Supreme Court New South Wales Medium Neutral Citation: Dowsett v King (No 2) [2020] NSWSC 6 Hearing dates: On the papers Date of orders: 14 January 2020 Decision date: 14 January 2020 Jurisdiction: Equity Before: Robb J Decision: (1) Orders that judgment be entered in favour of the plaintiff against the defendant in the sum of $171,561.85 (inclusive of interest); (2) Orders the defendant to pay the plaintiff's costs of her claim for repayment of $140,000 plus interest from the commencement of the proceedings to 29 June 2018 and the plaintiff's costs of the proceedings after that date on the ordinary basis. (3) Orders that each party bear their own costs of the proceedings from their commencement to 29 June 2018 in respect of all issues other than the plaintiff's claim for repayment of $140,000 plus interest. Catchwords: COSTS – departure from the usual rule – where the plaintiff formally abandoned a substantial part of her case immediately before the final hearing – where plaintiff accepted earlier offer made by the defendant that in return for the plaintiff abandoning several issues, each party would bear their own costs of the issues to be abandoned – where plaintiff successful on remaining issue at a final hearing – appropriate that the defendant pay the plaintiff's costs of the remaining issue up to the date of accepting the defendant's offer and the costs of the proceedings thereafter Legislation Cited: Civil Procedure Act 2005 (NSW), s 100 Contracts Review Act 1970 (NSW) District Court Act 1973 (NSW), s 134 Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Dowsett v King [2019] NSWSC 1459 Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531; [2007] HCA 8 Huang v Drumm [2017] NSWCA 29 McDonough v Owners Strata Plan No 57504 (2014) 17 BPR 33,573; [2014] NSWSC 1708 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Category: Costs Parties: Marea Pearl Dowsett by her attorney and tutor Terrence Charles Dowsett (plaintiff) Donna Maree King (defendant) Representation: Counsel: A J Bulley (plaintiff) D Eardley (defendant) Solicitors: Nicholas Dan (plaintiff) Falzon Legal (defendant) File Number(s): 2017/155950 Publication restriction: Nil Judgment 1. On 28 October 2019, the Court delivered the principal judgment in these proceedings (Dowsett v King [2019] NSWSC 1459 – "the Principal Judgment"). This judgment, which deals essentially with the issue of costs, assumes familiarity with the Principal Judgment. I will continue to refer to the parties in the same manner as in the Principal Judgment. 2. By her Statement of Claim filed on 6 July 2017, Mrs Dowsett originally sought a declaration that Donna held the Pelican Property on trust for her. Alternatively, Mrs Dowsett pleaded that the transfer of the Pelican Property to Donna in October 2014 be set aside pursuant to the Contracts Review Act 1970 (NSW) or on the basis of the equitable doctrines of undue influence or unconscionability. Mrs Dowsett also sought orders for the return of certain jewellery that was allegedly taken from her by Donna; for Donna to repay an amount of $30,000 which Mrs Dowsett allegedly transferred to Donna; and for Donna to pay to her an amount of $140,000, which represented a sum that was allegedly transferred from an account jointly held by Mrs Dowsett and Donna into an account held in Donna's sole name (in addition to any other amount that was found to be have been transferred into Donna's account). By her pleadings, Mrs Dowsett alleged that the amounts transferred from her account were held by Donna on trust and demanded that the equivalent of such amounts be repaid. Alternatively, Mrs Dowsett sought an order that Donna pay the equivalent of those amounts on the basis of monies had and received. 3. On 20 November 2018, the matter was set down before me for a four day hearing to commence on 29 July 2019. However, on 25 July 2019, shortly before the commencement of the hearing, Mrs Dowsett was given leave to file an Amended Statement of Claim. By her amended pleadings, Mrs Dowsett abandoned all but one claim. The remaining claim was in respect of the repayment of the $140,000 sum, and any other money sought to be proved at the hearing. As events turned out, at the hearing Mrs Dowsett did not seek to prove that Donna was liable for any amounts other than the $140,000 sum. 4. In the Principal Judgment, the Court determined that the $140,000 sum which was transferred out of Mrs Dowsett's account and into an account held in Donna's sole name was not intended to be a gift (see [92]–[93]). The Court therefore concluded (at [105]) that Mrs Dowsett was entitled to an order that Donna pay to her the sum of $140,000 plus pre-judgment interest calculated in accordance to s 100 of the Civil Procedure Act 2005 (NSW). 5. The Court has yet to make final orders as it has awaited the calculation of pre-judgment interest by those acting for Mrs Dowsett. The Court has now received a schedule from Mrs Dowsett containing such calculations. The schedule states that pre-judgment interest is calculated at $31,561.85. I did not understand that figure to be disputed by Donna. The Court will therefore order that Donna pay to Mrs Dowsett the sum of $171,561.85. 