Horn v GA & RG Horn Pty Ltd (No 2)

[2022] NSWSC 1747

Supreme Court

New South Wales

Medium Neutral Citation:

Horn v GA & RG Horn Pty Ltd (No 2) [2022] NSWSC 1747

Hearing dates:

5 December 2022

Date of orders:

16 December 2022

Decision date:

16 December 2022

Jurisdiction:

Equity

Before:

Meek J

Decision:

Orders made to give effect to estoppel findings and costs orders made

Catchwords:

ORDERS — Discussion regarding orders to give effect to findings in respect of successful estoppel claim

COSTS — Meaning of event — Discussion regarding whether claims of husband and wife plaintiffs were substantively different claims such that a discrete costs order should be made in respect of a claim dismissed that that the wife was entitled to the benefit of a particular representation – Discussion regarding whether the company the subject of the estoppel the claimed shares and claimed property was an active defendant or whether the widow of the deceased who was under the deceased’s last Will gifted the deceased’s shareholding in the company was the main active defendant

COSTS — Offers of compromise — Whether offer valid — Meaning of must not include an amount for costs in r 20.26(2)(c) UCPR

COSTS — Offers of compromise – Approach to assessment of whether judgment outcome is “no less favourable” than offer in r 42.14(1) UCPR — Court approaches issue substantively

COSTS — Claims for indemnity costs — Reasons to order otherwise — Consideration of various contentions regarding plaintiffs’ conduct of proceedings

COSTS — Set off — Whether costs in proceedings should be set off

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Supreme Court Rules 1970 (NSW)

Succession Act 2006 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Australian Receivables Ltd v Tekitu Pty Ltd(subject to deed of company arrangement) (deed administrators appointed) & Ors [2011] NSWSC 1425

Black-Tie Holdings Pty Ltd (No 2) [2022] NSWSC 856

Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333

Cretazzo v Lombardi (1975) 13 SASR 4

D Capital 2 Pty Ltd v Western (No 2) [2022] NSWSC 1283

Diamond v Simpson (No 4) [2004] NSWCA 57

Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20

Horn v GA & RG Horn Pty Ltd [2022] NSWSC 1519

Hughes v Western Australian Cricket Association (Inc) & Ors (1986) ATPR 40–748

Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391; 18 ANZ Insurance Cases 62-049

Lewis v Cummings (Federal Court of Australia, Wilcox J 29 May 1992, unrep)

Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (Full Court of the Federal Court of Australia, 29 August 1995, unrep)

Meares v Meares (No 2) [2017] NSWSC 523

New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100

Ryan v South Sydney Junior Rugby League Club Ltd [1975] 2 NSWLR 660

Skalkos v Assaf (No 2) [2002] NSWCA 236

Wentworth v Wentworth [1996] NSWCA 553

Whitney v Dream Developments Pty Ltd [2013] NSWCA 188

Windsurfing International Link v Petit [1987] AIPC 90–441

Ye v Chen [2022] NSWSC 494

Texts Cited:

Richie’s Uniform Civil Procedure NSW (LexisNexis Butterworths)

Category:

Consequential orders

Parties:

Michael George Horn (First Plaintiff)
Adele Ruth Horn (Second Plaintiff)
GA & RG Horn Pty Ltd (First Defendant)
Barbara Constance Horn (Second Defendant)

Representation:

Counsel:
C Mantziaris (Plaintiffs)
N Simpson (Defendants)

Solicitors:
Arnold Lawyers (Plaintiffs)
Tranter Lawyers (Defendants)

File Number(s):

2021/75707

JUDGMENT

Introduction

1. HIS HONOUR: These proceedings were heard over 12 days in September and October 2022.

2. Following submissions, the last of which were received on 26 October 2022, on 10 November 2022, I delivered reasons for judgment upholding the first plaintiff’s estoppel claim: see Horn v GA & RG Horn Pty Ltd [2022] NSWSC 1519 (principal judgment).

3. These reasons assume a familiarity with the principal judgment and will adopt its abbreviations.

4. I directed the parties to submit short minutes of order to give effect to the reasons for judgment, including as to costs, or if there was no agreement between them, their respective draft orders, submissions (not exceeding five pages) and any affidavits.

5. The plaintiffs provided a draft of outline submissions, a draft of short minutes of order and an affidavit of Mr Slattery sworn 23 November 2022 (Slattery affidavit), which affidavit addresses the issue of costs.

6. Following a request on behalf of the defendants for further time to provide submissions, which I permitted, on 2 December 2022, the defendants provided submissions on orders and costs.

7. I will refer to the respective party submissions on the forms of order and costs as “PSOC” and “DSOC” respectively.

8. On 5 December 2022, the matter was listed to permit the parties to speak to the submissions.

9. Broadly speaking there are two matters to be addressed namely:

1. the orders to give effect to my findings regarding the estoppel claim; and

2. the appropriate order to make for the costs of the proceedings.

10. This judgment addresses those issues.

Substantive orders

11. As between them, the parties are in agreement regarding orders to give effect to my findings in respect of the estoppel claim and also in relation to the family provision claim.

12. Subject to some comments, I will make those orders which are essentially appropriate, and in light of the agreement of the parties I propose to make orders 1, 2, 3 and 6 in the short minutes of order proposed by the plaintiff.

Estoppel claim orders

13. The plaintiffs proposed three orders to address the Court’s findings in respect of the estoppel claim:

1. an order (order 1) addressing the date on which the deceased held his shares in the company on trust for Michael, and the capacity in which Barbara is said to hold the shares;

2. a mechanical order (order 2) to give effect to order 1; and

3. an undertaking (order 6) to reflect my findings regarding the $817,417 amount.

14. In relation to the dating for the recognition of the constructive trust, the plaintiffs submit that the Court made no finding as to the precise date of its creation. That is true. The reason for that is, as recorded in the principal judgment, that the timing at which the constructive trust might arise was not the subject of specific submissions: principal judgment [1267].

15. In the judgment I referred to caselaw which sets out the general position as to when equity will regard, in an estoppel context, that the relevant constructive trust has come into existence: principal judgment [1268]-[1270].

16. In particular, there is a focus on the time at which the plaintiff acts in reliance upon the promise or expectation such that it later becomes unconscionable or unconscientious for the promisor, or the inducer of the expectation, to resile from it.

17. The plaintiffs submit that a number of dates are suggested by the reasoning in the principal judgment in relation to the dates of detrimental reliance. Those dates (or more precisely years or months) refer to reliance as at 2004, 2010 and 2017 (or September 2017).

18. The plaintiffs submit that the least controversial date for the recognition of the constructive trust is the date of the deceased's death (20 March 2020) and, if that is not accepted, then 1 September 2017, or as a third alternative, 31 December 2010: PSOC [4].

19. The defendants agreed with the proposed order of recognising the constructive trust as at the date of the deceased’s death.

20. I accept as a general proposition that there is, in terms of recognising when the trust arises, a focus upon acts of reliance. On the facts of this case, however, although there was clearly reliance by Michael at the times that I have mentioned in the principal judgment (including relevantly from a point in or after 1991 – see [1016]), there was also an evolving aspect to the arrangements between Michael and the deceased which impacted on the issue of whether it was unconscionable for the deceased to depart from his promises.

21. The evolving aspect included, on the deceased’s part, statements at a number of times not pressing for certain payments that had been proposed to be made and, as I found, steps taken by Michael from about September 2017 consequent upon the deceased raising with the plaintiffs the notion of making provision for Nick by means of the Gostwyck Flats: e.g. principal judgment [1064]ff.

22. Michael, for his part, attempted to accommodate the deceased’s requests: principal judgment [676], [1051], [1066] and [1078].

