Hillman v Box (No 5)
[2014] ACTSC 150
•26 June 2014
NOELLE ELIZABETH HILLMAN v LYNDA BOX, DEBRAH BOX AND SKYE BOX AS EXECUTORS OF THE ESTATE OF GRAEME WILLIAM BOX (NO 5)
[2014] ACTSC 150 (26 June 2014)
PROCEDURE – Costs – Whether order can be amended after being made – Order not perfected – Application to re-open costs – Costs do not necessarily follow event in family provision cases – “Calderbank letter” – Plaintiff not given reasonable time to consider offer – “Calderbank letter” not to be considered in assessing costs due to lack of unreasonableness in rejecting offer
Family Provisions Act 969 (ACT)
Supreme Court Act 1933 (ACT), s 37E(4)
Court Procedures Rules 2006 (ACT), r 1721
Supreme Court Rules 1970 (NSW), Pt 52, r 30
Rules of the Supreme Court 1965 (UK), O 62 r 28
Halsburys Laws of England (4th ed, v 32
AGC (Advances) Ltd v West (1984) 5 NSWLR 301
Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 583
Becker v Queensland Investment Corporation (No 2) [2009] ACTSC 147
Brymount Pty Ltd t/a Watson Toyota v Cummins (No 2) [2005] NSWCA 69
De L v Director-General, NSW Department of Community Services (No 2) (1997) 190 CLR 207
Dobb v Hacket [1993] 10 WAR 532
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd [2000] FCA 602
Dzundza v Nielsen [2013] ACTSC 220
Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59
Financial Integrity Group Pty Ltd v Farmer (No 4) [2014] ACTSC 145
Ford Motor Company of Australia Ltd v Lo Presti (2009) 41 WAR 1
Frankenburg v Famous Lasky Film Service Ltd [19431] 1 Ch 428
Giles v Randall [1915] 1 KB 290
Goodwin v Storrar [1947] KB 457
Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435
Hillman v Box (No 4) [2014] ACTSC 107
J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23
Jones v Trad (No 3) [2013] NSWCA 463
Latoudis v Casey (1990) 170 CLR 534
Lyon v Lyon [1953] P 1
Mainteck Services Pty Ltd v Stein Heurtey SA [2013] NSWSC 1165
Maritime Union of Australia v Geraldton Port Authority (2001) 111 FCR 434
Ng v Chong [2005] NSWSC 385
Quirk v Bawden (1992) 112 ACTR 1
Re Adamow (deceased) (1989) 97 FLR 410
Re Marsland & Marsland [1902] St R Qd 219
Savvaki v Papagyriou [2008] NSWSC 922
Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268
Singer v Berghouse (1993) 114 ALR 521
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97
Smith v NSW Bar Association (1992) 176 CLR 256
The National Safety Council (in liquidation) (No 2) [1992] 1 VR 485
Underwood v Underwood [2009] QSC 107
Walsh v Walsh (No 2) [2013] NSWSC 1281
Woolnough v Public Trustee (No 2) [2005] TASSC 102
No. SC 564 of 2010
Judge: Refshauge J
Supreme Court of the ACT
Date: 26 June 2014
IN THE SUPREME COURT OF THE )
) No. SC 564 of 2010
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:NOELLE ELIZABETH HILLMAN
Plaintiff
AND:LYNDA BOX, DEBRAH BOX AND SKYE BOX AS EXECUTORS OF THE ESTATE OF GRAEME WILLIAM BOX
Defendants
ORDER
Judge: Refshauge J
Date: 26 June 2014
Place: Canberra
THE COURT ORDERS THAT:
That one fifth of the plaintiff’s costs including the costs of the submissions as to costs be paid on a common fund basis out of the assets of the Estate of the late Graeme William Box.
On 28 May 2014, I made orders which made provision for Noelle Hillman, the plaintiff, out of the estate of the late Graeme William Box (the Estate) but otherwise dismissed her claims: Hillman v Box (No 4) [2014] ACTSC 107.
I ordered that the costs of the defendants be paid out of the Estate on a trustee basis.
