New South Wales Supreme Court CITATION : MB v Protective Commissioner [2000] NSWSC 882 CURRENT JURISDICTION: Equity Division - Protective List FILE NUMBER(S) : SC 59/87; 72/94 HEARING DATE(S) : 23/08/00 JUDGMENT DATE : 4 September 2000 PARTIES : MB - Applicant Protective Commissioner - Respondent JUDGMENT OF : Hodgson CJinEq at 1 COUNSEL : Mr. A. Martin SC for applicant Mr. D. Officer QC with Mr. J. Sexton SC for respondent SOLICITORS : Mooney & Kennedy, Sydney for applicant Connery & Partners for respondent CATCHWORDS : COSTS - EVIDENCE - Without prejudice offer of settlement - No assertion of intention to rely on quesiton of costs - Admissible LEGISLATION CITED : Evidence Act 1995 s.131(2)(h) CASES CITED : AMEV Finance Ltd. v. Artes Studios Thoroughbreds Pty. Ltd (1988) 13 NSWLR 486 DECISION : See par.19 of judgment IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST CORAM: HODGSON, CJ in Eq. Monday 4th September 2000 NO. 59 OF 1987 MB V. THE PROTECTIVE COMMISSIONER JUDGMENT (On Costs) 1 I gave a judgment in this matter on 25th July 2000. I have now heard submissions as to costs. The Protective Commissioner seeks an order that the costs of both parties be paid out of P's estate; and M seeks an order that the Protective Commissioner pay all the costs of the proceedings. FURTHER EVIDENCE 2 Evidence was tendered on behalf of M of a settlement offer made by M, and of ensuing events. This was objected to by Mr. Officer QC, for the Protective Commissioner, on the ground that the offer was without prejudice, and no intention to tender the offer on the issue of costs had been stated in the offer. Prior to the passing of the Evidence Act 1995, I had expressed the view that, in those circumstances, without prejudice communications were not admissible: see AMEV Finance Limited v. Artes Studios Thoroughbreds Pty. Ltd. (1988) 13 NSWLR 486. However, in my opinion, s.131(2)(h) of the Evidence Act plainly makes a without prejudice communication of this kind admissible on the question of costs, even though the communication did not disclose an intention to tender the material on the question of costs. 3 The without prejudice offer was contained in a letter dated 18th August 1999 from M's solicitors to the Protective Commissioner's solicitors, which set out matters M intended to rely on in support of her application for the removal of the Protective Commissioner, and then continued as follows: In view of the possibility of further delay and erosion of the fund, our client makes the following offer to settle the matter. 1. That a private financial manager, agreed to by the parties, be approved and appointed by the Court. 2. That the sum of $250,000.00 remain invested in the Common Fund by the Office of the Protective Commissioner to provide for the ongoing needs of the protected person. 3. That the balance of the fund be paid into a personal superannuation account as an undeducted contribution and thereafter to be managed by the financial manager appointed by these Orders. 4. That the Officer of the Protective Commissioner waive all fees otherwise payable for a period of three (3) years and thereafter the fee be set by the Court. 5. That the financial manager report quarterly to the parties and the Court. 4 By letter dated 30th August 1999, the Protective Commissioner's solicitors sought a complete list of the alleged conduct of the Protective Commissioner to be relied on. 5 The matter came before me for mention on 8th October 1999. In a judgment I gave on that day, I commented on the significance of undertaking fully contested adversary proceedings. I stood the matter over for further mention on 22nd October 1999, so that M could make a decision whether she wished to pursue full adversary proceedings. I vacated hearing dates that had been set for 29th November to 1st December 1999, and tentatively fixed the matter for hearing in February 2000. 6 Ultimately, M put on a Statement of Claim pleading the allegations relied on against the Protective Commissioner, and the matter was heard in July 2000. 7 The Protective Commissioner did not at any stage respond to the settlement offer, and it was withdrawn on 12th October 1999. SUBMISSIONS 8 In those circumstances, Mr. Martin SC for M submitted that the Protective Commissioner should pay the costs of the proceedings, for two reasons: firstly, the Protective Commissioner had acted unreasonably in failing to recognise that the breakdown of his relationship with M meant that a new manager should be appointed; and secondly, the offer of settlement made on 19th August 1999 reflected the substance of what M obtained from the proceedings. Although a person in the position of a trustee is normally entitled to costs out of the fund, that is not the case where the trustee has acted unreasonably; and that was the situation here. See Pt.52A r.42(1) and (2)(a). 