New South Wales Supreme Court CITATION : Savvaki v Papagyriou [2008] NSWSC 922 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 02/09/08 JUDGMENT DATE : 2 September 2008 JURISDICTION : Equity Division JUDGMENT OF : Macready AsJ at 1 EX TEMPORE JUDGMENT DATE : 2 September 2008 DECISION : Paragraph 27 CATCHWORDS : Family Provision. Costs of previous application. Calderbank offer. Need to provide sanctions for such offers particularly in small estates. PARTIES : CATHERINE SAVVAKI (AKA KATERINA SAVVAKI) v CON PAPARGYRIOU AS EXECUTOR OF THE ESTATE OF GREGORY PAPARGYRIOU FILE NUMBER(S) : SC 2226/06 COUNSEL : Mr P Blackburn-Hart SC for plaintiff Mr MS White for defendant SOLICITORS : Lane & O'Rourke Solicitors for plaintiff Truman Hoyle Lawyers for defendant - 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ASSOCIATE JUSTICE MACREADY TUESDAY 2 SEPTEMBER 2008 2226/06 CATHERINE SAVVAKI (AKA KATERINA SAVVAKI) v CON PAPARGYRIOU AS EXECUTOR OF THE ESTATE OF GREGORY PAPARGYRIOU JUDGMENT ON COSTS 1 HIS HONOUR: In this matter I delivered judgment on 14 August 2008 and I indicated that, subject to submissions in respect of costs, I would order the defendant's costs on an indemnity basis and the plaintiff's costs on an ordinary basis be paid or retained out of the estate of the deceased, such order not to affect the plaintiffs liability for the cost's order made on 3 March 2008. 2 I have now heard fairly extensive and helpful submissions in respect of the variation which is sought. That variation arises out of some offers that have been made between the parties. It should be noted that I have referred in the judgment of 14 August 2008 to the position taken by the defendant at the trial. 3 In a letter written by the defendant's solicitors in April 2007, the defendant offered to purchase the Enmore property for $360,000 less the current mortgage, retain the Nissan motor vehicle, cash and the shareholdings, the plaintiff would retain other items of personalty, he would waive the collection of half the rent that had been collected by the plaintiff and the plaintiff would bear any legal costs out of that half rental figure. 4 There was then a mediation in the proceedings in July 2007 and on 29 October 2007 the plaintiff made an offer which was in effect that she would get the whole estate, subject to her providing out of the estate the sum of $156,245 to the defendant and the defendant would bear out of this sum his own costs. 5 By the time when the trial before Rein J occurred on 3 March 2008 the costs were some $66,831 and plainly the defendant would have received a sum of at least $90,000 under the offer. 6 There was then a rejection of that offer and on 19 December 2008 there was a further offer by the defendant to pay $480,000, the plaintiff to pay out the existing mortgage on Enmore with the Westpac bank and the defendant to retain the ownership of the vehicle, the sum of $10,000 in the Westpac account, the shares and some shotguns and some other items of personalty. The defendant was to retain the estates half share of the property and each party pay their own costs. 7 Eventually I decided in my judgment that the plaintiff should receive the whole of the subject estate, as I have indicated, and I thought the defendant's costs, absent any other special circumstances, should come out of the estate. 8 It seems clear that the offer of 29 October 2007 was one which was far more favourable to the defendant. He was set to receive, after meeting all his costs to that time, $90,000 and now, under the judgement as it presently stands, he only has the payment of his costs out of the estate. 9 The later offer made in December 2007 was not one which put the defendant in any better situation than what had been offered in the earlier offer. 10 The application which the plaintiff now makes pursuant to liberty to apply is an order that the defendant have its costs out of the estate up to 3 December 2007 when the offer of 29 October 2007 expired, costs orders made on 3 March should not be disturbed and the defendant should have its costs of the hearing on 3 March to the extent that they are not included; but otherwise the defendant to pay the plaintiff's costs. 11 No application is made for the costs to be paid on an indemnity basis. 12 The plaintiff relies obviously upon the offer and the circumstances of the case where, in the nature of the provisions made by the deceased, it was the defendant who stood to receive any amount under the will of the estate to the extent that the plaintiff was not successful. In this sense the proceedings were adversarial. 13 I have been asked to have regard to the provisions of UCPR 42.1, namely, that the costs should follow the event unless it should appear that some other order should be made. 14 The juxtaposition of that with section 33 of the Family Provision Act is referred to in Bearns v Bearns-Hayes, a decision of Young J of 7 May 1997 where his Honour held that the appropriate way of approaching the conflict between section 76, as it then was, and section 73, is that section 76 applies save as is modified by section 33. Therefore that the general principle should apply unless it is appropriate that the costs be paid out of the estate. 15 Costs are appropriately paid out of the estate in a number of circumstances and those are referred to particularly in Nowell v Palmer (1993) 32 NSWLR 574 at page 581 by Mahoney JA. 16 There have been a number of cases where proceedings have been conducted in an adversarial way between the plaintiff and the defendant executor where the defendant executor is personally interested in the estate. This was the case here and in such circumstances it is frequently relevant to consider the way in which the case has been conducted as well as the result. 