Levy v Harpur
[2004] VSC 461
•16 November 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6796 of 1999
| FRANK ERNEST WILLIAM LEVY AND OTHERS | Plaintiffs |
| who sue as the Executors of the Estate of PETER THOMAS EVAN RAND deceased | |
| v | |
| PAUL HENRY HARPUR AND OTHERS | Defendants |
| AND BETWEEN | |
| KAI TAK PTY LTD (ACN 005 568 721) as Trustee of the P & GR Harpur Trust | Plaintiff by Counterclaim |
| And | |
| FRANK ERNEST WILLIAM LEVY AND OTHERS | Defendants by Counterclaim |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 27 AUGUST 2004 | |
DATE OF JUDGMENT: | 16 NOVEMBER 2004 | |
CASE MAY BE CITED AS: | LEVY & ORS v HARPUR & ORS | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 461 | |
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Costs – Discretion to award – Relevant considerations – Plaintiffs successful on judgment obtained pursuant to r.23.01(2) – Application for such judgment made five years after proceeding instituted – Interlocutory steps taken in the interim on other issues raised by the statement of claim – Whether plaintiffs entitled to costs of entire proceeding – First and second defendants not necessary parties – Entitlement of these defendants to their costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A.J. Myers QC with Mr R. Rosenberg | Sackville Wilks & Co |
| For the Defendants | Mr D.R. Meagher QC with Mr M. Wise | Mills Oakley Lawyers |
| For the Third Defendant to Counterclaim | Mr D. Weinberger | Kliger Partners |
HIS HONOUR:
The late Peter Thomas Evan Rand died on 7 October 1997. He left a will, the last of many, dated 8 September 1997. On 23 December that year, the present plaintiffs, as executors of his estate, made an application for a grant of probate of that will. On 3 February 1998, the second defendant (Mrs Pamela Harpur) filed particulars of objection. By paragraph 1 of that document, the effect of a deed of trust, which was alleged to have been made by the deceased on 17 August 1997, was raised as an issue. As a consequence, on 10 February 1998 the first plaintiff applied by originating motion for orders that letters of administration pendente lite to Mr Rand's estate be granted to him. The application was successful; and on 30 July 1998 Beach J granted the orders sought.
Protracted litigation has followed. The application for probate was referred to a judge of this Court and came on for hearing on 23 March 1999. That day, terms of settlement were signed. Each of the present defendants was a party to the agreement thus effected. There is no suggestion that the terms are not binding on them all.
Paragraph 3 of the terms of settlement provides that, within six months after the day on which the terms are signed, the executors as plaintiffs will commence proceedings:
“…to test the validity of the deed of trust dated 27 August 1997 and made or alleged to have been made by the deceased. The defendants to the fresh proceeding[s] will be Kai Tak Pty. Ltd. in its capacity as the trustee of the P & GR Harpur Trust, Paul Harpur, Pamela Faye Rand Harpur and Michael Aquilina.”
The present litigation is the result. The writ was issued on 9 September 1999, within the six months allowed. In accordance with the terms of settlement, Kai Tak Pty. Ltd., Paul Harpur and Pamela Harpur are named as defendants. Mr Aquilina was not. (He is, however, a defendant to the third defendant’s counterclaim).
By the statement of claim, the plaintiffs allege (in effect) that Mr Rand died possessed of certain specifically identified real estate and certain personal property. But that allegation cannot be made good if the deed of trust is valid, because the latter purports to provide that as of 1 October 1997 Mr Rand would hold that same property on trust for the beneficiaries of the P & GR Harpur Trust. Those beneficiaries are members of the Harpur family. The provision made for them by the will was far less generous. It follows that, if the deed of trust is valid, a significant portion of the very valuable assets of which on any view Mr Rand was the legal owner at the time of his death is now beneficially held by members of the Harpur family. If, by contrast, the deed is null and void, then that property forms a very significant part of Mr Rand’s estate and is held on behalf of a very different group of beneficiaries.
The plaintiffs claim that the deed of trust is null and void. It is, they allege, a fraud. Mr Rand never executed it. It is the invention of one or more of the persons who, if it were authentic, would benefit from it. If the deceased did execute it, he did not intend to create a trust thereby. His will was overborne, and his judgment impaired; and anyway, he subsequently revoked it. What is more, it is on any view ineffectual because it merely expresses a present (as of 27 August 1997) intention to create a trust on 1 October that year – a date then in the future. But 1 October came and went, and the deceased did nothing to give effect to what was to that point, and remained thereafter, the mere expression of an intention. The law is (the argument continues) that a present intention to bring a trust into existence is insufficient if the only expression of that intention was made in the past and nothing was done subsequently to give it effect.
The defendants assert that the deed of trust should be given effect according to its terms. They deny each of the grounds upon which the plaintiffs base their case. They have maintained that denial with vigour throughout the entirety of the proceedings thus far.
The result has been a series of expensive interlocutory exercises accompanied by, or associated with, equally expensive forays into the thickets of pre-trial disputation. The plaintiffs estimate their costs at approximately $1,400,000. Little of this, however, is attributable to the hearing that, subject to appeal, determined the fate of the entire litigation. It was over in less than two days. It was brought on by a summons, issued by the plaintiffs on 4 March 2004, seeking orders pursuant to r.23.01(2) for judgment in the proceeding generally. The single ground was that the defence did not disclose an answer to the allegation that the declaration of trust contained in the deed of trust “was incomplete and remained so.”[1]
[1] Amended statement of claim, para. 18.2.
The application was successful. The plaintiffs now contend that, as a consequence, they are entitled to declarations against each of the defendants that the relevant property forms part of the estate of the late Mr Rand, and that the deed of trust of 27 August 1997 is “null and void and of no effect.”[2] The plaintiffs also seek orders against each defendant for the plaintiffs’ costs of the proceeding, including reserved costs. They submit that so much follows ineluctably from their success on the hearing of their summons.
[2] Ibid: prayer for relief, para. C.
The defendants beg not only to differ, but to turn the question of costs completely around. Their principal submissions are, first, that no declarations should be made against either Mr or Mrs Harpur. They were not necessary or even proper parties: as they say in their written outline of submissions, “the proper party to the proceedings was the third defendant as trustee.”[3] Not only should the individual defendants therefore not be required to pay the plaintiffs’ costs, but their costs should be paid, on an indemnity basis, by the plaintiffs. Secondly, any order for costs in favour of the plaintiffs should be made only against the third defendant (Kai Tak Pty. Ltd.) and “should be restricted to the costs incurred in respect of the particular question determined by the judgment.”[4] The defendants accordingly submit “that the Court should fix the proportion those costs bear to the total costs of the proceedings”.[5]
[3] Defendants’ written outline of submissions dated 27 August 2004, p.1
[4].Op. cit., p.4
[5] Op. cit., p.1.
In my opinion, the plaintiffs are correct in their submission that Mr and Mrs Harpur were proper, even if they were not necessary, parties. First, the terms of settlement – by which, of course, both they and the plaintiffs are bound – required that they be joined as defendants. This is hardly surprising. An indication of the depth of their interest in the outcome of the case is given by the fact that they have throughout been active in maintaining and advancing their opposition to the plaintiffs’ claims. At stake is property worth millions of dollars, to say nothing of individual reputations.
The second and allied reason why Mr and Mrs Harpur are proper parties is that they are the occupiers of property known as “The Sisters” at 3080 Nepean Highway, Sorrento. This property, unless it was the subject of a valid disposition effected by the deed of trust, forms part of the estate. If the deed of trust is void, then these defendants will lose their right of occupancy of “The Sisters” – and not only that, but any other interest they might have under the deed.
The third relevant factor in relation to the individual defendants’ position as proper parties (albeit one in which Mrs Harpur has but an indirect interest) is that Mr Harpur’s credit is very much in issue. If the plaintiffs’ allegations about his part in the creation of the deed of trust were made out, the first defendant has been and is guilty of very serious fraud. And a fourth factor is that both Mr and Mrs Harpur are directors of Kai Tak Pty. Ltd.; and that company is the trustee of the P & GR Harpur Trust. Mrs Harpur is the appointor of that trust as well as being a general beneficiary.
