Karen Haines v Ofelia Sardinola Croft [2001] ACTSC 77 (14 August 2001)

Last Updated: 6 November 2001

Karen Haines v Ofelia Sardinola Croft

[2001] ACTSC 77 (14 August 2001)

CATCHWORDS

PRACTICE AND PROCEDURE - Costs - Plaintiff discontinuing by consent action under Family Provision Act - application of "normal rule" that costs follow the event where no hearing on the merits - whether Master's discretion miscarried on making no order as to costs.

Family Provision Act 1969, s 7

House v The King [1936] HCA 40; (1936) 55 CLR 499

Mann v Carnell [2001] ACTSC 18; (2001) 159 FLR 466

J T Stratford & Sons Ltd v Linley (No 2) [1969] 3 All ER 1122

Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194

Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 283

Calderbank v Calderbank [1975] 3 All ER 333

ON APPEAL FROM MASTER CONNOLLY

No. SCA 9 of 2001

Judges: Miles CJ, Gray and Ryan JJ

Supreme Court of the ACT

Date: 14 August 2001

IN THE SUPREME COURT OF THE )

) No. SCA 9 of 2001

AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM MASTER CONNOLLY

BETWEEN:

KAREN HAINES

Appellant

AND: OFELIA SARDINOLA CROFT

Respondent

ORDER

Judges: Miles CJ, Gray and Ryan JJ

Date: 14 August 2001

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The parties file and serve within fourteen days, submissions in writing addressed to the orders which should be made in respect of the costs of the appeal.

IN THE SUPREME COURT OF THE )

) No. SCA 9 of 2001

AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM MASTER CONNOLLY

BETWEEN:

KAREN HAINES

Appellant

AND:

OFELIA SARDINOLA CROFT

Respondent

Judges:	Miles CJ, Gray and Ryan JJ
Date:	14 August 2001
Place	Canberra
REASONS FOR JUDGMENT

THE COURT:

1. This is an appeal from an order of the Master of 29 January 2001 whereby he ordered that the respondent, who was the plaintiff in proceedings under the Family Provision Act 1969 ("the Act"), pay the defendant's costs of a motion on notice dated 13 December 2000 but that otherwise there be no order as to costs. The need for the Master to consider the question of costs arose from the fact that the respondent/plaintiff had undertaken forthwith to file a notice of discontinuance and had consented to an order that she be barred from making any further application for provision out of the estate of the deceased. In consequence of those consent orders, the parties agreed that the Master should determine the question of costs.

2. In an affidavit in support of the application for leave to discontinue, the respondent/plaintiff's solicitor requested that leave be granted -

"on the basis that:

(i) she does not wish to proceed with her application;

(ii) The Statement of Claim and affidavits filed on her behalf in support of the application disclose a real and arguable case. The application was neither frivolous nor vexatious."

3. By her Statement of Claim, the plaintiff alleged that she had been the domestic partner of the deceased within the meaning of s 7 of the Act for fifteen years before the death of the deceased. The appellant/defendant was the widow of the deceased and the executrix of his will dated 28 November 1978 under which she was the sole beneficiary. The plaintiff sought a lump sum provision of $50,000 out of the estate of the deceased. By her defence, the defendant denied that the plaintiff had ever resided with the deceased and denied that the deceased had given assistance to the plaintiff of the kind alleged in the Statement of Claim.

4. The learned Master gave ex tempore reasons for his orders in respect of costs. After noting that the other orders for leave to discontinue and barring the plaintiff from making a further application for provision out of the estate of the deceased were made by consent, he observed:

"The substantive proceedings involve an application under the Family Provisions Act of the ACT in unusual circumstances. The plaintiff puts her case forward on the basis that she was the lover for a period in excess of a decade of the deceased and that by virtue of that relationship and certain financial undertakings that occurred within it supported in an affidavit filed at the time, she would, she said, meet the test of eligibility under section 7 of the Family Provisions Act. It was asserted correctly by all parties when this matter was first before me on 15 September 2000 that these were unusual circumstances and untested waters."

5. The Master then noted that s 7 of the Act creates a class of eligible applicant broader than that of the traditional de fact spouse, and continued:

"It seemed to me and it still seems to me that a domestic partner as defined under the Act can well mean something other than the traditional common law test of a de facto spouse. It seems to me that eligible partner may well be parallel or equivalent to the old common law de facto test, but domestic partner may well mean something more and the plaintiff's case would have tested that. The parties have consented to the matter being discontinued. The only issue between them being what should happen as to costs.

