[1993] HCA 35
Category: Costs
Parties: Radan Rogic (Plaintiff)
Source
Original judgment source is linked above.
Catchwords
[1993] HCA 35
Category: Costs
Parties: Radan Rogic (Plaintiff)
Judgment (6 paragraphs)
[1]
Summary
I delivered the Court's principal judgment in these proceedings on 28 September 2018: Rogic v Samaan [2018] NSWSC 1464 (the "Principal Judgment"). Defined terms in that judgment have the same meaning in these reasons. All amounts for fees in these reasons are inclusive of GST.
It will be recalled that Radan's claims in estoppel and under the Act both failed. These reasons (which should be read with the Principal Judgment) deal with the defendants' application that Radan pay their costs of the proceedings. For the reasons which follow, the Court has decided that Radan should pay the defendants' costs. However, the amount which the defendants are entitled to recover from Radan will be capped.
[2]
Capping the defendants' costs
Before turning to the dispute between the parties as to costs, it is first necessary for me to say something about the costs which have been incurred by the defendants in these proceedings because that is a matter highly relevant to the Court's consideration as to what costs order should ultimately be made between the parties. I propose to accede to Radan's alternative application that if he is to pay the defendants' costs, those costs should be capped pursuant to paragraph 24 of the Court's Family Provision Practice Note (Practice Note No SC EQ 7) (there being no dispute about the Court's power to make such an order):
"Costs
24. Orders may be made capping the costs that may be recovered by a party in circumstances including, but not limited to, cases in which the net distributable value of the estate (excluding costs of the proceedings) is less than $500,000."
Insofar as counsel's fees are concerned, there is nothing to be said. The memorandum of fees of senior counsel for the defendants is in evidence. It is for $33,660. Having regard to the nature of the case, the evidence adduced and the two day hearing, I am satisfied that senior counsel's fees are reasonable.
It is in relation to the fees of the defendants' solicitor, Mr Farah, that some attention is required. Having regard to the relatively short length of the various affidavits relied upon by the defendants (see paragraphs [11]-[12] below), when I became aware of the defendants' costs on an indemnity basis through the usual costs affidavits filed in a family provision matter, at the end of the hearing I ordered Mr Farah to file an affidavit justifying those costs. I would have required such an affidavit irrespective of who won the case.
Mr Farah complied with that order and filed an affidavit which included his tax invoice in connection with the proceedings. That tax invoice was for a total of $67,426.15. I note immediately that Mr Farah excluded for the purposes of today's exercise a number of items (totalling $3,388) relating to disputes with the defendants' former solicitors, the sale of the Property, an unrelated CTP insurance claim and attendances in relation to a complaint which at least one of the defendants instructed should be made to the Legal Services Commissioner in connection with her concerns about the defendants' former solicitors.
I will return to what further deductions ought, in my opinion, be made from Mr Farah's tax invoice in a moment.
To explain further my concerns about the fees incurred by the defendants, it is necessary to say something about the scope of the case which they had to meet. The case involved no discovery and, as is apparent from the Principal Judgment, was largely word against word. In considering the reasonableness of the costs incurred by the defendants, I take into account that the case which they had to meet was set out in the following affidavits:
1. Radan in chief - 23 pages with some annexures.
2. Senija in chief - 10 pages with no annexures.
3. The usual costs affidavit from Radan's solicitor.
For completeness, I record that Radan's evidence in reply was:
1. Radan's affidavit in reply - 19 pages with some annexures.
2. Senija's affidavit in reply - 5 pages with no annexures.
It will be apparent from the preceding two paragraphs that the scope of Radan's affidavit evidence was not large.
The defendants' evidence comprised:
1. Irene's affidavit as executor with material going to the issues in the case - 5 pages with 18 pages of annexures.
2. Irene's updating affidavit as executor - 3 paragraphs comprising 1 page with no annexures.
3. Irene's affidavit in reply - 12 paragraphs comprising 2 pages with one 6 page annexure.
4. Mile's affidavit - 2 pages with one 2 page annexure.
5. Antoni's affidavit - 4 pages with one 3 page annexure.
6. An affidavit of Mr Farah concerning the circumstances of the beneficiaries - nine paragraphs comprising 3 pages.
7. Mr Farah's affidavit as to costs - three paragraphs comprising 1 page.
In total, the defendants' evidence was 18 pages of affidavits and 29 pages of annexures. Mr Farah's hourly rate is $605 per hour. Because it will be relevant later in these reasons (see paragraph [41] below), I also record that I have been informed that both Radan's solicitor and counsel were retained in this litigation on a no win/no fee basis.
