Cong v Shen - [2021] NSWSC 1206 - NSWSC 2021 case summary — Zoe

NSWNSWSC

Cong v Shen

[2021] NSWSC 1206

Supreme Court of NSW|2021-09-17|Before: Ward CJ

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Source facts

Court

Supreme Court of NSW

Decision date

2021-09-17

Before

Ward CJ

Source

Original judgment source is linked above.

Judgment (28 paragraphs)

[1]

A 369 Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147 Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 Brew v Whitlock (No 3) [1968] VR 504 Calderbank v Calderbank [1975] 3 All ER 333 Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 Charnock v Handley [2011] NSWSC 1408 Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197 Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 Commonwealth of Australia v Gretton [2008] NSWCA 117 Cong v Shen (No 3) [2021] NSWSC 947 Cong v Shen [2020] NSWSC 945 Coppins v Helmers; Brambles Constructions Pty Ltd (1969) 72 SR (NSW) 273 Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 Craigcare Group Pty Ltd v Superkite Pty Ltd [2014] NSWSC 326 Daulizio v Trust Company of Australia [2005] VSCA 215 Detheridge v Detheridge [2019] NSWSC 183 Dickman v Holley; Estate of Simpson [2013] NSWSC 18 Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 EDPI Pty Ltd v Rapdocs Pty Ltd [2007] NSWSC 195 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Equititrust Ltd v Franks (2009) 258 ALR 388; [2009] NSWCA 128 Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519 GR Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 Gray v Hart (2012) 10 ASTLR 379; [2012] NSWSC 1562 Guardian Trust and Executors Company of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115 Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133 Hancock v Arnold (No 2) [2009] NSWCA 19 Harkness v Harkness (No 2) [2012] NSWSC 35 Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 In re Swire; Mellor v Swire (1885) 30 ChD 239 In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161 Ivanhoe Gold Corporation Ltd v Symonds (1906) 4 CLR 642; [1906] HCA 71 Jamal v Department of Health (1998) 14 NSWLR 252 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 Jones v Bradley (No 2) [2003] NSWCA 258 Kenny v Wilson (1911) 11 SR (NSW) 460 Lahoud v Lahoud [2012] NSWSC 284 Leichhardt Municipal Council v Green [2004] NSWCA 341 Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 McCusker v Rutter (2010) 7 ASTLR 137; [2010] NSWCA 318 Milillo v Konnecke (2009) ASTLR 235; [2009] NSWCA 109 Miller v Director of Public Prosecutions (No 2) [2004] NSWCA 249 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Muller v Marriott (1921) 22 SR (NSW) 100 Murdocca v Murdocca (No 2) [2002] NSWSC 505 Mutual Shipping Corporation v Bayshore Shipping Co Ltd [1985] 1 WLR 625 Newmont Yandal Operations Pty Ltd v J Aron Corp (2007) 70 NSWLR 411; [2007] NSWCA 195 Nicholls v Hall (2007) 2 ASTLR 419; [2007] NSWCA 356 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Peters v Salmon [2013] NSWSC 953 Phillips v James (2014) 85 NSWLR 619; [2014] NSWCA 4 Poche v Poche [2020] NSWSC 835 Rafferty v Time 2000 West Pty Ltd (No 5) (2010) 87 IPR 593; [2010] FCA 873 Re Application of Scali [2010] NSWSC 1254 Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Re Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268; [2005] NSWSC 1003 Richardson v Rearden [2006] NSWSC 1252 Ritter v Godfrey [1920] 2 KB 47 Sahade v Bischoff (No 2) [2016] NSWCA 45 Salmon v Osmond (2015) 14 ASTLR 442; [2015] NSWCA 42 Sarant v Sarant [2020] NSWSC 1686 Short v Crawley (No 40) [2008] NSWSC 1302 Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Stojanovski v Stojanovski [2019] NSWSC 1713 Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 Tonna v Mendonca (No 2) [2020] NSWSC 306 Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 Vieira v O'Shea (No 2) [2012] NSWCA 121 Warton v Yeo (2015) 15 ASTLR 462; [2015] NSWCA 115 Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328; [1994] NSWCA 338 White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303 Windsurfing International Incorporated Inc v Petit (1987) AIPC 90-441 Texts Cited: Practice Note SC Eq 7 Category: Costs Parties: Edmund Bede Hao San Cong (First Plaintiff) Teresa Mae Yin Cong (Second Plaintiff) The estate of the late Laurence Xavier Xiao Ming Cong by its representatives Edmund Cong and Teresa Cong (Third Plaintiff) Yanjiao Shen (First Defendant) Yaqin Wu (Second Defendant) The estate of the late Zi Li Cong by its representative Tamara Goodwin (Third Defendant) Representation: Counsel: MK Condon SC with P Sharp (Plaintiffs) DA Smallbone (Defendants)

[3]

Judgment

HER HONOUR: On 3 August 2021, I published my principal judgment in this proceeding (Cong v Shen (No 3) [2021] NSWSC 947) (the principal judgment) dealing with a dispute involving members of the first and second families of the deceased (the late Mr Zi Li Cong). The background to the dispute is set out in the principal judgment and I will not repeat it here. I adopt the same definitions as used in those reasons.
For the reasons set out in the principal judgment, I concluded (as summarised at [1895]) that Mr Cong's last Will (the 2016 Will) was a valid Will, made when Mr Cong had testamentary capacity and with his knowledge and approval, and that it incorporated a deed entered into at the same time as the 2016 Will (the Deed) (although I also concluded that the Deed should be set aside as against Mr Cong's second wife, Ms Shen, by way of relief under the Contracts Review Act 1980 (NSW) (Contracts Review Act)). I concluded that the 2016 Will (with the Deed annexed) should be admitted to Probate and that Probate should be granted to both the named executors (Ms Shen and Mr Cong's son, Edmund). I held that the claim by Mr Cong's two surviving adult children from his first marriage (Edmund and Teresa) for proper provision out of Mr Cong's estate had been established (and that notional estate should be designated for that purpose). Otherwise, I found that the various claims made by the plaintiffs had not been made good (which included the only claims made against the second defendant, Ms Wu) and that, other than the Contracts Review Act claim, Ms Shen's cross-claim had not been made good.
I reserved the question of costs and made directions for brief submissions on costs to be filed, with a view to dealing with the issue of costs on the papers if possible. I also granted liberty to apply on three days' notice if issues arose in the implementation of the orders that I made.
Since then, two notices of motion have been filed: a notice of motion filed on 17 August 2021 by Edmund and Teresa (to whom I will refer collectively as the plaintiffs although there is of course a third plaintiff - the estate of their deceased brother, Laurence) the plaintiffs, seemingly exercising the liberty granted when the final orders were made; and a notice of motion filed on the same day by Ms Shen, pursuant to rr 36.16(1) and (3A) and/or 36.17 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Both sides filed submissions as to costs (and further or reply submissions in relation to the issues raised in the notices of motion and as to costs).
There was then an application by the plaintiffs (leave for the filing of which was not opposed by the first and second defendants, albeit that they oppose the relief sought therein) for the filing of an amended notice of motion and for further submissions in relation thereto; all of which led me to list the amended notice of motion for hearing with final submissions to be made orally. That hearing occurred on 17 September 2021 and these reasons now deal with all of the issues remaining to be dealt with in order to dispose of the proceeding.

[6]

Submissions

As to the plaintiffs' initial notice of motion, the first and second defendants complained that no juridical basis for the application in prayer 1 (in effect that Ms Shen personally be liable to pay the provision ordered in favour of the plaintiffs) has been articulated by the plaintiffs; and they emphasise that an order for provision operates through the estate and only in respect of assets of the estate (and any notional estate).
The plaintiffs' response to this complaint, in their first set of reply submissions was to identify that they rely, as the relevant source of power, on s 66(1)(i) of the Succession Act 2006 (NSW) (Succession Act), as enabling the making of orders to secure "the due performance of an order under this Part". The plaintiffs submit that s 66 of the Succession Act is cast in very broad terms, pointing, by way of example, to s 66(1)(l), which provides that the Court may make orders relating to "any other matter the Court thinks necessary" for the purpose of giving effect to the family provision order.
The plaintiffs say that the proceeds of the sale of the 16 Nicholson Street and 43 Amy Street properties were received by Ms Shen and applied by her for her own benefit. They submit that, as that notional estate no longer exists, it is appropriate (in order to secure due performance of the family provision orders that were made) for there to be a further order affixing personal liability to Ms Shen to make the family provision payment to the plaintiffs; and that such an order is consistent with the overriding purpose in s 56(1) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) and avoids the possibility of any further dispute about the enforcement of the family provision orders, or litigation by the executors to recover those assets. The plaintiffs refer to the observations made at [1872]-[1873] of the principal judgment in this regard (which I do not here repeat, but in which I expressed the opinion, to which I adhere, that in the circumstances Edmund and Teresa cannot expect to receive anything further out of Mr Cong's estate without an order for provision). (Ironically, of course, the complaint by the plaintiffs in the proceeding as to intransigence on Ms Shen's part in relation to any distribution to Edmund and Teresa is contradicted somewhat by the making of the Calderbank offer on which Ms Shen here relies, though my observations in the principal judgment were made at the conclusion of the hearing whereas the offer made by Ms Shen was at an earlier stage - and not seemingly repeated once the hearing commenced; or at least I have not been made aware of any such later offer.)

[7]

Determination - initial notice of motion

As initially filed, what the plaintiffs sought in their notice of motion was an order that Ms Shen pay the provision ordered on 3 August 2021 (and for liberty to be given to the plainitffs to seek such further orders as may be required to give effect to orders 5 and 6 made on 3 August 2021).
I accept that s 66 of the Succession Act is cast in very broad terms, permitting the making of any orders relating to any other matter considered necessary to give effect to the family provision order. However, insofar as the premise of the application in this regard is a perception that, without such relief, Ms Shen would or may not comply with her obligations as an executor, I do not accept that I should make such an assumption. I have set out in the principal judgment my conclusions as to the construction of the 2016 Will and to the orders made for provision. Subject to the outcome of any appeal, as co-executor I would expect Ms Shen to abide by them.
While I am well aware of the overriding statutory mandate imposed by s 56(1) of the Civil Procedure Act, I am not persuaded that the mandate to facilitate the just, quick and cheap resolution of the real issues in dispute extends to the anticipation and avoidance of disputes arising in the future. Further, the observations made at [1872]-[1873] of the principal judgment related to the stance that had been adopted by Ms Shen of the discretion she believed had been afforded to her in relation to the distribution to be made to Edmund and Teresa (and, before his death, Laurence), which is not now likely to be relevant in the circumstances which have transpired.
In passing, it seems to me not the least bit ironic that the plaintiffs here seek an order that Ms Shen be personally liable to pay the amount ordered by way of provision when that is the significant advantage to which Ms Shen points when comparing the Calderbank offer that was not accepted by the plaintiffs with the ultimate outcome of the proceeding (to which I refer in due course).
I do not consider it appropriate to make the order sought in prayer 1 of the initial notice of motion. As to prayer 2 of the notice of motion, I do not consider it necessary for such an order should be made. If an issue arises in future in the implementation of the orders (and is properly considered to be within the concept of the working out of those orders) then an application can be made via my associate in the ordinary course, but otherwise I consider that the making of final orders now to be made will conclude my role in the matter (and I will thereafter be functus officio).
I will return to the additional relief sought in the amended notice of motion after addressing Ms Shen's notice of motion.

[9]

Submissions

As to (a), reference is made to [1877] of the principal judgment, in which I identified what I was proposing to designate as notional estate, namely: 1877 … such of the proceeds of sale of the 16 Nicholson Street and 43 Amy Street properties (up to the maximum of Mr Cong's half share in those properties) as is necessary to meet the order for provision (i.e., the sum of $1.4 million).
As to (b), reference is made by Ms Shen to s 83 of the Succession Act and what was said at [1833] and [1874] of the principal judgment.
Section 83 of the Succession Act, to which I had regard in the course of the principal judgment (as there noted), provides that a notional estate order must not be made unless the Court is satisfied that the relevant property transaction or the holding of the property resulting from the relevant property transaction: (a) directly or indirectly disadvantaged the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death), or (b) involved the exercise by the principal party to the transaction or any other person (whether alone or jointly or severally with any other person) of a right, a discretion or a power of appointment, disposition, nomination or direction that, if not exercised, could have resulted in a benefit to the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death), or (c) involved the exercise by the principal party to the transaction or any other person (whether alone or jointly or severally with any other person) of a right, a discretion or a power of appointment, disposition, nomination or direction that could, when the relevant property transaction was entered into or at a later time, have been exercised so as to result in a benefit to the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death) or (d) involved an omission to exercise a right, a discretion or a power of appointment, disposition, nomination or direction that could, when the relevant property transaction was entered into or at a later time, have been exercised by the principal party to the transaction or any other person (whether alone or jointly or severally with any other person) so as to result in a benefit to the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death).
Thus, as emphasised by Ms Shen, account must be taken of the disadvantage sustained by the estate due to the relevant property transaction.
The passages in the principal judgment to which reference is made by Ms Shen in this context are as follows: 1833 Prior to his death, Mr Cong held a half-share, as joint tenants with Ms Shen, in the properties at 16 Nicholson Street and 43 Amy Street, and a share in the moneys held in their joint bank accounts (those joint bank accounts comprising of $20,555.06 and $36,817.84 as per Ms Shen's 2017 affidavit). By reference to the sale price of those two properties ($2,470,000 and $1,375,000 respectively), Mr Cong's share of those properties was worth around $1,922,500 - although there were debts secured over those properties ($1,680,000 over 16 Nicholson Street; and $699,112 over 43 Amy Street). Mr Cong's interest in the properties held as joint tenants with Ms Shen and the joint bank accounts passed by way of survivorship to Ms Shen on his death and did not form part of the assets of his estate (and, as I have found, the resulting trust claim in respect of those two properties fails). … 1874 On the basis that a rough calculation of the notional estate would be around $2.3 million (half the sale value of each of the 16 Nicholson Street and 43 Amy Street properties plus half the amount held in the joint bank accounts and one-third of the life insurance proceeds), and leaving aside the position of Jolly Trading (the value of which has not to my mind been established particularly given the level of debts balanced against the value one would put on the likelihood of a continuing income stream without Mr Cong alive); and having regard to the wishes of Mr Cong as to the level of provision he wished to make for his elder children, taking into account that they are likely to face a large costs exposure in this litigation; and taking into account all of the circumstances outlined above, I have concluded that the proper provision for Edmund and Teresa is that each receive a lump sum legacy in lieu of the provision made for them in the Will in the sum of $700,000.
Ms Shen notes that, pursuant to s 84 of the Succession Act, a person's rights are extinguished to the extent that they are affected by a notional estate order.
The plaintiffs submit that, if the notional estate is to be assessed taking into account the encumbrances thereon, as the first and second defendants maintain, then the true position was not captured at [1874] of the principal judgment (where I spoke of the sale value of 16 Nicholson Street and 43 Amy Street). In that event, the plaintiffs now invoke the slip rule and seek an order that the notional estate include (at least) the one-third share of insurance proceeds and a half share of the amounts held in the joint bank accounts (see the plaintiffs' amended notice of motion below).
In the alternative, the plaintiffs say that the defendants cannot assert that the size of the legacies assumed an ability to meet a costs order whilst contending that the estate is potentially insolvent. The plaintiffs submit that if there is, as the defendants contend, doubt about the ability of the estate to pay the plaintiffs' legacies, that is a factor which goes to the terms of any costs orders the court can make.

