Doedens v Owen (No 2)
[2018] SASC 23
•7 March 2018
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
DOEDENS & ORS v OWEN (No 2)
[2018] SASC 23
Judgment of The Honourable Justice Nicholson
7 March 2018
SUCCESSION - FAMILY PROVISION - PROCEDURE - ORDERS AND OTHER PROCEDURAL MATTERS - COSTS - OFFER OF COMPROMISE
INTEREST - RECOVERABILITY OF INTEREST
The claims of the three plaintiffs for provision for their maintenance, education or advancement from the deceased’s intestate estate were settled prior to trial. A ruling was delivered on 16 February 2018 addressing a number of issues that arose following the settlement of the claims.
This judgment addresses three further issues. The first is whether the costs of the litigation guardian appointed on behalf of the third plaintiff should be met by the deceased’s estate on an indemnity basis. The second is whether the costs of the second and third plaintiffs should be paid by the deceased’s estate and, if so, on what basis. The final issue is whether the first plaintiff is entitled to post judgment interest with respect to the asserted late payment of the amount payable pursuant to the order for provision made in settlement of the first plaintiff’s claim.
Held:
1. The costs and disbursements of the litigation guardian appointed on behalf of the third plaintiff are to be paid by the deceased’s estate as an indemnity.
2. The costs of the second plaintiff are to be paid by the deceased’s estate on a solicitor and client basis.
3. The costs of the third plaintiff, excluding those of the application for the appointment of the first plaintiff as litigation guardian, are to be paid by the deceased’s estate on a solicitor and client basis.
4. The first plaintiff is entitled to receive the sum of $5,948.63 from the deceased’s estate on account of post judgment interest, pursuant to section 114 of the Supreme Court Act 1935.
Inheritance (Family Provision) Act 1972 (SA) s 6, s 7, s 9; Supreme Court Civil Rules 2006 r 267; Supreme Court Act 1935 (SA) s 40, s 114; District Court Act 1991 s 40, referred to.
Sluiter v Keimeier (1969) 54 LSJS 641, discussed.
Millbrook v Davies (No 2) [2004] SADC 92; Holtby v Hodgson (1889) 24 QBD 103; Church of the New Faith Inc v Bower (No 2) (1979) 21 SASR 161; Taylor v Company Solutions (Aust) Pty Ltd [2012] QSC 309; Ward & Ors v HCOA Operations (Australia) Pty Ltd & Anor [2013] QSC 92, considered.
DOEDENS & ORS v OWEN (No 2)
[2018] SASC 23Civil: Application
NICHOLSON J.
Introduction
The three plaintiffs in this matter applied, pursuant to section 6 and section 7 of the Inheritance (Family Provision) Act 1972 (SA) for provision for their further maintenance, education or advancement out of the estate of Christopher Owen who died intestate on 29 November 2015. The defendant is the wife of the deceased and, but for the plaintiffs’ claims, is solely entitled to the whole of the intestate estate in accordance with section 72G of the Administration and Probate 1919 (SA).
Each plaintiff’s claim settled before trial but with two matters outstanding, being the costs of the second and third plaintiffs and a claim for interest consequent on the asserted late payment by the defendant of the first plaintiff’s settlement sum. Some background to the litigation and further details concerning the nature of the settlements arrived at in this matter are canvassed in my earlier judgment.[1]
[1] Doedens & Ors v Owen [2018] SASC 12.
The claim by the first plaintiff, the sister of the deceased, was settled relatively early in the litigation and for a substantial sum together with costs. The claims of the second and third plaintiffs did not settle at this stage and their claims proceeded towards trial. The only issue arising with respect to the first plaintiff’s claim is the one concerning interest for asserted late payment and is dealt with later in these reasons.
The second plaintiff was the deceased’s mother. However, she passed away on 1 February 2018 some 11 days before the trial of this matter had been listed to commence. She was 93 years old. The second plaintiff’s claim was settled on 8 February 2018, being the Thursday before the trial was due to commence the following Monday, on the basis that her estate is to be paid a legacy of $12,500 with the costs of the second plaintiff reserved to the trial Judge.
The third plaintiff is the deceased’s 94 year old father. His claim settled on 9 February 2018, being the Friday before the trial was due to commence. In essence, the settlement of the third plaintiff’s claim provides for the sum of $80,000 to be paid out of the estate to be held on trust for the benefit of the third plaintiff. The trustee is entitled to expend income and capital on behalf of the third plaintiff and in accordance with the terms of the trust. However, it is a term that any balance of the fund remaining at the death of the third plaintiff is to revert to the defendant as sole beneficiary of the intestate estate. It was also a term of the settlement that the costs of the third plaintiff were reserved to the trial Judge.
