Stone v Kramer (No 2)

[2022] NSWSC 1716

Supreme Court

New South Wales

Medium Neutral Citation:

Stone v Kramer (No 2) [2022] NSWSC 1716

Hearing dates:

20 October 2022

Decision date:

16 December 2022

Jurisdiction:

Equity

Before:

Robb J

Decision:

See [94] for proposed orders. The parties are directed to provide short minutes of order to the Associate to Robb J within 21 days.

Catchwords:

ESTOPPEL — estoppel by representation — relief — whether plaintiff entitled to orders that he be entitled to water licence and equipment collateral to management of farming property — whether to allow plaintiff to reopen his case to prove entitlement to water licence and equipment — whether plaintiff entitled to order that defendants pay costs ancillary to transfer of real property — whether defendants entitled to orders granting them licence to occupy cottage on farming property

COSTS — party/party — exceptions to general rule that costs follow the event — offers of compromise/Calderbank offers — rejection of Calderbank offer not unreasonable — no basis for indemnity costs order in plaintiff’s favour

Legislation Cited:

Water Act 1912 (NSW)

Water Management Act 2000 (NSW), ss 71M, 71N

Cases Cited:

Alexakis v Masters [2022] NSWSC 1256

Autodesk v Dyason (No 2) (1993) 176 CLR 300

Calderbank v Calderbank [1975] 3 All ER 333

Cunningham v Guardian Royal Financial Services Pty Ltd [2017] NSWSC 1057

Divine Real Estate v Agha [2022] NSWSC 543

Elders Rural Finance Ltd v Westpac Banking Corporation (1989) 6 BPR 13,439

Martin v Martin [2010] NSWSC 700

Stone v Kramer [2021] NSWSC 1456

Stuart Henry Masters v NSW Trustee & Guardian as trustee for Genniece Merlene Gorey [2018] NSWSC 1670

Urban Transport Authority of NSW v Nweiser (1991) 28 NSWLR 471

Category:

Consequential orders

Parties:

David Lindsay Stone (Plaintiff)
Hilary Lorraine Kramer (First Defendant)
Jaime Ferrer (Second Defendant)

Representation:

Counsel:
L Ellison SC & Dr H Bennett (Plaintiff)
C Harris SC & S Hartford-Davis (Defendants)

Solicitors:
Lane Associates (Plaintiff)
Morris Mennilli (Defendants)

File Number(s):

2017/261027

JUDGMENT

1. The Court published its primary judgment in these proceedings on 10 November 2021: see Stone v Kramer [2021] NSWSC 1456 ("J"). The plaintiff substantially succeeded on his claim. I considered the appropriate relief at J [338]-[343]. At J [343], I invited the parties to provide draft short minutes of order to my Associate to give effect to my reasons for judgment.

2. I will, as have the parties and as I did in the primary judgment, refer to the parties by their first names and otherwise use the same terms as were used in the primary judgment. As Hilary conducted the hearing for the defendant executors, I will generally refer to Hilary alone unless it is more appropriate to refer to the executors.

3. The Court has not yet made final orders to give effect to the primary judgment. After some communications between the parties, on 3 May 2022 David filed the notice of motion whose determination is a subject of these reasons. The Court should also address whether final orders should be made now. The parties filed a number of written submissions, the last of which was filed by Hilary on 10 October 2022. The hearing of the notice of motion took place on 20 October 2022.

David’s notice of motion

4. David seeks the following relief in his notice of motion:

1.    The plaintiff have leave to file and serve an Amended Statement of Claim in the form and substance of the proposed Amended Statement of Claim attached to the affidavit of David Lindsay Stone dated 3 May 2022.

2.    The plaintiff have leave to file and serve evidence in support of the relief sought in those parts of the Amended Statement of Claim not pleaded and particularised in the Statement of Claim filed 28 August 2017.

3.    Such other orders as this Honourable Court thinks fit.

4.    The plaintiff's costs of the Notice of Motion be the plaintiff's costs in the cause.

Final orders sought by David

5. David also asks the Court to make the following final orders in the proceedings:

1.    A declaration the defendants as executors of the estate of Leonie Judith Kramer hold the whole of the property [known in these proceedings as the Colo Property] together with any irrigation or water licence incidental thereto or benefiting the property ("the Colo Property") on trust for the plaintiff.

2.    An order the defendants transfer the Colo Property and any irrigation or water license incidental thereto or benefiting the Colo Property free of encumbrance to the plaintiff.

3.    An order the defendants pay all costs of and incidental to the transfer of the Colo Property, including any stamp duty, together with all rates, taxes, fees and liabilities referable to the Colo Property up to the date of the transfer.

4.    Order 2 be complied with within one (1) month of the making of the orders herein.

5.    A declaration the defendants as executors of the estate of the late Leonie Judith Kramer hold the plant and equipment situate upon the Colo property (including all machinery and pumps) on trust for the plaintiff.

6.    An order the defendants deliver the said plant and equipment to the plaintiff.

7.    The Court notes that the Defendants have paid the Plaintiff $12,500 from the $200,000 legacy the Plaintiff was to receive under clause 6 of the Will.

8.    A declaration the Defendants are not liable to pay the Plaintiff the remainder of the $200,000 legacy under clause 6 of the Will.

9.    An order that the defendants pay the plaintiff's costs as agreed or assessed on the ordinary basis and, after 4 November 2020, on the indemnity basis.

10.    The Defendants be entitled to deduct from the Plaintiff's entitlement under order 9 the sum of $10,000.

11.    An order the defendants' costs on the indemnity basis be paid out of the estate of the deceased.

12.   Liberty to apply with regard to orders 2, 3, 5 and 6.

6. I will briefly note the issues that arise out of the final orders proposed by David. As to orders 1, 2, 4, 5 and 6, it follows from the primary judgment that David is entitled to a declaration that the executors hold on trust for him the real property that constitutes the Colo Property and consequential orders. The principal issue the subject of these reasons is whether the Court should now make orders that include with the real property the water licence and the plant and equipment associated with the Colo Property. If not, should the Court give David leave to amend his statement of claim to include a claim for this additional property and also reopen his case to prove that entitlement?

