Deputy Commissioner of Taxation v Bourke and Williams
[2018] VSC 113
•16 March 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 02211
| DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA | First Plaintiff |
| COMMONWEALTH OF AUSTRALIA | Second Plaintiff |
| v | |
| KATHLEEN ELLEN BOURKE (IN HER CAPACITY AS EXECUTOR OF THE ESTATE OF GEORGE LESLIE WILLIAMS) | First Defendant |
| ROBERTA WILLIAMS (IN HER CAPACITY AS EXECUTOR OF THE ESTATE OF GEORGE LESLIE WILLIAMS, AND IN HER PERSONAL CAPACITY) | Second Defendant |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 February and 8 March 2018 |
DATE OF JUDGMENT: | 16 March 2018 |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation & Anor v Bourke & Williams |
MEDIUM NEUTRAL CITATION: | [2018] VSC 113 |
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PRACTICE AND PROCEDURE – Summary judgment for possession of land by a mortgagee – Defendants being executors of estate of deceased person – One defendant does not resist mortgagee obtaining possession and exercising power of sale – Other defendant defends the claim – No evidence in support of pleaded defences – No appearance by relevant defendant to resist summary judgment – Plaintiffs’ evidence negatives defences pleaded by defendant – No defence with real as opposed to fanciful prospect of success – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; Hausman v Abigroup Contractors Pty Ltd, [2009] VSCA 288.
COSTS – Where estate of deceased defended the claim through only one of the two executors who is bankrupt – Where defences raised are without merit – Whether defending executor entitled to be indemnified for her costs from the assets of the deceased estate – Plaintiffs to be paid their costs first from the net proceeds of sale of the land – Defending executor not to have recourse to the estate for her own costs – Re Jones, Christmas v Jones [1897] 2 Ch 190; Drummond v Drummond [1999] NSWSC 923.
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APPEARANCES: | Counsel | Solicitors |
| For the First and Second Plaintiffs | Mr J D McKay | Australian Government Solicitor |
| For the First Defendant | Ms C Sparke QC | Slater & Gordon |
| No appearance for or on behalf of the Second Defendant |
HIS HONOUR:
Introduction
On 8 February 2018, the Court made orders granting the first plaintiff (‘DCT’) summary judgment against the defendants for possession of the land known as 82 Primrose Street, Essendon, Victoria (‘the Property’), and associated relief. The hearing was adjourned to 8 March 2018 for further submissions on costs, and the DCT and the defendants were directed to file any outline of submissions on that question by successive dates. The plaintiffs did so. The first defendant relied on an outline of submissions handed to the Court on 8 February 2018, supplemented by oral submissions. The second defendant submitted no outline of submissions.
At the time of granting the DCT summary judgment I expressed short ex tempore reasons for doing so.[1] In particular, reference was made in those ex tempore reasons to matters more fully set out in the plaintiffs’ written outline of submissions.[2] I take this opportunity to state my reasons for the orders of 8 February 2018 in more detail, being reasons which address the matters dealt with in the plaintiffs’ outline of submissions to which I made reference in the ex tempore reasons.
[1]Transcript of Proceedings, (8 February 2018), 23-25.
[2]Plaintiffs’ outline of submissions on summary judgment dated 29 January 2018.
In addition, these reasons address the costs question reserved on 8 March 2018, which involves issues concerning the estate of the late George Leslie Williams, deceased (‘George Williams’).
Summary judgment
By a summons filed 21 November 2017, the plaintiffs applied for summary judgment against the defendants. The substance of the judgment sought was an order for possession of the Property, and costs on an indemnity basis.
Background facts
George Williams was the registered proprietor of the Property.[3] He died on 12 May 2016,[4] leaving a will dated 16 December 2010 under which he appointed the defendants as the executors of his estate. This Court granted probate of the will to the defendants on 14 February 2017 (first defendant) and 3 April 2017 (second defendant).[5] The second defendant is in possession of the Property.[6]
[3]Affidavit of Vincent Daniel Tavolaro sworn 21 November 2017 (‘Tavolaro affidavit’), exhibit VT-15.
[4]Tavolaro affidavit, exhibit VT-19.
[5]Tavolaro affidavit, exhibit VT-20.
[6]Amended defence of second defendant filed 2 October 2017 (‘Amended Defence’) [6].
On 20 November 2007 the Australian Taxation Office (‘ATO’) issued to George Williams amended assessments of income tax for the years ended 30 June 2001, 2002, 2003 and 2004, together with notices of assessment and liability to pay a penalty.[7]
[7]Tavolaro affidavit [5], exhibit VT-1.
The sums stated in the notices were not paid, so on 6 February 2008 the DCT commenced proceedings in the Supreme Court of Victoria for the recovery of the sums stated in the notices together with a Running Balance Account (‘RBA’) deficit debt in the amount of $118,794.93.[8] The Supreme Court proceeding was proceeding S CI 2008 04522. That proceeding was discontinued by the DCT on 19 June 2009. In an affidavit sworn by Robin Allan Best (‘Best’) on 13 August 2012 in another proceeding, (proceeding S CI 2011 05571) the circumstances leading to that discontinuance were described. Those circumstances are:
[8]Tavolaro affidavit [6], exhibit VT-2.
(a) Best is an officer of the Australian Public Service who was employed in the Serious Non-Compliance Section of the ATO. On about 21 January 2009 representatives of Victoria Police approached the ATO and discussed the possibility of Victoria Police paying George Williams’ tax debt;
(b) Best had several conversations with Senior Victoria Police Officers as to the terms of the proposed payment, including one conversation with Deputy Commissioner Simon Overland (‘Overland’) and other conversations with Inspector Peter Wilkins (‘Wilkins’). On 17 March 2009, Wilkins called Best and advised that Overland had ‘okayed’ the payment of George Williams’ tax debt. However, Wilkins asked Best whether the payment could be held in abeyance by the ATO until Victoria Police advised that it could be applied in reduction of George Williams’ tax debts. Wilkins stated that Victoria Police still had some issues that they were discussing with George Williams that required resolution;
(c) Best discussed Wilkins’ request with an ATO staff member (Aris Zafiriou) who advised Best that the payment would be held in a suspense account where it could be retained without being applied to pay the tax debts until Victoria Police directed this to occur. This advice was relayed to Wilkins who agreed to make payment on those terms;
(d) on about 15 June 2009, Victoria Police paid to the ATO the sum of $576,000 by cheque. The money was deposited in the suspense account. The cheque was accompanied by a document headed ‘Advice to Payee’ which described the payment as having been made to the ATO ‘holding account’;
(e) on 17 July 2009, a letter was sent by the ATO to George Williams which stated, in effect, that the $576,000 had been applied in payment of his taxation debts and that there was now a nil balance owing;
(f) on 20 July 2009, an ATO employee (Paul Rafferty) emailed Best and stated, relevantly:
Please find attached a copy of correspondence issued to George Williams in response to his inquiry regarding the account balance… . Can you advise me if the payment that was made on 15 June 2009 can be transferred from the suspense account into the tax payer’s income tax and CAC accounts.
