KJ v SJ (No 2)

[2020] NSWSC 1100

Supreme Court

New South Wales

Medium Neutral Citation:

KJ v SJ (No 2) [2020] NSWSC 1100

Hearing dates:

On the papers

Date of orders:

19 August 2020

Decision date:

19 August 2020

Jurisdiction:

Equity - Protective List

Before:

Williams J

Decision:

The costs of all parties to the application are to be paid out of SJ’s estate on an indemnity basis.

Catchwords:

COSTS – departure from the usual rule – protective jurisdiction – where applicant unsuccessful in seeking a declaration and orders under s 86 of the NSW Trustee and Guardian Act 2009 (NSW) – where applicant reasonably commenced and maintained the application – where conduct of application as a whole not adversarial in nature – where applicant’s financial manager adopted a neutral position and provided valuable assistance to the Court – appropriate that all parties’ costs be paid out of the applicant’s estate on an indemnity basis

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

NSW Trustee and Guardian Act 2009 (NSW), ss 65 and 86

Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.5 and 57.8

Cases Cited:

CAC v Secretary, Department of Family & Community Services [2014] NSWSC 1855

CAC v Secretary, Department of Family & Community Services (No 2) [2015] NSWSC 344

CCR v PS (No 2) (1986) 6 NSWLR 622

Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25

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

Re D [2012] NSWSC 1006

Re K's Statutory Will (2017) 96 NSWLR 69; [2017] NSWSC 1711

Re TLH, a Protected Person [2017] NSWSC 737

Category:

Costs

Parties:

KJ (Plaintiff/First Respondent)
SJ (Defendant/Applicant)
The Trust Company (Australia) Ltd (Second Respondent)
NSW Trustee and Guardian (Third Respondent)
Perpetual Trustee Company Ltd (Fourth Respondent)

Representation:

Counsel:
Mr C Hickey (Plaintiff/First Respondent)
Mr J A Dalzell AM (Defendant/Applicant)
Mr M K Meek SC (Second and Fourth Respondent)
Ms J Brouwer, solicitor (Third Respondent)

Solicitors:
Boyd House & Partners (Plaintiff/First Respondent)
Austen Brown Boog Solicitors (Defendant/Applicant)
Carrol O’Dea Lawyers (Second and Fourth Respondent)
NSW Trustee and Guardian (Third Respondent)

File Number(s):

2013/217773

Publication restriction:

On 6 July 2020, the Court made an order pursuant to s 7 of the Court Suppression and Non–publication Orders Act 2010 (NSW) that the name, previous or current residential address and place of work of SJ and any member of her family (including her husband, children, parents and siblings) not be published without leave of the Court by reason of s 8(1)(a) and/or s 8(1)(e) of that Act.

Judgment

1. On 23 July 2020, I published my reasons for dismissing an application brought by SJ pursuant to s 86 of the NSW Trustee and Guardian Act 2009 (NSW) (the Act) for the revocation of a declaration made on 26 August 2013 that she is incapable of managing her affairs and for the revocation of orders that her estate be subject to management under the Act.

2. These reasons deal with the costs of the application and assume familiarity with the earlier judgment. I will adopt the same abbreviations and terminology used in the earlier judgment.

3. Order 3 of the orders made on 23 July 2020 directed the parties to provide written submissions in support of the costs orders for which each party contended by 31 July 2020, with any submissions in reply to be provided by 7 August 2020. The Court has since received written submissions from the applicant SJ, KJ (the first respondent) and Perpetual and Trust Company (the second and fourth respondents). NSW Trustee (the third respondent) did not provide written submissions. Only Perpetual and Trust Company provided submissions in reply by 7 August 2020.

4. The relevant principles to be applied were not in dispute. The starting point is that costs are in the discretion of the Court, which has full power to decide who will pay costs to whom and to what extent, whether on the ordinary basis or on an indemnity basis (Civil Procedure Act 2005 (NSW), s 98). This discretion is to be exercised judicially and in accordance with proper principles or legislative provisions which operate as a fetter on the discretion (Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24]; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65]). One fetter on the exercise of this discretion is the operation of r 42.1 of Uniform Civil Procedure Rules 2005 (NSW) (UCPR) which provides that costs follow the event unless it appears to the Court that some other order should be made.

