Awad v Awad (No 3)

1. [1]

   HIS HONOUR: By a cross-claim filed 24 May 2017 (“the cross-claim”), the cross-claimant, Michael Awad (“Michael”) sought, inter alia, a declaration that he had a beneficial one-half interest in the property at Bexley in the State of New South Wales (“the property”) owned by his mother, the first cross-defendant, Nouhad Awad (“Nouhad”).

2. [2]

   At the outset, it should be noted that the parties and witnesses will be referred to by their first names, as was done during the course of the proceedings before the Court, noting that nearly all of the relevant persons have the same surname. The Court adopts that approach with no disrespect intended to the relevant persons.

3. [3]

   Michael’s primary cause of action, as pleaded in the cross-claim, was based upon equitable estoppel and, in particular, proprietary estoppel. In summary, Michael’s case was that in 1994 his parents, Tony Awad (“Tony”) and Nouhad, were registered proprietors of the property as joint tenants. At that time, Nouhad had a debt of $28,000 owed for legal costs arising from an unsuccessful workers compensation application by her. A solicitor’s bill was received from GH Healey & Co Solicitors about September 1994 in which a demand was made for payment within 28 days. That, it was submitted, constituted an “emergency” because Tony and Nouhad were not working; they were pensioners. It was alleged that Tony, in Nouhad’s presence and with her express approval, orally represented to Michael that, if he paid the legal costs and also paid costs of renovating the property, Tony and Nouhad would give Michael a beneficial one-half interest in the property and allow him to reside there during their lifetimes.

4. [4]

   It was contended, as a basis for the primary cause of action, that Michael was induced by and relied upon that representation or promise. Michael relied upon two formulations of the promise as expressed in Michael’s evidence, both constituting one promise. The first formulation of the promise is to be found in his affidavit filed 28 December 2016 (at para 29) and was in the following terms:

5. [5]

   Counsel for Michael also relied upon the evidence of, as he put it, a “slightly more detailed formulation” of the promise which Michael included in his affidavit sworn 28 March 2017 (at para 8). It should be noted that Michael also swore an affidavit on 13 April 2017 in which the promise was expressed in identical terms (at para 10) to the March 2017 affidavit. Paragraph 8 of the March 2017 affidavit was as follows:

6. [6]

   The promise was said by counsel for Michael to be constituted by the statement made by Michael’s father. In written submissions, counsel referred to the statement of “the same clear and unequivocal promise or assurance”.

7. [7]

   Despite the differences as to the terms of the promise as expressed in the December 2016 affidavit and the March 2017 affidavit (or the April 2017 affidavit) above, Michael’s counsel contended that his case was there was only one representation made on a single occasion. Counsel for Michael also contended that the promise was made by Tony around September 1994 in the presence of Nouhad and with her express approval. Thus, the promise was, it was submitted, as much Nouhad’s as it was Tony’s, and Nouhad was personally – not vicariously – liable. The claim against her is not a derivative from Tony.

8. [8]

   Tony died in 2004 and his interest in the property passed to Nouhad. Since 2004, Nouhad had been suffering from dementia and had headaches and forgetfulness. Since at least 2009, she had been suffering from Alzheimer-type dementia. Michael’s sister and Nouhad’s daughter, Zouha Habib (“Zouha”), was Nouhad’s tutor and has been Nouhad’s enduring guardian and attorney since 23 February 2013.

9. [9]

   Michael sought the following relief in the cross-claim:

10. [10]

    The relief claimed in the sixth and seventh prayers for relief, namely, relief enabling Michael and his wife, Arze Awad (“Arze”), the second cross-defendant, to reside at the property, was no longer pursued. (It should also be noted “Arze” was also spelt “Arzi” in some documents in the proceedings. The Court will adopt the spelling used in her affidavit.)

11. [11]

    The matter initially proceeded to hearing with respect to the primary claim as reflected in prayers for relief 1, 2 and 5 (“the primary claim”). Claims for relief 3, 4 and 9 were advanced as alternative claims (“the alternative claims”). By a judgment delivered on 8 April 2019, the Court rejected the primary claim: Awad v Awad [2019] NSWSC 385 (“Awad No 1”).

