Horn v GA & RG Horn Pty Ltd

Horn v GA & RG Horn Pty Ltd - [2022] NSWSC 1747 - NSWSC 2022 case summary — Zoe

[5]

Estoppel claim orders

The plaintiffs proposed three orders to address the Court's findings in respect of the estoppel claim: 1. an order (order 1) addressing the date on which the deceased held his shares in the company on trust for Michael, and the capacity in which Barbara is said to hold the shares; 2. a mechanical order (order 2) to give effect to order 1; and 3. an undertaking (order 6) to reflect my findings regarding the $817,417 amount.
In relation to the dating for the recognition of the constructive trust, the plaintiffs submit that the Court made no finding as to the precise date of its creation. That is true. The reason for that is, as recorded in the principal judgment, that the timing at which the constructive trust might arise was not the subject of specific submissions: principal judgment [1267].
In the judgment I referred to caselaw which sets out the general position as to when equity will regard, in an estoppel context, that the relevant constructive trust has come into existence: principal judgment [1268]-[1270].
In particular, there is a focus on the time at which the plaintiff acts in reliance upon the promise or expectation such that it later becomes unconscionable or unconscientious for the promisor, or the inducer of the expectation, to resile from it.
The plaintiffs submit that a number of dates are suggested by the reasoning in the principal judgment in relation to the dates of detrimental reliance. Those dates (or more precisely years or months) refer to reliance as at 2004, 2010 and 2017 (or September 2017).
The plaintiffs submit that the least controversial date for the recognition of the constructive trust is the date of the deceased's death (20 March 2020) and, if that is not accepted, then 1 September 2017, or as a third alternative, 31 December 2010: PSOC [4].
The defendants agreed with the proposed order of recognising the constructive trust as at the date of the deceased's death.
I accept as a general proposition that there is, in terms of recognising when the trust arises, a focus upon acts of reliance. On the facts of this case, however, although there was clearly reliance by Michael at the times that I have mentioned in the principal judgment (including relevantly from a point in or after 1991 - see [1016]), there was also an evolving aspect to the arrangements between Michael and the deceased which impacted on the issue of whether it was unconscionable for the deceased to depart from his promises.
The evolving aspect included, on the deceased's part, statements at a number of times not pressing for certain payments that had been proposed to be made and, as I found, steps taken by Michael from about September 2017 consequent upon the deceased raising with the plaintiffs the notion of making provision for Nick by means of the Gostwyck Flats: e.g. principal judgment [1064]ff.
Michael, for his part, attempted to accommodate the deceased's requests: principal judgment [676], [1051], [1066] and [1078].
Up until shortly before his death, when the deceased changed his Will on 15 March 2020, the deceased had not acted unconscionably and there was a sense in which the proceeds of Gostwyck Sold were being appropriated for the benefit of Danika in a way which the plaintiffs, or at least Michael, proposed following receipt of various professional advices.
It seems to me that in the context of the evolving dialogue between Michael and the deceased regarding the properties, which even in relation to Gostwyck Remnant was still evolving up until the deceased's death, the appropriate time to recognise the trust is the date of the deceased's death (as the parties' propose).
In submissions on the orders, and this was further discussed with counsel for the parties, neither counsel put any different position other than it should be recognised at the date of death: T 1105.
I propose to do that.
In relation to proposed order 1(b), it is uncontroversial that the capacity in which Barbara currently holds the share should be recognised as being in her capacity as administrator of the deceased's estate.
Dr Mantziaris described his proposed orders dealing with delivery of a share transfer, registration of the share transfer and transfer of the books and records as being of a mechanical nature intended to reflect the Court's reasoning and conclusions.
Certainly, orders 2(a) and (b) fall into that category.
In relation to the transfer of books, records and seal of the company to Michael, minds may differ as to whether that is appropriately "mechanical".
Books, records and the seal of the company are not ordinarily delivered up to one of various shareholders of the company.
Nonetheless, Mr Simpson agrees that the order is appropriate (I assume in a practical sense), and in the circumstances I consider that it is appropriate to make that order.
Order 6 regarding the undertaking is properly consequential upon my finding that relief should be given to Michael conditioned upon acceptance of the profit undertaking: principal judgment [1332].

