Shelley v Prager

Assets of the estate in comparison to the parties' costs

1. As recorded in the Judgment at [9]-[14]: 1. the estimated value of the deceased estate in the Inventory of Property annexed to the grant of probate was $701,799. 2. as at the conclusion of the hearing, the net assets of the deceased estate had a value of approximately $621,656. [2]
2. As recorded in the Judgment at [15]: 1. the plaintiff's costs of the proceedings up to the conclusion of the three day hearing were $143,600 on an ordinary basis; and 2. the defendant executors' costs of the proceedings up to the conclusion of the hearing were $87,247 on an indemnity basis.
3. It will be immediately apparent that the plaintiff's legal costs are very high in comparison to the value of the estate.

Defendants' submissions

1. As I have noted in [3] above, the defendants submitted that the plaintiff's costs should not be paid out of the estate and that the plaintiff should pay her own costs as well as the defendants' costs of the proceedings.
2. The defendant executors relied on various authorities referring to the applicable principles set out above.
3. The defendants submitted that the unsuccessful plaintiff's costs should not be paid out the estate in this case because: 1. in the period when the plaintiff had foreshadowed a claim but had not yet commenced proceedings, the plaintiff had ignored three requests made by the defendants to discuss the matter with a view to avoiding the costs of legal proceedings; 2. the plaintiff subsequently rejected two offers made by the defendants, and the matter failed to settle at a Court-ordered mediation; 3. the plaintiff made one offer of compromise one month before the hearing under which, if accepted, she "would have received by far the largest share of the estate"; 4. in the month prior to the hearing, the plaintiff had unnecessarily and inappropriately incurred costs by issuing subpoenas that were said to be "unnecessary and inappropriate" and requesting "particulars & financial detail over & above the norm". Whilst the plaintiff's solicitor was "possibly doing what she regarded as a thorough job for her client", these actions increased legal costs compared to the relatively small size of the estate, with the result that "the plaintiff's costs were way over & above what should have been expended on the meagre assets pool that was available for distribution to the beneficiaries."
4. There was no evidence of the plaintiff ignoring requests for discussions prior to the commencement of proceedings. However, the plaintiff's submissions did not dispute that these requests had been ignored. It was submitted on behalf of the plaintiff that the defendants had resisted providing the plaintiff with a signed copy of the Inventory of Assets annexed to the grant of probate prior to the commencement of these proceedings, and that it was therefore unlikely that a meeting between the plaintiff and defendants prior to the commencement of proceedings would have been successful in resolving the dispute.
5. The offers of compromise referred to in the defendants' written submissions were not in evidence. The plaintiffs' written submissions referred to the same offers, adding some additional detail concerning the terms of the defendants' offer made on 4 July 2019 to which it will be necessary to return below. The defendants did not rely on the offers, and the plaintiff's failure to accept the defendants' offers, in support of a submission that the plaintiff should pay their costs on an indemnity basis. The offers, together with the plaintiff's refusal to meet with the defendants prior to the commencement of proceedings, were relied on in support of the defendants' submission that the plaintiff's costs should not be paid out of the deceased estate.
6. The defendants further submitted that the plaintiff should pay their costs of the proceedings because: 1. the estate is modest in size and the plaintiff knew this from the outset; 2. the plaintiff's claim for an order designating property as notional estate was "dubious at best"; 3. until the time of the hearing, the plaintiff's approach to the proceedings was to claim "the lion's share of the estate" by expressing the need for her mortgage in excess of $500,000 to be paid out and a fund for her to retire comfortably; 4. the plaintiff's expectations had diminished significantly by the time of the hearing, but her own legal fees were grossly disproportionate to the value of the estate by that time; 5. "the plaintiff has been prepared to greatly dwindle the assets of the estate, in the belief that her excessive legal fees would not have to be met by her, but by the estate. She appears to have cared not about the impact this would have on the assets of the estate & in turn the beneficiaries of the estate"; 6. "a great injustice would occur to the beneficiaries if the estate was ordered to pay costs which would have been totally unnecessary if [the plaintiff] had been reasonable enough to negotiate with [the defendants] at the outset &, having known what the estate was worth, had kept her expectations to a less selfish level"; and 7. the plaintiff has sufficient assets to fund her costs and the costs of the defendants.

