McCusker v Rutter - [2010] NSWCA 318

NEW SOUTH WALES COURT OF APPEAL

CITATION:
McCusker v Rutter [2010] NSWCA 318

FILE NUMBER(S):
2009/298212

HEARING DATE(S):
28 September 2010

JUDGMENT DATE:
26 November 2010

PARTIES:
Anne Maire McCusker (Appellant)
David Andrew Rutter (First Respondent)
Jane Elizabeth Rutter (Second Respondent)
Kenneth Bruce Hancock (Third Respondent)

JUDGMENT OF:
Campbell JA Young JA Handley AJA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
SC 3119/05, SC 2138/06

LOWER COURT JUDICIAL OFFICER:
McLaughlin AsJ

LOWER COURT DATE OF DECISION:
20 February 2009

LOWER COURT MEDIUM NEUTRAL CITATION:
Rutter v McCusker (No 2) [2009] NSWSC 71

COUNSEL:
R Brender and C Carter (Appellant)
M R Gracie and D A Neggo (First and Second Respondents)
P O'Loughlin (Third Respondent)

SOLICITORS:
Brock Partners (Appellant)
Gadens Lawyers (First and Second Respondents)
Hancock Aldis & Roskov (Third Respondent)

CATCHWORDS:
Costs- unsuccessful claims by three adult children for provision under Family Provision Act 1982- whether order for costs should be made against the respondent children for their unsuccessful claims- trial judge found improper motive of appellant executrix in instigating daughter's proceedings- allegation never put to executrix- finding, which was not merely dicta, unsupportable- Court of Appeal needs to exercise discretion afresh- whether overall justice of the case warrants order other than costs follow the event- strong guidelines that court should exercise discretion that successful party should have costs- no sufficient displacement in this case.

LEGISLATION CITED:
Civil Procedure Act 2005, s 98
Family Provision Act 1982, s 33
Uniform Civil Procedure Rules, Part 42.25

CATEGORY:
Principal judgment

CASES CITED:
Adam v Mullen (Holland J, 15 December 1976, unreported)
Deen v The Different Drummer Pty Ltd (Court of Appeal, 30 March 1978, unreported) BC7800157
Edmund v Martell (1907) 24 TLR 25
Hally v Dennis [1955] HCA 41; 95 CLR 661
London Welsh Estates Pty Ltd v Phillip (1931) 144 LT 643
Mitropoulos v The Greek Orthodox Church (1993) 10 ACSR 134
Moussa v Moussa [2006] NSWSC 509
Re S J Hall (dec'd) (1958) 59 SR (NSW) 219
Ritter v Godfrey [1930] 2 KB 47
Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268
Singer v Berghouse [1993] HCA 35; 114 ALR 521
Total & Universal Pty Ltd v Kingsway Property Investments (No 2) Pty Ltd [2007] NSWSC 581
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213
Vasilijev v The Public Trustee [1974] 2 NSWLR 497

TEXTS CITED:

DECISION:
(1) Appeal allowed.
(2) The respondents David Andrew Rutter and Jane Elizabeth Rutter to pay jointly and severally the appellant's and the third respondent's costs of the appeal.
(3) Set aside the costs orders made by McLaughlin AsJ.
(4) In lieu order that David Andrew Rutter and Jane Elizabeth Rutter jointly and severally pay 85% of the appellant's costs of the proceedings in the Equity Division.
(5) Order that the appellant receive out of the estate her costs incurred in the proceedings in the Equity Division brought by her daughter Flossiy on an indemnity basis.
(6) Order that the appellant receive out of the estate on an indemnity basis her costs incurred in defending the proceedings brought by David Andrew Rutter and Jane Elizabeth Rutter to the extent to which those costs are not recovered from those parties.
(7) The third respondent administrator may retain out of the estate his costs of the appeal to the extent to which they are not recovered from the first and second respondents.
(8) The respondents David Andrew Rutter and Jane Elizabeth Rutter to have certificates under the Suitor's Fund Act.
[The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2009/298212
CAMPBELL JA
YOUNG JA
HANDLEY AJA
Friday 26 November 2010

