Benz v Armstrong; Benz v Armstrong; Benz v Armstrong (No 2)

[2022] NSWSC 668

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Benz v Armstrong; Benz v Armstrong; Benz v Armstrong (No 2) [2022] NSWSC 668

Hearing dates:

On the papers

Date of orders:

26 May 2022

Decision date:

26 May 2022

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

See [47]

Catchwords:

SUCCESSION — Family provision — Nature of orders — Orders for provision

COSTS — Indemnity costs — Unreasonable refusal of Calderbank offer

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98(4)

Probate and Administration Act 1898 (NSW), s 84(3)

Succession Act 2006 (NSW), s 59

Uniform Civil Procedure Rules 2005 (NSW), rr 41.14, 42.1, 42.25

Cases Cited:

Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39

Bassett v Cameron (No 2) [2021] NSWSC 419

Beach Petroleum NL v Johnson (1995) 57 FCR 119; [1995] FCA 350

Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534

Calderbank v Calderbank (1975) 3 ALL ER 333

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353

Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398

Commonwealth of Australia v Gretton [2008] NSWCA 117

Coote v Coote [2021] NSWSC 59

Drummond v Drummond [1999] NSWSC 923 per Austin J

Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (NSW) (No 2) [2020] NSWSC 519

Hamod v New South Wales [2011] NSWCA 375

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

Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213

Hazeldene’s Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) (2005) 13 VR 435; [2005] VSCA 298

Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23

Karpin v Gough [2022] NSWSC 471

King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204

King v Hudson [1009] NSWSC 1500

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

Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (FCAFC, Spender, French (as his Honour then was) and Lee JJ, 29 August 1995, unrep)

MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236; [1996] FCA 862

Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13

Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344

Ohn v Walton (1995) 36 NSWLR 77

Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121

Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278

Re Jones; Christmas v Jones [1897] 2 Ch 190

Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35

South Eastern Sydney Area Health Service v King [2006] NSWCA 2

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

Vale v Eggins (No 2) [2007] NSWCA 12

Warton v Yeo (2015) 15 ASTLR 462; [2015] NSWCA 115

Wilson v Porada (No 2) [2017] NSWSC 1362

Category:

Costs

Parties:

2020/00101770
Anna Rosalba Benz (Plaintiff)
Erlita Espanol Armstrong (Defendant)

2020/00106692
Catherine Jean Benz (Plaintiff)
Erlita Espanol Armstrong (Defendant)

2020/00234101
Andrew James Benz (Plaintiff)
Erlita Espanol Armstrong (Defendant)

Representation:

Counsel:
2020/00101770
CA Vindin (Plaintiff)
A Lakeman (Defendant)

2020/00106692
GE Underwood (Plaintiff)
A Lakeman (Defendant)

2020/00234101
PJ Muscat (Plaintiff)
A Lakeman (Defendant)

Solicitors:
2020/00101770
McCray Legal (Plaintiff)
Fox and Staniland Lawyers (Defendant)

2020/00106692
Michael Rogers & Co (Plaintiff)
Fox and Staniland Lawyers (Defendant)

2020/00234101
PB Ritz Lawyers (Plaintiff)
Fox and Staniland Lawyers (Defendant)

File Number(s):

2020/00101770; 2020/00106692; 2020/00234104

Publication restriction:

Nil

Judgment

1. HER HONOUR: On 5 May 2022, I published reasons for judgment in three separate family provision claims relating to the estate of the late Dr William Benz (Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534). For the reasons there set out, I concluded that in all circumstances there was not adequate or proper provision made for any of the three plaintiffs and determined what I considered to be the adequate and proper provision to be made out of the estate and notional estate of the deceased (indicating the property to be designated as notional estate to the extent necessary to enable that provision to be made (and to meet any costs orders)). I directed the parties to file any brief submissions as to the form and content of the proposed orders so as to reflect the principal reasons within seven days.

