Pang v Fong

Settlement negotiations

The evidence that is now before the Court concerning the history of settlement negotiations between the parties is as follows.
On 16 October 2013 the defendants made a settlement offer to Mr Pang in which they would pay him $200,000 by 31 January 2014. The offer was exclusive of the plaintiff's costs, and was in addition to the sum of $50,000 already paid to Mr Pang.
The offer also referred to a property at 8 Caroline Street, Kingsgrove, which the father had transferred to the parties to these proceedings as well as Ms Edna Pang as tenants in common in equal shares in about 1987. As I have explained in par 50 of the principal judgment, since mid-2012 the other co-owners have been trying to persuade Mr Pang to cooperate in the sale of that property, which the parties agreed is worth $800,000. Mr Pang has refused to cooperate because he took the view that the distribution of assets under his father's will was not fair.
In a subsequent letter written by the defendants' solicitor on 23 October 2013 the solicitor referred to Mr Pang's refusal to cooperate in the sale of the Caroline Street property, and suggested that Mr Pang was being unreasonable and intransigent in declining to accept the offer that had been made and to cooperate in the sale of the property.
Mr Pang served an offer of compromise under UCPR r 20.26(8) on 19 November 2013. There has been no submission by the executors that the offer of compromise was ineffective. In substance Mr Pang agreed to accept payment of $300,000; his costs on the ordinary basis would be paid out of the estate, and the executors costs would be paid on the indemnity basis out of the estate. Mr Pang would actually receive $250,000, after allowing for the $50,000 that he had already received. The offer of compromise did not deal with the issue of the sale of the Caroline Street property.
On 30 January 2014, after a telephone conversation between the solicitors for the parties, Mr Pang's solicitor made a without prejudice offer to the executors that he would accept the sum of $225,000, in addition to the amount of $50,000 already received, plus payment of Mr Pang's costs (I infer on the ordinary basis). The solicitor advised on behalf of Mr Pang that he would agree to sell the Caroline Street property subject to the executors accepting his offer.
The executors' solicitor advised on 20 February 2014 that the executors did not accept Mr Pang's 30 January 2014 offer.
On 5 May 2014 Mr Pang's solicitor made another offer by letter, which was expressed to be in accordance with Rule 20.26, that he would accept $215,000, allowing for the $50,000 that he had already received, giving a total of $265,000. Mr Pang's costs as agreed or assessed would also be paid by the executors. Mr Pang therefore reduced his offer made on 30 January 2014 by $10,000. This letter also did not mention the sale of the Caroline Street property.
None of the offers that were made was accepted by the party or parties to whom the offer was made.
The effect of the family provision order that I foreshadowed in the principal judgment will be, assuming allowance is made for the $50,000 already received by Mr Pang; requiring Mr Pang to meet half of the shortfall of the expenses of the estate, being $6088.38; and allowing for the whole of the parties' legal costs of $134,172.42 been paid out of the estate, is that Mr Pang will receive an additional amount of approximately$400,000. That is plainly substantially more than the equivalent amount that Mr Pang offered to accept in each of the offers that he made to settle his family provision claim.

