Heffernan v Innes (No 2)

[2021] NSWSC 1187

Supreme Court

New South Wales

Medium Neutral Citation:

Heffernan v Innes & Anor (No 2) [2021] NSWSC 1187

Hearing dates:

In Chambers on the papers

Date of orders:

17 September 2021

Decision date:

17 September 2021

Jurisdiction:

Equity

Before:

Hallen J

Decision:

Refer to paragraph [174]

Catchwords:

COSTS – Probate proceedings - Where Court finds in favour of an informal document propounded by the Plaintiff; rejected the defence of lack of testamentary capacity; and dismissed the Cross-Claim of the Defendants which alleged that there was a will made by the deceased which was not found and the original, a copy, or even a draft, of which no one had seen – Defendants had also asserted that the unfound will was removed by the father of the Plaintiff, after the deceased’s death, from the deceased’s home – Serious allegation of what may have amounted to criminal conduct under s 135 Crimes Act 1900 (NSW) made but not proved – Whether Defendants maintained defences and made the serious allegation which had no reasonable prospects of success

COSTS - Whether there should be exception to general rule that costs follow the event bearing in mind nature of the proceedings or otherwise – Consideration given to the nature of the proceedings

COSTS - Offers made by the Plaintiff – Whether each a Calderbank offer – Each offer not accepted by the Defendants, and the Plaintiff obtains an order on the claims no less favourable to her than the terms of the offer - Relevance of offer made if it was not a Calderbank offer on question of costs

Plaintiff contends that the Defendants should pay her costs of the proceedings calculated on the indemnity basis – Defendants orally submit that their costs should be paid out of the estate of the deceased

COSTS - How costs should be borne and whether the circumstances warrant the exercise of the Court’s discretion to make an indemnity costs order in favour of the Plaintiff.

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 3

Crimes Act 1900 (NSW) s 135

Evidence Act 1995 (NSW) s 131

Legal Profession Uniform Law Application Act 2014 (NSW) ss 74-80

Uniform Civil Procedure Rules 2005 (NSW) r 20.26, 42.2

Cases Cited:

Ausino International Pty Ltd v Apex Sports Pty Ltd [2006] NSWSC 1119

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

Bouras v Grandelis (2005) 65 NSWLR 214; [2005] NSWCA 463

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

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

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353

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

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Commissioner of Taxation v Ross (No 2) [2021] FCA 1088

Commonwealth of Australia v Gretton [2008] NSWCA 117

Coregas Pty Limited v Penford Australia Pty Limited (No 2) [2013] NSWCA 11

Crump & Ors v Equine Nutrition Systems Pty Ltd trading as Horsepower & Anor (No 2) [2007] NSWSC 25

Davies v Gregory (1873) LR 3 P&D 28

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

EMI Records Limited v Ian Cameron Wallace Ltd [1983] 1 Ch 59

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

Evans v Braddock (No 2) [2015] NSWSC 518

Girardi as trustee for The Superannuation Fund – Greengate Investments v Duncum [2021] NSWSC 1138

Goodwin v Avison & Ors [2021] EWHC 2356

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

Greer v Greer [2021] QCA 174

Grynberg v Muller [2002] NSWSC 350

Hamod v New South Wales [2002] FCAFC 97; 188 ALR 659

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

His Eminence Metropolitan Petar, Diocesan Bishop of The Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142

Hunter v Roberts (No 2) [2019] NSWCA 235

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

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

Leichhardt Municipal Council v Green [2004] NSWCA 341

Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan) [2009] NSWCA 161

Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212

Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116

Mr Rental Australia Pty Ltd v IRD Services Pty Ltd (No 2) [2016] NSWSC 918

Munday v Bowman (1997) FLC 92-784

Noon v Bondi Beach Astra Retirement Village Pty Ltd (No 2) [2010] NSWCA 285

Old v McInnes and Hodgkinson [2011] NSWCA 410

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

Perpetual Trustee v Baker [1999] NSWCA 244

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

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

Spiers v English [1907] P 122

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

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

Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353

Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194

Tu v Tu Estate of Tu [2008] NSWSC 458

Walker v Wilsher (1889) 23 QBD 335

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

Wharton v Bancroft [2012] EWHC 91 (Ch)

Wright v Apthorpe [2020] NSWCA 300

Ying v Song [2011] NSWSC 618

Texts Cited:

Dyson Heydon, Cross on Evidence (12th ed, 2020, LexisNexis Australia)

G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths)

William E Miller, Probate Practice (1900, Maxwell)

Category:

Costs

Parties:

Lisa Louise Heffernan (Plaintiff/Cross-Defendant)

Sandra Rae Innes (First Defendant/Cross-Claimant)
Matthew Edward Heffernan (Second Defendant/Cross-Claimants)

Representation:

Counsel:
T Catanzariti (Plaintiff/Cross-Defendant)
L Clarke (Defendants/Cross-Claimants)

Solicitors:
Makinson d’Apice Lawyers (Plaintiff/Cross-Defendant)
Eden Legal & Conveyancing (Defendants/Cross-Claimants)

File Number(s):

2020/92169

Publication restriction:

Nil

Judgment

Introduction

1. HIS HONOUR: In this matter, I delivered principal reasons for judgment on 17 August 2021, the medium neutral citation of which is Heffernan v Innes & Anor [2021] NSWSC 1033 ("the principal judgment"). Events and people are referred to in these reasons in the same way as in the principal judgment.

2. Following publication of the principal judgment, the proceedings were adjourned until 31 August 2021 (brought forward to 30 August 2021) to enable the parties to ascertain whether the original of the informal document was in the possession of NSW Police and also to see whether they could agree on the question of costs.

3. Unsurprisingly, no agreement was reached on how the costs of the proceedings should be borne and upon what basis. At the directions hearing, it became clear, from what the Court was told about the differing positions of the parties, that there was a real dispute about how the costs of the proceedings should be borne, and that the hearing, necessarily, might not be a short one. Directions were then made for the evidence on the costs applications to be filed and served. The Court also invited written submissions.

4. At the mention on 30 August 2021, the parties agreed that the issue of costs could be determined on the papers, in Chambers, following completion of the service of any further evidence upon which either party intended to rely and the written submissions, in chief and in reply, of counsel, being lodged and served. Neither party sought an oral hearing.

5. Each counsel, thereafter, provided detailed written submissions to the Court. (Although the Defendants’ counsel provided lengthy submissions in reply, I mention that most were not really “in reply”. Most of what was written should have been included in her submissions in chief.) I have carefully read the written submissions of the parties.

6. Since receiving the submissions, I am satisfied that the Court could deal with the costs without the need for a hearing. However, the nature of the competing submissions results in these reasons being longer than one would normally expect. This is one of the rare cases in which it is necessary “to give detailed reasons for decision … [and] to give elaborate reasons” on the question of costs: Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212 at [12] (Maxwell P and Kellam JA).

Two preliminary matters

7. Before proceeding further, there are two matters to which reference should be made in order to make clear that they have not been, and should not be, forgotten.

8. The first matter relates to two affidavits filed and served by the Defendants going to the whereabouts of the original of the informal document. This issue was raised in, and arises out of, the principal judgment at [27].

9. The first affidavit was one sworn on 26 August 2021 by Clinton Ernest Oxenbridge, a Detective Senior Constable of Police, who stated:

“I was shown 6 handwritten letters on a Pool Table in the garage area. They were left in situ until the crime scene investigator arrived. I left the location before the arrival of the crime scene investigator. The letters were subsequently collected by other Police and entered as EFIMS exhibit entry XF000763374.

On 5 March 2020, I contacted the Bega Court Registrar and sought permission to return the letters. About 3pm 5 March 2020, Mr Karl VAN LOUWERSEN attended the Bega Police Station. I handed the letters to him and updated the disposal details on EFIMS (Exhibit Forensic Information Miscellaneous Property System).”

10. The second affidavit was one sworn by Deanna Kay Barbas, an Administrative Assistant to the Defendants’ solicitor. Her affidavit relates to her conversation, on 19 August 2021, with Detective Senior Constable Oxenbridge. Her version of the conversation includes more than what was included in his affidavit to which I have referred.

11. In view of the direct evidence from Detective Senior Constable Oxenbridge, I am satisfied that it is not necessary to repeat the conversation that Ms Barbas stated in her affidavit.

12. Counsel for the Plaintiff, in answer to this evidence, referred to the principal judgment, at [305], in which I set out the evidence given by Mr Van Louwersen.

13. I do not have to determine the conflict of evidence. I remain unable to see any reason why Mr Van Louwersen would not produce the original informal document if it were in his possession. In any event, there was never any dispute that the copy of the informal document, produced at the hearing, which was tendered, was an authentic copy. One purpose of seeking the original informal document was to determine the form that the grant of administration should take.

14. The second matter relates, in part, to the costs of the proceedings. Whatever the result of the costs applications, the Defendants are not required to bear the costs of the notice of motion for the caveat to cease to be in force. I dealt with the costs of the notice of motion to have the caveat cease to be in force at [46] – [60] of the principal judgment.

15. In relation to that notice of motion, the orders made included:

“Orders that the costs of the Notice of Motion other than the costs of the directions hearing on 6 July 2020 be the respondents’ costs in the cause.

Makes no order as to the applicant’s costs, to the intent that she will bear her own costs of the Notice of Motion, and not be indemnified from the estate of the deceased in respect thereof.”

16. The respondents were, of course, the Defendants. They succeeded, without a determination by the Court, and an order was made that the matter would proceed by pleadings. There was no question that there was jurisdiction to make such a costs order, which order meant that, then, there were no immediate costs consequences to either party. The order operated if the party were successful in the proceedings, but it did not deal with the future costs of the proceedings. If, as anticipated, the matter proceeded to trial, and the Defendants were successful, only then would they receive their costs of the notice of motion.

17. In Ausino International Pty Ltd v Apex Sports Pty Ltd [2006] NSWSC 1119 Campbell J, at [55] – [56], stated:

“… the present proceedings before me are brought on the basis that they are an interlocutory process. The usual order which is made as to costs concerning interlocutory processes, is that if the plaintiff is the applicant, and succeeds, then the costs of the interlocutory process become the plaintiff’s costs in the cause, while, if the plaintiff is the applicant, and loses, the usual order is that the plaintiff pay the defendant’s costs of that application.

The rationale for that arises from the way that interlocutory proceedings are intended to advance the final hearing. If a plaintiff has a victory on the way to a final hearing, whether that victory is ultimately one which is fruitful will depend upon whether the plaintiff succeeds in the final hearing. However, if the plaintiff brings an interlocutory application and loses, then that interlocutory hearing is one which will, irretrievably, have cost the defendant money, and the justice of the situation is that the defendant should be indemnified for those costs, regardless of the outcome of the proceedings.”

18. In His Eminence Metropolitan Petar, Diocesan Bishop of The Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142 the Court of Appeal wrote, at [18] and [21]:

“An order that the costs be 'costs in the cause' or 'costs in the proceedings' (the terms are interchangeable) means that the costs of the interlocutory proceedings correspond with the final order for costs in the action. Thus if, in the final proceedings, the plaintiff is successful and an order for costs of the final hearing is made in the plaintiff's favour, the plaintiff gets the costs of the interlocutory proceedings as part of the costs of the action against the defendant, regardless of who was successful on the interlocutory application: see J T Stratford Ltd v Lindley [1969] 1 WLR 1547 at 1553 per Lord Denning MR.

…

.... The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court's focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts.”

19. Also see Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [44] (Campbell JA).

20. That meaning is consistent with authorities cited by G E Dal Pont in Law of Costs (4th ed, 2018, LexisNexis Butterworths) at [14.25] - [14.26].

21. Of course the principle applies vice versa, that is to say, if the Defendants succeeded in the Cross-Claim, or if they obtained an order for their costs, the costs of the notice of motion would be part of their costs of the substantive action. In the result, it follows that, since the Defendants were unsuccessful, they are not entitled to the costs of the notice of motion, which was, ultimately, determined without a hearing. Nor is the Plaintiff entitled to any costs of the notice of motion from the Defendants for the reasons expressed in the principal judgment.

22. It also follows that the submission made, on behalf of the Plaintiff, that “the Defendants should pay the Plaintiff’s costs on the ordinary basis since the commencement of proceedings until 4 November 2020” (Paragraph 30 of the written submissions) cannot be accepted.

The evidence relied upon

23. I now return to the issue of the costs of the proceedings, otherwise, and the facts relied upon.

24. The Plaintiff read two affidavits, the first being the Plaintiff’s affidavit sworn 29 January 2021, which detailed the nature and value of the deceased’s estate, together with the liabilities. I referred to this affidavit at [87] - [92] of the principal judgment.

25. In view of the dispute as to the value of the Tura Beach property, I was unable to express any concluded view about the net value of the deceased’s estate. I did not conclude, as submitted by counsel for the Plaintiff, that the net value of the estate was in the order of $110,500. However, it was clear from the Plaintiff’s evidence that the net value of the estate was not large, as there were significant debts, funeral and testamentary expenses.

26. The second affidavit was one affirmed on 19 August 2021, by Mr I Sinnadurai, the Plaintiff’s solicitor, to which was annexed a copy of documents, passing between the legal representatives of the parties, which contained offers made to resolve the proceedings. These documents are relied upon as a basis for the order for costs sought by the Plaintiff. I shall refer to the copy documents annexed in some detail.

27. On the issue of costs, the Defendants relied upon an affidavit sworn 30 August 2021, of their solicitor, Ms I Chiumento. The affidavit was one to which was annexed a copy of the documents, passing between the legal representatives of the Plaintiff and of the Defendants, which contained offers made on her, and their, behalf, respectively.

28. Neither of the solicitors was cross-examined and no objection was taken, by either party, to the affidavit evidence relied upon by the other. (The failure by the Defendants’ counsel to object is important for reasons to which I shall turn.)

The offers made to resolve the proceedings

29. Counsel for the Defendants referred in the submissions to the Defendants having made “multiple attempts to settle the proceedings, before they commenced, and during” the proceedings. However, the offers to which I shall refer are those that were made in writing and which are in evidence on the question of costs.

30. I have taken the following from the annexures to the affidavits filed and read on the costs application. There really cannot be a dispute about what follows.

31. On 4 November 2020, National Probate and Estates Group, the Plaintiff’s then solicitors, sent a letter to the Defendants’ solicitors, Eden Legal. The letter was headed “WITHOUT PREJUDGE (sic) SAVE AS TO COSTS”. (The word “Prejudge” was obviously a typographical error and should have been “Prejudice”.)

32. I shall refer to this document as “the Plaintiff’s first offer”. It was in the following terms:

“In the interest of reducing costs delays and uncertainty associated with proceeding to a final hearing in this matter, we have been instructed to make the following offer to your clients in relation to the whole of the proceedings

1. Letters of Administration be granted to our client.

2. Your clients’ cross-claim be dismissed.

3. Your clients’ legal costs are to be paid out of the estate of the deceased on the indemnity basis.

4. Our client’s costs are to be paid or retained, as the case may be, out of the estate of the deceased.

5. Payment of your clients’ costs are to have priority over payment of our client’s costs.

6. Our client is to pay your clients a lump sum total of $16,000 additional to payment of their legal costs.

This offer is made pursuant to Rule 20.26 of the Uniform Civil Procedure Rules 2005 and shall remain open until 4:00 pm on 3 December 2020 whereupon it will lapse and the plaintiff reserves her rights to rely upon this offer in relation to any future argument in relation to costs.”

33. The effect of the first offer was that the Plaintiff would pay the Defendants' legal costs, calculated on the indemnity basis, with priority, and $16,000. (The first Defendant had paid $15,549.21 on account of estate costs and expenses). Shortly before the offer was made, Ms Chiumento had informed the Plaintiff’s solicitor that the Defendants’ legal costs, calculated on the indemnity basis, were $38,020.50.

33. There is no dispute that the Defendants’ solicitor received the Plaintiff’s first offer.

34. (Despite the terms of the offer and the reference to the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 20.26, which deals with offers of compromise, and also counsel for the Defendants referring to it as an offer of compromise, counsel for the Plaintiff included the reference to this offer as one of three “Calderbank offers” made by the Plaintiff and served upon the Defendants.)

35. On 3 December 2020, the Defendants’ solicitor sent a letter to the Plaintiff’s then solicitors, rejecting the Plaintiff’s first Offer. In the same letter, the Defendants’ solicitor sent what was said to be an Offer of Compromise on behalf of the Defendants. I shall refer to this document as “the Defendants’ first offer”. It was in the following terms (with the highlighted parts as they appeared):

“We refer to your letter of offer of compromise dated 4 November 2020 and advise that our clients do not accept your offer of settlement.

However, in an attempt to finalise the matter, we are instructed to make an offer of compromise so that the parties are able to move forward without incurring any further stress or legal costs.

On a without prejudice basis, our clients make the following offer:

1. That your client retains all monies paid out from the deceased’s superannuation fund and death benefit without any further claim by our clients;

2. That your client pays our clients a lump sum total of $100,000.00 in full satisfaction of any further claim by our clients;

3. That your client pays our clients’ legal costs on an indemnity basis;

4. That your client return all of the deceased’s personal belongings including but not limited, to his guns, knives, Warhammer collection, wedding ring and other items that remained at the home at this time of his death;

5. That your client provides an undertaking that she will repay the debt owed to Mr Vincent Heffernan in the sum of $100,000.00.

This offer is made pursuant to Rule 20.26 of the Uniform Civil Procedure Rules 2005 and shall remain open for acceptance until 4:00 pm on 17 December 2020 whereupon it will lapse and our clients reserve their rights to rely upon this offer in relation to any future argument in relation to costs.”

37. The Defendants’ first offer was rejected by the Plaintiff.

38. On 13 January 2021, the Defendants’ solicitors received notice that the Plaintiff had changed solicitors.

39. On 2 February 2021, Makinson d’Apice, the Plaintiff’s new solicitors, sent a letter to the Defendants’ solicitors, enclosing what was described as a Calderbank offer. It was headed ‘Without prejudice except as to costs’. (Counsel for the Defendants refers to this offer as an offer of compromise, but it appears to be accepted that it was not one.) I shall refer to this as “the Plaintiff’s second offer”.

40. I shall not set out the precise terms of the letter, which provided a detailed explanation of the Plaintiff’s claim and the reasons why, it was said, that the Defendants’ case would fail in its entirety. In broad terms, the contents of the letter are reflected in the submissions made at the hearing.

41. The Plaintiff’s second offer was in the following terms:

“With a view to resolving the proceedings expeditiously and to avoid the significant legal costs and disbursements in connection with the preparation of, what will be at least 5 copies of the Court book, as well as the collective costs of the proceedings, including the cost of a contested 3-day hearing which could easily exceed $200,000, we are instructed to make the following offer of settlement, formulated on the information set out above, on a without prejudice basis in full and final settlement of all matters in issue in these proceedings:

(a) Order that letters of administration on intestacy be granted to the Plaintiff;

(b) Order that the statement of cross-claim be otherwise dismissed;

(c) No order as to costs with the intent that the First Defendant and the Second Defendant bear their own costs of the proceedings;

(d) Order that the Plaintiff’s costs of the proceedings be paid out of the Estate on the indemnity basis;

(e) Note that the Plaintiff, in her capacity as the sole beneficiary of the Estate, authorise and direct the Plaintiff, in her capacity as the administrator of the Estate, to pay to the First and Second Defendants (jointly) the sum $25,000.00 as an ex gratia payment (Lump Sum), representing a greater than 50% share of the current estimated net value of the Estate;

(f) Order that the Lump Sum be paid within 28 days of final orders being made in these proceedings;

(g) Interest be paid on the Lump Sum above, at the rate prescribed for the payment of legacies pursuant to section 84A(3) of the Probate and Administration Act 1898 (NSW) if not paid within the timeframe stipulated;

(h) Note that the First Defendant receive the following items owned by the Deceased:

(i) Toyota Corolla 2006 motor vehicle registration BH89TM (Deceased’s Vehicle);

(ii) iPhone;

(iii) iPad;

(iv) the Deceased’s personal effects and possessions located in the garage to the Deceased’s property, excluding the Deceased’s Warhammer figurines and Bowie Knife (with the red handle), as identified in the enclosed photographs;

and that the Estate will bear the burden of nominal stamp duty (to the limit of $50) payable on the transfer of the Deceased’s Vehicle to the First Defendant.

(i) Note that the Plaintiff intends honouring the Deceased’s wishes recorded in the Suicide Note (found with the Deceased’s body) that:

(i) his Warhammer figurines be given to the Deceased’s friend, Brendan White;

(ii) his Bowie Knife (with the red handle) be given to the Deceased’s friend, Robbie Lawrence.

(j) Note that there is no dispute between the parties that the following expenses, paid by the First Defendant, are Estate expenses, and that the First Defendant is entitled, and will be reimbursed, out of the Estate:-

(i) Funeral expenses totally $13,860.00;

(ii) NAB mortgage repayment of $1,562.86;

(iii) Insurance premium of $126.35;

Total: $15,549.21

…

This offer is open for acceptance until 5:00 pm on Monday 23 February 2021 after which time it will lapse and will not be available for acceptance.

The Plaintiff regards this offer as a genuine compromise and is made with a view to reduce the time and the costs spent on the proceedings.

This offer is made in accordance with the principles of Calderbank v Calderbank [1976] Fam 93 and subsequent cases.

If the matter proceeds to a hearing and the Defendants does (sic) not achieve a result which is more favourable than this offer, the Plaintiff reserves her right to seek an order that the Defendants pay her costs of the proceedings on the indemnity basis either from the date of this letter or generally.

The Plaintiff reserves her right to rely on this letter on any argument as to costs.”

42. It is clear that this offer was not quite as beneficial to the Defendants as the Plaintiff’s first offer, since, although the lump sum had increased, they were required to pay their own costs of the proceedings.

43. The Defendants’ solicitor acknowledged receipt of the Plaintiff’s second offer, in an email dated 8 March 2021. It is unclear whether the offer was rejected or whether it lapsed. It does not matter.

44. On 19 March 2021, the Defendants’ solicitor received a letter from the Plaintiff’s solicitor, but this letter seems to relate to the costs of the notice of motion and the order concerning costs made in respect of the notice of motion.

45. On 21 June 2021, the Plaintiff’s solicitor sent another email to the Defendants’ solicitor, enclosing a third, and final, offer of settlement.

46. The Plaintiff’s third offer, which was simply headed “Without Prejudice” was in the following terms:

“The plaintiff wishes to make a further offer in full and final settlement of all matters in issue between the plaintiff and the defendants. I attach a copy of our letter to you dated 2 February 2021 (Letter). In the offer set out below I refer to several elements of the offer contained in the Letter.

In full and final settlement of all matters in issue in these proceedings, the plaintiff makes the following offer based on the offer of settlement contained in the Letter:

1. The Court grant letters of administration on intestacy to the plaintiff of the estate of the late Thomas Vincent Heffernan (Tom).

2. The plaintiff’s costs of the proceedings be paid out the Estate on the indemnity basis.

3. The defendants’ cross-claim be dismissed with no order as to costs.

4. The defendants will abandon and release all their claims against the Estate and Tom’s superannuation.

5. The plaintiff, in her capacity as the sole beneficiary of the Estate, will pay the defendants jointly the sum of $65,000.00 as an ex gratia payment (Lump Sum).

6. The Lump Sum be paid within 28 days of the making by the Court of a grant of letters of administration to the plaintiff.

7. The Lump Sum is inclusive of the following payments made by the first defendant:

(a) funeral expenses totalling $13,860.00;

(b) NAB mortgage repayment of $1,562.86;

(c) Insurance premium of $126.35.

The items and figures noted above are those specified in paragraph (j) on page 6 of the Letter.

8. The plaintiff is willing to transfer to the first defendant the items specified in paragraph (h) on page 5 of the Letter, subject to the exceptions noted in sub-paragraph (h)(iv) and noting the limit on the burden of any applicable stamp duty.

9. The plaintiff also intends to honour Tom’s wishes recorded in his suicide note specified in paragraph (i) on pages 5 and 6 of the Letter.

Please obtain the defendants’ instructions and let us know their response. …”

47. In a separate email sent on 23 June 2021, the time for acceptance of the offer was said to be 4:00 pm on Thursday 24 June 2021. It was also said that “the offer will not be available for acceptance after that time”.

48. On 5 July 2021, the Defendants’ solicitor sent to the Plaintiff’s solicitor an email, headed “Without Prejudice save as to Costs” setting out some reasons why the offer of settlement also made in the letter should be accepted. I shall refer to this offer as “the Defendants’ second offer”.

49. The offer was in the following terms:

“In any event and prior to this substantial further work being undertaken, the Defendants have instructed to make one last final offer of settlement in order that the parties may finalise this matter without further personal stress and legal costs. This is also made in view of the hearing potentially being vacated due to the current COVID 19 situation. In making the following offer, the Defendants note that regardless of the result from the hearing, they will be seeking that costs be paid by the Plaintiff on an indemnity basis with respect to the wholly unsuccessful Notice of Motion brought by the Plaintiff.

Bearing in mind all of the above and without including all other formal clauses such as the Plaintiff being granted letters of administration etc, the substantive points of the Defendants' offer of settlement are as follows

1.   That the Plaintiff pay the Defendants the amount of $80,000.00 inclusive of the Defendant's legal costs and the funeral and grave stone expenses within 30 days of the date of these Orders;

2.   That the Plaintiff return all the personal belongings of the Deceased to the Defendants as per the list attached forthwith;

3.   In all other respects, the parties release each other from any claims both present and future.

…

The above offer is open until COB on 6 July 2021 after which time we will be expending further time and costs in responding to the recent Affidavits filed by the Plaintiff and her father.”

50. It is unclear whether this offer was rejected or lapsed. However, it does not matter.

51. On Friday, 16 July 2021, that is, after the first three days of the hearing had been completed, the Defendants’ solicitors sent another email to the Plaintiff’s solicitor headed “Without prejudice basis save as to costs”. I shall refer to this offer as “the Defendants’ third offer”.

52. Relevantly, the letter of offer provided:

“Further to our previous attempts to settle this matter yesterday, we kindly seek that the following matters be taken into consideration by your client prior to her considering our clients' offer of settlement below:

1.   That the evidence before the Court thus far, is such that the Court will have difficulty in being persuaded that the case should be determined in favour of the Plaintiff;

2.   That the evidence thus far, has shed sufficient light on the matter such that the question of who pays whose costs will now not be a simple matter of 'winner takes all';

3. Given the above and on the issue of costs, we note that the caselaw and the relevant UCPR provisions, suggests that although ultimately a matter for the court, the Defendants will be able to argue that the Estate should bear the legal costs of both the Plaintiff and the Defendants.

Our clients also wish for the Plaintiff to be advised that, as emphasised in our earlier correspondences with her previous lawyers, our clients do not hold any malicious intentions with respect to this matter or against the Plaintiff personally but rather, their only intention was to follow the last wishes of the deceased as expressed to them and noted in his emails.

Noting the above and the emotional stress that this case has caused to our mutual clients, particularly when watching footages of the deceased in the moments prior to his death, and also to avoid any further stress and costs on any of the parties, our clients propose as follows:

1.   That the Plaintiff pay to the Defendants an amount of $62,000.00;

2.   That the remaining terms be as proposed in your email of 21 June 2021.”

53. It is unclear whether this offer was rejected or lapsed. However, it does not matter.

54. It is difficult to glean the significance of most of the documents annexed to Ms Chiumento’s affidavit going to the offers made on behalf of the Defendants on the question of how the costs of the proceedings should be borne. It is not enough, as submitted by counsel, that the Defendants engaged, or willingly participated, in settlement negotiations during the proceedings, or that, in 2020, they were the proactive party in that approach, or even that the Plaintiff, for whatever reason, might not have wished to engage in any form of settlement conference prior to 17 June 2021.

55. What is beyond argument is that the Defendants did not obtain any order on their claim no less favourable to them than the terms of any of the offers that were made on their behalf to resolve the proceedings.

The Submissions

56. The Plaintiff’s principal submission was that the Defendants should pay the Plaintiff’s costs, calculated on the indemnity basis, of the proceedings. Bearing in mind the costs order made in relation to the notice of motion, as stated, this submission cannot be accepted in its entirety. Counsel also submitted that the Defendants should not receive any of their costs out of the estate.

57. Initially, the Defendants’ oral submission was not only that they should not have to pay the Plaintiff’s costs, but that the whole of their costs of the proceedings should be paid out of the estate of the deceased: Tcpt, 30 August 2021, p 02(46)-03(01). Standing back from the detail of the matters to which I shall refer, it might be thought audacious in circumstances where first, the Defendants failed completely, and second that the defence included an allegation of serious misconduct, if not criminality, on the part of the Plaintiff’s father, (in removing an unfound Will), which allegation was not proved, that the Defendants should have their costs paid from the estate, whether or not they should have to pay the Plaintiff’s legal costs in vindicating the informal testamentary document.

58. Perhaps, having reflected further on the initial submission, the Defendants’ counsel, for the first time in submissions in reply, sought the following orders:

1. The Plaintiff, as administrator of the estate, is to do all things necessary to ensure that the deceased’s grave is marked by an appropriate headstone, or, alternatively, an allowance, as identified by the court, is to be paid to the first defendant out of the estate for her to arrange a headstone to mark the deceased’s grave;

2. The first Defendant be paid the sum of $15,549.21 being testamentary expenses owing by the estate of the late Thomas Heffernan;

3. The first and second Defendants be paid a specified gross sum of $40,000, instead of assessed costs out of the estate of the deceased.

4. An amount as determined by the Court, to be paid out of the estate of the deceased as a capped gross sum in lieu of the Plaintiff’s costs.

59. The matter referred to in (1) above had not been the subject of any evidence or prior submissions. It is not for the Court, at this stage of the proceedings, to make an order that the Plaintiff, as administrator of the deceased’s estate, deal with the gravesite of the deceased. I do not propose to make such an order.

60. The matter referred to in (2) above was not the subject of dispute between the parties. In her affidavit sworn 29 January 2021, the Plaintiff referred to three “Estate reimbursements to Sandra Rae Innes” which total $15,549.21. I had referred to the obligation to repay the first Defendant the amounts that she had paid by way of debts, funeral and testamentary expenses: Tcpt, 21 July 2021, p 333(05-10). I do not propose to make the order sought.

61. The matter referred to in (4), in the result of the case, is unnecessary. The Plaintiff is entitled to the whole of the deceased’s estate and to limit the amount of the costs payable out of the estate is not a matter for the Defendants or, necessarily, the Court.

62. Turning then to the submissions in detail, there were three bases for the Plaintiff’s submission, namely:

1. The Defendants had been unsuccessful in the whole of their Defence and Cross-Claim.

2. The Defendants had made an extremely serious allegation against Mr Van Louwersen, the Plaintiff’s father, which allegation they should never have made and which they had been unable to establish.

3. Prior to the hearing, there were a number of Calderbank offers made by the Plaintiff, but not accepted by the Defendants. As a result of the principal judgment, the Plaintiff will obtain orders no less favourable to her than the terms of each of the offers that were made by her to them.

63. The Plaintiff’s counsel acknowledged that the deceased, having left an informal document, may have been seen as having caused the litigation and requiring it to be investigated. However, she submitted that there were still a number of reasons why the Defendants’ costs should not be borne by the estate and why they should bear the Plaintiff’s costs.

64. It was submitted that given probate litigation is interest litigation, the only persons entitled to call for an investigation or challenge the deceased’s Will are those persons who would be entitled to participate in the distribution of the deceased’s estate if the informal document was held not to constitute the deceased’s last valid Will. Whilst the Defendants advanced that the deceased had left an unfound Will, they were unable to establish its existence or its contents. Then, even if the informal document was not the deceased’s last valid Will, he would have been found to have died intestate, with the result that the Plaintiff, as his spouse, was entitled to the whole of his estate.

65. Counsel went on to submit that, even if the circumstances surrounding the informal document reasonably called for an investigation, this did not mean the Defendants were entitled to their costs out of the estate, but that there should be no order as to their costs since they had been unsuccessful.

66. The Plaintiff also submitted that, even if the Defendants were the natural contradictors, they would only be entitled to their costs of being the contradictors, that is, the costs of challenging the informal document. In practical terms, this was a pointless, and unproductive, challenge since the Plaintiff was entitled to the whole of the deceased’s estate under the operation of the rules of intestacy.

63. The Plaintiff rejected any claim that the deceased left his affairs in disarray because of the unsent emails found on his iPad. According to counsel for the Plaintiff, the deceased did not send the emails and had not referred to them in any of the documents found in the garage, or otherwise, when his body was discovered. In any event, the unsent emails were not left in a prominent place and were only found by opening the email application on his iPad and scrolling past the emails sent after those emails were dated.

64. In any event, reasonable investigation, in this instance, amounted to contacting solicitors, or friends, in regards to the unfound Will. Once they had concluded their searches, and had been unable to find any Will, draft, or copy, thereof, they should not have persisted with the assertion.

65. According to counsel for the Plaintiff, most of the Defendants’ costs, in any event, related to the assertion of an unfound Will and the allegation made against Mr Van Louwersen. The allegations about the unfound Will relied upon the Plaintiff’s father having removed it, a most serious allegation and one which could amount to a criminal offence. The Plaintiff submitted that the Defendants’ evidence in support of this serious allegation was, effectively, baseless.

66. It seemed that the thrust of the Defendants’ written submissions went to the reasons why the Defendants should not pay the Plaintiff’s costs.

67. I do not need to consider, in detail, a number of paragraphs in the written submissions that refer to what might be described as emotional reasons for the Defendants’ conduct. These submissions relate to the Defendants’ alleged reasons for defending the proceedings and not directly to how the burden of costs should be borne. I refer, particularly, to paragraphs 3, 13, 17, 18, 22 and 93 of the written submissions.

68. It should also be noted, as recently pointed out in Commissioner of Taxation v Ross (No 2) [2021] FCA 1088 at [20] (Derrington J), that “the principles relating to the making of orders for indemnity costs ought never to descend into an analysis of the nature and extent of negotiations between parties or whether any negotiations were sufficient or otherwise properly pursued. That would be entirely inappropriate and almost certainly result in extensive satellite litigation”.

69. Relevantly, counsel for the Defendants submitted:

1. The Defendants were “rightful contradictors”. It was understandable that they would have wanted to uphold what they believed, “not without substance”, were the deceased’s testamentary intentions. Reliance was placed on the unsent emails and the conversations that the first Defendant, in particular, was said to have had with the deceased in the period of weeks before his death.

2. These are Probate proceedings and there are some special rules that apply in determining how costs should be borne.

3. The three settlement offers made by the Plaintiff are not relevant to the determination of how the costs of the proceedings should be borne.

74. In regards to (a), the Defendants submitted that, given the Plaintiff only pleaded the informal Will from 20 October 2020, the Defendants had a duty to place before the Court any document that may have constituted a testamentary instrument, particularly on a claim of intestacy. (This submission is not entirely accurate: see [4] of the principal judgment.)

75. In regards to (b), counsel for the Defendants submitted that the deceased’s actions provided a ground for questioning his testamentary capacity, pointing specifically to the fact that he had been drinking prior to his death and the existence of the emails the deceased had drafted.

76. In relation to (c), it was submitted that, regarding the Plaintiff’s first offer (which included terms, amongst others, that the Defendants’ legal costs were to be paid out of the estate on the indemnity basis, and a lump sum payment of $16,000), the lump sum was reimbursement of the estate costs and expenses that the first Defendant had previously paid. The offer, thus, was, in essence, one for the payment of the Defendants’ costs, calculated on the indemnity basis.

77. The Defendants submitted that it was not unreasonable to reject this offer as, at that time, the Plaintiff had recently filed her Statement of Claim. Furthermore, the Plaintiff did not provide any evidence going to the contents of the gun safe until 11 June 2021. It was not unreasonable for them to maintain the belief that the deceased had left a will.

78. In relation to the Plaintiff’s second offer, the Defendants submitted that an offer to settle made “without prejudice” cannot be relied upon at all on questions of costs.

79. This part of the submission must be rejected, at the outset, because it ignores, amongst other things, the paragraph of the letter, which stated: “This offer is made in accordance with the principles of Calderbank v Calderbank [1976] Fam 93 and subsequent cases”.

80. Otherwise, the Defendants drew the Court's attention to paragraph (e) of the offer, submitting that the proceedings had not been decided at the time of the Plaintiff’s second offer. The Plaintiff did not know, then, whether she would be successful. She did not know whether the Defendants would not be successful on their claim. It was questioned how an offer of $25,000 could be made "in her capacity as the sole beneficiary" or "in her capacity as the administrator of the estate." On 2 February 2021, she had not received recognition from the Court that she was either a beneficiary or would be appointed as the administrator.

81. This part of the submission, also, must be rejected, immediately, as the other terms of the offer must be considered and those terms, if accepted, would have resulted in the Plaintiff being the principal, if not the sole, beneficiary of the deceased’s estate.

82. It was also submitted that the offer of $25,000, plus the repayment of estate expenses paid by the first Defendant did not constitute what could be considered to be a genuine compromise of the proceedings, in circumstances where the Plaintiff would have known that the Defendants' costs, on the indemnity basis, as at 4 November 2020, were $38,020.50. It was put that the offer required complete surrender, with an acceptance of less than the costs the Defendants had incurred.

83. In relation to the Plaintiff’s third offer, counsel for the Defendants submitted that the email of 21 June 2021 did not include a date during which the offer was open for acceptance. The separate email, sent two days later (23 June 2021), advising of the date that the offer was open for acceptance did not constitute a proper and formally executed offer. Even then, the period to consider the offer could not be regarded as a reasonable one.

84. Furthermore, the offer did not identify whether it is intended to be an offer under the UCPR rules, or a Calderbank offer as each email was simply headed "Without Prejudice". It was submitted that an offer to settle made simply on a “without prejudice” basis could not be relied upon on questions of costs.

85. Reliance was placed on a passage in Cross on Evidence (12^th ed, 2020, LexisNexis Australia), at 25360, which is in the following terms:

“Without prejudice negotiations are not admissible on questions of costs. Nor can an adverse inference in relation to costs be drawn against a party refusing disclosure on this ground. This rule does not, like most aspects of the privilege, rest on public policy; on the contrary, ‘a consciousness of a risk as to costs if reasonable offers are refused can only encourage settlement’. The rule rather rests on ‘an implied agreement based on general usage and understanding’. Since customary usage is not immutable, a qualification based on agreement has grown up. A party may make an offer which is marked ‘without prejudice save as to costs’. This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but it is now recognised to be of general application. The consequence of marking an offer ‘without prejudice save as to costs’ is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties — they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.”

86. Reliance could have been placed on s 131(1) of the Evidence Act 1995 (NSW) which makes clear, that in order to attract the privilege, a communication or document must be made, or prepared, “in connection with an attempt to negotiate a settlement”, which clearly was the purpose of the third offer.

87. The Defendants’ submission misunderstands what was written on this aspect. Making an offer “without prejudice” can be significant, if it is not accepted, in excluding it from evidence. Such a letter is covered by what is described as “without prejudice privilege”. Counsel did not refer to the passage in Cross at 25350 which states:

“As part of an attempt to settle a dispute, the parties frequently make statements “without prejudice”. When this is done, the contents of the statement cannot be put in evidence without the consent of both parties, the case being one of joint privilege.”

88. However, where, as here, neither party sought to exclude the without prejudice offer, by objection to its tender, any privilege gained from the fact that it was a “without prejudice” communication was waived. Indeed, in this case, both solicitors attached a copy of the Plaintiff’s third offer to his and her affidavit respectively.

89. In Walker v Wilsher (1889) 23 QBD 335, Lord Esher MR stated, at 337:

“It is, I think, a good rule to say that nothing which is written or said without prejudice should be looked at without the consent of both parties, otherwise the whole object of the limitation would be destroyed” (emphasis added).”

90. Whilst the third offer was served shortly before the commencement of the hearing, the timing of its service must also be considered in the context of a judicial settlement conference having taken place a short time before (on 17 June 2021). The urgency, in terms of the time for acceptance, was based, presumably, on the fact that the hearing was to commence on 13 July 2021.

91. The Defendants also alleged that the Plaintiff’s costs were extortionate and that, given the full extent of the Plaintiff’s costs were unknown, it would be unjust to require the Defendants to pay those costs. This submission does not assist the Defendants as if agreement cannot be reached on the quantum of the costs, the Plaintiff will have to have her costs assessed.

92. Nor does the submission, made in reply, that the Defendants’ offers were relevant because they demonstrated “the defendants were open to settlement and made multiple efforts to do so, whether that be in the format of a formal offer, informal calls between the legal representatives, or requests made for mediation”.

93. I find the Plaintiff’s submissions far more persuasive than the Defendants’ submissions.

The Principal Judgment

94. In order to consider the context in which the costs question must be determined, I shall first refer to the principal judgment.

95. In summary, in the principal judgment at [25] – [26], I found:

1. The deceased died testate;

2. The informal document propounded by the Plaintiff purported to state the testamentary intentions of the deceased and was not executed in accordance with s 6 of the Succession Act 2006 (NSW) (the Act).

3. The deceased intended the informal document to form his Will.

4. The Defendants had not established that the deceased had a prior will in existence at the time of his death.

5. The Defendants had not established the Plaintiff’s father stole, destroyed, or concealed, the whole of any unfound will of the deceased after his death.

6. The Defendants had not established that if the deceased had a prior will, the presumption of destruction, with the intention to revoke it, had been rebutted.

7. There should be a grant of administration, with the informal document annexed, to the Plaintiff.

96. The Defendants were unsuccessful in defending the Plaintiff’s claim and their Cross-Claim will be dismissed. As stated, this was the first basis upon which a costs order was sought by the Plaintiff.

97. It is clear that the Defendants relied upon the assertion regarding Mr Van Louwersen to fortify their defence of the Plaintiff’s claim. Thus, it is necessary to refer to the findings made in relation to (5) above, which grounded the second basis for the Plaintiff’s application for costs. The relevant paragraphs of the principal judgment set the context for this basis for the Plaintiff’s application for indemnity costs. I refer specifically to [19], [21], [225], [253]-[254], [267], [272], [277], [289], [294]-[295] and [439]-[441]. These paragraphs highlight some important findings on the issues raised.

98. It would, however, be useful to refer, specifically, to paragraph [22] of the principal reasons:

“It cannot go unremarked that the whole of the Defendants’ case was predicated upon the existence of the unfound Will and the Court finding that the allegation made against the Plaintiff’s father, and persisted with, throughout the hearing, would be able to be proved.”

99. The seriousness of the Defendants’ allegation was referred to by the Court on the first day of the hearing, and subsequently: Tcpt, 13 July 2021, p 58(10-39); Tcpt, 14 July 2021, p 86(09-11); Tcpt, 20 July 2021, p 298(33-36); Tcpt, 21 July 2021, p 303(39)-304(03).

100. It is next necessary to note that the Defendants maintained the allegation made against Mr Van Louwersen until the conclusion of the hearing, despite it being conceded that there was no evidence that any person saw him removing any Will. I refer, without repetition, paragraphs [346]-[349] of the principal judgment.

101. With that lengthy prologue, I turn now to the legal principles that guide the determination of the issue.

The Law

102. In Old v McInnes and Hodgkinson [2011] NSWCA 410, Beazley JA (dissenting in the result on the costs appeals before the Court) noted, at [6], that:

“Litigation is not a process for the faint hearted. It is a costly and time-consuming process and usually productive of stress, all of which, of their nature, have adverse effects upon those involved in the process. In some, if not most, cases that come before the courts, it is a necessary evil. However, the court processes are designed to encourage parties to engage in the litigation efficiently and with an eye to ensuring costs bear an appropriate relationship with the matter in dispute. Thus, the statutory injunction in the Civil Procedure Act 2005, s 56, which is binding on the court, the legal practitioners and the parties alike, looks to the ‘just, quick and cheap’ resolution of disputes.”

Some general principles

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

104. In Walsh v Walsh (No 2) [2013] NSWSC 1281, I set out some general principles about costs that should not be the subject of any dispute, namely:

“The Civil Procedure Act 2005, s 98(1), provides that subject to the rules of Court, and that, or any other, Act, costs are in the discretion of the Court. The discretion is broad but not unconfined. It is a judicial discretion to be exercised on a principled basis.

Section 98(4) of the Civil Procedure Act provides:

‘In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.’

The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ.

The UCPR rule 42.1 provides that costs follow the event, unless it appears to the Court that some other order should be made as to the whole, or any part, of the costs. The rule provides that the discretion to award costs, ordinarily, will require an order that the successful party's costs will be paid by the unsuccessful party. The power to ‘make any order as to costs’ enables the Court, in an appropriate case, to depart from the general rule if it would be unjust to apply it. Thus, there is flexibility in determining questions of costs. Again, the rule extends to the costs in any proceedings. There is no suggestion that the UCPR does not apply to proceedings for a family provision order.

The UCPR rule 42.2 provides:

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

In Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84, Gray J in the Full Court said:

‘[17] The overriding principle that costs are in the discretion of the Court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.’

105. In Wright v Apthorpe [2020] NSWCA 300, the Court discussed the parts of the Civil Procedure Act 2005 (NSW) and the UCPR, relating to costs. Simpson AJA (with whom Bell P and McCallum JA agreed) wrote at [57] – [60]:

“Section 98(1) is expressed to be subject to the Rules, to the Civil Procedure Act, and to any other Act. No provision of the Rules (other than r 42.2), nor of the Civil Procedure Act, nor of any other Act, has been identified as bearing on the exercise of the discretion. The only other possible means of confining, limiting, or restricting the breadth of the discretion is via the development of judicially pronounced guidelines, in order to enhance the quest for consistency: Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17. No such guidelines, or guidance, have been identified. To the contrary, the case law suggests that s 98(1) is to be given a liberal construction.

There are two aspects to an order of costs. They are distinct from one another. The first concerns on whom the burden of costs is to fall. In that respect there is a ‘general rule’, stated in Milne v Attorney General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460 at 477; [1956] HCA 48:

‘It is a general rule that a wholly successful defendant should receive his costs...’

The common law ‘general rule’ is formalised in r 42.1, and is reflected in what is commonly known as ‘the usual order as to costs’ (see Oshlack, at [67], per McHugh J) or the order that ‘costs follow the event’ (as in r 42.1). The second aspect of an order as to costs concerns the basis on which the costs are to be assessed. The ‘general rule’ says nothing about the basis on which the costs ordered are to be assessed. That function is performed by s 98(1), which confers a discretion in the widest possible terms.

Section 98(1) is cast in terms commonly used in statutes conferring a costs discretion. There is no suggestion that the Civil Procedure Act and the UCPR do not apply to Probate proceedings.”

146. In South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [85] Hunt AJA (with whom Mason P and McColl JA agreed) stated that indemnity costs should not be awarded in that case as “it would be unfair to a defendant to make an order for indemnity costs when the evidence at the trial is different from that known to the defendant at the time of the offer.”

Determination

150. I start by noting that in the notice of motion to have the caveat cease to be in force, there were matters which led the Plaintiff to appreciate that there was “a doubt” that required investigation. Presumably, it was for that reason the notice of motion was resolved, without determination, by the Court, and the matter proceeded by way of pleadings.

151. However, that was at a relatively early stage of the proceedings and not when it was necessary to conclude that there were provable facts and a reasonably arguable view of the law which supported the submission that the defence and Cross-Claim had reasonable prospects of success.

152. This, then, gives rise to the distinction between costs before, and after, a certain point, when the Defendants were, or ought to have been, reasonably informed of material matters and when they should have considered those matters with the benefit of legal advice.

153. Next, it should be remembered that, otherwise, this is not a case that was resolved without a hearing on the merits. It was a hard fought case that ran for 6 days, in which a very serious allegation was made, and pursued throughout, against the father of the Plaintiff. In that sense, the Plaintiff had no practical alternative but to continue the proceedings when each of her offers was rejected or lapsed.

154. The point in time that the Defendants became, or ought to have become, as reasonably informed as they were likely to be, was by the end of January 2021. Other than one affidavit, from Mr Van Louwersen, and affidavits filed by the Plaintiff’s solicitor (which went to costs) all of the affidavits which were read in the Plaintiff’s case had been filed and served. Thereafter, only one affidavit, being his affidavit of 2 July 2021, was filed and served. In this affidavit, Mr Van Louwersen denied knowing about the existence of any will left by the deceased or destroying such a will and stated that he had never had access to the deceased’s safes. Importantly, he had previously, under oath, denied destroying the deceased’s Will, in his affidavit sworn 14 August 2020.

155. Mr Van Louwersen also gave evidence, in his affidavit of 2 July 2021, of an occasion where, whilst at the deceased’s home, he saw the portable ammunition safe open with ammunition next to it, which he placed in the safe.

156. The Plaintiff also filed and served another affidavit of 11 June 2021 going to having opened the deceased’s gun safe in May 2021 with her friend, Matthew, and annexed photos of its contents. However, as the assertion was always that the unfound Will was not in the gun safe, because it had been taken by Mr Van Louwersen prior to May 2021, this does not assist the Defendants on the question of costs.

157. Furthermore, by the end of January 2021, the Defendants had been involved in the proceedings since they had filed the general caveat on 23 April 2020, that is to say, for about 10 months. It was not suggested that any additional provable facts were discovered after the end of January 2021. Importantly, by that time, Mr Van Louwersen’s denial of finding any unfound Will or testamentary document had been made. They ought to have been aware of what they would be likely to be able to establish.

158. Ultimately, in order to have any prospect of success, the Defendants had to establish, amongst other things, the existence of the unfound Will and its terms. This they also could not do. Even if they had done so, they would, then, have had to rebut the presumption of revocation by the deceased animo testandi. Again, they were unable to do this.

159. This was a case in which “the defendants pursuit of a claim … did not meet the required standard of evidentiary proof”. It was a case in which they ought to have realised that, on the available evidence, they would not be able to meet the required standard of evidentiary proof. Yet, they persisted with their claims and with the allegation against Mr Van Louwersen.

160. In my view, in forensically examining the evidence available, there were a number of aspects that the Defendants ought to have appreciated, by the end of January 2021, which demonstrate that their conduct, in continuing the defence of the proceedings, was unreasonable. These were:

1. They continued to maintain a challenge to the validity of the informal document. I have dealt with the time spent dealing with the assertion of the deceased’s lack of testamentary capacity based upon intoxication. On this topic, no expert evidence was called going to the question of the deceased’s intoxication.

2. Even if the Plaintiff was not able to establish that the informal document was a document to which s 8 of the Act applied, for example, upon the basis of a lack of testamentary capacity, unless there was clear evidence of a Will, formal or informal, the deceased would have died intestate, with the result that the whole of the deceased’s estate would pass, under the operation of the rules of intestacy, to the Plaintiff.

3. No Will, copy Will, or even draft Will, of the deceased, had been located, despite the searches that were made by them and by the Plaintiff, or by their, and her, legal representatives, respectively.