McCUSKER v RUTTER

Headnote

The appeal concerned the proper order for costs flowing from unsuccessful Family Provision claims and an unsuccessful cross claim. The appellant, Anne McCusker had a de facto relationship with the late Barry Rutter with whom she had a daughter, Alexandra Florence Margaret (Flossiy). At the time of proceedings the appellant was the executor under the will and granted probate. On 24 May 2005 Flossiy filed a summons seeking provision under the Family Provision Act 1982. Her mother was defendant as executrix. David Andrew Rutter (David) and Jane Elizabeth Rutter (Jane), the first and second respondents, were the two children of the deceased’s earlier marriage, and on 31 March 2006 filed a summons, out of time, seeking provision. David and Jane were added as defendants to Flossiy’s case and took over carriage of defence of the will. On the fifth day of a seven day hearing the appellant filed a cross claim seeking determination of the shareholdings in Halibut Pty Ltd (Halibut); the will having granted the testator’s shares in Halibut to David.

At trial, the summonses were heard together. McLaughlin AsJ dismissed Jane and David’s claims as having failed to establish relevant need, or provide adequate explanation for being commenced out of time. He also dismissed Flossiy’s claim, however, her appeal was allowed by consent. His Honour determined the shareholding in Halibut unfavourably to the appellant and declined to grant the consequential relief that she sought.

In the costs judgment, McLaughlin AsJ held that as Jane and David expressly eschewed any costs order in their favour against Flossiy, they were unable to look to the estate instead for their costs. Further, as David and Jane’s own applications were unsuccessful, they would normally be required to pay the appellant’s costs and the appellant would be entitled to recover any deficiency from the estate. However, he made no order for the appellant’s costs because the appellant’s conduct in brining an unsuccessful cross claim late in the hearing and, in particular, encouraging her daughter to instigate an hopeless claim against the estate with the intention of diminishing the assets available to meet provision for David and Jane were inconsistent with her duty as executor. An order for costs would advance this improper purpose.

On appeal, it was acknowledged by both sides that the primary judge’s finding, that the appellant’s cross claim and her instigation of Flossiy’s claim were both intended to reduce the assets payable to the deceased’s first family, could not be supported. The appellant argued that these matters were never put and that the cross claim was necessary to determine how the shares in Halibut were held beneficially. There was no basis for finding misconduct and no reason why the appellant should not receive her costs from the estate or any shortfall in those costs against David and Jane. The respondents argued that the unsupportable findings were obiter. Rather, the appellant’s unreasonable actions in the conduct of the proceedings, in bringing the unsuccessful cross claim, and in the administration of the estate justified a denial of costs. The appellant’s funding and support of Flossiy’s claim and her failure to uphold or defend the will against this claim were breaches of her duty as executor and led the parties into an adversarial battle. Further, the appellant failed to get in a debt owed by her company Designplace Pty Limited to the estate. Additionally, the appellant had not sought her costs of Flossiy’s claim from David and Jane at first instance, and David and Jane effectively defended Flossiy’s claim on behalf of the estate.
The appeal raised 3 issues:
1. Whether the trial judge’s exercise of discretion miscarried.
2. Whether the appellant should receive costs against Jane and David.
3. Whether the appellant should not be able to claim her costs out of the estate.

The Court held, allowing the appeal:
1. As to whether the trial judge’s exercise of discretion miscarried:
Young JA (Campbell JA and Handley AJA agreeing): the unsupportable findings were not obiter. They were repeated a number of occasions and were at the forefront of the primary judge’s decision when exercising the discretion. The exercise of the discretion must be set aside and the court must exercise this discretion afresh.

Handley AJA (Campbell JA, agreeing): the appellant’s duty to uphold the will did not extend to a duty to refrain from encouraging her daughter to make a claim and supporting her in that claim. The duty to uphold the will is to be performed in the litigation and does not override normal family relationships outside the court, including parental duties to children needing advice about their rights and assisting them in enforcing them. The appellant performed her duty as executrix.
Re SJ Hall (Decd) (1958) 59 SR (NSW) 219; Vasiljev v The Public Trustee [1974] 2 NSWLR 497, referred to.

2. As to whether the appellant should receive costs against Jane and David:
Handley AJA (Campbell JA, agreeing): David and Jane should pay the estate’s costs of their own claims, which were brought out of time. They failed to obtain orders extending the time or to establish need. Because the claims were heard together, the appellant’s costs against David and Jane included the whole of her costs of attending the trial, even though the appellant took no active part in defending Flossiy’s claim. There is no occasion to apportion those costs as though part was attributable to Flossiy’s claim.

