Supreme Court New South Wales Medium Neutral Citation: Tuitupou v Davies [2019] NSWSC 160 Hearing dates: 18 February 2019 Decision date: 27 February 2019 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Dismiss the plaintiffs' amended notice of motion filed 14 February 2019 with no order as to the costs of the hearing on 18 February 2019 (to the intent that each party bear his or her own costs of that hearing). 2. Order that, save as provided in order 1, the parties' costs since 13 December 2018 be paid in the same way as the costs orders made by consent on 18 February 2019 for the balance of the proceedings. Catchwords: COSTS — application by plaintiff for judgment in terms of an "in-principle" agreement ––s 73 of the Civil Procedure Act 2005 (NSW) application –– where matter has not been heard on the merits –– whether conduct of defendants so unreasonable as to warrant costs orders against them –– whether conduct of the defendants' solicitor a serious dereliction of duty, serious misconduct or gross negligence to warrant a personal costs order Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56-59, 73 and 99, Pt 6, Div 1 Succession Act 2006 (NSW), s 59 Trustee Act 1925 (NSW), s 59(4) Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.25, Pt 42 Cases Cited: Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Calderbank v Calderbank [1975] 3 All ER 333; (1975) 3 WLR 586 Dura (Australia) Construction Pty Ltd v Hue Boutique Living Pty Ltd (No 5); (2014) 48 VR 1; [2014] VSC 400 Edwards v Edwards [1958] P 235; [1958] 2 All ER 179 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Masters v Cameron [1854] HCA 72; (1954) 91 CLR 353 Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572 Myers v Elman [1940] AC 282; [1939] 4 All ER 484 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 One.Tel Ltd v Commisioner of Taxation (2000) 101 FCR 548 Re Bendeich (No 2) (1994) 53 FCR 422 Re Dunstan (No 2) [2000] ACTSC 33; (2000) 155 FLR 189 Re Jones; Christmas v Jones [1897] 2 Ch 190 Re Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 Re the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 Re Weall: Andrews v Weall [1889] 42 Ch D 674 Renton v Kelly [2018] NSWSC 1377 Tarabay v Bechara [2010] NSWSC 202 Warton v Yeo [2015] NSWCA 115; (2015) 15 ASTLR 462 Texts Cited: G E Dal Pont, Lexis Nexis, Solicitor Manual, revised ed (at 16 January 2019) Category: Costs Parties: Natalie Kim Tuitupou (First Plaintiff) Kyle Terrence Johnson (Second Plaintiff) Kathryn Elise Davies (First Defendant) Shannon Kate Lee (Second Defendant) Representation: Counsel: F Santisi (Plaintiffs) R Winfield (Defendants) Solicitors: Michael Vassili Barristers and Solicitors (Plaintiffs) Paul Gowran & Co (Defendants) File Number(s): 2018/00036130 Publication restriction: Nil Judgment 1. HER HONOUR: In this matter the substantive dispute between the parties (a claim by the plaintiffs, both children of the deceased (the late Eric Johnson), pursuant to s 59 of the Succession Act 2006 (NSW) for provision out of the deceased's estate) was resolved by the making of orders by consent on 18 February 2019, the date on which the matter was listed before me for hearing. At the same time, related proceedings involving a claim by another party for provision out of the deceased's estate (Parrot v Davies 2018/0098194) were also resolved by the making of consent orders. The defendants in both these and the related proceedings (the sister-in-law and niece of the deceased) are the executors of the deceased's estate. Only one of the defendants (the second defendant) is a beneficiary named in the deceased's Will. 2. The sole issue remaining between the parties to the proceedings now before me (the Tuitupou proceedings) is as to the costs of an application brought by the plaintiffs by notice of motion filed 14 February 2019, shortly before the hearing was due to commence, pursuant to s 73 of the Civil Procedure Act 2005 (NSW), for judgment in terms of an "in-principle" agreement reached between the parties in the form of an offer of settlement made on 23 August 2018 by the defendants, through their solicitor, and accepted on 14 September 2018 by the plaintiffs, by their solicitor (as to which see further below at [30]). 3. The consent orders made on 18 February 2019 in the Tuitupou proceedings contained a carve-out in respects of the costs of the plaintiffs' February 2019 notice of motion; the costs orders otherwise agreed being for the plaintiffs to bear their own costs and for the costs of the defendants to be borne on an indemnity basis out of the estate. 4. As to the disputed costs, the plaintiffs maintain that their costs of the proceedings from a specified date (in argument put as 13 December 2018 though in written submissions put from an earlier date), including the costs of the further amended notice of motion and the hearing of the costs dispute on 18 February 2019, should be borne by the defendants and that the defendants' costs from that date should not be paid out of the estate (see T 31.21). 5. The defendants resist that application. They maintain that they are entitled to be reimbursed out of the estate for the costs that they have incurred in these proceedings and that they should not be ordered to pay the plaintiffs' costs of the s 73 application. 6. Regrettably, this is yet another matter where further costs are incurred by parties in a dispute as to costs orders in respect of a proceeding that has otherwise settled and in respect of which there has been no hearing as to the merits. This is also a case in which the value of the estate is relatively small (estimated at around $450,000). 