Williams v Williams

The Pre-Trial Offers and the Evidence on the Motion

1. Timothy's Calderbank letter dated 3 August 2020 was sent by Giles Payne & Co, the solicitors for the defendant, to Webb and Boland, the solicitors for the plaintiff. The letter was also sent to the lawyers for Timothy's and Richard's sisters, Anne and Cate.
2. Timothy's 3 August 2020 offer was to the effect that Richard would receive a defined portion (identified by cross-hatching in an accompanying diagram) of the family grazing property "Oakstand", described in the offer as "Part Oakstand", which was then said by reason of unaccompanied valuation to be worth $1,150,000. Richard was to contribute $300,000 to a settlement with Anne and Cate of $450,000, Richard would pay the costs of the subdivision of Part Oakstand from Oakstand and the transfer of Part Oakstand, and Richard would pay his own legal costs up to that time. The offer referred to a recent mediation and was addressed to the solicitors for Richard and Anne and Cate as follows: As discussed with the legal representatives of the parties, our client makes the following offer in full and final settlement of all claims upon the Estate of the late Ioan Noel Williams (referring to the parties using their given names for ease of identification - no disrespect is intended): (1) Richard receives "Oakstand" as depicted in the hatched area on the map attached to the covenant dated 27 February 2012 (hereafter referred to as "Part "Oakstand""); (2) Richard to receive possession of Part "Oakstand" six (6) weeks from the date of acceptance of this offer; (3) Richard to be responsible for the subdivision and transfer, at his cost, of Part "Oakstand" subject to: a. Richard commencing the process of subdivision and transfer within six (6) weeks of the date of any deed or orders made finalising Richard's family provision claim; and b. The subdivision and transfer being completed no later than 12 months from the date of any deed or orders made finalising Richard's family provision claim. (4) Written direction from the Estate to allow the withdrawal of monies erroneously paid into the overdraft facility to the CBA secured over Cwmteg by Woolworths to be provided to Richard or as Richard directs within fourteen (14) days of acceptance of this offer; (5) Richard to cause Ronald Hunter (Sales) Pty Ltd to discharge the CBA mortgage and guarantee over Cwmteg within one (1) month of completion of the registration of transfer of Part "Oakstand"; (6) Tim to discharge the loans to the Rural Assistance Authority currently secured over the whole of the land comprising "Oakstand" within six (6) weeks of notification by Richard of the lodgment of the transfer of Part "Oakstand"· (7) Richard to pay the sum of $300,000 in total to Anne and Cate within 13 months of the date of any deed or orders made finalising Richard's family provision claim; (8) Tim to pay the sum of $450,000 in total to Anne and Cate within 13 months of the date of any deed or orders made finalising Richard's family provision claim.
3. The Giles Payne & Co letter then made comments about the desirability of Richard accepting the offer, including the following: "Northern NSW has been in drought for the past three (3) years making it difficult for Tim and Kerry to service any loan facilities they would be required to obtain to meet their obligations to Anne and Cate. Tim and Kerry have loans from the Rural Assistance Authority which will further impact their ability to raise funds for service alone".
4. The 3 August letter enclosed a valuation report of 9 July 2020 prepared by CA Brown & Associates in relation to part Oakstand stating that the current value of Part Oakstand with the existing clearing and cultivation was $1,150,000 and on the basis of the future clearing of 28 paddock trees and cultivation the value was $1,390,000. The letter provided the financial statements of Timothy's wife Kerry and the financial statements of the Cwmteg's Partnership. The letter expressed the difficulty that Timothy would have in financing his portion of any settlement payment to Anne and Cate, until the mortgage over Cwmteg was discharged, because Cwmteg remained in the name of the deceased and could not be transferred to Timothy as a beneficiary. The offer was left open for 28 days.
5. Timothy's argument on this application was that on 31 May 2022 the Court made orders providing the plaintiff with a legacy of $625,000 and an order for costs in the sum of $147,548, making a total of $772,548. He says that the outcome of the proceedings was considerably less favourable to Richard than the value of the offer that was made on 3 August and that he should now have an order for indemnity costs from the time the offer was rejected.