[12]

Submissions

The plaintiffs rely upon the slip rule in support of prayer 3 of their amended motion, noting the breadth of that rule (see Newmont Yandal Operations Pty Ltd v J Aron Corp (2007) 70 NSWLR 411; [2007] NSWCA 195 (Newmont Yandal)). The plaintiffs say that they have no reason to doubt the accuracy of the calculations by which the first and second defendants say that a half-share of the net proceeds realised from the two properties designated as notional estate will be insufficient to meet the family provision orders that have been made (see at [53] of the first and second defendants' submissions dated 19 August 2021). The plaintiffs apprehend (correctly) that, had regard been had to those matters, I would have sought to ensure that sufficient notional estate be identified to permit the family provision orders to be enforced, also bearing in mind the incidence of costs.
The plaintiffs note that, pursuant to Ch 3, Pt 3.3 of the Succession Act, any property of the person against whom a notional estate order can be made may be designated (citing Phillips v James (2014) 85 NSWLR 619; [2014] NSWCA 4 at [74] per Beazley P, as Her Excellency then was (with whom Basten and Meagher JJA agreed); and Charnock v Handley [2011] NSWSC 1408 at [190] per Hallen AsJ, as his Honour then was). In particular, reference is made to what was said by Campbell J, as his Honour then was, in Richardson v Rearden [2006] NSWSC 1252 (Richardson v Rearden) at [23], namely that: That provision [referring to the equivalent provision, s 24 of the Family Provision Act 1982 (NSW)] means that if someone has received a benefit from a deceased estate, it is possible to designate as notional estate an asset of that person, even if that asset is not something into which it would be possible to trace any specific asset of the testator. That ordinarily gives the court a fairly wide power to do practical justice, and make sure that the assets of a deceased estate end up, so far as at least their value is concerned, in the hands that the court decides are the appropriate ones to enable the deceased to fulfil his or her obligations. However, in the present case, even that broad power will not be adequate to meet the present situation of the plaintiff. There is simply no asset that can be identified, of any person who received benefits from the estate of the deceased, which could be designated as notional property. Under these circumstances, the application under the Family Provision Act 1982 would inevitably fail, even if the extension of time were granted.
It is noted that that analysis was accepted by the Court of Appeal in Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133 at [48] per Meagher JA (with whom Macfarlan and Leeming JJA agreed).
In relation to prayer 3 of the plaintiffs' amended notice of motion, the plaintiffs submit that, pursuant to r 36.17 of the UCPR, order 5 of the orders made on 3 August 2021 should be amended to include, as relevant notional estate, the first defendant's one-third share of the proceeds of the life insurance policy and Mr Cong's half share of the moneys in the joint bank accounts to which reference was made in [1867], [1869] and [1874] of the principal judgment. The plaintiffs say that the last sentence of [1869] indicates that the insurance proceeds could be treated as notional estate as to one-third for the reasons there set out. (Pausing there, at [1869], having noted the matters that must be considered under ss 83 and 87 of the Succession Act before any notional estate order is made, I said that any order designating the insurance proceeds as notional estate should be limited to Ms Shen's one-third share of those proceeds.)
In their submissions, the first and second defendants have pointed out that the legal effect of a notional estate order is that a person's rights are extinguished to the extent that they are affected by a notional estate order (see s 84 of the Succession Act). Although, in its terms, order 6 of the orders made on 3 August 2021 was an order made against the defendants as parties to the proceedings, the first and second defendants point out that it realistically affects only Ms Shen as, of the three defendants, only she had a personal interest in the proceeds of sale that were designated as notional estate.
The first and second defendants say that the effect of s 84 is to extinguish Ms Shen's interest in the proceeds of sale to the extent of the orders for provision but that it does not impose personal liability to pay a certain sum (rather, it would leave Ms Shen, to the extent that the proceeds are held by her, holding them without any continuing right to do so and therefore subject to her administration obligations as an executor). It is noted that the distribution of the funds would then be governed by the administration of the estate pursuant to the 2016 Will, subject to the superimposed orders made on 3 August 2021, and the ordinary obligations of executors under the general law, including obligations to creditors.
The first and second defendants note that the two properties concerned were burdened by mortgages securing $1.68 million against 16 Nicholson Street and $699,112 against 43 Amy Street (see at [1833] of the principal judgment) which mortgages were discharged on completion. The first and second defendants say that, to that extent, the proceeds of sale did not come into the hands of Ms Shen (rather they were paid to the banks, who are not parties to the proceedings or the order and whose interest is not affected by the order because they are not privy to it). It is said that the result of extinguishing the interest of Ms Shen in the proceeds of sale is that the payments to the banks, on completion, extinguished debts that Ms Shen and the estate co-owed to the banks. Thus, it is said (and I agree) that the estate has already received the benefit of its share of the proceeds of sale and has applied them to discharge its equal share of the debts to the banks.
The first and second defendants say that, but for the notional estate order, Ms Shen would be entitled to say that (because of her survivorship to the entirety of the two properties), she was entitled to the entire proceeds of sale and to have the benefit of their application to discharge liabilities co-owed to the banks, such that she would be entitled to contribution from the estate for one half of each of those debts; and they accept that an effect of the notional estate order is therefore to alter this position, with the effect that the estate's share of debt was repaid by its consequent share of the proceeds of sale.
Thus, it is said that Ms Shen is no longer a creditor for those amounts. However, the first and second defendants say that this does not make Ms Shen personally liable to pay (a second time) money that was already paid by the purchasers to the mortgagees for (as matters now stand under the orders) the benefit of the estate.
It is said that the consequence of depriving Ms Shen of her interest in Mr Cong's share (had he lived) in the proceeds of sale of the two properties the subject of the order for provision is that the payment (of the estate's share) to the bank is not now to be attributed as a payment to Ms Shen's benefit and is therefore not money that she received. Alternatively, it is said that, if there was a notional receipt by Ms Shen for the estate's benefit, it is matched by a notional payment by Ms Shen to the bank for the estate's benefit so that she has already parted with the money without any wrong that would sound in an ongoing liability to the estate to pay or account to it for that money a second time.
The financial impact is said to be that the interest of Mr Cong's estate (a 50% interest in the net equity in the relevant properties) amounts to $732,944 (because the net equity in 16 Nicholson Street was $790,000 and the net equity in 43 Amy Street was $675,888) - i.e., Mr Cong's estate was 50% of $1,465,888 (see [1833] of the principal judgment). This, it is said, demonstrates the significance of the words "up to" in order 6 made on 3 August 2021 (and it is noted that this falls well short of the practical benefit and worth of the offer made on 29 November 2017).
Ms Shen, as adverted to above, made no complaint as to the amendment of the plaintiffs' motion to add the proposed prayer 3 if confined to the slip rule (i.e., on the basis that no other power be invoked), noting that the orders have been entered and the time for making an application under r 36.16 of the UCPR has expired and that s 64 of the Civil Procedure Act does not apply (see s 64(5)). However, Ms Shen opposes the relief sought in prayer 3 of the amended notice of motion.
Reference is made by Ms Shen to the finding (at [1867] of the principal judgment) that the potential notional estate was limited to Mr Cong's half share of 16 Nicholson Street and 43 Amy Street, the life insurance proceeds, the joint bank accounts and the assets of Jolly Trading. It is thus said that prayer 3 of the amended notice of motion goes beyond (and seeks to contradict) the actual findings made and hence is not an application which can be made under the slip rule. Further objection is made that the relief now sought goes beyond the plaintiffs' submissions at trial.
As to the insurance proceeds, it is noted that, at [1869], I accepted that any order designating the insurance proceeds as notional estate must be limited to Ms Shen's one third share. However, Ms Shen says that this does not imply an intention so to designate those funds (her submission being that it is simply a finding as to a limit on what could potentially be designated, if further requisite findings and decision were made). Ms Shen argues that, at [1877], there was, in effect, a decision made not to make an order designating the one third share of the insurance proceeds; and that no slip has been identified therein. Ms Shen submits that a decision to designate one third of the insurance proceeds and Mr Cong's share of the moneys held in the joint bank accounts would or might have involved further factual findings as to the use and application of those funds (for the purpose of ruling on the various considerations required under ss 83 and 87), though it is not clear what, if anything, would now be raised as to those issues.
Ms Shen argues that ss 83 and 86 and Div 3 of Pt 3.3 require fact finding and an evaluative decision, as well as the selection of a remedy in the event that all other elements are satisfied. It is submitted that the plaintiffs' assumption that there was an intention to designate from any source necessary sufficient property to meet a $1.4 million provision order ignores the recognition at [1869] of the limits imposed by s 83 of the Succession Act namely, that the designated property cannot exceed in quantum the amount by which the estate was disadvantaged by the relevant transaction; and of the limits imposed by s 87.
Ms Shen submits that both the notional estate order and the provision order contain limitations each of which operates according to its own terms; and that there was no slip. It is said that reopening the question of the property to be designated and extending it to other property would require s 83 and Div 3 of Pt 3.3 to be further considered and the limits of the order to be re-evaluated; and that this is neither possible nor appropriate on a slip rule application. Reference in that regard is made to Brew v Whitlock (No 3) [1968] VR 504 at 506-507 where the Full Court of the Supreme Court of Victoria (Winnecke CJ, Little and Gowans JJ) said that it was impossible to apply the slip rule where, on the application to correct the judgment, it was necessary to exercise an independent discretion; and to Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 (Storey & Keers) at 453E where McHugh JA (as his Honour then was) added to that proposition where it is "a matter upon which a real difference of opinion might exist".
It is noted that, McHugh JA also said (at 453C) that: … it is only omissions or mistakes which are accidental which can be rectified. It would be contrary to the rationale of the slip rule to allow judgments and orders to be amended to deal with matters which were not in issue in the proceedings. Such matters must be dealt with by way of appeal and in accordance with the principles which govern the raising of new matters on appeal ….
His Honour had suggested (at 452G) that an earlier decision (Coppins v Helmers; Brambles Constructions Pty Ltd (1969) 72 SR (NSW) 273) (where there was an unsuccessful application for variation to a costs order) might be justified on the basis that the proposed variation there "related to a matter separate and distinct from what had been in issue at the trial". It is noted that, at 453F, McHugh JA stated the test of accident as being whether, had the matter been drawn to the attention of the court at the time, the correction would "at once have been made".
Ms Shen says that there were not submissions before me at trial on the questions now arising in prayer 3 of the amended notice of motion (referring to the complaint made to that effect in her closing written submissions dated 15 December 2020 at [706] and repeated at [726]-[727] concerning the insurance proceeds and at [729] concerning the bank accounts). Reference is further made to the submissions at [705] and oral closing submissions at T 1171.18-20, as to the case that the first and second defendants had to meet in this regard. Insofar as the property now sought to be designated as notional estate goes beyond the insurance proceeds and bank accounts, Ms Shen says that [294] of the plaintiffs' submissions in chief at the trial did not identify that it was sought to attach the notional estate claim to property other than that which was identified in that submission. It is said that the plaintiffs' submissions did not address any issues of limitation under s 83 and Pt 3.3 Div 3 of the Succession Act which would arise if the designation of notional estate was not to be limited to the property that itself was the subject of the "relevant transactions" as defined in the Succession Act and alleged in the pleading.
Reference is made to the plaintiffs' oral submissions in closing on the Succession Act claim (see T 1098; T 1145.45 to T 1149.3). Insofar as it was put that the estate was a large estate that included $12 million of property that had been held on resulting trust and was to be included as notional estate, Ms Shen points out (as is undoubtedly the case on the findings in the principal judgment) that the resulting trust claim failed on the merits (and hence there is no question of a slip in that respect).
Reference is also made to the submissions in reply (the plaintiffs' written submissions dated 31 March 2021 at [142]-[143], and oral submission at T 1204).
Ms Shen says that no specific submission on the notional estate provisions was addressed to a claim limited to the remaining notional estate assets without the claimed resulting trust assets (noting that there was no submission that a claim in respect of those assets should be effectuated by designating other property or as to how, if that were to be done, the amounts limited by s 83 were to be ascertained, nor how Div 3 considerations were to be dealt with in respect of the different property now sought to be designated "in relation to" the "relevant transactions" concerning the assets which have been designated by the Court's order.
Reference is made to the additional submissions made by the first and second defendants as to the insurance proceeds (see at [723]; [725] of the closing submissions at trial) and to [223] of the defence; and, in respect of the bank accounts, to [224] of the defence.
Ms Shen says that the plaintiffs did not identify how the estate was disadvantaged by the four "relevant transactions" up to the amount of $1.4 million, nor did they deal with s 87 on the basis that there were no resulting trusts and show how the events that happened enable the claims to be asserted consistently with Div 3 against all the other assets. It is submitted that such a submission would not be open to be made on a slip rule application (and that this illustrates that the subject is one of substantial controversy, rather than an obvious and merely accidental mistake or omission).
Ms Shen points out that a slip rule application is not an occasion for further fact finding or evaluative judgment and substantial consideration of remedies on questions that it was not necessary to decide because of the failure of the plaintiffs' large estate claim and the decision by the Court to designate specific property less extensive than what is here sought.
Further, (and I address this in due course) Ms Shen points to the impact on the assessment of Ms Shen's 29 November 2017 offer of acceding to the plaintiffs' application in prayer 3 if confined to the addition of property equal to one third of the insurance proceeds and half of the joint bank accounts.

[13]

