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[2011] VSC 275
Supreme Court of Victoria
2011-06-22
GARDINER As J
Original judgment source is linked above.
FAMILY PROVISION - Costs - whether unsuccessful plaintiff should be ordered to pay costs of the estate - plaintiff ordered to pay costs.
1 The plaintiffs in these two proceedings made application under Part IV of the Administration and Probate Act 1958 ("the Act") for provision out of the estate of their late mother, Margaret Carn.
2 On 4 March 2011, I delivered judgment. The plaintiff in proceeding No. S CI 2009 5569, Peter Moerth, was unsuccessful in his application. The plaintiff in proceeding No. S CI 2010 4323, Paul Moerth, was given further provision in the form of a legacy of $25,000. In addition, he was given a life interest in a property to be purchased from the proceeds of sale of the home owned by his mother at Buckingham Street in North Richmond.
3 Towards the end of my judgment, I indicated that I would hear the parties on the question of costs after they had had an opportunity to consider my reasons. I expressed the tentative view that, even though Peter had not been successful in his application, the costs of the proceedings should be paid by the estate.
4 In these reasons, I will continue to refer to the respective plaintiffs by their first names only for reasons of convenience and without intending any disrespect.
5 On 29 March 2011, a further hearing took place at which the parties made submissions as to what orders should be made for costs in these proceedings. Ms Sparke, counsel for Paul, contended that Peter's claim had no reasonable prospects of success and that he should pay the estate's costs of the proceeding. Mr Phillips of Counsel, who appeared on behalf of Peter, submitted that Peter should have his costs from the estate and that he should not be liable in any way for the estate's costs.
6 Mr Barton of Counsel, who appeared on behalf of the estate, did not appear at the hearing for costs but filed a written submission. In that submission, it was indicated that the beneficiaries other than Paul, who were Peter's children, were content with an order that the costs of both proceedings be borne by the estate. Paul's co-executor, Mrs MacBean, stated however that, unless Paul took the same view as the other beneficiaries (which he did not), she would put no submission on the issue because of such conflicting views. Mr Barton indicated that, because Paul was separately represented, Paul had had no input into the submissions made on behalf of the estate.
7 It was accepted by all parties that the costs of Mrs MacBean, the second defendant in Peter's proceeding and the defendant in Paul's proceeding, whose only involvement in the proceedings was as an executor of the estate of Mrs Carn, should be paid out of the estate on a trustee basis. I agree that such an order should be made. Mrs MacBean also submitted on behalf of the estate that in the event that Peter was ordered to pay any part of the estate's costs in his proceedings and he failed to do so, that there be an order that the costs of the defendant executors be had and retained out of the estate.
Consideration of the authorities on the question of costs
8 Sub-sections 97(6) and (7) of the Act make specific provision in respect of costs in applications under Part IV. Those sub-sections provide:
(6) Subject to sub-s (7), the Court may make any order as to the costs of an application under s 91 that is, in the Court's opinion, just.
(7) If the Court is satisfied that an application for an order under s 91 has been made frivolously, vexatiously or without reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.
9 Section 97(6) and its precursors[1] have been in the Act for nearly 100 years but s 97(7) was only introduced in 1997.
10 I did not understand Ms Sparke to contend that Peter's claim was made frivolously or vexatiously. Rather she says that the claim was made and maintained in circumstances where it had no reasonable prospects of success and even if it did, it is just that Peter pay his own costs and those of the estate on an application of the principle of costs following the event.
11 There is relatively little recent authority in this State on the question of what orders should be made as to costs following an unsuccessful application by a plaintiff for provision under Part IV of the Act. Before turning to a consideration of the circumstances in these proceedings, I regard it as useful to review the case law in this and the other States which deal with the issue, including whether such costs should come from the estate or whether they should follow the event. Although the Court of Appeal has said that judges should refrain from providing elaborate reasons when disposing of the question of costs,[2] I consider that it is appropriate to do so in these circumstances. The analysis which follows reveals that there is a difference in the approach taken in the various jurisdictions.
