Diana Ruth Johnstone v Flying Spur Pty Limited [1987] ACTSC 55 (24 July 1987)

SUPREME COURT OF THE ACT

DIANA RUTH JOHNSTONE v. FLYING SPUR PTY LIMITED
S.C. No. 84 of 1987
S.C. No. 95 of 1987
Costs - Real Property - Practice and Procedure

COURT

IN THE SUPREME OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Costs - proceedings under the Real Property Ordinance 1925 - proceeding terminated by consent orders except as to costs - related proceedings in Family Court of Australia - discretion of court as to costs - exercise of discretion - need to look at background of matter in absence of pleadings - Australian Capital Territory Supreme Court Act 1933 s. 15(2).

Real Property - discretionary trust - equitable chose in action held by object of trust - whether an estate or interest in land capable of protection by caveat - Real Property Ordinance 1925 s. 104.

Practice and Procedure - discretion of court as to costs - exercise of discretion - Australian Capital Territory Supreme Court Act 1933 s. 15(2).

Laquillo v. Haden Engineering Pty. Ltd. (1978) 1 NSWLR 306

Mr. B.C. Cairns in Australian Civil Procedure (2nd edition) at pp 483 to 484

Re Goldsworthy, deceased (1969) VR 843 at 849

Hardingham & Baxt, Discretionary Trusts (2nd edition) 1984 para. 605

In re Cooper (1904) 4 SR NSW 470

In re Powell's Caveat 1966 QWN 9

Family Law Act 1975 s. 117

HEARING

CANBERRA
24:7:1987

ORDER

Each party bear the whole of her and its costs, including the costs of these applications for costs.

DECISION

I have before me what are in effect cross-applications for costs. On the one hand there are the applications by Diana Ruth Johnstone (Mrs. Johnstone), the moving party in proceedings numbered SC 84/87, and on the other hand there are the applications by Flying Spur Pty. Ltd. (Flying Spur), the moving party in proceedings numbered SC 95/87. Each of those proceedings was terminated by orders made by consent on 13 February 1987. Unfortunately the parties were then as now unable to agree on the question of costs, and the question of costs was simply reserved. It is those reserved costs with which I have now to deal. It may be noted that there is nothing on either of the court files by way of notice of motion or the like relating to the present applications. I gather from the way in which the applications proceeded that Flying Spur initiated the restoration of the matters to the list for the purpose of its applications for costs, and that that move was met by an indication on behalf of Mrs. Johnstone that she would apply in each case for an order for costs in her favour. Although no formal order was made or sought that the applications in both matters be heard together, that is in fact what happened.

2. It is necessary to go into the background of these matters. Mr. and Mrs. Johnstone regulated the financial affairs of themselves and their family, or some of them, by means of a discretionary trust which became known as the T.M. & D.R. Johnstone Family Settlement. The trust was established by a deed of settlement dated 3 December 1973. The trustee then appointed to administer the trust was a company called McLeod Wilton Pty. Ltd. (McLeod Wilton). I was informed from the bar table and there appears to be no dispute that that company was controlled by Mr. Johnstone, although Mrs. Johnstone was a shareholder and thus entitled to be notified of and to some extent participate in some of its proceedings. During the course of time the trust property came to include the matrimonial home at 24 Melbourne Avenue, Deakin and Unit 26, Kingston Mews, Giles Street, Kingston.

3. I do not propose to discuss or set out the provisions of the trust deed, as amended from time to time, in any detail. It is sufficient to summarise it as follows. Mr. Johnstone was one of the objects of the trust. So was Mrs. Johnstone. There were a number of other persons who were objects of the trust, chiefly members of the family. The trustee had an absolute discretion to distribute or to withhold distribution of the income during any one year and to distribute all or any of such income, should it decide to distribute income, to any one or more of the objects. Similarly, the trustee had an absolute discretion upon the eventual vesting of the trust to distribute the income and capital or to withhold distribution of income and capital. Likewise the trustee had an absolute discretion upon the eventual vesting of the trust to distribute all or any of the income and capital, should it decide to distribute the same, to any object.

4. There were default provisions relating to the rights of the children of Mr. and Mrs. Johnstone and grandchildren to receive undistributed income in the course of any one year and relating to the rights of the children and the children of deceased children to receive shares in the capital and income undistributed at the vesting of the trust.

5. Because Mr. Johnstone controlled the corporate trustee he had the power to direct which of the objects of the trust were to share in the income and capital.

6. By the terms of the original trust deed of 3 December 1973 the power of appointing a new trustee and of removing a trustee was vested in Mr. Johnstone during his lifetime.