[7]

Costs orders proposed by the parties

The main contention between the parties relates to the appropriate costs orders to be made in the proceedings.
The plaintiffs submit the appropriate orders are as follows: 1. that Barbara pay Michael's costs on a "party/party" (i.e. ordinary) basis as assessed or agreed for the period up until 14 May 2021 and thereafter on an indemnity basis as agreed or assessed; and 2. that there be no order as to costs in relation to the company with the intent that it bears its own costs.
The defendants opposed the plaintiffs' proposed costs orders: DSOC [2].
The defendants, in their written submissions as to proposed costs orders, argue as follows: "16. The defendants submit that the totality of the above issues suggests that an apportionment of any costs the first plaintiff is entitled to is warranted in the circumstances. The assessment of any apportionment of costs is a matter of impressionistic discretionary evaluation. The defendants submit that having regard to the extent of the issues abandoned or not pursued by the first plaintiff, and that these issues occupied a significant amount of time both in preparation for the hearing as well as during the hearing, any order for costs in favour of the first plaintiff should be limited to 50% of the first plaintiff's costs on the ordinary basis and should exclude any costs in respect of Day 2 of the hearing, which was effectively lost due to the plaintiffs' conduct in connection with late production of documents. The defendants submit that it would be appropriate in the circumstances that the plaintiffs be ordered to pay the defendants costs thrown away in relation to Day 2 of the hearing. 17. As to the second plaintiff's claim, the issues relied upon by the second plaintiff are clearly separate and distinct to the issues relied upon by the first plaintiff. There appears no reason to deviate from the general rule and order the second plaintiff to pay the defendants costs in respect of the second plaintiff's claims."
During the listing on 5 December 2022, Mr Simpson modified those submissions more particularly and clarified the nature of the orders for costs sought.
Mr Simpson submitted that the appropriate costs orders are as follows (T 1107): 1. the defendants (plural) pay 50% of Michael's costs on the estoppel claim on the ordinary basis (excluding any costs in respect of day two of the hearing and the family provision claim); 2. Adele pay the defendants' costs in respect of her claims.
In relation to the family provision costs, Mr Simpson proposed that they be addressed in one of two ways. First, they could be included as part of the discount to his proposal that the defendants pay 50% of Michael's costs on the estoppel claim and alternatively that Michael pay the estate's costs of the family provision claim: T 1107.

[8]

General principles

In the matter of Black-Tie Holdings Pty Ltd (No 2) [2022] NSWSC 856, I addressed principles regarding costs.
I stated there as follows: 44. Costs are in the discretion of the Court, subject to the Civil Procedure Act 2005 (NSW) (CPA), rules of Court and any other Act: s 98(1)(a) CPA. 45. The Court has full power to determine by whom, to whom and to what extent costs are to be paid: s 98(1)(b) CPA. 46. The Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis: s 98(1)(c) CPA. 47. An order for costs may be made by the Court at any stage of the proceedings or after the conclusion of the proceedings: s 98(3) CPA. 48. The general position is that if the Court makes any order as to costs, the Court is to order that the costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs: r 42.1 UCPR. … 51. Generally costs payable to a party under an order of the Court are to be assessed on the ordinary basis: r 42.2 UCPR. 52. The UCPR provides a regime by which offers of compromise may be served, in which case there is what is described under the rules as an entitlement in a party who has obtained a favourable outcome, having regard to the terms of the offer, to have costs assessed on an indemnity basis, unless the Court orders otherwise: e.g. r 42.15 UCPR. 53. The proper exercise of the discretion for costs will clearly have regard to the reason for dismissal of the proceedings in any given case: Ritchie's Uniform Civil Procedure NSW at [42.20.10]. 54. The position in relation to offers outside the offer of compromise regime, being offers expressed to be without prejudice except as to costs and relied upon in accordance with the principles in Calderbank, is that there is no prima facie entitlement in a party who has achieved a favourable outcome under the terms of the offer to an indemnity costs order in its favour. Rather, the making of a Calderbank offer is one of a number of circumstances the Court takes into account in exercising its discretion to make an order for costs on an indemnity basis. 55. A Calderbank offer, per se, will generally speaking not justify an order for indemnity costs unless the offer is a genuine offer of compromise and its rejection is unreasonable: e.g. Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [7]; Ying v Song [2011] NSWSC 618 at [26] per Ward J (as her Honour then was). 56. There is an onus 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]. The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. 57. There are numerous cases of awards of indemnity costs where a party has engaged in inappropriate conduct (such as misleading the Court; maintaining proceedings that are known to have no real prospects of success, maintaining proceedings for an ulterior purpose) or engaged in conduct that has caused unreasonable delay and expense in the proceedings. However, subject to what I note below, there is no suggestion that any of those sorts of considerations apply here. 58. Nonetheless, it is recognised that a prehearing settlement offer which encourages a reasonable settlement of the claim and where the offeree has obtained an outcome significantly less favourable consequent upon the hearing to the outcome offered prehearing may, in appropriate circumstances, give rise to an order for indemnity costs: e.g. Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425.
An order for costs is not awarded by way of punishment of the unsuccessful party. Costs are compensatory in the sense of being awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 per Mason CJ.