The costs of the litigation guardian appointed on behalf of the third plaintiff
The third plaintiff suffers from multiple morbidities, including advanced dementia and lives in a high dependency nursing home. It is common ground that the third plaintiff is a litigant under a disability. As a consequence, Ms Judith Quick, an independent solicitor experienced in the wills and estates area, was appointed by the Court as his litigation guardian.[2] A litigation guardian serves as an officer of the court and is required to take all appropriate measures for the benefit of the litigant under disability.[3]
[2] In Doedens & Ors v Owen [2018] SASC 12, I provided reasons for granting an approval to the compromise entered into on behalf of the third plaintiff, such court approval being required with respect to the settlement of a claim on behalf of a litigant under a disability in accordance with rule 257 of the Supreme Court Civil Rules 2006 (SA). I also determined who was to be the trustee and provided reasons for that determination.
[3] Rhodes v Swithenbank (1889) 22 QBD 577 at 579.
According to rule 267(2) of the Supreme Court Civil Rules 2006, the representative of a person under a disability is not to be personally liable for costs unless the court orders to the contrary. Ordinarily, a litigation guardian who has properly conducted the action is entitled to be indemnified for costs incurred by the litigant under a disability or out of that litigant’s estate.[4] There is no suggestion in this matter by either party that the litigation guardian’s costs in this matter have been in any respect improperly incurred.
[4] Sparham v SGIC (1992) 165 LSJS 354 and Murray v Kirkpatrick (1940) 57 WN (NSW) 162.
Whilst the defendant does not concede the point, she put no submission in opposition to an order that the litigation guardian for the third plaintiff receive her costs out of the estate on an indemnity basis. I see no reason in the circumstances of this matter not to make an order which will have this effect. Of course, Ms Quick is not a party to the litigation and her right to be indemnified lies against the third plaintiff and/or his estate. As such, an appropriate order might be one to the effect that any costs order against the estate in favour of the third plaintiff is to include his liability to indemnify the litigation guardian for costs incurred by her in the conduct of the litigation. However, such an order might be seen as unnecessarily cumbersome.
In some jurisdictions, where the Court appoints a solicitor as the litigation guardian of a person under a disability, the rules provide that it may direct that the costs incurred in the performance of the duties of that office be borne and paid by one or more of the parties to the proceeding or out of any fund in court in which the person with the disability may be interested.[5] There is no such specific rule in South Australia. However, one commentator has observed[6] that the legal position will be the same by virtue of the general costs discretion conferred by statute.
[5] See, for example, High Court Rules 2004, rule 56.11.2; ACT Court Procedures Rules 2006, rule 1733(1), (2); NSW Uniform Civil Procedure Rules 2005, rule 42.24(a); TAS Supreme Court Rules 2000, rule 62(1)(a); and WA Rules of the Supreme Court 1971, order 66, rule 6(1). See also, for example, Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 (S) at [13]-[17] (McLure J) and see generally, Dal Pont, Law of Costs, 2nd ed, 2009, LexisNexis Butterworths Australia at [10.42].
[6] Dal Pont, Law of Costs, 2nd ed, 2009, LexisNexis Butterworths Australia at [10.42].
Subsection 40(1) of the Supreme Court Act 1935 is in these terms.
Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.
Section 40 confers on courts and judges an unfettered discretion as to costs,[7] although the discretion must, of course, be exercised judicially in accordance with the rules of court and having regard to relevant considerations but not irrelevant considerations.[8] I am satisfied that the costs jurisdiction of this Court includes the power to order, in appropriate circumstances, that the costs of a litigation guardian be met directly by a party to the litigation or in a case such as the present out of the deceased’s estate. I propose to so order.
[7] See, generally, Copping v ANZ McCaughan [1995] SASC 4917; (1995) 63 SASR 523 at 527, Gwinnett v Day (No 2) [2012] SASCFC 61.
[8] House v The King [1936] HCA 40; (1936) 55 CLR 499.
The costs incurred by the second and third plaintiffs
The determination of costs orders with respect to proceedings pursuant to the Inheritance (Family Provision) Act calls for a discretionary judgment by the Court as to what is just in the circumstances. Subsection 9(8) of the Inheritance (Family Provision) Act provides:
The Court may make such order as to the costs of any proceeding under this Act as it considers just.
The nature of the discretion conferred by subsection 9(8) is no more confined than the general costs discretion and may, in some respects, be broader. Further, like the general costs discretion, it covers proceedings at large, that is, it is not restricted to proceedings that have been finalised following a trial on the merits.
As a general proposition, costs will follow the event and applicants who are successful following a trial will be entitled to receive their costs out of the estate. However, even an unsuccessful applicant may, where just, obtain an order for costs out of the estate, particularly where the claim was reasonably arguable and the applicant’s conduct during the course of the action is not to be characterised as unmeritorious. It is said that such a potentially “indulgent” approach is more compelling in claims against large estates or where a costs order would adversely affect the applicant’s financial position.[9]
[9] See, generally, the discussion of these propositions and the authorities relied on in Dal Pont, Law of Costs, 2nd ed, 2009, LexisNexis Butterworths Australia at [10.33].
In the present case, the second and third plaintiffs’ claims resolved by way of settlement on the eve of trial and not following a contested hearing on the merits. Nevertheless, the defendant does not oppose an order that the second and third plaintiffs receive their costs out of the estate on a party and party basis. However, the second and third plaintiffs seek an order, opposed by the defendant, that their costs be met out of the estate on a solicitor and client basis.
