Wheatley v Lakshmanan

Judgment

1. HER HONOUR: On 16 May 2022, I published reasons for judgment on an application brought by Vittoria Alexis Lakshmanan Wheatley (one of the two daughters of the late Dianne Victoria Lakshmanan) for construction, or in the alternative rectification, of the deceased's last Will dated 25 August 2008 and for provision or further provision out of the estate or notional estate of the deceased (Wheatley v Lakshmanan [2022] NSWSC 583). The first defendant, Regina Erin Lakshmanan, is the deceased's other daughter and executor of the deceased's estate. (The second and third defendants are the corporate entities which held the respective commercial properties at The Entrance referred to in the judgment.) For convenience, I will adopt the abbreviations used in the principal judgment.
2. For the reasons set out in the principal judgment, I found against Alexis on the construction of the deceased's Will and her claim for rectification of the Will. As to the family provision claim made by Alexis, I found that there had not been adequate and proper provision made for Alexis (even taking into account the provision made for Alexis during the deceased's lifetime) and I concluded that the appropriate and proper provision for Alexis was a legacy in the sum of $820,000, in lieu of the provision made for her in the deceased's Will. I raised concerns as to the magnitude of the costs that had been incurred in the proceeding (see at [410]), having noted that Alexis had rejected an open offer made following a mediation of the dispute; and indicated (at [415]) a preliminary view that it might be appropriate to place a significant cap on such costs (and that Alexis might bear her own costs of seeking the tax advice, since it seemed to have been for her personal interests that this was sought). I made no order as to costs at the time, with directions for the parties to file brief written submissions on that issue. Those submissions have now been received. Accordingly, I now address the sole remaining issue in the proceeding (the vexed issue of costs).

Summary of parties' positions as to costs

1. By way of summary, the competing positions as to costs are as follows.
2. Alexis seeks orders: that her costs be capped at $456,000 (which it is noted is the total of the defendants' costs, rounded down to nearest $1,000), which order it is said would make some allowance for the fact that Alexis' success was limited to her claim for a family provision order; that there be a gross sum costs order in favour of Alexis in that amount; and that there should not be an adverse costs order against her in favour of the defendants.
3. The defendants contend for a rather more complicated costs regime, namely that: Alexis pay 20% of the defendants' costs; that Alexis should be paid 80% of her costs (calculated on the ordinary basis, and subject to there being a cap) up to a particular point of time (as to which see below), determined by reference to offers made by the defendants; and that, after that time, Alexis pay the defendants' costs on the indemnity basis.
4. The alternative dates put forward by the defendants are: 1. 26 March 2019 (the date of the open offer referred to at [15] of the principal judgment) which offer was repeated through the letter dated 21 May 2019 (reproduced at [394] of the principal judgment); 2. 6 September 2019 (the date of the defendants' offer to pay the net proceeds of sale of The Entrance Road Property, plus $100,000 on account of Alexis' costs); 3. 1 November 2019 (the date of the Binding Heads of Agreement entered into between the parties but which was later set aside, pursuant to which the defendants agreed to pay $190,000 on account of Alexis' costs in addition to the net proceeds of sale of The Entrance Road Property); 4. 13 November 2019 (the date when the defendants agreed to pay $170,000 on account of Alexis' costs in addition to the net proceeds of sale); and 5. various dates between 19 and 28 October 2021 (when the defendants offered to pay, in addition to the net proceeds of sale, amounts ranging from $245,000 to $346,940.36 on account of Alexis' costs) (see below).
5. The defendants propose the abovementioned costs regime on the basis that: it would reflect Alexis' failure on certain discrete and severable components of her claim; that Alexis' conduct was unreasonable to the extent that she sought, throughout the litigation, both the gift of The Entrance Road Property (pursuant to cl 4 of the Will) and an additional sum by way of a family provision order (referring to the principal reasons at [94]-[95]); and that effect would thereby be given to the defendants' offers of settlement (see above).
6. The defendants accept that the net consequences of the orders they propose cannot presently be determined (in net dollar terms) on the evidence. However, it is submitted that Alexis' costs should be capped before any set-off is undertaken (referring to the view expressed at [415] of the principal judgment). The defendants submit that this is appropriate, saying that Alexis' costs were disproportionately large having regard to the nature of her claims; Alexis prosecuted claims which were overly ambitious and unrealistic; Alexis rejected multiple offers of settlement; and Alexis made the decision, in late 2019, to apply to set aside the Binding Heads of Agreement and to continue to pursue her claims (notwithstanding that she has not achieved any better outcome by so doing and that the parties have had to incur significant extra costs as a result).
7. The defendants say that if their proposed costs orders are made then there is no need to consider separately the costs incurred by Alexis in retaining Mr Nicholas Gangemi to give what they maintain was, in substance, private advice to Alexis in relation to a potential ATO ruling (see at [106]). The defendants contend that they should not have to bear those costs (as I had provisionally indicated at [415]).
8. Turning then to the respective submissions in support of those competing costs regimes, they may be summarised as follows.

Plaintiff's submissions as to costs

1. Alexis says that: family provision cases stand apart from cases in which costs follow the event; that costs in family provision cases generally depend on the overall justice of the case; and that it is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if costs orders would have a detrimental effect on the applicant's financial position (referring, by way of example, to Purnell v Tindale [2020] NSWSC 746 per Henry J at [335] her Honour there citing Gaudron J in Singer v Berghouse (1993) 67 ALJR 708; [1993] HCA 35 (Singer v Berghouse) at 709; and also to Penfold v Predny [2016] NSWSC 472 per Hallen J at [167]). In particular, Alexis points to the observation in Singer v Berghouse (at 709) that there may be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate.
2. Alexis submits that bearing a substantial proportion of her own costs (as is the effect of what is proposed by her) will have a significant impact upon her financial position; and says that if she were also required to pay a portion of the defendants' costs on any basis (whether ordinary or indemnity) this would have a significant detrimental impact upon her financial position. It is submitted that there would also be an element of double-counting if there were to be a cost capping order and then a further reduction of the (on that hypothesis already capped) costs payable to Alexis by an order providing that she only recover a percentage of those capped costs and/or that she pay some of the defendants' costs. Alexis relies upon the following matters in support of the costs capping order which she proposes.
3. First, Alexis says that both sides' costs were significant. In particular, it is said that the solicitors' fees on both sides were equivalent and that the difference in the total sums results from (first) the fact that Alexis retained both Senior and Junior Counsel whereas the defendants only retained Senior Counsel and, second, the disbursements incurred by Alexis (in this regard pointing to the accountancy fees which related to the advice in relation to the taxation consequences of disbursement of funds received by reason of the sale of The Entrance Road Property by Wheatley Investments and costs in relation to the obtaining of a taxation ruling on behalf of Alexis, which it is said was obtained to put this issue beyond doubt). (The defendants cavil with the suggestion of equivalence of the costs incurred - see below - but there is no doubt that the cost of the tax advice was a significant addition to the overall costs.)
4. Second, that the taxation advice (as opposed to the subsequent ATO taxation ruling) was necessary in order to quantify the size of the deceased's estate (Alexis noting that it was relied on in the determination of the provision to be made - see at [411]-[414]).