7. For the following reasons, I am of the view that the appropriate costs orders are for there to be no order as to costs for the hearing of the costs application on 18 February 2019 but otherwise the costs of the proceedings from 13 December 2018, including of the making of the s 73 application, should be borne in the same fashion as the costs for the balance of the proceedings (i.e, the plaintiffs should have their costs on the ordinary basis out of the estate and the defendants should be reimbursed out of the estate for their own costs on an indemnity basis). Chronology of events leading to the filing of the plaintiffs' application 1. The background to the underlying dispute does not here need to be explored in any detail. What is, however, relevant is the course of events leading up to the filing of the s 73 application and thereafter to the date the hearing was due to commence. It is by reference to those events that the plaintiffs contend for costs orders in their favour and that the defendants should not be entitled to the reimbursement out of the estate of their costs. 2. On 16 July 2018, at a directions hearing before the Registrar in Equity, this matter was listed, together with the related (Parrot) proceedings, for four days commencing on 18 February 2019. 3. By without prejudice letter dated 5 August 2018, the plaintiffs' solicitor conveyed to the defendants' solicitor an offer "in full and final settlement of our client's [sic] involvement in the matter". That offer of settlement contemplated, among other things, that each of the plaintiffs would receive, by way of provision out of the estate, a legacy calculated by reference either to a specified percentage (25%) of the estate or a specified amount, and that the summons be dismissed with the estate bearing the costs of the plaintiffs on a party/party basis. It also (though this is not relevant for present purposes) provided for the distribution of certain items of personal property of the deceased to the plaintiffs. With that letter, a formal Offer of Compromise was served, expressed to be pursuant to r 20.26 of the UCPR, encapsulating that settlement offer. The letter further stated that the offer was made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; (1975) 3 WLR 586 (Calderbank). 4. By without prejudice letter dated 23 August 2018, the defendants' solicitors conveyed the following counter-offer: Without prejudice, our clients are prepared to offer 22.5% each to your clients, each to pay their own costs, by way of final settlement together with the personal items. 1. By letter dated 14 September 2018, the plaintiffs' solicitor communicated his clients' instructions to accept that settlement offer and requested that the defendants' solicitor "attend to preparation of the appropriate consent orders and settlement checklist to finalise the matter". (As it transpired, there were a number of requests for the preparation of a settlement checklist of the kind required on settlement of cases in the Family Provision List but one was not provided by the defendants' solicitor prior to the date listed for hearing.) 2. In response to that letter, the defendants' solicitors, by letter dated 17 October 2018, forwarded Short Minutes of Order for signature and return "so that it [sic] may be filed". Those proposed orders contained (at [3]) an order that each party pay his or her own costs. They also incorrectly referred, in the proposed order [2], to the first plaintiff rather than the second plaintiff; an error pointed out by letter dated 8 November 2018 from the plaintiffs' solicitor. 3. By letter dated 12 November 2018, the defendants' solicitor forwarded "once again" the Short Minutes of Order, this time correcting order 2 to refer to the second plaintiff. There was no amendment to the proposed costs order at [3]. (This I refer to as the 12 November 2018 version of the Short Minutes of Order.) 4. By letter dated 15 November 2018, with no explanation for the amendment, amended Short Minutes of Order were forwarded by the defendants' solicitor, with the requirement that they be signed and returned as soon as possible. The amended version of the proposed orders added the words "with the Defendants [sic] costs to be paid from the Estate on an indemnity basis". (This I refer to as the 15 November 2018 version of the Short Minutes of Order.) 5. It appears that the above letter was not received by the plaintiffs' solicitor until after the 12 November 2018 version of the Short Minutes of Order (containing provision for each party to pay his or her own costs) had been signed by the plaintiffs' solicitor on behalf of his clients (see letter dated 15 November 2018 from the plaintiffs' solicitor, with which the signed 12 November 2018 Short Minutes of Order were returned to the defendants' solicitor). 