Determination

The most controversial aspect of the relief sought by the parties on the present applications is that comprised by prayer 3. This requires consideration of the scope of the "slip rule" contained in r 36.17 of the UCPR.
At the outset, it should be noted that in Newmont Yandal, the Court of Appeal observed (at [117]) that caution must be exercised in the application of case law from the past or from other jurisdictions when construing the slip rule in other contexts. With that caution in mind, I nevertheless note that in Mutual Shipping Corporation v Bayshore Shipping Co Ltd [1985] 1 WLR 625 at 633, Donaldson MR said that: It is the distinction between having second thoughts or intentions and correcting an award or judgment to give true effect to first thoughts or intentions, which creates the problem. Neither an arbitrator nor a judge can make any claim to infallibility. If he assesses the evidence wrongly or misconstrues or misappreciates the law, the resulting award or judgment will be erroneous, but it cannot be corrected …. The remedy is to appeal, if a right of appeal exists. The skilled arbitrator or judge may be tempted to describe this as accidental slip, but this is a natural form of self-exculpation. It is not an accidental slip. It is an intended decision which the arbitrator or judge later accepts as having been erroneous.
In Storey & Keers, McHugh JA (as his Honour then was) said (at 449) in relation to the slip rule and the inherent jurisdiction to correct accidental slips or omissions: The Courts of Common Law and the Court of Chancery had inherent power to correct any clerical mistake or error in a judgment or order if it was the result of an accidental slip or omission: Lawrie v Lees (1881) 7 App Cas 19 at 34-35. This power was an exception to the general principle that a party is bound by a judgment or order once it has been drawn up unless he can set it aside: Kinch v Walcott [1929] AC 482. But although the principle of the slip rule is clear enough in conception, its application in practice has often proved difficult. The dividing line between a mistake or error which is the result of an accidental slip or omission and a mistake or error which is the product of a deliberate decision has often been difficult to draw. The difficulty became much greater when it was decided that an error might be the result of an accidental slip or omission even though, because of the inadvertence of the party's legal representative, the point was not raised at the hearing of the action: cf L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] (1982) 151 CLR 590 at 594-595.
In Storey & Keers (at 453) McHugh JA also said that the rationale of the slip rule requires that an omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or as a matter upon which a real difference of opinion might exist.
Relevantly (and pertinently in the present case), in Newmont Yandal, the Court of Appeal considered (at [60]) that the inherent jurisdiction of the court permitted the correction of orders the legal consequences of which were unforeseen or contrary to those intended, applying Ivanhoe Gold Corporation Ltd v Symonds (1906) 4 CLR 642; [1906] HCA 71; In re Swire; Mellor v Swire (1885) 30 ChD 239. Pausing here, I say that this is pertinent in the present case because my understanding at the time of the principal judgment - as I explained in debate with Counsel on the present application and as I consider to be implicit from my rough calculation of the potential notional estate at [1874] - was that (subject of course to the evidence of costs) the provision so ordered would be able comfortably to be met out of the proposed notional estate. If the effect of the orders for designation of notional estate (because of my failure to take into account Mr Cong's half share of mortgage expenses having been discharged out of the proceeds of sale) has had an unforeseen consequence or a consequence contrary to what was intended, then that enlivens the slip rule jurisdiction as explained in Newmont Yandal. However, I accept that what is clearly not contemplated by the slip rule is the exercise afresh of a discretion which was originally considered by the decision-maker in relation to the particular issue.
Of course, I accept there is a potential difficulty if one is applying the slip rule by reference to unarticulated thought processes at the relevant time. In Newmont Yandal, Spigelman CJ, having emphasised that, by reason of the insertion of the overriding objective into the Civil Procedure Act, words such as "error" and "correct" in the slip rule should not be given a narrow interpretation (at [24]-[29]), said that, in considering whether there had been an error falling within the slip rule or capable of correction within the inherent jurisdiction of the court, the relevant intention was the objective intention of the decision-maker at the time the original orders were made. (Hence, the distinction I draw here between objective and subjective intention.)
It is relevant here to repeat what I said at [1874]: 1874. On the basis that a rough calculation of the notional estate would be around $2.3 million (half the sale value of each of the 16 Nicholson Street and 43 Amy Street properties plus half the amount held in the joint bank accounts and one-third of the life insurance proceeds), and leaving aside the position of Jolly Trading (the value of which has not to my mind been established particularly given the level of debts balanced against the value one would put on the likelihood of a continuing income stream without Mr Cong alive); and having regard to the wishes of Mr Cong as to the level of provision he wished to make for his elder children, taking into account that they are likely to face a large costs exposure in this litigation; and taking into account all of the circumstances outlined above, I have concluded that the proper provision for Edmund and Teresa is that each receive a lump sum legacy in lieu of the provision made for them in the Will in the sum of $700,000.
I had there calculated (expressly noting that this was a rough calculation) that the property that might be designated as notional estate was in the order of around $2.3 million. It was in that context that I concluded that the proper provision for Edmund and Teresa, having regard to all of the matters discussed in the reasons, was that each should receive a lump sum legacy in the amount there provided. I apprehended at the time that such an amount might be reduced by any requirement to pay their own costs of the litigation as well as any potential liability to pay the costs of the first and second defendants having regard to the outcome of the proceeding. However, I was not in a position to know the amount by which the lump sum legacy would thereby be reduced (not least because no determination had yet been made as to the costs orders). What I did not include in that rough calculation (and what can be seen objectively by reference to the reasons) was the effect, on the "pool" of potential property that might be designated as notional estate, of the debts of the estate that had been discharged in relation to mortgage liabilities. Thus, I draw comfort from the fact that I am not here relying on my subjective recollection of the reasoning process - I consider that it can be objectively discerned from the reasons.
The matters to which the first and second defendants have pointed in relation to Ms Shen's notice of motion lead inevitably to the conclusion that I misapprehended (and significantly overstated) the amount of the potential notional estate because I did not have regard to the discharge of Mr Cong's share of the mortgage liabilities in respect of the two properties in question. Whether that was due to the failure of the executors to adduce comprehensive evidence as to the assets of the estate or a failure to address these issues adequately in submissions (both of which were put forward on the present application as matters that might explain the error) seems to me not necessary here to explore.
The fact remains that, had I appreciated at the time the import of the discharge of those liabilities on the net amount that might properly be designated as notional estate in respect of the proceeds of sale of the two properties in question, I have no doubt that I would have expanded the designation of notional estate to include Mr Cong's half share of the bank accounts and a one-third share of the life insurance proceeds.
Insofar as the test is, as suggested in authorities, whether had my attention been drawn to this error at the time I would have made a different order, I have no doubt that I would have done so in the way suggested above. In that regard, I consider it self-evident that to sever the joint tenancy in the bank accounts disadvantaged the estate by depleting the amount available for distribution to beneficiaries and, similarly, that the failure to change the designation of a one-third share of the insurance proceeds to Ms Shen relevantly disadvanted the estate. As to the s 87 issue, it is sufficient to note that I addressed this in relation to the remaining two-thirds share of the insurance proceeds (referable to two of Mr Cong's sons from his second marriage). Implicitly, I did not consider the same to be an issue in relation to Ms Shen's one-third share. Having regard to the way in which Ms Shen has dealt with the overall funds in the estate it seems to me evident that Ms Shen has treated everything in the estate as being within her absolute discretion to deal with; and I do not consider that to have been a reasonable expectation.
However, whether I would have designated assets held in Ms Shen's name alone as notional estate raises squarely the issue referred to above (between having second thoughts and correcting an order properly to reflect the initial thoughts or intentions of the decision-maker). I say that because I certainly had not given consideration at the time to designation of any property held in Ms Shen's own name as notional estate; and, had it been raised, I would have explored with Counsel the basis for such relief (as I did when it was raised on the present application). I accept in that regard that a slip rule application is not an occasion for entering into further fact finding or evaluative judgment. The fact that no property held in Ms Shen's name was designated as notional estate was not an accidental slip. It was something to which I did not ever turn my mind.
As it transpires, it is not here necessary to explore the question of power to do so (otherwise than under the slip rule) in any detail since it was accepted by Ms Shen that there is power to designate as notional estate property held solely in her name (and not transferred to her as part of Mr Cong's estate), she having received benefits under the 2016 Will. However, as explained in submissions, it is Ms Shen's position that the limit to the amount that can be designated as notional estate (having regard to s 83 of the Succession Act) is the amount of $1,190,317 because that is the extent to which (accepting the plaintiffs' position) Mr Cong's estate has been disadvantaged by the transactions in question. In other words, the reality is that the amount ordered by way of provision cannot be met out of Mr Cong's estate even with the amount referable to property capable of designation as notional estate. Hence, it is not even necessary to consider issues such as the reasonable expectations of Ms Shen as the owner of the property held in her name in which she and her children still reside.
The issue, as I understand it, is thus not one as to finding property held by Ms Shen that would enable the family provision order to be satisfied; it is the fact that notional estate can only be designated (in compliance with the mandate provided by s 83 of the Succession Act) up to the limit of around $1.19 million. If I be mistaken in this regard then no doubt I will in due course be corrected, but my understanding of the submissions put forward on Ms Shen's behalf is that the order made for provision can (subject to any other estate liabilities) be satisfied up to the amount of $1.19 million but that an order for notional estate cannot permissibly be made designating sufficient property to satisfy the order beyond that amount. I accept that this is a consequence of the application of s 83 of the Succession Act and that the position is, in effect, not so dissimilar from that in Richardson v Rearden, namely that there may be no ability to identify sufficient property to meet what would be considered to be proper provision for the particular claimants.
However, it does seem to me that if there is an issue as to whether the existence of other estate liabilities precludes as a practical matter receipt by Edmund and Teresa of at least $1.19 million (taking their position collectively at this point and leaving aside the question of costs) then it seems to me that it is imperative to consider what orders may be necessary in order to do practical justice and to make sure that the assets of the deceased's estate end up, so far as at least their value is concerned, in the appropriate hands to enable the fulfilment of Mr Cong's testamentary obligations (to adapt the language used by Campbell J in Richardson v Rearden).
In that regard, I have some difficulty insofar as I am not confident that I have a clear idea of the liabilities of the estate and I see no basis to prejudice other creditors of the estate from what would be the ordinary distribution of estate assets. I have concluded that the making of practical justice would here be achieved by an order pursuant to s 66 of the Succession Act to the effect that any liabilities owed by the estate to Ms Shen (such as, for example, for reimbursement of funeral expenses for Mr Cong) be deferred (and not be paid in priority) to the distribution required to be made to Edmund and Teresa pursuant to the orders for family provision that have been made. As a practical matter, I consider that this would be appropriate insofar as Ms Shen has had both the benefit of the property that has been designated as notional estate and the benefit of significant provision by Mr Cong in his lifetime (as explained in the principal judgment) and it is not unreasonable to expect that Ms Shen, who I accepted was a loving wife of Mr Cong, would accept responsibility for his funeral expenses if there were insufficient funds in the estate to pay them. I do not consider that such an order could properly be made in relation to other (third party) creditors (who would have had a reasonable expectation to be paid in respect of the estate's debts).
Further, to the extent that there is insufficient money in the coffers of the estate, when including the additional property now to be designated as notional estate (i.e., the half share of the joint bank accounts and the one-third share of the insurance proceeds), taking into account proper estate liabilities, then it seems to me that it would not be inappropriate to designate property held in Ms Shen's name as notional estate in order to permit the provision orders to be met up to the amount of $1.19 million. (I say "proper" estate liabilities because I would not readily accept that the estate would properly be liable for amounts that might be claimed by persons associated with Ms Shen such as Mr Baoming Shen or Ms Wu, for the reason that I considered the former to be an unreliable witness and the latter to have been little more than a cipher for Ms Shen; and hence, I would suggest that any claims by those individuals would need to be considered with caution by the executors.)
However, as to what (if any) additional property should be designated for that purpose, again my difficulty lies in determining precisely how much of a shortfall (from the $1.19 million) there might be and the assets over which such a designation should be made (bearing in mind that I consider that Ms Shen would have had a reasonable expectation that there be no interference in her interest in the current family property).
Ultimately, and conscious of the fact that there is a burning issue as to liability for costs, I have concluded that the appropriate way to achieve practical justice (so far as that can be achieved having regard to the constraints on the amount that can be designated as notional estate in this case) is to do the following: in the exercise of the power under the slip rule, designate as additional notional estate a one-half share of the joint bank accounts and one-third share of the insurance proceeds; and, in the exercise of the power under s 66 of the Succession Act, order that the executors of Mr Cong's estate satisfy the orders made for provision in favour of Edmund and Teresa in priority to any debt owing by the estate to Ms Shen.
Further, as will now be addressed, the practical effect of the position now put before me must in my opinion have an impact on the costs orders now to be made. I say this because, while I was conscious that the mixed outcome in the proceeding might lead to an adverse costs consequence for Edmund and Teresa - and I made clear that I had taken into account that possibility in the amount of provision I had ordered, I certainly did not anticipate that the outcome of the costs orders might be to deprive Edmund and Teresa of a substantial proportion of the provision that was there being ordered (and, as already noted, I had contemplated that there was an available pool of assets from which orders for provision totalling $1.4 million might comfortably be met). It is now apparent that the maximum (leaving aside the impact of costs orders) that Edmund and Teresa could hope to receive out of the provision ordered for them is around $550,000 each (as opposed to $700,000 each) which is a significant difference if they are in the position where they must also meet costs orders in favour of the first and second defendants. I therefore turn now to the issue of costs.

[14]

Costs

As to the issue of costs, the parties' contentions are (as with most issues in the proceeding) diametrically opposed.
The plaintiffs seek orders that: 1. Ms Shen pay their costs of the primary proceeding (by which I understand the plaintiffs to be referring to their claims under the statement of claim as opposed to the claims made by Ms Shen in the cross-claim) on the ordinary basis; 2. insofar as their claims for family provision under the Succession Act are concerned, their costs be paid first, out of the notional estate of Mr Cong (pursuant to s 99(1) of the Succession Act) and, second, to the extent that their costs are not covered by the notional estate, by Ms Shen on the ordinary basis; and 3. Ms Shen pay the plaintiffs' costs of the cross-claim on the ordinary basis.
The plaintiffs further seek an order that Ms Shen not have her costs of defending the claims directed to the estate - principally, the claims in relation to the validity of the 2016 Will and the claims for a family provision order.
As a separate matter, the plaintiffs seek an order that the first defendant pay their costs of the various freezing order applications in respect of which costs were reserved on the ordinary basis (referring to the orders made on 15 May 2019, 31 May 2019, 7 June 2019, 30 August 2019, 3 December 2019, 20 February 2020, 11 June 2020, 18 June 2020 and 24 July 2020, respectively).
The first and second defendants, on the other hand, contend that the appropriate costs orders are that: 1. the plaintiffs' costs of the proceeding up to 29 November 2017, and interest on those costs, be assessed on the ordinary basis and paid from the estate and designated notional estate of the late Mr Cong; 2. Ms Shen's costs of the proceeding, and interest on those costs, be assessed on the indemnity basis and paid from the estate and designated notional estate of the late Mr Cong; 3. the plaintiffs pay the first and second defendants' costs of the proceedings incurred after 29 November 2017, and interest on those costs; 4. the costs and interest on costs ordered to be payable by the plaintiffs to the first and second defendants be assessed on the indemnity basis; and 5. the costs and interest on costs payable by the plaintiffs to the defendants be charged against the provision ordered by the orders of 3 August 2021.
In respect of proposed order (e), the first and second defendants point, by way of analogy, to s 21 of the Civil Procedure Act and submit that the conditions are satisfied for an equitable set off of the costs liability against the plaintiffs' entitlement under the order for provision. Further, the first and second defendants say that they are eligible to have a charging order under s 106(1)(c) of the Civil Procedure Act and would, upon assessment of their costs and entry of a judgment therefor, be entitled in any event to garnish the plaintiffs' entitlement pursuant to s 106(1)(b) of the Civil Procedure Act. The first and second defendants say that the real competition here is with Ms Joyce (as the plaintiffs' funder - or perhaps more accurately, through whose family trust the funding was obtained) and it is submitted that Ms Joyce cannot not be in a better position than the plaintiffs, particularly where the case on behalf of Laurence was being pursued by the plaintiffs in circumstances where Ms Joyce was the sole beneficiary of his estate and was unwilling to be a co-plaintiff.

[15]

Relevant Principles

The relevant principles in relation to costs applications (including in the context of family provision claims) were summarised by me earlier this year in Bassett v Cameron (No 2) [2021] NSWSC 419 (Bassett v Cameron (No 2)) and, for convenience, I simply repeat here what I there said (at [17]-[19]): 17 There is a broad discretion as to costs (see s 98 of the Civil Procedure Act; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack)) but it must be exercised judicially and having regard to the overriding statutory purpose mandated by s 56 of the Civil Procedure Act. 18 The usual order is that costs follow the event (r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)); unless the Court considers that some other order ought to be made (see Purnell v Tindale (No 2) [2020] NSWSC 1047 at [12] per Henry J; Commonwealth of Australia v Gretton [2008] NSWCA 117 (Gretton) at [38] per Beazley JA, as Her Excellency then was (with whom Mason P agreed)). Ordinarily, where there are multiple issues in proceedings, the Court does not seek to differentiate between the issues on which a party succeeded and those in which the party did not succeed, unless the two are clearly severable (see Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328; [1994] NSWCA 338 at 330-331 per Mahoney JA; and Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24] per Beazley, Ipp and Tobias JJA). The apportionment of costs between different issues in proceedings may be appropriate, for example, where: there is a separate issue involving a disputed question of fact or law and the determination of that issue takes additional time in preparation and in argument (see Ryde Developments v Property Investors Alliance (No 2) [2018] NSWCA 40 at [7] referring to Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38]). 19 As to costs in relation to family provision claims, again that there is a broad costs discretion in making orders under the Succession Act 2006 (NSW) to achieve overall justice in the case. There are various alternatives which may be adopted in this regard, including the capping of costs, orders for provision inclusive of costs and, in appropriate cases, making no order as to costs. Parties to family provision claims are discouraged, during the case management process, from incurring substantial costs (and they are required to file affidavits deposing to their costs in advance of the hearing). Generally, the executor's costs of defending such claims will be payable out of the deceased's estate on an indemnity basis.
The plaintiffs here emphasise the recognition in the authorities that, ultimately, fairness should dictate how the costs discretion should be exercised (see, for example, Commonwealth of Australia v Gretton [2008] NSWCA 117 at [85], [121]; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] cited in Tonna v Mendonca (No 2) [2020] NSWSC 306 (Tonna v Mendonca) at [176]). Reference was also made in that regard to my observations in In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161 at [83]-[84] and [86].
As to cases where there has been a mixed outcome in the proceeding, reference is made by the plaintiffs to the discussion in Tonna v Mendonca (see from [169]ff); and see Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423, where Hammerschlag J referred to the authorities collated by White J, as his Honour then was, in Short v Crawley (No 40) [2008] NSWSC 1302, at [25]-[32]).
Relevantly, the circumstances in which apportionment of costs as between different issues may be appropriate include: where, in respect of one or more issues, the successful party has "unfairly, improperly, or unnecessarily increased the costs" (Waddell J, as his Honour then was, in Windsurfing International Incorporated Inc v Petit (1987) AIPC 90-441); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (see, for example, Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328; [1994] NSWCA 338 (Waters v PC Henderson) at 3 per Mahoney JA; Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 (Hughes) per Toohey J); or where a particular issue or group of issues is clearly dominant or separable (see, for example, Waters v PC Henderson at 5 per Mahoney JA; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6] per Beazley JA,as Her Excellency was then, McColl and Basten JJA).
Where there is a mixed outcome in proceedings, the question of apportionment is recognised as being very much a matter of discretion, the exercise of which "will often depend upon matters of impression and evaluation" (Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272 per Gummow, French and Hill JJ).
As to the making of special costs orders, in the present case the opposing parties rely on different aspects of the circumstances when this may arise: the plaintiffs invoke the line of authority where special costs orders are made by reference to the unreasonable conduct of litigation (referring to Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [44] per Gaudron and Gummow JJ; White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303 (White Constructions) at [11] per McDougall J; Jamal v Department of Health (1998) 14 NSWLR 252 (Jamal) at 271 per Mahoney JA); whereas the first and second defendants invoke the special costs regime under the Calderbank principles (see Calderbank v Calderbank [1975] 3 All ER 333), having regard to the making of a Calderbank offer at an early stage in the proceeding (see below).
As to the former line of authority, i.e., special costs orders referable to the unreasonable conduct of litigation, in Oshlack it was recognised that the discretion to award indemnity costs may be exercised where there is some special or unusual feature or circumstances in the case (concerning the conduct of the party, as a litigant, against whom the order is made and relating to the proceedings in question) to justify such an order (see Oshlack at [44]). The concept of "relevant delinquency" means delinquency bearing a relevant connection to the conduct of the matter, not some form of moral or ethical delinquency (see White Constructions at [11]). A successful party's conduct may be discreditable to the extent that they are deprived of costs (see, for example, Jamal at 271 per Mahoney JA).
As to the latter line of authority, see Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9], the Court of Appeal there approving what had been said by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] that: The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure
The factors relevant to take into consideration in this regard are well-known (see, as summarised in Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519 (Favotto) at [20]-[30]). Relevantly, while the rejection of a Calderbank offer (in circumstances where it later transpires that the final result in the proceeding is less favourable to the offeree), enlivens the discretion to award indemnity costs, it does not create a prima facie right to such an order (see Favotto at [28]; Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197 at [9] per Campbell, Macfarlan JJA and Handley AJA).
In order to warrant the making of a special costs order, the offer must constitute a genuine offer of compromise that was unreasonable for the party against whom the order is sought not to accept (see Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] per Handley, Basten and Beazley JJA; see also Hancock v Arnold (No 2) [2009] NSWCA 19 at [23] per Ipp, McColl and Basten JJA; Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8] per Basten JA (with whom Santow JA and Young CJ in Eq, as his Honour then was, agreed); Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23] per Santow JA (with whom Bryson JA and Stein AJA agreed)). Where the offer is a Calderbank offer, the onus to demonstrate that it was unreasonable to reject it is on the party seeking to rely on the making of the offer (see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] per Giles, Ipp and Tobias JJA).
The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable include: (i) the stage of the proceeding at which the offer was received; (ii) the time allowed to the offeree to consider the offer; (iii) the extent of the compromise offered; (iv) the offeree's prospects of success assessed as at the date of the offer; (v) the clarity with which the terms of the offer were expressed; and (vi) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it (see Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 (Hazeldene's Chicken Farm) at [25] per Warren CJ, Maxwell P and Harper AJA; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA (with whom McColl and Campbell JJA agreed).
Where a Calderbank offer is unreasonably rejected, and the offeror succeeds in litigation, costs may be made on an indemnity basis at least from the date of the offer or thereabouts. Whether such an order will be made will be determined in the exercise of the Court's discretion (see Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147 at [12] per Refshauge J).

