SUCCESSION – FAMILY PROVISION AND MAINTENANCE –INDEMNITY COSTS
– whether rejection of Calderbank offer unreasonable
– particular
difficulties in predicting family provision claims
Source
Original judgment source is linked above.
Catchwords
SUCCESSION – FAMILY PROVISION AND MAINTENANCE –INDEMNITY COSTS– whether rejection of Calderbank offer unreasonable– particulardifficulties in predicting family provision claimsSuccession Act 1981 s 41(1), (2), s 66Supreme Court ofQueensland Act 1991 s 114(1)Uniform Civil Procedure Rules 1999 R660(1)(a) and (b), R 661, R 667, R 668Barns v Barns (2003) 214 CLR 169Bowyer v Woods[2007] SASC 327CAG v Public Trustee of Queensland [2008] QCA252Calderbank v Calderbank [1996] Fam 93Coates v NationalTrustees and Executors Agency Co Ltd [1956] HCA 23(1956) 95 CLR 494(applied)Coffee v Bennett [1961] VR 246Dobb v Hackett(1993) 10 WAR 532
Re Findlay (1964) NZLJ 170
Kalejas v The
Minister for Justice and Customs [2001] FCA 1769
(2001) 111 FCR 442
King v Condon
[2009] QSC 67
Kozak v Matthews [2007] QSC 203
Latoudis v
Casey [1990] HCA 59
(1990) 170 CLR 534
McEvoy v The Public Trustee (1989) 16
NSWLR 92
Manly v Public Trustee of Queensland [2007] QSC 388,
(considered)
New South Wales TAFE Commission v Fines (1993) 32 NSWLR
358
Powell v Monteath [2006] QSC 24
Read v Nicholls [2004]
VSC 66
Re Shannon (1935) 35 NSWLR 516
Singer v Berghouse
[1994] HCA 40
(1994) 181 CLR 201 (applied)
Sherbourne Estate (No 2) [2005] 65
NSWLR 1003
Stephenson v Human Rights and Equal Opportunity Commission
(1996) 68 FCR 290
Vanvalen & Anor v Neaves & Anor [2005] NSWSC 1003
65 NSWLR
268
Vigolo v Bostin [2005] HCA 11
[2005] 221 CLR 191
White & Barron
[1980] HCA 14
(1980) 144 CLR 431
Judgment (170 paragraphs)
[1]
SUCCESSION - FAMILY PROVISION AND MAINTENANCE -INDEMNITY COSTS - whether rejection of Calderbank offer unreasonable - particular difficulties in predicting family provision claims
Mr A P Collins for the first and second respondents
[29]
Williams Graham & Carman for the first and second respondents
[30]
[1] By this judgment I hope to bring to an end an unfortunate dispute over the estate of Peter Charles Underwood ("the testator") who died on 9 May 2006, leaving an estate worth approximately $2.5m. The testator had given earnest consideration to the disposition of his property. He had consulted with his accountant and with his solicitor over a lengthy period and he was guided by their advice in the preparation of his final will. It was a difficult balancing act. He had to meet the moral obligations towards his business partners, (who had supported him for almost 20 years of his semi-retirement and retirement from the business) and the obligations to his children and his de facto wife.
[31]
[2] Two separate proceedings were commenced within one day of each other. By the first in time (No. 53 of 2007), three of the claimants required one clause in the will to be construed. Their preferred construction was not accepted but with the consequence that the costs of the proceeding exhausted the residuary estate which was to be shared by the claimants and their brother Gregory. The second was the subject proceeding wherein the Court was asked to adjudicate on the respective claims for further provision from the testator's estate. These reasons should be read in conjunction with my earlier reasons for judgment - [2007] QSC 256 and [2008] QSC 159.
[32]
[3] With some prescience for the adverse consequences, the testator expressed the wish that none of his beneficiaries "make any claims against or with respect to my estate". This wish was ignored by four beneficiaries and the two separate proceedings have now run their respective courses to completion. The Court's assessment has had the effect of increasing the benefit for two claimants - one to the extent of approximately $60,000 (which claim the executors now argue has abated) and the other to the extent of $30,000. If the three first named claimants were intent on pursuing claims for further provision (as seems to be the case) the construction issue could easily have been disposed of within the context of the statutory claims. Now the costs of pursuing the proceedings, much of which will be borne by the estate, will probably exceed $500,000. The costs are so disproportionate to the likely gains from the proceeding it calls to mind the comment of Palmer J in Sherbourne Estate (No 2); Vanvalen & Anor v Neaves & Anor[1] who said (at [16]):-
[33]
"While this litigation is of great importance to the parties themselves, it must nevertheless be borne in mind that this is not a commercial dispute between corporations, involving millions of dollars. It is a family dispute between people of quite modest means: the amounts which all three of the plaintiffs might reasonably have hoped to obtain by further provision from the deceased's estate could never have come anywhere near the sum of $600,000 which has been expended in this litigation. What has happened in this case is a dark stain on the administration of justice. One might wonder that anything has changed since Dickens' Bleak House."
[34]
[4] To spare the parties further expense and the prospect of contested costs assessments, I propose to fix the amount of costs payable to, or recoverable, from the estate. I do so pursuant to R 687 of Uniform Civil Procedure Rules ("UCPR") having received an independent assessment of costs from Hickey & Garrett, Costs Assessors.
