 September 2022.

We enclose:

1.   An amended draft deed of settlement, in Word format (the Draft Deed). This deed incorporates the amendments sought by your client that we have accepted, and further amendments proposed.

2.   A comparison document in pdf, which identifies the differences between the Draft Deed and the amended deed attached to your email of 27 September 2022.

We make the following comments in respect of the Draft Deed and the amendments proposed by your client:

…

It is now over 18 weeks since the mediation occurred. In the circumstances please let us have any further comments on the draft deed by no later than Thursday, 27 October 2022.

…

We look forward to hearing from you shortly.”

16. That letter included 13 sub-paragraphs (not reproduced here) setting out areas of agreement, disagreement and proposed amendment.

17. On 2 November 2022, Mr Leamey wrote to Mr Reid:

“Please see attached list of comments on the amended deed.”

18. The attached list contained 13 points of comment.

19. On 14 November 2022, Mr Frawley wrote a lengthy letter to Mr Reid, which included (emphases in original):

“We refer to your email dated 2 November 2022.

Relevant History

On 6 June 2022, the parties executed a binding Heads of Agreement (HOA).

On 19 July 2022, we sent you an advanced draft of a deed of settlement designed to reflect, and more fully restate, the terms of the HOA. Shortly thereafter, we sent you drafts of the ancillary documents to give effect to the various transactions and transfers provided for under the HOA.

It was not until 27 September 2022 that we received your comments on the draft deed. By way of your client's proposed amendments, your client sought to fundamentally change the settlement agreed in the HOA. In particular, amongst other things, your client sought to:

…

In our response of 21 October 2022, we addressed the various issues above, and provided a further amended draft deed, in mark-up. Once again, our amended deed sought to reflect the terms of the HOA.

On 2 November 2022, you provided various further comments on the draft deed. In those comments, your client effectively insisted upon the reinstatement of all of the amendments rejected by our client (including those referred to in numbered paragraphs 1 to 3 above). The reasons for our client's rejection of those amendments were explained in our letter of 21 October 2022. In contrast, your client has simply insisted upon the reinstatement of clauses that our client has rejected, without providing any proper reason for doing so.

Current Status

In circumstances where your client continues to insist upon the inclusion of provisions that are either entirely contrary to or beyond the scope of the HOA, it is apparent that your client is unwilling to execute a deed of settlement that is “fuller and more precise but not different in effect” to the HOA, as contemplated by the HOA.

In those circumstances, and having regard to the fact that your client maintains that position despite having had the original draft deed since at least 19 July 2022 (now almost 4 months), our client will instead rely upon and enforce the HOA.

HOA – Clause 11(b) Demand

Pursuant to clause 11(b) of the HOA, your client agreed to execute, and cause her related entities to execute, any document required to give full effect to the agreement recorded in the HOA.

Pursuant to clause 11(b) of the HOA, our client requires your client and her related entities to execute and return the documents set out in Schedule 1 to this letter. Copies of the documents listed in Schedule 1 are enclosed. We have also enclosed consents to act executed by our client and Simone Gooley.

Please arrange for your client and her related entities to execute and return the documents to us by no later than 5pm on Monday, 21 November 2022.

….

Enforcement proceedings

In the event that your client fails or refuses to execute and return the documents by the date we have specified above, our client intends to commence proceedings seeking specific performance of the HOA, and orders compelling your client and her related entities to execute the Schedule 1 documents.

If that becomes necessary, our client will rely upon this correspondence in support of those proceedings, including (without limitation) on the question of costs in any proceedings, including indemnity costs. For the avoidance of doubt, we confirm that this letter is intended to be open correspondence.

Our client reserves all of his rights, including his rights under the HOA generally, and the right to require execution of additional documents to give full effect to the agreement recorded in the HOA and/or commence proceedings seeking specific performance of the HOA.

We await your response by 5pm on Monday, 21 November 2022.”

20. On 23 November 2022, Mr Leamey wrote to Mr Reid:

“I refer to your letter advising that your client is not entering into a deed.

The HOA refers to a proposed Deed & we want to proceed with a deed that is sufficient to implement the HOA.

We are waiting for an advice from Counsel which we should receive within a few days.

Do you want me to send you a simple deed to the effect that we think should be entered into?

If the parties want to expand it, then we agree with that also, provided that it is done fairly & is not one sided.”

21. Later that day, Mr Reid replied to Mr Leamey, including (italics and emphasis in original):

“It is not correct to characterise our letter of 14 November 2022 as “advising that [our client] is not entering into a deed”. Our letter advised that our client would rely upon and enforce the Heads of Agreement (HOA) in circumstances where your client was unwilling to enter into a deed that reflected the HOA.

We provided you with that advice in the context of having made numerous attempts to meaningfully engage with you on a draft deed over the past 4 months. Those attempts included:

…

In our client's view, your latest correspondence is a further attempt, on behalf of your client, to delay implementation of the settlement contained in the HOA. In the above circumstances, our client does not accept that your client is now prepared to enter into a deed that is "fuller and more precise but not different in effect” to the HOA. Your client has had over 4 months to meaningfully engage in the process of finalising a deed, but has not done so.

If your client wishes to propose any appropriate amendments to the draft deed in the form most recently provided to you, your client should do so, using mark-up to clearly identify the proposed amendments sought. Alternatively, your client should execute and return the HOA implementation documents on the basis requested in our letter of 14 November 2022. We request that your client take either course by the end of this week.

Our client presently intends to commence proceedings against your client to enforce the HOA, including your client's obligation to execute, and cause her related entities to execute, any other document required to [g]ive full effect to the agreement recorded in the HOA. Our client intends to commence those proceedings without further reference to you or your client, in the event that we do not receive the communication we have requested by the time specified above. If that becomes necessary, we will rely upon this correspondence in the proceedings, including (without limitation, noting that this is intended to be open correspondence} on the issue of costs.”

22. Brett’s summons for orders to enforce the HOA was filed on 20 December 2022 and was returnable for directions on 8 February 2023.

23. On 30 January 2023, Mr Leamey wrote to Mr Reid:

“I am instructed that the signed transaction documents will be provided to you by my client in the next 24 to 48 hours. They were signed previously but misplaced. She was going to sign another copy yesterday.

I am presently overseas & will arrive back in Sydney at Noon on Tuesday.

Perhaps a one week adjournment is appropriate in all matters.”

24. The various signed transaction documents were emailed on 5 February 2023. Additional director resignations signed by Aleta were sent on 10 February 2023. On 15 February 2023, Mr Reid emailed Mr Leamey requesting that Aleta deliver up all books, records and other corporate property (including electronic records) in respect of the various corporate entities in which she no longer had an interest. On 27 February 2023, Aleta delivered a small box of documents to Mr Reid’s office.

25. The parties then exchanged correspondence in an attempt to resolve the question of the costs of the summons. As will be apparent, that attempt was unsuccessful.

26. The relevant legal principles as to costs were not in dispute. The issue before me was whether the Court should “order otherwise” under r 42.20(1).

Brett’s submissions

27. Mr Knackstredt's submissions as to why Brett was entitled to his costs of his summons may be summarised as follows. Aleta had acted so unreasonably that it had forced Brett to commence the litigation. Furthermore, Brett was certain to have succeeded had it continued through to a conclusion. These two propositions depend on the well-known decision of McHugh J in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6.

28. Furthermore, it was put that there had been a complete capitulation by Aleta insofar as only a few days before the first return date of the summons she had accepted that she should execute and provide all the relevant formal transaction documents that had been demanded in the earlier correspondence. This meant that Brett had achieved practical success in the proceedings: Eastmark Holdings Pty Ltd v Owners Strata Plan 74602 [2009] NSWSC 1483 at [4] per Brereton J (as his Honour then was).

29. Insofar as the application for a gross sum costs order was concerned, Mr Knackstredt submitted that this was a classic example of a case in which the Court should make such an order for three reasons:

1. The evidence that had been read from his solicitor permitted the Court to have confidence in how the sum should calculated. There had been an appropriate discount to allow for what costs would be typically recovered on assessment.

2. The parties had been in many disputes over a long period of time. The prospects of them agreeing on quantum could be inferred to be minimal. Given the amount sought was not large in the context of the history between the parties, a gross sum costs order would avoid considerable expense, delay and aggravation.

3. The making of a gross sum costs order was consistent with the overriding purpose in providing a just cheap and quick resolution of the present dispute, again also bearing in mind issues of proportionality given the amount involved.

Aleta’s submissions

30. Mr Size submitted that there had been no relevant unreasonableness on the part of Aleta in her conduct. On the contrary, he submitted that Brett had been unreasonable in filing the summons when he did.

31. Two matters underpinned these submissions. The first was that Aleta had not in fact breached the HOA because a reasonable time had not yet run within which she was to comply with all her various obligations.

32. Second, and in any event, through her solicitors, a conference had been offered to resolve the outstanding issues as to the drafting of the deed contemplated by the HOA. I have dealt with this submission in [14] above. Mr Size submitted that the Court should take the view that Brett had been peremptory in his commencement of the proceedings and that the parties would have been able to bridge whatever remaining gaps there were if only they had kept negotiating.

30. Turning to the application for a gross sum costs order, Mr Size submitted that this was not a case in which the Court could be satisfied that a proper basis was available in the evidence for the Court to determine what those costs should be. In particular, he drew attention to a number of matters which were being claimed that he submitted were not matters properly referable to either the conduct of the proceedings or the resolution of the present costs dispute.

31. In relation to this submission, I should immediately record that Mr Knackstredt in his written submissions in reply dealt with the specific items which Mr Size had identified as not being properly recoverable. Mr Knackstredt conceded that to be the case, but made the point, which I accept, that the amount involved was approximately $1,700 (ex GST) and for present purposes was immaterial, especially in the light of the inevitable discounting process that would occur. Mr Size was unable to identify any additional items which he could submit were otherwise not recoverable if a costs order was made.

Resolution – the appropriate order as to costs

35. I am satisfied that an order should be made that Aleta should pay Brett's costs and that a gross sum costs order should be made for the following reasons.

36. Having regard to the nature of the evidence (being what appears from the correspondence only) and the amount in question, it is neither appropriate nor practical for the Court to go into the reasonableness of the negotiating stances taken by the parties. The proper approach is for the Court to take something of a helicopter view of what occurred.

37. Looking at what transpired between the parties in that way, the fact is that the HOA were executed on 6 June 2022 and the parties were still negotiating in November 2022 to achieve what the HOA contemplated. While there was reference in the submissions to the complexity of the issues involved, that description is inapt on the evidence to which the Court has been referred. There were a number of practical measures that had to be taken in relation to the various companies and trusts involved, but as events demonstrated, at their heart they involved the execution by Aleta of various formal company and trust documents to bring about transfers and similar changes to corporate roles and responsibilities.

38. The only other substantive issue between the parties was the negotiation of the terms of a further and better agreement as contemplated by the HOA. But as the course of negotiations demonstrated, the matter really came down to the execution of a large series of formal corporate documents.

39. So understood, it was not at all unreasonable given the delay and the nature of the essential tasks involved for Brett to bring matters to a head by filing the summons when he did. In reaching this conclusion, I accept Mr Knackstedt’s submission that the Court can be fortified in its view by Mr Leamey’s assertions in June 2022 that a reasonable time to provide the draft deed contemplated by the HOA would have been a month (see [8] and [10] above).

40. Another way of looking at the reasonableness of the timing of the commencement of the proceedings is to compare the time that in fact was allowed between the final letter of demand and the filing of the proceedings with what in fact occurred.

41. A demand was made on behalf of Brett for execution of relevant documents by Aleta on 14 November 2022 and allowing seven days for that to occur (see [19] above). However, as a matter of fact the proceedings did not commence until the 20 December 2022, being some five weeks from the date of demand to the commencement of proceedings.

42. It is also of significance in assessing the reasonableness of what was done and what was demanded that the period from when Aleta conceded through her solicitors that she would execute the relevant corporate and related documents to when in fact that task (including the provision of records) was completed was the period between 30 January 2023 and 27 February 2023.