(g) Best was on leave from 17 July 2009 to 24 July 2009 and did not become aware of the email of 20 July 2009 and the letter of 17 July 2009 until 28 July 2009. Upon seeing the email, Best realised that the letter of 17 July 2009 had incorrectly stated that the $576,000 payment had been allocated to George Williams’ taxation accounts. On 28 July 2009, Best contacted Aris Zafiriou and asked why the 17 July 2009 letter had been sent given that the monies were supposed to remain in the suspense account until further advice had been received from Victoria Police. Zafiriou stated the letter of 17 July 2009 had been issued in error;
(h) later that day, Best sent an email to Paul Rafferty that confirmed and summarised his conversation with Zafiriou. The email stated, relevantly:
I have just returned from leave and the email suggests that the letter has already been issued to George. Vic Police were adamant that the basis of payment was for the funds to be held in suspense until they advised the ATO that they were in agreement that the funds could be transferred to George’s account. I have spoken with Aris this morning and he agrees that a further letter will be issued to George advising him that the original letter (was) issued in error and that the account remains in debt.
(i) the same day, Rafferty issued a correction letter to George Williams which advised that the 17 July 2009 letter had been sent in error, and that a sum of $574,296.90 remained owing to the ATO;
(j) on 18 September 2009, Best spoke with Wilkins to find out whether the $576,000 could be applied to George Williams’ taxation accounts. Wilkins stated that Victoria Police had not resolved ‘the issue’ that was preventing the payment from being applied. Wilkins did not say what the ‘issue’ was. At no time did Victoria Police ever instruct the ATO to pay the $576,000 from the suspense account to satisfy George Williams’ taxation debts;
(k) on 22 February 2010, Best received a facsimile from the Victoria Police which stated, relevantly:
It is now clear that the proposed arrangements relating to the taxation affairs of Mr Williams are no longer an option for Victoria Police. … I can advise that any arrangements or undertakings for Victoria Police to provide monies on behalf of George Williams in regard to any tax debt owing to the ATO have been withdrawn.
(l) the $576,000 was subsequently repaid to Victoria Police.
Other evidence shows that the $576,000 paid by Victoria Police to the ATO remained at all times in a suspense account and was repaid to the Victoria Police on 5 July 2010.[9]
[9]Tavolaro affidavit [9]–[12].
As a result of the failure of the arrangements between Victoria Police and George Williams, his tax debt was not discharged and on or about 18 October 2011 the DCT commenced proceedings S CI 2011 05571 against George Williams in this Court seeking payment of income tax, interest and penalties in the sum of $559,745.13 together with a RBA deficit debt in the amount of $183,306.97.[10]
[10]Tavolaro affidavit [14].
George Williams, by his amended defence in proceeding S CI 2011 05571 contended that:
(a) there had been an agreement between the State of Victoria and George Williams’ son, the late Carl Williams, pursuant to which the State of Victoria had promised Carl Williams that it would pay (or arrange the waiver of) George Williams’ tax liabilities (‘Payment Agreement’);
(b) the State of Victoria performed the Payment Agreement by, inter alia, the payment of $576,000 from the Victoria Police to the DCT on 15 June 2009 and the application of that payment to George Williams’ ATO Integrated Client Account and Income Tax Account.[11]
[11]Tavolaro affidavit [15], exhibit VT-7.
The Deputy Commissioner of Taxation replied to that defence that the payment of $576,000 from the Victoria Police to the ATO was made on the express condition that it be held in a holding account and not applied until instructed by the Victoria Police, that at all material times that sum was held in a suspense account and no part was allocated to George Williams’ accounts and that on 12 July 2010 it was repaid to the Victoria Police on their instructions.[12]
[12]Tavolaro affidavit [17], exhibit VT-8.
On 25 September 2012, George Williams, Roberta Williams (the second defendant in this proceeding) and Dhakota Lee Williams (by her litigation guardian Roberta Williams) commenced proceedings against the State of Victoria and the Commissioner of Taxation for the Commonwealth (Proceeding S CI 2012 05437) alleging the existence of a Payment Agreement on substantially the same terms as the Payment Agreement referred to above and alleged in proceeding S CI 2011 05571.[13]
[13]Tavolaro affidavit [19]–[20], exhibit VT-9.
Settlement agreement and mortgage
On 6 May 2013, George Williams’ solicitors, Lennon Mazzeo, sent a letter to the Australian Government Solicitor, who acted for the DCT in proceeding S CI 2011 05571 and proceeding S CI 2012 05437 offering to settle the proceedings on the basis that judgment would be entered against George Williams in proceeding S CI 2011 05571 in the sum of $576,000, with no order as to costs, George Williams would procure a mortgage over the Property to secure the judgment debt, there would be judgment for the Commissioner of Taxation against George Williams in proceeding S CI 2012 05437, with no order as to costs and the DCT would not enforce the judgment in proceeding S CI 2011 05571 until the conclusion of proceedings against the State of Victoria in proceeding S CI 2012 05437, or 4pm on 7 May 2018, whichever was the earlier.[14]
[14]Tavolaro affidavit [21], exhibit VT-10.
That offer was accepted by the AGS on 6 May 2013.[15] This resulted in what has been called the ‘Settlement Agreement’.
[15]Tavolaro affidavit [23], exhibit VT-11.
By consent orders made on 6 May 2013, this Court gave judgment for the DCT against George Williams in the sum of $576,000 (‘the Judgment Debt’) on account of unpaid tax liabilities owed by him. By consent orders made on 14 May 2013 in accordance with the Settlement Agreement judgment was entered for the Commissioner of Taxation in proceeding S CI 2012 05437.[16]
[16]Tavolaro affidavit [25], exhibit VT-13.
