Woodley v Woodley [No 2] - [2017] WASC 94 (S)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   WOODLEY -v- WOODLEY [No 2] [2017] WASC 94 (S)
CORAM:   PRITCHARD J
HEARD:   13 SEPTEMBER 2017; FURTHER WRITTEN SUBMISSIONS 5 & 20 OCTOBER 2017; 4 APRIL 2018
DELIVERED          :   10 APRIL 2018
FILE NO/S:   CIV 1821 of 2013
BETWEEN:   TERRY RAY WOODLEY
Plaintiff
AND
ROSS MAXWELL WOODLEY
First Defendant
RAYMOND THOMAS WOODLEY
Second Defendant
WAYNE CHARLES WOODLEY
Third Defendant
ANN CHERYL LEWIS
Fourth Defendant
ROSLYN PATRICIA WOODLEY
Fifth Defendant
KIM REBECCA WOODLEY
Sixth Defendant
ANGELA WOODLEY
Seventh Defendant
NATALIE CHANTELLE BIRCH
Eighth Defendant
MORGAN LEE WOODLEY
Ninth Defendant

Catchwords:

Costs - Application for special costs - Where matter unusually difficult

Costs - Application for indemnity costs - Where settlement offer was not accepted - Whether settlement offer was a Calderbank offer

Legislation:

Legal Profession Act 2008 (WA)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)

Result:

Application for special costs granted in part

Category: B

Representation:

Counsel:

Plaintiff	:	Ms M L Coulson
First Defendant	:	Mr P G Donovan
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Fifth Defendant	:	Mr P G Donovan
Sixth Defendant	:	No appearance
Seventh Defendant	:	No appearance
Eighth Defendant	:	No appearance
Ninth Defendant	:	No appearance
Non-party	:	Mr C Bailey

Solicitors:

Plaintiff	:	AMR Lawyers
First Defendant	:	MDS Legal
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Fifth Defendant	:	MDS Legal
Sixth Defendant	:	No appearance
Seventh Defendant	:	No appearance
Eighth Defendant	:	No appearance
Ninth Defendant	:	No appearance
Non-party	:	Williams & Hughes

Case(s) referred to in decision(s):

Atwell v Roberts [2013] WASCA 37 (S)
Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159
Blenkinsop v Herbert [2017] WASCA 87(S)
Calderbank v Calderbank [1975] 3 All ER 333
Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195
Clay v Karlson [2001] WASC 141
Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2009] WASCA 158(S)
Crawley Investments Pty Ltd v Elman [2014] WASC 233 (S)
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S)
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S)
Estate of Plant (dec’d); Wild v Plant [1926] P 139; (1926) 42 TLR 443
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
Frigger v Lean [2012] WASCA 66
Great Southern Managers Australia Ltd v Thackray [2010] WASC 138(S)
Hogan v Hogan (1983) 2 NSWLR 561
Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia [No 7] [2009] WASC 218
Oreski v Ikac [2008] WASCA 220
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Re Malley SM; Ex parte Gardner [2001] WASCA 83
Re Palermo Unit Trust [2014] WASC 69
Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S)
Sons of Gwalia v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S)
Vigolo v Bostin (2005) 221 CLR 191
Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S)
Woodley v Woodley [No 2] [2017] WASC 94

PRITCHARD J:

I delivered judgment in this action last year.[1] These reasons should be read in conjunction with those reasons for decision (primary reasons). The parties are referred to in the same way, and the same abbreviations have been used as in the primary reasons.
[1] Woodley v Woodley [No 2] [2017] WASC 94.
There were three components to the action overall:
(i)Competing claims made by Terry and the Defendants as to whether there should be a grant of probate in respect of the Original Will (as Terry contended), or whether the Court should pronounce the force and validity of an Amended Will, and grant probate in respect of the Amended Will (as the Defendants contended in their counterclaim);
(ii)The balance of Terry's action concerning whether the Court should pass over Ross and Ray as executors of the Estate, and grant probate to Terry as the sole executor and trustee of the Estate and the testamentary trust;
(iii)The balance of the Defendants' counterclaim concerning whether the Court should pass over Terry as an executor, and grant probate to Ross and Ray as the executors and trustees of the Estate and the testamentary trust, or alternatively whether the Court should appoint an independent administrator and trustee.
I made orders to pronounce the force and validity of the Amended Will, to grant probate in respect of the Amended Will to Ross and Ray as the executors of the Estate and trustees of the testamentary trust (established under the Amended Will), and to order that Terry be passed over as an executor and as a trustee of the testamentary trust.
The Defendants have applied for costs orders in relation to the action and the counterclaim generally, and in relation to a number of interlocutory applications in respect of which costs were reserved, namely those on 22 December 2015, 31 March 2016, 19 May 2016 and 26 May 2016 (interlocutory applications).
The interlocutory applications in respect of which costs were reserved concerned the following applications:
•22 December 2015: Terry's application for leave to amend the statement of claim;
•31 March 2016: hearing of the Defendants' objections to Terry's witness statements;
•19 May 2016: hearing of Terry's objections to Defendants' witness statements and the Defendants' re‑amended pleading;
•26 May 2016: hearing of Terry's objections to the Defendants' witness statements and Terry's application for discovery.
For the reasons which follow, I will make orders of the following nature:
(i)An order that Terry pay the Defendants' costs of the action and counterclaim, including the costs of each of the interlocutory applications, without regard to the maximum allowances fixed for work done on specific occasions which was covered by various items in the applicable costs scales[2] (as set out later in these reasons); and
(ii)To the extent that the Defendants are unable to recover the costs in (i) from Terry, those costs are to be paid out of the Estate.
[2] The work done is covered by the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012; Legal Practitioners (Supreme Court) (Contentious Business) Determination 2014; and Legal Practitioners (Supreme Court) (Contentious Business) Determination 2016. I will refer to these as the applicable scale or scales.
In these reasons for decision, I deal with the following:
1.The orders sought by the Defendants, and by Terry, in the costs application;
2.Whether the Court should refrain from determining the question of the costs of the action, and instead order that the costs of the action be dealt with by the Court of Appeal;
3.The Court's discretion to award costs;
4.Why Terry should pay the Defendants' costs of the action and the counterclaim, including the reserved costs of the interlocutory applications, but not on an indemnity basis;
5.Why the Defendants' application for a special costs order should be granted;
6.Why there should be an order that to the extent that the Defendants are unable to recover their costs from Terry that those costs should be paid out of the Estate; and
7.The orders which should be made.

