Cody v Cody [No 2]
[2013] VSC 401
•6 August 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PROBATE LIST
S CI 2012 05489
IN THE MATTER of the Will and Estate of PIERCE THOMAS CODY, deceased
IN THE MATTER of an application pursuant to O 54 of the Supreme Court (General Civil Procedure) Rules 2005
| PATRICIA ADRIENNE CODY and PATRICK FRANCIS CODY (who sue as executors of the Estate of PIERCE THOMAS CODY, deceased) | Plaintiffs |
| v | |
| PIERCE PATRICK CODY (who is sued as executor of the estate of PIERCE THOMAS CODY, deceased) | Defendant |
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JUDGE: | McMillan J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 April, 21 June 2013 | |
DATE OF JUDGMENT: | 6 August 2013 | |
CASE MAY BE CITED AS: | Cody v Cody [No 2] | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 401 | |
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COSTS – Executors applied to court for orders effecting sale of real estate of the deceased’s estate – One executor, the defendant, unsuccessfully opposed the sale – Whether the defendant should be entitled to his costs out of the estate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S P Newton | Wisewould Mahony |
| For the Defendant | Mr C E Shaw | Norton Rose Australia |
HER HONOUR:
Introduction
On 24 June 2013, I ordered the executors of the estate of Pierce Thomas Cody, deceased, (who are all parties to this proceeding) to place the apartment known as 1 Sion Kopje corner Sitzmark and Falls Creek Road, Falls Creek (‘Falls Creek Apartment’) on the market for sale at the end of the 2014 ski season unless a majority of certain family members agreed that it should be retained by the estate. I also ordered that certain procedures be followed in the event that the apartment was sold and that, pending any sale, the apartment should continue to be used by the family members in accordance with an agreed set of rules.
The plaintiffs, Patricia and Patrick Cody, now seek an order that their costs of this application be paid by the defendant, Pierce Cody, on an indemnity basis, and that the defendant pay these costs personally. That is, the plaintiffs contend that the defendant should not be indemnified out of the estate for the costs said to be owing to the plaintiffs, and for his own legal costs.[1] Alternatively, the plaintiffs submitted orally that the defendant should have his costs out of the estate up to and including the mediation, and thereafter, personally. The defendant seeks an order that both the plaintiffs’ and the defendant’s costs be paid out of the estate.[2]
[1]Plaintiffs’ undated Minute of Order, handed up in court on 21 June 2013.
[2]Defendant’s undated Minute of Proposed Orders, handed up in court on 21 June 2013.
Factual Background
The relevant facts of the dispute are set out in my reasons for judgment.[3] I have reproduced the relevant factual background below:
The deceased died on 21 November 2001. On 16 October 2002, the plaintiffs [Patricia Cody, the widow of the deceased, and a son, Patrick Cody] and defendant [Pierce Thomas Cody, the other son of the deceased], as executors of the estate of the deceased, obtained a grant of probate of the will and two codicils of the deceased. … the relevant beneficiaries under the will and codicils are Mrs Cody and the five children of the deceased, namely, Pierce, Patrick, Anna, Caroline and Joanna Cody. Under the will and codicils, discretionary trusts were set up for the benefit of each of the families of the five children.
The Falls Creek Apartment is one of the remaining assets of the deceased’s residuary estate, with an approximate value of $650 000. This is held via shares in Eismeer Pty Ltd, a company controlled by the estate. The effect of the will and codicils of the deceased is that each of the five discretionary trusts has a one-fifth share in the residuary of the estate, including shares in Eismeer Pty Ltd.
… Mrs Cody states that, following the death of her husband, ‘due to constant bickering and disagreement between my children the trustees prepared a set of rules for the use and occupation’ of the Falls Creek Apartment. A set of rules was also prepared in respect of a property at Mount Martha, being another asset forming part of the residuary estate of the deceased. … According to Mrs Cody, ‘[d]espite the rules and booking system there was constant bickering and disagreement between my children over the use and occupation’ of the Mount Martha property and Falls Creek Apartment. The trustees ultimately decided to sell the Mount Martha property in 2010.
The Cody family continued to use the Falls Creek Apartment, but there were disagreements over the implementation of the rules and use of this property. New rules were drafted, amendments were proposed, but, according to the plaintiffs, no agreement was ultimately reached. …
Mrs Cody’s affidavit exhibits extensive and bitter correspondence between her children.[4]
[3]Cody v Cody [2013] VSC 274 (5 June 2013).
