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[2009] NSWSC 1199
Supreme Court of NSW
2009-11-04
Palmer J, Mason P
Original judgment source is linked above.
CITATION : Carey v Robson & Anor; Nicholls v Robson & Anor (No 2) [2009] NSWSC 1199
DECISION : In each proceeding, apart from costs of the formal executors' affidavits, Plaintiff to pay Defendant's costs on party/party basis.
CATCHWORDS : SUCCESSION - FAMILY PROVISION - COSTS - Whether unsuccessful claimant should have costs out of estate or no adverse costs order - whether costs should follow event - principles - discretionary factors - excessive costs incurred - significance of Practice Note SC Eq 7.
TEXTS CITED : Davern Wright "Testator's Family Maintenance in Australia and New Zealand" 3rd Ed, p 176
Marion Allinson Carey (Plaintiff 4842/07, 2nd Defendant 5215/07) PARTIES : Rosemary Helen Nicholls (2nd Defendant 4842/07, Plaintiff 5215/07) Alan Frederick William Robson (First Defendant 4842/07 & 5215/07)
L.J. Ellison SC (Plaintiff 4842/07, 2nd Defendant 5215/07) COUNSEL : R.M. Lovas (2nd Defendant 4842/07, Plaintiff 5215/07) G.R. Waugh (1st Defendant in 4842/07 & 5215/07)
Kerrisons the Law Firm (Plaintiff 4842/07, 2nd Defendant 5215/07) SOLICITORS : The Law Company (2nd Defendant 4842/07, Plaintiff 5215/07) W.A. Baxter & Co (1st Defendant in 4842/07 & 5215/07)
4842/07 Carey v Robson & Anor } 5215/07 Nicholls v Robson & Ors } No 2
1 I gave judgment in these proceedings on 28 October 2009: [2009] NSWSC 1142. I will assume that the reader is familiar with that judgment. The parties have now made extensive submissions on what costs orders should be made. 2 For the sake of convenience, and without intending disrespect, I will continue to refer to the members of the family by their first names. 3 The Plaintiffs in both proceedings, Marion and Rosemary, were unsuccessful in their claims under s 7 Family Provision Act 1982 (NSW) for further provision out of the estate of the deceased. Their Summonses have been dismissed. 4 The primary submission of the First Defendant, Alan, is that the usual costs order should be made, i.e. that costs should follow the event so that Marion and Rosemary should each be ordered to pay his costs of defending their respective claims on the party/party basis. To the extent that Alan does not recover his costs in full from Marion and Rosemary, Alan submits, he should be recouped from the estate. However, as Alan is the residuary beneficiary, the recoupment order would be of no moment since, one way or another, Alan would have to pay out of his own assets such part of his own costs as he is unable to recover from Marion and Rosemary. Marion's proceedings
5 Despite the fact that her claim failed, Marion seeks an order that her costs be paid out of the estate. Alternatively, she says, there should be no costs order made, each party being left to bear her and his own costs. 6 Mr Ellison SC, who appears for Marion, accepts that the usual rule in New South Wales, namely that costs follow the event, applies in family provision cases. However, he says, the Courts have recognised that family provision litigation sometimes raises special considerations. Mr Ellison draws attention to the following passage from the judgment of Mason P, Hodgson and McColl JJA in Nicholls v Hall [2007] NSWCA 356, at [57]: "… we note that in times past, adverse costs orders have occasionally been withheld against plaintiffs who have (without misconduct in the proceedings) brought tenable yet ultimately unsuccessful claims under the Family Provision Act (see Mason & Handler, Succession Law and Practice NSW at [6089]). This practice may have been seen as having some justification from a perceived desirability of minimising post-litigation conflict in family disputes, the availability in some cases of a significant fund the use of which could alleviate hardship on a losing party, and the circumstance that in some cases the decision was a marginal discretionary decision on which reasonable minds could differ. The Court was informed that this is no longer the practice of the Equity Division and that what may be termed general costs principles apply to these types of cases. Without endorsing or disendorsing the apparent change of practice, we would simply note that the point does not arise for consideration in this appeal. 7 Reference should also be made to the judgment of Barrett J in Moussa v Moussa [2006] NSWSC 509, in which the plaintiffs' claims under the Family Provision Act failed. At paras [4]-[8] and [10] his Honour said: "[4] Section 33 of the Family Provision Act regulates the extent to which the court may order that costs be paid out of the estate. In the present case, the application before me is an application for an order that costs be paid by the plaintiffs. I can therefore leave s 33 to one side.
