Hinderry v Hinderry

The Applications for Costs

1. At the hearing of the costs application, I was informed, without objection from the bar table, that the quantum of the costs of Charlie and Simon had been agreed by Tony and them, at $16,500, inclusive of GST, but there was no agreement on how the burden of those costs should be borne.
2. Although counsel for Michael did not oppose a lump sum order being made for costs, he stated that he did not have instructions to agree that the quantum was appropriate. He added, however, that he did not wish to be heard further on that issue. However, he submitted that "there should only be one order for one set of legal representatives to be paid out of the estate". Presumably, if that is done, he seeks the same order in relation to those costs, namely that they be borne by the beneficiaries, other than Michael, rateably.
3. In my view, it is appropriate to make a specified gross sum order instead of an order for costs to be assessed. In reaching this view, I have in mind what was written in Bobb v Wombat Securities Pty Limited (No 2) [2013] NSWSC 863 by Beech-Jones J at [6], recently referred to by Bellew J, with approval, in Plassas v Person (No 2) [2016] NSWSC 1515 at [5], namely that such an order can be made in "very short and relatively straightforward cases" in which costs are modest and where pursuit of the costs assessment process might lead to unnecessary expense and delay.
4. Since the hearing of the costs argument, the Court of Appeal has determined Bechara trading as Bechara and Company v Bates [2016] NSWCA 294 and referred to matters for consideration at [12] - [15].
5. Having reached that point, I granted leave to counsel for Charlie and Simon to withdraw upon the basis that a lump sum order for $16,500, inclusive of GST, would be made. Mr B Levet of counsel, who had appeared, then withdrew.

The Issues

1. The issues for the Court to decide on the costs application are: 1. Should Michael receive his costs, calculated on the ordinary basis, of the family provision proceedings, those costs being borne by the other beneficiaries? 2. Should Michael receive his costs of the notice of motion for interim provision and the appointment of a special administrator, filed 9 October 2014? 3. Who should bear Tony's costs, calculated on the indemnity basis, of the family provision proceedings? 4. How should Charlie and Simon's costs be borne?
2. In relation to issue (b), after some debate between Bench and bar, Michael and Tony, by his counsel and senior counsel, respectively, agreed that since those costs had been dealt with by Lindsay J as part of the Probate proceedings that were dealt with by him on an interlocutory basis, in October 2014, and as the Probate proceedings had, ultimately, been settled, the costs of the notice of motion should be treated as part of the costs in the Probate proceedings.
3. Before leaving this topic, I should mention that the Probate proceeding was resolved without a contested hearing in September 2015 and one of the orders made was that the costs of the proceedings of each of the parties, calculated on the indemnity basis, be paid out of the estate of the deceased.
4. In relation thereto, in a letter dated 11 July 2016 from the first Defendant's solicitor, to which reference will be made, the following appears: "A. Probate Costs In relation to the probate costs all of the costs (i.e. Michael's, Tony's, and then Semaan's) have by order of Justice Hallen in September 2015 been ordered to be paid out of the estate on the indemnity basis. Unless there is any agreement or order otherwise the basic position is that the probate costs would be borne in accordance with the provisions of Part II of the Third Schedule of the Probate Administration Act 1898. That means that to the extent that there is any residue, the residue would bear the main burden. However because there is little or no residue, the shortfall in the amount available to pay the liabilities should be paid from "assets specifically disposed of by Will, rateably according to value" as per point 6 of Part II. The phrase "rateably according to value" means "value" to the testator (as distinct from value to the beneficiary): see R.A. Woodman "Administration of Assets" 2nd Ed (1978) Law Book Co citing Re John [1993] Ch 370 & Re Sloan [1943] VLR 63. Accordingly each of the beneficiaries including Michael needs to bear the proportion of the costs according to the value of the gifts they have been given. Thus Michael would need to bear approximately 45% of the total probate costs."
5. It follows, in view of the order made in the Probate proceeding, that if the estimates of costs prove accurate, Michael's share of the Probate costs will be in the order of $80,000. However, that amount will include part of his own costs that will be paid.
6. I should also note, before turning to the remaining issues, that it was not in dispute that Tony would not seek to recover any of the amounts paid to Michael since the death of the deceased. (This appears to have been a sensible agreement between the parties and it may avoid further costs and expenses of having a full accounting of the income and expenditure of the estate having to be undertaken.)

