Karpin v Gough

Defendant's submissions on costs

1. The defendant seeks a special costs order, relying on the making by the defendant (and non-acceptance by the plaintiff) of an undated Offer of Compromise by which the defendant offered to pay to the plaintiff (and consent to appropriate orders thereto) the sum of $251,000. The offer was served under cover of a letter dated 6 November 2020.
2. The defendant submits that the offer is in accordance with Pt 20, Div 4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and, in particular, r 26 of the UCPR (so as to attract the operation of r 42.15A of the UCPR - see below, in the event of its non-acceptance and where the defendant obtained an order or judgment on the claim no less favourable to the defendant than the terms of the offer). It is noted that, if accepted, the plaintiff would have received a party/party costs order in her favour. However, the offer was not accepted (and indeed it is said that there was no response thereto).
3. The offer contained a notation that, if it did not comply with the rules as to Offers of Compromise, then the same offer was made "on a 'without prejudice save as to costs' basis in accordance with the principles in Calderbank v Calderbank" (see Calderbank v Calderbank [1975] 3 All ER 333).
4. The defendant says that (although it is accepted that this is neither exhaustive nor determinative), the following matters are relevant to the consideration of the application for a special costs order. First, that, consequent upon the dismissal of a plaintiff's case, ordinarily, costs would "follow the event". Second, that the defendant put into dispute all relevant matters and, apart from the plaintiff establishing a de facto relationship of between six and 12 months (see principal judgment at [219]), that the plaintiff failed to establish there was any other form of eligibility or that there were "factors warranting" or that she had established any significant need or that the provision made for her during the deceased's lifetime was not "proper and adequate". Third, that there is an expectation of parties to make reasonable attempts to settle litigation well before the additional costs occasioned by a final hearing (and the offer of the defendant is said to reflect this).
5. It is noted that, by early November 2020 when the defendant's offer had been served, all affidavits on behalf of the plaintiff (apart from updating affidavits in August 2021) had been served so that the plaintiff knew the strength (and weaknesses) of her case; and that, by November 2020, all affidavits on behalf of the defendant had been served save for the updating executor's affidavit and the affidavits of Professor Carmelle Peisah and Ms Claudine Newton which were served during November 2020. The defendant points out that that even with respect to those last two mentioned affidavits, the rules provided for the defendant's offer to be open until 4 December 2020, which is said to have been sufficient time for the plaintiff either to accept the offer or to seek an extension (neither of which happened).
6. The defendant points out that the plaintiff's costs were estimated at $253,000 at trial (as noted in the principal judgment at [190]) and says that, therefore, had the plaintiff accepted the defendant's offer nearly a year earlier, she would have received a substantial sum "in the hand" (almost certainly more than the amount I had contemplated of $50,000 to $100,000 were I to have made an order for provision - see the principal judgment at [217], [223]).
7. The defendant notes that the effect of the service of a valid Offer of Compromise under the UCPR is to shift the "onus" to the plaintiff (in effect to require her to justify her non-acceptance of the offer). It is submitted that, having done his best to settle the case, the defendant (as legal personal representative) should not now have imposed on him the burden of paying the plaintiff's legal costs. (I interpose here to say that there seems to me no reason why the costs would not ultimately come out of the estate - it not being suggested that there is any shortfall in this regard; and hence the suggestion that the defendant might be personally liable for the costs, if that is what is here being suggested, should not arise.)
