Ballam v Ferro (No 2)

[2022] NSWSC 1358

Supreme Court

New South Wales

Medium Neutral Citation:

Ballam & Ors v Ferro & Anor (No 2) [2022] NSWSC 1358

Hearing dates:

28 September 2022

Date of orders:

10 October 2022

Decision date:

10 October 2022

Jurisdiction:

Equity

Before:

Hallen J

Decision:

See [125]

Catchwords:

SUCCESSION – COSTS – Probate dispute (subject of Cross-Claim by Defendants) and family provision dispute (subject of the Plaintiffs’ claim) – In addition, shortly prior to the hearing, Plaintiffs commenced separate proceedings – In allocation of costs by reference to issues, parties agree that costs are equally divided between Probate and family provision proceedings – No agreement regarding costs in separate proceedings – In probate claim, in which Cross-Claimants successful, whether circumstances warranted investigation and whether the litigation caused by the conduct of the deceased – In family provision claim, which was dismissed, an Offer of Compromise had been made by Defendants – In separate proceedings, consent to dismissal if Defendants successful on Cross-Claim – Costs incurred in regard to separate proceedings dealt with separately

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 56, 98

Powers of Attorney Act 1998 (Qld) s 107

Succession Act 2006 (NSW) s 57(1)(e)

Uniform Civil Procedure Rules 2005 (NSW) rr 20.26, r 42.1, 42.14, 42.15A, 42.2

Cases Cited:

AB v Curry (No 2) [2015] NSWSC 1209

Ballam v Ferro [2022] NSWSC 1200

Bassett v Bassett [2021] NSWCA 320

Bates v Cooke (2015) 14 ASTLR 221; [2015] NSWCA 278

Bates v Cooke (No 2) [2014] NSWSC 1322

Brady v Mikan (No 2) [2022] NSWSC 1320

Briggs v Mantz (No 2) [2014] VSC 487

Bruce v Greentree (No 2) [2015] NSWSC 1636

Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353

Chant v Curcuruto (No 2) [2021] NSWSC 882

Chisak v Presot (No 2) [2021] NSWSC 754

Commonwealth of Australia v Gretton [2008] NSWCA 117

Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248

D Capital 2 Pty Ltd v Western (No 2) [2022] NSWSC 1283

Fielder v Burgess [2014] SASC 98

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364

Gray v Hart; Estate of Harris (No. 2) [2012] NSWSC 1562

Gray v Richards [No 2] (2014) 89 ALJR 113; [2014] HCA 47

Haertsch v Whiteway (No 2) [2020] NSWCA 287

Hancock v Arnold (No 2) [2009] NSWCA 19

Harkness v Harkness (No 2) [2012] NSWSC 35

Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34

Houatchanthara v Bednarczyk [1996] NSWCA 253

House v The King (1936) 55 CLR 499; [1936] HCA 40

In Re Tsaousis [2019] VSC 511

J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) [1993] FCA 42

Karpin v Gough (No 2) [2022] NSWSC 682

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Leichhardt Municipal Council v Green [2004] NSWCA 341

Ling v Beyond Development Group Pty Ltd (No 2) [2022] NSWSC 817

Maxwell v Maxwell (No 2) [2022] NSWSC 1146

Mendonca v Tonna (No 3) [2020] NSWCA 332

Meres v Meres (No 2) [2017] NSWSC 523

Mitchell v Gard (1863) 3 SW & Tr 275; (1863) 164 ER 1280

Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17

Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25

Nuendorf v Public Trustee of Queensland (as executor of the estate of Dickfos) (dec) [2015] 1 Qd R 513

Ohn v Walton (1995) 36 NSWLR 77

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Page v Hull-Moody [2020] NSWSC 411

Page v Page [No 2] [2016] NSWSC 1323

Pawlowska v Zaiglic [2010] NSWSC 864

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6

Re Wilcox; Ex parte Venture Industries (No 2) (1996) 72 FCR 151; [1996] FCA 1942

Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368

Sassoon v Rose [2013] NSWCA 220

Shovelar v Lane [2011] EWCA Civ 802

Smith v Whittaker [2016] VSC 287

Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685

Sydney Markets Credit Services Co-Operative Ltd v Taylor (No 3) [2015] NSWSC 1236

Sze Tu v Lowe (No 2) [2015] NSWCA 91

Vector Corrosion Technologies Limited v E-Chem Technologies Ltd [2022] FCA 519

Walker v Harwood [2017] NSWCA 228

Walsh v Walsh (No 2) [2013] NSWSC 1281

Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111

Wheatley v Lakshmanan (No 2) [2022] NSWSC 851

Wright v Apthorpe [2020] NSWCA 300

YWCA Australia v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 102

Category:

Costs

Parties:

Maree-Marcelle Ballam (first Plaintiff)
Claudia Puglia (second Plaintiff)
Benjamin Puglia (third Plaintiff)
Carmelina Ferro (first Defendant)
Daniela Cantale (second Defendant)

Representation:

Counsel:
L Ellison SC (Plaintiffs)
T Alexis SC with S Speirs (Defendants)

Solicitors:
Unsworth Legal (Plaintiffs)
Di Girolamo Lawyers (Defendants)

File Number(s):

2021/189997; 2022/150470

Publication restriction:

Nil

Judgment

1. HIS HONOUR: This is the judgment determining the appropriate order for costs arising out of the hearing of Probate and family provision proceedings and also what was described as “the separate proceedings” commenced by the Plaintiffs shortly before the hearing. The reasons for judgment of those claims were delivered on 7 September 2022 and bear the medium neutral citation Ballam v Ferro [2022] NSWSC 1200 (the principal judgment). This judgment should be read with the principal judgment as events, matters and persons are referred to in both judgments in the same way.

2. At the request of the parties, the determination of costs could not be dealt with at the hearing or in the principal judgment: see [118] of the principal judgment.

3. In summary, in the principal judgment, I concluded that:

1. The deceased had testamentary capacity at the time he made the 2012 Will.

2. The deceased knew and approved the contents of his 2012 Will.

3. Although each of the Plaintiffs was a grandchild of the deceased, they were not, at any particular time, wholly, or partly, dependent on the deceased and, therefore, each of them was not an eligible person within the meaning of s 57(1)(e) of the Succession Act 2006 (NSW).

4. In light of the finding as to the validity of the 2012 Will, the separate proceedings should be dismissed.

4. Having reached the conclusion in (3) above, it was unnecessary for me to decide any additional issues in the claim for a family provision order.

5. The Plaintiffs were unsuccessful in the entirety of each of the claims and in their defence of the Cross-Claim.

6. Based on my conclusions, the Court ordered that, within seven days, the legal representatives of the parties provide short minutes of order, in each of the two matters, that reflected the reasons. This was done and the necessary orders, other than in respect of costs, were made.

7. Following the publication of the principal judgment, I allowed the legal representatives an opportunity to discuss the question of costs (in each of the proceedings). However, and perhaps unsurprisingly, they were unable to agree upon how the costs of the proceedings should be borne.

8. The costs hearing was listed before me on 28 September 2022 and the same counsel appeared. Although, helpfully, senior counsel stated that the parties did not require written reasons, I have considered that written reasons should be given because the appropriate orders are, indisputably, contentious and because they deal with costs, the quantum of which is significant.

Evidence in the Costs Proceedings

9. The Defendants, effectively, tendered documents relating to an Offer of Compromise. I take the following matters as undisputed on the costs application.

