Maynard v Maynard (No 2) [2019] NSWSC 104

Supreme Court New South Wales

Medium Neutral Citation: Maynard v Maynard (No 2) [2019] NSWSC 104 Hearing dates: Decided on the papers Date of orders: 15 February 2019 Decision date: 15 February 2019 Jurisdiction: Equity Before: Robb J Decision: Order the plaintiff to pay the defendant's costs on the ordinary basis. Catchwords: COSTS — Party/Party — Exceptions to general rule that costs follow the event — Offers of compromise/Calderbank offers — Whether the offer of compromise involved a real element of compromise Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), Pt 20 Div 4, Pt 42 Div 3 Cases Cited: Beech v Squire (No 2) [2018] NSWSC 605 Harkness v Harkness (No 2) [2012] NSWSC 35 Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 Maynard v Maynard [2018] NSWSC 1961 Category: Costs Parties: Marcelle Zeneetha Maynard (Plaintiff) Josephine Maynard (Defendant) Representation: Counsel: A Moutasallem (Plaintiff) L Ellison SC (Defendant)

Solicitors: T & S Law Firm (Plaintiff) Marsdens Law Group (Defendant) File Number(s): 2017/192298

Judgment 1. In the principal judgment in these proceedings, delivered on 14 December 2018, I dismissed the plaintiff's claim for family provision relief against the defendant, who is the widow of the deceased and the executor of his estate: Maynard v Maynard [2018] NSWSC 1961. 2. As was the case in the principal judgment, to avoid confusion I will refer to persons by their given names. 3. I held at [210] that the defendant, Josephine, was entitled to an order that the plaintiff, Marcelle, pay her costs on the ordinary basis. 4. As requested by Josephine, I gave her the opportunity to make an application that Marcelle pay her costs on a different basis, and Josephine has applied for a special order for costs on the ground that Marcelle did not accept an offer of compromise dated 19 December 2017. 5. Josephine seeks the following order in lieu of the proposed order for costs set out in the primary judgment. "(3) The Plaintiff pay the costs of the Defendant on the ordinary basis up to and including 20 December 2017 and on the indemnity basis thereafter." 1. The offer of compromise, which was dated 19 December 2017, stated: "The Defendant offers to compromise the whole of the proceedings upon the following terms: 1. The Summons filed 8 February 2017 be dismissed. 2. No order as to costs of the Plaintiff to the extent that the Plaintiff bears her own costs and; 3. The Defendant's costs on an indemnity basis to be paid out of the Estate of the Deceased. NOTE: (a) This offer is pursuant to UCPR Part 20 Division 4. (b) This offer is open for acceptance until 12:00pm on 9 February 2018 at which time it will expire. (c) In the event this offer does not comply with the Rules as to Offer of Compromise, the same offer is made on a "Without Prejudice Save as to Costs" basis in accordance with the principles of Calderbank v Calderbank and will be relied on in any application by the Defendant for a Special Costs Order against the Plaintiff." 1. Marcelle accepted that the offer was an offer of compromise for the purposes of Uniform Civil Procedure Rules 2005 (NSW) (UCPR) Part 20 Division 4, and that Marcelle did not accept the offer. 2. She also accepted that UCPR rule 42.15A applies, as she did not accept Josephine's offer, and the effect of the dismissal of her claim meant that the judgment was no less favourable to Josephine than if the offer of compromise had been accepted. The rule provides: 42.15A Where offer not accepted and judgment no less favourable to defendant (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. The effect of the application of this rule is that Josephine will be entitled to the special costs order that she seeks unless the Court orders otherwise. 2. Marcelle submitted, and Josephine accepted, that it would provide a proper basis for the Court to order otherwise if Marcelle establishes that the offer of compromise did not involve a real element of compromise. 3. As did Kunc J in the recent decision of Beech v Squire (No 2) [2018] NSWSC 605, I respectfully accept that the relevant principles are as stated in Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391, as extracted by his Honour at [15] (equivalent principles apply to proceedings at first instance where the offer of compromise is made under UCPR rule 20.26): "[15] As to the relevant legal principles, I respectfully adopt what was said by McColl JA (with whom Gleeson JJA and Sackville AJA agreed) in Leach v Nominal (QBE Insurance (Australia) Ltd) (No 2) (2014) NSWCA 391 ("Leach") (emphases added): "8. Costs are in the discretion of the Court which has full power to determine by whom, to whom and to what extent costs are to be paid (whether on the ordinary basis or on an indemnity basis), subject to, inter alia, rules of court: s 98(1), Civil Procedure Act 2005 (NSW). 