Nolan v Nolan (No 2)[2014] QSC 286

SUPREME COURT OF QUEENSLAND

1. On 29 August 2014 I delivered judgment for the plaintiff in Nolan v Nolan & Ors,^[1] finding that the parties carried on a common endeavour and accordingly a constructive trust could be imposed on the property, Kitcombe.

2. In those reasons I indicated that the parties were to provide submissions as to the form of the orders and costs in this matter by 5 September 2014. On 8 September 2014, the plaintiff provided its submissions and the defendants’ submissions were provided on 9 September 2014 with further submissions provided by the plaintiff on 15 September 2014.

3. In that decision I indicated that, taking a broad brush approach, I would value Donna’s share of the common endeavour at $405,000. I accept that there was an omission of $27,500 by not taking into account the value of the motor vehicle. I am satisfied, however, that pursuant to the slip rule that figure should be adjusted to take into account the value of the motor vehicle at $27,500 as final orders have not been pronounced. Accordingly, Donna’s share of the common endeavour is $432,500. Incorporating the deduction for Donna’s rent-free accommodation which is currently $69,300, which I will discuss at [9], Donna is entitled to $363,200, before interest or costs which I will now consider.

Interest

4. The defendants argue that if a sum of money is to be paid, it should not include any pre-judgment interest. The defendants submit that pursuant to r 150(1)(h) of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), the plaintiff was required to specifically claim interest (including the rate and method of calculation), which the plaintiff failed to do. Consequently, the defendants argue that the plaintiff cannot receive any pre-judgment interest. In my view the defendants’ submissions fail on two bases. First, I consider that the defendants are precluded from raising this issue now that the main proceedings have ended. The relief claimed in the statement of claim included, “Such further or alternative orders including equitable compensation as may be determined by the court in its discretion to give effect to the plaintiff’s rights as pleaded herein.” No objection was taken as to this form of pleading nor was there any objection to the claim for interest made by the plaintiff in closing submissions. No issue about interest was taken until after closing submissions and the defendants have had ample opportunity to raise this earlier in the proceedings. Second, as this is a case in equity there is no doubt that the court may make an award of interest even where it is not pleaded if it would be equitable to do so. Is it equitable to do so in the circumstances of this case?

5. The defendants also argue that it would be inequitable for the plaintiff to receive pre-judgment interest because the purpose of the court’s power to grant an award of interest is to “compensate a plaintiff for the loss or detriment that he or she has suffered by being kept out of his or her money during the relevant period.”^[2] Given that the plaintiff has not suffered any detriment from being kept out of her share of the Kitcombe property, the defendants argue that it would be inappropriate grant the plaintiff interest. I do not consider that this submission can be sustained given the plaintiff has been deprived of the use of that money for five years when she was clearly entitled to a quarter share of the common endeavour.  Even if the value has not changed the plaintiff has been precluded from using or investing that money for five years. There is no doubt she has been precluded from many options which a large cash settlement five years ago would have brought her.

6. The plaintiff, however, argues that interest should be allowed from June 2006 due to the approach which I adopted in assessing costs which was essentially based on the methodology the parties themselves adopted in 2006. It is clear that in coming to the figure at paragraph [106] of my Reasons in Nolan v Nolan I was adopting a broad brush approach which acknowledged the flexibility which is available in assessing the form of relief in cases of constructive trust where a subjective assessment ultimately had to be made. That figure was then ‘reality checked’ against the alternate methodology which had been suggested and I was satisfied that the figure arrived at was appropriate.  I am satisfied that the figure is now $432,500 with the adjustment for motor vehicles. As I indicated in my reasons at footnote [67] I was satisfied that the value of the joint endeavour as at December 2009 was approximately 1.7 million and that the value of the joint endeavour as at 2006 was also in that vicinity, i.e. in the order of $1.6 -1.7 million.

7. Given that similarity of values I was therefore content to apply the 2006 methodology to the 2009 values which I considered resulted in a figure in the order of $405,000 now adjusted to $432,500. Accordingly whilst the figure I arrived at adopted the 2006 methodology, I considered that, in reality, the 2009 result would not have been much different and therefore confirmed that the figure that the parties had roughly arrived at in 2006 was the appropriate 2009 figure. As previously indicated the formulation of relief in cases such as this is not able to be done in a precise mathematical way but I considered that the figure I arrived at reflected the considerations I had to take into account in achieving a fair result between the parties.

8. In terms of interest it is clear that interest was not specifically pleaded however such a claim can hardly take the defendants by surprise as it was specifically referred to in the plaintiff’s closing submissions in writing at paragraph [182] and [187]. Further, given this is a case in equity, there is exists an equitable right to interest, independently of any right governed by statute.^[3] In my view interest should be allowed from December 2009. 

