Gambacorta v Di Giovanni (No 2)

The primary judgment in these proceedings was published on 9 February 2021: Gambacorta v Di Giovanni [2021] NSWSC 61.

The parties were required to confer and submit short minutes of order to give effect to the reasons in the primary judgment. Directions were made for the service of submissions on the issue of the orders to be made, including as to the costs of the proceedings.

These reasons will assume knowledge of the primary judgment. Without meaning any disrespect, I will also refer to the parties and the other persons involved by their first names.

Giuliano delivered written submissions on 13 May 2021 and Caterina responded on 17 May 2021. Giuliano provided a reply on 25 May 2021. Both parties supplied a bundle of correspondence. The outstanding issues are to be decided on the papers.

There was a substantial measure of agreement between the parties concerning the substantive orders that should be made to give effect to the primary judgment. Where there are small drafting differences, I prefer the version of the proposed orders submitted on behalf of Giuliano. They are as follows:

The parties agree that these orders should be made, save that Caterina objects to order 4 and submits that different costs orders should be made than orders 7 and 8 proposed by Giuliano. Caterina proposes only the following costs order:

In seeking this order for costs, Caterina relies on a letter dated 16 October 2018 from her solicitors to the solicitors for Giuliano, which Caterina submits is an effective Calderbank offer.

In relation to proposed orders 2 and 5, concerning the 1,900 AGL shares, it is necessary to refer to [8] of the primary judgment. As I stated there, there was some ambiguity concerning the claim in relation to the shares. They were not mentioned in Caterina's evidence. Whereas certain assertions were made concerning them in Caterina's written opening submissions, Giuliano's submissions did not deal with the issue. I stated: "It will be necessary for the Court to clarify the position concerning Caterina's claim in respect of the shares after these reasons for judgment have been delivered".

It now appears that Giuliano accepts that the AGL shares should be dealt with on the basis that they were owned as tenants in common in equal shares as between Maria and Giuliano. I note, however, that the proposed orders are drafted on the basis that the shares are in the name of Giuliano, although Caterina had submitted that they were jointly owned. That may be because Giuliano arranged for ownership of the shares to be transferred to him by AGL on the basis of survivorship.

I will proceed on the basis that there is no longer any issue about the beneficial ownership of the AGL shares, and that the parties agree that half of the net sale price for those shares will be part of Maria's estate.

The only reason that I have specifically mentioned this issue is that I consider that the orders that will be made should be treated as a result of compromise rather than any finding in the primary judgment. The agreement between the parties is a sensible one, but I did not actually deal with the issue because of the insufficiency of direct evidence. That is relevant because the parties at different times made written offers of settlement to the other, and there is scope for dispute as to the reasonableness of those offers in relation to how they dealt with the ownership of the AGL shares. I propose to treat that issue as being a separate one, as it was ultimately dealt with by agreement between the parties.

I consider that it is appropriate for the Court to make proposed order 4, to the effect that Giuliano be reimbursed the $21,510.50 that he paid from his own monies for Maria's funeral expenses out of Maria's estate's share of the joint bank accounts now held in Giuliano's solicitor's trust account. Giuliano did not plead a claim for this reimbursement, although it was clearly raised during the hearing. It would not be appropriate for the Court to put the parties to the expense of amending their pleadings in respect of such a small claim.

Giuliano has provided a copy of a receipt dated 12 September 2017 showing payment by him of $21,510.50 to the funeral director for Maria's funeral. That was a testamentary expense of Maria's estate which should be paid by Caterina as Maria's executor. The evidence appears to establish that Giuliano paid the amount from his own funds, and not out of the joint bank accounts. I am not sure that I understand Caterina's submissions on the issue, but Caterina has not demonstrated by reference to any bank statements that the funeral expenses were paid out of the jointly held accounts. Consequently, I do not accept Caterina's submission, which appears to be that Giuliano is only entitled to reimbursement of half of the amount paid.

I will now turn to the issue of the proper costs order to be made in these proceedings.