Effect of failure to accept offer of compromise

The question is whether the failure by the executors to accept any of Mr Pang's offers, particularly the first offer of compromise that he made, should have the effect that they should be ordered to bear the costs of the proceedings personally.
It is to be noted that Mr Pang did not submit that he should be entitled to his costs on the indemnity basis after the executors ought to have accepted his first offer of compromise, rather than on the ordinary basis, but instead he submitted that the executors should be ordered to pay their own costs.
Section 99(1) of the Act provides: (1) The Court may order that the costs of proceedings under this Chapter in relation to the estate or notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit.
Section 98(1) of the Civil Procedure Act 2005 (NSW) provides: (1) Subject to rules of Court and to this or any other Act: (a) costs are in the discretion of the Court, and (b) the Court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
UCPR r 42.1 provides: Subject to this Part, if the Court makes any order as to costs, the Court is to order that the costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs.
The Court of Appeal in Chapple v Wilcox [2014] NSWCA 392 made the following observations concerning how the provisions set out above may operate in family provision applications. Basten JA said: [25] The costs of the trial and the appeal should be considered separately. With respect to proceedings under the repealed Family Provision Act, this Court accepted that s 33(1) of that Act conferred a broad discretion as to costs payable out of the estate, not constrained by the general rule that costs follow the event: Diver v Neal [2009] NSWCA 54; 2 ASTLR 89 at [75]-[78]. If the new Act applied, Diver v Neal said that s 99(1) of the Succession Act provides a general power, not confined by the considerations identified in s 33: at [81]. [26] Neither s 99, nor its predecessor, apply to costs as between party and party, as opposed to costs to be paid out of the estate. However, in Singer v Berghouse [1993] HCA 35; 67 ALJR 708 at 709, col 1, Gaudron J said (in dealing with an application for security for costs): Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the [Family Provision Act] which, in s 33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. 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 … . And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate. [27] Whether or not an unsuccessful applicant should be allowed to litigate without expense to the estate will depend on a variety of circumstances. There is always a discretion in the Court when making an order pursuant to s 98 of the Civil Procedure Act 2005 (NSW). The discretion conferred on the Court by that provision is subject to the rules of Court (s 98(1)) and thus to r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), which provides that costs will follow the event unless it appears to the Court that some other order should be made. That rule is not disapplied in relation to family provision orders. Nor should applicants for such orders have any expectation that, as a general rule, the discretion will be applied so as to exempt them from liability for costs incurred by an estate in the case of an unsuccessful application. In some cases applicants will already be beneficiaries of the estate and may thus have some incentive to ensure that the costs of litigation are kept within tight bounds. However, that is not always the case. Where an applicant is entirely unsuccessful, an order that he or she should pay the costs of the estate may well be the appropriate order.
On the same subject Barrett JA said: [119] Section 98(1) of the Civil Procedure Act 2005 (NSW) provides that, subject to the rules of Court, the Civil Procedure Act itself and any other Act, costs are in the discretion of the Court. Rule 42.1 of the Uniform Civil Procedure Rules states that costs should follow the event unless it appears to the Court that some other order should be made as to the whole, or any part, of the costs. Rule 42.20(1) provides that if the Court makes an order for the dismissal of proceedings then, unless the Court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed. [120] Section 99(1) of the Succession Act makes special provision as follows in relation to proceedings under Chapter 3: The Court may order that the costs of proceedings under this Chapter in relation to the estate or notional estate a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit. [121] Similar provision was formerly made by s 33 of the Family Provision Act 1982 (NSW), but with a proviso that allowed costs to be paid out of the estate in certain cases only if the person claiming costs had been successful in proceedings under the Act or special circumstances made it just and equitable that the estate bear the costs. Among the cases dealt with by the proviso were those in which the applicant for provision had "eligible person" status only because of dependency on the deceased at some time or as a grandchild who had been at some point a member of the deceased's household. No similar restriction operates in relation to s 99 of the Succession Act. [122] In Singer v Berghouse [1993] HCA 35 ; 67 ALJR 708 at 709, Gaudron J said in relation to cases arising under the former legislation: Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s 33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. 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. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate. [123] In McCusker v Rutter [2010] NSWCA 318 (a case under the former legislation), this Court made it clear that the question of costs in family provision matters is to be determined by reference to the discretion conferred by s 98 of the Civil Procedure Act 2005 (NSW), but with the added discretion made available by the special provision also available to be deployed.