5. Third, that the proceeding was not a "simple" family provision claim, in that there were also issues as to the construction of the Will and significant taxation issues. Alexis notes that the initial understanding of the parties as to the tax issues (that being their understanding when they entered into the Binding Heads of Agreement on 1 November 2019) was incorrect (reference here being made to the affidavit sworn by Alexis' solicitor, Ms Michaela Money, on 18 December 2019 which was filed on 27 December 2019 and annexure "F" of the affidavit sworn by Alexis on 18 December 2019 in which Alexis calculated, based on the expert advice then obtained, that she would receive $1,361,684 from the proceeds of sale of The Entrance Road Property, being net of expenses and taxation). It is further noted that the defendants' opening submissions dated 31 October 2019, which were prepared at a point when the sale price for The Entrance Road Property was known to be $1.56 million (see the footnote 4 on page 1 of those submissions) stated at [34] that, if Alexis were correct about cl 4 of the Will, she was likely to receive well over a million dollars from the sale.
6. Fourth, that costs increased as the hearing (initially listed before Robb J for five days commencing 4 November 2019) was vacated on the first day due to the issues that had arisen in relation to the Binding Heads of Agreement (as set out in the affidavits of Ms Money and Alexis, each sworn 18 December 2019). It is noted that Alexis agreed to bear her own costs of the notice of motion, which were estimated by her solicitor, Ms Money, to be in the sum of $23,394; and that Alexis also agreed (as reflected in order 3(a) of the orders made by Hallen J on 15 October 2020) that the defendants' costs of the motion, in the fixed sum of $20,000, be deducted from any amount one or more of the defendants was ordered to pay Alexis in resolution of the proceeding. In this regard, it is said that the proposed cost capping order should be taken to account for this; alternatively, that the proposed amount could be reduced by $20,000.
7. Fifth, insofar as Alexis has been criticised in relation to the costs incurred after entry into the Binding Heads of Agreement, Alexis says that the defendants' calculation (at [27] of the defendants' submissions - see [52] below) is inaccurate as it does not allow for the fact that, as at that date, further significant counsel's fees had been incurred (although not yet rendered), noting that preparations were well underway for the hearing then listed to commence on 4 November 2019 and there had also been lengthy settlement negotiations, involving counsel and solicitors, leading up to the Binding Heads of Agreement. Also, it is said that, even had the matter settled at that point, there would have been further fees payable in relation to the hearing itself due to its proximity. It is submitted by Alexis that this error also infects the calculations at [28] of the defendants' submissions (see at [53] below.)
8. Sixth, it is said that the proceeding was at least in part brought about by reason of the difficulties created by the deceased in relation to the gift in favour of Alexis in her last Will (in that it did not achieve what the deceased had intended and made the litigation necessary). Further, it is submitted that determination of the effect of the deceased's last Will was a necessary precondition to determination of what if any, family provision order might be made in favour of Alexis (noting that the position of the defendants before litigation was commenced was that Alexis received nothing under the Will).
9. The final matter relied on by Alexis in support of the cost capping order she proposes is that it is said that, after Alexis filed a "relatively simple" family provision application and affidavit in support of her claim, the defendants caused a "significant escalation" in the litigation (and resultant costs) by reference to Erin's affidavit sworn 8 May 2018 (as to which complaint is made that it contained substantial and harsh criticism of Alexis, many of which criticisms Alexis says were not ultimately borne out), which then led to detailed evidence in reply).
10. Alexis submits that the additional disbursements and Counsels' fees incurred by her were reasonably incurred but accepts the need for cost capping to reflect the significant size of the costs incurred and to make an allowance for the fact that she was not successful on all aspects of her claim. Alexis submits that the costs capping order which she proposes provides proportionality between the parties and will bring finality to the proceeding (and avoid issues on assessment of costs). In that regard, it is said that the costs orders proposed by the defendants are complicated and unwieldy.
11. As to the gross sum costs order sought by Alexis (relying on s 98(4) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act)), Alexis refers to the principles summarised in McGettigan v Coulter (No 2) [2021] NSWSC 1356 by Slattery J at [19]-[36]. It is submitted that there is ample material before this Court to conclude that the sum proposed is fair, logical and reasonable (having regard to the affidavits of the respective solicitors in relation to costs); indeed, it said that there is little doubt that Alexis has incurred costs far above the amount proposed for the order. As adverted to above, Alexis submits that the making of a gross sum costs order will minimise the prospect of further disputes and costs being incurred by the parties including the expense, delay and aggravation arising out of any costs assessment procedures.
12. As to the reliance placed by the defendants on the settlement offers made by them, Alexis emphasises that the defendants did not make any Offer of Compromise as such under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), pointing out (as is undoubtedly the case) that the costs implications on rejection of a Calderbank offer (see Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586) are different from those arising under the rules in relation to Offers of Compromise (reference being made to the discussion in Rakovich v Marszalek [2020] NSWSC 589 per Hallen J at [258]-[267] in this regard). It is noted by Alexis that the authorities relied upon by the defendants in their submissions (other than Lowe v Lowe (No 3) [2015] NSWSC 1800) (Lowe v Lowe) deal with cases where an Offer of Compromise pursuant to the rules was made rather than a Calderbank offer.
13. Alexis notes that what must be shown (by the party seeking to rely on rejection or non-acceptance of a Calderbank offer - here, the defendants) is that the rejection of the offer was unreasonable; and that such a determination is not made with the benefit of hindsight (rather, the strength or otherwise of the claim needs to be considered prospectively at the time of the relevant offer).
14. Alexis argues that it can be assumed that the reason that the defendants chose not to serve an Offer of Compromise in accordance with the rules is that they wished for their benefit to include in their offer a number of things that could not be included in an Offer of Compromise (such as no order being made for Alexis' costs or that the order be for a fixed amount of costs) rather than making an offer the effect of which would be that the costs be able to be assessed. (The defendants in their submissions have confirmed that this is so but point out that the same can be said of the offers made by Alexis herself.)
15. Reference is made to the two letters sent by the defendants' solicitors making an open offer on 21 May 2019; the shorter of the two letters (referred to at [394] of the judgment) not remaking the earlier 26 March 2019 open offer but the longer letter so doing (albeit with some variations to that earlier offer).
16. Alexis says that the shorter open offer dated 21 May 2019 is not more favourable to her than the orders made in the proceeding; and maintains that at that date it was not unreasonable for her to reject that offer given it made no provision for her costs. As to the longer open offer (as was also the case with the earlier open offer dated 26 March 2019), it is noted that this envisaged that Alexis would bear her own costs. Additionally, in the earlier offer there was a requirement that a release of rights be approved by the Court pursuant to s 95 of the Succession Act 2006 (NSW) (Succession Act). It is noted that both offers contained various other provisions, including mutual releases between the parties.
17. Alexis points out that, at the time that the open offers were made on 21 May 2019, she had already incurred substantial costs; the proceeding had been commenced over a year earlier; considerable evidence had been filed; and there had been a mediation. It is also noted that the calculations in that letter are based upon an assumed value of $2.1 million for The Entrance Road Property. Alexis says that it is not possible to form any view as to how accurate that assumption was, although she submits that it is unlikely to have been accurate given that only five months later the property was sold for $1.56 million.
18. Further, Alexis points to the letters dated 3 May 2019 and 16 July 2019 from her solicitors, which advised that there may be difficulty selling the property (and set out reasons against accepting the offers made), and it is noted that on 13 September 2019 Alexis provided the defendants with a market appraisal to the effect that estimated that the property was worth between $1.4 million and $1.5 million.