5. It is said that the question of costs of proceedings conducted in the Court’s protective jurisdiction are exceptions to the usual rule that costs follow the event. As explained by Powell J (as his Honour then was) in CCR v PS (No 2) (1986) 6 NSWLR 622 at 640, this is so because:

“…first, that in the normal case, proceedings in this Division are taken in the interests of those thought to be incapable of protecting themselves and their property; and, second, that those who would otherwise be concerned to act to protect the mentally ill or the mentally infirm might be deterred from acting if they were to expose themselves to the risk of costs if their application, even though reasonably made, were unsuccessful.”

6. Powell J continued:

“In the light of these facts, the principle normally applied in proceedings in this Division is that the court will make that order which, in all the circumstances, seems proper.”

7. This approach has been described as a “practice” or “ordinary rule” in the exercise of the Court’s discretion as to costs in protective proceedings (see, for example, CAC v Secretary, Department of Family and Community Services [2014] NSWSC 1855 at [130]; CAC v Secretary, Department of Family & Community Services (No 2) [2015] NSWSC 344 at [11]; Re K's Statutory Will (2017) 96 NSWLR 69; [2017] NSWSC 1711 at [13]).

8. In CAC v Secretary, Department of Family & Community Services (No 2) (supra), Lindsay J described the Court’s approach in the following terms (at [15], emphasis added):

“In the protective jurisdiction, because of the purposive nature of the jurisdiction (confirmed by Marion’s Case [1992] HCA 15; (1992) 175 CLR 218 at 258-259) and accumulated experience, the Court may proceed on the basis that it is generally necessary, and appropriate, to ask ‘What, in all circumstances, seems the proper order to make in relation to costs?’”

9. His Honour explained (at [19]–[20]) that it was not necessary to exhaustively define the word “proper” in the above definition or to elevate the word beyond its station. This is because:

“[t]he Court has to deal with a wide variety of situations, as variable as the human condition, in exercise of its protective jurisdiction…”

10. In Re K's Statutory Will (supra) at [17]–[18], Lindsay J identified the following considerations in addition to those referred to by Powell J in CCR v PS (No 2) (supra) that are relevant to the exercise of the Court’s discretion as to costs in protective proceedings:

“17.   Where participants in protective proceedings are close family members of the person in need of protection, the court needs to hasten slowly in burdening a family member with an obligation to pay costs in circumstances in which imposition of such an obligation might impact adversely on relationships of, or care for, the person in need of protection.

18.   Protective proceedings are not adversarial in the sense encountered in ordinary civil litigation but, rather, are attended by a strong public interest element in which (as noted by Lord Eldon in Ex parte Whitbread in the Matter of Hinde, a Lunatic (1816) 2 Mer 99; 35 ER 878, extracted in W v H [2014] NSWSC 1696 at [39]–[40]) the court generally needs to look to family members and carers for assistance in identifying problems to be solved and available solutions.”

(see also CAC v Secretary, Department of Family & Community Services (No 2) (supra) at [16])

11. Thus, the underlying rationale for the long-standing practice in protective matters that the Court will make such costs orders as seem proper in all the circumstances is the Court’s concern to protect a person who is incapable of protecting their own interests.

12. While previous decisions provide useful guides as to the exercise of the Court’s discretion, each case will turn on its particular facts.

13. In the present case, SJ submitted that an order be made that her costs be paid out of her estate on an indemnity basis and that the Court should make no order as to the respondents’ costs.

14. It was submitted on behalf of SJ that she did not seek any financial gain from pursuing the revocation orders. Rather, SJ’s motivation in bringing the application was to regain her “autonomy, freedom of decision, freedom of action and to be more self-reliant in matters relating to her personal, domestic and financial affairs.” It was submitted that the dismissal of her application does not change the fact that she still has an estate to the value of $2.6 million, albeit that the estate will continue to be managed by Perpetual on her behalf.

15. The submissions made on behalf of SJ accepted that neither KJ nor any other member of SJ’s family stood to gain anything personally from resisting SJ’s application. It was acknowledged that they acted out of concern for SJ’s welfare. SJ’s submissions acknowledged that Perpetual and Trust Company, who were jointly represented by one solicitor and senior counsel, had provided considerable assistance to the Court. SJ nevertheless submitted that no order should be made as to the respondents’ costs (with the intention, I infer, that the respondents should bear their own costs). This submission was put on the basis that, to make a costs order against SJ or for the payment of the respondents’ costs out of SJ’s estate would be “overly onerous and punitive”, as she had incurred legal costs in the order of $100,000.00 (exclusive of GST) since about September 2015.