6. Richard's solicitors, Webb and Boland, replied rejecting the offer on 19 August and made a counteroffer as follows: Having said that, I am instructed to propose a counter-offer for your client's consideration. 1. That Richard Williams receives the "Oakstand" property. This offer is not limited to the hatched area, but is inclusive of the entire "Oakstand" property which, to the best of my client's understanding, is comprised of Lot 11 DP 750507, Lot 102 DP 1117730, Lot 103 DP 1117730, Lot 106 DP 1117730 and Lot 5 DP 750507. 2. That Richard Williams be granted access to the "Oakstand" property within seven (7) days of a mutually agreeable deed of release being signed for the purposes of fencing and survey. 3. That within six (6) months of the settlement of the property "Oakstand being transferred to Richard Williams, he will organise for the CBA Guarantees to be discharged in full and released. This offer is formulated on the basis that the value of "Oakstand", taking into account the recent valuation provided by the Estate, would be approximately $1.6 million and it is my client's considered view that the remaining Cwmteg property would have a valuation of not less than $6.6 million. l am instructed to keep this offer open for a period of thirty (30) days.
7. The counteroffer was not accepted, and the proceedings went to trial. The important structural feature of the 3 August 2020 offer was that it was an offer to transfer land, supported by a valuation of the land commissioned by the offeror when the whole region had been drought affected for many years. The counteroffer did not expressly or implicitly accept the value of the part of the land to be subdivided and transferred, Part Oakstand, but the counteroffer sought the whole of Oakstand.
8. As can be seen from the first judgment, Richard contended in submissions at the hearing for the transfer of the whole of Oakstand to him. But this was at a time when, as the first judgment shows, the drought had broken and both parties were more confident about the value of Oakstand than they were in August 2020.
9. The contest in relation to the 3 August 2020 offer is complicated by the fact that Richard and Timothy's sister, Cate, recalls at the time the 3 August 2020 letter was made she communicated to Richard that she would not be accepting the offer being made to her at the same time through the 3 August 2020 letter. But Cate and her sister Anne did ultimately settle their actions against the estate in July 2021 just before the hearing for a total sum of $700,000.
10. In the Court's first judgment the Court made observations on the financial evidence presented by both parties: first judgment, [124], [125] and [126]. The Court explained in these paragraphs its caution in assessing the financial evidence in a case which had been based mainly upon the experience of both Cwmteg and Rob Hunter Sales in years of drought, whereas by the time of the hearing the drought had broken and the Court did not wholly accept the economic and agricultural outlook advanced by either brother, because they each tended to put the worst face on their financial situations.
11. Richard did not agree with the valuation report of Part Oakstand that accompanied the 3 August 2020 letter. His view was that Part Oakstand which was the subject of the offer could not constitute a viable grazing operation and was not suitable for farming and that his analysis at the time was the property was worth approximately $630,000.
12. Richard also had doubts at the time of the 3 August 2020 offer was put to him whether he would be able to discharge the CBA guarantee in time to comply with the terms of the offer. In August 2021 the balance owing on the guarantee to the CBA was $881,880.94. Richard says that even if he accepted Mr Kelly's valuation of Oakstand at $1,150,000 he would then have to pay to Anne and Cate the sum of $300,000, leaving him with $850,000. Accepting that the cost of subdivision was approximately $25,000 and as that date he would incur legal fees of approximately $35,000. Once those expenses had been subtracted, he said that he would have insufficient funds to pay out the balance owing to CBA guarantee.
13. Richard also says that he was was conscious of the position taken by Anne and Cate that they would not accept the proposal outlined in the 3 August 2020 letter, which made it an even less attractive offer for him.
14. Timothy replied to Richard's evidence, indicating that Richard had not protested at the time about the correctness of Mr Kelly's valuation of Oakstand.