23. Up until shortly before his death, when the deceased changed his Will on 15 March 2020, the deceased had not acted unconscionably and there was a sense in which the proceeds of Gostwyck Sold were being appropriated for the benefit of Danika in a way which the plaintiffs, or at least Michael, proposed following receipt of various professional advices.

24. It seems to me that in the context of the evolving dialogue between Michael and the deceased regarding the properties, which even in relation to Gostwyck Remnant was still evolving up until the deceased’s death, the appropriate time to recognise the trust is the date of the deceased’s death (as the parties’ propose).

25. In submissions on the orders, and this was further discussed with counsel for the parties, neither counsel put any different position other than it should be recognised at the date of death: T 1105.

26. I propose to do that.

27. In relation to proposed order 1(b), it is uncontroversial that the capacity in which Barbara currently holds the share should be recognised as being in her capacity as administrator of the deceased’s estate.

28. Dr Mantziaris described his proposed orders dealing with delivery of a share transfer, registration of the share transfer and transfer of the books and records as being of a mechanical nature intended to reflect the Court’s reasoning and conclusions.

29. Certainly, orders 2(a) and (b) fall into that category.

30. In relation to the transfer of books, records and seal of the company to Michael, minds may differ as to whether that is appropriately “mechanical”.

31. Books, records and the seal of the company are not ordinarily delivered up to one of various shareholders of the company.

32. Nonetheless, Mr Simpson agrees that the order is appropriate (I assume in a practical sense), and in the circumstances I consider that it is appropriate to make that order.

33. Order 6 regarding the undertaking is properly consequential upon my finding that relief should be given to Michael conditioned upon acceptance of the profit undertaking: principal judgment [1332].

Family provision claim

34. The plaintiffs’ proposed orders include an order dismissing Michael’s family provision claim (order 3). The defendants agree that such an order should be made.

35. There is no issue about dismissal, and I will make that order.

36. There is an issue regarding the cost of the family provision claim and I will address this below.

Costs orders proposed by the parties

37. The main contention between the parties relates to the appropriate costs orders to be made in the proceedings.

38. The plaintiffs submit the appropriate orders are as follows:

1. that Barbara pay Michael’s costs on a “party/party” (i.e. ordinary) basis as assessed or agreed for the period up until 14 May 2021 and thereafter on an indemnity basis as agreed or assessed; and

2. that there be no order as to costs in relation to the company with the intent that it bears its own costs.

39. The defendants opposed the plaintiffs’ proposed costs orders: DSOC [2].

40. The defendants, in their written submissions as to proposed costs orders, argue as follows:

“16. The defendants submit that the totality of the above issues suggests that an apportionment of any costs the first plaintiff is entitled to is warranted in the circumstances. The assessment of any apportionment of costs is a matter of impressionistic discretionary evaluation. The defendants submit that having regard to the extent of the issues abandoned or not pursued by the first plaintiff, and that these issues occupied a significant amount of time both in preparation for the hearing as well as during the hearing, any order for costs in favour of the first plaintiff should be limited to 50% of the first plaintiff’s costs on the ordinary basis and should exclude any costs in respect of Day 2 of the hearing, which was effectively lost due to the plaintiffs’ conduct in connection with late production of documents. The defendants submit that it would be appropriate in the circumstances that the plaintiffs be ordered to pay the defendants costs thrown away in relation to Day 2 of the hearing.

17. As to the second plaintiff’s claim, the issues relied upon by the second plaintiff are clearly separate and distinct to the issues relied upon by the first plaintiff. There appears no reason to deviate from the general rule and order the second plaintiff to pay the defendants costs in respect of the second plaintiff’s claims.”

41. During the listing on 5 December 2022, Mr Simpson modified those submissions more particularly and clarified the nature of the orders for costs sought.

42. Mr Simpson submitted that the appropriate costs orders are as follows (T 1107):

1. the defendants (plural) pay 50% of Michael’s costs on the estoppel claim on the ordinary basis (excluding any costs in respect of day two of the hearing and the family provision claim);

2. Adele pay the defendants’ costs in respect of her claims.

43. In relation to the family provision costs, Mr Simpson proposed that they be addressed in one of two ways. First, they could be included as part of the discount to his proposal that the defendants pay 50% of Michael’s costs on the estoppel claim and alternatively that Michael pay the estate’s costs of the family provision claim: T 1107.

Cost principles

General principles

44. In the matter of Black-Tie Holdings Pty Ltd (No 2) [2022] NSWSC 856, I addressed principles regarding costs.

45. I stated there as follows:

44. Costs are in the discretion of the Court, subject to the Civil Procedure Act 2005 (NSW) (CPA), rules of Court and any other Act: s 98(1)(a) CPA.

45. The Court has full power to determine by whom, to whom and to what extent costs are to be paid: s 98(1)(b) CPA.

46. The Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis: s 98(1)(c) CPA.

47. An order for costs may be made by the Court at any stage of the proceedings or after the conclusion of the proceedings: s 98(3) CPA.

48. The general position is that if the Court makes any order as to costs, the Court is to order that the costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs: r 42.1 UCPR.

…

51. Generally costs payable to a party under an order of the Court are to be assessed on the ordinary basis: r 42.2 UCPR.

52. The UCPR provides a regime by which offers of compromise may be served, in which case there is what is described under the rules as an entitlement in a party who has obtained a favourable outcome, having regard to the terms of the offer, to have costs assessed on an indemnity basis, unless the Court orders otherwise: e.g. r 42.15 UCPR.

53. The proper exercise of the discretion for costs will clearly have regard to the reason for dismissal of the proceedings in any given case: Ritchie's Uniform Civil Procedure NSW at [42.20.10].

54. The position in relation to offers outside the offer of compromise regime, being offers expressed to be without prejudice except as to costs and relied upon in accordance with the principles in Calderbank,is that there is no prima facie entitlement in a party who has achieved a favourable outcome under the terms of the offer to an indemnity costs order in its favour. Rather, the making of a Calderbank offer is one of a number of circumstances the Court takes into account in exercising its discretion to make an order for costs on an indemnity basis.

55. A Calderbank offer, per se, will generally speaking not justify an order for indemnity costs unless the offer is a genuine offer of compromise and its rejection is unreasonable: e.g. Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [7]; Ying v Song [2011] NSWSC 618 at [26] per Ward J (as her Honour then was).

56. There is an onus on the party making the Calderbank offer to satisfy the Court that it should exercise the costs discretion in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26]. The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ.

57. There are numerous cases of awards of indemnity costs where a party has engaged in inappropriate conduct (such as misleading the Court; maintaining proceedings that are known to have no real prospects of success, maintaining proceedings for an ulterior purpose) or engaged in conduct that has caused unreasonable delay and expense in the proceedings. However, subject to what I note below, there is no suggestion that any of those sorts of considerations apply here.

58. Nonetheless, it is recognised that a prehearing settlement offer which encourages a reasonable settlement of the claim and where the offeree has obtained an outcome significantly less favourable consequent upon the hearing to the outcome offered prehearing may, in appropriate circumstances, give rise to an order for indemnity costs: e.g. Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425.

46. An order for costs is not awarded by way of punishment of the unsuccessful party. Costs are compensatory in the sense of being awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 per Mason CJ.

Plaintiff’s offer of compromise not accepted: r 42.14 UCPR

47. In relation to offers of compromise, the relevant provisions are contained in r 42.14 UCPR.

48. Rule 42.14 deals with the situation where an offer of compromise has been made in accordance with the UCPR by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order on the claim no less favourable to the plaintiff than the terms of the offer.

