Walters v Perton (Costs)
[2023] VSC 380
•6 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S CI 2017 02159
| LYNNE MARGARET WALTERS | Plaintiff |
| v | |
| JANE ELIZABETH PERTON (who is sued in her capacity as the Executor of the Will and Trustee of the Estate of Donald Graeme Warring, deceased) | Defendant |
- and –
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2018 00225
| LYNNE MARGARET WALTERS | Plaintiff |
| v | |
| JANE ELIZABETH PERTON (who is sued as trustee of the Port Eagle Investment Trust and as Executrix of the Will and Trustee of the Estate of Donald Graeme Warring, deceased) | Defendant |
| - and – | |
| JANE ELIZABETH PERTON (as Trustee of the Port Eagle Investment Trust) | Plaintiff by Counterclaim |
| v | |
| LYNNE MARGARET WALTERS | Defendant by Counterclaim |
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JUDGE: | FORBES J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 14, 17 April 2023 |
DATE OF JUDGMENT: | 6 July 2023 |
CASE MAY BE CITED AS: | Walters v Perton (Costs) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 380 |
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ADMINSTRATION OF JUSTICE – Overarching obligations – Where conduct of defendant in proceedings alleged to have contravened overarching obligations – Whether conduct breaches obligations – Whether court should sanction contravention by indemnity costs order – Civil Procedure Act 2010 (Vic) ss 19, 20, 23, 24, 25 and 29.
PRACTICE AND PROCEDURE – Costs – Costs of three related proceedings – Where two substantive proceedings were heard together – Appropriate apportionment across two substantive proceedings – Whether interlocutory costs orders should be vacated – Where one party’s fees significantly exceed the other party’s – Whether appropriate to fix gross sum or order taxation – Whether executor is to be indemnified from estate for costs orders – Costs of proceedings heard together to apportioned equally – Interlocutory orders stand – Costs estimates to be reduced by 15%.
PRACTICE AND PROCEDURE – Costs – Where plaintiff was wholly successful in one proceeding – Where defendant breached obligations of the Civil Procedure Act 2010 – Whether costs to be awarded on an indemnity basis – Costs of Part IV proceeding to be paid on an indemnity basis.
PRACTICE AND PROCEDURE – Costs – Where plaintiff had mixed success in other proceeding – Whether to make adverse costs orders on an issues basis in other proceeding – Whether to discount costs awarded to plaintiff in other proceeding – Costs of TEP proceeding to be paid on a standard basis with further reduction for mixed success – No adverse costs order in respect of issues that did not succeed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | R Garratt KC | Nedovic Lawyers |
| For the Defendant | D Farrands KC L Mills | Darrer Muir Fleiter |
HER HONOUR:
Background
These reasons deal with the parties’ costs in three related proceedings between Lynne Walters and Jane Perton. Lynne was the partner of Don Warring, who died on 4 February 2017. Jane is Don’s daughter and the executor of his estate. The three proceedings are:
(a) Lynne’s application for further provision from Don’s estate commenced on 6 June 2017 under Part IV of the Administration and Probate Act (Part IV proceeding);
(b) Jane’s application as trustee of the Port Eagle Investment Trust to recover possession of the house at Oldewald Rd, Eaglemont in which Lynne and Don had been residing prior to Don’s death, commenced on 16 June 2017 (possession proceeding); and
(c) Lynne’s application seeking various declarations regarding her own and the estate’s interest in various assets commenced on 5 July 2018 (TEP proceeding).
These reasons assume some familiarity with the issues arising across the three proceedings as detailed in my reasons of 9 February 2023 (the principal judgment) and in my further reasons of 20 June 2023 dealing with the quantum and payment of further provision (the quantum judgment). They also assume some familiarity with three sets of reasons Derham AsJ published in the possession proceeding. I adopt the names and other definitions used in my principal judgment.
In summary, the costs issues that the parties ask the Court to consider are:
(a) the appropriate course of action for the present stay on orders regarding costs in the possession proceeding and the summons for taxation of those costs (Proceeding S ECI 2018 00654, the Costs Court proceeding);
(b) the apportionment of overall costs between the Part IV and TEP proceedings;
(c) the quantum and basis upon which Lynne’s costs are calculated in the Part IV proceeding including reserved costs;
(d) the costs of the TEP proceeding including reserved costs, and including three interlocutory costs orders in respect of various contested applications on discrete issues, namely:
(i) a costs order in Lynne’s favour relating to Jane’s application to set aside subpoenas to produce financial documents;
(ii) a costs order in Lynne’s favour relating to payment of her costs thrown away by reason of Jane no longer pursuing her application for removal of a caveat as a matter to be determined before trial; and
(iii) a costs order in Jane’s favour relating to Lynne’s application for a trial of separate questions pursuant to r 47.04 of the Supreme Court (Civil Procedure Rules) 2015 (the Rules) (collectively the existing costs orders); and
(e) the extent to which the parties are to be indemnified from the estate for their costs in the TEP and Part IV proceeding.
In summary, I have reached the following conclusions:
(a) The total costs of the Part IV and TEP proceedings be apportioned equally.
(b) Jane should pay Lynne’s costs of the Part IV proceeding as a gross sum on an indemnity basis, fixing an amount for set fees but requiring further information regarding disbursements.
(c) Jane should pay Lynne’s costs of the TEP proceeding on a standard basis subject to a percentage reduction to account for issues on which Lynne was unsuccessful.
(d) The three existing costs orders with respect to the TEP proceeding should not be vacated. They should each be paid on a standard basis. To avoid taxation, the parties should provide the Court with an assessment of these costs.
(e) The parties must provide further information before determination of the stay on the costs orders in the possession proceeding.
(f) Further information is required to determine the extent to which Jane is entitled to be indemnified from the estate in respect of her costs.
The costs of the possession proceeding
As outlined in the principal judgment, Jane commenced a proceeding to recover possession of the Eaglemont property. Derham AsJ determined the possession proceeding on Jane’s summary judgment application and granted possession of the property to Jane as trustee. Derham AsJ ordered Lynne to pay Jane’s costs of the possession proceeding on a standard basis.
Jane subsequently issued a summons for taxation of those costs payable by Lynne. Jane filed an itemised Bill of Costs and Lynne’s cost consultant inspected Jane’s solicitors’ file. The costs consultant identified two emails between Jane and her solicitors in the possession proceeding (the disputed emails). Those emails were relevant to whether Don contributed funds to the purchase of the Eaglemont property (which Jane had denied) and are detailed in Derham AsJ’s reasons[1] and my principal judgment.[2] Lynne sought disclosure of the disputed emails but Jane did not consent.
[1]Perton v Walters [2018] VSC 445, [23] (‘Perton v Walters’).
[2]Walters v Perton [2023] VSC 37, [78]-[85].
As a result of the disputed emails and the subsequent discovery of the document that Don signed at the time of purchase, Lynne made a successful application in the possession proceeding to stay the costs orders.[3] Lynne obtained an order that Jane pay her costs of that application.
[3]By summons dated 9 July 2018.
Derham AsJ found that it was appropriate to stay both costs orders, one in favour of Jane and one in favour of Lynne, until further order. His Honour did so by orders in the possession proceeding dated 17 August 2018.
The issue in the possession proceeding is therefore whether I should lift both stays on the costs orders, as Jane contends, or permanently stay both orders, as Lynne contends.
The costs of the TEP and Part IV proceedings
Both parties accept that the Part IV proceeding and the subsequent TEP proceeding are inextricably linked and that their total costs over both proceedings should be apportioned appropriately. The actual apportionment that should be made is a matter of dispute.
The issue in the Part IV proceeding is the appropriate quantum of apportioned costs to award to Lynne and whether those costs should be payable on a standard or indemnity basis.
The first issue in costs apportioned to the TEP proceeding is who should recover costs and the quantum of what is recovered given the plaintiff succeeded in obtaining some but not all relief sought.
The second issue is to address the existing costs orders. They relate to the following information:
(a) In February 2019, with the Court’s leave, Lynne issued Jane and NAB with subpoenas requesting production of bank documents and other financial documents. Lynne issued the subpoenas in response to Jane’s bankruptcy application. Jane sought to set aside the subpoenas as an abuse of process or vexatious and oppressive, but in accordance with detailed reasons,[4] Derham AsJ determined that Jane be required to produce most of the documents and pay the costs of production.[5] Derham AsJ made orders awarding costs in Lynne’s favour.
(b) Jane made application asking the Court to remove prior to trial the caveat that Lynne lodged over the Eaglemont property.[6] Prior to the hearing scheduled on 14 August 2019, but after the parties had prepared affidavits and submissions, Jane notified the Court that she no longer pressed for removal of the caveat prior to trial. Derham AsJ ordered Jane pay Lynne’s costs thrown away. His Honour’s reasons for making the costs order also provides an analysis of the affidavit material and submissions prepared by Lynne, which ‘provide some guidance for the costing exercise’.[7]
(c) Lynne applied for a trial of separate questions pursuant to r 47.04 of the Rules. In accordance with reasons published on 12 November 2019,[8] Derham AsJ dismissed the application and ordered Lynne pay Jane’s costs of the application (in Jane’s capacity as executor and trustee of the PEI Trust).