43. In other words, what actually happened bears out the reasonableness of the period of time between the letter of demand and when in fact the proceedings were commenced. It also supports the conclusion that a reasonable time had passed from when the HOA were entered into and the letter of demand on 14 November 2022 (see [19] above).

44. Next, the Court accepts Mr Knackstredt's submission that Brett achieved practical success through Aleta's immediate capitulation by agreeing to execute the relevant corporate and other documents. Looking at the events to which the Court has been referred as a whole, the Court concludes that Brett does not appear to have had any alternative but to bring the proceedings to bring matters to a head and achieve the result he in fact did.

Resolution – a gross sum costs order

45. I accept that the evidence that has been provided on behalf of Brett by Mr Frawley provides a sufficient basis for the Court to have confidence as to an amount that should than awarded.

46. Furthermore, the history of litigation between these parties, and the history of this particular episode in the litigation, puts beyond doubt that all possible future opportunities for disputation between these parties should be avoided whenever possible. It is clear that if these costs go to assessment, the prospects of there being further expense and disputation between the parties are very high. This is exactly the kind of case in which gross sum costs orders should be made, if they otherwise can be made, to avoid further argument between the parties.

47. That is particularly so in a case such as the present where the amount involved is not very large by the standards of litigation in this Court. It would be contrary to the overriding purpose to allow the question of costs to go off to assessment, not least because of the disproportion involved between the amount at stake and the costs that would be incurred in the assessment process.

48. Brett seeks two components of costs. The first is the costs that he has incurred of and incidental to the summons itself. The second relates to the costs of the present application. The latter is based on an estimate of the costs likely to be incurred rather than those which have in fact been incurred. No point was taken, (correctly, in my respectful view) by Mr Size that the Court could not make an order on a gross sum costs basis where what has in fact been provided to the Court is an estimate of costs that will be incurred. As a matter of practical reality, a party is entitled when bringing a gross sum costs order to seek to have its costs of that application on a gross sum costs basis.

49. It would be impractical to commit parties to a never-ending cycle of making applications for gross sum costs orders in relation to the costs of applying for the order itself. However, as I will shortly come to, where the application is based upon estimates of costs to be incurred for the application itself, a higher discount is warranted to ensure that no injustice is visited on the respondent to the order by reason of an over-estimation of what the costs might be.

50. Turning to the figures themselves, the evidence is that the costs which have been incurred on a solicitor/client basis by Brett total $33,654.58. The figures which follow up to and including [57] below are all ex GST.

51. Mr Frawley opines that in relation to the summons Brett would be entitled to recover on a party/party basis approximately $22,779 (ex GST) on the basis that the professional fees incurred would be reduced on assessment by 30 percent, but that the disbursements such as counsel’s fees would be allowed as to 100 percent.

52. The Court accepts that evidence. However, in such applications the Court often makes a further discount to reflect the time and costs saved by the making of a gross sum costs order and to provide some additional assurance to the defendant that the relatively informal assessment which the Court makes does not result in an injustice.

53. In the circumstances, I propose to discount the figure of $22,779 by a further 20 percent, which gives $18,223. I will round that down to $18,000.

54. Applying similar principles of deduction as to the likely outcome on assessment, Mr Frawley’s evidence is that the estimated party/party costs recoverable by Brett in relation to this application itself is $20,673.

55. As I have already said above, while there is no objection in principle to the Court making a gross sum costs order based on an estimate of the costs for the application itself, the very fact that it is an estimate requires, in my respectful opinion, a higher rate of discount than might otherwise apply. That is done without disrespect to the skill and diligence of the solicitor who has made the estimate.

56. In the present case, I am satisfied that there ought to be a further one third reduction in the amount claimed in respect of the costs of this application, which gives a figure of $13,644 that I will round down to $13,500.

57. Therefore, the total figure is $31,500. However, the order I will make will be inclusive of GST.

58. The orders of the Court are:

1. Summons dismissed.

2. The defendant is to pay the plaintiff's costs of the proceedings assessed as a gross sum of $34,650 (GST inc).

**********

Decision last updated: 14 September 2023