7. By deed dated 10 February 1986 Mr. Johnstone purported to remove McLeod Wilton as trustee and in its place appoint Flying Spur to be the trustee of the deed of settlement. There was some doubt as to whether the deed of 10 February 1986 was effective for this purpose and a further deed was entered into on 16 January 1987 by Mr. Johnstone and Flying Spur. That deed removed any doubt as to the effectiveness of the appointment of Flying Spur as the new trustee. Nothing turns on that doubt for the purpose of the present applications. I proceed on the common basis that Flying Spur was validly appointed as from 10 February 1986.

8. In the meantime, matrimonial differences between Mr. Johnstone and Mrs. Johnstone had arisen. Flying Spur was and is, as I have been told, a company in which Mrs. Johnstone has no part and no right to participate. It was suggested from the bar table on behalf of Mrs. Johnstone that Mr. Johnstone has some indirect interest in Flying Spur, but there is no evidence of this and I do not act upon that allegation.

9. On 10 December 1986, by memorandum of transfer of Crown lease, McLeod Wilton sought to transfer the title in the matrimonial home at Deakin to Flying Spur. On the same day, by memorandum of transfer of units lease, McLeod Wilton sought to transfer the title in the unit at Kingston to Flying Spur.

10. On the same day Mrs. Johnstone caused a caveat to be lodged in the Land Titles Office in respect of the title to each property. Each of the caveats claimed an interest in the following terms:

"A proprietary interest in the property as a

beneficiary of the Vernon Family Trust
established by deed of settlement dated the third
day of December 1973 whereby McLeod Wilton Pty.
Limited, a company incorporated in the Australian
Capital Territory, having its registered office
at 24 Melbourne Avenue, Deakin, was appointed as
the corporate trustee."

11. It may be noted that by that time proceedings between Mr. and Mrs. Johnstone had been commenced in the Family Court of Australia. On 23 January 1987 Mrs. Johnstone brought proceedings against Flying Spur Pty. Ltd. seeking orders under s.106 of the Real Property Ordinance 1925 that the caveats be deemed not to have lapsed upon the expiration of fourteen days after notice given to her. Those proceedings were No. S.C. 84/87. They were commenced by way of notice of motion in accordance with Order 2 Rule 1(3) of the Supreme Court Rules which provides that where a matter is not already the subject matter of pending cause or matter and no other mode of making the application is prescribed, the application shall be made by motion or by originating summons.

12. On 23 January 1987 Kelly J. made orders extending the caveats for a period to expire at 5 p.m. on 6 February 1987. Amongst the further orders made by His Honour was an order that if in the meantime the applicant filed a statement of claim asking for a declaration of her interest in the land and served the same, the caveats might be extended until the hearing so commenced by the statement of claim. There was also an order that Mr. Johnstone be joined as a respondent.

13. On 28 January 1987 Flying Spur commenced proceedings by way of originating summons against Mrs. Johnstone seeking orders that she show cause why the caveats should not be removed and orders restraining Mrs. Johnstone from lodging any further or other caveats. These were proceedings No. S.C. 95/87.

14. On 3 February 1987 in proceedings No. S.C. 84/87 Flying Spur took out a notice of motion to set aside the orders made on 23 January 1987 extending the caveats and seeking also the substantive orders sought in the originating summons in proceedings No. S.C. 95/87.

15. On 13 February 1987 the applications on behalf of both parties came before Spender J. Consent orders were made in each case. The orders formally taken out do not reflect the whole of the agreement between the parties. The Court record indicates that the orders were in the following terms:

"By consent -

1. That the orders made by this Court on 23
January 1987 on both matters Nos. S.C.
84/1987 and S.C. 95/1987 be vacated.

2. That the application and proceedings in
matter No. 84 of 1987 be dismissed.

3. That, upon Diane Ruth Johnstone
undertaking to withdraw caveats numbered 560718
and 560719 within seven (7) days from the
date hereof, matter No. 95 of 1987 be
dismissed, and that undertaking is hereby
given.

Noted that these orders have no effect upon the
order made by the Family Court on 19 January 1987
or upon the undertakings giben by the husband in
those proceedings on 10th December 1986, which
undertakings and orders shall continue until the
completion of Family Court Proceedings No. 1997
of 1986 or any proceeding in substitution
therefor instituted for seeking the same or
similar relief.

Diane Ruth Johnstone and Timothy McLeod Johnstone
undertake not to complain in any way about the
decision of Flying Spur Pty. Limited to be party
to the above consent orders.

