H, R T v E, C K (No 2)
[2009] SADC 96
•4 September 2009
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
H, R T v E, C K (No 2)
[2009] SADC 96
Judgment of His Honour Judge Tilmouth
4 September 2009
FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS
Costs - property adjustment proceedings pursuant to s 10 and 11 of the De Facto Relationships Act (1996). Discussion of the meaning of costs to follow the "event". Discussion of the effect of an informal offer to settlement under 6DCR 263(3).
Interest - plaintiff's claim effectively for a monetary sum - both parties conducted the trial on basis that a monetary sum was payable to plaintiff - award of interest not appropriate in the circumstances of the case.
H, RT v E, CK [2009] SADC 76; De Facto Relationships Act 1996 (SA) ss 10, 11; District Court Act 1991 ss 39, 42; Johnson v Perez (1988) 166 CLR 351; Batchelor v Burke (1981) 148 CLR 448; Hungerfords v Walker (1988) 171 CLR 147; Arnold v Dalton (2003) 84 SASR 482; District Court Civil Rules 2006 6R 187, 263, referred to.
Wilson v Vater (No 1) (2008) 252 LSJS 444; M, DA v P, N (No 2) [2008] SADC 180; Hogg v Roberts (2003) 87 SASR 248; Forlyle Pty Ltd v Tiver (2007) 252 LSJS 387, discussed.
H, R T v E, C K (No 2)
[2009] SADC 96The issues
Judgment was delivered in this matter arising under the De Facto Relationships Act 1996 (SA) on 24 July 2009.[1] The court made orders requiring the transfer of a property at Roxby Downs to the defendant upon the payment by her to the plaintiff of $160,000. There were other subsidiary orders, but these were at the core of the judgment. The plaintiff now seeks interest on that sum, as well as costs of the action. This judgment deals with those subsequent issues.
[1] H,RT v E,CK [2009] SADC 76
The judgment of the court
The order for the payment of $160,000, was an order “for the division of property” within the meaning of s 10 of the Act and one made under s 10(2)(c) thereof. Section 10 provides:
(1) On an application for the division of property, the court may make orders it considers necessary to divide the property of either or both the de facto partners between them in a way that is just and equitable.
(2) For example, the court may make orders for –
(a) the transfer of property from one de facto partner to the other; or
(b)the sale of property and the division of the net proceeds between the de facto partners in proportions decided by the court; or
(c) the payment by one de facto partner of a lump sum to the other.
The order was based on findings that as of the purchase of the Roxby Downs property in early February 2005, the overall contributions by the parties expressed in monetary terms, were 1/3 by the plaintiff and 2/3 by the defendant.[2] Adjusted to present day value, the measure of the defendant’s contribution was assessed at $145,000. A further adjustment of $15,000 was made in favour of the plaintiff on account of the defendant’s sole occupation of the house after he ceased living there from around mid-June 2007.
[2] At [43]
The question of interest
The power to award interest is vested by s 39 of the District Court Act 1991 (SA). This provides:
39—Pre-judgment interest
(1) Unless good reason is shown to the contrary, the Court will, on the application of a party in whose favour a monetary judgment has been, or is to be, given include in the judgment an award of interest in accordance with this section.
(2) The interest—
(a) will be calculated at a rate fixed by the Court; and
(b)will be calculated in respect of a period fixed by the Court (which must, however, in the case of a judgment given on a liquidated claim, be the period running from when the liability to pay the amount of the claim fell due to the date of judgment unless the Court otherwise determines); and
(c)is, in accordance with the Court's determination, payable in respect of the whole or part of the amount for which judgment is given.
(3) The Court may, without proceeding to calculate interest under subsection (2), award a lump sum instead of interest.
