Marquis v McNamara

Facts

1. The principal asset of the estate was the property. The parties were in dispute about its value, but quite properly reached an agreement as to its value for the purposes of the litigation. However, that says nothing about what value it might actually have had or achieved around the time of either offer, or what it will be sold for when that eventually occurs.
2. The first offer was an offer of compromise made on 5 March 2024 under the UCPR and in the relevant Supreme Court form: The defendant makes an offer of compromise as follows: The defendant allows 40% of the net estate of the Late Alfred Marquis to be distributed to the plaintiff by way of family provision. The orders proposed by the defendant for disposal of the plaintiff's claim against the defendant and the estate of the Late Alfred Marquis are: 1. An order pursuant to s 59 of the Succession Act that the plaintiff receive by way of provision from the estate of the late Alfred Marquis a sum equivalent to 40% of the net proceeds of the estate. 2. An order that the amount is payable within 7 days from the settlement for the sale of the property of the late Alfred Marquis, situated at 79 Albert Street, Nowra. 3. An order that the plaintiff's costs be met from the estate, as agreed or assessed on the ordinary basis. 4. An order that the costs of the defendant, calculated on the indemnity basis, be paid from the estate. 5. An order that "net proceeds" includes the cost of obtaining probate, and the cost of these proceedings, including all costs related to the sale of the property mentioned herein. This offer of compromise is open until 19 March 2024 at 4 p.m This offer of compromise is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005.
3. Somewhat ironically given the difficulty which has arisen about the first offer, on 13 March 2024 Craig's solicitor wrote to Mr McNamara asking for an extension of the period of the offer to enable Craig to consider further evidence that was due to be filed. That request was rejected.
4. The second offer was made by letter dated 18 March 2024 unqualified by any limitation of the kind seen in Calderbank offers: We have been advised by one of the beneficiaries, Nicholas Marquis, that the family has reached an agreement in this matter. Please confirm that your client will settle for 60% of the net estate, and that each of the sibling grandchildren will receive 10% thereof. A further condition is that your client bear his own costs. Clearly the estate is a long way from finalisation, with the probate still to be granted and the administration, including sale of the house, to be completed. We will draft the agreement if that is in order. As plaintiffs, please advise the court of the agreement. We suggest the deed can be finalised even though the probate is yet to be granted.
5. Mr Glissan submitted, and the Court accepts, that this was an open offer notwithstanding its somewhat peremptory terms. While some criticism could be made of it because it did not specify a date for acceptance, that potential problem (and its status as an offer) was cured by a further email from Mr McNamara's solicitor on 26 March 2024: We made what we thought was an excellent offer of 60% of the net estate to your client in this matter, parties to pay their own costs, on 18 March 2024. Full benefit of the offer would be gained were we to receive a reply before considerable expenses are incurred in the preparation of multiple affidavits. We would appreciate a reply before COB on Thursday 28 March.
6. Strictly this should be treated as a new offer incorporating the letter of 18 March 2024 and adding the date for acceptance, but nothing really turns on this. Any concern about the reasonableness of the short period of time for acceptance between 26 and 28 March 2024 is overcome by the fact that on 27 March 2024 the second offer was rejected on behalf of Craig in a without prejudice letter which made a counteroffer. I also add that because of the context of offers being exchanged at the time and that it is an open offer, I have no difficulty in accepting that it was intended to be relied upon as to costs, even though it does not say so in terms.