[4]Walters v Perton [2019] VSC 356.
[5]By orders of 14 June 2019 amended pursuant to the slip rule on 14 August 2019.
[6]Jane also sought relief in the summons issued 20 March 2020.
[7]Walters v Perton (No 2) [2019] VSC 542, [19].
[8]Walters v Perton (No 3) [2019] VSC 733.
The evidence
Background
The parties tendered further evidence in respect of the costs issues. Lynne relied on her affidavit sworn on 17 March 2023. She was not cross-examined. Lynne’s solicitor Mr Nedovic was cross-examined at trial as to costs.
Lynne tendered a Notice to Admit and responding Notice of Dispute.[9] Amongst other facts, the Notice to Admit sought an admission that ‘no extant demand for payments of money on any account had been served on the deceased by NAB as at the date of his death’.[10] Jane disputed this on the basis that it involved ‘mixed questions of fact and law’.[11]
[9]Exhibit 21, Plaintiff, ‘Notice to Admit dated 12 February 2020 and Notice to Dispute in response dated 25 February 2020’ in Lynne Margaret Walters v Jane Elizabeth Perton S ECI 2018 00225.
[10]Ibid, Notice to Admit dated 12 February 2022, page 2 [Fact 2].
[11]Ibid, Notice to Dispute dated 25 February 2020, page 2 [1].
Jane relied on the affidavit of Mr Dare sworn 6 April 2023 deposing to Jane’s legal costs. His affidavit contained a table summarising Jane’s legal costs incurred across all matters.[12] He was cross-examined on his affidavit. Jane tendered a costs agreement between Lynne and her solicitors and accompanying disclosure statement dated 10 April 2017.[13]
[12]Exhibit G, Defendant, ‘Affidavit of Shane William Dare’ sworn on 6 April 2023 in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225, document exhibited at SWD-1.
[13]Exhibit J, Defendant, ‘Costs Agreement and Disclosure Statement between Nedovic Lawyers and Lynne Walters dated 10 April 2017’ in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225.
Jane tendered emails from Mr Dare dated 1 March 2019 and 22 December 2021. The first email attached two costs agreements – one for Jane in her capacity as executor and the other in her personal capacity.[14] The second email attached a costs agreement in respect of preparation for the then forthcoming trial listed in February 2022. It identifies Jane in her capacity as executor and as trustee of the PEI Trust.[15]
[14]Exhibit 19A, Plaintiff, ‘Email sent by Shane Dare to Jane Perton and Brendan Fleiter on 1 March 2019 at 11.04am’ in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225.
[15]Exhibit 20, Plaintiff, ‘Email sent by Shane Dare to Jane Perton on 22 December 2021 at 11.04am’ in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225.
Jane tendered emails from Mr Dare dated 1 March 2019 and 22 December 2021. The first email attached two costs agreements – one for Jane in her capacity as executor and the other in her personal capacity.[16] The second email attached a costs agreement in respect of preparation for the then forthcoming trial listed in February 2022. It identifies Jane in her capacity as executor and as trustee of the PEI Trust.[17]
[16]Exhibit 19A, Email sent by Shane Dare to Jane Perton and Brendan Fleiter on 1 March 2019 at 11.04am.
[17]Exhibit 20, Email sent by Shane Dare to Jane Perton on 22 December 2021 at 11.04am.
Lynne tendered a letter from Darren Muir Fleiter Lawyers (DMF) to Nedovic lawyers dated 9 September 2020.[18] The purpose of the letter was for Jane’s solicitor to confirm from Lynne’s solicitor that Lynne would be able to meet adverse costs orders. It foreshadows an application for security for costs if adequate confirmation of financial capacity is not received. The letter detailed extensive reasons why, in DMF’s opinion, Lynne’s position in respect of the TEP claim will fail. It made no mention of prospects in the Part IV claim.
[18]Exhibit 19, Plaintiff, ‘Letter from Darren Muir Fleiter to Nedovic Lawyers dated 9 September 2020’ in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225.
Mr Nedovic was taken to his letter estimating costs as at 2 February 2022.[19] Of the then total of $900,000 in costs he attributed $141,000 to the possession and bankruptcy proceeding. Lynne’s evidence is that the costs incurred in the possession proceeding are $138,085.88.[20] Of the $759,000 then attributed to the TEP and Part IV proceedings, Mr Nedovic was asked in cross examination to allocate a percentage to each. He said ‘if I had to guess I’d say about 75% of the fees, and I’m only making a very rough guess, was related to [proceeding] 225 and not to the Part IV’.[21]
[19]Exhibit 18, Defendant, ‘Affidavit of Shane William Dare’ sworn on 22 October 2020 in Lynne Margaret Walters v Jane Elizabeth Perton S ECI 2018 00225CB 5949, document exhibited at SWD-4.
[20]Exhibit 14, Plaintiff, ‘Affidavit of Lynne Margaret Walters’ sworn on 17 March 2023 in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159, 2 [9].
[21]Transcript of Proceedings, Lynne Margaret Walters v Jane Elizabeth Perton (Supreme Court of Victoria, S CI 2017 02159 and S ECI 2018 00225, 9-14 February 2022, 4 April 2022) 238.27 (‘Trial Transcript’).
Mr Dare gave evidence that, though he was not a partner at DMF, he had been in practice for approximately 20 years. He initially worked under Mr Muir’s supervision but subsequently worked without partner supervision. Mr Fleiter, who had previously been a partner at DMF, continued to discuss the litigation with Mr Dare after retiring from the partnership.[22]
[22]Transcript of Proceedings, Lynne Margaret Walters v Jane Elizabeth Perton (Supreme Court of Victoria, S CI 2017 02159, S ECI 2018 00225, 14 and 17 April 2023) 81.26 (‘T’).
Mr Dare said that upon being notified of the intended Part IV proceeding he considered that Lynne was likely to have a moral claim on the estate but did not seek to quantify the claim at that time.[23] He said that the bankruptcy proceeding was for the purpose of taking the Part IV proceeding out of Lynne’s hands and placing it in the control of an official appointed by the Federal Circuit Court.[24]
[23]T 84.5-8.
[24]T 89.7.
As to the Notice to Admit, in cross-examination Mr Dare agreed that the admission sought regarding any demand of NAB on Don was a ‘straight question of fact’[25] and that there was no correspondence that could be found evidencing a NAB demand.[26]
[25]T 92.5.
[26]T 93.7.
Parties’ costs estimates
Lynne provided an estimate of her costs in her affidavit of 17 March 2023. According to this estimate, her fees incurred in all litigation involving Jane total $1,244,950.17. The breakdown is as follows:[27]
[27]Exhibit 14, Affidavit of Lynne Walters sworn on 17 March 2023, [8]-[9].
Proceeding
Breakdown of costs
Total amount
Possession proceeding Costs: $83,722.10
Disbursements: $54,363.78
$138,085.88 Part IV and TEP proceedings Costs: $680,935.75
Disbursements: $425,928.54
$1,106,864.29
Jane’s fees incurred in all litigation totals $815,781.65.[28] The breakdown is as follows:[29]
[28]Exhibit G, Affidavit of Shane Dare sworn on 6 April 2023, document exhibited at SWD-1.
[29]Ibid.
Proceeding
Breakdown of costs
Total amount
Part IV proceeding Costs: $22,269.50
Disbursements: $9,992.66
$32,262.16 TEP proceeding Costs: $198,388.28
Disbursements: $479,215.67
$677,603.95 Possession proceeding Costs: $46,106.52
Disbursements: $8,930.20
(this breakdown is provided in the taxable bill of costs, which totals $55,036 for the amount for the possession proceeding)[30]
$73,457.98
Bankruptcy proceeding Costs: $5,588.60
Disbursements: $6,590
$12,178.60 Probate proceeding Costs: $3,705.00
Disbursements: $638.90
$4,343.90 [30]Exhibit 23, Plaintiff, ‘Bill of Costs for Jane Perton dated 31 January 2018 (prepared by Blackstone Legal Consulting)’ in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225.
Evidence going to whether costs should be ordered on an indemnity basis
As stated above, Mr Dare gave evidence that upon being notified of Lynne’s intended Part IV proceeding he considered that Lynne was likely to have a moral claim on the estate.[31] Lynne’s solicitor initially described the Part IV proceeding as a ‘garden variety’ Part IV application and the costs estimate he first provided Lynne was $20,000.[32]
Encumbrance of the Bell St Property
[31]T 84.5.
[32]Trial Transcript 226.20-25.
In a letter of 2 May 2017, Lynne’s solicitor sought an undertaking in the following terms:[33]
An undertaking that our client can continue to use and occupy the Eaglemont property on a rent free basis, and that all utility expenses in respect of the property except the telephone will continue to be paid by MCS Digital or the entity which has been paying for them to date, until the Part IV proceedings are finalised.
