Judgment
1These family members have fought each other in this litigation for years. Except for the appointment of one of the deceased's children as the administrator of the deceased's estate on an interim basis, it has not been possible for them to agree on any matter of significance since his death in September 2011. They have expended almost $1 million in costs in the litigation, the subject of judgment delivered on 9 July 2014: In the Estate of the late Anthony Marras [2014] NSWSC 915 (the Judgment). They now continue their disputation about the costs of the litigation, the extent of which may be gleaned from their competing positions referred to in these reasons.
Background
2It is appropriate to refer to some of the background (the full detail of which is found in the Judgment) to set the context in which the various costs applications are to be determined. The deceased and his first wife, Maria Marras (Maria), had five children. They are, in order of age, Ula Falanga (Ula), Betty Marras (Betty), George Marras (George), Helen Marras (Helen) and Steven Marras (Steven). The deceased and Maria were married from 1958 until 1980. After his divorce from Maria, the deceased married his second wife, Effy Marras (Effy), in 1982. The deceased and Effy separated in 2008 and final property orders were made in June 2010. However, they were not divorced at the time of the deceased's death on 14 September 2011. The deceased died intestate.
3Ula, the plaintiff in proceedings 2011/340511 (the Probate proceedings), sought Letters of Administration.
4Maria as the first defendant in the Probate proceedings claimed by way of Cross Claim that because of an alleged de facto relationship with the deceased at the time of his death, she and Effy (as the deceased's widow) were entitled to share equally in the deceased's estate under s 125 of the Succession Act 2006 (the Act). In the alternative, Maria made a claim under s 59 of the Act for provision out of the deceased's estate on the bases set out in the Judgment. Maria also applied for Letters of Administration.
5Effy filed a Second Cross Claim in the Probate proceedings seeking: the deceased's personal effects, the statutory legacy calculated under s 106 of the Act and half of any remainder of the estate. In the alternative Effy claimed that, if Maria successfully established that she was the deceased's de facto partner at the time of his death, she and Maria were entitled to the entirety of the deceased's estate pursuant to s 123 of the Act. Effy made an alternative claim for family provision, which she later abandoned. She also sought Letters of Administration.
6Three of the deceased's children brought family provision proceedings pursuant to section 59 of the Act. George brought proceedings 2012/286004, Helen brought proceedings 2012/258861 and Steven brought proceedings 2012/285583. Ula and Maria were the first and second defendants respectively in each of these proceedings. Betty resides in Greece and did not take part in the proceedings.
7Prior to the hearing, the parties agreed that Ula be appointed as interim administrator. On 28 November 2013 orders were made, pending the determination of the Probate proceedings, appointing Ula as the administrator with a limited grant for the purposes of calling in the deceased's real and personal property and holding the assets on trust pending an order of the Court to distribute the assets; and paying the just debts and testamentary expenses of the deceased. An order was also made that Ula was to be reimbursed her fair and reasonable costs of the administration from 28 November 2013.
8Ula, Maria and Effy's applications for Letters of Administration were all withdrawn during the course of the hearing. On 28 May 2014 Consent Orders were made in chambers appointing Mr Gordon Salier as the administrator of the estate.
9All proceedings were heard together, with evidence in one being evidence in the others, on 7, 8, 9, 12, 13, 14 and 15 May 2014. Orders in accordance with the Judgment of 9 July 2014 were made on 23 July 2014 as follows:
In matter 2011/340511 (the Probate Proceedings)
1. The caveat lodged by Maria Marras on 4 November 2011 cease to be in force.
2. Note that by order made on 9 July 2014 the claim of the plaintiff for a grant of letters of administration was dismissed.
3. The cross claim of Maria Marras, the first defendant/cross claimant is dismissed.
4. In lieu of the entitlement of Effy Marras pursuant to the intestacy provisions of section 113 of the Succession Act, order that Effy Marras, the second defendant and second cross claimant is entitled to 10% of the balance of the estate of the deceased, Anthony Marras, such balance being as defined in the Schedule to these orders, together with the deceased's personal effects.
5. In lieu of the entitlement of Ula Falanga to the estate of the late Anthony Marras as determined by the intestacy provisions of s 127 of the Succession Act order that Ula Falanga is entitled to a payment of $15,000.
In matter 2012/286004 (George's Family Provision Proceedings)
In lieu of the entitlement of the Plaintiff George Marras to the estate of the late Anthony Marras pursuant to the intestacy provisions of section 127 of the Succession Act order that George Marras is entitled to 40% of the balance of the estate of the deceased, Anthony Marras, such balance being as defined in the Schedule to these orders.
