Darveniza v Darveniza & Drakos as Executors of the Estate of Bojan Darveniza and Ors (No 2) [2014] QSC 49 [2014] 14 QLR

SUPREME COURT OF QUEENSLAND CITATION: Darveniza v Darveniza & Drakos as Executors of the Estate of Bojan Darveniza and Ors (No 2) [2014] QSC 49 PARTIES: NATASHA MORGAN (under Part 4, Sections 40-44, Succession Act 1981 (Qld) (applicant) v XIAO HONG DARVENIZA AND HARRY DRAKOS as Executors of the Estate of BOJAN DARVENIZA deceased (respondents) FILE NO: SC 13827 of 2010 PARTIES: STEVEN BOJAN DARVENIZA (plaintiff) v XIAO HONG DARVENIZA AND HARRY DRAKOS as Executors of the Estate of BOJAN DARVENIZA deceased (first defendant) LEISURE KART CITY PTY LTD AS TRUSTEE FOR THE DARVENIZA FAMILY TRUST (second defendant) MIDAS INVESTMENTS PTY LTD (third defendant) UNIVERSAL ACCOMMODATION PTY LTD (fourth defendant) DARVENIZA PROPERTIES PTY LTD (fifth defendant) DARVENIZA PROPERTIES PTY LTD AS TRUSTEE FOR DARVENIZA GROUP SUPERANNUATION FUND (sixth defendant) FILE NO: SC 1766 of 2012 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 27 March 2014 DELIVERED AT: Brisbane HEARING DATE: 18 March 2014 (Written submissions on 19 March 2014) JUDGE: Martin J -- 1 of 7 -- 2 ORDERS: 1. In Proceeding BS 13827 of 2010 the costs of all parties be paid from the estate of Bojan Darveniza (deceased) on an indemnity basis. 2. In Proceeding 1766 of 2012 the plaintiff is to pay the defendants’ costs on the standard basis to the extent that those costs were not incurred in any event by reason of Proceeding BS 13827 of 2010. CATCHWORDS: PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – CONDUCT OF PARTIES – DEMAND, OFFER AND CONSENT – where the applicant was awarded a lump sum of $3,000,000 as further provision from the estate of the testator – where a Calderbank offer of $3,600,000 plus $150,000 for costs had been made in respect of the application – where the offer included the purchase of shares then valued at $800,000 – where the offer included commercial terms that would bind third parties including the applicant’s wife, and involve the renunciation of beneficial entitlements under certain discretionary trusts – whether the applicant’s conduct in rejecting the offer was unreasonable Fiorentini v O’Neil [1998] NSWCA 79 COUNSEL: R T Whiteford for the plaintiff/applicant P W Hackett for the defendants/respondents SOLICITORS: McCullough Robertson for the applicant/plaintiff H Drakos and Company for the respondent/defendant [1] On 18 March I delivered judgment in these matters – 13827 of 2010 (“the provision claim”) and 1766 of 2012 (“the companies claim”). In the provision claim I ordered that further provision be made for the proper maintenance and support of Steven Darveniza out of the estate of Bojan Darveniza by payment of a lump sum of $3,000,000. I dismissed the companies claim. [2] Mr Hackett sought leave on behalf of the Respondents to deliver a written submission on the question of costs. I have received written submissions from both parties. In these reasons, I will refer to Steven Darveniza as the Applicant and the -- 2 of 7 -- 3 executors of Bojan Darveniza’s estate and all the corporate defendants as the Respondents. [3] In the ordinary case, where an applicant’s claim for further provision from an estate is successful the usual order is that the applicant’s and the executor’s costs be paid out of the estate on an indemnity basis.1 Although the Applicant was successful, the Respondents submit that the order in this case should be that the Applicant’s costs of and incidental to the proceedings until 11 October 2012 be paid out of the estate on an indemnity basis and that no other order be made for costs on the claim for further provision. [4] An offer was made on 11 October 2012 by the Respondents to the Applicant. It was amended on 15 October. It was not an offer within the meaning of the Uniform Civil Procedure Rules. It was what is usually called a Calderbank offer. There is no reason why a costs order which might otherwise be made can not be displaced in a proper case in consequence of an unaccepted Calderbank offer.2 [5] The Respondents submit that, had the Applicant accepted the offer, he would have been better off financially than he is as the result of the orders which were made. In order to test that proposition I need to set out some of the details of the offer: (a) The terms of the offer were contained in a deed. It was expressed to be between all of the parties to the two actions and, a non-party, Deborah Darveniza, the Applicant’s wife.3 (b) The Applicant was to be paid $3,600,000. This sum excluded costs which were fixed in the amount of $150,000. 1 Fiorentini v O’Neil [1998] NSWCA 79. 