Executors Held in Contempt of Court with Consequential Costs Order Made  

In the recent decision of Henry J in Jordan v Goldspring (No 3) [2024] NSWSC 11 (29 January 2024), executors of an estate were found to be in contempt of Court for failing to comply with earlier orders. Although the executors were not removed, they were ordered to pay, without recourse to the estate, 50% of the costs of the application. Henry J said:

21. I was, however, satisfied that the Applicants had established, beyond reasonable doubt, that the Executors were in breach of Orders 1 and 4 of Hallen J’s Orders, as the Rapson Spreadsheet and the documents produced failed to:

(a) include a full account of transactions relating to the Macquarie Share Account, as referred to in sub-paragraph 11(d) of the Statements of Charge relating to Hallen J’s Orders: Judgment at [140]–[147]; or

(b) produce documents in relation to the line items referred to in the Rapson Spreadsheet as the 62 “Manual Journal” line entries, including in relation to the Six Profit Distributions (Manual Journal Entries), as referred to in at sub-paragraphs 11(i) and (j) of the Statements of Charge relating to Hallen J’s Orders: Judgment at [155]–[163].

22. I was satisfied that the Applicants had established the elements of civil contempt by the Executors in relation to the breaches as they had not been remedied and were continuing, the Executors were on notice and had knowledge of Hallen J’s Orders, they were the result of deliberate acts and they were not casual, accidental or unintentional, and found that the Executors had committed civil contempt of Court by failing to comply with Hallen J’s Orders by failing to include a full account in relation to the Macquarie Share Account or to produce documents in relation to the line items referred to in the Rapson Spreadsheet as “Manual Journal” entries, which include the Six Profit Distributions: Judgment at [168]–[171].
23. I deferred making any orders when the Judgment was delivered to enable the parties to consider the reasons. I indicated that I would hear from them on the question of punishment (if any) as sought in Order 2 of the Amended Motion and on the issue of costs and invited them to agree a timetable to deal with those matters and next steps in relation to the Amended Motion: Judgment at [173]–[175].

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Costs

89. Contempt proceedings are conducted in the civil jurisdiction of the Court and attract the applicable rules in relation to costs, including that costs follow the event: Mahaffy v Mahaffy [2018] NSWCA 42 at [274] (Mahaffy).
90. The Court has a broad discretion under the CPA and the UCPR to determine on what basis and to what extent costs should be awarded. This discretion is to be exercised judicially having regard to the circumstances of the case: CPA, s 98(1); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22] (Gaudron and Gummow JJ), [65] (McHugh J) and [134] (Kirby J).
91. The usual rule is that costs follow the event, unless it appears that some other order should be made: UCPR, r 42.1.
92. The event may be characterised in more than one way. Generally, the event refers to the event of the claim or counterclaim and is understood as the practical result of a particular claim. Where there is a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the court: Mahaffy at [275], and the cases there cited.
93. There is no rule of law that mandates that costs be awarded on an indemnity basis against those found to be in contempt of Court: Mahaffy at [274], referring to McIntyre v Perkes at 428 (Samuels JA, with whom Mahoney JA agreed). However, the authorities to which reference was made by both sets of parties indicate that indemnity costs are commonly awarded where no penalty by fine or other means is imposed: Blacktown City Council v Nitopi at [220]; Canterbury City Council v Mihalopoulos (No 3) at [46]; McIntyre v Perkes at 426–7; Khoury v Kirwan (No 6) at [18]–[22]; see also G E Dal Pont, Law of Costs (2021, 5^th ed, LexisNexis Australia) at [16.72].
94. In Australian Securities and Investments Commission v Sigalla (No 4) (2011) 80 NSWLR 113; [2011] NSWSC 62, at [49], White J noted that indemnity costs are commonly awarded in civil contempt cases as an important sanction to mark the Court’s condemnation of the breach of its orders (at [49]).
95. In my view, it is appropriate to make an order for costs on an indemnity basis in favour of the Applicants to mark the Court’s condemnation of the Executors’ breach of the Court’s orders in circumstances where no punishment or penalty has been imposed and there is no evidence that the Executors have made an attempt to comply with the aspects of Hallen J’s Orders that were found to have given rise to findings of civil contempt.
96. However, I also consider that some allowance should be made to recognise the mixed outcome in this case. This is in circumstances where the Applicants succeeded on only three of the 12 contempt charges brought against the Executors, the Applicants have not succeeded on their revocation application and some of the charges brought by the Applicants were found to be bad in form, unclear and involved ambiguity and imprecision (Judgment at [125], [130], [141] and [149]).
97. Adopting a broad brush and impressionistic approach and bearing in mind the matters in [95] above, I consider that 50% is an appropriate allowance and will order the Executors to pay 50% of the Applicants’ costs on an indemnity basis.
98. The remaining issue concerns the Applicants’ claim in relation to the Executors’ costs and indemnification from the deceased’s estate. Having regard to the prima facie position under UCPR, r 42.25(1), the matters raised by the Applicants (as outlined at [38]–[40] above), the statement by the Executors they do not intend to obtain indemnification and the orders made require the Executors to remedy their defaults, I am satisfied that the Court should exercise its discretion and make orders which provide for the Executors to pay costs without indemnification from the deceased’s estate and will so order.

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As said by Judge Rackemann in Hearsay 90 (December 2022) in ‘How to Infuriate a Judge’:

Disobeying court orders or directions

10. Where a proceeding has been the subject of orders or directions, including by way of case management, it is infuriating for a judge to see, on the next occasion the matter is before the court, that the previous orders or directions have been flouted, without the matter having been brought back before the court to seek excusal, together with such further orders as may be appropriate in the circumstances. To fail to comply with a court order or direction, without seeking excusal is tantamount to assuming the power to grant yourself an extension of, or excusal from, compliance with the order. Agreeing with your opponent that there ought be an extension of time does not excuse the non-compliance or effect an extension. That is a matter for the court. Particularly where a proceeding is subject to case management, the judge might not be prepared to accept the timetable that the parties agree between themselves.
11. It should be remembered that a failure to comply with an order of the court, without lawful excuse, is a contempt of court.2 Even where the order is directed to your client, the contempt may, depending on the circumstances, be one to which you, as the legal practitioner responsible for the conduct of the litigation on behalf of the client, is a party.

Care should be taken when advising parties in this respect. Orders of the Court are not widow dressing and costs consequences or worse may flow from disregard of the same. If non-compliance is likely an extension of time should be sought from the Court.