Jordan v Goldspring (No 2)

[2021] NSWSC 215

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Jordan v Goldspring (No 2) [2021] NSWSC 215

Hearing dates:

In Chambers – On the papers

Date of orders:

11 March 2021

Decision date:

11 March 2021

Jurisdiction:

Equity

Before:

Hallen J

Decision:

The Court:

1. Orders that the fifth Defendant, Goldspring’s Australia PM Pty Ltd (as the trustee of the Goldsprings Family Trust) and the seventh Defendant, Goldspring Equipment Hire Pty Ltd (as the trustee of the Fred Goldspring and Sons Family Trust) pay 80 per cent of the Plaintiffs’ costs, calculated on the indemnity basis, of the amended Summons filed on 9 September 2019.

2. Orders that the costs to be paid by the fifth and seventh Defendants shall be without recourse to the trust property of which each is a trustee.

3. Makes no order as to costs of each of the other Defendants to the intent that each should bear his, or her, or its, own costs, respectively, of the amended notice of motion without recourse to the trust fund of which each is a trustee or a director of the trustee.

Catchwords:

COSTS – Trusts and trustees – Where Plaintiffs did not know whether they were beneficiaries or discretionary objects, or whether they were within a class of beneficiaries or discretionary objects, or whether they had an interest in the property subject to trusts – Court found that Plaintiffs entitled to access to some documents relating to different trusts created during the lifetime of their parents – Basis of quantification of costs - Whether costs of application for disclosure of documents, calculated on the indemnity basis, should be paid – Question raised as to which Defendants should pay the costs – No dispute that at least fifth Defendant and seventh Defendant should pay costs, and that there should be no indemnity provided from the trust property respectively

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Trustee Act 1925 (NSW)

Cases Cited:

Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359

Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343

Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225; [1993] FCA 801

Commonwealth of Australia v Gretton [2008] NSWCA 117

Drip World Pty Ltd v Dardy Touring Corp (No 2) [2021] NSWSC 74

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202

Gray v Richards (No 2) (2014) 315 ALR 1; [2014] HCA 47

Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan) [2009] NSWCA 161

Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212

Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Preston v Nikolaidis (No 2) [2021] NSWSC 174

Re Beddoe; Downes v Cottam [1893] 1 Ch 547

Rosniak v Government Insurance Office (1997) 41 NSWLR 608

Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865

Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173

Wright v Apthorpe [2020] NSWCA 300

Texts Cited:

G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths)

Category:

Costs

Parties:

Katherine Mary Jordan (First Plaintiff)
Rhonda Fay Thomas (Second Plaintiff)
Lynette June Goldspring (Third Plaintiff)
Peter Michael Goldspring (First Defendant)
Mark Andrew Goldspring (Second Defendant)
Marianne Evelyn Goodchild (Third Defendant)
Goldspring Investments PM Pty Ltd (Fourth Defendant)
Goldspring’s Australia PM Pty Ltd (Fifth Defendant)
Goldspring’s Pipelines PM Pty Ltd (Sixth Defendant)
Goldspring’s Equipment Hire Pty Ltd (Seventh Defendant)
Goldspring’s Earthmoving & Heavy Haulage Pty Ltd (Eighth Defendant)

Representation:

Counsel:
J S Drummond (Plaintiffs)
D A Allen (Defendants)

Solicitors:
Nolan Commercial Law Practice (Plaintiffs)
Catalyst Legal Pty Ltd (Defendants)

File Number(s):

2019/00197779

Publication restriction:

Nil

Judgment

Introduction

1. HIS HONOUR: On 15 January 2021, this Court delivered reasons for judgment (the principal reasons) in proceedings concerning a dispute, essentially between the children of Frederick Martin Goldspring and Nita June Goldspring, both of whom are now deceased, and the entitlement of three of those children (the Plaintiffs) to see various documents relating to different trusts created during the lifetime of their parents. In these reasons, I shall refer to the parties as I did in the principal reasons.

2. The question the Court asked was whether there was a reasonable basis, beyond speculation, for concluding that the Plaintiffs had established, at least prima facie, that they were beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust.

