Succession - Family provision and maintenance - Practice - Procedure, orders and other matters - Other procedural matters - Costs - Applicant wholly successful - Small estate - Needy applicant - Calderbank offer.

Judgment Number: [2005] TASSC 102

(Edited version of reasons delivered orally) 24 August 2005

1 There are two applications for costs before me in relation to an application under the Testator's Family Maintenance Act 1912 by a widow. She was wholly successful in the proceedings. Her husband left her a life interest in his estate, but as a result of her application she has received the whole of the estate.

2 The administrator of the estate is the Public Trustee. The Public Trustee is the respondent to the application. I have already ordered that the whole of the Public Trustee's costs be paid out of the estate on a solicitor/client basis.

3 The application was opposed by three beneficiaries. Each of those three was entitled under the will to a remainder interest in one eleventh of the estate. The other beneficiaries who were entitled to the other eight elevenths in remainder did not oppose the application. Of course, all the beneficiaries other than the widow have been deprived of the interests that they had under the will.

4 There is an application by the three represented beneficiaries for their costs to be paid out of the estate. There is also before me an application by the applicant for the three represented beneficiaries to pay her costs and to indemnify the estate in respect of the costs of the Public Trustee. I will refer to the three represented beneficiaries as "the beneficiaries". The beneficiaries rely on the general practice of courts in Testator's Family Maintenance Act cases of ordering the costs of all parties to be paid out of an estate when an application is successful. That practice is referred to, for example, in De Groot and Nickel, Family Provision in Australia, 2nd ed, at par9.2. Although the Court has an unfettered discretion as to costs, it is usual in cases of this nature for costs not to follow the event, and for the estate to bear the costs of all parties. I include in that term represented beneficiaries who are not respondents.

5 The beneficiaries rely not only on the general practice of the courts in this sort of situation, but also on the fact that, as a result of their participation in the trial and in the making of submissions, it was unnecessary for the Public Trustee to be represented at those stages. They also rely on the fact that they took an extraordinarily passive stance in the final stages of the litigation. They did not seek to cross-examine the applicant or any of her witnesses. They conceded that some greater provision should be made out of the estate for her than had been made by the testator in the will. They adduced no evidence, save for evidence stating what stance they took as to what should become of the estate. They consented to the case proceeding by way of written submissions, so that the trial was over and done within a few minutes, and substantial costs were saved. It is on that basis that they submit that they should have all their costs from the estate.

6 The applicant contends that the usual rule should be departed from because of the way in which the beneficiaries conducted the litigation. The applicant relies on the fact that each of the three swore, filed and served an affidavit in September 2003 making certain allegations that made her application a hotly contested one, but, after she and her solicitors had gone to the trouble of marshalling evidence to refute those allegations, decided not to rely on their original affidavits, or the allegations in them, and to take the passive stance that I have referred to. The applicant also relies on the fact that offers of settlement were made in early 2004, including an offer that was made without prejudice except as to costs to the effect that each of the three beneficiaries would be paid $5,000 in consideration of them giving up their remainder interests in the estate and paying their own costs. It is contended that, because of the size of the estate and the financial circumstances of the applicant on whom the burden of a costs order in favour of the beneficiaries would fall, those factors make it appropriate to depart from the ordinary practice that I have referred to.

7 I should say a little about the size of the estate. According to the affidavit of assets and liabilities prepared for probate purposes, the assets of the estate at the date of death were worth a little over $300,000, and the liabilities amounted to a little under $80,000. There was evidence before me at trial of the real estate having increased in value. I made findings that, if the applicant were to receive the whole estate, and if a doubtful debt owing to the estate were to be paid in full, and if the applicant were to content herself with selling the farm forming part of the estate and buying a house costing $180,000, the remaining funds would be exhausted at about the time of her death if she spent the interest and capital at a rate equivalent to $20,000 per annum in today's money, assuming that she had an approximately average lifespan. Those findings took into account her pension entitlements and the impact of her assets and income on them.

8 It is clear, therefore, that if I make an order for costs in favour of the beneficiaries, that order will deplete an already small estate, and the burden of it will fall on a woman in her 60s who is already in a somewhat difficult financial position. Those factors, in my view, are relevant ones. They weigh in her favour in relation to the question of costs.

