Cumming v Sands

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5003/98 DELYS LOUISE CUMMING v MARGARET LESLIE SANDS & ORS

JUDGMENT 1 HIS HONOUR: I have already delivered three judgments in this matter: Cumming v Sands [2001] NSWSC 2; Cumming v Sands [2001] NSWSC 507; and Cumming v Sands [2001] NSWSC 599. In the latter two, matters of costs were dealt with; I respectively decided that the first defendant should pay the plaintiff's costs of the proceedings and that she should not be entitled to her own costs out of her mother's estate. The order for the plaintiff's costs was on the ordinary, not the indemnity, basis. The plaintiff now asks for her costs on the indemnity basis from 7 June 2000. Despite my earlier determination in respect of these costs, no objection has been taken to this application being made at this stage, and I proceed to determine it on its merits. The other matter of contest in determining the final form of the orders is the time at which the plaintiff must make payment of or allowance for the sum for which she is liable for rent and occupation fee. This turns on the application of what is known as the rule in Cherry v Boultbee (1839) 4 My & Cr; 41 ER 171. INDEMNITY COSTS 2 The application is made on the following basis. On 7 June 2000 the plaintiff's solicitors forwarded to the first defendant's solicitors a Calderbank letter: see Calderbank v Calderbank [1976] Fam 93. That letter contained the following offer: "In this matter we are instructed to make an offer of settlement containing. in substance, the following terms:-

1. The first defendant to pay the plaintiff the sum of $60.000.00 plus costs as agreed or assessed;

2. he first defendant and the Second Defendants to pay their own costs of the proceedings;

3. Subject to the above, the claims and cross-claims be otherwise dismissed.

You will note from the Statement of Claim filed in these proceedings that the relief sought by our client seeks one half of the proceeds of sale of the property 1 Elton Street Lismore (approximately $61.000.00), the sum of $51,000.00 representing monies [sic] expended by our client on the property between 1990 and 1995, and costs."

There was no response to the letter. 3 In the event I found that the plaintiff was entitled to a charge over the fund representing the sale proceeds of the subject property, subject to the first defendant's entitlement to costs and expenses of her executorship which had not been recouped and allowance for a rent or occupation fee in restect of a period when the plaintiff had occupied the subject property without payment. As I have said, I have ordered the first defendant to pay the plaintiff's costs. The plaintiff says that, allowing for payment of rent/occupation fee and the first defendant's costs and expenses (estimated at $29,000), the plaintiff now looks likely to receive an amount of approximately $75,000, plus costs. She says that she has therefore bettered the offer and ought be awarded indemnity costs from the date of the letter. 4 The parties agree (correctly) that the critical question is whether the first defendant has acted unreasonably in refusing to accept the plaintiff's offer of settlement. In determining this the Court looks to all the circumstances of the case: see Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 [20], [21]; SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 [37], [43] and [85]. In the latter case, Giles JA said at [37]: "The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank [1976] Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree 's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FCR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 235." 5 It is said that the first defendant could not accept the offer because it involved the second defendants being prepared to consent to their being no order as to their costs, but that would not have prevented the first defendant accepting on her part, and the costs of the second defendants have been no great consideration in these proceedings in any event. More importantly, it is not inherently very easy to apply the Calderbank doctrine in these proceedings. The reasons for this appear in the written submissions for both contesting parties. The subject matter involved the declaration of a charge over the balance of the mother's estate, the question of whether the first defendant had a continuing role as executor of that estate and the accounting to Dr Brand's estate, represented by the second defendants, for half the balance of the mother's estate. The plaintiff concedes that the first defendant had the right to test the veracity of the plaintiff's claim. In the end, apart from anything else, in my view the ultimate result of the proceedings was not at all clear at the time the offer was made. This is a case with some similarity to MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 235 in that the evidentiary considerations on which the decision was finally made became plain only during the trial. One example is the first defendant's concession that she relied entirely on her brother in matters relating to the tenancy of the subject premises because she trusted him. Whilst this fact was always known to the first defendant personally, there is no reason to think that its ultimate significance was plain to her or her advisers at the time of the offer. 6 In the light of all the circumstances, I am unable to conclude that it was unreasonable for the first defendant not to accept the offer, and the plaintiff's application for indemnity costs is refused. THE RULE IN CHERRY v BOULTBEE 7 The rule in Cherry v Boultbee was formulated by Sargant J in In re Peruvian Railway Construction Company Limited [1915] 2 Ch 144 at 150 thus: "Where a person entitled to participate in a fund is also bound to make a contribution in aid of that fund, he cannot be allowed to participate unless and until he has fulfilled his duty to contribute."

See also Parkes Property and Stock Company Ltd v Perpetual Trustee Company Ltd (1936) 36 SR(NSW) 457 per Long Innes CJ in Eq at 463 - 464; In re Hurburgh. National Executors and Trustees Co of Tasmania Ltd v Hurburgh , [1959] Tas SR 25 per Gibson J at 30 - 31; Re Fused Electrics Pty Ltd (in liq) v Donald [1995] 2 QdR 7 per Williams J at 8; and see generally Meagher, Gummow & Lehane, Equity Doctrines and Remedies (3rd ed, 1996) [3723] ff. 8 The first defendant submits that the rule requires the making of an order for the immediate payment by the plaintiff of the amount due in respect of rent and occupation fee, albeit it may be some time before her share of the fund wends its way back to her through the medium of Dr Brand's executors. The plaintiff contends that all that is necessary to meet the dictates of equity is that that amount be deducted before payment to the plaintiff, leaving it in the fund for the benefit of the first defendant, who alone is entitled to that amount. 9 The point of the rule is to require prior contribution to meet the dictates of equity where the whole of the contributor's entitlement may not in fact come back, as, for instance, where the fund contributed to is insolvent, so that the contributor remains liable for the whole contribution but may receive a dividend only in respect of his or her entitlement. It would have application here if, for example, the first defendant's prior entitlements to the mother's estate were of a size which would leave less than her full entitlement under the charge available to the plaintiff at the end of the day. That is not the case in light of the determinations which have been made. The only suggestion which is put forward is that there may be unknown exigencies of Dr Brand's estate which may produce this effect. This suggestion has already been brought forward and rejected by me as relevant in the absence of evidence of any such exigencies. This contest over this point has provided another opportunity for such evidence, if it existed, to be brought forward without the appearance of any. In those circumstances, in my opinion, the deduction of the amount at the time of payment to the plaintiff will satisfy the dictates of equity. If any wholly unexpected exigency arises, it can be dealt with under the general liberty to apply in respect of the orders, which I intend in any event to reserve. …oOo…

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