[5] On that basis, the ordinary rule reflected in r 42.1 of the Uniform Civil Procedure Rules 2005 will apply and, in the absence of some good reason to the contrary, there should be an order that the costs of the successful defendants be paid by the unsuccessful plaintiffs.
[6] It is to be remembered, however, that Family Provision Act cases are acknowledged to attract special considerations in relation to costs. I quote from the judgment of Gaudron J upon a security for costs application before the High Court in Singer v Berghouse (1993) 114 ALR 521 at pp 521-2: In most cases, costs follow the event in the sense that, save in special or extraordinary circumstances, costs are awarded in favour of the successful party and against the unsuccessful one. …
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.
[7] Gaudron J then referred to the circumstances that, at first instance, no order for costs was made against the applicant even though she had been unsuccessful.
[8] In Jvancich v Kennedy (No 2) [2004] NSWCA 397, Giles JA observed (with Handley JA and McColl JA agreeing) that the 'overall justice of the case' is 'not remote from costs following the event' -thus indicating that the generally applicable rule is to be recognised. But proceedings of this kind involve elements of judgment and discretion beyond those at work in most inter partes litigation. As Palmer J said in Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003: A decision whether a Family Provision Act claim fails or succeeds produces a black and white result which often belies the fact that the case was borderline and could have gone either way.
[10] It was by no means unreasonable for the plaintiffs' legal advisers to believe that the claim had reasonable prospects of success. Its ultimate lack of success paid attention, in large measure, to the assets and resources available to their mother. In those circumstances, I view this case in the same way as Palmer J viewed the situation of the unsuccessful applicant in Sherborne and am of the opinion that 'the overall justice of the case' , to use Gaudron J's expression, warrants the conclusion that no order for costs should be made against the plaintiffs." 8 In Re Sherborne Estate (No 2) [2005] NSWSC 1003, the unsuccessful applicant failed because she was not able to demonstrate sufficient unequivocal dependency on the deceased to qualify as an "eligible person" within paragraph (d)(i) of the definition. However, there had been a loving and mutually supportive relationship between the applicant and the deceased and the applicant's financial position was very modest. It was not unreasonable for her legal advisers to believe that the application for provision from the estate had some prospect of success. 9 If the usual costs order had been made against the applicant when her Summons was dismissed, the consequences could have crippled her future prospects in life. However, refusal of such an order would have had far less severe consequences on the successful defendant. In those circumstances, the "overall justice of the case" required that no costs order be made against the applicant: judgment paras [64]-[66]. 10 The circumstances of Marion's case are not remotely similar to those in Re Sherborne or in Moussa v Moussa. In brief, Marion's claim failed because she was already in comfortable financial circumstances even without provision from the deceased's estate. She had been left a provision of $470,000 out of the estate and wished to have more, primarily to advance the prospects in life of her adult, able bodied children and in order to enhance the rural property of her husband. She and her advisers went to considerable pains to put forward evidence justifying a claim for a total of $3,203,000 out of an estate of $4,985,000 when, as she must reasonably have acknowledged, Alan's moral claim to the testator's bounty was far higher than her own and his financial circumstances were far more precarious in that although he owned rural land of considerable value he was extremely "income poor". 11 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. 12 Is the "overall justice of the case", which is to be considered in determining the appropriate costs order, affected by the fact that the testator made far larger provision for Alan than he did for Marion? Although Mr Ellison did not propound, even as a prima facie principle or presumption in family provision cases, that children of a testator should receive equal testamentary treatment, he placed at the forefront of his case the fact that Alan had received far more from the testator than had Marion: see judgment paras [57]-[58]. That circumstance, of course, sends a powerful subliminal message and to emphasise it was undoubtedly good advocacy. That children should be treated equally is a normal parental and societal aspiration. 13 However, as the law presently stands, equality of testamentary treatment between children is not, in itself and without more, a foundation for a family provision claim. I cannot, therefore, permit inequality of testamentary treatment in Marion's case affect the "overall justice of the case" for the purposes of a costs order. 