McLean v Cree (No 2)

Category: Costs

Parties: Scott Roderick McLean (Plaintiff)
Jodie Cree in her capacity as executor of the estate of the late John Henry Cree (Defendant)

Representation: Counsel:
M Gaven (Plaintiff)
D Liebhold (Defendant)
Solicitors:
Halyburton Legal (Plaintiff)
Turner Freeman Lawyers (Defendant)

File Number(s): 2024/83197

Publication restriction: Nil

JUDGMENT

1. I delivered judgment in these proceedings on 30 May 2025: McLean v Cree [2025] NSWSC 577 (the principal reasons). I ordered pursuant to s 59 of the Succession Act 2006 (NSW) that further provision in the sum of $75,000 should be made for the plaintiff. I further ordered that the interest which the deceased held in the Malabar property and which was distributed by the defendant, as executor of his estate, to herself as sole beneficiary should be designated as notional estate for the purpose of satisfying the order for further provision.

2. These reasons deal with the question of the costs of the proceedings.

Plaintiff’s submissions

3. The plaintiff submits that he has been successful in the proceedings and that costs should follow the event. He further submits that he should be entitled to his costs on an indemnity basis for the whole of the proceedings or, alternatively, from the time of an offer made on 29 April 2025.

4. As to his general claim to indemnity costs for the whole of the proceedings, the plaintiff submits that the defendant unreasonably refused the plaintiff’s requests for reimbursement in relation to the repair of the lake Cathie property well prior to the commencement of the proceedings. The plaintiff points to paragraph [28] of the principal reasons where I expressed the view that his requests were reasonable. The plaintiff submits that if the defendant had acceded to those requests earlier then the proceedings could have been avoided altogether.

5. The plaintiff relies in the alternative on an offer sent to the defendant on 29 April 2025 (the Offer). The Offer was attached to a letter, headed ‘without prejudice save as to costs’, sent from the plaintiff’s solicitors, Halyburton Legal, to the defendant’s solicitors, Turner Freeman. The Offer was explicitly made pursuant to rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’). It was also expressed to be an offer made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93.

6. The terms of the Offer were (a) an order pursuant to s 59 of the Succession Act in favour of the plaintiff in the amount of $70,000 and (b) the plaintiff’s costs to be paid on the ordinary basis out of the estate.

7. The plaintiff submits that he has achieved a more favourable outcome than that proposed in the Offer. He submits that pursuant to rule 42.14 of the UCPR, he is entitled to costs on the indemnity basis from 29 April 2025.

8. The plaintiff also submits that any costs order in his favour should be made against the defendant personally. That submission is made with reference to s 95 of the Probate and Administration Act 1898 (NSW):

95 Right to follow assets

Nothing contained in section 92, 93 or 94 prejudices the right of any beneficiary, creditor or other person who has a claim in respect of the assets of the estate of a testator… to follow those assets or any part of those assets into the hands of the persons or any of the persons among whom those assets or that part may have been distributed or who may have received those assets or that part.

9. The plaintiff points to the reasons of Handley JA in Melbourn v Stephenson [2002] NSWCA 403 at [13] where his Honour said in obiter dicta:

“Section 95 of the Wills Probate and Administration Act preserves the direct right of action in equity against beneficiaries when the right against the legal personal representatives has become barred, pursuant to earlier sections, by distribution without notice following appropriate advertisements for claims. This section provides that nothing in those sections ‘prejudices the right of any beneficiary, creditor or other person who has a claim in respect of the assets of the estate of a testator or an intestate’ to follow those assets into the hands of the persons to whom they have been distributed. The plaintiff may have had a right of action against the beneficiaries after judgment as a creditor or before judgment as an ‘other person who has a claim’”.

10. Finally, and in light of what I said in paragraphs [70]-[87] of the principal reasons, the plaintiff submits that I should make notional estate orders in relation to any costs order, in addition to a personal order against the defendant.

Defendant’s submissions

11. The defendant submits that the Court should depart from the ordinary rule that costs follow the event and that the appropriate order is that each party bear its own costs. The defendant’s various submissions in support of this position are as follows.