10. On 28 September 2021, Mr Di Girolamo, the Defendants’ solicitor, sent a letter to Mr Buchanan, the Plaintiffs’ solicitor, enclosing an Offer of Compromise. The letter provided that either of the first, second and/or third Plaintiff could accept the offer within 28 days, and also stated:

“The Defendants maintain the view that the Plaintiffs are not ‘eligible persons’ within the meaning of s 57(1)(e) of the Succession Act 2006 (NSW). In their assessment of the affidavit evidence served to-date, the Plaintiffs cannot overcome the insurmountable hurdle of establishing that the deceased was a surrogate parent: see Bowditch v NSW Trustee and Guardian [2012] NSWSC 275 at [133]; and Chapple v Wilcox [2014] NSWCA 92.”

11. Each of the Plaintiffs received the same Offer of Compromise, which was in the same terms, being:

“1. An order pursuant to section 59 of the Succession Act 2006 (NSW) that [each of the Plaintiffs] receive, by way of provision out of the estate, a lump sum of $150,000.

2   An order that [each of the Plaintiffs’] costs of the proceedings be paid out of the estate on the ordinary basis, as agreed or assessed.

3   An order that the Defendants [sic] costs of the proceedings be paid out of the estate on an indemnity basis.

4   This offer shall remain open for acceptance for 28 days.”

12. It is unclear whether the offer made in the Offer of Compromise was rejected, or whether it lapsed through the effluxion of time. In the circumstances, it does not matter.

13. No evidence was relied upon by the Plaintiffs in relation to any offer made by, or on behalf, of any of them. However, during oral submissions, senior counsel tendered a copy of an email, dated 6 December 2021, which disclosed that each Defendant’s principal affidavit was sworn and served on 6 December 2021 (some 11 weeks after the date of the Offer of Compromise).

14. The purpose of the tender of the email was to demonstrate that the principal affidavits of the Defendants, which included relevant evidence, was not available to the Plaintiffs at, or within the period of acceptance, of the Offer of Compromise.

Submissions

15. With respect to the Probate proceedings, for the Plaintiffs it was submitted in writing that, although the Court, ultimately, was satisfied that the Defendants had discharged the burden of showing the deceased had testamentary capacity, that he knew and approved of the terms of the 2012 Will and that there were no suspicious circumstances, there were peculiar circumstances surrounding the preparation and execution of the 2012 Will.

16. It was submitted that the circumstances requiring investigation were such that it was reasonable that the Plaintiffs put the Defendants to proof of the validity of the 2012 Will and that the deceased ought properly to be seen as the cause of the Probate proceedings.

17. The Plaintiffs pointed to Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562 at [4] (White J) as authority for the proposition that:

“the principles applicable to the awarding of costs in probate litigation differ from those applicable to ordinary civil suits where the principle that costs follow the event usually means that the losing party pays the winning party’s costs”.

18. Reference was also made to the principles, or exceptions, identified in Mitchell v Gard (1863) 3 SW & Tr 275; (1863) 164 ER 1280, namely that the costs may properly be paid out of the estate if the fault of the testator is the cause of the litigation and that if there is sufficient and reasonable ground to question the execution of the will or the capacity of the testator, the losing party may be properly relieved from the costs of the successful opponent.

19. Finally, the Plaintiffs relied on White J’s findings in Gray v Hart; Estate of Harris (No 2) at [19] that:

“where the categories do overlap, if the testator is properly seen as the cause of the litigation, the usual order is that costs be paid out of the estate. It is where the testator is not the cause of the litigation, but an investigation is reasonably called for, that there is usually no order as to the unsuccessful party’s costs. Of course, if there is no reasonable cause for investigation, that is, if the unsuccessful party has not acted reasonably, then he or she will pay the costs.”

20. With respect to the family provision proceedings, the solicitor for the Plaintiffs relied on what Ward CJ in Eq had written in Karpin v Gough (No 2) [2022] NSWSC 682 at [14], submitting that the value of the estate is substantial and that the Defendants have benefited, inter vivos, and also under the 2012 Will.

21. The Plaintiffs submitted that the costs of the parties, even if entirely borne by the estate of the deceased, would consume only a modest portion of the value of the estate whereas to order the Plaintiffs to bear the Defendants’ costs, in whole or in part, would impose a significant financial burden on each of them. It was submitted that the overall justice of the case would be best served by the Plaintiffs bearing their own costs of the family provision case and there being no order that the Plaintiffs pay the Defendants’ costs of the family provision case.

22. Curiously, the Plaintiffs, in the written submissions, did not specifically address the issue of the Offer of Compromise made by the Defendants. As stated, however, the date of service of the Defendants’ principal affidavits, some weeks after the service of the Offer of Compromise, was relied upon, presumably to establish that it was not unreasonable for each of the Plaintiffs to not accept the offer made in the Offer of Compromise.

23. With respect to the separate proceedings commenced shortly before the hearing, the solicitor for the Plaintiffs submitted that no order for costs should be made, to the intent that the parties should each bear their own costs, respectively, of the proceedings. The basis for that submission was not entirely clear bearing in mind the proceedings were dismissed. However, it seems that the basis of the submission was that it was only after the separate proceedings had been commenced that information came to light which resulted in the concession made that the proceedings should be dismissed if the 2012 Will was found to be the last valid Will of the deceased.

24. Counsel for the Defendants sought the following orders as to costs:

1. In respect of the Probate proceedings:

1. The Plaintiffs/Cross-Defendants to pay the Defendants’/Cross-Claimants’ costs, calculated on the ordinary basis until 5 April 2022 and then calculated on the indemnity basis, of the Cross-Claim, from 6 April 2022 including the Defendants’/Cross-Claimants’ costs associated with the application for costs.

2. There be no order as to the Plaintiffs’/Cross-Defendants’ costs to the intent that they should bear their own costs of the Cross-Claim, including the costs associated with the application for costs.

2. In respect of the family provision claims:

1. The Plaintiffs to pay the Defendants’ costs, calculated on the ordinary basis, up to 28 September 2021 and calculated on the indemnity basis, after 28 September 2021, including the Defendants’ costs associated with the application for costs.

3. In respect of the separate proceedings:

1. The Plaintiffs to pay the Defendants’ costs of the separate proceedings, calculated on the indemnity basis.

25. Counsel for the Defendants submitted that it was understood that the Plaintiffs did not oppose orders for the Defendants’ costs, calculated on the indemnity basis, of the family provision claims, the Probate claim and the separate proceedings, otherwise being paid out of the estate of the deceased. An additional order will be required in regard to any costs not recovered from the Plaintiffs.

26. With respect to the Probate proceedings, the Defendants acknowledged that there were two issues arising on the issue of costs, namely:

1. How the Plaintiffs’ costs of the Probate proceedings are to be borne; and

2. Whether the Plaintiffs ought to pay the Defendants’ costs of the Probate proceedings, and if so, from when and on what basis.

27. Counsel for the Defendants relied on what I had written in Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685 at [62], and upon what White J had written in Gray v Hart; Estate of Harris (No 2) at [5]. They submitted that, whilst the public interest element is plain, there remains important, countervailing considerations to ensure that parties are not put to ‘fruitless litigation on the basis that their costs will be paid by others (or out of the estate): Starr v Miller at [71] citing In Re Tsaousis [2019] VSC 511 at [32]-[33] (McMillan J).