The Submissions and Consideration

1. The principles that apply to the assessment of Calderbank offers are well settled. A party seeking an order for indemnity costs based on a Calderbank offer must persuade the Court that the other party's refusal to accept the offer was unreasonable: Evans Shire Council v Richardson (No. 2) [2006] NSWCA 61 (at [20]). The considerations relevant to determining whether a refusal of a Calderbank is unreasonable were set out in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 ("Miwa").
2. In applications for family provision orders under the Succession Act, the Court has additional "liberality and discrimination" in considering whether to exercise the discretion to override the usual rule in the assessment of a Calderbank offer: Chapple v Wilcox [2014] NSWCA 392 at [138] - [139] and Salmon v Osmond [2015] NSWCA 42 at [174].
3. Timothy argues that it was unreasonable of Richard not to accept the offer because the offer was clearly more favourable to Richard than the result Richard would achieve in Court. He argues that under the offer then defined, Part Oakstand was valued as at August 2020 as $1,150,000, Richard would pay $25,000 for the cost of subdivision, Richard would cause the discharge of the CBA guarantee over Cwmteg, Richard would contribute $300,000 towards the settlement of Anne and Cate's claims and Richard would bear his own legal costs. According to Timothy, the value of the Calderbank offer to Richard was $825,000, (being $1.15 million minus $300,000, minus $25,000).
4. Timothy submits that as the Calderbank offer was inclusive of costs and Timothy's costs at that time were $35,000, the value of the Calderbank offer after legal costs was $790,000 ($825,000 minus $35,000) and the judgment that Richard obtained was only $625,000, a margin of $165,000. Richard submits that this margin is sufficiently substantial that the judgment Richard received was clearly less favourable than the terms of his Calderbank offer. Richard submits that the other conditions set out in Miwa for determining whether rejection of the Calderbank offer was reasonable were satisfied in this case.
5. It is not necessary for the Court to set out all the arguments Richard advances in answer to Timothy's submissions. It is sufficient to determine this issue based on one of Richard's arguments and another which developed in the course of argument in exchanges between the legal representatives and the Bench. The submissions put by Mr Kirby on behalf of Richard have been incorporated here in the Court's consideration.
6. The 3 August 2020 offer to Richard was interdependent with and conditional upon the offer to Cate and Anne. Richard cannot establish that Cate and Anne would have accepted the 3 August 2020 offer within the time provided for acceptance under the terms of the offer of 28 days. Timothy points out that Anne and Cate did settle their actions later. But their settlement was for more than the $450,000 that Timothy was contemplating in his 3 August 2020 offer. But the Court accepts that Cate was unwilling to settle for the sum offered within the offer period.
7. The structure and the wording of the 3 August offer imply that the offers to Anne and Cate and Timothy were interdependent with one another. The introductory words "our client makes the following offer in full and final settlement of all the claims on the estate" (emphasis added) implies that the offer is open to all parties to all proceedings and must be accepted by all parties to all proceedings to be effective. No mechanism for partial settlement is provided. Moreover, the settlement proposed between Richard and Timothy in the August letter requires Richard to fund $300,000 of an assumed $450,000 settlement with Cate and Anne. If the settlement with Cate and Anne did not take place, it is impossible to accept that Timothy would have been content for Richard to contribute only $300,000 towards his potentially open-ended liability to Anne and Cate, which might be greater than $450,000 and indeed turned out to be $700,000.
8. Moreover, it cannot be said that the outcome Richard achieved in the proceedings was less favourable than the 3 August 2020 letter. That is because the structure of the 3 August letter is quite different from the Court's orders in the first judgment. The orders in the first judgment give Richard a definite sum of money to enable him to approach a bank and refinance the payment out of the CBA mortgage. The Court's orders provide certainty to Richard: he does not have to make difficult judgments about the value of Part Oakstand, or take the risk that execution of the orders might fail if Oakstand turns out to be less valuable than he had assumed when he is seeking to refinance the CBA mortgage on the basis of it as security. The Court's orders are deliberately structured to avoid Richard having to grapple with that kind of risk.
9. In contrast, the 3 August letter places the risk of the valuation of Part Oakstand being incorrect upon Richard. If Richard had accepted the offer and the valuation turned out to be wrong, Richard would suffer the financial consequences of his misjudgment. It was not unreasonable for Richard to reject an offer which required him to take on a risk which was avoided for him in the Court's final judgment, which allocated to Timothy the risk of an incorrect valuation of Part Oakstand. The certainty Richard gained through the Court's first judgment was not available through the 3 August 2020 offer.
10. Timothy seeks to counter this argument, by contending that the valuation with the 3 August offer shows a significant margin over the Court's award and that refusing it was still unreasonable. But the Court cannot dismiss the doubts Richard had about the value of Part Oakstand at the time of the offer was made.
11. Timothy submits that Richard did not have doubts about the value of Part Oakstand as he did not express them in correspondence on his behalf in August 2020. Timothy further submits that Richard's lack of genuine misgivings about obtaining Part Oakstand is to be inferred from the fact he submitted in the proceedings it should be transferred to him.
12. But there are two answers to these arguments. First, in August 2020 this region had suffered severe drought since 2017. Although some rains had started to fall by mid-2020 both parties were corresponding in August 2020 on the basis that the drought was persisting. Apart from Richard's analysis of the agricultural deficiencies of Part Oakstand, which the Court accepts as genuine, it was objectively reasonable from the prevailing drought conditions for Richard to believe that any error in the valuation of Part Oakstand would be on the downside. Second, the drought had broken by mid-2021 and economic conditions in the region had improved. What Richard was prepared to submit at the hearing of the proceedings in August 2021 is therefore not a proper measure of the reasonableness of accepting a Calderbank offer in August 2020.
13. Other arguments were fielded on both sides of the debate as to whether the 3 August 2020 letter qualified as a Calderbank offer, but they were not decisive. For these reasons the Court will dismiss Timothy's motion with costs.

Conclusion and Orders

1. Accordingly, the Court makes the following orders and directions: 1. Dismiss the defendant's motion of 14 June 2022 ("the motion"). 2. Order the defendant to pay the plaintiff's costs of the motion on the ordinary basis. 3. Direct the plaintiff to provide within 7 days an affidavit setting out the plaintiff's costs of the motion. 4. Grant liberty to the parties if there is a dispute about the costs of the motion to approach the Court for the making of an order under Civil Procedure Act 2005, s 98 (4)(c), but the Court notes that before the Court is approached on such an issue, the Court expects the party approaching the Court to make a Calderbank offer as to a reasonable amount of costs, and to have endeavoured to settle the dispute in relation to costs. 5. Direct the plaintiff by Tuesday, 4 October to provide to the defendant the plaintiff's plan in conformity with Order 2 of the Court's orders made on 31 May 2022. 6. Direct the defendant by Tuesday, 18 October 2022 to respond to the plaintiff's plan.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 October 2022