Grant v Grant (No 2)
[2013] VSC 393
•2 August 2013
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2009 09850
| ROBERT GRANT | Plaintiff |
| v | |
| DAVID GRANT | First Defendant |
| - and - | |
| IRENE GRANT | Second Defendant |
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JUDGE: | DALY AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 July 2013 | |
DATE OF JUDGMENT: | 2 August 2013 | |
CASE MAY BE CITED AS: | Grant v Grant (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 393 | |
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JUDGMENT
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COSTS – Where apportionment of costs appropriate – Parties successful on different issues – Relevance of overarching purpose under the Civil Procedure Act to the Court’s exercise of discretion with respect to costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G McCormick | O’Neill Behan & Associates |
| For the Defendant | Mr R Young | Waters Lawyers |
HER HONOUR:
On 28 June 2013 I published my findings and reasons in relation to the claims and counterclaims made by the plaintiff and the defendants in this proceeding (“reasons”)[1] and invited the parties to make submissions with respect to the form of orders required to give effect to the reasons, and the question of costs. As is explained in the reasons, the parties, being Robert Grant on the one hand, and his parents, David and Irene Grant on the other hand, had mixed success in the proceeding. Robert was unsuccessful in establishing an entitlement to part or all of the proceeds of sale of David and Irene’s home (“property”) by reason of either an agreement between the parties or the imposition of a constructive trust. However, he was successful in obtaining a declaration that he was validly appointed a director of Seventh Advocate Management Pty Ltd (“company”), that David’s share in the company was validly transferred to him, and that Irene’s share in the company was held on trust for him. Robert was also successful in obtaining declarations that certain furniture and other chattels were purchased either using his funds or company funds. However, David was successful in his counterclaim, seeking the return of various vintage and limited edition guitars converted by Robert. Prior to the resumed hearing on 19 July 2013, counsel for the plaintiff helpfully drafted and circulated a draft form of order for consideration. Only three issues remain in dispute: first, the question of costs, secondly, whether all of the furniture and other chattels referred to in the schedule prepared by the parties properly belong to Robert or the company, and thirdly, whether I should make any declaration regarding the freedom of David and Irene to make their wills in the way they see fit.
[1]see Grant v Grant [2013] VSC 329.
Costs
Counsel for Robert submitted that, in effect, costs should follow the event, in that Robert should have the costs of the proceeding, save for the counterclaim, where David should have his costs. Counsel for David and Irene submitted that there be no order as to costs, that is, each party should bear their own costs of the entire proceeding.
Counsel for Robert submitted that Robert had been substantially successful in obtaining the relief sought in his further amended statement of claim, and that there was no reason why the Court should not follow the ordinary course, and order that costs follow the event. The fact that Robert was unsuccessful in his claim for part or all of the sale proceeds of the property should not be held against him, as the evidence led in support of that claim would have been necessary in any event, to provide the background and context for Robert’s claim in respect of his control of the company, upon which he was successful. Further, Robert was also successful in making out his claim for the furniture and other chattels, while David was successful upon that aspect of his counterclaim which sought the return of the guitars.
Counsel for Robert submitted that, while no party made a Calderbank offer which would have bettered the position that the relevant party achieved at trial, the Calderbank letter served on behalf of Robert on 17 May 2012, which sought fifty per cent of the proceeds of the sale of the property, the transfer of the company and its assets and liabilities to Robert, delivery up of the furniture and other chattels to Robert, delivery up of the guitars to David, and that each party bear their own costs, was much closer to the ultimate outcome of the proceeding than the Calderbank offer made on behalf of David and Irene. This offer, served on 29 August 2012, provided not only that David and Irene retain the proceeds of sale of the property, but that Robert pay to David and Irene the sum of $225,030.81 on account of monies advanced to the company from the 2007 refinancing, and pay David and Irene’s costs of the proceeding. The terms of this offer, it was submitted, amounted to an ambit claim, and as such, may have been a breach of s 22 of the Civil Procedure Act 2010 (Vic) (“Act”), by reason of which the parties to a civil proceeding must use reasonable endeavours to resolve the dispute. He submitted that it was always going to be necessary for Robert to proceed to trial, because of the obstinate position adopted by Irene, as referred to in my reasons.
