Simmons v Williams (No. 2) No. DCCIV-01-20

SIMMONS v WILLIAMS
[2003] SADC 131
Judge Robertson
Reasons for Decision
Nature of the Application

I have two applications before me. The first by the Plaintiff, who seeks to recover from the Defendant, solicitor and client costs of the proceedings pursuant to Rule 41 of the District Court Rules 1992. (“the Rules”). The application arises from an Offer to Consent to Judgment by the Plaintiff, dated 4 January 2001.
The second Application, is by the Defendant who seeks to recover from the Plaintiff costs incurred, on a party and party basis, for the period commencing fourteen days after 18 December 2001. It was on that date that the Defendant filed an Offer to Consent to Judgment. This application is brought pursuant to Rule 40 of the Rules.
The Plaintiff’s Application
The Plaintiff lodged an Offer to Consent to Judgment and served a copy on the Defendant, on 4 January 2001. It is submitted by Mr Frayne, Counsel for the Plaintiff, that the effect in money terms of the Offer is that the Plaintiff was prepared to accept the sum of $157,000 in settlement of the De Facto Relations Act proceedings brought by him. The further submission is that following my decision, the Plaintiff is entitled to payment in the order of $182,000 and that as that sum is greater than the Offer filed, the Plaintiff is entitled to have his entire costs paid on a solicitor and client basis, pursuant to Rule 41.04 of the Rules.
Nature of the De Facto Relationships Act Proceedings
The Plaintiff brought proceedings pursuant to Sections 9 and 10 of the De Facto Relationships Act 1996 (“the Act”) seeking a division of property. The Defendant filed a counter-claim, also seeking a division of property pursuant to Sections 9 and 10 of the Act. Whilst both parties were in possession of various items of property at the time of the Trial, the only property for which orders were sought were:-
·a house property at 207 Wattle Street, Malvern, which was held by the Plaintiff and the Defendant as joint tenants;
·an amount of a little over $60,000 which was standing in a solicitors trust account. This amount was the net proceeds of a sale of a house property owned at Russell Place, Williamstown in Victoria which had also been owned by the parties as joint tenants.
Both parties, at Trial, agreed that the remaining property held by each of them respectively could be retained by the party who was presently holding that property.
The issues at Trial were:-
·the manner in which the property, the subject of the proceedings, was to be divided between them;
·the valuation of the Wattle Street house;
·whether the Wattle Street house should be sold at auction and the net proceeds divided in the manner ordered by the Court or whether the Court should make an order for division based upon the valuation of the property.
At the Trial, the Plaintiff maintained the position that he had held throughout the course of the proceedings, namely that the property, the subject of proceedings, should be divided equally between the Plaintiff and the Defendant. By the end of the Trial, the Defendant submitted that the division of the property should be on the basis that the Plaintiff receive twentyfive to thirty percent and that she should retain the remaining portion of the property. Her position at the beginning of the Trial differed from her position at the end. At the beginning it was the Defendant’s position that the Plaintiff should receive less than twentyfive percent.
The Issue regarding the Auction of the Wattle Street House.
At the commencement of the Trial, the Plaintiff successfully applied to amend his Statement of Claim to include an alternative claim for relief, namely that the Wattle Street property be sold and the net proceeds of the sale be divided equally between the parties. It was the Plaintiff’s case that there was a buoyant and rising real estate market and that it would be unjust to have an order for division of property based upon a final finding regarding the valuation of the house. There was disagreement regarding the valuation of the house between the Valuer employed by the Plaintiff and the two Valuers employed by the Defendant. The Plaintiff did not abandon his claim that there be a division of property based upon valuation. The claim for relief that the property be sold was presented in the alternative. However, this was the Plaintiff’s primary submission. The Plaintiff further submitted that the house be sold by auction.
At the hearing, the Defendant opposed the Plaintiff’s case that the property be sold by auction. It was the Defendant’s case that any final orders should be determined on the basis of the value of the Wattle Street house. At the time of Trial, the Defendant was living in the house with her husband and young child. She expressed a desire to retain the house.
