Kostopoulos v Dellis (No 2)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KOSTOPOULOS v DELLIS & ANOR (No 2)
[2023] SASC 109
Reasons for Decision of Auxiliary Judge Costello a Master of the Supreme Court
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
The applicant applied for an order that her costs of the action be paid out of the estate on a solicitor/client basis - the second respondent opposed such an order and sought that the costs of the parties be paid out of the estate on a party/party basis - consideration of the "standard order" and the factors relevant to the exercise of the court's discretion on costs in matters of this type.
Held:
1. The applicant is to have her costs paid out of the estate of the deceased on a solicitor/client basis.
2. There be no order for costs for the second respondent.
Inheritance (Family Provision) Act 1972 (SA); Supreme Court Criminal Rules 2014 (SA), referred to.
Pizimolas v Pizimolas & Zannis (No 2) [2010] SASC 209; Whitington v Whitington (No 2) [2009] SASC 178; Parker v Australian Executor Trustees Ltd (No 2) [2016] SASC 115; Bramwell v Bramwell & Ors (No 2) [2022] SASC 76; Latoudis v Casey (1990) 170 CLR 534; Ohn v Walton (1995) 36 NSWLR 77 at 79, considered.

KOSTOPOULOS v DELLIS & ANOR (No 2)
[2023] SASC 109
Introduction

On 17 May 2023 I delivered judgment[1] in respect of the applicant’s claim for further provision, pursuant to the Inheritance (Family Provision) Act 1972 (“the IFP Act”).
[1] Kostopoulos v Dellis & Anor [2023] SASC 78
By her will the deceased made a specific bequest of $20,000.00 to the applicant (her daughter) and left the residue of the estate, the quantum of which was nearly $400,000.00, to the second respondent (her son).
In my judgment I was satisfied that the applicant had been left without adequate provision for her proper maintenance, education and advancement in life and determined that further provision should be made for the applicant out of the residual estate of the deceased.
In lieu of the bequest of the sum of $20,000.00 to the applicant I ordered that the estate should be divided by distributing an amount equal to 40% of the residual estate to the applicant and 60% to the second respondent.
Consequent upon the delivery of my judgment, the parties filed written submissions on the question of costs and supplemented those submissions with brief oral argument on 20 July 2023. These reasons deal with the issue of costs.
Filed offers
On 14 December 2022 the second respondent filed an offer to resolve the dispute on the following basis:
a. That, in addition to the $20,000.00 legacy left to her in the deceased’s will, the applicant receive a further $40,000.00 for her proper maintenance, education and advancement in life;
b. That there be no order as to costs.
On 20 December 2022 the applicant filed an offer to resolve the dispute on the following basis:
The following provision be made out of the estate of Efstathia Dellis late of 16A Little Sturt Street, Adelaide, deceased (“deceased”) who died on 26th August 2021 for the maintenance, education or advancement in life of the Applicant, namely:
a. That in lieu of the benefits conferred upon her by the will of the deceased:
(1) The net estate be divided into 100 equal parts;
(2) The Applicant receive 40 of those parts.
The burden of the provision referred to in paragraph [1(a)] of this order by (sic) borne by and paid out by the residual estate of the deceased.
The residual estate of the deceased pay the costs of the Offeror on the standard costs basis up to acceptance of this offer or 14 days after service of this offer whichever is earlier.
In her written submissions on the issue of costs, the applicant seeks an order that the respondents pay her costs on the following basis:
a. A solicitor and client basis from 10 March 2022 to date; or
b. In the alternative, on the standard cost basis from the date when Court documents were drafted on 10 March 2022 (“commencement date”) and on an indemnity basis from 16 January 2023.
For his part, in his written submissions, the second respondent seeks an order that the parties’ costs (being the costs of the applicant, the first respondent and the second respondent) be paid on a party/party basis, out of the estate.[2]
[2] The reference in these written submissions to the first respondent is otiose because an order has already been made with respect to the first respondent executor’s costs.
The law
The Court’s power to award costs is to be found in s 40 of the Supreme Court Act 1935 which reads as follows:
40—Power of court with regard to costs
(1) Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.