[4]Ibid [3]–[7] (citations omitted).
This bitterness is evidenced in exhibit PAC-19 to Patricia Cody’s affidavit of 28 September 2012. That exhibit contains an email from the defendant to Tony Joyce, Mrs Cody’s solicitor,[5] sent on 3 September 2012 at 4:15pm. It is clear from the email that the defendant and Mrs Cody agreed not to contact each other. The defendant stated ‘I wish no contact with her. None at all. … She is unstable. … Sort her out please’. The many emails exhibited to Patricia Cody’s affidavit demonstrate that the defendant and Caroline Cody (both beneficiaries) do not wish to sell Falls Creek, whilst Patricia Cody, Patrick Cody, Joanna and Anna Cody do. There are a number of emails from Patrick Cody that set out variously his reasons for wishing to sell the apartment, and his frustration with Caroline in relation to her refusal to agree to the rules, to which the defendant does not offer a constructive reply.
[5]Note: the email was also addressed to Lynne Phillips of Watson Mangioni Laywers, the solicitor for the defendant at the time.
The defendant opposed the application by the plaintiffs and defended it on the basis that the Cody family can continue to use the Falls Creek apartment if a set of rules can be agreed and that a set of rules has been agreed to by the trustees.[6] The defendant’s solicitor deposed that it is the defendant’s belief that it would be imprudent to sell Falls Creek owing to its complex ownership structure and the depressed state of the alpine real estate market.
[6]Cody v Cody [2013] VSC 274 (5 June 2013) [8] (citations omitted).
The parties attended a mediation of this dispute, the matter settled and Binding Heads of Agreement (‘the Agreement’) were entered into. The Agreement provided for the sale of the Falls Creek apartment at the end of the 2014 ski season. The Agreement also provided for the defendant to be paid his entitlements out of the capital of the family trust (‘the Cody Family Settlement’) earlier than provided for according to the terms of the trust.[7] That latter part of the Agreement was not part of the application before the Court, but a side issue dealt with at the instigation of the parties.[8]
[7]Ibid [10]–[12].
[8]Ibid [13].
The parties subsequently struggled to agree in relation to the execution of two Deeds of Settlement, which were required in order to give effect to the Binding Heads of Agreement. In this context the parties returned before the Court, the plaintiffs seeking an order that the Court give effect to the Agreement, but only in relation to the sale of the Falls Creek Apartment. The defendant opposed this course, submitting that the two agreements provided for in the Agreement were interdependent and that the plaintiffs were in effect seeking specific performance of part only of an agreement, which a Court will generally not order.[9]
[9]Ibid [26].
I determined that the Agreement was a mere accord executory and was therefore not a binding agreement. I also determined that, in light of the extensive evidence of deep and protracted divisions between the children of the deceased, and the trustees’ powers under the will to sell estate property, it was appropriate to order that the Falls Creek Apartment be sold.[10]
[10]Ibid [78]–[80].
The Calderbank Offer
A Calderbank letter dated 11 October 2012 from Carroll & Dillon was sent to the defendant’s solicitors and was produced by the plaintiffs in support of their application for indemnity costs. The letter relevantly provided:
The plaintiffs offer to resolve this proceeding on the following terms:
1.The apartment at Falls Creek is to be sold by auction. The parties shall take all steps necessary to effect such a sale by the registered proprietor of the apartment.
2.The conduct of the sale of the property shall be by an agent agreed by the plaintiffs and the defendant. In the event that no agreement can be reached … within 30 days of acceptance of this offer then the agent shall be appointed by the President … of the Real Estate Institute of Victoria.
3.The Sale shall take place on a date not later than 15th October 2013 to be agreed by the plaintiffs and the defendant. In the event that no agreement can be reached then the same shall be determined by the agent appointed to conduct the auction.
… [The offer then went on to stipulate that the property be sold at auction at an agreed reserve or otherwise privately and in default of agreement, the agent appointed will set the reserve and other terms of sale.]
6.The plaintiffs and the defendant shall be entitled to purchase the apartment and to bid at the auction notwithstanding their status as a trustee.
… [The offer provided that in the meantime the apartment shall continue to be used in accordance with the rules and in default of agreement, David Kew, the accountant of the deceased shall administer the usage.]
