Briggs v Mantz (No 2)
[2014] VSC 487
•3 October 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2013 02482
IN THE MATTER of Part IV of the Administration and Probate Act 1958
-and -
IN THE MATTER of the will and estate of OLGA ADA BRIGGS, deceased
| GARRY GEORGE BRIGGS | Plaintiff |
| v | |
| SHARLENE MANTZ (who is sued as the executor of the will of the abovenamed deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 September 2014 |
DATE OF JUDGMENT: | 3 October 2014 |
CASE MAY BE CITED AS: | Briggs v Mantz (No 2) |
MEDIUM NEUTRAL CITATION: | [2014] VSC 487 |
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Practice and Procedure — Family provision — Costs of successful defendant — Whether to be no orders as to costs or paid by the plaintiff — Whether to be paid on a standard basis or an indemnity basis — Administration and Probate Act 1958, ss 97(6), (7)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Verspaandonk | Slater & Gordon |
| For the Defendant | Mr R Wells | McNab McNab & Starke |
HER HONOUR:
Introduction
In this proceeding, the plaintiff sought an order for further provision from the estate of his mother, Olga Ada Briggs (‘the deceased’), pursuant to s 91 of the Administration and Probate Act 1958 (‘the Act’). The estate was valued at trial at approximately $800,000, but estimated to be reduced by up to $200,000 in total legal costs if those costs were to be borne by the estate. The plaintiff, the only son of the deceased, was left a one-fifth share in the residuary estate, with the other four shares divided equally between his four children, the only grandchildren of the deceased. The relevant facts are set out in my judgment delivered on 22 August 2014.[1] The plaintiff was unsuccessful in his claim and his application was dismissed.[2]
[1]Briggs v Mantz [2014] VSC 281 (22 August 2014) [2]–[93].
[2]Ibid [157].
On 5 September 2014, the parties made submissions concerning the costs of the proceeding:
(a)The defendant sought an order that the plaintiff pay the defendant’s costs on an indemnity basis (assessed at $95,000) from either 31 May 2013 or 7 May 2014, and otherwise on the standard basis. The costs order sought against the plaintiff arises from three offers made to the plaintiff, the first on 6 March 2013, the second on 20 May 2013 and the third on 5 May 2014.[3]
(b)The plaintiff sought orders that each party bear their own costs of the proceeding. No evidence as to the plaintiff’s own costs of the proceeding was provided to the Court. Alternatively, the plaintiff submitted that if a costs order is made against him, it ought to be on the standard basis and not an indemnity basis.
[3]The trial commenced on 22 May 2014.
For the reasons that follow, I have determined that the plaintiff should pay the defendant’s costs on a party and party basis up to 31 March 2013, on a standard basis from 1 April 2013 to 31 May 2013, and on an indemnity basis thereafter.
The defendant’s offers to the plaintiff
In support of the submission that the defendant’s costs be paid by the plaintiff, the defendant relies on three offers made to the plaintiff. The first offer was made in circumstances where the plaintiff had foreshadowed that a claim would be made against the estate; that is, before the proceeding was issued. The offer was accompanied by a detailed letter explaining the basis of the offer. The letter also stated that it would be recited in the defendant’s affidavit, so that the court would know that the plaintiff was fixed at the outset with the knowledge of the costs burden on the estate if the proceeding was commenced, and stressed that the plaintiff would be at risk on costs. The remaining two offers foreshadowed an application for indemnity costs in the event of rejection of the offers.
The first offer — 6 March 2013
On 6 March 2013, the defendant forwarded a ‘without prejudice’ Calderbank letter to the plaintiff stating:
Whilst our client’s primary position remains that a Judge will not make an order for further provision for your client, in the interest of resolving the matter and preventing further costs, the estate is prepared to offer him a sum of $50,000 in addition to his one fifth share of the estate (a total sum of $220,000).
