New South Wales Supreme Court CITATION : Hoobin v Hoobin (No. 2) [2004] NSWSC 953 HEARING DATE(S) : 01/10/04 JUDGMENT DATE : 1 October 2004 JUDGMENT OF : White J DECISION : See Paras 49 - 58. CATCHWORDS : Orders to give effect to reasons in Hoobin v Hoobin [2004] NSWSC 705 - Costs - Failure to accept settlement offer in a Calderbank letter - Effect of election under s 61D of Wills, Probate and Administration Act being to pass the burden of costs payable from the estate onto the successful defendants - Where orders for provision under the Family Provision Act and determination of how burden of orders should be borne took account of parties' financial positions on assumption that all costs would be paid from the estate - Whether unsuccessful administratrix should bear portion of costs personally. Family Provision Act 1982 (NSW) LEGISLATION CITED : Wills, Probate and Administration Act 1898 (NSW) Legal Profession Act 1987 (NSW) Shorter v Hodges (1988) 14 NSWLR 698 CASES CITED : Giunti & Ors v Cavallaro [2004] NSWCA 62 Re Bardon and Florence, Shepparton and Florence (Unreported, 15/12/83, Holland J) Mavrideros v Mack (1998) 45 NSWLR 80 Margaret Rae Hoobin v Tina Louise Hoobin & 4 Ors PARTIES : Tina Louise Hoobin & 4 Ors v Margaret Rae Hoobin Margaret Rae Hoobin v Tina Louise Hoobin & 4 Ors FILE NUMBER(S) : SC 114192/02; 1230/03; 2009/02 COUNSEL : Plaintiff: Mrs M Bridger Defendants: Mrs M Gilmour SOLICITORS : Plaintiff: O'Neill's Solicitors Defendants: Budd & Piper IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WHITE J Friday, 1 October 2004 114192/02 MARGARET RAE HOOBIN v TINA LOUISE HOOBIN & 4 Others 1230/03 TINA LOUISE HOOBIN & 4 Others v MARGARET RAE HOOBIN 2009/02 MARGARET RAE HOOBIN v TINA LOUISE HOOBIN & 4 Others JUDGMENT 1 HIS HONOUR: These proceedings were heard over five days from 21 to 25 June 2004. I gave judgment on 6 August 2004, but for reasons which are apparent from the judgment, I was not able to make orders to dispose of the proceedings numbers 2009/02 and 1230/03, in which the parties sought relief under the Family Provision Act. 2 In my judgment of 6 August I called Mrs Margaret Hoobin the plaintiff, although she is the plaintiff in only two of the three proceedings, and I called the deceased's children the defendants, although they are defendants in only two of the three proceedings. I will use the same descriptions in these reasons until I come to make orders in the individual proceedings. 3 In my judgment of 6 August 2004 I directed the plaintiff to re-list the proceedings within 28 days of the grant of Letters of Administration to her. I have been advised that Letters of Administration were granted to the plaintiff on 12 August 2004. The proceedings were re-listed by the defendants, the plaintiff not having done so, and came before me again on 13 September 2004. On the plaintiff's application the matter was then adjourned until today. 4 Today I have been advised by Mrs Bridger of counsel, who appears for the plaintiff, that the plaintiff has made her election pursuant to s 61D of the Wills, Probate and Administration Act. Accordingly, I will make orders today in due course as envisaged by paragraphs 82, 135, 136, 138, 145, 153, 154 and 161 of my judgment. 5 I will accept the undertaking which has been proffered today by Mrs Gilmour, counsel for the defendants, as envisaged by paragraph 157 of the judgment. I will also deal with the question of costs, which was the principal issue which was argued before me today. 6 In reaching my conclusion on the appropriate provision to be made in the Family Provision Act proceedings, I acted on the basis of the agreed valuations of the assets of the estate, and on the evidence given as to the parties' estimates of their actual costs incurred in the proceedings to the dates upon which the respective solicitors swore their affidavits as to costs, and their estimates of the additional costs to the conclusion of the five day hearing. 7 On the basis of those agreed figures and estimates, and on the assumption that all of the parties' costs would be paid from the estate, and on the assumption that the plaintiff would exercise her right to make an election under section 61D of the Wills, Probate and Administration Act, I calculated that on intestacy each of the defendants would inherit $26,400. 8 In addition, I concluded that two of the defendants were entitled to provision under the Family Provision Act in an amount of $50,000 each, and one defendant was entitled to provision under that Act in an amount of $15,000. 9 The defendants have submitted that although the parties' respective financial positions and likely amounts of inheritance were assessed on the assumption that all costs to be incurred would be paid by the estate in the sums to which I referred in paragraph 13 of the judgment, in fact a different order should be made. The reason for that, it was submitted, was because before the hearing commenced the defendants had offered to compromise their claim for an amount which was less than the amounts which they are entitled to receive pursuant to the judgment. 