Plaintiff v Defendant

Supreme Court of Victoria|2016-08-05|Before: McMillan J

CONTRACT - Where parties entered into deed of settlement in respect of foreshadowed claim for further provision from deceased estate pursuant to Pt IV of the Administration and Probate Act 1958 - Where will referred to some parcels of land in colloquial terms and other parcels of land by registered title - Where solicitor relied on inventory of assets prepared by probate clerk and wording of the will and did not undertake title searches - Where both parties to the deed mistaken as to the identification of the parcels of land - Whether mistake at common law or in equity - Whether rescission, rectification or setting aside the appropriate remedy - Where both parties submitted that deed should be set aside if a common mistake is found - Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 - Svanosio v McNamara ; - ; - - -

COSTS - Where solicitor for plaintiff subpoenaed to give evidence at trial - Where subpoenaed witness seeks costs of compliance with subpoena - Where costs claimed are below scale - Where plaintiff accepts witness entitled to costs of travel, accommodation and time out of office - Where subpoenaed witness sought legal representation so that the findings made in this case do not adversely affect him in any future litigation - ASADA v 34 Players and one Support Person [2015] VSC 14 - Pyramid Building Society v Farrow Finance Corp Ltd [1995] VicRp 30; [1995] 1 VR 464

1 The plaintiff seeks rectification of a settlement deed ('the deed') entered into with the defendant, who is his sister. Alternatively, he seeks an order setting aside the deed, or a permanent injunction restraining the defendant from enforcing the deed.

2 The plaintiff and the defendant are the adult children of Garth Rees, who died on 13 August 2012 ('the deceased'). They are both beneficiaries under the deceased's will made on 22 March 2012. At the date of his death, the deceased was the registered proprietor of certain parcels of land, which together made up the Rees farm property.

3 Probate of the deceased's will was granted to the plaintiff on 31 October 2013, with leave reserved to Courtney Jayde Dunn, the other executor named in the will, to come in and prove the will.

4 By his will, the deceased devised certain farm property, being Crown Allotments 14A, 15 and 29, to the defendant and devised the remaining farm property to the plaintiff, which included Crown Allotment 28. Within the Rees family, Crown Allotments 14A and 15 are known as Min's paddocks ('Min's paddocks') and Crown Allotment 29 is known as the Spotlighting Paddock ('the Spotlighting Paddock' or 'Allotment 29').

5 Allotment 28 is larger and more valuable than Allotment 29. In the inventory of assets filed with the application for a grant of probate of the deceased's will, Allotment 28 was valued at $439,903.75 and Allotment 29 was valued at $226,853.25.

6 The land devised to the plaintiff had a total value of $1,204,509.75. The land devised to the defendant had a total value of $784,769.25. There are debts attaching to the real estate that amount to $50,000 and, under clause 3.10 of the will, this amount is to be borne by the plaintiff.

7 The issues in dispute between the parties focus on Crown Allotments 28 and the Spotlighting Paddock. Allotment 28 is the land described in Certificate of Title Volume 5825 Folio 960, and comprises five paddocks in the north of the farm, each of which have different names, and fronts onto the highway. The Spotlighting Paddock is Lot 1 on Title Plan 106830E being the land described in Certificate of Title Volume 9673 Folio 371 and is located in the southwest corner of the farm next to Min's paddocks.

8 By letter dated 21 January 2014, the defendant claimed that the deceased had failed to make adequate provision for her proper maintenance and support and proposed a private mediation with the plaintiff to resolve her foreshadowed claim against the estate, pursuant to Part IV of the Administration and Probate Act 1958 ('the foreshadowed Part IV claim').

9 On 17 July 2014, the parties attended a mediation where they executed the deed by which they purported to compromise the defendant's foreshadowed Part IV claim. Pursuant to the deed, the plaintiff was to transfer certain real property to the defendant, including Allotment 28.

10 In this proceeding, the plaintiff contends that when executing the deed he was under the mistaken belief that:

(a) the will was in error in referring to Allotment 29;

(c) when referring to Allotment 29 the deceased had intended to refer to Allotment 28; and

(d) the deed accurately reflected the true intention of the deceased, namely, to devise Allotment 28 to the defendant.

11 In substance, the plaintiff thought Allotment 29 was Allotment 28, and that there was no such land as Allotment 29. According to the plaintiff, but for the mistaken belief, he would not have entered into the deed.

12 After executing the deed, the plaintiff discovered that Allotment 29 does in fact exist, and that it is the Spotlighting Paddock and, therefore, there was no error in the deceased's will.

13 The plaintiff submits that the deed was executed in circumstances where there was either a common mistake or a unilateral mistake on the part of the plaintiff. Either way, the deed should be rectified so that it refers to Allotment 29 instead of Allotment 28, or it should be set aside.

14 The defendant opposes the plaintiff's claim and wants to enforce the deed. She contends that from about 8 October 2012, the plaintiff's solicitors, Brown & Proudfoot, have had in their possession title searches that disclose the existence of Allotment 29 and their knowledge is to be imputed to the plaintiff. With that knowledge, the plaintiff could not be said to be operating under an alleged mistaken belief. Alternatively, the defendant contends that the plaintiff was not operating under a mistaken belief, because any such belief was without reasonable grounds as it arose out of the carelessness of the plaintiff's solicitors, acting within the scope of their authority.

15 The plaintiff and the defendant gave oral evidence. In addition, Mr John Brack of Brown & Proudfoot, solicitors for the estate, gave evidence in support of the plaintiff's case. Mr Brack also prepared the deceased's will, and had acted for the Rees family since the 1970s. Mr Andrew Byrne of BJT Legal gave evidence in support of the defendant's case.

16 The key clauses of the deceased's will are clauses 3.1 to 3.4 and 3.10, which provide:

3.1 I DEVISE Crown Allotment 18, Parish of Mockinya comprising 320 acres or thereabouts to my said wife ILKA JEAN REES but if she shall predecease me then for my said son SHANE CAMERON REES.

3.2 I DEVISE Crown Allotment 8, Parish of Mockinya to my Trustees UPON TRUST for my said wife ILKA JEAN REES for her lifetime and on or after her death for my said son SHANE CAMERON REES.

3.3 I DEVISE Crown Allotments 14A, 15 and 29, Parish of Mockinya comprising approximately 735 acres to my said daughter DEBRA LYNNE REES free of all encumbrances.

3.4 I DEVISE all my remaining farming real estate (subject to the direction contained in clause 3.10 hereof) to my said son SHANE CAMERON REES.

3.10 I DIRECT that my said son SHANE CAMERON REES, in consideration of the fact that he is receiving more land than his sister, bear all debts attaching to my real estate whether or not that is secured on the land received by him or the land received by my said daughter DEBRA LYNNE REES.

17 Significantly, the will does not refer specifically to Allotment 28. It refers to the Spotlighting Paddock as Allotment 29 in clause 3.3, but treats Allotment 28 as the 'remaining farming real estate' in clause 3.4.

18 The key parts of the deed are recitals E and F, clause 3.1, and clauses 1.1 and 1.2 of the schedule to deed, which provide as follows:

The [defendant] intends seeking an order making further provision for maintenance and support out of the estate of the deceased ("the dispute").
The parties wish to compromise the dispute for the sum and on the terms set out in the schedule.

3.1 The [plaintiff] agrees to perform, out of the estate of the deceased, and the [defendant] agrees to accept in full settlement, the matters set out in the schedule.

1.1 The parties acknowledge that a mis-description is contained in clause 3.3 of the deceased's last will and the parties agree that the clause, as amended, shall read as follows:

I devise Crown Allotments 14A, 15 and 28 Parish of Mockinya comprising approximately 735 acres to my said daughter Debra Lynne Rees free of all encumbrances.

1.2 The [plaintiff] agrees to execute a Transfer, Statutory Declarations and any other documents reasonably required in order to effect a transfer of the Crown Allotments referred to in Clause 3.3 and being the lands contained in Certificates of Title Volume 8681 Folio 910 and Volume 5825 Folio 960 to the [defendant] and do so at the estate's expense.

19 The plaintiff has worked on the family farm for most of his life and knows the property well. During his lifetime, the deceased expressed a desire that the northern part of the farm property pass to the plaintiff because it was a viable farming unit that the deceased did not want broken up. The deceased told the plaintiff that he was going to leave Min's paddocks and the Spotlighting Paddock to the defendant.

20 Mr Brack's evidence was that the deceased had said to him that he wanted 'that farm property at the north...10, 11, 13A and 28 to go to [the plaintiff] because it was a viable unit, and he didn't want to break it up'. Mr Brack said there was no reason for him to believe the deceased was confused about what land he was leaving to the defendant.

21 In the lead up to the mediation, the plaintiff learnt of the allotment numbers for the various paddocks that were usually described by the given names used within the family. Until that time, the plaintiff did not know of the allotment numbers. The plaintiff did not pay the rates, accounts or bills in respect of the properties and, prior to the mediation, he did not know that the Spotlighting Paddock was Allotment 29 or that Allotment 28 was the land up near the highway. He was 'just the worker on the farm and went to the appropriate paddock and did what [he] was told'. He said that if the will had referred to the paddocks by name he would have known 'exactly where they were'.

22 The defendant's evidence was that on numerous occasions in the latter years of the deceased's life, the defendant said to her that she was only receiving the Spotlighting Paddock. The plaintiff asked the deceased to show the defendant the paddocks that were to go to her and after that the defendant no longer said that she was only receiving the Spotlighting Paddock.

23 In cross examination, the plaintiff was asked about the time when the valuer, Mr Ower, attended the farm and the plaintiff showed him around the property. This was for the purpose of valuing the property for the probate application to be lodged. The plaintiff said Mr Ower may have had a parish map on his knee as they drove around the farm, however he did not recall Mr Ower showing him any maps or plans.

24 As the solicitors for the estate, Brown & Proudfoot prepared the probate application, with Mr Brack and his probate clerk preparing the inventory of assets and liabilities for this purpose.

25 Mr Brack could not remember seeing title searches for the estate's real property when preparing the inventory. He checked the probate application before it was lodged at the Probate Office and went through it with the plaintiff. Mr Brack did not specifically check each piece of land against each certificate of title and did not show any of the title searches to the plaintiff. This is consistent with the plaintiff's evidence that he did not recall ever having seen a title search or title plan for the Spotlighting Paddock.

26 With the exception of the Spotlighting Paddock, the inventory included the relevant Crown Allotment number for each parcel of land. Allotment 29, however, was referred to in the inventory as 'Land known as Downies Lane, Mockinya, Victoria, being Lot 1 on Title Plan 106830E, Parish of Mockinya being land described in Certificate of Title Volume 7652 Folio 150'. It is common ground that those volume and folio numbers in the inventory are incorrect, and that the true Certificate of Title is Volume 9673 Folio 371. So, the inventory did not refer to 'Allotment 29'.

27 There was, however, a title search on Mr Brack's file for Certificate of Title Volume 9673 Folio 371, which referred to Allotment 29. In cross examination Mr Brack conceded that before the inventory was filed at the probate office he had looked at the title search for Certificate of Title Volume 9673 Folio 371, and had probably read the words 'formerly known as part of Crown Allotment 29' that appear on it. He agreed that if he had read the title search he would have known that it was referring to the land that was Allotment 29. Counsel for the defendant then asked Mr Brack why, before lodging the probate application, he did not then amend the inventory to accord with what the true situation was. Mr Brack agreed in cross examination that when he read the title search he had not appreciated that it referred to Allotment 29.

28 In the lead up to the mediation on 17 July 2014, Brown & Proudfoot's probate clerk alerted Mr Brack to the fact that 'Allotment 29' did not appear in the inventory. The probate clerk approached Mr Brack with the file and put the will in front of him and said 'Crown Allotment 29 doesn't exist. Look at the probate inventory. It's not there. It must have been a typographical error'. Mr Brack checked the will and inventory, but not a map or the title searches, and could not find a reference to Allotment 29. His evidence was that he accepted the assurance of his probate clerk that the allotment did not exist and that it was possibly a typographical error. Mr Brack then telephoned BJT Legal and Morrow & McKenzie[1] to say 'Look, I think there's been an error in the will. The reference to 29 may in fact have been mistaken'. He had reached the conclusion that the reference to 29 should have been a reference to 28. Mr Brack said he reached that conclusion 'only because they were consecutive numbers and I can't assign any more reasonable explanation than that'.

29 In evidence, Mr Brack explained that if the will had said that the plaintiff was to receive Allotments 10, 11, 13A and 28 instead of saying 'remaining farming real estate', the mistake would never have occurred because he would have known that Allotments 28 and 29 both existed.

30 When it was put to him in cross examination that he had no basis for any belief at all that a typographical error had been made in cl 3.3 of the will, Mr Brack said he believed sincerely that he had a basis for that belief. He agreed that he should have checked the diagrams, but he said that 'the people at the mediation' should also have checked them.

31 Before the mediation, Mr Brack met with the plaintiff and explained that he must have made a typographical error in the will, because Allotment 29 did not exist. At that meeting, the plaintiff did not ask to see any of the titles to confirm what Mr Brack was telling him, nor did Mr Brack show the plaintiff any of the titles or the inventory of assets. When asked whether he asked to see any plan to 'look to see what in fact your sister might be getting if it was different to what the will said', the plaintiff said that Mr Brack had been on the farm numerous times and knew the land. The plaintiff continued, '[h]e knew what was going on, he'd spoken to dad, he wrote the will, he was in control, he knew'. The plaintiff did not do any sums to add up the amount of acres that the defendant was to receive under the deceased's will. Based on Mr Brack's explanation at the meeting, the plaintiff relied on what Mr Brack told him and understood that the Spotlighting Paddock, which had been left to the defendant, was Allotment 28 not Allotment 29.

32 On 10 July 2014 Mr Brack sent a letter to Mr Morrow referring to the defendant receiving 'Approx 735 acres comprising Crown Allotments 14A, 15 and 28 (note that CA 28 was described erroneously in the Will as CA 29)'. When sending that letter Mr Brack was under the impression that cl 3.3 of the will was intended as a devise to the defendant of 'only 735 acres which was colloquially known as the Spotlighting paddock and that the numbering was somehow wrong in the will'. Mr Brack identified three allotments on the parish map as the Spotlighting Paddock. Mr Brack in fact identified Min's paddocks and the Spotlighting Paddock, but he referred to them collectively as the Spotlighting Paddocks. He said Allotment 29 was 'part of that parcel of 735 acres'. The three allotments amount to 727 or 728 acres, but the deceased referred to them as being 735 acres.

33 Mr Brack's view of the meaning of cl 3.3 of the will did not change at any time before the deed was executed. He gave evidence that until 26 September 2014 he believed that under the deed the defendant was receiving the 'three Spotlighting paddocks' which constituted a viable block of land that the defendant 'could sell quite readily without affecting the integrity of the main farm block' that had been left to the plaintiff. He believed the correct description of Allotment 29 was, in fact, Allotment 28 and thought that under the deed the plaintiff was receiving the land to the north.

34 On 16 July 2014 Mr Morrow sent a letter to BJT Legal also referring to the defendant receiving 'Approx 735 acres comprising Crown Allotments 14A, 15 and 28 (note that CA 28 was described erroneously in the Will as CA 29)'.

35 Before the mediation occurred Mr Brack had advised the plaintiff that to reach a resolution he would likely have to offer the defendant more than what she was getting under the will. Mr Brack said that the plaintiff understood that.

36 The mediation took place on 17 July 2014. At the mediation, the plaintiff suggested the estate be divided in accordance with the position set out in the 16 July 2014 letter. The defendant accepted the proposal, subject to other matters not related to the real property of the estate. The parties did not consult a map of the family farm. The parties executed the deed on the same day, with the division of the real property reflecting that as described in the letter of 16 July 2014.

