McBain v Parsons

[2004] TASSC 3

[2004] TASSC 3

CITATION:           McBain v Parsons [2004] TASSC 3

PARTIES:  McBAIN, Roger
  v
  PARSONS, Cathryn Maree
  PARSONS, Bronwyn Alice

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  23/2002
DELIVERED ON:  4 February 2004
DELIVERED AT:  Launceston
HEARING DATE/S:  17 December 2003
JUDGMENT OF:  Crawford J

CATCHWORDS:

Procedure – Costs – General rule - costs follow the event – Costs of issues – Whether particular issue was dominant or separable – Whether good reason to limit award of costs to separate issues.

Burnie Port Corporation Pty Ltd v Bank of Western Australia Ltd [2003] TASSC 132, referred to.

Aust Dig Procedure [557]

REPRESENTATION:

Counsel:
             Plaintiff:    S B McElwaine
             Defendants:  G Bigmore QC
Solicitors:
             Plaintiff:  S B McElwaine
             Defendants:  McLean Phillips & Bartlett

Judgment ID Number:  [2004] TASSC 3
Number of paragraphs:  20

Serial No 3/2004
File No 23/2002

ROGER McBAIN v CATHRYN MAREE PARSONS and
BRONWYN ALICE PARSONS

REASONS FOR JUDGMENT  CRAWFORD J
  4 February 2004

1. On 14 March 2002 the plaintiff as trustee of the bankrupt estates of Geoffrey James Parsons and Peter Frederick Parsons, sued their respective wives.  The action went to trial.  I published reasons for judgment to the parties (McBain v Parsons [2003] TASSC 144) and as a consequence, they reached agreement concerning the final orders that were made on 17 December 2003. The only outstanding question concerns the order for costs that ought to be made.

1. In the statement of claim annexed to the writ, the plaintiff claimed:

1That in about March 1997 the defendants entered into an agreement with their husbands which was partly written, partly oral and partly to be implied, by which they agreed (inter alia) to purchase the husbands' business and to become legally liable for the payment of certain mortgages ("the CWS mortgages") in place of their husbands.  The plaintiff sought:

(a)a declaration that the defendants must indemnify him for all liability pursuant to those mortgages; and

(b)a declaration that the plaintiff was entitled to set off an equity of exoneration to which each defendant was entitled with respect to Commonwealth Bank mortgages over their homes to secure business loans of the husbands, against the plaintiff's entitlement to the indemnity sought in subpar(a).

2As against the first defendant, that she was liable to account to the plaintiff for the proceeds of sale of AMP shares, beneficially owned by her husband, that were paid to her by her husband when he sold the shares in about May 1998.  The plaintiff sought:

(a)an account of the proceeds;

(b)an order that the first defendant pay the proceeds and interest thereon to the plaintiff or alternatively, that she pay him equitable damages equivalent to the proceeds together with interest in equity;

(c)in addition, or alternatively, tracing of the proceeds. 

3That he was entitled to a legal interest as a beneficial one half owner as tenant in common with each of the defendants with respect to the residential property that had been respectively owned by each defendant with her husband.  In the relief sought at the end of the statement of claim, the plaintiff claimed "partition of the" respective properties.  However, when pleading his claim under the Partition Act 1869, the plaintiff stated in par38 that he sought pursuant to the Act:

(a)orders for the judicial sale of each property;

(b)orders for the distribution of the net proceeds of sale. 

4That pursuant to orders of the Full Court of the Federal Court made on 5 April and 12 July 2001, the plaintiff was ordered to pay the costs of the defendants in respect of an appeal to the Full Court, as a consequence of which the plaintiff was liable to pay the first defendant $3,704.25 and the second defendant $8,658.15.  The plaintiff claimed that he was entitled to set off those amounts against his claims against the defendants.  He sought an injunction restraining the defendants from recovering or attempting to recover the respective amounts due to them for the costs. 

