Sculthorpe v Preece
[2014] TASSC 36
•24 July 2014
[2014] TASSC 36
COURT: SUPREME COURT OF TASMANIA
CITATION: Sculthorpe v Preece [2014] TASSC 36
PARTIES:SCULTHORPE, Patricia by her Attorney
DOWNIE, Susan Margaret Stuart
v
PREECE, Craig
MARTIN, Phillip
HOLMES, Matthew
trading as PREECE MARTIN ACCOUNTANTS
& BUSINESS ADVISORS
FILE NO: 151/2014
DELIVERED ON: 24 July 2014
DELIVERED AT: Hobart
HEARING DATE: 18 July 2014
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Procedure – Costs – Jurisdiction – Persons not parties to proceedings – Whether causal connection between non-party and proceedings – Whether exceptional circumstances.
Supreme Court Civil Procedure Act 1932 (Tas), s12(2).
Knight v FP Special Assets Ltd (1992) 174 CLR 178; Clarence City Council v Howlin [2010] TASFC 2; [2010] 20 Tas R 136 applied.
Aust Dig Procedure [551]
REPRESENTATION:
Counsel:
Applicant: S B McElwaine SC
Respondents: No appearance
Anne Brown Sculthorpe and
Elizabeth Margaret Parker: D F Zeeman
Solicitors:
Applicant: Rae & Partners
Respondents: Fairley + Associates
Anne Brown Sculthorpe and
Elizabeth Margaret Parker: Butler McIntyre & Butler
Judgment Number: [2014] TASSC 36
Number of paragraphs: 24
Serial No 36/2014
File No 151/2014
PATRICIA SCULTHORPE by her Attorney SUSAN MARGARET STUART DOWNIE v CRAIG PREECE, PHILLIP MARTIN & MATTHEW HOMES trading as PREECE MARGIN ACCOUNTANTS & BUSINESS ADVISORS
REASONS FOR JUDGMENT Holt ASJ
24 July 2014
The application
The applicant, Patricia Sculthorpe, brought an originating application against a firm of accountants seeking discovery of documents to enable her to identify the name or names of persons against whom proceedings might be commenced and also to enable her to obtain sufficient information to make an informed decision as to whether proceedings should be commenced.
The persons having control over the documents held by the accountants agreed to release them to the applicant the day before the scheduled hearing. Those persons being Anne Sculthorpe and Elizabeth Parker.
The applicant now seeks an order that Anne Sculthorpe and Elizabeth Parker pay the costs of the discovery application brought against the accountants.
The background
The background is as follows.
Roger Sculthorpe died on 11 January 2013. He was survived by the applicant, his wife of almost 28 years then aged 88 years, his two daughters by a previous marriage and his wife's daughter. By his will made in March 2012 Mr Sculthorpe left his wife the sum of $5,000, a life interest in the family home and a fortnightly allowance equal to double the old age pension. He left to his stepdaughter, Susan Downie, a rifle and the sum of $2,000. He left to his other two daughters the sum of $100,000 each plus the remainder of his estate. Mr Sculthorpe appointed his wife and two daughters as executors of his estate, but his wife executed an instrument renouncing her right as executor.
The wife's daughter holds her power of attorney and the wife brought the discovery proceedings by her attorney. Mr Sculthorpe's daughters are the persons against whom the costs order is now sought. For convenience I shall refer to them in the balance of these reasons as "the executors".
Prior to bringing the discovery application the wife, by her attorney, had commenced an action against the executors claiming, amongst other things, that half of the money held in various bank accounts by the late Mr Sculthorpe was held on constructive trust for her. The action was commenced on 18 July 2013. The executors have denied the claim.
In the action, the executors made discovery by providing a list of documents verified by affidavit sworn 6 November 2013. Document 4 on the list is a letter dated 19 June 2006 from Mr Sculthorpe to the trustee of his superannuation fund directing the trustee that upon his death the proceeds of the fund were to be paid to the executors of his estate to be distributed in accordance with his will. Document 5 on the list is a letter dated 20 June 2006 from the trustee to Mr Sculthorpe confirming that upon his death the superannuation money would be paid to the estate.
