Solicitors:
Leverage Solicitors (Plaintiffs)
Marsdens Law Group (Defendant)
File Number(s): 2013/272826
[2]
Judgment
HIS HONOUR: In this matter, I delivered reasons for judgment on 4 November 2015, the medium neutral citation of which is Bruce v Greentree [2015] NSWSC 1611 ("the principal judgment").
In the principal judgment, I determined that each Plaintiff's claim for a family provision order should be dismissed. The decision was based upon, amongst other things, the Plaintiffs not having satisfied me that there was "sufficient cause" for extending the time for the making of the application by each of them; there was virtually no actual estate out of which an order could be made; the value of the property that could be designated as notional estate if a designating order were made (which was not) was tiny; the terms of an open offer made by the Plaintiffs during the course of the hearing suggested that the claim, in each case, was not to satisfy any "need" of each Plaintiff; and the competing moral claim of the Defendant as the sole beneficiary entitled on intestacy.
Another part of the Plaintiffs' claim, which was for a declaration that certain property was held on trust, was dismissed at the commencement of the hearing because the Plaintiffs did not wish to pursue it. I dealt with the costs of that part of the proceedings at the time the court was informed that such relief sought in the Statement of Claim could be dismissed.
The remaining outstanding matter before the Court, upon which the parties were unable to agree, relates to the costs of the balance of the proceedings. When my Associate informed the parties, by counsel, of the date of publishing the principal judgment, at my request, she also informed them that I expected each to be ready to make submissions on costs.
Despite having informed counsel of that expectation, Ms A Power, counsel for the Plaintiffs, who had appeared at the hearing, sought an adjournment, presumably until my return from long leave, to enable her to consider the reasons for judgment, before making submissions on costs.
I declined to grant an adjournment in the hope that I might finally deal with the costs issue, in a "just, quick and cheap" way, but this hope proved futile. However, Ms Power was given the opportunity to read the reasons for judgment and obtain instructions, by telephone, from her instructing solicitors before I dealt with the submissions on costs.
Counsel had also been informed that I would be on leave, but even so, would deliver the principal judgment in order to avoid the delay to the parties in knowing the result of the case until my return in February 2016, and in the hope that the judgment of the court might bring an end to the wrangling, if not to the continuing reverberations of the fractured relationships, and the antagonistic feelings, that were evident at the hearing, and that if written reasons on the costs issue were required, I would be unlikely to publish these reasons before my return. However, as she was entitled to do on behalf of the Plaintiffs, Ms Power requested written reasons for judgment on the issue of costs. In these circumstances, it was necessary to reserve the decision on costs. Having avoided the delay in providing the parties with the result of the case, I consider that any delay in determining the costs question is not warranted.
Before hearing the submissions, each party tendered correspondence and what was said to be an Offer of Compromise which had been served upon the other prior to the hearing.
The copy correspondence from the Plaintiffs' solicitors to the Defendant's solicitors tendered (Ex. G) was a letter dated 13 August 2015, which was in the following terms:
"1. This Offer of Compromise is made in accordance with Rule 20.26, Division 4 of Part 20 of the Uniform Civil Procedure Rules 2005 (NSW).
2. The plaintiffs offer to compromise the whole of their claim against the defendant in these proceedings on the following terms:
(a) Judgment for the plaintiffs.
(b) The defendant is to pay to the plaintiffs the sum of $10,000.00.
3. If this Offer of Compromise is accepted within the period for acceptance referred to in paragraph 4 below, the following orders will be filed with the Court:
(1) Judgment for the plaintiffs.
(2) Order that the defendant is to pay to the plaintiffs the sum of $10,000.00.
4. This Offer of Compromise shall remain open for acceptance until 9am, Monday 17 August 2015."
The letter appears to have been sent on Thursday, 13 August 2015, the hearing being set to commence on Monday, 17 August 2015. In addition, there was a letter sent by their solicitors to the Defendant's solicitors, of the same date, which was in the following terms:
"We refer to the abovementioned proceedings, in which we act for both plaintiffs.
We consider that, in all the circumstances, both plaintiffs have a strong claim to provision out of the Estate of the late James Neville [sic] Greentree. In particular, both plaintiffs are in a position of demonstrable financial need.