The Respective Positions of the Parties at the Costs Hearing

1. Michael sought an order that his costs of the family provision proceedings should be paid out of the deceased's estate, or, in the alternative, that there should be no order as to the Plaintiff's costs.
2. Tony sought an order, firstly, that Michael should bear his own costs of the family provision proceedings, and that his own costs, calculated on the indemnity basis, should be paid out of the deceased's estate. In other words, Tony did not seek an order that Michael should pay his costs as one of the executors of the estate. The consequence of the order sought by Tony is that Michael would bear about 45 per cent, Tony himself would bear about 30 per cent, Joseph would bear about 15 per cent and Mary would bear about 10 per cent, respectively, of those costs.
3. Having heard the submissions on these issues, and because I was satisfied about what orders would do justice between the parties, in all the circumstances of the case, I announced the orders I proposed and stated that I would publish my reasons, without any need for any party to appear again, in due course. Subsequently, I provided to counsel a form of orders that would be entered in due course. Each confirmed that the orders made were appropriate.
4. These are the reasons for making the orders that I stated at the conclusion of the hearing. (In order to save further costs, counsel did not, necessarily, wish to appear to take the judgment on costs and these reasons will be sent to each when published.)

The Principal Judgment

1. I shall repeat a number of matters identified in the principal reasons for judgment, which in my view, are particularly relevant to the determination of the costs of the family provision proceeding.
2. At [26] - [27], I referred to evidence given by Michael, which prompted senior counsel for Tony to make an application for a permanent stay of the proceedings upon the basis (at [29]) that "the answers given by the Plaintiff, in circumstances where the Probate proceedings had been determined and orders had been made resolving the issue of the validity of the 2011 Will; that to raise the spectre of the validity of his father's Will, Probate of which had been granted and had not been the subject of any application to have Probate revoked; and to deal with the conduct of members of his family in relation to "someone signing the elderly's signature when they're sick", amply demonstrated that Michael was using the Court's process (seeking a family provision order) for ulterior and illegitimate motives".
3. At [93], I determined that without any reduction for costs, and bearing in mind that Units 2 and 8 were subject to a mortgage of approximately $260,000, the respective entitlements of the beneficiaries (subject to some comments regarding the form of Clauses 8 and 9 of the Will) was that Joseph (Unit 2/8), received a property with a net value of $262,500; that Tony (Unit 5, half share Unit 8 and Unit 9), received property with a total net value of $532,750; that Mary (half share of Unit 8) received property with a net value of $172,250; and that Michael (Unit 2 Gladstone Ave and Unit 6 Miller Street) received property with a net value of $789,500, plus the value of residue (if any).
4. At [94], Michael's share of the deceased's estate was estimated to be about 44 per cent of the net value of the estate (before the payment of the legal costs of the proceedings and the amount left to be paid to Mr Kelly). (Tony now submits that it is about 45 per cent, but I do not think anything turns on this difference).
5. At [103], I noted that the Court had been informed that Michael's costs of the Probate proceeding were $122,000; that Tony's costs of the Probate proceeding were $50,248; and that Charlie's and Simon's costs of the Probate proceeding were estimated to be $13,200. (In an affidavit sworn by Mr Rod, and filed, with leave, on the third day of the hearing, Charlie's and Simon's costs were reduced to $12,400, inclusive of GST.) Thus, the costs of the parties, of the Probate proceeding, were estimated to be approximately $184,650.
6. At [104], I noted that the Court also had been informed that Michael's costs of the family provision proceeding were $140,000 (and $180,000 on the indemnity basis); that Tony's costs, calculated on the indemnity basis, of the family provision proceeding were $92,733 (of which $5,599 had been paid out of the estate, leaving a balance of $87,134); and that Charlie's and Simon's costs of the family provision proceeding, presumably calculated on the indemnity basis, were estimated to be $70,475. (In the affidavit sworn by Mr Rod, Charlie's and Simon's costs were reduced to $64,061, inclusive of GST.) Thus, the estimated unpaid costs of the parties, of the family provision proceeding, were estimated to be approximately $295,000.