Simultaneously with the offer, an open letter was forwarded to the defendant by the plaintiff, setting out the difficulties that the defendant considered the plaintiff faced in pursuing his claim against the estate, as well as the consequences that might follow. This letter included the following matters:
Where there is no provision or provision is inadequate, the Court will consider what would be adequate and proper provision in all the circumstances. While your client may not be content with a one fifth share of the estate, we believe it is adequate and proper in all the circumstances and that a Supreme Court Judge will not make an order for further provision for him.
…
As matters presently stand, your client's entitlement is to a 1/5th share of the residuary estate. Based on the figures set out in the Inventory of Assets, the residuary estate is valued at approximately $850,000. Your client's entitlement will be approximately $170,000.
The consequence of reaching trial is to incur substantial expenses that will have severely depleted the pool available for division.
With this type of litigation, it is not uncommon for each side to incur legal costs to a mediation of approximately $20,000 to $25,000 and to trial of approximately $75,000 to $95,000.
…
By the end of a trial (in a two party dispute) the net residuary estate will be approximately $700,000. 80% will be in the region of $560,000. We take the view that if he proceeds your client cannot expect that any Court will award him the 80% he seeks, nor will the Court disregard the interests of the remaining beneficiaries all of whom we understand have competing needs.
…
Some prospective plaintiffs are of the belief that in bringing this claim there would be no costs consequences to them personally. Costs are at the discretion of the trial Judge and we stress the point that your client will be at risk.
The defendant’s offer of 6 March 2013 was not accepted by the plaintiff. A mediation (with position statements) was then held on 14 May 2013. This did not resolve the issues between the parties and, on 15 May 2013, the plaintiff issued his proceeding against the estate.
The second offer — 20 May 2013
On 20 May 2013, five days after the proceeding was issued, the solicitors for the defendant sent a further offer in an open letter to the solicitors for the plaintiff, enclosing an offer of compromise by the defendant. The letter also stated that if the offer was not effective for the purposes of the rules of Court, the defendant intended to rely on it as a Calderbank offer. The offer was predicated on the basis of a net value of the estate estimated to be $731,000, and it provided for further provision to the defendant of $380,500, with payment to be made within 14 days of settlement of the sale of the Howe Parade property, the payment of the plaintiff’s costs fixed at $19,500 plus the plaintiff to vacate the property within 28 days of the acceptance of the offer. This offer represented an overall entitlement of $400,000 inclusive of costs.
That offer was rejected by the plaintiff in a counter-offer made 31 May 2013, in which the plaintiff offered to pay each beneficiary $50,000 plus costs of $37,000. Under this counter-offer, the plaintiff would be entitled to ownership of the Howe Parade property.
The third offer — 5 May 2014
By letter dated 5 May 2014, three weeks before the trial commenced, the defendant made a final offer to the plaintiff based on the up-to-date financial value of the estate at $720,000.[4] The offer was for a payment of $380,000 to the plaintiff, plus the plaintiff’s reasonable legal costs as assessed by the Law Institute Costing Service on the Supreme Court standard basis. In the letter, the defendant estimated the plaintiff’s costs up to that date at $40,000 making the effective quantum of the offer in the amount of $420,000 or 58 per cent of the estate. The offer expired two days before the trial commenced on 19 May 2014, without being accepted by the plaintiff.
[4]As detailed in the letter dated 5 May 2014.
The submissions of the parties
The defendant’s submissions
The defendant submitted that the plaintiff should pay the defendant’s costs essentially for the reasons that costs ordinarily follow the event in civil litigation, and that it was not necessary to show that the claim had been made frivolously, vexatiously or with no reasonable prospect of success in making such an order in Part IV litigation. The defendant relied on Moerth v Moerth (No 2),[5] and Webb v Ryan (No 2).[6]
[5][2011] VSC 275 (22 June 2011) [28] (Gardiner AsJ).
[6][2012] VSC 431 (20 September 2012) [27] (Whelan J).
