Miller v Miller (No 2)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
MILLER v MILLER (No 2)
[2017] SASC 53
Judgment of the Honourable Justice Blue
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - COSTS OF ISSUES
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES
SUCCESSION - ADMINISTRATION OF ESTATE
SUCCESSION - FAMILY PROVISION - PROCEDURE - TIME FOR MAKING APPLICATION
Costs issues on determination of preliminary issue in action for provision out of estate.
On the determination of the preliminary issue, it was held that the first defendant executor of the estate had conferred authority on her solicitors which encompassed authority to accept service of an application under the Act but on the proper construction of Rule 67 of the Supreme Court Civil Rules 2006 the fact that the solicitors did not issue an acknowledgment of acceptance of service prevented there being effective service: Miller v Miller [2017] SASC 37.
The defendants seek an order that the plaintiff pay their costs of the preliminary issue on the basis that costs follow the event. They also seek that their costs of the preliminary issue under the Inheritance (Family Provision) Act 1972 be paid on an indemnity basis because the plaintiff unreasonably failed to accept offers to settle the action which he cannot now better.
The plaintiff seeks an order that the defendants pay his costs of the preliminary issue on an indemnity basis on the ground that he was successful on the issue which occupied almost all of the time at trial and the defendants are guilty of misconduct in, relating to or leading up to litigation.
Held:
1. Although the defendants were successful on the preliminary issue, they were unsuccessful on the substantive issue which took almost all of the time at trial and in the circumstances, by reason of the mixed success, each party should bear their own costs of the preliminary issue ([at 15]).
2. If the defendants are guilty of misconduct in, relating to or leading up to the litigation (which is not decided), it would not relevantly affect the costs of the preliminary issue ([at 22]).
3. The settlement offers made by the defendants do not relevantly affect the costs of the preliminary issue ([at 28]).
4. Order that there be no order as to the costs of the preliminary issue ([at 29]).
Inheritance (Family Provision) Act 1972 (SA); Supreme Court Act 1935 (SA) s 40; Supreme Court Civil Rules 2006 (SA) ss 67, 187, 188F, 188G, 263, referred to.
Calderbank v Calderbank [1975] 3 WLR 586; Oshlack v Richmond River Council (1998) 193 CLR 72, discussed.
Advance Resource Services Pty Ltd v Charlton (2008) 100 SASR 388; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873; Australian Trade Commission v Disktravel [2000] FCA 62; Bostock v Ramsey Urban District Council [1900] 2 QB 616; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107; Copping v ANZ McCaughan Ltd (1995) 63 SASR 523; F King & Co v Gillard & Co [1905] 2 Ch 7; Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd (2014) 120 SASR 532; Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460; Robinson v Australian Association of Social Workers Ltd (2000) 210 LSJS 73, considered.

MILLER v MILLER (No 2)
[2017] SASC 53
Civil
BLUE J:

On 22 March 2017 I delivered reasons for judgment determining a preliminary issue in an action by Colin Miller (Colin) for provision out of the estate of his father, John Miller, for his maintenance, education or advancement in life pursuant to the Inheritance (Family Provision) Act 1972 (SA) (the Inheritance Act). I determined that Colin’s application was not served on the first defendant, Cheryl Miller (Cheryl), the executor of the estate, within six months of the date of grant of probate of the estate of John Miller.[1]
[1] Miller v Miller [2017] SASC 37.
I found that Cheryl’s solicitors, Adelta Legal, had authority to accept service of the application when the summons was delivered to them (issue 1). However, I found that, on the proper construction of rule 67 of the Supreme Court Civil Rules 2006 (SA) (the Rules), the fact that Adelta Legal did not issue an acknowledgement that it accepted service on Cheryl’s behalf under rule 67(1)(c) prevented the delivery of the initiating documents to Adelta Legal being effective service (issue 2).
Colin seeks an order that Cheryl and the second defendant, Robert Miller, pay his costs of the preliminary issue on an indemnity basis. Colin contends that he was successful on issue 1 which occupied nearly all of the time at trial and that Cheryl and Robert are guilty of relevant misconduct in, relating to or leading up to the litigation.
Cheryl and Robert seek an order that Colin pay their costs of the preliminary issue on an indemnity basis. They contend that they were successful on the preliminary issue and costs should follow the event, and in addition that Colin unreasonably failed to accept a filed offer or a Calderbank offer to settle the entire action and he cannot now better that offer when the action is finally determined.
Relevant costs principles
Costs are at the discretion of the Court under section 40 of the Supreme Court Act 1935 (SA). The discretion is unfettered, but must be exercised judicially.[2]
[2] Copping v ANZ McCaughan Ltd (1995) 63 SASR 523 at 527-528 per King CJ (with whom Mohr and Nyland JJ agreed).
