PROCEDURE - Judgments and orders - Orders giving effect to the principal judgment - declaration of legal and beneficial interest in land and order to pay rent received
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PROCEDURE - Judgments and orders - Orders giving effect to the principal judgment - declaration of legal and beneficial interest in land and order to pay rent received
Judgment (3 paragraphs)
[1]
Solicitors: Diamond Conway (plaintiff/cross defendant)
Marsdens Law Group (defendants/cross claimants)
File Number(s): 2014/216557
[2]
Judgment
On 16 February 2018 I delivered the principal judgment in these proceedings: Perpetual Trustee Company Ltd v Corbett [2018] NSWSC 126.
The plaintiff, Perpetual Trustee Company Ltd (Perpetual), is the trustee of the estate of the late Keith William Corbett. The primary issue in the proceedings was whether the deceased had made representations to the first defendant, his son, John Keith Corbett, which, in all of the circumstances, had the result that Perpetual holds the property at 240 Picton Road, Maldon, NSW, on trust for John Corbett.
I found that Perpetual does hold the Maldon Property on trust for John Corbett, and is liable to transfer that property into John's name. I dismissed Perpetual's claim that none of the defendants had any legal or equitable interest in the Maldon Property and for consequential orders. The other relevant facts and circumstances are as set out in the reasons for judgment.
I held that Perpetual should be ordered to pay the defendants' costs of the proceedings, including their cross claim.
I invited the parties to bring in short minutes of order to give effect to my reasons for judgment.
The parties were unable to agree on the orders that should be made, or the basis upon which Perpetual should be ordered to pay the defendants' costs.
A further short hearing took place on the outstanding issues on 12 April 2018, at which the parties proffered alternative short minutes of order to the Court.
I will explain in these supplementary reasons the orders that I propose to make to give effect to my reasons for judgment.
The parties agreed on the terms of orders 1 and 2, which are a declaration as to the beneficial ownership of the Maldon Property and an order that Perpetual deliver a transfer to Mr Corbett together with the relevant certificate of title. I will set these orders out below.
Mr Corbett sought a new order 3, to the effect that if Perpetual fails to comply with the order that it transfer the title to the Maldon Property to Mr Corbett, the Registrar of the Court be empowered to execute all documents necessary to give effect to the order. I will not make that order as I consider there is no chance that Perpetual will not comply with the order. In any event, Mr Corbett could make a further application to the Court if the order was not complied with.
The draft short minutes of order propounded by Perpetual included the following order:
3. Order the cross defendant to pay to the first cross claimant the rent, less outgoings, received by it from the Land since 4 October 2012, and interest pursuant to s 100 Civil Procedure Act 2006 (NSW).
Mr Corbett proposed that the following words be added after "4 October 2012", namely: "any mesne profits payable by the cross defendant, less reasonable outgoings paid by the cross defendant for the portion [of] the land occupied by the cross claimant".
The background to this dispute is that the Maldon Property was effectively in the possession of Mr Corbett for many years. One of the defendants, a company controlled by Mr Corbett, occupied part of the Maldon Property for its business purposes.
Another part of the Maldon Property was leased to a company called Roadworx. Mr Corbett, or one of the other defendants, received the rent from Roadworx after the death of the deceased until a time when Perpetual, as the legal owner of the property, demanded that Roadworx pay the rent to it. Thereafter the rent was paid to Perpetual until a time came when Roadworx ceased to occupy part of the Maldon Property or pay any further rent to Perpetual.
The effect of the addition to the draft order suggested by Mr Corbett would be that not only would Perpetual be required to pay the net rent that was actually received to Mr Corbett, but it would have to pay mesne profits for any period when the remainder of the Maldon Property was not leased (except for the part of the property that continues to be occupied by one of the defendants).
Perpetual contended that the addition should not be made to the order, and that it was inappropriate in all of the circumstances that Perpetual be ordered to pay mesne profits for the time when the balance of the Maldon Property was unoccupied. It correctly pointed out that in the cross claim, at pars 23 to 26, Mr Corbett only specifically claimed mesne profits in relation to the lease entered into by Roadworx. No wider claim was prosecuted at the hearing, and Mr Corbett did not tender evidence to prove the proper amount of any occupation fee. Furthermore, Perpetual did not in any real way occupy or gain any benefit from the Maldon Property after it ceased to be leased by Roadworx. It was not proved that Perpetual had a duty to find a new tenant, or that it was in breach for not doing so. In fact, there was no issue to that effect at the hearing, and no relevant findings were made by the Court.