However, the plaintiffs wish to avoid the further legal costs of a final hearing.
We are therefore instructed to make the following settlement offer in respect of the entire proceedings in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333:
1. The defendant is to pay to the plaintiffs the sum of $10,000.00 in settlement of these proceedings.
2. Proceedings dismissed.
3. Each party is to bear their own costs.
This offer is made in respect of the entire proceedings and, if accepted, is accepted in its entirety.
We consider the above offer represents a very fair and reasonable compromise.
Noting that the matter is set down for hearing commencing on Monday, 17 August 2015, this offer will remain open for acceptance until 2pm, Friday 14 August 2015.
If this offer is not accepted, we may rely upon this letter in seeking indemnity costs against your clients."
Counsel for the Defendant said, from the Bar table, that the Defendant's solicitors had received each document on Friday, 14 August 2015. I do not think anything turns on precisely when each document was received as it is clear that the offer was made just prior to the hearing. It was hardly a timely offer.
The correspondence from the Defendant's solicitors to the Plaintiffs' solicitors tendered (Ex. 2) was as follows. First, there was a letter dated 21 July 2015, which was in the following terms:
"We enclose by way of service Offer of Compromise.
We note the offer is made less than 2 months prior to the hearing and therefore we consider 14 days to be a reasonable time for its acceptance. If you hold a different view please advise and the reason for your view.
If for any reason this offer is not found to comply with the rules you should consider it is as an offer made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333."
The Offer of Compromise to which the letter referred and that was enclosed, which was dated 21 July 2015, was in the following terms:
"The Defendant offers to compromise the whole of this claim on the following terms:
1. Judgment for the Defendant, Statement of Claim be dismissed.
2. This offer is open for a period of 14 days from the date of this offer.
3. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005."
Next, there was a letter dated 11 August 2015 from the Defendant's solicitors to the Plaintiffs' solicitors, which letter was in the following terms:
"I refer to the above matter and previous correspondence.
On a purely commercial basis, with a view to avoiding the costs associated with the impending hearing commencing on 17 August 2015, our client makes the following offer to settle your clients' Statement of Claim:
1. The plaintiffs pay the defendant's costs as agreed or assessed.
2. The Statement of Claim be dismissed.
Reasonableness of the Offer
In our view our client will be successful in her defence of the Statement of Claim and will obtain a costs Order against your clients. However, should our client be required to continue to defend these proceedings, she is going to incur significant further costs in doing so.
With that in mind we advise:
1. Our client's costs to date are approximately $35,000.00;
2. If this offer is accepted within time, our client's Counsel has advised that he does not intend to charge a cancellation fee.
This offer is made in accordance with the principles enunciated in Calderbank v Calderbank and is open for acceptance until 3.00pm Thursday, 13 August 2015, after which time it will automatically lapse."
The final letter relied upon by the Defendant was one dated 17 August 2015, the first day of the hearing, which was in the following terms:
"I refer to the above matter and to the hearing before Justice Hallen today.
In an effort to avoid the costs to be incurred in having a second day of this hearing, our client makes the following offer to settle the dispute between the parties:
1. The Plaintiffs' Statement of Claim is dismissed.
2. The Plaintiffs' to vacate occupation of and hand over any keys located at Lot 23, xxx, Yarrowitch NSW 2354 (Folio Identifier 23/DPxxxx); and Lot 30, xxx, Yarrowitch NSW 2354 (Folio Identifier 30/DPxxxx) to the Defendant, care of Marsdens Law Group, within 14 days.
3. The Caveats over Lot 23 and Lot 30 xxx, Yarrowitch NSW 2354 are lapsed and/or lifted.
4. All costs orders are vacated.
5. Each party bear their own costs of the proceedings.
This offer is made in accordance with the principles enunciated in Calderbank v Calderbank and is open for acceptance until 9am Tuesday 18 August 2015."
It is clear that the final letter was sent by the Defendant's solicitors to the Plaintiffs' solicitors after the conclusion of the first day of the hearing (the hearing having commenced at about 2:00 p.m. on 17 August 2015).