2. The respective parties have now filed written submissions (other than in the case of Catherine, whose solicitor simply indicated her position as to the proposed orders without the need for submissions) and in some cases submissions in reply or supplementary submissions. These reasons now deal with the remaining issue (costs) and the making of the final orders will now dispose of the proceedings. For convenience, I adopt the abbreviations used in the principal judgment.

3. There is no dispute as to the relevant costs principles applicable (which I summarise briefly below). The position of the respective plaintiffs (and Erlita’s response thereto) is as follows.

Anna

4. Anna has no issue with the form of the proposed orders as set out in the principal judgment at [306], save that she seeks a more favourable costs order (on the basis of the making by her, and non-acceptance by Erlita, of an offer on 15 October 2021, expressed to be “without prejudice save as to costs”, to accept the sum of $1,700,000 inclusive of costs in full and final settlement of her claim). The 15 October 2021 letter (which on its face was also to be sent by email) was expressed to be made in accordance with the principles in Calderbank v Calderbank (1975) 3 ALL ER 333 and contained a statement to the effect that Anna would rely on the offer (should it not be accepted) on the issue of costs. The offer was expressed to remain open for acceptance until 9.15am on the following Monday, 18 October 2021, after which it was to lapse. The first day of the hearing was on 18 October 2021.

5. Anna accepts that the time for acceptance of the offer was short, saying that the offer was made on the Friday morning prior to commencement of the hearing the following Monday. However, it is noted that this offer followed the making by Erlita of a formal Offer of Compromise (stated also to be put in accordance with the Calderbank principles) three days before (sent by letter dated 12 October 2021) in which Erlita offered the sum of $200,000 to settle the proceeding (that offer being expressed to be open until 9.30am on 18 October 2021). Further, it is noted that Erlita responded to Anna’s Calderbank offer that same day, making a further Offer of Compromise and Calderbank offer in the sum of $333,000, those expressed to be until 9.15am on 18 October 2021. It is noted that the effect of the making of the further offer by Erlita was to reject the offer that had been made by Anna.

6. Anna submits that, having achieved a better result than the basis on which she offered to settle (namely an order for provision in the sum of $1,900,000 together with a costs order on the ordinary basis other than for indemnity costs in respect of a limited aspect of preparation of the claim), there should be an order for Anna’s costs to be paid on the indemnity basis. Although initially Anna sought this to be from the commencement of hearing on 18 October 2021, her offer of 15 October 2021 having been rejected by the defendant’s offer made later that same day, in further submissions, Anna has amended that to seeking an order for indemnity costs from Saturday 16 October 2021, the day after Anna’s Calderbank offer was in effect rejected. It is submitted that this is of consequence, as there were several affidavits served by Erlita on 15 October 2021 requiring much attention and thus incurring costs over the weekend prior to commencement of hearing on Monday, 18 October 2021.

Catherine

7. As adverted to above, Catherine takes no issue with the content of the proposed orders but seeks an additional order such that if the orders for provision and costs are not met in the contemplated time frame Catherine may apply to the Court for ancillary relief, including any necessary orders compelling the sale of particular assets or appointing trustees for sale of particular assets. A proposed form of order to that effect was provided.

Andrew

8. Andrew takes no issue with the proposed form of orders so far as concerns the order in which assets shall be designated as notional estate for the purposes of meeting the orders for provision and the orders for costs after the exhaustion of the actual estate for that purpose.

9. Similarly to the position of Catherine, Andrew seeks an additional order such that, if the orders for provision and costs are not met in the timeframe contemplated, he can apply to the Court for ancillary relief, including any necessary orders compelling the sale of particular assets or appointing trustees for sale of particular assets (and proposed a form of order to that effect in the same terms as that put forward by Catherine). (Andrew also noted a cross-referencing error in relation to the proposed orders in his proceeding (which I will correct).)

10. I note that in reply submissions, Anna also seeks an order reserving liberty to apply for ancillary and consequential relief in aid of enforcement in the terms sought by Andrew.