[10]

Determinations regarding offers of compromise

In Meares v Meares (No 2) [2017] NSWSC 523 at [43]-[44], Hallen J indicated that the question for determination regarding the effect of what is said to be an offer of compromise involves a two-stage process. His Honour stated as follows: 43. From the authorities, it appears the question for determination regarding the effect of what is said to be an Offer of Compromise involves a two-stage process. The first stage is to enquire whether the offer made is an 'Offer of Compromise' at all, within the meaning of the UCPR. This will depend, in part, on whether it satisfies the formal requirements laid down by UCPR rule 20.26. It also depends, in part, on whether the offer made is one that can truly be called a "compromise". 44. If the court concludes that the offer which is made is an "Offer of Compromise" within the meaning of the Rules, and that the offer made is one that can truly be called a compromise, then UCPR rule 42.15A(2) operates to establish a 'default' position, relevantly that, if the defendant obtains a judgment no less favourable than that which the defendant had offered to accept, then indemnity costs would follow. It is then that the second stage of the process arises, in that the court can "otherwise order". The court will "otherwise order" if it is persuaded that is appropriate, in the interests of justice, that the "default" position ought not apply: Manly Council v Bryne (No 2) [2004] NSWCA 227, per Campbell JA, at [10]; Evans v Braddock (No 2) [2015] NSWSC 518, at [52].
In D Capital 2 Pty Ltd v Western (No 2) [2022] NSWSC 1283, I made the following observations: 128. For an offer to be regarded as an Offer of Compromise it must contain a real element of 'compromise': see e.g. Leichardt Municipal Council v Green [2004] NSWSC 341 at [31]-[37]. 129. The question whether any particular offer involves the required element of compromise depends upon the totality of the circumstances and involves an impressionistic assessment: Shellharbour City Council v Johnson (No 2) (2006) 67 NSWLR 308; [2006] NSWCA 114 at [20]-[23]. … 131. The power to order "otherwise" must be for proper reasons: Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [47] adopting the comments of Hely J in Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 at [17]. 132. The mere fact that it is reasonable for a litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule. However that does not mean that reasonableness of the rejection is an irrelevant consideration: Leach at [48].

[12]

Plaintiffs' first offer of compromise

Omitting formal parts, the first offer of compromise offered that the proceedings be compromised on the following terms: "6. The Proceedings be disposed on the following terms: a. The first plaintiff pay the second defendant $308,500. b. A notation to the effect that no order for provision be made be made for the first plaintiff's maintenance, education and advancement in life pursuant to s 59 of the Succession Act 2006 out of the estate and/or notional estate of the deceased. c. A declaration that the first defendant holds the following property on trust for the first plaintiff: i. the real estate property situated and known as 598 Gresford Road Vacy NSW 2421 being folio identifier 123/10663557 (Rossdale); ii. the real estate property situated and known as 471 Dungog Road Vacy NSW 2421 being folio identifier S/1248814 (Gostwyck Flats Remnant) on trust for the Plaintiff; and iii. the Water Access Licences WAL14722 and WAL14723 (Rossdale WALs). d. A declaration that the second defendant holds all the shares in the first defendant forming a part of the estate of the late Ross George Horn of Unit 202, 365 Morpeth Road, Morpeth, New South Wales, 2321, who died on 20 March 2020 (the deceased) (the shares) on trust for the first plaintiff. e. An order that the second defendant execute and deliver to the solicitors of the first plaintiff, a share transfer form in favour of the first plaintiff, for all shares in the first defendant held by the second defendant. f. An order that the first and second defendants do all things necessary to transfer the shares, and register that transfer, to the first plaintiff forthwith. g. The second defendant, Hamish Furner and Andrew Franci Saide resign as directors of the second defendant at the time of the acceptance of this offer and render accounts for the period of their directorships. h. There be no order as to costs, with the intention that each party bear their own legal costs with respect to the Proceedings."