[33]Exhibit B, Defendant, ‘Affidavit of Jane Elizabeth Perton’ sworn on 9 April 2019 in Lynne Margaret Walters v Jane Elizabeth Perton S ECI 2018 00225, document exhibited at JEP-44.
On 16 May 2017, with knowledge of the intended Part IV proceeding, Jane chose to encumber the Bell St property that she now owned with a new mortgage to support her guarantee of MCS borrowings.[34]
[34]Exhibit 1, Plaintiff, ‘Affidavit of Lynne Margaret Walters’ sworn on 31 July 2017 in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159, document exhibited at LMW-5.
By 17 May 2017, prior to substantively responding to Lynne’s solicitor, Jane had new borrowings of $300,000 approved with a drawdown date of 26 May 2017 and secured by a second mortgage over the Eaglemont property. These funds were primarily to fund the anticipated expense of the Part IV proceeding.
On Jane’s instructions, DMF responded to the letter from Lynne’s solicitor (the DMF letter). DMF sent the letter contemporaneously with another letter from Madgwicks on Jane’s instructions as the trustee of the PEI Trust (the Madgwicks letter).[35] Both were sent on 29 May 2017. The Madgwicks letter expressed that Jane was prepared to permit Lynne to reside in the property for the six-month period, subject to Lynne, at her own cost, signing consent orders to relinquish possession on 4 August 2017 in a proceeding Jane would commence to recover possession of the property.
[35]Ibid [37]-[40].
The DMF letter stated that Don’s will did not make provision to Lynne for $200,000, and stated that apart from $10,000 payable from any residuary, the will made no binding provision for Lynne.
In the trial, Graham Haydar’s evidence was that Jane wished to ‘gear up the Bell St property to the maximum LVR allowed for by the NAB’.[36] On 27 April 2017, following a meeting with Jane and Graham Haydar, NAB confirmed that it was possible to release the Bell St property on certain conditions, including debt reduction of MCS and the offer of her property in Albert Park as security.[37]
Jane’s ‘strategies’
[36]Trial Transcript 403.7-9.
[37]Trial Transcript 376.31-378.21; 434.7-435.1.
In August 2018 when Derham AsJ ordered Jane produce the disputed emails over her objection and stayed costs ordered against both parties, his Honour also made a number of directions. His Honour referred both the TEP proceeding recently commenced and the Part IV proceeding to mediation as well as the quantum of costs between the parties, to be concluded by 31 October 2018. His Honour also ordered that Jane as executor make, file and serve an affidavit setting out the estate’s financial position between seven and 14 days prior to the mediation. His Honour noted at the time of the referral to mediation that it is desirable ‘in pursuit of the just efficient, timely and cost effective resolution of the real disputes between Mrs Walters and Mrs Perton, that there be a mediation of all proceedings as early as may be’.[38]
[38]Perton v Walters (n 1), [81].
The mediation did not occur in accordance with these orders. On 19 October 2018 the parties agreed to a mediation on 30 October 2018 and agreed on a mediator. The day prior to the mediation Jane provided an unsworn affidavit, said to be in compliance with the orders of 17 August 2018. It did not include the Bell St property as an asset of the estate and gave no explanation. Jane did not provide a sworn affidavit and the mediation on 30 October was adjourned. DMF ceased to act for Jane as executor on 30 November 2018, although the firm continued as her solicitor for the bankruptcy proceeding. Jane provided a sworn copy of the unsworn affidavit in January 2019. DMF resumed acting for Jane from 7 March 2019, shortly after Jane advised this Court in February 2019 that she proposed to discontinue the bankruptcy proceeding.
Jane has filed Form 4A certifying that she has read and understood the overarching obligations set out in s 16 to 26 and the paramount duty set out in s 16 of the Civil Procedure Act 2010 (Vic) (Civil Procedure Act). She has filed such a document in the TEP proceeding both in her capacity as executor of the deceased’s estate and as trustee of the PEI Trust. She did not file such a certificate in the earlier commenced Part IV proceeding when filing an appearance or first substantive document – the affidavit sworn 8 December 2017.
The submissions
As a preliminary matter, Jane made two open offers to Lynne in the course of the trial, neither of which Lynne accepted. Neither party made any submissions on costs consequences that should flow from this.
Lynne’s submissions
Lynne submits that there should be broad costs orders encompassing the disputes across proceedings. She seeks the following orders:
(a) there be an order for Jane to pay a fixed sum of gross costs in each proceeding, pursuant to rule 63.07(2)(c), instead of an order of taxed costs, and alternatively, Jane pay Lynne’s costs of the Part IV proceeding and the TEP proceeding on an indemnity basis;[39]
[39]T 130.8-15.
(b) Lynne’s entitlement to her costs of the TEP proceeding include her costs of defending the counterclaim;
(c) the three existing costs orders be set aside; and
(d) the stays that Derham AsJ ordered on the payment of costs in the possession proceeding be made permanent.
Costs on an indemnity basis
(i) Failure to seek judicial advice
As a preliminary point in support of her costs submissions, Lynne submits that Jane breached her duties as executor by failing to seek judicial advice before bringing the possession proceeding and before defending the Part IV and TEP proceedings. Lynne therefore submits that Jane’s costs of those proceedings were not properly incurred because a court properly informed would not have given advice to commence the possession proceeding nor to defend the Part IV proceeding, which would have rendered the TEP proceeding unnecessary. Lynne submits that the premise on which the Court made existing costs orders in the TEP proceeding was that Jane was conducting the defence of the TEP proceeding in accordance with judicial advice, and that she only appreciated that this premise was wrong at the trial’s conclusion. Lynne submits that Jane’s failure to seek judicial advice as executor means that she should not be permitted to recoup her costs from the estate, such that she would be personally liable to meet adverse costs orders.
(ii) Jane’s strategies
In the TEP proceeding Lynne submits that, as she succeeded in establishing that the estate held an asset capable of meeting adequate provision for her, and noting that costs follow the event, she is entitled to her costs of the TEP proceeding. Lynne submits that Jane should pay both these costs and her costs of the Part IV proceeding on an indemnity basis.
In support of this argument, Lynne submits that Jane’s conduct of the litigation both generally and specifically has been unmeritorious, deliberately obstructive and/or improper, warranting an order for indemnity costs. Lynne’s opening and closing submissions at the trial outlined the various matters on which she submitted that Jane engaged in calculated conduct to take advantage of Lynne’s limited resources and vulnerable position in order to defeat Lynne’s legitimate interests. Annexure A of the closing submissions identified a number of steps characterised as a ’campaign’ by Jane to defeat Lynne’s expectations.[40] Lynne submits that Jane’s steps – including encumbering the Eaglemont property, bringing the possession proceeding and removing the Bell St property from the estate and encumbering it when on notice of the intended Part IV proceeding – support her argument that costs should be paid on an indemnity basis, as Jane has not performed her duties as executor conscientiously.
Apportionment between proceedings
[40]Plaintiff, ‘Outline of Closing Submissions’, Submissions in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225, 28 February 2022, Annexure A.
As set out in the table in paragraph [24], Lynne’s evidence is that her total costs of the Part IV and TEP proceedings are $1,106,864.29. In her submissions, Lynne rounds this to $1,106,000, and apportions them as $441,000 (roughly 40%) to the TEP proceeding and $665,000 (roughly 60%) to the Part IV proceeding.[41]
Gross costs order
[41]Plaintiff, ‘Outline of Supplementary Submissions as to Costs of Defendant by Counterclaim’, Submissions in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225, 20 March 2023, [25] (‘Plaintiff’s TEP Submissions’), and ‘Outline of Submissions of Plaintiff’, Submissions in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225, 28 March 2023, [42] (‘Plaintiff’s Part IV Submissions’).
Lynne submits that the Court should make a gross costs order instead of requiring the parties to go through taxation. She notes that the bill in taxable form for the possession proceeding, which was determined by summary judgment application four months after being issued, is 68 pages and the cost of drawing such a bill was over $6,500.[42] She submits that the process of taxing the Part IV proceeding and the TEP proceeding, which proceeded over six and five years respectively would comfortably surpass $150,000.[43]
[42]Exhibit 23, Bill of Costs of Jane Perton dated 31 January 2018 (prepared by Blackstone Legal Consulting).
[43]T 118.15.
Lynne seeks a gross costs order for the TEP proceeding of $395,000, being 90% of her estimate for indemnity costs ($441,000).[44] Lynne seeks a gross costs order for the Part IV proceeding of $590,000, being 90% of her estimate for indemnity costs ($665,000).[45]
[44]Plaintiff’s TEP Submissions, [25].
[45]Plaintiff’s Part IV Submissions, [42].
Lynne acknowledges that these costs are significant but submits that they are not excessive and were incurred necessarily because of Jane’s campaign to defeat her claim. She submits that it would not be appropriate to consider the question of whether the costs are excessive by reference to the quantum of Jane’s legal costs. Lynne submits that I should not take into account the fact that Jane’s costs are lower by comparison as indicating that Lynne’s are excessive, noting the following:
(a) Lynne had no junior counsel briefed for much of the proceeding, which increased the burden on her solicitors and therefore their fees as they were responsible for a greater share of the work compared to Jane’s solicitors.