The defendant further submitted that the plaintiff should pay the defendant’s costs on an indemnity basis from the making of the second offer, and certainly from the making of the third offer, on the basis that it was unreasonable for the plaintiff to reject those offers. The defendant relied both on r 26.08(4) of the Supreme Court (General Civil Procedure) Rules 2005 (‘the rules’) and also on the general principles relating to Calderbank offers. The position that was taken by the plaintiff throughout the proceeding was that he should receive the whole or nearly the whole of the estate, and this position – which was unreasonable – prevented any possibility of the matter being settled.
The plaintiff’s submissions
In resisting the costs orders as sought by the defendant and seeking that each party bear their own costs, the plaintiff relied on the overriding discretion of the court to achieve overall justice in terms of the costs in the proceeding. In support of this contention is cited the poor financial position of the plaintiff including his lack of capital, his short working life and the fact that family provision claims are inherently uncertain in their outcomes. The plaintiff distinguished the decision in Webb v Ryan on the basis that the plaintiff is in a substantially different position. He is an adult son who has been living in the deceased’s house and sought further provision for his housing, whereas the plaintiffs in Webb v Ryan were not family members.
The plaintiff submitted that the condition that the plaintiff vacate the property with 28 days of acceptance of the offer did not comply with the rules relating to offers of compromise because it was ‘too difficult and too speculative’, and could not be assessed or measured in money terms. In making this submission, the plaintiff relied on the decision of White v Director of Housing.[7]
[7][2003] VSC 124 (29 April 2003) (Gillard J).
The 20 May 2013 offer stated that, if it did not comply with the r 26, the defendant would rely upon it as a Calderbank offer. The plaintiff submitted that it was not unreasonable in the circumstances to reject the offer because of the poor financial position of the plaintiff including his lack of capital, his short working life and the fact that family provision claims are inherently uncertain in their outcomes. The plaintiff submitted that the offers did not set out a reasoned basis because they failed to deal with the foundations of the plaintiff’s claim beyond assertions.
Of the 5 May 2014 offer, the plaintiff acknowledged it was compliant in form with the rules, but submitted that, for the same reasons as those outlined in the preceding paragraph, it was also not unreasonable for the plaintiff to reject the offer.
The plaintiff further submitted that, if a costs order were made against him, such order should be on a standard basis only, as that would be sufficient punishment to him in terms of costs.
General consideration of the costs principles
The jurisdiction of the Court as to costs is conferred by s 24(1) of the Supreme Court Act 1986. This general discretion must be exercised in accordance with r 63 of the rules.[8] The principles relating to costs in Part IV litigation, and also in respect of indemnity costs orders, require the Court to consider general principles of justice and the reasonableness of the parties in conducting the litigation, so it is convenient to deal with both considerations together.
Costs in Part IV litigation
[8]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012) (Croft J) [11]; see also Coombes v Ward (No 2) [2002] VSC 85 (27 March 2002) (McDonald J).
With respect to Part IV claims, the Court must also have regard to the provisions of s 97(6) and (7) of the Act, which specify:
(6)Subject to subsection (7), the Court may make any order as to the costs of an application under section 91 that is, in the Court's opinion, just.
(7)If the Court is satisfied that an application for an order under section 91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.
These specific provisions were considered by Byrne J in Re Bull (No 2).[9] The Part IV regime in Victoria has contained express legislative provisions in relation to costs since its inception. The usual order as to costs in civil litigation (that costs should follow the event) has been the exception, rather than the norm, in Part IV litigation. Under these provisions, the Court may make any order as to costs that it considers just. The authorities in respect of costs in Part IV litigation are informed, as with other probate litigation, by the fact that it involves litigants who are brought to their respective positions by the conduct of the deceased testator. Ordinarily, a trustee will be entitled to be indemnified from the estate for their costs, and there ‘have even been cases where an unsuccessful plaintiff has, nevertheless, obtained his or her costs from the estate’.[10]
[9][2006] VSC 226 (30 June 2006). See also Hansen v Hennessy (No 2) [2014] VSC 115 (24 March 2014) (Lansdowne AsJ).
[10]Re Bull (No 2) [2006] VSC 226 (30 June 2006) [4].
As Byrne J made clear in Re Bull(No 2), the fact that the Court may exercise a power to award costs against an applicant by virtue of s 97(7) does not act as a restriction on the Court awarding costs against an applicant by virtue of the general discretion contained in s 97(6). Rather, it contains a reminder and encouragement to the Court ‘to operate as a disincentive to would-be applicants whose claim to a moral entitlement are tenuous’.[11] It certainly does not prevent the Court from considering the application of the general principles of costs in civil litigation.
[11]Ibid [7].
When a plaintiff embarks on a Part IV claim, he or she can no longer assume an entitlement to have costs paid out of the estate, nor can a plaintiff assume that he or she will not be ordered to pay the costs of the estate. As stated by the Court of Appeal in Forsyth v Sinclair (No 2):
We consider that it is a matter of concern that in many family provision cases, the amount available for distribution amongst the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before costs get out of proportion.[12]
[12][2010] VSCA 195 (5 August 2010) [17] (Neave and Redlich JJA, Habersberger AJA).
In Moerth v Moerth (No 2), Gardiner AsJ held that even where the plaintiff’s claim is not made frivolously, vexatiously or with no reasonable prospect of success, there will be cases where it will nevertheless be just that the unsuccessful plaintiff pay the costs of the defendant executor.[13]
[13][2011] VSC 275 (29 June 2011) [29].
In Webb v Ryan(No 2),[14] Whelan J, after considering authorities across a number of jurisdictions, observed:
Family provision cases are different to other civil cases in some respects. By their nature, they can be more difficult to predict. There can be wide divergence between different judges as to the appropriate outcome. Claimants often establish a moral obligation, even if they fail. Quantification is inherently uncertain. A claimant might fail because, although a responsibility was owed to him or her, investigation reveals that a greater responsibility was owed to others or that there simply is ‘not enough to go around’.
…
Having said that, it seems to me that the tendency to move towards the application of general costs principles, whilst recognising the special characteristics of family provision cases where they are relevant, is a sound and sensible approach. It reflects the changes made in 1997 which significantly broaden the range of potential claimants, it recognises the pressures to settle placed on executors if claimants do not see themselves as at risk on costs if they fail, and it recognises that when costs on unsuccessful claims do not follow the event they are in effect borne by the beneficiaries. It is always necessary to take account of all of the relevant circumstances, including the special features of family provision cases where those features are relevant, and to determine what is just in each case. But it is also important, particularly when one is dealing with claims by non-family members, to bear in mind the observation of Giles JA in Jvancich that often the justice of the case ‘is not remote from costs following the event’.[15]
[14][2012] VSC 431 (20 September 2012).
[15]Ibid [37]–[38] (citations omitted). See also Re Sherborne (No 2) [2005] NSWSC 1003 (10 October 2005) (Palmer J).
Where a Part IV claim fails, it is most common for there to be no order as to costs,[16] the effect of which is that the unsuccessful plaintiff bears their own costs and the defendant executor receives their costs out of the estate.
Indemnity costs
[16]Ibid [33].
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd, Woodward J set out the principles that guide the proper exercise of the Court’s power to award indemnity costs.[17] The court's discretion to make an award of costs is absolute and unfettered, but must be exercised judicially. It is appropriate to consider awarding indemnity costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases, the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.[18]
[17][1988] FCA 202 (17 June 1988) (Woodward J).
[18]Ibid [21].
Where Calderbank letters are relied upon to support a claim for indemnity costs, the principles set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[19] are relevant. The correct approach is to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs. The critical question is whether the rejection of a Calderbank letter (containing terms more favourable than the result achieved) is sufficient to establish indemnity costs. The answer to this question depends upon whether the offer was unreasonable in the circumstances, having regard to:
[19](2005) 13 VR 435 (Warren CJ, Maxwell P and Harper AJA).
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.[20]
[20]Ibid 442.