In matter 2012/258861 (Helen's Family Provision Proceedings)
In lieu of the entitlement of the Plaintiff Helen Marras to the estate of the late Anthony Marras pursuant to the intestacy provisions of section 127 of the Succession Act 2006 order that Helen Marras is entitled to 35% of the balance of the estate of the deceased, Anthony Marras, such balance being as defined in the Schedule to these orders.
In matter 2012/285583 (Steven's Family Provision Proceedings)
In lieu of the entitlement of the Plaintiff Steven Marras to the estate of the late Anthony Marras pursuant to the intestacy provisions of section 127 of the Succession Act order that Steven Marras is entitled to 15% of the balance of the estate of the deceased, Anthony Marras, such balance being as defined in the Schedule to these orders.
The "balance of the estate" was defined as:
that sum calculated by deducting from the gross value of the estate once realised, (and excluding the Deceased's personal effects) the sum of $15,000 payable to Ula Falanga pursuant to orders in proceedings 2011/340511 and the costs of the administrator, Mr Gordon Salier, and the costs ordered to be paid from the estate in these proceedings and [the related proceedings].
10These orders also provided that the costs of Ula, Effy, George, Helen and Steven were to be paid from the estate as agreed or, if not agreed, subject to an order of the Court. The orders also provided that if agreement could not be reached: the parties were to file submissions on costs by 26 August 2014; any submissions in reply by 2 September 2014; and the costs argument was to be determined on the papers, unless any party sought leave to restore the proceedings to the list. No such leave has been sought.
11Costs submissions were filed on behalf of Ula, Maria, Effy, Helen and Steven on 22 August 2014. George's costs submissions were filed on 25 August 2014. Ula, Helen and Maria filed submissions in reply on 2 September 2014.
Competing claims
12A Schedule attached to these reasons sets out the costs expended in the litigation by or on behalf of each of the parties, the claims made by each of the parties for their costs, and the other parties' responses to those claims.
Ula
13Ula seeks an order for the payment of her costs of the Probate proceedings and the family provision proceedings from the estate on an indemnity basis.
14Ula submits that there is no reason for the Court not to make the 'usual' order that the defendant's costs in family provision proceedings be paid from the estate on an indemnity basis. It is submitted that there are additional reasons for the making of such an order in this case because:
Ula was appointed as interim administrator by the Court;
She was successful on the major issue in the family provision claims and cross claims, which was whether Maria was in a de facto relationship with the deceased at the time of his death;
There is no reason to criticise Ula's conduct of the proceedings, which were unduly delayed and complicated by Maria's claim that she was the deceased's de facto partner; and
The Court substantially accepted Ula's approach towards her own entitlement for provision from the estate.
15Ula submits it was reasonable for her to apply for Letters of Administration in circumstances where Helen had appropriated estate funds. She submits that her application was largely unopposed as Maria and Effy's applications for Letters of Administration were ultimately not pressed and George and Steven consented to her application. An independent administrator was appointed on the Court's own motion rather than as a result of any application by any of the parties.
16Ula opposes the capping of her costs on the basis that this would unjustly cause her to bear the costs of the proceedings from her own funds. Unlike the other children and Effy, she would not benefit from the consequential increase in the balance of the estate because her entitlement is quantified as a fixed sum, rather than a percentage of the estate. In addition, a general cap on costs would operate unfairly on Ula because she has been a party in four proceedings.
17Effy submits that Ula should be awarded the costs of her interim administration from 28 November 2013 until 28 May 2014 on an indemnity basis, excluding the costs she incurred contesting the administration of the estate. She also submits that Ula should not have persisted in her application for Letters of Administration in the light of Effy's superior claim and the obvious need for an independent administrator.
18Helen submits that Ula's costs should be paid from the estate on the ordinary basis and capped at $100,000. Helen submits that Ula should not receive indemnity costs because:
She chose to become an active party despite not being a major beneficiary. Helen contends that it was unnecessary for Ula to intervene in the proceedings because Maria's de facto claim could have been dealt with by George, Steven and/or Effy;
She only took minor steps towards calling in the estate's assets;
She was incapable of performing the role of administrator impartially because she was unwilling to accept an innocent explanation for Helen's behaviour in respect of the withdrawals of moneys from the deceased's account after his death;
She acted in conflict to her role as contradictor to the family provision claims of George and Steven when she procured affidavits from them and called them as witnesses in the course of contesting Maria's claim for Letters of Administration;
She did not withdraw her application for Letters of Administration until the last day of the hearing, despite the Court indicating that such a course would be appropriate;
28Each of the other parties submits that Maria should not receive any costs from the estate on the basis that her claim was unsuccessful and her de facto relationship claim, which was found to be baseless, greatly added to the length and complexity of the proceedings.
