Purnell v Tindale (No. 2)

[2020] NSWSC 1047

Supreme Court

New South Wales

Medium Neutral Citation:

Purnell v Tindale (No. 2) [2020] NSWSC 1047

Hearing dates:

On the papers

Date of orders:

11 August 2020

Decision date:

11 August 2020

Jurisdiction:

Equity - Family Provision List

Before:

Henry J

Decision:

See [44].

Catchwords:

COSTS – where family provision claim unsuccessful –– whether overall justice of case warrants departure from the usual rule that costs follow the event – where plaintiff has limited financial reserves – where plaintiff found not to be an eligible person and claims not borderline – where undistributed estate available to pay some of the defendant’s costs – unsuccessful plaintiff ordered to pay defendant’s costs not otherwise paid out of the deceased’s undistributed estate

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Succession Act 2006 (NSW), s 99(1)

Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 36.16

Cases Cited:

Allplastics Engineering Pty Ltd v Dornock Ltd [2006] NSWCA 33

Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392

Daniels v Hall (No 2) [2014] WASC 272

Jvancich v Kennedy (No 2) [2004] NSWCA 397

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

McCusker v Rutter [2010] NSWCA 318

McDougall v Rogers; Estate of James Rogers [2006] NSWSC 484

Moussa v Moussa [2006] NSWSC 509

Purnell v Tindale [2020] NSWSC 746

Re Sherborne Estate (No 2) (2005) 65 NSWLR 268; [2005] NSWSC 1003

Singer v Berghouse (1993) 67 ALJR 708; [1993] HCA 35

Texts Cited:

Nil

Category:

Costs

Parties:

John Inglis Purnell (Plaintiff)
Graham Neville Tindale (Defendant)

Representation:

Counsel:
K Morrissey (Plaintiff)
R Tregenza (Defendant)

Solicitors:
Turner Freeman Lawyers (Plaintiff)
Lander & Daniel (Defendant)

File Number(s):

2018/215115

Publication restriction:

Nil

Judgment

1. On 17 June 2020, I gave judgment on the plaintiff’s application for provision from the estate of his late aunt: Purnell v Tindale [2020] NSWSC 746 (judgment). These reasons deal with the issue of costs and assume familiarity with the judgment.

2. In the judgment, I dismissed the plaintiff’s application for provision and proposed making no order as to costs. I deferred entry of the costs order for 14 days to enable the parties to consider the judgment and whether they wished to seek an alternative order as to costs.

3. By notice of motion filed on 26 June 2020, the defendant has applied for alternative costs orders. He seeks an order that the plaintiff pay his costs of the proceedings as agreed or assessed on an ordinary basis and an order that his costs which are otherwise not ordered to be paid and are paid by the defendant be paid out of that part of the estate which remains undistributed on an indemnity basis.

4. The parties have provided written submissions in accordance with an agreed timetable and are content for me to determine the issue on the papers. The defendant also relies on his affidavit sworn 26 June 2020.

Background

5. Under a will dated 15 December 2000, the deceased left her major asset, namely a house in Chelmsford Ave Lindfield, to the plaintiff and the defendant equally as tenants in common subject to a right in favour of the defendant to live there for as long as he wishes or until his death. Probate was granted to the defendant as executor and the deceased’s estate was distributed according to her will by August 2017.

6. The plaintiff’s claim for provision was, in effect, to gain access to his legacy under the deceased’s will by way of a lump sum payment of half of the net proceeds of sale of the Chelmsford Ave house to meet his needs.  The plaintiff is a disability pensioner, resides in public housing and suffers from a range of health issues. Other than some personal and household effects, his only asset was the remainder of a significant legacy from his mother’s estate which, at the date of the hearing, was valued at $774,028.64 after payment of the plaintiff’s legal costs of $74,234.40. Because of the distribution from his mother’s estate, the plaintiff will lose the benefit of a rental subsidy of around $1,300 per month.

7. The plaintiff’s application for provision was brought on 12 July 2018, 11 months out of time. I granted the plaintiff an extension of time to bring the proceedings as I was satisfied that he had sufficient cause for not making the application within time, no substantial prejudice to the defendant had been shown to arise from the delay and the plaintiff’s application was not bound to fail.

8. The next issue was whether the plaintiff, as the deceased’s nephew, was an eligible person to apply for a provision order: Succession Act 2006 (NSW), s 57(1)(e). I concluded that the plaintiff was not an eligible person as he was not, at any time, wholly or partially dependent on the deceased or a member of the household of which she was a member. On this basis, the plaintiff’s application for provision was dismissed.