As Ms Hillman had only been partially successful, I did not consider that she should have all her costs. I said in the decision:
411.I do not consider, however, that Ms Hillman should receive all her costs. I am mindful that she has had some success and had to take the proceedings in order to obtain that success. Nevertheless, she had made a large number of claims which occupied the majority part of the proceedings on which she has failed.
412.I would propose, subject to any contrary submissions, to allow her out of the estate one-fifth of her costs on a common fund basis.
Accordingly, I gave the parties leave to make submissions as to the costs order that should be made in relation to Ms Hillman’s costs.
Ms Hillman advised me that she had no contrary submissions as to the order that should be made and that the order I proposed should be made.
The defendants, Lynda Box, Debrah Box and Skye Box, have, however, submitted that a different order should be made. In particular, the defendants submitted that Ms Hillman pay the defendants’ costs from 11 December 2012.
Ms Hillman then made submissions in reply which suggested that these submissions of the defendants were misconceived.
While Ms Hillman accepted that the order I made as to the defendants’ costs was “made in the proper and appropriate exercise of the Court’s discretion as to costs”, the order I proposed in [412] of my reasons for judgment was also “the appropriate orders as to the Plaintiff’s costs”.
When delivering judgment and to give effect to my order that the parties be heard as to the plaintiff’s costs, I did give directions that Ms Hillman make any submissions within seven days and that the defendants’ reply within seven days.
Ms Hillman made her submissions on 4 June 2014, within the seven days; the defendants made their submissions on 12 June 2014, one day outside the further seven days. In the circumstances, I am not prepared to reject them on this account. Indeed, the further submissions of Ms Hillman were sought by me within a further seven days but an extension was sought and granted as counsel was unavailable.
Ms Hillman submitted that
the Defendants, not having raised any issue about the costs of the Defendants as ordered on 28 May 2014 and having regard to the fact that the Court expressly made its Orders in that regard and only ordered that ‘the parties be heard as to the costs of the Plaintiff’, it is not appropriate for the Defendants to now seek to raise issues about this Honourable Court’s Orders made on 28 May 2014 as to the Defendants’ costs; and thus the purported ‘Calderbank Offer’ attached to the Defendants’ submissions on costs ought not be received as to those costs.
I found this difficult to understand, but I apprehend that what is being submitted that, since I had already made provision for the defendants’ costs, namely to be paid out of the Estate, I could not, now, make a different order, namely that part of these costs be paid by Ms Hillman.
I do not accept that, in the circumstances, this is correct. While I did make an order for the payment of the defendants’ costs out of the Estate, that order has not been perfected and can be recalled. See Financial Integrity Group Pty Ltd v Farmer (No 4) [2014] ACTSC 145 at [7]. The order has not been perfected in this matter.
The grounds on which a court may re-open an order even before it has been perfected are not at large. They are confined, as suggested by the High Court in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300, though the court was there divided on the exact limits of that jurisdiction and the rationale for its exercise. In that decision, Mason CJ suggested (at 302) that the power could be exercised where there had been a misapprehension of the facts or the law and Gaudron J suggested (at 322) that this power may be exercised if the interests of justice so require.
In Smith v NSW Bar Association (1992) 176 CLR 256 at 265, Brennan, Dawson, Toohey and Gaudron JJ held that the power could be exercised if “there is some matter calling for review”.
R D Nicholson J set out in Maritime Union of Australia v Geraldton Port Authority (2001) 111 FCR 434 at 439-40; [20] the tests to be applied on such an application, discerned from an analysis of the authorities.
In De L v Director-General, NSW Department of Community Services (No 2) (1997) 190 CLR 207, the High Court considered whether it could re-open a costs order where there was no consideration of what might be regarded as a relevant regulation (which the Court held did not bind the High Court) and held it could do so.
There is no doubt that the power should be exercised rarely and sparingly. In De L v Director-General, NSW Department of Community Services (No 2) at 223, Toohey, Gaudron, McHugh, Gummow and Kirby JJ, said
Even if the foregoing conclusions, which require the dismissal of the application, had been different, a question would remain whether, in the exercise of its discretion, the Court should vacate its earlier order. It is one thing to permit reopening of the orders to allow consideration of a matter accidentally overlooked so that it may be taken into account. It is another to provide relief where the party seeking it has, by its own confession, not done all that might have been done to raise the point when it was timely and appropriate to do so. Especially in this Court, judges are entitled to look to the parties, at least where they are legally represented, to defend their own interests and to alert the Court to any claimed immunities which rest upon legal provisions. That was not done here.