29Ula, Effy, George and Steven submit that Maria should pay the estate part of its costs of the proceedings. Ula submits that Maria should be ordered to pay 20% of the estate's costs. She submits that this quantification reflects the fact that Maria was one of five parties making claims against the estate. In light of the fact that Maria is the mother of Ula, George, Helen and Steven, Ula notes that she would not press for this order against Maria if no such order were sought by Effy, Steven, George and Helen.
30Effy submits that Maria should pay the estate's costs in an amount fixed by the Court because she advanced a false de facto spouse claim, which was completely rejected by the Court, and her application for administration had no basis. Effy submits that these claims should never have been made and they greatly increased the length and cost of the trial.
31George submits that the estate should receive a Bullock order against Maria for 25% of the costs paid to him, Helen, Steven and Effy. He submits that such an order is justified because Maria brought a "hopeless" and "dishonest" action, which wasted significant time. He submits that there "is a public benefit in there being recognition that foolish family provision claims may rebound against the maker of the claim."
32Steven submits that Maria should pay the costs of the estate on the ordinary basis to the extent to which she was unsuccessful.
33Ula, Effy, George and Helen all acknowledge that Maria would not have the means to pay any costs order made against her.
34In reply Maria submits that at worst her case was borderline, she was willing to settle and the proceedings were not prolonged by her claims.
35It is true that Maria did propose settlement of the proceedings. It is also true that she was joined as a defendant in each of the family provision proceedings and in that sense was a necessary party to the proceedings. However the reality is that she propounded her own claim as a de facto of the deceased, which failed, and the position that she took in respect of the family provision claims of her children was affected by her alternative claim that she too wished to have provision out of the estate of the deceased.
36The claims made by each of the children, George, Helen and Steven did not result in an order that the Summons be dismissed as against Maria. However the fact that she was joined as a defendant is a factor to be taken into account in determining the costs orders to be made in the proceedings.
37It is true that Maria agreed as early as 25 October 2013 that an independent administrator be appointed.
38The claim that Maria is not a "sophisticated litigant" does not assist the determination of this application. First of all she had solicitors appearing for her throughout. She also had counsel briefed at the trial. It is not quite clear what is intended by the epithet "sophisticated" in this submission. However there is no doubt that Maria made claims about her relationship with the deceased that were not accepted. It does not need a great deal of sophistication to understand that making a claim that includes events that did not occur may result in an outcome adverse to the claimant. The suggestion that Maria's claim that she was in a de facto relationship with the deceased did not prolong the proceedings is rejected.
Effy
39Effy claims that she, George and Steven should receive their costs from the estate, capped at $130,000. She submits that she is entitled to receive her costs because:
She was a necessary party to the Probate proceedings as she was the deceased's spouse;
She was the only party that could defend her interests in the other proceedings because Ula "joined in the attack" on those interests;
Despite having the strongest, legal claim to be administrator, she proposed the appointment of an independent administrator as early as 18 April 2013 in order to avoid the expenditure of the estate's assets in litigation;
She made a pre-trial offer of compromise;
She proposed capping the parties' costs at the beginning of the trial; and
She agreed to the only two majority position settlement offers during the trial.
40Helen submits that Effy's costs should be paid from the estate on the ordinary basis, capped at $100,000 (the same costs order she proposes in relation to herself, Ula, George and Steven). She submits that, although Effy was entitled to defend her interests, it is fair to cap her costs in light of her conduct during the course of the proceedings. She submits that Effy's costs increased dramatically during the course of the trial, probably as a result of preparing additional affidavits to counter the objections to her earlier affidavits. Helen further submits that Effy's 'irreducible minimum' argument was legally unsound and rejected by the Court. It influenced her offers of compromise, which overstated her entitlement and thus inhibited the parties' settlement efforts.
41George submits that Effy (as well as himself, Helen and Steven) should receive $80,000 in costs from the estate. He submits that it is necessary to cap the costs in order to preserve the estate. Although Effy's costs were approximately $20,000 more than those of George, Helen and Steven, George submits that she should receive the same amount because she ran "a wasteful and disingenuous case" and "added to the burden of all other parties." George submits in the alternative that a Bullock order could be made against Effy but prefers a capping order as it would be less cumbersome.
