Ross v Gordon (No 2)
[2021] ACTSC 136
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Ross v Gordon (No 2) |
| Citation: | [2021] ACTSC 136 |
| Hearing Date: | 12 May 2021 |
| Decision Date: | 6 July 2021 |
| Before: | Loukas-Karlsson J |
| Decision: | See [34] |
Catchwords: | COSTS – Application by unsuccessful party – where defendant was successful in substantive proceedings – whether variation of usual costs order warranted – whether unsuccessful party has |
| demonstrated why the usual approach ought not apply | |
| Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 1721, 1751 Family Provision Act 1969 (ACT) s 8 |
| Cases Cited: | Calderbank v Calderbank [1975] 3 All ER 333 Cooper v Singh [2017] ACTCA 21 |
| EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd | |
| [2011] FCAFC 92 Faris v Savage (No 3) [2021] ACTSC 60 Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 Furber v Stacey [2005] NSWCA 242 Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1 Hulanicki v Walton (No 2) [2015] ACTCA 45 Keddie v Foxall [1955] VLR 320 Latoudis v Casey (1990) 170 CLR 534 Lombard Insurance Co (Australia) Ltd v Pastro [1994] SASC 4481; 175 LSJS 488 Northern Territory v Sangare [2019] HCA 25; 265 CLR 164 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 Ritter v Godfrey [1920] 2 KB 47 Singer v Berghouse (1993) 114 ALR 521 SMA v John XXIII College (No 3) [2020] ACTSC 236 Southwell v Staite (No 2) [2019] ACTSC 83 Talent v Talent (No 2) [2020] ACTSC 294 | |
| Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) | |
| [2005] NSWSC 1111 | |
| Parties: | James Young Ross (Plaintiff) Donna Maree Gordon (First Defendant) Donna Maree Gordon as Trustee of the Olga Hart Trust (Second Defendant) |
| Donna Maree Gordon as Executor of the Estate of Olga Hart | |
| (Third Defendant) | |
| Representation: | Counsel |
| T Crispin (Plaintiff) | |
| W Sharwood (Defendant) | |
| Solicitors | |
| Ray Swift Moutrage & Associates (Plaintiff) Sharman Robertson (Defendant) | |
| File Number: | SC 80 of 2019 |
| LOUKAS-KARLSSON J: | |
| Introduction |
1. Mr James Ross (the plaintiff) brought a claim against Ms Donna Gordon in her own right, in her capacity as trustee of the Olga Hart Trust (the Trust), and in her capacity as Executor of the estate of her late mother, Olga Hart (the defendants).
2. The plaintiff sought declaratory relief and an order for provision pursuant to s 8 of the Family Provision Act 1969 (ACT) (Family Provision Act). In the alternative, the plaintiff sought damages for the tort of devastavit, and relief in equity. On 24 March 2021, I delivered judgment in favour of the defendants and ordered that the plaintiff was to
pay the defendants’ costs of the proceedings: Ross v Gordon [2021] ACTSC 41
(Ross v Gordon). The effect of the substantive order was such that the plaintiff
received no money from the Estate of the deceased Olga Hart.
Orders Sought
3. Initially, following the determination of the substantive proceedings, the defendants indicated that they would seek an order for costs in their favour on an indemnity basis. On 25 March 2021 the defendants indicated that no such application would be made.
4. On 1 April 2021 the plaintiff provided written submissions by email seeking the costs orders to be varied such that the parties would bear their own costs of the
proceedings. On the same day, by way of reply, the defendants’ reinitiated their
application for indemnity costs and provided short written submissions.
5. On 13 April 2021 the defendants withdrew their submissions seeking indemnity costs, instead asking only that costs remain ordered on the usual basis. This position was confirmed by counsel for the defendants during a brief oral hearing of the matter on 12 May 2021 (T3.5-20).
6. Therefore, the only application remaining to be determined is that which the plaintiff now seeks, being an order that the parties bear their own costs of the proceedings.
Submissions
Plaintiff (Applicant on Costs)
7. The plaintiff accepted that the power to award costs is one which lies in the discretion of the Court, and that the usual approach is for an order that an unsuccessful party pay the costs of the successful party: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 (Oshlack) at [67]; [134].