28. It was acknowledged that, while the general proposition applies to probate proceedings (namely, that an award of costs is discretionary and the discretion is generally exercised in favour of the successful party), two exceptions to the general proposition have emerged, namely:

1. Where the testator has, or those interested in residue have, been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate; and

2. If the circumstances led reasonably to an investigation in regard to the document propounded, the costs may be left to be borne by those who respectively incurred them.

29. It was submitted that the burden which the Plaintiffs must discharge to establish the first exception is a high one. They pointed to Starr v Miller at [67], in which I had written that “[i]n order to come within the first exception, and receive the benefit of a costs order, the unsuccessful party needs to show, relevantly, that the deceased was the “cause” of the litigation’.

30. They then submitted that there was no proper basis on which the Plaintiffs could contend that the deceased was the “cause” of the litigation, and that the findings of the Court that concerned the deceased’s preparation, and then due execution, of the 2012 Will, were strongly against the submission made by the Plaintiffs.

31. The Defendants also submitted that there were compelling reasons why the Plaintiffs did not come within the second exception. They again pointed to what I had written in Starr v Miller at [69] that “all proper steps should have been taken by the party challenging the Will”. They submitted that the Plaintiffs did not take all proper steps when challenging the validity of the 2012 Will.

32. They submitted that the Plaintiffs had failed to undertake even the most basic steps to prepare, or investigate, their defence to the Probate claim and then pleaded a positive defence on 6 April 2022 in circumstances where:

1. They had been provided with Father Kariba’s affidavit made on 2 March 2021 for about one year before amending the Defence.

2. There was no evidence of them having made any inquiries of Father Kariba to ascertain the veracity of his written evidence.

3. They had failed to marshal any medical evidence in support of the allegation that the deceased was suffering from some type of cognitive impairment at the time the 2012 Will was executed.

4. They had not issued any subpoenas to doctors or hospitals for medical records of the deceased. The subpoenas that the Plaintiffs had issued were not served until 20 April 2022 and 3 May 2022.

33. Counsel for the Defendants also relied on these circumstances to submit that “proper steps” had not been taken to investigate the circumstances of the 2012 Will and that it could not be said that the circumstances had “led reasonably to an investigation” of the validity of the 2012 Will. They submitted that “the Plaintiffs put their positive case without a feather to fly with!’: Counsel for the Defendants’ written Submissions dated 21 September 2022 at [29].

34. Further, it was submitted that the Plaintiffs had failed to provide any probative evidence concerning lack of testamentary capacity to support the positive defence, and that the evidence of Dr Drago (the deceased’s treating physician in Sicily between 17 March 2010 and 31 December 2012) which stated that he had “no recollection and have no documents to confirm a diagnosis of Alzheimer’s dementia or other cognitive impairment”, which was not challenged at the hearing, should have caused the Plaintiffs to consider their position.

35. On the question of indemnity costs, the Defendants submitted that the circumstances of the Probate proceedings were such that it was appropriate for the Court to order the Plaintiffs to pay the Defendants costs, calculated on the indemnity basis, from 6 April 2022 (being the date the amended Defence was filed).

33. Counsel for the Defendants relied on s 98(1)(c) of the Civil Procedure Act 2005 (NSW) which gives the Court the power to make an order that costs be calculated on the indemnity basis. They pointed to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364, in which Woodward J held that indemnity costs are appropriate where “an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.”

34. They also relied upon the proposition that an indemnity costs order is appropriate if “for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case”: J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) [1993] FCA 42 (French J). They submitted that an indemnity costs order will be warranted where proceedings were maintained by a party having “no reasonable prospect of success”: Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [106]-[113] (Basten JA, Giles JA and Young CJ in Eq agreeing).

35. The Defendants submitted that the Plaintiffs’ positive defence of the Probate proceedings fell into that category of case. They relied on paragraph [15] of the principal judgment. Counsel emphasised that the Plaintiffs were on clear notice, given by the Defendants’ former solicitor, that there was ‘abundant’ evidence to support the Defendants’ case that the deceased had testamentary capacity at the time the 2012 Will was executed, and that the Plaintiffs seemingly had no evidence, in their possession, to support their claim of a lack of testamentary capacity in December 2012.

36. Counsel for the Defendants also noted that the Plaintiffs agitated the testamentary capacity issue from the time of the initial Defence, as was clear from what had been said during the several directions hearings from 29 November 2021 to 30 March 2022.

37. Therefore, the Defendants were effectively put to the expense of the Plaintiffs’ lack of testamentary capacity defence as early as November 2021, even though this was not formally pleaded by the Plaintiffs until 6 April 2022.

38. With respect to the family provision proceedings, the Defendants submitted that, on 28 September 2021, the Defendants had served an Offer of Compromise in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’). The Defendants had offered to compromise each claim with an order for provision out of the estate of the deceased for $150,000 plus costs. The offers remained open for acceptance by any of the Plaintiffs for 28 days. The offers had not been accepted by any of the Plaintiffs.

39. Counsel for the Defendants submitted that the offers could be seen as a ‘genuine’ compromise (in that each was an ‘actual’ offer which contained a ‘real element of compromise’ by the Defendants): Hancock v Arnold (No 2) [2009] NSWCA 19 at [23] (Ipp, McColl and Basten JJA); Leichhardt Municipal Council v Green [2004] NSWCA 341 at [37]-[40] (Santow JA).

40. Counsel for the Defendants also submitted that the covering letter to the Offer of Compromise drew explicit attention to the weakness of the Plaintiffs’ case, in terms consistent with the Court’s ultimate findings.

41. It was submitted that the offers were made after each of the Plaintiffs had filed her and his primary affidavit evidence and shortly after the parties had attended a Court ordered mediation on 24 September 2021. Thus, the Plaintiffs were each well positioned, and informed, to properly assess the likelihood of success of the claims for a family provision order respectively, against the offers of settlement before them. In these circumstances, it was unreasonable for the Plaintiffs to not accept the offer made to her or him respectively.

42. Counsel for the Defendants submitted that it is well established that UCPR r 42.15A applies to proceedings for a family provision order: Walsh v Walsh (No 2) [2013] NSWSC 1281 at [27]; Pawlowska v Zaiglic [2010] NSWSC 864 (Ball J).

43. Counsel for the Defendants pointed to the features of family provision litigation identified by Kunc J in Bates v Cooke (No 2) [2014] NSWSC 1322 which ground ‘a stronger public policy basis for the encouragement of settling litigation than might apply in other types of cases’. They also pointed to the remark made by Ward CJ in Eq in Wheatley v Lakshmanan (No 2) [2022] NSWSC 851 at [103] that:

“I accept the force of the observation of Kunc J in Bates v Cooke at [27]-[33] that there are sound policy reasons in family provision proceedings to be slow to depart from the prima facie position as to costs in relation to offers of compromise...”

47. They also relied on the general principles set out in Harkness v Harkness (No 2) [2012] NSWSC 35 at [17]-[18].

48. The Defendants submitted that there was no proper basis, in this case, to displace the usual consequences of r 42.15A of the UCPR.

49. With respect to the separate proceedings, the Defendants relied on the Plaintiffs’ concession that, in the event that the 2012 Will was the last valid Will of the deceased, there could be no compensation payable such that the separate proceedings should be dismissed. They submitted that it follows, ‘having regard to the hopeless nature of the defence to the Probate claim that by their own concession, the separate proceedings were also doomed to fail’: Counsel for the Defendants’ written Submissions dated 21 September 2022 at [41].