Although it would have been preferable for the defendants to have sought that I do not deal with costs until after judgment had been given (Walsh v Walsh (No 2) [2013] NSWSC 1281 at [2]), I do not consider that the approach of the High Court as there explained, applies here. I gave no consideration as to whether there was any basis for an order that Ms Hillman pay the defendants’ costs and counsel was not present at the handing down of the judgment. If the issue had then been raised, I have no doubt that I would have given consideration to the issue.
It does, however, require those persons, who appear when judgment is delivered, to be fully instructed as to issue that may arise, particularly as to costs and seek either to make submissions then or to ask for time within which to make appropriate submissions.
Accordingly, I am prepared to entertain what is, in effect, an application by the defendants to re-open the order I made as to their costs and consider whether Ms Hillman should pay some portion of them.
The defendants, in the submissions, refer to a letter dated 11 December 2012 sent by their lawyers to the lawyers for Ms Hillman. It was in the following terms, omitting formal parts
The Defendants offer to settle the Plaintiff’s claim in full by the payment to the Plaintiff of $100,000.00 inclusive of interest and each part to pay their own costs.
This offer is open and capable of acceptance only in writing no later than 4pm Friday 14 December 2012 after which time the offer will lapse and not be capable of acceptance.
This offer is made under the principles of Calderbank v Calderbank. This letter may be tendered in evidence on any question of costs, including an application by the Defendants for the Plaintiff to pay the Defendants’ costs on an indemnity basis, if the offer is rejected or the offer was not accepted.
It appears that this letter was actually sent by facsimile transmission at 12:20 pm on 12 December 2012. That was in the context of the trial of the proceedings commencing on 17 December 2012.
Such a letter, commonly known as a “Calderbank letter”, constitutes an offer of compromise which, if it was unreasonable that the offeree should have accepted it, will have cost consequences.
I referred to these recently in Financial Integrity Group Pty Ltd v Farmer (No 4) at [25] where I said of the letter in that case,
There is no doubt that the compromise letter, headed “Without prejudice save as to costs” (AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1988) 13 NSWLR 486 at 487), and in clear terms such that its acceptance would create a binding contract (Perry v Comcare (2006) 150 FCR 319 at 335; [56]) and not “inclusive as to costs” (Van Zonneveld v Seaton [2005] NSWSC 175 at [6]) was of the kind that has been recognised to justify an order for costs that had consequences other than the usual order for costs. Thus, unless it was disabled for some recognised reason, it should have consequences for the costs order I should make.
The consequences for costs was described by Higgins J, with whom Miles CJ and Gallop J agreed, in Quirk v Bawden (1992) 112 ACTR 1 at 6 as follows
Accordingly, I believe that this court should apply an appropriate costs sanction where a party has declined to accept or to make, as the case may be, a reasonable offer of settlement. It may, in some cases, be sufficient to deprive an otherwise successful party of all or part of the costs that otherwise would follow the event. In other cases, it may be appropriate to award some or all costs of an action on a more favourable than usual basis to a party who has been put to the expense of continuing litigation that ought reasonably to have been earlier settled.
It is clear that Ms Hillman has, in the litigation, recovered far less than she would have recovered if the compromise had been accepted so far as the provision to be made out of the Estate. As I awarded no interest, that issue does not arise.
While the offer was not expressed to be “inclusive of costs”, however, the effect of each party paying their own costs may be taken to be much the same. The difficulty with such offers of compromise by “Calderbank letters” is the difficulty that the offeree may be unable to determine the amount to attribute to the provision to be made and the costs incurred in advancing the claim.
In Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 101-2, Spender J was very critical of such offers when his Honour said of letters “inclusive of costs”
It requires an applicant to assess two components: the likely value of the claim and the likely party and party costs to date as they would tax.
...