On about 2 July 2013, in accordance with the Settlement Agreement, George Williams granted the Mortgage to ‘Commonwealth of Australia as represented by the Deputy Commissioner of Taxation of the Commonwealth of Australia’.[17]
[17]Tavolaro affidavit [26], exhibit VT-14.
The Mortgage was registered on Title on 2 August 2013. It is a mortgage tailor-made to suit a security for the payment of the Judgment Debt and provides, so far as relevant, that:[18]
[18]Tavolaro affidavit, exhibit VT-15.
(a) ‘Mortgagor’ means ‘George Leslie Williams his successors and assigns’ (clause 1(1)(g));
(b) upon an Event of Default the security shall thereupon become enforceable in accordance with clause 13 of the Mortgage (clause 3);
(c) an Event of Default for the purposes of the Mortgage (clause 4) –
Shall be constituted by any of the following events:
(a)if the Mortgagor defaults in making the payment in accordance with this Mortgage;
(b)if the Mortgagor otherwise defaults in duly performing, discharging or observing any of his obligations, liabilities and covenants under this Mortgage;
…
(h)if the Mortgagor does not carry out any of the matters which he has agreed to carry out within the specified time periods specified in the Settlement Agreement for these matters in the Settlement Agreement or where the time for the performance of a matter has passed within the time requested by the Mortgagee.
(d) ‘Settlement Agreement’ is defined to mean the agreement between the Mortgagor and the Mortgagee created by the Mortgagor’s counter-offer contained in the letter dated 6 May 2013 from Lennon Mazzeo Lawyers to the Mortgagee and accepted by email sent from Australian Government Solicitor on behalf of the Mortgagee to Lennon Mazzeo Lawyers on 6 May 2013 (clause 1(1)(k));
(e) the Mortgagor shall pay the moneys secured in the amounts and at the times provided in the Settlement Agreement (clause 2);
(f) at any time upon or after an Event of Default the Mortgagee may enter upon and take possession of the Property or any part thereof (clause 13(3));
(g) the ‘Monies Secured’ under the Mortgage means, so far as presently relevant:
(i)all moneys and amounts which the Mortgagor is or at any time may become actually or contingently liable to pay to the Mortgagee under or pursuant to the Settlement Agreement;
(ii)all interest that is or may become payable thereon or on any other monies;
(iii)any costs or expenses incurred payable by the Mortgagee in connection with the stamping, registration, discharge or enforcement of the Settlement Agreement or this Mortgage or any collateral security;
(iv)any costs or expenses incurred or payable by the Mortgagee in exercising any of the rights and powers whether express or implied conferred on the Mortgagee under the Settlement Agreement or this Mortgage or any collateral security;
(v)any costs, expenses, or payments incurred by the Mortgagee on account of any default by the Mortgagor in the performance or observance of any of the covenants on the part of the Mortgagor herein contained or implied (clause 1(1)(e)).
(h) the period for which the default specified in s 76 of the Transfer of Land Act 1958 (Vic) (‘TLA’) must continue before service of the notice referred to in that section is seven days (clause 13(2)(a));
(i) the period for which the default must continue after service of a notice before the power of sale given by s 77 of the TLA can be exercised is seven days (clause 13(2)(b)).
Supreme Court proceeding S CI 2012 05437 was concluded by the entry of consent orders giving judgment for the defendant (the State of Victoria) on 28 July 2015.[19] This was confirmed by the solicitors for George Williams by letter dated 29 July 2015.[20] In consequence, the Judgment Debt became enforceable against, and payable by, George Williams under the Settlement Agreement. This, accordingly, had the result that under the Mortgage the Judgment Debt was money which George Williams became liable to pay to the Mortgagee under or pursuant to the Settlement Agreement within the meaning of clause 1(1)(e) of the Mortgage. It was thereby ‘Money Secured’ under the Mortgage.
[19]Tavolaro affidavit [27], exhibit VT-17.
[20]Tavolaro affidavit [27], exhibit VT-16.
George Williams did not pay any part of the Judgment Debt to the DCT either on 28 July 2015 or at any time thereafter.[21] This constituted a breach of the Mortgage because George Williams did not pay the Monies Secured in the amounts and at the times provided in the Settlement Agreement. Thus an Event of Default occurred under the Mortgage and the DCT is entitled to enter into possession under the terms of the Mortgage and to exercise the rights conferred by the TLA. The DCT is also entitled to possession pursuant to s 78 of the TLA.
[21]Tavolaro affidavit [31].
On 31 August 2015 the DCT wrote to George Williams demanding payment of the $576,000 due under the orders of 6 May 2013 in proceeding S CI 2011 05571.[22] George Williams died on 12 May 2016. On 22 March 2017, notices of default were served on the defendants in accordance with s 76 of the TLA demanding payment of monies secured under the Mortgage.[23]
[22]Tavolaro affidavit [28], exhibit VT-18.
[23]Tavolaro affidavit [30], exhibit VT-21.
The Defence
Both defendants entered an appearance but only the second defendant filed a defence. The first defence was self-drawn[24] and was struck out by order of the Court on 31 August 2017. A defence settled by counsel was filed on 2 October 2017. The defence primarily advanced reiterates the contentions advanced by George Williams in proceedings S CI 2011 05571 and S CI 2012 05437. A summary of those defences is:
[24]Defence filed 31 July 2017 (‘Defence’).
(a) George Williams’ taxation liability was satisfied by Victoria Police pursuant to an agreement between Victoria Police and George Williams, and it would accordingly be unlawful to enforce the Mortgage against the defendants and the judgment debt should be set aside;[25]
[25]Defence [8], [11]–[12], [16]–[17], [20]–[21], [23]–[24], [28], [31]–[35]. See also plaintiffs’ outline of submissions on summary judgment [4(a)].
(b) the Settlement Agreement and the Mortgage are void for want of consideration moving to George Williams;[26]
[26]Amended Defence [12],[21]; plaintiffs’ outline of submissions on summary judgment [4(b)].
