Naismith v Fraser (No 2)
[2019] VSC 19
•31 January 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S CI 2017 04587
| In the matter of Part IV of the Administration and Probate Act 1958 - and - In the matter of the will and estate of BRIAN ANDREW HAZEL FRASER (deceased) CATHERINE REBECCA AEDY NAISMITH | Plaintiff |
| v | |
| MARY CHRISTINA FRASER (who is sued as the Executor of the will of BRIAN ANDREW HAZEL FRASER deceased) & ORS (according to the schedule attached) | Defendants |
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JUDGE: | ZAMMIT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 31 January 2019 |
RULING MAY BE CITED AS: | Naismith v Fraser (No 2) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 19 |
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COSTS – Where plaintiff unsuccessful – Where size of estate revised downwards after grant of probate – Where Calderbank offer after mediation and before trial – Offer refused – Whether refusal of offer reasonable – Supreme Court (General Civil Procedure) Rules 2015 r 63.28 – Civil Procedure Act 2010 s 24.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Gillies | Maurice Blackburn |
| For the Defendants | Mr D Sanders | Armstrong Legal |
HER HONOUR:
Introduction
The background circumstances of this proceeding are set out in Naismith v Fraser[1] and need not be repeated here.
[1][2018] VSC 689 [5]–[40] (‘Naismith (No 1)’).
In short compass, the plaintiff applied under Part IV of the Administration and Probate Act 1958 (‘the Act’) for provision out of the estate of her late father, Brian Fraser (‘the deceased’). That application was unsuccessful. On 15 November 2018, I delivered reasons for judgment and indicated that I would accept written submissions on the question of costs, to be filed and served by 30 November 2018. The time for filing and serving those submissions was subsequently extended until 11 December 2018.
The submissions of the parties, as received on 11 December 2018, may be summarised as follows.
Counsel for the plaintiff submitted, with reference to the abolition of s 97(6) and (7) of the Act, that this is an appropriate case for the costs of both parties to be paid out of the estate.[2] In particular, in circumstances in which the defendants originally advertised the net value of the estate as $673,598 and then, shortly after the grant of probate, revised it downwards to $104,421, it was submitted that the plaintiff should not be penalised for commencing proceedings. Further, counsel submitted that the plaintiff is in necessitous circumstances, suffers from mental health issues and is in a distressed state.
[2]The plaintiff referred to the observations of Gaudron J in Singer v Berghouse (1993) 114 ALR 521.
Counsel for the defendants submitted, with reference to recent case law governing the exercise of the discretion,[3] that the plaintiff has been wholly unsuccessful and that, as such, the starting point is that costs should be ordered on a standard basis. However, pursuant to r 63.28 of the Supreme Court (General Civil Procedure) Rule 2015 (‘the Rules’), the Court may order indemnity costs where the proceeding exhibits special circumstances, such as where an offer of compromise has been rejected, and that rejection was unreasonable in all the circumstances. Counsel for the defendants submitted that a detailed and solid Calderbank offer of $25,000 inclusive of costs was made by the defendants on 30 May 2018. The window for accepting that offer closed on 14 June 2018. Accordingly, counsel submitted, the plaintiff should pay the defendants’ costs on a standard basis up to and including 14 June 2018 and on an indemnity basis thereafter to be taxed in default of agreement.[4]
[3]See, eg, Re McKenzie (No 2) [2018] VSC 238 [18]–[22].
[4]The defendants’ written submissions foreshadowed a potential claim against the plaintiff’s solicitors. That claim was, however, abandoned under cover of an email dated 8 January 2019. It is therefore unnecessary to address this aspect of the dispute.
For the reasons that follow, I agree with the defendants that the plaintiff should pay the defendants’ costs of and incidental to the proceeding, including any reserved costs, on a standard basis up to and including 14 June 2018 and on an indemnity basis thereafter to be taxed in default of agreement.
Background to costs dispute
It is necessary to say something about the background to the costs dispute and, in particular, the Calderbank offers made by the defendants.[5]
[5]See generally Calderbank v Calderbank [1976] Fam 93.
On 28 February 2018 the defendants’ solicitors advised the plaintiff’s solicitors that they had been engaged. They requested a two month extension of time (of the orders made prior to their engagement) so as to obtain the file from the defendants’ former solicitors and to obtain advice as to whether the contract of sale dated 28 June 2013 (‘the contract’) and/or the deed of family arrangement dated 31 October 2013 (‘the deed’) were binding. This was necessary as these instruments, if binding, would significantly reduce the size of the estate.[6]
[6]See, as to the significance of the contract and the deed, Naismith (No 1) VSC 689 [22]–[32].
On 12 April 2018 the defendants’ solicitors wrote to the plaintiff’s solicitors advising that the contract and the deed were enforceable and that, as a result, the size of the estate was significantly reduced. They further advised that they would prepare an updated inventory of assets and liabilities disclosing the true net value of the estate for the purposes of any successful Part IV claim.
On 4 May 2018 the defendants’ solicitors sent the plaintiff’s solicitors, under cover of email, a signed position statement and an unsworn affidavit as to the financial position of the estate. The signed position statement included an explanation as to why the contract and/or deed was binding on the estate and what effect this would have on the net value of the estate.