8. The defendant says that the prima facie consequence of the plaintiff's failure to accept the Offer of Compromise is for the costs order to be imposed pursuant to r 42.15A of the UCPR, namely an order that the plaintiff pay the defendant's costs of the claim, assessed on the ordinary basis, up to the day of the offer (it being made before the first day of the trial) and assessed on an indemnity basis from the beginning of the following day.
9. It is noted that the plaintiff did not identify whether her costs were "conditional" or whether there was an "uplift factor" (as referred to in the principal judgment at [190]), which the defendant submits may be seen as inconsistent with the comments in Oxley v Oxley [2018] NSWSC 91 at [57]-[90] per Hallen J, especially at [83]. In that context, the defendant points to the following extract of the cross-examination of the plaintiff's solicitor (at (T 120.4-18): Q. If the plaintiff is unsuccessful in this claim, is she obliged to pay your costs and disbursements? A. She's obliged to pay my disbursements. … Q. Those disbursements are estimated, according to your affidavit, approximately $6,000 past and future but unpaid? A. Yes, approximately. That's not including counsel fees. Q. Just to clarify things; if the plaintiff is unsuccessful, then all she has to pay you are the past and future or present disbursements which, according to your affidavit, total about $6,000? A. That's correct, yes. which I then sought to clarify (at T 120.46-50, T 121.1-3), observing that one would often see Counsel's fees as a disbursement on a solicitor's bill: Q. Can I just clarify one thing. You said that if the plaintiff is unsuccessful in the proceedings, all she has to pay are the past and future disbursements of about $6,000. Am I right in thinking that whatever arrangements there are between your firm and Ms Cohen, the plaintiff is not responsible for counsel's fees if she's unsuccessful in the proceedings? A. That is my understanding. She is responsible for, for example, company searches or court books or law and order - I'm organising the USB, so I will be charging her for those things.
10. The defendant cavils (gently) with the observation at [224] as to the "usual costs order for this kind of claim", pointing to the remarks of Hallen AsJ (as his Honour then was) in Harkness v Harkness (No 2) [2012] NSWSC 35 (Harkness) (at 18 and (f)) as indicating that it is far from clear that there is such a usual costs order; and noting that it would be open pursuant to s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) to make no order as to the costs of the plaintiff (with the intent that she bear her own costs) or to make a costs order in favour of the plaintiff identifying the amount to be paid by her to her solicitors for disbursements (noting that her solicitor referred to disbursements of "approximately $6,000"); albeit, neither of those courses is the preferred course of the defendant (see also Blendell v Byrne (No 2) [2019] NSWSC 798 at [72]ff) per Hallen J).
11. In that regard, I note that it has been said that while "family provision claims stand apart from cases in which costs follow the event", the appropriate order as to costs depending on the overall justice of the case (see Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35 at 521-2 per Gaudron J). The Court making an order that an unsuccessful party has his or her costs paid out of the estate in light of the circumstances and overall justice of the case, albeit not as a matter of course. 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 (Purnell v Tindale [2020] NSWSC 746 at [333] per Henry J; Penfold v Predny [2016] NSWSC 472 at [167] per Hallen J). Furthermore, it is not uncommon for the (reasonably incurred) costs of all parties (successful or unsuccessful) to be borne by the estate (see, for example, Wardle v Wardle (No 2) [2021] NSWSC 1663 at [12] per Slattery J).
12. In any event, the defendant submits that in all the circumstances, and noting that the offer was made some 11 months before the hearing and that much money could have been saved had it been accepted, the special costs order now sought should be made.