[16]

Plaintiffs' submissions

In essence, the plaintiffs submit that costs should follow the event. The plaintiffs maintain that costs should be awarded in their favour as they enjoyed success in relation to a substantial aspect of their claims (the Succession Act claims), which they contend required consideration of a number of matters relevant to the other claims on which they did not succeed.
Pausing here, insofar as the plaintiffs in their submissions refer to the "array of defences" with which their claims were met (including a denial of probate and the enforceability of the testamentary agreement), it should be noted that the escalation of the dispute appears to have been precipitated by the expansion in early 2018 of the plaintiffs' case beyond what might have been a relatively straightforward family provision claim by each of the then three surviving children of Mr Cong's first marriage to include various claims based on the alleged testamentary agreement (i.e., the Deed) and of resulting and constructive trusts, which gave rise to that very array of defences.
That said, the plaintiffs' observation (as they go on in their submissions to make) that the litigation was adversarial seems to me to be an understatement; it was strenuously fought on both sides. On the plaintiffs' side, it included allegations of unethical business practices on the part of Mr Cong and his company as well as implicit (and at times explicit) slurs on Ms Shen's character (about which Ms Shen made vociferous complaint during the course of the hearing). On the first and second defendants' part, it included criticism (at least in their pleadings) as to the filial devotion of Mr Cong's three eldest children (which criticism seemed to me to be unfounded and no doubt equally as distressing to them as the slurs cast on Ms Shen were to her). All in all, it was an unfortunate example of an acrimonious and extended family dispute (and contrary to the expressed wishes of Mr Cong that there be no fighting between his respective families after his death).
The plaintiffs say that they are entitled to their costs on the ordinary basis from the estate in accordance with the usual rule in family provision claims (citing Sarant v Sarant [2020] NSWSC 1686 (Sarant v Sarant) at [57] per Hallen J). There, Hallen J said: 57. Usually, in calculating the value of the deceased's estate available from which a family provision order may be made, the costs of the proceedings should be considered with circumspection. Unless the overall justice of the case requires some different order to be made, the applicant for a family provision order, if successful, normally would be entitled to an order that his, or her, costs and disbursements, calculated on the ordinary basis, should be paid out of the estate of the deceased, while the defendants, as the persons representing the estate of the deceased, irrespective of the outcome of the family provision proceedings, normally will be entitled to an order that their costs, calculated on the indemnity basis, should be paid out of the estate. The size of the deceased's estate, and the conduct of a party, may justify a departure from what is said to be the usual rule
Further, the plaintiffs say that, as Mr Cong's estate has been depleted by Ms Shen, there should be an order that their costs be paid from the designated notional estate (pursuant to s 99(1) of the Succession Act); and then, to the extent that such notional estate is insufficient to meet their costs, the plaintiffs seek an order that their costs be paid by Ms Shen.
The first and second defendants cavil with the suggestion that Ms Shen has depleted the estate, and I consider their submissions below. Relevantly, however, I here note that the complaint as to the depletion of Mr Cong's estate can only logically relate to the half share of the two properties that were jointly in Mr Cong's name, the funds held in his or the couple's joint bank accounts, the business of Jolly Trading, and Ms Shen's share of the proceeds of the life insurance, since the balance of the properties to which the plaintiffs here laid claim were assets held in Ms Shen's name alone (and their resulting trust claims in respect of those assets did not succeed).
The plaintiffs say that the costs orders they seek would produce a just result. The plaintiffs maintain that they were required to bring the proceeding essentially because of the intransigent attitude of Ms Shen towards carrying out Mr Cong's testamentary intentions; and that Ms Shen should bear all or a substantial portion of their costs of the proceeding.
I interpose to note that Ms Shen's so-called intransigence (with which accusation the first and second defendants also cavil, pointing to the offer made by Ms Shen of settlement in relation ot the proceeding) seems to have followed the making of demands by the plaintiffs through their lawyers in July 2017 (see, for example, Teresa's evidence that Ms Shen's response to that demand was to take the position that if the children took her to Court then they would get nothing - a perhaps empty threat as Ms Shen not long afterwards relented to the extent that she made the offer here relied upon by the first and second defendants for the special costs orders). Moreover, when considering the plaintiffs' complaint as to Ms Shen's intransigent attitude towards carrying out Mr Cong's testamentary intentions, it should also be remembered that under the 2016 Will and Deed the three elder children were not to receive substantial sums out of the estate for a considerable period (in most scenarios, no sooner than ten years after Mr Cong's death; and perhaps even later dependent on Ms Shen's discretion in that regard). Hence, the sense in which the family provision claim was said not to be a true alternative claim to the primary claims (because of the delay in the provision made for the three elder children under the 2016 Will and Deed) (and the recognition in the opening submissions for the first and second defendants (see at T 37), to which reference is made in their costs submissions (at [27]), to the effect that but for the much larger (primary) case that they brought, there would have been a good claim for provision).
The plaintiffs nevertheless submit that the costs orders they seek are appropriate in circumstances where Ms Shen appropriated to herself the assets which constituted the estate (and notional estate) and has taken steps to frustrate the Court's processes by disposing of assets that would be available to satisfy any judgment in favour of the plaintiffs' claims. In this regard, the plaintiffs point out that Ms Shen first became aware of their family provision claims on 21 July 2017; and they say that, since that time, Ms Shen has taken steps to divest herself of assets which could be used to meet any liability in respect of the family provision claims, including the three Campsie properties that were registered in Ms Shen's name and the business of Jolly Trading. (Of course, the three Campsie properties registered in Ms Shen's name could only have been available to meet a family provision claim if the resulting trust or other primary claims were made good.)
The plaintiffs refer to the principle that, if a trustee or other person in a fiduciary capacity has received notice that a fund in his or her possession is, or may be, claimed by another, he or she will be liable to that other person if he or she deals with the fund in disregard of that notice should the claim subsequently prove to be well-founded (citing Guardian Trust and Executors Company of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115 at 127 per Romer LJ; Dickman v Holley; Estate of Simpson [2013] NSWSC 18 at [189] per White J).
It is submitted that the cost of the litigation has increased significantly by reason of Ms Shen's conduct in taking steps to divest the estate of assets. I accept, in this regard, that the steps taken by Ms Shen in relation to the transfer to Ms Wu of the Wu Property (which was one of the properties the subject of the obligations that the plaintiffs sought to enforce under the Deed) and then its encumbrance in breach of Court orders, resulted in a number of interlocutory applications to which I refer in due course. It is, however, relevant to note that the Campsie properties to which reference was made in the above submission were in Ms Shen's sole name and that the allegations of resulting trust were ultimately not made good; so I have some difficulty in seeing how the above principles are said to apply in relation to that conduct.
As to the position of Jolly Trading (the shares and business of which were left to Ms Shen under the 2016 Will), I have dealt in the principal judgment with the complaints made as to Ms Shen's closure of that business (and almost immediate commencement of trading through Cong Australia International of essentially the same business). I accept that the shares in the business and company (which were left to Ms Shen under the 2016 Will) would have been assets of the estate which could have been made the subject of orders for provision in favour of the plaintiffs. However, the evidence supports the conclusion that there were debts of the company which were met by Ms Shen prior to the closure of the business; hence the extent to which Ms Shen might be said to have depleted those assets was not clear.
The plaintiffs say that their claims to enforce the testamentary agreement (under the Deed) were separate, but not severable, from their Succession Act claims. Athough noting that a separate issue can relate to "any disputed question of fact or law" (referring to what was said in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34] per Beazley JA, as Her Excellency then was, Tobias and McColl JJA), the plaintiffs submit that the issues as to whether the testamentary agreement was enforceable and the circumstances of its making were intertwined with the terms of the grant of Probate and the issue as to whether the plaintiffs had been left with inadequate provision under the 2016 Will.
In this regard, the plaintiffs point to the factors to be taken into account pursuant to ss 60(2)(i), (j) and (n) of the Succession Act in the context of the determination of their family provision claims, namely: any provision made for the plaintiffs by Mr Cong or made from Mr Cong's estate (s 60(2)(i)); any evidence of Mr Cong's testamentary intentions (s 60(2)(j)); and the conduct of any other person (here, Ms Shen) (s 60(2)(n)). The plaintiffs argue that, in order to address those matters, it was necessary for them to adduce evidence of Mr Cong's testamentary intentions (both as recorded in the Deed and in his oral representations to the plaintiffs), the circumstances of the preparation of and execution of the 2016 Will and the Deed (to displace the suggestion that Mr Cong lacked testamentary capacity and to establish its validity), and Ms Shen's conduct towards and representations made to the plaintiffs (relevant to Mr Cong's testamentary intentions and her failure to make provision to the plaintiffs in accordance with those intentions).
It is thus said that resolution of the issues concerning the testamentary agreement was required before an informed assessment could be made of the plaintiffs' entitlement to a family provision order, if any, under the Succession Act. In particular, it is said that whether the plaintiffs should have benefited from a family provision order (and, possibly, the amount of any legacy thereunder), could only have been determined in light of the testamentary agreements entered into and a determination of the estate's creditors, including under the Deed. The plaintiffs say that determination of the construction issue was necessary for the proper administration of Mr Cong's estate and that such a determination would necessarily have involved a determination as to whether the Deed was enforceable against Ms Shen.
It is further noted that, in exercising the costs discretion, account may be taken of the amount of time spent on various issues and the degree of overlap between them. The plaintiffs contend that the matters upon which the first defendant succeeded occupied comparatively little time at the hearing. For example, it is said that the first and second defendants' submissions on the Contracts Review Act claim comprised only three pages. Moreover, the plaintiffs say that the factual matters informing that defence were relevant to other issues in relation to claims upon which the plaintiffs were successful.
The plaintiffs point to the issues raised in the defence to the amended statement of claim associated with: Mr Cong's physical state; the extent to which the 2016 Will had been explained to him; the financial position and prospects of Jolly Trading; Mr Cong's assets; the true construction of the Deed; and whether the Deed caused unfairness to Ms Shen. The plaintiffs say that the terms of the Deed and the circumstances of its making were thus relevant to an issue in respect of which the plaintiffs were successful, namely the application for a grant of Probate of the 2016 Will.
The plaintiffs maintain that their claims for relief under the Succession Act were an alternative means of claiming the same relief as was sought in the testamentary agreement claim. The plaintiffs submit that the two claims shared: a common evidentiary foundation with the majority of the evidence; and hearing time and submissions concerned with Mr Cong's testamentary intentions, his capacity, the preparation and execution of the Will and the Deed and Ms Shen's conduct. It is said that it would be a futile exercise to attempt to parse the parties' costs in relation to these matters.
The plaintiffs say that other significant issues propounded by the plaintiffs at the hearing included the acquisition of the various properties owned by Mr Cong and Ms Shen, which formed part of the plaintiffs' case on resulting trusts, and Ms Shen's conduct in relation to Jolly Trading (relevant to the issue of Jolly Trading's financial position and her credit); both of which the plaintiffs say were ultimately relevant to the question of the nature and extent of Mr Cong's estate (referring to s 60(2)(c) of the Succession Act).
Thus, the plaintiffs say that, although the juridical nature of the plaintiffs' testamentary agreement claim and Succession Act claims are different, the costs of the totality of the proceedings were not materially increased by consideration of the legal issues relevant to the enforceability of the testamentary agreement (which it is said were confined to the parties' respective written submissions); and, hence, it is argued that the claims based upon the Deed and the Succession Act claims are not severable.
Costs are sought against Ms Shen in the context of the Probate claim and the Succession Act claim for the following reasons.
First, and in addition to the application of the rule in Sarant v Sarant, it is said that the litigation, in essence, involved the construction of the 2016 Will (the construction of the Deed and the question of the plaintiffs' entitlement thereunder being relevant to the construction of cl 9(d) of the 2016 Will). The plaintiffs say that it was necessary for the construction issue to be resolved to ensure the proper administration of the Mr Cong's estate (referring to Murdocca v Murdocca (No 2) [2002] NSWSC 505 at [40]-[42] per Campbell J; Warton v Yeo (2015) 15 ASTLR 462; [2015] NSWCA 115 (Warton v Yeo) at [74]). The plaintiffs thus say that their costs were testamentary expenses.
The plaintiffs note in this regard that the construction issue was not straightforward (pointing to the observations made in the principal judgment as to the drafting of the Deed in this respect - see at [1189]). The plaintiffs say that, in large part, this litigation was caused by Mr Cong's failure to ensure that his testamentary plans were effective to carry out his intentions (referring in that context to Muller v Marriott (1921) 22 SR (NSW) 100 at 102 per Street CJ; Gray v Hart (2012) 10 ASTLR 379; [2012] NSWSC 1562 (Gray v Hart) at [6]-[19] per White J).
Pausing here, while I certainly referred (at [1189]) to Mr Cong (and perhaps also Ms Shen, through the instructions communicated by Ms Lan) having played a part in the drafting of the Deed (by conveying the instructions as to the inclusion of the matters in cll 2(d) and 2(e) in the Deed, the former being part of the difficulty that had arisen in construing cl 2), it remains problematic to say that someone in Mr Cong's position (a lay person and one for whom English was not his first language) was responsible for infelicities in the drafting of legal documents. In any event, here what was squarely before the Court was not so much a construction suit as adversarial litigation in which the construction of the 2016 Will and Deed was in issue.
Second, it is submitted that, as a moving party, Edmund acted in accordance with his duty to uphold the 2016 Will (McCusker v Rutter (2010) 7 ASTLR 137; [2010] NSWCA 318 (McCusker v Rutter) at [58] per Handley AJA) and, consistently with this duty, he opposed the first defendant's challenge to the validity of the 2016 Will and the enforceability of the Deed. While the plaintiffs appear to accept that Edmund had a personal interest in the outcome (and hence it is said that he was no doubt motivated by self-interest), the plaintiffs point out that such interest was vindicated by the finding that Mr Cong's ultimate testamentary intention involved payments to the three elder children after the expiration of 10 years ([1457]) and that, on the proper construction of the Deed, if no rezoning had by then occurred, such payment would be $3 million ([1210]). Correspondingly, it is submitted that Ms Shen's failure to discharge her executorial duty of upholding the 2016 Will and the Deed, in furtherance of her personal interest to avoid or limit her exposure to the plaintiffs, is a reason why her costs should not be paid from notional estate or otherwise (the plaintiffs again here citing Warton v Yeo at [72]).
The plaintiffs submit that their costs should be borne by Ms Shen because the litigation was in substance adversarial and because of her conduct in the period after the commencement of the proceeding (here pointing in particular to the taking by Ms Shen of steps to dissipate her assets and to the criticism made in the principal judgment as to Ms Shen's reliability as a witness).
It is noted that, after the plaintiffs' summons was filed on 21 July 2017, Ms Shen: caused Jolly Trading to be deregistered and its business transferred to Cong Australia International; transferred the Wu Property to Ms Wu for no consideration; and sold the properties at 56 Duke Street and 58 Duke Street. It is noted that (at [852] of the principal judgment) I accepted that there was a basis for the suspicion held by the plaintiffs that Ms Shen had acted to dissipate assets that might otherwise have been available to them and I expressed the view (though it was not necessary ultimately to make a finding on this issue) that it was most likely that the Wu Property transfer was to put that asset out of the control of the estate and into Ms Wu's hands (and hence, under Ms Shen's control through her mother).
The plaintiffs emphasise (as they did at the hearing) that Ms Shen had breached court orders and had made a deliberate decision not to inform the plaintiffs of her conduct (at [618]). The plainiffs point out that not only was Ms Shen found not to be a reliable witness ([660], [669]) who had downplayed her fluency in English ([630]), her commercial nous ([630]) and her financial resources ([622]), but also that her affidavit evidence, in parts, did not put forward a complete picture of events ([616]) and was misleading ([647]). It is noted that Ms Shen's claim that the 2016 Will was not attested was disbelieved ([640]), as was her claim about Jolly Trading's unprofitability at the time of Mr Cong's death and her explanations for the bank transactions ([649]), and that her evidence explaining the breach of the Court's orders was found to be unsatisfactory ([665]). Reference is also made to the observations made in the principal judgment ([613], 652], [851] and [1873]), which I do not need here to repeat.
The plaintiffs say that the manner in which Ms Shen has conducted herself since the commencement of proceedings, and the manner in which she gave evidence in support of her opposition to the plaintiffs' claims, was discreditable and warrants not only an order depriving her of her costs (citing Ritter v Godfrey [1920] 2 KB 47 (Ritter v Godfrey); Jamal at 271) but also an order that Ms Shen pay the plaintiffs' costs. It is noted that the observations of Mahoney JA in Jamal were made before the enactment of the Civil Procedure Act and that ss 56-58 of that Act now require consideration of matters such as any failure to comply with orders of the court when exercising a discretion with respect costs (see s 56(5)); and referring to Baker v Towle (2008) 39 Fam LR 323; [2008] NSWCA 73 at [23] per Beazley JA, again as Her Excellency then was).
The plaintiffs also point out that Ms Shen raised allegations of undue influence and unconscionability against Mr Cong as well as alleging that he lacked testamentary capacity (suffered from "delusional optimism"). It is submitted that these defences were not supported by "substantial grounds" and raised an issue of the propriety of Ms Shen's conduct. The plaintiffs contend that the costs of those issues should be borne by Ms Shen, referring to Gray v Hart at [32]-[39]). In Gray v Hart, White J, as his Honour then was, referred to the observations of Rich AJ in Kenny v Wilson (1911) 11 SR (NSW) 460 to the effect that, where undue influence is pleaded unsuccessfully, the costs of that issue must be borne by the party who raised it unless substantial grounds are shown (White J applying similar reasoning to an allegation concerning the deceased's mental capacity at [37]-[38]).
The plaintiffs submit that the family provision orders made in their favour should not be diminished by requiring them to pay any part of the first and second defendants' costs (notwithstanding that the plaintiffs' claims were dismissed against Ms Wu). In this regard, reference is made to the position of family provision cases as standing apart from other cases in relation to costs issues, citing Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35 at 522 per Gaudron J, in dealing with a security for costs application; and Harkness v Harkness (No 2) [2012] NSWSC 35 (Harkness v Harkness), at [18]-[19], where Hallen J said: … (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].
It is submitted that, although Harkness v Harkness was decided in a different context (i.e., where all that was concerned was the disposition of a family provision claim), what Hallen J said is consistent with s 99 of the Succession Act. Reference is also made to Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 where Barrett JA accepted (at [141]) that a party's financial position could be relevant to the costs discretion, in so far as claims for a family provision order were concerned; and did not disagree with the reasoning of Young JA in McCusker v Rutter at [34] to the effect that a costs order in this context which would make a litigant impecunious might be counter-productive as it would enable him or her to bring a fresh application for provision.
The plaintiffs refer to the evidence in the proceeding as to their financial means (those being modest in nature) and as to the amounts owed by them as at February 2020 (which will no doubt have increased since then) to their mother's family trust in respect of the costs of the proceedings. The plaintiffs say that an order for costs against them will impose a substantial detriment on them and will derogate from the benefit of the provision that has been considered appropriate. (It is relevant, however, here to note - and I discuss this in due course - that the family provision orders that were made did involve consideration of potential adverse costs liabilities.) Conversely, while the plaintiffs accept that a refusal to make the usual costs order against the plaintiffs will have adverse consequences on the first and second defendants, they maintain that the overall effect on their position would not be nearly so severe. It is submitted that it is consistent with the overall justice of the case that no order for costs be made against the plaintiffs.
As to the freezing order applications, the plaintiffs say that the basis for each of those applications was to prevent the frustration of the Court's processes by dissipation of assets by Ms Shen so as to prevent enforcement of any judgment against her (referring to Cong v Shen [2020] NSWSC 945 at [131]). It is said that there was a proper basis for the plaintiffs' concerns (noting what was said in this regard in the 2020 decision referred to above (at [144]-[146])).
The plaintiffs argue that the rationale for such an order applies equally to secure their entitlement to costs; and that, as the plaintiffs have now obtained judgment on their Succession Act claims, the utility of their several applications to prevent the dissipation of assets by the first defendant has been validated.
It is submitted that it is just and equitable that Ms Shen (who the plaintiffs say, by her own deliberate conduct, caused them to incur significant costs to prevent the frustration of the Court's processes) should pay for that litigation (i.e., the freezing order applications, as I understand it), rather than that the burden of its cost be cast on them (they being parties who it is said have done no wrong) (Daulizio v Trust Company of Australia [2005] VSCA 215 at [23] per Nettle JA).