16. Perpetual and Trust Company submitted that the costs of SJ, KJ, Perpetual and Trust Company should be paid out of SJ’s estate on an indemnity basis. As regards to their own costs, Perpetual and Trust Company submitted that a financial manager is in a similar position to that of an executor of an estate or trustee or agent in relation to acting for or on behalf of a protected person. It followed that an order that costs be paid out of the protected person’s estate “is supported by the nature of the office that the financial manager holds”. Reference was made to the decision of Re TLH, a Protected Person [2017] NSWSC 737 in which an order was made by Lindsay J that the costs of all parties in that proceeding (including the private financial manager) be paid out of the protected person’s estate.

17. Perpetual and Trust Company referred to UCPR r 57.8. That rule provides:

“The evidence in support of an application under section 86 of the NSW Trustee and Guardian Act 2009 must include the following--

(a)   the affidavits of at least 2 medical practitioners or other persons qualified to give an expert opinion on the defendant's condition, each of whom must state--

(i)   his or her formal qualifications, the extent of his or her experience in practice and his or her special qualifications in regard to questions relating to the condition of the protected person, and

(ii)   that, in his or her opinion, the protected person is capable of managing his or her affairs, and

(iii)   the reasons for that opinion or the tests on which that opinion is based, set out in his or her own handwriting,

(b)   the affidavits of members of the defendant's family or other persons, each of whom must state--

(i)   what opportunity he or she has had of assessing whether or not the protected person is capable of managing his or her affairs, and

(ii)   his or her assessment and the facts, grounds and circumstances on which he or she made his or her assessment, and

(iii)   any other facts that may be relevant.”

18. Perpetual and Trust Company submitted that underlying this rule was the notion that parties to applications in the Court’s protective jurisdiction are not engaged in adversarial litigation in which they choose to bring evidence in support of their respective positions but rather are tasked with assisting the Court with all relevant evidence that is necessary for the Court to make a proper determination. It was submitted that SJ acted consistently with this rule and its underlying purpose by providing the affidavits and medical reports of Dr Woods and Dr Frukacz in addition to the affidavit of her husband, LJ. It was submitted that while the Court broadly accepted the evidence adduced by KJ and the other members of the family about SJ’s present capacity, the evidence relied upon by SJ was not rejected, but simply that the Court found that the evidence given by KJ and other members of the family was more reliable. It was submitted that, in those circumstances, SJ had acted reasonably in bringing and maintaining the application, and legal costs were therefore reasonably incurred for SJ’s benefit.

19. In relation to KJ’s costs, Perpetual and Trust Company submitted that the evidence of KJ and SJ’s other family members were consistent with the underlying purpose of UCPR r 57.8. That evidence, it was submitted, reflected the concerns expressed by KJ that SJ was putting herself at risk by fighting against the steps that KJ and TJ have taken with great care and effort to look after what they perceived as SJ’s best interests and to protect her from potential exploitation. It was submitted (consistently with the observations made by Lindsay J in Re K's Statutory Will (supra) at [17]–[18]) that it was appropriate for KJ’s costs to be paid out of SJ’s estate.

20. Perpetual and Trust Company also submitted that NSW Trustee had appropriately limited involvement in the proceeding and were excused from the hearing at an early opportunity, having regard to NSW Trustee’s supervisory role in managing SJ’s estate. NSW Trustee’s role in the proceeding was limited to providing reports concerning the management of SJ’s estate to the Court and appearing for the first half day of the four day hearing, following which NSW Trustee was excused from further attendance.

21. I note that the NSW Trustee did not provide any written submissions in relation to costs, but communicated to the Court that it did not demur from the submissions made by Perpetual and Trust Company. NSW Trustee did, however, formally indicate that it sought an order for its costs of the hearing until it was excused by the Court.

22. KJ submitted that her costs should be paid out of SJ’s estate. She relied upon the principles expressed by Lindsay J in Re K's Statutory Will (supra) at [17]–[18]) and CAC v Secretary, Department of Family & Community Services (No 2) (supra) at [16]. It was submitted that KJ resisted the application because she remained of the view that SJ continued to be in need of protection and that she wished to protect SJ from any potential exploitation. It was also submitted that the evidence relied upon by KJ in resisting the application materially assisted the Court in arriving at its determination. KJ also adopted the submissions made by Perpetual and Trust Company in relation to the appropriateness that the costs of those entities be paid out of SJ’s estate, but did not make any submission as to the costs of SJ or NSW Trustee.

