Abson by his tutor NSW Trustee and Guardian v Johnston (No 2)

1. [1]

   These proceedings commenced on 8 May 2023. The statement of claim sought possession of a property owned by the plaintiff at XXX Windsor Street, Richmond.

2. [2]

   The proceedings were brought by the plaintiff by his tutor, the NSW Trustee and Guardian (“NSWTG”). Orders had been made by the Guardianship Tribunal under the Guardianship Act 1987 (NSW) on 17 August 2000 which committed the estate of the plaintiff to management by the Protective Commissioner under the Protected Estates Act 1983 (NSW). On the coming into operation of the NSW Trustee and Guardian Act 2009 (NSW) (“the NSWTG Act”), the NSWTG took over the functions and responsibilities of the Protective Commissioner.

3. [3]

   By virtue of the orders of the Guardianship Tribunal, the power of the plaintiff to deal with his property, was suspended and the NSWTG could exercise any right that the plaintiff could exercise in respect of his property. The property at Richmond became part of the plaintiff’s property in 2006, and the NSWTG asserted in the statement of claim that it formed part of the property the subject of the Financial Management Order.

4. [4]

   Ultimately the proceedings settled with the defendants agreeing to give possession of the property to the plaintiff. The plaintiff now seeks costs of the proceedings on a gross sum basis.

5. [5]

   The proceedings have a checkered history and from a costs perspective it is necessary to recite that history.

Procedural history

1. [6]

   Prior to the commencement of the proceedings, the NSWTG sent a number of letters in 2021 and 2022 to “The Occupants” of the property and to “Matthew Fitzgerald” who was believed to be the occupier of the property requiring him to give vacant possession of the property.

2. [7]

   The statement of claim named as the defendant in occupation of the property, Matthew Fitzgerald. In fact, the occupant’s name was Mathew Johnston. The error occurred in this way. After the Financial Management Order had been made, David Maloney, a solicitor from Legal Aid NSW, who was acting on behalf of the NSWTG, spoke to the plaintiff with regard to assisting him to regain possession of his property. The plaintiff had been diagnosed with schizophrenia, and had issues that affected his cognitive ability, in part due to substance abuse. He could only remember initially that the person that he had permitted to reside in the premises was called Matthew. He was not sure of this person’s surname but thought it was Fitzgerald.

3. [8]

   Two affidavits from Robert Vassallo, the process server, of 8 and 15 June 2023 disclose that when he went to the property he handed the statement of claim and a notice to occupier to a person apparently residing at the property. When he asked for the person’s name, he was told it was Mathew Johnston, and he was told that Mr Johnston resided at the property with his son Corey.

4. [9]

   The following day, Mr Maloney received an email from an email address corey6657@mail.com from “Mathew” saying that he would be getting representation to defend the proceedings.

5. [10]

   On Mr Maloney being satisfied that the proper name of the defendant was Mathew Johnston, an application was made to amend the statement of claim to name Mathew Johnston as the defendant.

6. [11]

   An amended statement of claim was filed on 26 February 2024. Subsequently the amended statement of claim and a notice to occupier were served by those documents being left in the letterbox of the property and placed in a conspicuous place on the front door of the premises. Mr Maloney spoke subsequently to Mr Johnston who said he had not received the documents. With Mr Johnston’s agreement, he was then served a copy of the documents on 12 March 2024 by email at the email address previously referred to.

7. [12]

   On 5 April 2024 at a directions hearing before me where Mr Johnston appeared in person, I made an order pursuant to rr 10.14(3) and 10.15(4) of the Uniform Civil Procedure Rules 2005 (NSW) that the amended statement of claim, possession of land cover sheet and the notice to occupier be taken to have been served on the defendant and on the occupier on 12 March 2024.

8. [13]

   I inquired of Mr Johnston what his defence to the claim was. He told me that he had an agreement with the plaintiff to have possession of the house until the plaintiff agreed to reimburse Mr Johnston for work that he had carried out at the property. I informed the defendant that he needed to file a defence and to include that information in the defence. I directed that such defence was to filed by 19 April 2024.

