Friend v Brien & Anor

Judgment 1HIS HONOUR: I have heard argument on what costs orders should be made following my order dismissing the plaintiff's claim for an order for provision. 2The defendants have tendered a letter dated 6 November 2013 to the plaintiff's solicitors with an enclosed offer of compromise. The offer of compromise is made in accordance with Uniform Civil Procedure Rules, r 20.26. The defendants offered to compromise the whole of the plaintiff's claim by paying to her a further legacy of $45,000 in addition to the legacy of $157,500 provided for her in cl 3(a) of the will, making a total legacy in all of $202,500. The offer included a provision that the defendants pay the plaintiff's costs as agreed or assessed up to the time of the offer. 3The offer is expressed to be made in accordance with r 20.26 and to be open for a period of 28 days. It is common ground that the offer is in accordance with that rule following the amendment to the rules made from 7 June 2013. Rules 42.15 and 42.15A provide: "42.15 Where offer not accepted and judgment no more favourable to plaintiff (cf SCR Part 52A, rule 22; DCR Part 39A, rule 25; LCR Part 31A, rule 20) (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise: (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. 42.15A Where offer not accepted and judgment no less favourable to defendant (cf SCR Part 52A, rule 22; DCR Part 39A, rule 25; LCR Part 31A, rule 20) (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 4The defendants say that r 42.15A applies and that the appropriate order is that the plaintiff pay the defendant's costs up to 7 November 2013 being the day after the offer on the ordinary basis and thereafter pay the defendant's costs on the indemnity basis. The defendants submit that there is no reason why the Court should order otherwise. 5The plaintiff says that the case falls within r 42.15 in that it can be said that the plaintiff as well as the defendant obtained an order. In the case of the plaintiff the order was not more favourable to her than the terms of the offer. I do not think that that is the right construction of the Rules. Where the order is that the plaintiff's claim be dismissed, I think the order is taken to be obtained by the defendant and not by the plaintiff: in contra-distinction to a case in which the plaintiff obtained some measure of success, for example in this case, obtaining an order for provision for an additional legacy of $30,000, being less than what had been offered. 6The plaintiff points to the terms of the covering letter of 6 November 2013. The defendant's solicitor said: "If it is held that the offer of compromise does not comply with div 4 pt 20 of the Rules and should the defendants achieve an outcome in the litigation equally or more favourable to them by reference to para 1 of the offer they intend to tender the attached document in this letter in support of an application that your client receive costs on the ordinary basis up to the time of this offer and that your client pay costs subsequent o the time of this offer on the indemnity basis in accordance with the principles in Calderbank v Calderbank. To that extent this letter and the attached document is served without prejudice except as to costs." 7In saying that the offer of compromise should be considered as a Calderbank offer if it did not comply with Div 4 of Pt 20 of the Rules, the defendant's solicitor's were acting prudently. (See the notes in Ritchie's Uniform Civil Procedure New South Wales at [20.26.7].) 8However, insofar as the offer was said to be propounded on an alternative basis on the principles in Calderbank v Calderbank [1976] Fam 93, the defendants foreshadowed that the costs order they would seek if the plaintiff did not better the offer, would be that the plaintiff receive her costs on the ordinary basis up to the time of the offer, not that she pay the defendant's costs on the ordinary basis up to that time. 9That statement was made only if it were held that the offer of compromise did not comply with Div 4 of Pt 20 of the rules. I do not think that the fact that the defendants foreshadowed seeking a costs order more favourable to the plaintiff than the costs order now sought, if it were held that the offer of compromise does not comply with the rules, should affect a determination of what costs order should be made, given that it is common ground that the offer of compromise does comply with the rules. I think a reasonable assessment of the offer of compromise and the covering letter, would be and would have been, that if the offer complied with the rules, and if the plaintiff failed in her claim, the defendants would be entitled to their costs on the ordinary basis up to the day following the offer and thereafter on the indemnity basis, unless the Court otherwise ordered. I do not regard the terms of the letter itself as being a reason for making an order otherwise. 10In South Eastern Area Health Service v King [2006] NSWCA 2 Hunt AJA (with whom Mason P and McColl JA agreed) said of the rules concerning offers of compromise formerly in the Supreme Court Rules that were materially to the same effect as the present rules, albeit speaking of a case where it was the plaintiff who made the offer of compromise and obtained a judgment no less favourable than the terms of the offer, that if the offer of compromise conformed with the rules, the onus was on the defendant to persuade the Court that indemnity costs should not be ordered. Hunt AJA said (at [83]): "He must demonstrate the basis on which an order should be made denying the plaintiff's entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer and that he had assessed the plaintiff's case properly and in the context of the rule and the achievement of its purpose - to encourage the proper compromise of litigation in the private interests of the litigants and in the public interest of the prompt and economical disposal of the litigation. Generally exceptional circumstances are required to justify such an order denying the plaintiff's entitlement.", and (at [84]): "Although the Court may take into account the particular features of the case and the difficulty of putting an accurate estimate on it's value in advance of the litigation those considerations should not provide a basis by themselves for denying the party making the offer an order for indemnity costs." (Citation of authority omitted.) 