3. The Court concluded that the fact of two of the Trusts, being the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust, containing the word "Family" in its name, where the Plaintiffs were members of the immediate family of Frederick and Nita, and, indeed, of the natural Defendants, was sufficient, although barely so, to establish a prima facie case that the Plaintiffs would be expected to be named as beneficiaries, or discretionary objects, or within a class of beneficiaries or discretionary objects, or as persons interested in the property subject to those two Trusts and that successful concealment of the particular Trust instruments could preclude enjoyment of any interests of those persons in the trust property.

4. The Court ordered that the documents, inspection of which should be permitted, were those referable only to the Trust instruments of each Trust in which the word “Family” appeared in the name of the Trust, being the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust.

5. It was also noted, in relation to costs, on a tentative basis, and whilst the Court had not heard submissions, that the determination of how costs of the application should be borne should await the inspection of the relevant documents and the final determination of the question whether the Plaintiffs, or any of them, were beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust. If they were, the Defendants, or some of them, should be ordered to pay the Plaintiffs' costs. If the Plaintiffs, or any of them, were not beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust, then the Plaintiffs should be ordered to pay the Defendants' costs.

6. Unsurprisingly, the parties did not reach agreement on either the form of orders for disclosure (although some orders, substantially, were, ultimately, agreed) or how the burden of costs should be borne. On 18 February 2021, after some discussion with counsel, the Court made orders, essentially without serious opposition by them, that the Defendants would provide to the Plaintiffs a copy of the documents referred to in Paragraph 1 of the notice of motion filed on 17 February 2021, excepting documents in sub-paragraph (f) and sub-paragraph (k).

7. The Court also made directions regarding the parties’ submissions on costs, with which directions the parties have complied.

8. Although counsel for the parties, considerately, indicated that they did not require reasons for the orders for costs that would be made, having considered the nature of the submissions, I have determined that I should provide some short reasons for the orders to be made.

9. These reasons deal with costs and should be read in the context of the principal reasons. In so doing, I remember what was written in Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212 at [12] (Maxwell P and Kellam JA):

"In the ordinary case, it is both appropriate and desirable that a costs question be decided at the conclusion of argument. Rarely will it be necessary for a judge to give detailed reasons for decision adverting to every matter debated in argument. This court will assume, as should the parties, that every matter addressed in argument on costs has been considered. This court will set its face against any proposition which would require judges disposing of questions of costs to give elaborate reasons."

The Submissions

10. The background to the matter is set out in the principal reasons and I do not propose here to repeat it. Nor is it necessary to set out all of the matters in the written submissions on costs, which, in the case of the Plaintiffs, were extremely detailed. I mention that the application for costs is not based upon any offer of compromise or Calderbank offer that was made on behalf of the Plaintiffs to any of the Defendants.

11. Most importantly, counsel for the Plaintiffs, in his written Submissions on costs, which had been served on the Defendants, and provided to the Court, stated:

“On 5 February 2021, the Defendant produced for inspection but not to copy the original Deeds each dated 1 June 2006, creating the FGSFT and the GFT and some of the documents in respect to the appointment of Appointors and Trustees of each Trust.

…

The provisions contained in each of the Trust Deeds dated 1 June 2006 creating the FGSFT and GFT were in identical terms, other than the identification of the Trustee and those persons appointed as Appointors as identified in clause 7.1 of each of those Trust Deeds.

…

Each of the Trust Deeds creating the FGSFT and the GFT clearly provided that each of the Plaintiffs were not only beneficiaries of each Trust but also default beneficiaries of each Trust. By clause 3.3 of each Trust Deed, the Trustees were only permitted to remove a beneficiary with the consent of the appointor. Such power did not permit the Trustee to remove those persons identified as default beneficiaries in clause 13.2(d)(i) of each Trust Deed.

Pursuant to clause 3.1(b) and (c), apart from the three Plaintiffs falling within the class of beneficiaries identified as the children of Fred and Nita, each of the grandchildren of Fred and Nita including the spouse of the Plaintiffs, and the spouse of each grandchild of Fred and Nita, being also the children of the Plaintiffs, were also persons identified in those categories as beneficiaries and default beneficiaries of each Trust.