In my view, it would not promote the finality of litigation, but fragment it. This is demonstrated by what was suggested by counsel for the respondent in this case. It was suggested that the question of costs be adjourned until there was a taxation of costs up until 21 May 1991. If those costs were clearly over $110,000 (which was the difference between the judgment awarded, adjusted for interest up to that date, and the offer) the submission was that the applicants should have their costs. If the taxed costs up to that date were significantly under $110,000 it was submitted that the applicants should pay the respondent’s costs subsequent to that date.
Ordinarily, the costs component of an offer needs to be isolated in a way that is clear and capable of independent and proper assessment without a taxation or formal assessment of costs: Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd [2000] FCA 602 at [24].
That approach, however, has not found universal favour. In Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [143], Basten JA said
If a party in receipt of an offer wishes to know how far the sum offered will go in meeting its costs up to that time, all it has to do is ask its lawyers. In an age where lawyers are required to provide advance estimates of their fees and in circumstances where commercial services are billed on a monthly basis, it is unrealistic to suggest that the recipient of an inclusive offer will be confused or otherwise unable to assess the financial risk of proceeding with litigation. In any event, the offeree is likely to be liable for legal fees exceeding the costs recoverable from the other party. Most litigants, in considering offers, will want to know from their own lawyers, how much they will receive in the hand. Of course, if the offer is not left open for a reasonable time, that might itself make non-acceptance a reasonable course. However, an offeree which is genuinely seeking to assess its position, might be advised to seek more time, if it thinks that is reasonably required.
While what his Honour says is correct, the issue is somewhat more complex for the costs component is, of course, one not of solicitor and own client costs but usually of party and party costs and the amount of that can be estimated by the party’s lawyers but is only actually quantified by formal assessment or agreement.
That is to say, it is only if Ms Hillman’s costs here are less than $50,000 that she has recovered less than the offer made.
Ms Hillman’s counsel has replied to the defendants’ submissions and submitted that her costs, but only up to the date of the offer, were
· $90,008.95 (exclusive of GST, but including disbursements) for solicitors’ costs;
· $54,834.00 (exclusive of GST) for counsel’s fees.
That these are probably solicitor and own client costs is not to the point. If that is so, there will be a deduction, but the question is as to how much. I also note that the costs ordinarily payable to a successful plaintiff are payable on a common fund basis (Hillman v Box (No 4) at [410]) and so the allowable amount would be more generous than if the costs were only allowable on a party and party basis.
As there has been no formal assessment of the costs, I am, in fact, not in a position to say that, in terms of the offer actually made, Ms Hillman has, by my order, received less than the amount offered to her.
Nevertheless, I accept that it is unlikely that Ms Hillman’s costs on a common fund basis are likely to be at best $250,000 which is what they would have to be in order that the provision plus costs (on the basis I proposed) meet or exceed the offer made.
Nevertheless, the uncertainty about the offer, being effectively an “inclusive of costs offer” is a relevant factor which I must take into account.
The next challenge to the “Calderbank letter” by Ms Hillman was that the offer it contained was only open for acceptance for a very short time and that it was very close to trial, in proceedings that had been on foot for more than two years.
The challenge was that, given the timing of the offer, it was not unreasonable for Ms Hillman not to have accepted the offer. In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 at 442; [25] the Victorian Court of Appeal set out six factors to which, at least, while not exhaustive, a court considering a “Calderbank offer” should ordinarily have regard. The second factor listed was “the time allowed to the offeree to consider the offer”. This factor is mentioned in a number of authorities in various jurisdictions (see, for example, Brymount Pty Ltd t/a Watson Toyota v Cummins (No 2) [2005] NSWCA 69 at [14]; Ford Motor Company of Australia Ltd v Lo Presti (2009) 41 WAR 1 at 8; [19]; J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23 at [6]). It has been accepted in this jurisdiction: Becker v Queensland Investment Corporation (No 2) [2009] ACTSC 147 at [12]; Dzundza v Nielsen [2013] ACTSC 220 at [3].
In this case, the offer was made on 11 December 2012, but apparently communicated at 12:20 pm on 12 December 2012. It was to be open until 4:00 pm on 14 December 2012, after which it would lapse. The trial of the proceedings commenced on 17 December 2012.