[35]
[5] A new issue has arisen because of the untimely death of Peta Underwood who died on or about 1 September 2008. She is survived by her son, Benjamin, who was at the time of her death seven years of age. Her legal representative is her mother, Annette Underwood, who, pursuant to order dated 14 November 2008, is named as the first applicant in substitution for Peta. It will be convenient in considering the role played by Peta in each of the proceedings to continue to refer to her interest by her given name.
[36]
[6] The questions which now arise for determination are:-
[37]
1. Has the claim of Peta Underwood abated? If not, should the assessment be altered by reason of her death?
[38]
2. Should the unsuccessful claimants be ordered to pay costs and, if so, to what extent?
[39]
3. Should the successful claimants recover costs from the estate and if so, to what extent?
[40]
4. Should the successful claims be paid rateably across the whole of the estate, save for the exonerated gifts, or is some other order appropriate?
[41]
[7] By the date of Peta's death the outcomes of each of the four claims had been determined. The amount of Peta's entitlement had been assessed. All that remained was for the order to be expressed in terms which would allow the estate to be wound up.[2] In particular, Peta's entitlement was expressed as the value of a share in the business (equal to that of each of her brothers) or the equivalent monetary value and an additional $25,000 to cover her immediate financial needs.[3] That assessment of the level of Peta's entitlement was final, save for any correction to it pursuant to r 667 and r 668 of UCPR or by the operation of sub-sections 41(2), (3), (4) and (5) of the Succession Act 1981 ("the Act").
[42]
[8] Against that background, the respondents assert that no actual final order has been made and that Peta's statutory right under s 41(1) abated upon her death and in the absence of any final order her entire claim expired upon her death. As a consequence, the respondents argue that her estate is entitled to receive only the provision made for her in the will. Alternatively, they argue that if the action has not abated, the level of any further provision from the estate is limited to Peta's needs, taking into account the fact of her death. In such a consideration, they contend her needs were fully met by her legacy under the will and there was no warrant for making any further provision.
[43]
[9] Mr Jonsson of Counsel for Peta's estate contended that the assessment of her entitlement was a final order within the meaning of r 660(1)(a) and (b) of the UCPR. He further contended that s 41(1) of the Act confers upon an eligible applicant a statutory right which is capable of surviving the death of the applicant. He relies particularly on the express terms of the section; the breadth of the relevant discretion; the beneficial and remedial nature of the legislation requiring expansion application and full amplitude of its terms. He relies also on cases in other jurisdictions where such claims were allowed to survive the applicant's death, to which list of cases one can now add the recent Queensland decision of King v Condon[4].
[44]
[10] I should deal firstly with the issue as to finality.
[45]
[11] The applicant's claims were not final in the sense that there were no further orders had to be made. The pathway to finality required the taking of at least one further step at which particular issues were to be resolved. The making of the order on 15 July 2008 finalised which claims were successful and the quantum of the further provision to be provided by the estate to each of the successful applicants. As mentioned above, the assessment of Peta's claim was in two parts - firstly, equalisation with her brothers of the share in a business asset and secondly, an additional $25,000 allowance. The first of those alternatives could find expression either by recasting the terms of the will or by simply making a monetary provision. This was the point in requiring the further consideration which was still to be undertaken at the time of Peta's death.
[46]
[12] Rule 660(1) of UCPR provides that an order is made by being pronounced in court by the person making the order. The order was indeed pronounced in open court on 15 July 2008 but no order in those terms has yet been drawn up or filed as formally required by R 661. Hence the order cannot be enforced under the UCPR and it is susceptible to being varied or set aside pursuant to R 667. That, effectively, is what the executors now seek. But the right to do so has to be looked at in the context of the legislation which creates the right to make a claim for adequate provision.
[47]
[13] The scheme of the Act limits potential claimants to a person who is either a spouse, a child or a dependant (subsection (1)) with a dependant's right being further qualified (subsection (1A)). Subsections (2)-(5) provide the various ways in which the court may give effect to the provision it has ordered to be made. This may result in changes as a result of "any subsequent order" (subsection (4)) or the fixing of a periodic payment "at any time" (subsection (5)). Thus, it is clear that the primary order determining the provision to be made may be subject to changes as to the manner in which effect will be given to it. Subsection (10) needs to be considered. It provides:-
[48]
"(10) Upon any order being made, the portion of the estate comprised therein or effective thereby shall be held subject to the provisions of the order."
[49]
This subsection gives security to the claimant for whom the provision is made. For that security to be effective there would need to be certainty as to the portion of the estate which is subject to that statutory injunction. That point in this proceeding has not yet been reached such as to allow Peta's right to further provision to be enforced.
[50]
[14] In my view, the order of 15 July 2008 is not a final order.
[51]
[15] As to the question of abatement, the starting point is to determine whether the right to claim is a purely personal right or whether it is transmissible. It is, first and foremost, a right given by statute. The legal principles whereby the right is recognised, and given effect to, have been set out in paras [24]-[31] of my reasons for judgment [2008] QSC 159. I will not repeat those here, save to set out the express terms of s 41(1) which is the foundation of the statutory right. The subsection provides:-
[52]
"(1) If any person (the deceased person) dies whether testate or intestate and in terms of the will or as a result of the intestacy adequate provision is not made from the estate for the proper maintenance and support of the deceased person's spouse, child or dependant, the court may, in its discretion, on application by or on behalf of the said spouse, child or dependant, order that such provision as the court thinks fit shall be made out of the estate of the deceased person for such spouse, child or dependant."