[17]

First and second defendants' submissions on costs

The first and second defendants' claim for special costs orders is based on the non-acceptance by the plaintiffs of an offer (the Calderbank offer) made by Ms Shen (then the only defendant) on 29 November 2017 to pay $2 million to the plaintiffs to settle the proceeding (which then comprised only the three children's family provision claims) "and any matters arising from or related to the facts involved in the present proceedings" expressly including: any claim by the plaintiffs, their assigns and heirs, against Ms Shen, her assigns and heirs "as to the assets of the estate, notional estate and/or alleged potential notional estate," as well as "any claim against the estate, notional estate and/or potential notional estate" by the plaintiffs, their assigns and heirs. The offer provided for each party to pay his or her own costs.
The first and second defendants point out that the letter made clear that the offer was a Calderbank offer which, if it were not bettered, would be relied on for the purpose of an indemnity costs application.
As to the time at which the offer was made, it is noted that at that stage Ms Shen was the interim legal representative of Mr Cong's estate for the purpose of the proceeding (pursuant to consent orders made according to r 7.10(2)(b) of the UCPR at the first directions hearing in the proceeding on 24 August 2017). It is submitted that Ms Shen could therefore expect that, in due course, an order would be made that her own costs be paid from the estate or notional estate on the indemnity basis.
The first and second defendants point to the statement in the letter that the offer was made "notwithstanding our client wishing to resolve the present matters as expeditiously as possible, to minimise costs for all parties involved, and in respect for the deceased, as well as any hope of a mended relationship between your clients and our client" (these observations were repeated towards the end of the letter).
At that stage, the respective parties' estimates as to the costs of the family provision proceedings up to and including mediation (set out in affidavits filed in accordance with cll 6(c) and 9 of Practice Note SC Eq 7) were that the plaintiffs' costs were estimated at not in excess of $32,101 (including filing fees and disbursements) and Ms Shen's costs were commensurately in the order of $33,000.
Thus, had the 29 November 2017 offer (which required the parties to bear their own costs) been accepted, the net result would have been that the amount received by the plaintiffs would have been close to $2 million. The first and second defendants say that this therefore presented an opportunity to the plaintiffs to obtain a substantial return, quickly and cheaply, and without the deepened destructive impact on family relations that it is submitted is the inevitable consequence of a case such as this (and to which I adverted in the principal judgment).
The first and second defendants emphasise that, had the plaintiffs accepted the offer, they would also have had the benefit of a personal obligation upon Ms Shen to pay a certain settlement sum (as opposed to the effect of an order for family provision which, even with the benefit of a notional estate order, would be limited to claiming through the estate "with its attendant burdens and costs of administration and the obligation of the estate to satisfy the liabilities of the deceased before beneficiaries".
The first and second defendants say that the offer that was made was a very substantial offer to make in respect of claims for family provision by adult children and that the plaintiffs have not bettered that offer.
Pausing here, effectively the $2 million offer as between the then three claimants was in effect some $666,000 each. By the time of the hearing, of course, Laurence had died and the orders made for provision out of the estate and notional estate in favour of Edmund and Teresa were for the sum of $700,000 each. However, while it might be thought that the monetary sum awarded was thus more favourable for Edmund and Teresa than the offer, that does not take into account the question of costs or the practicalities of uncertainty as to the ability of that order to be met out of the assets of the estate or notional estate. Moreover, Laurence's estate continued to press claims in the litigation and those claims did not succeed. Therefore, on any view I accept that the offer was more favourable than the ultimate result.
The first and second defendants accept that there is no presumption that failure to accept a bettered Calderbank offer was unreasonable; and that they bear the onus of establishing this. However, the first and second defendants submit that, according to ordinary principles (including the responsibility of parties for the prudent conduct of litigation), it was unreasonable to reject the offer.
It is submitted that such a large offer involved a genuine compromise (and was generous). The first and second defendants say that, although the offers made in 2017 were in the context solely of the family provision claims then on foot, they were not removed from the controversy that ultimately developed (a submission which is not inconsistent with the plaintiffs' own submission as to the intertwined nature of the claims in the final hearing) and the first and second defendants say that the making of the offers should be accepted as relevant to the costs of that final controversy.
In terms of the chronology of the making of the offer, the first and second defendants note that the proceeding was commenced on 17 July 2017. Prior to the joinder of Ms Wu as second defendant (on 12 February 2018), the parties had participated in a mediation (pursuant to directions made by Hallen J). Following that mediation, the plaintiffs, by their solicitors' letter dated 31 October 2017 had offered to accept an order for provision in the sums of $1.1 million each (i.e., $3.3 million) plus costs on the ordinary basis out of Mr Cong's estate and notional estate. (The first and second defendants say that it is difficult to think that the offer could have been made without a view that the estate or notional estate could be greatly augmented.)
On 10 November 2017, Hallen J made directions requiring the plaintiffs to inform Ms Shen by 4pm on 24 November 2017 of the claims sought to be agitated in relation to property said to be held on trust for the estate of the deceased. Thereby, the first and second defendants say that it is apparent that the wider claim must have been contemplated at the time of the offer. The Calderbank offer was served prior to the direction that the matter continue on the pleadings (which was made on 8 December 2017) and service of the initial statement of claim which was ordered to be filed and served by 23 January 2018.
Thus, the first and second defendants say that the plaintiffs' 31 October 2017 offer and their own 29 November 2017 offer were made in the context that the family provision claims were part of a broader controversy that had by then emerged.
The first and second defendants say that the fact that the plaintiffs' claims had not been fully developed at the time of the offer was a matter disadvantageous to Ms Shen (who did not even have the benefit of a pleading at that stage), noting that when the pleading was served in February 2018 there were requests made for particulars and an explanation of the pleading (in particular relating to the resulting trust claims, on which the plaintiffs ultimately failed). It is suggested that the resulting trust claims may have been at the root of the high premium that the first and second defendants say the plaintiffs put on the matter (though that seems to me to be inviting speculation as to the basis of the offer put by the plaintiffs - which may simply have been by reference to the lowest of the amounts provided for under the testamentary regime in the 2016 Will and Deed). In any event, the first and second defendants say that insistence by the plaintiffs on a $3.3 million plus costs position was not reasonable and that this is the reason why the case did not settle in 2017 (again it seems to me to be unproductive to speculate on the particular motivation for rejection or non-acceptance of the respective offers).
The first and second defendants note that on the first day of the final hearing a Calderbank offer was made by the plaintiffs, being an offer to accept $3 million inclusive of costs (which is said to have been the most favourable offer made by the plaintiffs during the course of the proceeding) by which time very large costs had been incurred on both sides (see at [1844] of the principal judgment).
It is submitted that Ms Shen's offer was all the more commendable in circumstances where she was not then confronted with an articulated claim; and that it was therefore particularly incumbent on the plaintiffs to consider it carefully. It is said that in those circumstances, and given that the outcome is less favourable, it was unreasonable to reject it. (Pausing here, the fact that an outcome is less favourable than an offer does not to my mind mean that it was necessarily unreasonable to reject it in the first place; though I accept that the making of the offer at an early stage of the proceeding is to be commended.)
The first and second defendants also note the references in the principal judgment (at [1844] and [1874]) to the potential adverse costs exposure faced by the plaintiffs (something I considered of relevance in the determination of the provision to be made but necessarily without having a concluded view as to what costs orders might be made - and certainly without any understanding of the special costs orders that are now being sought). Nevertheless, I accept that it is relevant that, a significant factor in the findings as to the amount of provision to be ordered was the known liability for debts owed to the family trust controlled by Ms Joyce and the potential exposure to an adverse costs order.
The first and second defendants note emphasise in this context that acceptance of the 29 November 2017 offer would have: eliminated any exposure to the first and second defendants' costs; would have eliminated the need for the plaintiffs to incur their own costs going forward; and would have provided each of the three adult children with a far larger net return after costs. By reference to the comment made at [1876] of the principal judgment to the effect that the order for provision would permit Edmund and Teresa to meet "some or all of their debts in relation to costs" (with the hope of leaving a buffer), the first and second defendants say that acceptance of their offer would have been a very substantial provision for the adult children (and would not have been subject to the limitation to available notional estate since there would have been a personal obligation of Ms Shen).
The first and second defendants point to the public policy underlying the special costs order regime and to the encouragement of early settlement of proceedings that is reflected in the procedure for mediation of family provision disputes. It is noted that it is a frequent problem in family provision matters that the costs will diminish the resource (i.e., the estate). The first and second defendants contend that the fact that as the costs principles in this regard are well-established should militate against excusing successful provision claimants from the ordinary consequences of rejection of a more favourable offer, emphasising the need for parties to take into account the costs impact of litigation.
The first and second defendants say that in the present case the estate and notional estate will be insufficient to discharge all of the obligations that lie upon the estate such that the exectors will need to deal with the estate in accordance with the rules that apply to insolvent estates.
In further support of the orders that they seek, the first and second defendants submit as follows.
First, that Ms Wu has been entirely successful. It is submitted that Ms Wu should have an order for her costs (and not merely her separate costs of the proceedings). It is said that Ms Wu has incurred separate costs in relation to her advice, defence and evidence. It is said that even in respect of those costs that overlap with those of Ms Shen (such as the costs of the hearing), the overlapping issues with which Ms Shen was also concerned were issues on which both the first and second defendants were successful (i.e., the resulting trust case in respect of 58 Amy Street, the various constructive trust claims so far as they affected that property, and the case founded in various ways in relation to the Deed). It is said that a hearing confined to claims based on the notional estate that was found and on the finding that the Deed did not withstand challenge would have been significantly shorter.
Second, that had the offer of 29 November 2017 been accepted, Ms Wu could not have been sued (since she was sued as an assign of Ms Shen). Therefore, it is submitted that Ms Wu should have her costs assessed on the indemnity basis.
Third, that because Ms Wu was not joined to the proceeding until February 2018, all of her costs were after the date of the offer of 29 November 2017.
Fourth, that the interposition of the third defendant (pursuant to the orders of Slattery J) was necessitated only by the claims that have been unsuccessful. It is said that, apart from those claims, the estate could have been represented by Ms Shen, so that the costs, if any, of the third defendant are the consequence of the plaintiffs making the claims that failed. Moreover, it is said that for the time between the consent order of 24 August 2017 and the order of Slattery J, the defence on behalf of the estate was conducted by Ms Shen as representative of Mr Cong's estate and there is no reason to deprive her of her normal entitlement to the costs of so acting.
Fifth, that the claims made by the plaintiffs, as legal personal representatives of Laurence's estate, have been entirely unsuccessful and should sound in costs. It is said that the controversy concerning representation of his estate arose only because of the continuing claims on behalf of his estate and these were claims that were unsuccessful; and that this exposed the first and second defendants to the claims made on behalf of his estate whilst depriving them of the opportunity to have a costs order against the original administrator of Laurence's estate (Ms Joyce), as co-plaintiff, which she would otherwise have been required to be if the claims were to proceed. It is said that the plaintiffs, having chosen to stand in the shoes of Laurence to pursue proprietary, equitable and contractual claims, cannot be heard to say that because they have a claim for provision from the estate and notional estate they can be exonerated from the costs of bringing claims for Laurence for which they volunteered to take personal responsibility.
Sixth, that the practical importance of the probate case always lay with the claim to enforce the Deed. It is said that before that was commenced there was no probate case and the plaintiffs were initially content to proceed without the need for a final grant. It is said that, no matter which Will was admitted to probate, the provision case could have reached the same result. Therefore, the practical outcome (in respect of the proceedings as a whole) is said to be a win for Ms Shen, save for the provision orders.
Seventh, that costs of the provision claim are affected by s 99 of the Succession Act, which in turn is confined by s 78 of that Act but that the balance of the costs of the suit are not within the scope of this power. Furthermore, it is noted that the plaintiffs' exposure to costs has already been taken into account in deciding to fix the amount of provision and making the notional estate order that was made on 3 August 2021. (Reference is made to the submission made at trial referring to Stojanovski v Stojanovski [2019] NSWSC 1713 (Stojanovski v Stojanovski) at [573]-[589] (referred to in the principal judgment at [1790]) in this context.)
It is said that since s 99 does not pick up the costs of the wider suit, those costs will be determined on ordinary principles and the impact of that will in turn affect in a practical way the scope here for the more flexible approach (to a limited extent) to costs that the authorities indicate for provisions cases. It is said that had this case been confined to a provision claim cl 25 of Practice Note SC Eq 7 would have been applicable.
The plaintiffs say that the above matters should sound in costs in any event but that they also provide further support for the submission above that the outcome is less favourable than the offer of 29 November 2017.
Finally, reference is made to the the effect of the notional estate order and the impact of the two notices of motion filed on 17 August 2021 (also said to provide further support for the submission that it is not necessary to come to a concluded view of the financial impact of the notional estate order, in order to accept Ms Shen's primary case on the costs application).
Addressing the particular costs orders sought by the plaintiffs, in essence the position of the first and second defendants is as follows.
First, they say that the order proposed at (a) is not appropriate; that at no time was it suggested that the plaintiffs would settle for their provision claims limited to notional estate; and that, insofar as the plaintiffs point to their success on the grant of probate, that was only one issue out of the overall controversy (and one that had little if any significance for the provision orders which it is said may well have been the same had the 2014 Will been admitted to probate). The first and second defendants contend that, in practical terms, they were the parties who were successful on the primary claim (by which I understand them to be referring to the claims other than the family provision claim).
Insofar as the plaintiffs suggest that the testator was the cause of the dispute, the first and second defendants say that this would be a reason to visit the costs on the estate (not a basis for visiting costs on the successful party; nor does it support excusing the unsuccessful party from paying the successful party's costs). Insofar as complaint is made by the plaintiffs of Ms Shen's conduct (in the course of the proceeding and otherwise - see the plaintiffs' submissions above), the first and second defendants say that much of this is contentious and in any event they emphasise that costs orders are compensatory not punitive.
Second, as to the order sought at (b) (which seeks to visit costs of the family provision claim on Ms Shen personally), it is said that there is no reason to disturb the ordinary position that an executrix will not be personally liable for costs and will obtain her costs from estate or notional estate; and that a successful party's costs will fall on the estate (citing Milillo v Konnecke (2009) ASTLR 235; [2009] NSWCA 109 at [130] per Ipp JA (with whom Macfarlan JA and Sackville AJA agreed) for the former proposition and, as an example, the orders in Nicholls v Hall (2007) 2 ASTLR 419; [2007] NSWCA 356 for the latter).
As to the fact that Ms Shen contested the making of a family provision order, the first and second defendants say that this is a normal occurrence and (but for the Calderbank offer) would justify a costs order against the estate for the costs of the provision claim (as proposed in (a) of the first and second defendants' proposed orders). As to the complaint that the estate has been depleted by Ms Shen, it is noted that there was no such finding in the principal judgment (and that the designation of notional estate is a consequence of Mr Cong's failure to sever the joint tenancies).
As to the suggestion that the costs of the proceeding were the result of Ms Shen's intransigence in carrying out Mr Cong's testamentary intentions, the first and second defendants say that such a submission cannot stand in the face of Ms Shen's success on the cross-claim concerning the Deed and the Calderbank offer (and the plaintiffs' own conduct in changing their evidence in mid 2018 to disparage Ms Shen and raising the "project Wickenby" threat - noting that the threat was after such reports to the authorities had already been made).
The first and second defendants complain that, rather than Ms Shen, the plaintiffs are the ones who were intransigent, by claiming against the 2016 Will and unsuccessfully seeking to augment the estate by making the resulting trust claims. The first and second defendants say that if those resulting trust claims were made on behalf of the estate then the plaintiffs should pay Ms Shen's costs of those claims and should indemnify the estate for that liability as persons who sought to sue in its name.
The first and second defendants say that the plaintiffs' claim was disproportionate to the estate and notional estate and that the disproportionate burden of costs now falls as a result of the plaintiffs' decision to prosecute the primary (i.e., other than the provision) claims on which they lost; and that the plaintiffs should bear the consequences of this in the ordinary way.
As to the freezing orders, the first and second defendants say that these were a consequence of the primary claim (based on a $6 million cap) and would not have been justified by the provision claim; and that this does not justify a departure from the usual incidence of costs in respect of provision claims.
As to the matters raised in relation ot the sales of the properties (see [8] of the plaintiffs' submissions), the first and second defendants point out that the resulting and constructive trust claims failed; they say that Ms Shen was not a trustee and that the sales were undertaken openly and under financial strain.
The first and second defendants say (and I see no little force in this submission) that the real problem is that the scale of the case went far beyond what the estate could bear and could only be justified by success on the primary claim; but that in any event, even if the provision claims are not severable from the primary claims (a proposition with which the first and second defendants cavil), this would not affect the ordinary position that the plaintiffs' costs would fall only on the estate and notional estate.
Insofar as the plaintiffs have submitted that orders for costs should not be made that would diminish the family provision orders, the first and second defendants say that the orders which they propose would allow full credit for the family provision orders but that the authorities on which the plaintiffs rely (at [25]-[29] of their submissions) do not provide a basis for relieving the plaintiffs from the operation of ordinary costs principles on the basis of their claims and on the cross-claim. The first and second defendants emphasise the warnings expressed in cases such as Harkness v Harkness (at [18]-[20]) as to disproportionate costs particularly in respect of relatively small estates.
In this context it is noted that the provision order made in favour of the plaintiffs was one that took into account their known and potential costs exposure.
Third, as to the order sought by the plaintiffs in (c) of their proposed orders in relation to the cross-claim, the first and second defendants say that Ms Shen succeeded on her cross-claim and should have her costs (notwithstanding that she succeeded on one ground rather than another). It is said that Gray v Hart does not assist the plaintiffs as it concerns undue influence or fraud in probate suits not equitable claims concerning undue influence.
Finally as to the separate order sought in relation to the freezing order applications, the first and second defendants say that such a proposition should be rejected. They note that a costs order was made in their favour when Lindsay J dismissed the first freezing order application in February 2019; that the first and second defendants' position that they were entitled to sell the various properties was ultimately vindicated; and it is said that much time was spent on the plaintiffs' insistence on limiting the first and second defendants' costs (putting at risk the conduct of the defence and the ability of the first and second defendants to be represented) and on the adequacy of the security, which would not have been necessary had the plaintiffs not insisited on a $6 million cap.
The first and second defendants say that the final result does not support the $6 million freezing orders made against Ms Shen (nor any freezing order against Ms Wu); nor (in the perspective of the final result) would a more modest freezing order be seen to be justified, where a $2 million offer was not accepted.