It was, therefore, open for a very short time, shorter than the time for which such offers are ordinarily open (Financial Integrity Group Pty Ltd v Farmer (No 4) at [29]), though made at a late stage in the proceedings when it may be expected that Ms Hillman would be aware of the evidence to be led, it having been required to be given initially by affidavit. That is a relevant factor in determining whether the time limited for acceptance of the offer is reasonable: Mainteck Services Pty Ltd v Stein Heurtey SA [2013] NSWSC 1165 at [10]. In that case, the offer was said to be “open for only seven days” (at [17]) though the offeror did explicitly state that if the offeree still wished to settle, further negotiations were possible, though with re-calculation as to costs. Similarly, in Jones v Trad (No 3) [2013] NSWCA 463 at [47] the same period of seven days was also mentioned unfavourably. See also Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 583 at [38] where five days was regarded as too short a period of time and Ng v Chong [2005] NSWSC 385 at [14] where the offer, made after commencement of the trial, was only open for seven days. Indeed, in Walsh v Walsh (No 2) at [20], the Court considered that an offer open for only ten days (described at [71] as a “relatively short period”) might in some circumstances be relevant to whether the offer was unreasonably rejected.
In this case, the issues were complex and required careful evaluation. The arguments, especially, for example, as to whether the joint tenancy as to the Spence property had been severed were technical and without clear precedent.
In my view, the time within which Ms Hillman had to consider the offer was not a reasonable time in the circumstances.
In any event, it has been said that, in relation to “Calderbank letters”, litigation in Family Provisions matters are in a somewhat different position because of what may be regarded as the special nature of such proceedings.
In Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268 at 278-9; [54], [56]-[58], Palmer J said
54.The fact that a plaintiff has recovered judgment in an amount less than an offer of settlement contained in a Calderbank letter does not automatically warrant the making of an order that the plaintiff pay the defendant’s costs as from the date of refusal of the offer on an indemnity basis. While that circumstance undoubtedly has weight, all of the facts and circumstances of the case must still be taken into account in the exercise of the Court’s discretion as to costs: see e.g. MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236, at 238-239 per Lindgren J; John S. Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201, at 206 per Hill J.
...
56 A claim under the Family Provision Act is not quantifiable by the parties’ legal advisers prior to judgment with anything like the prescience possible in a claim for a liquidated sum such as a contract debt, or even in a claim for unliquidated damages for personal injury or for future economic loss. There are statutory and judicial guidelines for the range of damages appropriate for various types of personal injury; expert accountants attempt to quantify damages for future economic loss by reference to historical financial information.
57 However, in a claim under the Family Provision Act the Court has to quantify what provision “ought ... to be made” for the applicant out of the deceased’s estate “having regard to the circumstances at the time the order is made”: s 7. Inevitably, that question involves a large element of subjective assessment by the Judge. Inevitably, on any particular set of facts, there would be a variety of answers given by different Judges. The decided cases offer broad parameters as to what provision “ought to be made” in certain kinds of circumstances but there is no formula and there is no yardstick on which the degrees of measurement are not etched by the Judge’s own experience of life.
58 There will be some Family Provision Act cases in which the applicant’s claim is so unreasonable that the applicant is clearly unjustified in commencing the proceedings let alone prosecuting them to a conclusion. In such a case indemnity costs might well be ordered. There will be many cases in which an applicant only just fails to qualify for further provision before one Judge when the same applicant would have only just succeeded in qualifying for provision before another Judge. There will be cases in which the applicant obtains an order for further provision which one Judge would regard as appropriate, another would regard as generous and a third would regard as niggardly.
The Court was there echoing what Gaudron J had said in Singer v Berghouse (1993) 114 ALR 521 at 522
Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s 33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have a detrimental effect on the applicant’s financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate.
Nevertheless, “Calderbank letters” have been enforced in Family Provisions actions in some circumstances. For example, where the proceedings have been conducted on an adversarial basis, the plaintiff in Savvaki v Papagyriou [2008] NSWSC 922, succeeded in having such an offer enforced against the personal representative of the estate.
This is not dissimilar (save as to outcome) here, where the proceedings were conducted in an adversarial manner and, in particular, a significant number of claims independent of the Family Provisions Claims were prosecuted. Thus, in Underwood v Underwood [2009] QSC 107 at [33] Jones J referred to the need
to ensure that unreasonable behaviour on the part of any party, or the pursuit of claims which have no reasonable prospects of success, makes the party liable to some costs sanction.
