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[2014] WASC 272
Supreme Court of WA
2014-07-29
Mr J, Dr P, Heenan J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : DANIELS -v- HALL (as Administrator of the Estate of Arnold Edward Daniels) [No 2] [2014] WASC 272
MATTER : In the Matter of the Inheritance (Family and Dependants Provision) Act 1972
In the Matter of the Estate of Arnold Edward Daniels, late of Esperance Aged Care Facility, 1 Eyre St, Esperance, Western Australia, dec
MARILYN DENISE HALL (as Administrator of the Estate of Arnold Edward Daniels)
Family provision - Family Provision Act 1972 - Unsuccessful application by adult son - Costs of parties - Application by unsuccessful plaintiff for his costs to be paid out of the estate - Application by executrix for her costs to be paid on an indemnity basis by the plaintiff or alternatively by the estate - Application by other defendants (residuary beneficiaries) for their costs to be paid by the plaintiff or from the estate - Calderbank offers rejected by plaintiff - Application by residuary beneficiaries for their costs to be paid by the plaintiff on an indemnity basis following the rejected Calderbank offers - Costs in Family Provision Act applications generally - Significance of practice direction 9.2.2(5) - Discretionary considerations
Plaintiff to pay the taxed costs of each of defendants on a party and party basis until his rejection of Calderbank offer and thereafter on an indemnity basis.
First defendant, executrix, to have all her costs taxed on an indemnity basis from the estate but to be satisfied in part by such of her taxed costs as are paid by plaintiff, or if her costs are first paid by the estate then her costs as payable by the plaintiff shall be paid to the estate in partial indemnity of her costs recovered from the estate.
1 EM HEENAN J: For reasons published on 2 May 2014, I dismissed the plaintiff's application under the Family Provision Act 1972 (WA) for provision to be made for him out of the estate of his late father - Daniels v Hall (as Administrator of the Estate of Arnold Edward Daniels) [2014] WASC 152.
2 When doing so, I also made orders and directions granting liberty to each of the defendants to apply by written submissions for any orders for costs which they might seek, directing that such written submissions should set out the grounds for, and the nature of, the orders required and be served upon the plaintiff's solicitors within 14 days. I also granted liberty to the plaintiff to seek an order for costs, should he wish to do so, at the same time and in the same manner as the defendants. These directions were accompanied by further directions which provided that, in the event of the plaintiff seeking an order for costs, the defendants should file any submissions in opposition to the plaintiff's application and that the plaintiff have a further opportunity to file written submissions in reply according to a timetable then set. The final direction was that at the end of the period fixed all or any applications for costs would be decided on the papers unless, for good reason, any one or more of the parties sought an oral hearing to determine any issues arising as to costs.
3 Since then applications for costs have been made on behalf of the first, second and third defendants and also by the plaintiff. Written submissions in support of, and in opposition to, the respective applications have been filed, including submissions in reply. No party has sought to have the applications for costs listed for any oral hearing or submissions and I have, therefore, proceeded to deal with all of the applications on the papers.
4 As is apparent from this short narrative, no application for costs has been made by or on behalf of the fourth, fifth or sixth defendants. They took no active part in the proceedings.
5 The family relationships, the history of the Daniels' farming activities at and near Hopetoun, the provisions made by the deceased to leave the bulk of his estate to three of his adult children (or in the case of his elder son, who predeceased him, to that son's children) and the details of the inter vivos gifts or dispositions of farming land made by the father to his other son, Robert Graeme Daniels, the plaintiff, are all set out in my earlier reasons. I shall not repeat any of that background but rather proceed on the basis that these reasons and consequent decisions follow from the findings which I have previously made.
6 There are four applications now advanced for orders for costs resulting from these proceedings. They are:
(a) An application by the plaintiff, notwithstanding his failure in the proceedings, for an order that his costs be paid from the estate of the deceased.
(b) An application by the first defendant, as executrix of the estate, for the plaintiff to pay her costs on an indemnity basis or, alternatively, for the plaintiff to pay her costs on a party and party basis to and including 31 August 2012, alternatively to 21 August 2013, and, thereafter, for the plaintiff to pay her costs on an indemnity basis. In the event that no order is made for the plaintiff to pay the first defendant's costs, then the first defendant seeks an order that her costs as executrix should be paid out of the estate on an indemnity basis.
(c) The second and third defendants (in the former case in her position as one of the residuary beneficiaries) each seek orders that the plaintiff should pay her costs on an indemnity basis or, alternatively, party and party costs until 31 August 2012 and, in the further alternative, to 21 August 2013 and, thereafter on an indemnity basis.
7 Each application for costs includes an application for payment of reserved costs.
8 The references to claims in the alternative for indemnity costs from either 31 August 2012 or from 21 August 2013 are references to the dates when actual or alleged Calderbank offers were made on behalf of the defendants to the plaintiff but not accepted: Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586. It will be necessary to refer generally to those two offers, and the plaintiff's responses later in these reasons.