11The plaintiff points to a number of matters which are said to justify both the making of an order otherwise under 42.15A and departing from the ordinary rule that costs follow the event by making no order as to costs. 12One such matter was that the defendant had not made timely disclosure of all of his assets and financial position notwithstanding that he had sworn an affidavit on 4 October 2009 in which he set out reasons as to why it would not be financially prudent and would be difficult for him to make any provision for the plaintiff. He failed to disclose four sums of money to which I referred in the principal judgment until accounts were furnished to the plaintiff on 27 April very shortly before the hearing. These were matters to which he deposed only in his affidavit of 29 April 2014. They ought to have been disclosed much earlier and at least by his affidavit of 4 October 2013. In my reasons in the principal judgment I said that that was conduct to be deplored. The question is whether it has any, and if so what, costs consequence. 13I do not think that it can be said that any substantial additional costs were incurred by the plaintiff by reason of the late provision of the financial information and its non-disclosure in the second defendant's earlier affidavits. It was a matter which naturally enough occupied some time in the second defendant's cross-examination but the hearing of the case was in any event concluded within a day and I do not think the additional costs occasioned by that late disclosure could be said to be material. 14Costs on the indemnity basis are not awarded for the delinquent conduct of litigation as punishment as such, and I think it would smack of punishment rather than be a proper exercise of the costs discretion to deprive the defendants of their costs by reason of that late disclosure. I also bear in mind that the burden of the costs of this litigation insofar as it will be borne by the estate will be primarily be borne by the first defendant, not the second defendant, because she receives the residuary estate which is subject to the burden of debts, funeral, testamentary and administrative expenses. 15Secondly, although not necessarily in this order, it was urged for the plaintiff that the defendants' affidavits contained no acknowledgement until very recently that any sum was in fact due to the plaintiffs. The defendants, it was said, did not make it clear that they acknowledged that the plaintiff was entitled to the legacy of $157,500 under the will. 16There is really little evidence about that. There is no documentary or other material which shows that prior to the delivery of the plaintiff's submissions it was thought that the plaintiff might contend that she was not entitled to inherit under the will. Immediately on the receipt of the plaintiff's submissions in which that contention was advanced the defendants' counsel was asked to provide advice about that contention which he promptly did. This is consistent with the defendants not having appreciated the position adopted by the plaintiffs prior to the delivery of the plaintiff's submissions. Such being the case there would be no reason for the defendants to make any particular statement about the plaintiff's entitlement to her legacy. In any event, I do not see that this was a factor that would have influenced the expenditure of costs by either party. Nor would it have affected the plaintiff's decision to proceed with the litigation. 17I think the plaintiffs should also be taken to have submitted that special principles as to costs can apply in family provision proceedings. 18In Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521, in dealing with a security for costs application, Gaudron J said that: "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." 19See as an example where such a position was taken as to costs, Moussa v Moussa [2006] NSWSC 509. In Carey v Robson (No. 2) [2009] NSWSC 1199 Palmer J noted that the practice in South Australia appears to be against applying the usual costs rule in an unsuccessful family provision application, but went on to say (at [20]): "The opposite is the case in New South Wales. I do not know why the same approach to costs orders in Family Provision cases is not followed throughout Australia but I am not at liberty, nor do I desire to depart from the current law and practice in this State. It reflects the policy embodied in s 56 of the Civil Procedure Act that litigation must be conducted responsibly and should only be commenced by a plaintiff after careful evaluation of the costs consequences likely to attend failure." 20In other words, although there can be departure from the usual principle that costs follow the event and that an unsuccessful applicant for a family provision order might not be required to pay costs, or might even have his or her costs out of the estate, that is not the usual order. There is a public policy in the usual practice as well as the element of justice reflected in the rule that costs follow the event. 