(c) the Settlement Agreement and Mortgage were procured by duress, and should not be enforced;[27]
(d) the Settlement Agreement and Mortgage were procured by unconscionable conduct, and should not be enforced;[28]
(e) the Mortgage was granted over a separate parcel of land in Certificate of Title Volume 11431 Folio 319 rather than the Property (which is contained in Certificate of Title Volume 10695 Folio 211).[29]
[27]Amended Defence [13], [22]–[23]; plaintiffs’ outline of submissions on summary judgment [4(c)].
[28]Amended Defence [14]–[17]; plaintiffs’ outline of submissions on summary judgment [4(d)].
[29]Amended Defence [19]; plaintiffs’ outline of submissions on summary judgment [4(e)].
Victoria Police agreement
The second defendant’s plea on this issue is that:
(a) the Judgment Debt was ‘apparently’ made by consent, and there has been no adjudication on the merits to determine whether the taxation debts underlying the Judgment Debt were truly payable;[30]
[30]Amended Defence, [8(a)–(b)].
(b) in fact, those tax debts were discharged on or about 15 June 2009 by a payment from Victoria Police pursuant to an agreement ‘between Victoria Police and the deceased son of Williams, Carl Williams’;[31]
(c) the DCT has acknowledged this in a letter dated 17 July 2009;[32]
(d) the plaintiffs are therefore ‘estopped’ from seeking to recover under the Mortgage as this would allow for a ‘double recovery’, and would be ‘unconscionable’.[33]
[31]Amended Defence, [8(c)], [8(e)].
[32]Amended Defence, [8(d)].
[33]Amended Defence, [8(f)].
I have set out above the evidence of the DCT of the circumstances surrounding Victoria Police’s payment of $576,000 to the ATO. That evidence shows clearly that the Victoria Police never discharged George Williams’ taxation debt. The letter upon which the second defendant relies was sent in error and the moneys held in the suspense account at the ATO were never applied to the Judgment Debt. The Victoria Police never gave their permission to apply the payment in reduction of George Williams’ taxation debts, and Victoria Police were eventually refunded the money at their request.
Notwithstanding that the second defendant filed no evidence in opposition to the application for summary judgment, a matter I shall return to, counsel went on to deal with the legal position arising from the proceedings previously commenced by George Williams which raised the same legal case as this part of the defence of the second defendant (the Victoria Police agreement).
In summary the following matters stood in the way of the so called Victoria Police agreement providing any defence:[34]
[34]Plaintiffs’ outline of submissions on summary judgment [10]-[14].
(a) the agreement had been alleged and compromised in proceedings S CI 2012 05437 and S CI 2011 05571;
(b) by an amended defence dated 7 March 2013 filed in S CI 2011 05571, George Williams contended at paragraphs 32 to 35 that there had been an agreement between the State of Victoria and Carl Williams pursuant to which the State of Victoria had promised Carl Williams that it would pay (or arrange the waiver of) George Williams’ tax liabilities, and that the State of Victoria performed this payment agreement by the payment of $576,000 to the Deputy Commissioner of Taxation on 15 June 2009;[35]
[35]Tavolaro affidavit [15], exhibit VT-7.
(c) similar assertions were made at paragraphs 40 to 40H of the statement of claim filed by George Williams in proceeding S CI 2012 05437;[36]
[36]Tavolaro affidavit [20], exhibit VT-9.
(d) by entering into the Settlement Agreement, George Williams agreed to the entry of judgment for the first defendant in proceeding S CI 2011 05571 in the sum of $576,000, and for judgment to be entered against him in proceeding S CI 2012 05437 where he had agitated his claims regarding the alleged ‘payment agreement’. These judgments were in fact entered and authenticated;
(e) upon the entry of the judgments, the underlying rights and causes of action agitated in the proceedings merged in the judgment, were extinguished (or, alternatively, became the subject of issue estoppel preventing them being re-agitated in future proceedings);[37]
[37]Wolfe v Permanent Custodians Limited [2012] VSC 275, [86]–[91].
(f) the principles enunciated in Melbourne Authority v Anshun Pty Ltd[38] would also prevent the second defendant running any variation of the ‘payment agreement’ argument that differs from the claims agitated in the earlier proceedings;
[38](1981) 147 CLR 589.
(g) the principles of res judicata (of which merger forms a part) and issue estoppel apply to judgments entered by consent.[39] Accordingly, the second defendant (who stands in George Williams’ position as his executor) cannot re-agitate the claims and arguments connected with the payment agreement in the present proceeding;
[39]Isaacs v Ocean Accident and Guarantee Corporation Limited [1958] SR (NSW) 69, 75 (Street CJ and Roper CJ in Eq); Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; 164 CLR 502, 508; Trustees for the Roman Catholic Church for the Diocese of Bathurst v Hine [2016] NSWCA 213.
(h) the Settlement Agreement has extinguished any rights George Williams possessed to dispute his underlying liability to pay the relevant $576,000. The Settlement Agreement cannot be construed as compelling the entry of judgment against George Williams for $576,000, whilst leaving it open to him to dispute his liability to pay that very sum by reference to the same arguments he had proffered before the compromise, and in the very proceedings that were settled under the compromise. The Settlement Agreement should be treated as having discharged the parties’ anterior rights and replaced them with the rights flowing under the judgments. If this result does not follow from the ordinary rules of construction, it should be imposed by implication[40] or necessary inference;[41]
[40]BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.
[41]Hawkins v Clayton (1988) 164 CLR 539.
(i) further, the judgments cannot be set aside merely because they are consent orders. Consent judgments derived from an agreement between the parties cannot be set aside except on such grounds as would invalidate an agreement ab initio at common law or in equity, such as duress or unconscionable conduct;[42]
(j) the second defendant’s arguments to invalidate the Settlement Agreement on the grounds of duress or unconscionable conduct are hopeless, and therefore the consent judgments are unimpeachable;
(k) the second defendant has failed to identify any proper legal foundation for her generalised arguments about prior discharge and double payment. She makes vague references to ‘estoppel’ and ‘unconscionable’ conduct without pleading the elements of either of these doctrines.[43] In truth, there is nothing unconscientious about George Williams (through his personal representatives) being held to a bargain he entered voluntarily, and on the advice of experienced litigation lawyers.
[42]Harvey v Phillips (1956) 95 CLR 235; Wilson Four Pty Ltd v Sihota & Anor [2014] QSC 257.
