SUPREME COURT OF NORFOLK ISLAND

Kleiner v Randall [2006] NFSC 3

COSTS - application for costs against persons who were not parties to the proceedings - proceedings on behalf of other persons - discretionary power to order a non-party to pay costs - order is exceptional relief - non-participating beneficiaries having interest in the outcome of the proceedings - whether sufficient - proof of threshold issue of parties’ impecuniosity - when needs to be established - whether liberty to apply - needs to finalise proceedings.

Statutes

Supreme Court Act 1960 (Norfolk Island) s 6

Judicature Act 1890 (Vic) s 5

Cases

Bischof v Adams [1992] 2 VR 198 Cited

Kebaro Pty Ltd v Saunders [2003] FCAFC 5 Followed

Knight v FP Special Assets Limited (1992) 174 CLR 178 Cited

RICHARD AARON KLEINER v FRANKLIN ERNEST RANDALL and KEVIN RANDALL

SC10 OF 2004

KIEFEL J

BRISBANE

22 MARCH 2006

THE COURT DECLARES THAT:

1.         In respect of the land described as Portion 13p of Section 11: -

(a)        Any right and title of the estate of John Forrester Young deceased is extinguished;

(b)        The first and second defendants are the owners of that part of the land which is described as Portion 13p¹ on the attached sketch plan number 10517 - 3 subject to registration of formal survey plan: and

(c)        The Registrar of Lands is hereby directed after registration of the plans to issue a certificate of title of freehold in the names of the first and second defendants as tenants in common in equal shares free of all encumbrances subject to all usual reservations to the Crown (if any).

2.         In respect of the land described as Portion 13r of Section 11: -

(a)        Any right and title of the estate of John Forrester Young deceased is extinguished;

(b)        The first and second defendants are the owners of that part of the land which is described as Portion 13r¹ on the attached sketch plan number 10517 -3 subject to registration of formal survey plans; and

(c)        The Registrar of Lands is hereby directed after registration of the plans to issue a certificate of title of freehold in the names of the first and second defendants as tenants in common in equal shares free of all encumbrances subject to all usual reservations to the Crown (if any).

THE COURT ORDERS THAT:

3.       The plaintiff pay the defendants’ costs of and incidental to the proceedings to be taxed failing agreement.

REASONS FOR JUDGMENT

1                     In these proceedings the plaintiff sought orders that certain lands on Norfolk Island known as Portions 13p and 13r of Section 11 were owned by his great-grandfather’s estate.  The defendants counterclaimed for declarations that either or both of them is or are owners of the lands by reason of the continued possession and use of the land by them and the first defendant’s parents adverse to the interests of the estate of the deceased.  I found in favour of the defendants save for a part of Portion 13r which was the subject of use by a neighbour and gave my reasons on 11 August 2005.  I proposed at that time to make orders declaring the estate’s right and title in the disputed lands to be extinguished and that the defendants are the owners of Portion 13p and that part of Portion 13r which would be the subject of description following a survey.  The matter was stood over to enable the survey to be undertaken.  That survey has now been completed.  Following discussions between the defendants and the neighbours who occupy the small area on the northern end of Portion 13r the surveyor, Mr Hickey, has prepared a sketch plan 10517-1 showing that land as a new Portion 13u having a total area of 5140 square metres.  The area the subject of the defendants’ possession is shown on sketch plan 10517-3 together with Portion 13u.  The parties to the proceedings have agreed upon the terms of orders referring to this plan and there will be orders accordingly.

2                     The question of costs was also reserved on 11 August 2005.  The defendants are clearly entitled to their costs from the plaintiff.  I intended making such an order but the defendants foreshadowed an application for costs against persons who were not parties to the proceedings.  That application has now been made.  The basis for the order is that the plaintiff brought the proceedings on behalf of other persons, relatives who had an interest in the estate of the deceased, John Forrester Young.

3                     Section 6 of the Supreme Court Act 1960 (Norfolk Island) provides:

‘(1)      The Supreme Court and the Judge sitting in Chambers have jurisdiction to award costs in all matters brought before the Court, including matters dismissed for want of jurisdiction.

(2)       Subject to the rules of Court, the costs of and incidental to the proceedings in the Supreme Court, including the administration of estates and trusts, are in the discretion of the Court or Judge, and the Court or Judge has the power to determine by whom and to what extent the costs are to be paid.’

4                     Section 6(2) is in the same terms as s 5 of the Judicature Act 1890 (Vic) which has been held to confer a power to award costs against non-parties:  see Knight v FP Special Assets Limited (1992) 174 CLR 178, 196-7 (‘Knight’).  The plaintiff does not dispute this.

5                     These proceedings were commenced in September 2004.  On 1 July 2003 a Deed of Agreement was entered into between some of the beneficiaries of the deceased’s estate who had agreed to join in and contribute to the cost of pursuing the claim to the estate’s lands.  The plaintiff and his sister Frances McConnell were identified as beneficiaries participating in this way.  The other seven ‘Non-Participating Beneficiaries’ were to pay the same sum towards costs in the event that the estate succeeded in its claim to the lands. 

6                     The defendants did not notify the plaintiff or the non-parties that costs may be sought against all beneficiaries who were parties to the deed.  No questions were put to the defendants during the trial concerning matters relevant to the making of an order against non-parties including his financial position.  The other beneficiaries have not had an opportunity of putting submissions before the Court.  So far as I am aware they have not been served with any application for costs.  No doubt with these difficulties in mind, the defendants do not seek orders against the non-parties at this stage.  They seek an order that the plaintiff pay their costs and a further order that, in the event that he does not pay those costs within a specified period, the defendants be at liberty to bring applications against the beneficiaries who were parties to the Deed.

7                     In Kebaro Pty Ltd v Saunders [2003] FCAFC 5 (‘Kebaro’) a Full Court undertook an extensive review of the authorities concerning the nature of the discretionary power to order a non-party to pay costs.  It considered that the authorities establish that such an order is exceptional relief, although some categories of factual situations are recognised as coming within the discretion (at [103]).  In that regard Mason CJ and Deane J in Knight (at 192-193) had said:

“For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation.  That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation.  Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.”

8                     Their Honours in Kebaro went on to observe that, although the categories are not closed, the authorities suggest that a sufficiently close connexion with the litigation must be shown to warrant such an order.  Gobbo J in Bischof v Adams [1992] 2 VR 198 at 204-205 had held that the connexion between the non-party and the proceedings ‘must be real and direct and material to the issue of costs.  The mere fact that a person may benefit from the litigation will not, without more suffice.’

9                     In the present case the non-participating beneficiaries obviously have an interest in the outcome of the proceedings.  Of itself that is not sufficient.  Their agreement to put monies towards costs in the event of a successful outcome no doubt operated as some encouragement to the plaintiff in bringing the proceedings, but it should not be overstated.  It was a conditional promise.  The plaintiff was risking a personal liability for costs in the event of failure of the claim.  Their promise to contribute can be seen as connected to their right to participate in the estate.  Beyond this there is nothing to suggest that they otherwise encouraged the bringing of the proceedings or their continuance.  They are not in my view shown to have such a close connexion to the proceedings as would warrant the making of such an order.

10                  The plaintiff’s sister is in a somewhat different category, having promised to carry the conduct of the action with her brother and to meet all costs and expenses associated with it.  Although further evidence, as to her actual involvement in the litigation, might clarify the degree of connexion, it is possible that she may come within the category of persons against whom an order could be made.  The question is whether the defendants should be permitted to further pursue this matter.

11                  The general category of cases referred to by Mason CJ and Deane J in Knight has as one of its components the fact that the party to the litigation will be unable to pay the other party’s costs.   Here the plaintiff has been shown to be the joint owner of land on Norfolk Island with his sister.  Its likely value is not the subject of evidence from the defendants.  It is not shown to be encumbered.  The plaintiff has some income from casual employment, although it may not be substantial.  His financial position otherwise is unknown and has not been gone into. These facts do not establish that the plaintiff will be unable to meet an order for costs. 

12                  The defendants ask the Court to draw an inference that the plaintiff would be unable to do so because he entered into the deed. The fact that he and his sister were prepared to fund the litigation, and only seek assistance from the other beneficiaries in the event of success does not without more, support such a conclusion.  The defendants need to show what his full financial position is or that his sister was principally funding the litigation.  The plaintiff’s position is, on one view, a threshold question on the issue of costs.  It could have been the subject of enquiry during the course of the proceedings and in particular during cross-examination. 

13                  Given these circumstances I do not consider the defendants should be permitted to make a further application for costs in the event that they find the plaintiff is in fact unable to pay.  This should have been established as a minimum in order to show that a further application against the plaintiff’s sister would have some prospect of success.  The case against the plaintiff’s sister is at present entirely speculative.  This does not provide a basis for the grant of leave to bring a further application.  The proceedings should be finalised.

14                  In addition to the declarations, in terms of the draft consent orders, there will be an order that the plaintiff pay the defendants’ costs of and incidental to the proceedings to be taxed failing agreement.

Associate:

Dated:              22 March 2006