Rathswohl v Court (No 2)

[2021] NSWSC 505

Supreme Court

New South Wales

Medium Neutral Citation:

Rathswohl v Court (No 2) [2021] NSWSC 505

Hearing dates:

5 May 2021

Date of orders:

5 May 2021

Decision date:

05 May 2021

Jurisdiction:

Equity

Before:

Rees J

Decision:

Final orders made for provision, costs (including indemnity costs) and interest.

Catchwords:

COSTS – family provision – offer of compromise – plaintiff offers to accept $499,000 – judgment for $500,000 – plaintiff’s costs greater than estimate given in costs affidavit – whether plaintiff’s costs should be capped to preserve net estate for the defendant – no evidence plaintiff’s costs excessive – would defeat purpose of offer of compromise regime to cap fees by reason of defendant’s failure to accept a reasonable offer.

Legislation Cited:

Probate and Administration Act 1898 (NSW)

Succession Act 2006 (NSW) ss 66(1)(l) and 99(1)

Uniform Civil Procedure Rules 2005 (NSW) rr 20.26, 42.5(b), 42.14

Cases Cited:

Baychek v Baychek [2010] NSWSC 987

Detheridge v Detheridge [2019] NSWSC 183

Rathswohl v Court [2021] NSWSC 356

Texts Cited:

Practice Note No. SC Eq 7

Category:

Procedural rulings

Parties:

Robert Rathswohl (Plaintiff)
Yvette Court (Defendant)

Representation:

Counsel:
Mr L Ellison SC (Plaintiff)
Mr S Reuben (Defendant)

Solicitors:
Barwick Boitano Lawyers (Plaintiff)
City Lawyers (Defendant)

File Number(s):

2019/353844

ex tempore Judgment

1. HER HONOUR: On 9 April 2021, I held that provision should be made out of the Estate of the late Josef Rathswohl for his son, the plaintiff: Rathswohl v Court [2021] NSWSC 356. I directed the parties to bring in short minutes of order reflecting my reasons within 14 days, at which time any errors or omissions should also be notified.

2. The defendant has proffered various errors or omissions, some of which are probably better articulated in a Notice of Appeal than in finalising a form of orders to reflect my reasons. Final orders must also reflect an Offer of Compromise served by the plaintiff but not accepted.

Facts

3. The relevant facts are of short compass. These proceedings commenced on 7 November 2019. A judicial settlement conference took place on 27 February 2020. The matter was unable to be resolved. On 11 March 2020, the plaintiff served an Offer of Compromise in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW), offering to accept $499,000 plus costs on an ordinary basis. The offer was not accepted.

4. The plaintiff has, in the result, achieved a more favourable result than he was prepared to accept in March 2020 – albeit by a whisker – and the defendant accepts the plaintiff is entitled to his costs on an indemnity basis from the date of the Offer of Compromise onwards: rule 42.14, Uniform Civil Procedure Rules.

5. In preparation for trial, the plaintiff's solicitor, Frank Boitano, prepared an affidavit in accordance with Practice Note No. SC Eq 7, Family Provision, paragraph 17.1 of which provides:

The plaintiff’s final affidavit as to costs and disbursements should identify the costs and disbursements calculated on the indemnity basis and those costs and disbursements calculated on the ordinary basis and the amount, if any, already paid on account of costs and disbursements. …

6. In his costs affidavit, Mr Boitano set out the plaintiff’s costs and disbursements “incurred to the date of this affidavit” and provided an estimate of further costs and disbursements which would be incurred by the plaintiff to the completion of the hearing. In combination, the plaintiff's costs to the conclusion of a trial on an ordinary basis were $153,210 and, on an indemnity basis, $174,960. Mr Boitano did not estimate any costs which may be incurred after the completion of the hearing, of which there would clearly be some given subsequent correspondence, written submissions and a further hearing today.

7. On 15 April 2021, the plaintiff’s solicitor advised that the plaintiff’s costs and disbursements in the matter are, in fact, $219,000. There was no evidence as to why the plaintiff’s actual costs and disbursements are $44,040 more than what Mr Boitano estimated. Presumably, such information will be supplied if sought and, in any event, will be provided on any costs assessment.

