Hughes v Sangster (No 2)
[2019] ACTSC 202
•1 August 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Hughes v Sangster (No 2) |
Citation: | [2019] ACTSC 202 |
Hearing Date: | 1 August 2019 |
DecisionDate: | 1 August 2019 |
Before: | Mossop J |
Decision: | See [16] |
Catchwords: | PROCEDURE – COSTS – Calderbank offer by plaintiff rejected – subsequent offers also rejected – defendant’s rejection of offers unreasonable – defendant to pay plaintiff’s costs on a solicitor and client basis from the date the Calderbank offer was made – quarantining of the proceeds of the sale of a house to which the defendant would otherwise be entitled to in order to preserve the defendant’s costs obligations. |
Legislation Cited: | Civil Law (Property) Act 2006 (ACT), s 244 Trustee Act 1925 (ACT), ss 70, 79 |
Cases Cited: | Hughes v Sangster [2019] ACTSC 178 Calderbank v Calderbank [1975] 3 All ER 333 Ofria v Cameron(No 2) [2008] NSWCA 242 |
Parties: | Christina Ella Hughes by her Guardian and Manager Warwick Samuel Hughes (Plaintiff) Martell Justine Sangster (Defendant) |
Representation: | Counsel JA Rose (Plaintiff) DA Hassall (Defendant) |
| Solicitors Bradley Allen Love Lawyers (Plaintiff) Legal on London (Defendant) | |
File Number: | SC 478 of 2017 |
MOSSOP J:
Introduction
This matter was listed before me today for the making of final orders, including the determination of the question of costs. The making of orders was largely uncontroversial in light of the reasons that I had given on 26 July 2019.
Costs
The plaintiff sought costs on a more favourable than usual basis. She sought costs on a party and party basis for the period prior to 1 June 2017 and thereafter on a solicitor and client basis, or alternatively, on a party and party basis up until 8 April 2019 and thereafter on a solicitor and client basis. She also seeks the preservation of the defendant’s share of the proceeds of sale of the Nicholls property so that they are available to meet the costs obligations of the defendant.
The better than usual cost orders are based principally upon two offers made to resolve the proceedings. The first is an offer dated 1 June 2017 and the second is an offer dated 8 April 2019. Notwithstanding that these were the offers relied upon, the whole of the correspondence in relation to settlement was put into evidence and this includes further offers and correspondence. In the circumstances, it is only necessary to refer in detail to the offer of 1 June 2017.
As the chronology set out in my earlier reasons at [8]-[37] indicates, the offer of 1 June 2017 predates the commencement of proceedings. The letter refers to previous correspondence between the parties in relation to settlement that occurred in 2013, that is, prior to the appointment of Warwick Hughes as a guardian and manager for the plaintiff. It identifies that Mr Hughes was appointed as guardian and manager on 10 January 2017. The letter was a detailed one reciting the positions articulated in previous correspondence, setting out the plaintiff’s view of the facts, identifying the relevant legal principles and therefore identifying the plaintiff’s claim against the defendant. It articulated the proposition that the equitable ownership reflects the payment of, in effect, $360,000 by the plaintiff and $20,000 by the defendant. It then referred to the estimated value of the property and summarised the past settlement negotiations. It put an offer to settle on the basis that the plaintiff had an 85% beneficial interest in the property and the defendant had a 15% interest in the property. Based upon the estimated value of the property of between $800,000 and $850,000, that gave an estimated value of the defendant’s interest of between $120,000 and $127,500. The settlement proposed involved a severance of the joint tenancy and an agreement not to exercise any right of survivorship should one of the parties predecease the severance. The offer was expressly made on the basis that it was in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and authority was given for the proposition that a Calderbank offer may be effective even though no proceedings were currently on foot: Ofria v Cameron(No 2) [2008] NSWCA 242. The letter annexed a substantial number of relevant documents.
In summary:
(a)The offer of settlement was made in accordance with a recognised procedure for making a Calderbank offer and as such was marked “without prejudice save as to costs”.
(b)It proposed terms detailed enough to permit them to be accepted in a manner which provided a workable contract to settle the dispute and separate the interests of the parties. There was no relevant ambiguity which would detract from its effectiveness.
(c)The offer allowed a period of 29 days in which it was open for acceptance. That was clearly a reasonable period of time in the circumstances. While there is clear evidence that the letter was received by the solicitors then acting for the defendant, there is no evidence of any response having been made.
(d)The offer foreshadowed that it would be relied upon in relation to costs in the event that it was not accepted. The plaintiff was required to commence proceedings and ultimately awarded an interest in the property that was greater than she offered to accept.