[53]
[16] The jurisdiction of the Court to deal with the application depends upon a preliminary finding that adequate provision had not been made for the applicant. White v Barron[5]; Singer v Berghouse (No.2)[6]; Vigolo v Bostin[7]. If the necessary jurisdiction is found, the statutory right is for the applicant to receive such provision "as the court thinks fit". Remedying a breach of that right may be achieved in a variety of ways. The terms of the will may be varied to provide for a bequest of property, real or personal, or by imposing on the estate the obligation of a legacy which may be charged on estate property.
[54]
[17] Importantly, the cause of action for any breach of the right subsists from the date of death but its quantification will be subject to evidence about the foreseeable circumstances known, and the reasonable expectations held, as at the date of the assessment. In Coates v National Trustees Executors and Agency Co Ltd[8] Dixon J said:-
[55]
"But it is important to see what exactly is involved in that interpretation. It means that the court determining the application must look at the will which the testator leaves and the dispositions if any which it contains in favour of his widow or children as the case may be and consider whether they amounted to an adequate provision for her or their proper maintenance and support. But the very question what is proper maintenance and support involves the future of the widow or children to be maintained or supported. It is, however, the future stretching forward from the date of the testator's death and therefore considered as from that date. It involves what is necessary or appropriate prospectively from that time. To determine that question contingent events must be taken into account as well as what may be considered certain or exceedingly likely to happen. When a court is called upon to consider such a question many years after the date as at which the court must take its stand, all the advantage is available of knowing the events that have occurred. The intervening events may be taken into consideration because they suggest or tend to show what antecedently might have been expected. But they must not be outside the range of reasonable foresight. If all contingencies that might reasonably have been anticipated have been taken into account, it would be difficult to say that the actual occurrence of some event which antecedently no one could reasonably have foreseen shows that the maintenance or support was not proper or the provision therefor was not adequate. It is therefore impossible to treat actual intermediate occurrences as more than evidentiary facts. The ultimate question must remain one of adequate provision for proper maintenance and support as at the date of the testator's death."
[56]
[18] It follows from the above passage that the applicant's right, if it exists, crystallises at the date of the testator's death.[9] The question then arises, does such a claim survive under the survival of action legislation which, in Queensland, finds expression in s 66 of the Act as follows:-
[57]
(1) Subject to the provisions of this section and with the exception of causes of action for defamation or seduction, on the death of any person after the 15 October 1940 all causes of action subsisting against or vested in the person shall survive against, or, as the case may be, for the benefit of, the person's estate.
(2) ...
(4) The rights conferred by this section for the benefit of the estates of deceased persons shall be in addition to, and not in derogation of any rights conferred on the defendants of deceased persons by the provisions of the Supreme Court Act 1995, part 4 and so much of this section as relates to causes of actions against the estates of deceased persons shall apply in relation to causes of actions under those Acts as it applies in relation to other causes of action not expressly excepted from the operation of subsection (1).
[58]
[19] On behalf of the executors, Mr Collins of Counsel argued that Peta's claim abated because, by virtue of s 41(1), it was not enforcing an entitlement such as a debt or damages but rather it simply reflected a discretion that may or may not be exercised by a court. He relied particularly on the decision of Powell J in McEvoy v The Public Trustee[10] under the relevant New South Wales legislation. The terms of that legislation however differed from the Queensland section by expressly providing that an order may be made "in favour of a person then living". He relied also on the decision in Coffey v Bennett[11] which considered the impact of survival legislation in the Victorian context but that decision turned on the right of a trustee in bankruptcy to make the application. Though Scholl J there held that the claimant's right was a "personal right" the case is not authority in the circumstances which prevail here. Mr Collins also acknowledges that those decisions have been doubted in some later decisions, particularly in Re v Nichol[12] and in conflict with the earlier decision of In Re Shannon[13].
[59]
[20] On behalf of Peta's estate, Mr Jonsson of Counsel referred to a number of cases where McEvoy was not followed and in particular King v Condon (supra). He relied on the language of the Act in which the statutory discretion or power is broad and relatively unconstrained; where the purpose is beneficial and remedial and thus should be broadly construed. See Barns v Barns[14]. He relied particularly on the remarks of Long-Innes CJ in Eq who said in Re Shannon (at p 518):-
[60]
"The jurisdiction of the Court is based on the statute, and is limited to making such provision for the "maintenance, education and advancement" of the persons entitled to the benefit of the Act as the Court thinks fit. The claimant having died before any order could be made, it is obvious that no provision could be properly made for her future maintenance, education or advancement; nor do I think that in the case where the claimant has died after having in fact maintained herself without running into debt, even though on a scale less generous than he or she was entitled to require or expect, the Court ought to make an order after the claimant's death which would merely have the effect of swelling the estate which would pass under the claimant's will, or to his or her next-of-kin if intestate, and of benefiting persons who are not within the scope of the Act."
[61]
That passage notes two exceptions where the right to claim continues after the death of an applicant, namely where there has been a debt incurred and where the effect of a provision is not merely to swell the estate for the benefit of a person not entitled to claim. The presence of those exceptions suggests primarily that the claim is not abated though the quantum of the claim may be reduced.
[62]
[21] In CAG v Public Trustee of Queensland[15] the Court of Appeal approved a statement by Kenny J in Kalejas v The Minister for Justice and Customs[16] in which his Honour noted that the passing of survival of actions legislation abolished the common law rule that personal actions did not survive the death of a party and he referred to the observations of the Full Court of the Federal Court in Stephenson v Human Rights and Equal Opportunity Commission[17] where Wilcox J (Jenkinson and Einfeld JJ agreeing) said:-
[63]
"I do not think that common law rules are relevant to this case. Those rules were evolved by judges as necessary ancillaries to substantive common law principles, also evolved by the judges. They are meaningful only in relation to the common law actions to which they relate. Where a right of action is created by statute, guidance must be sought in the statute itself; a parliament that creates a cause of action may ordain as it pleases in relation to the cause of action's survival on death of a party. And the same principle applies in relation to a statutory entitlement that falls short of constituting a 'cause of action', as lawyers use that term, or a statutory proceeding...