9. [14]

   On that day, the defendant filed a defence, but it contained nothing but an affidavit in the usual form. There was no pleading and no narrative identifying what the defendant’s defence was.

10. [15]

    When the matter came back before me on 22 April 2024 the plaintiff sought to strike out the defence. I again explained to Mr Johnston the sort of matters which needed to be included in a defence that he had to file. I directed that any amended defence was to be filed and served by 29 April 2024.

11. [16]

    On that day, a further defence was filed. Its form did not accord with the requirements of the rules, but it annexed a number of documents including two documents purportedly signed by the plaintiff permitting Corey Johnston to reside in the property on certain conditions.

12. [17]

    One document dated 18 June 2019 headed “Rental Agreement until all stolen items returned”, and purportedly signed by Mr Abson and two witnesses, relevantly said:

13. [18]

    The second document dated 15 November 2019 and purportedly signed by Mr Abson and a witness, relevantly said:

14. [19]

    At the directions hearing on 1 May 2024, the plaintiff indicated that he wished to apply for summary judgement. In all the circumstances, it seemed better to me that the matter should be prepared for a final hearing, and I made directions for the filing and service of affidavits by both parties. I encouraged Mr Johnston again to engage a lawyer to assist him because of the complexity of the matters he wished to raise as a defence to the claim for possession.

15. [20]

    Subsequently, Mr Orlizki, a solicitor at Kent Attorneys, commenced to act not only for Mr Johnston but also for his son Corey. On 13 June 2024 I made orders by consent joining Corey Johnston as the second defendant to the proceedings, giving leave to Mathew Johnston to file an amended defence, directing Corey Johnston to file a defence, giving leave to the defendants to file a cross-claim and making directions for the filing of evidence. I ordered that Mathew Johnston pay the costs thrown away by reason of filing an amended defence.

16. [21]

    When the proceedings came back before me on 22 July 2024, Mr Orlizki appeared and informed me that a settlement of the proceedings had been reached with the only outstanding issue being costs. On that day I made the following orders by consent:

    1. (1)

       Judgment for the Plaintiff for possession of the land comprised in folio identifier XXX, being the land situated at and known as XXX Windsor Street. Richmond.

    2. (2)

       Judgment in paragraph 1 is stayed until 31 August 2024.

    3. (3)

       Leave to the Plaintiff to issue a writ of possession after 31 August 2024.

    4. (4)

       The Court notes that the Plaintiff agrees not to raise, in any proceedings commenced by the Defendants (or either of them) within the applicable limitation period, a defence based upon issue estoppel or Anshun estoppel by reason of these proceedings, the conduct of these proceedings, or any issue raised or that could have been raised in these proceedings.

17. [22]

    I also made directions for the filing and service of evidence and submissions in relation to the costs issue.

18. [23]

    In light of the agreed orders giving the plaintiff possession of the property, the plaintiff seeks an order that the defendants pay the plaintiff’s costs of the proceedings and that a gross sum costs order of $16,000 in favour of the plaintiff be ordered. The principal basis upon which the costs are sought is what is said to be the defendants’ unreasonable rejection of the plaintiff’s settlement offers from as early as 9 June 2023 in accordance with the principles in Calderbank v Calderbank [1973] 3 WLR 586; 3 All ER 333.

19. [24]

    On 9 June 2023, shortly after the proceedings were commenced, Mr Maloney sent an email to the defendant marked “without prejudice save as to costs”. Mr Maloney relevantly said in the letter:

20. [25]

    On 1 February 2024 shortly before the plaintiff’s notice of motion to amend the statement of claim to correct the defendant’s name came before me, Mr Maloney sent another email to the defendant marked “without prejudice save as to costs”, which relevantly said:

21. [26]

    Further, Mr Maloney sent an email to the defendant on 18 April 2024 explaining how he should complete his defence. The email also said:

22. [27]

    No counter proposal was put by the defendant to any of the offers put by the plaintiff set out above. Indeed, none of the offers was responded to by the defendant at all.