37 At the time of the mediation the plaintiff believed that the deed gave the defendant what the will gave her, being Min's paddocks and the Spotlighting Paddock. He thought that he would be receiving the whole of the rectangular part of the farm fronting the highway, including Allotment 28. The plaintiff's evidence was that he surprised by the result of the mediation as he attended it expecting a discussion about blocks of land or a sum of money, but all the defendant wanted was essentially a table. The plaintiff thought that under the deed the defendant was simply receiving what she was meant to receive under the will, plus a table and he assumed the defendant was happy just to have the table.

38 The mistake relied upon by the plaintiff in this proceeding was discovered on 26 September 2014. This was as a result of a real estate agent from Elders telephoning the plaintiff to ask how to get from one of the defendant's blocks to the other one. The plaintiff told him that the paddocks 'all join'. Later that day the agent met with the plaintiff at the farm when the agent showed a map to the plaintiff and pointed out the blocks that were going to the defendant. This appears to be the first time the parish map was consulted by anyone. The plaintiff then realised that a mistake had been made in that the deed provided for the defendant to receive Min's paddocks and the five paddocks in the north of the farm. It did not provide, as he thought it did, for the defendant to receive Min's paddocks and the Spotlighting Paddock.

39 The plaintiff then rang Mr Brack to inform him of the mistake. Mr Brack consulted his file and discovered that he had not, in fact, made a mistake in the will. He then telephoned BJT Legal and Morrow & McKenzie to inform them of this and sent a letter to BJT Legal dated 30 September 2014 confirming the mistake.

40 The plaintiff's evidence was that he would not have signed the deed had he known it was providing for the defendant to receive the five paddocks in the north of the farm (Allotment 28) and for him to receive the Spotlighting Paddock.

41 The plaintiff submitted that it is clear from the evidence that in executing the deed both parties believed they were agreeing to the transfer from the estate to the defendant of the Spotlighting Paddock and Min's paddocks. When it came to which blocks of land she understood she was to receive under the will and the deed, the defendant's answers were clear and consistent, and should be accepted. Accordingly, the defendant shared the mistaken belief, which was the plainly stated basis for the deed. The defendant never agreed or expected to receive Allotment 28. Even if she did not share the mistaken belief, she must have known that the plaintiff was mistaken as to the basis of the deed.

42 In response to the defendant's arguments on carelessness, the plaintiff admitted that the actions of his solicitors, Brown & Proudfoot, were careless, but not reckless. The plaintiff, correctly in my view, treated carelessness as going to relief, rather than to whether there was a mistake. The defendant's case, however, was that carelessness precluded a finding of mistake. The plaintiff submitted that recklessness may disentitle a party to equitable relief, but the carelessness in this case does not have that effect.

43 Many mistakes arise due to carelessness on the part of one or both parties to a contract. If carelessness were a reason for relief to be denied, then equity would be powerless to intervene in most cases of mistake. In Taylor v Johnson,[2] Mrs Johnson was careless, but that did not disentitle her to relief. The mere fact of having made a mistake may attract a degree of blameworthiness but that does not necessarily disentitle a person to relief. In Pacer v Westpac Banking Corporation,[3] Santow J said that 'fault' [as referred to by Denning LJ in Solle v Butcher[4]] does not include the carelessness of having been mistaken, there being almost inevitably that feature in many cases of mistake'.[5]

44 In respect of the defendant's reliance on McRae v Commonwealth Disposals Commission,[6] the plaintiff submitted that that case was concerned with recklessness, gross negligence and serious fault, as opposed to carelessness and is, therefore, distinguishable. Recklessness is where a person says or does something without any belief as to whether it is true or not and it could not be said that Mr Brack did not care whether his conclusion that cl 3.3 of the will had an error in it was correct or not. The plaintiff conceded that there was a high degree of carelessness in Mr Brack's conduct, but it was no more than careless. The plaintiff also submitted that the Court should not be troubled by the decision of Associated Japanese Bank[7] being another decision on, which the defendant relied as that case went well beyond McRae.

45 Further, the plaintiff submitted there was carelessness on both sides as if BJT Legal had conducted a title search to find out what had happened to Allotment 29, it would have discovered that it did in fact exist. BJT Legal would then have realised that its client's interest under the will was valued at $784,769 not $557,916.

46 The defendant agreed that there was no error in cl 3.3 of the deceased's will and that the deceased intended to devise the Spotlighting Paddock to her and Allotment 28 to the plaintiff.

47 The defendant's evidence was that the deceased said to her that she and the plaintiff were to have equal shares, but that over and above that 'equal share' the plaintiff was to receive the house, the woolshed, the machinery shed and all the equipment to run the farm. She was consistent in her evidence that based on the deceased's words, her understanding was that she and the plaintiff were to receive 'equal shares' under the will, aside from some additional property going to the plaintiff. The deceased told the defendant that she was to receive the Spotlighting Paddock and Min's paddocks. She could not recall the deceased ever contradicting his statement that she was to receive the Spotlighting Paddock and Min's paddocks.

48 Based on her reading of the will, the defendant believed that by cl 3.3 she was to receive Min's paddocks and the Spotlighting Paddock. She retained BJT Legal to act on her behalf in a proposed claim for further provision because she 'did not believe that [she] was compensated in the way that Dad had verbally said' to her. She said she was 'taking proceedings due to insufficient funds to how I was told the will was to be left'. The defendant was dissatisfied with the amount of money that she was told the Spotlighting Paddock and Min's paddocks were worth. She 'believed it was very unbalanced, it was very unfair in the financial sums'. At one point in her cross examination, the defendant said 'the amount of money has always been the question'. She was consistent in her evidence that she was concerned with the value of the land she was to receive, rather than the particular parcels of land.

49 Mr Andrew Byrne of BJT Legal gave evidence that he formed the view that the plaintiff had a good claim or a strong claim for further provision. Accordingly, BJT Legal wrote a letter to Brown & Proudfoot dated 21 January 2014 asserting that the defendant had a strong claim for further provision. When he formed this view, Mr Byrne thought the defendant was only receiving Allotments 14A and 15 under the will because the inventory listed Allotments 14A and 15, but did not mention Allotment 29. In cross examination, Mr Byrne said before writing the letter dated 21 January 2014, he relied on the inventory to assess the value of the bequests and devises to the defendant, did not take any steps to find out what had happened to Allotment 29, did not call the estate's solicitors to ask what had happened to Allotment 29 and did not carry out any title searches, but simply assumed it did not exist. Mr Byrne did not accept that he was careless in not taking any steps to follow up what had happened to Allotment 29.

50 Mr Byrne received a letter from Morrow & McKenzie dated 16 July 2014. In cross examination, Mr Byrne eventually agreed that the values in the letter came as a surprise. The letter had suggested that the defendant was going to receive more under the will than Mr Byrne had initially thought, based on the inventory. Despite the values in the letter coming as a surprise, Mr Byrne did not think that some mistake might have been made.

51 On 16 July 2014 the defendant met with Mr Byrne. Mr Byrne showed her the letter from Morrow & McKenzie and she read it. The defendant said that before that meeting she did not have any appreciation of the value of her inheritance. This evidence is difficult to reconcile with her earlier evidence that she retained BJT Legal and sought to take proceedings 'due to insufficient funds to how I was told the will was to be left'. When she read the 16 July 2014 letter she 'believed it to be true of what my dad had wished'. Mr Byrne had formed the view, based on the values set out in the letter, that the defendant did not have a good or strong claim for further provision.

52 The defendant and Mr Byrne both gave evidence that, at the mediation, there was no negotiation about land or money as those matters had been dealt with in the 16 July 2014 letter. As the defendant was only concerned about the monetary value of the land and was content with the amount set out in the 16 July 2014 letter, it is little surprise that there was no negotiation at the mediation about land or money. The location of the land was of no consequence to the defendant.