1. An amended statement of claim dated 21 March 2002 was filed and delivered.  It contained amendments immaterial to the issue of costs. 

1. The first defence was dated 3 May 2002.  The defendants pleaded to the plaintiff's claims in the following ways:

1Concerning the claim for an indemnity with respect to the CWS mortgages, they pleaded that the terms of their agreement to purchase their husbands' business were confined to a written contract and they denied that they agreed to become legally liable for the payment of the CWS mortgages in place of their husbands. 

2Concerning the proceeds of the AMP shares, the first defendant pleaded that the shares had been allotted to and were held by her husband not as part of the property of his estate but upon trust for the beneficiaries of an AMP Endowment Personal Superannuation Plan and alternatively, the shares were after-acquired property of her husband within the meaning of the Bankruptcy Act 1966 (Cth), s126. She denied that her husband had sold the shares, received the proceeds of the sale or paid the proceeds to her. She pleaded that the shares had been sold and that the proceeds of sale were paid into a joint bank account of her and her husband, mixed with other monies paid into the account and then dissipated by her husband. She denied that she applied the proceeds. She therefore disputed the plaintiff's claim against her concerning the shares and the proceeds of their sale.

3Concerning the claim under the Partition Act, the defendants denied that the plaintiff had any interest in the properties because each had an equity of exoneration with respect to the CWS mortgages over the properties by which the burden of satisfying those mortgages in full was thrown upon the plaintiff's respective shares in the properties, the plaintiff had paid nothing in satisfaction of those mortgages and neither property was worth more than twice the amount secured against it by the mortgages, with the result that the value of the plaintiff's interest in each property was nothing.  They claimed to be entitled to purchase the plaintiff's respective interests in the properties for the prices found by the Court to be their respective values, and by their defences they each offered $1 for the respective interest.  In the alternative, they claimed that as a condition of any order for sale in lieu of partition, the Court should order that all of the net proceeds of sale from each property should be paid to the respective defendant who had an interest in it. 

4Concerning the plaintiff's claim to a set off with respect to the defendants' entitlements to costs, they denied the basis upon which the plaintiff claimed to be entitled to a set off. 

1. An amended defence was filed on 16 August 2002.  It had the following effect:

1Concerning the plaintiff's claim for an indemnity with respect to the CWS mortgages, no amendment was made. 

2Concerning the AMP shares, the first defendant made a number of amendments to her defence.  She abandoned her claim that her husband held the shares upon trust for the beneficiaries of an AMP Endowment Personal Superannuation Plan.  Most of her other denials and defences remained.  However, I do not understand why, for ultimately, in par20 of the amended defence, she added by way of an amendment an express admission of the allegations in par31 of the amended statement of claim, which were to the effect that she was liable to account to the plaintiff for the proceeds of the shares and to pay to the plaintiff an amount equivalent to the proceeds, together with interest.  It therefore appears that the only issue that remained between the plaintiff and the first defendant concerning the proceeds of the shares was the quantification of the proceeds and the interest.  Neither the plaintiff or the defendant pleaded those matters, but agreement was reached on 27 November 2002 when the first defendant responded to a notice to admit facts. 

3Concerning the claim under the Partition Act, no amendment was made. 

4Concerning the claim to a set off with respect to the defendants' entitlement to costs, they maintained their defences, except that the first defendant, consistent with her admission of liability with respect to the proceeds of sale of the AMP shares and interest thereon, admitted that she was indebted to the plaintiff in an amount, to be quantified, that represented the proceeds of the shares plus interest less $3,704.25 due to her from the plaintiff for the costs. 

