H Stanke & Sons Pty Ltd v Frederick John Von Stanke - [2008] SASC 56

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
H STANKE & SONS PTY LTD & ANOR v FREDERICK JOHN VON STANKE & ORS
[2008] SASC 56
Reasons for Decision of The Honourable Justice Sulan
29 February 2008
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
Second defendant sought orders, inter alia, for discovery and production of documents by first defendant - those parties and plaintiffs applied for costs - second defendant had also sought an order that its costs be paid on an indemnity basis.
Held: First defendant to pay costs of second defendant on a party and party basis.
Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225; Re Wilcox; Ex parte Venture Industries Pty Ltd & Ors (1996) 72 FCR 151, applied.
Moyes & Anor v J & L Developments Pty Ltd & Anor (No 3) (2007) 250 LSJS 86, considered.

H STANKE & SONS PTY LTD & ANOR v FREDERICK JOHN VON STANKE & ORS
[2008] SASC 56
SULAN J

The second defendant filed a specially returnable application on 18 December 2006, which was listed for hearing on 21 December 2006. The application was directed to the first defendant. It sought, inter alia, discovery and production of three categories of documents.
I have received written submissions from the plaintiffs and the first and second defendants on the question of costs. Both the plaintiffs and the first defendant applied for an order that their costs be paid by the second defendant. In her application, the second defendant had sought an order that her costs be paid by the first defendant on an indemnity basis and in his personal capacity.
The second defendant submitted that the urgency of the application arose because the second defendant had been ordered to file its Amended Contribution Notice on a date that was approaching, and the second defendant’s solicitor considered it necessary to have access to the documents to complete that Notice. In its submissions on costs, which were filed on 14 September 2007, the second defendant’s solicitor submitted that it was not necessarily for him to establish the utility of the documents – rather, his client was entitled to the documents and had not received them despite numerous requests.
The specially returnable application was served on all parties to the action. The plaintiffs were represented at the 21 December 2006 hearing. They submitted that their presence was necessary because one of the categories of documents sought was:
2.1all documents, including any legal files in the possession, custody or control of the executor relating to his retaining of Ms Judith Choate or any firm of which she was a partner in relation to any claim by any person of an equitable or other unregistered interest in any of the land which is the subject of these proceedings
The plaintiffs submitted in their submissions on costs, filed on 16 August 2007, that the application “clearly concerned the plaintiffs and their legal representation”, and that the plaintiffs “had a clear interest in the application and a right to be heard”.
From the plaintiffs’ perspective, the second defendant’s application occurred at a time when the second defendant’s solicitors had corresponded with the plaintiffs’ solicitors about the role of Ms Choate when she was a partner of Mouldens and any difficulties that may have arisen from her having subsequently become a partner of Piper Alderman, who are the plaintiffs’ solicitors. That correspondence was appended as exhibits to an affidavit filed by the second defendant’s solicitors in support of the 18 December 2006 application. Part of the second defendant’s case, as articulated in its Amended Contribution Notice and in the correspondence, is that Ms Choate had, at some time in the past, acted for the estates while she was a partner at Mouldens. The second defendant alleges that Ms Choate had written a letter to a Gary McCarthy advising that the companies had no equitable or other interest in the land which was later to become part of the companies’ claim in the present action.
The second defendant’s solicitor in his submissions on costs submitted that the documents were relevant as they “demonstrated conduct that was inconsistent with the Companies’ claim and was therefore discoverable.” The second defendant also drew attention to the fact that Ms Choate’s representation of the estate needed to be pleaded in the Amended Contribution Notice, and had in fact been pleaded in paragraphs 15 to 19.
The plaintiffs’ submissions on costs highlight that the application was made during a time of correspondence about a possible conflict of interest. In my view, while it is perhaps understandable that the plaintiffs sought to be represented at the hearing on 21 December 2006 (in light of the correspondence that had taken place regarding the role of Ms Choate), the second defendant did not seek any orders against the plaintiffs. Nor did the second defendant seek any documents from the plaintiffs relating to Ms Choate. The documents were relevant to the plaintiffs in the sense that they were sought for the purpose of seeking to demonstrate conduct inconsistent with the plaintiffs’ claim to an equitable interest in the land. However, the plaintiffs did not challenge that they were discoverable, and only opposed the order that the application be made specially returnable, as they claimed that there was no urgency in the application. The plaintiffs stated that they only wished to be heard on the order sought in paragraph 2.1 of the application, which was ultimately unnecessary, as the first defendant had told the court that there were no such documents.
In these circumstances, it is my view that the plaintiffs should not be entitled to their costs when, shortly stated, they appeared at a hearing in which orders were not sought against them.
Much of the hearing time on 21 December 2006 was taken up with discussion about why the first defendant had not already provided the second defendant with the documents sought in paragraphs 2.2 and 2.3 of the application. The second defendant’s position was that her solicitors had made repeated requests for the documents, to which the first defendant’s solicitor had not responded.
The first defendant’s position was that the second defendant’s solicitor could have come and inspected the documents and made copies if he wished, but that he had not done so. The second defendant’s solicitor denied that such an invitation had been extended to him.
