Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker & Anor

COUNSEL: D E Grieve QC/C J Bevan/E Young (Appellants) L J Ellison SC/J Wilcher (Respondents)

Mallesons Stephen Jaques (Appellants) SOLICITORS: Tress Cox Lawyers (First Respondent) Public Trustee of New South Wales (Second Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT DATE OF DECISION: 25 July 2006 2 November 2006

LOWER COURT MEDIUM NEUTRAL CITATION: Reginald Alfred Becker v Public Trustee of New South Wales & 2 Ors [2006] NSWSC 743 Reginald Alfred Becker v Public Trustee of New South Wales & 2 Ors [2006] NSWSC 1146

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40538/06 ED 3332/03

MASON P IPP JA McCOLL JA

Friday 10 August 2007 Trustee for the Salvation Army (NSW) Property Trust & Anor v Reginald Alfred Becker & Anor (No 2) Judgment - On Costs 1 MASON P: I agree with Ipp JA. 2 IPP JA: On 15 June 2007, this Court delivered judgment dismissing the appellants' appeal and ordering them to pay the costs of the appeal: Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker & Anor [2007] NSWCA 136. When judgment was delivered, the first respondent sought to argue that the costs of the appeal should be paid on an indemnity basis. Directions were given in regard to the filing of written submissions concerning this issue and those submissions have been filed. These reasons relate to the indemnity costs question so raised. 3 The first respondent's application is based on two offers of compromise. The first was made on 28 June 2006 (at the end of the third day of the trial) and was intended to be a Calderbank offer. The second was made on 8 November 2006 and was intended to take effect as a formal offer of compromise under the Uniform Civil Procedure Rules 2005 (NSW). 4 I shall first deal with the argument based on the offer of 28 June 2006. This was in the following terms: "The Plaintiff/First Cross Defendant offers to compromise the whole of the proceedings by consenting to the making of the following Orders: 1. Probate in solemn form of the Will dated 21 February 2002 be granted to the Plaintiff/First Cross-defendant. 2. The costs of the Plaintiff/First Cross-defendant on the indemnity basis be paid out of the estate of the deceased. 3. The costs of the Second and Third Defendants/First and Second Cross-claimants agreed in the sum of $100,000 be paid out of the estate of the deceased. 4. Interest at UCPA rates to run on so much of the costs as ordered in paragraph 3 hereof, as remain unpaid more than 4 months after the making of the Orders herein. The offer is made in accordance with the principles of Calderbank v Calderbank [1975] 3 WLR 586. In the event the Plaintiff/First Cross-defendant obtains a grant of Probate of the 23 February 2002 Will an application will be made that the Second and Third Defendants/First and Second Cross-claimants pay the costs of the Plaintiff/First Cross-defendant of the proceedings. Further, an Order that the costs of the Plaintiff/First Cross-defendant be assessed on the indemnity basis will also be sought. This offer is open for acceptance up until 4pm on Friday 30 June 2006 after which time it will lapse." 5 The trial took place over nine days during February, June and July 2006. Judgment was delivered on 25 July 2006. On 2 November 2006, the trial judge (Nicholas J) delivered judgment in regard to costs: see Reginald Alfred Becker v Public Trustee of New South Wales & 2 ors [2006] NSWSC 1146. He ordered the appellants to pay the costs of the first respondent on the ordinary basis up to 4.00 pm on 30 June 2006 and thereafter on an indemnity basis. The order for indemnity costs for the period after 30 June 2006 was based on the making of the offer of 28 June 2006. 6 In relying on that offer, the first respondent draws attention to the rule that a Calderbank offer made prior to judgment at the trial remains relevant to costs orders on appeal: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404. 7 While continuing to remain so "relevant", such Calderbank offers do not give rise to a prima facie presumption in favour of indemnity costs if the offer is not bettered: Leichhardt Municipal Council v Green [2004] NSWCA 341. The matter remains one for the court's discretion (Jones v Bradley (No 2) [2003] NSWCA 258), the exercise of which depends on all the circumstances of the case: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37] per Giles JA). It is well established that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Jones v Bradley (No 2); SMEC Testing Services Pty Ltd v Campbelltown City Council; Leichhardt Municipal Council v Green; Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 (at [14] per Beazley JA); Russell v Edwards (No 2) [2006] NSWCA 52 (at [6] to [7]). 8 In Brymount, Beazley JA said (at [29]): "[G]iven that the compromise offers substantially pre-dated proceedings in this Court … coupled with the substantial judgment the respondent received in the District Court, the appellants should have advanced subsequent offers in the period between the trial and appeal if they wished to secure their claim for indemnity costs of the appeal."

