Re Moran (No 2)
[2023] VSC 83
•1 March 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2022 01152
| IN THE MATTER of the estate of KEVIN CHARLES MORAN, deceased | |
| and | |
| IN THE MATTER of an application pursuant to Ord 54 of the Supreme Court (General Civil Procedure) Rules 2015 | |
| and | |
| IN THE MATTER of s 76 of the Guardianship and Administration Act 2019 | |
| BETWEEN | |
| KYLIE LOUISE MAMONE and AARON GRAY MORAN | Plaintiffs |
| and | |
| PAUL RONALD MORAN (who is sued as executor by substitution of the estate of KEVIN CHARLES MORAN, deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 1 March 2023 |
CASE MAY BE CITED AS: | Re Moran (No 2) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 83 |
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COSTS – Where plaintiffs’ application concerning construction of will dismissed – Where plaintiffs did not accept defendant’s Calderbank offer – Whether plaintiffs’ rejection of offer was unreasonable – Where offer expressed to be conditional on consent of third person – Where no evidence of consent of third person conveyed to plaintiffs – Where defendant seeks indemnity costs – Where plaintiffs seek costs from the estate – Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; Apostolidis v Kalenik (No 2) (2011) 35 VR 563.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S P Newton | Equity Legal Australia |
| For the Defendant | Mr N J Baum | T J Mulvany & Co |
HER HONOUR:
Introduction
This proceeding concerned a devise of real estate in the will of Kevin Charles Moran (‘the deceased’) dated 24 September 1976 (‘the will’). The plaintiffs are the deceased’s two grandchildren by his son, Geoffrey Moran (‘Geoffrey’). The defendant is the deceased’s nephew by his brother, Ronald Moran (‘Ronald’). The deceased died on 22 July 2020. He was predeceased by Geoffrey, and Ronald subsequently died in November 2021. Both Geoffrey and Ronald were beneficiaries under the will.
By originating motion filed 5 April 2022, the plaintiffs sought declarations that they were entitled to receive so much of the deceased’s estate as represented the deceased’s half-share of the proceeds of sale of a property in Thorpe Street, Newport (‘the Thorpe Street property’).
The Court delivered its reasons for judgment on 14 December 2022 (‘the reasons’),[1] dismissing the plaintiffs’ claim. Orders were made for written submissions on costs to be filed by 25 January 2022, if the parties could not otherwise agree, with costs to be determined on the papers.
[1]Re Moran [2022] VSC 776 (‘reasons’).
Relevant background
On 28 June 2021, the defendant’s solicitors made contact by email with the plaintiffs’ mother, Cheryl Moran (‘Cheryl’), regarding the plaintiffs’ possible entitlement under the will. That email relevantly provided as follows:
[The deceased] died in July 2020. My firm is assisting the executor [Ronald] in relation to the administration of the estate.
…
It is possible that [Geoffrey’s] children may have an entitlement, pursuant to the Will of [the deceased]. It is quite a complicated situation.
Further correspondence then passed between the parties. In a subsequent email dated 29 September 2021 from the defendant’s solicitors to Cheryl, it was stated:
I still have not been able to receive instructions from [Ronald]. …
My instructions were to make inquiries in relation to [Geoffrey] and any children that he may have.
As an Officer of the Court, I consider that it is appropriate that your children are to receive a copy of the Will.
Please see attached.
Probate had (sic) been granted. My instructions are that the funds are not to be distributed until we know who should get what.
The Will is open to interpretation given the uncertainties of what constitutes ‘real estate’.
…
I cannot give any ‘advice’ because this firm represents the executor of the estate, who also happens to be a beneficiary.
…
That said, I do recommend that your children seek legal advice.
Between November and December 2021, solicitors for the plaintiffs and defendant exchanged further correspondence concerning, inter alia, the administration of the deceased’s estate and the correct distribution of its residuary funds. The plaintiffs’ claims concerning the application of a statutory exception to the common law principle of ademption to the gift of the deceased’s interest in the Thorpe Street property made to Geoffrey under the will (and thereby to the plaintiffs)[2] were first raised in a letter to the defendant’s solicitors dated 6 December 2021.
[2]Reasons, [8]–[13].
Those claims were rejected by the defendant’s solicitors by way of reply letter dated 18 January 2022, which relevantly stated:
[W]e are of the view that the exception to the ademption rule does not necessarily apply and we respectfully do not agree with assertions that you have made on behalf of your clients.
In the foreseeable future, our client anticipates obtaining a Grant of Probate for the estate of [Ronald] and will therefore have responsibility in respect of the Estate of [the deceased]. In discharging his anticipated responsibility as executor for the Estate of [the deceased], he must ensure that the law is applied correctly. It would therefore be appropriate, in circumstances where reasonable minds can differ in respect of the application of the law, to seek a ruling pursuant to Order 54.02 of the [Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’)].
Please seek instructions from your clients as to whether they seek to be added as a party to the anticipated Supreme Court proceedings …
The solicitors for the plaintiffs responded by letter dated 24 February 2022,[3] advising that they had obtained advice from counsel to the effect that, inter alia, ‘no ademption has occurred’ and requesting that the defendant provide a response to this and other propositions. The letter further stated:
It is also unacceptable, that having obtained counsel’s advice, your client has now advised of his intention to proceed with an application to the Supreme Court of Victoria which will result in substantial legal fees to the Estate of [the deceased], in circumstances where no arguments or reasons have been advanced to our client, that could afford them the option to consider a negotiated settlement of the dispute with your client.
…
If your client determines to ignore our client’s request and commences the legal proceeding foreshadowed in your correspondence, then our expectation is that this will occur expeditiously to avoid further delay in the disposition of this matter. …
To be absolutely clear, our clients will be ready, willing and able to negotiate a compromise of this dispute, provided they receive the adequate response hereby requested.
[3]The letter from the plaintiffs’ solicitor is in fact dated 24 February 2021, but this is clearly an error.
By letter dated 25 March 2022, solicitors for the defendant expanded upon their contemplated application, and relevantly stated:
In relation to your expectation that the anticipated court application will be made expeditiously, this is indeed the intention of our client. He will not have standing to make any application in relation to the estate of [the deceased] until he has a grant of probate in respect of the estate of [Ronald].
You have acknowledged that this firm is not acting for our client in respect of the probate application for the estate of [Ronald]. Our understanding is that the application will be made imminently.
We have had preliminary advice from two respected Counsel that this is a matter that requires a ruling pursuant to Order 54.02 [of the Rules]. In circumstances where reasonable minds can differ as to the potential outcome, seeking such a ruling is a very sensible course of action. Our client is aware that such a process is not cheap however we have no reason to believe that the litigation will be not (sic) conducted sensibly and in a cost-effective manner by both parties. This being the case, it is likely that both parties’ reasonable legal fees should be met by the estate.
… our client as anticipated executor, will have a position of responsibility in respect of how [the deceased’s] estate ought to be distributed. … We accept that there is an arguable case that no ademption has occurred and that therefore as a consequence the majority of the funds possibly ought be paid to your clients. We also are firmly of the view that there is an arguable case that the gift of real estate has been adeemed which would have quite a different outcome in respect of the distribution of the estate.
…
We cannot rely on your assertions as to the application of the law in respect to ademption. We consider that it is appropriate to seek a ruling pursuant to Order 54.02 [of the Rules].
…
The only sensible course of action open to our client once he has grant of probate for [Ronald’s] estate is to seek an Order 54.02 ruling.
It is possible that once our client has obtained a grant of probate in respect of [Ronald], he can seek for written advice to be provided in respect of the issues that need to be resolved … That said, it may be more cost effective to simply file the application … We repeat that clear advice has been provided by two Counsel that an Order 54.02 ruling is required.
We understand that you have indicated … that your clients are considering making their own ‘application’ … [W]e urge you to accept that the process that we have suggested is appropriate. We acknowledge delays in resolving this matter to date however they can easily be explained by [Ronald’s] ill health prior to his death and the subsequent need for a grant of probate to be obtained for his estate. In the event that it is necessary for our client to have to defend any anticipated application of your clients … then there may be adverse costs implications.