9. Had the plaintiff been an eligible person, I would have been satisfied that there were factors warranting his application but would have declined to make an order for his further provision by way of a notional estate order. I accepted that the plaintiff had needs but was not persuaded that more should have been provided for him or that a notional estate order should be made having regard to the substantial sum remaining from his mother’s legacy, the nature and extent of the deceased’s relationship with the defendant compared to that of the plaintiff, the weight to be given to the deceased’s testamentary intentions and the defendant’s reasonable expectations in respect of the Chelmsford Ave house.

10. The defendant’s legal costs in these proceedings are estimated to be $88,000 on an indemnity basis, and $76,000 on an ordinary basis, of which he has paid $16,080.72 personally: judgment at [116].

11. According to the defendant’s affidavit filed in support of his notice of motion, the deceased’s estate expects to receive receivership dividend distributions from L M First Mortgage Income Fund totalling $19,500 (undistributed funds), rather than a distribution of $2,250 that was disclosed in the probate as an asset of the estate. A distribution in the amount of $9,750 was received in March 2020 and the balance is expected to be received in 2021.

Consideration

12. The Court has a broad discretion to award costs. As a general rule, costs follow the event, unless it appears to the Court that some other costs order should be made: Civil Procedure Act 2005 (NSW), s 98; Uniform Civil Procedure Rules2005 (NSW), r 42.1.

13. In family provision cases, it may be appropriate to deviate from the ordinary rule that costs follow the event and make no order that an unsuccessful plaintiff pay the defendant’s costs. Whether a Court will make such an order will depend on the overall justice of the case: Singer v Berghouse (1993) 67 ALJR 708; [1993] HCA 35 at 709; McCusker v Rutter [2010] NSWCA 318 at [28]-[34] (McCusker v Rutter).

14. The defendant contends that this is not an appropriate case in which the Court should exercise its discretion and make no order as to costs against the plaintiff. He submits that the overall justice of the case warrants an order being made that the plaintiff pay the defendant’s costs as the plaintiff’s claims to be an eligible person and entitled to further provision were risky and difficult.

15. The defendant also asserts that the plaintiff has assets available to him from the remainder of his mother’s legacy which mean that the burden on the plaintiff from having to pay the defendant’s costs would not be financially crippling to him.

16. The defendant also submits that the finding that the plaintiff was not an eligible person is of relevance, as is the detrimental impact on the defendant’s finances if no costs order in his favour is made.

17. In written submissions, the defendant referred to the approach taken in other cases as illustrative that a finding of eligibility is a relevant consideration in the exercise of the Court’s discretion and that financial considerations alone are not sufficient to warrant departure from the usual order that costs follow the event.

18. In Re Sherborne Estate (No 2) (2005) 65 NSWLR 268; [2005] NSWSC 1003 (Re Sherborne Estate), Palmer J declined to order an unsuccessful plaintiff (who was found not to be an eligible person) to pay costs as her financial position was very modest, the consequences of ordering her to pay costs could have crippled her future prospects in life and it was not unreasonable to consider that her claim for provision had some prospects of success: Re Sherborne Estate at [64]-[66].

19. In Moussa v Moussa [2006] NSWSC 509 (Moussa), Barrett J (as His Honour then was) acknowledged (at [5]) that in the absence of some good reason to the contrary, there should be an order that the costs of the successful defendant be paid by the unsuccessful plaintiff. His Honour declined to award costs against the unsuccessful plaintiffs, who were eligible persons, as the case was of a “borderline” nature and its ultimate lack of success was, in large measure, because there was not enough money to go around: Moussa at [9] and [10].

20. The Court of Appeal considered the issue of costs in family provision cases in Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 (Chapple v Wilcox). At [138], Barrett JA noted and endorsed the comments of E M Heenan J in Daniels v Hall (No 2) [2014] WASC 272 at [32] that in more modern times, particularly with principles of modern case management, the tendency has been to move away from the position that a costs order should not be made against an unsuccessful plaintiff if it would have a detrimental effect on that plaintiff's financial position, in favour of the more general principle of costs following the event but with attendant liberality and discrimination before adopting such a position in any particular case.