In considering the reasonableness of the fees incurred by the defendants, I accept Mr Farah's submission that the length of affidavits as finally produced is not a complete indicator of the time spent and effort required to produce the affidavits. The Court well understands that litigation has some of the features of an iceberg. The Court only sees what is above the surface (the finished product), whereas a great deal of work has been done to produce what is ultimately provided to the Court. Nevertheless, when one takes into account the issues in, and evidentiary scope of, the case which the defendants had to meet, the ultimate length of the affidavits produced and tendered on behalf of the defendants is nevertheless an important indicator for the purposes of the exercise in which I am engaged, namely considering whether an order capping recoverable costs should be made.
Because of the relatively informal way I reviewed Mr Farah's fees with him (a course to which Mr Farah did not object), I am not to be taken as making any findings personally or professionally critical of Mr Farah. Nevertheless, the question must be asked as to how a reasonable member of the general public might react if told that in litigation which was essentially of a family nature, solicitors' fees of some $63,000 (Mr Farah's reduced figure) were incurred to produce 18 pages of affidavits with 29 pages of annexures.
When I put this question to Mr Farah, he explained from the bar table, and I accept, that he had to spend a great deal of time with Irene, the first defendant. He informed me that she had been a demanding client who took the litigation very personally and wished to provide a great deal of information that ultimately proved irrelevant during the course of a number of attendances on Mr Farah. Mr Farah told me, and I accept, that he had drawn to her attention that she was taking more time than might be thought reasonable in relation to providing him with instructions. I record these matters not to criticise Irene. However, they are highly relevant to considering what it is reasonable for Radan to have to pay. I take that consideration into account in paragraph [19] below in adopting a higher range of discount that I propose to apply in relation to Mr Farah's fees.
I mentioned earlier that Mr Farah had excluded a number of attendances from his tax invoice concerning matters unrelated to this litigation. Having closely reviewed Mr Farah's tax invoice, I drew to his attention that there appeared to be a number of other attendances which fell within the same categories of exclusion as I have recorded in paragraph [6] above. He accepted that. That resulted in a number of other entries being excluded from what costs might be visited upon Radan.
Finally, there was also nearly $5,000 in fees related to preparing documents for the hearing and the preparation of a court book. Especially in relation to the latter, Mr Farah accepted (correctly in my respectful view) that those costs were not necessary because it was Radan who was to (and did) prepare the court book. In any event, having regard to the amount of material with which the Court was provided, I cannot understand how charges of nearly $5,000 in relation to the preparation of what was a very thin and simple court book would be allowed as reasonable on any assessment. I have also excluded those charges from the total amount in Mr Farah's tax invoice.
The total amount of exclusions from Mr Farah's tax invoice is $12,920. When this is subtracted from the total figure of $67,426.15, it leaves a balance of $54,506.15. That is, of course, a solicitor/client figure. There is no suggestion Radan should be liable for anything other than party/party costs.
Because I am in effect making a gross sum costs order for party/party costs it is necessary to determine an appropriate discount. I have taken into account the Court's experience that solicitors' costs tend to be reduced to anywhere between two thirds and 80% on assessment of the solicitor/client fees. In this case, and having regard to Mr Farah's explanation about the amount of time that had to be taken to obtain instructions compared to what might be thought to have been reasonable, I propose to discount the solicitor/client figure by 30% to arrive at a party/party costs figure of $38,154.30 which I will round up to $38,200.
It follows that the party/party costs for which Radan might be liable is the sum of $38,200 (solicitor's costs) and $33,660 (counsel's fees), being a total of $71,860.
Finally on this topic, because of the view that I have taken concerning Mr Farah's costs I will not make the usual indemnity order in favour of the defendants. I will modify the order to make it clear that the defendants are entitled to indemnity from the estate in such amount as may be agreed or assessed in relation to their costs. However, if Mr Farah seeks to recover from the defendants more than the amount I have determined in the preceding paragraph, it will be for him to satisfy the defendants or a costs assessor that the costs over that amount were reasonably incurred. I do not see any reason why an unlimited indemnity should be granted to the defendants out of the estate such that the beneficiaries are visited with the consequences of the possibility of unreasonably incurred amounts being recovered.
[3]
Should Radan pay the defendants' costs?
It is then necessary to turn to the question of whether or not Radan should pay the defendants' costs, albeit limited in the way I have set out above.
The defendants' submissions on costs were straightforward. They submitted that the starting point was that costs should follow the event and that Radan bore the onus to demonstrate that there should be a departure from the usual rule. They submitted that in this case Radan had failed to make out any reasons why the usual rule should not apply.
