McDonald v Higgins
[2013] WASC 6
THE PUBLIC TRUSTEE (WA) -v- BRUMAR NOMINEES PTY LTD [No 3] [2013] WASC 6
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 6 | |
| Case No: | CIV:1658/2011 | 17 OCTOBER 2012 | |
| Coram: | PRITCHARD J | 6/02/13 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | The costs of the plaintiff, and of the first and second defendants, to be paid out of the estate The third and fourth defendants to bear their own costs | ||
| B | |||
| PDF Version |
| Parties: | THE PUBLIC TRUSTEE (WA) BRUMAR NOMINEES PTY LTD DELGA NOMINEES PTY LTD TRACEY DALE KITTELTY SHANE BURNETT KITTELTY |
Catchwords: | Costs Exercise of discretion with respect to costs Costs of parties acting in capacity of trustees Whether trustees acting for the benefit of the estate Whether trustees entitled to costs paid out of estate Costs paid out of property where party seeking order had genuine interest to protect Rules of the Supreme Court 1971 (WA), O 66 r 4 and O 66 r 9 |
Legislation: | Administration Act 1903 (WA), s 35 Guardianship and Administration Act 1990 (WA), s 64 Public Trustee Act 1941 (WA), s 9 |
Case References: | Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Grljusich v Grljusich (Unreported, WASC, Library No 960646, 8 November 1996) Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
BRUMAR NOMINEES PTY LTD
First Defendant
DELGA NOMINEES PTY LTD
Second Defendant
TRACEY DALE KITTELTY
Third Defendant
SHANE BURNETT KITTELTY
Fourth Defendant
Catchwords:
Costs - Exercise of discretion with respect to costs - Costs of parties acting in capacity of trustees - Whether trustees acting for the benefit of the estate - Whether trustees entitled to costs paid out of estate - Costs paid out of property where party seeking order had genuine interest to protect - Rules of the Supreme Court 1971 (WA), O 66 r 4 and O 66 r 9
(Page 2)
Legislation:
Administration Act 1903 (WA), s 35
Guardianship and Administration Act 1990 (WA), s 64
Public Trustee Act 1941 (WA), s 9
Result:
The costs of the plaintiff, and of the first and second defendants, to be paid out of the estate
The third and fourth defendants to bear their own costs
Category: B
Representation:
Counsel:
Plaintiff : Ms C F Holyoak-Roberts
First Defendant : Mr A P Hershowitz
Second Defendant : Mr A P Hershowitz
Third Defendant : Mr M M Mony De Kerloy
Fourth Defendant : Mr M M Mony De Kerloy
Solicitors:
Plaintiff : Public Trustee (WA)
First Defendant : Paiker & Overmeire Solicitors
Second Defendant : Paiker & Overmeire Solicitors
Third Defendant : Mony De Kerloy
Fourth Defendant : Mony De Kerloy
Case(s) referred to in judgment(s):
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Grljusich v Grljusich (Unreported, WASC, Library No 960646, 8 November 1996)
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319
(Page 3)
1 PRITCHARD J: I delivered reasons for decision in this matter on 22 May 2012 and 17 September 2012, and these reasons should be read in conjunction with those earlier reasons.
2 In summary, this action concerned whether a contract for the sale of property which was entered into by Mr Robert Kittelty on 15 June 2009 (the Contract) was invalid as a result of a lack of capacity on Mr Kittelty's part to enter into the Contract. Mr Kittelty died shortly after the Contract was entered into. He executed two wills and probate has not yet been granted in respect of either will. The Public Trustee holds Mr Kittelty's real and personal property on trust pending the grant of probate.1
3 The Public Trustee commenced the present proceedings2 seeking a declaration as to the validity and enforceability of the Contract, an order pursuant to s 35 of the Administration Act 1903 (WA) appointing the Public Trustee the receiver in respect of the property the subject of the Contract so as to enable the Public Trustee to perform the Contract (if it was declared to be a valid and enforceable contract) and a declaration as to the liability of the estate of Mr Kittelty (the estate) for interest (or more correctly, compensation) claimed by the first and second defendants pursuant to a default notice they issued after the Contract was not performed.
4 The first substantive hearing in this action took place on 23 and 26 March 2012 and was concerned solely with the question whether Mr Kittelty had capacity to enter into the Contract and thus whether the Contract was valid (the first hearing). The second hearing took place on 21 June 2012, and dealt with the balance of the matters the subject of the action (the second hearing). The costs of each hearing were reserved.