[43]Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
Duress
Notwithstanding an absence of any evidence from the second defendant, counsel for the plaintiffs also dealt with the defence of duress raised in the second defendant’s defence. She alleges that the Settlement Agreement and Mortgage were procured by duress consisted of threats by the DCT or his servants and agents that George Williams would be declared bankrupt if he did not enter into the Settlement Agreement or Mortgage. The alleged threats are not particularised, and no evidence has been called to support the claims.
The plaintiffs’ solicitor has deposed: ‘I have examined the files connected with each of the earlier proceedings referred to above and have not located any correspondence or file note suggesting that any such threat was made. I did not personally make such a threat’.[44] There is no reason to doubt this evidence.
[44]Tavolaro affidavit [36].
In any event, even if the alleged threat had been made (which is denied), it merely warned George Williams of the inevitable consequence of judgment being entered against him for $576,000. Plainly enough, the ATO would not issue proceedings and obtain a judgment against a person owing tax liabilities without seeking to enforce that judgment, either by bankruptcy proceedings or other hostile action such as a writ of seizure and sale. The supposed ‘threat’ amounted to a mere statement of the obvious - matters that would have been known to George Williams and his legal advisers. Accordingly, the duress claim is hopeless.
Unconscionable conduct
The second defendant alleges that George Williams suffered from a ‘special disability’ at the time he entered into the Settlement Agreement and Mortgage consisting of chronic heart-related conditions and severe depression, and that the plaintiffs were aware or ought to have been aware of the special disability.[45] The persons who are said to have possessed this knowledge, and the source of the knowledge, are not identified or particularised, and the second defendant has adduced no evidence to support the claim. The plaintiffs’ solicitor has deposed that neither he nor the Commonwealth entities’ other legal representatives had any knowledge that George Williams suffered from any physical and mental ailment at the time the Settlement Agreement or Mortgage was entered into that would have prevented him from being able to protect and preserve his interests in the relevant dispute. There is no reason to doubt this evidence.
[45]Amended Defence [14]–[15].
Further, George Williams was represented by capable litigation lawyers, who themselves made the offer that led to the Settlement Agreement.[46] Even if George Williams was depressed and seriously ill, it is difficult to imagine that he was incapable of giving instructions to his lawyers. Even if he was, there is no evidence that anyone in the plaintiffs’ camp was aware of an illness of this magnitude. Given that George Williams was legally represented, the second defendant must prove:[47]
(a) the plaintiffs’ representatives’ knowledge of George Williams’ illness; and
(b) that the plaintiffs’ representatives knew (or ought to have known) that the illness was of such a magnitude that George Williams had lost the ability to receive advice from, and give instructions to, his lawyers. This is because a person who is represented by lawyers is, prima facie, able to protect and preserve their own interests in the transaction. Only where the person’s disadvantage is so disabling that the lawyer’s assistance cannot overcome that disability will a ‘special disadvantage’ exist. Except in these extraordinary cases, even persons who suffer from disabilities or infirmities are capable of preserving their own interests in a transaction by hiring expert lawyers to negotiate on their behalf.
[46]Tavolaro affidavit [41].
[47]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. Proof of the defendant’s knowledge of the special disadvantage is required.
The burden of proof of unconscionable conduct is, in this case, insuperable. The AGS was receiving correspondence from George Williams’ lawyers in a manner that suggested George Williams was of sound mind, and able to provide instructions. The inference is clear that George Williams’ own lawyers believed he was capable enough to provide such instructions, or they would not have made the relevant offer on his behalf. In these circumstances, to suggest that the Commonwealth’s officers should have somehow discerned the existence of a ‘special disadvantage’ that his own lawyers were unaware of is, frankly, ludicrous.
Want of consideration
The second defendant has advanced a further argument to the effect that the Settlement Agreement and Mortgage were void for want of consideration.[48] However, George Williams plainly did receive consideration. Under the terms of the Settlement Agreement, the first plaintiff undertook not to enforce the Judgment Debt until the conclusion of proceeding S CI 2012 05437 (including any appeals) or 4pm on 7 May 2018, whichever was the earlier. This promise was adhered to, with the effect that the enforcement of the Judgment Debt was delayed for several years until after George Williams’ death. Further, the sum of $576,000 was less than the total sum claimed in proceeding S CI 2011 05571, which was $743,052.10.[49] Finally, the Commonwealth entities agreed to bear their own costs of the proceeding, meaning that George Williams avoided the risk of an adverse costs order. Accordingly, the consideration argument is also doomed to fail.
[48]Tavolaro affidavit [42].
[49]Tavolaro affidavit, exhibit VT-5.
Wrong volume and folio
The second defendant argues that the Mortgage is defective because it contained the title particulars for Certificate of Title Volume 11431 Folio 319 rather than the Property (which is the land contained in Certificate of Title Volume 10695 Folio 211).[50] However, the title search for the Property confirms that Certificate of Title Volume 11431 Folio 319 is the parent title of the Property. As such, it is clear that the mortgaged land (being the parent title) was subdivided after the Mortgage was registered so as to create the Property, and that the Mortgage remained on title after this subdivision, and appears now on the title to the Property. This cannot be denied, as the Mortgage remains registered on the title to the Property. However, if the second defendant presses this argument, an historical title search can be produced to better prove the matters stated above.
[50]Amended Defence [19].
Lack of evidence from the second defendant
The only evidence concerning the subject of all aspects of the defence is that contained in the DCT’s affidavit in support of the summary judgment application. In these circumstances, the observations of the Court of Appeal in Hausman v Abigroup Contractors Pty Ltd are apt:[51]
[51][2009] VSCA 288 [61]–[65].
(a) a defendant, faced with an application for summary judgment, may invoke r 22.04 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’). So far as presently relevant, that rule provides that the defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court;
(b) where the plaintiff’s application is properly made, as is the case here, there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the Court;
(c) the defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim;
(d) the Court will normally require an affidavit by or on behalf of the defendant before it will be satisfied that the defendant is entitled to leave to defend;
(e) an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood;
(f) the affidavit should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.
There was no appearance for the second defendant on the application by the plaintiffs for summary judgment, save for an application for an adjournment, which was refused.[52] After the adjournment was refused, Mr Radebe, the solicitor appearing for the second defendant, announced ‘I don’t have instructions to defend this matter’. And he then sought leave to withdraw. Subsequently, on 23 February 2018, Radebe and Associates, the solicitors on the Court record representing the second defendant, filed a ‘Notice that Practitioner has Ceased to Act’.