Plaintiff's submissions on costs

1. The plaintiff accepts that an Offer of Compromise was served on 6 November 2020 and takes no issue as to the validity of that offer or its compliance with the special costs regime under the UCPR for such offers. I interpose to note that there is therefore no need to consider the applicability of the Calderbank principles to the offer that was made by the defendant nor the different onus that applies in that regard.
2. In the plaintiff's submissions (quite extraordinarily to my mind), the plaintiff (by her Counsel) appears to suggest that it could be concluded that she has deceived her legal representatives. Indeed, the thrust of the submissions (again extraordinarily in my opinion) appears to be that the prima facie consequence of rejection (or non-acceptance) of the Offer of Compromise (i.e., that there be no order for costs in favour of the plaintiff) should not follow because the persons who will suffer from this will be the lawyers and not the plaintiff (and it is suggested that this will have a detrimental effect on the willingness of lawyers who are "prepared to take on" family provision claims for impecunious plaintiffs).
3. The plaintiff's submissions note that, at the time of service of the Offer of Compromise in November 2020, affidavits had been served but no subpoenas had yet been issued. It is said that the "inconsistencies" in the plaintiff's evidence were only discoverable by the plaintiff's lawyers after the issue of subpoenas in 2021. It is said that, at that stage, the plaintiff's lawyers had only had the plaintiff's instructions upon which to rely when advising the plaintiff not to accept the offer contained in the offer of compromise (from which I infer, though it is not necessarily intended that there be any waiver of legal professional privilege in this regard so I am not sure that it was intended to disclose any such communication, that the plaintiff received advice to that effect).
4. Complaint also seems to be made that, from December 2020 onwards, there was no offer of compromise made available by the defendant (i.e., as I understand it, no offer made at a time when the plaintiff's lawyers would have become aware of the "inconsistencies" between the plaintiff's instructions and the documentary evidence produced on subpoena).
5. The submissions go on to say that the evidence (referring as I understand it to the evidence at the hearing) shows that the plaintiff will be unable to pay any order for costs made against her in favour of the defendant; and it is said that the plaintiff will be unable to pay any costs to the lawyers who acted for her in the proceeding. (Pausing here, the evidence extracted above from the plaintiff's solicitor was to the effect that, if unsuccessful in the proceeding, the plaintiff would only be responsible to her legal representatives for disbursements of around $6,000; and the evidence at the trial suggested that the plaintiff would have been able to pay that amount at an earlier time. Hence the submission that the plaintiff will be unable to pay her lawyers' costs is not a conclusion I would presently draw. I do, however, accept that it seems unlikely that the plaintiff would be able to meet the defendant's costs but that is not the relevant test.)
6. As adverted to above, the plaintiff's submissions state that: The lawyers have probably been deceived by the plaintiff. It is the usual case that a plaintiff in a Family Provision Claim is impecunious and will be represented by lawyers who are prepared to wait for payment till the end of the proceedings. If there is no order for costs in favour of a plaintiff in Family Provision claims where the plaintiff is impecunious there will be less lawyers who are prepared to take these cases.
7. The plaintiff says that the Offer of Compromise was sent to her early in the proceeding (and again states that this was at a time when the only instructions were as deposed in the plaintiff's affidavits and the affidavits of her witnesses). Further, it is noted that, even in her affidavits in reply to the defendant's witnesses, the plaintiff's instructions were in accordance with her original instructions.
8. Thus, the plaintiff seeks an order that her costs be paid from the estate for at least the period up to the date of the expiry of the Offer of Compromise (calculated at 5 December 2020).