7. As to order 3, no stamp duty would have been payable if Dame Leonie had left the Colo Property to David in her will, as she said she would in making the Third Representation as found in the primary judgment. Had the Colo Property been left to David in the will, he would have become liable to pay expenses such as rates from the date of transfer, but he would have had the benefit of ownership of the Colo Property. Stamp duty will now be payable on the transfer by the executors to David, and if any rates or similar obligations remain unpaid at the time of transfer, it may be necessary for David to meet those obligations. This was not an issue raised by David's statement of claim or dealt with at the hearing.

8. Orders 7, 8 and 10 address the finding in the primary judgment that the executors should not be required to pay David the legacy of $200,000 given to him in Dame Leonie's will. The proposed orders provide for the executors to retain out of the amount of costs they are required to pay David any part of the legacy that has already been paid to David. I understand that there is no issue between the parties in principle concerning the appropriateness of the Court making these orders. However, I do not understand why order 7 notes that the executors have paid David $12,500 and order 10 permits the executors to retain $10,000. Paragraph 29 of David's principal submissions stated that the executors had paid $10,000 to David from the legacy. It will be necessary for the parties to clarify this issue before final orders are made.

9. The explanation for David being able to ask the Court to make the final orders set out above at the same time as he moves on his notice of motion for leave to file an amended statement of claim and for leave to reopen his evidence to support the amended part of his statement of claim is that David submitted that it would be proper and correct for the Court to make all of the final orders that he seeks on the basis of the evidence that was before the Court on the primary hearing, without there being any need for David actually to amend and to reopen and lead additional evidence. That is, it is David’s case that the existing evidence and the reasons in the primary judgment already justify the final orders that he seeks. In this light, the amendments that David seeks leave to make to his statement of claim are, in David’s submission, only formal amendments to make it clear that the terms in which the statement of claim was originally drafted were intended to comprehend the final relief now sought. David’s position is that it will only be necessary for him to exercise the leave to amend and to reopen his evidence if the Court is not satisfied that it is proper to make the final orders that he seeks on the basis of the existing evidence and the reasons in the primary judgment.

Relief sought in David’s statement of claim

10. Relevantly, David sought the following relief in his statement of claim:

1.    A declaration the defendants, as executors of the estate of the late Leonie Judith Kramer, hold on trust for the plaintiff the property known as "the Colo Property" in Upper Colo, consisting of the following lands:

Lot XXX and Lot YYY in Deposited Plan 1156ZZZ.

2.   An order, the defendants, as executors of the estate of the late Leonie Judith Kramer, transfer the deceased's share in the Colo property to the plaintiff.

11. The relevant feature of these prayers is that they specifically claim a declaration that the executors of Dame Leonie's estate hold identified real property on trust for David.

12. Because of the complexity of the issues dealt with in the primary judgment, it will be necessary for the Court to assume that the reader of these reasons has knowledge of the primary judgment. For present purposes, it will be sufficient to note that the Court found in the primary judgment that David had succeeded in establishing that the executors of Dame Leonie's estate were bound by a proprietary estoppel that arose out of the following matters alleged in David's original statement of claim:

11.    In 1988, after the death of Dr Kramer, the deceased represented to the plaintiff that the Colo Property was to pass to him upon her death, together with a sum of money (the Third Succession Plan).

12.    The context of the Third Succession Plan was that the plaintiff would continue with the Share Farming Agreement and otherwise assist the deceased and her family with the management of the farm.

Reason for David’s application

13. The circumstance that has led David to make the present application is his realisation that the real property identified in prayer 1 of his statement of claim was limited to the real property that constitutes the farm itself and did not extend to any irrigation or water licence incidental to or benefiting the real property. It also did not extend to all machinery and pumps used in the operation of the farm unless those items were fixtures to the real property.

Amendments proposed by David

14. Consequently, David has sought the Court's leave to amend his statement of claim to add the following additional prayers for relief:

2A. A declaration the defendants as executors of the estate of the late Leonie Judith Kramer hold on trust for the plaintiff, the water licence appurtenant to the Colo property comprised in Water Management Act 2000, Certificate of Title WALXXXXX ("the water licence").

2B.    An order the defendant (sic) as executor (sic) of the estate of the late Leonie Judith Kramer transfer the water licence to the plaintiff.

2C.    A declaration the defendants as the executors of the estate of the late Leonie Judith Kramer hold on trust for the plaintiff such machinery, pumps, plant and equipment ("the equipment") still in the (sic) existence as was located on the Colo property as at 20 April 2016.

2D.    An order the defendants transfer the equipment to the plaintiff.

2E.    An order that in respect of any transfer to the defendants [error - read plaintiff] pursuant to order 2, 2B and 2D, the defendants as executors of the estate of the late Leonie Judith Kramer pay all stamp duty, rates, taxes, fees and liabilities in respect of the said Colo property, water licence and equipment, as existed up to the date of transfer.

15. 20 April 2016, as mentioned in prayer 2C, is the date of Dame Leonie’s death.

16. It is not necessary to consider the original or amended pleadings and particulars in detail. It is sufficient to note that by the additional allegations David wishes to claim that it was: "Implied, implicit, or incidental to the … third succession agreement [meaning the Third Succession Plan] so far as it related to the Colo property that the water licence, and the equipment would be dealt with in the same manner as the Colo property”. Further, David wishes to add an allegation that it was his expectation that on the death of Dame Leonie he would receive the Colo Property, including the water licence and the equipment.

Hilary’s response to David’s application

17. Hilary opposed the relief sought by David in his notice of motion. She submitted that the statement of claim was explicit in only seeking a declaration and consequential relief in respect of identified real property. According to Hilary, she reasonably conducted the hearing on that basis. The beneficial ownership of any water licence in the name of Dame Leonie and any machinery, pumps plant and equipment owned by Dame Leonie was not, according to Hilary, an issue that was raised or contested at the hearing. Hilary submitted that, as the hearing had been completed and the Court has delivered comprehensive reasons for judgment, it would now be an abuse of process and inconsistent with the paramount principle of finality of litigation to permit David to make the amendments and to lead the new evidence that he seeks leave to make and lead.