…

Each Trustee of the FGSFT and the GFT has known since 2008, that the original Trust Deeds of each Trust included as beneficiaries, each of the Plaintiffs.

…

The Trustees of each of the FGSFT and GFT have known since 2008, of the removal of the Plaintiffs as beneficiaries of each Trust.

…

Even when the matter came on for hearing on 10 and 11 November 2012, not only did the Defendants refuse to produce the Trust Deeds to the Court, but maintained that they were not obliged to produce the Trust Deeds unless each Plaintiff could prove that each was a beneficiary of each Trust.

The cross examination of each of Rhonda Thomas and Katherine Jordan was to the effect that the conversations alleged to have taken place with Nita in 2006 did not take place but more importantly, that they knew that they were not beneficiaries of either Trust.

The submissions placed before this Court by Counsel for the Defendants, at paragraph 23(d), stated that the omission of the Plaintiffs as beneficiaries of either Trusts, was because ‘Nita and Fred did not wish for the Plaintiffs to have anything to do with the trusts because they had no interest in the trusts’. At [31], Counsel for the Trustees also submitted that ‘the Trustees do not want to defeat their own case by tendering the Trust Deeds thereby disclosing the contents to the plaintiffs’. Each of Rhonda Thomas and Katherine Jordan were also cross examined to the effect that the proceedings arose out of "bad blood" between the Plaintiffs, Peter, Mark and Marianne and their ‘perception’ based upon jealousy that each of Peter, Mark and Marianne should not be entitled to accumulate wealth by their hard endeavour (i.e. that Peter, Mark and Marianne had a personal interest as directors of each of the trustee companies to keep the Trust Deeds and Deeds of Variations secret).

Nowhere in the submissions of Counsel for the Defendant is there any reference to the Plaintiffs having been beneficiaries of either Trust prior to their removal by the present Trustees by of [sic] the Deeds of Variation.

The documents creating each Trust demonstrate the inaccuracy of the submissions as set out … above.

…

In short, these proceedings were unnecessary, protracted and ill-founded. The conduct of the Trustee of each Trust was for the personal benefit of Peter, Mark and Marianne as directors of the relevant Trustee companies to preserve to themselves and their children the benefits of each Trust.”

12. In his amended submissions, counsel for the Defendants did not dispute the fact that the Plaintiffs were persons, or within the class of persons, who are discretionary objects, or that they were persons interested, or who could be interested, in the property subject to a trust.

13. In his submissions, counsel for the Plaintiffs submitted that, not only did the fifth and seventh Defendants fail, but each of the fourth, sixth and eighth Defendants, also failed, to produce any documents either prior to, or during, the course of the proceedings. Each of the fourth, sixth and eighth Defendants had not only refused to produce the various Trust Deeds, and any variations thereto, as sought by the Plaintiffs, but had persisted with their defence, ultimately, without reading any evidence at the hearing of the amended notice of motion.

14. Counsel added that not only were the proceedings unnecessary and protracted, but also ill-founded, on the part of the fifth and seventh Defendants, but also by the defences maintained by the fourth, sixth and eighth Defendants. Each of the Defendants was said to be in breach of the duty, imposed upon a party to civil proceedings, by s 56 of the Civil Procedure Act 2005 (NSW), to further the overriding purpose of the Act and rules to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (Section 56(5) enables the Court to take into account any failure to comply with s 56(3) or s 56(4) in exercising a discretion with respect to costs.)

15. It was put that, had the fourth to eighth Defendants complied with their obligations under s 56, the Plaintiffs would then have known, with certainty, “whether they were beneficiaries of each of the claimed trusts or not”. As evidenced by the documents produced in respect to the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust, the Plaintiffs were clearly beneficiaries of each of the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust until their removal by the present trustees by undated Deeds, but presumably ones executed on or about 30 June 2008.