12. First and foremost, the defendant submits that the principal reasons ‘rest fundamentally’ on the circumstance that the plaintiff made a contribution to the Lake Cathie property, this being a circumstance of the kind described in s 60(2)(h) of the Succession Act. This is despite, the defendant submits, the plaintiff at all times having advanced his claim as a ‘global’ one, centred on the argument that the deceased had failed in his moral duty to make adequate provision for the plaintiff in his will. The defendant says that, prior to the hearing, the fact that the plaintiff had made a contribution to the Lake Cathie property was only one of several factors addressed by the plaintiff.

13. The defendant submits that she had ‘no notice at any time that the plaintiff’s claim was based on s 60(2)(h)’ and that the case was never put in that way. I was referred to transcript references where counsel for the plaintiff submitted that her client’s claim was broader than an exercise in seeking ‘compensation’ for work done on the Lake Cathie property. In this respect, the defendant submits that the case is analogous to Bryant v Quinn [2022] NSWCA 163. The defendant also submits that whilst the evidence relied upon by the plaintiff at the hearing did contain details about the property repairs, the defendant ‘could not readily discern (at least up to the point of the plaintiff’s outline submissions filed on 16 May 2025) that the evidence would be relied upon for a submission under s 60(2)(h)’.

14. The defendant puts this argument in a slightly different way as well. She submits that she in fact achieved a measure of success in the proceedings, in the sense that ‘but for the single matter of the repairs to the Lake Cathie property, the plaintiff’s claim would have failed.’ This is a reference to my reasons at paragraph [48] of the principal reasons where I explained that if the plaintiff had not made significant contributions to conserving the deceased’s estate by doing the repairs to the Lake Cathie property, I would not have been persuaded that all of the other circumstances were a sufficient reason to conclude that an order for further provision should be made.

15. The defendant also says she had some success in that the amount for which the plaintiff contended in her opening submissions was $150,000, twice the amount of the $75,000 awarded. The defendant notes also that the plaintiff had not quantified his claim prior to the written submissions filed before the final hearing.

16. The defendant also relied on evidence from her solicitor, Mr Goldberg. Mr Goldberg swore an affidavit dated 11 June 2025 in which he explained his rationale for having made various forensic decisions in the course of the litigation, including his decision not to seek production of documents relating to the expenditure on and in relation to the Lake Cathie property which the plaintiff claimed to have incurred. Mr Goldberg says that if he had been given notice that the plaintiff’s claim was being put ‘solely – or even chiefly – under s 60(2)(h)’ he would have taken different steps in the proceedings.

17. The defendant made no submissions regarding the Offer dated 29 April 2025.

What costs order should be made?

18. Rule 42.14 of the UCPR is as follows:

42.14 Where offer not accepted and judgment no less favourable to plaintiff

(1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim:

(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b) assessed on an indemnity basis:

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

19. As mentioned, the defendant made no submissions in relation to the Offer. She did not suggest that it did not comply with UCPR r 20.26 or that it did not allow a reasonable time for acceptance. I find that the Offer complied with the rules.

20. Because the plaintiff has done better in the principal reasons than what was proposed in the Offer, it follows from UCPR r 42.14 that the plaintiff is entitled to his costs on an indemnity basis from 30 April 2025, unless I order otherwise.

21. In Croghan v Blacktown City Council (2019) 100 NSWLR 757*;* [2019] NSWCA 248 Meagher JA (with McCallum JA and Simpson AJA agreeing) addressed the circumstances where a judge might ‘order otherwise’ at [10]-[13]:

“[10] There was not much attention, either before the primary judge or in this Court, to the principles which apply to the exercise of the discretion conferred by r 42.15 to ‘order otherwise’.

[11] It is convenient to start with the statement of those principles by Mason P in Morgan v Johnson (1998) 44 NSWLR 578 at 581-582:

(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: Maitland Hospital [(1992) 27 NSWLR 721] (at 725-726); Hillier [(1995) 36 NSWLR 414] (at 421, 431).

(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital (at 724).

(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party: NSW Insurance Ministerial Corporation v Reeve [(1993) 42 NSWLR 100] (at 102); Hillier (at 422). This is because, from the time of non-acceptance ‘notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise’: Maitland Hospital (at 724); see also Hillier (at 420).

(4) Lying behind the rule is the common knowledge that ‘litigation is inescapably chancy’: Maitland Hospital (at 725). For this reason, the ordinary provision is expected to apply in the ordinary case: ibid NSW Insurance Ministerial Corporation v Reeve (at 102-103). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: NSW Insurance Ministerial Corporation v Reeve (at 102).