23. [28]

    After Mr Orlizki commenced to act for the defendants and he and Mr Maloney were negotiating the terms on which the proceedings would be settled, Mr Maloney made a without prejudice offer that, although Legal Aid had spent in the region of $25,000 in costs to that point, the plaintiff would accept the sum of $12,500 to finalise the costs aspects of the matter. That offer was rejected by Mr Orlizki who informed Mr Maloney that his clients would only agree to scale costs on a default judgement.

Legal principles

1. [29]

   In Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, McHugh J said at 624 – 625:

2. [30]

   In Furnish & Finish Pty Ltd v Holland [2020] NSWSC 1593, Ward CJ in Eq (as her Honour then was) said (at [34] – [37]):

3. [31]

   In Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack & Ors [2003] NSWCA 302, Davies AJA (with whom Mason P and Meagher JA agreed) quoted with approval what was said by Burchett J in One Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at 552-3:

Submissions

1. [32]

   The plaintiff submitted that the defendant acted unreasonably in not accepting the offers made on three occasions that they should vacate the premises in circumstances where they were given time to do so. The plaintiff submitted that the defendants’

2. [33]

   ultimate agreement to vacate the property did not leave them in a more advantageous position than they would have been if they had accepted the offers of settlement made at an earlier time.

3. [34]

   The defendants submitted that they did not act unreasonably because they had an arguable right of possession by virtue of the agreement signed by the parties, that they had an arguable charge over the property as a result of the work carried out and the money expended, and that they were entitled to rely on an estoppel in answer to the plaintiff’s assertion that he had no right to deal with the property as a result of the management order made in favour of the NSWTG.

4. [35]

   The defendants submitted also that the settlement agreement cannot be regarded as a complete capitulation by them because by conceding the plaintiff’s claim and abandoning their rights to possession of the property, the defendants were giving away little of practical value to them. That is because they agreed to preserve their rights to make a claim against the plaintiff in a court of appropriate jurisdiction and, given the property is vested in a statutory trustee, it was highly unlikely to be sold with the proceeds dissipated without regard to the claims the defendants have against the plaintiff.

5. [36]

   The defendants submitted that it was not unreasonable for them to have rejected the Calderbank offers because the offers did not represent a compromise but rather an invitation to capitulate. It was submitted further that, in any event, Calderbank offers do not apply in circumstances where there has been a consent resolution rather than a hearing on the merits and a result worse for the offeree than the Calderbank offer provided for.

Consideration

1. [37]

   In my opinion, this is one of those rare cases where I can conclude that the plaintiff would almost certainly have succeeded if the matter had gone to a final hearing. That is because the Guardianship Tribunal made an order that Mr Abson’s estate be subject to management under the provisions of the Protected Estates Act and that the management of his estate be committed to the Protective Commissioner. As noted earlier, the Protected Estates Act was replaced with the NSWTG Act.

2. [38]

   Division 2 of Part 2 of Schedule 1 to the NSWTG Act provides:

3. [39]

   Section 71 of the NSWTG Act relevantly provides:

4. [40]

   The two documents relied upon by Mathew Johnston (and seemingly by Corey Johnston also) whereby Mr Abson purportedly gave some rights over the property to Corey Johnston were dated 18 June 2019 and 15 November 2019. The Financial Management Order was in place at those times, and Mr Abson had no capacity to enter into the agreements or arrangements contained in those documents.

5. [41]

   In any event, the documents purported to give rights to Corey Johnston and not Mathew Johnston.

6. [42]

   Neither of the defences filed by Mathew Johnston provided any defence to the plaintiff’s claim for possession both by reason of s 71 of the NSWTG Act and the express terms of the alleged agreements. No defence was ever filed by Corey Johnston despite his having been served as an occupier of the property.