When the proceeding commenced, Mr Finlay E. Davis represented the defendants as their solicitor. On 20 August 2002, their present solicitors, Mills Oakley Lawyers, replaced him. Four months later, on 17 December, that firm wrote to the solicitors for the plaintiffs with an invitation immediately to discontinue against the individual defendants. The invitation was accompanied by a warning. If the plaintiffs did not file and serve an appropriate notice of discontinuance within seven days, “we will make an application that the action be summarily dismissed as against” Mr and Mrs Harpur.
The invitation was not taken up. A notice of discontinuance was not filed. But nor was the foreshadowed application made. As a result, the individual defendants have retained their status as such.
It is in these circumstances proper that those defendants not be able to escape orders for costs simply on the basis that the plaintiffs ought to have discontinued against them. By their acceptance of the terms of settlement, Mr and Mrs Harpur made a choice. They opted to obtain whatever benefits flowed to them as defendants, rather than as bystanders, to the proceedings. Having made that choice, and having thereby committed the plaintiffs to whatever additional expenditure was necessary as a consequence, it was incumbent on the individual defendants to do one of two things if they wished to revoke their earlier decision. Either they could apply to the Court for their release; or they could include, in any request of the plaintiffs for that release, an offer to pay any costs thrown away by their joinder following the agreement of 23 March 1999. The defendants did neither. As things presently stand, the individual defendants ask the Court to ignore both the fact that they were willing participants in their joinder in the first place, and the fact that they have since enjoyed whatever advantages flowed from that joinder - the cost of which has possibly been borne, in part, by the plaintiffs.[6] In these circumstances, it seems to me to be unjust to use, as a reason why the individual defendants should escape an order for costs which otherwise would be made against them, the (accurate) proposition that they were not necessary parties to the present proceeding. Still less is there any basis for an order that the plaintiffs pay the first and second defendants’ costs on an indemnity basis.
[6]As a general proposition, this is true to the extent that the plaintiffs’ costs have been increased by the presence of three defendants rather than one.
On the other hand, I should not, it seems to me, accede to the plaintiffs’ submission that their costs of the entire proceeding be paid by the defendants. The summons by means of which the plaintiffs obtained judgment was concerned with but one of the grounds upon which the plaintiffs sought declarations to the effect that the deed of trust was null and void. It nevertheless proved to be sufficient for the plaintiffs’ purposes. It was open to them to issue it, and bring it on for hearing, immediately after pleadings were closed. It raised no issue of contested fact. It succeeded or failed depending on the view taken by the Court on a question of pure law. Its success has meant that all the costs of each party save those reasonably spent up to the close of pleadings, and thereafter on the litigation of that question, have been wasted.
By s.24(1) of the Supreme Court Act 1986, the Court has “full power to determine by whom and to what extent the costs are to be paid.” The costs of a trial are therefore in the discretion of the trial judge. This, of course, is a discretion that must be exercised judicially; that is to say, it must be exercised subject to and in accordance with O.63 of the Rules of the Supreme Court. Rule 63.02 relevantly provides that “[t]he power and discretion of the Court as to costs under s.24 of the Act shall be exercised subject to and in accordance with this Order.”
I am in my opinion entitled, if not required, in the exercise of my discretion on costs to take into account the fact that the plaintiffs had available to them a potentially very inexpensive path to judgment – inexpensive certainly in comparative, and probably in absolute, terms. It was inexpensive for the very reason that it could be explored before involving the parties in such interlocutory steps as were relevant only to those aspects of their claim that gave rise to disputed issues of fact. The statement of claim raised four distinct issues, of which three required for their resolution a close examination of evidence going to the deceased’s state of mind in the final months of his life. Of those three, two also raised very serious allegations of fraud; fraud of the kind which, if the allegations are true, involve perfidy and which illustrate perfectly the insight behind Sir Walter Scott’s famous aphorism from Marmion:
"Oh what a tangled web we weave,
When first we practise to deceive"[7] .
[7]Marmion (1808) canto 6, st. 17 .