19. Alexis notes that the shorter letter dated 21 May 2019 also makes reference to incorrect taxation assumptions (those being the assumptions upon which the parties had relied when entering into the Binding Heads of Agreement of 1 November 2019, before the further report provided by the jointly retained expert (Mr Vale) which was not consistent with the earlier assumptions) (reference here being made to the affidavit sworn 18 December 2019 by Ms Money).
20. Alexis also says that there are timing issues in relation to the open offer made on 26 March 2019 and the longer letter of 21 May 2019 (which remade the offer of 26 March 2019 in that those offers contemplated a time period within which The Entrance Road Property would be sold (that being, respectively, six or nine months), which it is said reinforces the likelihood that the assumption of a value at $2.1 million was unsound for the time at which the sale was likely to have taken place had those offers been accepted.
21. Alexis emphasises that the Binding Heads of Agreement were signed when both parties thought that the effect of the agreement would be different (and more favourable for Alexis) in relation to the taxation consequences than was subsequently determined to be the case; and says that the fact that she was prepared to compromise her costs (and, on that basis, was prepared to agree to obtain approval of a release pursuant to s 95 of the Succession Act) does not mean that the fact that those offers sought a s 95 release can be ignored. Alexis says that the fact that (under the orders as ultimately made) there is no s 95 release, and that she therefore retains her rights to make a further family provision claim, is something of value. For that reason alone, it is said for Alexis that it cannot be concluded that any offer which includes that requirement is equivalent to, or more favourable than, the orders ultimately made in favour of Alexis by the Court.
22. Alexis argues that, in circumstances where (at best for the defendants) it is not possible to determine with any precision the extent to which Alexis has or has not achieved a better result than the various offers relied upon by the defendants, it cannot be concluded that she would have received a better net result had she accepted one of the earlier offers. Alexis again says that it is unlikely that the sale price of The Entrance Road Property at that time would have been materially different from that which was ultimately achieved when it was sold on 31 October 2019.
23. Alexis says that it is "notoriously difficult" to predict family provision outcomes, contrasting in this regard claims for a liquidated sum or for unliquidated damages but where there are statutory and judicial guidelines to guide estimation of damages. Alexis notes that in family provision claims there is a large element of subjective assessment and that it has been recognised that on any particular set of facts there may be a variety of outcomes given by different judges (referring in this context to what was said in Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268; [2005] NSWSC 1003 at [56]-[58] per Palmer J).
24. Reference is made to the fact that in family provision cases an adverse costs order may not even be made in cases where an Offer of Compromise has been served, at least if the ultimate result is close to the offered result (Alexis noting the discussion in Watton v MacTaggart (No 2) [2020] NSWSC 1351 at [95]); and Alexis points to the concern expressed by Robb J in Coote v Coote (No 2) [2021] NSWSC 461 (Coote v Coote) at [37]-[38]); and also to the consideration by Rees J in Schneider v Kemeny; Kemeny v Schneider (No 2) [2021] NSWSC 664 (Schneider v Kemeny) (at [34]) as to the detrimental effect of making an adverse costs order on the plaintiff seeking provision.
25. Alexis argues that whether or not she thought at one point that she should receive more than simply the gift of The Entrance Road Property (and/or whether her legal representatives so advised her) does not make it unreasonable for her to have rejected the settlement offers. Alexis submits that the submission now made to that effect by the defendants is based on hindsight (rather than considering whether or not it was unreasonable for her not to accept the various offers at the time they were made). Further, it is submitted that any unreasonableness in Alexis pursuing her claim, in terms of costs being incurred, can be adequately dealt with by a cost capping order.
26. Alexis submits that, considering the various offers prospectively, it was not unreasonable for her not to have accepted the various offers; and that it was not unreasonable for her to consider that the ultimate result might have included either a sum for the net rent derived from The Entrance Road Property and/or a greater family provision order.
27. Finally, it is said that this is not a situation that Alexis made no offers and did not try to resolve the proceeding; rather, that the parties took different views regarding what the likely result might be; and that, in those circumstances, and given the significant financial consequences which would be visited upon Alexis by an adverse costs order (and what is said to be Erin's substantially stronger financial position at the conclusion of the proceeding, if only by reason of her ownership of the Dover Heights Property), no adverse costs order ought be made against Alexis and the costs capping orders she proposes should be made.

Defendants' submissions as to costs

1. In support of their proposed order that Alexis should pay 20% of the defendants' costs, the defendants point to the dismissal of Alexis' claims as to: the proper construction of cl 4 of the Will ([225]-[227]); rectification of the Will and for relief under s 81 of the Trustee Act 1925 (NSW) ([250]-[252]); the rent derived from The Entrance Road Property ([271]-[272]); and the appropriate manner of performance of the gift under cl 4. Further, it is said that Alexis failed on the construction point principally for the reasons identified by the defendants in their first exchange of communications (predating the commencement of the proceeding) on 5 September 2017 (referring to [93] of the principal judgment).
2. The defendants' solicitor (Ms Asheetha Jelliffe) has estimated that approximately 15 to 20% of the defendants' costs were incurred by reference to the claims identified above which were dismissed (see Ms Jelliffe's affidavit sworn 29 October 2021); referring to the principal judgment at [124]. (Those percentages are quantified in dollar terms as representing $61,452 and $91,270, respectively, of the defendants' overall costs.) It is submitted that the 15-20% estimate represents a realistic assessment, as those matters attracted the most time and attention when it came to the consideration of legal principle.
3. Further, it is said that Alexis pressed her claims as to the proper construction and rectification of the Will, and for other relief in relation to the Will, even though (as noted at [227] of the principal judgment) such relief had little practical significance to Alexis because her rights could be accommodated within a family provision order. It is submitted that, to that extent, these costs cannot be said to have facilitated the resolution of the real issues in dispute between the parties. The defendants say that Alexis' approach was all the more uncommercial having regard to the fact that, had she been successful, she herself would have incurred significant tax liabilities, totalling well in excess of $600,000, and leaving her with a net benefit in the order of $820,000 (referring to the principal judgment at [10] and [114]).
4. In addition, as adverted to above, the defendants contend that Alexis' approach to the litigation was unreasonable. It is noted that (at least from September 2018 - see at [398] of the principal judgment) Alexis' position in substance was that she sought both The Entrance Road Property pursuant to cl 4 of the Will and a family provision order (see at [1], [5], [12] and [274] of the principal judgment) and that her submission was that she was entitled to receive between $1.8 million and $2.1 million, which would in turn require the estate to bear (wholly or largely) the tax consequences on the sale of The Entrance Road Property (see at [15] of the principal judgment). The defendants note that the consequences of this position were summarised at [308] and [410]-[411] of the principal judgment, namely that, if Alexis succeeded, she would take the proceeds of sale of The Entrance Road Property without having to pay the debt secured against it; and that the costs of the proceeding might jeopardise the ability to give effect to the deceased's testamentary intentions in relation to the Dover Heights Property.
5. It is submitted that Alexis' prosecution of the claims has frustrated (to Erin's disadvantage) the deceased's testamentary intention that the Torrens Avenue Property provide income to support Erin and her family's living expenses (see [76] and [336] of the principal judgment) noting, too, the observation made (at [413]) that the legacy to be made by way of provision for Alexis came at the very real cost to the estate (and hence to Erin). It is said that this disadvantage could have been avoided had Alexis accepted any one of Erin's many settlement offers.
