Dunne v Radburn (No 2)

[2020] NSWSC 63

Supreme Court

New South Wales

Medium Neutral Citation:	Dunne v Radburn (No 2) [2020] NSWSC 63
Hearing dates:	3, 10 February 2020
Date of orders:	10 February 2020
Decision date:	10 February 2020
Jurisdiction:	Equity
Before:	Parker J
Decision:	See [23]
Catchwords:	COSTS – litigation concerning administration of deceased estate - Calderbank letter – based on ultimate distribution of estate – whether effective
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Dunne v Radburn [2019] NSWSC 607
Category:	Costs
Parties:	Vanessa Rose Dunne (Plaintiff) Brett Morton Radburn (Defendant)
Representation:	Counsel: A Kuklik (Plaintiff) R Weaver (Defendant)   Solicitors: Irongroup Lawyers (Plaintiff) Higgins Lawyers (Defendant)
File Number(s):	2017/95022
Publication restriction:	Nil

Judgment – EX TEMPORE

Revised and reissued 18 February 2020

1. This judgment deals with the costs of the proceedings. It assumes familiarity with my principal judgment delivered in May 2019: Dunne v Radburn [2019] NSWSC 607.

2. In my main judgment I made a declaration that the monies shown as loans to Vanessa and Brett in the inventory of the deceased's property attached to the grant of probate are debts owing to the estate. I dismissed Brett's cross-claim based on an alleged agreement to divide up the estate in a particular way.

3. These orders resolved the party's pleaded claims except for Vanessa’s claim concerning the future administration of the estate. Initially Vanessa had sought an order removing Brett as one of the executors which would have left her as the sole executrix, but at the trial she recognised that it might be necessary, given the ill feeling between herself and Brett, for an independent administrator to be appointed.

4. Following the delivery of judgment, lengthy negotiations took place between the parties. Brett's solicitors attempted to negotiate an agreement specifying figures for final distribution. This raised various issues as to the identification and valuation of estate assets and liabilities. Agreement could not be reached and eventually Brett's legal advisors accepted that an independent administrator should be appointed. In December, I made a consent order revoking the grant of probate to Brett and Vanessa and appointing Christopher Wood of L Rundle & Co in Sydney as administrator.

5. As I have mentioned, the remaining question in the proceedings, although not the sole question in the remaining administration of the estate, is costs. A costs hearing was fixed by agreement between the parties on 3 February. Prior to the hearing the parties exchanged written submissions; they then had an opportunity to supplement those submissions orally.

6. In the course of the hearing a question arose about the valuation of the properties in the estate (that is, Naringla and the three properties which eventually passed to the estate on the dissolution of the Farnleigh partnership). Counsel for Vanessa sought an adjournment so as to lead further evidence and make further submissions on this issue. I acceded to this application but ordered that Vanessa pay the costs thrown away. The matter has now come back before me today for final determination.

7. Counsel for Vanessa seeks an order that Brett pay Vanessa's costs of the proceedings. Counsel submitted that Vanessa has substantially succeeded in obtaining the relief she sought and in resisting the relief claimed by Brett on the cross-claim.

8. Counsel for Brett disputed this characterisation of the outcome. Counsel acknowledged that Vanessa succeeded on the loan issue and that this would result in Brett having to allow a figure of approximately $168,000 in her favour (half the difference between the deceased's loan to Brett and the deceased's loan to Vanessa). But counsel submitted that this had to be considered in the light of other adjustments.

9. Counsel stated that, of the four estate properties, Vanessa would receive two (Naringla and Martins), and Brett two (Fletchers and The Lease). Based on valuations from 2008 and 2009 which were in evidence before me in the principal hearing, this would result in an adjustment in favour of Brett of $81,000, leaving an overall adjustment in favour of Vanessa of only $87,000.

10. Counsel then referred to an offer of compromise made on 8 August 2018, shortly before the trial began. The offer provided that Brett would pay Vanessa the sum of $315,000 inclusive of costs. By way of clarification the following day Brett's solicitors stated that this was on the premise of what they described as “earlier negotiations”, namely that Vanessa would retain Naringla and receive Martins, and Fletchers and The Lease would be transferred to Brett. Although not expressly stated it is clear that the offer proceeded on the basis the proceedings would be dismissed.

11. This was not an offer in accordance with the provisions of the Uniform Civil Procedure Rules, but counsel for Brett relied upon it under the principles applicable to informal offers, often referred to as Calderbank offers. The offer was rejected by letter dated 9 August 2018, the day of the clarificatory letter from Brett's solicitors.

12. Counsel accepted that Brett should pay Vanessa's costs of the proceedings up to the date of the offer. But counsel contended that the offer was more favourable to Vanessa than the eventual outcome of the litigation would be. Counsel pointed out that under the offer Vanessa would receive $315,000 and counsel compared this with the $87,000 which it was said she would receive on the distribution of the estate. Counsel acknowledged that under the offer Vanessa would be left to bear her own costs but submitted that those costs were substantially less than the difference between $315,000 and $87,000. Counsel submitted that the offer should have been accepted and, accordingly, Vanessa should pay Brett's costs on an indemnity basis from the date of the offer onwards.