10 On 14 May 2004 in proceedings 1230/03 each of the defendants (who were the plaintiffs in those proceedings) made an offer of compromise. The offer of compromise was in terms that the individual defendant offered to settle his or her claim against the estate pursuant to the Family Provision Act in the terms that provision be made for that person from the estate in the sum of a specified figure, and that that person's costs be paid on a party/party basis as agreed or assessed. 11 The sum of the amounts comprised in those offers came to $220,000. It is not clear from the terms of the offers of compromise whether they were offers to compromise only the claims made by the defendants for relief under the Family Provision Act, but I would infer from the face of the document that that was so. 12 However, on 10 June 2004 the defendants explained and modified their position in a letter, upon which they rely on the argument about costs. In that letter the defendants' solicitors gave a reasoned explanation for the offers which totalled $220,000 plus costs, from which it can be inferred that the offers were intended to encompass not only the claims under the Act, but all other claims against the estate. 13 Further, the offer was modified in that the plaintiff was advised that the defendants were prepared to further compromise their claims by payment to them of the sum of $200,000 plus costs in the sum of $51,000. 14 On 18 June 2004 the defendants made a further offer in a Calderbank letter. The defendants' solicitors said: "We advise that in an attempt to settle the matter without incurring further costs on both sides, our clients are prepared to further compromise their claims by payment to them of the sum of $180,000 plus costs in the sum of $60,000, a total of $240,000." 15 The defendants' costs to 16 June 2004 totalled $59,029 and their solicitor estimated that their costs for the five day hearing would be approximately $27,500. 16 On the basis of the judgment of 6 August 2004, and the plaintiff's election under section 61D, it is plain that the defendants have obtained relief which is substantially in excess of the amount for which they were prepared to compromise their claims on 18 June 2004. The ordinary consequence of such an offer of compromise made in a Calderbank letter, where the party making the offer does substantially better after a hearing, would be to entitle that party to be paid his or her costs on an indemnity basis rather than a party/party basis for the period after the offer was made, or at least for the period a reasonable time after the offer was made and by which it ought to have been accepted. 17 However, the question of the defendants receiving their costs on a party/party rather than an indemnity basis, is not in issue here. As I have said in the judgment of 6 August 2004, the matter proceeded on the common assumption that the parties would be entitled to have their costs recouped from the estate on an indemnity basis. 18 In this case, however, the effect of the plaintiff having made her election under s 61D is to throw on to the defendants either the entire or at least the greater part of the burden of an order directing that the parties' costs be paid from the estate (see paragraph 16 of that judgment). So the question in issue here, it seems to me, is whether a consequence of the plaintiff not accepting the offer of compromise should be to require that either the costs which she has incurred in the proceedings be paid personally by her, without recourse to the estate, or whether she should be required personally to pay the defendants' costs without recourse to the estate, or both. 19 Prima facie, as a fiduciary, the plaintiff would be entitled to recover her costs on a trustee basis from the estate, at least in respect of those claims which she has defended as a putative administratrix of the estate, and at least to the extent to which such costs were properly incurred. (See Shorter v Hodges (1988) 14 NSWLR 698 at 709). 