Craig v Craig (No 3)

[2016] SADC 37

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

CRAIG v CRAIG & ANOR (No 3)

[2016] SADC 37

Judgment of His Honour Judge Slattery

11 April 2016

PROCEDURE - COSTS

Held: the defendants are entitled to 70% of their costs of the action.

Craig v Craig & Anor. [2015] SADC 109 (17 July 2015); Craig v Craig & Anor. (No. 2) [2015] SADC 162 (27 November 2015); District Court (Civil) Rules Rule 187 , referred to.
Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322; Firebird Global Master Fund II Limited v Republic of Nauru (No 2) [2015] HCA 53, applied.
Calderbank v Calderbank [1975] 3 All ER 333; Blackburn & Anor. v Logos Research & Ors (No. 2) [2016] SADC 19 (9 February 2016); Boscaini Investments Pty Ltd & Ors v Corporation of the City of Kensington and Norwood [1999] SASC 327; Australian Securities Commission v Aust-Home Investments Ltd (1993) 116 ALR 523; Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 283; Yates Property Corporations Pty Ltd v Boland [2000] FCA 1106; The State of South Australia v Clarke (No. 2) [2016] SADC 28 (4 March 2016), considered.

CRAIG v CRAIG & ANOR (No 3)
[2016] SADC 37

JUDGE SLATTERY

1. In this matter I have delivered two judgments.[1] The questions for resolution in the July 2015 judgment were whether the defendants[2] held an interest in a property at Glandore under a resulting trust for the plaintiff. A second alternative question was whether the defendants held that same interest under a constructive trust as to 7/16ths of the property. The contention of the defendants was that by virtue of an agreement made in 1984, the plaintiff (and his late wife) agreed to provide a gift of $70,000 in consideration of the defendants selling their existing real estate assets and contributing $90,000 to the purchase price of the Glandore property, as well as providing the plaintiff and his late wife the occupation of a house on the Glandore property for their lives free of expenses.

   [1] [2015] SADC 109 (17 July 2015); [2015] SADC 162 (27 November 2015).

   [2]    The defendants are the son and daughter in law of the plaintiff.

2. For the reasons which I have published, I found the plaintiff and his late wife provided the sum of $70,000 as a gift and in consideration thereof the defendants gave an assurance that they would provide accommodation to the plaintiff and his wife rent-free and cost-free for their lives. Any presumption of resulting trust would be rebutted by the arrangements made between the parties. Consequently I found that a constructive trust did not arise as a matter of law and that the plaintiff did not own any legal or beneficial interest in the Glandore property. The plaintiff continued to have an entitlement to occupy the Glanodre property and the defendants were subject to equitable personal obligations to perform the conditions of the promise which they have made to the plaintiff and his late wife in 1984. Those personal obligations were enforceable in equity and there were remedies available to the Court including an order for compensation or if necessary a decree for specific performance following any breach by the defendants of those obligations.

3. As a result of my findings, the plaintiff made an application for a finding that the agreement between the parties constituted a personal obligation upon the defendants enforceable in equity and that the defendants were in breach of those obligations. The question then was whether the plaintiff was entitled to an award of damages. In my judgment of November 2015 I found that the agreement between the parties constituted a personal obligation upon the defendants enforceable in equity, that the defendants were in breach of their personal obligations. I also found that those personal obligations may be enforced in equity by an order for compensation and I assessed compensation in the amount of $35,500 plus interest of $1,750. I then heard argument as to costs.

4. In the course of that argument I was informed that on 2 April 2014, some 12 business days before trial, the defendants made an offer to the plaintiff based upon an assessment according to life tables of the value of the life interest of the plaintiff in the Glandore property. The offer read in part as follows:-

   1.   Having regard to the above matters our clients are prepared to adopt the higher of the figures set out at paragraph 8 and we offer to pay to your client the sum of $54,984 representing the value of his life interest… In addition our clients are prepared to pay an additional sum of $10,000 on account of improvements your client claims to have done at the property…

   2.   This offer is made in respect of principal relief. Our clients may be prepared to make an offer in respect of your client’s costs but first require your client to:

   a.   Indicate whether or not he is prepared to accept the offer in respect of principal relief; and

   b.   If your client is prepared to accept the offer in respect of principal relief, advise what claim is made for costs.