Young JA: although discretionary, the initial proposition that a successful party gets her costs and unsuccessful party pays costs favours an order for costs in the appellant’s favour in Jane and David’s case. However, the overall justice of this Family Provision case favours an order other than the usual order for costs. The case was an adversarial contest between the first and second family with a result of a virtual draw and a very large amount of wasted costs. Flossiy’s case took substantial time with no order for costs due to a concession by David and Jane and it is inequitable that for this reason they should bear a large amount of the costs of the second half of the case. In order to save costs, fairness dictates that the Court assume equal time occupied with 5% deducted from David and Jane’s case as time devoted to the cross claim. David and Jane’s costs at trial should be discounted for the abovementioned reasons.
London Welsh Estates Ltd v Phillip (1931) 144 LT 643; Ritter v Godfrey [1920] 2 KB 47; Singer v Berghouse [1993] HCA 35; 114 ALR 521, discussed.

3. As to whether the appellant can claim her costs out of the estate:
Handley AJA (Campbell JA, agreeing): the appellant must pay the respondent’s costs of her unsuccessful cross claim and may not charge the estate with her own costs of the cross claim. The appellant is entitled to receive out of the estate her costs incurred in defending the proceedings brought by David and Jane on an indemnity basis to the extent that those costs are not recovered from David and Jane.

Young JA: an order that the appellant as executor at the time cannot claim her costs out of the estate is one that should not normally be made. The appellant should not be deprived from having a proportion of her costs out of the estate.
Adam v Mullen, Holland J, 15 December 1976, unreported, applied.

IN THE SUPREME COURT

OF NEW SOUTH WALES
COURT OF APPEAL

2009/298212
CAMPBELL JA
YOUNG JA
HANDLEY AJA
Friday 26 November 2010

McCUSKER v RUTTER

Judgment

CAMPBELL JA: I agree with the reasons of Handley AJA.
The totality of the Appellant’s costs of the proceedings in the Equity Division fall into the three categories identified by Handley AJA at [63] of his judgment. Because the claim brought by Flossiy, and the claim brought by David and Jane, were heard together, even though the Appellant took no active part in defending Flossiy’s claim, the Appellant’s costs of the proceedings in the Equity Division included the whole of her costs of attending at the trial. Her costs of defending the claims brought by David and Jane would thus include the whole of her costs of attendance at the trial. In my view there is no occasion to apportion those costs as though part was attributable to Flossiy’s claim. Particularly in light of the failure of David and Jane to obtain even an extension of time, this is not an appropriate case to exercise the undoubted power in a Family Provision Act case to make an order that mitigates the burden of the costs order that would be appropriate on the principles applied in other species of litigation.
I agree with the orders proposed by Handley AJA.
YOUNG JA: This appeal by leave concerns the proper order that should be made as to costs with respect to an unsuccessful claim under the Family Provision Act 1982.
There were two applications made under the Family Provision Act with respect to the estate of the late Barry Rutter who died on 29 March 2004 aged 74.
The deceased had only been married once, and that to Anne Caroline Rutter on 21 December 1953. There were two children of that marriage, Jane who is now 52 and David who is 50. That marriage ended in divorce on 19 April 1988.
From some time in the 1980s the deceased had entered into a de facto relationship with the appellant, Anne Maire McCusker and they had a child Alexandra Florence Margaret who is known as Flossiy who is now aged 24. For convenience, and not meaning any disrespect, I will refer to Ms McCusker as the appellant, Mrs Anne Rutter as Anne, Alexandra Florence Margaret as Flossiy and the other children as Jane and David.
The will named the appellant and another person which person renounced probate as his executors and probate was granted to the appellant on 14 September 2005. The will gave the testator’s shares in Halibut Pty Ltd (hereafter “Halibut”) to David together with any debt owed to him by Halibut. He gave Jane $150,000 though he said it was to be paid to her by equal quarterly payments not stating the amount of such payments and gave the residue to the appellant with a gift over to Flossiy if the appellant did not survive him by 30 days.
It is very difficult to work out the value of the estate. It would seem that at present, for all practical purposes, it is somewhere in the vicinity of $375,000 and that the only valuable asset is the share in Halibut.
On 24 May 2005, Flossiy filed a summons seeking provision under the Family Provision Act. The appellant, her mother, as executor of the estate, was the defendant. On 31 March 2006, well out of time, David and Jane filed a summons seeking provision under the Act and also seeking that the property which the deceased held jointly with the appellant be identified as notional estate. In David and Jane’s claim, the appellant filed a cross claim as to the status of the shareholding in Halibut and associated issues.
The two summonses were heard together. They took 7 hearing days before Associate Justice McLaughlin in 2007, the last hearing date being 10 October 2007. The primary judge gave judgment on 28 March 2008. He dismissed both the claims, but determined that the shareholding in Halibut was that the deceased, Anne Rutter, David and Jane each held one A class share and one B class share.
As to Jane’s claim, the learned primary judge said at [146]-[147] of his judgment that Jane contemplated instituting her proceedings only when she became aware that Flossiy had made a claim and that it was open to him to infer that at least one of the reasons for the claim was to thwart Flossiy’s claim, but no adequate explanation for the proceedings being commenced out of time had been given nor had Jane established any relevant need.
As to David’s claim, the primary judge also found that he had not established any relevant need, and that even if he were wrong, it would not warrant dispossessing the appellant and Flossiy of their home. He also dismissed Flossiy’s claim. The matter of costs was stood over for further consideration. The primary judge heard argument on the matter on 3 November 2008 and gave judgment on 20 February 2009. His order was that there would be no order as to anyone’s costs, and further that the appellant not be entitled to resort to the estate for payment of any costs incurred by her in the proceedings.
