Slack v Rogan & Anor; Palffy v Rogan & Ors

Judgment 1HIS HONOUR: This judgment concerns the costs orders to be made in proceedings 2011/220317. In my reasons of 10 May 2013 I said prima facie the appropriate order was that Mr Slack, the third defendant, should pay Mr Palffy's costs out of the estate on the ordinary basis. 2In related proceedings 2011/247466, I revoked the grant made to the first and second defendants on 18 May 2011 and ordered that probate be granted to Mr Slack with liberty to Mr Abigail to join in to apply for a grant. In proceedings 2011/ 220317 I ordered that Mr Slack be joined as the third defendant. 3Mr Palffy seeks an order that his costs should be paid out of the estate. That order is opposed by Mr Slack on the basis of an offer of compromise made by the first and second defendants who were then the executors of the estate. 4The offer of compromise was dated 20 April 2012 and served on 24 April 2012. The offer was that the claim of Mr Palffy be compromised by payment to him of a sum of $130,000. Had that offer been accepted Mr Palffy would have been entitled to that sum and would have been entitled to his costs assessed on the ordinary basis up to the time the offer was made. Mr Palffy did not accept the offer. 5Accordingly, Mr Slack contends that pursuant to Pt 42, r 15 of the Uniform Civil Procedure Rules, Mr Palffy should be entitled to his costs assessed on the ordinary basis only up to 25 April 2012, and that Mr Palffy should pay the defendants' costs of his claim on the indemnity basis after that date. Ultimately, counsel for Mr Slack did not press for an order that the costs Mr Palffy should be ordered to pay pursuant to r 42.15(2)(b) should include the costs of the third defendant, Mr Slack. But he did seek an order that Mr Palffy pay to Mr Slack, who is now the executor (or at least entitled to be appointed as the executor) the costs of the previous executors in defending the proceedings from the time of the offer of compromise. 6Other issues concerning the orders for costs that should be made as between Mr Slack on the one hand, and the first and second defendants on the other, were resolved during the course of submissions. 7Counsel for Mr Palffy does not dispute that r 42.15 is applicable. Counsel submits that in determining whether the Court should order otherwise than provided for under r 42.15(2) the Court should have regard to the fact that costs of the family provision proceedings can also be ordered under s 99 of the Succession Act 2006 and that special principles can apply to the exercise of the general costs discretion in family provision proceedings. (See Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521 at 522; Jvancich v Kennedy (No. 2) [2004] NSWCA 397; Re Sherborne Estate (No. 2) [2005] NSWSC 1003; Moussa v Moussa [2006] NSWSC 509; Carey v Robson (No. 2) [2009] NSWSC 1199; Harkness v Harkness (No. 2) [2012] NSWSC 35 at [18].) 8Counsel for Mr Palffy also points to the following matters. The offer of compromise was served about six weeks after an unsuccessful mediation. At the mediation the plaintiff and the first and second defendants reached a conditional agreement on the settlement of Mr Palffy's claim for a sum of $200,000 with no order as to costs. Mr Slack's consent to that agreement was required, but was not forthcoming. 9The offer of compromise in the sum of $130,000 was served on 24 April 2012. The letter under cover of which the offer was sent did not refer to consent having been obtained from Mr Slack to that offer. I do not think that this is material to the exercise of the costs discretion or to the decision whether or not to make a contrary order under r 42.15(2). 10Mr Palffy immediately rejected the offer of compromise because in his view it was inadequate. Had he been minded to accept the offer, but was uncertain as the whether or not Mr Slack's consent to the offer was required, he could have, and no doubt would have, sought clarification. He did not do so. In fact, Mr Slack had agreed to the first and second defendants making the offer of compromise. Had Mr Palffy asked, he would have been informed that Mr Slack agreed to the offer being made, but having regard to his view as to the inadequacy of the offer, this was not a relevant consideration. Nor is it relevant to the exercise of the costs discretion. 11Another matter relied upon by counsel for Mr Palffy as to why there should be an "otherwise order" is that the provision ordered of $90,000 had regard to my assessment of the available estate after allowance for the parties' costs. Costs had substantially increased after April 2012. Counsel submitted that the extent by which the estate has been reduced by costs was not something that could have been reasonably foreseen by Mr Palffy, and had there not been a substantial reduction he could reasonably have expected to obtain a materially larger provision than he succeeded in obtaining. 12However, it was not said for Mr Palffy that at the time he rejected the offer of compromise he was unaware that proceedings for the revocation of the grant had been brought by Mr Slack. He must have been aware that if that claim was not resolved, there was a serious risk that the estate available to meet his claim would be reduced, not only by the costs of the family provision proceedings brought by him and by Mr Slack, but also by the costs of the proceedings for revocation of the grant. No doubt he could not have accurately estimated the extent to which the available estate would be reduced by reason of costs being incurred by other parties. That was only one of the imponderables he faced in deciding whether or not to accept the offer of compromise. 13The difficulty of accurately estimating the value of a claim for a family provision order is not a sufficient reason to depart from the prima facie position under r 42.15 (Hillier v Sheather (1995) 36 NSWLR 414 at 422-423; South Eastern Area Health Service v King [2006] NSWCA 2 at [83] and [84]; Vagg v McPhee (No. 2) [2012] NSWSC 187 at [16]-[22]; and Mather v Mather (No. 2) [2012] NSWSC 1264 at [9]-[17]). 14The uncertainty of the size of estate available to meet a family provision claim was only one of the imponderables Mr Palffy faced. It is not a sufficient reason to depart from the prima facie position under the rule. Nor would it be a sufficient basis to depart from that prima facie position that Mr Palffy may have acted reasonably in not accepting the offer. In fact, I think the offer was a substantial one, even if the estate had not been further substantially depleted by reason of costs. 15Mr Palffy's position was that he was simply not interested in the offer which, with costs, was valued by his solicitor at about $160,000. He had made his own offer of $210,000 inclusive of costs. The fact that he miscalculated, even if acting reasonably, is not a reason for departing from the prima facie position under the rule. 16The offer of compromise was made by the first and second defendants when they were the executors. 17The costs, which will be payable by Mr Palffy from 25 April 2012, will be payable to the third defendant, who has been, or is to be, appointed as executor in place of the first and second defendants. But I would not make an order which, in any event, could only be made under the general discretion under s 98 of the Civil Procedure Act 2005, or s 99 of the Succession Act 2006 for the payment of the third defendant's costs incurred in relation to Mr Palffy's proceedings. To do so would be to burden Mr Palffy with two sets of indemnity costs. 18I have regard to the fact that it was counsel for Mr Slack who took up much of the running of the defence of Mr Palffy's claim during the hearing. However, the matters dealt with by counsel for Mr Slack were also relevant to Mr Slack's own family provision claim. Mr Slack is, however, entitled to his costs on the ordinary basis of opposing Mr Palffy's application for costs. 19For these reasons I make the following orders in proceedings 2011/220317: