This is my second judgment in these proceedings. It deals with questions of costs. In the Court's first judgment the Court made orders declaring property in the defendant's name to be part of a deceased estate but making orders for further provision out of the estate in favour of the defendant: Wardle v Wardle [2021] NSWSC 1529 ("the principal judgment"). Events, matters and persons are referred to in both judgments in the same way and they should be read together.
The parties have given the Court a skeleton outline of submissions on issues of costs. These submissions raise four issues. These issues are: first, what costs orders should be made as between the parties; secondly, whether costs-capping orders should be made; thirdly, whether time to pay should be given; and fourthly, whether any special orders should be made in relation to the defendant's costs because of the referral of Mr Pickering's conduct to the NSW Law Society.
I will deal with the costs-capping orders first. The Court's jurisdiction in family provision cases to deal with costs-capping is well known. I have set out a comprehensive summary of that jurisdiction in the matter of Wilson v Porada; The Estate of Peter Wolfgang Porada, late of Pericoe (No. 3) [2018] NSWSC 60.
More recently, the Court has confirmed the practice of costs-capping orders in Cooper v Atkin [2020] NSWSC 828 (per Hallen J) at [69]; Olsen v James [2020] NSWSC 1015 (per Parker J) at [152]; and Poche v Poche [2020] NSWSC 835 (per Henry J) at [326] ("Poche"). In Poche, Henry J stated that "[t]he Court has the power to make an order capping costs in family provision proceedings retrospectively at the end of a hearing and in cases where the value of the estate is greater than $500,000."
The issue of costs-capping was raised by the Court during the hearing. It was raised in the principal judgment, and it is specifically raised in the Supreme Court Family Provision Practice Note No. SC EQ 7, clause 24. So, all parties are on notice of the possibility of such orders being made.
The costs claimed by the plaintiff at the hearing were $130,000 on the basis set out in my principal judgment. In the principal judgment I indicated that there should have been costs savings on both sides because Court had confined the hearing of the case to two days rather than the originally planned three days. As I have indicated to Mr Morrison of counsel appearing for the plaintiff, Roderick, this morning, I was somewhat surprised that initially Mr Smith's present claim for costs was higher than that original figure of $130,000. It appeared to the Court that no reduction in costs had occurred due to the saving of one day of hearing and extra fees were being charged for the costs argument, which the Court said should be undertaken on an economical basis.
Mr Morrison took instructions this morning about these issues. As a result, the position of the solicitor for the plaintiff was thereafter modified, which the Court was pleased to see. The Court made considerable efforts at the hearing to try and compress the three days for which the case had been listed into two days, in order to effect costs savings on all sides. The Court announced this objective on the first day of the hearing. The Court expected, as a component part of its costs-capping jurisdiction, that some of those economies would also have been brought to bear in real time. This should have resulted in a reduction of legal costs from the time the Court said at the hearing that it wanted to compress the proceedings into two days.
The Court can approach the making of a cost-capping order, somewhat similarly to Civil Procedure Act 2005, s 98(4)(c), by looking at the matter on an impressionistic basis. Taking into account the early warnings of the need for economy, the relative size of the plaintiff's and the defendant's legal costs and the shortening of the hearing of the proceedings by one-third, I have decided in the circumstances that it is reasonable to cap the plaintiff's costs at the maximum figure of $120,000. It will not be necessary to cap the defendant's costs. They will be dealt with in a different way.
The next question is what orders for costs should be made as between these two parties. The law is well-known that the Court may award costs out of a fund to a party if the expenditure of costs resulted in a benefit to the common property represented by the fund and the expenditure has been reasonably incurred: Permanent Trustee Co v Redman (1917) 17 SR (NSW) 353 at 360 ("Redman"). That principle can be difficult to apply where a small fund or estate is in issue. That is why costs-capping orders are sometimes made.
But in my view, this case does not really fit into that category. Although Roderick's expenditure of costs did benefit the estate, this is also a family provision case involving direct competition between two parties for a single fund. Other relevant considerations include that the claim on behalf of the estate to set aside the conveyancing transaction from the deceased to the defendant occupied a little over half of the time in hearing the proceedings, and the competing family provision claims occupied the rest of the hearing. Another relevant consideration is that the fund was legally no longer in the estate (though in equity it still was) but had become the defendant's home.
As a result, the contest in these proceedings more resembled an inter partes dispute between siblings, in which one sibling was seeking a legacy from the estate and the other sibling was seeking to retain the accommodation in which she lived and was substantially successful in that endeavour.
Mr Morrison has rightly emphasised that the usual order in an estate case is that the parties' costs be paid out of the estate. He has emphasised the modifications through the costs-capping orders and the fact that no offers of settlement compliant with Calderbank principles have been made in the proceedings. And he has emphasised the plaintiff was wholly successful in setting aside the questioned transfer from the deceased to the defendant. But the defendant had, as my principal judgment made clear, a strong family provision claim against the deceased's estate, and succeeded subject to the relatively small legacy I have given to the plaintiff.