12 In an application for security for costs prior to the hearing of the High Court appeal in Singer v Berghouse,[3] Gaudron J observed that it is not uncommon in the case of unsuccessful applicants for no order to be made as to costs, particularly if it would have a detrimental effect on the plaintiff's financial position. It might be said that, for most people, an adverse order as to costs will have a detrimental effect on their financial position. The evidence filed and testimony given in the trial of Peter's proceeding revealed that, while he has significant net assets by ordinary community standards, he will probably have to dispose of property in order to meet an adverse order for costs. However, no specific evidence or submission was put on behalf of Peter to the effect that such an order would cause hardship to him in the relevant sense.
The position as summarised in Bowyer would appear to be as follows:
• The Full Court stated that the general rule is that the Court will make no order as to costs where an application is unsuccessful, that is, the unsuccessful applicant will not be liable to pay the costs of the other parties. The personal representatives of the testator will usually be entitled to an order for costs out of the estate.[6]
• The authorities surveyed for the main part did not discuss the principles to be applied or give elaborate reasons and simply noted the order as to costs. In a number of decisions involving unsuccessful applications, no costs orders were made. In Fox v Burvill,[7] the High Court ordered that the costs of the unsuccessful applicant should be paid out of the estate. In the Victorian decision of Krause v Sinclair,[8] Tadgell J decided that the unsuccessful plaintiff should not have the benefits of a costs order out of the estate, however, she was not ordered to pay costs. In that case, the executor's costs were paid out of the estate. In the hearing of the appeal in Singer v Berghouse, the majority in the High Court observed that there is nothing in the legislation which precludes an order for costs against an unsuccessful applicant. In the Victorian case of Re De Feu (deceased),[9] the Court, in exercising its discretion not to order costs against an unsuccessful applicant also considered the effect of an order for costs on the applicant's financial position.
• In the Queensland case of Re Bodeman,[10] a number of plaintiffs succeeded but one failed. It was ordered that the costs of both the successful and unsuccessful plaintiffs be paid out of the residuary estate on a solicitor client basis, Hoare J observing that the deceased had a "strong moral obligation" to the plaintiff whose claim had failed. In another decision of Hoare J, In re Klease,[11] the existence of a strong moral obligation by the deceased in that case was again cited as the basis for an award of costs out of the estate in favour of unsuccessful plaintiffs.
• In the Tasmanian decision of Morse v Morse,[12] Slicer J summarised the position as being that the discretion granted by the statute is wide but not unfettered. The matters to be considered included the merits and reasonableness of the claim, conduct in the proceedings and the size of the estate. Citing Re De Feu referred to above, Slicer J considered that it stood for the proposition that an unsuccessful plaintiff will not be the subject of an order for costs if such an order will have a detrimental effect on his or her financial position.
• In the Victorian decision of Re Sitch (Decd) (No 2),[13] Gillard J stated that the position prior to the introduction of s 97(7) was that if an application failed the plaintiff was not ordered to pay costs. However, Gillard J observed that with the introduction of s 97(7) the Legislature had made it clear that in appropriate cases a costs order could be made against an applicant and the old cases in this regard must be approached with care.
• In Bowyer, the trial judge had ordered the unsuccessful plaintiff to pay the costs of the executors and of certain defendants who were beneficiaries on a party/party basis. The Full Court allowed the appeal on the question of costs as it considered that the circumstances were an instance of "what was on any view a reasonable claim founded on the moral obligation of the testatrix to her daughter, the plaintiff. Even if the claim had failed, it remained a reasonable claim."[14]
14 In Bowyer, the Full Court summarised the position in South Australia at least, as being that generally speaking there will be no order as to costs of an unsuccessful application. The Court may in its discretion make an order in favour of an unsuccessful applicant who makes a reasonable application based on a moral claim or obligation. The cases considered in Bowyer also suggested that the Court may in its discretion order an unsuccessful applicant to pay costs where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the plaintiff had been guilty of some improper conduct in the course of the proceedings, that is, an approach very similar in terms to that of section 97 (7) of the Act.