On 22 November the applicant filed an application in the action against the executors seeking discovery of documents relating to the bank accounts including three allocated pension accounts in the name of Mr Sculthorpe's superannuation fund which had been managed by the accountants who are the respondents to the present discovery application. The solicitors for the executors asserted that the superannuation documents were not documents held by the estate and they would not be produced as part of the discovery process in the action.
On 14 February 2014 the applicant, through her solicitors, wrote to the accountants advising that production of the documents sought had been resisted by the executor's solicitors in the primary action. The letter invited the accountants to obtain an authority for the release of the documents from the trustee of the superannuation fund. The letter foreshadowed that absent production an application for discovery would be made against the accountants.
On 24 February a partner in the firm of accountants responded by letter stating: "I write to inform you that I have no authority to disclose the information requested in your letter". This letter followed a letter from the solicitors for the executors dated 19 February, in which the author stated that he had advised the accountants "not to provide any information".
The originating application for discovery against the accountants was filed on 4 March and made returnable for mention on 20 March.
On 20 March the accountants were represented. Counsel advised that the accountants did not wish to participate at the hearing of the application and that the documents had been handed over to one of the executors, namely Anne Sculthorpe, at 11 am on 28 February 2014. Counsel for the executors appeared and advised the Court that the executors wished to be heard on the originating application and that the executors would be resisting the orders for discovery against the accountants which the applicant was seeking.
The application was set down for hearing to commence on 26 March.
The day before the hearing was to occur the solicitors for the executors advised the applicant's solicitors that the documents, the subject of the originating application, would be produced. Shortly afterwards the solicitors for the executors provided to the solicitors for the applicant the superannuation fund deed, financial accounts, member entitlement statements, tax returns and voluminous bank statements disclosing that as at 30 June 2013 the money in the three allocated pension accounts totalled about $1.7m.
Following receipt of the documents the applicant commenced a second proceeding against the entity believed to be the trustee of the superannuation fund and against the executors as trustees or trustees de son tort of the superannuation fund and against the executors as executors of Mr Sculthorpe's estate seeking orders for an account of the superannuation money.
The jurisdiction to make a costs order against a non-party
There was no dispute as to the applicable legal principles. They are conveniently set out by Crawford CJ, with whom Tennent J and Wood J agreed, in Clarence City Council v Howlin [2010] TASFC 2, [2010] 20 Tas R 136 at pars[116] – [125]. In summary, the principles are as follows:
·The Supreme Court has the power to make an order that a non-party pay the costs of proceedings. Supreme Court Civil Procedure Act 1932 (Tas), s12(2). Knight v F P Special Assets Ltd (1992) 174 CLR 178.
·Orders have been made for costs against non-parties where the non-party has some management of the action, maintained or financed the action, was a party in a closely related action heard at the same time and where a non-party has caused proceedings to be commenced. The categories of cases in which non-party costs orders may be appropriate, however, are not rigid or closed. Symphony Group Pty Ltd v Hodgson (1994) QB 179 at 191 - 192.
·A non-party costs order will only be made where the interests of justice justify a departure from the general rule that only parties to proceedings are subject to costs orders. Knight v FP Special Assets Pty Ltd (1992) 174 CLR 178 at 192.
·Central to the exercise of the discretion is that the non-party has a connection with the proceedings and that connection has caused costs to be incurred or increased. Bischof v Adams (1992) 2 VR 198 at 205; National Mutual Life Association of Australasia Ltd v Chris Poulson Insurance Agencies Pty Ltd (1998) 8 Tas R 123 at 135; Wentworth v Wentworth (1999) 46 NSWLR 300 at 310; Re Bonlac Foods Ltd (2001) 37 ACSR 457 at 463.