9 As set out in my reasons when dismissing the plaintiff's application at [8] - [9], the net value of the estate was estimated, in the course of the proceedings, to be currently in the order of $1,500,000 of which approximately $420,543 consisted of debts due to the estate by the plaintiff which are still outstanding and parts of which carry interest. The evidence at trial indicated that the approximate net value of the plaintiff's estate, after assuming the discharge of his liabilities to his father's estate, his bank and to other creditors, was approximately $1.867 million: see [27].
General principles relating to any award of costs
10 The fundamental point is that any award as to costs is in the discretion of the court. The general rule, subject to any express provisions of any statute or other rules of court, is prescribed, without limiting the general discretion conferred on the court by the Act, by Rules of the Supreme Court 1971 (WA) (RSC) O 66 as being that the court will generally order that the successful party to any action or matter should recover his costs. That order also provides, by r 9(2), that where a person has been a party to any proceedings in the capacity of trustee or personal representative he or she shall, unless the court otherwise orders, be entitled to the costs of those proceedings insofar as they are not recovered from or paid by any other person out of a fund held by the trustee or personal representative as the case may be, and that the court may otherwise order only on the ground that the trustee or personal representative has acted unreasonably or has in substance acted for his or her own benefit rather than for the benefit of the fund.
11 The breadth and generality of the court's discretion with respect to costs in Family Provision Act proceedings is confirmed expressly by s 14(6) of the Family Provision Act 1972 which provides:
(6) The Court may make such order as to the costs of any proceeding under this Act as it deems just.
12 Although not having the force or effect of any legislative or delegated legislative instrument, the consolidated practice directions of this court contain general guidance to practitioners and litigants about the approaches which may be taken to awarding costs in Family Provision Act proceedings. I stress that these practice directions are only of advisory status so that their content must always yield to the particular circumstances of any individual case. They cannot be taken to limit or control the general discretion of a Judge in determining what, if any, orders for costs should be made in any particular case. Nevertheless, in view of the wide experience of the court which the general practice directions reflect, they are illustrative of matters which may be taken into consideration. Those directions include the following paragraphs:
9.2.2(2) The Court is concerned by the excessive costs often incurred in Family Provision Act matters - see for example Sergi v Sergi [2012] WASC 18 [49] - [52] - and is obliged to ensure that the principle of proportionality set out in O 1 r 4B in the Rules of the Supreme Court applies in the way that proceedings are managed to settlement or trial.
...
9.2.2(5) When making final orders after trial the Court will consider whether costs should simply follow the event with the result that an unsuccessful party may be required to pay the costs of the successful party or at least bear his own costs. Practitioners should not assume that the costs of unsuccessful parties will necessarily be awarded from the estate. Further, the costs orders made by the Court and the amount of costs payable to or by a party will take into account any unreasonable conduct by that party or any other party in the course of the application.
Principles relating to costs in Family Provision Act proceedings
13 The usual practice that, in civil litigation, costs should follow the event or outcome of the litigation is not invariably applicable in Family Provision Act proceedings, although in appropriate cases it is applied. The reasons why special considerations arising in Family Provision Act proceedings have an effect on the exercise of the discretion to award or withhold an award of costs depends upon features which are characteristic of, if not unique to, this type of litigation.
14 Unlike claims arising from commercial disputes, contracts, torts or property disputes, the power of the court to make or withhold an award to an applicant under this legislation does not depend on the ascertainment and enforcement of any pre-existing legal or equitable rights but, rather, upon a consideration of whether or not, under the statutory formula, the deceased has failed to make adequate provision for the proper maintenance and welfare of an applicant within a particular class of eligible family members. If there has been a failure by testator to make adequate provision for a particular applicant, then the jurisdictional or objective test is satisfied and it becomes a discretionary judgment for the court to determine what, if any, provision or additional provision should be made for that applicant. Consequently, although there is now a very widespread and settled jurisprudence and system of principles which apply to guide courts in any particular case, there are difficulties in assessing the nature and extent of any entitlement to extra provision by an eligible applicant in many of these cases which, not infrequently, renders an assessment of the nature and prospects of success in any particular case more difficult than in many other types of litigation.
15 So, for example, in Re Sherborne Estate (No 2) [2005] NSWSC 1003; (2005) 65 NSWLR 268 [56] - [57] Palmer J said:
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 to various types of personal injury; expert accountants attempt to quantify damages for future economic loss by reference to historical financial information.
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.
16 Consequently, these difficulties mean that a degree of restraint and tolerance is necessary in some cases if the court is asked to refuse or limit costs for an applicant, whether successful or unsuccessful, or to order that an applicant meet some or all of the costs of an unsuccessful application.