Defendant's reply submissions

1. The defendant's reply submissions followed without delay the plaintiff's submissions on costs dated 18 May 2022.
2. As to the reliance placed on the fact that the Offer of Compromise was served prior to the issue (by the defendant) of subpoenas, the defendant points out that it is the usual practice that subpoenas are not issued until affidavits have been served (consistent with Practice Note SC Eq 11 at [4] in relation to disclosure), noting that until the plaintiff's affidavit evidence had been served the identity of the recipients of the subpoenas could not be determined. Further, the defendant points out that none of the relevant subpoenas was issued on behalf of the plaintiff; and that the documents obtained under subpoena were the plaintiff's social security, housing department, telephone, credit card and medical records (to all of which the plaintiff could have had access at any time without the need for a subpoena and which information she could have shared with her legal advisers).
3. Further, it is said that the plaintiff's solicitor should have been alerted to the plaintiff's credibility issues by reference to the plaintiff's affidavit sworn on 10 August 2020 in which the plaintiff "corrected" her evidence of 12 June 2020 that she had gone "off the pension". It is noted that this correction was not in response to a subpoena (but, rather, that it was in response to the defendant's request that the plaintiff consent to Centrelink providing her social security history; reference being made in this context to the defendant's submissions at trial at [5.42]).
4. As to the reference to the "inconsistencies" in the plaintiff's evidence, the defendant points out that, while these may only have been discoverable by the plaintiff's lawyers after the issue of the subpoenas, it must be the case that they were known all along to the plaintiff (as indeed seems to be implicitly accepted by the submission here made for the plaintiff to the effect that the plaintiff's lawyers were "probably … deceived" by the plaintiff). The defendant maintains that there is no requirement for a defendant to inform the plaintiff (or the plaintiff's lawyers) of perceived "inconsistencies" in the evidence. Further, the defendant points out that the plaintiff did not recant her evidence following access to the documents produced under subpoena (nor was it suggested that the plaintiff revealed to her legal representatives that they might have been misled and that the case could (or should) be brought to an end).
5. The defendant maintains that the Offer of Compromise was for a "proper and adequate" amount, even when viewed in the context of the plaintiff's (as then yet untested) affidavit evidence; and says that the plaintiff's instructions reflected her greed. It is pointed out that the defendant does not seek personal costs orders against the plaintiff's solicitors but, rather, an order for the defendant's costs to be paid by the plaintiff.
6. As to the lack of any offer of compromise after December 2020, the defendant says that the plaintiff did not herself serve an Offer of Compromise reflecting the strength (and weaknesses) of her case. (I interpose here to note that the argument for the plaintiff that the defendant should have made further offers at a later stage in the proceeding is both unsupported by any authority; nor is it supported by any relevant principle. It is surely a matter for the plaintiff to make her own settlement offer, the defendant's earlier offer having not been accepted - indeed having effectively been ignored by the plaintiff.)
7. The defendant says that inability on the part of the plaintiff to satisfy an adverse costs order is not relevant. (I agree.) Further, in view of the evidence of the plaintiff's solicitor that the plaintiff, if unsuccessful, would only be liable to pay his disbursements, and not Counsel's fees, the defendant says that the making of an adverse costs order consistent with that for which the defendant here contends will not prevent the plaintiff paying the said disbursements. (I agree.)
8. As to the submission that the persons who will suffer will be the legal representatives, the defendant argues that it would be a bizarre conclusion for an unsuccessful plaintiff to "escape" a costs order but for the defendant who successfully prepared and defended the claim to have to pay costs to the solicitors for the plaintiff when those solicitors were "probably deceived" by their client or failed properly to scrutinise the evidence of their client.
9. As to the argument raised with respect to the effect of such an order on the ability of impecunious plaintiffs to obtain representation to pursue a claim, the defendant says (among other things not necessary here to repeat) that "[t]he problem is not that impecunious plaintiffs will not be given an opportunity to pursue a case but that greedy plaintiffs reject more than adequate Offers of Compromise thinking they will always do better at the hearing".
10. As to the submission that the plaintiff's lawyers were probably deceived, reference is made to the evidence of the plaintiff in cross-examination at the hearing (at T 109.18-27) in which the plaintiff referred to her long friendship with her Counsel and to the effect that her Counsel "knows I'm not a liar, she knows I'm not a crook ... I have very old friends who trust and believe me, it's not just fly by night …". The defendant asks, rhetorically, why (if the plaintiff's lawyers were unable to identify the weaknesses of the plaintiff's case up to judgment), the defendant should pay for their work.
11. As to the time at which the Offer of Compromise was sent, the defendant says that this was when the plaintiff's case was at its strongest. The defendant points to the principal reasons and notes that, even if the plaintiff's submissions had been accepted and an order for provision made, the amount that I indicated I would have considered appropriate would still have fallen far short of the offer. It is submitted that this demonstrates why the offer should have been accepted. The defendant says that there is no evidence that the plaintiff's lawyers ever sought instructions to accept the offer; or that they gave advice to the effect that the offer should be accepted. Further, it is noted that the plaintiff's submissions (in referring to her reply affidavits being in accordance with her original instructions) make clear that access to the material produced under subpoena had no effect on the plaintiff and her lawyers.
12. In summary, the defendant says that the defendant was more than generous at an early stage in trying to settle the case; and the defendant resists any order for the plaintiff's costs.