18. Hilary disputes the suggestion that David’s claimed entitlement to beneficial ownership of the water licence and machinery, pumps, plant and equipment incidentally fell within the relief claimed in the statement of claim. Consequently, the Court cannot properly make the final orders now sought by David to the extent that they would encompass beneficial ownership of the water licence and the machinery, pumps, plant and equipment.

19. Hilary’s position is that, if the leave sought by David is granted, it will be necessary for the Court to conduct a further substantive hearing at which Hilary will be able to challenge David’s claims in respect of the water licence and the machinery, pumps, plant and equipment. That, according to Hilary, will involve a substantial hearing at which the parties will traverse a significant part of the issues that were dealt with at the completed hearing. Moreover, Hilary submits that, if it were necessary for the Court to hear and determine David’s additional claims, the Court would be placed in the invidious position of having to retrace lines of reasoning in the primary judgment that might, as a real possibility, jeopardise the integrity of those reasons. In essence, Hilary’s position is that it is now too late for the Court to entertain a renewal of the completed hearing, as that would require the Court to revise its findings on a significant number of important issues in the proceedings. Hence, according to Hilary, the only just course for the Court to take is for it to dismiss David’s notice of motion and to make final orders on the basis of the primary judgment.

Final orders sought by Hilary

20. Hilary opposed the relief sought by David in his notice of motion and submitted that the Court should make final orders in the proceedings based upon the primary judgment. Hilary submitted that the orders should be as follows:

1.    Declaration that the defendants, as executors of the estate of the late Dame Leonie Judith Kramer (the Deceased), and in lieu of the provision for the plaintiff in clause 6 of the Will of the Deceased of which probate was granted on 2 December 2016, hold the whole of the [Colo Property] on trust for the plaintiff but subject to Hilary Lorraine Kramer and Jocelyn Anne Kramer each having a right of occupation during their lifetimes in the cottage on the Property which was occupied by the deceased from time to time during her life.

2.    Order that the defendants deliver to the plaintiff, within 90 days, a duly executed transfer in registrable form of the title to the Colo Property consistent with Order 1.

3.    Order that the defendants pay the plaintiff's costs of the proceedings.

4.    Order that orders 1 to 3 above be stayed for 28 days.

David’s response to Hilary’s proposed orders

21. Apart from submitting that the Court should make the orders that he seeks, David opposed the qualification to order 1 as sought by Hilary in terms that the trust upon which the Colo Property would be held was subject to the right of Hilary and Jocelyn to occupy the cottage on the Colo Property during their lifetimes. David opposed this qualification on the basis that an order to that effect was not formally sought in the proceedings by cross claim, and the entitlement of Hilary and Jocelyn to licences to use the cottage during their lifetimes was not the subject of any proper forensic examination at the hearing. David also submitted that, as a matter of fact, there was no evidence that the qualification was imposed by Dame Leonie as part of what I called the Third Representation in the primary judgment. Finally, David submitted that, because of the breakdown in the relationship between David, Hilary and Jocelyn as a result of the terms of Dame Leonie's will, and the subsequent events that have led to the commencement and determination of these proceedings, the qualification should not be imposed upon the trust because it was not feasible for the Court to formulate terms that would govern the licences either as to the basis of use or contribution to the costs of maintaining the cottage. Furthermore, the existence of lifetime licences in Hilary and Lorraine would constitute a clog on David's title that would make it impracticable for him to sell the Colo Property, whether as a voluntary act or in response to financial need.

22. As I understand the submissions made by senior counsel for Hilary at the hearing, in recognition of the problems that may arise from the clog on David's title that I have mentioned, Hilary accepted that a restriction on the qualification limited to the period when David continued to own the Colo Property may be warranted.

Issue concerning costs order

23. Finally, the parties are at issue as to whether the executors should only be ordered to pay David's costs on the ordinary basis, or whether those costs should be paid on the indemnity basis from 4 November 2020. The issue is whether David should be entitled to indemnity costs because the executors did not accept a Calderbank offer made by David.

Evidence on the hearing of the notice of motion

24. In order to facilitate the efficient hearing of the notice of motion, and to avoid the need for cross-examination on the affidavits read by the parties, I ruled with the tacit agreement of the parties that I would receive all of the affidavits into evidence on the basis that, where evidence was included in an affidavit that was really the evidence that would be relied upon by a party at a subsequent hearing if David was given leave to amend and to reopen his case, I would treat the evidence as such and not as evidence of facts on the hearing of the notice of motion. This ruling has not caused any difficulty in dealing with the issues in dispute between the parties.

Hilary's evidence

25. Hilary responded to the receipt of the form of orders sought by David by swearing an affidavit on 22 February 2022. She said that if she had known that David's application extended beyond a claim to the real property to include the water licence and the machinery, pumps, plant and equipment that were on the farm at the date of Dame Leonie's death, additional evidence would have been led in her case to contest that claim.

26. Hilary explained that the water licence was issued in Dame Leonie's name on 19 July 2012. At that time, Hilary was acting as Dame Leonie's attorney because of her dementia. With David's assistance, Hilary signed the necessary documents for the permanent transfer of 57 ML of the 158 ML entitlement under the previous water licence. The permanent relinquishment of the 57 ML was in exchange for the upgrade of the irrigation system on the Colo Property. Hilary said that the water licence is held in Dame Leonie's name and does not form part of the title to the Colo Property. It is a valuable asset of Dame Leonie's estate that is able to be sold or transferred independently to the title to the Colo Property.

27. Hilary provided a list of plant and equipment purchased for the Colo Property, that is still in use or otherwise in good repair, both by Dame Leonie and by Hilary after she took over the management of the farm in 2010. Hilary listed five items of plant and equipment purchased by Dame Leonie for a total of $62,152 and four items of plant and equipment that she purchased for a total of $55,270. In addition to that plant and equipment, Hilary said that, after David left the Colo Property in November 2014, Hilary purchased additional plant and equipment for a total cost of $44,710. Hilary was unaware of David's claim to be beneficially entitled to the Colo Property when she acquired the items purchased by her. Hilary said that she would not have purchased the additional plant and equipment, had she known of David's claim.

28. As a separate matter, Hilary gave evidence in her affidavit based upon evidence given by David at the hearing that Hilary claimed involved David acknowledging that he understood that if he were to inherit the Colo Property, that would be on the condition that Hilary and Jocelyn be entitled at any time to visit the Colo Property and stay in the family cottage. Hilary explained why the Colo property was a significant place to Hilary and other members of her family.