17 Another difference of importance in this form of proceedings is that one defendant will always be either the executor or administrator of the estate of the deceased, whose duty it is to put all material facts relating to the size and administration of the estate before the court and, subject to that obligation, to seek to uphold the will or the laws of intestate distribution as they apply to the estate, but in a manner that avoids partisanship or close alliance with either the applicant or other beneficiaries. Subject to performing this duty in an objective way, the role of the executor or administrator in appearing before the court and dealing with such an application, whether contested or otherwise, is part of that person's duty to undertake due administration of the estate. Accordingly, the executor or administrator who performs this role is usually entitled to his or her costs of the proceedings, regardless of the outcome, and on an indemnity basis, as part of the costs and expenses of the administration of the estate: compare O 66 r 9(2).
18 Other beneficiaries who appear in the proceedings, particularly residuary beneficiaries, have an existing interest under the will or intestacy to protect and, subject to reasonable conduct on their behalf and to their avoidance of unnecessary duplication of representation and other expenses, are usually entitled to their costs of the proceedings on a party and party basis, again regardless of the outcome.
19 An applicant who succeeds in obtaining an award for provision or greater provision out of the estate is usually, but not always, entitled to his or her costs of the proceedings, such costs to be paid out of the estate as the court may direct. It does not always follow that a successful applicant's costs should be paid out of the estate generally because the court has power to direct whether or not those costs should be paid from a particular fund or at the expense of a particular disposition rather than from the general residue.
20 When and how such a power may be exercised will usually depend upon the dispositions made by the testator in his will. For example, if a testator with a significant estate left large legacies to charities which are likely to consume the bulk of the estate and comparatively little to eligible applicants such as children who were left as beneficiaries of only a small residue, it may well be appropriate in a case in which one or more of the children succeeded in obtaining an order or orders for additional provision under this legislation for the court to order that the costs should come out of one or more of the large legacies rather than from the smaller residue going to the family. Every case will, of course, turn on the particular circumstances and the nature and size of the estate.
21 The large variability and potential influence of these matters render it important that the general discretion over costs by the court should be carefully determined and exercised rather than merely following, without regard to the particular circumstances, general principles or practices.
22 Again, previous decisions have established that, in these cases, a successful applicant will be entitled to his costs to be paid out of the estate but not against the executor or administrator unless, and then to the extent that, the executor or administrator has improperly or unnecessarily caused the applicant to incur what otherwise, would be unnecessary or unreasonable costs. There also has been a body of authority, certainly in the past but less frequently so in modern times, that an unsuccessful applicant may receive his or her costs out of the estate or that no order for costs against the unsuccessful applicant should be made. I will examine in more detail shortly some of the authorities which have recognised this practice.
23 There are various reasons which have accounted for this, some of which remain of significance in modern times. First of all, there is the occasional uncertainty about the prospects of success for any particular claim so that an arguable application may nevertheless fail perhaps because it is just narrowly below the borderline of recognition or because discretionary considerations associated with the size of the estate and the potential impact of an award on other beneficiaries combine to preclude an order being made in favour of the applicant. Secondly, in most of these cases the contest is between one or more family members as applicants and other family members or beneficiaries identified by the deceased or by the law of intestacy as having a right to distribution of the estate. Commonly, but not invariably, the contending parties will be well-known, if not related, to each other. Consequently restraint or limitation on making further inroads on the estate by large costs orders in view of the desire to preserve or, if possible, re-establish family harmony in the longer term, can be an influential factor.
24 Thirdly, and importantly, the resources available to meet an order or orders as to costs are usually quite limited. If the costs are to be met out of the estate, then it is important to consider the impact of costs which are likely to reduce the entitlement of other beneficiaries, particularly residuary beneficiaries, to the share of the estate which the testator, or the law of intestacy, provided for them.
25 The risk that a large amount of an estate, particularly a small estate, might be consumed by costs is an ever present concern and has sparked many judicial warnings and calls for restraint. For example:
(a) the Forsyth v Sinclair (No 2) (2010) 28 VR 635; [2010] VSCA 195 [27] the court said that an applicant now cannot 'assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate';
(b) in Milillo v Konnecke [2009] NSWCA 109; (2009) 2 ASTLR 235 [127] the NSW Court of Appeal observed that the estate does not automatically bankroll the legal costs of every party who wishes to be heard;
(c) in Carey v Robson (No 2) [2009] NSWSC 1199 Palmer J observed at [21] that any practice that:
there was little risk, and probably a lot to be gained, in making a claim, however tenuous, because even if the claim failed, the claimant would very likely get his or her costs out of the estate ... should be recognised, once and for all, as thoroughly discredited.
(d) in Sergi v Sergi [2012] WASC 18, when dealing with an application for the approval of a compromise of a claim under this legislation where the residuary beneficiaries included an infant, I observed at [49] that:
The potential impact which legal costs may have on a small estate in influencing beneficiaries or claimants under the Inheritance Act (now the Family Provision Act) to yield in negotiations, not because of the plausible merits of a claim, but, rather, because proceedings may so significantly deplete the estate that, even if unsuccessful, it seems economically preferable to yield to an unmeritorious claim is a very undesirable feature of claims associated with this legislation. All practitioners and judges will have had experience in which claims, seemingly unmeritorious, are pursued and concessions and settlement negotiations demanded because of the in terrorem effect which the risk of costs in the proceedings can produce - especially in small or modest estates.