6. The only outstanding issue to be determined is the question of costs. In the Principal Judgment, the Court observed (at [11] and [106]) that the fact that Mrs Dowsett abandoned a substantial part of her case immediately before the final hearing may demonstrate a reason to depart from the usual order as to costs provided in Uniform Civil Procedure Rules 2005 (NSW), r 42.1. The Court (at [107]) directed the parties to provide to my Associate brief written submissions addressing this issue. 7. The parties have since provided written submissions. Mrs Dowsett also provided an affidavit of her solicitor sworn on 11 November 2019. In that affidavit, the solicitor annexes a letter sent by Donna's solicitor dated 25 June 2018. By that letter (expressed to be written "without prejudice"), Donna's solicitor offered that in return for Mrs Dowsett abandoning the claims in respect of the Pelican Property; the claim in relation to the $30,000 sum; and the claim in respect of the jewellery, then each party would bear their own costs in relation to those claims that would be abandoned. The offer was expressed to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. It was stated that should the offer be accepted, this would have the result of narrowing the issues in dispute to a single claim as to whether Mrs Dowsett was entitled to the $140,000 sum. The offer was expressed to be open for acceptance until 4pm on 29 June 2018. 8. On 29 June 2018, Mrs Dowsett's solicitor sent an email (at 3:55pm) which contained a letter accepting the aforementioned offer. 9. In her written submissions, Mrs Dowsett contended, by reference to the acceptance of Donna's offer to compromise part of the proceedings, that she should be entitled to her costs of the proceedings after 29 June 2018. It was submitted that she was entirely successful in relation to the claim for payment of the $140,000 sum, which was the only issue that was prosecuted at the final hearing. It was noted that the decision to prosecute this claim was consistent with the acceptance of Donna's offer made on 25 June 2018. 10. In her written submissions, Donna contended that Mrs Dowsett should pay her costs of the proceedings on either the ordinary or indemnity basis. Donna submitted that although Mrs Dowsett's solicitor purported to accept the offer made by her solicitor, it was in reality no acceptance at all. This is because Mrs Dowsett did not seek to take any steps to amend her pleadings to reflect her acceptance of the terms of the offer until over a year later, on 25 July 2019, which was only a few days before the final hearing. Donna submitted that there was no explanation or reasons proffered by Mrs Dowsett for the delay in seeking to amend her pleadings, and by this fact the Court should infer that Mrs Dowsett's intention was to actively pursue the balance of the claims which she purportedly abandoned by acceptance of the offer. 11. It follows, it was submitted, that Donna was put to extraordinary expense to defend claims which were formally abandoned at the last minute or not proved at a final hearing. Donna noted that the remaining, successful claim with respect to the $140,000 sum was a claim that "clearly" should have been brought in the District Court and not the Supreme Court. Donna further submitted that to the extent that the abandoned claims remained alive up until the filing of the Amended Statement of Claim on 25 July 2019, they were not established by the evidence and therefore the Court should treat Mrs Dowsett as being unsuccessful in respect of those claims. Donna accepted, however, that if the Court was persuaded that Mrs Dowsett accepted the offer on 29 June 2018, then it follows that each party pay their own costs up until that date, with Mrs Dowsett being entitled to her costs thereafter. 12. In her submissions in reply, Mrs Dowsett maintained her position as to costs. She rejected Donna's submission that there was only a "purported" acceptance of Donna's offer. It was submitted that nothing turned on the fact that the pleadings were not amended to reflect the formal abandonment of the claims the subject of Donna's offer. Accordingly, it was submitted that the Court should not infer that Mrs Dowsett still intended to pursue those abandoned claims. 13. In my opinion, the submissions of Mrs Dowsett should be accepted. The evidence establishes that the solicitor acting on behalf of Mrs Dowsett accepted an offer made by Donna's solicitor in which it was clearly expressed that in exchange for abandoning a substantial part of Mrs Dowsett's case, the parties would bear their own costs of those abandoned claims. The letter sent by Mrs Dowsett's solicitor was sent to Donna's solicitor within the timeframe in which the offer was expressed to be open for acceptance. Donna did not submit that the 25 June 2018 letter was incapable of being accepted or failed to be effective for some other reason. 