12. [12]

    By the Court’s judgment in Awad v Awad (No2) [2020] NSWSC 25 (“Awad No 2”) the alternative claim with respect to pars 3, 4 and 9 of the relief claimed was dismissed. That determination was reached as a result of the Court finding adversely to Michael with respect to certain threshold issues. The conclusion was also reached because the further proceedings as to the alternative claims after the Court’s judgment in Awad No 1 was predicated upon concessions made by counsel on the final day of hearing of the proceedings leading to that judgment which were departed from by counsel in the further pursuit of the alternative claim.

13. [13]

    At the conclusion of the Court’s judgment in Awad No 2, the Court determined that Nouhad should have costs of the disposition of the threshold issues and, subject to hearing from the parties as to the final disposition of the proceedings, costs of the alternative claim. The Court had earlier found in Awad No 1 that the costs of the hearing of the primary relief should be made in favour of Nouhad. The Court made provision in directions for the resolution of any dispute as to any costs.

14. [14]

    After a relatively lengthy process from the delivery of the judgment in Awad No 2 on 30 January 2020, Nouhad sought the Court to exercise its discretion in favour of her by making an order that Michael pay the cost of the proceedings on an ordinary basis up to 26 April 2018 and then on an indemnity basis from 27 April 2018 (corresponding with the service of a Calderbank offer on 12 April 2018: “the Calderbank letter” or “Calderbank offer”).

15. [15]

    Michael sought his costs thrown away from 30 January 2020 of the hearing of the costs application on 25 March 2021? from Nouhad as agreed or assessed.

16. [16]

    Neither party disputed that the Court would make an order for costs on an ordinary basis in the proceedings to 30 January 2020.

17. [17]

    This judgment concerns the Court’s determination of those applications for costs.

Submissions of the parties

1. [18]

   In summary, Michael’s submissions were as follows:

   1. (1)

      A Calderbank offer was served on Michael on 12 April 2018. Michael was given until 26 April 2018 to respond. The first date of hearing for the primary relief was 14 May 208.

   2. (2)

      Whilst the Calderbank letter is not a compromise for the purposes of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 42.14, the same types of considerations arise: Calderbank v Calderbank [1975] 3 All ER 333 and Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103 at 108.

   3. (3)

      Nouhad made an offer by the Calderbank letter which was detailed and provided Michael with more than one month prior to the hearing. The ultimate decision of the Court was substantially the same as the offer which Nouhad put to Michael. The Court has a discretion to allow indemnity costs so long as Michael’s case was properly articulated with satisfactory particulars and supporting documents at the time the Calderbank offer was made. In this case at the time the Calderbank offer was served the other party had all of the evidence and particulars and had the background including participation at a mediation. Michael had all of the information necessary to make an informed decision whether to accept or reject the offer: Nair-Smith v Perisher Blue Pty Ltd (No 3) [2013] NSWSC 1736 (“Nair-Smith”).

   4. (4)

      In the proceedings concerning the primary relief, the Court found that a finding of fabrication with respect to Michael’s evidence was at least potentially available on the evidence. Ultimately, the Court decided that there had been a significant reconstruction on the part of Michael.

   5. (5)

      On the final day of the hearing, Michael’s counsel sought to defer the alternative claim for supplementary submissions without the requirement for further evidence. He ultimately sought to lead evidence in support of that claim. That application failed.

   6. (6)

      Particularly having regard to the Court’s reliance on ss 56-60 of the Civil Procedure Act 2005 (NSW), the ordinary rule that costs follow the event should be departed from for the period sought and an award for indemnity costs made.

   7. (7)

      Michael relied upon the fact that Nouhad had received Legal Aid. There was no dispute that she had received that assistance. However, this is not an impediment to the Court exercising its discretion to make an order for indemnity costs in favour of Nouhad.

   8. (8)

      By s 42 of the Legal Aid Commission Act 1979 (NSW), a court may order the payment of costs in proceedings where a legally assisted person is a party to the proceedings and to make an order for costs in respect of the legally aided person as if she was not a legally assisted person.

   9. (9)

      There is no reason why a legally aided person should be in any different position to any other litigant. In any event, Legal Aid will reimburse solicitors for work done at the rate of 175% of the normal hourly rate if costs are recovered. Therefore, there is no barrier to the award of indemnity costs in favour of a legally aided person.

2. [19]

   In summary, Michael’s submissions were as follows:

   1. (1)

      The Calderbank offer relied on by Nouhad in support of her application for indemnity costs from 27 April 2018 was not an offer of compromise under the UCPR.