26 While the effect of such considerations is very obvious and prejudicial in the case of small estates, they remain powerful considerations even in larger estates. It is offensive to contemporary senses of justice that large proportions of an estate of any size should be consumed in the cost of litigation at the expense of the persons ultimately beneficially entitled in distribution.
27 These are factors which have, on many occasions, caused courts to be sparing in the nature and extent of awards of costs made in this type of litigation. So, for example, apart from the entitlement of an executor or administrator, a court may refuse to award indemnity costs even to a successful party and limit an award of costs to party and party costs. In the case of small estates or when dealing with costs of individual defendant beneficiaries, the court may choose, instead of ordering costs to be taxed, to fix those parties' costs at some predetermined amount, usually of a conservative dimension.
28 There are also cases where, either before or in the course of contentious proceedings, an offer or offers of settlement may have been made to an applicant which are refused or declined and then the eventual outcome is less favourable to the party who rejected or declined the offer than would have been the result if it had been accepted. So, not infrequently, Calderbank offers are made on behalf of the estate or, for that matter, an applicant, in these proceedings on a without prejudice basis except as to costs and then the significance of an offer which has been declined is raised as a factor for attention before any ultimate order for costs. This case is an example of where that has occurred and I will examine the Calderbank offers in detail later in these reasons. For an example of an order for costs being made against a party who rejected an offer of settlement more favourable than the eventual outcome being ordered to pay costs on an indemnity basis see Dawson v Joyner (No 2) [2012] QSC 24.
29 However, again because of the occasional difficulties in precise predictability of any particular outcome in the course of a litigation, the mere failure to obtain a result more favourable than an offer which has been rejected will not necessarily deprive an applicant of his or her costs or result in an order for costs being made against that applicant. However, that factor will be relevant for consideration in the exercise of a general discretion to award costs, and if the rejection of the offer was, on an objective basis, unreasonable in the circumstances, it may lead to an order for costs being made against the applicant even on an indemnity basis.
30 Nevertheless, there has been a long-standing recognition that in Family Provision Act proceedings caution needs to be exercised in merely resorting to and applying a general rule that costs follow the event. In Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521 [6] Gaudron J said:
Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s 33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs particularly if it would have a detrimental effect on the applicant's financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate.
31 In making those observations, Gaudron J also referred to the position in the United Kingdom described by Ross Martyn, Family Provision Law and Practice (1985) which included a note, at page 78, that, in the United Kingdom, an unsuccessful applicant 'will be very lucky indeed if he gets his costs out of the estate'. Also in that passage Gaudron J made reference to the work by Dr A J Dickie 'Family Provision After Death' (1992) at 184 - 185, which includes the passage at 185:
Instead of making an order for the payment of costs from the deceased's estate, the court may simply decline to make an order for costs, with the result that each party, or a particular party, must then bear his or her own costs - Re Kennedy (dec) [1920] VicLawRp 93; [1920] VLR 513; Re Klease [1972] QWN 44. Alternatively, the court may order that an unsuccessful party pay the other side's costs. However, as proceedings for family provision are essentially proceedings for maintenance it has been held that a court may properly decide not to make an order for costs against an unsuccessful applicant, even though this may otherwise be justifiable, if such an order will have a detrimental effect upon his or her financial position - Re De Feu (dec) [1964] VicRp 54; [1964] VR 420 at 428.
32 This leniency with regard to the costs of an unsuccessful applicant has a long provenance, several of the early decisions being discussed in RJ Davern Wright QC, 'Testators' Family Maintenance in Australia and New Zealand' (2nd ed, 1966) 183 - 192, but it seems clear that, in more modern times, particularly with principles of modern case management, the tendency has been to move away from that position in favour of the more general principle of costs following the event but with attendant liberality and discrimination before adopting such a position in any particular case.
33 So, in Bowyer v Wood [2007] SASC 327; (2007) 99 SASR 190 [68] Debelle J observed:
There is ... a substantial body of consistent opinion as to rules which ordinarily operate in relation to an unsuccessful application. The principles are that, generally speaking, there will be no order as to costs of an unsuccessful application. The court may in its discretion make an order in favour of an unsuccessful applicant who makes a reasonable application founded on a moral claim or obligation. While it is unnecessary to decide the issue in this case, the cases also suggest that the court may in its discretion order an unsuccessful applicant to pay costs where the claim is frivolous or vexatious or made with no reasonable prospect of success or where the applicant has been guilty of some improper conduct in the course of proceedings.
