Roche v Steven Constantine Varnavides in his capacity as Executor of the Estate of the late Lillian Rose Varnavides
[2004] WASC 164 (S)
ROCHE -v- STEVEN CONSTANTINE VARNAVIDES in his capacity as Executor of the Estate of the late LILLIAN ROSE VARNAVIDES & ANOR [2004] WASC 164 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 164 (S) | |
| Case No: | CIV:2017/1999 | 18-20 MAY, 16 DECEMBER 2004 | |
| Coram: | MASTER NEWNES | 29/07/04 | |
| 31/01/05 | |||
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Costs of all parties to be paid out of estate | ||
| B | |||
| PDF Version |
| Parties: | MARILYN VERA ROCHE STEVEN CONSTANTINE VARNAVIDES in his capacity as Executor of the Estate of the late LILLIAN ROSE VARNAVIDES STEVEN CONSTANTINE VARNAVIDES |
Catchwords: | Practice and procedure Claim under Inheritance Act Order 24A offer by defendant Plaintiff recovered less than offer Affidavit evidence of defendant at time offer made deficient Whether defendant entitled to costs of proceedings from time of offer Relevant principles Turns on own facts |
Legislation: | Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6 Rules of the Supreme Court 1971 (WA), O 24A |
Case References: | Campbell v Jones & Fryberg & Anor [2002] QCA 332 Castro v Hillery [2003] 1 Qd R 661 Cerini v The Minister for Transport [2001] WASC 309 Collins v Carey [2002] QSC 417 Dobb v Hacket (1993) 10 WAR 532 Houatchanthara v Bednarczyk, unreported; NSWCA; 14 October 1996 McChesney v Singh & Ors [2004] QCA 217 Morgan v Johnson (1998) 44 NSWLR 578 New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 Oxlade v Gosbridge Pty Ltd (No 2) [1999] NSWCA 165 Roche v Varnavides & Anor [2004] WASC 164 Ross v Suncorp Metway Insurance Ltd [2002] QCA 93 Simonovski v Bendigo Bank Ltd (No 2) [2003] VSC 139 Szombathy v Public Trustee [2002] WASC 89 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 31 JANUARY 2005 FILE NO/S : CIV 2017 of 1999 MATTER : Estate of the late LILLIAN ROSE VARNAVIDES
and
Section 6 of the Inheritance (Family & Dependants Provision) Act 1972 (WA)
- Plaintiff
AND
STEVEN CONSTANTINE VARNAVIDES in his capacity as Executor of the Estate of the late LILLIAN ROSE VARNAVIDES
First Defendant
STEVEN CONSTANTINE VARNAVIDES
Second Defendant
(Page 2)
Catchwords:
Practice and procedure - Claim under Inheritance Act - Order 24A offer by defendant - Plaintiff recovered less than offer - Affidavit evidence of defendant at time offer made deficient - Whether defendant entitled to costs of proceedings from time of offer - Relevant principles - Turns on own facts
Legislation:
Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6
Rules of the Supreme Court 1971 (WA), O 24A
Result:
Costs of all parties to be paid out of estate
Category: B
Representation:
Counsel:
Plaintiff : Dr P R MacMillan
First Defendant : Mr J C Curthoys
Second Defendant : Mr J C Curthoys
Solicitors:
Plaintiff : Friedman Lurie Singh & D'Angelo
First Defendant : South Legal
Second Defendant : South Legal
Case(s) referred to in judgment(s):
Campbell v Jones & Fryberg & Anor [2002] QCA 332
Castro v Hillery [2003] 1 Qd R 661
Cerini v The Minister for Transport [2001] WASC 309
Collins v Carey [2002] QSC 417
Dobb v Hacket (1993) 10 WAR 532
Houatchanthara v Bednarczyk, unreported; NSWCA; 14 October 1996
McChesney v Singh & Ors [2004] QCA 217
(Page 3)
Morgan v Johnson (1998) 44 NSWLR 578
New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100
Oxlade v Gosbridge Pty Ltd (No 2) [1999] NSWCA 165
Roche v Varnavides & Anor [2004] WASC 164
Ross v Suncorp Metway Insurance Ltd [2002] QCA 93
Simonovski v Bendigo Bank Ltd (No 2) [2003] VSC 139
Szombathy v Public Trustee [2002] WASC 89
Case(s) also cited:
Nil
(Page 4)
1 MASTER NEWNES: On 29 July 2004, I delivered judgment on the plaintiff's application for further provision out of the estate of her late mother, pursuant to s 6 of the Inheritance (Family and Dependants Provision) Act 1972 (WA). I found that adequate provision had not been made for the plaintiff and concluded that an appropriate provision for the plaintiff would be an amount of $225,000.
2 I said I would hear the parties on the question of costs and that was argued before me on 16 December 2004. It is with that question that I am now concerned.
3 I have set out the relevant facts of the matter in my judgment of 29 July 2004: Roche v Varnavides & Anor [2004] WASC 164. I will refer in due course to those parts of the judgment which are relevant to the question of costs. Suffice it to say for the moment that the proceedings were commenced by the plaintiff by originating summons filed on 13 September 1999. The plaintiff's affidavit in support was filed with the originating summons. The second defendant filed an affidavit in response on 3 December 1999. On 10 February 2000, the plaintiff filed a further affidavit responding to the second defendant's affidavit.
4 That affidavit evidence constituted, in substance, the relevant evidence in the matter until shortly before the hearing, which was listed to commence on 29 March 2004. The plaintiff then sought to rely upon a further substantial affidavit sworn on 26 March 2004. As a consequence, the trial dates were vacated and an order made that the plaintiff bear the costs of the application to vacate the trial dates and any costs thrown away by reason of the adjournment.
5 In response to the plaintiff's affidavit of 26 March 2004, a further substantial affidavit was filed and served on behalf of the second defendant on 7 May 2004.
6 A number of offers of settlement passed between the solicitors for the plaintiff and the second defendant respectively in 1999 and 2000. Relevantly for present purposes, on 24 February 2000 the second defendant's solicitors wrote to the plaintiff's solicitors making an offer of settlement on behalf of the second defendant in the sum of $250,000. The letter was expressed to be made under O 24A of the Rules of the Supreme Court1971 (WA) and was also headed "Without prejudice except as to costs"; that is, in the terms of a Calderbank offer. The offer of $250,000 was broken down into various sums to cover the plaintiff's car loan, a credit facility in her name, a sum for contingencies and an amount to
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- invest, in the total sum of $233,000, and the second defendant's solicitors said the second defendant was "willing to contribute $17,000 towards the plaintiff's legal costs, which we have advised is more than reasonable in the circumstances". The offer was expressed to be open for 28 days.
7 The plaintiff made a counter offer which was not accepted by the second defendant. The plaintiff did not accept the second defendant's offer of 24 February 2000.
8 The plaintiff having obtained at trial an order for provision in the sum of $225,000, and that being less than the second defendant's offer of $233,000, the second defendant says that, in accordance with O 24A r 10(5), the plaintiff is liable to pay his costs from the date of the offer.
9 The plaintiff did not argue that O 24A does not apply to proceedings under the Inheritance (Family and Dependants Provision) Act 1972 (WA) but submitted, first, that the offer in this case did not comply with O 24A and, accordingly, did not attract the consequences provided for under that rule. In particular, it was submitted that the offer was expressed to be inclusive of legal costs in the sum of $17,000, whereas O 24A provides that, upon acceptance of an offer, the plaintiff may recover taxed costs.
10 Counsel for the second defendant submitted that the offer was effective under O 24A. The figure of $250,000 was specifically broken down into a total sum of $233,000 in respect of provision for the plaintiff and a further sum of $17,000 by way of costs. It was submitted that, on any view, the sum of $17,000 was in excess of any amount that would have been allowed on taxation. In any event, O 24A r 10(2) provides that where a notice of offer contains a term which purports to negative or limit the plaintiff's right to tax their costs, the term is of no effect. Accordingly, the limit of $17,000 in the offer did not affect the plaintiff's right to tax her costs or affect the validity of the offer under O 24A.
11 In my view, the offer was an effective offer under O 24A. It complied with the requirements of O 24A r 1 in that it was an offer in writing bearing a statement to the effect that it was made under O 24A. It was not an offer of a single sum expressed to be inclusive of costs, so that it was impossible to discern the actual amount offered by way of provision for the plaintiff. The amounts offered by way of provision for the plaintiff and for cost respectively were clearly identified. However, the operation of O 24A r10(2) renders ineffective any limitation sought to be imposed on the amount recoverable by the plaintiff by way of costs on
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- taxation so, to the extent that the offer of $17,000 in respect of costs sought to limit the costs recoverable by the plaintiff, it was, in my view, of no effect.
12 Even if I were wrong in that, the offer would, in my view, be effective as a Calderbank offer and I would be entitled to take it into account in exercising my discretion on the question of the costs of the proceedings: Dobb v Hacket (1993) 10 WAR 532.
13 I did not understand it to be in dispute that, as noted by Murray J in Dobb v Hacket, the normal rule in proceedings of this nature is that the costs of all parties be taxed and paid out of the estate. However, the second defendant contended that, in light of the offer of settlement, the plaintiff must bear his costs of the proceedings from the date of the offer. Counsel referred to what Murray J said in that case [at 540] as follows:
" … The court should preserve in the minds of litigants, the conscious consideration that their behaviour may place them at risk as to costs if they refuse reasonable offers of settlement. The court should be careful not to foster the proposition that obstinacy and unreasonableness will not be punished by orders as to costs. Such considerations foster the public interest in the desirability, not only from the point of view of the particular litigants in the case in question, but from the point of view of litigants generally, of the court so behaving as to encourage the achievement of reasonable and timely settlements."
14 It was submitted on behalf of the second defendant that, as a consequence of the rejection of the offer, a further four years of litigation ensued involving legal fees in the total sum of some $300,000 and the beneficiaries were prevented from using the assets of the estate for that period. I might observe in passing that, on the material before me, I have difficulty in understanding how the parties could have incurred legal fees of such a magnitude in this matter. I have even greater difficulty in understanding how such costs could have been incurred after the offer was made, given that by that time a substantial portion of the evidence had already been set out in the affidavits. The explanation may lie in matters which are not apparent from the papers before me.
15 On behalf of the plaintiff, it was submitted that the costs of all parties should be taxed and paid out of the estate. Counsel argued that in proceedings of this nature an order for costs against a party should only be made where the party has acted unreasonably in the conduct of the
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- proceedings. It was submitted that there had been no unreasonable conduct on the part of the plaintiff. Counsel referred to evidence that a number of offers of settlement had been made by the plaintiff, including an offer of $250,000 plus taxed costs made six days after the defendants' offer of 24 February 2000. Counsel noted that the amount received by the plaintiff at trial of $225,000 was only marginally less than the defendants' offer of $233,000 and was close to the plaintiff's own offer of $250,000.
16 It was also argued on behalf of the plaintiff that the Court, having made a finding in respect of an appropriate provision for the proper maintenance of the plaintiff, should be slow to make a costs order which would have the effect of substantially undermining the effect of that provision, unless the plaintiff's conduct has been so unreasonable as to justify such an order. Counsel referred to Szombathy v Public Trustee [2002] WASC 89 at [15] and [19]. I do not, however, find anything in that case which would support such a general proposition.
17 It was submitted on behalf of the plaintiff that in exercising its discretion as to costs the Court should have regard to the size of the estate and to the overall conduct of the plaintiff and the defendants respectively in the proceedings. In this case, it was argued, the estate was a substantial one and the plaintiff had conducted her claim in a proper and reasonable manner and her evidence had been accepted in all material respects. By contrast, the second defendant's evidence was not accepted in a number of material respects and he was found not to have been candid in relation to financial issues going to the size of the estate and his own financial position and contribution to the assets of the estate. The plaintiff's counsel also pointed out that the second defendant had commenced separate proceedings to assert a claim to an equitable interest in certain assets of the estate and, it was submitted, those proceedings, which had been commenced in July 1999 and were not finally discontinued until June 2002, had caused significant costs to be incurred and delay in the completion of these proceedings.
18 It was submitted that in the circumstances the Court in the exercise of its discretion should order the costs of the parties to be paid out of the estate.
19 In Morgan v Johnson (1998) 44 NSWLR 578, Mason P, with whom Sheller JA concurred, in considering a New South Wales rule analogous to O 24A, set out (at 581 - 582) the principles guiding the exercise of the discretion as follows:
(Page 8)
- (1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation.
(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance.
(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party. This is because, from the time of non-acceptance "notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise".
(4) Lying behind the rule is the common knowledge that litigation is inescapably chancy. For this reason, the ordinary provision is expected to apply in the ordinary case. The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule.
- In this respect Mason P cited observations of Clarke JA in Houatchanthara v Bednarczyk, unreported; NSWCA; 14 October 1996 where at 2 - 3 Clarke JA said:
"The rule lays down the general principle that should be applied, and the Order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case.
It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. … Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk."
- (5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be
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- borne in mind. Reasons must be given for "otherwise ordering".
23 Those principles have been referred to with approval by this Court in Cerini v The Minister for Transport [2001] WASC 309 and by the Queensland Court of Appeal in McChesney v Singh & Ors [2004] QCA 217 at [13].
24 In New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100, Gleeson CJ, with whom Cripps and Clarke JJA agreed, said, at [102], that "discussion of the availability of the discretion, is done in the context of a recognition that in any ordinary case … the rule should be applied in its terms."
