Lucas v Salman

Should costs follow the event or should each party pay their own costs?

1. In support of their submission that the plaintiffs still "lost" more than they "won", the defendants relied upon a detailed analysis of how they submitted the case could be viewed in terms of work devoted to the various issues. This extraordinarily detailed analysis was summarised in the defendants' written submissions: "8. To further illustrate why it is appropriate that the plaintiffs pay their own costs up until the date of the defendants' offer, and in summary (but addressed more fully in Annexure A to these submissions), so far as the preparation of the case was concerned: a. pleadings: 8 of the 31 paragraphs (about 25%) of the Plaintiffs' Second Further Amended Statement of Claim went to the estoppel claim; the balance (16 of 22, or about 75%) went to claims upon which the plaintiffs did not succeed; b. affidavit evidence: plaintiffs i. about 10% of the plaintiffs' affidavit evidence went to the estoppel claim; and ii. about 90% of the plaintiffs' affidavit evidence went to other issues upon which the plaintiffs did not succeed; c. affidavit evidence: defendants i. about 3.5% of the defendants' affidavit evidence went to the estoppel claim; and ii. about 96.5% of the defendants' affidavit evidence went to other issues upon which the plaintiffs did not succeed; d. subpoenas: the two subpoenas issued by the plaintiffs sought documents that went almost entirely to the family provision claims, and the documents produced in response took up a substantial portion of Section 3 of the Court Book; e. written submissions: i. the plaintiffs' written submissions were 85 paragraphs, and 20 pages, long. Of that, 17 paragraphs (or about 20%) addressed matters relating to the successful estoppel claim and the balance (about 80%) related to claims upon which the plaintiffs did not succeed; and ii. the defendants' written submissions were 15 pages long, and just over 3 pages of that related to the estoppel claim. About 80% of the defendants' written submissions related to other issues, upon which the plaintiffs did not succeed. 9. In summary, so far as the hearing was concerned: a. oral evidence: about 34.3% of the oral evidence was devoted to the estoppel claim, and the balance of about 65.7% of the time spent in oral evidence went to the family provision claims (in particular, the size of the estate and the respective financial positions of the parties and beneficiaries); and b. oral submissions: about 57% of the closing oral submissions related to the estoppel claim (albeit some of that was spent on the broader estoppel claim against the whole estate and notional estate, and an insurance policy), meaning about 43% of closing oral submissions related to issues upon which the plaintiffs did not succeed."
2. The defendants drew attention to my own recent decision in Brady v Mikan (No 2) [2022] NSWSC 1320 (Brady) and the even more recent decision of Robb J in Perry v Perry (No 2) [2022] NSWSC 1462 (Perry) as examples of cases where the Court made differentiated costs orders by reference to issues upon which a partially successful plaintiff had failed.
3. For the plaintiffs, Mr Armfield submitted that the claims in contract and estoppel were put as alternative claims to the family provision claims in relation to George's and Jill's estates. He submitted that the contract and estoppel claims involved substantially the same evidence because the facts which were relied upon to establish the estoppel claim were coextensive with those which gave rise to the contract claim.
4. Mr Armfield's written submissions included: "4. The evidence which was relevant to the contract and estoppel claims was also relevant to the family provision claims. The representations made by George are relevant to the family provision relief - Vukic v Grbin [2006] NSWSC41. Similarly, the evidence as to family relationship between the plaintiffs and George (both before Jill's death and after Jill's death) and Jill were relevant both to the contract, estoppel and family provision claims. By way of illustration, the family relationship is important in assisting the Court in determining whether representations were made. Similarly, evidence of the defendants' financial circumstances was relevant both to the family provision and estoppel claims because not only did it show their financial position, it also showed how the monies had been distributed from George's estate, including how his superannuation was applied."
5. The parties accepted that costs were ultimately in the discretion of the Court. Whether a differentiated costs order should be made is a matter of both discretion and impression. Impression will be the product of both: 1. An understanding of the separate causes of action that were advanced and the evidence adduced in relation to each of them; and 2. The judge's overall assessment of the extent of overlap (if any) in how those issues were presented and unfolded in the course of the hearing.
6. In Brady, a relatively clear delineation of the issues and evidence, and their presentation, presented itself which enabled the Court to have confidence that a differentiated costs order could both rationally be made (matters of impression still involving rationality) and would do justice between the parties. The same appears to have been the case in Perry.
7. However, I do not agree that these proceedings fall into that category. The Court accepts Mr Armfield's submissions recorded in [11] and [12] above. I accept that some of the evidence relating to the family provision claims (most obviously, evidence about the plaintiffs' current financial circumstances) was only relevant to the family provision claims. However, that evidence was not sufficiently substantial or time consuming to be sufficient, either of itself or in combination with other pieces of evidence which with the benefit of hindsight proved irrelevant to the outcome, to displace the usual result mandated by UCPR r 42.1.
8. It follows that, subject to the Court giving discretionary effect to the Offer, costs should follow the event.

