Alabakis v Alabakis (Costs)
[2012] VSC 496
•25 October 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. SCI 2010 3902
IN THE MATTER OF Part IV of the Administration and Probate Act1958
and
IN THE MATTER OF the Will and Estate of Theodoros ALABAKIS (Deceased)
B E T W E E N
| PAULINE ALABAKIS | Plaintiff |
| v | |
| THOMAS ALABAKIS (who is sued in his capacity as the Proving Executor and Trustee of the Will and Estate of the abovenamed Deceased) and ALEXANDER ALABAKIS | First Defendant Second Defendant |
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JUDGE: | MACAULAY J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 October 2012 | |
DATE OF JUDGMENT: | 25 October 2012 | |
CASE MAY BE CITED AS: | Alabakis v Alabakis & Anor (Costs) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 496 | |
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COSTS – Proceeding under Part IV of Administration and Probate Act 1958 – Judgment for plaintiff – Whether costs of second defendant were to be paid by plaintiff where issue in respect of second defendant abandoned by plaintiff during trial – Whether Calderbank offer made – Costs of second defendant apportioned between plaintiff and estate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Pitt | William Murray Solicitors |
| For the First Defendant | Mr R Miller | GSM Lawyers |
| For the Second Defendant | Mr M Goldblatt | Kempsons Hall & Thompson Lawyers |
HIS HONOUR:
Introduction
On 21 September 2012, I published my reasons for judgment[1] in which I held that the plaintiff, Pauline Alabakis, was entitled to further provision out of the estate of Theodoros Alabakis in the sum of $475,000. I invited the parties to agree the consequential orders. Agreement has been substantial but there remain some areas of dispute.
[1]Alabakis v Alabakis & Anor [2012] VSC 437 (Reasons)
The most significant area of dispute concerns the costs and expenses of Alexander Alabakis of the proceeding. Pauline’s claim was defended not only by the executor of the estate, Thomas Alabakis, but also by Alexander: the brother of Thomas and stepbrother of Pauline. Since being joined to the proceeding, by order of Associate Justice Zammit made on 18 May 2011, Alexander has been represented separately by solicitors and counsel. At trial he was represented by Mr Goldblatt of counsel; Mr Millar appeared for the executor, Thomas.
Both Alexander and Thomas contend that Pauline should pay Alexander’s costs of the proceeding (as between solicitor and client) whereas Pauline contends that Alexander’s costs should be taxed and paid out of the estate. If Pauline is not to pay Alexander’s costs, there is no dispute that his costs should otherwise be paid out of the estate.
The other area of disagreement concerns whether I should make orders certifying for the appearance of two counsel for the plaintiff and that the costs of the plaintiff include the costs of transcript.
Section 97(6) of the Administration and Probate Act 1958 specifically addresses the Court’s power to make a costs order in relation to an application for further provision out of an estate brought under s 91. The subsection provides:
(6)Subject to subsection (7) the Court may make any order as to the costs of an application under s 91 that is, in the Court’s opinion, just.
(7)If the Court is satisfied that an application for an order under s 91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.
Because Pauline has succeeded in this case, subsection (7) has no application. Whether or not s 97(6) is the sole source of my power to order costs, or it supplements the discretion conferred by s 24 of the Supreme Court Act 1986, need not be addressed. Both confer a wide discretion upon the court.
Should Pauline pay Alexander’s costs?
Alexander contended there were two main reasons why Pauline should have to pay his costs.
The first reason was that he participated in the proceeding solely to counter Pauline’s allegation that a sum of $500,000 had been loaned to him by Theo, rather than given to him, and that Pauline then simply abandoned her argument on that issue mid-trial. The second reason, which was related to the first, was that, prior to trial, he had served a ‘Calderbank letter’ upon Pauline warning that he would apply for costs if she failed upon the gift/loan issue – and she did ‘fail’ on that issue (because she abandoned it).
I do not consider that either of those arguments provide a proper foundation for Pauline having to pay all of Alexander’s costs in this case. However, as I explain below, I consider it just that Pauline should pay a proportion of Alexander’s costs.
Alexander’s reason for participating in the proceeding
Counsel for Pauline opened her case explaining that the gift/loan issue was one of the significant evidentiary controversies in the trial. Affidavits had addressed this controversy. At the beginning of day three of the trial senior counsel for the plaintiff announced:
We think, your Honour, it may probably be the most appropriate way to shorten the load of this case to say that Alex has received an inter vivos gift of $500,000 shortly before the death of his father and that is one of the matters your Honour can take into consideration under 91(4). That would remove any necessity for the finding on the material which is before you which these two affidavits go specifically to. In that sense, your Honour, not the issue of the loan or the gift, but the issue of the $500,000 is still before you in terms of making a decision in relation to the Part IV claim.[2]
[2]Transcript 178.