9. Subject to the provisions of UCPR Part 42, if the court makes any order as to costs, it is to order that the costs 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 42.1. Unless the court orders otherwise or the rules otherwise provide, costs payable by court order or under the rules are to be assessed on the ordinary basis: UCPR 42.2. The "ordinary basis" means the basis of assessing costs in s 364(1) and (2) of the Legal Profession Act 2004 (NSW): s 3(1) Civil Procedure Act. 10. UCPR Part 51, Division 8, Subdivision 1 deals with "Offers of compromise" in the Court of Appeal. In Subdivision 1, "'opposite party' means a prospective respondent, respondent or cross-respondent (as the case may be)": UCPR 51.46[.] [At [11] and [12], her Honour discussed certain modifications to the rules that apply to proceedings in the Court of Appeal that are not here relevant.] … 13. UCPR 42.15A, which appears in Division 3 of Part 42, must be taken into account for the purposes of UCPR 42.1 and UCPR 51.48… [Her Honour then set out rule 42.15A.] … 40. The consequence is that a prima facie entitlement arose in favour of the respondent to have costs awarded in accordance with UCPR 42.15A: New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 (at 102) per Gleeson CJ (Clarke and Cripps JJA agreeing); Leichhardt Municipal Council v Green [2004] NSWCA 341 (at [19]) per Santow JA (Stein JA agreeing). This is because, from "the time of non-acceptance 'notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise'": Morgan v Johnson [1998] NSWSC 367; (1998) 44 NSWLR 578 (at 581-582) per Mason P (Sheller JA agreeing). 41. However, in order for an offer of compromise made under the UCPR to attract an indemnity costs order, it must involve a "genuine offer of compromise" and not merely be made so as to trigger the costs consequences under the rules: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 (at [16]) (Spigelman CJ; Beazley and McColl JJA). 42. Whether there was a real element of compromise is determined objectively according to the circumstances of the particular case at the time the Offer was made rather than with the benefit of hindsight: Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19 (at [17]); Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 ("Miwa") (at [11]). It is also determined by reference to the rule pursuant to which the offer was made: Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 (at [22]) per Basten JA (Campbell JA agreeing). … 45. Accordingly, the question is whether, as the appellant submits, the Court should "order otherwise": UCPR 42.15A(2). The onus is on the appellant to demonstrate why the Court should depart from the consequence of his rejection of the Offer: Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 (at [35]) per McColl JA (Mason P and McClellan CJ at CL agreeing); Miwa (at [16]). … 50. A walk-away offer is one "where the offeror expresses its willingness to settle on the ground that each party bears its own costs" (G E Dal Pont, Law of Costs (3rd ed 2013, LexisNexis at [13.9]). As will be apparent, both UCPR 20.26(3)(a)(i), and former rule UCPR 20.26(2), enable a walk-away offer to be made in an offer of compromise: Schepis v Commonwealth of Australia [2013] NSWCA 354 (at [33]) per Leeming JA (Beazley P agreeing); see also Taheri v Vitek (No 2) [2014] NSWCA 344 (at [8]) where the court (Bathurst CJ, Emmett and Leeming JJA) observed that "it has long been open for a defendant (or respondent to appeal) to engage the rules by an offer that there be a verdict in its favour with no order as to costs." 51. A walk-away offer can successfully trigger the indemnity costs mechanisms under the rules, however "the claim or defence would have to approach something of the character of being frivolous or vexatious for that to be the case": Regency Media Pty Ltd v AAV Australia Pty Ltd (at [31]) per Spigelman CJ; Beazley and McColl JJA." 1. The question whether the offer of compromise in this case contained a sufficient element of compromise must be answered as at the date of the offer, 19 December 2017, without the benefit of knowledge that this Court has subsequently dismissed Marcelle's claim or the basis for that dismissal. 2. The Court was informed that by the date of the offer of compromise, Marcelle was aware of the size of the estate and the circumstances relevant to the two competing claimants, being Josephine and Somaya. All of the primary affidavits had been served. There was a Court appointed mediation on 1 September 2017, and also a judicial settlement conference that was attended by the parties on 11 December 2017. The Court does not know what happened at the mediation or the settlement conference, save that they did not lead to a settlement. It should be accepted, however, that at the date the offer of compromise was served Marcelle and her legal representatives had a full basis for assessing the relative strength of the parties' cases. 3. However, the offer of compromise was a 'walk away offer' of sorts. It required Marcelle to capitulate on the basis that she would have to pay her own costs but not the costs of Josephine. However, as Josephine would be indemnified for her costs out of the deceased's estate, as an equal one-third beneficiary in the estate, Marcelle would effectively bear one third of Josephine's costs. That costs arrangement was proper and conventional for an executor in Josephine's position, but it shows how the offer of compromise was in practical terms worse for Marcelle than the standard 'walk away offer' where the plaintiff's claim is dismissed and each party bears their own costs. 4. In my view, in the present case, the offer contained in the offer of compromise did not contain an adequate element of compromise, so that it will be proper for the Court to make a costs order otherwise than in accordance with UCPR rule 42.15A. 5. I do not consider Marcelle's case to have approached something of the character of being frivolous or vexatious or, speaking more generally, that its prospects of success as at 19 December 2017 were so limited as to make it of real advantage to Marcelle to have been given the opportunity to walk away on the terms offered. 6. To the extent that an applicant's needs are of relevance to their entitlement to family provision relief, Marcelle's circumstances were relatively desperate. In a purely objective sense, the deceased did not make adequate provision for Marcelle (although relative to the limited size of the estate, the Court ultimately found that the provision was not inadequate). By the time of the offer of compromise, Marcelle would already have incurred significant legal costs. The present was not a case where the Court has found against Marcelle on a basis that should have been recognised by Marcelle and her legal representative as demonstrating that her case was very likely to fail. Marcelle did fail, but that was because submissions that were reasonably available to her were not accepted. I refer in particular to Marcelle's reliance on the fact that Josephine's financial circumstances were much worse than they needed to be because Josephine had expended relatively large sums for the benefit of her family in circumstances that would at least support a reasonable argument that she had not acted prudently. There was also evidence led by both parties for and against the proposition that the other had acted badly towards the deceased. As it happened, I found at [115] that the Court did not have a sound basis for deciding these issues on the evidence. I observed that the truth may lie somewhere in the middle between the events as recounted by each of the parties. The present was a case in which, deprived of hindsight, Marcelle and her legal advisers had a proper basis for hoping as at the date of the offer of compromise that the Court would ultimately find in Marcelle's favour. Marcelle's needs were such that were it not for the limited nature of the deceased's estate, she may well have succeeded in obtaining some extra provision. 7. In Harkness v Harkness (No 2) [2012] NSWSC 35, Hallen AsJ (as his Honour then was) stated the principles that he considered ought to be applied in determining whether an applicant for family provision relief whose claim is dismissed should be ordered to pay the defendant's costs, as follows: "[17] 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. [18] 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 Public Trustee (NSWSC, Young J, 21 April 1998, unreported)." 1. Albeit not directly, these considerations have some bearing on the question of whether the Court should regard the offer of compromise as having a sufficient element of compromise. In the present case, notwithstanding Marcelle's very limited financial circumstances, I decided that she should at least pay Josephine's costs on the ordinary basis because all of the beneficiaries were financially needy, the estate was not large, the deceased had been generous to Marcelle by dividing his estate equally between his wife and his two daughters, and importantly that he had made his will very shortly before his death in circumstances where he had grounds for fearing that he would not live much longer. In these circumstances, Marcelle and her legal advisers should have realised that, notwithstanding her need, there was not a real basis for depriving the other beneficiaries. 2. However, when it comes to consider whether Marcelle should have abandoned her case on 19 December 2017, it must be borne in mind, as the now Family Provision List Judge observed, that "Proceedings for a family provision order involve elements of judgment and discretion beyond those at work in most inter partes litigation". There is some truth in the proposition that the outcome of such applications is likely in many cases to be less predictable than in many other civil proceedings. Furthermore, there are cases where the Court does not apply the rule that costs follow the event. In Harkness v Harkness (No 2) his Honour made an order that the defendant's costs be paid out of the estate on the indemnity basis, but he did not make any other costs order. 3. At least in the circumstances of the present case, I am satisfied that Marcelle had sufficiently good prospects of achieving some additional family provision by pursuing her claim, to require that for any offer to have involved a real element of compromise, some amount of money would need to have been provided. It is not necessary to decide how much that offer would have had to have been, but it may be that an amount as low as $25,000-$30,000 would have been adequate. It is sufficient to say that, given Marcelle's circumstances and her prospects, the 'walk away offer' that was made did not provide any real compromise. 4. Accordingly, the costs order that I will make is: Order the plaintiff to pay the defendant's costs on the ordinary basis.