Judgment of the Court
On 13 December 2002 I delivered Judgment and provided written Reasons for that Judgment. I determined that the property in dispute should be apportioned as to forty percent to the Plaintiff and sixty percent to the Defendant. I ordered that the Wattle Street property be sold by auction and the net proceeds divided in the manner I ordered. The money held in the solicitor’s trust account from the sale of Russell Place property was also to be divided in the same proportions. I also ordered that the parties repay a loan of $3,000 which had been lent to them by the Plaintiff’s mother.
Whilst I finally ordered that the house be sold, I felt that it was appropriate to also resolve the issue of the value of the Wattle Street house. There were differing opinions provided by the Valuer called by the Plaintiff and the two Valuers called by the Defendant. In the end, I did not accept the valuation of any valuer. I concluded that the value of the house was $430,000.
Rule 41 of the Rules.
Rule 41.01 (1) of the Rules provides that a Plaintiff may at any time up to twentyone days prior to trial lodge with the Registrar and serve on a Defendant a notice offering to accept a stated amount or a judgment for a stated amount together with costs of action in satisfaction of the proceedings. Rule 41.04 provides that where the Defendant does not accept the Plaintiff’s offer and the sum recovered by the Plaintiff is equal to or greater than that contained in the Plaintiff’s filed Offer then the Court, “… unless it thinks proper to order otherwise …” shall require the Defendant to pay the Plaintiff’s costs as between solicitor and client. It is Rule 41.04 that a Plaintiff relies upon in seeking an order for solicitor and client costs.
The Plaintiff’s calculations in support of his application.
I was provided with a Schedule of Calculations which indicated that at 17 June 2003, being the day before the hearing of the Application for costs, the sum of $66,769.26 was the current balance of the funds held in the Victorian solicitor’s trust account. The net proceeds of the Russell Place property had continued to increase in total due to the interest that was being earned. The Plaintiff calculated that forty percent of that amount was $26,707.70. The Plaintiff also calculated that forty percent of the net proceeds of the sale of Wattle Street property namely, $393,055.91, was the sum of $157,222.36
Mr Frayne, submitted that the Plaintiff was entitled, pursuant to my Orders, to the sum of $182,429 calculated as follows:-
40% of Russell Place   $26,707.10
40% of Wattle Street   $157,222.36
$183,929.46
Less amount to Plaintiff’s
Mother (half of $3,000)                $1,500.00
Total              $182,429.46
Later, in the course of his submissions, Mr Frayne accepted that, in his calculations he had overlooked deducting from that amount the sum of $8,318.00 which is the amount expended on the Wattle Street property to prepare it for sale. Taking this amount into account the effect of Mr Frayne’s submission is that the Plaintiff is entitled to $174,111.50. He submitted that as that amount exceeded the sum of $157,000 then the Plaintiff was entitled to his solicitor and client costs pursuant to Rule 41.
Terms of the Offer by the Plaintiff
It is appropriate that I set out the terms of the Offer to Consent to Judgment made by the Plaintiff:-
“1.That the plaintiff transfer to the defendant his interest in the property situated at 207 Wattle Street, Malvern being the whole of the land comprised and described in Certificate of Title Register Book Volume 5611 Folio 921 (“the Malvern property”).
2.That the defendant cause the mortgage registered over the Malvern property being Mortgage No. 8596684 to be discharged.
3.Proceeds of sale of the property situated at 24 Russell Place Williamstown in the State of Victoria (“the Russell Place proceeds”) be paid to the plaintiff.
4.That the parties jointly pay and discharge the debt of $3,000 owing by the parties to the plaintiff’s mother’s Margaret Anne Simmons.
5.That the defendant pay to the plaintiff the sum of $97,000 contemporaneously with the transfer to the defendant of the plaintiff’s interest in the Malvern property.
6.That the plaintiff and the defendant retain their savings.