[52]T1–4.
It is clear from the above analysis of the claim and the defences raised to it that the claim has been properly proved and that no defence has a real as opposed to a ‘fanciful’ prospect of success.[53]
[53]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 [29] (Warren CJ, Nettle JA (Neave JA agreeing)).
Summary judgment - Conclusion
For these reasons, I determined on 8 February 2018 to grant summary judgment to the first plaintiff against the second defendant. The first defendant has filed no defence, and has formally conceded that there is no proper basis upon which she could defend the proceeding.[54] It is therefore appropriate that judgment should be entered against the first defendant summarily, or pursuant to r 21.02 of the Rules, it matters not which is relied upon.
[54]Court’s orders of 31 October 2017 per Derham AsJ, paragraph A in ‘Other Matters’.
At that time of the hearing of the summary judgment application, the first defendant was represented by Ms Sparke, of counsel, who made submissions regarding the way that orders for costs should be dealt with as between the plaintiff and defendants, and as between the defendants and the estate of George Williams. There was some information at that time that the second defendant may have been declared bankrupt, but no certain evidence as to that. There was some limited debate about the disposition of the costs of the proceeding until it became clear that additional evidence was required and the making of further submissions were required, for which further time was needed.
Orders were made for the filing of outlines of submissions and the costs argument was adjourned to 8 March 2018.
Costs
In the course of the hearing on 8 February 2018, when there was some discussion as to the costs orders that might be made, information from the Bar table indicated that the second defendant was, and might still be, an undischarged bankrupt.
On 7 March 2018 the plaintiffs filed a further affidavit of Vincent Tavolaro made that day which exhibited copies of a sequestration order made in respect of the estate of the second defendant on 8 November 2016, and an extract from the National Personal Insolvency Index kept by the Australian Financial Security Authority showing the date of her bankruptcy as above and the appointment of Malcolm Kimbal Howell as her Trustee.
The plaintiffs do not press any application for costs against the second defendant in her personal capacity. The second defendant’s bankruptcy will prevent her from meeting any costs order from resources other than the Estate assets, and the order would accordingly be futile.
On whom should the costs fall?
The plaintiffs seek an order that their costs be paid by the Estate. Clause 1(1)(e) of the Mortgage on the Property states that the monies secured thereunder include:
(iii)any costs or expenses incurred payable by the Mortgagee in connection with the stamping, registration, discharge or enforcement of the Settlement Agreement or this Mortgage or any collateral security;
(iv)any costs or expenses incurred or payable by the Mortgagee in exercising any of the rights and powers whether express or implied conferred on the Mortgagee under the Settlement Agreement or this Mortgage or any collateral security;
(v)Any costs, expenses, or payments incurred by the Mortgagee on account of any default by the Mortgagor in the performance or observance of any of the covenants on the part of the Mortgagor herein contained or implied.
Legal costs incurred by the DCT as mortgagee plainly fall within some or all of these subparagraphs.
The plaintiffs submitted, and I agree, that:
(a) the moneys payable under clauses 1(1)(e)(iii) to (v) of the Mortgage are debts secured under the Mortgage that were owed by George Williams, and for which the Estate is liable;
(b) upon registration of the Mortgage, by the operation of s 40(1) of the TLA, the covenants therein bound George Williams as covenants in a deed, and required him to pay any enforcement costs the DCT might incur in the future;
(c) that contingent obligation has now crystallised into a current debt of the Estate. The position is governed by s 37(1) of the Administration and Probate Act 1958 (Vic) (‘A & P Act’), which provides that a deceased’s assets are to be applied in:
payment of the debts of such deceased person (whether by specialty or simple contract) and of his liabilities, and any disposition by will inconsistent with this enactment is void as against the creditors, and the Court shall, if necessary, administer the property for the purpose of the payment of the debts and liabilities;
(d) in these circumstances, there is no reason why the Court should not give effect to the terms of the Mortgage and s 37(1) of the A & P Act by compelling the Estate to honour George Williams’ costs liability to the DCT.
Unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.[55] The discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation.[56]In the exercise of the discretion, practices or guidelines have been developed.[57] These practices or guidelines are not legal rules that confine the exercise of the discretion.[58]
[55]Supreme Court Act 1986 (Vic) s 24(1).
[56]Latoudis v Casey (1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72, 86.
[57]Oshlack v Richmond River Council (1998) 193 CLR 72, 86.
[58]Norbis v Norbis (1986) 161 CLR 513, 537; Oshlack v Richmond River Council (1998) 193 CLR 72, 86.
Although costs are in the discretion of the Court, there is a settled practice (sometimes called a general rule) that in the absence of good reason to the contrary a successful litigant should receive his or her costs.[59] There is no reason to depart from the usual costs order in this case.
[59]Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477.
The plaintiffs submitted, and I agree, that:
(a) this case is unusual because the first defendant, one of the two executors of George Williams’ Estate, did not oppose the claim, and the Estate therefore defended the claim through only one of the two executors;
(b) Executors, as the deceased’s personal representatives, can act jointly or severally, and can bind an estate without the consent of their co-executors.[60]
[60]Union Bank of Australia v Harrison Jones & Devlin Ltd (1910) 11 CLR 494, 516; Leeburn v Derndorfer [2004] VSC 172.
There is no evidence one way or the other as to whether the administration of the Estate is complete, and all parties have proceeded on the footing that it is not. If it were, then the defendants would have become trustees under the will of George Williams, and then they may only act jointly.[61]
[61]Attenborough v Soloman [1913] AC 76; Commissioner of Stamp Duties (Qld) v Livingstone (1964) 112 CLR 12; Union Bank of Australia v Harrison Jones & Devlin Ltd (1910) 11 CLR 494; Szabo v Balogh [2007] VSC 232 [12]–[13].
