Chalik v Chalik

Analysis

The effect of the September 2021 and June 2022 offers. As to the Calderbank offer of September 2021, the principles applicable to Calderbank offers are well settled. Principles concerning attempts to compromise proceedings by Calderbank offers are applicable in probate proceedings: Walker v Harwood [2017] NSWCA 228 ("Walker") at [58]. Parties seeking an order for indemnity costs based on a Calderbank offer have the burden of showing the Court why such an order should be made in their favour, and, generally, this means that they should persuade the Court that the refusal to accept the offer was unreasonable in all the circumstances of the case: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [20].
The Court of Appeal's decision in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 ("Miwa"), (at [9]), is authority for the proposition that an informal offer (and indeed an offer of compromise under the Uniform Civil Procedure Rules 2005) must contain "a real and genuine element of compromise": see also The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] 67 NSWLR 706; [2006] NSWCA 120, (at [8]). In Miwa, the Court noted that there is authority that the epithets "real" and "genuine" add little to the requirement of compromise: Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19, (at [23]); Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170, (at [17]-[18]).
The determination of whether the rejection of an offer was unreasonable is an evaluative judgement to be made by reference to the terms of the offer and all the relevant surrounding circumstances and should not be upheld other than on clear grounds: King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No. 2) [2009] NSWSC 8204 at [11] and Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113].
The considerations relevant to the determination of whether a refusal of a Calderbank offer is unreasonable were stated in Miwa, at [12], based on Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 435; [2005] VSCA 298 ("Hazeldene's"), (at [25]). The Victorian Court of Appeal (Warren CJ, Maxwell P and Harper AJA) in Hazeldene's held that the following elements were relevant to determining whether the rejection of a Calderbank offer was unreasonable: "(a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it."
The September 2021 offer put the facts before Gregory, the evidence in other courts and tribunals in which the deceased's medical conditions and dementia had been expounded, the deceased poor command of English and the lack of any indication that she had interpreter available to her when the will was made, the solicitor who prepared the will having scant notes of his dealings with the deceased, and Gregory's conduct towards the deceased, using her money and taking advantage of her vulnerable position. Isaac clearly bettered this Calderbank letter's offer of joint support for probate of the 1998 will and $20,000 to be paid to Gregory.
It was unreasonable of Gregory not to accept the Calderbank letter. Although it was issued before the proceedings were commenced Gregory was well aware of and closely involved in the events that weighed in Henry J's consideration against admitting the 2013 will to probate. The offer represented a genuine compromise given the limited options in probate proceedings and was open for 21 days, yet Gregory went ahead and commenced the proceedings, thereby causing both parties to incur the very substantial costs of these proceedings. Subject to the considerations discussed below, the Calderbank letter should be given effect.
As to the offer of compromise of June 2022, the principles that govern the Court's exercise of discretion in relation to costs where an offer of compromise is not accepted are well known. Here, Isaac's offer was not accepted, and judgment was entered which was no more favourable to the plaintiff than the terms of the offer: UCPR r 42.15. Subject to the Court's discretion to "otherwise order" the presumption that arises under the rule is that the plaintiff may only recover costs from the defendant up to the time that the offer was made and thereafter the defendant is entitled to costs on an indemnity basis.
The applicable principles have been summarised in authorities such as Benette v Cohen (No. 2) [2009] NSWCA 162 and Walker v Harwood [2017] NSWCA 228. One important matter for emphasis is that prima facie the consequence of non-acceptance of an offer of compromise will be that the rule will be enforced against the non-accepting party, because from the time of the non-acceptance "notionally the real cause and occasion of the litigation is the attitude adopted by the [party] which has rejected the compromise": Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721 at 724 ("Maitland Hospital").
The rationale for the rule is to encourage the compromise of litigation to advance both the private interests of the parties and public interest and to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital at 724. An offeree may resist the cost presumption arising from an offer of compromise by establishing it was not unreasonable for them to reject the offer in all the circumstances: Arnott v Choy (No. 2) [2010] NSWCA 285.
