Supreme Court New South Wales Medium Neutral Citation: Sung v Malaxos (No 2) [2015] NSWSC 290 Hearing dates: 9 March 2015 Date of orders: 25 March 2015 Decision date: 25 March 2015 Jurisdiction: Equity Division Before: Pembroke J Decision: See paragraphs [24] and [25] Catchwords: SUCCESSION – family provision – costs – unsuccessful plaintiff COSTS – family provision – costs of unsuccessful plaintiff – appropriate order Legislation Cited: Civil Procedure Act 2005 Succession Act 2006 Uniform Civil Procedure Rules 2005 Cases Cited: Bowditch v NSW Trustee and Guardian [2012] NSWSC 702 Harkness v Harkness (No 2) [2012] NSWSC 35 McDougall v Rogers (Estate of James Rogers) [2006] NSWSC 484 Re Bodman [1972] QD R 281 Singer v Berghouse [1994] HCA 40; 181 CLR 201 Category: Costs Parties: Rosetta Kai Sung - plaintiff Nick Malaxos - defendant Representation: Counsel: G A Elliott – for the plaintiff J D Beck – for the defendant Solicitors: Elias Gates & Associates – for the plaintiff Forum Law – for the defendant File Number(s): 2014/094155 Judgment 1. On 9 March 2015 I delivered judgment in these proceedings and ordered that the plaintiff's claim for a family provision order be dismissed. I concluded that her claim was without merit and that adequate provision for her proper maintenance in life had been made by the will of the testator. 2. The remaining outstanding matter relates to the costs of the proceedings. The defendant seeks an order that his costs be paid by the plaintiff on an indemnity basis while the plaintiff submits that she should have her costs out of the estate on an indemnity basis. Prior to the hearing the defendant made four offers to the plaintiff in an effort to settle the proceedings. The first offer was made on 6 June 2014. Each of the offers was well considered and reasonable. Had the plaintiff accepted any of the offers she would have been in a better financial position than she is in today. 3. For the reasons that follow I have decided that costs should follow the event and that the defendant should have his costs on an indemnity basis from 7 June 2014 in accordance with Rule 42.15A (2)(b)(i) of the Uniform Civil Procedure Rules 2005. Legal Principles 1. The usual order in litigation in this court is that costs follow the event, namely that the unsuccessful party pays the costs of the successful party: Section 98(1) of the Civil Procedure Act 2005; Rule 42.1 of the UCPRs. 2. It is however well accepted that family provision cases stand apart from ordinary cases and that different considerations sometimes apply. Section 99 of the Succession Act 2006 provides: (1) The Court may order that the costs of proceedings under this Chapter in relation to the estate or notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit. 1. For that reason, it is not uncommon in the case of unsuccessful applicants in family provision claims for no order to be made as to costs, with the result that the plaintiff bears the burden of his or her own costs: Singer v Berghouse [1994] HCA 40; 181 CLR 201 at [6] (per Gaudron J). In some cases, the plaintiff will be ordered to pay the defendant's costs, with the result that the estate of the testator is not required to bear the burden of the costs incurred in defending the claim. 2. In proceedings where the claim is meritorious, reasonable or borderline the court may often allow an unsuccessful plaintiff his or her costs out of the estate: McDougall v Rogers (Estate of James Rogers) [2006] NSWSC 484; Re Bodman [1972] QD R 281; Harkness v Harkness (No 2) [2012] NSWSC 35; Bowditch v NSW Trustee and Guardian [2012] NSWSC 702. 3. In Harkness v Harkness (No 2) Hallen AsJ (as he then was) summarised the relevant principles, which I gratefully adopt: (a) In Singer v Berghouse [1993] HCA 35; [1993] 114 ALR 521, Gaudron J, said, at 522: 'Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s33, 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 a 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. (b) Despite the above statement, which, of course, was written in the context of a security for costs application, and in respect of proceedings under the Family Provision Act, s 99 of the Succession Act provides a wide discretion in relation to costs ('in such manner as the Court thinks fit'). (c) The view of some practitioners advising a potential applicant contemplating a claim for a family provision order, that there is little risk, and probably much to be gained, in making a claim, however tenuous, because even if the claim fails the applicant