Hall v SG Hall Pty Limited as Trustee for the Kelaar Trust; Hall v Hall

[2010] NSWSC 573

CITATION:	Hall v SG Hall Pty Limited as Trustee for the Kelaar Trust; Hall v Hall [2010] NSWSC 573
HEARING DATE(S):	24 May 2010
JUDGMENT DATE :	24 May 2010
JUDGMENT OF:	Bergin CJ in Eq
DECISION:	Indemnity costs refused. Costs order pursuant to s 93(3) of the Trustee Act 1925.
CATCHWORDS:	COSTS - Parties settle proceedings - previous Anton Piller order - whether indemnity costs justified
LEGISLATION CITED:	Conveyancing Act 1919 Trustee Act 1925
CASES CITED:	Re Minister for Immigration and Ethnic Affairs; Ex-parte Lai Qin (1997) 71 ALJR 533
PARTIES:	Geoffrey Vincent Hall (Plaintiff) SG Hall Pty Ltd / Stephen Geoffrey Hall (Defendants)
FILE NUMBER(S):	SC 2006/257264; 2006/257265
COUNSEL:	W Washington (Plaintiff) S Benson (Defendants)
SOLICITORS:	Slater & Gordon Lawyers (Plaintiff) TressCox Lawyers (Defendants)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BERGIN CJ in Eq

24 MAY 2010

2006/257264 GEOFFREY VINCENT HALL v SG HALL PTY LIMITED AS TRUSTEE FOR THE KELAAR TRUST

2006/257265 GEOFFREY VINCENT HALL v STEPHEN GEOFFREY HALL

JUDGMENT – EX TEMPORE

1 On 26 November 2009 these two sets of proceedings were set down for hearing for four days commencing today. On 17 May 2010 the plaintiff brought an urgent motion for amendment and for the vacation of the hearing date. The motion and affidavits in support of that application are contained in exhibit 2.

2 The hearing was not vacated, but between 17 May and today the parties settled their differences save as to costs. I made final orders in proceedings 2006/257265, which have been referred to as the "estate proceedings". I also made orders in proceedings 2006/257264, which have been referred to as the "partnership proceedings", pursuant to which questions have been referred to the referees for report to the Court.

3 The present application is in relation to the estate proceedings which were commenced on 20 June 2006. As originally commenced the plaintiff, Geoffrey Vincent Hall, who is the father of the defendant, Stephen Geoffrey Hall, sought an order that the defendant be removed as trustee of the last will and testament of Leonard Albert Hall, the deceased, who was the father of the plaintiff. The Summons also sought an account be taken of all moneys received and dispersed by the defendant in respect of the estate.

4 The plaintiff and the defendant were co-trustees. The deceased owned, amongst other things, a farming property in the northwest of New South Wales known as "Tea Trees". The plaintiff was favoured in the defendant's will as life income beneficiary, and three of his four children as remaindermen (or perhaps the more modern term, remainderpersons). They are his daughters, Amanda and Wendy, and the defendant, his son.

5 It would appear that it is common ground between the parties that although "Tee Trees" was run as a going concern farming operation by the plaintiff in conjunction with the defendant, and the defendant as a chartered accountant worked on the accounts or administration of the trust property or the estate, there was a falling out such that in 2006, as I have said, the plaintiff sought the removal of his son as co-trustee.

6 There was an order made that the proceedings proceed by way of pleadings. A chronology of the proceedings that has been agreed includes the various orders that were made in the management of the case, including an order for discovery. That order contemplated documents being produced that were relevant to the issues between the parties, one issue being whether the defendant should be removed as co-trustee. Thus, documents that were relevant would include the documents that the defendant had allegedly agreed to provide, being the accounts.

7 The chronology demonstrates that although there were consent orders made for the production of the financial statements and documents, they were not produced in compliance with the order. This culminated in an application brought ex-parte by the plaintiff before Hamilton J in February 2007. Hamilton J made an ex-parte Anton Piller order, now referred to as a search and seizure order. It is common ground that no application to dissolve such an order was made, and no application to set aside such an order was made.

8 Documents were produced and the proceedings moved forward by way of pleadings and further interlocutory steps.

9 The defendant filed a cross-claim on 2 January 2008 in which he sought the removal of both himself and his father, and the appointment of a trustee company. That cross-claim also sought an order for the sale of the property pursuant to s 66G of the Conveyancing Act 1919.

10 In 2009 the plaintiff sought agreement from the defendant for distribution from the trust or estate's account. It is common ground that in operating the farm, in particular in producing and selling crops, the plaintiff would pay the net proceeds from the sale into the account without reduction. The plaintiff sought the defendant's agreement to a disbursement from the account in his favour. As had become the way of life between the plaintiff and the defendant, there was no agreement. The defendant proposed the distribution of $150,000 as opposed to the figure claimed by the plaintiff of $291,492.