Neither party provided any written submissions on how the burden of costs should be borne or on the relevance of the offers that had been made, but each has made oral submissions.
(I am satisfied that despite counsel for the Plaintiffs seeking an adjournment, some consideration had been given by her and her solicitors, to the documents to be tendered and to the submissions to be made.)
Having read the principal judgment, counsel for the Plaintiffs submitted that the appropriate order for costs of the family provision part of the proceedings was that each party should bear their, or her, own costs, respectively, of the proceedings. (It seems to me, bearing in mind the way in which the Plaintiffs' case had proceeded, and the findings of the court, that this was the only submission that could reasonably be made.)
Ms Power submitted that this order was appropriate because:
(a) The offer made to resolve the proceedings demonstrated "a willingness on the Plaintiffs' part to try to resolve the proceedings";
(b) The judgment of Gaudron J in Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521, at 522 (to which I shall refer), was applicable;
(c) The Defendant had acted unreasonably in that she was found to have not disclosed, fully and accurately, her financial and material circumstances; and
(d) An order for costs payable by the first Plaintiff would impact significantly on her financial and material circumstances.
In relation to the first submission, Ms Power did not seem to appreciate that unless an order for costs out of the estate, in their favour, was made, an order that they did not seek at the costs hearing, the offer made by the Plaintiffs prior to the hearing, was more favourable to them than the result of the case as it involved the payment of a sum of money ($10,000). She simply relied upon the offer made as demonstrating the Plaintiffs "had attempted to resolve the proceedings". She was unable to explain, why that fact, on its own, avoided the usual costs order in circumstances where the proceedings had been dismissed. (She said nothing about the inapplicability of the form of the Offer of Compromise in a claim for a family provision order.)
I shall deal with counsel's other submissions shortly.
The Defendant sought costs orders in the alternative. First, she sought an order that the Plaintiffs should pay the Defendant's costs, calculated on the indemnity basis, from either 22 July 2015; or from 13 August 2015; or from 18 August 2015. This submission was based upon the service of the Offer of Compromise, the Calderbank offers, and the correspondence to which I have referred respectively.
This submission did not really proceed very far, because counsel for the Defendant, in my view correctly, promptly accepted, when it was raised, that the Offer of Compromise, and the first Calderbank offer, in each case, did not appear to demonstrate any element of compromise. The Defendant was seeking the dismissal of the proceedings and the payment of her costs on the ordinary basis. (Whilst the Offer of Compromise proposed a judgment in favour of the Defendant and did not make any reference to costs, Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rule 42.13A(3) would have that result.)
In relation to the Calderbank offer made on 17 August 2015, it was made during the course of the hearing, but before there had been any cross-examination. Indeed, only some of the affidavits had been read and objections dealt with. It allowed less than 24 hours for acceptance.
In addition, counsel accepted that the conclusion in the principal judgment that the Defendant did not fully, and frankly, disclose her financial and material circumstances, spoke strongly against the making of an indemnity costs order in the Defendant's favour.
Before leaving the factual matrix in which the consideration of costs must be determined, I should repeat what I wrote, at [56], in the principal judgment:
"… the court allowed the parties every opportunity to resolve the proceedings, including holding a settlement conference, at a time when the costs and disbursements would not have been as large as they have turned out to be. Even during the hearing, when each party made her, or their, open offer, (to which I shall refer) the court suggested that they should again consider trying to resolve the proceedings. This did not lead anywhere. A further opportunity was given to them, after the conclusion of the Plaintiffs' evidence, when it was clear that the matter would have to proceed the next day. Again, no settlement was reached."
This matter, also, speaks against the making of an indemnity costs order. It will be borne in mind that whilst the Defendant was not obliged to accept the offer to pay the Plaintiff's $10,000, had she done so, it would have avoided some of the costs of the hearing and all of the costs of the argument on costs. It is likely that the costs and disbursements incurred by her after the Plaintiffs' offer was made would have been more than $10,000.
This is not to say that a Defendant should be "held to ransom" in circumstances such as these. Sometimes, however, a costs comparison might be a pragmatic consideration, particularly when the case involves a disunited family, when the hearing has not commenced, and when it is likely that costs and disbursements, on both sides, for the hearing, will be significant.