53 In cross examination, the defendant said that prior to the mediation she did not appreciate precisely which blocks corresponded to which crown allotment numbers. She said she had not been shown any maps. Further, the allotment numbers were not discussed or explained at the mediation. The defendant was asked to identify by name (not number) the blocks of land she thought she was receiving under the deed when she signed it. She replied 'The Spotlight Paddock and Aunty Min's block'. She agreed that she now understands that the Spotlighting Paddock is Allotment 29.

54 In re-examination, the defendant said she signed the deed because she thought it was fair and just and in accordance with what the deceased had said to her. She said there was no dispute at any time over the monetary value or the layout of the land, and that the monetary value was fair for both parties.

55 The defendant submitted that she was not interested in land and this case was not about which particular block of land someone gets: it was about the value of that land. The defendant was interested to know the value of her inheritance, as she planned to sell the land and then buy a home. She submitted that the Court should find that the defendant thought, based on the inventory and what was thought to be the land she was receiving under the will (there being no reference to Allotment 29 in the inventory), that she was only going to receive land valued at $557,916. Given that value 'did not even approximate to equality', she sought to make a claim for further provision.

56 At the mediation, based on the letter dated 16 July 2014, the defendant saw herself receiving land worth approximately $1.011 million and the plaintiff receiving land worth approximately $1.45 million. In her mind she was receiving land worth a certain value, rather than particular paddocks of land. She was driven by money and not the actual physical land itself.

57 The defendant submitted there was no common mistake and, in executing the deed, she was not mistaken. She did not accept that the plaintiff had made a mistake when the deed was executed.

58 The defendant argued that the Court should find that the plaintiff had not made a mistake at all when signing the deed because the plaintiff had imputed knowledge of what Mr Brack discovered in the course of his retainer, namely the contents of Certificate of Title Volume 9673 Folio 371. Mr Brack must have had imputed knowledge of the contents of that title search, and Mr Brack's knowledge is in turn imputed to the plaintiff because Mr Brack was the plaintiff's agent acting within his authority in preparing and filing the probate application. Consequently, the plaintiff could not be mistaken about cl 3.3 of the will being in error, as he is taken to have known that Allotment 29 existed. For this argument the defendant relied on the following passage from G E Dal Pont's Law of Agency:

Where the presumption [that the knowledge of (or notice to) an agent is imputed to the principal] operates, a principal cannot deny liability to a third party on the basis that the agent had not disclosed relevant and material information pertaining to the dealing with the third party, and that had that disclosure been made the principal would not have effected the dealing or at least would have done so on different terms...

Consistent with the foregoing, a client (principal) has imputed notice of what its solicitor (agent) discovers in the course of the retainer...[8]

59 Further argument put forward by the defendant as to why the plaintiff was not operating under a mistake when he signed the deed was that the alleged mistake arose out of carelessness on the part of the plaintiff's solicitor, precluding a finding of common mistake.

60 The defendant submitted that the plaintiff's mistake was the product of his solicitor's carelessness in preparing the inventory and in concluding in July 2014 that there was a mistake in the will. On this basis, the Court should find that the plaintiff was not operating under a mistaken belief. The defendant relied on McRae, Svanosio v McNamara,[9] Associated Japanese Bank and Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd.[10]

61 The events of the week leading up to 17 July 2014 demonstrate carelessness on the part of Mr Brack. He concluded that Allotment 29 did not exist and that the deceased must have meant Allotment 28 without crosschecking the prior wills, the certificates of title for Allotments 28 and 29 or any parish map or plan.

62 The defendant relied on Associated Japanese Bank to argue that a party cannot be allowed to rely on a common mistake where the mistake consists of a belief which is entertained by him or her without any reasonable grounds for such belief.

63 The defendant submitted that if it is found that there was no mistake, and therefore no relief is granted to the plaintiff and the defendant is able to enforce the deed, the plaintiff will not necessarily be left with an unviable farm. The plaintiff might refuse to transfer Allotment 28, and the defendant could claim damages for the breach. In other words, the deed provided for the defendant to receive land valued at approximately $1.011 million. If the plaintiff transfers land worth less than that to the defendant, she could claim damages for the difference in value. So, if the plaintiff only transfers to the defendant the Spotlighting Paddock and Min's paddocks, the defendant would have a claim in damages for approximately $200,000. The plaintiff could, therefore, avoid being left with an unviable farm by simply transferring Allotments 14A, 15 and 29, and paying the defendant approximately $200,000.

64 In my view, the plaintiff and the defendant were operating under two common mistakes when they executed the deed on 17 July 2014. The first was that the Spotlighting Paddock was Allotment 28 when, in fact, the Spotlighting Paddock was Allotment 29. The second was that Min's paddocks and the Spotlighting Paddock together were valued at approximately $1.011 million when, in fact, they were valued at $784,769.25.

65 It was common ground that the deceased, by his will, intended to devise the Spotlighting Paddock to the defendant, among other things, and Allotment 28 to the plaintiff, among other things.

66 The acreage referred to in the will, the deed and the correspondence between the parties is important. Clause 3.3 of the will contains the devise to the defendant of 'Allotments 14A, 15 and 29...comprising approximately 735 acres'. Those allotments in fact comprise approximately 728 acres, but the deceased referred to them as comprising 735 acres. In terms of the physical land, it was the Spotlighting Paddock and Min's paddocks that amounted to approximately 735 acres. Clause 1.1 of the schedule to the deed provides that as amended, cl 3.3 of the will shall read as a devise to the defendant of 'Allotments 14A, 15 and 28...comprising approximately 735 acres'. Given the will and the deed both refer to 735 acres, it is clear that both documents intend to refer to the same parcels of land.

67 In the relevant correspondence the parties also referred to 735 acres. The letter from Morrow & McKenzie to BJT Legal dated 16 July 2014 summarised the position of the parties under the will. It said the defendant was to receive 'Approx. 735 acres comprising Crown Allotments 14A, 15 and 28 (note that CA 28 was described erroneously in the Will as CA 29)'. That letter was based on the 10 July 2014 letter from Brown & Proudfoot to Morrow & McKenzie, which also referred to 'Approx. 735 acres comprising Crown Allotments 14A, 15 and 28 (note that CA 28 was described erroneously in the Will as CA 29)'.

68 From the will, the deed and the correspondence it is clear that the defendant was to receive approximately 735 acres. The land that (approximately) constitutes those 735 acres was the Spotlighting Paddock and Min's paddocks.

69 Min's paddocks combined with the five paddocks in the north of the farm, namely Allotment 28, amount to approximately 785 acres. None of the parties was under the impression that the will or the deed provided for the defendant to receive 785 acres. None of the parties was under the impression that the defendant was to receive Min's paddocks and the five paddocks in the north of the farm, namely Allotment 28.

70 The plaintiff and the defendant both gave evidence that when executing the deed they believed the defendant was receiving Min's paddocks and the Spotlighting Paddock. They also gave evidence that it was only in the lead up to the mediation and at the mediation that they began to consider allotment numbers, as opposed to the family names for the paddocks. They did not have any independent knowledge of which allotment number corresponded to which paddock. When executing the deed both parties understood that by providing for the plaintiff to transfer Allotments 14A, 15 and 28 to the defendant, the deed was providing for the defendant to receive Min's paddocks and the Spotlighting Paddock.

71 The defendant emphasised her concern with value and she tried to persuade the Court that this was a case about money, not land. It is true that the parties had different concerns at the mediation. The plaintiff's concern was that the defendant receive the three parcels of land devised to her under the will. The particular paddocks were important to him: the Spotlighting Paddock and Min's paddocks. The defendant's concern was the monetary value of the parcels of land she received, as she planned to sell them and buy a house with the sale proceeds. She wanted to receive land with a value approximately equal to the value of the plaintiff's inheritance. While it was not important to her which particular paddocks she received, she did have a belief at the mediation as to which paddocks she was meant to receive under the will and which paddocks she was receiving under the deed: the Spotlighting Paddock and Min's paddocks.

72 Clearly, the parties were motivated by different factors. Critically, both parties went into the mediation and signed the deed with a belief as to the identity of the parcels of land the defendant was to receive. Further, both parties believed that one of those parcels was properly described as Allotment 28. That belief was wrong, and the parties therefore shared a common mistake. That is, they made the same mistake. That is the first common mistake. Given that the mistake was common, the plaintiff's case on unilateral mistake falls away.