11 The application for distribution was made by motion which came before Forster J in the latter part of 2009. Although the case was mentioned on a number of occasions the ultimate position reached by the parties in late November was to have the matter set down for hearing today. There was agreement to the distribution of $150,000.

12 When the application was made to vacate the trial the evidence in support included an affidavit by Mariano Rosetto, who was a chartered accountant. Mr Rosetto reviewed a report that had been prepared by Vincents Chartered Accountants as a result of them being provided with the documents that were seized in the Anton Piller process. Mr Rosetto expressed the opinion that the Court would not be assisted by the expert opinion in the Vincent Report. His evidence was that the essential element in the estate proceedings and in the other proceedings, the partnership proceedings, was how the defendant had accounted for the transactions and whether, as an example, he had correctly allocated costs, expenses or income in both the partnership and the estate accounts.

13 Mr Rosetto expressed the opinion that based on the information available to him he believed it was possible to dissect the transactions and to determine how the defendant had accounted for them, effectively indicating to the Court that what the plaintiff's previous expert, Vincents, had done would not assist the Court.

14 Mr Rosetto expressed the view that it would take considerable time to prepare such a report, and thus the application was made to vacate the trial date so that such expert opinion could be obtained.

15 The plaintiff also swore an affidavit in support of the application to vacate the trial. In that affidavit the plaintiff complained about the defendant's conduct in failing to comply with orders made to prepare accounts, and he claimed that he had to reconstruct the financial statements both in respect of the estate and also the partnership. He expressed this view that this could not be completed by today because it was a complex and lengthy exercise. In those circumstances the plaintiff claimed that the proceedings were not ready for hearing.

16 The defendant relied on an affidavit of Christine Margaret McPhillips sworn on 18 May 2010, which forms part of exhibit 2 on this application. It was noted in that affidavit that the defendant was a chartered accountant and that the defendant had incurred substantial costs both in relation to earlier Notices of Motion and in preparation for the hearing generally. That affidavit also included the statement that the defendant in his capacity as an accountant was retained by the parties to prepare accounts in both the estate and the partnership, and was directed to do so by the Court on 16 September 2009 and 13 October 2009.

17 The defendant's solicitor stated that the draft accounts were prepared and submitted to the plaintiff on 5 November 2009 in accordance with the orders, and that the defendant had not been paid the fees rendered by him for the work he carried out at the direction of the Court and as agreed to by the plaintiff. That affidavit also referred to the claim that the defendant had paid funds of $33,000 into the trust account of his lawyers on account of fees for counsel, and that he was prepared to go to hearing and wished to continue with the hearing. As I have already said, the hearing was not vacated and both counsel had indicated that they wished to continue to discuss the prospect of settlement of the matter.

18 The plaintiff seeks two orders; first, that the plaintiff's costs of and incidental to the application for the Anton Piller order before Hamilton J on 12 February 2007 be paid by the defendant on an indemnity basis; and second, that the balance of the costs of both the plaintiff and the defendant in the proceedings - other than in respect of the Notice of Motion to vacate the hearing date which has been the subject of an agreed costs order made today - be paid out of the fund of the estate of the deceased pursuant to s 93(3) of the Trustee Act 1925 and in accordance with Rule 42.25 of the Uniform Civil Procedure Rules. Section 93(3) of the Trustee Act provides as follows:

In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of the testator or intestate, or with respect to the interpretation of the trust instrument, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings.

19 The defendant resists the first order in respect of the Anton Piller proceedings. The defendant also resists the second order and seeks an order that the plaintiff pay the defendant's costs of the proceedings on an indemnity basis. Where there has been no hearing on the merits a Court is necessarily deprived of the factor that usually determines whether or how it will make a costs order: Re Minister for Immigration and Ethnic Affairs; Ex-parte Lai Qin (1997) 71 ALJR 533 at 535 per McHugh J.

20 As was said in Qin, and adopted in a large number of cases, in an appropriate case a Court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. McHugh J said at 535:

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to cost of the proceedings.

21 In this case the parties seek costs in their favour, both seeking some proportion of them on an indemnity basis. Mr Benson, counsel for the defendant, submitted that the proceedings brought by the plaintiff were flawed and that it must have been obvious by no later than the time at which the defendant filed his cross-claim seeking the removal of both trustees that the only reasonable result was that both trustees be removed and an independent trustee be put in place.

22 Mr Benson has referred to the proceedings brought by the plaintiff, or alternatively continued by the plaintiff after January 2008 as “a folly”. He submitted that the remaindermen should not be burdened with an order in favour of costs being paid out of the corpus of the estate for the inappropriate and flawed proceedings brought by the plaintiff.