will, very likely, get his, or her, costs out of the estate and that he, or she, will not be significantly out of pocket, and the legal practitioner will receive his, or her, costs and disbursements in any event, has been thoroughly discredited. ` (emphasis added) (d) Parties should not assume that this type of litigation can be pursued, safe in the belief that costs will be paid out of the estate: Carey v Robson (No 2) [2009] NSWSC 1199; Forsyth v Sinclair (No 2) [2010] VSCA 195 . It is now much more common than it previously was for an unsuccessful applicant to be ordered to pay the Defendant's costs of the proceedings (Lillis v Lillis [2010] NSWSC 359 at [23]) and be disallowed his, or her, own costs. (emphasis added) (e) Where, as here, the issue is whether the unsuccessful applicant should bear the costs of the successful Defendant, s 98 of the Civil Procedure Act, and the rules quoted above, will apply, and, in the absence of some good reason to the contrary, there should be an order that the costs of the successful Defendant be paid by the unsuccessful Plaintiff: Moussa v Moussa [2006] NSWSC 509 at [5]. (f) 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 she, or he, has been guilty of some improper conduct in the course of the proceedings: Re Sitch (No 2) [2005] VSC 383. (g) In small estates particularly, the court should be careful not to foster the proposition that obstinacy and unreasonableness will not result in an order for costs: Dobb v Hacket (1993) 10 WAR 532, at 540. (h) Proceedings for a family provision order involve elements of judgment and discretion beyond those at work in most inter partes litigation: Jvancich v Kennedy (No 2) [2004] NSWCA 397; Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003. (i) In exercising its discretion in relation to costs, the court will have regard to 'the overall justice of the case': Jvancich v Kennedy (No 2). The 'overall justice of the case' is 'not remote from costs following the event'. However, the court may be more willing to depart from the general principle in proceedings for a family provision order than in other types of case: Moussa v Moussa; Carey v Robson (No 2); Bartkus v Bartkus [2010] NSWSC 889 at [24]. (j) 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: Morse v Morse (No 2) [2003] TASSC 145; McDougall v Rogers; Estate of James Rogers [2006] NSWSC 484; McCusker v Rutter [2010] NSWCA 318 at [34]. (k) There are also other circumstances that may lead the court to order payment out of the estate of the costs of an unsuccessful Plaintiff. The court may allow an unsuccessful Plaintiff costs out of the estate, if in all the circumstances the case was meritorious, reasonable or 'borderline': McDougall v Rogers; Estate of James Rogers; Re Bodman [1972] Qd R 281; Shearer v The Public Trustee (NSWSC, Young J, 21 April 1998, unreported). Discussion 1. Applying these principles, I have formed the view that the 'overall justice' of this case, even after applying a certain amount of 'liberality and discrimination', requires that the plaintiff, not the estate, bear both her own and the defendant's costs of the proceedings. The only potentially relevant factor against making this order is that it will adversely affect the plaintiff's financial position. However, this is not a case where the plaintiff will become impecunious or will have to sell assets to pay costs. The plaintiff's provision out of the estate will be sufficient to pay the costs of the defendant and her own costs. 2. The Calderbank Offer dated 6 June 2014 starkly foreshadowed the consequences for the plaintiff of failing to accept the defendant's offer of compromise: We reserve our right to tender this offer on an application for costs if the offer is rejected and to seek indemnity costs from the plaintiff. We will be seeking orders that the plaintiff's legal costs on an indemnity basis should not be paid by the estate. 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. The potential for this hardship to be averted is one to which Ms Sung ought give serious consideration in deciding whether to accept or reject this offer. (emphasis added) 1. I suspect that, as a matter of practical reality, the costs to be paid by the plaintiff are unlikely to unduly affect her financial position. It seems probable that the value of the Lilyfield property has increased by around $200,000 since the proceedings were commenced. This increase in value will be more than adequate to cover her legal expenses. 