Further order:

4. That in each of the matters Nos. S.C.
84/1987 and S.C. 95/1987 the question of
costs be reserved.

Noted that in relation to the undertakings given
by the husband in the Family Court on 10 December
1986 and the orders made by that Court on
19 January 1987, I take it from the concurrence
of the representatives for the other parties that
it is the understanding of all the parties that
they will continue in effect."

16. On 6 February 1987 in proceedings No. 84/87 Mrs. Johnstone filed a statement of claim in which she sought the following orders and declarations:

"7. By reason of the premises, the wife seeks:

(i) A declaration as to the nature and extent
of her interest in the family home;

(ii) A declaration as to the nature and extent
of her interest in the Kingston unit;

(iii) A declaration that the Trustee holds the
said family home and Kingston Unit (inter
alia) upon trust for the applicant;

(iv) An order that the Trustee be restrained
from selling, dealing with, encumbering or
otherwise disposing of the family home and
or the Kingston unit;

(v) A declaration that the Deed of Appointment
purporting to dismiss the Trustee and to
appoint the respondent, Flying Spur Pty.
Limited, is void and of no effect;

(vi) Alternatively to (v), that the Deed of
Appointment take effect subject to a
declaration that Flying Spur Pty. Limited
is bound by the terms of the declaration
and orders (i) to (v) hereof inclusive;

(vii) Costs."

17. It has been necessary to set out the background of these applications in some little detail because in the absence of pleadings it is not easy to identify the issue or issues which the Court has to determine. However, the background material that was furnished to me in order to decide these applications for costs was far more complex. The admissibility of a good deal of that material itself was challenged on the ground of relevance. The question of relevance itself could not be decided until the Court determined the ambit of the issues to be determined on these applications for costs. On the one hand it was submitted for Mrs. Johnstone that unless there were special circumstances costs ought follow the event, and that as a consequence it was necessary for the Court to embark upon an enquiry as to which party would have been successful if the orders by consent had not been made and the litigation had been pursued to a hearing. On the other hand, it was submitted on behalf of Flying Spur that the costs were in the discretion of the Court and it was relevant in the exercise of that discretion to inquire as to whether the conduct of Mrs. Johnstone in lodging the caveats and seeking an extenstion of those caveats was reasonable. I took the preliminary view that costs were in the discretion of the Court and for that reason I allowed the evidence of the dealings between Mr. and Mrs. Johnstone. That evidence was contained largely in copies of affidavits which have been filed in the Family Court of Australia. It turns out to have very little bearing on my decision.

18. I adhere to my provisional ruling that the costs are within the discretion of the Court. Indeed that is trite law. Sub-s. 15(2) of the Australian Capital Territory Supreme Court Act 1933 provides that subject to Rules of Court, to any Ordinance and to the express provisions of any other Act, the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or Judge, and the Court or Judge shall have full power to determine by whom and to what extent the costs are to be paid.

19. It is, however, a rule of practice that costs normally follow the event, in the sense that where one party is wholly successful in a proceeding and the other party is wholly unsuccessful, the losing party may expect to be liable for the successful party's costs without incurring further expense by further argument on the question.

20. Counsel for Flying Spur relied upon a decision of the Court of Appeal of the Supreme Court of New South Wales in Laguillo v. Haden Engineering Pty. Ltd. (1978) 1 NSWLR 306 to support a submission that there was a "cardinal principle" that a successful party ought in the absence of special circumstances have his or her costs. I think that that case has to be read in the light of the facts. The plaintiff had succeeded upon the issue of liability and the defendant had succeeded upon the issue of damages in the sense that the plaintiff had recovered less than what the defendant had paid into Court. That is not an uncommon situation and it is often attended by a consequent dispute on the appropriate order as to costs. In any event the Court of Appeal did not lay down the principle stated in the headnote upon which counsel for Mrs. Johnstone relied. What was said by Reynolds J.A. at p 308 was that "a successful defendant who has been brought to court at the suit of the plaintiff should have his costs" (my emphasis). His Honour also referred to "another principle of importance . . . . that, as a general rule, a party is entitled to the costs of an issue on which he succeeds." I think that the general position is accurately summarised by Mr. B.C. Cairns in Australian Civil Procedure (2nd edition) at pp 483 to 484:

"While the court has a general discretion over
costs, it is well settled that it exercises its
discretion to award costs to the successful
party. In this sense it is said that costs
follow the event. The successful litigant is
indemnified as to party and party costs by the
unsuccessful party. In proper circumstances the
court has power to make another order, but it
does so only for a good reason (Ritter v. Godfrey
(1920) 2 KB 47; Donald Campbell & Co. Ltd. v.
Pollak (1927) AC 732; Morosi v. Mirror
Newspapers Ltd. (1977) 2 NSWLR 749; E.M.I.
Records Ltd. v. Ian Cameron Wallace Ltd. (1982) 3
WLR 245. The court orders costs as between
defendant and a third party on the same
principles as for party and party costs between a
plaintiff and the defendant: Johnson v. Ribbins
(1977) 1 WLR 1458.) Having stated the general
rule, however, it must be emphasised that the
jurisdiction over costs is discretionary. As
with any other discretion it must be exercised by
the court in the light of all relevant
considerations. Where it is proper the general rule can
be displaced; in strict law the court has a duty
not to follow it blindly and irrespective of
other relevant circumstances. Moreover, the
court must actually exercise its discretion over
costs. A party has no right to costs until the
court makes an order to that effect."