Giuliano's position is that the costs of both parties should be paid out of Maria's estate on the indemnity basis, because the need for the proceedings arose out of the fault of Maria in leaving her affairs in a state of confusion on the principle in Re Buckton; Buckton v Buckton [1907] 2 Ch 406. See also Re Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709; Shorten v Shorten [2002] NSWCA 73 at [15]. Caterina rejected this approach and submitted that this matter is more akin to that dealt with by Brereton J (as his Honour then was) in Wood v Inglis (Costs) [2009] NSWSC 1900, where his Honour dealt with the costs issue on the basis that in reality the case was a contest between parties in their own interests so that the ordinary costs rules should be applied.

The relevant term of Maria's 2 December 2016 will is clause 4(v), which is set out at [96] of the primary judgment. That provision dealt with Maria's "other assets including my Shares and all my monies held with the Commonwealth Bank of Australia and the ANZ Bank jointly with my husband" Giuliano. The principal issue in the proceedings was whether Maria's share in the monies in the joint bank accounts and in the shares were part of her estate, so that they would be dealt with in accordance with clause 4(v) of Maria's will, or whether, at the time of her death, they remained jointly owned, so that property in those assets passed directly to Giuliano by survivorship.

The conclusion reached in the primary judgment was that, by reason of an oral agreement between Maria and Giuliano, the joint tenancy in the monies in the joint bank accounts was severed at a time no later than Maria's death, which had the consequence that clause 4(v) of Maria's 2 December 2016 will was effective. Relevantly, if the joint tenancy had not been severed, then clause 4(v) would simply have failed.

In fact, there was nothing confusing about Maria's 2 December 2016 will considered as a testamentary instrument. The will was capable of being executed, whether or not the joint interests in the relevant property had been severed. There would simply have been one outcome if severance had occurred, and another if it had not. As a matter of probate law, Maria did not leave her affairs in a state of confusion.

What Maria did do, however, was leave the question of whether the joint interests were or were not severed in a state of considerable evidentiary confusion. That was so because, as considered in depth in the primary judgment, the testimonial evidence on balance supported a finding that Maria and Giuliano came to a definite agreement that they would deal separately in their wills with their shares in the jointly owned property, but then they made wills the terms of which cast very considerable doubt on the existence of such an agreement in fact. If the terms of the wills had been consistent with the oral agreement, then the wills would largely have had similar structures and, importantly, their terms would have been consistent with the agreement to sever the joint tenancies. In fact, the wills had quite different structures, and some of the terms, in particular of Giuliano's will, seemed to have been drafted upon the assumption that the principle of survivorship would operate.

Consequently, these proceedings raised what I considered to be a very difficult question. There was indeed a state of confusion, but it was not as to the terms of Maria's will, rather it concerned the content of her estate.

I therefore do not think that this is a true case for the operation of the special probate rules concerning costs that operate where there are real questions concerning the testamentary capacity of a testator, or the meaning and effect of the testator's will. Strictly, Maria did not leave her affairs in a state of confusion, but she made her own 2 December 2016 will knowing the terms of Giuliano's 2 December 2016 will, in circumstances that created a difficult evidentiary question concerning whether or not there was an effective agreement between Maria and Giuliano to sever the joint tenancy in their jointly owned assets.

It remains necessary, however, to examine the correspondence between the parties concerning the dispute.

That correspondence started with a letter dated 6 April 2018 from the solicitor who then acted for Caterina (who was also the solicitor who had prepared the two 2 December 2016 wills) to Giuliano's solicitor. The letter referred to clause 4(v) of Maria's will and to the amounts then thought to be in the joint bank accounts, and demanded payment from Giuliano of $220,440.73, being the amount claimed as the estate's severed interests in the joint bank accounts.

Caterina's then solicitor was replaced by the solicitor who acted for her in these proceedings, apparently because the solicitor who had prepared the wills was perceived to have a conflict of interest. On 16 April 2018, Caterina's present solicitor again wrote to Giuliano's solicitor to demand an undertaking that the amount of $220,440.73 be placed in trust, or Caterina would commence proceedings in this Court "for orders seeking an injunction to quarantine the above amount".