A straight application of the principles applicable to “Calderbank letters” in the context of Family Provisions litigation is Dobb v Hacket [1993] 10 WAR 532 where there was no mention of the particular considerations in relation to such litigation but the plaintiff, for whom provision was made, should have been costs out of the estate up to the date of the letter and thereafter should pay the costs of the defendants.
Similarly, in Woolnough v Public Trustee (No 2) [2005] TASSC 102, the court gave effect to a “Calderbank letter” in Family Provision proceedings, especially where the successful applicant was awarded the whole of a quite modest estate and who would, therefore, be the person on whom the burden of costs of the respondent beneficiaries would fall, they being the parties who did not accept the compromise offer.
Indeed in Walsh v Walsh (No 2) at [74], Hallen J suggested that
[t]here is no reason why, depending on the circumstances of the case, a relevant Calderbank offer should not be considered when determining how the burden of the costs of an application for a family provision order should be borne.
Accordingly, I would have been prepared to have regard to the “Calderbank offer” had it been unreasonable for it to have been rejected. I do not consider, having regard to the fact that it was an “inclusive of costs” offer and that the time was, notwithstanding that it was immediately prior to trial, too short, that it should be considered. It was not unreasonable, in the circumstances, for it to have been rejected.
I shall, therefore, in the absence of any reason why should not do so, make the order I originally proposed in my reasons for judgment in Hillman v Box (No 4) at [412].
The reference in the order to “costs on a common fund basis” perhaps requires some little elucidation. I note, for example, that it is not a term that appears in the indexes of most of the major texts on the subject of costs.
As I indicated in the decision, costs of a successful plaintiff in proceedings under the Family Provisions Act 969 (ACT) are ordinarily to be paid on a common fund basis and I referred to Re Adamow (deceased) (1989) 97 FLR 410 at 416.
The genesis of the notion of costs on a common fund basis seems to stem from the making of O 62 r 28 in the Rules of the Supreme Court 1965 (UK) which relevantly provided
28.(1) This rule applies to costs which by or under these rules or any order or direction of the Court are to be paid to a party to any proceedings either by another party to those proceedings or out of any fund (other than a fund which the party to whom the costs are to be paid holds as trustee or personal representative).
(2)Subject to the following provisions of this rule, costs to which this rule applies shall be taxed on the party and party basis, and on a taxation on that basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.
(3)The Court in awarding costs to which this rule applies may in any case in which it thinks fit to do so order or direct that the costs shall be taxed on the common fund basis.
(4)On a taxation on the common fund basis, being a more generous basis than that provided for by paragraph (2), there shall be allowed a reasonable amount in respect of all costs reasonably incurred, and paragraph (2) shall not apply; and accordingly in all cases where costs are to be taxed on the common fund basis the ordinary rules applicable on a taxation as between solicitor and client where the costs are to be paid out of a common fund in which the client and others are interested shall be applied, whether or not the costs are in fact to be so paid.
As can be seen, the provisions are similar to what might now be called solicitor and client costs. Indeed, it was said in AGC (Advances) Ltd v West (1984) 5 NSWLR 301 at 304 that this basis was a replacement for the solicitor and client basis in Halsburys Laws of England (4th ed, v 32, [1032], [1036]).
Thus, Megarry VC said in EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59 at 63-4, when discussing the various basis of taxation of costs:
(2)The common fund basis. Under rule 28(3) and (4), the court may direct a taxation on the common fund basis; and this is stated to be ‘a more generous basis’ than the party and party basis. In place of ‘necessary or proper,’ what is to be allowed is ‘a reasonable amount in respect of all costs reasonably incurred.’ On such a taxation ‘the ordinary rules applicable on a taxation as between solicitor and client where the costs are to be paid out of a common fund’ are to be applied, even if in fact the costs will not be paid out of any common fund. The common fund basis seems to have been intended to replace the old ‘solicitor and client’ basis (in one of the four meanings of the phrase ‘solicitor and client’: see Gibbs v Gibbs [1952] P 332, 347), though in doing so it not very happily uses the very phrase itself. In the end, the practical result seems to be that taxation on the common fund basis is little more than a party and party taxation conducted ‘on a more generous scale’: see Giles v Randall [1915] 1 KB 290, 295, per Buckley L J. It is sometimes said that on average a common fund taxation produces a figure some 5 to 10 per cent higher than a party and party taxation; and that may be so.