8.The plaintiffs’ and the defendant’s costs of and incidental to this proceeding be paid from the assets of the estate of P T Cody, deceased, such costs to be agreed or in default of agreement taxed on an indemnity basis.
9.Orders shall be sought from the Court in accordance with the above.
The plaintiffs are of the view that this offer achieves a desirable outcome in that:
(a)it brings to an end the family disharmony which has arisen in relation to the apartment;
(b)it ensures that the property is sold in an orderly fashion;
(c)it ensures that all trustees are protected from any allegation that they have failed to act in the best interests of the beneficiaries by selling the property;
(d)all family members will be given the opportunity to purchase to apartment on the open market should they wish.
This offer is open to be accepted until 4:00pm on Tuesday 16th October 2012.
This offer is a Calderbank letter. In the event that the defendant does not accept the offer contained herein and does not achieve a more favourable result from the court then the plaintiff will produce this letter to the Court … in support of an application that the defendant pay the plaintiffs’ costs of and incidental to the proceeding and incurred after the date hereof on an indemnity basis.
The solicitors for the defendant replied to the offer by letter dated 16 October 2012, the relevant parts of which are set out below:
We consider that the Purported Offer is flawed and incapable of acceptance for a number of reasons, including (but not limited to) the following:
1.Clause 6 of the Purported Offer provided that your clients or our client shall be entitled to purchase the Falls Creek apartment and bid at the proposed auction notwithstanding their status as trustees. However, a sale to a trustee can only occur with the consent of the Court or all of the beneficiaries, and neither of these consents have been obtained.
2.Clause 7 of the Purported Offer provided that pending the sale and settlement of the Falls Creek apartment the apartment shall continue to be administered pursuant to the trust for the benefit of the beneficiaries and in accordance with the rules (provided to us by email on 15 October 2012), which shall be administered by a person as agreed between our respective clients or in the event that no agreement can be reached, David Kew. However, we note:
(a)The rules cannot work without the agreement of the person who is to administer them.
(b)David Kew has not agreed to the rules that were forwarded to us by email on 15 October 2012. We understand that Mr Kew sent your clients’ former solicitor, Tony Joyce, an email on 15 August 2012 with his required amendments and various queries regarding those rules.
… [The letter went on to state that the solicitor did not believe it conformed to the requirements of an effective Calderbank offer.]
3.Having regard to the above matters, our client considers the most sensible course, would be for the trustees and all of the beneficiaries to participate in discussions to try to resolve the issues between them in respect of the Estate and the Cody Family Settlement (without the need to incur further costs in pursing [sic] the current proceeding or any other proceedings).
I consider that the evidence given on behalf of the defendant in this proceeding and his reasons for rejecting the offer of the plaintiffs to settle are inconsistent. On the one hand, the solicitor for the defendant deposes in an affidavit sworn 15 November 2012 that discussions between family members to try to resolve the issues in dispute, including issues regarding the entire estate and the family trust, have not been fruitful.[11] On the other hand, the same affidavit expresses hope that a general mediation in ‘a more formal and guided setting’ might give way to a resolution. By the letter above of 16 October 2012, the defendant appears to favour the possibility that a resolution might be achieved through mediation. On the other hand the letter also states that ‘[t]he relationship between the trustees has deteriorated to such an extent that they are unable to work together and are at odds in relation to almost all decisions’. Similarly, the defendant’s solicitor deposes in the affidavit of 15 November 2012 that the defendant opposes the sale because a set of rules for use of the apartment has been agreed.[12] But, in the letter of 16 October 2012, the solicitor for the defendant states that a set of rules has not in fact been agreed, and this forms part of the defendant’s reasons for rejecting the Calderbank offer. The defendant appears to acknowledge the deep divisions amongst the trustees yet also suggests that it would be possible for the beneficiaries to mediate in order to save the costs of litigation.
[11]Affidavit of Benjamin Thomas Davis sworn 15 November 2012, [5].
[12]Note: those agreed rules were not exhibited to the affidavit.
The defendant has consistently attempted to expand the ambit of the plaintiffs’ original application to the Court, by referring to other matters of dispute within the family, which are of limited relevance to the plaintiffs’ application. Evidence relating to broader disputes within the Cody family in relation to the estate and the family trust is relevant to the present application to the extent that this evidence demonstrates that the trustees have been unable to agree to a particular course of action (in this case, the sale of the Falls Creek apartment).