49. Rule 42.14(2) provides as follows:

(2)  Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim—

(a)  assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b)  assessed on an indemnity basis—

(i)  if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii)  if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

Determinations regarding offers of compromise

50. In Meares v Meares (No 2) [2017] NSWSC 523 at [43]-[44], Hallen J indicated that the question for determination regarding the effect of what is said to be an offer of compromise involves a two-stage process. His Honour stated as follows:

43. From the authorities, it appears the question for determination regarding the effect of what is said to be an Offer of Compromise involves a two-stage process. The first stage is to enquire whether the offer made is an ‘Offer of Compromise’ at all, within the meaning of the UCPR. This will depend, in part, on whether it satisfies the formal requirements laid down by UCPR rule 20.26. It also depends, in part, on whether the offer made is one that can truly be called a “compromise”.

44. If the court concludes that the offer which is made is an “Offer of Compromise” within the meaning of the Rules, and that the offer made is one that can truly be called a compromise, then UCPR rule 42.15A(2) operates to establish a ‘default’ position, relevantly that, if the defendant obtains a judgment no less favourable than that which the defendant had offered to accept, then indemnity costs would follow. It is then that the second stage of the process arises, in that the court can “otherwise order”. The court will “otherwise order” if it is persuaded that is appropriate, in the interests of justice, that the “default” position ought not apply: Manly Council v Bryne (No 2) [2004] NSWCA 227, per Campbell JA, at [10]; Evans v Braddock (No 2) [2015] NSWSC 518, at [52].

51. In D Capital 2 Pty Ltd v Western (No 2) [2022] NSWSC 1283, I made the following observations:

128. For an offer to be regarded as an Offer of Compromise it must contain a real element of ‘compromise’: see e.g. Leichardt Municipal Council v Green [2004] NSWSC 341 at [31]–[37].

129. The question whether any particular offer involves the required element of compromise depends upon the totality of the circumstances and involves an impressionistic assessment: Shellharbour City Council v Johnson (No 2) (2006) 67 NSWLR 308; [2006] NSWCA 114 at [20]–[23].

…

131. The power to order "otherwise" must be for proper reasons: Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [47] adopting the comments of Hely J in Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 at [17].

132. The mere fact that it is reasonable for a litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule. However that does not mean that reasonableness of the rejection is an irrelevant consideration: Leach at [48].

Evidence on costs

52. The Slattery affidavit, as noted above, was read on the application without objection.

53. Mr Slattery’s evidence is that the plaintiffs made two “without prejudice” offers of compromise in accordance with r 20.26 UCPR: first on 14 May 2021 (first offer of compromise), and secondly on 25 October 2021 (second offer of compromise).

Plaintiffs’ first offer of compromise

54. Omitting formal parts, the first offer of compromise offered that the proceedings be compromised on the following terms:

“6. The Proceedings be disposed on the following terms:

a. The first plaintiff pay the second defendant $308,500.

b. A notation to the effect that no order for provision be made be made for the first plaintiff's maintenance, education and advancement in life pursuant to s 59 of the Succession Act 2006 out of the estate and/or notional estate of the deceased.

c. A declaration that the first defendant holds the following property on trust for the first plaintiff:

i. the real estate property situated and known as 598 Gresford Road Vacy NSW 2421 being folio identifier 123/10663557 (Rossdale);

ii. the real estate property situated and known as 471 Dungog Road Vacy NSW 2421 being folio identifier S/1248814 (Gostwyck Flats Remnant) on trust for the Plaintiff; and

iii. the Water Access Licences WAL14722 and WAL14723 (Rossdale WALs).

d. A declaration that the second defendant holds all the shares in the first defendant forming a part of the estate of the late Ross George Horn of Unit 202, 365 Morpeth Road, Morpeth, New South Wales, 2321, who died on 20 March 2020 (the deceased) (the shares) on trust for the first plaintiff.

e. An order that the second defendant execute and deliver to the solicitors of the first plaintiff, a share transfer form in favour of the first plaintiff, for all shares in the first defendant held by the second defendant.

f. An order that the first and second defendants do all things necessary to transfer the shares, and register that transfer, to the first plaintiff forthwith.

g. The second defendant, Hamish Furner and Andrew Franci Saide resign as directors of the second defendant at the time of the acceptance of this offer and render accounts for the period of their directorships.

h. There be no order as to costs, with the intention that each party bear their own legal costs with respect to the Proceedings.”

Plaintiffs’ second offer of compromise

55. The second offer of compromise was, omitting formal parts, in the following terms:

“6. The Proceedings be disposed on the following terms:

a. A notation to the effect that no order for provision be made be made for the first plaintiff's maintenance, education and advancement in life pursuant to s 59 of the Succession Act 2006 out of the estate and/or notional estate of the deceased.

b. A declaration that the first defendant holds the following property on trust for the first plaintiff:

i. the real estate property situated and known as 598 Gresford Road Vacy NSW 2421 being folio identifier 123/10663557 (Rossdale);

ii. the real estate property situated and known as 471 Dungog Road Vacy NSW 2421 being folio identifier 5/1248814 (Gostwyck Flats Remnant); and

iii. the Water Access Licences WAL14722 and WAL14723 (Rossdale WALs).

c. A declaration that the second defendant holds all the shares in the first defendant forming a part of the estate of the late Ross George Horn of Unit 202, 365 Morpeth Road, Morpeth, New South Wales, 2321, who died on 20 March 2020 (the deceased) (the shares) on trust for the first plaintiff.

d. An order that the second defendant execute and deliver to the solicitors of the first plaintiff, a share transfer form in favour of the first plaintiff, for all shares in the first defendant held by the second defendant.

e. An order that the first and second defendants do all things necessary to transfer the shares, and register that transfer, to the first plaintiff forthwith.

f. The second defendant, Hamish Furner and Andrew Francis Saide resign as directors of the second defendant at the time of the acceptance of this offer and render accounts for the period of their directorships.

g. An order, that by 30 months after the first plaintiff becoming the holder of the shares in the first defendant, the first plaintiff and first defendant do all things necessary to sell Rossdale and the Rossdale WALs by private treaty and/or auction on the open market at the earliest practical date and pay the net proceeds of sale, after the payment of Agent's commission and legal expenses for the sale and Council and Water rates for the property and the WALs:

i. As to the second defendant 20%; and

ii. As to the remaining 80%, as the first plaintiff directs.

h. An order, that by 3 months after the receipt of the proceeds of sale of Rossdale, the first plaintiff and first defendant do all things necessary to transfer Gostwyck Remnant at the earliest practical date to the second defendant at no cost to the second defendant and free of any mortgage or other encumbrances save for any Council rates that may be due and payable as of the date of transfer.

i. An order, that by 3 months after the receipt of the proceeds of sale of Rossdale, the first plaintiff and first defendant pay Hamish Furner $8,273.00.

j. That the parties give mutual releases in relation to the subject matter of the proceedings and as arising out of the proceedings including in other dealings between them creating liabilities such as loans to the first defendant by the plaintiffs and loans by the first defendant to Ross George Horn (deceased).

k. There be no order as to costs, with the intention that each party bear their own legal costs with respect to the Proceedings.

Notation: it may be that the proposed orders set above are cast as an amendment to the terms of the last Will of the deceased in order to achieve the most cost-effective outcome for the parties in implementing the above terms, for example, the transfer of the shares to the first plaintiff.”

56. On 15 November 2021, Mr Slattery (following receipt of an offer from the defendants’ solicitor, Ms Young) renewed the offer of 25 October 2021, advising that it was open for acceptance up to, and including, 3 December 2021.

Defendants’ settlement offer

57. Mr Slattery notes that the defendants made a settlement offer under cover of a letter from Ms Young to Arnold Lawyers dated 26 October 2021.