50. Counsel for the Defendants also submitted that the circumstances in which the separate proceedings were commenced are reason enough for the Plaintiffs to be liable to pay the Defendants costs on an indemnity basis. They submitted that this is so because:

1. The Plaintiffs failed to undertake any proper searches or inquiries before commencing the separate proceedings, including searches into whether the relevant properties had been encumbered.

2. The Plaintiffs had offered no real explanation for the late filing of the claim.

3. The Plaintiffs had not filed any evidence which could truly establish the claim for compensation under s 107 of the Powers of Attorney Act1998 (Qld) as:

1. They did not file any valuation of the properties; and

2. They did not address the majority of the factors that a Court is to consider when determining an application for compensation pursuant to s 107, as set out by Martin J in Nuendorf v Public Trustee of Queensland (as executor of the estate of Dickfos) (dec) [2015] 1 Qd R 513 at [22].

51. Neither party mentioned, in the written submissions, that the Plaintiffs had entered a conditional costs agreement with their legal representatives, the effect of which was that they would not have to bear their own costs of the proceedings: see [110] of the principal judgment and Tcpt, 2 June 2022, p 293(22-30). It followed that if the orders sought by the Plaintiffs were made, the Plaintiffs would be left to bear none of the costs that had been incurred.

The Law – Costs generally

52. I shall first refer to some general principles relevant to the determination of costs and will then turn to what may be regarded as additional principles that apply in Probate and family provision cases.

53. How costs are to be borne is a matter for the exercise of broad discretion by the Court: s 98 Civil Procedure Act 2005 (NSW); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11.

54. The section is expressed without any qualification and is unconfined, although, naturally, it must be exercised judicially (i.e. not arbitrarily or capriciously), having regard to any statutory context, established principle and the circumstances of the relevant case. The Court, also, must have regard to the requirement imposed by s 56 of the Civil Procedure Act to give effect to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceeding. The exercise of the discretion must be appropriately reasoned: House v The King (1936) 55 CLR 499; [1936] HCA 40 at 503 and 505.

55. Costs orders are compensatory in nature, to reflect the vindication of the successful claim or defence thereof, not punitive: Latoudis v Casey (1990) 170 CLR 534 at 543; [1990] HCA 59; Ohn v Walton (1995) 36 NSWLR 77; Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA agreed.

56. The exercise of discretion will be guided by well-established principles in order to promote consistency in decision-making: Norbis v Norbis (1986) 161 CLR 513 at 519; [1986] HCA 17 (Mason and Deane JJ, with whom Brennan J generally agreed); Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24]-[25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ).

57. Effectively, “[t]he disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires”: Gray v Richards [No 2] (2014) 89 ALJR 113; [2014] HCA 47 at [2] (French CJ, Hayne, Bell, Gageler and Keane JJ).

58. In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA (with whom Mason P agreed) wrote at [121]:

“[U]nderlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.”

59. The observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98] (Gleeson JA, with whom Macfarlan and Leeming JJA agreed).

60. The usual order as to costs is that a successful party in litigation is entitled to an award of costs in his, her, or their, favour, and an unsuccessful party bears the liability for the costs of the litigation: UCPR r 42.1, unless it is considered that some other order ought to be made. That is, costs follow the event. The relevant ‘event’ is success in the action or on particular issues: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6 (McHugh J).

61. The onus lies on the unsuccessful party to demonstrate a basis for departing from the usual rule: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10] (Brereton J); Maxwell v Maxwell (No 2) [2022] NSWSC 1146 at [10] (Ward P).

62. Section 98(1)(c) of the Civil Procedure Act distinguishes between costs awarded “on the ordinary basis” or “on an indemnity basis”.

63. UCPR r 42.2 provides:

“Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.”

64. In Wright v Apthorpe [2020] NSWCA 300 at [54], Simpson AJA (with whom Bell P and McCallum JA agreed) wrote:

“Rule 42.2 is directed, not to courts, and not to the manner in which courts are to exercise the 98(1) discretion, but, rather, to costs assessors. In this respect it does create a presumption, or a default position, but it is not one that affects the exercise of the judicial discretion.”

65. There can be no doubt that the Court does have the power to make an order that the costs be calculated on the indemnity basis. The decision to award such costs will depend on the exercise of the Court’s discretion in light of the particular circumstances of the case.

66. Again, ultimately, the question is whether the justice of the case requires the costs to be calculated on that basis: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343 at [10] (Allsop P, Basten and Young JJA).

67. Black CJ, in Re Wilcox; Ex parte Venture Industries (No 2) (1996) 72 FCR 151 at 152-153; [1996] FCA 1942, wrote:

“... indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court exercising its discretion in that way. See John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J, referring to the judgment of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225. But as Hill J pointed out in John S Hayes (at 203):

‘... care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed: Colgate-Palmolive at 233; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991) per French J at p 8; Regata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993) per Davies J at p 6. In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted.’”

68. In Vector Corrosion Technologies Limited v E-Chem Technologies Ltd [2022] FCA 519 at [38], Jagot J wrote:

“...While the purpose of an indemnity costs order remains compensatory, the basis for such an order is a conclusion that the unreasonable conduct of a party (be it bringing or persisting in a case the party should have known was hopeless, causing unnecessary costs to be incurred, prolonging a hearing, bringing or persisting in a case for an ulterior motive, or otherwise) should result in full compensation to the other party for the costs incurred.”

69. In Ling v Beyond Development Group Pty Ltd (No 2) [2022] NSWSC 817, Ward P summarised the principles at [44]-[45]:

“Special costs orders will be warranted in certain circumstances, relevantly including where the conduct of the case by the party against whom costs are sought is “plainly unreasonable” or amounts to “relevant delinquency” by the party as a litigant (see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202 per Woodward J; Sydney City Council v Geftlick [2006] NSWCA 280 at [90] per Tobias JA, with whom Mason P and Hodgson JA agreed; Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491; [2007] NSWCA 266 at [44] per McColl JA, with whom Beazley JA, as Her Excellency then was, and Ipp JA agreed; Leichhardt Municipal Council v Green [2004] NSWCA 341 at [57] per Santow JA, with whom Bryson and Stein JJA agreed; Oshlack at [44] per Gaudron and Gummow JJ).

“Relevant delinquency” in that context does not mean moral delinquency or some ethical shortcoming but delinquency bearing a relevant relation to the conduct of the case (see, for example, White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303 at [11] per McDougall J). Thus, it has been said that indemnity costs may be awarded in cases commenced or continued where there is no chance of success, the claim is “without substance”, “groundless”, “fanciful or hopeful” or so weak as to be futile (see Vagg v McPhee (No 2) [2013] NSWCA 126 (Vagg) at [31] per Tobias AJA; with whom I agreed). However, it has also been said that “mere weakness of a case will not be sufficient to warrant the exercise of the discretion to award indemnity costs” (see Vagg at [32] per Tobias AJA); and that something more is required (which generally involves some form of wilful conduct) to justify the conclusion that the relevant proceeding should not have been instituted (or not have been pursued). In Refina Pty Ltd v Binnie (Costs) [2009] NSWSC 1098, Brereton J, as his Honour then was, referred at [6] to the concept of a proceeding being doomed to fail as being “whether the proceedings were obviously or manifestly hopeless at the outset, or at some earlier stage”. It has been said that there will not lightly be a departure from awarding costs on the ordinary basis (see Vagg at [30] per Tobias AJA).”

