Supreme Court New South Wales Medium Neutral Citation: Meres v Meres (No 2) [2017] NSWSC 523 Hearing dates: 4 May 2017 Date of orders: 09 May 2017 Decision date: 04 May 2017 Jurisdiction: Equity Before: Hallen J Decision: The Court: (a) Makes no order as to costs of the Plaintiff, to the intent that he will bear his own costs of the proceedings, including the costs of the hearing of the application for costs; (b) Orders that the Defendant's costs, calculated on the indemnity basis, of the proceedings, be paid out of the estate of the deceased, such costs not to include the costs of the hearing of the application for costs. (c) Orders, in relation to the Defendant's costs of the hearing of the application for costs, he is to bear his own costs. Catchwords: SUCCESSION – FAMILY PROVISION – COSTS – Following dismissal of suit for family provision order –Offer of Compromise served some months prior to the hearing – Plaintiff failed to obtain order more favourable than offer made – Whether Court's discretion should be exercised – Overall justice of the case warrants exercise of the Court's discretion Legislation Cited: Civil Procedure Act 2005 Family Provision Act 1982 (NSW) Succession Act 2006 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: AB v Curry & Anor (No. 2) [2015] NSWSC 1209 Bates v Cooke (No 2) [2014] NSWSC 1322 Briggs v Mantz (No 2) [2014] VSC 487 Durham v Durham [2010] NSWSC 482 Evans v Braddock (No 2) [2015] NSWSC 518 Friend v Brien (No. 2) [2014] NSWSC 614 Grey v Harrison [1997] 2 VR 359 Hinderry v Hinderry [2016] NSWSC 780 Houatchanthara v Bednarczyk [1996] NSWCA 253 Manly Council v Bryne (No 2) [2004] NSWCA 227 Ohn v Walton (1995) 36 NSWLR 77 Oshlack v Richmond River Council (1998) 193 CLR 72 Page v Page [No 2] [2016] NSWSC 1323 Pearson & Ors (The Joint Administrators of Lean Brothers International (Europe)) v Lehman Brothers Finance SA & Ors [2010] EWHC 3044 Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Smith v Whittaker [2016] VSC 287 Category: Costs Parties: Lennie Meares (Plaintiff) Rodney Stanley Meares (Defendant) Representation: Counsel: Ms L Goodchild (Plaintiff) Mr D Liebhold (Defendant) Solicitors: LJ Sharpe & Co (Plaintiff) Owen Hodge Lawyers (Defendant) File Number(s): 2016/203508 Judgment 1. HIS HONOUR: This judgment is concerned with the costs of litigation ("the principal proceedings") between twin brothers in relation to the estate of their mother, Olga Gene Meres ("the deceased"). The hearing of the costs argument occurred on 4 May 2017. Immediately following the submissions, I informed the parties of the costs orders that I proposed to make and stated that I would publish my reasons later. These are the reasons for making the orders that were stated at the conclusion of the hearing and which appear below. 2. In the principal proceedings, the Plaintiff sought additional provision out of the deceased's estate pursuant to the Succession Act 2006 (NSW) ("the Act"). In reasons for judgment, bearing the medium neutral citation Meres v Meres [2017] NSWSC 285 ("the principal judgment"), the Court ordered that the Plaintiff's Summons be dismissed and that any argument as to costs of the proceedings, and how those costs are to be borne, be listed on a date to be arranged. (The parties requested that costs not be dealt with in the reasons for judgment as documents may be relevant to the determination of how costs should be borne.) 3. During the course of the principal proceedings, the Court had ordered, by agreement of the parties, that Rodney Stanley Meres, the Defendant, be appointed to conduct the proceedings on behalf of the estate, he being the only other beneficiary named in the deceased's Will and the person who would bear the burden of any additional provision made for the Plaintiff. 4. The Defendant resisted the Plaintiff's claim for a family provision order, submitting that it should be dismissed with costs. Again, at the hearing of the costs argument, he maintained the position in regard to costs, for reasons to which I shall come, and submitted that the Plaintiff should bear the burden of his costs, in part, those costs to be calculated on the indemnity basis. 5. It is necessary to repeat some of the facts that were identified in the principal judgment to provide part of the context for the determination of how the costs should be borne. 6. At the hearing of the principal proceedings, the Plaintiff's costs and disbursements, calculated on the ordinary basis, of the proceedings, were estimated to be $47,000, inclusive of GST. The Defendant's costs and disbursements, calculated on the indemnity basis, of the proceedings, were estimated to be $71,500, inclusive of GST. (The Plaintiff complained about the quantum of the Defendant's costs bearing in mind that the matter was relatively straightforward and because it was heard and determined in one day. There may be merit in that complaint but that will be necessary for a costs assessor to determine if agreement cannot be reached by the parties. I do not determine the quantum of the Defendant's costs in these proceedings.) 