5 The parties subsequently sought that costs orders be made in respect of the action. Apart from the reserved costs of the first and second hearings, costs were reserved in respect of shorter interlocutory hearings on two other occasions.3 Counsel for the parties did not pursue costs orders in respect of the reserved costs.
6 In these reasons, I deal with the following matters:
1. Overview of the parties' submissions as to costs.
(Page 4)
- 2. General principles with respect to the award of costs and the outcome of the litigation.
3. The appropriate exercise of discretion with respect to:
(i) the Public Trustee's application for costs;
(ii) the first and second defendants' application for costs;
(iii) the third and fourth defendants' application for costs.
4. The orders which should be made.
1. Overview of the parties' submissions as to costs
7 Counsel for the Public Trustee submitted that his costs up to and including the first hearing should be paid out of the estate, and that his costs after the first hearing should be paid by the third and fourth defendants. The third and fourth defendants submitted that the Public Trustee's costs of the entire action should be paid out of the estate.
8 The first and second defendants submitted that their costs for the entire action should be paid from the estate. In the alternative, the first and second defendants submitted that their costs up to and including the first hearing should be paid from the estate, and their costs after the first hearing should be paid by the third and fourth defendants. The Public Trustee submitted that any award of costs in favour of the first and second defendants should be made against the third and fourth defendants and not against the estate.
9 The third and fourth defendants submitted that all of the defendants' costs up to and including the first hearing should be paid out of the estate, and that thereafter the defendants should bear their own costs. The third and fourth defendants submitted that their own costs should be paid out of the estate because they had initially been joined as parties to the proceedings by the Public Trustee, and an application by the first and second defendants to remove them as parties was unsuccessful.
10 Counsel for the third and fourth defendants submitted that the present proceedings were capable of analogy with principles sometimes applied in probate actions where there is a dispute about the grant of probate, or where there is a question raised in relation to a will which is propounded. I understood counsel to be referring to the application of O 66 r 9(1) of the Rules of the Supreme Court 1971 (WA) (RSC), and to the well recognised exception (to the usual approach to costs) which is sometimes applied in
(Page 5)- probate actions.4 It is unnecessary to say more about this submission because O 66 r 9(1) is not directly applicable and the present proceedings are not sufficiently analogous to a probate action to warrant the direct application of those principles. Instead, the preferable approach is to exercise the Court's discretion to award costs guided by the general principles applicable to the exercise of that discretion and having regard to such specific costs rules under O 66 RSC as may be applicable.
2. General principles with respect to the award of costs and the outcome of the litigation
11 By virtue of s 37 of the Supreme Court Act 1935 (WA) the Court has a broad discretion to make orders in relation to the costs of, and incidental to, a proceeding. Although it is broadly stated, the statutory discretion is not unqualified and the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation.5 The most important factor which guides the exercise of the costs discretion is the result of the litigation.6 Generally speaking, the Court will make an order that the successful party to an action recover his costs from the unsuccessful party.7 This principle is reflected in O 66 r 1(1) of the RSC.
12 However, there are exceptions to this general approach to costs. Generally, these exceptions derive from conduct of the successful party in relation to the litigation, or leading up to the litigation, which is seen to disentitle that party to the benefit of the exercise of the discretion in its favour.8 By way of example, 'the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation, unnecessarily protracts the proceedings, succeeds on a point not argued before a lower court, prosecutes the matter solely for the purpose of increasing the costs recoverable, or obtains relief which the unsuccessful party had already offered in settlement of the dispute'.9 Further, the RSC contemplate that sometimes a departure from the usual order as to costs will be required if a successful party has not been successful on all of the issues raised in the proceedings.10
(Page 6)
13 Given the nature of the present proceedings, it is not entirely apt to treat this case as one involving successful and unsuccessful parties. It is, however, useful to bear in mind the position of the parties in relation to the issues which required resolution by the Court.
14 The position of the Public Trustee in the litigation waxed and waned a little. Generally speaking, the Public Trustee adopted a neutral position, and brought the proceedings in order to resolve questions which had arisen in relation to the performance of the Contract. Ultimately, however, counsel for the Public Trustee submitted that the evidence supported the conclusion that the Contract was valid (and that it was therefore enforceable), but that the estate should not be liable to pay compensation arising from the delay in the performance of the Contract.