The Court in Brymount did not order indemnity costs. 9 In my opinion, the same considerations as those that influenced the Court in Brymount apply in this case. Moreover, of particular significance is the fact that, according to its terms, the Calderbank offer of 28 June 2006 lapsed on 30 June 2006 and was not thereafter renewed. As the offer had so lapsed (prior to the conclusion of the trial), it was not possible for the appellants to accept it thereafter. In particular, it could not have been accepted on the launching of the appeal or thereafter. On that basis alone, it seems to me, the offer could play no part in the exercise of the discretion to order indemnity costs in regard to the appeal. 10 I turn now to the second offer of 8 November 2006. This was intended to be a formal offer of compromise made in accordance with Pt 20 Div 4 of the Uniform Civil Procedure Rules. By this offer the first respondent offered to compromise "the whole of the proceedings herein" by consenting to the following orders: "1. Appeal dismissed. 2. Confirm Orders made by Nicholas J on 25 July 2006 and 2 November 2006. 3. The costs of the appellants be paid out of the estate of the deceased on the part[y]/party basis. 4. The costs of the first respondent be paid out of the estate of the deceased on the indemnity basis." 11 The last paragraph of the offer stated: "In the event the Uniform Civil Procedure Rules are held not to be applicable to Offers of Compromise in Probate proceedings, this offer is to be treated as an offer on the same terms and conditions and made pursuant to the principles in Calderbank v Calderbank [1975] 3 WLR 586. In the event the appeal is dismissed an application will be made that the appellants pay the costs of the first respondent of the proceedings. Further, an order that the costs of the first respondent be assessed on the indemnity basis will also be sought." 12 The offer was made after the trial judge had delivered judgment, and was intended to relate specifically to the costs of the appeal. By its terms, it was open for acceptance until 11 December 2006, after which time it was expressed to lapse. 13 The appellants contend that this offer is "invalid" by reason of Pt 20 r 20.26(2) of the Uniform Civil Procedure Rules. Rule 20.26(2) provides: "An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs." 14 The first question that arises is whether the Uniform Civil Procedure Rules govern the making of offers of compromise in proceedings involving what the appellants have described as "probate proceedings", that is, proceedings in the Supreme Court concerning the administration of a deceased's person's estate. The proceedings in this case fell into this category. 15 Part 1 r 1.5 of the Uniform Civil Procedure Rules provides: "1.5 Application of these rules (1) Subject to subrule (2), these rules apply to each court referred to in Column 1 of Schedule 1 in relation to civil proceedings of a kind referred to in Column 2 of that Schedule. (2) In respect of each court referred to in Column 1 of Schedule 1, civil proceedings of a kind referred to in Column 2 of that Schedule are excluded from the operation of each provision of these rules referred to in Column 4 of that Schedule in respect of those proceedings." 16 By Sch 1, the Uniform Civil Procedure Rules apply to all civil proceedings in the Supreme Court and no provisions in either the Civil Procedure Act 2005 (NSW) or the Uniform Civil Procedure Rules are excluded (because Columns 3 and 4 in the Schedule, which contain excluded provisions, are blank). 17 Part 1 r 1.7 of the Uniform Civil Procedure Rules provides: "1.7 Local rules that prevail over these rules The rules of court specified in Schedule 2 prevail over these rules." 18 Schedule 2 provides, in turn, that all rules in Pt 78 of the Supreme Court Rules 1970 (NSW) prevail over the Uniform Civil Procedure Rules. That is to say, Pt 78 prevails notwithstanding any inconsistency with provisions contained in the Uniform Civil Procedure Rules. 19 Parts 20 and 42 of the Uniform Civil Procedure Rules govern offers of compromise. As mentioned, those Parts are not excluded from having operation in probate proceedings as they are not listed in Column 4 of Schedule 1. 20 Part 78 of the Supreme Court Rules contains rules governing the exercise of probate jurisdiction in the Supreme Court. By Pt 78, a number of provisions of the Uniform Civil Procedure Rules do not apply to probate proceedings. Parts 20 and 42 are not listed amongst those provisions of the Uniform Civil Procedure Rules that are excluded from application in probate proceedings. Indeed, offers of compromise are not even dealt with by Pt 78 of the Supreme Court Rules, thereby leaving one in no doubt that Pt 78 of the Supreme Court Rules cannot "prevail" (as that term is understood in Pt 1 r 1.7) over Pts 20 and 42 of the Uniform Civil Procedure Rules. 21 Accordingly, Pts 20 and 42 apply to probate proceedings. 22 Part 20 r 20.26(2) reflects the law as stated by Giles J (as his Honour then was) in Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349. In that case, the plaintiff offered to compromise the proceedings by paying the defendant $135,000 "inclusive of costs". Giles J, in adopting the approach of Rogers CJ Comm D in Thiess Contractors Pty Ltd v SCI Operations Pty Ltd (unreported, Supreme Court of New South Wales, 21 September 1990), said (at 350 to 351): "Part 52, r 17(1), provides that on the acceptance of an offer of compromise, the plaintiff may unless the court otherwise orders tax his costs in respect of the claim against the defendant up to and including the day the offer was accepted. It goes on to provide that if the costs are not paid within four days after the signing of a certificate of taxation the plaintiff may enter judgment against the defendant for the taxed costs. Those words are apt to bring about the result that if the plaintiff had accepted the defendant's offer by the offer of compromise of 29 November 1990 then unless the court otherwise ordered the plaintiff would be entitled to tax its costs. There is immediately a conflict with the fact that the offer was made for a sum inclusive of costs. Part 52, r 17(2) provides: '(2) If a notice of offer contains a term which purports to negative or limit the operation of subrule (1), that term shall be of no effect for any purpose under Part 22 or this rule.' If this subrule be given the effect which its words seem to require the difficulty would be resolved by treating the making of the offer as an offer inclusive of costs as of no effect, and it should be noted of no effect not only for the purpose of Pt 52, r 17(1), but for any purpose under Pt 52, r 17."

