Katakouzinos v Katakouzinos (No 2)
[2019] VSC 96
•26 February 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S CI 2017 04388
IN THE MATTER of Part IV of the Administration and Probate Act 1958
- and –
IN THE MATTER of the Estate of ANDREAS KATAKOUZINOS, deceased
BETWEEN:
| ARISTIDIS KATAKOUZINOS | Plaintiff |
| v | |
| ANASTASIA KATAKOUZINOS as legal personal representative of the Estate of SOTIRIOS KATAKOUZINOS and in her own capacity (who is sued in her capacity as a person having a substantial interest in opposing the application pursuant to Rule 16.04(2) Chapter 11 – Supreme Court (Miscellaneous Civil Proceedings) Rules 2006) | Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers: written submissions filed 14 and 15 February 2019 |
DATE OF JUDGMENT: | 26 February 2019 |
CASE MAY BE CITED AS: | Katakouzinos v Katakouzinos (No 2) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 96 |
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COSTS – Claim under Part IV of the Administration and Probate Act 1958 (Vic) – Whether plaintiff received an outcome at trial more favourable than the terms of an offer of compromise – Supreme Court (General Civil Procedure) Rules 2015, rule 26.08 – Nakos v Sedaris [2016] VSC 179, referred to.
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HER HONOUR:
These orders are made as a consequence of the reasons delivered on 1 February 2019 (‘reasons’),[1] and following the written submissions regarding costs filed by the parties on 14 and 15 February 2019. The nature of the claim, the circumstances of the parties, and my determination of the outcome of the plaintiff’s claim are detailed in the reasons. In the reasons, I found that the plaintiff was entitled to a payment from the estate of his late father (‘estate’) of $416,000. This sum, based upon the estimates of the net value of the estate agreed between the parties for the purposes of the trial, represents approximately 57 per cent of the value of the estate,[2] exclusive of the parties’ costs.
[1][2019] VSC 3.
[2]Based upon the value of the net estate of $730,000, as agreed between the parties at trial.
The outstanding issue between the parties is whether the plaintiff ought to have his costs of the proceeding on a standard basis, an indemnity basis, or on an indemnity basis for a period of time based upon an offer of compromise served on 24 August 2018 (‘August offer’). The August offer provided, relevantly, as follows:
2.The Plaintiff offers to settle this proceeding (Proceeding) on the following bases:
a.That the Plaintiff receive and retain the Deceased’s motor vehicle, and some of the Deceased’s furniture in accordance with paragraph 5 herein;
b.That the Net Estate (as defined below) be distributed as follows (Distribution):
A.Firstly, in reimbursement to the Defendant of the following funeral costs and testamentary expenses associated with the estate of the late Andreas Katakouzinos (Deceased).
i.Orthodox Funeral Services - $6,316.00;
ii.Costs of the Deceased’s memorial (x2) - $5,280.00
(subject to adjustment for any payment received by Sotirios Katakouzinos from the Deceased’s bank account in reimbursement of such expenses).
B.Secondly, in payment of initial costs incurred for the administration of the estate and billed by Anthony Rose Mainwaring in the sum of $2,904.00.
C.Thirdly, in payment of the Plaintiff’s costs of and associated with the Application for Probate of the Deceased’s Will on an indemnity basis, determined by agreement and failing agreement as taxed.
D.Fourthly:
i.60% to the Plaintiff; and
ii.40% to the estate of the late Sotirios Katakouzinos (and the Defendant shall be liable for repayment of the ANZ loan account ending in the numbers …2001).
c.That the Defendant waive any claim against the Plaintiff for any debt owing by the Plaintiff to the estate of the late Sotirios Katakouzinos.
d.That the parties bear their own costs of and incidental the Proceeding.
