Brown v Brown (No 2)

Case •

[2023] NSWSC 7

•

23 January 2023

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Brown v Brown (No 2) [2023] NSWSC 7
Hearing dates: On the papers
Date of orders: 23 January 2023
Decision date: 23 January 2023
Jurisdiction:Equity - Family Provision List
Before: Henry J
Decision:

(1) Order 2 of the orders made by Henry J on 14 June 2022 be set aside and the following order be made in substitution:

(a) Subject to any costs orders already made in the proceedings, the plaintiff shall pay the defendant’s costs of the proceedings on the ordinary basis, capped at the sum of $50,000, as agreed or assessed.

(2) Each party is to bear their own costs of the applications for costs which is the subject of these reasons.

Catchwords:

COSTS – succession – claim by adult plaintiff for family provision – no provision orders – where defendant applies for indemnity costs – where plaintiff applies for each party to pay costs or cap on costs – Calderbank offers – Offers of Compromise – UCPR rr 20.26 and 42.15A – whether the Court should “otherwise order” – whether rejection of Calderbank offer unreasonable – impecuniosity – significant adverse impact on financial position – size of the estate – conduct of the hearing – indemnity costs not ordered – plaintiff is to pay defendant’s costs on the ordinary basis – cap on costs made

Legislation Cited:

Succession Act 2006 (NSW), Ch 3, ss 59, 65, 99

Civil Procedure Act 2005 (NSW), s 98

Family Provision Act 1982 (NSW)

Succession Amendment (Family Provision) Act 2008 (NSW), s 5

Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.13, 42.13A, 42.15A, 42.20

Cases Cited:

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

Bassett v Bassett [2021] NSWCA 320

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

Brown v Brown (Supreme Court (NSW), Henry J, 2 February 2022, unrep)

Brown v Brown [2022] NSWSC 1393

Calderbank v Calderbank [1975] 3 WLR 586; [1975] 3 All ER 333

Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392

Daniels v Hall (No 2) [2014] WASC 272

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

Harris v Carter [2020] NSWSC 196

Houatchanthara v Bednarczyk [1996] NSWCA 253

Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391; (2014) 18 ANZ Insurance Cases 62-049

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

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

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

Page v Hull-Moody [2020] NSWSC 411

Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268

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

Salmon v Osmond [2015] NSWCA 42; (2015) 14 ASTLR 442

Sarant v Sarant (No 2) [2020] NSWSC 1897

Sassoon v Rose [2013] NSWCA 220

Schneider v Kemeny; Kemeny v Schneider(No 2) [2021] NSWSC 664

Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor (2005) 65 NSWLR 268; [2005] NSWSC 1003

Underwood v Underwood [2009] QSC 107; (2009) 4 ASTLR 150

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

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

Texts Cited:

Practice Note SC Eq 7

Category:Costs
Parties: David Brown (Plaintiff)
Robert Frank Brown (Defendant)
Representation:

Counsel:
M J Henry (Plaintiff)
S K Hill (Defendant)

Solicitors:
DL Legal (Plaintiff)
Avid Law (Defendant)
File Number(s): 2020/00302945
Publication restriction: Nil

JUDGMENT

  1. On 14 October 2022, I published my reasons for dismissing the plaintiff’s claim for provision pursuant to s 59 of the Succession Act 2006 (NSW) (Succession Act) from the estate of the late John William Brown (deceased): Brown v Brown [2022] NSWSC 1393 (Judgment).

  2. The Judgment included a default costs order that provided for the plaintiff to pay the defendant’s costs of the proceedings subject to any party applying for a different order within 14 days. Each party has made an application for a different costs order.

  3. The defendant seeks an order that his costs be paid by the plaintiff on the indemnity basis in respect of the whole of the proceedings or alternatively from a series of dates, relying upon offers made prior to and during the course of the proceedings. His application is made by written submissions and an affidavit from his solicitor, Naomi Morris, dated 28 October 2022.

  4. The plaintiff (who no longer has a solicitor acting for him) opposes the defendant’s application for indemnity costs and contends that there should be no order as to his costs, with the intent that each party should bear their own costs of the proceedings. The plaintiff’s application is made by notice of motion dated 28 October 2022 and an affidavit dated 26 October 2022.

  5. In accordance with directions made by the Court on 31 October 2022, each party has filed and served further written submissions and the issue of costs is to be dealt with on the papers. The plaintiff served written submissions in support of his application on costs, written submissions in reply to the defendant’s application for an indemnity costs order, and a further affidavit dated 11 November 2022. The defendant served written submissions in reply to the plaintiff’s application on costs on 25 November 2022.

  6. These reasons assume familiarity with and adopt the same terms as those used in the Judgment. 

Background: value of estate, various offers and costs incurred

  1. The background to the proceedings is set out in the Judgment at [24]-[69].  The plaintiff was the stepson of the deceased. The defendant is the deceased’s son from his marriage to his ex-wife and the deceased’s only biological child.

  2. The deceased died in October 2019. His last will was made on 3 July 2018. Under the will, the defendant was appointed as the sole executor and sole beneficiary of the deceased’s estate. The will did not mention the plaintiff, the deceased’s ex-wife or the plaintiff’s sister: Judgment at [70]-[72].

Offers made to compromise proceedings

  1. On 17 June 2020, the plaintiff’s then-solicitors, Turnbull Hill Lawyers, sent a letter to the defendant’s solicitors, Avid Lawyers, that indicated the plaintiff intended to bring a family provision claim and requested details concerning the deceased’s estate.

  2. On 1 July 2020, Avid Lawyers sent to Turnbull Hill Lawyers a copy of the Probate granted to the defendant on 25 March 2020 and the deceased’s will under cover of a letter which advised that it was expected that the deceased’s estate would have a net value of approximately $524,200.

