Highland v Labraga (No 3)

[2006] NSWSC 871

CITATION:	Highland v Labraga (No 3) [2006] NSWSC 871
HEARING DATE(S):	02/05/06
JUDGMENT DATE :	31 August 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Motion to reopen costs order dismissed.
CATCHWORDS:	PROCEDURE [585]- Costs- Proceedings to remove executor- Commenced by principal object of discretionary trust where discretionary trust was beneficiary under the will- Proceedings amended- Order made that first defendant pay whole costs of suit- Application made under slip rule that no order for costs should be made before amendment or at all as after amendment, first defendant filed submitting appearance- There is a guideline that normally a submitting party is immune from any liability for costs, however it is significant here that this litigation was part of a complex set of proceedings heard together- First defendant took a more active role than is usual for a submitting appearance- The order that the first defendant pay the plaintiffs' costs should not be varied.
LEGISLATION CITED:	Uniform Civil Procedure Act 2005, Pt 36 r17
CASES CITED:	Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 Sakr v Mercantile Mutual Insurance (Australia) Ltd [2000] NSWCA 266
PARTIES:	Penelope Louise Highland (P1) Philip Edward Pomfret (P2) Julio Cesar Labraga (D1) Nowhere In Particular Pty Limited (D2)
FILE NUMBER(S):	SC 2466/05
COUNSEL:	G K Burton SC (P1) M Ashhurst (D1)
SOLICITORS:	Dibbs Abbott Stillman (P1) Kemp Strang (D1)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Thursday 31 August 2006

2466/05 – HIGHLAND v LABRAGA (NO 3)

JUDGMENT

1 HIS HONOUR: The background to this further judgment is that prior to March 2003, three gentlemen, sometimes through family trusts controlled by them, held equal interests in a group of companies. Each of the three gentlemen had particular skills. None of them had the same skills, but their skills were complementary.

2 In March 2003, one of them, Richard Highland, died and he made a will naming the other two, Messrs Labraga and Pomfret as his executors, and left all his property to his discretionary trust.

3 Messrs Pomfret and Labraga fell out and there were a number of pieces of litigation in which they sought remedies from the court which would put one of them in a better position with respect to the former joint enterprise.

4 The widow of Mr Highland, Penelope Louise Highland, was not happy with what was going on and she commenced these proceedings to remove Mr Labraga as an executor of the estate: she was happy with Mr Pomfret.

5 The proceedings were amended by order of Barrett J on 6 June 2005 by adding Mr Pomfret as a co-plaintiff and seeking an order that the grant be revoked and a fresh grant made.

6 I believe the first serious judgment I gave in these various proceedings was Exception Holdings Pty Ltd v Albarran [2005] NSWSC 677 delivered on 30 June 2005 after a hearing that day, then there was Exception Holdings Pty Ltd v Albarran (No 2) [2005] NSWSC 981 delivered on 29 September 2005 after a hearing on 18 and 25 August 2005. Then I delivered a judgment in the present proceedings, together with 2063/05 as Labraga v Pomfret; Highland v Labraga [2005] NSWSC 973 again on 29 September 2005, the hearing having taken place on 13, 14 and 15 July 2005. I stood the matter over for costs to be argued. This took place on 11 October 2005. There were then further written submissions and I gave judgment on 29 November 2005; see Highland v Labraga (No 2) [2005] NSWSC 1212.

7 My conclusion in the latter judgment at para 28 was:

"As the suit before amendment was competent (although put in better form by the amendment of 9 June 2005) and as the proceedings succeeded, the proper order is that the first defendant pay the plaintiffs' costs and I so order."

8 Returning to the present matter, on 11 October I made certain orders and reserved costs for further submissions on the point as to whether the suit was properly constituted before Mr Pomfret became a party and directed submissions by 28 October.

9 On 14 October 2005, I received a document headed "Plaintiffs' Further Submissions on Standing and Costs" which had the name of Gregory Burton SC, counsel for the plaintiffs, printed at the end, but the submissions were not signed. Paras 6 and 7 of those submissions read as follows:

6. "… if the court finds that prior to the amendment on 6 June the existing plaintiff (Mrs Highland) had standing in respect of the summons as then propounded then the court ought to consider ordering that the first defendant pay the costs of the proceedings to date of the orders (including the costs associated with deciding the costs and standing question). The first defendant's principal activity in the proceedings was to raise the challenge to standing and to oppose the 6 June amendment (on the basis that it ought to be the subject of fresh proceedings). Further, as stated in para 111 of his Honour's judgment of 29 September 2005, the second defendant on the eve of the hearing sought leave (granted on the first day of the hearing) to change his appearance to a submitting appearance but nevertheless filed a defence and made submissions which impacted on issues in the estate proceedings."
7. If the court finds that Mrs Highland had no standing until the orders on 6 June 2005, the court ought to deny the second defendant his costs from any source (the estate or the plaintiffs) up to and including 9 June 2005 … ".

10 On 11 November 2005, Mr Mark Ashhurst signed a document headed "First Defendant's Submissions on Costs". This document was in reply to the first plaintiff's document of 14 October.

11 Para 5 reads in part:

"On 6 June 2005, in obvious recognition of the standing difficulties that her claim faced, Mrs Highland sought to amend her Summons again, this time by adding Mr Pomfret as a Plaintiff. Barrett J allowed the amendment … and expressly reserved the costs of the proceedings to date. It is those reserved costs that Mr Labraga now claims. (Mr Labraga filed a submitting appearance to the amended claim on 7 July 2005)."