It is that latter judgment that is the focus of the present appeal. It is cited as Rutter v McCusker (No 2) [2009] NSWSC 71.
In that judgment the learned primary judge noted that costs, although in the discretion of the court, normally follow the event, but then referred to s 33 of the Family Provision Act 1982 and cases decided as to the interaction between that section and the normal legislation as to costs. He noted that it is the duty of the executor to uphold the terms of the will, but that in the present case the appellant was not only the executor, but also the primary beneficiary. He then said that in his earlier reasons he had held it was apparent that Flossiy’s proceedings had been brought with the complete support and encouragement of the appellant with a view to reducing the assets of the estate and thus diminishing the benefits that would flow through to Jane and David.
I should note that in Flossiy’s claim, Jane and David were added as defendants and it was they who had the carriage of the defence rather than the appellant.
The primary judge said that as Flossiy lost, she was not entitled to any costs, and that ordinarily, she should have to pay costs. However, he noted that both Jane and David expressly eschewed any costs order being made in their favour against Flossiy. He then added at [18]:
“If, however, David and Jane do not wish to pursue against Flossiy the costs to which they would normally be entitled, then I do not see how they can establish an entitlement to receive those costs either from (the appellant) personally or from the estate. If they were prepared to claim their costs against Flossiy and if ultimately they were not able to recover those costs from her, then there might be grounds for David and Jane to look to the estate for reimbursement. But, since they have expressly disclaimed any costs order in their favour against Flossiy, they cannot look instead to the estate for those costs.”
As to David and Jane’s own applications, the primary judge noted that each were unsuccessful and would normally be required to pay the appellant’s costs and that the appellant would be entitled to recover any deficiency from the estate. However, he then proceeded to make no order for costs, as I have noted, following a process of reasoning which can be summarised as follows:
(a)          on the fifth day of hearing the appellant filed a cross claim seeking determination as to the shareholdings in Halibut;
(b)          the costs of the totality of the proceedings were not materially increased by either Mrs Anne Rutter or Halibut being named as defendants to the cross claim;
(c)          the appellant was not successful in obtaining the relief which she sought regarding Halibut;
(d)          David and Jane’s applications were in fact, even if not in form, adversarial proceedings between them and the appellant;
(e)          the appellant’s conduct in carrying out her duties and responsibilities as executor of the estate was relevant and the costs order should not be approached without taking that into consideration and the way in which Flossiy’s application was brought against the estate;
(f)           an order for costs against David and Jane would be inconsistent with the absence of a similar order being made against the unsuccessful Flossiy.
(g)          the appellant’s conduct was inconsistent with and contrary to her duty and responsibility as executor “she encouraged her own daughter to make and persist in a hopeless claim against the estate, with the clear intention that that claim, if successful, would diminish the assets available to meet the entitlement of David and Jane, first, under the terms of the will of their father, and second by way of any order for additional provision out of their father’s estate” [41];
(h)          the cross claim was largely motivated by the intention to diminish the assets available to meet provision in favour of David and Jane;
(i)           any order for the appellant’s costs would have the effect of advancing her improper purpose of attempting to diminish the assets of the estate available to meet the entitlements of David and Jane;
(j) Part 42.25 of the Uniform Civil Procedure Rules makes it clear that a trustee is entitled to be paid her costs out of the fund but the court may order otherwise if the trustee has acted unreasonably or for her own benefit rather than for the benefit of the fund and that that rule is applicable here;
(k)          the claim of Flossiy could be regarded as a claim made for a collateral and indeed an improper purpose and was brought at the instigation of the appellant for the purpose of ensuring the estate would be diminished [52];
(l)           Flossiy’s claim was unmeritorious;
(m)         accordingly, no order for the appellant’s costs should be made.