  3. On 22 September 2020, Turnbull Hill Lawyers sent a letter to Avid Lawyers that enclosed a draft affidavit by the plaintiff and made an offer to settle the plaintiff’s claim on the deceased’s estate on the basis that the plaintiff receive one-third of the net distributable estate, inclusive of his costs. The plaintiff’s offer was open for 14 days and expressed to be made pursuant to the principles in Calderbank v Calderbank [1975] 3 WLR 586; [1975] 3 All ER 333 (Calderbank).

  4. On 2 October 2020, Avid Lawyers sent a letter that rejected the plaintiff’s offer and made a counter-offer to settle the plaintiff’s claim on the basis that the defendant, as executor of the deceased’s estate, paid to the plaintiff the sum of $50,000 inclusive of costs (2 October 2020 Offer). The 2 October 2020 Offer was expressed to made in accordance with the principles in Calderbank and open for acceptance for 14 days. The letter noted that the defendant had settled a family provision matter with Alison for $50,000 inclusive of costs, and set out the rationale for the defendant’s offer as follows:

“●    Your client’s financial and material circumstances indicate that he is reasonably comfortable.

●    Your client was only partly dependent on the deceased for a period of 7 years during his minority. During this time, your client demonstrated reluctance to accept the deceased into the household which caused significant strain to the relationship.

●    After your client moved out of the family home, he made minimal effort to maintain a relationship with the deceased up to and including the deceased’s final stages of life.

●    Our client did not “poison” the deceased against your client and had nothing to do with the breakdown of the relationship between your client and the deceased.

●    The continued strain and complete breakdown of the relationship between your client and the deceased was because of your client’s own actions.

●    The deceased took no responsibility for your client financially or otherwise after your client left the family home 42 years ago.

●    The deceased made regular comments that he had no responsibility for your client after this time and particularly after the breakdown of the relationship between the deceased and your client’s mother.

●    Your client’s mother has indicated many times that it was her understanding that the deceased would leave his entire estate to our client.

●    Our client had a very close and loving relationship with the deceased, and they supported each other right up to the date of death.”

  1. On 14 October 2020, Turnbull Hill Lawyers sent a letter that rejected the defendant’s 2 October 2020 Offer. In that letter, Turnbull Hill Lawyers made a further offer pursuant to which the plaintiff was willing to settle his claim by payment of the sum of $150,000 inclusive of costs, which offer was open for acceptance until 5.00pm on 19 October 2020. That offer was not accepted by the defendant.

  2. On 21 October 2020, Avid Lawyers made a further offer to settle the plaintiff’s claim on the basis that the defendant, as executor of the deceased’s estate, paid to the sum of $50,000 plus costs of $10,000, with the matter to be settled by way of deed including a release by the plaintiff (21 October 2020 Offer). The 21 October Offer was expressed to be made under the principles in Calderbank and open for acceptance for 14 days although withdrawn if the plaintiff commenced proceedings. The amount of $10,000 for legal costs was based on information provided by Turnbull Hill Lawyers in response to a request from Avid Lawyers for details about the plaintiff’s costs to the effect that the plaintiff’s total costs on an indemnity basis were $18,000 and $10,000 on an ordinary basis.

  3. The plaintiff did not accept the defendant’s 2 or 21 October 2020 Offers and commenced the proceedings by Summons filed on 22 October 2020.

  4. On 14 December 2020, the parties attended Court-annexed mediation. Prior to the mediation, the plaintiff had served his affidavit pursuant to paragraph 6(a) of Practice Note SC Eq 7 (Practice Note) and the defendant had served his affidavits in reply in accordance with paragraph 9 of the Practice Note.

  5. On 16 December 2020, Avid Lawyers served on Turnbull Hill Lawyers an offer of compromise from the defendant that was expressed to be made in accordance with r 20.26 of the Uniform Civil Procedure Rules2005 (NSW) (UCPR) and open for acceptance for 28 days (Offer of Compromise). The Offer of Compromise provided that the defendant would compromise the whole of the plaintiff’s claim in the proceedings on the basis that:

“1.     By way of provision out of the estate of the [deceased], the Plaintiff receive a lump sum of $50,000 out of the deceased’s estate.”

  1. No response was received to the Offer of Compromise and, accordingly, it lapsed.

  2. On or around 9 February 2021, Turnbull Hill Lawyers ceased acting for the plaintiff. The following day, DL Legal advised Avid Lawyers that they were acting for the plaintiff.

  3. On 15 February 2021, DL Lawyers served a further affidavit of the plaintiff pursuant to paragraph 6(a) of the Practice Note. DL Lawyers subsequently indicated that this affidavit was in substitution for the plaintiff’s affidavit sworn 28 October 2020. On 1 March 2021, the defendant served his affidavit in reply.

  4. On 17 June 2021, DL Lawyers sent a letter to Avid Lawyers making an offer to settle the proceedings on the basis that provision be made for the plaintiff out of the deceased’s estate in the amount of $216,520 plus costs on an indemnity basis. The offer was expressed to be in accordance with the principles in Calderbank and open for acceptance for seven days. The plaintiff also deposes that, on 16 July 2021, he made a further offer to settle the proceedings in a letter (which is not annexed to his 11 November 2022 affidavit) and an offer of compromise expressed to be made in accordance with UCPR r 20.26 that provided for the plaintiff to receive a lump sum of $190,000 out of the deceased’s estate and was open for a period of 28 days. It is not clear whether the plaintiff’s 17 June and 16 July 2021 offers were rejected or simply lapsed.

  5. On 5 August 2021, Avid Lawyers sent a letter to DL Lawyers containing a further offer to settle the plaintiff’s claim which provided for the plaintiff to receive $65,000 by way of a lump sum provision from the deceased’s estate, the plaintiff’s costs of the proceedings to be paid on an ordinary basis from the deceased’s estate and the defendant’s costs to be paid out of the deceased’s estate on an indemnity basis (5 August 2021 Offer). The offer was expressed to be made under the Calderbank principles and open for acceptance for 14 days. Prior to this offer being made, the proceedings had been listed for a three day hearing commencing on 31 January 2022.