In these circumstances the order that the Court will make will not have the additional words proposed by Mr Corbett.
The next order proposed by consent of all parties is that the Court reserve liberty to the parties to apply further in relation to the quantum of the amount payable pursuant to the order for the payment by Perpetual of the net rent to Mr Corbett. I had hoped that the parties would have completed the investigations concerning the amount of the rent and outgoings by this stage, but the parties assured the Court that there was reasonable ground for thinking that the necessary work could be done shortly. I will accordingly make an appropriate order as requested, but will not leave the order open-ended as to time. The parties agreed that 21 days should be sufficient for them to complete the exercise.
Mr Corbett sought a further order that, if the parties do not agree to the amount payable to Mr Corbett by a stipulated date, an order now be made for the matter to be referred to a referee under rule 20.14 of the Uniform Civil Procedure Rules 2005 (NSW). I indicated during the hearing that I would decline to make that order now, although it may ultimately be an appropriate order to be made. I will wait until I see whether there is a dispute, and if so what the nature of that dispute is. That will enable the Court to ensure that the terms of any reference are appropriate.
The next order in the contending short minutes of order was an order that Perpetual pay the costs of the proceedings to the defendants. It is the position of Perpetual that all of the costs should be paid on the ordinary basis. The defendants claim that part of the costs should be paid on the indemnity basis. The defendants put two alternative claims as to the period for which they should be entitled to receive indemnity costs. The first was from 6 May 2015 and the second was from 8 April 2016.
The basis of the first alternative was a formal offer of compromise made in accordance with rule 20.26 of the UCPR dated 5 May 2015. The primary aspect of that offer was that Mr Corbett would pay Perpetual $300,000 for the transfer of the Maldon Property, and would not pursue the mesne profits claim.
Perpetual accepted that this was a genuine compromise, as indeed it was. Perpetual submitted, however, that it was reasonable at that time for Perpetual to decline to accept the offer, primarily because the offer of compromise was made shortly after the close of pleadings, and before Perpetual had the benefit of any evidence to be filed by the defendants.
Perpetual relied on the authority of Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [147], Miwa Pty Ltd v Stanton Properties Pty Ltd (No 2) [2011] NSWCA 344 at [11] and Velik v Steingold (No 2) [2012] NSWSC 1347 at [11] to support its submission that it was reasonable for Perpetual to reject the offer of compromise in the circumstances.
Perpetual pointed out that it was a trustee of an estate, and had no personal knowledge of the facts and circumstances relevant to Mr Corbett's claim. Nor were there any witnesses available to Perpetual in respect of Mr Corbett's claim that his father had made the alleged representations many years before, as there were no witnesses to those conversations. Perpetual also had the ordinary obligations of a trustee.
I accept that it was reasonable for Perpetual to decline to accept the early offer of compromise, as Perpetual had no basis at all for assessing the strength of Mr Corbett's case, or to make a proper judgment in the interests of the beneficiaries of the estate concerning the risks of not accepting the offer of compromise.
The alternative basis for the defendants' claim for indemnity costs is a Calderbank offer made on behalf of the defendants on 7 April 2016. This offer pointed out that Perpetual had stated that it had obtained a valuation of the Maldon Property at $2.9 million. Mr Corbett offered to accept a payment of $800,000 in settlement of the cross claim. That would have had the result that Mr Corbett would have abandoned his claim for mesne profits as well. Mr Corbett offered that each party would pay its own costs of the proceedings.
Perpetual accepted that this was a genuine offer of compromise of the claim, as indeed it was.
However, Perpetual submitted that it was still reasonable for it to have declined to accept the offer.
The Calderbank offer was made after the defendants had served all of their evidence.
Nonetheless, Perpetual submitted that it was reasonable for it as a trustee not to have accepted the offer, not only because Mr Corbett's evidence that the deceased had made the alleged representations was not witnessed by any person, but also because Mr Corbett had made various statements and taken positions after the deceased died, which arguably were inconsistent with Mr Corbett believing that the representations had been made, and accordingly cast doubt on the credibility of his claims. I have dealt with that conduct in the principal judgment.
Perpetual also claimed that the fact that it is a trustee of an estate has some significance. It was not in a position safely to decide for itself to accept the compromise. It would have had to obtain judicial advice, which would have involved it in putting all of the evidence before a judge of the Court in order to obtain advice under s 63 Trustee Act 1925 (NSW) that Perpetual would be justified in entering into the compromise.