…

(5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind: Maitland Hospital (at 725-726). Reasons must be given for ‘otherwise ordering’: Hillier (at 419); Quach [(Court of Appeal, 15 June 1995, unreported)].

[12] In ordinary litigation, where the presumption that costs follow the event applies, a significant consideration in determining that an order ‘otherwise’ is justified is whether in the circumstances the offeree acted reasonably in rejecting the offer, although it is recognised that it may not be sufficient to justify such an order that the offeree reasonably believed at the time that it was justified in rejecting the offer: see New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 at 102; The Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172 at [15], [18], [31]; Leach v Nominal Defendant (QBE Insurance (Australia) Limited) (No 2) [2014] NSWCA 391 at [48]; Aukuso v Tahan (No 2) [2018] NSWCA 302 at [60] – [62]. A similar approach is taken to the exercise of the costs discretion in the face of the rejection of an informal offer, although in such a case there is no presumption that the offeree who does not accept, and does not obtain a more favourable judgment, will pay indemnity costs from the date of the offer: Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25]; Miwa at [8]; and Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [32]–[36], [60].

[13] In Fairall v Hobbs (No 2) [2017] NSWCA 133, where it was accepted that the presumption in r 42.15 might be displaced ‘by demonstrating that the rejection of the offer was reasonable’, the Court described the matters relevant to such an assessment as including:

…where the full parameters of the dispute are still uncertain at the time of the offer: Equity 8 Pty Limited v Shaw Stockbroking Limited [2007] NSWSC 503 at [42]; or where the offeror’s case changes after the offer: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [85]; or where all relevant evidence has not been served before the offer: Vale v Eggins (No.2) [2007] NSWCA 12 at [22].”

22. Although not put this way, I will proceed on the basis that the defendant submits that I should order otherwise within the meaning of UCPR r 42.14(2).

23. The defendant’s primary argument is that the principal reasons were determined solely, or at least primarily, on the basis of the plaintiff’s contributions to the Lake Cathie property, being a relevant consideration under s 60(2)(h) of the Succession Act. The defendant says that the plaintiff never put their case in a way that centred around s 60(2)(h) and that the defendant could not have predicted the ultimate way in which the proceedings played out.

24. Inherent in the whole of the defendant’s submissions on costs is the proposition that the plaintiff succeeded on the basis of the circumstance described in s 60(2)(h) but that the defendant succeeded on the other circumstances described in s 60(2). I do not accept this premise. It does not reflect the way ss 59 and 60 of the Succession Act operate generally. Nor does it reflect my reasons set out in the principal judgment.

25. The Succession Act contemplates that in making a family provision order, the Court will have regard to all relevant circumstances disclosed in the evidence, including but not limited to circumstances described in s 60(2). Generally speaking, the task involves identifying whether particular circumstances existed, making findings in relation to the nature of those circumstances, and then determining whether, in the light of those findings, it is appropriate to make an order under s 59. It will sometimes be true to say of a party that they have ‘succeeded’ in relation to the existence or non-existence of a particular circumstance. However, it is incorrect to say that a plaintiff who has succeeded in demonstrating that the Court should make a family provision order has succeeded on any particular paragraph of s 60(2) or, indeed, on any particular circumstance at all.

26. The point may be illustrated by reference to the facts of this case. As I said at paragraph [48], I would not have been willing to make a family provision order in favour of the plaintiff if he had not made any contribution to the conservation of the deceased’s estate. That is because, when all of the other circumstances were taken into account, those other circumstances would not have led me to conclude that it was appropriate to make a family provision order. But it by no means follows that the only consideration that led to the making of the order was the fact that the plaintiff made a contribution to the conservation of the deceased’s estate. That fact alone would rarely if ever justify the making of a family provision order and it was far from the only relevant circumstance here. The plaintiff could not have succeeded by showing only that he made a contribution to conserving the deceased’s estate. He succeeded because his contribution to conserving the deceased’s estate, when combined with all of the other circumstances most notably the historical relationship of step-father and step-son and the relationship between them created by the plaintiff’s mother’s will (s 60(2)(a)), led me to conclude that a family provision order was appropriate.

27. I also do not accept that the defendant was not on notice of the extent to which the plaintiff relied on s 60(2)(h). The plaintiff’s affidavit sworn 3 April 2024 contained the usual list of headings corresponding to the circumstances described in s 60(2). One of the headings corresponded precisely to paragraph (h). Under that heading, the plaintiff said:

“52. The deceased failed to maintain the Lake Cathie Property in accordance with the conditions of the right of residence as set out in Schedule 1 of my mother’s last Will. As a result, I paid in excess of $100,000 for repairs to the Lake Cathie Property on the deceased’s death.”