Despite extensive and learned submissions that have been put to me by Mr Hassall on the test of eligibility and his submissions that I ought be satisfied that the plaintiff was not eligible to bring the claim, I'm not able to make that ruling today. It seems to me that in order to make that ruling I would have had to go into the whole of the evidence. I would have had to hear the plaintiff's evidence and I would have to give the defendant the opportunity to cross-examine the plaintiff, and indeed at a point in submissions this morning when Ms Tonkin referred to some material in the plaintiff's affidavit Mr Hassall made the point quite properly that he wanted to test the veracity of the particular assertion Ms Tonkin had referred to.

It seems to me then that I ought not embark - I would be in grave risk of error if I was to embark on any attempt to definitively rule on whether or not the plaintiff would have been an eligible person and I must approach the costs application on the basis of the ordinary principles to be applied when a matter is discontinued."

6. Reference was then made to Fortescue v Northey [1905] VLR 724 and other authority to the effect that "normally when a matter is discontinued costs follow the event". However, the Master went on to note that more recent authorities on the point included Gribbles Pathology Pty Ltd v The Health Insurance Commission (1997) 80 FCR 283, Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194 and J T Stratford & Sons Ltd v Linley (No 2) [1969] 3 All ER 112. The effect which the Master distilled from those authorities was:

"...to caution the judge in the exercise of the discretion as to costs where the merits have not been and cannot be tested that there is grave risk in making a cost order adverse to either party. ...

It seems to me that the range of possible outcomes could have gone from total success for the defendant, if I had been persuaded after hearing all the evidence, that the plaintiff indeed did not meet the statutory test for eligibility to substantive success for the plaintiff if she had established eligibility and had been able to bring evidence before me to satisfy me that a substantive verdict ought to be entered in her favour insofar as eligibility for relief or an immediate outcome which could well have been a finding of eligibility, a very modest award of relief. But circumstances there[sic][were] that after a 3 or possibly 4 day trial a plaintiff in those circumstances may well have been able to argue that that was a very proper case for her costs to have been met from the estate, an outcome which would have substantially reduced the amount of the estate to the eventual beneficiary."

7. In coming to exercise his own discretion, the Master concluded:

"I have great sympathy with the circumstances that Mrs Haines has found herself in following the death of her husband, and this litigation which she has had not [sic] alternative but to defend. The matter has been resolved insofar as the action has been discontinued and there is an order that it cannot be resumed. It seems to me that in exercising discretion as to costs I am better guided by the more recent views of Finkelstein and Hill JJ in the Federal Court, particularly in circumstances where the case, had it gone to hearing, would have involved complex issues of fact and law and I cannot say with any certainty on the information that I have had to date, which really is limited to the affidavit material that has been referred to in the arguments this morning, as to where the eventual merits would have lain.

In those circumstances it seems to me that the proposition that where there is a discontinuance by the plaintiff there is normally a costs order in favour of the defendant is no longer a sound proposition and, guided by more recent authority, this seems to me a case where I order that there be no order as to costs."

8. The appellant's amended notice of appeal raises eight grounds, all of which have been pressed by Mr Hodgson of counsel for the appellant at the hearing of her appeal. It is convenient to examine separately and in order each of those grounds;

(a) That the Master was in error in the exercise of his discretion in that the result embodied by his failure to make an order as to costs is plainly unreasonable and manifestly unjust.

9. In support of this ground, Mr Hodgson accepted that the Court's discretion as to costs is a wide one. However, he contended that "the general rule has always been that costs follow the event unless special circumstances require it to be otherwise." In the present case, the circumstances were said to reinforce was what asserted to be the general rule. In the first place, counsel pointed out that the institution of the proceedings had compelled the appellant to defend them. Indeed, it was submitted, she was under a duty as the executrix of the deceased to defend the proceedings. However, the appellant was the sole beneficiary under the deceased's will and there is no suggestion that any creditors or other persons stood to be affected by the attraction of any liability for the appellant's own costs. Accordingly, the only duty the appellant owed was to herself and we regard her as in no different position from a defendant in ordinary commercial litigation, although we acknowledge the force of the point that, in the absence of an order in her favour, she will have to defray her own costs out of the resources of a "comparatively modest estate".

10. Another circumstance to which counsel for the appellant pointed was that the respondent, as a recipient of legal aid, might be excused from making any contribution to her own costs. It was also pointed out in this context that senior counsel had been prepared to act for the respondent on a pro bono basis. However, we consider these matters to be neutral in their effect on the discretion as to costs. They do suggest that the respondent may have had a degree of immunity from liability for her own costs but they also argue that a responsible authority charged with the disbursement of public funds, and independent senior counsel have both considered that she had a sufficiently strong claim on the merits to warrant the provision of legal aid.

