Kahlon (As Executor of the Estate of Joginder Singh Kahlon) v Kaur - [2018] SADC 108

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
KAHLON (AS EXECUTOR OF THE ESTATE OF JOGINDER SINGH KAHLON) v KAUR
[2018] SADC 108
Reasons for Decision of His Honour Judge O'Sullivan
29 October 2018
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT
In 2018, the Defendant applied to the Registrar General of the Lands Titles Office for removal of a Caveat which had been registered on her property by her late husband. The parties had divorced in 2013 and Consent Orders in relation to property had been made in 2015.
The Plaintiff, as executor of the estate of the Defendant's late husband, applied for an order that the time for removal of the Caveat be extended.
On the first return date the time for removal of the Caveat was extended until further order.
In August 2018 the defendant's solicitors had written an open letter to the Plaintiff's solicitors offering to resolve the matter, including by removal of the Caveat.
In September 2015, the Defendant applied for removal of the Caveat shortly before the hearing, the Plaintiff indicated it would consent to an order removing the Caveat.
Application for costs following removal of caveat by consent - application for payment of costs on an indemnity basis and by trustee personally.
HELD: Defendant entitled to costs on a party-party basis. Trustee not obliged to pay costs personally.
District Court Rules 2006 rr 263, 264(5)(b); Administration and Probate Act 1919 s 69; Trustee Act 1936 ss 90-92, referred to.
Kenneally v Pouras & Ors [2007] SASC 303; Colgate-Palmolive Co Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225; Blair v Curran (1939) 62 CLR 464; Essential Beauty Franchising (WA) Pty Ltd & Ors v Pilton Holdings Pty Ltd & Ors (No 2) (2014) 120 SASR 433; Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand & Anor (2008) 237 CLR 66; Re: Beddoe [1893] 1 Ch 547, considered.

KAHLON (AS EXECUTOR OF THE ESTATE OF JOGINDER SINGH KAHLON) v KAUR
[2018] SADC 108
Introduction

By application dated 21 June 2018 the plaintiff, as executor of the estate of Joginder Singh Kahlon, the defendant’s late husband, sought an order that the time for removal of Caveat numbered X12011748 lodged in the Lands Titles Office in respect of the land comprised in Certificate of Title register book Volume 5846 Folio 219 be extended until further order. That land is the property at 76 Twentieth Street, Renmark, which is owned by the defendant.
By interlocutory application dated 7 September 2018 (‘interlocutory application’), the defendant sought orders:
1. That Caveat number X12011748 registered at the Lands Titles Office over the whole of the land comprised in Certificate of Title Register Book Volume 5846 Folio 219 be removed;
2. That the Plaintiff, in his personal capacity and not in his capacity as executor, pay the Defendant’s costs of and incidental to these proceedings on an indemnity basis.
…
When the matter came before the Court on 17 September 2018, the plaintiff consented to the removal of the Caveat and orders were made accordingly. There remained an issue between the parties as to the costs of and incidental to the application to extend time for the removal of the Caveat and the defendant’s interlocutory application.
In support of her application for costs, the defendant relies on the affidavit of Gregory Neil Welden sworn 15 October 2018 (‘first Welden affidavit’), the second affidavit of Gregory Neil Welden sworn 17 October 2018 (‘second Welden affidavit’) and the defendant’s affidavit sworn 6 September 2018 (‘Kaur affidavit’).
The plaintiff relies on the affidavit of Mohinder Singh Kahlon sworn 21 June 2018 (‘plaintiff’s first affidavit’) and the second affidavit of Mohinder Singh Kahlon sworn 16 October 2018 (‘plaintiff’s second affidavit’).
Background
The defendant and her husband had divorced in January 2013 and on 26 September 2013, the defendant’s husband lodged a Caveat over the defendant’s property at 76 Twentieth Street, Renmark (‘Caveat’).
On 13 February 2015 the parties entered into Consent Orders in the Federal Circuit Court by way of settlement of property and alteration of interest in property (‘Consent Orders’).