73 The second common mistake concerned the value of the land the parties thought the defendant would receive under the deed. It is clear from the letters dated 10 July 2014 and 16 July 2014 that when he executed the deed the plaintiff believed that Min's paddocks and the Spotlighting Paddock were valued at approximately $1.011 million. He did not give evidence to the contrary. It also clear from the defendant's evidence that she relied on the letter dated 16 July 2014 and that when she executed the deed she believed Min's paddocks and the Spotlighting Paddock were valued at approximately $1.011 million. That belief, shared by both parties, was wrong.

74 I do not accept the defendant's submissions that, due to imputed knowledge and carelessness, the Court should find there was no mistake. It is true that Brown & Proudfoot had a title search for the Spotlighting Paddock on file that, if read and understood, indicated that Allotment 29 did in fact exist. The search was for Certificate of Title Volume 09673 Folio 371. Under the heading 'Land Description' the search statement reads 'Lot 1 on Title Plan 106830E (formerly known as part of Crown Allotment 29 Parish of Mockinya)'. The search statement is dated 8 October 2012. This search statement does not, however, demonstrate that the plaintiff or his solicitors knew that Allotment 29 existed and that the Spotlighting Paddock was Allotment 29.

75 I accept Mr Brack's evidence that when the deed was executed he sincerely believed the correct description of Allotment 29 was in fact Allotment 28, and that the deed provided for the defendant to receive the Spotlighting Paddock, rather than the five paddocks in the north of the farm. It is not to the point that Mr Brack had a document on file that would have disabused him of that belief had he read it carefully. In cross examination, Mr Brack conceded that he would have read the title search at some point, but that does not change his sincere belief at the time the deed was executed. The passage from Law of Agency relied on by the defendant goes to imputing Mr Brack's knowledge to the plaintiff, but it does not establish Mr Brack's knowledge or understanding of the contents of his file.

76 Having failed to establish that Mr Brack knew of the true state of affairs when the deed was executed, the defendant also fails in her argument that the plaintiff must be imputed with Mr Brack's knowledge of the true state of affairs.

77 As to Mr Brack's carelessness, the defendant mainly relied on McRae. In McRae, Dixon and Fullagar JJ, with whom McTiernan J agreed, said that 'a party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground, and, on the other hand, deliberately induced by him in the mind of the other party'.[11] That is, the Commonwealth Disposals Commission may have had a real belief in the existence of the non-existent oil tanker, but if so, the Commission was guilty of the grossest negligence because there was no reasonable ground for such a belief.[12] The Commission had asserted the existence of the tanker recklessly and without any reasonable ground. The Commission took no steps to verify what it was asserting. The Commission could not rely on any mistake to avoid the contract because any mistake was induced by its own serious fault.[13] Therefore, the contract to sell the non-existent tanker stood.

78 In this case, there was a mistake in the inventory in that it referred to 'Lot 1 on Title Plan 106830E, Parish of Mockinya being land described in Certificate of Title Volume 7652 Folio 150' when it should have said Certificate of Title Volume 9673 Folio 371. It was not argued that that mistake caused or contributed to the critical mistake, which was to assume that Allotment 29 did not exist and that the Spotlighting Paddock was actually Allotment 28.

79 The critical mistake occurred because Mr Brack relied on his probate clerk and the inventory, and did not check the parish map or the title searches for the real property in the estate himself. Not checking the title searches or the parish map was careless and the plaintiff conceded as much. As for reliance on the probate clerk, there was no evidence as to how experienced the probate clerk was, so the Court cannot conclude that relying on her was unreasonable in the circumstances whereas relying on the inventory was reasonable.

80 Apart from the volume and folio numbers for Allotment 29, the inventory appears to be accurate. The inventory correctly refers to 'Lot 1 on Title Plan 106830E' in relation to Allotment 29. It refers to allotment numbers and to land described otherwise than by allotment number. In my view, it was reasonable to assume that where land had an allotment number, the inventory recorded that allotment number, and that where land did not have an allotment number, the inventory did not record an allotment number. Therefore, based on the inventory, it was reasonable to assume that Allotment 29 did not exist. Failing to confirm the assumption was careless. Nevertheless, it was a reasonable assumption. I also consider it reasonable for Mr Brack to assume that the reference in the will to Allotment 29 must have been a reference to Allotment 28, because they are consecutive numbers. Allotment 29 appeared in the will but not the inventory and Allotment 28 appeared in the inventory but not the will. These circumstances support the assumption that Allotments 29 and 28 are one and the same. Again, failing to confirm the assumption was careless, but the assumption was nonetheless reasonable.

81 That means the assumptions that led to the critical mistake were reasonable in the circumstances. They provided Mr Brack with reasonable grounds for concluding that Allotment 29 did not exist and that the Spotlighting Paddock was actually Allotment 28. Failing to confirm those reasonable assumptions was careless, but it was not reckless. Further, unlike in McRae, Mr Brack did take some steps to verify what his probate clerk told him as he consulted the will and the inventory. For these reasons McRae and Associated Japanese Bank may be distinguished from the circumstances of this case. The carelessness in this case is the type one would expect to see in a case of common mistake. It does not mean that there was no mistake.

82 Having found that the parties were operating under two common mistakes when they executed the deed, it needs to be considered whether those mistakes should result in the deed being rectified or set aside. It was only after the defendant gave her evidence that the plaintiff sought rectification on account of a common mistake. Until then, the plaintiff sought for the deed to be set aside on the basis of a unilateral mistake.

83 The plaintiff made submissions on common mistake at common law, common mistake at equity, and unilateral mistake at equity. In closing submissions, the plaintiff abandoned its case on common law common mistake. Given my findings on common mistake, the plaintiff's submissions on unilateral mistake need not be considered. This leaves the plaintiff's common mistake claim at equity to be considered.

84 The plaintiff submitted that this is a text book case for rectification, as the agreement provides for Whiteacre to be transferred whereas the parties had it in their minds that Blackacre would be transferred. Here, the deed should be rectified so that it refers to Allotment 29, instead of Allotment 28.

85 There is a discretion in equity to rectify an instrument that fails to record the true agreement reached by the parties. The remedy is most commonly available in cases of common mistake in the form of error in a written instrument recording the parties' agreement. The plaintiff relied on Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd,[14] where Phillips JA said:

...the principle upon which rectification depends always remains the same; it depends in every case upon a want of correspondence between the form of the document (that is, in the words actually used) and the common intention of the parties at the time when the document is executed. Where the disconformity is the product of a common mistake, that mistake may be as to what words have been employed in the document or the meaning or effect of such words as appear. But whatever the common mistake, the lack of correspondence must be between the form of the document and the common intention, if rectification is to be available. In Rose v Pim the parties were mistaken as to the effect of their words, but there was no disconformity between the words employed and what was held to be their common intention - and so rectification was not available. In Carlenka, there was a lack of correspondence between form and intention and so rectification was available. Of course, whatever the nature or source of the underlying mistake of the parties, the common intention of the parties at the time of the execution of the document remains a matter of fact, which accounts, I believe, for such variations as occur in result. The result in any given case will depend upon whether in the particular circumstances of that case there is (as a matter of fact) the requisite disconformity between the document as executed and the common intention of the parties. It is not enough that the parties have made a mistake about their document (whether the mistake be about the words used, their meaning or their effect); that mistake may serve to explain such disconformity (if any) as is seen to exist, but it cannot be a substitute for it.[15]

86 Here there is a stark disconformity between the description of the land in the deed and the common intention of the parties at the time when it was executed. The parties both intended that, as well as Min's paddocks, the Spotlighting Paddock would be transferred to the defendant. The deed, however, provides for Allotment 28, being the five paddocks in the north of the farm, to be transferred to the defendant, which is something that neither party contemplated at the time. The mistake in the wording of cl 1.2 of the schedule to the deed is a mistake as to 'the meaning or effect of such words as appear'.