One matter upon which the defendants relied arose from an inquiry which I made during the course of the hearing as to whether the matter had been the subject of mediation. There was no dispute that mediation had not taken place. This was apparently because the defendants had said that it would be too hard to obtain instructions at a mediation from the beneficiaries, who were all in the Serb Republic. Nevertheless, counsel for Radan accepted that, during the course of an earlier directions hearing, when Hallen J was informed of the difficulties about obtaining instructions from the beneficiaries, he had encouraged Radan to make an offer to the defendants to settle the proceedings. It was common ground that no such offer was made. The defendants submitted, and I accept, that in those circumstances Radan's failure to make an offer is relevant to the Court's considerations as to costs.
Radan submitted that one view of the case was that it was a "borderline" type of case (referring to the judgment of Hallen AsJ, as his Honour then was, in Harkness v Harkness [2012] NSWSC 35 at [18] which should incline the Court to an order that Radan receive his costs out of the estate, notwithstanding that he was unsuccessful in the litigation:
"There are also other circumstances that may lead the court to order payment out of the estate of the costs of an unsuccessful Plaintiff. The court may allow an unsuccessful plaintiff costs out f the estate, if in all the circumstances the case was meritorious, reasonable or "borderline": McDougall v Rigers; Estate of James Rogers; Re Bodman [1972] Qd R 281; Shearer v Public Trustee (NSWSC, Young J, 12 April 1998, unreported)."
Alternatively, Radan submitted that in all the circumstances of the case, including the nature of the claim, the absence of mediation, Radan's relationship with Ljubica, Radan's financial and personal circumstances (including his health and potential need for medical treatment and future accommodation), the authorities indicated that the usual "follow the event" principles should not be applied. Radan submitted that the appropriate costs order should be:
1. The defendants be entitled to their costs on an indemnity basis from the estate;
2. There otherwise be no order as to costs to the intent that Radan will not be liable for any portion of the defendants' costs; and
3. Radan be liable to bear his own costs.
By way of final alternative, Radan submitted that if Radan was to pay any costs this was a case for the Court to consider a costs capping order.
In support of his submissions, Radan also referred to the following authorities.
In Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521, Gaudron J said, at [522]:
"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."
In Moussa v Moussa [2006] NSWSC 509, Barrett J held, at [8]:
"In Jvancich v Kennedy (No 2) [2004] NSWCA 397, Giles JA observed (with Handley JA and McColl JA agreeing) that the "overall justice of the case" is "not remote from costs following the event" - thus indicating that the generally applicable rule is to be recognised. But proceedings of this kind involve elements of judgment and discretion beyond those at work in most inter partes litigation. As Palmer J said in Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003:
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 Bowditch v NSW Trustee and Guardian [2012] NSWSC 702, after citing the passage in Singer v Berghouse quoted above, Hallen AsJ (as his Honour then was) set out the following factors a court should look at in determining an appropriate costs order:
"[34] ...
(a) 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.
(b) Despite the above statement, which, of course, was written in the context of a security for costs application, and in respect of proceedings under the Family Provision Act, s 99 of the Succession Act provides a wide discretion in relation to costs ("in such manner as the Court thinks fit").
(c) The view of some practitioners advising a potential applicant contemplating a claim for a family provision order, that there is little risk, and probably much to be gained, in making a claim, however tenuous, because even if the claim fails the applicant will, very likely, get his, or her, costs out of the estate and that he, or she, will not be significantly out of pocket, and the legal practitioner will receive his, or her, costs and disbursements in any event, has been thoroughly discredited.
(d) Parties should not assume that this type of litigation can be pursued, safe in the belief that costs will be paid out of the estate: Carey v Robson (No 2) [2009] NSWSC 1199; Forsyth v Sinclair (No 2) [2010] VSCA 195. It is now much more common than it previously was for an unsuccessful applicant to be ordered to pay the defendant's costs of the proceedings (Lillis v Lillis [2010] NSWSC 359 at [23]) and be disallowed his, or her, own costs.
(e) Where, as here, the issue is whether the unsuccessful applicants should bear the costs of the successful Defendant, s 98 of the Civil Procedure Act, and the rules quoted above, will apply, and, in the absence of some good reason to the contrary, there should be an order that the costs of the successful defendant be paid by the unsuccessful plaintiff: Moussa v Moussa [2006] NSWSC 509 at [5].
(f) An unsuccessful plaintiff will, usually, be ordered to pay costs where the claim was frivolous, vexatious, made with no reasonable prospects of success, or where she, or he, has been guilty of some improper conduct in the course of the proceedings: Re Sitch (No 2) [2005] VSC 383.
