Re Morgan

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TESTATORS FAMILY MAINTENANCE LIST

S ECI 2021 02097

IN THE MATTER of Part IV of the Administration and Probate Act 1958

-and-

IN THE MATTER of the will and estate of MARGARET THERESE MORGAN, deceased

BETWEEN:

LAURENCE ANTHONY MORGAN	Plaintiff
v
PETER BARRY MORGAN (who is sued in his capacity as executor of the estate of MARGARET THERESE MORGAN, deceased)	Defendant
- and -
MIRKA CARMELLI and MCK LEGAL	Non-parties

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	23 March 2023
CASE MAY BE CITED AS:	Re Morgan
MEDIUM NEUTRAL CITATION:	[2023] VSC 133

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COSTS — LEGAL PRACTITIONERS — Overarching obligations under Civil Procedure Act 2010 (Vic) ss 18, 19, 20, 22, 23 and 24 — Whether breached by solicitor for plaintiff —Whether costs order should be made against solicitor for the plaintiff under Civil Procedure Act 2010 (Vic) s 29.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	MCK Legal until 3 February 2022
For the Defendant	Clarke & Barwood Lawyers
For the Non-parties	MCK Legal

HER HONOUR:

Introduction

Margaret Therese Morgan (‘the deceased’) died intestate on 29 March 2020. Pursuant to the intestacy provisions, the deceased’s father (‘the defendant’) is the sole beneficiary of the estate of the deceased.[1] On 20 January 2021 letters of administration on intestacy were granted to the defendant.
[1]Administration and Probate Act 1958 (Vic), s 70ZH.

Laurence Morgan (‘the plaintiff’) is the deceased’s brother. By originating motion filed 17 June 2021, the plaintiff sought provision from the estate of the deceased, pursuant to Part IV of the Administration and Probate Act 1958 (Vic) (‘the Administration and Probate Act’). The plaintiff was represented by MCK Legal. The plaintiff’s solicitor was Mirka Carmelli of MCK Legal.

By orders made 19 November 2021 and an email dated 22 December 2021, the Court reminded the practitioners of their obligations under the Civil Procedure Act 2010 (Vic) (‘the Civil Procedure Act’) and the sanctions under Part 2.4 of that Act and that costs would not necessarily be paid out of the estate.

On 22 December 2021 the defendant’s solicitors informed the Court that they had recently become aware that the plaintiff had died and that the plaintiff’s solicitor was also aware of his death.

On 3 February 2022 MCK Legal filed a notice of ceasing to act for the plaintiff.

At a hearing on 4 February 2022, the Court indicated that notwithstanding the plaintiff’s death and the filing of the notice of ceasing to act for the plaintiff, the costs of the proceeding needed to be determined. The Court also repeated the concerns it had expressed throughout the conduct of the proceeding, relating to:

(a) the affidavits filed in the proceeding containing a substantial amount of irrelevant and inadmissible information;

(b) the cost estimates given in the joint trial document filed 18 November 2021, which estimated costs up to and including the trial as $115,000 for the plaintiff and $105,000 for the defendant; and

(c) the costs incurred up until the current stage in the proceeding.

Counsel for the defendant provided an estimate of the defendant’s costs of around $46,000 and submitted that this quantum was largely due to the conduct of Ms Carmelli, such as raising irrelevant matters and without prejudice discussions and failing to provide relevant information in circumstances where the plaintiff had minimal assets.

At the request of the Court, the defendant’s solicitor, Mr Matthew Scott, filed an affidavit on 17 February 2022 (‘the Scott affidavit’) addressing liability for costs and the conduct of the proceeding, including as they pertained to the Civil Procedure Act. Mr Scott’s affidavit raised a number of matters relating to Ms Carmelli and MCK Legal’s compliance with their overarching obligations.

On 10 March 2022 the Court sent an email informing the parties that the matters set out in Mr Scott’s affidavit established a prima facie case that Ms Carmelli and/or MCK Legal may have contravened their overarching obligations under the Civil Procedure Act. Ms Carmelli and MCK Legal were given the opportunity to show cause why they should not be joined as non-parties to the proceeding for the purposes of an investigation on the Court’s own motion as to whether they have contravened any of the overarching obligations.

On 25 March 2022 Ms Carmelli filed an affidavit affirmed on 24 March 2022 in relation to the conduct of the proceeding and the costs incurred. On 29 March 2022, the Court made orders adding Ms Carmelli and MCK Legal as non-parties to the proceeding for the purpose of investigating possible contraventions of the Civil Procedure Act and determining the question of liability for costs.

Given the serious nature of the Court’s concerns, Ms Carmelli and MCK Legal were afforded significant allowances in providing a response. After being added as non‑parties Ms Carmelli and MCK Legal were ordered to file any submissions as to the costs to be paid and on what basis they should be allowed by 10 May 2022. Two identical affidavits of Ms Carmelli affirmed 16 May 2022 were filed on 16 May 2022 and 26 July 2022, respectively. A further affidavit of Ms Carmelli affirmed on 26 July 2022 was filed on 27 July 2022.

As Ms Carmelli’s affidavits did not address the defendant’s position, the non-parties were provided with a further opportunity to file submissions by 31 August 2022. A further affidavit of Ms Carmelli was filed on 5 September 2022.

In her affidavits Ms Carmelli disclosed that the plaintiff’s costs amounted to $42,991.66 and that MCK Legal had paid disbursements amounting to $12,751.60 as the plaintiff did not have the capacity to do so.

The defendant’s costs of the proceeding totalled $59,349.70 which included the appearance at the 4 February and the Scott affidavit calculated as follows:

Item  Amount
Disbursements (half share of mediator’s fee)           $2,100.00
Solicitors’ costs  $34,668.20
Counsel’s costs  $22,581.50
Total  $59,349.70

For the following reasons, the Court has determined that:

(a) Ms Carmelli and MCK Legal breached their overarching obligations under ss 18(d),19, 20, 23 and 24 of the Civil Procedure Act;

(b) Ms Carmelli and MCK Legal pay 80 per cent of the defendant’s costs of and incidental to the proceeding, assessed on an indemnity basis in default of agreement;

(c) no orders as to the plaintiff’s costs; and

(d) otherwise the proceeding be dismissed.

Background

Ms Carmelli deposes that the plaintiff came to see her in mid-June 2020 in respect of matters pertaining to the estate of the deceased. The plaintiff is said to have advised Ms Carmelli that the deceased had made provision for him in an unsigned will and pursuant to a binding death benefit nomination which had not been correctly completed.

Ms Carmelli’s observation of the plaintiff was that he was in poor health and not in a financial position to commence proceedings in the Supreme Court. He was a pensioner and had suffered injuries while working on fishing boats. He also confessed to being a long-term drug user and an alcoholic, and although he had been sober and off drugs for the past ten years, he was on a methadone program and vulnerable to relapse.

Plaintiff’s caveats over the deceased’s property in Brunswick and in the Probate Registry

In late June 2020 Ms Carmelli lodged a caveat over the deceased’s property in Brunswick and a caveat in respect of the deceased’s estate with the Supreme Court Probate Registry.

Deceased’s alleged informal will

By letter dated 2 July 2020, Ms Carmelli wrote to the defendant’s daughter alleging that the plaintiff was entitled to the deceased’s estate pursuant to an unsigned will of the deceased and advising that she had lodged caveats ‘on instructions’ over the deceased’s Brunswick property and also on the deceased’s estate. In her letter, Ms Carmelli stated that she understood that the defendant’s daughter had obtained legal advice that the plaintiff did not have any entitlement under the unsigned will. Ms Carmelli’s instructions were to propose a meeting to clarify the issues relating to the estate and the known wishes of the deceased.

By letter dated 27 August 2020, the defendant’s solicitors requested that the caveat preventing the grant of letters of administration of the deceased’s estate be removed on the basis that the deceased had no claim on the estate and that the costs would be the responsibility of the plaintiff. He also noted that the plaintiff was residing in the deceased’s Brunswick property without making any contributions to the mortgage over the property and informed Ms Carmelli that the defendant was willing to participate in a family meeting after the defendant had obtained a grant of letters of administration.

On 10 September 2020 the defendant’s solicitors emailed Ms Carmelli stating that as a matter of urgency the defendant needed to deal with the notice of default on the deceased’s home loan due by 21 September 2020 in the amount of $4,602.07 and suggested the family enter an informal mediation so as to avoid the costs of litigation and default on the loan.

On 11 November 2020 the plaintiff advertised his intention to apply for a grant of administration of the unsigned informal will on the basis that the named executors had renounced probate. On 25 November 2020 the defendant lodged a caveat to prevent the grant.

Grant of letters of administration to defendant

The plaintiff’s caveat in respect of the deceased’s estate lapsed and on 20 January 2021 letters of administration of the estate of the deceased were granted to the defendant.

Foreshadowed Part IV claim

In a letter to the defendant’s solicitors dated 17 February 2021 Ms Carmelli noted that the defendant had obtained letters of administration of the estate of the deceased. Ms Carmelli confirmed that the plaintiff would make an application for provision from the estate of the deceased. Ms Carmelli alleged that the defendant was an eligible person under Part IV as he was a member of the common household of the deceased and was living with her at the time of her death. Ms Carmelli said the plaintiff had no assets and received a carer’s allowance.

On 1 March 2021 by way of email the defendant’s solicitor Mr Scott informed Ms Carmelli that he was not satisfied that her client had a claim under Part IV based on the information provided by her. He pointed out that the plaintiff had lived with the deceased for only around five months and there was no evidence that he intended to live there indefinitely or that he was financially dependent on the deceased. Notwithstanding this position, the defendant agreed to a mediation as proposed by Ms Carmelli on the basis that the plaintiff provide an affidavit outlining his claim and addressing the relevant issues for his proposed claim.

By letter dated 15 March 2021 Ms Carmelli declined to provide an affidavit from the plaintiff, claiming that such a request was disingenuous and if she had to go to the expense of an affidavit then the plaintiff may as well instruct her to commence the Part IV proceeding.

On 19 March 2021 the defendant’s solicitors sent a reply email noting that the basis of the plaintiff’s claim and what he expected to receive was unclear and asked that Ms Carmelli provide clarification of these issues, noting that the defendant was amenable to mediation, provided it had some prospects of success.

On 29 March 2021 Ms Carmelli informed the defendant’s solicitors that the plaintiff wanted a minimum of one-third of the deceased’s non-superannuation assets and all of the deceased’s superannuation.

Deceased’s superannuation

On 29 April 2021 the trustee of the deceased’s superannuation fund determined that the whole of the death benefit should be paid to the defendant as the legal personal representative of the estate of the deceased. The plaintiff lodged an objection to the trustee’s decision. On 22 September 2021 the trustee reaffirmed the decision.

The plaintiff’s claim

On 17 June 2021 the plaintiff served an originating motion on the defendant claiming provision ‘as the Court thinks fit’.

On 21 June 2021 a mediation was held, without the benefit of any affidavits in support of the plaintiff’s claim. At this time, there was an extant offer of the defendant for the plaintiff to receive $140,000 with $30,000 to be paid within 14 days of acceptance. At the request of the plaintiff, this offer remained open for a further 14 days. This offer lapsed on 5 July 2021, without any response from the plaintiff.

The plaintiff then issued a summons seeking a directions hearing on 20 July 2021. This date was adjourned by the Court as the plaintiff failed to file any affidavits in support of his claim or his estimated costs and disbursements. Ms Carmelli sought to file an affidavit on 16 July 2021 which was rejected for filing. She failed to provide the affidavit to the defendant’s solicitors. By letter dated 19 July 2021 the defendant’s solicitors sought a copy of the plaintiff’s affidavit. They also reiterated their reasons for defending the plaintiff’s claim. In order to protect his position, the defendant made a Calderbank offer to the plaintiff. The offer was that the plaintiff be paid $300,000 in full and final settlement and each party bear their own costs. The offer was open for 13 days from the date of the letter. The defendant’s solicitors informed Ms Carmelli that the offer was made purely to avoid further costs and delays in the litigation and ‘should not be interpreted by your client as a concession by the estate to his claim’.

On 22 July 2021 the plaintiff filed and served an affidavit sworn 21 July 2021, which included without prejudice discussions.

Subsequently Ms Carmelli sought agreement from the defendant for an adjournment of the directions hearing then scheduled for 30 July 2021 and an extension of time in respect of the Calderbank offer. The defendant agreed to the extensions of time. At this stage, the Court reminded Ms Carmelli that she had not yet filed an affidavit as to the plaintiff’s costs and disbursements.

Further orders were made in the proceeding on 17 August 2021 and 22 October 2021, including for the filing of a proposed joint trial outline. Throughout November 2021 the defendant’s solicitors communicated with Ms Carmelli in regard to what they considered to be substantive difficulties with the proposed joint trial outline. In the end, the parties filed separate trial outlines.

Defendant’s position on costs

In the Scott affidavit, Mr Scott deposed to the history of the dealings with Ms Carmelli prior to the commencement of the Part IV proceeding and thereafter. As a result of these dealings, the defendant’s costs amount to $59,349.70 (excluding administration costs of approximately $14,200).

Mr Scott deposed that it would be likely that a costs order against the plaintiff would not be satisfied as he did not own any significant assets or have savings and his funeral expenses remain partly outstanding. In addition, the defendant does not wish to pursue a costs order against the estate of the plaintiff, however, this position does not preclude any order for costs that the Court may make against Ms Carmelli and/or MCK Legal. The defendant is not opposed to the Court making such an order should the Court consider it appropriate.

Non-parties’ position on costs

Ms Carmelli and MCK Legal were given the opportunity by the Court to show cause why they should not be joined as non-parties to the proceeding for the purposes of an investigation on the Court’s own motion as to whether they have contravened any of the said overarching obligations.

Ms Carmelli subsequently filed her affidavit affirmed 24 March 2022. The affidavit did not give any adequate explanation as to why Ms Carmelli and MCK Legal should not be joined as non-parties to the proceeding. On 29 March 2022 Ms Carmelli and MCK Legal were added as non-parties to the proceeding for the purposes of the investigation into possible contraventions of the Civil Procedure Act and determining questions of liability for the costs in the estate of the deceased.

Thereafter the non-parties filed two identical affidavits affirmed 16 May 2022 but filed on 16 May 2022 and 26 July 2022, respectively, and an affidavit affirmed 26 July 2022. Ms Carmelli also sought to rely on her affidavit affirmed 3 February 2022.

The non-parties seek that their legal costs up to and including the 4 February 2022 directions hearing be paid in accordance with a bill of costs prepared by Blackstone Legal Costing dated 2 May 2022. Thereafter, they seek that their costs be paid on an indemnity basis as agreed or, in default of agreement, as taxed, due to the defendant rejecting an offer from Ms Carmelli that she waive her costs absolutely in return for the defendant paying her disbursements of $12,751.60.

The bill of costs prepared by Blackstone Legal Costing assessed the costs of the non‑parties as $44,267.26 (inclusive of disbursements and GST). However, the assessment did not provide subtotals for the costs in respect of the probate caveat, the Part IV proceeding and superannuation aspects of the file. In response to an email from the Court dated 19 May 2022 requesting subtotals for the different aspects, on 25 May 2022 by way of reply email Ms Carmelli provided the following breakdown of costs:

(a) $826.06 for the probate caveat;

(b) $1,548.80 for the superannuation aspects; and

(c) $41,892.40 for the Part IV proceeding.

By email dated 30 March 2022, and subsequently followed up on 19 May 2022, the Court requested copies of any costs agreements and disclosure statements entered into between the non-parties and the plaintiff. On 25 May 2022 Ms Carmelli emailed a costs agreement and disclosure statement dated 18 May 2020 to the Court.[2] The disclosure statement identifies the lawyer primarily responsible for the file as being Ms Carmelli. It also discloses the estimate of legal costs, including charges and disbursements up to the commencement of Court proceedings including for completing any mediation, to be $40,000. The estimate was itemised to include charges of $35,000 and disbursements of $25,000 (totalling $60,000).
[2]The dates of the costs agreement and disclosure statement appear to be approximately one month earlier than Ms Carmelli’s first meeting with the deceased in mid-June: see [16] above.

As the non-parties made no submissions regarding the defendant’s costs of the proceeding beyond describing them as ‘considerably excessive’ and commenting that they should be ‘assessed’, by email dated 10 August 2022 the Court enquired of the non-parties whether they wished to file submissions regarding the defendant’s positions on costs and, if so, to file their submissions by 31 August 2022. Subsequently, at the request of the non-parties, the time for filing of their submissions was extended to 9 September 2022.

On 5 September 2022 a further affidavit affirmed by Ms Carmelli was filed. In her affidavit Ms Carmelli deposed that she is a general practitioner and not an expert in the area of wills and estates. She also deposed that she sought advice from counsel in relation to the merits of the plaintiff making a Part IV claim and, based on that advice and the plaintiff’s instruction, she issued the proceeding. Otherwise her affidavit referred to various communications between her and the defendant’s solicitors both before and after the commencement of the family provision claim.

The defendant’s costs

The relevant principles in relation to costs were conveniently summarised by Moore J in Ross v Ross (No 2)[3] as follows:
[3][2020] VSC 148.

Subject to any applicable legislative provisions and the Supreme Court (General Civil Procedure) Rules 2015, the Court has a general discretion as to costs.[4] Since 1 January 2015, costs in family provisions claims are to be determined in the exercise of that general discretion.[5] As stated by the Court of Appeal in Sinclair v Forsyth:[6]
[4]Supreme Court Act 1986 (Vic) s 24(1).
[5]With the repeal of ss 97(6) and (7) of the Administration and Probate Act 1958 (Vic) effected by the Justice Legislation Amendment (Succession and Surrogacy) Act 2014 (Vic).
[6](2010) 28 VR 635, 642 [27].
We consider that it is a matter of concern that in many family provision cases the amount available for distribution among the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before the costs get out of proportion. However, it takes two to settle a dispute and unless sensible offers of settlement are made in a form which can be referred to subsequently, it is very difficult for the court to allocate responsibility for the dispute not settling. All that can be done is to conclude that where costs have been incurred unreasonably, as here, they must be borne personally.

…
Where awarded, costs will ordinarily be determined on a standard basis. The Court has a discretion, however, to award costs determined on an indemnity basis, or such other basis at the Court may direct.[7] The unreasonable rejection of a Calderbank offer by a party is a relevant factor in determining whether to depart from the ordinary rule as to costs. In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[8] the Court of Appeal identified that the following factors would ordinarily be relevant in considering whether the rejection of a Calderbank offer was unreasonable:[9]
(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;
(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.[10]

[7]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.28.

[8](2005) 13 VR 435.

[9]Ibid 442 [25].

[10]Ross v Ross (No 2) [2020] VSC 148, [14], [16].

The parties mediated the defendant’s last offer on 21 June 2021. That offer was for the plaintiff to receive the total sum of $140,000 with $30,000 to be paid within 14 days of acceptance. At the request of the plaintiff, the defendant’s offer remained open for a further 14 days. That offer lapsed on 5 July 2021 without any further communication.

By letter dated 19 July 2021 the defendant’s solicitors wrote to Ms Carmelli giving reasons why the defendant was confident that the plaintiff would not succeed in his claim. Notwithstanding these reasons, in order to avoid further costs and delays of litigation and to protect the defendant’s position, the defendant made a Calderbank offer to the plaintiff. The offer was that the plaintiff be paid $300,000 in full and final settlement, with $30,000 to be paid within seven days of written acceptance of the offer and $270,000 to be paid within seven days of the latter of the plaintiff vacating the deceased’s Brunswick property. Each party was to bear their own costs of the proceedings. The offer was open for 13 days from the date of the letter. At the request of Ms Carmelli, the defendant agreed to an extension of time until 13 August 2021. No response was communicated in respect of the offer and the plaintiff may be taken to have rejected the offer.

The plaintiff filed his Part IV claim on the basis that he was a member of the household of the deceased. According to the plaintiff, he was invited by the deceased to live with her in or about mid-October 2019 having told him that she was ill and would need looking after as her illness progressed. The deceased died on 29 March 2020. Therefore the defendant lived with the deceased for approximately five months prior to her death for the purpose of caring for her and received a carer’s allowance for doing so.

Notwithstanding any advice from counsel in relation to the merits of the plaintiff making a Part IV claim, as discussed at [70], the merits of the plaintiff’s claim were very weak. The plaintiff was the brother of the deceased and given the short period in which he had lived with the deceased for the purpose of providing her care he was unlikely to be considered an eligible person wholly or partly dependent on the deceased for his proper maintenance and support. Furthermore, there was a dearth of evidence in his affidavit establishing that the deceased had any moral duty to provide for his proper maintenance and support.

Given these circumstances, the defendant’s Calderbank offer of payment of $300,000 was generous and unreasonably rejected by the plaintiff. The value of the deceased’s estate as set out in the inventory of assets is $1,120,377.51. Even if the Court were able to be satisfied that an order for provision should be made in favour of the plaintiff, the affidavit evidence before the Court would not support an order greater than the offer sum of $300,000.

In light of the plaintiff’s unreasonable rejection of the defendant’s offer, the Court is satisfied that the defendant is entitled to his costs of and incidental to the proceeding after 19 July 2021 assessed on an indemnity basis.[11] Separate and further to the defendant’s entitlement to indemnity costs as a result of the rejected Calderbank offer, the Court considers that the particular facts and circumstances of this case would warrant an order that the defendant be entitled to his costs of and incidental to the proceeding assessed on an indemnity basis from the commencement of the proceeding in line with the principles identified in such authorities as Colgate-Palmolive Co v Cussons Pty Ltd.[12] The basis of such an order is the Court’s conclusion that in the proceeding there was unreasonable conduct which caused the needless prolonging of the case and unnecessary costs to be incurred.[13]The relevant conduct is adequately set out below by reference to breaches of the overarching obligations.
[11]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, 440 [19] (Warren CJ, Maxwell P and Harper AJA).
[12](1993) 46 FCR 225 (Sheppard J).
[13]See, eg, Ballam v Ferro (No 2) [2022] NSWSC 1358, [68] (Hallen J), quoting Vector Corrosion Technologies Ltd v E-Chem Technologies Ltd [2022] FCA 519, [38] (Jagot J).

Further, the costs of and incidental to the proceeding include all of the matters as described by Ms Carmelli as ‘pertaining to the estate’. These matters include all issues alleged by the plaintiff prior to the filing of the plaintiff’s Part IV claim, namely, the deceased’s unsigned will, the unsigned binding death benefit, the caveat lodged over the Brunswick property and the caveat lodged with the Probate Registry.

While accepting that the impecuniosity of the plaintiff’s estate is not, without more, reason to deprive the defendant of such an order for his costs,[14] in this matter the Court will not order that the plaintiff pay the defendant’s costs. Relevant to this decision are considerations including the manner in which this proceeding has come to an end, the fact that the defendant does not wish to pursue a costs order against the plaintiff’s estate, and the Court’s obligation to facilitate the just, efficient, timely and cost-effective resolution of disputes.[15] Ultimately, it is the Court’s conclusion that the justice of the case requires that no such order be made.[16]
[14]Northern Territory v Sangare (2019) 265 CLR 164.
[15]Civil Procedure Act ss 7, 8.
[16]See, eg, MA & J Tripodi Pty Ltd v Swan Hill Chemicals Pty Ltd [2019] VSCA 46, [154] (Kyrou, Kaye and Emerton JJA).

The plaintiff’s costs

Ms Carmelli and MCK Legal seek payment of the plaintiff’s costs out of the estate of the deceased. Specifically, costs are sought up to and including 4 February 2022 in accordance with the bill of costs and costs from this date are sought on an indemnity basis. Given the unsatisfactory manner in which the proceeding has been conducted by Ms Carmelli and MCK Legal, the Court is perturbed that such a position has been adopted by them. Further, the maintenance of this position in face of the Court’s communicated concerns only serves to highlight their apparent indifference to the Court’s consternation in this proceeding.

Ms Carmelli’s claim that had her offer dated 4 February 2022 been accepted by the defendant, considerable court time and unnecessary costs to all parties would have been saved was gratuitous and self-serving. Having regard to the plaintiff’s unreasonable rejection of the defendant’s offer, the poor prospects of the plaintiff’s case, and the manner in which the proceeding was conducted, Ms Carmelli’s offer to the defendant was unreasonable.

In such circumstances, the Court will not make orders that the plaintiff’s costs be paid from the deceased’s estate. The estate is not large and the quantum of costs claimed by the plaintiff are in the range of what might be expected after a trial of the proceeding. An order that the plaintiff’s costs be paid out of the estate would burden the defendant, who is the only beneficiary of the estate, as well as the executor of the deceased’s estate. Further, an order that the plaintiff’s costs be borne by the estate in this proceeding would serve only to condone undesirable conduct and encourage the assumption that family provision litigation may be pursued free from costs risks or consequences. This case should serve as a forceful reminder to the contrary.

There will be no order as to the plaintiff’s costs.

Court’s own motion investigation under the Civil Procedure Act

Pursuant to the Civil Procedure Act, a party must conduct a proceeding in a manner that is consistent with their overarching obligations.[17] The overarching obligations also apply to legal practitioners and law practices acting for and on behalf of parties and they must not cause their clients to contravene any obligations.[18] In exercising its discretion as to costs, the Court may take into account any contravention of the overarching obligations.[19]
[17]Civil Procedure Act 2010 (Vic) (‘Civil Procedure Act’) s 10(1)(a).
[18]Ibid ss 10(1)(b), (c), 14.
[19]Ibid s 28(2).

By email dated 10 March 2022 the Court informed Ms Carmelli that there was a prima facie case that she and/or MCK Legal may have contravened their overarching obligations under, inter alia, ss 18, 19, 20, 22, 23 and 24 of the Civil Procedure Act.

Despite the clear risk of a costs order being made against her and/or MCK Legal, Ms Carmelli appears not to have notified her insurer of the potential breaches. As such, the Court has not had the benefit of submissions on behalf of Ms Carmelli and MCK Legal other than the affidavits filed by Ms Carmelli.

The Scott affidavit raised a number of matters of concern in relation to compliance by Ms Carmelli and MCK Legal with their overarching obligations, including:

(a) that the claim was made without a proper basis;

(b) a failure to ensure that costs were proportionate;

(c) a failure to use reasonable endeavours to resolve the dispute, including by failing to respond to the offer of settlement made at the mediation on 21 June 2021 and subsequently extended at the plaintiff’s request to 5 July 2021 and the Calderbank offer made on 19 July 2021 (which remained open until 13 August 2021);

(d) a failure to only take steps to resolve or determine the dispute, and a failure to narrow the issues in dispute, through the inclusion of irrelevant and inadmissible material, including without prejudice discussions, in affidavits filed by the plaintiff; and

(e) a failure to properly co-operate in the preparation of the joint trial document.

Ms Carmelli’s affidavits contain evidence relevant to each of the above matters, but they do not directly address each particular overarching obligation raised in the Court’s email. The absence of direct submissions addressing Ms Carmelli and/or MCK Legal’s compliance with their specific obligations makes the Court’s task more difficult and Ms Carmelli’s approach suggests a worrying lack of understanding or regard for the seriousness of the Court’s investigation. Nevertheless, the Court will consider the matters raised by Mr Scott’s affidavit, set out above.

Requirement of proper basis

Section 18 of the Civil Procedure Act provides:

A person to whom the overarching obligations apply must not make any claim or make a response to any claim in a civil proceeding that—
(a)       is frivolous; or
(b)       is vexatious; or
(c)       is an abuse of process; or
(d)does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case required, have a proper basis.

In s 18, ‘claim’ refers to a cause of action or the assertion of a right that entitled the asserting party to relief from the Court, and it has been held that the obligation applies equally to claims for interlocutory relief.[20] The assessment of whether a proper basis exists is made at the time of advancing or responding to a claim, whether by filed document or in the course of an oral application.[21]
[20]Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) (2014) 48 VR 1, 34 [88] (John Dixon J) (‘Dura’).
[21]Ibid.

In a Civil Procedure Act investigation, practitioners may be given some benefit of the doubt where their ability to defend themselves is hindered by client legal privilege. However, Ms Carmelli’s affidavit contained details of a number of apparently privileged communications, including the written advice of counsel. As a result, the Court will proceed on the basis that privilege has been waived and that the non-parties do not have the benefit of such doubt.

Nonetheless, the Court is concerned that privilege has not been waived in this case. Privilege is not destroyed by the death of the plaintiff and Ms Carmelli has not indicated that the plaintiff’s personal representative has assented to her producing privileged communications. Furthermore, the communications from the deceased’s sons to Ms Carmelli suggest that they are unlikely to do so.[22]
[22]If correct, it may be that Ms Carmelli breached r 9 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015. In the circumstances, the issue will be referred to the Victorian Legal Services Board + Commissioner for determination.

As identified in the Court’s email dated 22 December 2021, the plaintiff’s claim for provision under Part IV raised the following issues:

The first issue to be determined is whether the plaintiff is an eligible person. If not, the claim for further provision must be dismissed. If so, then the Court will proceed to consider whether the deceased had a moral duty to provide for the plaintiff’s proper maintenance and support and, if so, the Court may make an order for provision taking in to account the mandatory and discretionary matters set out in s 91A of the Administration and Probate Act 1958. In the orders made on 17 August 2021 it was noted that the plaintiff seeks provision of 75% of the estate. It is unclear how this percentage is calculated.

In her affidavit filed 3 February 2022, Ms Carmelli submitted that it was arguable based on the affidavit filed in the proceeding that the plaintiff was an eligible person pursuant to s 90(k) of the Administration and Probate Act which provides:

eligible person means—
(k)a person who, at the time of the deceased’s death, is (or had been in the past and would have been likely in the near future, had the deceased not died, to again become) a member of the household of which the deceased was also a member;

In her 25 March 2022 affidavit, Ms Carmelli stated that on 3 December 2020 in a telephone conference with counsel she was advised that ‘given our client was living with the deceased, at her request, he would be an eligible person and had standing to make a Part IV claim for provision out of his late sister’s estate’. The written advice of counsel provided ex post facto of the telephone conference on 2 August 2021 (after the plaintiff’s claim had been commenced) exhibited to Ms Carmelli’s affidavit stated:

The only category that I advised [the plaintiff] he may seek to rely on was the category in s.90(k) of the Administration and Probate Act 1958 (Vic) (“the APA”) as amended post 1 January 2015. … Judicial Registrar Englefield of the Supreme Court had just decided the third of a trilogy of cases involving a family provision claimant who had relied on this category; Re Stojanovska; Stojevski v Stojevski and Anor [2020] VSC 702 (“Stojanovska”). A copy of that decision was sent to my instructor after the telephone conference on 9 December 2020. I will not discuss the decision in detail in this memorandum, suffice to say that in my view, [the plaintiff] could show that he was dependent on the deceased for accommodation and support and the deceased in turn was dependent on him for care and support. Both in my view were also financially dependent on each other. I was of the view that [the plaintiff] had a meritorious case to raise for a family provision claim on his late sister’s estate, relying on this category of eligible applicant.