The orders sought by the Defendants, and by Terry, in the costs application

In summary, the Defendants seek the following costs orders:
(i)An order that Terry pay all costs incurred by the Defendants in the action and counterclaim, including the costs of the interlocutory applications, to be taxed on an indemnity costs basis;
(ii)In the alternative, an order that Terry pay all costs incurred by the Defendants in the action and counterclaim, including all costs of the interlocutory applications, to be taxed without regard to the maximum hourly rates or allowances fixed for certain specific items in the applicable costs scales, and including the Defendants' costs of obtaining the transcript of the trial and of certain directions hearings; and
(iii)To the extent that the Defendants are unable to recover their costs from Terry, those costs are to be paid out of the property of the Estate.
In contrast, Terry submits that the following costs orders should be made:
(i)The Defendants' costs of the action, including the costs of the costs application, be paid out of the Estate, on a solicitor-client basis;
(ii)In the alternative to order 1, Terry pay the Defendants' costs of the action, including the costs of the application for indemnity costs, to be taxed if not agreed; and
(iii)In respect of order 2, that the costs are assessed without reference to the limits provided for at items 3(b), 3(c) and 7(b) of the applicable scales.
The executors of the Estate are now separately represented in that capacity. They did not seek to make any submissions in response to the Defendants' costs application.

Whether the Court should refrain from determining the question of the costs of the action, and instead order that the costs of the action be dealt with by the Court of Appeal

Terry has commenced an appeal against the orders set out in [3] above. That appeal has not yet been heard. Terry's counsel submits that given that Terry has commenced the appeal, I should order that the costs of the action be dealt with by the Court of Appeal, pursuant to O 66 r 10(2) of the Rules of the Supreme Court 1971 (WA) (RSC). I do not accept that submission, for two reasons.
First, the costs application that has now been made, and the arguments advanced by the parties, require the exercise of the Court's discretion. The exercise of the Court's discretion, in relation to applications for indemnity costs, and special costs orders, following trial, necessarily draws on a trial judge's knowledge of the matter, how the parties approached the litigation, and of the reasonableness of the parties' conduct in all of the circumstances. Those are matters about which it is more appropriate for the trial judge to first express a view, which can then be the subject of appeal to the Court of Appeal if necessary.
Secondly, counsel for Terry submits that Terry's appeal relies partly on the admission of fresh evidence, and 'if that evidence is admitted it will be relevant to the hearing of this matter'.[3] That consideration does not support Terry's contention that the Defendants' costs application should be referred to the Court of Appeal. If the appeal is upheld, the Court of Appeal will need to consider how to deal with the costs of the action and counterclaim. In that event, the Court of Appeal may be assisted by seeing this Court's reasoning in relation to costs.
[3] Plaintiff's Submissions [3].

The Court's discretion to award costs

Under s 37 of the Supreme Court Act 1935 (WA) (SC Act), and O 66 r 1 RSC, the Court has a broad statutory discretion to make orders in relation to the costs of, and incidental to, a proceeding. Although broadly stated, that statutory discretion is not unqualified and the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation.[4] The most important factor which guides the exercise of the costs discretion is the result of the litigation.[5] Generally speaking, the Court will make an order that the successful party to an action recover his or her costs from the unsuccessful party.[6] This principle is reflected in O 66 r 1(1) RSC.
[4] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [65].
[5] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [66] (McHugh J).
[6] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [66] (McHugh J).
However, there are exceptions to this general rule as to costs. Generally, these exceptions derive from conduct of the successful party in relation to the litigation, or leading up to the litigation, which is seen to disentitle that party to the benefit of the exercise of the discretion in its favour.[7] The RSC also contemplate that sometimes a departure from the usual order as to costs will be required where a successful party has not been successful on all of the issues raised in the proceedings.[8]
[7] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [69] (McHugh J).
[8] See, for example, Rules of the Supreme Court 1971 (WA) O 66 r 1(3).
Probate cases are no different to other cases in the sense that the ordinary starting point on questions of costs is the general rule that costs follow the event.[9] Indeed, it has been suggested that unsuccessful litigants may not receive their costs out of an estate without making a very strong case.[10] However, there are two well recognised exceptions to the general rule as to costs in the probate jurisdiction, which tend to overlap, but are not coterminous:[11]
1.where the testator has, or those interested in the residue have, been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate; [and]
2.if the circumstances led reasonably to an investigation concerning the document propounded, the costs may be left to be borne by those who incurred them.

Why Terry should pay the Defendants' costs of the action and the counterclaim, including the reserved costs of the interlocutory applications, but not on an indemnity costs basis
[9] Clay v Karlson [2001] WASC 141 [147] (Roberts-Smith J).
[10] Estate of Plant (dec’d); Wild v Plant [1926] P 139; (1926) 42 TLR 443, 445.
[11] Oreski v Ikac [2008] WASCA 220 [68] (Newnes JA, Martin CJ & McLure JA agreeing).

The principles in relation to the grant of an order for costs on an indemnity basis are well-established. They were set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd.[12] After pointing out that an order for indemnity costs will only be made in exceptional circumstances,[13] the Court summarised the relevant principles as follows:[14]
[12] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S).
[13] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [7] referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83.
[14] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [10] (citations omitted).
1.[The Court] in its inherent jurisdiction, may make an indemnity costs order.
2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis.
3.The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd, Woodward J said:
Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where 'there is some special or unusual feature in the case to justify the court exercising its discretion in that way'. (emphasis added)
4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party. In J‑Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2), French J by reference to the observations of Woodward J in Fountain Selected Meats, said:
It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd, French J observed:
The categories in which the discretion may be exercised are not closed.
6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs. In Quancorp Pty Ltd v MacDonald, Wheeler J observed:
On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as 'hopeless' so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as 'hopeless' is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.
7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers.
8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling.
9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance. In Unioil (No 2), Ipp J observed:
However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.
10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct. In Flotilla, Pullin J said:
A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.
In addition to these principles, the following may be added. An order for costs on an indemnity basis may be made on the grounds that an action was 'hopeless' in the sense that the action was 'commenced or continued in circumstances where the plaintiff, properly advised, should have known that the action had no prospect of success'.[15] An action which appears to have been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or the clearly established law.[16]

The basis for the application for an order for costs on an indemnity basis

[15] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [84] (Newnes JA).

[16] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401.

The Defendants' primary position is that Terry should pay their costs of the action and the counterclaim, and that he should do so on an indemnity basis.
The Defendants say that Terry should pay those costs because he pursued the action, and was unsuccessful, and that costs should follow the event in the ordinary course.[17] They say that this case does not fall within the two exceptions to the general rule, which have been recognised in probate actions (discussed at [16]).[18]
[17] Defendants' Submissions [2].
[18] Defendants' Submissions [7], [22] referring to Oreski v Ikac [2008] WASCA 220 [68].