11. We consider that the Master correctly understood that, unless circumstances require otherwise, a discontinuing party should be ordered to pay the costs of the other side. That understanding accorded with the observation of Miles CJ in Mann v Carnell [2001] ACTSC 18; (2001) 159 FLR 466 at 467. However, the discretion to weigh the relevant circumstances is a wide one, to be reviewed on appeal only in accordance with the principles enunciated, for example, in House v The King [1936] HCA 40; (1936) 55 CLR 499, where Dixon, Evatt and McTiernan JJ observed, at 504:

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."

12. One relevant circumstance which seemed to weigh heavily with the Master was that the application had been discontinued at a point where the respondent, apparently, had a respectably arguable claim for provision out of the deceased's estate. That approach was consistent with the views expressed by the Court of Appeal in Stratford. In that case, Lord Denning MR said, at 1124:

"The plain fact is that, when the House of Lords made the order for "costs in the cause", they anticipated that the case would go to trial for adjudication on the merits. It was a case that was finely balanced. A slight turn in the evidence might make all the difference. So the House though it right to make the costs of the interlocutory proceedings depend on who won or lost in the main action. But a situation has arisen which they never envisaged. Counsel for the plaintiffs has urged us to award the plaintiffs the costs because they would very probably have won if the action had been tried on its merits. I decline to go into that question. We cannot try the action at this stage. I put aside the respective merits of the dispute. I ask simply: what is to be done in a situation which the House of Lords did not envisage? I think that we should not dismiss the action under R.S.C., Ord. 25, r.1(5), for want of prosecution. I think that the court should give the plaintiffs leave under R.S.C, Ord. 21, r.3(1), to discontinue. That rule gives the court a wide discretion as to costs. It covers the costs which have been ordered to be "costs in the cause". In the new situation, we should deal with the costs as if they had been "costs reserved". Finding that neither side wishes to go on with this action, I think that the master and the judge exercised their discretion wisely in giving leave to discontinue on the footing that each side is to bear its own costs, including costs in the cause. The order should be that the action be discontinued, each side paying its own costs, including the costs in the cause."

13. To similar effect, Cross LJ observed in the same case, at 1125:

"I have no doubt that the order which was made here did justice between the parties because, although each side was prepared to go on with the fight rather than pay the other side's costs, neither side wanted the issue to be determined for its own sake. Further, I agree with my Lords that the master in the circumstances of this case was entitled to deal with the matter as he did - not under the defendants' application to dismiss but under the plaintiffs' summons for leave to discontinue, and that there was nothing in the order of the House of Lords [see [1964] 3 All E.R. 102 at p.107; [1965] A.C. 269 at p.325.] which precluded him from giving them leave to discontinue without imposing on them an obligation to pay the defendants' costs of the interlocutory proceedings."

14. See also Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194, where Hill J at 201, in circumstances not unlike the present, exercised his discretion by making no order as to the costs of the proceedings. His Honour extracted several principles from the authorities, the first two of which he noted derived support from Strathford. The first three of his Honour's principles were stated in these terms:

"(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 [[1969] 1 WLR 1547; [1969] 3 All ER 1122] and the SEQEB [South East Queensland Electricity Board v Australian Telecommunications Commission (unreported, Federal Court of Australia, 10 February 1989)] case.

(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.

(3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB)."

15. We do not regard it as a point of distinction between that case and the present that, in this case, the proceedings have been discontinued, whereas, the Australian Securities Commission requested the dismissal of its action. We also consider that the reasonableness of a plaintiff's institution of an action is bound up with his or her prospects of success. This view permeated the reasoning of Finkelstein J in Gribbles v Health Insurance Commission, where his Honour said, at 287:

"For my own part I should wish to emphasise that in the absence of a hearing on the merits it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in special circumstances. To do otherwise would require some prediction of the outcome of the case. It seems to me that the third proposition stated by Hill J was intended to cover the situation where the Court was in fact able to form a clear view about the merits of a case without a trial. So, if a claim is patently hopeless that would be a good reason to make an order for costs against the claimant. Likewise if a defence was bound to fail that would be good reason for awarding costs in favour of the claimant. But I venture to suggest that there will be very few cases where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of a party.

Applying these principles to the present case I should observe at once that it is by no means apparent to me that the respondents' case is so hopeless that an order for costs should be made against them."

16. Contrary to the submission advanced on behalf of the appellant, we are not persuaded that the result arrived at by the learned Master was so unreasonable and plainly unjust as to raise the inference discussed in the paragraph from House v The King quoted above, that it must have been infected by error.

(b) That the Master was in error at law in failing to follow the general principle that costs follow the event unless special circumstances require it to be otherwise.

17. Subject to the qualification that the principle does not require the circumstances to be "special", we consider, as explained in relation to Ground (a), that the learned Master did not misunderstand, or, fail to apply, this principle. Whether the members of this Court in applying the principle would have reached the same result is not to the point unless the Master's application of it is shown to have been erroneous.

(c) That the Master was in error in the exercise of his discretion in failing to give any weight to an offer of settlement made by the defendant by letter dated 21 September 2000 in accordance with the principle enunciated in the decision of Calderbank v Calderbank [1975] 3 All ER 333.

18. The offer conveyed by the letter dated 21 September 2000 was made "without prejudice save as to costs" in these terms:

"We refer to our "without prejudice" letter/fax dated 13 September 2000 wherein we advised our client was prepared to compromise her claim for the sum of $5,000 in full and final settlement of the plaintiff's claim. That offer remained open for acceptance until close of business on Thursday, 21 September 2000.

Upon review of our file, it has come to our attention that the offer did not specify that it was "plus costs".

We therefore wish to confirm that our client is prepared on a non-admission and without prejudice basis to offer the plaintiff the sum of $5,000 plus costs in full and final settlement of her claim under the Act.

Given the above confusion, the time for acceptance of the offer will be extended to close of business Thursday, 28 September 2000. Should the plaintiff proceed with her application and obtain a judgment in the action for less than the settlement offer, we hold instructions to apply for an order that the plaintiff pay her own costs from the date of this letter, and further that the plaintiff pay our client's costs from the date of this letter on an indemnity basis. In that even, we are instructed to tender a copy of this letter and our earlier letter of 13 September 2000 in support of the application."

19. It is clear that the letter had been drawn to the Master's attention although Mr Hassall of counsel who then appeared for the defendant, made only this passing reference to it in the penultimate paragraph of his submissions:

".........there is on any affidavit material, even of the plaintiff's side, a reference to a sequence of negotiations and to what was considered a quite generous offer at one stage, of $5,000 plus costs made by the defendant, without concession of any liability but simply to end the matter. And that would seem against the background of a point that I bear - I might just point out, Master, that since this matter was previously before you, when the claim - the wide claim was for $150,000, the actual statement of claim only seeks $50,000 and you put that offer of $5,000 plus costs, we'd suggest was quite a reasonable offer."

20. An alternative submission was made in reply by Mr Hassall that the plaintiff should pay on an indemnity basis the defendant's costs incurred after the date of the letter of 21 September 2000.

21. The practice endorsed by the Court of Appeal in Calderbank v Calderbank is to the effect that an offer made on the basis that it can be revealed after the substantive issue has been resolved when the discussion of costs takes place, can be taken into account if the substantive outcome is more favourable to the offeror than the terms of the offer. In one sense,that condition was satisfied in the present case. In another sense, however, there was no substantive determination because, in the words of Cross LJ in Stratford, "neither side wanted the issue determined for its own sake". It was also open to the Master to take account of the offer of 21 September 2000 as a recognition that the plaintiff's case had some prospect of success, although, as counsel for the appellant submitted to this Court, it may have been made only in acknowledgment of the "nuisance value" of her claim.

22. In the light of all these circumstances, we consider the preferable inference to be that the Master did not disregard the letter of 21 September 2000 but considered its impact on his discretion as to costs to be neutral or insufficient to tilt the balance in favour of the defendant. We can discern no error in the approach to this matter which we impute to the Master.

(d) That the Master was in error in the exercise of his discretion by failing to take into account the merits of the plaintiff's case.

23. It will be clear from the passages from his reasons which we have reproduced at [5] and [6] that the Master did advert to the merits of the plaintiff's case when he indicated that they could not be tested without permitting cross-examination and otherwise, in effect, trying the action. Consistently with the policy explained in Stratford and some of the other authorities to which we have referred, the Master declined to take that course. Nor do we accept the submission by counsel that the Master should have regarded the bare statement on affidavit by the plaintiff's solicitor that "she does not wish to proceed" as an admission that she had no claim on the merits. Other explanations, at least equally open, include that suggested by Mr Hodgson himself, that the plaintiff had been distressed by the defendant's issuing of subpoenas to various of the plaintiff's employers and an assessment that the amount likely to be recovered was not worth the costs and stress which would be occasioned by a three or four day trial.

(e) That the Master was in error in the exercise of his discretion by failing to consider whether the plaintiff acted reasonably in initiating proceedings and whether the defendant acted reasonably in defending the same.