In Re Stojanovska,[23] Englefield JR identified that

[w]here a person relies on paragraph (k) of the definition of eligible person, pursuant to s 91(2)(b) of the Act, the Court must not order provision for a plaintiff unless satisfied that the plaintiff was wholly or partly dependent on the deceased for his proper maintenance and support, at some time in their mutual lifetimes.[24]

[23][2020] VSC 702.

[24]Ibid [4] (emphasis in original) citing Veniou v Equity Trustees Ltd [2018] VSC 832, [49].

However, the issue in question in Re Stojanovska was not whether the plaintiff came within subparagraph (k) of the definition of eligible person but rather whether the plaintiff had shown dependency on the deceased at the time of the deceased’s death. In Re Meuleman,[25] Englefield JR considered the concept of ‘a member of the household’ for the purposes of s 91(k):
[25][2020] VSC 376.

Membership of the Household: Cohabitation
In New South Wales, membership of a household requires cohabitation. Regular visiting without staying overnight is insufficient. However, sharing a rented house or boarding arrangements, while involving cohabitation, are not considered sufficient to create the relationship of ‘member of the household’ between the cohabitants. Therefore, it may be said that the type of cohabitation required to form a ‘household’ for family provision eligibility in New South Wales needs the underpinning of a relationship and cannot come about merely from expedience. The parties need to share not only a residence, but their lives. It is a combination of physical location and emotional attachment or unity. It is a question of fact and degree.
Multiple or split households are permissible. One person may be the member of more than one household simultaneously. For example, a child in a shared custody arrangement or a person with multiple spousal relationships. On the other hand, one household may inhabit two properties.
Although no minimum time is prescribed in either the Victorian Act or the NSW Act, the cohabitation must have sufficient duration, as well as sufficient quality of relationship, to satisfy ‘continuity and permanency’.

Membership of the Household: Relationship Factors
The concept of a ‘household’ is an abstract concept. Further, no single ‘relationship factor’ is definitive. Nonetheless, some key features of a relationship that transform people residing together into a ‘household’ for family provision purposes include:
(a)       a bond and unity; a concern with and interest in the lives of each other;
(b)       a degree of continuity and permanency of mutual living arrangements;
(c)       intimate connection with another member of the household;
(d)willingness to permit return, or to return, when faced with vicissitudes, turbulence or failed attempts at living independently;
(e)mutual support, community of resources, voluntary restraint on personal freedom for the sake of the other; and
(f)a bond between them that must be quasi familial or that of friendship rather than that of landlord and boarder or master and servant.[26]

[26]Ibid [38]-[41] (citations omitted) (emphasis added).

Relevant to the prospects of his claim, the plaintiff’s affidavit states:

(a) he was invited by the deceased to live with her in mid-October 2019;[27]
[27]It is not clear from the plaintiff’s affidavit when he in fact commenced living with the deceased, however it appears he lived with her for approximately 5 months prior to her death.

(b) while he cared for the deceased he received a carer’s allowance;[28]

(c) the plaintiff assisted the deceased with daily tasks, including taking her to all her medical appointments, and the deceased had given him her credit card and authority to use it to pay for groceries and bills; and

(d) the deceased provided him with ‘a small allowance of $50 per week to reimburse [him] for any out-of-pocket expenses’.[29]

[28]No documentary evidence was provided of this fact.

[29]No documentary evidence was provided of this fact.

The plaintiff also deposed the following:

I say I was a member of the common household of [the deceased] and was living with her at the time of her death and would have continued to live with her had she not passed away.
I relied on [the deceased] for my basic needs but also for emotional support. [The deceased] generously provided from [sic] me financially by allowing me to stay with her, paying for utilities, food and some nominal spending money. I offered [the deceased] emotional and physical support. We certainly relied on each other.
Unlike my siblings, I am on a disability pension and have no assets or superannuation to live on. I am in poor physical health due to several injuries sustained while working on boats and motor vehicle accident in the 1980’s. … For these reasons I have little capacity for work.
[The deceased] felt she had a moral obligation to provide for me. She told me so and did so by way of the Will even though it is unsigned. She also provided for me by way of the NLBN and it was just an oversight that [the deceased] failed to tick the box in Section 4B of the NLBN form. Scott North from Rathdowne Financial Management will provide evidence of Margie's intention in respect to the NLBS.

The plaintiff’s affidavit did not include any further details or documentary evidence in relation to his financial position. Based on the plaintiff’s affidavit, his claim under Part IV was weak, and in particular, given the short time he had lived with the deceased, it is unlikely that he would have been found to have been an eligible person under s 90(k).

There was also little evidence to establish that the plaintiff was wholly or partly dependent on the deceased for his proper maintenance and support during their mutual lifetimes. That the plaintiff received a carer’s allowance while living with the deceased is irrelevant for this purpose[30] and the allowance for ‘out-of-pocket expenses’ does not amount to maintenance and support. Further, while the plaintiff lived with the deceased while caring for her, there is no evidence of his living situation prior to this time and it appears that the provision of accommodation was to facilitate the deceased’s maintenance and support, rather than that of the plaintiff.
[30]Administration and Probate Act s 91(3).

Nor was there sufficient evidence to satisfy the Court that the deceased had a moral duty to provide for his proper maintenance and support[31] or to have an understanding of the plaintiff’s need through documentary evidence of his financial situation.[32]
[31]Ibid s 91(2)(c).
[32]See, eg, Re Janson [2020] VSC 449.

An applicant initiating a Part IV proceeding is required, inter alia, to file an affidavit prior to the first return of the summons for directions, if the estate exceeds $1,000,000, that sets out all relevant matters set out in s 91A of the Administration and Probate Act in support of a claim for provision. On the basis of the plaintiff’s affidavit, his claim was unlikely to succeed as the relevant evidence was not included in his affidavit. This was possibly because the claim was frivolous or, more likely, pursuant to s 18(d) of the Civil Procedure Act, on the factual and legal material available at the time of making the claim, the claim did not have a proper basis. Accordingly, the Court is satisfied that the non-parties breached s 18(d) of the Civil Procedure Act.

Obligation to ensure the costs were reasonable and proportionate

Section 24 of the Civil Procedure Act imposes an overarching obligation on parties and legal practitioners to ‘use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate’ to the complexity or importance of the issues in dispute and the amount in dispute. This is consistent with the overarching purpose of the Civil Procedure Act, namely to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.’[33]
[33]Civil Procedure Act s 7(1).

In Yara Australia Pty Ltd v Oswal (‘Yara’)[34] the Court of Appeal explained:

Section 24 adopts a flexible test. There is plainly no costs matrix or formula that can be applied in determining whether the parties have met their obligations. Rather, the court must weigh the legal costs expended against the complexity and importance of the issues and the amount in dispute, in order to determine whether the parties used reasonable endeavours to ensure those costs were proportionate.
Each party and their solicitor and counsel have an obligation to comply with the overarching obligation. Whether any of them have breached that overarching obligation is to be determined by an objective evaluation of their conduct having regard to the issues and the amount in dispute in the proceeding. The legal practitioners’ duty is non-delegable. The obligation will override their duty to their client where the discharge of that duty would be inconsistent with the overarching obligation. The legal practitioners will not be relieved of this overarching obligation because of the instructions of their client.[35]

[34](2013) 41 VR 302 (‘Yara’).

[35]Ibid 307 [13]–[14] (Redlich and Priest JJA and Macaulay AJA).

The value of the deceased’s estate set out in the inventory of assets is $1,120,377.51. While there is a dispute over the value of the deceased’s Brunswick property, in an email to Ms Carmelli on 19 July 2021, the defendant’s solicitors estimated the value of the estate at approximately $1,550,000. Such a value is considered a modest estate in today’s terms.

The issues to be determined for the plaintiff’s claim for provision from the deceased’s estate were not complex or unusual. By the joint trial document filed 18 November 2021, the parties estimated their costs up to and including the hearing would be $115,000 for the plaintiff and $105,000 for the defendant. A total of $250,000 for costs in a modest estate is, prima facie, not reasonable and proportionate to the issues in dispute.

The bill of costs prepared by Blackstone Legal Costing assessed the plaintiff’s costs as being $44,267.26 (inclusive of disbursements and GST), comprising:

(a) $826.06 for the probate caveat;

(b) $1,548.80 for the superannuation aspects; and

(c) $41,892.40 for the Part IV proceeding.

Having regard to the stage to which the proceeding had progressed, prima facie, the costs of the plaintiff of $41,892.40 for the Part IV proceeding are not reasonable and proportionate to the issues in dispute.

Similarly, the defendant’s costs of $59,349.70 are, prima facie, not reasonable and proportionate. However, as submitted by the defendant, a significant portion of those costs were due to the manner in which the plaintiff’s case was run, the nature of the evidence and the multiple issues raised on the part of the plaintiff, and the need for the defendant to respond to each of these issues.

The Court repeatedly warns practitioners and litigants of the necessity of ensuring that costs of Part IV proceedings are proportionate to the issues in dispute and the size of the estate. In Forsyth v Sinclair (No 2) (‘Forsyth’)[36] the Court of Appeal warned that

[w]e consider that it is a matter of concern that in many family provision cases the amount available for distribution among the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before the costs get out of proportion.[37]

[36](2010) 28 VR 635 (‘Forsyth’).

[37]Ibid 642 [27] (Neave and Redlich JJA and Habersberger AJA).

Similar concerns have been raised in other jurisdictions, for example, in Tchadovitch v Tchadovitch[38] Allsop P stated:

Most disputes under the Family Provision Act 1982 or Ch 3 of the Succession Act 2006 are between ordinary people who have the misfortune to disagree about the just and appropriate distribution of an estate of someone with whom they had a connection, generally of blood, love or friendship. Such proceedings should always be run by the parties and their legal practitioners with a keen eye to the minimisation of costs at all stages.[39]

[38](2010) 79 NSWLR 491.

