Kavanagh v Londy [No 2][2022] QDC 259

Introduction

1. [1]
   On 25 July 2022, a claim by Michael Kavanagh to enforce part of an agreement he made with his second cousin, Mary Kavanagh, was dismissed.^[1] The part sought to be enforced was that whereby Mary agreed to bequest a property known as Emerald View to him. I found that no consideration was given for the agreement, and that it was voidable by reason of it having resulted from undue influence and unconscionable conduct by Michael.^[2]

2. [2]
   When judgment was delivered, I directed the parties prepare draft orders, but if they were unable to agree the orders, then to file and serve submissions as to the appropriate orders and costs. The parties have been unable to agree the appropriate orders and have filed submissions accordingly.  This judgment deals with the final orders to be made.

Orders Sought by defendants

3. [3]
   The executors and trustees for the estate of Mary and Mr Byrne submit that the following orders should be made:

   1. A declaration that the agreement is void;
   2. A declaration that Michael holds the Thagoona property on trust for the executors;
   3. The claim be dismissed;
   4. That Michael transfer the Thagoona property to the executors and trustees and pay equitable compensation of $50,000 to the trustees, or in the alternative pay equitable compensation of $250,000 to the executors;
   5. That the caveat over Emerald View be removed;
   6. That Michael account for the profits he received from the Thagoona property;
   7. That Michael pay interest on the sum of $50,000, or in the alternative on the sum of $250,000, and on the sum determined to be due following the account; and
   8. Michael pay costs of the proceedings on a standard basis until 5 April 2019 and thereafter on an indemnity basis.
4. [4]
   It is convenient to deal with each order in turn.

Declarations relating to the Agreement and the Claim

5. [5]
   In his written submissions, Michael agrees with the form of the declaratory order relating to the agreement; though in the draft orders provided, he says that the agreement should be declared avoided. The form of order sought in the counter-claim was that the agreement is void.
6. [6]
   The effect of the findings relating to consideration is that the agreement is void. The effect of the findings in equity is that the agreement is now regarded as validly rescinded, with the parties to be returned to the status quo.
7. [7]
   The appropriate order is that the agreement be declared void.
8. [8]
   There is no dispute that the appropriate order is that the claim should be dismissed.

Orders on the Counter-claim

9. [9]
   The substantive dispute relates to the counterclaim; which concerns two other parts of the agreement.  Apart from the bequest of Emerald View, the agreement provided that Mary was to pay to Michael the amount of $250,000 and that he would purchase from her a property at Thagoona for the sum of $200,000.
10. [10]
    The trustees of the estate submit that a declaration should be made that the plaintiff holds the Thagoona property on trust for the estate and that orders should be made for its transfer to the estate and an account as to the moneys owing between them.  In the alternative, they submit that an order should be made for payment of the sum of $250,000 plus interest.
11. [11]
    Michael submits that the appropriate order is simply that he pay the sum of $250,000 to the trustees.  In support of that submission, Michael says that whilst the purchase of the Thagoona property was referred to in the agreement, it was a separate transaction and there was no evidence, nor was it the case for the trustees, that the property was purchased at undervalue.
12. [12]
    The only evidence on the subject was from Michael.  Michael gave evidence that a valuation of the property had been obtained at the instigation of Mary, prior to entering into the agreement.
13. [13]
    Neither the contract for the purchase of the property, the transfer, a title search or documents showing payment for the property or any other settlement documents were put into evidence.  The only evidence as to the completion of the transfer was the oral evidence of Mr Pender, by reference to his diary note of the conversation, of Michael having called his office on 19 June 2012 and it having been confirmed that the transfer documents for the house had been signed and Michael requesting that the documents be forwarded to his solicitors.
14. [14]
    There is no reason, therefore, to consider that the transfer and payment of $200,000 did not occur and that the amount paid was not the proper amount.
15. [15]
    The agreement could therefore be declared void without detracting from the actual transfer of the Thagoona property.
16. [16]
    It is relevant in this respect that the counter-claim with respect to the Thagoona property was one made by the executors and Mr Byrne only as an alternative to the claim for the payment of the sum of $250,000.  The primary claim was for payment of that sum of money.
17. [17]
    There remains to be considered the position in equity.
18. [18]
    In reversing any transaction, a court of equity aims to achieve practical justice for both parties.^[3]
19. [19]
    If the sale of the Thagoona property were set aside, the estate would have to repay the sum of $200,000 to Michael, and Michael would have to pay the estate the sum of $250,000.  There would then seem to remain the issue as to what amount Michael actually paid for repairs to the house (if any), and there might be an issue as to whether that added to the value of the property.  Michael received income from tenants at the property, but presumably paid expenses as well.  An order for the payment of the money, rather than a transfer of the property, has the additional benefit to both parties, of simplicity with the additional savings as to time and cost which would accompany it, and the avoidance of an order for the taking of an account.
20. [20]
    In my view, the appropriate order is that Michael pay to the estate the sum of $250,000.