42Steven submits that Effy's costs should not be paid from the estate because she chose to become a party even though her interests could have been adequately protected by Ula. He submits that she should therefore bear the cost of her unnecessary intervention which "significantly added to the costs of the proceedings." He further submits that Effy should pay the costs of the estate to the extent to which she was unsuccessful. In this regard, her 'irreducible minimum' argument was rejected by the Court and she abandoned her family provision claim on the sixth day of the hearing.
43There is no doubt that Effy was a necessary party to the Probate proceedings. Her characterisation of Ula having "joined the attack" on her interests is unfair. Ula's approach to the litigation was the most even handed of all of the litigants.
44There was clear animosity between Effy and Helen after Effy and the deceased commenced living at the farm. Notwithstanding that animosity Effy made offers that, if accepted, would have resulted in Helen receiving what Effy regarded as a reasonable distribution from the deceased's estate. Ultimately that was not an approach that found favour.
45It is true that the argument that was raised on Effy's behalf that the intestacy provisions included an "irreducible minimum" to be paid to Effy was rejected. However I do not regard the rejection of that argument as having a significant impact on the determination of the costs orders to be made in these proceedings.
46It is understandable that George wishes to cap the costs of the estate so that his percentage does not reduce further. However the prospect of the reduction in the estate was clear from the first day of the trial and yet the parties continued with their adversarial battle over seven days and continued to incur costs in the rounds of submissions in respect of the costs of the litigation. Where it is not possible for parties to reach their own agreement, they are entitled to have the Court determine their various claims. Notwithstanding the exhortations for the parties to try to reach agreement, it appears that the familial complexities and deep seated resistance to each other's claimed positions prevented their agreement.
47Effy certainly had an expectation far higher than that which could be achieved in the litigation. However, as I have said, she was an essential party to the proceedings.
George and Steven
48George claims that, in order to preserve the estate he, Steven, Helen and Effy should receive $80,000 in costs. Steven submits that his costs as well as those of George, Ula and Helen, should be paid from the estate on the ordinary basis. He submits that he and George should receive their costs because they made successful applications for family provision.
49Helen submits that she, George, Steven, Ula and Effy should receive their costs on the ordinary basis, capped at $100,000. She submits that George and Steven successfully claimed family provision and as such would normally be entitled to their costs on the ordinary basis. She submits that it is fair to cap their costs at $100,000.
50Both George and Steven are understandably keen to cap the costs because it will prevent further depletion of the estate.
Helen
51Helen submits that she should receive her costs on the ordinary basis, capped at $100,000 (as should George, Steven, Effy and Ula). She submits that her success in her family provision claim would normally entitle her to receive her costs on the ordinary basis and it is fair to cap the costs at $100,000.
52Steven submits that Helen should receive her costs from the estate on the ordinary basis because she made a successful application for family provision. George submits that Helen should receive $80,000 in costs from the estate. He submits that her costs should be capped at this amount in order to preserve the estate.
53Effy submits that Helen's costs should be capped at $65,000 because she "behaved irresponsibly" by: supporting Maria's false de facto claim; giving evidence about her employment and future work plans that was found by the Court to be "most unimpressive"; and undermining the prospects of settlement. In reply Helen submits that, as a successful party, she should not be deprived of costs unless such an order is justified in the circumstances. She submits that the Court's findings that parts of her evidence were "most unimpressive" [195] and that she knew that Maria did not travel to the farm after July 2009 [208] do not provide sufficient reason to make such a detrimental costs order. She also submits that it was reasonable for her to reject Effy's offer of settlement because she obtained a more favourable order from the Court.
54Once again Helen is keen to cap the costs to ensure no further depletion of the estate because she has a percentage share of the balance of the estate. Helen's financial need was recognised and she was successful in her application for provision. However her conduct in appropriating the money from the deceased's estate and obviously supporting her mother's claim that she was in a de facto relationship with the deceased did little to help these parties reach a sensible out of Court settlement.
Settlement Offers
55None of the offers of settlement or compromise as a whole bettered any parties' position as awarded. However those who made offers refer to them as a basis for finding that at least they were willing to make them, that they were open to negotiation and did not act unreasonably in the litigation.
56On 9 May 2014, during the course of the hearing, Effy made an offer of settlement on the basis of a net distributable estate after all reasonable costs of administration of $1.5 million: that Ula would receive $150,000 in respect of her costs and $25,000 or the chattels of the estate; Maria would receive $60,000; George would receive $330,000; Helen would receive $285,000; Steven would receive $300,000; and she would receive $400,000.
57If the size of the estate were ultimately found to exceed or fall short of $1.5 million then Effy's offer was that the amounts to be paid to Maria, George, Helen, Steven and Effy were to increase or decrease on a pro rata basis. Effy concedes that the orders of the Court are less favourable to her than the terms of this offer.