The plaintiffs further submitted, and I again agree, that:
(a) because of this bifurcation of the defence to the plaintiffs’ claim, the plaintiffs were put to the expense of overcoming defences mounted on behalf of the Estate that have proved to be without merit, notwithstanding that it was agitated only by one executor;
(b) it may be unfortunate that the beneficiaries’ entitlements are depleted by the second defendant’s conduct, it is nevertheless not appropriate to visit the consequences of that conduct on the plaintiffs, who is an innocent party;
(c) this is especially so where the monies sought to be recovered by the plaintiffs are payable to the Commonwealth revenue for the public benefit;
(d) the second defendant’s conduct is better addressed by denying the second defendant the usual right of indemnity for her own costs;
The first defendant relied upon the affidavit of her solicitor, Rita Kheissy made 7 February 2018. In that affidavit Ms Kheissy gave the following evidence:
(a) on 14 February 2017, the first defendant obtained probate of George Williams’ will, with leave reserved to the second defendant to prove. On 17 February 2017, the first defendant’s solicitors wrote to the second defendant informing her of the grant of probate and stating that unless she was in a position to pay the debt to the plaintiffs, the Property would have to be sold in order to discharge the debt. The letter indicated that if the second defendant was not in a position to pay the debt, the first defendant would proceed to sell the Property. There being no reply, a follow up letter was sent on 6 March 2017;
(b) on 8 March 2017, the first defendant’s solicitor’s clerk received a telephone call from the second defendant in which the second defendant abused the solicitors. This provoked a response by letter dated 9 March 2017 in which Ms Kheissy stated that she would only communicate in writing with a solicitor acting on behalf of the second defendant. Later in March 2017 the second defendant retained a solicitor;
(c) on 23 March 2017, the first defendant’s solicitors wrote to the second defendant’s solicitor, Mr Clohesy suggesting that it would be in the interests of the Estate to minimise the cost and have some control over the sale by allowing the mortgagee’s right to be exercised over the Property;
(d) on 3 April 2017, the second defendant obtained probate under the leave reserved to her;
(e) on 5 April 2017, and before this proceeding was commenced, Ms Kheissy sent an email to each of the Australian Government Solicitor, acting for the plaintiffs, and Mr Clohesy, acting for the second defendant, in which she said that it was the first defendant’s preference for the Property to be sold and the first defendant had no objection to the plaintiffs exercising their right to sell the Property forthwith;
(f) on 5 April 2017, the first defendant’s solicitors learned that the second defendant had lodged a caveat over the Property;
(g) the first defendant is unable to sell the Property as she does not have physical possession of it. The second defendant retains all keys. The first defendant does not have the physical ability to remove the second defendant from the Property.
The writ in this proceeding was issued by the plaintiffs on 7 June 2017. The first defendant has not filed a defence. The first defendant has incurred costs of correspondence with the plaintiffs and the second defendant, and the costs of being involved in the proceeding. The first defendant contended (before it was clear that the second defendant was bankrupt) that:
(a) if the plaintiffs are successful in the application any costs ordered in favour of the plaintiffs be paid by the second defendant personally, without the second defendant having a right of indemnity for those costs from the Estate;
(b) alternatively, the plaintiffs’ costs be paid first from the sale proceeds of the Property;
(c) the second defendant have no right of indemnity from the Estate for her costs of and associated with the proceeding or the application;
(d) the costs of the first defendant be paid from, and be borne by, the sale proceeds of the Property.
The first defendant submitted that the usual rule is that executors have a right of indemnity from an estate for costs not unreasonably incurred, which ordinarily means that they be paid from the residue of the Estate generally. Where an estate has no residue (as is the case here) then ordinarily the costs and expenses are to be borne proportionately between the various gifts in the estate. The Estate here consists of two properties, specifically devised respectively to the first defendant and the second defendant’s daughter (which is the security Property). Without specific orders to the contrary, the costs of the proceeding would be borne by the beneficiaries proportionately to the value of the properties devised by the will of George Williams. Thus, the first defendant would bear a portion of the costs of the proceeding where she did all that she could to prevent those costs being incurred.
In support of the specific orders sought, the first defendant submitted that:
(a) the second defendant has chosen to defend the proceedings where it was not reasonable for her to do so. The defence of the proceeding has been unsuccessful. The very nature of the defence, which asked the Court to go behind the consent judgment and Settlement Agreement made before the George Williams’ death was inherently unlikely to succeed. She has produced no foundation for the assertions of duress, unconscionable conduct or want of consideration;
(b) the second defendant ought to have known that the defence of the proceeding was likely to fail, it being a defence which a reasonable person would not have put forward. In these circumstances the Court is authorised to deprive the second defendant as executor of her costs out of the Estate;[62]
(c) the second defendant did not seek to obtain a Beddoe order providing her with judicial advice as to whether she should defend the proceedings, or use the Estate’s funds to do so;[63]
(d) in these circumstances, it is clear that the second defendant has chosen to defend the proceedings without a reasonable basis to do so and ought not to have any indemnity for her costs from the Estate.
[62]Re Jones, Christmas v Jones [1897] 2 Ch 190, 198 (‘Re Jones’); Drummond v Drummond [1999] NSWSC 923 (‘Drummond’).
[63]In Re Beddoe, Downes v Cottam [1892] 1 Ch 547.
The first defendant also submitted that the plaintiffs ought first to obtain its costs out of the proceeds of the sale of the Property and should only be entitled to costs from any other assets of the Estate, of course that being the Property devised to the first defendant, if there is any shortfall. But for the bankruptcy of the second defendant, the first defendant would have sought to have all of the costs of the plaintiffs paid personally by the second defendant. Authority suggests that the Court may, pursuant to its general discretion as to costs, where it is just to do so, order that a specified proportion of the costs of a plaintiff successful against multiple defendants be paid by a particular defendant.[64]
[64]G E Dal Pont, Law of Costs (LexisNexis Butterworths 3rd ed, 2013) 312 [11.7].
The plaintiffs accept that the second defendant has acted unreasonably in defending the claim, and that this is sufficient to deprive her of the usual right of indemnity. The plaintiffs do not oppose the orders sought by the first defendant on this point. Further, the plaintiffs accept that the first defendant has generally acted reasonably in the conduct of the litigation, and that she is entitled to her usual right of indemnity from the assets of the Estate. This right of recovery ought to be limited only in respect of the proceeds of sale of the Property. The plaintiffs have a superior right to this money because it is property secured under the mortgage, and they ought to have priority in the event of any shortfall. Otherwise, the plaintiffs and first defendant ought to have their costs paid by the Estate on an indemnity basis, with such claims to rank equally in priority.