[18]

Plaintiffs' submissions in reply

In their submissions in reply, the plaintiffs provided the following reasons to support the conclusion that it was not unreasonable for the plaintiffs to have rejected the Calderbank offer.
First, the plaintiffs submit that the Calderbank offer was made jointly to the plaintiffs and not capable of individual acceptance by any of them. It is said that the Calderbank principles do not apply to an offer jointly made to more than one plaintiff (with separate causes of action) by a defendant, that is not accepted by the plaintiffs, since one plaintiff's ability to accept is dependent upon another plaintiff's agreement (citing Archer v Archer (No 2) [2000] NSWCA 315 at [8] (Archer v Archer) per Windeyer J; Sahade v Bischoff (No 2) [2016] NSWCA 45 (Sahade v Bischoff)).
In particular, the plaintiffs refer to the reasoning of Gleeson JA (with whom Basten JA and Beech-Jones J, as his Honour then was, agreed) in Sahade v Bischoff at [19]-[23]. There, his Honour noted (at [20]) that the offer of compromise was a joint offer to the appellants/cross-respondents and could not be accepted by only one of them; that each of the appellants/cross-respondents was an independent party with separate causes of action for malicious prosecution (and in the case of one of them, Mr Sahade, a further separate cause of action in assault); and that the cross-summons pleaded a cause of action for damages for trespass only against Mr Sahade, the other appellant having no interest in the cross-summons so far as it related to the costs order against Mr Sahade relating to the cross-claim for damages.
Having cited (at [21]) the reasoning of the Court of Appeal in Archer v Archer at [8] (Handley, Beazley and Fitzgerald JJA) to the effect that an offer of compromise made to the parties jointly, although their causes of action were several, was not an offer capable of individual acceptance and therefore that there was no basis for the making of an indemnity costs order based on an offer of compromise which had not been accepted by the two unsuccessful plaintiffs, went on to say at [22] that r 42.15A(1) of the UCPR: … cannot apply to a joint offer made by defendants, but not accepted by the plaintiffs with separate causes of action, since one plaintiff's ability to accept is dependent upon another plaintiff's agreement. The same reasoning would apply to r 42.14(1), if the Bischoffs had sought to separately characterise their offer regarding their cross-summons as referable to that rule. In my view, the costs consequences stated in these rules do not operate in this scenario.
At [23], his Honour made clear that the same reasoning applied if the offer of compromise was treated as a Calderbank offer, pointing out that the inquiry as to whether it was unreasonable for the unsuccessful offeree to have rejected a Calderbank offer assumes that the offer was capable of acceptance by the offeree (there citing Vieira v O'Shea (No 2) [2012] NSWCA 121 (Vieira v O'Shea) at [10] per Basten and Meagher JJA and Handley AJA and Rafferty v Time 2000 West Pty Ltd (No 5) (2010) 87 IPR 593; [2010] FCA 873 (Rafferty) at [21], [33] per Besanko J).
Thus, the plaintiffs emphasise that the Court of Appeal considered that this rule should apply equally to offers of compromise and Calderbank offers.
The plaintiffs submit (and I accept) that each of them had separate and distinct claims for a family provision order; each claim with its own strengths and characteristics (pointing to the separate assessment of their respective claims albeit against a shared background or context to the claim).
Second, the plaintiffs say that the Calderbank offer was made at a very early stage in the proceeding (after the summons had been filed, on 21 July 2017, but prior to the notification by Ms Shen, in her defence filed on 15 May 2018, of her intention to disclaim the Deed (under the Contracts Review Act and by reference to equitable principles). The plaintiffs accept that an offer made early in the proceedings does not necessarily preclude a finding that its rejection was unreasonable (referring to Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [146] per Basten JA). Nevertheless, the plaintiffs submit that if an offeree is not apprised of the claim upon which the offeror is ultimately successful, then that is relevant to the question of the reasonableness of an offeree's rejection of the offer. Here, the plaintiffs say that they were not in a position properly to assess Ms Shen's offer in November 2017 (as they did not know that she, despite having signed the Deed, claimed that she was not bound by it). It is said that they therefore could not reasonably have anticipated Ms Shen's success on the basis of the Contracts Review Act claim.
Third, the plaintiffs submit that the first and second defendants cannot establish that the terms of the Calderbank offer were more favourable than the outcome of the proceedings. The plaintiffs note that the Calderbank offer was made jointly to the three elder children for the sum of $2 million (on the basis that each party pay his or her own costs), whereas the family provision order made in favour of Edmund and Teresa was for the amount of $700,000 each. The plaintiffs submit that it is not possible to compare the proposed and actual outcomes in these circumstances. It is said that, given the success of the extant family provision claims, Laurence's claim (had he remained alive) for family provision would likely also have succeeded (and it is submitted that Laurence's need, in view of his mental health issues, was arguably greater than that of his siblings). Thus, the plaintiffs say that the quantum of any hypothetical family provision order that Laurence may have received is unknowable and they note that the courts eschew hypothetical predictions when considering questions of costs (citing Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 at 625-626 per McHugh J). While the plaintiffs do not suggest (nor do the first and second defendants contend) that it would be appropriate hypothetically to determine Laurence's claim in order to assess the effect of the Calderbank offer (citing Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [3] per Basten JA), the plaintiffs say that the first and second defendants' submissions do not indicate how Laurence's claims should be assessed in determining whether the plaintiffs' rejection of the Calderbank offer was unreasonable.
Fourth, the plaintiffs submit that it is notoriously difficult to predict family provision outcomes (though to my mind that would suggest that there should be a greater degree of caution before embarking or continuing on with litigation in the face of a reasonably large settlement offer). The plaintiffs say that their rejection of the Calderbank offer was not unreasonable given that their claims, dependent as they were upon a large degree of subjective evaluation, were not capable of reasonable quantification by their legal advisers (referring to Re Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268; [2005] NSWSC 1003 (Sherborne Estate (No 2)) at [56] per Palmer J). It is noted that in Sherborne Estate (No 2), Palmer J said (in the context of a claim for indemnity costs referable to a Calderbank offer): 56. A claim under the Family Provision Act is not quantifiable by the parties' legal advisers prior to judgment with anything like the prescience possible in a claim for a liquidated sum such as a contract debt, or even in a claim for unliquidated damages for personal injury or for future economic loss. There are statutory and judicial guidelines for the range of damages appropriate for various types of personal injury; expert accountants attempt to quantify damages for future economic loss by reference to historical financial information. 57. However, in a claim under the Family Provision Act the Court has to quantify what provision "ought … to be made" for the applicant out of the deceased's estate "having regard to the circumstances at the time the order is made": s 7. Inevitably, that question involves a large element of subjective assessment by the Judge. Inevitably, on any particular set of facts, there would be a variety of answers given by different Judges. The decided cases offer broad parameters as to what provision "ought to be made" in certain kinds of circumstances but there is no formula and there is no yardstick on which the degrees of measurement are not etched by the Judge's own experience of life.
The plaintiffs submit that, while the amount of the Calderbank offer was substantial, so too, was the amount awarded to the plaintiffs by way of provision. Therefore, they submit that it was not obviously unreasonable for the plaintiffs' legal advisers to believe in November 2017 that it was possible that the plaintiffs could receive further provision from the deceased's estate in an amount greater than the sum of $2 million. (In this regard, I do not accept that the possibility of a greater sum at the conclusion of contested litigation is necessarily the test of reasonableness or otherwise in rejecting an offer - what is made clear in the authorities is that the public policy underlying special costs orders includes discouraging wasted or unnecessary costs; and that it requires an objective assessment of the prospects - both favourable and unfavourable - of the claim. The "possibility" of a higher verdict (after taking into account questions of cost and the like) must surely be weighed against the possibility of a lesser verdict in determining the unreasonableness or otherwise of the rejection of an offer of settlement made at a relatively early time in the proceeding.)
Fifth, the plaintiffs say that the Calderbank offer was also ineffective because it contemplated acceptance by the plaintiffs of an offer which bound them to enter into "a deed on the standard terms giving effect to the above". In this regard, the plaintiffs submit that those terms were not identified and the use of the adjective "standard" was not prescriptive.
In response to the submission by the first and second defendants that the plaintiffs' offer of $3.3 million plus costs was "not reasonable" and "aggressive", the plaintiffs say (and I would accept that this is the likely derivation of the amount offered) that the plaintiffs' offer was clearly referable to Mr Cong's intention, recorded in the Deed, that his elder children receive a minimum of $3 million (and in one scenario, up to a maximum of $9 million depending on whether or not the Campsie properties were rezoned or not). The plaintiffs say that, as the Deed was executed by Ms Shen, it was reasonable for them to assume that Ms Shen was bound by it and would adhere to its terms.
The plaintiffs say that, seen in the context of the above, their rejection of the Calderbank offer was not unreasonable; a fortiori, where the defence relying upon the Contracts Review Act was yet to be filed. (In this regard, the plaintiffs submit that it is not without significance that I concluded (at [1210]) that, on the true construction of the Deed (and subject to the Contracts Review Act defence), an amount of $3 million was payable to the plaintiffs in 10 years in the event that the Campsie properties were not rezoned.)
As to the first and second defendants' submission (invoking s 21 of the Civil Procedure Act and the principles of equitable set-off) that an order should be made to the effect that any costs payable by the plaintiffs to the defendants be charged against the provision made in their favour, the plaintiffs say that while such a defence does not need to be pleaded in a filed defence, it nevertheless must be litigated at the hearing (citing Equititrust Ltd v Franks (2009) 258 ALR 388; [2009] NSWCA 128 at [59] per Macfarlan JA (with whom Ipp JA and Handley AJA agreed). The plaintiffs say that such a claim has not here been litigated.
The plaintiffs note that where the issue is the set-off of a judgment with a costs order, the Court's inherent jurisdiction is the source of its power, not the statutory jurisdiction relating to common law set-off nor equitable principles (citing Lahoud v Lahoud [2012] NSWSC 284 at [70]-[93] and Miller v Director of Public Prosecutions (No 2) [2004] NSWCA 249 at [23]-[24] per Young CJ in Eq, as his Honour then was). The plaintiffs say that there is no mutuality between the payer of any family provision order and the first and second defendants (subject to the outcome of the motion filed by the plaintiffs on 17 August 2021). With the same qualification, the plaintiffs say that the family provision order will be satisfied by a payment from the estate and not personally by either defendant. Further, the plaintiffs maintain such a set-off could not include the amount of any costs order made in favour of Ms Wu. The plaintiffs point to the lack of any authority cited for the proposition that a costs order made in favour of one defendant (here, say, Ms Wu) can be set-off against a judgment payable by another defendant (here, say, Ms Shen).
As to the charging order sought by the defendants, the plaintiffs say that it has not been established that this would be appropriate. The plaintiffs point out that s 106(1)(c) of the Civil Procedure Act (which is invoked by the first and second defendants) enables the making of a charging order to enforce a "judgment debt". The plaintiffs submit that, in the event that they are ordered to pay costs, a charging order would be premature for two reasons: (i) there is no relevant "judgment debt" upon which a charging order can attach until a costs assessor's certificate is obtained and registered as a judgment; and (ii) once such a certificate is obtained, there must be compliance with the procedure for obtaining charging orders set out in rr 39.44 and 39.45 of the UCPR.
While the plaintiffs accept that there is a discretion whether or not to make a charging order, they submit that the discretion should not here be exercised in favour of the first and second defendants. The plaintiffs submit that it is not uncommon for family members to fund one another's litigation; and that some form of funding (be it through Ms Joyce or otherwise) was inevitable given the plaintiffs' financial position.
As to the submission by the first and second defendants that the "provision case could have reached the same result whichever will were admitted to probate" and that the practical outcome is a win for the defendants, the plaintiffs say that: (i) this ignores the importance placed upon the Deed and the circumstances of its preparation, including the instructions that were passed to Mr Glynn and Mr Cong's conversations with various people about it (see at [1852]) in ascertaining Mr Cong's testamentary intentions for the purpose of s 60(2)(i) of the Succession Act; and (ii) it ignores the determination that the 2016 Will incorporates the Deed and that the grant of probate included the Deed (but not so as to bind Ms Shen). By contrast, the plaintiffs maintain that the family provision orders made in favour of the plaintiffs were substantial and that, a fortiori, the practical outcome was a win for the plaintiffs.
As to Ms Wu, it is said that any costs orders made in favour of her should reflect the fact that her involvement in the proceedings was limited to the defence of the plaintiffs' claims in respect of the Wu Property (of which she is the registered proprietor). The plaintiffs accept that Ms Wu is entitled to a costs order but say that it should be limited to the separate costs of her defence of the claims against her, which costs they say should be isolated from Ms Shen's costs. The plaintiffs submit that, if not so limited, this would permit more than one set of costs to successful litigants who were represented by the same legal advisers (on the basis that the issues upon which Ms Wu succeeded also concerned Ms Shen).

