Andrew Sinphet MATHER by his tutor Kerrie Patricia MATHER v Christopher Andrew MATHER

Judgment 1I have heard argument as to what costs orders I should make in this matter in which I gave judgment on 20 September 2012. 2As is apparent from my judgment the case concerned the claim by an adopted son for whom the deceased made no provision. The estate substantially passed to the deceased's brothers. The estate had a value after costs of $2,143,056. 3I held in my judgment that an appropriate order was that the plaintiff receive a legacy of $1,100,000 from the estate of the deceased. 4On 24 August 2012 an offer of compromise dated the same day was served by the defendants on the plaintiff. The offer was to compromise the proceedings on the basis that the plaintiff receive a legacy of $1,200,000. The offer of compromise was in the form required under Part 20 Division 4 of the Uniform Civil Procedure Rules and was open for a period of 14 days after the date upon which it was served. The trial before me was to start on 17 September and it was conducted on 17 and 18 September with a judgment given on 20 September. 5The offer was not accepted and on 6 September 2012 the plaintiff served an offer of compromise in which the defendants appeared to pay the plaintiff the sum of $1,500,000. That of course was not accepted and the matter proceeded to trial. 6The solicitor for the plaintiff, Christine McPhillips, gave evidence of two matters which had to be dealt with during the period of 14 days of currency of the offer. The first was the assessment of the affidavits of the defendants which were served on 4 September which disclosed the amount of an inheritance which they would receive from their late mother who died on 22 July 2012. The second matter concerned the self managed superannuation fund of the deceased which had not been dealt with in an earlier affidavit. This concerned the finalisation of a property settlement between the deceased and his wife. This was the subject of earlier investigation early in the year. But in any event all the inquiries made about that aspect were answered on 7 September 2012. From the substance of the documentation concerning this event provided several days earlier on 5 September 2012, it was apparent that by 6 September the plaintiff was sufficiently satisfied about these two matters to have made the offer to settle for $1,500,000 which was made on that day. 7The defendants sought an order that the plaintiff's costs be payable on the ordinary basis out of the estate of the deceased up until 27 August and thereafter that the plaintiff and the plaintiff's tutor should pay the defendants' costs on an indemnity basis. They relied upon UCPR 42.15A which is in the following terms: "(1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant, or more favourable to the defendant, than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 8As I have explained above, the pre-condition was satisfied and in the ordinary course of applying the rule the orders sought by the defendant would normally be made. It is necessary to see whether or not the Court should make an order otherwise than in accordance with the rule. 9The defendants referred me to a recent discussion by Schmidt J in Vagg v McPhee (No 2) [2012] NSWSC187 when she said the following: "16 When the plaintiffs did not succeed, having rejected the offer of compromise made under the Rules, under r 42.15A an onus fell upon them to establish that the Court should depart from the consequences of the Rule, the defendants having obtained a judgment at least as favourable to them as the terms of their offer. That onus has not been met. 17 The defendants relied on Leichhardt Municipal Council v Green where Bryson JA observed at [59]: "I agree with the conclusions reached by Santow JA. The application for an order for costs to be assessed on the indemnity basis raises a discretionary question the answer to which is not in my view susceptible of much detailed exposition. The settlement offer was made before trial and was no longer available while the appeal was pending. The respondent's case did not succeed, but it was not a case which could not reasonably be argued and it succeeded at first instance. The only element of compromise in the offer was as to costs: otherwise it was a call on the respondent to capitulate and give up: the element of compromise was slight, and the respondent's ultimate lack of success does not to my mind demonstrate that the reasonable course for the respondent was to capitulate, nor does anything show that the respondent was delinquent in going on with the trial or in resisting the appeal." 18 That was a case concerned with a Calderbank offer, as was Miwa Pty Ltd v Siantam Properties Pty Ltd (No 2), on which reliance was also placed. The Rules in relation to offers of compromise operate differently to the principles which apply to Calderbank offers. In the case of a Calderbank offer an onus falls on the offeror to convince the Court that it should exercise its discretion in the offeror's favour, the offeree having acted unreasonably in rejecting the offer (see Jones v Bradley (No 2) [2003] NSWCA 258; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 per Giles, Ipp and Tobias JJA at [26]. ) The offeror must also show that the offer was a genuine compromise (see Leichhardt Municipal Council v Green , at [21] - [24], [36] per Santow JA (Stein JA agreeing) and Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] - [5] per Handley, Beazley and Basten JJA). In considering a Calderbank offer, the Court strives to achieve fairness in the result (see the discussion in Commonwealth v Gretton [2000] NSWCA 118). 