Supreme Court New South Wales Medium Neutral Citation: MacAlpine v MacAlpine (No 2) [2020] NSWSC 1003 Hearing dates: 31 July 2020 Date of orders: 31 July 2020 Decision date: 31 July 2020 Jurisdiction: Equity - Family Provision List Before: Parker J Decision: See [42] Catchwords: COSTS – party/party – exception to the general rule that costs follow the event – family provision claim unsuccessful – whether 'special' order should be made that costs come out of the estate or that there be no order as to costs COSTS – party/party – basis of quantification – indemnity basis – plaintiff who was unsuccessful rejected defendant's Calderbank offer Cases Cited: Chapple v Wilcox (2014) 87 NSWLR 646 Daniels v Hall (No 2) [2014] WASC 272 Megerditchian v Khatchadourian (No 2) [2020] NSWSC 112 Singer v Berghouse (1993) 67 ALJR 708 Category: Costs Parties: Stuart MacAlpine (Plaintiff) Grant MacAlpine (Defendant) Representation: Advocates: S Joseph (solicitor) (Plaintiff) BJ Skinner (counsel) (Defendant) Solicitors: Cole & Butler Solicitors (Plaintiff) Cheney Suthers Lawyers (Defendant) File Number(s): 2019/116888 Publication restriction: Nil Judgment – EX TEMPORE Revised from transcript; issued 3 August 2020 1. On 26 June this year, I delivered my principal judgment in these proceedings: MacAlpine v MacAlpine [2020] NSWSC 824. I dismissed the plaintiff's application for family provision and reserved the costs of the proceedings for further consideration. This judgment now deals with the question of costs. It assumes familiarity with, and uses the terminology used in, my first judgment. 2. At today's hearing, the plaintiff, Stuart, was represented by his solicitor, Mr Joseph. The defendant, Grant, was represented by his counsel, Mr Skinner. No order as to costs 1. There are two issues for determination. The first concerns the incidence of costs. Mr Skinner contends that costs should follow the event and Stuart should be ordered to pay the costs of the proceedings. Mr Joseph contends that no order for costs should be made against Stuart and Grant should be left to take his costs out of the estate (which, in substance, means that he would have to bear them himself, as he is the residuary beneficiary). 2. In order to deal with this dispute, I need to say something about the case and its outcome. The main thrust of Stuart's case was that the Court should make provision for him to meet his needs. These included expenditure associated with his age and health (especially his chronic back condition). They also included (and this was financially the greater part of the claim) costs associated with his farming business and paying off debts. 3. Stuart's case relied on two other factors. The first was that the deceased had, so Stuart alleged, exploited him (or at least profited from him) financially. In turn, this involved two allegations. One concerned the deceased's conduct as trustee of Bogan Downs, the large rural property which Stuart had inherited from his grandmother. The allegation was that, in acting as trustee, the deceased had misappropriated monies and misused assets which belonged to Stuart, in order to benefit herself and other members of the family. 4. The second allegation concerned the settlement of proceedings which Stuart commenced in 1994. Stuart's claim was that he settled the proceedings without receiving full value for his claims. Stuart alleged that, as a result both of the misappropriation of his inheritance and his leaving money on the table in the settlement, monies became available to the deceased upon which she was able to build, as ultimately reflected in the value of her estate (which at the date of her death was approximately $2.5 million). 5. The second additional aspect of Stuart's case focused on the breakdown of the family relationship between Stuart and the other members of his family, starting in the late 1980s. Stuart claimed that the breakdown was because of his parents' bigotry. But he also claimed that, after a time, his relationship with the deceased improved so that by the time of her death there was no real justification for excluding him from the estate. 6. I rejected Stuart's contention that he was relevantly in need. The evidence showed that Stuart had net assets of $4.3 million. This was sufficient to provide for his medical and ageing needs many times over. I considered that the deceased's estate had no obligation to underwrite Stuart's farming activities and his borrowings for the benefit of himself and members of his family. 7. I also rejected Stuart's allegations of financial exploitation. I thought that the allegations concerning the deceased's conduct as trustee were based on a misreading of the ledger book upon which Stuart relied in order to make his claim and, in any event, that Stuart's evidence on the deceased's conduct as trustee going back to the 1960s and 1970s was not reliable. Nor was I satisfied that Stuart had left any significant money on the table in the settlement of his 1994 proceedings or that this had contributed in any significant way to the value of the deceased's estate when she died over 20 years later. 