Sarant v Sarant

The submissions on costs

1. Senior counsel for George submitted that the appropriate costs order was that there be no order as to George's costs, to the intent that he would bear his own costs of the proceedings and that the order, in respect of Maria-Lyn's and Melissa's costs, should not be that those costs, calculated on the indemnity basis, be paid out of the estate, because of their conduct in defending the claim for a family provision order. He submitted that they should bear their own costs of the proceedings.
2. Counsel for Maria-Lyn and Melissa submitted that unless George was ordered to pay their costs, or some of their costs, they would have to bear those costs, immediately, out of the lump sum of $600,000, which may be paid by George on or before 16 March 2021. If the lump sum was not paid, they would have to raise funds to pay the balance of their costs pending the sale of the Bronte property.
3. Counsel for Maria-Lyn and Melissa also submitted: "It is submitted that in the circumstances of this case that the appropriate orders is no order for the plaintiff's costs with the intent that he bear his own costs and an order that he pays the debts of the estate and/or the defendants' costs on the indemnity or [the] ordinary basis within 28 days of agreement or assessment."
4. (Ultimately, as stated earlier, an order was made, by agreement, that the estate debts would be paid by George.)
5. Counsel referred to the principal judgment at [365]: "If each of Maria-Lyn and Melissa receives about half of the lump sum of $600,000 that is paid, that should provide a reasonable deposit for accommodation, or alternatively a fund for exigencies of life, out of which rent for alternative accommodation could be paid."
6. Counsel then submitted: "It is submitted from that finding the court considers that it [is] appropriate that each of the beneficiaries receive about $300,000 after the debts of the estate and costs are paid. For each of the beneficiaries to receive that sum the plaintiff should pay the costs of the proceedings or part of the costs."
7. Although he did not refer to the principal judgment, at [369], in his written submissions, he referred, in oral submissions, to that paragraph, where, I wrote: "Depending upon any agreement on the order for costs, George may have to pay an additional amount to the estate on account of Maria-Lyn's, and Melissa's, costs of the proceedings now, but I am unable to determine whether he will have to do so at this time and upon what basis."
8. I do not accept counsel's submission. The paragraph relied upon was written in the context of the suggestion that "there are some matters that may be relevant to that determination that could not be disclosed at the hearing". In the events that happened, there were none. This is hardly surprising bearing in mind the uncompromising approach to the litigation adopted by Maria-Lyn and Maria to which I referred in the principal judgment.
9. In addition, it is clear from the use of the words "may have to pay", that the question of costs remained one yet to be decided. Every opportunity, once again, was given to the parties to attempt to reach an agreement on costs, without success.
10. It may be accepted that in respect of Maria-Lyn and Melissa, as the only executors and beneficiaries named in the deceased's Will, the usual order for costs that could have been made was an order that their costs, calculated on the indemnity basis, would be paid out of the estate of the deceased, if those costs had been properly incurred in defending the estate from George's application for provision. However, as the only beneficiaries, they would have then borne the burden of those costs out of the estate (after taking into account the provision made for George).
11. Presumably, it was this fact that prompted the submission that George should pay their costs.