[64]
The question whether statutory rights of this kind are to survive death, depends upon the intention of the legislature; there does not appear to be any general or presumptive rule; see Jones v Symes; Dean v Wiesengrund (citations omitted)."[18]
[65]
[22] In New South Wales TAFE Commission v Fines[19] the Court of Appeal of New South Wales determined that because the statutory right related to a financial entitlement, it was transmissible to the claimant's legal personal representatives. Handley JA said (at p 392):-
[66]
"Moreover, when a statute confers a discretionary power on a court or tribunal to make orders having substantive effect, the right to apply for such an order is not merely procedural. Such provisions also create substantive rights in the persons entitled, although such rights are not separately identified."
[67]
His Honour, relying upon Re Shannon (supra) referred to a right to make an application under the Act as a familiar illustration of these principles.
[68]
[23] The difference as to the nature of the statutory right and whether it was transmissible were considered by the authors in De Groot & Nichol; "Family Provision in Australia" 3rd Ed. who then concluded:-
[69]
"The true position seems to be that, while the right is not a property right, it is not a personal right either, notwithstanding the statements to the contrary in Coffee v Bennett,Luxton v Luxton and McEvoy v The Public Trustee. We agree with O'Halloran JA in Barker v Westminster Trust Co that it is an equitable right vested by statute. As such, the court is concerned with the enforcement of a statutory duty which does devolve to a personal representative, provided that the cause of action was subsisting at the date of death. It would seem to be essential that the claim has been filed in court for this to be the case."[20]
[70]
[24] In King v Condon (supra) de Jersey CJ considered the point and concluded that "the applicable cause of action arose on the stepfather's death, the claimant asserted it in her filed application, and upon her death, it survived for the (potential) benefit of her estate.[21]
[71]
[25] I respectfully adopt the approach identified by the authors of De Groot and Nichol and by Chief Justice de Jersey and hold that Peta's claim did not abate on her death.
[72]
[26] The next question is whether the assessment should be reviewed.
[73]
[27] Having taken the view that there is not yet any final order in respect of Peta's claim, the executors are entitled to seek a re-assessment. The executors argue that the court, having heard the evidence of Peta's death, must determine whether her entitlement under the will ($144,791) plus one quarter of the residuary estate was an adequate provision having regard to her now known limited life expectancy. They contend that the benefit was more than adequate provision for that two years and four months period of life after the testator's death. They rely upon the statement in Re Findlay[22] to the effect that "the court except in the exceptional circumstances should limit the provision made to a suitable amount with reference to the period between the date of the testator's death down to the date of the death of the applicant". This expression is consistent also with the view expressed in the number of cases referred to above.
[74]
[28] The starting point is to examine the basis of the further provision that was assessed prior to her death and to note the requirements of the legislation that the provision be for "the proper maintenance and support" of Peta. What is "proper" invites a consideration of a number of matters. In the original assessment, I made reference to Peta having equality with her brothers in respect to the business asset and her need for additional support in relation to her personal life. See paras [38]-[41] of Reasons for judgment.
[75]
[29] In reassessing Peta's entitlement now limited to what is "proper" support up to the date of her death, I should add to what I have previously expressed taking into account of her life as a child of the family in which the testator's involvement in the business was central. Though Peta's contribution to the business was minor, that fact was conditioned by the adverse behavioural problems which commenced in her teenage years. The bequest to her brothers had the character of their retaining a token interest in the business rather than being a genuine source of future income.[23] From this historical perspective, I see no reason to distinguish between Peta and her siblings in any entitlement to a benefit from the business. This benefit, I find, relates to a past obligation rather than future maintenance. The monetary equivalent of the value of that interest is the sum of $36,000.[24]
[76]
[30] The sum of $25,000 was to cover her "immediate financial needs" which were present at the date of the testator's death and which have been since satisfied by the expenditure of her own money or by support which she has received from her mother. The original provision was premised on the expectation that with rehabilitation and re-training Peta would be able to provide for herself in the future. Consequently, in my initial assessment I made no allowance for future ongoing maintenance beyond the period of her rehabilitation and re-training in the period between the death of the testator and Peta's own death. I am satisfied that she met from her resources, or created obligations which allowed her to meet the special needs for which the allowance was made.
[77]
[31] Accordingly, I am satisfied that Peta's untimely death has not reduced the level of the provision which I have previously assessed as being proper.