Hilary’s solicitor’s evidence

29. Hilary's solicitor swore an affidavit on 27 May 2022 in which he gave evidence concerning the correspondence received from David's solicitor before the commencement of the proceedings, as well as aspects of the proceedings that caused Hilary to understand that David's claim was limited to the beneficial entitlement to the real property that constituted the farm at Upper Colo. The solicitor also deposed to lines of cross examination and submissions that would have been available to Hilary had she known that David's real claim also encompassed entitlement to the water licence and to the machinery, pumps, plant and equipment.

30. It is not necessary to analyse this evidence in detail, but it establishes that, in correspondence dated 29 March 2017 and 7 August 2017, David's solicitor explained the nature of David's claim in terms that restricted it to the real property, including specifically by reference to the particulars of title of that property.

31. Hilary's solicitor also identified the parts of the statement of claim and the submissions made on behalf of David at the hearing by his counsel that clearly described David's claim as applying to the real property. For example, in opening, David's senior counsel described the subject matter of the relief sought as: "It's a freestanding parcel of land in the Colo, unencumbered real property, with some form of accommodation on it…" The solicitor said that, on his instructions, these matters reinforced Hilary's understanding that David was only seeking relief in respect of the real property.

32. The solicitor responded to David's evidence that he had always expected to inherit under Dame Leonie's will the real property plus the water licence and the machinery, pumps, plant and equipment, because it was his aspiration to continue the farming operation on the Colo Property, by reminding the Court that it was a significant part of David's case at the hearing that the farming operation had never been commercially viable without the injection of capital by Dr Harry and Dame Leonie that they did not expect to recover.

33. The solicitor pointed out that in some 123 pages of written testimony in his affidavits, David did not depose to his now-stated belief, expectation or understanding that, in addition to the title to the Colo Property, he would inherit plant and equipment and the water licence.

34. Finally, the solicitor identified in outline a number of additional avenues of cross examination of David that would have been available if Hilary had understood that his claim was the one he now seeks to make. The solicitor referred in particular to Hilary's argument that David ought to have informed Hilary of his belief as to the representation that had been made to him by Dame Leonie, before David permitted Hilary to make substantial payments for machinery that David now claims he was entitled to inherit on Dame Leonie's death.

David’s evidence

35. David affirmed affidavits in response to Hilary's evidence on 11 March 2022 and 3 May 2022.

36. He said that Dame Leonie did not mention visiting rights by her children when she made the representation that David called the Third Succession Plan.

37. David explained that the present water licence was not issued to Dame Leonie but was transferred to her by David because the Government required the water licence to be in the name of the proprietor of the land. The original water licence was apparently issued to David as the share farmer at a much earlier time, but there was little evidence concerning the reason why the water licence was issued to David.

38. David stated his opinion that the water licence is integral to and part of what constitutes the Farm, and he went so far as to assert that the water licence does form part of the title to the land which comprises the Farm. As I understand it, that is no more than David's opinion, and as a matter of law, the title to the water licence is a separate and marketable interest.

39. In relation to the water licence, as I understand David's submissions, he relied upon the judgment of Rees J in Stuart Henry Masters v NSW Trustee & Guardian as trustee for Genniece Merlene Gorey [2018] NSWSC 1670 at [74] to support the proposition that the water licence "attached to the Colo Property" and "formed part of the land". Her Honour, at [74], referred to a decision of Bryson J (as his Honour then was) in Elders Rural Finance Ltd v Westpac Banking Corporation (1989) 6 BPR 13,439, who was concerned with water entitlements under the Water Act 1912 (NSW). Bryson J held that the water rights under that Act could not be assigned, and it followed that the water rights were inseparable from and part of the land. However, as Rees J went on to explain, at [77], under the Water Management Act 2000 (NSW), access licences to water can be transferred to any person (ss 71M and 71N). Her Honour therefore agreed, at [78], with the analysis of White J in Martin v Martin [2010] NSWSC 700, that an access licence "was personal property, which no longer had a necessary connection with the land". As I understand it, David did not ultimately contest the conclusion that the present water licence is personal property of Dame Leonie's estate, and may be transferred for value separately to the real property.

40. David took issue with some of the statements made by Hilary concerning the purchases of plant and equipment and the utility of some of the plant and equipment that was purchased.

41. Ultimately, the most significant aspect of David's evidence was to the effect that he had always understood when representations were made to him that he would inherit "the Farm" that the Farm included the land, all improvements, water tanks, fencing, plant and equipment, standing crops at the time of transfer and the water licence. In David's second affidavit, he set out an analysis of the evidence at the hearing that David claimed supported the understanding that he had formed concerning the composition of "the Farm".

Evidence on the costs issue

42. David's solicitor swore an affidavit on 22 February 2022 in support of David's claim that part of his costs should be paid by the executors on the indemnity basis.

43. The settlement correspondence began with a letter dated 15 October 2020 from Hilary's solicitors to David's solicitors. The letter contained a detailed explanation of why Hilary believed David's claim would fail, and made an offer to pay David a sum of money and to pay his costs. That was expressed to be an offer of compromise or alternatively a Calderbank offer. David did not accept the offer.

44. David's solicitors responded by letter dated 28 October 2020, which stated as follows:

I refer to your letter dated 15 October 2020.

The purpose of this letter is to reply to the settlement offer at paragraph 14 of your letter.

My client never wanted, nor expected he would have to make this claim, for the simple reason he expected that what was promised to him, would be done by the Kramer family.

My client has been honest and truthful throughout his dealings with the Kramer family for some 40 years and, likewise, his claim is based on the truth. You would therefore appreciate that my client does not share the confidence, which your clients apparently hold, that his claim will be dismissed for the reasons stated in your letter, or any other. Indeed, some of the evidence supplied by the Defendants, or on their behalf, has advanced his position and his resolve to pursue the claim.