Pursuant to those Consent Orders[1] the defendant was, amongst other things, obliged:
…
1.4    …[to] pay one half of all monies due and payable to the Department of Environment Water and Natural Resources in respect of invoice number 100090465…upon presentation of a demand for payment following the date of this order…
1.6    …from time to time do pay to the husband one half of all legal costs on an indemnity basis incurred by and invoiced to the husband in defending, answering or seeking to modify or the forgiveness, remittance excusing of the amount sought in…invoice number 100090465…
1.10 That within fourteen (14) days of these orders the wife do pay or cause to be paid the sum of $1,991.95 to SA Water in respect of account number 75 16412 15 5…
1.14 That the wife’s interest in the Twentieth Street property be charged with her obligations created by paragraphs 1.4, 1.6 and 1.12 of these orders…
[1]    Exhibit MSK-2 to plaintiff's first affidavit.
The defendant’s interest in the property at 76 Twentieth Street, Renmark, was not charged with the defendant’s obligations created by paragraph 1.10.
Invoice 100090465 was for a total sum of $52,019.40.[2] The defendant’s share was $26,009.70 excluding legal costs.
[2] Plaintiff’s first affidavit [6], exhibit ‘MSK-3’.
The defendant’s husband died on 24 September 2015.
In May 2016 the defendant negotiated a payment plan with the Department of Environment, Water and Natural Resources (‘the Department’) for her to pay one half of invoice 100090465. As at 30 June 2018 a total of $14,891 had been received by the Department pursuant to the payment plan.[3]
[3] Kaur affidavit [14], exhibit ‘HK-2’.
On 21 June 2018 the plaintiff made enquiries of the Department and was advised that the invoice addressed to the husband in the sum of $52,019.40 remained unpaid. The plaintiff further asserted that the defendant had failed to comply with paragraph 1.10 of the Consent Orders requiring the defendant to pay the sum of $1,991.95 to SA Water in respect of the account number 7516412155.
There is no evidence, nor any suggestion, that the plaintiff made any enquiries of the defendant as to whether or not the defendant had complied with paragraphs 1.4, 1.6 and 1.10, nor made any demand for the defendant to comply with paragraphs 1.4, 1.6 and 1.10 of the Consent Orders.
The Application
On 1 June 2018 the defendant lodged an application with the Registrar General to remove the Caveat.
As noted above, on 21 June 2018 the plaintiff commenced these proceedings.
This matter came before the Court on 5 July 2018, at which time the Court was concerned as to whether or not there was a caveatable interest and whether it had jurisdiction given that the Consent Orders were made in the Federal Circuit Court. Nonetheless, with the consent of the defendant the time for removal of the Caveat was extended until further order, with liberty to apply on short notice to vary or discharge the order.[4]
[4] Transcript 5 July 2018 T3.26-28 and T4.36-5.9.
The defendant filed her interlocutory application on 7 September 2018. On 21 August 2018 (‘August letter’) the defendant’s solicitors wrote to the plaintiff’s solicitors[5] in which the defendant’s solicitors:
1       Enclosed a copy of the historical payments made by the defendant in relation to invoice number 100090465 (and which related to paragraphs 1.4 and 1.6 of the Consent Orders);
2       Observed that the plaintiff’s right as executor to specifically enforce the condition in paragraph 1.14 of the Consent Orders created an equity in the plaintiff’s favour over the defendant’s interest in the Twentieth Street property;
3       Asserted that the Caveat cannot be maintained since the Consent Orders have overtaken the Caveat.
[5]    Second Welden affidavit, exhibit ‘GNW-4’.
The August letter was stated to be open and also contained an offer to resolve the matter on the basis that:
1       There be an order by consent that the Caveat be removed;
2       There be no order as to costs in the Action;
3       The Action otherwise be dismissed;
4       The plaintiff, in his capacity as executor of the deceased estate, provide a signed, written undertaking to the defendant’s solicitors that he will not seek payment of any costs associated with the Action, including Court filing fee, legal fees or disbursements (including counsel fees) from the deceased’s estate.
Some two hours prior to the matter being called on, on 17 September 2018, the plaintiff’s solicitors wrote to the defendant’s solicitors, indicating a willingness to consent to an order in terms of paragraph 1 of the defendant’s interlocutory application on the basis there be no order as to costs, or alternatively, that each party pay their own costs of and incidental to the proceedings.[6]
[6] First Welden affidavit [a], exhibit ‘GNW-8’.