Although I accept that Pauline simply jettisoned a factual argument she had previously agitated, it is not at all evident that Alexander ‘s reason for being joined to the proceeding on 11 May 2011 lay solely, if at all, with the issue concerning the characterisation of the $500,000 advance. Alexander’s affidavit in support of the application does not mention the $500,000 gift/loan issue at all. Rather, in it, he relied upon his need to advance an argument for a constructive trust over his home situated on the farm property as the reason for his joinder.
Before applying to be joined to the proceeding Alexander had unsuccessfully sought leave to bring a proceeding to seek an declaration of constructive trust.[3] Although, not permitted to seek that relief, he nevertheless continued to participate in the trial to press the factual issues lying behind that argument. What was once called the ’constructive trust‘ issue remained a matter upon which Alexander led evidence and made submissions. Ultimately, I made findings on the factual matters and they were of relevance in my final determination.[4]
[3]Application refused by Beach J, 15 April 2011.
[4]See [48], [49] and [87] of the Reasons.
Further, during the course of the trial there was a debate about the extent to which Alexander should be permitted to participate, arising out of a concern that there ought not to be duplication between the role played by Thomas in defending Pauline’s claim and the role played by Alexander. Mr Goldblatt justified Alexander’s participation in the trial upon three bases: (1) the $500,000 gift/loan issue; (2) the fact that Alexander’s house was situated on an unsubdivided portion of the farmland, being the most substantial estate asset, and he needed to protect his ‘interest’ in the house; and (3), related to the second reason, the extent of the capital improvements he had made to that house from his own resources. The last two matters were, in large part, the factual foundation for the constructive trust issue which was put forward as the reason for his joinder in the first place.
After Pauline’s counsel announced on the third day of trial that the gift/loan issue no longer needed to be determined, and that Pauline was content to accept for the sake of argument that the monies constituted a gift, Alexander continued to participate in the trial through counsel and solicitors. The reason given for his continued participation was that Mr Goldblatt had taken all the instructions pertaining to Alexander’s evidence on matters relevant to the estate’s defence of Pauline’s claim, and it would not have been convenient to require Mr Miller (who represented the estate) to take over the role of leading that evidence at such a late stage.
But it was also evident that Mr Goldblatt and Mr Miller had divided up between them the tasks for advancing the estate’s interest at the trial: Mr Miller gave a detailed opening and Mr Goldblatt took the lead in making final submissions, both for Alexander and, in substance, for the estate. While this may well have made sensible use of having the two counsel representing the brothers’ mutual interests at trial, it nonetheless illustrates the reality that Alexander participated in a broader way than merely being confined to the gift/loan issue.
For these reasons I reject the contention that Alexander’s joinder to the proceeding and participation in the trial was limited to the advocacy on the gift/loan issue.
Did Pauline unreasonably refuse a Calderbank offer?
The other basis for alleging that Pauline should pay for Alexander’s costs was her failure to properly respond to the so-called Calderbank letter of 7 February 2012. By this letter, sent from Alexander’s solicitors to Pauline’s solicitors and headed ’Without Prejudice Save as to Costs‘, the solicitors wrote:
…our client has been added as a second defendant in this matter and has had to engage separate legal representation for the Trial to defend the claims made by your client, that the sum of $500,000 was advanced to our client by his late father as a loan and not a gift.
We are instructed if your client is unsuccessful with his argument at the upcoming Trial, we will make an application to the Court for payment of our client’s Trial costs to be paid by your client personally.
The first thing to notice about this letter is that it does not contain an offer. It cannot therefore truly be regarded as a Calderbank offer:[5] it merely contains a warning that if Pauline failed on the gift/loan issue Alexander intended to apply for costs. The premise for the argument that Alexander should, in those circumstances, be entitled to his costs appears to be that he was added as a second defendant for the purpose of defending the allegation concerning the gift/loan. I have already dealt with this earlier. The premise does not appear to be correct: at least it is not entirely correct.
[5]Calderbank v Calderbank [1975] 3 All ER 333; Cutts v Head [1984] Ch 290.
Moreover, one of the matters that the court must take into account in determining what effect, if any, a Calderbank offer should have on a question of costs, is the clarity with which the offer was expressed.[6] If there is an offer to be discerned from the text of the letter which I have set out above, it is opaque. Mr Goldblatt suggested that the implicit offer was that if Pauline should withdraw her allegation about the loan then Alexander would not need to participate in the trial nor need to seek his costs at the end. Not only is that proposition not expressed clearly, nor is there any offer made with respect to the costs of representation incurred to date, or any proposal as to where those costs should fall. Pauline could not know from that letter what she was being asked to agree to, assuming she was being asked to agree to anything.
[6]Hazeldene’s Chicken Farm Pty Ltd v Victoria WorkCover Authority (No 2) (2005) 13 VR 435 [25].
So I reject the argument that non-compliance with the letter of 7 February 2012 warrants Pauline having to pay Alexander’s costs of the proceeding.
Pauline should pay a proportion of Alexander’s costs
But having dismissed both of those grounds as a basis for ordering Pauline to pay Alexander’s costs of the proceeding (on a solicitor and client basis) I do not consider that is the end of the matter.
I accept that the question of the gift/loan was one of the issues which motivated Alexander to participate in the trial, at least from early February 2012. The issue had vexed the parties for some time and could reasonably have been expected to be the subject of examination and cross-examination at trial. It was then simply abandoned by the plaintiff. And Pauline abandoned it by arguing, as she could well have done a long time earlier, that it did not really matter for her case whether the money was a loan or a gift: either way it could be taken into account in her favour in the exercise of the court’s discretion.
I think there is an element of unfairness about this. Alexander was justified in thinking that this was an issue which affected him individually, in relation to which there may be some conflict between himself and the estate. As I say, the need to defend Pauline’s argument on this point became one of a number of issues which persuaded him to take a separate role in the proceedings. Just how much weight this particular issue had in his decision is difficult for me to decide, but I accept it played some role. There is at least the possibility that had the issue been abandoned by the plaintiff at a much earlier time, Alexander would have considered it unnecessary for him to be separately represented. Instead, he may simply have given instructions to the estate’s lawyers to enable them to lead from him whatever evidence was in the interests of both himself and the estate.
As it turned out, the ’defending parties‘ derived some benefit having two counsel appearing in the case, just as the plaintiff did, and so I cannot easily resolve the question of the net benefit or disadvantage to Alexander of having the separate representation that he had.
In all the circumstances I consider that the plaintiff ought to pay a proportion of Alexander’s costs. The proportion which I will fix represents, in my view, a just allowance for the cost of the issue abandoned and the prospect that Alexander might have chosen not to participate in the trial at all, but also makes allowance for the advantage to Alexander of having two counsel represent the mutual interests of himself and Thomas at the trial. The court’s wide general discretion with respect to making costs orders extends to apportioning the costs relating to particular factual questions.[7]
[7]Byrns v Davies (1991) 2 VR 568, 571; and see r 63.04 Supreme Court (General Civil Procedure) Rules 2005.
I fix that proportion to be 20 percent, but that proportion only applies to the costs incurred in preparation close to trial (I will fix it from 13 February 2012), and of the trial itself, when it should have been evident that the $500,000 loan/gift issue was a significant issue for Alexander’s participation in the trial.
Other issues
The second main issue of disagreement was whether I should order that the plaintiff’s costs include the cost of transcript, and whether I should certify for two counsel, including senior counsel. These matters, I was told, are generally dealt with by the Costs Court, but the plaintiff argued that just as Croft J in Challenger Property Asset Management Pty Ltd v Stonnington City Council (No 2)[8] made similar orders to those proposed, then out of an abundance of caution I should do so too. But I accept that, in that case, his Honour made those orders for special reasons that do not exist here, and only after substantial argument on the issues, which has not occurred here. I will therefore leave those matters to be dealt with by the Costs Court in the usual way.
[8][2012] VSC 67.
In the result, the orders I will make are as follows:
(1)The plaintiff shall receive by way of provision out of the estate of the deceased the sum of $475,000 and this sum is to be paid out of the residuary estate of the deceased.
(2)The costs of the plaintiff of and incidental to this proceeding, including any reserved costs, shall be taxed as between solicitor and client and, when taxed, shall be paid out of the estate.
(3)The costs and expenses of the first defendant (executor) of and incidental to this proceeding, including any reserved costs, shall be taxed and, when taxed, shall be paid or retained out of the estate.
(4)One fifth of the costs of the second defendant of and incidental to this proceeding incurred on and after 13 February 2012, including any reserved costs in that period, shall be taxed and, when taxed, shall be paid by the plaintiff; all other costs of the second defendant of and incidental to this proceeding, including any reserved costs, shall be taxed and, when taxed, be paid or retained out of the estate.
(5)The first defendant is released from his undertaking given through his solicitors, GSM Lawyers, on 13 May 2010.
(6)An authenticated copy of this order shall be annexed to the probate of the will of the above named deceased.
(7)There is a stay on the operation of order 1 until 4.00 pm 21 December 2012.
(8)Each party has liberty to apply.
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