[78]
[32] There was at one time a perception that a claimant's costs, even an unsuccessful claimant, would be recoverable from the estate. That perception was dispelled a considerable time ago and now orders are commonly made, either disallowing costs for an unsuccessful applicant, or ordering such a claimant to pay costs. Costs in this jurisdiction have not been awarded on the traditional basis of "costs following the event", rather the question to be considered is whether the applicant's pursuit of the claim was reasonable. The authors in De Groot & Nickel "Family Provision in Australia" (supra) note that the usual orders are costs to be paid out of the estate on an indemnity basis for a successful applicant and no order for costs for an unsuccessful applicant. They note that in New South Wales and Victoria when an application is dismissed, the applicant is usually ordered to pay the costs of the respondent. The personal representatives would normally be entitled to indemnity costs out of the estate.[25]
[79]
[33] One obvious feature which results from costs being paid out of the estate is that the entitlement of a beneficiary can vary quite markedly during the course of the proceeding. Every step taken in pursuit of, or in resistance to, a claim diminishes the value of the estate and leads to uncertainty as to the level of entitlement. A rash claim by one applicant can sometimes spark a defensive response by other applicants. An ill considered challenge to a valuation of an asset might necessitate the seeking of formal (and expensive) valuations. Similarly, over zealous responses by the executors or their legal representatives can seriously consume estate funds in ways not apparent to the applicants. Consequently, for every action and reaction in a proceeding of this kind some part of the costs is borne by the estate and its value is thereby diminished. That cost is often paid by beneficiaries who played no part in the cost generating activity. There is consequently a need to ensure that unreasonable behaviour on the part of any party, or the pursuit of claims which have no reasonable prospects of success, makes that party liable to some costs sanction.
[80]
[34] This sentiment has been referred to in a number of recent cases. In Dobb v Hackett[26] Murray J said (at 540):-
[81]
"The courts should preserve in the minds of litigants, the conscious consideration that their behaviour may place the matter at risk as to costs if they refuse reasonable offers of settlement. The court should be careful not to foster the proposition that obstinacy and unreasonableness will not be punished by orders as to costs."
[82]
"In my opinion the legislature (in Victoria) has made it clear that in appropriate cases a costs order can be made against an applicant, and some of the old cases must now be approached with care. The old rule which, as I say, was a common practise not to award costs against the plaintiff who failed, can no longer be accepted as a general proposition."
[83]
In Bowyer v Woods[28] Debelle J (Nyland and Anderson JJ agreeing) undertook an examination of cases which led the Full Court of South Australia to conclude (at [68]):-
[84]
"There is therefore, a substantial body of consistent opinion as to the rules which ordinarily operate in relation to an unsuccessful application. The principles are 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 founded on a moral claim or obligation. While it is unnecessary to decide the issues in this case, the cases also suggest that the court may in it 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 applicant has been guilty of some improper conduct in the course of the proceedings."
[85]
Whilst there is no Queensland statutory equivalent to the Victorian provision referred to by Gillard J, the principles upon which the court's discretion is now exercised has been similarly refined in the manner expressed by the Full Court of South Australia. The rejection of a reasonable offer of settlement is now more commonly seen as a basis for either denying a successful applicant some part of his or her costs or indeed, ordering payment to the estate of part of its costs.
[86]
[35] This is consistent with the approach adopted by Palmer J in Re Sherbourne No 2 (supra), a case which gives rise to issues similar to those under consideration here. His Honour was concerned with the relevant civil procedure rules of New South Wales which express in more detail the general approach to costs. Notwithstanding that, he observed that family provision cases are different to those which attract the general rule that costs should follow the event. He said:-
[87]
"56. A claim under the FPA (Family Provision Act) is not quantifiable by the parties' legal advisers prior to judgment with anything like the prescience possible in a claim for a liquidated sum such as a contract debt, or even in a claim for unliquidated damages for personal injury or for future economic loss. There are statutory and judicial guidelines for the range of damages appropriate to various types of personal injury; expert accountants attempt to quantify damages for future economic loss by reference to historical financial information.
[88]
57. However, in a claim under the FPA the Court has to quantify what provision "ought to be made" for the applicant out of the deceased's estate "having regard to the circumstances at the time the order is made": S.7. Inevitably, that question involves a large element of subjective assessment by the Judge. Inevitably, on any particular set of facts, there would be a variety of answers given by different Judges...
[89]
58. There will be some FPA 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 an 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."[29]
[90]
[36] This expression finds support in the words of Gaudron J in Singer v Berghouse[30] who said (at p 522):-
[91]
"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 for 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."
[92]
[37] Those remarks, it seems to me, indicate the approach that I must take but noting that more recent cases suggest closer scrutiny of unsuccessful claims on the issue of costs. The general rule expressed in R 681 of the UCPR that costs should "follow the event unless the court orders otherwise" must give way to the special considerations in cases of this kind. The discretion generally to order costs and to fix costs must be exercised judicially on a proper factual foundation and explicable according to principle. As Palmer J summarised in Re Sherbourne No 2 (at [54]):-
[93]
"The fact that a plaintiff has recovered judgment in an amount less than an offer of settlement contained in a Calderbank letter does not automatically warrant the making of an order that the plaintiff pay the defendant's costs as from the date of refusal of the offer on an indemnity basis. While that circumstance undoubtedly has weight, all of the facts and circumstances of the case must still be taken into account in the exercise of the Court's discretion as to costs."[31]
[94]
[38] The respondents seek to recover costs from each of the applicants based upon the applicant's respective rejection of an offer which was more favourable than the outcome achieved. The respondents draw attention to offers and counter offers made in the context of court directed mediation. I have ignored the fact of any such offer having been made since by the force of s 114(1) of the Supreme Court of Queensland Act 1991, such offers ought not to have been drawn to my attention unless all parties to the dispute agreed, and there was no such agreement. Nonetheless, counsel on behalf of the respondent refers to the Practice Direction No.8/2001 as imposing a positive duty on the parties to make proper efforts to resolve the claims. The respondents contend that applicants who ignore reasonable offers do so at the risk of incurring costs sanctions beyond simply not receiving ones costs. Likewise, I have ignored the fact that a bulk offer was made to all claimants, leaving them to agree among themselves. An offer of that kind has no efficacy in persuading the court that its non-acceptance was unreasonable.