8. Finally, I rejected Stuart's main allegations about the family rift. I was not satisfied that it resulted from bigotry on the deceased's part and I thought it more likely that the rift arose from the breakdown in Stuart's relationship with his brother, Grant, and related disagreement as to how the family farming activities should be carried out. I was also not satisfied that Stuart's relationship with the deceased had improved to the extent which he claimed in later years. 9. Mr Joseph argued, as counsel for Stuart had argued at the trial, that he is "asset rich and cash poor". Mr Joseph submitted that to require him to pay costs would impose a significant and damaging additional burden on him at a time when he is seeking to restock Bogan Downs following the very severe drought of the past few years. 10. Mr Joseph submitted that in family provision matters, the rules concerning the incidence of costs are "special". He referred to what Gaudron J said in Singer v Berghouse (1993) 67 ALJR 708 at 709: Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s 33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have detrimental effect on the applicant's financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate. 1. The question of the incidence of costs in family provision matters was considered by the Court of Appeal in Chapple v Wilcox (2014) 87 NSWLR 646. The leading judgment was given by Barrett JA, with whom Gleeson JA agreed and with whose reasons Basten JA generally concurred. 2. After referring to what Gaudron J said in Singer v Berghouse, Barrett JA referred at [138] to the following statement by EM Heenan J in Daniels v Hall (No 2) [2014] WASC 272 at [32]: In more modern times, particularly with principles of modern case management, the tendency has been to move away from that position in favour of the more general principle of costs following the event but with attendant liberality and discrimination before adopting such a position in any particular case. 1. At [139] Barrett JA continued: That more modern approach seems to me to reflect the position in New South Wales. Where the application for a family provision order is dismissed, the prima facie principle with respect to costs is as stated in r 42.1 and r 42.20(1) of the UCPR — that is, there should be an order that the unsuccessful plaintiff pay the defendant's costs. In Jvancich v Kennedy (No 2) [2004] NSWCA 397, Giles JA observed (with Handley JA and McColl JA agreeing) that, in circumstances of that kind, the overall justice of the case — the expression employed by Gaudron J in Singer v Berghouse — is not remote from costs following the event: at [11]. There is, of course, discretion to depart from the prima facie principle for good reason, even to the extent of ordering that the unsuccessful plaintiff's costs be paid out of the estate; and the court should apply the "liberality and discrimination" to which EM Heenan J referred. 1. In the case before the Court of Appeal, the unsuccessful plaintiff was in a poor financial position and there appears to have been no dispute that if an order for costs were made against him, he would have "instantly become impecunious": see at [140]. Barrett JA asked whether this amounted to a sufficient reason to depart from the principle that costs should follow the event. He said (at [141]-[142]): [141] Generally speaking, of course, a litigant's financial position is irrelevant when it comes to the exercise of the costs discretion, particularly where that litigant is a plaintiff. Having subjected the defendant to court proceedings and lost, a plaintiff without means will generally not be able to resist a costs order just because he or she cannot pay. That general principle may be subject to some relaxation in family provision cases by application of liberality and discrimination — but only, I think, where the claim, although ultimately unsuccessful, had merit and involved a genuine question whether the scheme of testamentary benefaction in fact applying was, in the particular circumstances, one reflecting community standards. In Jvancich, Giles JA recognised an analogy, as to costs, between family provision cases and probate proceedings. He noted that, in probate cases, departure from the rule that costs follow the event is often recognised as appropriate where the testator has been the cause of the litigation — where, for example, the will is ambiguous. In such cases, the costs of unsuccessfully opposing the executor may be ordered to be paid out of the estate. It may be said, in the same way, that if the testator has been the cause of family provision litigation by failing to make some disposition that he or she arguably should have made in accordance with community standards, the costs burden should fall on the estate, even if the ultimate decision of the court does not accommodate that disposition. [142] This is not such a case. There was very little merit indeed to the respondent's contention that he should, to some extent, supplant his mother — the deceased's only child — to whom the whole estate had been given. Applying the probate analogy, the testator was not the cause of the litigation. 1. In the present case, Stuart's position, so far as resisting a costs order is concerned, is less favourable than the unsuccessful plaintiff's position in Chapple v Wilcox. As my findings show, Stuart is well able to afford the costs of the proceedings even if they exceed $100,000. He has an unencumbered property worth $3.5 million. He and Patricia also have $750,000 tied up in a property which they have provided for their daughter and son-in-law and the acquisition of which was funded by carbon sequestration payments received by Stuart. 