(e)The letter was a genuine attempt to reach a negotiated settlement and not merely an attempt to trigger a costs sanction against the defendant: Leichhardt Municipal Councilv Green [2004] NSWCA 341 at [39]. It involved a significant element of compromise and was not merely in essence an offer to capitulate: Kain v Mobbs (No 2) [2008] NSWSC 599 at [10]-[12].
There was no evidence led and no submission made that there was any difficulty on the defendant’s part in obtaining advice in relation to the offer in order to assess its merits and make a decision whether or not to accept it.
The plaintiff and her guardian are elderly people of limited means who had every motivation to make reasonable attempts to resolve the dispute without the need for litigation and did so.
The failure to accept this offer has led to the necessity to litigate the matter at very substantial expense. The matter involved five days of hearing, including the preparation of substantial written submissions. The plaintiff’s party and party costs are estimated by the plaintiff’s solicitor at somewhere approximating $168,000. While at the time of the offer the estimated sale price was between $800,000 and $850,000, it is now approximately $900,000. The effective percentage of the total proceeds of sale to which the defendant is entitled is significantly less than that which was offered in the letter, namely 5.26% of the total value of the property compared to the 15% that was offered. Leaving aside the costs subsequently incurred and treating the sale costs as being equivalent, the result achieved by the defendant in litigating the matter to conclusion is to achieve an outcome substantially less favourable to her than was offered more than two years ago.
That alone is only sufficient to warrant a better than usual costs order in favour of the plaintiff if the defendant’s rejection of that compromise was unreasonable. In my view it was.
First, it must have been known to the defendant that the litigation of the matter to finality would involve very substantial expense. That is a factor which must be taken into account in assessing the reasonableness of conduct of a party in relation to an offer to compromise proceedings. The very substantial expense of litigating a matter to finality is a factor which increases the obligation on a party to give serious and genuine consideration to the compromise of the proceedings.
Second, the position of the defendant was based upon foundations which, when realistically assessed, were clearly insecure. The key respects in which they were insecure are addressed in my earlier reasons. Most obviously, the note signed by the defendant acknowledging a liability of $183,000 in 2005, the absence of any contemporaneous documentation supporting the inclusion of the $125,000 as a contribution towards the acquisition of the property, the absence of any contemporaneous documentation supporting the forgiveness of the balance of the acquisition cost and the absence of any detailed non-documentary evidence concerning the transactions between the plaintiff and defendant that would support the defendant’s position.
Third, I take into account the absence of any response to what was a reasonable and detailed offer.
Fourth, the evidence discloses that even in response to a subsequent offer in 2019 which offered a 38% beneficial interest to the defendant on the basis that there be no order as to costs, the defendant continued to insist upon a 50% interest. Further, she rejected an alternative offer which would have given her a 15% interest as well as a right of survivorship in relation to a smaller replacement property to be acquired in the plaintiff’s and the defendant’s names. She subsequently rejected an offer of a 40% interest or an alternative offer of a 25% interest plus a right of survivorship in a replacement property to be acquired in the names of the plaintiff and the defendant. Finally she rejected an offer of a 70%/30% distribution. A counter-offer identified as a final offer to settle was for a 48% interest rather than a 50% interest. On the day of final submissions an offer was made by the defendant to accept a 60%/40% distribution. While that mirrored a pre‑trial offer by the plaintiff, obviously by that stage vast amounts of costs had been spent on the hearing.
This subsequent history is consistent with an unrealistic approach to the settlement of the case on the part of the defendant and persistent genuine attempts by the plaintiff to offer a genuine compromise of the claim which were significantly more favourable to the defendant than the result achieved and would have stemmed the haemorrhaging of legal costs on both sides. I do not accept the submission made on behalf of the defendant that her continued courteous responses to the various offers made by the plaintiff was sufficient to deflect a conclusion of unreasonableness. Courtesy and the making of counter-offers, while relevant, are not sufficient to deflect a conclusion that the conduct of a party is unreasonable. One must look at the substance of the position adopted. It is the substance of the position adopted in this case by the defendant which I consider to be unreasonable. I do accept the submission that the defendant was entitled to obtain a ruling from the court in relation to the extent of her equitable interest in the property. However, such an entitlement does not detract from the capacity of the court to make costs orders which are consistent with the judicial policy of encouraging reasonable and realistic efforts to settle proceedings.