On 1 April 2022, the defendant obtained a grant of probate of Ronald’s will.
The plaintiffs then filed their originating motion on 5 April 2022, seeking declarations in respect of their interest in the proceeds of sale of the Thorpe Street property. On 13 May 2022 orders were made in a separate proceeding filed by the defendant to the effect that the defendant, as executor of the estate of the deceased, was justified in defending the plaintiffs’ application and paying the costs of defending such application out of the deceased’s estate.[4]
Calderbank offer
[4]Proceeding S ECI 2022 01538.
On 21 June 2022, the defendant’s solicitors sent a letter to the plaintiffs’ solicitors which contained an offer to settle the proceeding in accordance with the well-known principles in Calderbank v Calderbank[5] (‘the Calderbank offer’). The Calderbank offer relevantly provided as follows:
[5][1975] 3 All ER 333.
… having regard to the small size of the estate, to the costs that the estate will incur in defending the proceeding if it is not settled, and to our client’s obligations both as an executor and under the Civil Procedure Act 2010, our client is prepared to make an offer to settle the proceeding on the following terms:
(a)our client, in his capacity as executor of the deceased’s estate will pay your clients the sum of $40,000, inclusive of their costs, from the estate of the deceased; and
(b)the parties agree that the proceeding is dismissed with no order as to costs.
The above offer is subject to the consent of Dean Moran, the other remaining beneficiary of the estate of the deceased, and to execution of a mutually acceptable deed of settlement … As set out above, it is open to be accepted at any time before 4pm on 5th July 2022. Having regard to the need for our client to incur the cost of preparing affidavit evidence, due 8 July 2022,[6] if the offer is not accepted, the time for acceptance will not be extended.
… If your clients do not accept this offer, and our client succeeds at trial, our client will rely on this letter to seek orders that your clients pay our client’s costs of defending the proceeding on an indemnity basis, without recourse to the estate.
Your clients ought to accept this offer. It is made at an early stage in the proceeding, before your clients, or our client, have incurred further substantial legal costs. We have provided your clients with two weeks to consider the offer, which should be ample time. In circumstances where your clients cannot hope to succeed at trial, because Re Foord[7] squarely applies, it constitutes a significant compromise by our client. We have expressed the offer in clear terms, and explained the reasons why it ought be accepted. In those circumstances, it would plainly be unreasonable for your clients not to accept the offer.
[6]Pursuant to orders of Keith JR made 8 June 2022, the defendant was to file and serve any affidavit evidence upon which he intended to rely in relation to the relief claimed in the plaintiffs’ originating motion by 8 July 2022.
[7][2019] VSC 444.
Dean Moran (‘Dean’), the beneficiary whose consent the Calderbank offer was expressed to be conditional upon, is the defendant’s brother. Dean was not a party to the proceeding.[8]
Offer of compromise
[8]It seems that the plaintiffs initially contemplated joining Dean to the proceeding, but that this was not ultimately done, for reasons which are unknown.
On 4 July 2022, the solicitors for the plaintiffs responded to the Calderbank offer by letter. This letter enclosed a counter offer of compromise, made pursuant to r 26.02 of the Rules (‘the offer of compromise’). The offer of compromise relevantly provided:
2.The Plaintiffs offers (sic) to compromise their claim in this proceeding against the Defendant upon the following terms:-
(a)THAT, from the funds held in trust by the Defendant’s solicitors and or any third party for the benefit of the Estate of [the deceased], received or resulting from the sale of [the deceased’s] share of [the Thorpe Street property], the Estate of [Ronald] be paid $20,000.00 …
(b)THAT, after payment of the funds referred to at sub-paragraph 2(a) above, all the costs of this proceeding be paid from the balance of the funds held in trust by the Defendant’s solicitors and or any third party, received or resulting from the sale of the share of [the Thorpe Street property].
(c)THAT the Plaintiffs be paid the remainder of the funds held in trust for the Estate of [the deceased] by the Defendant’s solicitors and or any third party, received or resulting from the sale of [the Thorpe Street property] after the payments referred to at sub-paragraphs 2(a) and (b) have been made.