6. That led to a flurry of correspondence from the defendants' solicitor (by letters dated 20 November 2018, 27 November 2018 and 6 December 2018) referring to the "amended, updated Short Minutes of Order" emailed on 15 November 2018 and advising that it was this document that was "required to be signed and dated by [the plaintiffs]". Those letters variously emphasised the urgency for the document to be signed and returned so that this part of the proceedings might settle; advised that this document was awaited so that the plaintiffs' participation in the matter could be concluded; and sought advice as to when the defendants' solicitor would receive the signed, updated Short Minutes of Order "so that both parties can resolve this matter before Christmas". (Interposing here, it can be inferred from this that the defendants' solicitor, at least, considered that acceptance of the 23 August 2018 offer and the return of the earlier (12 November 2018) signed Short Minutes of Order did not constitute a binding agreement to settle the proceedings on those terms; a position seemingly consistent with the plaintiffs' solicitor's understanding of the position, as evident by what subsequently transpired.) 7. By letter dated 13 December 2018, the plaintiffs' solicitor forwarded to the defendants' solicitor, by post and by email, "corrected draft short minutes of order" for the defendants' review and execution, foreshadowing an application for orders to be made in chambers to settle the matter. Those "corrected" orders in substance reflected the orders forwarded by the defendants' solicitor on 15 November 2018 and included the provision as to the defendants' costs that had then been sought by the defendants. The orders were signed by the plaintiffs' solicitor and dated 14 December 2018, from which I infer that the letter (though dated 13 December 2018) was not sent to the defendants' solicitor until 14 December 2018 (though nothing relevantly turns on this). 8. In oral submissions, Counsel for the defendants pointed out that it was not clear when the above letter (and signed Short Minutes) had been received by her instructing solicitors (see T 24.1). One might perhaps have inferred that the signed 15 November 2018 version of the Short Minutes of Order (which made provision for the defendants' costs to be paid on an indemnity basis out of the estate) had been received by 18 December 2018, four days after they were dated, and presumably posted in the ordinary course. However, there is room for doubt about this, which is significant because, by a without prejudice letter of 18 December 2018, the defendants' solicitor wrote to the plaintiffs' solicitor stating that "[p]lease note that the Short Minutes of Order signed by your clients and posted to us are not acceptable" (emboldening as per original). In the course of oral argument, Counsel for the defendants submitted that it should be inferred that the reference to unacceptable signed Short Minutes of Order in this letter was a reference to the earlier (12 November 2018) version of the orders that had been forwarded to the plaintiffs' solicitor on 12 November 2018 (and signed and returned by the plaintiffs' solicitor on 15 November 2018) not to the 15 November 2018 version of the Short Minutes of Order (that was signed on 14 December 2018 and referred by letter dated 13 December 2018). Certainly, the statement that signed Short Minutes in the amended form sent to the plaintiffs' solicitor on 15 November 2018 were unacceptable to the very parties who had asked for them, and would benefit by the amendment, would make no sense; but for, perhaps, the fact that the 18 December 2018 letter also raised a new dispute (see below at [20]). 9. The letter dated 18 December 2018 asserted that contracts had now been exchanged (for the deceased's Buff Point property) for a purchase price less than a previous offer of purchase and that the plaintiffs' "refusal to allow" that earlier offer to be accepted had resulted in a loss. The letter stated that "[w]e will hold you liable for this loss unless this matter can be resolved". Thus, it was at least open for the recipient of the 18 December 2018 letter (i.e., the plaintiffs' solicitor) to read this as a withdrawal by the defendants from the position reflected in the 15 November 2018 Short Minutes of Order (which is clearly how the plaintiffs' solicitor read that correspondence). 10. The plaintiffs' solicitor by letter dated 18 December 2018, referring to the correspondence between solicitors from 14 September 2018 onwards, responded, noting, among other things, that: "your client and our office agreed in principle on 17 September 2018" (a reference presumably meant to be to 17 October 2018); "[t]hat it is your conduct alone that is incurring unnecessary fees as to the estate"; and that "[y]ou have, since 17 September 2018 [sic], not provided a copy of orders in line with the agreement, and are, quite frankly, incurring costs as against the estate against your professional obligation". The letter also stated that "[s]hould you not provide consent to the orders as proposed, or provide a set of orders that are competent in reply, by close of business tomorrow, 19 December 2018, we confirm that our office shall seek orders under section 73 of the Civil Procedure Act 1973 [sic]". A copy of that letter appears to have been forwarded by email to the defendants' solicitor on 19 December 2018. (Pausing here, reference to an agreement "in principle" itself seems to accept that it was understood that there was no binding agreement constituted simply by acceptance of the offer in question.) 