On 10 May 2018 a judicial mediation was held but the matter did not resolve. The defendants’ affidavit of financial position was sworn and served on the plaintiff. It is incontrovertible that, at the very least, from this time onwards the plaintiff was on notice that the net value of the estate was $104,421 rather than $673,598.
On 30 May 2018 the defendants’ solicitors sent a detailed Calderbank letter to the plaintiff’s solicitors.[7] The letter noted, inter alia, the modest value of the estate, the plaintiff’s poor prospects of success and the need to preserve something for the deceased’s widow as the person with the strongest moral and legal claim on the estate. It then stated that the defendants were willing to settle the claim for the sum of $25,000 inclusive of the plaintiff’s legal costs. The letter stated that as the amount offered was approximately one quarter of the net value of the estate, it would be unreasonable at this stage of proceedings for the plaintiff to refuse. Further, the letter indicated that if the plaintiff did refuse the offer, the defendants would press for indemnity costs from the date of its expiration, namely 14 June 2018 (being 14 days from the date of the letter).
[7]The defendants solicitors sent a further Calderbank letter on 13 June 2018 but it is not necessary to discuss the contents of that letter.
I note for completeness that on 22 June 2018, in open court, the defendants’ counsel reiterated their pre-existing offer to settle the matter for $25,000 all in. The terms of that offer are recorded in Naismith (No 1) and need not be repeated here.[8]
[8][2018] VSC 689 [45].
As at 21 December 2018, litigation costs totalled $70,874.62 for the plaintiff and $108,442.71 for the defendants.
Applicable legislation and principles
The principles to be applied in making a costs order in this jurisdiction were recently summarised by McMillan J in Re McKenzie (No 2).[9] I adopt those principles as restated below:
The usual order as to costs is that a successful party in litigation is entitled to an award of costs in its favour and the unsuccessful party bears the liability for the costs of the unsuccessful litigation.
…
The prima facie position in respect of costs in litigation is for standard costs to be ordered by the Court.
…
A special costs order will only be made where the proceeding exhibits a special or unusual feature or special circumstances … The rejection of an offer is a matter to which the Court should have regard when considering whether to order indemnity costs.[10]
[9][2018] VSC 238.
[10]Ibid [18]–[22].
Whether the rejection of a Calderbank offer should give rise to an order for indemnity costs will depend on whether the rejection was unreasonable in all the circumstances. A non-exhaustive list of the factors ordinarily to be considered in the exercise of the discretion was set out by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[11] Those factors are as follows:
[11](2005) 13 VR 435 (‘Hazeldene’s’).
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.[12]
[12]Ibid 442 [25].
Of course, the fact that a plaintiff has recovered judgment in an amount less than that offered by a defendant does not automatically warrant the making of an order for indemnity costs, whether from the date of the refusal of the offer or earlier. The serving of a Calderbank letter is merely one of the factors the Court will have regard to; its weight, and what should flow from it, will depend on the surrounding circumstances of each case.[13]
[13]Ibid 442.
It should also be remembered that civil proceedings are governed by the Civil Procedure Act 2010 (‘the CPA’) and, in particular, by the overarching obligations set out therein. It is well settled that the obligations imposed by the CPA apply equally to litigants and legal practitioners. Relevantly, pursuant to s 24, parties to a proceeding must ensure that costs are reasonable and proportionate not only to the complexity of the issues in dispute but also the amount in dispute.[14] The amount in dispute in the instant proceeding, while not trivial, was small when compared with other cases in this jurisdiction. Self-evidently, in order to know whether continuing the proceeding was consistent with their overarching obligations, the parties needed to determine with some finality the size of the estate.
[14]See generally Yara Australia Pty Ltd v Oswal (2013) 41 VR 302, 307 [13].
Analysis
It was not in dispute in this proceeding that the deceased owed the plaintiff at moral duty. What was disputed was the adequacy of the provision made for the plaintiff. As McMillan J observed in Re McKenzie (No 2):
It is incumbent on a personal representative to assess the evidence in an impartial and objective manner, act properly and reasonably in conducting the litigation and, if appropriate, compromise the proceeding. Parties to family provision litigation are encouraged to make open offers as early as practicable. This is consistent with the fiduciary duty of a personal representative conducting litigation affecting an estate, whereas beneficiaries do not have such a duty. The family provision legislation imposes a duty on testators to make adequate and proper provision for eligible persons and that duty must not be ignored by personal representatives.[15]
[15][2018] VSC 238 [29] (citations omitted).
As I have said, when the plaintiff commenced proceedings on 14 November 2017, the estate was valued at $673,598. On 4 May 2018 the defendants sent by email a position statement and an unsworn affidavit as to the financial position of the estate. The position statement explained that the deed was binding and, as a result, that the net value of the estate was significantly reduced.[16] The affidavit of financial position was subsequently sworn and served on the plaintiff on 10 May 2018. From then on, at a minimum, the plaintiff was on notice that the net value of the estate was $104,421.