6. The defendants say that the feature of family provision claims is that they are concerned with the proper distribution of a fixed pool of assets and, as such, that orders that deprive a successful party of his or her costs, or which cap those costs, may be appropriate as part of determining the overall justice of the case (citing Wilson v Porada (No 2) [2017] NSWSC 1362 (Wilson v Porada) at [35] per Slattery J).
7. The defendants submit that, in the circumstances, the burden already borne by the estate should not be increased or substantially increased. It is said that Alexis advanced a claim that failed as to part and, as to the balance, was overly ambitious and which never reflected an appropriate adjustment in her favour; and that the estate has been burdened both by the need to pay its own costs of the proceeding and by the tax consequences of the sale of The Entrance Road Property (and, if necessary, the Torrens Avenue Property). The defendants argue that the justice of the case should not require it to pay any significant additional sum to compensate Alexis for her costs; a fortiori where those costs are excessive (here invoking the observations of Slattery J in Wilson v Porada at [43]; and of Henry J in Poche v Poche [2020] NSWSC 835 at [336]).
8. It is said that, in absolute terms, Alexis' costs and disbursements to the conclusion of the proceeding (estimated to be $626,963 inclusive of GST; as noted at [125] of the principal judgment) are excessive having regard to the real issues in dispute between the parties; and the defendants point out that this sum represents about 76% of the legacy ordered in Alexis' favour.
9. As to the settlement offers that were made, the defendants say that the rules relating to Calderbank offers do not apply differently in family provision cases (citing Bates v Cooke (No 2) [2014] NSWSC 1322 (Bates v Cooke) at [26] per Kunc J; Lowe v Lowe 1800 at [58]-[62] per Kunc J; and AB v Curry (No 2) [2015] NSWSC 1209 (AB v Curry) per White J, as his Honour then was, at [4]-[5]).
10. The defendants say that the significance of the offers is informed by the parties' understanding of the value of The Entrance Road Property and the amount realised from its sale of The Entrance Road Property, noting that (as recorded at [8] of the principal judgment) its market value was thought to be $2.1 million as at late 2018 or early 2019; and that it was sold at the end of 2019 for $1.56 million, realising net proceeds of $1,496,437.46 (see at [121] of the principal judgment).
11. The first offer relied upon is the open offer referred to at [15] of the principal judgment, which was repeated on 21 May 2019 (see at [394]). The defendants accept that this did not make any provision for the payment of Alexis' costs and that it is not possible to determine whether The Entrance Road Property would, in fact, have then sold for $2.1 million. However, they point out that the fact that an offer provides for each party to bear its own costs does not preclude reliance on it in this context (citing Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208, at [10]-[11] per the Court (Macfarlan, Gleeson and Leeming JJA)). Moreover, the defendants say that the offer gave Alexis the opportunity to achieve a net result better than she ultimately received (i.e., if The Entrance Road Property sold for its then estimated current market value). The defendants submit that, in assessing the overall justice of the case, it is relevant that the defendants offered, from an early point, an amount at least equal to that which was ultimately awarded; and they emphasise that it is possible that Alexis could have recovered more if the then current valuation truly reflected the value of The Entrance Road Property on the open market.
12. The defendants say that, thereafter, they made offers pursuant to which (in substance) Alexis would receive the net proceeds of sale of The Entrance Road Property and a significant contribution towards her costs; and that, after 6 September 2019 the parties were not in dispute as to the terms of the ancillary provisions of any agreement. Reference is made in this regard to the letter of 6 September 2019 in which the defendants offered to pay $100,000 as to costs, adding terms such as releases and the retention of certain chattels and photographs (see at items 9-12), the appropriateness of which terms was accepted by Alexis in that the letter written on her behalf on 8 October 2019 reproduced them.
13. It is said that there is nothing to suggest that Alexis was not well able to reach an informed view about the merits of the litigation (noting that she herself made a number of offers). The defendants say that it can be inferred that the parties readily appreciated the cost consequences of the offers passing back and forth and, to that extent, they should be taken to have accepted the risks of the positions they staked out by reference to the rules of court in deciding to continue with the litigation.
14. The defendants point out that, by the Binding Heads of Agreement dated 1 November 2019, the agreed contribution towards Alexis' costs was $190,000 (see cl 1), and that, when Alexis challenged the validity of the Binding Heads of Agreement, the defendants offered to pay $170,000 on account of Alexis' costs (the $20,000 reduction being referable to their own costs in disputing Alexis' motion to set aside the contract). It is noted that those figures on account of costs exceed both the range of figures which Slattery J in Wilson v Porada considered to be appropriate for a complex case; and the figure which Alexis had indicated she would accept (albeit a little earlier, on 8 October 2019) on account of her costs (i.e., $150,000). Further, it is noted that Alexis' solicitor deposed on 29 October 2019 that paid and unbilled fees and expenses to that point of time were in the order of $247,042.
15. Thus, it is said that, under the Binding Heads of Agreement, Alexis would have received just under 77% of her solicitor/client costs (and that Ms Money calculated Alexis' party and party costs to be 75% of her solicitor/client costs). The defendants note that these figures assume no writing down of Alexis' costs by reference to a reduction of 20% on account of the claims which would have been dismissed or pursuant to a capping order. (As already noted, Alexis says that these calculations are erroneous - as explained above - because they do not include costs already incurred but not rendered.)
16. The defendants place significance on the fact that it was Alexis who moved (by notice of motion filed on 20 December 2019) to set aside the Binding Heads of Agreement; and that she did so notwithstanding that Mr Vale then estimated that she would receive $842,340 from the proceeds of sale of The Entrance Road Property pursuant to that agreement. Thus, it is said that, from that time, Alexis prosecuted the litigation in the hope that she would receive more than that figure (and that the price of that strategy has been significantly increased costs for all parties). By way of example (though I note that Alexis says this calculation is erroneous), it is said that Alexis has incurred costs in the order of $379,921 (since that time), taking into account the difference between the amount estimated by Alexis' solicitor as costs to the conclusion of the hearing (recorded at [125] of the principal judgment) and the amount deposed to by Alexis' solicitor on 29 October 2019 as the paid and unbilled fees and expenses to that period of time (as noted at [51] above).
17. The defendants next point to their offer on 19 October 2021, namely, to pay the amount of $821,791 (being the net proceeds of sale of The Entrance Road Property), interest on the moneys which have been held in the controlled money accounts (slightly in excess of $6,000) and the amount of $245,000 referable to the plaintiff's costs and the net rental proceeds of the property. In that letter, the defendants' solicitors explained why they maintained that figure for costs was reasonable (including by reference to the fact that Alexis should not recover her costs of the notice of motion to set aside the Binding Heads of Agreement; that the claim for rectification of cl 4 was a discrete and severable contention; and that Alexis' conduct had been unreasonable because it was overly ambitious).
18. Finally, it is noted that, before the trial the defendant made two additional offers which differed in substance only by reference to the amount to be paid in addition to the net proceeds of The Entrance Road Property: an offer made on 25 October 2021 to pay, on this account, $321,940.36; and an offer made three days later increasing this amount to $346,940.36. It is submitted that those amounts well exceeded what might be regarded as an appropriate figure for costs for a case of this complexity.