70. There is no suggestion that the Civil Procedure Act, and the UCPR do not apply to probate proceedings or proceedings in which a claim for a family provision order is sought.

71. I stress that these, and what follows, are general principles, which should not be elevated into rules of law, propositions of universal application, or rigid formulae. Nor do I wish to suggest that the jurisdiction should be unduly confined, or the discretion should be constrained, by statements of principle found in dicta in other decisions, or by preconceptions and predispositions. Decisions of the past do not, and cannot, put any fetters on the discretionary power, which is left largely unfettered. Also, I do not intend what is provided as a guide to be turned into a tyrant.

Costs – Probate Proceedings

72. As was outlined by White J in Gray v Hart; Estate of Harris (No 2) at [5]:

“There is a public interest in keeping faith with the wishes of a capable will-maker that requires an investigation into the validity of the propounded wills. A grant of probate in solemn form operates in rem, that is, it binds the world, or at least those affected persons who have notice of the proceedings (...) There is, therefore, a public interest in the incurring of some level of costs in cases where there is genuine doubt about the validity of a will.”

73. Kunc J recently stated in Brady v Mikan (No 2) [2022] NSWSC 1320 at [30] that:

“It is that hard fought, adversarial character of the litigation as a whole which fortifies me in the view that this is an appropriate case for the Court to attempt to dissect or delineate the issues for the purposes of costs. Furthermore, I remain of the view that I expressed during the course of argument that, because the deep antipathy between the parties is likely to carry over through to any costs assessment, the Court should do all it can to reduce the complexity of any such assessment by making its delineation as a percentage of the total costs rather than by reference to the issues themselves. It would be contrary to the just, quick and cheap disposal of these proceedings to leave a costs assessor the task of attempting to attribute particular costs to particular issues.”

74. In this case, the parties were able to delineate the proportion of costs which should be attributed to each of the Probate proceedings and the family provision proceedings: see Paragraph [109] of the principal judgment.

75. In Probate proceedings, and otherwise, the Court starts by treating the success or failure of the relevant party as being the starting point in consideration of the question of costs. Ordinarily, the successful party may reasonably expect to receive her or his costs, whether that outcome be described as costs following the “event” or otherwise.

76. However, the question of costs is always within the Court’s unfettered discretion which must be exercised judicially and by reference only to considerations relevant to its exercise and upon facts connected with, or leading up to, the litigation: Northern Territory v Sangare at [24].

77. I have recently set out the principles relating to the determination of costs, in Probate proceedings, in Starr v Miller at [51]-[86]. I recently summarised those principles in Chant v Curcuruto (No 2) [2021] NSWSC 882 at [32] as follows:

“(a) One aspect of the award of costs is a recognition that a party has been put to expense, often significant expense, which, taking account of the merits, as ultimately found following the hearing 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: Norbis v Norbis (1986) 161 CLR 513 at 519; [1986] HCA 17 (Mason and Deane JJ, with whom Brennan J generally agreed).

(b)   In Probate proceedings and otherwise, the Court starts by treating the success or failure of the relevant party as being the starting point in consideration of the question of costs. Ordinarily, the successful party may reasonably expect to receive their, her, or his, costs, whether that outcome be described as costs following the “event” or otherwise. However, the question of costs is always within the Court’s unfettered discretion, which must be exercised judicially and by reference only to considerations relevant to its exercise and upon facts connected with, or leading up to, the litigation: In Re Green [1969] WAR 67 at 83 (Wolff CJ); Twist v Tye (1902) P 92; Spiers v English [1907] P 122; Middlebrook v Middlebrook (1962) 36 ALJR 216 at 217; Nicholson v Knaggs [No 3 - Severance And Costs] [2009] VSC 328 at [38].

(c)   In Probate suits, there are considerations that more readily affect the application of the Civil Procedure Act2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW) than in most other forms of litigation. These considerations act as guides to the exercise of discretion, but they are not inflexible. The role which a particular party has played in litigation, whether as plaintiff or defendant, is relevant. Further, facts about the knowledge available to parties and the reasonableness of their conduct in conducting the litigation can be taken into account.

(d)   In Probate suits, there are certain exceptions to the general rule, where “adequate reason” is shown leading to an order that the costs of both the successful and the unsuccessful parties, might be paid from the estate, or an order that the costs might be left to be borne by those who incurred them. One exception is where the litigation is caused by the will-maker because his or her, conduct, habits, and mode of life, gave rise to a contest about the disputed will. (Although the older cases speak in terms of “fault” or “blame” that “did not necessarily mean moral fault or culpability, but rather that the touchstone should be whether it was the testator’s own conduct which had led to his will ‘being surrounded with confusion or uncertainty in law or fact’”: Kostic v Chaplin [2007] EWHC 2909 (Ch) at [9]. Perhaps, the question to be determined, in each case, is whether the will-maker by reason of his or her conduct is to be considered the cause of the litigation which has occurred, concerning the validity of his or her Will: Davies v Gregory (1873) LR 3 P&D 28 (Sir James Hannen).)

Another exception is where, broadly speaking, it was “reasonable” for the unsuccessful party to have brought or to have defended the proceedings, for example, because the unsuccessful party had a reasonable and bona fide belief that the will-maker had, or did not have, testamentary capacity (as the case may be), or because in the case of the propounder of the disputed Will (or Wills), the will-maker gave every appearance of having capacity. The two exceptions tend to overlap: Perpetual Trustee Company v Baker at [13]–[14].

(e)   The onus is on the party asserting that one, or other, of the two probate exceptions should apply: Pates v Craig (Estate of the late Joyce Jean Cole) (Supreme Court (NSW), Santow J, 5 September 1995, unrep) at 5–6.

(f)   The exceptions, like the general rule, provide a starting point for analysis. Neither is exhaustive nor prescriptive. The Court then considers whether it should exercise its discretion as to costs in order to do justice between the parties: Brown v Guss (No 2) [2015] VSC 57 at [36] (McMillan J).

(g)   Any costs order should reflect the way in which the proceedings were conducted and dealt with, or as was noted by Slattery J in Sydney Markets Credit Services Co-operative Ltd v Taylor (No. 3) at [32], “The costs order should reflect the reality of the contest”. In that regard, the Court may take into account facts about the knowledge available to the parties and the reasonableness of their conduct in conducting the litigation: Perpetual Trustee v Baker at [14] (Giles JA and Brownie AJA) citing In the Estate of Moyle: Moyle v Moyle (Supreme Court (NSW), Santow J, 18 June 1988, unrep).

It is relevant to consider whether the Plaintiffs, knowing what they did about the circumstances in which the 2017 Wills were prepared and executed, should have proceeded to propound the Wills and continue the litigation: Tsaousis v Tsaousis (a minor, by his litigation guardian Tsaousis) [2019] VSC 511 at [35] (McMillan J).

(h)   The principle enunciated by Sir Gorrell Barnes P that “if the circumstances lead reasonably to an investigation of the matter, then the costs may be left to be borne by those who have incurred them” should be remembered: Spiers v English [1907] P 122 at 123; Middlebrook v Middlebrook at [217]. However, the party bringing or defending the proceedings must have taken all proper steps to inform themselves about the facts of the case.

(i)   As was written over a century ago in Miller’s Probate Practice (Maxwell: 1900 Ed.), at 438-439:

“Two questions are to be considered with reference to an application for costs of the unsuccessful party: (1) Was there reasonable ground for litigation? (2) Was it conducted bona fide? Where both these questions can be answered in the affirmative it is the usual practice of the Court, without having regard to the amount or the ownership of the property, to order the general costs to be paid out of the personal estate.”