The Caveat

21. [21]
    Michael did not contest an order being made for the removal of the caveat.
22. [22]
    That relief was not sought in the counter-claim.
23. [23]
    It is not relief which is referred to in sections 68 and 69 of the District Courts Act 1976 (Qld); nor would it seem to be the kind of relief which the parties could consent to giving to the court under section 72 of that Act. The Land Titles Act 1994 (Qld) specifically gives power to the Supreme Court to grant that relief.^[4]
24. [24]
    I accordingly decline to make that order.

Interest

25. [25]
    On behalf of Michael, it is submitted that the court, as a matter of discretion, should make no orders for the payment of interest.  Although it is well recognised that orders for the payment of interest are discretionary, no authorities were relied upon for the submission that a sound exercise of the discretion would involve no order being made.
26. [26]
    The trustees do not make any submissions as to the interest rate or the period for which it should be ordered, nor offer any evidence on the subject.
27. [27]
    Courts will often apply the same rates used for default judgments; namely the Reserve Bank cash rate plus 4%.^[5]
28. [28]
    Awards are often made from the date the cause of action arose.  That date is often applied even though the claimant has delayed in taking action; principally because the payee has had the benefit of the money.  In this case, the moneys paid enabled Michael to purchase the property in June 2012 and receive rent from it.
29. [29]
    On the other hand, Michael may have paid expenses relating to the property and, the counterclaim by the estate was not made until 7 June 2019, nearly ten months after the proceedings were commenced by Michael and nearly thirty-four months after the death of Mary.
30. [30]
    Mary died on 14 September 2016. Her estate has been deprived of the money since that time. I will order that interest be payable from that date, calculated in accordance with the Practice Direction.

Costs

31. [31]
    The last order sought by the executors and Mr Byrne is costs.
32. [32]
    Ordinarily, given their success in defending the claim and succeeding on the counterclaim, the executors and Mr Byrne would be entitled to costs on a standard basis.
33. [33]
    In this case they rely on a formal offer made pursuant to the Uniform Procedure Rules 1999 (Qld) (UCPR) by them on 22 March 2019 to settle the proceedings on the basis that Michael discontinue his claim and that they pay their own costs. They enclosed a signed notice of discontinuance with the offer. They submit that it follows that they are entitled to standard costs until the expiry of the offer and indemnity costs thereafter. They also submit that they are entitled to indemnity costs anyway for the egregious conduct of Michael; relying upon Colgate-Palmolive Co v Cussons.^[6]
34. [34]
    On behalf of Michael, it was submitted that it was reasonable for him not to accept the offer given that it was made before the defence was amended and that the decision was based upon credibility findings that could not be foreseen.
35. [35]
    That submission is not accepted.
36. [36]
    The defence which applied at the time of the offer, the amended defence filed 26 March 2018, very clearly defended the claim for enforcement of the agreement as to the bequest on the basis that the February 2012 agreement was made without consideration and was therefore unenforceable and was made as a consequence of undue influence and unconscionable conduct and was therefore unenforceable.
37. [37]
    The decision was not solely based upon findings of credit, but also upon documents that were in existence at the time of the offer, including the affidavit of Mary and the notes of the solicitor, and the absence of any real basis for the view that Michael or his family had been wronged.  Michael should have been well aware of his propensity to be steadfast and persistent in his claims, and unreasonable in his presentation and that this might affect his credit.
38. [38]
    The offer was made prior to the counter-claim for the sum of $250,000, and it does not refer to one.  Nevertheless, if the offer had been accepted by Michael also signing the notice of discontinuance which was enclosed with the offer, the proceedings would have been brought to an end.  It might be said therefore that, especially taking into account that a costs order will follow the dismissal of the claim, Michael has failed to obtain an order no less favourable than the offer.
39. [39]
    It is important, however, to pay closer regard to the wording of the rule.  Rule 361 of the UCPR provides as follows:

“361 Costs if offer by defendant

1. (1)
   This rule applies if—

1. (a)
   the defendant makes an offer that is not accepted by the plaintiff and the plaintiff does not obtain an order that is more favourable to the plaintiff than the offer; and

1. (b)
   the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer.

1. (2)
   Unless a party shows another order for costs is appropriate in the circumstances, the court must—

1. (a)
   order the defendant to pay the plaintiff’s costs, calculated on the standard basis, up to and including the day of service of the offer; and

1. (b)
   order the plaintiff to pay the defendant’s costs, calculated on the standard basis, after the day of service of the offer.

1. (3)
   However, if the defendant’s offer is served on the first day or a later day of the trial or hearing of the proceeding then, unless the court otherwise orders—

1. (a)
   the plaintiff is entitled to costs on the standard basis to the opening of the court on the next day of the trial; and

1. (b)
   the defendant is entitled to the defendant’s costs incurred after the opening of the court on that day on the indemnity basis.

1. (4)
   If the defendant makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule.”