7. On 1 November 2016, the parties participated in a judicial settlement conference. As is obvious, the matter was not resolved. At the judicial settlement conference, the costs of both parties were estimated to be, in total, $40,000. Thereafter, almost $80,000, in total, was incurred in costs. The costs are now, undoubtedly, more. 8. Using the estimates of costs and disbursements provided at the hearing, an amount in the order of $118,500 may be payable. I have no evidence of whether, and by how much, those costs have increased. Mercifully, in view of the costs order I have made, that is irrelevant. 9. In the principal judgment, the Court estimated the net value of the deceased's distributable estate available, after the identified costs and disbursements of the proceedings and the costs and expenses of sale of the Rockdale property, are deducted, would be about $1,057,567. It followed, on the basis of the calculations made, that the entitlement of each of the parties would be about $528,783. If the Rockdale property were sold, but the costs were not deducted from the estate, the entitlement of each party would be to about $588,000. 10. In the principal proceedings, the Defendant did not make an application for an order under the Act. Nor did he raise his financial circumstances in the proceedings. 11. In the principal judgment, I wrote: "I have earlier noted that the parties did not wish me to determine the issue of costs. However, as shown in the passage of the Plaintiff's evidence set out above, the impact of costs is of real significance in the present proceedings. The Court, on many occasions, has emphasised the necessity for parties to bear in mind the proportionality of costs, the importance of making appropriate settlement offers, and that if one wishes, or both wish, to adopt an approach that may have the effect of reducing the value of the estate, then they should not proceed on the basis that their costs and disbursements will necessarily be borne by the estate: Geoghegan v Szelid [2011] NSWSC 1440 at [21]- [24]. Section 60 of the Civil Procedure Act 2005, which applies equally to a claim for a family provision order, refers to "the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute". In Forsyth v Sinclair (No 2) at [27], it was said by the Court of Appeal (Neave and Redlich JJA and Habersberger AJA) at [27]: "We consider that it is a matter of concern that in many family provision cases the amount available for distribution amongst the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before the costs get out of proportion. However, it takes two to settle a dispute and unless sensible offers of settlement are made in a form which can be referred to subsequently, it is very difficult for the Court to allocate responsibility for the dispute not settling. All that can be done is to conclude that where costs have been incurred unreasonably, as here, they must be borne personally. (Omitting citation)"" 1. I also wrote: "It is clear that if the Rockdale property were sold, the Plaintiff would have a need for accommodation. Yet, importantly, by the terms of her Will, and with her knowledge of the facts then available to her, particularly going to the Plaintiff's conduct as a loving and dutiful son, the deceased did not consider that it was her moral obligation to provide accommodation for the Plaintiff, by way of the whole of the Rockdale property being devised to him absolutely in her Will. It is to be noted, also, that the Plaintiff has, for some time, whilst only receiving an income by way of pension, been living within his means. The capital sum that he now has available (from his father's estate), until used, could provide some income to supplement his current pension income. Even if he used all of the provision made for him in the Will of the deceased and some of the capital sum that he has available from his father's estate for the purchase of accommodation, his pension income will continue, albeit it may be reduced depending on what capital sum remains. The Court is entitled to take into account pension benefits as part of the resources of the Plaintiff, and to consider that they will continue to be received in whole or in part. In addition, the Plaintiff has the financial resource, being his claim for compensation for injuries sustained in a motor vehicle accident. I do not place too much emphasis on this fact because whether he will be successful in his claim, and if so, what amount he will receive, is unknown at the date of the hearing. It is obvious, in the present case, bearing in mind the size of the estate, and the lack of any evidence about the financial and material circumstances of the Defendant, that there is no competing financial claim of any other person that would inhibit the practicability of meeting any needs of the Plaintiff not met by the provision made for him in the deceased's Will. Yet, the Defendant does not have to justify retaining the benefits provided to him under the Will of the deceased on the basis of need. To summarise, then, using the value of the deceased's estate at the date of hearing ($1,201,917) on sale of the Rockdale property (the costs being $25,850), each party would expect to receive about $588,000. The Plaintiff has received the whole of his father's estate, which, following the distribution of that estate to him, at the date of hearing, means that he also has $358,000 in available funds. It follows that upon sale of the Rockdale property, the Plaintiff would have about $946,000, in cash, available to purchase alternative accommodation and to provide a capital sum as a buffer against the vicissitudes of life. Assuming, then, that the Plaintiff purchased accommodation for $749,000 (the highest of the range of costs for accommodation stated in evidence), he would have left about $197,000, from which to pay stamp duty on the purchase (which was estimated to be about $30,000), the legal costs and disbursements of the purchase, and any moving costs (which I estimate to be $4,000), with the balance left for exigencies of life. After payment of those costs, he would have about $163,000 available." … Of course, in the above calculations, the costs of these proceedings have not been deducted from the value of the deceased's estate. It seems to me, in the circumstances of this case, that is the way the Plaintiff's case must be determined, since no costs order has yet been made and there is the possibility of a special costs order being made based upon the service of an Offer of Compromise or a Calderbank offer. The issue of costs will have to be determined, so it seems to me, taking contextual circumstances of the litigation and the conduct of the parties into account. To do otherwise, might suggest a predetermination of how the costs of the proceedings are to be borne." The Evidence on the Costs Application 1. Counsel for the Plaintiff tendered a copy of a letter dated 1 December 2016 from the Plaintiff's solicitors to the Defendant's solicitors. In that letter, the Plaintiff offered to "pay to the Defendant the net proceed (sic) of the sale of the Durras Lake property which we understand has been sold for $368,000". (The Plaintiff inherited the Durras Lake property following the death of his father.) 2. Counsel for the Defendant read two affidavits, each sworn by the Defendant's solicitor on 28 April 2016. In the longer of the two affidavits, the solicitor provided estimates of the costs calculated for different periods at the different rates as claimed by the Defendant, with the Defendant's total costs and disbursements calculated to be $58,346. At the hearing, counsel for the Defendant revised this figure to $55,000 (T3.48). 3. In the shorter of the two affidavits, the solicitor annexed a copy of two written offers that had been made on behalf of the Defendant. Each was described as an Offer of Compromise. On 26 September 2016, the Defendant offered to resolve the proceedings on the basis that the Summons be dismissed and that each party bear his own costs (with the Defendant's costs to be paid out of the estate on the indemnity basis) ("the September offer"). The offer was not accepted (or it lapsed). 4. The September offer was expressed to close on 24 October 2016, which is one day less than the 28 days prescribed by UCPR rule 20.26(5)(a). The Defendant did not rely on the offer as an Offer of Compromise. The Defendant sought to rely upon it as a "Calderbank" offer. 5. The Defendant served the second document headed "Offer of Compromise" on the Plaintiff under cover of a letter dated 11 November 2016 ("the November offer"). He offered to resolve the proceedings on the basis that, following the payment of the Defendant's costs out of the estate on the indemnity basis, and the Plaintiff's costs on the ordinary basis, as well as the payment of sale costs and other estate liabilities, the Plaintiff would receive the greater of (a) $720,000; and (b) 61 per cent of the nett proceeds of sale of the Rockdale property. The offer was not accepted (or it lapsed). 6. There is no dispute that the November offer complied with all of the requirements of UCPR rule 20.26. The Respective Positions of the Parties at the costs hearing 1. I have had the benefit of receiving a written outline of submissions from counsel for each of the Plaintiff and the Defendant. Those submissions, will, of course, remain with the Court papers. 2. The Defendant submitted that, as the result obtained by the Defendant is no less favourable to him than the terms of the November offer, by operation of UCPR rule 42.15A, there is a statutory presumption that the Defendant is entitled to an order against the Plaintiff for the Defendant's costs (a) assessed on the ordinary basis up to 11 November 2016; and (b) assessed on the indemnity basis from 12 November 2016. 3. It was submitted that the November offer contained a significant compromise as to an amount to be paid to the Plaintiff. The offer did not invite capitulation, because the Plaintiff would have been better off had the offer been accepted, particularly since the offer would have resulted in additional provision out of the estate being made for him. 4. Counsel referred to the principles outlined by White J (as his Honour then was) in Friend v Brien (No. 2) [2014] NSWSC 614 and, what I had written, more recently, in Page v Page [No 2] [2016] NSWSC 1323. He also relied upon the following passage written by Kunc J in Bates v Cooke (No 2) [2014] NSWSC 1322 (which was cited, with approval, by White J in AB v Curry & Anor (No. 2) [2015] NSWSC 1209, at [4], and by the Supreme Court of Victoria in Briggs v Mantz (No 2) [2014] VSC 487, at [33]-[35], and Smith v Whittaker [2016] VSC 287, at [36]): "Taking into account the language of r 42.15A, a party seeking to persuade the Court to order otherwise must identify some feature or features of one or more of the proceedings, the claim, the offer (including, for example, when it was made) and the order or judgment obtained by the successful party which provide a rational basis for the Court to displace what the rule specifies is the costs order to which "the defendant is entitled". 