[13]

Plaintiffs' second offer of compromise

The second offer of compromise was, omitting formal parts, in the following terms: "6. The Proceedings be disposed on the following terms: a. A notation to the effect that no order for provision be made be made for the first plaintiff's maintenance, education and advancement in life pursuant to s 59 of the Succession Act 2006 out of the estate and/or notional estate of the deceased. b. A declaration that the first defendant holds the following property on trust for the first plaintiff: i. the real estate property situated and known as 598 Gresford Road Vacy NSW 2421 being folio identifier 123/10663557 (Rossdale); ii. the real estate property situated and known as 471 Dungog Road Vacy NSW 2421 being folio identifier 5/1248814 (Gostwyck Flats Remnant); and iii. the Water Access Licences WAL14722 and WAL14723 (Rossdale WALs). c. A declaration that the second defendant holds all the shares in the first defendant forming a part of the estate of the late Ross George Horn of Unit 202, 365 Morpeth Road, Morpeth, New South Wales, 2321, who died on 20 March 2020 (the deceased) (the shares) on trust for the first plaintiff. d. An order that the second defendant execute and deliver to the solicitors of the first plaintiff, a share transfer form in favour of the first plaintiff, for all shares in the first defendant held by the second defendant. e. An order that the first and second defendants do all things necessary to transfer the shares, and register that transfer, to the first plaintiff forthwith. f. The second defendant, Hamish Furner and Andrew Francis Saide resign as directors of the second defendant at the time of the acceptance of this offer and render accounts for the period of their directorships. g. An order, that by 30 months after the first plaintiff becoming the holder of the shares in the first defendant, the first plaintiff and first defendant do all things necessary to sell Rossdale and the Rossdale WALs by private treaty and/or auction on the open market at the earliest practical date and pay the net proceeds of sale, after the payment of Agent's commission and legal expenses for the sale and Council and Water rates for the property and the WALs: i. As to the second defendant 20%; and ii. As to the remaining 80%, as the first plaintiff directs. h. An order, that by 3 months after the receipt of the proceeds of sale of Rossdale, the first plaintiff and first defendant do all things necessary to transfer Gostwyck Remnant at the earliest practical date to the second defendant at no cost to the second defendant and free of any mortgage or other encumbrances save for any Council rates that may be due and payable as of the date of transfer. i. An order, that by 3 months after the receipt of the proceeds of sale of Rossdale, the first plaintiff and first defendant pay Hamish Furner $8,273.00. j. That the parties give mutual releases in relation to the subject matter of the proceedings and as arising out of the proceedings including in other dealings between them creating liabilities such as loans to the first defendant by the plaintiffs and loans by the first defendant to Ross George Horn (deceased). k. There be no order as to costs, with the intention that each party bear their own legal costs with respect to the Proceedings. Notation: it may be that the proposed orders set above are cast as an amendment to the terms of the last Will of the deceased in order to achieve the most cost-effective outcome for the parties in implementing the above terms, for example, the transfer of the shares to the first plaintiff."
On 15 November 2021, Mr Slattery (following receipt of an offer from the defendants' solicitor, Ms Young) renewed the offer of 25 October 2021, advising that it was open for acceptance up to, and including, 3 December 2021.

[14]