My client has not claimed more than he was promised by the representations made by Dr Kramer and Dame Leonie and upon which he relied for almost his entire working life. I am therefore instructed:

1.    to reject the settlement offer at paragraph 14 of your letter; and

2.    to make the following counter-offer:

(a)    the entire Colo property is transferred to the plaintiff;

(b)    the inheritance of $200,000 (indexed to CPI) is not paid to the plaintiff as per the terms of the Will of the late Dame Leonie Kramer;

(c)    the plaintiff's costs of $402,044.42 are paid by the Defendants; and

(d)    the parties enter a deed of settlement to reflect the terms.

The counter-offer is open for acceptance in writing within 7 days from the date of this letter.

45. The letter was marked: "Without prejudice save as to costs".

46. It will be important to note that par 2(a) of the offer required what was described as "the entire Colo property" to be transferred to David. As is now appreciated, but may have been ambiguous at the time, David considers the Colo Property to consist of the real property, the water licence, and the machinery, pumps, plant and equipment that were on the farm at the date of Dame Leonie's death.

Consideration of David’s application and proposed orders

47. I will deal first with the issue of whether the Court should now make final orders sought by David to the effect that a declaration should be made that the water licence and the plant and equipment are held on trust for him and should be transferred to him, and, if not, whether the Court should make the orders sought by David in his notice of motion on that subject.

48. Aspects of the consideration of these issues invite the Court to comment on its reasons in the primary judgment. The executors retain a right to appeal from the final orders that will be made, and Hilary has informed the Court that she wishes to obtain advice as to whether the executors should take that course. Although some difficulty may arise in setting out the reasons in this judgment, I consider that I must be circumspect in formulating those reasons, and I must avoid making a commentary on the reasoning in the primary judgment.

49. The starting point in David's submissions was that it was already available and proper for the Court to make orders that had the effect of including the water licence and the plant and equipment in the property declared to be held on trust by the executors for David because the conduct of the hearing and the findings in the primary judgment supported that outcome.

50. I accept Hilary's submission that the Court should reject David's argument that the final orders that he seeks can be made now. The question is whether the Court should make the orders sought in David's notice of motion. If it does, then consequential case management orders will be necessary. In due course, a new hearing will have to be fixed and it will be necessary for me to preside at that hearing. It is not clear whether the issues to be dealt with at the supplementary hearing will be circumscribed in any way. The Court will be required to deliver a new judgment that may need to address issues apparently determined by the primary judgment as well as new issues that may be raised by David's amendment.

51. The obvious point of commencement is that the prayers for relief and the pleading of the facts in David's statement of claim specifically and unequivocally identify the subject matter of his claim for beneficial ownership as real property, being lots in an identified deposited plan.

52. I accept Hilary's submission that she and her legal representatives understood that the only subject matter of David's claim was the real property component of the Colo Property. I also accept Hilary's submission that the references in the evidence to the irrigation of the Farm and the purchase and use of plant and equipment were merely incidental and part of the background evidence to David's claim.

53. I should also record that my participation in the hearing and the formulation of my reasons for judgment involved the same understanding as Hilary and her legal representatives. That understanding was derived implicitly from the wording of David's prayers for relief, and it did not occur to me that David expected the orders made by the Court to encompass the water licence and the plant and equipment.

54. Insofar as what I found to be the Third Representation made by Dame Leonie was to the effect "the farm will pass to you upon my death", I now understand that there is ambiguity in the word "farm". That ambiguity was not obvious to me during the hearing, or in the preparation of the primary judgment. That was because I started with an understanding that the only subject of David's claim was the real property.

55. I accept that there is some logic in par 16 of David's primary written submissions on the present application that a representation that the Farm would pass to David should mean "the farm would include not only title to the Colo Property itself, but also all necessary functional underpinnings, such as any irrigation or water licence, and any plant and equipment employed as part of the "farming operations". However, that logic was effectively undermined by the terms in which David's prayers for relief were formulated.

56. David relied upon a number of authorities as establishing the correct principles to be applied on this application. First, David relied upon the following extract from the judgment of Henry J in Alexakis v Masters [2022] NSWSC 1256 at [8]-[10]:

[8] The plaintiff’s application is made under rr 2.1 and 29.5 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which relevantly provide that the Court may give directions as to the conduct of proceedings and order of evidence as appear convenient for the just, quick and cheap disposal of proceedings.

[9] The applicable principles are not in dispute. The parties referred the Court to the principles I set out in Goodman Fielder Consumer Foods Pty Ltd v GrainCorp Foods Australia Pty Ltd [2020] NSWSC 706 at [39] – [48]. In summary, the key issue to be determined is whether the interests of justice are better served by allowing or rejecting the plaintiff’s application. Relevant factors to consider include:

(a)   the degree of importance, relevance and probative value of the proposed new evidence to the issues in the case;

(b)   the likely prejudice to the other party if the application is allowed, including the delay to completion of the proceedings and consequential costs;

(c)   the public interest in the finality of litigation, with the consequent expectation that parties will present their evidence and submissions at one hearing;

(d)   the public interest and the interest of the parties that the proceedings will be conducted efficiently and expeditiously, thereby minimising delay and expense;

(e)   whether the occasion for calling the further evidence ought reasonably to have been foreseen; and

(f)   any delay in making the application.

[10] While these factors provide useful guidance, ultimately the Court’s discretion to permit a party to re-open must be exercised having regard to all the circumstances of the case, which includes the public interest in a just, quick and cheap resolution of the real issues in the proceedings and the finality of litigation, as reflected in the Civil Procedure Act 2005 (NSW), s 56(1); Taouk v Louis (No 1) [2014] NSWSC 656 at [11]; Owners - Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1682 at [43].

57. That was a matter in which the application by a party to reopen the party's evidence was made after judgment had been reserved but before it was delivered. David also relied upon the decision of Urban Transport Authority of NSW v Nweiser (1991) 28 NSWLR 471 at 478D for the principle that the fundamental criterion for granting leave to a party to reopen is whether the interests of justice are better served by allowing or rejecting the application. That was a case in which the application for leave to reopen was made during final address.

58. David also relied upon the decision of Sackar J in Divine Real Estate v Agha [2022] NSWSC 543. In that judgment, Sackar J dealt with the principles that govern an application for leave to reopen both after judgment but before entry of orders and after orders had been entered. In the present case, the only part of his Honour's reasons that are relevant are those dealing with the case where the application for leave to reopen is made after judgment is handed down but before the entry of final orders. His Honour said on that subject at [28]-[35]:

[28] In general terms, a judgment or order is said to be perfected when it has been entered.