15 The issue has also been the subject of close consideration by the Supreme Court of New South Wales. In Re Sherborne Estate (No 2); Vanvalen v Neaves[15] one of the applicants for provision was unsuccessful. The Court considered several questions in regard to costs including:
(i) should the "usual costs" rule apply, that is, the costs follow the event so that successful applicants have all their costs and that the unsuccessful applicant will pay the estate's costs;
(ii) should the costs of the successful applicants be capped?
(iii) should no order for costs be made against the unsuccessful applicant?
16 Palmer J considered that, unlike a claim for a liquidated sum such as a contractual debt or even a claim for unliquidated damages for personal injury or future economic loss, a claim under the Family Provision Act was not quantifiable by the parties' legal advisers prior to judgment with anything like the prescience possible in those other types of claims. He stated that when an order is made under the Family Provision Act, a judge is required to consider what provision "ought to be made" for the applicant out of the deceased's estate, which requires a large element of subjective assessment. Different judges would have a variety of views on any particular set of facts. He stated that there is no formula as to what provision ought to be made and no yardstick on which the degrees of measurement are not etched by the judge's own experience of life.
17 Palmer J, in the context of refusing to order indemnity costs against a successful applicant who was awarded less than the amount of a Calderbank offer, observed:[16]
[58] There will be some [Family Provision Act] cases in which the applicant's claim is so unreasonable that the applicant is clearly unjustified in commencing the proceedings let alone prosecuting them to a conclusion. In such a case indemnity costs might well be ordered. There will be many cases in which the applicant only just fails to qualify for further provision before one judge when the same applicant would have only just succeeded in qualifying for provision before another judge. There will be cases in which the applicant obtains an order for further provision which one judge would regard as appropriate, another would regard as generous and a third would regard as niggardly.
18 The trial in Sherborne lasted for five days. By the time the hearing commenced, the costs and expenses incurred by the plaintiffs were approximately $360,000. A further $90,000 was incurred by way of costs in the trial itself. As such, the applicants incurred costs of approximately $450,000. The successful plaintiffs received a total of $360,000 as further provision. The estate's costs were in the order of $205,000. The litigation was described by Palmer J as a family dispute between people of quite modest means and the amounts which the applicants for family provision might have hoped to obtain could never have come anywhere near the $600,000 which was spent on legal expenses in the litigation. The judge wondered whether anything had changed since the situation depicted by Charles Dickens in Bleak House.
19 In Sherborne, Palmer J went on to consider whether the unsuccessful applicant should pay the estate's costs, observing that if the usual rule in litigation was applied, costs would follow the event, that is, the unsuccessful plaintiff would pay the defendant's costs. In Sherborne, the unsuccessful plaintiff's claim failed because she could not establish her status as "an eligible person"[17]. Palmer J observed at [64]:
A decision whether a Family Provision Act claim fails or succeeds produces a black and white result which often belies the fact that the case was borderline and could have gone either way. In the present case, Julia's claim to be an eligible person failed because she was not able to demonstrate sufficient unequivocal dependency on the deceased within the meaning of par (d)(i) of the definition of "eligible person". ... I think it was not unreasonable for Julia's legal advisers to believe that her claim under the Act had some prospects of success.
[65] There is no question but that the usual costs order against Julia would have a severely detrimental effect on her financial position and could well cripple her future prospects in life. Of course, a refusal to make the usual costs order against Julia would have adverse consequences for Grant as well, but the overall effect on his position would not be nearly so severe.
[66] In my view, "the overall justice of the case", to use the phrase of Gaudron J in Singer v Berghouse, leads me to the conclusion that no order for costs should be made against Julia.
20 In another New South Wales decision Moussa v Moussa,[18] Barrett J had decided that the plaintiff's claim for family provision failed on its merits because of a competing greater need of a widow and young child. The plaintiffs seeking further provision were the teenaged children of the deceased by his first wife. Barrett J declined to make an order for costs against the unsuccessful plaintiffs. After referring to the observations made by Palmer J in paragraph [64] of Sherborne extracted in paragraph [19] above, Barrett J observed
That comment is apposite here. At para [29] of the judgment, I said that "It may be doubted whether Therese and Samuel had been left without adequate provision". The possibility that they had been left without adequate provision was acknowledged. I went on to hold that, even if they had been left without adequate provision, I was not satisfied that any provision should be made for them out of the estate. This was basically because there was not enough to go around and that the predominating need was for the house (which was the only asset) to be preserved as a home for the widow and very young child of the widow and the deceased, in company with the widow's other two children. In short, a need to keep a roof over the heads of the widow and the young child outweighed the need to make provision for the older children whose mother was able to provide for them to a reasonable standard. ...
[10] It was by no means unreasonable for the plaintiff's legal advisers to believe that the claim had reasonable prospects of success. Its ultimate lack of success paid attention, in large measure, to the assets and resources available to the mother. In those circumstances I view this case in the same way as Palmer J viewed the situation of the unsuccessful applicant in Sherborne and am of the opinion that "the overall justice of the case" to use Gaudron J's expression, warrants the conclusion that no order for costs should be made against the plaintiffs.
21 In Carey v Robson (No 2),[19] Palmer J again considered the issue of what orders for costs should be made. In that case, the unsuccessful plaintiff had sought an order that her costs be paid out of the estate, alternatively that there should be no order for costs, with each party being left to bear their own costs. Palmer J made reference at length to the decision of the New South Wales Court of Appeal in Nicholls v Hall,[20] where it was observed that courts have recognised that family provision litigation sometimes raises special considerations. The Court of Appeal observed that while adverse costs orders have occasionally been withheld against plaintiffs who have (without misconduct in the proceedings) brought tenable yet ultimately unsuccessful claims under the Family Provision Act, it was said that the "usual rule" in New South Wales, namely that costs follow the event, applied.
22 In Nicholls v Hall, the New South Wales Court of Appeal observed that the practice of not awarding costs against unsuccessful plaintiffs on occasions may have been seen as having some justification based on a perceived desirability of minimising post-litigation conflict in family disputes, the availability in some cases of a significant fund the use of which could alleviate hardship on the losing party, and the circumstance that in some cases the decision involved the exercise of finely balanced discretion about which reasonable minds could differ. The Court of Appeal was informed by counsel and accepted that this was no longer the practice of the Equity Division of the Supreme Court of New South Wales and that what may be termed general costs principles apply to these types of cases.
23 In Carey, Palmer J, after referring to the decisions of Sherborne and Moussa, stated at paragraph [10]:
The circumstances of Marion's case are not remotely similar to those in Re Sherborne or in Moussa v Moussa. In brief, Marion's claim failed because she was already in comfortable financial circumstances even without provision from the deceased's estate. She had been left a provision of $470,000 out of the estate and wished to have more, primarily to advance the prospects in life of her adult, able-bodied children and in order to enhance the rural property of her husband. She and her advisers went to considerable pains to put forward evidence justifying a claim for a total of $3,203,000 out of an estate of $4,985,000 when, as she must reasonably have acknowledged, Alan's moral claim to the testator's bounty was far higher than her own and his financial circumstances were far more precarious and that although he owned rural land of considerable value he was extremely "income poor".
[11] I do not regard Marion's claim as borderline. However, I readily acknowledge that other minds may come to a different conclusion. Marion may have succeeded in her application before another judge, that is the nature of this kind of litigation.
[12] Is the "overall justice of the case", which is to be considered in determining the appropriate costs order, affected by the fact that the testator made far larger provision for Alan than he did for Marion? Although Mr Ellison did not propound, even as a prima facie principle or presumption in family provision cases, the children of a testator should receive equal testamentary treatment, he placed at the forefront of his case the fact that Alan had received far more from the testator than had Marion: ... that circumstance, of course sends a powerful subliminal message and to emphasise it was undoubtedly good advocacy. That children should be treated equally is a normal parental and societal aspiration.
However as the law presently stands, equality of testamentary treatment between children is not, in itself and without more, a foundation for a family provision claim. I cannot, therefore, permit inequality of testamentary treatment in Marion's case affect the "overall justice of the case" for the purposes of the costs order.
Mr Ellison has made no submission that the usual costs order should not be made because it would have severe financial consequences for Marion. This is understandable.
[15] Marion's own costs will be about $210,000. They are far larger than they should be - a matter to which I will return. Alan's costs of both proceedings will be about $204,000. I will assume that this amount will be apportioned roughly between both proceedings. If the usual costs order is made against Marion, she will have to pay her costs and about $102,000 for Alan's costs, a total of about $312,000, although it is highly probable that Alan's costs will be reduced on assessment.
[16] Nevertheless, the evidence suggests that if the usual costs order is made against Marion, neither Marion nor Robert will have to sell assets to pay those costs. Marion's provision of $470,000 out of the estate will be sufficient to pay those costs and she will have a significant amount left for discretionary expenditure.
24 At [20] and following, Palmer J after considering the passage of Bowyer v Wood at [68], summarized in paragraph 13 above, stated:
In South Australia it appears that the present tendency is against applying the usual costs rule in an unsuccessful family provision application. The opposite is the case in New South Wales. I do not know why the same approach to costs orders in family provision cases is not followed throughout Australia but I am not at liberty, nor do I desire, to depart from the current law and practice in this State: it reflects the policy embodied in s 56 of the Civil Procedure Act that litigation must be conducted responsibly and should only be commenced by a plaintiff after careful evaluation of the costs consequences likely to attend failure.
Palmer J went on to order that the unsuccessful plaintiff pay the costs of the proceedings on a party-party basis.
25 In Carey, Counsel for that unsuccessful plaintiff had contended that the defendant had received significant inter vivos gifts and something of a windfall by the terms of the will. Palmer J rejected those submissions and stated at [23]:
[23] ...the basic reason that Rosemary's claim failed [was that] she was already in comfortable financial circumstances even without provision from the testator's estate, had been left a substantial provision out of the estate and wished to have more primarily to advance the interests of her children in their sporting endeavours.
[24] Mr Lovas' two points really come down to a submission that Rosemary received much less from the testator than did Alan. As I have said, that circumstance, in itself and without more, does not justify or support a family provision claim.
26 In my view, there is no basis for contending in this state that there is some special type of principle in applications under Parts IV of the Act that an unsuccessful plaintiff will, as a starting point, be awarded their costs out of the estate. There are, in my view, strong policy reasons for this. They are articulated by Palmer J at [21] of his judgment in Carey where he stated:
Previously, in this State, there was a view held by some practitioners advising a client contemplating a claim under the Testator Family Maintenance and Guardianship of Infants Act (1916) and later the Family Provision Act 1982 (NSW) that there was little risk, and probably a lot to be gained, in making a claim, however tenuous, because even if the claim failed, the claimant would very likely get his or her costs out of the estate; the client would not be out of pocket and the solicitor would receive his or her fee in any event. That approach to family provision litigation in effect, throws the whole burden of costs onto the beneficiaries of the estate. It promoted much wasteful litigation, it was not supported by authority (see Davern Wright "Testator Family Maintenance in Australia and New Zealand" 3rd ed p.176) and it should be recognised, once and for all, as thoroughly discredited.
27 In Victoria, the Court of Appeal in Forsyth v Sinclair (No 2) [21] stated:
"We consider that it is a matter of concern that in many family provision cases, the amount available for distribution amongst the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before the costs get out of proportion. "
28 If a plaintiff, when embarking on a claim under Part IV, considers that there is little risk and much to be gained in making a claim, however weak, because the plaintiff is very likely to get his costs out of the estate, nothing will discourage weak claims from being made. If such a principle applied, lawyers advising such a client could comfortably advise their client to embark on weak claims with the probability that, not only would they not be required to pay the estates costs, their own costs will be paid out of the estate, perhaps even on a solicitor/client basis. This cannot be right. There must be some constraint in the form a principle as to costs which discourages unmeritorious claims being commenced.