11. By letter dated 8 February 2019 (Exhibit 1), the defendants' solicitor served on the plaintiffs' solicitor an affidavit of the first defendant that had been filed that day in the proceedings. That affidavit (paragraphs [1]-[17] of which were provisionally read by me, subject to relevance, on the present application) deposed to the placement by the plaintiffs of a caveat on the title to the deceased's Buff Point property in June 2017, as well as a caveat on the grant of probate. It was asserted in that affidavit that the caveats prevented probate being granted until 26 March 2018; that the plaintiffs did not consent to a sale of the property to the neighbours, as a result of which the neighbours declined to proceed; that the property was put on the market again in October 2018; and that a contract in respect of the property was "rescinded"; as a result of which the first defendant asserted that as a result of the plaintiffs' actions the estate had suffered a loss. (Though there was no signed contract in evidence; there was a copy of a sales advice and a letter from licensed conveyancers in terms rescinding an agreement for sale of land dated 14 December 2018, exercising the rights under the statutory cooling off period.) 12. By email on 11 February 2019 (one week before the hearing was due to commence) the plaintiffs' solicitor sent an email to the defendants' solicitor stating, among other things: Please note that if you do not provide signed consent orders which were provided to your office on 13 December 2018, or an alternative set of orders capable of acceptance and reflective of the agreement in principal [sic] with our office by 11 AM on 12 February 2019, that we will file a motion in the proceeding and seek a listing of said motion before the court to deal with said motion instanter under s 73 of the Civil Procedure Act. 1. The email on 11 February 2019 also foreshadowed an application for a personal costs order against the defendants' solicitor. 2. The plaintiffs then proceeded to prepare their notice of motion dated 13 February 2019, seeking, among other relief, judgment on the so-called "in-principle" agreement to settle the proceedings on the terms of the 23 August 2018 settlement offer (those terms not including the amendment to order 3 in relation to the defendants' costs). The notice of motion also sought an order that: …the costs of the First and Second Plaintiffs of the proceedings be paid from 17 September 2018 to date, or in the alternative, from 15 November 2018 to date, by the Solicitor for the First and Second Defendants, on an indemnity basis, or in the alternative, on a party party basis. 1. That notice of motion was filed in Court on 14 February 2019, when the matter had been listed by me for directions following an application made by the plaintiffs' solicitor to my associate for an urgent listing of the matter (the hearing of the matter being due to commence before me the following week). I was informed that the urgency of the relisting of the matter was the concern of the plaintiffs at incurring costs in relation to the Court Book in circumstances where the plaintiffs maintained that an agreement to settle the proceedings had been reached. 2. Meanwhile, however, by email sent at 11.13am on 14 February 2019 (Exhibit 2) the defendants' solicitor had forwarded to the plaintiffs' solicitor a "formal Offer of Compromise" on the basis that each of the plaintiffs would receive 22.5% of the net proceeds of the estate. That offer of compromise included the following term: "3. No order as to costs to the intent that the First and Second Plaintiffs pay his or her own costs"; and was stated to be open for acceptance until 5.00pm on 15 February 2019. (Reliance was not ultimately placed on this offer as giving use to any special costs order under the costs regimes provided under the rules or the principles in Calderbank. Rather, it was relied upon as demonstrating the defendants' understanding at the time that no agreement had yet been reached for the settlement of the proceedings.) 3. By that stage, therefore, it must have been clear to the plaintiffs' solicitor that there was agreement at least on the terms of the 23 August 2018 offer (the Offer of Compromise being silent as to the defendants' costs as executors) but there was room for doubt as to the position in relation to the amendment contained in the 15 November 2018 version of the Short Minutes of Order. 4. On 14 February 2019, I made various directions with a view to the plaintiffs' notice of motion being heard at the outset of the hearing on 18 February 2019. 5. It is clear from the plaintiffs' initial written submissions in support of their motion that it was considered at that stage that there was a dispute as to whether there was a concluded agreement (the submissions canvassing authorities as to when there is a binding agreement including the well-known decisions in Masters v Cameron [1854] HCA 72; (1954) 91 CLR 353; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 (McLelland J) and on appeal GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631) and it was not conceded in oral submissions by Counsel for the defendants that there was a binding agreement constituted by acceptance of the offers pending the making of final consent orders. 6. However, by the time of the hearing before me on 18 February 2019, it was accepted by the defendants that an agreement had been reached for the settlement of the proceedings (other than as to the issue of costs after December 2018) and the argument was confined to the cost implications of the parties' conduct after the acceptance ("in principle") of the 23 August 2018 offer and particularly after the signing of the 15 November 2018 Version of the Short Minutes of Order. 