20 In Giunti & Ors v Cavallaro [2004] NSWCA 62 Santow JA referred with approval to the position as it applies to costs of probate suits as set out by Holland J in Re Bardon and Florence, Shepparton and Florence, 15 December 1983 unreported as follows: "There is an analogy here between the position that applies with probate suits. It is conveniently set out in Re Bardon v Florence; Shekelton v Bardon (Holland J, Supreme Court of NSW, 15 December 1983, unreported): (1) In a probate suit costs are discretionary. There are no inflexible rules, although there are general principles that act as guides to the exercise of discretion in the ordinary run of cases. (2) The general principle is that costs of the litigation ought to follow the event. But there are considerations that arise in probate cases that are not common to other jurisdictions and lead to two exceptions. Those considerations arise out of the public interest in having the court exercise the function of investigating, where there are grounds for questioning it, the execution of an alleged Will and the capacity of the deceased to make it. This is so as to enable the court to answer and declare what the true will of the testator was. (3) The two main exceptions to this general principle are: (i) if a person who makes a Will or is interested in residue, has by his or her conduct caused the litigation to occur, then the costs of a party unsuccessfully contesting the Will may be ordered out of the estate. (ii) if the circumstances reasonably called for an investigation to be made before the court could properly pronounce in favour of the Will, then a contesting party who fails, ought not to be required to pay costs and, as has been, in some of the cases, left to bear merely his or her own costs; ( Spiers v English [1907] P 122; Re Cutcliffe's Estate; Le Duc v Veness [1959] P 6). There is however also the alternative that costs in this context should be allowed out of the estate ( In the Will of Millar (1908) VLR 682)." 21 It would not follow from the principle that as a fiduciary the plaintiff is entitled to recoup her costs from the estate on a trustee basis that she was therefore necessarily entitled to the costs of unsuccessfully propounding the probate proceedings, nor the costs of the proceedings which she brought for relief under the Family Provision Act. 22 Nor is there any doubt that an order can be made which disentitles an executor or trustee from recouping his or her costs from the estate, particularly in cases where in substance the executor or trustee is defending his or her own position and interests. See as an example, Mavrideros v Mack (1998) 45 NSWLR 80 at 108. 23 As I understand the orders which were submitted on behalf of the defendants as the appropriate orders to be made as to costs, their effect would be that the Court would not order that costs incurred by the plaintiff in any of the proceedings be assessed on any particular basis. The effect of the orders would be that in relation to the proceeding number 1230/03, in which the defendants are the plaintiffs, the plaintiff would be directed to pay her costs and the defendants' costs out of the share of the estate to which she is entitled. 24 In response to the application which the defendants made as to costs, Mrs Bridger of counsel, who appeared for the plaintiff, submitted first that although the plaintiff failed in her application for a grant of probate, her application for probate was a proper one to have been brought, and the issue was finely balanced. She submitted that the plaintiff was obliged, or at least entitled, to seek to give effect to the deceased's intention as to who should inherit his estate. 25 Secondly, she submitted that had the plaintiff been successful in obtaining a grant of probate, it could not be said that the defendants would have done better in their claims under the Family Provision Act than the offer of compromise which was made on 18 June 2004. 26 Thirdly, she submitted that the offer of compromise was unclear as to how the proceedings should be disposed of. Fourthly, she submitted that there would in any event have been the need for a hearing because even if the parties had reached a common position on the probate proceedings, a hearing would still have been required, that is because the grant of or withholding of probate is a public act which does not depend on the consent of the parties. 27 Fifthly, she submitted that the parties had conducted the case on the common assumption that costs on an indemnity basis would be paid from the estate, and that I have assessed the quantum of provision for the successful claimants on that basis. 28 As to this last point, Mrs Gilmour says that the hearing in June proceeded on the conventional basis that the parties put forward their actual and estimated costs, and that the calculations for provision have to start somewhere. 29 It does seem extraordinary that the defendants should end up bearing the burden of not only their own costs, but also of the plaintiff's costs, although that is the effect of the application of the rules for inheritance on intestacy, if the plaintiff's costs or the costs for which she may be liable are to be paid from the estate. 30 That consideration placed a particular onus on the plaintiff in considering the offer of compromise of 18 June 2004. Had the offer been accepted the costs of the hearing would have been substantially, although not entirely, avoided. On the evidence, those costs of the hearing amounted to $27,500 for the defendants and $39,600 for the plaintiff, a total of $67,100. 