19 The provisions of Rule 42.15A operate quite differently, even though it should be noted, that even in the case of a Calderbank offer a "walk-away" offer can be a "genuine offer of compromise" (see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [36]; and GIO General Ltd v ABB Installation and Service Pty Ltd [2000] NSWCA 118 at [36];) 20 Having refused the defendants' offer the plaintiffs had to establish circumstances which, as a matter of justice, warrant a departure from what the Rule contemplates will be the usual result of refusal of the offer. The defendants are entitled to an order in accordance with the Rule, unless the plaintiffs establish that the Court should order otherwise. 21 The exercise of that discretion in favour of the plaintiffs requires that they establish that 'exceptional circumstances' exist, as discussed in South Eastern Sydney Area Health Service v King [2006] NSWCA 2 per Hunt AJA (Mason P and McColl JA agreeing): "83 Part 52 rule 22 provides that, where a plaintiff who has made an offer of compromise in accordance with Part 22 (Division I) which is not accepted by the defendant, and where the plaintiff obtains a judgment no less favourable than the terms of the offer, then, unless the Court otherwise orders, the plaintiff will be entitled to an order against the defendant for costs on an indemnity basis in relation to his costs incurred from the day after the offer was made. The onus is on the defendant to persuade the Court that indemnity costs should not be ordered. He must demonstrate the basis on which an order should be made denying the plaintiff's entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff's case properly and in the context of the rule and the achievement of its purpose - to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation. Generally, exceptional circumstances are required to justify such an order denying the plaintiff's entitlement. See, generally, Fowdl v Fowdl , Court of Appeal, 4 November 1993, unreported, per Kirby P at 12, 16; Hillier v Sheather (1995) 36 NSWLR 414 at 422-423; Morgan v Johnson (1998) 44 NSWLR 578 at 581-582. 84 Although the Court may take into account the particular features of a case and the difficulty of putting an accurate estimate on its value in advance of the litigation, those considerations do not provide a basis by themselves for denying the party making the offer an order for indemnity costs: Hillier v Sheather (at 423). In Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725, it was said that a miscalculation in a case with large imponderables, where the course taken by the party to whom the offer was made may have been perfectly reasonable, would provide a basis for denying an order, but the subsequent decision in Hillier v Sheather suggests that, whilst "large" imponderables may be a relevant factor in the particular case in denying an order for indemnity costs, in the general case a party's reasonable belief as to his own chances of success does not alone provide a basis for denying an order for indemnity costs." 22 In Hillier v Sheather (1995) 36 NSWLR 414 it was also observed (at 423) that: "Secondly, it might be thought that the rule operates rather unfairly upon plaintiffs. They may be subjected to risk by early offers which are judged to be unrealistic. Plaintiffs may not be able to afford the risks of litigation with the added risk as to costs. The transference of the risk of costs to them (even if they succeed generally) imposes upon ordinary plaintiffs a burden which few can afford to bear. It is important that the courts should not approach the exercise of the discretion to "otherwise order" in a mechanical way: cf, Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725. Even skilled legal representatives do not have the gift of prophecy. Calculating damages verdicts is inescapably inexact because of the many imponderables which must be taken into account. The present is a case in point. So much depended upon the view which would be taken concerning the significance (if any) of pre-injury spinal and neck pain. In exercising the discretion, courts will not overlook the particular features of a case and the difficulty of putting an accurate estimate on its value in advance of the litigation. Yet the general considerations of chance and risk would have been known to the rule-maker when Pt 19A, r 9 of the District Court Rules was introduced into the District Court Rules . Without more, they could not provide a basis for ordering otherwise than as the rule will ordinarily provide. If this puts plaintiffs' legal representatives in an impossible position and, in practice, forces the settlement of cases for sums less than they are worth because the costs of litigation cannot be wagered against their risks, the complaint must be against the terms of the rules and the apparently narrow provision for exempting orders. The complaint cannot be against a court which merely gives effect to the purpose of the rule as expressed in its plain language." 23 In this case, there was no evidence led or explanation given for the plaintiffs, as to why the offer wasn't accepted. Exceptional circumstances warranting a departure from the effects of r 42.15A have not been established." 10Mr Whittle SC of counsel, on behalf of the defendants, suggests that there are no exceptional circumstances warranting a departure from the effect of the present day equivalent of the Rules being discussed by the courts above. 11The plaintiff referred to the following matters in their submissions: (1)The differential between the offer and the judgment was less than 10%. (2)The plaintiff as the tutor was not running the proceedings for her own benefit. (3)In a large estate with only one eligible person, reasonable minds may differ as to what could be the likely result. Reference was made to Sherborne Estate No 2: Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor (2005) 65 NSWLR 268. (4)Apart from mediation the only offers of compromise served were in August 2012. (5)The inquiries to which Christine McPhillips referred had to be made before the offer could be assessed. (6)Failure to serve the executors additional affidavit until the 4th or 5th September. 