16. Counsel submitted that the fundamental facts were known by the fourth to eighth Defendants, and notwithstanding that knowledge, they had maintained "secrecy”, in order to prevent the Plaintiffs challenging either the appointment of the trustees to each of those trusts on 30 June 2008 or the undated Deeds, by which each of those trustees had sought to remove each of the Plaintiffs and their issue as beneficiaries of those trusts. He added that if the fourth, sixth and eighth Defendants, prior to the commencement of these proceedings, or at any time prior to Judgment on 15 January 2021, had produced the Trust Deeds, and any variations thereto, the issue would have been known, without the requirement to commence and/or continue the proceedings to judgment.

17. The orders for costs proposed by the Plaintiffs were stated in the alternative as follows:

“Order the Fourth to Eighth Defendants to pay the Plaintiffs’ costs of the proceedings on an indemnity basis.

In the alternative to Order 2 above an order that the Fourth to Seventh Defendants pay the Plaintiffs’ costs of the proceedings on an indemnity basis.

In the alternative to Orders 2, and 3 above the Fifth and Seventh Defendants pay the Plaintiffs’ costs of the proceedings on an indemnity basis.

In the alternative to Orders 2 to 4 above the Fourth to Eighth Defendants pay the Plaintiffs’ costs of the proceedings on a party/party basis.

In the alternative to Orders 2 to 5 above the Fourth to Seventh Defendants pay the Plaintiffs’ costs of the proceedings on a party/party basis

In the alternative to Orders 2 to 6 above the Fifth and Seventh Defendants pay the Plaintiffs’ costs of the proceedings on a party/party basis.

That there be no order as to costs of the First to Third Defendants with the intent that the First to Third Defendants bear their own costs.

That there be no order as to costs in relation to the Fourth, Sixth and Eighth Defendants with the intent that each of those parties bear their own costs.

That pursuant to paragraph 37 of the judgment dated 15 January 2021 the Plaintiffs to pay the Defendants costs in relation to the Plaintiffs’ further submissions filed on 7 December 2020.

Further order that the Fourth to Eighth Defendants not be entitled to indemnification from the trust funds of which each is a trustee.

a.   Any costs ordered to be paid in favour of the Plaintiffs; and/or

b.   The costs incurred in the proceedings respectively by each of the Fourth to Seventh Defendants.

Further order in the alternative to Order 11 above the Fifth and Seventh Defendants not be entitled to indemnification from trust funds of which they are a trustee:

a.   Any costs ordered to be paid in favour of the Plaintiffs; and/or

b.   The costs incurred in the proceedings by each of the Fifth and Seventh Defendants.”

18. Counsel for the Defendants provided amended submissions that were extremely short. He wrote, amongst other things:

“No argument is made against an Order that the fifth defendant, Goldspring’s Australia PM Pty Ltd (the trustee of the Goldspring’s Family Trust) and the seventh defendant Goldspring Equipment Hire Pty Ltd (the trustee of the Fred Goldspring and Sons Family Trust) pay the plaintiff’s cost of the proceedings against, respectively, those defendants.

…

An order is sought by the plaintiffs that the fifth and the seventh defendants pay the plaintiff’s costs ‘without recourse to the trust fund of which they are trustees.’ Without admission this order can be made. This concession is made on the basis that no costs orders have been sought against the first to third defendants.

However, the fifth and seventh defendants are entitled to a costs order in their favour in accordance [sic] his Honour’s reasons at [37] of the reasons for judgement.

…

If it is accepted that the first to third defendant siblings were not proper parties to the proceedings because they were and are not the trustees, they are entitled to their costs. They are certainly entitled to their costs of the proceedings up to the amendment.

The case as against the other corporate trustees failed. Costs follow the event.”

19. The orders for costs, as amended, proposed by the Defendants were:

1. The fifth and seventh defendants are to pay the plaintiff’s costs of the claims brought respectively against those defendants.

2. The fifth defendant is not to be indemnified from the property of the Goldspring’s Family Trust for the cost payable to the plaintiff in accordance with order 1.

3. The seventh defendant is not to be indemnified from the property of the Fred Goldspring and Sons Family Trust for the cost payable to the plaintiff in accordance with order 1.

