Cong v Shen (No 4)

Case •

[2021] NSWSC 1206

•

24 September 2021

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Cong v Shen (No 4) [2021] NSWSC 1206
Hearing dates: 17 September 2021
Decision date: 24 September 2021
Jurisdiction:Equity
Before: Ward CJ in Eq
Decision:

1.   Pursuant to the slip rule, amend order 6 of the orders made on 3 August 2021:

(a)   by inserting, after the word “Campsie”, the words “up to the maximum of the late Mr Zili Cong’s half share in those properties”; and

(b)   by inserting after those words the words “net of the expenses of the sales of those properties and the mortgage liabilities discharged on completion of those sales”.

2. Pursuant to the slip rule, amend order 5 of the orders made on 3 August 2021 to include, as relevant notional estate, the first defendant’s one-third share of the proceeds of the life insurance policy and Mr Cong’s half share of the moneys in the joint bank accounts to which reference was made in [1867], [1869] and [1874] of the principal judgment.

3.   Note that the amount of notional estate out of the assets so identified is limited to the sum in aggregate of $1,190,317.

4. Pursuant to s 66 of the Succession Act order that the executors satisfy the orders made for provision in favour of Edmund and Teresa in priority to any debt owing to Ms Shen out of the estate of the late Zi Li Cong.

5. Order that the first defendant’s costs of defending the family provision claims, assessed on the ordinary basis, for the period in which the first defendant represented the estate be paid out of the estate of the late Zi Li Cong but that, pursuant to s 66 of the Succession Act, those costs be paid after the orders made for provision in favour of Edmund and Teresa have been satisfied.

6.   Order that other than as provided above, the first, second and third plaintiffs and the first defendant respectively pay his or her own costs of the proceeding.

7.   Order that the first, second and third plaintiffs pay the costs of the second defendant on the ordinary basis limited to the costs specifically and separately referable to the second defendant’s defence of the proceeding and not including the second defendant’s costs of legal representation throughout the hearing.

8.   Order that the costs, if any, of the third defendant be borne by the first, second and third plaintiffs.

9.   Order that the costs of the respective motions here determined form part of the costs of the proceeding as a whole and be dealt with as above.

Catchwords:

JUDGMENTS AND ORDERS — Amending, varying and setting aside — Correction under slip rule

COSTS — Party/Party — General rule that costs follow the event — Application of the rule and discretion

COSTS — Party/Party — Exceptions to general rule that costs follow the event — Offers of compromise/Calderbank offers

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 21, 56, 57, 58, 60, 64, 106

Contracts Review Act 1980 (NSW)

Succession Act 2006 (NSW), ss 60, 66, 78, 83, 84, 86, 87, 99, Div 3, Pt 3.3

Uniform Civil Procedure Rules 2005 (NSW), rr 10.2, 36.16, 36.17, 39.44, 39.45

Cases Cited:

Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120

Archer v Archer (No 2) [2000] NSWCA 315

Baker v Towle (2008) 39 Fam LR 323; [2008] NSWCA 73

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

Baychek v Baychek [2010] NSWSC 897

Bechara v Legal Services Commissioner (2010) 79 NSWLR 763; [2010] NSWCA 369

Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147

Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107

Brew v Whitlock (No 3) [1968] VR 504

Calderbank v Calderbank [1975] 3 All ER 333

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

Charnock v Handley [2011] NSWSC 1408

Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197

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

Commonwealth of Australia v Gretton [2008] NSWCA 117

Cong v Shen (No 3) [2021] NSWSC 947

Cong v Shen [2020] NSWSC 945

Coppins v Helmers; Brambles Constructions Pty Ltd (1969) 72 SR (NSW) 273

Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423

Craigcare Group Pty Ltd v Superkite Pty Ltd [2014] NSWSC 326

Daulizio v Trust Company of Australia [2005] VSCA 215

Detheridge v Detheridge [2019] NSWSC 183

Dickman v Holley; Estate of Simpson [2013] NSWSC 18

Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261

EDPI Pty Ltd v Rapdocs Pty Ltd [2007] NSWSC 195

Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373

Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322

Equititrust Ltd v Franks (2009) 258 ALR 388; [2009] NSWCA 128

Evans Shire Council v Richardson (No 2) [2006] NSWCA 61

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

GR Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263

Gray v Hart (2012) 10 ASTLR 379; [2012] NSWSC 1562

Guardian Trust and Executors Company of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115

Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133

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

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

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

Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375

Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748

In re Swire; Mellor v Swire (1885) 30 ChD 239

In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161

Ivanhoe Gold Corporation Ltd v Symonds (1906) 4 CLR 642; [1906] HCA 71

Jamal v Department of Health (1998) 14 NSWLR 252

James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296

Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208

Jones v Bradley (No 2) [2003] NSWCA 258

Kenny v Wilson (1911) 11 SR (NSW) 460

Lahoud v Lahoud [2012] NSWSC 284

Leichhardt Municipal Council v Green [2004] NSWCA 341

Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72

McCusker v Rutter (2010) 7 ASTLR 137; [2010] NSWCA 318

Milillo v Konnecke (2009) ASTLR 235; [2009] NSWCA 109

Miller v Director of Public Prosecutions (No 2) [2004] NSWCA 249

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

Muller v Marriott (1921) 22 SR (NSW) 100

Murdocca v Murdocca (No 2) [2002] NSWSC 505

Mutual Shipping Corporation v Bayshore Shipping Co Ltd [1985] 1 WLR 625

Newmont Yandal Operations Pty Ltd v J Aron Corp (2007) 70 NSWLR 411; [2007] NSWCA 195

Nicholls v Hall (2007) 2 ASTLR 419; [2007] NSWCA 356

Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84

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

Peters v Salmon [2013] NSWSC 953

Phillips v James (2014) 85 NSWLR 619; [2014] NSWCA 4

Poche v Poche [2020] NSWSC 835

Rafferty v Time 2000 West Pty Ltd (No 5) (2010) 87 IPR 593; [2010] FCA 873

Re Application of Scali [2010] NSWSC 1254

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

Re Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268; [2005] NSWSC 1003

Richardson v Rearden [2006] NSWSC 1252

Ritter v Godfrey [1920] 2 KB 47

Sahade v Bischoff (No 2) [2016] NSWCA 45

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

Sarant v Sarant [2020] NSWSC 1686

Short v Crawley (No 40) [2008] NSWSC 1302

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

SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323

Stojanovski v Stojanovski [2019] NSWSC 1713

Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446

Tonna v Mendonca (No 2) [2020] NSWSC 306

Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160

Vieira v O’Shea (No 2) [2012] NSWCA 121

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

Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328; [1994] NSWCA 338

White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303

Windsurfing International Incorporated Inc v Petit (1987) AIPC 90-441

Texts Cited:

Practice Note SC Eq 7

Category:Costs
Parties: Edmund Bede Hao San Cong (First Plaintiff)
Teresa Mae Yin Cong (Second Plaintiff)
The estate of the late Laurence Xavier Xiao Ming Cong by its representatives Edmund Cong and Teresa Cong (Third Plaintiff)
Yanjiao Shen (First Defendant)
Yaqin Wu (Second Defendant)
The estate of the late Zi Li Cong by its representative Tamara Goodwin (Third Defendant)
Representation:

Counsel:
MK Condon SC with P Sharp (Plaintiffs)
DA Smallbone (Defendants)

Solicitors:
Mervyn Finlay Thorburn & Marshall (Plaintiffs)
Accuro Maxwell (Defendants)
File Number(s): 2017/00222405
Publication restriction: Nil

Judgment

  1. HER HONOUR: On 3 August 2021, I published my principal judgment in this proceeding (Cong v Shen (No 3) [2021] NSWSC 947) (the principal judgment) dealing with a dispute involving members of the first and second families of the deceased (the late Mr Zi Li Cong). The background to the dispute is set out in the principal judgment and I will not repeat it here. I adopt the same definitions as used in those reasons.

  2. For the reasons set out in the principal judgment, I concluded (as summarised at [1895]) that Mr Cong’s last Will (the 2016 Will) was a valid Will, made when Mr Cong had testamentary capacity and with his knowledge and approval, and that it incorporated a deed entered into at the same time as the 2016 Will (the Deed) (although I also concluded that the Deed should be set aside as against Mr Cong’s second wife, Ms Shen, by way of relief under the Contracts Review Act 1980 (NSW) (Contracts Review Act)). I concluded that the 2016 Will (with the Deed annexed) should be admitted to Probate and that Probate should be granted to both the named executors (Ms Shen and Mr Cong’s son, Edmund). I held that the claim by Mr Cong’s two surviving adult children from his first marriage (Edmund and Teresa) for proper provision out of Mr Cong’s estate had been established (and that notional estate should be designated for that purpose). Otherwise, I found that the various claims made by the plaintiffs had not been made good (which included the only claims made against the second defendant, Ms Wu) and that, other than the Contracts Review Act claim, Ms Shen’s cross-claim had not been made good.

  3. I reserved the question of costs and made directions for brief submissions on costs to be filed, with a view to dealing with the issue of costs on the papers if possible. I also granted liberty to apply on three days’ notice if issues arose in the implementation of the orders that I made.

  4. Since then, two notices of motion have been filed: a notice of motion filed on 17 August 2021 by Edmund and Teresa (to whom I will refer collectively as the plaintiffs although there is of course a third plaintiff – the estate of their deceased brother, Laurence) the plaintiffs, seemingly exercising the liberty granted when the final orders were made; and a notice of motion filed on the same day by Ms Shen, pursuant to rr 36.16(1) and (3A) and/or 36.17 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Both sides filed submissions as to costs (and further or reply submissions in relation to the issues raised in the notices of motion and as to costs).

  5. There was then an application by the plaintiffs (leave for the filing of which was not opposed by the first and second defendants, albeit that they oppose the relief sought therein) for the filing of an amended notice of motion and for further submissions in relation thereto; all of which led me to list the amended notice of motion for hearing with final submissions to be made orally. That hearing occurred on 17 September 2021 and these reasons now deal with all of the issues remaining to be dealt with in order to dispose of the proceeding.

Respective notices of motion

  1. I deal sequentially with the respective notices of motion.

Plaintiffs’ initial notice of motion

  1. The plaintiffs’ initial notice of motion filed on 17 August 2021 sought the following orders:

1.   To the extent necessary, an order that the first defendant [Ms Shen] pay the provision made by Order (5) made by the Court on 3 August 2021.

2.   To the extent necessary, an order that liberty be given to the plainitffs to seek such further orders as may be required to give effect to Orders (5) and (6) made by the Court on 3 August 2021.

  1. Orders 5 and 6 to which reference is there made were the orders made on 3 August 2021 for provision in favour of Edmund and Teresa, namely:

5.   Pursuant to s 59 of the Succession Act 2006 (NSW), order that provision be made out of the estate of the late Zi Li Cong in favour of the first and second plaintiffs in the sum of $700,000 each, in lieu of the provision made for the first and second plaintiffs under the deceased’s Will executed on 3 June 2016.

6. Designate as notional estate so much of the proceeds of sale of the properties at 16 Nicholson Street, Burwood and 43 Amy Street, Campsie as is necessary in order to make provision for the first and second plaintiffs in accordance with order 5 (i.e., up to $1.4 million).

Submissions

  1. As to the plaintiffs’ initial notice of motion, the first and second defendants complained that no juridical basis for the application in prayer 1 (in effect that Ms Shen personally be liable to pay the provision ordered in favour of the plaintiffs) has been articulated by the plaintiffs; and they emphasise that an order for provision operates through the estate and only in respect of assets of the estate (and any notional estate).

  2. The plaintiffs’ response to this complaint, in their first set of reply submissions was to identify that they rely, as the relevant source of power, on s 66(1)(i) of the Succession Act 2006 (NSW) (Succession Act), as enabling the making of orders to secure “the due performance of an order under this Part”. The plaintiffs submit that s 66 of the Succession Act is cast in very broad terms, pointing, by way of example, to s 66(1)(l), which provides that the Court may make orders relating to “any other matter the Court thinks necessary” for the purpose of giving effect to the family provision order.

  3. The plaintiffs say that the proceeds of the sale of the 16 Nicholson Street and 43 Amy Street properties were received by Ms Shen and applied by her for her own benefit. They submit that, as that notional estate no longer exists, it is appropriate (in order to secure due performance of the family provision orders that were made) for there to be a further order affixing personal liability to Ms Shen to make the family provision payment to the plaintiffs; and that such an order is consistent with the overriding purpose in s 56(1) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) and avoids the possibility of any further dispute about the enforcement of the family provision orders, or litigation by the executors to recover those assets. The plaintiffs refer to the observations made at [1872]-[1873] of the principal judgment in this regard (which I do not here repeat, but in which I expressed the opinion, to which I adhere, that in the circumstances Edmund and Teresa cannot expect to receive anything further out of Mr Cong’s estate without an order for provision). (Ironically, of course, the complaint by the plaintiffs in the proceeding as to intransigence on Ms Shen’s part in relation to any distribution to Edmund and Teresa is contradicted somewhat by the making of the Calderbank offer on which Ms Shen here relies, though my observations in the principal judgment were made at the conclusion of the hearing whereas the offer made by Ms Shen was at an earlier stage – and not seemingly repeated once the hearing commenced; or at least I have not been made aware of any such later offer.)

Determination – initial notice of motion

  1. As initially filed, what the plaintiffs sought in their notice of motion was an order that Ms Shen pay the provision ordered on 3 August 2021 (and for liberty to be given to the plainitffs to seek such further orders as may be required to give effect to orders 5 and 6 made on 3 August 2021).

  2. I accept that s 66 of the Succession Act is cast in very broad terms, permitting the making of any orders relating to any other matter considered necessary to give effect to the family provision order. However, insofar as the premise of the application in this regard is a perception that, without such relief, Ms Shen would or may not comply with her obligations as an executor, I do not accept that I should make such an assumption. I have set out in the principal judgment my conclusions as to the construction of the 2016 Will and to the orders made for provision. Subject to the outcome of any appeal, as co-executor I would expect Ms Shen to abide by them.

  3. While I am well aware of the overriding statutory mandate imposed by s 56(1) of the Civil Procedure Act, I am not persuaded that the mandate to facilitate the just, quick and cheap resolution of the real issues in dispute extends to the anticipation and avoidance of disputes arising in the future. Further, the observations made at [1872]-[1873] of the principal judgment related to the stance that had been adopted by Ms Shen of the discretion she believed had been afforded to her in relation to the distribution to be made to Edmund and Teresa (and, before his death, Laurence), which is not now likely to be relevant in the circumstances which have transpired.

  4. In passing, it seems to me not the least bit ironic that the plaintiffs here seek an order that Ms Shen be personally liable to pay the amount ordered by way of provision when that is the significant advantage to which Ms Shen points when comparing the Calderbank offer that was not accepted by the plaintiffs with the ultimate outcome of the proceeding (to which I refer in due course).

  5. I do not consider it appropriate to make the order sought in prayer 1 of the initial notice of motion. As to prayer 2 of the notice of motion, I do not consider it necessary for such an order should be made. If an issue arises in future in the implementation of the orders (and is properly considered to be within the concept of the working out of those orders) then an application can be made via my associate in the ordinary course, but otherwise I consider that the making of final orders now to be made will conclude my role in the matter (and I will thereafter be functus officio).

  6. I will return to the additional relief sought in the amended notice of motion after addressing Ms Shen’s notice of motion.

Ms Shen’s notice of motion

  1. Ms Shen, by notice of motion filed on 17 August 2021 seeks an order amending order 6 of the orders made on 3 August 2021 (see above) in two respects, by:

(a)   Inserting, after the word “Campsie”, the words “up to the maximum of the late Mr Zili Cong’s half share in those properties”; and

(b)   Inserting after those words, the words “net of the expenses of the sales of those properties and the mortgage liabilities discharged on completion of those sales”.

Submissions

  1. As to (a), reference is made to [1877] of the principal judgment, in which I identified what I was proposing to designate as notional estate, namely:

1877   … such of the proceeds of sale of the 16 Nicholson Street and 43 Amy Street properties (up to the maximum of Mr Cong’s half share in those properties) as is necessary to meet the order for provision (i.e., the sum of $1.4 million).

  1. As to (b), reference is made by Ms Shen to s 83 of the Succession Act and what was said at [1833] and [1874] of the principal judgment.

  2. Section 83 of the Succession Act, to which I had regard in the course of the principal judgment (as there noted), provides that a notional estate order must not be made unless the Court is satisfied that the relevant property transaction or the holding of the property resulting from the relevant property transaction:

(a)   directly or indirectly disadvantaged the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death), or

(b)   involved the exercise by the principal party to the transaction or any other person (whether alone or jointly or severally with any other person) of a right, a discretion or a power of appointment, disposition, nomination or direction that, if not exercised, could have resulted in a benefit to the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death), or

(c)   involved the exercise by the principal party to the transaction or any other person (whether alone or jointly or severally with any other person) of a right, a discretion or a power of appointment, disposition, nomination or direction that could, when the relevant property transaction was entered into or at a later time, have been exercised so as to result in a benefit to the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death) or

(d)   involved an omission to exercise a right, a discretion or a power of appointment, disposition, nomination or direction that could, when the relevant property transaction was entered into or at a later time, have been exercised by the principal party to the transaction or any other person (whether alone or jointly or severally with any other person) so as to result in a benefit to the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death).

  1. Thus, as emphasised by Ms Shen, account must be taken of the disadvantage sustained by the estate due to the relevant property transaction.

  2. The passages in the principal judgment to which reference is made by Ms Shen in this context are as follows:

1833   Prior to his death, Mr Cong held a half-share, as joint tenants with Ms Shen, in the properties at 16 Nicholson Street and 43 Amy Street, and a share in the moneys held in their joint bank accounts (those joint bank accounts comprising of $20,555.06 and $36,817.84 as per Ms Shen’s 2017 affidavit). By reference to the sale price of those two properties ($2,470,000 and $1,375,000 respectively), Mr Cong’s share of those properties was worth around $1,922,500 – although there were debts secured over those properties ($1,680,000 over 16 Nicholson Street; and $699,112 over 43 Amy Street). Mr Cong’s interest in the properties held as joint tenants with Ms Shen and the joint bank accounts passed by way of survivorship to Ms Shen on his death and did not form part of the assets of his estate (and, as I have found, the resulting trust claim in respect of those two properties fails).

…

1874   On the basis that a rough calculation of the notional estate would be around $2.3 million (half the sale value of each of the 16 Nicholson Street and 43 Amy Street properties plus half the amount held in the joint bank accounts and one-third of the life insurance proceeds), and leaving aside the position of Jolly Trading (the value of which has not to my mind been established particularly given the level of debts balanced against the value one would put on the likelihood of a continuing income stream without Mr Cong alive); and having regard to the wishes of Mr Cong as to the level of provision he wished to make for his elder children, taking into account that they are likely to face a large costs exposure in this litigation; and taking into account all of the circumstances outlined above, I have concluded that the proper provision for Edmund and Teresa is that each receive a lump sum legacy in lieu of the provision made for them in the Will in the sum of $700,000.

  1. Ms Shen notes that, pursuant to s 84 of the Succession Act, a person’s rights are extinguished to the extent that they are affected by a notional estate order.

  2. The plaintiffs submit that, if the notional estate is to be assessed taking into account the encumbrances thereon, as the first and second defendants maintain, then the true position was not captured at [1874] of the principal judgment (where I spoke of the sale value of 16 Nicholson Street and 43 Amy Street). In that event, the plaintiffs now invoke the slip rule and seek an order that the notional estate include (at least) the one-third share of insurance proceeds and a half share of the amounts held in the joint bank accounts (see the plaintiffs’ amended notice of motion below).

  3. In the alternative, the plaintiffs say that the defendants cannot assert that the size of the legacies assumed an ability to meet a costs order whilst contending that the estate is potentially insolvent. The plaintiffs submit that if there is, as the defendants contend, doubt about the ability of the estate to pay the plaintiffs’ legacies, that is a factor which goes to the terms of any costs orders the court can make.

Determination – Ms Shen’s notice of motion

  1. As to (a) of Ms Shen’s motion, I accept that order 6, as made, did not include the words “up to the maximum of Mr Cong’s half share in those properties” and, pursuant to the slip rule (which I address in more detail shortly), and subject to my consideration of the plaintiffs’ prayer 3 in the amended notice of motion, I consider it appropriate to amend order 6 to include those words. I certainly did not intend Ms Shen’s half share of the proceeds of sale in respect of those properties to be the subject of any order designating it as notional estate (nor could such an order properly have been made).

  2. As to (b), I accept that the relevant property to be designated as notional estate in relation to the Campsie properties referred to in order 6 should be the net proceeds of sale; and, again in the exercise of the slip rule, I will amend order 6, as sought by the first and second defendants in order to make that clear. (I note that even if the slip rule did not otherwise apply, s 83 of the Succession Act does not permit the designation of assets as notional estate unless the holding of the property disadvantaged the estate and I accept the submission of Ms Shen that the payment of the expenses of sale and money due to the mortgagee on behalf of the deceased could not of itself have disadvantaged the estate insofar as it discharged a liability of the deceased.)

  3. Therefore, subject to anything arising from the following, I will make the orders sought in Ms Shen’s notice of motion.

Plaintiffs’ amended notice of motion

  1. In response to the defendants’ notice of motion filed on 17 August 2021, invoking the slip rule (as indicated above) so as to amend the orders made on 3 August 2021 to limit the designated notional estate to a half-share of the proceeds of sale from the 43 Amy Street and 16 Nicholson Street properties, the plaintiffs sought to file an amended notice of motion, adding a further prayer for relief (prayer 3) by which they seek an order designating other property as notional estate: namely, the property identified in the principal judgment at [1867], [1869] and [1874]; and any of the properties identified at [25] of the plaintiffs’ amended statement of claim, insofar as this is required to make good the family provision orders that have been made.

Submissions

  1. The plaintiffs rely upon the slip rule in support of prayer 3 of their amended motion, noting the breadth of that rule (see Newmont Yandal Operations Pty Ltd v J Aron Corp (2007) 70 NSWLR 411; [2007] NSWCA 195 (Newmont Yandal)). The plaintiffs say that they have no reason to doubt the accuracy of the calculations by which the first and second defendants say that a half-share of the net proceeds realised from the two properties designated as notional estate will be insufficient to meet the family provision orders that have been made (see at [53] of the first and second defendants’ submissions dated 19 August 2021). The plaintiffs apprehend (correctly) that, had regard been had to those matters, I would have sought to ensure that sufficient notional estate be identified to permit the family provision orders to be enforced, also bearing in mind the incidence of costs.

  2. The plaintiffs note that, pursuant to Ch 3, Pt 3.3 of the Succession Act, any property of the person against whom a notional estate order can be made may be designated (citing Phillips v James (2014) 85 NSWLR 619; [2014] NSWCA 4 at [74] per Beazley P, as Her Excellency then was (with whom Basten and Meagher JJA agreed); and Charnock v Handley [2011] NSWSC 1408 at [190] per Hallen AsJ, as his Honour then was). In particular, reference is made to what was said by Campbell J, as his Honour then was, in Richardson v Rearden [2006] NSWSC 1252 (Richardson v Rearden) at [23], namely that:

That provision [referring to the equivalent provision, s 24 of the Family Provision Act 1982 (NSW)] means that if someone has received a benefit from a deceased estate, it is possible to designate as notional estate an asset of that person, even if that asset is not something into which it would be possible to trace any specific asset of the testator. That ordinarily gives the court a fairly wide power to do practical justice, and make sure that the assets of a deceased estate end up, so far as at least their value is concerned, in the hands that the court decides are the appropriate ones to enable the deceased to fulfil his or her obligations. However, in the present case, even that broad power will not be adequate to meet the present situation of the plaintiff. There is simply no asset that can be identified, of any person who received benefits from the estate of the deceased, which could be designated as notional property. Under these circumstances, the application under the Family Provision Act 1982 would inevitably fail, even if the extension of time were granted.

  1. It is noted that that analysis was accepted by the Court of Appeal in Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133 at [48] per Meagher JA (with whom Macfarlan and Leeming JJA agreed).

  2. In relation to prayer 3 of the plaintiffs’ amended notice of motion, the plaintiffs submit that, pursuant to r 36.17 of the UCPR, order 5 of the orders made on 3 August 2021 should be amended to include, as relevant notional estate, the first defendant’s one-third share of the proceeds of the life insurance policy and Mr Cong’s half share of the moneys in the joint bank accounts to which reference was made in [1867], [1869] and [1874] of the principal judgment. The plaintiffs say that the last sentence of [1869] indicates that the insurance proceeds could be treated as notional estate as to one-third for the reasons there set out. (Pausing there, at [1869], having noted the matters that must be considered under ss 83 and 87 of the Succession Act before any notional estate order is made, I said that any order designating the insurance proceeds as notional estate should be limited to Ms Shen’s one-third share of those proceeds.)

  3. In their submissions, the first and second defendants have pointed out that the legal effect of a notional estate order is that a person’s rights are extinguished to the extent that they are affected by a notional estate order (see s 84 of the Succession Act). Although, in its terms, order 6 of the orders made on 3 August 2021 was an order made against the defendants as parties to the proceedings, the first and second defendants point out that it realistically affects only Ms Shen as, of the three defendants, only she had a personal interest in the proceeds of sale that were designated as notional estate.

  4. The first and second defendants say that the effect of s 84 is to extinguish Ms Shen’s interest in the proceeds of sale to the extent of the orders for provision but that it does not impose personal liability to pay a certain sum (rather, it would leave Ms Shen, to the extent that the proceeds are held by her, holding them without any continuing right to do so and therefore subject to her administration obligations as an executor). It is noted that the distribution of the funds would then be governed by the administration of the estate pursuant to the 2016 Will, subject to the superimposed orders made on 3 August 2021, and the ordinary obligations of executors under the general law, including obligations to creditors.

  5. The first and second defendants note that the two properties concerned were burdened by mortgages securing $1.68 million against 16 Nicholson Street and $699,112 against 43 Amy Street (see at [1833] of the principal judgment) which mortgages were discharged on completion. The first and second defendants say that, to that extent, the proceeds of sale did not come into the hands of Ms Shen (rather they were paid to the banks, who are not parties to the proceedings or the order and whose interest is not affected by the order because they are not privy to it). It is said that the result of extinguishing the interest of Ms Shen in the proceeds of sale is that the payments to the banks, on completion, extinguished debts that Ms Shen and the estate co-owed to the banks. Thus, it is said (and I agree) that the estate has already received the benefit of its share of the proceeds of sale and has applied them to discharge its equal share of the debts to the banks.

  6. The first and second defendants say that, but for the notional estate order, Ms Shen would be entitled to say that (because of her survivorship to the entirety of the two properties), she was entitled to the entire proceeds of sale and to have the benefit of their application to discharge liabilities co-owed to the banks, such that she would be entitled to contribution from the estate for one half of each of those debts; and they accept that an effect of the notional estate order is therefore to alter this position, with the effect that the estate’s share of debt was repaid by its consequent share of the proceeds of sale.

  7. Thus, it is said that Ms Shen is no longer a creditor for those amounts. However, the first and second defendants say that this does not make Ms Shen personally liable to pay (a second time) money that was already paid by the purchasers to the mortgagees for (as matters now stand under the orders) the benefit of the estate.

  8. It is said that the consequence of depriving Ms Shen of her interest in Mr Cong’s share (had he lived) in the proceeds of sale of the two properties the subject of the order for provision is that the payment (of the estate’s share) to the bank is not now to be attributed as a payment to Ms Shen’s benefit and is therefore not money that she received. Alternatively, it is said that, if there was a notional receipt by Ms Shen for the estate’s benefit, it is matched by a notional payment by Ms Shen to the bank for the estate’s benefit so that she has already parted with the money without any wrong that would sound in an ongoing liability to the estate to pay or account to it for that money a second time.

  9. The financial impact is said to be that the interest of Mr Cong’s estate (a 50% interest in the net equity in the relevant properties) amounts to $732,944 (because the net equity in 16 Nicholson Street was $790,000 and the net equity in 43 Amy Street was $675,888) – i.e., Mr Cong’s estate was 50% of $1,465,888 (see [1833] of the principal judgment). This, it is said, demonstrates the significance of the words “up to” in order 6 made on 3 August 2021 (and it is noted that this falls well short of the practical benefit and worth of the offer made on 29 November 2017).

  10. Ms Shen, as adverted to above, made no complaint as to the amendment of the plaintiffs’ motion to add the proposed prayer 3 if confined to the slip rule (i.e., on the basis that no other power be invoked), noting that the orders have been entered and the time for making an application under r 36.16 of the UCPR has expired and that s 64 of the Civil Procedure Act does not apply (see s 64(5)). However, Ms Shen opposes the relief sought in prayer 3 of the amended notice of motion.

  11. Reference is made by Ms Shen to the finding (at [1867] of the principal judgment) that the potential notional estate was limited to Mr Cong’s half share of 16 Nicholson Street and 43 Amy Street, the life insurance proceeds, the joint bank accounts and the assets of Jolly Trading. It is thus said that prayer 3 of the amended notice of motion goes beyond (and seeks to contradict) the actual findings made and hence is not an application which can be made under the slip rule. Further objection is made that the relief now sought goes beyond the plaintiffs’ submissions at trial.

  12. As to the insurance proceeds, it is noted that, at [1869], I accepted that any order designating the insurance proceeds as notional estate must be limited to Ms Shen’s one third share. However, Ms Shen says that this does not imply an intention so to designate those funds (her submission being that it is simply a finding as to a limit on what could potentially be designated, if further requisite findings and decision were made). Ms Shen argues that, at [1877], there was, in effect, a decision made not to make an order designating the one third share of the insurance proceeds; and that no slip has been identified therein. Ms Shen submits that a decision to designate one third of the insurance proceeds and Mr Cong’s share of the moneys held in the joint bank accounts would or might have involved further factual findings as to the use and application of those funds (for the purpose of ruling on the various considerations required under ss 83 and 87), though it is not clear what, if anything, would now be raised as to those issues.

  13. Ms Shen argues that ss 83 and 86 and Div 3 of Pt 3.3 require fact finding and an evaluative decision, as well as the selection of a remedy in the event that all other elements are satisfied. It is submitted that the plaintiffs’ assumption that there was an intention to designate from any source necessary sufficient property to meet a $1.4 million provision order ignores the recognition at [1869] of the limits imposed by s 83 of the Succession Act namely, that the designated property cannot exceed in quantum the amount by which the estate was disadvantaged by the relevant transaction; and of the limits imposed by s 87.

  14. Ms Shen submits that both the notional estate order and the provision order contain limitations each of which operates according to its own terms; and that there was no slip. It is said that reopening the question of the property to be designated and extending it to other property would require s 83 and Div 3 of Pt 3.3 to be further considered and the limits of the order to be re-evaluated; and that this is neither possible nor appropriate on a slip rule application. Reference in that regard is made to Brew v Whitlock (No 3) [1968] VR 504 at 506-507 where the Full Court of the Supreme Court of Victoria (Winnecke CJ, Little and Gowans JJ) said that it was impossible to apply the slip rule where, on the application to correct the judgment, it was necessary to exercise an independent discretion; and to Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 (Storey & Keers) at 453E where McHugh JA (as his Honour then was) added to that proposition where it is “a matter upon which a real difference of opinion might exist”.

  15. It is noted that, McHugh JA also said (at 453C) that:

… it is only omissions or mistakes which are accidental which can be rectified. It would be contrary to the rationale of the slip rule to allow judgments and orders to be amended to deal with matters which were not in issue in the proceedings. Such matters must be dealt with by way of appeal and in accordance with the principles which govern the raising of new matters on appeal ….

  1. His Honour had suggested (at 452G) that an earlier decision (Coppins v Helmers;Brambles Constructions Pty Ltd (1969) 72 SR (NSW) 273) (where there was an unsuccessful application for variation to a costs order) might be justified on the basis that the proposed variation there “related to a matter separate and distinct from what had been in issue at the trial”. It is noted that, at 453F, McHugh JA stated the test of accident as being whether, had the matter been drawn to the attention of the court at the time, the correction would “at once have been made”.

  1. Ms Shen says that there were not submissions before me at trial on the questions now arising in prayer 3 of the amended notice of motion (referring to the complaint made to that effect in her closing written submissions dated 15 December 2020 at [706] and repeated at [726]-[727] concerning the insurance proceeds and at [729] concerning the bank accounts). Reference is further made to the submissions at [705] and oral closing submissions at T 1171.18-20, as to the case that the first and second defendants had to meet in this regard. Insofar as the property now sought to be designated as notional estate goes beyond the insurance proceeds and bank accounts, Ms Shen says that [294] of the plaintiffs’ submissions in chief at the trial did not identify that it was sought to attach the notional estate claim to property other than that which was identified in that submission. It is said that the plaintiffs’ submissions did not address any issues of limitation under s 83 and Pt 3.3 Div 3 of the Succession Act which would arise if the designation of notional estate was not to be limited to the property that itself was the subject of the “relevant transactions” as defined in the Succession Act and alleged in the pleading.

  2. Reference is made to the plaintiffs’ oral submissions in closing on the Succession Act claim (see T 1098; T 1145.45 to T 1149.3). Insofar as it was put that the estate was a large estate that included $12 million of property that had been held on resulting trust and was to be included as notional estate, Ms Shen points out (as is undoubtedly the case on the findings in the principal judgment) that the resulting trust claim failed on the merits (and hence there is no question of a slip in that respect).

  3. Reference is also made to the submissions in reply (the plaintiffs’ written submissions dated 31 March 2021 at [142]-[143], and oral submission at T 1204).

  4. Ms Shen says that no specific submission on the notional estate provisions was addressed to a claim limited to the remaining notional estate assets without the claimed resulting trust assets (noting that there was no submission that a claim in respect of those assets should be effectuated by designating other property or as to how, if that were to be done, the amounts limited by s 83 were to be ascertained, nor how Div 3 considerations were to be dealt with in respect of the different property now sought to be designated “in relation to” the “relevant transactions” concerning the assets which have been designated by the Court’s order.

  5. Reference is made to the additional submissions made by the first and second defendants as to the insurance proceeds (see at [723]; [725] of the closing submissions at trial) and to [223] of the defence; and, in respect of the bank accounts, to [224] of the defence.

  6. Ms Shen says that the plaintiffs did not identify how the estate was disadvantaged by the four “relevant transactions” up to the amount of $1.4 million, nor did they deal with s 87 on the basis that there were no resulting trusts and show how the events that happened enable the claims to be asserted consistently with Div 3 against all the other assets. It is submitted that such a submission would not be open to be made on a slip rule application (and that this illustrates that the subject is one of substantial controversy, rather than an obvious and merely accidental mistake or omission).

  7. Ms Shen points out that a slip rule application is not an occasion for further fact finding or evaluative judgment and substantial consideration of remedies on questions that it was not necessary to decide because of the failure of the plaintiffs’ large estate claim and the decision by the Court to designate specific property less extensive than what is here sought.

  8. Further, (and I address this in due course) Ms Shen points to the impact on the assessment of Ms Shen’s 29 November 2017 offer of acceding to the plaintiffs’ application in prayer 3 if confined to the addition of property equal to one third of the insurance proceeds and half of the joint bank accounts.

Determination

  1. The most controversial aspect of the relief sought by the parties on the present applications is that comprised by prayer 3. This requires consideration of the scope of the “slip rule” contained in r 36.17 of the UCPR.

  2. At the outset, it should be noted that in Newmont Yandal, the Court of Appeal observed (at [117]) that caution must be exercised in the application of case law from the past or from other jurisdictions when construing the slip rule in other contexts. With that caution in mind, I nevertheless note that in Mutual Shipping Corporation v Bayshore Shipping Co Ltd [1985] 1 WLR 625 at 633, Donaldson MR said that:

It is the distinction between having second thoughts or intentions and correcting an award or judgment to give true effect to first thoughts or intentions, which creates the problem. Neither an arbitrator nor a judge can make any claim to infallibility. If he assesses the evidence wrongly or misconstrues or misappreciates the law, the resulting award or judgment will be erroneous, but it cannot be corrected …. The remedy is to appeal, if a right of appeal exists. The skilled arbitrator or judge may be tempted to describe this as accidental slip, but this is a natural form of self-exculpation. It is not an accidental slip. It is an intended decision which the arbitrator or judge later accepts as having been erroneous.

  1. In Storey & Keers, McHugh JA (as his Honour then was) said (at 449) in relation to the slip rule and the inherent jurisdiction to correct accidental slips or omissions:

The Courts of Common Law and the Court of Chancery had inherent power to correct any clerical mistake or error in a judgment or order if it was the result of an accidental slip or omission: Lawrie v Lees (1881) 7 App Cas 19 at 34-35. This power was an exception to the general principle that a party is bound by a judgment or order once it has been drawn up unless he can set it aside: Kinch v Walcott [1929] AC 482. But although the principle of the slip rule is clear enough in conception, its application in practice has often proved difficult. The dividing line between a mistake or error which is the result of an accidental slip or omission and a mistake or error which is the product of a deliberate decision has often been difficult to draw. The difficulty became much greater when it was decided that an error might be the result of an accidental slip or omission even though, because of the inadvertence of the party’s legal representative, the point was not raised at the hearing of the action: cf L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] (1982) 151 CLR 590 at 594-595.

  1. In Storey & Keers (at 453) McHugh JA also said that the rationale of the slip rule requires that an omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or as a matter upon which a real difference of opinion might exist.

  2. Relevantly (and pertinently in the present case), in Newmont Yandal, the Court of Appeal considered (at [60]) that the inherent jurisdiction of the court permitted the correction of orders the legal consequences of which were unforeseen or contrary to those intended, applying Ivanhoe Gold Corporation Ltd v Symonds (1906) 4 CLR 642; [1906] HCA 71; In re Swire; Mellor v Swire (1885) 30 ChD 239. Pausing here, I say that this is pertinent in the present case because my understanding at the time of the principal judgment – as I explained in debate with Counsel on the present application and as I consider to be implicit from my rough calculation of the potential notional estate at [1874] – was that (subject of course to the evidence of costs) the provision so ordered would be able comfortably to be met out of the proposed notional estate. If the effect of the orders for designation of notional estate (because of my failure to take into account Mr Cong’s half share of mortgage expenses having been discharged out of the proceeds of sale) has had an unforeseen consequence or a consequence contrary to what was intended, then that enlivens the slip rule jurisdiction as explained in Newmont Yandal. However, I accept that what is clearly not contemplated by the slip rule is the exercise afresh of a discretion which was originally considered by the decision-maker in relation to the particular issue.

  3. Of course, I accept there is a potential difficulty if one is applying the slip rule by reference to unarticulated thought processes at the relevant time. In Newmont Yandal, Spigelman CJ, having emphasised that, by reason of the insertion of the overriding objective into the Civil Procedure Act, words such as “error” and “correct” in the slip rule should not be given a narrow interpretation (at [24]-[29]), said that, in considering whether there had been an error falling within the slip rule or capable of correction within the inherent jurisdiction of the court, the relevant intention was the objective intention of the decision-maker at the time the original orders were made. (Hence, the distinction I draw here between objective and subjective intention.)

  4. It is relevant here to repeat what I said at [1874]:

1874.   On the basis that a rough calculation of the notional estate would be around $2.3 million (half the sale value of each of the 16 Nicholson Street and 43 Amy Street properties plus half the amount held in the joint bank accounts and one-third of the life insurance proceeds), and leaving aside the position of Jolly Trading (the value of which has not to my mind been established particularly given the level of debts balanced against the value one would put on the likelihood of a continuing income stream without Mr Cong alive); and having regard to the wishes of Mr Cong as to the level of provision he wished to make for his elder children, taking into account that they are likely to face a large costs exposure in this litigation; and taking into account all of the circumstances outlined above, I have concluded that the proper provision for Edmund and Teresa is that each receive a lump sum legacy in lieu of the provision made for them in the Will in the sum of $700,000.

  1. I had there calculated (expressly noting that this was a rough calculation) that the property that might be designated as notional estate was in the order of around $2.3 million. It was in that context that I concluded that the proper provision for Edmund and Teresa, having regard to all of the matters discussed in the reasons, was that each should receive a lump sum legacy in the amount there provided. I apprehended at the time that such an amount might be reduced by any requirement to pay their own costs of the litigation as well as any potential liability to pay the costs of the first and second defendants having regard to the outcome of the proceeding. However, I was not in a position to know the amount by which the lump sum legacy would thereby be reduced (not least because no determination had yet been made as to the costs orders). What I did not include in that rough calculation (and what can be seen objectively by reference to the reasons) was the effect, on the “pool” of potential property that might be designated as notional estate, of the debts of the estate that had been discharged in relation to mortgage liabilities. Thus, I draw comfort from the fact that I am not here relying on my subjective recollection of the reasoning process – I consider that it can be objectively discerned from the reasons.

  2. The matters to which the first and second defendants have pointed in relation to Ms Shen’s notice of motion lead inevitably to the conclusion that I misapprehended (and significantly overstated) the amount of the potential notional estate because I did not have regard to the discharge of Mr Cong’s share of the mortgage liabilities in respect of the two properties in question. Whether that was due to the failure of the executors to adduce comprehensive evidence as to the assets of the estate or a failure to address these issues adequately in submissions (both of which were put forward on the present application as matters that might explain the error) seems to me not necessary here to explore.

  3. The fact remains that, had I appreciated at the time the import of the discharge of those liabilities on the net amount that might properly be designated as notional estate in respect of the proceeds of sale of the two properties in question, I have no doubt that I would have expanded the designation of notional estate to include Mr Cong’s half share of the bank accounts and a one-third share of the life insurance proceeds.

  4. Insofar as the test is, as suggested in authorities, whether had my attention been drawn to this error at the time I would have made a different order, I have no doubt that I would have done so in the way suggested above. In that regard, I consider it self-evident that to sever the joint tenancy in the bank accounts disadvantaged the estate by depleting the amount available for distribution to beneficiaries and, similarly, that the failure to change the designation of a one-third share of the insurance proceeds to Ms Shen relevantly disadvanted the estate. As to the s 87 issue, it is sufficient to note that I addressed this in relation to the remaining two-thirds share of the insurance proceeds (referable to two of Mr Cong’s sons from his second marriage). Implicitly, I did not consider the same to be an issue in relation to Ms Shen’s one-third share. Having regard to the way in which Ms Shen has dealt with the overall funds in the estate it seems to me evident that Ms Shen has treated everything in the estate as being within her absolute discretion to deal with; and I do not consider that to have been a reasonable expectation.

  5. However, whether I would have designated assets held in Ms Shen’s name alone as notional estate raises squarely the issue referred to above (between having second thoughts and correcting an order properly to reflect the initial thoughts or intentions of the decision-maker). I say that because I certainly had not given consideration at the time to designation of any property held in Ms Shen’s own name as notional estate; and, had it been raised, I would have explored with Counsel the basis for such relief (as I did when it was raised on the present application). I accept in that regard that a slip rule application is not an occasion for entering into further fact finding or evaluative judgment. The fact that no property held in Ms Shen’s name was designated as notional estate was not an accidental slip. It was something to which I did not ever turn my mind.

  6. As it transpires, it is not here necessary to explore the question of power to do so (otherwise than under the slip rule) in any detail since it was accepted by Ms Shen that there is power to designate as notional estate property held solely in her name (and not transferred to her as part of Mr Cong’s estate), she having received benefits under the 2016 Will. However, as explained in submissions, it is Ms Shen’s position that the limit to the amount that can be designated as notional estate (having regard to s 83 of the Succession Act) is the amount of $1,190,317 because that is the extent to which (accepting the plaintiffs’ position) Mr Cong’s estate has been disadvantaged by the transactions in question. In other words, the reality is that the amount ordered by way of provision cannot be met out of Mr Cong’s estate even with the amount referable to property capable of designation as notional estate. Hence, it is not even necessary to consider issues such as the reasonable expectations of Ms Shen as the owner of the property held in her name in which she and her children still reside.

  7. The issue, as I understand it, is thus not one as to finding property held by Ms Shen that would enable the family provision order to be satisfied; it is the fact that notional estate can only be designated (in compliance with the mandate provided by s 83 of the Succession Act) up to the limit of around $1.19 million. If I be mistaken in this regard then no doubt I will in due course be corrected, but my understanding of the submissions put forward on Ms Shen’s behalf is that the order made for provision can (subject to any other estate liabilities) be satisfied up to the amount of $1.19 million but that an order for notional estate cannot permissibly be made designating sufficient property to satisfy the order beyond that amount. I accept that this is a consequence of the application of s 83 of the Succession Act and that the position is, in effect, not so dissimilar from that in Richardson v Rearden, namely that there may be no ability to identify sufficient property to meet what would be considered to be proper provision for the particular claimants.

  8. However, it does seem to me that if there is an issue as to whether the existence of other estate liabilities precludes as a practical matter receipt by Edmund and Teresa of at least $1.19 million (taking their position collectively at this point and leaving aside the question of costs) then it seems to me that it is imperative to consider what orders may be necessary in order to do practical justice and to make sure that the assets of the deceased’s estate end up, so far as at least their value is concerned, in the appropriate hands to enable the fulfilment of Mr Cong’s testamentary obligations (to adapt the language used by Campbell J in Richardson v Rearden).

  9. In that regard, I have some difficulty insofar as I am not confident that I have a clear idea of the liabilities of the estate and I see no basis to prejudice other creditors of the estate from what would be the ordinary distribution of estate assets. I have concluded that the making of practical justice would here be achieved by an order pursuant to s 66 of the Succession Act to the effect that any liabilities owed by the estate to Ms Shen (such as, for example, for reimbursement of funeral expenses for Mr Cong) be deferred (and not be paid in priority) to the distribution required to be made to Edmund and Teresa pursuant to the orders for family provision that have been made. As a practical matter, I consider that this would be appropriate insofar as Ms Shen has had both the benefit of the property that has been designated as notional estate and the benefit of significant provision by Mr Cong in his lifetime (as explained in the principal judgment) and it is not unreasonable to expect that Ms Shen, who I accepted was a loving wife of Mr Cong, would accept responsibility for his funeral expenses if there were insufficient funds in the estate to pay them. I do not consider that such an order could properly be made in relation to other (third party) creditors (who would have had a reasonable expectation to be paid in respect of the estate’s debts).

  10. Further, to the extent that there is insufficient money in the coffers of the estate, when including the additional property now to be designated as notional estate (i.e., the half share of the joint bank accounts and the one-third share of the insurance proceeds), taking into account proper estate liabilities, then it seems to me that it would not be inappropriate to designate property held in Ms Shen’s name as notional estate in order to permit the provision orders to be met up to the amount of $1.19 million. (I say “proper” estate liabilities because I would not readily accept that the estate would properly be liable for amounts that might be claimed by persons associated with Ms Shen such as Mr Baoming Shen or Ms Wu, for the reason that I considered the former to be an unreliable witness and the latter to have been little more than a cipher for Ms Shen; and hence, I would suggest that any claims by those individuals would need to be considered with caution by the executors.)

  11. However, as to what (if any) additional property should be designated for that purpose, again my difficulty lies in determining precisely how much of a shortfall (from the $1.19 million) there might be and the assets over which such a designation should be made (bearing in mind that I consider that Ms Shen would have had a reasonable expectation that there be no interference in her interest in the current family property).