34 This is reflected in the decision of Jones J in Underwood v Underwood [2009] QSC 107; (2009) 4 ASTLR 150 [32] where his Honour observed:
There was at one time a perception that a claimant's costs, even an unsuccessful claimant, would be recoverable from the estate. That perception was dispelled a considerable time ago and now orders are commonly made, either disallowing costs for an unsuccessful applicant, or ordering such a claimant to pay costs. Costs in this jurisdiction have not been awarded on the traditional basis of 'costs following the event', rather the question to be considered is whether the applicant's pursuit of the claim was reasonable. The authors in De Groot & Nickel, 'Family Provision In Australia' note that the usual orders are costs to be paid out of the estate on an indemnity basis for a successful applicant and no order for costs for an unsuccessful applicant. They note that in New South Wales and Victoria when an application is dismissed, the applicant is usually ordered to pay the costs of the respondent. The personal representatives would normally be entitled to indemnity costs out of the estate.
35 In this respect regard may be had to the observations of Powell JA in Wentworth v Wentworth (1995) 37 NSWLR 703, 729:
It is not, I believe, the function of the Family Provision Act to provide an applicant funds to enable that applicant to pursue hopeless litigation and still less to provide funds to protect an applicant from the consequences of pursuing such litigation. Nor, so it seems to me, is it the function of the Family Provision Act to provide to an applicant sums to cover the difference between the applicant's solicitor and client costs which have been awarded for the applicant in other litigation.
36 And in Nicholls v Hall [2007] NSWCA 356 [57] Mason P, Hodgson & McColl JJA jointly observed:
However, we note that in times past, adverse costs orders have occasionally been withheld against plaintiffs who have (without misconduct in the proceedings) brought tenable yet ultimately unsuccessful claims under the Family Provision Act (see Mason & Handler, Succession Law and Practice NSW at [6089]). This practice may have been seen as having some justification from a perceived desirability of minimising post-litigation conflict in family disputes, the availability in some cases of a significant fund the use of which could alleviate hardship on a losing party, and the circumstance that in some cases the decision was a marginal discretionary decision on which reasonable minds could differ. The Court was informed that this is no longer the practice of the Equity Division and that what may be termed general costs principles apply to these types of cases. Without endorsing or disendorsing the apparent change of practice, we would simply note that the point does not arise for consideration in this appeal.
37 All these observations and dicta are, undoubtedly, helpful and pertinent but it must never be forgotten that in awarding costs in claims under this litigation the court is exercising a broad and general discretion which must have regard to the circumstances of each particular case and not be limited, controlled or circumscribed by any general rule or practice.
38 In support of the various written submissions by the parties on these costs applications, affidavits have been filed on behalf of the plaintiff and the first and third defendants referring to offers made, without prejudice except as to costs, at earlier stages of these proceedings. These are the so-called Calderbank offers.
39 Following a mediation conference in this court, the details of which have not been disclosed and which remain confidential, the solicitors for the first defendant executrix wrote to the solicitors for the plaintiff making a without prejudice offer on behalf of all the named defendants. The terms of that offer were conditional on the resolution and agreement upon the exact terms of settlement, if it were to be accepted, which would address certain taxation issues thought by the defendants to be potentially relevant. Subject to this condition, the offer was:
40 The letter explained that the reason for the formulation of the offer and the imposition of the condition was that taxation questions arising from the proposed settlement were not straightforward and that the defendants' solicitors had been instructed to seek advice from specialist taxation counsel and accountants regarding those matters and that it would not be possible to reach agreement as to the precise terms of settlement in the absence of that advice. The offer was expressed to remain open until the close of business on 14 September 2012 - that is, two weeks after it was made.
41 The time for acceptance of that offer expired without the defendants having received the desired legal advice relating to taxation and accounting matters. There appears to have been some earlier offer or counter-offer by the plaintiff, the details of which have not been disclosed to the court, which resulted in requests for an extension of the time or times for the acceptance of one or both of the offers. The details are not clear from the evidence put before the court but nothing turns on the resolution of this uncertainty because on 21 September 2012 the defendants' solicitors advised that they were not prepared to reopen their previous settlement offer which had, by then, lapsed and that their clients' position then was that they wished the matter to proceed to trial as soon as possible.
42 The solicitors for the plaintiff submit that, because of the condition attached to the defendants' Calderbank offer and the absence of any resolution of the tax or accounting matters which that entailed, it was never possible for the plaintiff to accept that offer before it lapsed or was withdrawn. For that reason, the plaintiff submits that the making of this offer should not be regarded as having any consequences for the ultimate resolution of the question of costs now to be decided.