Defendants' settlement offer

Mr Slattery notes that the defendants made a settlement offer under cover of a letter from Ms Young to Arnold Lawyers dated 26 October 2021.
The offer is in the following terms: "Settlement offer We are instructed that our clients have considered the offer made at the closing of the mediation. We are instructed that, whilst there are components of the offer that our clients can work with, the entirety of the offer in its current form is not acceptable to our clients. We are instructed to respond with the following counteroffer: Companv 1. Barbara to be the beneficial owner of the shares currently held by the estate. Michael to retain his share in the company. 2. Michael to be appointed a director of the company with the current directors. 3. Rossdale to be sold (see further below). 4. Division 7A loan to be re-allocated from Ross to Michael. 5. Division 7A loan to Michael to be subsequently forgiven at the next meeting of directors. 6. Michael to be personally liable for tax or duties relating to the Division 7A loan (if any) and, to the extent that it is necessary, shall indemnify the company, the estate, and Barbara if any such consequences arise. 7. The purchase price received in relation to Rossdale is to be applied in the following order: (a) Firstly, payment of all real estate agent's fees (commission and marketing expenses) and legal fees (conveyancing only); (b) Secondly, except as provided below, payment of all company liabilities, including any tax liability arising from the sale of Rossdale; and (c) Thirdly, net proceeds are to be split: 35% to Barbara; and 65% to Michael. 8. Michael shall be solely liable to repay and agrees to indemnify the company in relation to the mortgage to National Australia Bank Limited current secured against the Gostwyck Remnant. 9. Any debt owed by the company to Michael and Adele is to be forgiven without repayment. 10. Following distribution by the company of the entitlements of Barbara and Michael, they shall both transfer their shares in the company to Nicholas and resign as directors. Rossdale 11. Michael and Adele to remain living at Rossdale during the sale process on the condition that: (a) Michael and Adele indemnify the company for and shall be liable to pay all outgoings associated with Rossdale, including all rates and insurances; (b) Michael and Adele to provide receipts in respect of the payment of all outgoings; (c) Michael and Adele to provide certificates of currency in respect of the insurance held over Rossdale; (d) Michael and Adele to maintain Rossdale in its current condition and shall be responsible for all maintenance and repairs; and (e) Michael and Adele agree to vacate Rossdale within 28 days of a contract for sale being exchanged. 12. Michael and Hamish, in their capacities as directors, to jointly arrange and manage sale of Rossdale. All communications in relation to the sale of Rossdale (eg. real estate agents, solicitors etc) to be in writing via email to the company email address and to a personal email address for each of Michael and Hamish. 13. Real estate agent to be appointed by agreement between Michael and Hamish within 90 days. If such agreement cannot be reached, Michael and Hamish shall each nominate 2 real estate agents and all the directors of the company shall vote on the appointment. Any such nomination is to be supported by a marketing proposal from any agent nominated that sets out the agent's costs/commission and marketing expenses together with an appraisal of the market value of the property supported by market evidence of such appraisal. 14. Tranter Lawyers to be appointed to act for the company on the conveyance. 15. Rossdale to be put on the market for sale within 120 days. 16. All parties to do all things necessary to progress the sale of Rossdale in a timely manner and not to hinder any part of the sale process, including but not limited to signing all necessary documents, providing instructions where required, and allowing access to the property when required. Gostwyck Remnant 17. Mortgage to National Australia Bank Limited over the Gostwyck Remnant to be transferred to Rossdale within 28 days. 18. Nicholas and family to remain living at the Gostwyck Remnant on the condition that: (a) Nicholas to indemnify the company for and shall be liable to pay all outgoings associated with Gostwyck Remnant, including all rates and insurances; (b) Nicholas to provide receipts in respect of the payment of all outgoings; and (c) Nicholas to provide certificates of current in respect of the insurance held over the Gostwyck Remnant. Danmah Trust 19. No further action to be taken with respect to the Danmah Trust such that the assets of the Danmah Trust remain as is and the company and/or the estate releases the Danmah Trust and/or Michael and Adele in respect of any civil or criminal fraud associated with the transfer of Gostwyck Sold. Proceedings generally 20. Deed of Settlement to be executed recording the terms of the agreement. To ensure the entirety of the dispute is resolved, the Danmah Trust and Nicholas Horn are also to be parties to the deed. 21. Releases to be given by each party to all other parties in respect of all claims between them, whether current or future, including any claim for provision pursuant to s 57 of the Succession Act 2006. 22. Proceedings to be dismissed. 23. Each party to hear their own costs of the proceedings and the negotiation and execution of the deed. Conclusion Our clients' offer is an open offer and will be relied upon on the questions of costs in the proceedings. Our clients' offer remains open for a period of 7 days from the date of this letter."

[18]

Defendants' submissions

Ms Young provided written submissions and Mr Simpson in substance adopted them and supplemented them with oral submissions on 5 December 2022.
In substance, the defendants' submissions were to persuade a position as follows: 1. whilst Michael was prima facie entitled to an order for costs in his favour on the estoppel claim, those costs should be substantially discounted by reason of the plaintiffs' conduct during the hearing; 2. Adele had a separate claim in the proceedings and as she was unsuccessful on her claim the defendants were entitled to an order for costs in their favour against her; and 3. the inclusion of a provision that "there be no order as to costs, with the intention that each party bear their own legal costs with respect to the proceedings" in each of the plaintiffs' offers of compromise invalidated the offers by contravening r 20.26(2)(c) UCPR.
In relation to the offers of compromise, Mr Simpson, apart from asserting the above-mentioned invalidity, submitted that: 1. the judgment was less favourable than the terms of the offers of compromise, at least insofar as both offers sought declarations that not only were the shares held on trust, but also the claimed property; 2. by reason of the above and the fact that Michael did not succeed in obtaining an order for transfer of the properties to him but (allegedly) abandoned that part of his claim and only pursued a claim in relation to the shares, his rejection of the offer was unreasonable and he in fact received a judgment that was less favourable to him.
In relation to costs generally, but also in respect of the offers of compromise, Mr Simpson raised the following matters as being aspects of the plaintiffs' conduct of the proceedings that caused significant costs to be incurred which were unnecessary and in breach of the plaintiffs' obligations pursuant to s 56 CPA: DSOC [7].
The factors were as follows: 1. the statement of claim canvassed irrelevant issues and added distraction to the case; 2. many aspects of the plaintiffs' pleaded case were abandoned such as references to the Rossdale Arrangement, the Gostwyck Arrangement and the post-2017 events; 3. there was unnecessary extensive cross-examination on issues that ultimately had no relevance to the plaintiffs' final claim; 4. the plaintiffs pursued issues in relation to the final Will of the deceased, including seeking evidence from the Beryl Mudd which incurred costs and which were not ultimately relevant to the outcome of the proceedings; 5. the plaintiffs' failure to comply with the notice to produce dated 16 November 2021 caused some prejudice to the defendants in dealing with the matter fairly and led to a significant amount of time, both in preparation for hearing and during the hearing itself which was wasted, in particular, the cost of time lost on the second day of the hearing (because of the non-compliance); and 6. the cross-examination of Barbara regarding photographs (Exhibit P6) which had not been adduced as part of the plaintiffs' evidence prior to the commencement of the trial. The argument being that if they had been adduced, the hearing would have been shorter in length.

[23]

Issue 2 - Was there more than one 'active' defendant in the case?

The role of the "defendants" in the proceedings needs to be more particularly addressed.
The question regarding the involvement of the company was the subject of comment by Dr Mantziaris in the POS: see [27b],[28]. [27b] Second, it should not escape attention that the Company has taken an active role in these proceedings when it was open to it to enter a submitting appearance. The Company is now controlled by two directors and a majority shareholder (Barbara qua Administrator) who are parties with an interest in the outcome of the proceedings. Barbara is the recipient of the shares in the Company under the Handwritten Will; and Hamish is the remunerated co-executor and the potential 'primary beneficiary' of the 2020 Barbara Will should his mother Philippa, the sole beneficiary, predecease Barbara. [28] While the latter issue could be considered to be an internal matter for the Company (of which Michael remains a shareholder), the only valuable asset of the Company is the land (or the shares) which are the subject of the suit. With the Company under the direction of Hamish and Barbara, it is highly likely that the Company is incurring legal costs which are properly the costs of the Estate; and that this diminishes the value of the subject of the suit. These matters are notified now, in the event that they become significant in the making of costs orders.
In the circumstances of this case, I consider those submissions to be apt.
It would be an unfair outcome for company property to be used for a non-company purpose, namely, to litigate as between Barbara and Michael and/or Adele who between them is properly entitled to the benefit of the deceased's shareholding in the company.
In the course of the hearing, as I have noted in the principal judgment, when the issue regarding the costs of the company came to a head, I made directions for the defendants to particularise as between them the costs incurred by them.
The affidavit of Ms Young revealed that there was a distinct differentiation of costs, and that on a solicitor client basis the only cost that was solely referable to the company was the sum of $4,719: see principal judgment at [282]-[289].
That differentiation in regard to the estimate of costs in the proceedings to my mind bore out the reality of how the proceedings were conducted namely that the company was in substance a non-active or submitting defendant and the real contradictor to the plaintiffs' claim was Barbara.
In circumstances where there was contest as to who as between Michael or Barbara was entitled to the deceased's shares, there was no occasion for the company to play any adversarial role in that dispute.
It seems to me that the order proposed by Dr Mantziaris that the Court make no order as to the costs in relation to the company with the intent that it bear its own costs is a fair and appropriate order in the circumstances of the case.
I reject Mr Simpson's submission that the defendants ("plural") be responsible for Michael's costs.

[25]

What does "must not include an amount for costs" mean?

Rule 20.26 UCPR was amended following Whitney such that offers made after 7 June 2013 (pursuant to r 20.26(2)(c) UCPR) must not include an amount for costs and must not be expressed to be inclusive of costs: see e.g. Ye v Chen [2022] NSWSC 494 at [104]-[105] per Adamson J.
Rule 20.26(2)-(3) provides as follows: (2) An offer under this rule - (a) must identify - (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and (b) if the offer relates only to part of a claim in the proceedings, must include a statement - (i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or (ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and (e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose - (a) a judgment in favour of the defendant - (i) with no order as to costs, or (ii) despite subrule (2)(c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer."
The purpose of the rule is clear. It is directed to the mischief of a monetary offer in a lump sum which does not differentiate between the plaintiff's claim on one hand and the plaintiff's costs on the other: Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 (Jojeni) at [11] per Macfarlan, Gleeson and Leeming JJA .
Generally, a recipient of an offer will have some basis (whether it be pleadings, particulars and evidence) for making an assessment of a plaintiff's claim but without some particular prior disclosure, will not have an informed basis for making assessment of the plaintiff's costs: Jojeni at [11].
The prohibition in r 20.26(2)(c) avoids the difficulty that it may not be possible to determine whether the default position of indemnity costs applies until the costs have been assessed: Jojeni at [11].
Thus, an offer that there be no order as to costs with the intention that each party bear their own legal costs with respect to the proceedings does not fall within that which is precluded under r 20.26(2)(c) and, accordingly, is not invalid for that reason: Jojeni at [10]-[15].