15 The first and second defendants submitted that the Contract was valid and enforceable. They were 'successful' in respect of those questions. However, they were 'unsuccessful' on the question whether the estate was liable to pay compensation for the delay in the performance of the Contract.
16 The third and fourth defendants submitted that the Contract was invalid. They also submitted that the Contract was not enforceable on the basis that this was a case in which specific performance would not have been ordered. They were 'unsuccessful' in relation to both questions. However, they were 'successful' in submitting that the estate should not be liable to pay compensation for the delay in the performance of the Contract.
17 All of the parties agreed that the Public Trustee should be appointed the receiver of Mr Kittelty's real estate in the event that the Contract was valid and enforceable, and that issue was insignificant in terms of the time taken in the proceedings as a whole.
3. The appropriate exercise of discretion with respect to costs
(i) The Public Trustee's costs
18 The Public Trustee commenced these proceedings in his capacity as a trustee. In the absence of a special order, a plaintiff who sues in a representative character will personally be liable to pay the costs of the defendant in the case of a non-suit or of a judgment for the defendant.11 In the case of a plaintiff who is a trustee, that rule reflects the basic principle that a trustee is personally liable for debts incurred as trustee in
(Page 7)- the administration of the trust fund.12 However, a trustee has a right to reimburse itself out of trust property for all expenses reasonably and properly incurred in the execution of its powers and duties as a trustee. Alternatively, the trustee can pay those expenses out of trust property.13
19 Order 66 r 9(2) RSC also deals with the costs of a person who is a party to proceedings in the capacity of a trustee. That rule relevantly provides:
Where a person is or has been a party to any proceedings in the capacity of trustee … he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee … and the Court may otherwise order only on the ground that the trustee … has acted unreasonably, or in the case of a trustee … has in substance acted for his own benefit rather than for the benefit of the fund.
20 Rule 9(2) operates as a complete code in relation to the circumstances in which costs will be awarded to trustees, personal representatives and mortgagees.14
21 The Public Trustee commenced the present proceedings primarily in order to resolve a question that had arisen as to Mr Kittelty's capacity to enter into the Contract. Having regard to the circumstances outlined in my earlier reasons for decision, that course of action was reasonable, and the Public Trustee's costs should be recovered out of the estate.
22 The only dispute in relation to the Public Trustee's costs concerned his costs arising from the second hearing. The Public Trustee pursued the second hearing to resolve the remaining questions in the Originating Summons, including the question of the enforceability of the Contract. The hearing was pursued even though the Public Trustee's position was that because the Contract was valid it was therefore liable to be performed (and enforced in the event of non-performance). The first and second defendants submitted that the conduct of the Public Trustee in pursuing the second hearing was unreasonable in that the Public Trustee should have accepted that the Contract was required to be performed, without the need for any further hearing, after the Court declared that the Contract was valid. (I note that quite apart from that issue, there was a further issue which required resolution at the second hearing, namely whether the first
(Page 8)- and second defendants were entitled to claim compensation as a result of the delay in the performance of the Contract.)
23 Counsel for the Public Trustee submitted that the Public Trustee's costs of the proceedings after the first hearing should be paid by the third and fourth defendants. It was submitted that it was only because the third and fourth defendants, who were potential beneficiaries of the estate, objected to the performance of the Contract and the payment of compensation, that the Public Trustee chose to pursue the second hearing. It was submitted that the Public Trustee would otherwise have been able to reach an agreement with the first and second defendants on the payment of compensation.15
24 There are two reasons why in my view the Public Trustee's costs after the first hearing should not be paid by the third and fourth defendants, but should be paid out of the estate. First, notwithstanding that the Public Trustee and the first and second defendants apparently agreed that the Contract should be performed once it was declared to be valid, the Public Trustee pursued the second hearing in relation to the question whether the Contract should be enforced. I make no criticism of the Public Trustee for doing so. In my view, the Public Trustee was acting in the interests of the estate in pursuing the second hearing to resolve, once and for all, the remaining issues in the Originating Summons. However, I do not think it can fairly be said that the only reason why a second hearing was pursued was because the third and fourth defendants had concerns about the enforcement of the Contract, and about the payment of compensation. Clearly it was in the interests of the estate to determine whether the first and second defendants were entitled to compensation.