58Maria's submissions annex, amongst other correspondence, settlement offers made by her on 1 May 2014 and 7 May 2014. The 1 May 2014 offer proposed that: Ula receive Letters of Administration, the deceased's personal effects and $150,000 in costs; and that Maria, Effy, George, Helen and Steven each receive one fifth of the remainder of the estate (estimated at $270,000). The offer of 7 May 2014 proposed that: Ula be paid costs of $150,000; Maria to receive $100,000; and the distribution of the remainder of the estate to be decided by the other parties. Both these offers propose orders more favourable to Maria than the outcome of the proceedings.
59Maria argues that the Court should make costs orders against the other parties pursuant to rules 42.15 and 42.15A UCPR because they failed to achieve a better result than that proposed in her offers or that she achieved a more favourable result than that proposed in her offers. This submission fails to recognise that a pivotal aspect of the offers was a payment to Maria that she did not achieve in the litigation.
Relevant Costs Principles
60Section 98 of the Civil Procedure Act 2005 (CPA) gives the Court a broad discretion to make costs orders. This discretion is subject to the rules of Court, the CPA and any other Act. Rules 42.1 and 42.2 UCPR provide that, unless the Court otherwise orders, costs follow the event and are calculated on the ordinary basis. The principle of the proportionality of costs, which is expressed in section 60 of the CPA, is also relevant. As Palmer J said in Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003; 65 NSWLR 268 "proportionality of costs to the value of the result is central to the just and efficient conduct of civil proceedings" (at 274).
61Additional principles also guide the Court's discretion in family provision proceedings. Section 99 of the Act provides that the Court may order that the costs of such proceedings be paid from the estate in such manner as the Court thinks fit.
62As interim administrator, Ula would ordinarily be entitled to receive her costs of defending the family provision proceedings from the estate unless she has acted unreasonably or for her own benefit: rule 42.25 UCPR (see Sackar J's helpful summary of the law in Enzo Jair Ploder v Vittoria Angelina Garcea (as executrix of the estate of the late Fiona Rita Garcea) [2013] NSWSC 1360 at [106] - [108]).
Capping orders
63The Court may also make orders capping the costs that may be recovered by the parties (CPA s 98(4)(c); Practice Note SC Eq 7 - Family Provision [24]). In Re Sherborne Estate Palmer J considered an application by an unsuccessful defendant to family provision proceedings to cap the costs of the successful plaintiffs. His Honour said at 276 [42]:
It is conceivable that the Court could exercise the power under s 98(4)(c) on the application of an unsuccessful party in making a final costs order so as to cap a successful party's recoverable costs where the Court considers that the successful party's costs are grossly excessive. ... But such a capping order would be very rare: the Court's decision would have to be an informed one, that is, 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.
64Palmer J declined to cap the successful plaintiffs' costs on the basis that 276 [46]:
While I agree that the costs incurred by Barbara and Helen are disproportionate to the result which they achieved, the fact remains that they were successful in their claims, they are entitled to costs in some amount, and no evidentiary basis has been put forward upon which the Court could rationally and reasonably make an estimate of the proper amount which should be inserted in a costs order under s 98(4)(c).
65Pembroke J adopted a broader approach in Ireland (as executor of the Estate of Gordon) v Retallack (No 2) [2011] NSWSC 1096. In that case, which dealt with the costs of a will construction suit, his Honour disallowed certain of the executor's costs on the basis that they were incurred without reasonable cause and were disproportionate to the complexity of the issues [34] - [35]. His Honour considered that s 98(4)(c) CPA gives the Court a broad discretion and that the Court should only exercise this power when it is confident that it can do so fairly, which incorporates a requirement that the Court can calculate an appropriate sum on the information available. His Honour also said that the Court should be confident that its approach to the estimation of costs is "logical, fair and reasonable" [41] and observed at [44] that:
For my part, I do not share quite the same reticence about the application of Section 98(4)(c) in circumstances such as these as Palmer J expressed in Sherborne Estate (No 2) (supra) at [43] - [44]. I regard the power given by Section 98(4)(c) as a particularly convenient mechanism by which the interests of justice may be served.
66However in Nicholls v Michael Wilson & Partners Ltd (No 2) [2013] NSWCA 141 Sackville AJA (with whom Meagher and Barrett JJA agreed) said at [22]:
It is not necessary to decide whether, as Palmer J suggested, an order capping the costs of a successful party will be made only very rarely. At the least, the party seeking to cap the successful party's costs must lay an evidentiary foundation for the application. Ordinarily, the evidence would need to address the kinds of issues identified by Palmer J in Sherborne (No 2).