31 I accept that the application for the grant of probate was a proper case to have been brought, and that the issue which it raised was one of difficulty, upon which there was no conclusive authority, and that the issue was finely balanced. However, I think it is clear from my reasons for judgment that even if the plaintiff had been successful in obtaining a grant of probate the defendants would have bettered their position in their claim under the Family Provision Act by more than the $180,000 which was offered. 32 The orders for provision which I made, which totalled $115,000 for three claimants, took into account the amounts which they received on intestacy, which on the agreed figures were $26,400 each if the plaintiff made her election under s 61D. Hence the three successful claimants will, it is assumed in my judgment, be entitled to receive $198,200. 33 In any event, the fact remains that the plaintiff did not succeed in her probate claim and that the defendants have done substantially better than the amount for which they offered to compromise the action. Further, had the offer been accepted, I think most of the $67,000 spent in costs on both sides would have been saved. 34 The major difficulty is the last point which I have referred to, (although I do not think it was the last in temporal sequence in which it was put). It is that in assessing what provision is proper for the three claimants, and how the burden of the provision should be borne as between those entitled to share in the estate, I have had to take into account the financial position and needs of the plaintiff (see paragraphs 87 to 91 and 150 to 153 of the judgment). 35 If the plaintiff has to bear the burden of all or some of the costs personally, then clearly enough her financial resources will be diminished, and her ability to satisfy her future needs will be to that extent reduced. Mrs Gilmour submits that any such hardship is a result of the plaintiff's own fault in unreasonably refusing the proffered settlement, and thereby causing costs to both parties to be incurred, which should have been avoided. To an extent I agree with that submission. Even had the plaintiff succeeded on the probate claim, the offer was one which ought to have been accepted, and in the event she has failed on the probate claim. 36 The amount spent on costs is out of all proportion to the value of the estate, and I think it is unfair that the plaintiff should be able to pass the whole burden of costs onto the defendants by being able to recoup the costs which she has paid or for which she is liable from the estate. However, I must still keep in mind her financial position and her needs and not make any adjustments to the course which I proposed in my earlier judgment, if the consequence of doing so would be to require a complete reassessment of what is an appropriate provision. 37 I think the probate case was one which it was entirely proper to fight, irrespective of how the parties ought to have agreed upon a compromise of the claims under the Family Provision Act. I think it was the duty of the plaintiff as executrix of the will to propound the will for probate. However, for the reasons which I have given, I do not think that the claims for provision under the Family Provision Act should have been litigated. I think they should have been compromised. 38 Because the evidence in each case was heard together, it would be very difficult to isolate the costs separately incurred in each of the three proceedings. My impression is that the claims under the Family Provision Act took up about two-thirds of the hearing time, and I think the justice of the case would be served if I directed that the plaintiff bear a substantial proportion of her own costs of the five days of hearing. Rather than making a direction requiring an assessment, I will act on the figures provided by the plaintiff's solicitor, that her costs of the five day hearing were estimated to be $39,600. 39 I will direct that the plaintiff is to bear $25,000, being roughly 63 per cent of her costs, personally, without recourse to the estate. 40 The next question then is whether all or any part of the defendants' costs of the five day hearing should be paid by the plaintiff personally, without recourse to the estate. I am concerned that if I were to make that additional order her financial position might be adversely affected to such an extent that I would have to reconsider whether the amounts which she will get from the estate will be sufficient to meet her future needs, as assessed against the competing claims of the defendants. 41 In paragraph 165 of the judgment I recorded that it was common ground between the parties that the costs of all the parties of the three proceedings under a trustee basis should be paid from the estate. I also said that because the intricate calculations of the parties' shares on intestacy would be disturbed if I proceeded otherwise, with a consequent need for further evidence and submissions and therefore further costs, I was reluctantly prepared to act on what appeared to me to be the common ground of the parties. 