19. The defendants refer to the principles relating to costs in family provision proceedings summarised by Hallen J in Blendell v Byrne (No 2) [2019] NSWSC 798 (Blendell v Byrne) (at [72]ff) and they place weight on the propositions there stated to the effect that: parties to family provision claims cannot assume that costs will be paid out of the estate and it is not uncommon for an unsuccessful applicant to be ordered to pay the estate's costs and be disallowed his or her own costs; and that regard to the overall justice of the case is not as a principle remote from the principle that costs follow the event; and that the discretion to order costs is informed by the overriding duty prescribed by s 56 of the Civil Procedure Act.
20. The defendants maintain that, in considering whether to order indemnity costs by reference to settlement offers, it is not enough for an offeree to show that he or she acted reasonably in not accepting the offer; rather that the purpose of the rules is to oblige the offeree to give serious thought to the risks involved in non-acceptance (citing here Nadilo v Souris (No 2) [2019] NSWSC 246 at [24] per Leeming JA; Blendell v Byrne at [70] per Hallen J). Pausing here, it must be noted that the onus lies on the offeror seeking to rely on a Calderbank offer to show that non-acceptance was unreasonable - not on the offeree to establish that non-acceptance was reasonable. Nevertheless, I accept that the public policy including special costs order regimes is indeed to encourage litigants to give serious consideration to the strengths and weaknesses of their case and to encourage settlement and discourage wasteful litigation (see Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 724 per the Court (Kirby P, as his Honour then was, Mahoney JA and Samuels AJA)).
21. The defendants maintain that it was unreasonable for Alexis to reject the initial open offers and then the Calderbank offers. Emphasis is placed on the fact that, from an early point, the defendants offered an amount "at least slightly greater" than the family provision order that was ultimately made (and, as already noted, it is said that it is possible that the plaintiff would have received more pursuant to the open offers, having regard to the then value of The Entrance Road Property).
22. It is said that, from September 2019, the defendants' offers included significant sums on account of Alexis' costs; and that those amounts fairly reflected what was properly recoverable by Alexis on this account. The defendants complain that what has occurred since then has been expensive and unproductive litigation whereby Alexis has achieved no more favourable outcome in relation to her principal claims, at the cost of legal fees which are entirely disproportionate to any "haggling" about the legal costs referred to in the offers. The defendants invite the inference that Alexis' views about the litigation were in part informed by her antipathy towards Erin (such as is said to be illustrated by Alexis' allegations of forgery, referring to [151] of the principal judgment).
23. The defendants say that the litigation has been wasteful because of Alexis' pursuit of relief which was unrealistic (initially, seeking a transfer of both The Entrance Road Property and the Torrens Avenue Property - see her solicitors' letters dated 18 October 2017 and 10 November 2017; and then seeking both The Entrance Road Property (or its net value) and a family provision order). It is noted that the amount awarded by way of family provision order is very substantially less than her claim for, in total, between $1.8 million and $2.1 million.
24. Complaint is made that Alexis' prosecution of this litigation has come at particular cost to the defendants, who have not only incurred significant legal fees themselves but may have to sell the Torrens Avenue Property in order to meet the direct and indirect costs of the litigation. It is submitted that all of this could have been avoided had Alexis chosen to accept any one of the offers made in 2019; and that so much would have been plain to Alexis had she given serious thought to the risks to herself and to the estate by continuing the litigation.
25. The defendants accept that account can be taken of the consequences of a costs order to Alexis' overall financial position but emphasise the observation by Hallen J in Blendell v Byrne, as noted above, to the effect that parties to family provision claims cannot assume that costs will be paid out of the estate and that it is not uncommon for an unsuccessful applicant to be ordered to pay the estate's costs and be disallowed his or her costs. The defendants say that this principle has all the greater weight where Alexis was afforded a number of opportunities to compromise the proceeding; where the offers were accompanied by detailed reasoning which explained the defendants' position; and where, as noted above, Alexis' financial position is not to be considered in isolation but also having regard to the costs and taxation liabilities of the estate. The defendants point to the observation of White J (as his Honour then was) in AB v Curry to the effect that the rules as to indemnity costs can be applied notwithstanding that this compromises the benefits of a family provision order; and say that this reflects the application of public policy.
26. Thus, the defendants say that such entitlement as Alexis has for costs should be initially assessed by reference to her failure on discrete points and the fact that her costs are excessive, such as to justify a capping order; and that, regardless of the ultimate formulation of the order for costs, the estate should not be left to bear any significant liability having regard to the consequences summarised in the principal judgment (at [308]; [410]-[411]). It is submitted that it is entirely appropriate that Alexis pay something towards the defendants' costs having regard to her decision to pursue the litigation after she elected to seek something greater than she would have recovered had she agreed to implement the Binding Heads of Agreement.
27. In reply to the submissions that Alexis has made, the defendants say the following.
28. First, that insofar as Alexis (at 1 and [11]) accepts that a capping order is in part justified because her success was limited to her claim for a family provision order, the defendants point to the view tentatively expressed in the principal judgment as to the imposition of a "significant" cap on any award in favour of Alexis (see at [415]) (without, they say, any reference to the suggested qualification by Alexis); and the defendants maintain that Alexis' submission does not acknowledge the fact that a costs order in favour of the defendants is, in this respect, justified because they have incurred substantial costs defending multiple claims which failed.
29. As to Alexis' submissions at [5]-[6], the defendants say that difficulty in estimating the value of a claim for a family provision order is not a sufficient reason to depart from the statutory presumptions arising from an unaccepted offer of compromise (referring to Slack v Rogan; Palffy v Rogan (No 2) [2013] NSWSC 827 at [13] per White J, as his Honour then was). It is said that there is no reason why that principle should not apply to a Calderbank offer where, as here, the offeree claimed a figure which was far greater than that ultimately awarded (i.e., $1.8 million to $2.1 million as against $820,000 - referring to [15] of the reasons). It is said that difficulty in sometimes assessing what might be ordered (in a family provision claim) does not explain that disparity; rather, the defendants suggest that the explanation is that (contrary to the position ultimately found at [410]-[411] of the principal judgment) Alexis asserted that what she was seeking reflected her mother's intentions (reference being made in this regard to what was said at T 11.15ff as to the amount claimed reflecting the value of The Entrance Road Property at the time of the deceased's death, and thus the provision which Alexis says is manifest in the Will). There, Alexis represented that much of the evidence bore upon the question of what the deceased intended, with Alexis alleging that the deceased had told her that she and Erin would be treated equally, with both The Entrance Road Property and the Torrens Avenue Property going to Alexis, and that Alexis was disappointed by what she had found in the Will).
30. The defendants say that the present case is far removed from that of Coote v Coote (to which Alexis refers in her submissions at [26]), where the order made in the claimant's favour was only $1,000 (or 1%) less than the sum offered in the offer of compromise. It is submitted that in the present case, there were no "small errors of judgment" (because it is said that Alexis pressed a claim for an excessive sum) and, again, it is submitted that an inference can be drawn that Alexis' antipathy towards Erin (see at [155] of the principal judgment) at least partly explains this.
31. The defendants point to Bates v Cooke where Kunc J noted (at [26]) authorities to the effect that Calderbank offers were considered no differently in family provision cases; and (at [31]) certain features of family provision litigation which suggested an even stronger public policy basis for the encouragement of settling litigation than might apply in other types of case (the first, being that family provision litigation involves a fixed fund which risks being substantially depleted by legal costs to the disadvantage of all concerned if litigation is persisted with - which the defendants say is apt in the present case).
