Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Phillips v James (No 2) [2014] NSWCA 135 Hearing dates: On the papers Decision date: 30 April 2014 Before: Beazley P; Basten JA; Meagher JA Decision: (1) Declare that each respondent is liable to contribute equally to property designated as notional estate for the satisfaction of the provision ordered by the Court in favour of the appellant. (2) Order that the respondents are to pay the appellant's costs in this Court and at first instance. (3) In the event that any of the amounts required to be paid under order (3) made by this Court on 6 February 2014 and under order (2) hereof remain unpaid within 28 days of: (a) in the case of order (3) made on 6 February 2014, the date of this judgment; or (b) in the case of order (2) hereof, the date of agreement or assessment of such costs; the parties have liberty to apply to the judge in charge of the Family Provision List in the Equity Division for further orders, including an order designating any asset or assets of the respondents as notional property for the purpose of satisfying any liability of the respondents for provision, interest or costs resulting from the judgments of this Court. (4) Grant the respondents a certificate under the Suitors' Fund Act 1951 with respect to the costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: SUCCESSION - family provision and maintenance - distribution of estate - satisfaction of order for provision from notional estate SUCCESSION - family provision and maintenance - costs - whether order for costs to be made from notional estate - Succession Act 2006, s 99(1) PROCEDURE - costs - general rule costs follow the event - exceptions to general rule - conduct of parties - no disentitling conduct Legislation Cited: Civil Procedure Act 2005, s 98 Succession Act 2006, s 78(2), s 84, s 99(1) Uniform Civil Procedure Rules 2005, r 42.1 Cases Cited: Beoco Ltd v Alfa Laval Co Ltd [1993] EWCA Civ 22; [1995] QB 137 W & K Holdings (NSW) Pty Ltd v Laureen Margaret Mayo (No 2) [2013] NSWSC 1581 Category: Costs Parties: Brian Phillips (Appellant) Gaye James (First Respondent) Gary Phillips (Second Respondent) Representation: Counsel: L Ellison SC; D Liebhold (Appellant) P W Bates (Respondents) Solicitors: D Stanefska & Associates (Appellant) Needs Chan & Monahan (Respondents) File Number(s): CA 2012/223379 Decision under appeal Jurisdiction: 9111 Citation: Phillips v James [2012] NSWSC 688 Date of Decision: 2012-06-22 00:00:00 Before: Stevenson J File Number(s): 2010/420872 Judgment 1THE COURT: On 6 February 2014 the Court delivered its principal judgment in these proceedings: Phillips v James [2014] NSWCA 4. The Court held that the primary judge, Stevenson J, did not err in finding that the provision made for the appellant in the deceased's will was not adequate and that further provision should be made in his favour in the sum of $100,000. The Court held, however, that Stevenson J erred in refusing to make a notional estate order. The Court ordered that provision be made for the appellant out of property to be designated as notional estate. 2There are three outstanding matters to address. First, how the provision ordered by the Court should be borne as between property of the parties to be designated as notional estate. Secondly, what property of the respondents ought to be designated as notional estate. Thirdly, what orders should be made in respect of the costs of the trial and the appeal. Designation of property as notional estate 3In written submissions, the first and second respondents state that they will contribute $50,000 each to the payment of further provision and have each nominated a bank account, in each case held jointly held with their respective spouses, to be nominated as notional estate. Pursuant to the Succession Act 2006, s 84, the effect of the designation of this property as notional estate will be that the rights of the account holders will be extinguished to the extent that they are affected by the order. 4The appellant accepts the apportionment between the respondents and the proposed designation of the bank accounts as notional estate. However, he seeks an additional order that he has liberty to apply to a judge in the Equity Division for the purpose of identifying property as notional estate for the purpose of satisfying any order for provision, interest, or costs made in his favour. The appellant submits that such an order is required in case the moneys are not paid should the bank accounts nominated by the respondents have insufficient funds. 5There is no evidence before the Court as to the balance of the bank accounts nominated by the respondents to be designated as notional estate. The most recent evidence before the Court as to the assets of the respondents is contained in the affidavit of the first respondent dated 17 February 2012 and the affidavit of the second respondent dated 17 February 2012. There is no reference in the first respondent's affidavit regarding the bank account she now nominates as notional estate, although there is a reference in her affidavit to a joint bank account with the Commonwealth Bank which, as at the date of the affidavit, had a balance of $47,516. There is a reference in the second respondent's affidavit to a bank account, containing $134,000. That bank account appears to be the same account that he has nominated to be designated as notional estate. This sum could, however, have been diminished during the intervening period. 