[39]Ibid 492 [3].

The affidavit filed by the plaintiff contains a substantial amount of irrelevant and inadmissible information. For example, the plaintiff’s affidavit affirmed 21 July 2021 included irrelevant background in relation to family dynamics and extensively canvassed events and discussions involving the plaintiff, the defendant and other family members following the deceased’s death that were not relevant to the issues in dispute. The plaintiff’s affidavit also included without prejudice communications from the defendant’s lawyer.

The plaintiff’s affidavit also deals extensively with the issues of the deceased’s unsigned will and the deceased’s superannuation. These matters were of extremely limited relevance to the plaintiff’s Part IV claim. While they may arguably have been relevant to the deceased’s intentions in relation to providing for the plaintiff,[40] the prominence given to these issues was not in proportion to their impact on the issues in dispute, particularly given the fact that the will was unsigned and the binding death benefit nomination was not completed by the deceased.
[40]Administration and Probate Act s 91A(1)(c).

In communications between the parties, including in the preparation of the joint trial document, Ms Carmelli also persisted with pressing irrelevant and peripheral matters rather than focussing on relevant issues.

Further, the plaintiff’s affidavit failed to address issues that were, in fact, relevant to his claim, for example, there was little evidence of the plaintiff’s financial position or need.

It is self-evident that the inclusion of irrelevant or otherwise inadmissible material in affidavits causes unnecessary costs of perusal by the opposing party, increased costs of responsive affidavits and, if objection is ultimately taken at the hearing, the costs of a longer hearing.[41] As a result of the matters raised by the plaintiff, the defendant’s affidavits extensively deal with irrelevant matters and matters that had little bearing on the issues actually in dispute.
[41]See, eg, Hansen v Hennessey (No 2) [2014] VSC 115, [22] (Lansdowne AsJ).

This, in turn, affects the quantum of the defendant’s costs such that they were also disproportionate to what is involved in a Part IV proceeding, particularly given the size of the estate and the issues in dispute. The conduct of the plaintiff’s proceeding by Ms Carmelli and MCK Legal placed the defendant in a difficult position given the manner in which the plaintiff’s case was run, as it created a need to consider and respond to the many and persistent irrelevant and peripheral issues.

The affidavits filed by Ms Carmelli in relation to costs suggests she does not fully appreciate the Court’s concerns with the quantum of costs incurred in the proceeding or the manner in which the plaintiff’s claim has been conducted by her. Despite warnings from the Court in orders made on 19 November 2021, the Court’s email on 22 December 2021 and at the hearing on 4 February 2022, Ms Carmelli did not address the concerns raised by the Court in her affidavit of 16 May 2022 and instead maintained that the defendant’s rejection of her unreasonable offer on 4 February 2022 should entitle her to indemnity costs from that point in time.

Even after the Court made orders adding Ms Carmelli and MCK Legal as non-parties for the purposes of investigating possible contraventions of the Civil Procedure Act and determining questions of liability for costs, Ms Carmelli maintained this position in later affidavits. In her 22 September 2022 affidavit Ms Carmelli still does not directly deal with the Court’s concerns about irrelevant matters raised in the plaintiff’s affidavits, instead stating that the defendant’s costs ‘seem considerably excessive’ and that in the event the Court finds in the defendant’s favour the defendant’s costs should be assessed.

In her affidavits Ms Carmelli also emphasised that she is a general practitioner and, as she is not an expert in the law of wills and estates, she relied on advice of experienced counsel that the plaintiff had a meritorious claim. This is an unusual statement and it in no way excuses her from her ongoing duty to ensure that costs incurred throughout the proceeding were reasonable and proportionate.

In an email on 18 June 2021, the defendant’s solicitors clearly identified the defendant’s position and the issues in dispute, stating:

At this stage we do not consider that your client is an eligible person as he was living in the house for only a short period. If he is an eligible person then it is not clear what if any moral duty the deceased had for his proper maintenance and support. It is also not clear the degree to which your client was financially dependent on the deceased if at all.

The advice the plaintiff received from counsel in the telephone conference on 9 December 2020, reflected in the written advice dated 2 August 2021, also identified the key issues as being whether the plaintiff was an eligible person, whether he was dependent upon the deceased and the plaintiff’s need. The advice also made clear that the issues of superannuation and the unsigned will were of limited relevance stating:

I was of the view that the testator having failed to execute her Will and failed to ensure that she had ticked a clear box on the form to benefit [the plaintiff] with her superannuation benefits, raised serious doubts about the deceased’s true intentions when it came to benefiting her brother over his sisters and father. It was my view that all of these factors conspired against [the plaintiff] being able to successfully show that he was the intended beneficiary of the deceased’s superannuation entitlements and her estate.

Having the benefit of both the defendant’s position and advice of counsel, it was incumbent on Ms Carmelli and MCK Legal to avoid unnecessary costs by focussing on the issues in dispute.

The issues in dispute were clearly identified and were not particularly complex. The costs incurred by the plaintiff were not proportionate to those issues. Further, the conduct of the plaintiff’s proceeding also exacerbated the costs incurred by the defendant. Ultimately, Ms Carmelli and MCK Legal failed to use reasonable endeavours to ensure that costs incurred in connection with the proceeding were reasonable and proportionate.

Obligation to use reasonable endeavours to resolve the dispute

Section 22 of the Civil Procedure Act provides:

A person to whom the overarching obligations apply must use reasonable endeavours to resolve a dispute by agreement between the persons in dispute, including, if appropriate, by appropriate dispute resolution, unless—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only judicial determination is appropriate.

Like s 20 of the Civil Procedure Act, s 22 ‘require[s] parties to make real attempts to resolve disputes … before the costs incurred make resolution difficult if not impossible’.[42] The obligation reflects the aims of the Civil Procedure Act to build a culture in which litigants are encouraged to resolve their cases without going to court and actively encourages litigants and their lawyers to use reasonable endeavours to achieve early resolution of cases by agreement or to narrow the issues in dispute.
[42]Babcock & Brown DIF III Global v Babcock & Brown International Pty Ltd [2015] VSC 612, [78] (Riordan J) (‘Babcock v Babcock’).

Mr Scott’s affidavit filed on 17 February 2022 identifies that:

(a) The defendant’s last offer at the mediation held on 21 June 2021 was for the plaintiff to receive a total sum of $140,000 with $30,000 to be paid within 14 days of acceptance. Following a request from the plaintiff that the offer remain open for 14 days, the offer lapsed on 5 July 2021 without any response from the plaintiff.

(b) By letter dated 19 July 2021 the defendant offered to pay the plaintiff the sum of $300,000 in full and final settlement of the matter, with each party to bear their own costs. The offer was open for 13 days from the date of the letter and, at the plaintiff’s request, that offer was extended for a further 14 days. However, once again the defendant received no response from the plaintiff before the offer lapsed.

In her affidavits Ms Carmelli details that prior to issuing proceedings she wrote to the plaintiff’s sister, Pauline Pearson, on 2 July 2020 in relation to the dispute over the unsigned will and that on 27 August 2020 she received a letter from the defendant’s solicitors indicating that their client would be willing to participate in a family meeting at an appropriate time. After subsequent correspondence Ms Carmelli received an email on 30 September 2020 from the defendant’s solicitors making the following offer:

1.$130,000.00 payment to [the plaintiff] — to be the equivalent of his pension for five years that Centrelink will deem his [sic] is in possession of the money; and
2.Divide the rest and residue of the estate, which is to include all superannuation death benefits payable, equally between [the deceased’s sisters] and your client.

On 1 October 2020 Ms Carmelli received a further email from the defendant’s solicitors withdrawing the offer as the defendant wished to receive further financial advice on the matter. In her affidavit of 5 September 2022, Ms Carmelli states:

I informed my client that the offer had been withdrawn. My client expressed his disappointment and indicated that he felt his family had little or no concern for his welfare and that they were not honouring the wishes of his late sister. However, he agreed to take no further action in respect of the caveat that I had filed on his behalf on the estate. The caveat was subsequently allowed to lapse and on 20 January 2021 the Court granted Letters of Administration to the defendant.

I say my client would have settled on the offer made to him on 30 September 2020, which by my calculations would have provided him with a sum of on [sic] about $500,000. This sum is based on the assumption that the [Brunswick property] would sell for more than $750,000 which was the amount stated in the inventory of assets and liabilities filed by the defendant with his Application for Letters of Administration. A google search of the value of like properties in the Brunswick area indicated the Brunswick property could be worth up to $1.5 million.

In relation to the final offer made at the mediation, Ms Carmelli deposes in her 25 March 2022 affidavit:

I … confirm that the mediation was terminated by mid-day. [The plaintiff] became very upset by the offer that was made to him particularly since quite a different offer had been put to him on 30 September 2020, (which had later been withdrawn). [The plaintiff] expressed his dismay that his family would treat him with so little or no regard. He indicated that [the deceased’s] wishes for the disposition of her estate were being totally ignored. He became emotional and distressed. For these reasons the mediation was terminated ‘abruptly’. Mr Stavris requested an extension of time on the offer to give [the plaintiff] time to properly consider it without, if possible, the emotions attached to it.

In her 5 September 2022 affidavit Ms Carmelli states that ‘[t]he mediation failed because the offer which was made to my client was as put by him “insulting”’.

In relation to the 19 July 2021 offer, Ms Carmelli states in her affidavit filed 25 March 2022:

Due to the COVID restrictions, it was difficult to have meaningful discussions with my client and with counsel however, the offer of settlement that had been made on 19 July 2021 was put to [the plaintiff] and over time I was able to obtain instructions. [The plaintiff] was very disappointed by the offer and despite my efforts and those of counsel, the offer was not accepted by him. I subsequently allowed the offer to lapse.

As stated, the plaintiff’s rejection of the 19 July 2021 offer was unreasonable. The offer made on 30 September 2020 is ultimately irrelevant as it related to the dispute over the unsigned will and not the plaintiff’s Part IV application.

