Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Bovaird v Frost [2013] NSWCA 91 Hearing dates: 12 April 2013 Decision date: 24 April 2013 Before: Basten JA Decision: In each of matters 2009/298569, 2009/298580 and 2009/298581, order that: (1) The appeal be dismissed. (2) The appellants pay the respondents' costs in this Court. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: APPEAL - civil - whether appeal against quantum of damages should be dismissed - whether appeal would be an exercise in futility - where applicants awarded damages for breach of contract against estate - where estate bankrupt - where amount awarded exceeded remaining assets in the estate - where applicants had brought devastavit proceeding against executors of estate Legislation Cited: Family Provision Act 1982 (NSW) Cases Cited: Bovaird v The Trustee of the Bankrupt Estate of Maxwell Walter Allen Frost [2010] FCA 1159 Frost v Bovaird [2012] FCAFC 60 Category: Principal judgment Parties: In matter 2009/298569: Monica Catherine Bovaird (Applicant) Alan Maxwell Frost (First Respondent) Diana Catherine Fallon (Second Respondent) Max Donnelly as trustee of the bankrupt estate of the late Maxwell Walter Allen Frost (Third Respondent) In matter 2009/298580: Monica Catherine Bovaird (Applicant) Alan Maxwell Frost (First Respondent) Diana Catherine Fallon (Second Respondent) AFM Developments Pty Ltd (Third Respondent) Max Donnelly as trustee of the bankrupt estate of the late Maxwell Walter Allen Frost (Fourth Respondent) In matter 2009/298581: Leon Lewis MacGillivray Bovaird (Applicant) Alan Maxwell Frost (First Respondent) Diana Catherine Fallon (Second Respondent) AFM Developments Pty Ltd (Third Respondent) Max Donnelly as trustee of the bankrupt estate of the late Maxwell Walter Allen Frost (Fourth Respondent) Representation: Counsel: M Condon SC (Applicants) R J Carruthers (Respondents) J Dawson, Solicitor (Trustee in bankruptcy) Solicitors: Garland Hawthorn Brahe (Applicants) MBP Legal (Respondents) Carneys Lawyers (Trustee in bankruptcy) File Number(s): 2009/298569; 2009/298580; 2009/298581 Decision under appeal Jurisdiction: 9111 Citation: [2009] NSWSC 337; [2009] NSWSC 917 Date of Decision: 2009-04-30 00:00:00 Before: Brereton J File Number(s): 2004/2211; 2004/3159; 2006/1923 Judgment 1BASTEN JA: On 12 April 2013 the Court heard motions seeking to vacate the hearings in each of three related appeals, which had been listed together for hearing on 6 May 2013. The Court does not readily accede to such applications unless the proceedings have been settled or abandoned. In the present case, the appellants consented to the dismissal of some claims made in the appeals, but sought to have others remain on foot until after separate proceedings presently before the Equity Division are resolved. The respondents seek to have the appeals finalised at this stage, asking that each should be dismissed with costs. 2For reasons which will be explained below, the Court had no option but to vacate the hearing date, which it did. The Court reserved its judgment in respect of the disputed issues. The following further orders should now be made in each matter: (1) Dismiss the appeal. (2) Order that the appellants pay the respondents' costs of the proceedings in this Court. A family dispute 3The disputing parties are now limited to the families of a brother and sister each of whom is now deceased. Mr Maxwell Frost (the brother) died on 26 November 2002. His sister, Mrs Monica Bovaird died on 29 November 2011. The dispute concerns claims against the estate of Mr Maxwell Frost ("the testator"). Although they were estranged at the time of his death, the testator was married to Mrs Margaret Frost. They had three children, two of whom (Mr Alan Frost and Ms Diana Fallon) were appointed executors of the testator's will and obtained a grant of probate on 2 May 2003. The testator was also a director of a Frost family company, AFM Developments Pty Ltd. It was joined in two of the proceedings now under appeal, and is a respondent in the appeals in this Court. 4The sole beneficiary under the testator's will was the Australian Cancer Research Fund. At the time of the testator's death the estate appears to have been worth in the order of $2.4 million. However, there were a number of claims on the estate. Two claims were made under the Family Provision Act 1982 (NSW), one by the testator's estranged wife, Mrs Margaret Frost, and the other by his sister, Mrs Monica Bovaird. The executors apparently settled their mother's claim by payment of $270,000. Mrs Bovaird commenced a proceeding under the Family Provision Act in the Equity Division which was resolved by the judgment of Brereton J, the subject of the appeal: Bovaird v Frost [2009] NSWSC 337. Mrs Bovaird's claim was dismissed, but only because she was successful in other proceedings. (It should be noted that judgment below was delivered on 30 April 2009, before Mrs Bovaird's death. The proceedings in this Court are irregular to they extent they remain in her name.) 5The other proceeding brought by Mrs Bovaird involved a claim for damages for breach of contract, being a contract between her, the testator and AFM Developments, pursuant to which she agreed to move to a retirement unit on the basis that the testator (or AFM Developments) would pay for her aged care accommodation and ongoing expenses and would lend her son, Mr Leon Bovaird, the sum of $880,000 for the purpose of redeveloping her property at Cecil Street, Gordon: judgment at [1]. 