   2. (2)

      Accordingly, reliance on UCPR r 42.14 is erroneous.

   3. (3)

      The UCPR is not relevant and there is no statutory test to be applied in this matter.

   4. (4)

      It follows that the determination of the application for indemnity costs will involve the exercise of a discretion of the Court. There is no automatic consequence flowing from the Calderbank letter.

   5. (5)

      In Nair-Smith, Beech-Jones J refused to exercise a discretion to order indemnity costs in reliance on a Calderbank offer made at a time when the plaintiff had not articulated a claim for economic loss, had not properly particularised her claim and had not provided adequate medical evidence does not establish a legal principle on which Nouhad can rely here to obtain an order for indemnity costs from 27 April 2018 or from any later date.

   6. (6)

      The issues involved in the proceedings were equitable issues involving a claim for equitable relief, primarily estoppel, but, in the alternative, constructive trust. Michael was unsuccessful in both respects.

   7. (7)

      The cross-claimant’s primary claim for equitable relief based on equitable estoppel principles was refused after a hearing due to an adverse finding made concerning his credibility concerning the oral representations that he alleged had been made to him by his father in the presence of his mother on which his primary claim was based. But for such adverse finding, it is confidently submitted that his primary claim should and would have succeeded.

   8. (8)

      Thus, Michael’s case failed on his own evidence. The Court’s determination did not depend, as counsel for Michael submitted, upon “the evidence of family members because they weren’t witnesses to the conversation between my client and his parents and the father had died and the mother couldn’t given evidence due to advanced dementia”. Further, the Court did not determine the matter based on the affidavits proffered by Nouhad in support of the Calderbank offer.

   9. (9)

      The fact that the Cross-Defendant was legally aided at all relevant times is very relevant to whether an order for indemnity costs should be made in her favour at all.

   10. (10)

       In the case of a legally aided person it is virtually impossible to distinguish between ordinary costs and indemnity costs because that person’s legal representatives’ professional costs are fixed at discounted rates determined by Legal Aid NSW and are paid by it to them directly.

   11. (11)

       A party/party order can do no more than fully indemnify a successful party against his or her costs and disbursements.

   12. (12)

       Such an order would result in Legal Aid NSW recouping whatever professional fees it has paid to a legally aided party’s legal representatives plus the recovery of any disbursements.

   13. (13)

       Where a costs order is made, Legal Aid NSW may provide for an increase of legal practitioner fees to 175% of its scale hourly rates, but only where those costs are recovered.

   14. (14)

       There has been no recovery here, and there is unlikely to be any recovery here, due to Michael’s impecuniosity.

   15. (15)

       Counsel for Michael was unaware of any decided authority in which an indemnity costs had been made in favour of a legally aided person.

   16. (16)

       The Court should take judicial notice of the fact that Legal Aid pays scale rates to legal representatives of a legally aided person. There is not one rate for indemnity costs and another for party/party costs. There is a fixed scale of costs which is discounted.

   17. (17)

       As to the increase in legal practitioners’ rates where there is costs recovery, the provision of the Legal Aid website merely provides for an increase in the scale rates of 175% if there is actual recovery of costs.

   18. (18)

       Michael should have his costs for the period from 30 January 2020 because of costs thrown away due to the repeated delay on the part of Nouhad’s solicitors in providing short minutes of order and progressing the issue as to costs.

3. [20]

   The general rule as to costs is set out in s 98 of the Civil Procedure Act 2005 (NSW) and Pt 42 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), namely, that costs follow the event.

4. [21]

   As to the principles applicable in that respect I refer to my judgment in Moseley v AB (No 2) [2017] NSWSC 1812 at [64]-[79].

Indemnity Costs

1. [22]

   The power to award indemnity costs is found in s 98(1)(c) of the Civil Procedure Act and r 42.5 of the UCPR. Section 98(1) is extracted below:

2. [23]

   Rule 42.5 of the UCPR is as follows:

3. [24]

   The overriding purpose of the Civil Procedure Act is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1). A party to civil proceedings is under a duty to assist the Court to further the overriding purpose and, to that effect, to participate in the processes of the Court and to comply with directions and orders of the Court: s 56(3)

4. [25]

   One of the leading authorities on indemnity costs remains Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801. In that case, Sheppard J noted some of the circumstances which have been thought to warrant the exercise of the discretion to order indemnity costs (at 233-234):

5. [26]

   A summary of the relevant authority was set out by Slattery J in Ly v Dong [2018] NSWSC 122. His Honour observed (at [45]-[46]):

6. [27]

   In Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, at [44], the Court noted:

7. [28]

   An award of indemnity costs should be compensatory and not punitive: Hamod v State of NSW (2002) 188 ALR 659; [2002] FCA 424.