(d)THAT the Estate of [Ronald] be paid all other funds held in trust for the Estate of [the deceased] which were not received and or which did not result from the sale of [the Thorpe Street property].
(e)THAT the proceeding be dismissed.
3.This offer remains open to be accepted until the expiration of 14 days after service of this notice.
Neither the Calderbank offer nor the offer of compromise was accepted before the date of their expiry.
On 1 September 2022, the plaintiffs’ solicitors emailed the defendant’s solicitors enclosing proposed minutes of consent orders referring the proceeding to judicial mediation. On 5 September 2022, the defendant’s solicitors responded by email, relevantly stating:
… I am instructed to seek that this matter be set down for trial without utilising the limited estate resources for the purpose of a mediation, given what seems to be a polarisation of the respective positions of the litigants. Will your client agree to seek to simply list this matter for a ½ day trial and therefore bypassing mediation?
The proceeding was heard on 2 November 2022, and the reasons were delivered shortly over one month later, dismissing the plaintiffs’ originating motion.[9]
[9]Reasons, [39].
The plaintiffs’ total costs incurred in the proceeding to date are approximately $49,157.39. The quantum of the defendant’s costs is unknown. As at the date of the hearing, the deceased’s estate was valued at approximately $687,657.93.[10]
[10]Reasons, [7].
Submissions
Plaintiffs’ submissions
The plaintiffs submit that the Court should exercise its discretion to award the costs of both parties out of the deceased’s estate, on an indemnity basis. They submit that this follows because the proceeding involved the determination of a question of law arising in the administration of the deceased’s estate which was ‘far from clear’.
In this regard, the plaintiffs rely upon the correspondence set out above to submit that the defendant recognised such a question of law arose on the facts of this case and, indeed, contemplated the commencement of his own application to determine that question (with the plaintiffs presumably to be joined to the application, and the costs of the same to be paid out of the deceased’s estate). However, due to the defendant’s alleged failure to provide a response to the plaintiffs’ solicitors’ letter of 24 February 2022 or to make the application foreshadowed in his prior correspondence, the proceeding was commenced by the plaintiffs.
The fact that this proceeding was ultimately commenced by the plaintiffs rather than the defendant is said to be of no moment in relation to the question of costs. It is submitted that the plaintiffs effectively brought the same application that the defendant had contemplated was required; and the plaintiffs were entitled to progress the matter by commencement of their own proceeding, given the delay and unresponsiveness that was allegedly occurring on the part of the defendant.
In light of the correspondence between the parties set out above, the plaintiffs submit that it was not appropriate for the defendant to have made the Calderbank offer, which sought to put the plaintiffs at risk of costs in a proceeding that the defendant himself had indicated was necessary. For example, the Calderbank offer states that the plaintiffs’ application is ‘misconceived’, yet the defendant had himself foreshadowed that very application in correspondence between the parties.
The plaintiffs also submit that the reasoning exhibited in the Calderbank offer, which was said to support assertions as to the strength of the defendant’s case, was legally incorrect, specifically:
[The Calderbank offer] sought to equate Re Foord with this case, whereas in Re Foord the wording of the gift was quite different …
…
Further, as the court stated in [the reasons], ‘…there is little to be gleaned from comparisons to be arrived at in constructions arrived at in other cases’ …[11]
[11]Reasons, [20].
It is also submitted that the defendant’s legal arguments were only properly articulated for the first time in the defendant’s submissions filed on 6 September 2022, after the Calderbank offer had lapsed. Further, the Calderbank offer was stated to be conditional on the defendant receiving the consent of Dean, which consent was never conveyed to the plaintiffs.
The plaintiffs further submit that they were entitled to subsequently provide a countering response by way of the offer of compromise, in circumstances where the defendant had first served the Calderbank offer. However, they contend that this does not mean the defendant was justified in serving the Calderbank offer in the first place.
In the circumstances, it is submitted that it was therefore not unreasonable for the plaintiffs to reject the Calderbank offer, especially given the ‘relatively minimal’ amount of $40,000 (including costs) offered thereunder.
Finally, it is submitted that the correspondence of early September 2022 reflected the defendant’s position that it was appropriate for the issue to be judicially determined. The reasons were also said to demonstrate that the question raised in the proceeding was ‘far from clear’, a circumstance alleged to arise from the drafting of the will.