Where a suit is compromised before trial and the parties have reached no agreement as to costs, the lack of a hearing on the merits will deprive the court of the main factor to be considered when deciding on an appropriate costs order, that is, the ultimate outcome of the trial. There is authority to the effect that a starting point in such a situation is that each party should bear its own costs and that it is rarely appropriate for a court to seek to determine a case on the merits simply for the purpose of making a costs order. This is particularly so where such a trial would involve complex factual matters where credit would be an issue.[10]
[10] See, generally, the discussion of these propositions and the authorities relied on in Dal Pont, Law of Costs, 2nd ed, 2009, LexisNexis Butterworths Australia at [14.64].
Notwithstanding these considerations, a court should make a costs order that is just in all of the circumstances where it is able to do so. In appropriate circumstances, an order for costs will be made notwithstanding that the litigation has been compromised rather than proceeding to a trial on the merits.
A court is more likely to be able to make such an order where it is able to form a material view of the merits and where other material considerations commend themselves notwithstanding the absence of a trial. In estate litigation, such matters may include the extent to which the parties have acted reasonably or otherwise in both proceeding with the litigation in the first instance and in the manner by which it is resolved, the size of the estate and the impact that the failure to obtain a costs order might have on the applicant’s financial position bearing in mind the size of the award obtained (by way of settlement).
If it is open, in appropriate circumstances, to make a costs order in favour of an unsuccessful applicant following a trial on the merits,[11] it must follow that it can be within the discretion to order costs in favour of a successful applicant albeit only as a result of the settlement of a claim.
[11] See, generally, the discussion by Debelle J in Bowyer v Woods [2007] SASC 327; (2007) 99 SASR 190 in particular at [66]-[67] and by Kourakis J (as his Honour then was) in Pizimolas v Pizimolas & Zannis (No 2) [2010] SASC 209.
The claims of the second and third plaintiffs settled virtually on the eve of trial. I repeat what I said in my earlier reasons in the context of my discussion of whether or not to approve the third plaintiff’s compromise.[12]
I have not heard the evidence proposed to be adduced by the parties at trial. In these circumstances, the common practice is to require an opinion as to the merits of the proposed compromise from independent counsel. This has been provided. In addition, I do have available the joint trial book containing, inter alia, the affidavit evidence that the parties would have sought to read at trial, various expert reports as to the third plaintiff’s medical conditions and a report from two rehabilitation practitioners canvassing areas of the third plaintiff’s physical and emotional care that could, it is said, be improved upon if further financial support were to become available.
Various aspects of the proposed evidentiary materials in the trial book appear on their face to be inadmissible and, in this respect, I have had the benefit of each party’s list of objections to the other party’s proposed evidence. Of course, none of the affidavits has been formally read before me, nor has any deponent been cross-examined, nor has any of the medical and rehabilitation evidence been tested at trial. I have considered the trial book material with these important caveats in mind.
I have reviewed this material (bearing in mind the caveats noted in the above passage), together with the submissions of the parties bearing on it, as part of my consideration of the costs question.
[12] Doedens & Ors v Owen [2018] SASC 12 at [11]-[12].
I am satisfied that each of the second and third plaintiffs was entitled to bring their claim in the sense that each fell within the jurisdiction of the Court prescribed by section 6(i) of the Inheritance (Family Provison) Act and notwithstanding the particular qualification provided for in that placitum.[13]
[13] Section 6 identifies the persons who are, in respect of the estate of a deceased person, entitled to claim the benefit of the Act and placitum (i) is in these terms: “a parent of the deceased person who satisfies the court that he cared for, or contributed to the maintenance of, the deceased person during his lifetime” (emphasis supplied).
Further, and based on the materials before me, I find it highly likely that both the second plaintiff and the third plaintiff would have demonstrated at trial a moral obligation on the part of their son to make some provision for them. In this respect, it is common ground that, during their latter years, both suffered (and in the third plaintiff’s case, continues to suffer) from a large number of significantly debilitating medical conditions together with the ordinary vicissitudes of life for persons in their nineties. Both were financially impoverished with little, if anything, by way of assets and reliant on the pension.
In assessing the extent of any such moral obligation, I have also had regard to the fact that the deceased died unexpectedly (in a motorbike accident) at the age of 55 not having made a will. More likely than not, he had not thought to make provision for his parents pursuant to a will given that, in the ordinary course, he would have anticipated that his parents would predecease him by many years.
I have also had regard to the evidence available to the effect that the parents maintained the deceased as a child and adolescent and assisted him as a young man, that the deceased maintained a good relationship with his parents, notwithstanding that he was living in South Australia and they in Queensland, and that he assisted them financially and in other ways during his life.
In assessing the weight to be given to the moral obligation with respect to the parents, I have also had regard to the fact that the estate of the deceased, prior to the settlement of the first plaintiff’s claim, was in the order of $2.1 million and that, whilst the defendant is entitled at law to the whole of the estate on an intestacy, the fact is that she and the deceased had separated many years before his death, without divorcing, and had entered into a binding financial arrangement at that time. In this respect, I have not overlooked the fact that there is evidence to the effect that, as at the time of death and for some time beforehand, the deceased and the defendant had reconciled to a degree and, whilst not living together, were maintaining a relationship.