29 An executor has to defend such a proceeding and even the most spurious claim will involve expenditure of considerable costs because, absent some extraordinary feature, the estates' costs are routinely paid out of the estate on a trustee basis. S 97(7) of the Act deals with claims which are frivolous, vexatious or do not enjoy reasonable prospect of success. There will be cases where the claim will not meet such a characterization but where it will be "just" that the unsuccessful claimant pay the costs of the estate. If the estate is not recompensed by an order for costs against the unsuccessful plaintiff in such circumstances, the residuary beneficiaries will pay for the costs of that plaintiff commencing a claim to see what offers might emerge to resolve the litigation and, if none do, to proceed to trial and judgment.
30 The situation becomes particularly acute in small estates, where, if such a principle applied, half or perhaps more of an estate accumulated over a lifetime by the testator may be consumed in litigation which should never have been commenced. The present case is an example of this; approximately a quarter of the capital of the deceased accumulated over a lifetime has been consumed in legal costs for no good purpose on litigation which should never have been commenced.
31 In the end, the question must be determined on a consideration of what is "just" in the circumstances of each particular case.
32 I now turn to consider the particular facts of these applications. As my reasons reveal, Peter's claim failed because he was unable to establish the existence of a responsibility by his mother to make provision for him in her will. The evidence which emerged at trial was that, when compared with his brother, he had substantial net assets, whereas Paul would virtually be of limited means if his mother had not provided for him as she did in the will. At the end of the day, the failure of Paul's claim did not turn on the resolution of a finely balanced consideration of the discretionary factors mentioned in s 91(4).
33 This was not a borderline case or "at the margin".[22] Peter's motivation for bringing his claim was not founded on a need on his part in the relevant sense. Rather, he conceded that the primary reason for bringing the proceeding was to redress what he regarded as the unfairness of the terms of his mother's will, which he said gave no recognition for his contribution to his mother's welfare. In cross-examination, he agreed that his desired outcome from these proceedings was to get either property or money to enable him to continue servicing the loans on his property portfolio so that he could ultimately leave them to his children.
34 His financial position only became known to the other parties to the proceedings at the trial itself. That evidence revealed that, by contemporary standards in the Australian community, his financial position would be regarded as well above average.
35 The communications between the parties in relation to offers to resolve the proceeding prior to trial were put into evidence at the costs hearing. Ms Sparke placed much emphasis on a letter of 4 August 2010, in which Paul's solicitors, Slater and Gordon, wrote a letter to Peter's solicitors, Callea Pearce, making what was described as a Calderbank offer.[23]
36 In the affidavit of Bibi Amidzic, of Paul's solicitors, Ms Amidzic states that the letter meeting the offer was sent on behalf of "the defendant in Supreme Court proceeding No. S CI 2009 5569". There are two defendants to that proceeding, and it is clear that it was sent on behalf of Paul alone and not Mrs MacBean, the other defendant and co-executor. The estate was represented by separate solicitors, Buller Macleod Lawyers. The letter was said to be sent on behalf of Paul both in his capacity as one of the executors of the estate and personally. It sets out the basis on which Paul was willing to authorise Peter's proceeding to be compromised and was subject to the consent of Mrs MacBean. The author of the letter anticipated that the consent of Mrs MacBean would be provided without any difficulty. It also required the consent of the other persons interested in the estate, ie Peter's three children.
37 The offer contained in the letter was that the property at Buckingham Street be sold by auction on a long contract to settle no sooner than 120 days from the date of the offer but no more than 150 days from it. It provided that the costs of the estate and of Peter be paid from the proceeds of sale, as would any discrete legal costs incurred by Paul. Peter and Paul's costs were to be paid on a solicitor/client basis and the estate's costs on an indemnity basis. The offer then provided that Peter then receive $108,000 in settlement of his claim. Curiously, the letter does not mention what is to become of the balance of the estate, in particular, what Paul was to receive under the proposal or what the other beneficiaries would receive.