Giuliano's solicitor responded on 17 April 2018 by letter that included the following paragraphs:

It seems that Giuliano's solicitor was unsure whether the claim for $220,440.73 had made an allowance for Giuliano's right to be reimbursed the $21,510.50. Neither party by this stage had referred to the possibility that Maria's estate had an interest in the AGL shares.

Giuliano's offer was, in the light of the outcome of these proceedings, a fair and sensible one and should have been responded to positively by Caterina.

It is not necessary to analyse the subsequent correspondence in detail. It is fair to say, however, that the responses by Caterina's solicitor were more aggressive than was called for.

On 17 April 2017, Caterina's solicitor asserted that Giuliano's offer was unclear, and queried whether "the amount of $209,688.48 (that is $220,443.73 less 10,755.25) is to be deposited into an account nominated by the executrix". Caterina's solicitor appeared to assume that the funeral expenses had been paid out of the joint accounts, and that Giuliano was only entitled to reimbursement for half of the amount. Caterina's solicitor apparently did not pick up the telephone to resolve this relatively trifling factual question. The solicitor again demanded that an undertaking be provided by 2pm and that the amount of $220,443.73 be paid into trust by 4pm that day, failing which proceedings would be instituted.

As appears from the correspondence, Giuliano's solicitor had understandable difficulty in getting instructions as Giuliano was 91 years old and lived in Italy at the time.

Caterina's solicitor's 18 April 2018 letter asserted that Giuliano ought to have known that the joint interests of the parties in the bank accounts had been "severed as joint funds at the time of the deceased's death by the terms of her will". As found in the primary judgment, it was not the terms of Maria's will that effected the severance of the joint tenancies. As explained in that judgment, severance cannot be effected unilaterally. As also explicated in the primary judgment, the two wills were completely confusing if they were relied upon as being the effective cause of the severance.

Following a recalculation of the claim made by Maria's estate, the amount of $237,319.09 was first claimed in Caterina's solicitor's 18 April 2018 letter.

Giuliano's solicitor advised on 18 April 2018 that he had instructions from Giuliano that he would pay the amount of $237,319.09 into the firm’s trust account the next day. The payment into the trust account was confirmed by Giuliano on 19 April 2018. On 26 April 2018, Giuliano's solicitor advised that the funds had cleared.

Importantly, on 4 May 2018, Giuliano's solicitor requested the following information from Caterina's solicitor:

That was a reasonable request for information, in my view, as severance of the joint interests was not effected by the terms of Maria's 2 December 2016 will alone, and the question of whether severance had taken place was a complex factual one.

The tone of Caterina's solicitor's responses was generally combative and unhelpful. By letter dated 11 May 2018, Caterina's solicitor, in essence, relied upon the terms of the two wills made on 2 December 2016 and said:

Giuliano's solicitor's 16 May 2018 response included the following paragraph:

In making this statement, Giuliano's solicitor was evidently acting on the basis that the doctrine of survivorship applied.

In a further hostile letter dated 17 May 2018, Caterina's solicitor said:

This response was evidently made upon the assumption that Maria was able to unilaterally sever the joint interests in the monies in the bank accounts by the terms of her will.

On 18 May 2018, Giuliano's solicitor made a further request for information in the following terms:

Caterina's solicitor apparently responded by letter dated 22 May 2018, as a letter of that date is referred to in Giuliano's solicitor's letter dated 24 May 2018. The Court was not provided with the 22 May 2018 letter. Giuliano's solicitor said:

The letter advised that if a response was not received by 30 May 2018, Giuliano would "take steps to commence proceedings in the Supreme Court of NSW seeking a declaration that our client is entitled to funds in the joint bank accounts and shares with costs on an indemnity basis."

There was some further correspondence between the solicitors for the parties in which it was asserted on behalf of Giuliano that 50% of the AGL shares did not form part of Maria's estate.

On 16 October 2018, Caterina’s solicitor wrote a letter to Giuliano’s solicitor to advise him that probate of Maria’s will was granted to Caterina on 26 September 2018. The letter also advised that the solicitor was in the process of commencing these proceedings. The letter referred to an offer of compromise that would be made by separate letter.

That letter was dated 16 October 2018, and contained the offer that is now relied upon as a Calderbank offer. The operative part of the letter said:

Giuliano’s solicitor responded on 7 December 2018. The response included: “With respect, the offer is hardly a compromise given that the issues that we have previously canvassed to you”.