1. In summary therefore, the issues that remained at the outset of the trial were as follows.  The plaintiff and the defendants were in dispute as to whether the defendants were liable to indemnify the plaintiff with respect to the CWS mortgages.  No dispute remained between the plaintiff and the first defendant concerning the proceeds of sale of the AMP shares.  Although the plaintiff's counsel described the first defendant's amended pleading about the matter as ambiguous, there was an express admission of liability by her that was repeated in the defence when dealing with the claim to a set off.  As to the Partition Act claim, the plaintiff wanted orders for sale in lieu of partition but the defendants opposed such orders and sought orders transferring the plaintiff's respective interests to them, basing their defences on the values of the properties.  The plaintiff's claim to an interest in each property was not challenged, but the defendants claimed that the value of each was so low that the interest was worthless.  No party pleaded what the value was.  It seems unlikely that there was any real issue between the parties concerning the claim to a set off.  Although the defendants had asserted their resistance to an injunction restraining them from enforcing their orders for costs and maintained that they would take all lawful steps to recover the costs, the real issue between the parties concerning set off was the determination of the plaintiff's claim to an indemnity with respect to the CWS mortgages.

1. Therefore it ought to have been obvious to the parties at the outset of the trial that the principal issues outstanding between them concerned whether the wives contracted to indemnify the husbands, as to which the plaintiff bore the onus of proof, and the question whether the respective valuations of the two properties rendered the plaintiff's interests in them worthless, as to which the defendants bore the onus of proof. 

1. On 3 May 2002 the defendants jointly made an offer of compromise to the plaintiff pursuant to the Supreme Court Rules 2000, Pt9, by which they offered to compromise on the basis that they would pay him a total of $15,000, that the defendants would forego payment of the costs ordered in their favour by the Full Court of the Federal Court, that each of the defendants would purchase from the plaintiff his interest in the respective property in which they had an interest for $1 and that each party would pay his or her own costs of the action. Having regard to the costs that were offered to be foregone, the offer was to benefit the plaintiff by $27,362.40 and in return he was to transfer his interest in each property to the respective defendant. The defendants do not seek to rely on the making of the offer of compromise for the purposes of the determination of the issue of costs, for the obvious reason that following the trial, the plaintiff achieved a better outcome than the one offered. He obtained a judgment against the first defendant for $28,141.70 against which the first defendant is entitled to set off the sum of $4,815.52, giving a net amount payable by the first defendant to the plaintiff of $23,325.95. In addition the first defendant is to pay to the plaintiff $28,442.53 in return for a transfer of the plaintiff's interest in the property in which she has an interest. The second defendant is to pay the plaintiff $402.04 in return for a transfer by the plaintiff to her of his interest in the property in which she has an interest, and she will forego her entitlement to $8,658.15 costs as ordered by the Full Court of the Federal Court.

1. I deal next with what happened at the trial.  No oral evidence was given.  An agreed bundle of documents and an affidavit were relied on as evidence.  The opening address of the plaintiff's counsel included the presentation of the plaintiff's case.  Counsel for the defendants then addressed, in the course of which he presented their cases.  Counsel for the plaintiff replied and counsel for the defendants was permitted to respond.  Although at the final directions hearing before trial the parties estimated that the length of the trial would be two to three days, it took only 3½ hours, finishing half an hour after the luncheon adjournment.  Most of the time was occupied by the indemnity question.

1. Early in the opening address of the plaintiff's counsel, he confirmed that there was no outstanding dispute between the plaintiff and the first defendant concerning the proceeds of the AMP shares.  Subject to the determination of the indemnity issue, there was no argument concerning the plaintiff's right to a set off.  Early in his opening address, the plaintiff's counsel referred to the claim for a sale under the Partition Act and accepted that its resolution depended on the respective values of the properties.  Thereafter he addressed at length concerning the indemnity question.  He produced no evidence of the values of the properties. 