Those considerations apply in this context, as noted by Palmer J in Re Sherborne (No 2):[21]
The fact that a plaintiff has recovered judgment in an amount less than an offer of settlement does not automatically warrant the making of an order that the plaintiff pay the defendant’s costs as from the date of refusal of the offer on an indemnity basis. While that circumstance undoubtedly has weight, all the facts and circumstances of the case must still be taken into account in the exercise of the Court’s discretion as to costs.[22]
[21][2005] NSWSC 1003 (10 October 2005) (Palmer J).
[22]Ibid [54].
The rule relied upon by the defendant is r 26.08(4), which provides:
(4)Where an offer of compromise is made by a defendant and the plaintiff unreasonably fails to accept the offer and the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant, then unless the Court otherwise orders—
(a)the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim until 11.00 a.m. on the second business day after the offer was made, taxed on the ordinarily applicable basis; and
(b)the defendant shall be entitled to an order against the plaintiff in respect of the defendant's costs after the time referred to in paragraph (a) taxed on an indemnity basis.
Rule 26.08(4) came into effect as at 1 September 2013, and applies only to offers made after that date. Accordingly, it can only apply to the final offer made by the defendant. Although some Federal Court authority was initially relied upon by counsel for the defendant to the effect that the order applied irrespective of the reasonableness of the offer, that submission was ultimately withdrawn, and need not be addressed.
I would also note that prior to the introduction of the above rule, the relevant rule would have been then r 26.08(3), which provided:
(3)Where an offer of compromise is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains a judgment on the claim to which the offers relates not more favourable to the plaintiff than the terms of the offer, then unless the Court otherwise orders—
(a)the plaintiff shall be entitled to an order against the defendant for the plaintiff’s costs in respect of the claim up to and including the day the offer was served taxed on a party and party basis; and
(b)the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter taxed on a party and party basis.
That rule does not assist the issues in this case, for two reasons: it only applies where the plaintiff has been successful, albeit on terms less favourable than the offer;[23] and it does not support an application for indemnity costs. The defendant did not appear to rely upon this rule.
Indemnity costs orders in Part IV litigation
[23]Cf. Simply Irresistible Pty Ltd v Couper (No 2) [2011] VSC 33 (17 February 2011) (Kyrou J).
Recently, in Bates v Cooke (No 2),[24] Kunc J in the New South Wales Supreme Court considered the costs principles relating to an indemnity costs application in a testator’s family maintenance case where an offer of compromise has been refused. In that case, one month before the hearing, the defendant executors had made an offer of $100,000 to the plaintiff, an adult son of the deceased – in an estate with a value of at least $1,100,000 – which was refused. The plaintiff’s claim was dismissed.
[24][2014] NSWSC 1322 (25 September 2014) (Kunc J).
His Honour’s considerations, strictly speaking, relate only to whether a family provision claim by its very nature falls within the ‘special circumstances’ under which a court may ‘otherwise order’ for the purposes of r 42.15A of the Uniform Civil Procedure Rules 2005 (NSW). That rule has one noticeable difference from the equivalent rule in this state — r 26.08(4) — in that it does not require the rejection of the offer to have been unreasonable. However, his Honour also considered the relationship between testator’s family maintenance litigation and offers of compromise more generally, and endorsed White J’s findings in Slack v Rogan (No 2)[25] that the starting point remains the usual order as to costs,[26] noting that that there is no authority that Calderbank offers should be considered differently.[27] As Kunc J explained, this is for sound reasons of policy and principle:
[25]Slack v Rogan (No. 2) [2013] NSWSC 827 (11 June 2013).
[26]Ibid [20]; Bates v Cooke (No 2) [2014] NSWSC 1322 (25 September 2014) (Kunc J) [22]–[25].
[27]Bates v Cooke (No 2) [2014] NSWSC 1322 (25 September 2014) (Kunc J) [26].
Furthermore, there are certain features of family provision litigation which suggest an even stronger public policy basis for the encouragement of settling litigation than might apply in other types of case. Those considerations include:
(1)Family provision litigation involves a fixed fund which risks being substantially depleted by legal costs to the disadvantage of all concerned if litigation is persisted with.