[19]

First and second defendants' response to plaintiffs' reply submissions

In response to certain of the reply submissions of the plaintiffs filed on 1 September 2021 (and in the context of submissions made as to the amended notice of motion), the first and second defendants raised the following matters.
First, as to the term of the 29 November 2017 Calderbank offer requiring a deed on "standard terms" to give effect to the settlement if the offer had been accepted, the first and second defendants say that this does not render the Calderbank offer ineffective. Reference is made to the rejection of such an argument by the Court of Appeal in Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 (Valmont Interiors) at [29]. In that case, no draft deed had been requested by the offeree. The first and second defendants rely on this decision for the proposition that an offer need not finally resolve all the detail of the terms of settlement in order to be relevant to the exercise of the costs power (though the first and second defendants accept that it is a factor that may be taken into account in assessing the impact of the offer).
In the present case, the first and second defendants argue that the reference in the offer to a deed on standard terms "giving effect to the above" might on one view come within the first category of offer considered in Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 at 360 per Dixon CJ, McTiernan and Kitto JJ; but even if that is not the case, in the absence of any suggestion that the plaintiffs enquired or called for a draft deed, Valmont Interiors establishes that the offer may be taken into consideration. (I agree.)
Second, as to the reliance placed by the plaintiffs on Sahade v Bischoff and Archer v Archer, the first and second defendants point out that different considerations may apply to offers of compromise because of the need for the offer to answer the description of an offer of compromise attracting the operation of the rules. It is noted that in Sahade v Bischoff, Gleeson JA applied, by way of analogy, reasoning that had disposed of an offer considered as an offer of compromise under the rules; his Honour noting that "[t]he inquiry as to whether it was unreasonable for the unsuccessful offeree to have rejected a Calderbank offer assumes that the offer was capable of acceptance by the offeree" (there citing Vieira v O'Shea at [10]).
The first and second defendants submit that the ultimate question remains whether it was unreasonable to reject, or not to accept, the offer in question. (I interpose to note that this ultimate question only arises if the special costs jurisdiction is enlivened in the first place.)
The first and second defendants point to Vieira v O'Shea and say that, there, the relevant offer (made by the plaintiff during the proceeding at first instance) had been made to a number of defendants collectively and the special costs order was sought only against the first respondent (i.e., the appellant was not seeking an order against all the defendants at first instance); and that, at first instance, the interests of the first respondent and the other offeree defendants had been opposed (and they had been separately represented). The first and second defendants note that in the Court of Appeal their Honours referred to this (at [11]) and also to other practical difficulties for the first respondent; and concluded (at [13]) that it was not unreasonable for the first respondent not to accept the offer. The first and second defendants say that such reasoning would have been unnecessary if it were a rule of law or firm principle that a combined offer to several offerees (by virtue of the structure of such an offer) is always irrelevant to the costs issue; and they say that such an offer may be relevant but its impact in a given situation depends on the practical consequences of its structure. Pausing here, however, the conclusion at [13] in Vieira v O'Shea was prefaced by the recognition that the offer was not capable of acceptance by the first respondent alone and as it was not suggested that the first respondent was able to bind the other defendants, it was not unreasonable for the first respondent not to accept the offer.
As to the reliance placed by Gleeson JA in Sahade v Bischoff (at [23]) on Rafferty, the first and second defendants emphasise that, in Rafferty, Besanko J made an indemnity costs order against related parties to whom an offer had been jointly made, but refused to order indemnity costs against an unrelated party (which had received another offer addressed to it jointly with the other parties). The first and second defendants argue that this means that attention must be focussed on whether the offerees are independent, rather than related, parties. They note that in Sahade v Bischoff, Gleeson JA concluded that it was not appropriate to make an indemnity costs order based on Calderbank principles in a case where the joint offer was made to independent parties and it was not open to one party to accept unless the other also accepted.
As to Archer v Archer, where there was emphasis on the nature of the joint offerees' causes of action being several, the first and second defendants note that to the extent that the reasons refer to the offer as an "offer of compromise" the result may have been influenced by the structure and requirements of the rules of Court concerning offers of compromise.
The first and second defendants say that, in the present case, the plaintiffs were not independent parties; rather, they had common representation and common funding. The significance of the former is said to be that the plaintiffs themselves advanced the position that their claims were not in conflict or that, to the extent that they were, the plaintiffs took responsibility for managing that conflict under the presentation of a common front.
It is noted that the plaintiffs ultimately sued in a variety of capacities (including on behalf of Laurence's estate) and that they had already foreshadowed such wider claims when the Calderbank offer was made. It is submitted that, so far as the plaintiffs asserted claims on behalf of Mr Cong's estate, they acted jointly; and that, so far as they asserted claims as beneficiaries of a trust (and direct equities), they asserted equitable claims to which they were all necessary parties, as joint promisees. The first and second defendants emphasise that Ms Shen's offer was made at a time when the plaintiffs had indicated an intention ot expand their claim and that this was reflected in the terms of Ms Shen's offer that sought to encompass all possibilities. Further, it is said that, even in respect of the provision claims, the plaintiffs (in the summons and amended summons of July and August 2017) made a common application for provision for all plaintiffs by one order to direct provision for them all (and that this was the form of the order ultimately obtained).
Thus, it is submitted that, both in form and substance, Ms Shen was confronted with a common front (and it is noted that Ms Shen received the offer of compromise of 31 October 2017 made by the plaintiffs jointly for the benefit of each).
Further, the first and second defendants say that the nature of their claim was against a fund, in which the totality of all burdens had always to be considered before allowing any claim. Thus, it is submitted (and I accept) that the addition of Laurence does not translate into a claim of the same size as that awarded. In that regard reference is made to Peters v Salmon [2013] NSWSC 953 where the nature of the estate, and the other claims upon it, meant that one adult child's claim failed, while her more necessitous sibling succeeded; and, on appeal, in Salmon v Osmond (2015) 14 ASTLR 442; [2015] NSWCA 42 even the successful sibling's relief was reduced and she was deprived of costs.
The first and second defendants say that all of the plaintiffs receiving the offer of 29 November 2017 had to consider the offer and how they would proceed in respect of the claim that they had brought together in common by a single suit and seeking a single prayer of relief for them all (as well as foreshadowing wider claims together). It is noted that there has been no suggestion of dissension in their ranks. The first and second defendants say that, it the plaintiffs wanted to proceed as separate claimants, they should have amended their summons or at least given notice to Ms Shen; and that Ms Shen was confronted with unspecified claims, which she was entitled to try to settle.
The first and second defendants also say that Ms Shen could not settle the whole case without making a joint offer to all of the plaintiffs because they intended to make (and had foreshadowed) a variety of claims in which it was likely that some of the claims were joint (as ultimately was the case). The first and second defendants say that the plaintiffs cannot be heard to say that, by choosing to proceed in the way they did, as well as foreshadowing a claim that they had yet to articulate, Ms Shen should be denied the benefit of trying to settle in the only practical way with these related plaintiffs, by making an offer to them all. It is submitted that, in those circumstances Ms Shen was entitled to think that the plaintiffs were related parties acting together and presenting a common front; and that she had to deal with them all if she was to settle.
Therefore, it is submitted that (in considering whether it was unreasonable or not to accept the Calderbank offer) the offer of 29 November 2017 (in the context of the plaintiffs' claims having been framed as they were, and the case having been conducted in common as related parties as it was) was capable of acceptance in the relevant sense.
Third, as to the fact that the plaintiffs did not know Ms Shen's grounds of defence in November 2017, the first and second defendants say that this is because the plaintiffs had not yet articulated their claims; but the first and second defendants point out that two affidavits had by then been served in the defence case (including Ms Shen's affidavit of 13 October 2017 which raised the issue as to Mr Cong's communication to Ms Shen in relation to the Deed having been in Mandarin, and that any portion of the proceeds in future to be forwarded to the plaintiffs would be at Ms Shen's discretion).
It is said that, on the material already in evidence by that time and given the "inherent difficulties" of the Deed itself, it must have been understood that there would be a serious contest involving issues of the procedural and substantive fairness of the Deed, and Ms Shen's understanding of it, if claims under the Deed were to be pursued.
Accordingly, and having regard to the nature of the dispute being a family dispute and the policy of the Succession Act and the Court encouraging early settlement, the first and second defendants say that the submission that the plaintiffs were not or could not have put themselves into a position properly to assess the offer made on 29 November 2017 should be rejected.
Finally, as adverted to earlier, the first and second defendants point to the impact on assessment of their Calderbank offer in the event that the relief sought in the amended motion is (partially) granted and there is a designation as notional estate of Mr Cong's half share of the joint bank accounts and a one-third share of the life insurance proceeds. It is noted that there was a finding (at [1833]) that Mr Cong's half share of the two bank accounts (see at [509]) amounted to $57,372.90.
On an adjustment of the notional estate to take into account those amounts, the first and second defendants have calculated that the notional estate would increase to $1,190,317 (before, they say, the ss 63 and 87 factors affecting the insurance proceeds and joint accounts, and before taking into account Mr Cong's remaining debts, funeral expenses, administration expenses and costs). Thus, it is said that the amount available would still be well under Ms Shen's Calderbank offer (even ignoring the additional benefit of direct personal liability that that offer contained). Thus, it is submitted that there is no available construction of events on which it could be said that the plaintiffs have "beaten" the Calderbank offer made to them.

[21]

Ms Wu

The position of Ms Wu's costs is a prime example of this. The claims made against Ms Wu (who was not joined to the proceeding until February 2018) were ultimately wholly unsuccessful. While there was clearly a basis for suspicion that the Wu Property was transferred in order to put that property beyond the reach of the plaintiffs (see, for example, the matters referred to at [1589] of the principal judgment), albeit that there was also clearly a concern on the part of Ms Shen to minimise the tax implications of the property portfolio (see at [1590]), it was not necessary to reach a concluded view on that question because I was not persuaded that the Wu Property was held on resulting trust for Mr Cong's estate and I did not consider the Deed to be binding on Ms Shen. Therefore, on the basis of the general rule that costs follow the event, ordinarily the plaintiffs would be liable for Ms Wu's costs of the proceeding (leaving aside the question, to which I next turn, as to whether such an order should be limited to Ms Wu's separate costs).
As to the question whether the costs orders in favour of Ms Wu should or should not be limited to her separate costs, the authorities suggest that the successful defendants' ordinary entitlement to costs is subject to adjustment where they have the same legal representation, my attention here being directed to what was said by McClellan CJ at CL (with whom McColl and Young JJA agreed) in Bechara v Legal Services Commissioner (2010) 79 NSWLR 763; [2010] NSWCA 369 (Bechara) at [138]-[139]: 138. To my mind an analysis of the cases confirms the correctness of the views expressed in Quick on Costs at [4.3380]. The correct principle can be stated as follows: where a solicitor is retained to act for multiple clients whose proceedings are heard together with evidence in one being evidence in the other (regardless of whether the proceedings are formally consolidated), and the clients are charged on a time-costed basis, there must be an apportionment of time spent on matters common to two or more of the proceedings. One unit of time cannot be charged more than once. 139. The precise mechanism of apportionment will depend on the circumstances of the case. It may be appropriate to make an equal apportionment where the time spent on each client's case is for all purposes, equal. In other cases, the practitioner may need to calculate how much time was spent exclusively on each client's case, and how much time was spent on common issues, and charge accordingly. In all cases, the apportionment must pay due regard to the principle that one unit of time may not be charged more than once.
I consider, however, in the present case, that Ms Wu's costs should be paid by Edmund and Teresa on the ordinary basis and only those costs specifically and separately referable to her defence. There is no doubt that Ms Shen was the guiding mind in the litigation as far as the first and second defendants were concerned and I have no doubt that the bulk of the costs incurred would have been referable to Ms Shen's position. Where costs have been duplicated or would otherwise have been incurred by Ms Shen in any event, the costs order in Ms Wu's favour should not cover those costs. For the avoidance of doubt, I also do not include in those costs any costs referable to Ms Wu's legal representation at the hearing, since the legal representatives were there also appearing on behalf of Ms Shen.

[22]

Costs as between the plaintiffs and Ms Shen

The position is more complicated when it comes to consideration of the costs orders as between the plaintiffs on the one hand and Ms Shen on the other. On a simplistic level, the plaintiffs succeeded on their respective family provision claims against the estate and lost on their primary claims against Ms Shen; and Ms Shen succeeded on her Contracts Review Act claim but otherwise failed on her cross-claim. Apart from the issue that arises of whether (or how) to apportion costs as to those respective claims, there is also the complication introduced by the fact that the claims on which the plaintiffs succeeded were claims for which the costs of defending would ordinarily be met out of the estate and the claims on which the plaintiffs lost were claims to which more general costs principles would be applicable.
As adverted to above, in their submissions at the hearing itself the first and second defendants pointed to the observations made by Robb J in Stojanovski v Stojanovski (at [578]-[589]) as to the impact of costs on a provision claim that is made in the context of a larger case. His Honour there took into account (when considering the circumstances as at the date of the determination of the application) whether there would reasonably be an expectation that the deceased's testamentary obligations would give rise to an expectation, some years after the deceased's death, for the deceased to change his testamentary dispositions in favour of his adult sons "to make adjustments between them to compensate for the consequences of the decisions made by them in respect of the litigation in which they have engaged" (at [590]). See also the consideration of costs in other litigation in which the costs of the family provision claims were dwarfed by those in relation to other claims maintained in the same proceeding (such as Poche v Poche [2020] NSWSC 835; Baychek v Baychek [2010] NSWSC 897; and Bassett v Cameron (No 2), to which I have referred above).
As to whether it would be appropriate to apportion costs between the claims on which the plaintiffs succeeded and those on which they did not, I accept that there was an element of overlap between the issues to be determined on the family provision claims and those to be determined on the remaining claims (such as the nature and extent of Mr Cong's estate; the construction of the 2016 Will and Deed - to ascertain the provision in fact made for the plaintiffs out of Mr Cong's estate; and Mr Cong's testamentary intentions).
However, I consider it unlikely that the amount of time (and no doubt cost) expended in issues relating to the resulting trust claims (for example) or the exploration of Mr Cong's testamentary intentions would have been nearly so extensive had the claims been limited to the family provision claims on which the plaintiffs ultimately succeeded. So much can be drawn from a comparison of the initial extent of the evidence filed in support of the family provision claims and that on which reliance was placed at the final hearing. Therefore, while I accept that to an extent some of the issues on which there was mixed success were intertwined, I do not consider that they were so inseverable as to preclude a differential costs result in relation thereto.
Similarly, there were issues (such as the allegations made as to unethical business practices) on which costs (including the cost of expert evidence) were incurred which might be said to have had only peripheral relevance but which were part of the consideration of the nature and extent of Mr Cong's estate (and were relied upon as having relevance to the financial position of Jolly Trading to dispel the suggestion by Ms Shen of its insolvency).
Moreover, evidence as to the preparation of and execution of the 2016 Will and the Deed was necessary to address the contention by Ms Shen (which she failed to establish) that Mr Cong had lacked testamentary capacity and to establish its validity (which would not have been required or at least not to the same extent, had Ms Shen not put those matters in issue).
In the principal judgment, I had endeavoured, when determining the amount of the provision to be made for Edmund and Teresa (in lieu of that under the 2016 Will) to take into account not only that they would have their own costs exposure (the extent of which was not known but which would clearly have exceeded $100,000 each) and that there was a potential adverse costs exposure in that they had failed in the claims for relief made against Ms Shen (other than in relation to the family provision claim against the estate) and Ms Wu. I expressed the hope that the provision as ordered would leave a buffer for Edmund and Teresa (albeit not in the amount Mr Cong had intended by way of testamentary disposition for them) in order to set them up in life to some extent. (As adverted to above, I readily accept that I did not have in contemplation at the time anywhere near an exposure as large as an indemnity costs order in favour of Ms Shen would likely have been.) However, I reached this conclusion on the (mistaken) assumption that the pool of assets available to meet the claim for provision was in the order of some $2.3 million, which would have meant that the full amount of provision would be able to be recovered less whatever set off for any costs payable to the first and second defendants (after taking into account any costs payable to Edmund and Teresa in relation to their family provision claim). That is now not the case. To my mind that has an impact on how costs overall should be assessed.
Subject to the outcome of the special costs orders sought, I have concluded, in respect of the issue of costs as between Edmund and Teresa and Ms Shen, that the appropriate result is that each side bears its own costs of the proceeding. Each had success on a number of issues and failed on a number of other issues. Ms Shen was effectively representing the estate in the unsuccessful defence of the family provision claim (and had a clear personal interest in the outcome of that claim) but was largely successful in her defence of the claims of resulting or constructive trust and on the enforceability as against her of the Deed (though unsuccessful on issues as to testamentary capacity and the like).
Considered in a broad brush impressionistic fashion, the outcome seems to me largely to be a draw. Edmund and Teresa have obtained orders for provision in their favour (though not to the extent they had clearly hoped to achieve) and Ms Shen has resisted claims that would have resulted in a very large increase in the estate assets to her personal cost (particularly since one of the assets claimed is the not insubstantial family home).
I consider that Ms Shen should have an order for her costs on the ordinary basis out of Mr Cong's estate of defending the family provision claim on behalf of the estate for the short period of time that she did so (until the third defendant was appointed in that role) but that those costs should not have priority over the amount payable by way of provision for Edmund and Teresa. (Such an order may, I recognise, be of little utility given the size of the estate but at least some of the reason for the estate being as it is includes the cessation of the Jolly Trading business which would otherwise have formed an asset of the estate, albeit one left to Ms Shen under the 2016 Will.)
An order that these parties bear their own costs means that Edmund and Teresa are left with their own (not insubstantial) costs liability (and will have to bear the costs of Ms Wu, limited as I have indicated above to her specific and separately incurred costs); and that Ms Shen's costs of the family provision claims (in which she in effect defended the estate) will be borne out of Mr Cong's estate but paid only after the payment of provision to Edmund and Teresa of the orders made for provision in their favour up to the limit of around $1.19 million (that being the limit of the notional estate); and Ms Shen's costs of the balance of the claims (in respect of which there was mixed success) will be borne by her. Postponing Ms Shen's claim against the estate in respect of costs of defending the family provision proceeding until after payment of the provisions in favour of Edmund and Teresa recognises Ms Shen's personal interest in the outcome of those claims. I also note that the extent to which Ms Shen's costs of the family provision claim can be claimed out of the estate are limited to the period of 24 August 2017 (when consent orders were made for the appointment of Ms Shen as representative of the estate) and 21 May 2020 (when Slattery J rescinded the relevant order of 24 August 2017 and appointed Ms Goodwin as representative of the estate).
As to the position of the third plaintiff (formerly Laurence but after his death, his estate as continued by Edmund and Teresa as representatives of his estate), the claim for provision could not succeed after his death and the balance of the claims made on his behalf were unsuccessful. I would have considered that there should be an order against his estate for the costs of the first and second defendants (but Edmund and Teresa should not be personally liable as representatives of the estate for those costs as that would defeat the purpose of the order for provision in their favour). However, in this regard, I note that it seems to me unlikely that any additional costs were separately incurred referable to the claim of Laurence's estate, since that claim was one that was being prosecuted by Edmund and Teresa in any event. Since Ms Shen's costs of the issues relating to Laurence's estate will largely, if not wholly, have been subsumed in the costs of the issues raised in relation to Edmund and Teresa's claims, I make no separate order in relation to Ms Shen's costs of those claims.