(j)   Whilst doubtful wills should not pass easily into proof by reason of the cost of opposing them, parties should not be tempted into fruitless litigation by the knowledge that their costs will be defrayed by others: Mitchell v Gard (1863) 3 Sw & Tr 275 at 279; 164 ER 1280 at 1281-1282.

(k)   Any suggestion that there is a general rule that costs in probate proceedings are borne out of the estate should be immediately rejected. About 95 years ago, it was written in Re Plant [1926] P 139, at 152:

“I should be reluctant to do anything to create the idea that unsuccessful litigants might get their costs out of the estate, without making a very strong case on facts. The lure of ‘costs out of the estate’ is responsible for much unnecessary litigation.”

(l)   Ultimately the orders for costs must be adapted to the justice of the particular case. If, for example, it is made to appear that when propounding a will the executor must have known that she, or he, was attempting to obtain the sanction of the Court to a document which could not be supported, she, or he, ought to be condemned in the costs. It would be quite unjust to hold otherwise.”

78. A different view has been expressed in some probate judgments. In Fielder v Burgess [2014] SASC 98 at [65], Kourakis CJ observed that the costs principles in probate litigation were, arguably, anachronistic in modern times in which there is a greater concern with a need for proportionality in litigation and that it may soon be necessary to reconsider it.

79. The view of Kourakis CJ accords with what had been written by Ward LJ in Shovelar v Lane [2011] EWCA Civ 802 at [44]:

"I conclude that the so-called rule in probate cases does not apply in the case before us. The probate rule is rooted in the inquisitorial exercise that was conducted by the Ecclesiastical Courts and the Probate Division where the court had to be satisfied of the validity of the will before it could pronounce for the will and admit it to probate. The effect of mutual wills upon the distribution of the estate under a later will which is admitted to probate is a matter for the Chancery Division applying the law of trusts; it is not a matter of probate law and practice. The nature of that litigation is not inquisitorial: it is adversarial and, not infrequently, very adversarial as the two families disunited by death battle for their perceived true inheritance. That is exactly what has happened here."

80. Ultimately, however, any costs order should reflect the way in which the proceedings were conducted and dealt with, or as was noted by Slattery J in Sydney Markets Credit Services Co-Operative Ltd v Taylor (No. 3) [2015] NSWSC 1236 at [32], “[t]he costs order should reflect the reality of the contest”.

Determination – Probate Proceedings

81. I have carefully considered the Plaintiffs’ submissions. I have re-read the principal judgment, the contents of which I shall not repeat but which have been, again, carefully considered.

82. I am unable to accept that there was anything in the conduct of the deceased that could reasonably have led the Plaintiffs to challenge the validity of the 2012 Will. All he did was exercise his testamentary freedom. Furthermore, the Plaintiffs had not seen the deceased between the time he and Maria had left Sydney in 2010 and when the deceased executed the 2012 Will.

83. In my view, the Plaintiffs disputed the validity of the 2012 Will, as the provision made for them in the 2005 Will was much greater. In other words, the litigation was to advance their own interests. They had been served with the affidavit evidence of Father Kariba more than 12 months prior to the commencement of the hearing. There was nothing to suggest that his evidence was likely to be successfully challenged as he was the only person who could give evidence of the events that occurred on the day on which the 2012 Will was executed. There was no suggestion that they had instructed their legal representatives to contact Father Kariba prior to the hearing to discuss his evidence.

84. In the reasons for judgment, I noted that I did not place very much weight on Mr James Ballam’s evidence as evidence of incapacity, particularly in light of the clear evidence of Father Kariba and Mr Maniscalco. I found his evidence about the topic unconvincing. He was the only non-party witness who was called by the Plaintiffs to give evidence on the deceased’s capacity in 2012.

85. Furthermore, although Maree-Marcelle had annexed a photograph and caption that she had published on Facebook, she agreed that, if she had honestly thought that the deceased had no idea what was going on, the positing of the comment would be disrespectful of him, and that she had intended the photograph for the purposes of humour.

86. Claudia had attended the wedding of Maree-Marcelle in 2012 but gave no evidence of observing any signs that suggested a lack of capacity. One might have thought that she would have done so had she observed any such signs.

87. Benjamin did not attend the wedding and did not see the deceased after 2010. He could not provide any evidence on the issue of the validity of the 2012 Will.

88. The medical evidence relied upon by the Plaintiffs was medical evidence obtained in the period from about 2016, that is to say some years after the execution of the 2012 Will. It did not assist the Plaintiffs in any way. For their part, the Defendants relied upon an email chain between their solicitor and Dr Drago, including an email dated 13 April 2022, in the Italian language, from that solicitor to Dr Drago and an email in reply from Dr Drago dated 27 April 2022, a copy of which had been provided to their solicitors, albeit not long before the hearing commenced.

89. I have not found anything at all that would lead me to conclude that the Plaintiffs were justified in maintaining their opposition to the grant of Probate of the 2012 Will. Having seen a copy of the 2012 Will and having received, and considered, the evidence of Father Kariba, they should have reflected upon the Defendants’ case and determined that they were at risk as to costs if they proceeded with opposition to the Cross-Claim. Furthermore, the medical evidence about the deceased’s condition in 2016 ought to have led them to appreciate that the risk was a real one.

90. However, there are four reasons why I am not satisfied that the Plaintiffs should bear the Defendants’ costs, calculated on the indemnity basis, of the Probate part of the proceedings. The first is that it was necessary, with the leave of the Court, for Father Kariba to supplement his affidavit evidence orally. It was only in his oral evidence that he described, in more detail, how the Will had been written out, and how the deceased had prepared for his meeting with Father Kariba; precisely how the deceased had dictated his wishes and intentions in Italian, and Sicilian dialect to Father Kariba; and how the instructions had been written in English: see [168]-[177] of the principal judgment.

91. Father Kariba added that the deceased had prepared for the meeting as he had the various pieces of paper on which the details of the different properties to be devised were written in English. He did not know who had written the details on the paper, but he maintained that it was only the deceased who had identified the beneficiary, or beneficiaries, who was, or who were, to receive the relevant property. This evidence was not referred to in his affidavit and it was an important piece of the evidentiary mosaic which led to the ultimate conclusion.

92. The second reason is that the evidence of Peter Maniscalco OAM, whose evidence I accepted, was only served shortly before the hearing, his affidavit having been made on 24 May 2022. He also gave evidence of the conversations that he had with the deceased in February 2013, and in September 2014 which corroborated the evidence of Father Kariba as to the deceased’s behaviour.

93. The third reason is that had the Plaintiffs put the Defendants to proof of the validity of the 2012 Will, the evidence, broadly speaking, would probably have been the same. Not much Court time was spent in the cross-examination of Father Kariba and Mr Maniscalco.

94. The fourth reason is that no Offer of Compromise, or on the evidence, any other offer, was served dealing with the Probate proceedings. That could have been done and had it been accepted, could have provided an opportunity for the Probate proceedings to be compromised.

95. In the circumstances, the Plaintiffs should pay the Defendants’ costs, calculated on the ordinary basis, of the Probate part of the proceedings. To the extent that the costs calculated on the ordinary basis do not meet all of the Defendants/Cross-Claimants costs, the balance of those costs, calculated on the indemnity basis, should be paid out of the deceased’s estate.