I consider below the principles relevant to an application for judicial advice and those relevant to the Calderbank offer.
Relevant Principles
Dal Pont notes that, when a trustee applies to the court for advice or directions, the costs of the application are generally subject to a complete indemnity provided that the appropriate procedure is followed by the trustee.[13] It is a general rule that ‘trustees are generally entitled to their costs of any application to the court as part of the general right to indemnity[14] and will only lose that right by misconduct’.[15] There is therefore a presumption, subject to the Court’s discretion, that a trustee will be indemnified out of trust funds when a trustee or an executor brings a proceeding, as has occurred in this case.
[13]G E Dal Pont, Equity and Trusts in Australia (Lawbook Co, 5th ed, 2011) 689.
[14]Gleeson v Fitzpatrick (1920) 29 CLR 29.
[15]J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 7th ed, 2006) 591 [2136].
Expenses and liabilities incurred by a trustee must be properly incurred.[16] Expenses and liabilities that are improperly incurred are not caught by the right of indemnity and shall be borne by the trustee personally.[17] Both English[18] and Australian[19] authorities have affirmed that, in cases of doubt, the trust estate should bear the trustee’s costs. Ormiston JA has approved of the approach of Bowen LJ in Re Beddoe to a limited extent, where his Honour expanded upon the meaning of ‘properly’.[20] Bowen LJ stated that the term ‘properly’ means that trustees should not be personally liable for ‘mere errors in judgment’ and that ‘mere bona fides is not the test’.[21] Ormiston JA added that ‘what is “proper” and “improper” must be answered by reference to the circumstances and in particular by reference to the duty with which a trustee was obliged to comply or the power which a trustee is intending to exercise’.[22] Further, a trustee will be indemnified where an expense, although improperly incurred, benefits the trust.[23]
[16]Dal Pont, above n 13, 679 citing Turner v Hancock (1882) 20 Ch D 303, 305; Re Beddoe [1893] 1 Ch 547, 558; Nolan v Collie (2003) 7 VR 287, 303–10 (Ormiston JA).
[17]Dal Pont, above n 13, 679–80 citing Re O’Donogue [1998] 1 NZLR 116, 121; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566, 606.
[18]Re Beddoe [1893] 1 Ch 547, 558.
[19]Nolan v Collie (2003) 7 VR 287, 304.
[20]Ibid.
[21]Re Beddoe [1893] 1 Ch 547, 562.
[22]Nolan v Collie (2003) 7 VR 287, 306–7.
[23]Ibid.
Dal Pont notes[24] that trustees may lose their right to costs where they have unnecessarily applied to the court,[25] have litigated unreasonably[26] or have incurred unnecessary expense in the proceedings before the court.[27]
[24]G E Dal Pont, above n 13, 689–90.
[25]Trimble v Kirkland (1913) 13 SR (NSW) 417.
[26]Dixon v Williams (1875) 13 SCR Eq 7; Re Hewitt (deceased) (Unreported, High Court of NZ, Fisher J, 19 May 1998).
[27]Read v Chown (1929) 46 WN (NSW) 154; Re Price (1935) 35 SR (NSW) 444.
The principles relevant to Calderbank letters are set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (‘Hazeldene’s’).[28] The Court of Appeal rejected the view that a Calderbank offer gives rise to a presumption that the party rejecting the offer should pay the offeror’s costs on an indemnity basis if the offeree receives a less favourable result.[29] Instead, the Court confirmed that the correct approach is to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs.[30]
[28](2005) 13 VR 435.
[29]Ibid 440.
[30]Ibid 441.
The Court of Appeal stated that the critical question is whether the rejection of the offer was unreasonable in the circumstances.[31] The Court further stated:
[31]Ibid.
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.[32] It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
[32]See House v R (1936) 55 CLR 499, 505.
(a)the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.[33]
[33]Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, 442.
The Parties’ Submissions
Counsel for the defendant submitted that the starting point is that the costs of the proceeding should be paid out of the estate.[34] He submitted that the proper way to characterise the dispute was not as one of winners and losers but as a dispute between trustees who act for the benefit of beneficiaries regarding what should be done about certain trust property.[35] Counsel for the defendant submitted that the dispute was a result of a difference of opinion regarding what was in the best commercial interests of the trust estate,[36] although I note that the defendant also opposed the sale on the basis that rules for the apartment’s use can be agreed and have been agreed.[37] Counsel for the defendant also submitted that it was appropriate for the defendant to oppose the sale because two of the beneficiaries of the trust (the defendant and one of his sisters) opposed the sale.