(my emphasis added)
The IFP Act, which governs these proceedings, has such an express provision, namely in s 9(8) which provides that:
(8) The Court may make such order as to the costs of any proceeding under this Act as it considers just.
The question, as to the basis upon which the costs of a successful applicant should be paid, has been considered by a number of single judges of this Court.
Kourakis J (as he then was) in Pizimolas v Pizimolas & Zannis (No 2)[3] said:
I order that the defendants have their costs paid from the estate. I am informed that such costs are often ordered on a solicitor/client basis. I am not persuaded that it is appropriate to so order. A practice direction has been issued on the award of costs in estate matters.
…
In my view, it better promotes the prudent settlement of family provision claims to limit the awards of costs of beneficiaries and claimants made out of the estate to party/party costs.
[3] [2010] SASC 209
In Whitington v Whitington (No 2)[4] White J said:[5]
By s 9(8) of the IFP Act, the Court may make such order as to the costs of the proceedings as it considers just. It is common for the costs of a successful applicant under the IFP Act to be awarded on a solicitor/client basis. However, the Court’s usual discretion must be exercised and, amongst other things, account may be taken of the size of the estate, the successful applicant’s conduct in the litigation, and the effect of an order on a solicitor/client basis on any residuary beneficiary.
(citation omitted)
[4] [2009] SASC 178.
[5] [2009] SASC 178 at [30].
More recently Lovell J, in Parker v Australian Executor Trustees Ltd (No 2),[6] referred to the Court’s decisions in Pizimolas and Whitington and said:[7]
Both Kourakis J and White J acknowledge the existence of a “standard order” and the fact that it has been the practice in South Australia for that to be followed. However it appears that White J, whilst acknowledging that the “usual discretion” on costs was to be exercised, was prepared to accept as a factor affecting the exercise of the discretion the practice of awarding solicitor/client costs to successful applicants.
With respect I agree that the approach of White J is preferable unless the Full Court determines otherwise. The practice of making a “standard order” is a factor to be taken into account when a court is exercising its discretion on costs.
In my opinion the parties to this type of litigation should not assume that a court will automatically award costs on a solicitor/client basis. A court may exercise the discretion on costs taking into account the practice of the “standard order” but also looking at the other factors mentioned by White J such as the size of the estate, the parties conduct in the litigation, what offers of settlement have been made by any party and the effect that the costs order may have on any beneficiary. Obviously other factors pertinent to the case may have relevance to the exercise of the discretion.
[6] [2016] SASC 115.
[7] [2016] SASC 115 at [12]-[14].
Finally, I note that Bochner AJ, in Bramwell v Bramwell & Ors (No 2),[8] determined that the applicant was entitled to receive her costs on a solicitor/client basis in reliance on the principles enunciated in Parker.
[8] [2022] SASC 76 at [56].
In summary, it may be accepted that, in exercising its discretion on costs in matters of this type, a court will have regard to, inter alia, the following factors:
(a)The practice of awarding solicitor/client costs (“the standard order”) to successful applicants;
(b)The size of the estate;
(c)The parties’ conduct in the litigation;
(d)Whether and if so what offers of settlement have been made by any party;
(e)The effect that a solicitor/client costs order would have on the residuary beneficiary.
The standard order
It is perhaps trite to observe that a judgment in favour of the applicant means that she has satisfied the Court that the deceased failed to make adequate provision for her. However, if the result of a costs order on a party/party basis was to dilute the adequacy of any such provision, by reason of her having to meet the difference between the costs recovered and any reasonable costs incurred, then such a decision would effectively undo the benefit of the level of provision initially made to her.
Given the relative impecuniosity of the applicant the making of a standard order in her favour is an important factor in the discretionary exercise.
Size of the estate
Although the exact value of the residuary estate is uncertain, dependent as it is upon the value that the house property realises on a sale, it may be accepted that it is a small estate in both relative and absolute terms. As such, a costs order of the type sought by the applicant will have a significant impact on the amount ultimately received by the second respondent.
Parties’ conduct in the litigation
The parties in this litigation have not exactly “covered themselves in glory”. The applicant’s evidence was unsatisfactory in a number of respects. Although one explanation for much of that might be attributable to her previous lifestyle, it was a lifestyle she chose to take up.
The second respondent gave equally unsatisfactory evidence in some respects and his conduct of the estate, in his capacity as executor, was poor. Subject to what I am about to say on the specific issue of offers of settlement, I regard this general issue to be, predominantly, a neutral factor.
Offers of settlement
The second respondent made an offer to settle in the sum of $60,000.00 with there being no order as to costs. Regardless of the actual value of the estate, this offer is well under the amount the applicant can expect to receive arising from my reasons for judgment. In my view, the applicant acted reasonably in rejecting this offer.
The applicant made an offer to settle which, to borrow from the respondents’ submissions, albeit “by the barest of margins, [nevertheless] matched the applicant’s offer”.
In considering this issue, I have also had regard to the fact that the applicant’s offer constituted a formal, relevant offer within the meaning of UCR 132.10 and that she has obtained a judgment no less favourable than her formal offer. I note that in such circumstances the Rules provide that an applicant is entitled to indemnity costs from a date 14 days after the offer.
In my view, whether or not the second respondent’s failure to accept the applicant’s offer could be categorised as imprudent, his conduct in not making any response at all to the offer was unwise.
Effect of a costs order on the second respondent
I am informed that the applicant’s costs, should a solicitor/client order be made, are in the vicinity of $50,000.00-$55,000.00.
As I have already acknowledged, an award of costs of this amount will have a significant impact on the amount which the second respondent can expect to receive and it will no doubt result in a real hardship to a man of his relative impecuniosity.
Nevertheless, I do not overlook the fact that costs orders of this nature are made to compensate the successful litigant, not to punish a party who is unsuccessful.[9]
[9] Latoudis v Casey (1990) 170 CLR 534; Ohn v Walton (1995) 36 NSWLR 77 at 79.
In all the circumstances, I am of the view that the applicant should have her costs upon a solicitor/client basis.
I decline to make an order that the second respondent have his costs paid out of the estate.
Formal orders
In order to give effect to the reasons I delivered in Kostopoulos v Dellis & Anor [2023] SASC 78 and to these reasons, I make the following orders:
1.The costs of the First Respondent Executor of this action be taxed or agreed on a solicitor and client basis and paid out of the residual estate upon the footing of an indemnity.
2.The following provision be made out of the estate of EFSTATHIA DELLIS late of 16A Little Sturt Street Adelaide SA deceased who died on 26 August 2021 for the maintenance, education or advancement in life of the applicant, MARY KOSTOPOULOS in lieu of the benefits conferred upon such person by the will of the deceased namely that:
a.the net estate be divided into 100 portions;
b.the applicant is to receive a legacy equivalent to 40 of those portions;
3.The burden of the legacy referred to in order 2 herein be borne by and paid out of the residual estate of the deceased.
4.Save as aforesaid the First Respondent Executor shall stand possessed of the estate of the deceased upon and subject to the trusts declared in the will so far as such trusts shall be capable of taking effect and as varied by these orders.
5.A certified copy of this Order be made on the probate of the will of the deceased and, for that purpose, the First Respondent Executor produce the probate to the Registrar of Probates.
6.Pursuant to s 8 and s 12 of the Aged and Infirm Persons Property Act 1940 (“AIPPA”), a protection order is made over the applicant’s estate and be limited to the legacy paid by way of order 2 herein (“Legacy Portion”).
7.The Public Trustee of South Australia be appointed manager to take possession of and control and manage the Legacy Portion of the Protected Person’s estate with the powers and duties given and imposed by the AIPPA and the Rules of Court made pursuant to the AIPPA.
8.This Order be served on the protected person and Public Trustee within 7 days by forwarding an office copy of it to each of them by prepaid post and that such service be proved by affidavit or statement of facts filed in this action within 7 days of the service.
9.The applicant’s costs and disbursements of and incidental to this action be paid out of the residual estate of the deceased on a solicitor and client basis.
10.There be no order as to costs of the second respondent.
11.The parties may apply for further orders and directions.

[2023] SASC 109

25 July 2023