2. A factor that I wish to emphasise is that the litigious process is inherently stressful for any party, in particular for individuals such as the testator's daughter, Brita and her husband. That stress includes uncertainty and concern as to the amount of legal costs being incurred and the potential for those costs to deplete the estate. In some cases, of which Dickens' fictional Jarndyce v Jarndyce is only one example, the costs not merely deplete the estate – they exhaust it. 3. It is notorious that family provision claims frequently require parties to submit to an intrusive investigation of their personal lives and finances. Brita Benjamin and her husband were compelled to answer subpoenas and to subject themselves to the full panoply of an adversarial hearing in a public courtroom. This included cross-examination, criticism, comment and submission about their lifestyle, their holidays, their personal finances and Mr Benjamin's medical condition. All of this could have been avoided if any of the offers of compromise had been accepted. 4. The stresses of litigation have been recognised at the highest appellate levels in this country and in the United Kingdom. In this court, Allsop P (as he then was) said in Richards v Cornford (No 3) [2010] NSWCA 134: [42] The litigious process is inherently stressful for any party, in particular an individual. Ms Richards embarked upon a time-consuming, stressful and potentially very expensive process. Litigation can be described as 'a costly and stressful, though necessary, evil': White v Overland [2001] FCA 1333 at [4]. The wider passage and the paragraph in which this appeared as part of the reasoning were approved by this Court in Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; 53 NSWLR 116 at [1], [28] and [39]. That stress includes the uncertainty and concern as to the effects of legal costs that can lead to bankruptcy and financial ruin. The reality of the person strain of litigation is now clearly recognised by the Courts: Ketteman v Hansel Properties Ltd [1987] AC 189 at 220; Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; 225 CLR 364 at [37]; GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710 at 715-716; Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 at [100]. [43] This being the nature of the process of litigation, the courts in this country in modern times, have sought to exercise control and supervision over litigation in order to see cases resolved in a relatively timely fashion. It cannot always be done. Parties, practitioners, courts and judges sometimes fall behind by reference to appropriate standards of efficiency and timeliness. Nevertheless, the need for the due despatch of the cases of litigants is ever-present and is a fundamental aim of the administration of justice. [44] To put the matter simply and bluntly, parties are entitled to expect that the costly and stressful, though necessary evil that is litigation be resolved with reasonable despatch so as to minimise, where reasonably possible, the time during which people are subject to its rigours and strains. 1. The plaintiff was aware or should have been aware that Mr Benjamin had a degree of psychological and psychiatric vulnerability which was real and not contrived. She should have been aware of the financial instability of Brita Benjamin and the likelihood of her emotional vulnerability arising from the loss of her father. The executor Mr Nick Malaxos has had to take time off work to attend conferences, prepare affidavits, and attend court. During this protracted process, he suffered a minor heart attack. He has done his duty to uphold the will faithfully and diligently. 2. In the circumstances, I have reached the view that the plaintiff acted unreasonably in commencing and continuing the claim, especially after the offers of compromise. She unnecessarily exposed the executor and Mr and Mrs Benjamin to the rigours and strains of litigation, when there was never any merit in her contention that she should, in effect, supplant the testator's daughter. 3. There is one further factor. The number of affidavits and the quality of evidence tendered was disproportionate to the complexity of the dispute and the issues involved. There was no issue as to the eligibility of the plaintiff or her status as a de-facto. It was simply not reasonable to carry out the work represented by the compilation, drafting and tender of such a large quantity of evidence. A great deal of it was, in any event, of marginal relevance and little or no practical utility. This unfortunate aspect of the proceedings had the effect of increasing the defendant's costs. As Palmer J said in Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003; 65 NSWLR 268: 'proportionality of costs to the value of the result is central to the just and efficient conduct of civil proceedings' (at 274). 