Bradley Bates v Robert Henry Cooke

Mr Cooke's submissions 10It was submitted for Mr Cooke that, in the events which had happened, r 42.15A had been engaged so that Mr Cooke was entitled to an order for costs on the ordinary basis up to the date of the Offer and on the indemnity basis from the day after the Offer. If Bradley was to persuade the Court to order otherwise, it was necessary for Bradley to demonstrate exceptional circumstances: Vagg v McPhee (No 2) [2012] NSWSC 187; (2012) 10 ASTLR 32 ("Vagg"), a decision of Schmidt J itself applying the decision of the Court of Appeal in South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2. It was submitted that Bradley had made no attempt to establish exceptional circumstances or offer any kind of explanation as to why the Offer had not been accepted. 11Insofar as Bradley was suggesting that special considerations might apply in the exercise of the discretion to order otherwise under r 42.15A in relation to family provision cases, Mr Cooke submitted that notwithstanding some observations by White J in Slack v Rogan & Anor; Palffy v Rogan & Ors (No. 2) [2013] NSWSC 827 ("Slack"), it was clear that there was nothing special about family provision applications and that the rules in relation to offers of compromise should apply no more or less than they did to other cases. Attention was drawn to the decision of Macready AsJ in Mather v Mather (No 2) [2012] NSWSC 1264 where his Honour applied Schmidt J's decision in the context of a family provision application and found that exceptional circumstances had not been made out. Macready AsJ made orders in that case giving effect to r 42.15A. 12Finally, Mr Cooke relied on the dictum of Hallen J in Walsh v Walsh (No 2) [2013] NSWSC 1281 ("Walsh") (a case concerning the impact of a Calderbank offer in a family provision application) at [27] that "there is no suggestion that the UCPR does not apply to proceedings for a family provision order". While his Honour was there referring to r 42.1 that costs follow the event unless it appears to the Court that some other order should be made, his Honour's observation was, it was submitted, of general application.

Bradley's submissions 13It was submitted for Bradley that family provision cases had special features which meant that even an unsuccessful plaintiff could have their costs paid out of the estate. As Brereton J observed in McDougall v Rogers; Estate of James Rogers [2006] NSWSC 484 at [57] (citations omitted): The court may allow an unsuccessful plaintiff costs out of the estate, if in all of the circumstances the case was meritorious and reasonable, for example where a claim by an adult son for provision failed for want of establishing need, despite a substantial contribution or expectation basis for some testamentary benefit. Or the court may decline to make an order for costs against an unsuccessful plaintiff, leaving the parties to bear their own costs. As proceedings for family provision are essentially for maintenance, a court may properly decide to make no order for costs, even though it were otherwise justified, against an unsuccessful applicant, if it would adversely affect a financial position which had been taken into account in dismissing the application. 14Bradley's submission was developed by reference to the eleven general principles identified in relation to costs in family provision cases set out by Hallen AsJ (as his Honour then was) in Harkness v Harkness (No 2) [2012] NSWSC 35 at [17]-[18] ("Harkness"): 17. I have identified, in a number of other cases in which a family provision order has been sought (see, for example, Smith v Smith (No 2) [2011] NSWSC 1105, Mikan v Velcic (No 2) [2011] NSWSC 505), after referring to the legislation, which I have again set out above, the general principles I considered relevant. 18. For the assistance of the parties and others reading this judgment, I repeat the principles stated previously which I consider relevant to the present case: (a) In Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521, Gaudron J, said, at 522: "Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s.33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have a detrimental effect on the applicant's financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate." (b) Despite the above statement, which, of course, was written in the context of a security for costs application, and in respect of proceedings under the Family Provision Act , s 99 of the Succession Act provides a wide discretion in relation to costs ("in such manner as the Court thinks fit"). (c) The view of some practitioners advising a potential applicant contemplating a claim for a family provision order, that there is little risk, and probably much to be gained, in making a claim, however tenuous, because even if the claim fails the applicant will, very likely, get his, or her, costs out of the estate and that he, or she, will not be significantly out of pocket, and the legal practitioner will receive his, or her, costs and disbursements in any event, has been thoroughly discredited. (d) Parties should not assume that this type of litigation can be pursued, safe in the belief that costs will be paid out of the estate: Carey v Robson (No 2) [2009] NSWSC 1199; Forsyth v Sinclair (No 2) [2010] VSCA 195. It is now much more common than it previously was for an unsuccessful applicant to be ordered to pay the defendant's costs of the proceedings ( Lillis v Lillis [2010] NSWSC 359 at [23]) and be disallowed his, or her, own costs. (e) Where, as here, the issue is whether the unsuccessful applicant should bear the costs of the successful Defendant, s 98 of the Civil Procedure Act , and the rules quoted above, will apply, and, in the absence of some good reason to the contrary, there should be an order that the costs of the successful defendant be paid by the unsuccessful plaintiff: Moussa v Moussa [2006] NSWSC 509 at [5]. (f) An unsuccessful plaintiff will, usually, be