4. There was no objective evidence, other than a reference to a will in two unsent emails, a conversation with Mr Shoobridge, more than 12 months before the deceased’s death, and uncorroborated conversations alleged by the first Defendant, about any Will made by the deceased.

5. Even if an unfound Will had existed, it was said to have been in the deceased’s possession. If it could not be located upon his death, the presumption of its destruction animo revocandi, by the deceased, unless rebutted, would apply, with the result that he would have died intestate. (This was not an inference but a presumption which, unless rebutted, operated automatically once the relevant fact that it was traced into his possession was established.)

6. The only basis that was asserted to rebut the presumption of destruction animo revocandi was the allegation made against Mr Van Louwersen.

7. There was no evidence to establish that the Plaintiff, or Mr Van Louwersen, had known about any Will said to have been made by the deceased or about the location of any such Will. There was no evidence that either the Plaintiff, or Mr Van Louwersen, had seen the unsent emails, or that either had known of the conversation that Mr Shoobridge had, or the uncorroborated conversations said to have been had with the first Defendant. Indeed, Mr Shoobridge had only told the first Defendant of the conversation some weeks after the death of the deceased, although it was said, by the second Defendant, that “Whilst at the house I heard Josh say: ‘Tom told me that he had a Will and that it was in his gun safe.’” (Neither the Plaintiff nor Mr Van Louwersen had been present at the time of this conversation.)

8. There was no evidence to establish that Mr Van Louwersen had removed any testamentary document of the deceased and in an early affidavit he had denied having taken any Will or testamentary document of the deceased. The evidence of what was seen in his possession did not resemble a testamentary document.

9. The allegation made against Mr Van Louwersen was a very serious allegation which, if proved, may have amounted to criminal conduct. The Defendants chose to base their case on this highly contentious, unsubstantiated, allegation. They advanced, and aggressively pursued, the allegation of impropriety over an extended period of time despite the lack of any foundation in the evidence for the allegation. They pursued the allegation to the very end of the hearing, even after having read, seen, and heard, all of the evidence. It appears to have arisen and been maintained only from their imagination.

10. In none of the documents that were found at the time of the deceased’s death, including, importantly, the note addressed to each of the Defendants, was there any reference to a Will. The informal document suggested that there was, then, no such Will. (I have referred, in the principal judgment, to the first Defendant’s failure to produce the document addressed to her and her husband that was found on the deceased’s death.)

11. The bulk of the costs incurred by the Plaintiff were, therefore, incurred as a result of the Defendants’ conduct.

161. There can be no doubt that the Defendants had been warned about the risk that they were taking in regard to continuing to make the allegation concerning Mr Van Louwersen, if unsubstantiated, at the hearing. As stated, they continued to maintain it, even during the submissions made towards the conclusion of the proceedings.

162. The Defendants’ case, as advanced, resulted in a resounding defeat. In my view, it was unreasonable for them to pursue the case as they did to the very end.

163. I then turn to the offers made by the Plaintiff. In this regard, it seems to me that it was also unreasonable for the Defendants to reject each of the offers made in 2021.

164. In my view, each of the offers made in February 2021, expressed to be a Calderbank offer, and the without prejudice offer made in June 2021, did involve a genuine element of compromise and was a reasonable offer based on the information then known. Each, if accepted, would have produced an outcome more favourable to the Defendants than that which flows from the result of the case.

165. By the end of January 2021, the Defendants ought to have realised the weaknesses in their Defence and the extreme difficulty, if not impossibility, of them being able to establish the facts asserted in the Cross-Claim. They had not obtained an order for their costs of the notice of motion but simply an order that those costs be the Defendants’ costs in the cause. The first offer of $25,000, plus the repayment of the testamentary expenses that the first Defendant had paid, whilst it may not have been sufficient to satisfy their costs, calculated on the indemnity basis, would have gone some way to paying those costs.

166. The subsequent offer of $65,000, made in June 2021, shortly before the commencement of the case, although it included the amount that had been expended by the first Defendant in testamentary expenses (about $16,000), and to which she was entitled to be reimbursed, would have resulted in an amount of slightly less than $50,000 to the Defendants. Even if it was not sufficient to satisfy their costs, calculated on the indemnity basis, it would have gone some way to paying those costs.

167. When one considers all the circumstances of the case, including the net value of the deceased’s estate, and importantly, the Defendants’ conduct in pursuing the Defence and Cross-Claim, the reasonableness of their decision to pursue the allegations and the issues, and the manner in which they relentlessly did so, I have reached the view that reasonable defendants would not have pursued the claims that the Defendants did in this case.

168. Furthermore, their rejection of the offers made by the Plaintiff, which, in my view, were genuine offers, revealing a desire to compromise, in 2021, even if all of them are not Calderbank offers, demonstrate the Defendants’ unyielding approach. Taking into account the forensic difficulties which they faced, I am not persuaded that any of the offers made by the Defendants demonstrated a genuine desire to compromise the proceedings.

169. It is unnecessary to repeat the offers made by the Defendants.

170. In this case, after their investigations, and by the end of January 2021, the Defendants should have realised that they did not have real prospects of success on the evidence that was available.

171. I am satisfied that they should pay the Plaintiff’s costs, calculated on the indemnity basis from 1 March 2021. I have selected that date to take into account a reasonable opportunity for the Defendants to have considered their position and determine to accept the offer made in early February 2021.

172. In the exercise of discretion, I am of the view that in the period between 11 September 2020 and 1 March 2021, the Defendants should pay the Plaintiff’s costs, calculated on the ordinary basis, of the proceedings and that thereafter, they should pay her costs, calculated on the indemnity basis. To not make these orders would, in my view, be unjust in all the circumstances of the case.

173. Making the orders for costs gives no pleasure. However, Probate proceedings ought not to be continued, unless there is, or appears to be, a real chance of success. Contested probate proceedings simply diminish the value of the estate and impose a great hardship on those involved, particularly if they are ultimately successful in litigation.

174. The Court:

1. Notes that the original of the informal document, an authentic copy of which is Ex. P11 in the proceedings, has not been produced.

2. Declares pursuant to s 8 of the Succession Act 2006 (NSW) that the Court is satisfied that the informal document, a copy of which is Ex. P11 in the proceedings, purports to state the testamentary intentions of the deceased, and that it has not been executed in accordance with Part 2.1 of the Succession Act.

3. Declares pursuant to s 8 of the Succession Act that the deceased intended the informal document, a copy of which is Ex. P11 in the proceedings, to form his Will.

4. Orders that letters of administration in solemn form with the informal document, a copy of which is Ex. P11 in the proceedings, annexed, be granted to Lisa Louise Heffernan, the Plaintiff, in the proceedings, limited until the original of that informal document shall be brought into the Probate Registry of the Court.

5. Orders that the matter be remitted to the Senior Deputy Registrar in Probate to complete the grant.

6. Orders that any requirement for an administration bond be dispensed with.

7. Orders that the Statement of Claim filed on 16 September 2020 otherwise be dismissed.

8. Orders that the Cross Claim filed on 16 July 2021 be dismissed.

9. Orders that the Defendants pay the Plaintiff’s costs of the proceedings:

1. calculated on the ordinary basis between 11 September 2020 and 1 March 2021;

2. calculated on the indemnity basis, thereafter, including the costs of the costs application.

10. Makes no other order for costs to the intent that each party will bear her, and their, own costs, respectively, of the proceedings.

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Decision last updated: 20 September 2021