8. The plaintiff submitted that this usual approach will give way where a Court considers other orders are necessary to achieve justice: Lombard Insurance Co (Australia) Ltd v Pastro [1994] SASC 4481; 175 LSJS 488; Furber v Stacey [2005] NSWCA 242. It was accepted that the onus lies on the unsuccessful party to show why the usual approach ought not apply: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10].
9. The plaintiff submitted that the conduct of the defendant was one significant factor in the determination of whether there should be a departure from the usual approach. It
was submitted that “[b]ehaviour which effectively invites litigation” would be conduct
capable of disentitling successful defendants from their costs, and that this behaviour need not amount to misconduct: Ritter v Godfrey [1920] 2 KB 47; Keddie v Foxall [1955] VLR 320.
10. The plaintiff submitted that the defendant had made the admission that the plaintiff had been given an ultimatum that he was to accept her proposed disposition of the Estate by 14 November 2018, or he would receive nothing. It was submitted that prior to the commencement of the substantive proceedings, the plaintiff had sought voluntary production of documents, including the trust deed for the Trust, a request which had been refused. It was submitted that the plaintiff had then brought an application for preliminary discovery, which was successfully opposed by the defendants.
11. Counsel for the plaintiff submitted that the consequence of these preliminary matters was that the 14 November 2018 deadline had passed by the time that the plaintiff was in a position to seek advice on the legal implications of the arrangement which the testator had put in place. It was submitted that the instructions which had been given to the defendants by the testator had neither required nor authorised the imposition of the deadline. It was similarly submitted that there had been no instructions from the testator requiring the opposition to the disclosure of the trust deed and other documentation, and that had the plaintiff had the opportunity to take proper legal advice before the expiry of the deadline it was plausible that the proceedings would not have been commenced. Importantly, counsel for the plaintiff accepted that the plaintiff had the opportunity to receive proper legal advice by the
time of the defendants’ offer to settle the litigation in September 2019, and that this
letter was received approximately one year after the initial offer to settle had been
made (T2.35-46; 3.1-15).12. It was submitted that the testator’s recorded instructions had been clear, in that she had wanted a clause in the will “about if he wants to contest it that it comes out of his
$200,000.00”: see Ross v Gordon at [57]. It was submitted that the testator had
expressed a clear intention that if the plaintiff were to contest the will, that the costs for those proceedings should come from his entitlement under the will, rather than from him in a personal capacity. It was submitted that the testator had experienced lengthy litigation during her lifetime, and that these instructions were informed by an awareness of the concept of costs (T9.24-40). It was submitted that the testator had considered the possible outcomes and did not wish for the plaintiff to personally suffer the costs of what she expected to be unsuccessful litigation.
13. It was submitted that throughout the substantive proceedings, the defendant had relied upon the instructions of the testator to justify her conduct and had been
successful in doing so. It was submitted that those instructions “do not merely authorise, but also bind” the defendant, such that it would be a breach of the testator’s instructions were the defendants to seek their costs of the proceedings from the plaintiff. Counsel submitted that having prevailed on the basis of the testator’s
instructions, they could not be selectively bound by those instructions (T4.24-26).
Counsel for the plaintiff conceded that this was “an unusual situation” (T4.28-30).
14. The plaintiff submitted that the purpose of a costs order is to compensate the party in whose favour it is made, rather than to punish the party against whom it is made: Northern Territory v Sangare [2019] HCA 25; 265 CLR 164 at [25]. It was submitted that the plaintiff had already borne and paid significant costs in respect of the probate
and preliminary discovery proceedings, and in light of the testator’s intentions as to
the handling of the costs, submits that the appropriate order is that the parties bear
their own costs.
Defendants (Respondents on Costs)
15. The defendants resist the plaintiff’s application and seek only the original order that
the plaintiff is to pay the costs of the proceedings. It was submitted that the justice of
this case clearly favours an order that the plaintiff pay the defendants’ costs, noting
that the plaintiff had made four unsuccessful challenges, being the caveat placed against the grant of probate, an application for preliminary discovery determined by McWilliam AsJ, the family provision claim, and the challenge to the Trust in these proceedings (T5.35-47).
16. Counsel for the defendants referred to three attempts to resolve the litigation, by way of offers of settlement dated 24 October 2018, 30 October 2018, and 23 September 2019. Copies of these letters were annexed to their written submissions.