23 Mr Benson also submitted that the application by the plaintiff for his costs for the Anton Piller process should be dismissed, because it is clear that the process produced nothing. He submitted that this can be seen from the Vincent Report, which is in exhibit 2. The Vincent Report analyses the source material and identifies what have been described as “irregularities” in the accounts. It would appear that the expert has not identified with precision those matters that would have been necessary for the plaintiff to assist the Court on the expert question of how the defendant dealt with the accounts of the estate and/or the partnership, thus, the application to have a different expert utilise the source material to achieve a more helpful expert opinion. Mr Benson submitted that when one looks at the report it is obvious that the Anton Piller process was a waste of costs and produced nothing.

24 I disagree with that submission. It is obvious that the Anton Piller process produced quite a deal of material, having regard to the content of Mr Vincent's report. The fact that Mr Vincent expressed himself in a particular manner does not mean that there was nothing produced. I do not know the real basis upon which the Anton Piller order was made, other than assuming that the judge correctly applied the principles in relation to such an order, that it was a necessary step in the litigation, and that it was not the subject of any application either to discharge it or set it aside before or after execution.

25 It is not clear to me why the plaintiff would be entitled to an order for costs on an indemnity basis for an ex-parte order and process. It is obvious from the chronology agreed to between the parties that the defendant did not produce the documents that were ordered to be produced. Mr Benson has made the submission that the process engaged in by the plaintiff could reasonably be described as “using a sledge hammer to crack a nut”. He also submitted that the better and more professional approach would have been for the lawyers to have the matter relisted to seek a new timetable for the production of documents, rather than the utilisation of such an intrusive process. As I have already said, I do not know the true basis on which the order was made, but it would appear to me that something more than relisting appeared to be necessary.

26 Mr Benson's proposition that the proceedings were flawed from the outset and that the proceedings amounted to a folly is a submission with which I cannot agree on the evidence before me. The deceased died in 1973. The trustees have obviously been managing the estate and/or partnership for many years. When families fall out, and where families are closely aligned in appointments by their relatives to manage trustee estates, some of the steps taken by those persons in dispute may appear to them to be not unreasonable, when the objective assessment of them is that they are unreasonable.

27 In this instance it would have been sensible for these parties to have tried to work out their differences without resorting to litigation. But, as can be seen from the chronology agreed between the parties, they attempted a mediation, which was unsuccessful. The steps taken thereafter seem to me to be reasonable responses to the other side in circumstances that were obviously difficult and complicated. I cannot be satisfied on the evidence before me that the commencement of the proceedings was flawed or was a folly. I do not know the detail of what the defendant was doing that caused the obvious rift, or, alternatively, I do not know what the plaintiff was doing that caused the obvious rift.

28 However the plaintiff has the life income beneficiary status and it is understandable that once problems arose, any deadlock needed to be resolved. One way of resolution was to prove that the defendant should be removed. Hindsight and objectivity might suggest that where two trustees are having difficulty it is probably better to have an independent trustee appointed, except if the new trustee's fees are going to be so great that it would be unhelpful to all parties concerned to take that step. That observation should not be taken as a finding of unreasonable conduct by either party. The parties to this litigation have been assisted by competent lawyers, and with that assistance have ultimately settled their differences. True it is they did not settle until the first day of the hearing, but the process was obviously one that was not free from friction throughout the time that they were litigating.

29 It is true that the outcome of the proceedings has resulted in an order similar to that which was sought in the cross-claim; that is the appointment of independent trustees, with the removal of the plaintiff and the defendant as trustees. Mr Benson submitted that the plaintiff should have agreed to that order as soon as the defendant filed his cross-claim seeking such a similar order. He submitted that the only sensible outcome was the agreement to that order, and that I would be satisfied that at least from the time the cross-claim was filed in January 2008, the plaintiff should pay the defendant's costs on an indemnity basis.

30 The aim in such an application as this is to do justice between the parties. On the one hand it does appear that the plaintiff had to go to the extent of bringing an ex-parte Anton Piller application to have the matter move forward. It is also clear that there was a proper basis for the concern that the plaintiff had. That would seem to me to be in the plaintiff's favour.

31 On the other hand, the defendant sought to bring the matter to a head by suggesting the removal of both trustees, and in respect of the motion for distribution the defendant submitted that no final resolution of that motion occurred other than the matter being set down for hearing. That would seem to be in the defendant's favour.

32 I am not satisfied that I should make any order for indemnity costs in this case. I am also satisfied that it would not be fair to try to apportion costs on a percentage basis between plaintiff and defendant. It is very difficult to know three years after the event what percent should be applied as against the defendant because of his conduct in failing to comply with court orders justifying an Anton Piller order.

33 I am satisfied that the fairest way to finalise these proceedings in respect of the costs of the parties is to order that both the plaintiff's and defendant's costs be paid out of the fund of the estate of the deceased pursuant to section 93(3) of the Trustee Act.

34 I make the following orders; the costs of the plaintiff and the defendant in these proceedings, other than costs already the subject of an order made today in respect of the plaintiff's motion to vacate the hearing, be paid out of the fund of the estate of the late Leonard Albert Hall pursuant to section 93(3) of the Trustee Act.

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