7.That the defendant deliver up to the plaintiff the family room rug and one sofa and that the defendant otherwise retain the furniture and effects contained in the Malvern property, and that the plaintiff retain the furniture and effects in his possession.
8.That each party retain their respective superannuation entitlements, shares, cars and all other assets in their respective possession.
9.That the defendant do pay to the plaintiff his costs of this action to be agreed or taxed.”
I have set out the Offer to Consent to Judgment in full to show that it was not simply a monetary offer to consent to Judgment. Mr Frayne submitted that the effect of the offer in money terms was that the Defendant would pay to the Plaintiff of the order of $157,000. I emphasise the word “effect”. As I understood his submission, he reached that figure on the basis that the amount outstanding in the solicitor’s trust account from the proceeds of the net sale of Russell Place at that time was approximately $60,000, so that the addition of that amount to the sum of $97,000 referred to in paragraph 5 of the offer amounts to $157,000.
The Relevant Legal Principles
Rule 41 of the Rules provides that where the sum recovered by a Plaintiff as a result of a judgment is equal to or greater than the Plaintiff’s monetary offer then “… unless it thinks proper to order otherwise …”, the Court shall order the Defendant to pay the whole of the Plaintiff’s costs of action as between solicitor and client.
The Full Court in the decision of Shaw v Jarldorn (1999) 76 SASR 28, had occasion to consider Rule 41 and in particular the phrase “… unless it thinks proper to order otherwise …”. Doyle CJ (at p.29) made the following observations:-
“The power to “order otherwise” confers upon the Court an unfettered discretion. But it is a discretion which, if exercised, is exercised to displace what will otherwise be the required effect of r 41.04, which is that the defendant pay the whole of the plaintiff’s costs of action as between solicitor and client. In other words, it will be proper for the Court to order otherwise only if, in the exercise of that wide discretion, there is good reason to order that the rule is not to have its usual effect. In considering whether there is good reason to so order, it is necessary to bear in mind the manner in which the rule operates, and the context in which it operates.
The rule expressly contemplates that a defendant who does not accept an offer that the plaintiff ultimately betters, will pay the whole of the plaintiff’s costs of action as between solicitor and client. It is part of the ordinary operation of the rule that it affects the amount to be paid by way of costs in respect of steps in the action that precede the making of the offer. That is an aspect of the incentive, deliberately created, to respond to an offer, rather than to continue to litigate in the hope of achieving a better outcome. In this respect the operation of the rule can be said to be penal, in the manner that the predecessor rule was described in Whitehead v Maas (1991) 56 SASR 362 at 367. But this operation of the rule cannot, of itself, be a reason to order otherwise. It is part of the very scheme of the rule.”
With respect to the exercise of the discretion provided in Rule 41, Perry J, with whom Doyle CJ agreed, made the following comments (p. 34):-
“It seems to me that the rule in its present form is likely to have an even narrower scope than the operation accorded its predecessor in Whitehead v Maas. The circumstances which are most likely to arise and which might justify relieving a defendant from the obligation to pay solicitor and client costs, will be those where there is such a significant change in the manner in which the plaintiff’s case is presented at the trial, or the manner in which the evidence emerges at the trial, that it might fairly be said that the full dimensions of the plaintiff’s entitlement could not possibly have been foreseen before the hearing commenced.
Another circumstance which might give rise to an application of the discretion in favour of the defendant is if the plaintiff substantially amends his or her case at the trial, or at least after the period within which the defendant might have accepted the offer has expired.”.
The Defendant’s Submissions
It was submitted by Ms Morosini, Counsel for the Defendant, that there are matters present which indicate that it is proper to exercise the discretion and refuse the application. I do not propose to identify the specific submissions made by Ms Morsosini. It is suffice to say, that I did not feel that any of those submissions supported her contention that I should exercise the discretion and not order solicitor and client costs. Having said that, I still need to consider whether the Plaintiff should receive solicitor and client costs.
Is the Offer “A Stated Amount” pursuant to Rule 41.01?