Counsel for the first defendant was not able to point to any correspondence in which an invitation to inspect and/or copy the documents was made in those terms. The only correspondence which approached that position was a letter sent by the first defendant’s solicitor to the second defendant’s solicitor dated 2 November 2006, which referred to a telephone conversation of 17 October 2006. As that letter assumed prominence in the first defendant’s submissions, I will set it out in full:
I refer to my telephone conversation with you on 17 October 2006. I also refer to Mr Ower’s email to you dated 19 October 2006. In that telephone conversation, I confirmed that my client had instructed an accountant to prepare an updated statement of assets and liabilities and financial statements in relation to both estates. You then requested me to provide not only current financial information but also details of monies expended by the executor applied as against bank assets.
I further confirmed I was away on country for nearly 2 weeks on native title commitments and that inspection of documents could not be arranged until I returned. I further advised that I hold no trust documentation other than what you have already inspected. I have requested the Executor to provide me with any further information that may have come into his possession pertaining to the estates. Furthermore the executor and myself are meeting with the accountant shortly to finalise the present financial statements of the estate.
As soon as the statements come to hand I will provide you with a copy of same.
The second defendant’s solicitor stated that it was not correct that an invitation was extended to him during the telephone conversation of 17 October 2006. He suggested that counsel should take instructions from the first defendant’s solicitor, who was present in court. Counsel stated that she would take instructions on that question if required to by the court. I stated that I would not direct counsel to take instructions. No instructions were taken on that question. I pause to observe that it is not the role of the Court to direct counsel how to present their case, nor to direct counsel in the circumstances, as they arose, to take instructions.
As I observed during the hearing, if there was any misunderstanding between the parties as to whether or not the second defendant’s solicitors were able to inspect and copy documents, it would have been very simple for the first defendant’s solicitor to resolve. Upon receiving the specially returnable application, it was open to the first defendant’s solicitor to contact the second defendant’s solicitor and advise them that the application was misconceived, and that the documents were available to them even in the absence of a court order. The first defendant’s solicitor did not do that. Nor does it appear that the first defendant’s solicitor responded to the letters sent by the second defendant’s solicitors between 2 November 2006 and 18 December 2006 in which repeated requests were made for the documents.
There was much correspondence between the second defendant and the plaintiffs and the first defendant in the period preceding the application. Some of the requests for the documents were interspersed with correspondence about other issues. However, in the days before the application was filed, there were several letters from the second defendant which contained exclusively a request for documents.
In short, even if the second defendant’s solicitor was mistaken about the position of the first defendant with respect to the documents he sought, the first defendant’s solicitor was in a position to disabuse him of that misunderstanding, and did not do so in the face of repeated correspondence and, ultimately, a specially returnable application.
In those circumstances, it is my view that the second defendant should be entitled to her costs of and incidental to the application filed on 18 December 2006.
Is the second defendant entitled to costs on an indemnity basis?
As I noted above, one of the orders sought by the second defendant in her application of 18 December 2006 was an order that the first defendant pay the costs of the second defendant on an indemnity basis, and in his personal capacity. In his submissions, the solicitor for the second defendant did not press for an award in these terms.
The reasons for making an award of indemnity costs, and the circumstances in which such an award will be made, were discussed by Sheppard J in Colgate‑Palmolive Company & Anor v Cussons Pty Ltd.[1] That case was approved by the Full Court of the Federal Court in Re Wilcox; Ex parte Venture Industries Pty Ltd & Ors[2] and, as Debelle J observed in Moyes & Anor v J & L Developments Pty Ltd & Anor (No 3),[3] the principles are applicable in this Court. In Colgate-Palmolive, Sheppard J observed that the categories of case in which such an award may be made were not closed, but indicated that there should be some special feature of the case which necessitated a departure from the ordinary practice, and cited examples of circumstances in which an award had been made, including the commencement or continuation of proceedings for an ulterior motive, or misconduct causing loss of time to the Court and other parties.[4]
[1] (1993) 46 FCR 225.
[2] (1996) 72 FCR 151.
[3] (2007) 250 LSJS 86, 87
[4] Colgate‑Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225, 232-4.
Sheppard J also emphasised that the making of an award was ultimately a matter for the discretion of the judge.
It is well established that the ordinary order as to costs will be that they are paid on a party and party basis unless there is “some special or unusual feature” of the case that justifies an order in different terms.[5] The solicitor for the second defendant, in his written submissions, did not point to any particular conduct or circumstances in support of an application for costs to be paid on an indemnity basis. In my view, while it is unfortunate that this matter could not have been resolved by the solicitors communicating between themselves, the conduct of the first defendant or his solicitors was not such as to give rise to a basis for costs to be paid on an indemnity basis.
[5] Re Wilcox; Ex parte Venture Industries Pty Ltd & Ors (1996) 72 FCR 151, 152.
Orders
I would order that the plaintiffs and the first defendant bear their own costs of and incidental to the second defendant’s application of 18 December 2006.
I would order that the first defendant pay to the second defendant her costs of and incidental to the application of 18 December 2006, on a party and party basis, as taxed or agreed.