[95]
[39] The respondents made offers to each of the applicants in a form compliant with Chapter 9 of Part 5 of the UCPR and as well in terms appropriate to a "Calderbank offer"[32]. They did so because of a perceived difficulty in the treatment of offers in Family Provision Applications fitting within the requirements of Chapter 9 of UCPR. The same point was considered in Kozak v Matthews[33] by Helman J who favoured the view that the offers made there as Calderbank offers. Given the dual approach adopted by the respondents, the distinction is of no moment in my consideration. I respectfully agree with the approach of Helman J and will, for convenience, simply refer to the Calderbank offers.
[96]
[40] Some argument was made that even the individual offers lack certainty unless, as part of the offer, the amount was exonerated from other impacts. I reject this argument. In the fluid state of costs being incurred by four claimants and by the respondents, the executors would have great difficulty in formulating individual offers which could be exonerated from the impact of orders yet to be made.
[97]
[41] In respect of each applicant, Calderbank offers were made which I will now consider.
[98]
[42] Peta was the first to initiate a claim for further provision. She has succeeded in her family provision application but to an extent less favourable than the Calderbank offer made on 12 December 2007. That offer was for the amount of the specific legacy of $150,555.74 together with interest which had accrued thereon plus $101,000 plus costs on an indemnity basis. Under the will that specific legacy had to remain under the control of trustees but used for Peta's benefit.
[99]
[43] By my assessment, Peta was entitled to receive a monetary equivalent to the share in the business bequeathed to each of her brothers, plus an additional sum of $25,000. In combination, the value of the assessment is considerably less than the sum of $101,000. The question then is whether her refusal of the Calderbank offer was so unreasonable in the circumstances as to justify the imposition of an adverse order for costs.
[100]
[44] In her counter offer, and in the articulation of her claim in evidence before me, Peta sought provision at a level which effectively allowed for a benefit equivalent to a residence and a motor vehicle. Having regard to the available estate at this time and the claims of other beneficiaries there was an air of unreality in her approach. This may have coloured her consideration of the Calderbank offer but I have come to the view that her rejection of it was unreasonable. At that time the residuary estate had been expended on legal costs in an application initiated in part by her; there was no dispute about the value of the estate property; it was obvious that costs of any continuation of the proceedings to trial would seriously deplete the entitlement of other beneficiaries. This lack of appreciation of the extent of her true entitlement and the reckless indifference to the rights of others leads me to conclude that she ought to contribute to the respondents' costs on an indemnity basis after the date of the Calderbank offer but she should have her costs on an indemnity basis up to that date.
[101]
[45] Fixing the contribution to the respondents' costs requires an assessment of the relative contributions each application made to the costs of the respondent defending the claims. Having presided at the trial and having some appreciation of the evidence which the respondents had to generate to respond to their respective applications, I propose to apportion the costs on a percentage basis. This exercise is somewhat arbitrary but is one that would in any event have to be undertaken by a costs assessor in respect of major individual items e.g. counsel's fees, travel expenses and preparation of affidavits. In this regard, I would assess Peta's contribution to the totality of the respondents' costs at 40%, Derek and Scott at 10% each and Annette at 40%.
[102]
[46] Peta's costs on an indemnity basis, up to the date of the Calderbank offer, have been assessed by independent cost assessors at $47,283.89.[34] The respondents' costs after the date of the Calderbank offer, assessed on the indemnity basis, a total of $93,047.02.[35] The assessment of projected further costs for the respondents total $18,612 but not all of these should be taken into account. Some part of these costs will have to be incurred whether or not settlement had been achieved. I will allow $10,000 as the amount of future expenditure which would have been avoided by acceptance of the offers. The respondents' claimable indemnity costs should be fixed at $103,047.02. A significant part of these costs were incurred in the respondents' unsuccessful post trial attempt to argue that Peta's claim had abated and to contend that she, by reason of her death, was not entitled to a further provision. Some adjustment is necessary to take account of the respondents' lack of success on the issues. I do so by reducing the extent of Peta's contribution from 40% of the costs to 30%. This calculates to a contribution of $30,914.23. Setting that amount off against the costs due to Peta results in her being entitled to recover from the estate costs, which I fix in the sum of $16,369.66.
[103]
[47] Because the claims of Derek and Scott were similar, and their conduct in pursuing the claims virtually identical, it is convenient to deal with their cost issues together. Neither of them seeks costs from the estate but they resist the executor's claims that they be ordered to pay the executor's costs incurred in resisting their applications. The executors refer to and rely upon offers to settle made at various times during the course of the proceeding.
[104]
[48] The first of these were offers made for the purpose of mediation which, by the force of s 114(1) of the Supreme Court of Queensland Act 1991, cannot be referred to.
[105]
[49] The executors then refer to the applicant's refusal to accept two formal offers of settlement made respectively on 23 November 2007 and 20 December 2007. The first, in terms identical for each of the applicants, offered an amount less than the applicant's entitlement on the face of the will. Each applicant rejected it and that rejection should not have any impact on costs.
[106]
[50] The second offer was in terms which had the effect of each applicant receiving their respective entitlements on the face of the will plus an additional $1,000 plus costs on an indemnity basis. As a result of my dismissal of each application, the outcome is less favourable than the offer. Prima facie, the respondents are entitled to seek the entire costs of resisting their claims and particularly indemnity costs after the date of the offer unless another order for costs is more appropriate. The extent of their contribution to the respondents' costs I would assess at 10% each[36].