Defendant’s submissions
The defendant’s starting position is that, in circumstances where the plaintiffs’ originating motion was dismissed and the defendant was thus wholly successful in the proceeding, the usual order as to costs should be made, that is, the defendant is entitled to an award of costs in his favour.
Further, the defendant submits that the plaintiffs should pay the defendant’s costs on an indemnity basis from 5 July 2022[12] as their rejection of the Calderbank offer was unreasonable in the circumstances.[13] In support of this submission, the defendant notes that:
[12]Being the day after the date that the plaintiffs responded to the Calderbank offer.
[13]Citing the factors set out by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 (‘Hazeldene’s’).
(a) [The Calderbank offer] was sent before the plaintiffs had incurred any costs save for the costs of commencing the proceeding. The only steps that the defendant had taken prior to making that offer was to seek the Court’s leave to defend the proceeding. … If accepted, both the plaintiffs and the defendant could have avoided the costs of filing affidavits and submissions, and the cost of appearing at trial.
(b) [The Calderbank offer] allowed the plaintiffs two full weeks to consider the offer. That timing … was dictated by the date on which the defendant was due to file his evidence. Had the offer been accepted … it would have been unnecessary for the defendant to pay the costs of filing an affidavit in response.
(c) The extent of the compromise offered is significant. The defendant offered to pay $40,000 to the plaintiffs, inclusive of their costs. The effect of the compromise would have been that the estate would have borne both the plaintiffs (sic) and the defendant’s costs, and the plaintiffs would also have received a small distribution, in circumstances where, as the Court has found, they are not entitled to any share of the estate.
(d) The plaintiffs’ prospects of success as at the date of the offer were poor. The submissions on which the defendant relied at trial were set out in [the Calderbank offer]. Those submissions were accepted by the Court. … The defendant’s evidence, filed after the date of the letter, did not change that assessment.
(e) The terms of [the Calderbank offer] were clear … While the offer was subject to the consent of another beneficiary, and to terms, the substance of the offer was simple and easily comparable to the result achieved at trial.
(f) [The Calderbank offer] clearly foreshadows … that an application would be made for the plaintiffs to pay costs on an indemnity basis.
Finally, with reference to Re Buckton,[14] the defendant submits there is no basis to oust the usual order as to costs in circumstances where the proceeding is best characterised as adversarial litigation, wherein the plaintiffs sought the whole or a substantial part of the deceased’s estate and the defendant resisted. In particular, in circumstances where the deceased’s estate would be reduced if the plaintiffs’ costs were paid from the estate (and where the plaintiffs were wholly unsuccessful in the litigation), the ordinary costs rule should be ‘rigidly enforced’.
[14][1907] 2 Ch 406 (‘Re Buckton’).
Applicable principles
Costs are in the Court’s discretion, unless otherwise provided by an act or the Rules.[15] 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 liability for the costs of the unsuccessful litigation; that is, costs follow the event.[16] The Court’s discretion must be exercised through the prism of modern civil procedure reforms, which stress the quick, cheap and efficient resolution of the real issues in dispute.[17]
[15]Supreme Court Act 1986 (Vic) s 24(1).
[16]Oshlack v Richmond River Council (1998) 193 CLR 72, 97 [67] (McHugh J).
[17]Civil Procedure Act 2010 (Vic) s 7(1); GE Dal Pont, Law of Costs (LexisNexis Australia, 4th ed, 2018) 159 [6.15].
The starting position in respect of costs orders is for costs to be awarded on a standard basis, with the Court retaining a discretion to award costs on some other basis.[18] Special costs orders will only be made where there is some special or unusual feature or circumstance in the proceeding justifying such an order.[19]
Awarding costs out of a deceased estate
[18]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.28.
[19]See, eg, Re Hayes (No 3) [2023] VSC 5, [13] (McMillan J) and the cases there cited.