17. There was an offer by letter dated 24 October 2018, marked “Without Prejudice Save as to Costs” to the effect that there would be a payment to the plaintiff in the sum of
$200,000. The defendants submit that this offer was left open for 21 days, and the plaintiff was legally represented when the offer was made, but lapsed without acceptance by the plaintiff.
18. On 30 October 2018, the defendants issued a second letter repeating the offer, which also lapsed without acceptance by the plaintiff.
19. On 23 September 2019, the defendants made a further offer by letter marked Without
Prejudice Save as to Costs”. In that letter the defendants offered to settle the litigation
by making a payment to the plaintiff of $200,000 and in addition to that payment the defendants would waive the benefit of the costs order from the earlier litigation, which had been determined to be $30,755.07. This offer was not accepted by the plaintiff.
20. The defendants submitted that it had been made clear in the September 2019 letter that if the plaintiff did not accept the offer, and in the event that the plaintiff did not achieve a better result than $230,755.07, which he did not, then the defendants
would be seeking an order that the plaintiff pay the defendants’ costs on an indemnity
basis. While the defendants do not seek that order, they do rely on the offers of settlement in support of their submissions that the order that costs be paid on the usual basis remain in place.
21. Counsel for the defendants accepted that the first 2018 letter may not qualify as a letter which was issued in accordance with the criteria in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank), as it did not contain a threat that it would be used to found an application for indemnity costs. Nevertheless, counsel emphasised that the letter was sent at the time of pre-litigation. It was submitted that the 2019 letter was a clear Calderbank letter, and that there was authority to the effect that there were circumstances in which an offer which was inclusive of costs would be appropriate, referring to Talent v Talent (No 2) [2020] ACTSC 294 (Talent v Talent (No 2)) and the cases cited (T7.3-33). It was submitted that instead of accepting significant offers, the plaintiff had decided to commence litigation, and had done so
after having received legal advice “all the way along” (T6.15-22).
22. Counsel for the defendants submitted that the assessment of whether to make a different order as to costs was not a question of selecting parts of a discussion between the testator and her solicitor (T6.23-24). It was submitted that it could not
have been the testator’s anticipation, nor the correct legal outcome, that the plaintiff
could undertake litigation without incurring responsibility for any costs (T6.36-40).
23. Counsel for the defendants conceded that costs orders are in the discretion of the Court, however submitted that the justice of this case clearly favours an order that the
plaintiff pay the defendants’ costs. Counsel emphasised that there was no fund of
$200,000 against which an alternative costs order could be offset, rather that the
money being discussed was the personal funds of the first defendant (T10.5-10).
Consideration
24. The principles applicable to Calderbank offers have been set out comprehensively in Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki v Walton (No 2)) at [13]-[16]. A number of the relevant considerations have been referred to in Southwell v Staite (No 2) [2019] ACTSC 83 at [7]-[17].
25. In Talent v Talent (No 2) at [7]-[18] McWilliam AsJ considered the principles applicable to the making of alternative costs orders where there had been a rejection of favourable settlement offers which had been equal to or better than the results after a finally determined contested hearing, and principles applicable to the assessment of whether this amounted to unreasonable conduct such that there should be a departure from the usual orders:
Applicable principles
7. Under r 1721 of the Court Procedure Rules 2006 (ACT) (the Rules), the Court’s
discretion with regard to the awarding of costs is wide and unconfined: Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 at [41]-[42]. The purpose of a costs order is to reach a fair and just result: Cooper v Singh [2017] ACTCA 21 at [14]-[16]. The making of a costs order in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1 at [2].
8. However, the discretion must be exercised consistently with judicial principle: see Nelipa v Dr Robertson and Commonwealth of Australia [2009] ACTSC 16 (Nelipa) at [80]-[85] and the cases there-cited. Ordinarily, the party who has created the litigation and failed in it will be required to meet the costs of the other party: Nelipa at [86]; Latoudis v Casey (1990) 170 CLR 534 (Latoudis) at 567 per McHugh J, with the latter case cited by Crowe AJ in probate proceedings that also involved the present parties: see In the Estate of Joan Gwen Talent deceased [2019] ACTSC 261 at [13]-[14].
9. The discretion to refuse to award costs should not be exercised against the successful party except for a reason connected with the case: Latoudis at 567. One example of an exception is where there has been some delinquency on the part of a party, even the successful party, which may justify depriving that party of their costs,
or even requiring them to pay the other party’s costs: Nelipa at [86].