5.The Property at 320 Purves Road, Main Ridge (Property) be marketed for sale and sold by auction within 7 weeks of the date of acceptance of this offer at a reserve price (Reserve) of $1,600,000 and with a settlement period of no greater than 60 days. The Property will be sold using a real estate agent nominated by the Defendant in writing within 2 weeks of acceptance of this Offer of Compromise, failing which an agent will be nominated by the Plaintiff, and the parties will sign all necessary documents and do all necessary things to effect such sale. In the event that the Property is not sold at a price equal to or greater than the Reserve (or such other price as is agreed between the parties) then the Property shall be removed from the market for 4 weeks, after which the Property will be listed for auction with a different agent, nominated by the Defendant, with the auction to be held within a further 7 weeks (i.e. 11 weeks after the initial auction) and on the same terms. This process shall be repeated until the sale of the Property at no less than the Reserve price is achieved. The Defendant shall present the Property for sale in a neat and tidy condition at all inspection and auction times. Following the sale of the Property, an interim distribution shall be made to the parties forthwith upon release of the deposit in the percentages contemplated in paragraph 2.b.D herein.
4.For the purposes of this Offer of Compromise, the ‘net estate’ (net estate) is calculated as follows:
a.50% of the sale price of the Property;
b.less 50% of the usual selling costs of the Property, including marketing costs (for marketing as agreed and, failing agreement, as recommended by the real estate agent), agents fees, and conveyancing costs, and any refurbishment or staging costs which are agreed in writing between the parties with a view to maximising the sale price;
c.less 50% of the ANZ mortgage loan account number …5428 balance as at the date of acceptance of this Offer of Compromise;
d.less any tax payable by the Deceased or the estate.
5.The Deceased’s furniture contained in the Property shall be divided between the Plaintiff and Defendant in accordance with their previous verbal agreement and, in the event of dispute, shall be divided equally between them as determined by an independent expert agreed between the parties and, failing such agreement, such expert, anticipated to be a local antique dealer, shall be nominated by the Defendant’s solicitors.
6.For the sake of clarity, and for the purposes of Rule 26.02 of the Rules, the amounts payable to each of the Plaintiff and the Defendant pursuant to the Distribution is inclusive of that party’s costs of this Proceeding.
In summary, the offer provided for the plaintiff to receive sixty per cent of the net estate after the Main Ridge property was sold, inclusive of costs.
The plaintiff seeks his costs on an indemnity basis, fixed at $105,000, for the whole of the proceeding, on the basis that he made reasonable offers to compromise his claim from an early stage, including prior to the issue of the proceeding. These submissions have some force. However, I accept that it was not unreasonable for the defendant to reject these offers, on the basis that the offers either were made prior to the defendant being in a position to understand the strengths and weaknesses of her position, and, in the case of an earlier offer made on 24 August 2017, the offer sought an amount higher than the amount referred to in the reasons. Further, at the time the earlier offers were made, the plaintiff was actively pursuing a claim against the defendant’s late husband’s superannuation fund (‘fund’), such that the respective parties’ financial positions remained uncertain. Finally, some of the earlier offers were made on the basis that payments were made to the plaintiff very promptly.
The plaintiff submitted that the August offer, which complied with order 26 of the Rules, offered to accept, in effect, $438,000 inclusive of costs. In cash terms, this was $22,000 more than the amount ultimately awarded at trial. The plaintiff asserts that his actual costs to the conclusion of the trial were $105,000, and, as such, I can infer that the plaintiff achieved a better result at trial than under the terms of the August offer.
Rule 26.08 of the Rules provides, relevantly, as follows:
Costs consequences of failure to accept
(1)This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.
(2)Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled—
(a)if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim taxed on an indemnity basis;
(b)in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis.
Two questions arise in the current case:
(a) whether the outcome at trial was more favourable to the plaintiff than the terms of the August offer; and
(b) if the question in (a) above is answered in the affirmative, whether I should exercise the discretion to ‘otherwise order’.