32. Insofar as Alexis relies upon the consequences to her financial position if her costs submission is not accepted (see for example in her submissions at [28], where second appearing), the defendants point out that: while account was taken in the principal judgment of the financial position of Alexis and her husband, the evidence does not reveal any specific financial goal which would be prejudiced should Alexis' legacy be reduced as a result of orders of the type sought by the defendants; and that (at [409]) it is noted that Alexis and Frank have not insubstantial assets, professional qualifications and the ability to earn income in the future.
33. It is submitted that there is no reason to depart from the position that has been recognised that, even in family provision cases the starting point is that impecuniosity of an unsuccessful party, without more, is no reason to deprive a successful party of an order for costs to which they are otherwise entitled (reference being made to Haertsch v Whiteway (No 2) [2020] NSWCA 287 at [9] per the Court (Macfarlan, Meagher and Leeming JJA)).
34. The defendants further say that Alexis was well-advised and knew the risks she was running; that both parties were exchanging offers with a view to protecting their own positions when it came to costs; and that Alexis would presumably have invoked her offers to seek a costs advantage had she been successful. It is submitted that, in principle, Alexis ought to bear the corresponding burden that she would have sought to place on the defendants had she been successful.
35. The defendants assert emphatically that (as noted at [414] of the principal judgment), the legacy to Alexis comes at a very real cost to the estate (and hence to Erin) and that this burden will be increased if the estate has to bear costs in the amount sought by Alexis.
36. The defendants argue that Schneider v Kemeny is distinguishable because Rees J there dismissed the claim for a family provision order and in those circumstances it is said that it was unremarkable that Rees J considered that a costs order adverse to the claimant would work a material change to a factor which had been considered important in dismissing the family provision claim (namely, the claimant's financial position).
37. The defendants point out that in the present case Alexis has received a significant sum pursuant to the principal judgment; and could have secured a much larger sum still had she accepted any one of several offers. It is submitted that the public policy considerations which encourage the settlement of family provision litigation mean that Alexis must be taken to have accepted the consequences if she rejected the offers.
38. The defendants say that Alexis' submissions as to a capped order proceed on the unwarranted assumption that (despite the matters identified in the defendants' submissions) Alexis should nonetheless receive the bulk of her costs. The defendants again point to the affidavit of Alexis' solicitor, sworn immediately before the trial, in which the solicitor/client costs of a six-day trial were estimated to be $626,963. The defendants note that $456,000 represents 72.73% of that figure (which they say is very little less than what might be assessed on the ordinary basis if Alexis obtained an order for all her costs). It is submitted that this calculation is likely too generous to Alexis where: the trial's duration was shorter than had been assumed by Ms Money in her calculations; and Ms Money's figures included Alexis' costs of obtaining the tax ruling.
39. The defendants say that the submission made for Alexis (at 10) incorrectly asserts that the solicitors' fees on both sides were equivalent by reference to a table handed up at the conclusion of the trial (noting that the document was prepared on behalf of Alexis; not a joint document). It is said that the comparable figure of approximately $360,000 includes, on the part of the defendants at least, disbursements including Senior Counsel's fees (referring here to 4 and (b) of the affidavit of Ms Jelliffe sworn 20 October 2021).
40. The defendants cavil with the submission for Alexis at 10 to the effect that a cause of the significant escalation of costs was Erin's affidavit in reply. It is noted that Alexis' affidavit sworn on 24 January 2018 was itself lengthy and asserted dishonesty and drug abuse on the part of Erin (see at [101]-[106] thereof - with, I note, [103]-[106] being read subject to a s 136 Evidence Act 1900 (NSW) limitation for the fact of the communication contained in those paragraphs, and not the truth of what was said). It is said that these and other allegations of misconduct were irrelevant to the real issues in dispute.
41. The defendants say that the proposed order sought by Alexis incorporates no allowance for the measure of success enjoyed by the defendants; and they argue that a costs capping order is not the most obvious mechanism for addressing the consequences of unaccepted Calderbank offers (compare this with Alexis' submissions at [29]). The defendants say that a capping order is justified because Alexis' costs are disproportionate to the costs which ought to have been incurred litigating the real issues in dispute between the parties. It is submitted that at least some of the costs of this litigation have been incurred by reason of false allegations made by Alexis (such as her claims that Erin forged her signature and emails - see at [151]-[155] of the principal judgment).
42. As adverted to above, the defendants accept that they relied upon Calderbank offers because they sought terms which could not be incorporated into an offer of compromise (such as orders for the transfer of assets which were not the subject any claim for relief cf r 20.26(2) of the UCPR). However, it is noted that Alexis also submitted Calderbank offers for, presumably, the same reason; and that, ultimately, the parties were agreed on these ancillary terms (simply not agreeing on the amount to be paid to Alexis). Thus, it is noted that, on 26 March 2019, Erin made an offer which included a s 95 release (see at 9(h)); that the Binding Heads of Agreement provided for such a release (cl 6); and that Alexis' offer of 5 August 2020 also included an offer to give a s 95 release. It is said that thereafter, the parties did not disagree that a s 95 release should be a part of any settlement (but see Alexis' submissions at [25]). Further, it is said that a s 95 release was, in practical terms, not disadvantageous to Alexis (it being suggested that it is unlikely that Alexis could ever bring a second application for a family provision order).
43. The defendants note that a Calderbank offer may validly include the provision of a release, at least between the parties to the litigation (citing Magenta Nominees Pty Limited v Richard Ellis (WA) Pty Limited (Full Court of the Federal Court of Australia, 29 August 1995, unrep) (Magenta Nominees); Chapel Road Pty Ltd v Australian Securities and Investments Commission (No 11) [2014] NSWSC 636 at [11] per Schmidt; and P Taylor, Ritchie's Uniform Civil Procedure New South Wales (2022, LexisNexis) at [42.13.27]). It is said that Alexis does not identify any other feature of the defendants' offers which preclude a conclusion that their rejection was unreasonable.
44. The defendants say that the dangers of hindsight (to which Alexis refers at [29] of her submissions) carry no weight when: Alexis was well-advised and had the benefit of, inter alia, tax advice; and the defendants' offers aligned with the deceased's testamentary intentions. It is said that the fact that Alexis herself made multiple offers (as noted in her submissions at [30]) indicates that she was fully able to assess the merits of the litigation. (The defendants here emphasise their complaint that Alexis pressed claims which were excessive and contrary to the deceased's wishes, which were expressed in writing.)
45. Finally, as to the reference in Alexis' submissions at [30] to Erin's substantially stronger financial position; it is noted that because the estate did not include cash of any significance, the burden of costs (be it Alexis' or her own) will fall on Erin personally and/or will need to be borne from the proceeds of any sale of the Torrens Avenue Property. The defendants submit that the overall justice of the case should not require the deceased's testamentary wishes to be disturbed more than necessary, regardless of the consequences to Alexis.

Determination

1. It is well-recognised that costs are in the discretion of the Court (s 98 of the Civil Procedure Act) and that the discretion is a broad one (albeit to be exercised judicially and having regard to the overriding statutory mandate set out in the Civil Procedure Act. Ordinarily, costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs (r 42.1 of the UCPR). Where special costs orders are sought by reference to the making of Offers of Compromise or Calderbank offers, then the public policy underlying such orders needs to be borne in mind.