Counsel for Robert also submitted that, following a taxation of costs of both the claim and counterclaim, the net amount ordered in favour of Robert ought to be deducted from the funds held on trust in the names of all parties (being the proceeds of sale of the property) with the balance to be paid to David and Irene.
Counsel for David and Irene submitted that, in all of the circumstances of the case, including the mixed success of Robert on the one part and David and Irene on the other part, and the particular difficulties and complexities involved in a taxation in this case, having each party bear their own costs would be a fair outcome.
Counsel for David and Irene submitted that Robert should not have his costs of the proceeding, given that he failed on the most significant part of his claim, being the proceeds of sale of the property. He submitted that this proceeding was analogous to a partition proceeding in the Family Court, which is generally a “no costs” jurisdiction.
Counsel submitted that, apart from the fact that if the parties were awarded costs on an “issue” basis, the net sum payable in favour of one party may well be negligible, the nature and the content of the affidavit material prepared on behalf of the parties would add a further complicating dimension to a taxation. It was agreed prior to the commencement of the trial that much of the affidavit evidence, particularly evidence regarding events and conversations which post dated the falling out between the parties, and, in particular, post dating the issue of this proceeding, was either completely or substantially irrelevant to the issues in the proceeding. However, in order to limit the length of the trial, and the associated costs, no lengthy process of assessment of the admissibility of evidence was undertaken, but such issues could properly be arguable if the proceeding went to taxation, making the task even more complicated and costly.
In response, counsel for Robert submitted that an order that there be no order as to costs would be contrary to the principle espoused by Dixon J in Smith v Madden,[2] where it was stated that:
In such a case the taxation of the costs of the action and of the counterclaim is governed by the principle that the party receiving the costs of the claim should recover the general costs and whatever was reasonably incurred in bringing and maintaining or defending the action, as the case may be, considered as if there had been no counterclaim, and that the party receiving the costs of the counterclaim should recover the further or increased costs reasonably incurred in bringing and maintaining or defending the counterclaim.
[2](1946) 73 CLR 129, 133.
However, the current case is not an example of a case where a plaintiff has succeeded on all aspects of its claim and a defendant has succeeded on all aspects of its counterclaim. I agree with counsel for David and Irene that the application of what appears to be a simple and uncontroversial principle is not so straightforward in the current case.
It is almost trite to say that the discretion of the Court with respect to costs is a broad discretion, but it is one which must be exercised judicially. The principles governing the exercise of the discretion in such a way which departs from the usual order that costs follow the event are helpfully summarised by Hargrave J in Kalenik v Apostolidis (No 3),[3] the relevant parts of which are reproduced (omitting citations) below. Circumstances where the Court may choose to depart from the usual order as to costs include:
First, where a successful party fails in respect of issues which it pursued at trial, including discrete or alternative heads of claim raised on the pleadings, disputed questions of law and disputed questions of fact.
Second, where a successful party wins on some issues and loses on others, it is preferable that a single order apportioning costs is made; rather than awarding costs in relation to particular questions or issues in the proceeding.
Third, the conduct of a party prior to or during the trial may warrant censure by the Court, to be reflected in the exercise of the costs discretion. For example, where a successful plaintiff is found to have lied in evidence, or to have engaged in other litigation misconduct such as inducing witnesses to lie, the Court may reduce the successful plaintiff’s entitlement to costs. This is particularly so where the conduct has the effect of making a proceeding more complicated and prolonged.
Fourth, the power of a Court to order costs on a basis higher than party and party costs, such as solicitor and client or indemnity costs, requires the establishment of some special circumstances. Special circumstances justifying a higher costs order include misconduct by the losing party in relation to the proceeding, especially misconduct which causes prolongation of the interlocutory proceedings or the trial, and the making of allegations which ought never to have been made.
Fifth, where a defendant makes a Calderbank offer, the unreasonable refusal of the offer by a successful plaintiff is, by itself, sufficient to justify an order that the successful plaintiff pay the defendant’s costs from the date of the offer on an indemnity basis.
[3][2009] VSC 475.
Further, in Kalenik,[4] Hargrave J found that Calderbank offers, even offers which would not of themselves justify an order for costs in favour of the party making the offer, are relevant to the Court’s exercise of discretion with respect to costs.