As a general rule, costs follow the event.[3] The general rule applies to a wholly successful party.[4] Where the overall successful party has failed on one or more issues, the question arises whether costs should be apportioned according to issues. The question of apportionment involves an assessment of all relevant circumstances, including:
1.the degree to which the issues on which the successful party failed were distinct and severable;
2.the proportion of costs incurred in respect of the issues on which the successful party failed;
3.the strength or merit of the issues on which the successful party failed; and
4.the conduct generally of the successful party.[5]
[3]    Supreme Court Civil Rules 2006 (SA) r 263(1); Copping v ANZ McCaughan Ltd (1995) 63 SASR 523 at 527-528 per King CJ (with whom Mohr and Nyland JJ agreed); Advance Resource Services Pty Ltd v Charlton [2008] SASC 118, (2008) 100 SASR 388 at [10] per Doyle CJ and [52] per Bleby J.
[4]    See the mode of expression of the High Court in Milne v Attorney‑General for the State of Tasmania (1956) 95 CLR 460 at 477 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ.
[5]    See Australian Trade Commission v Disktravel [2000] FCA 62 at [3] per French, Kiefel and Mansfield JJ; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[6] per Finkelstein and Gordon JJ.
Where there is an apportionment of costs according to issues, in some cases the successful party is deprived of costs in respect of issues upon which it was unsuccessful and in other cases the successful party is ordered to pay the costs of its opponent in respect of those issues.[6] Usually a broad axe is wielded and only a single costs order is made.
[6] Robinson v Australian Association of Social Workers Ltd [2000] SASC 239, (2000) 210 LSJS 73 at 81-82 per Martin J (with whom Prior and Williams JJ agreed).
A relevant factor in exercising the discretion as to costs is the extent to which the costs of litigation have been caused or increased by misconduct of a party in, relating to or leading up to the litigation.[7] For this purpose, the conduct of the party that is the subject matter of the action does not itself qualify as misconduct.[8]
[7] Bostock v Ramsey Urban District Council [1900] 2 QB 616 at 622 per A. L. Smith LJ; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874 per Devlin J.
[8] F King & Co v Gillard & Co [1905] 2 Ch 7 at 11 per Vaughan Williams LJ.
If it is concluded that a party has been guilty of relevant misconduct, it is necessary to analyse whether, and if so to what extent, the relevant misconduct caused or contributed to the existence, continuation or extent of the litigation and hence the incurring of costs in the litigation.[9]
[9] Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] SASCFC 103, (2014) 120 SASR 532 at [57]-[59] per Blue J (with whom Sulan and Parker JJ agreed).
In Oshlack v Richmond River Council,[10] McHugh J said:
The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
"No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct."
"Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.[11]
[10] [1998] HCA 11, (1998) 193 CLR 72.
[11] At [69]. (Citations omitted)
A party may be deprived of costs or ordered to pay the opponent’s costs or ordered to pay the opponent’s costs on a solicitor and client or indemnity basis if that party has unreasonably failed to accept an offer to settle the matter which would have produced a better (or equal) result to the first party than the result of the judgment of the court. This may be pursuant to rule 188G of the Rules or under the principle articulated in Calderbank v Calderbank.[12]
[12] [1975] 3 WLR 586.
Mixed success
The vast majority of the time spent at trial and costs incurred by the parties related to issue 1, being the authority of Adelta Legal to accept service of the application on behalf of Cheryl as executor of the estate. All of evidence related to issue 1: issue 2 did not involve any disputed facts but solely the construction of rule 67. The majority of the submissions related to issue 1. My assessment is that only five per cent of the total time spent and costs incurred in respect of the preliminary issue related to issue 2.
In relation to issue 1, the vast majority of the time spent at trial and costs incurred by the parties related to the issue of general or implied authority. While Colin made a submission in closing address that ostensible authority or specific authority might be found, the submission was untenable for the reasons given in my principal judgment and virtually no time was spent by either party in closing address dealing with this submission. No evidence was adduced in relation to ostensible authority and the evidence in relation to specific authority was limited to a handful of questions asked of Cheryl and Melissa Yule. The costs incurred in respect or by reason of Colin’s brief ostensible authority and specific authority contentions are de minimus.
To use a military analogy, Colin won the only major battle to which virtually all of the resources of the parties were devoted and lost three minor skirmishes to which virtually no resources were devoted. However, Cheryl and Robert won the war because they won one of the minor skirmishes.
In the circumstances, prima facie Cheryl and Robert should not be ordered to pay Colin’s costs of the preliminary issue because they were successful on the issue but they should also not recover from Colin their costs of the preliminary issue because they lost issue 1 in respect of which the vast majority of costs were incurred.
Alleged misconduct
Colin contends that Cheryl and Robert are guilty of misconduct in two respects by reason of which they ought to pay Colin’s costs of the preliminary issue and on an indemnity basis.
Colin contends that Cheryl acted improperly or in a manner embarrassing to the administration of justice by distributing the majority of the assets of the estate and that Cheryl and Robert acted improperly by receiving those distributions with inordinate haste in circumstances in which Cheryl had been given notice that Colin intended to pursue a claim under the Inheritance Act. Colin contends that Cheryl and Robert caused Colin to incur costs on the basis that the proceeding had been instituted in time because they did not identify any time limitation point until May 2016 and did not plead any such defence until September 2016. This occurred in circumstances in which Colin would otherwise have acted differently in prosecuting the action if they had not delayed in taking the time limitation point.
Cheryl and Robert contend that Colin has not laid a sufficient evidentiary basis to make these submissions and in any event they do not afford good reason to deprive them of an order that Colin pay their costs.
This action was instituted by Colin in August 2015 and in October 2015 a defence was filed. In September 2016 the matter was listed for trial to commence on 1 November 2016. At a pre-trial directions hearing on 28 October 2016, I suggested to the parties that they consider the hearing and determination of a preliminary point at a preliminary trial on 1 November 2016, with the main trial to be deferred until after the hearing and determination of the preliminary point. The parties agreed to this and on 31 October 2016 I made an order for the preliminary trial. The preliminary trial proceeded on 1 and 2 November 2016.
The conduct by Cheryl and Robert upon which Colin relies may or may not result in due course in an adverse costs order against Cheryl and Robert when the action is finally determined and orders relating to the costs of action are made. The preliminary issue, however, involves a discrete step in the action which incurred its own costs and is separate and distinct from the action as a whole and the costs incurred in the action as a whole. It is loosely analogous to the hearing and determination of an interlocutory issue such as a pleadings dispute, disclosure dispute, security for costs dispute or other issue determined in advance of the main trial in respect of which separate costs orders are often made in which costs follow the event of the interlocutory issue and not the action as a whole.
The conduct by Cheryl and Robert upon which Colin relies was a historical fact. Colin was faced with the choice of proceeding to contest the preliminary issue or conceding it. If Colin had lost outright on the issues relevant to the preliminary issue, there is no reason why he should not have been ordered to pay the costs of Cheryl and Robert on the preliminary issue. Conversely, if he had won outright on the issues relevant to the preliminary issue, there is no reason why Cheryl and Robert should not have been ordered to pay his costs on the preliminary issue.
For these reasons, whatever relevance the alleged misconduct might have on the costs of action at large, it does not affect the costs of the preliminary issue.
Settlement offers
On 6 September 2016 Cheryl and Robert filed a formal offer pursuant to rule 187 offering to consent to the making of an order that provision be made out of the estate in favour of Colin such that he would receive the house property at Kimba and the company shares remaining in the estate and that Cheryl and Robert pay Colin’s costs of the action on a party/party basis.
On 10 October 2016, Cheryl and Robert made a Calderbank offer to Colin offering to settle the action on essentially the same terms as the formal filed offer.
Rule 188F of the Rules does not apply to the filed offer because it was not a monetary offer and hence not a complying offer within the meaning of that rule. Rule 188G provides:
188G—Costs in other cases
(1)This rule applies in cases to which rule 188F does not apply.
(2)When—
(a)a party has made a formal offer;
(b)the offer was not accepted; and
(c)     judgment is granted in respect of the claim the subject of the offer on terms no less favourable to the offeror than the terms of the offer—
the Court is to take those matters into account in determining what order for costs to make.
(3)Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs in accordance with subrule (2), if the Court considers that a party unreasonably rejected a formal offer, the Court may—
(a)     order that the offeree pay the costs of the offeror in respect of the claim the subject of the offer after 14 days after service of the formal offer on an party and party basis or some other basis; or
(b)     order that the offeree bear its own costs in respect of the claim the subject of the offer after 14 days after service of the formal offer; or
(c)make such other order as to costs as it thinks appropriate.
Rule 188G does not apply at this point because no judgment has yet been granted in respect of the claim the subject of the offer and the condition contained in subrule (2)(c) is not satisfied at this point. Nevertheless, the philosophy behind rule 188G and the rationale for the costs principle articulated in Calderbank v Calderbank[13] may potentially have application at this stage.
[13] [1975] 3 WLR 586.
On 28 October 2016 Cheryl and Robert were faced with the choice of proceeding to contest the preliminary issue or conceding it, and more particularly were faced with the choice of conceding that Adelta Legal had general authority from Cheryl to accept service of Colin’s application and relying only upon rule 67. If Cheryl and Robert had lost outright on the issues relevant to the preliminary issue, there is no reason why they should not have been ordered to pay Colin’s costs on the preliminary issue. Conversely, if they had won outright on the issues relevant to the preliminary issue, there is no reason why Colin should not have been ordered to pay their costs on the preliminary issue. The position is loosely analogous to the hearing and determination of an interlocutory issue in respect of which separate costs orders are often made in which costs follow the event of the interlocutory issue, regardless of orders for the costs of action as a whole made as a result of the unreasonable refusal of a settlement offer.
For these reasons, whatever relevance the non-acceptance by Colin of the settlement offers might have on the costs of action at large, it does not affect the costs of the preliminary issue.
Conclusion
I order that there be no order as to the costs of the preliminary issue and that those costs be defined as the costs incurred by the parties in the action after (but not including) 28 October 2016 up to 11 April 2017 other than any costs incurred in respect of an appeal against the judgment on the preliminary issue.

[2017] SASC 53

11 April 2017