11. On the issue of costs, Andrew submits that determining the amount of his costs “as to the identification of the assets of the deceased’s estate and notional estate” (that being the subject of the indemnity costs order) will involve a level of extreme practical difficulty (for the parties and on any assessment) and Andrew’s position is that, if at all possible, the costs assessment process should be avoided and an agreement should be reached on lump sum calculations.

12. Andrew has proposed a formula to Erlita (on an open basis) that provides in effect for:

1. 25% of his costs to be agreed as costs “as to the identification of the assets of the deceased’s estate and notional estate”, and paid on the indemnity basis;

2. the balance of his costs to be paid on the ordinary basis, with solicitors’ fees discounted by 30% for that purpose;

3. a further discount to account for any arithmetical errors or risk that the assessment of ordinary costs is overstated; and

4. an overall payment on account of Andrew’s costs out of the estate and/or notional estate of $125,000.

13. It is said that this would leave Andrew to bear the balance of his costs of the proceeding (approximately $32,000) and the costs of the related trust proceeding (which will be claimed from, but is expected unlikely to be recoverable against, the trust) of approximately $8,000; thus a total of approximately $40,000. It is noted that this would leave him with net provision of approximately $860,000.

14. As at the time of the submissions, Andrew had not received a response to this proposal. (I note that, as far as I know it has not since been accepted.) Andrew submits that, in the absence of a response, orders might be made pursuant to the jurisdiction to make a specified gross sum costs order under s 98(4)(c) of the Civil Procedure Act 2005 (NSW) referring to the principles summarised in Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39.

15. In this regard, Andrew submits that: the assessment of Andrew’s costs through the lens of the contemplated order would no doubt be protracted and expensive, given that even itemised costs ledgers may not easily reflect which pieces of work related to the identification of the assets of the deceased’s estate and notional estate, and which did not; and that a specified gross sum costs order would avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process.

16. It is noted that the power to award a gross sum should only be exercised when it is considered that this can be done fairly between the parties and where an appropriate sum can be determined from the available materials. In that regard, Andrew submits that: it is clear that he and his legal representatives took the lead in relation to the identification of the assets of the deceased’s estate and notional estate (certainly that was the case from my observation of the conduct of this issue at the hearing); this is apparent on the face of the affidavits filed by Andrew, and on the position taken by Andrew’s representatives at the hearing (including time spent on cross-examination and submissions on this issue (again, I agree)); and that 25%, with a discount in favour of Erlita, is a broad-brush but fair estimation of costs attributable to this issue.

17. It is submitted that, applying an impressionistic approach in terms of costs generally, the practical upshot of the proposed overall figure is fair and reasonable and consistent with the ultimate success of Andrew. (The need for further consideration of this issue and the tender of further documents, including itemised invoices, was foreshadowed.)

18. Andrew also makes clear that he does not take issue with a further order being added to reflect the payment of Erlita’s costs out of the estate and/or notional estate of the deceased.

19. In response to Andrew’s submissions on the issue as to the indemnity costs aspect of the orders, Anna says that the assessment of costs of establishing the assets of the estate in the face of the defendant’s failures to make full disclosure, those costs having been awarded on the indemnity rather than the ordinary basis, is not as problematic for Anna; and that if a lump sum order were to be contemplated, Anna would be content to adopt a percentage of 5%. It is conceded by Anna that Andrew’s legal representatives undertook the bulk of work on this aspect of the matter. Anna says that she will provide details as to her costs to facilitate the process if it is adopted.

Erlita’s position

20. Erlita seeks orders that her costs (as defendant) in each matter be paid or retained on an indemnity basis from the estate or notional estate of the deceased (noting that ordinarily the administrator's costs are paid from the estate, referring to Karpin v Gough [2022] NSWSC 471 at [224]). Reference is also made to r 42.25 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) which provides that person who is or has been a party to any proceedings in the capacity of trustee is entitled to be paid his or her costs in the proceedings.