9 On the first point, Mr. Martin submitted that the breakdown in the relationship was evident from 1988 onwards. The Protective Commissioner should have recognised that there was this breakdown, and should not have maintained the position of opposing removal, thereby exposing the estate to further costs. Even though irretrievable breakdown was articulated as a ground for removal only on the first day of the hearing, the Protective Commissioner should have been aware of this, without the need for formal complaint, and should have been aware of what was in the interests of the estate. In any event, when this ground had been spelt out, the Protective Commissioner did not change his attitude, but continued vigorous opposition to the application, thereby putting the estate at further risk. 10 On the second matter, Mr. Martin submitted that the offer of 18th August 1999 was, in principle, the same as what was achieved. Details would have needed working out, but if the offer had been accepted, there is no reason to suppose that they could not have been worked out. Despite repeated requests, there was never any meaningful response. This was unreasonable, having regard to the breakdown of the relationship, the continuing costs being incurred, and the warning about the costs of adversary proceedings given in my judgment of 8th October. 11 At the very least, Mr. Martin submitted, the Protective Commissioner should have sought directions from the Court as to what to do, rather than strenuously opposing and defending the application, and causing the incurring of substantial costs. 12 Mr. Officer for the Protective Commissioner submitted that the allegations made in the letter offering settlement made it necessary for the Court to order the filing of a Statement of Claim: a number of these were filed, the last one on the first day of the hearing. In none of them was there put, as a ground of removal, the irretrievable breakdown of the relationship. The Statements of Claim were all based on unfitness because of breaches of trust and fiduciary duty, and in respect of those matters, M failed. The question therefore was, was the Protective Commissioner acting unreasonably in opposing an application framed as an application for removal for unfitness. Plainly, Mr. Officer submitted, he was not: the Protective Commissioner should not be required to guess at additional matters the applicant could have relied on. 13 Furthermore, it was not until late June 2000, despite numerous request, that the Protective Commissioner was advised that the proposed new trustee was the Perpetual Trustee Company, and later again that particulars concerning the terms on which it would act were supplied. 14 Turning to the offer, Mr. Officer submitted that the Protective Commissioner was entitled to be mindful of the fact that he was a statutory authority, charged with a statutory duty, in respect of whom it was suggested that he ought to be removed for unfitness. In those circumstances, before agreeing to removal, on terms amounting to an admission of misconduct, it was appropriate to seek particulars of the allegation before responding to the settlement offer. The offer was in fact withdrawn on 12th October 1999, before all the information had been provided. 15 Mr. Officer submitted that terms 2 and 4 of the Terms of Settlement, providing that the Protective Commissioner manage $250,000.00 for three years, without fees, would have amounted to an admission of misconduct. DECISION 16 As recorded in my previous judgment, there were in my opinion circumstances which made it reasonable for the Protective Commissioner to apply, in November 1994, for an order that P be cared for in a house to be leased by the Protective Commissioner: see pars.101 and 113 of my previous judgment. Thereafter, particularly when the relationship between M and T broke down, it was not in my opinion unreasonable for the Protective Commissioner not to take any initiative towards finding a replacement manager. 17 There is force in Mr. Officer's submissions that the offer of August 1999 did not significantly change the position. It did seek a concession from the Protective Commissioner that could have been taken as an admission of wrong-doing. It made no provision at all as to the identity of the substitute manager, or as to the terms on which the substitute manager was to act. It was made at a time when M was seeking to greatly widen the proceedings into adversary proceedings, making serious allegations against the Protective Commissioner, even though the date fixed for the hearing was only about three months away. There was no assurance that, if the Protective Commissioner did respond positively by suggesting that there should be an agreed change of manager, with no admission of liability by the Protective Commissioner, on terms to be worked out between M and the Protective Commissioner, that would have been fruitful. 18 On the other hand, having regard to the breakdown in the relationship, and the expense to P's estate that would be caused by adversary litigation, I believe the Protective Commissioner should at least have explored the possibility of settlement, in response to the letter of 18th August. It may be that that exploration would not have been fruitful; but there is some possibility that it would have been. 19 In those circumstances, I do not think the Protective Commissioner should be ordered to reimburse P's estate for M's costs, the payment of which out of the estate I have already authorised. However, I think it would be a fair reflection of the Protective Commissioner's failure to explore settlement that the order that the Protective Commissioner's costs be paid out of the estate, on an indemnity basis, be qualified to the extent that the Protective Commissioner not recover from the estate one-half of the costs incurred after 31st August 1999. I so order. ******* Last Modified: 09/27/2000 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.