25 Secondly, following the second hearing I concluded that the estate was not liable for the payment of compensation to the first and second defendants. In that respect, the third and fourth defendants' opposition to the payment of compensation was effectively vindicated. It would not have been appropriate for the third and fourth defendants to be required to pay the Public Trustee's costs of the second hearing, at least in relation to the question of compensation.
26 In all of the circumstances, in my view, the just course is that the Public Trustee should recover his costs of the entirety of the proceedings out of the estate. No order is required to give effect to the principle underlying O 66 r 9(2) RSC, namely that a trustee is entitled to the costs
(Page 9)- of proceedings out of the fund held by the trustee.16 However, for the avoidance of doubt in this case, the preferable course appears to be to make an order that the Public Trustee is entitled to his costs to be taxed and recovered out of the estate.
(ii) The first and second defendants' costs
27 All of the parties to the proceedings accepted that the first and second defendants should benefit from an award of costs in their favour. The only questions were as to the extent of that award of costs, and who should pay those costs.
28 As to the extent of those costs, the only issue on which the first and second defendants were 'unsuccessful' was the question of compensation. Counsel for the third and fourth defendants submitted that as the first and second defendants were 'successful' in relation to the question of enforcement of the Contract, but 'unsuccessful' in relation to the question of compensation, the appropriate order was that there be no order as to the first and second defendants' costs after the first hearing. However, the question of compensation occupied a relatively small amount of hearing time, and in my view there is no warrant for denying costs, or reducing the first and second defendants' costs, in relation to that question. The first and second defendants should have an order for their costs of the proceedings as a whole.
29 As to who should pay those costs, the first and second defendants submitted that their costs after the first hearing should be paid by the third and fourth defendants or alternatively that all of their costs should come out of the estate. The Public Trustee submitted that the first and second defendants' costs should be paid by the third and fourth defendants. The third and fourth defendants submitted that the first and second defendants' costs up to and including the first hearing should be paid out of the estate (and that otherwise that the first and second defendants should bear their own costs).
30 In my view, the appropriate order is that the first and second defendants' costs for both the first and second hearings should be paid out of the estate, having regard to the following factors.
(Page 10)
31 First, in so far as the costs up to and including the first hearing are concerned, the first hearing resulted from the Public Trustee's decision to seek declaratory relief from the Court primarily in relation to the question of the validity of the Contract, a question which was clearly raised in all of the circumstances, especially having regard to the medical evidence which was then available.
32 Secondly, the medical evidence adduced by the third and fourth defendants in the first hearing was highly significant in the outcome of the hearing, and was of considerable assistance to the Court in resolving the question of capacity (albeit in a way which was contrary to the third and fourth defendants' view of the situation).
33 Thirdly, although the participation of the third and fourth defendants in the proceedings increased the duration of the first hearing it did not do so to such an extent, in the circumstances, as to justify a costs order against them. The Court would necessarily have had to consider evidence as to Mr Kittelty's capacity. Ultimately, there was no direct evidence of knowledge on the part of the first and second defendants of any possible incapacity on Mr Kittelty's part, but such evidence and submissions as the third and fourth defendants sought to adduce in relation to the question of knowledge occupied very little hearing time.
34 Fourthly, in so far as the second hearing was concerned, that hearing proceeded in part because the first and second defendants wished to pursue compensation for the delay in the performance of the Contract (a matter on which they were ultimately unsuccessful) and because the Public Trustee considered it appropriate to pursue the second hearing as as to resolve the remaining issues in the Originating Summons.
35 Each of these factors militates against an order for costs being made against the third and fourth defendants.
36 In the course of the hearing, I asked the parties how an order might be made that the costs of any party (other than the Public Trustee) be paid out of the estate. Counsel for the Public Trustee submitted that the Court had no power to make such an order. However, there appear to me to be two alternative ways in which a costs order might be made which would be borne by the estate.
(Page 11)
37 First, an order could be made that the Public Trustee pay the first and second defendants' costs, and those costs could in turn be recovered by the Public Trustee from the estate, those costs having been reasonably incurred in this case.17
38 Secondly, O 66 r 4 RSC also appears to provide a basis for an order that the first and second defendants' costs be paid out of the estate. That rule provides:
(1) Where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the Court may make an Order that the costs of any party may be recovered out of the property with or without recourse against any other party: Provided that no such order shall be made unless the Court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
(2) Where the Court orders payment of costs out of any property it shall direct out of what portion or portions the costs shall be paid.