58. The offer is in the following terms:

“Settlement offer

We are instructed that our clients have considered the offer made at the closing of the mediation. We are instructed that, whilst there are components of the offer that our clients can work with, the entirety of the offer in its current form is not acceptable to our clients.

We are instructed to respond with the following counteroffer:

Companv

1.    Barbara to be the beneficial owner of the shares currently held by the estate. Michael to retain his share in the company.

2.    Michael to be appointed a director of the company with the current directors.

3.    Rossdale to be sold (see further below).

4.    Division 7A loan to be re-allocated from Ross to Michael.

5.    Division 7A loan to Michael to be subsequently forgiven at the next meeting of directors.

6.    Michael to be personally liable for tax or duties relating to the Division 7A loan (if any) and, to the extent that it is necessary, shall indemnify the company, the estate, and Barbara if any such consequences arise.

7.    The purchase price received in relation to Rossdale is to be applied in the following order:

(a)    Firstly, payment of all real estate agent’s fees (commission and marketing expenses) and legal fees (conveyancing only);

(b)    Secondly, except as provided below, payment of all company liabilities, including any tax liability arising from the sale of Rossdale; and

(c)    Thirdly, net proceeds are to be split: 35% to Barbara; and 65% to Michael.

8.    Michael shall be solely liable to repay and agrees to indemnify the company in relation to the mortgage to National Australia Bank Limited current secured against the Gostwyck Remnant.

9.    Any debt owed by the company to Michael and Adele is to be forgiven without repayment.

10.    Following distribution by the company of the entitlements of Barbara and Michael, they shall both transfer their shares in the company to Nicholas and resign as directors.

Rossdale

11.    Michael and Adele to remain living at Rossdale during the sale process on the condition that:

(a)    Michael and Adele indemnify the company for and shall be liable to pay all outgoings associated with Rossdale, including all rates and insurances;

(b)    Michael and Adele to provide receipts in respect of the payment of all outgoings;

(c)    Michael and Adele to provide certificates of currency in respect of the insurance held over Rossdale;

(d)    Michael and Adele to maintain Rossdale in its current condition and shall be responsible for all maintenance and repairs; and

(e)    Michael and Adele agree to vacate Rossdale within 28 days of a contract for sale being exchanged.

12.    Michael and Hamish, in their capacities as directors, to jointly arrange and manage sale of Rossdale. All communications in relation to the sale of Rossdale (eg. real estate agents, solicitors etc) to be in writing via email to the company email address and to a personal email address for each of Michael and Hamish.

13.    Real estate agent to be appointed by agreement between Michael and Hamish within 90 days. If such agreement cannot be reached, Michael and Hamish shall each nominate 2 real estate agents and all the directors of the company shall vote on the appointment. Any such nomination is to be supported by a marketing proposal from any agent nominated that sets out the agent’s costs/commission and marketing expenses together with an appraisal of the market value of the property supported by market evidence of such appraisal.

14.    Tranter Lawyers to be appointed to act for the company on the conveyance.

15.    Rossdale to be put on the market for sale within 120 days.

16.    All parties to do all things necessary to progress the sale of Rossdale in a timely manner and not to hinder any part of the sale process, including but not limited to signing all necessary documents, providing instructions where required, and allowing access to the property when required.

Gostwyck Remnant

17.    Mortgage to National Australia Bank Limited over the Gostwyck Remnant to be transferred to Rossdale within 28 days.

18.    Nicholas and family to remain living at the Gostwyck Remnant on the condition that:

(a)    Nicholas to indemnify the company for and shall be liable to pay all outgoings associated with Gostwyck Remnant, including all rates and insurances;

(b)    Nicholas to provide receipts in respect of the payment of all outgoings; and

(c)    Nicholas to provide certificates of current in respect of the insurance held over the Gostwyck Remnant.

Danmah Trust

19.    No further action to be taken with respect to the Danmah Trust such that the assets of the Danmah Trust remain as is and the company and/or the estate releases the Danmah Trust and/or Michael and Adele in respect of any civil or criminal fraud associated with the transfer of Gostwyck Sold.

Proceedings generally

20.    Deed of Settlement to be executed recording the terms of the agreement. To ensure the entirety of the dispute is resolved, the Danmah Trust and Nicholas Horn are also to be parties to the deed.

21. Releases to be given by each party to all other parties in respect of all claims between them, whether current or future, including any claim for provision pursuant to s 57 of the Succession Act2006.

22.    Proceedings to be dismissed.

23.    Each party to hear their own costs of the proceedings and the negotiation and execution of the deed.

Conclusion

Our clients’ offer is an open offer and will be relied upon on the questions of costs in the proceedings. Our clients’ offer remains open for a period of 7 days from the date of this letter.”

Defendants’ open offer

59. Finally, the defendants made an open offer during the hearing which I referred to in the principal judgment at [1375]-[1379].

Submissions

60. It was not suggested by Mr Simpson that the defendants’ offers regarding costs were such as to have provided outcomes to the plaintiffs or either of them that were no less favourable to them than the judgment outcome.

61. In those circumstances, I do not propose to expressly address the defendants’ offers.

62. The main issues arose in relation to the plaintiffs’ offers which I address below.

Plaintiff’s submissions

63. Dr Mantziaris submitted essentially as follows:

1. the plaintiffs were successful in all their claims for relief relating to the estoppel and constructive trust over the shares of the company and there is nothing in the judgment or the conduct of the hearing which calls for any deviation from the rule that costs follow the event;

2. Michael’s alternative claim for provision did not have to be prosecuted;

3. none of the defendants’ defences were accepted and the overwhelming majority of the defendants’ arguments were rejected;

4. the judgment was “no less favourable” to the plaintiffs than the terms of each of their offers of compromise and accordingly the consequences of r 42.14 should apply;

5. in the event that the offers of compromise are found to be ineffective they should be given effect as Calderbank offers;

6. no order should be made in relation to the costs of the company on the basis that any such costs order would penalise the successful party.

Defendants’ submissions

64. Ms Young provided written submissions and Mr Simpson in substance adopted them and supplemented them with oral submissions on 5 December 2022.

65. In substance, the defendants’ submissions were to persuade a position as follows:

1. whilst Michael was prima facie entitled to an order for costs in his favour on the estoppel claim, those costs should be substantially discounted by reason of the plaintiffs’ conduct during the hearing;

2. Adele had a separate claim in the proceedings and as she was unsuccessful on her claim the defendants were entitled to an order for costs in their favour against her; and

3. the inclusion of a provision that “there be no order as to costs, with the intention that each party bear their own legal costs with respect to the proceedings” in each of the plaintiffs’ offers of compromise invalidated the offers by contravening r 20.26(2)(c) UCPR.

66. In relation to the offers of compromise, Mr Simpson, apart from asserting the above-mentioned invalidity, submitted that:

1. the judgment was less favourable than the terms of the offers of compromise, at least insofar as both offers sought declarations that not only were the shares held on trust, but also the claimed property;

2. by reason of the above and the fact that Michael did not succeed in obtaining an order for transfer of the properties to him but (allegedly) abandoned that part of his claim and only pursued a claim in relation to the shares, his rejection of the offer was unreasonable and he in fact received a judgment that was less favourable to him.

67. In relation to costs generally, but also in respect of the offers of compromise, Mr Simpson raised the following matters as being aspects of the plaintiffs’ conduct of the proceedings that caused significant costs to be incurred which were unnecessary and in breach of the plaintiffs’ obligations pursuant to s 56 CPA: DSOC [7].