40. [40]
    In Emanuel Management v Fosters Brewing Group Limited,^[7] Chesterman J held that r 361 does not apply where the plaintiff has been wholly unsuccessful.^[8]  That decision has been followed subsequently.  At the time of the decision by Chesterman J, r 361 applied when the “the plaintiff does not obtain a judgment that is not more favourable to the plaintiff than the offer”.
41. [41]
    It may be that the change in wording (in two respects) means that the view that the rule does not apply in circumstances such as these does not apply with the same rigour.^[9]
42. [42]
    On the other hand, there remains the difficulty caused by sub-rule (2). It does not make sense to order the defendants to pay the plaintiff’s cost up to the date of the offer when the plaintiff has been wholly unsuccessful.
43. [43]
    That could be ameliorated by a decision that another order would be more appropriate, but it leaves extant the issue that arises in this case, namely that the rule does not allow for the award of indemnity costs whatever the eventuality.
44. [44]
    The offer was not expressed, in the alternative, as a Calderbank offer.^[10]  It did not even signify that it was made without prejudice save as to costs.  It did not contain any statement as to why Michael should accept it.  It did not signify that it would be relied upon if successful at trial for an application for indemnity costs. There is no basis for treating it as an effective substitute for the limitations in the UCPR.^[11]
45. [45]
    In Colgate-Palmolive, Sheppard J in dealing with an application for indemnity costs set out a number of relevant principles.  In the course of his judgment, he noted some of the instances where indemnity costs orders might be justified: making allegations of fraud knowing them to be false, the making of irrelevant allegations of fraud, evidence of particular misconduct that causes loss of time to the court and other parties, proceedings commenced or continued for some ulterior motive or in wilful disregard of the known facts or clearly established law, the making of groundless allegations which ought never to have been made, the undue prolongation of a case by groundless contentions or the imprudent refusal of an offer to compromise.
46. [46]
    These categories were only noted as a basis for an order for indemnity costs, but they illustrate the character of the conduct required for a special costs order.
47. [47]
    The submissions on behalf of the executors and Mr Byrne did not attempt to characterise the conduct of Michael’s case in any of the ways mentioned, and appeared to confine themselves to a submission that an order for indemnity costs was justified by reason of the unmeritorious claim made by Michael to Mary and his conduct in 2012.
48. [48]
    Although evidence of the historic grievances was given, they were repeated as a means of justifying the 2012 agreement, and to answer the allegations in the defence that there was no consideration for the agreement.  The evidence was not admitted as evidence of the facts, nor was any decision to be made as to their accuracy.  The proceedings themselves were based upon a signed written agreement.
49. [49]
    I do not consider that the conduct of the proceedings was such as to warrant indemnity costs; for any period.
50. [50]
    As such, the order remains an order for costs of the proceedings on the standard basis.
51. Stay
52. [51]
    On behalf of Michael, it was submitted that the orders for the payment of the sum of $250,000, the removal of the caveat and costs should be stayed pending the determination or discontinuance of the appeal against my judgment.
53. [52]
    It was submitted that if the caveat were removed, the trustees would sell Emerald View or transfer it to Mr Byrne, and that, due to the sentimental attachment to the land, that could not be cured by an award of damages.
54. [53]
    Ordinarily, a successful party to litigation is entitled to the fruits of its judgment.^[12]
55. [54]
    Applying the test for stays under r 761 and r 800 of the UCPR, the issue is whether it is “appropriate” to grant a stay in the circumstances of this case.^[13]
56. [55]
    In the case of an application based upon the fact that a judgment is the subject of an appeal, that would involve a consideration of whether there was a good arguable case, whether the applicant would be disadvantaged if a stay was not ordered and, whether there was some competing disadvantage to the respondent if the stay were granted which outweighs the disadvantage suffered by the applicant.^[14]
57. [56]
    No submissions were made in relation to the grounds of appeal, nor was the notice of appeal before me.  In any event, it is not an attractive proposition to be asked to adjudicate upon such matters.
58. [57]
    It is not suggested that Michael would suffer any prejudice if the order for the payment of $250,000, interests or costs were made.
59. [58]
    It is not suggested that there would be some competing disadvantage to the estate or Mr Byrne if the stay were ordered, but the only matter advanced in favour of a stay was, as I have said, Michael’s sentimental attachment to the property which is the subject of the caveat.
60. [59]
    It is difficult to see why such an assertion would justify the estate and Mr Byrne being refused their entitlement to the fruits of their victory; especially having regard to the way I have found Michael sought to obtain the property the subject of the caveat.
61. [60]
    Given that, I have not made an order for removal of the caveat, however, it is unnecessary to consider the matter further.
62. [61]
    The application for a stay of the orders is refused.

Orders

12. [62]
    Accordingly, the orders to be made are:

1. A declaration that the agreement is void.
2. The plaintiff’s claim is dismissed.
3. That the plaintiff pay compensation of $250,000 to the first defendant.
4. That the plaintiff pay interest on the sum of $250,000 from 14 September 2016 in the amount calculated in accordance with Practice Direction 6 of 2013.
5. That the plaintiff pay the defendants’ costs of the proceedings to be assessed or agreed.