42 I think a departure from that position is justified to some extent to accommodate the evidence as to the offer of compromise, which could not have been adduced before judgment, but the extent to which it can be disturbed is necessarily limited. In the circumstances I decline to make any other adjustment to the costs orders which I have proposed, by reason of the offers of compromise. 43 The next matter about which the defendants made submissions on costs was that the plaintiff should not be permitted to pay herself her costs from the estate. The defendants submitted that an order should be made such that the plaintiff should be entitled to payment of her costs only after she has verified, filed and passed her accounts. 44 Mrs Bridger objected to that submission on the basis that the procedure for verifying, filing and passing of accounts was time consuming and costly, and would result in further and unnecessary expenditure in costs. I did not understand her, however, to make any submission in opposition to the defendants' point that some regime was appropriate to be put in place to prevent the plaintiff from paying herself her costs without the agreement of the defendants or an external assessment. I think some such regime is essential, particularly having regard to the observations in paragraph 164 of the judgment. 45 I know of no reason in principle, however, why the plaintiff's costs of the three proceedings, albeit that they may be assessed on a trustee basis or an indemnity basis as appropriate, cannot be assessed in accordance with Part 11 Division 6 of the Legal Profession Act 1987, and in particular, s 208F and s 208G. I will make a direction that the plaintiff not recoup her costs from the estate except: (a) with the agreement in writing of the defendants, or (b) pursuant to an assessment made under Part 11 Division 6 of the Legal Profession Act , or (c) upon her verifying, filing and passing her accounts. 46 The next matter the defendants submitted was that the defendants should be entitled to their costs since the date of the hearing. In paragraph 165 of the judgment of 6 August 2004 I said that the costs orders to be made on disposition of the proceedings under the Family Provision Act should include an order that the parties' costs of all three proceedings, payable out of the estate, be capped at the figures referred to in paragraph 13 of the judgment. Those were the figures which the parties' solicitors deposed were the actual and estimated costs up to the conclusion of the hearing. 47 My directing that there be such a cap on the costs allowed from the estate was deliberate, and I did not overlook that the parties were likely to incur further costs after 6 August 2004 until the final disposition of the proceedings. In my view this estate has already been subjected to an excessive amount of costs, and I will direct that in relation to the costs from the delivery of judgment on 6 August 2004, that each party bear his or her own costs without recourse to the estate. If my assessment of the effect of the plaintiff's election under s 61D is correct, I do not think that that is likely to have an adverse effect upon the defendants in any event. 48 That disposes of all of the questions of costs which were argued this morning, and I will come to the precise orders in a moment. This afternoon Mrs Gilmour of counsel for the defendants sought a further order. Mrs Bridger of counsel was not available this afternoon, and I understand opposes the order being sought. After discussion with counsel, the defendants did not pursue the application for an additional order beyond those which were sought this morning. 49 I will deal now with the orders to be made in each proceeding, and in these reasons I will now describe the parties by reference to the particular proceeding as plaintiff or defendant as the case may be. 50 In the probate proceeding number 114192/02 I made orders on 6 August 2004. I have been advised that those orders have not been entered. One of the orders which I made was that the costs of both the plaintiff and the defendants of those proceedings be paid from the estate on a trustee basis. I was in error in directing that the defendants' costs be paid from the estate on a trustee basis, as they are not the adminstratrix of the estate. 51 It was unnecessary to consider whether that error can be corrected under the slip rule as the orders have not been entered. I vacate the order that the defendants' costs be paid from the estate on a trustee basis. In its place I order that the defendants' costs be paid on the indemnity basis from the estate. 