4. The plaintiffs are to pay to the fifth and seventh defendants’ costs in relation to the plaintiff’s submissions sent to his Honour on 7 December 2020.

5. The plaintiffs are to pay the first, second, third, fourth, sixth and eighth defendants’ costs.”

   20. From these submissions, there are really only two questions for determination on the question of costs. The first is whether the Plaintiffs’ costs should be calculated on the indemnity, or on the ordinary, basis and the second is by whom, or which, of the Defendants, should the costs of the proceedings be paid.

The Law

21. Section 98(1) of the Civil Procedure Act provides:

Subject to rules of court and to this or any other Act-

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

22. The fundamental principle which guides the exercise of the discretion contained in s 98 is that costs should follow the event, and that the successful party is, prima facie, entitled to his, or her, costs against the expense of litigation: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67] (“Oshlack”). The discretion to be exercised has been described as absolute, unconfined, or unfettered, except that it is required to be exercised judicially, that is, not by reference to irrelevant, or extraneous, considerations, or capriciously, but on facts connected with, or leading up to, the litigation: Oshlack at [34] (Gaudron and Gummow JJ).

23. Any exercise of the discretion is to indemnify or compensate the successful party, not to punish the unsuccessful party. It is guided by well-established principles in order to promote consistency in decision-making: Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17 at [6] (Mason and Deane JJ, with whom Brennan J generally agreed)

24. A successful party may be deprived of a proportion of his, her, or its, costs, or even required to pay costs to the other party, if the successful party succeeded only upon a portion of the claim, or failed on issues that were not reasonably pursued, or where the result of the litigation might be described as mixed.

25. There is academic commentary, by Professor Dal Pont, that the “central and overriding principle is that of doing justice to the parties in each particular case, it being judicially remarked that there is ‘no better test than the test of what is fair and just between the parties’” (see G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths) at 6.15).

26. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that:

"… underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs."

27. The exercise of the general discretion for determining the appropriate order for costs in the face of competing considerations should reflect a broad evaluative judgment of what the justice of the case requires: Gray v Richards (No 2) (2014) 315 ALR 1; [2014] HCA 47 at [2].

28. The Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rule 42.2 provides:

“42.2 General rule as to assessment of costs

Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.”

29. In Wright v Apthorpe [2020] NSWCA 300 at [54], Simpson AJA (with whom Bell P and McCallum JA agreed) wrote:

“Rule 42.2 is directed, not to courts, and not to the manner in which courts are to exercise the 98(1) discretion, but, rather, to costs assessors. In this respect it does create a presumption, or a default position, but it is not one that affects the exercise of the judicial discretion.”

30. Section 98(1)(c) of the Civil Procedure Act distinguishes between costs awarded “on the ordinary basis” or “on an indemnity basis”. In Wright v Apthorpe, Bell P wrote at [3]:

“The word “ordinary” implies that the award of costs will usually be other than on an indemnity basis, and I do not consider that the wording of Uniform Civil Procedure Rules 2005 (NSW) r 42.2 is intended to reflect anything more than that fact. There is a well established body of case law identifying the circumstances where it will be open and may be appropriate for a Court to award costs on the indemnity basis but the statutory discretion is a broad one in respect of "by whom, to whom and to what extent costs are to be paid”: see s 98(1)(b). I agree with Simpson AJA that neither the Civil Procedure Act nor the Uniform Civil Procedure Rules establish a presumption or default rule as to the basis of the award of costs.”

31. At [58] – [61], Simpson AJA also noted:

“There are two aspects to an order of costs. They are distinct from one another. The first concerns on whom the burden of costs is to fall. In that respect there is a “general rule”, stated in Milne v Attorney General for the State of Tasmania (1956) 95 CLR 460 at 477; [1956] HCA 48:

“It is a general rule that a wholly successful defendant should receive his costs…”

The common law “general rule” is formalised in r 42.1, and is reflected in what is commonly known as “the usual order as to costs” (see Oshlack, at [67], per McHugh J) or the order that “costs follow the event” (as in r 42.1). The second aspect of an order as to costs concerns the basis on which the costs are to be assessed. The “general rule” says nothing about the basis on which the costs ordered are to be assessed. That function is performed by s 98(1), which confers a discretion in the widest possible terms.