67In that case the Court of Appeal declined to make a capping order because there was insufficient evidence to determine whether the costs were disproportionate to the issues in dispute, whether the costs were unreasonably incurred and, if the costs were disproportionate, the reason for this disproportionality [23].
68However, the circumstances in this case are somewhat different as various successful parties have proposed capping orders for themselves as well as the other successful parties. Of course this approach may be influenced by the fact that their awards are based on a percentage of the estate.
Dismissal of proceedings
69As Maria's family provision claim was dismissed and Effy's Cross-Claim was dismissed in part, reliance was placed on 42.20 UCPR, which provides that:
If the court makes an order for the dismissal of the proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.
70There is an issue between Maria and the other parties as to whether Maria should receive her costs and whether she should pay part of the costs of the estate. The relevant principles are helpfully set out in the judgment of Hallen AsJ (as his Honour then was) in Harkness v Harkness (No2) [2012] NSWSC 35 at [18]:
(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).
Bullock Order
71George submits that Bullock orders should be made against Maria and Effy requiring them to reimburse the estate some of its costs. However, the principles relating to such orders are designed for cases in which a plaintiff has suffered a wrong and sued more than one defendant because they were unable to ascertain prior to trial exactly who was legally liable. Such orders are not well adapted to the rather specialised circumstances of these proceedings.
72For example, as explained by King CJ in Fennell v Supervision and Engineering Services Holdings Pty Ltd (1988) 47 SASR 6 at 7:
The unsuccessful defendant has caused the litigation by his wrongful act and by disputing liability for it. He therefore ought to pay all costs reasonably incurred by the plaintiff in connection with the litigation. If it was reasonable, as between the plaintiff and the unsuccessful defendant, for the plaintiff to sue the successful defendant, the unsuccessful defendant ought therefore in justice be liable to indemnify the plaintiff against the costs of so doing, including those which he is ordered to pay to the successful defendant.
73It is artificial to characterise the estate as the 'successful defendant' and Maria or Effy as 'unsuccessful defendants'. In addition, while it is submitted that Maria and Effy added to the complexity and length of the proceedings, it is not accurate to say that they caused the family provision proceedings by their wrongful acts.
74It is therefore more appropriate to consider whether Maria and Effy should reimburse the estate by reference to the Court's broad discretion and the applicable principles referred to earlier.
Effy's intervention
75Steven submits that Effy's intervention in the proceedings was unnecessary because, as the interim administrator, Ula was obliged to put all relevant material before the Court. He submits that Effy should bear her own costs because she chose to add to the cost of the litigation by refusing to rely on Ula to protect her interests. Steven relies upon Re Lanfear (1940) 57 WN (NSW) 181 and Vasiljev v Public Trustee [1974] 2 NSWLR 497 in support of these submissions. Those two cases relate to "the duty of the executors either to compromise the claim, or to contest it and seek to uphold the provisions of the will" and the related obligation to "place all the relevant evidence before the Court": Re Lanfear at 183; Vasiljev at 503.
76These cases do not directly deal with the costs implications of unnecessary intervention by a beneficiary. Re Lanfear was a case in which the Public Trustee, which was the executor of a will, declined to put on evidence relating to a beneficiary's entitlement, thus obliging her to intervene to protect her own interests. Consequently, the beneficiary's intervention was necessary. Williams J ordered that the beneficiary's costs be paid from the estate, with the exception of the costs of two affidavits. Williams J said intervention may be necessary (at 183):
In special cases where for instance the executors are themselves beneficiaries under the will, or where very substantial benefits are conferred upon beneficiaries ... but as a general rule such separate representation should not be necessary if the executors do their duty.
77In Vasiljev an appeal against a successful family provision application was allowed and the matter remitted to the equity division for rehearing. One of the reasons for allowing the appeal was that by refusing to grant an adjournment to allow the executor (the Public Trustee) to seek evidence regarding an absent beneficiary, the trial judge had prevented it from fulfilling its duty to put all relevant material before the Court.
78These cases do not establish that a beneficiary who chooses to intervene to represent their own interests in a case where an interim administrator of an intestate estate has been appointed should necessarily bear their own costs. In determining whether the beneficiary should recover their costs from the estate it is necessary to consider whether there were special circumstances that made their intervention necessary.
Conclusions
79The parties incurred total costs of approximately $935,000. It is estimated that at this stage (subject to the possibility of other assets being gathered in) that the estate is worth approximately $1.5 million.
80Maria's claims were dismissed in their entirety. Each of the other parties had at least a modicum of success.