21. Erlita points out that, as the executor and trustee of the deceased’s estate, she still has a duty to account to the beneficiaries of the estate including the remaining residual beneficiaries (Michele, Robert and John – although it is noted that there was a settlement reached with John, the terms of which have not been disclosed), including the payment of the costs of the respective plaintiffs and Erlita’s own costs in each proceeding.

22. In submissions in reply to Anna’s submissions, Erlita maintains her position that the usual order should be made in respect of Erlita’s costs.

23. As to Anna’s claim for indemnity costs, Erlita refers to r 41.14 (2) of the UCPR and notes that an order for indemnity costs pursuant to the rule is a discretionary matter. In that regard, Erlita raises the following three factors that she says should be considered: first, that the hearing that commenced on 18 October 2022 involved a multiplicity of parties and it is said that settlement with one party and not the others could result in an unfair advantage to that party; second, that the Court has considered the amount of the costs claimed by each party and it is submitted that in determining the amount of provision to be made to Anna, her costs (assessed on the ordinary basis) would usually be considered; and, third, the timing of the offer (being made on the Friday before the hearing was to commence).

24. In submissions in reply to Andrew’s submissions, Erlita maintains that the usual orders should be made that Andrew’s costs be agreed or assessed (pausing here, I see no need to add that the costs “be agreed or assessed” as that will follow in the ordinary course).

25. As to the invitation to reach agreement about the quantum of the costs, Erlita says that Andrew’s costs appear to have increased from the amounts set out in the affidavit of Phillip Briffa sworn 1 October 2021 (of $103,396 inclusive of GST on the ordinary basis and $137,603 inclusive of GST on the indemnity basis) (referred to at [260] of the principal judgment); and says that the reasonableness of Andrew’s claim is difficult to consider without more detail of the costs incurred (it being noted that itemised invoices appear to be available). Erlita’s suggestion appears to be that the parties be given further time to see if an agreement can be reached. (Given the apparent fate of the last attempted mediation, I have some doubts as to the wisdom of allowing further time for some possible future agreement.)

Determination

26. As noted above, the relevant costs principles do not appear to be in dispute. The usual order is that costs follow the event (r 42.1 of the UCPR); unless the Court considers that some other order ought to be made (see Commonwealth of Australia v Gretton [2008] NSWCA 117 at [38] per Beazley JA, as Her Excellency then was (with whom Mason P agreed)). Costs orders in civil litigation are well recognised as being compensatory, not punitive, in nature (see Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA concurred, in turn citing Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 per Mason CJ; Ohn v Walton (1995) 36 NSWLR 77 at 84 per Cole JA). However, special costs orders will be warranted in certain circumstances, including where the special costs procedure for offers of compromise is validly invoked or the Calderbank principles apply.

27. In the context of family provision claims, ordinarily the costs of the successful plaintiff be paid out of the estate on the ordinary basis and the executor’s costs be paid out of the estate on the indemnity basis (see, for example, Coote v Coote [2021] NSWSC 59 at [197] per Robb J his Honour there describing these as the usual orders). The position is less clear vis-à-vis unsuccessful plaintiffs. In Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35 at 521-2, Gaudron J opined that “[f]amily provision cases stand apart from cases in which costs follow the event” and that “costs in family provision cases generally depend on the overall justice of the case”. Her Honour went on to state that there may be “circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate”. That said, Hallen J in Harkness v Harkness (No 2) [2012] NSWSC 35 at [18](e) and (f) has indicated that it is far from clear that there is such thing as an usual costs order, in terms of an unsuccessful plaintiff’s costs being borne by the estate. As to quantum, in Wilson v Porada (No 2) [2017] NSWSC 1362, Slattery J at [43] referred to the costs of a “standard family provision proceeding” as follows:

43.… A standard family provision proceeding conducted over a two day period with a handful of witnesses on each side could incur costs of the order of $70,000 to $80,000. A more complex case going four days may incur costs of the order of $120,000 to $140,000.