39 The terms of O 66 r 4(1) will ordinarily require that the Court consider whether to make an order after it has been determined whether the party has an interest in the fund and whether it was reasonable in all the circumstances for the part to take the position it did in the relevant proceedings.18 Clearly O 66 r 4 does not compel the Court to make an order for costs out of the property.19
40 In this case it can properly be said that property was the subject of the present matter, or alternatively that a question which arose in this matter would affect a right or claim to property, in that the Contract concerned the sale of land, and the resolution of the question whether the Contract was valid determined whether the first and second defendants had the right to insist on the performance of the Contract. Following the sale of the land when the Contract is performed, the proceeds of that sale will be held by the Public Trustee in trust on behalf of the estate. I am also satisfied that it was reasonable for the first and second defendants to appear on the hearing of the Originating Summons.
41 Accordingly, in so far as the costs of the first and second defendants are concerned, I will make an order pursuant to O 66 r 4 RSC that the first and second defendants' costs of the action be recovered out of the estate.
(Page 12)
(iii) The third and fourth defendants' costs
42 As the third and fourth defendants did not seek an order for their costs after the first hearing, the issues for determination are whether the third and fourth defendants should have an order for the payment of their costs, and if so, whether those costs should also be paid out of the estate.
43 I have reached the conclusion that the third and fourth defendants should bear their own costs up to and including the first hearing. In reaching that conclusion I have borne in mind that the first and second factors to which I referred in [31] - [32] provide some support for the conclusion that the third and fourth defendants' costs, up to and including the first hearing, be recovered out of the estate. However, those factors are outweighed by two countervailing considerations. First, and most significantly, the case advanced by the third and fourth defendants (that the Contract was invalid) was rejected. One of the reasons why their contention of invalidity was rejected was that there was no evidence of any knowledge on the part of the first and second defendants of any mental incapacity on Mr Kittelty's part. Secondly, the third and fourth defendants sought to participate in the proceedings, through counsel, and to advance a particular case. As counsel for the Public Trustee submitted, the third and fourth defendants did so in circumstances where the evidence they sought to put before the Court in relation to Mr Kittelty's mental capacity could no doubt have been adduced by counsel for the Public Trustee, had it been made available to the Public Trustee.
44 In these circumstances, the just outcome, in my view, is that the third and fourth defendants should bear their own costs up to, and including, the first hearing and thereafter.
4. The orders which should be made
45 I propose to make the following orders:
1. The Public Trustee is entitled to his costs to be taxed and recovered out of the estate of Mr Robert Kittelty.
2 The first and second defendants' costs of the action, to be taxed, are to be recovered out of the estate of Mr Robert Kittelty.
3. There be no order as to the costs of the third and fourth defendants.
1 Section 9 of the Public Trustee Act 1941 (WA).
2 It appears that the proceedings were commenced pursuant to s 49(j) of the Public Trustee Act 1941 (WA).
3 See ts 17/10/12 at 326 - 327.
4 See Kendall and Curthoys, Civil Procedure Western Australia [73.0.9] and the cases referred to therein.
5Oshlack v Richmond River Council [1998] HCA 11;(1998) 193 CLR 72 [65].
6Oshlack[66].
7 See Oshlack[66] (McHugh J).
8 See Oshlack[69].
9Oshlack[69] (citations omitted).
10 See, for example, O 66 r 1(3) RSC.
11 Order 66 r 2(f) RSC.
12Vacuum Oil Co Pty Ltd v Wiltshire[1945] HCA 37; (1945) 72 CLR 319, 335; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd(1992) 8 WAR 42, 52 (Owen J).
13 See s 71 of the Trustees Act 1962 (WA); see also Vacuum Oil Co Pty Ltd v Wiltshire(335 - 336); Custom Credit Corporation v Ravi Nominees (52) (Owen J).
14Grljusich v Grljusich(Unreported, WASC, Library No 960646, 8 November 1996) [6] (Murray J).
15 ts 17/10/12 at 308 - 309.
16 See Grljusich v Grljusich[16] (Murray J).
17 Section 71 of the Trustees Act 1962 (WA).
18Great Southern Managers Australia Ltd v Thackray [2010] WASC 138(S) at [5] (Le Miere J).
19Corporate Systems Publishing Pty Ltd v Lingard (No 4) [2009] WASCA 158(S) at [154] (Owen JA).
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