In terms of financial need, the claims of the second plaintiff and the third plaintiff were strong. Given their age and other factors, this is not a case where hundreds of thousands of dollars would have been awarded to either plaintiff. However, based on the evidence available, such as it is, and recognising that it is untested and, in part, strenuously challenged by the defendant, this was a case where there was a high likelihood of a not insubstantial award being made with respect to each of the second and third plaintiffs.
On the evidence available, such as it is, it would seem that the defendant, prior to receiving the inheritance, was and remains significantly financially better off than either the second or third plaintiff. However, I do not accept their submission that there was no equivalent financial need on her part, particularly bearing in mind her quite significant medical disabilities and her relatively young age and expected longevity. I also do not accept the submission that she had no competing moral claim. On the evidence such as it is, findings that the defendant felt some level of dependency on the deceased and that he maintained a strong affection for the defendant and felt a strong obligation towards her were likely.
Even after the first plaintiff’s settlement is taken into account, the estate available to the defendant (but subject to the settlement amounts due to the second and third plaintiffs and costs liabilities) is of the order of $1.4 million, a not insubstantial amount. Whilst it might be seen as ungracious to characterise it as a windfall, the fact remains that it is the separated wife of the deceased, and the beneficiary of a binding financial settlement, who will receive a very substantial inheritance, unexpectedly and well in advance of when in the ordinary course the deceased might have been expected to die. It is in this context and generally that I also have had regard to the fact that, if the second and third plaintiffs were not to be fully protected as to their costs of the litigation, such would be financially very damaging particularly having regard to the size of the settlement sum in each case.
If these were the only considerations, I would have no difficulty in concluding that the second and the third plaintiffs should each be entitled to their costs on a solicitor and client basis to be paid out of the estate. In coming to this conclusion, I do not overlook and have taken into account the defendant’s submissions developed during the hearing of this matter that the claims of the second and third plaintiffs were always limited by their great age and limited life expectancy, that their claims were always subject to their individual medical conditions insofar as these affected both their key needs and life expectancies and that the defendant was proposing to call evidence, including from a geriatrician, which, if accepted, would undermine both plaintiffs’ cases as to quantum.
Nevertheless, there is another important consideration. The defendant relies upon a series of offers to settle the matter made during the litigation. The defendant submits that each of the second and third plaintiffs, properly advised as to obvious weaknesses in their cases, acted unreasonably in not accepting one or other of the offers.
Defendant’s offers made with respect to the third plaintiff’s claim
On 3 July 2017, an offer was made by the defendant to settle the third plaintiff’s claim in the amount of $10,000 plus solicitor client costs. On 5 January 2018, an offer was made to settle the claim for $80,000 payable to the Queensland Public Trustee on terms similar to those ultimately accepted, including that any balance of the trust fund not exhausted at the date of the third plaintiff’s death would revert to the defendant. This offer also provided for the third plaintiff’s costs to be paid but this time only on a party and party basis.
It would seem that, for a period after 5 January 2018, two offers co-existed because it was on 1 February 2018 that both these offers were withdrawn. On 1 February 2018, a further offer was put to the effect that the sum of $80,000 be held on trust by the Queensland Public Trustee on the same conditions as before but this time with only $15,000 being payable on account of the third plaintiff’s costs. As at 1 February 2018, the defendant was on notice that on or about 29 January 2018 the second plaintiff, the third plaintiff’s wife, had suffered a sudden and likely to be fatal stroke. It is not clear whether she was then on notice that the second plaintiff died on 1 February.
None of these offers was recommended by independent counsel engaged by the litigation guardian and none was accepted. In my view, the third plaintiff did not act unreasonably in this respect, when regard is had to the considerations set out earlier and the following additional considerations.
The offer of $10,000 made on 3 July 2017 was relatively early in the litigation and before the substantial costs of preparing the matter for trial were to be incurred. The offer of $10,000, bearing in mind the moral obligation likely owed to the third plaintiff and the inchoate nature of but very real financial needs of the third plaintiff, was parsimonious to say the least and arguably opportunistic. The two offers of $80,000 to be held on trust were more substantial although not, to my mind, to be characterised as generous. Further, each came with a disadvantageous and, in the case of the offer made on 1 February 2018, a very disadvantageous costs condition. In my view, the third plaintiff did not act unreasonably in failing to accept either of these offers. On the material available, and without coming to any conclusion myself, it was well open to the third plaintiff’s advisors to take the view that the third plaintiff would do better at trial.
The defendant’s offers made with respect to the second plaintiff’s claim
On 3 July 2017, the defendant offered the sum of $10,000 together with solicitor client costs. The comments I have made with respect to this offer in the context of the third plaintiff apply equally in the case of the second plaintiff. On 5 January 2018, the defendant offered the sum of $120,000 to be held on trust by the Queensland Public Trustee with a condition that the balance not expended as at the death of the second plaintiff would revert to the defendant, together with costs on a party and party basis. Again, as at 5 January 2018 and for a short period thereafter, there were two offers available.