21. For the purposes of the present application, it is not easy to apply a principle that costs should follow the event. The terms of the orders noted on 13 February 1987 do not identify any "successful" party. Counsel for Mrs. Johnstone submitted that it was necessary to enquire as to who would have been successful if the case had been pursued to an ultimate conclusion without consent orders disposing of the subject matter of the proceedings. This is an artificial, burdensome and costly exercise, and if it can be avoided it should. However, as it turns out, it may be disposed of briefly. It was submitted on behalf of Flying Spur that Mrs. Johnstone's claim had to fail because she had no estate or interest in the land as required by s.104 of the Real Property Ordinance 1925. Without discussing the authorities in detail, I think that it is correct that as an object of a discretionary trust, Mrs. Johnstone did not have a caveatable interest. She did not have a proprietary interest (see Re Goldsworthy, deceased (1969) VR 843 at 849). What she had was a right in the nature of an equitable chose in action to call upon the trustees to deal with the distributable fund in a manner appropriate to the due administration of the trust. That right, however, does not constitute an interest, vested or contingent, in the trust fund, see Hardingham & Baxt, Discretionary Trusts (2nd edition) 1984 para. 605. Nor does it constitute an interest in any part of the trust property from which a distributable fund or part of a fund might derive. In my view that right does not constitute an estate or interest in land within s.104 of the Real Property Ordinance 1925.

22. It was further submitted on behalf of Flying Spur that Mrs. Johnstone was bound to fail in the proceedings which she brought in this Court because it was not open to her to allege any interest other than that claimed in the caveats. Reliance was placed upon the principle that there is no jurisdiction to amend a caveat: see In re Cooper (1904) 4 SR N.S.W. 470 and In re Powell's Caveat 1966 QWN 9. However, in my view no question of amendment of a caveat fell to be determined at any ultimate hearing. In accordance with the orders of Kelly J., Mrs. Johnstone had availed herself of the opportunity to file a statement of claim in which she simply sought a declaration as to the nature and extent of her interest in the family home and in the Kingston unit, a declaration that the trustee held those properties upon trust for her, and certain consequent orders. On behalf of Mrs. Johnstone it was submitted that she was entitled to rely not only on the provisions of the deed of settlement but also upon a resulting trust which, if I understand the submission correctly, was said to have resulted from the illegality of the scheme established by the deed of settlement in order to evade tax and from a contribution by Mrs. Johnstone to the financial basis which rendered possible the acquisition of both the Deakin and Kingston properties. However, if those matters are intended to provide alternative grounds for the orders sought in the statement of claim, it is peculiar that the statement of claim makes no mention of them. Nevertheless, the statement of claim introduces issues between the parties beyond but not exclusive of those raised by the caveats. It is in the circumstances simply impossible to predict what the outcome of the litigation might have been if it had not been settled by consent orders.

23. Similarly, it is, in my view, impossible to determine for the purposes of the costs application whether it was reasonable or unreasonable for Mrs. Johnstone to lodge the caveats. It was submitted on her behalf that the consent orders amounted in substance to a determination of the proceedings in her favour, but I do not accept this submission. After all her application by notice of motion and her statement of claim were both dismissed and she undertook to withdraw the caveats. The best that might be said in her favour, I think, is that the outcome was the freezing of the status quo and possibly the continuation of Family Court proceedings unprejudiced by what had happened in this Court.

24. Furthermore, for the purpose of the exercise of general discretion, it must be said that the present proceedings have about them a distinct "family" character. Indeed if the Jurisdiction of Courts (Cross-Vesting) Act 1987 had been proclaimed, it might have been appropriate for the whole of the dispute between Mr. and Mrs. Johnstone and their associated companies to be determined in the Family Court of Australia where, unless the court is of opinion that there are circumstances that justify it making an order, each party bears his own costs; Family Law Act 1975 s.117.

25. In the circumstances I think that the appropriate order is that in each case each party bear the whole of her and its costs, including the costs of these applications for costs.