(b) DMF’s costs are also comparatively less because Mr Dare – who had conduct of the proceeding for a significant period – is not a partner and was not subject to partner supervision for a large period.
(c) DMF was charging solicitor’s time at $300 per hour,[46] even though the Supreme Court scale permits $412 per hour plus GST.[47]
(d) Jane paid disbursements directly and these amounts are not included in the figures that Mr Dare prepared.[48]
[46]Exhibit 19, Letter from Darrer Muir Fleiter to Nedovic Layers dated 9 September 2020.
[47]Supreme Court (General Civil Procedure) Rules 2015 (Vic), Appendix A (as in force as at 1 January 2019).
[48]T 95.30-21; T 96.1-11.
Lynne also submits that Jane’s separate costs incurred in briefing Madgwicks to act for her in her capacity as trustee of the PEI Trust constitutes an unnecessary duplication of costs.
Costs of the TEP proceeding and counterclaim
Lynne submits that the outcome of the TEP proceeding is that she established that there were sufficient funds in the estate available to meet further provision to which she was entitled. She resists an approach that apportions costs based upon the outcome of issues as submitted by Jane. Her apportionment as between proceedings is set out above as is her calculation of costs on an indemnity basis.
Lynne submits that her entitlement to costs in the TEP proceeding should include her costs in defending the counterclaim in the TEP proceeding. Lynne submits that the basis for removing the caveat is the converse of Lynne failing to establish an equitable interest in Eaglemont – an issue that occupied no additional time at trial. The costs of defending the counterclaim would notionally include the outcome of the application for removal of the caveat as a matter to be determined prior to trial. That application is the subject of one of the three existing costs orders.
Lynne submits that, to establish liability for damages pursuant to s 118 of the Transfer of Land Act 1958, Jane would have had to demonstrate that the caveat was lodged without reasonable cause. Lynne submits that she had reasonable cause as she believed, based on legal advice, that she may have an interest in the Eaglemont property. Jane did not challenge the reasonableness of this belief at trial, and Lynne submits that Jane did not establish any loss by reason of the caveat. Lynne submits that she is therefore entitled to recover her costs in defending the counterclaim.
Existing costs orders
Lynne made no substantive submissions in support of her argument that the interlocutory costs orders in the TEP proceeding should be set aside. She submitted that it would be appropriate to set them aside if I accepted that the relief to be provided was by way of equitable compensation for breaches of fiduciary duty by Jane. Relief in that form would mean that no order as to costs was sought because Lynne’s costs would be accounted for in the calculation of equitable compensation. She otherwise submitted that the costs order in her favour is accounted for in the fixed sum gross cost order calculation or the provision of indemnity costs. She makes no direct submission on vacating the existing costs order in Jane’s favour, although she does make submissions as to the inflated estimate of the costs that would be covered by that order.
Costs of the possession proceeding
Lynne submits that the possession proceeding should be seen as an integral element of a deliberate course of action that Jane took to deprive Lynne of a roof over her head.[49] Lynne submits that Jane’s conduct has caused Lynne to exhaust her only substantial asset, being the proceeds of sale of the Blackman’s Bay house. It was on this basis that Lynne submitted that the cost of fighting the eviction proceeding (in total approximately $138,000) and obtaining adequate provision from the estate (for which she has paid approximately $375,000 of the outstanding total)[50] have left her without funds to contribute to accommodation. She submits that she will not recoup her own legal costs in the possession proceeding and has no resources to have the costs order against her set aside in that proceeding.
[49]T 119.25.
[50]Exhibit 14, Affidavit of Lynne Margaret Walters sworn on 17 March 2023, [8].
Lynne submits that it would be just to stay the costs orders for and against her in the possession proceeding permanently. The costs of the stay application in the possession proceeding are included in the amount of $138,806, although a breakdown is not before me. Lynne submits that the quantum of the costs orders in Jane’s favour and in her favour essentially offset each other.[51]
Indemnification from the estate
[51]T 188.21-26.
Finally, Lynne submits that costs are awarded in favour of or against parties. The question of recourse to the estate to indemnify a party is a separate question to the liability for costs and if appropriate may be subject to a second order granting that indemnification. Lynne submits that Jane should pay her costs personally, largely for the same reasons as advanced in support of a claim for payment of costs on an indemnity basis. Additionally, given that the estate now has no asset capable of meeting a costs order, any order that payment of costs be met from the estate would be futile.
Jane’s submissions
In summary Jane seeks the following orders:
(a) In the Part IV proceeding there be no order for costs as between Lynne and Jane but an order that both parties’ costs both be indemnified out of the estate to the extent that there be some recourse to the Bell St asset on a standard basis.
(b)With respect to the TEP proceeding, as the issues were discrete as to each property interest claimed, costs should be apportioned on an issues basis and costs orders should be made in favour of the party who succeeded on each issue for a portion of their costs. Therefore, Lynne should pay Jane’s costs with respect to that part of the TEP proceeding that related to the Eaglemont property and the MCS shares. The estate should pay Lynne’s costs and Jane’s costs with respect to the Bell St Property.
(c) Lynne pay Jane’s costs in respect of the Eaglemont property on an indemnity basis.
(d) The three existing costs orders in the TEP proceeding stand and be taxed forthwith.
(e) The parties bear their own costs of Jane’s counterclaim for removal of the caveat and compensation. Jane submits that this is appropriate as the counterclaim has had mixed success – the effect of the findings in the TEP proceeding is that the caveat should be removed but Jane no longer presses for payment of compensation. She notes that in any event such costs are likely to be minimal.
(f) The stays on the payment of costs in the possession proceeding be lifted and those costs taxed.
Without prejudice to the submissions outlined below, Jane submitted that Lynne’s costs are exorbitant and would likely be significantly reduced on taxation. Jane requested that there be taxation of costs on a standard basis. Although Jane’s written submissions suggested as an alternative to taxation that Lynne’s costs overall be capped, this was not developed in any way.[52]
Apportionment of costs of the Part IV proceeding
[52]Defendant, ‘Defendant’s Further Submissions for Part IV Proceeding’, Submissions in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225, 12 April 2023, [110] (‘Defendant’s Part IV Submissions’).
In order to estimate Lynne’s costs of the Part IV proceeding, Jane submits that Lynne’s total costs should be apportioned based on Mr Nedovic’s estimate in cross-examination that 75% of the fees (approximately $829,000) related to the TEP proceeding and 25% (approximately $275,000) related to the Part IV proceeding.[53] Therefore Jane submits that Lynne is entitled to indemnification from the estate for her costs of the Part IV proceeding totalling $275,000. Jane submits that this sum should be reduced as recoverable costs should be ordered on a standard basis.[54]
[53]Trial Transcript 238.19-28.
[54]Defendant’s Part IV Submissions [15].
Jane submits that her own total costs of the Part IV proceeding, being $169,400.75 (25% of her total costs for the two proceedings), plus an additional $32,262.16 that she says DMF charged exclusively for the Part IV proceeding, should also be met out of the estate on a standard basis.[55]
Lynne’s and Jane’s costs of the TEP proceeding
[55]Ibid [14].
Jane submits that costs with respect to the TEP proceeding (which are considered to be 75% of the overall costs) should be apportioned on an issues basis to reflect the mixed success of the proceeding – noting that Lynne only established that one of three disputed assets was in the estate.[56] Jane cites the Victorian Court of Appeal in Chen & Ors v Chan & Ors (‘Chen’) to support her submission that costs should be ordered between the parties on an issues basis.[57] Jane submits that the outcome of the two proceedings should not be conflated, because the TEP proceeding outcome was an anterior question to be answered before the issues in the Part IV claim could be determined.
[56]Defendant’s TEP Submissions [14]-[20].
[57]Chen & Ors v Chan & Ors [2009] VSCA 233 (‘Chen’).
In Jane’s written submissions, she suggested that the appropriate apportionment should be 50% to the Eaglemont property, 25% to the MCS shares and 25% for the Bell St property, which would mean Lynne is only able to recover 25% of her costs in the TEP proceeding (being the proportion associated with the Bell St property).[58]
[58]In oral submissions on 17 April 2023, Jane provided the Court with a table that Mr Dare prepared, apportioning the costs of the TEP proceeding as 60% Eaglemont, 15% MCS and 25% Bell St. These are different figures to the original figures in written submissions, but noting that the 25% Bell St property apportionment is unchanged, it does not alter Jane’s submissions with respect to what costs Lynne is required to pay.
Jane submits that the costs to Lynne and herself for 25% of the TEP proceeding should each be indemnified out of the estate, as the Bell St property was an asset of the estate at the date of Don’s death and the question of encumbrance was contested in the proceeding, with Jane as executor representing the estate. Jane’s cost for this part of the TEP proceeding is calculated at $127,000.
Jane submits that Lynne should bear the balance of her own costs of the TEP proceeding.
Jane submits that Lynne pay the other 75% of Jane’s costs of the TEP proceeding (Jane’s estimate of the proportion of time spent on the issues in which Jane was successful), which equates to $381,151 (three quarters of 75% of $677,603, being the total amount of Jane’s costs in the Part IV and TEP proceedings in Mr Dare’s table of Jane’s costs).