7. [43]

   Further, although Mathew Johnston claimed a right to occupy the property he did not act reasonably in that regard. He failed to comply with orders of the Registrar to file affidavits in response to the plaintiff’s motion to amend the statement of claim. He failed to file a defence when served with the amended statement of claim. He subsequently failed to file a defence containing any defence of substance until after two further directions hearings, and that defence (as I have said) only raised the spectre of Corey Johnston, who had not applied to be joined as a defendant despite being served, of having some right to occupy the premises. Mathew Johnston then failed to comply with a direction made on 1 May 2024 to file and serve his evidence. On 13 June 2024, the day after that evidence was due, Mathew Johnston sought orders, which were consented to by the plaintiff, to file amended pleadings including a cross-claim, and Corey Johnston sought to be joined as a defendant for the first time.

8. [44]

   It may be accepted that Mathew Johnston did not have a solicitor acting for him until about 13 June 2024 although I had repeatedly urged him to seek assistance from a number of organisations and legal aid centres. In the meantime, three offers in a similar form had been made to Mathew Johnston to settle the proceedings, as set out at [24], [25] and [26] above, all of which were ignored, and no counter-proposal put forward.

9. [45]

   It may be strictly correct that Calderbank offers operate in a similar manner to offers of compromise under the Uniform Civil Procedure Rules 2005 (NSW), that is, a comparison of the offer made with an adjudicated outcome, whereas in the present case there is no adjudicated outcome. But the enquiry in relation to whether costs should be ordered where proceedings are settled or discontinued focuses on the reasonableness of the conduct of the parties.

10. [46]

    Mathew Johnston had no defence to the claim made both by reason of the Financial Management Order coupled with s 71 of the NSWTG Act and because any agreement with Mr Abson did not give Mathew Johnston any rights, only possibly Corey Johnston, subject to s 71. Mathew Johnston did not, in those circumstances act reasonably with the result that costs were unnecessarily incurred, subject to one matter, from December 2023 until 22 July 2024 when the defendants accepted that the plaintiff was entitled to the order he sought for possession of then property. Moreover, it was necessary for the plaintiff to commence the proceedings in the first place because both defendants had failed to vacate the premises from March 2021 despite a number of requests by the NSWTG to do so.

11. [47]

    The settlement represents a complete capitulation by Mathew Johnston. His right to bring fresh proceedings based on some agreement to be reimbursed for moneys spent on the property is not a benefit obtained by the settlement. The proceedings brought by the plaintiff were for possession only. A successful claim for debt or damages as a result of any work carried out by Mathew Johnston or Corey Johnston could not amount to a defence to a claim for possession. The Johnstons could not be estopped from bringing their own proceedings for reimbursement by a reliance by the plaintiff on the doctrine espoused in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45. The joint judgment of Gibbs CJ, Mason J and Aikin J said (at 602):

12. [48]

    A judgment that Mr Abson was liable to reimburse one or both of the Johnstons for amounts they had expended on the property would by no means be inconsistent with Mr Abson being entitled to possession of his property.

13. [49]

    In all of the circumstances, the plaintiff is entitled to its costs of the proceedings, subject to one matter.

14. [50]

    The one matter referred to in the previous paragraph is the wrong designation of the defendant. The reason Mathew Johnston was wrongly named was not the fault of Mr Johnston. Costs incurred in relation to the plaintiff’s notice of motion to amend the statement of claim to name Mathew Johnston as the defendant should be borne by the plaintiff. Subject to that matter, the defendant Mathew Johnston should pay the plaintiff’s costs of the proceedings.

15. [51]

    The plaintiff seeks costs on an indemnity basis and also seeks a lump sum costs order. However, the amount sought by the plaintiff is in the sum of $16,000 against the total of costs incurred of a little over $31,000 including GST. In those circumstances, consideration of an entitlement to indemnity costs does not arise. The questions are only whether it is appropriate to make a gross sum order and what the gross sum should be.

16. [52]

    I set out the principal authorities concerning gross sum costs orders in Qasim v Bird & Ors (No 3) [2022] NSWSC 418 at [11]-[13]. In my opinion, the present matter is an appropriate one to make a gross sum costs order. This was a relatively short and straightforward case (Bobb v Wombat Securities Pty Ltd & Ors (No 2) [2013] NSWSC 863 at [6]), there is a sufficient doubt about the capacity of the defendants to pay costs (Bobb at [8]; Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21]; Hamod v State of New South Wales [2011] NSWCA 375 at [813]) and if the defendants cease to be represented again, the assessment is likely to be protracted (Harrison at [21]; Hamod at [813]). Further, the solicitor now acting for the defendants, in his email of 18 July 2024 proposing a settlement of the proceedings, invited the plaintiff’s solicitor to put a figure as to the plaintiff’s costs with a breakdown of those costs, but thereafter said that the defendants would only pay scale costs on a default judgment..

17. [53]

    The evidence of Mr Maloney discloses the prescribed Legal Aid rates for solicitors and counsel. These rates are considerably below market rates charged by solicitors and counsel. His affidavit identifies the rates actually charged by the plaintiff’s counsel which were below the prescribed rates. Given counsel’s seniority, the rates charged are modest.

18. [54]

    Mr Maloney’s affidavit provides a breakdown of the work carried out by him. At the Legal Aid rates for solicitors, the total of solicitor’s fees is $15,258.75 (excluding GST). Total disbursements amount to $13,743.91 of which counsel’s fees constitute $11,863.91 (excluding GST). The total of the costs is $28,993.66 (excluding GST) or $31,937.93 (including GST).

19. [55]

    When assessing the costs for the purpose of making a gross sum order a broad brush approach may be taken: Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99 at [31] and [38]; Hamod v New South Wales (No 13) [2009] NSWSC 756 at [31]; see also Hamod v State of New South Wales [2011] NSWCA 375 at [819]-[820] and Young v Hones (No. 3) [2014] NSWSC 499 at [28]-[30]. It is also usual to discount the total fees by up to 30% depending on whether indemnity or party/party costs are sought.

20. [56]

    Although, as I have noted, the plaintiff seeks indemnity costs, the plaintiff seeks only a gross sum of $16,000. That represents a discount of almost 50% of the plaintiff’s actual costs. In response to the offer of settlement made by the defendants’ solicitors on 19 July 2024, the plaintiff’s solicitor made an offer that the plaintiff would accept a gross sum costs order of $12,500. That offer was rejected on the basis that the plaintiff should only receive scale costs on a default judgment. Given the history of the matter, and that fact that no default judgment was involved, the rejection by the defendants of the plaintiff’s costs offer was entirely unreasonable. The result was that the plaintiff incurred further costs.

21. [57]

    In all of those circumstances, I consider that a gross sum costs order in the amount of $16,000 should be made. That figure is not only a generous, but appropriate, discount; it also takes into account that Mathew Johnston should not be liable for the costs associated with his being wrongly named in the original statement of claim, and the correction of that misnomer.

22. [58]

    Although Corey Johnston was only added as a defendant by orders made on 13 June 2024, he wrongly occupied the property with Mathew Johnston, he was served with a notice to occupier when Mathew Johnston was served with the statement of claim but did nothing about applying to be joined as a defendant, he remained in occupation of the property, and it was only by reason of the written “arrangements” he made with Mr Abson that Mathew Johnston claimed an entitlement to the property. His defence would almost certainly have failed by reason of the Financial Management Order and s 71 of the NSWTG Act. In those circumstances, he should be jointly and severally liable to the plaintiff for the costs which are ordered.

23. [59]

    On 13 July 2024 a costs order was made against the first defendant by reason of his being given leave to file an amended defence. That costs order will be revoked on the basis that it will fall within the gross sum costs order that will be made.

Conclusion

1. [60]

   I make the following orders:

   1. (1)

      I revoke order 3 made 13 June 2024 which ordered the first defendant to pay the plaintiff’s costs thrown away by reason of the amendment to his Defence.

   2. (2)

      I make a gross sum costs order against both defendants in the sum of $16,000.