Consideration - Offering a percentage of the estate

1. The Court accepts Mr Locke's submission that both offers are inherently uncertain because they make an offer in terms of a percentage of the estate. This conclusion can also be expressed as a finding (which the Court makes, to the extent relevant) that rejection of both offers was not unreasonable given that uncertainty. Either basis is why the Court would otherwise not give effect to the offers in the exercise of its discretion.
2. In Curtis v Curtis [2024] NSWCA 136 Leeming JA (with whom Mitchelmore JA and Basten AJA agreed) said: "130. These grounds do not arise. But it may be doubted that it was appropriate to make provision in terms of a percentage of the net proceeds of sale of the home, rather than in a fixed amount. The primary judge made no finding as to the needs of either Brock or Blake, and no finding as to what the net proceeds of sale of the home would be (or indeed when the sale might occur). All this calls into question whether the approach adopted was one which complied with s 59(2). It is one thing to say that a fixed amount of money should be ordered by way of provision because that amount is the provision which "the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made"; it is another to say that the amount ought to be a fraction of the net proceeds of a sale when the timing and price and associated costs of that sale are unknown (there is no reason to think that the $50,000 estimate would be accurate). This was the point made by McDougall J in Bouttell v Rapisarda [2014] NSWSC 1192 at [96]: To make provision by way of a share, the value of which can only be ascertained until after realisation of all the estate's assets, runs the very real risk of under-providing (or over-providing) for [the applicant's] needs. 131. There may be cases where an approach similar to that adopted by the primary judge will be appropriate. But there were practical difficulties in this case, because the house had been damaged in a flood, and it seemed likely that a better price would be achieved if rectification work were first undertaken, leading to a question as to how the cost of such work should be borne. Even so, it does not follow that allocating 40% of the net proceeds of sale by way of orders for family provision in favour of Blake and Brock was appropriate. An alternative approach in a case such as the present, where the sale of the deceased's home is inevitable, is for the sale to take place before a final order for family provision is made."
3. I express my respectful agreement with Leeming JA's observations. In my view, there is a real question (which for the reasons set out in [18] to [26] below it is not necessary for me to determine) whether, as a matter of statutory construction, an order expressed as a percentage of the value of an estate would be "such order for provision" within the meaning of s 59(2) of the Act. Arguably that bespeaks an order for a fixed or specific asset (most commonly a specific sum of money or property such as the family home), especially when read with s 65 of the Act (as it would have to be). For example, could it be said that an order for a percentage of the estate after sale of the property was "specified … future property" (my emphasis; see s 65(2)(d) of the Act)?
4. Whether such an order can be made is especially relevant in relation to the first offer because an offer of compromise "must identify…the proposed orders for disposal of the claim": UCPR Pt 20 r 20.26(2)(a)(ii). That cannot be an order which the Court has no power to make. In any event, even if it were possible to make such an order, in my experience it would be a rare case where that could sensibly be done.
5. Furthermore, an essential element of any kind of offer is that it is sufficiently certain for a party to know what it will receive as a result of its acceptance. At the end of the day, in family provision cases that is almost inevitably an amount of money or a specific residence or both.
6. In this case, as in many family provision cases, there was a dispute over the value of the property. As I have already observed, the fact that the parties agreed on that value for the purposes of the hearing says nothing about what the property might have in fact achieved if sold either at the time of the offers or as it will now be sold in the future. In that situation, a party cannot be said to be acting unreasonably in not accepting an offer where it has no certainty as to the precise amount of money it will receive as a result of the acceptance of that offer.

Consideration - The first offer does not comply with the Rules and this cannot be overcome

1. It was common ground that, in any event, the first offer did not comply with the UCPR. To meet that deficiency, Mr Glissan applied for the Court to exercise what he contended was its power to abridge the time fixed for the acceptance of the first offer so that it would comply with the UCPR.
2. This submission requires consideration of two provisions.
3. First, the first offer does not comply with UCPR Part 20 r 20.26(5): (5) The closing date for acceptance of an offer-- (a) in the case of an offer made two months or more before the date set down for commencement of the trial--is to be no less than 28 days after the date on which the offer is made, and (b) in any other case--is to be such date as is reasonable in the circumstances.
4. There was no dispute that the first offer did not comply with subrule (a), such that it had to be open "no less than 28 days after the date on which" it was made. It was expressed to be open only for 14 days.
5. The second provision is UCPR Part 1 r 1.12: Extension and abridgment of time 1.12 Extension and abridgment of time (1) Subject to these rules, the court may, by order, extend or abridge any time fixed by these rules or by any judgment or order of the court. (2) The court may extend time under this rule, either before or after the time expires, and may do so after the time expires even if an application for extension is made after the time expires.
6. There are two difficulties with Mr Glissan's application.
7. First, while neither counsel nor those assisting me in the time available have been able to find an authority on this point, in my respectful opinion there is a real question whether the provision for the closing date for acceptance of an offer expressed "to be no less than 28 days" after a particular date answers the description of "any time fixed by these rules". This is because there is a plausible argument that "any time fixed by these rules" (my emphasis) refers to a specific date or period (e.g. "within 28 days"). A provision that something is to be open no less than a particular period of time says nothing about how long it is to be open for other than specifying a minimum period, otherwise leaving it to the offeror to fix the period for which the offer would be open. Mr Glissan submitted to the contrary, but it is not necessary for me to resolve this for the next reason.
8. Second, even if the Court had a discretion to vary UCPR Part 20 r 20.26(5)(a) in relation to the first offer, it would not do so in the exercise of that discretion. That is because the scheme of offers of compromise depends on parties being certain as to their effect.
9. But for an overriding discretion to order otherwise, offers of compromise are made on the basis that the UCPR provide, and parties understand, that a certain consequence will follow if a better outcome than the offer is not achieved. It would be inimical to that certainty, which is an important part of the offer of compromise scheme, to open up the possibility that a party may have to take into account the risk that a non-conforming offer could, months or years later, suddenly become a conforming offer by reason of the exercise of the Court's discretion in relation to periods of time.