(2)The jurisdiction is redistributive rather than punitive or compensatory.
(3)As a corollary of the preceding point, family provision litigation is not the fault of the parties in the sense that the parties have not come to court because of the alleged breach, fault or delict of any of them in the way that might otherwise give rise to civil litigation.
(4)The parties are almost always natural persons and, more often than not, people who are completely unused to litigation. The emotional, let alone financial, strain on litigants in family provision claims can be much higher precisely because it concerns matters of family, relationship and emotions.
(5)The amounts at stake are often, but by no means always, not large compared to other matters that come before the Court. Real questions often arise as to the proportionality of the legal costs when compared to the amounts of money at stake.[28]
[28]Ibid [31].
Those principles apply with equal force in Victoria.
What is the effect of the offers of compromise in this proceeding?
Quite properly, the defendant did not in argument seek that indemnity costs should run from the first offer of 6 March 2013. That offer was prior to the commencement of the proceeding, and prior to the mediation of the proceeding, and did not foreshadow an application for indemnity costs. The defendant did, however, rely on that first offer in that the open letter attached to that offer set out a detailed and thorough analysis of the likely costs of the proceeding and the potential consequences, which put the plaintiff on notice for the remainder of the proceeding, including the second and third offers.
Insofar as the plaintiff contended that the 6 March 2013 offer and the 20 May 2013 offer do not set out a reasoned basis for the offer, I consider that the author (Ms Dagher) of the 6 March 2013 letter that accompanied the 6 March 2013 offer, has clearly stated her reasons for the defendant’s offer. The letter is, in my view, an exemplar of what should occur in making an offer to an opposing side in a Part IV claim. It covers the issues to be determined, the reasons she considers that a court would not make further provision for the plaintiff, a detailed analysis of the costs to be incurred in each step in the proceeding and the fact that the plaintiff should not proceed on the basis that there would be no costs consequences to the plaintiff. By the time the 20 May 2013 offer was sent, the parties had attended an unsuccessful mediation (with position statements). Those involved were all of the same family and the facts were well known to them. The 20 May 2013 offer came following the 6 March 2013 letter where the defendant’s analysis of the plaintiff’s claim had been set out and explained. In these circumstances, I do not accept that the defendant failed to set out a reasoned basis for the two offers.
In relation to the plaintiff’s submission that the 20 May 2013 offer did not comply with r 26, I note first that – in all likelihood – nothing follows from that. Under the rules in force at the time, there was no rule deeming that the plaintiff would have to pay costs on an indemnity basis, because the new r 26.08(4) had not yet come into effect and the old r 26.08(3) only applies in circumstances where the plaintiff is successful. The offer could only be assessed as a Calderbank offer, not as an offer under the rules.
Nevertheless, I do not accept the plaintiff’s submission that the 20 May 2013 offer did not comply with r 26 because the vacation of the property by the plaintiff within 28 days was incapable of numeric or monetary assessment. The plaintiff was living in the Howe Parade property and not paying any rent. The monetary value of the vacation of the property could be easily assessed in those circumstances. An evaluation of a release clause and a confidentiality clause in monetary terms is substantially different from an evaluation of a requirement for the vacation of a property. In my view, the requirement for the plaintiff to vacate the property was consistent with the requirement stated by Gillard J in White v Director of Housing that the ‘terms of an offer must be clear, precise, certain and capable of acceptance’.[29]
[29][2003] VSC 124 (29 April 2003) [17].
In any case, considering the offer as a Calderbank offer, in my view, it was unreasonable of the plaintiff to reject the offer on that basis. It was contemplated and realised from an early stage of the negotiations that the only asset of the estate would need to be sold. It followed that the plaintiff would have to vacate the Howe Street property in any event at some stage. The plaintiff rejected the 20 May 2013 offer in his letter dated 31 May 2013 and sought, amongst other things, that the property be transferred to him.
