Harrisson v Skinner

Judgment - ex tempore 1HIS HONOUR: In this matter, I delivered principal reasons for judgment on 11 June 2013, the medium neutral citation of which is Harrison v Skinner (2013) NSWSC 736. In those reasons, I determined that each of the Plaintiff's claim for a family provision order should be dismissed. The decision was based upon, amongst other things, the size of the deceased's estate and the competing claims of the beneficiaries named in the Will of the deceased who were entitled, pursuant to the Will, to remain living in the "house property" owned by the deceased at the date of his death. 2I also found that the Plaintiffs had not satisfied me that there was "sufficient cause" for extending the time for the making of the application by each of them. 3The remaining outstanding matter presently before the Court, on which the parties have not been able to agree, relates to the costs of the proceedings. The Defendants seek an order for costs, such costs, as against the Plaintiffs, being calculated on the ordinary basis, and, to the extent that those costs are not met, or are insufficient to satisfy the quantum of their costs calculated on the indemnity basis, that they should be paid out of the deceased's estate. 4The Plaintiffs do not seek any order for costs but they oppose the making of an order that they pay the Defendants' costs of the proceedings. They do not oppose an order that the Defendants' costs of the proceedings, calculated on an indemnity basis, should be paid out of the estate of the deceased. (In this regard, it is to be remembered that the Plaintiffs are named, with their siblings, as residuary beneficiaries and if that order were made, they would be bearing a proportion of the Defendants' costs in any event.) 5Neither party tendered any evidence on the costs application. I gleaned from this that neither party had served an offer of compromise, or a Calderbank offer, which would be relevant on the issue of costs. 6Neither party made any written submissions but both have made oral submissions. 7I have dealt with the legislative framework that applies in other cases and about which there was no issue in this case. I shall not repeat what I have previously written, other than to note that s 98(1) of the Civil Procedure Act 2005 provides that subject to the rules of Court and that, or any other, Act, costs are in the discretion of the Court. Similarly, Uniform Civil Procedure Rules 2005 ("UCPR"), rule 42.1, provides that costs should follow the event unless it appears to the Court that some other order should be made as to the whole, or any part of the costs. UCPR rule 42.20(1) provides that if the Court makes an order for the dismissal of proceedings, then unless the Court otherwise orders, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed. 8The effect of these rules, in this case, is that the Plaintiffs must pay the Defendants' costs unless the Court otherwise orders and the Court can only order otherwise if there is a discretionary decision to depart from what the Rules provide. 9As I have also written in other cases, the Rules reflect the general proposition that an award of costs is discretionary but generally, the discretion is exercised in favour of the successful party. 10Because of the wording of s 98(1) of the Civil Procedure Act it is necessary to mention the relevant provision of the Succession Act 2006. Section 99 of that Act provides that the Court may order that the costs of proceedings under Chapter 3 of that Act in relation to the estate or the notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate or both in such manner as the Court thinks fit. 11It is clear that s 99 of the Succession Act, also, provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne. 12If costs are ordered to be paid, it is clear that the usual order is that those costs are calculated on the ordinary basis (UCPR rule 42.2). The Defendants, as executors, generally are entitled to indemnity costs out of the estate. 13Finally, as counsel for the Plaintiffs pointed out, Practice note SC Eq 7 - Family Provision, Paragraph 24, provides: "Orders may be made capping the costs that may be recovered by a party in circumstances including, but not limited to, cases in which the value of the estate is less than $500,000." 14Counsel for the Plaintiffs submitted that the Defendants' costs should be capped. However, there was no submission made as to the amount at which they should be capped, or upon what basis I should determine how they should be capped. I do not propose to make a capping order in these circumstances. 15In other cases, including, Harkness v Harkness (No 2) [2012] NSW SC 35 I have set out the authorities which apply in cases in which a family provision order is sought. For the assistance of the parties and others reading this judgment I repeat the principles stated previously which I consider relevant to the present case: "[18] ... (a) In Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521, Gaudron J, said, at 522: "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." (b) Despite the above statement, which, of course, was written in the context of a security for costs application, and in respect of proceedings under the Family Provision Act, s 99 of the Succession Act provides a wide discretion in relation to costs ("in such manner as the Court thinks fit"). (c) The view of some practitioners advising a potential applicant contemplating a claim for a family provision order, that there is little risk, and probably much to be gained, in making a claim, however tenuous, because even if the claim fails the applicant will, very likely, get his, or her, costs out of the estate and that he, or she, will not be significantly out of pocket, and the legal practitioner will receive his, or her, costs and disbursements in any event, has been thoroughly discredited. (d) Parties should not assume that this type of litigation can be pursued, safe in the belief that costs will be paid out of the estate: Carey v Robson (No 2) [2009] NSWSC 1199; Forsyth v Sinclair (No 2) [2010] VSCA 195. It is now much more common than it previously was for an unsuccessful applicant to be ordered to pay the defendant's costs of the proceedings (Lillis v Lillis [2010] NSWSC 359 at [23]) and be disallowed his, or her, own costs. (e) Where, as here, the issue is whether the unsuccessful applicant should bear the costs of the successful Defendant, s 98 of the Civil Procedure Act, and the rules quoted above, will apply, and, in the absence of some good reason to the contrary, there should be an order that the costs of the successful defendant be paid by the unsuccessful plaintiff: Moussa v Moussa [2006] NSWSC 509 at [5]. (f) An unsuccessful plaintiff will, usually, be ordered to pay costs where the claim was frivolous, vexatious, made with no reasonable prospects of success, or where she, or he, has been guilty of some improper conduct in the course of the proceedings: Re Sitch (No 2) [2005] VSC 383. (g) In small estates particularly, the court should be careful not to foster the proposition that obstinacy and unreasonableness will not result in an order for costs: Dobb v Hacket (1993) 10 WAR 532, at 540. (h) Proceedings for a family provision order involve elements of judgment and discretion beyond those at work in most inter partes litigation: Jvancich v Kennedy (No 2) [2004] NSWCA 397; Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003. (i) In exercising its discretion in relation to costs, the court will have regard to "the overall justice of the case": Jvancich v Kennedy (No 2). The "overall justice of the case" is "not remote from costs following the event". However, the court may be more willing to depart from the general principle in proceedings for a family provision order than in other types of case: Moussa v Moussa; Carey v Robson (No 2); Bartkus v Bartkus [2010] NSWSC 889 at [24]. (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]. (k) There are also other circumstances that may lead the court to order payment out of the estate of the costs of an unsuccessful Plaintiff. The court may allow an unsuccessful plaintiff costs out of the estate, if in all the circumstances the case was meritorious, reasonable or "borderline": McDougall v Rogers; Estate of James Rogers; Re Bodman [1972] Qd R 281; Shearer v The Public Trustee (NSWSC, Young J, 21 April 1998, unreported). [19] Finally, what I said in Smith v Smith (No 2) at [77], is also applicable to the facts of the present case: "I commend to parties involved in proceedings in which a family provision order is sought, that every effort, particularly in a relatively small estate, as this one is, to conduct negotiations frankly and openly, to try to resolve the proceedings, and if there are issues or concerns about an offer that has been made, to raise any issues at the first convenient opportunity with the offeror's solicitors, so that any ambiguities, or other concerns, can be resolved. The Court should be able to see that the parties have considered what is being offered in a sensible, practical, and commercial way." 16Mr Vincent, counsel for the Plaintiffs, who appeared at the hearing, and today, has raised three matters which he submits should be taken into account in determining the costs order that I make. 17Firstly, he points to the fact that during the case, I stated to the parties that the matter was a difficult one. That statement was no more than an indication that there were competing claimants on the bounty of the deceased and that the size of the estate was small, so that whatever the result, difficult questions about the competing claims of the parties would be relevant. 18Secondly, Mr Vincent submitted that each of the Plaintiffs was in a "straitened" financial position. I had set out, in [141] - [153] of the reasons for judgment, the financial resources of not only each of the Plaintiffs, but also the financial resources of the relevant beneficiaries. It is clear that the financial position of each of those beneficiaries is at least as "straitened" as those of each Plaintiff. In fact, in the case of Patricia, her financial resources may be worse. 