New South Wales Supreme Court CITATION : Matsen v Matsen [2008] NSWSC 226 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 6 March 2008 JUDGMENT DATE : 6 March 2008 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Order that the plaintiff pay the defendant's costs of the proceedings. CATCHWORDS : PROCEDURE [553] - Costs - General rule - Costs follow the event - Costs of whole action - Generally - Defendant generally successful - Plaintiff wins on one issue - Issues intertwined. Civil Procedure Act 2005 s 99 LEGISLATION CITED : Conveyancing Act 1919 s 66G Supreme Court Rules 1970 Part 66A rr 4, 9 Uniform Civil Procedure Rules 2005 r 42.1 CATEGORY : Procedural and other rulings Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) [2006] NSWSC 583 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 Domino Hire Pty Ltd v Pioneer Park Pty Ltd (In Liq) [2002] NSWSC 313 Donald Campbell & Co v Pollak [1927] AC 732 Hughes v Western Australian Cricket Association (1986) ATPR 40-748 CASES CITED : Latoudis v Casey (1990) 170 CLR 534 Matsen v Matsen [2008] NSWSC 135 Oshlack v Richmond River Council (1998) 193 CLR 72 Ritter v Godfrey [1920] 2 KB 47 Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 Waters v P C Henderson (Australia) Pty Ltd NSWCA 6 July 1994 unreported PARTIES : Ronald Gibson Matsen (P) Kenneth Leslie Matsen (D) FILE NUMBER(S) : SC 6080/05 COUNSEL : J E Rowe (P) A A Gomez (D) SOLICITORS : Anthony Scarcella (P) Kenneth Harrison (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 6 MARCH 2008 6080/05 RONALD GIBSON MATSEN v KENNETH LESLIE MATSEN JUDGMENT 1 HIS HONOUR : The purpose of this judgment is to determine the incidence of costs in these proceedings in which I delivered my substantive judgment on 26 February 2008: Matsen v Matsen [2008] NSWSC 135 ("my judgment"). The defendant was generally successful in the proceedings, his version as to the beneficial interests in the property being accepted and the plaintiff's application for the appointment of trustees for sale under s 66G of the Conveyancing Act 1919 being refused. Both of these conclusions flowed from my finding of the existence of an agreement between the parties before the acquisition of the property in terms propounded by the defendant and denied by the plaintiff. 2 Both parties have provided detailed written submissions on the question of costs that have been of assistance to me in coming to my conclusion on this matter. Their arguments, being recorded in those written submissions, do not need to be set out by me at great length. 3 It is fair to say that the plaintiff's claim that the usual result as to costs should be departed from falls under two general headings. The first may be called the irrelevant material argument. It is to the effect that a great deal of the evidence at the trial and a great deal of the argument was taken up with irrelevant issues, for the introduction of which the defendant alone was responsible. The issues claimed to fall into that category are listed in par 2 of the plaintiff's written submissions on costs. The second main head is that the proceedings were protracted by lack of preparedness and conduct generally on the defendant's part. This may be called the defendant's misconduct argument. 4 So far as the relevance argument is concerned, it has been contended on behalf of the defendant that the issues put forward on the plaintiff's behalf as irrelevant were not in all cases irrelevant to the proceedings and that, in any event, they occupied a much lesser part of the proceedings than the plaintiff asserts. Two things need to be said about the arguments put forward by the plaintiff under this head. 5 The first is that the plaintiff's claim as to the part of the proceedings taken up by the supposedly irrelevant issues is greatly exaggerated in the plaintiff's submissions. In par 25 of those submissions it is stated: "It is also clear that the evidence of the irrelevant issues took up most of the hearing." Ms Gomez, of counsel for the defendant, in reply to this contention has given a very detailed account in her written submissions, both of the portions of the trial taken up by the supposed irrelevant issues and of the manner in which those issues were introduced into the trial. Without my going into detailed analysis of those matters, it is certainly not clear to me that the evidence of the irrelevant issues took up most of the hearing. Indeed, I am of the view that that simply is not so. 6 Furthermore, in par 19 of the plaintiff's written submissions it is stated: "The defendant prepared a massive 57 page submission of which no more than five pages dealt with the issue. The balance dealt with the irrelevant material." An examination of the defendant's 57 page written submission shows that this allegation is clearly inaccurate and is indeed fanciful. For a start, 24 pages of the written submissions are taken up with arguments as to the law, both in relation to the s 66G discretion and also in relation to the alternative bases, such as estoppel, on which the defendant's case was put. I did not come to deal with those alternative bases, because I found for the defendant on the basis of the 1993 agreement. It may be that, had the defendant failed on the 1993 agreement, he would also have failed on the alternative bases, but that does not mean that he was not entitled to put the submissions. 