43 A second Calderbank offer was made on behalf of all the beneficiaries, including the second defendant, by the solicitors for the third defendant on 21 August 2013. Again by correspondence, without prejudice save as to costs, the solicitors for the third defendant wrote to the solicitors for the plaintiff on behalf of the second to sixth defendants, making an offer in full and final settlement of the plaintiff's claim. The offer was that all beneficiaries proposed to allow the plaintiff to be relieved from his debts due to the estate which, at that date, totalled $419,037.32. The details of the composition of that sum were set out and the variation from figures earlier mentioned is accounted for by the amount of interest which had accrued to that date. The letter pointed out that the net value of the balance of the estate was then approximately $1,200,000, so that if this were to be distributed to the residuary beneficiaries then, subject to tax and other expenses, each of the second and third defendants would receive approximately $400,000 and the fourth, fifth and sixth defendants would share that amount between them. The letter went on to assert that the plaintiff had already had significantly more benefit from the estate and his parents than any of the defendants would receive and that while they accepted that the plaintiff's financial position was dire, it did not appear that that could be rectified by any likely outcome of the present litigation. The offer concluded by referring to Calderbank v Calderbank and stated that the defendants would refer the court to the letter on the question of costs generally and, in particular, in support of a submission that the plaintiff pay the costs incurred by the defendants on an indemnity basis from the date of the letter. The offer was to expire on 6 September 2013 - that is, two weeks later. There was no response by or on behalf of the plaintiff to that proposal and it therefore lapsed once the time for acceptance had passed.
44 As already outlined, the plaintiff seeks an order that his costs be paid from the estate and relies on the passages already cited from Singer v Berghouse and Bowyer v Wood. In further support of his application, the plaintiff refers to findings which I made in the reasons for decision that he:
(a) 'worked assiduously on the farm for many years ... for limited financial reward' [93];
(b) 'had a closer relationship with his father and did more to support his father than ... Malcolm, or his two married sisters' [135];
(c) 'may well have expected, and it would seem to be reasonable in all the circumstances, that greater provision would have been made by the deceased for [him] than for each of his other children' [136]
45 so that it could properly be said that the plaintiff made a 'reasonable application founded on a moral claim or obligation' such as to invoke the principles in Bowyer v Wood. The plaintiff's submission proceeded to contend that whilst his claim had ultimately failed, because his father during his lifetime had conferred benefits on the plaintiff [148] that did not detract from the fact that there was a reasonable basis for the claim. Furthermore, the plaintiff's submission includes the contention that, in exercising the discretion as to costs, the court should also take into consideration:
(a) that the plaintiff is presently in a precarious financial position;
(b) that if his costs are not paid from the estate then this precarious financial position will be made even worse;
(c) that the plaintiff is an elderly man who is trying to hold on to his farm and that, if his costs are not paid from the estate, a further hurdle meeting his own costs would be placed in the way of achieving this.
46 As for the plaintiff's submissions about his relationship with his father, his role as an assiduous worker on the farm and the close ties which he had with his father by reason of that activity and their continued working relationship and particularly his care of his father in his declining years, I accept those submissions as reflecting the findings which I earlier made but these must be read fully and in their context. Nothing in those earlier reasons or in these present reasons should suggest that, as a result of the plaintiff's long labours with his father on the Hopetoun properties, there was no occasion for the plaintiff to receive special recognition by his father. The point of my earlier findings, and these observations, however, is that his obligation was fully recognised by the plaintiff's father and honoured during his lifetime. By the earlier gifts of farming properties and the sale of the remaining properties to the plaintiff made before the late Mr Daniels' death, these obligations were recognised and fulfilled. Having set the plaintiff up in what, on any account, must be regarded as a valuable farming enterprise, it was only right that the deceased should then turn his attentions to the need to provide for his other children or, in the case of his deceased son, Malcolm, for his children. That is what the will achieved and by then, in my view, adequate - indeed, ample - provision for Robert Daniels had already been made.
47 The plaintiff also filed further submissions in response to the defendants' applications for costs. In these he notes that the second defendant has made no separate application for costs and that the third defendant has only sought an order that her costs be paid out of the estate. In fact, the second defendant joined in the application for costs made by the third defendant as advancing such a claim on her own behalf.The plaintiff then repeated the substantial part of the submission made in support of his original application and then submitted that no order should be made requiring him to meet any defendant's costs because the claim was not 'frivolous or vexatious or made with no reasonable prospect of success or where the applicant has been guilty of some improper conduct in the course of the proceedings' and because an adverse costs award would 'have a detrimental effect on his own financial position'.
48 As to the Calderbank offers, the plaintiff submits that the first such offer was never open for acceptance and that non-acceptance of the second offer does not mean that his claim thereby became 'frivolous or vexatious' nor does it have any bearing on whether an adverse costs award would have a detrimental effect on his own financial position. The plaintiff then submits that if any adverse costs award is to be made against him, that it should be limited to the costs of the first defendant as executrix and that there was no need for the other beneficiaries to be represented. In this regard, it was submitted that the second and third defendants, by their counsel, took only a minor role in the conduct of the trial and that evidence of their respective financial positions could have been presented without them being legally represented. In my view, this tends to overlook the challenges which were made by the plaintiff to the evidence relating to the means and circumstances of the second and third defendants during the course of the trial and in final submissions.
49 Finally, the plaintiff submitted that, even if his rejection of the second offer of settlement were to be significant on the issue of costs, it should not result in any order for costs being made against him on an indemnity basis because there are no grounds to consider that the rejection was unreasonable.
