Dalton v Paull (No 2)

[2007] NSWSC 803

CITATION:	Stephen John Dalton v Vicki Paull (No.2) [2007] NSWSC 803
HEARING DATE(S):	18/07/07
JUDGMENT DATE :	24 July 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Associate Justice Macready at 1
CATCHWORDS:	Family Provision - Application for a Capping Order on the matter of costs awarded to the Plaintiff in respect of a small estate - Legacy granted for the Plaintiff of $25,000 and the costs capped at $25,000
LEGISLATION CITED:	Civil Procedure Act 2005 - s98(1)(a)(b), s98(4)(a)(b)(c)(d) Uniform Civil Procedure Rules - Rule 42.4
CASES CITED:	Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) 94 FCR 167 Parker v Parker [2006] NSWSC 473 Sherborne Estate (No2) Vanvalen v Neaves (2005) 65 NSWLR 268 Woolf v Snipe (1933) 48 CLR 677
PARTIES:	Stephen John Dalton v Vicki Paull
FILE NUMBER(S):	SC 2407/06
COUNSEL:	Plaintiff - Mr R Wilson Defendant - Mr L Ellison SC
SOLICITORS:	Plaintiff - Ms NA Darcy Defendant - Mr AS Holmes

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE MACREADY

24 July 2007

2407/06 Stephen John Dalton v Vicki Paull (No. 2)

JUDGMENT

1 HIS HONOUR: I have now heard further submissions on the costs orders to be made in this matter after publication of my reasons on 29 June 2007. In that judgment, I found that the plaintiff should receive a legacy out of the estate of the deceased in the sum of $25,000. I ordered that the plaintiff’s costs on the ordinary basis and the defendant’s on the indemnity basis be paid or retained out of the estate of the deceased. On the request of Counsel, I stayed the application of that order so that an order seeking to cap the amount of costs could be made. This judgment addresses the submissions which deal with that aspect.

2 This was a small estate and after a distribution of $30,000, the estate amounted to $172, 187.00. There had already been paid out of that a sum of $5,257 on account of the defendant’s costs and the balance of the defendant’s costs were estimated at $15, 712. The plaintiff’s costs were estimated at $33, 948 and that left a distribute of estate if both those sums were accepted in the amount of $122, 527. There is now evidence before me that the total amount of the plaintiff’s party and party costs assessed by the plaintiff’s solicitor is $34,673.85. That evidence gives some details of the particular items involved in the work but no detailed breakdown other than as follows:

(a) Professional fees $18,795

(b) GST $1,879.50

(c) Counsel’s fees $11, 330

(d) Miscellaneous disbursements $2,669.35

3 The application was made initially under section 98(4)(c) of the Civil Procedure Act 2005. Another source of power for a slightly different order is Uniform Civil Procedure Rules, Rule 42.4. I will address both matters.

4 Rule 42.4 of the Uniform Civil Procedure Rules provides as follows:

“ Power to order maximum costs
(1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another.

(2) A maximum amount specified in an order under subrule (1) may not include an amount that a party is ordered to pay because the party:
(a) has failed to comply with an order or with any of these rules, or

(b) has sought leave to amend its pleadings or particulars, or

(c) has sought an extension of time for complying with an order or with any of these rules, or
(d) has otherwise caused another party to incur costs that were not necessary for the just, quick and cheap:
(i) progress of the proceedings to trial or hearing, or
(ii) trial or hearing of the proceedings.

(3) An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap:
(a) progress of the proceedings to trial or hearing, or
(b) trial or hearing of the proceedings.

(4) If, in the court’s opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1).”

5 [72] This rule took the place of the former Supreme Court Rule Pt 52A r 35. The matter has been dealt with by Palmer J in Sherborne Estate (No2); Vanvalen v Neaves (2005) 65 NSWLR 268. I agree with His Honour’s analysis of the rule that the rule “is intended as a means whereby the court may, if the need arises, curb the tendency of one or all parties to engage in disproportionate expenditure on legal costs by making it clear, at an early stage of the proceedings, that beyond a certain limit the parties will have to bear their own costs – win or lose”.”