7. I also noted, at [108], that there was likely to be a significant debate about the reasonableness and proportionality of the estimate of the costs of all parties, and at [109], that the estimates of the parties' costs of the proceedings were of such a magnitude as to invite consideration of whether (and, if so, what) effective orders could be made for costs to be capped. (Only Tony has made submissions on capping the costs of Simon and Charlie. I have referred to those submissions.)
8. At [116], I noted: "In relation to the other beneficiaries, only Joseph has sworn an affidavit read in the proceedings, in which his financial resources are identified. Thus, the Court may assume that each of Tony and Mary does not wish his, and her, financial resources (including earning capacity) and financial needs, both present and future, respectively, to be taken into account: Matthews v Wear [2011] NSWSC 1145, at [45] (Macready AsJ).
9. At [301], I concluded: "Subject to any costs order (about which I shall say nothing more at this time), since Michael is entitled to receive the two units absolutely, there are several alternatives that, with appropriate advice, will be available to him in relation to the future. Objectively, one such alternative would provide security of accommodation (one of the units in which he may return to live) and a capital sum (the value of the unit in which he does not live) that will provide an income to supplement his disability pension, which, on current information, would not be, or would not substantially be, reduced. His "needs", when one takes into account these matters, diminish significantly."
10. Counsel for the Plaintiff submitted, on this application, that what the Court "had not taken into consideration was that Michael, at the time of the hearing, unless he received an order in his favour was not going to receive the two units absolutely as there was a charge against each property for a contribution by him towards the payment of debts according to their rateable value … and further one property was subject to him attaining the age of 60 years".
11. In relation to the first matter, I specifically stated, at the commencement of the paragraph quoted, that what I said was "subject to any costs order". At that time, the issue of costs was one upon which no submissions had been made.
12. In relation to the second matter, at the commencement of the hearing of the substantive proceedings, the condition referred to was the subject of discussion between bench and bar (at 1T4 - 1T5): "HIS HONOUR: 6/8 Miller Street $344, 500, Michael Hinderry, that's clause 8, the conditions appear to be that he has to survive and obtain the age of 60 years. MEEK: Yes. HIS HONOUR: That's clause 8. … Then we come to 2/98 Gladstone Avenue. This one is difficult to know what this clause means because it simply says to be held on trust for the plaintiff. Does everyone agree it's an absolute gift or what? Anyway, would you have to think about that. One of the questions I'm going to ask you, Mr Meek, is, is the attitude of the first defendant that the plaintiff should not receive the two properties other than on condition, as it were. MEEK: No. HIS HONOUR: You're content for there to be an absolute transfer of the two properties to the plaintiff as part of any resolution of the proceedings. MEEK: Well, subject to the effect of costs on the … HIS HONOUR: I'm going to come to costs. That is a troublesome aspect of the matter. All I'm really concerned about is leaving aside that issue, it's not a situation where you're saying that under the terms of the Will in their present form, that's adequate. In other words, you're not submitting that it would be appropriate to make Mr Michael Hinderry wait until he's 60. MEEK: I'm not but I will be saying that in the context of the history of the matter it is entirely understandable why the deceased… HIS HONOUR: I understand that. That's a different issue. MEEK: Yes but I've said what I've said. The other thing I say is that irrespective of whether there are conditions on those gifts is entirely open to Michael to disclaim and take the properties outright. There is no… HIS HONOUR: That's what you said on intestacy. There's no residue clause. MEEK: There's no residue clause. He can take it on intestacy without the need of any proceedings. HIS HONOUR: Mr Ellison, does that concession make any difference to the plaintiff's case? ELLISON: I didn't understand that there was a‑‑ HIS HONOUR: ‑‑the concession is that the result of the proceedings subject to what Mr Meek is going to say regarding adequacy and proprietary of the provision made in the Will, the first defendant is not going to assert that the plaintiff should receive the properties absolutely effectively now as opposed to waiting until his 60th. Subject to costs he can do as he pleases with the two properties. … HIS HONOUR: He's going to give the properties to the plaintiff subject to any question of costs. There is no dispute that the plaintiff should receive those properties absolutely now rather than on condition. ELLISON: Well, subject to the question of costs and if that's what the defendant wishes to do then, that's greatly acknowledged but HIS HONOUR: He wants more than two properties absolutely. ELLISON: Yes."