[34]Transcript of Proceedings, Cody v Cody (No 2) (Supreme Court of Victoria, McMillan J, 21 June 2013) 2.21.
[35]Ibid 6.15.
[36]Ibid 6.21.
[37]See above paragraph [5].
Counsel for the defendant also sought to rely on two related Queensland cases: McKnight v Ice Skating Queensland Inc (‘McKnight’).[38]In these cases, Chesterman J ordered that the trustees should have their costs out of the estate in circumstances where, although their opinion of the trust was wrong, ‘they were not acting irresponsibly’.[39] In doing so, his Honour relied on the authority of Re Evans deceased, Union Trustee Co of Australia Ltd v A-G (Qld),[40] in support of the principle that in those particular circumstances it was not appropriate to deprive the trustees of their right to have their costs out of the estate.[41] In McKnight, a dispute arose between the trustees of the Ice Skating Association of Queensland No 1 Trust and the Ice Skating Association of Queensland. It was factually very different from the present case, which relates to a non-charitable private trust, not a trust with a public element.[42] Counsel for the defendant submitted that McKnight is relevant to these facts because, although the trustees in that case took a particular view but lost, they were not ordered to pay their costs personally. I do not think that the case is particularly useful, given its different factual background, and, in particular, due to the nature of the relevant trusts.
[38][2007] QSC 273 (27 September 2007); [2007] QSC 279 (4 October 2007) (Chesterman J).
[39][2007] QSC 279 (4 October 2007) [4].
[40](1957) St R Qd 345.
[41]McKnight v Ice Skating Queensland Inc [2007] QSC 279 (4 October 2007) [5].
[42]Note: in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, 92, the High Court underlined the importance of the role of context, albeit in relation to applying s 63 of the Trustee Act 1925 (NSW). Non-charitable private trusts were distinguished from charitable trusts or trusts with a public element to them.
Counsel for the defendant also noted that, during the hearing of this application on 24 April 2013, the plaintiffs appeared to support an order that costs for both parties be paid out of the estate, but that, since I published my reasons, the plaintiffs have altered their position.[43] Counsel for the defendant stated that a special costs order in this matter would mean that the defendant is not entitled to have his costs out of the estate, and that ‘an even more special costs order’ would involve ordering that the defendant pay both his own costs and those of the plaintiffs personally. Further, he submitted that a departure from that order would involve the defendant’s bearing his own costs and those of the plaintiffs on an indemnity basis. It was pointed out that, not only do the plaintiffs seek their costs on an indemnity basis, they seek them in relation to the entire proceeding.[44]
[43]Transcript of Proceedings, Cody v Cody (No 2) (Supreme Court of Victoria, McMillan J, 21 June 2013) 9.17.
[44]Ibid 10.26–11.11.
Counsel for the defendant submitted that Hazeldene’s is relevant in relation to estate matters for the proposition that an unreasonable refusal to accept a Calderbank offer may enliven the Court’s discretion to depart from the usual order as to costs.[45] In estate matters, the usual order as to costs is that the costs are paid by the estate on an indemnity basis.
[45]Ibid 11.9.
In relation to the terms of the Calderbank offer, counsel for the defendant submitted that the following factors demonstrated that it was not unreasonable for the defendant to refuse to accept the plaintiffs’ Calderbank offer:
(a)the offer was not a genuine compromise but rather an offer to ‘capitulate’;
(b)it is not clear that the plaintiffs have done better than the terms proposed in their offer;[46]
(c)the offer was made at a very early stage in the proceedings;[47]
(d)the offer was only open for a short period of time;
(e)the offer lacked clarity in its terms, for example, it was unclear who was the proposed selling agent.
[46]Note: this was said to be because the plaintiffs have obtained an order for a deferred sale of the apartment.
[47]Note: the originating motion was filed on 27 September 2012 and the offer was made on 11 October 2012.
Counsel for the defendant submitted that the circumstances of the proceeding do not justify a departure form the ordinary rule that the costs of both parties come out of the estate on an indemnity basis. He further submitted that the circumstances of defendant’s refusal to accept the Calderbank offer do not shift that presumption, because it was not unreasonable of the defendant not to accept it.