9 I think it is appropriate to have regard to the history of the litigation in three stages. The first stage was the stage before any participation on the part of the three represented beneficiaries. It was not until 22 September 2003 that any affidavits were filed on behalf of any of them. Prior to that date, all of the work done in relation to this litigation was work that needed to be done, whatever stance the three represented beneficiaries were going to take, in order for the applicant to pursue her application and obtain proper provision out of the estate of the testator who, of course, had not made proper provision for her. In those circumstances I do not see any reason why the three represented beneficiaries should pay any of the costs that were incurred in respect of that first stage of the proceedings.

10 The next stage of the proceedings was the stage from 22 September 2003 until the rejection of the offer that I have referred to. That offer was rejected on 4 March 2004. During that period, as I have said, each of the three beneficiaries swore, filed and served an affidavit in which certain allegations were made; work was done by the applicant and her solicitors to respond to those allegations; a further affidavit of hers was filed and served; and subsequently those allegations were abandoned, in the sense that a decision was made that those affidavits not be read at trial. I do not think it can be said that there was any impropriety in those affidavits being filed, nor in the decision being made not to rely on them. I am not in a position to make any findings of fact as to the allegations made in those affidavits and contradicted by the applicant in the affidavit that she filed in answer to them. I think that the situation is akin to one where, in an action, matters are pleaded, work is done in consequence of that pleading, and the pleading is amended so as to remove or abandon matters that have been pleaded. In that situation the amending party would be ordered to pay the costs thrown away as a result of the matters having been pleaded and then not relied on. Given what I have said about the size of the estate and the financial circumstances of the applicant, I think that she should recover from the three beneficiaries a large proportion of the costs in respect of the period from 22 September 2003 until 4 March 2004, but not all her costs of that period, because not all of the work done during that period resulted from the making of the allegations in the affidavits that were not read.

11 I have already outlined the offer that was rejected on 4 March 2004. There was another offer made at the same time that the applicant would pay the three beneficiaries' taxed costs to date. Thus, if it happened that their costs exceeded $15,000, they having been offered $5,000 each, then the three beneficiaries would have been in a position to settle for enough money to pay their costs. I think it is reasonably clear that their costs to 4 March 2004 should not have come anywhere near $15,000. What their lawyers needed to do prior to then was to take instructions, read the originating application and the affidavit filed in support of it, read the affidavit material filed by the Public Trustee, prepare the three affidavits that were later not read, attend a settlement conference, conduct necessary preparation and research, and provide appropriate advice. All of that, together with incidental letters and attendances, in my view should not have cost as much as $15,000, though certainly the work involved can be expected to have cost several thousand dollars.

12 It is worth contrasting the offer with the stances later taken by the three beneficiaries and with the result of the trial. The result of the trial was that they were wholly deprived of their one eleventh remainder interests. The stance that they took at trial was that the applicant should receive $150,000 in the nature of a legacy, but that the rest of the estate, likely to amount to about $240,000, should be applied for the applicant's benefit during her lifetime, most of it being expended on a residence, and the balance of perhaps about $60,000 being invested with the interest going to her - so that what the three would each have received on her death, probably about 23 years hence according to the statistics, would have been a one eleventh interest in $60,000 and a one eleventh interest in a residence now worth $180,000. The stance that they took in the affidavits that they filed in November 2004 was a little different from the stance that they took at trial. In one sense it would have been to the advantage of the three beneficiaries to have received $5,000 each and had some money in their pockets after paying their costs rather than having a one eleventh entitlement in what was left of a small estate probably some time in the 2020s.

13 In an estate of this size, when the burden of a costs order would fall on the successful applicant, a person with limited financial resources, and thereby deplete the estate, I think the refusal of a reasonable offer of settlement should be regarded as a very significant consideration. In this case I think the offer that I have outlined was reasonable. The three beneficiaries came out worse off than they would have been if they had accepted that offer. If I make an order for costs against them, they will still get the benefit of having kept the costs of the litigation to a minimum.

14 So far as the Public Trustee's costs are concerned, I am not satisfied that its costs have been significantly increased by the refusal of the offer of settlement or by the way in which the three beneficiaries have conducted their cases. So far as the first stage of the proceedings, that before 22 September 2003 is concerned, I do not think the beneficiaries should be ordered to bear any costs. However, I think this is an appropriate case for the three beneficiaries, rather than receiving the benefit of an order for costs, to be ordered to pay a substantial proportion of the costs incurred after 22 September 2003. I do not see any reason to order a different percentage for the periods before and after the offer of settlement. I order that Rodney Gordon Woolnough, Marian Bromley Rush and Rosemary Helen Morrison pay 90 per cent of the applicant's costs as from 22 September 2003, and I certify for counsel.