12In Sherborne Estate (No.2): Vanvalen v Neaves (2005) 65 NSWLR 268, his Honour Justice Palmer was concerned with the question of whether the plaintiff had unreasonably rejected a Calderbank offer. At paragraphs 55-60 he said the following: "[55] I do not think that Helen's rejection of the defendants' Calderbank offer was so unreasonable as to justify an indemnity costs order against her, for the following reason. [56] A claim under the Family Provision Act is not quantifiable by the parties' legal advisers prior to judgment with anything like the prescience possible in a claim for a liquidated sum such as a contract debt, or even in a claim for unliquidated damages for personal injury or for future economic loss. There are statutory and judicial guidelines for the range of damages appropriate for various types of personal injury; expert accountants attempt to quantify damages for future economic loss by reference to historical financial information. [57] However, in a claim under the Family Provision Act, the Court has to quantify what provision "ought ... to be made" for the applicant out of the deceased's estate "having regard to the circumstances at the time the order is made": s 7. Inevitably, that question involves a large element of subjective assessment by the Judge. Inevitably, on any particular set of facts, there would be a variety of answers given by different judges. The decided cases offer broad parameters as to what provision "ought to be made" in certain kinds of circumstances but there is no formula and there is no yardstick on which the degrees of measurement are not etched by the judge's own experience of life. [58] There will be some Family Provision Act cases in which the applicant's claim is so unreasonable that the applicant is clearly unjustified in commencing the proceedings, let alone prosecuting them to a conclusion. In such a case indemnity costs might well be ordered. There will be many cases in which an applicant only just fails to qualify for further provision before one judge when the same applicant would have only just succeeded in qualifying for provision before another judge. There will be cases in which the applicant obtains an order for further provision which one judge would regard as appropriate, another would regard as generous and a third would regard as niggardly. [59] In the present case, the further provision which Helen received by the prosecution of her claim to judgment was $40,000 less than the amount offered in the defendants' Calderbank letter. However, the further provision which Helen received was a substantial amount. I do not think that it was obviously unreasonable for Helen's legal advisers to believe that it was possible that Helen could receive further provision from the deceased's estate in an amount greater than the sum of $120,000 which she was offered in the Calderbank letter. Another judge might have been more liberal than I have been. I do not think that it was manifestly unreasonable for Helen to pursue her claim to judgment rather than accept the defendants' offer of settlement. [60] Accordingly, I decline the defendants' application for an indemnity costs order against Helen." 13Importantly of course, this is only a case concerning a Calderbank offer. As has been pointed out in the cases quoted above the situation is different with offers of compromise under the Rules where the onus is on the plaintiff to establish that there are exceptional circumstances warranting a departure by the Court from the consequences of r 42.15A. The decision of Palmer J was briefly referred to in Tchadovitch v Tchadovitch [2010] NSWCA 316; (2010) 79 NSWLR 491. 14At paragraph 88, Campbell JA said: [88] The width of discretion available to a trial judge in fixing the quantum of an appropriate award under the Family Provision Act is one of the strengths of the respondent's position concerning the appeal. Ironically, that self-same factor is a significant weakness in the respondent's position concerning the cross-appeal: cf Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268 at [56]-[58], per Palmer J. The likely outcome or range of outcomes of the litigation was not, at the time the offer was made, so clear that it was unreasonable for the appellants to reject the offer. 15In that case, the comments were in the context of a Calderbank offer rather than an offer of compromise in accordance with the Rules. 16So far as the plaintiff's submissions that the plaintiff being the tutor was not running the proceedings for her own benefit that technically is of course the correct position. However as will be observed from the judgment the plaintiff is of course the mother of the real plaintiff who has now achieved his majority and is still living with her. In those circumstances it is not as though she is a disinterested person who does not have responsibilities for the person under the disability. It was also suggested that because there was a tutor the settlement was subject to approval. However that is not of itself a sufficient ground given the decision of the Court and the sum fixed by the Court. 17However the more troubling question is whether the Court should give consideration to the types of consideration referred to by Palmer J in Sherborne. As this is an offer of compromise under the Rules, they should apply. The rule has a narrow provision for exemption orders and in my view the Court should not accept that an offer within 10% of the result constitutes exceptional circumstances which would lead the Court not to apply the rule. 18I order that: (a) the plaintiff's costs be paid out of the estate of the deceased up to 27 August 2012 and that thereafter the plaintiff's tutor pay the defendants' costs on an indemnity basis. (b) the defendants' costs on the indemnity basis be paid out of the estate of the deceased.