14. Rather, the principal complaint is that Mrs Dowsett's delay in failing to promptly amend her pleadings demonstrated that she did not actually intend to accept the offer. I reject those submissions. There can only be a "delay" if there was some obligation on Mrs Dowsett's part, contained in the terms of the 25 June 2018 offer, to formally amend the pleadings to reflect the reality of the situation. Nothing in the offer expressly obliged Mrs Dowsett to take such steps. 15. It appears that directions were made by consent on 27 June 2018 by the Equity Registrar (before the offer was accepted) for Mrs Dowsett to serve a draft amended statement of claim on Donna on or before 27 July 2018. It is not apparent if any steps were taken by Mrs Dowsett pursuant to that direction. In any event, it has not been demonstrated that Mrs Dowsett's conduct after the acceptance of the offer on 29 June 2018 was inconsistent with an intention to act in accordance with the terms of the offer. Donna did not put on any evidence which showed such intention. It is not apparent that any evidence was filed or served in the interval between 29 June 2018 and the final hearing which demonstrated that Mrs Dowsett intended to pursue any of the abandoned claims. Neither has it been demonstrated that Donna was acting under some assumption in respect of the conduct of the proceedings which was different to that adopted by Mrs Dowsett. 16. It has not been shown that there was any intention on Mrs Dowsett's part to run the abandoned claims at the final hearing or, at least, until the filing of the Amended Statement of Claim on 25 July 2019. But to the extent that Donna submits that the Court should conclude that those abandoned claims would have been unsuccessful on the evidence, I reject that submission. The effect of this submission was to invite the Court to undertake an assessment of the merits of those abandoned claims in the absence of a final determination. It is well known that in these circumstances it is inappropriate for the Court to conduct a hypothetical trial of those issues for the purposes of determining a question of costs (Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 at 624–5; Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [31]–[32] and [47]). 17. Something, however, should be said about the submission that the remaining claim in respect of the $140,000 sum should have been pursued in the District Court and not the Supreme Court. There is some force in this submission. The value of the claim was well within that court's jurisdictional limit (being $750,000). While it cannot be suggested that it was inappropriate for Mrs Dowsett to commence proceedings in the Supreme Court, it might be said that once it was agreed that the only claim to be pursued was the claim for a monetary sum in the order of $140,000 that it was incumbent on Mrs Dowsett's legal representatives to bring an application to transfer the proceedings to the District Court. A closer analysis, however, reveals that there may have been jurisdictional issues that would have prevented that court from hearing the remaining claim. 18. Mrs Dowsett's remaining claim in respect of the $140,000 sum was equitable in nature, in which it was asserted that a trust was impressed upon that sum in favour of Mrs Dowsett. The District Court is, of course, a court of record whose jurisdiction is defined by statute (Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531; [2007] HCA 8 at [20). The court's equitable jurisdiction is conferred by s 134 of the District Court Act 1973 (NSW). That section relevantly provides: (1) The Court shall have the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in proceedings for: (a) the foreclosure or redemption of a mortgage or the enforcing of any charge or lien where the amount owing in respect of the mortgage, charge or lien does not exceed $20,000, as determined by the Court, (b) the specific performance, rectification, delivery up or cancellation of any agreement for: (i) the sale or purchase of any property at a price not exceeding $20,000, or (ii) the lease of any property the value of which does not exceed $20,000, as determined by the Court, (c) an order under section 3 of the Testator's Family Maintenance and Guardianship of Infants Act 1916 (as in force immediately before that Act was amended by the Succession Amendment (Intestacy) Act 2009) or a family provision order under Chapter 3 of the Succession Act 2006, (d) relief against fraud or mistake where the damage sustained or the estate or fund in respect of which relief is sought does not exceed $20,000 in amount or value, as determined by the Court, (e) the execution of a trust or a declaration that a trust subsists, where the estate or fund subject or alleged to be subject to the trust does not exceed $20,000 in amount or value, as determined by the Court, or (f) the administration of the estate of a deceased person, where the estate does not exceed $20,000 in amount or value, as determined by the Court, or (g) any application under the Property (Relationships) Act 1984, or (h) any equitable claim or demand for recovery of money or damages, whether liquidated or unliquidated (not being a claim or demand of a kind to which any other paragraph of this subsection applies), in an amount not exceeding the Court's jurisdictional limit. 