The medical and future needs circumstances with respect to the second plaintiff were quite different from those of the third plaintiff. The second plaintiff did not suffer from dementia and lived with her daughter, the first plaintiff. She had a longer life expectancy than the third plaintiff and was not as seriously compromised medically as was the third plaintiff. Again, on my review of the evidence, such as it is, the offer of $120,000 to be held on trust with the residue payable to the defendant, together with costs but only on a party and party basis could not reasonably be characterised as generous. Again, in my view, the second plaintiff and her advisors did not act unreasonably in refraining from accepting that offer. It was open, at the time, for the view to be held that the second plaintiff had good prospects of obtaining a better award and a better costs outcome at trial.
The death of the second plaintiff
Either on or very shortly prior to 30 January 2018, the defendant received notice that the second plaintiff had fallen mortally ill. The defendant withdrew both extant second plaintiff offers on 30 January 2018. The second plaintiff died two days later on 1 February 2018, just 11 days before the trial of the matter had been listed to commence. The parties had before them case law to the effect that the second plaintiff’s claim for provision out of the estate, arguably, survived her death to a limited extent.[14] In any event, the parties settled the second plaintiff’s claim on 8 February 2018 on the basis that her estate is to be paid a legacy of $12,500 with the costs of the second plaintiff reserved to the trial Judge.
[14] See In the Estate of Wardle (Deceased) (1979) 22 SASR 139 (Zelling J) and Read v Nicholls [2004] VSC 66 (Nettle J as his Honour then was). Some interstate authorities suggest to the contrary, eg. McEvoy v Public Trustee (1989) 16 NSWLR 92 (Powell J).
The unexpected death of the second plaintiff, occurring so close to the commencement of trial, brought about a significant change of circumstances with respect to both the second and third plaintiffs. In the case of the second plaintiff, a potentially substantial claim had, through no fault of the second plaintiff or her advisors, been reduced substantially and there had arisen a not insignificant risk of failure at trial in toto. As far as the third plaintiff was concerned, were he to proceed with the trial he would have been solely liable for the costs of prosecuting the trial and solely exposed to any adverse costs order.
Further considerations
It was only very late in the preparation for trial that the defendant produced a medical report from an expert geriatrician which, if accepted, may have served to undermine to some degree although not wholly the third plaintiff’s claim as to financial need. In this respect, the defendant contends that the third plaintiff’s claim was never properly or comprehensively investigated or prepared by his legal advisors. As such, the third plaintiff’s claim for costs should be marked down on this account. I disagree. The third plaintiff’s advisors produced, in good time, evidence as to financial need that they intended to rely on. It supported the third plaintiff’s claim on its face and it was a matter for the defendant to adduce contesting evidence if so advised which she belatedly did.
The compromise ultimately entered into by the third plaintiff was, in the circumstances at that time, a beneficial settlement for the reasons I have set out in my earlier judgment.[15] This was so notwithstanding that the settlement did not take account of costs but left costs to be determined by the Court. However, that is not to say that the third plaintiff or his advisors acted unreasonably in their assessment of and failure to accept the offers earlier provided given the circumstances at the time when those offers were extant.
[15] Doedens & Ors v Owen [2018] SASC 12.
Two discrete issues
The defendant has raised two further discrete costs issues.
After the first plaintiff’s claim settled, an application was made on behalf of the third plaintiff for the first plaintiff to be appointed his litigation guardian (FDN 13). This was opposed by the defendant on the basis that she retained an interest in the proceedings. That “interest” was said to arise given the likelihood that the first plaintiff would benefit, in time, from the third plaintiff’s estate in the event that his estate were to be augmented as a result of the proceedings. Rule 79(2)(b) of the Supreme Court Civil Rules 2006 provides as follows.
(2)However –
(a) …
(b) a person who has an interest in proceedings before the Court (apart from his or her interest as representative of the protected person) cannot act as a protected person’s litigation guardian in the proceedings unless the Court directs to the contrary.
In the face of this opposition, the application was abandoned and Ms Quick was appointed instead. The costs of the application to appoint the first plaintiff were reserved. I agree with the defendant’s submission that no order as to costs should be made with respect to the third plaintiff’s abandoned application, FDN 13. The order for costs that I propose to make in favour of the third plaintiff will exclude those costs but not the costs of and incidental to the third plaintiff moving the Court for the appointment of Ms Quick.
The second discrete matter raised by the defendant concerns what she characterises as material in the plaintiffs’ affidavit evidence which seeks irrelevantly to attack the defendant’s character. The defendant asks for a direction to the costs adjudicating Master that she or he is to specifically consider whether and to what extent costs should be allowed with respect to affidavit material to which objection has been taken by the parties.
The costs adjudicating Master will determine the allowable costs in accordance with the usual rules governing the costs adjudication. A direction such as that sought is unnecessary and I decline to make it.
Conclusion as to costs
There is nothing about the history of the various offers made by the defendant to the second plaintiff and to the third plaintiff or concerning their failures to accept any of the offers, that would cause me to depart from my initial position that each should be awarded their costs out of the estate on a solicitor and client basis.