[4]at [24].
The current case is a classic example where one party is successful in relation to some discrete issues, and the other in respect of other issues. The question is, once the issues have been identified, having had regard to the significance of the issues and the amount of preparation and court time required to deal with those issues, and the other matters referred to above, whether there should be an apportionment of costs and if so, how?
In my view, having regard to all of the above matters, I accept the submissions of counsel for David and Irene that there should be no order as to costs of either the claim or the counterclaim. Examining the proceeding as a whole, I would analyse the case not so much on an “issue by issue” basis, but rather on the basis of the assets against which the claims were made. This was consistent with the manner in which the case was presented and the reasons were prepared, and indeed, consistent with the manner in which the parties’ Calderbank offers were framed. The relevant assets are:
(a)the sale proceeds of the property;
(b)the company;
(c)the furniture and household chattels; and
(d)the guitars.
The order in which the assets are listed above are also the order in which I have ranked their significance in the proceeding, both in terms of the value to the parties, and in the time devoted to them in terms of preparation time (as evidenced by the affidavit material), and court time. While it could be said that Robert succeeded on two out of the three assets which were the subject of his statement of claim, the reality is that he failed to establish his claim to the most significant asset, being the sale proceeds of the property. My conclusion that this asset was the most significant asset and issue in the proceeding is bolstered by the contents of the Calderbank offers: the only matter that the parties were apart upon prior to trial, aside from the question of costs, was the question of who was to receive the proceeds of the sale of the property. The proposal made on behalf of David and Irene in their solicitors’ letter of 29 August 2012 that Robert pay to them the sum of $225,330.81 was, while unhelpful, not pursued either in the pleadings or at trial, and, as the evidence ultimately bore out, reflected the nature, if not the quantum, of a claim that may have been able to have been made by the company against Robert by reason of his use of company funds to reduce his personal indebtedness.
I agree with the submissions by counsel for Robert that the potential cost, difficulty, and complexity of a taxation should not, of itself, be a reason to make an order that each party bear their own costs. However, given that this is a case where there were substantially, if not completely, discrete issues to be determined, and mixed success on those issues, an apportionment of costs would be one appropriate remedy available. This is particularly the case in circumstances where the counterclaims did not only concern the guitars, but also certain declarations (albeit largely defensive in nature).
Of course, if I were to make an order apportioning the costs of the proceeding on an issue basis, it would be difficult to predict with any great precision what the net outcome would be. However, given that Robert failed on both the most significant and the least significant issues, and succeeded on the two “middle” issues, it would not be unreasonable to assume that the ultimate net result in favour of one party might be relatively small, indeed probably quite small in proportion to the potential cost and inconvenience of a taxation. Further, while I agree that the likely costs and complexity of a taxation are not, of themselves, sufficient reason to refrain from making an award for costs, I do agree with the proposition advanced by counsel for David and Irene that any taxation may well be burdened by some of the debates about the relevance and admissibility of evidence that were generally successfully sidestepped in the course of the running of the trial.
Of course, the notions of “efficiency” and of “proportionality” are significant principles underlying the Act. Section 8 of the Act requires the Court to give effect to the overarching purpose of the Act in exercising its powers, which must include the power to make an award of costs. Section 7(1) of the Act provides that the overarching purpose of the Act is the “just, efficient, timely and cost effective resolution of the real issues in dispute”, and section 7(2) of the Act makes it clear that there is no limitation on the manner in which the Court may seek to achieve the overarching purposes. Further, section 9(1) of the Act provides that in making any order in a civil proceeding, a court shall further the overarching purpose by having regard to (among other things) the following objects: the efficient conduct of the business of the court, the efficient use of judicial resources, and dealing with a civil proceeding in a manner proportionate to the complexity and importance, and amount in dispute.
In the circumstances of this proceeding, in particular, the limited pool of resources in dispute, and the fact that the parties are family members, the overarching purpose of the Act is best facilitated by making no order as to costs, rather than an apportionment based upon the parties’ successes on each of the issues.