Order in relation to proceeds of sale
Additionally, the plaintiff seeks an order quarantining the proceeds of the sale to which the defendant would otherwise be entitled to, so that they are available to meet, in part, the costs obligation of the defendant. I accept the plaintiff’s submission that it is open to the court to fashion its relief in a manner analogous to a Mareva injunction that preserves the proceeds of sale so that they are available to meet the costs order: cf Jet West Ltd v Haddican [1992] 2 All ER 545; 1 WLR 487. In my view, such an order is appropriate. The defendant gave evidence that she was no longer in employment and her only source of income was income protection insurance. If no such order is made there is a real risk that the amount to be paid to the defendant from the proceeds of the sale of the house will be unavailable to meet the costs obligations of the defendant. While there is a real risk in any event that recovery of costs will involve substantial additional legal costs, the quarantining of the amount that would otherwise be paid to the defendant will reduce the extent to which the plaintiff is exposed to those further costs.
Orders
The Court:
1.Orders that the defendant’s Amended Application in Proceeding dated 9 May 2019 is dismissed.
2.Orders that the defendant’s Amended Counterclaim dated 9 May 2019 is dismissed.
3.Declares that the defendant holds the defendant’s interest as tenant‑in-common in the land described in Certificate of Title volume 1536 folio 5, being the land at Section 40, Block 5 in Plan 9193 in the Division of Nicholls in the Australian Capital Territory, and known as 13 Rumbelow Court, Nicholls (the Nicholls Property) on trust for the plaintiff and the defendant as tenants in common in the following shares:
(a)the plaintiff: a 89.47% share; and
(b)the defendant: a 10.53% share.
4.Orders that Warwick Samuel Hughes is appointed as a co-trustee of the trust declared in order three above, jointly with the defendant, pursuant to s 70 of the Trustee Act 1925 (ACT).
5.Orders that the property of the trust declared in order three above is vested in the defendant and Warwick Samuel Hughes pursuant to s 71 of the Trustee Act 1925 (ACT).
6.Orders that the defendant pay the plaintiff's costs of and incidental to these proceedings (including the counterclaim, the defendant’s Amended Application in a Proceeding dated 9 May 2019, and Mossop J’s reserved costs order of 8 May 2019) as follows:
(a)assessed on a party and party basis up to and including 31 May 2017; and
(b)assessed on a solicitor and client basis from 1 June 2017 onwards.
7.Orders that the costs payable by the defendant pursuant to order six above shall, in the first instance, be payable out of the defendant's beneficial interest in the net proceeds of sale of the Nicholls property.
8.Orders that the Nicholls Property be sold pursuant to the Civil Law (Property) Act 2006 (ACT) s 244(1)(b) and (4).
9.Orders that the Registrar of the Supreme Court be appointed under s 79 of the Trustee Act 1925 (ACT) to:
(a)convey the Nicholls Property and execute the contract for the sale of the Nicholls Property and other documents reasonably required for the purposes of the sale of the Nicholls Property;
(b)appoint including but not limited to the appointment of real estate agents; and
(c)appoint solicitors to convey the Nicholls Property and to hold the gross sale proceeds in trust and to give instructions to the solicitors appointed to convey the Nicholls Property:
(i)to pay expenses and costs in respect of the conveyance of the Nicholls Property; and
(ii)to distribute the net proceeds in accordance with the Court’s declaration, orders and directions.
10.Orders that if the plaintiff and the said Warwick Samuel Hughes are continuing to reside personally in the Nicholls Property, the Registrar shall not require them to vacate the Nicholls Property any earlier than seven days before the completion of any sale of the Nicholls Property.
11.Orders that the said Registrar be appointed as trustee to receive and apply the proceeds of sale of the Nicholls Property pursuant to Civil Law (Property) Act 2006 (ACT) s 244(3)(a).
12.Orders that the proceeds of sale of the Nicholls Property are to be distributed, pursuant to Civil Law (Property) Act 2006 (ACT), s 244(3)(b)(ii), as follows:
(a)firstly, in payment of such agent’s commission and costs of sale of the Nicholls Property as the Registrar may determine;
(b)secondly, in payment to the plaintiff of 50% of the balance, being the amount of her legal tenancy, estate or interest in the Nicholls Property as a tenant in common; and
(c)thirdly, in payment to the plaintiff of 89.47% of the balance, being her beneficial interest in the defendant’s interest in the Nicholls Property pursuant to the trust declared in order three above;
(d)fourthly, in payment to the plaintiff of her costs of these proceedings, as ordered by order six above; and
(e)fifthly, of the remaining balance (if any), to the defendant in payment of her beneficial interest in the defendant’s interest in the Nicholls Property pursuant to the trust declared in order three above.
13.Grants leave to the Registrar and the parties to apply to the Court on seven days’ notice including to seek the advice of the Court as to distribution and as to the expenses of the Registrar or to obtain such further, or other, relief to enable effect to be given to these orders or the discharge thereof as are considered necessary or appropriate.
| I certify that the preceding sixteen [16] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: |
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