The basis was then expressly adopted from these rules in the Supreme Court Rules 1970 (NSW), where Pt 52 r 30 provided
30(1) The Court may order that costs be taxed on the common fund basis.
(2)The common fund basis is a more generous basis than the party and party basis.
(3)On a taxation on the common fund basis:
(a)there shall be allowed a reasonable amount in respect of all costs reasonably incurred; and accordingly:
(b)the ordinary rules applied on a taxation as between solicitor and client where the costs are to be paid out of a common fund in which the client and others are interested shall be applied, whether or not the costs are in fact to be so paid.
In AGC (Advances) Ltd v West, Hodgson J described this basis as follows (at 303)
The second possible basis is that described in the rules as the common fund basis which is defined in Pt 52, r 30, as being a more generous basis than the party and party basis and specifically as extending to ‘a reasonable amount in respect of all costs reasonably incurred’. The rule goes on to say that on the basis there should be applied ‘the ordinary rules applied on a taxation as between solicitor and client where the costs are to be paid out of a common fund in which the client and others are interested’. The essential difference between party and party costs and costs on a common fund basis appears to be that the notion of necessity which is involved in party and party costs is not required on a common fund basis but rather the applicable test is one of reasonableness both as to the incurring of the costs and as to the amount.
The reference to “a more generous scale” has a distinguished history; it is the phrase used by Denning J in Goodwin v Storrar [1947] KB 457 at 458 where his Honour distinguished between two meanings of “solicitor and client” costs, the first being what we would now probably call solicitor and own client costs and solicitor and client costs paying out of a common fund, saying
The other meaning of “taxation as between solicitor and client,” a technical meaning, which I will refer to as meaning B, is an inquiry as to the costs to be paid to the solicitor out of a common fund in which the client and others are interested and is substantially a taxation as between party and party, but on a more generous scale.
See also Giles v Randall [1915] 1 KB 290 at 295; Frankenburg v Famous Lasky Film Service Ltd [19431] 1 Ch 428 at 436.
The question of what is meant by “on a more generous basis”, however, had not been made entirely clear. Thus, in Gibbs v Gibbs [1952] P 332 at 363, Havers J described the task as follows:
(1)Under the order for taxation it is in my view the duty of the taxing master to adopt as his normal standard the direction in Ord 63, rule 27(29).
(2)That at the same time he should make more generous allowances than he would on a taxation as between party and party. In making more generous allowances the taxing master, in my judgment, is permitted not only to allow items which can be properly included in a party and party taxation at a higher figure but also to allow additional items which would not be allowed on a taxation as between party and party. The taxing master has, of course, a very wide discretion.
That approach was considered by Birkett LJ in Lyon v Lyon [1953] P 1 at 10-11 where his Lordship said
The way in which I interpret these words is that the distinction between a taxation on the party and party basis and on the solicitor and client basis seems to me to be that the taxing master, in his discretion, having the facts of the whole matter before him, can say: ‘There are certain items which I do not think it proper to include in the party and party taxation, but which I think it proper to include in a solicitor and client taxation; and, secondly, there are certain items on which I have allowed a certain amount in the party and party column on which I think in my discretion I could be more generous on the solicitor and client basis.’
It is, however, not a basis of either solicitor and own client costs nor of indemnity costs which are quite different.
In Australia, despite what Hodgson J said in AGC (Advances) Ltd v West, I note that Griffith CJ said in Re Marsland & Marsland [1902] St R Qd 219 at 233
for the same work there must be the same remuneration on whatever basis the taxation is had.