8. [29]

   The general rule that costs follow the event may be displaced, in the exercise of the Court’s discretion, so as to make a special order for costs where the successful party has made an offer in a Calderbank letter. Unlike an offer of compromise, a Calderbank letter is merely a relevant consideration in the exercise of the discretion and does not have the equivalent presumptive effect to an offer of compromise under the rules (see UCPR r 42.14). A failure to accept a Calderbank offer which is not bettered by the unsuccessful party and the rejection of the offer was unreasonable may have consequences then in the exercise of the Court’s discretion to make a special order for costs.

9. [30]

   By the offer made in the Calderbank letter, Nouhad made an offer in full and final satisfaction of all claims brought by Michael on the following terms:

   1. (1)

      The proceedings be dismissed forthwith, with the cross-claimant to pay the first cross-defendant’s costs as agreed or assessed on an ordinary basis as at the date of the letter.

   2. (2)

      The parties would provide mutual releases for all claims including any and all present or future, actual or contingent actions, causes of action, suits, proceedings, complaints, dispute resolution procedures (whether in a court, tribunal, industry body, ombudsman scheme or other forum dealing with complaints or disputes), pleadings, defences, expenses, costs (including legal costs on a full indemnity basis), losses, obligations or liabilities whatsoever arising out of or in relation to the subject matter of the proceedings.

   3. (3)

      The caveat dated 23 December 2016 in relation to registered dealing number 3/203238 be removed.

   4. (4)

      The parties enter into a deed of settlement giving effect to the above together with terms of confidentiality.

10. [31]

    Michael, as the unsuccessful party, did not better that offer as his primary and alternative cases were dismissed and he was, subject to any special order made by the Court, subject to rulings of the Court that he would pay the costs of the hearing as to the primary and alternative claims (see Awad No 1 at [396] and Awad No 2 at [124]).

11. [32]

    In substance, Michael’s submitted that the refusal of the Calderbank offer was not unreasonable because the determination of the primary claim only turned upon adverse findings made concerning Michael’s credibility and that, but for those adverse findings, the primary claim would have succeeded. By that submission it was presumably contended that Michael could not anticipate his evidence would be rejected in that way. It was also submitted that the evidence of, for example, Michael’s brothers did not enter that deliberation and their evidence could not have deterred Michael’s pursuit of the claim because they did not witness the promise underpinning Michael’s claim.

12. [33]

    Further, it was contended that the alternative claim for equitable relief was purely dismissed on procedural grounds and was not heard on the merits.

13. [34]

    A closer examination of Awad No 1 and Awad No 2 demonstrates the difficulties with those propositions.

14. [35]

    It is true that the Court’s conclusion in Awad No 1 turned substantially upon a finding that Michael’s credibility as a witness was so undermined by cross-examination that a conclusion must be made that he was a wholly unreliable witness (at [367]).

15. [36]

    However, the Court concluded that a finding was potentially available, in the light of its considerations, that Michael’s evidence as to the promise and his reliance upon it was a fabrication (reference was made at [366] of the judgment additionally to an answer provided by Michael during the course of possession proceedings before M Adams J). In any event, the Court found that Michael’s account was a significant reconstruction. Those findings related not only to the promise said to be given by Tony and Nouhad to Michael but to Michael’s evidence that, at a later time to the giving of the promise, Tony indicated that he had given Michael half of the house in the presence of Michael and all of his siblings.

16. [37]

    Michael swore five affidavits in the proceedings (see Awad No 1 at [86]). Affidavits in reply were filed by Jim, Michael’s younger brother; Paul, Michael’s older brother; Joseph (Michael’s eldest brother) and Zouha, Michael’s older sister.

17. [38]

    Jim had, by his affidavit, given evidence inconsistent with the promise as asserted by Michael. Even on Michael’s case, which was highly inconsistent on this point, Jim was present at some point during the making of the promise, notwithstanding that Jim’s cross-examination with respect to the promise related to Tony’s later purported disclosure of the promise to the family.