38 The 4 August letter then culminates in the statement that if the offer was not accepted or that if Peter was successful for an amount no less favourable than the offer, the letter would be produced to the Court on the question of costs. In that event, the author of the letter states "we" will be applying for an order that Peter bear his own costs of the proceeding personally and pay the costs of the estate and of Paul from the date of expiry of the offer until the date of judgment on an indemnity basis.
39 As it turned out, at the costs hearing on 29 March 2011, Ms Sparke did not seek to use the letter in a Calderbank context or press strongly for an order that Peter pay the costs of the estate on an indemnity basis. Further, in response to a question in that regard from me, she did not contend that it was a case apt for an order for indemnity costs on an application of the principles set out in Colgate-Palmolive Co v Cussons Pty Ltd.[24]
40 I do not consider that an award of indemnity costs against Peter is appropriate. The 4 August 2010 letter was not cast in terms such that if accepted would have resulted in a conclusion to the proceeding. Although the obtaining of the consent of Mrs MacBean and the residuary beneficiaries, Peter's children, might be regarded as a formality, it did not deal, as I have said, with what was to become of the balance of the estate. In particular, it did not state what was proposed in regard to the residuary beneficiaries and remaindermen. In any event, the real relevance of the letter would seem to go to the issue of whether Peter should be ordered to pay indemnity costs and neither the estate nor Paul's counsel sought such an order.
41 On 12 August 2010, Paul's solicitors wrote to the solicitors for the estate, Buller Macleod, on a letter headed "without prejudice save as to costs". It is a more elaborate and well considered letter than the 4 August 2010 letter sent to Peter's solicitors. I note that Paul Moerth had only commenced his proceeding three days before that letter was sent. The letter makes much the same offer as that contained in the previous letter but goes on to provide for what is to become of the balance of the estate. It provides that as to one half of the net balance of the estate after the payment of the usual expenses and legal costs, Peter shall receive $108,000. It provides that otherwise the executors shall distribute to Peter such sum, if any, as the Court orders, he is to receive from the estate. The balance of that one half share is to be held for Paul Moerth for his life time and upon his death for Peter's children. The other half of the estate was to go to Paul Moerth absolutely.
42 The letter also purported to set up the offer made in the 12 August 2010 letter as a "Calderbank" offer. I did not understand Ms Sparke to press a submission that this letter had any relevance other than a demonstration that her client was willing to negotiate a resolution to the proceeding. She did not submit that her client could rely upon it to obtain a special order for costs. Paul, in the judgment, received a life interest, as distinct from a freehold interest, in a property to be purchased by the estate together with a modest legacy. He did not do better by proceeding to trial.
43 Ms Sparke submitted that in some cases, costs are awarded to successful plaintiffs on a solicitor/client basis but conceded, sensibly in my view that in this instance, the usual order for costs should be made that they be paid on a party/party basis.
44 In his submissions, Mr Phillips, counsel for Peter, tendered a letter of 5 February 2006 from his instructors to the solicitors for the estate, Buller Macleod. In that letter, Peter made an offer to the estate to settle his proceeding on the basis that Peter would purchase a property of Paul's choice for up to $400,000 in Richmond or a suitable surrounding suburb. If that property cost less than $400,000, Peter would renovate the property, including installation of a new kitchen, a bathroom and laying of carpet to a total cost of $400,000. Peter also offered to pay all associated costs with the purchase of the new property, including legal costs and stamp duty. In addition, he would also pay all legal costs of the proceeding including Paul's costs, capped at $23,000, and the estate's costs capped at $20,000. As part of that proposal, the Buckingham Street property was to be transferred to Peter and Peter's children and Peter's children would renounce their interest in the estate. Peter would pay his own legal costs.
45 Mr Phillips submitted that the relevance of this offer was that Peter was also prepared to be reasonable and negotiate a resolution to the proceeding and should therefore be entitled to his costs out of the estate, both of his own claim and of his contribution to the resistance to Paul's claim.