81Maria's claim that she was in a de facto relationship with the deceased at the time of his death took up a great deal of time at the trial. That claim was pivotal to Maria's application for a share of the deceased's estate under the intestacy provisions of the Act. Accordingly it affected Effy and the children who made the application for provision. It failed.
82Maria did not accept that the children were entitled to an order in their favour on their applications without an order being made in her favour on the alternative claim under section s 59 of the Act. Maria's claims were all unsuccessful and I am satisfied that the appropriate order in respect of those claims is that her application for costs to be paid out of the estate is refused.
83The next question is whether, as submitted by each of the other parties, excluding Helen, that a costs order should be made against Maria to pay the costs of the estate in dealing with her case.
84Ula's approach to seeking 20% of the estate's costs from Maria was only adopted because the other parties have sought an order against Maria in this regard. There is no real prospect that Maria has any capacity to pay any costs. However the parties who seek an order against Maria have submitted that the Court should make such an order to demonstrate that an adverse costs outcome should occur when unwarranted claims are made. The complexity of the lives and interrelationships in this family were such that I am comfortably satisfied that if Helen had not supported Maria in her claim, it may well not have been made. Having regard to all of the circumstances of the litigation and the fact that Maria was named in each of the family provision proceedings as a defendant, I am not satisfied that I should make an award against Maria to pay the costs of the estate. However I intend to make no order as to Maria's costs as a defendant in the family provision claims.
85Each of George, Helen and Steven were successful in varying degrees in their applications. Although Effy's Cross-Claim was dismissed in part, she also had some success. I am of the view that each of their costs should be paid out of the estate on the ordinary basis.
86Ula is in a separate category. She was willing to take on the role of interim administrator in the hope (vain as it turned out) that costs might be contained. She conducted the Probate proceedings in that role. She relinquished any right or entitlement under the intestacy provisions of the Act. All she sought was a very modest monetary sum. Helen's submissions that Ula would not accept an innocent explanation from her are noted. However Ula was justified in seeking to have Helen account for the appropriated monies. Although Mr Salier was appointed as administrator after the hearing had concluded, Ula's application was for the benefit of the estate and she was successful in the major factual issue posed by those proceedings. I am satisfied that these matters justify an award of costs in her favour as claimed.
87There is no detailed evidence of the way in which the parties' costs were expended. The only material before the Court was the indications from each party as to the amount of the costs expended at the beginning and at the end of the trial. The parties could not settle their differences. I accept that their respective legal representatives endeavoured to assist the parties to settle the proceedings and obviate the need for the final hearing. However these were disputes that were insoluble without a curial determination. I do not intend to cap any of the costs.
88I am satisfied that in all the circumstances it is appropriate to make the following orders:
In proceedings 2011/340511
Ula's costs are to be paid out of the estate on an indemnity basis.
Effy's costs are to be paid out of the estate on an ordinary basis.
Maria's application for costs is dismissed.
The application for Maria to pay the costs of the estate is dismissed.
In proceedings 2012/286004
George's costs are to be paid out of the estate on an ordinary basis.
Ula's costs are to be paid out of the estate on an indemnity basis.
I make no order as to costs in respect of Maria's costs.
In proceedings 2012/258861
Helen's costs are to be paid out of the estate on an ordinary basis.
Ula's costs are to be paid out of the estate on an indemnity basis.
I make no order as to costs in respect of Maria's costs.
In proceedings 2012/285583
Steven's costs are to be paid out of the estate on an ordinary basis.
Ula's costs are to be paid out of the estate on an indemnity basis.
I make no order as to costs in respect of Maria's costs.
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Decision last updated: 24 September 2014
She should not have drained estate funds by pursuing her administration application when the only reasonable option was the appointment of an independent administrator;
Awarding Ula indemnity costs would deplete the estate to the detriment of Helen, George and Steven, who have all established financial need.
19In reply to Helen's submissions, Ula submits that:
She was a beneficiary with an entitlement of no less than $150,000;
The conduct of the interim administration is irrelevant to whether Ula should receive indemnity costs for her administration claim, there was no significant evidence in chief regarding Ula's administration and the costs of the administration are less than $2,000;
The Court shared Ula's unwillingness to accept Helen's explanation of events relating to the appropriation of estate moneys;
Ula filed affidavits of George and Steven in her administration case in order to defeat Maria's de facto claim 16 months before the Court ordered that she be the defendant to the family provision claims. It was in the estate's interests to defeat Maria's claim and, even if there were a conflict, this would not bear on the Court's costs discretion. In any event, Ula behaved impartially;
The slight delay between the Court's indication that the appointment of an independent administrator would be appropriate and Ula's withdrawal of her application for Letters of Administration did not increase the costs of the proceedings;
Ula's application did not add significantly (or at all) to the costs of the proceedings because the main issue in all proceedings was Maria's de facto claim. Furthermore, Helen did not at any time suggest or support the appointment of an independent administrator;
The estate has been depleted by the inability of the parties to agree. Ula's approach was always to try to assist her family and she was always amenable to settlement. An indemnity costs order would merely reimburse her for the costs she reasonably incurred;
Ula was an administrator, the costs of administering the estate and the costs of the litigation are separate issues and there is no evidence to support the allegation of bias.