68. The factors were as follows:

1. the statement of claim canvassed irrelevant issues and added distraction to the case;

2. many aspects of the plaintiffs’ pleaded case were abandoned such as references to the Rossdale Arrangement, the Gostwyck Arrangement and the post-2017 events;

3. there was unnecessary extensive cross-examination on issues that ultimately had no relevance to the plaintiffs’ final claim;

4. the plaintiffs pursued issues in relation to the final Will of the deceased, including seeking evidence from the Beryl Mudd which incurred costs and which were not ultimately relevant to the outcome of the proceedings;

5. the plaintiffs’ failure to comply with the notice to produce dated 16 November 2021 caused some prejudice to the defendants in dealing with the matter fairly and led to a significant amount of time, both in preparation for hearing and during the hearing itself which was wasted, in particular, the cost of time lost on the second day of the hearing (because of the non-compliance); and

6. the cross-examination of Barbara regarding photographs (Exhibit P6) which had not been adduced as part of the plaintiffs’ evidence prior to the commencement of the trial. The argument being that if they had been adduced, the hearing would have been shorter in length.

Issues raised by the submissions

69. The above-mentioned submissions raise a number of issues which may be identified as follows:

1. Issue 1 – Was there more than one ‘substantive’ plaintiff in the case?

2. Issue 2 – Was there more than one ‘active’ defendant in the case?

3. Issue 3 – Are the plaintiffs’ offers of compromise invalid?

4. Issue 4 – Was a “no less favourable” outcome achieved by the plaintiffs?

5. Issue 5 – Did the plaintiffs’ conduct of the case amount to a reason for the Court to “order otherwise”?

Issue 1 – Was there more than one ‘substantive’ plaintiff in the case?

70. In particular, the question raised by this issue is whether Adele’s claim is an event such that there should be a separate discrete costs order against Adele?

What is an event?

71. Depending on the nature of the litigation the “event” may be characterised in more than one way: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 (Doppstadt) at [15] per Ward, Emmett, and Gleeson JJA.

72. Generally, the “event” refers to the event of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt at [15] citing Windsurfing International Link v Petit [1987] AIPC 90–441 at 37,861-37,862 per Waddell J.

73. An “event” may refer to the determination of the proceedings as a whole or of particular causes of action, although not necessarily so. It may include certain disputed questions of fact or law.

74. An event will not necessarily be limited to “issues” in the technical pleading sense, but any disputed question of fact or law: Hughes v Western Australian Cricket Association (Inc) & Ors (1986) ATPR 40–748 at 48,136 per Toohey J citing Cretazzo v Lombardi (1975) 13 SASR 4 at 12 per Hogarth J; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22 per Young J (as his Honour then was); Australian Receivables Ltd v Tekitu Pty Ltd(subject to deed of company arrangement) (deed administrators appointed) & Ors [2011] NSWSC 1425 at [25] per Ward J (as her Honour then was).

75. How the Court approaches the question will essentially be guided by the circumstances of each given case rather than abstract analysis of how the notion of an event should be viewed.

Determination

76. Mr Simpson submitted that Adele’s claim for entitlement to the shares failed.

77. In a technical sense that is true. However, substantively speaking, the claims in relation to relief for Adele regarding the shares were not truly competing against Michael’s claim.

78. Whilst Mr Simpson cross-examined Adele regarding the nature of the promises, the general running of the proceedings in the plaintiffs’ camp was not to propound something on Adele’s part that was substantively different from Michael’s claim.

79. Whilst it is easy to find references in the pleadings to separate representations made by the deceased to each of Michael and Adele and to some extent differing versions of evidence adduced by each of Michael and Adele regarding reliance upon the deceased promises, when the proceedings are viewed as a whole and as a matter of substance, I regard the claims of Michael and Adele as being substantively propounded as being a single unified claim.

80. I do not regard the claims of Michael and Adele as being propounded separately in any serious way.

81. The additional “representation 6” (that should Michael predecease the deceased Adele would receive what Michael was to receive under representation 1) did not loom as any real issue in the proceedings in a sense in which s 56 CPA talks about real issues. The simple fact of the matter is that Michael did not predecease the deceased.

82. I reject the submission of Mr Simpson that there should be a separate order that Adele pay the defendant’s costs of “her claim”.

Issue 2 – Was there more than one ‘active’ defendant in the case?

83. The role of the “defendants” in the proceedings needs to be more particularly addressed.

84. The question regarding the involvement of the company was the subject of comment by Dr Mantziaris in the POS: see [27b],[28].

[27b] Second, it should not escape attention that the Company has taken an active role in these proceedings when it was open to it to enter a submitting appearance. The Company is now controlled by two directors and a majority shareholder (Barbara qua Administrator) who are parties with an interest in the outcome of the proceedings. Barbara is the recipient of the shares in the Company under the Handwritten Will; and Hamish is the remunerated co–executor and the potential ‘primary beneficiary’ of the 2020 Barbara Will should his mother Philippa, the sole beneficiary, predecease Barbara.

[28] While the latter issue could be considered to be an internal matter for the Company (of which Michael remains a shareholder), the only valuable asset of the Company is the land (or the shares) which are the subject of the suit. With the Company under the direction of Hamish and Barbara, it is highly likely that the Company is incurring legal costs which are properly the costs of the Estate; and that this diminishes the value of the subject of the suit. These matters are notified now, in the event that they become significant in the making of costs orders.

85. In the circumstances of this case, I consider those submissions to be apt.

86. It would be an unfair outcome for company property to be used for a non-company purpose, namely, to litigate as between Barbara and Michael and/or Adele who between them is properly entitled to the benefit of the deceased’s shareholding in the company.

87. In the course of the hearing, as I have noted in the principal judgment, when the issue regarding the costs of the company came to a head, I made directions for the defendants to particularise as between them the costs incurred by them.

88. The affidavit of Ms Young revealed that there was a distinct differentiation of costs, and that on a solicitor client basis the only cost that was solely referable to the company was the sum of $4,719: see principal judgment at [282]-[289].

89. That differentiation in regard to the estimate of costs in the proceedings to my mind bore out the reality of how the proceedings were conducted namely that the company was in substance a non-active or submitting defendant and the real contradictor to the plaintiffs’ claim was Barbara.

90. In circumstances where there was contest as to who as between Michael or Barbara was entitled to the deceased’s shares, there was no occasion for the company to play any adversarial role in that dispute.

91. It seems to me that the order proposed by Dr Mantziaris that the Court make no order as to the costs in relation to the company with the intent that it bear its own costs is a fair and appropriate order in the circumstances of the case.

92. I reject Mr Simpson’s submission that the defendants (“plural”) be responsible for Michael’s costs.

Issue 3 – Are the plaintiffs’ offers of compromise invalid?

93. In relation to the submission that the plaintiffs’ offers of compromise were invalid by reason of inclusion of a term “there be no order as to costs, with the intention that each party bear their own legal costs with respect to the Proceedings”, it is necessary to consider the terms of the UCPR.

94. Mr Simpson referred to the decision of the Court of Appeal in Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 (Whitney) in relation to whether an offer of compromise may permissibly include a term addressing costs.

What does “must not include an amount for costs” mean?

95. Rule 20.26 UCPR was amended following Whitney such that offers made after 7 June 2013 (pursuant to r 20.26(2)(c) UCPR) must not include an amount for costs and must not be expressed to be inclusive of costs: see e.g. Ye v Chen [2022] NSWSC 494 at [104]-[105] per Adamson J.

96. Rule 20.26(2)-(3) provides as follows:

(2)  An offer under this rule—

(a)  must identify—

(i)  the claim or part of the claim to which it relates, and

(ii)  the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and

(b)  if the offer relates only to part of a claim in the proceedings, must include a statement—

(i)  in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or

(ii)  in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and

(c)  must not include an amount for costs and must not be expressed to be inclusive of costs, and

(d)  must bear a statement to the effect that the offer is made in accordance with these rules, and

(e)  if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and

(f)  must specify the period of time within which the offer is open for acceptance.