[28]

When is a judgment "no less favourable"?

What is meant by "no less favourable" in r 42.14(1) UCPR?
Questions regarding whether judgment outcomes are "no less favourable" than offers may occur where there are provisions in the offer in non-monetary terms, such as a requirement for an apology or a release.
It has been suggested that the proper exercise of the general costs discretion will involve the Court in considering the reasonableness of the condition and addressing the issue of how the judgment result compares with the terms of the offer as a matter of substance: Richie's Uniform Civil Procedure NSW (LexisNexis Butterworths) at [42.14.8] citing, inter alia, Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (Full Court of the Federal Court of Australia, 29 August 1995, unrep) (Magenta).
Magenta discussed the approach to assessing outcomes in the context of considering a "Calderbank" offer: see Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333.
In Magenta, the Full Court of the Federal Court referred to observations of Wilcox J in Lewis v Cummings (Federal Court of Australia, Wilcox J, 29 May 1992, unrep) to the effect that it may be a mistake - in exercising a discretion of costs - to dissect matters too much and, further, that one may need to make a broad judgment as to what is reasonable in the whole of the circumstances: at 36.
In Magenta, the Full Court observed that the primary Judge had considered various objections but also had regard to the consideration that the respondents in the particular matter wished to negotiate a global settlement.
In Diamond v Simpson (No 4) [2004] NSWCA 57 (Diamond), Young CJ in Eq (as his Honour then was), with whom Meagher and Ipp JJA agreed at [1] and [2] respectively, considered submissions in respect of the reasonableness of a condition within an offer and referred to the decision of the Full Court in Magenta and also the Court of Appeal in Skalkos v Assaf (No 2) [2002] NSWCA 236: at [75].
Thus, the approach in Magenta has been applied by the Court of Appeal to the offer of compromise regime (albeit that Diamond involved consideration of the Supreme Court Rules 1970 (NSW) rather than the UCPR).
Young CJ in Eq noted that the principle is essentially to the effect that when considering reasonableness, one needs to consider all the circumstances of the case and the reasonableness of the offeree's conduct generally, not just the narrow question of the reasonableness of a condition: at [78].
Young CJ in Eq noted that in a case involving $10 million or more, the condition as to costs was a minor matter and that whilst it might have been reasonable for the offeree to have made a counteroffer or sought to have the condition withdrawn, it was not reasonable merely to reject the offer: at [79].

[31]

Was the first offer no less favourable than the outcome?

Mr Simpson sought, during the hearing regarding the orders and costs, to differentiate between the terms in the offers of compromise regarding the claimed property on the one hand, and the shares on the other, as being "two highly distinctive property rights" in respect of which the plaintiff was successful in relation to the shares but not the property: T 1114. I reject that contention.
The fact that the offer additionally sought a declaration over the claimed property does not, in light of the authorities above requiring offers to be viewed substantively, preclude it from consideration as being an offer which would engage r 42.14.
Whilst in the principal judgment I distinguished between the claimed property on the one hand and the shares on the other, I made a finding that essentially what was promised was the shares: principal judgment [842].
There was no real suggestion in the case that the plaintiffs, in seeking declarations regarding the property on the one hand and shares on the other, were somehow "wanting to have their cake and to eat it too".
However, the first offer of compromise does not grapple with an important issue in the case regarding the $817,417 amount.
I found that relief on the estoppel claim to Michael should be conditioned on acceptance of an undertaking that he not be permitted to enforce a claim against the estate in respect of the $817,417 amount: principal judgment at [1332].
No particular submissions were directed to analysing whether or not the $817,417 amount would have made a difference as to whether the first offer of compromise would have been better for Barbara and/or the company.
The clear impression I have is that the first offer of compromise was for Barbara (as the main and active defendant) a better outcome than the findings that I have made in the judgment.
Even if under the first offer of compromise it was possibly open to the plaintiffs to attempt to recover the $817,417 amount from the deceased's estate that would not have impacted Barbara sufficiently for the offer to cease to be a better outcome for her than the findings that I have made in the judgment.
That is because apart from the shares and excluding property accruing to Barbara by reason of a joint tenancy, the deceased did not have any remaining property of such value that would impact on any material way on the outcome: [268]-[277] principal judgment.
An offer of $308,500 to Barbara under the first offer would have given Barbara a better outcome than under the judgment, irrespective of whether, other than the shares and property held in joint tenancy, Barbara got some other property out of the deceased's estate or nothing from the deceased's estate.
I am persuaded that the first offer of compromise was an effective offer of compromise in that, in terms of the orders to be made, the plaintiffs or Michael obtained an order on the claim no less favourable to them or him then the terms of the offer.
In the event that I am incorrect regarding whether the first offer of compromise by its terms engages r 42.14(1), I find that the terms of the second offer of compromise clearly do so.