23. I am satisfied that all parties’ costs of the application should be paid out SJ’s estate on an indemnity basis. I generally accept the submissions of Perpetual and Trust Company in this respect.

24. In relation to SJ, I am satisfied that the application, whilst unsuccessful, was commenced and maintained reasonably for her benefit and in an effort to achieve SJ’s clearly expressed wish to have control of her own affairs. The commencement and maintenance of the application was supported by the medical reports provided by Dr Woods and Dr Frukacz, albeit that the reasons for the opinions expressed in those reports had to be adduced in oral evidence and the critical opinions of those witnesses were ultimately not accepted by the Court. The other evidence adduced by SJ was consistent with the requirements of UCPR r 57.8. Subject to my remarks later in these reasons concerning the amount of costs, I consider that SJ’s legal costs of the proceeding were incurred reasonably and for her benefit, and it would be unjust if her legal representatives were unable to recover any of those costs: see Re D [2012] NSWSC 1006 at [69]–[71].

25. KJ strenuously opposed SJ’s application. However, I accept that this position was taken on the basis of KJ’s strongly and genuinely held view that SJ is not capable of managing her own affairs and KJ’s ongoing concern with SJ’s welfare and her desire to avoid SJ being placed in a position where she may be at risk of being financially exploited. KJ’s view was consistent with the expert evidence of Dr Jungfer, which the Court ultimately accepted. With one exception, I do not consider that KJ’s strong opposition to the application could be characterised as adversarial. The exception is that KJ objected to the Court admitting into evidence the reports of Dr Woods and Dr Frukacz on the basis that those experts had failed to disclose the basis of and reasons for their opinions. Whilst the taking of these objections was an adversarial step, it usefully highlighted at an early stage the paucity of reasoning in the reports and the need for oral evidence to be adduced from both experts if their opinions were to be of any assistance to the Court. SJ was given leave to adduce such oral evidence, although much of the exploration of the basis for the experts’ opinions was ultimately undertaken by senior counsel for Perpetual and Trust Company rather than by counsel for SJ. Viewing this adversarial step taken on behalf of KJ in context and having regard to its helpful effect on the conduct of the hearing, I would not characterise KJ’s conduct of the hearing overall as adversarial.

26. SJ’s contention that KJ should bear her own costs of SJ’s application overlooks the fact that the expert evidence (Dr Jungfer) and the non-expert evidence adduced by KJ was of considerable assistance to the Court in determining SJ’s application. Indeed, Court largely accepted that evidence as being the most reliable indicator of SJ’s present capacity. That evidence was adduced in accordance with the requirements of UCPR r 57.8. In those circumstances, it would be unjust for KJ to have to bear her own costs of providing this necessary assistance to the Court. I accept the submissions advanced by Perpetual, Trust Company and KJ that those costs should be paid out of SJ’s estate on an indemnity basis (again, subject to my remarks about quantum later in these reasons).

27. I also accept that Perpetual and Trust Company should have their costs paid out of SJ’s estate on an indemnity basis, having regard to the considerable assistance they provided to the Court. Perpetual and Trust Company neither consented to nor opposed the revocation order sought by SJ. As I have noted earlier in these reasons, they were represented by one solicitor and senior counsel. Senior counsel provided opening submissions that helpfully identified the relevant legal principles. During the hearing, senior counsel adduced important oral evidence from Dr Wood and Dr Frukacz to assist the Court to understand the reasons for their opinions, as I have referred to above. Senior counsel’s questioning of Dr Jungfer was principally directed to ascertaining her response to the opinions expressed by Dr Wood and Dr Frukacz orally, so that the Court had the benefit of understanding the competing opinions and the basis for them. In addition, senior counsel assisted the Court by asking questions of non-expert witnesses, including open questions asked of SJ that were designed to elicit responses that were capable of shedding light on SJ’s present ability, or lack of ability, to manage her own affairs. At the conclusion of the evidence, senior counsel carefully took the Court through the salient aspects of the evidence that were relevant to the Court’s determination, again without taking a position or expressing a view about what that the determination should be. The role played by senior counsel for Perpetual and Trust Company was of significant assistance to the Court in determining SJ’s application. Senior counsel’s conduct during the hearing was at all times consistent with the neutral position taken by Perpetual and Trust Company and consistent with s 39 of the Act and the nature and purpose of the Court’s protective jurisdiction. In my opinion, it is proper in those circumstances that an order should be made for the payment of the costs of Perpetual and Trust Company out of SJ’s estate on an indemnity basis (subject to my remarks about quantum below).