28. As Erlita has noted in her submissions, ordinarily an executor or trustee representing the estate will be entitled to costs out of the estate (see, for example, Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13 at 578 per Latham CJ; Drummond v Drummond [1999] NSWSC 923 (Drummond) at [41]-[51] per Austin J) (subject, of course, to exceptions - including where the executor is effectively protecting his or her own interests – see Warton v Yeo (2015) 15 ASTLR 462; [2015] NSWCA 115 at [72]; Re Jones; Christmas v Jones [1897] 2 Ch 190 at 197; King v Hudson [1009] NSWSC 1500; Drummond at [43]-[45] and [49]) (as to a large extent, Erlita here was).

29. In the present case, the two issues raised in the submissions as to the costs orders are: first, Anna’s claim for indemnity costs; and second, the suggestion by Andrew (adopted by Anna) that in the absence of agreement with Erlita as to an agreed sum for costs there should be a gross sum costs order (to avoid the delay and cost of a formal costs assessment process).

28. Turning to the first, as to the consequences of non-acceptance of a Calderbank offer, in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa) Basten JA (McColl and Campbell JJA agreeing) summarised at [8] the principles involved, noting that there were two questions, namely, whether there was a genuine offer of compromise and whether it was unreasonable for the offeree not to accept it. Whether a rejection of a Calderbank offer (or other offer of settlement) was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances (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). It has been said that a finding of unreasonableness should not be made other than on 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).

29. The factors to which regard is to be had when considering whether the rejection or non-acceptance of the offer was unreasonable (referred to in Miwa at [12]) include 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, namely: 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 FavottoFamily Restaurants Pty Ltd v Chief Commissioner of State Revenue (NSW) (No 2) [2020] NSWSC 519 (Favotto); Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA).

30. 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: 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, as her Excellency then was, with whom McColl JA agreed); 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 and McColl JJA agreeing); 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); the inclusion of conditions in the offer (Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (FCAFC, Spender, French (as his Honour then was) and Lee JJ, 29 August 1995, unrep)); 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).

31. As to the second, a gross sum costs order is appropriate where it is desirable to avoid the expense, delay and aggravation likely to be involved in a costs assessment or where a party’s conduct has unnecessarily contributed to the costs of the proceedings and “especially where the costs incurred have been disproportionate to the result of the proceedings” (Hamod v New South Wales [2011] NSWCA 375 (Hamod v New South Wales) at [817]-[818] per Beazley JA with whom Giles and Whealy JJA agreed).

32. As to the considerations material to the exercise of the discretion, these principally include the following (see Hamod v New South Wales at [813]-[820] per Beazley JA (as her Excellency then was) with whom Giles and Whealy JJA agreed, and Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [5]-[7] per Campbell AJA): the complexity of the proceedings in relation to their cost; whether the assessment of costs would be “protracted and expensive”; whether there is a risk that the unsuccessful party would not be able to meet a liability of the order likely to result from the assessment; and the relative responsibility of the parties for the costs incurred, especially where the costs incurred are disproportionate to the result of the proceedings.

33. As to the circumstances where gross sum costs orders may be made, as noted in Bassett v Cameron (No 2) [2021] NSWSC 419 (at [28]), the power to make a gross sum costs order “should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available” (see Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22] per Giles JA).

34. The purpose of a gross sum costs order is to avoid the expense, delay, and aggravation involved in protracted litigation arising out of assessment (Hamod v State of New South Wales at [29]; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9] per Einstein J; Beach Petroleum NL v Johnson (1995) 57 FCR 119; [1995] FCA 350 at 120 per von Doussa J).

35. Applying those principles in the present case, I say the following.

36. First, as to the consequence of non-acceptance of Anna’s Calderbank offer, there is no suggestion by Erlita that the offer did not enliven the special costs orders regime; i.e., that it did not involve a genuine element of compromise. Having regard to the provision that Anna sought in her submissions served prior to the hearing (notwithstanding that at the hearing her counsel submitted that a lesser sum was the minimum required for proper provision), it is clear that it did. Therefore, the question is whether it was unreasonable of Erlita to reject the offer. In this context Erlita raises two issues (the timing of the offer and the fact that there were other claims to be taken into account).