Evidence read on the Costs application

1. There is no evidence, and thus, no submission, that Tony acted unreasonably, or that he acted for his own benefit, rather than for the benefit of the beneficiaries, other than the Plaintiff, named in the deceased's Will, in his defence of the proceedings commenced by the Plaintiff. The fact that he was successful in that defence is, of course, a relevant consideration.
2. There was no dispute that Tony's costs, calculated on the indemnity basis, should be paid out of the deceased's estate.
3. There is evidence that more than three months before the hearing, Tony made an offer to Michael, under cover of a letter dated 11 February 2016 from his solicitors to the Plaintiff's solicitors. The offer in substance provided that: 1. Michael would be paid a lump sum of $800,000. 2. Michael's legal costs capped at $50,000 (inclusive of GST) would be paid. 3. Michael would retain the benefit of the interim payments that had been paid to him and that he would continue to receive interim payments of $350 a week from the estate until he was paid the lump sum of $800,000. 4. The payment of the lump sum and the legal costs would be made within two calendar months from the date of notification of acceptance of the offer or the grant of probate of the Will whichever was later. 5. The offer was in lieu of Michael's interest under the Will of the deceased. 6. Michael was to provide a release of any claim for a further family provision order, which release should be approved by the Court.
4. Whilst not specifically stated in the offer made, it seems clear that, if the offer had been accepted, Michael would not have had to make any contribution to Tony's costs of the family provision proceedings at that time, or to the further liabilities of the estate (for example, CGT). In addition, as the Probate proceeding had been resolved in September 2015, he would not have had to make any contribution, from the lump sum paid to him, to the costs of any party of those proceedings, and indeed, would have received his costs of those proceedings pursuant to the order of the Court as to costs that had been made in that proceeding.
5. I draw these conclusions from the first paragraph of the offer, which was that Michael "be paid" a lump sum of $800,000. If he was to contribute towards costs, he would not have been paid that amount, or it would have been stated that the lump sum would have been paid subject to the payment thereout of his share of the costs.
6. The offer was also communicated, at the same time, to the solicitors for Charlie and Simon. There is no evidence of any response from them.
7. There was no dispute that, unless there were an order made providing how the burden of the costs of each proceeding was to be borne, the ordinary position would have been that costs would have to be borne in accordance with the provisions of Part II of the Third Schedule of the Probate and Administration Act 1898 (NSW), namely that since the residue of the estate ("assets undisposed by will") was insufficient to bear the costs, the costs would be paid from assets specifically disposed of by the deceased's Will rateably according to value. Accordingly, on the estimates of value, Michael would bear about 45 per cent of those costs.
8. It is not possible to estimate the costs of the parties at the time of the offer, to which costs, Michael would not have had to make a contribution. In all the circumstances, considering the evidence of the estimated costs of both proceedings given at the hearing, the likely overall costs would have been substantial.
9. On 4 March 2016, Michael, by his solicitor, rejected Tony's offer. Michael's solicitors provided no reasons for rejecting the offer made.
10. Michael's counsel submitted, in relation to the offer: "18 It would appear the plaintiff has "beaten" the offer because he has retained the units which are worth significantly more than the offer that was put. Further, it did not allow for a proper costs assessment. Finally, it was an offer which was said to have required a s.95 release. 19 The onus is on the first defendant to prove it was unreasonable to reject the offer. The offer was not a genuine offer to resolve the proceedings. It was not unreasonable for the first plaintiff to reject it. It involved a release which was not part of the Court's decision making power."
11. There is no suggestion, in any correspondence read on the costs application, that the reason for the rejection of the offer made was the term that required the release to be given.
12. In addition to the evidence of the offer made by Tony prior to the hearing, there is evidence of another offer, which dealt with the costs of the family provision proceeding, made on 11 July 2016, to Michael (by his solicitor) and to Charlie and Simon (by their solicitors), following the delivery of the principal judgment. Relevantly, that offer provided: "B. Family Provisions Costs As Michael's claim failed, my client's position is that: (a) There should not be an order as to Michael's costs to the intent that he bears his own costs; (b) My client's costs should be paid out of the estate on the indemnity basis with each of the beneficiaries including Michael to bear the proportion of those costs according to the value of the gift they have taken. Accordingly Michael's contribution would be approximately 45%. (c) As far as the Semaan's costs are concerned their costs should be paid out of the estate on a party/party basis limited to the costs associated with any necessary compliance with fulfilling obligations under the practice note and a watching brief and a solicitor attending the hearing. The costs would need to be briefly itemised and not exceed $15,000.00. Of this sum Michael would also be responsible for approximately 45%. This letter is written without prejudice save as to costs and it will be relied upon in any future costs arguments."
13. On 14 July 2016, Michael's solicitors responded in the following terms: "We refer to the above matter. We have at this stage been unable to take instructions as to costs. If we are able to obtain instructions, can you please advise what your client's position is as to the opposed interim provision application. That application was successful and given the submissions made at the final hearing by your client's Senior Counsel that was an outcome which your client should have been aware was always going to occur. Notwithstanding he chose to oppose the application. The application was also necessary for the appointment of an interim administrator of the estate which was likewise necessary and could be properly passed as part of probate. In the interim, should you have any enquiries please do not hesitate to contact the writer."
14. There is no evidence of any further correspondence to, or from, either Michael's solicitors or Charlie's and Simon's solicitors.