(3)  An offer under this rule may propose—

(a)  a judgment in favour of the defendant—

(i)  with no order as to costs, or

(ii)  despite subrule (2)(c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff’s costs, or

(b)  that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or

(c)  that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.”

97. The purpose of the rule is clear. It is directed to the mischief of a monetary offer in a lump sum which does not differentiate between the plaintiff’s claim on one hand and the plaintiff's costs on the other: Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 (Jojeni) at [11] per Macfarlan, Gleeson and Leeming JJA .

98. Generally, a recipient of an offer will have some basis (whether it be pleadings, particulars and evidence) for making an assessment of a plaintiff’s claim but without some particular prior disclosure, will not have an informed basis for making assessment of the plaintiff's costs: Jojeni at [11].

99. The prohibition in r 20.26(2)(c) avoids the difficulty that it may not be possible to determine whether the default position of indemnity costs applies until the costs have been assessed: Jojeni at [11].

100. Thus, an offer that there be no order as to costs with the intention that each party bear their own legal costs with respect to the proceedings does not fall within that which is precluded under r 20.26(2)(c) and, accordingly, is not invalid for that reason: Jojeni at [10]-[15].

Determination

101. Both the first offer of compromise (see 6(h)) and the second offer of compromise (see 6(k)) contained a term that “there be no order as to costs, with the intention that each party bear their own legal costs with respect to the proceedings”.

102. As a matter of plain construction, supported by authority (Jojeni), it is not obvious that a term that there be “no order as to costs…” infringes any aspect of r 20.26(2)(c). Such a term does not include an “amount” for costs.

103. Nor does such a term provide for an outcome that is “inclusive of costs”.

104. I reject the argument that the plaintiffs’ offers of compromise are invalid by reason of infringement of r 20.26(2)(c) UCPR.

105. Apart from in the respect that I have mentioned, Mr Simpson did not suggest that either of the plaintiffs’ offers of compromise were technically invalid.

Issue 4 – Was a “no less favourable” outcome achieved?

106. In light of my finding above, as a matter of substance Barbara is the appropriate defendant liable under the terms of the provisions of r 42.14(2) as engaged by the plaintiffs’ offers of compromise.

107. The defendants’ submissions raise the issue of whether a judgment is “no less favourable” to the plaintiffs than the terms of their offers of compromise.

When is a judgment “no less favourable”?

108. What is meant by “no less favourable” in r 42.14(1) UCPR?

109. Questions regarding whether judgment outcomes are “no less favourable” than offers may occur where there are provisions in the offer in non-monetary terms, such as a requirement for an apology or a release.

110. It has been suggested that the proper exercise of the general costs discretion will involve the Court in considering the reasonableness of the condition and addressing the issue of how the judgment result compares with the terms of the offer as a matter of substance: Richie’s Uniform Civil Procedure NSW (LexisNexis Butterworths) at [42.14.8] citing, inter alia, Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (Full Court of the Federal Court of Australia, 29 August 1995, unrep) (Magenta).

111. Magenta discussed the approach to assessing outcomes in the context of considering a “Calderbank” offer: see Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333.

112. In Magenta, the Full Court of the Federal Court referred to observations of Wilcox J in Lewis v Cummings (Federal Court of Australia, Wilcox J, 29 May 1992, unrep) to the effect that it may be a mistake – in exercising a discretion of costs – to dissect matters too much and, further, that one may need to make a broad judgment as to what is reasonable in the whole of the circumstances: at 36.

113. In Magenta, the Full Court observed that the primary Judge had considered various objections but also had regard to the consideration that the respondents in the particular matter wished to negotiate a global settlement.

114. In Diamond v Simpson (No 4) [2004] NSWCA 57 (Diamond), Young CJ in Eq (as his Honour then was), with whom Meagher and Ipp JJA agreed at [1] and [2] respectively, considered submissions in respect of the reasonableness of a condition within an offer and referred to the decision of the Full Court in Magenta and also the Court of Appeal in Skalkos v Assaf (No 2) [2002] NSWCA 236: at [75].

115. Thus, the approach in Magenta has been applied by the Court of Appeal to the offer of compromise regime (albeit that Diamond involved consideration of the Supreme Court Rules 1970 (NSW) rather than the UCPR).

116. Young CJ in Eq noted that the principle is essentially to the effect that when considering reasonableness, one needs to consider all the circumstances of the case and the reasonableness of the offeree’s conduct generally, not just the narrow question of the reasonableness of a condition: at [78].

117. Young CJ in Eq noted that in a case involving $10 million or more, the condition as to costs was a minor matter and that whilst it might have been reasonable for the offeree to have made a counteroffer or sought to have the condition withdrawn, it was not reasonable merely to reject the offer: at [79].

What in substance was the first proposed first offer?

118. The above authorities establish that issues of (1) the reasonableness of the proposed conditions of an offer and (2) whether the judgment result is “no less favourable” than the terms of the offer are appropriately to be considered as a matter of substance.

119. The first offer of compromise proposed compromise of the proceedings on eight terms: 6(a)-(h). The first offer of compromise contains a number of substantive provisions in terms of compromise of the proceedings and a number of terms which are essentially mechanical.

120. Mr Slattery described the main terms as including a trust in favour of Michael over the shares in the company, payment of $308,500 to Barbara, and no order as to costs with the intent that each party bear their own legal costs: Slattery affidavit at [11]. For the purposes of considering costs, that is, leaving the “mechanics” of the offer aside, a broadly fair assessment.

What in substance was proposed by the second offer?

121. Mr Slattery describes the main terms of the second offer of compromise as involving a trust in respect of the shares, payment to Barbara of 20% of the net proceeds of sale of Rossdale and the Rossdale WALs, transfer of Gostwyck Remnant to Barbara and no order as to costs with the intention that each party bear their own legal costs: Slattery affidavit at [15].

122. For the purposes of considering costs, that is, leaving the “mechanics” of the offer aside, and subject to the following, a broadly fair assessment.

123. There are eleven terms to the second offer of compromise.

124. There are other components of the 25 October 2021 offer which are important. In particular, term 6(j) expressly addressed the loan by the company to the deceased which, on the findings in the proceedings, covers the $817,417 amount. Mutual releases were proposed in relation to the subject matter of the proceedings including any other dealings between them creating liabilities.

Was the first offer no less favourable than the outcome?

125. Mr Simpson sought, during the hearing regarding the orders and costs, to differentiate between the terms in the offers of compromise regarding the claimed property on the one hand, and the shares on the other, as being “two highly distinctive property rights” in respect of which the plaintiff was successful in relation to the shares but not the property: T 1114. I reject that contention.

126. The fact that the offer additionally sought a declaration over the claimed property does not, in light of the authorities above requiring offers to be viewed substantively, preclude it from consideration as being an offer which would engage r 42.14.

127. Whilst in the principal judgment I distinguished between the claimed property on the one hand and the shares on the other, I made a finding that essentially what was promised was the shares: principal judgment [842].

128. There was no real suggestion in the case that the plaintiffs, in seeking declarations regarding the property on the one hand and shares on the other, were somehow “wanting to have their cake and to eat it too”.

129. However, the first offer of compromise does not grapple with an important issue in the case regarding the $817,417 amount.

130. I found that relief on the estoppel claim to Michael should be conditioned on acceptance of an undertaking that he not be permitted to enforce a claim against the estate in respect of the $817,417 amount: principal judgment at [1332].

131. No particular submissions were directed to analysing whether or not the $817,417 amount would have made a difference as to whether the first offer of compromise would have been better for Barbara and/or the company.