Section 98(1) is cast in terms commonly used in statutes conferring a costs discretion. Paragraphs (a) and (b) effectively reproduce s 76(1)(a) and (b) (now repealed) of the Supreme Court Act 1970 (NSW). Paragraph (c) of s 76(1), while to the same effect as par (c) of s 98(1), provided at the date of introduction:

the Court may order costs to be taxed or otherwise ascertained on a party and party basis or on any other basis.

I see no difference in substance between par (c) of s 76(1) and par (c) of s 98(1). The different language reflects differences in the terminology used with respect to the assessment of costs at different times.

In a context which need not be elucidated, the High Court said that it would not be right to give s 76 a narrow interpretation, and rejected a submission that the section:

“does no more than change the rule that the costs follow the event…”.

The High Court said that the section:

“… confers a wide discretion on the Court to decide whether any and which party to proceedings shall pay costs to another party …”: Wentworth v Attorney-General for the State of New South Wales (1984) 154 CLR 518 at 528; [1984] HCA 70.

Nothing was said about the par (c) discretion as to the basis on which costs may be ordered to be assessed (or ascertained).”

32. An order for costs calculated on the indemnity basis can substantially increase the costs that a successful party can recover from the unsuccessful party in the proceedings. To make such an order requires an exercise of discretion. When such an order is made, it more fully, or adequately, compensates the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part: Oshlack at [44]. The words “relevant delinquency” were used by Gaudron and Gummow JJ, meaning delinquency bearing a relevant relation to the conduct of the case, rather than moral delinquency or some ethical shortcoming.

33. Yet, in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, the Court of Appeal noted, at 616, that the discretion to depart from the usual party and party basis for costs is not confined to the situation of what Gummow J described as the “ethically or morally delinquent party” in Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412; [1992] FCA 194 at [18].

34. An order that costs be calculated on the indemnity basis is not punitive. It is, instead, intended to operate as an indemnity against the expense of litigation that should not, in justice, have been visited upon the applicant party.

35. Some of the circumstances thought to justify an indemnity costs order were collected by Sheppard J in Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225 at 233-4; [1993] FCA 801 at [24]. His Honour recognised that the categories in which the discretion may be exercised are not closed. By way of example, an order for indemnity costs may be justified where a party, properly advised, should have known that success was unlikely bearing in mind the known facts: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202, at [21]; or where the Court’s time and the successful party’s money were wasted on “totally frivolous and thoroughly unjustified defences”: Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362, or with a wilful disregard of the known facts.

36. More recently, in Drip World Pty Ltd v Dardy Touring Corp (No 2) [2021] NSWSC 74, Stevenson J wrote at [19] quoting what he had written in Hudson Resources Limited v AceA Resources Pte Ltd [2021] NSWSC 41 at [7]-[9]:

“The Court may make an order for indemnity costs where a claim has been commenced or continued in circumstances where the plaintiff should have known that there was no chance of success or where a party maintains proceedings, having no reasonable prospects of success.

The discretion to award indemnity costs arises when ‘for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case’.

Indemnity costs will not be ordered simply because a party has been unsuccessful. More than mere lack of success is required for an order for indemnity costs to be made. Some ‘special or unusual feature of the particular case’ is necessary before an order is made for indemnity costs.”

37. However, as was noted in Preston v Nikolaidis (No 2) [2021] NSWSC 174, by Williams J, at [9], “[T]he mere fact that, with the benefit of hindsight after reviewing the reasons for judgment, the unsuccessful party should have known that it was likely to lose, is not generally sufficient to warrant an order for indemnity costs”.

38. Thus, in broad summary, and by illustration only, to justify an indemnity costs order, there must be conduct deserving of criticism and resulting in greater expense to the innocent party. However, the categories of circumstances which enliven the discretion to award indemnity costs are not closed.

