HILL v COPELAND [1999] NSWSC 632

New South Wales Supreme Court CITATION : HILL v COPELAND [1999] NSWSC 632 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 1757/97 HEARING DATE(S) : 3 and 4 June 1999 JUDGMENT DATE : 28 June 1999

PARTIES : GAIL CHRISTINE HILL v MELVYN COPELAND & MICHELLE KAY VRANDICH JUDGMENT OF : Master Macready at 1

Ms L.V. Stapleton for the plaintiff COUNSEL : Mr L. Ellison for the 1st defendant Mr J. Dupree for the 2nd defendant Marsdens for the plaintiff SOLICITORS : Teece, Hodgson & Ward for the 1st defendant L.C. Muriniti & Associates for the 2nd defendant CATCHWORDS : Practice. Plaintiff seeks to discontinue at commencement of proceedings and have second defendant pay her costs. Claim based upon an alleged deliberate ambush of the plaintiff by the 2nd defendant. Consideration of the proper approach to such an application. Held not appropriate to determine merits and not possible to determine whether the proceedings properly commenced. Plaintiff ordered to pay 2nd defendant's costs from the time the plaintiff could properly assess the 2nd defendant's position. DECISION : Paragraph 42

- 21 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER MACREADY

Monday, 28 June 1999 1757/97 GAIL CHRISTINE HILL v MELVYN COPELAND & MICHELLE KAY VRANDICH

JUDGMENT 1 MASTER MACREADY: This matter was listed before me for hearing on 3, 4, 7 and 8 June 1999. When the matter was called on for hearing on 3 June 1999 the plaintiff made an application for leave to discontinue the proceedings. In addition the plaintiff sought as terms of the leave to discontinue orders that the second defendant pay the plaintiff's and the first defendant's costs on an indemnity basis. It was made clear during the course of the application for leave to discontinue that the making of the orders as sought by the plaintiff was not a condition precedent to her desire to discontinue. The second defendant seeks orders that the plaintiff pay her costs and the first defendant, the Executor of the estate of the deceased seeks an order that his costs be payable out of the estate of the deceased on an indemnity basis. Alternatively, the first defendant seeks that the plaintiff pays his costs. 2 The proceedings are brought by the plaintiff who is a daughter of the deceased and the first defendant is the Executor of the will. The first defendant was a friend of the deceased having known him for some years through work and other associations. The second defendant is the other daughter of the deceased. The deceased died on 20 September 1995 and under his will of 12 October 1993 he gave his daughter, the second defendant, his property at 115 Woodland Street, Balgowlah. He made some minor specific legacies of some personal property and a legacy of $50,000 to be paid out of a specific account to the plaintiff. At the date of his death that account had no money in it and, accordingly, the gift to the plaintiff failed. When the deceased died the property at 115 Woodland Street, Balgowlah was valued for probate at $330,000. The parties are agreed that its present value is $460,000. There was a quantity of furniture, watches and jewellery most of which was subject to specific bequests valued at $16,150. Other monies in bank accounts amounted to a little over $7,000, there was a car for $13,100 which also passed to the second defendant under the will. It can be seen that the estate was substantially comprised of the property at Woodland Street, Balgowlah which passed to the second defendant. 3 The deceased was born in 1923 and his wife Fay Duncan was born on 15 October 1928. They married on 9 November 1946 and from all accounts their marriage was not a happy one. By 1972 there were proceedings between them for divorce and ultimately in 1976 proceedings were heard and a decree nisi pronounced on the grounds that the marriage had broken down irretrievably. The previous years before that were difficult ones for the children. It is clear that the break up of the marriage had a severe impact, not only upon the deceased and his wife, but also on the children. The deceased's wife is still alive but she makes no claim in these proceedings. 