It is a fair assumption that, until the issue of the plaintiffs’ summons of 4 March this year, the attention of all parties was focussed on whether or not there was a web and, if there was, how tangled it had become. Indeed, Mr Israel Bock, a member of the firm of solicitors acting for the plaintiffs, exhibited to an affidavit sworn on 25 August 2004 a chronology prepared by him. It shows that pleadings effectively closed with the filing on 5 November 1999 of the defence of all three defendants. That was five years ago. Since then the statement of claim has been amended once: by orders made by me on 4 May last, leave was granted to the plaintiffs to add to paragraph 25 an allegation that, by reason of the matters alleged in that paragraph, Mr Rand (if, as the defendants contend, he did execute the deed of trust) did not in so doing understand its meaning and effect. The only other addition to the pleadings has been the issue – by the third defendant alone – of a counterclaim the defendants to which are the plaintiffs to the claim, together with Michael Aquilina. It is alleged by the counterclaim that the defendants to it have failed to deliver up to Kai Tak Pty. Ltd. as trustee of the P & GR Harpur Trust the property the subject of that trust.
The counterclaim depends for its validity on the validity of the deed of trust. It therefore fell with that deed when, on 2 July, I gave judgment for the plaintiffs on the summons of 4 March. Equally importantly for present purposes, the point remains that since November 1999 the parties have known that one of the issues on which they were divided was that which the present summons brought to a head. They have also known that that issue could have been dealt with either pursuant to r.23.01(2) or pursuant to r.47.04 – by which the Court has power to order (among other things) that any question in a proceeding be tried before the trial of the proceeding. An application pursuant to r.47.04 could have been made as well by the defendants as by the plaintiffs.
Gold v Patman and Fotheringham Ltd[8] is a case in point. The plaintiff was a building owner; the defendants, building contractors. The building site gave inadequate support to adjoining buildings. Adjoining landowners sought compensation. The plaintiff was not insured against such claims. This, he said, was the fault of the builder, which by the building contract was bound to effect insurance in the names of both owner and builder against this risk. The defendant contended that it was obliged to insure only itself. This argument having been rejected by the trial judge, the builder appealed. The Court of Appeal agreed with the builder. The question of costs then arose. The owner pointed out to the Court of Appeal that in the court below six out of eight days were dedicated to the trial of issues (of fact and concerning the construction of the building contract) on which the builder wholly failed and which were not the subject of the appeal. In the result, therefore, the builder was ultimately successful; but only because of its success on another construction point. Accordingly, the plaintiff argued, there should be an apportionment of the costs.
[8][1958] 2 All E.R. 497.
The Court of Appeal accepted the owner’s submission on costs. The appeal was therefore allowed, but the builder obtained only half its costs at first instance. In agreeing with Hodson LJ on the question of costs, Romer LJ said:
"I only wish to say once again what I have said on more than one occasion before, that I wish litigants would take advantage of the facilities which are afforded of having a preliminary point of law decided. That could very well have been done in this case. As it turned out before this court, the matter had depended on the construction of the contractual documents. If the defendants had asked for that point to be decided and they had lost on it, it would still have been open to them to raise all their other defences at the trial, and for my part I wish that they had done so. It seems to me that this was a case par excellence in which the facilities should have been used."[9]
[9]pp.503-504
Gold’s case was considered with apparent approval by Gobbo J in Byrns and Anor. v Davie and Ors.[10] His Honour in that case gave judgment for the defendants but was satisfied that:
"some 70% of the hearing was taken up with those parts of the proceedings … in respect of which the plaintiffs were successful and in respect of which the second and thirdnamed defendants failed …
In my view, the general discretion as conferred by the Act and the rules enables me to make an order … fixing what proportion of a party's costs should be paid by another party …"[11]
[10][1991] 2 VR 568.
[11]Ibid at 571
In my opinion, I should apply this reasoning to the circumstances of this case. The plaintiffs are entitled as against all defendants to their costs including any reserved costs (a) of the summons of 4 March 2004; (b) separately attributable to the determination of the issue decided by the judgment on that summons; and (c) up to and including the date of service on them of the defence issued on 5 November 1999. Since either set of parties (with the necessary exclusion of Mr Aquilina) could thereafter have taken the step which, on the basis of the outcome of the summons of 4 March, would have brought the proceeding to an end, neither is entitled to an order for costs after that date. The third defendant must pay Mr Aquilina his costs of its counterclaim.
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