  6. There was no direct response to the 5 August 2021 Offer although the plaintiff made two further offers to settle the proceedings. The first was by letter from DL Legal dated 23 September 2021 that provided for the defendant to pay to the plaintiff the sum of $120,000 plus costs. The second was by letter from DL Legal dated 3 December 2021 that provided for the defendant to pay to the plaintiff the sum of $106,000 plus costs fixed in the sum of $50,000. The 3 December 2021 letter asserted that the defendant executor had refused to make any reasonable or serious offer to settle the matter.

  7. It is not clear whether these offers were rejected by the defendant or merely lapsed.

Value of estate and costs of proceedings

  1. As recorded in the Judgment at [74]–[92]:

  1. the estimated value of the deceased’s estate in the Inventory of Property annexed to the grant of Probate was $821,500.00;

  2. I concluded that, at the date of the hearing, the gross value of the deceased’s estate that was available for distribution was $476,248.69 (excluding unpaid and unbilled legal costs); and

  3. I found that the deceased’s superannuation death benefits of $217,508.42 (which were paid out to the defendant after the deceased’s death and had been included in the Inventory of Property for Probate) should not be treated as forming part of the deceased’s estate.

  1. As to legal costs, the Judgment records that:

  1. the plaintiff’s costs of the proceedings were estimated to be $101,414 on an ordinary basis and $120,000 on the indemnity basis, of which he had paid $38,953: at [98]; and

  2. the defendant executor’s costs of the proceedings were $101,502.65 on the indemnity basis and $76,126.99 on an ordinary basis, of which the estate had paid $63,002.65: at [99].

  1. These estimates were based on a hearing of three days and were set out in the parties’ schedule of assets and liabilities of the deceased’s estate and legal costs. As the Judgment notes, the hearing did not complete within three days: at [100].

  2. In his affidavit sworn 26 October 2022 and served on his costs application, the plaintiff deposes that his out of pocket expenses in the proceedings are $61,897.49 and that he has an unpaid costs liability of $145,857.55 (comprising professional fees of $128.70, counsel’s fees of $105,750 (including GST) and previously outstanding amounts totalling $39,978.85), which totals $207,755.04.

Submissions

  1. The defendant seeks an order that the plaintiff pay his costs of the whole of the proceedings on an indemnity basis, relying on the 2 and 21 October 2020 Offers that were more favourable to the plaintiff than the result he achieved. The defendant refers to the principles relevant to the consequences of non-acceptance of a Calderbank offer, as summarised by Basten JA (McColl and Campbell JJA agreeing) in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa v Siantan) at [8] and [12].

  2. The defendant submits that, in the circumstances of this case, it was unreasonable for the plaintiff to have refused the 2 and 21 October 2020 Offers. He says that at the time those offers were made, the plaintiff had sufficient information to assess them as he had already served a draft affidavit, was in a position to take legal advice about his claim and was aware that the deceased’s estate was of a modest size, the plaintiff had not had any relationship or contact with the deceased since 2004 and the deceased had not provided for the plaintiff financially since he left home 42 years before. The defendant also submits that the only unknown factor at the time the October Offers were made was the defendant’s competing financial circumstances which, the plaintiff argues, was not a large imponderable.

  3. In the alternative, and relying on the Offer of Compromise, the defendant contends that the plaintiff should pay costs on an ordinary basis up to 16 December 2020 and thereafter on the indemnity basis. He submits that the Offer of Compromise is compliant with the UCPR requirements and, as a result, UCPR r 42.15A comes into play and has the effect that the defendant is presumptively entitled to costs on the basis he seeks. The defendant submits that it was unreasonable for the plaintiff not to have accepted the Offer of Compromise as at the time it was served, the plaintiff and defendant had each served their affidavits in accordance with the Practice Note and the plaintiff was aware of the defendant’s relationship with the deceased and competing financial and material circumstances.

  4. As a further alternative, the defendant seeks an order that the plaintiff pay his costs on the ordinary basis up to and including 5 August 2021 and thereafter on the indemnity basis, relying on the 5 August 2021 Offer. He contends that by that stage of the proceedings, all the evidence had been served (other than the updating affidavits) and the offer of $65,000 plus costs was, in the circumstances, a generous one.

  5. The plaintiff’s primary contention position is that, in the circumstances of this case, each party should pay their own costs of the proceedings.

  6. The plaintiff submits that family provision applications raise different issues with respect to costs noting that the outcomes of family provision claims are “notoriously difficult to predict”, involve a “large element of subjective assessment by the judge” and that a “variety of answers given by different judges as they perform their own subjective assessment”, referring to Underwood v Underwood [2009] QSC 107; (2009) 4 ASTLR 150 and Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor (2005) 65 NSWLR 268; [2005] NSWSC 1003 at [56]–[58]. He says that the issue of costs in family provision cases will generally depend on the overall justice of the case and that “no order as to costs” can be appropriately made in circumstances where the making of a costs order would create a material change in the plaintiff’s financial circumstances, referring to Haertsch v Whiteway(No 2) [2020] NSWCA 287 (Haertsch v Whiteway) at [5], [7] and the cases there cited, and Schneider v Kemeny; Kemeny v Schneider(No 2) [2021] NSWSC 664 (Schneider v Kemeny).

  7. The plaintiff submits that a fair result in this case would be for each party to bear their own costs as the Judgment recognised that the plaintiff has a long history of mental illness, there was no suggestion that the claim was frivolous or vexatious, the Court found that the plaintiff was endeavouring to give his evidence truthfully and to the best of his recollection (although conceding that not all of his evidence was accepted) and because making a costs order against the plaintiff would have a significant detrimental impact on his financial position. He submits that an order that requires him to pay his own costs will cause a material change to his financial position as it would leave him with “potentially manageable debts of about $140,000” (representing his liability for legal costs), and that also requiring him to pay the defendant’s costs would almost certainly have to present a “debtor’s petition”.

  1. The plaintiff submits that, on this application, the Court can reconsider the findings in the Judgment that the plaintiff may be able to realise some value from selling or assigning the management rights after 2025 (of no more than $280,000) and that (at the time of trial) he could expect an income of around $60,000 per annum to account for what he says is “the forced divestment of the UFM Realty shares and to account for his current lack of liquidity or any other liquid asset or superannuation”. The plaintiff’s submissions regarding his financial position are based on his 26 October 2022 affidavit in which the plaintiff deposes to the following:

  1. the plaintiff is the holder of bank accounts that total $41,369.83; at [2];

  2. the plaintiff’s only sources of income are employment with Unitrade Facilities Management and UFM Realty: at [6] and [7];

  3. as a result of a period of depression after the trial, the plaintiff had to engage someone to assist with the property management as complaints were made about his work and, in lieu of income, he had instead given them a 50% shareholding in UFM Realty: at [11] and [12]; and

  4. if a costs order is made against the plaintiff, he would not have the capacity to pay it, would immediately become insolvent and would have no choice but to declare bankruptcy which, he says, would leave him with nothing but the old age pension when he becomes eligible to receive it as the Agreements will be liable to be terminated if the plaintiff presents a debtor’s petition to declare bankruptcy or a sequestration order is made against his estate: at [13]; [15]–[18].

  1. The plaintiff submits that the consequence of making an order that he pay the defendant’s costs is that the plaintiff would have no means to meet his medical expenses, provide accommodation for himself or for his future living expenses and unforeseen contingencies in life. He also says that, if he is bankrupted, any costs order made against him is unlikely to be paid.

  2. The plaintiff’s submissions refer to the following additional reasons why no order as to costs should be made in favour of the defendant:

“That there was nothing in the Plaintiff’s conduct of the case attributable to him that could be characterized as “unmeritorious conduct” or dishonest conduct.

….

That the trial took longer than it was listed for by no personal fault of the Plaintiff.

The fact that the Respondent had not succeeded in his argument regarding the inability of the Applicant to establish “factors warranting”.

That the Respondent promptly settled the competing claim of Allison Brown without the need for her to incur any legal expense whatsoever.

The diminution of the Estate by way of the Respondent’s lawful claims on the superannuation account of the Testator remarkably changed the value of the Estate in between the time that the proceeding was commenced and the trial of the matter.

The Plaintiff received any benefit from the deceased’s estate, nor did he make any unreasonable offer to settle the matter.

The ability of the Estate to meet the Defendant’s costs without there being any significant detrimental impact on the Defendant’s long-term finances.

The fact that the Estate was not (prior to the superannuation benefits being withdrawn after proceeding had been commenced) a “small estate” as defined Succession Act and that a statutory remedy capping costs is proscribed by the Succession Act 2006.”

  1. The plaintiff’s submissions on costs also refer to the costs of the Notice of Motion that the plaintiff filed on the first day of the hearing. The plaintiff submits that the Notice of Motion was a necessary predicate to enforce compliance by the defendant with a subpoena and that the plaintiff would ordinarily expect to have his costs of that application in the context where the defendant conceded that he had not complied with his obligations and, at the time, it was agreed that the question of costs would be reserved and addressed after reasons were published.

  2. In response to the defendant’s application for indemnity costs based on the Calderbank offers and the Offer of Compromise, the plaintiff contends that the defendant’s submissions do not account for an order that would be consistent with the overall justice of the case. The plaintiff says that he attempted to act reasonably and to settle the matter at a figure that would have seen him with a small fund for exigencies of life, this is not a case where he has engaged in any misconduct, acted dishonestly or capriciously, and the overall justice of the case justifies the costs orders sought by the plaintiff.

  3. The plaintiff contends, in the alternative, for an order that the plaintiff pay the defendant’s costs of the proceedings capped at $50,000. The plaintiff says that the alternative order should be made “so as to not crush the defendant and to arrive at a just outcome in all of the circumstances of the case”.

  4. The defendant’s reply submissions acknowledge that it may be appropriate to deviate from the ordinary rule that costs follow the event in family provision cases but submits that no deviation is warranted in the circumstances of this case.

  5. In reply submissions, the defendant also takes issue with the plaintiff’s reliance on his affidavit sworn 26 October 2022. The defendant submits that the affidavit constitutes an attempt to reopen the plaintiff’s case and adduce new evidence in order to portray the plaintiff as impecunious, noting that the Court has made findings about the plaintiff’s assets and earning capacity in the Judgment. The defendant also submits that the appropriate costs orders in respect of the Notice of Motion is that the costs be costs in the cause.

Consideration and determination

  1. The Court has a discretion to award costs, to decide who will pay costs to whom and to what extent and whether on the ordinary basis or on an indemnity basis: Civil Procedure Act 2005 (NSW) s 98.

  2. Although broad, the Court’s discretion on costs is subject to legislative provisions, court rules and established principles, including the principle that the award of costs is compensatory in nature, not punitive: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44] and [65].

  3. Relevant court rules include UCPR r 42.1, which provides that costs follow the event unless it appears to the Court that some other costs order should be made, and r 42.20(1), which provides that if the Court makes an order for the dismissal of proceedings then, unless the Court otherwise orders, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which the proceedings have been dismissed. Applying these rules in this case, the starting point is that the plaintiff should bear the defendant’s costs of the proceedings unless the Court otherwise orders.

  4. The plaintiff’s submissions refer to “Family Provision Act, s 33” as containing “an additional power and permits certain unsuccessful applicants for provision to have their costs paid out of the estate whether or not there are special circumstances justifying such a course”, which is said to “acknowledge a different starting point to UCPR, r 42.1”. The Family Provision Act 1982 (NSW) was repealed with effect from 1 March 2009 by s 5 of the Succession Amendment (Family Provision) Act 2008 (NSW) and replaced by Ch 3 of the Succession Act.

  5. Section 99(1) of the Succession Act relevantly provides:

“The Court may order that the costs of proceedings under this Chapter in relation to the estate or notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit.”

  1. That section provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne but does not apply to costs as between party and party. Rather, it applies to costs to be paid out of the estate: Sarant v Sarant (No 2) [2020] NSWSC 1897 at [33].

  2. In this case, the plaintiff does not contend that his costs should be paid out of the estate. He accepts that as he was unsuccessful, the plaintiff should bear the burden of his own costs. The issue is whether the plaintiff should bear the burden of the defendant’s costs and, if so, on what basis.

  3. The exercise of the Court’s discretion on costs is also subject to consideration of the effect of the Calderbank offers and the Offer of Compromise made by the defendant, and upon which he relies. To the extent that the plaintiff’s written submissions suggest that offers of compromise made under the UCPR are inapplicable to family provision litigation and that the Calderbank principles have little application, I reject those submissions. The authorities make clear that such offers and the Calderbank principles apply to family provision applications: see, eg, Bassett v Bassett [2021] NSWCA 320 (Bassett v Bassett); Salmon v Osmond [2015] NSWCA 42; (2015) 14 ASTLR 442; Ballam & Ors v Ferro & Anor (No 2) [2022] NSWSC 1358; Harris v Carter [2020] NSWSC 196 (Harris v Carter); Bates v Cooke (No 2) [2014] NSWSC 1322 (Bates v Cooke); Schneider v Kemeny.

  4. If an offer of compromise complies with the requirements of UCPR r 20.26 and a defendant obtains an order or judgment on the plaintiff’s claim no less favourable than the terms of the offer, the offer of compromise has the effect that a presumptive entitlement arises for an order for the defendant’s costs on an ordinary basis and on the indemnity basis from the date after the offer was made, subject to the Court ordering otherwise: UCPR rr 42.13 and 42.15A.

  5. There is some conflict in the authorities about whether “exceptional circumstances” are required for the Court to “otherwise order”: YWCA Australia v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 102 at [23]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [32]–[38]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [15]; Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391; (2014) 18 ANZ Insurance Cases 62-049 at [46]–[47]. I have approached the issues in this case on the basis that there is a clear onus on a plaintiff who receives a valid offer of compromise to persuade the Court that indemnity costs should not be ordered by identifying some feature or features of the proceedings, the claim, the offer (including, for example, when it was made) and the order obtained by the defendant which provides a rational basis for the Court to displace what the rule specifies is the costs order to which “the defendant is entitled”, and that the Court may “otherwise order” if it is persuaded that it is in the interests of justice that the presumptive default position ought not to apply: Harris v Carter at [189]; Bates v Cooke at [33]; Meres v Meres (No 2) [2017] NSWSC 523 at [44].

  6. The rejection of a Calderbank offer in circumstances where the final outcome is less favourable to the offeree enlivens the discretion to award indemnity costs but does not create any prima facie right to such an order.  In order to warrant making an indemnity costs order, aCalderbank offer must embody a genuine compromise and be shown by the party seeking to rely on it that it was unreasonable for the unsuccessful party not to accept, which is an evaluative judgment to be made by reference to the terms of the offer and all the circumstances at the time that the offer was made: Wheatley v Lakshmanan(No 2) [2022] NSWSC 851 at [96]–[99], citing Miwa v Siantan at [8], [12] and the cases cited therein.

  7. The principles that guide the exercise of the Court’s discretion on costs in family provisions cases were summarised by the Court of Appeal in Haertsch v Whiteway, as follows:

“5.      It is well established that family provision applications ‘raise different issues with respect to costs’ to those raised by other proceedings: Salmon v Osmond [2015] NSWCA 42 at [172] (Beazley P, McColl and Gleeson JJA agreeing). The liberal approach to costs in such cases has a long provenance, though reference is now typically made to remarks of Gaudron J in Singer v Berghouse [1993] HCA 35; (1993) 67 ALJR 708 at 709, to the effect that ‘costs in family provision claims generally depend on the overall justice of the case’ and that 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’. Indeed, in some jurisdictions it would seem that no order as to costs is the usual or general consequence of an unsuccessful application: Bowyer v Wood (2007) 99 SASR 190 at 210, 211; [2007] SASC 327; Underwood v Underwood [2009] QSC 107 at [32]-[33].

6.      However, as Giles JA observed in Jvancich v Kennedy (No 2) [2004] NSWCA 397 at [11] (Handley and McColl JJA agreeing), the ‘overall justice of the case’ is ‘not remote from costs following the event’. For one thing, the default rule encourages prospective applicants for provision to have regard to the significant costs consequences to themselves of making such an application. But while the default rule in r 42.1 applies to family provision proceedings, its application remains subject to the court exercising greater than usual ‘liberality and discrimination’ in deciding whether to depart from it: Salmon v Osmond at [174] (Beazley P, McColl and Gleeson JJA); Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 at [26]-[27] (Basten JA, Gleeson JA agreeing); [138]-[139] (Barrett JA, Gleeson JA agreeing).

7.      It is not uncommon, though atypical, for an unsuccessful applicant not to be ordered to pay the defendant’s costs where the applicant is or would become impecunious and the claim for provision was reasonable or borderline: see eg, with no attempt to be exhaustive, Re Sherborne Estate (No 2) (2005) 65 NSWLR 268; [2005] NSWSC 1003; Moussa v Moussa [2006] NSWSC 509; Bevilacqua v Robinson (No 2) [2008] NSWSC 520; Ray v Greenwell [2009] NSWSC 1197; Dugac v Dugac [2012] NSWSC 192; Raiola v Raiola [2014] NSWSC 1172; Purnell v Tindale [2020] NSWSC 746.