Having disclosed these as tentative views during argument, counsel for the Defendant then, in my view, very properly, did not persist with his submissions regarding an indemnity costs order, but went on to submit that an order should be made for the Plaintiffs to pay the Defendant's costs, such costs, to be calculated on the ordinary basis.
In support of this alternative submission, counsel relied upon what I had written in my reasons for judgment and the usual rule as to costs.
[3]
Determination
I have dealt with the legislative framework that applies in other cases and about which neither counsel raised any issue.
Section 98(1) of the Civil Procedure Act 2005 (NSW) provides that subject to the rules of Court and to this, or any other, Act, costs are in the discretion of the Court. Similarly, UCPR rule 42.1, provides that costs should follow the event unless it appears to the Court that some other order should be made as to the whole, or any part of the costs. UCPR rule 42.20(1) provides that if the Court makes an order for the dismissal of proceedings, then unless the Court otherwise orders, the plaintiff must pay the defendant's costs of the proceedings to the extent to which the proceedings have been dismissed.
The effect of these rules, in this case, is that the Plaintiffs must bear the Defendant's costs of the proceedings for the family provision order, unless the Court otherwise orders. The Court can only order otherwise if there is a discretionary decision to depart from what the UCPR provide.
There is no suggestion that the Civil Procedure Act and the UCPR do not apply to family provision proceedings.
As I have also written in other cases, the UCPR reflect the general proposition that an award of costs is discretionary but generally, the discretion is exercised in favour of the successful party.
Because of the wording of s 98(1) of the Civil Procedure Act it is necessary to mention the relevant provision of the Succession Act 2006 (NSW). Section 99 of that Act provides that the Court may order that the costs of proceedings under Chapter 3 of that Act in relation to the estate or the notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit.
It is clear that s 99 of the Succession Act, also, provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne.
Finally, Practice Note SC Eq 7 - Family Provision, Paragraph 24, provides:
"Orders may be made capping the costs that may be recovered by a party in circumstances including, but not limited to, cases in which the net distributable value of the estate (excluding costs of the proceedings) is less than $500,000."
Neither party sought an order capping costs. In addition, although I raised it, neither counsel asked me to make a lump sum costs order pursuant to s 98(4) of the Civil Procedure Act.
In other cases, including, Harkness v Harkness (No 2) [2012] NSWSC 35, at [18]-[19], I set out the general principles that apply in cases in which a family provision order is sought. For the assistance of the parties, none of whom were present in court on the application for costs, 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).
19Finally, what I said in Smith v Smith (No 2) at [77], is also applicable to the facts of the present case:
'I commend to parties involved in proceedings in which a family provision order is sought, that every effort, particularly in a relatively small estate, as this one is, to conduct negotiations frankly and openly, to try to resolve the proceedings, and if there are issues or concerns about an offer that has been made, to raise any issues at the first convenient opportunity with the offeror's solicitors, so that any ambiguities, or other concerns, can be resolved. The Court should be able to see that the parties have considered what is being offered in a sensible, practical, and commercial way.'"
These principles have been cited, with approval, since 2012.
In addition to the above principles, I should note that the usual costs rule in an unsuccessful family provision application "reflects the policy embodied in s 56 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 to failure": Carey v Robson; Nicolls v Robson (No 2) [2009] NSWSC 1199, per Palmer J, at [20], and that "[t]here is a public policy in the usual practice as well as the element of justice reflected in the rule that costs follow the event": Friend v Brien (No 2) [2014] NSWSC 614, per White J, at [20].
The most important matters that might have led me to conclude that I should make no order as to costs, the order sought by the Plaintiffs, are my conclusion that the Defendant had not fully, or accurately, disclosed, her financial and material resources and that she had financial resources greater than she disclosed in her affidavit evidence, or otherwise, to the court.
However, as I stated, in reaching my ultimate conclusions, I disregarded the Defendant as a person with a competing financial, but not with a competing moral, claim, on the bounty of the deceased. Accordingly, whilst I do not condone her conduct in that regard, her financial and material circumstances did not lead me to conclude that the Plaintiffs' Statement of Claim should be dismissed.