Because of the somewhat different nature of this contest, it being more an inter partes contest than a typical estate dispute about a fund, it is not a matter in which I should simply apply the estate principles, exemplified in Redman. Mr Morrison says I should recognise the plaintiff's success in setting aside the unconscionable transaction aspect of the case, which took slightly more than half the time. But recognition also needs to be given to the fact that the defendant always had a strong family provision case, which the plaintiff should have recognised from the beginning.
Doing the best I can in this unusual combination of circumstances, I will award the plaintiff just under two-thirds of his costs. I capped the plaintiff's costs at $120,000. Two thirds of that would be $80,000. I am going to award just under that amount in costs to the plaintiff, which is the sum of $75,000. So effectively, the plaintiff is getting an award of about 62.5% of his costs. The plaintiff will therefore get a total award of $150,000. This also reflects the necessary proportionality between the legacy which the plaintiff will receive and the plaintiff's costs in achieving that legacy.
Finally, I go to the question of the defendant's solicitor's costs. I have raised with Mr Blank the possibility of making orders preventing Mr Pickering enforcing his claim for costs against the property recovered until the NSW Law Society determines the matter, which the Registrar of the Court has referred to the NSW Law Society. Mr Blank has put submissions against that position. The Court was contemplating making a general order imposing a moratorium on Mr Pickering recovering costs against the defendant before the outcome of the NSW Law Society's inquiry into the matters referred to in the principal judgment.
A part of the costs in this case has arguably been occasioned by the matters that have been referred to the NSW Law Society. The Court raised with Mr Blank why his solicitor's recovery of costs should not await the outcome of the referral of Mr Pickering's conduct to the Law Society. The parties had to litigate the setting aside of the Macquarie Park property transaction, as distinct from a simpler family provision claim.
Mr Blank submits that even if no criticism could be brought against Mr Pickering's legal advice, or if he had not acted for both parties, the transaction would still have gone ahead because of the deceased's apparent determination to make the gift, the plaintiff would still have tried to set aside the transaction, and the parties' costs parties would still be of their present order.
That is part of a possible counterfactual. But the rest of the likely counterfactual is that, had the plaintiff attempt to set aside the transaction, he would have been likely to fail, resulting in a costs order against the plaintiff on that significant issue. This would have considerably strengthened the defendant's financial position resulting from the proceedings. True it is the defendant would have faced the same competing family provision applications, but in that contest she prevailed.
In an estate of this size, the defendant's total legal costs of conducting a family provision claim would be acceptable in the range of about $60,000 to $80,000. So, I will therefore order that Mr Pickering is not able to recover costs of more than $80,000 plus counsels' fees and other disbursements pending the outcome of any investigation by the NSW Law Society into the matters referred by the Court for investigation.
[2]
Two Additional Matters
The orders set out in [19] above were pronounced in open Court in this form, as "plus counsels' fees and other disbursements" (emphasis added) pending the outcome of any investigation by the NSW Law Society into the matters referred by the Court for investigation. But upon settling the orders in Chambers, the Court perceived the Court had made an unintended error in pronouncing the orders that did not reflect the Court's reasons for decision. The order will accordingly be entered, as it was originally intended by the Court, as "inclusive of counsels' fees and other disbursements" (emphasis added), so the limit on recovery accords with the maximum amount of legal fees which the defendant would have been likely to have incurred in a contested family provision case.
After pronouncing the orders, the Court heard submissions about whether the defendant should have time to pay the legacy, which had been ordered to be charged over the Macquarie Park property. She had indicated in written submissions on her behalf that she needed time to raise the funds. As a result of those submissions the Court decided to order that $75,000, representing the legacy itself should be paid in the following two tranches, $75,000 within 120 days of these orders, and further $75,000 within 240 days of these orders. And the Court granted liberty to apply to the defendant to seek further time. But the Court indicated that the grant of any further time would be an indulgence and any request for such an indulgence would be likely to be at the defendant's own expense.
Given the additional time afforded to the defendant to pay the legacy and costs payable to the plaintiff, the Court also decided to grant the plaintiff a right to interest at Civil Procedure Act 2005, s 100 rates, rather than the lower rates of interest due on unpaid legacies under the Probate and Administration Act 1898.
[3]
Conclusions and Orders
For these reasons the Court makes the following declarations, orders and directions:
1. Order that the plaintiff's legal costs are capped in the maximum amount of $120,000;
2. Order the defendant to pay $75,000 (or 62.5%) of the plaintiff's legal costs;
3. Order the defendant to pay the plaintiff the total sum of $150,000, being the legacy of $75,000 ordered in the principal judgment and the sum of $75,000 for costs referred to in Order (2), in the following two tranches:
1. $75,000 within 120 days of these orders; and
2. A further $75,000 within 240 days of these orders.
1. Order that the defendant pay interest at rates to be calculated under Civil Procedure Act 2005, s 100 in respect of any amounts not paid in accordance with the timetable prescribed in Order (3);
2. Order that the solicitor for the defendant, Mr Pickering, may not recover from the defendant more than $80,000 (inclusive of counsel's fees and other disbursements) pending the outcome of any investigation by the Law Society into the matters referred by the Court; and
3. Grant the defendant liberty to apply for four months from today, if the defendant requires further time to pay the amounts referred to in Order (3).
[4]
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Decision last updated: 20 December 2021