39. In Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan) [2009] NSWCA 161, Giles JA (McColl JA agreeing) stated at [100] – [101]:

“Section 56 of the Civil Procedure Act now adds emphasis to occasion to depart from costs on the ordinary basis where failure properly to conduct the proceedings had caused costs to be incurred unnecessarily. But it does not override the need for a rational connection between the reason for departure and the extent of the departure.

There may no doubt be cases in which the effect of the misconduct is so pervasive that, in a proper exercise of the general discretion, the higher level of reimbursement can extend to the entire costs of the proceedings. That is perhaps the explanation for Adelaide Congregation Jehovah’s Witnesses Incorporated v Pegasus Leasing Ltd (Olsson J, SASC, 24 December 1996, unreported), where the defence was described as unrealistic and uncompromising as to all issues and leading to a very protracted trial. It is necessary to remember that the trial judge was exercising a discretion, and a discretion in relation to costs as to which this Court is particularly cautious in its intervention; a trial judge is in an advantageous position in arriving at the just disposition of costs. However, the trial judge did not express a pervasive effect of the Council’s conduct of which he was critical, or say that the Council acted unreasonably in defending at all.”

The Conclusion on Costs

40. The decision on costs should be made against the background provided by the general principles to which I have referred above. In this case, the Plaintiffs have submitted that the proceedings were defended in wilful disregard of known facts, the making of allegations which ought never to have been made, and the undue prolongation of the proceedings by groundless contentions. There is some merit in this submission.

41. The trustee of each of the relevant Trusts ought to have known of the terms of the relevant Trust Deed at the time of the commencement of the proceedings. In my view, they adopted a position that was unreasonable in the circumstances, as ascertained, following the disclosure of the two relevant Trust Deeds to the Plaintiffs. Permitting the proceedings to continue was delinquent to the duty of those trustee Defendants, as parties to the litigation, required by s 56 of the Civil Procedure Act.

42. The terms of the relevant Trust Deeds, as identified in counsel’s submissions, seem to make it plain that the Plaintiffs were beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust of each of the two Trusts.

43. I do not accept the submission, in the circumstances of the case, that the Defendants were entitled to put the Plaintiffs to proof of their entitlement to relief, particularly when none of the natural Defendants entered the witness box. Doing so resulted in unnecessary expense to them and a significant amount of time having to be spent by the Court in determining the issue.

44. In the circumstances, I am persuaded that the circumstances of their defence to the amended Summons warrants departure from costs being calculated on the ordinary basis.

45. However, I also remember that:

1. in relation to the production of the Trust Deeds and Deeds of Variation, the Plaintiffs did not seek, at any time, relief under UCPR Pt 5, which Part includes seeking an order for preliminary discovery against any prospective defendants, in order to determine whether the applicants may be entitled to make a claim for relief, against the prospective defendants, or any of them, and which provides that the prospective defendants must give discovery to the applicants of all documents that are, or have been, in the person's possession, and that relate to the question of whether or not the applicants are entitled to make a claim for relief: UCPR, r 5.3: see [18] – [19] of the principal reasons for judgment.

2. the Plaintiffs’ legal representative, over three weeks after the final day of the hearing, sent an email attaching a document entitled “Additional Submissions on Behalf of the Plaintiffs”. This was done without the leave of the Court and without the consent of the Defendants: see [28] – [37] of the principal reasons.

3. There would have been costs incurred by the Defendants in considering the supplementary submissions sent to the Court without leave.

4. There were a number of reasons to doubt the evidence given by the two Plaintiffs: see [99] of the principal reasons. (The typographical error in this paragraph of the principal reasons has now been corrected).

5. The Plaintiffs were not successful in all of their claims. Indeed, they sought far more than the relief that they ultimately obtained. In that way, the Defendants did obtain some measure of success. In Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865, Black CJ and French J said, relevantly, at [15]:

"And a trial judge may award only a proportion of the successful party's costs if the conduct of that party at trial was such as to unreasonably prolong the proceedings …" (citations omitted)

6. The Court made a number of attempts to encourage the parties to avoid the large amount of time and costs that have been incurred: see, for example, [11] and [17] of the principal reasons.