1. (An appeal from the substantive judgment of Kunc J was dismissed in Bates v Cooke (2015) 14 ASTLR 221; [2015] NSWCA 278. Nothing was written by the Court of Appeal about the costs judgment.) 2. At the hearing, counsel for the Defendant referred to Houatchanthara v Bednarczyk [1996] NSWCA 253. The case involved an application for leave to appeal from a costs order made in the District Court in circumstances based upon District Court Rules, Part 19 rule 9(6). It is unnecessary to set out that rule in these reasons other than to note it is in terms similar to UCPR rule 42.15A. 3. I did not find the passages relied upon in the judgment of Clarke JA (agreed with by Santow JA) take the Defendant's case on the issue of costs very far. As will be seen, it is clear that UCPR rule 42.15A lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise where the court considers the justice of the case warrant such a departure. 4. Nor did I find particularly helpful counsel's reliance on the passage of Handley JA's judgment to the effect that "[G]eneral factors which apply in most, if not all cases, such as hardship, and difficulty in predicting the result of the trial cannot support an exercise of the discretion in favour of the unsuccessful party". Counsel for the Plaintiff did not submit that either of those matters alone would justify the exercise of the Court's discretion to make an otherwise order. 5. Counsel for the Defendant submitted "…the appropriate orders and notations as to costs are: 1. Orders that the plaintiff is to pay the defendant's costs (a) assessed on the ordinary basis up to 26 September 2016 (or, alternatively, 11 November 2016); and (b) assessed on the indemnity basis from 27 September 2016 (or, alternatively, 12 November 2016). 2. Orders that the balance of the defendant's costs are to be paid out of the estate on the indemnity basis. 3. Notes that there is no order as to the plaintiff's costs to the intent that he bear his own costs." 1. I have earlier referred to the offer made by the Plaintiff in December 2016. The proceeds of the Durras property, as at February 2017, were $358,544.49. 2. It was submitted that the Rockdale property had an agreed value of $1.2 million. Based upon the estimates quoted earlier, the offer made by the Plaintiff to the Defendant, before costs of these proceedings were deducted, amounted to 67.8% of the Defendant's entitlement under the deceased's Will. 3. Counsel submitted that the Plaintiff's case: "….was reasonable and borderline. The Plaintiff failed because the Court determined that the provision out of the estate for the Plaintiff was, upon the sale of the Rockdale home, said to be sufficient for him. The Plaintiff desperately wished to stay in his home where he had resided for many years. This property not only provided to him accommodation but also provided for his emotional and psychological wellbeing. The fact of the rising house prices in the Sydney property market over recent years has inflated the value of what is a very modest home". 1. Counsel also submitted that a costs order would be a substantial burden on the Plaintiff. An adverse costs order would effectively undermine the basis upon which the Court determined the matter - that the Plaintiff had sufficient funds, although modest, to meet his needs. 2. The Plaintiff then urged the Court to make no order as to the Plaintiff's costs with the intention that he pay his own costs and an order that the Defendant's costs, calculated on the indemnity basis be paid out of the estate of the deceased. In this way, it was submitted that the Plaintiff would be bearing one half of the Defendant's costs. 3. Neither party asked the Court to make a lump sum costs order under s 98 (4) of the Civil Procedure Act. Such an order would avoid the need for an assessment and would allow expedited distribution and finalisation of the estate if a costs order was made. 4. Before turning to the legal principles that apply, at the commencement of the submissions, the Court raised with the parties the practical effect of the different orders proposed by the Plaintiff and by the Defendant. Using the estimates referred to in the principal judgment, but substituting the costs estimate provided by the Defendant's solicitor for the Defendant's costs, on the Defendant's case, the amount to be paid by the Plaintiff out of his share of the estate for his own costs ($47,000), and for the Defendant's costs ($55,000) would total $102,000. On the Plaintiff's case, the amount to be paid by the Plaintiff out of his share of the estate for his own costs ($47,000) and for one half of the Defendant's costs ($27,500) would total $74,500. The difference between the two amounts, in broad terms is $27,500. Neither counsel disagreed with the calculations that revealed this difference (T9.42; T11.20 – T11.39). The Legal Principles 1. McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at [66] - [67] wrote: "By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] 103, when setting aside an arbitrator's costs award: "the arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure." The combined force of the sentiments recognised above by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the "usual order as to costs". The usual order as to costs The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation." 1. The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77, per Gleeson CJ, at 79. 2. It may be necessary to analyze the whole of the proceedings to determine the appropriate costs order. A relevant consideration is whether the Plaintiff acted reasonably in commencing the proceedings and whether the Defendant acted reasonably in defending them. 3. In Hinderry v Hinderry (No 2) [2016] NSWSC 1577, I set out the principles relating to costs in relation to proceedings for a family provision order that had been dismissed, at [50] – [64], as follows: "In order to determine the issue of the appropriate costs orders, it is next necessary to refer to the principles applicable to ordering costs in proceedings for a family provision order. Of course, one starts in any determination of costs, with s 98(1) of the Civil Procedure Act 2005 (NSW), which provides that subject to the rules of court and to this, or any other Act, costs are in the discretion of the Court. UCPR rule 42.1 provides that costs should follow the event unless it appears to the Court that some other order should be made as to the whole, or any part of the costs. UCPR r 42.20(1) 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 of the proceedings to the extent to which the proceedings have been dismissed. The effect of these rules in this case, is that the Plaintiff must bear at least the first Defendants' costs of the proceedings for the family provision order, unless the Court otherwise orders. The Court can only order otherwise if there is a discretionary decision to depart from what the UCPR provide. There is no suggestion that the Civil Procedure Act and the UCPR do not apply to family provision proceedings. Section 99 of the Succession Act 2006 (NSW) provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne. However, that section does not apply to costs as between party and party, but rather to costs to be paid out of the estate. In Harkness v Harkness (No 2) [2012] NSWSC 35 at [17]-[18], I wrote: "I have identified, in a number of other cases in which a family provision order has been sought (see, for example, Smith v Smith (No 2) [2011] NSWSC 1105, Mikan v Velcic (No 2) [2011] NSWSC 505), after referring to the legislation, which I have again set out above, the general principles I considered relevant. For the assistance of the parties and others reading this judgment, I repeat the principles stated previously which I consider relevant to the present case: (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 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 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. (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. (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). In Bruce v Greentree (No 2) [2015] NSWSC 1636 at [43], I wrote: "In addition to the above principles, I should note that the usual costs rule in an unsuccessful family provision application "reflects the policy embodied in s 56 Civil Procedure Act that litigation must be conducted responsibly and should only be commenced by a plaintiff after careful evaluation of the costs consequences likely to attend to failure": Carey v Robson; Nicolls v Robson (No 2) [2009] NSWSC 1199, per Palmer J, at [20], and that "[t]here is a public policy in the usual practice as well as the element of justice reflected in the rule that costs follow the event": Friend v Brien (No 2) [2014] NSWSC 614, per White J, at [20]." What I said in Smith v Smith (No 2) [2011] NSWSC 1105 at [77], is also applicable to the facts of the present case: "I commend to parties involved in proceedings in which a family provision order is sought, that every effort, particularly in a relatively small estate, as this one is, to conduct negotiations frankly and openly, to try to resolve the proceedings, and if there are issues or concerns about an offer that has been made, to raise any issues at the first convenient opportunity with the offeror's solicitors, so that any ambiguities, or other concerns, can be resolved. The Court should be able to see that the parties have considered what is being offered in a sensible, practical, and commercial way." I referred to all of these principles, more recently, in Penfold v Predny [2016] NSWSC 472 at [161]-[166] and in Stojanovski v Stojovski [2016] NSWSC 976 at [265]. As was noted (albeit in another context), in Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136 at [9] (by Greenwood and Rares JJ): "The exercise of the discretion takes account of all of the contextual circumstances of the litigation and the conduct of the parties. One aspect of the award of costs is a recognition that a party has been put to expense which, taking account of the merits as ultimately found on the trial of the action, might otherwise have been avoided. That consideration does not infuse the award of costs with any sense of penalty or punishment but simply recognizes the compensatory nature of an award of costs, in context and according to principle. That is why an award of costs, although involving the exercise of a discretion, generally favours the successful party. As to the importance the community attaches to legal costs incurred of and incidental to the resolution of controversies before courts, see Clark v Commissioner of Taxation [2010] FCA 415 at [90]; Uniline Australia Ltd v S Briggs Pty Ltd (No. 2) [2009] FCA 920; (2009) 82 IPR 56 at [38]; and, Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [130] to [132]." I accept, of course, that claims for a family provision order do, in some ways, raise issues with respect to costs that differ from those in other litigation and that there is more flexibility where there has been an unsuccessful claim. One example where an order for costs being made against an unsuccessful Plaintiff may be inappropriate is where, if such an order for costs were made, he or she would immediately become impecunious and so may be able to make a fresh application under the Act. In that example, it would be counter-productive to make an order as to costs against the unsuccessful plaintiff: McCusker v Rutter [2010] NSWCA 318 at [34] (Young JA). A contrary example where the Court may, "in its discretion order an unsuccessful applicant to pay costs [is] where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the applicant has been guilty of some improper conduct in the course of the proceedings": Bowyer v Wood (2007) 99 SASR 190; [2007] SASC 327, at [68]. The "more modern" approach appears to be that stated by the Court of Appeal in Chapple v Wilcox [2014] NSWCA 392. At [27], Basten JA stated: "Whether or not an unsuccessful applicant should be allowed to litigate without expense to the estate will depend on a variety of circumstances. There is always a discretion in the Court when making an order pursuant to s 98 of the Civil Procedure Act 2005 (NSW). The discretion conferred on the Court by that provision is subject to the rules of court (s 98(1)) and thus to r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), which provides that costs will follow the event unless it appears to the Court that some other order should be made. That rule is not disapplied in relation to family provision orders. Nor should applicants for such orders have any expectation that, as a general rule, the discretion will be applied so as to exempt them from liability for costs incurred by an estate in the case of an unsuccessful application. In some cases applicants will already be beneficiaries of the estate and may thus have some incentive to ensure that the costs of litigation are kept within tight bounds. However, that is not always the case. Where an applicant is entirely unsuccessful, an order that he or she should pay the costs of the estate may well be the appropriate order." At [137] – [139], Barrett JA (with whose reasons Gleeson JA agreed), referred to the passage quoted above in Bowyer v Wood and added: "In Western Australia, it was recently said by E M Heenan J, in a discussion of the notion that a costs order should not be made against an unsuccessful applicant if it would have a detrimental effect on that applicant's financial position, that "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": Daniels v Hall (No 2) [2014] WASC 272 at [32]. 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 rules 42.1 and 42.20(1) of the Uniform Civil Procedure Rules - 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". 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 E M Heenan J referred." Counsel for the Plaintiff, presumably in respect of his alternative submission, relied upon what I had written in Harkness v Harkness, at [18]: "(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]."" 1. In this case, the issue of costs is made complicated by the service of the two offers to which reference has been made. 2. UCPR rule 42.15A deals with the situation, like the present, where an Offer of Compromise, made in accordance with the Rules, is made by a defendant and not accepted by the plaintiff, and when the defendant obtains judgment on the claim which is no less favourable than the terms of the offer. 3. Rule 42.15A(2) provides: (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 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368, Spigelman CJ, Beazley and McColl JJA, wrote, at [15]: "... Rules 42.14, 42.15 and 42.15A... provide that, when the relevant costs rule is engaged, a party is entitled to indemnity costs from a specified time (usually one day after an offer of compromise is made), "unless the court orders otherwise"...." 1. From the authorities, it appears the question for determination regarding the effect of what is said to be an Offer of Compromise involves a two-stage process. The first stage is to enquire whether the offer made is an 'Offer of Compromise' at all, within the meaning of the UCPR. This will depend, in part, on whether it satisfies the formal requirements laid down by UCPR rule 20.26. It also depends, in part, on whether the offer made is one that can truly be called a "compromise". 