The application of s 39 is triggered by the entry of a “monetary judgment”. Further, where judgment is given on a liquidated claim, interest ordinarily applies from the date when the liability first arose, unless the court determines otherwise. In the bulk of actions involving tortious or contractual damages for instance, there is normally little difficulty in calculating interest from the date of breach, although of course the court retains a discretion to calculate damages at some other point in time: Johnson v Perez.[3]
[3] (1988) 166 CLR 351 a5 [355-356]
However this is not such a cause. The De Facto Relationships Act creates a statutory cause of action. When an order is made pursuant to s 10(2)(c), the liability to pay a lump sum so ordered, arises only when judgment is entered. In Wilson v Vater (No 1),[4] Judge Lunn SCM held an action under the Domestic Partner’s Property Act 1996 (SA), was not one based on a “monetary claim”. There is no material difference between an action under that Act and an action under the De Facto Relationships Act. As His Honour noted, such claims are “statutory causes of action conferred by the Act”.[5] He then continued:
[13] The primary power of the Court under ss 9 and 10 is to make a division of property between the parties. A judgment in monetary term is only one of several possibilities under s 10(2)(c). The Court may well resolve an action under the Act without giving any judgment in monetary terms. Therefore, it cannot be said that an action which only involves the Act can be an action based on a monetary claim. Here the plaintiff in her statement of claim has not specifically sought any judgment in monetary terms.
[4] (2008) 252 LSJS 444; [2008] SASC 7
[5] At [12]
I agree with this analysis, so that at first sight, s 39(1) of the District Court Act simply does not apply. Even if it did, the claim is not properly characterised as one “given on a liquidated claim” so the primary principle erected by s 39(2)(c) is not attracted.
Nevertheless the plaintiff’s counsel supported the application for an award of interest by reference to the decision of Judge Beazley in M, DA v P, N (No 2).[6]His Honour earlier made a similar property adjustment order expressed as a lump sum, of $650,000. He later awarded interest on that sum from 4 September 2007 of $52,800, that date being the last day of the trial.[7] As a question of principle his Honour approached the question on this footing:[8]
Where the claim is in effect for a monetary sum following an adjustment of property interest should run from the date of trial. The valuations of the property are fixed as at trial. The date of trial is the time at which the Court determines whether an adjustment ought be made. To this extent relief sought under section 10 of the De Facto Relationships Act differs from common law claims for a monetary sum.
[6] [2008] SADC 180
[7] At [13]
[8] At [9]
With respect I also agree with that approach. In M, DA v P, N (No 2)[9] the Court found “the fact remains that the plaintiff has been kept out of a monetary entitlement” before making the interest award.[10] This is not the position in this case. In the instant litigation the parties effectively sought a division of property by the payment of a lump sum. The plaintiff made no claim for the transfer of the Roxby Downs property to him, and for her part the defendant laid no claim to his Hahndorf property. The question always was how much, if any, the defendant should have to pay in order to secure a full legal interest in Roxby Downs. The pleadings were framed in this way, the trial conducted with that outcome in mind on both sides and the final submissions were wholly consistent with that approach.
[9] [above]
[10] At [12]
That being so, there is no reason to suppose the primary order was in substance other than in the nature of a “monetary judgment” for the purposes of s 39. Despite this conclusion it follows from the above analysis that in claims of this kind, because of the peculiar nature of the remedy and the underlying requirement to adjust property interests as they stand as at the date of trial, pre-judgment interest would not be applicable as a general rule.
An award of interest is not appropriate in the circumstances of this case for three reasons. In the first place, the plaintiff’s entitlement was calculated at present day value. An award of interest is designed to protect parties from the erosion in value of their monetary claims with the passage of time, where the party is kept out of the use of money that ought to have been paid earlier: Batchelor v Burke.[11] To express it another way, interest is awarded as “some protection against the late payment of damages”: Hungerfords v Walker.[12] As the appropriate “lump sum” was calculated beginning with the position when Roxby Downs was purchased and brought up to date by means of the occupation fee to the date of the trial, there is no occasion for awarding interest on the merits. In no sense has the plaintiff been kept out of the use of money.
[11] (1981) 148 CLR 448 at 454-455
[12] (1988) 171 CLR 125 at 147
The second reason is that interest under s 39 usually runs from the time liability first arises and flows through to the date of judgment. These dates are one and the same in the present situation. Thirdly, the action is not properly characterised as a liquidated claim. Although that conclusion does not impinge on the power to award interest, it does in respect of the date when interest commences to apply. It is true that in Hogg v Roberts,[13] a small lump sum award for interest was made, but it is not clear why it was so.[14] The question was not discussed, nor was it stated how the sum was calculated. As it was a relatively small amount of $800, it seems to have been made to protect the judgment sum ultimately entered on appeal, from the time of judgment at first instance.