Plaintiff's submissions

1. As I have noted in [4] above, the plaintiff submitted that her costs should be paid out of the estate on the ordinary basis and the defendants' costs should be paid out of the estate on the indemnity basis.
2. It was submitted that the costs jurisdiction of the Court under Part 3 of the Succession Act in relation to family provision matters is more flexible than under UCPR r 42.1 and that, in some circumstances, it is appropriate for an unsuccessful party to have their costs paid out of the estate. It was submitted that this was such a case because: 1. although the plaintiff's claim was unsuccessful, it was not unreasonable, frivolous or vexatious and the claim was conducted appropriately; 2. the matter had been "marked by a failure by the Defendants to provide reasonable and complete information to the Plaintiff such that she could be confident of the extent of the estate and, therefore, what may constitute a reasonable offer". Specifically: 1. the defendants had failed to provide a certified copy of the grant of probate with the Inventory of Property annexed, the executor's affidavit setting out the estate's assets and liabilities and evidence of the current balance of the assets of the estate until 1 May 2019; 2. when those materials were provided, the value attributed to the two properties was significantly less than the amount for which those properties subsequently sold, although I note that the sale price would represent the full value of each property whereas the Inventory listed the value of the deceased's half interest. A third property was not listed on the Inventory at all. Subsequent searches by the plaintiff revealed that the third property had been sold in 2017; 3. the defendants delayed in providing detailed complete information about how the sale proceeds of that third property had been applied; 1. the plaintiff did not act unreasonably in failing to accept the defendants' offers, due to lack of detailed information about the value of the estate at the time the offers were made and/or an unreasonable condition attached to one of the offers that the plaintiff was not to further litigate the affairs of the deceased and his wife (the plaintiff's mother) unless she is prepared to personally fund the costs of such litigation; 2. the plaintiff had conducted the proceedings reasonably, including in issuing the subpoenas referred to in the defendants' submissions; and 3. by contrast, the defendants had conducted the proceedings in a manner that was unreasonable and/or increased costs, including by failing to comply with certain pre-trial directions, and by raising matters during the hearing that unnecessarily occupied time (such as a late application to call oral evidence from the deceased's wife, who resides in a nursing home and suffers from dementia).
3. I note that in their submissions in reply, the defendants disputed the allegation that they had failed to provide detailed information and asserted that it was the plaintiff who had resisted and delayed providing relevant evidence about her financial circumstances.
4. The plaintiff disputed that she had sought "the lion's share" of the estate. The plaintiff submitted that she had merely adduced evidence of her needs in order for the Court to determine the appropriate orders having regard to the matters set out in s 60 of the Succession Act.