2. If the court concludes that the offer which is made is an "Offer of Compromise" within the meaning of the Rules, and that the offer made is one that can truly be called a compromise, then UCPR rule 42.15A(2) operates to establish a 'default' position, relevantly that, if the defendant obtains a judgment no less favourable than that which the defendant had offered to accept, then indemnity costs would follow. It is then that the second stage of the process arises, in that the court can "otherwise order". The court will "otherwise order" if it is persuaded that is appropriate, in the interests of justice, that the "default" position ought not apply: Manly Council v Bryne (No 2) [2004] NSWCA 227, per Campbell JA, at [10]; Evans v Braddock (No 2) [2015] NSWSC 518, at [52]. Determination 1. In this case, the Plaintiff submits that an "otherwise order" should be made. Importantly, however, he does not submit that the Defendant's costs calculated on the indemnity basis should not be paid, but rather that they should not be paid, entirely, by the Plaintiff. 2. In coming to a conclusion about costs, and importantly whether to make an "otherwise order" under UCPR rule 42.15A(2), I have the following features of the case in mind: 1. The Plaintiff, already a beneficiary, was making a claim adverse to the Defendant, who was the other beneficiary named in the Will of the deceased, and seeking additional provision out of the estate of the deceased than had been made for him. However, his conduct of the proceedings did not unreasonably increase the costs of the hearing. The case was listed for one day and was completed within that time. 2. There were no findings made that the Plaintiff was lacking credit in the giving of his evidence. 3. The Defendant was made a party because his interest under the Will of the deceased would be adversely affected if a family provision order in favour of the Plaintiff was made. However, he did not raise his financial and material circumstances in opposition to the Plaintiff's claim. Rather, his moral claim was one based, almost entirely, as a chosen object of testamentary bounty in a Will made by the deceased 6 months before her death. It was only in the last Will of the deceased, made 6 months or so prior to her death, that the Defendant had been named as a beneficiary. 4. The Plaintiff had a close and loving relationship with the deceased for most of his life. Indeed, he had lived with her for many years prior to her death. Whilst he had enjoyed rent free accommodation, he had provided significant assistance to the deceased. He did all that he could to assist the deceased. As the Court wrote in the principal judgment, at [38], he had "remained exceptionally close to [the deceased], and … had supported and nurtured her in her old age". 5. The Plaintiff, at the date of the hearing, was living on a pension and suffered from a number of medical conditions. I concluded that he had no earning capacity. 6. If an order were made that the Plaintiff pay the Defendant's costs in whole or in part, as well as his own costs, the assets of the Plaintiff will be significantly reduced. Whilst not becoming impecunious, a costs order would seriously diminish the amount available to spend on the accommodation that he will require upon the sale of the Rockdale property and also the amount available to provide for exigencies of life. A costs order, therefore, would clearly impose a substantial burden on the Plaintiff. 7. The burden on the Defendant of paying his own costs, or part of those costs, must be considered in the context of him not having disclosed his financial and material circumstances. In any event, even if the order sought by the Plaintiff is made, with the effect that he will bear one half of his own costs, he will still receive over $500,000 out of the deceased's estate. If this order were made, it will alleviate some of the financial burden on the Plaintiff. 8. The amount between the two alternative submissions is about $27,500. 9. The Plaintiff and the Defendant are twin brothers. The Court should endeavour to minimise post-litigation conflict in family disputes, bearing in mind the terms of the deceased's Will. 10. The Plaintiff's claim was not obviously untenable, or doomed to failure from the outset. Although the determination of the case produces a black and white result, that result often belies the fact that the case was borderline and could have gone either way: Re Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003. 11. This case was one where minds may have legitimately differed on the outcome. 12. That the Plaintiff's claim was dismissed ultimately depended upon an evaluative judgment. As was observed, in Grey v Harrison [1997] 2 VR 359, by Callaway JA, at 366–367: "There is no single provision of which it may be said that that is the provision that a wise and just testator would have made. There is instead a range of appropriate provisions, in much the same way as there is a range of awards for pain and suffering or a range of available sentences. Minds may legitimately differ as to the provision that should be made. Furthermore, it is not at all clear that reasons for an appropriate provision need be fully articulated. To borrow again from the analogy of sentencing, what is required is an instinctive synthesis that takes into account all the relevant factors and gives them due weight." 