I have decided that it will be appropriate to order Perpetual to pay the defendants' costs on the indemnity basis from 8 April 2016, as I believe that the offer made on 7 April 2016 was an effective Calderbank offer.
While it is true that there were no direct witnesses to the deceased making the representations alleged by Mr Corbett, and Mr Corbett did engage in the alleged conduct after the death of the deceased that formed the basis of at least an argument that the Court should not find that the representations had been made, there was other objective and independent evidence that the Court ultimately accepted that supported Mr Corbett's claims.
First, Mr Corbett and the other defendants were allowed by the deceased to occupy the Maldon Property for many years as if Mr Corbett was the beneficial owner of the property. Secondly, there was evidence by independent persons, which is discussed in the primary judgment, of the deceased making statements that strongly supported a finding that he accepted that in reality Mr Corbett was the owner of the Maldon Property.
As the Calderbank offer was made after Perpetual had received all of the defendants' evidence, I have concluded that it was in the same position as all litigants and had to take the risk of not accepting a reasonable Calderbank offer.
While a trustee in the position of Perpetual may be in a more difficult position than a private litigant in respect of deciding to accept a Calderbank offer, that does not excuse it entirely from the consequences of failing to accept such an offer. Perpetual could have obtained advice from suitably qualified counsel as to the reasonableness of the proposed settlement, and an application for judicial advice could have been made on the basis of that advice and a statement of facts in the ordinary way.
Although borderline cases may be imagined where a litigant in the position of a trustee can more reasonably decline to accept an offer to compromise a case than a private litigant, I do not accept that the present case is near the border.
The parties were agreed as to how the defendants' cost should be paid, and in effect that Perpetual was entitled to be indemnified out of the estate.
However, Mr Corbett sought to add the following order:
9. The indemnity is not to extend to the 1/8th share of the estate otherwise available to be distributed to John Corbett.
Mr Corbett's position is that, as he is a 1/8th beneficiary in the deceased's estate, it will not be fair if his share of the estate has to bear any part of the indemnification of Perpetual in respect of its own costs or the costs that it has to pay the defendants.
That position was put by Mr Corbett on the basis of simple fairness, and he was unable to inform the court of any authority which in the present context supported the proposition that, after litigation between a trustee and a beneficiary in which the beneficiary succeeds, the order for the indemnification of the trustee as to costs out of the trust estate should be thrown on the beneficiaries other than the successful party.
In the absence of authority, I would not make the order sought by Mr Corbett. As the trustee, Perpetual was required to make its own decision as to whether it should institute the proceedings and defend the cross claim. It has done so, and Mr Corbett's proper acceptance that it is entitled to be indemnified out of the trust estate is consistent with his accepting that Perpetual has not acted in any way improperly in relation to the litigation. The Court does not know whether the beneficiaries entitled to the other 7/8ths of the estate supported the course taken by Perpetual. Some or all of them may or may not have done so. It is an unfortunate reality that the estate must bear the costs, but that is the outcome of many types of estate litigation where the estate must bear the trustee's costs.
In the circumstances I will make the following orders:
1. Declaration that the first cross claimant is entitled, subject to any relevant lease interests, to the full legal and beneficial interest in the land in Certificate of Title Folio Identifier 1/732582, being the property at 240 Picton Road, Maldon (the Land).
2. Order that the plaintiff, within 7 days, deliver to the first cross claimant duly executed Memorandum of Transfer in registrable form of the title to the Land, and Certificate of Title Folio Identifier 1/732582.
3. Order the cross defendant to pay to the first cross claimant the rent, less outgoings, received by it from the Land since 4 October 2012, and interest pursuant to s 100 Civil Procedure Act 2006 (NSW).
4. Direct the parties to confer in order to agree the amount that is payable to the first cross claimant under order 3 within 21 days, and failing agreement reserve liberty to the parties to apply further in relation to the quantum of the amount payable pursuant to Order 3.
5. Order the plaintiff/cross defendant to pay the defendants/cross claimants' costs of the statement of claim and cross claim on the ordinary basis until 7 April 2016 and on the indemnity basis from 8 April 2016.
6. Order that the plaintiff/cross defendant be indemnified out of the estate of the late Keith William Corbett for the costs payable pursuant to Order 5.
7. Order that the plaintiff/cross defendant's costs of the statement of claim and cross claim be paid out of the estate of the late Keith William Corbett on the indemnity basis.
[3]
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Decision last updated: 05 June 2018