[107]
[51] The reasonableness or otherwise of their conduct has to be assessed on the whole of the evidence which includes a reference to the level of the open offers each of them made to the respondents. Those offers had to be considered in the circumstances that their entitlements had been reduced by the loss of the residuary estate to legal costs and the ongoing costs of the continuation of the proceeding which would further reduce the entitlements of other beneficiaries. In the case of Derek the offer was a sum of $280,000 plus indemnity costs - almost $100,000 more than his specific legacy allowing $150,000 for his share of the proceeds of sale of the residence at approximately $36,000 for the value of the 1/6th share of the testator's interest in the business.[37] In the case of Scott, on the same basis the offer was almost $60,000 more than the equivalent legacy.
[108]
[52] Derek contends that as the Calderbank offer required him to withdraw his claim for the further provision of $1,000 and indemnity costs, he did not behave unreasonably in rejecting it. This offer was the first genuine offer made to him and it was made only a short time before the trial by which time he had incurred substantial legal costs. He submits that his application was reasonably arguable and he refers to cases where unsuccessful claimants either received costs or at least did not have to pay the respondent's costs.
[109]
[53] Similarly, Scott contends that as the relevant Calderbank offer was only roughly equivalent to his entitlement it was not unreasonable for him to reject it. The claim was not frivolous or vexatious and there were no adverse findings about his conduct in the reasons which explained the rejection of his claim. His making the claim did not add significantly to the respondents' costs necessarily occasioned in resisting the successful claims.
[110]
[54] Counsel for each of the claimants referred to the remarks of Gaudron J in Singer v Berghouse (supra) and to the remarks of Debelle J in Bowyer v Woods (supra). They draw attention to the approach of McMeekin J in Manly v The Public Trustee of Queensland[38] who, despite finding "powerful reasons" for the claimant having to bear the burden of costs, in fact made no such order.
[111]
[55] In my view, neither claim had any reasonable prospects of success and ought not to have been instituted. The respondents made their views clear from the start that they would be seeking costs in the event these claims were dismissed. The Calderbank offer, though for a small amount above entitlement, was a reasonable one particularly as it allowed for indemnity costs. It followed mediation and an earlier offer where again the claimants were put on notice about costs. The circumstances here were quite different to that considered by McMeekin J in Manly v the Public Trustee of Queensland where the estate was very small and considerations of the overall justice of the claimant's position was quite different.
[112]
[56] Having regard to the costs pressures which the applications impose on the entitlements of other beneficiaries, and having regard to the fact that they had participated in an unsuccessful argument on the construction of the will which also reduced the entitlement of another beneficiary as well as their own, their rejection of the Calderbank offer was unreasonable. The prospects of the success of each of these claims when weighed against the costs of litigating it, points very clearly to the fact that the claim should not have been instituted. Having done so, the claimants were committed to pursuing mediation. However, there was no warrant, in my view, for their continuing the claims after the Calderbank offer. Each of these claimants should contribute 10% to the respondents' indemnity costs after 20 December 2007. These costs I have fixed at $103,047.02 and the contribution of Derek and Scott will thus be $10,304.70 each. I propose to order these amounts be paid from their respective entitlements.
[113]
[57] Annette, successful in her claim, seeks costs from the estate on an indemnity basis. The respondents oppose the making of such an order on the basis that the assessment of her claim is less than the Calderbank offer made on 21 December 2007 to the effect that she receive an additional sum of $40,000 together with indemnity costs to that date. They submit that her rejection of that offer demonstrated a generally unreasonable approach typified by her subsequent offer to settle for a much larger amount. The respondents point also to Annette's late disclosure of relevant material, particularly relating to her property dealings in favour of her children. They point also to the conflicting views she expressed about making a claim at all and to the increased work this occasioned the executors by her lateness in filing the claim.
[114]
[58] Mr Morzone of Counsel for Annette, contended that in the special jurisdiction of family provision and having regard to the legislative intent in the relevant sections referred to above, principles concerning costs differ from those applicable in ordinary civil jurisdiction. He picked up on the theme of the "overall justice" of the claim as referred to by Gaudron J in Singer (supra). He referred also to the remarks of Mason CJ in Latoudis v Casey[39] to submit that costs orders are compensatory and not punitive,[40] and this character remains even in the "offer to settle" rules. He contended in the circumstances here Annette's rejection of the 21 December 2007 offer was not unreasonable; that the difference between the amount offered and the ultimate assessment was too small to require her to abandon the claim when other claimants were pursuing theirs; and that it was reasonable for her to remain involved to protect her interests.
[115]
[59] I have difficulty in accepting this submission. Annette's interests would have been well protected by an agreement with the executors and by the effect of s 41(10) when an order was made. The other claims were unlikely to so deplete the estate that a settlement at this level would have been at risk. Also, adverse cost orders made as a consequence of the unsuccessful pursuit of a claim in the face of a reasonable offer cannot be classified as punitive. They are, indeed, compensatory for the successful party.
[116]
[60] Annette also seeks to be protected from costs incurred by meeting the partisan and aggressive conduct of the respondents. She points firstly to the hearing on 6 December 2007 in which the respondents brought a pre-emptive application suggesting a lack of good faith in her presenting a claim and in circumstances where she was not obliged to file any further material until 7 December 2007. Secondly, the reopening of the trial in May 2008 to canvas the consequence of Annette's loss of her local government position was unreasonable and unnecessary.