4. In these circumstances, there are no discretionary factors to justify departure from the usual costs rule. In Jvancich v Kennedy (No 2) [2004] NSWCA 397 Giles JA observed (with Handly JA and McColl JA agreeing) that the 'overall justice of the case' is 'not remote from costs following the event'. Offers to compromise 1. For completeness I should summarise each of the four offers to the plaintiff to compromise the claim: 1. Firstly, an offer dated 6 June, 2014 made in accordance with rule 20.26 (2) of the UCPRs was served on the plaintiff on 6 June 2014. The defendant offered to pay the plaintiff $40,000 in addition to the plaintiff's entitlement under the deceased's 2012 will. It was open for 28 days and no response was received from the plaintiff; 2. Secondly, an offer dated 6 June 2014 was made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 33. The defendant offered to pay the plaintiff $40,000 in addition to the plaintiff's entitlement under the deceased's 2012 will. It was open for 28 days and no response was received from the plaintiff; 3. Thirdly, a Calderbank Offer dated 14 August, 2014 offering inter alia, in lieu of the provision in clause 3.5 of the testator's will an amount of $470,000. The plaintiff's costs to be assessed or agreed and to be paid by the Estate. The offer remained open for 28 days; 4. Fourthly, a Calderbank Offer dated 1 October, 2014 was served on the plaintiff on 1 October, 2014. At paragraph (g) of that offer the defendant offered inter alia, to pay the plaintiff $600,000 inclusive of the plaintiff's costs and to permit her to reside in the Lilyfield property until 7 days prior to the date for completion of the sale of property. It was open for 28 days and rejected by letter dated 17 October, 2015 from the solicitor for the plaintiff, Elias Gates & Associates. 1. By making four separate offers, and increasing the final offer significantly, the defendant acted responsibly and reasonably in attempting to resolve the proceedings. The refusal of these offers suggests that the plaintiff did not consider what was being offered in a sensible, practical, and commercial way. I infer that experienced legal practitioners, advising the plaintiff, must have explained to her the risks as to costs if the offers were refused and if a less favourable result were achieved. While the plaintiff was entitled to take those risks, she is not entitled to escape the consequences of doing so. 2. The offer contained in the letter of 6 June 2014 was made when the plaintiff was in a position to give it prompt, and informed consideration. Each of the points made by the solicitor for the defendant in support of all of the offers of compromise at the time they were served have been made out by the defendant at the trial. Each of the offers was clear and provided a time frame of 28 days within which to respond. 3. UCPR 42.15A provides: (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. 1. In respect of the first offer made to the plaintiff on 6 June 2014, the defendant is prima facie entitled to his costs on an ordinary basis up to 6 June 2014 and on an indemnity basis from 7 June 2014. Orders 1. I therefore make the following orders: 1. The plaintiff pay the defendant's costs on the ordinary basis up to 6 June 2014 and on the indemnity basis from 7 June 2014; 2. The plaintiff pay her own costs. 1. As to possession of the Lilyfield property, I make the following orders: 1. The plaintiff to cease occupation of the Lilyfield property by 25 May 2015; 2. For each day that the plaintiff continues to reside in the Lilyfield property past 25 May 2015, she is to pay $160 per day, which if not paid shall constitute a charge on the plaintiff's entitlement pursuant to the will; 3. During the occupation period the plaintiff shall: 1. pay all costs and outgoings of the property including but not limited to Council rates, water rates, taxes including land tax, if any, utilities and insurances; 2. preserve, maintain and keep insured the property; 3. co-operate with the defendant in order to facilitate the sale of the property, including by permitting access to the defendant, potential purchasers and their agents, and by allowing the property to be styled and cleaned. 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: 26 March 2015