Suggested error

8. In my judgment, I concluded at [176]:

Bearing in mind that the net value of the Estate after payment of the executor’s legal costs is some $1.36 million, I consider that provision ought be made out of the Estate for Robert in an amount of $500,000 plus costs. This will permit Robert to buy suitable accommodation and have a capital sum sufficient to make this purchase secure by paying long overdue credit card and child support debts. In addition, the capital sum will permit him to attend to significant hearing and dental problems and fund spectacles. There may be enough to buy a car. This will leave Yvette with some $700,000 to purchase a one-bedroom apartment in the Sydney area, which is ample on the evidence before the Court bearing in mind that she has a further $100,000 of funds obtained from Josef to supplement the purchase if needed.

9. The defendant suggested that my judgment contained a mathematical error, when I said at [140]:

… I consider that the Concord property, if sold, would fetch between $1.45 million and $1.65 million. I will use the mid-point of $1.55 million. Thus, at the time of hearing, the value of the shares was some $17,600. The defendant’s costs are $203,827.09 on the ordinary basis and $228,178.60 on the indemnity basis. Josef’s Estate net of Yvette’s legal costs is therefore some $1.36 million.

10. This was said not to be a correct statement as the executor is ordinarily entitled to be indemnified out of the Estate for her costs on the indemnity basis. The Estate net of the defendant’s legal costs on an indemnity basis is some $1.34 million. As I understood it, the defendant wished me to reduce the provision made in favour of the plaintiff to ensure that she received $700,000 from the Estate.

11. Whilst each of the figures used in the calculation at [140] necessarily had an element of imprecision – hence the recurring word “some” – it was inherent in the calculations that I did not consider it appropriate in the circumstances which I had reviewed that the defendant would necessarily be entitled to her costs on an indemnity basis (in particular, the defendant had rather ‘helped herself’ to those assets which her father left to her siblings, such that they ended up with nothing: see [72], [75] and [164]). I maintain that view. The result is that the net Estate was some $20,000 more than it may otherwise have been. It may be the matter which the defendant has raised is more appropriate to raise on an appeal: there may well be an error on my part, but it is not mathematical.

Interest

12. The defendant sought that interest not run for four months from the date of these orders, rather than the three months proposed by the plaintiff. It was said this additional time was necessary to enable the defendant to attend to the marketing and sale of the Concord property from which the plaintiff's provision will need to be paid.

13. I am not prepared to grant the additional time in circumstances where my judgment was handed down a month ago. Further, it was apparent at the hearing in October 2020 that the Concord property would have to be sold in any event to pay the defendant’s legal costs and disbursements, which she did not otherwise have the means to pay: at [169]. It must also have been abundantly clear by the conclusion of the hearing – at least to the defendant’s legal representatives – that the defendant’s case had not gone well and substantial provision was likely to be made for the plaintiff. More than six months have since passed. So far as can be told, the defendant has done nothing to begin the sale process.

14. The plaintiff should not be adversely affected by the defendant's delays, if any, in selling the property once final orders have been entered. The plaintiff has extremely modest financial circumstances and is paying rent whilst the defendant – who is in possession of a wage – continues to live rent free in the Concord property, as she has done for several years.

Cost cap?

15. The defendant's counsel submitted that, having regard to the principles explained by Slattery J in Detheridge v Detheridge [2019] NSWSC 183 at [174]-[177], I should cap the plaintiff’s costs in line with the amounts estimated by Mr Boitano as, otherwise, the plaintiff’s actual costs will diminish the amount which the defendant will receive from the Estate.