Principles relating to Costs

1. In order to determine the issue of the appropriate costs orders, it is next necessary to refer to the principles applicable to ordering costs in proceedings for a family provision order.
2. Of course, one starts in any determination of costs, with s 98(1) of the Civil Procedure Act 2005 (NSW), which provides that subject to the rules of court and to this, or any other Act, costs are in the discretion of the Court. 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 r 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 the proceedings have been dismissed.
3. The effect of these rules in this case, is that the Plaintiff must bear at least the first Defendants' costs of the proceedings for the family provision order, unless the Court otherwise orders. The Court can only order otherwise if there is a discretionary decision to depart from what the UCPR provide.
4. There is no suggestion that the Civil Procedure Act and the UCPR do not apply to family provision proceedings.
5. Section 99 of the Succession Act 2006 (NSW) provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne. However, that section does not apply to costs as between party and party, but rather to costs to be paid out of the estate.
6. In Harkness v Harkness (No 2) [2012] NSWSC 35 at [17]-[18], I wrote: "I have identified, in a number of other cases in which a family provision order has been sought (see, for example, Smith v Smith (No 2) [2011] NSWSC 1105, Mikan v Velcic (No 2) [2011] NSWSC 505), after referring to the legislation, which I have again set out above, the general principles I considered relevant. 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: (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).
7. In Bruce v Greentree (No 2) [2015] NSWSC 1636 at [43], I wrote: "In addition to the above principles, I should note that the usual costs rule in an unsuccessful family provision application "reflects the policy embodied in s 56 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 to failure": Carey v Robson; Nicolls v Robson (No 2) [2009] NSWSC 1199, per Palmer J, at [20], and that "[t]here is a public policy in the usual practice as well as the element of justice reflected in the rule that costs follow the event": Friend v Brien (No 2) [2014] NSWSC 614, per White J, at [20]."
8. What I said in Smith v Smith (No 2) [2011] NSWSC 1105 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."
9. I referred to all of these principles, more recently, in Penfold v Predny [2016] NSWSC 472 at [161]-[166] and in Stojanovski v Stojovski [2016] NSWSC 976 at [265].
10. As was noted (albeit in another context), in Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136 at [9] (by Greenwood and Rares JJ): "The exercise of the discretion takes account of all of the contextual circumstances of the litigation and the conduct of the parties. One aspect of the award of costs is a recognition that a party has been put to expense which, taking account of the merits as ultimately found on the trial of the action, might otherwise have been avoided. That consideration does not infuse the award of costs with any sense of penalty or punishment but simply recognizes the compensatory nature of an award of costs, in context and according to principle. That is why an award of costs, although involving the exercise of a discretion, generally favours the successful party. As to the importance the community attaches to legal costs incurred of and incidental to the resolution of controversies before courts, see Clark v Commissioner of Taxation [2010] FCA 415 at [90]; Uniline Australia Ltd v S Briggs Pty Ltd (No. 2) [2009] FCA 920; (2009) 82 IPR 56 at [38]; and, Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [130] to [132]."
11. I accept, of course, that claims for a family provision order do, in some ways, raise issues with respect to costs that differ from those in other litigation and that there is more flexibility where there has been an unsuccessful claim. One example where an order for costs being made against an unsuccessful Plaintiff may be inappropriate is where, if such an order for costs were made, he or she would immediately become impecunious and so may be able to make a fresh application under the Act. In that example, it would be counter-productive to make an order as to costs against the unsuccessful plaintiff: McCusker v Rutter [2010] NSWCA 318 at [34] (Young JA).
12. A contrary example where the Court may, "in its discretion order an unsuccessful applicant to pay costs [is] where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the applicant has been guilty of some improper conduct in the course of the proceedings": Bowyer v Wood (2007) 99 SASR 190; [2007] SASC 327, at [68].
13. The "more modern" approach appears to be that stated by the Court of Appeal in Chapple v Wilcox [2014] NSWCA 392. At [27], Basten JA stated: "Whether or not an unsuccessful applicant should be allowed to litigate without expense to the estate will depend on a variety of circumstances. There is always a discretion in the Court when making an order pursuant to s 98 of the Civil Procedure Act 2005 (NSW). The discretion conferred on the Court by that provision is subject to the rules of court (s 98(1)) and thus to r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), which provides that costs will follow the event unless it appears to the Court that some other order should be made. That rule is not disapplied in relation to family provision orders. Nor should applicants for such orders have any expectation that, as a general rule, the discretion will be applied so as to exempt them from liability for costs incurred by an estate in the case of an unsuccessful application. In some cases applicants will already be beneficiaries of the estate and may thus have some incentive to ensure that the costs of litigation are kept within tight bounds. However, that is not always the case. Where an applicant is entirely unsuccessful, an order that he or she should pay the costs of the estate may well be the appropriate order."
14. At [137] - [139], Barrett JA (with whose reasons Gleeson JA agreed), referred to the passage quoted above in Bowyer v Wood and added: "In Western Australia, it was recently said by E M Heenan J, in a discussion of the notion that a costs order should not be made against an unsuccessful applicant if it would have a detrimental effect on that applicant's financial position, 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": Daniels v Hall (No 2) [2014] WASC 272 at [32]. That "more modern" approach seems to me to reflect the position in New South Wales. Where the application for a family provision order is dismissed, the prima facie principle with respect to costs is as stated in rules 42.1 and 42.20(1) of the Uniform Civil Procedure Rules - that is, there should be an order that the unsuccessful plaintiff pay the defendant's costs. In Jvancich v Kennedy (No 2) [2004] NSWCA 397, Giles JA observed (with Handley JA and McColl JA agreeing) that, in circumstances of that kind, the "overall justice of the case" - the expression employed by Gaudron J in Singer v Berghouse - is "not remote from costs following the event". There is, of course, discretion to depart from the prima facie principle for good reason, even to the extent of ordering that the unsuccessful plaintiff's costs be paid out of the estate; and the court should apply the "liberality and discrimination" to which E M Heenan J referred."
15. Counsel for the Plaintiff, presumably in respect of his alternative submission, relied upon what I had written in Harkness v Harkness, at [18]: "(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]."
16. In relation to the service of a Calderbank offer, I shall simply repeat what I recently wrote in Page v Page [No 2] [2016] NSWSC 1323 at [54] - [57] : "In relation to a claim for a family provision order in which a Calderbank offer has been served, I dealt with the principles in Walsh v Walsh (No 2) [2013] NSWSC 1281, so far as they relate to reliance upon a Calderbank offer, at [39]-[56]. I shall not repeat all of what I wrote there. Essentially, a Calderbank offer does not attract the same cost consequences as a formal offer of compromise made under the UCPR. Its presence does not yield any presumption of a costs order outside the normal rules. In an appropriate case, the existence of a Calderbank offer may influence, but not govern, the exercise of discretion supporting a different order as to costs. It enables the Court to consider whether it should exercise its discretion to make a costs order other than as provided by the UCPR rule 42.1 and rule 42.2. Nor does the making of a more favourable Calderbank offer appear to be determinative of what kind of (more favourable) costs order (or order other than the usual) should be made: In the matter of Cheal Industries Pty Ltd - Fitzpatrick v Cheal [2012] NSWSC 932 at [54] (Ward J, as her Honour then was). Even where it is held that a Calderbank offer should have been accepted, and the offeree achieves a result as, or less, favourable than the offer at the trial, there is no automatic consequence. What must be considered is the reasonableness of the offeree's rejection or non-acceptance of that offer, a matter to be determined having regard to the circumstances at the time that the offer fell to be considered. The question is whether, in all the circumstances, the failure to accept the offer warrants departure from the ordinary rule as to costs. In Evans v Braddock (No 2) [2015] NSWSC 518, I added, at [50]: "To these principles, I should add that service of a Calderbank offer serves a number of purposes, including to promote settlement and also to give the offeror cost protection in the event of an unreasonable refusal by the offeree. Furthermore, "to some extent any offer of compromise or Calderbank offer is necessarily a tactical weapon. At the heart of a Calderbank offer are two factors - settlement of the case and protection on costs if the offer is ultimately regarded as reasonable. Characterisation as a tactical weapon does not necessarily defeat the efficacy or the genuineness of the offer": Zealley v Liquorland (Australia) Pty Ltd & Anor (Costs Ruling) [2015] VSC 133, per J Forrest J, at [18] and [24]."