[29] Again, in general terms, when a judge recognises or is informed his or her judgement is affected by serious error, he or she may, in certain limited circumstances, reopen the judgment or order prior to entry, though some authorities doubt the existence of jurisdiction to do so after entry has occurred. It may also be accepted that the procedure in Equity over many years has been that if it were to be submitted a judge had failed to deal with a point, he or she should be asked to make additional findings: 260 Oxford Street Pty Ltd & Ors v Premetis & Anor [2006] NSWCA 96, per Young CJ in Eq at [136] (where application was made before entry of judgment).

[30] The general rule that a court lacks the requisite power to set aside or vary a final judgment which had been entered has been affirmed by the High Court: see, for example, DJL v Central Authority (2000) 201 CLR 226 (‘DJL’).

[31] But there were some limited exceptions, such as when it could be said that the interest of justice or procedural justice required it.

[32] Reopening a case before judgment or order of course raises different principles to those relevant here. The High Court in Autodesk v Dyason (No 2) (1993) 176 CLR 300 (‘Autodesk’) considered the inherent jurisdiction of a court to reopen a judgment which had not been entered. Mason CJ in that case described the jurisdiction in such circumstances as a wide jurisdiction: Autodesk, 301-302.

[33] These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law.

[34] The various members of the courts identified their own examples of instances where the jurisdiction could be invoked. Their Honours all referred to situations where the judge misunderstood the facts or the law.

[35] However, a recurrent theme throughout each judgment was the obvious need to recognise the public interest in the finality of litigation in circumstances where there was no neglect or failure on the part of the applicant and no hearing had in fact occurred, as opposed to simply reagitating a point already put.

59. Hilary responded to these submissions by noting in particular the reference by Mason CJ in Autodesk v Dyason (No 2) (1993) 176 CLR 300 at 301-302 to the Court taking the exceptional step of reviewing or rehearing an issue when the Court has good reason to consider that, in its earlier judgement, it has proceeded on a misapprehension as to the facts or the law.

60. It would not be correct in the present case to characterise any aspect of the primary judgment as having proceeded on a misapprehension as to the facts or the law. Rather, for reasons that the Court can never know, the person who drafted the prayers for relief in David's statement of claim used wording that unequivocally confined the claim to the real property component of the Colo Property. The Court can well understand that David himself may not have appreciated the fundamental difference between the claim made on his behalf and what he understood the outcome of the proceedings may be. It is nonetheless clear that the purpose of the present application is to obtain leave to change the ambit of David's case, and not to correct some misapprehension upon which the Court has proceeded.

61. A number of features of this case strongly militate against David being given the leave that he seeks in his notice of motion.

62. First, the Court's findings concerning the lack of commercial viability of the Colo Property as a farming operation of the type conducted under the share farming agreement between the Kramers and David pervaded the whole of the primary judgment. That finding was a substantial basis for the determination of David's claim in his favour. It may be that a reason why the Court and Hilary and her legal representatives simply accepted that the subject matter of David's claim was the real property component of the Colo Property was that a basis of David's claim was that the farming operation was not commercially viable, so the implicit assumption was that, if David succeeded in his claim, he would in due course sell the Colo Property and use the proceeds of sale to fund his retirement. David now says that he wants the water licence and the plant and equipment also to be transferred to him so that he can recommence the farming operation. If he is permitted to do that, he will obtain relief that is inconsistent with the fundamental basis upon which he achieved the success that he has achieved thus far in these proceedings.

63. Secondly, the subject matter of David's claim for leave to amend and to reopen is not some separate and discrete issue that was inadvertently omitted from his original claim. If the relief sought in David's notice of motion is granted, the effect will not be to introduce a separate claim that can be litigated in a way that is entirely divorced from the matters determined by the primary judgment. While the degree of overlap cannot at this stage be precisely delineated, I am satisfied that the effect of the Court granting the relief sought by David would be to reopen fundamental issues that have been determined by the primary judgment. That is because the terms in which what I called the Third Representation was made by Dame Leonie, its content, and how it should have been understood by David, will be reopened. Whether or not reference by Dame Leonie to the Farm could objectively be taken to encompass the water licence and all plant and equipment is a contestable issue.

64. The hearing was conducted and the primary judgment was prepared on the basis that the Third Representation was one-dimensional – it referred only to the real property. That is an inherently simple representation. The real property was owned by Dame Leonie at the time of the representation and, assuming it was not sold, the same real property would be owned by her at the time of her death. The water licence, while an essential component of the farming operation, and also plant and equipment purchased and replaced from time to time, may also have been objectively included in the subject matter of the representation, but that was not necessarily so.

65. I am satisfied that if the prayers for relief in David's statement of claim had made it clear that David sought to establish that the water licence and the plant and equipment were also held on trust for him by the executors, David would have been subjected to more avenues of attack in cross-examination, with a correspondingly increased risk that David would not have been able to sustain his position with the same credibility that the Court in fact found in the primary judgment it should accord his evidence. Perhaps more particularly with the plant and equipment than the water licence, it is not at all self-evident that Dame Leonie would have volunteered to reward David by promising to leave him the water licence and all plant and equipment, as well as the real property itself.

66. I consider that it would be fundamentally unfair to Hilary to grant David the relief that he seeks in his notice of motion, because that would have the effect of permitting him to achieve substantial success on his application in circumstances that have reduced his litigation risk, and then enabling him to seek to add to his success by claiming additional relief in circumstances where he would not face the same litigation risk that he would have faced had the full ambit of this claim been made clear from the inception.

67. Furthermore, I think it would be inevitable that the Court would be drawn into re-considering many of the issues that have been determined in the primary judgment, and which are interwoven with, and logically effect, the proper determination of the whole of David's claim. There is a substantial risk that this course would compromise the authority of the Court by putting the Court in the position where it had effectively to review its own reasoning.

68. In the circumstances, I am satisfied that the principle of finality of litigation requires the dismissal of David’s notice of motion.