24. This ground is essentially a reformulation of ground (d) which we have just discussed. In support of ground (e), counsel for the appellant referred to a letter dated 17 January 2001 from the respondent's solicitor intimating that she would discontinue the proceedings. That letter contained this statement:

"Mrs Croft wishes your client to know that she commenced these proceedings because she wished some acknowledgment that she was an integral part of Mr Haines' life and he of hers for many many years."

25. However, we do not regard that statement of the respondent's motive in instituting the proceedings (even assuming, as is by no means clear, that it was her sole motive) as implying a concession that the respondent had no case on the merits. Indeed, the rest of the letter goes on to indicate matters tending to support the plaintiff's eligibility to make a claim under the Act. Moreover, the Master acknowledged that the plaintiff had at least an arguable chance of establishing a need for provision when he adverted, in the passage quoted at [6] above, to the prospect of her recovering "a very modest award of relief". We consider, as well, that the Master expressly accepted that the appellant had acted reasonably in defending the proceedings when he referred to "this litigation which she has had no alternative but to defend".

(f) That the Master was in error in the exercise of his discretion in failing to have regard to the conduct of the proceedings by the plaintiff.

26. As we perceive it, the only matters related to the plaintiff's conduct of the proceedings which could have influenced the Master's discretion as to costs, were her motive for commencing the action, whether she had an arguable case on the merits, her reaction to the Calderbank letter and her decision to discontinue before the trial had commenced. The first three of those matters have already been examined and the last could only have operated in the plaintiff's favour had the Master considered, as he well could have, that a party should not be discouraged from a step which brings about a saving of the time and resources of the Court and the other party.

(g) That the Master was in error in the exercise of his discretion in failing to have regard to the detriment suffered by the defendant as a consequence of being deprived of her costs.

27. This ground has as its premise the proposition that the defendant would have recovered her costs had the action proceeded to judgment. That outcome was by no means certain because it depended on the defendant's succeeding on the merits on all issues and on her obtaining a favourable exercise of the Court's general discretion as to costs. In any event, the Master did not disregard the possible detriment to the defendant as he referred, in the passage quoted at [6] above, to the first of a "range of possible outcomes" as being "total success for the defendant" which we take to mean dismissal of the action with costs. Nor do we consider that the Master overlooked the fact that, given the defendant's age and relatively modest circumstances, such an outcome would have been a significant benefit to her.

(h) That the Master was in error at law for failing to give proper consideration to Order 30 of the ACT Supreme Court Rules.

28. This ground seems, as we understand it, to be based on the proposition that, because a party who discontinues under O 30(1)(1) creates an automatic entitlement to costs in the other party, a similar entitlement arises, at least prima facie, upon discontinuance by leave. Order 30(1)(1) provides:

"The plaintiff may, where there are pleadings, at any time before the receipt of the defendant's defence, or, after the receipt thereof, before taking any other proceeding in the action (save any interlocutory application), and, where there are no pleadings, the plaintiff may, within 15 days after appearance, by notice in writing, wholly discontinue his or her action against all or any of the defendants, or withdraw any part or parts of his or her alleged cause of complaint, and thereupon he or she shall pay the defendant's costs of the action, or, if the action is not wholly discontinued, the costs occasioned by the matter so withdrawn."

29. It is by no means clear that the argument which we have just distilled from ground (h) is anything more than a restatement of the general rule discussed above in relation to ground (a). In any event, it is open to a party, even before receipt of a defence, or within 15 days of appearance, to seek the leave of the Court to discontinue and urge the exercise in his or her favour of the discretion which the Master exercised in the present case. That is made clear by O 30(1)(2) which provides:

"Save as in this rule otherwise provided, it shall not be competent for the plaintiff to withdraw the record or discontinue the action without leave of the Court, but the Court may, before, or at or after the hearing or trial, upon such terms as to costs and as to any other action and otherwise as are just, order the action to be discontinued, or any part of the alleged cause of complaint to be struck out." (Emphasis added.)

Conclusion

30. For these reasons, we have not been persuaded that the Master's discretion miscarried. Accordingly, the appeal must be dismissed. As indicated at the end of the hearing of the appeal, we shall receive submissions in writing addressed to the orders which

should be made in respect of the costs of the appeal. Those submissions should be filed and served within fourteen days.

I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Date: 14 August 2001

Counsel for the Appellant: Mr T Hodgson

Solicitor for the Appellant: John Nicholl & Co

Counsel for the Respondent: Ms A Tonkin

Solicitor for the Respondent: Legal Aid, Canberra

Date of hearing: 31 July 2001

Date of judgment: 14 August 2001