[117]
[61] Both these complaints are, in my view, completely justified. There was no useful purpose to be served by the first application and the reopening rehearsed issues that had been raised at the trial and the material new facts ought to have been dealt with by a simple affidavit. Further, the opposition to Annette's claim was undertaken with greater intensity than was really necessary, having regard to the nature of her claim. This resulted in members of her family being called unnecessarily to answer queries about the intra-family dealings. The remarks I made earlier about the obligation on claimants to consider the nature of the estate and the impact of costs on the entitlements of beneficiaries apply with greater force to executors and those who advise them. Where, as a consequence of over zealous defence of a claim or partisan behaviour by executors, claimants are forced to incur unnecessary costs then adjustments to costs orders may be required in the pursuit of "overall justice" which must inform discretionary decision making.
[118]
[62] Turning then to the competing consideration, I regard Annette's pursuit of her claim as not being as straightforward and cooperative as it ought to have been. However, that did not, in my view, justify her being put to the additional expense of meeting the two unnecessary applications brought by the executors. I regard her rejection of the Calderbank offer as unreasonable in the circumstances and for this reason, she should not have her costs paid after the date of that offer. She should however recover indemnity costs up to that date and contribute to the executors' costs thereafter. The contribution, which I would have assessed at 40% of the total, will be reduced to 30% to take account of the unnecessary costs occasioned by over zealous conduct of the respondents. I fix her indemnified costs at $75,305.88.[41] I fix her contribution to the executors' costs at $30,914.23. Setting off this amount against her costs entitlement, I propose to order that she recover from the estate the sum of $44,391.65 for costs.
[119]
[63] As mentioned in my reasons 2008 [QSC] 159, certain specific bequests have, by agreement, been exonerated from the impact of these proceedings. Different submissions have been made as to how best to implement the additional provisions which have been assessed. The extra provision that each of the successful claimants should be treated as an augmentation to the specific bequests under the will. The successful claimants submit they should receive the additional monetary entitlements as a specific legacy exonerated from any impact of costs orders which might diminish the augmented bequests. The unsuccessful claimants contend that the additional provisions and the impact of costs orders should fall rateably across the whole estate.
[120]
[64] The respondents argue that the business assets bequeathed to Louis and Glen Underwood should be exonerated from any such impact to give effect to the demonstrable wishes of the testator and because as beneficiaries they are "victims of the approaches made by the claimants". The same claim could be made on behalf of Gregory. In terms of priority, I see no reason to distinguish between him and Louis and Glen who had been the major beneficiaries under the will.
[121]
[65] In circumstances where there are multiple claimants, some successful, some unsuccessful, and where the impact of legal costs is so detrimental it is difficult to conceptualise where justice resides for the beneficiaries who took no part in the proceedings. Ultimately, the notion of "overall justice" to which some decided cases make reference, must be considered in the light of all the circumstances, including the fact of the litigation and its impacts. In short, it means the gifts, which the testator intended to bestow on those beneficiaries, did not have the value at which they were originally assessed. The gifts he intended to bestow on the unsuccessful claimants have been even more reduced by the incidence of legal costs and the imposition of an order to pay part of the respondents' costs. Also, the major beneficiaries have had their interests protected by the executors fulfilling the duty to uphold the will.
[122]
[66] By s 41(3) of the Act "the incidence of the payments ordered shall, unless the court otherwise directs, fall rateably upon the whole estate of the deceased person..." Thus, it becomes a matter of discretion for the court. Do the needs of the successful claimants or the economic hurt to the non-party beneficiaries require special consideration in this case? The basis upon which the executors suggest that the unsuccessful claimants should bear the greater burden is because of their conduct. Whilst I have already noted that the construction of the will issue could have been dealt with in the context of this proceeding, and have found that the unsuccessful claims really had little chance of success, these are matters of judgment on which minds may differ. But I find nothing in the personal conduct of the claimants generally which warrants my making an order different to the broad thrust of s 41(3).
[123]
[67] The appropriate course, it seems to me, is simply to make an order providing for the respective extra provisions which are payable to Peta and Annette rather than attempting to change the terms of the will. On the assumption that costs and administration expenses have exhausted the residuary estate, those extra provisions and the incidence of costs should fall rateably across the whole of the estate.
[124]
1. From the estate of Peter Charles Underwood (deceased), I order that the respondents' pay the sum of $61,000 to the first respondent, Annette Underwood, as administrator ad litem, to hold the said sum on trust for the benefit of the estate of Peta Underwood (deceased). The receipt of Annette Underwood shall be sufficient discharge for the respondents.
[125]
2. The claim of the second applicant, Derek John Underwood, is dismissed.
[126]
3. The claim of third applicant, Scott Andrew Underwood, is dismissed.
[127]
4. From the estate of Peter Charles Underwood (deceased) I order that the respondents pay to the fourth applicant, Annette Marie Shepherd, the sum of $30,000.
[128]
5. I order that the respondents pay to the first applicant costs fixed in the sum of $16,369.66.
[129]
6. I order that the respondents pay to the fourth applicant costs fixed in the sum of $44,391.65.
[130]
7. I order that the second applicant pay to the respondents costs fixed in the sum of $10,304.70, which sum may be deducted from the second applicant's entitlement under the will of Peter Charles Underwood.
[131]
8. I order that the third applicant pay to the respondents costs fixed in the sum of $10,304.70, which sum may be deducted from the third applicant's entitlement under the will of Peter Charles Underwood.
[132]
9. For the purposes of section 52(1)(e) of the Succession Act 1981, the rate of interest payable on any legacies shall be that rate as derived from time to time by the first respondents on the investment of the proceeds of sale of the property referred to as Granadilla in paragraph 3(f) of the last will of the deceased.