In light of the defendant’s submissions, it is relevant to set out the three classes of case originally identified in Re Buckton[20] and helpfully synthesised in Warton v Yeo:[21]
There are circumstances in which the costs of litigation concerning the administration of estates should be borne by the parties personally … Three classes of case can be identified. … In the first, the applicants are trustees of a will who ask the court to construe the will for their guidance, in order to ascertain the interests of the beneficiaries. In the second class, the application is made not by the trustees (who are respondents) but by some of the beneficiaries because, for whatever reason, that course has been deemed more convenient. In the third class of case, the application is made by a beneficiary who makes a claim adverse to other beneficiaries, and as such, the proceedings are properly characterised as adversary litigation. In the first two classes of case, the costs of all parties are borne by the estate; in the third class, the costs are borne by the parties themselves.
If litigation seeking to construe a will falls within the first or second class of case, then the court is in substance carrying out the same task (with respect to costs) as it would have carried out had it been administering the estate itself … On the other hand, if such litigation falls into the third class of case, the court is concerned only with who, out of the parties before it, should pay the costs of any other of the parties before it (that is, it applies the usual rule as to costs), and does not need to be concerned about indemnification from the estate …
[20]Re Buckton (n 14) 414–5 (Kekewich J).
[21](2015) 15 ASTLR 462, 479 [78]–[79] (Ward JA, Basten and Emmett JJA agreeing). See also Mantovani v Vanta Pty Ltd (No 3) [2022] VSC 357, [10] (McMillan J).
As is clear from the foregoing extract, where the litigation is, in truth, adversarial litigation, the Court will generally make the usual order as to costs and parties should not assume that their costs will automatically be paid out of a deceased’s estate.[22]
Calderbank offers
[22]See, eg, Re Koroneos; Koroneos v Koroneos [2021] VSC 734, [20] (McMillan J); Re Condo; Marinucci v Condo [2020] VSC 613, [23] (McMillan J).
In considering the effect of a Calderbank offer on the question of costs, the correct approach is to treat the rejection of it as a matter to which the Court should have regard when deciding whether to order indemnity costs. The critical question is whether the rejection of that offer was, in all of the circumstances, ‘unreasonable’.
Such a determination is made with regard to the factors set out by the Court of Appeal in Hazeldene’sChicken Farm Pty Ltd v Victorian Workcover Authority (No 2), namely:[23]
[23]Hazeldene’s (n 13) 442 [25] (Warren CJ, Maxwell P and Harper AJA).
(a) the stage of the proceedings 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 an indemnity costs in the event of the offeree’s rejecting it.
Offers of compromise
Order 26 of the Rules governs offers of compromise generally. However, r 26.08(2) provides that an offer of compromise made by a plaintiff and not accepted by a defendant will only sound in costs consequences where the plaintiff goes on to obtain a judgment which is no less favourable to the plaintiff than the terms of the relevant offer. As the plaintiffs were unsuccessful in the proceeding, the offer of compromise has no application or relevance to the question of costs.
Consideration
The defendant was wholly successful in the proceeding, in that the plaintiffs’ originating motion was dismissed. Accordingly, costs would ordinarily follow the event, with a costs order made in the defendant’s favour.
The plaintiffs’ submissions emphasise that the question of law raised in this proceeding was ‘far from clear’, ‘required determination by the court’ and arose ‘from the drafting of the will’. They also note that the defendant had foreshadowed his own application pursuant to r 54.02 of the Rules, and argue that the plaintiffs’ action in filing their originating motion effectively brought on the same matter in circumstances of alleged delay and unresponsiveness by the defendant. Thus, they submit that the ordinary rule as to costs should not apply in this proceeding.
However, this argument is not accepted by the Court. This proceeding was ultimately not commenced by the defendant, and any argument advanced by the plaintiffs that their originating motion effectively brought the same application contemplated in correspondence by the defendant in circumstances of alleged delay by the defendant, must be rejected for two reasons.
First, the defendant’s solicitors flagged repeatedly that their contemplated application would be made timeously, but was contingent on first obtaining a grant of probate of Ronald’s will. That grant was ultimately obtained on 1 April 2022, with the plaintiffs’ originating motion filed only a few days later on 5 April 2022.