37. As to the first, I do not accept that the timing of the offer counts against the making of an indemnity costs order in circumstances where it was clearly capable of consideration within the time allowed (indeed Erlita was able to respond that same day) and Erlita herself appears to have contemplated that an offer made shortly before the hearing was not unreasonable (herself making such an offer on the Friday) and having made an earlier offer a mere three days before.

38. As to the second (the fact that the offer was by one of the three then subsisting plaintiffs) (Erlita apparently already having felt capable of reaching a settlement with John despite her current submission that to accept Anna’s offer might potentially be unfair to the other plaintiffs), the offer was not conditional on any stance being taken with respect to the other plaintiffs. Moreover, with such a large estate it could hardly be thought that acceptance of this offer would deplete the resources of the estate so as to prejudice the ability to reach a compromise with the other plaintiffs or to meet an order for provision in their favour. Indeed, the very fact that Erlita was capable of making two offers of compromise that very week to Anna belies the proposition that there was any difficulty accepting this offer alone.

39. Considering the factors referred to in Favotto, I make the following observations. As to the stage of the proceeding at which the offer was made, as noted above, it was effectively on the eve of the hearing but by then Erlita was in a prime position to have understood the strengths and weaknesses of the case and to assess the offer. As to the time allowed to the offeree to consider the offer, as noted, there was clearly sufficient time for Erlita to do so and her own offer allowed a similar limited period of time for acceptance. As to the extent of the compromise offered, it was around $300,000 or so less than the amount that Anna had sought in submissions before the hearing and was inclusive of costs, which involved a genuine element of compromise; as to the offeree’s prospects of success, assessed as at the date of the offer, it surely must have been apparent to Erlita, with the benefit of legal advice, that she was the beneficiary of a large estate and that Anna stood to inherit nothing from her father despite that large estate (and, with Andrew, was the only child of the deceased who had not received assistance during his lifetime with the acquisition of property) – in those circumstances it seems difficult to think that Erlita did not appreciate that it was on the cards that some order for provision would be made; as to the clarity with which the terms of the offer were expressed there is no issue; and the offer clearly foreshadowed an application for indemnity costs in the event of its rejection.

40. None of the factors that in other cases have been found to be relevant in determining whether, and tending against a finding that, the rejection of a Calderbank offer was not unreasonable here applies. All or almost all relevant evidence seems to have been served by the day of the offer and the matter was ready to proceed; the full parameters of the dispute should by then have been clear; the offeror’s case does not seem relevantly to have changed after the making of the offer; the offer did not include conditions; and the issues in dispute in the proceeding were not complex.

41. Balancing all the above matters, I consider that it was unreasonable for Erlita to reject the offer made by Anna and that an order for indemnity costs should be made with effect from 16 October 2021 in her favour.

42. As to the gross sum costs orders sought by Andrew (and Anna), I consider that this is a case where such orders would be appropriate. I accept that the factor that some costs have been ordered on an indemnity basis is likely to add to the cost and delay of the cost assessment process (and I have no confidence in the ability of the parties to reach agreement if further time is allowed for that process – and indeed it would still be open for them to do so even if gross sum costs orders were to be made).

43. However, there is insufficient information before me to allow me confidently to conclude that a gross sum costs order could be fairly assessed at this stage (even noting that it is to be an evaluative process and not one that masquerades as a disguised costs assessment). Therefore, I propose to put in place a regime to refer the assessment of costs on a fixed sum broad evaluative basis to an external costs referee to prepare a report as to the appropriate sum.

44. Finally, I will make the order as sought by Erlita in respect of her costs (although it is somewhat ironic that she refers to her obligation to account to the residuary beneficiaries for the costs orders in circumstances where she apparently has not felt it necessary to disclose to the residuary beneficiaries the details of the settlement with John).