16. In Detheridge v Detheridge, Slattery J made a costs inclusive family provision order pursuant to sections 66(1)(l) and 99(1) of the Succession Act 2006 (NSW) and the Court’s wide powers in respect of costs: at [172]-[174]. His Honour drew on Ball J’s observations in Baychek v Baychek [2010] NSWSC 987 as to relevant considerations to the exercise of cost capping jurisdiction: at [175]. In Baychek, Ball J noted at [25]: (emphasis added)

In fixing costs as a cap rather than as a substitute for an assessment, it seems to me that the court should take into account the same matters that it takes into account in determining an appropriate cap. That is, what the court must be satisfied of is that the costs are excessive having regard to matters such as the nature of the case, the size of the estate and the amount that the costs applicant has recovered and could reasonably be expected to have recovered at the time proceedings were commenced. If the court is satisfied that the costs are excessive, then it will need to determine what amount to fix. But, as I have said, the nature of that enquiry seems to me to be no different from an enquiry concerning what amount to fix as a cap. …

17. I am not satisfied of any of these matters in respect of the plaintiff’s actual costs. Given that:

1. the plaintiff's costs and disbursements are $219,000, including the fees of leading senior counsel; and

2. the defendant's costs and disbursements were $228,179, having employed junior counsel,

I am not overall troubled by the plaintiff's final expenditure.

18. As to the increase from Mr Boitano’s costs affidavit, whilst solicitors no doubt carefully prepare estimates of future costs, experience suggests that, from time to time, these estimates prove inaccurate by reason of the interstices of litigation. I have no reason to think that there is anything untoward about the increase. It will be for a costs assessor to examine the plaintiff’s costs and disbursements in detail should the parties be unable to agree on an amount. Even where costs have been ordered on an indemnity basis – as they will be for the period in which these particular costs were incurred – a costs assessor can disallow costs and disbursements which “appear to have been unreasonably incurred or appear to be of an unreasonable amount”: rule 42.5(b), Uniform Civil Procedure Rules.

19. The defendant is essentially asking that – because she did not accept a reasonable offer of settlement – the plaintiff’s provision should be reduced to preserve what she will received from the Estate. That would undermine the purpose of the offer of compromise regime, which is to encourage parties to accept reasonable offers of settlement. It would also un-do the effect of this particular Offer of Compromise, which will be to further compensate the plaintiff in respect of his legal expenses in the circumstances which have prevailed. Any consequences which follow the defendant’s failure to accept a reasonable offer of settlement should be visited upon the defendant.

20. Further, as I noted at [141]-[144] of my principal judgment, at the time of the hearing the plaintiff was aged 62, unemployed, living in a caravan park, with significant hearing impairment (and in need of substantial dental care), suffering from depression, with little chance of gaining employment and very limited financial resources. At [3]: (emphasis added)

… provision should be made for Robert to enable him to secure permanent accommodation together with a capital sum sufficient to enable him to attend to significant health issues and the payment of debts which Robert will otherwise be unable to pay and which may imperil the stability which this provision is intended to secure.

21. If I were to cap the plaintiff's legal fees in the manner contended for by the defendant, that of itself will imperil the stability which the provision is intended to secure, as the plaintiff will have to use part of the provision to pay his lawyers. This would undermine what I had endeavoured to achieve by the provision, which I also considered to be consistent with the testator’s wish that all of his children – not just the defendant – have their own home: at [100], [118]-[119], [152]-[153], [171] of my principal judgment.

22. For these reasons I make the orders in the short minutes of order proposed by the plaintiff as follows:

1. In lieu of the provision made for the plaintiff under the Will of the deceased, the plaintiff receive a lump sum of $500,000.

2. Interest as for a legacy under the Probate and Administration Act 1898 (NSW) to run on so much of the lump sum ordered herein as remains unpaid for more than 3 months after the making of the orders herein.

3. The Court notes the consent of Lisa Davies to be the trustee of the lump sum ordered in favour of the plaintiff herein.

4. The trustee is to hold the provision for the plaintiff and only to be paid out if satisfied it is for his advancement, maintenance or benefit.

5. The defendant to pay the costs of the plaintiff on the ordinary basis up to and including 11 March 2020 and on the indemnity basis thereafter.

6. The burden of the provision, such interest as may be payable and the costs order in favour of the plaintiff is to be charged against the estate realty at Concord.

7. Defendant’s costs on the indemnity basis to be paid out of or retained by the estate of the deceased.

8. Liberty to apply on 7 days’ notice in respect of the implementation of Orders 1, 2 and 6.

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Decision last updated: 10 May 2021