50 The first defendant's submissions as to costs are confined to an application for costs for the first defendant as executrix of the estate. Mrs Hall relies on the principle that generally a personal representative is entitled to his or her costs out of the estate on an indemnity basis: Krause v Sinclair [1983] VicRp 7; [1983] 1 VR 73 and Re Nielsen [1968] Qd R 221: see also O 66 r 9(2). Her submissions acknowledge that such costs may be restricted to a party and party basis if they are disproportionate to the size of the estate or where the defence has been conducted by the personal representative with some animus against the plaintiff and that, in such a case, the personal representative might even be deprived of costs: Wang v D'Ambrosio [1999] NSWSC 227 and Cumming v Sands [2001] NSWSC 507.
51 The first defendant acknowledges that an unsuccessful plaintiff will not necessarily have costs ordered against him but that such an order may be made if the institution or pursuit of the claim was unreasonable: Bevilacqua v Robinson (No 2) [2008] NSWSC 520 and that, in any event, the court should consider the effect of a costs order upon the plaintiff's financial position: Re Sherborne Estate (No 2); Bentley v Brennan (No 2) [2006] VSC 226 [7]. The first defendant referred to the following instances where an unsuccessful applicant was ordered to pay costs or where the unsuccessful plaintiff's costs were to be paid from his share of the estate - Singer v Berghouse (No 2) [1993] HCA 35; (1993) 114 ALR 521 and Gapes v Haeberie [2003] VSC 461. The first defendant also referred to Nicholls v Hall where the New South Wales Court of Appeal noted that the practice of the Equity Division in relation to the award of costs in these cases had changed, and to the consolidated practice direction of this court set out previously.
52 The first defendant proceeds to submit that the plaintiff's claim never had any reasonable prospect of success and that he failed because he did not satisfy the jurisdictional test. The basis for that failure, taken from paragraphs in the reasons for the judgment, was then identified.
53 The essential position of the first defendant is that the plaintiff should pay the personal representative's costs on an indemnity basis or, alternatively, on an indemnity basis after the rejected Calderbank offer or offers and, failing that, on a party and party basis with the personal representative's costs beyond that amount to be paid to her from the estate on an indemnity basis.
54 Short written submissions were made by the second defendant, Mrs Hall, in her personal capacity but these essentially repeated the submissions made by her in her capacity as executrix and supported the applications by the third defendant seeking an order for personal costs on the same basis.
55 The third defendant also made detailed submissions relating to costs outlining the principles and many of the authorities which have already been cited. The third defendant has submitted that the plaintiff acted unreasonably in commencing and continuing the claim and that all the costs of the defendants who were represented should be paid by the plaintiff. Her submissions proceed on the basis that, as found, the deceased made substantial provision for the plaintiff before his death and wished to provide adequately for his other children from his remaining assets. The submissions also stress the discrepancy between the financial resources of the plaintiff on the one hand and the second and third defendants on the other and pointed out that neither the second nor third defendant had received any substantial provision from her father during his lifetime. Submissions similar to those made by the first defendant in relation to the Calderbank offers were also advanced.
56 In all the circumstances, I consider that the commencement and pursuit of this claim by the plaintiff was very speculative and adventurous, with little or no real merit to commend it. For reasons which I have already given in the action, the plaintiff had received generous treatment by his father over many years prior to his death. The deceased had fulfilled his promise to the plaintiff of ensuring that the farming lands near Hopetoun would eventually be his. It is true that this was achieved over a period of many years and involved both gifts to the plaintiff and purchase of some land by him. The value of those gifts made many years before the death of the deceased had appreciated very substantially before his death and the purchase of the balance of the farm was, as I have earlier described, on concessional terms and without interest. The combined results of these activities were that the plaintiff was left, comparatively speaking, very well off and in possession of a large scale broadacre valuable farming enterprise. His sisters had received nothing of comparable value from their father or mother's estate, and were each in financial circumstances far more modest than those of the plaintiff. There was an obvious symmetry in the deceased's will which, in effect, provided that the whole of his estate which remained after the disposition of all the farming lands to the plaintiff, should be divided equally between his other children or, in the case of the son who predeceased him, his share going to that son's children. The plaintiff had, by the time the will was made and certainly by the time of his father's death, received property worth many times the value of the shares in his father's estate which, by the will, were bequeathed to the plaintiff's sisters and his brother's children.
57 This overall dimension of the family's circumstances and the financial benefits which have been received from the late Mr Daniels, either during his life or as a result of his will, were plain and obvious from the outset. I have concluded that there was no failure by the deceased to make adequate provision for the plaintiff, having regard to the history of the transactions between them and the deceased's moral obligations to his other children and to his deceased son's children.
58 It has to be accepted that the plaintiff is, as I have found, presently in very difficult financial circumstances and that there is a significant degree of probability that these will force the sale of all or part of his farming lands. Even if that were to come about, he still has a substantial equity in the property which, after discharging all his debts, should ensure that he will be able to live in comparative comfort and security in his retirement.