6Both accounts are, as indicated, held jointly with the respondents' respective spouses. There is no material before the Court to indicate that Mr James and Mrs Phillips consent to the bank accounts in which they have a joint interest being designated as notional estate. Whilst the Court accepts that it is likely that they do consent, it would be inappropriate for it to make an order in respect of property in which persons have an interest and in respect of which the Court is uninformed as to whether they consent to that course. 7In those circumstances, and given that the respondents have agreed that they will each be liable for one half of the provision that has been ordered in favour of the appellant, the appropriate course, in an attempt to minimise the costs in this matter, is to make a declaration as to the proportion of the provision that each respondent should contribute. The Court anticipates that the provision ordered will be paid to the appellant without the necessity of further orders. However, if that does not occur, the appellant will have liberty to apply to the Family Provision list judge in the Equity Division for further orders in respect of the designation of property as notional estate. Costs 8The respondents submit that the Court should order that they pay two thirds of the appellant's costs both at first instance and on the appeal on the ordinary basis. The respondents state that they would share that liability on an equal basis. The respondents submit that the Court should depart from the rule that costs follow the event because of the appellant's unreasonable delay in bringing the proceedings and the manner in which he conducted the case. They submit that this is supported by a number of findings made by the primary judge that were not overturned on appeal. 9In relation to the question of delay, the respondents refer to the three month delay between the appellant 'thinking' that he ought to seek legal advice and in seeking that advice and the primary judge's finding that the first respondent was reasonably entitled to believe that she was free to deal with the proceeds of sale of the estate: see at [188], [190], [194]; and that the delay also impacted adversely upon the second respondent. 10In relation to the manner in which the appellant conducted his case, the respondents submit that the appellant received an indulgence in being permitted to reformulate his pleaded case, that that pleading had been "inept" and that much time was taken up at first instance and on the appeal with analysis of the altered pleadings. 11The appellant submits that there is no reason why costs should not follow the event and that the reasons provided by the respondents for some other order are so closely related to the issues at the trial and the appeal that they cannot be distinguished from the overall result. He submits that the matters relied on by the respondent go to the Court's discretion, which was exercised in favour of the appellant. In relation to the matter of delay, he emphasised that the conduct of the respondents in administering the estate by distributing it to themselves when they were on notice of his intention to make a claim should be discouraged and that even out-of-time claimants who are successful do not have their costs reduced because of delay. 12The appellant also seeks an order that the Court designate as notional estate any such asset that it thinks fit for the purpose of satisfying any costs order in his favour. The Court has the power to make such an order under the Succession Act, s 99(1), the statutory pre-condition in s 78(2) that the Court has made a family provision order in favour of the applicant having been satisfied. The respondents made no submission in reply to the appellant's application that property be designated as notional estate for the purposes of costs. 13The usual rule in proceedings brought in courts in New South Wales is that subject to the Uniform Civil Procedure Rules 2005 (UCPR) and, relevantly any other Act, costs are in the discretion of the court: the Civil Procedure Act 2005, s 98. UCPR, r 42.1 provides, in essence, that subject to any other provision in Pt 42, costs follow the event unless the court makes some other order. 14In the present case, the respondents recognise that a costs order should be made in favour of the appellant. The questions for determination are whether the appellant should be entitled to an order that he have all of his costs and, if so, whether property should be designated as notional estate to satisfy that order. 15The respondents' submission that this Court left in place certain findings of the trial judge particularly in relation to delay is not correct. The appellant brought proceedings within the time prescribed by the Succession Act. It was the respondents who acted precipitously in selling the deceased's property before the expiration of the time in which an application could be brought under the Act. Although the primary judge refused to make a notional estate order because of the appellant's delay in bringing the proceedings: see at [154], this Court made such an order in circumstances where the respondents distributed the estate, including to themselves, within the 12 month period specified by s 58(2) of the Act: see at [107]. 16In finding that the primary judge erred in refusing to make a notional estate order, this Court also emphasised that although the first respondent was not aware that the appellant was making a claim for provision when she dealt with the proceeds of sale, she was cognisant that he may contest the will. Further, the Court held that at the time the second respondent dealt with the property and its proceeds, he knew that the appellant was making a claim for provision from the estate. 