(g) In small estates particularly, the court should be careful not to foster the proposition that obstinacy and unreasonableness will not result in an order for costs: Dobb v Hacket (1993) 10 WAR 532, at 540.
(h) Proceedings for a family provision order involve elements of judgment and discretion beyond those at work in most inter partes litigation: Jvancich v Kennedy (No 2) [2004] NSWCA 397; Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003.
(i) In exercising its discretion in relation to costs, the court will have regard to "the overall justice of the case": Jvancich v Kennedy (No 2). The "overall justice of the case" is "not remote from costs following the event". However, the court may be more willing to depart from the general principle in proceedings for a family provision order than in other types of case: Moussa v Moussa; Carey v Robson (No 2); Bartkus v Bartkus [2010] NSWSC 889 at [24].
(j) As proceedings for a family provision order are essentially for maintenance, a court may properly decide to make no order for costs, even though it were otherwise justified, against unsuccessful applicants, if it would adversely affect the financial position which had been taken into account in dismissing the application: Morse v Morse (No 2) [2003] TASSC 145 at [4]; McDougall v Rogers; Estate of James Rogers [2006] NSWSC 484; McCusker v Rutter [2010] NSWCA 318 at [34].
[35] Finally, what I said in Smith v Smith (No 2) at [77], is also applicable to the facts of the present case:
I commend to parties involved in proceedings in which a family provision order is sought, that every effort, particularly in a relatively small estate, as this one is, to conduct negotiations frankly and openly, to try to resolve the proceedings, and if there are issues or concerns about an offer that has been made, to raise any issues at the first convenient opportunity with the offeror's solicitors, so that any ambiguities, or other concerns, can be resolved. The Court should be able to see that the parties have considered what is being offered in a sensible, practical, and commercial way."
For the following five reasons, and bearing the foregoing principles in mind, I have concluded that Radan should be ordered to pay the defendants' costs of the proceedings, but in the amount which I have fixed by way of a costs capping order.
First, costs should follow the event. I do not accept Radan's submission that this was a "borderline" or "near run" type of case. Radan failed in relation to the case brought in equity. The only success Radan had in relation to his family provision case was barely persuading the Court (see paragraph [130] of the Principal Judgment) that he should be given leave to bring his family provision claim out of time. In every other respect Radan failed and, if the Court had found it necessary to consider the merits of his family provision claim, he would have failed in relation to that as well. This is not just a hindsight assessment. The main reasons Radan failed - completely uncorroborated evidence as to the quantum of his contributions and Radan's thirteen year marriage and two children with Zorka - were (or should have been) cautionary indicators from the start.
Second, the case was run primarily as a proceeding in equity with the family provision claim being further and in the alternative. So much is apparent from the form of the relief sought in the statement of claim:
"1 A declaration that the Defendants:
(a) Hold the proceeds of sale of the property at XXXX (the Property) on Trust for the Plaintiff, alternatively
(b) The Defendants hold a portion of the proceeds of sale of the Property commensurate with the Plaintiff's contributions to the discharge of mortgage, on Trust for the Plaintiff, alternatively
2 Payment of the proceeds of sale of the Property or so much of the proceeds of sale as are found to be held on trust.
3 An Order that time for commencing family provision claim proceedings pursuant to s.58(2) of the Succession Act 2006, is extended up to and including the date of filing of the Summons in these proceedings.
4 An Order pursuant to s.59 of the Succession Act 2006 that provision be made out of the Estate and/or Notional Estate of Ljubica Pacic, late of Canley Heights in the State of NSW, for the maintenance, education and advancement in life of the Plaintiff."
Counsel for Radan submitted that this should not count against his client because essentially the same evidence was required in relation to both claims. That may be true. Nevertheless, the case was primarily run as a case relying on equitable principles. To that extent, it reduces the importance of the sensitivity which the Court sometimes brings to bear in dealing with costs determinations in relation to family provision matters.
Third, while not in and of itself decisive, Radan's failure to take up the suggestion made by Hallen J to make an offer to the defendants is a matter which I take into account against Radan, even though the Court cannot know if any offer he made would have been successful. It is now beyond argument that the parties' obligations under s 56 of the Civil Procedure Act 2005 (NSW) (the "CPA") include giving proper attention to the possibility of settling litigation. While I accept that it may have been difficult for the defendants to have all the beneficiaries available for the purposes of a mediation, that does not apply to considering an offer of settlement.
Mr Farah was able to conduct a conference with the beneficiaries to obtain instructions about their circumstances. It should have been obvious to Radan, or those advising him, that instructions could have been obtained by the defendants from the beneficiaries concerning any offer that might have been made. As appears from the next paragraph, there seems to have been considerable room for movement in Radan's position which I am satisfied could have played an important part if negotiations had been entered into, and warrants the conclusion (which I draw) that the prospects for a settlement were not hopeless.
Fourth, I take into account that while Radan continued to maintain his claim to the whole Property (in effect, the distributable proceeds of $930,000), when pressed in argument much more modest claims were advanced by his counsel as alternative possibilities. These included an alternative on the case in equity which would have yielded (with compound interest) a result of $50,466 for Radan; a "property law settlement approach" which would have yielded (with compound interest) $68,090; an approach based on Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 which yielded a figure of $201,067; or, based on family provision principles, a figure to pay his rent for the rest of his life of $529,471.
There are two things to be said about these alternative cases. First, they make it clear that there was fruitful ground for the possibility of a successful resolution of the proceedings. Second, these proceedings are an unfortunate example of something which the Court sees far too often, namely an ambit claim being maintained right up to and including the hearing, with less ambitious alternative analyses being propounded only during the course of the hearing itself. One of the major benefits of parties turning their minds to settlement is that it generally requires them to give realistic consideration to alternative available outcomes depending on which legal analysis finds favour with the Court. In short, I take into account against Radan on the question of costs that my third and fourth reasons demonstrate that he does not appear to have behaved entirely reasonably or in accord with s 56 of the CPA in the way he conducted the litigation.
Fifth, this is not a case where I propose to take into account the potential adverse effect of a costs order on his financial position. As Radan's counsel drew to attention, there is authority for the proposition (see paragraph [31] above) that in some family provision cases the Court may decide to make no order as to costs against an unsuccessful applicant if it would adversely affect the financial position which had been taken into account in dismissing the application. However, even if this case was solely a family provision case, which it is not (see paragraph [34] above) it is not one where I consider the effect of a costs order will so adversely affect Radan's financial position to justify not making a costs order which I think otherwise should be made.
In paragraphs [146]-[150] of the Principal Judgment, I dealt with what the Court would have done had it been required to determine the family provision claim. Radan's financial circumstances were only one of several factors which the Court took into account. The same conclusions I reached in the Principal Judgment would still apply even if what I characterised as Radan's buffer against vicissitudes of $265,000 in savings is reduced by having to pay costs in the amount of $71,860. In reaching this conclusion I have also taken into account that Radan has no costs liability to his own solicitor and counsel (see paragraph [12] above).
[4]
Costs budgets should be considered
Before making final orders, I wish to observe that this is a good example of a case which would have benefited from the ordering of a binding costs budget in advance of the conduct of the litigation. In my experience and understanding, the Court's power to order maximum costs under UCPR r 42.4 is little used at the commencement of proceedings. Similarly, applications for costs capping orders at the end of litigation are relatively infrequent.
Arising from the recent visit to Australia of Sir Rupert Jackson, the author of the United Kingdom civil costs reforms (Review of Civil Litigation Costs: Final Report (2010)), local attention has been given to the system of costs management orders which has been introduced in the United Kingdom. That system requires parties to exchange costs budgets before the first directions hearing. In assessing costs, the court will generally not depart from approved or agreed budgeted costs. The scheme is to be found in Civil Procedure Rules 1998 (UK), Pt 3, s II, rr 3.12-3.18 and Practice Direction 3E - Costs Management (2016).
In my opinion, family provision cases fall within that category of litigation in this Court which would especially benefit from the introduction of such a scheme. I respectfully commend consideration of this development to those concerned with law reform.
[5]
Orders
The orders of the Court are:
1. Order that the defendants' recoverable costs in the proceedings be limited to $38,200 (inclusive of GST) in relation to solicitors' costs and $33,660 (inclusive of GST) in relation to counsel's fees.
2. Order that the defendants be entitled to their costs from the estate on an indemnity basis, but on the basis that it will be for the solicitor for the defendants to satisfy an assessor why costs in excess of those referred to in Order 1 were reasonably incurred.
3. Order Radan to pay the defendants' costs assessed in the sum of $71,860 such amount to be paid on or before 13 November 2018 into the trust account of the defendants' solicitor.
[6]
Amendments
18 October 2018 - Para 19 - "reduced by" changed to "reduced to"
Para 30 - Barret changed to Barrett
43 - last sentence, Pt 2 changed to Pt 3
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Decision last updated: 18 October 2018