4 The plaintiff's claim for costs against the second defendant is based upon the proposition that the plaintiff had a reasonable case for provision when she commenced the proceedings given her effective total omission from the will. She knew her sister's situation and believed that there was some prospect for an order being made in her favour. Evidence emerged shortly before the matter was due for hearing, that the second defendant not only had the property transferred to her but that she had some years before mortgaged it in order to support borrowings by an acquaintance who was running a fashion business. Those borrowings were increased with the consent of the second defendant and the term extended to September 1999. It was also disclosed in the affidavit of 24 May 1999 that recently the borrower's business had failed, she was having difficulty meeting the interest payments and would not be able to pay back the loan for some time. Hence the property in the second defendant's name was effectively worth considerably less than its agreed value of $460,000 because of the loan outstanding of $230,000. The plaintiff submits that there was a deliberate withholding of this information such that the plaintiff was ambushed at the last minute and was hence forced, on a consideration of that material and the costs of her being involved to that date, to seek leave to discontinue. 5 In order to evaluate this claim it is necessary once again to go into some history following the death of the deceased and following the commencement of proceedings. 6 As I have mentioned the deceased died on 20 September 1995 and probate was granted 22 March 1996. A month earlier on 22 January 1996 the solicitors for the plaintiff had written to the solicitors for the Executor indicating that they had instructions to make a claim under the Act and sought some information in the hope that the matter could be finalised without resort to litigation. By 21 March 1996 the plaintiff's solicitors were supplied by the 1st defendant's solicitors with copies of the application for probate giving details of the estate. On 26 April 1996 the plaintiff's solicitors wrote seeking confirmation that there would be no distribution of assets to the beneficiaries and in particular that the real estate be not transferred to any other person other than the Executor pending the clarification of the plaintiff's future claim. That letter was forwarded to the Executor probably on or before 2 May 1996. It is thus perfectly clear that the Executor, the 1st defendant, knew of the request not to transfer the property to the beneficiary. The usual notice of claims was published on 6 April 1996 and required particulars of claims to be given within one month. Clearly this was done in this case. On 12 June the 1st defendant's solicitors indicated that they had still not received instructions from the Executor but indicated that they had themselves received no instructions to transfer the property. 7 On 30 July 1996 the solicitors for the 1st defendant wrote to the plaintiff's solicitor and advised that their instructions had been terminated as from that date. The Executor on his own initiative had signed a transmission application on 24 July 1996 whereby the property was transferred to the 2nd defendant. Apart from communications between solicitors there were discussions between the plaintiff and the 2nd defendant during 1995. According to the plaintiff the 2nd defendant initially denied knowing about the gift to her, this being in December 1995. At the start of July 1996 there was a further conversation when the plaintiff sought to discuss the matter with the 2nd defendant to avoid legal action. The 2nd defendant hung up the phone. On 11 August 1996 there were further calls in which the 2nd defendant refused to discuss the matter and again on 22 August 1996 when the 2nd defendant told the plaintiff not to ring her again. 8 Given the termination of instructions the plaintiff's solicitor wrote direct to the Executor on 14 August 1996 again requiring that there be no distribution and seeking confirmation from him. The Executor in correspondence claimed he had discharge his final duties as Executor two days before he received that letter and enclosed a copy of the letter which he wrote to the plaintiff on 15 August 1996. In that letter he sent a watch which under the will was given to the plaintiff's son, Duncan, and advised that the property at Woodland Street had been transferred to the 2nd defendant some week earlier. He also took the opportunity of enclosing a letter from the deceased and a statutory declaration from someone who may well be a witness indicating the deceased's strong desire that the plaintiff have nothing out of the estate. The plaintiff's solicitors wrote to the Executor challenging him on this matter to which the Executor replied that he had discharged his duties to the late Mr Duncan's wishes "to the letter". 9 On 21 September 1996 the second defendant mortgaged the property for a loan of $190,000. Her signature to that mortgage was witnessed by the solicitor who has acted for her in these proceedings, Mr Muriniti. On 21 January 1997 she increased the amount of the mortgage from $190,000 to $230,000 and on 23 October 1998 the term was extended to 30 September 1999. 