…

9.      The impecuniosity of an unsuccessful party, without more, is no reason to deprive a successful party of an order for costs to which they are otherwise entitled: Sassoon v Rose [2013] NSWCA 220 at [10] (Meagher JA, Gleeson JA agreeing); Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [26]-[27]. However, the irrelevance of impecuniosity is said to be ‘subject to some relaxation in family provision cases’: Chapple v Wilcox at [141]. One reason that the impecuniosity of an unsuccessful applicant for family provision is of greater than usual relevance is that adverse costs orders might alter the basis on which the claim for provision was rejected, and thereby cause or justify a further application: McCusker v Rutter [2010] NSWCA 318 at [34].

…

11.      Although family provision claims can only succeed or fail, those binary outcomes tend to conceal difficult and even “borderline” questions of judgment. That is one reason for the more liberal approach to costs: Re Sherborne state (No 2) at 279; Moussa v Moussa at [8]. Those observations are typically directed to the evaluative and discretionary judgments as to what would constitute adequate provision for the applicant’s proper maintenance, education or advancement.”

  1. In Sarant v Sarant at [39], Hallen J stated:

“From all of the authorities, it is clear that the purpose of a costs order is to reach a fair and just result. The making of a costs order in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) (2014) 315 ALR 1 at 2 [2]; [2014] HCA 47 at [2] (French CJ, Hayne, Bell, Gageler and Keane JJ).”

  1. Turning to the matters raised by the parties’ submissions, the first issue concerns the costs of the plaintiff’s Notice of Motion that sought the production of documents. The plaintiff’s Amended Notice of Motion dated 31 January 2022 was filed with the leave of the Court on 1 February 2022 and was subject to submissions on the first and second days of the hearing.

  2. I do not accept the plaintiff’s submission that he would ordinarily expect to have his costs of that Notice of Motion. At the hearing, the plaintiff did not succeed in obtaining orders for access to a document produced by the defendant over which a claim of without prejudice privilege had been made by Alison, including for the reason that the plaintiff had not established that the document has any relevance to the issues in this case: Brown v Brown (Supreme Court (NSW), Henry J, 2 February 2022, unrep). He also did not succeed in obtaining production of documents relating to the deceased’s superannuation accounts (for reasons including the lateness of the application) and did not press for most of the other documents sought in the context where documents had been requested by the plaintiff the previous week and had produced informally by the defendant prior to or at the hearing.

  3. In my view, the plaintiff’s Notice of Motion did not need to be filed to enforce compliance with the subpoena issued in September 2021 in relation to the estate bank accounts. As the defendant submits, copies of the bank statements had already been produced, although incorrectly scanned such that every second page was missing. This obvious mistake could have been dealt with by inter partes correspondence, rather than filing the Motion. I accept the defendant’s contention that it is appropriate for the costs of that Notice of Motion to be costs in the cause.

  4. As to the defendant’s 2 and 21 October 2020 Offers, they made clear that they would be relied on in relation to the issue of costs and invoked the Calderbank principles. They both offered for the plaintiff to receive an amount by way of provision that involved a genuine element of compromise and an outcome more favourable to the plaintiff than the final judgment. The 21 October 2020 Offer also included an offer of provision of $50,000 plus $10,000 for legal costs, which represented the amount of the plaintiff’s legal costs assessed on the ordinary basis at that time. The plaintiff’s contentions in his written submissions that his costs at “that time were about $40,000 including a generous uplift that he was liable to pay his previous lawyers” and that the $10,000 was “considerably less than he was liable to pay them a few weeks later” are not supported by the evidence on this application, which includes the details provided by the plaintiff’s then-solicitor to the defendant’s solicitor (as described at [13] above) and the plaintiff’s 11 November 2022 affidavit which identifies, as at 21 October 2020, that the plaintiff had paid $1,760 to Turnbull Hill Lawyers (at [20]) and had incurred costs amounting to approximately $12,000 (based on the details of the invoice from Turnbull Hill Lawyers at Annexure A).

  5. However, I am not satisfied that the defendant has established that it was unreasonable for the plaintiff to reject the 2 and 21 October 2020 Offers when they were made and thus, reject the defendant’s application for a special costs order in relation to the costs of the whole of the proceedings. The 2 and 21 October 2020 Offers were made prior to the commencement of the proceedings, before the defendant’s evidence was served, when the plaintiff was not yet aware of the details of the defendant’s competing financial and material circumstances, the defendant’s evidence relating to the ongoing close relationship between the defendant and the deceased post-2004, or that the defendant had received the superannuation death benefits, which had the effect of reducing the value of the deceased’s estate as identified in the Inventory of Probate. In my view, these matters were material to a proper assessment of the likely outcome of the plaintiff’s claim.

  6. As to the Offer of Compromise, the plaintiff’s written submissions assert, incorrectly, that the defendant acknowledged that the Offer of Compromise does not comply with the formalities required under the UCPR. The defendant’s written submissions addressed the position in the event that the Offer of Compromise is found to be valid as a Calderbank letter as an alternative, but the defendant’s primary contention is that the Offer of Compromise complies with the requirements of r 20.26 of the UCPR. In my view, that contention is correct.

  1. Rule 20.26 of the UCPR relevantly provides:

“20.26   Making of offer

(1)      In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.

(2)      An offer under this rule:

(a)      must identify—

(i)      the claim or part of the claim to which it relates, and

(ii)      the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment

…

(c)      must not include an amount for costs and must not be expressed to be inclusive of costs

(d)     must bear a statement to the effect that the offer is made in accordance with these rules, and

…..

(f)      must specify the period of time within which the offer is open for acceptance.

(3)      An offer under this rule may propose:

(a)      a judgment in favour of the defendant:

(i)      with no order as to costs, or

(ii)      despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff’s costs, or

(b)      that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or

(c)      that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.”

  1. The Offer of Compromise was in writing, identified that it was made to compromise the whole of the plaintiff’s claim and the proposed order for the disposal of that claim, namely, by way of an order for provision out of the deceased’s estate to the plaintiff for a lump sum of $50,000 pursuant to s 65 of the Succession Act. It also stated that it was made in accordance with UCPR r 20.26 and was open for 28 days. Although the Offer of Compromise does not refer to costs, there is no requirement for such a provision to be included.

  2. The plaintiff’s submissions do not contend that the Offer of Compromise contained no element of compromise or was made simply to trigger the costs consequences under the rules. I am satisfied that it demonstrated a sufficient element of compromise to amount to an offer for the purposes of the UCPR r 20.26. The plaintiff’s submissions note that he had incurred legal costs of $40,000 at the time the Offer of Compromise was made. But if he had accepted the Offer, the plaintiff would have been entitled to his legal costs assessed on the ordinary basis at the time the offer was made, in addition to provision in the amount of $50,000: UCPR rr 42.13A(1) and (2).

  3. The Offer of Compromise was made at a time when the plaintiff and the defendant had filed affidavits in accordance with the Practice Note and they had attended a mediation. At that time, the plaintiff was aware of the bases of the defendant’s competing claim, such as the matters set out in the letter referred to at [12] above, although a further affidavit was served by the defendant after the Offer of Compromise was made.

  4. The 5 August 2021 Offer was for $65,000 plus the plaintiff’s costs which were to be paid out of the deceased’s estate on an ordinary basis. If that offer had been accepted, the plaintiff would have recovered a large proportion of the legal costs he had incurred at that time, as well as an increased amount for provision of $65,000. The further affidavits (other than updating affidavits) had been served by the time the 5 August 2021 Offer was made. In that context, I accept that it represented a genuine compromise and there is some basis for the defendant’s submissions that it was unreasonable for the plaintiff to have rejected the 5 August 2021 Offer.

  5. The plaintiff does not explain why the Offer of Compromise was left to lapse or why he rejected the 5 August 2021 Offer. I infer from the plaintiff’s submissions and evidence that he did not accept them as he considered that he was entitled to more than what had been offered based on his understanding about the size of the deceased’s estate and that the deceased would have made greater provision for him if he had known about the plaintiff’s position in life. His written submissions state that the plaintiff had been given advice that he could expect to receive a third of the “net distributable estate” by the lawyers who advised the plaintiff to commence the proceedings. Presumably, his previous lawyers and DL Legal had also given him advice regarding settlement, the risks of litigation, the costs consequences of not accepting an offer of compromise under the UCPR and the Calderbank principles, noting that the plaintiff also made offers of that nature prior to and during the proceedings.

  6. As to size of the deceased’s estate, I do not accept that the plaintiff had no knowledge that “the deceased had withdrawn the superannuation benefits until trial”. Prior to the Offer of Compromise, the plaintiff was aware that the defendant estimated that the value of the deceased’s estate available for distribution was just over $500,000 (as referred to at [10] above) and that the deceased’s superannuation death benefits had been paid to the defendant (Administrator’s Affidavit dated 27 November 2020 at [7]). That said, at that time, the defendant referred to the superannuation death benefits as being held by him as trustee and possibly the subject of a prescribed transaction or relevant property transaction for the purposes of the Succession Act (Administrator’s Affidavit dated 27 November 2020 at [8]). It was in the defendant’s written submissions schedule of agreed assets and liabilities that were served just prior to the hearing that the defendant claimed that the benefits were “mistakenly” included in the Inventory of Property and were not part of the deceased’s estate (or notional estate) and after the Offer of Compromise and 5 August 2021 Offer were served that the communications between the defendant and the trustees of the deceased’s superannuation accounts and the nomination forms signed by the deceased were produced to the plaintiff.

  7. I accept the plaintiff’s submission that his claim was not frivolous or vexatious. In my view, the plaintiff’s claim for provision could not be characterised as untenable and was not unreasonably brought. The plaintiff succeeded in establishing that the nature and quality of his relationship with the deceased was a factor that warranted the making of his application, an issue that had been contested by the defendant, although it was “finely balanced”: Judgment at [253]–[257]. The Court also found that the plaintiff had established some financial needs to meet demands that he was likely to face and given his age and health issues, his earning capacity was somewhat limited: Judgment at [290]–[291].

  8. While ultimately concluding that inadequate provision had not been made for the plaintiff’s proper maintenance and advancement in life, the Judgment noted that there may be a range of views on what community standards and expectations would require in the circumstances of this case: Judgment at [297]. Significant factors in the Court’s ultimate conclusion were the defendant’s strong competing claim and the relatively modest size of the deceased’s estate, particularly when regard is had to the legal costs incurred by the parties: Judgment at [293]. Relevantly, the defendant’s costs of the proceedings that had been paid out of the estate (of approximately $63,000) were taken into account in assessing the gross value of the estate that was available for distribution ($476,248.69). In other words, the plaintiff’s claim for provision was considered against an estate which had already been reduced by the defendant’s legal costs.

  9. I accept the plaintiff’s submission that the impost of a costs order against him would have a significant adverse impact on his financial position. I leave to one side the matters concerning the plaintiff’s financial position and earning capacity as set out in his 26 October 2022 affidavit, about which objection was taken by the defendant, noting that some of the matters dealt with in that affidavit were the subject of evidence at the hearing and for which leave to reopen was not granted and contained submission and assertion (see, for example, the evidence regarding his income and assets, including from UFM and UFM Realty at [2], [6]-[8], [10], [21], [22], the terms of the Agreements at [13]–[15], [18], and about his LinkedIn profile at [27]).

  10. Considering the plaintiff’s position based on the evidence at the hearing and findings in the Judgment (at [160], [166] and [177]), the plaintiff’s limited financial reserves (which comprised, in the main, shares valued at $141,318) would be entirely depleted if he were ordered to pay the plaintiff’s legal costs in addition to paying his own legal costs. The plaintiff would be left with relying on a reduced income, derived solely from the Agreements, and the prospect of realising some value from a sale or assignment of the management rights after 2025, the amount of which is uncertain and of no more than $280,000.

  11. The change in the plaintiff’s financial position may not have greatly improved his prospects of success, noting that there is doubt as to whether a family provision order should be made to deal with the legal costs of proceedings: see, eg, Bassett v Bassett at [198]; Page v Hull-Moody [2020] NSWSC 411 at [256]. The hardship in meeting an order for costs is also not, by itself, sufficient to resist the usual order under UCPR 42.15A or make the refusal of the 5 August 2021 Offer reasonable: Houatchanthara v Bednarczyk [1996] NSWCA 253 at page 3; Sassoon v Rose [2013] NSWCA 220 at [10]. That said, it is apparent that a costs order would impose a substantial burden on the plaintiff, a factor that is relevant to the exercise of the Court’s costs discretion.

  12. I recognise the sound policy reasons for encouraging the settlement of family provision cases and why the default position under UCPR r 42.15A and the Calderbank principles apply to such cases: see, eg, Bates v Cooke at [31]. However, having considered and weighed the submissions and evidence of the parties, and applying the principles set out at [54]–[55] above, the conclusion that I have come to is that the features of this case referred to at [70]–[74] warrants making an “otherwise order” in relation to the Offer of Compromise and the Court should not make an indemnity costs order based on the operation of the 5 August 2021 Offer. In particular, the timing of the defendant’s disclosures regarding the deceased’s superannuation death benefits, the finding that there were factors warranting the plaintiff’s application, the impost of a costs order on a plaintiff with limited financial reserves and earning capacity, and the value of the deceased’s estate having already taken into account a large proportion of the deceased’s legal costs. These features taken together with the recognised “liberality and discrimination” that may be applied in family provision cases (Daniels v Hall (No 2) [2014] WASC 272 at [32], cited approvingly in Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 at [138]–[139]), satisfy me that it would be in the interests of justice for the Court to depart from the default position in UCPR r 42.15A and that it was not unreasonable for the plaintiff to reject the 5 August 2021 Offer.

  13. On the other hand, I am not persuaded by the plaintiff’s submissions that the Court should exercise its discretion and make no order as to costs, with the intent that the defendant bear his own costs. I do not accept that such an order would be fair or reflect the overall justice in this case.

  14. Having regard to all of the circumstances, I have concluded that it would be appropriate to exercise my discretion and make the alternative order proposed by the plaintiff, namely, that the plaintiff pay the defendant’s costs of the proceedings capped at $50,000.

  15. In my view, such an order strikes an appropriate balance having regard to the features outlined above, the overall outcome and the fact that the plaintiff made forensic decisions to pursue the claim despite reasonable settlement offers having been made. In coming to this conclusion, I have had regard to the following additional matters which I consider relevant to and support my conclusion on costs:

  1. While there were no findings that the plaintiff was dishonest, as recorded in the Judgment (at [14], [153], [168] and [191]), the plaintiff’s credibility was undermined by inadequacies and inconsistencies with aspects of his evidence, particularly relating to his financial circumstances, his relationship with his biological father and the extent of his claimed impairment.

  2. The trial took longer than the three day listing. I accept that this may not have been due to the personal fault of the plaintiff. The transcript at the hearing records that the plaintiff experienced issues with his solicitors prior to and during the course of the hearing. Although it is not necessary to go into detail about those issues, it is appropriate to record that the plaintiff was represented by counsel, no application was made to vacate the hearing, the Court sought to accommodate the plaintiff by granting some short adjournments and sitting late on the fourth day, and a costs order was made against the plaintiff on 8 February 2022 in relation to the plaintiff’s Notice of Motion dated 7 February 2022 (seeking leave to re-open to complete re-examination of the plaintiff), the hearing time associated with the further re-examination and the costs of the hearing on 8 February 2022.

  3. Orders may be made for capping the costs that may be recovered by a party in cases, such as this, where the value of the estate that was available for distribution (excluding unpaid legal costs) is less than $500,000: Practice Note at [24].

  4. Overall, my impression is that the manner in which the defendant ran his case did not lead to increased costs and that his legal costs are not excessive. However, capping the defendant’s legal costs at $50,000 represents a reasonable proxy for the unpaid legal costs of the defendant, noting that the estimate referred to at [26] above was for a three day hearing and his legal costs (even on an ordinary basis) are likely to exceed that amount.

  5. The burden on the defendant of “paying” his own costs above $50,000 is to be considered in the context where a large portion of his costs have already been paid by the estate.

  6. The defendant executor is the only beneficiary such that, even accepting that the defendant is upholding the will of the deceased, he was in reality conducting the defence in his or her own interests.

  1. In relation to the costs of this application for costs, my view is that each party should bear their own costs, noting that the plaintiff is no longer represented by solicitors and the defendant did not obtain the costs orders he proposed.

  2. For these reasons, I make the following orders:

  1. Order 2 of the orders made by Henry J on 14 June 2022 be set aside and the following order be made in substitution:

  1. Subject to any costs orders already made in the proceedings, the plaintiff to pay the defendant’s costs of the proceedings on the ordinary basis, capped at the sum of $50,000, as agreed or assessed.

  1. Each party is to bear their own costs of the applications for costs which are the subject of these reasons.

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Decision last updated: 23 January 2023

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Cases Citing This Decision

1

Toppi v Toppi (No 4) [2025] NSWSC 1136
Cases Cited

39

Statutory Material Cited

5

Ballam v Ferro (No 2) [2022] NSWSC 1358
Bassett v Bassett [2021] NSWCA 320
Bates v Cooke (No 2) [2014] NSWSC 1322