[13] (2003) 87 SASR 248
[14] At 87 SASR 248 at [57]
It is not appropriate to award interest on the extra $15,000 allowed for occupation, because that was calculated on the basis of present day rental capacity. However, as the plaintiff has been otherwise kept out of his money since 24 July 2009, interest will be allowed on $161,000 over six weeks at the rate of 6.5 per cent to the date of this judgment, in the lump sum of $1,300.
Costs
Both parties seek orders for costs in their favour, the plaintiff on an indemnity or solicitor and client basis from the time proceedings were issued. Section 42(1) of the District Court Act (above) vests a wide and unfettered discretion to award costs.
The plaintiff made several offers to settle, to which there was no response, at least in a form which was provable before the court. The court has found he was effectively precluded from living in the joint home, so for all practical purposes he was forced into taking action. However the issue does not rest there.
Under 6R 263 of the District Court Civil Rules (2006), “as a general rule, costs follow the event”. Sub-rule 263(2) contains a number of exceptions not otherwise relevant. The Full Court in Forlyle Pty Ltd v Tiver,[15] held that: [16]
“… the general rule is that a successful party has a reasonable expectation of obtaining an order for costs unless for some reason connected with the case a different order was specially warranted”.
[15] (2007) 252 LSJS 387; [2007] SASC 464
[16] At [29] per DeBelle J, Sulan and Vanstone JJ agreeing
The intent of 6R 263 is that the party who on the whole succeeds should normally have to costs of the action: see Master Norman “Legal Costs South Australia Butterworths para 1172, Reid Hewitt & Co v Joseph.[17] The plaintiff’s predicament was akin to that in Forlyle Pty Ltd v Tiver, where the plaintiff “had no alternative but to bring the proceedings”.[18]
[17] [1918] AC 171
[18] At [28]
There is an issue as to precisely what “the event” means in this instance. Counsel for the plaintiff maintained that he was the successful party, as he won a property adjustment order expressed in money terms, which he had always sought. The defendant consistently denied he was entitled to any such order. The defendant on the other hand submitted that as the parties came to court holding a 50 per cent joint legal interest in the Roxby Downs property, and as the defendant acquired a full legal interest as a consequence of the proposed division of property, the defendant should be considered to be the successful party, the “event” having fallen in her favour.
This latter stance misunderstands the nature of the action and the effect of the orders proposed. As to the former, the event enlivening the discretion to make an order for costs, is the making of a property adjustment order, an order which the plaintiff sought and obtained. Viewed objectively, he was the successful and the defendant was losing party.
Second, to determine what “the event” is, does not commence by comparing the antecedent legal position, with the ultimate outcome. Although of course the defendant was in the eyes of the law of real property an equal half owner as joint tenant in the Roxby Downs property, that interest was always subject to the interests of the plaintiff under the De Facto Relationships Act. Her strict legal interest was always subject to his statutory entitlements. The court valued his interest in Roxby Downs at $145,000, against her insistent position that he held no interest or other entitlement in it at all. In that sense she failed to persuade the court to award her a full legal interest in the property, to the exclusion of the plaintiff, without first paying the plaintiff a substantial sum. Thus it was the plaintiff who was relevantly successful. The submission of the defendant should therefore be rejected on that topic.
The offer to settle
The plaintiff has proven an offer to settle the action, filed on 25 June 2008. This purported to be made pursuant to 6R 187. The terms proposed were the payment within 30 days to him of $186,000, inclusive of interest, “plus costs to be agreed or taxed”. There were other mechanical aspects which are irrelevant for the present purpose. 6R 187(3)(d) provides that an offer made under the rules must:
state whether the party to whom the offer is made may accept the offer of principal without also accepting the offer as to costs.