ordered to pay costs where the claim was frivolous, vexatious, made with no reasonable prospects of success, or where she, or he, has been guilty of some improper conduct in the course of the proceedings: Re Sitch (No 2) [2005] VSC 383. (g) In small estates particularly, the court should be careful not to foster the proposition that obstinacy and unreasonableness will not result in an order for costs: Dobb v Hacket (1993) 10 WAR 532, at 540. (h) Proceedings for a family provision order involve elements of judgment and discretion beyond those at work in most inter partes litigation: Jvancich v Kennedy (No 2) [2004] NSWCA 397; Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003. (i) In exercising its discretion in relation to costs, the court will have regard to "the overall justice of the case": Jvancich v Kennedy (No 2) . The "overall justice of the case" is "not remote from costs following the event". However, the court may be more willing to depart from the general principle in proceedings for a family provision order than in other types of case: Moussa v Moussa; Carey v Robson (No 2); Bartkus v Bartkus [2010] NSWSC 889 at [24]. (j) As proceedings for a family provision order are essentially for maintenance, a court may properly decide to make no order for costs, even though it were otherwise justified, against an unsuccessful applicant, if it would adversely affect the financial position which had been taken into account in dismissing the application: Morse v Morse (No 2) [2003] TASSC 145; McDougall v Rogers; Estate of James Rogers [2006] NSWSC 484; McCusker v Rutter [2010] NSWCA 318 at [34]. (k) There are also other circumstances that may lead the court to order payment out of the estate of the costs of an unsuccessful Plaintiff. The court may allow an unsuccessful plaintiff costs out of the estate, if in all the circumstances the case was meritorious, reasonable or "borderline": McDougall v Rogers; Estate of James Rogers ; Re Bodman [1972] Qd R 281; Shearer v The Public Trustee (NSWSC, Young J, 21 April 1998, unreported). 15Taking into account those principles Bradley submitted that there were five reasons why the Court should exercise its discretion to order that his costs be paid out of Mrs Cooke's notional estate: (1)Bradley's financial position would be adversely affected if a costs order were made against him. In the principal judgment the Court had recognised that Bradley and his wife Leanne have significant debts and liabilities which are only just being met from Bradley's current income. (2)Bradley's financial position was especially important because it was the only material reason for the failure of his application. If Bradley was ordered to pay costs, then his debt position would be worse than that which was the basis for the Court's assessment of his need for provision. (3)Bradley's claim was reasonable and meritorious, particularly given that at the time it was commenced Leanne's mother had not yet died (so that the legacy from Leanne's mother was then nothing more than an expectancy). (4)A substantial proportion of the legal costs incurred by Bradley's solicitors was incurred in seeking production of documents and obtaining particulars about Mrs Cooke's notional estate in circumstances where Mr Cooke was being obstructive and unhelpful. (5)Mr Cooke's approach to providing information meant that part of the hearing was spent asking him about information that had not been properly disclosed. Furthermore, some documents sought by Bradley from Mr Cooke were not produced until part way through the hearing. 16During the course of argument I drew to the attention of Bradley's counsel that the authorities on which he was relying, in particular Harkness, referred to what might be called special considerations in relation to costs in family provision matters when no Calderbank letter or offer of compromise under the Uniform Civil Procedure Rules had been made. I indicated that Mr Cooke's submissions as to the applicability of r 42.15A appeared to be, prima facie, correct and that Bradley's task was to persuade me that the Court should order otherwise within the meaning of that rule. I gave Bradley an opportunity to research the matter further in the context of the application of r 41.15A and to make further submissions, with an opportunity for Mr Cooke to reply. That was done and my summary of the parties' submissions in these reasons synthesises both their earlier and later submissions. 17Having had the opportunity to consider the matter further, Bradley submitted that while there did not appear to be any case which decided whether principles of the kind set out in Harkness might impact upon offers of compromise in family provision cases, the issue had to some extent been considered by White J in Slack. In that case (at paragraph [7]) White J records a submission by counsel that "in determining whether the court should order otherwise than provided for under r 42.15(2) the court should have regard to the fact that costs of the family provision proceedings can also be ordered under s 99 of the Succession Act 2006 and that special principles can apply to the exercise of the general costs discretion in family provision proceedings" (citing, inter alia, Harkness). However, so it was submitted, the express ratio of White J's decision was (at paragraph [13]) that "the difficulty of accurately estimating the value of a claim for a family provision order is not a sufficient reason to depart from the prima facie position under r 42.15" (citing, inter alia, Vagg). In those circumstances it was said that White J's decision did not stand in the way of Bradley's submission that all of the matters upon which he relied (summarised in paragraph [15] above), justified the Court in ordering otherwise and that those factors, taken together, were much more persuasive than those which had been considered by White J as insufficient to justify the Court ordering otherwise in the case before his Honour.