2. In any event, as the reasoning in Chapple v Wilcox shows, Stuart's financial position would generally be irrelevant when it comes to the exercise of the costs discretion. As in that case, I do not consider that it would be proper to regard the deceased as being the cause of the litigation. 3. For these reasons I think there is no justification for departing from the principle that costs should follow the event. Costs on an indemnity basis 1. The second issue debated before me concerns the scale on which costs should be awarded. Mr Skinner contended that costs should be awarded on an indemnity basis from a series of dates in late 2019 and early 2020 onwards. This contention was based on three offers made on Grant's behalf to resolve the proceedings, which Mr Skinner submitted were more favourable than the ultimate result. Mr Skinner also submitted that there had been some delinquency in the conduct of Stuart's case at trial and afterwards. 2. Apart perhaps from the consequences of the third offer which was made in January 2020, after the trial, Mr Joseph disputed that any of these grounds provided a sufficient reason for the award of indemnity costs. 3. The deceased died in August 2018. At some point after that, not revealed in the evidence, Stuart retained Mr Daniel O'Keefe, a solicitor at Dubbo who practises under the name "Macquarie Law", to act for him in making a family provision application. Stuart's affidavit in support of the application was sworn on 4 April 2019 and Mr O'Keefe filed a summons on his behalf commencing the proceedings on 15 April. 4. On 28 June 2019 there was a mediation between the parties at Orange. That mediation was unsuccessful in resolving the proceedings. 5. On 30 July Mr O'Keefe served on the solicitor for Grant, Ms Danielle Ford of Cheney Suthers Lawyers, a formal offer of compromise under the Rules. The offer was that Stuart should receive a legacy out of the estate of $600,000 and his costs of the proceedings should be paid on the ordinary basis. This offer was not accepted and the preparation of the case and the interlocutory steps continued. On 22 August Patricia swore her affidavit in support of Stuart's application. 6. Then on 4 September Ms Ford made an offer in the form of a Calderbank letter for the resolution of Stuart's claim. The offer involved a payment of $150,000 inclusive of Stuart's costs. It was expressed to be open for 28 days, expiring on 2 October. 7. In the meantime, on 13 September, the matter came back before the Court where it was listed before Kunc J. His Honour was informed that the case was ready for hearing and he put it in for call-over on 4 October. 8. On 24 September, still within the period of Ms Ford's Calderbank offer, Mr O'Keefe served a further formal offer of compromise under the Rules. This was for Stuart to receive $250,000 plus costs on the ordinary basis. The offer was not accepted and on 2 October Ms Ford's Calderbank offer expired. Two days later the matter was fixed by the Chief Judge for hearing on 19 and 20 December, the last two days of term. 9. On 24 October Mr O'Keefe wrote to Ms Ford. He stated that his instructions had been withdrawn and that Mr Joseph, whose firm is called Cole & Butler, would be taking over the matter for Stuart. Mr Joseph filed the Notice of Change of Solicitor on 12 November. On the same day he wrote to Ms Ford saying that he was having difficulty in getting the matter ready for trial and foreshadowing an application to have the hearing date vacated and the trial adjourned to the following year. 10. On 18 November Ms Ford wrote to Mr Joseph repeating the offer made in her Calderbank letter of 4 September, namely $150,000 inclusive of costs. The offer was open until that Friday, 22 November. It was not accepted. 11. The matter came before me on 26 November on an application to have the hearing date vacated but I was able to make timetabling orders which allowed for Mr Joseph and his counsel, Mr Underwood, to be ready for the hearing and it proceeded on 19 and 20 December. As I recorded in my first judgment, it was only possible to complete the evidence at the hearing and the submissions were, by agreement between the parties, presented in writing. 12. On 16 January, before the first of the submissions had been filed, Ms Ford wrote a further Calderbank letter. The offer in this letter was that the proceedings should be discontinued by Stuart on the basis that each party pay his own costs. The offer was expressed to be open for two weeks, but the parties agreed to extend the deadline until 7 February. The offer was not accepted within this period and it was formally declined by letter from Mr Joseph on 10 February. 13. I will begin with the September 2019 offer made by Ms Ford. As I have already indicated, the offer was made in the form of a Calderbank letter. It was not a formal offer in accordance with the rules. 14. In Megerditchian v Khatchadourian (No 2) [2020] NSWSC 112, I had to consider a Calderbank offer made in family provision proceedings. I explained why offers under the Rules contain procedural advantages from the point of view of the offeror party and that it was always better practice to make a formal offer rather than an informal one if that is possible. But as I observed, if an informal offer is made instead, that should not prevent the offering party from succeeding if he or she can discharge the additional onus involved in demonstrating that refusal of the offer was unreasonable (see at [33]-[36]). 15. As I understood it, both parties accepted that I should approach the offer made in this case in the same way. 16. One of the factors in determining whether the rejection of an offer is unreasonable, where the offer is an inclusive one, is how much the offering party has incurred in costs. Where the offer is made by the defendant to a plaintiff, the fact that the defendant does not know what the plaintiff's costs are is not necessarily a barrier to the offer's success since the plaintiff should know or can readily find out what costs have been incurred and therefore how much he or she will receive "in the hand": see Megerditchian at [39]. 17. In the present case there is no evidence before the Court of how much the plaintiff had incurred in costs at the time the offer was made but there is evidence of the costs that had been incurred up to the mediation, which were $24,000. Although further work would have been done after that date in preparing Patricia's affidavit, it is clear that the offer would have left Stuart with a sum "in hand" of more than $100,000 and probably more than $110,000. This is a significant sum, if not a large one compared with the overall value of the estate. 18. In the letter Ms Ford noted that she had been advised by Mr O'Keefe that he did not expect to file any further evidence "at this stage". This is consistent with what the Court was told on 13 September. Ms Ford continued: We have considered the evidence filed on behalf of your client including his own capacity and resources for meetings his needs and have been unable to discern any inability on his part to meet such needs as have been identified. Furthermore, in considering the nature, extent and character of the estate and the fact that the testatrix regarded the claim of the majority beneficiary to be superior to those of the plaintiff, we are unable to reach a conclusion that provision ought to have been made in favour of your client. See Pontifical Society for the Propagation of Faith v Scales (1962) 107 CLR 9 at 19. We anticipate that the claim made by your client will be dismissed with costs. We intent to rely upon the offer contained herein in support of an application that upon dismissal of the plaintiff's claim that your client pay the cost of the estate on the indemnity basis. 1. As I understood Mr Joseph's submissions, he suggested that, based on his subsequent experience, at the time the offer was made the case had not been properly prepared by Mr O'Keefe. It is not possible to go into this for the purposes of the present application and it is not necessary to do so. It is objective unreasonableness in failing to accept the offer which counts. 2. Mr Joseph did not suggest that Mr O'Keefe had no proper opportunity to consider the offer. He could not have made such a suggestion. The evidence was complete and it is clear from the fact that Mr O'Keefe had himself already made an offer on Stuart's behalf and was shortly about to make a further offer that the merits of Stuart's claim must have been under specific consideration by Mr O'Keefe. In her letter Ms Ford drew attention to the main grounds on which the defendant proposed to resist the application for Family Provision and those grounds were ultimately successful. 3. The mere fact that an offer is made which turns out ultimately to be less favourable than the result obtained by the offeree does not establish that rejection of the offer was unreasonable. But taking into account that the parties were actively exchanging offers of settlement and that the claim failed essentially for reasons which were foreshadowed in the letter, I think that it is clear that the decision not to accept the offer must have been an unrealistic one, based either on too sanguine a view of the approach the Court takes to family provision claims of this type, or a failure to appreciate the weaknesses or potential weaknesses of the evidence in support of Stuart's case, or both. I am satisfied that the rejection of the offer was unreasonable and it should attract an award of indemnity costs. 4. This makes it unnecessary to consider the later offers and the other alleged delinquencies upon which Mr Skinner relied, but I will say that I was not impressed with his criticisms of the way in which the case was conducted. It is always possible to point after the event to different ways in which forensic steps could have been taken, especially in a losing case. But overall I see no reason to think that Mr Joseph and Mr Underwood did anything other than their best to put Stuart's case fairly and properly before the Court. The seeds of the indemnity costs order that I will make were sown before their involvement. 5. The order of the Court is: 1. Order that the plaintiff pay the defendant's costs of the proceedings on the ordinary basis up to and including 2 October 2019 and thereafter on an indemnity basis. ******** 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: 03 August 2020