Indemnity costs
Jane seeks indemnity costs for that portion of her costs relating to the Eaglemont property issues for two reasons:
(a) First, because Lynne made an allegation of fraud against Jane that was known to be false and failed at trial.[59] In Jane’s submission, there was no evidence that she was aware of any relocation agreement and yet Lynne alleged that Jane used her position as the registered proprietor to defeat Lynne’s equitable interest based upon the relocation agreement.
(b) Second, because Lynne commenced the TEP proceeding – with regards to her Eaglemont claim – in ‘wilful disregard of known facts’.[60]
[59]Defendant, ‘Defendant’s Closing Submissions’, Submissions in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225, 16 March 2022, [113].
[60]Defendant’s TEP Submissions [36].
Jane resists payment of Lynne’s costs on an indemnity basis in either proceeding. She submits that Lynne has not articulated why the discretion should be so exercised in conformity with the established principles described in Ugly Tribe Co Pty Ltd v Sikola (‘Ugly Tribe’).[61]
[61][2001] VSC 189.
In respect of her own costs Jane submits that she has incurred total costs of $815,781.65.[62] The table of costs that Mr Dare prepared sets out that the amount of Jane’s costs referable only to the Part IV – which totals $32,262. This sum includes costs to 6 July 2017 only. Thereafter all costs referable to the Part IV proceeding are included in the costs tabled against the TEP proceeding, which totals $677,603. Jane’s standard costs in the possession proceeding, according to the taxable bill of costs prepared, amount to $55,036. Jane’s total costs in that proceeding (including the Costs Court proceeding) are estimated at $90,000.
Existing costs orders
[62]Exhibit G, ‘Affidavit of Shane Dare’ sworn 6 April 2023, document exhibited at SWD-1.
Jane submits that the three existing costs orders remain and in each case the costs proceed to agreement on quantum or taxation. Jane submits that the difficulties in quantifying and fixing costs mean using a broad brush approach is unjust.
Possession proceeding
Jane submits that the outcome of the TEP claim demonstrates that neither Lynne nor the estate had the interest in the Eaglemont property that was alleged. She submits that the stays should be lifted and the costs now be assessed.
Summary of the effect of Jane’s submissions
Jane’s submissions would result in the following outcome as to costs on the current estimates:
(a) The estate pay Lynne’s costs of $481,250, representing her costs of the Part IV proceeding ($275,000) and 25% of her costs of the TEP proceeding ($206,250).
(b) Lynne pay Jane’s costs of the TEP proceeding at $471,151 (75% of the TEP total at $381,951) and Jane’s costs of the possession proceeding, which Jane says is $90,000.
(c) The estate pay Jane’s costs in the sum of $328,663, being 25% of Jane’s costs of the TEP proceeding ($127,000) and Jane’s costs of the Part IV proceeding ($169,400.75) and an additional $32,262.16 that DMF charged Jane exclusively for the Part IV proceeding.
Leaving aside the three existing costs orders and the orders in the possession proceeding currently stayed, the outcome of the above is that the estate would be obliged to pay to Lynne $481,250 and Lynne obliged to pay Jane $471,151, the result being that Jane would owe a net amount of approximately $10,000 to Lynne in costs.[63]
[63]Table headed Jane’s Total Costs handed up as an aide memoire (see n 58).
Consideration
Given the estimates of costs incurred to date by both parties, I am approaching the questions of costs mindful to avoid any further increase unless absolutely necessary. To that end I accept that at this stage a simple order for taxation of costs will be a complicated exercise that would incur substantial further costs and such an order would not further the overall interests of justice between the parties. The estimate of costs of both parties at the time of trial would have required an allowance from the estate for costs of just over $1,500,000. As I said in the principal judgment, that amount, on the information then available as to the approximate value of the estate, would have left a minimal equity for distribution.[64] I thought the estimates of both parties appeared inflated and likely to be an overstatement of a realistic estimate, particularly if the costs to be indemnified from the estate were to be on a standard basis.
[64]Principal judgment [331].
Apportionment between the Part IV proceeding and the TEP proceeding
As I have said, and as the parties submit, the overlap in costs as between the two proceedings is complex and it would be difficult if not impossible to approach taxation of costs of each proceeding separately. In my view, and in line with the parties’ submissions, the costs should be considered together and the first step is to apportion those overall costs as between the two major proceedings. The quantum should also reflect that costs have been saved due to the two cases being managed together.
I do not accept either submission as to the appropriate apportionment between the proceedings.
First, I do not accept Jane’s reliance on Mr Nedovic’s attribution in cross examination that only 25% of his costs were attributable to the Part IV proceeding. In my view this was a rough and unreliable estimate. It was expressly qualified as such and was unsupported by any reasoning. Lynne’s written submission as to the appropriate apportionment of around 60% to the Part IV proceeding was equally devoid of any explanation and for that reason I do not rely on it.
Second, Jane’s approach to apportionment suggests that she only considered the question of whether the estate had any equity in the Bell St property as an issue in the TEP proceeding. While Lynne sought a declaration to that effect in the TEP proceeding, unlike the other two properties the parties did not dispute that it was an asset within the estate. It was therefore necessarily an issue determining the value of the estate. The TEP proceeding relief also sought an order requiring Jane to take all necessary steps to discharge the existing encumbrances over the Bell St property pending full administration of the estate. Clearly that relief too is linked to the determination of the Part IV claim. A significant amount of the costs associated with the Bell St property squarely overlapped with the Part IV proceeding.
Third, Jane put Lynne to proof in the Part IV proceeding on two issues: that Don had not made adequate provision for her and that there was an asset available to meet further provision. That proof necessarily dealt with whether the Bell St property was encumbered in the estate because of the guarantee Don gave during his lifetime. It also became necessary in the context of both proceedings to consider the circumstances of transfer and further encumbrance of the asset in May 2017. At trial the parties gave these issues at least as much attention as those relating to the Eaglemont property. To some extent this again illustrates the overlap between issues.
Fourth, costs in the Part IV proceeding commenced from the time of initial instructions in April 2017, the TEP claim some fifteen months later. As Jane’s breakdown of costs demonstrated there was a period of time during which the costs were solely attributable to the Part IV claim and not apportionable. Jane’s total costs were $677,603 plus $32,252 charged exclusively for the Part IV claim prior to 6 July 2017, demonstrating a small allowance, perhaps in the order of 5%, in favour of the Part IV proceeding would be appropriate to reflect this period in the overall apportionment.
Similarly, although Lynne’s alleged interests in the Eaglemont property were more distinct from the issues in the Part IV proceeding, the necessary fact-finding exercise informed both the estate’s size and Lynne’s need for provision. In considering the discretionary factors under s 91A(2) of the Administration and Probate Act, it is relevant to consider any benefits that the deceased gave to any eligible person or beneficiary. As I wrote in the principal judgment, if Don gifted Jane the funds then Don had effectively disposed of his only substantial asset other than the Bell St property and then put those funds beyond the reach of his estate.[65] Jane sought to conceal Don’s provision of funds to her until such time as the disputed emails came to light in the Costs Court proceeding. Until that time she had maintained that she purchased the Eaglemont property using either her personal funds or borrowings she secured to the PEI trust.
[65]Principal judgment [303].
I accept that the issues of Lynne’s claimed interest in the Eaglemont property were of a broader compass than the Part IV proceeding. The remaining issue in the TEP proceeding – the transfer of the MCS shares – was a discrete issue determined on documentary evidence and the evidence of Graham Haydar and Jane called on behalf of the estate.
Further, given that the bankruptcy application sought to have a strategic effect on the Part IV proceeding, I would include the allowance estimated in Lynne’s costs associated with that application as falling within the Part IV costs, and not the TEP costs. Although Jane accounted for her costs in that proceeding separately, Lynne’s costs were bound up in the overall costs estimate of the two proceedings and not otherwise identified. The amount of those costs was not great.[66]
[66]T 238.21.
On the information available, I consider that the appropriate apportionment of fees between the Part IV and the TEP proceedings should commence from a starting point of equal apportionment. I acknowledge that this is broadly impressionistic and necessarily so.[67] It takes account of the particular factors I have identified. I will apply this apportionment to the fees component of the costs.
[67]Chen (n 57) [10].
However, disbursements might readily be attributed in whole to one or other proceeding. Filing fees, expert reports and similar associated costs, as well as barristers’ fees might in some instances be readily discernible as relating to one or other proceeding specifically. Where that can be identified it would be appropriate to attribute those disbursements to the relevant proceeding rather than to include them in an apportioned amount. Clearly counsels’ fees for the trial, or for directions listed concurrently for both proceedings, could not fall within this category. The attribution will be important, as will become clear, because the basis on which the costs will be ordered in each proceeding differs. Disbursements incurred common to both proceedings will need to be dealt with separately. I will therefore deal with solicitors’ fees on the basis that they are apportioned equally between the Part IV proceeding and the TEP proceeding.