2. Section 99 of the Succession Act 2006 (NSW) expressly provides that the Court may order that the costs of family provision proceedings be paid out of the estate of the deceased in such manner as the Court thinks fit.
3. In the present case, as I sought to make clear in my principal judgment, the issue of costs is particularly troubling - not only because of the magnitude of those costs (well outside that expected in the ordinary course of family provision claims) but also because of what seem to me to be the very real prospect that the incidence of costs (on top of the tax consequences arising out of the sale of The Entrance Road Property; and any sale of the Torrens Avenue Property that is required in order to fund the legacy ordered in favour of Alexis or the tax to be borne by the estate) will put at risk the ability to give effect to the deceased's very clear (and long held) testamentary intention that Erin inherit the Dover Heights Property. (It goes without saying that it also puts at risk the ability to give effect to the testator's intention that the Torrens Avenue Property be available as a source of income for Erin - particularly relevant in circumstances where the deceased intended that Alexis inherit The Entrance Road Property unencumbered.) Also troubling in this context was the fact that I was aware that there had been at least one open offer of settlement that had been rejected by Alexis but I considered that the import of this would best be considered in the context of costs with the benefit of submissions in due course.
4. The respective parties' costs submissions have only reinforced my concerns as to those matters. In broad terms, as I understand the position, the effect of Alexis' proposed orders is that she would be required to bear around 28% of her own costs (the difference between the estimated solicitor client costs prior to the hearing at be $626,963 and the proposed amount of the gross sum costs order of $456,000), thus reducing the benefit to her of the provision that was ordered to around $650,000 on my rough calculations but the estate (and in effect Erin) would be left to bear not only the mortgage debt over the Dover Heights Property that related to the two commercial properties but also the tax consequences of the sale of The Entrance Road Property (and potentially also the Torrens Avenue Property) and the estate's own costs of the proceeding.
5. Moreover, any result whereby Alexis receives a figure comparable to what might be assessed as the party/party costs recoverable as against solicitor/client costs of the amount her solicitors had estimated would not, as the defendants point out, reflect the fact that Alexis had lost on a number of issues in the proceeding (and had rejected a number of settlement offers that might well have placed her in a better position), even leaving aside the complaint as to the unreasonableness of her conduct of the litigation.
6. However, also approaching the defendants' proposal in broad terms, if the effect of the defendants' proposal would be effectively to strip Alexis of a substantial portion of the provision ordered in her favour, then this would be relevant to take into account.
7. As noted in the principal judgment at [411], I was at that stage left with the difficulty of determining what adequate and proper provision for Alexis should be, in light of the deceased's wish that Erin be able to live in the Dover Heights Property and in light of the complex tax consequences of any such order for provision. I took into account that any provision for Alexis by way of a legacy would leave the tax burden (as well as the existing debt secured over the Dover Heights Property) and would likely require the sale of the Torrens Avenue Property with a consequential tax burden there arising.
8. Addressing various of the matters raised in submissions, my view is as follows.
9. First, the fact that both sides incurred substantial costs is unfortunate, to say the least, but seems to me principally to be a consequence of the stance taken by Alexis once the tax consequences of the sale of The Entrance Road Property were properly understood. I accept that in quantifying the size of the deceased's estate the tax consequences of the holding (and sale) of that property were relevant. However, the burden of the tax consequences (had Alexis' construction of the Will been correct) would have fallen on Alexis, not the estate. So, in that sense, it was for Alexis' purposes that tax advice was required to be obtained. Moreover, the need for Mr Gangemi's advice arose because of the change to Alexis' position having regard to the corrected advice by Mr Vale and, once Mr Gangemi's advice was obtained, the application for a tax ruling can only have been for Alexis' benefit (and hence on any view I consider that the costs of obtaining advice from Mr Gangemi and the application for an ATO tax ruling should be borne by Alexis).
10. Furthermore, once it was accepted that the tax consequences would be as they were explained by Mr Gangemi, there was (it seems to me) a clear turning point in the litigation. Alexis could have chosen to accept that there would be a lesser benefit for her than she had agreed to accept under the Binding Heads of Agreement or than had been anticipated at the time of that agreement (but that no further costs would then be incurred by her in the litigation) or she could (as she did) move to set aside the Binding Heads of Agreement and run the litigation to the end of a contested hearing (thus inevitably causing delay and much greater overall cost to all parties). It is not immediately apparent why Alexis should not bear the consequences of that forensic decision.
11. As to the submission that this was not a "simple" family provision claim, I accept that the overall costs were no doubt greater (by reference to the fact that there were also issues as to construction and rectification of the Will), although there is some force to the proposition that those other issues may have been unnecessary to pursue if Alexis was (as she did) seeking a family provision order in any event. Nevertheless, I accept that it was not unreasonable for Alexis to pursue the claims for construction and rectification of the Will in addition to the family provision claims (including because the claim for rental in respect of The Entrance Road Property was at least on one view dependent on the construction argument). What in my opinion really caused the escalation in costs was the vacation of the first set of hearing dates and the subsequent exploration of the tax issues (those being at Alexis' instigation as noted above).
12. As to the submission that the proceeding was brought about at least in part by the deceased (in that the Will contemplated a bequest to Alexis of property that the deceased did not herself own), I accept that there is force to that submission. However, that does not address the fact that, during the course of the proceeding, Erin made offers that would have accommodated this difficulty. I accept that the stance initially adopted by Erin (as executor) was that under the Will there was no entitlement on the part of Alexis but, as noted in oral argument during the hearing, that letter carried with it reference to a foreshadowed claim by Alexis for further provision which suggested that the concern at that stage was as to the overall ambit of Alexis' claim(s). Indeed, the irony of the eventual position is that it was apparently not considered to be in Alexis' interests to receive The Entrance Road Property unencumbered (as opposed to a legacy) because receipt of the property or sale proceeds would have carried with it the tax consequences to which I have already referred. Therefore, focus on the real issues in dispute - at least by the time of the hearing - would on one view have meant that none of the issues of construction or rectification may for practical purposes have needed to be determined; and the case could have been conducted solely as a claim for provision.
13. As to the complaint by Alexis that Erin's response to the claim caused a significant escalation in the litigation by reference to the criticisms made of Alexis; and the corresponding complaint by Erin that Alexis made a number of serious allegations against her to which Erin was then required to respond, I am inclined to think that both parties share equal responsibility for the descent into such matters.
14. Before turning to the submissions as to gross sum costs orders, it is convenient at this point to consider the import of the settlement offers. The principles applicable to the consideration of the costs consequences of non-acceptance of Calderbank offers (as each of the offers, made on an open basis or otherwise, was) are well-known and can be briefly summarised as follows.
15. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa) Basten JA (McColl and Campbell JJA agreeing) summarised at [8] the principles involved, noting that there were two questions, namely: first, whether there was a genuine offer of compromise; and second, whether it was unreasonable for the offeree not to accept the offer. Whether a rejection of a Calderbank offer was unreasonable is an evaluative judgment which must be made by reference to the terms of the offer and all the relevant surrounding circumstances (see, for example, King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11] per Young JA, with whom Hodgson and Campbell JJA agreed). I note that it has been said that a finding of unreasonableness should not be made other than on tolerably clear grounds (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113] per Basten JA with whom Young CJ in Eq and Giles JA agreed).
16. When determining whether the rejection or non-acceptance of the offer was unreasonable the Court is to have regard to a number of factors (referred to in Miwa at [12]), including those identified in Hazeldene's Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA. Such factors include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it (see also Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (NSW) (No 2) [2020] NSWSC 519; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA).