On the appeal, further material was received on a limited basis and is included in the Green Appeal Book. From this and from what we were told at the bar table, the following additional facts may need to be taken into account:
1.            After the primary judge’s decision, Palmer J revoked probate and appointed Mr Hancock, solicitor, as executor of the estate. (This order must have been made per incuriam as Mr Hancock should have been appointed administrator cta, but no-one has taken any point on this).
2.            The appellant has a judgment against her for $282,515.32 for legal costs and a bankruptcy notice has been issued in respect of that judgment.
3.            By consent, Flossiy’s appeal was allowed and she was awarded a legacy of $130,000.
4.            Counsel were rather reticent about how this occurred, the best answer we could get was that this was done “for commercial reasons”.
The appeal was heard on 28 September 2010, Mr R Brender and Mr C Carter of counsel appeared for the appellant, Mr M R Gracie and Mr D A Neggo appeared for Jane and David, and Mr P O’Loughlin for Mr Hancock. Leave to appeal had previously been granted by this Court.
Mr Brender put that one of the chief reasons given by the primary judge was his finding that the claim by Flossiy had been instigated by the appellant with a view to reducing the benefit that would flow from the estate to Jane and David. He submitted that that suggestion was never put to the appellant. He says that the cross examination of the appellant was brief, she was asked whether she preferred her own interests to those of the beneficiaries and that she had acted unreasonably in the proceedings, that she had paid Flossiy’s legal fees as loans and whether she expected repayment. The cross examination is on pages 233 and following of the Black Book. The appellant denied that she preferred her own interests to the interests of the beneficiaries. She admitted that she had loaned Flossiy legal fees but said she had no intention to deny justice to Flossiy through starving her of funds and supported Flossiy. However, she often paid Flossiy’s obligations.
However, it was never put to the appellant that she instigated the claim of Flossiy. Furthermore, it was never put to her that the cross claim was motivated by an intention to diminish the assets. Indeed, Mr Brender puts that it was necessary that it be determined how the shares in Halibut were held beneficially. Accordingly, Mr Brender puts, there was no basis for finding misconduct and thus no reason why the appellant should not receive her costs from the estate or any shortfall in those costs after satisfaction of a party/party order against David and Jane.
Mr Gracie puts that contrary to the appellant’s submission, the appeal does not stand or fall on the finding of the primary judge that Flossiy’s claim was improperly instigated by Anne or why the Flossiy’s claim was considered hopeless. These matters were obiter and may be disregarded.
As to Flossiy’s claim, the appellant did not seek costs from Flossiy. It now appears that the appellant seeks her costs of Flossiy’s claim from David and Jane; she didn’t seek that at first instance, and it was David and Jane who effectively defended Flossiy’s claim on behalf of the estate.
As to David and Jane’s claims, the appellant was rightly denied costs because of her bad behaviour being her unreasonable actions in the conduct of the proceedings and in the administration of the estate (a matter which she denied at 234C).
Mr Gracie says that it was the cross claim and the funding and support of Flossiy’s claim which led the parties into an adversarial battle between the deceased’s first and second families, that has wasted the estate on legal costs and there are no grounds for supporting an order rewarding the appellant for bringing about this state of affairs. He puts that the primary judge clearly recognised this, and although it would have been better if his comments about Flossiy’s hopeless claim and the appellant’s intentions were not made, the comments were unnecessary and obiter, the decision was really made on a legitimate basis. In any event, the claims of Flossiy and David and Jane were interwoven, the appellant had paid Flossiy’s legal fees, the primary judge said he was satisfied that Flossiy was not required to repay these and there has been no appeal from that finding. The fact that the appellant paid Flossiy’s legal fees was a breach of the appellant’s duty as executor and her submission she was entitled “as a mother” to do it was no doubt correct, but is irrelevant.
With regard to Flossiy’s claim, the appellant did not uphold the will or defend the will and these breaches were sufficient in any event to justify the primary judge’s finding. Furthermore, the appellant’s failure to get in a debt owed by her own company Designplace Pty Limited to the estate showed that she was acting unreasonably in and about the conduct of the estate.
Section 98 of the Civil Procedure Act 2005 sets out the general rule as to costs, that is, that costs are in the discretion of the court. However, Part 42 r1 then says that if the court makes any order as to costs it is to order that the costs follow the event unless it appears to the court that some other order should be made.
The general rule is that “there is no power in the court to make a successful defendant pay the costs of an unsuccessful plaintiff. The reason is obvious: it is the plaintiff who brings the defendant into court.” London Welsh Estates Ltd v Phillip (1931) 144 LT 643 applied by the High Court in Hally v Dennis [1955] HCA 41; 95 CLR 661 and by this Court in Deen v The Different Drummer Pty Ltd, 30 March 1978 (BC7800157). Here the order was not that the unsuccessful plaintiff get her costs from the successful defendant, but rather that no order for costs be made. Such cases are not as black and white as the ones I have just referred to, but even so, the authorities show that it is relatively rare that a court should make such an order.
The leading case is the decision of the English Court of Appeal in Ritter v Godfrey [1920] 2 KB 47. At 60, Atkin LJ said:
“In the case of a wholly successful defendant, in my opinion the judge must give the defendant his costs unless there is 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.”
As to the third principle, his Lordship went on to say at p 61:
“Such conduct must, however, be in the course of the transaction complained of.”
Earlier in his Lordship’s judgment he referred to Edmund v Martell (1907) 24 TLR 25, 26, where Buckley LJ said:
“The judge had no power to deprive the successful litigant of costs because in some matters not material he might think that that party should have behaved, say, with more courtesy or consideration.”