The interest question
For various reasons the payment of the first plaintiff’s settlement sum was delayed. The first plaintiff has made a claim on the defendant for post judgment interest which the defendant has resisted. Each contends that the delay in payment was the fault of the other. The parties agreed during the argument concerning costs that they would file and serve affidavits dealing with the interest question and that, unless I decided that I needed further assistance, I could decide the interest dispute in Chambers and include my reasons in this costs judgment.
The settlement of the first plaintiff’s claim for provision was embodied in the following court order pronounced in court by a Master of this Court on 10 August 2017 with the consent of the defendant and the first plaintiff.
THE COURT NOTES that:
The legal and beneficial ownership of the property situated at 76 Woodville Place, Annerley in the State of Queensland “Annerley” was in dispute to (sic) effect a settlement of the First Plaintiff’s claim it is noted that the First Plaintiff and the Defendant agree that the whole of Annerley is beneficially owned by the estate of the deceased.
THE COURT ORDERS that:
1.The following provision be made out of the estate of Christopher Andrew OWEN late of Unit 5, 8 Prospect Road Fitzroy in the State of South Australia Scientist (“the deceased”) who died on 29 November 2015 for the maintenance, education or advancement in life of the First Plaintiff namely:
(a) that the First Plaintiff be paid a legacy of $650,000 inclusive of interest to the date of this order within 28 days of the execution of a transfer of the First Plaintiff’s legal interest in Annerley to the Defendant as the Administrator of the estate of the deceased and that the Defendant produce a transfer or authority to transfer in registrable form to the First Plaintiff’s Solicitors within 7 days of the date of this order;
The order made on 10 August 2017 imposed an obligation on the defendant to pay to the first plaintiff, out of the deceased’s estate, the judgment sum of $650,000 inclusive of interest. The payment was to be made within, that is, no later than, 28 days of the execution of a transfer “of the First Plaintiff’s legal interest in [the Annerley property] to the Defendant …”.
The order imposed an obligation on the defendant to produce to the first plaintiff’s solicitors, within seven days of 10 August 2017, a transfer in registrable form.
As it happened, a transfer in registrable form was not executed by the first plaintiff until 6 October 2017. Following this, a sum of $100,000 was paid into the trust account of the first plaintiff’s solicitors on 27 October 2017 and a further sum of $550,000 on 30 October 2017.
The first plaintiff relies on two affidavits by her solicitor, Pamela Jean McEwin, sworn 15 February 2018 and 22 February 2018 and the defendant relies on the third affidavit by her solicitor, Melissa May Yule, sworn on 21 February 2018. The affidavits exhibit correspondence and other documents designed to explain the history of the parties’ interactions between the making of the Court order on 10 August 2017 and the final payment of $550,000 on 30 October 2017, with a view to each allocating blame to the other for the delays in complying with components of the order and, ultimately, in payment.
Initially, the first plaintiff contended, to the effect, that the judgment sum should have been paid on or before 29 September 2017. According to the first plaintiff, this allowed for the production by the defendant to the first plaintiff of a transfer in registrable form “within seven days of the date of service of the order” (emphasis supplied), together with a further 28 days within which to make the payment. As it happened, the order was not served by the first plaintiff on the defendant’s solicitors until 25 August 2017, an initial delay of 15 days.
This initial position of the first plaintiff was overly generous to the defendant. It gave the defendant the benefit of the first plaintiff’s delay in serving a sealed order on the defendant. However, the terms of the order are clear to the effect that the initial step of the defendant producing to the first plaintiff a transfer in registrable form, was to occur within seven days of the date of the order, not its service. In a subsequent written submission, dated 28 February 2018 (see below) the first plaintiff appears to have recognised this fact and now maintains that the payment fell due on or before 15 September 2017.[16]
[16] This date is arrived at by allowing seven days from the date of the order (10 August 2017) for the defendant to proffer an effective transfer, one day for the execution of the transfer and then a further 28 days “within” which payment was to be made.
After the service of the order, there was significant toing and froing between the parties before the first plaintiff came to execute what her solicitors accepted to be a transfer in registrable form on 6 October 2017. However, as I will explain, it is unnecessary to explore the various reasons for the delays in completing the necessary steps called for by the order or to attempt to attribute blame for those delays.
Based on the time period over which interest was payable, as initially contended for by the first plaintiff (that is, commencing from 29 September 2017) her solicitors performed a mathematical calculation using a simple interest rate of 7.5 per cent per annum. That calculation yielded a total amount of $3,945.15 over the period. However, in the first plaintiff’s subsequent (28 February 2018) submission this calculation was adjusted on the basis that the judgment sum was due and therefore interest began to run from 15 September 2017. The new calculation proffered by the first plaintiff was $5,845.89. However, the worksheet provided as part of the first plaintiff’s submission (and the submission itself) discloses, by way of typographical error, 22 October 2017 as being the date on which the first $100,000 was paid rather than the correct date of 27 October 2017. When the calculation is adjusted to take account of this, the mathematically correct amount now claimed by the first plaintiff is $5,948.63.