Costs of the TEP proceeding
Jane’s submission is that I should apportion the costs of the TEP proceeding on an issues basis, so that each party would pay the costs of the other for those portions of the TEP proceeding where that party did not succeed.
Given the discrete nature of the three properties in dispute there is some force in Jane’s submission that the parties have had mixed success in the TEP proceeding. Lynne did not succeed in establishing an interest in the Eaglemont property in her own right, nor of the estate’s interest in either the Eaglemont property or the MCS shares.
However, this considers the TEP proceeding in isolation, when it was in fact reactive to Jane’s assertion that the estate had no funds or was bankrupt, and to Jane’s denial that Don had contributed funds to the purchase of the Eaglemont property. In substance Jane’s defence of the TEP proceeding in relation to all three properties in issues prolonged the Part IV proceeding.
I accept Lynne’s submission that the outcome of the TEP proceeding, by reference to the findings regarding the Bell St property, is one in which Lynne was successful. Although she did not succeed on all heads of claim, she has obtained relief that identified an asset of the estate that may be available to meet any further provision. Another way in which she might have obtained success was by establishing the interests in the Eaglemont property. As outlined above both the Eaglemont property and the Bell St property directly bore on the issues in the Part IV proceeding.
I do not accept Jane’s submission that Lynne should pay her costs in relation to the issues of the Eaglemont property and MCS shares. The principles in Chen and their application to the facts in that case did not canvas the prospect of an adverse costs order being made against a successful litigant at trial who did not succeed on all issues. The first three of the seven principles as summarised by the Court of Appeal in Chen are:
(1) The general rule is that costs follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.
(2) 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 parties on matters of costs.
(3) Where there is a 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.[68]
[68]Chen (n 57) [10].
In some cases, where the issues are discrete, it may be possible to make adverse costs orders on an issues basis. APN Funds Management Limited v Australian Property Investment Strategic Pty Ltd & Anor (Costs)[69] is an illustration of such an approach. In this case, the plaintiff sued two defendants, and the claim concerned two discrete issues. One issue affected only the first defendant, and the first defendant succeeded. The second issue concerned only the second defendant, and the plaintiff succeeded. The costs included costs for a point ‘sufficiently connected’ with the issue that was lost.
[69][2012] VSC 365 (‘APN’).
Sifris J said:
The Court has a broad discretion in relation to costs and may in suitable cases and despite its general reluctance to do so, deprive a successful party (whether plaintiff or defendant) of certain costs or order a successful party (whether plaintiff or defendant) to pay the costs of issues that it did not succeed on. In my opinion this is precisely such a case. The issues were discrete, clearly defined and there was a winner and a loser in relation to each such discrete issue…
In my opinion, it is not necessary to determine who was the successful party and then assess whether that party should be deprived of part of its costs because of some misconduct. Rather, such party should pay the other party’s costs not because of some misconduct but because it lost the particular issue. Consequently, it is not a case of disentitling a successful party of its costs but it is giving it costs to the extent that it succeeded and depriving it of costs, and ordering it to pay the other party’s costs because it lost the issue.[70]
[70]Ibid [11]-[12] (citations omitted).
In conformity with the first of the principles in Chen, it is appropriate that Lynne should recover her costs notwithstanding she has not succeeded on all heads of claim. The flexibility of considering success on an issues basis is permissible and appropriate given the distinct factual and legal issues surrounding each of the three properties in dispute. However, it is not appropriate in this case to go further and make adverse costs orders against Lynne in respect of those heads of relief that she did not obtain, given the overlap in issues regarding the effect on the estate and provision to Lynne notwithstanding that each party raised distinct issues.
In Chen, the Court was dealing with the costs of an appeal where the grounds of appeal raised three discrete questions, but the appellants succeeded only on the second issue. In relation to the first and third issue, the Court did not depart from the usual rule that the appellants pay the respondents’ costs of the appeal. The issue that succeeded on appeal – although something that occupied little time in hearing and a limited amount of material in the appeal book – was of real significance to the parties: ‘where there had been a judgment debt, there is now only a finding of liability’.[71] The respondents had conceded this issue at an early stage in the appeal. In those circumstances the appellants obtained no order for costs in their favour. The Court of Appeal considered only a downward adjustment of the costs order payable by the appellants to the respondents to be appropriate.
[71]Chen (n 57) [23].
Given the broad discretion that the Court has as to costs, there are circumstances where an adverse costs order may be made against a party who has had success on some but not all issues.[72] However, it is not appropriate in this case. The related nature of the TEP proceeding to the Part IV proceeding, and Lynne’s fundamental success in the TEP proceeding in establishing that an asset capable of satisfying the order for provision fell within the estate, means that overall the outcome of the TEP proceeding is that Lynne has succeeded. In effect Jane argued that Lynne’s conduct in respect of the Eaglemont property was improper and warranted an adverse costs order, and one made on an indemnity basis. For the reasons canvassed below considering applications for indemnity costs I do not accept that Lynne acted improperly in a way that would warrant an adverse costs order relating to the Eaglemont property issues.
[72]See for example Smith v Gould (No 2) [2012] VSC 541 (John Dixon J); Ajaimi v Giswick Pty Ltd (No 2) [2022] VSC 275 (M Osborne J); and APN (n 69) as cited by Jane.
There is no basis to depart from the principle that, although not succeeding on all heads of relief sought, Lynne has succeeded in the TEP proceeding and is entitled to an order for costs in her favour. I consider a 20% reduction in costs overall is appropriate. This reduction is to be applied to the 50% fees and to those disbursements that relate only to the TEP proceeding. This also excludes reduction of the costs covered by the three existing costs orders, which are considered next.
The existing costs orders in the TEP proceeding
The three existing costs orders made by Derham AsJ in the TEP proceeding should remain. They are for costs on a standard basis and the Court should not disturb that basis. It is also not appropriate to reduce their amount by 20% as I have ordered for the costs of the TEP proceeding generally. Derham AsJ’s reasons for each order demonstrate that either Jane or Lynne was wholly successful in each. Those successes are unaffected by the mixed success of the overall proceeding.
Lynne has not provided an estimate of her costs for the two applications in which she was successful, being the objection to subpoenas and the application dealing with the privilege dispute and release from the Harman undertaking. They are included in the estimate of fees and disbursements apportioned to the TEP proceeding. Lynne’s costs of the rule 47.04 application presumably are also included.
Jane has not satisfactorily quantified her costs in relation to the rule 47.04 application. In his affidavit sworn 6 April 2023, Mr Dare describes it as having been ‘litigated extensively between 18 February 2019’ until ruled upon and the subject of a ‘contested hearing on 14 August 2019 and 11 September 2019’.[73] This approach simply binds up the caveat matter and other matters in dispute throughout 2019. It is not apparent that there was much activity prior to the hearing of the application or any evidence was prepared specifically for the purpose of the argument that proceeded on 11 September 2019. By comparison, Jane and her lawyers filed several affidavits in the caveat application and provided detail of work.[74]
[73]Exhibit G, ‘Affidavit of Shane Dare’ sworn 6 April 2023, [24].
[74]Exhibit 3, Defendant, ‘Affidavit of Peter Nedovic affirmed 27 October 2022’ in Lynne Margaret Walters v Jane Elizabeth Perton S ECI 2018 00225, document exhibited at PN-8.
The three costs orders will stand. I will make directions as to the steps to achieve resolution of the quantum of those orders before any taxation is undertaken.
Part IV proceeding: Indemnity costs
Lynne is entitled to payment of her costs associated with the Part IV proceeding. The next question to answer is whether those costs are payable on an indemnity basis, or whether they should be fixed or capped.
In principle costs are generally ordered on a standard basis. An entitlement to indemnity costs provided by the Rules (such as when consequential on an offer of compromise) is not relevant here. As a discretionary matter, indemnity costs are awarded in exceptional circumstances and generally require unmeritorious, deliberate, high-hand or other improper conduct such as to warrant the Court’s disapproval. Cases such as Ugly Tribe predate the Civil Procedure Act. The inclusive list use of conduct provided there as illustrative of conduct that may justify a departure from the usual course should now include conduct in contravention of the overarching obligations where a court is satisfied that the breach ought be sanctioned by an indemnity costs order pursuant to s 29 of the Civil Procedure Act.
Jane’s solicitor acknowledged that Lynne had a moral right to adequate provision. When the Bell St property remained in the estate, there was no doubt that the estate would have been able to meet any further provision. This might have been subject to MCS having to renegotiate security for its borrowings, but that matter would not have affected the estate’s value. Jane’s argument was that provision in the will was already adequate. Jane initially believed the value of contents in Don’s home, now in the estate, to be more than sufficient to meet estate liabilities and would leave a sum of more than $100,000 in residuary of the estate.
(i) Judicial advice
Lynne submits that Jane’s failure to apply for judicial advice as to whether to defend the Part IV proceeding and the TEP proceeding, or to institute the possession proceeding, is a basis upon which she is entitled to:
(a) indemnity costs in both proceedings;
(b) vacation of the costs order in favour of Jane in the TEP proceeding; and
(c) a permanent stay of the costs orders in the possession proceeding.