25 It is therefore clear that general factors which apply in most, if not all, cases such as hardship and difficulty in predicting the result of the trial cannot support an exercise of the discretion in favour of the unsuccessful party: Houatchanthara v Bednarczyk (supra) per Handley JA. Nor is the ordinary operation of the rule to be displaced just because the case is a difficult one: Oxlade v Gosbridge Pty Ltd (No 2) [1999] NSWCA 165 at [8] per Mason P, with whom Fitzgerald JA and Shephard AJA agreed.
26 But an offer cannot be viewed in isolation from the circumstances in which it was made. Thus it has been held that the ordinary operation of the rule may be inappropriate where the offer is made at the time of the delivery of the offeror's pleading, when the nature of the case is not clear: Ross v Suncorp Metway Insurance Ltd [2002] QCA 93 at [1], [3], [30], or where the party succeeds upon a case which only emerges from subsequent amendments to the pleadings: Collins v Carey [2002] QSC 417 at [10]. It has also been held that where at the time of the offer the plaintiff's statement of loss and damage did not disclose significant material bearing upon the ultimate assessment of damages the plaintiff was not entitled to indemnity costs under the rule: Campbell v Jones & Fryberg & Anor [2002] QCA 332.
27 In Castro v Hillery [2003] 1 Qd R 661, Williams JA (with whom Wilson JA concurred), having reviewed a number of English authorities, concluded [at 663 - 4] that the recipient of an offer must have an informed opportunity to assess the chances of doing better than the offer. That issue must be decided on the material disclosed in the proceedings and must be evaluated in the light of the circumstances as they existed at the time the offer was made. In a like vein, in Simonovski v Bendigo Bank Ltd (No 2) [2003] VSC 139, Ashley J said at [18] - [19]:
(Page 10)
- "In my opinion it is important that, when an offer is made, and during the period when it remains open for consideration, the offeree then has in its possession all the material from the opposing party to which it is entitled, whether by operation of the Rules or by order of the Court. An offeree should not be obliged to consider an offer whilst ignorant of required detail of the offeror's case. In the present case the defendant was relevantly in default when its offer was made; and it continued in default throughout the period that the offer remained open. Moreover, the default was not trivial; rather, the contrary.
Counsel for the defendant submitted that his client could have made its offer earlier, in which case the plaintiffs would not have been entitled to material to which they were entitled by late August 2002. True enough. But to say that because the defendant could have made an offer which the plaintiffs would have been obliged to consider without the advantage of having received particular material from the defendant is beside the point. The fact is that when the offer was made and throughout the period during which it remained open they were so entitled. There is no reason why an offeror which is in breach of rules or orders requiring it to provide information to the offeree should have the advantage of a Rule as to costs when the offeree by reason of the defendant’s breach is less equipped than it should be to evaluate the offer. The contrary is the case. That is not to say, I emphasise, that such a failure to provide material will always justify an order otherwise. It will depend upon the circumstances of the particular case."
28 In the present case, at the time the second defendant's offer was made, the plaintiff had filed two affidavits in support of her claim and the second defendant had filed an affidavit on his own behalf in response to the plaintiff's first affidavit. In the second defendant's affidavit, he set out in some detail his involvement in the business enterprises which formed or had contributed to the assets of the estate as at the death of the testatrix. He also set out in some detail his own financial circumstances and the frugality with which he said he and his family had lived over the years to build up the businesses and assets concerned. Those were matters on which the second defendant placed substantial reliance in resisting the plaintiff's claim.
29 It was clear from the evidence that the plaintiff had little real knowledge of the activities or financial affairs of the second defendant
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- since at least the late 1980s when she ceased living in Pemberton, where the second defendant's activities were conducted. It was not in issue that, from that time, the plaintiff's only contact with the second defendant was on visits the plaintiff made from time to time to her mother in Pemberton. Whilst it was clear from the plaintiff's affidavit of 10 February 2000, and from the course that the cross-examination of the second defendant took at trial, that the plaintiff did not accept the position as deposed to by the second defendant, it is not apparent that at the time of the offer she had access to other material that would have enabled her to find out the true position for herself.
30 It is, in my view, important to bear in mind that litigation of this nature is unlike most other litigation where the parties might be expected to be reasonably well informed about, or in a position more readily to obtain, information concerning the material facts relevant to the issues in the proceedings. In the present case, it is not reasonably to be expected that the plaintiff would have any detailed knowledge of the activities or financial affairs of the second defendant since, at best, the late 1980s or that she would readily be able to inform herself of them. That is often the case in proceedings of this sort, particularly where, as in this case, there has been relatively little contact over the years between adult siblings. The potential difficulties of the plaintiff in that respect could not have escaped the second defendant.
31 In my view, the second defendant was less than candid in a number of material respects in the affidavit evidence which he provided to the plaintiff in the period before the offer of settlement expired. In my reasons for judgment I referred at [54] to [56] to a number of matters where in the course of cross-examination concessions were made by the second defendant in respect of matters that were not covered, or were not adequately covered in his affidavit of 3 December 1999. In the end it was, in my view, evident that the second defendant's affidavit did not accurately set out the second defendant's financial position or circumstances. At [62], I concluded as follows:
"I have no doubt that the second defendant considers very strongly that, by reason of the work that he and his wife have put in over the years, he (and through him, his family) is entitled to the bequests in the Will. He is plainly of the view that, as it was put by his counsel, the plaintiff 'seeks to reap where she has not sown.' The second defendant's view of the merits of his cause has, however, tended in significant ways to colour his evidence. He has, in my view, sought to brush aside
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- anything that might cast a different light on the part he has played in relation to the family businesses and especially he has been inclined to understate the financial benefits that he and his family have gained through those businesses, and from the testatrix, over the years and to overstate the extent of their deprivation. Although in respects in which he considered it assisted his case, the second defendant was able to produce detailed records, and to refer to incidents and specific sums of money (including quite small sums of money), going back many years, in other respects, and in particular in relation to his financial affairs of more recent years, the same meticulousness seemed to be lacking. It is also difficult to reconcile the scale of his borrowings and expenditure over the years with the income that he said he and his wife earned from the farm and the businesses. In the end, I am not satisfied that the full extent of the second defendant's financial affairs, or the benefits which he derived from the farm and the business, and otherwise from the testatrix, over the years were ever revealed."
32 The concessions made by the second defendant in cross-examination justified the suspicion the plaintiff clearly harboured that the second defendant's affidavit did not adequately disclose the true state of affairs.
33 It is the case that at some stage in the proceedings the plaintiff had available to her material in relation to the assets of the estate and to the second defendant's affairs, apart from the second defendant's affidavit. It appears that in the interlocutory stages of the proceedings the second defendant made some 20 lever arch files of documents available for inspection. It seems that the plaintiff's solicitors did not inspect them. There is, however, nothing before me to indicate what information those documents contained and it is not clear when that material was made available for inspection. In that connection, it is evident that a substantial supplementary affidavit of discovery was provided by the second defendant in September 2000, well after the offer of settlement had expired. In any event, it would not, in my view, be to the point that the true state of affairs may, or even would, have emerged from a full (and no doubt costly) analysis of that material. Where a party misstates the position, he cannot be heard to say that the consequences should not be visited upon him because, with greater effort, the other party could have unearthed the true position.
34 Nor, in my view, is it to the point that, even when the true position was known (to the extent it was), the plaintiff still did not recover more
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- than the amount offered. It is incumbent upon a party who makes an offer under O 24A, or a Calderbank offer, to ensure that any material he has provided to the offeree, whether of his own volition or in accordance with rules or orders of the Court, and on which it is reasonably to be expected that the offeree will have regard in assessing the reasonableness of the offer, is not misleading or deficient in any material respect. In my view, a party who fails to do so cannot assume that he will be entitled to the benefit of the prima facie rule as to the consequences of non-acceptance of the offer. Where such material is misleading or deficient the question of whether the offeror will be entitled to his costs as a result of making the offer will depend upon the particular circumstances of the case, including the nature and effect of the material in question and the reasonableness of the conduct of the offeree in not accepting the offer.
35 In the present case, the affidavit that had been served by the second defendant before the offer of settlement expired appeared to the plaintiff to be - and subsequently was shown to be - incorrect or unreliable in material respects. While the plaintiff did not accept the second defendant's affidavit evidence, to a significant extent she remained in the dark as to the true position, not knowing where the truth lay, until trial. It was therefore not unreasonable for the plaintiff to put the second defendant to proof of those matters and to avail herself of the opportunity of cross-examination at trial to ascertain the true position. In the circumstances the second defendant can hardly now be heard to say that, regardless of her misgivings, the plaintiff should have accepted the offer of settlement and must bear the costs of the proceedings because she did not do so.
36 It was submitted on behalf of the second defendant that the practical effect of an order that the costs of the parties be paid out of the estate would be that the burden of those costs would fall on the second defendant. In the circumstances of this case I do not consider that that is a factor which weighs significantly in the balance.
37 In the end, I am satisfied that the circumstances of this case are such as to take it out of the normal rule under O 24A r 10(5). I would therefore order that the costs of all parties be taxed and paid out of the estate.
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