I accept the submission made on behalf of Giuliano, relying upon the statement of Santow JA in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19], that the Court retains a discretion as to the proper costs order following the non-acceptance of a Calderbank offer. I also accept the submission that the 16 October 2018 offer was not an effective Calderbank offer as there was no real element of compromise: see Hazeldene’s Chicken Farm Pty Ltd v Victorian Work Cover Authority (No 2) (2005) 13 VR 435. In fact, the outcome of the proceedings proved to be relatively finely balanced because of the difficulty of the evidentiary issues that were involved. The matter called for a relatively substantial compromise, if the letter was to be an effective Calderbank offer. In fact, not only was there no element of compromise, but the offer required Giuliano to accept reimbursement for only half of the funeral expenses.

The timing of the service of Caterina's evidence is of additional significance to the question of whether the 16 October 2019 offer could be an effective Calderbank offer. The offer was made at a time when Caterina’s solicitor had relied only on a legally incorrect basis for the claim that the joint interests in the funds in the bank accounts and the AGL shares had been severed, and the solicitor had declined to provide the elaboration that Giuliano’s solicitor had reasonably sought on a number of occasions.

These proceedings were commenced by summons filed on behalf of Maria on 30 July 2019. The summons was supported by affidavits made by Caterina, Caterina’s daughter, the solicitor who prepared all of the wills made by Maria and Giuliano and the solicitor’s wife. Although the evidence that was ultimately relied upon by Caterina at the hearing was augmented by affidavits filed in reply to Giuliano’s evidence, I am satisfied that Caterina substantially disclosed the evidentiary basis of her claim at the time the summons was filed. That was the first time that Giuliano was given relatively comprehensive information concerning the basis of the claim.

Uniform Civil Procedure Rules 2005 (NSW) r 42.1 provides:

The event, in this case, is the success of Caterina on her claim. However, I have concluded that the circumstances of this matter, as discussed above, justify an order other than that Giuliano pay Caterina's costs of the proceedings.

Giuliano initially made a reasonable offer to settle these proceedings that was tantamount to a surrender by him, which gave Caterina all that she could have expected, once Giuliano’s entitlement to be reimbursed for Maria’s funeral costs was clarified. Caterina did not respond to that offer positively, and did not explain the basis of her case adequately until she served her affidavits at the same time as she filed the summons to commence these proceedings.

Giuliano may have been entitled to an order that Caterina pay his costs of the proceedings, but following the commencement of the proceedings, he abandoned his reasonable offer and vigourously defended the proceedings.

Caterina’s so-called Calderbank offer was not effective to justify the Court in making an order that Giuliano pay any part of Caterina’s costs on the indemnity basis.

Although it is not possible for the Court to make precise judgments as to the times when the parties changed their respective positions, I have concluded that Giuliano’s approach to the dispute should be considered to be the more reasonable of the two parties up until the time when he was served with Caterina’s summons and affidavits. He then had a reasonably comprehensive basis for understanding the strength of Caterina’s claim. Instead of maintaining his original position, he responded by defending the claim.

In these circumstances, the fair and just outcome is that there be no order as to costs of either party up to the point when Giuliano was served by Caterina with her summons and the affidavits. From that point on, Giuliano should be ordered to pay Caterina’s costs of the proceedings on the ordinary basis. So that there is no doubt, the costs that Giuliano will be ordered to pay will not include Caterina’s costs of preparing the affidavits served with her summons, but will include the costs of preparing and filing the summons. An order would have been made that Giuliano pay Caterina’s costs of preparing the initial affidavits, if Caterina had responded more positively to Giuliano’s repeated requests for an explanation of the basis of Caterina’s claim, and Caterina had provided a reasonably comprehensive explanation that included the basis upon which she ultimately succeeded, being the evidence of the oral agreement between Maria and Giuliano that they could dispose of their own shares in the jointly owned property individually in their wills, and that was not limited to reliance upon the terms of clause 4(v) of Maria’s 2 December 2016 will.

The final orders of the Court in these proceedings therefore are: