Jordan v Goldspring (No 2)

HIS HONOUR: On 15 January 2021, this Court delivered reasons for judgment (the principal reasons) in proceedings concerning a dispute, essentially between the children of Frederick Martin Goldspring and Nita June Goldspring, both of whom are now deceased, and the entitlement of three of those children (the Plaintiffs) to see various documents relating to different trusts created during the lifetime of their parents. In these reasons, I shall refer to the parties as I did in the principal reasons.

The question the Court asked was whether there was a reasonable basis, beyond speculation, for concluding that the Plaintiffs had established, at least prima facie, that they were beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust.

The Court concluded that the fact of two of the Trusts, being the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust, containing the word "Family" in its name, where the Plaintiffs were members of the immediate family of Frederick and Nita, and, indeed, of the natural Defendants, was sufficient, although barely so, to establish a prima facie case that the Plaintiffs would be expected to be named as beneficiaries, or discretionary objects, or within a class of beneficiaries or discretionary objects, or as persons interested in the property subject to those two Trusts and that successful concealment of the particular Trust instruments could preclude enjoyment of any interests of those persons in the trust property.

The Court ordered that the documents, inspection of which should be permitted, were those referable only to the Trust instruments of each Trust in which the word “Family” appeared in the name of the Trust, being the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust.

It was also noted, in relation to costs, on a tentative basis, and whilst the Court had not heard submissions, that the determination of how costs of the application should be borne should await the inspection of the relevant documents and the final determination of the question whether the Plaintiffs, or any of them, were beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust. If they were, the Defendants, or some of them, should be ordered to pay the Plaintiffs' costs. If the Plaintiffs, or any of them, were not beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust, then the Plaintiffs should be ordered to pay the Defendants' costs.

Unsurprisingly, the parties did not reach agreement on either the form of orders for disclosure (although some orders, substantially, were, ultimately, agreed) or how the burden of costs should be borne. On 18 February 2021, after some discussion with counsel, the Court made orders, essentially without serious opposition by them, that the Defendants would provide to the Plaintiffs a copy of the documents referred to in Paragraph 1 of the notice of motion filed on 17 February 2021, excepting documents in sub-paragraph (f) and sub-paragraph (k).

The Court also made directions regarding the parties’ submissions on costs, with which directions the parties have complied.

Although counsel for the parties, considerately, indicated that they did not require reasons for the orders for costs that would be made, having considered the nature of the submissions, I have determined that I should provide some short reasons for the orders to be made.

These reasons deal with costs and should be read in the context of the principal reasons. In so doing, I remember what was written in Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212 at [12] (Maxwell P and Kellam JA):

The background to the matter is set out in the principal reasons and I do not propose here to repeat it. Nor is it necessary to set out all of the matters in the written submissions on costs, which, in the case of the Plaintiffs, were extremely detailed. I mention that the application for costs is not based upon any offer of compromise or Calderbank offer that was made on behalf of the Plaintiffs to any of the Defendants.

Most importantly, counsel for the Plaintiffs, in his written Submissions on costs, which had been served on the Defendants, and provided to the Court, stated:

In his amended submissions, counsel for the Defendants did not dispute the fact that the Plaintiffs were persons, or within the class of persons, who are discretionary objects, or that they were persons interested, or who could be interested, in the property subject to a trust.

In his submissions, counsel for the Plaintiffs submitted that, not only did the fifth and seventh Defendants fail, but each of the fourth, sixth and eighth Defendants, also failed, to produce any documents either prior to, or during, the course of the proceedings. Each of the fourth, sixth and eighth Defendants had not only refused to produce the various Trust Deeds, and any variations thereto, as sought by the Plaintiffs, but had persisted with their defence, ultimately, without reading any evidence at the hearing of the amended notice of motion.

Counsel added that not only were the proceedings unnecessary and protracted, but also ill-founded, on the part of the fifth and seventh Defendants, but also by the defences maintained by the fourth, sixth and eighth Defendants. Each of the Defendants was said to be in breach of the duty, imposed upon a party to civil proceedings, by s 56 of the Civil Procedure Act 2005 (NSW), to further the overriding purpose of the Act and rules to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (Section 56(5) enables the Court to take into account any failure to comply with s 56(3) or s 56(4) in exercising a discretion with respect to costs.)

It was put that, had the fourth to eighth Defendants complied with their obligations under s 56, the Plaintiffs would then have known, with certainty, “whether they were beneficiaries of each of the claimed trusts or not”. As evidenced by the documents produced in respect to the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust, the Plaintiffs were clearly beneficiaries of each of the Goldsprings Family Trust and the Fred Goldspring & Sons Family Trust until their removal by the present trustees by undated Deeds, but presumably ones executed on or about 30 June 2008.

Counsel submitted that the fundamental facts were known by the fourth to eighth Defendants, and notwithstanding that knowledge, they had maintained "secrecy”, in order to prevent the Plaintiffs challenging either the appointment of the trustees to each of those trusts on 30 June 2008 or the undated Deeds, by which each of those trustees had sought to remove each of the Plaintiffs and their issue as beneficiaries of those trusts. He added that if the fourth, sixth and eighth Defendants, prior to the commencement of these proceedings, or at any time prior to Judgment on 15 January 2021, had produced the Trust Deeds, and any variations thereto, the issue would have been known, without the requirement to commence and/or continue the proceedings to judgment.

The orders for costs proposed by the Plaintiffs were stated in the alternative as follows:

Counsel for the Defendants provided amended submissions that were extremely short. He wrote, amongst other things:

The orders for costs, as amended, proposed by the Defendants were:

From these submissions, there are really only two questions for determination on the question of costs. The first is whether the Plaintiffs’ costs should be calculated on the indemnity, or on the ordinary, basis and the second is by whom, or which, of the Defendants, should the costs of the proceedings be paid.

Section 98(1) of the Civil Procedure Act provides:

The fundamental principle which guides the exercise of the discretion contained in s 98 is that costs should follow the event, and that the successful party is, prima facie, entitled to his, or her, costs against the expense of litigation: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67] (“Oshlack”). The discretion to be exercised has been described as absolute, unconfined, or unfettered, except that it is required to be exercised judicially, that is, not by reference to irrelevant, or extraneous, considerations, or capriciously, but on facts connected with, or leading up to, the litigation: Oshlack at [34] (Gaudron and Gummow JJ).

Any exercise of the discretion is to indemnify or compensate the successful party, not to punish the unsuccessful party. It is guided by well-established principles in order to promote consistency in decision-making: Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17 at [6] (Mason and Deane JJ, with whom Brennan J generally agreed)

A successful party may be deprived of a proportion of his, her, or its, costs, or even required to pay costs to the other party, if the successful party succeeded only upon a portion of the claim, or failed on issues that were not reasonably pursued, or where the result of the litigation might be described as mixed.

There is academic commentary, by Professor Dal Pont, that the “central and overriding principle is that of doing justice to the parties in each particular case, it being judicially remarked that there is ‘no better test than the test of what is fair and just between the parties’” (see G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths) at 6.15).

In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that:

The exercise of the general discretion for determining the appropriate order for costs in the face of competing considerations should reflect a broad evaluative judgment of what the justice of the case requires: Gray v Richards (No 2) (2014) 315 ALR 1; [2014] HCA 47 at [2].

The Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rule 42.2 provides:

In Wright v Apthorpe [2020] NSWCA 300 at [54], Simpson AJA (with whom Bell P and McCallum JA agreed) wrote:

Section 98(1)(c) of the Civil Procedure Act distinguishes between costs awarded “on the ordinary basis” or “on an indemnity basis”. In Wright v Apthorpe, Bell P wrote at [3]:

At [58] – [61], Simpson AJA also noted:

An order for costs calculated on the indemnity basis can substantially increase the costs that a successful party can recover from the unsuccessful party in the proceedings. To make such an order requires an exercise of discretion. When such an order is made, it more fully, or adequately, compensates the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part: Oshlack at [44]. The words “relevant delinquency” were used by Gaudron and Gummow JJ, meaning delinquency bearing a relevant relation to the conduct of the case, rather than moral delinquency or some ethical shortcoming.

Yet, in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, the Court of Appeal noted, at 616, that the discretion to depart from the usual party and party basis for costs is not confined to the situation of what Gummow J described as the “ethically or morally delinquent party” in Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412; [1992] FCA 194 at [18].

An order that costs be calculated on the indemnity basis is not punitive. It is, instead, intended to operate as an indemnity against the expense of litigation that should not, in justice, have been visited upon the applicant party.