Determination

1. At the outset, it should be noted that in the claim for a family provision order, Michael, a beneficiary, was making a claim adverse to the other beneficiaries named in the will of the deceased, and seeking greater provision out of the estate of the deceased than made for him.
2. In all the circumstances of this case, I do not accept the submission, made on behalf of Michael, that he should have his costs of the family provision proceeding out of the estate of the deceased. In my view, his was not a case that was "meritorious", "reasonable", or "borderline", bearing in mind his conduct towards the deceased over many years.
3. Michael's conduct towards the deceased had been of concern to her. At [82] of the principal judgment, I noted: "After some debate during oral submissions, the parties accepted that the objective facts asserted in Clause 11, namely that Michael, over the years, had experienced drug problems; that he had caused a great deal of angst to the deceased and Wahib; and that apprehended violence orders had been taken out by them against Michael, had been established by other evidence in the case."
4. Also, as I stated at [297] - [299] of the principal judgment: "His conduct, whilst not disentitling him to provision, as the deceased, herself, recognised, certainly permitted her to form the view that it restrained its amplitude. She had, on occasions, perceived his conduct as conveying a real threat to her wellbeing and that it was sufficiently serious to seek apprehended violence orders. This type of conduct is not condoned by society, and cannot be condoned by the Court. His other criminal conduct, even if not directly affecting the deceased, created what might be regarded as "normal disappointment and anguish of a mother at her son's wrongdoing" (Re Smith (Deceased) (1991) 8 FRNZ 459 at 463), or, as it was described in the 2011 Will, "angst". Furthermore, Michael's denials in the proceedings that he had behaved badly towards the deceased, and his repeated assertions, both before and after her death, about her instability, when there is no other evidence to support such assertions, do him no credit."
5. From the commencement of the proceedings, it should, reasonably, have been anticipated that Tony would be raising issues of Michael's conduct.
6. Furthermore, the offer made by Tony is relevant on this issue. Michael should have considered the effect of his conduct and how it would impact upon his claim, and, therefore, the reasonableness of his rejection of the offer. The evidence relating to his conduct was available, certainly by the time that Tony made the offer in February 2016, and it could, and should, have been investigated far earlier.
7. There is no evidence of any counter-offer made by, or on behalf of, Michael. It has not been submitted that the offer made by Tony was rejected because of the term relating to the release of rights to make a claim for further provision out of the estate of the deceased. As stated by his senior counsel, at the hearing, Michael wanted "more than [the] two properties absolutely" so it is more likely than not that the offer was rejected because Michael did not consider that it provided enough.
8. I should also note, relevant to family provision matters generally, that the Court is increasingly alert to the dangers of encouraging litigation, and discouraging settlement of such claims, at an early stage, if costs are allowed out of the estate to the unsuccessful party. Where possible, all minds should concentrate upon the need, regularly, to address the strength, or otherwise, of the case, the benefits and detriments of advancing particular arguments, and the wisdom of searching for alternative forms of resolution of the dispute, whether by compromise or even abandonment: see, albeit in another context, Pearson & Ors (The Joint Administrators of Lean Brothers International (Europe)) v Lehman Brothers Finance SA & Ors [2010] EWHC 3044 (Ch), per Briggs J, at [12].
9. When one considers all of the matters I am required to consider, in order to provide a just outcome, I propose to make no order as to Michael's costs of the family provision proceedings. He should bear his own costs of the proceeding.
10. It does not seem to be in dispute that Tony should receive his costs, calculated on the indemnity basis of the family provision proceedings and I propose to make that order. As stated previously, how the burden of those costs should be borne is the real issue.
11. In the present case, Tony seeks an order that Michael should bear part of the burden of his costs of the proceedings in accordance with the Probate and Administration Act 1898. Specifically, he seeks an order that he bears, rateably, 45 per cent of Tony's costs of the family provision proceedings. In addition, he relies upon the offer made and rejected prior to the hearing. Michael submits that he should not have to bear any part of the burden of those costs.
12. Of course, the offer made by Tony well prior to the hearing is relevant. The provision to be made for Michael was to be by way of lump sum and to be paid to him without any conditions attached. In addition, the amount was to be paid without reduction for legal costs incurred in the Probate proceeding (in respect of which an order had been made) and in the family provision proceeding that Michael would, in the normal course, have been obliged to contribute.
13. Had the offer been accepted, a significant amount of costs incurred by Michael in the family provision proceeding would have been saved since his costs thereafter, also, would have been avoided.
14. However, the offer of $800,000, in lieu of the two properties was not very much of a compromise. It was agreed, at the hearing, that the value of those properties was $789,500. It seems to me that the real compromise was in respect of the contribution to the costs of the family provision proceeding, which contribution Michael would not have had to make. However, the offer made did impose a condition, as to the release of rights, which could not have been imposed by the Court.
15. Since I have made no order as to Michael's own costs, and since he will have to contribute to the costs of the Probate proceeding, which will include his own costs incurred in those proceedings, it seems to me that to order him to bear a part of Tony's costs would impose too great a financial burden upon him. Even though his claim for a family provision order was dismissed, I propose to refrain from making the order sought by Tony.
16. Taking all of the matters into consideration, I consider, in the exercise of my discretion, that Michael should not bear, rateably, his share of Tony's costs payable out of the deceased's estate, in respect of the family provision proceedings. He should also not bear his share of Tony's costs, calculated on the indemnity basis, of the costs application. All of those costs should be borne by the other beneficiaries rateably. (I have rounded off the percentages for ease of calculation.)
17. The Court: 1. Makes no order as to the Plaintiff's costs of the family provision proceeding, to the intent that he will bear his own costs. 2. Orders that the first Defendant's costs, calculated on the indemnity basis, of the family provision proceeding, be paid out of the estate of the deceased. 3. Orders that a lump sum costs order of $16,500, being the costs of the second and third Defendants of the family provision proceeding, be paid out of the estate of the deceased. 4. Orders that the Plaintiff not bear, rateably, any share of the Defendants' costs of the family provision proceeding, to the intent that all of those costs will be paid by the other beneficiaries, namely Tony, as to 54.5 per cent, Joseph, as to 27.25 per cent and Mary, as to 18.25 per cent. 5. Orders that each party's costs of the Plaintiff's notice of motion for interim provision and the appointment of a special administrator, filed on 9 October 2014, be paid as part of the costs of the Probate proceeding ordered to be paid by Lindsay J on 13 October 2014. 6. Orders that the exhibits be returned.

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: 09 November 2016