Re Connock (No 4)
[2023] VSC 488
•17 August 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S CI 2019 03554
| RICHARD ANTHONY CONNOCK (in his capacity as executor of the estate of Dr Richard Hugh Shephard Connock) | Plaintiff |
| v | |
| BARBARA FAYE CONNOCK | Defendant |
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JUDGE: | Moore J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Written submissions |
DATE OF JUDGMENT: | 17 August 2023 |
CASE MAY BE CITED AS: | Re Connock (No 4) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 488 |
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COSTS – Estate litigation – Where plaintiff unsuccessful in proprietary estoppel claim – Costs follow the event – No special circumstances warranting award of indemnity costs – Plaintiff to pay defendant’s costs on a standard basis – Supreme Court Act 1986, s 24 – Supreme Court (General Civil Procedure) Rules 2015, O 63 – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; Northern Territory v Sangare (2019) 265 CLR 164.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Gunson SC with Mr L Hogan | John Keating & Associates |
| For the Defendant | Mr M Tehan | Hall & Wilcox |
HIS HONOUR:
On 24 July 2023, I delivered my reasons for judgment in this proceeding in which Mrs Connock was successful in defending a case brought by Mr Connock.[1] I found that there was no Asset Expectation, being the premise on which Mr Connock’s case of proprietary estoppel rested.
[1]Re Connock (No. 3) [2023] VSC 420 (the reasons for judgment). In this judgment I use the abbreviations as defined in the reasons for judgment.
Mr Connock accepts that he should pay Mrs Connock’s costs of the proceeding on a standard basis. However, Mrs Connock seeks indemnity costs on the basis of Mr Connock having refused two Calderbank offers.
The first offer was made by way of a letter from Mrs Connock’s solicitors to Mr Connock’s solicitors dated 4 March 2022 (the first offer) in which Mrs Connock relevantly offered:
(a) to pay $150,000 to the Connock children;
(b) that this proceeding and proceeding S ECI 2018 01646 (the Part IV proceeding)[2] be discontinued with no order as to costs; and
(c) that each party bear their own costs of this proceeding and the Part IV proceeding.
[2]The Part IV proceeding is brought by two of the Connock children: Linda Sutton and Patricia Connock.
The second offer was made by way of a letter from Mrs Connock’s solicitors to Mr Connock’s solicitors dated 28 June 2022 (the second offer) and relevantly offered:
(a) for $200,000 from any sale or transfer of Kooroui Court to be paid to the Connock children at the time of settlement of a sale or transfer (with a caveat to be lodged to support the sum);
(b) to pay $150,000 to the Connock children;
(c) that this proceeding and the Part IV proceeding be discontinued with no order as to costs; and
(d) that each party bear their own costs of this proceeding and the Part IV proceeding.
Unless otherwise expressly provided by an Act or by any rules made pursuant to the Supreme Court Act 1986, the Court has a general discretion in respect of costs, including in relation to the administration of estates and trusts.[3] The discretion is to be exercised judicially and in accordance with order 63 of the Supreme Court (General Civil Procedure) Rules 2015.
[3]Supreme Court Act 1986, s 24.
The usual rule as to costs is that a successful party to litigation is entitled to an award of costs in its favour, with the unsuccessful party bearing the liability for the costs of the unsuccessful litigation. In Northern Territory v Sangare, the High Court stated that:[4]
A guiding principle by reference to which the discretion is to be exercised – indeed, “one of the most, if not the most, important” principle – is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. ...
[4](2019) 265 CLR 164, 173 [25], omitting citations.
The principles governing Calderbank offers were set out by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[5] The critical question identified by the Court of Appeal is whether the rejection of the offer was unreasonable in the circumstances.[6] After noting that ‘deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression’,[7] the Court continued:[8]
[5](2005) 13 VR 435 (‘Hazeldene’).
[6]Ibid [23] (citations omitted).
[7]Ibid [24].
[8]Ibid [25].
At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
In submitting that it was unreasonable for Mr Connock to reject the two Calderbank offers, Mrs Connock emphasised that the primary matters which underlay her success in defending the proceeding[9] were all matters which were known to Mr Connock from an early stage and by the time of the respective offers. It was said this was not a case where a plaintiff might be entitled to reasonably reject an offer because of the possibility that its witnesses might perform better, or the defendant’s witnesses might perform worse, while giving their evidence.