The June 2022 offer of compromise set out the full history of matters relevant to the probate issues and explained the issues in considerable detail and offered a grant of probate of the 1998 will to Ms Ross-Maranik, dismissal of the 2021/326779 proceedings, the payment of Ms Ross-Maranik's costs out of the estate and equal distribution of the estate after allowing for the interim distribution of $250,000 to Gregory.
Gregory cannot establish that it was not unreasonable for him to reject this offer of compromise. By the time the offer was made all the relevant evidence was filed including the expert evidence of Dr Lonie. Gregory was given ample time to consider the offer, which represented a genuine compromise by abandoning the cross-claim. And in the result, Gregory obtained an order that was no more favourable to him than the terms of the offer the offer made by Isaac. Subject to the considerations below, this offer of compromise should also be given effect.
What costs order should be made? The considerations that troubled Henry J and caused her Honour not to make a full costs order against Gregory after he was unsuccessful in the proceedings are still potent and need to be weighed in the balance here. Although rejection of a Calderbank letter or an offer of compromise usually produces a clear outcome of indemnity costs after the offer, here, the judicial exercise of the Court's cost discretion still requires some constraints on giving full effect to Isaac's Calderbank letter and his offer of compromise.
In the principal judgment Henry J's discussion at [527] - [533] noted the Court's unfettered discretion in relation to awarding costs, provided the discretion was exercised judicially and her Honour noted the greater flexibility of making cost orders in family provision cases. But at [533], Henry J was reluctant to undermine through a substantial costs order against Gregory, the basis of her reasoning by which she rejected Gregory's family provision claim because of what he received under the 1998 will, explaining that a costs order "would have impacted my ultimate decision, given it would have reduced the buffer for contingencies by half".
But now the Court needs to balance the additional effect of two now-revealed unreasonably unaccepted offers against the same considerations that faced Henry J without undermining the logic of not making a costs order after declining to make a family provision order. In the Court's view, Isaac's submissions point to an acceptable balance between these competing considerations.
As Isaac submitted, some level of costs order can be made against Gregory that is consistent with still giving due weight to Henry J's concern that Gregory should have access to something like the $160,000 that he estimated was necessary to start a run a business. The buffer Henry J allowed in the result of about $220,000 means that there is still about $60,000 of an unallocated buffer after Gregory's potential business start-up expenses have been taken into account. In the Court's view, the correct discretionary course in this case is to use part of that unallocated buffer to give effect to at least part of the result that would ordinarily flow from Isaac's effective September 2021 and June 2022 offers.
Isaac submitted that a costs order should be made in his favour against Gregory in the sum of $90,000 based on Isaac's legal fees and disbursements, which Mr Ziman's affidavit proves have been incurred. But that is too much. An award in that amount would unacceptably diminish the sum available to Gregory from his entitlements under the 1998 will, which he could use to start his own business. The Calderbank letter and the offer of compromise do change the discretionary costs landscape slightly in Isaac's favour. The Court should make an order for costs in Isaac's favour fixed in the maximum sum of $40,000. This figure is selected as coming comfortably within the approximate $60,000 residual buffer available to Gregory under the 1998 will after allowing for him to commence his own business. It also allows Gregory to discharge his obligation to pay Dr Lonie from within that buffer. Fixing a precise figure such as this gives greater certainty to the administrator of the estate, Ms Ross-Maranik and simplifies her subsequent administration of the estate.
Provided the Court is satisfied Isaac has incurred costs of more than this amount, the Court can fix the costs payable to Isaac and cap them in this amount to take into account the balance of competing considerations here. Mr Ziman's affidavit demonstrates clearly that costs well beyond this have been incurred by Isaac. They include solicitors professional costs of $46,435, counsel's fees of $110,398 disbursements to Dr Lonie of $11,384 and printing and court book and other sundry costs of $2,261. This totals $170,478 plus GST, which comes to $187,526.
The Court therefore has sufficiently reliable materials before it to fix a specified gross sum instead of assessed costs under Civil Procedure Act, s 98(4)(c) and to limit of those costs under Civil Procedure Act, s 98(1) to $40,000 and the Court will so order.

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Cases Cited (18)