Ritter v Godfrey has been followed on many occasions in this Court, see eg Mitropoulos v The Greek Orthodox Church (1993) 10 ACSR 134 per M McLelland J and Total & Universal Pty Ltd v Kingsway Property Investments (No 2) Pty Ltd [2007] NSWSC 581 per Campbell JA. See also in the Federal Court Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 at 220-221 per Fisher J.
A series of decisions at first instance show that there is some more flexibility where there has been an unsuccessful claim made under the Family Provision Act. In Singer v Berghouse [1993] HCA 35; 114 ALR 521, 522 Gaudron J said:
“Family Provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s 33, makes special provision in that regard, costs in Family Provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have a detrimental effect on the applicant’s financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate.”
Examples of situations where courts have thought no order should be made against an unsuccessful plaintiff are afforded by Sherborne Estate (No 2): Vanvalen v Neaves (2005) 65 NSWLR 268 per Palmer J and Moussa v Moussa [2006] NSWSC 509 per Barrett J. Whilst it is clearer in a case where if an order for costs is made against an unsuccessful plaintiff he or she will instantly become impecunious and so may be able to make a fresh application under the Act so that it is counter-productive to make an order as to costs against such a plaintiff, what Gaudron J said in Singer shows that it is not only in such cases that it may be inappropriate to make an order for costs against an unsuccessful plaintiff under the Act.
With these principles in mind, I must turn to review what happened before the primary judge.
It is acknowledged on both sides that the primary judge’s findings that the appellant deliberately had Flossiy commence hopeless proceedings at her instigation motivated by a desire to reduce the amounts that could be paid to the deceased’s first family cannot be supported. They were never put to the appellant. It would appear to be no part of the case made out by Jane and David.
It is difficult, with great respect, to merely put the primary judge’s findings on these matters to one side as merely being obiter as Mr Gracie would like us to do. The fact that the findings were repeated on a number of occasions indicates that they were very much to the forefront of the primary judge’s decision when exercising his discretion. By taking into account such matters, his exercise of the discretion must be set aside.
It follows that this Court must exercise the discretion afresh.
Before doing so, I should note that there is a difference between the order that the appellant get no costs as against Jane and David and the order that she not be able to claim her costs out of the estate.
The second order is one that should not normally be made, as was pointed out by Holland J in Adam v Mullen, 15 December 1976, unreported (but noted in Ritchie’s Supreme Court Practice [13024] a case note inexplicably removed from the current Practice). It is ordinarily better to leave questions as to whether costs should be paid out of the estate to when an account is taken of an executor’s administration in the Probate Court as the beneficiaries entitled to object may be different to the people who are parties to the litigation. However, in the instant case it does not matter as the only beneficiaries are persons who are party to the proceedings.
There are thus two questions:
(1) Should an order for costs be made against David and Jane in respect of their unsuccessful claims under the Family Provision Act? and
(2) Should an order be made that the appellant not get any of her costs out of the estate?
So far as the cross claim is concerned, the appellant says that the claim only took 5% of the hearing time, if that, and it was essential that the question as to what proportion of the shares in Halibut were part of the estate be determined. That latter point is certainly correct. There does not appear to be demur in respect of the first point.
The learned primary judge obviously considered that the fact that the cross claim was made did have a considerable forensic impact on the litigation generally. Just why that is so is not instantly apparent.
It is also very strange that a relatively simple Family Provision Act application took as much as seven hearing days. One would have thought the major difficulty would be the value of the estate and whether notional property should be resorted to to meet any orders. However, these matters did not seem to feature at all in the judgment as both claims were dismissed.
The primary judge classed Flossiy’s claim as hopeless and that, of course, spurred him to say that it was only instigated by the appellant to diminish the value of the estate. Even though Flossiy’s claim was settled on appeal for $130,000 for commercial reasons (if that be the case), it is now hard to say that it was a hopeless case.
All the applications were heard together so it is very difficult without spending a lot of time before a costs assessor to work out just how much time was spent on Flossiy’s claim and how much time on Jane and David’s claim and how much was referable to both claims. Theoretically, that sort of matter can be left to the costs assessor but experience shows it is far better for a court to make a ball park assessment.
The matter is a discretionary matter, but the authorities show that one starts with the proposition that a successful party gets her costs and an unsuccessful party pays costs. That proposition favours an order for costs being made in the appellant’s favour in Jane and David’s case, less, perhaps, 5% discount because of the cross claim. However, the cross claim would be something that should be properly paid for out of the estate.
Then I must ask whether the rule that one must look at the overall justice of the case requires some different order to be made. It seems to me that for some of the reasons mentioned by the primary judge, there is a case under this rule though it is not one which should apply to the whole of the costs, nor is it one which should deprive the appellant from having her costs out of the estate.
The factors that make me take this view are that the primary judge was correct in saying that an overall view of the case was that it was an adversarial contest between the first family and the second family of the deceased and the result was virtually a draw apart from a very large amount of wasted costs. In Flossiy’s case which took a fair amount of time at the trial, there was no order for costs, partly because of a concession from Jane and David, and it is rather inequitable that that concession should mean that they personally bear a large amount of the costs of what might be called the second half of the case. On the other hand, this is not a situation where it would appear that even a significant sum of costs would bring either Jane or David into penury.