19The third matter raised was that in this case, the Defendants did not wish to undertake a mediation thereby demonstrating, so it was submitted, that their attitude was unreasonable to obtaining a resolution of the proceedings, which resulted in the Plaintiffs' case having to be heard and determined. 20In my view, the application made to dispense with a mediation did not demonstrate that the Defendants' attitude was unreasonable, but simply that this was a case in which the additional costs of a mediation were not warranted, a matter that I accepted when the matter was listed for hearing and when a mediation was dispensed with. Any agreement for provision to be made in favour of one, or both, of the Plaintiffs would have necessitated the sale of the real estate, with the result that the beneficiaries entitled to reside therein would not be able to continue to do so. 21Mr Hughes, the agent for the Defendants' legal representatives, has submitted that this is a case where the usual rule that costs follow the event should apply. He referred me to the statement, made in various cases, that a party who makes a claim for a family provision order should not assume that the litigation can be pursued safe in the belief that costs will be paid out of the estate or that no order for costs will be made if she or he is not successful. 22During the course of the submissions, I raised with counsel for the Plaintiffs the fact that, in this case, the Plaintiffs had a conditional costs agreement with their own legal representatives. In fact, as I wrote at [19] of the reasons for judgment, the arrangement between the Plaintiffs and their solicitors was "a contingency costs agreement - that is one which would result in 'no win, no fee'" and that it had been acknowledged, during submissions, that in the event that the Plaintiffs were unsuccessful, no professional fees would be charged to them by their solicitors. However, the contingency costs agreement did not relate to disbursements. 23Whilst there is no evidence that the Plaintiffs were advised of their risk as to costs, counsel for the Plaintiffs acknowledged that I was entitled to assume that such advice had been given. That the Plaintiffs chose to proceed, having been so advised, seems to me, to be a risk that they were prepared to take, safe in the knowledge that they would only have to pay the disbursements of their solicitors. They should not be allowed, at the expense of the estate, to avoid the costs consequences of that decision. 24Whilst the Plaintiffs' legal representatives were entitled to come to any arrangement as to costs that they chose to, there was no evidence that the Defendants' legal representatives had a similar arrangement. 25In this case, as I found in [13] and [14] of my reasons, essentially, the estate consisted of the land being real estate at Dungog (comprising two Lots). Whilst there was other property, almost all of the estate consisted of the real estate. The Defendants should not have to sell the real estate to meet costs to be borne by the estate. This would provide a backhand method of achieving what the Plaintiffs were seeking, namely the sale of the real estate. 26In my view, this is a case where the overall justice of the case requires me to order the Plaintiffs to pay the Defendants' costs, such costs to be calculated on the ordinary basis. The Defendants should receive the balance of their costs (as are calculated on the indemnity basis) from the deceased's estate. It will be for the Defendants and their legal representatives to determine how, when, and from where, the balance of the costs should be paid. 27Counsel for the Plaintiffs indicated that because of the financial and material circumstances of each of the Plaintiffs, they should not be ordered to pay the costs but that the costs should constitute a charge on their share of the estate with the result that when the real estate were sold, the Defendants' costs would be paid from the Plaintiffs' share of the net proceeds of sale. 28Naturally, I have carefully considered this submission. However, it seems to me that it would be unjust to delay the recovery of the Defendants' costs until such time as the real estate is sold. Once again, it seems to me that the Plaintiffs should have considered their risk as to costs and that the Court would not order that those costs, if ordered to be paid, should constitute a charge on their share of the deceased's estate until paid. 29Accordingly, I order the Plaintiffs to pay the Defendants' costs, calculated on the ordinary basis. I order that to the extent that there are any costs, calculated on the indemnity basis not met by the costs order made, those costs should be paid out of the estate. 30I make no order as to the Plaintiffs' costs to the intent that they should pay such costs and disbursements as are incurred, if any, for which they are responsible.