Consideration - are "exceptional" circumstances required to order otherwise? 18There is no doubt that r 42.15A applies in this case. Before turning to Bradley's submissions, one aspect of Mr Cooke's argument requires elucidation insofar as it was submitted on his behalf that "exceptional" circumstances had to be shown before the Court would otherwise order under r 42.15A. The position is not so clear. As McColl JA observed in Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 308 ALR 571; (2014) 282 FLR 453; (2014) 98 ACSR 274: 64. There is a conflict in decisions of this court as to whether exceptional circumstances are required before the court may exercise the r 42.12(2) of the UCPR discretion to "otherwise order" (see Barakat v Bazdarova [2012] NSWCA 140 at [42] - [49] (Barakat) per Tobias AJA (Bathurst CJ and Whealy JA agreeing)) or whether that discretion has to be exercised having regard to all the circumstances of the case: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368; BC200910207 at [15]. 65. Tobias AJA concluded in Barakat (at [50]) that it was unnecessary to determine which line of authority to follow because he was of the view that none of the circumstances of that case would justify depriving the respondent of indemnity costs. 19In the circumstances of this case it is unnecessary for me to resolve the conflict to which her Honour refers, insofar as a judge at first instance might be able to do so. Uninstructed by authority I would respectfully adopt the view that a requirement to show exceptional circumstances was an unwarranted gloss on r 42.15A. This is because words to that effect neither appear in the rule nor, in my respectful opinion, could they be necessarily implied. However, in this case, Bradley has failed to demonstrate any circumstances, exceptional or otherwise, which would justify the Court, whatever the test, in ordering otherwise.

Consideration - offers of compromise in family provision cases: something different? 20Before considering the various circumstances peculiar to these proceedings upon which Bradley relies, I will first deal with the more general submission put on his behalf that the special considerations which sometimes apply in costs applications in family provision cases where no Calderbank offer or offer of compromise has been made mean that the rules in relation to offers of compromise operate differently in family provision cases. I do not accept that submission. 21It is necessary to supplement the references to authorities that have already been made by referring to two additional cases. First, in Pawlowska v Zajglic [2010] NSWSC 864, Brereton J made orders applying r 42.15A against an unsuccessful plaintiff in family provision proceedings. Other than observing (at paragraph [5]) that no substantive reason for ordering otherwise had been advanced, his Honour applied the rule without any reference to the possibility that some special feature arose because the order was being made in family provision proceedings. 22The other case is the decision of White J in Friend v Brien (No 2) [2014] NSWSC 614 ("Friend") in which his Honour applied r 42.15A in family provision proceedings. In that judgment his Honour said: 17. I think the plaintiffs should also be taken to have submitted that special principles as to costs can apply in family provision proceedings. 18. In Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521, in dealing with a security for costs application, Gaudron J said that: Family Provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which in s 33 makes special provision in that regard, costs in Family Provision cases generally depend on the overall justice of the case, it is not uncommon in the case of unsuccessful applications for no order to be made as to costs, particularly if it would have a detrimental effect on the applicant's financial position and there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate. 19. See as an example where such a position was taken as to costs, Moussa v Moussa [2006] NSWSC 509. In Carey v Robson (No. 2) [2009] NSWSC 1199 Palmer J noted that the practice in South Australia appears to be against applying the usual costs rule in an unsuccessful family provision application, but went on to say (at [20]): The opposite is the case in New South Wales. I do not know why the same approach to costs orders in Family Provision cases is not followed throughout Australia but I am not at liberty, nor do I desire to depart from the current law and practice in this State. It reflects the policy embodied in s 56 of the Civil Procedure Act that litigation must be conducted responsibly and should only be commenced by a plaintiff after careful evaluation of the costs consequences likely to attend failure. 20. In other words, although there can be departure from the usual principle that costs follow the event and that an unsuccessful applicant for a family provision order might not be required to pay costs, or might even have his or her costs out of the estate, that is not the usual order. There is a public policy in the usual practice as well as the element of justice reflected in the rule that costs follow the event. 23Although, with the utmost respect, it is not entirely clear, I read his Honour's conclusion in paragraph [20] as a rejection of the submission which his Honour records in paragraph [17] insofar as that submission must be understood as having been put in the context of an argument as to why the Court should order otherwise under r 42.15A. 24In that same judgment, his Honour also reaffirmed what he had said in Slack that the difficulty of estimating the value of the claim is not a sufficient reason to order otherwise under r 42.15A: 29. It is difficult for parties to assess the likely outcome of a claim for a family provision order. The criteria to be applied are so general and the judgment to be made so evaluative that the same facts can appeal to different judges in markedly different ways. As Palmer J said in Carey v Robson (No 2) (at [11]) concerning the claim of an unsuccessful plaintiff that: I do not regard Marion's claim as borderline. However, I readily acknowledge that other minds may come to a different conclusion. Marion may have succeeded in her application before another judge. That is the nature of this kind of litigation. 