This offer did not do that. Further it was significantly in excess of the $161,000 judgment proposed by the court. Accordingly, not only was it made in breach of a mandatory requirement of the rules, it was in terms more favourable to the plaintiff than the terms of the court’s order, so the consequences of the defendant’s failure to accept the offer are not attracted. Rule 6R 188(6) provides:
188(6) If a formal offer of settlement so far as it relates to principal relief is not accepted by the party to whom the offer is made and the Court determines the relevant action or claim on terms (as to principal relief) that are no more favourable to the party than the terms of the offer, then, subject to the Court's order to the contrary—
(a)the party to whom the offer was made is not to be entitled to costs referable to the period falling after the relevant date; and
(b) the party that made the offer—
(i)if a defendant—is entitled to costs referable to the period falling after the relevant date; and
(ii)if a plaintiff—is entitled to the whole of the party's costs of action on a solicitor/client basis and the defendant is not entitled to any costs not otherwise ordered.
The application by the plaintiff for costs on a solicitor/client basis on account of this offer must therefore fail.
Matters are further complicated because of a second offer made by the plaintiff, by letter dated 19 May 2009. This proposed payment by the defendant of $150,000 “and in addition thereto, $80,000 to cover costs and interest”, within 30 days. This proposal was delivered in the shadow of a resumed hearing, set to recommence some two weeks later, on 1 June 2009. It is to be recalled the trial commenced on 24 March and continued over six sittings days, resuming for a further six sitting days, ending on 9 June 2009.
This second offer did not on its face purport to invoke the rules, and it would have failed to comply in any case, for the same reasons the first was non-compliant. The defendant gave no formal response, despite a reminder on 28 May 2009, which left the offer open for acceptance until 4pm on Friday 29 May 2009. That was the last business day before the trial was due to resume.
On the other hand, this offer was close to and in fact on terms less favourable to the plaintiff than he ultimately achieved under the terms of the court judgment, at least in terms of principal relief. In exercising the discretion vested by 6R263(3), the court may “have regard to any offer to consent to judgment or other attempt to settle the action or an issue involved in the action.” Thus the court is not precluded from considering offers that do not comply with the formal requirements of the Rules. This second offer was wholly reasonable in the circumstances. It was one capable of acceptance, either as to the primary relief, or as to costs, or both. It merited a substantial response in view of the length of time the proceedings had taken already, the sum of money potentially at stake, and the limited nature and scope of the orders sought by the parties.
In the wake of this background, the question is what order for costs is appropriate? The plaintiff’s case was unrealistic. As mentioned in the principal judgment, he sought to prove contributions to the relationship through tables provided to the defence on the first day of the trial. By trials end his counsel formulated a claim for the payment to him of some $277,000. His manner of presentation locked the defendant into responding to the schedules and consequently extended the length of the hearing. Both parties embarked upon a mode of proof contrary to the approach suggested by the authorities: Arnold v Dalton[19] and Hogg v Roberts.[20]
[19] (2003) 84 SASR 482 at [25]
[20] (2003) 87 SASR 248 at [17]
The defendant’s case was not without its blemishes either. Her manner of proof was non-specific. She was totally unresponsive to any offer throughout the proceedings and doggedly denied the entitlement by the plaintiff to a monetary adjustment. In his closing submission, the defendant’s counsel maintained that she should keep the Roxby Downs property and the plaintiff keep the Hahndorf property. Had things stood there, the only appropriate order was that each party bear their own costs of the proceedings.
Things stand quite differently, however, following the second offer, preceding the resumption of the trial between the 1st and 9th June 2009. A great deal of the evidence had been advanced by that stage. The plaintiff’s case was fully exposed and substantially tested under cross-examination. The defendant was in an ideal position to know exactly what the case against her was and what the risks were. The second offer was very close to the mark in terms of principal relief and apposite in point of time. Her failure to respond in any respect and to continue to resist to the bitter end, on a basis that was ultimately rejected, tells heavily against her. From this point onwards in the combined circumstances, it is clearly appropriate to give effect to the policy lying behind 6R 263. Accordingly as to the second part of the trial, the plaintiff should have his costs on a party/party basis, as and from 4pm Friday 29 May 2009.
Orders
Consistent with the above reasons, there will be orders in terms as substantially drafted by the parties (with some minor drafting changes) as follows:
THE COURT ORDERS THAT:
In full and final settlement, satisfaction and redemption of any claim that either party may have against the other for settlement of property and alteration or interests in property arising out of law and equity, including but not limited to the Domestic Partners Property Act 1996 (SA)
1.Within 30 days of the date hereof the defendant do pay to the plaintiff the sum of ONE HUNDRED AND SIXTY THOUSAND DOLLARS ($160,000) plus interest in the amount of ONE THOUSAND DOLLARS ($1,000) by way of bank cheque made payable to TINDALL GASK BENTLEY TRUST ACCOUNT for and on behalf of the plaintiff.