[34]

The family provision claim

Mr Simpson acknowledged that the costs of the family provision claim "wasn't an enormous part of the trial": T 1107. However, beyond that, he did not venture any submission as to what proportion of the overall cost of the proceedings was referable to the family provision claim, noting that that would be a difficult exercise: T 1107.
As I have noted in the principal judgment, the only claim for relief in the summons filed on 17 March 2021 (which initiated the proceedings) was a claim for family provision relief.
On 5 May 2021, within two months of filing the summons, the plaintiffs filed a statement of claim in which the estoppel claim was cast as the principal claim and family provision relief had been relegated in priority: CB 1/53.
In the POS, Dr Mantziaris expressly stated that the family provision claim was cast in the alternative and need only be determined if the plaintiffs failed on the estoppel claim: principal judgment [139], [1368]. The relief was disputed: principal judgment [171].
Apart from the limited reference in the POS describing the family provision claim as an alternative claim (POS [15]), Dr Mantziaris made no submissions at any point during the hearing regarding the claim in any way which would enable me to understand how the claim was put: principal judgment [1341]-[1346].
There were some exchange between myself and Dr Mantziaris during the hearing regarding orders and costs on 5 December 2022 addressing the context in which I had observed that no submissions were made on the family provision claim.
The substance of the submission of Dr Mantziaris was that a forensic decision was made by him and or the plaintiffs, in light of matters said in Court on a number of days prior to the conclusion of the hearing, not to expressly press a family provision claim.
I was not taken to any transcript references regarding what had been said in Court to support his submission. In any event, suffice it to say, I do not accept that the responsibility for the forensic decision not to make submissions lies other than in the plaintiffs' camp: T 1109-1111.

[46]

Conclusion

The orders of the Court are as follows.
The Court: 1. Subject to the undertaking given by the plaintiffs AND recorded as a notation in paragraph 6 below, DECLARES: 1. That as at 20 March 2020, the late Ross George Horn held all shares in the first defendant on trust for the first plaintiff. 2. That the second defendant, in her capacity as administrator of the estate of the late Ross George Horn (Estate), holds all the shares in the first defendant on trust for the first plaintiff. 1. DIRECTS the second defendant to: 1. Deliver to the first plaintiff, within seven days, a form executed by the second defendant by which the second defendant, as transferor, transfers all shares held by the second defendant in the first defendant to the first plaintiff as transferee. 2. Do all things necessary and incidental to the registration of the share transfer in the name of the first plaintiff on the share register of the first defendant. 3. Transfer the books, records and seal of the first defendant to the first plaintiff forthwith and provide all electronic access codes and other permissions necessary for the performance of the activities of the first defendant. 1. ORDERS that the first plaintiff's claim for provision pursuant to section 59 of the Succession Act 2006 (NSW) be dismissed. 2. ORDERS, subject to order 7, that the second defendant pay the plaintiffs' costs of the proceedings on: 1. a party/party basis as assessed or agreed for the period up until 14 May 2021; and 2. thereafter, on an indemnity basis as agreed or assessed. 1. The Court makes no order as to costs of the proceedings in relation to the first defendant with the intent that it bears its own costs. 2. NOTES AND ACCEPTS that the plaintiffs undertake that they, by themselves or by the first defendant, will not seek to enforce a claim against the Estate in respect of the $817,417 amount recorded as a loan by the first defendant to the late Ross George Horn. 3. ORDERS that the plaintiffs pay the second defendant's costs referable to: 1. the family provision claim from the date of the filing of the summons on 17 March 2021 up to and including 4 May 2021; and 2. day two of the hearing. 1. ORDERS that the costs the subject of orders 4 and 7 be set off against one another.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (47 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (29)

Cited By (3)