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Kuether v Kuether [2020] NSWSC 1459 (21 October 2020)

Last Updated: 21 October 2020

Case Name:	Kuether v Kuether
Medium Neutral Citation:	[2020] NSWSC 1459
Hearing Date(s):	On the papers
Date of Orders:	21 October 2020
Decision Date:	21 October 2020
Jurisdiction:	Equity - Applications List
Before:	Williams J
Decision:	The proceeding is dismissed with no order as to costs.
Catchwords:	COSTS – dispute between parties as to the plaintiff’s right to reside at property of the parties’ deceased father – proceeding commenced by the plaintiff to enforce rights under occupancy agreement entered into prior to death of deceased – defendant appointed joint executor under will of deceased – proceedings resolved without a determination on the merits – not appropriate to conduct a hypothetical trial for the purposes of determining a question of costs – no orders made as to the costs of the proceeding
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 26 Uniform Civil Procedure Rules 2005 (NSW), rr 36.16 and 42.19
Cases Cited:	Baller Industries Pty Ltd v Mero Mero Leasing Pty Ltd  [2019] NSWSC 1067
Category:	Costs
Parties:	Will Paul Kuether (Plaintiff) Monika Christianne Kuether (Defendant)
Representation:	Solicitors: Somerville Legal (Plaintiff) Segelov Taylor Lawyers (Defendant)
File Number(s):	2020/136935
Publication Restriction:	N/A

JUDGMENT

1. This is an application by the plaintiff for an order that the defendant pay his costs of this proceeding which was settled at a Court-annexed mediation in June 2020.
2. In summary, the plaintiff accepts that there has been no determination on the merits of the dispute between the parties but contends that he should nonetheless have his costs of the proceeding paid by the defendant because the defendant has capitulated.
3. The defendant opposes any order requiring her to pay the plaintiff’s costs. The defendant submits that the Court should either make no order as to costs, or order that each party pay their own costs of the proceeding. In the alternative, the defendant submits that any costs paid by the defendant should be limited to the period from the commencement of the proceeding on 7 May 2020 up until 11 May 2020.
4. The plaintiff relied on his affidavits affirmed on 10 and 31 July 2020. The defendant relied on her affidavits sworn on 10 May and 27 July 2020 and the affidavit of Tanya Segelov, a solicitor who has had carriage of part of the underlying dispute between the parties. Both parties prepared written submissions.
5. The parties indicated that they had no objection to the Court determining the issue of costs on the papers.

BACKGROUND

6. Egon Kuether (the deceased) died on 25 April 2019. The deceased’s children are the plaintiff (Will Kuether, who is 47 years old), the defendant (Monika Kuether, who is 52 years old) and Lydia Curtis, who is not a party to this proceeding. I shall refer to the deceased’s children by their first names, Will, Monika and Lydia, without intending any disrespect.
7. The deceased made his last will on 11 March 2019, under which he appointed Lydia and Monika as joint executors and bequeathed the whole of his estate to Lydia, Will and Monika in equal shares. The deceased’s last will required the Property to be sold no later than 12 months from the date of his death. The will was prepared on the deceased’s instructions by Ms Segelov, solicitor.
8. Monika resided in the family home at 15 Turner Avenue, Ryde (the Property) from 2013 until 12 May 2020.
9. Monika entered into a residential tenancy agreement with the deceased on 30 March 2018. I note that Will disputes the validity of that agreement and complains that he was not aware of its existence until the commencement of this proceeding.
10. The will provided that Monika could live in the Property rent free until the grant of probate and the finalisation of the sale of the Property, on the condition that she keep it in good repair, having regard to its condition at the date of the deceased’s death.
11. As at May 2020, the Property had not been sold because Monika and Lydia had not yet obtained a grant of probate of the deceased’s last will. This was due to an ongoing dispute between Lydia and Monika concerning whether Monika was liable to repay certain sums of money to the estate which were alleged to have been misappropriated by her from the deceased during the final stages of his life. Monika denies these allegations, and each of Monika and Lydia retained solicitors in relation to this dispute. This dispute stalled the application for a grant of probate of the deceased’s last will as neither Monika nor Lydia could agree on the form of the executor’s affidavit that is necessary to file with such application. As a result, Will, Monika and Lydia have not received their share of the proceeds of sale of the Property that they are entitled to receive under the terms of the deceased’s will.
12. In February 2020, Will arrived in Australia from the United States where he had predominantly resided since mid-2011. He was initially living with and received support from friends and relatives in Sydney, including Lydia. By April 2020, he was living in his car and lacked funds to afford alternative accommodation. According to Will, Monika had changed the locks of the Property sometime in April 2019 which prevented him from accessing and living in the Property when he sought to do so in April 2020.
13. On 17 April 2020, Will parked his car on the Property and set up a small camping area in the front yard. The police were called to the Property that day at Monika’s behest. Monika complained that Will was trespassing on the Property. The police did not take any action, but Will moved his vehicle off the Property and parked on the street directly outside the Property.
14. On 7 May 2020, Will commenced this proceeding by summons in the Equity Duty Judge List. In that summons, Will sought urgent interim relief in the nature of an order requiring Monika to allow Will to access the Property forthwith (prayer 6), or, in the alternative, an order restraining Monika from preventing Will to access the Property (prayer 7). The summons named Monika as the only defendant in the proceeding.
15. In support of that urgent interim relief, Will relied on an Occupancy Agreement that he had entered into with the deceased on 6 August 2018. The Occupancy Agreement, signed by both Will and the deceased, was in the form of a template document obtained from the NSW Fair Trading website. It described the deceased as the “proprietor” and Will as the “Resident”. In a section headed “Term of Contact”, the “Commencement Date” is stated to be “CURRENT” and the “Term of agreement” is as follows:

“The resident named in this agreement has the right to occupy the residence listed above, this includes the period after the Proprietors death and up until the sale of the property. These terms are binding to all Trustees.”

16. In his affidavit affirmed on 7 May 2020, Will deposed to a conversation with the deceased prior to signing the Occupancy Agreement in which Will agreed to contribute to the maintenance of the Property, including gardening, hedging, lawn mowing and general repairs on the dwelling, in return for the right to occupy the Property pursuant to the Occupancy Agreement.
17. The deceased also executed a statutory declaration on 6 April 2018 in which he made a declaration that Will had a right to occupy the Property, including in the period after the death of the deceased and up until the sale of the Property.
18. A similar occupancy agreement was entered into between the deceased and Lydia on 6 August 2018. The deceased also made a statutory declaration that Lydia had a right to occupy the Property.
19. In her affidavit of 10 May 2020, Monika deposed that she was unaware of the existence of both occupancy agreements and the statutory declarations during the deceased’s lifetime. The first time both occupancy agreements became known to Monika and her legal representative was in a letter dated 30 April 2019 sent by the solicitors acting for Lydia and Will to the solicitors then acting for Monika shortly after the deceased’s death. Ms Segelov also deposed that she was not informed by the deceased about the occupancy agreements when she prepared the deceased’s last will dated 11 March 2019.
20. The final relief sought in the summons filed on 7 May 2020 was a declaration that the Occupancy Agreement entered into between Will and the deceased gave rise to a binding right in Will’s favour to occupy the Property until it is sold by the executors of the deceased’s estate (prayer 8).
21. When the matter came before me as Equity Duty Judge on 7 May 2020, Will moved on the urgent application for interim relief described above. For ex tempore reasons delivered that day, I determined that Will had established a prima facie case (albeit not a strong case) but declined Will’s application on grounds that the balance of convenience did not favour the grant of relief being sought. One of the reasons for refusing the application was that Monika had offered during the course of the hearing to pay a sum of $1,000 to Will to allow him to obtain alternative accommodation elsewhere for a short period of time until the matter could be brought back before the Court for an urgent final hearing. Monika, through her counsel, had informed the Court that she feared for her safety if Will was permitted to occupy the Property together with her. Because Will had made his application for interim relief on an urgent basis, Monika did not have an opportunity to adduce evidence of the basis of those concerns for the purpose of the hearing on 7 May 2020. Monika’s offer was described as a standing offer. Will, through his counsel, indicated that he did not wish to accept the offer. The Court formally noted Monika’s offer and adjourned the matter to 11 May 2020 for final hearing of the summons. I reserved the costs of Will’s urgent application for interim relief.
22. Will eventually accepted Monika’s offer either later that day or the following day. Monika transferred $1,495 to Will’s account to pay for his short-term accommodation at the Hilton Hotel in George Street.
23. On the morning of 8 May 2020, Monika’s solicitors sent a letter to the solicitors acting for Will in which it was said that the relationship between Monika and Will was “toxic” and that any prospect of the parties sharing the Property in any form was “unrealistic”. The letter stated that the Property needed to be sold and the estate distributed and that this “must happen as soon as possible”. The letter noted the allegations made against Monika in respect of the sums said to have been misappropriated (which were denied) and that those allegations had delayed the application for probate being made. The letter offered a proposal as a way through the impasse between the parties, that:

(a) Monika would loan the sum of $12,000 to Will to be used for his living expenses in return for Will agreeing not to seek access to the Property for a period of six weeks. The loan would be repaid from the estate following the sale of the Property;

(b) the parties participate in a mediation which would work to identify a mutually agreeable resolution of Will’s living arrangements until such time as the Property is sold and the estate is distributed. It was suggested that Lydia, as joint executor of the deceased’s estate, participate in this mediation. The mediation would take place within 21 days;

(c) that the mediation identified above would occur at the same time as the mediation between Monika and Lydia around the alleged sums said to have been misappropriated from and repayable to the estate; and

(d) the proceedings be stood over for a period of four weeks in order for the mediation to occur.

24. On the same day, Monika’s solicitors also sent a letter to the solicitors acting for Lydia setting out the proposal to mediate the dispute between them in relation to the disputed sums.
25. On the evening of 8 May 2020, Will’s solicitors responded by email to Monika’s solicitor’s letter, in which it was stated that Will rejected Monika’s proposal and that he would proceed with the hearing on 11 May 2020.
26. In her affidavit affirmed on 27 July 2020, Monika deposed that:

(1) while Will was parked directly outside the Property from 17 April 2020, he had video cameras at the front and rear of his van pointed at the Property 24 hours per day, and the cameras appeared to be motion activated. On one occasion, Will stood by the fence and filmed Monika as she was watering plants;

(2) Monika felt distressed and intimidated by Will’s presence immediately outside the Property, and was too scared to go outside;

(3) over the weekend of 9 and 10 May 2020, Monika sought alternative accommodation for herself because:

“I came to the realisation that even if, because of the lease, I was to succeed in any action, the Plaintiff would be able to continue to reside on the nature strip outside the house with the camera turned on me. The Police had told me that they were unable to prevent this occurring, and it made me feel very unsafe. I realised that I had to leave and move somewhere else.”

(4) on the following Monday (that is, 11 May 2020) Monika:

“... instructed my solicitors to offer that I would vacate, with effect from the following day and let my brother have the home to my exclusion. My intention at the time was and remains (that he would remain there until the house is sold). I have not been back to the house since then.”

27. Will affirmed an affidavit on 31 July 2020 in which he replied to Monika’s affidavit of 27 July 2020. Will did not dispute the factual matters referred to [26(1)] above.
28. When the matter returned to Court on 11 May 2020, the Court made orders by consent (and without admission on the part of Monika) that Monika provide Will with access to the Property by 12:00pm on 12 May 2020 until further order of the Court. Orders were also made pursuant to s 26 of the Civil Procedure Act 2005 (NSW) for the parties to undertake Court-annexed mediation on 20 May 2020. Directions were also made requiring any application to join Lydia to the proceeding to be brought by 18 May 2020.
29. A notice of motion was subsequently filed by Monika on 18 May 2020 seeking an order that Lydia be joined as a defendant in the proceeding or, in the alternative, leave to file a proposed cross-claim naming Lydia as cross-defendant. Under the proposed cross-claim, Monika sought an order that she “be appointed as Executrix of the Estate of the estate of [the deceased].” In orders made with the consent of the parties by the Equity Duty Judge that day, the Court vacated the Court-annexed mediation to occur on 20 May 2020 and appointed a new date for such mediation to occur on 23 June 2020. The motion was stood over until 29 June 2020.
30. Will, Monika and Lydia, participated in the Court-annexed mediation on 23 June 2020. The parties reached an agreement in principle on that occasion which was reflected in the terms of a Heads of Agreement between Monika and Lydia signed on 24 June 2020.
31. The terms of the Heads of Agreement included the following:

(a) the notice of motion filed by Monika on 18 May 2020 be withdrawn with each party to pay their own costs of that motion;

(b) Monika and Lydia agreed to depose to a form of executor’s affidavit, and other related documents;

(c) the Property be sold by a particular agent who was to be engaged within seven days of receiving the grant of probate. The sale was to occur by public auction, subject to the agent’s recommendation and advice which Monika and Lydia agreed to accept;

(d) Monika and Lydia agree to permit Will to remain in occupation of the Property up until 5:00pm the day prior to settlement of the sale of the Property, on the condition that he keeps the Property in good order to the satisfaction of the agent and the executors, makes the Property available for inspection by the agent (or potential purchasers and others as required), and agrees to be personally responsible for the payment of utilities and other expenses during the period of occupancy;

(e) the parties to prepare a short joint letter of instructions to a lawyer appointed within 45 days from the date of the grant of probate setting out an agreed request that they provide a written determination and reasons for the determination as to whether Monika owes a debt to the deceased’s estate and, if so, its quantum. The appointed lawyer will consider any material and submissions and make such determination within 10 weeks of their appointment, with such determination being final and binding on the parties; and

(f) Monika and Lydia agree to take steps necessary and do all things required to give effect to the terms of the agreement, including the sale of the Property.

32. On 29 June 2020, the Court made directions for the filing and service of evidence in respect of the costs of the proceeding, and made a notation to the effect that it was expected that the parties would provide consent orders in respect of a declaration to the effect that Will has a right to occupy the Property under the Occupancy Agreement dated 6 August 2018 until the sale of the Property by the deceased’s executors. The matter was stood over to 10 August 2020.
33. On 10 August 2020, the Court made orders by consent dismissing the notice of motion filed on 18 May 2020 with no order as to the costs of that motion. Directions were also made for Will and Monika to file written submissions on the issue of the costs of the proceedings. The parties had filed a declaration proposed to be made by consent in the terms of prayer 8 of the summons. That proposed declaration was awaiting consideration by a Judge as at 10 August 2020.
34. At a directions hearing before Ward CJ in Eq on 25 August 2020, Will abandoned the proposed declaration upon learning that the Court will not make a declaration by consent unless it is satisfied of the legal and factual basis for the declaration, and that there would need to be a hearing for that purpose.
35. Will’s abandonment of the proposed declaration was confirmed at a further directions hearing on 22 September 2020. It is clear from the transcript of those directions hearings that Monika regarded the declaration as “superfluous” given that the property was being sold in accordance with the Heads of Agreement. It was in that context that she had consented to the declaration. The application for costs was referred to me to be determined on the papers.

SUBMISSIONS AND CONSIDERATION

36. The applicable principles have recently been summarised by Ward CJ in Eq in Baller Industries Pty Ltd v Mero Mero Leasing Pty Ltd  [2019] NSWSC 1067  at  [19] -  [22] :

“19. ...where there has been no hearing on the merits, it is not appropriate for the Court to conduct what would amount in effect to an hypothetical trial in order to determine an application for costs (see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 (Lai Qin) at 624 per McHugh J). In Lai Qin, McHugh J observed, among other things, that when there has been no hearing on the merits, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order (namely, success in the action or on particular issues). However, his Honour went on to say (at 624-625) that:

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation...
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant’s taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.

20. The use of the word ‘so’ in the first of the paragraphs extracted above indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred (as I noted in Renton v Kelly [2018] NSWSC 1377 at [56]).
21. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Agribusiness) as to the appropriate considerations in cases where there has been no hearing on the merits, Basten JA said (at [8]) that:

... although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.

22. It is also relevant here to emphasise that the overriding mandate in respect of the conduct of litigation in this Court (see s 56 of the Civil Procedure Act) is for the just, quick and cheap resolution of the real issues in dispute.”

37. Written submissions of 12 pages in length were prepared on behalf of Will in support of his application for an order that Monika pay his costs of the proceedings.
38. Submissions of 9 pages in length were prepared on behalf of Monika.
39. Submissions in reply of 8 pages in length were prepared on behalf of Will.
40. I have considered all of those submissions. It is sufficient to set out a high level summary of the substance of the submissions in order to determine Will’s application in relation to costs.
41. The submissions canvased the long history of dealings between Will and Monika prior to the commencement of this proceeding, including Monika’s responses to Will’s requests for access to the Property in April 2019, more than one year before this proceeding was commenced. Many aspects of this factual background, including whether or not Will threatened, bullied or intimidated Monika in 2019, are the subject of dispute between the parties. Consistently with the principles set out in [36] above, the Court will not embark on a process of determining those factual disputes for the purpose of determining Will’s application in relation to costs.
42. As I have referred to earlier in these reasons, Monika consented (without admissions) to the interim order made on 11 May 2020 granting Will access to the Property, and agreed in the Heads of Agreement dated 24 June 2020 to Will continuing to reside in the Property pending its sale by Monika and Lydia as executors of the deceased’s estate. It was submitted on behalf of Will that this was a capitulation by Monika, resulting in Will succeeding in his claims and that Monika should therefore be ordered to pay his costs of the proceeding.
43. Underlying this submission is a contention that Will would have succeeded in his claim and Monika recognised this by consenting to the interim order made on 11 May 2020 and by subsequently entering into the Heads of Agreement. In response to Monika’s submission identifying several arguments that she would have made if the matter had proceeded to a contested hearing on the merits and that (in Monika’s submission) may have resulted in the Court refusing to grant the relief sought by Will, Will submitted that it was not open to Monika to “float” these arguments after capitulating.
44. One of the arguments referred to in Monika’s submissions is the same matter to which I referred in concluding on 7 May 2020 that Will’s case, on the evidence then available was not a strong case. That was one reason why Will’s application for interim relief was dismissed and the matter listed for urgent final hearing on 11 May 2020. That final hearing did not proceed because the parties consented (without admissions by Monika) to an interim regime pending mediation. The matter was then resolved following mediation as I have referred to [30]–[30] above. Thus, there has been no hearing on the merits. The Court cannot conduct a hypothetical trial in order to determine whether Will would have succeeded and should have his costs paid by Monika. Without such a hypothetical trial, the Court cannot determine whether Will’s case – which was not strong as at 7 May 2020 ­­– was strengthened or weakened by the evidence served after that date. This is not a case in which the Court can feel confident that Will was almost certain to succeed if the proceeding had not settled.
45. Will submitted that Court should reject Monika’s evidence that she agreed to the interim orders on 11 May 2020 and entered into the Heads of Agreement for the reasons given in her affidavit of 27 July 2020 to which I have referred in [26] above. He submitted that, if Monika had been motivated to vacate the Property by his continuing presence outside the Property, it is to be expected that she would have done so shortly after he took up that position on 17 April 2020 and before the commencement of this proceeding on 7 May 2020. Will further submitted that Monika’s consent to the interim order 11 May 2020 came only after both parties had served all of their evidence for the urgent final hearing and that “the weight of the evidence in [Will’s] favour weighed heavily on [Monika’s] decision to consent to the interim orders on the morning of 11 May 2020”.
46. Applying the principles referred in [36] above, the Court will not assess the weight of the evidence concerning the substantive matters that were in dispute and have now been resolved solely for the purpose of determining Will’s application for an order that Monika pay his costs of the proceeding. In any event, Monika’s explanation for her decision to reach an interim compromise on 11 May 2020 has a ring of truth to it. It is readily understandable that the commencement of the proceeding lead Monika to the conclusion that Will had no intention of moving to a different location and that, as Monika put it in her submissions, either outcome of the proceeding was therefore unpalatable to her.
47. Moreover, the sale of the Property in accordance with the deceased’s will was inevitable, so that Monika would have to vacate the property in the near future irrespective of the outcome of the proceeding. As referred to in [23] above, Monika proposed mediation to agree on a pathway for sale of the Property and Will’s living arrangements in the meantime on 8 May 2020, before all of the parties’ evidence for the final hearing was served. In this context, it would be mere speculation to interpret Monika’s “capitulation” as reflecting her assessment of Will’s prospects of success, as opposed to her pragmatic acceptance of her need to vacate the Property and a desire to avoid further costs of litigation.
48. Will also made submissions to the effect that he had not acted unreasonably in commencing the proceeding without formally notifying Monika of his intention to do so, and the lack of any such formal notice should not deprive him of his costs as the successful party. Monika made submissions in response.
49. For the reasons that I have explained above, I do not regard Will’s position as equivalent to the position of a party who has succeeded on the merits. It is therefore not necessary to address these submissions further.
50. Will also submitted that Monika had acted unreasonably in denying him access to the Property since the death of the deceased in April 2019 until 8 May 2020. Whether or not Monika’s conduct was unreasonable depends on the merits of Will’s claims and Monika’s defences to them, about which there has been no hearing or determination. It is not appropriate to conduct a hypothetical trial of those claims and defences for the purpose of determining Will’s application in relation to costs.
51. For all of those reasons, it would be inappropriate in all of the circumstances of this case to order the defendant to pay the plaintiff’s costs of the proceedings. The appropriate outcome is that there be no order as to costs.
52. The parties have abandoned the application for the Court to make a declaration by consent and costs has been the only remaining issue in dispute since 25 August 2020. It is necessary to make some order formally disposing of the summons. It seems to me, that the appropriate course is therefore to make an order that the summons be dismissed with no order as to costs.
53. If, for some reason not apparent from the evidence and submissions, the plaintiff is prejudiced by the summons being dismissed rather than discontinued, the plaintiff may apply under r 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to set aside the order for dismissal and substitute an order granting leave to the plaintiff to file a notice of discontinuance. Any such application will need to be accompanied by draft orders which contain provisions appropriate to avoid UCPR r 42.19 overriding my decision that there be no order as to costs.

Conclusion

54. For all of the reasons set out above, I make the following notations and order:

(1) Note that the plaintiff’s application for interim relief in prayers 1 to 7 of the summons was determined on 7 May 2020.

(2) Note that the parties withdrew their application for the Court to make a declaration by consent in terms of prayer 8 of the summons, following which the only remaining issue in dispute between the parties was what order (if any) should be made in relation to the costs of the proceeding.

(3) Order that the summons otherwise be dismissed with no order as to costs.

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