The plaintiffs on the other hand submitted the following in relation to the Calderbank offer:
(a)that it is unclear what more they could have done by the offer to resolve the dispute;
(b)that the question is not whether the plaintiff did better than the offer but whether the defendant did better than the offer and that the substance of the offer is relevant;[48]
(c)the defendant agreed in mediation to an order that the property be sold and then reversed his position, and could have avoided the proceeding continuing beyond that point if he had stood by the in principle agreement reached at mediation;
(d)looking at all the circumstances, it cannot be said that the defendant was genuinely seeking a determination from the Court in the interests of the beneficiaries, but rather the defendant tried to prevent the plaintiffs from selling the property, which was part of an ongoing dispute.
[48]Note: it should be noted that in support of this proposition the plaintiffs relied on Kalenik v Apostolidis [No 3] [2009] VSC 475 (23 October 2009) [24] (Hargrave J). However, in my view, that case does not support the plaintiffs’ proposition.
In reply, counsel for the defendant strenuously asserted that the characterisation of the defendant’s behaviour as ’walking away’ from the agreement reached at mediation was unfair. He submitted that the defendant resisted a specific order in relation to the sale of the apartment because it was part only of the agreement reached at mediation.
In relation to the plaintiffs’ original request at the hearing on 24 April 2013 for orders that costs be paid out of the estate, counsel for the plaintiffs conceded that the defendant should be ordered to pay the costs of the parties incurred since the mediation, if I were not minded to order that the defendant pay the costs of the whole proceeding.
Counsel for the plaintiffs submitted that this was adversarial litigation, that it was not simply a matter of trustees coming forward with a genuine bona fide dispute, and that it was not the substance of what happened in the present dispute. I note however that no specific evidence was referred to by counsel for the plaintiffs to substantiate this claim. The allegation was put at a very general level.
Conclusion
In my view, it was not unreasonable for the defendant to reject the plaintiffs’ Calderbank offer. The principal reason for this is that the offer was made at a very early stage in the proceedings, approximately two weeks after the originating motion was filed, and was open for only five days. At the time the offer was made, the only substantive material that had been filed was an affidavit of Patricia Cody sworn 28 September 2012 and filed 3 October 2012. By that stage, the defendant would have had some idea of the nature of the claims that he would have to meet in order to resist an order that the apartment be sold, but there was a possibility of further affidavit material being filed by the plaintiffs. The offer by the plaintiffs did not involve a genuine element of compromise, although it is difficult to identify a middle ground in relation to this dispute, as the range of potential outcomes in this Court was limited.
I also consider that the offer contained some shortcomings in relation to whether a trustee is permitted to purchase trust property and in relation to whether a set of rules for the use of Falls Creek had been agreed. These aspects of the offer required clarification. I do not agree with the submission by counsel for the defendant that by the terms of the offer it was unclear who was to be the proposed selling agent. The offer provided that the trustees were to select a selling agent, and, in default of agreement, the President of the Real Estate Institute of Victoria was to appoint an agent.
Although the defendant has not done better than the terms of the offer,[49] and the plaintiffs have effectively achieved a result that largely corresponds with the substance of their offer, the early stage at which the offer was made and the lack of clarity in relation to parts of its terms, in my view, support the view that it was not unreasonable in those circumstances for the defendant to reject the offer. I note that the plaintiffs’ did indeed foreshadow an application that the defendant pay the plaintiffs’ costs on an indemnity basis, but I do not believe that aspect of the offer overcomes its other shortcomings described above.
[49]Note: this is because I ordered that the apartment be sold, albeit on a deferred basis after the 2014 ski season.
I consider, however, that the defendant’s persistence in resisting an order that the apartment be sold, even after the mediation had taken place, resulted in improper expenses in the way of costs being incurred by the estate. The defendant’s conduct is not caught by the exception that, although improperly incurred, the expense benefited the trust.[50] In my view, I consider that a departure from the usual costs order in trust matters is warranted on these facts.
[50]Nolan v Collie (2003) 7 VR 287, 310.
I order that the defendant be entitled to his costs out of the estate up to and including the mediation and that the defendant must pay any of his own costs incurred after the mediation personally. The plaintiffs shall have their costs out of the estate up to and including the mediation. The defendant shall be ordered to pay the costs of the plaintiffs incurred following the mediation on an indemnity basis. I shall hear the parties as to the form of orders.
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