[25]

Calderbank offer

It is now necessary to consider the impact of the special costs orders sought on the above position, and, in particular, the import of the non-acceptance by the plaintiffs of the 29 November 2017 Calderbank offer.
First, as to the debate in relation to Sahade v Bischoff, I consider it to be authority binding on me to the effect that the offer in the present case (being a joint offer only capable of acceptance by all of the then plaintiffs) was not an offer open for acceptance so as to trigger the operation of the special costs rules. So much to my mind follows from from the way in which Gleeson JA framed his analysis of the issue. The fact that the relief that was claimed at that stage was expressed in a composite claim for an order for provision does not change the fact that each of the three plaintiffs then had a separate claim for provision (which would need to be separately considered and determined). Thus, the claim for special costs fails at the threshold.
However, in the event that I be wrong on this issue I set out below the conclusions I would have reached had it been an offer that did trigger the operation of the costs rules.
At the outset, there is no doubt that the offer was a genuine offer and that it represented a genuine compromise. I accept that in the context of claims for family provision by adult children it can be described as generous (indeed, I note that the per child amount of the offer was not much less than the amount of the provision I ultimately considered would properly be ordered - and that was taking into account costs that would not have arisen had the Calderbank offer been accepted; though I accept that one cannot assume that Laurence's claim for provision would have been met with the equivalent result as those of his siblings - and an order for provision for Laurence might well have affected the amount of provision ordered for one or both of Edmund and Teresa).
The factors to be taken into account in determining whether rejection or non-acceptance of such an offer have been summarised above (see Hazeldene's Chicken Farm at [25]). As to those factors I make the following observations.
First, as to the stage of the proceeding at which the offer was made, it was made after evidence had been filed in relation to the family provision claims and after a mediation of the dispute (at which it may be inferred both sides were able to, and did, put forward their position as to the issues then in dispute). There is nothing to suggest that the plaintiffs were not well able to make a considered assessment of the offer at that stage (and indeed they had already made their own offer, invoking the Offer of Compromise procedure, the month before). Moreover, there is nothing to suggest that the amended claims that were thereafter brought were not within the plaintiffs' knowledge or contemplation at that time (and hence the giving up of those claims could be weighed against the offer contained in the Calderbank offer - albeit without the complete evidentiary picture).
As to the time allowed to the plaintiffs to consider the offer, it is not suggested that it was insufficient to allow a proper assessment of the offer.
As to the extent of the compromise offered, it represented a substantial payment (and a personal obligation to be assumed by Ms Shen). Set against the provision contemplated by the Deed, the worst case of the rezoning scenarios (i.e., that the Campsie properties were not rezoned within ten years) was a payment of some $3 million after the expiration of the ten-year period. Instead of the prospect of a $1 million payment each at the end of ten years, with a yearly annuity of $10,000 each year until then, what the plaintiffs were being offered was some $666,000 (with a relatively small offset for their already incurred costs) payable following acceptance of the offer. I have not attempted to calculate the net present value of $1 million in ten years' time but it would no doubt be less than $1 million.
Even contrasted with the prospect of a greater amount (under either of the rezoning scenarios) one would need to take into account both a discount for uncertainty as to when the amount would be payable and as to how Ms Shen would exercise the discretion as to the relevant amount (and then factor in a net present value discount).
The only other scenario was that which was the plaintiffs' primary case - i.e., that the obligation under the Deed had been triggered by the transfer of the Wu Property. However, that still left an element of discretion to Ms Wu as to the amount and it depended on the ultimate construction of the Deed (which must have been understood to be problematic or at the very least open to different interpretations). In other words, the plaintiffs' claims under the Deed were by no means an open and shut case and, hence, the extent of the compromise would fall to be assessed against that background.
As to the plaintiffs' prospects of success, assessed as at the date of the offer, I would be prepared to say that the plaintiffs would reasonably have assessed their prospects of establishing a claim for family provision out of the estate as good (bearing in mind the issues as to the construction of the Deed - even assuming it to be binding on Ms Shen; because the only provision for the plaintiffs other than under the Deed was the annuity provided for under the 2016 Will). However, the outcome of claims by adult children can differ markedly depending on the circumstances of the particular case and such cases are notoriously fact specific. The amount offered was to my mind generous in the context of the range of amounts typically awarded for such claims (and it carried with it the offer of personal liability on Ms Shen's part).
As to the clarity with which the terms of the offer were expressed, other than the complaint that it suggested a deed in standard terms (which does not seem to me to be problematic since there was no request for identification of the proposed terms of any such deed), it is not suggested that there was any issue with the offer in this regard; and as to whether the offer foreshadowed an application for indemnity costs in the event of the plaintiffs rejecting it, this was clearly stated in the letter.
The fact that the offer provided for each party to bear his or her own costs does not preclude reliance on it for special costs order purposes (see Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 at [10]-[11] per Macfarlan, Gleeson and Leeming JJA).
Therefore, but for the conclusion (binding on me) in Sahade v Bischoff, I would have concluded that the discretion to make a special costs orders is here enlivened. In hindsight there can be no doubt that the plaintiffs would have been better off had they accepted the Calderbank offer (not least in the case of Laurence, who was still alive at the time of the offer, since his estate has obtained nothing out of the litigation as things have transpired); and would have had the benefit of personal liability on the part of Ms Shen to meet the payments.
On balance I consider, not (I hasten to add) by way of any hindsight reasoning (i.e., not because it has not been bettered by the ultimate judgment) but by reference to the matters that would properly have been taken into account in assessing the Calderbank offer, that its rejection at the time was unreasonable. I consider there to be force in the submission put by the first and second defendants that the rejection of the offer was a "big gamble" on the proper construction and application of the Deed itself.
I accept that at that stage: those claims were yet unpleaded but they must have been in contemplation at that time (because it could surely only have been if the plaintiffs' construction of the Deed were to be accepted that sums in the amount of the plaintiffs' Offer of Compromise could have been anticipated by way of provision under the 2016 Will); that the extent of the estate (and hence the need for reliance to be able to be made on notional estate) was unknown (although I point out that Edmund was a co-executor named under the 2016 Will and it might be expected that he would have made the necessary enquiries as to the estate assets well before the making of the Calderbank offer); and that the nature of the defences that Ms Shen might run to such a claim may not have been fully appreciated (though the making of the offer followed an unsuccessful mediation at which the merits of the claim would surely have been discussed and, as Ms Shen points out, the plaintiffs' first affidavits deposed to Ms Shen's lack of facility with the English language which might well have pointed to issues as to her understanding of the Deed).
I also accept that there could not have been certainty as to how each of the plaintiff's provision claims might fare in the end result (that being dependent on what has been recognised as an holistic muti-faceted evaluative judgment once the finding of inadequate provision is made; and it being notorious in this area of the law that there may be differing views as to a parent's testamentary obligations to adult children - although the authorities also make clear that there is no particular rule as such in relation to adult children). To use an analogy not far removed from the gambling sphere, claims based on the construction of the 2016 Will and Deed at that stage could not have been seen as a lay-down misere.
I would not have concluded that rejection of the offer made on 29 November 2017 should sound in an indemnity costs order in favour of Ms Wu. True it is that, had it been accepted, the proceeding against Ms Wu would not have eventuated. However, the Calderbank offer was not made on behalf of Ms Wu. (Ms Wu's joinder to the proceeding was a direct result of her willingness to act on the instruction or direction of Ms Shen and to accept the transfer of the Wu Property for no consideration; and the plaintiffs would surely not have anticipated that this would occur.)
Otherwise, I accept that the costs consequences of rejection of a Calderbank offer if that be found to be unreasonable would ordinarily extend to the costs of the balance of the proceeding even if there was a later expansion of the pleaded issues (since had the offer been accepted there would have been no further issues in the proceeding). That said, as the first and second defendants accept, there is no presumption that a special costs order will be made even where the Calderbank principles are applicable (as I have concluded they would have been but for the problem as to the way in which the offer was couched).
Turning to the discretion in that regard, reference was made by the first and second defendants to EDPI Pty Ltd v Rapdocs Pty Ltd [2007] NSWSC 195 where Brereton J, as his Honour then was, did not order indemnity costs (notwithstanding that an Offer of Compromise had been bettered at trial) because the plaintiff's conduct of the trial had significantly expanded the time taken, as a result of which costs were unnecessarily incurred (at [76]-[85]).
In the present case, I accept that there can be no real doubt that the plaintiffs' conduct in expanding the claims made in the proceeding (including joining Ms Wu - though she was clearly a necessary party given the relief sought in respect of the Wu Property which was by then in her name) led to a significant expansion of the time involved in the hearing (in particular having regard to the resulting trust claim) but, so too, did the issues raised by Ms Shen (on which Ms Shen did not succeed), such as the testamentary capacity of Mr Cong).
It is also relevant at this stage to consider the complaints raised by the plaintiffs as to the manner in which Ms Shen conducted the proceeding (as referred to above). In that regard, I see no need to repeat the observations I made in the principal judgment as to Ms Shen's unreliability as a witness and the like. It will be recalled that I did not make a positive finding of dishonesty although I expressed concern as to the inconsistencies in Ms Shen's affidavit evidence and I considered much of her explanations of events to be implausible; just as I considered Ms Shen's reliance on her inability to understand English to have been a convenient excuse or refuge. Neverthess, I do not consider that this amounts to sufficient reason to make special costs orders against Ms Shen (or to refrain from making special costs orders against the plaintiffs if they be otherwise warranted). More problematic is the conduct that warranted the making of freezing orders and the subsequent (admitted) breach of those orders but I consider that this is best dealt with in the context of the application for the costs orders associated with those freezing order applications.
On balance, even had the Calderbank principles been enlivened in the present case I have concluded that it would be inconsistent with the considerations that warranted the making of orders for provision that the plaitniffs should be deprived of any benefit at all from those provision orders (notwithstanding their unreasonable non-acceptance of the Calderbank offer) and I bear in mind the context of, and prism through which, family provision claims are seen.
I do not consider it likely that Mr Cong would have considered it consistent with the obligations on his testamentary bounty in relation to his surviving elder children that he would have wished them to be deprived of any benefit at all out of his estate (though I accept that he did not wish there to be dispute between his two families and he equally wished for his second wife and three younger children to be established in life); nor do I consider that resort to community standards or expectations (such as were considered in Stojanovski v Stojanovski) warrants such a result. Therefore, had the Calderbank principles been enlivened I would nevertheless not have exercised the discretion to order costs on an indemnity basis.

[26]

Special costs order against Ms Shen

As noted above, the plaintiffs seek a special costs order against Ms Shen in respect of her conduct of the litigation. In Ritter v Godfrey at [60], Atkin LJ said that the relevant considerations for the exercise of the discretion to make special costs orders for misconduct in the litigation are evidence that the defendant "(1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains". It is not necessary to establish misconduct nor that the case be exceptional, see GR Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 at [20] where Bryson JA (with whom Hodgson and Santow JJA agreed) stated: It would be an error to think that it has been established, as a matter of law, that an order that a successful party to pay costs of an unsuccessful party cannot be made unless it has first been found in terms or to the effect that it is a most exceptional case, or a strong or exceptional case. Judicial references to general rules for the award of costs should not be understood as endeavours to alter the discretionary character of such decisions.
I refer here to what was said by Hallen J in Craigcare Group Pty Ltd v Superkite Pty Ltd [2014] NSWSC 326 at [283]: The ability of the court to limit the amount of recoverable costs of its own motion reveals that the purpose of such a costs order is not merely restricted to protecting a party from the consequences of an adverse costs order. The purpose also extends to the court implementing the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings, acting in accordance with the dictates of justice and ensuring that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute: Caroona Coal Action Group Inc v Coal Mines Australia Pty Ltd and Minister for Mineral Resources [2009] NSWLEC 165 at [10].
However, I am not persuaded that a special costs order is warranted against Ms Shen.
In Re Application of Scali [2010] NSWSC 1254 Brereton J, as his Honour then was, said: 10 It is well established that, in proceedings under the (NSW) Family Provision Act 1982, the primary duty of the executor as defendant is to uphold the will and to put before the Court any necessary material that can reasonably be found to assist the Court [see Anthony Dickey, Family Provision After Death (1992) Law Book Co, Vasiljev v Public Trustee [1974] 2 NSWLR 497]. No doubt this does not mean that the proceedings must be defended as if they were a murder trial, and it does not deny that the executor must exercise a due sense of proportionality in the conduct of any such defence and seek to compromise a claim, if at all possible, in a way that would save both the plaintiff and the other beneficiaries' costs [see Sziazko v Travini [2004] NSWSC 610]. Thus, the duty of executors to uphold the will does not extend to doing so where it is of no commercial benefit to anyone, and regard should be had to the extent to which upholding the will would benefit beneficiaries [Sziazko v Travin].
In McCusker v Rutter (at [57]-[62]) it was said in effect that an executor, faced with a statutory family provision claim, is bound "within reason" to uphold the terms of the Will but that, in appropriate cases, the legal personal representative will be justified in compromising the claim or even consenting to the orders sought. Handley AJA said at [62] that: 62. The Judges who held that executors have a duty to uphold the terms of the will did not define that duty in the wide terms that would be necessary if it prevented a parent or other family member discharging normal parental or familial duties to children needing advice about their rights and assistance in enforcing them. I cannot believe that those Judges ever had in contemplation a duty of that nature.
In weighing the duty to uphold the Will, an executor must exercise a due sense of proportionality involved in defending the proceedings (see also s 60 of the Civil Procedure Act in this regard). Costs may be capped to reflect their relative success and to be proportionate to the importance and complexity of the subject matter in dispute (s 60 of the Civil Procedure Act; and see Detheridge v Detheridge [2019] NSWSC 183 at [172]-[175] per Slattery J). In the present case I am not persuaded that Ms Shen's conduct has led to "disproportionate" costs being incurred.

[27]

Orders

For the above reasons, I order as follows: 1. Pursuant to the slip rule, amend order 6 of the orders made on 3 August 2021: 1. by inserting, after the word "Campsie", the words "up to the maximum of the late Mr Zili Cong's half share in those properties"; and 2. by inserting after those words the words "net of the expenses of the sales of those properties and the mortgage liabilities discharged on completion of those sales". 1. Pursuant to the slip rule, amend order 5 of the orders made on 3 August 2021 to include, as relevant notional estate, the first defendant's one-third share of the proceeds of the life insurance policy and Mr Cong's half share of the moneys in the joint bank accounts to which reference was made in [1867], [1869] and [1874] of the principal judgment. 2. Note that the amount of notional estate out of the assets so identified is limited to the sum in aggregate of $1,190,317. 3. Pursuant to s 66 of the Succession Act order that the executors satisfy the orders made for provision in favour of Edmund and Teresa in priority to any debt owing to Ms Shen out of the estate of the late Zi Li Cong. 4. Order that the first defendant's costs of defending the family provision claims, assessed on the ordinary basis, for the period in which the first defendant represented the estate be paid out of the estate of the late Zi Li Cong but that, pursuant to s 66 of the Succession Act, those costs be paid after the orders made for provision in favour of Edmund and Teresa have been satisfied. 5. Order that other than as provided above, the first, second and third plaintiffs and the first defendant respectively pay his or her own costs of the proceeding. 6. Order that the first, second and third plaintiffs pay the costs of the second defendant on the ordinary basis limited to the costs specifically and separately referable to the second defendant's defence of the proceeding and not including the second defendant's costs of legal representation throughout the hearing. 7. Order that the costs, if any, of the third defendant be borne by the first, second and third plaintiffs. 8. Order that the costs of the respective motions here determined form part of the costs of the proceeding as a whole and be dealt with as above.

Cong v Shen

At a glance

Court

Decision date

Before

Source

Judgment (28 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (101)

Cited By (1)