Rejection of offers of settlement
10. In certain circumstances, the making of an offer of settlement may justify a departure from the usual approach that costs follow the event. These include circumstances when the resolution that was offered is more favourable to the recipient party than the ultimate outcome of the matter: Rural & General Insurance Broking Pty Limited (ACN 093483928) v Australian Prudential Regulation Authority [2009] ACTSC 67; 231 FLR 199 at [137]. An unreasonable rejection of an offer of settlement may
disentitle a party to some or all of that party’s costs, or even require that party to pay
the costs of the other party: Calderbank v Calderbank [1975] 3 All ER 333.
11. An approach frequently adopted is to ask whether there was a genuine offer of compromise; and if so, whether it was unreasonable for the offeree not to accept it, having regard to the circumstances of the case: Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki) at [14]; Tuggeranong Town Centre Pty Ltd v Brenda Hungerford Pty Limited (No 3) [2017] ACTSC 301; 325 FLR 436 at [281] and the case there-cited.
12. As to the first question of whether there was an offer of compromise, the key
criteria are:
(a) the correspondence relied upon must be either open correspondence or
marked “without prejudice save as to costs” and thus be able to be tendered
at any hearing or an application for costs;
(b) the offer in the letter must be a genuine compromise;
(c) the offer must be in clear and unambiguous terms and be a final offer, not
subject to any further negotiation; and
(d) the letter must state expressly that, if the offer is not accepted, then a
special order, such as for indemnity costs, will be sought.
13. Cases where these requirements have been discussed include: Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 at [97] and Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 at [24]-[46].
14. The second question of the reasonableness of rejecting an offer genuinely made was discussed in Hulanicki at [14], citing Hazeldene's Chicken Farm Pty Ltd v
Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 (Hazeldene’s
Chicken Farm) at [25] with approval. The non-exhaustive considerations include:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree's prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs (or otherorder) in the event of the offeree rejecting the offer.
15. An effective offer may be made before an action commences: Ofria v Cameron
(No 2) [2008] NSWCA 242 at [27].16. The costs component of an offer should ordinarily be isolated in a way that makes it clear and capable of proper assessment without a taxation or formal assessment of
costs: Hillman v Box (No 5) [2014] ACTSC 150 at [30]. However, the Court’s
discretion is not confined to considering only offers made exclusive of costs. An offer
may be made “inclusive of costs”, and accepted as a genuine assessable
compromise: DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251; 51 ACSR 555 at 557 and [12]-[13]; Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [5] per Beazley JA (as her Honour then was), at [135] per Basten JA.
17. Where an offer is made inclusive of costs, it may create difficulties if the Court is not readily able to determine the various components of an offer, so as to assess whether it was unreasonable not to accept it. The question is whether the offer is made in terms that enable the offeree to give proper consideration to it: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [13].
18. It is also important to remember that the Court assesses the offeree’s prospects of
success not from the position of hindsight, but as at the date the offer was made (see
Hazeldene’s Chicken Farm at [17]). A plaintiff or defendant may not have had an
unreasonable view about a particular claim at the time the offer was made.
Conclusion
26. Costs are in the discretion of the Court: r 1721 of the Court Procedure Rules 2006 (ACT) (the Rules). It is accepted that there is a wide costs discretion conferred upon the Court. Ordinarily a successful litigant is entitled to recover their costs from the opposing party: Oshlack at [67] (per McHugh J); [134] (per Kirby J); Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 (Pires v DibbsBarker) at [92].
An order to this effect is commonly described as “costs follow the event”: Singer v
Berghouse (1993) 114 ALR 521 at [5] (per Gaudron J). So, in the usual case, costs follow the event and are awarded on a party/party basis: r 1751 of the Rules: see Hulanicki v Walton (No 2) at [11]; Faris v Savage (No 3) [2021] ACTSC 60 (Faris v Savage (No 3)) at [49].
27. While the discretion is wide, it must be exercised judicially, in accordance with established principle and context: Oshlack at [35] (per Gaudron and Gummow JJ); [65] (per McHugh J). The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party: EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [92]; Faris v Savage (No 3) at [50].