Lest it be thought that it has been forgotten, I have borne in mind that the Defendant received, and retained, all of the proceeds of sale of the Rossmore property ($453,250) (half of $906,500), although she did use some of the proceeds of sale for the deceased's benefit (said to be about $153,400), and that she received, by survivorship, the whole of the deceased's interest, as a joint tenant, in Lot 23 and Lot 30 ($122,500).
I have also considered that the Plaintiffs raised the uncertainty of the nature, and value, of the deceased's estate and notional estate. However, they were unsuccessful in establishing that the deceased's interest in the proceeds of sale of the Rossmore property, or any part of those proceeds, formed part of the actual estate of the deceased. The Plaintiffs were also unsuccessful in having the court exercise its discretion to designate any property as the notional estate of the deceased. In those circumstances, raising that uncertainty is not a sufficient reason to depart from the usual order for costs.
Whilst there is no evidence that the Plaintiffs were each advised by their lawyers of the risk as to costs in the event that her, and/or his, claim for a family provision order was unsuccessful, when parties are legally represented, the court is entitled to assume that such advice must have been given. If that advice was not given, that will be a matter between the Plaintiffs and their legal representatives.
Certainly, in the settlement conference to which reference has been made, both parties were informed, by the court, of the risk of a costs order, and that neither party should assume that a costs order favourable to them, or her, would be made.
That the Plaintiffs chose to proceed, having been advised of the risks, leads me to assume, also, that they were prepared to take that risk as to costs in the event that they were unsuccessful. The terms of their offer amply demonstrate that this was so.
The Plaintiffs should not be allowed, at the expense of the Defendant, to avoid the costs consequences of that decision. That does not mean that the making of the usual costs order is punitive. Such an order will be compensatory in nature, and made, at least to some extent, to reimburse the Defendant, who has incurred, and paid some of, the costs of litigation brought as a result of the actions of the Plaintiffs.
(In this regard, I reject the submission that because the first Plaintiff's financial and material circumstances would be detrimentally affected by the making of a costs order, no costs order should be made against her. Even that circumstance, when taken with the other matters to which I have referred, is not a discretionary factor leading to a departure from the usual costs rule.)
In reaching my conclusion, it is not necessary for me to express a view on whether it was reasonable for the Plaintiffs to bring their claims. Even if I expressed the view that it was, that circumstance would not justify a departure from the usual order.
Yet, counsel for the Defendant, did refer to the open offer made by each party during the course of the hearing, with which I dealt, in some detail, in the principal judgment. It is not necessary to repeat what was written concerning the Plaintiffs' offer.
It seems to me that the Defendant's offers, if accepted, might have saved the costs of the hearing after the first day. This provides an additional basis for not departing from the usual costs rule.
The Defendant, as the person appointed to represent the estate and notional estate of the deceased, generally, is entitled to indemnity costs out of the estate and notional estate. In this case, however, the Defendant, as the person solely entitled to the deceased's estate by operation of the rules of intestacy, the recipient of the money which the Plaintiffs unsuccessfully asserted formed part of the actual estate of the deceased and as the joint proprietor of the real estate, the deceased's interest in which was sought to be designated as notional estate, will have to bear the burden of any difference between ordinary, and indemnity, costs.
Yet, it is to be remembered that in defending the proceedings, the Defendant was endeavouring to protect her financial interests only. There was no other person entitled to any part of the deceased's estate and notional estate. However, this fact does not deprive her of the operation of the usual costs order. An application for a family provision order ought not to be launched unless there is, or there appears to be, a real chance of success, because the result of the proceedings simply diminishes the estate and notional estate and is a significant hardship on those beneficiaries entitled if the applicant is ultimately unsuccessful in the litigation.
In my view, the overall justice of the case requires me to order the Plaintiffs to pay the Defendant's costs, such costs to be calculated on the ordinary basis. There are no other discretionary factors that justify departure from the usual costs rule.
Accordingly, I order the Plaintiffs to pay the Defendant's costs, calculated on the ordinary basis.
[4]
Amendments
17 March 2016 - Wording of Paragraph 49 amended
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Decision last updated: 17 March 2016