I mentioned before that Rule 41.01(1) was premised on the basis that the offer should contain “a stated amount”. The question that immediately arises is whether the Plaintiff’s offer contains “a stated amount”?I earlier set out the full context of the offer. In my view, it is not an offer “… to accept a stated amount …”. Previously I referred to Mr Frayne’s submission that “the effect of this offer in money terms was that the defendant would pay to the plaintiff of the order of $157,000”. (Emphasis added) In my opinion, Mr Frayne was forced to present his submission in that manner because there is no readily identifiable “stated amount”. I stated that the sum of $157,000 appears to have been arrived at by the addition of the amount of the proceeds of sale of the Russell Place, sitting in the trust account of the solicitors, namely the sum of $60,000, with the sum of $97,000, which was the figure contained in paragraph 5 of the Offer. This amount was to be paid by the Defendant upon the Plaintiff transferring to the Defendant his interest in the Wattle Street property.
It is important to remember that this Rule is penal in nature. It is therefore fundamental to the operation of the Rule that there is an identifiable amount in the Offer, which the Defendant is able to accept. It is also important to recognise that pursuant to Rule 41.02, the Defendant may at any time after the receipt of the Offer and up to seven days prior to Trial, file and serve a Notice of Acceptance of the Offer.
Part of the Offer of the Plaintiff was that the proceeds of the sale of the property at Williamstown be paid to the Plaintiff (Paragraph 3 of the Offer). This amount is not identified in the Offer. I have assumed that what is meant by the phrase “proceeds of sale” in paragraph 3 is a reference to the amount contained in the trust account of the Victorian solicitors. If it means literally the proceeds of sale of the property then that amount is likely to be different than the amount that was presently in the solicitor’s trust account at the time of the Offer. Furthermore, whilst the Offer remained extant, the amount contained in the solicitor’s trust account continued to increase because it was earning interest. For the Defendant to determine whether to accept the Offer, she would first need to ascertain the balance outstanding in the trust account, so that she would be fully informed at the time the offer was under consideration for acceptance. In my view, the Rule does not contemplate a Defendant having to take such a step. This highlights the point which I have expressed, that the Offer does not contain a “stated amount”. The Offer varies according to the increase in the amount in the solicitor’s trust account by way of interest earned from time to time. This may only seem a small matter in that the variation in an amount would not be great. But that is not the point. Because the Rule is penal in nature there must be certainty in the amount of the Offer.
There is a further reason why I am of the view that the Offer does not contain a “stated amount”. If the Defendant accepted the Offer then she was required to deliver up to the Plaintiff “the family room rug and one sofa”. That provision of the Offer, standing alone, suggests that the Offer was not for a “stated amount”. Furthermore, even if that is not correct, the Offer does not identify the value of those two items. There would need to be agreement between the Plaintiff and Defendant as to the value of those two items, at the very least, before it could be argued that the offer was for a “stated amount”.
I have before me a letter from the Plaintiff’s solicitors to the Defendant dated 3 October 2000, in which it allocates a sum of money to each of those items. The family room rug is allocated $400 and the sofa $750. I assume that the Plaintiff considered that these amounts were what the rug and sofa were worth. However, that in itself does not assist here. As I said earlier, because of the penal nature of Rule 41 the obligation is upon a Plaintiff to specify a certain amount. If the Plaintiff wished to obtain the benefit of the terms of Rule 41, then he was obliged to specifically identify in monetary terms the amount of the Offer. In my view, he failed to do so in his Offer.
For the reasons I have expressed, I am of the opinion that the Offer upon which the Plaintiff relies in this application is not an Offer made pursuant to the provisions of Rule 41 and accordingly the Plaintiff’s Application fails.
Should the discretion be exercised against making the order?