Consideration - The second offer is uncertain

1. Quite apart from the difficulty created by making an offer in terms of a percentage of the estate, the second offer is uncertain in at least two other respects.
2. First, it will be recalled that Deborah obtained a specific legacy of $20,000 under the will. The second offer gives no indication as to what was to happen to that second legacy. The reference to "the family has reached an agreement in this matter" is ambiguous in terms of whether or not Deborah was part of "the family" which had come to the agreement. Given that Deborah was the mother of one of Craig's children and also enjoyed a close relationship with Alfred after she divorced Craig (as is demonstrated by the fact that she received her specific legacy), it would certainly be open to read "family" as referring to Deborah.
3. Second, that ambiguity is compounded by the fact that no explanation is given to the term "the net estate". That is in contrast to the care taken in the first offer to set out what was meant by "net estate" (see [7] above).

Consideration - The provision order took costs into account

1. Finally, it is well understood in the family provision jurisdiction that the outcome on costs may be different to that in other adversary proceedings if the Court has taken into account the question of costs in coming to its conclusion as to the amount of provision to be ordered. This is such a case. The usual costs outcome was expressly considered (see principal judgment [64] and [73]) in arriving at an award of modest additional provision in a small estate. It would undermine the benefit of that order for Craig if either of the special costs orders were made. That is in and of itself a sufficient reason, were no other reason available, for the Court to exercise its discretion by making the usual costs order in preference to any special costs order.

Consideration - Two other matters

1. There are two other submissions made by Mr Glissan to which I should refer.
2. First, it was submitted that while it was neither an offer of compromise nor a Calderbank letter, the Court should still take into account the first offer in favour of making a special costs order. Mr Glissan relied on the decision of the Court of Appeal in Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188 that a non-compliant offer of compromise could take effect as a Calderbank offer if the circumstances or its terms indicated that was intended.
3. There are two reasons why the Court rejects that submission.
4. First, Mr Glissan, with respect correctly, accepted that in accordance with Whitney, the first offer could not take effect as a Calderbank offer. The same logic means it cannot take effect as an open offer, because there is nothing in its terms or the circumstances that would enable the Court to conclude that it was intended to be taken into account on some other basis if it was ineffective as an offer of compromise.
5. Second, even if the submission was correct, it would not overcome the problem of uncertainty which the Court has found attends both offers.
6. Mr Glissan's other submission was a more general one made by reference to various dicta concerning the role of fairness in the disposition of costs. He drew attention, for example, to what was said by Hodgson JA (with whom Mason P agreed) in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]: "Costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of costs."
7. The submission is not accepted because the way in which that dictum was deployed paid no regard to its second clause. Fairness was to be determined "having regard to what the court considers to be the responsibility of each party for the incurring of costs".
8. The Court rejects the submission insofar as it was intended to invoke "fairness" as an unqualified or freestanding test. It was submitted that the Court should take into account the attitude of the parties to settlement, the totality of offers made between them and what, in the light of those matters, might have been thought to be a "fair" outcome on costs having regard to the Court's determination of the proceedings.
9. The Court is not entitled to depart in an unprincipled way from the starting point that costs should follow the event, even if it may be recognised that otherwise the Court has a general discretion as to costs fettered only by the constraints that it must be exercised judicially and for a proper purpose. To abandon well understood principles as to costs in favour of a general, and perhaps idiosyncratic, test of fairness would not only be a departure from a principled approach to the question, but would undermine the capacity of parties and their legal advisers to be able to make a reasoned assessment of likely outcomes when considering commencing, continuing or settling litigation.

Conclusion

1. For these reasons, the Court will make the orders upon which the parties have agreed together with what I have described as the usual order.

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