1. The September offer is not one upon which any weight ought to be placed. The offer was made relatively early in the proceedings when the evidence was not complete. In addition, other than in respect of costs, the Defendant sought an order which would result in the dismissal of the whole of the proceedings and require the Plaintiff to bear the burden of his own costs. In my view, it did not suggest much compromise. 2. The November offer, it appears, was made after the judicial settlement conference at which the parties were informed that neither should proceed upon the basis that his costs would be paid out of the estate. 3. The November offer was a generous offer, and, certainly, more favourable to the Plaintiff than the result of the proceedings. The offer was clearly intended to avoid the continuation of the litigation. That does suggest, however, that the Defendant considered that the Plaintiff's case was not without merit. 4. It should not be overlooked that one consequence in the litigation was the sale of the Rockdale property which was found to have been the Plaintiff's home for over 25 years. In view of this fact, and because the Defendant was not advancing his own financial and material circumstances, the failure to accept the offer was not, necessarily, unreasonable. However, it should have given the Plaintiff good reason to pause in deciding whether to proceed further. 5. By her last Will, the deceased's intention was, effectively, to treat her children equally, even though, as was found, the Plaintiff had provided considerably more assistance to her than had the Defendant. Consistent with that equal treatment, the submission of the Defendant that the Plaintiff should suffer the consequences of a full costs order where it is said that his conduct in continuing the proceedings should be balanced in an overall sense against the services that he had previously provided to the deceased. The fact that he brought a claim that had some merit, but which failed, should not displace the principle of equal treatment: Durham v Durham [2010] NSWSC 482, per Ball J, at [6]. The submission of the Plaintiff as to costs is more aligned with what the deceased intended by her Will. 1. The Court is increasingly alert to the dangers of encouraging litigation, and discouraging settlement of such claims, at an early stage, if costs are allowed out of the estate. Where possible, all minds should concentrate upon the need, regularly, to address the strength, or otherwise, of the case, the benefits and detriments of advancing particular arguments, and the wisdom of searching for alternative forms of resolution of the dispute, whether by compromise or even abandonment: See, albeit in another context, Pearson & Ors (The Joint Administrators of Lean Brothers International (Europe)) v Lehman Brothers Finance SA & Ors [2010] EWHC 3044 (Ch), per Briggs J, at [12]. Conclusion 1. The Plaintiff has not sought an order that his costs come out of the estate or that he should not shoulder part of the burden of the Defendant's costs. He acknowledges that he should bear half of the burden of the Defendant's costs. 2. In all of these circumstances of this case, weighing up all of the matters upon which submissions have been made, including the making of the two offers relied upon by the Defendant, together with the other features to which I have referred, as well as the legal principles to be applied, I am of the view that the overall justice of this case points against the application of the usual rules that the Plaintiff should pay the Defendant's costs upon the basis set out in UCPR rule 42.15A(2), or otherwise. 3. I have come to the view that the overall interests of justice will be adequately served by the Plaintiff not receiving any costs from the estate of the deceased and that the costs of the Defendant, calculated on the indemnity basis, should be paid out of the estate. In this way, as submitted by the Plaintiff, he is bearing, at least, a part of the Defendant's costs. 4. In relation to the costs of the application for costs, the Plaintiff's submissions as to the costs orders to be made have been accepted, whilst the Defendant's submissions have not resulted in the costs orders proposed by him. However, in achieving the result, the Plaintiff has effectively obtained the Court's exercise of discretion to make an "otherwise order". 5. The Court: 1. Makes no order as to costs of the Plaintiff, to the intent that he will bear his own costs of the proceedings, including the costs of the hearing of the application for costs; 2. Orders that the Defendant's costs, calculated on the indemnity basis of the proceedings, be paid out of the estate of the deceased, such costs not to include the costs of the hearing of the application for costs. 3. Orders, in relation to the Defendant's costs of the hearing of the application for costs, the Defendant is to bear his own costs. ********** 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: 10 May 2017