The defendant does not challenge that, in the event interest were to be payable, 7.5 per cent per annum is the required rate in accordance with section 114 of the Supreme Court Act 1935 and supplementary rule 217 of the Supreme Court Supplementary Civil Rules 2014.
After reviewing the affidavit evidence in chambers, I was troubled that there had been no attempt by either party to address the terms of section 114 of the Supreme Court Act 1935. I arranged for my associate to invite the parties to provide a written submission on the potential application of this section. I have considered the first plaintiff’s written submission received by email and dated 28 February 2018 and the defendant’s written submission received by email and dated 1 March 2018.
Section 114 of the Supreme Court Act 1935 and, relevant to this case, subsection 114(2)(a), governs any award of post judgment interest.
Interest on judgment debts
(1)All money, including costs, payable under any judgment or order shall bear interest at the rate from time to time prescribed by the rules of court.
(2)The interest shall be computed from the following times:
(a) in the case of money other than adjudicated costs, from the time specified in the judgment or order, and if no time is so specified from the date of the judgment or order;
(b) in the case of adjudicated costs, from the date of the certificate of the adjudicating officer by whom the costs were adjudicated or an earlier date specified by the adjudicating officer in the certificate.
In my view, the language of section 114(2)(a) is clear and prescribes the period for which the first plaintiff is entitled to interest, irrespective of how the delay in any payment might come about and whose fault it might have been.
The sum of $650,000 ordered to be paid to the first plaintiff comprises money payable under a judgment or order and, as such, is to bear interest in accordance with section 114. It comprises money other than adjudicated costs. Thus, according to subsection 114(2)(a), the interest is to be computed “from the time specified in the judgment or order, and if no time is so specified from the date of the judgment or order”.
The question arises as to what “the time specified in the judgment or order” refers. There are two possibilities – the time from which interest is to run as specified or the time for payment of the judgment sum as specified.
If the former construction applies, it is arguable that no such time has been specified. If so, interest should be computed from the date of the judgment or order. By parity of reasoning in cases such as Holtby v Hodgson[17] and Church of the New Faith Inc v Bower (No 2)[18] the date of the order in this case is the date it was pronounced rather than the date a sealed order was taken out. To hold otherwise would lead to the result that the time from when interest was to run would depend on the vagaries attendant on when an application for a sealed order was made and court registry practices. It also would pay no regard to the fact that the judgment debt per force operates to prevent prejudgment interest from running and would allow for a hiatus in the receipt of interest by the judgment creditor leading to a windfall use of the money by the judgment debtor.
[17] (1889) 24 QBD 103 at 107.
[18] (1979) 21 SASR 161.
If the latter construction applies, a time “within” which the judgment sum is to be paid can be identified although, such time might vary according to the conduct of the parties. However, even on this construction, it is arguable that a time has not been “specified”.
There is the authority of a single Judge of this Court that supports the former construction. Mitchell J in Sluiter v Keimeier,[19] considered an earlier form of section 114 but which, insofar as subsection (2)(a) is concerned, was in materially the same terms as the present.
[19] (1969) 54 LSJS 641.
On 21 May 1969, Travers J ordered that the plaintiff, an infant, should recover the sum of $21,000 from the defendant. The defendant appealed but did not seek a stay pending appeal. Nor did the plaintiff seek to enforce the judgment notwithstanding that, on one view, it took effect from the day it was pronounced. The appeal was dismissed on 15 September 1969. On 17 October 1969, a Master ordered that the judgment sum together with interest at the prescribed rate, from 21 May 1969 until date of payment, was to be paid to the Public Trustee.
The defendant appealed against the interest order and contended that interest should only be payable from 17 October 1969, the date of the Master’s order. Mitchell J set out the terms of section 114(2)(a) as it then stood and observed:
No time from which interest is to be paid is specified in the present judgment, and in my view the Master was correct in holding that interest should be computed from the date of judgment.
[emphasis supplied]
If the reasoning had stopped there, her Honour’s reliance on the relevant language of subsection 114(2)(a) as referring to a need to specify a time from which interest is to run in order to avoid the default position would have been clear. However, Mitchell J went on to dismiss an argument from the defendant to the effect that the judgment sum had not been payable to the infant until the Master had made the order directing how the money was to be dealt with. Her Honour said this:
Certainly a defendant may not pay monies under a judgment direct to an infant, but the judgment debtor may himself apply under Order 22 Rule 9 for directions as to the method in which the monies are to be dealt with. I do not agree with the contention that the monies under the judgment are not payable until such directions are given. In my view they are payable as from the date of the judgment. The appeal will be dismissed with costs.
In my view and with respect, her Honour did not convincingly deal with the defendant’s argument. Her Honour appears to concede that there inevitably may have been some delay after judgment was pronounced before the judgment sum became payable. And this was so, no matter whose fault it might have been in not having applied to Travers J to direct payment to the Public Trustee on the day he pronounced judgment. However, and in any event, the defendant’s argument lacked utility in the present context. Once her Honour had determined the point of statutory construction in the way that she did the defendant’s argument operated as a non sequitur.