Interest on the Rent-Free Accommodation Deduction:

9. The plaintiff submitted in its submissions on costs and orders that the pre-judgment interest on the rent-free accommodation should be discounted at 50% to reflect the fact that the benefit did not accrue on 14 December 2009 but accrued throughout the period from December 2009 until May 2014 when Donna moved out of Kitcombe. In my view the basis of such a submission has not been fully established and I accordingly reject the submission. The amount of $69,300 should be deducted from the figure of $432,500 which is $363,200.

10. I will deal now with the issue of costs.

Arguments as to Costs of the Proceedings

11. Pursuant to r 681 of the UCPR, costs normally follow the event. The plaintiff has succeeded in her claim for a constructive trust based upon a joint endeavour between the parties. The plaintiff seeks an order for these costs to be assessed on an indemnity basis whereas the defendants seek an order that the plaintiff pay the first defendant’s costs on a standard basis until 26 June 2014 and thereafter on an indemnity basis, and pay the second, third and fourth defendants’ costs on the standard basis.

12. The plaintiff has served three formal offers of settlement pursuant to Pt 5 of Ch 9 of the UCPR:

1. The first offer was served on 29 April 2010 and sought payment of $450,000 inclusive of interest, and the payment of the plaintiff’s costs on the standard basis.

2. The second offer was served on 4 October 2010 and sought payment of $495,000 comprising $396,000 in relation to the plaintiff’s claims, $29,110 for interest to the date of the offer, and $69,890 in relation to the plaintiff’s legal costs, which were estimated as her costs to date on the standard basis.

3. The third offer served on 11 December 2012 sought payment of $400,000 inclusive of interest, the payment of her costs on the standard basis and provisions for continuing her caveats until payment.

13. Each of these offers was in compliance with the UCPR and each offer was rejected by the defendants.

14. The plaintiff submits that r 360(1) of the UCPR applies given that she made offers that were not accepted by the defendants and has now obtained a judgment no less favourable than the offers made to the defendants. Although three offers were made r 360 is satisfied if at least one of the offers was no less favourable than the judgment. I am satisfied that the judgment obtained is no less favourable than at least one of the offers and possibly all three although a true comparison is difficult because the figures offered were made up of different components, given some included costs and interest and others did not.

15. Rule 360 provides that unless the defendants can show that that another order for costs is appropriate the Court must order that the defendant pay the plaintiff’s costs calculated on the indemnity basis. The onus is therefore clearly on the defendants to show that another order is appropriate.

16. The defendants argue that a reasonable offer to settle was made prior to serving the Claim and Statement of Claim which would have put the plaintiff in a better position than the judgment. Whilst no formal offer was made by the defendants it is argued however that this was “a Calderbank style offer” and that the plaintiff’s refusal to settle on the basis of the informal offer has caused years of stress and legal costs and not produced an outcome in which the plaintiff is in fact in a better position. The informal offer of 23 April 2010 is set out in an email from the accountant Brendan Vaughan to the plaintiff and is exhibited to the affidavit of Sean Russell sworn 8 September 2014. That offer was for a total of $420,000. That is therefore an ‘all up’ offer at a time when the plaintiff had expended $50,000 on legal costs.

17. A week after that informal offer was made by the defendants the plaintiff served a formal offer on the defendants on 29 April 2010 offering to settle for $450,000 inclusive of interest plus payment of costs on the standard basis. That formal offer was rejected. The second offer was then made some six months later in October 2010 and sought a figure in the order of $425,100 plus costs on the standard basis. Those figures of $450,000 and $425,100 which are inclusive of interest but exclusive of costs are clearly very close to the figure of $433,500 which I consider is the value of Donna’s share of the common endeavour before the deduction for rent. I also consider that the informal offer of $420,000 which was inclusive of costs and interest and made prior to the proceedings beings filed was a reasonable offer in all of the circumstances at that point in time. Given those factors I consider that each party should pay its own costs up until 11 December 2012.

18. In my view however the situation changed at the time of the third offer was made on 11 December 2012. That offer was made more than two and a half years after the first offer and two years after the second offer. I consider the letter of 11 December 2012 was critical because this was the point at which disclosure was complete and the defendants had had a good opportunity to realistically assess the merits of the plaintiff’s claim. In particular the defendants were notified of the plaintiff’s intention to rely on the 1998 letter from Mr Edgar which specifically referred to the second defendants instructions acknowledging the role that the plaintiff had played in the management of the farming enterprise. The letter also acquired particular significance in the trial due to Brian Nolan’s unsuccessful challenge to the veracity of the letter and because the defendants also attempted to suppress it. It cannot be ignored that a significant amount of time at the trial was taken up with issues of credit.

19. It is also clear that the December 2012 letter was a valid Calderbank offer and that the defendants were specifically notified in that letter that the letter would be relied upon in support of an order for costs of the proceeding to be assessed on an indemnity basis.