The Defendants' application for an indemnity costs order against Terry is put on two alternative bases. First, the Defendants say an indemnity costs order is warranted having regard to Terry's conduct ‑ namely that Terry pursued the action for an improper purpose, that he deliberately sought to increase the costs of the action, and that he persisted in a hopeless case, unnecessarily adding to the costs.[19]
[19] Defendants' Submissions [4.1] - [4.3].
Secondly, and in the alternative, the Defendants say[20] that Terry refused to accept reasonable offers of settlement, which were made on a number of occasions. As I understand the argument, the Defendants say that those offers constituted offers of the kind described in Calderbank v Calderbank.[21]
[20] Defendants' Submissions [4.4].
[21] Defendants' Submissions [4.4].
For the following reasons, I am not persuaded that costs should be awarded on an indemnity basis, on either ground.

Why indemnity costs are not warranted on the basis of Terry's conduct

The Defendants contend that Terry brought the action not because he wanted to see the Estate properly administered, but out of a desire to increase the share of the Estate that he would ultimately receive. They point to my finding (in the primary reasons) that a large component of Terry's motivation was self-interest.[22] The Defendants also point to my finding that Terry did not seek to administer the Estate in accordance with Shirley's wishes, but rather to distribute the assets of the Estate so as to result in an equal distribution to all of the Siblings, taking into account what their parents provided during their lifetimes, as well as under Shirley's Will, which they say would necessarily result in Terry receiving a greater share of the Estate.[23]
[22] Defendants' Submissions [26] - [27].
[23] Defendants' Submissions [29].
The Defendants also contend that Terry brought the action for an improper purpose, in that it was pursued with a view to him being able to use his position as an executor of the Estate in order to pursue claims against the Siblings, and without serious regard for the prospects of success of that litigation.[24] The Defendants say that in bringing the action, Terry was in part motivated by his desire to frustrate his Siblings' wishes to administer the Estate.[25]
[24] Defendants' Submissions [31].
[25] Defendants' Submissions [34].
The Defendants further contend that Terry unnecessarily added to the cost of the proceedings, and that an indemnity costs order is warranted on that basis also. They submit that his conduct was consistent with a strategy of delay, in order to force the Siblings to acquiesce to his demands.[26]
[26] Defendants' Submissions [36].
Finally, the Defendants contend that in pursuing the application, Terry persisted in a hopeless case, having regard to the reluctance of courts to pass over a named executor, save in special or exceptional circumstances.[27] They say that their solicitors pointed out to Terry the weaknesses in his case in September 2013, and again in February 2014,[28] but to no avail.
[27] Defendants' Submissions [38].
[28] Defendants' Submissions [41], [42].
In so far as the interlocutory applications are concerned, the Defendants say that indemnity costs should be awarded for the following reasons in relation to each hearing:
•22 December 2015 (Terry's application for leave to amend the statement of claim). The Defendants say that they consented to a number of the amendments set out in the pleading, but joined issue with others. The only amendments permitted by the Court were those to which the Defendants had consented. The Defendants say that in those circumstances, indemnity costs should be awarded on the same bases as set out above.[29]
•31 March 2016 (hearing of the Defendants' objections to Terry's witness statements). The Defendants point out that Terry did not concede any of the objections they raised, and that the overwhelming majority of their objections were upheld. The Defendants say that as a consequence of Terry's refusal to concede any objections, each of them had to be argued at the special appointment, and that this greatly increased the Defendants' costs.[30] They say an order for indemnity costs is justified in these circumstances because although Terry was unrepresented, he chose to be so, and his conduct was patently unreasonable.[31]
•19 May 2016 (hearing of Terry's objections to Defendants' witness statements and the Defendants' re‑amended pleading). The Defendants point out that leave was given to the Defendants to amend the defence, as proposed. (The hearing of the objections was largely deferred to another day.) They say Terry's refusal to consent to the amendment was unreasonable and unnecessarily added to the cost of the proceedings.[32]
•26 May 2016 (hearing of Terry's objections to the Defendants' witness statements and Terry's application for discovery). The Defendants note that the overwhelming majority of Terry's very numerous objections were dismissed by the Court. They say that Terry's approach to the objections greatly increased the cost of the proceedings.[33]
[29] Defendants' Submissions [52] - [54].
[30] Defendants' Submissions [55] - [56].
[31] Defendants' Submissions [57].
[32] Defendants' Submissions [61].
[33] Defendants' Submissions [63] - [64].
There is some force in the Defendants' submissions. In the primary reasons, I concluded that Terry's motivation in pursuing the proceedings was largely self‑interest, in that if he was able to persuade the Court to make an order to pass over Ross and Ray, he intended to administer the Estate in the manner he saw fit. He clearly did not understand the role of an executor of a deceased estate. Furthermore, the manner in which Terry conducted the case undoubtedly made the litigation much more difficult than litigation of this kind ordinarily is (a matter I will return to later in the reasons), and resulted in greatly increased costs for the Defendants. Many of the allegations Terry made in support of his application to pass over Ross and Ray were without any reasonable foundation.
In addition, Terry's conduct in relation to the interlocutory applications greatly increased the time and costs involved in resolving those applications. By way of example, Terry pursued the admission of numerous objectionable paragraphs of his witness statements, and raised a very large number of objections to the witness statements filed by the Defendants. Most of the Defendants' objections to Terry's witness statements were upheld, and most of his objections to the Defendants' witness statements were dismissed. The hearing time involved was significant. Ordinarily, contested arguments about the admissibility of witness statements should not need to occur because the statements should be prepared, from the outset, so that they are compliant with the rules of evidence, and so that no inadmissible material is included in them in first place. In the event that objections are made, those should ordinarily be able to be resolved by conferral between counsel.
Having taken into account all of the matters raised by the Defendants, however, I am not persuaded that an award of costs on an indemnity basis would be a just outcome in this case, for two reasons. First, it cannot be said that the entirety of Terry's case was hopeless, or brought for an improper purpose. There was clearly a question as to whether the Original Will or the Amended Will should be the subject of a grant of probate. In addition, the acrimonious and unworkable relationship between Terry and the Defendants was also such that an order to pass over him, or them, or all of them, as executors, was likely to be required, in the interests of the administration of the Estate. Those matters necessarily had to be determined by the Court, and to that extent it was inevitable that proceedings would be commenced in this Court.
Secondly, for much of these proceedings, Terry has not been represented by solicitors. (I have not overlooked the fact that Terry was represented until July 2014. However, most of the work in preparing for the trial, and the trial itself, was conducted after that point.) There can be no doubt that Terry's lack of legal representation contributed to the way that he ran the litigation. The Defendants say that Terry chose not to be represented (because during the trial he asserted that he was of considerable financial means[34]), but there is no evidence as to why Terry was not represented after July 2014. In any event, a natural person who is a party is not obliged to be legally represented in proceedings in this Court.
[34] ts 345.
Had Terry been represented by a solicitor, and had his case been conducted in the same manner, the application for indemnity costs would have taken on an entirely different complexion because of the expectation on solicitors and counsel to conduct litigation in the most expeditious and cost effective manner possible. While it is true that parties who are unrepresented in litigation face the same potential costs outcomes as represented parties, the fact that a party is not legally represented is an important consideration in assessing whether their conduct was improper or unreasonable, so as to warrant the sanction of an order for costs on an indemnity basis. Whether an action was commenced or pursued for an improper purpose, or unreasonably, requires attention to what the party knew, or ought reasonably to have known, in the circumstances. If a party is unrepresented, and has no legal training, they are likely to have considerable difficulty, for example, in determining whether they have a cause of action, in properly pleading a case, in assessing the strength of particular allegations from a legal perspective, or in assessing the admissibility of evidence. Allowances must clearly be made for that lack of knowledge in assessing whether an indemnity costs order is warranted.
In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd,[35] Hodgson CJ in Eq discussed similar issues in responding to submissions by a litigant in person that costs should not be awarded against him. His Honour observed:
… I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they otherwise would be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstances that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event.
[35] Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159 [13].
I respectfully agree with his Honour's observations.
In my view, the additional costs that the Defendants incurred as a result of the way in which Terry prosecuted his action can be adequately addressed through the special costs order which should be made.

Why indemnity costs are not warranted on the ground that Terry rejected the Defendants' offers of settlement

In Calderbank v Calderbank[36] it was accepted that the rejection of a settlement offer may be a basis for an award of indemnity costs, in the following circumstances:
It is common practice for an offer to be made by one party to another of a certain apportionment. If that is not accepted no reference is made to that offer in the course of the hearing until it comes to costs, and then if the court's apportionment is as favourable to the party who made the offer as what was offered, or was more favourable to him, then costs will be awarded on the same basis as if there had been a payment in.[37]
[36] Calderbank v Calderbank [1975] 3 All ER 333.
[37] Calderbank v Calderbank [1975] 3 All ER 333, 342 (Cairns LJ, Scarman LJ & Sir Gordon Willmer agreeing).
The principles in relation to an award of indemnity costs following the rejection of a Calderbank offer were set out by Buss JA (with whom Wheeler JA agreed) in Ford Motor Company of Australia Ltd v Lo Presti. His Honour said:[38]
[38] Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [16] - [32] (Buss JA, Wheeler JA agreeing) (citations omitted).
A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable.
All of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable.
The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable.
…[D]eciding whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression. Although it is neither possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable … ordinarily, regard should be had to, at least, the following:
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree's prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for … indemnity costs in the event of the offeree's rejecting it.
…
The party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour.
In Chaina v Alvaro Homes Pty Ltd the Court of Appeal of New South Wales, after reviewing a number of authorities, said:
While the general rule remains that costs should be assessed on a party and party basis, it is important that the standard to be applied in awarding indemnity costs not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part. A test of unreasonableness should not be upheld on other than clear grounds.
Decisions of Australian intermediate courts of appeal in recent years have established that the critical question in deciding whether to award indemnity costs against a party who has rejected a Calderbank offer is whether the rejection was unreasonable in the circumstances. This is the test which must be applied in Western Australia.
…
In my opinion, the weight of recent authority at the level of Australian intermediate courts of appeal is against qualifying the concept of 'unreasonableness' by words such as 'manifestly', 'plainly' or 'so' which, on one view, suggest (if not require) a more stringent test.
…
Australian intermediate courts of appeal have disapproved the view ... that unreasonableness is, on the face of it, to be found in the rejection by an offeree of a Calderbank offer which is not bettered on judgment … . It has been established that there is no presumption of an entitlement to an award of indemnity costs in this situation. The unreasonableness of the rejection of the offer is not determined by a presumption. Rather, it depends on the circumstances of the particular case.
The Defendants say that in September 2013, they offered to settle the matter on the basis that an independent administrator be appointed to administer the Estate, failing which the Defendants advised that they intended to apply to the Court for the appointment of an independent administrator. The Defendants say that they reiterated that view in February 2014. They also say that they made a Calderbank offer to Terry in June 2015, offering to settle the proceedings on the basis that an independent administrator be appointed. The Defendants submit that Terry's rejection of these offers was unreasonable, and that while an independent administrator was not appointed, the outcome of the litigation was even less favourable to Terry than that course would have been.[39]
[39] Defendants' Submissions [48].
In my view, there is room for argument as to whether Calderbank principles apply when a party rejects an offer to settle but where the Court makes an order which is qualitatively (rather than quantitatively) different from that proposed in the settlement offer. At least in part, that will be because there will be scope for arguments as to whether the order made by the Court was at least as favourable as the compromise proposed. However, it is unnecessary to resolve that question because I am not persuaded that the letters on which the Defendants rely support a claim for an award of costs on an indemnity basis.
In so far as the Defendants' letter of 25 September 2013 is concerned, I am not persuaded that it meets the criteria for a Calderbank offer, but even if it did, Terry's refusal of it was not unreasonable, in the circumstances, for the following reasons. The letter simply proposed that the parties agree to the appointment of an independent administrator of the Estate. The Defendants' solicitors sought Terry's comments in relation to that proposal. Nothing in the letter suggested that that was a formal offer to settle the litigation (or at least this aspect of the parties' dispute) nor did it set out precisely the terms of such a settlement. Nor was there any suggestion that if the Defendants eventually applied to the Court for the appointment of an independent administrator, and obtained that order, that they would seek costs on an indemnity basis from Terry. (The letter instead indicated that the Defendants would seek costs from Terry personally.)
Furthermore, Terry's refusal of the 'offer' (if that was what it was) cannot be considered unreasonable in the circumstances. The offer was made very early on in the litigation, when it would have been difficult for Terry (even with the benefit of the legal representation that he then had) to make an assessment of the prospects of his case for passing over Ross and Ray, as opposed to the appointment of an independent administrator. In addition, rejection of the 'offer' at that stage cannot be regarded as unreasonable given that the letter did not contain details of important terms of any proposed settlement (such as a firm proposal to appoint a particular person as administrator), or the cost implications of appointing an independent administrator.
As for the letter of 4 February 2014, that letter did not contain an offer to settle, but rather pointed out the deficiencies that the Defendants saw in Terry's case, proffered the view that 'it is clear that the only way the estate can move forward is by the appointment of an independent administrator' and sought the views of Terry's solicitors on the matters set out in the letter. I accept the submission of Terry's counsel that that letter cannot support an application for indemnity costs on Calderbank principles.[40]
[40] Plaintiff's Submissions [37].
Finally, as for the letter of 9 June 2015, that letter merely invited Terry to reconsider his previous objection to the appointment of an independent administrator. The letter again did not set out a firm settlement proposal, comprising important matters such as the identity of a particular administrator, or a list of persons suitable for appointment, or the likely cost of the services of any such person. Without that information, Terry could not properly assess the offer, and in my view, his refusal to agree with the proposal cannot be regarded as unreasonable so as to warrant an order for costs on an indemnity basis.

Why the Defendants' application for a special costs order should be granted

Ordinarily, the taxation of bills of costs charged by a legal practice is regulated by costs determinations made by the Legal Costs Committee established under the Legal Profession Act 2008 (WA) (LP Act).[41] However, the applicable limits under the scale of costs set out in such costs determinations are able to be raised or removed by the Court pursuant to the power in s 280(2) of the LP Act, which provides:
... if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
[41] Legal Profession Act 2008 (WA) s 280(1).
The principles concerning special costs orders under s 280(2) of the LP Act are well‑established. They were set out by the Court of Appeal in Wainwright v Barrick Gold of Australia Ltd.[42] In Crawley Investments Pty Ltd v Elman,[43] those principles were summarised by Edelman J as follows:
(i)The court must form an opinion which has two components. First, the court must determine that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate. Second, the court must conclude that the inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter'.
(ii)Having heard the matter and being familiar with the way in which the case was conducted and the issues which were litigated, the court is in a position to form the opinions required under the section as matters of impression rather than 'detailed evaluation', 'precision', 'science' or 'mathematics'.
(iii)As to the first question (inadequacy) the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant costs determination. Until that threshold is crossed, the power will not ordinarily be exercised.
(iv)A conclusion that it is fairly arguable that the taxing officer might properly allow costs at an amount greater than the amount allowable under the Scale does not always require evidence of the costs actually incurred.[44]
(v)As to the second question (the cause of the inadequacy being unusual difficulty, complexity or importance), the word 'unusual' qualifies only the 'difficulty' of the matter and not its complexity or importance. The word 'unusual' in this context means unusual having regard to what one might describe as the usual run of civil cases determined in the Supreme and District Courts. That essentially involves the making of a value judgment by the court, having regard to the court's experience of the particular case when compared with the usual run of cases. And the word 'importance' in s 280(2) encompasses importance to the parties; it does not require broader importance to the public or a sector of the public.[45]
(vi)Although replacing the amount of the Scale item with a different ceiling may be appropriate where sufficient information exists to make that assessment, it is not uncommon for an order to be made removing the limit for the Scale item without replacing that limit with a different ceiling.[46]
(vii)One of the principles that should guide a court in addressing an issue under s 280(2) is that the court should not usurp the role of the taxing officer.[47]
[42] Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S) [7] - [9] (the Court).
[43] Crawley Investments Pty Ltd v Elman [2014] WASC 233 (S) [5].
[44] Frigger v Lean [2012] WASCA 66 [81] (Allanson J, Newnes & Murphy JJA agreeing).
[45] Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S) [7] (Beech J).
[46] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [8] - [9], [13] (Martin CJ); Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S) [5] (Beech J).
[47] Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S) [6] (Beech J).
The Defendants submitted a draft bill of costs, which was annexed to the affidavit of Ms Burnside sworn 5 October 2017. The Defendants say that when the bill is assessed, the taxed amounts are likely to exceed the scale limits under items 3(b), 3(c), 7(b), 10(a), 10(c), 17, 20(c), 20(h) and 24(a) of the applicable scales.[48] Items 3(b) and 3(c) refer to the preparation of the defence and counterclaim respectively. Item 7(b) pertains to giving discovery. Item 10(a) pertains to proceedings in chambers, and item 10(c) pertains to consent orders, including conferral about such orders. Item 17 refers to the preparation of the case for trial. Item 20(c) refers to counsel fees for the second and subsequent days of hearing, and item 20(h) refers to attending on a reserved judgment, consideration of the reasons, and all work to obtain final orders. Item 24(a) pertains to attendance at mediations and other conferences.
[48] Defendants' Supplementary Submissions [21].
The order the Defendants seek is an order that their costs be taxed 'without regard to the maximum hourly rates and/or maximum allowances' fixed in the applicable scales. They seek to remove the limits under the scale items without replacing those with different limits.[49]

The parties' submissions in relation to special costs

[49] Defendants' Supplementary Submissions [22].

The Defendants say that the criteria for a special costs order have been met in this case. The Defendants submit that the factual matrix of the action was complex, and that that was confirmed by the length of the primary reasons and the number of issues addressed, which included many issues relating to commercial and property disputes between the parties.[50] The Defendants also submit that the case was complex because the fact that Terry was unrepresented extended the time involved in the hearing of objections to witness statements and similar interlocutory matters,[51] and resulted in complex pleadings which were amended on a number of occasions.[52] The Defendants submit that the matter was unusually difficult when contrasted to a typical application for the passing over of an executor, given the scope and extent of the issues raised by Terry.[53] The Defendants also submit that the action was extremely important to them as it had implications for their reputations and those of other members of Shirley's family, and had significant ramifications for a number of commercial and property disputes between the parties. Those implications meant that Terry's allegations needed to be properly addressed by the Defendants.[54]
[50] Defendants' Supplementary Submissions [14] - [15].
[51] Defendants' Supplementary Submissions [16].
[52] Defendants' Supplementary Submissions [17].
[53] Defendants' Supplementary Submissions [18].
[54] Defendants' Supplementary Submissions [19].
Counsel for Terry did not take issue with the contention that the action involved unusual difficulty, although she did not accept that the case was complex or that it was important.[55] Terry's counsel submits that there are sufficient grounds to make a special costs order in favour of the Defendants in relation to items 3(b), 3(c) and 7(b) of the applicable scale. However, she submits that the maximum hourly rates set out in the scale still ought to apply.[56]
[55] Plaintiff's Supplementary Submissions [22].
[56] Plaintiff's Supplementary Submissions [16].
As for the balance of the Defendants' application for a special costs order, Terry's counsel submits that the draft bill annexed to Ms Burnside's affidavit is deficient for the purposes of supporting a special costs order, on a number of bases. These include that the bill does not assist in determining which items are likely to exceed the maximum amounts under the scale,[57] that in respect of item 10(a) in the scale, the Defendants have not identified which of the interlocutory hearings are relevant, and failed to establish that the scale limits applicable to the interlocutory hearings are likely to be exceeded on a taxation, and that it appears from the bill that the only items relevant to the interlocutory hearings which are likely to exceed the scale maxima are items 17 and 25.[58]
[57] Plaintiff's Supplementary Submissions [10] - [11].
[58] Plaintiff's Supplementary Submissions [12] - [13].
Terry's counsel acknowledged that the granting of an order to remove the limits on a scale item will affect the dollar value of that item in the scale, and that each of the matters that go to make up that dollar limit ‑ the nature of the fee earner, the hourly rate and the number of hours ‑ will be capable of variation.[59] However, she submits that an order should not be made to lift the hourly rates in assessing party‑party costs merely because a party's solicitor or counsel have charged at a higher rate,[60] and that the terms of any costs agreement between the party receiving costs and its solicitor do not determine any allowance exceeding the scale.[61] Terry's counsel submits that although the matter did contain a degree of unusual difficulty, it was not so complex as to warrant lifting the hourly rates.[62]

Disposition ‑ special costs order

[59] Plaintiff's Supplementary Submissions [18.1], citing Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia [No 7] [2009] WASC 218 [31].

[60] Plaintiff's Supplementary Submissions [18.2], citing Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S) [7]; Flotilla Nominees Pty Ltd v Western Australia Land Authority (2003) 28 WAR 95 [22].

[61] Plaintiff's Supplementary Submissions [18.3], citing Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S) [8].

[62] Plaintiff's Supplementary Submissions [19].

There is no dispute that this action was one which involved unusual difficulty. There is no doubt that that is so. The large number and variety of allegations made by Terry, in support of his contention that Ross and Ray should each be passed over, meant that this case was one of unusual difficulty compared with what might be described as the 'usual' run of civil cases, especially those concerning deceased estates. That unusual difficulty derived not from the legal principles involved (which were quite straightforward) but from the factual breadth of the allegations which spread over many years, involved different incidents, and which resulted in the discovery, and tender at trial, of a very large volume of documentary material, and in lengthy witness statements in support of, and to respond to, Terry's allegations.
I am satisfied (and there is no dispute) that it is likely that on the taxation of the bill, the costs allowed under the applicable scale will be inadequate in respect of items 3(b) and 3(c) (the preparation of the defence and counterclaim respectively) and item 7(b) (discovery) by virtue of the unusual difficulty of this case. I am satisfied that the maximum amount allowed under those items in the scale should not apply.
The Defendants seek that the maximum allowance under item 10(a) (which pertains to proceedings in chambers) should not apply in respect of particular hearings in chambers, namely the hearings on 17 November 2015 (which concerned Terry's application to amend the statement of claim), 31 March 2016 (which concerned the Defendants' objections to the witness statements on which Terry sought to rely) and 13 September 2017 (the hearing of the costs application). In respect of the first two hearings, the amount in the draft bill is not significantly more than the maximum allowance under the applicable scale. On the other hand, the claim for the number of hours of work performed by the Defendants' counsel and solicitor by way of preparation, and attendance at the hearing, appears to be quite reasonable, having regard to the number of objections involved, and thus the unusual difficulty of the matter. Consequently, I am satisfied that is fairly arguable that the bill may properly tax at an amount which is greater than the limit under item 10(a) for those chambers hearings. I am satisfied in each case that the inadequacy of the limit under item 10(a) of the applicable scale is due to the unusual difficulty of this matter. Each of these hearings was lengthy and covered factual matters of some breadth and difficulty. The maximum allowance under item 10(a) should not apply in respect of these hearings.
In respect of the present costs application, the amount in the bill exceeds the scale allowance in item 10(a) by a considerable margin. I accept that there is a fairly arguable case that the bill will tax at an amount higher than the scale, given the variety of bases on which costs were sought, the hearing time involved, and the need for supplementary submissions.
However, I am not satisfied that the inadequacy of the applicable scale is due to the unusual difficulty of this case. Although the costs application involved a number of different arguments as to costs, involved costs reserved on a number of occasions, and required supplementary submissions to be prepared by the parties, none of this was evidently due to the unusual difficulty of the case. The costs application was not out of the ordinary. I am therefore not persuaded that the maximum allowance under item 10(a) of the applicable scale should be lifted in respect of the present costs application.
The Defendants seek that the maximum allowance under item 10(c) be lifted in respect of work done on 14 December 2014 to obtain consent orders. Although the draft bill of costs refers to work covered by item 10(c) on 14 December 2014, no consent orders were made by the Court in close proximity to that date. The Defendants have not established a basis to lift the scale allowance for this work.
The Defendants seek that the limit under items 17 and 20(c) of the applicable scale be lifted. Item 17 pertains to the preparation of the case for trial, and item 20(c) pertains to counsel's fees. Having regard to the draft bill of costs, there is no doubt that it is fairly arguable that on a taxation the taxed amounts will exceed that allowed under items 17 and 20(c), and that the inadequacy of the scale limit is attributable to the unusual difficulty of this case. A considerable volume of work was undoubtedly required to prepare for the trial, and in the conduct of the trial itself both before and after each hearing day, having regard to the dimensions of the case, and its consequent unusual difficulty. The maximum allowance under items 17 and 20(c) will be lifted.
The Defendants seeks that the maximum allowance under item 20(h) be lifted. That item refers to attending on a reserved judgment, consideration of the reasons, and all work to obtain final orders. I am satisfied that it is fairly arguable that the taxed bill will exceed the limit allowed under the scale, and that that is also attributable to the unusual difficulty in this case, which was reflected in the very lengthy primary reasons which were delivered after the trial. The maximum allowance under item 20(h) will be lifted.
In so far as the Defendants seek an order that the maximum hourly rates under the applicable scales should not apply, that order was sought both in addition, and in the alternative, to the order that the maximum allowances fixed under the scales should not apply. I am not persuaded that it is necessary to make an order that the maximum hourly rates applicable under the scales should not apply, in addition to an order that the maximum allowances under the scales should not apply. In this case, the reason why the scale allowance appears likely to be exceeded is because of the number of hours of work undertaken, which I accept is due to the unusual difficulty of the matter. The Defendants have not contended that the unusual difficulty of the matter warranted instructing solicitors and counsel of particular expertise so as to warrant removing the hourly rates under the applicable scales. In my view, removing the maximum allowance for particular items of work will ensure that the costs Terry is required to pay for particular items will fairly reflect the additional work involved in response to the unusual difficulty of this case. I do not consider that lifting the scale limit for hourly rates is also warranted.
I emphasise that lifting the limits on scale items does not mean that the amounts claimed by the Defendants in their draft bill will be allowed. It will be up to the taxing officer to determine what amount is reasonable in all of the circumstances.