Consideration and determination

1. I accept the plaintiff's submission that the Court's costs jurisdiction in relation to family provision matters is "more flexible than under [UCPR r 42.1]", in the sense that additional "liberality and discrimination" is to be applied in considering whether, having regard to all relevant circumstances, the overall justice of the case warrants departing from the usual rule in UCPR r 42.1 that costs follow the event. I have summarised the applicable principles above.
2. I also accept the plaintiff's submission that her claim was not frivolous or vexatious.
3. However, the plaintiff's claim was certainly not strong. All of the circumstances of the case that ultimately resulted in the claim being dismissed because the plaintiff had failed to establish that the deceased's will did not make adequate provision for her proper maintenance, education and advancement in life must have been clear to the plaintiff from the outset or from very soon after the commencement of proceedings: see Judgment at [192]-[212].
4. The parties' submissions devoted much attention to the question of the reasonableness or otherwise of the plaintiff's conduct in commencing and maintaining the proceedings rather than reaching a compromise with the defendants before commencing the proceedings or at an early stage. However, in all the circumstances of this case, I do not regard this as a factor that has any relevance in the exercise of the costs discretion over and above the consideration that the plaintiff's claim was not a strong one from the outset.
5. On the one hand, the plaintiff complains that she had difficulty obtaining a copy of the Inventory of Property annexed to the grant of probate and obtaining a detailed accounting from the defendants explaining how the proceeds of sale in 2017 of property owned by the deceased and his wife had been applied. On the other hand, the plaintiff was provided with the Inventory on 1 May 2019, very soon after these proceedings were commenced. Whilst the plaintiff may not previously have been aware of the 2017 sale, she must have appreciated that funds would have had to be raised from somewhere to pay for her mother's nursing home accommodation and medical care. Had she been more involved in her parents' care in the years prior to the death of the deceased, or had she chosen to engage in the discussions that the defendants sought to initiate prior to the commencement of these proceedings, the plaintiff would most likely also have appreciated that her parents' living expenses (including the costs of maintaining the remaining two properties) had exceeded their aged pension income for some time. The plaintiff demanded evidence and an accounting which she ultimately received through the evidence filed and served by the defendants: see Judgment at [133]-[155]. From at least 14 June 2019 when the first of such evidence was served, the plaintiff was aware that more than half of the sale proceeds had been applied to pay the bond required to secure the nursing home accommodation for the plaintiff's mother: see Judgment at [135].
6. On the one hand, the plaintiff's approach to the proceedings and to negotiations with the defendants to resolve her claim may well have been infected by an attitude that she was entitled to an equal share of the estate with her sisters: see Judgment at [212]. On the other hand, it may have been difficult for the plaintiff to resolve the proceedings from the end of June 2019 onwards except on the terms stipulated in the defendants' offer made on 4 July 2019 that the plaintiff agree not to further litigate the affairs of the deceased and his wife unless the plaintiff is prepared to personally fund the costs of such litigation. I accept the plaintiff's submission that this term was unreasonable. For example, it would have constrained the plaintiff's ability to make any family provision claim in the future in relation to her mother's estate in circumstances where the merits of any such claim or the circumstances that may be relevant to the questions of the costs of any such claim could not possibly be known. The deceased's mother is still alive.
7. I reject the defendant's submission that the plaintiff's evidence of her needs demonstrates that she was making a claim for "the lion's share" of the estate. I accept the plaintiff's submission that her evidence described her needs for the purposes of submissions being made on her behalf, and the Court ultimately determining, whether adequate provision had been made for her and, if not, what provisions should be made. The plaintiff's submission as to what provision should be made was that she should receive an equal share of the estate with her sisters: see Judgment at [22].
8. In my opinion, the level of costs incurred by the plaintiff in prosecuting her claim was disproportionate to the value of the estate. The plaintiff's costs of $143,600 (on the ordinary basis) amount to approximately 20.5% of the value of the estate as set out in the Inventory of Property, or approximately 23% of the value of the estate as estimated by the defendants as at the conclusion of the hearing.
9. It is neither necessary nor appropriate for the Court now to conduct an audit of the manner in which the proceeding was conducted on behalf of the plaintiff and determine whether or to what extent the high level of costs is attributable to the issue of subpoenas or requests for information criticised by the defendants, or other matters. In any event, the parties' submissions did not provide the level of detail that would be required to undertake such an exercise. It is sufficient to observe that the total amount of costs is objectively disproportionate to the modest value of the estate which had to be distributed amongst the beneficiaries named in the will in addition to any provision ordered in favour of the plaintiff. As will be apparent from the Judgment, the case did not raise complex issues of a kind that might have warranted costs being incurred in such a disproportionate amount. The costs incurred by the plaintiff were unreasonable in all the circumstances.
10. However, I reject the defendants' submission that the plaintiff incurred these costs as part of a conscious strategy to "greatly dwindle the assets of the estate, in the belief that her excessive legal fees would not have to be met by her, but by the estate". There is simply no evidence about what advice the plaintiff was given concerning potential costs orders if her claim did not succeed. There is no basis for assuming or inferring that she would have been advised otherwise than in accordance with the applicable principles that I have summarised above.
11. I do not accept the plaintiff's submission that the manner in which the defendants conducted the proceedings or the hearing materially contributed to the very high costs incurred by the plaintiff. Assuming that the defendants failed to comply with some pre-trial directions as the plaintiff submitted, the submissions did not identify how this was said to have increased the plaintiff's costs. It is correct that the defendants unsuccessfully sought to adduce certain evidence during the hearing, but that did not significantly increase the hearing time and the hearing still concluded within the three days that had been set aside. It is fair to say that time was taken by each party in cross-examining the other party's witnesses about matters of detail that ultimately had little to do with the merits and outcome of the claim: see Judgment at [44].
12. Taking all of those matters into account and applying the principles set out earlier in these reasons, I have concluded that the overall justice of this case does not warrant a departure from the usual rule that costs follow the event. The plaintiff's claim, which was not a strong claim from the outset, has failed. The defendants were required to incur the costs of defending the estate from the claim, and the plaintiff incurred very significant costs in prosecuting the claim. There is no reason in this case why the burden of those costs should be borne by the estate (and therefore by the beneficiaries) rather than by the unsuccessful plaintiff.

Conclusions and orders

1. For the reasons above, I make the orders set out in [6] above.

Endnotes

1. I note the statement to similar effect referred to by the defendants in Friend v Brien (No. 2) [2014] NSWSC 614 at [20] per White J (as his Honour then was).
2. Adopting the defendants' estimate (and noting that the plaintiff's estimate was approximately $8,000 less) and excluding the $181,861 which I declined to designate as notional estate for the reasons set out in [133]-[155] of the Judgment. 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: 04 November 2020