The Law – Family Provision Proceedings

96. I turn now to the principles of law relating to costs in the family provision proceedings. On this topic, the Offer of Compromise is particularly relevant.

97. Rule 42.15A of the UCPR, which is applicable to family provision proceedings (Page v Page [No 2] [2016] NSWSC 1323 at [51]-[52]), 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.

98. There was no submission made that the Offer of Compromise was not a genuine offer of compromise, or one merely made to trigger the costs consequences under the rules: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368. I am satisfied that the offer made to each of the Plaintiffs represented a real compromise.

99. I dealt with the principles in Chisak v Presot (No 2) [2021] NSWSC 754 at [54]-[66]). It is not necessary to repeat what I wrote there. The rule referred to leaves parties with an expectation of the costs consequences that, in the ordinary course of litigation, will flow from the non-acceptance of an offer of compromise made under the UCPR where the offerees obtain a less favourable result than the one made in the offer.

100. Recently, in D Capital 2 Pty Ltd v Western (No 2) [2022] NSWSC 1283 at [127], Meek J referred to what I had written in Meres v Meres (No 2) [2017] NSWSC 523. In that case, I explained the two-stage process for determining the effect of what is said to be an Offer of Compromise at [43]-[44]:

“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”:

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 r 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 to 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].”

101. In Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248 the approach to be adopted by the Court was set out as follows at [11] and [13] (Meagher, McCallum JJA and Simpson AJA):

“It is convenient to start with the statement of those principles by Mason P in Morgan v Johnson (1998) 44 NSWLR 578 at 581–582:

‘(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: Maitland Hospital [(1992) 27 NSWLR 721] (at 725–726); Hillier [(1995) 36 NSWLR 414] (at 421, 431).

(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital (at 724).

(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party: NSW Insurance Ministerial Corporation v Reeve [(1993) 42 NSWLR 100] (at 102); Hillier (at 422). 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’: Maitland Hospital (at 724); see also Hillier (at 420).

(4) Lying behind the rule is the common knowledge that ‘litigation is inescapably chancy’: Maitland Hospital (at 725). For this reason, the ordinary provision is expected to apply in the ordinary case: ibid NSW Insurance Ministerial Corporation v Reeve (at 102–103). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: NSW Insurance Ministerial Corporation v Reeve (at 102).

…

(5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind: Maitland Hospital (at 725–726). Reasons must be given for ‘otherwise ordering’: Hillier (at 419); Quach [(Court of Appeal, 15 June 1995, unreported)].’

…

In Fairall v Hobbs (No 2) [2017] NSWCA 133, where it was accepted that the presumption in r 42.15 might be displaced ‘by demonstrating that rejection of the offer was reasonable’, the court described the matters relevant to such an assessment as including:

‘[15] … where the full parameters of the dispute are still uncertain at the time of the offer: Equity 8 Pty Limited v Shaw Stockbroking Limited [2007] NSWSC 503 at [42]; or where the offeror’s case changes after the offer: South EasternSydney Area Health Service v King [2006] NSWCA 2 at [85]; or where all relevant evidence has not been served before the offer: Vale v Eggins (No.2) [2007] NSWCA 12 at [22].’

102. The judgment in Croghan v Blacktown City Council was referred to in Mendonca v Tonna (No 3) [2020] NSWCA 332, in which the Court of Appeal (Bell P, Meagher and Payne JJA), wrote, at [24]:

“As this Court said in Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248 at [12]-[14], a significant (but not necessarily determinative) factor that may justify the Court ordering ‘otherwise’ is where the rejection of the offer was reasonable. Whether that is so depends on the facts and circumstances specific to the case, including whether the nature of the dispute was uncertain at the time of the offer; whether the offeror’s case changed after the offer was made; or whether all the relevant material had been served before the offer was made. Furthermore, an offer made pursuant to the UCPR will generally not attract indemnity costs where no significant compromise is made by the offeror: Mega-Top Cargo Pty Ltd v Moneytech Services Pty Ltd [2016] NSWCA 3 at [5].”

103. On the question as to whether the rejection of the offer was reasonable, albeit in the context of the service of a Calderbank offer, Ward CJ in Eq outlined the applicable principles in Wheatley v Lakshmanan (No 2) at [97]-[99]:

“Whether a rejection of a Calderbank offer was unreasonable is an evaluative judgment which must be made by reference to the terms of the offer and all the relevant surrounding circumstances (see, for example, King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11] per Young JA, with whom Hodgson and Campbell JJA agreed). I note that it has been said that a finding of unreasonableness should not be made other than on tolerably clear grounds (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113] per Basten JA with whom Young CJ in Eq and Giles JA agreed).

When determining whether the rejection or non-acceptance of the offer was unreasonable the Court is to have regard to a number of factors (referred to in Miwa at [12]), including those identified in Hazeldene’s Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA. Such factors include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree’s prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it (see also Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (NSW) (No 2) [2020] NSWSC 519; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA).

Factors that have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192] per Allsop P, as his Honour then was, Beazley JA, as Her Excellency then was, and McColl JJA agreeing); all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22] per Beazley JA, with whom McColl JA agreed); the inclusion of conditions in the offer (Magenta Nominees); the offeror’s case changing after the making of the offer (South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [85] per Hunt AJA, Mason P and McColl JA agreeing); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236; [1996] FCA 862 at 242D per Lindgren J).”

104. The recent judgment of Payne JA in YWCA Australia v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 102 demonstrates that there remains a difference in the authorities as to whether exceptional circumstances are required for the Court to “otherwise order”. Although his Honour was referring to UCPR r 42.14, what his Honour wrote, at [23], applies equally to UCPR r 42.15A:

“There is a difference in the authorities about whether r 42.14(2) requires exceptional circumstances for the court to ‘otherwise order’: see Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [15] (Spigelman CJ, Beazley JA and McColl JA); Barakat v Bazdarova [2012] NSWCA 140 at [42] – [49] (Tobias AJA, with whom Bathurst CJ and Whealy JA agreed). It is not possible to state the circumstances in which the court’s discretion to ‘otherwise order’ might be exercised: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [48] (McColl JA, with whom Gleeson JA and Sackville AJA agreed). It is not necessary to determine whether a court’s discretion to ‘order otherwise’ under r 42.14(2) is confined to ‘exceptional circumstances’: see Barakat v Bazdarova at [48]; Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) at [46]-[48]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [32]-[38] (Gleeson JA and Tobias AJA). To the extent that such circumstances are required, they are present here.”

105. In Walker v Harwood [2017] NSWCA 228, Basten JA had written at [22]:

“There is a further consideration to be taken into account in determining how willing the court should be to depart from the ordinary rule. Satellite litigation in relation to costs imposes a significant drain on both public and private resources and should be discouraged so far as justice permits. Access to the appellate jurisdiction to challenge costs orders is inconsistent with the obligations of the courts and the parties under Pt 6, Div 1 of the Civil Procedure Act 2005 (NSW) ‘to facilitate the just, quick and cheap resolution of the real issues in the proceedings’. The ‘real issues’ should be understood as the substantive issues and not ancillary issues, such as those relating to costs. That purpose of facilitation will best be achieved by maintaining a tight leash on the circumstances in which the court should otherwise order, thereby promoting certainty in the operation of the provisions relating to offers of compromise and discouraging offerees from seeking to ‘game the system’.”