14 Mr Ellison has made no submission that the usual costs order should not be made because it would have severe financial consequences for Marion. This is understandable. 15 Marion's own costs will be about $210,000. They are far larger than they should be - a matter to which I will return. Alan's costs of both proceedings will be about $204,000. I will assume that this amount will be apportioned roughly equally between both proceedings. If the usual costs order is made against Marion, she will have to pay her costs and about $102,000 for Alan's costs, a total of about $312,000, although it is highly probable that Alan's costs will be reduced on assessment. 16 Nevertheless, the evidence suggests that if the usual costs order is made against Marion, neither Marion nor Robert will have to sell assets to pay those costs. Marion's provision of $470,000 out of the estate will be sufficient to pay those costs and she will have a significant amount left for discretionary expenditure. 17 In those circumstances, I can see no discretionary factors in Marion's case justifying departure from the usual costs rule. As Giles JA said in Jvancich v Kennedy (No 2) [2004] NSWCA 397, the overall justice of the case is not remote from costs following the event. Rosemary's proceedings
18 Like Marion, Rosemary submits that, notwithstanding the failure of her claim, she should be awarded the costs of the proceedings. In the alternative, she says, no costs order should be made against her. 19 Mr Lovas of Counsel, who appears for Rosemary, concedes that the law in New South Wales as to costs orders in family provision cases is as summarised in Moussa v Moussa and in Nicholls v Hall (supra). However, he refers to a decision of the Full Court of the Supreme Court of South Australia in Bowyer v Wood [2007] SASC 327. There, the claimant for provision succeeded on appeal and was, accordingly entitled to costs out of the estate. Nevertheless, Debelle J (with whom the other members of the Court agreed) made some general observations as to the costs of unsuccessful applications in family provision cases. At [68] his Honour referred to Singer v Berghouse (1993) 114 ALR 521, at 522, Morse v Morse (No 2) [2003] TASSC 145 at [4], and re Sitch [2005] VSC 383, and said: "There is, therefore, a substantial body of consistent opinion as to the rules which ordinarily operate in relation to an unsuccessful application. The principles are that, generally speaking, there will be no order as to costs of an unsuccessful application. The court may in its discretion make an order in favour of an unsuccessful applicant who makes a reasonable application founded on a moral claim or obligation. While it is unnecessary to decide the issue in this case, the cases also suggest that the court may in its discretion order an unsuccessful applicant to pay costs where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the applicant has been guilty of some improper conduct in the course of the proceedings."
As Mr Lovas points out, this statement is obiter dicta but I have no doubt that it correctly states the law in South Australia. 20 In South Australia it appears that the present tendency is against applying the usual costs rule in an unsuccessful family provision application. 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 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. 21 Previously, in this State, there was a view held by some practitioners advising a client contemplating a claim under the Testator's Family Maintenance and Guardianship of Infants Act 1916 (NSW) and, later, the Family Provision Act 1982 (NSW) that there was little risk, and probably a lot to be gained, in making a claim, however tenuous, because even if the claim failed, the claimant would very likely get his or her costs out of the estate: the client would not be out of pocket and the solicitor would receive his or her fee in any event. That approach to family provision litigation, in effect, threw the whole burden of costs onto the beneficiaries of the estate. It promoted much wasteful litigation, it was not supported by authority (see Davern Wright "Testator's Family Maintenance in Australia and New Zealand" 3rd Ed, p 176) and it should be recognised, once and for all, as thoroughly discredited. 22 Mr Lovas urges as discretionary factors supporting the orders which he seeks that:
27 The facts of this case were not in dispute. The circumstance that the estate exceeded $4M in value did not warrant expenditure of costs in an amount larger than was necessary to present the issues fully and fairly. The issues depended almost entirely upon an assessment of the respective financial situations of Marion, Rosemary and Alan, as Marion and Rosemary did not deny that Alan had been primarily responsible for looking after the testator in his declining years and had contributed substantially by his own efforts to the value of the testator's estate. 28 The Plaintiffs' cases should have been presented in a straightforward and economical fashion. However, Marion's first affidavit was 62 pages in length and the annexures comprised a further 237 pages. A great of money was spent on experts' reports which were unnecessary. A valuation of the land in question was ultimately agreed between the parties, as it should have been from the beginning. A detailed building report describing the renovations which Marion hoped to make was unnecessary and irrelevant and was disallowed. 29 Rosemary's first affidavit, including annexures, was 388 paragraphs and 45 pages in length. She served a further five affidavits in reply. 30 Much of the affidavit evidence of both Marion and Rosemary recounted events in the family's history which were of no real significance and threw no light on the resolution of the issues. This kind of evidence has been frequent in family provision cases in this Court. The present case is very far from being the worst example. 31 The Judges of this Division have long endeavoured to curb excessive and disproportionate expenditure of costs in family provision and testamentary capacity cases. In Fiorentini v O'Neill [1998] NSWCA 79, Mason P, Handley JA and Fitzgerald AJA said: "The Court should set its face against litigation in which an estate is unnecessarily consumed in costs." This and similar exhortations seemingly went unheeded by the profession: see for example Re Sherborne Estate (supra); Tobin v Ezekiel [2008] NSWSC 1108. 32 The Court has now issued a Practice Note as to the conduct of family provision cases (SC Eq 7). It applies to claims both under the Family Provision Act 1982 and under its replacement, Chapter 3 Succession Act 2006 (NSW). The Practice Note, in conjunction with other Practice Notes relating to proceedings in the Equity Division generally, is intended to further the overriding purpose of the Civil Procedure Act 2005 (NSW), which is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings: s 56(1) CPA. 33 Paragraph 4 of SC Eq 7 requires an applicant's affidavit to comply with the form specified in Annexure 1. That form shows the essential information to be provided in support of an application in a family provision case. Importantly, it emphasises the economy with which that information is to be given. Of especial significance is paragraph 8 of the pro forma affidavit, which shows that strict economy in giving evidence as to "moral obligation" is expected. 34 The evidence of a defendant in family provision case should display similar focus and economy. If what used to be called "conduct disentitling" is to be raised against an applicant, the evidence should be direct, admissible and free from gratuitous insult. 35 Of particular importance is paragraph 23 SC Eq 7, which provides: " Costs If any affidavits include irrelevant material, the court may order that the party responsible for that affidavit pay: His/her own costs of preparing the affidavit and any time spent dealing with the affidavit in court
The indemnity costs of other parties to the proceedings in responding to the affidavit." 36 The Registrar, in giving directions in the family provision list, will be astute to ensure that the requirements of SC Eq 7 are observed by both sides from the earliest stages of the proceedings. Affidavits which do not comply with the Practice Note or which otherwise contain irrelevant material will attract immediate costs orders against the party responsible, as indicated in paragraph 23. 37 In the present case, as it happens, most of the costs wasted on unnecessary and irrelevant evidence will fall directly on the parties responsible, Marion and Rosemary. They, as unsuccessful plaintiffs, will have to pay their own costs in full and, as well, they will have to pay the assessed costs of Alan. Alan's evidence was more discursive than it should have been but that was largely because it was responding to the evidence of Marion and Rosemary. Because the consequences of unnecessary evidence will, in this case, fall where they belong, there is no need for me to make any special costs orders of the kind envisaged in paragraph 23 of SC Eq 7. 38 Finally, I should note a submission of Mr Lovas that the Court should disallow the costs of Senior and Junior Counsel for Alan. Mr Lovas says that the factual and legal issues were not so complex or voluminous that two Counsel were justified. I am unable to agree. Alan had to meet two separate cases, each involving a large volume of material. Senior Counsel was briefed for Marion and doubtless there was some co-operation between Mr Ellison SC and Mr Lovas in presenting common features of their cases. In those circumstances, I cannot say that the retention of Senior and Junior Counsel for Alan was unjustified. Orders
39 In each proceeding the orders of the Court are as follows:
(1) The costs of the formal joint affidavits of the executors and any other costs of the executors acting jointly are to be paid out of the estate on the indemnity basis.
(2) Otherwise, the Plaintiff is to pay the First Defendant's costs of the proceedings on the party/party basis.
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.
[2007] SASC 327
[2003] TASSC 145
[2005] VSC 383
(1993) 114 ALR 521