10 The plaintiff knew, of course, that her sister was residing in the property and in August she became aware of he transfer of the property to her. There was no suggestion that the plaintiff's solicitors had any knowledge of the mortgaging of the property by the 2nd defendant until April 1999. 11 No application was made by the plaintiff to restrain any dealings with the land by the 2nd defendant no doubt because there was nothing that she knew which would indicate the likelihood of disposal or encumbering. The plaintiff commenced her proceedings on 19 March 1997, naming the 1st defendant as the only defendant and sought an order for provision under s7. That day was the last day or the last day but one for commencing the proceedings. The affidavit of the Executor of 3 June 1999 was served at about that time and that plainly set out that there had been a distribution of the estate. That prompted the plaintiff's solicitors to file an amended Summons on 25 June 1997 adding the 2nd defendant as a defendant seeking an order that the premises at Woodland Street be designated as notional estate. No doubt this should have been done when the proceedings were first commenced. There was a further amended Summons filed on 11 September 1998 in which the plaintiff, as a matter of precaution also sought an order under s16(2) extending time so far as it related to the application against the 2nd defendant. The plaintiff certainly did not concede that it needed that order and it seems somewhat doubtful whether she would need such an order. However, that amendment was merely made by way of precaution. 12 One thus has a situation where the property had been mortgaged without the knowledge of the plaintiff or her solicitor. Later I will deal with the question of whether it may have been prudent before commencing proceedings to have searched the title to the property at that stage. 13 However, the 2nd defendant did become a party to the proceedings in June 1997 and the progress of the proceedings thereafter is something which the plaintiff relies upon as indicating the an intention on the part of the 2nd defendant to deceive the plaintiff about the 2nd defendant's financial situation. To put it bluntly, the 2nd defendant was on numerous occasions in breach of orders to file her evidence. Eventually her evidence only became available during early 1999. 14 I turn to some more of the history. The first order for the 2nd defendant to file and serve her affidavit was made on 4 December 1997 on an occasion when she did not attend the directions hearing of which she had notice. She was directed to file and serve her affidavits by 19 December 1997. She failed to do. The subsequent history is set out in a brief fashion in my judgment of 5 March 1999 in this matter. That judgment was given on an application by the 2nd defendant for leave to file three affidavits because by that stage although a year or more had passed she had not filed any evidence in the case and the Registrar had ordered that she could not file any further affidavits without the leave of the Court. I will not repeat that history as this is set out in that judgment. In the result I allowed three affidavits which were then suggested by the 2nd defendant as necessary for her case to be filed and made other appropriate interlocutory orders. The matter had in fact been listed for hearing on 20 April and there were other appearances before me for directions before that date. One was 16 April in which I gave directions and gave leave to the defendant to serve some further affidavits and made other directions. 15 On 20 April the hearing date was vacated and I fixed 3, 4 and 8 June for the hearing and 21 May for directions. I also made an order in terms of the usual directions in these matters requiring the affidavits as to costs to be served by 19 May 1999. On 21 May 1999 I made orders for the plaintiff to file affidavits in reply by 27 May 1999 which was the date for return of subpoenas and fixed an additional day for the hearing. It was on 21 May 1999 that the first mention was made in court by the 2nd defendant of the fact that the 2nd defendant's property had been mortgaged. An affidavit setting this out was sworn by the 2nd defendant on 24 May 1999. The solicitor for the plaintiff subpoenaed the mortgagee and inspected the appropriate files on 28 May 1999 to verify the information that the plaintiff had provided in her affidavit. However, the fact that the property was mortgaged became apparent to the plaintiff a few days after 12 April 1999. She had received a copy of a valuation of the property from Mr Fawcett, a valuer, to which was annexed a title search showing the mortgage. Her solicitor had also received that valuation but had not noticed the mortgage. The plaintiff was concerned and raised the matter with her solicitor who then discussed it with counsel. I will come back to what significance was attached to the mortgage by the solicitor and the then counsel for the plaintiff. 