The submissions ended in the final paragraph:

"There is therefore no substantive reason why Mrs Highland should not pay Mr Labraga's costs prior to the date that the proceedings were amended on 6 June 2005."

12 On 13 April 2006, Mr Labraga filed a notice of motion. It noted that he wished to move for an order under Part 36 rule 17 of the Rules under the Uniform Civil Procedure Act. That is, the slip rule. The notice of motion as originally filed just did not make sense grammatically but it was clear and the clarity was made perfect by the amendment granted on 2 May 2006 that he wished to set aside the order that he pay the plaintiffs' costs up to the date of the first defendant filing a submitting appearance and that the plaintiffs indeed pay his costs of the amendment determined by Barrett J on 6 June 2005 and any costs thrown away as a result of such an amendment.

13 I should note here that as there is no evidence in the file that the formal order as to costs was ever taken out, the slip rule is really irrelevant as up until the final order is taken out, the Judge has relatively full powers to make appropriate amendments to his or her order. However, I will not refer to this again as no party raised it.

14 Mr Ashhurst appeared for Mr Labraga and Mr Burton SC appeared for Mrs Highland. Mr Ashhurst made oral and written submissions. The submissions put forward the proposition that "The first defendant understood that the question of costs that was being determined by the court was limited to those costs that were incurred prior to the joinder of the second plaintiff on 6 June 2005 which had been expressly reserved by Barrett J. The first defendant had understood there was no issue regarding costs after this date because the first defendant had, after the joinder of the second plaintiff, filed a submitting appearance (Filed on 7 July 2005)." The submissions complain that the point that there was a submitting appearance filed by the first defendant had been overlooked, that the oversight could be rectified by the slip rule and that consistently with authorities such as Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 at [42], Mr Labraga should not have to pay costs. The submission also was that the costs of the amendment on 6 June 2005 and the costs thrown away by the amendment should not be costs for which Mr Labraga should be liable.

15 Mr Burton SC put that the point was addressed and I should not revisit what I did last November. He put in particular that it was a bizarre situation where Mr Labraga was both submitting and arguing. He put that when one looked at the whole conspectus including the Albarran proceedings, it could be seen that Mr Labraga was in every sense a combatant rather than a submitting defendant and that he should not be allowed to both submit and also say what he liked.

16 As to the counsel for Mr Labraga acting under a misunderstanding, Mr Burton submitted that that really could not have existed after he had made his written submissions and that one must look at the matter not as a slip but rather a deliberate decision.

17 Mr Burton then put that even if I were to look at the matter again, I would come to the same conclusion. The argument that the proceedings were initially bad may well have been technically correct, but these days the court would not permit proceedings to be dismissed on such a technicality in the view of the old rule, Part 40 rule 1, or new rule 36(1), but rather the court would have compelled the trustee of the discretionary trust, Nowhere In Particular Pty Ltd to bring an application for revocation of the grant. In any event, Mr Burton puts that Mr Ashhurst is now cavilling with the deliberate decision made by me last November.

18 If experienced counsel says there was a misunderstanding, then I have adopted the practice of accepting that statement even though objectively it may be hard to determine that there were reasonable grounds for such a misunderstanding. If there is a misunderstanding on the part of counsel as to what is being argued, although earlier on it was thought this was not sufficient to allow relief to be given under the slip rule, more modern authority such as that summed up by O'Keefe AJA in Sakr v Mercantile Mutual Insurance (Australia) Ltd [2000] NSWCA 266, shows that it is now within the rule.

19 The vital question is whether there is some overriding principle that a person who files a submitting appearance is immune from costs.

20 Mr Ashhurst relies on the decision of Bignold J in the Develtor Property Group case to which I have already made reference. He held in [42] that "The effect of the respondent's submitting appearance in the present case, where that appearance has not been challenged or impugned, is that the submitting party is generally to be regarded as immune from any liability for costs incurred in the proceedings after the filing of the submitting appearance".

21 A word that must not be overlooked in that quotation is the word "generally".

22 Ritchie's Uniform Civil Procedure in note 6.11.5 quotes the Develtor Property Group case as authority for the proposition that "A submitting party will not ordinarily be liable in respect of costs incurred after filing the submitting appearance". Again, semantic significance must be given to the word "ordinarily".

23 In a case where a defendant has been named as a proper party, but genuinely takes no part in the proceedings and files a submitting appearance, then almost certainly no order for costs will be made against it. However, that's not the present case. There were a series of proceedings involving Mr Labraga, Mr Pomfret and Mrs Highland. One cannot view the present case in isolation. Mr Labraga was putting pressure on the others by his manoeuvres with respect to the companies in the group and taking an active part in the other sets of proceedings. Indeed, even in the instant proceedings he filed a submitting appearance, obtained leave to put on a defence and then probably argued far more than the leave would entitle him to do. In my view Mr Burton gets close to the mark that Mr Labraga was trying to have the best of all worlds.

24 Having considered the matter again, and having taken into account everything that Mr Ashhurst has said in his further written submissions, I do not consider that I should adjust what I previously said in any way.

25 Accordingly, the first defendant's notice of motion is dismissed with costs. The exhibits should be retained.

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