7. I gave leave on 18 February 2019 for a further amended notice of motion to be filed in Court. In terms, this sought an order as to the settlement that included the defendants' costs to be paid from the estate on an indemnity basis (though in oral argument it transpired that the plaintiffs did not seek judgment in those terms in respect of costs after 13 December 2018). The plaintiffs then sought an order (misconceived as a matter of principle in my view) to "vary" the agreement they asserted had been reached such that: 3. …the costs of the First and Second Plaintiffs of the proceedings be paid from 17 September 2018 to date, or in the alternative, from 13 December 2018 to date, by the Solicitor for the First and Second Defendants, or in the alternative, from the distribution from the Estate to the First and Second Defendants, on an indemnity basis, or in the alternative, on a party party basis including any and all costs thrown away from preparation and instructing counsel for the hearing starting Monday 18 February 2019 and the motion. 4. That the Defendants['] costs of the litigation are to be paid from their own distribution and not the estate as from 17 September 2018 or in the alternative from 13 December 2018 to date. 1. It was against that background that I heard the costs application by the plaintiffs. Plaintiffs' submissions as to costs 1. In essence, the plaintiffs argue that they were justified in bringing the s 73 application when they did and that they "acted reasonably in withholding to avoid such costs" (whatever that may mean). It is submitted in the alternative that they were justified in continuing to prepare for a defended hearing. 2. The plaintiffs place weight on the communication by the defendants' solicitor of 18 December 2018 (see [18]-[19 above), which the plaintiffs contend was a communication of an intention not to be bound by "any of the deals struck" since 17 October 2018, including that of 13 December 2018. It is noted that the defendants had not engaged in any communication with the plaintiffs to the effect that the 18 December 2018 communication had been withdrawn until 14 February 2019. (Of course, that begs the question of the proper construction of that communication.) 3. Insofar as the defendants had submitted in their written submissions an intention to honour the deal struck on 13 December 2018 but that there was a need to settle with a third party (i.e., the Parrot proceedings) first, and that the plaintiffs would never have agreed to settle on terms that took into account the outcome of the third party proceedings, the plaintiffs argue that there is no evidence of this and that the submission should be rejected. Further, it is submitted by the plaintiffs that the terms agreed "by operation of law were always subject to how the third party proceedings would impact on the net estate, [and] as such the [defendants'] submission is not logical nor does it accord with law" (see submissions in reply at [8]-[10]). 4. It is argued by the plaintiffs that the reason advanced by the defendants' solicitors in the 18 December 2018 correspondence "clearly demonstrates an inference that it is the defendants that had a change of heart and wanted to claw the offer that had already been accepted not once but several times for whatever reason motivated them" (reply submissions at [11]). 5. Thus, it is submitted by the plaintiffs that the need to incur unnecessary preparation costs arose "purely by reason of the defendants['] conduct" and that this was conduct that is "disentitling or by reason of the incompetence of the lawyer"; there referring to the conduct in seeking to withdraw from a concluded deal and the conduct in failing to communicate and state the position (if in fact there was the third party outcome which was a concern as now claimed) (see reply submissions at [13]-[14]). 6. The plaintiffs referred to authorities standing for the proposition that a trustee can fail to be indemnified if his or her conduct is unreasonable, dishonest or otherwise disentitling (see at [19] of the reply submissions) and can be ordered to pay personally. 7. It is submitted that, the defendants: knew that a concluded agreement had been reached; were on notice that a s 73 application would be made; yet remained silent and in fact advanced a clear intention not to be bound thereby, before agreeing on the day of the application on 14 February 2019 that a concluded agreement had been reached; and then advanced on 14 February 2019 "an illogical and different reason why it did not engage and continued to remain silent" (see reply submissions at [20]). It is submitted that the defendants' silence was conduct that "was at the very least unreasonable and aimed at advancing the interest of competing beneficiaries and not the estate" and that therefore the trustees were acting not in the interest of the fund but otherwise in their own interest (or in the interest of a competing set of beneficiaries of which one of the defendants was a member). Reliance was placed on what was said in Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572 (Miller v Cameron) in that regard. 