17 In the present case the plaintiff made a number of allegations in her affidavits prior to be aborted hearing in March 2008 all of which were served well before the offers were made which required the defendant to defend a number of allegations of misconduct by the deceased. These ultimately did not substantially affect the case when the matter finally came on for hearing. 18 It is clear that the defendant certainly conducted the case in a reasonable way in the sense that the matter was prepared according to allegations made by the plaintiff. The defendant sensibly, to the extent that one defends proceedings did so by not acting in any vindictive or improper way. The defendant was faced with having to deal with those allegations. 19 The orders that are now sought do not put any penalty on the defendant as a result of the plaintiff's fault in the mistrial which occurred before Rein J on 3 March. All the costs thrown away as a result of that aborted hearing would include preparation of new affidavits in a proper form for the trial which eventually occurred. 20 The defendant has pointed to a number of factors and in particular has made reference to Sherbour Estate (No 2) Van Allan v News and anor (2005) NSWSC, 65 NSWLR, 65 NSWSC 103. In that case his Honour dealt with the rejection of a Calderbank offer in these terms: "55. I do not think that Helen's rejection of the Defendants Calderbank offer was so unreasonable as to justify an indemnity costs order against her, for the following reason. 56. A claim under the FPA is not quantifiable by the parties legal advisers prior to the judgement with anything like the prescience possible in a claim for a liquidated sum such as a contract debt, or even in a claim for liquidated damages for personal injury or for future economic loss. There are statutory and judicial guidelines for the range of damages appropriate for various types of personal injury; expert accountant's attempt to quantify damages for future economic loss by reference to historic financial information. 57. However, in a claim under the FPA the Court has to quantify what provision 'ought to be made' for the applicant out of the deceased's estate 'having regard to the circumstances at the time the order is made': s7. Inevitably, the question involves a large element of subjective assessment of the Judge. Inevitably, on any particular set of facts, there would be a variety of answers given by different Judges. The decided cases offer broad parameters as to what provision 'ought to be made' in certain kinds of circumstances but there is no formula and there is no yardstick on which the degrees of measurement are not etched by the Judges own experience of life." 21 The submission was that there was a difficulty for the defendant in trying to assess what might be an appropriate settlement of the matter by assessing what might be the possible outcome. The problem with that is that the estate is a small one and costs were well known to those advising the defendant at that stage. The costs ultimately were very substantial, the defendant's costs being some $90,000 odd. 22 The other area where it was suggested by the defendant there ought to be no variation is because the logic of my judgment was underpinned by the defendant having his costs out of the estate. That does not necessarily follow. I was of the view the plaintiff ought to have flexibility. What it comes down to now is the question whether there ought to be some change to the order because of the failure to accept the Calderbank offer. 23 The purpose of such offers and offers of compromise are plainly to endeavour to settle matters without the waste of expensive costs. There has to be an appropriate sanction to Calderbank offers because otherwise matters continue and costs are inappropriately run up in cases like this where the size of the estate is relatively small. 24 I accept that the defendant in presenting the case does not appear to have in any way been vindictive but has conducted the matter in some senses in an appropriate way, making offers to try and assist. But the logic of my judgment was that these offers were not sufficient. This probably came about because of the situation of the loans made to the plaintiff's son which were secured over the properties. 25 Be that as it may, there is still an adversarial element in the sense that it is the defendant's personal interest which was at stake and he has failed to accept an offer that would have put him in a better position. 26 I do not think that acceding to the plaintiff's application undermines the rationale of the judgment. It is only the orders for costs which are affected from a subsequent date. 27 Accordingly, it seems to me that it is appropriate to accede to the plaintiffs application. Accordingly, in lieu of the orders which I made on 14 August 2008, in order 2, I make the following orders: 1. That the defendant's costs on an indemnity basis be paid or retained out of the estate of the deceased up to and including 3 December 2007. 2. That the costs order made on 3 March 2008 remain. 3. To the extent it was not included in the order on 3 March 2008, that the costs of the defendant on an indemnity basis in respect of the hearing of 3 March 2008 be paid or retained out of the estate of the deceased. 4. That the plaintiff's costs on an ordinary basis be paid or retained out of the estate of the deceased up to and including 3 December 2007. 5. That the defendant pay the remaining plaintiffs costs on and after 3 December 2007 except to the extent that they are included within the other orders referred to above. 6. I note the orders should not include that the defendant pay any of the plaintiff's costs in respect of 3 March 2008. ********** 05/09/2008 - No amendment - Paragraph(s) No amendment 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.