13. As I have mentioned, the valuations on which counsel's calculations were based were valuations of the properties as at 2008 and 2009. Supplementary evidence led on behalf of Vanessa included some more recent valuations. These were valuations in 2018 of the three former partnership properties undertaken in 2018 by another valuer, Mr Michael Begg. A brief update of each of the three valuations was obtained from Mr Begg a few days before the hearing.

14. The principles which govern the award of costs on failure to accept a Calderbank offer are not in doubt. The ultimate question is whether the rejection of the offer was unreasonable. Reasonableness must be judged in the circumstances the offer was made, looking ahead. At that time, of course, the result will not be known, but the actual result may cast light on what the offeree, properly advised, could or should have anticipated when considering whether or not to accept the offer.

15. In the present case, for the purpose of assessing the reasonableness of the offer, the argument by counsel for Brett treats the “event” as the ultimate distribution to be received by Vanessa from the estate. An immediate difficulty with this approach is that Vanessa's claims in the proceedings were not claims for specific sums of money. They were claims concerning the way in which the estate should be administered. The only aspect of the proceedings which would have resulted in certainty as to distribution of the assets or at least some of the assets, was Brett's cross-claim alleging a binding settlement agreement, and that cross-claim failed.

16. The Court must bear in mind that administration of an estate is not an end in itself; the ultimate purpose of the administration is the efficient realisation of the assets of the estate and their distribution to those entitled to them under the will. But at the same time it must be recognised that in an administration issues may arise, the financial implications of which are not clear. In my view, for the Court to judge the reasonableness of a party's conduct in responding to a settlement offer, and to award costs, on the basis of the ultimate distribution of the estate rather than success or failure on the issues actually litigated runs the risk of injustice. I do not say that the Court can never act on the basis of the refusal of a settlement offer of the type made in these proceedings. But in my view the Court should only act on such an offer where the evidence makes it clear that at the time the offer was made and rejected, the continued agitation of the issues in the litigation would, having regard to the terms of the offer, undoubtedly have been wasteful and unnecessary.

17. Whether the ultimate distribution of the proceeds of the estate should be based on the 2008 and 2009 valuations or on the 2018 valuations was not fully debated before me. Uninstructed by authority, I would suppose that the distribution should be calculated as at the date it is actually made. That would make the current value of the three ex-partnership properties applicable and Mr Begg's valuation would presumably be the best guide to what that current value is.

18. In the present case, the transfer of the Farnleigh Partnership properties was not agreed with the other partners until 20 February 2018, many years after the 2008 and 2009 valuations were undertaken and indeed some considerable time after the proceedings were commenced. Until that point it was not even certain that the estate would receive those particular properties. Even if the estate had received those properties it might have been necessary for cash adjustments to be made between the estate and the other partners. In my view, this supports the tentative conclusion that I have reached, namely that the Court can only sensibly calculate the party's share of the distribution at the time that it makes the actual distribution.

19. Counsel for Brett put forward an alternative calculation based on similar reasoning. He argued that at the time of the distribution of Naringla it represented 26 per cent of the value of the real property assets of the estate (treating the interest in the Farnleigh Partnership as real property assets). It followed, so counsel submitted, that Vanessa would only be entitled to receive 24 per cent of the remaining value of the properties as part of the distribution. Again, my tentative view is that it would be inappropriate to treat the distribution of Naringla in 2008 or 2009 as being mathematically comparable with the distribution of other rural assets more than a decade later. The fact is, as the valuations show, and as one would expect, that the properties which remain to be distributed have increased in value significantly over that period.

20. It hardly needs to be said, of course, that in calculating the distribution according to current value, allowance must be made for the fact that Vanessa has had the benefit of Naringla since 2009. By the same token, Brett might have to make allowance for income received from the partnership properties in the meantime, and from the delay in satisfying the debts to the estate from which he has disproportionately benefited. As I noted in my principal judgment, there have also been issues between the parties as to the valuation and distribution of certain items of farm equipment. So far as I can see on the evidence none of these matters of adjustment has been agreed in any final way and if, as it appears, they cannot be agreed, they will need to be determined by the administrator. There are also outstanding questions about the extent to which costs of Mr Higgins, Brett's solicitor, are chargeable to the estate.

21. It is not necessary to reach any final conclusion on whether the distribution must be calculated as at the date it is actually made, or on what adjustments are necessary. It is enough to say that it is unclear even now where the balance will lie. It would have been even less clear at the time the offer was made. Even if the evidence showed that the balance was likely to be in Brett's favour (which I do not think it does), in my view that would not be enough. The regrettable history of this case demonstrates that the parties have proved unwilling to agree on numerous issues, including some of very little value. Hindsight shows that when the offer was made in August 2018 the disputes between the parties had a long way to run and their financial outcome was unclear. I do not think that on any view of the facts it could be said that reasonableness required Vanessa, in response to Brett’s offer, to abandon the contentions on which she has ultimately been vindicated.

22. For these reasons I reject the argument by counsel for Brett based on the Calderbank offer.

23. The orders of the Court are:

1.   Order that the defendant pay the plaintiff’s costs of the proceedings including the costs of the cross-claim.

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Decision last updated: 19 February 2020