The rule which gives an executor the prima facie entitlement to be indemnified out of the estate for costs relates only the costs incurred in the administration and distribution of the estate. Such costs are to be distinguished from costs incurred by an executor in furtherance of a personal interest.[65] Executors who pursue personal interests in litigation are not fighting for the estate any more than if they were not executors at all.[66]
[65]Miller v Cameron (1936) 54 CLR 572, 578 (Latham CJ); Re Jones [1897] 2 Ch, 197-8; Skrimshire v Melbourne Benevolent Asylum (1894) 20 VLR 13, 18 (Madden CJ); Drummond [1999] NSWSC 932 [47].
[66]Plimsoll v Drake (No.2) (Supreme Court of Tasmania, Zeeman J, unreported, 8 June 1995); Drummond [1999] NSWSC 932 [47].
As a rule, an executor or trustee is allowed his or her costs out of the trust estate if his or her conduct has been honest, even though it may have been mistaken.[67] This normal rule is subject to exceptions, including:
(a) cases involving impropriety, which include an executor taking or defending proceedings in breach of trust, or conducting the proceedings in such a way that the Court, on a general view of the case, regards the executor’s conduct as ‘not honestly brought forward’;[68]
(b) where the claim or defence is one which no reasonable person could say ought to have been put forward.[69] While mistakes or errors in judgment would not disentitle the trustees to an indemnity, the beneficiaries are entitled to expect ‘reasonable prudence’ of the trustees.[70]
[67]Miller v Cameron (1936) 54 CLR 572, 578 (Latham CJ).
[68]Re Jones [1897] 2 Ch 190, 198; Drummond [1999] NSWSC 932 [45].
[69]Ibid.
[70]Re WeallAndrews v Weall (1889) 42 Ch D 674, 678-9; Drummond [1999] NSWSC 932 [47].
In these cases, recourse to the estate for the costs incurred may be denied to an executor.
Having regard to my conclusions regarding the defences raised by the second defendant, it is in my view clear that no reasonable person properly advised and apprised of the facts as they have been set forth in the affidavit material filed by the plaintiffs, would or should have raised those defences. It is noteworthy that the solicitor acting at the time the amended defence was filed on 2 October 2017 has not filed a proper basis certificate under s 42 of the Civil Procedure Act 2010 (Vic). Nor has an overarching obligations certificate signed by the second defendant been filed pursuant to s 41 of that Act. The fact that the second defendant is in possession of the Property rather indicates that it is her personal interest, and the interest of her daughter, that has motivated her to defend the plaintiffs’ claims in the way that she has.
The evidence filed on behalf of the first defendant shows that she took appropriate steps to prevent the commencement of the proceeding and, once it had started, to end it. But for the unwillingness of the second defendant to give up the Property, and defences raised by her to the plaintiffs’ claim, there would have either been a mortgagee’s sale and no proceeding commenced at all, or judgment for the plaintiffs at an early stage.
Indemnity costs
The plaintiffs submitted, and again I agree, that:
(a) in cases such as this, where there is an agreement specifically requiring the payment of costs in a particular circumstance, the terms of any agreement as to costs will inform the Court’s discretion as to the basis of taxation of costs;[71]
[71]See, eg, Perpetual Trustees Australia Ltd v Schmidt (No 3) [2010] VSC 261 [38]-[41] (J Forrest J); Whild v GE Mortgage Solutions Ltd (No. 2) [2012] VSC 322 [5] (‘Whild’).
(b) the Court should ordinarily exercise its discretion in accordance with the agreement;[72]
[72]Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 [12]-[14] (Beazley JA, Ipp and Hodgson JJA agreeing); Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137 [23], [25] (Whelan J); Taree Pty Ltd v Bob Jane Corp Pty Ltd [2008] VSC 228 [43]–[44] (Vickery J); Whild [2012] VSC 322 [5].
(c) whether the terms of any agreement as to costs entitle a party to more than party and party costs is ultimately a matter of construction;[73]
[73]Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137 [22] (Whelan J); Whild [2012] VSC 322 [5].
(d) the terms of the agreement must provide in plain and unambiguous language that costs are to be paid on a special basis, otherwise costs should be awarded on a party and party basis only;[74]
[74]Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 [12] (Beazley JA, Ipp and Hodgson JJA agreeing); Taree Pty Ltd v Bob Jane Corporation Pty Ltd (No 2) [2008] VSC 228 [47]–[48]. And see Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384 (Croft J); Whild [2012] VSC 322 [5].
(e) when determining the basis upon which costs shall be awarded, the Court looks to the language of the agreement and compares it to the language of the Rules governing the bases of costs to determine the scale for which the agreement provides;
(f) in Whild, Croft J held that a mortgage clause allowing recovery of ‘reasonable expenses’ reflected the language of a solicitor-client costs order under r 63.30 of the Rules, and awarded costs on that basis;[75]
(g) in this case, clause 1 allows for the recovery of ‘any costs and expenses’ (see above at [43]). Thus the Court should, unless good cause is shown, order that the plaintiffs’ costs be paid by the Estate on an indemnity basis in conformity with r 63.30.1 of the Rules, which allows all costs ‘except in so far as they are of an unreasonable amount or have been unreasonably incurred’.
[75]Whild [2012] VSC 322 [17].
Conclusion - costs
In conclusion, in my view the orders as to costs proposed by the plaintiffs, and not opposed by the first defendant,[76] are fair, take into account the matters addressed above, and should be made, as follows:
[76]The first defendant suggested the plaintiffs be paid their costs first from the net proceeds of sale of the Property, and the plaintiffs agreed. I have included that in paragraph (c) of the proposed orders.
(a) the plaintiffs’ costs of and incidental to the proceeding be assessed on an indemnity basis and paid from the Estate of George Leslie Williams, deceased (‘the Estate’);
(b) the first defendant’s costs of and incidental to the proceeding be assessed on an indemnity basis and paid from the Estate of George Leslie Williams, deceased;
(c) the plaintiffs be paid their costs first from the net proceeds of sale of the land known as 82 Primrose Street, Essendon, in the State of Victoria, being the land more particularly described as Lot 1 on Plan of Subdivision 506108K, and being the land presently contained in Certificate of Title Volume 11431 Folio 319, in priority to the costs of the first defendant;
(d) the second defendant bear her own costs of and incidental to the proceeding; and
(e) the second defendant is not entitled to be indemnified for her costs of and incidental to the proceeding from the assets of the Estate.
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