The Offer

1. There was no dispute between the parties about the legal principles which applied to the Offer, recognising that the Offer was a matter which went to the Court's discretion and did not raise any automatic presumption as to the outcome. The essential questions were whether the plaintiffs had achieved a result no less favourable than if they had accepted the Offer and, if not, whether the Offer was a real compromise and whether it was unreasonable for the plaintiffs to have rejected the Offer in the circumstances.
2. The hearing was fixed to commence on Monday, 1 November 2021.
3. The Offer was dated and sent on Friday, 22 October 2021 at 2.47pm to the plaintiffs' solicitor. It included: "We refer to the Hearing scheduled to commence on 1 November 2021. Having considered the evidence served by the plaintiffs, we are of the opinion it will be open to the Court to find, on the balance of probabilities: 1. There was no contractual promise from the deceased to the plaintiffs in the manner alleged by the plaintiff's [sic]; 2. The plaintiff's [sic] failed to take the steps needed to receive the superannuation of the Late Jill Salman, and although they were appointed executors under her Estate, failed to take steps in relation to that estate; 3. The plaintiff's [sic] stole personal property from the deceased, and severed their relationship with him. If the Court finds, on balance, the plaintiffs agreed to loan their late mothers [sic] superannuation of $200,000 to the deceased on the condition it was to be repaid to them on the death of the deceased, their claim would be limited to $200,000 plus interest. We are instructed the defendants offer to resolve these proceedings on the basis that within 28 days, the defendants will pay $400,000 inclusive of interest and costs to the plaintiffs on the basis that: 1. The parties are to enter into a Deed in which the parties agree to release each other from all claims relating to the Estate of the Late George Salman and the Estate of the Late Jill Salman; 2. The parties are to file consent orders in which: a. The plaintiff's [sic] claims are dismissed. b. There are no orders as to costs such that the parties will each pay their own costs of the proceedings. This offer is made in a genuine attempt to resolve these proceedings without the need for further litigation including the costs of the hearing over 4 days. The offer is open for acceptance until 5pm on Thursday, 28 September [sic] 2021, and will not be available after that time."
4. While Mr Armfield briefly drew attention to the obvious typographical error referring to the closing date as 28 September rather than 28 October, he did not ultimately suggest that anyone was in doubt that the Offer was open until Thursday, 28 October 2021. If there had been such doubt, I would have expected immediate clarification to have been sought on behalf of the plaintiffs.
5. On Monday, 25 October 2021 at 9:44am, the plaintiffs' solicitor wrote to the defendants' solicitor on a "without prejudice" basis: "We estimate our all up costs to date to be $145,000 inclusive of GST and we estimate our costs at the end of the four day hearing to be $220,000 inclusive of GST."
6. On Friday, 29 October 2021 (the day after the Offer expired), the plaintiffs put a counter-offer which included: "Our legal costs have increased substantially as a result of the preparation of the Court Books in accordance with Justice Kunc's protocol. As such, our current legal fees to date are approximately $170,000 inclusive of GST and disbursement [sic]."
7. Having set out those facts, it is first necessary to deal with some mathematical issues: 1. Looking at the position at the commencement of the Offer period it appears that both at the time and now that the Judgment Sum is known, the plaintiffs would have done better to accept the Offer than proceeding to judgment: 1. The Court has held that the amount of George's superannuation to which the plaintiffs are entitled is $211,892.84. As at 22 October 2021 there was no dispute that the interest to which the plaintiffs would have been entitled at the date of the Offer was $25,520.02. This makes a total of $237,412.86. On the assumption that the plaintiffs' costs were $145,000 at the commencement of the Offer period (see [21] above), the amount to which the plaintiffs were theoretically entitled inclusive of costs was $382,412.86 ($237,412.86 + $145,000) as compared to the Offer of $400,000 (what might be termed a net gain of $17,587.14 had the Offer been accepted). 2. The plaintiffs have actually obtained judgment for $246,192.49 (inclusive of interest). On the assumption that the plaintiffs' costs were $145,000 at the commencement of the Offer period (see [21] above), this gives a total of $391,192.49 ($246,192.49 + $145,000) as compared to the Offer of $400,000 (what might be termed a net gain of $8,807.51 had the Offer been accepted). 1. Looking at the position on the last day the Offer was open, it appears that both at the time and now that the Judgment Sum is known, the plaintiffs have done better by rejecting the Offer and proceeding to judgment: 1. The Court has held that the amount of George's superannuation to which the plaintiffs are entitled is $211,892.84. As at 22 October 2021 there was no dispute that the interest to which the plaintiffs would have been entitled to at the date of the Offer was $25,520.02. This makes a total figure of $237,412.86. On the assumption that the plaintiffs' costs were $170,000 at the end of the Offer period (see [22] above), the amount to which the plaintiffs were theoretically entitled inclusive of costs was $407,412.86 ($237,412.86 + $170,000) as compared to the Offer of $400,000 (what might be termed a net deficit of $7,412.86 had the Offer been accepted). 2. The plaintiffs have actually obtained judgment for $246,192.49. On the assumption that the plaintiffs' costs were $170,000 at the end of the Offer period (see [22] above), this gives a total of $416,192.49 ($246,192.49 + $170,000) as compared to the Offer of $400,000 (what might be termed a net deficit of $16,192.49 had the Offer been accepted).