As I have said earlier, properly speaking, the amount of time spent on the case of Jane and David as opposed to the case of Flossiy is a matter for the costs assessor. However, to deal with it in that way will probably only increase costs. It is fair in my view to assume that equal time was occupied by both cases thus notionally apportioning 50% of the costs to Flossiy’s case and 50% to the case of Jane and David.
I should accept that 5% of the time of the case of Jane and David was devoted to the cross claim, thus it would seem to me that 45% of the costs of the whole proceedings should be charged to the claim made by Jane and David. That, however, should be discounted by a quarter for the factors that I have mentioned, so that rounding down the proper order for costs is that Jane and David pay one-third of the costs of the appellant of the proceedings below and pay the whole of the costs of this appeal.
As to the remaining costs, ie the remaining one-sixth of the total re David and Jane’s costs, they should be paid out of the estate. There should be no order for costs as to the other one half of the total costs, ie the costs which relate to Flosssiy’s claim.
I would also set aside the orders that no part of the costs should be recovered out of the estate. I would thus propose the following orders:
(1) Appeal allowed.
(2) Set aside the order for costs made by McLaughlin AsJ.
(3)In lieu, order that David Andrew Rutter and Jane Elizabeth Rutter pay one-third of the costs of the proceedings below and the whole of the costs of this appeal.
(4)Order that the appellant receive one-sixth of her costs out of the estate of the late Barry Rutter.
HANDLEY AJA: In this appeal by leave I have had the benefit of reading the reasons for judgment of Young JA in draft.
I agree generally with his Honour's reasons but will add some supplementary reasons and propose different orders for the disposal of the appeal.
I agree that the exercise by the Associate Justice of his discretion as to costs miscarried, for the reasons given by Young JA, and the Court must intervene. However in my opinion his exercise of discretion miscarried for additional reasons.
An executor or administrator with the will annexed, faced with a claim under this legislation, is bound, within reason, to uphold the terms of the will. However in appropriate cases the legal personal representative will be justified in compromising the claim or even consenting to the orders sought: Re SJ Hall (decd) (1958) 59 SR (NSW) 219; Vasiljev v The Public Trustee [1974] 2 NSWLR 497 CA, 503-4.
The duty to uphold the will is one which is to be performed in the litigation. It is not a duty which overrides normal family relationships outside the Court.
The Associate Justice’s reasons for depriving the appellant of her costs as executrix included [18(g) above] encouraging her daughter to make and persist in a hopeless claim against the estate. Young JA has set aside this finding and I agree with his reasons for doing so.
The appellant performed her duty as executrix. After filing the usual, uncontroversial, affidavit about the estate she stood aside and David and Jane Rutter took over the defence to the daughter's claim.
The Associate Justice thought that the appellant's duty to uphold the will should have prevented her encouraging her daughter to make a claim and supporting her in that claim. In my judgment the appellant had no duty which required her to refrain from such conduct.
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.
The costs incurred by the appellant at the trial fell into three categories, those incurred in the daughter's claim before David and Jane Rutter took over the defence, those incurred in her cross-claim, and those incurred in defending the claims brought by David and Jane.
In my opinion the appellant is entitled to her costs in the first category out of the estate, and on the usual indemnity basis. Those costs incurred in instructing solicitors to appear in the daughter’s application and preparing and filing her executor’s affidavit will be modest. I would estimate these at 5% of her total costs. These are not payable by David and Jane, nor by the daughter who succeeded on appeal and are properly payable out of the estate on an indemnity basis.
The costs in the second category were incurred in the appellant’s unsuccessful cross-claim relating to the ownership of the issued shares in the family company. She must pay the cross respondent’s costs of the cross-claim and it is not clear that she is entitled to charge the estate either with those costs or with her own costs of the cross-claim. I have estimated that 5% of the costs of David and Jane and 5% of her costs were incurred in the cross-claim.
In my opinion David and Jane should be ordered to pay the estate’s costs of their claims under the Act. These claims were brought out of time and the applicants failed to obtain orders extending the time, and failed to establish need. This was not a case where the applicants established need and only failed because the estate was not large enough to satisfy prior claims and theirs as well.
In these circumstances David and Jane should pay 85% of the appellant’s costs of the proceedings in the Equity Division. The appellant is also entitled to receive out of the estate her costs incurred in defending the proceedings brought by David and Jane on an indemnity basis to the extent that those costs are not recovered from David and Jane.

I therefore propose the following orders:
(1)Appeal allowed.
(2)The respondents David Andrew Rutter and Jane Elizabeth Rutter to pay jointly and severally the appellant’s and the third respondent’s costs of the appeal.
(3)Set aside the costs orders made by McLaughlin AsJ.
(4)In lieu order that David Andrew Rutter and Jane Elizabeth Rutter jointly and severally pay 85% of the appellant’s costs of the proceedings in the Equity Division.
(5)Order that the appellant receive out of the estate her costs incurred in the proceedings in the Equity Division brought by her daughter Flossiy on an indemnity basis.
(6)Order that the appellant receive out of the estate on an indemnity basis her costs incurred in defending the proceedings brought by David Andrew Rutter and Jane Elizabeth Rutter to the extent to which those costs are not recovered from those parties.
(7)The third respondent administrator may retain out of the estate his costs of the appeal to the extent to which they are not recovered from the first and second respondents.
(8)The respondents David Andrew Rutter and Jane Elizabeth Rutter to have certificates under the Suitor’s Fund Act.
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LAST UPDATED:
26 November 2010