The defendant did not accept the plaintiff’s offer, however, the parties agreed that an order could be made by consent that the Caveat be removed. As noted above, the parties remained in disagreement on the question of costs.
The Cost Application
The defendant seeks costs on an indemnity basis or alternatively on a party‑party basis and further seeks that the plaintiff pay the costs personally and not recoup the costs from the estate of the deceased.
Is the Defendant entitled to Costs?
The question of costs is in the discretion of the Court[7] and in general terms costs follow the event. The plaintiff submits that there was no ‘event’ in that there was a Consent Order made that the Caveat be removed and relies on the decision in Kenneally v Pouras & Ors.[8]
[7] District Court Rules 2006 r 263.
[8] [2007] SASC 303.
In that matter an infant plaintiff’s claim for damages resolved part way through a trial. The plaintiff had filed an offer to consent to judgment, and following the resolution of the matter, the plaintiff submitted that it had, by the compromise, succeeded on liability. In considering that submission, White J held that it could not be said that the plaintiff had succeeded on the issue of liability since the plaintiff’s claim had not proceeded to judgment. In particular, the approval of the settlement by a Justice of the Supreme Court did not involve a judicial pronouncement on the defendant’s liability. Further, the terms of the defendant’s offer, which was accepted by the plaintiff, did not involve any concession that the plaintiff had succeeded in establishing liability such that his Honour could not infer liability from the fact that the defendant had voluntarily agreed to pay in order to compromise the plaintiff’s claim.[9]
[9] Ibid [29], [30].
In this matter, the issue is straight forward and does not involve any question of liability per se. The question is whether the time for removal of the Caveat should be extended. The defendant’s interlocutory application seeking the removal of the Caveat has succeeded, albeit as a result of Consent Orders. However, that does not mean there was no ‘event’. In my view, the ‘event’ was the removal of the Caveat consequent upon interlocutory applications. Were it not for that application, the Caveat would remain in place until further order.
As I have noted above, the Consent Orders required the defendant to make certain payments. It seems clear that those payments were not made, as a result of which the defendant’s interest in her property at 76 Twentieth Street, Renmark remained charged with her obligations created by paragraphs 1.4 and 1.6 of the Consent Orders. The non-payment of $1,991.95 in accordance with paragraph 1.10 of the Consent Orders does not result in a charge being placed on the defendant’s interest in her property.
The defendant asserts that she paid the sum of $1,991.95 in cash to her late husband for the account the subject of paragraph 1.10 of the Consent Orders.[10] That is disputed by the plaintiff, however the defendant paid that amount direct to SA Water on 14 July 2018.[11]
[10] Kaur affidavit [11].
[11] Kaur affidavit [12], exhibit ‘HK-1’.
Following the plaintiff’s enquiry on 21 June 2018 of the Department and SA Water, as to whether invoice number 100090465 had been paid and whether the sum of $1,991.95 in respect of account number 7516412155 had been paid, the application to extend the time for removal of the Caveat was filed. No enquiry had been made either to either the Department, SA Water or the defendant prior to that date. The application was made four days before the date on which the Caveat was to be removed.[12]
[12] Plaintiff’s first affidavit [12], exhibit ‘MSK-5’.
The Consent Orders provide security for the estate insofar as the invoice required to be paid pursuant to paragraph 1.4, and the contribution to legal costs required by paragraph 1.6, of the Consent Orders are concerned (which is in the total sum of $27,594.40) by reason of the charge which exists over the defendant’s interest on the property at 76 Twentieth Street, Renmark. The plaintiff submits that the charge does not protect the plaintiff’s interests in the sense that it does not prevent the house from being sold or otherwise encumbered so as to frustrate the plaintiff’s security.
Whether that is correct or not, there is no evidence, nor any suggestion, that the defendant was intending to sell or encumber the property. Indeed a simple enquiry of the defendant prior to issuing the application to extend the time for the removal of the Caveat would have revealed that the defendant had entered into a payment plan with the Department.
The defendant has succeeded in having the Caveat removed and, in my view, is entitled to her costs.
The Relevant Scale
The defendant seeks costs on an indemnity basis on two grounds.