2.Contemporaneously with the payment to the plaintiff referred to in paragraph 1 hereof, the plaintiff do deliver up to the defendant a Memorandum of Transfer, in registrable form of all the plaintiff’s right, title, estate and interest in the property situated at 18 Wangianna Street Roxby Downs in the State of South Australia, being the whole of the land comprised and described in Certificate of Title Register Book Volume 5199 Folio 848 (herein called “the Roxby Downs property”) to the intent that after payment as provided for in paragraph 1 hereof, the defendant shall be entitled to be the registered proprietor thereof free from any claim by the plaintiff hereinafter.
3.Henceforth the defendant shall discharge to the exoneration of the plaintiff all payments of principal and interest accruing or arising pursuant to any registered mortgage or charge over the said property and the defendant shall indemnify the plaintiff and hold the plaintiff forever indemnified with respect thereto.
4.In default of the defendant paying to the plaintiff either all or part of the sums provided for in paragraph 1 hereof, the defendant shall pay interest on such unpaid monies due to the plaintiff, such interest to be at the rate prescribed from time to time by the Rules of Court pursuant to s 40 of the District Court Act 1991 (SA) payable to the plaintiff as and from the date on which such payment or payments fall due and until payment has been made.
5.In the event the defendant shall default in the payment of all or part of the sums referred to in paragraph 1 hereof and such default shall continue for a period of THIRTY (30) days, the Roxby Downs property shall be sold on such terms as the parties may agree and in default of agreement as ordered by the court, the net proceeds of sale together be applied as follows:
(a) in payment of all costs of and incidental to the sale of the said property including Land Agent’s fees, conveyancing costs and the costs of discharging any mortgage thereon;
(b) as to the sum of ONE HUNDRED AND SIXTY ONE THOUSAND THREE HUNDRED DOLLARS ($161,300) referred to in paragraph 1 hereof, by way of bank cheque payable to TINDALL GASK BENTLEY TRUST ACCOUNT for and on behalf of the plaintiff;
(c) the balance to the defendant.
6.The plaintiff transfer to the defendant all his right, title, estate and interest in the Toyota Avalon motor vehicle registration number WWL 443 to the intent that the defendant be the owner thereof free from claim by the plaintiff hereinafter.
7.The defendant transfer any interest she may have in the plaintiff’s business COOINDA ELECTRICAL to the plaintiff subject to the plaintiff indemnifying her in respect of all costs and liabilities arising therefrom including but not limited to taxation liabilities.
8.Other than as specified herein, all the property hereafter in the possession of the plaintiff, including but not without limited the generality thereof:
(a) the property located at 3 Johns Lane, Hahndorf in the State of South Australia being the whole of the land and improvements thereon comprised and described in Certificate of Title Register Book Volume 5648 Folio 976;
(b) any motor vehicle currently in his possession;
(c) any monies standing to his credit in any financial institution;
(d) all life insurance, life assurance policies and superannuation entitlements currently in his name;
(e) all items of personalty including furniture currently in his possession; and
(f) any other item of property whether real or personal of whatsoever nature and whatsoever source currently in his possession;
shall be the sole property of the plaintiff free of any claim by the defendant.
9.Other than as specified herein, all the property hereafter in the possession of the defendant, including but without limiting the generality thereof:
(a) any motor vehicle currently in her possession;
(c) any monies standing to her credit in any financial institution;
(d) all life insurance, life assurance policies and superannuation entitlements currently in her name;
(e) all items of personalty including furniture currently in her possession; and
(f) any other item of property whether real or personal of whatsoever nature and whatsoever source currently in her possession;
shall be the sole property of the plaintiff free of any claim by the defendant.
10.The parties shall do all such acts and things and duly execute all such documents as may be necessary to give effect to the terms of this order.
11.The parties shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to this order.
12.The defendant pay the plaintiff’s costs incurred as and from 4pm on Friday 29 May 2009 on a party/party basis, such costs to be agreed or taxed.
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