46 I do not agree with that submission. Peter has been completely unsuccessful in his claim. The result of the acceptance of his offer of February 2006 would have been a significantly better result for him. While there was evidence that he was prepared to negotiate a resolution, it presupposes that he would be able to demonstrate the need for further provision which he ultimately failed to do. At the time of that offer and indeed until the running of the trial itself, he and only he was aware of his financial position when compared with that of his brother.
47 Section 97(6) requires the Court to make an order as to costs as it thinks "just". As Giles JA said in Jvancich v Kennedy (No 2),[25] the overall justice of the case is not remote from costs following the event. I do not consider that there is any reason why the principle of costs following the event should be departed from in this instance. Peter's case was commenced and maintained for the wrong reasons and the estate should not be inflicted with such costs. I consider that Peter should pay the estate's costs of the proceeding and that he should bear his own costs of the proceeding.
48 Further, I am prepared to say that Peter's claim when considered objectively had no reasonable prospects of success within the meaning of that expression in section 97(7) of the Act. A simple assessment of his financial position results in the conclusion that he could not demonstrate a need for further provision and his claim therefore failed to even pass the threshold test. He alone knew his financial position (and would have had a good knowledge of his brother's).
49 The authorities concerning family provision applications are replete with the principle that just because one receives much less or nothing from the testator than another does not justify, without more, a proceeding being commenced and maintained. As Palmer J observes in Carey,[26] equality of testamentary treatment between children is not in itself, without more, a foundation for a family provision claim. Further, as he observed in the present context, inequality of testamentary treatment cannot effect the "overall justice of the case" for the purposes of a costs order.
50 I now turn to the issue of Paul's costs of the proceedings. In my view, in so far as Paul has incurred costs as a defendant in proceeding No. S CI 2009 5569, those costs should be paid on the same basis as those of Mrs MacBean, i.e. on a trustee basis.
51 As to Paul's costs as plaintiff in proceeding S CI 2010 4323, I observe that that proceeding was commenced quite late in the piece. Paul's affidavit of 10 August 2010 for the large part augments and repeats what is contained in his affidavit of 2 November 2009 filed in opposition to Peter's claim. He has been awarded a modest legacy and the life interest in a property.
52 The costs incurred by the estate in defending the proceeding commenced by Peter were directed to protect Mrs Carn's will including and in particular, Paul's entitlements under it. I consider that confirmation of the life interest to Paul and the modest legacy were little advanced in his own proceeding.
53 I will order that the estate pay Paul's costs of his proceeding on a party/party basis.
In proceeding No. S CI 2010 4323, I order as follows:
55 I will ask the parties to submit a form of order which conforms with the above and includes the substantive orders which I have previously pronounced.
[1] Administration and Probate Act 1915 s 115 (7), Administration and Probate Act 1928 s 145(7)
[2] Luxmore v Hydedale [2008] VSCA 212 at [12]
[4] [2007] SASC 327 ('Bowyer').
[5] The legislation which deals with the issue in South Australia, Section 9(8) of the Inheritance (Family Provision) Act is in very similar terms to section 97(6) of the Victorian Act but there is no equivalent provision to section 97(7).
[6] [2007] SASC 327 at [65], citing Re McGoun [1910] VicLawRp 29; [1910], VLR 153; Re Sharp [1923] QSR; Re Neilson [1968] QR 221; Krause v Sinclair [1983] VicRp 7; [1983] 1 VR 73.
[7] [1955] HCA 50; (1955) 92 CLR 334 at 341.
[9] [1964] VicRp 54; [1964] VR 420 at 428.
[17] i.e. akin to the requirement in section 91(1) of the Victorian act for a plaintiff to demonstrate the existence of a responsibility by the testator to make provision.
[21] [2010] VSCA 195 at [27] per Neave and Redlich JJA and Habersberger AJA.
[22] Forsyth v Sinclair (No 1) [2010] VSCA 147 per Redlich JA
[23] Affidavit of Bibi Amidzic sworn 17 March 2011.
(1993) 114 ALR 521
(1955) 92 CLR 334