20George submits that Ula's costs should be paid from the estate in the sum of $165,000. He submits that it is usual for an administrator to be paid from the estate on an indemnity basis. Also, while Ula was not ultimately granted final Letters of Administration, her application was directed to avoiding the expense of appointing an independent administrator, rather than personal gain. He further submits that the only other applicants for Letters of Administration were Maria and Effy and they were clearly unsuitable candidates.
21Steven submits that Ula's costs should be paid from the estate on the ordinary basis.
22Helen submits that George and Steven's support for Ula's costs application does not assist the Court because of the "partisan positions" taken by them and the "financial interdependence" between these three siblings. Ula submits that she provided financial assistance to Helen, as well as George and Steven, and that Helen's submissions would be just as affected by "partisan positions" as those of George and Steven.
23I agree with the submissions made on Ula's behalf that she was successful on the major issue in the family provision claims and cross claims. I also agree with the submission that there is no reason to criticise her conduct of the proceedings. It is true that Ula's approach towards her own entitlement was substantially accepted. Ula's attempt to contain costs, although it was unsuccessful, was a very reasonable approach to take in the circumstances of Betty having apparently transferred $480,000 out of the joint account in Greece and Helen having appropriated the monies out of the deceased's account in Australia soon after his death. These were just some of the complexities that faced each of the other beneficiaries or applicants for provision out of the estate.
24Helen's criticisms of Ula are unwarranted. To suggest that she was not a major beneficiary is not correct. It would all depend upon the outcome of Maria's de facto claim. If that claim were defeated then certainly Ula stood to share equally in the estate with her siblings under the intestacy provisions of the Act. The fact that Ula was willing to give up her 'entitlement' (but for a modest monetary award) theoretically put her in a position of being able to bring a more impartial approach to the administration. However it is true that Ula took the view that Helen's explanation was not to be accepted. That was, as found, a justified approach.
25Helen's suggestion that awarding Ula indemnity costs would deplete the estate to her detriment and that of her siblings is of course a reality. However Ula's presence and her justified continuation of the proceedings in circumstances where Helen and Betty had effectively helped themselves to the deceased's monies was a necessity.
26During the course of the trial Ula's counsel, on behalf of all counsel, indicated that they were very conscious of the need to try and settle the proceedings and continued their attempts to do so throughout the proceedings (tr 250). However that resolution was not possible.
Maria
27Maria claims that she should receive all of her costs, which are quantified at $172,000. In the alternative, she claims $80,000 (or alternatively $65,000). This claim is made on the basis that at one stage there was an agreement between the parties, other than Helen, that Maria could receive that sum in settlement of her claims. In any event Maria submits that she is entitled to receive her costs from the estate because:
A full scale inquiry was necessary;
Her claims "were not frivolous, vexatious nor made with no reasonable prospect of success" and "in fact were meritorious, reasonable or at the very least borderline";
Maria made attempts to settle the proceedings;
The "obstinate and unreasonable" actions of Ula, Effy, George and Helen increased the costs of the proceedings and prevented settlement;
George, Helen and Steven named Maria as a defendant in their family provision proceedings but did not achieve any specific orders against her, which means that their Summons would be dismissed as against her and costs orders made under rule 42.20(1) Uniform Civil Procedure Rules 2005 (UCPR);
Her administration claim was not unsuccessful because an independent administrator was appointed, a course she had agreed to as early as 25 October 2013;
The Court should make orders pursuant to rules 42.15 and 42.15A UCPR because the other parties failed to achieve a more favourable result than that offered by Maria during settlement negotiations (although it is conceded that the letters of offer did not comply with the rules);
The purpose of a costs order is to compensate the person in whose favour it is made and none of the parties in this case "deserve compensation as they all did worse off or no better in the case of George and in fact engaged in a real risk that the estate would be totally wasted"; and
She is not a sophisticated litigant and there was no evidence to suggest that she falsified her de facto relationship claim.