132. The clear impression I have is that the first offer of compromise was for Barbara (as the main and active defendant) a better outcome than the findings that I have made in the judgment.

133. Even if under the first offer of compromise it was possibly open to the plaintiffs to attempt to recover the $817,417 amount from the deceased's estate that would not have impacted Barbara sufficiently for the offer to cease to be a better outcome for her than the findings that I have made in the judgment.

134. That is because apart from the shares and excluding property accruing to Barbara by reason of a joint tenancy, the deceased did not have any remaining property of such value that would impact on any material way on the outcome: [268]-[277] principal judgment.

135. An offer of $308,500 to Barbara under the first offer would have given Barbara a better outcome than under the judgment, irrespective of whether, other than the shares and property held in joint tenancy, Barbara got some other property out of the deceased’s estate or nothing from the deceased’s estate.

136. I am persuaded that the first offer of compromise was an effective offer of compromise in that, in terms of the orders to be made, the plaintiffs or Michael obtained an order on the claim no less favourable to them or him then the terms of the offer.

137. In the event that I am incorrect regarding whether the first offer of compromise by its terms engages r 42.14(1), I find that the terms of the second offer of compromise clearly do so.

Issue 5 – Did the plaintiffs’ conduct of the case amount to a reason for the Court to “order otherwise”?

138. The defendants’ submissions regarding the plaintiffs’ conduct of the case raise the issue of whether there is a reason for the Court to “order otherwise”.

139. Accepting, as I do, that the first offer of compromise engages the terms of r 42.14, the consequence is that, prima facie, the plaintiffs are entitled to an order against Barbara for the plaintiffs’ costs in respect of the claim assessed on the ordinary basis up to 14 May 2021 and thereafter on an indemnity basis, unless the Court orders otherwise.

140. In light of Mr Simpson’s submissions regarding costs, the question arises as to whether I should make an “otherwise order” within the terms of r 42.14(2).

141. I have addressed separately Mr Simpson’s submissions in respect of the issue regarding Adele’s position. I do not consider that the plaintiffs’ costs should be distinguished in a way to separate out any component referable to Adele.

142. Essentially, there are two matters which Mr Simpson contends should be reason to otherwise order.

143. The first is that the family provision claim was a separate claim and should be the subject of an “otherwise order” in the way that Mr Simpson described in the submissions on 5 December 2022 (outlined above).

144. The second matter raised by Mr Simpson related to the way the plaintiffs conducted the proceedings.

145. I address these matters below.

When might a Court “order otherwise”?

146. It is impossible to exhaustively state the circumstances in which the Court's discretion to “order otherwise” might be exercised: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391; 18 ANZ Insurance Cases 62-049 (Leach) at [48] per McColl JA (Gleeson JA and Sackville AJA agreeing) citing New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 at 102E-F per Gleeson CJ (Clarke and Cripps JJA agreeing).

147. “Exceptional circumstances” are not per se required; nonetheless, the prima facie position (in this case arising from r 42.14(2)) should only be departed from for proper reasons which, in general, only arise in an exceptional case: Leach at [47] per McColl JA (Gleeson JA and Sackville AJA agreeing).

148. More generally, the Court may take into account any failure of a party, legal representative or person with the relevant interest in the proceedings to comply with their respective duties to facilitate the just, quick and cheap resolution of the real issues in the proceedings in exercising a discretion with respect to costs: s 56(5) CPA.

The family provision claim

149. Mr Simpson acknowledged that the costs of the family provision claim “wasn't an enormous part of the trial”: T 1107. However, beyond that, he did not venture any submission as to what proportion of the overall cost of the proceedings was referable to the family provision claim, noting that that would be a difficult exercise: T 1107.

150. As I have noted in the principal judgment, the only claim for relief in the summons filed on 17 March 2021 (which initiated the proceedings) was a claim for family provision relief.

151. On 5 May 2021, within two months of filing the summons, the plaintiffs filed a statement of claim in which the estoppel claim was cast as the principal claim and family provision relief had been relegated in priority: CB 1/53.

152. In the POS, Dr Mantziaris expressly stated that the family provision claim was cast in the alternative and need only be determined if the plaintiffs failed on the estoppel claim: principal judgment [139], [1368]. The relief was disputed: principal judgment [171].

153. Apart from the limited reference in the POS describing the family provision claim as an alternative claim (POS [15]), Dr Mantziaris made no submissions at any point during the hearing regarding the claim in any way which would enable me to understand how the claim was put: principal judgment [1341]-[1346].

154. There were some exchange between myself and Dr Mantziaris during the hearing regarding orders and costs on 5 December 2022 addressing the context in which I had observed that no submissions were made on the family provision claim.

155. The substance of the submission of Dr Mantziaris was that a forensic decision was made by him and or the plaintiffs, in light of matters said in Court on a number of days prior to the conclusion of the hearing, not to expressly press a family provision claim.

156. I was not taken to any transcript references regarding what had been said in Court to support his submission. In any event, suffice it to say, I do not accept that the responsibility for the forensic decision not to make submissions lies other than in the plaintiffs’ camp: T 1109-1111.

The notice to produce and costs of the second day

157. There is no doubt that much of the time on the second day of the hearing was practically lost because of non-compliant production by Michael and Adele on the notice to produce dated 16 November 2021.

158. My Associate’s record of proceedings shows that fairly soon after the second day of the hearing commenced, there was a call on the notice to produce to Michael and Adele dated 16 November 2021. During the course of the morning the matter was mentioned and adjourned several times. Just prior to 11 AM the matter was stood down to 2 PM. The hearing recommenced approximately at 2 PM and, in light of persisting issues regarding production, was adjourned at 2:21 PM until the following day.

159. A copy of the notice to produce is at CB 1/240.

160. The notice to produce requested the following material:

“1. The password to the email account set up for and used by the first defendant, G.A. & R.G. Horn Ply Ltd.

2. Any document, deed or agreement establishing the Danmah Family Trust.

3. Any document, deed or agreement varying the terms of the Danmah Family Trust.

4. Statements for all bank accounts held by or on behalf of the Danmah Family Trust for the period 1 July 2018 to 30 June 2019.

5. Statements for all bank accounts, including any credit cards, held by the plaintiffs either jointly or severally for the period 1 July 1993 to 14 April 2021.”

A pragmatic solution is proposed

161. Dr Mantziaris proposed that a pragmatic way of addressing the costs associated with the family provision claim would be to make an order in favour of the defendants on the family provision claim with respect to costs limited to two components: T 1112.

162. First, to the costs associated with day two of the hearing.

163. Secondly, for the costs to cover the costs incurred from the filing of the family provision summons until the date of the filing of the plaintiff’s statement of claim which he says was the commencement effectively of the estoppel case.

164. Dr Mantziaris submitted that all other costs incurred would be either subsumed in the costs of the estoppel claim or would be accommodated in a rough manner with awarding the costs of the whole of the second day of the hearing lost. He submitted that that would be practical justice: T 1112-1113.

165. Mr Simpson, when asked to respond to that submission, did not embrace it in a way to depart from his prior submission: T 1113.

Determination

166. Whilst the material sought to be produced under the notice to produce was certainly referable to the family provision claim, arguably it was, at least in part, also referable to the estoppel claim.

167. More broadly, it seems to me that even on a cost assessment it may be a difficult task to precisely isolate what were admittedly not large family provision costs in the proceedings from the costs on the estoppel claim.

168. As I have noted above, Mr Simpson acknowledged this during the hearing regarding orders and costs. He accepted that identifying what portion of the overall costs were referable to the family provision claim would be a “difficult exercise”: T 1107.