69. Finally, I add that it should not be assumed that, by dismissing David's claim for the leave that he seeks in his notice of motion, the Court has necessarily denied David additional valuable relief that he would have obtained if the prayers for relief in his statement of claim had included the orders that he now seeks in relation to the water licence and the plant and equipment. It must be remembered that where a proprietary estoppel is created, the Court is required to fashion the relief that it grants in a way that is just and equitable in all of the circumstances of the case. The Court does not treat the representation upon which the proprietary estoppel is based as if it were an enforceable contract in all cases.

70. It is sufficient to note that, in the present case, the water licence was apparently originally in David's name. Why that was so was not established by the evidence. However, it is clear that the statutory basis upon which water licences were issued changed. That led to the circumstance in 2011 that the water licence under the new legislation was either transferred or issued to Dame Leonie as the registered proprietor of the Colo Property. Either 58 ML or 60 ML of entitlement were voluntarily relinquished. The payment for that relinquishment was applied in improving the irrigation system on the Colo Property. Importantly, that was all done by negotiation between David and Hilary. Whatever representation was made by Dame Leonie, the representation was not made by Hilary, and David did not inform Hilary of his claim that the representation had been made.

71. As to the plant and equipment, it would have been expected by both David and Dame Leonie at the time the Third Representation was made that the plant and equipment that was then in use on the Farm might be replaced and improved many times over during Dame Leonie's lifetime.

72. I cannot say more without entering too far into the reasoning in the primary judgment, but it is proper to observe that it should not be taken for granted that the Court would have ordered the executors to transfer the water licence and the plant and equipment to David, even if he had originally included that claim in his relief. It is an open question.

73. I will now turn to David’s claim that his proposed order 3 should now be made that will require the executors to pay all costs of and incidental to the transfer of the Colo Property, including stamp duty. Alternatively, David seeks leave to amend his statement of claim to add prayer 2E, by which he would seek an order to the same effect.

74. I do not think that this application should be dealt with on the same basis that I have explained above in response to David’s claim in relation to the beneficial ownership of the water licence and the plant and equipment. I am satisfied that this issue should fairly be treated as a discrete matter that has by inadvertence been omitted from the claim made by David. There is a reasonable argument that, if stamp duty and other costs would not have been payable by David had Dame Leonie left the Colo Property to David in her will, but stamp duty or other costs will now be payable as a result of the executors complying with the Court’s order that they transfer the Colo Property to David, the executors should be ordered to pay equitable compensation to David equal to that stamp duty and costs. The Court’s permission for David to seek this additional relief will not require the Court to revisit any of the issues dealt with in the primary judgment. David sought equitable compensation in prayer 3 of his statement of claim, albeit in the alternative. The interests of justice are in my view best served by allowing this aspect of David’s application. The Court should not make the orders sought by David now without having evidence of the nature and amounts of the equitable compensation that the executors would be ordered to meet by way of equitable compensation. David should be given leave to make the relevant amendment, and he should be required to provide evidence concerning the costs that would be the subject of the order for equitable compensation. The parties should be required to deliver submissions on the issue. The issue is one that may be able to be decided on the papers.

Consideration of licence in favour of Hilary and Jocelyn

75. The final substantive issue for determination is the application made by Hilary that the declaration that the executors hold the Colo Property on trust for David should be subject to a proviso that Hilary and Jocelyn should have a licence during their lifetimes, or alternatively during the period when David remains the registered proprietor of the Colo Property, to use as they see fit the cottage on the property that was formerly occupied by their parents.

76. The executors did not file a cross claim in which they sought relief to that effect, and did not formally raise the issue at the hearing. As David has been denied his application to amend his statement of claim because he did not formally raise the new issues before the end of the hearing and the delivery of judgment, so should Hilary and Jocelyn be denied the qualification to the declaration in favour of David that they now ask the Court to make.

77. I accept that David in cross-examination was induced to concede that he understood that, if the Colo Property was left to him in Dame Leonie's will, he was expected to permit Hilary and Jocelyn to use the cottage on the property for such time as David remained the owner of the Colo Property. However, that qualification was not part of the Third Representation that the Court found was made to David by Dame Leonie.

78. As a practical matter, the parties were not given the opportunity at the hearing to litigate the question of the terms upon which Hilary and Jocelyn would have been entitled to exercise the licence that they now seek.

79. Furthermore, being realistic, whatever may have been practicable on the basis of cordial relations between David on the one hand and Hilary and Jocelyn on the other hand had David inherited the Colo Property in Dame Leonie's will, the personal relationship, at least as between David and Hilary, has been destroyed as a result of interactions between them following David learning that he would not inherit the Colo Property, and Hilary's fiercely fought allegations in the proceedings that David had acted fraudulently and incompetently in the performance of his obligations under the share farming agreement.

80. It would not be feasible in the circumstances for the Court to craft orders that would permit Hilary and Jocelyn to exercise a licence to reside at the cottage on the Colo Property that would not create a substantial risk of dispute and acrimony. Accordingly, I will not make an order that grants Hilary and Jocelyn the licence that has been sought by Hilary.

Basis for payment of costs

81. The issue is whether the Court should only order the executors to pay David's costs of the proceedings on the ordinary basis, or whether it should order that the costs be paid on the ordinary basis up to 28 October 2020 and the indemnity basis thereafter. David's submission was that his costs from 28 October 2020 were $274,690.58 on the ordinary basis and $300,028.58 on the indemnity basis.

82. David relies upon the principle in Calderbank v Calderbank [1975] 3 All ER 333. The parties were agreed that the principles to be applied in the context of Calderbank offers are as have been summarised by Ward CJ in Eq (as the President then was) in Cunningham v Guardian Royal Financial Services Pty Ltd [2017] NSWSC 1057 at [17], as follows:

[17] There is no dispute between the parties as to the principles that apply when there is an application for indemnity costs following non-acceptance or rejection of a Calderbank offer. Those principles are well known and do not need here to be restated (see, for example, Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344; Treloar Constructions Pty Limited v McMillan (No 2) [2017] NSWCA 146). Broadly speaking, an order for indemnity costs may be made in those circumstances if the offer is a genuine offer of compromise and the Court is persuaded that it was unreasonable for the offeree not to accept the offer. The onus is 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]).