8. Pausing here, as adverted to earlier, the first defendant is not a beneficiary named in the will. Hence, arguments suggesting that she was seeking to advance her own interests cannot be sustained nor could the relief sought to the effect that costs or a proportion of costs be paid out of her distribution out of the estate have any meaningful operation. The first defendant's co-executor is her daughter, who is named as a beneficiary in the will. However, there is no evidence in my opinion to support a contention that the executors were seeking to advance the interests of a competing set of beneficiaries at the expense of the estate, whatever be the rights or wrongs of the delay in confirming the executors' position in that regard. Defendants' submissions 1. The defendants in essence argue that the correspondence on 18 December 2018 is unclear (when it states that the short minutes of order signed by the plaintiffs were not acceptable) as to whether this was a reference to the first (12 November 2018) set of short minutes or the (15 November 2018) amended set of short minutes (though it was accepted that this was not something sought to be clarified until the week before the hearing – see T 22.40). It is also submitted that the plaintiffs' solicitor's correspondence of 18 December 2018 and 11 February 2019 was unclear insofar as those letters contemplated the possibility of an alternative set of orders "that are competent in reply" or "an alternative set of orders capable of acceptance and reflective of the agreement in principal [sic] with our office" (see T 24.43). 2. It is submitted by the defendants that the offer of compromise served at 11.13am on 14 February 2019 (by which time, I interpose to note, it seems likely that the cost of preparing the notice of motion and affidavit had already been incurred) indicated acceptance in principle of the agreement (Exhibit 2) and that there was an agreement between the parties at that time (T 25.21; T 26.29). It is then put that the implication from service of the offer of compromise was that the defendants "were of the view there was still an argument about the actual terms of settlement" (T 26.37) notwithstanding the 11 February 2019 correspondence. 3. The defendants also argue that no binding agreement could be made until consent orders were actually made (see T 27.10). (In reply, the plaintiffs maintain that the correspondence makes clear that there was an intention immediately to be bound by the settlement terms (see T 30.40) and dispute that there was any ambiguity in the plaintiffs' correspondence.) 4. As to the submission that the defendants not receive their costs as executors, reliance was placed on Re the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698; Miller v Cameron at 578; and Re Weall: Andrews v Weall [1889] 42 Ch D 674 at 677. Counsel for the defendants emphasised the thankless nature of the executors' task and that the first defendant was a "total volunteer in this estate", (pointing to the affidavit evidence – admitted provisionally subject to relevance, as to the tasks the first defendant had performed in cleaning the deceased's house and to the lack of help from the plaintiffs, including as to funeral expenses) (T 28.32). (Ultimately, I do not see that evidence as being of any relevance or assistance on the present application.) Determination 1. There are in essence three relevant issues thrown up by the present costs application: first, as to whether the defendants should pay the plaintiffs' costs of the s 73 application (or of the proceedings from a date around 13 December 2018); second, as to whether the defendants should be indemnified out of the estate for their costs of the proceedings from that time; and, third, whether any costs order should be made personally against the defendants' solicitors. (In that regard, no real attention was devoted in the oral or written submissions to this third issue – beyond the assertion of incompetence on the part of the defendants' solicitor; and there was no separate representation on behalf of the defendants' solicitor to argue that issue.) 2. As to the first of those issues, the applicable principles on the exercise of the costs discretion in cases where matters have been resolved without a hearing on the merits were not in dispute (see Re Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 (Lai Qin)). 3. While r 42.1 of the Uniform Civil Procedure Rules (UCPR) provides that the general rule is for costs to follow the event, in circumstances where a matter has been resolved without a hearing as to the merits (as was the case in Lai Qin) it is generally the position that the Court will not embark on a consideration as to the merits of the matter in dispute and that costs will only be awarded in favour of one party where it can be concluded that the other party has acted "so unreasonably" that the first should obtain the costs of the action; the use of the word "so" indicating a level of unreasonableness which is established by the circumstances in which the costs were incurred (see the application of those principles, for example, in Renton v Kelly [2018] NSWSC 1377; see also Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302, at [5]); One.Tel Ltd v Commisioner of Taxation (2000) 101 FCR 548, at 552-3; and Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84). 4. Also relevant to note at the outset is the overriding mandate in respect of the conduct of litigation in this Court (see ss 56-59 of the Civil Procedure Act ) that being the just, quick and cheap resolution of the real issues in dispute; and the professional obligations of solicitors as officers of the Court in relation thereto. 