169. Indeed, one of Mr Simpson’s submissions for dealing with family provision costs was that they should “form part of” a discount on the amount of costs that the defendants might have to pay of Michael’s costs on the estoppel claim: T 1107.

170. Mr Simpson, understandably, in light of his above-mentioned comments about difficulty in identifying what portion of the hearing was referable to the family provision claim, did not venture a percentage amount of any such discount that would be deducted from the costs on the estoppel claim: T 1107.

171. That fact commends a form of practical solution. Taking a broad-brush approach, it seems to me that, doing practical justice between the parties on the issue on costs, the proposal of Dr Mantziaris is an appropriate one and in the particular circumstances of this case I propose to accede to it.

172. I will deal more expressly below with the question of set-off of costs.

The plaintiffs’ conduct of the proceedings

173. The final matter which essentially needs to be addressed is Mr Simpson’s submissions that there should be an “otherwise order” because of the way the plaintiffs conducted the proceedings.

174. I have summarised above under 6 points the matters that Mr Simpson referred to. I address these points below.

Contention 1 – alleged irrelevant pleading issues

175. Whilst I did make a comment in the principal judgment regarding the pleading of the claim, in particular, the raising of matters such as the October 2019 Agreement in respect of which no relief was ever sought, ultimately, as Dr Mantziaris has submitted, I was not critical of the forensic choices: principal judgment [198].

176. I am not persuaded that the asserted conduct on the part of the plaintiffs on this contention warrants an “otherwise order”.

Contention 2 – alleged abandonment of pleaded issues

177. I do not accept the submission that many aspects of the plaintiffs’ pleaded case were abandoned such as references to the Rossdale Arrangement and the Gostwyck Arrangement.

178. Whilst no relief was sought regarding the Rossdale Arrangement and the Gostwyck Arrangement, issues raised based on the defence regarding the monetary arrangements between the plaintiffs and the deceased arising in part out of the Rossdale Arrangement and the Gostwyck Arrangement were clearly litigated and matters that were ultimately addressed making findings on the estoppel claim.

179. As to the complaints regarding the post 2017 events, at least on the defendants’ side, a number of these matters were canvassed as part of the defendants’ claim that the plaintiffs were guilty of unclean hands.

180. The fact that the plaintiffs did not seek particular relief in relation to the post 2017 events does not mean that they were not properly canvassed in the context of addressing the estoppel claim. I do not consider that any discount should be made on account of that.

Contention 3 – alleged unnecessarily extensive and irrelevant cross-examination

181. As to the submission that the plaintiffs engaged in extensive cross-examination on issues that had no relevance to the final claim, I do not regard the conduct of the case by the plaintiffs in this regard as being inappropriate or unreasonable in such a way as should be marked by an otherwise costs order.

182. The reality is that the case was hard-fought on both sides and cross examination, extensive as it was, simply formed part of the legitimate forensic battle.

Contention 4 – alleged irrelevant issues in respect of the deceased’s Last Will

183. In relation to the assertion that the plaintiffs raised issues with respect to the validity of the deceased’s last Will without seeking consequential relief and that substantial costs were incurred in respect of dealing with those matters, I do not consider that the matters were of such significance as to warrant an “otherwise order”.

184. Dr Mantziaris says that the issues regarding the deceased’s last Will at least bore upon, and were relevant to, the deceased’s change of heart and the question of unconscionability in respect of the estoppel case.

185. Had the deceased not changed his Will five days prior to his death, there might have been no litigation at all. I do not consider it to have been unreasonable for the plaintiffs to have sought to explore, including by use of subpoena, the context in which the deceased changed his Will five days prior to his death.

Contention 5 – non-compliance with the notices to produce

186. The fifth matter concerning the notice to produce dated 16 November 2021 I have already dealt with in relation to the family provision costs. No further account needs to be taken regarding that complaint.

Contention 6 – cross-examination on the photographic evidence

187. The last particular matter relied upon by Mr Simpson related to the cross-examination, by Dr Mantziaris, of Barbara based on the photographs.

188. It is true that the photographs were not adduced as part of the plaintiffs’ evidence prior to the commencement of the hearing. It might well be the case that if they had been adduced earlier, some time might have been saved. I find myself unable to really speculate as to how that possibility might have played itself out.

189. It would have been open to the defendants to issue a notice to produce in respect of photographs of works done on the property. The photographs were essentially historic photographs and not photographs prepared per se for the purposes of the proceedings.

190. I am not persuaded that any “otherwise order” should be made in respect of that matter.

Set off of costs

191. The powers of the Court pursuant to ss 90, 96 and 98 CPA are sufficiently extensive to arguably allow for set off of costs.

192. In any event, the Court has an inherent discretion to allow set off of costs orders in the same proceedings: Wentworth v Wentworth [1996] NSWCA 553 at 2 per Priestley and Clarke JJA, Grove AJA. See also Ryan v South Sydney Junior Rugby League Club Ltd [1975] 2 NSWLR 660.

193. Technically, in respect of what is described regarding the family provision claim, the plaintiffs would pay the costs of the estate or Barbara as administratrix.

194. The legal position is that Barbara is entitled to the entirety of the deceased’s estate. In the circumstances of this case, Barbara is the person who would bear the practical burden of any costs order against the estate, on the one hand, and the practical benefit of any costs order in favour of the estate on the other hand.

195. However, having found that Barbara was in substance the active defendant on the estoppel claim, and the fact that she is beneficially entitled to the entirety of the deceased estate (as disclosed in the evidence in the principal judgment), in my view the order that should be made is that the plaintiffs pay Barbara’s costs of the family provision claim in the two respects referred to, and that such costs be set off against the liability of Barbara to pay Michael’s costs on the estoppel claim.

Conclusion

196. The orders of the Court are as follows.

197. The Court:

1. Subject to the undertaking given by the plaintiffs AND recorded as a notation in paragraph 6 below, DECLARES:

1. That as at 20 March 2020, the late Ross George Horn held all shares in the first defendant on trust for the first plaintiff.

2. That the second defendant, in her capacity as administrator of the estate of the late Ross George Horn (Estate), holds all the shares in the first defendant on trust for the first plaintiff.

2. DIRECTS the second defendant to:

1. Deliver to the first plaintiff, within seven days, a form executed by the second defendant by which the second defendant, as transferor, transfers all shares held by the second defendant in the first defendant to the first plaintiff as transferee.

2. Do all things necessary and incidental to the registration of the share transfer in the name of the first plaintiff on the share register of the first defendant.

3. Transfer the books, records and seal of the first defendant to the first plaintiff forthwith and provide all electronic access codes and other permissions necessary for the performance of the activities of the first defendant.

3. ORDERS that the first plaintiff’s claim for provision pursuant to section 59 of the Succession Act 2006 (NSW) be dismissed.

4. ORDERS, subject to order 7, that the second defendant pay the plaintiffs’ costs of the proceedings on:

1. a party/party basis as assessed or agreed for the period up until 14 May 2021; and

2. thereafter, on an indemnity basis as agreed or assessed.

5. The Court makes no order as to costs of the proceedings in relation to the first defendant with the intent that it bears its own costs.

6. NOTES AND ACCEPTS that the plaintiffs undertake that they, by themselves or by the first defendant, will not seek to enforce a claim against the Estate in respect of the $817,417 amount recorded as a loan by the first defendant to the late Ross George Horn.

7. ORDERS that the plaintiffs pay the second defendant’s costs referable to:

1. the family provision claim from the date of the filing of the summons on 17 March 2021 up to and including 4 May 2021; and

2. day two of the hearing.

8. ORDERS that the costs the subject of orders 4 and 7 be set off against one another.

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Decision last updated: 19 December 2022