   In light of the imminent trial date, we advise our clients seek a response to this offer within a period of seven days (after which point, it may be withdrawn).

   This letter is written on a without prejudice basis and in accordance with the principles set out in Calderbank v Calderbank… and our clients reserve their right to rely on it in relation to any application for, or any issue in respect of, costs (particularly in the event of the Court ordering relief to your client on the basis of a finding on a life interest in the property) including:

   1.   To resist any application for cost by your client for costs against our client;

   2.   To apply for costs of the action of a special costs basis.

   We await your response.

5. The defendants sought the costs of the action based upon their success in the action and relying upon the offer in the solicitor’s letter of 2 April 2014. The defendants put their claim for costs on a number of bases. The first was that the “event” that determines the issue of costs was the first hearing on the question of resulting trust and therefore the judgment of July 2015 determined the event in favour of the defendants. On that argument, merely because an assessment had been made by the judgment of November 2015 that the plaintiff was entitled to equitable damages in the amount of $35,500 plus interest does not mean that there was any uncertainty about the success of the defendants on the event. The defendants also contended that based upon the second judgment the plaintiff had formulated a claim for damages in the amount of $77,000 and had failed in that claim.

6. I am unable to accept the defendants’ submissions on the question of costs. The letter of offer was made some 12 business days prior to the commencement of trial. It was after the time allowed for formal offers to be lodged under Rule 187 and 188 of the District Court (Civil) Rules. The proximity of trial is a relevant matter.[3] The defendants’ offer is ambiguous because it is not capable of acceptance. It is stated to be in respect of principal relief but there is no accompanying offer in relation to costs. At best, the defendants say that if the plaintiff accepts their offer, they may make an offer in relation to costs. The whole offer may also be withdrawn after 7 days and so the defendants appear only to be paying lip service to the time periods allowed to an offeree party and the Rules of Court.

   [3]    White J in Morris v McEwan (2005) 92 SASR 281.

7. I am of the view that based on the well settled authorities that bind me, for any offer of settlement to be effective it must be capable of being accepted and therefore concluding the proceedings. The offer once accepted must create a binding contract. There must be contractual certainty about the offer and the acceptance.

8. The plaintiff contended for a number of constructions of the offer. The first was that it was not an offer at all but merely an invitation to treat. That is, if the plaintiff tells the defendants that he is prepared to accept $65,000 the defendants may make an offer as to costs. The second possible construction was that if the plaintiff accepted the $65,000, then the defendants offered to then negotiate on the question of costs. In my opinion, on either construction, the letter of offer fails to create the necessary impetus to reward the defendants for having made the offer. As I have already pointed out, the authorities are quite clear that any offer, once accepted, must lead to a binding contract. An offer that envisages further negotiations does not fulfil that requirement. These principles are so well settled and obvious that they do not require the citation of authority.

9. Even if I was wrong about that, it would not be imprudent for the plaintiff to have refused the offer because the plaintiff would correctly anticipate disputes arising in relation to any further negotiations on the question of costs.

10. I do not accept the contention that it would have been possible for the Court to have made an assessment of costs, if the matter was left to the Court. The defendants appear to contend that the parties could have left to the Court to determine the issue of costs without the cost and expense of litigating the issues in the action. I am unable to accept that submission. The principles that guide the exercise of the Court’s discretion in such an application are gathered in a series of well settled authorities: Boscaini Investments Pty Ltd v Corporation of the City of Kensington and Norwood [2009] SASC 327; Australian Securities Commission v Aust-Home Investments Ltd & Ors. (1993) 116 ALR 523 especially at 560; Booth v Helensvale Gold Club Ltd [1997] 2 Qd R 141; Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 especially at 287; Yates Property Corporation Pty Ltd v Boland [2000] FCA 1106. I surveyed the effect of these authorities in my decision in Blackburn & Anor. v Logos Research & Ors.[4] The Court would not entertain any application for the resolution of the parties’ issues on costs based upon this approach.

    [4]    (No. 2) [2016] SADC 19 (9 February 2016).