After making reference to this comment, J D Phillips J said in The National Safety Council (in liquidation) (No 2) [1992] 1 VR 485 at 501-2
Thus, it might be appropriate to allow on solicitor/client taxation the cost of preparing a witness who did not in the end have to be called, even if it were inappropriate to allow such cost on party/party taxation. So too, the circumstances might justify allowing the cost of a full transcript on solicitor/client taxation, although not on party/party taxation: eg Re Joint Stock Trust and Finance Corporation Ltd (1927) 137 LT 630. It may be that the same item was therefore allowed at a higher rate on the one taxation than the other, but if so, on the view of Griffith CJ, that could only be because the work involved was the greater: eg Re O’Sullivan, Currie and Co.’s Bill of Costs 1971 QWN 105, at 107.
With respect, it is easier to understand this distinction between solicitor/client taxation and party/party taxation than that suggested in England, if indeed anything different was meant by the reference to taxing ‘on a more generous scale’ or the making of ‘more generous allowances’. In view of the varying circumstances in which the order might be made for solicitor/client taxation, perhaps the clearest guide in general terms is found in Smith v Smith [1906] VicLawRp 12; 1906 VLR 78. In that case, the parties had settled on terms that the plaintiff trustees should be paid their costs ‘as between solicitor and client’ by the defendant. A’Beckett J. said, at 80: ‘It was contended for the plaintiffs that the agreement to pay their costs should be considered as an agreement to indemnify them against everything which their solicitor might properly ask them to pay, not under any special agreement, but by reason of his employment in the litigation and of the steps which he thought it desirable to take in their interests.’ His Honour remarked that taxation as between solicitor and client ‘appears to have a meaning stopping far short of indemnity’, and then went on to say: ‘The rule applicable to the present case is stated in Daniell’s Chancery Practice (7th ed.), p. 1009: - ‘In taxation as between solicitor and client the party will be allowed as many of the charges which he would have been compelled to pay his own solicitor for costs of action as fair justice to the other party will permit.’ This rule is referred to with approval in Ryan v Dobson 1872 7 IR (Eq) 92, p. 94. If it be correct, two conditions must occur in allowing a charge - one that it must be such as the client could be compelled to pay, not merely such as a liberal client might reasonably be willing to pay; and secondly that it must be such a charge as can be allowed with fair justice to the other party.’
In summary, costs on a common fund basis appear to be equivalent to what was called solicitor and client costs before further complexity was introduced into the matter. It requires the assessment of the costs by application of the usual rules and the scale of costs in the usual way, but with a more generous approach to the items allowed and, where appropriate, the quantum, but not so as to provide a full indemnity. The costs will, therefore, be those that are reasonably incurred and of a reasonable amount. In particular, unusual costs or amounts specially agreed will not be allowed on assessment.
It is on this basis that the order that I make is to be understood.
The defendants also referred to interlocutory costs orders made on 8 December 2010 and on 18 February 2011 in their favour. They submitted that the court should order that those costs orders should be paid.
So far as the first order is concerned, the defendant sought to appeal against that order. As an interlocutory order, leave to appeal was required (s 37E(4) of the Supreme Court Act 1933 (ACT)) but it appears not to have been granted. The application for leave does not act to stay the proceedings and so there is no reason why that order should not be immediately enforced. Ms Hillman may have grounds to have the application for leave to appeal struck out for want of prosecution.
The second order was stated not to be enforceable “until judgment or other order”. Judgment has now been given. That order is now enforceable.
In my view, both orders for costs are now immediately enforceable. They are not subsumed in any of the orders I have made in connection with the costs of the proceedings, save that the costs out of the Estate cannot be recovered in respect of the costs recovered under those orders from Ms Hillman as costs are an indemnity (Latoudis v Casey (1990) 170 CLR 534 at 567) and so cannot be recovered twice.
In my view, these costs are subject to a separate order and so are not subsumed under r 1721 of the Court Procedures Rules 2006 (ACT) nor overtaken by any orders I made on 28 May 2014 or today.
Accordingly, I do not consider it is necessary or appropriate to make any order in relation to the earlier interlocutory costs orders.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.
Associate:
Date: 26 June 2014
Counsel for the plaintiff: Mr D A Hassall
Solicitor for the plaintiff: Capital Lawyers
Counsel for the defendant: Dr C Ward and Mr G Theakston
Solicitor for the defendant: Tetlow Tigwell Watch Lawyers
Date of submissions: 4, 12 and 20 June 2014
Date of judgment: 26 June 2014
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