2 Ibid. 3 No order could have been made in either action which would have bound Mrs Darveniza. 2 Ibid. -- 3 of 7 -- 4 (c) In return for that payment, the Applicant would: (i) Discontinue both actions, and (ii) Transfer his shares in the companies and in a company (Stevania Properties Pty Ltd – which was not a party to the proceedings) to the Executors. (d) The shares were defined as having a value of $800,000. (e) Both the Applicant and his wife would relinquish their entitlements under three Darveniza family trusts. (f) The Respondents would pay the Applicant: (i) $350,000 within 30 days of the date of the deed, and (ii) $3,250,000 within 12 months of the deed. (g) But, if the executors were “unable to pay the amounts” set out above, then, under clause 5.3, they would pay the Applicant “interest on the amounts owing from the due date until payment calculated at the rate of 10%”. [6] The Respondents submitted that the “value” of the offer was approximately $2,900,000 because the evidence at trial (after allowing for some discounting) was that the shares were actually worth somewhere between about $695,000 and $740,000. I am not persuaded that that is an appropriate measure to use. The deed proposed an agreed value for the shares of $800,000 and there was no reason, when contemplating this offer, to use another figure. [7] The purpose of the Respondents’ submissions on this point is to show that the amount the Applicant might have received under the deed was so close to 3 No order could have been made in either action which would have bound Mrs Darveniza. -- 4 of 7 -- 5 $3,000,000 that it was unreasonable to reject it. And, that that unreasonableness should be reflected in the costs order. [8] I consider that it was reasonable for the Applicant to refuse the offer, for the following reasons: 1. Some of the terms could not have been realised by any court order, as: (a) The offer required a non-party (Mrs Darveniza) to relinquish rights she held; and (b) The offer required a transfer of shares in a number of companies (including Stevania Pty Ltd). 2. It required the agreement of a non-party – Mrs Darveniza. 3. The proposal was uncertain in at least this respect – no value was ascribed to the value of the Applicant’s (or Mrs Darveniza’s) rights as a beneficiary under the family trusts. 4. If the Applicant’s rights as a beneficiary under the family trusts were of no value, then on the proposed agreed value of the shares, the offer was worth no more than $2,800,000. 5. The proposal for payment was unacceptable. There was no certainty about when payment would be made because of the provisions of clause 5.3. The payment of $3,250,000 was to be delayed for 12 months, but it could have been longer because the clause allowed for the payment to be postponed. It was also expressed poorly and could have led to further litigation over: (a) The meaning of “unable to pay the amounts”, and (b) When interest was to be paid, as no provision for payment other than the rate was prescribed. -- 5 of 7 -- 6 [9] As the Applicant’s refusal of the offer was reasonable, the usual order on the provision claim will be made. [10] On the companies claim the Respondents seek their costs on the standard basis. The Applicant seeks an order that the Respondents only get their costs in the companies claim action to the extent that they would not have been incurred in any event by reason of the provision claim. [11] The cases were run together and the thrust of the case related to the family provision claim. The claims made in the second action were based almost entirely on evidence which was relevant in the provision claim. It was the provision claim which took up most of the time of the trial and most of the material prepared for the trial. An obvious exception was the accountant’s report prepared for the companies claim concerning the Applicant’s alleged loss of income. [12] All the Respondents were represented by the same barristers and solicitors and the Executors are going to recover their costs of the provision claim from the estate on an indemnity basis. It is inappropriate that the Respondents have the capacity to recover costs in the companies claim without some recognition that they will be recovered, on an indemnity basis, by the Executors in the first claim. Orders [13] I make the following orders: 1. In Proceeding BS 13827 of 2010 the costs of all parties be paid from the estate of Bojan Darveniza (deceased) on an indemnity basis. -- 6 of 7 -- 7 2. In Proceeding 1766 of 2012 the plaintiff is to pay the defendants’ costs on the standard basis to the extent that those costs were not incurred in any event by reason of Proceeding BS 13827 of 2010. -- 7 of 7 --