30. Those elements of uncertainty do not warrant a departure from the usual provision in r 42.15 A. It has been held on a number of occasions in different contexts, including in the context of a claim for a family provision order, that the difficulty of accurately estimating the value of the claim is not a sufficient reason to depart from the prima facie position under the rule (see Slack v Rogan (No 2) [2013] NSWSC 827 at [13] and cases cited). 31. Having regard to the policy of the rules concerning offers of compromise I do not think that I would be warranted in making an otherwise order, let alone in making no order as to costs. 25As I understand it, the position to which White J ultimately came in Friend is that the special principles that might otherwise apply in relation to costs in family provision matters do not have the same application when considering whether the Court should otherwise order for the purposes of r 42.15A. If I have correctly understood his Honour's decision, I respectfully agree with it. In any event, I have come to the same result independently. 26As a starting point, it should be noted that there is no authority that supports Bradley's submission and some (Slack) that appears to be to the contrary. Furthermore, there are numerous decisions applying what might be called the common law of Calderbank offers to family provision cases. A recent compendious statement as to both costs generally and Calderbank offers in particular in family provision cases is to be found in Walsh at [23]-[56]. There is no suggestion that Calderbank offers are considered any differently in family provision cases. It would be an odd result if the position were otherwise in relation to offers of compromise. However, the terms of the rules do not permit such a result. 27Neither the text of r 42.15A nor the policy underlying the offer of compromise provisions in the Uniform Civil Procedure Rules support the conclusion that in family provision cases those rules are to be applied differently to other cases or, perhaps putting the matter more precisely, that there are some a priori features of family provision litigation which mean that the Court will more readily order otherwise in family provision cases than other types of litigation. 28UCPR Pt 20, r 20.26 (which deals with the form of an offer of compromise and when it can be made) and, in this case, r 42.15A must be read together. With one exception, those provisions are entirely general in their expression. In particular, r 22.6(1) provides that "In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms" (emphasis added). The one exception, clearly directed at family provision proceedings, is r 20.26(3)(c) (introduced in 2013) that an offer may propose "that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer". 29The Court is therefore unable to identify anything in the language of the relevant parts of the rules concerning offers of compromise and their consequences which suggest any legislative intention that family provision cases are to be treated in any way differently from other types of litigation. 30Insofar as the policy underlying those provisions is concerned, namely encouraging the realistic assessment by parties of their respective positions and facilitating the resolution of litigation by giving a failure to accept an offer of compromise real consequences in terms of costs, there is again nothing to suggest that family provision litigation should be treated any differently. On the contrary, the introduction of r 20.26(3)(c) evinces a legislative recognition that the rules in relation to offers of compromise apply to family provision litigation. 31Furthermore, there are certain features of family provision litigation which suggest an even stronger public policy basis for the encouragement of settling litigation than might apply in other types of case. Those considerations include: (1)Family provision litigation involves a fixed fund which risks being substantially depleted by legal costs to the disadvantage of all concerned if litigation is persisted with. (2)The jurisdiction is redistributive rather than punitive or compensatory. (3)As a corollary of the preceding point, family provision litigation is not the fault of the parties in the sense that the parties have not come to court because of the alleged breach, fault or delict of any of them in the way that might otherwise give rise to civil litigation. (4)The parties are almost always natural persons and, more often than not, people who are completely unused to litigation. The emotional, let alone financial, strain on litigants in family provision claims can be much higher precisely because it concerns matters of family, relationship and emotions. (5)The amounts at stake are often, but by no means always, not large compared to other matters that come before the Court. Real questions often arise as to the proportionality of the legal costs when compared to the amounts of money at stake. 32It is features such as those to which I have just referred which underlie the Court's special concern to facilitate the resolution of family provision matters where possible. That concern is evidenced by the rules set out in Practice Note No SC Eq 7, including that all such proceedings will be referred to mediation, unless the Court orders otherwise. 33Taking into account the language of r 42.15A, a party seeking to persuade the Court to order otherwise must identify some feature or features of one or more of the proceedings, the claim, the offer (including, for example, when it was made) and the order or judgment obtained by the successful party which provide a rational basis for the Court to displace what the rule specifies is the costs order to which "the defendant is entitled". While in a particular case such a feature may coincide with the type of considerations identified in Harkness (see paragraph [14] above), it will do so because of the particular circumstances (exceptional or not, depending on the resolution of the diversity of authorities in the Court of Appeal) in the case at bar and not because of their presumptive or a priori application because the proceedings are for family provision.