It is often difficult to determine whether a party and, particularly a solicitor themselves, used reasonable endeavours to resolve a dispute by agreement without understanding the entire course of, and the context in which negotiations between the parties unfolded, as well as the instructions upon which the solicitors were acting.[43] In this proceeding there is substantial information presently before the Court in relation to various negotiations concerning multiple issues raised by Ms Carmelli. The issues outside of the Part IV proceeding were ultimately not pursued whereas the Part IV proceeding continued to be pursued, despite generous offers made by the defendant. All of these issues caused the defendant to incur costs.[44] It is difficult to assess Ms Carmelli’s attempts to encourage the plaintiff to resolve the dispute, particularly when she failed to file the plaintiff’s affidavit with the Court before the first return date on 5 June 2021 and Mr Scott wrote to Ms Carmelli on 16 July 2021 asking for the affidavit to be sent to him. Ultimately, the affidavit was filed on 21 July 2021 whereas the Calderbank offer was dated 19 July 2021. In her later affidavits, Ms Carmelli’s responses to the offers are after the fact and appear self serving, referring to her ‘effort’ to convince the plaintiff to accept the 19 July 2021 offer’.
[43]See, eg, Lee v Korean Society of Victoria [2015] VSC 262, [58] (John Dixon J).
[44]See references at [16], [18], namely, alleged unsigned will of deceased, unsigned binding death nomination, caveat lodged improperly on title to Brunswick property and caveat preventing grant of probate of deceased will.

Nonetheless, the use of reasonable endeavours to resolve the dispute, as well as other overarching obligations such as the duty to co-operate, suggest that it is prudent to communicate the rejection of an offer of compromise and to articulate the parties’ position, such as through the making of counter offers.

Ms Carmelli’s failure to respond to the defendant’s offers and the plaintiff’s failure to articulate his position or make a counter offer to the 19 July 2021 offer is not explained by Ms Carmelli. In all of the circumstances, including Ms Carmelli’s observations of the plaintiff,[45] the Court is satisfied that Ms Carmelli and/or MCK Legal breached their obligations under s 22 of the Civil Procedure Act.
[45][17].

Obligation to cooperate in the conduct of civil proceeding

Section 20 of the Civil Procedure Act provides:

A person to whom the overarching obligations apply must cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding.

The duty in s 20 requires parties to make proper attempts to avoid distracting and expensive disputes about non-essential issues.[46] The duty highlights the importance of direct and meaningful communications between legal practitioners for the purpose of reducing interlocutory disputes and avoiding unnecessary costs.[47]
[46]See, eg, Babcock v Babcock [2015] VSC 612, [71], [79] (Riordan J).
[47]Ibid [79]. See also Hera Project Pty Ltd v Bisognin (No 4) [2017] VSC 270, [63] (Riordan J).

The Scott affidavit raised a prima facie case that the non-parties breached their obligation to cooperate by, inter alia, repeatedly seeking to include matters that were not agreed upon as ‘agreed facts’ in the joint trial document. In particular, Mr Scott deposes that:

(a) On 9 November 2021, Ms Carmelli sent him a draft joint trial document by email.

(b) On 12 November 2021, the defendant’s solicitors emailed a letter to Ms Carmelli stating the following about the draft joint trial document:

You [sic] client’s draft trial document does not contain all the information that the Court has ordered. In addition, it includes matters that your client asserts are to be jointly agreed to which our client does not agree to. For example, we do not understand why the issue of the superannuation is relevant at all to your client’s claim for proper maintenance and support under Part IV of the … Act. Even if it is some way relevant to the claim, which our client denies, our client disputes the characterisation that has been given to that issue in your draft document.
Given that the document is to contain agreed facts, the fact that our client does not consent to include these matters does not mean that your client cannot attempt to raise them at the trial and lead evidence. Although we put you on notice that our client will object to your client’s attempts at relying on such matters.

The letter enclosed a draft trial document which complied with the Court’s order.

(c) On 15 November 2021, Ms Carmelli emailed him a copy of the amended trial document for execution which again included ‘agreed facts’ with which the defendant did not agree.

(d) On 16 November 2021, the defendant’s solicitors emailed Ms Carmelli a further amended joint trial document, incorporating some of the plaintiff’s changes but deleting some of the agreed facts. In a letter Mr Scott stated:

You will note that by in [sic[ large, we have accepted your changes, including the two you sought in your email of today. However, there are a few entries under the “Plaintiff’s position” [of the “Agreed Facts”] section which our client does not agree to have included. The fact that our client has not agreed to these mean that they cannot be included in the joint document but that will not preclude your client from seeking to give evidence on those matters.

(e) Later on the same day, 16 November 2021, Ms Carmelli again sought to include matters under ‘Agreed Facts’ of the trial document which the defendant had deleted. In response, Mr Scott emailed Ms Carmelli at 3:45pm stating:

We reiterate that the nature of the joint trial document is that the entries listed in the document are agreed by all parties. Our client does not consent to the inclusion of paragraphs 19, 20, 22 and 23 and therefore will not sign the joint trial document if they are included.
The fact that they are not included in the joint trial document does not preclude your client from leading evidence about the contents of each entry.
We ask that you please sign the document as is and send through to our office for signing.

(f) At 4:52pm on 16 November 2021, Ms Carmelli sent a reply email to Mr Scott stating:

I understand the point you are making however we fail to see how your client could object to their inclusion given that all matters included depict our client’s position and are included in the affidavits filed by the Plaintiff and by others on his behalf.
Having said this we would agree to sign the agreed joint trial document excluding paragraphs 19, 20, 22 and 23 and pending the deletion of item 22 on page 7 due to its duplication (see item 11 on page 6), provided you agree to include a notation in the Minutes of Proposed Consent Order that at trial we will provide evidence of medical condition of our client by way of affidavit from the Plaintiff's treating physician.

(g) At 6:35 pm on 16 November 2021, Mr Scott replied:

Our client’s position remains that he does not consent to the inclusion of paragraphs 19, 20, 22 and 23 in the joint trial document for the reasons stated in our previous email.
In reply to your below email, our client does not agree to include a notation in the Minutes of Proposed Consent Order that you will provide evidence of medical condition by way of affidavit from the Plaintiff’s treating physician.
This is the first you have proposed such evidence. The Order of Judicial Registrar Englefield dated 17 August 2021 provided for the defendant [sic] to file and serve affidavit material on which the plaintiff intends to reply [sic]. Your client filed and served material including an expert report in relation to your client’s health. Your client is not entitled to file further affidavit material.
If you fail to sign the joint trial document by 9.30am tomorrow morning (Wednesday 17 November) then we will write to the Court, attaching the unsigned joint trial document, and advise the Court that the Plaintiff seeks to include paragraphs 19-23 and that the Defendant does not agree.

(h) At 9:15 am on 17 November 2021, Ms Carmelli emailed the Court, attaching a proposed joint trial document and relevantly stating:

The parties are in a stale mate in respect to the inclusion of paragraphs 19 to 22 at page 4 of the document in respect to the Plaintiff’s Position.
We maintain that these paragraphs need to be included as they represent the Plaintiff’s Position whereas the Defendant objects to their inclusion.
…
As a way forward the parties could provide individual Trial Documents. However the parties agree on all matters other than the inclusion of four paragraphs as indicated above.
…
Please advise how the parties are to proceed.

The Deputy Prothonotary responded to Ms Carmelli’s email recommending that the parties obtain the advice of counsel or, alternatively, address any issues in open Court at the directions hearing on 22 November 2021. The Court also reminded Ms Carmelli that correspondence with the Court must be limited to uncontroversial matters.

(a) On 17 November 2021, the defendant’s solicitors emailed the Court outlining its position in respect of the matters raised in Ms Carmelli’s email.

(b) Subsequently, there was further communication between the parties in respect of the contents of the joint trial document and on 18 November 2021 the parties agreed to a joint trial document.

The joint trial document ultimately filed did not include the disputed paragraphs from the draft trial document. The disputed paragraphs provided:

19.He suffers from several health issues caused by working in the fishing industry including but not limited to injuries to his shoulders and arm.
20.He has been on a Methadone program since 2010 and has a longstanding history of substance used [sic] involving illicit drugs and alcohol.
21.He is on a waiting list for surgery to replace his right hip due to degenerative arthritis.

22. He suffers from anxiety and depression which is escalating.
23.He has no assets and faces uncertain future in respect to his financial position and accommodation.

In her affidavit filed 25 March 2022, Ms Carmelli stated:

The sworn valuation for the property and an affidavit from [the plaintiff’s] treating physician were the two major issues for the parties to agree on the joint trial document. I considered these to be significant issues and hence my insistence that the Defendant agree to have these documents included.

In her affidavit filed 5 September 2022, Ms Carmelli stated:

As the matter progressed, and a joint trial document was required, I insisted that my client should be afforded the opportunity to place before the Court affidavits in respect to:
a. A sworn valuation for the Brunswick Property; and
b.An assessment from my client’s treating physician in respect to his current and future needs.

Much time was spent reaching agreement on these two matters which I regarded as critical to my client’s case.

The affidavits filed by Ms Carmelli in relation to costs and the Court’s own motion investigation did not otherwise deal with the parties’ dispute in relation to the joint trial document.

The orders of Englefield JR made on 22 October 2021 contained the following order in relation to the filing of an agreed joint trial document:

By 4.00 pm on 14 November 2021, the parties shall file an agreed joint trial document addressing the following matters:
a.a list of agreed facts and documents to be tendered by agreement of the parties (such an agreed statement shall constitute evidence before the Court of the facts it contains);

b. a list of the legal issues to be determined;
c. a timetable for the hearing…
d.a schedule of the affidavits that the parties intend to rely on in the trial and whether either party objects to any parts of the affidavits (if so, the parties should consult in an effort to determine the objections); and

e. an estimate of the costs of each side up to and including the trial.

That the agreed statement was to be evidence of the facts it contained served to achieve the overarching purpose of the Civil Procedure Act to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[48]
[48]Civil Procedure Act s 7(1).

The parties were obliged by s 20 of the Civil Procedure Act to cooperate in discussions regarding the facts to be agreed. Where a dispute arises this will inevitably involve clear communication of why certain matters are sought to be included. Where it becomes clear that certain matters cannot be agreed upon for inclusion, the duty to cooperate requires that parties avoid protracted, distracting and expensive dispute which would undermine the purpose of the joint trial document. As the agreed facts were themselves to be evidence in the proceeding it is plainly inappropriate, and a failure to cooperate, for a party to leverage unrelated issues or disputes in negotiation over the contents of the joint trial document.

The defendant’s solicitors made clear the defendant’s position in relation to the disputed matters the plaintiff sought to include as agreed facts and correctly informed Ms Carmelli that the fact those matters were not included in the joint trial document would not preclude evidence being led about those matters. In face of that position, Ms Carmelli repeatedly pressed for the inclusion of those matters as agreed facts despite putting forward no cogent reason as to why the defendant should change his position. Ms Carmelli also sought to use the dispute about the agreed facts as a bargaining chip for the extraneous issue of whether the defendant would consent to the plaintiff putting on further affidavit evidence. Subsequently, Ms Carmelli unnecessarily raised contentious issues with the Court rather than seeking to cooperate and come to agreement.

Ms Carmelli’s unflinching position in relation to the inclusion of the disputed matters in the joint trial document constituted a failure to cooperate and resulted in unnecessary costs for both parties. Accordingly, the Court considers that the non‑parties’ conduct in relation to the preparation of the joint trial document amounts to a breach of s 20 of the Civil Procedure Act.

Obligation to only take steps to resolve or determine the dispute

Section 19 of the Civil Procedure Act provides:

For the purpose of avoiding undue delay and expense, a person to whom the overarching obligations apply must not take any step in connection with any claim or response to any claim in a civil proceeding unless the person reasonably believes that the step is necessary to facilitate the resolution or determination of the proceeding.

In Bolitho v Banksia Securities Ltd (No 18) (remitter),[49] John Dixon J observed:

The requirement ‘reasonably believed’ is not directed to what a reasonable person would have believed, but whether, objectively assessed by reference to the circumstances in which the step was taken, it was open for a person in the position of the contravener to believe that the step was necessary to facilitate the resolution or determination of the proceeding.
The expression ‘any step in connection with any claim or response to any claim in a civil proceeding’ is not to be given a narrow interpretation. It includes conduct such as sending correspondence. I can see no justification in the text, context or purpose of the Act, including by reference to extrinsic materials, for concluding that the concept of a ‘step’ is to be confined to the filing of formal process as required by the Rules. One objective of the Civil Procedure Act is to change litigation culture, in particular, to avoid unnecessary delay and cost in civil litigation occasioned by a party taking steps for tactical reasons or to oppress another party in a manner that fails to focus on the real issues in dispute in the proceeding. That objective is facilitated by a broad view of what constitutes a ‘step’.
It cannot be gainsaid that correspondence or communications between parties, whether by the legal representatives or otherwise, is an essential component of the conduct of civil litigation. The scope of the obligation, and its effectiveness in advancing the purposes of the Act, would be unduly constrained by the construction that the defendants contended for.
Further, ‘step’ must be given a consistent meaning in its use throughout the Act. The use of that term in relation to case management in Part 4.2, or the now-repealed Chapter 3 (which expressly referred to the exchange of correspondence as a ‘step’), is consistent with the conclusion that Parliament envisaged that a broad range of acts could constitute taking a ‘step’ in the proceeding, including correspondence between parties.
As the Contradictor correctly submitted, correspondence can plainly be influential in the conduct of a proceeding by legal practitioners. Correspondence that threatens to seek costs against a party or practitioner personally without a proper basis, or inappropriately pursues tactical or strategic objectives that are collateral, extraneous or ulterior to the resolution or determination of the proceeding, are inappropriate steps in breach of the obligation.[50]

[49][2021] VSC 666 (‘Bolitho’).

[50]Ibid [1351]–[1255] (citations omitted).

The Court is satisfied that, in their communications with the defendant’s solicitors and the Court regarding the joint trial document, the non-parties took steps that were unnecessary to facilitate the resolution or determination of the proceeding. As the defendant’s solicitors clearly articulated to Ms Carmelli more than once, the fact that certain matters were not agreed by the defendant to be included in the joint trial document did not preclude the plaintiff from leading evidence about those matters.

Furthermore, the inclusion of irrelevant matters and without prejudice discussions in the plaintiff’s affidavits constituted breaches of s 19 of the Civil Procedure Act. The inclusion of such matters in the affidavits filed was unnecessary to facilitate the resolution or determination of the proceeding and was causative of undue expense for both the plaintiff and the defendant.

Obligation to narrow the issues in dispute

Section 23 of the Civil Procedure Act provides:

If a person to whom the overarching obligations apply cannot resolve a dispute wholly by agreement, the person must use reasonable endeavours to—
(a)resolve by agreement any issues in dispute which can be resolved in that way; and

(b) narrow the scope of the remaining issues in dispute—
unless—
(c) it is not in the interests of justice to do so; or
(d)the dispute is of such a nature that only judicial determination is appropriate.

The Court expects legal practitioners to have the ability to recognise the issues relevant to a particular proceeding. Section 23(a) requires practitioners to actively seek to narrow those issues by agreement, while s 23(b) requires them to take active steps to ensure that the relevant issues, which have not been so resolved, are not obscured by extraneous or irrelevant matters.

The affidavits filed by the non-parties on the plaintiff’s behalf contain irrelevant matters which unnecessarily enlarged the matters in dispute. For example, the plaintiff’s affidavits extensively recited settlement discussions with the defendant and other members of the plaintiff’s family and included irrelevant family disputes. As a result the defendant went to unnecessary expense in considering and responding to those matters. While s 29 provides for exceptions, none are relevant to the extraneous and irrelevant matters raised throughout the proceeding.

In her affidavits Ms Carmelli emphasises that she is a general practitioner and not an expert in the law of wills and estates. However, any inexperience in the area does not itself excuse her of compliance with her overarching obligations and, in any event, she had the benefit of advice from experienced counsel identifying the relevant issues for the plaintiff’s claim. Furthermore, the defendant had clearly articulated his position in relation to the plaintiff’s claim and identified the relevant hurdles the plaintiff’s Part IV claim would face.

The Court expects a practitioner in Ms Carmelli’s position to ensure that the plaintiff’s claim is restricted to actual issues in dispute and, in the circumstances, is satisfied that the pressing of irrelevant and distracting matters in the material filed on the plaintiff’s behalf, and in correspondence with the defendant’s solicitors, amounted to a failure to use reasonable endeavours to narrow the scope of the issues in dispute as required by s 29(b).

Furthermore, the Court is satisfied that, in their communications with the defendant’s solicitors and the Court regarding the joint trial document, the non-parties failed to resolve by agreement any issues in dispute which can be resolved in that way.

The non-parties’ approach to the Court’s own motion inquiry

Ms Carmelli’s approach to the Court’s own motion inquiry under the Civil Procedure Act, outlined above, has itself served to undermine the purpose of the Civil Procedure Act to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

The failure of Ms Carmelli to address the Court’s concerns in a timely and appropriate manner, despite being given significant latitude, falls well below the standard expected of practitioners. This has made the Court’s task of assessing the conduct of the parties and non-parties more onerous and has itself been inconsistent with the paramount duty to further the administration of justice in relation to any civil proceeding[51] and the overarching obligation to minimise delay.[52]
[51]Civil Procedure Act s 18.
[52]Ibid s 25.

Should a costs order be made against the non-parties?

For the reasons above, Ms Carmelli and MCK Legal breached their overarching obligations under ss 18, 19, 20, 23 and 24 of the Civil Procedure Act. Pursuant to s 29(1)(a) if the Court is satisfied, on the balance of probabilities, that a person has contravened any overarching obligation the Court may make any order it considers appropriate in the interests of justice, including but not limited to, an order that the person pay some or all of the legal costs or expenses of any person arising from the contravention of the overarching obligation.

Recently in Re Hayes (No 3),[53] the Court explained:

In applying s 29, a two-step process is involved: the Court first considers whether an order should be made, before turning to the type of order.[54] In making an order under s 29, the Court must seek to give effect to the overarching purpose set out in s 7(1) of the Civil Procedure Act,[55] namely, the facilitation of the just, efficient, timely and cost-effective resolution of the real issue in dispute. Further, an order will ‘ordinarily be limited to costs or expenses that were caused by the contravention of an obligation to the court’.[56]

[53][2023] VSC 5 (McMillan J).

[54]Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 8) [2014] VSC 567, [255] (John Dixon J) (‘Hudspeth (No 8)’).

[55]Ibid [257] (John Dixon J).

[56]Re Hayes (No 3) [2023] VSC 5, [71] citing Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 4) [2013] VSC 14, [5] (John Dixon J), referred to in Yara (2013) 41 VR 302, 310–1 [24] (Redlich and Priest JJA and Macaulay AJA). See also Bolitho [2021] VSC 666, [1724] (John Dixon J); Yunghanns v Colquhoun-Denvers (s 29 CPA application) [2021] VSC 243, [109]– [110] (Daly AsJ).

The discretion to be exercised under s 29 is governed by the principles in Briginshaw v Briginshaw.[57]
[57](1938) 60 CLR 336; Dura (2014) 48 VR 1, 42 [108] (Dixon J).

In addition to its powers under the Civil Procedure Act the Court retains a general discretion as to costs under s 24 of the Supreme Court Act 1986 (Vic). Rule 63.23 of the Rules sets out the circumstances in which a lawyer may be liable to pay the costs of a party to a proceeding, often referred to as a ‘wasted costs’ order. In particular, r 63.23(1) provides:

Where a solicitor for a party, whether personally or through a servant or agent, has caused costs to be incurred improperly or without reasonable cause or to be wasted by a failure to act with reasonable competence and expedition, the Court may make an order that—
(a)all or any of the costs between the solicitor and the client be disallowed or that the solicitor repay to the client the whole or part of any money paid on account of costs;
(b)the solicitor pay to the solicitor’s client all or any of the costs which the client has been ordered to pay to any party;
(c)the solicitor pay all or any of the costs payable by any party other than the client.

Only exceptionally will the Court consider making a non-party costs order. A non‑party costs order will be made in situations ‘where the interests of justice justify a departure from the general rule that only parties to proceedings may be subject to costs orders’.[58] In addition, ‘[i]n most cases, it will be prima facie unjust to award costs against a non-party and as a matter of discretion the circumstances in which an order will be made are confined’.[59]
[58]Hudspeth (No 8) [2014] VSC 567 [249] (Dixon J), citing Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd [1991] Qd R 518, 544 (Shepherdson J); Vestris v Cashman (1998) 72 SASR 449, 468 (Doyle CJ, Olsson and Lander JJ).
[59]Ibid [249] (citation omitted).

In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5),[60] John Dixon J stated that the following relevant matters which need to be considered in the exercise of the wasted costs jurisdiction:
[60](2014) 48 VR 1.

(a)The court’s jurisdiction to make a wasted costs order against a solicitor is founded on breach of the duty owed by the legal practitioner to the court to perform his duty as an officer of the court in promoting, within his own sphere, the cause of justice.
(b)‘Negligent’ should be understood in an untechnical way to denote failure to act in a way no reasonably well-informed and competent ordinary member of the profession would have done.
(c)The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised with care and discretion and only in clear cases.
(d)The wasted costs jurisdiction discloses a tension between two important public interests, one that the wasted costs orders should not become a back-door means of recovering costs not otherwise recoverable against a legally-aided or impoverished litigant, and that the remedy should not grow unchecked to become more damaging than the disease and, two, that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponents’ lawyers.
(e)A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or a defence that is plainly doomed to fail.
(f)The legal practitioner is not the judge of the credibility of the witnesses or the validity of the argument.

…
(h)A legal practitioner against whom a claim for a costs order is made must have full and sufficient notice of the complaint and full and sufficient opportunity of answering it, and a legal practitioner should not be called on to reply unless an apparently strong prima facie case has been made.
(i)Where a legal practitioner’s ability to rebut the complaint is hampered because the client maintains client legal privilege, full allowance must be given for the practitioner’s inability to tell the full story and he or she should be given the benefit of the doubt. In such circumstances, the court should not make an order against a practitioner without satisfying itself that it is in all the circumstances fair to do so, or put the other way, it is only when, with all allowances made, a practitioner’s conduct of proceedings is quite plainly unjustifiable that it can be appropriate to make a wasted costs order.
(j)The procedure to be followed in determining applications for wasted costs must be fair and as simple and summary as fairness permits.[61]

[61]Ibid 22 [57].

In deciding whether to make a wasted costs order, the Court has regard to the framework created by the Civil Procedure Act for the conduct of civil proceedings. Section 28(2) of the Civil Procedure Act provides that, in exercising its discretion as to costs, a court may take into account any contravention of the overarching obligations under the Civil Procedure Act.

The primary object of r 62.23(1) is not punitive or disciplinary but compensatory.[62] However, in Actrol Parts Pty Ltd v Coppi (No 3),[63] Bell J identified that:

the purposes of the powers of the court under s 24 of the Supreme Court Act and O 63 of the Supreme Court (General Civil Procedure) Rules are compensatory (even where indemnity costs are ordered). By contrast, where contravention [of the overarching obligations] is established the powers of the court under pt 2.4 of the Civil Procedure Act are wider and have both compensatory and punitive elements.[64]

[62]Yara (2013) 41 VR 302, 309 [18].

[63](2015) 49 VR 573.

[64]Ibid 603 [110] (citations omitted).

Ms Carmelli and MCK Legal’s breaches of their overarching obligations under ss 18, 19, 20, 23 and 24 of the Civil Procedure Act have caused unnecessary costs being incurred by both the plaintiff and the defendant. Taken together, the breaches exemplify the undesirable manner in which the proceeding was approached and conducted and demonstrate that the non-parties’ conduct fell far below that which would be expected from a well-informed and competent ordinary member of the profession.

As a result of Ms Carmelli and MCK Legal’s breaches of their overarching obligations the Court considered that orders under s 29 of the Civil Procedure Act are appropriate.

Ms Carmelli deposes that she has not been paid any legal fees by the plaintiff and that she paid all the disbursements on the plaintiff’s behalf as he did not have the capacity to do so. The information before the Court suggests that there are little or no assets in the plaintiff’s estate from which his legal fees, or the defendant’s costs, could be paid.

The Court is mindful that an order that the non-parties pay some of the defendant’s cost should not be made simply to enable him to recover costs he is unable to recover and, on his own submission, is uninterested in recovering, from the plaintiff’s estate. However, given the non-parties’ breaches of their overarching obligations led to the defendant incurring substantial unnecessary costs, it is appropriate to order that the non-parties pay some of the defendant’s costs. The Court’s purpose in making such an order is primarily compensatory. However, while it may be that some of the relevant costs of the defendant resulting from the non-parties’ breaches of their overarching obligations could be itemised, it is unlikely to be possible to quantify methodically the exact costs flowing from the non-parties’ various breaches of their overarching obligations. Furthermore, the Court considers that there should be a punitive element in the orders made given the totality of the non-parties’ conduct and the unsatisfactory manner in which the Court’s own motion inquiry has been handled by them.

In summary, the Court identifies particularly the following conduct resulting in the wasting of both the Court and the defendant’s time and resources that warrants a costs order with compensatory and punitive elements:

(a) the filing of affidavits containing substantial irrelevant and inadmissible information, including without prejudice communications;

(b) the misguided preoccupation in communications with matters of limited relevance such as the deceased’s unsigned will and superannuation;

(c) the needlessly obstinate approach to the preparation of the joint trial document;

(d) the incurring of costs far in excess of what would be expected given the stage of the proceeding; and

(e) the inadequate, multiple responses to the Court’s own motion inquiry.

While not determined to amount to breaches of the overarching obligations, the Court notes in addition the following conduct of the non-parties that reflects the undesirable character of the proceeding:

(a) the failure to file required documents leading to the Court’s postponement of the first directions hearing;

(b) the delay in informing the Court of the plaintiff’s death; and

(c) the inappropriate communication with the Court.

As identified by the Court of Appeal in Yara, there will be cases where an order for indemnity costs is warranted by reason of a breach of an obligation under the Civil Procedure Act.[65] The breaches of the overarching obligations in this case are sufficiently serious and deserving of the Court’s disapproval to be met with the ordering of indemnity costs.[66] The non-parties’ conduct is an exemplar of the type of conduct that the Civil Procedure Act requires the Court to exert control and for which parties are to be held to account.
[65]Yara (2013) 41 VR 302, [56].
[66]Ibid [57].

In light of the need to facilitate the just, efficient, timely and cost-efficient resolution of this matter, the Court considers it appropriate to reach a combined assessment of the compensatory and punitive elements of the order as a proportion of the costs of the proceeding. In reaching this figure, the Court has recognised the overlap between the factors justifying costs paid on an indemnity basis and those supporting the conclusion that there have been contraventions of the overarching obligations. Further, the Court has taken into account that the defendant’s costs were also disproportionate to the issues in dispute, most likely as a result of the conduct of the non-parties.

Overall, the Court considers it is in the interests of justice for Ms Carmelli and MCK Legal to pay 80 per cent of the defendant’s costs, assessed on an indemnity basis in default of agreement. Further, as the Court has made a finding of improper conduct on the part of the non-parties, it is appropriate that they pay the costs of the defendant relating to the Scott affidavit on an indemnity basis. Mr Scott did not separately identify these costs in his affidavit but in order to facilitate the just, efficient, timely and cost-efficient resolution of the proceeding, the Court has considered this in arriving at the percentage of the defendant’s costs to be awarded.

Disposal of the proceeding

In his affidavit affirmed on 3 February 2022, Mr Scott deposed that the plaintiff’s eldest son, Jack Ettery (‘Jack’), had advertised his intention to apply for a grant of administration of the plaintiff’s estate upon intestacy on 6 January 2022. He also deposed that Jack and the plaintiff’s other son, Mitchell Ettery, had indicated to other family members that they did not wish the plaintiff’s Part IV proceeding to continue.

In her affidavit affirmed on 24 March 2022, Ms Carmelli deposed that on 16 December 2021 she telephoned Jack to give him her condolences and informing him of the instructions provided to her by the plaintiff. Ms Carmelli also sent him an email with a draft unsigned will of the plaintiff. On 18 January 2022, Ms Carmelli forwarded the Court’s email of 22 December 2021 to Jack and requested him to advise her of any decisions he and his family may have made in respect of the plaintiff’s Part IV proceeding. In response to Ms Carmelli’s email Jack replied:

Hi no one will be pursing this legal case, this was between you and my dad he has passed away, I nor no one else will be following this up. Don’t contact me again thank you.

On 29 March 2022, letters of administration of the plaintiff’s estate were granted to Jack. Jack did not seek an order to be made a party in substitution for the plaintiff , pursuant to r 9.09(2) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’).

Rule 9.10(1) provides:

Where a party dies, and a cause of action in the proceeding survives, but no order is made under Rule 9.09(2) substituting a personal representative of the deceased party as party, the Court, on application by a party or by a person to whom liability on the cause of action survives on the death, may order that unless an order for substitution is made within a specified time the proceeding be dismissed so far as concerns relief on the cause of action for or against the person to whom the cause of action or the liability thereon survives on the death.

The defendant has not made an application under r 9.10(1). However, in circumstances where the Court is satisfied that the plaintiff’s personal representative is aware of the proceeding and has no intention in maintaining the plaintiff’s claim, it is appropriate, pursuant to r 2.04(1) of the Rules, to dispense with compliance with r 9.10 and order that the proceeding be dismissed, alternatively, it is appropriate to exercise the power in r 9.10(1) on its own motion under r 1.14(2)(a).

Conclusion

The Court has determined that Ms Carmelli and MCK Legal breached their overarching obligations under ss 18(d), 19, 20, 23 and 24 of the Civil Procedure Act and that Ms Carmelli and MCK Legal pay 80 per cent of the defendant’s costs, assessed on an indemnity basis in default of agreement.

Jack, in his capacity as administrator of the estate of the deceased, has not sought to be made a party in the proceeding in substitution for the plaintiff and the defendant does not wish to pursue a costs order against the estate of the plaintiff. In the circumstances, there should be no order as to the plaintiff’s costs of the proceeding.

Orders

The Court orders:

(a) the non-parties, Ms Carmelli and MCK Legal, pay 80 per cent of the defendant’s costs, assessed on an indemnity basis in default of agreement;

(b) no orders as to the plaintiff’s costs of the proceeding; and

(c) pursuant to r 1.14(2)(a) of the Supreme Court (General Civil Procedure) Rules 2015, the proceeding be dismissed pursuant to r 9.10 of the Rules.

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[2023] VSC 133

23 March 2023