17It follows that the respondents' argument that the appellant should be deprived of a portion of his costs because of delay should not be accepted. 18That leaves for consideration whether there should be any costs consequences flowing from the manner in which the appellant conducted his case at first instance. The respondents' complaint related to the amendment of the pleading in respect of which the respondents said time had been wasted. 19In Beoco Ltd v Alfa Laval Co Ltd [1993] EWCA Civ 22; [1995] QB 137, Stuart-Smith LJ, with whom the other members of the Court of Appeal agreed, commented at 154: "As a general rule, where a plaintiff makes a late amendment as here, which substantially alters the case the defendant has to meet and without which the action will fail, the defendant is entitled to the costs of the action down to the date of the amendment. There may, of course, be special reasons why this general rule should not be applied. An example of this is to be found in Kaines (UK) Ltd v Osterreichische Warrenhandelsgessellschaft mbH, (formerly CGL Handelgesellschaft mbH) [1993] 2 Lloyd's Rep 1, 9, where the judge was satisfied that, even if the amendment had been made earlier, the action would have been vigorously resisted." 20Beoco has been referred to and applied in New South Wales: W & K Holdings (NSW) Pty Ltd v Laureen Margaret Mayo (No 2) [2013] NSWSC 1581, but not in the context of family provision litigation. 21Even if the approach suggested in these cases was applicable to a family provision application, the Court does not consider that it applies in the circumstances of this case. In the present case, the appellant sought leave to amend his pleading on the first day of the hearing at first instance. The proposed amended pleading sought that property, which the respondents asserted no longer existed, being the proceeds of sale of the real estate bequeathed to the respondents, be designated as notional estate. The respondents objected to the amendment on the basis it was futile and that they had no case to answer because the property referred to in the proposed pleading no longer existed. 22However, as there was property available to be designated as notional estate, the appellant's application for provision could not, at the commencement of the proceedings, properly be characterised as futile. The appellant's success on his application demonstrates that any such characterisation was misconceived. Further, as Beazley P observed, at [95] of the principal judgment: "... the matter was conducted on the basis that an order was being sought that extended to the properties that Gaye and Gary had purchased with the proceeds of sale of those two properties." 23It is also appropriate to take into account, when determining whether a party should be deprived of a portion of costs because of conduct that occurs during the course of the hearing, the extent to which such conduct impacted upon the length of the hearing. In the present case, the argument on the amendment proceeded over less than five pages of transcript on the first day of a three day hearing. In the Court's opinion, the agitation of the argument on the amendment did not so affect the conduct of the trial as to justify depriving the appellant of his full costs. 24Although the Court is empowered to order that the paid out of notional estate: Succession Act, s 99(1), the Court, with the aim of minimising further costs, considers it preferable for the parties to attend to the payment of their costs liability under the orders of the Court without making a notional estate order in relation to costs. However, if the respondents fail to do so, the Court proposes that the liberty to apply for further orders will also extend to the payment of costs. 25It should be emphasised to the parties that it is not the expectation of the Court that it will be necessary for the liberty to apply to be invoked. If the payments are not promptly made, interest will run in accordance with the UCPR. Further, the parties should be mindful of the power of the Court to order costs to be assessed on an indemnity basis in the event that further litigation is required for the purpose of having the parties comply with their obligations as ordered by the Court. 26The Court accordingly makes the following additional orders: (1) Declare that each respondent is liable to contribute equally to property designated as notional estate for the satisfaction of the provision ordered by the Court in favour of the appellant. (2) Order that the respondents are to pay the appellant's costs in this Court and at first instance. (3) In the event that any of the amounts required to be paid under order (3) made by this Court on 6 February 2014 and under order (2) hereof remain unpaid within 28 days of: (a) in the case of order (3) made on 6 February 2014, the date of this judgment; or (b) in the case of order (2) hereof, the date of agreement or assessment of such costs; the parties have liberty to apply to the judge in charge of the Family Provision List in the Equity Division for further orders, including an order designating any asset or assets of the respondents as notional property for the purpose of satisfying any liability of the respondents for provision, interest or costs resulting from the judgments of this Court. (4) Grant the respondents a certificate under the Suitors' Fund Act 1951 with respect to the costs of the appeal. ********** 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: 30 April 2014