Consideration - the reasons advanced by Bradley 34Approaching the matter in the way set out in the preceding paragraph, the Court is not satisfied that any of the reasons advanced on behalf of Bradley (see paragraph [15] above) are sufficient, individually or cumulatively, to displace Mr Cooke's entitlement to orders of the kind specified in rule 42.15A. They are not exceptional or otherwise sufficient, irrespective of which test is applied. 35Bradley made no effort to explain, for example by an affidavit from his solicitor, what consideration was given to the Offer and why it was refused. The evidence does not permit the Court to draw any inference as to why the Offer was refused. Such evidence would generally, but not always, be the starting point of a submission as to why the Court should order otherwise. 36Furthermore, in considering the matters advanced on behalf of Bradley, the Court notes that the Offer was made on 24 June 2014, approximately four weeks before the hearing was fixed to commence. Two significant events had occurred by that date. 37First, irrespective of whatever effort and expense Bradley may have been expending in pursuing information and records from Mr Cooke, that process had reached its culmination in the provision of an affidavit sworn by Mr Cooke on 26 June 2014 in response to orders made by the Court to set out his assets, liabilities, income and expenditure for each of the jointly held properties. Lack of financial information cannot be relied upon as a sufficient reason in this case to order otherwise. 38Second, by the date of the Offer Bradley must have been aware, and the Court infers that he was aware, of the likely size of the legacy that Leanne was to receive from the estate of her late mother. As is referred to in paragraph [52] of the principal judgment, Leanne's entitlement to that legacy had a significant, beneficial effect on Bradley's financial position. However meritorious his application for family provision may have been at the time he filed it, his financial circumstances were, by reason of the impending legacy, materially improved as at the date of the offer. It should have been obvious that given the change in his financial position, his prospects of obtaining any or any substantial provision were somewhat reduced, making the Offer commensurately more attractive. 39Taking into account the matters referred to in paragraphs [37] and [38] above, in the absence of any explanation as to why the Offer was refused the Court is not persuaded that there is any rational basis upon which it should otherwise order.

Conclusion and orders 40As is noted in paragraph [26] above, there are numerous cases demonstrating the operation of Calderbank offers in relation to family provision matters. Such offers do not raise any presumption in favour of the successful party, who bears the onus of satisfying the Court that an order should be made in his or her favour, usually by demonstrating that the opponent's rejection of the offer was unreasonable. On the other hand, an offer of compromise offers a more certain result in that it gives rise to a statutory entitlement to a particular costs order, subject only to the Court ordering otherwise. The Court places special emphasis on encouraging settlement in family provision matters (see paragraphs [31] and [32] above). The obligation of parties and practitioners under s 56 of the Civil Procedure Act 2005 (NSW) includes the active pursuit of settlement. The result in these proceedings may serve to remind practitioners about the real utility of offers of compromise in family provision litigation. 41Mr Cooke has demonstrated that the circumstances of this case fall within r 42.15A. Bradley has failed to satisfy the Court that there are any circumstances (exceptional or otherwise) which warrant the Court ordering otherwise than in accordance with the entitlement conferred on Mr Cooke by r 42.15A. 42In addition to the orders already made dismissing Bradley's summons and directing the return of the exhibits in accordance with Practice Note SC Gen18, the Court orders: (1)The plaintiff pay the defendant's costs of the proceedings on the ordinary basis up to and including 24 June 2014. (2)The plaintiff pay the defendant's costs of the proceedings on the indemnity basis on and from 25 June 2014 including, for the avoidance of doubt, the defendant's costs of the hearing and submissions as to costs. 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: 25 September 2014