6 After discussing a common matter which tends to increase the cost in these type of matters, namely personal animosity, Palmer J in Sherborne Estate (No. 2), Re; Vanvalen v Neaves (2005) 65 NSWLR 268 went on to say at para [29] to [31]:

”[29] It seems to me that UCPR 42.4 and its precursor, SCR Pt 52A r.35A, were designed to put into the Court’s hands a brake on intemperate and disproportionately expensive conduct of proceedings. The power conferred by the Rule is not brought into play only if one of the parties invokes it: the Court itself may exercise the power on its own motion whenever it sees the need. This is because the policy of the law, enshrined in CPA s.56(1), is to facilitate the just, quick and cheap resolution of the real issues in proceedings. By s.56(2), the Court not only may, but must, give effect to that policy whenever it exercises any power conferred upon it by the Act or the Rules – indeed, even when the parties themselves do not wish to conduct the proceedings quickly or cheaply.

[30] Proportionality of costs to the value of the result is central to the just and efficient conduct of civil proceedings: see e.g. Lownds v Home Office (Practice Note) [2002] 1 WLR 2450 per Lord Wolfe CJ. It is a pity that the precursor of UCPR 42.4 seems never to have been used to this end. In Jvancich v Kennedy (No 2) [2004] NSWCA 397 at para [6], the Court of Appeal pointed out that it has not been the practice in Australia for the Court to fix the amount of costs. However, the Court in that case was concerned with a costs order made at the conclusion of proceedings and was not giving consideration to the making of a capping order in the course of case management under SCR Pt 52A r.35A (UCPR 42.4). I do not read Jvancich as inhibiting the use to which I have suggested UCPR 42.4 may be put. In my opinion the Court should not be reluctant to use UCPR 42.4 to prevent extravagant expenditure of legal costs in FPA cases, such as has occurred here. The time for its use is early in case management, whenever it appears that the parties’ litigious fervour may be leading them to excessive expenditure of costs.

[31] However, the remedy provided by UCPR 42.4 is prophylactic: it cannot be used as a cure for excessive expenditure at the time of making a final costs order at the conclusion of proceedings: other powers of the Court must be engaged.”

7 The practice note Supreme Court Practice Note SC Eq 1, announced 17 August 2005, makes it clear that in cases where the estate is under $500,000, the court may cap the costs of a successful claim. Thus, although in this particular case there were no pre-trial directions in which the costs were limited early on, there is a clear warning in the practice note and also in a number of other decisions that the Court will consider the capping of costs in the circumstance where the estate is under $500,000.

8 As I have mentioned, application was also made under section 98 of the Civil Procedure Act 2005. Section 98 provides as follows:

“ Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
…..
4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs,

(d) such proportion of the assessed costs as does not exceed a specified amount.”

9 Under s 98(4)(c), there is power to limit the costs by fixing the amount instead of allowing them to be assessed. In Sherborne, His Honour Mr Justice Palmer referred to this power. His Honour discussed the section in the following terms:

“39. The purpose for which Mr Lindsay seeks to use CPA s.98(4)(c) is not the purpose for which it has been used so far, according to the authorities. In the usual case in which the power is exercised it is the successful party which seeks to avail itself of the power in order to avoid the expense and delay of a costs assessment. Here, Mr Lindsay, on behalf of an unsuccessful party, seeks to use the power against the successful party – not to avoid the delay and expense of a contest before the assessor but in order to cap the costs of the trial itself.

40 There is no justification in the words of the CPA for restricting the use of s.98(4) to circumstances in which it has been used in the past: indeed, such an interpretation would be contrary to the mandate in CPA s.56(1) and (2) which obliges the Court, in interpreting any provision of the CPA or the UCPR, to give effect to the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in dispute.