It is noteworthy that subsection 40(2)(b) of the District Court Act 1991 is in different and more explicit terms.
(2)Subject to any direction by the Court to the contrary, the interest runs –
(a) in the case of … costs …
(b) in the case of any other monetary sum – from the date of the judgment.
Again, the default position is the date of judgment. But this is subject to any direction by the Court to the contrary. There is no suggestion that interest is to run from the date the judgment sum is payable, although it would be open to the Court to so direct. Similarly, under section 114 of the Supreme Court Act, the Court could so direct or “specify”.
The more explicit language of section 40 leads to the same result as does section 114 on my preferred construction. It would be invidious if it were to the contrary; the extent of a successful plaintiff’s entitlement to post judgment interest might vary according to the Court in which the proceedings were instituted.
In Millbrook v Davies (No 2),[20] Smith DCJ held that post judgment interest ran, in accordance with section 40, from the date of judgment and notwithstanding a statutory obligation imposed on the defendant to withhold payment of the judgment sum until the defendant had complied with section 1184B of the Social Security Act 1991 and section 30 of the Health and Other Services (Compensation) Act 1995.[21]
[20] [2004] SADC 92.
[21] See also, dealing with Queensland provisions in terms similar to section 40 of the District Court Act, Taylor v Company Solutions (Aust) Pty Ltd [2012] QSC 309 and Ward & Ors v HCOA Operations (Australia) Pty Ltd & Anor [2013] QSC 92.
In my view, the construction adopted by Mitchell J in Sluiter, albeit intuitively and without explanation, is correct. The phrase “from the time specified in the judgment or order” where it occurs in subsection 114(2)(a), on its natural reading, takes its meaning from the chapeau to the subsection – “the interest should be computed from the following times”. A simplified version of the subsection which remains faithful to its language and structure is this.
In the case of money … interest shall be computed from … the time specified in the judgment or order and if no time is so specified from the date of the judgment or order.
The construction I prefer is consistent with the fact that a judgment sum ordinarily is inclusive of pre-judgment interest and that the general[22] statutory entitlement to interest on the judgment sum thereafter is that conferred by section 114. In this case, the settlement sum of $650,000, as reflected in the court order, was expressed to have been inclusive of interest to the date of the order. From that point, the first plaintiff had given up her claim in exchange for this fixed sum and the defendant had the use and advantage of this sum until payment.
[22] In appropriate cases, other statutory interest regimes may apply in lieu or in addition, see for example, section 57 of the Insurance Contracts Act 1984 (Cth).
As against this latter consideration, in this case the settlement sum was not intended to be payable until a date, being “within” 28 days of execution by the defendant of a transfer in registrable form. By implication, it was expected that the defendant would receive the executed transfer in registrable form soon after supplying the same to the first plaintiff for execution within seven days of the order. This leaves open the question of whether or not, on the proper construction of the Judge’s order, a time as from when interest should be payable was in fact specified (if only by implication), being the date adopted by the first plaintiff (15 September 2017). I have not heard full argument on this issue and the first plaintiff in her written submission appears (at least by implication) to have conceded the point in favour of the defendant.
It may be (and I express no opinion about this) that the delays which occurred between the making of the order and the ultimate provision of the executed transfer in registrable form by the first plaintiff to the defendant were, in part or in whole, the fault of the first plaintiff. It may be, and again I express no opinion, that, as a consequence, the first plaintiff did not comply in some way with the court order and that this has caused delay to the defendant in securing the whole legal title to Annerley and, perhaps, prejudice. However, if this were so, it would simply give rise to a complaint on the part of the defendant independent from the question of the proper computation of interest payable. It would not give rise to a reason to interfere with the defendant’s obligation to pay interest computed in accordance with section 114(2)(a).
In my view, it is arguable that the first plaintiff is entitled to interest calculated at the rate of 7.5 per cent per annum for the period commencing on the date the order was pronounced in open court, 10 August 2017, until the date of payment. However, the first plaintiff has not pressed such a contention and has been content to proceed on the basis that a different commencement date for payment of interest (in effect, 15 September 2017) has been “specified” in the order. The first plaintiff claims an amount calculated from that date. I am satisfied that she is entitled to at least that amount and will allow the first plaintiff’s application to that effect.
Conclusion
I make the following orders.
1.The first plaintiff is entitled to receive out of the estate of Christopher Owen, on account of post judgment interest pursuant to section 114 of the Supreme Court Act 1935, the sum of $5,948.63.
2.The costs and disbursements of Judith Quick, as litigation guardian, and including those of independent counsel engaged by her are to be paid by the estate of Christopher Owen as an indemnity.
3.The costs and disbursements of the second plaintiff, Marion Owen (now her estate), are to be paid by the estate of Christopher Owen, if not agreed, to be adjudicated as between solicitor and client.
4.The costs and disbursements of the third plaintiff, John Owen, but excluding those of and incidental to the application, FDN 13, for the appointment of the first plaintiff as litigation guardian, are to be paid by the estate of Christopher Owen, if not agreed, to be adjudicated as between solicitor and client
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