Linke v Linke (No 2)
[2018] VSC 815
•21 December 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2016 03041
| GRAEME DAVID LINKE, AGNES MARIE BAENSCH, PETER MICHAEL LINKE and ANDREW CORNISH | Plaintiffs |
| v | |
| VICTOR HAROLD LINKE, JUDITH ANN LINKE, COLIN MICHAEL LINKE, MARIA GRACE LINKE, GLENIS WALTER LINKE and IAN DAVID LINKE | Defendants |
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JUDGE: | Justice Keogh |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 December 2018 |
DATE OF JUDGMENT: | 21 December 2018 |
CASE MAY BE CITED AS: | Linke & Ors v Linke & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 815 |
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COSTS – Whether two sets of costs should be ordered where defendants were separately represented – No conflict between defendants – Unreasonable to award more than one set of costs – Supreme Court Act 1986 (Vic) s 24 – Supreme Court (General Civil Procedure) Rules 2015 (Vic) O 63 – Oshlack v Richmond River Council (1998) 193 CLR 72 – Statham v Shepherd & Anor (No 2) (1974) FLR 244 – HP Mercantile Pty Ltd v Harnett [2017] NSWCA 79 (18 April 2017) – Apportionment of costs – Defendants were entitled to raise all reasonable defences – No costs order for failed defences – Chen v Chan [2009] VSCA 233 (8 October 2009) – Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 – Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 (8 June 2011).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | T Mitchell | Stephen Peter Byrne |
| For the First and Second Defendants | No appearance | |
| For the Third and Fourth Defendants | J Rizzi | Dwyer Robinson Pty Ltd |
| For the Fifth and Sixth Defendants | No appearance |
HIS HONOUR:
In this proceeding the plaintiffs claimed a farm in Western Victoria known as Abbey Hills was held on trust for them by the first, second, third and fourth defendants (Victor, Judith, Colin and Maria). On 4 September 2018 I delivered a judgment in favour of the defendants.[1] On 12 November I dismissed the plaintiffs’ claims and ordered that they pay Victor and Judith’s costs on a standard basis.
[1]Linke & Ors v Linke & Ors [2018] VSC 505 (4 September 2018).
The plaintiffs and Colin and Maria are in dispute in relation to costs orders.
The plaintiffs seek orders that:
(a) Colin and Maria pay 15% of the plaintiffs’ costs of the proceeding; and
(b) There otherwise be no orders as to costs.
Colin and Maria seek an order that the plaintiffs pay their costs of the proceeding on a standard basis.
Background
I will not repeat the relevant background set out in the judgment dismissing the plaintiffs’ claim. In summary, Johannes Linke died in 1962 leaving his estate, which included Abbey Hills, to his five children, Leonard, who died in 1965 before the estate was distributed, Victor and the first, second and third plaintiffs, Peter, Agnes and Graeme. The fourth plaintiff, Andrew, is Leonard’s son. In 1973 Johannes’ estate was wound up and Abbey Hills was transferred to Victor and his wife Judith. Years later Victor and Judith transferred part of Abbey Hills to their son Colin and his wife Maria. The plaintiffs claimed an equitable interest in Abbey Hills as beneficiaries of Johannes’ estate, alleged that Colin and Maria received part of the property as volunteers, and that Abbey Hills was held on trust for them by Victor, Judith, Colin and Maria.
The dispute between the parties in relation to Abbey Hills erupted in 2015. After family meetings and negotiations a release was executed and Victor and Judith made payments to Peter, Agnes and Graeme.
Despite the release, this proceeding was commenced. Initially Victor, Judith, Colin and Maria were represented by the same lawyers. On 11 August 2016 the plaintiffs wrote to the defendants’ lawyer in the following terms:
Conflict
First, it occurs to us the 2nd – 4th defendants may have defences to make distinct from the 1st defendant’s and they may also have claims to make against the 1st defendant.
This matter has been a long time coming before the Supreme Court. The plaintiffs first exhausted all avenues to settle this matter before issuing. They’re reluctant litigants. They’re not young. And they don’t want to be delayed at some later point in this litigation by some or all of the 2nd – 4th defendants having to seek the advice or retain the counsel of different solicitors. So please consider their position now.
A defence was filed for Victor and Judith on 9 September 2016. On 13 September a Notice of Change of Solicitors and Defence was filed for Colin and Maria. Despite the change in representation the two defences were almost identical. No issue of conflict was raised in pleadings then or subsequently.
An amended defence was filed in March 2017 in which Colin and Maria pleaded that they did not receive part of Abbey Hills as volunteers.
In the judgment I concluded that the plaintiffs did not have an interest in Abbey Hills as claimed.[2] Had it been necessary I would have found that Colin and Maria were volunteers, the plaintiffs’ claim was not barred because a limitation period had expired or by laches, and the release was effective to defeat the claim.
[2]Ibid.
Relevant provisions
The power to award costs, and to determine by whom and to what extent costs are paid, is in the Court’s discretion.[3]
[3]Supreme Court Act 1986 (Vic) s 24 (the ‘Act’), Supreme Court (General Civil Procedure) Rules 2015 (Vic) O 63 (the ‘Rules’).
Should the plaintiffs be ordered to pay the third and fourth defendants’ costs?
The plaintiffs submitted, first, that there was no conflict of interest between the defendants in the presentation of their cases. They argued that, since Colin and Maria farm in partnership with Victor and Judith, and the claims relate to the farmland, the costs of the proceeding may be characterised as a partnership expense. Second, the only point of difference between the defendants was that Colin and Maria ran some additional arguments that failed.