[16]The defendants’ position statement also raised the issues of: the plaintiff’s early inheritance; Mary Fraser’s competing claim and financial position; the deceased’s will and reasons for making the bequests in it; the deceased’s extensive succession planning and advice he received from his legal representatives to ensure his estate passed in accordance with his wishes.
When the plaintiff issued proceedings she already had the deed in her possession and, indeed, had exhibited it to her own affidavit. She deposed that it had been entered into some years ago and had been partly performed. From the outset, but especially from 10 May 2018, the plaintiff, who was at all times legally represented, was on notice that there was a real issue as to the size of the estate. There is force in the defendants’ submission that the plaintiff should have realised, by 10 May 2018, that any further litigation would simply exhaust what was already a very meagre estate.
It cannot reasonably be doubted that, by 4 May 2018, the plaintiff knew that the deceased, well aware of his duty to provide for her, considered that he had adequately done so during his lifetime by selling her the property referred to as Kohnes farm at a price well below market value.[17] What followed, as set out above, was the defendants’ detailed Calderbank letter of 30 May 2018 offering to settle the matter for $25,000 inclusive of costs. I note that that offer represented approximately one quarter of the net value of the estate. That letter described why the defendants believed the plaintiff claim had poor prospects of success and would very likely fail in her claim for further provision.
[17]See Naismith (No 1) VSC 689 [15]–[18].
On 16 June 2018 the defendants’ solicitors reiterated, by way of an email with attached letter, the basis for claiming that the deed was binding. I note that the submissions made and evidence referred to in that and earlier correspondence was virtually the same as that adduced by the defendants at trial. By contrast, prior to trial, there was no rebuttal or evidence put forward by the plaintiff’s solicitors as to the crucial question of the size of the estate.
The trial commenced on 18 June 2018. On 19 June 2018, the plaintiff sought to add a new cause of action as to an equitable estoppel, requiring an adjournment and the filing and serving of written submissions. On 22 June 2018, I ruled against the plaintiff on this point, after which point the trial recommenced. On the same day, namely 22 June 2018, the defendants reiterated in open court their offer of $25,000 all in, which was immediately rejected by the plaintiff. All of this takes on additional colour in light of the fact that the plaintiff was at trial unable to put forward evidence to substantiate her key assertions.[18]
[18]Naismith (No 1) [2018] VSC 689 [92]–[93].
The plaintiff’s refusal of the 22 June 2018 open offer was telling. While I accept that the question as to the size of the estate was complex, the plaintiff was at all times legally represented and, as such, careful analysis of the defendants’ argument and evidence before trial must have given rise to serious concerns. To my mind, given all the material in the plaintiff’s hands by 14 June 2018, the refusal of the 30 May 2018 Calderbank offer was unreasonable.
The plaintiff’s dogged pursuit of her claim is demonstrated by the fact that, apart from rejecting numerous offers of settlement, at no stage did she make a reasonable counteroffer or put forward any sound arguments as to why this Court should not accept the defendants’ submissions as to the size of the estate, the early inheritance, the deceased’s testamentary intentions, or the moral paramountcy of Mary’s competing claim and her position of financial reliance.
It may not have been clear to the plaintiff that the net value of the estate was $104,421 in November 2017. However, it was unquestionably clear that the estate was not worth $673,598 by 14 June 2018, but very likely a great deal less.
The rejection of the 30 May 2018 Calderbank offer was unreasonable having regard not only to the defendants’ position statement but also to the imminent commencement of the trial. The defendants had a strong defence at all times and their offers were realistic and sensible in light of their obligations under the CPA. The offers were clearly expressed and foreshadowed that an application for indemnity costs would follow in the event of rejection. The same cannot be said for the plaintiff’s refusals. Her stubborn decision to press on with the proceeding caused a substantial increase in legal fees.
Costs are not awarded to punish an unsuccessful litigant; they are awarded to indemnify a successful litigant against reasonable costs incurred in the course of seeing the litigation through to completion.[19] The result for the defendants at trial was a judgment significantly more favourable than the offers they made to the plaintiff. The plaintiff has unnecessarily prolonged the litigation.
[19]Latoudis v Casey (1990) 170 CLR 534, 543 (Mason CJ).
Orders
The Court will make the following order:
The plaintiff pay the defendants’ costs of and incidental to the proceedings, including any reserved costs, on a standard basis up to 14 June 2018 and on an indemnity basis thereafter to be taxed in default of agreement.
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SCHEDULE OF PARTIES
| S CI 2017 04587 | |
| BETWEEN: | |
| CATHERINE REBECCA AEDY NAISMITH | Plaintiff |
| - and - | |
| MARY CHRISTINA FRASER (who is sued as the Executor of the Will of BRIAN ANDREW HAZEL FRASER, deceased) | First Defendant |
| ANDREW MCKAY COLEMAN FRASER (who is sued as the Executor of the Will of BRIAN ANDREW HAZEL FRASER, deceased) | Second Defendant |
| SARAH ELIZABETH JANE COLQUHOUN (who is sued as the Executor of the Will of BRIAN ANDREW HAZEL FRASER, deceased) | Third Defendant |
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