Supreme Court New South Wales Medium Neutral Citation: Smith v Moore (No 2) [2020] NSWSC 1640 Hearing dates: On the papers Date of orders: 18 November 2020 Decision date: 18 November 2020 Jurisdiction: Equity - Family Provision List Before: Williams J Decision: The plaintiff is to pay the defendant's costs on the ordinary basis. The balance of the defendant's costs (being the difference between the defendant's costs on the ordinary basis and on the indemnity basis) is to be paid out of the estate of the late Yvonne Gwendoline Smith. The Court makes no order as to the plaintiff's costs, with the intention that the plaintiff will bear his own costs. Catchwords: COSTS – whether unsuccessful claimant for provision out of deceased estate should pay own costs and pay defendant executor's costs – no question of principle Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Succession Act 2006 (NSW), ss 59 and 99 Uniform Civil Procedure Rules 2005 (NSW), rr 42.1 and 42.20 Cases Cited: Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 Detheridge v Detheridge [2019] NSWSC 183 Haertsch v Whiteway (No 2) [2020] NSWCA 287 Harkness v Harkness (No 2) [2012] NSWSC 35 Hinderry v Hinderry (No 2) [2016] NSWSC 1577 Meres v Meres (No 2) [2017] NSWSC 523 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Smith v Moore [2020] NSWSC 1446 Category: Costs Parties: Kenneth David Smith (Plaintiff) Minerva Ruth Moore (Defendant) Representation: Counsel: Mr J E Armfield (Plaintiff) Mr S F Hughes (Defendant) Solicitors: Soothill & Associates Lawyers (Plaintiff) Mark Mulock & Co (Defendant) File Number(s): 2019/191473 Publication restriction: N/A Judgment Introduction and summary of decision 1. On 19 October 2020, I published the principal judgment dismissing the plaintiff's claim for provision out of the estate of her late mother: Smith v Moore [2020] NSWSC 1446 (the Judgment). 2. The question of the costs of the proceeding was reserved to be determined on the papers after receiving written submissions from the parties. 3. The defendant executor made written submissions on 2 November 2020 contending for an order that the plaintiff pay her costs of the proceeding on the ordinary basis, with the balance of her costs (that is, the difference between the defendant's costs on an ordinary basis and on an indemnity basis) to be paid out of the deceased's estate. 4. The plaintiff made written submissions on 3 November 2020 contending that there should be no order as to his costs (with the intention that he bear his own costs of the proceeding) and that the defendant's costs should be paid out of the estate on an indemnity basis. 5. Both parties subsequently notified the Court that they did not wish to make further submissions responding to each other's earlier submissions. 6. For the reasons that follow, I have decided to make the following orders: 1. no order as to the plaintiff's costs of the proceeding, with the intention that he will bear his own costs; 2. the plaintiff is to pay the defendant's costs of the proceeding on the ordinary basis; 3. the balance of the defendant's costs of the proceeding (that is, the difference between the costs payable by the plaintiff pursuant to order (2) above and the defendant's costs on an indemnity basis) be paid out of the estate of the late Yvonne Gwendoline Smith. 1. These reasons assume familiarity with the Judgment. Principles applicable to costs orders in family provision proceedings 1. Section 98 of the Civil Procedure Act 2005 (NSW) provides that costs are in the discretion of the Court, which has full power to decide who will pay costs to whom and to what extent, whether on the ordinary basis or on an indemnity basis. 2. This provision must be read alongside s 99(1) of the Succession Act 2006 (NSW) which empowers the Court to award costs in family provision proceedings to be paid out of the estate (or notional estate) as the Court thinks fit. Section 99(1) of the Succession Act confers on this Court an unfettered discretion as to when costs are to be paid out of the estate. However, as Hallen J said in Hinderry v Hinderry (No 2) [2016] NSWSC 1577 at [54], the provision does not apply to costs as between party and party, but only as to when and how much costs are to be paid out of the estate. 3. In an appropriate case, the Court may also make an order capping the costs to be recovered by one party from the estate: see Detheridge v Detheridge [2019] NSWSC 183 at [174]–[177] and the authorities referred to therein. 4. While s 98 of the Civil Procedure Act confers a broad discretion on the Court to award costs, it is well known that this discretion must be exercised judicially and in accordance with established principles or legislative provisions which operate as a fetter on the exercise of the discretion: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65]. One such provision is Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 which provides that costs are to follow the event unless it appears to the court that some other order should be made. 5. The principles that guide the exercise of the discretion under s 98 and the application of r 42.1 in family provision cases were recently confirmed by the Court of Appeal in Haertsch v Whiteway (No 2) [2020] NSWCA 287: "5. It is well established that family provision applications 'raise different issues with respect to costs' to those raised by other proceedings: Salmon v Osmond [2015] NSWCA 42 at [172] (Beazley P, McColl and Gleeson JJA agreeing). The liberal approach to costs in such cases has a long provenance, though reference is now typically made to remarks of Gaudron J in Singer v Berghouse [1993] HCA 35; (1993) 67 ALJR 708 at 709, to the effect that 'costs in family provision claims 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 it would have a detrimental effect on the applicant's financial position'. Indeed, in some jurisdictions it would seem that no order as to costs is the usual or general consequence of an unsuccessful application: Bowyer v Wood (2007) 99 SASR 190 at 210, 211; [2007] SASC 327; Underwood v Underwood [2009] QSC 107 at [32]-[33]. 6. However, as Giles JA observed in Jvancich v Kennedy (No 2) [2004] NSWCA 397 at [11] (Handley and McColl JJA agreeing), the 'overall justice of the case' is 'not remote from costs following the event'. For one thing, the default rule encourages prospective applicants for provision to have regard to the significant costs consequences to themselves of making such an application. But while the default rule in r 42.1 applies to family provision proceedings, its application remains subject to the court exercising greater than usual 'liberality and discrimination' in deciding whether to depart from it: Salmon v Osmond at [174] (Beazley P, McColl and Gleeson JJA); Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 at [26]-[27] (Basten JA, Gleeson JA agreeing); [138]-[139] (Barrett JA, Gleeson JA agreeing). 7. It is not uncommon, though atypical, for an unsuccessful applicant not to be ordered to pay the defendant's costs where the applicant is or would become impecunious and the claim for provision was reasonable or borderline: see eg, with no attempt to be exhaustive, Re Sherborne Estate (No 2) (2005) 65 NSWLR 268; [2005] NSWSC 1003; Moussa v Moussa [2006] NSWSC 509; Bevilacqua v Robinson (No 2) [2008] NSWSC 520; Ray v Greenwell [2009] NSWSC 1197; Dugac v Dugac [2012] NSWSC 192; Raiola v Raiola [2014] NSWSC 1172; Purnell v Tindale [2020] NSWSC 746. … 9. The 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: Sassoon v Rose [2013] NSWCA 220 at [10] (Meagher JA, Gleeson JA agreeing); Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [26]-[27]. However, the irrelevance of impecuniosity is said to be 'subject to some relaxation in family provision cases': Chapple v Wilcox at [141]. One reason that the impecuniosity of an unsuccessful applicant for family provision is of greater than usual relevance is that adverse costs orders might alter the basis on which the claim for provision was rejected, and thereby cause or justify a further application: McCusker v Rutter [2010] NSWCA 318 at [34]." 1. It is convenient to set out in full paragraph [141] of the judgment of Barrett JA (with whom Gleeson JA agreed) in Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392, cited by the Court of Appeal in Haertsch v Whiteway (No 2) (supra) at [9]: "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 v Kennedy (No 2) (above), Giles JA recognized 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 recognized 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." 1. In Chapple v Wilcox (supra), the unsuccessful clamant had an unfavourable financial position and would be instantly rendered impecunious if a costs order were made against him. The Court of Appeal held that this did not warrant a departure from the general rule that costs follow the event, in circumstances where the claim had lacked merit. 2. In Haertsch v Whiteway (No 2) (supra), the Court of Appeal held that the claimant's impecuniosity was of little to no relevance to the exercise of the costs discretion because her claim had failed for reasons unrelated to her financial position and no further application for family provision could possibly succeed (the first claim having been brought out of time and the Court of Appeal having held that the primary judge erred in granting the plaintiff an extension of time in which to apply for provision). Submissions Defendants' submissions 1. As noted at [3] above, the defendant executor submitted that the plaintiff should pay the defendant's costs of the proceeding on the ordinary basis and that her remaining costs (that is, the difference between the defendant's costs on the ordinary basis and on the indemnity basis) should be paid out of the estate. 2. The defendant referred to Hallen J's summary of the relevant principles governing costs in family provision proceedings in Meres v Meres (No 2) [2017] NSWSC 523 at [35]–[38], noting in particular that: 1. the effect of UCPR rr 42.1 and 42.20(1) is that the unsuccessful plaintiff must bear the defendant's costs of the proceeding unless the Court otherwise orders; and 2. an unsuccessful plaintiff will, usually, be ordered to pay costs where the claim was frivolous, vexatious, made with no reasonable prospects of success, or where the plaintiff has been guilty of some improper conduct in the course of the proceedings. 1. The defendant submitted that the plaintiff should pay her costs because the plaintiff's failure to be frank with the Court (which included the giving of false evidence) was improper conduct which caused the estate to incur costs in the course of the proceedings. 2. In support of this submission, the defendant referred to the following findings in the Judgment: 1. the rejection of the plaintiff's and Ms Nelson's evidence that the plaintiff was indebted to Ms Nelson in the amount of $49,720 or any amount (see Judgment at [131]–[138]); 2. the finding that the plaintiff and Ms Nelson gave false evidence concerning the existence of the alleged loan (see Judgment at [151]), and that the alleged loan was a "recent invention made shortly before the hearing [the proceeding] in the hope of improving the prospects of success of [the plaintiff's] family provision claim" (see Judgment at [131]); and 3. the finding that the plaintiff and Ms Nelson were financially dependent on each other (see Judgment at [131]), despite the plaintiff's and Ms Nelson's assertions to the contrary (see Judgment at [154]) Plaintiff's submissions 1. As noted above at [4] above, the plaintiff submitted that there should be no order as to the plaintiff's costs with the intention that he bear his own costs, and that the defendant's costs be paid out of the estate on the indemnity basis. 2. Referring to Harkness v Harkness (No 2) [2012] NSWSC 35 at [18] and Meres v Meres (No 2) (supra) at [38] and [46], the plaintiff submitted that, as proceedings for a family provision order are essentially for maintenance, it is open to the Court to make no order as to costs against an unsuccessful plaintiff if the making of the costs order would adversely affect the plaintiff's financial position that had been taken into account in dismissing the application. It was submitted that it was open to the Court to take this course, even if a costs order against the plaintiff were otherwise justified. 3. The plaintiff relied on the Court's findings that the plaintiff has few assets in his name and a debt of $53,053 to the Australian Taxation Office (see Judgment at [139]) and that the plaintiff's income does not cover his weekly expenses (see Judgment at [140]). The plaintiff noted the defendant's costs of $96,000 (calculated on the indemnity basis) and submitted that if he was ordered to pay her costs (even on the ordinary basis) that this would severely affect his financial circumstances. In those circumstances, it was submitted that the Court should make no order as to his costs. Consideration and determination 1. I accept that the adverse impact of a costs order on the financial position of an unsuccessful plaintiff may be a relevant factor in the exercise of the costs discretion in family provision cases. However, its relevance is limited, or it may have no relevance at all, in cases where the plaintiff's financial position was not material to the dismissal of the application: Haertsch v Whiteway (No 2) at [9]. 2. It is true that the plaintiff was found to have few assets in his name and a debt of $53,053 to the Australian Taxation Office and a very modest income that does not cover his expenses. 3. However, that is only part of the picture. 4. The plaintiff was also found to have a long-term and close relationship with Ms Nelson in which they have provided one another with mutual financial support as required since at least early 2017. The plaintiff adduced no evidence of Ms Nelson's assets or income or her capacity to provide ongoing financial support for him in the future. 5. Moreover, the plaintiff and Ms Nelson were found to have given false evidence to the effect that he was indebted to Ms Nelson in the amount of $49,720. In doing so, they sought to withhold from the Court the true nature of their relationship as one involving mutual financial support and dependence. 6. I accept the defendant's submission that the adducing of false evidence involved improper conduct on the part of the plaintiff, and that the plaintiff's conduct in maintaining the proceedings on the basis of false evidence, whilst withholding other relevant evidence, caused the defendant to incur costs. 7. Ultimately, the plaintiff's claim failed because he failed to adduce evidence of all matters relevant to an assessment of the adequacy or otherwise of the provision for made for him in the deceased's will. The Court was therefore unable to reach the state of positive satisfaction required by s 59(1)(c) of the Succession Act. In the continuing absence of evidence of all relevant matters, it cannot be said that an adverse costs order might alter the basis on which the plaintiff's claim for provision was rejected. 8. Taking all of those circumstances into account, I am of the opinion that the "overall justice" of the case, even after applying "liberality and discrimination", requires that the defendant's costs (as well as the plaintiff's own costs) be borne by the plaintiff and not by the estate. Conclusions and orders 1. For the reasons above, I make the orders set out in [6] above. ********** 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: 19 November 2020