17. Factors that have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192] per Allsop P, as his Honour then was, Beazley JA, as Her Excellency then was, and McColl JJA agreeing); all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22] per Beazley JA, with whom McColl JA agreed); the inclusion of conditions in the offer (Magenta Nominees); the offeror's case changing after the making of the offer (South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [85] per Hunt AJA, Mason P and McColl JA agreeing); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236; [1996] FCA 862 at 242D per Lindgren J).
18. It was not suggested that any of the offers was not a valid offer for the purpose of at least invoking the Calderbank principles, in particular, that it did not comprise a genuine element of compromise. Rather, the focus in submissions was as to the unreasonableness (or otherwise) of Alexis' non-acceptance of the respective offers (bearing in mind, as already noted, that it was for Erin to establish that rejection of the offers was in all the circumstances unreasonable, and whether the offer was, in comparison, more favourable to Alexis than the ultimate outcome of the litigation).
19. As to the difficulty of assessing the strengths or weaknesses of the case, I accept that where there is an evaluative judgment to be exercised there can be some difficulty. However, the fact that different judges might have come to different views on the family provision aspect of the claim is not in my opinion a basis for concluding that it was not unreasonable for Alexis to have rejected any one or more of the particular offers. That difficulty arises in many cases (not just family provision cases). Here, there were discrete issues as to construction or rectification of the Will (on which it is not suggested that any evaluative judgment was involved); there was the question as to whether anything ultimately would practically be gained by pursuing those issues if there was to be a claim for family provision in any event; and the offers (broadly speaking) were surely able to be assessed on the broad basis that they involved various amounts that reflected a proposed sale of The Entrance Road Property and a contribution to Alexis' costs to that date.
20. As to the giving up of the ability to make a further family provision claim in the future (i.e., the s 95 release), while I accept that this is an element that may need to be weighed in the balance when comparing the offers with the ultimate outcome in the case, I do not place much weight on this aspect of the offers, noting that such a release was not a matter in dispute between the parties (what was in dispute was the amount that was to be received by Alexis).
21. I accept the force of the observation of Kunc J in Bates v Cooke at [27]-[33] that there are sound policy reasons in family provision proceedings to be slow to depart from the prima facie position as to costs in relation to offers of compromise and that this would apply to the position (albeit there is no prima facie presumption) in relation to Calderbank offers even if this has a detrimental effect on the provisions ultimately to be received.
22. That said, I have concluded (with some hesitation) that it was not unreasonable for Alexis to reject the respective offers (noting that the offers were roughly comparable, to the extent that they can usefully be compared, with the ultimate outcome). That is because I accept that there was a particularly difficult exercise to be undertaken in weighing the matters relevant to the appropriate order to be made for provision in this case having regard to the tax consequences that had arisen.
23. However, that does not mean that the making and rejection of the offers should be excluded from consideration altogether in the exercise of the costs discretion. It is regrettable, to say the least, that the forensic decision of Alexis to pursue an outcome whereby she would receive the estimated value of the proceeds of the sale (without bearing any of the tax consequences) together with an additional amount (plus a substantial portion of her costs) has led to all parties incurring substantial increased costs in the litigation (at the risk of frustrating the deceased's evident testamentary intentions). Moreover, while I do not accept that the proceeding was driven by Alexis' antipathy towards Erin, the litigation cannot have assisted in repairing the apparently fractured relationship between them and the evident objective of Alexis (at least as at December 2018) to "secure the remainder" of the deceased's estate (beyond the Dover Heights Property) and to attempt to "force" Erin to "take the company loans which are secured on the houses" (see at [98] of the principal judgment), which was ultimately an unrealistic outcome (as Alexis seems to have accepted was the effect of the advice she had received).
24. As to gross sum orders, the principles applicable to the award thereof were set out in Hamod v New South Wales [2011] NSWCA 375 (Hamod v New South Wales). A gross sum costs order is appropriate where it is desirable to avoid the expense, delay and aggravation likely to be involved in a costs assessment or where a party's conduct has unnecessarily contributed to the costs of the proceedings and "especially where the costs incurred have been disproportionate to the result of the proceedings" (Hamod v New South Wales at [817]-[818] per Beazley JA, as Her Excellency then was, with whom Giles and Whealy JJA agreed).
25. The considerations material to the exercise of the discretion to make gross sum orders include: the complexity of the proceedings in relation to their cost; whether the assessment of costs would be "protracted and expensive"; whether there is a risk that the unsuccessful party would not be able to meet a liability of the order likely to result from the assessment; and the relative responsibility of the parties for the costs incurred, especially where the costs incurred are disproportionate to the result of the proceedings (see Hamod v New South Wales at [813]-[820]; and Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [5]-[7] per Campbell AJA).
26. Having regard to the conduct of the litigation and the magnitude of the costs that have been incurred, I accept that that it would be preferable for gross sum costs orders to be made if that were possible on the material before me. That said, I consider that in the present case the more efficient way to proceed is to make an order capping the recoverable costs (as I explain below).
27. I do not accept that the appropriate costs outcome is for the estate to bear the whole of its costs and for Alexis to recover, in effect, the whole of her party/party costs (which is the broad outcome of Alexis' proposal). I do not consider that this would appropriately reflect the fact that the defendants were successful on a number of discrete issues and that, conversely, Alexis failed on a number of discrete issues; nor the fact that Alexis clearly made a forensic decision to pursue the litigation in the face of very reasonable settlement offers.
28. However, I am also concerned that there must be a balance between depriving Alexis of a substantial portion of the legacy ordered in her favour and the estate being further burdened of costs.
29. I have concluded that the appropriate outcome is that Alexis should pay roughly 15% of the defendants' costs (that being an appropriate - and indeed generous to Alexis - apportionment of the issues on which the defendants succeeded in the case compared to those on which Alexis succeeded), which amount I will cap and fix at $70,000; that Alexis should bear the whole of the costs relating to Mr Gangemi's evidence and the ATO tax ruling and not recover any portion of those costs from the estate; and that Alexis should recover out of the estate the capped (and fixed) sum of $250,000 towards her costs on a party/party basis (being in effect a substantial, although not the whole, amount of the costs estimated to have been incurred as at the time of the Binding Heads of Agreement), less the $20,000 ordered by Hallen J in October 2020 to be deducted out of any amount payable to Alexis by the defendants (i.e., $230,000). Setting off the capped amount thus payable to the estate towards its costs ($70,000) and the net capped amount thus payable to Alexis out of the estate towards her costs ($230,000), this leaves an amount payable to Alexis of $160,000 out of the estate. That means that Alexis will receive provision of $820,000 out of the deceased estate in lieu of the provision made for her under the Will, together with a net sum of $160,000 towards her costs out of the estate.

Orders

1. For the reasons set out above, I make the following costs orders: 1. The plaintiff be paid the net sum of $160,000 out of the estate of the late Dianne Victoria Lakshmanan as a capped and fixed amount towards her costs of the proceeding on a party/party basis (and taking into account the amount ordered by Hallen J to be paid by her to the defendants in October 2020). 2. The first defendant, as executor, be entitled to recoup her costs of the proceeding out of the estate on the indemnity basis. 3. There be no other order as to costs.

Amendments 29 June 2022 - Amendment to coversheet - representation 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: 29 June 2022