Determination

1. The applicable principles on the exercise of the statutory costs discretion are well-known. There is a broad discretion pursuant to s 98 of the Civil Procedure Act, which must be exercised judicially (see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22] per Gaudron and Gummow JJ) and having regard to the overriding statutory mandate contained in the Civil Procedure Act for the conduct of litigation in this Court. Costs orders in civil litigation are well recognised as being compensatory, not punitive, in nature (see Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59; and Ohn v Walton (1995) 36 NSWLR 77).
2. The general rule (see r 42.1 of the UCPR) is that costs follow the event. However, and relevantly, for present purposes, special costs orders are warranted in certain circumstances, including where the offer of compromise procedure under the UCPR has been validly invoked. Rule 42.15A of the UCPR deals with the position where a valid Offer of Compromise has been made by the defendant and is not accepted by the plaintiff (as I have indicated above).
3. In order to enliven the discretion to make special costs orders by reference to the rejection of an Offer of Compromise, it is necessary that the offer in question amounts to a genuine offer of compromise (see Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] per Handley and Basten JJA, with Beazley JA, as Her Excellency then was; see also Hancock v Arnold (No 2) [2009] NSWCA 19 at [23] per Ipp, McColl and Basten JJA; Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8] per Basten JA (with whom Santow JA and Young CJ in Eq, as his Honour then was, agreed); Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23] per Santow JA (with whom Bryson JA and Stein AJA agreed)).
4. It is important to recognise the public policy considerations that underlie the special costs order regime - see Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 (Maitland Hospital v Fisher); Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA (with whom McColl and Campbell JJA agreed). See also the decision of Beazley JA, as Her Excellency then was, in Commonwealth v Gretton [2008] NSWCA 117).
5. In Maitland Hospital v Fisher at 724 the objects of the rules of court as to indemnity costs were identified as including: 1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court; 2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and 3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation.
6. Under UCPR Part 42 Division 3, there is a distinction between Offers of Compromise and Calderbank offers. A party who fails to better an offer of compromise is liable to pay indemnity costs from the date of the offer unless the court otherwise orders (UCPR r 42.13-42.15). Thus, with offers of compromise there is a presumption that indemnity costs will be awarded. Whereas, with Calderbank offers, the discretion to make a special costs offer is enlivened where a Calderbank offer has been made and the final judgment is no more favourable than the offer and its rejection was unreasonable. The question of reasonableness in the rejection of an offer, which factors into the Court's discretion to decline to award indemnity costs (under UCPR r 42.15A), is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances (see King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11]).
7. In the present case, there is no doubt that the offer comprised a genuine element of compromise (it provided for the payment of a not insubstantial sum in circumstances where, if the offer had been accepted, the plaintiff would have received a party/party costs order in her favour in accordance with the UCPR). It was incumbent on the plaintiff to give proper consideration to the strengths and weaknesses of her case in assessing whether to accept that offer. The fact that subpoenas had not yet been issued by the defendant (and hence documents had not yet been produced that called into question various of the assertions that the plaintiff had made in her affidavit evidence) is not to the point. Moreover, this effectively assumes that the plaintiff's representations were little more than the mouthpiece of their client and able to rely on no more than her word as to what had occurred.
8. The plaintiff knew of the relevant matters that would ultimately count against her case (even if she did not appreciate the import of those matters) (namely, that the relationship had not been of long term duration; that, at the time of the deceased's death, she was not living with the deceased and therefore there might be a question as to the status of the relationship at that time; the circumstances in which the relationship had come to an end; and that the deceased had made significant provision for her during their relationship). The plaintiff's lawyers should also have known those matters and have been in a position to offer advice as to the strength and weaknesses of the case; and hence the reasonableness of the offer.
9. True it is that the plaintiff maintained that she was in a position of significant need; she blamed one or more of the deceased's children for the break-up of her relationship with the deceased (indeed she accused one or more of them of elder abuse); and she maintained that the deceased wished to provide her with a property in Paddington. However, it must have been appreciated by her legal representatives that the claim was being defended and that the plaintiff's factual assertions were or might well be challenged. If the plaintiff's legal advisers chose to take the plaintiff at her word when taking instructions from her as to the claim, without testing that evidence themselves, then that is hardly a matter the responsibility for which ought lie at the feet of the defendant (or at the cost of the deceased's estate).
10. Moreover, the purpose of costs orders is not to ensure that a party's legal representatives will be paid; it is to compensate the relevant party for costs that have been incurred in the conduct of litigation in which there has been a relevant successful "event".
11. The position in the context of family provision claims is, I accept, more nuanced than in many other kinds of case (in that, commonly, the expectation of prospective applicants is that an applicant's costs will be borne out of the estate even where the applicant may not succeed or may only partially succeed in the claim for provision - hence my reference in the principal judgment to the usual kind of order in this type of claim). However, as Hallen AsJ (as his Honour then was) has made clear in Harkness, it cannot be assumed that this will be the case. Moreover, the position here is complicated by the fact that the plaintiff was an eligible person only by reference to s 57(1)(e) which required her to establish "factors warranting", which she did not do.
12. I do not accept that the making of an order that the plaintiff pay the defendant's costs (by reason of the rejection of the Offer of Compromise on a partial indemnity basis) will have the "floodgates" effect foreshadowed in the plaintiff's submissions. I would hope that it would instead have the salutary effect that proper consideration will be given to Offers of Compromise of this kind in future.
13. While I remain of the view that the conduct of the plaintiff (in giving, at times admittedly false evidence on aspects of the matter and being prone to exaggeration) was so unreasonable in all the circumstances, as, of itself, to this warranted an order disentitling her to costs or requiring her to pay the defendant's costs (if, for example, the position in Leary v NSW Trustee and Guardian (No 2) [2017] NSWSC 1226), in my opinion there is no reason not to apply the consequence that would ordinarily follow from rejection of a valid offer of compromise.

Order

1. For the above reasons, I order as follows: 1. Order that the plaintiff pay the defendant's costs of the proceeding assessed on the ordinary basis up to and including 6 November 2020 and thereafter on the indemnity basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 May 2022