11. Both parties then made submissions that an appropriate approach was to assess and allow a percentage amount for costs. These arguments appeared to depend upon the parties’ views as to who may have been successful on particular issues in the matter in the trial. For example, the defendants contend that having been successful in relation to the principal action, they should be successful in their claim for costs. Conversely, the plaintiff argued that the event was not determined until such time as the question of equitable compensation was determined and that was not known until there had been further argument, further evidence and the decision of the 27 November 2015. Under that judgment, I made an assessment of compensation including for care in the amount of $35,500 plus interest of $1,750, in total $37,250.

12. In my judgment in The State of South Australia v Clarke (No. 2),[5] I gave consideration to the question of the approach of the Courts to a division of amounts awarded for costs. I have found it difficult to draw any statement of principle from intermediate Court decisions because most, if not all of those cases turn on their own peculiar facts. Two recent decisions of the High Court appear to have settled the controversy.[6] Based upon those decisions, the proper question is to identify whether in a particular case the event of success is contestable. If that be the case, then the Court may depart from the usual rule that costs should follow the event. Otherwise, the Court should not embark upon some largely unhelpful assessment of how a particular matter was argued or what result was obtained on any one or several of the issues in the case. I will apply that approach.

    [5] [2016] SADC 28 (4 March 2016).

    [6]    Plaintiff M76/2013 v Minister for Immigration, Multicutural Affairs and Citizenship (2013) 251 CLR 322; Firebird Global Master Fund II Limited v Republic of Naura (No. 2) [2015] HCA 53.

13. The event of success in this matter was contestable. Although the defendants successfully overcame the attack of the plaintiff on the question of resulting trust, constructive trust and the plaintiff owning any legal or beneficial interest in the Glandore property, the end result must be, even on the defendants’ best case, that the plaintiff had a continuing right to occupy the Glandore property. The defendants also had a liability to answer to the plaintiff for breach of their personal obligations to the plaintiff which were enforceable and to the remedies that were sought by the plaintiff in respect of those breaches of their personal obligations to him.

14. In those circumstances, I have formed the view that in the exercise of my discretion, my final order as to costs of the whole action is that the defendants have an entitlement to 70% of their costs of the action. In submissions[7] the defendants informed me that they sought an order for costs in their favour set in the sum of $35,500 plus $1,750 (total $37,250), that there be no further order for costs and that the judgment of 27 November 2015 be stayed. The effect of this offer made in open Court was that the defendants conceded that if they were successful in whole or in part in their application for costs, then that costs claim would exceed the amount of the judgment in favour of the plaintiff under the judgment of 27 November 2015 (depending upon the percentage of costs allowed) and that, as a means of bringing this matter to an end the defendants would consent to a lump sum costs order in their favour in that amount. Experience dictates that the cost of the action will be well in excess of $37,250. Experience also dictates that the figure of costs being the equivalent of 70% of the parties costs of action that I have awarded to the defendants will well exceed the amount of $37,250.

    [7]    T14.11-17.

15. Under the Rules of Court, I have the power to fix a lump sum order as to costs. In these circumstances, I am in a position to make an order that the defendants are entitled to a lump sum order for costs in the amount of $37,250. I am not prepared to make an order for a stay as proposed by the defendants. The plaintiff did not consent to that course and I would not impose that result upon him. Commercial common sense would dictate that no claim would be made by or on behalf of the plaintiff on the question of the money judgment in his favour in light of the offer of the defendants to fix a lump sum costs in their favour.

16. I have now been informed that the plaintiff is deceased and he passed away on 31 December 2015. I have received no application from those representing the estate of the deceased. I will, on the same commercial basis, assume that in light of the lump sum costs offer made by the defendants that there would be no pursuit of the judgment sum in favour of the plaintiff under my judgment of 27 November 2015. However, because of the absence of any consent by or on behalf of the plaintiff to the stay of the November judgment, I am in a position where the only order that I can make is that the defendants are entitled to 70% of their costs of the action. Even so I would expect that plain commercial common sense would prevail here.

17. My orders are as follows:-

    1.   In this action, the defendants are entitled to 70% of their costs of action;

    2.   The defendants have the costs of this application;

    3.   I give liberty to apply.