·The jurisdiction should be exercised sparingly and with considerable caution and only in exceptional circumstances which would make such an order reasonable and just. It will be especially exceptional for an order to be made where there existed a cause of action against the non-parties so that the non-parties could have been joined to the proceedings. In such cases it is generally expected that the non-parties will have been provided with a warning at the earliest opportunity that a costs order might be sought against them. A judge, when being asked to make a non-party costs order should be alert to the possibility that the application might have been motivated by resentment of an inability to obtain an effective costs order against a party. There is no exhaustive list of material considerations. Each case must be viewed in light of its own circumstances. Symphony Group Pty Ltd v Hodgson (1994) QB 179 at 192 – 194.
The arguments
Counsel for the applicant, Mr McElwaine SC, said that the non-party costs order sought should be made as the executors;
·were asked to produce the documents and refused,
· instructed the accountants in possession of the documents not to produce them following the applicant's request to the accountants,
· took possession of the documents from the accountants and advised the Court that they intended to take the role of contradictor on the hearing of the application against the accountants, and
· effectively conceded the request for documents the day before the hearing by advising that the documents would be produced.
Counsel submitted that the executors, by causing the accountants to decline to produce the documents, caused the initiation of the originating application for discovery. They prolonged the proceedings by not causing or permitting the documents to be produced until the day before the hearing. They were accordingly connected with the commencement and continuation of the proceedings and their connection caused the applicant to incur the whole of the costs of the originating application. The circumstances are exceptional so that there should be a departure from the general rule that only parties are subject to costs orders. It is reasonable and just for an order to be made requiring the executors to pay.
Counsel for the executors, Mr Zeeman, submitted that the order sought should not be made because:
· Rule 403H of the Supreme Court Rules 2000 provides that where an order is made on an application to obtain discovery with a view to later commencing proceedings the Court or a judge may order a party to other proceedings to pay the costs. Here, no order has been made on the discovery application.
· The executors could have been joined as parties to the application by the applicant when advised that the documents had been handed by the accountants to the executors. They were not joined as parties.
· The application against the accountants was unnecessary as there was already an undetermined application for discovery of the documents against the executors in the primary action which application could have been, but was not, pursued.
· The release of the documents prior to the hearing deprived the applicant of the ability to obtain a costs order against the accountants and this is the motivation which has led to the applicant pursuing an order against the executors
Determination
I find the case put forward by Mr McElwaine SC on behalf of the applicant to be compelling. With respect, I do not find the arguments presented by Mr Zeeman for the executors to be persuasive.
The fact that no order was made on the discovery application was the result of the executors making the discovery sought prior to the allocated hearing date. There was no need to join the executors as parties to the discovery application as they knew of it, intended to participate in it and were to be the sole contradictors. Pursuit of the further and better discovery application in the primary application may have resulted in the documentation being discovered, but there was doubt as to whether the application would succeed as the executors claimed that the superannuation documents were not property of the estate the subject of the action. It was a practical and expedient approach to endeavour to obtain the documents independently of the issues raised in the primary action. The fact that no order was made on the discovery application against the accountants is of little relevance as by bringing the application the applicant obtained the documents sought and hence obtained the whole of the substantive relief applied for without the need to proceed to a hearing or final orders.
I find the circumstances of the present case to be such as to result in a conclusion that it is reasonable and just to order that the executors pay the costs. The executors caused the application to issue by instructing the accountants not to release the documents. They caused the application to be continued by obtaining the documents from the accountants and advising the Court that they would be appearing on the hearing of the application to resist the making of the orders sought. The fact that they were not substituted as respondents or warned about possible costs consequences to them is of little significance. They were legally represented and the present costs application should have been well within their contemplation from the time the application was originally brought.
Order
There will be an order that Anne Brown Sculthorpe and Elizabeth Margaret Parker, being the defendants in action 749/2013, pay the costs of the originating application.
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