Lynne’s submissions describe the effect of Macedonian Orthodox Community Church Inc v Macedonian Orthodox Diocese of Australia and New Zealand (‘Macedonian Orthodox’)[75] as an ‘admonition’ by the High Court that before defending or commencing proceedings Jane must first obtain and act in accordance with judicial advice,[76] quoting:
… a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings.[77]
[75]Macedonian Orthodox Community Church Inc v Macedonian Orthodox Diocese of Australia and New Zealand 237 CLR 66 (‘Macedonian Orthodox’).
[76]Plaintiff’s Part IV Submissions [39].
[77]Macedonian Orthodox (n 74) 94 [74].
That paragraph continues:
But deciding whether it would be proper for a trustee to defend proceedings instituted about a trust is radically different from deciding the issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceeding.[78]
[78]Ibid.
Lynne’s submissions do elide these two steps: glossing over the factual conflicts that existed and underpinned the adequacy of the provision in the will and the property interests alleged. They do not grapple with the discretionary nature of the power to give judicial advice but assume it would have been given.
Further, I reject any submission that an executor or trustee, in receipt of legal advice, must also obtain judicial advice prior to commencing or defending proceedings. Obtaining judicial advice, where appropriate, protects the executor or trustee from personal liability. This is often important because the person acting in that capacity would otherwise be at risk of a personal costs order where acting in this capacity is an unpaid endeavour. In Macedonian Orthodox, at issue was the ability for the trustee of a charitable trust to defend a proceeding commenced by beneficiaries of the trust by using funds of the trust for that defence. That was the question central to the judicial advice obtained. The converse position, that by not having judicial advice a trustee or executor is acting in some way inappropriately, does not automatically follow.
Any failure to seek judicial advice is not a basis for an order for indemnity costs in Lynne’s favour.
(ii) Jane’s conduct
On 2 May 2017, Lynne’s solicitor sought an undertaking that Lynne could continue to reside in the Eaglemont property until the Part IV proceeding was finalised. As I have already said, Jane’s responses to this request – the DMF letter and the Madgwicks letter – withheld important information.
Significantly, the Madgwicks letter did not mention Don’s other wish expressed in his will concerning the payment from the sale of the Eaglemont property, nor did it say that Jane intended to sell the property in order to make such a payment.
Further, the DMF letter did not inform Lynne that Jane would honour Don’s wishes expressed in the will, nor did it address the requested undertaking as to accommodation pending the Part IV proceeding. Instead it clearly conveyed a position that the will made no binding provision and the estate had no funds so that any proposed proceeding would be futile.
The DMF letter explained:
‘Following the deceased’s passing the NAB insisted that our client immediately transfer the freehold reversion of the Bell St property pursuant to the terms of the will. This was done prior to and without notice of your client’s claim.’[79]
[79]Exhibit 1, Affidavit of Lynne Margaret Walters sworn on 31 July 2017, document exhibited at LMW-3.
That statement was misleading in two important respects. First, it said the transfer of title was done without notice of the potential Part IV proceeding. Although the transfer was set in motion prior to notice on 2 May 2017, the transfer was not lodged until 3 May 2017, the day after both Jane and DMF had been informed of the claim.
Second, the letter is silent as to the fact that the mortgage Don previously gave over the Bell St property had been replaced on 17 May 2017 by a mortgage that Jane gave after she as executor transferred title to herself. This would have made clear that the bank considered Don’s guarantee did not survive as a liability of the estate. Whatever might be said in defence of a transfer of title without knowledge of the Part IV proceeding, it is beyond doubt that Jane chose on 17 May 2017 to encumber the asset in full knowledge of Lynne’s pending claim. For the reasons set out in the principal judgment I concluded that this was a matter of choice and a deliberate decision Jane made for her own benefit.[80] It was not necessary, as NAB had not demanded the immediate transfer of Bell St.[81] It was one thing to transfer title of the Bell St property to facilitate a refinancing proposal, but it was another thing entirely to re-mortgage it as security in the face of the Part IV proceeding.
[80]Principal judgment [261].
[81]See principal judgment [259].
Further, Mr Dare’s evidence made clear that at the end of 2018 Jane made a deliberate strategic decision to place the estate into bankruptcy ‘to try to end the Part IV proceeding by appointing or seeking to appoint a trustee in bankruptcy who would then have conduct of those proceedings’.[82] The bankruptcy proceeding directly led to DMF ceasing to act in the Part IV proceeding. Again the timing of this strategic twist is relevant. Jane’s temporary withdrawal of instructions frustrated the parties’ ability to mediate in accordance with orders of the Court.
[82]T 88.16-19.
In determining Jane’s application in the TEP proceeding seeking to set aside the subpoenas issued to herself and NAB, Derham AsJ made several damning observations about Jane’s conduct. Derham AsJ highlighted the deficiencies in her affidavit and described Jane’s subsequent conduct as engaging in ‘strategies’ designed to frustrate the timely, just and efficient conduct of the dispute.[83] He posed the question of whether such strategies in the conduct of the proceedings was in accordance with the overarching obligations prescribed by the Civil Procedure Act. Those strategies largely concerned matters affecting both the Part IV proceeding and the TEP proceeding up until May 2019.
[83]Walters v Perton [2019] VSC 356, [45]-[53].
I agree with Derham AsJ’s observations. Jane has engaged in strategies – specifically referable to both the Part IV proceeding and to those aspects of the TEP proceeding referable to her actions as executor in relation to the Bell St property – that have been directed at frustrating or rendering futile any order for further provision. Jane has attempted to obfuscate the true position with regard to the Bell St property which, it is common ground, was in the estate until Jane removed it. She did this in order to render futile any order for further provision in the event that her defence of the Part IV proceeding failed.
The Second Further Amended Statement of Claim specifically pleaded that the following conduct contravened the Civil Procedure Act:
(a) Jane’s denial of Don’s contribution of funds to the purchase of the Eaglemont property;[84]
[84]Plaintiff, ‘Second Further Amended Statement of Claim’ dated 27 November 2020 in Lynne Margaret Walters v Jane Elizabeth Perton S ECI 2018 00225 [38].
(b) Jane’s compliance with the orders of Derham AsJ dated 17 August 2018 and subsequent failure to mediate matters;[85]
(c) Jane commencing the bankruptcy proceeding premised on affidavit in contravention to that sworn in the Part IV proceeding;[86] and
(d) Jane encumbering the Bell St property after notice of the Part IV proceeding.[87]
[85]Ibid [40].
[86]Ibid [51]-[52].
[87]Ibid [45].
By adopting the strategies outlined above, I am satisfied that on the balance of probabilities Jane breached her obligations under the Civil Procedure Act. Particularly damning are the bankruptcy proceeding Jane commenced and the affidavit she swore in support of that proceeding, which was diametrically opposed to the affidavit she swore in support of probate. Jane did this to frustrate the litigation in this Court and, combined with her failure to comply with Derham AsJ’s orders, she sought to disrupt and frustrate the Court-ordered mediation. Combined with the calculated non-disclosure of Don’s provision of sale proceeds to her in respect to the purchase at Eaglemont, Jane sought a forensic advantage in the TEP proceeding. The capacity to disrupt the litigation was significant.
I am satisfied on the balance of probabilities that by this conduct Jane contravened her obligations to only take steps to resolve or determine the dispute,[88] to cooperate with the parties and the Court in the conduct of the proceeding,[89] to narrow the issues in dispute,[90] to ensure costs are reasonable and proportionate,[91] and to minimise delay.[92] By breaching these obligations Jane has not met her paramount duty to the Court to further the administration of justice. I take these matters into account in relation to the exercise of my discretion as to the appropriate costs orders in accordance with s 28(2) of the Civil Procedure Act. I am also satisfied that the conduct has been of a character that warrants departure from the usual rule that standard costs are payable to a successful party.
[88]Civil Procedure Act 2010 (Vic) s 19.
[89]Ibid s 20.
[90]Ibid s 23.
[91]Ibid s 24.
[92]Ibid s 25.
Although Jane failed to file a certificate of overarching obligations in the Part IV proceeding, I have not considered her failure to comply with s 41(1) of the Civil Procedure Act in exercising my discretion as to costs and make no finding of breach in respect of s 18 of the Civil Procedure Act. I will direct that she provide an explanation on oath to the Court for that failure.
Although Lynne has not made a formal application under s 29(2) of the Civil Procedure Act for costs on this basis, the Court can do so on its own motion. The question of indemnity costs and the question of breaches of the Civil Procedure Act by Jane’s conduct have been squarely in issue throughout the hearing and submissions on costs issues have addressed these matters fully.
Accordingly, Lynne is entitled to indemnity costs in respect of the Part IV proceeding from 29 May 2017. Although the conduct has no doubt had an impact on aspects of the TEP proceeding as well, it is not appropriate to depart from the usual rule that costs are to be paid on a standard basis. Principally this is because the breach of obligations has largely been by Jane in her capacity as executor, defending the Part IV claim and the Bell St property aspect of the TEP claim. Her conduct in relation to the Eaglemont property and the MCS shares was not of a similar character. Whilst the court has been critical of her evidence and conduct in relation to Don’s contribution to the purchase of the Eaglemont property, her conduct ultimately did not affect the outcome in relation to that property and so does not warrant a departure from the standard costs order.