Some matters in the principal judgment

1. It would be useful to provide a summary of only some matters that appear in the principal judgment. I shall not repeat the findings verbatim, but shall summarise some of the findings that I consider are relevant to the issue of costs: 1. George was born in June 1945 and is now 75 years of age. He and the deceased married in 1970, and remained so until the date of the deceased's death in September 2018. The marriage, even before separation under the one roof, was of about 44 years' duration. 2. The Defendants sought to highlight the relationship of George and the deceased and tried to demonstrate that they had been separated, although married to one another, for many years prior to the deceased's death. The finding that I made was that the deceased herself, by her lawyers, when raising the question of the adjustment of property interests with George, had asserted that she and he had separated, under the one roof, in about 2014. I also found that whilst there had been some discord in the relationship, which was hardly surprising in a marriage that spanned 48 years, his relationship with the deceased had "softened". No proceedings were ever commenced by the deceased, or by George, for property adjustment under the Family Law Act 1975 (Cth). 3. I accepted George's evidence that he and the deceased had discussions about the other being able to live in the Bronte property after the death of the first to die. 4. The value of the deceased's estate, without taking into account the costs of the proceedings, was $1,762,595. As at the date of the hearing, the estate consisted entirely of a one-half interest, as tenant in common with George, in real property situated at Bronte. 5. No explanation was given by the deceased for the failure to make any provision for George. 6. George does not have any earning capacity and, whilst he might have had sufficient funds with which to purchase alternate accommodation in the event that the Bronte property were sold, to require him to do so would displace him from his home of some 38 years. 7. George had made significant contributions to the relationship, and to the Bronte property, throughout the duration of his marriage to the deceased. 8. Maria-Lyn and Melissa failed in the prosecuting the Cross-Claim.
2. None of the above findings ought to have come as any real surprise to the Defendants. Any reasonable, and proper, consideration of the evidence, overall, would have included those matters of fact. Moreover, in conducting the defence of the proceedings, the Defendants' affidavits, in many respects, descended to irrelevant minutiae.
3. The Defendants' estimated costs of the proceedings to the end of a two day case were $171,500 (of which $82,041 remains unpaid). The estimate, considering the above matters, and other matters, is far outside the range of costs seen by the Court for defendants up to the end of a two day case. It seems to demonstrate an over-vigorous defence of the proceedings, where the personal interests of Maria-Lyn and Melissa, and their animosity towards George, were given primary consideration and where their defence of George's case should be regarded as adversary litigation.
4. As I emphasised at [38] of the principal judgment, there was no reasonable basis for the Defendants' only submission that the Plaintiff was not entitled to any provision out of the deceased's estate, or that the Bronte property should be sold, and that George should pay all of the costs of the proceedings.
5. It is to be noted that there is no evidence of either party having made any offers of settlement with a view to avoiding the litigation altogether, or to minimising the costs of litigation after it was commenced. Any offers that were made, about which the Court knows nothing, must have been considered to be irrelevant by the legal representatives, on the issue of costs.