1. In his opening address, counsel for the defendants first dealt with the indemnity issue.  He then touched briefly on the Partition Act issues.  He conceded that in relation to each of the properties, the plaintiff and the respective defendant each had a moiety interest.  He noted that his clients' defences had been that the value of each property was so low that the plaintiff's interest in each was worthless, rendering inappropriate a course other than a transfer to the respective defendant.  However, he then announced, apparently for the first time in the course of the action, that there would be no evidence of value and conceded on behalf of the defendants that the Court should order a judicial sale of the properties, which was what the plaintiff had always been seeking, adding that it was the only practical solution.  He then returned to the indemnity issue.  At one point he emphasised that subject to the determination of that issue, there was no real difference between the parties as to the plaintiff's right to a set off. 

1. An outcome of the action was that the plaintiff lost on the indemnity question.  Most of the time at the trial was devoted to it.  I have no doubt that most of the professional work since the commencement of the action had been devoted to it. 

1. The plaintiff's claim against the first defendant for the proceeds of the AMP shares wholly succeeded.  However, by the amended defence of 16 August 2002, the first defendant had conceded the claim and by virtue of an agreement reached by the parties by 27 November 2002, the relevant figures for resolution of the claim had been resolved and it had ceased to be an issue. 

1. The claim under the Partition Act was won by the plaintiff against each defendant when it was conceded by their counsel in his opening address at the trial.  Although from that point in time the parties were in agreement that the Court should order a sale of each property, the parties subsequently reached agreement as to the respective values of the properties and agreed that the defendants should respectively acquire the plaintiff's interests in return for payment of agreed amounts.  Orders were made accordingly, by agreement.

1. The plaintiff's claim to a set off was hardly a real issue between the parties and little of the legal professional work would have been devoted to it.  Its eventual resolution is immaterial to the order for costs that should be made.

1. Counsel for the defendants referred the Court to Cannon v Johnson (1870) LR 11 Eq 90, Ball v Kemp-Welch (1880) 14 Ch D 512, Adler v Ferguson [1962] VR 129 and Molloy v Chisholm [2000] VSC 464 for the proposition that as a general rule, the costs of a Partition Act claim should be borne by the parties in proportion to their interests as determined by the Court.  Nevertheless, the Partition Act, s10, provides that the Court may make such order as it thinks just respecting costs up to the time of the hearing and I have no doubt that the same principle applies to the costs of the hearing. The general rule referred to by counsel must give way to circumstances warranting the Court apportioning the costs other than in accordance with the interests of the parties in the relevant property. In this case, as the defendants maintained their valuation defence until after the plaintiff closed his case at the trial, this is a case where, if the Partition Act claims were the only ones made by the plaintiff, he would have his costs of the action. 

1. Counsel for the plaintiff referred me to the recent judgment of Underwood J in Burnie Port Corporation Pty Ltd v Bank of Western Australian Ltd [2003] TASSC 132 in which reference was made to the general approach that has been taken by courts to ordinarily award the cost of proceedings to the successful party without differentiating between those particular issues on which the party was successful and those on which the party failed, unless a particular circumstance would justify that course, such as perhaps that a particular issue was clearly dominant or separable. See JDM Investments Pty Ltd v Todbern Pty Ltd [2000] NSWSC 432 at par4 citing Ritchie's Supreme Court Procedure [52A.11.2]. 

1. In financial terms the plaintiff was substantially successful against both defendants and he did much better than he would have done if he had accepted their offer of compromise.  Nevertheless he lost his claim to the indemnity and it was the one that occupied most of the hearing and I have no doubt, most of the professional work preparing the action for trial.  In those circumstances it is not just that the defendants should be ordered to pay all of the plaintiff's costs of the action. 

1. I regard the plaintiff's claims against each defendant as essentially separate and that he should have separate orders against them.  As his successful claim with regard to the AMP shares was against the first defendant only, he should be awarded a greater share of his costs against her than against the second defendant. 

1. I will exercise my discretion concerning costs in the following way.  It will be ordered that the first defendant pay 27½ per cent of the plaintiff's taxed costs of the action and that the second defendant pay 22½ per cent of the plaintiff's taxed costs of the action.