87 The equitable remedy of rectifying or setting aside the instrument is discretionary. In this case, the Court's discretion ought be exercised to rectify or set aside the deed because if the deed stands both parties must pay stamp duty and the plaintiff will be left with an unviable farm, contrary to the deceased's wishes. If Allotment 28 were sold and the plaintiff were left with Allotment 29, the operation of the farm would be immensely affected.

88 The plaintiff then submitted that beyond the scope of instruments for which rectification is available, there is a general equitable jurisdiction to set aside contracts for common mistake. For this proposition the plaintiff relied on Taylor v Johnson,[16] Svanosio v McNamara,[17] Lukacs v Wood,[18] and several Supreme Court decisions. That jurisdiction is enlivened in this case because the mistake was fundamental to the deed. It meant that the plaintiff agreed to convey a piece of land, being the five paddocks in the north of the farm, that he did not intend to convey and that the defendant did not expect to receive. It also meant that the Spotlighting Paddock, which both parties intended should be transferred to the defendant, would end up being transferred to the plaintiff.

89 If the deed is set aside, the defendant will be free to pursue her claim for further provision against the estate. The plaintiff will not take a timing point against her by reason of the interval between the execution of the deed and judgment in this case. If, on the other hand, the deed is rectified, the release given by the defendant would be operative and she would not be able to reassert her claim for further provision.

90 The defendant submitted that if the Court finds that there was a common mistake, the deed should be set aside, rather than rectified. Given my findings on common mistake, the defendant's submissions on unilateral mistake need not be considered.

91 If the Court were to rectify the deed, given the terms of the deed, the defendant would effectively be foreclosed from pursuing her further provision claim. She would end up with land worth less than what she thought she was receiving under the deed. The defendant entered into the deed because it brought the parties closer to equality, with the defendant's entitlements valued at $1,011,819 and the plaintiff's entitlements at $1,431,172. The defendant submitted that these are discretionary reasons why rectification should be refused.

92 The defendant's fall-back position was that if there was a common mistake, then the Court should set aside the deed. Setting aside the deed is the appropriate remedy. That would put the parties back to the position they were in before the deed was executed. The defendant could then re-agitate her further provision claim, if she so desired.

93 In my view, rectification is not appropriate in this case. Rectifying the deed so that it refers to Allotment 29 instead of Allotment 28 would address the first common mistake, but would not address the second common mistake. It would result in the defendant receiving Min's paddocks and the Spotlighting Paddock, which is what both parties believed to be the effect of the deed. It would not, however, result in the defendant receiving land valued at approximately $1.011million, which is what both parties believed to be the effect of the deed.

94 It appears from the evidence of the defendant and Mr Byrne that the defendant agreed to settle her claim because she thought that the deed increased the value of her inheritance from $557,916 to approximately $1.011 million. The evidence is not clear whether the defendant thought that $557,916 represented the value of part or all of the land devised to her under the will, that is, it is not clear whether the defendant thought $557,916 was the value of Allotments 14A, 15 and 29, or of Allotments 14A and 15 only. Nothing turns on it. What is important is that when executing the deed, the defendant believed that the value of Min's paddocks and the Spotlighting Paddock was about $1.011 million.

95 If the deed were rectified as sought by the plaintiff, the defendant would receive the Spotlighting Paddock and Min's paddocks, which are valued at $784,769.25, and she would not be able to re-agitate her claim for further provision. It may be that if the defendant thought that the properties she was to receive under the deed had a total value of $784,769.25, she would not have executed the deed. Counsel for the plaintiff did not ask the defendant whether she would have executed the deed if she knew the true value of Min's paddocks and the Spotlighting Paddock. Had there been evidence to the effect that the defendant would have executed the deed on the same terms in the knowledge that the land was valued at $784,769.25, rectification would have been an appropriate remedy.

96 In the circumstances, it would not be fair to the defendant to rectify the deed in the manner submitted by the plaintiff. The defendant was motivated by value. The plaintiff was motivated by particular paddocks. The parties were mistaken as to both matters. Rectifying the deed to address the mistake in relation to the plaintiff's motivating factor, while not addressing the mistake in relation to the defendant's motivating factor, would not do justice to both parties in circumstances where both parties have made careless mistakes.

97 The only relief that could address both mistakes is setting the deed aside. If the deed is set aside, the division of the farm will be as provided for under the will. The defendant will receive Min's paddocks and the Spotlighting Paddock, and the plaintiff will receive Allotment 28. This addresses the plaintiff's concerns in this case. Another consequence of the deed being set aside is that the defendant may re-agitate her claim for further provision. This will address the defendant's concerns in this case. Before deciding to re-agitate her claim, however, the defendant needs to appreciate that the will provides for her to receive land valued at $784,769.25, not $557,916 that any claim is not based on equality as between beneficiaries, which seemed to be her motivation for the foreshadowed claim in this first place.

98 The plaintiff has abandoned his claim for common law rescission. He now relies on equitable rescission. There is a debate about the existence and extent of the jurisdiction at equity to set aside contracts on account of common mistake. That debate is seen in Australia Estates Pty Ltd v Cairns City Council,[19] HWG Holdings Pty Ltd v Fairlie Court Pty Ltd,[20] Hawcroft v Hawcroft General Trading Co Pty Ltd,[21] Menegazzo v Pricewaterhousecoopers,[22] Errichetti Nominees Pty Ltd v Paterson Group Architects Pty Ltd[23] and Manna v Manna.[24]

99 In my view, it is established that there is an equitable jurisdiction to set aside contracts entered into under a common mistake. In Svanosio v McNamara[25] Dixon CJ and Fullagar J said:

"Mistake" might, of course, afford a ground on which equity would refuse specific performance of a contract, and there may be cases of "mistake" in which it would be so inequitable that a party should be held to his contract that equity would set it aside. No rule can be laid down a priori as to such cases...But we would agree with Professor Shatwell that it is difficult to conceive any circumstances in which equity could properly give relief by setting aside the contract unless there has been fraud or misrepresentation or a condition can be found expressed or implied in the contract.[26]

100 The majority, McTiernan, Williams and Webb JJ, said of rescission:

It may be possible in exceptional cases to obtain relief on the ground of common mistake after a contract for the sale of land has been completed. But the cases must be very rare. They are unlikely to go beyond cases where there has been a total failure of consideration.[27]

101 The majority discussed the availability of rescission where a contract for the sale of land had already been completed. They recognised that it is available in exceptional circumstances. They did not explain when that relief might be available where the contract has not been completed.

102 In Taylor v Johnson[28] the majority, Mason ACJ, Murphy and Deane JJ, quoted the passage from the judgment of Dixon CJ and Fullagar J in Svanosio v McNamara referred to above. The majority appeared to agree with that passage if by 'fraud' Dixon CJ and Fullagar J were referring to 'fraud' in the wide equitable sense.[29]

103 While the circumstances under which rescission is available at equity for common mistake may not be clearly defined, there is High Court authority for the proposition that the remedy exists for common mistake. Several cases since Taylor v Johnson have proceeded on the basis that the remedy exists for common mistake.[30] To the extent that Australia Estates Pty Ltd v Cairns City Council[31] says otherwise, I decline to follow it.

104 Critically, the defendant did not argue that the conditions for the exercise of the equitable jurisdiction to set aside contracts entered into under a common mistake (whatever those conditions may be) are not satisfied. What the defendant did argue is that there was no mistake for two reasons: the plaintiff had imputed knowledge of the true state of affairs and any mistake was the product of Mr Brack's carelessness. Those two arguments have been rejected and I have found there was a common mistake. The defendant's case was then that if the Court concluded that there had been a common mistake, the appropriate remedy is to set aside the deed in equity and put the plaintiff and the defendant back in the position that they were in prior to its execution. In other words, the defendant submitted that if a common mistake is found, the Court should set aside the deed.

105 Based on what the parties have asked the Court to do, and my findings that there were two common mistakes and that rectification is not appropriate in this case, it is appropriate to set aside the deed.