5. In the present case, what is abundantly clear is that there was a misunderstanding between the parties (or, more precisely, their solicitors) as to whether or not there was an agreement between them (in principle or otherwise) in terms of the 15 November 2018 version of the Short Minutes of Order (as signed on behalf of the plaintiffs) and as to whether the 18 December 2018 correspondence from the defendants' solicitor evidenced a withdrawal by the defendants from that position; and whether the orders sought in the plaintiffs' notice of motion (as first cast) represented a reversion by the plaintiffs to the regime agreed by reference to the 12 November 2018 version of the Short Minutes of Order. 6. The genesis of that confusion was obviously the fact that the 13 December 2018 letter forwarding the signed 15 November 2018 version of the Short Minutes of Order must have crossed in the mail, so to speak, with the defendants' solicitors 18 December 2018 letter. That confusion was no doubt exacerbated by the complaints raised in the 18 December 2018 correspondence as to loss caused to the estate by the plaintiffs' conduct in relation to the proposed sale (the rights and wrongs of which cannot here be determined). 7. By 11 February 2019, however, it should have been clear to the defendants' solicitor that the plaintiffs had accepted the 15 November 2018 version of the Short Minutes of Order and were insisting upon confirmation of consent to those orders (or orders reflecting the terms of the agreement "in principle"), failing which an application under s 73 of the Civil Procedure Act would be brought. There can have been no sensible room for dispute at that stage as to which agreement in principle was there being referred to – since the plaintiffs were affirming their agreement to the Short Minutes of Order signed and returned under cover of the letter dated 13 December 2018. 8. Where the position then became complicated was that the notice of motion as initially served referred back to the terms of the 23 August 2018 "agreement", which was not the version reflected in the 15 November 2018 version of the signed Short Minutes of Order. 9. What that leads me to conclude is that, although the plaintiffs have clearly incurred unnecessary expense in the bringing of the s 73 application (which ultimately became otiose since there was agreement as to the settlement of the proceedings), this was a product of misunderstanding on both sides and, while it is unfortunate that this occurred (and while I would have expected reasonably competent solicitors to have been able to sort this out without the cost or delay that was here occasioned) the conduct of the defendants cannot be said to be so unreasonable in the period from 11 February 2019 to the commencement of the hearing (or for that matter from 18 December 2018 if that be the relevant date) to warrant costs orders against them. 10. That in effect disposes also of the second issue. 11. The legal principles relating to payment of costs of trustee out of a deceased estate were considered in Warton v Yeo [2015] NSWCA 115; (2015) 15 ASTLR 462. There, the executors were acting in their capacity as trustees but there is no relevant difference for present purposes. In that case, Basten JA considered the various sources of law to be applied in relation to the trustees' costs of litigation: the general law principle that a trustee is entitled to an indemnity (or, where costs have been paid, reimbursement) from the estate for expenses incurred in the execution of the Will and in the administration of any trusts (which has statutory form in the Trustee Act 1925 (NSW), s 59(4)); the discretionary power with respect to the costs of litigation under UCPR r 42.25 (his Honour noting that r 42.25 operates by way of an exception to r 42.1, pursuant to which costs follow the event subject to other provisions in Pt 42); and the provisions in Pt 6, Div 1 of the Civil Procedure Act identifying "guiding principles" with respect to civil proceedings generally. 12. In that case it was concluded that, given the overriding purpose of the proceeding before the Court (i.e., for the construction of the deceased's Will), the trustee had acted unreasonably, for the purposes of r 42.25(2), in adopting an adversarial stance and incurring costs in the appeal proceedings; and that the proper order as to the trustee's costs must take into account the fact that he was the cause of the substantial costs being incurred. The trustee's application for an indemnity from the estate with respect to his costs of the appeal proceedings was rejected. 13. Although in the present case there was a submission that the defendants were seeking to advance the interest of competing beneficiaries and in breach of duties to the estate, as already stated I cannot make such a finding on the evidence before me. Further, I do not accept that the costs were incurred by the executors in the furtherance of a personal interest or that there was impropriety of the kind to which reference was made in Miller v Cameron) (see also Re Jones; Christmas v Jones [1897] 2 Ch 190 at 197). I am not persuaded that there was unreasonableness on the part of the executors in acting as they did. 14. Accordingly, I consider that the defendants' expenses should be borne on an indemnity basis out of the estate. 15. As to the third issue, the claim for costs to be borne personally by the defendants' solicitors, as already noted (at [45] above) this was not the subject of any detailed submissions. 