59 It was a conspicuous feature of the proceedings that the plaintiff considered and, indeed, had submitted not only that the court should order provision to be made for him out of his father's estate but that the size of the provision should be sufficient for him to meet his current pressing liabilities and save the farm. It must not be overlooked that significant among the liabilities of the plaintiff is his liability to the estate for unpaid rent and costs associated with the litigation in the District Court and his unsuccessful appeals from those decisions to the Court of Appeal and his application for special leave to appeal to the High Court of Australia. Furthermore, his large indebtedness to the bank had been caused, at least in the opinion of his experienced farm advisor, by poor management and farming practices on the property over a number of recent years and, consequently, however unfortunate, the plaintiff's present financial difficulties are, to a large degree, of his own making.
60 As observed in my earlier reasons [151] the plaintiff, by his written and oral submissions, sought an award of half the value of the estate, or approximately $800,000. With every respect, I consider that to have been grossly extravagant and, if allowed, would have resulted in him receiving from his father's estate, in addition to all the inter vivos benefits which he had previously received, an amount more than three times greater than either of his sisters or the share which had been left for his late brother's children. Not only was this claim completely unrealistic but, on the evidence, it is doubtful that it would have been sufficient for him to meet his liabilities to his bank and other creditors.
61 This is also of relevance to the plaintiff's persistence in the litigation after the offers of settlement had been made. I accept that the first offer, that is, the one dated 31 August 2012, never became capable of acceptance and, accordingly, does not result in the application of the Calderbank doctrine becoming applicable. It was, nevertheless, in all the circumstances, and certainly in retrospect, a very substantial and generous offer and one which, even if incapable of acceptance or initially rejected, could have been expected to lead to future successful negotiations. The second offer by the defendants, dated 21 August 2013, however, was quite specific and capable of immediate acceptance. I consider that the failure by the plaintiff to accept that does give rise to the application of the Calderbank doctrine and principles.
62 As for the position of the defendants, I consider that the defence of the claim and the conduct of the action by the first defendant as executor of her father's estate, was entirely proper and proportionate. In the case of the executrix, there is no reason to depart from the general principle that she should recover her costs of the proceedings on an indemnity basis and I propose orders to that effect.
63 As for the role of the second and third defendants, their separate representation by counsel at trial, and the conduct of the trial on their behalf, I consider that this was, in all the circumstances, well justified and proportionate. On any taxation or other resolution of costs, there is no reason to expect that the smaller but necessary roles of those defendants cannot be recognised and adjusted in the process of taxation without there being any duplication or unnecessary additional costs being awarded.
64 In all the circumstances, I consider that the plaintiff must pay the costs of the defendants in all the particular circumstances of this case. In my opinion, this is not an occasion in which the plaintiff should avoid the financial responsibility for the costs of this litigation which he has instigated, still less be recouped for his own costs from the assets of the estate which, while appreciable, are not large. The lack of merit in the claim was, as I have already observed, apparent from the beginning but the persistence in the claim after the second offer dated 21 August 2013 shows in stark measure how unreasonable the plaintiff's pursuit of the litigation was.
65 For these reasons, therefore, I consider that the plaintiff should pay the costs of each of the defendants on a party and party basis to and including 6 September 2013 (the date when the second Calderbank offer expired) and that he should pay the costs of each of the defendants from then on upon an indemnity basis but still subject to the control of the court by the process of taxation.
66 So far as the first defendant is concerned, I am satisfied that she should be entitled to an order that all her costs of the proceedings should be paid to her out of the estate, such costs to be taxed on an indemnity basis. Her entitlement to those costs can be satisfied either from the estate direct or, after taxation, by so much of the costs as are payable and paid by the plaintiff and, as to the balance, from the estate. If there is a delay or a failure by the plaintiff to pay the first defendant's costs or all of them, then the first defendant should have her taxed costs out of the estate and the costs payable by the plaintiff to the first defendant should be paid to the estate in partial indemnity for any costs recovered from the estate by the first defendant under these orders.
67 The effect of these decisions, therefore, should be that:
68 The final orders should provide for the contingency that if the plaintiff pays the first defendant's costs as taxed pursuant to proposed order 1, then the first defendant may recover only the balance of her taxed costs under proposed order 3 from the estate and that, if the plaintiff fails or delays in paying the first defendant's costs under proposed order 1, the first defendant may recover the whole of her taxed costs under proposed order 1 from the estate, in which event all costs payable by the plaintiff under order 1 should be paid to the estate in partial indemnity of costs paid by the estate to the first defendant.
69 I consider that counsel for the parties should now confer and endeavour to bring in an agreed minute containing proposed costs orders appropriate to give effect to these decisions. There will be liberty to apply in the event that agreement on the terms of a minute is not forthcoming or in relation to any other matter arising from this decision with respect to costs.
(1993) 114 ALR 521
(2010) 28 VR 635
(2005) 65 NSWLR 268
(2007) 99 SASR 190
(1995) 37 NSWLR 703