106 As the deed will be set aside, it is unnecessary to deal with the plaintiff's submissions on the problems that would arise if the deed were enforced in its current state, including potentially being required to make a false statutory declaration.

107 Mr Brack gave his evidence as a result being served with a subpoena by the plaintiff to give evidence at the trial. Pursuant to r 42.11 of the Supreme Court (General Civil Procedure) Rules 2015, he sought orders that the plaintiff pay his costs of $14,852.91 in complying with the subpoena.

108 The plaintiff did not dispute that Mr Brack was entitled to his travel costs, accommodation costs and his time out of the office, totalling $4,490. However, the plaintiff did not accept that Mr Brack was entitled to legal fees incurred in preparation for trial and at trial which costs were particularised as follows:

(a) $3,712.91 incurred in preparation for trial. $2,372 of that sum was Lander & Rogers' legal fees incurred in reviewing the subpoena, discussions with Mr Brack and briefing counsel. The remaining $1,340.91 was counsel's fees;

(b) $3,131.82 incurred on the first day of trial. $450 of that sum was Lander & Rogers' legal fees, and the remaining $2,681.82 was counsel's fees;

(c) $1,640.91 incurred on the second day of trial. $300 of that sum was Lander & Rogers' legal fees, and the remaining $1,340.91 was counsel's fees; and

(d) $1,877.27, being counsel's fees incurred on the third day of trial.

109 The total amount in dispute is $10,362.91 ('the disputed costs'). If Mr Brack is entitled to the disputed costs, there is no issue as to awarding those costs on a standard basis or on an indemnity basis, as the fees of Lander & Rogers and counsel are below scale. That means that if Mr Brack is entitled to the disputed costs, he will be awarded the full amount.

42.11 Costs and expenses of compliance

(1) The Court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena.

(2) If an order is made under paragraph (1), the Court shall fix the amount or direct that it be fixed in accordance with the Court's usual procedure in relation to costs.

(3) An amount fixed under this Rule is separate from and in addition to -

(a) any conduct money paid to the addressee;

(b) any witness expenses payable to the addressee.

111 Mr Brack relied on the decision of Croft J in ASADA v 34 Players and one Support Person[32] and submitted that the principle is that a subpoenaed party is entitled to reasonably incurred costs and expenses, including legal fees. He also submitted that a factor to be considered when deciding whether a subpoenaed witness is entitled to his or her legal costs is whether the court derived any benefit from counsel's presence.

112 Counsel for Mr Brack submitted that there were two ways in which his presence at trial assisted the Court. First, Mr Brack's counsel sought and obtained clarity in relation to legal professional privilege which was one of the reasons Mr Brack needed representation and that issue was clarified as a result of counsel's attendance at trial.

113 Secondly, counsel made a complaint about the ambit of the questions not being relevant to the pleadings, which was effectively upheld. There was an allegation in the defendant's pleadings and in her opening submissions that Mr Brack had been negligent. As a result of the complaint, the defendant's pleadings were amended and the word 'negligence' was taken out of the pleadings.

114 The privilege issue and the ambit of cross examination were matters properly dealt with from the bar table rather than from the witness box. Counsel for Mr Brack submitted that the circumstances of this case are similar to those in Pyramid Building Society v Farrow Finance Corp Ltd[33] in that a subpoenaed witness 'has been foreshadowed in a future proceeding they might be sued, or in that case prosecuted'. It was appropriate for Mr Brack to have representation, as there was an apprehension that he would be asked questions that might go to that future proceeding.

115 The plaintiff submitted that the subpoena served on Mr Brack was a subpoena to give evidence, not a subpoena to produce documents and give evidence. Recipients of subpoenas to give evidence do not need advice. They only need to know that they have to turn up at the appointed time set out in the subpoena. That is especially so when the witness is a solicitor. Further, the plaintiff questioned the need for an instructing solicitor to be in Court at any stage of the trial.

116 As for the ASADA case, the plaintiff directed the Court's attention to the following passage of that decision, where Croft J quoted Byrne J in Pyramid Building Society v Farrow Finance Corp Ltd:

Nevertheless, there appears in the judgments an underlying resistance to the award of compensation for legal expenses except where the relationship between the party calling the witness and the witness is an adversarial one or it is otherwise just that an order be made...

...In the ordinary course, non-party witnesses would not require advice as to their general rights and responsibilities in answering the subpoena, or legal assistance in communicating with the solicitors for the party filing the subpoena as to the time, place and manner of attendance.[34]

117 There was not much evidence of an adversarial relationship while the plaintiff's counsel was examining Mr Brack. No objections were taken to any questions that the plaintiff's counsel asked Mr Brack. The plaintiff also submitted that this case is not sufficiently outside the 'ordinary course' for the disputed costs to be awarded.

118 Finally, the plaintiff submitted that Mr Brack or his advisers must have formed a view that there was a risk of counsel for the parties abusing the process of the Court by asking questions not related to the subject matter of the litigation. There was no warrant for that assumption, because the Court is alert to prevent parties from abusing its process.

119 Mr Brack has not provided the Court with details of when he briefed solicitors and counsel, and why he chose to do so. It is clear, however, that Mr Brack retained Lander & Rogers and counsel before the defendant circulated her opening submissions dated 6 May 2016. It was in those submissions that the issue of carelessness and negligence arose for the first time. Counsel for Mr Brack was briefed with the statement of claim and various other documents, but not the defence. He received the defendant's opening submissions, which contained submissions as to his 'carelessness' and 'negligence', on the night before the trial started. Mr Brack therefore briefed solicitors and counsel before he learned that the defendant alleged carelessness or negligence. Thus, the negligence issue was not the reason Mr Brack incurred the disputed costs.

120 It may be that Mr Brack's decision to retain solicitors and counsel rested solely on the privilege issue, which Mr Brack could himself have easily sorted out with the plaintiff ahead of trial. Alternatively, he may have obtained legal advice in order to consider whether to challenge the subpoena. On the first day of trial, counsel for Mr Brack foreshadowed a possible application under r 42.04 to set outside the subpoena in part, if Mr Brack were asked a question that was not sufficiently relevant to the issues in dispute or was covered by legal professional privilege. As I have said, the second matter could have been dealt with by Mr Brack himself before trial. Counsel for Mr Brack explained that Lander & Rogers and he advised Mr Brack on the proper ambit of the subpoena having regard to the statement of claim. It may be that Mr Brack briefed solicitors and counsel to advise him on the subject matter of the proceeding and to represent him in Court so that questioning could be limited to that subject matter.

121 In my view, incurring legal expenses in order to understand the subject matter of a proceeding and being represented in Court to ensure that questioning does not stray beyond that subject matter do not meet the test in r 42.11. If they did, every subpoenaed witness would be entitled to legal representation, at the issuing party's expense, to protect the witness from answering irrelevant questions. They would also be entitled to legal advice, at the issuing party's expense, concerning what the proceeding is about and what sorts of questions the witness might be asked. There must be something more in order for legal expenses to be characterised as a 'reasonable...expense incurred in complying with the subpoena'.

122 The Court has been left to speculate as to why Mr Brack retained solicitors and counsel to advise him and represent him at the trial. In these circumstances, it is difficult for the Court to be satisfied that the disputed costs were reasonable and incurred in complying with the subpoena.

123 As counsel for Mr Brack submitted, the assistance given to the Court by the witness' legal representative is a relevant factor to consider when deciding whether to award costs under r 42.11. This is supported by ASADA v 34 Players and one Support Person, where Croft J said:

...the proper question is, how are the provisions of r 42.11 to be applied having regard to the authorities to which reference has been made; authorities which indicate that where a person seeks to invoke the coercive powers of the court with respect to subpoenas, a person who seeks to resist that process or to comply with the process is entitled to have costs and expenses reimbursed so that they are not out of pocket as a result. As the authorities indicate, this is particularly so in circumstances where they have no interest in the relevant proceedings and, in any event, seek to assist the court with respect to the issue of or compliance with the subpoena.[35]

124 The presence of Mr Brack's counsel in Court of not of any assistance, despite the 'two complaints' he made on behalf of Mr Brack.