52 I also make the following additional order, that the plaintiff's costs, which I have ordered be paid from the estate on the trustee basis, not be paid to her from the estate, except: (a) with the agreement in writing of the defendants, or (b) pursuant to an assessment made under Part 11 Division 6 of the Legal Profession Act , or (c) upon her verifying, filing and passing her accounts. 53 I turn then to proceeding number 2009/02. I make an order that the period within which an application may be made be extended up to the date of the filing of the summons, namely 25 March 2002. I dismiss the summons. 54 Subject to orders to be made in proceeding number 1230/03, I order that: (a) the defendants' costs of the proceedings be paid on the indemnity basis from the estate, and (b) the plaintiff's costs on an indemnity basis be paid from the estate. I direct that the plaintiff not recoup her costs from the estate except: (i) with the agreement in writing of the defendants, or (ii) pursuant to an assessment made under Part 11 Division 6 of the Legal Profession Act, or (iii) upon her verifying, filing and passing her accounts. 55 In proceeding number 1230/03 I make the following orders: 1. I extend the period within which the applications may be made up to the date of the filing of the summonses, namely, 28 January 2003. 2. I declare the property at 72 Lochlomond Drive, Banora Point to be notional estate of the deceased. 3. I note the undertaking to the Court given by the defendants through their counsel not to prosecute any claims against the plaintiff in relation to her action in regard to the property at 48 Castlecrag Avenue, Banora Point prior to any Letters of Administration being granted to her. 4. I order that in addition to the provision Christine Soden will receive as a result of the intestacy of the deceased, she is to receive provision of $50,000 pursuant to s 7 of the Family Provision Act 1982 . 5. I order that in addition to the provision Tina Hoobin will receive as a result of the intestacy of the deceased, she is to receive provision of $50,000 pursuant to s 7 of the Family Provision Act 1982 . 6. I order that in addition to the provision Carole Hoobin will receive as a result of the intestacy of the deceased, she is to receive provision of $15,000 pursuant to s 7 of the Family Provision Act 1982 . 7. In relation to the provisions ordered in the previous three orders, I direct that such provision shall not take effect by way of legacy. 8. I direct that the burden of $17,100 of the provision referred to in the three orders numbered 4, 5 and 6 is to be made from the share of the deceased's estate to which Leanne Pritchard would otherwise have been entitled upon the deceased's intestacy. 9. I direct that the balance of the burden of the provision referred to in orders 4, 5 and 6 in the sum of $97,900 be made from the share of the deceased's estate to which Margaret Rae Hoobin would otherwise have been entitled upon the deceased's intestacy, and upon her election pursuant to s 61D of the Wills, Probate and Administration Act , and is to be charged upon the property at 72 Lochlomond Drive, Banora Point. 10. I direct that subject to order 9 the plaintiffs' costs up to 6 August 2004 on an indemnity basis be paid from the estate. 11. I direct that subject to orders 14 and 15 the defendant's costs up to and including 6 August 2004 be paid on a trustee basis from the estate. 12. I direct that the defendant not recoup her costs from the estate except: (a) with the agreement in writing of the defendants, or (b) pursuant to an assessment made under Part 11 Division 6 of the Legal Profession Act , or (c) upon her verifying, filing and passing her accounts. 13. I direct that the costs of the plaintiffs in proceedings number 1230/03, being also the defendants in proceedings numbers 2009/02 and 114192/02, in all three proceedings, being costs to be paid from the estate, not exceed $86,592. 14. I order that the plaintiff in proceedings 114192/02 and 2009/02, being the defendant in proceedings 1230/03, bear $25,000 of her costs personally without recourse to the estate. 15. I further direct that her costs to be paid from the estate in respect of all three proceedings not exceed $78,325. 16. I order that interest run on the amount of provision referred to in orders 4, 5 and 6 after 90 days from the date of these orders, and thereafter on such amounts as are unpaid at the rates prescribed from time to time under Regulation 6(2) of the Wills, Probate and Administration Regulation 2003 as the rate of interest payable on legacies. 56 I grant all parties liberty to apply in relation to any of the proceedings on seven days' notice. 57 I will amend orders in proceedings numbers 2009/02 and 114192/02 to provide that the costs of all parties in those proceedings be costs up to and including 6 August 2004. 58 Exhibits may be returned after 28 days. ****** Last Modified: 10/18/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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