I will make the order for indemnity costs in the Part IV proceeding pursuant to s 29 of the Civil Procedure Act on the basis of my finding that Jane breached her overarching obligations, by breaching ss 19, 20, 23, 24 and 25 of the Civil Procedure Act.
For completeness I will address the application by Jane that her costs in respect of the Eaglemont property, if payable by Lynne, ought be paid on an indemnity basis. The claimed interest in the Eaglemont property failed because the agreement to relocate between Don and Lynne did not create an interest in the property either by common intent or by promise. Had I accepted that the evidence did create a constructive trust, it would follow that it would be unconscionable for Jane to act contrary to that interest. It was not to the point that Jane was unaware of the intent or promise that gave rise to the constructive trust, but that once imposed by the Court she would necessarily act in conformity with it. The submission that an allegation of fraud on the part of Jane, despite the way it is worded in submissions, was properly an assertion that it would be unconscionable for Jane to assert her absolute interest as registered proprietor in the face of a constructive trust imposed by the Court to give effect to the common intent or promise. I would reject the first basis for indemnity costs.
Second, I would not accept that Lynne commenced the TEP proceeding regarding the Eaglemont property in wilful disregard of known facts or clearly established law. The Court accepted that there had been a relocation agreement. Whether or not that conferred an interest in property was arguable by either common intent or promise. Although the evidence fell short of establishing the interest contended, it was an arguable claim, not on its face wilfully in disregard of known fact or settled legal principle. Lynne made no claim to an interest arising from a resulting trust. This matter was unclear, despite the caveat describing an ‘implied constructive or resulting trust’. Earlier versions of the pleading pleaded only an equitable interest as a result of the relocation agreement without identifying the nature of that equitable interest. It was not until the Third Further Amended Statement of Claim that the nature of the equitable interest alleged was more specifically pleaded as arising from a common intention constructive trust.[93] Lynne did not allege that there was a resulting trust.
[93]Plaintiff, ‘Third Further Amended Statement of Claim’ filed 20 April 2022 in Lynne Margaret Walters v Jane Elizabeth Perton S CI 2017 02159 and S ECI 2018 00225.
The costs of the possession proceeding
Lynne’s broad submission is that her costs in obtaining the stay of the costs orders and obtaining the right to see the disputed emails and use them in the TEP proceeding are likely to be broadly similar to Jane’s costs of obtaining summary dismissal – which, from the bill in taxable form, are approximately $55,000. While I accept that there were a number of legal issues canvassed by the application, I am again hampered by a broad submission unsupported by explanation that nearly half of the total costs of $138,000 in the possession proceeding relate to this application.
Summary
On the information presently available to the Court, not all questions as to the quantum of costs can be fairly determined between the parties.
Given my preliminary view that both parties’ estimates are likely to be inflated, I propose making an overall reduction of 15% of the present fee estimates. On the present estimates, Lynne’s overall fees are $681,000.[94] Reduced by 15% they are $578,850. Apportioned 50% to the Part IV proceeding they are, in round terms, approximately $290,000.
[94]Rounded to the nearest whole dollar.
Jane should pay Lynne’s costs of the Part IV proceeding, being 50% of overall fees and those disbursements applicable solely to that proceeding, on an indemnity basis. I will, in accordance with Lynne’s submissions, fix those costs and order payment on a gross sum basis. As those fees are on an indemnity basis there should be no further reduction. They will be fixed in the sum of $290,000 together with the amount of identified disbursements.
Jane should pay Lynne’s costs of the TEP proceeding, being 50% of the overall fees and disbursements referrable solely to the TEP proceeding, on a standard basis reduced by 20%. The amount of $290,000 on an indemnity basis will need to be adjusted so that the figure represents fees on a standard basis. The figure also needs adjustment to exclude the fees associated with the three existing costs orders. Disbursements associated solely with the TEP proceedings, and those within the TEP proceeding relating solely to the existing costs orders, will need to be identified. Lynne will need to identify the proposed amounts in accordance with these findings.
By my calculations from the table of Jane’s costs attached to Mr Dare’s affidavit of 6 April 2023, Jane’s fees associated with the Part IV and TEP proceedings total $220,657.78 on an indemnity basis. Within the period from 18 February 2019 to 5 December 2019 (being the time between issue of the summons for the separate questions under r 47.04 of the Rules until its determination), Jane’s total fees in that period are not quantified by Mr Dare. I observe that this period also included that of the other two applications covered by the existing costs order. The fees and disbursements of the parties will need identification and assessment of the amounts applicable to each of the three applications covered by the existing costs orders within those totals. The existing costs orders are for payment on a standard and not indemnity basis. In my preliminary view the hearing on 14 August 2019 ought be attributed to the costs thrown away in relation to the removal of the caveat application and the costs of the 11 September hearing attributable to the separate question application. The costs associated with the 21 March 2019 would be attributable to the subpoena application.
I will direct Jane to provide an estimate of her costs and list of disbursements in the Rule 47.04 application on a standard basis as falls within her overall fees estimate.
Lynne is to provide an estimate of the fees on a standard basis and list of disbursements in the subpoena application, those thrown away by reason of Jane’s abandonment of the caveat removal application, and her costs of the Order 47.04 application that are subject to the existing costs orders.
I will direct Lynne to prepare a list identifying her disbursements that can be attributed specifically to each of the TEP proceeding, the Part IV proceeding and subject to each of the three existing costs orders, and those other disbursements incurred in respect of both proceedings.
Upon receipt of those assessments I will give further direction as to resolution of the outstanding quantum issues.
The next question is whether it is appropriate that Jane be indemnified from the estate for her costs liability to Lynne. Jane submits her costs in defending the claim have been properly incurred and she is not guilty of misconduct, so she should be indemnified from the estate of her costs liability to Lynne and for her own costs as executor.
My finding and conclusion regarded breaches of the Civil Procedure Act raise the question that at least costs over and above Jane’s standard costs liability to Lynne might not be recoverable, and some or all of Jane’s own costs ought not be recoverable. I note Jane’s submissions seek only recovery of her own costs on a standard basis.
I will give Jane an opportunity to address the Court on her ability to obtain indemnity from the estate for reimbursement of her liability of Lynne’s costs and reimbursement of her own costs.
My finding as to the size of the estate at the time of death was that it included, at least the Bell St property unencumbered. The value of that asset at trial was agreed to be $2,950,000, leaving a sum in excess of $1,000,000 available to meet legal costs. The ability for Jane to be indemnified from the estate in respect of Lynne’s costs and her own costs as executor will depend on the mechanism by which the estate might meet the further provision and any costs liabilities.
Further Jane has incurred costs in her capacity as trustee of the PEI Trust in defending the TEP proceeding by resisting an estate interest or a direct interest of Lynne in the Eaglemont property. She sought an order that Lynne pay those costs but I have not accepted that submission. She has sought indemnification for her costs from the estate only in respect of her costs associated with the Bell St property. In that respect she seeks indemnification of 25% of her fees and disbursements. This would be 25% of $354,933,[95] a round sum of $89,000. It may be adjusted to take account of the existing costs order payable to her by Lynne.
[95]This figure being 50% apportioned to the TEP proceeding of her total costs of $709,865.
Subject to hearing from the parties, the costs orders and directions I propose are:
(a) The defendant pay the plaintiff’s fees in the Part IV proceeding pursuant to r 63.07(c) of the Rules as a gross sum of $290,000, plus disbursements specifically referable to the Part IV proceeding, which I will direct the plaintiff to identify.
(b) The defendant pay the plaintiff’s fees in the TEP proceeding, which I have concluded are a gross sum of $290,000. Using this figure as a base, these fees are then to be reduced to allow for an assessment on a standard basis, and then reduced by 20%. The defendant must also pay the plaintiff’s disbursements specifically referable to the TEP proceeding on a standard basis, also to be reduced by 20%. I will also direct the plaintiff to identify these disbursements.
(c) I will not vacate the three interlocutory costs orders in the TEP proceeding. The parties are to file and serve correspondence outlining their assessment, on a standard basis, of the fees and a list of disbursements relating to their costs in each of the three applications.
(d) I propose to certify in respect of counsel’s fees that overlap across both the Part IV and TEP proceedings not otherwise accounted for.
(e) For the remaining disbursements (those that overlap across both proceedings, are not covered by the existing costs orders and are not otherwise counsel’s fees), I propose to apportion them 50% to each proceeding.
(f) The plaintiff is to file and serve correspondence outlining her assessment of the proportion of her total costs in the possession proceeding as relates to her application by summons filed 9 July 2018 and heard 2 August 2018.
(g) I note Jane’s submission that the likely source of funds for costs will be Jane’s personal liability.[96] The question of the executor’s indemnification from the estate for costs liabilities remains outstanding.
[96]Defendant’s Part IV Submissions, [16].
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