Orders

47. For the reasons set out above, I make the following orders:

In Anna’s proceeding

1. In lieu of the gift in the plaintiff’s favour under the deceased’s Will of a one-sixth equal share of the deceased’s residuary estate, order pursuant to s 59 of the Succession Act 2006 (NSW) that there be further provision out of the estate of the late Dr William Benz in favour of the plaintiff, in the form of a legacy in the amount of $1.9 million.

2. Order that the plaintiff’s costs be met out of the deceased’s estate: as to the identification of the assets of the deceased’s estate and notional estate, on an indemnity basis and, as to the balance, on the ordinary basis up to and including 15 October 2021 and on the indemnity basis from 16 October 2021.

3. Order that the burden of the legacy provided for in Order (1) be charged as against one-third of the shares retained by the estate and the Centennial Park Property (as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534).

4. Designate so much of the following assets (in the following order) as notional estate as is necessary for the purpose of enabling the executor of the deceased’s estate to meet the order for provision and the order for costs in favour of the plaintiff:

1. the NAB shares transferred to the defendant on 10 January 2019;

2. the Westpac shares transferred to the defendant on 23 January 2019;

3. the $9.2 million worth of shares transferred in specie to the defendant from the deceased’s superannuation fund; and

4. the Pymble Property, as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534.

5. No interest is to be paid on the legacy if it is paid within two months of the making of orders; otherwise, interest calculated at the rate prescribed by s 84A(3) of the Probate and Administration Act 1898 (NSW), on unpaid legacies, is to be paid from that date until the date of payment in full.

6. Grant liberty to the plaintiff to apply, in these proceedings, for consequential and ancillary orders for the purpose of, or with respect to, giving effect to and implementing the family provision order made in favour of the plaintiff.

7. Order that the defendant’s costs be paid or retained on an indemnity basis from the estate of the deceased or, in the event that the estate of the deceased is insufficient to meet the orders for provision and costs in favour of the plaintiff and the defendant’s costs, out of the designated notional estate pursuant to Order (4) and in that order (and, if that be insufficient, out of the Wahroonga Property, as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534).

8. Order that the costs ordered in favour of the plaintiff above be fixed as a gross sum to be determined following referral out to a Court appointed referee to report on the appropriate gross sum based on a broad evaluative assessment in accordance with the principles in Hamod v State of New South Wales [2011] NSWCA 375 and Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213; and order that the referee’s costs of the referral process be borne proportionately by the parties.

9. Direct the parties to nominate an agreed referee or three alternative names within seven days, with a view to the Court making the appointment of its own motion if the parties are unable to agree within that period.

In Catherine’s proceeding

1. Extend time for the making of the plaintiff’s application for provision under s 59 of the Succession Act 2006 (NSW) to 8 April 2020.

2. In lieu of the gift in the plaintiff’s favour under the deceased’s Will of a one-sixth equal share of the deceased’s residuary estate, order pursuant to s 59 of the Succession Act 2006 (NSW) that there be further provision out of the estate of the late Dr William Benz in favour of the plaintiff, in the form of a legacy in the amount of $900,000.

3. Order that the plaintiff’s costs be met out of the deceased’s estate: as to the identification of the assets of the deceased’s estate and notional estate, on an indemnity basis, and as to the balance on the ordinary basis.

4. Order that the burden of the legacy provided for in Order (2) be charged as against one-third of the shares retained by the estate and the Centennial Park Property (as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534).

5. Designate so much of the following assets (in the following order) as notional estate as is necessary for the purpose of enabling the executor of the deceased’s estate to meet the order for provision and the order for costs in favour of the plaintiff:

1. the NAB shares transferred to the defendant on 10 January 2019;

2. the Westpac shares transferred to the defendant on 23 January 2019;

3. the $9.2 million worth of shares transferred in specie to the defendant from the deceased’s superannuation fund; and

4. the Pymble Property, as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534.