Principles

1. The principles governing the exercise of the Court's discretion as to costs are well known. Section 98(1) of the Civil Procedure Act 2005 (NSW) provides that subject to the rules of Court, and that, or any other, Act, costs are in the discretion of the Court. The subsection gives the Court full power to determine by whom, to whom, and to what extent, costs are to be paid. The discretion is broad but not unconfined. It is a judicial discretion to be exercised on a principled basis.
2. Section 98(6) provides that in the section, "costs" include "(a) the costs of the administration of any estate or trust".
3. Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 provides 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.
4. Section 99(1) of the Act provides, relevantly: 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.
5. The section provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne. However, that section does not apply to costs as between party and party, but rather to costs to be paid out of the estate: Blendell v Byrne; The Estate of Noeline Joan Blendell (No 2) [2019] NSWSC 798 at [71]; Smith v Moore (No 2) [2020] NSWSC 1640 at [9] (Williams J).
6. I wrote in the principal judgment at [57]: "Unless the overall justice of the case requires some different order to be made, the applicant for a family provision order, if successful, normally would be entitled to an order that his, or her, costs and disbursements, calculated on the ordinary basis, should be paid out of the estate of the deceased, while the defendants, as the persons representing the estate of the deceased, irrespective of the outcome of the family provision proceedings, normally will be entitled to an order that their costs, calculated on the indemnity basis, should be paid out of the estate. The size of the deceased's estate, and the conduct of a party, may justify a departure from what is said to be the usual rule."
7. The Court of Appeal (Macfarlan, Meagher and Leeming JJA) had occasion to revisit the principles applicable to costs in family provision cases in Haertsch v Whiteway (No 2) [2020] NSWCA 287. Their Honours considered at [5]-[7], [9], [11]: "It is well established that family provision applications 'raise different issues with respect to costs' to those raised by other proceedings: Salmon v Osmond [2015] NSWCA 42 at [172] (Beazley P, McColl and Gleeson JJA agreeing). The liberal approach to costs in such cases has a long provenance, though reference is now typically made to remarks of Gaudron J in Singer v Berghouse [1993] HCA 35; (1993) 67 ALJR 708 at 709, to the effect that 'costs in family provision claims generally depend on the overall justice of the case' and that 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'. Indeed, in some jurisdictions it would seem that no order as to costs is the usual or general consequence of an unsuccessful application: Bowyer v Wood (2007) 99 SASR 190 at 210, 211; [2007] SASC 327; Underwood v Underwood [2009] QSC 107 at [32]-[33]. However, as Giles JA observed in Jvancich v Kennedy (No 2) [2004] NSWCA 397 at [11] (Handley and McColl JJA agreeing), the 'overall justice of the case' is 'not remote from costs following the event'. For one thing, the default rule encourages prospective applicants for provision to have regard to the significant costs consequences to themselves of making such an application. But while the default rule in r 42.1 applies to family provision proceedings, its application remains subject to the court exercising greater than usual 'liberality and discrimination' in deciding whether to depart from it: Salmon v Osmond at [174] (Beazley P, McColl and Gleeson JJA); Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 at [26]-[27] (Basten JA, Gleeson JA agreeing); [138]-[139] (Barrett JA, Gleeson JA agreeing). It is not uncommon, though atypical, for an unsuccessful applicant not to be ordered to pay the defendant's costs where the applicant is or would become impecunious and the claim for provision was reasonable or borderline: see eg, with no attempt to be exhaustive, Re Sherborne Estate (No 2) (2005) 65 NSWLR 268; [2005] NSWSC 1003; Moussa v Moussa [2006] NSWSC 509; Bevilacqua v Robinson (No 2) [2008] NSWSC 520; Ray v Greenwell [2009] NSWSC 1197; Dugac v Dugac [2012] NSWSC 192; Raiola v Raiola [2014] NSWSC 1172; Purnell v Tindale [2020] NSWSC 746. … The impecuniosity of an unsuccessful party, without more, is no reason to deprive a successful party of an order for costs to which they are otherwise entitled: Sassoon v Rose [2013] NSWCA 220 at [10] (Meagher JA, Gleeson JA agreeing); Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [26]-[27]. However, the irrelevance of impecuniosity is said to be 'subject to some relaxation in family provision cases': Chapple v Wilcox at [141]. One reason that the impecuniosity of an unsuccessful applicant for family provision is of greater than usual relevance is that adverse costs orders might alter the basis on which the claim for provision was rejected, and thereby cause or justify a further application: McCusker v Rutter [2010] NSWCA 318 at [34]. That consideration is of little or no relevance to this case: the plaintiff's claim failed for reasons unrelated to her financial position and no further application for provision could possibly succeed. … Although family provision claims can only succeed or fail, those binary outcomes tend to conceal difficult and even 'borderline' questions of judgment. That is one reason for the more liberal approach to costs: Re Sherborne Estate (No 2) at 279; Moussa v Moussa at [8]. Those observations are typically directed to the evaluative and discretionary judgments as to what would constitute adequate provision for the applicant's proper maintenance, education or advancement."
8. True it is that, generally, a defendant in family provision proceedings, as executor, is not in the usual position of a private litigant defending his, or her, personal interests. As executor, the defendant has a duty to uphold the terms of the deceased's Will and to represent the interests of the beneficiaries named thereunder. However, as Robb J recognised in Pang v Fong (No 2) [2014] NSWSC 1924 at [51], the circumstances of an executor, or executors, 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".
9. Another example might be when the defendants, as executors, have unreasonably conducted the litigation and the trial.
10. The present case provides a combination of those examples, where Maria-Lyn and Melissa were entitled to the whole of the deceased's estate under her Will, had defended the proceedings entirely in their own interest, and had done so in a manner that seemed, in all the circumstances, to be unreasonable.
11. From all of the authorities, it is clear that the purpose of a costs order is to reach a fair and just result. The making of a costs order in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) (2014) 315 ALR 1 at 2 [2]; [2014] HCA 47 at [2] (French CJ, Hayne, Bell, Gageler and Keane JJ).