20. In my view 11 December 2012 is the date from which the defendants should pay indemnity costs.

21. Neither do I consider that there should be any apportionment of costs. There is no doubt that the plaintiff’s claim for a constructive trust on the basis of promissory estoppel was not successful but that a claim based on common endeavour was successful. I do not consider that less time would have been spent at trial if the argument based on promissory estoppel had not been argued. The factual issues which were explored at trial would have been the same. It was only the legal argument which was longer and in my view that did not involve a period of time which was significant enough to trigger an apportionment.

22. I also consider that the first defendant was a necessary defendant to the proceedings given that he was a part of the common endeavour between the parties. I also accept that in the Family Court proceedings the first defendant specifically raised the issue of Donna’s interest in the real properties and the farming enterprise. Those proceedings were held in abeyance pending the determination of the issue of a constructive trust in this court.

23. In my view the matters in dispute in this proceeding and in the Family Court would not have been effectively and completely adjudicated in the absence of the first defendant. It would seem to me that the doctrine of issue estoppel will arise in relation to the findings of this Court in relation to the farming enterprise and a constructive trust. Furthermore the first defendant did not take a neutral position in the proceedings but rather filed and served a defence denying the plaintiff’s claims.

24. I also note that the first defendant was given the opportunity to adopt a neutral position on 30 June 2014 by withdrawing his defence with no orders as to cost but that he declined to do so. In all the circumstances therefore I am satisfied that the first defendant was a person whose presence before the court was “desirable, just and convenient” pursuant to r 69(1)(b)(ii) of the UCPR. I can see no basis for the plaintiff to pay the first defendant’s costs of the proceeding.

Form of the Orders

25. In their submissions, the defendants submit that to ensure equity and fairness between the parties, it is imperative that the defendants be given an appropriate amount of time to sell the Kitcombe property. The defendants have requested that they be given a year to sell the property before the sum of money owing to the plaintiff becomes due and owing. The defendants based this time limit on the joint valuation expert’s opinion that his assessment of the market value of Kitcombe “assumes an effective marketing campaign of between six to twelve months which is considered the norm of rural holdings at present.”^[4] The defendants submit that if the plaintiff is immediately entitled to this sum, this will result in Kitcombe being sold at an undervalued price in a “fire sale” and that this position would not do equity between the parties.

26. I accept the force of this submission and consider that a period of 12 months should be allowed.

27. I shall assess the figure which represents the plaintiff’s share of the assets of the common endeavour therefore at $363,200. There should be interest on that sum from 14 December 2009 to the date of judgment.

28. I consider the Order should be in the following terms;

1. It be declared that the plaintiff has an equitable interest in:

1. Lot 1 on Crown Plan AG2956, County Aubigny, Parish Myall, Title Reference 14499224

2. Lot 3 on Registered Plan 98210, County Aubigny, Parish Jimbour, Title Reference 13840096

3. Lot 5 on Registered Plan 52015, County Aubigny, Parish Jimbour, Title Reference 16798056

4. One-half of the next value of the assets of the B&M Trust, and that the fourth defendant holds that property on trust for the plaintiff to the extent of her interest;

2. The second, third and fourth defendants pay the plaintiff the sum of $363,200 together with interest, calculated in accordance with Supreme Court Practice Direction 7 of 2013, from 14 December 2009 until the date of judgment.

3. If the second, third and fourth defendants have not paid to the plaintiff the amount referred to in paragraph (2) by 21 November 2015 the second, third and fourth defendants are to pay interest on that amount calculated in accordance with section 59 of the UCPR from the date of the Order until the date of payment.

4. The second, third and fourth defendants indemnify the plaintiff in respect of her liability under the Guarantee and Indemnity dated 29 May 007 in favour of the National Australia Bank Ltd.

5. The parties are to pay their own costs until 11 December 2012 and from that date the defendants pay the plaintiff’s costs on an indemnity basis including any reserved costs

6. Within 14 days of the date of the final orders, the plaintiff cause the following caveats to be removed:

1. Caveat No 713076635 lodged over Lot 1 on Crown Plan AG2956, County Aubigny, Parish Myall, Title Reference 14499224 on 23 February 2010.

2. Caveat No 713076635 lodged over Lot 3 on Registered Plan 98210, County Aubigny, Parish Jimbour, Title Reference 13840096 on 23 February 2010

3. Caveat No 713076635 lodged over Lot 5 on Registered Plan 52015, County Aubigny, Parish Jimbour, Title Reference 16798056 on 23 February 2010; and

4. Caveat No 714322633 lodged over Lot 6 on Registered Plan 853435, County of Aubigny, Parish Dalby, Title Reference 18551228 on 20 February 2012.

29. The parties are to prepare a minute of orders in accordance with these reasons by 28 November 2014.