1. The sub-sections above that are relevant to the present case are paragraphs (e) and (h). It is clear from a reading of s 134 as a whole that an equitable claim falling within one or more of the paragraphs contained in s 134(1)(a)–(g) (which are mostly limited to equitable claims up to the value of $20,000) will be excluded from the court's residual equitable jurisdiction set out in s 134(1)(h) (which is limited only by the court's general jurisdictional limit, that is, $750,000). 2. By her pleadings, there was a degree of imprecision in terms of the relief available as a consequence of establishing Mrs Dowsett's entitlement to a trust over the $140,000 sum. Mrs Dowsett did not seek a declaration that a trust existed over that sum, with consequential orders for that sum to be returned to Mrs Dowsett. Rather, the pleadings simply claimed that Donna "pay" $140,000 plus interest to Mrs Dowsett. Relief of this kind suggests that Mrs Dowsett's monetary entitlement arose as a consequence of a breach of trust by Donna such that the claim might be described as equitable compensation. 3. In McDonough v Owners Strata Plan No 57504 (2014) 17 BPR 33,573; [2014] NSWSC 1708, Brereton J (as his Honour then was) held that a claim for equitable compensation arising from a breach of trust fell within s 134(1)(e) of the District Court Act. Because the proposed equitable claim in that case exceeded the $20,000 limit in that section, the District Court did not have jurisdiction to determine that claim as it was precluded from falling within the residual equitable jurisdiction in s 134(1)(h) of the Act. 4. Mrs Dowsett's claim clearly exceeded the $20,000 limit prescribed in s 134(1)(e). If the Court applies Brereton J's reasoning in McDonough, the District Court would have no jurisdiction to determine the claim. 5. But in Huang v Drumm [2017] NSWCA 29, the Court of Appeal granted the appellant leave to appeal on the basis that the District Court had jurisdiction to award equitable compensation pursuant to s 134(1)(h), and not s 134(1)(e). The Court of Appeal described the proposed appellant's case to be "clearly arguable, and may even be strongly arguable". I am unaware of the Court of Appeal having heard or determined the substantive appeal. 6. The foregoing discussion shows that the jurisdiction of the District Court to hear Mrs Dowsett's remaining claim is not without its complexities. However, because Donna did not seek to develop her submissions in this regard, it is not necessary to say anything further in respect of the District Court's jurisdiction. The fact that there was a real risk that the District Court did not have jurisdiction to hear and determine Mrs Dowsett's claim meant that she was justified in maintaining the proceedings in this Court. 7. It follows from the above that there is no basis for Donna's contention that Mrs Dowsett ought to pay her costs of the proceedings on either the ordinary or indemnity basis. The Court should give effect to the terms of the agreement reached between the parties on 29 June 2018 that each party bear their own costs of those issues abandoned by Mrs Dowsett. 8. Mrs Dowsett's written submissions did not state whether she sought her costs in relation to the remaining $140,000 claim from the period in which proceedings were commenced up until the acceptance of the offer on 29 June 2018. I am prepared to assume that the failure to address this aspect was an oversight by those acting on Mrs Dowsett's behalf. As the successful party, Mrs Dowsett would ordinarily be entitled to those costs unless it was apparent to the Court that some other order was warranted. In my view, nothing in the circumstances persuades me that a different order should be made. The 25 June 2019 offer only proposed that each party pay their own costs of the proceedings that were referable to those issues proposed to be abandoned. It did not address the parties' costs of the remaining $140,000 claim. In my view, Mrs Dowsett should be entitled to her costs of the proceedings up to and including 29 June 2018 only insofar as those costs can be reasonably said to be apportioned to the $140,000 claim. 9. Accordingly, the Court: 1. Orders that judgment be entered in favour of the plaintiff against the defendant in the sum of $171,561.85 (inclusive of interest); 2. Orders the defendant to pay the plaintiff's costs of her claim for repayment of $140,000 plus interest from the commencement of the proceedings to 29 June 2018 and the plaintiff's costs of the proceedings after that date on the ordinary basis. 3. Orders that each party bear their own costs of the proceedings from their commencement to 29 June 2018 in respect of all issues other than the plaintiff's claim for repayment of $140,000 plus interest. ********** 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. Decision last updated: 17 January 2020