The plaintiffs’ impatience in this regard does not justify adverse costs consequences to the defendant or the deceased’s estate. Rather, the proper and appropriate course in the circumstances would have been to wait for the defendant to make the contemplated application and then seek to be added as a party to that proceeding, as outlined by the defendant’s solicitors in their letter dated 18 January 2022. If such an application had not been made in a reasonable timeframe, only then would further steps on the plaintiffs’ part have been justified.
Secondly, it is incorrect to say that the plaintiffs’ originating motion effectively brought the same application before the Court as that which was contemplated by the defendant. The character of these two applications was fundamentally different.
The defendant had earlier flagged his intention, pursuant to the advice of counsel, to seek the Court’s guidance pursuant to r 54.02 of the Rules ‘in circumstances where reasonable minds can differ’. Such an application might more readily be thought to fall within the first or second of the categories contemplated in Re Buckton, such that the costs for such ought be borne by the estate.
By contrast, the plaintiffs’ application sought a declaration of a preferential testamentary disposition under the will to the benefit of only the plaintiffs,[24] as may be seen by reference to the prayer for relief in the plaintiffs’ originating motion:
1.A declaration that … the gift made by [the will] of [the deceased] of the real estate owned by the deceased to [Geoffrey] (and by operation of section 45 of the Wills Act 1997 to the plaintiffs) was not adeemed by the sale during the lifetime of the deceased of the deceased’s property … being [the Thorpe Street property].
2.A declaration that the plaintiffs … are entitled to receive such of the deceased’s estate as represents the balance of the proceeds of sale of [the Thorpe Street property].
[24]In any case, the fact that a question relating to the construction of a will arises is not conclusive of which way a proceeding is characterised for these purposes: see Kempson v Haydon (Costs) [2022] VSC 366, [19] (Forbes J), citing Re Buckton (n 14) 414–6 (Kekewich J). This may be so even if such application is made pursuant to r 54.02 of the Rules: see, eg, Avery v Manno (2020) 62 VR 281, 297 [42] (Derham AsJ).
In substance, this proceeding falls squarely within the third category of cases contemplated in Re Buckton; that is, adversarial litigation in which the plaintiffs sought to secure the major asset of the deceased’s estate, to their benefit and the defendant’s expense. As stated by Long Innes J in the context of determining questions concerning a plaintiff’s interest under a will:
It is a case in which the plaintiff, on the one side, and the defendants, on the other, conceived themselves respectively to have certain rights … [the plaintiff] held a certain opinion, which I have held to be wrong; he backed his opinion, and lost, the defendants backed theirs, and won; in the result I must treat this as hostile litigation …[25]
[25]O’Brien v Ritchie (1931) 48 WN (NSW) 85, 86, as quoted in Greenham v Greenham (No 2) [2020] VSC 850, [24] (Moore J).
As previously observed by this Court, ‘adversarial litigation between disunited families battling for their perceived true inheritance’[26] does not rank among the classes of circumstance in which it is appropriate to depart from the ordinary rule as to costs and order that costs be paid out of a deceased estate. Such a description is apt for this proceeding, and costs should follow the event.
[26]Re Tsaousis [2019] VSC 511, [33] (McMillan J).
The remaining issue is the basis upon which the defendant's costs are to be assessed.
The Calderbank offer was conditional in that it was stated to be ‘subject to the consent of [Dean], the other remaining beneficiary of the estate of the deceased’. The defendant relies on the Calderbank offer in support of his claim for indemnity costs, although provides no evidence of consent from Dean. The plaintiffs gave evidence that notice of Dean’s consent pursuant to the terms of the Calderbank offer was never received by them.
Neither party directed the Court to authority dealing with the question of ‘conditional’ Calderbank offers. However, Dal Pont provides helpful guidance on this issue:
To trigger costs consequences, a settlement offer should not envisage further negotiation between the parties prior to the compromise being effected; it must be capable of being accepted, thereby bringing into existence a binding contract. If the ‘offer’ is properly construed, from the perspective of a reasonable offeree, as an invitation to negotiate a settlement, it may hold little sway so far as costs are concerned (but could generate adverse costs consequences for the offeree who issues a blanket refusal to take up the invitation).