7 The written submissions on the s 66G discretion were thorough and accurate. I found them of considerable assistance in deciding that issue. Of the 33 page balance of the written submissions, it is not true that only five pages dealt with relevant material. The highest that it could be put is that roughly the last 14 pages dealt with material about which it can be said, not so much that it was irrelevant, but that it went to the issue of the 1995 agreement, on which the defendant lost and the plaintiff won. However, I should say that, although that may be about 25 per cent of the volume of the written submissions, the evidence and other argument on that matter did not take up anything like 25 per cent of the trial. I shall return to the significance of the defendant's loss on that issue at a later time. 8 In the meantime, concerning the allegation of utter irrelevance of large parts of the defendant's case, I should refer to what was said by Einstein J in Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) [2006] NSWSC 583 at [28]: "These submissions may be accepted subject to an important rider, namely the need to accept that in any particular set of proceedings the parties are of course entitled to, in good faith, determine to litigate issues reasonably believed at the time to bear upon the real issues. The pendulum dictated by the Act should not be seen as a mechanism to deny parties their entitlement to litigate issues believed on proper grounds to be genuine issues even if, with the benefit of hindsight, the course of the evidence ultimately shows that the litigation of some of those issues may have been an incorrect call. Prescience is a rare commodity, particularly where very complex litigation is in play." 9 I should say that the written submissions followed a slightly unusual course. The defendant's written submissions were brought forward before the plaintiff's written submissions. Although this is the reverse of the usual order, it was not inappropriate in this case, as the conduct of the argument largely proceeded by reference to the defendant's cross claim. The plaintiff's written submissions, as I have said, followed the defendant's written submissions. There were then lengthy written submissions in reply on behalf of the defendant. In so far as it is suggested that those submissions in reply contained irrelevancies, it must be remarked that their content was largely dictated by the content of the plaintiff's written submissions to which they were replying. 10 The presumption where a party has been generally successful is that that party should have a general order for the costs of the proceedings. The Uniform Civil Procedure Rules 2005 (UCPR) by r 42.1 provide as follows: " General rule that costs follow the event (cf SCR Part 52A, rule 11) Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." And see per McHugh J in Latoudis v Casey (1990) 170 CLR 534 at 566 - 567 and Oshlack v Richmond River Council (1998) 193 CLR 72 at [67]. 11 It is correct to say, as has been submitted on behalf of the defendant, that for this presumption to be departed from there should be a particular justification established by the opposing party: see Ritter v Godfrey [1920] 2 KB 47 at 52 per Lord Sterndale MR; Donald Campbell & Co v Pollak [1927] AC 732 at 814 – 815 per Lord Cave LC; Hughes v Western Australian Cricket Association (1986) ATPR 40-748 at 48,136 per Toohey J; and Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234 - 235 per Black CJ and French J. 12 One of the bases which may lead to such a departure is the failure of the generally successful party on something that may be regarded as a discrete issue, both from the point of view of its formulation and from the point of view of the part that evidence concerning it played in the proceedings. It is true, as I have already said, that the defendant lost on the issue of the 1995 agreement. It is also true, as I have already said, that that issue did not take up one quarter of the proceedings or anything like it, although that may be the amount of the defendant's written submissions that referred to it. Furthermore, I do not regard that issue as it was litigated in these proceedings as having such a discrete existence that can be identified within the proceedings as to make appropriate a derogation from the general costs order in favour of the defendant: see Hughes and Ruddock supra; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271 per Gummow, French and Hill JJ; Waters v P C Henderson (Australia) Pty Ltd NSWCA 6 July 1994 unreported per Mahoney JA; and my judgment in Domino Hire Pty Ltd v Pioneer Park Pty Ltd (In Liq) [2002] NSWSC 313. 13 I am therefore not of the opinion that a general order for costs in favour of the defendant should be derogated from by reference to the irrelevant material argument or arising from the plaintiff's success on the 1995 agreement issue. 14 So far as concerns the defendant's misconduct argument, it would appear from the above, and it is certainly my conclusion, that that submission cannot be justified in relation to the conduct of the defendant's present representatives, who came into the case in the middle of 2007. Before that, the defendant was conducting the case in person, and there certainly was some delay and protraction by reason of his efforts as a litigant in person to grapple with the case. In one regard that has already been dealt with. I delivered a judgment on 15 June 2007 which dealt with the costs of the adjournment of a fixture of the part heard case that was to commence on 18 June 2007. That was partly by reason of the unpreparedness of the defendant's representatives, who had just come into the case, but it also arose from a history of delays by the defendant, of which the plaintiff led evidence, and from a lack of sufficient attention to the matter in some regards by the defendant himself. The result was that on that day I ordered the defendant to pay the plaintiff's costs of the application for adjournment and the costs thrown away by the adjournment. That order provides the plaintiff with some compensation for costs occasioned by delays on the defendant's side. Whatever orders I make concerning costs today, that order of 15 June 2007 will stand. The burden of any order for costs on the plaintiff will also be mitigated by the fact that, during a large part of the proceedings, the defendant was not legally represented. 15 Regarding the defendant's difficulties and lack of speed in conducting the case prior to his being represented, the following ought be said. The defendant was up till that time conducting the case in person. It was a case of some difficulty and legal sophistication, which is very difficult for a litigant in person to deal with. That it was not an unjustified case for him to be conducting is demonstrated by his ultimate success in the proceedings. 16 That there was always some case on the defendant's part seriously to be considered is evidenced by the fact that, as early as 21 April 2006, Barrett J made an order for referral of the defendant to the Registrar under Part 66A r 4 of the Supreme Court Rules 1970 ("the SCR") for referral to a barrister or solicitor on the pro bono panel for legal assistance. Despite the reference in Part 66A to the pro bono panel as the source of representatives to be appointed under Part 66A of the SCR, Mr Rowe, of counsel for the plaintiff, is correct in submitting that Part 66A does not really provide a pro bono scheme, but provides for representation on a no-win no-fee basis, allowing for the recovery by counsel and solicitor of costs if awarded in favour of the party they represent: see Part 66A r 9. 17 Despite Barrett J's order, no representation was found by the Court for the defendant. On 17 July 2006 White J delivered a short judgment, as a result of which he made a further referral to the Registrar under Part 66A r 4. Again, despite considerable efforts that were made, no representation was found for the defendant as a result of this order until the present solicitor and counsel undertook the conduct of his case in the middle of 2007. It is in my view most regrettable that representation was not provided for the defendant earlier despite the orders of Barrett J and White J. 18 With a quite difficult case, the defendant was doing the best he could in person in the meantime. That his efforts were not entirely successful and were not at times sufficiently diligent is shown by the order for costs that I made against him on 15 June 2007. That does not mean, however, that his efforts were totally futile. In fact, early in 2007 he conducted the first two days of the trial itself appearing in person. Although a deal of irrelevant material was rejected out of an affidavit prepared by him that he read, his own conduct of the matter in those first two days of the trial was by no means totally irrelevant or futile. It was during those days that the evidence of Ms Ford and Mr Godny was led and led by the defendant himself. The evidence of both those witnesses, as appears from my judgment, played a part in the defendant's ultimate success. That ultimate success itself must be taken into account in considering whether his own conduct of the case at the earlier time was irrelevant or futile. 19 The view that I have come to is that the order that I made on 15 June 2007 in all the circumstances sufficiently compensates the plaintiff for the defendant's delays and that no further detraction ought be made by reference to his conduct of the case from his entitlement to an order for the general costs of the proceedings. I have already expressed the view that there was nothing in the conduct of the case by the defendant's present counsel or solicitor that ought detract from the making of a general order for costs in the defendant's favour. That disposes of the misconduct argument. 