[9]Namely, that Dr Connock’s conduct and the provisions of the wills he made in 2012 and 2014 were inconsistent with the continuance of the Asset Expectation.
Referring to the above Hazeldene factors, counsel for Mrs Connock submitted it was unreasonable for Mr Connock to reject the first offer because:
(a) The first offer was made a little over three months before trial, at which stage discovery had occurred, a mediation had taken place and Mr Connock had filed and served the witness outlines of the witnesses he intended to call. At this point in time, Mr Connock knew the oral evidence he intended to rely on (which was generally accepted by the Court),[10] he knew of the documentary evidence available to the parties and knew the matters on which Mrs Connock relied to support the reasonableness of her offer. Therefore, the first offer was made sufficiently early so as to represent an opportunity to save significant costs, but also at a stage where Mr Connock was able to meaningfully assess his prospects of success.
[10]See, for example, the reasons for judgment at [35].
(b) Mr Connock was allowed almost a month to accept the offer.
(c) The compromise – being a payment of $150,000 and for each party to bear their own costs – was a significant one in light of the result ultimately achieved by Mr Connock.
(d) Mr Connock’s prospects of success were low, largely for the same factors set out in the reasons for judgment: Dr Connock’s actions and his contemporaneous documents were inconsistent with the continuing Asset Expectation. Those matters were canvassed in the offer.
(e) The offer was clear and made clear it would be relied upon for indemnity costs.
Given the above factors, counsel for Mrs Connock submitted that Mr Connock should pay Mrs Connock’s costs on a standard basis up to and including 1 April 2022 (being the date on which the first offer expired), and on an indemnity basis from that date.
Counsel for Mrs Connock largely adopted a similar analysis in respect of the second offer, while noting the following additional factors:
(a) At the point at which the second offer was made, Mr Connock had closed his case and so was in an informed position to assess his prospects.
(b) As a result of Mr Ristevski’s interposition in the usual order of witnesses, Mr Connock also had the opportunity to conduct a significant amount of the cross-examination of a key defence witness.
(c) The second offer was said to represent a very significant compromise (being a payment of $350,000 to the Connock children, comprised of $150,000 in cash and $200,00 in a future payment in relation to sale proceeds of Kooroui Court).
(d) Although the second offer was only available for a week, it was made in circumstances where the trial had commenced and therefore less time would have been required to assess it.
It was submitted that, if the Court was not minded to award indemnity costs from the expiry of the first offer, the Court should order that Mr Connock pay Mrs Connock’s costs on a standard basis up to and including 5 July 2022, being the date on which the second offer expired, and on an indemnity basis from that date.
While I acknowledge the merit of the propositions advanced on behalf of Mrs Connock, ultimately I consider that they are outweighed by two factors advanced on behalf of Mr Connock.
First, the offers made by Mrs Connock required the discontinuance of the separate Part IV proceeding which involved different litigants. Mr Connock, as executor of Dr Connock’s will is, along with Mrs Connock, a defendant in the Part IV proceeding. I agree with the submission made on behalf of counsel for Mr Connock that a party’s rejection of an offer that involves compliance with a mandatory term that is necessarily outside that party’s control is not unreasonable. Without obtaining the consent of third parties - Mr Connock’s two sisters - the compromise offered in the first offer or second offers would fail.
Secondly, the relief sought by Mr Connock in this proceeding was ‘all or nothing’. As submitted by counsel for Mr Connock, his claim did not involve a process of evaluation or assessment in which the end result could vary over a range: a trust would be declared over a property, whose terms continued to permit Mrs Connock’s use of the property in her lifetime, or it would not. Mrs Connock offered a relatively small proportion of the value of the assets claimed to be subject to the trust without recognition of a trust. Given the binary nature of the practical outcomes which could conceivably have flowed form the proceeding, Mr Connock’s rejection of Mrs Connock’s reasonably modest offer was not unreasonable.
Mrs Connock has therefore not established that there exist special circumstances warranting an award of indemnity costs. Mr Connock should pay Mrs Connock’s costs of and incidental to the proceeding on a standard basis. The Court will so order.
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