Costs on an indemnity basis is defined by r 264(5)(b) of the District Court Rules 2006 as costs on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation except to the extent that the party liable for the costs shows them to have been unreasonably incurred.
The basis upon which the defendant seeks indemnity costs are that:
1. The plaintiff commenced and continued the Action against known law; and
2. In the alternative, the plaintiff imprudently refused an offer of settlement.
The Plaintiff commenced and continued the Action against known law
The defendant submits that because the basis for the Caveat in 2013 was overtaken by the Consent Orders, in effect the Caveat could not remain.
The principles underlying an award of costs on an indemnity basis were reviewed by Sheppard J in Colgate-Palmolive Co Pty Ltd v Cussons Pty Ltd.[13] The principles are well-known but in summary, the circumstances in which the court might depart from the usual course that costs are payable on a party-party basis must be such as to warrant the court so acting. In particular, there should be some special or unusual feature in the case justifying the court in departing from the ordinary practice. However, the categories in which the discretion might be exercised are not closed. They include where there are allegations of fraud made knowing them to be false, evidence of particular misconduct that causes loss of time to the court and to other parties, the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, and an imprudent refusal of an offer to compromise.[14]
[13] (1993) 46 FCR 225; 118 ALR 248.
[14] Ibid at pp 233-234.
The Caveat was based on a claim by the defendant’s late husband ‘…to be beneficially entitled to an estate or interest in fee simple in some (at present) indefinable share or shares, having contributed to the acquisition, maintenance and improvement of the land described…’.
In the Consent Orders, paragraph 1.11 provided that subject to the orders:
…the wife do retain for her sole use and benefit free from any claim or entitlement of the husband her interest in the properties known as and situate at…76 Twentieth Street, Renmark…
There is an issue between the parties as to whether the basis for the Caveat remained valid or whether it had been overtaken by the Consent Orders.
On one view, it might be said that the interest claimed by the plaintiff in the 2013 Caveat merged upon the making of the Consent Orders, although there was no passing into judgment.[15] Alternatively, it may be argued that there was no merger and/or the interest upon which the Caveat was based continued in force until such time as the defendant complied with her obligations under the Consent Orders. Under these circumstances, it cannot be said that the Caveat was maintained and the application for an extension of the time for removal of Caveat made in circumstances which were contrary to known law.
[15] See Blair v Curran (1939) 62 CLR 464, 532 per Dixon J.
The Plaintiff imprudently refused an Offer of Settlement
As I have noted above, in the August letter the defendant’s solicitor wrote to the plaintiff’s solicitor proposing that the following should occur:
1. That an order be made by consent in this Action that caveat no. 12011748 be removed from Certificate of Title volume 5846 folio 219;
2. That there be no order as to costs in the Action;
3. That the Action otherwise be dismissed;
4. That your client, in his capacity as executor to the deceased estate, provide a signed, written undertaking to this firm that he will not seek payment of any costs associated with the Action, including Court filing fee, legal fees or disbursements (including counsel fees) from the deceased’s estate.
The offer is an informal offer and I note that it is not expressed to be a Calderbank letter, although nothing turns on that. It is stated to be an open letter with a reservation of the right to bring its contents to the attention of the Court on the question of costs.[16]
[16] Second Welden affidavit, exhibit GNW-4.
There is clear authority that informal offers may be taken into account in the exercise of the discretion on the question of costs. In Essential Beauty Franchising (WA) Pty Ltd & Ors v Pilton Holdings Pty Ltd & Ors (No 2),[17] Blue J considered the authorities[18] in relation to the use of informal offers in assessing whether to make a costs order other than the usual order. By the ‘usual order’, his Honour was referring to an order for costs on a party-party basis.
[17] (2014) 120 SASR 433.
[18] Ibid at [49]-[56].
At [56] his Honour observed the following:
In assessing whether to make a costs order other than the usual order by reason of the rejection or non-acceptance of an informal offer, the following principles are established by the authorities cited above and other authorities.
1.      The mere fact that it was open to the offeror to file a formal offer under the Rules is not in itself a reason to discount reliance upon rejection or non-acceptance of an informal offer as a reason to make an order departing from the general rule that costs on a party and party basis follow the event (a special costs order).
2.      While non-acceptance or rejection of an informal offer can be a relevant factor to take into account, it is not the only relevant factor and all relevant factors should be considered in deciding whether to make a special costs order.
3.      In assessing whether the offeree had a reasonable time to assess whether to accept the offer, it is necessary to take into account all the circumstances, including the stage the action has reached, the information available to the offeree, previous negotiations between the parties, legal representation of the offeree, the nature of the issues in the action and whether there was a response by the offeree to the offer.
4.      In deciding whether to make a special costs order, it is relevant to compare the form and substance of the informal offer with the form and substance required of a formal offer under the Rules.
5.      The mere fact that an offer is expressed to remain open for less than 14 days, or for less than the period required of a formal offer under the Rules, is not in itself fatal to an application for a special costs order founded on non-acceptance of the informal offer.

The August letter requested a response by the close of business on 24 August 2018, some three days after the date of the letter, however it does not say that the offer remains open for acceptance until that date. Nonetheless, three days is a very short time and was not a reasonable period for a response.
In the plaintiff’s second affidavit, the plaintiff deposes that he was unable to see his solicitor until 14 September 2018 due to his absence from the Riverland, by which time the defendant had already issued the interlocutory application.[19] Whereas it provides a potential reason for not responding within time, I do not consider that the absence of a party is reason, by itself, to excuse the non‑response to an offer for nearly four weeks. It was always open to the plaintiff’s solicitor to write to the defendant’s solicitor promptly after receipt of the August letter advising that the solicitor was unable to obtain the client’s instructions. That does not seem to have occurred.
[19] Plaintiff's second affidavit [30].
In any event, paragraph 4 of the offer set out in the August letter that the plaintiff undertake not to seek payment of costs from the husband’s estate was not a reasonable condition in view of the stated time for a response, or at all, given the 21 day period for removal of the Caveat. I deal with this point below.
In all the circumstances, the plaintiff did not act imprudently in failing to accept the offer.
I take the informal offer into account, in the exercise of my discretion, but I am not prepared to order indemnity costs.
The Defendant’s Application that the Plaintiff pay the Costs personally
In support of the defendant’s application that the plaintiff pay the costs personally, the defendant relies upon the decision of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand & Anor[20] and, in particular, the judgment of Gummow ACJ, Kirby, Hayne and Heydon JJ at [47] where their Honours refer to a passage in the reasons for judgment of Lindley LJ in Re: Beddoe:[21]
[A] trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards the costs, even if he acts on counsel’s opinion; and when the trustee seeks to obtain such costs out of his trust estate, he ought not to be allowed to charge them against his cestui que trust unless under very exceptional circumstances. If, indeed, the Judge comes to the conclusion that he would have authorised the action or defence had he been applied to, he might, in the exercise of his discretion, allow the costs incurred by the trustee out of the estate; but I cannot imagine any other circumstances under which the costs of an unauthorised and unsuccessful action brought or defended by a trustee could be properly thrown on the estate..
[20] (2008) 237 CLR 66.
[21] [1893] 1 Ch 547, 557
Given the short period of 21 days notice of intention to remove the Caveat, it was unreasonable to expect the plaintiff to have sought advice from the Supreme Court pursuant to the provisions of s 69 of the Administration and Probate Act 1919 or, in the alternative, ss 90-92 inclusive of the Trustee Act 1936 as to whether the plaintiff as trustee should defend the notice by issuing an application to extend time for removal of the Caveat.
This Court does not have jurisdiction to provide advice to trustees. However, given my views as to whether the offer was rejected imprudently and/or the plaintiff’s application was made contrary to known law, I consider that had an application for advice been brought prior to the issuing of the application, there is a likelihood that the application would have received the sanction of the Court in order to protect the Estate’s position until such time as the issue had been resolved.
In all the circumstances, it is not appropriate to impose personal liability upon the plaintiff. Of course, had the matter proceeded further, then the situation may well have been different, however I express no concluded view on that point
Under those circumstances I decline to order that the plaintiff pay the costs of the defendant personally.
Orders
The orders will be:
1. The plaintiff to pay the defendant’s costs of and incidental to Action no. 690 of 2018 on a party-party basis.
2. Certified fit for Counsel.