The three offers made to the plaintiff were timely, one before issue of the proceedings, the next just after issue and the final just before the trial. In making the three offers, the defendant has complied with her obligations under the Civil Procedure Act 2010 to take steps to resolve the dispute, to use reasonable endeavours to resolve the dispute and to ensure that costs are reasonable and proportionate.[30] Whilst the first offer was $50,000 over and above the plaintiff’s interest in the estate, the 20 May 2013 offer – made just after the issue of the proceeding – was a generous offer of $400,000 inclusive of costs on an estate then valued at $731,000. Approximately one year later, the final offer made before trial was substantially the same, although slightly more generous, being $420,000 inclusive of costs on an estate then valued at $720,000.
[30]See Civil Procedure Act 2010, ss 19, 22, 24.
These three offers were not marginally more than the final outcome of the proceeding: they were all generous and showed good judgment on the part of the defendant. The offers were commercial offers made, notwithstanding the defendant’s view of the plaintiff’s claim, to end the adversarial litigation between a father and his children and in a concerted effort to prevent costly legal fees from a modest estate that was to be divided between five people. They were generous in their terms, made in an attempt to both avoid the trial and the consequent costs and to avoid the family members having to give evidence against each other, and sought to preserve the estate for the beneficiaries.
In pressing on with his claim and rejecting, in particular, the generous offer made in the 20 May 2013 offer, in my view, the plaintiff was imprudent and unreasonable, and his rejections of the offers demonstrate that he has an unrealistic view of his entitlements. His unrealistic view is exemplified by his offer made 31 May 2013, which effectively was a payment to his four children of $50,000 each with $37,000 for the defendant’s costs and the Howe Parade property being transferred to him together with all household furniture and chattels. His imprudent, unreasonable and unrealistic view is even more surprising as he now seeks to rely on his poor financial circumstances as a reason for a costs order not being made against him. An acceptance of either the second or third offer by him would have solved his financial situation.
By the plaintiff’s rejection of the offers, the defendant has been required to defend the claim at considerable cost to the estate, in circumstances where the resources of the estate are finite and where the estate is to be shared between five beneficiaries, all of whom have financial need.
For those reasons, I consider that the plaintiff was wholly unreasonable in rejecting the second offer, and remained unreasonable in rejecting the third offer. It remains to consider what the consequences of that finding are.
Should the plaintiff pay the defendant’s costs of the proceeding?
If the defendant’s costs assessed at $95,000 were paid out of the estate, the five beneficiaries of the estate would have their one fifth share of the estate reduced by $19,000 and receive $141,000 instead of $160,000. Conversely, if the plaintiff were to ordered to pay the defendant’s costs, each of the four grandchildren would receive $160,000 and the plaintiff would receive $65,000.
Although it is correct that family provision cases are – in some respect – different from other civil cases, their outcome is not as difficult to predict as the plaintiff suggested. The outcome in this proceeding was the outcome predicted by the solicitor for the plaintiff, Ms Dagher, in her letter dated 6 March 2013. There are well-established principles to apply in family provision cases in the context of the requirements to be considered under the Act.[31] Like other civil cases, they are disputes between individuals advancing competing claims to a testator’s bounty for their own financial benefit. The nature of the litigation is adversarial and, in this proceeding, between family members battling for their entitlement to an inheritance.
[31]Administration and Probate Act 1958, s 91(4)(e)–(p).
At trial, the plaintiff contended that the deceased ought to have left the whole of her estate to the plaintiff, alternatively, because the only asset of the deceased had to be sold to pay the legal fees incurred by the litigation, then he should receive 90 per cent of the residuary estate.[32] I concluded that the plaintiff’s submissions fundamentally misunderstood the Part IV jurisdiction, which analyses the plaintiff’s case as if the four grandchildren were claimants to the estate, rather than named beneficiaries whose interests ought be safeguarded. I further held that there was no principle – as submitted by the plaintiff – of the ‘natural order’ of inheritance; that is, the child inherits the whole of an estate from the parent and that child, in turn, benefits his or her children, and that the will reflected the proper balance between freedom of testation and the moral duty of the deceased. This case was very different from those cases in which an adult child had been excluded from a parent’s will — the plaintiff received a substantial benefit, that his own conduct has reduced.