8. The mathematics which I have set out meant that the Court was confronted with a submission from the plaintiffs that they had achieved a result no worse than the Offer and a submission from the defendants that the plaintiffs would have done better to accept the Offer. On this point, the Court concludes: 1. Because the Offer was open for a period of time, the appropriate way to compare the plaintiffs' position had they accepted the Offer with the position they finally achieved is to determine the position that would have pertained if the Offer had been accepted on the last day on which it was open. On that basis, the plaintiffs have achieved a result no less than had they accepted the Offer and the Offer is irrelevant to the exercise of the Court's costs discretion. 2. If (1) is wrong, because of the variable outcome depending on when the Offer might have been accepted, the Court is not satisfied that the defendants - who bear the onus as the applicants for a special costs order - have demonstrated that the plaintiffs have achieved a result worse than if they had accepted the Offer. On this alternative basis, the Offer also is irrelevant to the exercise of the Court's costs discretion. 3. If both (1) and (2) are wrong, then on the assumption that the Court can take the Offer into account in exercising its costs discretion, the fact of the variable outcome satisfies the Court that the Offer was so "line ball" that it was not unreasonable for the plaintiffs to have rejected the Offer. That conclusion is fortified when it is appreciated that the Offer was open over the week before the hearing when much attention was focussed on preparation (including of the court books) and some evidence was still to be served (see [28(2)] below).
9. For completeness I will refer to some of the other submissions the parties made on the question of reasonableness in rejecting the Offer.
10. The defendants submitted that it was unreasonable on the part of the plaintiffs to have rejected the Offer because: 1. The conversations alleged to form the contract never included sufficiently certain terms to amount to a contract or to establish an intention to be legally bound, and even if they had, a contractual claim for damages against the estate would have yielded no benefit to the plaintiffs because there was nothing left in the estate and no tracing claim was pleaded; 2. Other than insofar as the estoppel claim related to George's superannuation, the balance of the claim was always too vague and uncertain; 3. It should have been obvious that the plaintiffs would not have been able to establish that there were factors warranting an order for provision from George's estate, given how tenuous their relationship was with him; and 4. The plaintiffs' family provision claim against Jill's estate was six years out of time that failure having been based upon legal advice and that, in any event, their financial positions would not have warranted the relief beyond the amount of the superannuation.
11. I do not accept any of the reasons advanced for the defendants set out in the preceding paragraph. They are, with respect, too much the product of hindsight rather than what would have been a reasonable view of their prospects open to the plaintiffs to take into account at the time the Offer was open.
12. Mr Armfield also advanced a number of other reasons why he submitted it was not unreasonable for the plaintiffs to have rejected the Offer. The Court finds that two of those reasons provide persuasive additional support for the conclusion which it has reached about the reasonableness of the plaintiffs' rejection of the Offer: 1. The form of the Offer did not include a submission to a judgment or provide any security to secure performance of the obligation under the deed of release which the Offer contemplated. In the absence of such security, the plaintiffs would have been forced to institute fresh proceedings to sue on the deed of release. 2. The Offer was made before some essential evidence from the defendants was available to the plaintiffs. The Offer was made prior to the receipt of the affidavit of Paul Salman of 2 November 2021 which set out his circumstances and only one day after receipt of Joanne Lees' affidavit of 21 October 2021. Furthermore, the defendants did not produce documents going to the circumstances of Jodie, Joanne, Paul and George's estate and notional estate until the first day of the hearing, 1 November 2021. Until the provision of all of the information, the plaintiffs were not in a position properly to evaluate their status as competing claimants on George's estate and notional estate.

Conclusion

1. For these reasons, the Court was satisfied that the usual outcome of costs following the event had not been displaced, and ordered the defendants to pay the plaintiffs' costs accordingly.

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