In the same vein, ‘offers’ that envisage the negotiation or approval of other (or third) parties do not, as a rule, carry weight on costs. So where, in Pearson v Williams, an offer was stated to be conditional on agreement being reached between the defendants on certain matters, and in Mid-City Skin Cancer and Laser Centre Pty Ltd v Zahedi-Anarak, the defendants offered to settle the proceedings for a set sum and for the parties to ‘resolve outstanding issues associated with the business names the subject of the Proceedings’, neither offer was held to amount to a Calderbank offer but rather an invitation to negotiate. And in Apostolidis v Kalenik (No 2) the Victorian Court of Appeal, faced with an offer expressed as being subject to approval by a third party (the Australian Taxation Office), accepted the submission that it ought not attract Calderbank principles.[27]
[27]Dal Pont (n 17) 430–1 [13.78] (citations omitted).
Parallels can be drawn between this proceeding and the case of Apostolidis v Kalenik (No 2),[28] referred to in the above excerpt. There, the terms of the offer and the Victorian Court of Appeal’s reasoning were as follows:
We mention for completeness an offer made during the course of the appeal which purported to be a further Calderbank offer. The offer was made on 17 January 2011 and remained open for four days. It was stated to be made in accordance with the principles in Calderbank v Calderbank. The terms of the offer were for the appeal and cross-appeal against the primary judgment to be allowed and the adjustment order increased to $1 million. The appeal against interest was to be allowed and rounded up to a sum of $1 million. The appeal against costs was to be allowed and there was to be no order as to the costs of the proceeding, each party to bear their own costs in relation to the appeal and cross-appeal. The offer was qualified by the following condition:
That this offer is subject to the ATO approving the offer and payment of the monies and, without limiting the generality of the foregoing, allowing/permitting the sale of so much of the Appellant’s … real property to satisfy the offer.
It appeared that there was no response from [the respondent] to the offer. [The respondent] argued that the offer ought not attract the principles governing Calderbank offers because it was subject to approval by a third party, the Australian Taxation Office, with respect to the terms of the offer, the payment of monies, and the sale of [the appellant’s] property. It was thus not a genuine Calderbank offer, but rather an invitation to negotiate with [the appellant] and the third party, to engage in ‘tripartite trading’. In any event, [the respondent] submitted, it was not unreasonable to refuse the offer given the third-party condition and the prospects of success at the time the offer was made, including the reasonable expectation of preserving the costs order of a not inconsiderable sum. We agree.[29]
[28](2011) 35 VR 563 (‘Apostolidis’).
[29]Ibid 612 [61]–[62] (Nettle, Ashley and Tate JJA).
Other cases have reiterated the principle that an offer subject to the approval of a third party will not constitute a Calderbank offer, but rather a mere offer to negotiate.[30]
[30]See, eg, Wong v McConville (No 2) [2014] VSC 282, [22(h)] (Derham AsJ), citing Apostolidis (n 28) 612–3 [61]–[64] (Nettle, Ashley and Tate JJA).
Similar conclusions must be drawn in the present circumstances. It may be that Dean consented, or would have consented, to the Calderbank offer, however, the plaintiffs did not receive notice of that fact, and the Court cannot infer or assume consent in the absence of positive evidence from the defendant. In the circumstances, the defendant’s characterisation of the plaintiffs’ rejection of the Calderbank offer as ‘unreasonable’ cannot be sustained. Accordingly, the defendant is not entitled to an award of indemnity costs, and his costs are to be assessed on the standard basis.
Conclusion
This proceeding does not fall within the classes of case where costs should be paid out of the deceased’s estate. The proceeding was, in truth, adversarial litigation in which the plaintiffs have been wholly unsuccessful. Costs should follow the event and are to be assessed on the standard basis, in default of agreement.
Orders
The Court orders that:
(a) the plaintiffs pay the defendant’s costs of and incidental to the proceeding personally, to be assessed on the standard basis in default of agreement and without reimbursement from the estate of the deceased; and
(b) the plaintiffs bear their costs of and incidental to the proceeding personally, to be assessed on the standard basis in default of agreement and without reimbursement from the estate of the deceased.
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