6. No interest is to be paid on the legacy if it is paid within two months of the making of orders; otherwise, interest calculated at the rate prescribed by s 84A(3) of the Probate and Administration Act 1898 (NSW), on unpaid legacies, is to be paid from that date until the date of payment in full.

7. Grant liberty to the plaintiff to apply, in these proceedings, for consequential and ancillary orders for the purpose of, or with respect to, giving effect to and implementing the family provision order made in favour of the plaintiff.

8. Order that the defendant’s costs be paid or retained on an indemnity basis from the estate of the deceased or, in the event that the estate of the deceased is insufficient to meet the orders for provision and costs in favour of the plaintiff and the defendant’s costs, out of the designated notional estate pursuant to Order (5) and in that order (and, if that be insufficient, out of the Wahroonga Property, as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534).

9. Order that the costs ordered in favour of the plaintiff above be fixed as a gross sum to be determined following referral out to a Court appointed referee to report on the appropriate gross sum based on a broad evaluative assessment in accordance with the principles in Hamod v State of New South Wales [2011] NSWCA 375 and Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213; and order that the referee’s costs of the referral process be borne proportionately by the parties.

10. Direct the parties to nominate an agreed referee or three alternative names within seven days, with a view to the Court making the appointment of its own motion if the parties are unable to agree within that period.

In Andrew’s proceeding

1. Extend time for the making of the plaintiff’s application for provision under s 59 of the Succession Act 2006 (NSW) to 11 August 2020.

2. In lieu of the gift in the plaintiff’s favour under the deceased’s Will of a one-sixth equal share of the deceased’s residuary estate, order pursuant to s 59 of the Succession Act 2006 (NSW) that there be further provision out of the estate of the late Dr William Benz in favour of the plaintiff, in the form of a legacy in the amount of $900,000.

3. Order that the plaintiff’s costs be met out of the deceased’s estate: as to the identification of the assets of the deceased’s estate and notional estate, on an indemnity basis and, as to the balance on the ordinary basis.

4. Order that the burden of the legacy provided for in Order (2) be charged as against one-third of the shares retained by the estate and the Centennial Park Property (as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534).

5. Designate so much of the following assets (in the following order) as notional estate as is necessary for the purpose of enabling the executor of the deceased’s estate to meet the order for provision and the order for costs in favour of the plaintiff:

1. the NAB shares transferred to the defendant on 10 January 2019;

2. the Westpac shares transferred to the defendant on 23 January 2019;

3. the $9.2 million worth of shares transferred in specie to the defendant from the deceased’s superannuation fund; and

4. the Pymble Property, as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534.

6. No interest is to be paid on the legacy if it is paid within two months of the making of orders; otherwise, interest calculated at the rate prescribed by s 84A(3) of the Probate and Administration Act 1898 (NSW), on unpaid legacies, is to be paid from that date until the date of payment in full.

7. Grant liberty to the plaintiff to apply, in these proceedings, for consequential and ancillary orders for the purpose of, or with respect to, giving effect to and implementing the family provision order made in favour of the plaintiff.

8. Order that the defendant’s costs be paid or retained on an indemnity basis from the estate of the deceased or, in the event that the estate of the deceased is insufficient to meet the orders for provision and costs in favour of the plaintiff and the defendant’s costs, out of the designated notional estate pursuant to Order (5) and in that order (and, if that be insufficient, out of the Wahroonga Property, as defined in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534).

6. Order that the costs ordered in favour of the plaintiff above be fixed as a gross sum to be determined following referral out to a Court appointed referee to report on the appropriate gross sum based on a broad evaluative assessment in accordance with the principles in Hamod v State of New South Wales [2011] NSWCA 375 and Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213; and order that the referee’s costs of the referral process be borne proportionately by the parties.

7. Direct the parties to nominate an agreed referee or three alternative names within seven days, with a view to the Court making the appointment of its own motion if the parties are unable to agree within that period.

**********

Amendments

27 May 2022 - [4] amendment to date

Decision last updated: 27 May 2022