Giles J did not go on to consider whether the offer so made took effect as a Calderbank offer. 23 I would emphasise that an offer that did not comply with Pt 52 r 17 of the Supreme Court Rules was not invalid, it merely did not take effect under the Rules: Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (cf Schulte-Hordelhoff v Patons Brake Replacements Pty Ltd [1965] VR 369). 24 Applying the reasoning in Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd by analogy to Pt 20 r 20.26(2), no effect, in accordance with the Uniform Civil Procedure Rules, can be given to an offer of compromise expressed to be inclusive of the costs of the proceedings. The fact that an offer does not comply with Pt 20 r 20.26(2) does not render it invalid; it merely has no effect under the Uniform Civil Procedure Rules. 25 The offer of 8 November 2006 was inclusive of the costs of the proceedings. Accordingly, no effect can be given to it under the Uniform Civil Procedure Rules. 26 The next question that arises is whether the offer of 8 November 2006 takes effect as a Calderbank offer. 27 Calderbank offers are simply offers that do not comply with the relevant rules of court relating to the making of offers of compromise: Jones v Bradley (No 2) (at [5]). Whether an offer, intended to be an offer under the Uniform Civil Procedure Rules but which is ineffective because it does not comply with those Rules, operates as a Calderbank offer, depends upon the intention of the offeror as revealed by the terms of the offer. The offer may disclose an intention that it should take effect only if it complies with the Uniform Civil Procedure Rules. On the other hand, it may disclose a general intent to make an offer, irrespective of whether it takes effect under the Uniform Civil Procedure Rules or not. 28 The offer of compromise in this case provided that, if it was ineffective under the Uniform Civil Procedure Rules because different Rules applied in probate proceedings, the offer was to be treated as a Calderbank offer. As I have explained, the Uniform Civil Procedure Rules do apply to offers of compromise in probate proceedings, and the offer of compromise is ineffective under the Uniform Civil Procedure Rules as it does not comply with Pt 20 r 20.26(2). Nevertheless, in my opinion, the offer reflects an overriding intent that, irrespective of its application under the relevant Rules that might apply to it, it should take effect as a Calderbank offer. In my opinion, the offer of compromise was capable of being accepted by the appellant on the basis that it was an informal Calderbank offer and should be regarded as such an offer. 29 In my opinion, the offer of 8 November 2006 constituted a genuine compromise and it was unreasonably rejected by the appellants. The comments I made in [131] of [2007] NSWCA 136 in relation to the Calderbank offer made at trial apply equally to the case brought on appeal. 30 On that basis, I consider that the following costs orders should be made:

(a) The appellants pay the first respondent's costs of the appeal on a party/party basis up to and including 9 November 2006 and on an indemnity basis thereafter.

(b) To the extent that the first respondent's costs are not wholly reimbursed by order (a), the first respondent's costs on an indemnity basis be paid out of the estate of the deceased. 31 McCOLL JA: I agree with Ipp JA. **********

05/09/2007 - Para [30] (b) 1st line: "appellants" deleted and replaced with "first respondent's" - Paragraph(s) Para 30

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