7. Some of the Defendants did achieve success in defending part of the claims made. I also bear in mind that none of them were separately represented.

46. Remembering that the Civil Procedure Act and the UCPR require the court to make such order as it thinks just in the particular circumstances of the case: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343 at [10] (the Court), and that “… It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do... Such an assessment will, undoubtedly be ‘rough and ready’… and that is entirely permissible,” (Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173 at [9]), I am of the view that the Plaintiffs should be paid 80 per cent of their costs, calculated on the indemnity basis, of the amended Summons filed on 9 September 2019.

47. In reaching this conclusion, and in making an order for indemnity costs, I do not seek to punish the Defendants for persisting with a case that failed in part. I am not making the type of order as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, I consider that the Plaintiffs should be indemnified for some of the costs incurred because it was unreasonable for the Defendants to have subjected them to the expenditure of those costs, as well as the delay in having the amended Summons determined, at least so far as the orders made.

48. I then turn to the persons, or entities, that should bear those costs. I am of the view that the trustee of the Goldsprings Family Trust and of the Fred Goldspring & Sons Family Trust should bear the burden of the costs order, without recourse to the Trust’s property in each case.

49. At [56] of the principal reasons, I noted that “It is likely that each of Peter, Mark and Marianne, is a director of, and each holds one share of three issued shares, in each of the companies”. However, I did not make any other finding in this regard. In those circumstances, I do not think that they should be ordered to pay the Plaintiffs’ costs.

50. As there was no dispute that each of the fifth and seventh Defendants should not obtain indemnity from the relevant trust, it is unnecessary to consider a trustee’s right of indemnity under statute (the Trustee Act1925 (NSW), s 59(4) and s 93(3)), the UCPR (rule 42.25) or under the general law.

51. For completeness, however, I refer to what was written by Bowen LJ in Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 562:

“The principle of law to be applied appears unmistakably clear. A trustee can only be indemnified out of the pockets of his cestuis que trust against costs, charges, and expenses properly incurred for the benefit of the trust — a proposition in which the word ‘properly’ means reasonably as well as honestly incurred. While I agree that trustees ought not to be visited with personal loss on account of mere errors in judgment which fall short of negligence or unreasonableness, it is on the other hand essential to recollect that mere bona fides is not the test, and that it is no answer in the mouth of a trustee who has embarked in idle litigation to say that he honestly believed what his solicitor told him, if his solicitor has been wrong-headed and perverse. Costs, charges, and expenses which in fact have been unreasonably incurred, do not assume in the eye of the law the character of reasonableness simply because the solicitor is the person who was in fault. No more disastrous or delusive doctrine could be invented in a Court of Equity than the dangerous idea that a trustee himself might recover over from his own cestuis que trust costs which his own solicitor has unreasonably and perversely incurred merely because he had acted as his solicitor told him.

If there be one consideration again more than another which ought to be present to the mind of a trustee, especially the trustee of a small and easily dissipated fund, it is that all litigation should be avoided, unless there is such a chance of success as to render it desirable in the interests of the estate that the necessary risk should be incurred.”

52. There should be no order as to costs of any of the other Defendants to the intent that each should bear his, or her, or its, own costs, respectively, of the amended Summons.

52. The Court:

1. Orders that the fifth Defendant, Goldspring’s Australia PM Pty Ltd (as the trustee of the Goldsprings Family Trust) and the seventh Defendant, Goldspring Equipment Hire Pty Ltd (as the trustee of the Fred Goldspring and Sons Family Trust) pay 80 per cent of the Plaintiffs’ costs, calculated on the indemnity basis, of the amended Summons filed on 9 September 2019.

2. Orders that the costs to be paid by the fifth and seventh Defendants shall be without recourse to the trust property of which each is a trustee.

3. Makes no order as to costs of each of the other Defendants to the intent that each should bear his, or her, or its, own costs, respectively, of the amended notice of motion without recourse to the trust fund of which each is a trustee or a director of the trustee.

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Amendments

12 March 2021 - Formatting of Coversheet.

Decision last updated: 12 March 2021