Determination

1. All parties, in a claim for a family provision order should have regard to the significant costs consequences of the application. Not doing so is fraught with risk. Very few cases are "all or nothing cases". Virtually all cases that are conducted to hearing demonstrate that each party has her, or his, own view of the merits, which are, more often than not, quite different.
2. Furthermore, parties should also be aware that "[g]enerally speaking … a litigant's financial position is irrelevant when it comes to the exercise of the costs discretion".
3. George, ultimately, was successful. His case had merit. It was not one that was frivolous, vexatious, or made without reasonable prospects of success. He established that the deceased's Will did not make adequate provision for his proper maintenance, or advancement in life. The case was not one where the merit of his claim for a family provision was unknown, or incapable of careful evaluation. It ought to have been clear to Maria-Lyn and Melissa from the outset, or from very soon after the commencement of proceedings, that he might succeed in whole, or in part, and that the sale of the Bronte property could not be regarded as a certainty. The Cross-Claim was dismissed.
4. Of course, Melissa-Lyn and Maria, whilst executors, were also the sole beneficiaries. They were entitled to defend their own interests in the proceedings. However, they did so at a risk as to costs in the event that they were unsuccessful in opposing George's claim in whole or in part.
5. Yet, the defence of George's case should never have been conducted in the way that it was, with virtually no quarter being given. Even during final submissions, their counsel did not acknowledge that George was entitled to any family provision order. Long before, however, they had chosen the battleground on which the case was conducted.
6. Bearing in mind the numerous decisions on the issue of costs in family provision proceedings, some of which were identified at [60] of the principal judgment, and remembering that the jurisdiction to award costs is discretionary, the Court is entitled to assume that Maria-Lyn's and Melissa's legal representatives had provided them with necessary advice as to that risk, and, having received that advice, they chose to proceed in the manner in which they did.
7. If Maria-Lyn and Melissa assumed that their costs of the proceedings would, automatically, be met by George, even if he were successful, they had no reasonable basis for doing so in circumstances where they were defending their own interests. As with their defence of the proceedings, in the manner that they did, any such assumption lacked a reasonable foundation bearing in mind the claim that was being made and the circumstances to which I have referred.
8. This was a case where the words of Madden CJ, written as long ago as 1894 are brought to mind: "[t]hey were not fighting for the estate any more than if they were not executors at all": Skrimshire v The Melbourne Benevolent Asylum (1894) 20 VLR 13 at 18. As sole executors and beneficiaries, they were unsuccessful in their opposition to George's claim. Arguably, there is no reason why the usual practice as to costs would not apply, with the consequence that they could be ordered to bear their own costs. They may consider themselves to be fortunate that George did not seek an order that they should bear his costs.
9. Furthermore, the mere fact that the absence of a costs order in the form submitted by their counsel, in Maria-Lyn's and Melissa's favour, would lessen the quantum of their ultimate entitlement, because of the order for provision, is not a sufficient reason, of itself, to make such an order. Effectively, if an order for costs out of the estate had been made in other circumstances, that is precisely what would have occurred because they are the only beneficiaries.
10. They will be entitled to recoup all their costs, calculated on the indemnity basis, from their share of the proceeds of sale of the Bronte property, when it is sold.
11. Taking all relevant matters into account, and applying the principles referred to earlier, the overall justice of the case requires a different order to one requiring George to pay all of Maria-Lyn's and Melissa's costs. In circumstances where George was successful in obtaining an order for provision, albeit an order which was not in accordance with the principal submission made on his behalf, it would be quite unjust, to order that he should bear the burden of all of the costs of the proceedings that were incurred by Maria-Lyn and Melissa.
12. As stated earlier, he has accepted that he should bear his own costs of the proceedings which were estimated, calculated on the indemnity basis, to be $137,500 (of which he has paid $81,944). That is a significant concession on his part.
13. Yet, I must remember that had the case proceeded differently, and had George received the whole of the deceased's interest in the Bronte property absolutely, he might have been ordered to pay some, or all, of the costs of the proceedings as there would have been no other estate out of which costs could have been paid. In order to continue living in the Bronte property, he may have been required to raise the funds necessary to pay his own costs and some, or all, of the costs of Maria-Lyn and Melissa. Of course, he would have been entitled to have their costs assessed.
14. A fair and just result, in my view, is that George should pay a part of Maria-Lyn's and Melissa's costs of the proceedings. Such an order would reflect the fact that George did not receive, by way of order, all that he sought.
15. Doing the best that I can, and bearing in mind their estimated costs, calculated on the indemnity basis, as well as the fact that they have already paid $89,459 of those costs, leaving an amount of about $82,000 to be paid, I am of the view that George should pay $40,000 on account of all of their costs. Otherwise, each party should bear his, or their, own costs of the proceedings.
16. This result will mean that each of Maria-Lyn and Melissa will have to bear $21,000 each out of the $600,000 if it is paid. I regard that as "about half of the lump sum of $600,000" if that amount is paid. If the amount of $600,000 is not paid, Maria-Lyn and Melissa will have to reach an agreement with their solicitors about costs, as the Bronte property may not be sold for three years. Again, that is a matter that they, and their legal representatives, ought to have considered.
17. The Court: 1. Makes no order as to the Plaintiff/Cross-Defendant's costs to the intent that he will bear his own costs of the proceedings. 2. Orders the Plaintiff/Cross-Defendant to pay $40,000 on account of the Defendants/Cross-Claimants' costs; otherwise, makes no order as to their costs to the intent that they are to bear their own costs of the proceedings. 3. Orders that the amount for costs be paid at the same time as the lump sum is paid; or, if it is not paid, out of George's share of the proceeds of sale of the Bronte property when it is sold.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 December 2020