Cost of obtaining the transcript

The Defendants obtained transcripts for several of the directions hearings leading up to the trial ‑ namely those on 22 September 2015, 17 November 2015, 10 December 2015 and 16 February 2016 ‑ and for the first four days of the trial.[63] The cost involved was $681.60 for the transcript of the directions hearings and $4,650.50 for the trial transcript.
[63] The Defendants' submissions referred to transcript for the first five days of the trial, but as the trial went for five days in total, I have assumed that the Defendants obtained transcript for the first four days of the trial, in which all of the evidence was adduced.
Generally speaking, the cost of obtaining transcript of hearings is usually dealt with on taxation as a disbursement or expense necessarily incurred in litigation. In that case, the party claiming that cost must persuade the taxing officer that the expense of transcript was reasonably necessary.
As there is no limit under the scales for the cost of disbursements and expenses, an allowance for the costs of transcript is not a matter for the exercise of discretion under s 280(2) of the LP Act.
In this case, the Defendants seek an order that Terry pay their costs of obtaining the transcript, pursuant to O 69 r 3 RSC. That rule provided:
Where, by any order of the Court any document is ordered to be printed or typewritten or otherwise produced, or where any part of the proceedings is taken in shorthand or is recorded, the Court may order the expense thereof to be borne and allowed and copies or transcripts thereof to be furnished, by and to such parties and upon such terms as shall be thought.
In support of that application, the Defendants rely on Atwell v Roberts, which is authority for the proposition that the Court may rely on the power in O 69 r 3 to order that a party pay the cost of the transcript obtained by another party, where that was reasonably necessary for the cost of the hearing in question.[64]
[64] Atwell v Roberts [2013] WASCA 37 (S) [29] - [32].
Order 69 r 3 RSC was repealed on 1 March 2018. Quite apart from that rule, however, the Court's discretion under s 37 of the SC Act is clearly sufficiently broad to permit an order of the same kind to be made here. I am satisfied that the cost of obtaining the transcript for the first four days of the trial was reasonably necessary. The ability to refer to the transcript enabled counsel, in closing, to accurately refer to key parts of the oral evidence in respect of the numerous factual issues raised on the pleadings.
As for the directions hearings (or strategic conferences) on 22 September 2015, 17 November 2015, 10 December 2015 and 16 February 2016, those hearings dealt with directions leading up to the trial and some significant interlocutory steps, including Terry's application for further discovery and for leave to further amend the statement of claim. I am satisfied that it was reasonably necessary for the Defendants to obtain a copy of the transcript of those hearings, in order to facilitate the proper preparation of the matter for trial in light of the Court's observations on the submissions made at those hearings, and to provide clarity about the outcome of Terry's interlocutory applications.

Why there should be an order that to the extent that the Defendants are unable to recover their costs from Terry that those costs should be paid out of the Estate

The Defendants say that it is open to make a costs order which is paid out of the Estate, to the extent that it is not paid by Terry, pursuant to O 66 r 4(1) RSC.
Under s 37(1) of the SC Act, the court or a judge has full power to determine by whom or out of what estate, fund, or property, and to what extent, costs are paid. O 66 r 4 RSC provides:
(1)Where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the Court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party: Provided that no such order shall be made unless the Court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
(2)Where the Court orders payment of costs out of any property it shall direct out of what portion or portions the costs shall be paid.
Order 66 r 4 does not compel the Court to make an order for costs out of property which is the subject of an action.[65]
[65] Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2009] WASCA 158(S) [154] (Owen JA).
The terms of O 66 r 4(1) will ordinarily require that the Court consider whether to make an order after it has been determined whether the party has an interest in a fund or in particular property, and whether it was reasonable in all the circumstances for the party to take the position it did in the relevant proceedings.[66] The Defendants say that the test is whether the costs were necessarily incurred for the benefit of the Estate.[67]
[66] Great Southern Managers Australia Ltd v Thackray [2010] WASC 138(S) [5] (Le Miere J).
[67] Defendants' Supplementary Submissions [5], citing Re Palermo Unit Trust [2014] WASC 69.
Order 66 r 9(2) is also relevant. That rule provides, relevantly, that unless otherwise ordered, a trustee shall 'be entitled to the costs of … proceedings, in so far as they are not recovered from or paid by any other person, out of the [trust] fund'. Under O 66 r 9(2), the Court may only order otherwise where the trustee has acted unreasonably, or for his or her own benefit rather than for the benefit of the trust.
The Defendants say that the present case is analogous to that category of trust disputes where a beneficiary brings a hostile claim against the trustee or another beneficiary[68] (for example, which challenges the propriety of any action taken or omitted to be taken). The starting point in those cases is that the costs between the parties will ordinarily follow the event. However, if the trustees properly (even if not necessarily successfully) defend a claim for the benefit of the estate, they will be entitled to their costs out of the estate, to the extent that those costs are not recovered from another party.[69]
[68] Defendants' Supplementary Submissions [3].
[69] Sons of Gwalia v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119 [9] (Finkelstein J).
Counsel for Terry submits that the dispute in this case did not solely revolve around the issue of a testamentary trust, but rather concerned the distribution of the assets of an estate. Accordingly, she submits that this case does not fit neatly into those cases where costs of a trustee may come out of the fund.[70] However, counsel for Terry did not oppose the making of an order for costs to be paid out of the Estate pursuant to O 66 r 4(1) RSC, or the exceptions to the general costs rule, which apply in probate actions, on a solicitor client basis (but not on an indemnity basis).
[70] Plaintiff's Submissions [48].
In my view, it was necessary for the Defendants to defend the claim brought by Terry, especially having regard to the approach to the administration of the Estate which he clearly intended to apply if he succeeded in having Ross and Ray passed over as executors. If Terry is unable to meet the costs order in the Defendants' favour, they should not be left out of pocket. Having regard to the terms of O 66 r 4 and O 66 r 9(2) RSC, I am satisfied that the order sought by the Defendants should be made in this case, so that to the extent that Terry is unable to meet their costs, those costs should be paid out of the Estate.

The orders which should be made

The orders which will be made will be to the following effect:
1.The plaintiff do pay the Defendants' costs of the action and counterclaim, including the reserved costs of the interlocutory applications heard on 22 December 2015, 31 March 2016, 19 May 2016 and 26 May 2016, to be assessed.
2.Pursuant to s 280(2) of the Legal Profession Act 2008 (WA), costs pursuant to order 1 are to be assessed without regard to the maximum allowances fixed for items 3(b), 3(c), 7(b), 10(a), 17, 20(c), 20(h) and 24(a) of the applicable scale in respect of the specific work discussed in these reasons.
3.To the extent that the Defendants are unable to recover the costs in order 1 from the plaintiff, those costs are to be paid out of the Estate.
The parties' solicitors should endeavour to settle a minute which sets out the precise terms of the orders, and which deals with the costs of the costs application.
In the event that the parties are unable to reach agreement, I will list the matter for a short hearing.