83. David submitted that the Court should accept that the offer that he made on 28 October 2020 was a genuine offer of compromise. He offered to forgo the $200,000 legacy left to him by Dame Leonie's will. As it has happened, the terms of David's offer were substantially the same as the determination made by the Court in the primary judgment.

84. David also submitted that a compromise whereby he offered to give up only $200,000 was genuine in this case because the object of his proceedings was to establish that he had a beneficial entitlement to the Colo Property, so that he was not in a practical position to offer a more substantial compromise without having to abandon the purpose of his proceedings.

85. In my view, the degree to which a compromise is judged as being genuine must be influenced in a broad way by an assessment of whether the amount of the compromise reflects a reasonable assessment of the risk of failure in the proceedings by the party who has offered the compromise. A compromise may be genuine in all of the circumstances even though it does not accurately reflect what the Court assesses at a later time was the true risk of failure by the party making the offer. However, in assessing whether an offer of compromise is genuine a relevant consideration is whether there was a realistic appraisal of the level of risk in order to fashion an offer that the other party might reasonably be expected to accept.

86. In cases where the object of the proceedings is to obtain a particular property, such as the Farm this case, the genuineness of an offer to compromise will not always be assessed by reference to the range of what can be offered without jeopardising the attainment of the object. That may be relevant consideration in a particular case, but in other cases such a constrained compromise may not be found to be genuine, because it simply does not recognise the true risk of failure of the claim. In some cases a genuine compromise may require that the party making the offer be prepared to accept some form of success that does not involve the receipt of the property the subject of the claim.

87. Even if that proposition is not accepted as correct, the extent to which the magnitude of the compromise matches the offeror's litigation risk is a factor that should be held relevant to the reasonableness of the offeree rejecting the offer.

88. I consider that the present case is an exceptional one because David's success depended absolutely on his credibility as a witness being accepted in a relatively high degree. Even though Hilary was a beneficiary of Dame Leonie's estate, the executors had a duty to uphold Dame Leonie's will to the extent that doing so was reasonably justifiable. David's claim in these proceedings was plainly contestable. That contest could only be resolved at the hearing. I am satisfied that Hilary and her legal advisers could not have made a reasonably reliable assessment of David's prospects of success in the proceedings simply by studying the evidence of David and the other witnesses.

89. Even though a much more substantial compromise, if offered by David, would have necessitated the sale of the Colo Property, it was open to David to construct a different offer than the one that he made that would have involved a more substantial element of compromise that would more clearly have approached the litigation risk that Hilary and her legal representatives were objectively entitled to assess at the time that the Calderbank offer was made.

90. An unusual feature of David’s claim for a special costs order is that it now appears that if the executors had accepted David’s offer, a dispute may have arisen as to whether “the entire Colo property” as referred to in par 2(a) of David’s solicitors’ 28 October 2020 letter consisted of the real property alone or also included the water licence and the plant and equipment. The better view may be that the compromise would only have had the former effect because of the terms of prayer 1 of David’s statement of claim. I need say nothing more than that the existence of this unappreciated ambiguity in the Calderbank offer fortifies me in exercising my discretion against making an order that the executors pay part of David’s costs on the indemnity basis.

91. In the circumstances, I have concluded, whether or not the Calderbank offer made by David is assessed as being a genuine one, it was reasonable in the circumstances for Hilary to have rejected the offer and to have required David to support his claim by giving evidence in court and subjecting himself to cross examination.

92. Accordingly, I reject David's claim that the executors should be ordered to pay his costs on the indemnity basis from 28 October 2020.

Proposed Orders

93. I propose to set out draft orders that I consider are appropriate to give effect to these reasons by making final orders in the proceedings to the extent possible and making case management orders in respect of the one issue that remains outstanding. The parties should confer for the purpose of inserting dates where necessary. They may communicate with my Associate as to whether or not they accept proposed Order 12. Given the time of at which year at which this judgment will be delivered, the parties’ responses should be provided to my Associate within 21 days.

94. The proposed orders are:

1. Declaration that the defendants, as executors of the estate of the late Dame Leonie Judith Kramer (the Deceased), and in lieu of the provision for the plaintiff in clause 6 of the Will of the Deceased of which probate was granted on 2 December 2016, hold the property known in these proceedings as the Colo Property in Upper Colo, consisting of Lot XXX and Lot YYY in Deposited Plan 1156ZZZ (the Colo Property) on trust for the plaintiff.

2. Order that the defendants deliver to the plaintiff, within 90 days, a duly executed transfer in registrable form of the title to the Colo Property consistent with the declaration in Order 1.

3. Subject to the note in Order 15, order the defendants to pay the plaintiff’s costs of the proceedings on the ordinary basis.

4. Order that Orders 1 to 3 be stayed until 28 days after the making of final orders in these proceedings as a result of the implementation of the following orders.

5. Grant leave to the plaintiff to amend his statement of claim to claim an order that in respect of the transfer to the plaintiff pursuant to Order 2, the defendants as executors of the estate of the Deceased pay all stamp duty, rates, taxes, fees and liabilities in respect of the Colo Property as existed up to the date of transfer.

6. Order that the amended statement of claim be filed and served within seven days of the making of these orders.

7. Grant leave to the plaintiff to reopen his case to tender additional evidence limited to the new issue raised by the amendment of his statement of claim the subject of Order 5 (the New Issue).

8. Order the plaintiff to file and serve his affidavit evidence in respect of the New Issue by [date to be inserted].

9. Order the defendants to file and serve their evidence in reply to the plaintiff’s additional evidence in respect of the New Issue by [date to be inserted].

10. Order the plaintiff to file and serve written submissions in support of the New Issue by [date to be inserted].

11. Order the defendants to file and serve written submissions in response on the New Issue by [date to be inserted].

12. Order that the New Issue be determined by the Court on the papers.

13. Save for Order 3 and 5, the plaintiff’s notice of motion filed on 3 May 2022 (the Notice of Motion) is otherwise dismissed.

14. Order the plaintiff to pay the defendants’ costs of the Notice of Motion on the ordinary basis.

15. Note that the costs of the parties in responding to Orders 5 to 14 will be reserved until the determination of the New Issue.

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Decision last updated: 16 December 2022