16. There is both inherent and statutory jurisdiction to make such an order if there is evidence that there has been a serious dereliction of duty, serious misconduct or gross negligence on the part of the legal practitioner (see Myers v Elman [1939] 4 All ER 484; [1940] AC 282 at 209, 304, 319; and G E Dal Pont, Lexis Nexis, Solicitor Manual, revised ed (at 16 January 2019) at [25,000.10]) – the former in the exercise of the Court's supervisory jurisdiction over its officers; the latter pursuant to s 99(1) of the Civil Procedure Act. 17. The statutory jurisdiction is enlivened if it appears to the Court that costs have been incurred: by the serious neglect, serious incompetence or serious misconduct of a legal practitioner; or improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. Section 99(2)(c) provides that, after giving the legal practitioner a reasonable opportunity to be heard, the Court may by order direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party. 18. For a costs order against a legal practitioner to be made, a causal connection must be established between the client's loss (whether the opposing client or the legal practitioner's own client) and the legal practitioner's serious dereliction of duty, serious misconduct or gross negligence. Mere negligence (or incompetence) is not sufficient to permit (or warrant) the making of such an order (see for example what was said by Drummond J in Re Bendeich (No 2) (1994) 53 FCR 422 (at 427) as cited in the Solicitor Manual at [25,005.10]): Lawyers should know that, so long as they are not guilty of either professional misconduct or gross, as opposed to mere, negligence in the way they conduct their client's case, they will not be exposed to any personal liability to pay either the costs of their own client or those of the opposing litigant. 1. As with costs orders generally, the purpose of such a costs order is not to punish the relevant legal practitioner nor to prove that he or she is guilty of professional misconduct; rather, such orders are primarily compensatory in nature. 2. As discussed in the Solicitor Manual at [25,025.5], the jurisdiction should be: exercised sparingly (Edwards v Edwards [1958] P 235; [1958] 2 All ER 179 at 248 per Sachs J); "with considerable caution" (Dura (Australia) Construction Pty Ltd v Hue Boutique Living Pty Ltd (No 5) (2014) 48 VR 1; [2014] VSC 400 at [97] per Dixon J); "with care and discretion and only in clear cases" (Re Dunstan (No 2) (2000) [2000] ACTSC 33; 155 FLR 189 at [18] per Miles CJ); and "not with the benefit of hindsight" (Tarabay v Bechara [2010] NSWSC 202 at [37] per Windeyer AJ). 3. In the present case, I am not satisfied that the legal practitioner acting for the defendants has been given sufficient notice of the complaint to which the proposed costs order relates and a reasonable opportunity to be heard. Although the claim for relief is stated in the amended notice of motion filed 14 July 2018, particulars of the complaint have largely emerged only in submissions. As recognised in Myers v Elman, the practitioner should have full and sufficient notice both of the complaint made against him or her and full and sufficient opportunity of answering it. I am concerned that the solicitors have not been separately heard on that issue (and may have sought separate representation to argue the question had they been properly advised of the application – which would only have added further to the costs of this litigation). 4. In any event, I am not persuaded on the material before me that there has been such serious dereliction of duty, serious misconduct or gross negligence on the part of the legal practitioner in question to warrant a personal costs order being made of the kind that is sought. True it is that it is unsatisfactory that there was no substantive response by the defendants' solicitors to the attempts made by the plaintiffs' solicitors leading up to the listed date for commencement of the hearing to obtain confirmation from the defendants as to their adherence to the settlement that had been struck (which no doubt meant that costs were incurred, which in hindsight were unnecessarily incurred, in the preparation for the hearing in the period leading up to 14 February 2019). However, there seems to have been confusion on both sides and it is not apparent to me that this readily be characterised as "disentitling conduct" as submitted for the plaintiffs. Therefore, I am not persuaded that it is appropriate to make any personal costs order against the solicitors and certainly would not have done so without separate submissions on behalf of the solicitors. 5. Finally, as to the costs of the hearing on 18 February 2019 of the costs application, in circumstances where the cause of the application arose from the confusion (at least up to 14 February 2019) as to whether the parties were agreed as to the terms on which the proceedings had been settled in principle and the matter was listed for hearing to commence on 18 February 2019 in any event, and having regard to the small amount of the estate, I will make no orders as to the hearing of the costs application on 18 February 2019. 6. For the above reasons, I make the following orders: 1. Dismiss the plaintiffs' amended notice of motion filed 14 February 2019 with no order as to the costs of the hearing on 18 February 2019 (to the intent that each party bear his or her own costs of that hearing). 2. Order that, save as provided in order 1, the parties' costs since 13 December 2018 be paid in the same way as the costs orders made by consent on 18 February 2019 for the balance of the proceedings. ********** 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: 27 February 2019