Gleeson JA at [150] agreed with the observations made by the other judges.
The Court of Appeal was not required to consider how the provisions in the Rules concerning offers of compromise should be applied in this context, particularly where the offer of compromise is made by the plaintiff to the defendant executor.
UCPR r 42.14 provides: (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.
There is a authority for the proposition that, where the offer of compromise is made by a defendant executor, and not accepted by the plaintiff, the Court will apply the equivalent rule to UCPR R 42.14, which is applicable to offers of compromise made by defendants (UCPR r 42.15) in the same way as that rule would be applied in any other case that did not involve an application for a family provision order: see Friend v Brien (No 2) [2014] NSWSC 614 per White J; and Bradley Bates v Robert Henry Cooke (No 2) [2014] NSWSC 1322 per Kunc J. Hallen J held in Walsh v Walsh (No 2) [2013] NSWSC 1281 that, in a similar fashion, the Court should give effect to Calderbank offers made by defendant executors to the plaintiff. I take these authorities to have the effect that the cost rules concerning offers of compromise and Calderbank offers rejected by plaintiffs apply in family provision cases, and are not excluded by any special consideration relevant to this type of case.
Mr Pang's submission appears to assume that, if the terms of UCPR r 42.14 apply to an executor who has rejected a plaintiff's offer of compromise, it will follow that the executor will be obliged to pay the executor's own costs personally. However, the rule is not concerned with the executor's own costs; it deals with the order that the Court should make against the defendant in respect of the costs that the defendant should pay to the plaintiff. Sub-rule (2) speaks of the plaintiff being "entitled to an order against the defendant for the plaintiff's costs".
Accordingly, the application of UCPR r 42.14 cannot have the effect desired by Mr Pang. It can only have the result that, instead of the Court making the usual order in family provision applications in favour of a successful plaintiff, that the plaintiff's costs be paid out of the estate on the ordinary basis, it may be appropriate that the plaintiff's costs after the making of the offer of compromise should be paid out of the estate on the indemnity basis.
Should the Court apply UCPR r 42.14 against a defendant executor in the same way that it would apply UCPR r 42.15 against a plaintiff who has applied for the making of a family provision order? This is not a straightforward question to answer. It is arguably more complicated than the reverse case where the offer of compromise or Calderbank offer is made by the defendant.
One reason why the application of UCPR r 42.14 in cases where executors reject offers of compromise may not be straightforward is that it is necessary to consider the interplay between s 99 of the Act and the rule.
If UCPR r 42.14 is to be applied in the case of an offer of compromise made by a plaintiff in a family provision application, the effect of sub-rule (2) is that "Unless the Court otherwise orders, the plaintiff is entitled to an order against the defendant for the plaintiff's costs" calculated as set out in the sub-rule. This may give rise to a second reason why the application of the rule may not be straightforward where an executor has not accepted an offer of compromise made by a plaintiff. There may be special considerations that should be taken into account in determining whether the Court should "otherwise order".
The defendant to a family provision application is usually not an ordinary private litigant who is defending the proceedings in his or her own interests. The defendant, as executor, has a positive duty to uphold the will, and to put before the Court the evidence that is available for that purpose, and can be obtained in a way which is proportionate to the value of the estate and the nature of the issues. The executor is the representative of the beneficiaries, who are not usually welcome as parties. The executor's circumstances may range from the case where the executor is entitled to the whole estate under the will, so that in a real way the executor defends the application in his or her own interests, to the case where the executor derives no benefit under the will. In cases where there are a number of beneficiaries, even where the executor is one, the executor will have to represent the interests of the other beneficiaries as well. There may be impediments in the way of the executor unilaterally accepting a compromise offered by the plaintiff, even though the executor has the legal power to do so. Ordinarily the executor would be expected to canvass the views of the beneficiaries, and the executor may be placed in personal jeopardy of legal proceedings if he or she ignores those views. In relation to any particular offer of compromise made by the plaintiff, the beneficiaries other than the executor may not adopt a unanimous response. In many cases executors will have to act in the interests of infant beneficiaries.