41 However, large though the power given by s.98(4) is, it must be exercised judicially: i.e., the exercise of the power must have a proper factual foundation and must be explicable according to legal principle.

42 It is conceivable that the Court could exercise the power under s.98(4)(c) on the application of an unsuccessful party in making a final costs order so as to cap a successful party’s recoverable costs where the Court considers that the successful party’s costs are grossly excessive. In Jvancich (supra) the Court of Appeal did not rule out the making of a capping order in any circumstance: see per Giles JA at para [6]. But such a capping order would be very rare: the Court’s decision would have to be an informed one, i.e. founded on a consideration of the costs actually incurred, the circumstances at the time at which they were incurred, whether they were reasonable in those circumstances, and what would have been a reasonable amount to have incurred.

43 There is a high risk that readily allowing an unsuccessful party to make a costs capping application under s.98(4)(c) will prolong the battle between the litigants at greater expense and with longer delay than if the successful party’s reasonable costs were estimated by an assessor in accordance with the Legal Profession Act” .

10 It should be appreciated that the type of capping order which I am discussing is one which does not affect the costs as between solicitor and client. There is of course a power in the Court, in the exercise of its supervisory jurisdiction, to limit the costs which might be payable by a client. See Woolf v Snipe (1933) 48 CLR 677 at 678 and Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) 94 FCR 167. In the present case, there has been no request by the plaintiffs to restrict their costs and there is no information before me about the retainer which they may have entered into with their solicitor.

11 In the absence of any restriction on the amount that the solicitors may charge the client, plainly if there is a capping order to limit the amount which the plaintiffs can recover from the estate, any amount of any award which they receive will be depleted by the amount which they have to pay over and above the costs they have recovered from the estate.

12 There has been some debate before me about some of the items of work in particular affidavits, and whether it would be reasonable to consider such amounts when calculating the plaintiff’s costs. Given the absence of detail, no useful conclusions can be drawn on the amount that should be deducted for costs which have turned out not to be necessary. This leads me to a further consideration of whether the order should be made under Rule 42.4 of the Uniform Civil Procedure Rules. I referred to cases where the Court had ordered that costs be capped and made comments on the amount of costs. In Parker v Parker [2006] NSWSC 473, Brereton J said at para [35] the following:

“[35] I raised with counsel the question of costs which in an estate as small as this with as many claims on it as here, always presents a difficulty. In Moore v Moore [2004] NSWSC 587, Young CJ in Eq said that ordinarily some special justification would be needed to warrant an order for more than $35,000 for costs of a successful claimant in a family provisions application. In the context of proceedings under the Property (Relationships) Act 1984 (NSW), in Deves v Porter [2003] NSWSC 878 Campbell J suggested that a useful rule of thumb in such proceedings was that the costs awarded ought not exceed the amount recovered. But in Van Zonneveld v Seaton (No 2) [2005] NSWSC 175 Campbell J recognised that, while Deves v Porter provided a useful rule of thumb, it was one which had to be applied with caution and having regard to the circumstances of the individual case.”

13 In the present case we are concerned with what is admittedly on any view a small estate. It must have been plainly obvious to the plaintiff from early in the proceedings. The matters referred to by Palmer J in para [30] of his judgment in Shereborne are very applicable to the present case and by themselves in my mind justify the capping of the costs at $25,000. In addition in his case, there are some other factors which support such an order. These are that the case was one where the plaintiff did not make, on my findings, a full and frank disclosure to the Court in respect of a matter important to his eligibility. That was the fact that, contrary to his affidavit evidence, he had in fact purchased a property with his then girlfriend and moved out from the deceased’s house. This lends support to the order which I propose to make based upon the necessity to prevent a small estate being burdened by substantial orders for costs where the plaintiff has only achieved a very modest result. I vary order 2 made on 29 June 2007 by providing instead that the plaintiff’s costs on the ordinary basis be capped at the amount of $25,000, and the defendants on an indemnity basis be paid or retained out of the estate of the deceased.

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