106. Perhaps, a useful summary of what the Court ought to do in determining whether to “otherwise order” was provided by Kunc J in Bates v Cooke (No 2) (which was cited, with approval, by White J in AB v Curry (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] (McMillan J), and Smith v Whittaker [2016] VSC 287 at [36] (Derham AsJ)). Kunc J wrote at [33]:

“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’.”

107. (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.)

108. Because it is relevant to the submissions made on behalf of the Plaintiffs, I should note that the fact that an adverse costs order will cause hardship to the unsuccessful party will not be sufficient, on its own, to resist the usual order. In this regard, I refer to Houatchanthara v Bednarczyk [1996] NSWCA 253, in which Clarke JA (Handley JA and Santow AJA agreeing) expressed that:

“[i]t is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk.”

109. Furthermore, the impecuniosity of a party is not a ground for refusing to make an order for costs against that party: Sassoon v Rose [2013] NSWCA 220 at [10] (Meagher JA, Gleeson JA agreeing). As was written there, “[T]he fact that an unsuccessful party is, or may, not be able to meet an order for costs is not a good reason to deprive the successful party of the opportunity to enforce or attempt to enforce such an order”.

110. The comments of the Court of Appeal in Bassett v Bassett [2021] NSWCA 320 at [198] are also relevant in this regard:

“Whether the adverse impact of legal costs or potential costs liabilities should be taken into account in assessing the needs and financial circumstances of particular beneficiaries and/or any applicant for orders under s 59 of the Succession Act is ultimately a discretionary matter; the factors specified in s 60(2) are all matters which the Court may consider. It may be doubted whether a “wise and just testator” (Re Allen [1922] NZLR 218 at 220–221; [1921] GLR 613; Bosch v Perpetual Trustee Co Ltd [1938] AC 463 at 478–479; The Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 19–20; [1962] HCA 19; Goodman v Windeyer (1980) 144 CLR 490 at 499–502; [1980] HCA 31; see [171] above), in whose shoes the Court notionally stands in considering questions of adequate provision for proper maintenance of an eligible applicant, would self-evidently look favourably upon an adult child whose own financial position has been diminished by the unsuccessful pursuit of his or her siblings in expensive legal proceedings in relation to the estate.”

111. I also remember what I had written in Page v Hull-Moody [2020] NSWSC 411 at [256]:

“Now, as a result of the proceedings that she commenced, subject to further submissions on the question of costs, Julie-Anne may have a significant debt which will relate to the costs that have been incurred in these proceedings. It is difficult to conclude that the Court should make a family provision order out of the estate of the deceased in order to ensure the payment of the costs of the proceedings. One asks rhetorically why a wise and just testatrix, or the application of contemporary community standards, would reasonably require that the deceased’s Will should be altered in favour of an adult child for whom she provided, in order to further provide for, amongst other things, the expensive costs consequences of the adult child’s decision to bring proceedings to effectively challenge that Will?”

112. More generally, in Harkness v Harkness (No 2) at [18]-[19], I set out the principles that relate to determining the issue of costs in family provision proceedings:

“(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).

Finally, what I said in Smith v Smith (No 2) 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.’”

113. In Bruce v Greentree (No 2) [2015] NSWSC 1636 at [43], I wrote:

“…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].”

114. The principles in respect of costs orders in family provision matters were summarised by the Court of Appeal in Haertsch v Whiteway (No 2) [2020] NSWCA 287 at [4]-[11] (Macfarlan, Meagher and Leeming JJA).

115. I have borne these principles in mind.

Determination – Family Provision Proceedings

116. Senior counsel did not provide any submissions on the reasons why the order sought by the Defendants, based upon the service of the Offer of Compromise, should not be made. I have referred to what was orally submitted at the costs hearing and the copy letter referred to then.

117. The offer made to each of the Plaintiffs clearly provided for a lump sum and the payment of costs, which lump sum, whilst not anything like the provision made for each in the 2005 Will, was clearly an offer that was a genuine compromise in all the circumstances. It is to be noted that the dispute existing in relation to eligibility was also pointed out in the covering letter enclosing the Offer of Compromise.

118. No explanation was given, in correspondence, or otherwise, for rejecting the offer made by the Defendants or allowing it to lapse. Nor was there any suggestion that the Plaintiffs sought to have the offers reinstated following the receipt of the Defendants’ evidence, or to make a counter-offer, in the same, or similar, terms, as the Offer of Compromise, after it had lapsed.

119. I commend to parties involved in proceedings in which a family provision order is sought, that every effort should be made 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 offerors’ 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.

120. One is left with the suspicion that as the Plaintiffs had entered into a conditional costs’ agreement with their legal representatives, they may have felt that they had nothing to lose by proceeding with their claims. If that is what they thought, they were quite wrong.

121. In my view, the Plaintiffs should bear the Defendants’ costs, calculated on the ordinary basis, of the family provision proceedings up until a reasonable time after they had an opportunity to have considered the Defendants’ affidavit evidence. In the exercise of my discretion, I propose to otherwise order, at least in part taking into account the date of the service of the Defendants’ evidence.

122. Bearing in mind when it was served, I am satisfied that the Defendants’ costs, calculated on the indemnity basis, after 31 January 2022 should be paid by them. Whilst this order does not strictly comply with the terms of UCPR rule 42.15A, I am considering the overall justice of the case so far as it relates to the family provision proceedings. The Plaintiffs should pay the Defendants’ costs, calculated on the indemnity basis, from 1 February 2022.

The separate proceedings

123. There was really no basis for the Plaintiffs commencing the separate proceedings so close to the date of the commencement of the hearing.

124. I have considered whether the costs should be calculated on the indemnity basis, but I have come to the conclusion that it should not. The Plaintiffs did not persist with the claim once the information about the debts was provided to them. Indeed, they consented to the dismissal of the separate proceedings in the event that the 2012 Will was found to be the last valid Will of the deceased.

125. The Court orders:

1. In respect of the Probate proceedings:

1. There be no order as to the Plaintiffs/Cross-Defendants’ costs, to the intent that they bear their own costs of the Cross-Claim.

2. The Plaintiffs/Cross-Defendants to pay the Defendants/Cross-Claimants’ costs, calculated on the ordinary basis, of the Cross-Claim, including the Defendants/Cross-Claimants’ costs associated with the application for costs.

1. To the extent that the Defendants/Cross-Claimants’ costs are not paid by the Plaintiffs/Cross-Defendants, those costs, calculated on the indemnity basis, are to be paid, or retained, as the case may be, out of the estate of the deceased.

2. In respect of the family provision claims:

1. There be no order as to the Plaintiffs’ costs, to the intent that they bear their own costs of the proceedings.

2. The Plaintiffs to pay the Defendants’ costs, calculated on the ordinary basis, up to 31 January 2022; and to pay the Defendants’ costs, calculated on the indemnity basis, from 1 February 2022, including the Defendants’ costs associated with the application for costs.

3. To the extent that the Defendants’ costs are not paid by the Plaintiffs, those costs, calculated on the indemnity basis, are to be paid or retained, as the case may be, out of the estate of the deceased.

3. In respect of the separate proceedings:

1. The Plaintiffs to pay the Defendants’ costs of the separate proceedings, calculated on the ordinary basis.

2. To the extent that the Defendants’ costs are not paid by the Plaintiffs, those costs, calculated on the indemnity basis, are to be paid or retained, as the case may be, out of the estate of the deceased.

4. Orders that the Exhibits should be dealt with in accordance with the Uniform Civil Procedure Rules 2005 (NSW).

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Decision last updated: 12 October 2022