Colin and Maria submitted, first, that they only arranged separate representation after they were put on notice of the need to do so by the plaintiffs’ letter of 11 August 2016. Second, it was appropriate for them to be separately represented because the relief the plaintiffs sought against them was different to the relief sought against Victor and Judith. Had the plaintiffs’ claim against them succeeded, they may have been entitled to claim indemnity against Victor and Judith. Third, the plaintiffs did not object to them having separate representation prior to or at trial and it was now too late to object. Fourth, had the trial been split as they suggested, unnecessary costs would have been avoided. Fifth, by bringing a claim the plaintiffs breached the deed of release and this should be taken into account when determining costs.
Analysis
The successful party in litigation is usually entitled to costs. In Oshlack v Richmond River Council,[4] McHugh J said:
…subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour…..Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party.[5]
[4](1998) 193 CLR 72 (‘Oshlack’).
[5]Ibid [67].
In Statham v Shepherd & Anor (No 2),[6] Woodward J identified a circumstance in which a successful litigant might not be entitled to costs:
[6](1974) FLR 244 (‘Statham’).
In general, two sets of costs will not be allowed to defendants between whom no conflict of interest could arise in the presentation of their cases.[7]
[7]Ibid 246.
His Honour outlined three provisos to this position:
In the first place, if a conflict of interest appears possible but unlikely, the defendant should make any necessary enquiries from the plaintiff as to the way in which his case is to be put if this would resolve the possibility of conflict between the defendants.
Secondly, there could be circumstances in which, although the defendants were united in their opposition to the plaintiff, their relationship to each other might be such that they would be acting reasonably in remaining at arms length during the general course of litigation.
Thirdly, even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.[8]
[8]Ibid 246-247.
In HP Mercantile Pty Ltd v Harnett,[9] commenting on Statham,[10] the NSW Court of Appeal said:
…the ultimate question is not…whether they have acted reasonably, nor whether there has shown to be duplication. The question is whether it is reasonable for the unsuccessful litigant to bear more than one set of costs.[11]
[9][2017] NSWCA 79 (18 April 2017).
[10](1974) FLR 244.
[11]Ibid [14].
For the following reasons I conclude that it is unreasonable for the plaintiffs to bear more than one set of costs. First, the letter sent by the plaintiffs appropriately asked the defendants to consider the potential for conflict which might require that they be separately represented. Second, no conflict was pleaded or raised by Colin and Maria. They did not make or foreshadow a claim for contribution or indemnity against Victor and Judith. The only time the issue of indemnity was raised was in submissions in relation to costs. Third, Colin and Maria adopted the same position as Victor and Judith in pleadings and at trial. Victor and Judith supported Colin and Maria’s case that they were not volunteers by pleading that the transfer to Colin and Maria:
was for consideration including love and affection and Colin and Maria work for less than fair reward in the new farming business.
Colin and Maria’s defence that they were not volunteers failed. Fourth, it was obvious during the trial that the relationship between the defendants was close and that their interests were aligned. Fifth, although the form of relief against Colin and Maria may have differed from the relief against Victor and Judith, without more that did not justify separate representation. Sixth, the Rules do not require a party to give notice of objection to the costs of separate representation. Seventh, although Colin and Maria submitted at a much earlier stage that the trial should be split, they did not suggest this would obviate the need for them to be represented at the first stage of the trial. Eighth, I do not accept that by bringing the proceeding the plaintiffs breached the release.
Should the third and fourth defendants be order to pay 15% of the plaintiffs’ costs?
The plaintiffs seek an order that Colin and Maria pay 15% of their costs. They submitted, first, that they are entitled to the costs that would ordinarily be payable by reason of Colin and Maria’s amendment to their defence. Second, because the plaintiffs successfully defeated Colin and Maria’s secondary defences the Court should apportion costs in their favour.
Colin and Maria submitted, first, that the plaintiffs’ amendment submission was misconceived. Second, the plaintiffs were only partially successful in defeating Colin and Maria’s secondary defences. Third, Colin and Maria did not engage in any ‘disqualifying conduct’ so as to justify the order sought by the plaintiffs.
Analysis
The Court of Appeal considered the apportionment of costs in Chen v Chan[12] and said:
[12][2009] VSCA 233 (8 October 2009) (‘Chen’).
The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should receive its costs even where it has not succeeded on all heads of claim.
The Rules of Court permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.
Where there is multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount…[13]
[13]Ibid [10] (citations omitted).
In Australian Conservation Foundation v Forestry Commission,[14] Burchett J reasoned:
[14](1988) 81 ALR 166 (‘Australian Conservation Foundation’).
A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitle to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably. He may suffer in costs. Ultimately, the question is one of discretion and judgment.[15]
In Griffith v Australian Broadcasting Corporation (No 2),[16] the NSW Court of Appeal referred to Burchett J’s comments in Australian Conservation Foundation.[17] Hodgson J added that:
…the application of… principles [concerning costs] may not be exactly the same for successful defendants as for successful plaintiffs. In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and had thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred…[18]
[15]Ibid 169.
[16][2011] NSWCA 145 (8 June 2011).
[17](1988) 81 ALR 166.
[18][2011] NSWCA 145 [19] (8 June 2011).
Analysis
For the following reasons I am against the plaintiffs. The plaintiffs chose to join Colin and Mara as defendants. Colin and Maria were entitled to raise all reasonable arguments in defence of the claim brought against them. An argument in defence of a claim is not unreasonable simply because it fails. The arguments on which Colin and Maria failed were reasonable, and did not add significantly to the cost of the proceeding. I have not awarded costs to Colin and Maria despite the fact that they succeeded in defeating the claim against them. It would be unreasonable in the circumstances to order that they pay part of the plaintiffs’ costs.
Orders
I will order that:
(a) There is no order as to costs between the plaintiffs and the third and fourth defendants.