21It was also submitted for the plaintiff that in this case costs should in any event be capped. This submission might well have arisen as a result of comments that I made because of concerns I expressed about the amount of costs that had been incurred. I understand that the costs of both parties on a solicitor and client basis are in the order of between $70,000 and $80,000. In other words, costs in the vicinity of approximately $150,000 have been expended, although the matter in issue has really been whether the plaintiff should receive no further provision, or should receive a further $230,000. Of course, the case was put somewhat differently by the plaintiff because it was said that provision made for her by the will had failed, but that was not correct. It is disturbing that costs of that magnitude should be spent when a comparatively small amount, that is, about $230,000, is what is truly in issue. 22I have given consideration as to whether I should make an order capping costs. I think there is power to make such an order under s 98 of the Civil Procedure Act 2005 (NSW). Equity Practice Note 7, para 24 either assumes the power or may itself be a source of such a power. The authorities enjoin caution before such a course should be embarked on. 23In Jvancich v Kennedy (No. 2) [2004] NSWCA 397 Giles JA giving judgment for the Court of Appeal, said (at [6]) that: "It may or may not be appropriate, in a particular case, for the Court to address a fixed or maximum amount in the costs order it makes, although normally the Court will not be in a position to know whether or not costs to or in excess of that amount were reasonably incurred." 24His Honour deprecated the suggestion that there should be a general ceiling on costs that can be recovered in family provision litigation. In Re Sherborne Estate (No. 2); Vanvalen v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268 Palmer J observed (at [42], 274) that in Jvancich the Court of Appeal did not rule out the making of a capping order in any circumstance. But his Honour went on to say that such a capping order would be very rare and that the Court's decision would have to be an informed one founded on a consideration of the costs actually incurred, the circumstances at the time at which they were incurred, whether they were reasonable in those circumstances and what would have been a reasonable amount to have incurred. 25The question whether a capping order should be made raises the principle reflected in s 60 of the Civil Procedure Act that there should be a proportion between costs incurred and the quantum and complexity of the subject matter in dispute. In Skalkos v T & S Recoveries Pty Ltd (2004) 65 NSWLR 151, Ipp JA said (at 153, [8]): "In determining whether costs have been reasonably and properly incurred it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue." (See also April Fine Paper Macao Commercial Offshore Limited v Moore Business Systems Australia Limited [2009] NSWSCA 67; (2009) 75 NSWLR 619 at [10]-[15].) 26I am not in a position to make an order imposing such a cap. Although I have been given information as to the costs actually incurred, I do not have information that would be needed in order to assess the reasonableness of the incurring of the costs at the time they were incurred. In this respect, so far as any admissible material goes, the first time from which it would appear that it should have been known of the comparatively modest amount that was in issue would have been on service of the plaintiff's submissions shortly before the hearing in which the plaintiff sought an order for provision of $400,000. So far as appears prior to then the plaintiff's claim for provision was at large. 27In any event, the principle of proportionality will be relevant to an assessment of costs on the ordinary basis and also on the indemnity basis. Under r 42.5 if costs are ordered on the indemnity basis all costs are to be allowed, other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount. Essentially, the difference between the assessment on the ordinary basis and on the indemnity basis involves questions of onus of proof. But it will be a matter for an assessor to determine on either basis whether the costs that were incurred were in proportion to the amounts that were perceived, or should have been perceived, as being at stake. 28If they were out of proportion then even on an assessment on the indemnity basis, such costs should be disallowed as having been unreasonably incurred or of an unreasonable amount. 29It is difficult for parties to assess the likely outcome of a claim for a family provision order. The criteria to be applied are so general and the judgment to be made so evaluative that the same facts can appeal to different judges in markedly different ways. As Palmer J said in Carey v Robson (No. 2) (at [11]) concerning the claim of an unsuccessful plaintiff that: "I do not regard Marion's claim as borderline. However, I readily acknowledge that other minds may come to a different conclusion. Marion may have succeeded in her application before another judge. That is the nature of this kind of litigation." 30Those elements of uncertainty do not warrant a departure from the usual provision in r 42.15A. It has been held on a number of occasions in different contexts, including in the context of a claim for a family provision order, that the difficulty of accurately estimating the value of the claim is not a sufficient reason to depart from the prima facie position under the rule (see Slack v Rogan (No. 2) [2013] NSWSCA 827 at [13] and cases cited). 31Having regard to the policy of the rules concerning offers of compromise I do not think that I would be warranted in making an otherwise order, let alone in making no order as to costs. 32Accordingly, and for these reasons I order that the plaintiff pay the defendants' costs of these proceedings up to and including 7 November 2013 on the ordinary basis and thereafter on the indemnity basis. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 May 2014