16 One other matter of note in the preparation of the case was the service of a offer of compromise on 27 April. In that offer the 2nd defendant offered to compromise on the basis that the 2nd defendant pay the plaintiff $50,000 with the plaintiff and the 2nd defendant paying their own costs. It did not address the costs of the 1st defendant. 17 Above I have referred to affidavits as to costs. These are normally required in these matters both for the benefit of the clients and for the Court. Frequently the Court has to take into account the effect of costs on the distributable estate. In the present matter the affidavits as to costs disclose the following position. 18 As at 19 May 1999 the plaintiff's solicitor's costs amounted to $21,000 with disbursements at $1,114. Counsel's fees to that date amounted to $9,110 and the plaintiff's costs for the hearing thereafter were as to solicitor's $5,500 to $7,000 based on a three day hearing with counsel's fees of a similar amount. This totals $42,224 to $45,224. At the time of service of the offer of compromise the plaintiff was liable for her own costs in an amount of about $31,224.. 19 The 1st defendant's costs for solicitors were $16,211.85 to date plus $328.97 disbursements and counsel's fees of $4,550. Solicitor's fees of $6,000 were estimated for a three day hearing and counsel's fees of $7,000 were estimated for that hearing. This totals $34,090.82. At the time of service of the offer of compromise the 1st defendant's costs were in the order of $21,090.82. 20 In contrast the estimate for the 2nd defendant was a sum of $100,000 inclusive of counsel's fees and disbursements to the conclusion of the proceedings. The 2nd defendant had signed a costs' agreement in April 1997 in which the total costs were estimated at $30,000. In March 1999 that estimate was increased to $50,000, in April 1999 the estimate was increased to $60,000 with costs to the conclusion of the hearing estimated at $100,000. Without commenting on the appropriateness of these charges one thing that is apparent is the 2nd defendant's costs were almost double that of the plaintiff's a fact which she or her advisers would not have been able to anticipate. 21 I turn to the question of proper principles to be used in considering the plaintiff's application. There are a number of cases which suggest that in the ordinary case the plaintiff can not usually apply to discontinue on terms that an order for costs be made against the defendant. See Mulcahey v Wilkinson (1887) 9 ALT 22, Lambton & Co v Parkinson (1887) 35 WLR 545 and Denman Homes Pty Ltd v Madnara Needham J 14 September 183. 22 More recent cases suggest that in exceptional cases a costs' order may be made against a defendant. An example of this was Garwolin Nominees Pty Limited v Statewide Building Society (1984) VR 469. In that case the plaintiff had obtained practical success before the hearing because the defendant has given up possession which was sought by the plaintiff. A similar more general approach was adopted in Telstra Corporation v Australian Telecommunications Authority Supreme Court of Victoria Hayne J 10 June 1994 unreported. However, in that case His Honour did not make an order that the defendant pay the plaintiff's costs. When dealing with a claim for dismissal of a cross claim which was not sought to be pursued and which could not be discontinued as the hearing had commenced, His Honour, McLelland J, as he then was in Ritz Hotel v Charles of the Ritz 12 IPR 75 at 77 took the view that such decisions should not be confined and should be made in a manner best calculated to achieve justice as between the parties in the circumstances of the particular case before the court. 23 The plaintiff's case that she have costs against the 2nd defendant has as one of its basic assumptions that the plaintiff had a good case which ultimately became one which could not be pursued once the 2nd defendant's true financial position became apparent. This raises fairly squarely the question of the extent to which in an application such as the present, one should consider the strengths of a party's case. Frequently when parties settle a case, apart from costs, the court is called upon to determine what order as to costs should be applied. 24 The principles normally applied in these circumstances were summarised by Mr Justice Hill in Australian Securities Commission v Aust-Home Investments Limited 34 F.C.R. 194. At page 201 His Honour summarised the cases in the following way:- "(1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case.