6The trial judge upheld the contract claims by Leon and Monica Bovaird as against the estate, but dismissed those claims against AFM Developments. Although he upheld Leon Bovaird's claim against the estate, he found that Mr Bovaird was entitled only to nominal damages. The successful claims were Mrs Monica Bovaird's claim for damages for breach of the agreement to pay her aged care accommodation costs and for breach of the agreement to provide the loan. He therefore gave judgment in Mrs Monica Bovaird's contract proceedings against the executors, in their capacity as such, in an amount of $1.13 million. 7On 4 September 2009 Brereton J delivered a second judgment increasing the amount of the contract claim to $1.24 million (in round figures). The executors were ordered to pay the plaintiff's costs in each proceeding; the plaintiffs were ordered to pay the costs of the company in the contract claims. 8So far as the appeals are concerned, it is sufficient to summarise the main issues, adopting the approach accepted by all parties at the hearing. The issues were whether the trial judge erred in: (a) failing to award larger sums to the plaintiffs in each proceeding; (b) failing to award costs against the executors to be assessed on an indemnity basis; (c) failing to award costs against the executors personally, without recourse to the estate, and (d) failing to find AFM Developments liable in damages for breach of contract. 9The notices of motion filed by the appellants in the various proceedings on 5 and 12 April 2013 asked the Court to strike out the grounds of appeal relating to AFM Developments and the grounds relating to costs. The consequence was to leave extant only those grounds which challenged the dismissal of the claim under the Family Provision Act and the quantum of damages for breach of contract. The question in dispute is thus whether the Court should leave for determination at a future time the appeals with respect to the amounts of the monetary judgments. 10The orders made by Brereton J in these proceedings gave rise to liabilities which exceeded the remaining assets in the estate. The executors thereupon applied for the appointment of a trustee in bankruptcy, in respect of the administration of the estate, which order was duly made on 23 October 2009. The appeals against the orders made by Brereton J thereafter required leave from the Federal Court. Perram J granted that leave on 27 October 2010, but limited to those grounds of appeal which are now abandoned. With respect to the quantum appeal, he refused leave on the basis that, if successful, the appeal would merely increase the liability of the estate to its principal creditors, which would serve no useful purpose as the estate was already insolvent: Bovaird v The Trustee of the Bankrupt Estate of Maxwell Walter Allen Frost [2010] FCA 1159 at [9]. 11There was an appeal and cross-appeal taken to the Full Court of the Federal Court. For present purposes the only relevant challenge was that in the cross-appeal brought by Mr Bovaird on his own behalf and on behalf of the estate of Mrs Bovaird, against the refusal of the primary judge to grant leave to proceed in respect of the quantum claim. The challenge was rejected: Frost v Bovaird [2012] FCAFC 60 at [105]. The Court (Jacobson, Siopis and Nicholas JJ) gave succinct reasons for that conclusion at [104]: "... In our view, the primary judge made no error in refusing leave to proceed on the grounds that increasing the size of the judgment debt was a futile exercise because the amount of the debt substantially exceeded the amount available to the Bovairds as creditors in the bankrupt estate. The Bovairds contended that the primary judge did not have regard to the fact that the Bovairds had commenced the devastavit proceeding and that there was a prospect that the amount available to creditors from the estate may increase by the successful pursuit of that proceeding. However, the Bovairds were unable to demonstrate that, even if the devastavit proceeding was successful, the amount in the estate then available to the creditors would exceed the amount owed to the Bovairds. A further consideration militating against the grant of leave to appeal on the quantum of damages is that additional costs would be occasioned by an expansion of the scope of the appeal for no demonstrable benefit." 