The approach to be taken to the cost consequences of a party’s failure to accept an offer of compromise made under order 26 of the Rules were summarised by Zammit J in Nakos v Sedaris:[3]
In this case, the defendant served the offer pursuant to r 28.06(3). It was rejected by the plaintiff’s litigation guardian. The jury returned a verdict well under the offer. The offer having been engaged, establishes a prima facie position set out in r 28.06(3). The plaintiff must now persuade the Court that it should make an order ‘otherwise’. The plaintiff must establish a proper basis for departure from the ordinary consequences of his refusal to accept the defendant’s offer.[4]
…
The discretion to order ‘otherwise’ in relation to an offer of compromise is unfettered. While the principles enunciated in Hazeldene may, on occasion, be relevant to the matters the Court considers when exercising its discretion in relation to an offer of compromise, the principles found in Hazeldene are not principles that must be applied or considered to any offer of compromise. It is trite to say that a Calderbank offer is different to an offer of compromise. Importantly, the entitlement to costs created by the offer of compromise is only displaced if the Court otherwise orders in terms of the rule, creating a presumption in favour of the party making the offer. A Calderbank offer creates no presumption in favour of a costs order. Consideration of the reasonableness or otherwise in rejecting an offer is highly relevant when a court assesses what costs penalties might flow from a Calderbank offer. In the context of an offer of compromise, a consideration of whether it was reasonable or unreasonable to reject the offer of compromise may be relevant, but of its own, is not enough to displace the presumption. The consideration of reasonableness is not, of itself, determinative.[5]
[3][2016] VSC 179.
[4]Ibid [37].
[5]Ibid [39].
In Simply Irresistable Pty Ltd v Couper and ors (No 2),[6] Kyrou J considered that the ‘presumption’ referred to above could be displaced where there are ‘special circumstances’.
[6][2011] VSC 33.
Accordingly, if I were satisfied that the terms of the August offer were less favourable to the plaintiff than the outcome at trial, the onus is then on the defendant to establish the grounds for a departure from the usual presumption which applies under order 26 of the Rules. The reasonableness or otherwise of the defendant’s rejection of the offer is but one matter to be taken into account in such circumstances.
The defendant submitted that, by reason of the terms of the August offer, the plaintiff has not achieved a more favourable outcome at trial. In particular, acceptance of the August offer would compel her to sell the Main Ridge property, which will not be an order I will make as a consequence of the trial. Further, it is impossible to say whether the terms of the August offer are less favourable than the award at trial, dependent as it was on the actual sale price of the Main Ridge property, any tax liabilities of the estate, and the actual amount of the plaintiff’s costs incurred as at that date.[7] Further, at the time of the August offer, the plaintiff was still pursuing his claim against the fund, which was only abandoned shortly before trial.
[7]See Metricon Homes Pty Ltd v Sawyer [2013] VSC 518; Hopkins v Hopkins [2015] VSC 50 as support for the proposition that where the Court is evaluating an ‘all-in’ offer, there should be actual evidence before the Court with respect to the costs as at the date of an offer.
I accept the submissions advanced on behalf of the defendant that it is not possible to determine, with the requisite degree of certainty, that the outcome at trial was more favourable to the plaintiff than the terms of the August offer. First, the award at trial was for the payment of a cash sum. While the practical consequence of the judgment may be that the defendant will have to or may choose to sell the Main Ridge property, that is not a foregone conclusion, given that she has access to cash reserves of some $700,000 through the fund. While an amount equivalent to most of the fund will be exhausted by the payment to the plaintiff and the legal costs of this proceeding, which is disappointing to say the least, it is not inconceivable that she will be able to service the mortgage and retain the Main Ridge property.
Further, I accept that there are too many uncertainties in order to form a conclusive view as to whether the terms of the August offer were less favourable than the outcome at trial. The sale price of the Main Ridge property might exceed the estimate relied upon by the parties at trial, any sale would incur advertising and other selling costs, the taxation liabilities of the estate are uncertain, and there is no evidence before me as to the amount of costs which would have been recoverable on a taxation by the plaintiff at the time of the August offer. The terms of the August offer are therefore difficult to compare with the outcome at trial, given that at the time of the August offer, the plaintiff’s claim upon the fund remained on foot, noting that the comparative financial positions of the plaintiff and the defendant was a significant consideration at trial.
Accordingly, I will order that the defendant pay the plaintiff’s costs of the proceeding, including reserved costs, on a standard basis, to be taxed in default of agreement.
For completeness, if I had been able to form the view to the requisite degree of satisfaction that the terms of the August offer were less favourable than the outcome at trial, I would not have found that there were any special circumstances which would displace the presumption that the plaintiff be entitled to his costs on an indemnity basis after the date of the August offer. However, I would not have been prepared to make an order for costs in a fixed sum, given the quantum claimed and the absence of any evidence to support the quantum claimed.
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