125 The first 'complaint' was made during examination in chief. Counsel for the plaintiff asked Mr Brack, '[a]nd you mentioned succession planning, what was the work that you did there [for the deceased]' and Mr Brack's counsel then said, 'I take it from that question that the plaintiff in his capacity as executor of the estate is waiving privilege of the deceased which is held by the estate'. Counsel for the plaintiff responded by saying, 'there's effectively been a general waiver of privilege on the part of the plaintiff in both capacities. The entire file has been discovered'. Counsel for Mr Brack said he was 'content with that'. No assistance was given to the Court in that exchange. It seemed obvious that privilege had been waived, given the holder of the privilege was the party asking Mr Brack the question. Further, Mr Brack could have confirmed himself, prior to trial, whether privilege had been waived. As a solicitor, he had the wherewithal to do so.

126 The second 'complaint' was the application under r 42.04 that counsel for Mr Brack had foreshadowed earlier. The application was made during cross examination, when counsel for the defendant asked Mr Brack if he would have obtained and read the deceased's original will after the deceased died. Counsel for Mr Brack applied to have the subpoena set aside in part insofar as it related to that line of questioning, because the questioning was not sufficiently relevant to the issues in dispute. The defendant's pleaded case was that the plaintiff received adequate legal advice. There was no allegation of negligence, carelessness, or anything else in the defence, and what the defendant appeared to be seeking to do, based on her opening submissions and that line of questioning, was to lead evidence that would establish that the plaintiff did not receive adequate legal advice. On the pleaded case, that line of questioning was irrelevant.

127 This issue arose because the defendant's defence did not mention negligence or carelessness. It was only in the defendant's opening submissions dated 6 May 2016 that the defendant's case on carelessness and negligence was revealed. The opening submissions stated that the plaintiff's allegedly mistaken belief 'was the product of negligence and carelessness in failing to check the relevant Certificates of Title', and also that 'his legal advisers at the time were negligent and careless in not properly checking the titles'. These submissions were linked to the submission based on McRae that the plaintiff had no reasonable ground for the alleged mistaken belief, and that the belief arose out of carelessness.

128 The subpoena was not set aside, in part or in full. Rather, the defendant was given the opportunity to amend her defence in line with her opening submissions. Until the pleading was amended the defendant was not allowed to pursue that line of questioning.

129 The defendant then prepared an amended defence dated 11 May 2016 for the second day of trial. The amended defence alleged that any mistaken belief on the plaintiff's part 'arose out of the negligence and/or carelessness of his agent', Mr Brack.

130 On the second day of trial, counsel for Mr Brack sought clarification of the word 'negligence' in the amended defence dated 16 May 2016. He asked whether it meant failure to take reasonable care in the colloquial sense, or the legal cause of action. The defendant's counsel then said that there is no cause of action in this proceeding alleging negligence against Mr Brack as a discrete cause of action. My view was that the particulars of the pleading reflected carelessness, rather than the legal cause of action 'negligence'. Counsel for the defendant then said that the passage he would be taking the Court to in McRae talks about carelessness or lack of reasonable grounds, and he agreed to take the word 'negligence' out of the pleading. The amended defence dated 16 May 2016 omitted the word negligence, but retained the word carelessness.

131 In my view, the defendant's argument on carelessness and/or negligence was clearly linked to the case of McRae, and in particular, that part of McRae that deals with mistake. In McRae, Dixon and Fullagar JJ said the Commonwealth Disposals Commission was 'guilty of the grossest negligence' in that it had no reasonable ground for its belief in the existence of an oil tanker. That characterisation of the Commission's actions was relevant to whether there was a contract, not whether the Commission had committed the tort of negligence. Dixon and Fullager JJ only considered McRae's cause of action in contract. They did not consider the claim in negligence. In fact, they mentioned the difficulties that the claim in negligence would have faced. This highlights that 'guilty of the grossest negligence' did not refer to the tort of negligence.

132 As the defendant argued her case, it became clear that she was asking the Court to find that the plaintiff had not made a mistake, because any such mistake was the product of carelessness, or even recklessness, as in McRae. She was not arguing that Mr Brack had committed the tort of negligence. The Court did not need the clarification sought by Mr Brack to understand the defendant's case. The only findings the Court needed to make to uphold the defendant's case were of carelessness, recklessness, or negligence in the sense those terms were used in McRae. In any event, the Court would not have made findings of negligence, in terms of the cause of action, against Mr Brack in circumstances where Mr Brack was not a party to these proceedings.

133 Accordingly, Mr Brack's clarification of the meaning of 'negligence' in the defendant's amended defence dated 11 May 2016 did not assist the Court. That clarification was for Mr Brack's own interests. Mr Brack's attempt to have the subpoena set aside in part and to narrow the ambit of questioning so that the findings made in this case do not adversely affect him in any future negligence action brought against him was also for his own interests.

134 A further reason that the disputed costs were not reasonable and incurred in complying with the subpoena is that, as submitted by the plaintiff, the relationship between the plaintiff and Mr Brack was not an adversarial one during Mr Brack's evidence. The plaintiff has not made a claim against Mr Brack in negligence and, during examination in chief and re-examination, the relationship between the plaintiff and Mr Brack did not appear to be adversarial. The relationship took on an adversarial character only after Mr Brack made his claim for the disputed costs.

135 Finally, I consider that Pyramid Building Society v Farrow Finance Corp Ltd may be distinguished as, in that case, when certain witnesses were called they made applications to the Court for permission to be represented. Byrne J permitted counsel to represent the witnesses to argue for privilege against self-incrimination, and those arguments were in fact made. Here, Mr Brack was not asserting his own privilege, as the witnesses were before Byrne J. The privilege in this case was held by the party who subpoenaed Mr Brack. Mr Brack did not need to argue that privilege as the witnesses before Byrne J did, he only needed to clarify the issue with the plaintiff ahead of trial.

136 Accordingly, Mr Brack is not entitled to the disputed costs as they are not a 'reasonable loss or expense incurred in complying with the subpoena' and his application is refused.

137 I will hear the parties as to the appropriate form of orders and as to costs.

[1] Mr Michael Morrow of Morrow & McKenzie attended the mediation as agent for Brown & Proudfoot. He represented the plaintiff at the mediation.

[3] (Unreported, Supreme Court of New South Wales, Santow J, 2 August 1996).

[4] [1950] 1 KB 671. In Solle v Butcher Denning LJ said, 'A contract is also liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault'.

[5] Pacer v Westpac Banking Corporation (Unreported, Supreme Court of New South Wales, 2 August 1996) 29-30.

[7] Associated Japanese Bank (International) Ltd v Credit du Nord SA [1988] 3 All ER 902 ('Associated Japanese Bank').

[8] (LexisNexis Butterworths, 2nd ed, 2008) [22.49]-[22.50]. There is a third edition of this text however the defendant relied on the second edition.

[19] [2005] QCA 328, [43]-[64].

[20] [2015] VSC 519, [46]-[56].

[22] [2016] QSC 94, [113]-[124].

[23] [2007] WASC 77, [50]-[69].

[24] [2008] ACTSC 10, [26]-[54].

[30] See eg, Hunter Valley Caravan Sales Pty Ltd v Vukatan Pty Ltd (1983) NSW ConvR 55-151; Pacer v Westpac Banking Corporation (Unreported, Supreme Court of New South Wales, Santow J, 2 August 1996); and Hawcroft v Hawcroft General Trading Co Pty Ltd [2016] NSWSC 555. See also Lukacs v Wood (1978) 19 SASR 520, which was decided after Svanosio v McNamara but before Taylor v Johnson.

[31] [2005] QCA 328 [64] (Atkinson J, with whom Jerrard JA agreed).

[34] [2015] VSC 14 [18]. (Citation omitted.)

Supreme Court (General Civil Procedure) Rules 2015

At a glance

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Before

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Judgment (184 paragraphs)

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Legislation Cited (2)

Cases Cited (6)