12Subject to one point requiring further consideration, that conclusion would warrant the appeals being dismissed. However, before reaching that conclusion it is necessary to identify the relevance of the devastavit proceeding. That proceeding involved a claim that the executors had wasted the estate by improper expenditure of available funds. The appellants claimed that the executors should make good the estate for the amounts improperly disbursed. The amounts sought to be recovered were identified in the appellants' solicitor's affidavit of 10 April 2013 (at paragraph 28) in the following terms: (a) paying to Margaret Frost in settlement of a Family Provision Act claim an amount of approximately $270,000; (b) payment to other creditors of $110,000; (c) incurring withholding tax of $20,500; (d) paying legal expenses of proceedings in the Guardianship Tribunal seeking to remove Leon Bovaird as his mother's guardian, being not less than $100,000, and (e) funding the costs of AFM Developments in defending the proceedings brought by the Bovairds. 13The last amount was unquantified and, to the extent it involved party and party costs, may be disregarded: the appeal with respect to the rejection of the contract claims against AFM Developments having been abandoned, the appellants remain liable for the costs of AFM Developments, pursuant to the orders of Brereton J. The estimate of the amount recoverable was $250,000, which seems an unlikely figure, if it be the difference between party and party costs and solicitor and client costs. Especially is that so if, as appears from the judgments of Brereton J, AFM Developments was not separately represented in those proceedings, which ran for five days. 14The appellants' solicitor then sought to add to the sums identified as wasted an amount of $325,000 on account of interest forgone on those amounts, some of which had been paid out in 2004. Accepting that an interest allowance was appropriate, the purpose of the estimation was to compare the claims in the devastavit proceedings against the alleged deficiency in the estate as at the date it was placed into bankruptcy. However, if the estate has not paid the amounts ordered by Brereton J, interest will also be running on those amounts, presumably at a similar rate. If one removes the AFM Development costs from the equation and puts the question of interest to one side, the recovery in the devastavit proceedings, if entirely successful, would be in the order of $500,000. That figure is less than the deficiency identified in May 2009. There would, as the Federal Court noted, be additional legal expenses incurred by the estate subsequent to May 2009. 15The solicitor for the appellants claimed in his affidavit that he had instructions to "amend the devastavit proceedings" to allege that, but for the acts of devastavit, the estate would not have been insolvent and accordingly the costs of the bankruptcy would not have been incurred. No estimate of those costs was provided, but it is apparent from the judgment of Perram J that the appellants would be required to return to the Federal Court to obtain leave in order to make a further claim in the devastavit proceedings. The proposed amendment, coming as late in the day as it does, and in the context of claims as to whether or not success in those proceedings would render the estate solvent, cannot be given much weight. Nor is there any attempt to allow for the possibility that the devastavit proceedings will be less than wholly successful. 16The inevitable conclusion is that nothing has been put before this Court to raise a doubt as to the conclusion of the Full Court of the Federal Court that the quantum appeal would be an exercise in futility. Acceptance of that assessment should lead to the appeal being dismissed. 17There is a further consideration. As the respondents pointed out, the appellants filed notices of motion on 4 July 2012 in this Court seeking to have the appeals stayed pending determination of the devastavit proceedings in the Equity Division. Those motions were abandoned and the appeals were provisionally listed for hearing on 22 March 2013. Thereafter, no steps appear to have been taken to prepare the matters for hearing on the date fixed in May. The appellants' affidavit makes no attempt to explain the desultory approach of the appellants to the proceedings in this Court. The interests of the respondents not to be further vexed by what must now be seen as speculative claims support the conclusion that the appeals should be dismissed. The appellant should pay the costs of the appeals. 18The Court orders: In each of matters 2009/298569, 2009/298580 and 2009/298581, order that: (1) The appeal be dismissed. (2) The appellants pay the respondents' costs in this Court. ********** 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: 24 April 2013