Another factor I have taken into consideration when deciding to make no order as to costs is the (successful) application by Robert at trial to withdraw the deemed admission by reason of Robert’s failure to respond to David and Irene’s notice to admit in relation to whether David signed a share transfer form in late 2006. Counsel for David and Irene submitted, and the proposition was not hotly disputed, that David and Irene should have the costs of and occasioned by the application for withdrawal. I agree, and note that the hearing of the application, and the additional evidence adduced and admitted by reason of the successful application to withdraw the admission, took up a substantial proportion of the total hearing time over the course of the trial (at least half a day, if not more). Accordingly, even if there was an award of costs based upon an apportionment of issues, and the net result favoured Robert, there would need to be a further “netting off” of the costs payable to David and Irene by reason of the application to withdraw the admission. Those costs are payable by reason of paragraph 3 of the orders made by me on 7 November 2012. Consistently with these reasons, I shall vacate that order.
For completeness, having regard to the principles in Kalenik, I should add that, while I did make some adverse findings in the reasons about particular evidence given by particular witnesses, this was not a case where any party has engaged in “litigation misconduct” to the extent that it would influence my discretion with respect to costs, or that there was any conduct to justify the making of a special costs order.
Furniture and other chattels
While in the course of the reasons I found that the furniture referred to in the schedule to the Further Amended Statement of Claim were paid for by Robert or the company, I did not consider it necessary to make a finding as to which items properly belonged to Robert and which items properly belonged to the company, as the other findings made by me will result in control of the company passing to Robert. However, in the course of discussions between counsel regarding the proposed form of order, it emerged that David and Irene contest that either Robert or the company paid for certain items, namely
(a)a chair upholstered in gold velvet in bedroom 1;
(b)the bedding in bedroom 2;
(c)an antique Chinese lamp in the dining room; and
(d)a gold chaise lounge and three coffee tables in the living room.
Robert, through his counsel, did not press for the return of the bedding.
David and Irene did not lead any evidence at trial regarding the purchase and ownership of particular items of furniture, although they did put Robert to proof regarding that issue. While the items referred to above were not directly identified in Robert’s evidence or in the table prepared by Kerry summarising the documentary evidence in relation to this matter (exhibit M), no submissions were made in relation to this matter, and I assumed that individual chattels were not in issue. Also, it may be that the items concerned were originally purchased by David and Irene, but that Robert or the company paid for repairs after the fire at the property in April 2008.
It would be open for me to form the view that David and Irene had ample opportunity at trial to lead evidence and make submissions regarding this issue. However, given that David and Irene’s resources are limited, and these are personal items, I will give them an opportunity to submit further evidence in relation to these particular items, allow Robert to respond, and make a determination on the issue in chambers to avoid any further unnecessary costs and expenses.
The Wills
The counterclaims filed and served by both David and Irene sought a declaration that they were not constrained in any way in the manner in which they might make their wills. While I did not make an express finding as such in the reasons, the necessary implication of my findings is that, while from about 2006 there may well have been discussions about how David and Irene planned to make wills which favoured Robert over Paul, there was no agreement to do so, or representations that they would do so in 1994 or 1995, as pleaded by Robert.
Counsel for David and Irene submitted that, for the avoidance of doubt, I should make such a declaration. During the course of argument, I expressed concern that making such a declaration might be relied upon in any subsequent application by a family member under Part IV of the Administration and Probate Act 1958 (Vic) (“Part IV claim”). Counsel for Robert agreed, and submitted that such a declaration was unnecessary, and would be difficult to formulate, with the issue being further complicated by David’s lack of capacity.
Upon reflection, I have formed the view that for completeness, and the avoidance of doubt, I should make the following declaration:
Subject to the first defendant’s capacity to do so, and their obligations at law as testators, neither defendant is constrained in the manner in which they make any will.
I consider that this formulation accurately reflects my findings that by reason of the matters pleaded in the further amended statement of claim, David and Irene were not under any particular obligation with respect to the contents of their wills. However, the incorporation of the words “subject to … their obligations at law as testators” is intended to make it clear that this declaration is not intended to absolve them of their duties as wise and just testators. While no section of the Administration and Probate Act expressly imposes duties upon testators, there is ample authority from this Court, when dealing with Part IV claims, as to the moral obligations as testators.
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