20 The defendant, however, goes further and claims indemnity costs. He makes this claim by reference to two offers that were made by the defendant to settle the proceedings in January and in July 2007. Both the offers involved the transfer of the plaintiff's share in the property to the defendant in return for different amounts of consideration. It is suggested that these offers were such that it was unreasonable, in light of the ultimate result of the proceedings, for the plaintiff not to have accepted them. I am of the view that it was not unreasonable for the plaintiff to reject these offers at the time, nor in my opinion are the results for the plaintiff that would have flowed from the acceptance of those offers better than the ultimate result. The offers do not correspond with that result, in that they involved the loss by or deprivation of the plaintiff of his half share of the property. It may be that, by reason of my judgment, he cannot dispose of his half share of the property without offering it to the defendant on the terms of the agreement that I have found. But, in the meantime, he does retain his beneficial half interest in and have the right to use a valuable property, which is clearly worth considerably more than what was paid for it. What might eventuate as to his disposal of his share of the property in the future remains completely uncertain. The result is that I do not think the offers necessarily provided a better result from the plaintiff's point of view than the result of the proceedings. In any case, bearing in mind the difficult and complicated nature of the proceedings, I do not think that it was unreasonable for the plaintiff to reject or not accept those offers at those times. There will therefore be no indemnity element in the costs ordered in favour of the defendant. 21 The conclusion that I come to as to the order for costs that should be made as between the plaintiff and the defendant is that the ordinary result should follow and that the plaintiff should be ordered to pay the defendant's costs of the proceedings. 22 There is one other matter brought forward in the plaintiff's submissions on costs, that is a claim for an order imposing part of the costs burden on the defendant's present legal representatives pursuant to s 99 of the Civil Procedure Act 2005 ("the CPA"). That section relevantly provides as follows: " Liability of legal practitioner for unnecessary costs (cf Act No 52 1970, section 76C; SCR Part 52A, rules 43 and 43A) 99(1) This section applies if it appears to the court that costs have been incurred: (a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or (b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. (2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following: (a) it may, by order, disallow the whole or any part of the costs in the proceedings: (i) in the case of a barrister, as between the barrister and the instructing solicitor, or as between the barrister and the client, as the case requires, or (ii) in the case of a solicitor, as between the solicitor and the client, (b) it may, by order, direct the legal practitioner: (i) in the case of a barrister, to pay to the instructing solicitor or client, or both, the whole or any part of any costs that the instructing solicitor or client, or both, have been ordered to pay to any other person, whether or not the solicitor or client has paid those costs, or (ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs, (c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party." 23 The making of an order under that section necessarily involves a finding of serious neglect, serious incompetence or serious misconduct on the part of a legal practitioner or the incurring of costs improperly or without reasonable cause in circumstances for which the legal practitioner is responsible. 24 In my view, the claim made against the legal practitioners is not properly constituted and therefore does not call for decision by me and I do not propose to decide it. The reason for this is that, before making an order under s 99 the Court must give the legal practitioner a reasonable opportunity to be heard. This claim was simply made in written submissions delivered pursuant to a direction for written submissions as to costs. In my view, giving the legal practitioner a reasonable opportunity to be heard as required by s 99(2) of the CPA involves a formal motion being taken out, in which the order under s 99 is sought against the legal practitioners, who would be named as respondents to that motion, although not parties to the proceedings. 25 This is of more than formal or technical importance. Whilst it may be of importance for those legal representatives to present to the Court the arguments on costs as between the parties, being the persons who have conducted the proceedings and have an intimate knowledge of them, it would be generally inappropriate or certainly unwise for those legal practitioners to appear for themselves on the motion against them for costs under s 99. Combined with the seriousness of the findings required to be made against legal practitioners to enliven the power to make orders against them under that section, this procedural disarticulation makes it imperative that any claim against them be made in a formally constituted proceeding. 26 As there is no such proceeding before me, I do not propose to determine those claims. It would seem unlikely that orders would be made against those legal representatives in light of the findings that I have made about their conduct of the proceedings for the purposes of determining the costs issue as between the parties. However, it must be repeated that I have not considered or determined any claim for s 99 orders against the defendant's legal representatives. ********** 20/03/2008 - Clerical errors - Paragraph(s) 7 and 18 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.