28. Other evidence, both from the plaintiff and his wife, expanded on this very same point. I also note that the defendant responded to this evidence with evidence of her own.

29. There can be no doubt that the existence of the s 60(2)(h) circumstance was central to the plaintiff’s claim and that this was apparent right from the very beginning of the litigation.

30. There can also be no doubt that the defendant appreciated the centrality of this circumstance to the plaintiff’s case. In fact, a central feature of the defendant’s own submissions was that the plaintiff’s reliance on his contributions to the Lake Cathie property meant that the proceedings were an abuse of process, because the plaintiff was in truth prosecuting the case to recover the loss involved in renovating the Lake Cathie property. That submission demonstrates that the defendant well understood that the plaintiff relied on this circumstance but that she altogether failed to appreciate the significance of it in the context of ss 59 and 60 of the Succession Act.

31. It is hard to know what more the plaintiff could have done to telegraph his reliance on the fact that he contributed to the conservation of the deceased’s estate by fixing up the Lake Cathie property. The point was in his evidence, and not as a mere throwaway point. It was central to the way the parties themselves addressed the issue before the litigation was commenced. The fact that the defendant made a forensic decision not to pursue this issue in discovery and that, through her counsel, she did not challenge the evidence in relation to this issue at the hearing, is not something that can be laid at the plaintiff’s feet.

32. Nor does this case bear any resemblance to Bryant v Quinn. That was a case in which the successful point was one identified for the first time by the trial judge and where the point, gratefully adopted by the plaintiff, took the matter well outside the pleaded case.

33. Ward P said at [81]-[82]:

“[81] It is apparent from a review of the transcript that the primary judge was grappling with the seeming injustice inherent in the proposition that the respondent had advanced funds to permit the appellant to meet the legal costs of the Supreme Court Proceedings but had not been reimbursed to the extent that those legal costs were subsequently recovered by the appellant pursuant to the costs orders made in those proceedings. That concern is understandable. However, with respect to the evident concern of the primary judge to resolve the controversy before him having regard to what might be seen to be the overall merits of the case, it is clear that the primary judge impermissibly went beyond the pleaded claim in circumstances where the appellant had staunchly resisted any departure from the pleadings and the respondent had (for whatever reason) chosen not to seek leave to amend his pleaded claim in order to encompass an alternative claim from that which had been pleaded.

[82] The fact that the appellant had the opportunity to make submissions as to the issue is not to the point (nor is the fact that the appellant did not seek an adjournment during final closing submissions to address the new case being advanced in argument with the primary judge). The respondent had seemingly made a forensic decision (notwithstanding the difficulties occasioned by his evidence in cross-examination) to rest his case on the pleading as to a loan agreement repayable on demand (the only apparent expansion of that claim being the submission to the effect that the loan agreement was not made until the conclusion of the Supreme Court Proceedings). The acceptance by the respondent in the course of closing submissions of the propositions put by the primary judge as to the concept of a conditional gift as emerging from Chaudhary v Chaudhary was reminiscent of the ‘enthusiasm of a shipwreck finding an unexpected life-raft on a stormy sea’ (to borrow from the words of Kirby J in dissent in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 at [78]).”

34. That is not this case. The passages of the transcript to which the defendant referred me on this issue demonstrate that it was counsel for the plaintiff, not me, who pressed the point that the plaintiff’s contribution to the deceased’s estate by fixing up the Lake Cathie property was an appropriate matter to take into account in making a family provision order. It was counsel for the plaintiff who drew the Court’s attention to s 60(2)(h) and not the other way around. For example, on the morning of the first day of the hearing, echoing the defendant’s own submissions, I pointed out to counsel for the plaintiff that the case seemed to turn to a large extent on the fact that the plaintiff did work on the Lake Cathie property for which he may have an alternative remedy. I challenged counsel on the question of whether those circumstances disclosed a proper basis for making a family provision order. The following exchange occurred:

“HIS HONOUR: If he’s got a claim, the fact of having spent so much money to fix up the property does seem to be a fairly significant factor in his case.

GAVEN: It’s not the only factor, your Honour.