Some of the circumstances thought to justify an indemnity costs order were collected by Sheppard J in Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225 at 233-4; [1993] FCA 801 at [24]. His Honour recognised that the categories in which the discretion may be exercised are not closed. By way of example, an order for indemnity costs may be justified where a party, properly advised, should have known that success was unlikely bearing in mind the known facts: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202, at [21]; or where the Court’s time and the successful party’s money were wasted on “totally frivolous and thoroughly unjustified defences”: Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362, or with a wilful disregard of the known facts.

More recently, in Drip World Pty Ltd v Dardy Touring Corp (No 2) [2021] NSWSC 74, Stevenson J wrote at [19] quoting what he had written in Hudson Resources Limited v AceA Resources Pte Ltd [2021] NSWSC 41 at [7]-[9]:

However, as was noted in Preston v Nikolaidis (No 2) [2021] NSWSC 174, by Williams J, at [9], “[T]he mere fact that, with the benefit of hindsight after reviewing the reasons for judgment, the unsuccessful party should have known that it was likely to lose, is not generally sufficient to warrant an order for indemnity costs”.

Thus, in broad summary, and by illustration only, to justify an indemnity costs order, there must be conduct deserving of criticism and resulting in greater expense to the innocent party. However, the categories of circumstances which enliven the discretion to award indemnity costs are not closed.

In Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan) [2009] NSWCA 161, Giles JA (McColl JA agreeing) stated at [100] – [101]:

The decision on costs should be made against the background provided by the general principles to which I have referred above. In this case, the Plaintiffs have submitted that the proceedings were defended in wilful disregard of known facts, the making of allegations which ought never to have been made, and the undue prolongation of the proceedings by groundless contentions. There is some merit in this submission.

The trustee of each of the relevant Trusts ought to have known of the terms of the relevant Trust Deed at the time of the commencement of the proceedings. In my view, they adopted a position that was unreasonable in the circumstances, as ascertained, following the disclosure of the two relevant Trust Deeds to the Plaintiffs. Permitting the proceedings to continue was delinquent to the duty of those trustee Defendants, as parties to the litigation, required by s 56 of the Civil Procedure Act.

The terms of the relevant Trust Deeds, as identified in counsel’s submissions, seem to make it plain that the Plaintiffs were beneficiaries or discretionary objects, or within a class of beneficiaries or discretionary objects, or persons interested in the property subject to a trust of each of the two Trusts.

I do not accept the submission, in the circumstances of the case, that the Defendants were entitled to put the Plaintiffs to proof of their entitlement to relief, particularly when none of the natural Defendants entered the witness box. Doing so resulted in unnecessary expense to them and a significant amount of time having to be spent by the Court in determining the issue.

In the circumstances, I am persuaded that the circumstances of their defence to the amended Summons warrants departure from costs being calculated on the ordinary basis.

However, I also remember that:

Remembering that the Civil Procedure Act and the UCPR require the court to make such order as it thinks just in the particular circumstances of the case: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343 at [10] (the Court), and that “… It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do... Such an assessment will, undoubtedly be ‘rough and ready’… and that is entirely permissible,” (Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173 at [9]), I am of the view that the Plaintiffs should be paid 80 per cent of their costs, calculated on the indemnity basis, of the amended Summons filed on 9 September 2019.

In reaching this conclusion, and in making an order for indemnity costs, I do not seek to punish the Defendants for persisting with a case that failed in part. I am not making the type of order as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, I consider that the Plaintiffs should be indemnified for some of the costs incurred because it was unreasonable for the Defendants to have subjected them to the expenditure of those costs, as well as the delay in having the amended Summons determined, at least so far as the orders made.

I then turn to the persons, or entities, that should bear those costs. I am of the view that the trustee of the Goldsprings Family Trust and of the Fred Goldspring & Sons Family Trust should bear the burden of the costs order, without recourse to the Trust’s property in each case.

At [56] of the principal reasons, I noted that “It is likely that each of Peter, Mark and Marianne, is a director of, and each holds one share of three issued shares, in each of the companies”. However, I did not make any other finding in this regard. In those circumstances, I do not think that they should be ordered to pay the Plaintiffs’ costs.

As there was no dispute that each of the fifth and seventh Defendants should not obtain indemnity from the relevant trust, it is unnecessary to consider a trustee’s right of indemnity under statute (the Trustee Act 1925 (NSW), s 59(4) and s 93(3)), the UCPR (rule 42.25) or under the general law.

For completeness, however, I refer to what was written by Bowen LJ in Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 562:

There should be no order as to costs of any of the other Defendants to the intent that each should bear his, or her, or its, own costs, respectively, of the amended Summons.

The Court: