Supreme Court New South Wales Medium Neutral Citation: Coss v Norman (No 2) [2021] NSWSC 1490 Hearing dates: On the papers; written submissions ending 10 November 2021 Date of orders: 19 November 2021 Decision date: 19 November 2021 Jurisdiction: Equity Before: Parker J Decision: See [40] Catchwords: COSTS – succession – family provision – application for further provision refused – incidence of costs – adverse effect on plaintiff's financial position if costs order made against him – plaintiff's application was for provision in the nature of advancement not maintenance – no sufficient reason to depart from the usual order as to costs – solicitor-client costs out of the estate – form of order Legislation Cited: Succession Act 2006 (NSW), s 59 Uniform Civil Procedure Rules 2005 (NSW), r 42.20 Cases Cited: Calderbank v Calderbank [1975] 3 WLR 586 Chapple v Wilcox (2014) 87 NSWLR 646 Daniels v Hall (No 2) [2014] WASC 272 Harkness v Harkness (No 2) [2012] NSWSC 35 Lewis v Lewis (No 2) [2020] NSWSC 1519 McCusker v Rutter [2010] NSWCA 318 Megerditchian v Khatchadourian (No 2) [2020] NSWSC 112 North v Daniel [2021] NSWSC 828 Singer v Berghouse (1993) 67 ALJR 708 Category: Costs Parties: Rodney James Coss (Plaintiff) Fiona Norman (Defendant) Representation: Counsel: TJ Morahan (Plaintiff) S Chapple (Defendant) Solicitors: Lang Noonan Legal (Plaintiff) Somerville Legal (Defendant) File Number(s): 2020/230538 Publication restriction: Nil Judgment 1. This judgment deals with the costs of an application for family provision under s 59 of the Succession Act 2006 (NSW). I delivered my principal judgment on 5 November 2021: Coss v Norman [2021] NSWSC 1464. This judgment assumes familiarity with, and uses the abbreviations in, my principal judgment. Paragraph references to my principal judgment are denoted "J1". 2. I set out the background and facts of the proceedings at J1 [2]-[16], which I will not repeat here. The following is provided by way of summary. 3. The proceedings concern the estate of the late David Henry Norman, who died in September 2019 at the age of 55. He and the plaintiff, James, lived together in a domestic relationship from 2012 onwards. This continued until May 2019, when James moved out. 4. The deceased died tragically by suicide. He never married and had no children. He was survived by his three siblings: Fiona (who is the defendant in these proceedings), Steven and Joanne. In the four months before his death, he made no less than four wills. By the last will, made nine days before his death, he appointed Fiona as his executor. Under the will, he left an investment property in Rosebery to James. He left the rest of his estate (excluding chattels belonging to James) to his siblings, with 70% going to Fiona. 5. As I noted at J1 [20]-[23], the value of the Rosebery property was $520,000. There was a mortgage debt of $320,000. The net value of the gift to James in the will was $200,000 (representing the equity in the property). By the time of the hearing, about $30,000 in income had accrued on it. But it may be that James will be liable for capital gains tax, if, as now appears likely, the property is sold: see J1 [25]. 6. James sought additional provision out of the deceased's estate. There was no dispute that he was an eligible person within the meaning of the Act. The only issue was whether the provision was inadequate for James' proper maintenance, education or advancement (and if so, what provision ought to be made). 7. In the end, I refused James' application for further provision. There were four main factors leading to this conclusion, which I set out at J1 [103]-[110]. 8. First, the amount contended for by James would have diverted to him a significant proportion of the residue. He would have received most, if not all, of the estate, leaving little or nothing for the other beneficiaries. 9. Second, the relationship between the deceased and James was not lengthy and started in later middle age. James did not undertake responsibility for any members of the deceased's family. This had to be weighed up against the deceased's family ties, based on a whole lifetime of shared experience between himself and his siblings, in particular, Fiona. 10. Third, on the evidence, the relationship, while it lasted, did not involve any great financial commitment on the part of James. He maintained his employment and, subject to a contribution of $1,000 per fortnight, he maintained his own separate finances. There was no suggestion that James' contributions resulted in any significant build-up of the deceased's assets, and it may be that overall the deceased was subsidising him. 11. Fourth, and perhaps most importantly, I found that James was violent towards the deceased during his lifetime. I considered this to be a major disentitling factor and did not think the Court should be seen to downplay, and much less to reward, behaviour of that kind. 12. As I explained at J1 [111], the pattern in the deceased's wills over the last four months of his life showed a fluctuation, but the last will, which is the one that was admitted to probate, was by far the most favourable from James' point of view. As already noted, it provided for him to receive $200,000 or thereabouts. The onus lay on James to substantiate his claim that the provision made for him was inadequate. Even without the disentitling factor mentioned in my judgment, I was not satisfied that he had done so. Accordingly, I dismissed the application and reserved the question of costs. Application for costs 1. The estimates given by the parties for the costs of these proceedings, which were not disputed, were $143,000 for Fiona (estimated on an indemnity basis), and $125,000 for James (estimated on a party-party basis): J1 [23]. Fiona's costs estimated on a party-party basis are unknown, but they would presumably be in the order of $100,000. 2. Rule 42.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) provides that if the court makes an order for the dismissal of proceedings, then, unless the court otherwise orders, the plaintiff must pay the defendant's costs. Counsel for Fiona relied on r 42.20(1) and submitted that in the circumstances of the present case, James should pay Fiona's costs of the proceedings assessed on the ordinary basis, with the balance of her costs (being the difference between her costs assessed on the ordinary basis and her solicitor-client costs) being paid out of the deceased's estate. 3. In response, counsel for James argued that this is an appropriate case for departure from the usual order as to costs. His position was that there should be no order as to James' costs (with the intent that he bear his own costs), leaving the entirety of Fiona's costs to be paid out of the estate. 4. Counsel pointed to James' financial situation, which I discussed at J1 [29]-[30]. Apart from his superannuation, James has few, if any, assets. He owns a car which is worth $3,500, and household contents worth $3,000. He has no investments or savings of any substance. He has credit card liabilities of over $11,000. He is employed by the Australian Border Force, where he earns a net income of $52,000 per annum. As at December last year, his superannuation (if cashed in) would have been worth $260,000. 5. Counsel submitted that if James had to pay Fiona's costs of the proceedings as well as his own, those costs would probably exceed the value of the deceased's legacy to him. Counsel submitted that in that event James would be effectively "wiped out". 6. Counsel relied on various statements of authority which were collected by Hallen J in Harkness v Harkness (No 2) [2012] NSWSC 35 at [17]-[18]. In particular, his Honour referred to the decision of Gaudron J, sitting as a single judge of the High Court on an application for security for costs, in Singer v Berghouse (1993) 67 ALJR 708, where her Honour stated (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. Singer was referred to by Young JA in McCusker v Rutter [2010] NSWCA 318. In that case, his Honour expressed the view (at [34]) that it would be "counter-productive" to make an order as to costs against an unsuccessful plaintiff where he or she would "instantly become impecunious and so may be able to make a fresh application under the Act". 2. Hallen J observed in Harkness (at [18(j)], citations omitted): As proceedings for a family provision order are essentially for maintenance, a court may properly decide to make no order for costs, even though it were otherwise justified, against an unsuccessful applicant, if it would adversely affect the financial position which had been taken into account in dismissing the application. 1. I am somewhat troubled by the idea that the Court should take into account at all the adverse effect of James having to pay his own lawyers' costs. The Court does not know whether and to what extent James will be called upon to meet those costs, and it would be invidious to ask for evidence on the question. But it is certainly clear that if James has to pay Fiona's costs it will severely reduce his benefit from the deceased's estate. The question is, what part should that play in the exercise of the Court's discretion. 2. In the present case, the deceased and James were both able-bodied adults who had formed a relationship later in life and maintained their own financial independence. Neither had any obligation to maintain the other. James' application was not so much one for maintenance as it was for advancement. That, I think, means that the fact that an adverse costs order may eat into James' provision must be a consideration of lesser weight (a view I also took in Megerditchian v Khatchadourian (No 2) [2020] NSWSC 112; see at [44]). 3. The statements in Singer and McCusker have been the subject of subsequent consideration at Court of Appeal level, by Barrett JA (with whom Gleeson JA agreed and with whose reasons Basten JA generally concurred) in Chapple v Wilcox (2014) 87 NSWLR 646. Barrett JA cited the judgment of EM Heenan J in Daniels v Hall (No 2) [2014] WASC 272, where his Honour referred to the statement in Singer, but observed (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. Barrett JA continued (at [139]): 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. His Honour referred to what Young JA said in McCusker, noting that the only potentially relevant factor in deciding whether to depart from the usual rule was the respondent's unfavourable financial position, and whether an order for costs would cause him to become "instantly impecunious". His Honour continued (at [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. 1. Counsel for James submitted that James' application had merit and involved a genuine question which required the adjudication and evaluation of the court. Counsel submitted that the evidence suggested that the deceased intended James to be "well looked after" following his death. Counsel also referred to the fact that at the time the deceased wrote the August statement (see J1 [71]-[74]), he was suffering from a disturbance of the mind and a high level of anxiety. Counsel submitted that the statement reflected a state of mind which was very different from other parts of the evidence. In counsel's submission, this was not a case where James should have read the statement and abandoned his claim for further provision or discontinued the proceedings. 2. My findings do not support these submissions. I was not satisfied that the August statement (or the will itself) was in any way unreliable as a result of the deceased's mental state. Furthermore, as I noted at J1 [98], although James denied Fiona's version of events, he did not, at any point, address the specific incidents referred to in the statement and seek to show that they were in some way incorrect. This was despite having ample opportunity to do so. 3. While the will provided for James to receive a substantial benefit, and to that extent is consistent with an intention that James be well looked after, the deceased equally wished to confer a substantial benefit (indeed, on the figures, a more substantial benefit) on Fiona. There is nothing to show that the deceased would have approved, in the events which have happened, of her benefit being eroded by costs for which James is prima facie liable as a result of his unsuccessful challenge. 4. Even if I did accept that James' claim was meritorious or reasonable, I am not sure what bearing that ought to have on the incidence of costs. It happens every day that litigants run cases that appear reasonable but prove unsuccessful, and are ordered to pay the costs. The decision in Chapple makes it clear, I think, that family provision claims are not governed by any different principle. As Hallen J recently observed in North v Daniel [2021] NSWSC 828 at [82]: I have repeated many times in the context of a claim for a family provision order, that parties should not assume, in all cases, that this type of litigation can be pursued safe in the belief that all costs will be paid out of the estate: Carey v Robson (No 2) [2009] NSWSC 1199 at [21] (Palmer J); Forsyth v Sinclair (No 2) (2010) 28 VR 635 at 642 at [27]; [2010] VSCA 195 at [27] (Neave and Redlich JJA and Habersberger AJA); Harkness v Harkness (No 2) [2012] NSWSC 35 at [18]. 1. In my view, it is particularly important in this area, especially where the estate is only of modest size, that the principles which govern the award of costs be clear and that their operation should be predictable by the parties and their advisors. 2. Counsel for Fiona relied on the fact that on 24 November 2020, her solicitors made two alternative offers to settle the proceedings. The offers were made on a without prejudice basis, invoking the principles in Calderbank v Calderbank [1975] 3 WLR 586. The first was that in lieu of the provision made for him in the will, James would receive a sum of $225,000 plus costs of $18,500 out of the estate. The second was that James' summons be dismissed and James would receive his costs of $18,500 out of the estate. 3. The offers were informal and were not made in accordance with the Rules. As I explained in Megerditchian at [33], when an offer is informal the basic test for its effectiveness is whether its rejection was unreasonable. Counsel for Fiona did not seek to rely on them as establishing an entitlement to indemnity costs, but submitted that it is a discretionary factor in favour of making the costs orders sought by Fiona. 4. Counsel for James contended at trial that, as the deceased's de facto spouse, James should receive a provision sufficient to give him an unencumbered property to live in, together with a $200,000 buffer against future expenses. The rejection of the offers is consistent with James and his advisors having had that view of his entitlements from the beginning. Be that as it may, the reasons that James' claim failed were factual. 5. In these circumstances, I see no analogy with will cases in which the deceased was the cause of the litigation. No general issue about community standards arose. Accordingly, it seems to me that however unfortunate the effect on James' financial position may be, consistent with the reasoning in Chapple there is no reason why I should take it into account when exercising my discretion as to costs. 6. I am not satisfied that James has demonstrated any good reason why the Court should depart from the usual order as to costs. I propose to make an order that James pay Fiona's costs of the proceedings. Costs out of estate 1. This leaves the incidence of costs on the estate. There is no dispute that, in the end, James should pay Fiona's party-party costs and her remaining solicitor-client costs should come out of the estate. But there is a difficulty with the form of order proposed by counsel. 2. Counsel's proposed order is that the difference between Fiona's party-party costs and her solicitor-client costs be paid out of the estate. The difficulty is that this would apparently mean that Fiona would only recover her costs once they had been assessed on a party-party basis between her and James. 3. It seems to me that, in principle, Fiona should be able to recover the whole of her solicitor-client costs from the estate as soon as the quantum of those costs has been settled. The estate will then be reimbursed, to the extent of the party-party costs, when those costs have been assessed and recovered from James (presumably by way of deduction from his legacy). 4. I addressed a similar problem in Lewis v Lewis (No 2) [2020] NSWSC 1519. In that case the party who had successfully litigated on behalf of the estate was not the administrator and I made a subrogation order. There is no need to do so in the present case because the party-party order for costs will be made in favour of Fiona in her capacity as executor. But the orders will make it clear that Fiona is entitled to recover the whole of her solicitor-client costs out of the estate without waiting for assessment of the party-party order against James. Orders 1. The orders of the Court are: 1. Order that the defendant's solicitor-client costs of the proceedings be paid out of the estate of the late David Henry Norman. 2. Order that the plaintiff reimburse the estate for the defendant's party-party costs of the proceedings, assessed on the ordinary 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: 19 November 2021