18. In circumstances where NSW Trustee is required to supervise Perpetual’s management of SJ’s estate, NSW Trustee was named as a respondent to SJ’s application and the involvement of NSW Trustee in the proceeding was appropriately limited as I have described above, it is proper in my opinion that there should be an order for the costs of NSW Trustee to be paid out of SJ’s estate on an indemnity basis. Have regard to NSW Trustee’s limited involvement and its appearance by a solicitor employed within that entity, I expect those costs to be modest.

19. As referred to earlier in these reasons, SJ’s submissions record that SJ has incurred legal costs in the order of $100,000.00 (exclusive of GST) since about September 2015. The Court has no evidence of the costs incurred, or how they are comprised. I note that SJ’s application was made by notice of motion filed on 27 August 2018 (as amended on 11 October 2018), but that the medical evidence relied on by SJ in support of the application comprised reports prepared during the period since late 2015.

20. The Court has no evidence of the amount of costs incurred by KJ, Perpetual and Trust Company.

21. Under s 65(1) of the Act and the direction issued by the NSW Trustee to Perpetual as manager of SJ’s estate, Perpetual will be required to seek approval from the NSW Trustee before making any payment out of SJ’s estate in respect of the costs of SJ, KJ, Perpetual and Trust Company, and NSW Trustee, that are the subject of these orders.

22. In my opinion, it is proper that the terms of the orders to be made should make it clear beyond doubt that it is open to the NSW Trustee to scrutinise those costs and take issue with any amounts that it considers have been unreasonably incurred or are unreasonable in amount and that are therefore beyond the scope of an order for payment of costs on an indemnity basis: see UCPR r 42.5. The terms of the orders will therefore limit the costs of SJ, KJ, Perpetual and Trust Company to be paid out of the estate on an indemnity basis to those costs that:

1. in the case of SJ’s legal costs, are in an amount agreed between SJ’s legal representatives and the NSW Trustee as representing (or, in the absence of such agreement, are in an amount assessed as representing) all of SJ’s legal costs of her application, save for any costs unreasonably incurred or unreasonable in amount; and

2. in the case of each of the respondents KJ, Perpetual and Trust Company, are in an amount agreed between the relevant respondent and the NSW Trustee as representing (or, in the absence of such agreement, are in an amount assessed as representing) all of the relevant respondent’s legal costs of SJ’s application, save for any costs unreasonably incurred or unreasonable in amount.

33. These limitations are not to be read as suggesting that I have formed a view that some costs may have been unreasonably incurred or may be unreasonable in amount. The limitations are merely intended to preserve to the NSW Trustee, when exercising its function of considering Perpetual’s application for approval of the payments, the ability to take issue with any such unreasonableness.

34. For the above reasons, I make the following orders:

1. Order that the applicant’s costs of the application made by notice of motion filed on 27 August 2018 as amended on 11 October 2018 (the Application) be paid out of the applicant’s managed estate on an indemnity basis in an amount:

1. agreed between the applicant’s legal representatives and the NSW Trustee and Guardian (third respondent) as representing; or

2. in the absence of such agreement, assessed as representing,

all of the applicant’s legal costs of that Application, save for any costs unreasonably incurred or unreasonable in amount.

2. Order that the third respondent’s costs of the Application be paid out of the applicant’s managed estate on an indemnity basis.

3. Order that each of the first, second and fourth respondent’s costs of the Application be paid out of the applicant’s managed estate on an indemnity basis in an amount:

1. agreed between the relevant respondent and the NSW Trustee and Guardian (third respondent) as representing; or

2. in the absence of such agreement, assessed as representing,

all of the relevant respondent’s legal costs of that Application, save for any costs unreasonably incurred or unreasonable in amount.

*********

Decision last updated: 19 August 2020