Whilst this conclusion brings the Plaintiff’s Application to a close, I consider it appropriate to go on and consider the Application on the assumption that it is an Offer pursuant to Rule 41. In doing so, I need to make an assumption regarding the “stated amount”. For the purpose of this exercise I will assume the “stated amount” is $157,000. I pause to state that the exercise in making the assumption emphasises the points I have made earlier. To make the assumption, I need to assume that the amount standing in the solicitor’s trust account is $60,000. Furthermore, it ignores the fact that part of the offer was the requirement to hand over the rug and sofa which must have some value.
It is clear from the figures contained in the Schedule of Calculations that the monetary amount recovered by the Plaintiff in accordance with the terms of my Order, following the sale of the Malvern Street property, is in excess of the sum of $157,000. Therefore, the Plaintiff is entitled to recover his solicitor and client costs “…unless the Court … thinks it proper to order otherwise…”. Should I then exercise my discretion and refuse the Plaintiff his solicitor and client costs? In other words, should I refuse to make the order because I do not think it is proper to make the order. In my opinion, I should refuse to make the order.

I mentioned earlier that the Plaintiff at the beginning of the Trial, amended his Statement of Claim to include in his prayer for relief an order that the Wattle Street property be sold. At the hearing, the Plaintiff submitted that the only just way to deal with the house was to sell it by auction and divide the proceeds according to the terms of the Order made. Until the time of the amendment, the litigation had proceeded on the basis that any division relating to the house would be determined on the value the Court attached to it. Indeed, the Plaintiff’s Offer must have been calculated and premised on the valuation of the house. The very essence of the Plaintiff’s Offer was that the Defendant should retain the property, provided she pay the Plaintiff the sum of $97,000 and discharge the existing mortgage. Although it is not expressly stated, the Plaintiff must have had in mind a value of the house at the time of marking the offer.
In my opinion, the amendment made at Trial was a substantial one. It added an entirely new dimension to the Plaintiff’s claim. It came at a time when the Offer of the Plaintiff could no longer be accepted by the Defendant. The extent of the new dimension can be seen by the result of the sale of the property. There is a substantially larger amount available for division between the Plaintiff and the Defendant than if the division had taken place on the basis of my finding of the value of the property of $430,000.
In my view, it would be unjust to allow the Plaintiff to now use the net proceeds of sale of the property as a method of calculating his monetary return for the purpose of determining whether he is entitled to his solicitor and client costs pursuant to Rule 41. The Offer was made at a time when the parties were in dispute regarding the value of the property. That was the issue up to the date of Trial. If the amendment had been made whilst the Offer was extant then that would have been another issue that the Defendant would need to have considered. She would have needed to consider the likelihood of the Court order, the sale of the property by auction and the likelihood of a sale price being greater than any of the valuations provided by the Valuers. As I said this amendment took place after the time for accepting the Offer had passed. The injustice in using the proceeds of sale for the purpose of the calculations is highlighted when the valuation amount of $430,000 is used in making the calculations instead of the net proceeds of sale. The net proceeds were calculated on a sale price of $515,000. When the figure of $430,000 is used the picture changes completely. Whilst I have not done the precise calculations there is a distinct possibility that in those circumstances, the Plaintiff would not have received an amount greater than the Offer. I think the results using this method is very close.
There is one final matter I wish to address. Mr Frayne pointed to a letter from the Plaintiff’s solicitors dated 16 August 2001 in which they indicated that the Plaintiff intended to make application seeking an order that the Wattle Street house be sold. The giving of this notice does not cause me to alter the views I have expressed. The application to amend was not made until the commencement of Trial. The Defendant did not need to consider this issue until the amendment was made. It was not done until the time for accepting the Offer had passed. It is not relevant to the exercise of my discretion.
For reasons I have expressed, I would exercise my discretion and refuse the Plaintiff’s Application for solicitor and client costs.