[32]Briggs v Mantz [2014] VSC 281 (22 August 2014) [146]–[149].
I consider the series of offers, including the first offer, and the plaintiff’s unreasonable rejection of the second and third offers, relevant to whether costs ought be awarded against the plaintiff as opposed to being borne by the estate.
Insofar as the plaintiff relied upon his financial circumstances, as set out in my judgment in this proceeding,[33] I note that, as I concluded in the judgment, the plaintiff in many respects failed to establish his financial position,[34] and relied mostly upon his own assertions. He failed to explain properly his income or expenses. In any case, I consider any financial difficulties he might face as a result of a costs order against him to be of limited relevance. The plaintiff knew his own financial circumstances when he commenced the proceeding. He was also told, in the very first letter from the defendant’s solicitor on 6 March 2013, that if he was unsuccessful he may have to bear the costs of the proceeding. He chose to ignore that risk, and cannot now plead financial hardship to escape responsibility for his conduct.
[33]Ibid [72]–[84].
[34]Ibid [124].
In the circumstances, my view is that it would not be just for the estate to be deprived of compensation for its costs in successfully defending the proceeding. The plaintiff’s claim for further provision has been determined and at all times he was made aware of the possibility of the costs consequences of proceeding. It is just from the plaintiff’s perspective because he has unreasonably rejected the generous offers made by the defendant from an early stage up to the trial. It is just from the defendant’s perspective because the defendant made those offers, they were rejected by the plaintiff and the claim has now successfully been resisted. To order otherwise would cause substantial injustice to the four grandchildren, as they would be penalised for the estate’s success in defending the claim, and the plaintiff would be benefitting notwithstanding the dismissal of his application. In my view, such a result cannot be said to be a just outcome in the circumstances. To order that the estate pay its own costs irrespective of the result gives little incentive to parties in family provision litigation to make appropriate decisions about prospects of success and the proportionality of the costs incurred in bringing or defending proceedings.
Should the costs order against the plaintiff be assessed on an indemnity basis?
Having regard to the factors set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[35] and for the reasons already expressed as to the plaintiff’s imprudent and unreasonable rejection of the generous offers made by the defendant, this is a case in which indemnity costs should be paid by the plaintiff from date at which he rejected the offer, being 31 May 2013.The offer was made early in the proceedings, contained a significant compromise on the part of the defendant (who in essence offered to halve the entitlement of each of the other beneficiaries to the estate – the grandchildren), accurately assessed the plaintiff’s prospects of success at that time and gave reasons for doing so, was made in clear terms, and foreshadowed an application for indemnity costs.
[35](2005) 13 VR 435, 442.
Insofar as the plaintiff submitted that, if a costs order is made against him, it should be on a standard basis only as that would be sufficient punishment to him, I consider that the submission misunderstands the nature and purpose of a cost orders. They are compensatory, not punitive. In this proceeding, the estate has incurred costs of $95,000 in successfully defending the proceeding and no orders as to costs would mean that the amount due to the four grandchildren, all of whom are in financial need, would be substantially reduced notwithstanding that the claim against the estate was dismissed.
The estate should not suffer the hardship of financial loss in having to defend the proceeding because the plaintiff imprudently and unreasonably did not accept the generous offers that would have resolved it. In particular, acceptance of the 20 May 2013 offer meant considerable cost and expense would not have been incurred by the estate at an early stage in the proceeding. The defendant could not have done any more than what has been done to resolve the proceeding. If an award of indemnity costs is not made in this proceeding, there will be very little incentive for executors ever to make generous offers to a plaintiff if, at the end of the day, there is nothing in it for them.
Orders
I order that the plaintiff pay the defendant’s costs of, and incidental to, the proceeding on a party and party basis up to 31 March 2013, on the standard basis from 1 April 2013 to 31 May 2013, and on an indemnity basis thereafter, such costs to be taxed in default of agreement.
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