Postscript

The parties were provided with an advance copy of these reasons and, in the course of reviewing them, it became apparent that I had not dealt with an aspect of the Defendants’ special costs application, namely, an application for an order to lift the maximum allowance under the applicable scale for the attendance at a strategic conference on 16 February 2016, including the preparation for that conference and conferral about it. That work is subject to item 24(a) of the applicable scale. That omission was an oversight on my part, as I failed to pick up that item in the draft bill of costs.
The strategic conference was an opportunity for the parties to come before the Court to discuss the action in that setting and to discuss the progress of the matter to a hearing. Given the factual dimensions of the action, it is not surprising that a considerable amount of work was done to prepare for the strategic conference, in addition to attending that conference. I am satisfied that it is fairly arguable that the draft bill will tax at an amount higher than the scale. I am also satisfied that that is due to the unusual difficulty of the matter. The maximum allowance under item 24(a) of the applicable scale should be lifted in respect of the work done in relation to the strategic conference on 16 February 2016.
An issue has also arisen in relation to the terms of the order which should be made to give effect to my reasons insofar as I concluded that, to the extent that Terry is unable to meet the costs of the Defendants, that their costs should be paid out of the Estate. The Defendants seek an order in the following terms:
Pursuant to Order 66 rule 4(1) [RSC], to the extent that the Defendants are unable to recover their complete costs of the action from the Plaintiff pursuant to orders 1 and 2 above then those costs be paid out of the property of the estate of the late Shirley Grace Woodley, to be taxed on a solicitor-client basis.
Terry’s counsel says that the appropriate order to give effect to my reasons is:
To the extent that the First and Fifth Defendants are unable to recover the costs in Order 1 from the Plaintiff, those costs are to be paid out the Estate.
The difference is, effectively, whether the Defendants should have recourse to the Estate for the part of their total costs (as assessed on a solicitor-client basis) as they are unable to recover from Terry (pursuant to the order for costs which should be made against Terry, pursuant to which Terry will pay the Defendants’ costs assessed on a party-party basis, subject to the special costs order I have determined should be made). Terry's counsel submits that the order she proposes would more accurately reflect the terms of my reasons.
In part 7 of my reasons, I suggested the terms of the orders which should be made to reflect those reasons, and I set out there a proposed order 3. That order is most closely reflected in the order now proposed by Terry's counsel.
However, the focus of my reasons had been on the question whether the Defendants should have recourse to the Estate for any part of their costs which could not be recovered from Terry. Little attention was paid in the reasons to the question of how the Defendants' costs, to the extent that the Defendants may have recourse to the Estate, should be taxed. As I noted at [76], Terry's counsel had conceded that the Defendants' costs could be paid out of the Estate, albeit on a solicitor‑client basis, rather than an indemnity basis.
I indicated in my reasons that I would give the parties the opportunity to be heard in relation to any dispute about the terms of the orders which should be made and, in so doing today, I have also had the benefit of hearing submissions from counsel for the executors.
All of that is by way of explanation for my conclusion that, to the extent that I postulated (at [78]) an appropriate order which should arise from my reasons, proposed order 3 perhaps inaccurately stated the ultimate outcome of the reasoning in part 6 of my reasons. The point is that I have not, prior to today, determined the question of the basis on which the Defendants should be able to have recourse to their costs from the Estate.
The Defendants' counsel has today drawn to my attention the decision of the Court of Appeal in Blenkinsop v Herbert[71] and to the orders made by the Court following the disposition of that appeal. Paragraph 2 of those orders was that:
Pursuant to O 66 r 4(1) [RSC], to the extent that the second respondent is unable to recover his costs of the appeal from the appellant pursuant to order 1 … and pursuant to O 66 r 4(1) … , those costs be paid out of the property of the [trusts].[72]
Counsel for the Defendants submits that that supported the form of the order that he now seeks in this case.
[71] Blenkinsop v Herbert [2017] WASCA 87(S).
[72] Blenkinsop v Herbert [2017] WASCA 87(S) [26].
The factual circumstances in Blenkinsop are, of course, not entirely on par with those in this case, but there are some similarities. That was a case in which a beneficiary under two family trusts had, unsuccessfully, sought to remove the guardians of the two trusts. The Court's decision as to costs largely concerned whether the circumstances of the case warranted a relaxation of the general rule that an unsuccessful beneficiary is liable to pay costs.
However, the Court considered whether the contradictor (the trustees having not taken an active part in the appeal) should be able to recover his costs from the property of the trusts to the extent that he did not recover those costs on a party-party basis from the beneficiary. The Court observed that that was the appropriate order to make and that such an order was not unconventional.[73]
[73] Blenkinsop v Herbert [2017] WASCA 87(S) [24].
In making that observation, the Court relied on the order proposed in Vigolo v Bostin[74] and that made by the Privy Council in Hogan v Hogan.[75] Vigolo v Bostin was an appeal, brought by a beneficiary under a will, in a case concerning the application of the Inheritance (Family and Dependants Provision) Act 1972 (WA). The beneficiary was unsuccessful in the appeal, and was then required to pay the costs of the first and second first named respondents (the executors of the will) in respect of the appeal. Gummow and Hayne JJ observed that the costs of the executors
should be taxed on the trustee basis and to the extent that those costs exceed the costs borne and paid by the appellant as between party and party they should be paid out of the estate.[76]
[74] Vigolo v Bostin (2005) 221 CLR 191 [84].
[75] Hogan v Hogan (1983) 2 NSWLR 561, 562.
[76] Vigolo v Bostin (2005) 221 CLR 191 [84].
I have referred to the facts of Vigolo v Bostin to illustrate that the general proposition - as to the basis on which certain parties may have recourse to estate or trust properties to meet their costs - is not confined, in any strict way, to the factual circumstances which pertained in Blenkinsop. In my view, the general approach taken in Blenkinsop, which reflects that taken in Vigolo and in Hogan, is appropriate in this case.
As I observed at [77] of my reasons, to the extent that the Defendants are unable to recover their costs from Terry, pursuant to the costs order which will be made as against him, they should not be left out of pocket. It was proper for the Defendants to defend the claim brought by Terry, having regard to the approach that he intended to take as to the administration of the Estate if he succeeded in his application to pass over Ross and Ray.
In my view, the appropriate order as to the Defendants’ costs, to the extent that they are to be drawn from the Estate, is that those costs should be assessed on the basis now sought by the Defendants, that is, on a solicitor-client basis.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LF
ASSOCIATE TO PRITCHARD J
10 APRIL 2018