18. [39]

    An illustration of this difficulty is set out at part of [212] of Awad No 1 as follows:

19. [40]

    Ultimately Jim was found to be a witness of credit.

20. [41]

    The Court’s finding in relation to Jim’s account and the promise was as follows (at [374]):

21. [42]

    Furthermore, in the affidavit evidence of the siblings there was a denial of a statement being made by Tony to his family regarding the effect of the promise as asserted by Michael. The Court accepted their evidence in that respect and accepted Michael’s brothers as witnesses of credit.

22. [43]

    Similar problems for Michael’s contention exist with respect to the alternative claim.

23. [44]

    Counsel for Michael submitted that the alternative claim was dismissed in Awad No 2 upon procedural grounds and not the merits of the case. However, this submission overlooks three important considerations. Firstly, the threshold issues determined in Awad No 2 were largely required to be dealt with because of the course taken by counsel for Michael with regard to the alternative claims (see the extract from Awad No 2 below). Secondly, as will be seen again from the extract from Awad No 2 below, the threshold issues went to fundamental aspects of the alternative case sought to be advanced by Michael. They were not merely technical or procedural issues. Thirdly, the Court observed in Awad No 2 that, whilst the Court had not resolved the merits of the alternative claim per se, the threshold issues had been determined adversely to Michael (at [119]).

24. [45]

    The paragraphs of the judgment in Awad No 2 to which I refer in this respect are at [14]-[21] in the following terms:

25. [46]

    Ultimately, the Calderbank offer in this case was made in close proximity to the commencement of the hearing of the proceedings where most of the evidence had been filed (other than the affidavits attached to the Calderbank letter) and Michael had been put on notice of the remainder. Michael had a clear view of the case to be brought by Nouhad (and was further ordered in this respect by a mediation). Michael had all of the information needed to make an informed decision, based on advice, as to his claim. In fact, he had, in substance, the case for Nouhad. A Calderbank offer was made, in clear terms, and Michael had ample time to consider it. The bases upon which it was said that a refusal of a Calderbank letter were reasonable have, for the reasons I have given, not been sustained. It follows that a foundation for the award of indemnity costs has been established by Nouhad but there remains two further factors to consider: the issues raised with respect to the proceedings being legally aided; and the claim for costs advanced by Michael for the period following the delivery of Awad No 2 until the hearing of the costs issue the subject of this judgment.

26. [47]

    As to the question of Nouhad receiving legal aid, it is plain that an award of costs may be made, at least on an ordinary basis, having regard to her success in the proceedings. No authority has been provided by counsel that an award of indemnity costs may not be made in these circumstances. As a matter of principle, no basis was demonstrated as to why such an award may not be made. No such limitation is apparent from s 42 of The Legal Aid Commission Act.

27. [48]

    A foundation for the proposition sought to be advanced by Michael was sought to be made by reference to matters not in evidence or which were sought to be relied upon on the basis of judicial knowledge or an assumed basis in fact.

28. [49]

    The difficulty with that approach is that the factual proposition advanced as to the costs processes within Legal Aid required a more precise analysis in order to evaluate whether, as I understand Michael’s submissions, an award of indemnity cost in legally aided proceedings may be of no utility. The submissions before the Court, so far as they bear upon the question, would indicate that there is utility in the making of an award of that kind.

29. [50]

    Finally, Michael contended that there were costs thrown away because of the conduct of the solicitors for Nouhad in the period after the delivery of Awad No 2. Whilst I would not accept that that contention would apply to the whole of the period between then and the hearing of the question of costs, there is some merit to the contention that the approach of the solicitors for Nouhad was productive of some costs to be thrown away after the judgment in Awad No 2. Some adjustment in the approach of the Court as to costs needs to be made in that respect, mindful that the ultimate determination on the question of costs itself primarily favours Nouhad.

30. [51]

    In my view, the resolution of Michael’s application for costs for the defined period should be resolved upon the basis of the concession proposed by Mr Schipp of counsel, namely that Nouhad should receive an award of costs on an ordinary basis from 30 January 2020 up to and including the hearing of the issue as to costs on 25 March 2021. Otherwise the orders proposed by Nouhad for orders for costs will be made.

Directions

1. [52]

   The cross-defendant shall bring in short minutes of order reflecting this decision within 14 days of this judgment.