21. Barrett JA went on to say, at [141], that:

Generally speaking, of course, a litigant's financial position is irrelevant when it comes to the exercise of the costs discretion, particularly where that litigant is a plaintiff. Having subjected the defendant to court proceedings and lost, a plaintiff without means will generally not be able to resist a costs order just because he or she cannot pay. That general principle may be subject to some relaxation in family provision cases by application of "liberality and discrimination" - but only, I think, where the claim, although ultimately unsuccessful, had merit and involved a genuine question whether the scheme of testamentary benefaction in fact applying was, in the particular circumstances, one reflecting community standards.

22. Barrett JA, with whom Gleeson JA agreed and with whose reasons Basten JA generally concurred, concluded that there was very little merit to the plaintiff’s unsuccessful claim and there was no factor that warranted departure from the usual rule that costs follow the event even though the unsuccessful plaintiff was an eligible person, in an unfavourable financial position and the circumstance that, if an order for costs against him was made, he “will instantly become impecunious”: Chapple v Wilcox at [140] and [142].

23. Having considered the submissions of the parties and the authorities to which I was referred, particularly the reasoning of Barrett JA in Chapple v Wilcox, I am persuaded by the defendant’s submission that it is not appropriate to make no order as to costs in this case.

24. The starting position is that costs should follow the event. The Court must consider whether there is any demonstrated reason for departure from that position: McCusker v Rutter at [47]; Chapple v Wilcox at [140].

25. The plaintiff’s submission that the overall justice of the case requires not applying the usual rule that costs follow the event is based on the plaintiff’s unfavourable financial position, as the only source of payment of the defendant’s costs is the plaintiff’s savings. The plaintiff contends that, were he to be ordered to pay the defendant’s costs, the balance of his savings from his mother’s inheritance would be reduced by around 10%. With net bank interest rates at almost nil and likely to remain that way indefinitely, the plaintiff submits that his savings will be eroded before and if, he can enjoy the benefits of his legacy under the deceased’s will to his share of the Chelmsford Ave house.

26. According to his written submissions, the value of the plaintiff’s savings (as constituted by the balance of his mother’s inheritance) is $686,770.64, an amount that does not reflect the financial position of the plaintiff at the hearing (see [6] above). Presumably, the reduction in the amount of the plaintiff’s savings is due to the payment of expenses, such as the balance of the plaintiff’s legal costs in the amount of $57,900 (see judgment at [115]), although it is not explained or supported by any evidence filed by the plaintiff on this application. That said, it seems a reasonable proxy on which to assess the submissions of the parties.

27. I accept that the plaintiff has limited financial reserves and is not in a position to readily meet an order to pay the defendant’s costs without depletion of his savings. But after payment of the defendant’s legal costs on an ordinary basis, the plaintiff will retain in excess of $610,000, a significant sum of money. In that context, the depletion of the plaintiff’s savings from having to pay the defendant’s costs would not, in my view, “cripple [the plaintiff’s] future prospects in life” or leave him in a “truly necessitous, if not desperate, position”: cf Re Sherborne Estate at 280; McDougall v Rogers; Estate of James Rogers [2006] NSWSC 484 at [59].

28. I do not consider that ordering the plaintiff to pay the defendant’s legal costs would have resulted in one of the bases of his claim for provision being undermined in a significant way, as the plaintiff’s submissions suggest. A reduction in the plaintiff’s cash assets by the amount of the defendant’s costs would not have placed the plaintiff in a significantly different financial position at the hearing such that his prospects of success would have been greatly improved. Relevantly, and while accepting the plaintiff had needs, his claim for provision was rejected for reasons which included significant non-financial factors such as the defendant’s competing claim being founded on a longstanding relationship with the deceased and contributions to her welfare, financially and in other ways, particularly during the deceased’s declining years.

29. In that context, requiring the plaintiff to pay the defendant’s costs would not result in the plaintiff “instantly becoming impecunious” and being able to make a fresh application for provision, such that it would be counter-productive to make an order as to costs against him: McCusker v Rutter at [34].

30. I also do not consider to be persuasive the plaintiff’s submission that costs should not be awarded against the plaintiff as his savings will be steadily eroded before and if he can enjoy the benefits of his legacy from the deceased’s estate. To a large extent, it is up to the plaintiff how he spends and/or invests his remaining savings and how fast they will be eroded. The Court is not in a position to speculate when they would be depleted or if ordering him to pay the defendant’s costs would likely result in them being eroded before the plaintiff is able to enjoy the benefaction under the deceased’s will. In any event, implicit in the judgment (as it was in the terms of the deceased’s will) was a recognition that the plaintiff’s enjoyment of his legacy under the deceased’s will is to be deferred to the defendant’s right to live in the Chelmsford Ave house for as long as he wishes, which might be for some years.