  1. It is also relevant at this stage to consider the complaints raised by the plaintiffs as to the manner in which Ms Shen conducted the proceeding (as referred to above). In that regard, I see no need to repeat the observations I made in the principal judgment as to Ms Shen’s unreliability as a witness and the like. It will be recalled that I did not make a positive finding of dishonesty although I expressed concern as to the inconsistencies in Ms Shen’s affidavit evidence and I considered much of her explanations of events to be implausible; just as I considered Ms Shen’s reliance on her inability to understand English to have been a convenient excuse or refuge. Neverthess, I do not consider that this amounts to sufficient reason to make special costs orders against Ms Shen (or to refrain from making special costs orders against the plaintiffs if they be otherwise warranted). More problematic is the conduct that warranted the making of freezing orders and the subsequent (admitted) breach of those orders but I consider that this is best dealt with in the context of the application for the costs orders associated with those freezing order applications.

  2. On balance, even had the Calderbank principles been enlivened in the present case I have concluded that it would be inconsistent with the considerations that warranted the making of orders for provision that the plaitniffs should be deprived of any benefit at all from those provision orders (notwithstanding their unreasonable non-acceptance of the Calderbank offer) and I bear in mind the context of, and prism through which, family provision claims are seen.

  3. I do not consider it likely that Mr Cong would have considered it consistent with the obligations on his testamentary bounty in relation to his surviving elder children that he would have wished them to be deprived of any benefit at all out of his estate (though I accept that he did not wish there to be dispute between his two families and he equally wished for his second wife and three younger children to be established in life); nor do I consider that resort to community standards or expectations (such as were considered in Stojanovski v Stojanovski) warrants such a result. Therefore, had the Calderbank principles been enlivened I would nevertheless not have exercised the discretion to order costs on an indemnity basis.

Special costs order against Ms Shen

  1. As noted above, the plaintiffs seek a special costs order against Ms Shen in respect of her conduct of the litigation. In Ritter v Godfrey at [60], Atkin LJ said that the relevant considerations for the exercise of the discretion to make special costs orders for misconduct in the litigation are evidence that the defendant “(1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains”. It is not necessary to establish misconduct nor that the case be exceptional, see GR Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 at [20] where Bryson JA (with whom Hodgson and Santow JJA agreed) stated:

It would be an error to think that it has been established, as a matter of law, that an order that a successful party to pay costs of an unsuccessful party cannot be made unless it has first been found in terms or to the effect that it is a most exceptional case, or a strong or exceptional case. Judicial references to general rules for the award of costs should not be understood as endeavours to alter the discretionary character of such decisions.

  1. I refer here to what was said by Hallen J in Craigcare Group Pty Ltd v Superkite Pty Ltd [2014] NSWSC 326 at [283]:

The ability of the court to limit the amount of recoverable costs of its own motion reveals that the purpose of such a costs order is not merely restricted to protecting a party from the consequences of an adverse costs order. The purpose also extends to the court implementing the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings, acting in accordance with the dictates of justice and ensuring that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute: Caroona Coal Action Group Inc v Coal Mines Australia Pty Ltd and Minister for Mineral Resources [2009] NSWLEC 165 at [10].

  1. However, I am not persuaded that a special costs order is warranted against Ms Shen.

  2. In Re Application of Scali [2010] NSWSC 1254 Brereton J, as his Honour then was, said:

10   It is well established that, in proceedings under the (NSW) Family Provision Act 1982, the primary duty of the executor as defendant is to uphold the will and to put before the Court any necessary material that can reasonably be found to assist the Court [see Anthony Dickey, Family Provision After Death (1992) Law Book Co, Vasiljev v Public Trustee [1974] 2 NSWLR 497]. No doubt this does not mean that the proceedings must be defended as if they were a murder trial, and it does not deny that the executor must exercise a due sense of proportionality in the conduct of any such defence and seek to compromise a claim, if at all possible, in a way that would save both the plaintiff and the other beneficiaries’ costs [see Sziazkov Travini [2004] NSWSC 610]. Thus, the duty of executors to uphold the will does not extend to doing so where it is of no commercial benefit to anyone, and regard should be had to the extent to which upholding the will would benefit beneficiaries [Sziazko v Travin].

  1. In McCusker v Rutter (at [57]-[62]) it was said in effect that an executor, faced with a statutory family provision claim, is bound “within reason” to uphold the terms of the Will but that, in appropriate cases, the legal personal representative will be justified in compromising the claim or even consenting to the orders sought. Handley AJA said at [62] that:

62.   The Judges who held that executors have a duty to uphold the terms of the will did not define that duty in the wide terms that would be necessary if it prevented a parent or other family member discharging normal parental or familial duties to children needing advice about their rights and assistance in enforcing them. I cannot believe that those Judges ever had in contemplation a duty of that nature.

  1. In weighing the duty to uphold the Will, an executor must exercise a due sense of proportionality involved in defending the proceedings (see also s 60 of the Civil Procedure Act in this regard). Costs may be capped to reflect their relative success and to be proportionate to the importance and complexity of the subject matter in dispute (s 60 of the Civil Procedure Act; and see Detheridge v Detheridge [2019] NSWSC 183 at [172]-[175] per Slattery J). In the present case I am not persuaded that Ms Shen’s conduct has led to “disproportionate” costs being incurred.

Orders

  1. For the above reasons, I order as follows:

  1. Pursuant to the slip rule, amend order 6 of the orders made on 3 August 2021:

  1. by inserting, after the word “Campsie”, the words “up to the maximum of the late Mr Zili Cong’s half share in those properties”; and

  2. by inserting after those words the words “net of the expenses of the sales of those properties and the mortgage liabilities discharged on completion of those sales”.

  1. Pursuant to the slip rule, amend order 5 of the orders made on 3 August 2021 to include, as relevant notional estate, the first defendant’s one-third share of the proceeds of the life insurance policy and Mr Cong’s half share of the moneys in the joint bank accounts to which reference was made in [1867], [1869] and [1874] of the principal judgment.

  2. Note that the amount of notional estate out of the assets so identified is limited to the sum in aggregate of $1,190,317.

  3. Pursuant to s 66 of the Succession Act order that the executors satisfy the orders made for provision in favour of Edmund and Teresa in priority to any debt owing to Ms Shen out of the estate of the late Zi Li Cong.

  4. Order that the first defendant’s costs of defending the family provision claims, assessed on the ordinary basis, for the period in which the first defendant represented the estate be paid out of the estate of the late Zi Li Cong but that, pursuant to s 66 of the Succession Act, those costs be paid after the orders made for provision in favour of Edmund and Teresa have been satisfied.

  5. Order that other than as provided above, the first, second and third plaintiffs and the first defendant respectively pay his or her own costs of the proceeding.

  6. Order that the first, second and third plaintiffs pay the costs of the second defendant on the ordinary basis limited to the costs specifically and separately referable to the second defendant’s defence of the proceeding and not including the second defendant’s costs of legal representation throughout the hearing.

  7. Order that the costs, if any, of the third defendant be borne by the first, second and third plaintiffs.

  8. Order that the costs of the respective motions here determined form part of the costs of the proceeding as a whole and be dealt with as above.

**********

Decision last updated: 24 September 2021

Most Recent Citation
Cases Citing This Decision

1

Macaulay v Macaulay (No 2) [2025] NSWSC 421
Cases Cited

82

Statutory Material Cited

4

Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120
Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375
Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120