The Defendant’s Application for Costs
I now turn to the Application by the Defendant. As I said earlier, her Application is made pursuant to Rule 40 of the Rules. Rule 40.01(1) provides (inter alia) that a Defendant may up to twentyone days prior to trial lodge with the Registrar and serve on the Plaintiff an Offer to Consent to Judgment in satisfaction of a Plaintiff’s claim, for a proportion of the Plaintiff’s claim expressed as a percentage. Ms Morosini, Counsel for the Defendant, submitted that the Offer to Consent to Judgment dated 18 December 2001, which she filed and served, was an Offer to accept a proportion of the Plaintiff’s claim expressed as a percentage.
I stated earlier that Rule 40.05 provides that where the Offer of the Defendant is not bettered then the Defendant is entitled to recover from the Plaintiff all costs incurred fourteen days after the service of the Offer on a party and party basis. However, as with Rule 41, the Court has a discretion. The Court is not obliged to make such an order if it does not think it is proper to do so.
The Defendant’s Offer
It is appropriate to set out the actual terms of the Defendant’s Offer which were:-
“UPON NOTING the values of the relevant assets as follows:-
207 Wattle Street, Malvern          $385,000.00
Less Mortgage Loan  $102,000.00     $283,000.00
Estimated proceeds sale 24 Russell Place                $63,000.00
Plaintiff’s motor vehicle  $8,000.00
$354,000.00
Less debt to plaintiff’s mother   $3,000.00
Balance  $351,000.00
The plaintiff makes the following offer in full and final settlement of the current proceedings:
1.That the defendant do pay to the plaintiff the sum of $69,400.00
2.That the proceeds of sale of 24 Russell Place in the sum of $63,000.00 be paid to the plaintiff.
3.That the plaintiff do retain his motor vehicle and all other assets currently in his possession or under his control.
4.That the plaintiff do indemnify the defendant against any liability for the debt in the sum of $3,000.00 owed to the plaintiff’s mother.
5.That each of the parties do pay their own costs of and incidental to these proceedings.
The offer set out herein represents a sum equivalent to 40% of the equity in the assets set out herein.”
The Defendant’s Argument
As I mentioned, the Defendant, through her Counsel Ms Morosini, submitted that her Offer was in the nature of an Offer for a proportion of the Plaintiff’s claim expressed as a percentage. It was submitted on behalf of the Defendant that the Offer was for the Plaintiff receive forty percent of his claim. Ms Morosini said that as the Offer was to divide the property, the subject of the proceedings, on the basis of forty percent to the Plaintiff and sixty percent to the Defendant, then the Plaintiff had not bettered the Offer and the Defendant is therefore entitled to her costs under Rule 40.
Is the Defendants Offer in the nature of a “Proportion Offer”?
In my opinion the Defendant’s Offer was not by its nature an Offer “for a portion of the Plaintiff’s claim expressed as a percentage”. The Offer is a monetary Offer. The Offer was not one in which the Defendant indicated that she was prepared to pay forty percent of whatever was found to be the value of the property, the subject of the proceedings. The Offer itself is premised on the basis that the Wattle Street property was valued at $385,000. The Offer is also premised on the basis that the proceeds of Russell Place was $63,000 and that the value of the Plaintiff’s motor vehicle was $8,000.
The statement in the Offer that the offer represented forty percent of the equity in the assets, does not have the effect of making the offer one which is “for a proportion of the Plaintiff’s claim expressed as a percentage”. That part of the Offer referring to the forty percent cannot be read in isolation. The entire terms of the Offer needs to be considered. When this is done, then the Offer cannot be characterised as an Offer “for a proportion of the plaintiff’s claim expressed as a percentage”. The Offer was to pay to the Plaintiff the additions of the amounts in paragraphs 1 and 2 being respectively, $69,400 and $63,000, being in all the sum of $132,400. In addition there were other terms of the Offer which also cannot be ignored. In my opinion the Defendant’s submissions must be rejected. I should also add that the Plaintiff received in money terms an amount in excess of $132,400.
For the reasons I have expressed the Defendant’s Application for costs pursuant to Rule 40 fail.
As both Applications have failed, I will now hear the parties with respect to the final order I should make regarding costs in the proceedings.

[2003] SADC 131

2 September 2003