31. As to the strength of the plaintiff’s case, I did not consider his claim was bound to fail, frivolous and without any prospects of success: judgment at [149] and [337].

32. That said, I would not describe the plaintiff’s claim to be an eligible person to be of a “borderline” nature. He did not establish either of the criteria required for the Court to conclude that he was an eligible person. I accept the defendant’s submission that there were real risks in the plaintiff establishing eligibility. The risks and challenges with the plaintiff’s claim to be an eligible person were likely to have been apparent from the outset given the claim was based principally on the plaintiff’s testimonial evidence relating to events from many years ago and the evidence indicated that the plaintiff had difficulties with his memory, which he also readily acknowledged during cross-examination. He also did not lead evidence from any corroborating witnesses and advanced very limited documentary evidence in support: judgment at [36] and [44].

33. Relevantly, the conclusion that the plaintiff was not an eligible person did not depend on his financial position, whether or not he is ordered to pay costs.

34. As the judgment notes, the question of whether there were factors warranting the application, in respect of which the plaintiff had some success, was also very finely balanced: judgment at [254]-[263].

35. The submissions from both parties recognise that the purpose of an order for costs is to compensate the person in whose favour it is made and not to penalise or punish the other against whom it is made: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 567 (McHugh J); Allplastics Engineering Pty Ltd v Dornock Ltd [2006] NSWCA 33 at [34].

36. And as Giles JA said in Jvancich v Kennedy (No 2) [2004] NSWCA 397 at [11], the overall justice of the case is not remote from costs following the event.

37. The defendant had no choice but to defend the plaintiff’s claim for provision in order to avoid the sale and remain living in the Chelmsford Ave house, which had been the defendant’s home for over 50 years. Other than the $19,500 in undistributed funds, there is nothing left in the deceased’s estate from which the defendant, as executor, can expect to recover his legal costs. The evidence at the hearing also indicated that the defendant’s cash reserves were similar in value to that of the plaintiff and were the primary source of the defendant’s income: judgment at [111]-[112].

38. In all of these circumstances, and subject to what follows in respect of the undistributed funds, I am satisfied that the overall justice of this case requires that an order be made for the plaintiff to pay the defendant’s costs of the proceedings.

39. Under the terms of the deceased’s will, the residue of the deceased’s estate, which would include the undistributed funds, goes to four named charities: cl 6. Relevantly, the four named charities have already received distributions from the deceased’s estate based on what was calculated to be the residue as at August 2017, after payment of legal fees, funeral expenses and other costs relating to the estate: judgment at [31].

40. The defendant seeks an order that would enable him to access the undistributed funds as partial reimbursement of his legal costs but has no objection to them being applied to his legal costs so as to reduce the plaintiff’s liability for them if his application for costs against the plaintiff is successful: Affidavit, Graham Tindale, 26 June 2020 at [5]. The plaintiff does not oppose such an order if the undistributed funds are credited to the defendant’s costs of $76,000 on the ordinary basis.

41. I am satisfied that an order should be made that enables the undistributed funds to be applied to the defendant’s legal costs. The Court has power to make such an order (Succession Act 2006 (NSW), s 99(1)) and the deceased’s wish that part of her estate goes to the named charities has already been fulfilled.

42. As to how the undistributed funds should be applied, in order for them reduce the plaintiff’s liability, I accept that they should be credited to the defendant’s legal costs on an ordinary basis, as contended by the plaintiff, with the plaintiff being liable to pay the balance of the defendant’s costs as assessed or agreed on an ordinary basis. In other words, the defendant’s costs on an ordinary basis which are not otherwise paid out of the undistributed funds are to be paid by the plaintiff.

22. As to the costs of this application, as the defendant’s motion was filed as part of the proceedings, the costs of the motion will also be subject to the costs orders I make.

23. For these reasons, I make the following orders:

1. Pursuant to r 36.16 of the Uniform Civil Procedure Rules2005 (NSW), Order 3 of the orders made by Henry J on 17 June 2020 be set aside and the following order be made in substitution:

1. The defendant’s costs of the proceedings as agreed or assessed on the ordinary basis are to be paid out of that part of the estate of the late Agnes Broadfoot which remains undistributed and otherwise are to be paid by the plaintiff.

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Decision last updated: 11 August 2020