I gave judgment in this matter on 26 September 2019: Kerr v Australian Executor Trustees (SA) Ltd; Australian Executor Trustees (SA) Ltd v Fuller and others trading as Sparke Helmore Lawyers [2019] NSWSC 1279. I shall use the same abbreviations here.
It is common ground that I should now enter judgment and make orders as follows:
1. Judgment be entered for Mr Kerr against AET in the sum of $76,619,978.42 inclusive of interest under s 100 of the Civil Procedure Act 2005 (NSW).
2. Mr Kerr's claim against Sparke Helmore be dismissed.
3. AET's cross-claim against Sparke Helmore be dismissed.
It also is common ground that AET should pay Mr Kerr's costs. Mr Kerr seeks an order for indemnity costs from 20 December 2018 on the basis of a Calderbank offer made on 20 November 2018 that the proceedings be dismissed on the basis of a payment by AET to Mr Kerr of $65 million inclusive of costs.
AET neither consents to nor opposes the making of such an order.
I am satisfied that the order sought by Mr Kerr should be made.
The offer was a genuine compromise and was for an amount considerably less than the judgment I am about to enter. At the time the offer was made Mr Kerr's case was made clear by his detailed pleadings. Evidence was complete and a mediation had taken place before Mr Jacobson QC at which, I assume, the issues ultimately ventilated before me were canvassed in detail.
Mr Kerr joined Sparke Helmore as a defendant. As Mr Kerr achieved success against AET, it was not necessary for Mr Kerr to prosecute his claim against Sparke Helmore.
In those circumstances, Mr Kerr seeks a Sanderson order (see Sanderson v Blyth Theatre Co [1903] 2 KB 533) that AET pay Sparke Helmore's costs of Mr Kerr's claim against Sparke Helmore.
AET neither consents to nor opposes the making of that order. Sparke Helmore adopts the same position.
I am satisfied that it is appropriate that a Sanderson order be made as it was, in my opinion, reasonable for Mr Kerr to join Sparke Helmore as second to sixty-first defendants and it would be fair, in all the circumstances, to impose on AET a liability to now meet those costs: Zhang v ROC Services (NSW) Pty Ltd; National Transport Insurance by its manager NTI Ltd v Zhang (2016) 93 NSWLR 561; [2016] NSWCA 370 at [299] (Leeming JA, with whom Macfarlan JA and Sackville AJA agreed).
As was submitted on behalf of Mr Kerr:
"…at the time that Mr Kerr sought judicial advice to join Sparke Helmore, AET had already named Sparke Helmore in its proportionate liability defence and had already joined Sparke Helmore to the proceedings by bringing its Commercial List Cross-Summons.
AET's proportionate liability defence required Mr Kerr to join Sparke Helmore and adopt the allegations which were being advanced by AET against Sparke Helmore. If Mr Kerr had not taken that course, and Mr Kerr's claim against AET was ultimately held to be apportionable, then any share of the responsibility for which Sparke Helmore was found liable would not have been recoverable by Mr Kerr on behalf of Covenantholders. This was a circumstance which AET (a defaulting trustee) itself created by its conduct of the litigation. As a Court appointed trustee, Mr Kerr could not responsibly take that risk given the allegations made by AET against Sparke Helmore.
In the conduct of the trial, Mr Kerr did not advance any claim against Sparke Helmore which was different to the case advanced by AET. Mr Kerr wholly relied upon the case advanced by AET against Sparke Helmore. Mr Kerr did not serve any of his own evidence on this aspect of the claim. Nor did he cross-examine any witness on the subject of the claim against Sparke Helmore. Mr Kerr's primary case at all times was that AET was 100% liable."
AET seeks a stay of the judgment I am about to enter for 28 days so that it may consider whether to appeal from my judgment.
On behalf of AET it was submitted:
"A short stay is warranted to maintain the status quo while AET assesses the prospects of an appeal and commences any such appeal. If such an appeal is commenced, it will thereafter be incumbent on AET to make any further application for a stay, at which time the parties may fully ventilate, with evidence, whether a stay pending the determination of the appeal should be granted, and, if so, whether any terms of a stay should apply."
On the hand, it was submitted on behalf of Mr Kerr:
"AET has not offered to pay the judgment sum into Court. AET has not offered to pay the judgment sum into a controlled monies account. AET has not offered security in any form for the costs of the appeal. Nor has AET sought some form of arrangement with Mr Kerr that, upon payment of the judgment sum, he will not distribute the proceeds prior to hearing of any appeal…
Mr Kerr is a Court appointed trustee. The Covenantholders have been waiting for compensation since 2011. Significant delays in this process of compensating Covenantholders has been caused by the stance taken by AET since 2011 (including in pursuing litigation to the High Court).
IOOF, in its market announcement about the Judgment, state that 'the maximum exposure of IOOF net of insurance proceeds, is approximately $16.5M.' … Mr Kerr is concerned that, absent parent company support, AET may be incapable of meeting the judgment debt given that AET's financial statements and reports for the period ending 30 June 2016, (being the most recent publicly available financial information) disclosed net assets of $148,093…
In the absence of payment of the judgment sum into Court, or into a controlled monies account, the Court should not countenance a stay of its orders."
As I noted at [32] of the judgment of 26 September 2019:
"AET now accepts that, leaving aside the advice it sought and obtained from Sparke Helmore, by acting as I have set out, it acted in breach of its duty to exercise due care and diligence, and thus in breach of trust."
In those circumstances, any appeal made by AET is likely to be directed to the question of whether, contrary to my findings, it was entitled to succeed on its cross-claim against Sparke Helmore.
If that turns out to be the case, it is hard to see why AET should not, pending the hearing of the appeal, at least pay the judgment sum into Court.
Nonetheless, in order to give AET a further short time to consider its position, it being almost a month since I published my reasons, I will stay the judgment I am about to enter for 14 days.
Finally, the parties agree that if any one of them wishes to make an application for a gross sum costs order under s 98(4)(c) of the Civil Procedure Act, it should do so within 28 days.
In those circumstances I enter judgment and make orders as follows:
1. Judgment for the plaintiff against the first defendant in the sum of $76,619,978.42 inclusive of interest under s 100 of the Civil Procedure Act.
2. The plaintiff's claim against the second to sixty-first defendants is dismissed.
3. The cross-claim is dismissed.
4. The first defendant pay the plaintiff's costs of the proceedings on a party/party basis up until 19 December 2018 and thereafter on an indemnity basis.
5. The first defendant pay the second to sixty-first defendants' costs of the plaintiff's claim against the second to sixty-first defendants.
6. The cross-claimant pay the cross-defendants' costs of the cross-claim.
7. Any party wishing to make an application pursuant to s 98(4)(c) of the Civil Procedure Act do so by filing a notice of motion, any evidence in support and brief outline submissions, within 28 days of the making of this order.
8. The judgment in order 1 be stayed for 14 days.
9. The parties have liberty to apply concerning the form of these orders, such liberty to be exercised by 5.00 pm on 24 October 2019.
10. Direct that the exhibit and subpoenaed material be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.
[3]
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Decision last updated: 22 October 2019