HIS HONOUR: No, but so far as the financial situation is concerned, it’s pretty big, and that’s a matter that seems to me to be something that he could just sue the estate for. I don’t know why he didn’t. Your submissions tell me that he elected not to. You say he elected not to.

GAVEN: I don’t think there’s - I think that was a flourish that I should withdraw because the evidence doesn’t say that.

HIS HONOUR: Okay. Even so - well, I’m going to need some assistance with that at some point over the next three days, understanding why that’s a matter that gives rise to financial need. He’s got another remedy. Where’s the need within the meaning of s 60?

GAVEN: …On the contribution front, that’s something as well, your Honour, that can be taken into account under s 60(2)(h), and before or after the deceased person’s death. So, your Honour, I think that that neatly covers this, as your Honour has identified, unusual scenario, but a scenario where, in fact, it does amount to a financial contribution at the end rather than throughout... In effect, the defendant has the benefit of him not spending the works throughout the 19-year - doing the works and maintaining the property throughout the 19-year period.”

35. This passage of the transcript, and the other passages to which the defendant referred me, do not make out her submission that the basis on which the case was decided was lit upon only by the Court at trial.

36. I am unable in these circumstances to accept that there is a proper basis to order otherwise than that the defendant pay the plaintiff’s costs in the manner prescribed by UCPR r 42.14.

37. As to the plaintiff’s claim to indemnity costs for the whole of the proceedings, it does not follow from the fact that I considered the plaintiff’s original requests for reimbursement to be reasonable (see paragraph [28]) that he should have his costs of the entire proceedings on the indemnity basis. Once the proceedings were commenced, it was reasonable for the defendant to defend them. I note that it was open to the plaintiff to make an offer on the terms of the 29 April Offer at any time.

38. It is however appropriate for the notional estate orders made on 30 May 2025 to be extended to accommodate the order for costs. As with any notional estate orders, it is important that such orders not be made without first considering the matters which the legislation requires the Court to consider. To that end, I note the following.

39. At paragraphs [70] to [87] of the principal reasons, I explained why it was appropriate in my view for notional estate orders to be made for the purpose of satisfying the order for further provision. As I pointed out, this is a case in which the estate has been fully distributed. The property of the estate was comprised of cash and an interest in the Malabar property, all of which has been distributed to the defendant in her personal capacity as sole beneficiary under the deceased’s will.

40. The circumstances that, in my view, made it appropriate to make notional estate orders to accommodate the payment of the family provision order equally make it appropriate for the notional estate orders to be expanded to accommodate the plaintiff’s costs of the proceedings. Such an order will further interfere with the defendant’s reasonable expectations in relation to the Malabar property, which has been her home for decades (s 87(a)), however the failure to make such an order would involve a substantial injustice to the plaintiff, who otherwise has no ability to recoup the costs of this litigation from the estate. The limited evidence as to the value of the deceased’s interest in the Malabar property satisfies me that an order designating that interest as notional estate to the additional extent required to meet costs will be appropriate (s 89).

41. I note that the Court may order that the costs of proceedings be paid out of the estate or notional estate or both, in such manner as the Court thinks fit: s 99. Notwithstanding the plaintiff’s submission that I should also make a costs order against the defendant in her personal capacity, it is appropriate in this case for the costs order to be made against the defendant in her capacity as executor of the deceased’s estate and also to order that the costs be paid out of the notional estate. That is because the value of the deceased’s half interest in the Malabar property, being the property now held by the defendant and which I have already indicated should be designated as notional estate, appears to me to be sufficient to cover the costs of the further provision as well as the plaintiff’s costs. I will however also make an order against the defendant as executor, because in the ordinary course the executor should be liable for the costs in any event.

42. I did not make orders on 30 May. I instead invited the parties to bring in short minutes of order to give effect to my reasons. Those short minutes are yet to be received but they should take into account these further reasons, with the intent that they will provide for the defendant to pay the plaintiff’s costs, such costs to be paid on the ordinary basis up to and including 29 April 2025 and on the indemnity basis thereafter. The short minutes should also contemplate that the costs order be made against the defendant in her capacity as executor, as well as out of the notional estate.

43. I will then make orders in chambers giving effect to my principal reasons as well as these reasons on costs.

Orders

44. I direct the parties to bring in short minutes of order to give effect to these reasons, and my principal reasons, by 5:00pm on Monday 14 July 2025.

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