This is not the occasion for the Court to attempt to generalise how the interplay between s 99 of the Act and UCPR r 42.14 should occur in all cases where defendant executors do not accept an offer of compromise made by the plaintiff, and the Court subsequently determines that a family provision order should be made in favour of the plaintiff, that is more favourable than the plaintiff was prepared to accept in the offer of compromise. Each case will depend upon its own facts. I do no more than point to the consideration that, if the circumstances do not warrant an order that the executor pay the costs personally (which would be an exceptional course), the plaintiff's costs will be borne by the estate, and thus the beneficiaries under the will. It is possible that there may in some cases be constraints on the ability of the executor to accept an offer of compromise that are relevant to whether the Court should "otherwise order".
In the present case the real protagonists were Mr Pang and Mrs Susan Fong, and the proceedings more closely resembled a claim by a plaintiff against a defendant in the defendant's personal interest than will often be the case with family provision applications. The executors were almost entirely acting in the interests of Mrs Susan Fong when they decided how they should respond to the various offers made by Mr Pang.
After the notional estate is reinstated to Mrs Susan Fong, as the various beneficiaries who received payments of $50,000 have agreed to do, she will hold the full amount of the notional estate, less the $50,000 distributed to Mr Pang. In practical terms, the family provision order that the Court will make, as well as any order for payment of Mr Pang's costs, will have to be paid by Mrs Susan Fong.
In this case it is appropriate that UCPR r 42.14 be applied, so that Mr Pang should receive his costs on the indemnity basis after the date of his first offer of compromise. It is proper that the amount that Mr Pang would otherwise have received from the notional estate of his father should be increased by the difference between his costs on the indemnity basis, and the ordinary basis, after that date. In the special circumstances of this case that will mean that Mrs Susan Fong has to bear the difference. I will formulate the orders to be made by the Court accordingly.
I will make the following orders: 1. Pursuant to section 91(2) of the Succession Act 2006 ("the Act") administration of the estate and notional estate of the late Chang Shang Pang ("the deceased") be granted to Susan Wai Wah Fong (the first defendant) and Eva Fong (the second defendant) for the purposes only of permitting the application of the plaintiff for provision out of the said estate and notional estate to be dealt with. 2. Pursuant to section 79 of the Act, the Court designates as Notional Estate one-half of all monies held standing in the joint bank accounts in the names of the deceased and the first defendant, as at the date of the deceased's death, being $582,975.73 (the "Notional Estate Sum"). 3. Pursuant to sections 59 and 99 of the Act, section 98 of the Civil Procedure Act 2005, and Uniform Civil Procedure Rules 42.1 and 42.14, in lieu of the provision made for him, further provision is to be made for the plaintiff in the form of a legacy as to the whole of the balance of the Notional Estate Sum, which is inclusive of the plaintiff's costs, adjusted as follows: 1. $50,000, being the sum already received by the plaintiff from the first defendant, shall be deducted; 2. $6088.38, being one half of the shortfall of the expenses of the estate as paid by the first defendant, shall be deducted; 3. the costs and expenses of the defendants of the proceedings on the indemnity basis shall be deducted; and 4. the difference between the plaintiff's costs and expenses of the proceedings from 20 November 2013 on the indemnity basis and his costs and expenses from 20 November 2013 on the ordinary basis shall be added. 1. The legacy referred to in order 3 is to be paid by the defendants within 28 days of the date of these orders failing which interest on the said legacy is to run after the 28 days at the rate prescribed by section 84A of the Probate and Administration Act 1898. 2. The legacy referred to in order 3 is to be paid to Davis Kwok, solicitor of Summit Legal, the solicitor for the plaintiff, to be held on trust for the benefit of the plaintiff for the purpose of purchasing real estate in the name of the plaintiff in order to secure his accommodation, and for the purpose of paying his legal fees. Such portion of the legacy, if any, as remains thereafter is to be transferred to the plaintiff for his use absolutely.
I also note the following matters that have been agreed between the parties: 1. The application was made within time. 2. The plaintiff is an eligible person. 3. The plaintiff has served a notice identifying all other eligible persons on the first and second defendants at the time of serving the summons. 4. The defendants have filed a copy of the affidavit required by SCR Schedule J. 5. The defendants have served notices of the plaintiff's claim on any person who, in the administrator's opinion, may be an eligible person.

At a glance

Court

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Judgment (9 paragraphs)

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Legislation Cited (4)

Cases Cited (9)

Cited By (2)