28. Relevantly, in Northern Territory v Sangare [2019] HCA 25; 265 CLR 164 at [25] the High Court summarised the applicable principles:
A guiding principle by reference to which the discretion is to be exercised – indeed, “one of the most, if not the most, important” principle – is that the
successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited
upon that party: Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] [1953] 1 WLR 1481 at 1484; [1953] 2 All ER 1588 at 1590. See also Harold v Smith (1860) 5 H & N 381 at 385 [157 ER 1229 at 1231]; Oshlack v Richmond River Council (1998) 193 CLR 72 at 96-97 [66]-[67], see also at 86 [35], 120-121 [134].. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action: see, e.g. Bostock v Ramsey Urban District Council [1900] 2 QB 616 at 622, 625, 627; Ritter v Godfrey [1920] 2 KB 47 at 53, 60, 66; Scottish Gympie Gold Mines Ltd v Carroll [1902] St R Qd 311 at 315-316; Stewart v Moore [1921] St R Qd 182 at 190. Redden v Chapman (1949) 50 SR (NSW) 24 at 25. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighted against the exercise of the discretion in its favour: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874; Oshlack v Richmond River Council (1998) 193 CLR 72 at 97-98 [69]. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the
“just resolution of the real issues in civil proceedings with minimum delay and
expense”, that might have been taken into account to justify refusing the appellant an
order on costs: Aon Risk Services Australia Ltd v Australian National University (2009)
239 CLR 175 at 210 [90]; [2009] HCA 27. See Supreme Court Rules, r 1.10.
(emphasis added)
29. The Court must also consider the question of Calderbank offers: see Hulanicki v Walton (No 2) at [13]-[16]; Faris v Savage (No 3) at [53]. Specifically, in Hulanicki v Walton (No 2) at [13] the Court stated the following:
The acceptance of reasonable offers of compromise is in the interests of litigants and the public; it minimises the personal and financial costs to litigants and it enables the courts to focus resources on claims that are not amenable to
compromise. “The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs”: Stewart
v Atco Controls Pty Ltd (In Liquidation) (No 2) (2014) 252 CLR 331 at [4]. On the other hand, it is critical that litigants have ready access to justice and do not feel unreasonably constrained to compromise cases.
(emphasis added)
30. Costs are always ultimately at the discretion of the Court. That discretion should be exercised to achieve a just result: SMA v John XXIII College (No 3) [2020] ACTSC 236 at [27]; Faris v Savage (No 3) at [56]. As stated by the High Court in Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1 (Gray v Richards (No 2)) at [2]:
The disposition of costs is within the general discretion of the Court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the Court. The
disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires.
(emphasis added, citations omitted)
31. In summary, the power to award costs lies in the discretion of the Court: Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 at [41]-[42]. The usual approach is for an order that the unsuccessful party pay the costs of the successful party: Oshlack at [67] (per McHugh J); [134] (per Kirby J); Nelipa v Dr Robertson and Commonwealth of Australia [2009] ACTSC 16 at [86]; Latoudis v Casey (1990) 170 CLR 534 at 567 (McHugh J). It is important for the Court to underline that the usual approach will not apply where the Court consider that other orders are necessary to achieve justice. The purpose of a costs order is to reach a fair and just result: Cooper v Singh [2017] ACTCA 21 at [14]-[16].
32. As stated above, this involves a broad evaluative judgment of what justice requires: Gray v Richards (No 2) at [2]. It must be said in dealing with the costs issue that this is an unusual case. This was conceded by both parties (T5.5 and T8.10). Nevertheless, having undertaken the broad evaluative judgment required, I do not accept the submissions of the plaintiff that the appropriate order is that the parties bear their own costs. It is important to note two matters in this regard. First, that the defendants made it clear in the September 2019 Calderbank letter of offer that an indemnity costs order would be sought. Second, that the plaintiff received legal advice: see Calderbank; Hulanicki v Walton (No 2) at [25]; Pires v DibbsBarker Canberra at [41]; Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145. Ultimately the defendants do not seek an indemnity costs order but seek the usual order as to costs.
33. In my view, taking all matters discussed above into account, justice requires, in this case, that the unsuccessful party must pay the costs of the successful party. The plaintiff must pay the costs of the defendants. In my view, justice requires that costs be awarded on the usual basis. I am not persuaded that justice requires an alternative approach.
Orders
34. I make the following orders:
(a) Plaintiff to pay the defendants’ costs. I certify that the preceding thirty-four [34] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Loukas-Karlsson.
Associate: Rhiannon McGlinn
Date: 6 July 2021
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